<<
(in millions of dollars, except per-share amounts)
-------------------------------------------------------------------------
Three months ended
------------------------
March 31, March 31,
2006 2005
------------------------
Energy revenue 37.1 31.0
EBITDA 17.6 9.4
Net earnings 7.6 3.4
Net earnings per share $0.25 $0.11
-------------------------------------------------------------------------
>>
MONTREAL, May 12 /CNW Telbec/ - For its first quarter ended March 31,
2006, Boralex Inc. ("Boralex" or the "Corporation") reported revenue from
energy sales of $37.1 million, compared to $31 million for the three-month
period ended March 31, 2005. Earnings before interest, taxes, depreciation and
amortization ("EBITDA") rose a substantial 87% to $17.6 million, versus
$9.4 million in 2005. The first quarter of 2006 ended with net earnings of
$7.6 million, or $0.25 per share, compared to $3.4 million, or $0.11 per
share, in 2005.
Boralex's improved first-quarter results in 2006 are primarily due to the
wind power start-ups at Massif Central and Plouguin in France. Revenue for
this segment grew $3.5 million, from $2.1 million in 2005 to $5.6 million in
2006. In addition, work is continuing at the St-AgrGeve site scheduled to start
up in the first quarter of 2007. The renewable energy tax-benefit programs in
the United States and France also contributed significantly to growth in the
Corporation's revenue and EBITDA.
In the first quarter, better hydrology allowed our hydroelectric power
stations to generate more power, 25% more than the historical average and 22%
higher than 2005. As a result, the hydroelectric segment reported revenue of
$3.6 million, up 33% over the same period in 2005.
Despite the increase in the Canadian dollar, which had a negative impact
of $1.2 million on revenue from the U.S. power stations translated into
Canadian dollars, revenue from the wood residue power stations rose to
$22.2 million, up 8% over the same three-month period in 2005. This segment's
performance is due mainly to the higher electricity prices on the U.S. open
market and tax credits granted to the U.S. power plants.
"As an expert in generating green and renewable energy and as part of a
growing worldwide trend, Boralex will continue in 2006 to benefit from the
positive factors that improved its performance in 2005. It will maintain its
focus on the responsible management of its operating costs and business
risks," said Claude Audet, president and chief operating officer.
Boralex focuses on four types of power generation: hydroelectric power,
thermal or cogeneration power from natural gas or wood residue, and wind
power. These are all fields where Boralex has developed proven expertise
centred on renewable energy. Boralex employs more than 260 workers and owns
20 power stations in Quebec, the United States and France, with an installed
capacity of 315 MW. With a new wind farm under construction, its installed
capacity will soon totalled 327 MW. Boralex also owns an urban wood processing
and recycling centre located in Montreal. ( www.boralex.com )
Effective May 15, 2006, BLX.A will become BLX on the Toronto Stock
Exchange.
In addition, Boralex holds a 23% interest in Boralex Power Income Fund
which owns 10 power stations in Quebec and the United States with an installed
capacity of close to 190 MW. Management of the Fund's assets is provided by
Boralex.
Certain statements in this release, including statements regarding future
results and performance, are forward-looking statements based on current
expectations. The accuracy of such statements is subject to a number of risks,
uncertainties and assumptions that may cause actual results to differ
materially from those projected, including, but not limited to, the effect of
general economic conditions, decreased demand for Boralex's products,
increases in raw material costs, fluctuations in currency exchange rates,
fluctuations in sales prices and adverse changes in general market and
industry conditions. The financial statements included in this press release
also contain certain financial measurements that are not recognized as
generally accepted accounting principles.
To assess the operating performance of its assets and reporting segments,
the Corporation uses Earnings before interest, taxes, depreciation and
amortization ("EBITDA") as a performance measurement. EBITDA is not defined
under Generally Accepted Accounting Principles ("GAAP") and does not have a
standardized meaning prescribed by GAAP. Therefore, this measure may not be
comparable to similar measures presented by other enterprises. EBITDA is
defined in note 14 of the interim financial statements included with this
press release, as well as in the latest annual report of the Corporation.
