For more than 30 years now, Innergex
Renewable Energy Inc. has believed
in a world where abundant renewable
energy promotes healthier communities
and creates shared prosperity. As an
independent renewable power producer
that develops, acquires, owns and
operates hydroelectric facilities, wind
farms, solar farms and energy storage
facilities, Innergex is convinced that
renewable energy will lead the way
to a better world. Innergex operates
in Canada, the United States, France
and Chile and follows a sustainable
development philosophy that balances
people, our planet and prosperity.
The Corporation’s shares are listed
on the Toronto Stock Exchange (‘’TSX’’)
under the symbols INE, INE.PR.A and
INE.PR.C and its convertible debentures
are listed under the symbols INE.DB.B
and INE.DB.C.
Key Figures
Innergex measures its performance using key
performance indicators (“KPIs”). Innergex believes
that these indicators are important, as they provide
management and the reader with additional information
about its production and cash-generating capabilities,
its ability to pay dividends and fund its growth.
These indicators are not recognized measures under
IFRS, have no standardized meaning prescribed by
IFRS and therefore may not be comparable to those
presented by other issuers. Please refer to the
“Non-IFRS Measures” section for more information.
Production KPIs
• Production in comparison with Long-Term Average
(«LTA») in megawatt/hours (“MWh”) and gigawatt/
hours (“GWh”)
• Production and Production Proportionate
Financial KPIs
• Revenues and Revenues Proportionate
• Adjusted EBITDA, Adjusted EBITDA Margin
and Adjusted EBITDA Proportionate
• Free Cash Flow
• Payout Ratio
• Adjusted Net Earnings (Loss)
Operational Key Performance Indicators
As at February 23, 2022, the Corporation has four geographic segments and three operating segments.
Gross Installed Capacity by Country*
Gross Installed Capacity
by Source of Energy (MW)*
Canada - 50.8%
France - 8.4%
USA - 32.5%
Chile - 8.3%
2016
2017
2018
2019
2020
2021
1,576
2,512
2,888
3,488
3,694
3,852
0
1,000
2,000
3,000
4,000
Hydro
Wind
Solar
* Gross Installed Capacity for continued operations, excluding the Shannon facility due to the project's assets and liabilities being classified
as disposal group held for sale, following the February 2021 Texas Events.
Table of Contents
04 Message to shareholders
18 Management's Discussion
and Analysis
92 Responsibility for
Financial Reporting
93 Independent Auditor's Report
99 Consolidated
Financial Statements
105 Notes to the Consolidated
Financial Statements
Financial Key
Performance Indicators
Revenues and Revenues Proportionate ($M)
1000
800
600
400
200
0
781.5
613.2
698.0
557.0
913.1
692.2
Revenues
747.2
2019
2020
2021
PTCs
JV - Texas
Revenues excluding Texas Events
JV
Texas**
Adjusted EBITDA Proportionate ($M)
Cash Flow From Operating Activities ($M)
800
600
400
200
0
560.3
516.8
409.2
422.1
673.7
470.7
470.7
400
300
200
100
0
Adjusted
EBITDA
525.6
240.1
235.1
285.2
268.1
2019
2020
2021
2019
2020
2021
PTCs
Adjusted EBITDA excluding Texas Events
JV - Texas
Texas**
JV
Texas**
Cash Flow From Operating
Activities excluding Texas Events
Free Cash Flow ($M)
Net Loss ($M)
93.3
93.3
108.1
125
100
75
50
25
0
2019
2020
2021
** Please refer to the "February 2021 Texas Events" section for
more information.
185.4
31.2
29.1
Net Loss
200
150
100
50
0
2019
2020
2021
Impairment non-current assets, net of tax
Impairment Flat Top and Shannon, net of tax
Texas**, net of tax
and Impairment Charges
Net Loss before Texas**
03
INNERGEX.COM —INNERGEX An Increasingly
Important Mission
As this second year of the pandemic
comes to a close, it is important
not to forget that 2021 was also
marked by climate change-related
natural disasters that underscore
our environmental fragility and the
urgency for action. All of these events
demonstrate how our mission to build
a better world with renewable energy is
more relevant than ever.
As the occurrence of similar types of
natural catastrophes is likely to increase
in the coming years, we at Innergex
will continue to focus our efforts on
strengthening the resilience of our
infrastructure and energy systems.
As we continue to grow, our team is
constantly looking for more innovative
solutions to ensure the performance and
longevity of our assets.
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Hawaii to develop flagship solar and storage projects
to accelerate the decarbonization of these islands.
Green hydrogen is another technology that our team
is starting to develop. While batteries are excellent
for short-term storage, green hydrogen is a more
viable long-term energy storage and distribution
solution in terms of wide-scale global deployment.
Green hydrogen would, among other things, make
the industrial and transport sectors greener,
both of which contribute significantly to current
GHG emissions.
We firmly believe that storage
represents an indispensable
component in the energy transition
and an undeniable complement to
renewable energy production.
We are therefore striving to expand our expertise in
the field of green hydrogen, both from a technical and
commercial knowledge point of view, and are studying
the various policy frameworks in place with a view to
seizing opportunities within our target markets.
We firmly believe in the development of ever
more innovative technologies to fight climate
change. Innergex can see enormous potential for
growth in such technologies, which is why we are
actively working on furthering our knowledge and
development within related technology sectors.
Continued growth
towards a better world
In terms of development, 2021 saw the commissioning
of three new projects.
In the United States, we commissioned the Griffin
Trail wind farm in Texas. This project, developed
over 16 months, was made possible thanks to the
United States extending the eligibility deadlines for
production tax credits, as well as our team’s creativity
in setting up an ingenious tax equity structure that
allowed to achieve the project's financing.
In Ohio, we commissioned the Amazon Solar Farm
Ohio – Hillcrest, which sells its output to a large
U.S. corporation under a long-term corporate power
purchase agreement. This type of contract is expected
to continue to grow in our industry as we see an
increasing number of companies seeking to reduce
or offset their GHG emissions by purchasing
clean electricity.
In Canada, construction of the Innavik project to
decarbonize the Inukjuak community continues in
partnership with the Inuit. More than ever this year,
Canada has learned about the trauma and harm
experienced by Indigenous peoples. We firmly believe
not only that the private sector has a responsibility
to participate in reconciliation, but also that ensuring
resource sustainability depends on establishing
viable partnerships with Indigenous communities,
drawing on their expertise and knowledge of
the territory.
In France, the commissioning of Yonne II in March
was an opportunity to highlight the development work
done since 2017 by our French team, who managed
to effectively negotiate authorization processes that
are significantly longer in this country than any other
countries where we carry out our activities. This year
saw the maturing of various development initiatives
where market momentum is now expected.
Also in France, we began the construction of
the Tonnerre standalone battery storage facility,
Innergex’s first project of this type. Batteries bring
more stability to renewable energies and make it
possible to regulate voltage as well as store electricity
produced to cover peak periods. We firmly believe that
storage represents an indispensable component in
the energy transition and an undeniable complement
to renewable energy production. We have therefore
tasked a dedicated in-house team of electricity
storage systems professionals with overseeing
initiatives in this sector, like those we are pursuing in
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Acquisitions that accelerate
our mission
While project development remains a profitable mid-
term outlook, acquisitions constitute an essential
complement to our growth strategy that increases
immediate cash flow, thus improving our payout
ratio. We diversified and considerably strengthened
our existing portfolio through several strategic
acquisitions in 2021.
Chile presents great potential for Innergex, as the
government has set ambitious energy transition
objectives. The country also boasts significant
renewable resources which should bring considerable
business opportunities in the future. In July, we
announced the acquisition of the remaining interest
in our Chilean partner, Energía Llaima, of which
Innergex already held a 50% stake since 2018. This
acquisition in Chile also allowed us to welcome over
80 new employees mainly based out of Santiago
who share our passion for and our philosophy of
sustainable development.
In July, we announced the acquisition
of the remaining interest in our Chilean
partner, Energía Llaima, of which Innergex
already held a 50% stake since 2018. This
acquisition in Chile also allowed us to
welcome over 80 new employees based
out of Santiago and elsewhere in the
country who share our passion for and our
philosophy of sustainable development.
In August, we continued our growth in Chile with the
acquisition of the Licán hydroelectric facility and, at
the beginning of 2022, we pursued this momentum
with the acquisition of the San Andrés solar farm and
of three wind farms (Sarco, Aurora and Cuel) totaling
382.6 MW of additional installed capacity.
We are also proud of having made our first acquisition
within the framework of the Strategic Alliance with
Hydro-Québec, namely the Curtis Mills and Palmer
Falls hydroelectric facilities (together ‘’Curtis Palmer’’)
in the state of New York. Curtis Palmer provides
us with significant cash flow as well as invaluable
learning opportunities within the important renewable
energy market that is the state of New York.
Employees committed
to building this better world
We rely on a solid team in four countries with cutting-
edge sector-specific know-how, whose joint skill sets
allow us to be very optimistic about our future.
We conducted an employee engagement survey this
year that clearly demonstrates their dedication and
the importance they place on our corporate mission.
This puts us in an excellent position to continue
our growth.
Resolutely turned
towards this better world
The private sector continues to lead the energy
transition, supported by growing demand from
investors seeking responsible investment
opportunities.
We know that the decisions we are making today are
paramount in shaping our energy future, and we want
our actions to be above all a source of hope in the face
of this crisis.
In the face of the urgency of climate action, we
will continue to ensure responsible growth and
make investment decisions based on long-term
considerations in accordance with our sustainable
business model.
We rely on a solid team in four
countries with cutting-edge sector-
specific know-how, whose joint skill
sets allow us to be very optimistic
about our future.
Our objective is to consolidate and expand our
current position by diversifying our assets through
the development of new assets and our mergers
and acquisitions activities, while continuing to seize
storage opportunities as they arise.
We extend a warm thank you to our employees, the
members of our board of directors, shareholders,
business partners and suppliers for their exceptional
contribution to our success.
I would like to congratulate the entire
Innergex team for their resilience and
adaptability within the context of the
pandemic, as well as for their passion and
determination every day.
What motivates me most is seeing every
morning the commitment to innovation
demonstrated by employees who are doing
everything possible to be part of the
solution, as well as the deep conviction,
which we all share here at Innergex, that we
are building a better world with renewable
energy.
I am honoured to have steered the Innergex
Board of Directors this year. I am convinced
of the importance of the corporation
mission, which focuses on much more
than simply generating profit, but also on
creating a better world.
The Board of Directors and I will continue to
guide this corporation and its management
team to deliver quality results that create
lasting shareholder value.
Michel Letellier
President and CEO
Daniel Lafrance
Chairman of the Board of Directors
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07
Generating solutions every day
to build a better world
The transition to a clean economy begins with
renewable energy. At Innergex, we remain focused
on pursuing sustainable growth by generating clean
energy exclusively from renewable sources and in line
with our commitment to the three P’s – People, our
Planet and Prosperity. Our team is what differentiates
us from others – they bring an unbridled passion,
dedication and skill set to achieve our goals. Our
dedication to a healthier planet is part of our DNA –
we approach every project with the idea that what we
do is just as important as how we do it. Our results
ensure we can continue to make a difference –
generating value for our employees, shareholders,
partners and other stakeholders is imperative for us
to continue to make a positive impact on
future generations.
People
Our advantage
They come from different backgrounds, have different
skill sets and bring different experiences to the
table, but the one thing they share is that our team
is the backbone of our success. Innergex is proud to
offer a nurturing, safe and inclusive work environment
where individuals are encouraged to reach their full
potential. By providing a flexible work/life balance,
fair and equitable compensation, generous benefits
and other perks, Innergex has been able to attract
and retain a workforce that will lead its future growth.
In 2021
IN 2021, THERE WERE
By promoting equal opportunities for a more
balanced and diverse workplace,
28 .3 %
of Innergex
employees are
women1
97 employees
WITH AT
LEAST
10
years of tenure
at Innergex
YES
NO
Our employee
engagement
survey had an
89%
response rate
Innergex’s
contributions
$1.3 M2
TO EMPLOYEE
RETIREMENT SAVINGS PLAN
IN 2021 TOTALED
Our employees received fair
and competitive compensation with
$54.4 M in employee wages
and benefits paid out3
1. The decrease from last year’s percentage is due to the addition of more than 80 employees in Chile, as part of the acquisition of Energía Llaima in July 2021.
2. For Canadian and US employees. Employees in France and Chile are covered by different retirement systems.
3. Compared with $48.6 million in 2020. Includes wages and benefi ts expenses capitalized to projects under construction or development,
and wages and benefi ts expenses recharged to joint ventures and associates.
08
INNERGEX —ANNUAL REPORT 2021 Planet
Our passion
Since our inception in 1990, we have been focused
on generating solutions to address a warming planet.
While many energy companies are in the process
of transitioning their operations fully to renewables,
throughout its history Innergex has remained committed
to generating electricity exclusively from renewable
sources and today has positioned itself as a leader in
the fight against climate change. Our run-of-river hydro,
solar and wind facilities capture the energy derived
from the natural flow of water, the photons from our
sun, and the flow of wind, period. By incorporating
battery storage technology into our efforts, we are
able to offer further stability and flexibility to our
customers while adding economic and environmental
benefits.
Our facilities do not emit
signifi cant amounts of GHGs and
produce green electricity that
offsets GHG emissions
The GHG emissions
offset by Innergex’s
production of clean,
renewable energy
was approximately
6,982,908
CO2
metric
tonnes of
EQUIVALENT TO
removing
1,518,642
GASOLINE PASSENGER
vehicles
from roads over
the year1
Over
$ 767,000
In 2021
was disbursed
to long-term
environmental
monitoring
programs
which study fi sh, wildlife,
and their habitats in and
around our facilities
We supplied
the equivalent of 1,083,528
households with clean,
renewable energy2
Our run-of-river hydro plants have
non-consumptive use of water
to generate clean
electricity
In 2021
By promoting equal opportunities for a more
balanced and diverse workplace,
28 .3 %
of Innergex
employees are
women1
IN 2021, THERE WERE
97 employees
WITH AT
LEAST
10
years of tenure
at Innergex
YES
NO
Our employee
engagement
survey had an
89%
response rate
Innergex’s
contributions
TO EMPLOYEE
RETIREMENT SAVINGS PLAN
IN 2021 TOTALED
$1.3 M2
Our employees received fair
and competitive compensation with
$54.4 M in employee wages
and benefits paid out3
1. The decrease from last year’s percentage is due to the addition of more than 80 employees in Chile, as part of the acquisition of Energía Llaima in July 2021.
2. For Canadian and US employees. Employees in France and Chile are covered by different retirement systems.
3. Compared with $48.6 million in 2020. Includes wages and benefi ts expenses capitalized to projects under construction or development,
and wages and benefi ts expenses recharged to joint ventures and associates.
1. Based on Innergex’s 2021 Production Proportionate of 9,853,366 MWh and calculated using the United States Environmental Protection
Agency’s Greenhouse Gas Equivalencies Calculator at https://www.epa.gov/energy/greenhouse-gas-equivalencies-calculator.
2. Based on Innergex’s 2021 Production Proportionate in each country in which we operate, divided by the local household average consumption,
with data from the World Energy Council (2014).
09
INNERGEX.COM —INNERGEX Prosperity
Our strategy
Innergex will continue to deliver sustainable growth
through innovative solutions that will generate
shareholder value by building on our expertise,
diversifying our activities and optimizing our
operations. We will remain committed to sharing
prosperity with our partners and the communities
where we conduct operations to act as a catalyst
for further sustainable economic development
and autonomy. Through its focus on renewable energy
generation, Innergex will continue to lead the way
to a more prosperous future for all.
In 2021
Our sponsorship, donation and
voluntary contributions supported
224
organizations
THAT HAVE SHARED OVER
$3MILLION
IN
donations
INNERGEX DECLARED
$132.2 M
in dividends
on common shares
Generating economic
opportunities and sharing
4 countries
UP
17%
UP
22%
$913.1M
in revenues
proportionate1
in 2021
$747.2 M
in revenues
in 2021
1. Revenues Proportionate is not a recognized measures under IFRS and therefore may not be comparable to those presented by other issuers.
Please refer to the «Non-IFRS Measures» section for more information.
10
INNERGEX —ANNUAL REPORT 2021 Governance
Our strength
Our Board of Directors has steadily built a strong
foundation for over 30 years, that has guided Innergex
with clear expectations and sound strategies. This
group of experts brings a diverse wealth of knowledge
and experience to guide the Corporation to ensure
its continued growth and success remains in line
with the interests of our shareholders, employees,
partners and other stakeholders. Ethics and integrity
are embedded into all decisions which reflect the
commitments contained in the Corporation’s Mission,
Vision and Values.
In 2021
Our sponsorship, donation and
voluntary contributions supported
224
organizations
THAT HAVE SHARED OVER
$3MILLION
IN
donations
INNERGEX DECLARED
$132.2 M
in dividends
on common shares
Generating economic
opportunities and sharing
4 countries
UP
17%
UP
22%
$913.1M
in revenues
proportionate1
in 2021
$747.2 M
in revenues
in 2021
100%
of employees
participated in online
self-training modules
on the
Code of
conduct
and other ethical
behaviours and
committed to uphold
its highest standards
The combined
attendance
at Board and committee
meetings was
100%
Ranked
20th
INNERGEX
In 2021
ON CORPORATE KNIGHTS
2021 Best 50
Corporate
Citizens List
80 %
of our board
members were
independent
6
members
of the Board of Directors are experts
in the fields of ESG criteria
ENVIRONMENTAL
SOCIAL
GOVERNANCE
1. Revenues Proportionate is not a recognized measures under IFRS and therefore may not be comparable to those presented by other issuers.
Please refer to the «Non-IFRS Measures» section for more information.
11
INNERGEX.COM —INNERGEX
Business Strategy
Innergex develops, acquires, owns and operates renewable power-generating facilities with a focus
on hydroelectric, wind and solar production as well as energy storage technologies.
The Corporation’s fundamental goal is to create
wealth by efficiently managing its high-quality
renewable energy assets and successfully pursuing
its growth.
Innergex is committed to producing energy from
sustainable renewable sources exclusively and
to providing energy storage capacity, guided by
its philosophy that balances investing in people,
caring for our planet and generating prosperity by
sharing economic benefits with local communities
and creating shareholder value.
Innergex is committed to developing, acquiring, owning
and operating renewable energy facilities exclusively
that generate sustainable cash flows, provide an
attractive risk-adjusted return on invested capital
and enable the distribution of a sustainable dividend.
Innergex owns interests in 40 hydroelectric facilities
drawing on 33 watersheds, 32 wind farms and 8 solar
farms. The expertise and innovation developed by our
skilled team in various energies and different locations
can be leveraged and shared among the Corporation
to maximize returns from our high-quality assets.
Setting the course for sustainable growth
The transition to a carbon-neutral economy will be led by the renewable energy sector. Innergex
is well-positioned to continue its strategic growth and contribute to climate protection by further
optimizing and growing its portfolio of renewable energy facilities. To do so, the Corporation has
set four strategic goals to be achieved by 2025:
Grow responsibly
Focus growth on current markets and target
opportunities in neighbouring ones
Optimize operations
Leverage expertise and innovation to maximize
returns from its high-quality assets
Build expertise
Become an expert in deploying energy
storage technologies
Diversify activities
Increase diversification of the Corporation’s
activities and assets
The Corporation will rely on its experience to pursue
acquisitions and the development of new projects.
It will adopt and master new technologies, mainly
energy storage, expand its customer base beyond
traditional utilities and deploy new business models
through which it will offer more value for the electrons
produced or stored.
Innergex has a solid track record, with decades of
producing green energy from its quality assets. Its
existing renewable energy facilities are operated by a
dedicated team of skilled professionals who will continue
optimizing operations and providing quality maintenance.
With soaring interest in renewable energy development
bringing new players to the sector, Innergex will also
remain committed to the approach that has long
provided responsible growth. Its belief in nurturing
relationships to develop long-term partnerships
with stakeholders and communities, in particular
Indigenous ones, has enabled the Corporation to
develop unique, value-creating renewable projects.
A skilled and passionate team providing expertise
Innergex recognizes that what it has accomplished
and what is yet to come would not be possible without
its highly-skilled team of employees who share its
mission, vision, values and key principles.
Their collective knowledge, talent, abilities,
experience and sound judgment have always been
key to its long-term success. The management
team has a proven track record of delivering projects
on-time and on-budget.
Furthermore, a pool of specialized partners provide
services outside the Corporation’s realm of expertise
when necessary, from engineering firms to
environmental monitoring professionals.
12
INNERGEX —ANNUAL REPORT 2021 Information on COVID-19
The Corporation continues to closely monitor the impacts of COVID-19 and is actively managing
its response by placing a priority on the health and safety of our employees, suppliers, business
partners and the broader community. Innergex is adhering to pandemic response plans and is
following guidance from government health departments with respect to conducting operations safely.
To the extent possible, and as permitted by local guidelines, the Corporation is facilitating vaccination
of its employees against COVID-19.
Power Production:
an Essential Service
Power production activities have continued in all
segments, as they have been deemed essential
services in every region where the Corporation
operates. Innergex’s renewable power production
is sold mainly through power purchase agreements,
which include sufficient protection to prevent
material reduction in demand, to financially solid
counterparties, and no credit issues are anticipated.
As such, the Corporation does not intend to make
any changes to its workforce and intends to maintain
salaries and benefits.
Health and Safety of our
Employees and Visitors
Since March 2020, Innergex has implemented
numerous measures to protect employees, suppliers
and business partners from COVID-19. In addition to
standard operating procedures designed to maintain
safe operations, the Corporation has implemented
additional measures including:
• work from home policy for all office employees.
While some offices are now open in respect
of regional guidance from government health
departments, others remain accessible only for
employee needing to achieve essential tasks that
require them to be on-site;
• enhanced cleaning and disinfection of facilities;
• limiting interactions between employees through
social distancing and physical barriers;
• mandating the use of personal protective
equipment by employees;
• revising and improving COVID-19 screening
protocols and measures specifically for monitoring
the health and safety of employees; and
• introducing specific instructions and guidance
on COVID-19 health and safety measures.
The Corporation is engaged in ongoing communications
with employees, apprising them on its response to the
pandemic. Innergex believes that its employees and
suppliers can access its facilities safely and in compliance
with relevant directives.
13
INNERGEX.COM —INNERGEX Portfolio of Assets
The Corporation owns interests in three groups of
projects at various stages: the Operating Facilities,
the Development Projects and the Prospective Projects.
As at February 23, 2022, the Corporation owns
and operates 80 facilities in commercial operation
(the “Operating Facilities”). Commissioned between
1986 and July 2021, the facilities have a weighted
average age of approximately 9.4 years.
For most Operating Facilities in Canada and in France,
PPAs include a base price and, in some cases, a price
adjustment depending on the month, day and hour
of delivery. For most Operating Facilities in the United
States, power generated is sold through PPAs or
on the open market mainly supported by financial
or physical power hedges. In Chile, Operating
Facilities sell the power generated through PPAs
to industrial customers or on the open market.
They mostly sell the generated power under long-term
power purchase agreements, power hedge contracts1
and short- and long-term industrial contracts (each,
a “PPA”) to rated public utilities or other creditworthy
counterparties or on the open market. The PPAs have
a weighted average remaining life of 14.1 years (weighted
average based on gross long-term average production).
The Corporation also holds interests in projects
under development that are either at an advanced
development stage or under construction (the
“Development Projects”).
1. A power hedge contract is deemed a PPA regardless of whether
it is subjected to hedge accounting or accounted for as a financial
derivative at fair value through earnings (loss).
The table below outlines Operating Facilities and Development Projects as at February 23, 2022.
Number
of Facilities1
Gross2 Installed
Capacity (MW)
Net3 Installed
Capacity (MW)
Storage Capacity
(MWh)
Operating
Facilities
Development
Projects
Operating
Facilities
Development
Projects
Operating
Facilities
Development
Projects
Operating
Facilities
Development
Projects
HYDRO
Canada
United States
Chile
Subtotal
WIND
Canada
France
United States
Subtotal
SOLAR
Canada
United States
Chile
Subtotal
STORAGE
France
Total
33
3
4
40
8
16
8
32
1
4
3
8
—
80
1
—
2
3
—
2
1
3
—
5
—
5
1
12
1,019
70
170
1,259
908
324
714
1,946
27
467
153
647
—
3,852
8
—
112
120
—
38
332
370
—
280
—
280
—
770
713
40
166
919
714
226
662
1,602
27
466
138
631
—
3,152
4
—
85
89
—
32
332
364
—
280
—
280
—
733
—
—
—
—
—
—
—
—
—
—
—
1504
150
—
150
—
—
—
—
—
—
—
—
—
—
3205
—
320
96
329
1. The number of Operating Facilities includes all facilities owned and operated by the Corporation, including non-wholly owned subsidiaries
and joint ventures and associates.
2. Gross installed capacity is the total capacity of all Operating Facilities of Innergex, including non-wholly owned subsidiaries and joint ventures
and associates.
3. Net installed capacity is the proportional share of the total capacity attributable to Innergex based on its ownership interest in each facility.
4. Capacity related to the hot water storage of the Pampa Elvira thermal solar facility.
5. Battery storage capacity related to Hale Kuawehi (120 MWh), Paeahu (60 MWh), Kahana (80 MWh) and Barbers Point (60 MWh) solar projects.
6. Tonnerre standalone battery storage project.
More information on the Corporation’s Prospective Projects is available in the “Prospective Projects” section of the Management’s
Discussion and Analysis.
14
INNERGEX —ANNUAL REPORT 2021
Non-Wholly Owned Subsidiaries
The Corporation shares ownership of some Operating Facilities, Development Projects and Prospective
Projects with corporate, financial, local community or Indigenous partners. Some Operating Facilities
have material non-controlling interests and are treated as non-wholly owned subsidiaries. These facilities’
results are included in the Corporation’s consolidated results.
Gross installed capacity attributable to Non-wholly owned subsidiaries represents 25.0% as at February 23, 2022.
Operating
Facilities
16 wind farms
located in France
Gross
Installed
Capacity
(MW)
Net
Installed
Capacity
(MW)
Sources
of
Energy
Principal Place
of Operation
Proportion of
Ownership Interest
and Voting Rights
Held by the
Corporation
324
225
Wind
France
69.55%
Mesgi'g Ugju's'n
150
75
Wind
Quebec
50.00%1,2,3
Douglas Creek,
Fire Creek,
Lamont Creek,
Stokke Creek,
Tipella Creek and
Upper Stave River
Cold Springs,
Desert Meadow,
Hammett
Hill, Mainline,
Ryegrass and Two
Ponds
150
75
Hydro
British
Columbia
50.01%
138
86
Wind
Idaho
62.25%
Kwoiek Creek
Curtis Mills,
Palmer Falls
50
60
Sainte-Marguerite
31
Walden North
16
6
12
34
Muko Partnership
Holding LLC
Kokomo
Energía Coyanco S.A.
Guayacán
Pampa Elvira Solar
SpA
Pampa Elvira
25
30
15
8
5.4
8.3
Hydro
British
Columbia
50.00%1,3
Hydro
New York
50.00% 3
Hydro
Quebec
50.01%
Hydro
British
Columbia
49.00%
Solar
Indiana
10.00%
Hydro
Chile
69.47%
18.7
Solar
Chile
55.00%
1. The Corporation owns more than a 50% economic interest in the entity.
2. The Corporation owns a 50% voting interest and a participation interest of 63.7% in 2021 (participation interest to decline over the years).
3. Based on the terms of agreements under which these entities were established, the Corporation is exposed to, and has right to, variable
returns from its involvement with the investee, and has the current ability to direct these entities's activities that most significantly affect
the returns.
15
Innergex Europe
(2015) Limited
Partnership and its
subsidiaries
Mesgi’g Ugju’s’n
(MU) Wind Farm L.P.
Harrison Hydro
Limited Partnership
and its subsidiaries
Mountain Air
Alternatives LLC
Kwoiek Creek
Resources Limited
Partnership
Innergex HQI
USA LLC, and its
subsidiaries
Innergex Sainte-
Marguerite S.E.C
Cayoose Creek
Power Limited
Partnership
INNERGEX.COM —INNERGEX Joint Ventures and Associates
Some Operating Facilities are treated as joint ventures and associates and accounted for using the equity
method. Innergex’s share of Production, Revenues and Adjusted EBITDA of the joint ventures and
associates are included in the Corporation’s proportionate measures.
Gross installed capacity attributable to Joint Ventures and Associates represents 12.7% as at February 23, 2022.
Operating
Facilities
Gross
Installed
Capacity
(MW)
Net
Installed
Capacity
(MW)
Sources
of
Energy
Principal
Place of
Operation
Proportion
of Ownership
Interest and
Voting Rights
Held by the
Corporation
Toba Montrose
General
Partnership
East Toba and
Montrose Creek
Dokie General
Partnership
Dokie
235
144
Jimmie Creek
62
94
37
32
Hydro
Wind
Hydro
British
Columbia
40.00%1,2
British
Columbia
25.50%
British
Columbia
50.99%2
Jimmie Creek
Limited
Partnership
Parc éolien
communautaire
Viger-
Denonville,
S.E.C.
Umbata Falls
L.P.
Viger-Denonville
25
12
Wind
Quebec
50.00%
Umbata Falls
23
11
Hydro
Ontario
49.00%
1. The Corporation holds a 51% voting interest and 40% participating economic interest. In 2046, the Corporation’s economic interest
will increase to 51% for no additional consideration.
2. The Corporation does not consolidate the entity as it does not have control over the decision-making process.
1
2
0
2
T
R
O
P
E
R
L
A
U
N
N
A
—
X
E
G
R
E
N
N
I
16
Corporate governance
Board of Directors
The Corporation is supported by a Board of Directors
which is responsible for the stewardship of the
Corporation. Its mandate is to oversee the management
of the business and affairs of the Corporation while
taking into account ESG criteria and shareholders’
interests. Members of the Board are elected at each
Annual General Meeting of Shareholders where other
matters are also up to a vote, including appointing
the auditor of the Corporation. Each common share
of the Corporation entitles its owner to one vote.
Daniel Lafrance
Chair of the Board
Independent
Joined: March 2010
Nathalie Francisci
Independent
Joined: May 2017
Dalton McGuinty
Independent
Joined: May 2015
Louis Veci
Non-Independent
Joined: February 2020
Ross J. Beaty
Independent
Joined: February 2018
Richard Gagnon
Independent
Joined: May 2017
Monique Mercier
Independent
Joined: October 2015
Pierre G. Brodeur
Independent
Joined: May 2020
Michel Letellier
Non-Independent
Joined: October 2002
Ouma Sananikone
Independent
Joined: February 2019
Executive Management
Michel Letellier
President and Chief
Executive Officer
Joined: 1997
Yves Baribeault
Chief Legal Officer
and Secretary
Joined: 2009
Alexandra
Boislard-Pépin
Chief Human
Resources Officer
Joined: 2020
Jean-François Neault
Chief Financial Officer
Joined: 2018
Pascale Tremblay
Chief Asset Officer
Joined: 2021
Jean Trudel
Chief Investment
and Development Officer
Joined: 2002
Renaud de Batz
Senior Vice President
Latin America
Joined: 2002
Jay Sutton
Senior Vice President -
Construction and
Technical Services
Joined: 2018
Colleen
Giroux-Schmidt
Vice President -
Corporate Relations
Joined: 2011
Robert Guillemette
Vice President -
Technical Services
Joined: 2018
Guillaume Jumel
Vice President
and Managing Director -
France
Joined: 2011
Matt Kennedy
Vice President -
Environment
Joined: 2011
David Little
Vice President and
Managing Director - USA
Joined: 2017
Niko Nikolaidis
Vice President -
Investments
and Financing
Joined: 2017
Jaime Pino
Vice President and
Managing Director -
Chile
Joined: 2021
I
N
N
E
R
G
E
X
.
C
O
M
—
I
N
N
E
R
G
E
X
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
This Management's Discussion and Analysis (“MD&A”) is a discussion of the operating results, cash flows and financial
position of Innergex Renewable Energy Inc. (“Innergex” or the “Corporation”) for the three- and twelve-month periods ended
December 31, 2021, and reflects all material events up to February 23, 2022, the date on which this MD&A was approved by
the Corporation's Board of Directors.
The MD&A should be read in conjunction with the audited consolidated financial statements and the accompanying notes for
the year ended December 31, 2021.
The audited consolidated financial statements attached to this MD&A and the accompanying notes for the year ended
December 31, 2021, along with the 2020 comparative figures, have been prepared in accordance with International Financial
Reporting Standards (“IFRS”). However, some measures referred to in this MD&A are not recognized measures under IFRS
and therefore may not be comparable to those presented by other issuers. Please refer to the “Non-IFRS Measures” section
for more information.
All tabular dollar amounts are in thousands of Canadian dollars, except amounts per share or unless otherwise indicated.
Some amounts included in this MD&A have been rounded to make reading easier, which may affect some calculations.
To inform readers of the Corporation's future prospects, this MD&A contains forward-looking information within the meaning of
applicable securities laws (“Forward-Looking Information”). Please refer to the “Forward-Looking Information” section for more
information.
Additional information relating to Innergex, including its Annual Information Form, can be found on the Canadian Securities
Administrators' System for Electronic Document Analysis and Retrieval (“SEDAR”) at sedar.com or on the Corporation's
website at innergex.com. Information contained in or otherwise accessible through our website does not form part of this
MD&A and is not incorporated into the MD&A by reference.
TABLE OF CONTENTS
1- Highlights ........................................................................
Financial Year 2021 - Operating Performance .....
Financial Year 2021 - Capital and Resources ......
Financial Year 2021 - Growth and Development
Initiatives ......................................................................
Subsequent Events ...................................................
Financial Year 2020 ...................................................
2- Overview of Operations ................................................
Business Environment ..............................................
Operating Facilities ....................................................
Corporate Development ............................................
Commissioning Activities ..........................................
Construction Activities ...............................................
Development Activities ..............................................
Prospective Projects ..................................................
3- Financial Performance and Operating Results .........
Hydroelectric Segment ..............................................
Wind Segment ............................................................
Solar Segment ............................................................
Consolidated Margin ..................................................
Net Earnings (Loss) ...................................................
Adjusted Net (Loss) Earnings .................................
Non-Controlling Interests ..........................................
4- Capital and Liquidity ......................................................
18
20
21
21
22
23
23
23
26
28
29
30
31
32
34
35
36
38
39
40
41
42
43
Capital Structure ........................................................
Tax Equity Investment ...............................................
Financial Position .......................................................
Cash Flows .................................................................
Free Cash Flow and Payout Ratio ..........................
Information on Capital Stock ....................................
Dividends .....................................................................
5- Outlook ...........................................................................
2021 Guidance Achievements .................................
2022 Growth Targets .................................................
Strategic Plan 2020-2025 .........................................
6- Non-IFRS Measures .....................................................
7- Additional Consolidated Information ...........................
Geographic Segments ..............................................
Related Party Transactions ......................................
Historical Quarterly Financial Information ..............
February 2021 Texas Events ...................................
8- Accounting Policies and Disclosure Controls ............
Critical Judgements and Estimates .........................
Significant Accounting Policies ................................
Disclosure Controls and Procedures ......................
Entities excluded from the Corporation's control
policies and procedures ............................................
9- Risks and Uncertainties ................................................
10- Forward-Looking Information ....................................
43
44
46
51
53
55
55
57
57
57
58
61
67
67
67
69
70
75
75
76
77
78
79
90
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p18
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS
OPERATING RESULTS
Production (MWh)
Revenues
Operating, general, administrative and
prospective projects expenses
Adjusted EBITDA1
Adjusted EBITDA Margin1
Net (Loss) Earnings (2019-from continuing
operations)
Adjusted Net (Loss) Earnings1
PROPORTIONATE
Production Proportionate (MWh)1
Revenues Proportionate1
Adjusted EBITDA Proportionate1
Adjusted EBITDA Proportionate Margin1
COMMON SHARES
Year ended December 31
February 2021
Texas Events
(9 days)3
2021
Normalized
2021
2020
2019
9,055,215
—
9,055,215
8,073,914
6,509,622
747,208
(54,967)
692,241
613,207
557,042
221,571
525,637
—
(54,967)
221,571
470,670
191,098
422,109
147,867
409,175
70.3 %
(2.3) %
68.0 %
68.8 %
73.5 %
(185,394)
(6,951)
64,219
—
(121,175)
(6,951)
(29,111)
22,311
(53,026)
(26,025)
9,853,366
913,147
673,745
—
(95,273)
(95,273)
9,853,366
817,874
9,590,140
781,466
8,021,758
698,001
578,472
560,328
516,819
73.8 %
(3.1) %
70.7 %
71.7 %
74.0 %
Dividends declared on Common Shares
132,229
Dividends declared on Series A Preferred
Shares
Dividends declared on Series C Preferred
Shares
Weighted Average Number of Common
Shares (in 000s)
2,757
2,875
180,857
—
—
—
—
132,229
125,543
95,046
2,757
2,875
3,067
2,875
3,067
2,875
180,857
170,292
134,658
CASH FLOW AND PAYOUT RATIO
Cash Flow From Operating Activities2
Free Cash Flow1,2
Payout Ratio1,2
Adjusted Payout Ratio1,2
FINANCIAL POSITION
Total Assets
Total Liabilities
Equity Attributable to Owners
Non-Controlling Interests
February 2021
Texas Events
(9 days)4
2021
Normalized
2021
2020
2019
265,498
92,315
143 %
98 %
17,093
15,789
(20) %
— %
282,591
108,104
122 %
98 %
235,108
93,260
240,065
93,311
135 %
114 %
102 %
89 %
As at December 31
2021
7,396,068
6,035,388
1,093,112
267,568
2020
7,141,598
6,070,666
1,008,854
62,078
2019
6,372,104
5,756,778
604,384
10,942
1. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production and
Production Proportionate are key performance indicators for the Corporation that cannot be reconciled with an IFRS measure. Please refer to the "Non-IFRS
Measures" section of this MD&A for more information.
2. For more information on the calculation and explanation, please refer to the "Free Cash Flow and Payout Ratio" section.
3. For the year ended December 31, 2021, the operating results are normalized to exclude the impacts of the February 2021 Texas Events. Please refer to the
"February 2021 Texas Events" section for more information.
4. For the year ended December 31, 2021, the Cash Flow From Operating Activities, Free Cash Flow and Payout Ratio are normalized to exclude the impacts of
the February 2021 Texas Events. Please refer to the "February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p19
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2021 – Operating Performance
For the year ended December 31, 2021, Revenues, on a normalized basis, excluding the February 2021 Texas Events, were
up 13% to $692.2 million compared with the same period last year. The hydroelectric power generation segment recorded an
increase in revenues mainly attributable to higher production at most of the facilities in British Columbia, the acquisition of the
remaining 50% interest in Energía Llaima, which is now included in Innergex's consolidated revenues and the Curtis Palmer
Acquisition. These items were partly offset by a lower contribution from some Quebec hydro facilities due to the combined
effect of lower production and lower selling prices from the recently renewed PPAs. The slight decrease in revenues in the
wind power generation segment is mainly attributable to a lower production from the wind facilities in Quebec and France.
This slight decrease is also attributable to a lower contribution from the Foard City facility due to a combined effect of lower
average selling prices and lower production. This decrease was partly offset by the first full year of contribution from the
Mountain Air Acquisition and the commissioning of the Griffin Trail wind facility. The increase in revenues from the solar power
generation segment was due to liquidated damages due from the EPC contractor for loss of revenues caused by the delays in
and the commissioning of the Amazon Solar Farm Ohio - Hillcrest ("Hillcrest") facility. This increase was also due to higher
selling prices at the Salvador facility combined with its first full year of contribution following its acquisition and the acquisition
of the remaining 50% interest in Energía Llaima. These items were partly offset by lower revenues at the Phoebe solar facility
due to lower production from the higher curtailment required by the distribution network in Texas along with lower irradiation
despite higher average selling prices. Revenues Proportionate1, on a normalized basis, excluding the February 2021 Texas
Events, were up 5% at $817.9 million compared with the same period last year.
For the year ended December 31, 2021, Operating, general and administrative expenses were up 16% to $221.6 million
compared with the same period last year. The hydroelectric power generation segment recorded an increase in expenses
due to higher operating expenses from the acquisitions of the Chilean and Curtis Palmer facilities. The increase in the wind
power generation segment is attributable to the first full year impact of operating expenses following the Mountain Air
Acquisition and the commissioning of the Griffin Trail facility. These items were partly offset by lower operating expenses due
to non-recurring expenses at Foard City facility in the same period last year. The increase in the solar power generation
segment is explained by higher operating expenses stemming from the acquisitions of the Chilean facilities and the
commissioning of the Hillcrest facility.
As a result of the above explanations and in combination with higher prospective expenses supporting the Corporation's
growth, the Adjusted EBITDA1, on a normalized basis, excluding the February 2021 Texas Events, was 12% higher at
$470.7 million for the year ended December 31, 2021, compared with the same period last year. The Adjusted EBITDA
Proportionate1, on a normalized basis, excluding the February 2021 Texas Events, reached $578.5 million, a 3% increase
compared with the same period last year.
