Caisse to back Boralex’s $215 mln buy of wind farm interests

Kingsey Falls, Québec-based renewable energy company Boralex Inc (TSX: BLX) has agreed to acquire interests in five Québec wind farms with a total net installed capacity of 201 megawatts. Boralex will pay $215 million in cash for the stakes to Invenergy Renewables LLC, an affiliate of Chicago-based Invenergy LLC. The deal will see Boralex increase its net installed capacity to 1,820 megawatts. It plans to fund the buy through a $180 million public offering and a $45 million private placement with Caisse de dépôt et placement du Québec, an existing Boralex shareholder. The Caisse also backs Invenergy, agreeing in May to increase its interest in the company to 52.4 percent.

PRESS RELEASE

Boralex Announces an Agreement to Acquire Invenergy Renewables’ Interests in 5 Wind Farms in Québec for $215 million, a $180 million Public Offering and a $45 million Private Placement

Key Transaction Highlights

Acquisition of interests in 5 wind farms in Québec totaling 201 MW of net installed capacity once closing conditions are met
PPAs with Hydro-Québec Distribution expiring between 2032 and 2041
Will increase net installed capacity in Québec to 568 MW
Significantly enhances Boralex’s renewable power portfolio
Will increase net installed capacity by 12% to 1,820 MW
Will extend portfolio’s weighted average PPA term to 14 year
Expected to add $45M in annual EBITDA(A)1
Accretive to Discretionary Cash Flow per share1
Mid single-digit accretion in 2019 and gradually increasing to high single-digit in or about 2022, combined with the acquisition of Kallista, which was completed on June 20, 2018
4.8% increase in annual dividend per share to $0.66, which represents the second increase in 2018 for a total 10% increase in annual dividend per share
Boralex increases its growth target
2019 EBITDA(A)2 target increased from $405-$425M to $490-$510M

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1 See “Other Non-IFRS Measures” below. EBITDA(A) and Discretionary Cash Flow information provided on a Combined basis (“Combined”) (previously referred to as proportionate consolidation).
2 On a Combined basis and annualized run rate basis.

MONTRÉAL, June 20, 2018 /CNW Telbec/ – Boralex Inc. (TSX: BLX) (“Boralex” or the “Corporation”) is pleased to announce it has entered into binding agreements with affiliates of Invenergy Renewables LLC (“Invenergy”) to acquire all of its economic interests in 5 wind farms in Québec totaling 201 MW (the “Projects”) of net installed capacity, for a total cash consideration of $215 million, subject to adjustments under the acquisition agreements (the “Acquisition”).

Located in the MRC d’Avignon and the MRC des Appalaches in Eastern Québec, the Projects were commissioned between March 2012 and December 2016. They comprise state-of-the-art Enercon and GE turbines. The Projects benefit from long-term Power Purchase Agreements (“PPAs”) with Hydro-Québec Distribution expiring between 2032 and 2041.

“We are delighted to announce today the proposed acquisition of interests in 5 wind farms from Invenergy. These high quality assets complement Boralex’s existing portfolio and will add exposure to our home market in Québec. Upon closing, Boralex will also become the new manager of the sites which will provide additional operating cash flows and is expected to lead to increased operational synergies for Boralex as a whole over time. Furthermore, today’s announced equity financings are expected to provide Boralex with the flexibility to pursue the implementation of its growth strategy and continue to deliver value to its shareholders.” said Patrick Lemaire, President and Chief Executive Officer of Boralex.

Description of the Projects

The Projects are comprised of the following:

Des Moulins I wind farm project (136 MW) (“Des Moulins I”) is located in the MRC des Appalaches, Québec and is currently owned, indirectly, by Invenergy (51%) and Caisse de dépôt et placement du Québec (“la Caisse”) (49%). Des Moulins I operates 59 E-82 wind turbines, was commissioned in December 2013 and has a PPA in place expiring in December 2033;
Des Moulins II wind farm project (21 MW) (“Des Moulins II”) is located in the MRC d’Avignon in Gaspésie, Québec and is currently owned, indirectly, by Invenergy (51%) and la Caisse (49%). Des Moulins II operates 9 E-92 wind turbines, was commissioned in December 2013 and has a PPA in place until December 2033;
Le Plateau I wind farm project (139 MW) (“Le Plateau I”) is located in the MRC d’Avignon in Gaspésie, Québec and is currently owned, indirectly, by Invenergy (51%) and la Caisse (49%). Le Plateau I operates 60 E-70 E4 wind turbines, was commissioned in March 2012 and has a PPA in place until March 2032;
Le Plateau II wind farm project (21 MW) (“Le Plateau II”) is located in the MRC D’Avignon in Gaspésie, Québec and is currently owned, indirectly, by Invenergy (59.96% in the project limited partnership and 51% in the general partner of the project limited partnership) and Régie intermunicipale de l’énergie Gaspésie-Iles-de-la-Madeleine (“Régie”) (40.04% in the project limited partnership and 49% in the general partner of the project limited partnership). Le Plateau II operates 9 E-92 wind turbines, was commissioned in December 2014 and has a PPA in place until December 2034. Régie holds a right of first offer with respect to Invenergy’s interest in Le Plateau II; and
Roncevaux wind farm project (75 MW) (“Roncevaux”) is located in the MRC d’Avignon in Gaspésie, Québec and is currently owned, indirectly, by Invenergy (50%), Régie intermunicipale de l’énergie du Bas-Saint-Laurent (previously Énergie éolienne Bas-Saint-Laurent S.E.N.C.) (“Énergie BSL”) (33.33%) and Régie (16.67%). Roncevaux operates 34 GE wind turbines, was commissioned in December 2016 and has a PPA in place until December 2041 Each of Énergie BSL and Régie holds a right of first offer with respect to Invenergy’s interest in Roncevaux project.