<<
Consolidated balance sheets
(in thousands of dollars)
As at As at
March 31 December 31
Note 2006 2005
-------------------------------------------------------------------------
(unaudited) (audited)
Assets
Current assets
Cash and cash equivalents 16,226 10,615
Accounts receivable 26,655 26,006
Inventories 3,505 5,232
Prepaid expenses 3,219 1,955
Future income taxes 4,766 7,979
-------------------------------------------------------------------------
54,371 51,787
Investment 78,398 77,997
Property, plant and equipment 269,643 262,460
Electricity sale contracts 17,511 16,814
Other assets 5 29,937 20,457
-------------------------------------------------------------------------
449,860 429,515
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Liabilities
Current liabilities
Bank loans and advances 6 - 1,215
Accounts payable and accrued liabilities 21,043 28,608
Income taxes 2,958 2,787
Current portion of long-term debt 6 41,275 37,802
-------------------------------------------------------------------------
65,276 70,412
Long-term debt 6 182,729 164,832
Future income taxes 27,044 28,026
Non-controlling interests 1,117 1,034
-------------------------------------------------------------------------
276,166 264,304
Shareholders' equity
Capital stock 3,4 111,892 111,686
Retained earnings 91,797 84,188
Cumulative translation adjustments (29,995) (30,663)
-------------------------------------------------------------------------
173,694 165,211
-------------------------------------------------------------------------
449,860 429,515
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
Consolidated statements of earnings
(in thousands of dollars, except per-share amounts and number of shares)
(unaudited)
For the quarters
ended March 31
Note 2006 2005
-------------------------------------------------------------------------
Revenue from energy sales 37,101 31,018
Renewable energy tax credit 2,955 -
Operating costs 26,167 22,455
-------------------------------------------------------------------------
13,889 8,563
Share in earnings of the Fund 3,585 3,105
Management revenue from the Fund 1,356 1,356
Other revenue 2,441 124
-------------------------------------------------------------------------
21,271 13,148
-------------------------------------------------------------------------
Expenses
Management and operation of the Fund 1,023 1,013
Administration 2,667 2,735
-------------------------------------------------------------------------
3,690 3,748
-------------------------------------------------------------------------
Earnings before the following 17,581 9,400
-------------------------------------------------------------------------
Other expenses
Amortization 4,620 2,376
Financial expenses 2,781 1,334
-------------------------------------------------------------------------
7,401 3,710
-------------------------------------------------------------------------
Earnings before income taxes 10,180 5,690
Income tax expense 2,500 2,200
-------------------------------------------------------------------------
7,680 3,490
Non-controlling interests (71) (81)
-------------------------------------------------------------------------
Net earnings 7,609 3,409
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Net earnings per class A share (basic and diluted) $0.25 $0.11
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Weighted average number of class A shares
outstanding 29,997,561 29,986,663
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
Consolidated statements of retained earnings
(in thousands of dollars)
(unaudited)
For the quarters
ended March 31
2006 2005
-------------------------------------------------------------------------
Balance - beginning of period,
as previously reported 84,188 63,419
Share of a change in accounting policy
of the Fund - (319)
-------------------------------------------------------------------------
Balance - beginning of period, restated 84,188 63,100
Net earnings 7,609 3,409
-------------------------------------------------------------------------
Balance - end of period 91,797 66,509
-------------------------------------------------------------------------
-------------------------------------------------------------------------
See accompanying notes
Consolidated statements of cash flows
(in thousands of dollars)
(unaudited)
For the quarters
ended March 31
Note 2006 2005
-------------------------------------------------------------------------
Operating activities
Net earnings 7,609 3,409
Distributions received from the Fund 3,098 3,098
Items not affecting cash:
Share in earnings of the Fund (3,585) (3,105)
Amortization 4,620 2,376
Amortization of deferred financing costs 144 52
Future income taxes 2,180 2,013
Renewable energy tax credit (2,955) -
Non-controlling interests 71 81
Others 141 60
-------------------------------------------------------------------------
Cash flows from operations 11,323 7,984
Net change in non-cash working
capital balances (7,718) (14,470)
-------------------------------------------------------------------------
