2014

Valener continues to benefit from the positive impact of the diversification of Gaz Métro's activities

 
HIGHLIGHTS FOR THE THIRD QUARTER OF FISCAL 2013
Valener
  • Seigneurie de Beaupré wind power projects: work continues in anticipation of a December 2013 start-up; and
  • Quarterly dividend of $0.25 per common share to be maintained for fiscal 2014.
Gaz Métro
  • $2.4 million in recurring net income;
  • $9.3 million1 increase in recurring net income generated in Vermont;
  • Decision by the Régie de l'énergie on the 2013 rate case for Quebec natural gas distribution activities; and
  • Partnership agreement with La Coop fédérée for the deployment of an innovative, multi-energy service station concept.

 

MONTREAL, Aug. 9, 2013 /CNW Telbec/ - Valener Inc. (Valener) (TSX: VNR), the public investment vehicle in Gaz Métro Limited Partnership (Gaz Métro), is today announcing its financial results.

For the first nine months of fiscal 2013, recurring net income attributable to common shareholders totalled $38.1 million ($1.01 per common share) compared to $33.3 million ($0.89 per common share) in the same period of fiscal 2012.

This increase was driven by net income growth in Gaz Métro's Vermont operations. "The Vermont results have contributed significantly to Gaz Métro's consolidated income, demonstrating that its targeted diversification strategy in recent years is paying off," said Pierre Monahan, Chairman of Valener's board of directors. "The results have also been achieved thanks to the Gaz Métro management team's disciplined execution of the strategy. Valener is reaping the rewards of this strategic decision."

The higher net income driven by Gaz Métro's energy distribution activities in Vermont offset the impact of the recent decision by the Régie de l'énergie (the Régie) on the 2013 rate case for natural gas distribution activities in Quebec. The Régie's decision translates into a $5.0 million reduction in the $187.7 million operating expenses included in the cost of service. Still, Gaz Métro expects to be able to mitigate the impacts of that decision on its net income by the end of the fiscal year.

The net impact of the preceding items on Valener's net income combined with the impact of the dividend on preferred shares issued in June 2012 was a $1.7 million year-over-year decrease in third-quarter recurring net income attributable to common shareholders, down from the $1.5 million in net income generated in the same period last year.

Cash flows related to operating activities totalled $33.6 million for the first nine months and $11.7 million for the third quarter of fiscal 2013, up $19.5 million and $2.7 million, respectively, from the same periods last year. These increases came mainly from higher distributions received from Gaz Métro as a result of the subscriptions of Gaz Métro units in fiscal 2012 and from a favourable change in non-cash working capital items.

Seigneurie de Beaupré wind power projects

 
Wind power projects 2 and 3
                 
Installed capacity   Start-up   Total investment   Valener   Gaz Métro
272 MW   Dec. 2013   ~$750M   24.5%   25.5%


On-site activities resumed in February 2013, and more than 59 wind turbines have been completed to date. In addition, the collector system has been buried and construction of the interconnection line to Hydro-Québec's transmission system has been completed. Initial energization took place successfully on July 11, 2013. These wind farms are still expected to be operational by December 1, 2013.

 
Wind power project 4
                 
Installed capacity   Start-up   Total investment   Valener   Gaz Métro
68 MW   Dec. 2014   ~$190M   24.5%   25.5%


In May 2013, the consortium made up of Gaz Métro, Valener and Boralex inc. created a joint venture, Seigneurie de Beaupré Wind Farm 4 GP (Wind Farm 4), for the development and operation of the project.

Having successfully completed the key environmental approvals stage, Wind Farm 4 is proceeding with the work needed for project start-up and is on course with the key stages of the project schedule. The final agreement with Borea Construction (for the civil engineering work) was signed in May 2013, and the agreement with Enercon (the supplier of turbines and maintenance services) is expected to be signed soon. In addition to implementing financing, planned for summer 2013, Wind Farm 4 expects to complete all of the foundation and road construction work as well as a significant portion of the collector system by the end of the construction season. This wind power project is scheduled for start-up in December 2014.