Key Attributes of the Acquisition

The acquisition of Invenergy’s interests in the 5 wind farms is expected to strengthen Boralex’s leading position in the Canadian renewable energy sector and is consistent with the Corporation’s proven acquisition strategy. Upon closing, the Acquisition will add 201 MW of clean energy to Boralex’s asset portfolio, increasing the Corporation’s net installed capacity by nearly 12% to 1,820 MW while extending its portfolio’s weighted average PPA term to 14 years.

Boralex expects that its net interest in the Projects will generate approximately $45 million in annual run-rate EBITDA(A) on a Combined basis. Boralex’s interest in the Projects will not be consolidated under IFRS and will be accounted for under the equity method. As a result, taking into account financial expenses and amortization, the net interest of Boralex in the Projects is expected to generate net earnings of $2 million on an annual run-rate basis for the initial years following completion of the Acquisition. In addition, Boralex will become the new manager of the sites by assuming the facilities management agreements currently in place and as such will manage the day-to-day business and affairs of the Projects which will immediately provide additional operating cash flows and is also expected over time to lead to increased operational synergies for Boralex as a whole.

Under the terms of the Acquisition, Boralex will pay a cash consideration of $215 million to Invenergy upon closing, subject to adjustments under the acquisition agreements. Each of the projects have secured long-term project financing from syndicates of international financial institutions. The financings consist of a combination of term loans at variable interest rates (a portion of which has been hedged) and fixed rate notes and loans. Outstanding project debt as at March 31, 2018 totaled $550 million ($283 million based on Boralex’s proportionate share of each project)

Boralex expects to finance the Acquisition with a $180 million public offering of subscription receipts and a $45 million private placement of subscription receipts to la Caisse. These two equity financings will contribute to preserving Boralex’s strong balance sheet and financing flexibility for future growth.

Boralex Continues on its Sustained Growth Pace

The proposed Acquisition follows the completion on June 20, 2018 of the acquisition of the portfolio of Kallista consisting of 163 MW of wind power projects in operation, a 10 MW ready-to-build project and a portfolio of development projects totalling about 158 MW, all located in France, for a consideration of €129 million (C$198 million) (the “Kallista Acquisition”). Together, the Acquisition (assuming closing) and the Kallista Acquisition represent close to $415 million of new acquisitions of wind power projects.

The Acquisition (assuming closing), combined with the Kallista Acquisition, is expected to be mid single-digit accretive to 2019 discretionary cash flows per share. Considering expected operational synergies and new assets to be commissioned from the Kallista portfolio, accretion to discretionary cash flows per share is expected to gradually increase to high single-digit range in or about year 2022.

Dividend Increase

In light of the Acquisition and its confidence in the outlook for the Corporation, the Board of Directors of Boralex has authorized a 4.8% increase in the annual dividend from $0.63 to $0.66 per share (or the quarterly dividend from $0.1575 per share to $0.1650 per share), which represents the second increase in the annual dividend by the Corporation in 2018 for a total 10.0% increase. This second increase will become effective upon closing of the acquisition of Des Moulins I, Des Moulins II and Le Plateau I (collectively, the “Des Moulins and Le Plateau I Acquisition”). This dividend will be paid to shareholders of record at the close of business on the next record date following closing of the Des Moulins and Le Plateau I Acquisition. Boralex is also maintaining its dividend policy of distributing between 40% and 60% of its discretionary cash flows.