3,605 (6,486)
-------------------------------------------------------------------------
Investing activities
Purchase of property, plant and equipment (8,150) (6,778)
Other assets (5,441) (712)
Proceeds on disposal of property,
plant and equipment - 400
-------------------------------------------------------------------------
(13,591) (7,090)
-------------------------------------------------------------------------
Financing activities
Bank loans and advances 6 (42,012) 6,292
Increase in long-term debt 6 59,896 7,736
Payments of long-term debt (2,067) (1,441)
Financing costs (717) (6)
Net proceeds on issuance of shares 84 -
-------------------------------------------------------------------------
15,184 12,581
-------------------------------------------------------------------------
Translation adjustments on cash
and cash equivalents 413 (20)
-------------------------------------------------------------------------
Net change in cash and cash equivalents 5,611 (1,015)
Cash and cash equivalents -
beginning of period 10,615 5,442
-------------------------------------------------------------------------
Cash and cash equivalents -
end of period 16,226 4,427
-------------------------------------------------------------------------
-------------------------------------------------------------------------
-------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE
Cash and cash equivalents paid for:
Financial expenses 2,635 1,158
Income taxes 334 368
-------------------------------------------------------------------------
See accompanying notes
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(tabular amounts in thousands of dollars, unless otherwise specified)
(unaudited)
Note 1 - Accounting policies
These unaudited interim consolidated financial statements were prepared
following the same accounting policies as the ones used in the latest audited
consolidated financial statements. These unaudited interim consolidated
financial statements and notes should be read in conjunction with the
Corporation's audited consolidated financial statements as at December 31,
2005.
Note 2 - Measurement uncertainty
Following the adoption, during the second quarter of 2005, of the
accounting policy regarding tax credits, Boralex now records renewable energy
tax credits when it possesses a reasonable assurance that they can be
recovered. In order to establish the recoverability of these credits, Boralex
forecasted its taxable income on the carry-forward period of the credits. This
forecast is based on assumptions that could vary considerably in the future.
The key assumptions are mainly: the future price of electricity and its
other associated revenues, the price of other energy sources, particularly
those of oil and natural gas, future costs of wood-residue procurement, and
finally the remaining useful life of the energy producing assets, considering
the investments and maintenance planned over the period.
On a three-year horizon, there exists some liquidity in the electricity
open market, making it possible to project the future price curve. Beyond
three years, prices can be negociated with specific parties, but often at a
significant discount considering a lack of liquidity for such a period.
Therefore, the assumption made is that for years four and after, the price
will vary according to inflation rates. Assumptions related to the other
sources of energy are made using a similar method because there exists a
correlation between their price and that of electricity.
In regards to wood-residue costs, this raw material is not part to an
organized open market. Purchases are made based on specific agreements
negotiated with each supplier. Most of the agreements are renewable on an
annual basis, therefore the prices are subject to some volatility. In that
context, the assumption for wood-residue costs is based on next year's
contracts, adjusted for inflation in the remaining years of the forecast
period.
Finally, the remaining life of the assets will vary with the amount of
maintenance work realized each year. When the power stations are sufficiently
well maintained, their useful life can be very long and limited mostly by
changes in technology which could make their production less competitive.
Consequently, the forecasts consider sufficient maintenance expenses to ensure
that the power stations' life will last, at a minimum, as long as the forecast
period.
Note 3 - Share information
As at March 31, 2006 the capital stock issued and outstanding consisted
of 31,013,098 Class A shares (29,989,398 as at December 31, 2005). During the
three-month period ending March 31, 2006, 23,700 options were exercised.
Finally, no option has been granted during this period.
Note 4 - Share purchase option plan
The Corporation applies the fair value method of accounting for stock-
based compensation awards granted to employees and officers. Accordingly, an
amount of $120,000 has been recorded as administration cost to account for the
cost of stock options, for the three-month period ended March 31, 2006
($44,000 in 2005).