"Thanks to Valener's and Gaz Métro's strategic directions, which have led to greater electricity distribution activity in Vermont, the divestiture of certain subsidiaries, the development of projects promoting liquefied natural gas, and investments in wind power, Valener has positioned itself to deliver consistent returns to its shareholders. Furthermore, we are pleased to announce that Valener will maintain a $1 annualized dividend per common share for fiscal 2014, in accordance with the announcement made at the time of Valener's creation in 2010," said Mr. Monahan.

 
Consolidated net income attributable to common shareholders
excluding the share in the non-recurring items of Gaz Métro, net of income taxes
  3 months ended
June 30
  9 months ended
June 30
(in millions of dollars, unless otherwise indicated) 2013   2012   2013   2012
Consolidated net income (loss) 0.9   (0.5)   44.6   31.3
  Share in the non-recurring items of Gaz Métro -   2.3   (4.3)   2.3
  Income taxes on the share in the non-recurring items of Gaz Métro -   -   1.1   -
Consolidated net income, excluding the share in the non-recurring items of Gaz Métro, net of income taxes  0.9   1.8   41.4   33.6
Less: Cumulative dividends on Series A preferred shares 1.1   0.3   3.3   0.3
Consolidated net income (loss) attributable to common shareholders, excluding the share in the non-recurring items of Gaz Métro, net of income taxes (1) (0.2)   1.5   38.1   33.3
Weighted average number of common shares outstanding (in millions of common shares) 37.7   37.5   37.6   37.4
Consolidated net income (loss) attributable to common shareholders, excluding the share in the non-recurring items of Gaz Métro, net of income taxes, per common share (in $) (1) (0.01)   0.04   1.01   0.89
(1) These measures are financial measures that are not defined in Canadian generally accepted accounting principles (GAAP). For additional information, refer to the Non-GAAP Financial Measures heading in Valener's MD&A for the quarter ended June 30, 2013.


Gaz Métro's results

Excluding non-recurring items, net income attributable to the Partners of Gaz Métro totalled $186.0 million and $2.4 million, respectively, for the first nine months and third quarter of fiscal 2013 versus $167.2 million and $6.1 million for the same periods last year.

"Our focus on innovation and responding to the new needs of our customers continues to drive our actions. Our recent association with La Coop fédérée to deploy multi-energy service stations as part of the Blue Road initiative is a fine example of the innovative solutions we are developing," said Sophie Brochu, President and Chief Executive Officer of Gaz Métro.

Energy Distribution

 
Quebec natural gas distribution (Gaz Métro-QDA)
             
Rate base   Authorized return   Distribution network   Customers
$1.8B   8.90%   10,000 km   189,000


On July 15, 2013, the Régie issued its decision on the 2013 rate case, which translated, among other things, into a $5.0 million decrease in the operating expense budget. During the fourth quarter, Gaz Métro-QDA will try to minimize the impact of this decision on its net income. Although the impact on its net income will be known only in the fourth quarter of fiscal 2013, and given the potential transportation service incentive return, Gaz Métro-QDA does not expect any significant change from the net income anticipated in the 2013 rate case, which showed a $6.6 million decrease in net income from fiscal 2012, as mentioned in previous quarters.

For the first nine months, Gaz Métro-QDA's net income attributable to the Partners of Gaz Métro totalled $139.0 million, essentially unchanged from the same period in fiscal 2012.

For the third quarter of fiscal 2013, Gaz Métro-QDA posted a $5.5 million net loss attributable to the Partners of Gaz Métro, an $8.4 million year-over-year decrease that was mainly due to the unfavourable impact of the $4.0 million adjustment to reflect the impact of the Régie's recent decision on the 2013 rate case for Gaz Métro-QDA's activities, as well as of the other parameters of the rate case, partly offset by lower transportation costs.