Revised 2019 Financial Targets

As a result of the Acquisition (assuming closing), the recently completed Kallista Acquisition and its visibility on projects under construction totaling 277 MW, Boralex is revising upward its 2019 EBITDA(A) target (calculated on a Combined basis and annualized run rate basis) from $405-$425 million to $490-$510 million or, under IFRS, from $360-$380 million to $400-$420 million.

These growth initiatives provide the Corporation with clear visibility on close to 2,100 MW, allowing it to exceed more than one year in advance its 2,000 MW contracted capacity target by the end of 2020. Boralex remains committed to ongoing meaningful growth in its installed capacity, as it has demonstrated with compounded annual growth in the order of 20% from 2013 to the end of 2019 (taking into account the addition of the projects acquired through the Kallista Acquisition, assuming closing of the Acquisition and including the projects already identified on Boralex’s growth path). The Corporation will continue to review market opportunity and expects to provide an updated long-term capacity target in line with ongoing growth objectives by the end of the year.

“We are pleased to have achieved our 2,000 MW capacity target significantly ahead of schedule. The strong growth experienced is the result of concerted effort by our employees to identify opportunities to leverage Boralex’s expertise and delivering value to our shareholders. Achieving profitable growth is in Boralex’s DNA”, said Patrick Lemaire, President and Chief Executive Officer of Boralex.

The revised 2019 financial targets are based on the prices secured via the PPAs with Hydro-Québec, long term average run-rate energy production estimates based on historical wind patterns, targeted contractual and other operational expenses customary to wind farms in Québec and the assumption that Boralex will complete the acquisition of all 5 projects. The revised 2019 financial targets are also based on the assumptions and methodology described in Boralex’s 2017 Management’s Discussion and Analysis under the heading, “Outlook and Development Objectives”, which should be read in conjunction with the “Caution Regarding Forward-Looking Statements” section below and are subject to the risks and uncertainties summarized therein, which are more fully described in Boralex’s public disclosure documents.

Public Offering of Subscription Receipts

Boralex has entered into an agreement with National Bank Financial Inc. and RBC Capital Markets, on behalf of a syndicate of underwriters, to issue and sell, on a bought deal basis, subscription receipts (or class A shares of Boralex (“Common Shares”) as noted below) of Boralex (the “Offering”). The agreement includes the issuance of 8,911,000 subscription receipts at a price of $20.20 per subscription receipt for gross proceeds of $180 million and up to $207 million in the event the underwriters exercise their over-allotment option. The subscription receipts will be offered in all provinces of Canada pursuant to a short form prospectus to be filed by Boralex.

The proceeds from the Offering will be held in escrow pending the completion of the Des Moulins and Le Plateau I Acquisition. If the Des Moulins and Le Plateau I Acquisition is completed on or prior to 5:00 p.m. on November 30, 2018, the net proceeds will be released to the Corporation and the subscription receipts will be exchanged on a one-for-one basis for Common Shares for no additional consideration or further action. The Offering is scheduled to close on or about July 11, 2018. Should the Des Moulins and Le Plateau I Acquisition closing occur before the closing of the Offering, Common Shares, in lieu of subscription receipts, will be issued upon closing of the Offering.

Holders of subscription receipts will also receive on the date of closing of the Des Moulins and Le Plateau I Acquisition, an amount equal to any dividends declared by Boralex and payable to holders of Common Shares of record as of dates from and including the closing date of the Offering to but excluding the date of closing of the Des Moulins and Le Plateau I Acquisition.

The underwriters will be entitled to a fee in the aggregate amount of $7.2 million, assuming no exercise of the over-allotment option, representing 4% of the aggregate gross proceeds of the Offering, payable as to 50% upon closing of the Offering and the other 50% upon closing of the Des Moulins and Le Plateau I Acquisition.

If the Des Moulins and Le Plateau I Acquisition is not completed on or prior to 5:00 p.m. on November 30, 2018, the holders of Subscription Receipts will receive a cash payment equal to the offering price of the Subscription Receipts plus their pro rata share of the interest actually earned on the escrowed funds during the term of the escrow and their pro rata share of the interest that would have been earned on 50% of the underwriters’ fee were such fee included in the escrowed funds.

Private Placement of Subscription Receipts

Boralex has also entered into a subscription agreement with la Caisse pursuant to which Boralex and la Caisse have agreed that la Caisse will acquire, on a private placement basis (the “Concurrent Private Placement”), 2,228,000 subscription receipts (the “Private Placement Subscription Receipts”) at a price of $20.20 per Private Placement Subscription Receipt, for aggregate gross proceeds of $45 million and up to $51.76 million in the event la Caisse exercises its private placement option to acquire additional Private Placement Subscription Receipts concurrently with, and pro rata to, the exercise of the over-allotment option of the underwriters.