Innergex recorded a net loss of $185.4 million ($1.09 loss per share - basic and diluted) for the year ended December 31,
2021, compared with a net loss of $29.1 million ($0.23 loss per share - basic and diluted) for the corresponding period in
2020. This was mainly due to the net unfavourable impact of $81.3 million before tax from the February 2021 Texas events, the
recognition of an aggregate $112.6 million share of impairment charges in the Flat Top and Shannon joint ventures and the
recognition of impairment charges related to the Phoebe solar facility in Texas, to the previously owned Energía Llaima
investment, and to a minority equity investment in France, totaling $24.7 million, $6.3 million and $5.9 million, respectively. The
increase in net loss is also due to a $27.1 million increase in depreciation and amortization, mainly attributable to the recent
acquisitions and commissioning activities, an unfavourable $26.8 million unrealized change in fair value of financial
instruments, and a $19.1 million increase in finance costs mainly related to the Griffin Trail wind facility, following its
commissioning in the third quarter and an increase in inflation compensation interests on the Harrison Hydro real return bonds.
These items were partly offset by a favourable $8.8 million movement in the realized portion of financial instruments,
mainly related to the Phoebe basis hedge, compared with the same period in 2020, a $45.1 million increase in recovery of
income tax, mainly related to the impacts of the February 2021 Texas Events and the reversal of deferred tax liabilities related
to the Flat Top and Shannon joint venture facilities, due to the projects' assets and liabilities being classified as disposal groups
held for sale, partly offset by the tax attributes being allocated to tax equity investors of the Griffin Trail and Hillcrest facilities
commissioned in 2021, and a $24.1 million increase in other income mainly related to the production tax credits and tax
attributes allocated to the tax equity investors at the Griffin Trail wind facility, following its commissioning during the third
quarter.
1 These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-
IFRS Measures" section of this MD&A for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p20
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2021 – Capital and Resources
The increase in total assets results largely from the Energía Llaima, Licán and Curtis Palmer acquisitions in the second half of
2021, as well as the construction activities, followed by the commissionning of the Hillcrest solar and Griffin Trail wind facilities.
This was partly offset by an impairment charge related to the Phoebe solar facility in Texas, reflecting an outlook of higher than
expected congestion charges, the share of loss in joint ventures and associates due mainly to the February 2021 Texas Events
and the impairment loss at the Shannon and Flat Top facilities, as well as depreciation and amortization. Additionally, Innergex
has acquired the remaining 50% interest in Energía Llaima, which triggered consolidation and concurrently reduced the
investments in joint ventures.
The increase in long-term loans and borrowings, including the current portion thereof, results largely from the debt assumed in
the Energía Llaima and Licán acquisitions, the net draws made toward the construction of the Hillcrest and Griffin Trail
facilities, including the tax equity financing thereof, and the purchase price of Curtis Palmer, partly offset by the proceeds
received from the public offering of common shares and the Hydro-Québec private placements applied against the revolving
credit facility.
The increase in equity attributable to owners is mainly attributable to shares issued related to the Energía Llaima Acquisition,
the public offering and the concurrent Hydro-Québec private placements, and the investment made by HQI US Holding LLC, a
subsidiary of Hydro-Québec, in the Curtis Palmer Acquisition, partly offset by the total comprehensive loss attributable to
owners of the parent and dividends declared.
The increase in cash flows from operating activities before changes in non-cash operating working capital items for the year
ended December 31, 2021, is mainly due to the Energía Llaima, Licán and Curtis Palmer acquisitions achieved during the
second half of 2021, the Hillcrest and Griffin Trail facilities commissioned in 2021, and the full year impact of the Mountain Air
and Salvador acquisitions of 2020. Free Cash Flow1 was favourably impacted by the above, partly offset by an increase in debt
principal repayments stemming from the Energía Llaima Acquisition in the third quarter of 2021 and the beginning of debt
repayments for Upper Lillooet/Boulder Creek project loan, and an increase in Free Cash Flow1 attributed to non-controlling
interests, stemming mainly from the Curtis Palmer Acquisition and the full year impact of the Mountain Air Acquisition realized
in 2020.
1- HIGHLIGHTS | Financial Year 2021 – Growth Initiatives
On March 1, 2021, the Corporation completed the commissioning of the 6.9 MW Yonne II wind farm in France. Innergex owns
a 69.55% interest in the wind farm and Desjardins Group Pension Plan ("RRMD") owns the remaining 30.45%.
On May 11, 2021, the 200 MW Hillcrest solar facility located in Ohio achieved PPA Commercial Operation and the tax equity
funding was completed on November 17, 2021.
On July 9, 2021, the Corporation completed the acquisition of the remaining 50% interest in Energía Llaima SpA (“Energía
Llaima”), a renewable energy company based in Chile, of which Innergex already owned 50%, for an aggregate consideration
of US$75.0 million ($94.0 million), which includes a contingent consideration of US$3.7 million ($4.6 million).
On July 26, 2021, the Corporation completed the commissioning of the 225.6 MW Griffin Trail wind facility located in north
Texas and concluded the tax equity funding on July 30, 2021.
On August 3, 2021, the Corporation acquired 100% of the shares of Empresa Eléctrica Licán S.A. (“Licán”). Licán was
acquired for an aggregate consideration of US$17.7 million ($22.1 million), which includes a contingent consideration of
US$1.0 million ($1.3 million).
On September 3, 2021, Innergex completed a bought deal equity financing of common shares. The Corporation issued a total
of 10,374,150 common shares, including 1,353,150 common shares as a result of the full exercise at of the over-allotment
option granted to the syndicate of underwriters, at an offering price of $19.40 per common share (the “Offering Price”) for
aggregate gross proceeds of $201.3 million (the “Offering”). As part of the Investor Rights Agreement between Innergex and
HQI Canada Holding Inc., a wholly owned subsidiary of Hydro-Québec (“Hydro-Québec”), Innergex has issued, concurrently
with the Offering, 2,581,000 common shares at the Offering Price for aggregate gross proceeds of $50.1 million in order to
maintain Hydro-Québec’s 19.9% ownership.
1 These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-
IFRS Measures" section of this MD&A for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p21
(in thousands of Canadian dollars, except as noted and amounts per share)
On October 25, 2021, Innergex and Hydro-Québec completed the acquisition of Curtis Palmer, a 60 MW run-of-river
hydroelectric portfolio located in Corinth, New York, consisting of the 12 MW Curtis Mills and 48 MW Palmer Falls facilities
(“Curtis Palmer”). This joint acquisition is the first under the Strategic Alliance formed by Innergex and Hydro-Québec in 2020.
Innergex owns indirectly a 50% interest in the Curtis Palmer facilities with Hydro-Québec indirectly owning the remaining 50%
interest. The total consideration for this acquisition was US$321.6 million ($397.3 million), which includes a contingent
consideration of US$3.2 million ($3.9 million).
On December 28, 2021, the Corporation completed the sale of its 51% interest in the Flat Top wind facility (“Flat Top”) for a
nominal amount.
Construction continued at the 7.5 MW Innavik hydro project in Quebec, Canada, which is expected to be commissioned in
late 2022. In France, at the Tonnerre standalone battery storage project, construction activities are mostly completed,
commissioning and testing activities are ongoing. In the U.S., construction began at the Hale Kuawehi solar and battery
storage project with the commencement of civil works and construction of roads and laydown areas.
Projects under development are progressing well with the addition of 3 new development projects: in the U.S., the Boswell
Springs wind project and the Palomino solar project, along with the France Auxy Bois Regnier wind project which
obtained on February 23, 2022 a 20-year PPA with EDF-OA.
The Prospective projects pipeline will allow several opportunities in the years to come, with 10 projects for a total 346 MW of
installed capacity currently at an advanced stage.
1-HIGHLIGHTS | Subsequent Events
Acquisition of San Andrés SpA
Innergex has completed on January, 28, 2022 the acquisition of the 50.6 MW San Andrés solar farm in Chile ("San Andrés").
The facility, commissioned in 2014, is located in the Atacama Desert in northern Chile. San Andrés was acquired for a total
consideration of US$25.8 million ($32.7 million), net of cash acquired. The facility is expected to produce a gross long-term
average of approximately 118.9 GWh per year.
Acquisition of Aela Generación S.A. and Aela Energía SpA
On February 3, 2022, Innergex has entered into an agreement to acquire 100% of the ordinary shares of Aela Generación S.A.
and Aela Energía SpA (together “Aela”), a 332 MW portfolio of three newly built operating wind assets in Chile, for a purchase
price of US$685.5 million ($870.6 million) (the “Aela Acquisition”), including the assumption of US$385.5 million
($489.6 million) of existing debt, subject to customary closing adjustments.
On February 10, 2022, Innergex has entered into two foreign exchange forward contracts with an aggregate notional amount
of US$100.0 million ($126.8 million) to manage its exposure to exchange rate fluctuations related to the purchase price. In
addition, in order to manage its exposure to the risk of increasing interest rates on a portion of the expected refinancing of the
non-recourse debt assumed in the acquisition and at Innergex’s existing Chilean projects, Innergex has entered into two
forward start interest rate swaps on February 17 and February 18, 2022, respectively, with an aggregate notional amount of
US$172.8 million ($219.1 million).
With this new wind portfolio, Innergex will diversify its geography and energy sources and more than double its installed
capacity in Chile, opening the way to refinancing its entire Chilean portfolio to generate long-term accretive value. The
Acquisition is expected to close in Q2 2022 and is subject to the regulatory approval of the Chilean Antitrust Agency (Fiscalía
Nacional Económica), as well as customary closing conditions.
Closing of equity offering
As part of the public offering closed on February 22, 2022 the Corporation issued 9,718,650 common shares at a price of
$17.75 for cash proceeds of $172.5 million. Concurrently with the closing of the public offering, Hydro-Québec subscribed
2,100,000 common shares of the Corporation for cash proceeds of $37.3 million.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p22
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2020
For the year ended December 31, 2020, the increase in Production (MWh), Revenues, Operating, general and administrative
expenses, Adjusted EBITDA1 and Adjusted EBITDA Proportionate1 were attributable mostly to the contribution of the facilities
commissioned in 2019, the Mountain Air and the Salvador acquisitions.
The decrease in loss from continuing operations in 2020 is mainly due to a decrease in the income tax expense related to a
decrease in tax attributes being allocated to tax equity investors and a non-cash favourable change in fair value of the power
and basis hedges, partly offset by the impairment charge recognized on the Energía Llaima investment, an increase in
depreciation and amortization from the facilities commissioned in 2019 and the 2020 acquisitions, a decrease in the tax
attributes allocated to the tax equity investors, and an increase in the share of loss of joint ventures and associates, mainly
related to a non-cash unfavourable change in fair value of the Flat Top and Shannon power hedges.
The increase in total assets is largely resulting from the construction of the Hillcrest, Griffin Trail and Yonne II projects, as well
as from the Mountain Air and Salvador acquisitions.
The increase in long-term loans and borrowings, including the current portion thereof, is largely resulting from the construction
activities and from the long-term loans and borrowings assumed in the Mountain Air Acquisition. This was partly offset by the
corporate revolving credit facility repayment made following the Hydro-Québec Private Placement, net of the amounts used
toward the respective purchase price of the Mountain Air and Salvador acquisitions.
The increase in equity attributable to owners is mainly a result of the Hydro-Québec Private Placement during the first quarter
of 2020, partly offset by dividends declared and the total comprehensive loss attributable to owners of the parent.
Cash flows from operating activities before changes in non-cash operating working capital items increased, mainly due to the
facilities commissioned in 2019, and the Salvador and Mountain Air acquisitions in 2020. Free Cash Flow1, however, remained
relatively stable, mainly due to the increase in debt principal payments stemming from the acquisitions and commissioning
activities.
2- OVERVIEW OF OPERATIONS | Business Environment
Key Growth Factors
Innergex's future growth will be subject to the following key factors:
•
•
•
•
•
•
•
•
•
the growing demand for renewable energy, as key to the energy transition to fight climate change, as supported by
international agreements such as the Paris Agreement;
stable and long-term government policies for climate change mitigation and adaptation and for the procurement of
new renewable energy capacity;
the availability of long-term renewable energy purchase contracts with highly creditworthy counterparties;
the implementation of non-discriminatory access to transmission systems, providing independent power producers
with access to regional electricity markets;
sustainable merchant prices in the different markets;
its capacity to evaluate and secure the best prospective sites for the development of new projects in cooperation with
local communities;
its ability to adequately forecast total construction costs, expected revenues and expected expenses for each project,
in a market with rapidly improving cost-competitiveness of renewable energy generation facilities;
its ability to make accretive acquisitions; and
its ability to finance its growth and to provide firm power with the increasing market readiness and cost effectiveness
of storage technologies.
1 These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-
IFRS Measures" section of this MD&A for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p23
(in thousands of Canadian dollars, except as noted and amounts per share)
Key Geographic Markets
In Canada, there has been significant growth in the renewable power generation sector over the years due to public and
private commitments to reducing greenhouse gas emissions in power generation; national carbon pricing regulations
introduced by the federal government; public concern over energy derived from fossil fuels, air quality and warming climate;
improvements in renewable energy technologies; and shorter construction lead times for some renewable energy projects.
Renewable electricity generation in Canada is also supported by federal and provincial procurements that result in long-term
fixed price contracts with Crown corporations, incentives such as accelerated depreciation, and legislated commitments to
renewable energy generation. In response to its commitments under the Paris Agreement, the Government of Canada
released the Pan-Canadian Framework on Clean Growth and Climate Change in 2016. Among its goals, the plan commits to
phasing out coal-fired electricity generation by 2030 and resulted in the implementation of a national price on carbon pollution
from industrial facilities as of 2019. The plan includes an Output-Based Pricing System to reduce carbon pollution from
electricity generation and ensure that renewable electricity sources, such as wind and solar, compete even more effectively
against non-renewable sources. In 2020, the Government of Canada released its strengthened climate plan, A Healthy
Environment and a Healthy Economy. The plan commits to a significant increase to the national carbon price to reach $170 per
tonne in 2030. Government took further steps in 2021: enhancing Canada’s Paris Agreement target to reduce emissions by
40-45% from 2005 levels by 2030; and passing a legislated commitment to achieve net-zero emissions by 2050. The
Government has also announced an aim to make Canada’s 82% emissions-free electricity grid 100% net-zero by 2035.
Achieving these targets will require significant electrification in all economic sectors and for Canada to produce around twice
as much non-emitting power as it does now. At the provincial and territorial level, many governments have set targets for an
increased component of renewable energy in their electricity generation supply mix, in order to reduce greenhouse gas
emissions over time.
In the United States, according to the U.S. Energy Information Administration, electricity generation from renewable energy is
expected to rise from 19% in 2019 to 38% by 2050, with approximately 117 GW of new wind and solar photovoltaic capacity
expected to be added from 2020-2023, encouraged by declining capital costs and the availability of tax credits. In many
markets across the U.S., wind and solar energy are already among the least costly new generation sources, even compared
with relatively low-cost natural gas. As electricity demand grows modestly, the primary drivers for new capacity are expected to
be the retirements of older, less-efficient fossil fuel units, the availability of renewable energy tax credits, and the continued
decline in the capital cost of renewable energy sources, especially solar photovoltaic (PV). The U.S. also has a growing portion
of new renewable energy projects being built to meet corporate demand. Favourable costs for renewable energy sources,
combined with legislated commitments toward renewable energy at the state level, are expected to continue driving demand
for new renewable generation capacity. States have been very active in adopting and increasing renewable portfolio standards
(RPS), policies that require electricity suppliers to source a certain amount of their electricity from designated renewable
resources or eligible technologies. Thirty (30) states, Washington, D.C., and three (3) territories have now adopted an RPS.
Thirteen (13) jurisdictions including Hawaii require 100% clean electricity by 2050 or earlier. Over 60% of U.S. electricity retail
sales are in a jurisdiction with legally binding RPS policies.
France continues to be a very attractive market for renewable power. The country has a largely decarbonized electricity
system thanks to the role of nuclear energy, which accounts for around 66% of its generation mix. Hydroelectricity, at 12% of
generation, is the largest source of renewable energy. Wind and solar PV generation have increased rapidly over the past
decade, driving the total share of renewables in electricity generation from 14% in 2010 up to 24% in 2020. Remaining
generation is a mix of fossil fuels, mainly natural gas. France’s decarbonization framework, anchored in the Energy Transition
Law of 2015, builds on the National Low-Carbon Strategy for 2050 (Stratégie Nationale Bas-Carbone, SNBC), with targets for
the reduction of fossil fuel use and emissions by sectors under three five-year carbon budgets out to 2034. In the energy
sector, actions are implemented by two successive five-year energy investment plans (la programmation pluriannuelle de
l’énergie, PPE). In 2020, the government updated the SNBC and the PPE toward the goal of carbon neutrality by 2050. The
French government has set ambitious goals to increase the share of renewable energy in the next 10 years by setting some
specific targets by technology. This translates into a projected 35 GW installed capacity in onshore wind by 2028, which
continues to be our main focus in this market. In addition, from 2021, we intend to address the large-scale solar sector, which
benefits from the same support with a 40 GW target by 2028. Finally, alongside renewable generation, Innergex intends to
pursue opportunities in the storage market for which a regulatory framework is in progress.
Renewable power continues to increase in Chile. In 2020, the production of solar and wind energy reached a total of
13,130 GWh, a 17% increase from 2019, and representing 21% of the total generated power. Meanwhile, hydroelectric
facilities continued to play a significant role in 2020, accounting for 27% of the total generation (equivalent to 20,634 GWh). As
of December 2021, there were 169 renewable energy facilities under construction, representing 4,500 MW of capacity. Non-
conventional renewable energies, which do not include hydro power with reservoirs, now make up 36.7% of the country’s
installed capacity and contribute 27% of annual electricity generation. Mining, which consumes about a third of Chile’s overall
power production, is also an industry that consumes most of the new renewable energy. Since 2014, the prices of solar energy
dropped by more than 60%, prompting the mining sector and other sectors to invest in renewable energy to reduce their
energy consumption expenses.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p24
(in thousands of Canadian dollars, except as noted and amounts per share)
Seasonality of Operations
The Corporation aims to maintain a diversified portfolio of assets in terms of geography and sources of energy to alleviate any
seasonal and production variations. The amount of electricity generated by the Operating Facilities is generally dependent on
the availability of water flows, wind regimes and solar irradiation. Lower-than-expected resources in any given quarter could
have an impact on the Corporation's revenues and hence on its profitability.
Fortunately, the complementary nature of hydroelectric, wind and solar energy production partially offsets any seasonal
variations, as illustrated in the following table:
Consolidated LTA and Quarterly Seasonality1
In GWh and %
HYDRO
WIND
SOLAR
Total
Q1
539
1,579
330
2,448
14 %
29 %
21 %
22 %
Q2
1,257
1,342
443
3,042
33 %
24 %
29 %
28 %
Q3
1,219
1,083
449
2,751
32 %
20 %
29 %
26 %
Q4
825
1,507
316
2,648
Total
21 %
27 %
21 %
24 %
3,840
5,511
1,538
10,889
35 %
51 %
14 %
100 %
1. The consolidated long-term average production is the annualized LTA for the facilities in operation as of February 23, 2022. The LTA is presented in accordance
with revenue recognition accounting rules under IFRS and excludes production from facilities that are accounted for using the equity method. Production in
comparison to the LTA is a key performance indicator for the Corporation. For more information, please refer to the “Key Figures” section.
Global Climate Change
Climate change, which increases the likelihood, frequency and severity of adverse weather conditions such as severe storms,
droughts and water stress, heat waves, forest fires, rising temperatures and changing precipitation patterns, presents both
risks and opportunities to the Corporation. Climate change may change existing weather patterns in ways that are difficult to
anticipate, which could result in more frequent and severe disruptions to the Corporation’s generation facilities and the power
markets in which the Corporation operates. In addition, energy demands generally vary with weather conditions.
The Corporation’s facilities and projects are exposed to various hazards that are expected to increase in the future under
various climate scenarios. The Corporation carefully manages physical risks, including preparing for, and responding to,
extreme weather events through activities such as proactive route selection, asset hardening, regular maintenance, and
insurance. The Corporation follows regulated engineering codes, evaluates ways to create greater system reliability and
resiliency and, where appropriate, submits regulatory applications for capital expenditures aimed at creating greater system
reliability and resiliency. When planning for capital investments or asset acquisitions, we consider site-specific climate and
weather factors, such as flood plain mapping and extreme weather history. Prevention activities include wildfire management
plans and vegetation management at electricity transmission and distribution sites. The Corporation maintains in-depth
emergency response measures for extreme weather events. Despite all the measures in place to prepare for and respond to
extreme weather events, there is no assurance that there would be no consequences on the Corporation’s revenues and
profitability.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p25
(in thousands of Canadian dollars, except as noted and amounts per share)
% of productionSeasonality of Production by Energy SourceHydroWindSolarTotalQ1Q2Q3Q4010203040
2- OVERVIEW OF OPERATIONS | Operating Facilities
Energy
segment
Location
Three months ended
December 31, 2021
Three months ended
December 31, 2020
Production
(MWh)
Production
as a % of
LTA
Production
(MWh)
Production
as a % of
LTA
Three
months
Production
% change
Year ended December
31, 2021
Year ended
December 31, 2020
Production
(MWh)
Production
as a % of
LTA
Production
(MWh)
Production
as a % of
LTA
Twelve
months
Production
% change
HYDRO
WIND
SOLAR
Quebec
Ontario
British Columbia
United States6
Chile5
Subtotal
Quebec
France
United States3
Subtotal
Ontario
United States
Chile4,5
Subtotal
TOTAL PRODUCTION1
Innergex's share of production of
joint venture and associates
PRODUCTION
PROPORTIONATE1,2
170,605
25,643
552,153
89,664
105,232
943,297
586,484
173,486
644,724
1,404,694
5,758
162,408
67,000
94 %
121 %
148 %
123 %
67 %
117 %
89 %
80 %
103 %
216,240
22,043
457,717
3,113
—
699,113
663,591
208,113
430,178
93 % 1,301,882
5,341
121,587
59,038
84 %
94 %
104 %
235,166
2,583,157
87 %
185,966
100 % 2,186,961
119 %
104 %
123 %
60 %
— %
120 %
100 %
97 %
104 %
101 %
96 %
89 %
102 %
93 %
106 %
688,416
(21) %
16 %
75,105
21 % 2,152,452
125,012
2,780 %
215,843
— %
35 % 3,256,828
(12) % 2,124,480
(17) %
646,208
50 % 1,938,737
8 % 4,709,425
38,994
8 %
853,798
34 %
196,170
13 %
98 %
101 %
717,839
67,957
98 % 1,961,283
42,499
109 %
—
70 %
96 % 2,789,578
92 % 2,357,580
86 %
711,114
99 % 1,424,116
94 % 4,492,810
38,652
637,010
115,864
107 %
84 %
94 %
26 % 1,088,962
18 % 9,055,215
87 %
791,526
94 % 8,073,914
103 %
91 %
89 %
91 %
— %
92 %
102 %
96 %
99 %
100 %
105 %
86 %
103 %
89 %
96 %
(4) %
11 %
10 %
194 %
— %
17 %
(10) %
(9) %
36 %
5 %
1 %
34 %
69 %
38 %
12 %
93,000
106 %
386,397
108 %
(76) %
798,151
97 % 1,516,226
99 %
(47) %
2,676,157
100 % 2,573,358
106 %
4 % 9,853,366
94 % 9,590,140
97 %
3 %
1. Some facilities are treated as joint ventures and associates and accounted for using the equity method; their revenues are not included in the Corporation's consolidated revenues and, for consistency, their electricity
production figures have been excluded from production and included in production proportionate.
2. The results from the Flat Top and Shannon joint venture facilities from April 1, 2021, onward were excluded due to the projects' assets and liabilities being classified as disposal groups held for sale, following the
February 2021 Texas Events.
3. The Mountain Air Acquisition was completed on July 15, 2020.
4. The Salvador Acquisition was completed on May 14, 2020.
5. The acquisition of the remaining 50% interest in Energía Llaima was completed on July 9, 2021, and the Licán Acquisition was completed on August 3, 2021.
6. The Curtis Palmer Acquisition was completed on October 25, 2021.
Production for the three-month period ended December 31, 2021, was 100% of LTA. The result is mostly explained by higher production at the facilities in British
Columbia and by above-average wind regimes at the Griffin Trail and Foard City facilities in Texas. These items were partly offset by below-average wind regimes in
Quebec and in France, below-average water flows in Chile and by the unfavourable impact of the intermittent curtailment required by the distribution network in Texas
along with lower irradiation at the Phoebe solar facility. Innergex's share of production of joint ventures and associates was 106% of LTA, translating into a Production
Proportionate at 100% of LTA.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p26
(in thousands of Canadian dollars, except as noted and amounts per share)
Production for the year ended December 31, 2021, was 94% of LTA. The variation is mostly explained by below-average wind regimes at some Quebec facilities, in
France and at the Foard City wind facility, by the unfavourable impact of the curtailment required by the distribution network in Texas along with lower irradiation at the
Phoebe solar facility and by below-average water flows in Chile. These items were partly offset by above-average wind regimes at the Griffin Trail and Mountain Air
facilities. Innergex's share of production of joint ventures and associates was 97% of LTA, translating into a Production Proportionate at 94% of LTA.
PPA Renewals
On April 16, 2018, the Corporation and Sekw’el’was Cayoose Creek Band announced that they reached an agreement with BC Hydro for the renewal of the Walden North
Facility’s electricity purchase agreement (the “Walden EPA Renewal”). Cayoose Creek Power Limited Partnership and BC Hydro agreed to terminate the Walden EPA
Renewal pursuant to its terms and to continue to transact pursuant to the terms of the original electricity purchase agreement initially entered into between BC Hydro and
ESI Power Corp., dated August 16, 1990 and the forbearance agreement initially entered into between BC Hydro and ESI Power-Walden Corporation, dated April 1,
2014. The Corporation expects EPA negotiations to resume shortly as BC Hydro filed its new Integrated Resource Plan with the British Columbia Utilities Commission
("BCUC").
On April 16, 2018, the Corporation announced that it reached an agreement with BC Hydro for the renewal of the electricity purchase agreement of the Brown Lake
Facility for a 40-year term (the “Brown Lake EPA Renewal”). The Corporation and BC Hydro amended the Brown Lake EPA Renewal as suggested by the BCUC so that
the Brown Lake EPA Renewal would have a term no longer than three years and ending on October 31, 2022. The amended Brown Lake EPA Renewal was submitted by
BC Hydro to the BCUC for acceptance and was accepted by the BCUC.
The PPA for the Portneuf facilities reached the end of their initial 25-year term in May 2021. The Corporation sent to Hydro-Québec its notice of automatic renewal for an
additional 25-year term. Discussions on the renewal terms and conditions are underway, in accordance with the renewal process of the initial PPA.
During the year ended December 31, 2021, the Corporation completed the renewals of the 25-year term PPA for the Sainte-Marguerite and the Montmagny facilities.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p27
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Corporate Development
Acquisition of remaining interests in Energía Llaima, in Chile
•
•
•
•
•
•
On July 9, 2021, the Corporation became the sole owner of the Chilean renewable energy company Energía
Llaima SpA by acquiring the remaining 50% interest for an aggregate consideration of US$75.0 million
($94.0 million), which includes a contingent consideration evaluated at US$3.7 million ($4.6 million).
As a consideration for this transaction, Innergex has issued to Energía Llaima’s shareholders 4,048,215 Innergex
common shares for an aggregate value of US$71.4 million ($89.4 million) at a price per share equal to the 10-
day volume weighted average price prior to the closing of the acquisition.
Additionally, as part of the Investor Rights Agreement between Innergex and Hydro-Québec, Innergex issued,
concurrently with the closing of the transaction described above, 1,148,050 common shares, for total proceeds of
$25.3 million, in order for Hydro-Québec to maintain its 19.9% ownership.
Innergex’s net installed capacity increased by 83.4 MW.
Following the transaction, Innergex gained interests in and operated three hydro facilities in Chile with a gross
installed capacity of 152 MW, a solar thermal facility with a gross installed capacity of 34 MW, as well as several
projects in the development or prospective stages.
The facilities are expected to generate annual revenues of US$26.8 million ($33.2 million) and operating, general
and administrative expenses of US$10.9 million ($13.4 million) for the first five years. These estimates are
comparable with the historical operating performance of the facilities.
Acquisition of a hydro facility in Chile
•
•
•
•
On August 3, 2021, the Corporation acquired Licán, an 18 MW run-of-river hydro facility with a reservoir for daily
regulation for up to 3.5 hours.
The facility commissioned in 2011 is located on the Licán river, in the region of Los Rios in Chile. The facility is
expected to produce a gross estimated long-term average of 77.8 GWh per year, selling its output on the
merchant market.
Licán was acquired for an aggregate consideration of US$17.7 million ($22.1 million), financed with cash held in
Chile, to pay the shareholders and partially pay the existing debt and other costs.
The facility is expected to generate annual revenues of US$4.2 million ($5.2 million) based on the expected long-
term average of 77.8 GWh per year, and operating, general and administrative expenses of US$2.1 million
($2.6 million) for the first five years. These estimates are comparable with the historical operating performance of
the facility.
Acquisition of a hydro portfolio in the State of New York
•
•
•
•
•
•
•
•
On October 25, 2021, the Corporation and Hydro-Québec completed their first joint acquisition with the purchase
of the 60 MW Curtis Palmer run-of-river hydroelectric portfolio.
Innergex owns indirectly a 50% interest in the Facilities with Hydro-Québec indirectly owning the remaining 50%
interest.
The portfiolio consists of the 12 MW Curtis Mills and 48 MW Palmer Falls facilities.
The Curtis Palmer facilities have a PPA for energy, RECs and capacity with Niagara Mohawk Power Corporation
(A3 / BBB+) that expires upon the earlier of either December 31, 2027, or the delivery of cumulative 10,000 GWh
(which is expected in 2026).
Following the expiry of the PPA, it is expected that the Curtis Palmer facilities will sell energy, RECs and capacity
in the NYISO market.
The Curtis Palmer facilities have an attractive cash flow profile and are expected to generate revenues of
US$49.3 million ($61.6 million) and operating, general and administrative expenses of US$6.8 million
($8.5 million) on average per year, through the end of the PPA. These estimates are comparable with the
historical operating performance of the facilities.
Total consideration of US$321.6 million ($397.3 million), includes a contingent consideration of US$3.2 million
($3.9 million).
On September 3, 2021, Innergex completed a $201.3 million public offering of common shares and a
$50.1 million concurrent private placement of common shares to Hydro-Québec to fund the Curtis Palmer
Acquisition, with the remainder of the net proceeds to be used toward general corporate purposes including
future growth initiatives.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p28
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Commissioning Activities
The table below outlines the projects commissioned since the beginning of 2021.
Name
(Location)
Type
Ownership
%
Gross
installed
capacity
(MW)
Gross
estimated
LTA1 (GWh)
PPA term
(years)
Total project
cost
Estimated1
($M)
Revenues1
($M)
Expected first 5-year average
Operating,
General and
Administrative
Expenses1
Adjusted
EBITDA1,2
Revenues
Proportionate1,2
($M)
Adjusted
EBITDA
Proportionate1,2
($M)
Hillcrest
(Ohio, U.S.)
Griffin Trail
(Texas, U.S.)
Yonne II
(France)
Solar
100
200.0
413.3
15
397.6 3
21.6 3
8.7 3
12.9 3
21.6 3
12.9 3
Wind
100
225.6
832.4
—
4
360.9 5
21.3 5
11.0 5
10.3 5
49.5 5
38.5 5
Wind
69.55
6.9
11.0
20
15.9 6
1.4 6
0.3 6
1.1 6
1.4 6
1.1 6
1. This information is intended to inform readers of the projects' potential impact on the Corporation's results. It is based on estimates that do not have directly comparable historical data. Actual results may vary.
These estimates are up-to-date as at the date of this MD&A.
2. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the “Non-IFRS Measures” section of this MD&A for more
information.
3. Total Estimated Project Cost at US$313.6 million, Expected Revenues at US$17.0 million, Expected Operating, General and Administrative Expenses at US$6.9 million and Expected Adjusted EBITDA at
US$10.2 million translated at a rate of 1.2678.
4. Power to be sold on the open market.
5. Total Estimated Project Cost at US$284.7 million, Expected Revenues at US$16.8 million, Expected Operating, General and Administrative Expenses at US$8.7 million, Expected Adjusted EBITDA at
US$8.1 million, Expected Revenues Proportionate at US$39.1 million, and Adjusted EBITDA Proportionate of US$30.3 million translated at a rate of 1.2678.
6. Total Estimated Project Cost at €10.8 million, Expected Revenues at €1.0 million, Expected Operating, General and Administrative Expenses at €0.3 million and Expected Adjusted EBITDA at €0.8 million translated
at a rate of 1.4391.
The following project had an updated status during the quarter:
Hillcrest:
•
Reached substantial completion on October 31, 2021 and concluded the tax equity funding on November 17, 2021.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p29
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Construction Activities
The table below outlines the projects that are under construction as at the date of this MD&A.
Name
(Location)
Hale Kuawehi (Hawaii, U.S.)
Innavik
(QC, Canada)
Tonnerre
(France)
Type
Ownership %
Gross
installed
capacity
(MW)
Gross
estimated
LTA1 (GWh)
PPA term
(years)
Expected
COD
Solar
Hydro
Storage
100
50
100
30.0 2
87.4 3
7.5
54.7
25
40
2023
2022
Note 4
—
— 5
2022
1.This information is intended to inform readers of the projects' potential impact on the Corporation's results. Actual results may vary. These estimates are up-to-
date as at the date of this MD&A.
2. Solar project with a battery storage capacity of 120 MWh.
3. PPA is a fixed lump sum capacity payment for the availability of dispatchable energy.
4. Standalone battery storage capacity of 9 MWh.
5. The project has been awarded a 7-year Contract for Difference offering a fixed-price contract for capacity certificate. The French Energy Code sets forth a
market-based premium regime. Under a Contract for Difference, the income of the producer relies on a price obtained on the market and an energy premium that
corresponds to the difference between a reference tariff calculated on the basis of the average financing and operation costs for an efficient and representative
installation and the average electricity and capacity market-based prices.
The following projects had an updated status during the quarter:
Hale Kuawehi:
▪
▪
▪
Construction started in January 2022
Execution of all major supply and construction contracts completed.
The blessing ceremony was held on site on January 4, 2022. Civil work commenced in January with
construction of roads and laydown areas.
Innavik:
•
•
•
Cofferdam installed and river flow now diverted through the diversion structure.
Powerhouse superstructure completed at 95%, the envelope will be completed in Q2 2022.
Some delays have been encountered due partly to the pandemic situation.
Tonnerre:
•
•
Construction work at site is completed.
Commissioning and testing works are ongoing and commissioning is expected to be achieved by the end of
Q1 2022.
Contingency plans and measures are in place at all construction sites to address the COVID-19 pandemic. Unless a decree is
issued to halt construction, all construction activities should continue as planned.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p30
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Development Activities
Innergex owns a portfolio of Development Projects with a gross installed capacity of approximately 732.2 MW. The table below
outlines their status as at the date of this MD&A.
Name
(Location)
Frontera (Chile)
Rucacura (Chile)
Lazenay (France)
Auxy Bois Regnier (France)
Boswell Springs (Wyoming, U.S.)
Paeahu (Hawaii, U.S.)
Kahana (Hawaii, U.S.)
Barbers Point (Hawaii, U.S.)
Palomino (Ohio, U.S.)
Type
Hydro
Hydro
Wind
Wind
Wind
Solar
Solar
Solar
Solar
Gross
installed
capacity
(MW)
109.0
PPA term
(years)
Expected
COD
— 1
—
3.0
9.0
29.4
331.8
15.0 3
20.0 3
15.0 3
200.0
— 1
— 1
20
30 2
25
25
25
15
2025
2023
2024
2024
2023
2023
2023
2024
1. Power to be sold on the open market or through PPAs yet to be signed.
2. The project has been selected to PacifiCorp's 2020 All-Source Request for Proposal final shortlist. Therefore, the project is currently negotiating the terms of a
busbar take-or-pay 30-year PPA with PacifiCorp.
3. Solar project with a battery storage capacity of 60 MWh for Paeahu, 80 MWh for Kahana and 60 MWh for Barbers Point.
The following projects had an updated status during the quarter:
Frontera
•
•
Construction contract and permitting are progressing slowly, awaiting decisions on financial items.
Project schedule is under revision.
Paeahu
•
The project has been delayed by an unfavourable decision at the circuit court regarding the county special
use permit due to local opposition. The project will commence a new proceeding with the Maui County
Planning Commission on the required permit in March 2022.
Project forecasts to use the maximum 148 days extension allowed in the PPA to reach COD.
•
• Management is currently reassessing the project's long-term outlook in regards of the recent decision.
Kahana
•
PPA was approved by the Hawaii public utilities commission on January 5, 2022.
Barbers Point
•
Environmental studies are completed.
Boswell Springs
•
•
•
•
PPA negotiations are underway, expected to be completed by Q3 2022.
Equipment procurement and EPC contractor selection process in progress.
Permitting is nearing completion.
Construction expected to begin during Q2 2023.
Palomino
•
•
Permitting application process and transmission line studies commenced.
Construction expected to begin by Q3 2023.
Auxy Bois Regnier
•
•
•
20-year PPA with EDF-OA obtained on February 23, 2022.
Interconnection request was made.
Environmental approval given, but legal procedures against it were initiated.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p31
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Prospective Projects
Innergex owns interests in numerous prospective projects at various stages of development. Some projects have secured land
rights, filed an investigative permit application or have submitted or could submit a proposal under a Request for Proposals or
a Standing Offer Program (collectively the “Prospective Projects”). The list of Prospective Projects is revised quarterly to add or
remove projects, according to their advancement potential. Prospective projects are categorized in different stages based on
the items below. There is no certainty that any Prospective Project will be realized.
In order to define the stage of each prospective project, their progression is measured according to the permitting maturity
phase leading to obtaining a final notice to proceed combined with a success probability factor that the project will reach the
development stage. Prospective projects are segregated into three different stages, i.e. early, mid and advanced.
Early Stage
The prospective projects in this category have a LOW permitting maturity combined with a LOW success
probability factor; or a MID-stage permitting maturity combined with a LOW success probability factor.
Mid Stage
Advanced Stage
The prospective projects in this category have a MID-stage permitting maturity combined with a MEDIUM
success probability factor; or a HIGH-stage permitting maturity combined with a MEDIUM success
probability factor.
The prospective projects in this category have a HIGH permitting maturity combined with a HIGH
success probability factor; or a MID-stage permitting maturity combined with HIGH success probability
factor.
Early Stage
Mid Stage
Advanced Stage
Capacity1
(in MW)
Number of
projects
Capacity1
(in MW)
Number of
projects
Capacity1
(in MW)
Number of
projects
Total
Capacity1
(in MW)
Total
number of
projects
CANADA
Hydro
Solar
Wind
Subtotal
UNITED STATES
Solar
Wind
Green hydrogen2
Subtotal
FRANCE
Solar
Wind
Subtotal
CHILE
Hydro
Solar
Wind
Storage3
Subtotal
Total
500
300
3,943
4,743
639
400
5
1,044
—
128
128
29
32
9
—
70
5,985
8
7
23
38
7
1
1
9
—
11
11
2
1
1
—
4
62
—
—
—
—
730
—
—
730
—
61
61
—
—
—
—
—
791
—
—
—
—
4
—
—
4
—
3
3
—
—
—
—
—
7
—
—
—
—
—
—
—
—
60
132
192
154
—
—
—
154
346
—
—
—
—
—
—
—
—
1
7
8
1
—
—
1
2
10
500
300
3,943
4,743
1,369
400
5
1,774
60
321
381
183
32
9
—
224
7,122
8
7
23
38
11
1
1
13
1
21
22
3
1
1
1
6
79
1. Only Gross Installed Capacity is disclosed for Prospective Projects as the net capacity is not yet defined at this stage.
2. In this table, the electrolyser was attributed to the United States until additional progress is achieved. The production is estimated at 800,000 kg per year, which
corresponds to approximately 5 MW based on current assumptions.
3. Battery storage capacity of 250 MWh.
Compared to the last quarter, the Boswell Springs wind project in the United States, the Palomino solar project in the United
States and the Auxy Bois Regnier wind project in France moved from the advanced stage to development activities.
One hydro project in Chile moved from the early to the advanced stage and one solar project in France progressed from the
mid to the advanced stage. Also, two new projects progressed to the early stage, a wind and a green hydrogen project, both in
the United States. Finally, a new storage project in Chile entered into the advanced stage.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p32
(in thousands of Canadian dollars, except as noted and amounts per share)
Strategic Alliance Pipeline
The Corporation formed a Strategic Alliance with Hydro-Québec on February 6, 2020, to leverage the strong Quebec know-
how in renewable energy and power grid management into global opportunities. Hydro-Québec has committed an initial
$500 million to the Strategic Alliance, which will be entirely and exclusively dedicated to co-investment projects with Innergex.
Each party has also committed to presenting investment opportunities in targeted sectors outside of Quebec to each other
exclusively for an initial 3-year period. Targeted areas for investment include wind and solar projects with battery storage or
transmission, distributed generation, off-grid renewable energy networks, and other sectors as may be agreed by both parties.
In the first year of the Strategic Alliance, both entities worked together to build a team responsible for identifying opportunities
to invest. Many opportunities have been assessed while many others are still under review. Both teams are collaborating on a
daily basis to identify and assess the best opportunities for the Strategic Alliance. The current COVID-19 pandemic has slowed
down the market but opportunities still exist and the team is evaluating all of those that make sense for the Strategic Alliance.
In addition, the entities are targeting standalone energy storage facilities with the battery technology developed by Hydro-
Québec, such as Innergex's Tonnerre battery project, which is the first battery deployment for Hydro-Québec.