As for the 2014 rate case, on June 6, 2013, the Régie approved the renewal of the 8.90% authorized rate of return on deemed common equity for fiscal 2014.

 
Energy distribution in Vermont
                     
Green Mountain Power (GMP)   Vermont Gas Systems (VGS)
                     
Rate base   Authorized return   Customers   Rate base   Authorized return   Customers
$1.1B   8.84%   258,000   $110M   9.75%   45,000


The recurring net income attributable to the Partners of Gaz Métro from the energy distribution activities in Vermont totalled $35.2 million1 for the first nine months and $7.9 million1 for the third quarter of fiscal 2013, up $22.8 million and $9.3 million, respectively, from the same periods last year.

These increases were mainly due to higher net income from GMP following the June 2012 acquisition of Central Vermont Public Service Corporation (CVPS), mitigated by the related increase in financing costs and the unfavourable first-quarter impact of costs incurred in the wake of Hurricane Sandy. Other factors underlying the increase include a favourable impact on GMP's volumes of the colder temperatures in the first nine months of 2013 compared to the same period of fiscal 2012 as well as a favourable impact of VGS's temperature normalization mechanism and its higher rates as per the rate case.

With regard to the merger of GMP's and CVPS's operations, GMP is working to accelerate implementation of its three-year plan so that it and its customers can benefit from the efficiencies and synergies as soon as possible. At present, GMP is ahead of schedule.

In December 2012, VGS filed an application seeking regulatory approval for phase I of its system extension to Addison County. A decision is expected by the end of the 2013 calendar year such that construction may begin in 2014. Note that the project includes a second phase that was announced by VGS in October 2012 after an agreement was reached with International Paper Company under which natural gas service would be extended to one of that company's mills starting at the end of the 2015 calendar year. VGS expects to seek regulatory approval for phase II by the end of the 2013 calendar year. If approved, the system developments (phases I and II) could double VGS's average rate base over time.

Natural Gas Transportation

In the Natural Gas Transportation segment, net income attributable to the Partners of Gaz Métro totalled $13.1 million1 for the first nine months and $2.7 million1 for the third quarter of fiscal 2013, a year-over-year increase of $0.1 million for the first nine months and decrease of $0.8 million from the third quarter last year.

These changes were mainly due to lower revenues from Trans Québec & Maritimes Pipeline (TQM) (as a result of a decrease in the final rates approved by the National Energy Board in May 2013 and effective retroactively to January 1, 2013) and to the allocation of the income tax expense related to TQM, as explained below, offset by a higher share in the income before taxes of Portland Natural Gas Transmission System (PNGTS), which benefited from, among other things, the decrease in natural gas available on other systems, thus increasing its short-term sales.

Note that, since the end of fiscal 2012, the income tax expenses related to TQM and Intragaz are recognized by Gaz Métro rather than by Valener and Gaz Métro inc.

Energy Production

This new segment consists of non-regulated energy production activities related to the wind farm construction projects located on the private lands of Seigneurie de Beaupré. These wind power projects are under construction and therefore have not yet begun to generate revenue.

Energy Services, Storage and Other

In the Energy Services, Storage and Other segment, recurring net income attributable to the Partners of Gaz Métro totalled $0.1 million1 for the third quarter and $4.7 million1 for the first nine months of fiscal 2013, down $1.5 million and $1.7 million, respectively, from the same periods last year.

The declines in net income were mainly due to the fact that, in fiscal 2012, net income had been realized by HydroSolution, L.P. (HydroSolution), whereas the interest in this company was sold during the first quarter of fiscal 2013, and to the allocation of the income tax expense related to Intragaz.

On July 18, 2013, as part of the Blue Road initiative, which plans to deploy a network of public liquefied natural gas (LNG) refuelling stations for the freight transportation industry along the corridor of Highways 20 and 401, Gaz Métro Transport Solutions, L.P. and La Coop fédérée announced the signing of a partnership agreement for the deployment of an innovative, multi-energy service station concept. These public stations will be the first in Eastern Canada to offer LNG as fuel. In addition to LNG, and compressed natural gas (CNG) in certain cases, they will distribute diesel, gasoline, propane and biofuel and make electric charging stations available to users.