The following assumptions were used to estimate the fair value, at the
date of grant, of each option issued to employees after October 1, 2002:
2005
--------
Risk-free interest rate 3.85%
Expected dividend yield 0%
Expected life of options 5 years
Expected volatility 45%
Note 5 - Other assets
March 31 December 31
2006 2005
-------------------------------------------------------------------------
Renewable energy tax credits 13,623 10,625
Net investment in lease financings 4,466 4,114
Deferred financing costs 2,685 2,060
Deferred costs 468 671
CO2 quota 1,056 717
Restricted funds and
other funds held in trust 6,895 1,636
Investments 87 85
Project development costs 657 549
-------------------------------------------------------------------------
29,937 20,457
-------------------------------------------------------------------------
-------------------------------------------------------------------------
a) Amortization of deferred costs was $18,000 for the three months ended
March 31,2006 ($156,000 for the twelve months ended December 31, 2005).
Amortization of deferred financing costs was $144,000 for the three months
ended March 31,2006 ($477,000 for the twelve months ended December 31, 2005).
The other items are not subject to amortization.
b) The Corporation has recorded during the 2 last years an amount of
$13,623,000 (of which $2,998,000 during the 1st quarter of 2006) of renewable
energy tax credits that can be used against US federal income tax during the
course of the next 20 fiscal years. These credits are awarded for producing
electricity by using wood-residues as the source of fuel, since January 1st,
2005.
c) During the 1st quarter of 2006, the Company reserved an amount of
3,437,000 euros ($4,869,000), as required under the financing of Massif
Central.
Note 6 - Long-term debt
March 31 December 31
Note Rate (1) 2006 2005
-------------------------------------------------------------------------
Revolving credit bearing
interest at a variable rate a) 5.91% 44,390 40,797
Secured credit with a balance of
15,725,000 euros as
at March 31, 2006
(15,725,000 euros in 2005),
bearing interest at a variable
rate and maturing
June 30, 2006 b) 2.96% 22,349 21,775
Secured senior credits with a
balance of 88,060,000 euros
as at March 31, 2006
(79,578,000 euros in 2005),
repayable in semi-annual
instalments and maturing
between 2017 and 2020 c) 4.99% 124,772 109,857
Secured junior credit with a
balance of 4,041,000 euros
as at March 31, 2006
(2,300,000 euros in 2005),
repayable in semi-annual
instalments and maturing
in 2015 c) 6.45% 5,726 3,175
Project leases with a balance of
13,221,000 euros as at
March 31, 2006
(13,585,000 euros in 2005),
repayable in quarterly instalments
and maturing between
2012 and 2015 d) 5.48% 18,733 18,755
Term loan bearing interest at
a variable rate with a balance
of US$4,896,000 as at March 31,
2006 (US$5,096,000 in 2005),
repayable in quarterly instalments
and maturing May 1, 2007 e) 6.00% 5,715 5,942
Others 2,319 2,333
-------------------------------------------------------------------------
224,004 202,634
Less:
Current portion of long-term debt 41,275 37,802
-------------------------------------------------------------------------
182,729 164,832
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Average weighted annual rates, adjusted to reflect the impact
of interest rate swaps.
a) On January 27, 2006, Boralex announced that it had concluded a long-
term refinancing agreement of $85 million, replacing the original $65 million
revolving credit issued in 2004. The new arrangement consists of a three-year
revolving credit, with two one-year options to renew. Like the previous
facility, the new financing is guaranteed by Boralex's investment in the Fund,
to a limit based on the market value of the Fund's trust units. The amounts
borrowed may therefore not exceed a certain percentage of the market value of
the investment, or the lenders can recall a portion of the amounts borrowed.
The instrument bears variable interest at bankers' acceptance rate, adjusted
by a margin that varies depending on the ratio of debt coverage by the
investment in the Fund.