On October 25, 2021, the Corporation and HQI US Holding LLC, a subsidiary of Hydro-Québec, announced the completion of
the 50-50 joint acquisition of the 60 MW Curtis Palmer hydroelectric portfolio in the state of New York. The Curtis Palmer
facilities consist of two run-of-river hydroelectric facilities, Curtis Mills (12 MW) and Palmer Falls (48 MW). Curtis Palmer has a
power purchase agreement for energy, RECs and capacity with Niagara Mohawk Power Corporation. The five employees of
Curtis Palmer facilities joined the Innergex team. This joint acquisition is the first under the Strategic Alliance.
Since the Curtis Palmer Acquisition, the focus has been to continue the collaboration to identify and complete other potential
transactions as part of the Strategic Alliance.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p33
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS
Three months ended December 31
Year ended December 31
2021
2020
Change
2021
February 2021
Texas Events
(9 days)3
2021
Normalized
2020
Change
202,388
42,555
167,927
36,510
34,461
6,045
21 % 747,208
17 % 149,106
(54,967)
—
692,241
149,106
613,207
131,442
12,813
9,709
137,311
9,979
3,608
117,830
67.8 %
70.2 %
2,834
6,101
19,481
28 %
169 %
45,098
27,367
17 % 525,637
—
—
(54,967)
45,098
27,367
470,670
42,948
16,708
422,109
70.3 %
(2.3) %
68.0 %
68.8 %
79,034
17,664
2,150
10,659
48,561
67,417
(34,565)
77,748
12
57,443
(7,304)
58,465
26,659
9,974
(27,261)
19,283
(26,647)
373 %
17 % 252,255
(89,621)
33 % 255,640
36,986
— %
—
—
—
—
252,255
(89,621)
255,640
36,986
233,143
(65,554)
228,526
26,659
19,112
(24,067)
27,114
10,327
13 %
13 %
5 %
64 %
12 %
8 %
37 %
12 %
— %
(791)
—
(13,874)
—
13,083
—
77,280
(94) %
— % 112,609
(64,197)
—
13,083
112,609
7,524
—
5,559
112,609
74 %
— %
Revenues
Operating expenses
General and administrative
expenses
Prospective projects expenses
Adjusted EBITDA1
Adjusted EBITDA margin1
Finance costs
Other net income
Depreciation and amortization
Impairment of long-term assets
Share of (earnings) losses of joint
ventures and associates:2
Share of (earnings) losses, before
impairment charges
Share of impairment charges
Change in fair value of financial
instruments
Income tax expense (recovery)
37,158
7,357
29,801
405 %
(26,240)
17,071
(9,169)
(15,411)
(22,810)
7,399
(32) %
92,122
(72,060)
20,062
2,025
18,897
18,037
891 %
(28,066)
(149) %
Net earnings (loss)
5,743
11,894
(6,151)
(52) %
(185,394)
64,219
(121,175)
(29,111)
(92,064)
316 %
Net earnings (loss) attributable to:
Owners of the parent
Non-controlling interests
Basic and diluted net (loss) earnings
per share attributable to owners
($)
(2,348)
8,091
5,743
11,920
(26)
11,894
(14,268)
(120) %
8,117 (31,219) %
(52) %
(6,151)
(191,805)
6,411
(185,394)
64,219
—
64,219
(127,586)
6,411
(121,175)
(32,628)
3,517
(29,111)
(94,958)
2,894
(92,064)
291 %
82 %
316 %
(0.02)
0.06
(1.09)
0.35
(0.74)
(0.23)
1. Adjusted EBITDA and Adjusted EBITDA Margin are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-IFRS Measures" section of
this MD&A for more information.
2. Some facilities are treated as joint ventures and associates and accounted for using the equity method; their revenues are not included in the Corporation's consolidated revenues.
3. For the year ended December 31, 2021, the Financial Performance and Operating Results are normalized to exclude the impacts of the February 2021 Texas Events. Please refer to the "February 2021 Texas Events"
section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p34
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS |
Hydroelectric Segment
Hydroelectric Segment
Production (MWh)
LTA (MWh)
Revenues (in $M)
Operating, general and administrative expenses
Adjusted EBITDA (in $M)1
Adjusted EBITDA Margin1
PROPORTIONATE1
Production Proportionate (MWh)
Revenues Proportionate (in $M)
Adjusted EBITDA Proportionate (in $M)
Adjusted EBITDA Margin Proportionate
Three months ended December 31
Year ended December 31
2021
943,297
806,256
96,392
24,019
72,373
2020
699,113
580,908
59,945
16,445
43,500
Change
35 %
39 %
61 %
46 %
66 %
2021
3,256,828
3,392,026
2020
2,789,578
3,017,166
277,302
64,866
212,436
229,102
55,233
173,869
75.1 %
72.6 %
76.6 %
75.9 %
999,294
103,899
77,402
828,189
74,358
53,854
21 %
40 %
44 %
3,738,333
327,849
250,983
3,372,316
293,497
223,695
74.5 %
72.4 %
76.6 %
76.2 %
Change
17 %
12 %
21 %
17 %
22 %
11 %
12 %
12 %
1. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production and Production Proportionate are key performance indicators for the
Corporation that cannot be reconciled with an IFRS measure. Please refer to the "Non-IFRS Measures" section of this MD&A for more information.
For the three-month period ended December 31, 2021, the increase of 61% in Revenues in the hydroelectric segment compared with the same period last year is mainly
explained by the Curtis Palmer Acquisition, completed on October 25, 2021, higher production at most of the facilities in British Columbia and at the Chilean facilities
following the acquisition of the remaining 50% interest in Energía Llaima on July 9, 2021. This increase was partly offset by lower production at the facilities in Quebec. The
increase of 46% in Operating, general and administrative expenses is explained by higher maintenance costs at some of the facilities in British Columbia, higher expenses
following the Curtis Palmer Acquisition and from the Chilean facilities following the acquisition of the remaining 50% interest in Energía Llaima on July 9, 2021. As a result,
the Adjusted EBITDA1 increased by 66% to $72.4 million. The Adjusted EBITDA Margin1 was up from 72.6% to 75.1%, mainly explained by the Curtis Palmer Acquisition,
for which margins are higher, and by higher average selling prices from recently acquired Chilean facilities.
For the three-month period ended December 31, 2021, the joint ventures' and associates' hydroelectric facilities' Revenues decreased compared to the same period last
year explained by a lower contribution from the Chilean facilities since their results are now included in the Corporation's consolidated results, following the acquisition of the
remaining 50% interest in Energía Llaima on July 9, 2021. Operating, general and administrative expenses decreased for the reason stated above. As a result, the Adjusted
EBITDA Proportionate1 increased by 44% to $77.4 million.
For the year ended December 31, 2021, the increase of 21% in Revenues in the hydroelectric segment compared with the same period last year was mainly explained by a
higher contribution from the facilities in British Columbia mostly attributable to higher revenues from higher production explained by lower 2020 figures that included the
impact of the curtailment imposed by BC Hydro for five facilities.This increase is also explained by the contribution from the Chilean facilities following the acquisition of the
remaining 50% interest in Energía Llaima on July 9, 2021, and to the Curtis Palmer Acquisition on October 25, 2021. This increase was partly offset by lower contribution
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p35
(in thousands of Canadian dollars, except as noted and amounts per share)
from some Quebec hydro facilities due to a combined effect of lower production and lower selling prices from the recently renewed PPAs. The increase of 17% in Operating,
general and administrative expenses is mainly explained by higher operating expenses from the Chilean facilities following the acquisition of the remaining 50% interest of
Energía Llaima on July 9, 2021 and to the Curtis Palmer Acquisition on October 25, 2021. As a result, the Adjusted EBITDA1 increased by 22% to $212.4 million. The
Adjusted EBITDA Margin1 was up from 75.9% to 76.6%, which is mainly explained by the Curtis Palmer Acquisition for which margins are higher but partly offset by lower
revenues from the Quebec facilities.
For the year ended December 31, 2021, the joint ventures' and associates' hydroelectric facilities Revenues decreased compared to the same period last year mostly
explained by a lower contribution from the Chilean facilities since their results are now included in the Corporation's consolidated results, following the acquisition of the
remaining 50% interest in Energía Llaima on July 9, 2021, lower contribution from facilities in British Columbia due to lower average selling prices, partly offset by a higher
contribution from the Jimmie Creek facility due to higher revenues from higher production explained by lower 2020 figures that included the impact of the curtailment
imposed by BC Hydro. This decrease was also due to lower production at the facilities in Ontario. Operating, general and administrative expenses decreased mostly due to
lower operating expenses from the Chilean facilities since their results are now included in the Corporation's consolidated results. As a result, the Adjusted EBITDA
Proportionate1 increased by 44% to $77.4 million.
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Wind Segment
Three months ended December 31
Year ended December 31
Wind Segment
Production (MWh)
LTA (MWh)
2021
1,404,694
1,506,858
2020
1,301,882
1,292,026
Change
2021
8 % 4,709,425
17 % 5,010,772
February
2021 Texas
Events
(9 days)2
—
—
2021
Normalized
4,709,425
5,010,772
2020
4,492,810
4,492,522
Revenues (in $M)
Operating, general and administrative expenses
Adjusted EBITDA (in $M)1
Adjusted EBITDA Margin1
90,280
16,262
74,018
98,470
19,812
78,658
(8) %
(18) %
(6) %
349,786
72,927
276,859
(16,801)
—
(16,801)
332,985
72,927
260,058
333,795
69,850
263,945
82.0 %
79.9 %
79.2 %
(7.8) %
78.1 %
79.1 %
PROPORTIONATE1
Production Proportionate (MWh)
Revenues Proportionate (in $M)
Adjusted EBITDA Proportionate (in $M)
1,441,697
111,436
94,632
1,555,772
127,030
103,164
(7) % 5,020,531
464,293
385,866
(12) %
(8) %
—
(57,107)
(57,107)
5,020,531
407,186
328,759
5,413,583
435,784
351,262
Change
5 %
12 %
— %
4 %
(1) %
(7) %
(7) %
(6) %
Adjusted EBITDA Margin Proportionate
84.9 %
81.2 %
83.1 %
(8.6) %
80.7 %
80.6 %
1. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production and Production Proportionate are key performance indicators for the
Corporation that cannot be reconciled with an IFRS measure. Please refer to the "Non-IFRS Measures" section of this MD&A for more information.
2. For the year ended December 31, 2021, the Financial Performance and Operating Results are normalized to exclude the impacts of the February 2021 Texas Events. Please refer to the "February 2021 Texas Events"
section for more information.
For the three-month period ended December 31, 2021, the decrease of 8% in Revenues in the wind power generation segment compared with the same period last year is
mainly attributable to lower production from the facilities in Quebec and France and lower average selling prices at the Foard City facility. The decrease was partly offset by
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p36
(in thousands of Canadian dollars, except as noted and amounts per share)
the commissioning of the Griffin Trail facility on July 26, 2021. The decrease of 18% in Operating, general and administrative expenses is explained by lower maintenance
expenses at some of the Quebec wind facilities, lower tax on production in France and lower operating expenses due to non-recurring expenses in 2020 at the Foard City
facility. These items were partly offset by higher operating expenses following the commissioning of the Griffin Trail facility. As a result, the Adjusted EBITDA1 decreased by
6% to $74.0 million. The Adjusted EBITDA Margin1 was up from 79.9% to 82.0% explained by the combined effect of higher revenues and lower expenses at the Mountain
Air facilities, these items were partly offset by lower revenues at the France wind facilities and lower revenues despite lower operating expenses at the Foard City facility.
For the three-month period ended December 31, 2021, the joint ventures' and associates' wind farms' Revenues decrease compared to the same period last year is mostly
explained by the exclusion of the results from the Flat Top and Shannon joint venture facilities, from April 1, 2021, onward, due to the projects' assets and liabilities being
classified as disposal groups held for sale, following the February 2021 Texas Events (the Flat Top facility was since sold on December 28, 2021). Operating, general and
administrative expenses decreased for the same reason stated above.
The PTCs generated by the wind farms, in the three-month period ended December 31, 2021, decreased due to the exclusion of the results from the Flat Top and Shannon
joint venture facilities, from April 1, 2021, onward, due to the projects' assets and liabilities being classified as disposal groups held for sale, following the February 2021
Texas Events (the Flat Top facility was since sold on December 28, 2021) and to lower PTCs earned at the Foard City facility from lower production. This decrease was
partly offset by the PTCs earned at the Griffin Trail facility following its commissioning on July 26, 2021.
As a result, the Adjusted EBITDA Proportionate1 decreased by 8% to $94.6 million.
For the year ended December 31, 2021, the Revenues in the wind power generation segment, on a normalized basis, excluding the February 2021 Texas Events, was
stable at $333.0 million, compared with the same period last year, mainly explained by lower contributions from the Quebec wind facilities from lower production, by lower
production over higher average selling prices from the wind facilities in France and by the combined effect of lower average selling prices and lower production at the Foard
City facility. These items were partly offset by the full year contribution of the Mountain Air Acquisition, completed on July 15, 2020, and the contribution from the Griffin Trail
facility, following its commissioning on July 26, 2021. The increase of 4% in Operating, general and administrative expenses is mainly explained by the first full-year impact
of operating expenses following the Mountain Air Acquisition and the commissioning of the Griffin Trail facility. These items were partly offset by lower operating expenses
due to non-recurring expenses at the Foard City facility in the same period last year. As a result, the Adjusted EBITDA1 decreased by 1% to $260.1 million. The Adjusted
EBITDA Margin1, on a normalized basis, excluding the February 2021 Texas Events, was down from 79.1% to 78.1%. This decrease is explained by lower revenues from
the facilities in Quebec and France.
For the year ended December 31, 2021, the joint ventures' and associates' wind farms' Revenues, excluding the February 2021 Texas Events, decreased compared with
the same period last year. This decrease is mainly attributable to the exclusion of the results from the Flat Top and Shannon joint venture facilities, from April 1, 2021,
onward, due to the projects' assets and liabilities being classified as disposal groups held for sale, following the February 2021 Texas Events (the Flat Top facility was since
sold on December 28, 2021). Operating, general and administrative expenses decreased for the same reasons stated above.
The proportional PTCs generated by the wind farms contributed $54.0 million for the year ended December 31, 2021, compared with a $70.5 million contribution in the
same period last year. This decrease is mainly attributable to the exclusion of the results from the Flat Top and Shannon joint venture facilities, from April 1, 2021, onward,
due to the projects' assets and liabilities being classified as disposal groups held for sale, following the February 2021 Texas Events (the Flat Top facility was since sold on
December 28, 2021) and to lower PTCs earned at the Foard City facility due to lower production. This decrease was partly offset by the PTCs earned at the Griffin Trail
facility following its commissioning on July 26, 2021.
As a result, the Adjusted EBITDA Proportionate1 decreased by 6% to $328.8 million.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p37
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Solar Segment
Solar Segment
Production (MWh)
LTA (MWh)
Revenues (in $M)
Operating, general and administrative expenses
Adjusted EBITDA (In $M)1
Adjusted EBITDA Margin1
PROPORTIONATE1
Production Proportionate (MWh)
Revenues Proportionate (In $M)
Adjusted EBITDA Proportionate (In $M)
Adjusted EBITDA Margin Proportionate
Three months ended December 31
Year ended December 31
2021
235,166
270,963
15,716
5,309
10,407
2020
185,966
199,786
9,512
1,377
8,135
Change
2021
26 % 1,088,962
36 % 1,257,038
February
2021 Texas
Events
(9 days)2
—
—
2021
Normalized
1,088,962
1,257,038
65 %
286 %
28 %
120,120
16,418
103,702
(38,166)
—
(38,166)
81,954
16,418
65,536
2020
791,526
887,369
50,310
11,096
39,214
66.2 %
85.5 %
86.3 %
(13.6) %
80.0 %
77.9 %
235,166
15,716
10,407
189,397
9,967
8,375
24 % 1,094,502
121,005
58 %
104,256
24 %
—
(38,166)
(38,166)
1,094,502
82,839
66,090
804,241
52,185
40,290
66.2 %
84.0 %
86.2 %
(13.5) %
79.8 %
77.2 %
Change
38 %
42 %
63 %
48 %
67 %
36 %
59 %
64 %
1. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production and Production Proportionate are key performance indicators for the
Corporation that cannot be reconciled with an IFRS measure. Please refer to the "Non-IFRS Measures" section of this MD&A for more information.
2. For the year ended December 31, 2021, the Financial Performance and Operating Results are normalized to exclude the impacts of the February 2021 Texas Events. Please refer to the "February 2021 Texas Events"
section for more information.
For the three-month period ended December 31, 2021, the increase of 65% in Revenues in the solar power generation segment compared with the same period last year is
mainly attributable to the commissioning of the Hillcrest facility, the contribution of the Pampa Elvira facility following the acquisition of the remaining 50% interest in Energía
Llaima on July 9, 2021 and by higher selling prices at the Salvador facility. The increase of 286% in Operating, general and administrative expenses is explained by higher
maintenance at the Phoebe facility, higher operating expenses at the Hillcrest facility from its commissioning and at the Pampa Elvira facility following its acquisition. These
items were partly offset by lower maintenance expenses at the Salvador facility. As a result, the Adjusted EBITDA1 increased by 28% to $10.4 million. The Adjusted EBITDA
Margin1 was down from 85.5% to 66.2% mainly explained by the lower contribution of the Phoebe facility from higher expenses over revenues and the Hillcrest
commissioning, for which margins are lower.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p38
(in thousands of Canadian dollars, except as noted and amounts per share)
For the year ended December 31, 2021, the Revenues in the solar power generation segment, on a normalized basis, excluding the February 2021 Texas Events,
increased by 63% compared with the same period last year. This increase is mainly explained by the liquidated damages due from the EPC contractor for loss of revenues
caused by the delays in and the commissioning of the Hillcrest solar facility, higher selling prices at the Salvador facility combined with its first full year of contribution and to
the contribution of the Pampa Elvira facility following the acquisition of the remaining 50% interest in Energía Llaima on July 9, 2021. These items were partly offset by lower
revenues from the Phoebe facility explained by lower production from the higher curtailment required by the distribution network in Texas along with lower irradiation,
despite higher average selling prices. The increase of 48% in Operating, general and administrative expenses is mainly explained by higher operating expenses following
the commissioning of the Hillcrest solar facility and from the Salvador and the Pampa Elvira acquisitions. As a result, the Adjusted EBITDA1 increased by 67% to
$65.5 million. The Adjusted EBITDA Margin1, on a normalized basis, excluding the February 2021 Texas Events, was up from 77.9% to 80.0% mainly explained by the
contribution of the Hillcrest facility and higher selling prices at the Salvador facility.
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Consolidated Margin
Innergex believes these indicators are important, as they provide management and the reader with additional information about Innergex's operating performance. For more
information, please refer to the Non-IFRS Measures section of this MD&A.
For the three-month period ended on December 31, 2021, on a consolidated basis, the Adjusted EBITDA1, was up 17% from $117.8 million to $137.3 million stemming from
the increase in the cumulative segmented Adjusted EBITDA1 as explained in the previous sections, partly offset by higher prospective expenses to support the
Corporation's growth. The Adjusted EBITDA Margin1,2 was down from 70.2% to 67.8%. This decrease is mainly explained by higher prospective expenses to support the
Corporation's growth and by the increased weight of the solar facilities in the United States and in Chile, for which margins are lower. This decrease is partly offset by the
Curtis Palmer Acquisition, for which margins are higher.
For the three-month period ended on December 31, 2021, on a consolidated basis, Adjusted EBITDA Proportionate Margin1 was down from 72.4% to 70.5%. This decrease
is explained by a lower Adjusted EBITDA margin1,2 and by lower PTCs due to the exclusion of the results from the Flat Top and Shannon joint venture facilities, from April 1,
2021, onward, due to the projects' assets and liabilities being classified as disposal groups held for sale, following the February 2021 Texas Events (the Flat Top facility was
since sold on December 28, 2021) and to lower PTCs earned at the Foard City wind facility due to lower production. This decrease was partly offset by the PTCs earned at
the Griffin Trail wind facility following its commissioning on July 26, 2021.
For the year ended December 31, 2021, on a consolidated basis, excluding the February 2021 Texas Events, the Adjusted EBITDA1 was up 12% from $422.1 million to
$470.7 million stemming from the increase in the cumulative segmented Adjusted EBITDA1 as explained in the previous sections, partly offset by higher prospective
expenses to support the Corporation's growth. The Adjusted EBITDA Margin1,2 was down from 68.8% to 68.0%. The decrease is explained by higher prospective expenses
to support the Corporation's growth and lower revenues at the Quebec wind facilities. This decrease was partly offset by the Curtis Palmer Acquisition, for which margins
are higher, and by higher revenues from the hydro facilities in British Columbia.
For the year ended December 31, 2021, on a consolidated basis, excluding the February 2021 Texas Events, the Adjusted EBITDA Proportionate Margin1 was down from
71.7% to 70.7% . The decrease is explained by a lower Adjusted EBITDA margin1,2 and by lower PTCs due to the exclusion of the results from the Flat Top and Shannon
joint venture facilities, from April 1, 2021, onward, due to the projects' assets and liabilities being classified as disposal groups held for sale, following the February 2021
Texas Events (the Flat Top facility was since sold on December 28, 2021) and to lower PTCs earned at the Foard City wind facility due to lower production. This decrease
was partly offset by the PTCs earned at the Griffin Trail wind facility following its commissioning on July 26, 2021.
1 These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-IFRS Measures" section of this MD&A for more information.
2
The Adjusted EBITDA Margin is a measure of Adjusted EBITDA as a percentage of revenues.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p39
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS |
Net Earnings (Loss)
Net earnings of $5.7 million ($0.02 earnings per share - basic and diluted) for the three-month period ended December
31, 2021, compared with net earnings of $11.9 million ($0.06 earnings per share - basic and diluted) for the corresponding
period in 2020.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously explained and the
increase in prospective projects expenses, the $6.2 million decrease in net earnings mainly stems from:
•
•
•
•
•
a $29.8 million increase in income tax expense mainly due to tax attributes being allocated to tax equity investors of the
Griffin Trail and Hillcrest facilities commissioned in 2021;
a $19.3 million increase in depreciation and amortization, mainly attributable to the Energía Llaima and Curtis Palmer
acquisitions and the Griffin Trail and Hillcrest commissioning in 2021;
a $13.1 million decrease in the share of earnings of joint ventures and associates, mainly related to the Flat Top and
Shannon mark-to-market gain in 2020, compared to nil in 2021;
a $10.0 million increase in finance costs mainly related to the Griffin Trail and Hillcrest facilities, the Energía Llaima
Acquisition, and an increase in inflation compensation interests on the Harrison Hydro real return bonds; and
an unfavourable $5.4 million unrealized change in the fair value of financial instruments, mainly related to the increase in
merchant power curves for the Phoebe power hedge, partly offset by a favourable change in foreign exchange forward
curves, compared with the same period in 2020.
These items were partly offset by:
•
a $27.3 million increase in other income mainly related to the production tax credits and tax attributes allocated to the tax
equity investors at the Griffin Trail wind facility, following its commissioning during the third quarter; and
The recognition of a $26.6 million impairment charge on the investment in Energía Llaima in 2020, compared with no
impairment charge for the same period in 2021.
•
Net loss of $185.4 million ($1.09 loss per share - basic and diluted) for the year ended December 31, 2021, compared with a
net loss of $29.1 million ($0.23 loss per share - basic and diluted) for the corresponding period in 2020.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously explained and the
increase in prospective projects expenses, the $156.3 million increase in net loss mainly stems from:
•
•
•
•
•
•
the February 2021 Texas Events, resulting in a net unfavourable impact of $81.3 million (refer to the "February 2021 Texas
Events" section of this MD&A for more information);
the recognition of an aggregate $112.6 million in impairment charges through the Corporation's share of loss of the Flat
Top and Shannon joint venture facilities, at $53.8 million and $58.8 million, respectively;
a $27.1 million increase in depreciation and amortization, mainly attributable to the Energía Llaima and Curtis Palmer
acquisitions, the full year impact of Mountain Air and Salvador acquired in 2020, and the Griffin Trail and Hillcrest
commissioning in 2021;
an unfavourable $26.8 million unrealized change in fair value of financial instruments, mainly related to the increase in
merchant power curves for the Phoebe power hedge, partly offset by a favourable change in foreign exchange forward
curves, compared with the same period in 2020;
a $19.1 million increase in finance costs mainly related to the Griffin Trail and Hillcrest facilities, the Energía Llaima
Acquisition, and an increase in inflation compensation interests on the Harrison Hydro real return bonds; and
the recognition of impairment charges related to the Phoebe solar facility in Texas reflecting an outlook of higher than
expected congestion charges, to the previously owned Energía Llaima investment in light of the purchase price for the
remaining interests, and to a minority equity investment in France, totalling $24.7 million, $6.3 million, and $5.9 million,
respectively, compared with a $26.6 million impairment charge on the investment in Energía Llaima in 2020.
These items were partly offset by:
•
•
•
a favourable $8.8 million movement in the realized portion of financial instruments, mainly related to the Phoebe basis
hedge, compared with the same period in 2020;
a $24.1 million increase in other income mainly related to the production tax credits and tax attributes allocated to the tax
equity investors at the Griffin Trail wind facility, following its commissioning during the third quarter; and
a $45.1 million increase in recovery of income tax, mainly related to the impacts of the February 2021 Texas Events and
the reversal of deferred tax liabilities related to the Flat Top and Shannon joint venture facilities, due to the projects' assets
and liabilities being classified as disposal groups held for sale, partly offset by the tax attributes being allocated to tax
equity investors of the Griffin Trail and Hillcrest facilities commissioned in 2021.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p40
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE ON OPERATING RESULTS |
Adjusted Net (Loss) Earnings
The Adjusted Net (Loss) Earnings1 seeks to provide a measure that eliminates the earnings impacts of certain derivative
financial instruments and non-recurring events, which do not represent the Corporation's operating performance. Adjusted Net
(Loss) Earnings1 is not a recognized measure under IFRS, has no standardized meaning prescribed by IFRS and therefore
may not be comparable with measures presented by other issuers. Please refer to the "Non-IFRS Measures" section for more
information.
References to "Adjusted Net (Loss) Earnings1" are to net earnings or losses of the Corporation, to which the following
elements are added (subtracted): unrealized portion of the change in fair value of financial instruments; realized portion of the
Phoebe basis hedge, realized loss on the termination of interest rate swaps, realized gain on foreign exchange forward
contracts, impairment charges, specific unusual or non-recurring events such as the February 2021 Texas Events, the net
income tax expense (recovery) related to these items, and the share of losses of joint ventures and associates related to the
above items, net of related tax.
The table below shows a summary statement of Adjusted Net (Loss) Earnings1 (Please refer to the "Non-IFRS Measures" for a
reconciliation to the Consolidated Statements of Earnings):
Three months ended December 31
Year ended December 31
2021
2020
2021
2020
Revenues
Expenses:
Operating expenses
General and administrative expenses
Prospective project expenses
Adjusted EBITDA1
Finance costs
Other net income
Depreciation and amortization
Share of losses of joint ventures and associates
Realized losses (gains) on power hedges
Income tax expense
Adjusted Net (Loss) Earnings1
202,388
167,927
692,241
613,207
42,555
12,813
9,709
137,311
67,417
(32,372)
77,748
(272)
1,672
33,092
(9,974)
36,510
9,979
3,608
117,830
57,443
(7,154)
58,465
(3,646)
(1,818)
1,550
12,990
149,106
45,098
27,367
470,670
252,255
(85,547)
255,640
(12,423)
2,902
64,794
(6,951)
131,442
42,948
16,708
422,109
233,143
(63,824)
228,526
(12,465)
(9,232)
23,650
22,311
1. Adjusted Net Loss (Earnings) and Adjusted EBITDA are not recognized measures under IFRS and therefore may not be comparable to those presented by other
issuers. Please refer to the "Non-IFRS Measures" section for more information.
Adjusted Net Loss1 of $10.0 million for the three-month period ended December 31, 2021, compared with an Adjusted Net
Earnings1 of $13.0 million for the corresponding period in 2020.
The $23.0 million increase in Adjusted Net Loss1 mainly stems from:
▪
▪
a $31.5 million increase in income tax expense mainly due to tax attributes being allocated to tax equity investors;
a $19.3 million increase in depreciation and amortization, mainly attributable to the Energía Llaima and Curtis Palmer
acquisitions and the Griffin Trail and Hillcrest commissioning in 2021; and
a $10.0 million increase in finance costs mainly related to the Griffin Trail and Hillcrest facilities, the Energía Llaima
Acquisition, and an increase in inflation compensation interests on the Harrison Hydro real return bonds.
▪
This item was partly offset by:
▪
▪
the hydroelectric, wind and solar segments' respective operating performance previously explained; and
a $25.2 million increase in other income mainly related to the PTCs and tax attributes allocated to the tax equity investors
at the Griffin Trail wind facility recognized primarily in the year of the commissioning.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p41
(in thousands of Canadian dollars, except as noted and amounts per share)
Adjusted Net Loss1 of $7.0 million for the year ended December 31, 2021, compared with an Adjusted Net Earnings1 of
$22.3 million for the corresponding period in 2020.
The $29.3 million increase in Adjusted Net Loss1 mainly stems from:
▪
a $41.4 million increase in income tax expense mainly due to tax attributes being allocated to tax equity investors of the
Griffin Trail and Hillcrest facilities commissioned in 2021;
a $27.1 million increase in depreciation and amortization, mainly attributable to the Energía Llaima and Curtis Palmer
acquisitions, the full year impact of Mountain Air and Salvador acquired in 2020, and the Griffin Trail and Hillcrest
commissioning in 2021;
a $19.1 million increase in finance costs mainly related to the Griffin Trail and Hillcrest facilities, the Energía Llaima
Acquisition, and an increase in inflation compensation interests on the Harrison Hydro real return bonds; and
an unfavourable $12.1 million movement in the realized portion of the power hedges, compared with the same period in
2020.
▪
▪
▪
These items were partly offset by:
▪
▪
the hydroelectric, wind and solar segments' respective operating performance previously explained; and
a $21.7 million increase in other income mainly related to an increase in the PTCs and tax attributes allocated to the tax
equity investors at the Griffin Trail wind facility, following its commissioning during the third quarter, partly offset by a
decrease in the tax attributes allocated to the tax equity investors at the Phoebe solar facility, largely related to a decrease
in the tax depreciation, which was recognized primarily during the first two years of operations.
3- FINANCIAL PERFORMANCE ON OPERATING RESULTS |
Non-Controlling Interests
Attribution of earnings of $8.1 million to non-controlling interests for the three-month period ended December 31, 2021,
compared with an attribution of nil for the corresponding period in 2020
The $8.1 million increase in earnings attributed to non-controlling interests for the three-month period ended December
31, 2021, is mainly due to:
•
•
•
a favourable unrealized change in the fair value of derivative financial instruments in Innergex Europe;
a higher allocation of earnings to the non-controlling interests of Kwoiek, largely due to a higher production;
the earnings allocated to the non-controlling interests in Innergex HQI USA following the Curtis Palmer acquisition in the
fourth quarter of 2021; and
a contractual increase in the percentage of allocation to the non-controlling interests of Mesgi'g Ugju's'n.
•
Attribution of earnings of $6.4 million to non-controlling interests for the year ended December 31, 2021, compared with an
attribution of earnings of $3.5 million for the corresponding period in 2020
The $2.9 million increase in earnings attributed to non-controlling interests for the year ended December 31, 2021, is mainly
due to:
•
•
•
a favourable unrealized change in the fair value of derivative financial instruments in Innergex Europe;
a contractual increase in the percentage of allocation to the non-controlling interests of Mesgi'g Ugju's'n;
the earnings allocated to the non-controlling interests in Innergex HQI USA following the Curtis Palmer acquisition in the
fourth quarter of 2021; and
the full year of earnings allocated to the non-controlling interests in Mountain Air.
•
These items were partly offset by:
•
a higher allocation of losses to the non-controlling interests of Harrison Hydro, largely due to an increase in the inflation
compensation interest on the real return bonds, compared with the same period last year; and
the temporary shutdown at the Kwoiek Creek facility due to the wildfire that damaged the facility's transmission line.
•
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p42
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Capital Structure
Our capital structure consists of the following components as shown below:
Equity1
Common shares2
Preferred shares3
Non-controlling interests
Long-term loans and borrowings1
Corporate revolving credit facility
Other corporate debt
Project-level debt
Tax Equity financing
Convertible debentures
Deferred financing costs
As at December 31, 2021
As at December 31, 2020
3,580,388
109,080
267,568
3,957,036
398,758
295,000
3,562,380
455,967
280,258
(67,928)
4,924,435
4,778,325
99,364
62,078
4,939,767
182,996
266,627
3,839,799
315,958
280,075
(71,574)
4,813,881
1.Common and preferred shares are presented at their market value as at December 31, 2021, and December 31, 2020, while non-controlling interests and long-
term loans and borrowings are presented at their respective book value.
2.Consists of the number of common shares outstanding as at December 31, 2021, and December 31, 2020, multiplied by the prevailing share price of $18.60
(2020 - $27.37) at the close of markets.
3.Consists of the number of preferred shares outstanding as at December 31, 2021, and December 31, 2020, multiplied by the prevailing share price of $17.20 and
$25.30 (2020 - $14.46 and $25.10), for the Series A and Series C preferred shares, respectively, at the close of markets.
8,881,471
9,753,648
Innergex's strategy in managing its capital is: (i) to develop or acquire high-quality renewable power production facilities that
generate sustainable and stable cash flows, with the objective of achieving a high return on invested capital, and (ii) to
distribute a stable dividend.
Innergex determines the amount of capital required, and its allocation between debt and equity, for the acquisition and
development of new electricity-generating facilities by considering the specific characteristics of stability and growth of each
facility. This determination is made in order to distribute a stable dividend while maintaining an acceptable level of
indebtedness. Generally, equity is the primary source of financing for the development of projects, while long-term loans and
borrowings are used to finance the construction projects. The Corporation expects to finance 70% to 85% of its construction
costs mostly through non-recourse long-term debt financing or tax equity financing for qualifying projects in the United States.
The fair value of common shares was impacted mainly by a net unfavourable change in the share prices, partly offset by the
shares issued related to the Energía Llaima Acquisition, the public offering and the concurrent Hydro-Québec private
placements (refer to the "Information on Capital Stock" section of this MD&A for more information). The preferred shares
structure remained consistent compared to December 31, 2020. The fair value was therefore impacted mainly by a net
favourable change in the preferred shares prices. The increase in non-controlling interests stems mainly from the investment
made by HQI US Holding LLC, a subsidiary of Hydro-Québec, in the Curtis Palmer Acquisition. The long-term loans and
borrowings remained consistent compared to December 31, 2020.
The effective all-in interest rate on the Corporation's long-term loans and borrowings was 4.62% as at December 31, 2021
(4.50% as at December 31, 2020).
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p43
(in thousands of Canadian dollars, except as noted and amounts per share)
Credit Agreements – Material Financial and Non-Financial Conditions
As at December 31, 2021, the Corporation and its subsidiaries have met all material financial and non-financial conditions,
unless indicated below, related to their credit agreements, trust indentures and PPAs. When they are not met, certain financial
and non-financial covenants included in the credit agreements, trust indentures and PPAs entered into by various subsidiaries
of the Corporation could limit the capacity of these subsidiaries to transfer funds to the Corporation. These restrictions could
have a negative impact on the Corporation's ability to meet its obligations.
The Beaumont and Vallottes facilities were not meeting their respective targeted ratios, which triggered a breach under their
respective credit agreement. The aggregate amount of €17.9 million ($25.8 million) that would otherwise be classified as long-
term was reclassified to the current portion of long-term loans and borrowings. Negotiations are currently underway to resolve
this situation.
The Phoebe solar facility was in breach of its credit agreement due to a non respect of a specific requirement of the insurance
clause. The US$100.3 million ($127.2 million) portion of the loan that would otherwise be classified as long-term was
reclassified to the current portion of long-term loans and borrowings. Ongoing dialogue and reporting are provided to the
facility lenders until this situation is resolved.
The Duqueco facility was in breach of its credit agreement following the acquisition of the remaining 50% interest in Energía
Llaima since the former Chilean equity investors ceased to jointly hold direct ownership of fifty percent of the company's
shares. The US$110.7 million ($140.4 million) portion of the loan that would otherwise be classified as long-term was
reclassified to the current portion of long-term loans and borrowings. Negotiations are currently underway to resolve this
situation.
4- CAPITAL AND LIQUIDITY | Tax Equity Investment
The Corporation owns equity interests in some facilities that are eligible for tax incentives available for renewable energy
facilities in the United States. With its current portfolio of renewable energy facilities, Innergex cannot fully monetize such tax
incentives. To take full advantage of these incentives, the Corporation partners with Tax Equity Investors (“TEI”) who invest in
these facilities in exchange for a share of the tax credits.
Some TEI financing structures include a partial pay as you go ("Pay-go") funding arrangement under which, when the actual
annual MWh production exceeds a certain production threshold, the TEI are obligated to make a cash contribution (“Pay-go
Contribution”) to the Corporation. The Pay-go arrangement results in a lower initial investment by the TEI and provides them
with some protection from potential underperformance of the asset.
Innergex recognizes the TEI contributions as long-term loans and borrowings, at an amount representing the proceeds
received from the TEI in exchange for shares of the subsidiary, net of the following elements:
Elements affecting amortized cost of the tax equity financing
Description
Production Tax Credits ("PTC")
Investment Tax Credits ("ITC")
Taxable income (loss), including tax attributes such as
accelerated tax depreciation
Interest expense
Pay-go contributions
Cash distributions
Allocation of PTCs to the TEI derived from the power
generated during the period and recognized in other net
income as earned and as a reduction in tax equity financing
Allocation of ITCs to the TEI stemming from the construction
activities and recognized as a reduction in both the cost of the
assets to which they relate and the tax equity financing
Allocation of taxable income and other tax attributes to the TEI
recognized in other net income as earned and as a reduction
in tax equity financing
Interest expense using the effective interest rate method
recognized in finance costs as incurred and as an increase in
tax equity financing
Additional cash contributions made by the TEI when the
annual production exceeds the contractually determined
threshold and recognized as an increase in tax equity
financing
Cash allocation to the TEI, recognized as a reduction in tax
equity financing
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p44
(in thousands of Canadian dollars, except as noted and amounts per share)
Production Tax Credit Program (“PTC”)
Current United States tax law allows wind energy projects to receive tax credits that are earned for each MWh of generation
during the first 10 years of the projects' operation. The TEIs are allocated a portion of the renewable energy facility's taxable
income (losses) and PTCs produced and a portion of the cash generated by the facility until they achieve an agreed-upon
after-tax investment return (“Flip Point”). After the Flip Point, TEIs will retain a lesser portion of the cash and the taxable
income (losses) generated by the facility.
Commercial
Operation
Date
Expected TEI
Flip Point5
TEI
Investment
(M$)
Expected
Annual PTC
Generation3
(M$)
Expected
Annual Pay-go
Contribution4
(M$)
TEI Allocation of
Taxable Income
(Loss) and PTCs
(Pre-Flip Point)
TEI Allocation
of Cash
Distributions
(Pre-Flip Point)
Foard City1,2
Griffin Trail1,2
2019
2021
2029
2031
372.7
210.6
41.3
26.4
4.4
4.7
99.00 %
82.50 %
5.00 %
5.00 %
1. Before the Flip Point, TEI cash distributions are based on a quarterly test measurement of cumulative generation for the project since commercial operations
date. Lower production could result in a higher cash allocation to the TEI or a change to the Flip Point. Figures provided are for 2021.
2. TEIs in U.S. projects generally require certain sponsor guarantees as a condition for their investment. To support the tax equity investments at Shannon, Flat
Top and Foard City, Alterra, a subsidiary of Innergex, executed a guarantee indemnifying the TEIs against certain breaches of project-level representations,
warranties and covenants. The Corporation believes these indemnifications cover matters that are substantially within its control, and are very unlikely to occur.
3. Based on the gross estimated LTA and the current credit of US$25/MWh generated for the period from COD to Flip Point, translated into Canadian dollars at
1.2678. PTCs generation will vary depending on actual production.
4. Average annual Pay-go Contributions estimate is based on PTCs generated on gross estimated LTA for each year from COD to Flip Point, translated into
Canadian dollars at 1.2678. Pay-go Contributions will be earned on actual production in excess of a specified annual threshold, subject to a contractual
cumulative maximum.
5. Represents the expected TEI Flip Point as estimated at the date of final funding from the TEI. Actual Flip Point may differ, subject to the facilities' respective
operating performance.
Investment Tax Credit Program (“ITC”)
Current United States tax law allows wind and solar facilities to receive a one-time federal tax credit, calculated on the basis of
the facility's capital cost. Projects that began construction through 2019 are eligible for 30% ITC. This credit decreases to 26%
for facilities that began construction in 2021 and 2022, 22% in 2023 and 10% thereafter.
Commercial
Operation Date
Expected TEI Flip
Point7
TEI Investment
(M$)
Phoebe 1,2,3,7
Hillcrest 1,4,5,6
2019
2021
2026
2028
244.3
142.2
TEI Allocation of
Taxable Income
(Loss) and ITC
(Pre-Flip Point)
TEI Preferred
Allocation of Cash
(Pre-Flip Point)
67.00 %
10.62% in excess of
priority distribution
99.00 %
4.23% in excess of
priority distribution
1. TEIs in U.S. projects generally require certain sponsor guarantees as a condition for their investment. To support the tax equity investments at Phoebe, Alterra, a
subsidiary of Innergex, executed a guarantee indemnifying the TEIs against certain breaches of project-level representations, warranties and covenants. The
Corporation believes these indemnifications cover matters that are substantially within its control, and are very unlikely to occur.
