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Innergex expanding footprint in France with C$21M wind deal

Innergex Renewable Energy Inc. and Régime de rentes du Mouvement Desjardins are acquiring two wind projects, totaling 24 MW, in France for about €15.05 million, or C$20.96 million, subject to certain adjustments.

The transaction is expected to close by the end of this year after the projects achieve commercial operations, according to a Dec. 12 news release. At closing, Innergex will pay about €9.06 million, or C$12.62 million, from its available funds for a 69.55% stake in the projects. The remaining stake will be held by Régime de rentes du Mouvement Desjardins, a Canada-based provider of private pension plan.

The wind farms, which hold a 15-year power purchase agreement with EDF Group, are expected to generate annual revenues of about €6.24 million, or C$8.69 million, and adjusted EBITDA of €5.19 million, or C$7.22 million, in 2017.

While the deal offers a modest incremental value to Innergex, Desjardins Capital Markets noted that it will not have a material impact on valuation. "We estimate they will add ~1.7% to our prior 2017 EBITDA estimate, ~C$0.02 to our adjusted [free cash flow per share] estimate (a ~2% increase) and ~C$0.05–0.08 to our [discounted cash flow] valuation," Desjardin analysts wrote in a Dec. 13 investor note.

Desjardins raised its 2017 estimates for the "hold"-rated company to C$297 million from C$292 million for adjusted EBITDA, and to C$1.02 from C$1 for adjusted free cash flow per share.

According to Innergex, the projects have already secured €39.65 million, or C$55.22 million, in financing for 2017. Interest on the nonrecourse project debt is fixed over a 10-year period at 1.25% for the 15-year tranche of €30.0 million, and at 1.15% for the 10-year tranche of €8.25 million.

The company plans to enter long-term currency hedging instruments to reduce its exposure to exchange rate fluctuations. As of Sept. 30, the company's derivative financial instruments to manage its exposure to exchange rate fluctuations on the future repatriation of cash flows from its French operations had a net negative value of C$87.7 million.