Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Innergex Renewable Energy Inc (INGXF, Financial) maintained a high asset availability of over 96% across its portfolio, demonstrating effective operational management.
- The company successfully commissioned a project in Chile under budget by $5 million, showcasing efficient project execution.
- Innergex Renewable Energy Inc (INGXF) signed a 25-year PPA with Hydro-Quebec, providing long-term revenue stability with full CPI indexing.
- The company has a diversified portfolio with projects in various stages of development, offering flexibility and optionality for future growth.
- Innergex Renewable Energy Inc (INGXF) reported a significant increase in free cash flow per share, rising from $0.09 in Q2 2023 to $0.26 in Q2 2024, driven by strategic transactions and cost management.
Negative Points
- The company experienced below-average wind regimes and lower irradiance, impacting production and resulting in generation being only 91% of the long-term average.
- Adjusted EBITDA proportionate decreased by approximately 8% year over year, affected by a less favorable generation mix.
- Innergex Renewable Energy Inc (INGXF) faced increased corporate expenses due to higher investments in greenfield activities, impacting short-term profitability.
- The company did not win any bids in a recent RFP, indicating challenges in competitive pricing and market conditions.
- Interconnection challenges in the US pose a significant hurdle for project development, potentially delaying future growth opportunities.
Q & A Highlights
Q: Can you give us a sense of price terms for the new contracts with Hydro-Quebec?
A: Michel Letellier, President and CEO, stated that they are not disclosing the price of the renewed contracts. However, he mentioned that the terms are in line with previous contracts, with an increase in capacity by about 15% due to equipment upgrades. The contracts are also indexed to CPI for 25 years.
Q: Any update on Palomino interconnection and the US prospective pipeline?
A: Michel Letellier explained that interconnection in the US is challenging, but they are working on projects like Omar, a 400 MW project, and exploring opportunities in Wyoming and the Midwest. They are also considering smaller projects that could interconnect more quickly.
Q: What milestones remain to complete the Boswell project, and how confident are you in meeting the year-end deadline?
A: Michel Letellier expressed confidence in meeting the year-end deadline, noting that Pacific Corp is finalizing a substation. Innergex has taken proactive measures, such as ordering equipment to facilitate commissioning, to ensure readiness for interconnection by December.
Q: How does the recontracting of partner hydro facilities inform your view on upcoming negotiations for Quebec wind farms?
A: Michel Letellier prefers long-term renegotiations to plan for decommissioning and repowering. He is optimistic about reaching agreements with Hydro-Quebec, given the need for power and the established infrastructure of existing projects.
Q: What is your plan for financing or refinancing upcoming debt maturities, including convertibles and sub-debt?
A: Jean Trudel, CFO, mentioned that the $150 million sub-debt could be repaid with revolving capacity, and discussions are ongoing for refinancing options. For convertibles, discussions have started, but it's early, and they will focus more on this in early 2025.
Q: With more merchant exposure in Texas, is there a plan to keep assets merchant or seek PPAs?
A: Michel Letellier indicated that with no debt, playing the merchant market is advantageous. They are open to PPAs if they offer cash predictability without basis risk, but currently, they are content with the merchant exposure.
Q: Can you explain the criteria for moving projects from early to advanced stages in your portfolio?
A: Jean Trudel explained that projects are assessed quarterly based on maturity and probability of success. Criteria include land rights and interconnection capacity. Projects can move quickly from early to advanced if they meet RFP requirements.
Q: How do you plan to utilize the investment tax credits (ITCs) for Canadian projects?
A: Jean Trudel stated that Innergex expects to receive 100% of ITCs for certain projects, which will be factored into financing structures. The ITCs will be claimed post-COD and are expected to significantly support project financing.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