2. Phoebe’s cash distribution amounts to the TEI are fixed and defined within the TEI partnership agreement. All amounts of distributable cash in excess of these
fixed and defined distributions are distributed at the rate of 10.62% to the TEI, until the Flip Point date.
3. TEI Allocation of taxable income (loss) and ITC are 67.00% until December 31, 2024, and up to 99.00% thereafter, until TEI Flip Point.
4. Hillcrest Solar Partners received US$22.4 million ($29.8 million) from the TEI in return for its Class A membership interest, representing 20% of the TEI's total
investment. The remaining funding of US$90.4 million ($114.6 million) is to be received upon commissioning of the project.
5. Hillcrest allocation of taxable income (loss) and ITCs is 99.00% to the TEI. From January 1, 2025, to December 31, 2025, allocation of taxable income (loss) to
the TEI will be 67.00%, and 5.00% thereafter.
6. Hillcrest’s cash distribution amounts to the TEI are fixed and defined within the TEI partnership agreement. All amounts of distributable cash in excess of these
fixed and defined distributions are distributed at the rate of 4.23% to the TEI, until the Flip Point date.
7. Represents the expected TEI Flip Point as estimated at the date of final funding from the TEI. Actual Flip Point may differ, subject to the facilities' respective
operating performance.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p45
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Financial Position
As at
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Investment tax credits recoverable
Other current assets
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Investments in joint ventures and associates
Goodwill
Other non-current assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Non-current liabilities
Long-term loans and borrowings
Other non-current liabilities
Total non-current liabilities
Total liabilities
SHAREHOLDERS' EQUITY
Equity attributable to owners
Non-controlling interests
Total shareholders’ equity
December 31, 2021
December 31, 2020
166,266
61,659
1,200
159,552
388,677
5,513,392
1,043,994
133,398
60,858
255,749
7,007,391
7,396,068
161,465
67,477
106,353
117,157
452,452
5,053,125
919,323
446,837
63,298
206,563
6,689,146
7,141,598
733,527
1,036,730
4,411,239
890,622
5,301,861
6,035,388
1,093,112
267,568
1,360,680
7,396,068
4,046,714
987,222
5,033,936
6,070,666
1,008,854
62,078
1,070,932
7,141,598
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p46
(in thousands of Canadian dollars, except as noted and amounts per share)
Working Capital Items
As at December 31, 2021, working capital1 was negative at $344.9 million, from negative $584.3 million in 2020, mainly
explained by:
•
•
•
Current assets amounted to $388.7 million as at December 31, 2021, a decrease of $63.8 million compared with
December 31, 2020, mainly due to a $105.2 million decrease in the investment tax credit recoverable following
Hillcrest commissioning and the allocation of the tax credits recoverable to the TEI. The decrease was partly offset by
a $25.2 million increase in accounts receivable mainly from business acquisitions.
Current liabilities amounted to $733.5 million as at December 31, 2021, a decrease of $303.2 million compared with
December 31, 2020, mainly due to a $255.6 million decrease in the current portion of long-term loans and borrowings
which primarily relates to the allocation of the investment tax credits recoverable to the Hillcrest TEI and the
resolution of breaches under the Mesgi'g Ugju's'n, Mountain Air, Montjean and Theil-Rabier project loans, partly offset
by the classification of the Beaumont, Vallottes, Phoebe and Duqueco project loans as current following the breach of
their respective credit agreement as at December 31, 2021.
Derivative financial instruments also contributed favourably to the working capital balance (please refer to the
"Financial Position – Derivative Financial Instruments and Risk Management" subsection below for more information).
The Corporation considers its current level of working capital1 to be sufficient to meet its needs, considering that a total amount
of $293.4 million that would otherwise be classified as long-term was reclassified to the current portion of long-term loans and
borrowings (see the "Capital Structure" section of this MD&A for more information). As at December 31, 2021, the Corporation
had $700.0 million in revolving term credit facilities and had drawn $398.8 million as cash advances, while $48.3 million had
been used to issue letters of credit, leaving $253.0 million available.
Non-Current Assets
Non-current assets amounted to $7,007.4 million as at December 31, 2021, an increase of $318.2 million compared with
December 31, 2020. The increase is mainly due to the Energía Llaima, Licán and Curtis Palmer acquisitions in the second half
of 2021. Moreover, the construction activities, mainly related to the Hillcrest and Griffin Trail facilities, contributed to increasing
property, plant and equipment by an aggregate amount of $201.3 million, net of the ITC recoverable recognized against the
Hillcrest construction costs. In addition, other non-current assets increased following proceeds received from a $19.6 million
letter of credit that the Corporation availed itself of following the bankruptcy of the service provider under the turbine supply
agreement at Mesgi'g Ugju's'n. The proceeds are to be used in the future to remediate the unfulfilled performance obligations
under the turbine supply agreement.
These items were partly offset by a $24.7 million impairment charge related to the Phoebe solar facility in Texas, reflecting an
outlook of higher than expected congestion charges, by the depreciation and amortization of $255.6 million, by the
strengthening of the Canadian dollar against the Euro and by the decrease in investments in joint ventures and associates.
The decrease in investments in joint ventures and associates is related mainly to the impacts of the February 2021 Texas
Events on the Flat Top and Shannon joint ventures, aggregating to a share of los ses of $64.2 million for Innergex, impairment
charges of $53.8 million and $58.8 million for Flat Top and Shannon, respectively, and to the acquisition of the remaining
interests in Energía Llaima, which was previously presented as an equity accounted investment.
Non-Current Liabilities
Non-current liabilities amounted to $5,301.9 million as at December 31, 2021, an increase of $267.9 million compared with
December 31, 2020. The increase is mainly due to the Energía Llaima and Licán acquisitions in the third quarter of 2021.
Moreover, the reclassification of project loans as non-current following the resolution of breaches of the Mesgi'g Ugju's'n,
Mountain Air, and Montjean and Theil-Rabier credit agreements contributed to increasing the non-current portion of long-term
loans and borrowings, as well as the net draws made toward the construction of the Hillcrest and Griffin Trail facilities,
including the tax equity financing thereof, and the Curtis Palmer purchase price, partly offset by the proceeds received from the
public offering of common shares and the Hydro-Québec private placements applied against the revolving credit facility. In
addition, other liabilities increased following proceeds received from a $19.6 million letter of credit that the Corporation availed
itself of following the bankruptcy of the service provider under the turbine supply agreement at Mesgi'g Ugju's'n.
1 Working capital represents the excess or deficiency of current assets over current liabilities.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p47
(in thousands of Canadian dollars, except as noted and amounts per share)
These increases were partly offset by the strengthening of the Canadian dollar against the Euro, scheduled principal
repayments, the classification of the Beaumont, Vallottes, Phoebe and Duqueco facilities project loans as current (see the
"Capital Structure" section of this MD&A for more information), and the proceeds received from the public offering of common
shares and the Hydro-Québec private placements applied against the revolving credit facility.
Shareholders' Equity
As at December 31, 2021, Shareholders' equity increased by $289.7 million compared with December 31, 2020, mainly
attributable to the shares issued related to the Energía Llaima Acquisition, the public offering and the concurrent Hydro-
Québec private placements (refer to the "Information on Capital Stock" section of this MD&A for more information), and the
investment made by HQI US Holding LLC, a subsidiary of Hydro-Québec, in the Curtis Palmer Acquisition, partly offset by the
total comprehensive loss of $116.2 million, the dividends declared on common and preferred shares totalling $137.9 million,
and $14.8 million in distributions to non-controlling interests.
Derivative Financial Instruments and Risk Management
The Corporation uses derivative financial instruments ("derivatives") to manage its exposure to the risk of increasing interest
rates on its debt financing, to manage its exposure to exchange rate fluctuations on the future repatriation of cash flows from
its French operations, and to reduce exposure to the risk of decreasing power prices.
As at December 31, 2021
Interest rate swaps
Interest rate swaps
Interest rate swaps
Foreign exchange forward contracts
Power hedges
Currency
CAD
USD
EUR
EUR-CAD
USD
Current Notional
Fair Value After Credit Adjustment
Currency of
origin
CAD
Currency of
origin
CAD
963,624
312,179
127,591
290,716
N/A
963,624
395,780
183,617
500,612
N/A
(58,396)
(6,260)
(8,443)
2,485
13,061
(57,553)
(58,396)
(7,936)
(12,150)
2,485
16,559
(59,438)
Current Notional
Fair Value After Credit Adjustment
As at December 31, 2020
Interest rate swaps
Interest rate swaps
Interest rate swaps
Foreign exchange forward contracts
Power and basis hedges
Currency
CAD
USD
EUR
EUR-CAD
USD
Currency of
origin
1,111,837
224,890
136,811
299,096
CAD
1,111,837
286,329
213,535
516,033
N/A
N/A
Currency of
origin
CAD
(116,925)
(22,987)
(13,975)
(37,113)
42,477
(148,523)
(116,925)
(29,266)
(21,811)
(37,113)
54,082
(151,033)
The aggregate fair value of derivative financial instruments amounted to a net liability of $59.4 million as at December
31, 2021, from a net liability of $151.0 million as at December 31, 2020. The favourable unrealized change in fair value relates
mainly to the interest hedging derivatives, favourably impacted by an upward shift in interest rate curves, the Phoebe basis
hedge, which matured on December 31, 2021, and the foreign exchange forward contracts, favourably impacted by a general
downward shift in the Euro-Cad forward curve. These items were partly offset by the unfavourable change in the Phoebe
power hedge, following an increase in the merchant price curves.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p48
(in thousands of Canadian dollars, except as noted and amounts per share)
Contractual obligation
As at December 31, 2021, the expected schedule of commitment payments is as follows:
Year of expected payment
Under 1 year
1 to 5 years
Thereafter
Total
Long-term loans and borrowings
154,995
1,737,191
2,417,411
4,309,597
Interest on long-term loans and borrowings
171,816
602,404
1,918,222
2,692,442
Lease liabilities
Other liabilities
Purchase obligations
10,178
1,783
42,087
202,781
9,266
31,210
26,560
125,722
229,520
Variable payments on lease contracts
8,838
41,800
4,214
255,046
42,259
381,802
54,852
Total
Contingencies
BC Hydro Curtailment Notices
374,170
2,558,470
4,803,358
7,735,998
In May 2020, Innergex received notices from BC Hydro in relation to six of the Corporation’s hydroelectric facilities in British
Columbia stating that BC Hydro would not accept and purchase energy under the applicable electricity purchase agreements
(“EPAs”) above a specified curtailment level for the period from May 22, 2020 to July 20, 2020. The specified curtailment levels
were 0.0 MW/h for the Jimmie Creek (accounted for using the equity method), Upper Lillooet River, Northwest Stave River,
and Boulder Creek facilities, 2.0 MW/h for the Tretheway Creek facility and 4.0 MW/h for the Big Silver Creek facility.
BC Hydro cited the current COVID-19 pandemic and related governmental measures taken in response to it as constituting a
“force majeure” event under the EPAs, and resulting in a situation in which BC Hydro was allegedly unable to accept or
purchase energy under the EPAs. The notices to Innergex followed public statements by BC Hydro regarding measures it w
taking to address the reduced electricity demand during the COVID-19 pandemic and related challenges to the safe operation
of its hydroelectric system.
Innergex disputes that the current pandemic and related governmental measures in any way prevent BC Hydro from fulfilling
its obligations to accept and purchase energy under the EPAs or enable it to invoke “force majeure” provisions under the EPAs
to suspend these obligations. Innergex acknowledges that BC Hydro retains “turn-down” rights under the EPAs, which enable
it to require Innergex to turn down or shut off its facilities in certain circumstances, including in order to avoid a safety or
stability risk. Where BC Hydro exercises this right, it is required under the EPAs to compensate Innergex for energy that would
have been produced at the facilities in the absence of the curtailment. Innergex has complied with BC Hydro’s curtailment
request, but has done so under protest, seeking to enforce its rights under the EPAs on the basis described above. For the
period from May 22, 2020, to July 20, 2020, actual eligible energy revenue that would have been produced at the facilities in
the absence of the curtailment amounts to $12.5 million ($14.2 million on a Revenues Proportionate2 basis). The dispute is
expected to conclude in 2022.
Harrison Hydro L.P. Water Rights
On March 23, 2017, the Comptroller of the Water Rights issued adjusted rental statements to the Harrison Hydro L.P. and its
subsidiaries for the years 2011 and 2012 for an amount of $3.2 million in aggregate regarding water rental rates to be charged
under the Water Act. The amount claimed was paid under protest and Harrison Hydro L.P. and its subsidiaries filed a notice of
appeal of the decision to the Environmental Appeal Board.
On July 26, 2019, the Environmental Appeal Board of British Columbia rendered a decision granting the appeal and ordering
the Comptroller of Water Rights to reimburse to each of the Limited Partnerships its proportionate share of the adjusted water
rental amounts of $3.2 million overcharged to Harrison Hydro L.P. and its subsidiaries for the years 2011 and 2012. On
November 22, 2019, the Environmental Appeal Board of British Columbia rendered another decision confirming that the sum
will accrue interest starting June 28, 2017, until the date it is refunded. On January 20, 2020, the Comptroller of Water Rights
filed with the Supreme Court of British Columbia a petition for judicial review of the Environmental Appeal Board’s order to
return the amount in water rental fees to Harrison Hydro L.P. and its subsidiaries, with interest. On January 31, 2020, the
Comptroller of Water Rights transferred an amount of $3.3 million, representing the principal of $3.2 million with interest
2 Revenues Proportionate is not a recognized measure under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
"Non-IFRS Measures" section of this MD&A for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p49
(in thousands of Canadian dollars, except as noted and amounts per share)
accrued between June 28, 2017, and January 31, 2020, to a trust account established by Harrison Hydro L.P. and its
subsidiaries’ external legal counsel, bearing interest in favour of the Appellants. The Limited Partnerships filed their response
to petition on April 14, 2020. The hearing took place in Victoria in the last week of September 2020. A decision was rendered
on February 9, 2021, by the Supreme Court of British Columbia, which concluded that the Environmental Appeal Board's
decision was reasonable, and dismissed the Comptroller of Water Rights' petition accordingly. The Comptroller of Water
Rights subsequently appealed the decision of the Supreme Court of British Columbia, which was unanimously dismissed by
the British Columbia Court of Appeal on January 7, 2022. The Corporation recognized the amount of $3.2 million in the
consolidated statements of earnings (loss) during the year ended December 31, 2019. A total amount of $3.4 million, including
interests, is receivable as at December 31, 2021.
February 2021 Texas Events
In February 2021, unprecedented extreme winter weather conditions and related electricity market failure paralyzed the state
of Texas, United States. These unprecedented extreme winter weather events pushed the Texas Government to declare a
disaster and the US Government to declare a state of emergency. The storm disturbed production, transmission and
distribution of power, severely impacting prices. Because of the disturbance, wholesale electricity prices in the Electric
Reliability Council of Texas (ERCOT) reached their cap of US$9,000 per MWh and remained at such a level for a prolonged
period of time. The February 2021 Texas Events lasted from February 11 to February 19, 2021. The combined effect of supply
interruptions, abnormal market pricing conditions and contractual obligations to supply a predetermined daily generation under
the power hedges, have had a net unfavourable impact at the Corporation's Phoebe solar facility located in Winkler County,
Flat Top wind facility in Mills County, and Shannon wind facility in Clay County.
Phoebe
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of the power
hedge of the Phoebe facility in February, which was rejected by the recipient.
On July 19, 2021, Innergex reached an agreement to settle the amounts that remained unpaid by the Phoebe solar facility
following the February 2021 Texas Events. The aggregate cash disbursement of US$24.0 million ($29.7 million) comprised the
agreed-upon settlement payment for the amounts disputed following the February 2021 Texas Events, and a payment on the
project’s tracking account balance, net of unpaid energy sold by the project during the negotiation process.
Flat Top and Shannon
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of the power
hedges of the Flat Top and Shannon facilities in February, which was rejected by the recipient. To preserve the Corporation’s
and its partners’ rights with regard to the Flat Top and Shannon facilities, court proceedings were initiated on April 21, 2021. On
May 20, 2021, the District Court of Harris County, Texas denied the temporary injunction application, directing the counterparty
to the power hedges for the Flat Top and Shannon wind facilities to suspend all remedies against the projects, including
foreclosure, arising from an alleged default of payment that was formally disputed by the Innergex, following the February 2021
Texas Events.
The carrying amount of the Flat Top and Shannon investments was decreased to nil following the $53.8 million and $58.8
million respective impairment charges recognized by the Corporation through its share of loss of joint ventures and associates
in March 31, 2021. During the period ended June 30, 2021, the underlying assets and liabilities of the Flat Top and Shannon
investments were classified as disposal groups held for sale. In addition, following the classification as held for sale, the
deferred tax liabilities related to the Corporation's equity investments in Flat Top and Shannon were decreased to nil, with
$24.4 million and $15.1 million deferred tax recoveries, respectively.
On December 28, 2021, the Corporation completed the sale of its 51% interest in Flat Top for a nominal amount. The
underlying assets and liabilities of the Shannon investment remain held for sale as at December 31, 2021, as the carrying
amount of its Class B shares will be recovered principally through a sale transaction. As required, the disposal groups are
measured at the lower of their respective carrying amounts and fair values less costs to sell, which is estimated to be nil, on a
net basis, as at December 31, 2021. On the basis that the project is non-recourse to the Corporation, the financial exposure of
the Corporation is limited to the non-cash impacts on the reversal of exchange differences in accumulated other
comprehensive income related to the project.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p50
(in thousands of Canadian dollars, except as noted and amounts per share)
Off-Balance-Sheet Arrangements
As at December 31, 2021, the Corporation had issued letters of credit totaling $207.1 million, including $48.3 million from its
available corporate facilities, to meet its obligations under its various PPAs and other agreements. These letters of credit were
issued as payment securities for various projects under construction and as performance or financial guarantees under PPAs
and other contractual obligations. As at that date, Innergex had also issued a total of $41.2 million in corporate guaranties used
mainly to guarantee certain activities of prospective projects. The corporate guaranties were also used to support the long-
term currency hedging instruments of its operations in France, and the performance of the Brown Lake and Miller Creek
hydroelectric facilities.
Tax equity investors in U.S. projects generally require sponsor guaranties as a condition to their investment. To support the tax
equity investments at Shannon, Kokomo, Spartan, Foard City, Phoebe, Hillcrest, Griffin Trail and Mountain Air, Alterra Power
Corp, a subsidiary of Innergex, has executed guaranties effective on funding of the tax equity investments indemnifying the tax
equity investors against certain breaches of project-level representations, warranties and covenants and other events. The
Corporation believes these indemnifications cover matters that are substantially under its control and are very unlikely to occur.
With respect to the Phoebe facility, Alterra has also provided a guarantee in favour of the project, which will become effective
only in the unlikely event that the Phoebe tax equity investors call upon their guarantee.
4- CAPITAL AND LIQUIDITY | Cash Flows
Three months ended
December 31
2021
2020
2021
Year ended December 31
2021
Normalized
2020
February
2021
Texas
Events (9
days)1
75,837
77,692 265,498
17,093 282,591 235,108
366,228
97,981 414,077
— 414,077 492,478
(446,083)
(169,803)
(667,054)
—
(667,054)
(725,608)
OPERATING ACTIVITIES
Cash flows from operating activities
FINANCING ACTIVITIES
Cash flows from financing activities
INVESTING ACTIVITIES
Cash flows used in investing activities
Effects of exchange rate changes on cash and
cash equivalents
(7,720)
4,801
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period 175,050 156,360 161,465
166,266 161,465 166,266
Cash and cash equivalents, end of period
(4,766)
(8,784)
(765)
5,105
(7,720)
21,894
—
17,093
3,263
5,241
— 161,465 156,224
17,093 183,359 161,465
1.Please refer to the "February 2021 Texas Events" section for more information.
Cash Flows from Operating Activities
For the three-month period ended December 31, 2021, cash flows from operating activities totaled $75.8 million, compared
with $77.7 million in the same period last year. The decrease relates primarily to an unfavourable change in non-cash
operating working capital items, partly offset by the contribution to operating cash flows from the Energía Llaima, Licán and
Curtis Palmer acquisitions during the third and fourth quarters of 2021, as well as the commissioning of the Hillcrest solar and
the Griffin Trail wind facilities.
For the year ended December 31, 2021, cash flows from operating activities totaled $265.5 million, compared with
$235.1 million in the same period last year. The increase relates primarily to the contribution from the Energía Llaima, Licán
and Curtis Palmer acquisitions in second half of 2021, the Hillcrest and Griffin Trail facilities commissioned in 2021, and the full
year impact of the Mountain Air and Salvador acquisitions of 2020, a favourable $20.9 million change in the realized loss on
the Phoebe basis hedge, an increase in revenues from the hydroelectric facilities in British Columbia explained by the lower
2020 figures that included the impact of the curtailment imposed by BC Hydro for five facilities, and an increase in distributions
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p51
(in thousands of Canadian dollars, except as noted and amounts per share)
from joint ventures and associates, primarily due to a distribution received from Energía Llaima in the second quarter of 2021.
The increase was partially offset by the February 2021 Texas Events, which contributed to a $17.1 million decrease in cash
flows from operating activities.
Cash Flows from Financing Activities
For the three-month period ended December 31, 2021, cash flows from financing activities totaled $366.2 million, compared
with $98.0 million in the same period last year. The increase stems mainly from the net increase in long-term loans and
borrowings, totalling $217.1 million in 2021, mainly draws made on the corporate revolving credit facility toward the Curtis
Palmer Acquisition. This compares with net draws of $143.8 million in 2020, mainly related to the construction of the Hillcrest
facility. The increase was also attributable to the $196.7 million investment made by HQI US Holding LLC, a subsidiary of
Hydro-Québec, in the Curtis Palmer Acquisition.
For the year ended December 31, 2021, cash flows from financing activities totaled $414.1 million, compared with
$492.5 million in the same period last year. The decrease stems partly from the $658.4 million cash inflow last year from the
Hydro-Québec Private Placement compared with $267.8 million cash inflow in 2021 from shares issued related to the public
offering and the Hydro-Québec private placements. The decrease was partly offset by net draws on long-term loans and
borrowings, totaling $118.0 million in 2021, mainly related to the construction of the Hillcrest solar and the Griffin Trail wind
facilities, and to the Curtis Palmer purchase price. The increase was also attributable to the $196.7 million investment made by
HQI US Holding LLC, a subsidiary of Hydro-Québec, in the Curtis Palmer Acquisition.
Cash Flows Used in Investing Activities
For the three-month period ended December 31, 2021, cash flows used in investing activities totaled $446.1 million, compared
with $169.8 million in the same period last year. The increase is mainly due to the consideration paid toward the Curtis Palmer
acquisition in 2021. This was partly offset by a decrease in additions to property, plant and equipment and project development
costs.
For the year ended December 31, 2021, cash flows used in investing activities totaled $667.1 million, compared with
$725.6 million in the same period last year. The decrease is mainly due to a decrease in additions to property, plant and
equipment and project development costs, and to the release of the restricted cash account upon final funding received in
November 2021 for the Hillcrest solar facility. This was partly offset by the higher consideration paid toward the Curtis Palmer
and Licán acquisitions in 2021, while the Energía Llaima Acquisition was entirely financed through equity, compared with the
Salvador and Mountain Air acquisitions in 2020.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p52
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Free Cash Flow and Payout Ratio
Free Cash Flow and Payout Ratio
calculation1
Cash flows from operating activities
Add (Subtract) the following items:
Changes in non-cash operating working
capital items
Maintenance capital expenditures, net of
proceeds from disposals
Scheduled debt principal payments
Free Cash Flow attributed to non-
controlling interests2
Dividends declared on Preferred shares
Add (subtract) the following non-recurring
elements3:
Realized loss on contingent
considerations
Realized loss on termination of interest
rate swaps
Transaction costs related to realized
acquisitions
Realized (gain) loss on the Phoebe basis
hedge4
Income tax paid on realized
intercompany gain
Recovery of maintenance capital
expenditures and prospective project
expenses on sale of HS Orka, net of
attribution to non-controlling interests5
Free Cash Flow6
Year ended December 31
February 2021
Texas Events
(9 days)6
2021
Normalized
2021
2020
2019
265,498
17,093
282,591
235,108
240,065
21,455
(8,029)
(160,973)
(25,076)
(5,632)
547
2,508
4,563
—
—
—
—
—
—
—
—
21,455
7,765
(25,634)
(8,029)
(160,973)
(2,828)
(151,623)
(8,752)
(128,691)
(25,076)
(5,632)
(13,491)
(5,942)
(12,679)
(5,942)
547
3,021
—
2,508
4,563
—
4,145
1,664
266
(2,546)
(1,304)
(3,850)
19,586
11,697
—
—
—
—
10,594
—
92,315
—
15,789
—
108,104
—
93,260
8,242
93,311
Dividends declared on common shares
Payout Ratio6
132,229
143 %
—
(20) %
132,229
125,543
122 %
135 %
95,046
102 %
Adjust for the following items:
Prospective projects expenses
Adjusted Free Cash Flow
27,367
135,471
16,708
109,968
12,905
106,216
Adjusted Payout Ratio
98 %
114 %
89 %
1. Free Cash Flow, Adjusted Free Cash Flow, Payout Ratio and Adjusted Payout Ratio are not recognized measures under IFRS and therefore may not be
comparable to those presented by other issuers. Please refer to the "Non-IFRS Measures" section for more information.
2. The portion of Free Cash Flow attributed to non-controlling interests is subtracted, regardless of whether an actual distribution to non-controlling interests is
made, in order to reflect the fact that such distributions may not occur in the period they are generated.
3. Non-recurring elements, such as one-time transaction costs related to acquisitions, refinancing activities, or fiscal strategies, incurred for the purpose of
improving the long-term cash generating capacity of Innergex, are excluded from Free Cash Flow, as they are deemed not to represent the long-term cash-
generating capacity of Innergex.
4. Due to their limited occurrence (maturity attained on December 31, 2021), gains and losses on the Phoebe basis hedge are deemed not to represent the long-
term cash-generating capacity of Innergex.
5. The sale of HS Orka has allowed for the recovery of maintenance capital expenditures and prospective project expenses incurred thereon since the acquisition
of the project in February 2018, totaling $5.7 million and $9.6 million, respectively. An amount of $7.1 million was deducted from the total recovery as it pertains
to non-controlling interests.
6. For the year ended December 31, 2021, the Free Cash Flow and Payout Ratio are normalized to exclude the impacts of the February 2021 Texas Events.
Please refer to the "February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p53
(in thousands of Canadian dollars, except as noted and amounts per share)
Free Cash Flow
For the year ended December 31, 2021, the Corporation generated Free Cash Flow1 of $92.3 million. Excluding the impacts
from the February 2021 Texas Events (refer to the "February 2021 Texas Events" section of this MD&A for more information),
the Corporation generated Normalized Free Cash Flow of $108.1 million, compared with $93.3 million for the corresponding
period last year.
Normalized Free Cash Flow1 increased $14.8 million compared with the comparative period, mainly due to:
•
•
•
the contribution to cash flows from operating activities before changes in non-cash operating working capital items
from the Energía Llaima, Licán and Curtis Palmer acquisitions in second half of 2021, the Hillcrest and Griffin Trail
facilities commissioned in 2021, and the full year impact of the Mountain Air and Salvador acquisitions of 2020;
an increase in revenues from the facilities affected by the BC Hydro-imposed curtailment, citing the COVID-19
pandemic, which mainly impacted the second quarter of 2020; and
an increase in distributions from joint ventures and associates, primarily due to a distribution received from Energía
Llaima in the second quarter of 2021.
These items were partly offset by:
•
•
•
an increase in debt principal payments stemming from the Energía Llaima Acquisition in the third quarter of 2021 and
the beginning of debt principal repayment for the Upper Lillooet/Boulder Creek project loan;
an increase in Free Cash Flow attributed to non-controlling interests, stemming mainly from the Curtis Palmer
Acquisition and the full year impact of the Mountain Air Acquisition realized in 2020; and
a decrease in cash flows from operating activities before changes in non-cash operating working capital items from
the Phoebe facility, due mostly to an unfavourable difference between sales at the Phoebe node and purchases at the
ERCOT South hub, compared with a favourable difference in the comparative period.
Payout Ratio
For the year ended December 31, 2021, the dividends on common shares declared by the Corporation amounted to 143% of
Free Cash Flow1. Excluding the impacts from the February 2021 Texas Events (refer to the "February 2021 Texas Events"
section of this MD&A for more information), the dividends on common shares declared by the Corporation amounted to 122%
of Normalized Free Cash Flow1, compared with 135% for the corresponding period last year.
1 Free Cash Flow is not a recognized measure under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-
IFRS Measures" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p54
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Information on Capital Stock
The Corporation’s Equity Securities
Number of common shares
Number of 4.75% convertible debentures
Number of 4.65% convertible debentures
Number of Series A Preferred Shares
Number of Series C Preferred Shares
Number of stock options outstanding
As at
February 22, 2022 December 31, 2021 December 31, 2020
174,582,586
148,635
143,750
3,400,000
2,000,000
233,539
204,071,907
148,023
142,056
3,400,000
2,000,000
265,570
192,493,999
148,023
142,056
3,400,000
2,000,000
265,570
As at the closing of the market on February 22, 2022, and since December 31, 2021, the increase in the number of common
shares of the Corporation is attributable mainly to the following:
–
–
–
the issuance of 9,718,650 common shares following the public offering;
the concurrent issuance of 2,100,000 common shares to Hydro-Quebec;
Also, the issuance of 12,939 common shares related to the Corporation's Dividend Reinvestment Plan ("DRIP").
These items were partly offset by:
-
the 253,681 common shares purchased and cancelled by the Corporation under the Normal Course Issuer Bid at an
average price of $17.40 for a total cash consideration of $4.4 million.
As at December 31, 2021, the increase in the number of common shares since December 31, 2020, was mainly due to the
following:
–
the issuance of 4,048,215 common shares following the acquisition of Energía Llaima on July 9, 2021. Concurrently,
with the closing of the acquisition, the Corporation issued 1,148,050 common shares, in order for Hydro-Québec to
maintain its 19.9% ownership;
the issuance of 10,374,150 common shares following the agreement with a syndicate of underwriters on
August 23, 2021. Concurrently with this agreement, the Corporation issued 2,581,000 common shares, in order for
Hydro-Québec to maintain its 19.9% ownership;
the conversion of a portion of the 4.65% Convertible Debentures into 73,969 common shares and the conversion of a
portion of the 4.75% Convertible Debentures into 30,600 common shares;
the issuance of 146,621 common shares related to the DRIP.
–
–
–
These items were partly offset by:
–
–
the 180,602 common shares purchased and cancelled by the Corporation under the Normal Course Issuer Bid
terminated on May 23, 2021, at an average price of $18.90 per share for a total cash consideration of $3.4 million.
the 310,590 common shares purchased and cancelled by the Corporation under the Normal Course Issuer Bid
renewed on May 24, 2021, (the "New Bid") at an average price of $17.98 per share for a total cash consideration of
$5.6 million.
Normal Course Issuer Bid renewal
The Corporation received approval from the Toronto Stock Exchange ("TSX") to proceed with a normal course issuer bid on its
common shares. Under the New Bid, the Corporation could purchase for cancellation up to 2,000,000 of its common shares,
representing approximately 1.15% of the 174,692,091 issued and outstanding common shares of the Corporation as at May
11, 2021. The New Bid commenced on May 24, 2021 and will terminate on May 23, 2022.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p55
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Dividends
The Corporation's dividend policy is determined by its Board of Directors and is based on the Corporation's operating results,
cash flows, financial condition, debt covenants, long-term growth prospects, solvency test imposed under corporate law for the
declaration of dividends and other relevant factors.
The following dividends were declared by the Corporation:
Dividends declared on common
shares1
Dividends declared on common shares
($/share)
Dividends declared on Series A
Preferred Shares
Dividends declared on Series A
Preferred Shares ($/share)
Dividends declared on Series C
Preferred Shares
Dividends declared on Series C
Preferred Shares ($/share)
Three months ended December 31
2021
2020
Year ended December 31
2020
2021
34,649
31,425
132,229
125,543
0.180
689
0.180
0.720
767
2,757
0.720
3,067
0.202750
0.225500
0.8110
0.9020
719
719
2,875
2,875
0.359375
0.359375
1.4375
1.4375
1. The increase in dividends declared on common shares was attributable to the issuances of common shares upon acquisitions, public
offering, Hydro-Québec private placements, and to the issuance of common shares under the DRIP.
The following dividends will be paid by the Corporation on April 15, 2022:
Date of
announcement
Record date
Payment date
Dividend per
common share
Dividend per Series
A Preferred Share
Dividend per Series
C Preferred Share
February 23, 2022
March 31, 2022
April 15, 2022
$0.180
$0.202750
$0.359375
The Board of Directors has decided to maintain the annual dividend at $0.72 per common share for 2022, in light of the
foreseeable growth plan both in terms of acquisitions and greenfield development.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p56
(in thousands of Canadian dollars, except as noted and amounts per share)
5- OUTLOOK | 2021 Guidance Achievements
In 2021, the Corporation exceeded its 2021 Growth Targets, except being 3 percentage points lower in terms of Production.
Production (GWh)2
Revenues
Adjusted EBITDA2
Adjusted EBITDA Proportionate2
Number of facilities in operation
Net installed capacity (MW)
2021
Actual Normalized3
Target4
2020
Actual1
9,055
692,241
+12 %
+13 %
+15 %
8,074
+10 %
613,207
470,670
+12 %
+10 %
422,109
578,472
+3 %
+2 %
560,328
79
3,101
75
2,742
1. Results from continuing operations unless otherwise indicated.
2. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production is a key
performance indicator for the Corporation that cannot be reconciled with an IFRS measure. Please refer to the "Non-IFRS Measures" section of this MD&A for
more information.
3. For the year ended December 31, 2021, the Financial Performance and Operating Results are normalized to exclude the impacts of the February 2021 Texas
Events. Please refer to the "February 2021 Texas Events" section for more information.
4. Target revised in November 2021. Please refer to the MD&A for the period ended September 30, 2021 filed on November 9, 2021.
The financial targets were exceeded mainly due to the following factors:
▪
▪
Acquisitions achieved in 2021 (Energía Llaima, Curtis Palmer and Licán); and
Higher than anticipated contribution from the recently commissioned facilities (Yonne II, Hillcrest, Griffin Trail).
The Production target was not met mainly due to:
▪
▪
▪
Lower average wind regimes in France and Quebec;
Lower average water flows in British Columbia; and
Other weather-related events.
5- OUTLOOK | 2022 Growth Targets
Production (GWh)2
Revenues
Operating, general, administrative and prospective projects expenses
Adjusted EBITDA2
Adjusted EBITDA Proportionate2
Number of facilities in operation
Net installed capacity (MW)
2022
Target
≈
≈
≈
≈
≈
+18 %
+16 %
+18 %
+15 %
+14 %
82
3,156
2021
Actual
Normalized3
9,055
692,241
221,571
470,670
578,472
79
3,101
1. Results from continuing operations unless otherwise indicated.
2. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production is a key
performance indicator for the Corporation that cannot be reconciled with an IFRS measure. Please refer to the "Non-IFRS Measures" section of this MD&A for
more information.
3. For the year ended December 31, 2021, the Financial Performance and Operating Results are normalized to exclude the impacts of the February 2021 Texas
Events. Please refer to the "February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p57
(in thousands of Canadian dollars, except as noted and amounts per share)
The Corporation now presents its 2022 growth targets for which it used certain assumptions to provide readers with an
indication of its business activities and operating performance. These assumptions include:
•
•
•
•
•
•
•
•
•
•
•
Full-year contribution of the acquisitions completed in 2021 (Energía Llaima, Curtis Palmer and Licán);
Full-year contribution of the facilities commissioned in 2021 (Yonne II, Hillcrest, Griffin Trail);
Success in commissioning the Innavik hydro facility (Q4 2022) and Tonnerre battery project (Q1 2022);
Average hydrology, wind regimes and solar irradiation projections leading to a 100% LTA target for all facilities;
Availability of capital resources and timely performance by third parties of contractual obligations;
No significant event occurring outside the ordinary course of business such as a natural disaster, pandemic or other;
Average merchant spot prices consistent with external price curves and internal forecasts;
No material changes in the assumed U.S. dollar to Canadian dollar and Euro to Canadian dollar exchange rate;
No significant variability in interest rates;
An average inflation rate based on historical trend; and
An increase in salaries based on market average assumptions.
The 2022 growth targets do not take into consideration potential acquisitions that could be achieved in 2022 nor the potential
impact of future waves of COVID-19. The 2022 growth targets exclude the impact of the Aela Acquisition as well as the shares
issued to finance this future transaction. The guidance will be revised upon closing of the Aela Acquisition.
These assumptions are based on information currently available to the Corporation and this list of assumptions is not
exhaustive. These assumptions, although considered reasonable by the Corporation on February 23, 2022, may prove to be
inaccurate. Important risks and uncertainties may cause actual results or performance to be materially different from the
Corporation’s expectations as set forth in this section. The risks and uncertainties are referred to in the "Risks and
Uncertainties" section of this MD&A.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p58
(in thousands of Canadian dollars, except as noted and amounts per share)
5 - OUTLOOK | Strategic Plan 2020-2025
Innergex has adopted a Strategic Plan for the period from 2020 to 2025. The success of this Strategic Plan will be evaluated
based on a set of qualitative and quantitative criteria. Success will not be measured in terms of MW but on the Corporation's
ability to increase shareholder return while efficiently managing its high-quality assets and successfully pursuing its growth.
The targets provided in the MD&A for the period ended September 30, 2021, are expected to remain substantially the same
despite lower financial results for 2021. The Adjusted EBITDA Proportionate1 is expected to achieve a compound annual
growth rate of approximately 9% by 2025 to $870 million and the Free Cash Flow1 per Share is expected to achieve a
compound annual growth rate of approximately 12% by 2025 to $0.95.
The following graphs present the targets for 2022 and 2025.
1
Adjusted EBITDA Proportionate and Free Cash Flow are not recognized measures under IFRS and therefore may not be comparable to those presented by other
issuers. Please refer to the "Non-IFRS Measures" section of this MD&A for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p59
(in thousands of Canadian dollars, except as noted and amounts per share)
Innergex's continued growth will come from a balanced strategy of developing greenfield projects with a deferred cash
contribution profile and strategic acquisitions in current markets with nearer-term cash contributions. The projected figures
above do not take into consideration potential transactions or projects that could be achieved or developed as part of the
Strategic Alliance with Hydro-Québec.
The Corporation presents the outlook for the 2020-2025 Strategic Plan to provide readers with an indication of its business
activities and operating performance. This outlook for the 2020-2025 Strategic Plan presented in this section is based on
certain assumptions, which include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The realization of the growth plan to reach 5,000 MW of gross installed capacity based on a strategic mix of
development activities and acquisitions of operating assets;
Average hydrology, wind regimes and solar irradiation projections leading to a 100% LTA target for all facilities;
Successful renewal of PPAs taking into consideration potential pressure on pricing;
Escalation on contractual PPAs;
Increase in the investment in prospective expenses to meet growth plan;
No material changes in the industry's market conditions and financial opportunities;
No material adverse impacts to the long-term investment and credit markets;
Sufficient human resources to deliver service and execute the capital plan;
Favourable market conditions for share issuance to support growth financing;
No significant variability in interest rates;
Average merchant spot prices consistent with external price curves and internal forecasts;
No severe and prolonged economic downturn;
Continued maintenance of information technology infrastructure and no material breach of cybersecurity;
No significant event occurring outside the ordinary course of business such as a natural disaster, pandemic or other
calamity;
No material changes in the assumed U.S. dollar to Canadian dollar and Euro to Canadian dollar exchange rate;
An average inflation rate based on historical trend; and
An increase in salaries based on market average assumptions.
These assumptions are based on information currently available to the Corporation and this list of assumptions is not
exhaustive. These assumptions, although considered reasonable by the Corporation on February 23, 2022, may prove to be
inaccurate. Important risks and uncertainties may cause actual results or performance to be materially different from the
Corporation’s expectations as set forth in this section. The risks and uncertainties are referred to in the "Risks and
Uncertainties" section of the Annual Report.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p60
(in thousands of Canadian dollars, except as noted and amounts per share)
6- NON-IFRS MEASURES
This MD&A has been prepared in accordance with IFRS. However, some measures referred to in this MD&A are not recognized measures under IFRS and therefore may
not be comparable to those presented by other issuers. Innergex believes these indicators are important, as they provide management and the reader with additional
information about Innergex's production and cash generation capabilities, its ability to sustain current dividends and its ability to fund its growth. These indicators also
facilitate the comparison of results over different periods. Innergex's share of Revenues of joint ventures and associates, Revenues Proportionate, Adjusted EBITDA,
Adjusted EBITDA Margin, Innergex's share of Adjusted EBITDA of joint ventures and associates, Adjusted EBITDA Proportionate, Adjusted EBITDA Margin Proportionate,
Adjusted Net (Loss) Earnings, Free Cash Flow, Adjusted Free Cash Flow, Payout Ratio and Adjusted Payout Ratio, are not measures recognized by IFRS and have no
standardized meaning prescribed by IFRS.
Production, Revenues, Adjusted EBITDA, and corresponding Margin and Proportionate measures
References in this document to "Innergex's share of Production of the joint ventures and associates" are to Innergex's equity interest in the joint ventures' and associates'
Production.