As at March 31, 2006 in order to secure some transactions including
the credit discussed in b), the Company has issued letters of credit for a
total of $24,282,000 against this credit.
b) This credit is secured by a letter of credit of $22,972,000, as
previously mentioned. Boralex intends to refinance this credit on a long-term
basis, but it has been included in current liabilities due to its current
maturity date.
c) The Company finances a significant portion of the development and
construction of its wind power sites with senior and junior secured credit.
Accordingly, on July 22, 2005, Boralex entered into a major master credit
agreement of 190,000,000 euros, including a 150,000,000 euros senior credit
facility, a 10,000,000 euros junior credit arrangement, and 30,000,000 euros
to finance amounts that will be recoverable in the short term from the French
TrDesor Public. These funds will be available for the development of new wind
power projects, subject to certain conditions. Each project will have separate
financing defined by its own contract. Interest will be at a variable rate
based on the EURIBOR rate plus a margin. This credit will be available until
December 31, 2008. As at March 31, 2006, an amount of 160,329,000 euros
($227,170,000) is available on this credit agreement.
Senior and junior credits are secured with the assets of the associated
projects, with the junior credit being subordinate to the senior credit.
d) Project leases consist of capital leases on assets located in France.
The net book value of capital assets covered by these leases is $25,334,000
($27,567,000 as at December 31, 2005).
e) During the 1st quarter of 2006, this term loan has been extended for
an additional period of one year under the same conditions, deferring it's
maturity until at May 1st, 2007.
Interest rate swaps
Except for the Nibas wind farm financing, all senior and junior secured
credit together with a portion of certain leases bear interest at a variable
rate. To offset the interest rate risk, the Company has entered into interest
rate swaps to obtain fixed interest charges on portions of 50% to 100% of the
corresponding credit. These agreements involve the periodic exchange of
interest payments without any exchange of the principal on which they are
calculated. Under these agreements, the Company receives a variable amount
based on the EURIBOR rate and pays fixed amounts based on rates of between
3.48% and 3.85%. Since the credit is drawn progressively and the loans are
periodically repaid when sites are commissioned, the swaps have been
structured to mirror the terms of the underlying credit arrangements and to
always cover a significant portion of these arrangements. By using these swap
instruments, the Company has reduced the proportion of its variable-rate debt
from 87% to 37%.
Guarantees
In addition to capital assets associated with capital leases and the
investment in the Fund securing the revolving bank credit, the property, plant
and equipment of one U.S. power station, one Quebec power station and French
power stations, with a net book value totalling $165,224,000 as at March 31,
2006 ($161,288,000 as at December 31, 2005), together with the related working
capital, have been pledged as collateral on the debts associated to those
projects.
The estimated aggregate amount of repayments on long-term debt in each of
the next five years is as follows:
2007 41,275
2008 10,536
2009 10,696
2010 55,009
2011 10,689
Note 7 - Financial instruments
A large part of Boralex's debt bears interest at a variable rate. As at
March 31, 2006, variable rate debt accounted for around 87% of the total
indebtedness. Bank loans and advances also bear variable interest rates. If
those rates should increase significantly in the future, this could affect the
amounts of liquidities available to develop new projects. As discussed in
note 6, the use of interest rate swaps enables Boralex to reduce its exposure
to interest rate volatility by reducing its exposure to that risk from 87% to
37%. As at March 31, 2006, the notional amount of those swaps was $128,255,000
(90,518,000 euros) and their favourable fair value stood at $638,000
(450,000 euros).
As at March 31, 2006, Boralex had also signed three electricity price
swaps for total deliveries of 147,888 MWh and for periods covering from 2 to
36 months. All these swaps were designated as hedges of future variable cash
flows related to the delivery of electricity. Their favourable fair value as
at that date was $215,000 and they are eligible for hedge accounting.
Note 8 - Seasonality
The Corporation's power generation follows a seasonal cycle. Generally,
consumption increases in the winter and summer, which correspond to Boralex's
first and third quarters. This means that, for those two periods, facilities
that sell on the open market usually have higher average electricity sales
prices. Given this, and because the wood-residue power stations can control
their level of production, they operate at a higher level during such periods.