 
Gaz Métro's segment results - Consolidated net income attributable to Partners
  3 months ended June 30 (1)   9 months ended June 30 (1)
(in millions of dollars) 2013   2012   Change   2013   2012   Change
Energy Distribution                      
  Gaz Métro-QDA (5.5)   2.9   (8.4)   139.0   139.0   -
  VGS and GMP 12.6   (6.8)   19.4   49.3   8.9   40.4
  Financing costs of investments in this segment (3) (4.7)   (2.5)   (2.2)   (14.1)   (4.4)   (9.7)
  Costs related to the CVPS acquisition (net of income taxes) -   7.9   (7.9)   -   7.9   (7.9)
  2.4   1.5   0.9   174.2   151.4   22.8
Natural Gas Transportation                      
  TQM, PNGTS and Champion 3.0   4.1   (1.1)   14.1   15.3   (1.2)
  Financing costs of investments in this segment (3) (0.3)   (0.6)   0.3   (1.0)   (2.3)   1.3
  2.7   3.5   (0.8)   13.1   13.0   0.1
Energy Production (2)                      
  Gaz Métro Éole and Gaz Métro Éole 4 (0.5)   (0.2)   (0.3)   (0.7)   (0.9)   0.2
  Financing costs of investments in this segment (3) -   -   -   -   -   -
  (0.5)   (0.2)   (0.3)   (0.7)   (0.9)   0.2
Energy Services, Storage and Other (2)                      
  Energy and storage 0.3   2.2   (1.9)   20.2   8.3   11.9
  Financing costs of investments in this segment (3) (0.2)   (0.6)   0.4   (0.8)   (1.9)   1.1
  Net gain on the disposal of the interest in HydroSolution -   -   -   (14.7)   -   (14.7)
  0.1   1.6   (1.5)   4.7   6.4   (1.7)
Corporate Affairs (2)                      
  Corporate affairs (2.3)   (0.3)   (2.0)   (5.3)   (2.7)   (2.6)
  (2.3)   (0.3)   (2.0)   (5.3)   (2.7)   (2.6)
Consolidated net income attributable to Partners, excluding non-recurring items (4) 2.4   6.1   (3.7)   186.0   167.2   18.8
Non-recurring items -   (7.9)   7.9   14.7   (7.9)   22.6
Consolidated net income (loss) attributable to Partners 2.4   (1.8)   4.2   200.7   159.3   41.4
(1) Seasonal temperature fluctuations influence the energy consumption levels of customers and in turn have an influence on Gaz Métro's interim consolidated financial results. Historically, Gaz Métro's revenues and profitability are higher in the first two quarters of a fiscal year than in the last two quarters.
(2) As of the first quarter of fiscal 2013, Gaz Métro modified its financial reporting structure for segment disclosures given the development of important wind power projects and the sale of certain companies. Last year's figures for the first three quarters have been reclassified to present financial information that reflects the new business segments.
(3) These costs consist of the interest on the long-term debt incurred by the Partnership to finance investments in the subsidiaries, joint ventures and entities subject to significant influence of each segment.
(4) This measure is a non-GAAP financial measure. For additional information, refer to the Non-GAAP Financial Measures heading in Valener's MD&A for the quarter ended June 30, 2013.


Conference call

Valener will hold a conference call with financial analysts today, Friday, August 9, 2013 at 2 pm (Eastern Time) to discuss its results and those of Gaz Métro.

The media and other interested parties are invited to listen to this conference call by dialling 647-427-7450 or toll-free 1-888-231-8191. It will also be available via webcast on Valener's website (www.valener.com) in the Events & Presentations page of the Investors section.