References in this document to "Innergex's share of Revenues of joint ventures and associates" are to Innergex's equity interest in the joint ventures' and associates'
Revenues. References in this document to "Revenues Proportionate" are to Revenues, plus Innergex's share of Revenues of the joint ventures and associates, other
income related to PTCs, and Innergex's share of the operating joint ventures' and associates' other income related to PTCs.
References in this document to “Adjusted EBITDA” are to net earnings (loss), to which are added (deducted) income tax expense (recovery), finance costs, depreciation
and amortization, impairment charges, other net income, share of (earnings) loss of joint ventures and associates, and change in fair value of financial instruments.
References in this document to "Innergex's share of Adjusted EBITDA of joint ventures and associates" are to Innergex's equity interest in the joint ventures' and
associates' Adjusted EBITDA. References in this document to "Adjusted EBITDA Proportionate" are to Adjusted EBITDA, plus Innergex's share of Adjusted EBITDA of the
joint ventures and associates, other income related to PTCs, and Innergex's share of other income related to PTCs of the joint ventures and associates.
References in this document to "Adjusted EBITDA Margin" are to Adjusted EBITDA divided by revenues. References in this document to "Adjusted EBITDA Margin
Proportionate" are to Adjusted EBITDA Proportionate, divided by Revenues Proportionate.
Innergex believes that the presentation of these measures enhances the understanding of the Corporation's operating performance. Readers are cautioned that
Innergex's share of Revenues of joint ventures and associates, and Revenues Proportionate, should not be construed as an alternative to Revenues, as determined in
accordance with IFRS. Readers are also cautioned that Adjusted EBITDA, Innergex's share of Adjusted EBITDA of joint ventures and associates, Adjusted EBITDA
Proportionate, Adjusted EBITDA Margin, and Adjusted EBITDA Margin Proportionate, should not be construed as an alternative to net earnings, as determined in
accordance with IFRS. Please refer to the "Financial Performance and Operating Results" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p61
(in thousands of Canadian dollars, except as noted and amounts per share)
Three months ended December 31
Year ended December 31
2021
2020
2021
2020
Production
(MWh)
Revenues Adjusted
EBITDA
Production
(MWh)
Revenues Adjusted
EBITDA
Production
(MWh)
Revenues Adjusted
EBITDA
Production
(MWh)
Revenues Adjusted
EBITDA
2,583,157 202,388 137,311
2,186,961 167,927 117,830
9,055,215 747,208 525,637
8,073,914 613,207 422,109
55,997
37,003
—
93,000
7,507
4,752
—
12,259
5,029
4,210
—
9,239
129,076
253,890
3,431
386,397
14,413 10,354
8,915 4,861
240
23,783 15,455
455
481,505
311,106
5,540
50,547 38,547
60,489 54,989
554
798,151 111,921 94,090
885
582,738
920,773
12,715
1,516,226
64,395 49,826
31,512 16,840
1,875 1,076
97,782 67,742
10,522 10,522
5,882
—
—
16,404 16,404
5,882
—
—
—
12,569 12,569
—
3,130 3,130
3,946 3,946
19,645 19,645
38,645 38,645
9,339
2,767
3,267
54,018 54,018
9,339
2,767
3,267
—
43,850 43,850
—
11,616 11,616
15,011 15,011
70,477 70,477
Consolidated1
Innergex's share of
joint ventures and
associates:
Hydro3
Wind2
Solar3
PTCs and Innergex's
share of PTCs
generated:
Foard City
Griffin Trail
Shannon (50%)2
Flat Top (51%)2
Proportionate
2,676,157 231,051 162,954
2,573,358 211,355 152,930
9,853,366 913,147 673,745
9,590,140 781,466 560,328
Adjusted EBITDA
Margin
Adjusted EBITDA
Margin Proportionate
67.8 %
70.5 %
70.2 %
72.4 %
70.3 %
73.8 %
68.8 %
71.7 %
1. Some facilities are treated as joint ventures and associates and accounted for using the equity method; their revenues are not included in the Corporation's consolidated revenues and, for consistency, their electricity
production figures have been excluded from production and included in production proportionate.
2. The results from the Flat Top and Shannon joint venture facilities from April 1, 2021, onward were excluded due to the projects' assets and liabilities being classified as disposal groups held for sale, following the
February 2021 Texas Events.
3. Innergex has acquired, effective July 9, 2021, the remaining 50% interest in Energía Llaima; therefore gaining control over the investee, which triggered consolidation and therefore results are excluded from share of
joint ventures.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p62
(in thousands of Canadian dollars, except as noted and amounts per share)
Below is a reconciliation of the non-IFRS measures to their closest IFRS measures:
Revenues
Innergex's share of revenues of joint ventures and associates
PTCs and Innergex's share of PTCs generated
Revenues Proportionate
Net earnings (loss)
Income tax expense (recovery)
Finance costs
Depreciation and amortization
Impairment of long-term assets
EBITDA
Other net income
Share of (earnings) losses of joint ventures and associates
Change in fair value of financial instruments
Adjusted EBITDA
Innergex's share of Adjusted EBITDA of joint ventures and associates
PTCs and Innergex's share of PTCs generated
Adjusted EBITDA Proportionate
Three months ended December 31
2021
2020
Year ended December 31
2020
2021
202,388
12,259
16,404
231,051
5,743
37,158
67,417
77,748
12
188,078
(34,565)
(791)
(15,411)
137,311
9,239
16,404
162,954
167,927
23,783
19,645
211,355
11,894
7,357
57,443
58,465
26,659
161,818
(7,304)
(13,874)
(22,810)
117,830
15,455
19,645
152,930
747,208
111,921
54,018
913,147
(185,394)
(26,240)
252,255
255,640
36,986
333,247
(89,621)
189,889
92,122
525,637
94,090
54,018
673,745
613,207
97,782
70,477
781,466
(29,111)
18,897
233,143
228,526
26,659
478,114
(65,554)
7,524
2,025
422,109
67,742
70,477
560,328
Adjusted EBITDA Margin
Adjusted EBITDA Margin Proportionate
67.8 %
70.5 %
70.2 %
72.4 %
70.3 %
73.8 %
68.8 %
71.7 %
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p63
(in thousands of Canadian dollars, except as noted and amounts per share)
Adjusted Net (Loss) Earnings
References to "Adjusted Net (Loss) Earnings" are to net earnings or losses of the Corporation, to which the following elements are added (subtracted): unrealized portion
of the change in fair value of financial instruments; realized portion of the Phoebe basis hedge, realized loss on the termination of interest rate swaps, realized gain on
foreign exchange forward contracts, impairment charges, specific unusual or non-recurring events such as the February 2021 Texas Events, the net income tax expense
(recovery) related to these items, and the share of loss (income) of joint ventures and associates related to the above items, net of related income tax.
The Adjusted Net (Loss) Earnings seeks to provide a measure that eliminates the earnings impacts of certain derivative financial instruments and non-recurring events,
which do not represent the Corporation's operating performance. Innergex uses derivative financial instruments to hedge its exposure to various risks. Accounting for
derivatives requires that all derivatives are marked-to-market. When hedge accounting is not applied, changes in the fair value of the derivatives is recognized directly in
net earnings (loss). Such unrealized changes have no immediate cash effect, may or may not reverse by the time the actual settlements occur and do not reflect the
Corporation’s business model toward derivatives, which are held for their long-term cash flows, over the whole life of a project. In addition, the Corporation uses foreign
exchange forward contracts to hedge its net investment in its French subsidiaries. Management therefore believes realized gains (losses) on such contracts does not
reflect the operations of Innergex.
Innergex believes that the presentation of this measure enhances the understanding of the Corporation's operating performance. Readers are cautioned that Adjusted
Net (Loss) Earnings1 should not be construed as an alternative to net earnings, as determined in accordance with IFRS. Please refer to the "Operating Results" section
for reconciliation of the Adjusted Net (Loss) Earnings.
Below is a reconciliation of Adjusted Net (Loss) Earnings to its closest IFRS measure:
Net earnings (loss)
Add (Subtract):
February 2021 Texas Events:
Revenues
Power hedge
Share of loss of Flat Top and Shannon
Share of impairment of Flat Top and Shannon
Share of unrealized portion of the change in fair value of financial instruments of joint
ventures and associates, net of related income tax
Unrealized portion of the change in fair value of financial instruments
Impairment of long-term assets
Realized (gain) loss on termination of interest rate swaps
Realized (gain) loss on the Phoebe basis hedge
Realized gain on foreign exchange forward contracts
Income tax expense (recovery) related to above items
Adjusted Net (Loss) Earnings
Three months ended December 31
2021
2020
Year ended December 31
2020
2021
5,743
11,894
(185,394)
(29,111)
—
—
—
—
(377)
(15,751)
12
(377)
(955)
(2,193)
3,924
(9,974)
—
—
—
—
(7,935)
(21,125)
26,659
—
133
(150)
3,514
12,990
(54,967)
70,756
64,197
112,609
20,226
18,502
36,986
2,508
(2,546)
(4,074)
(85,754)
(6,951)
—
—
—
—
15,722
(8,329)
26,659
—
19,586
(1,730)
(486)
22,311
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p64
(in thousands of Canadian dollars, except as noted and amounts per share)
Below is a reconciliation of Adjusted Net (Loss) Earnings adjustments to each line item of the consolidated statements of earnings:
Three months ended December 31
Year ended December 31
2021
Adj.
IFRS
Non-
IFRS
IFRS
2020
Adj.
Non-
IFRS
IFRS
2021
Adj.
Non-
IFRS
IFRS
2020
Adj.
Non-
IFRS
202,388
42,555
— 202,388 167,927
— 42,555 36,510
— 167,927 747,208 (54,967) 692,241 613,207
— 149,106 131,442
— 36,510 149,106
— 613,207
— 131,442
12,813
9,709
137,311
67,417
(34,565)
77,748
9,979
— 12,813
—
3,608
9,709
— 137,311 117,830
— 67,417 57,443
(7,304)
— 77,748 58,465
2,193 (32,372)
9,979 45,098
3,608 27,367
— 45,098 42,948
—
—
— 27,367 16,708
— 117,830 525,637 (54,967) 470,670 422,109
— 57,443 252,255
— 252,255 233,143
4,074 (85,547) (65,554)
(7,154) (89,621)
— 255,640 228,526
— 58,465 255,640
150
— 42,948
— 16,708
— 422,109
— 233,143
1,730 (63,824)
— 228,526
Revenues
Operating expenses
General and administrative
expenses
Prospective projects expenses
Adjusted EBITDA
Finance costs
Other net income
Depreciation and amortization
Impairment of long-term assets
Share of (earnings) losses of
joint ventures and associates
Change in fair value of financial
instruments
Income tax expense (recovery)
Net earnings (loss)
12
(12)
— 26,659 (26,659)
— 36,986 (36,986)
— 26,659 (26,659)
—
(791)
519
(272) (13,874) 10,228
(3,646) 189,889 (202,312) (12,423)
7,524 (19,989) (12,465)
(15,411) 17,083
37,158
(4,066) 33,092
1,672 (22,810) 20,992
(5,807)
7,357
1,096 12,990 (185,394) 178,443
(9,974) 11,894
(1,818) 92,122 (89,220)
1,550 (26,240) 91,034 64,794 18,897
(9,232)
4,753 23,650
(6,951) (29,111) 51,422 22,311
2,025 (11,257)
2,902
5,743 (15,717)
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p65
(in thousands of Canadian dollars, except as noted and amounts per share)
Free Cash Flow and Payout Ratio
References to “Free Cash Flow” are to cash flows from operating activities before changes in non-cash operating working capital items, less maintenance capital
expenditures net of proceeds from disposals, scheduled debt principal payments, the portion of Free Cash Flow attributed to non-controlling interests, and preferred
share dividends declared, plus or minus other elements that are not representative of the Corporation's long-term cash-generating capacity, such as gains and losses on
the Phoebe basis hedge due to their limited occurrence, realized gains and losses on contingent considerations related to past business acquisitions, transaction costs
related to realized acquisitions, realized losses or gains on derivative financial instruments used to hedge the interest rate on project-level debt or the exchange rate on
equipment purchases.
The Payout Ratio is a measure of the Corporation's ability to sustain current dividends as well as its ability to fund its growth. The Payout Ratio level reflects the
Corporation's decision to invest yearly in advancing the development of its Prospective Projects, for which investments must be expensed as incurred. The Corporation
considers such investments essential to its long-term growth and success, as it believes that the greenfield development of renewable energy projects offers the greatest
potential internal rates of return and represents the most efficient use of management's expertise and value-added skills. Innergex believes that the presentation of this
measure enhances the understanding of the Corporation's cash generation capabilities, its ability to sustain current dividends and its ability to fund its growth. Readers
are cautioned that Free Cash Flow should not be construed as an alternative to cash flows from operating activities, as determined in accordance with IFRS. Please refer
to the "Free Cash Flow and Payout Ratio" section for the reconciliation of Free Cash Flow.
References to "Adjusted Free Cash Flow" are to Free Cash Flow excluding prospective project expenses.
References to “Payout Ratio” are to dividends declared on common shares divided by Free Cash Flow. Innergex believes that this is a measure of its ability to sustain
current dividends as well as its ability to fund its growth.
References to "Adjusted Payout Ratio" are to dividends declared on common shares divided by Adjusted Free Cash Flow.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p66
(in thousands of Canadian dollars, except as noted and amounts per share)
7- ADDITIONAL CONSOLIDATED INFORMATION | Geographic Segments –
Non-current Assets
Non-current assets, excluding derivative financial instruments and
deferred tax assets1
Canada
United States
France
Chile
As at
December 31, 2021 December 31, 2020
3,390,029
2,301,353
801,752
423,856
6,916,990
3,504,403
1,978,363
922,330
166,881
6,571,977
1. Includes the investments in joint ventures and associates.
7- ADDITIONAL CONSOLIDATED INFORMATION | Geographic Segments –
Revenues
Revenues
Canada
United States
France
Chile
Year ended December 31
2020
2021
433,192
187,332
88,593
38,091
747,208
439,224
73,802
95,485
4,696
613,207
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p67
(in thousands of Canadian dollars, except as noted and amounts per share)
7- ADDITIONAL CONSOLIDATED INFORMATION | Related Party Transactions
Related party transactions conducted in the normal course of operations are measured at an exchange amount, which
is the amount established and agreed to by the related parties, unless specific requirements within IFRS require
different treatment.
Transactions with partners
The Corporation's subsidiaries have entered into the following transactions with partners:
•
•
•
•
Common shares issued to Hydro-Québec in 2020 and 2021 (please refer to the "Capital and Liquidity |
Information on Capital Stock" section of this MD&A for more information)
Curtis Palmer Acquisition in a 50-50 partnership with Hydro-Québec (see ''Highlights | Financial Year 2021-
Growth Initiatives'' section of this MD&A)
Sales made under PPAs with Hydro-Québec
Battery storage project with EVLO, a subsidiary of Hydro-Québec (below)
Tonnerre Energie SAS signed a Memorandum of understanding with EVLO, a Hydro-Québec subsidiary, for the 9 MWh
standalone energy storage project in France.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p68
(in thousands of Canadian dollars, except as noted and amounts per share)
7- ADDITIONAL CONSOLIDATED INFORMATION | Historical Quarterly Financial Information
(in millions of dollars, unless otherwise stated)
Dec 31,
2021
Sept 30,
2021
June 30,
2021
March 31,
2021
Dec 31,
2020
Sept 30,
2020
June 30,
2020
March 31,
2020
Three months ended
Production (MWh)
Revenues
Operating, general and administrative and
prospective projects expenses
Adjusted EBITDA1
Net earnings (loss)
Net (loss) earnings from continuing operations
attributable to owners of the parent
Net (loss) earnings from continuing operations
attributable to owners of the parent ($ per share –
basic and diluted)
Net (loss) earnings attributable to owners of the
parent
Net (loss) earnings attributable to owners of the
parent ($ per share – basic and diluted)
Dividends declared on common shares
Dividends declared on common shares, $ per share
2,583,157 2,290,086 2,396,027 1,785,947 2,186,961 2,021,559 2,185,793 1,679,598
132.1
202.4
170.6
184.6
189.7
150.5
162.7
167.9
65.1
137.3
5.7
62.1
122.5
(23.5)
47.9
122.7
50.2
46.6
143.1
(217.9)
50.1
117.8
11.9
54.2
108.5
7.5
45.2
105.3
(1.6)
41.7
90.4
(46.9)
(2.3)
(16.4)
41.1
(214.2)
11.9
11.7
(2.5)
(53.7)
(0.02)
(0.10)
0.23
(1.24)
0.06
0.06
(0.02)
(0.35)
(2.3)
(16.4)
41.1
(214.2)
11.9
11.7
(2.5)
(53.7)
(0.02)
34.6
0.180
(0.10)
34.7
0.180
0.23
31.4
0.180
(1.24)
31.4
0.180
0.06
31.4
0.06
31.4
0.180
0.180
(0.02)
31.4
0.180
(0.35)
31.3
0.180
1. Adjusted EBITDA is not a recognized measure under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "Non-IFRS Measures" section for more information.
The Corporation's production, revenues, net earnings and cash flows are variable with each season, depending on the geography and source of energy. Please refer to
the "Overview of Operations | Business Environment - Seasonality of Operations" section of this MD&A for more information on seasonality.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p69
(in thousands of Canadian dollars, except as noted and amounts per share)
FEBRUARY 2021 TEXAS EVENTS – SUPPLEMENTAL INFORMATION
All amounts are in thousands of Canadian dollars, unless otherwise indicated.
Innergex's Presence in Texas
Name
Location
Type
Status
Sponsor
Equity
Ownership
%
Gross installed
capacity (MW)
Contract Type
Foard City
Foard County
Wind
Operating
100
350.3
Power Purchase
Agreement and
Merchant Price
Phoebe
Flat Top
Shannon
Griffin Trail
Winkler County
Solar
Wind
Mills County
Clay County
Wind
Knox and Baylor Counties Wind
Operating
Operating
Operating
Operating
100
51
50
100
250.0 Power Hedge
200.0 Power Hedge
204.0 Power Hedge
225.6 Merchant Price
1. TEXAS EVENTS DESCRIPTION
▪
▪
▪
In February 2021, unprecedented extreme winter weather conditions and related electricity market failure paralyzed
the State of Texas, United States. These unprecedented extreme winter weather events pushed the Texas
Government to declare a disaster and the US Government to declare a state of emergency.
The storm disrupted production, transmission and distribution of power, severely impacting prices. Because of the
disturbance, wholesale electricity prices in the Electric Reliability Council of Texas (ERCOT) reached their cap of
US$9,000 per MWh and remained at such level for a prolonged period of time.
The February 2021 Texas Events lasted from February 11 to February 19, 2021, and the figures provided hereinafter
are normalized for this period.
1.1 Summary Impacts per Facility
The following table presents a reconciliation of the Production and financial impacts, before income tax, resulting from the
February 2021 Texas Events, detailed by facility:
For the 9-day period from February 11 to February 19, 2021
Production
(MWh)
LTA
(MWh)
Hedge
obligation
(MWh)1
Hedge
price
(US$)
Revenues
Power
hedge
Basis
hedge
Total
Financial
impacts
Consolidated facilities
Foard City
Phoebe
Total - Consolidated facilities
29,464
5,996
Joint venture facilities
35,175
14,550
N/A
13,473
18.13
33.10
16,801
38,166
54,967
—
(70,756)
(70,756)
—
(1,304)
(1,304)
16,801
(33,894)
(17,093)
2,046
15,546
Flat Top
Shannon
Total - Joint venture facilities
Total - Innergex's share of loss of the joint venture facilities
Total - Consolidated financial impact, before income tax
24,507
18,533
19,152
15,480
22.60
26.20
15,316 (113,609)
(93,123)
64,989
—
—
(98,293)
(28,134)
(126,427)
(64,197)
(81,290)
1. Hedge obligations are based on hourly commitments in MWh. Therefore, actual production is not always indicative of the hedge obligation fulfillment.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p70
(in thousands of Canadian dollars, except as noted and amounts per share)
2. FINANCIAL IMPACTS AND NORMALIZED FINANCIAL INFORMATION
2.1 Impacts to Consolidated Statement of Earnings
The Phoebe and Shannon facilities are subject to power hedges. In addition, prior to its sale on December 28, 2021, the
Flat Top facility was also subject to power hedges. For facilities subject to power hedges, the power that is generated by
the facility is delivered to the grid at the project's node (point of delivery) at the prevailing merchant prices. Production
delivered at the node at merchant prices is recognized by Innergex as revenue. Under the power hedges, the hourly
contracted energy is virtually purchased at the point of withdrawal on the grid ("hub"), subject to the prevailing merchant
prices, and exchanged for the contractual fixed price per MWh. Settlements under the power hedges are recognized as
change in fair value of financial instruments.
The following table presents a reconciliation of the February 2021 Texas Events' impacts to the Consolidated Statement of
Earnings, for each line-item impacted by the events:
As presented
Normalized
Year ended December 31, 2021
Impacts from the
February 2021
Texas Events
(9 days)
1 Revenues
Adjusted EBITDA1
747,208
(54,967)
692,241
525,637
(54,967)
470,670
2 Change in fair value of financial instruments
(92,122)
72,060
(20,062)
3 Share of losses (earnings) of joint ventures and
associates
(189,889)
64,197
(125,692)
(Loss) Earnings before income tax
(211,634)
81,290
(130,344)
1. Adjusted EBITDA is not a recognized measure under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
"Non-IFRS Measures" section for more information.
(1) Although power generation was depressed by the weather, revenues at the Foard City and Phoebe facilities were
favourably impacted by the events, with revenues of $16.8 million and $38.2 million, respectively, for an aggregate
impact of $55.0 million, as a result of the unprecedented increase in market prices prevailing at the point of delivery on
the grid ("Node").
(2) Conversely, the change in fair value of financial instruments was unfavourably impacted by a $70.8 million realized
loss on the Phoebe power hedge, and $1.3 million on the Phoebe basis hedge, for an aggregate impact of
$72.1 million, resulting from the unprecedented increase in market prices prevailing at the point of withdrawal on the
grid ("Hub"), for the committed power hedge hourly volumes.
(3) The Flat Top and Shannon joint ventures were similarly impacted by an increase in their respective revenues and
realized losses on their respective power hedges, resulting in a share of losses of joint ventures and associates of
$50.1 million and $14.1 million for Flat Top and Shannon, respectively, aggregating to a net $64.2 million
unfavourable impact on the share of losses of joint ventures and associates.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p71
(in thousands of Canadian dollars, except as noted and amounts per share)
The following table presents a reconciliation of the February 2021 Texas Events' impacts to the segmented information:
Revenues
Impacts from the February 2021 Texas Events
Normalized Revenues
Revenues Proportionate1
Impacts from the February 2021 Texas Events
Normalized Revenues Proportionate
Adjusted EBITDA1
Impacts from the February 2021 Texas Events
Normalized Adjusted EBITDA
Adjusted EBITDA Proportionate1
Impacts from the February 2021 Texas Events
Normalized Adjusted EBITDA Proportionate
Hydro
Year ended December 31, 2021
Solar
Wind
Unallocated
Total
277,302
—
277,302
327,849
—
327,849
212,436
—
212,436
250,983
—
250,983
349,786
(16,801)
332,985
464,293
(57,107)
407,186
276,859
(16,801)
260,058
385,866
(57,107)
328,759
120,120
(38,166)
81,954
121,005
(38,166)
82,839
103,702
(38,166)
65,536
104,256
(38,166)
66,090
—
—
—
—
—
—
(67,360)
—
(67,360)
(67,360)
—
(67,360)
747,208
(54,967)
692,241
913,147
(95,273)
817,874
525,637
(54,967)
470,670
673,745
(95,273)
578,472
1. These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to
the "Non-IFRS Measures" section for more information.
2.2 Impacts to Free Cash Flow and Payout Ratio
The following table presents a reconciliation of the February 2021 Texas Events' cash impacts:
Facility
Impact
Cash
Non-Cash
Total
For the 9-day period from February 11 to February 19, 2021
Foard City
Phoebe
Phoebe
Phoebe
Flat Top
Shannon
Revenues
Revenues
Power hedge
Basis hedge
Share of loss
Share of loss
16,801
38,166
(70,756)
(1,304)
—
—
(17,093)
—
—
—
—
(50,129)
(14,068)
(64,197)
16,801
38,166
(70,756)
(1,304)
(50,129)
(14,068)
(81,290)
For the year ended December 31, 2021, the February 2021 Texas Events, whose cash impacts are detailed above, have
impacted the Free Cash Flow1 and Payout Ratio1 as follows:
As presented
Normalized
Year ended December 31, 2021
Impacts from the
February 2021
Texas Events
(9 days)
1
Cash flows from operating activities before changes in
non-cash operating working capital items
286,953
17,093
304,046
2 Realized loss on the Phoebe basis hedge
Free Cash Flow1
Dividends declared on common shares
Payout Ratio1
(2,546)
92,315
132,229
143 %
(1,304)
15,789
—
(21) %
(3,850)
108,104
132,229
122 %
1. Free Cash Flow and Payout ratio measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other
issuers. Please refer to the "Non-IFRS Measures" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p72
(in thousands of Canadian dollars, except as noted and amounts per share)
(1) Cash flows from operating activities before changes in non-cash operating working capital items were impacted by a
net unfavourable amount of $17.1 million, representing the February 2021 Texas Events' realized losses on the
Phoebe power and basis hedges, partly offset by the favourable impact to the consolidated revenues.The
$64.2 million non-cash share of losses of joint ventures and associates does not directly impact cash flows from
operating activities before changes in non-cash operating working capital items. It will, however, affect the joint
ventures' future capacity to distribute cash to the Corporation.
(2) In the Free Cash Flow1 and Payout Ratio1 calculation, Innergex reverses the impacts of the Phoebe basis hedge due
to its limited occurrence (over the remaining contractual period of nine months), which are deemed not to represent the
long-term cash-generating capacity of Innergex. As such, $1.3 million is reversed from the recurring adjustment,
representing the February 2021 Texas Events' related realized loss on the basis hedge.
1. Free Cash Flow and Payout ratio measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other
issuers. Please refer to the "Non-IFRS Measures" section for more information.
3. IMPAIRMENT
Following the February 2021 Texas Events, which caused significant losses for facilities under power hedge contracts, a
general increase in the assessed risk has been observed throughout the industry for facilities subject to shape risk2 in this
region. While the other key assumptions remained largely consistent as compared to December 31, 2020, the above
factors contributed to increased discount rates to reflect higher risk premiums. On March 31, 2021, the Flat Top and
Shannon joint ventures, each identified as separate cash generating units ("CGU"), recognized impairment charges of
US$83.0 million ($105.4 million) and US$92.7 million ($117.7 million), respectively. The impairment charges were
recognized by the Corporation through its share of loss of joint ventures and associates, at $53.8 million and $58.8 million,
for Flat Top and Shannon, respectively.
The recoverable amount of each CGU was determined based on a value in use calculation which uses cash flow
projections based on financial budgets approved by management covering a period extending to the period for which the
Corporation owns its rights on the site, and discounted at a rate of 12%.
2. Shape risk exists when there is a mismatch, or a potential mismatch, between the volume commitment under a power hedge instrument, and the actual
production of the facility at a given time. For various reasons, it may happen that a facility's electricity output at a given time is below the contractual volume.
In such instance, the project cannot fully cover its hub purchases with its node sales and is therefore exposed to merchant prices on its purchases at the hub.
4. MANAGEMENT'S STRATEGIES
4.1 Procedures Initiated
Phoebe
▪
▪
▪
▪
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of
the power hedge of the Phoebe facility in February, which was rejected by the recipient.
On July 19, 2021, Innergex reached an agreement to settle the amounts that remained unpaid by the Phoebe solar
facility following the February 2021 Texas Events. The aggregate cash disbursement of US$24.0 million
($29.7 million) comprises the agreed-upon settlement payment for the amounts disputed following the February 2021
Texas Events, and a payment on the project’s tracking account balance, net of unpaid energy sold by the project
during the negotiation process.
Flat Top and Shannon
▪
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of
the power hedges of the Flat Top and Shannon facilities in February, which were rejected by the recipient.
To preserve the Corporation’s and its partners’ rights with regard to the Flat Top and Shannon facilities, court
proceedings were initiated on April 21, 2021.
On May 20, 2021, the District Court of Harris County, Texas denied the temporary injunction application, directing the
counterparty to the power hedges for the Flat Top and Shannon wind facilities to suspend all remedies against the
projects, including foreclosure, arising from an alleged default of payment that was formally disputed by Innergex,
following the February 2021 Texas Events. As a result of the Court’s decision, the counterparty to the power hedges
for the projects will not be precluded from exercising any of its remedies, including foreclosure.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p73
(in thousands of Canadian dollars, except as noted and amounts per share)
4.2 Decisions and Actions
Phoebe
•
During the year ended December 31, 2021, an impairment charge of $24.7 million was recognized, reflecting an
outlook of higher than expected congestion charges, combined with a higher discount rate to reflect higher risk
premiums for facilities under power hedge contracts in Texas.
Flat Top and Shannon
▪
▪
▪
▪
▪
▪
▪
▪
The carrying amount of the Flat Top and Shannon investments was decreased to nil following the aggregate
$112.6 million non-cash impairment charges on these facilities as at March 31, 2021.
During the period ended June 30, 2021, the underlying assets and liabilities of the Flat Top and Shannon investments
were classified as disposal groups held for sale.
In addition, as at December 31, 2021, the deferred tax liabilities related to the Corporation's equity investments in Flat
Top and Shannon were nil following the aggregate $39.5 million deferred tax recovery upon reclassification of the
projects' assets and liabilities as disposal groups held for sale during the period ended June 30, 2021.
On December 28, 2021, the Corporation completed the sale of its 51% interest in Flat Top for a nominal amount. The
underlying assets and liabilities of the Shannon investment remain held for sale as at December 31, 2021, as the
carrying amount of its Class B shares will be recovered principally through a sale transaction. Management does not
consider the Shannon facility to be viable in the long term in its current configuration.
As required, the disposal groups are measured at the lower of their respective carrying amounts and fair values less
costs to sell, which is estimated to be nil, on a net basis, as at December 31, 2021.
On the basis that the project is non-recourse to the Corporation, the financial exposure of the Corporation is limited to
the non-cash impacts on the reversal of exchange differences in accumulated other comprehensive income related to
the project.
The impact of the sale of the Flat Top facility and potential foreclosure of the Shannon facility on the Corporation's
Free Cash Flow1, based on the facilities' respective 2020 contribution, represents a loss of approximately $4.2 million
annually.
The sale of the Flat Top facility and the potential foreclosure of the Shannon facility also represent an avoided cash
outflow of US$60.2 million ($75.7 million), representing the share of the invoiced amounts attributable to the
Corporation, which Innergex would have funded through an equity contribution in the facilities.
1. Free Cash Flow and Payout ratio measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other
issuers. Please refer to the "Non-IFRS Measures" section for more information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p74
(in thousands of Canadian dollars, except as noted and amounts per share)
8- JUDGMENTS AND ESTIMATES, ACCOUNTING POLICIES AND
DISCLOSURE CONTROLS | Critical Judgments and Estimates
The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results
could differ from these estimates. During the reporting periods, management made a number of estimates and assumptions
pertaining primarily to the determination of control, joint control or significant influence over an investee, fair value calculation
of the assets acquired and liabilities assumed in business acquisitions, useful lives, impairment of assets, asset retirement
obligations, fair value of financial assets and liabilities including derivatives, tax equity financing and effectiveness of hedging
relationships. These estimates and assumptions are based on current market conditions, management's planned course of
action and assumptions about future business and economic conditions. Changes in the underlying assumptions and
estimates could have a material impact on the reported amounts. These estimates are reviewed periodically. If adjustments
prove necessary, they are recognized in earnings in the period in which they are made.
Determining control, joint control or significant influence of an investee
The determination of whether the Corporation has control, joint control or significant influence over an investee requires the
Corporation to make assumptions and judgments in evaluating the classification requirements. In particular, the Corporation
exercises judgement in determining whether non-wholly owned subsidiaries are controlled by the Corporation, which involves
assessing: (i) how the decisions about the relevant activities of the investee are made; (ii) whether the rights of other co-
investors are protective or substantive in nature; and (iii) the Corporation's ability to influence the returns of the investee.
Business acquisition fair value
The Corporation makes a number of estimates when determining the acquisition date fair values of consideration transferred,
assets acquired and liabilities assumed in a business acquisition. Fair values are estimated using valuation techniques based
on discounted future cash flows. Future cash flows may be influenced by a number of assumptions such as electricity
production, duration of the projects, selling prices, costs to operate, capital expenditures, growth rate and the discount rate.
The likelihood of being able to develop future projects is also assessed in respect of the competitive business environment and
the willingness expressed by the governmental authorities to procure additional sources of energy.
Useful lives of property, plant and equipment and intangible assets
Property, plant and equipment and intangible assets represent a significant proportion of the Corporation's total assets. The
Corporation reviews estimates of the useful lives of property, plant and equipment and intangible assets on an annual basis
and adjusts depreciation on a prospective basis, if necessary.
Impairment of non-financial assets
The Corporation makes a number of estimates when determining the recoverable amount of an asset or a cash-generating
unit using value in use calculations based on discounted future cash flows. Future cash flows may be influenced by a number
of assumptions such as electricity production, duration of the projects, selling prices, costs to operate, capital expenditures,
growth rate and the discount rate.
Asset retirement obligations
The Corporation makes a number of estimates when calculating fair value of the asset retirement obligations that represent the
present value of future remediation costs for various projects. Estimates for these costs are dependent on labour costs,
the effectiveness of remedial and restoration measures, inflation rates, discount rates that reflect a current market assessment
of the time value of money and the risk specific to the obligation, and the timing of the outlays.
Financial instruments measured at fair value
In measuring financial instruments at fair value, the Corporation makes estimates and assumptions, including estimates and
assumptions about forward electricity prices, interest rates, credit spreads and exchange rates.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p75
(in thousands of Canadian dollars, except as noted and amounts per share)
Tax equity financing
When a tax equity partnership is formed, the Corporation exercises judgement in assessing whether it retains control over the
entity, and in assessing the appropriate classification of the tax equity investor's contribution, which generally bears the
characteristics of a liability as the arrangements are made so that the contribution is repaid over time until the tax equity
investor has attained an agreed-upon rate of return. Judgment is also exercised in assessing the nature of the tax equity
investor's interest after it has attained the agreed-upon rate of return, which generally bears the characteristics of equity as it
retains entitlement to a portion of the partnership's variable returns and shares a residual interest in the net assets of the
partnership.
Tax equity investors generally require a specified allocation of the project's cash distributions and tax attributes such as
production tax credits, investment tax credits and taxable income or loss, including accelerated tax depreciation. Estimates are
made when determining the amount and allocation of cash distributions and tax attributes to the tax equity investors, which
may be influenced by a number of assumptions such as electricity production, selling prices, costs to operate and tax amounts.
Hedging
The Corporation makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis,
whether the hedging instruments are expected to be effective in offsetting the changes in the fair value or cash flows of the
respective hedged items during the period for which the hedge is designated.
Specifically, the Corporation may, from time to time, enter into long-term power hedge agreements. As part of determining fair
value, the Corporation makes certain assumptions, estimates and judgments regarding future events. Unobservable forecast
future power prices are inherently subjective and impact the change in fair value recognized in the consolidated statements of
earnings (loss).
8- ACCOUNTING POLICIES AND DISCLOSURE CONTROLS | Significant
Accounting Policies
New Accounting Standards and Interpretations Adopted During the Year
On January 1, 2021, the Corporation adopted the following new standards and interpretations:
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, and IFRS 16)
On August 27, 2020, the IASB finalized its response to the ongoing reform of inter-bank offered rates and other interest rate
benchmarks by issuing a package of amendments to IFRS Standards. The amendments complement those issued in 2019 as
part of Phase 1 amendments and mainly relate to:
• changes to contractual cash flows: a company will not have to derecognize the carrying amount of financial instruments
for changes required by the reform, but will instead update the effective interest rate to reflect the change to the alternative
benchmark rate;
• hedge accounting: a company will not have to discontinue its hedge accounting solely because it makes changes required
by the reform, if the hedge meets other hedge accounting criteria; and
• disclosures: a company will be required to disclose information about new risks arising from the reform and how it
manages the transition to alternative benchmark rates.
The amendments are effective for annual periods beginning on or after January 1, 2021.
Definition of Accounting Estimates (Amendments to IAS 8)
On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8).
The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the
financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve the
objective set out by an accounting policy. The Corporation early adopted the amendments on January 1, 2021, with no impact
to the consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p76
(in thousands of Canadian dollars, except as noted and amounts per share)
8- ACCOUNTING POLICIES AND DISCLOSURE CONTROLS | Disclosure
Controls and Procedures
In accordance with Regulation 52-109 respecting Certification of Disclosure in Issuers' Annual and Interim Filings, the
President and Chief Executive Officer and the Chief Financial Officer of the Corporation have certified that they have designed,
or caused it to be designed under their supervision:
•
•
Disclosure controls and procedures (“DC&P”) to provide reasonable assurance that: (i) material information relating to
the Corporation is made known to the President and Chief Executive Officer and the Chief Financial Officer by others,
particularly during the period in which the annual filings are being prepared; and (ii) the information required to be
disclosed by the Corporation in its annual filings, interim filings and other reports filed or submitted by it under
securities legislation is recorded, processed, summarized and reported within the time periods specified in securities
legislation.
Internal control over financial reporting (“ICFR”) to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with IFRS.
The President and Chief Executive Officer and the Chief Financial Officer of the Corporation have evaluated, or caused to be
evaluated under their supervision, the effectiveness of the Corporation’s DC&P and ICFR as at December 31, 2021, and have
concluded that they were effective at the financial year-end. During the period from October 1, 2021, to December 31, 2021,
there was no change to the ICFR that has materially affected, or is reasonably likely to materially affect, the Corporation's
ICFR.
The President and Chief Executive Officer and the Chief Financial Officer have also limited the scope of the Corporation's
design of DC&P and ICFR to exclude the controls, policies and procedures of the Curtis/Palmer Hydroelectric Company LP
and Energía Llaima SpA (collectively "entities excluded from the Corporation's control policies and procedures"). The
evaluation of the design and the operating effectiveness of the DC&P and ICFR for these entities will be completed in the 12
months following their dates of acquisition. A summary of the financial information about the entities excluded is presented in
the "Entities Excluded from The Corporation’s Control Policies and Procedures" section of this MD&A.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p77
(in thousands of Canadian dollars, except as noted and amounts per share)
8- ACCOUNTING POLICIES AND DISCLOSURE CONTROLS | Entities
excluded from the Corporation's control, policies and procedures
As stated in the "Disclosure Controls and Procedures'' section of this MD&A, the scope of the Corporation's design of
DC&P and ICFR exclude the controls, policies and procedures of the Curtis/Palmer Hydroelectric Company LP and
Energía Llaima SpA. The following tables present a summary of the entities excluded from the Corporation's control
policies and procedures:
Summary Statements of Earnings (Loss) and Comprehensive Income (Loss)
Revenues
Net earnings
Other comprehensive income
Total comprehensive income
For the period ended
December 31, 20211
35,219
6,963
863
7,826
1.
Includes the combined results of Curtis/Palmer Hydroelectric Company LP and Energía Llaima SpA for a 67-day and a 175-day
period ended December 31, 2021, respectively.
Summary Statement of Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
As at
December 31, 2021
72,701
793,975
866,676
174,858
77,047
614,771
866,676
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p78
(in thousands of Canadian dollars, except as noted and amounts per share)
9- RISKS AND UNCERTAINTIES
Corporate Risk Management and Board Oversight
The Corporation is committed to proactive strong risk governance and oversight practices supported by the Board of Directors
and members of the management.
The Board of Directors is responsible to review and assess material risks associated with the Corporation’s business, which
may adversely affect it, its activities, its financial condition or reputation. More specifically, the Board of Directors ensures that
the Corporation has implemented systems to effectively identify, manage and monitor the principal risks associated with its
business and to mitigate or reduce their potential negative impacts. The Board of Directors receives updates on specific risks
and risk mitigation activities from management and each of the relevant committee.
Responsibility for risk management is shared across the organization from each segment of activities. A Risk Oversight
Committee, which is comprised of senior management members, reviews all existing and emerging risks and assesses
appropriate mitigation measures. Moreover, the Investment Committee supervises, among others, the management of risks
inherent to investment management. Risk oversight also occurs at the level of operating subsidiaries of the Corporation, to
ensure that risks are efficiently managed at every level of its corporate structure. New risks or important risks are identified and
reported together with mitigation plans and discussed across all levels of the Corporation’s corporate structure. The risks that
have been identified, which may affect certain aspects of the activities of the Corporation or which are encountered in decision-
making process, are presented to the Board of Directors at each meeting, either by its committees or the officers of the
Corporation. Such risks are presented in relation to conjuncture, strategy and in relation to any proposed transactions
presented to the Board of Directors. The Board of Directors takes an active role discussing risk management with its
committees to ensure that risks are properly identified, assessed and effectively managed at all levels of the Corporation’s
activities. Internal audit is an additional tool to validate the effectiveness and efficiency of risk management across all aspects
of the Corporation’s business.