Their regular maintenance is then done in the spring or fall, which affects
their operating results.
Hydroelectric generation depends on water flows, which in Quebec and the
northeastern US are at their maximum in the spring and are generally good in
the fall, which correspond to Boralex's second and fourth quarters. Flows tend
to decrease in the winter and summer. Note that Boralex's hydroelectric
facilities do not have reservoirs with which they could regulate the water
flows.
In other respects, certain power stations have long-term fixed-price
power sales contract. This is the case for the two hydroelectric stations in
Quebec, one in the US, the natural gas cogeneration plant at Blendecques in
France and all the wind farms.
Consequently, Boralex is affected by seasonal cycles, however, its
diversification in production sources reduces the seasonal variations in its
results.
Note 9 - Comparative figures
Some comparative figures have been reclassified in order to conform to
the current period's presentation.
Note 10 - Segmented information
The Corporation's power stations are grouped under four distinct
segments: hydroelectric power, wood-residue thermal power, natural gas thermal
power and wind power, and are engaged mainly in the production of energy. The
classification of these segments is based on the different cost structures
relating to each type of power station. The accounting policies that apply to
the individual segments are the same policies used for the consolidated
financial statements as described in note 1.
The Corporation analyzes the performance of its operating segments based
on their EBITDA which is defined as earnings before interest, taxes,
depreciation and amortization. EBITDA is not a measure of performance under
Canadian generally accepted accounting principles; however, management uses
this performance measure for assessing the operating performance of its
reportable segments. Earnings for each segment are presented on the same basis
as those of the Corporation.
Information by segment For the quarters
ended March 31
2006 2005
-------------------------------------------------------------------------
PRODUCTION (in MWh)
Hydroelectric power stations 40,763 33,445
Wood-residue thermal power stations 284,417 264,244
Natural gas thermal power station 22,649 22,384
Wind power stations 46,530 15,002
-------------------------------------------------------------------------
394,359 335,075
-------------------------------------------------------------------------
-------------------------------------------------------------------------
REVENUE FROM ENERGY SALES
Hydroelectric power stations 3,594 2,699
Wood-residue thermal power stations 22,248 20,516
Natural gas thermal power station 5,685 5,739
Wind power stations 5,574 2,064
-------------------------------------------------------------------------
37,101 31,018
-------------------------------------------------------------------------
-------------------------------------------------------------------------
EBITDA(1)
Hydroelectric power stations 2,563 2,284
Wood-residue thermal power stations 4,247 2,040
Natural gas thermal power station 3,503 1,432
Wind power stations 4,511 1,646
Corporate and eliminations 2,757 1,998
-------------------------------------------------------------------------
17,581 9,400
-------------------------------------------------------------------------
-------------------------------------------------------------------------
PURCHASE OF PROPERTY, PLANT AND EQUIPMENT
Hydroelectric power stations 18 2
Wood-residue thermal power stations 2,076 3,420
Natural gas thermal power station - 129
Wind power stations 5,982 3,174
Corporate and eliminations 74 53
-------------------------------------------------------------------------
8,150 6,778
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The following table reconciles EBITDA to
net earnings:
Net earnings 7,609 3,409
Non-controlling interests 71 81
Income tax expense 2,500 2,200
Financial expenses 2,781 1,334
Amortization 4,620 2,376
-------------------------------------------------------------------------
Consolidated EBITDA 17,581 9,400
-------------------------------------------------------------------------
-------------------------------------------------------------------------
March 31 December 31
2006 2005
-------------------------------------------------------------------------
ASSETS
Hydroelectric power stations 20,465 20,762
Wood-residue thermal power stations 116,796 128,287
Natural gas thermal power station 21,932 18,258
Wind power stations 187,629 175,940
Corporate and eliminations 103,038 86,268
-------------------------------------------------------------------------
449,860 429,515
-------------------------------------------------------------------------
-------------------------------------------------------------------------
>>
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May 22, 2013, 1:25 PM EDT
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Boralex Gets Strong Start to 2006, Doubling Net Earnings
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