For 30 days afterward, a rebroadcast will be accessible by dialling 416-849-0833 or toll-free 1-855-859-2056 (access code: 15044257) and for 90 days on Valener's Web site.

Overview of Valener

Valener owns an economic interest of approximately 29% in Gaz Métro. Valener therefore has a stake in the energy industry and benefits from Gaz Métro's diversified profile, both in terms of geography and business segment. Valener also owns a 24.5% indirect interest in the wind power projects developed with Gaz Métro and Boralex inc. on the private lands of Séminaire de Québec. Valener's common shares and preferred shares are listed on the Toronto Stock Exchange under the "VNR" trading symbol for common shares and under the "VNR.PR.A" symbol for Series A preferred shares. www.valener.com

Overview of Gaz Métro

With more than $5 billion in assets, Gaz Métro is a leading energy provider. It is the largest natural gas distribution company in Quebec, where its underground network of over 10,000 km of pipeline serves 300 municipalities and more than 185,000 customers. Gaz Métro is also present in Vermont, producing electricity and distributing electricity and natural gas to meet the needs of approximately 300,000 customers. Gaz Métro is actively involved in the development of innovative, promising energy projects such as the production of wind power, the use of natural gas as a transportation fuel, and the development of biomethane. Gaz Métro is committed to ensuring the satisfaction of its customers, providing support to businesses, local organizations, families and communities, and meeting the needs of its partners (Gaz Métro inc. and Valener) and employees. www.gazmetro.com

Cautionary note regarding forward-looking statements

This press release may contain forward-looking information within the meaning of applicable securities laws. Such forward-looking information reflects the intentions, plans, expectations and opinions of the management of GMi, in its capacity as General Partner of Gaz Métro, and acting as manager of Valener (the management of the manager) and is based on information currently available to the management of the manager and assumptions about future events. Forward-looking statements can often be identified by words such as "plans," "expects," "estimates," "forecasts," "intends," "anticipates" or "believes" or similar expressions, including the negative and conjugated forms of these words. Forward-looking statements involve known and unknown risks and uncertainties and other factors beyond the control of the management of the manager. A number of factors could cause the actual results of Valener or of Gaz Métro to differ significantly from current expectations, as they are described in the forward-looking statements, including but not limited to the general nature of the aforementioned, terms of decisions rendered by regulatory agencies, the competitiveness of natural gas in relation to other energy sources, the reliability of natural gas and electricity supply, the integrity of the natural gas and electricity distribution systems, the progress of wind power projects and other development projects, the ability to complete attractive acquisitions and the related financing and integration aspects, the ability to secure future financing, general economic conditions, exchange rate and interest rate fluctuations, weather conditions and other factors described in the "Risk Factors Relating to Valener" and the "Risk Factors Relating to Gaz Métro" sections of Valener's MD&A for the year ended September 30, 2012 and in Gaz Métro's and Valener's disclosure filings. Although the forward-looking statements contained herein are based on what the management of the manager believes to be reasonable assumptions, in particular, assumptions to the effect that no unforeseen changes in the legislative and regulatory framework of energy markets in Quebec and in the New England states will occur; that the applications filed with the Régie will be approved as submitted; that natural gas prices will remain competitive; and that no significant event occurring outside the ordinary course of business, such as a natural disaster or other calamity, will occur; that Gaz Métro will be able to continue distributing substantially all of its net income (excluding non-recurring items); that the wind power projects in which Valener and Gaz Métro own indirect interests will be completed on schedule and as per specification; that GMP will be able to quickly and effectively integrate CVPS's operations; in addition to the other assumptions described in the Valener and Gaz Métro MD&As for the quarter ended June 30, 2013, the management of the manager cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of this date, and the management of the manager assumes no obligation to update or revise them to reflect new events or circumstances, except as required pursuant to applicable securities laws. Readers are cautioned to not place undue reliance on these forward-looking statements.

____________________________
1 Net of financing costs

 

 

SOURCE VALENER INC.



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