The Corporation maintains policies and a Code of conduct, applicable to all directors, officers and employees of the
Corporation and those of its subsidiaries, as well as any consultant or other person when representing the Corporation. Such
policies and Code of conduct are reviewed at least annually by the Board of Directors. These policies and the Code of conduct
aim to promote sound risk management throughout the Corporation, to delegate authority appropriately among its officers and
to set limits for authorizations required to approve and execute certain business transactions. As part of such policies, the
officers of the Corporation are responsible for maintaining effective communication with the Board of Directors and the
employees of the Corporation, to implement and promote a culture of efficient risk management throughout the Corporation’s
activities. Through strategic planning approved by the Board of Directors, the officers are also responsible to assess the risk
management activities. The Board of Directors’ risk management oversight aims to ensure that risks are identified, reduced
and mitigated, where possible. However, these risks cannot always be identified or be completely eliminated from the
Corporation’s activities.
The Corporation is exposed to various risks and uncertainties and has outlined below those that it considers material. There
may also exist additional risks and uncertainties that are not currently known to the Corporation or that are now believed to be
immaterial that may adversely affect the Corporation's business. Those risks could have a material adverse effect on the
Corporation’s business, operations, financial condition and results.
Risks Related to Operations
Performance of Major Counterparties
The Corporation enters into a variety of agreements with third-party suppliers. Should one or more major counterparties be
unable to meet their obligations under the contracts, this would result in unexpected costs, losses and delays for the
Corporation.
Equipment Supply
The Corporation’s development and operation of power generating facilities is dependent on the supply of equipment from
third parties. Equipment pricing, production timeline, or delivery delay may rapidly increase depending, among other things, on
equipment availability, raw material prices and on the market for such products. Any significant increase in the price, or delays
to supply the equipment could negatively affect the future profitability of the Corporation’s facilities and the Corporation’s ability
to develop other projects. There is no guarantee that manufacturers will meet all their contractual obligations. Failure of any
supplier of the Corporation to meet its commitments would adversely affect the Corporation’s ability to complete projects on
schedule and to honour its obligations.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p79
(in thousands of Canadian dollars, except as noted and amounts per share)
Delays and Cost Overruns in the Design and Construction of Projects
Delays and cost overruns may occur in completing the construction of the Development Projects and the development and
construction of Prospective Projects and future projects that the Corporation will undertake. A number of factors that could
cause such delays or cost overruns include, without limitation, permitting delays, construction pricing escalation, changing
engineering and design requirements, the performance of contractors, labour disruptions, adverse weather conditions and the
availability of financing. Even when complete, a facility may not operate as planned due to design or manufacturing flaws,
which may not all be covered by warranty. Mechanical breakdown could occur in equipment after the period of warranty has
expired, resulting in loss of production as well as the cost of repair. In addition, if the Development Projects are not brought into
commercial operation within the delay stipulated in their PPA, the Corporation may be subject to penalty payments or the
counterparty may be entitled to terminate the related PPA.
Health, Safety and Environmental Risks
The ownership, construction and operation of the Corporation’s power generation assets carry an inherent risk of liability
related to worker health and safety and the environment, including the risk of government-imposed orders to remedy unsafe
conditions and/or to remediate or otherwise address environmental contamination, potential penalties for contravention of
health, safety and environmental laws, licences, permits and other approvals, and potential civil liability. Compliance with
health, safety and environmental laws (and any future changes) and the requirements of licences, permits and other
approvals, such as sound level and other operational restrictions, remain material to the Corporation’s business. The
Corporation has incurred and will continue to incur significant capital and operating expenditures to comply with health, safety
and environmental laws and to obtain and comply with licences, permits and other approvals and to assess and manage its
potential liability exposure. Nevertheless, the Corporation may become subject to government orders, investigations, inquiries
or other proceedings (including civil claims) relating to health, safety and environmental matters. The occurrence of any of
these events or any changes, additions to or more rigorous enforcement of, health, safety and environmental laws, licences,
permits or other approvals could have a significant impact on operations and/or result in additional material expenditures.
Consequently, no assurances can be given that additional environmental and workers’ health and safety issues relating to
currently known or unknown matters will not require unanticipated expenditures, or result in fines, penalties or other
consequences (including changes to operations) material to its business and operations.
Equipment Failure or Unexpected Operations and Maintenance Activity
The Corporation’s facilities are subject to the risk of equipment failure due to deterioration of the asset from use or age, latent
defect and design or operator error, among other things. To the extent that a facility’s equipment requires longer-than-forecast
down times for maintenance and repair, or suffers disruptions of power generation for other reasons, the Corporation’s
business, operating results, financial condition or prospects could be adversely affected.
Variability of Installation Performance and Related Penalties
The ability of the Corporation’s facilities to generate the maximum amount of power which can be sold to Hydro-Québec, BC
Hydro, the IESO, Électricité de France, Idaho Power Company and other purchasers of electricity under PPAs is an important
determinant of the Corporation’s revenues. If one of the Corporation’s facilities delivers less than the required quantity of
electricity in a given contract year or is otherwise in default under its respective PPA, penalty payments may be payable to the
relevant purchaser by the Corporation. The payment of any such penalties by the Corporation could adversely affect the
revenues and profitability of the Corporation.
Increase in Water Rental Cost or Changes to Regulations Applicable to Water Use
The Corporation is required to make rental payments for water rights once its projects are in commercial operation. Significant
increases in water rental costs in the future or changes in the way that governments who regulate water supply or apply such
regulations (including those of Quebec, BC, Ontario, Idaho in the U.S. and Chile) where the Corporation has hydroelectric
Operating Facilities, could have a material adverse effect on the Corporation’s business, operating results, financial condition
or prospects.
Availability and Reliability of Transmission Systems
The Corporation’s ability to sell electricity is impacted by the availability of the various transmission systems in each
jurisdiction. The failure of existing transmission facilities, the lack of adequate transmission capacity or delays in construction
would have a material adverse effect on the Corporation’s ability to deliver electricity to its various counterparties or to the point
of interconnection, thereby affecting the Corporation’s business, operating results, financial condition or prospects.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p80
(in thousands of Canadian dollars, except as noted and amounts per share)
Assessment of Water, Wind and Solar Resources and Associated Electricity Production
The strength and consistency of the water, wind and solar resources at power facilities of the Corporation may vary from what
the Corporation anticipates. Electricity production estimates of the Corporation are based on assumptions and factors that are
inherently uncertain, which may result in actual electricity production being different from the estimates of the Corporation,
including (i) the extent to which the limited time period of the site-specific hydrological, wind or solar data accurately reflects
long-term water flows, wind speeds and solar irradiation; (ii) the extent to which historical data accurately reflects the strength
and consistency of the water, wind and solar resources in the future; (iii) the strength of the correlation between the site-
specific water, wind and solar data and the longer-term regional data; (iv) the potential impact of climatic factors and climate
change; (v) the accuracy of assumptions on a variety of factors, including but not limited to weather, ice build-up on wind
turbines and snow accumulation and soiling on solar panels, site access, wake and transmission losses and wind shear; (vi)
the accuracy with which anemometers measure wind speed, and the difference between the hub height of the wind turbines
and the height of the meteorological towers used for data collection; (vii) the potential impact of topographical variations,
turbine placement and local conditions, including vegetation; (viii) the inherent uncertainty associated with the specific
methodologies and related models, in particular future-orientated models, used to project the water, wind and solar resource;
and (ix) the potential for electricity losses to occur before delivery.
Global Climate Change
Global climate change, including the impacts of global warming, represents a risk that could adversely affect the Corporation’s
business, results of operations and cash flows. Variability in hydrology, wind regimes and solar irradiation and their
predictability may be affected by unforeseen climate changes such as hurricanes, wind storms, hailstorms, rainstorms, ice
storms, floods, severe winter weather and forest fires. To the extent weather conditions are affected by climate change,
customers’ energy use and the Corporation's power generation could increase or decrease depending on the duration and
magnitude of the changes.
Extreme weather events create a risk of physical damage to the Corporation’s assets and power outages and increase the
potential likelihood of disruptions to our generation and transmission facilities. As a result, the Corporation could suffer costs,
losses and damages, all or some of which may not be recoverable through insurance, legal, regulatory cost recovery or other
processes and could materially affect the Corporation’s business, including results of operations and cash flows, and its
reputation with customers, investors, local communities, regulators, governments and financial markets. Resulting costs could
include reconstruction, repower, regeneration, asset replacement, increased insurance premium and any losses incurred by
third parties.
Variability in Hydrology, Wind Regimes and Solar Irradiation
The amount of energy generated by the Corporation’s hydroelectric facilities depends on the availability of water flows. There
is no certainty that the long-term availability of such resources will remain unchanged. The Corporation’s revenues may be
significantly affected by events that impact the hydrological conditions of the Corporation’s hydroelectric facilities such as low
and high-water flows within the watercourses on which the Corporation’s hydroelectric facilities are located. In the event of
severe flooding, the Corporation’s hydroelectric facilities may be damaged. Similarly, the amount of energy generated by the
Corporation’s wind farms will depend upon the availability of wind, which is naturally variable. A reduced or increased amount
of wind at the location of one of the wind farms over an extended period may reduce the production from such facility and may
reduce the Corporation’s revenues and profitability. Finally, the amount of energy to be generated by the Corporation’s solar
farms will depend on the availability of solar irradiation, which is naturally variable. Lower solar irradiation levels at the
Corporation’s solar farms over an extended period may reduce the production from such facilities and the Corporation’s
revenues and profitability. Variability in hydrology, wind regimes and solar irradiation and their predictability may also be
affected by climate changes which may provoke unforeseen changes in the historical trends.
Preparedness to Facing Natural Disasters and Force Majeure
The Corporation’s facilities, operations and projects under development are exposed to potential damage, partial or full loss,
resulting from environmental disasters (e.g. floods, high winds, fires, and earthquakes), equipment failures or other unforeseen
events. The occurrence of a significant event that disrupts or delays the ability of the Corporation’s power generation assets to
produce or sell power for an extended period, including events that preclude existing customers under PPAs from purchasing
electricity, could have a material negative impact on the business of the Corporation. The Corporation’s generation assets
could be exposed to effects of severe weather conditions, natural disasters and potentially catastrophic events such as a major
accident or incident. The occurrence of such an event may not release the Corporation from performing its obligations
pursuant to PPAs, power hedges or other agreements with third parties. Furthermore, force majeure events affecting the
Corporation's assets could result in damages to the environment or harm third parties. In addition, many of the Corporation’s
projects are in remote areas, making access for repair of damage difficult.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p81
(in thousands of Canadian dollars, except as noted and amounts per share)
Hazards such as unusual or unexpected geologic formations, pressures, downhole conditions, rockslides, other events
associated with steep terrain, mechanical failures, blowouts, cratering, localized ground subsidence, localized ground inflation,
pollution and other physical and environmental risks can affect the Corporation's development and production activities. These
hazards could result in substantial losses including injury and loss of life, severe damage to and destruction of property and
equipment, pollution and other environmental damage and suspension of operations.
Pandemics, Epidemics or Other Public Health Emergencies
The Corporation’s business, results of operations, financial condition, cash flows and stock price can be adversely affected by
pandemics, epidemics or other public health emergencies, such as the COVID-19 pandemic. In March 2020, the World Health
Organization characterized COVID-19 as a pandemic. The COVID-19 pandemic has resulted in governments around the world
implementing increasingly stringent measures to help control the spread of the virus, including quarantines, “shelter in place”
and “stay at home” orders, travel restrictions, business curtailments, school closures, and other measures. In addition,
governments and central banks in several parts of the world have enacted fiscal and monetary stimulus measures to
counteract the impacts of COVID-19. Although certain governments have begun the process of easing their respective
restrictions on individuals and businesses, there is material variation in the requirements to lift and reimpose restrictions and
the pace at which those restrictions are being lifted and reimposed between jurisdictions. In some jurisdictions, increases in
new cases of COVID-19 have led to reinstatement of restrictions on individuals and businesses. Current business disruptions
could impact our suppliers, which in turn could impact the operating results of the Corporation. Should the outbreak become
more widespread, procurement of equipment and spare parts may be impacted and construction, operation and maintenance
of the Corporation’s assets may be halted or delayed and negatively impact the business, financial condition and results of
operations of the Corporation.
All of the Corporation’s facilities continue to operate as expected and preventative measures remain in place in accordance
with the Corporation’s emergency response plan and applicable local government directives. Management continues to
actively monitor the situation, which remains uncertain, and may take further actions as required or recommended by
authorities.
Cybersecurity
The Corporation is dependent on various information technologies to carry out multiple business activities. A successful cyber
intrusion, such as, and not limited to, unauthorized access, personal information and confidential information leak (or identity
theft), malicious software or other violations on the system that controls generation and transmission at any of our offices or
facilities could severely disrupt or otherwise affect business operations. Such attacks on our data information base systems
through theft, alteration or destruction and the inability to recover promptly could impact individuals, business partners, our
operation capabilities, generate unexpected expenses impacting profitability, damage the Corporation's reputation and result in
additional liabilities (e.g. investigation, litigation, fines, remedial action).
With the continuous evolution of cyberattacks and having most employees working from home, the Corporation is reviewing its
cybersecurity program and adapting it to this new reality. The Corporation continuously takes measures to secure its
infrastructure against potential cyberattacks that may damage its infrastructure, systems, and data. The Corporation has
implemented mandatory security user awareness training on security & data privacy. It also implemented security controls to
help secure its data and business operations including access control measures, intrusion detection and prevention systems,
logging and monitoring of network activities, and implementing policies and procedures to ensure the secure operations of the
business.
Reliance on Shared Transmission and Interconnection Infrastructure
The six Harrison Operating Facilities, the Northwest Stave River Facility, the Tretheway Creek Facility and the Big Silver Creek
Facility (the “Sharing Facilities”) all share joint transmission and interconnection infrastructure to transmit their electrical energy
generation to a joint substation, which then interconnects to the common point of interconnection for the Sharing Facilities at
the adjacent BC Hydro Upper Harrison terminal substation. Therefore, damage to or a failure of the shared transmission and
interconnection infrastructure may result in the Sharing Facilities being unable to deliver their electrical energy generation to
the point of interconnection with BC Hydro’s transmission system in accordance with the requirements for sale of energy under
the PPAs with BC Hydro in respect of the six Harrison Operating Facilities, the Northwest Stave River Facility, the Tretheway
Creek Facility and the Big Silver Creek Facility. All six Harrison Operating Facilities also share one common interconnection
agreement with BC Hydro and act as agent for the Northwest Stave Facility, the Tretheway Creek Facility and the Big Silver
Creek Facility. Therefore, a default by any one of the Sharing Facilities of its obligations under the interconnection agreement
may result in BC Hydro disconnecting all the Sharing Facilities from the BC Hydro transmission system.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p82
(in thousands of Canadian dollars, except as noted and amounts per share)
Risks Related to Corporate Strategy
Inability of the Corporation to Execute its Strategy for Building Shareholder Value
The Corporation’s strategy for building shareholder value is to acquire or develop high-quality renewable power production
facilities that generate sustainable cash flows and provide an attractive risk-adjusted return on invested capital, and to
distribute a stable dividend. However, there is no certainty that the Corporation will be able to acquire or develop high-quality
renewable power production facilities at attractive prices to supplement its growth. Furthermore, this strategy may require the
divestiture by the Corporation of certain assets, to pursue new opportunities, to support or realize the benefits of completed or
future acquisitions, raise additional capital and/or lower the debts of the Corporation.
The successful execution of this strategy requires careful timing and business judgment, the resources to complete the
development of power generating facilities, as well as an accurate assessment of the assets of the Corporation and the value
that it would receive in exchange for their divestiture. The Corporation may underestimate the costs necessary to bring power
generating facilities into commercial operation, may be unable to quickly and efficiently integrate new acquisitions into its
existing operations, inaccurately evaluate the value of its assets or be unable to find a purchaser therefor in a manner that
supports the Corporation’s strategy in a timely fashion.
Inability to Raise Additional Capital and the State of the Capital Market
Future development and construction of new facilities, the development of the Development Projects and the Prospective
Projects and other capital expenditures will be financed by the Corporation out of cash generated from its Operating Facilities,
borrowing or the issuance and sale of additional equity. To the extent that external sources of capital, including issuance of
additional securities of the Corporation, become limited or unavailable, the Corporation’s ability to make necessary capital
investments to construct or maintain existing or future facilities would be impaired. There is no certainty that sufficient capital
will be available on acceptable terms to fund further development or expansion. There are numerous renewable energy
projects to be constructed in the coming years that will result in competition for capital. In addition, payment of dividends may
impair the Corporation’s ability to finance its ongoing and future projects.
Furthermore, the Corporation’s capital-raising efforts could involve the issuance and sale of additional Common Shares, or
debt securities convertible into its Common Shares, which, depending on the price at which such shares or debt securities are
issued or converted, could have a material dilutive effect on holders of the Corporation’s Common Shares and adversely
impact the trading price of the Corporation’s Common Shares.
Inability to Secure New PPAs or Renew Any PPA
Securing new PPAs, which is a key component of the Corporation’s growth strategy, is a risk factor in light of the competitive
environment faced by the Corporation. The Corporation expects to continue to enter into various forms of PPAs (corporate or
utility owned) for the sale of its power, which PPAs are mainly obtained through participation in competitive Requests for
Proposals processes or bilateral negotiations. During these processes and negotiations, the Corporation faces competitors
ranging from large utilities to small independent power producers, some of which have significantly greater financial and other
resources than the Corporation. There is no assurance that the Corporation will be selected as power supplier following any
particular Request for Proposals in the future, that the Corporation will be successful in such negotiations or that existing PPAs
will be renewed or will be renewed on equivalent terms and conditions upon the expiry of their respective terms.
Reliance on Various Forms of PPAs
The power generated by the Corporation is mostly sold under long-term power purchase agreements and in some cases under
power hedges and commercial or industrial retail contracts. If, for any reason, any of the purchasers of power under such
PPAs were unable or unwilling to fulfill their contractual obligations under the relevant PPA or if they refuse to accept delivery
of power pursuant to the relevant PPA, the Corporation’s business, operating results, financial condition or prospects could be
adversely affected. If the Development Projects are not brought into commercial operation within the delay stipulated in their
respective PPA or power hedges, the Corporation may be subject to penalty payments or the counterparty may be entitled to
terminate the related PPA or power hedges.
Volatility of Supply and Demand in the Energy Market
A portion of the Corporation’s revenues are tied, either directly or indirectly, to the wholesale market price for electricity in the
markets in which the Corporation operates. Wholesale market electricity prices are impacted by a number of factors including
the management of generation and the amount of excess generating capacity relative to load in a particular market; the
structure of the electricity market; and weather conditions (such as extremely hot or cold weather) that impact electrical load.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p83
(in thousands of Canadian dollars, except as noted and amounts per share)
There is uncertainty surrounding the trend in electricity demand growth, which is notably influenced by macroeconomic
conditions; absolute and relative energy prices; and energy conservation and demand-side management. Therefore, from a
supply perspective, there are uncertainties associated with the timing of generating plant retirements which are in part driven
by environmental regulations, and with the scale, pace and structure of replacement capacity.
Fluctuations Affecting Prospective Power Prices
If the Corporation is unable to secure or renew PPAs for its development assets or maintain or renew PPAs for its operating
assets or contracts for the sale of 100% of generation, the Corporation may be forced to sell electrical power generated at
market price. Although most of the output at the Shannon Wind Farm, the Flat Top Wind Farm, the Foard City Wind Farm, the
Phoebe Solar Farm and the Salvador Solar Farm are sold under long-term PPAs, output not sold under the long-term power
hedge agreement is and will be subject to merchant prices. If the Corporation is unable to produce enough power to meet its
contractual obligations under its PPAs, the Corporation will be forced to purchase third-party power at merchant prices. If the
settlement point of the Corporation’s long-term power hedge agreements (a form of PPA) differs from the point of
interconnection, power sales pursuant to that power hedge are further subject to locational risk. This potential difference in
pricing is referred to as a “basis differential”. Depending on the specifics of the power hedge, a large basis differential could
require the Corporation to purchase third-party power at merchant prices, or otherwise supplement the basis differential to the
hedge provider. Power sales under power hedges are also required to be sold in blocks of hourly periods. If the Corporation’s
output within any given block is insufficient to meet its contractual commitments, it may be required to purchase third party
power at merchant prices to meet its commitments. This potential risk is referred to as a “shape risk”.
The market price of power in individual jurisdictions can be volatile and may be incapable of being controlled. If the price of
electricity should drop significantly during such time the Corporation is forced to sell electrical power generated at market price,
or increase significantly, when the Corporation is forced to purchase third party power at merchant prices, the economic
prospects of the operating facilities that rely, in whole or in part, on merchant prices, such as the Foard City Wind Farm, the
Phoebe Solar Farm, the Salvador Solar Farm, the Griffin Trail Wind Farm, the Licàn Hydro Facility, the Miller Creek Facility or
development projects in which the Corporation has an interest, could be significantly reduced or rendered uneconomic. A
material reduction or increase in such prices, as applicable, or a non-material reduction in such prices coupled with the impact
of the aggregate risks described above, could have a material adverse effect on the Corporation’s financial condition, in
particular, with respect to the Phoebe Solar Farm.
Uncertainties Surrounding Development of New Facilities
The Corporation participates in the construction and development of new power generating facilities. These facilities have
greater uncertainty surrounding their feasibility, social acceptance and future profitability than existing Operating Facilities with
established track records. In certain cases, many factors affecting costs are not yet determined, such as land royalty
payments, water royalties, or municipal or other applicable taxes. The Corporation is in some cases required to advance funds
and post-performance bonds during development of its new facilities. If some of these facilities are not completed or do not
operate to the expected specifications, or unforeseen costs or taxes are incurred, the Corporation could be adversely affected.
Obtainment of Permits
The Corporation does not currently hold all the approvals, licences and permits required for the construction and operation of
the Development Projects or the Prospective Projects, including environmental approvals and permits necessary to construct
and operate the Development Projects or the Prospective Projects. The failure to obtain or delays in obtaining all necessary
licences, approvals or permits, including renewals thereof or modifications thereto, could result in construction of the
Development Projects or the Prospective Projects being delayed or not being completed or commenced. There can be no
assurance that any one Prospective Project will result in any actual operating facility.
In addition, delays may occur in obtaining necessary government approvals required for future power projects.
From time to time, and to secure long lead times required for ordering equipment, the Corporation may place orders for
equipment and make deposits thereon or advance projects prior to obtaining all requisite permits and licences. The
Corporation only takes such actions where it reasonably believes that such licences or permits will be forthcoming in due
course prior to the requirement to expend the full amount of the purchase price. However, any delay in permitting could
adversely affect the Corporation.
Environmental permits to be issued regarding any of the Development Projects or the Prospective Projects may contain
conditions that need to be satisfied prior to obtaining a PPA, to start construction, during construction and during and after the
operation of the Development Projects. It is not possible to predict the conditions imposed by such permits or the cost of any
mitigating measures required by such permits.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p84
(in thousands of Canadian dollars, except as noted and amounts per share)
Inability to Realize the Anticipated Benefits of Completed and Future Acquisitions
The Corporation believes that completed and future acquisitions will provide benefits for the Corporation. However, there is a
risk that some or all the expected benefits will fail to materialize or may not occur within the time periods anticipated by the
management of the Corporation. The realization of such benefits may be affected by many factors, many of which are beyond
the control of the Corporation.
Integration of the Completed and Future Acquisitions
The integration of completed and future business and/or project acquisitions and their respective activities, employees and
officers, operations and facilities may result in significant challenges and management of the Corporation may be unable to
accomplish the integration successfully or without spending significant amounts of money or other resources. For completed
and future acquisitions, there can be no assurance that Management will be able to successfully integrate the teams, activities
and facilities forming part of such acquisitions or fully realize the expected benefits of such acquisitions.
Changes in Governmental Support to Increase Electricity to be Generated from Renewable Sources by
Independent Power Producers
Development and growth of renewable energy is dependent on governmental support, policies and incentives. Many
governments have introduced portfolio standards, tax credits and other incentives to increase the portion of renewable energy
in their electricity generation supply mix to reduce greenhouse gas emissions over time. There is a risk that governmental
support providing incentives for renewable energy could change at any time and that additional increase in the procurement of
renewable energy projects from independent power producers could be reduced or suspended at any time. As a result, the
Corporation may face reduced ability to develop its prospective projects and may suffer material write-offs of prospective
projects.
Regulatory and Political Risks
The development and operation of power generating facilities are subject to changes in governmental regulatory requirements
and the applicable governing statutes, including regulations related to the environment, unforeseen environmental effects,
general economic conditions and other matters beyond the control of the Corporation.
Moreover, the operation of power generating facilities is subject to extensive regulation by various government agencies at the
municipal, provincial, state and federal levels. There is always the risk of changes being made in government policies and
laws, which may result in increased rates, such as for water rentals, and for income, capital and municipal taxes.
The Corporation holds permits and licences from various regulatory authorities for the construction and operation of its
facilities. These licences and permits are critical to the operation of the Corporation’s business. Most of these permits and
licences are long-term in nature, reflecting the anticipated useful life of the facilities. In some cases, these permits may need to
be renewed prior to the end of the anticipated useful life of such facilities and there is no guarantee that such renewals will be
granted or on which conditions they will be renewed. These permits and licences require the Corporation’s compliance with the
terms thereof.
Risks related to U.S. Production and Investment Tax Credits, Changes in U.S. Corporate Tax Rates and
Availability of Tax Equity Financing
The Corporation owns interest in projects for which on- and off-site project activities are or were performed to qualify for U.S.
renewable tax incentives (PTCs or ITCs). There can be no assurance that the projects will qualify for PTCs or ITCs or, if they
do, that they will qualify for full PTCs or ITCs. There also can be no assurance that the PTCs or ITCs will continue to be
available. Any new tax rule, regulation or other guidance promulgated (as the same may be amended, updated or otherwise
modified from time to time, including those amendments passed in late 2017) in the U.S. may jeopardize or otherwise impede
the effectiveness of such on- and off-site project activities qualifying such projects for the full value of PTCs.
Qualification of the projects for PTCs or ITCs is critical to obtaining tax equity financing for wind and solar projects. The
inability to qualify the projects for PTCs or ITCs, in whole or in part, would adversely affect the financing options for those
projects. If the qualification of a project for PTCs or ITCs is not successful, there may be a material impairment of the
Corporation’s investment in that project.
Other government actions could be taken that could, directly or indirectly, inhibit the Corporation’s ability to raise tax equity
financing. For example, following the tax reform enacted in late-2017, lower corporate tax rates in the U.S. may impact the
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p85
(in thousands of Canadian dollars, except as noted and amounts per share)
amount of available tax equity investment for specific projects or generally in the market, impeding our ability to obtain enough
amounts of tax equity investment on terms and at rates beneficial to the Corporation and its projects.
Exposure to Many Different Forms of Taxation in Various Jurisdictions
The Corporation is subject to many different forms of taxation in various jurisdictions throughout the world, including but not
limited to, income tax, withholding tax, tax on capital, property tax, sales tax, transfer tax, social security and other payroll
related taxes, which may be amended or may lead to disagreements with tax authorities regarding the application of tax law.
Tax law and administration are extremely complex and often require the Corporation to make subjective determinations. The
computation of taxes involves many factors, including the interpretation of tax legislation in various jurisdictions in which the
Corporation is or may become subject to tax assessments. The Corporation’s estimate of tax related assets, liabilities,
recoveries and expenses incorporates significant assumptions. These assumptions include, but are not limited to, the tax rates
in various jurisdictions, the effect of tax treaties between jurisdictions and taxable income projections. To the extent that such
assumptions differ from actual results, the Corporation may have to record additional tax expenses and liabilities, including
interest and penalties.
Social Acceptance of Renewable Energy Projects
The social acceptance by local stakeholders, including, in some cases, First Nations and other Indigenous peoples, and local
communities is critical to our ability to find and develop new sites suitable for viable renewable energy projects. Failure to
obtain proper social acceptance for a project may prevent the development and construction of a project and lead to the loss of
all investments made in the development and the write-off of such prospective project.
Relationships with Stakeholders
The Corporation enters into various types of arrangements with communities or joint venture partners for the development of
its projects. Certain of these partners may have or develop interests or objectives that are different from or even in conflict with
the objectives of the Corporation. Any such differences could have a negative impact on the success of the Corporation’s
projects. The Corporation is sometimes required through the permitting and approval process to notify and consult with various
stakeholder groups, including landowners, Indigenous communities and municipalities. Any unforeseen delays in this process
may negatively impact the ability of the Corporation to complete any given project on time or at all.
Inability to Secure Appropriate Land
There is significant competition for appropriate sites for new power generating facilities. Optimal sites are difficult to identify
and obtain given that geographic features, legal restrictions and ownership rights naturally limit the areas available for site
development. There can be no assurance that the Corporation will be successful in obtaining any particular site in the future.
Foreign Market Growth and Development Risks
The Corporation may, regarding any international expansion of its activities, face risks related to (i) its ability to effectively
consummate future acquisitions, create new partnerships and develop, construct and operate projects in an unfamiliar
regulatory and procurement market (ii) competing with more established competitors, (iii) foreign exchange fluctuations, (iv)
lack of knowledge of foreign market, (v) changes in international and local taxation and (vi) excessive concentration of assets
in single foreign market.
Risks Related to Financing
Liquidity Risks Related to Derivative Financial Instruments
Derivative financial instruments are entered into with major financial institutions and their effectiveness is dependent on the
performance of these institutions. Failure by one of them to perform its obligations could involve a liquidity risk. Liquidity risks
related to derivative financial instruments also include the settlement of bond forward contracts on their maturity dates and the
early termination option included in some interest rate swap contracts and foreign exchange contracts.
The occurrence of any of the foregoing could have a material adverse effect on the Corporation’s business, financial condition
and results of operations. The Corporation uses derivative financial instruments to manage its exposure to the risk of an
increase in interest rates on its debt financing, of foreign currency variation or of electricity market price variation. The
Corporation does not own or issue financial instruments for speculation purposes.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p86
(in thousands of Canadian dollars, except as noted and amounts per share)
The nature of the Corporation’s energy and risk management activities creates exposure to financial risks, which include, but
are not limited to: (i) unfavourable movements in commodity prices, interest rates or foreign exchange which could result in a
financial or opportunity loss to the Corporation; (ii) a lack of counterparties, due to market conditions or other circumstances,
could leave the Corporation unable to liquidate or offset a position, or unable to do so at or near the previous market price; (iii)
the Corporation may not receive funds or instruments from counterparties at the expected time or at all; (iv) the counterparty
could fail to perform an obligation owed to the Corporation; (v) loss as a result of human error or deficiency in the Corporation’s
systems or controls; and (vi) loss as a result of contracts being unenforceable or transactions being inadequately documented.
Interest Rate Fluctuations and Refinancing
Interest rate fluctuations are of particular concern to a capital-intensive industry such as the electric power business. The
Corporation faces interest rate and debt refinancing risk in respect of floating-rate bank credit facilities used for construction
and long-term financings. The Corporation’s ability to refinance debt on favourable terms is dependent on debt capital market
conditions, which are inherently variable and difficult to predict. Interest rate fluctuation and refinancing risks could affect the
Corporation’s ability to raise additional capital.
Financial Leverage and Restrictive Covenants Governing Current and Future Indebtedness
The Corporation’s and its subsidiaries’ operations are subject to contractual restrictions contained in the instruments governing
any of their current and future indebtedness. The degree to which the Corporation and its subsidiaries are leveraged could
have important consequences to shareholders, including: (i) the Corporation’s and its subsidiaries’ ability to obtain additional
financing for working capital, capital expenditures, acquisitions or other project developments in the future may be limited; (ii) a
significant portion of the Corporation’s and its subsidiaries’ cash flows from operations may be dedicated to the payment of the
principal of and interest on their indebtedness, thereby reducing funds available for future operations; (iii) certain of the
Corporation’s and its subsidiaries’ borrowings will be at variable rates of interest, which exposes the Corporation and its
subsidiaries to the risk of increased interest rates; and (iv) the Corporation and its subsidiaries may be more vulnerable to
economic downturns and be limited in their ability to withstand competitive pressures.
The Corporation and its subsidiaries are subject to operating and financial restrictions through covenants in certain loan, equity
finance and security agreements. These restrictions prohibit or limit the Corporation’s and its subsidiaries’ ability to, among
other things, incur additional debt, provide guarantees for indebtedness, create liens, dispose of assets, liquidate, dissolve,
amalgamate, consolidate or effect any corporate or capital reorganization, make distributions or pay dividends, issue any
equity interests and create subsidiaries. These restrictions may limit the Corporation’s and its subsidiaries’ ability to obtain
additional financing, withstand downturns in the Corporation’s and its subsidiaries’ business and take advantage of business
opportunities. Moreover, the Corporation and its subsidiaries may be required to seek additional debt or equity financing on
terms that include more restrictive covenants, require repayment on an accelerated schedule or impose other obligations that
limit the Corporation’s or its subsidiaries’ ability to grow the business, acquire assets or take other actions the Corporation or
its subsidiaries might otherwise consider appropriate or desirable.
Changes in General Economic Conditions
Changes in general economic conditions could have an effect on the assessment of the value of the Corporation’s assets,
affecting its ability to raise capital, through financing, re-financing, divestiture of certain assets or generally its ability to execute
its strategy. Furthermore, most of the PPAs of the Corporation have a fixed price adjusted annually for inflation on a CPI
formula basis. If the inflation is lower than expected or if it decreases, the Corporation’s projected revenues and Projected
Adjusted EBITDA and free cash flow may be lower than expected or reduced, which would respectively impact the payout
ratio.
Foreign Exchange Fluctuations
The Corporation occasionally purchases equipment from foreign suppliers. As such, the Corporation may be exposed to
changes in the Canadian dollar in relation to the foreign currency-denominated equipment purchases. Our development work
and operations in Canada, France, the U.S. and Latin America make us subject to foreign currency fluctuations.
Some of our revenue and costs are denominated in currencies other than the Canadian dollar. Foreign exchange fluctuations
may impact our results as they are reported in Canadian dollars.
Our functional and reporting currency is the Canadian dollar. As such, our foreign investments, operations costs and assets will
be exposed to net changes in currency exchange rates. Volatility in exchange rates could have an adverse effect on our
business, financial condition and operating results.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p87
(in thousands of Canadian dollars, except as noted and amounts per share)
Other Risks
Possibility that the Corporation May Not Declare or Pay a Dividend
Holders of Common Shares, Series A Shares and Series C Shares do not have a right to dividends on such shares unless
declared by the Board of Directors. The Corporation does not face any restrictions that would prevent it from paying out
dividends or distributions. The declaration of dividends is at the discretion of the Board of Directors even if the Corporation has
enough funds, net of its liabilities, to pay such dividends.
The Corporation may not declare or pay a dividend if the Corporation's cash available for distribution is not sufficient or if there
are reasonable grounds for believing that (i) the Corporation is, or would after the payment be, unable to pay its liabilities as
they become due, or (ii) the realizable value of the Corporation’s assets would thereby be less than the aggregate of its
liabilities and stated capital of its outstanding shares. No assurance can be given as to whether the Corporation will in the
future pay dividends, or the frequency or amounts of any such dividends.
Insufficiency of Insurance Coverage
While the Corporation maintains insurance coverage it believes would be maintained by a prudent owner/operator of similar
facilities or projects, there is no certainty that such insurance will continue to be offered on an economically feasible basis, nor
that all events that could give rise to a loss or liability are insurable or insured, nor that the amounts of insurance will be
sufficient to cover each and every loss or claim that may occur involving our activities or assets. Insurance coverage of project
assets and facilities may be prescribed by project financing agreements and/or PPAs. In addition, the Corporation may
undertake construction or pursue acquisitions where obtaining insurance may be difficult, not economically feasible or
otherwise insufficient to cover each and every loss or claim that may occur involving the new assets or activities. There are
certain elements of the Corporation’s business which are not insured, either as is customary in the industry, or where the cost
of coverage is not economically viable. Insurance policies are generally subject to annual review by the respective insurers
and there is no certainty that equivalent or more favourable terms will be offered upon each renewal. A significant loss, that is
uninsured or significantly exceeding the limits of insurance policies, or the failure to renew insurance policies on equivalent or
more favourable terms could materially affect the Corporation’s business, including results of operations and cash flows, and
its reputation with customers, investors, lenders, regulators, governments and financial markets.
Ability to Attract New Talent or to Retain Officers or Key Employees
The Corporation’s officers and other key employees play a significant role in the Corporation’s success. The conduct of the
Corporation’s business and the execution of the Corporation’s growth strategy rely heavily on teamwork and the Corporation’s
future performance and development depend to a significant extent on the abilities, experience and efforts of its management
team. The Corporation’s ability to retain its management team or attract suitable replacements should key members of the
management team leave is dependent on the competitive nature of the employment market.
The loss of services from key members of the management team or a limitation in their availability could adversely impact the
Corporation’s prospects, financial condition and cash flow.
Further, such a loss could be negatively perceived in the capital markets. The Corporation’s success also depends largely
upon its continuing ability to attract, develop and retain skilled employees to meet its needs from time to time.
Litigation
In the normal course of its operations, the Corporation may become involved in various legal actions, including but not limited
to those involving claims relating to contract disputes, personal injuries, property damage, property taxes and land rights. The
Corporation maintains adequate provisions for its outstanding or pending claims. The final outcome with respect to
outstanding, pending or future actions cannot be predicted with certainty, and therefore there can be no assurance that their
resolution will not have an adverse effect on the financial position or results of operation of the Corporation in a particular
quarter or financial year.
Credit Rating May Not Reflect Actual Performance of the Corporation or a Lowering (Downgrade) of the
Credit Rating
The credit ratings applied to the Corporation, the Cumulative Rate Reset Preferred Shares, Series A and Cumulative
Redeemable Fixed Rate Preferred Shares, Series C (the “Credit Ratings”) are an assessment, by the rating agencies, of the
Corporation’s ability to pay its obligations. The Credit Ratings are based on certain assumptions about the future performance
and capital structure of the Corporation that may or may not reflect the actual performance or capital structure of the
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p88
(in thousands of Canadian dollars, except as noted and amounts per share)
Corporation. Changes in the Credit Ratings in the future may affect the market price or value and the liquidity of the securities
of the Corporation. There is no assurance that any Credit Ratings will remain in effect for any given period or that any rating
will not be lowered or withdrawn entirely by the rating agencies.
Revenues from Certain Facilities Will Vary Based on the Market (or Spot) Price of Electricity
Because the prices for electricity purchased from certain Operating Facilities vary based on the market price for electricity,
revenues from such facilities on the electricity market or under the applicable power purchase agreement will vary. An increase
in the volatility of spot price would add uncertainty to the determination of potential revenues and adjusted EBITDA and could
have an adverse impact on the Corporation’s results.
Host Country Economic, Social and Political Conditions
Several of the Corporation’s principal assets are located in foreign domiciles. Although the operating environments in these
jurisdictions are considered favourable compared to those in other countries, there are still economic, social and political risks
associated with operating in foreign jurisdictions. These risks include, but are not limited to, terrorism, hostage taking, war, civil
unrest or military repression, expropriation, repatriation or nationalization without adequate compensation, extreme fluctuations
in currency exchange rates, high rates of inflation and labour unrest, renegotiation or nullification of existing concessions,
licenses, permits and contracts, difficulties enforcing judgments in such jurisdictions, changes to tax and royalty regimes,
changes to environmental regulatory regimes, volatile local political, legal and economic climates, nepotism, subsidies directed
at industries competing with ours, difficulties obtaining key equipment and components for equipment, currency control and
host-country unfavourable legislation.
Host country economic, social and political uncertainty can arise as a result of lack of support for our activities in local
communities in the vicinity of our properties. Changes in renewable resource, energy or investment policies or shifts in political
attitudes may also adversely affect the Corporation’s business. The effect of these factors cannot be accurately predicted.
Though the effects of competition will increase the likelihood of market efficiencies and benefit our properties, elimination of
power cost subsidies may increase the inability of end-use consumers to pay for power and lead to political opposition to
privatization initiatives and have an adverse impact on our properties and operations.
Adverse Claims to Property Title
Although the Corporation has taken reasonable precautions to ensure that legal title to its properties is properly documented,
there can be no assurance of title to any of its property interests, or that such title will ultimately be secured. However, the
results of the Corporation’s investigations should not be construed as a guarantee of title. No assurance can be given that
applicable governments will not revoke or significantly alter the conditions of the applicable exploration and mining
authorizations nor that such exploration and mining authorizations will not be challenged or impugned by third parties. The
Corporation’s property interests may also be subject to prior unregistered agreements or transfers or other land claims, and
title may be affected by undetected defects and adverse laws and regulations.
The Corporation cannot guarantee that title to its properties will not be challenged. Title insurance is not always available, or
available on acceptable terms, and the Corporation’s ability to ensure that it has obtained secure claim to individual properties
may be severely constrained. A successful challenge to the precise area and location of these claims could result in the
Corporation being unable to operate on its properties as permitted or being unable to enforce its rights with respect to its
properties.
Reliance on Intellectual Property and Confidential Agreements to Protect the Corporation's Rights and
Confidential Information
The Corporation’s success and competitive position are dependent in part upon its proprietary methods and intellectual
property. Although the Corporation seeks to protect its proprietary rights through a variety of means, it cannot guarantee that
the protective steps it has taken are adequate to protect these rights.
The Corporation also relies on confidentiality agreements with certain employees, consultants and other third parties to
protect, in part, trade secrets and other proprietary information. These agreements could be breached, and the Corporation
may not have adequate remedies for such a breach. In addition, others could independently develop substantially equivalent
proprietary information or gain access to the Corporation’s trade secrets or proprietary information.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p89
(in thousands of Canadian dollars, except as noted and amounts per share)
Reputational Risks Arising from Misconduct of Representatives of the Corporation
The Corporation’s success can be impacted by events affecting its reputation. In some cases, the Corporation may be affected
or be held accountable for the actions of directors, officers or employees of the Corporation and those of third parties who act
for or on behalf of the Corporation. Although the Corporation seeks to protect its reputation through the Corporation's internal
policies, procedures and controls, there is a risk that events or actions of certain representatives of the Corporation could
affect its reputation. Adverse effects on the Corporation’s reputation could affect its relationships with various stakeholders,
partners, governments, employees, shareholders and the general public. This could, among other things, result in loss of
business opportunities, loss of revenue, litigation and a reduction in the Corporation’s ability to raise additional capital.