The proceeds from the Concurrent Private Placement will be held in escrow pending the completion of the Des Moulins and Le Plateau I Acquisition. If the Des Moulins and Le Plateau I Acquisition is completed on or prior to 5:00 p.m. on November 30, 2018, the net proceeds will be released to the Corporation and the Private Placement Subscription Receipts will be exchanged on a one-for-one basis for Common Shares for no additional consideration or further action. La Caisse will be entitled to a capital commitment fee equal to 4% of the gross proceeds and payable as to 50% upon the closing and 50% upon closing of the Des Moulins and Le Plateau I Acquisition.

The Private Placement Subscription Receipts and the underlying Common Shares will be subject to a four month hold from the closing date of the Concurrent Private Placement.

Conditions to Completion of Offering and Concurrent Private Placement

The issuance of subscription receipts pursuant to the Offering and Concurrent Private Placement is subject to customary closing conditions and approvals of applicable securities regulatory authorities, including the Toronto Stock Exchange. Closing of the Offering and Concurrent Private Placement is scheduled to occur concurrently with, and be conditional upon, each other, provided that the underwriters in connection with the public offering may waive the condition relating to closing of the Concurrent Private Placement. The completion of each of the Offering and the Concurrent Private Placement is also conditional upon there being no termination of the Des Moulins and Le Plateau I Acquisition or announcement of such termination prior to the closing of the Offering and Concurrent Private Placement.

Transaction Structure

Both Le Plateau II and Roncevaux are subject to rights of first offer (“ROFOs”) in favour of the other parties with interests in the respective projects. Such parties have been notified of the Acquisition and will have 45 days to exercise or waive their rights under the ROFOs, followed by a period of negotiation of 20 additional days if they make an initial offer during the initial 45-day period. Should the acquisition of the Le Plateau II and/or Roncevaux projects not be completed, whether as a result of such parties exercising their ROFOs or otherwise, Boralex will proceed with the Des Moulins and Le Plateau I Acquisition, totaling 151 MW of net installed capacity. The Acquisition, combined with the Kallista Acquisition, would be expected to remain accretive to discretionary cash flows per share excluding the Le Plateau II and Roncevaux projects in the event the ROFOs were exercised.

Conditions to Completion of the Acquisition

The Acquisition and related financing has been unanimously approved by the directors of Boralex, other than the representatives of la Caisse who abstained, and remains subject to customary regulatory approvals and closing conditions. The acquisition of Plateau II and Roncevaux is also subject to the provisions of the respective ROFOs. Subject to the foregoing, closing of the Des Moulins and Le Plateau I Acquisition is expected to occur in August 2018.

Related Party Transaction Matters

La Caisse owns approximately 19.9% of the Common Shares issued and outstanding as of June 19, 2018. La Caisse also indirectly holds a 31.7% economic interest in Invenergy, and on May 22, 2018, announced that as part of a separate transaction with Invenergy, it has entered into an agreement to increase its economic participation in Invenergy to 52.4% while Invenergy will remain the managing member and oversee the day-to-day operations.

As a result of the foregoing, the Acquisition could be considered a “related party transaction”, and the Concurrent Private Placement is a “related party transaction” for the purposes of Multilateral Instrument 61-101 – Protection of minority securityholders in special transactions (“MI 61-101”). The Corporation has relied on the exemptions from the valuation and minority approvals of MI 61-101 contained in paragraphs 5.5(a) and 5.7(a) of MI 61-101.

The two independent directors nominated by la Caisse for election to the board of directors of Boralex did not participate in the deliberations relating to the Acquisition and the Concurrent Private Placement, and they abstained from voting on such matters.

Availability of Documents

Copies of related documents, such as the preliminary short form prospectus and the underwriting agreement will be available on SEDAR (www.sedar.com) as part of the public filings of Boralex and on Boralex’s website at www.boralex.com.

About Boralex

Boralex develops, builds and operates renewable energy power facilities in Canada, France, the United Kingdom and the United States. A leader in the Canadian market and France’s largest independent producer of onshore wind power, the Corporation is recognized for its solid experience in optimizing its asset base in four power generation types — wind, hydroelectric, thermal and solar. Boralex ensures sustained growth by leveraging the expertise and diversification developed over the past 25 years. Boralex’s shares and convertible debentures are listed on the Toronto Stock Exchange under the ticker symbols BLX and BLX.DB.A, respectively. More information is available at www.boralex.com or www.sedar.com. Follow us on Facebook, LinkedIn and Twitter.

For further information: Media: Marilyse Paquin, Advisor, Public Affairs and Communications, Boralex Inc., (514) 985-1368, marilyse.paquin@boralex.com; Investor Relations: Marc Jasmin, Investor Relations, Boralex Inc., (514) 206-1643, marc.jasmin@boralex.com