Reputational harm could also reduce the Corporation's ability to attract new talent or retain officers and key employees,
decrease social acceptance of renewable energy projects and affect government support to increase electricity to be
generated by independent power producers.
10- FORWARD-LOOKING INFORMATION
To inform readers of the Corporation's future prospects, this MD&A contains forward-looking information within the meaning of
applicable securities laws (“Forward-Looking Information”), including the Corporation’s growth targets, power production,
prospective projects, successful development, construction and financing (including tax equity funding) of the projects under
construction and the advanced-stage prospective projects, sources and impact of funding, project acquisitions, execution of
non-recourse project-level financing (including the timing and amount thereof), and strategic, operational and financial benefits
and accretion expected to result from such acquisitions, business strategy, future development and growth prospects
(including expected growth opportunities under the Strategic Alliance with Hydro-Québec), business integration, governance,
business outlook, objectives, plans and strategic priorities, and other statements that are not historical facts. Forward-Looking
Information can generally be identified by the use of words such as “approximately”, “may”, “will”, "could”, “believes”, “expects”,
“intends”, "should”, "would”, “plans”, “potential”, "project”, “anticipates”, “estimates”, “scheduled” or “forecasts”, or other
comparable terms that state that certain events will or will not occur. It represents the projections and expectations of the
Corporation relating to future events or results as of the date of this MD&A.
Future-oriented financial information: Forward-Looking Information includes future-oriented financial information or financial
outlook within the meaning of securities laws, including information regarding the Corporation's targeted production, the
estimated targeted revenues, targeted Revenues Proportionate, targeted Adjusted EBITDA and targeted Adjusted EBITDA
Proportionate, targeted Free Cash Flow, targeted Free Cash Flow per Share and intention to pay dividend quarterly, the
estimated project size, costs and schedule, including obtainment of permits, start of construction, work conducted and start of
commercial operation for Development Projects and Prospective Projects, the Corporation's intent to submit projects under
Requests for Proposals, the qualification of U.S. projects for PTCs and ITCs and other statements that are not historical facts.
Such information is intended to inform readers of the potential financial impact of expected results, of the expected
commissioning of Development Projects, of the potential financial impact of completed and future acquisitions and of the
Corporation's ability to sustain current dividends and to fund its growth. Such information may not be appropriate for other
purposes.
Assumptions: Forward-Looking Information is based on certain key assumptions made by the Corporation, including, without
restriction, those concerning hydrology, wind regimes and solar irradiation; performance of operating facilities, acquisitions and
commissioned projects; project performance; availability of capital resources and timely performance by third parties of
contractual obligations; favourable market conditions for share issuance to support growth financing; favourable economic and
financial market conditions; the Corporation’s success in developing and constructing new facilities; successful renewal of
PPAs; sufficient human resources to deliver service and execute the capital plan; no significant event occurring outside the
ordinary course of business such as a natural disaster, pandemic or other calamity; continued maintenance of information
technology infrastructure and no material breach of cybersecurity. Please refer to Section 5 - Outlook of this MD&A for details
regarding the assumptions used with respect to the 2022 growth targets and outlook for the 2020-2025 Strategic Plan.
Risks and Uncertainties: Forward-Looking Information involves risks and uncertainties that may cause actual results or
performance to be materially different from those expressed, implied or presented by the Forward-Looking Information. These
are referred to in the "Risks and Uncertainties" section of the Annual Report and include, without limitation: performance of
major counterparties; equipment supply; delays and cost overruns in the design and construction of projects; health, safety
and environmental risks; equipment failure or unexpected operations and maintenance activity; variability of installation
performance and related penalties; increase in water rental cost or changes to regulations applicable to water use; availability
and reliability of transmission systems; assessment of water, wind and solar resources and associated electricity production;
global climate change; variability in hydrology, wind regimes and solar irradiation; preparedness to facing natural disasters and
force majeure; pandemics, epidemics or other public health emergencies; cybersecurity; reliance on shared transmission and
interconnection infrastructure; inability of the Corporation to execute its strategy for building shareholder value; inability to raise
additional capital and the state of the capital market; inability to secure new PPAs or renew any PPA; reliance on various forms
of PPAs; volatility of supply and demand in the energy market; fluctuations affecting prospective power prices; uncertainties
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p90
(in thousands of Canadian dollars, except as noted and amounts per share)
surrounding development of new facilities; obtainment of permits; inability to realize the anticipated benefits of completed and
future acquisitions; integration of the completed and future acquisitions; changes in governmental support to increase
electricity to be generated from renewable sources by independent power producers; regulatory and political risks; risks
related to U.S. production and investment tax credits, changes in U.S. corporate tax rates and availability of tax equity
financing; exposure to many different forms of taxation in various jurisdictions; social acceptance of renewable energy projects;
relationships with stakeholders; inability to secure appropriate land; foreign market growth and development risks; liquidity
risks related to derivative financial instruments; interest rate fluctuations and refinancing; financial leverage and restrictive
covenants governing current and future indebtedness; changes in general economic conditions; foreign exchange fluctuations;
possibility that the Corporation may not declare or pay a dividend; insufficiency of insurance coverage; ability to attract new
talent or to retain officers or key employees; litigation; credit rating may not reflect actual performance of the Corporation or a
lowering (downgrade) of the credit rating; revenues from certain facilities will vary based on the market (or spot) price of
electricity; host country economic, social and political conditions; adverse claims to property title; reliance on intellectual
property and confidential agreements to protect the Corporation's rights and confidential information; and reputational risks
arising from misconduct of representatives of the Corporation.
Although the Corporation believes that the expectations and assumptions on which Forward-Looking Information is based are
reasonable under the current circumstances, readers are cautioned not to rely unduly on this Forward-Looking Information, as
no assurance can be given that it will prove to be correct. Forward-Looking Information contained herein is provided as at the
date of this MD&A, and the Corporation does not undertake any obligation to update or revise any Forward-Looking
Information, whether as a result of events or circumstances occurring after the date hereof, unless so required by law.
Innergex Renewable Energy Inc.
Annual Report 2021
Management's Discussion and Analysis p91
(in thousands of Canadian dollars, except as noted and amounts per share)
Responsibility for Financial Reporting
The consolidated financial statements of Innergex Renewable Energy Inc. (the “Corporation”) and the management's
discussion and analysis and all of the information herein concerning the Corporation are the responsibility of Management.
These consolidated financial statements were prepared by Management in accordance with International Financial
Reporting Standards (“IFRS”) by applying the detailed accounting policies set out in the notes to the consolidated financial
statements. Management is of the opinion that the consolidated financial statements were prepared based on reasonable
criteria and using justifiable and reasonable estimates. The Corporation's financial information, presented elsewhere in the
annual report, is consistent with what is presented in the consolidated financial statements.
Management maintains efficient and high-quality internal accounting and management control systems while ensuring that
costs are reasonable. These systems provide assurance that the financial information is relevant, accurate and reliable, and
that the Corporation's assets are correctly accounted for and adequately safeguarded.
The Board of Directors of the Corporation is responsible for ensuring that Management fulfils its financial reporting
responsibilities. In addition, the Board of Directors is ultimately responsible for reviewing and approving the Corporation's
consolidated financial statements. The Board of Directors fulfils this responsibility through its Audit Committee.
The Audit Committee is appointed by the Board of Directors and all of its members are external non-related Directors.
The Audit Committee meets with Management and the independent auditor for the purposes of discussing internal controls
relating to the financial reporting process, audit of financial information and other financial issues, and to make sure that each
party is properly fulfilling its responsibilities. In addition, the Audit Committee reviews the annual report, the consolidated
financial statements and the independent auditors' report. The Audit Committee submits its findings to the Board of Directors
for review and for approval of the consolidated financial statements prior to their presentation to the shareholders. The Audit
Committee also determines whether to retain the services of an independent auditor and to renew their mandate, which is
subject to Board review and shareholders' approval.
These consolidated financial statements were approved by the Corporation's Board of Directors. The Corporation's
consolidated financial statements were audited by its independent auditor, KPMG LLP, in accordance with Canadian
generally accepted auditing standards and on the shareholders' behalf. KPMG LLP enjoys full and unrestricted access to
the Audit Committee.
[s] Michel Letellier
Michel Letellier, MBA
President and Chief Executive Officer
[s] Jean-François Neault
Jean-François Neault, CPA, CMA, MBA
Chief Financial Officer
Innergex Renewable Energy Inc.
Longueuil, Canada, February 23, 2022
Innergex Renewable Energy Inc.
Annual Report 2021
Responsibility for Financial Reporting p92
(in thousands of Canadian dollars, except as noted and amounts per share)
KPMG LLP
600 de Maisonneuve Blvd West
Suite 1500, Tour KPMG
Montréal (Québec) H3A 0A3
Tel. 514-840-2100
Fax. 514-840-2187
www.kpmg.ca
INDEPENDENT AUDITORS’ REPORT
To the Shareholders of Innergex Renewable Energy Inc.
Opinion
We have audited the consolidated financial statements of Innergex Renewable Energy Inc. (the "Entity"), which comprise:
•
•
•
•
•
•
the consolidated statements of financial position as at December 31, 2021 and December 31, 2020;
the consolidated statements of earnings (loss) for the years then ended;
the consolidated statements of comprehensive income (loss) for the years then ended;
the consolidated statements of changes in shareholders’ equity for the years then ended;
the consolidated statements of cash flows for the years then ended;
and notes to the consolidated financial statements, including a summary of significant accounting policies.
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material respects, the consolidated financial position
of the Entity as at December 31, 2021 and December 31, 2020, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with International Financial Reporting Standards (IFRS).
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those
standards are further described in the "Auditors’ Responsibilities for the Audit of the Financial Statements" section of our
auditors’ report.
We are independent of the Entity in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Canada and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial
statements for the year ended December 31, 2021. These matters were addressed in the context of our audit of the financial
statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
We have determined the matters described below to be the key audit matters to be communicated in our auditors’ report.
Innergex Renewable Energy Inc.
Annual Report 2021
Independent Auditors' Report p93
(in thousands of Canadian dollars, except as noted and amounts per share)
Evaluation of the acquisition date fair values of intangible assets and property, plant and equipment related to
business acquisitions
Description of the matter
We draw attention to Notes 2, 3 and 4 to the financial statements. On July 9, 2021, the Entity acquired the remaining 50%
interest in Energía Llaima SpA ("Energía Llaima"), a renewable energy company based in Chile, of which Innergex already
owned 50%, for an aggregate consideration of $94,012.
On October 25, 2021, the Entity and HQI US Holding LLC, a subsidiary of Hydro-Québec, acquired Curtis Palmer, a 60 MW
run-of-river hydroelectric portfolio located in Corinth, New York, for a total consideration of $397,347. The Entity owns a 50%
interest in Curtis Palmer with Hydro-Québec indirectly owning the remaining 50% interest.
In connection with these transactions, the Entity recorded intangible assets of $43,930 and $161,087 respectively, and
property, plant and equipment of $254,051 and $ 224,875 respectively.
The fair value of the intangible assets of Energía Llaima and Curtis Palmer related to power purchase agreements has been
established using a with-or-without approach by calculating the excess of the power purchase agreement prices over the
merchant prices for the generation that would have otherwise been sold in the market. The fair value of the intangible assets
related to operating licenses and permits, was calculated using a discounted cash flow approach. The fair value of property,
plant and equipment was established using a discounted cash flow approach.
The Entity makes a number of assumptions when determining the acquisition date fair values of intangible assets and
property, plant and equipment including:
•
•
Future cash flows which may be influenced by a number of assumptions such as electricity production and selling
prices
Discount rates
Why the matter is a key audit matter
We identified the evaluation of the acquisition date fair values of the intangible assets and the property, plant and equipment
related to business acquisitions as a key audit matter. This matter represented an area of significant risk of material
misstatement given the magnitude of intangible assets and property, plant and equipment. Further, there was a high degree of
estimation uncertainty in determining the fair value of the intangible assets and the property, plant and equipment since the
discounted cash flow model included significant forward-looking assumptions that could be affected by future economic and
market conditions. In addition, significant auditor judgment and specialized skills and knowledge were required in evaluating
the results of our audit procedures due to the sensitivity of the Entity’s determination of the fair value of intangible assets and
property, plant and equipment to minor changes to certain significant assumptions.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the appropriateness of the future cash flows significant assumptions used by the Entity in its valuation
methodologies by:
•
•
Comparing the estimated future electricity production assumption to historical electricity production. We took into
account changes in conditions and events affecting the intangible assets and property, plant and equipment to assess
the adjustments, or lack of adjustments, made by the Entity in arriving at future electricity production.
Comparing the future selling price assumption to long-term power purchase agreements and forecasts specific to the
regions.
Innergex Renewable Energy Inc.
Annual Report 2021
Independent Auditors' Report p94
(in thousands of Canadian dollars, except as noted and amounts per share)
We involved our valuation professionals with specialized skills and knowledge who assisted in:
•
•
Evaluating the appropriateness of discount rates by comparing inputs into the discount rate to publicly available
market data for comparable entities
Evaluating the appropriateness of the valuation models used by the Entity to calculate the fair value of intangible
assets and property, plant and equipment based on the knowledge of the valuation professional.
Evaluation of the impairment analysis for non-financial assets of facilities subject to market price risk exposure
Description of the matter
We draw attention to Notes 2, 3 and 14 to the financial statements. The Entity has property, plant and equipment of
$5,513,392, intangible assets of $1,043,994 and investments in joint ventures and associates of $133,398. A portion of these
non-financial assets are related to facilities that are subject to market price risk exposure.
At the end of each reporting period, the Entity reviews the carrying amounts of its non-financial assets, other than goodwill, to
determine whether there is any indication of impairment. If any such indication exists, the recoverable amount of the asset is
estimated. If the recoverable amount of an asset or cash- generating unit ("CGU") is lower than its carrying amount, the
carrying amount is reduced to its recoverable amount. An impairment loss is recognized immediately in earnings (loss).
Recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the estimated
future cash flows are discounted by the Entity to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or CGU. Future cash flows may be influenced by a
number of assumptions such as selling prices.
Why the matter is a key audit matter
We identified the evaluation of impairment analysis for non-financial assets of facilities subject to market price risk exposure as
a key audit matter. This matter represented an area of significant risk of material misstatement given the magnitude of the non-
financial assets of facilities subject to market price risk exposure and the high degree of estimation uncertainty in determining
the recoverable amount of such non-financial assets. In addition, significant auditor judgement and specialized skills and
knowledge were required in evaluating the results of our audit procedures due to the sensitivity of the Entity’s determination of
recoverable amount to minor changes to significant assumptions.
How the matter was addressed in the audit
The primary procedures we performed to address this key audit matter included the following:
We evaluated the appropriateness of the Entity’s future selling price assumptions by comparing to forecasts specific to the
regions.
We involved valuation professionals with specialized skills and knowledge, who assisted in evaluating the appropriateness of
the Entity’s discount rates assumptions by comparing the inputs into the discount rates to publicly available market data for
comparable entities.
Innergex Renewable Energy Inc.
Annual Report 2021
Independent Auditors' Report p95
(in thousands of Canadian dollars, except as noted and amounts per share)
Other Information
Management is responsible for the other information. Other information comprises:
•
•
the information included in Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions.
the information, other than the financial statements and the auditors’ report thereon, included in a document likely to
be entitled "2021 Annual Report".
Our opinion on the financial statements does not cover the other information and we do not and will not express any form of
assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit and remain alert for indications that the other information appears to be materially misstated.
We obtained the information included in the 2021 Management’s Discussion and Analysis filed with the relevant Canadian
Securities Commissions and the information, other than the financial statements and the auditors’ report thereon, included in
the "2021 Annual Report" as at the date of this auditors’ report. If, based on the work we have performed on this other
information, we conclude that there is a material misstatement of this other information, we are required to report that fact in
the auditors’ report.
We have nothing to report in this regard.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with
International Financial Reporting Standards (IFRS), and for such internal control as management determines is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Entity’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
management either intends to liquidate the Entity or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity’s financial reporting process.
Auditors’ Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with
Canadian generally accepted auditing standards will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Independent Auditors' Report p96
(in thousands of Canadian dollars, except as noted and amounts per share)
As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment
and maintain professional skepticism throughout the audit.
We also:
•
•
•
•
•
•
•
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error,
design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and
appropriate to provide a basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as
fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.
Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Entity's
internal control.
Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by management.
Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the
audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant
doubt on the Entity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are
required to draw attention in our auditors’ report to the related disclosures in the financial statements or, if such
disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to
the date of our auditors’ report. However, future events or conditions may cause the Entity to cease to continue as a
going concern.
Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and
whether the financial statements represent the underlying transactions and events in a manner that achieves fair
presentation.
Communicate with those charged with governance regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we identify during
our audit.
Provide those charged with governance with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may reasonably be
thought to bear on our independence, and where applicable, related safeguards.
Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities
within the group Entity to express an opinion on the financial statements. We are responsible for the direction,
supervision and performance of the group audit. We remain solely responsible for our audit opinion.
Innergex Renewable Energy Inc.
Annual Report 2021
Independent Auditors' Report p97
(in thousands of Canadian dollars, except as noted and amounts per share)
•
Determine, from the matters communicated with those charged with governance, those matters that were
of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. We describe these matters in our auditors’ report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our auditors’ report because the adverse consequences of doing so would
reasonably be expected to outweigh the public interest benefits of such communication.
The engagement partner on the audit resulting in this auditors’ report is Girolamo Cordi.
Montréal, Canada
February 23, 2022
*CPA auditor, CA, public accountancy permit No. A109612
Innergex Renewable Energy Inc.
Annual Report 2021
Independent Auditors' Report p98
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Revenues
Expenses
Operating
General and administrative
Prospective projects
Earnings before the following:
Depreciation
Amortization
Impairment of long term assets
Earnings before the following:
Finance costs
Other net income
Share of losses of joint ventures and associates:
Share of losses, before impairment charges
Share of impairment charges
Change in fair value of financial instruments
Loss before income tax
Income tax (recovery) expense
Net loss
Net loss attributable to:
Owners of the parent
Non-controlling interests
Loss per share attributable to owners:
Basic net loss per share ($)
Diluted net loss per share ($)
Year ended December 31
2020
2021
747,208
613,207
149,106
45,098
27,367
525,637
188,854
66,786
36,986
233,011
252,255
(89,621)
77,280
112,609
92,122
(211,634)
(26,240)
(185,394)
(191,805)
6,411
(185,394)
(1.09)
(1.09)
131,442
42,948
16,708
422,109
178,440
50,086
26,659
166,924
233,143
(65,554)
7,524
—
2,025
(10,214)
18,897
(29,111)
(32,628)
3,517
(29,111)
(0.23)
(0.23)
Notes
5
5
5
14
15
8,14,18
6
7
8
8
9 b)
10
25
11
11
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Consolidated Statements of Earnings (loss) p99
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
(LOSS)
INCOME
g
sNet loss
sForeign currency translation differences for foreign operations
Change in fair value of financial instruments designated as net
Items of comprehensive income (loss) that will be
g
s
subsequently reclassified to earnings:
:
n
g
e
s
investment hedges
g
e
s
flow hedges
g
e
s
associates designated as cash flow hedges
a
xRelated deferred income tax (expense) recovery
s
)Other comprehensive income (loss)
Change in fair value of financial instruments designated as cash
Change in fair value of financial instruments of joint ventures and
s
) Total comprehensive loss
o
: Total comprehensive loss attributable to:
n
tOwners of the parent
t
sNon-controlling interests
Notes
23
9,23
9,23
8,23
23
Year ended December 31
2020
2021
(185,394)
(29,111)
778
(27,032)
7,773
(2,128)
78,652
(89,549)
5,303
(23,277)
69,229
(5,148)
23,142
(100,715)
(116,165)
(129,826)
(130,733)
14,568
(116,165)
(129,093)
(733)
(129,826)
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Consolidated Statements of Comprehensive Income (Loss) p100
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
As at
ASSETS
Current assets
Cash and cash equivalents
Restricted cash
Accounts receivable
Derivative financial instruments
Investment tax credits recoverable
Prepaid and other
Total current assets
Non-current assets
Property, plant and equipment
Intangible assets
Project development costs
Investments in joint ventures and associates
Derivative financial instruments
Deferred tax assets
Goodwill
Other long-term assets
Total non-current assets
Total assets
LIABILITIES
Current liabilities
Accounts payable and other payables
Derivative financial instruments
Current portion of long-term loans and borrowings and other
liabilities
Total current liabilities
Non-current liabilities
Derivative financial instruments
Long-term loans and borrowings
Other liabilities
Deferred tax liabilities
Total non-current liabilities
Total liabilities
SHAREHOLDERS' EQUITY
Equity attributable to owners
Non-controlling interests
Total shareholders’ equity
Total liabilities and shareholders’ equity
December 31, 2021
December 31, 2020
(Note 33)
Notes
12
13
9
14
14
15
16
8
9
10
17
18
19
9
20,21
9
20
21
10
25
166,266
61,659
117,906
17,024
1,200
24,622
388,677
5,513,392
1,043,994
70,829
133,398
39,917
50,484
60,858
94,519
7,007,391
7,396,068
174,364
41,315
517,848
733,527
75,064
4,411,239
414,343
401,215
5,301,861
6,035,388
1,093,112
267,568
1,360,680
7,396,068
161,465
67,477
92,746
9,039
106,353
15,372
452,452
5,053,125
919,323
14,092
446,837
92,040
25,129
63,298
75,302
6,689,146
7,141,598
190,333
72,958
773,439
1,036,730
179,154
4,046,714
397,513
410,555
5,033,936
6,070,666
1,008,854
62,078
1,070,932
7,141,598
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Consolidated Statements of Financial Position p101
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
For the year ended December 31, 2021
Common
share
capital
account
Contributed
surplus
Preferred
shares
Convertible
debentures
Deficit
Accumulated
other
comprehensive
loss
Total
Non-
controlling
interests
Total
shareholders’
equity
Equity attributable to owners
Balance January 1, 2021
4,185 2,026,415 131,069
2,843 (1,043,962)
(111,696) 1,008,854
62,078 1,070,932
Net (loss) earnings
Other comprehensive income
Total comprehensive (loss) income
Common shares issued on July 9, 2021:
upon acquisition (Note 4)
Issuance fees (net of $47 of deferred income tax)
Common shares issued on Sept 3, 2021 :
public offering (Note 22)
Issuance fees (net of $2,282 of deferred income tax)
Common shares issued on private placements
(Note 22)
Issuance fees (net of $25 of deferred income tax)
Business acquisition (Note 4c)
Common shares issued through dividend
reinvestment plan
Buyback of common shares
Share-based payments and Performance Share
Plan
Convertible debentures converted into common
shares and redemption
Shares vested - Performance Share Plan
Shares purchased - Performance Share Plan
Investments from non-controlling interests (Note 25)
Dividends declared on common shares (Note 22)
Dividends declared on preferred shares (Note 22)
Distributions to non-controlling interests (Note 25)
—
—
—
89,437
(129)
201,259
(6,334)
75,396
(70)
—
3,312
(9,002)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
2,073
—
2,330
3,174
(2,622)
—
—
—
—
—
(6,320)
372
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(191,805)
—
(191,805)
—
61,072
61,072
(191,805)
61,072
(130,733)
6,411
8,157
14,568
(185,394)
69,229
(116,165)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
89,437
(129)
201,259
(6,334)
—
—
—
—
89,437
(129)
201,259
(6,334)
75,396
—
75,396
(70)
—
—
8,989
—
—
—
—
—
—
—
—
—
3,312
(9,002)
—
2,073
—
—
—
(24)
—
—
—
—
—
—
—
—
—
—
(132,229)
(5,632)
—
—
—
—
—
—
—
—
2,306
(3,146)
(2,250)
—
—
—
— 196,704
—
—
(14,771)
(132,229)
(5,632)
—
(70)
8,989
3,312
(9,002)
2,073
2,306
(3,146)
(2,250)
196,704
(132,229)
(5,632)
(14,771)
Balance December 31, 2021
360,936 2,022,540 131,069
2,819 (1,373,628)
(50,624) 1,093,112 267,568 1,360,680
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Consolidated Statements of Changes in Shareholders' Equity p102
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’
EQUITY
For the year ended December 31, 2020
Common
shares
capital
account
Contributed
surplus
Preferred
shares
Convertible
debentures
Deficit
Accumulated
other
comprehensive
(loss) income
Total
Non-
controlling
interests
Total
shareholders’
equity
Equity attributable to owners
Balance January 1, 2020
97,215 1,268,311 131,069
2,869
(879,849)
(15,231) 604,384
10,942
615,326
Reclassification of Performance Share Plan (Note 2)
—
6,340
—
—
—
—
6,340
—
6,340
Adjusted balance January 1, 2020
97,215 1,274,651 131,069
2,869
(879,849)
(15,231) 610,724
10,942
621,666
Net (loss) earnings
Other comprehensive loss
Total comprehensive loss
Common shares issued on February 6, 2020:
Private Placement (Note 22)
Issuance fees (net of $672 of deferred income tax)
Business acquisition
Common shares issued through dividend
reinvestment plan
Reduction of capital on common shares (Note 22)
Share-based payments and Performance Share
Plan
Stock options exercised
Convertible debentures converted into common
shares and redemption
Shares vested - Performance Share Plan
Shares purchased - Performance Share Plan
Dividends declared on common shares (Note 22)
Dividends declared on preferred shares (Note 22)
Distributions to non-controlling interests (Note 25)
Balance December 31, 2020
—
—
—
660,870
(1,842)
—
—
—
—
—
—
—
5,474
—
(754,355) 754,355
—
1,900
394
(2,343)
1,391
1,046
(6,008)
—
—
—
(2,148)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(26)
—
—
(32,628)
—
—
(96,465)
(32,628)
(96,465)
3,517
(4,250)
(29,111)
(100,715)
(32,628)
(96,465) (129,093)
(733)
(129,826)
— 660,870
—
660,870
(1,842)
—
—
63,169
(1,842)
63,169
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
5,474
—
1,900
(1,949)
1,365
(1,102)
(6,008)
—
—
—
—
—
—
—
—
—
5,474
—
1,900
(1,949)
1,365
(1,102)
(6,008)
(125,543)
(5,942)
—
(125,543)
— (125,543)
—
(5,942)
—
(5,942)
—
—
4,185 2,026,415 131,069
—
—
—
2,843 (1,043,962)
—
—
(111,696) 1,008,854
(11,300)
62,078
(11,300)
1,070,932
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Consolidated Statements of Changes in Shareholders' Equity p103
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF CASH FLOWS
OPERATING ACTIVITIES
Net loss
Items not affecting cash:
Depreciation and amortization
Impairment of long-term assets
Share of losses of joint ventures and associates
Unrealized portion of change in fair value of financial instruments
Production tax credits and tax attributes allocated to tax equity investors
Other
Finance costs
Finance costs paid
Distributions received from joint ventures and associates
Income tax (recovery) expense
Income tax paid
Effect of exchange rate fluctuations
Changes in non-cash operating working capital items
FINANCING ACTIVITIES
Dividends paid on common and preferred shares
Distributions to non-controlling interests
Investments from non-controlling interests
Increase in long-term debt, net of deferred financing costs
Repayment of long-term debt
Payment of other liabilities
Net proceeds from issuance of common shares
Repurchase of common shares
Payment of payroll withholding on exercise of stock options and Performance
Share Plan
INVESTING ACTIVITIES
Business acquisitions, net of cash acquired
Change in restricted cash
Additions to property, plant and equipment, net
Additions to project development costs
Investments in joint ventures and associates
Change in other long-term assets
Notes
14,15
8,14,18
8
9
7
6
24 b)
8
10
24 a)
24 c)
24 c)
21
4
Year ended December 31
2020
2021
(185,394)
(29,111)
255,640
36,986
189,889
18,502
(91,275)
4,502
252,255
(189,857)
26,072
(26,240)
(5,870)
1,743
286,953
(21,455)
265,498
(131,411)
(14,771)
196,704
1,682,752
(1,568,183)
(4,384)
267,768
(11,252)
(3,146)
414,077
(387,434)
7,886
(250,621)
(38,554)
—
1,669
228,526
26,659
7,524
(8,329)
(64,900)
717
233,143
(185,720)
21,504
18,897
(9,277)
3,240
242,873
(7,765)
235,108
(118,982)
(11,300)
—
983,168
(1,005,864)
(3,841)
658,356
(6,008)
(3,051)
492,478
(161,792)
(22,756)
(518,602)
(32,127)
(277)
9,946
Effects of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Additional information is presented in Note 24.
The accompanying notes are an integral part of these audited consolidated financial statements.
(667,054)
(725,608)
(7,720)
4,801
161,465
166,266
3,263
5,241
156,224
161,465
Innergex Renewable Energy Inc.
Annual Report 2021
Consolidated Statements of Cash Flows p104
(in thousands of Canadian dollars, except as noted and amounts per share)
DESCRIPTION OF BUSINESS
Innergex Renewable Energy Inc. (“Innergex” or the “Corporation”) was incorporated under the Canada Business Corporation
Act on October 25, 2002, and its shares and convertible debentures are listed on the Toronto Stock Exchange. The
Corporation is a developer, acquirer, owner and operator of renewable power-generating and energy storage facilities,
essentially focused on the hydroelectric, wind and solar power sectors. The Corporation's head office is located at 1225 St-
Charles Street West, 10th floor, Longueuil, QC, J4K 0B9, Canada.
These consolidated financial statements were approved by the Board of Directors on February 23, 2022.
1. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE
Statement of Compliance
These consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards (“IFRS”), as issued by the International Accounting Standards Board (“IASB”). The Corporation’s significant
accounting policies are described in Note 2. These policies have been consistently applied to all years presented, unless
otherwise stated.
Basis of Measurement
The consolidated financial statements have been prepared on a historical cost basis, except for certain financial
instruments and assets and liabilities acquired in business combinations that are measured at fair value.
Functional Currency and Presentation Currency
These consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p105
(in thousands of Canadian dollars, except as noted and amounts per share)
2. SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of the Corporation, and the subsidiaries that it controls.
Control exists when the Corporation has the power over the subsidiary, when it is exposed or has rights to variable returns
from its involvement with the subsidiary and when it has the ability to use its power to affect its returns. Subsidiaries that
the Corporation controls are consolidated from the effective date of acquisition up to the effective date of disposal or loss
of control.
Details of the Corporation's significant subsidiaries at the end of the reporting period are set out below.
Name of subsidiaries
Principal activity
Place of
creation and
operation
Proportion of
ownership interest
and voting rights
held by the
Corporation
Harrison Hydro L.P., and its
subsidiaries
Kwoiek Creek Resources L.P. 1
Upper Lillooet Limited Partnership
Innergex Inc.
Big Silver Creek Power Limited
Partnership
Innergex Europe (2015) Limited
Partnership, and its subsidiaries
Innergex Cartier Energy LP
Mountain Air Alternatives LLC, and its
subsidiaries
Own and operate hydroelectric facilities
Canada
Own and operate a hydroelectric facility Canada
Own and operate a hydroelectric facility Canada
Own and operate hydroelectric and wind
Canada
facilities
Own and operate a hydroelectric facility Canada
50.01%
50.00%
100.00%
100.00%
100.00%
Own and operate wind facilities
Canada/Europe
69.55%
Own and operate wind facilities
Canada
Own and operate wind facilities
United States
Mesgi'g Ugju's'n (MU) Wind Farm L.P.1 Own and operate a wind facility
Own and operate a wind facility
Foard City Holdings, LLC
Own and operate a solar facility
Phoebe Energy Project, LLC
Own and operate a solar facility
Hillcrest Solar I, LLC
Own and operate a wind facility
Griffin Trail Wind, LLC
Innergex HQI USA LLC1
Own and operate hydroelectric facilities
Duqueco SpA
Own and operate hydroelectric facilities
Canada
United States
United States
United States
United States
United States
Chile
100.00%
62.25%
50.00%
100.00%
100.00%
100.00%
100.00%
50.00%
100.00%
1. Based on the terms of agreements under which these entities were established, the Corporation is exposed to, and has right to,
variable returns from its involvement with the investee, and has the current ability to direct these entities's activities that most
significantly affect the returns.
Investments in joint ventures and associates
A joint venture is a joint arrangement whereby the parties that have joint control of the arrangement have rights to the net
assets of the joint arrangement. Joint control is the contractually agreed sharing of control of an arrangement, which exists
only when decisions about the relevant activities require unanimous consent of the parties sharing control.
An associate is an entity in which the Corporation has significant influence, but not control, over the financial and
operating policies. Significant influence is presumed to exist when the Corporation holds between 20% and 50% of the
voting power of another entity.
The determination of whether the Corporation has control, joint control or significant influence over an investee requires
the Corporation to make assumptions and critical judgments in evaluating the classification requirements.
The earnings, and assets and liabilities of joint ventures and associates are incorporated in these consolidated financial
statements using the equity method of accounting. Under the equity method, an investment in a joint venture or an
associate is initially recognized in the consolidated statement of financial position at cost and adjusted thereafter to
recognize the Corporation's share of the earnings (loss) and other comprehensive income (loss) of the joint venture or
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p106
(in thousands of Canadian dollars, except as noted and amounts per share)
associate. When the Corporation's share of losses of a joint venture or an associate exceeds the Corporation's interest in
that joint venture or associate (which includes any long-term interest that, in substance, forms part of the Corporation's net
investment in the joint venture), the Corporation discontinues recognizing its share of further losses. Additional losses are
recognized only to the extent that the Corporation has incurred legal or constructive obligations or made payments on
behalf of the joint venture or the associate.
An investment is accounted for using the equity method from the date on which the investee becomes a joint venture or
an associate. On acquisition of the investment in a joint venture or associate, any excess of the cost of the investment
over the Corporation's share of the fair value of the identifiable assets and liabilities of the investee is recognized as
goodwill, which is included within the carrying amount of the investment. Any excess of the Corporation's share of the net
fair value of the identifiable assets and liabilities over the cost of the investment, after reassessment, is recognized
immediately in earnings (loss).
At the end of each reporting period, the Corporation reviews the carrying amounts of its investments in joint ventures and
associates to determine whether there is any indication of impairment. If any such indication exists, the recoverable
amount of the net investment is estimated. Because goodwill that forms part of the carrying amount of a net investment in
an associate or a joint venture is not separately recognized, it is not tested for impairment separately by applying the
requirements for impairment testing of goodwill. Instead, the entire carrying amount of the investment is tested for
impairment as a single asset, by comparing its recoverable amount (higher of value in use and fair value less costs to sell)
with its carrying amount. Any impairment loss recognised in those circumstances forms part of the carrying amount of the
net investment in the associate or joint venture and is not allocated to any asset, including goodwill. Accordingly, any
reversal of that impairment loss is recognised to the extent that the recoverable amount of the net investment
subsequently increases.
The Corporation discontinues the use of the equity method from the date when the investment ceases to be a joint
venture or an associate. When the Corporation retains an interest in the former joint venture or associate and the retained
interest is a financial asset, the Corporation measures the retained interest at fair value at that date and the fair value is
regarded as its fair value on initial recognition in accordance with IFRS 9. The difference between the carrying amount of
the joint venture or associate at the date the equity method was discontinued, and the fair value of any retained interest
and any proceeds from disposing of a part interest in the joint venture or associate is included in the determination of the
gain or loss on disposal of the joint venture or associate. In addition, the Corporation accounts for all amounts previously
recognized in other comprehensive income in relation to that joint venture or associate on the same basis as would be
required if that joint venture or associate had directly disposed of the related assets or liabilities. Therefore, if a gain or
loss previously recognized in other comprehensive income by that joint venture would be reclassified to earnings (loss) on
the disposal of the related assets or liabilities, the Corporation reclassifies the gain or loss from equity to earnings (loss)
(as a reclassification adjustment) when the equity method is discontinued.
Business combinations
Business combinations are accounted for using the acquisition method. The consideration transferred is measured at the
aggregate of the fair values, at the acquisition date, of assets transferred, liabilities incurred or assumed, and equity
instruments issued by the Corporation in exchange for control of the acquiree. Where appropriate, the consideration
transferred includes any asset or liability resulting from a contingent consideration arrangement, measured at its
acquisition-date fair value. Subsequent changes in such fair values are adjusted against the consideration transferred
when they qualify as measurement period adjustments. All other subsequent changes in the fair value of contingent
consideration classified as an asset or liability are accounted for in accordance with the relevant IFRS and reflected
through net earnings. Changes in the fair value of contingent consideration classified as equity are not recognized.
Identifiable assets acquired, as well as liabilities and contingent liabilities assumed in a business combination, are
measured initially at their fair values at the acquisition date, irrespective of the extent of any non-controlling interests
("NCI"). The excess of the aggregate of consideration transferred, the amount of any NCI, and in a business combination
achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in the acquiree over the
fair value of the identifiable net assets acquired is recorded as goodwill in the consolidated statement of financial position.
Any negative goodwill is recognized directly in the consolidated statements of earnings (loss).
Cash and cash equivalents
Cash and cash equivalents include cash on hand, bank balances and short-term investments with original maturities of
three months or less, net of bank overdrafts whenever they are an integral part of the Corporation's cash management
process.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p107
(in thousands of Canadian dollars, except as noted and amounts per share)
Restricted cash and short-term investments
The Corporation holds restricted cash and short-term investments as required under some of its project financings. The
availability of funds in the restricted cash and short-term investments accounts are restricted by various agreements.
Property, plant and equipment
Property, plant and equipment are comprised mainly of hydroelectric, wind farm and solar facilities that are either in
operation or under construction. They are recorded at cost less accumulated depreciation and accumulated impairment
losses, if any.
Property, plant and equipment are depreciated on a straight-line basis over the lesser of (i) the estimated useful lives of
the assets or (ii) the period for which the Corporation owns the rights to the assets. Improvements that increase or extend
the service life or capacity of an asset are capitalized. Maintenance and repair costs are expensed as incurred. Property,
plant and equipment are not depreciated until they are ready for their intended use.
The estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period,
with the effect of any changes in estimate accounted for on a prospective basis.
An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposal or retirement of an item of
property, plant and equipment is determined as the difference between the sale proceeds and the carrying amount of the
asset and is recognized in earnings (loss).
Borrowing costs directly attributable to the acquisition, construction or production of qualifying assets, which are assets
that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those
assets, until such time as the assets are substantially ready for their intended use or sale.
Investment income earned on the temporary investment of specific borrowings pending their expenditure on qualifying
assets is deducted from the borrowing costs eligible for capitalization.
All other borrowing costs are recognized in earnings (loss) in the period in which they are incurred.
The useful lives used to calculate depreciation are summarized as follows:
Type of property, plant and equipment
Hydroelectric facilities
Wind farm facilities
Solar facilities
Other equipments
Leases
Nature of leasing activities
Useful life for the
depreciation period
8 to 75 years
14 to 30 years
15 to 35 years
3 to 10 years
The Corporation typically leases land and offices. Lease agreements are generally made for fixed long-term periods
based on each project's estimated lives at inception. Land leases for a given project are usually negotiated jointly, with
governments for government-owned land, or directly with groups of private landowners for privately-owned land. Office
and other leases are negotiated on an individual basis and contain a wide range of different terms and conditions. Being
negotiated for long-term periods, most land leases provide for additional payments based on changes in inflation. In
addition, leases generally include an option to renew the lease for an additional period after the non-cancellable contract
period. The Corporation assesses at lease commencement whether it is reasonably certain to exercise the extension
options. Generally, the Corporation aligns lease extension option renewals with the estimated life of projects.
Leases are recognized as a right-of-use asset and a corresponding lease liability at the date at which the leased asset is
available for use by the Corporation. Each lease payment is allocated between the lease liability and finance costs. The
finance costs are charged to earnings or loss over the lease period so as to produce a constant periodic rate of interest on
the remaining balance of the liability for each period.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p108
(in thousands of Canadian dollars, except as noted and amounts per share)
(i) Lease liabilities
Lease liabilities are recognized in other liabilities in the consolidated statement of financial position at the present value of
the future lease payments, discounted using the interest rate implicit in the lease. If that rate cannot be determined, the
lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. When
determining the amount of the future lease payments, the Corporation takes the following information into account:
◦ fixed payments, including in-substance fixed payments, less any lease incentives receivable; and
◦ variable lease payments that are based on an index or a rate;
Payments associated with short-term leases and leases of low-value assets are recognized on a straight-line basis as an
expense in earnings or loss. Short-term leases correspond to lease agreements with a term of 12 months or less.
Lease liabilities are subsequently measured at amortized cost using the effective interest method. A remeasurement of the
lease liabilities occur when there is a change in future lease payments arising from a variation in the relevant index or rate.
(ii) Right-of-use assets
Right-of-use assets are recognized in property, plant and equipment in the consolidated statement of financial position at
cost, comprising the amount of the initial measurement of the lease liability, any lease payments made at or before the
commencement date and any initial direct costs.
Right-of-use assets are subsequently depreciated on a straight-line basis over the lesser of (i) the estimated useful lives of
the assets or (ii) the lease term, including, when it is reasonably certain that they will be exercised, options to extend the
lease term. The estimated useful lives of right-of-use assets are determined on the same basis as those of property, plant
and equipment.
Intangible assets
Intangible assets consist of various power purchase agreements, permits, licenses and agreements. Intangible assets are
amortized using the straight-line method over a period ending on the maturity date of the power purchase agreements,
permits, licenses or agreements of each facility. They are recorded at cost less accumulated amortization and
accumulated impairment losses. Amortization starts when the related facility becomes ready for its intended use.
The Corporation recognizes an intangible asset arising from a service concession arrangement when it has the right to
charge for usage of the concession infrastructure. An intangible asset received as consideration for providing construction
or upgrade services in a service concession arrangement is measured at fair value upon initial recognition. Subsequent to
initial recognition, the intangible asset is measured at cost, which includes capitalized borrowing costs, less accumulated
amortization and accumulated impairment losses.
Intangible assets related to facilities under construction are not amortized until the related facilities are ready for their
intended use.
The estimated useful lives and amortization methods are reviewed at the end of each reporting period, with the effect of
any changes in estimates being accounted for on a prospective basis.
The useful lives used to calculate amortization are as follows:
Intangible assets related to:
Hydroelectric facilities
Wind farm facilities
Solar facilities
Project development costs
Useful life for the
amortization period
4 to 75 years
8 to 20 years
20 years
Project development costs are recorded at cost less any impairment losses, as applicable, and represent costs incurred
for the acquisition of prospective projects and for the design and development of hydroelectric, wind farm and solar sites.
Borrowing costs directly attributable to the acquisition or development are capitalized as project development costs.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p109
(in thousands of Canadian dollars, except as noted and amounts per share)
The Corporation defers project development costs when it becomes probable that the project will be completed and that it
will generate future economic benefits that will flow to the Corporation. The Corporation makes this determination by
taking into consideration various factors, either individually or combined, such as (amongst others):
•
•
•
•
whether a project has been granted, or whether it is probable that it will be granted, the required permits;
rights of access to the required land have been secured or it is probable that they will be secured;
the announcement, or the probability thereto, that a prospective project is awarded a power purchase agreement; and
access to an open market if the project is not in a market where it is expected to be awarded a power purchase
agreement.
These costs are transferred to property, plant and equipment or intangible assets at the commencement of construction.
When it is no longer probable that a project will be carried out, the project's development costs deferred to that date are
expensed. Current costs for prospective projects are expensed as incurred.
Impairment of property, plant and equipment, intangible assets and project development costs other than
goodwill
At the end of each reporting period, the Corporation reviews the carrying amounts of its non-financial assets, other than
goodwill, to determine whether there is any indication of impairment. If any such indication exists, the recoverable amount
of the asset is estimated. Where it is not possible to estimate the recoverable amount of an individual asset, assets are
grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely
independent of the cash inflows of other assets or groups of assets (the “cash-generating unit”, or “CGU”). Where a
reasonable and consistent basis of allocation can be identified, corporate assets are also allocated to individual cash-
generating units, or otherwise they are allocated to the smallest group of cash-generating units for which a reasonable
and consistent allocation basis can be identified.
Intangible assets not yet available for use are tested for impairment at least annually, and whenever there is an indication
that the asset may be impaired.
Recoverable amount is the greater of fair value less costs to sell and value in use. In assessing value in use, the
estimated future cash flows are discounted to their present value using a discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset or CGU.
If the recoverable amount of an asset or CGU is lower than its carrying amount, the carrying amount is reduced to its
recoverable amount. An impairment loss is recognized immediately in earnings (loss).
Where an impairment loss subsequently reverses, the carrying amount of the asset or CGU is increased to the revised
recoverable amount, to the extent that the carrying amount does not exceed the carrying amount that would have been
determined had no impairment loss been recognized. A reversal of an impairment loss is recognized immediately in
earnings (loss).
Goodwill
Goodwill arises during business combinations and is measured at the acquisition date. It is subsequently measured at
cost, less accumulated impairment losses (if any).
For purposes of impairment testing, goodwill is allocated to each of the Corporation's CGU (or groups of CGUs) that is
expected to benefit from the synergies of the combination.
A CGU to which goodwill has been allocated is tested for impairment annually, or more frequently when there is indication
that the CGU may be impaired. If the recoverable amount of the CGU is less than its carrying amount, the impairment loss
is allocated first to reduce the goodwill allocated to the CGU and then, to reduce the carrying amounts of the other assets
in the CGU on a pro-rata basis. Any impairment loss is recognized in earnings (loss). An impairment loss recognized for
goodwill is not reversed in subsequent periods.
Other long-term assets
Other long-term assets include security deposits under various agreements, and prepaid royalty fees, reserves, long-term
receivables and long-term investments that are not investments in joint ventures and associates.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p110
(in thousands of Canadian dollars, except as noted and amounts per share)
The Corporation holds three types of reserve accounts designed to help ensure its financial stability. The first is the
hydrology/wind reserve established at the start of commercial operations of a facility to compensate for the variability of
cash flows related to fluctuations in hydrology or wind conditions as well as other unpredictable events. The second is the
major maintenance reserve established in order to prefund any major plant repairs that may be required to maintain the
Corporation's generating capacity. A third reserve is the dismantlement reserve aiming to have sufficient funding available
for the decommissioning of wind farms at the end of the projects.
The reserve accounts are currently invested in cash or in short-term investments having maturities of a year or less as
well as in government-backed securities. The availability of funds in the reserve accounts may be restricted by credit
agreements.
Discontinued operations
A discontinued operation is a component of the Corporation's business that has been disposed of or is classified as held
for sale and that represents a separate major line of business or geographical area of operations and is part of a single
co-ordinated plan to dispose of such a line of business or area of operations. The results of discontinued operations are
presented separately in the consolidated statements of earnings (loss). Comparative figures are adjusted on the
consolidated statements of earnings (loss) and on the consolidated statement of comprehensive income (loss) as if the
operations had been discontinued from the beginning of the comparative period.
Provisions and asset retirement obligations
A provision is a liability of uncertain timing or amount. Provisions are recognized into other liabilities when the Corporation
has a present obligation (legal or constructive) as a result of a past event, it is probable that the Corporation will be
required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. A legal obligation can
arise through a contract, legislation, or other operation of law. A constructive obligation arises from an entity's actions
whereby, through an established pattern of past practice, published policies or a sufficiently specific current statement, the
entity has indicated that it will accept certain responsibilities and has thus created a valid expectation that it will discharge
those responsibilities. The amount recognized as a provision is the best estimate, at each period end, of the expenditures
required to settle the present obligation considering the risks and uncertainties associated with the obligation. Where
expenditures are expected to be incurred in the future, the obligation is measured at its present value using a current
market-based, risk-adjusted interest rate.
Asset retirement obligations are recorded in other liabilities when those obligations are incurred and are measured at the
present value, if a reasonable estimate of the expected costs to settle the liability can be determined, discounted at a
current pre-tax rate specific to the liability. In subsequent periods, the liability is adjusted for changes resulting from the
passage of time and revisions to either the timing or the amount of the original estimate of the undiscounted cash flows or
changes in the discount rate. The accretion of the liability as a result of the passage of time is charged to earnings while
changes resulting from the revisions to either the timing, the amount of the original estimate of the undiscounted cash
flows or a change of the discount rate are accounted for as part of the carrying amount of the related property, plant and
equipment. The carrying amount of the asset retirement obligations is reviewed at each quarter-end to reflect current
estimates and changes in the discount rate.
Financial instruments
The Corporation initially recognizes financial assets on the trade date at which the Corporation becomes a party to the
contractual provisions of the instrument.
Financial assets are initially measured at fair value. If the financial asset is not subsequently accounted for at fair value
through earnings (loss), then the initial measurement includes transaction costs that are directly attributable to the asset’s
acquisition or origination. On initial recognition, the Corporation classifies its financial assets as subsequently measured at
either amortized cost or fair value, depending on its business model for managing the financial assets and the contractual
cash flow characteristics of the financial assets.
(i) Financial assets measured at amortized cost
A financial asset is subsequently measured at amortized cost, using the effective interest method and net of any
impairment loss, if:
•
The asset is held within a business model whose objective is to hold assets in order to collect contractual cash
flows; and
The contractual terms of the financial asset give rise, on specified dates, to cash flows that are solely payments
of principal and/or interest.
•
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p111
(in thousands of Canadian dollars, except as noted and amounts per share)
The Corporation currently classifies its cash and cash equivalents, restricted cash, accounts receivable, investment
tax credits recoverable and reserve accounts recognized in other long-term assets as financial assets measured at
amortized cost.
(ii) Financial assets measured at fair value
These assets are measured at fair value and changes therein, including any interest or dividend income, are
recognized in net earnings unless hedge accounting is used in which case the changes are recognized in other
comprehensive income. Also, for investments in equity instruments that are not held for trading, the Corporation may
irrevocably elect, at initial recognition, to present subsequent changes in the investment’s fair value in other
comprehensive income. For such investments measured at fair value through other comprehensive income, gains
and losses are never reclassified to profit or loss, and no impairment is recognized in profit or loss. Dividends earned
from such investments are recognized in profit or loss, unless the dividend clearly represents a repayment of part of
the cost of the investment. This election is made on an investment-by-investment basis.
The Corporation currently classifies its derivative financial instruments as financial assets measured at fair value.
The Corporation derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or
it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially
all the risks and rewards of ownership of the financial asset are transferred.
Financial liabilities are classified into the following categories:
(i) Financial liabilities measured at amortized cost
Non-derivative financial liabilities are initially recognized at fair value less any directly attributable transaction costs.
Subsequent to initial recognition, these liabilities are measured at amortized cost using the effective interest method.
The Corporation currently classifies its accounts payable and other payables, long-term loans and borrowings, the
lease obligations recognized in other long-term liabilities and its tax equity liabilities as liabilities measured at
amortized cost.
Tax equity liabilities
The Corporation owns and operates certain projects in the U.S. under tax equity structures to finance the construction
of solar and wind projects. Such structures are designed to allocate renewable tax incentives, such as investment tax
credits ("ITCs"), production tax credits ("PTCs") and accelerated tax depreciation, to tax equity investors. Generally,
tax equity structures grant the tax equity investors the majority of the project's U.S. taxable earnings and renewable
tax incentives, along with a smaller portion of the projects' cash flows, until they achieve an agreed-upon after-tax
investment return (the "Flip Point"). The Flip Point dates are generally dependent on the projects' respective
performance. However, from time to time, the Flip Point dates may be contractually determined. Subsequent to the
Flip Point, the Corporation receives the majority of the project's taxable earnings and renewable tax incentives.
When a tax equity partnership is formed, the Corporation assesses whether the project company should be
consolidated based on the Corporation's right to variable returns and its ability to influence financial and operational
decisions impacting those returns. Due to the operational and financial nature of the projects, and the protective
nature of the rights normally given to tax equity investors, the Corporation typically has the influence to consolidate
the entity.
The terms of the tax equity partner's contribution are evaluated to determine the accounting treatment. The
contribution generally has the characteristics of a liability as the initial contribution is repaid, including an agreed upon
return, and the partner does not share in the risks of the project in the same way as a shareholder. As such, the
contribution is accounted for as loans and borrowings on the consolidated statements of financial position and
measured at amortized cost until the Flip date of the project. The amortized cost of the tax equity financing is
generally comprised of the following elements:
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p112
(in thousands of Canadian dollars, except as noted and amounts per share)
Elements affecting amortized cost of the tax equity financing
Description
Production tax credits ("PTC")
Investment tax credits ("ITC")
Taxable income (loss), including tax attributes such as
accelerated tax depreciation
Interest expense
Pay-go contributions
Cash distributions
Allocation of PTCs to the tax equity investor derived
from the power generated during the period and
recognized in other net income as earned and as a
reduction in tax equity financing
Allocation of ITCs to the tax equity investor stemming
from the construction activities and recognized as a
reduction in both the cost of the assets to which they
relate and the tax equity financing
Allocation of taxable income and other tax attributes to
the tax equity investor recognized in other net income
as earned and as a reduction in tax equity financing
Interest expense using the effective interest rate
method recognized in finance costs as incurred and as
an increase in tax equity financing
Additional cash contributions made by the tax equity
investor when the annual production exceeds the
contractually determined threshold, as an increase in
tax equity financing
Cash allocation to the tax equity investor, recognized
as a reduction in tax equity financing
Subsequent to the Flip Point, the tax equity partner will share in the risks and rewards in the project as a shareholder
and will be accounted for as a non-controlling interest.
(ii) Financial liabilities measured at fair value
Financial liabilities at fair value are initially recognized at fair value and are re-measured at each reporting date with
any changes therein recognized in net earnings unless hedge accounting is used in which case the changes are
recognized in other comprehensive income.
The Corporation currently classifies its derivative financial instruments as financial liabilities measured at fair value.
The Corporation derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.
Financial assets and liabilities are offset and the net amount presented in the consolidated statement of financial position
when, and only when, the Corporation has a legal right to offset the amounts and intends either to settle on a net basis or
to realize the asset and settle the liability simultaneously.
Financial instruments are classified in fair value hierarchy levels as follows:
Level 1: valuation based on quoted prices (unadjusted) in active markets to which the entity has access at the
evaluation date for identical assets or liabilities;
Level 2: valuation techniques based on inputs other than quoted prices included in Level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);
Level 3: valuation techniques using inputs for the asset or liability that are not based on observable market data
(unobservable inputs).
The fair value hierarchy requires the use of observable market inputs whenever such inputs exist. A financial instrument is
classified to the lowest level of the hierarchy for which a significant input has been considered in measuring fair value.
The Corporation recognizes transfers between levels of the fair value hierarchy at the end of the reporting period during
which the change has occurred.
Impairment of financial assets
The Corporation estimates the expected credit losses associated with the financial assets accounted for at amortized cost.
The impairment methodology used depends on whether there is a significant increase in the credit risk or not. For trade
receivables, the Corporation measures loss allowances at an amount equal to the lifetime expected credit loss (ECL) as
allowed by IFRS 9 under the simplified method. The Corporation recognizes in earnings (loss), as an impairment gain or
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p113
(in thousands of Canadian dollars, except as noted and amounts per share)
loss, the amount of expected credit losses (or reversal thereof) that is required to adjust the loss allowance at the
reporting date to the required amount.
Hedging relationships
The Corporation enters into derivative financial instruments to hedge its market risk exposures. On initial designation of
new hedges, the Corporation formally documents the relationship between the hedging instruments and hedged items,
including the risk management objectives and strategy in undertaking the hedge transaction, together with the methods
that will be used to assess the effectiveness of the hedging relationship. The Corporation makes an assessment, both at
the inception of the hedge relationship as well as on an ongoing basis, whether the hedging instruments are expected to
be effective in offsetting the changes in the fair value or cash flows of the respective hedged items during the period for
which the hedge is designated.
For a cash flow hedge of a forecasted transaction, the transaction should be highly probable to occur and should present
an exposure to variations in cash flows that could ultimately affect reported net earnings.
Derivatives are recognized initially at fair value, and attributable transaction costs are recognized in net earnings as
incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are accounted for
as described below.
Cash flow hedges
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows attributable to a
particular risk associated with a recognized asset or liability or a highly probable forecasted transaction that could affect
net earnings, the effective portion of changes in the fair value of the derivative is recognized in other comprehensive
income and presented in accumulated other comprehensive income as part of equity. The amount recognized in other
comprehensive income is removed and included in net earnings under the same line item in the consolidated statements
of earnings (loss) as the hedged item, in the same period that the hedged cash flows affect net earnings. Any ineffective
portion of changes in the fair value of the derivative is recognized immediately in net earnings. If the hedging instrument
no longer meets the criteria for hedge accounting, expires or is sold, terminated or exercised, then hedge accounting is
discontinued prospectively. The cumulative gain or loss previously recognized in other comprehensive income remains in
accumulated other comprehensive income until the forecasted transaction affects net earnings. If the forecasted
transaction is no longer expected to occur, then the balance in accumulated other comprehensive income is recognized
immediately in net earnings.
Net investment in foreign operation hedges
The Corporation applies hedge accounting to foreign currency differences arising between the functional currency of the
foreign operation and the Corporation’s functional currency (Canadian dollars).
Foreign currency differences arising on the translation of a financial liability designated as a hedge of a net investment in a
foreign operation are recognized in other comprehensive income to the extent that the hedge is effective, and are
presented within equity in the accumulated other comprehensive income. Any ineffective portion of changes in the
hedging instruments is recognized directly in net earnings. When the hedged part of a net investment is disposed of, the
relevant amount in accumulated other comprehensive income is transferred to the statement of earnings (loss) as part of
the profit or loss on disposal.
Embedded derivatives
Derivatives embedded in non-derivative financial liabilities or non-financial host contracts are treated as separate
derivatives when they meet the definition of a derivative, their risks and characteristics are not closely related to those of
the host contracts and the contracts are not measured at fair value through profit or loss. Derivatives embedded in non-
derivative financial assets are not bifurcated.
Non-controlling interests
Non-controlling interests in the net assets of consolidated subsidiaries are identified separately from the Corporation's
equity therein. The interest of non-controlling shareholders may be initially measured either at fair value of the
consideration received or receivable, or at the non-controlling interest's proportionate share in the recognized amounts of
the acquiree's identifiable net assets. The choice of measurement basis is made on an acquisition by acquisition basis.
Subsequent to acquisition, non-controlling interests consist of the amount attributed to such interests at initial recognition
and the non-controlling interest's share of changes in equity since the date of the acquisition.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p114
(in thousands of Canadian dollars, except as noted and amounts per share)
Revenue recognition
Revenue is recognized as the Corporation satisfies its performance obligation which occurs, upon delivery of electricity at
rates provided for under the PPAs entered into with the purchasing utilities, on the merchant market or upon
compensations from insurance or suppliers for loss of revenues when it is virtually certain that the claim will be received.
Penalties for non-production of electricity are recorded at the time when it is highly probable that the amount will be
payable as a reduction of revenues over the remaining term of the energy sales contract.
Government assistance
Government assistance in the form of subsidies or refundable investment tax credits are recorded in the consolidated
financial statements when there is reasonable assurance that the Corporation complied with all conditions necessary to
obtain the assistance.
The Corporation incurs renewable energy development expenditures, which are eligible for refundable investment tax
credits. The recorded investment tax credits are based on management's estimates of amounts expected to be recovered
and are subject to an audit by the taxation authorities. Investment tax credits for renewable energy development
expenditures are reflected as a reduction in the cost of the assets or expenses to which they relate.
Current United States tax law allows wind energy projects to receive production tax credits that are earned for each MWh
of generation during the first 10 years of the projects' operation, which are recognized in other net income.
Employee benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service
is provided. A liability is recognized for the amount expected to be paid under short-term cash bonus or profit-sharing
plans if the Corporation has a present legal or constructive obligation to pay this amount as a result of past service
provided by the employee, and the obligation can be estimated reliably.
Termination benefits are expensed at the earlier of when the Corporation can no longer withdraw the offer of those
benefits and when the Corporation recognizes costs for a restructuring. If benefits are not expected to be settled wholly
within 12 months of the reporting date, then they are discounted.
Equity-settled share-based payment
Stock option plan
The Corporation measures equity-settled stock option awards using the fair value method. Expense is measured at the
grant date at the fair value of the award and is recognized over the vesting period based on the Corporation's estimate of
the number of options that will eventually vest. Each equity-settled stock option award that vests in installments is
accounted for as a separate award with its own distinct fair value measurement. The fair value of options is amortized to
earnings over the vesting period with an offset to share-based payment in equity. For options that are forfeited before
vesting, the compensation expense that had previously been recognized and the offset to share-based payment in equity
are reversed. When options are exercised, the corresponding share-based payment in equity and the proceeds received
by the Corporation are credited to share capital.
Performance share plan (“PSP”)
The Corporation measures equity-settled awards using the fair value method. The expense is measured at the grant date
at the fair value of the award, based on the Corporation's estimate of the number of performance share rights that will
eventually vest. It is the Corporation's practice to have the fiduciary purchase that same number of shares on the
secondary market at the grant date. The corresponding fair value is debited to common shares capital. The share-based
payment expense is subsequently recognized over the vesting period with a corresponding amount to contributed surplus.
For shares that are forfeited before vesting, the expense that had previously been recognized is reversed. On the vesting
date, each performance share right entitles its holder to one common share of the Corporation with all the reinvested
dividends accrued thereon from the grant date.
Cash settled share-based payment
Under the Corporation’s Deferred Share Unit Plan (the “DSU Plan”), Directors and officers may elect to receive all or any
portion of their compensation in DSUs in lieu of cash compensation. The Corporation's cash-settled share-based
payments are measured at fair value at the grant date with a corresponding liability. Until the liability is settled, the fair
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p115
(in thousands of Canadian dollars, except as noted and amounts per share)
value of the liability is remeasured at the end of each reporting period and at the date of settlement, with any changes in
fair value recognized in earnings (loss). DSUs cannot be redeemed for cash until the Director leaves the Board of
Directors or the officer leaves the Corporation.
Foreign currency translation
The Corporation and its subsidiaries each determine their functional currency based on the currency of the primary
economic environment in which they operate. Transactions denominated in a currency other than the functional currency
of an entity are translated at the exchange rate in effect on the transaction date. The resulting exchange gains and losses
are included in each entity's net earnings in the period in which they arise.
The Corporation's foreign operations are translated to the Corporation's presentation currency, for inclusion in the
consolidated financial statements. Foreign-denominated monetary and non-monetary assets and liabilities of foreign
operations are translated at exchange rates in effect at the end of the reporting period and revenue and expenses are
translated at exchange rates in effect at the transaction date. The resulting translation gains and losses are included in
other comprehensive income (loss) with the cumulative gain or loss reported in accumulated other comprehensive income
(loss). Amounts previously recognized in accumulated other comprehensive income are recognized in earnings when
there is a reduction in the net investment.
The Corporation designates a portion of its foreign exchange forwards to hedge its investment in its Euro functional
currency foreign operations. Translation gains or losses on the portion of the foreign exchange forwards designated as
hedges are included in other comprehensive income with the cumulative gain or loss reported in accumulated other
comprehensive income. The gain or loss relating to the portion of the foreign exchange forwards in excess of the
investment in the foreign subsidiaries is recognized immediately in earnings. Gains and losses on the hedging instrument
relating to the effective portion of the hedge accumulated in the foreign currency translation reserve are reclassified to
earnings in the same way as exchange differences relating to the foreign operations. The Corporation formally documents
these hedges. On a quarterly basis, the Corporation reviews the hedges to ensure that they effectively offset the
translation gains or losses arising from its investment in its Euro functional currency foreign operations.
The exchange rates for the currencies used in the preparation of the consolidated financial statements were as follows:
Exchange rates as at
Average exchange rates for year
December 31, 2021
1.4391
1.2678
December 31, 2020
1.5608
1.2732
2021
2020
1.4336
1.2570
1.5537
1.3030
Euro
US dollar
lncome taxes
Current and deferred income taxes are recognized in earnings except to the extent that they relate to a business
combination, or to items recognized directly in equity or in other comprehensive income (loss).
Current income taxes are the expected taxes on the taxable income or loss for the year, using tax rates enacted or
substantively enacted at the reporting date, and any adjustment to taxes payable in respect of previous years.
Deferred income taxes are recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is measured at the tax
rates that are expected to be applied to temporary differences when they reverse, based on the laws that have been
enacted or substantively enacted at the reporting date.
Deferred income tax is not recognized in respect of subsidiaries for the temporary differences between the carrying
amounts of the investments and the tax basis, unless such differences are expected to reverse in the foreseeable future.
Deferred income tax assets are recognized to the extent that it is probable that taxable profits will be available against
which the deductible temporary differences can be utilized.
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets,
and they relate to income taxes levied by the same taxation authority on the same taxable entity, or on different tax
entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets and liabilities will be
realized simultaneously.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p116
(in thousands of Canadian dollars, except as noted and amounts per share)
Earnings (loss) per share
The Corporation presents basic and diluted earnings per share data for its common shares. Basic earnings (loss) per
share is calculated by dividing net earnings attributable to common shareholders of the Corporation by the weighted
average number of shares outstanding during the period as adjusted by the number of common shares held in trust under
the PSP plan.
The Corporation uses the treasury stock method for calculating diluted earnings (loss) per share. Diluted earnings (loss)
per share is calculated similarly to basic earnings (loss) per share except that the weighted average shares outstanding
are increased to include additional shares from the assumed conversion of convertible debentures and the exercise of
stock options, if dilutive. The number of additional shares is calculated by assuming that convertible debentures were
converted and that outstanding stock options were exercised and that the proceeds from such exercises were used to
acquire shares at the average market price during the year.
Performance Share Plan
During the year ended December 31, 2020, the Corporation proceeded to a change in the method of accounting for its
PSP under IFRS 2, which was previously recorded as a cash-settled share-based compensation plan. Under the revised
methodology, the PSP was reassessed as equity-settled, which resulted in the reclassification of the January 1, 2020 PSP
reserve of $6,340, from accounts payable and other payables, to contributed surplus. The change was applied during the
fourth quarter of 2020 and comparative figures have not been adjusted.
Changes in accounting policies
On January 1, 2021, the Corporation adopted the following new standards and interpretations which did not have a
significant impact on these consolidated financial statements:
Interest Rate Benchmark Reform - Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, and IFRS 16)
On August 27, 2020, the IASB finalized its response to the ongoing reform of inter-bank offered rates and other interest
rate benchmarks by issuing a package of amendments to IFRS Standards. The amendments complement those issued in
2019 as part of Phase 1 amendments and mainly relate to:
• changes to contractual cash flows: a company will not have to derecognize the carrying amount of financial
instruments for changes required by the reform, but will instead update the effective interest rate to reflect the change
to the alternative benchmark rate;
• hedge accounting: a company will not have to discontinue its hedge accounting solely because it makes changes
required by the reform, if the hedge meets other hedge accounting criteria; and
• disclosures: a company will be required to disclose information about new risks arising from the reform and how it
manages the transition to alternative benchmark rates.
The amendments are effective for annual periods beginning on or after January 1, 2021.
Definition of Accounting Estimates (Amendments to IAS 8)
On February 12, 2021, the IASB issued Definition of Accounting Estimates (Amendments to IAS 8).
The amendments introduce a new definition for accounting estimates, clarifying that they are monetary amounts in the
financial statements that are subject to measurement uncertainty. The amendments also clarify the relationship between
accounting policies and accounting estimates by specifying that a company develops an accounting estimate to achieve
the objective set out by an accounting policy. The Corporation early adopted the amendments on January 1, 2021, with no
impact to the consolidated financial statements.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p117
(in thousands of Canadian dollars, except as noted and amounts per share)
New accounting standards and interpretations issued but not yet effective
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements, to clarify the
classification of liabilities as current or non-current. On July 15, 2020, the IASB issued an amendment to defer the
effective date by one year. The amendments are effective for annual periods beginning on or after January 1, 2023. Early
adoption is permitted. The impact for the Corporation is being assessed by management.
Amendments to IAS 16, Property, Plant and Equipment - Proceeds before Intended Use
On May 14, 2020, the IASB issued Property, Plant and Equipment — Proceeds before Intended Use (Amendments to
IAS 16). The amendments prohibit deducting from the cost of an item of property, plant and equipment any proceeds from
selling items produced while bringing that asset to the location and condition necessary for it to be capable of operating in
the manner intended by management. Instead, an entity recognizes the proceeds from selling such items, and the cost of
producing those items, in profit or loss. The amendments are effective for annual reporting periods commencing on or
after January 1, 2022. Early adoption is permitted, however the Corporation did not expect to avail itself of that option. The
application of this standard is not expected to have a material impact for the Corporation.
Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2)
On February 12, 2021, the IASB issued Disclosure Initiative – Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2 Making Materiality Judgements). The key amendments include:
• requiring companies to disclose their material accounting policies rather than their significant accounting policies;
• clarifying that accounting policies related to immaterial transactions, other events or conditions are themselves
immaterial and as such not need to be disclosed
• clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves
material to a company’s financial statements.
The amendments are effective for annual periods beginning on or after January 1, 2023. Early adoption is permitted.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p118
(in thousands of Canadian dollars, except as noted and amounts per share)
3. USE OF JUDGMENTS AND ESTIMATES
Significant estimates and assumptions
The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates. During the reporting periods, management made a number of
estimates and assumptions pertaining primarily to the determination of control, joint control or significant influence over an
investee, fair value calculation of the assets acquired and liabilities assumed in business acquisitions, useful lives,
impairment of assets, asset retirement obligations, fair value of financial assets and liabilities including derivatives, tax
equity financing and effectiveness of hedging relationships. These estimates and assumptions are based on current
market conditions, management's planned course of action and assumptions about future business and economic
conditions. Changes in the underlying assumptions and estimates could have a material impact on the reported amounts.
These estimates are reviewed periodically. If adjustments prove necessary, they are recognized in earnings in the period
in which they are made.
Critical judgments and estimates
Determining control, joint control or significant influence of an investee
The determination of whether the Corporation has control, joint control or significant influence over an investee requires
the Corporation to make assumptions and judgments in evaluating the classification requirements. In particular, the
Corporation exercises judgement in determining whether non-wholly owned subsidiaries are controlled by the Corporation,
which involves assessing: (i) how the decisions about the relevant activities of the investee are made; (ii) whether the
rights of other co-investors are protective or substantive in nature; and (iii) the Corporation's ability to influence the returns
of the investee.
Business acquisition fair value
The Corporation makes a number of estimates when determining the acquisition date fair values of consideration
transferred, assets acquired and liabilities assumed in a business acquisition. Fair values are estimated using valuation
techniques based on discounted future cash flows. Future cash flows may be influenced by a number of assumptions
such as electricity production, duration of the projects, selling prices, costs to operate, capital expenditures, growth rate
and the discount rate. The likelihood of being able to develop future projects is also assessed in respect of the competitive
business environment and the willingness expressed by the governmental authorities to procure additional sources of
energy.
Useful lives of property, plant and equipment and intangible assets
Property, plant and equipment and intangible assets represent a significant proportion of the Corporation's total assets.
The Corporation reviews estimates of the useful lives of property, plant and equipment and intangible assets on an annual
basis and adjusts depreciation on a prospective basis, if necessary.
Impairment of non-financial assets
The Corporation makes a number of estimates when determining the recoverable amount of an asset or a cash-
generating unit using value in use calculations based on discounted future cash flows. Future cash flows may be
influenced by a number of assumptions such as electricity production, duration of the projects, selling prices, costs to
operate, capital expenditures, growth rate and the discount rate.
Asset retirement obligations
The Corporation makes a number of estimates when calculating fair value of the asset retirement obligations that
represent the present value of future remediation costs for various projects. Estimates for these costs are dependent on
labour costs, the effectiveness of remedial and restoration measures, inflation rates, discount rates that reflect a current
market assessment of the time value of money and the risk specific to the obligation, and the timing of the outlays.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p119
(in thousands of Canadian dollars, except as noted and amounts per share)
Financial instruments measured at fair value
In measuring financial instruments at fair value, the Corporation makes estimates and assumptions, including estimates
and assumptions about forward electricity prices, interest rates, credit spreads and exchange rates. See Note 27 –
Financial Risk Management and Fair Value Disclosures for further details.
Tax equity financing
When a tax equity partnership is formed, the Corporation exercises judgement in assessing whether it retains control over
the entity, and in assessing the appropriate classification of the tax equity investor's contribution, which generally bears
the characteristics of a liability as the arrangements are made so that the contribution is repaid over time until the tax
equity investor has attained an agreed-upon rate of return. Judgment is also exercised in assessing the nature of the tax
equity investor's interest after it has attained the agreed-upon rate of return, which generally bears the characteristics of
equity as it retains entitlement to a portion of the partnership's variable returns and shares a residual interest in the net
assets of the partnership.
Tax equity investors generally require a specified allocation of the project's cash distributions and tax attributes such as
production tax credits, investment tax credits and taxable income or loss, including accelerated tax depreciation.
Estimates are made when determining the amount and allocation of cash distributions and tax attributes to the tax equity
investors, which may be influenced by a number of assumptions such as electricity production, selling prices, costs to
operate and tax amounts.
Hedging
The Corporation makes an assessment, both at the inception of the hedge relationship as well as on an ongoing basis,
whether the hedging instruments are expected to be effective in offsetting the changes in the fair value or cash flows of
the respective hedged items during the period for which the hedge is designated.
Specifically, the Corporation may, from time to time, enter into long-term power hedge agreements. As part of determining
fair value, the Corporation makes certain assumptions, estimates and judgments regarding future events. Unobservable
forecast future power prices are inherently subjective and impact the change in fair value recognized in the consolidated
statements of earnings (loss).
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p120
(in thousands of Canadian dollars, except as noted and amounts per share)
4. BUSINESS ACQUISITIONS
a. Acquisition of Curtis Palmer
On October 25, 2021 Innergex and HQI US Holding LLC, a subsidiary of Hydro-Québec, have acquired Curtis Palmer, a
60 MW run-of-river hydroelectric portfolio located in Corinth, New York, consisting of the 12 MW Curtis Mills and 48 MW
Palmer Falls facilities for a total consideration of US$321,556 ($397,347). In addition, the acquisition is subject to an earn-
out provision based on the evolution of the New York Independent System Operator ("NYISO") market pricing during
calendar years 2023 and 2024, limited to US$30,000. Upon closing, the Corporation owns a 50% interest in the Facilities
with Hydro-Québec indirectly owning the remaining 50% interest. This acquisition was financed with the proceeds of the
September 2021 share issuances described in Note 22.
The purchase price has been calculated as follows:
Cash consideration
Working capital adjustment
Contingent consideration
US$
CA$
318,369
18
3,169
321,556
393,409
22
3,916
397,347
The following table reflects the preliminary amounts recognized for the assets acquired and liabilities assumed, on a fair
value basis, at the acquisition date:
Cash and cash equivalents
Accounts receivable
Prepaid and other
Property, plant and equipment
Intangible assets
Accounts payable and other payables
Total net assets
Investment by a non-controlling interest
Net assets acquired
Acquisition accounting
US$
CA$
3,820
3,584
1,870
181,982
130,361
(61)
321,556
159,184
162,372
4,720
4,429
2,311
224,875
161,087
(75)
397,347
196,704
200,643
The fair value of the intangible assets related to power purchase agreements has been established using a with-or-without
approach by calculating the excess of the power purchase agreement prices over the merchant prices for the power
generation that would have otherwise been sold in the market. The fair value of the intangible assets related to operating
licenses and permits, was calculated using a discounted cash flow approach. The fair value of property, plant and
equipment was established using a discounted cash flow approach. The fair value of the non-controlling interest
represents the cash consideration assumed by HQI US Holding LLC.
The acquisition gave rise to transaction costs of $4,190 which were expensed as incurred in other net income in the
consolidated statements of earnings (loss).
Based on the terms of agreements under which this entity is established, the Corporation is exposed to, and has rights to,
variable returns from its involvement with the investee, and has the current ability to direct the entity's activities that most
significantly affect the returns.
The investment was accounted for as a business combination and the results have been included in the consolidated
statements of earnings (loss) since the date of the acquisition. The revenues and net earnings included in the
consolidated statements of earnings (loss) are $15,678 and $6,276, respectively for the 67-day period ended December
31, 2021. Had the acquisition taken place on January 1, 2021, revenues and net earnings for the period from January 1,
2021 to December 31, 2021 would have been $46,600 and $2,452 higher, respectively.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p121
(in thousands of Canadian dollars, except as noted and amounts per share)
b. Acquisition of Licán
The Corporation acquired an 18 MW run-of-river hydro facility in Chile (“Licán”), on August 3, 2021, for an aggregate
consideration of US$17,655 ($22,148).
The purchase price has been calculated as follows:
Cash consideration
Working capital adjustment
Contingent consideration
US$
CA$
16,563
92
1,000
17,655
20,778
115
1,255
22,148
The following table reflects the preliminary amounts recognized for the assets acquired and liabilities assumed, on a fair
value basis, at the acquisition date:
Cash and cash equivalents
Restricted cash
Accounts receivable
Prepaid and other
Property, plant and equipment
Intangible assets
Deferred tax assets
Accounts payable and other payables
Long-term debt
Deferred tax liability
Net assets acquired
Acquisition accounting
US$
CA$
342
274
1,196
5
37,076
1,093
4,491
(474)
(26,000)
(348)
17,655
429
344
1,500
6
46,512
1,371
5,634
(594)
(32,617)
(437)
22,148
The acquisition gave rise to transaction costs of $88 which were expensed as incurred in other net income in the
consolidated statements of earnings (loss).
The investment was accounted for as a business combination and the results have been included in the consolidated
statements of earnings (loss) since the date of the acquisition. The revenues and net earnings included in the
consolidated statements of earnings (loss) are $4,435 and $2,230, respectively for the 150-day period ended December
31, 2021. Had the acquisition taken place on January 1, 2021, revenues and net earnings for the period from January 1,
2021 to December 31, 2021 would have been $4,073 and $855 higher, respectively.
c. Acquisition of remaining interests in Energía Llaima
Innergex has entered into a stock purchase agreement pursuant to which it has acquired, effective July 9, 2021, the
remaining 50% interest in Energía Llaima SpA (“Energía Llaima”), a renewable energy company based in Chile, of which
Innergex already owned 50%, for an aggregate consideration of US$75,000 ($94,012), which includes a contingent
consideration of US$3,650 ($4,575).
As a consideration for this transaction, Innergex has issued to Energía Llaima’s shareholders the number of Innergex
common shares for an aggregate value of US$71,350 ($89,437) at a price per share equal to the 10-day volume weighted
average price prior to the closing of the acquisition, for a total of 4,048,215 shares issued.
Concurrently with the closing of the financing, the corporation issued 1,148,050 common shares, for total proceeds of
$25,325, in order for Hydro-Québec to maintain its 19.9% ownership.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p122
(in thousands of Canadian dollars, except as noted and amounts per share)
The purchase price has been calculated as follows:
Shares issued
Contingent consideration
US$
CA$
71,350
3,650
75,000
89,437
4,575
94,012
The following table reflects the preliminary amounts recognized for the assets acquired and liabilities assumed, on a fair
value basis, at the acquisition date:
Cash and cash equivalents
Restricted cash
Accounts receivable
Prepaid and other
Property, plant and equipment
Intangible assets
Project development costs
Derivative financial instruments
Deferred tax assets
Other long-term asset
Accounts payable and other payables
Long-term loans and borrowings
Other liabilities
Deferred tax liabilities
Non-controlling interests
Total net assets
Previously held equity interest
Net assets acquired
Acquisition accounting
US$
CA$
17,344
1,156
10,331
494
202,673
35,046
13,097
2,184
21,924
7,076
(10,143)
(130,744)
(1,619)
(11,648)
(7,171)
150,000
75,000
75,000
21,741
1,449
12,950
619
254,051
43,930
16,417
2,738
27,482
8,870
(12,714)
(163,888)
(2,030)
(14,601)
(8,989)
188,025
94,013
94,012
The fair value of the intangible assets related to power purchase agreements has been established using a with-or-without
approach by calculating the excess of the power purchase agreement prices over the merchant prices for the generation
that would have otherwise been sold in the market. The fair value of the intangible assets related to operating licenses
and permits, was calculated using a discounted cash flow approach. The fair value of property, plant and equipment was
established using a discounted cash flow approach.
The acquisition gave rise to transaction costs of $265 which were expensed as incurred in other net income in the
consolidated statements of earnings (loss).
The investment was accounted for as a business combination and the results have been included in the consolidated
statements of earnings (loss) since the date of the acquisition. The revenues and net loss included in the consolidated
statements of earnings (loss) are $18,260 and $309, respectively for the 175-day period ended December 31, 2021. Had
the acquisition taken place on January 1, 2021, revenues and net loss for the period from January 1, 2021 to December
31, 2021 would have been $12,472 and $3,415 higher, respectively.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p123
(in thousands of Canadian dollars, except as noted and amounts per share)
5. EXPENSES BY NATURE
Operating, general and administrative and prospective projects expenses, as reported in the consolidated statements
of earnings (loss), have been grouped by nature of expenses as follows:
Operation and maintenance
Salaries and benefits
Property taxes and royalties
Prospective expenses
Insurance
Professional fees
Other expenses
Administrative expenses
Year ended December 31
2021
2020
85,243
46,163
41,301
17,028
13,076
8,560
8,338
1,862
72,733
39,615
41,764
8,844
10,503
8,889
6,711
2,039
Total of Operating, General and Administrative and Prospective
Projects
221,571
191,098
6. FINANCE COSTS
Interest expense on long-term corporate and project loans
Interest expense on tax equity financing
Interest expense on convertible debentures
Inflation compensation interest
Amortization of financing fees
Accretion expenses on other liabilities
Interest on lease liabilities
Other
Accretion of long-term loans and borrowings
Interest income on preferred shares of equity-accounted investees
Year ended December 31
2021
2020
176,945
27,020
13,642
12,504
8,308
5,479
4,371
4,275
344
(633)
252,255
171,877
25,169
13,800
1,797
9,453
5,112
4,040
5,377
1,493
(4,975)
233,143
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p124
(in thousands of Canadian dollars, except as noted and amounts per share)
7. OTHER NET INCOME
Production tax credits income
Tax attributes allocated to tax equity investors income
Liquidated damages income
Transaction costs related to business acquisitions
Professional and other fees - February 2021 Texas Events
Loss on repayment of loans
Realized loss on contingent considerations
Restructuring costs
Other income, net
Year ended December 31
2021
2020
(47,985)
(43,290)
(1,819)
4,543
1,348
1,317
547
—
(4,282)
(89,621)
(43,850)
(21,050)
(5,762)
1,664
—
—
3,021
1,157
(734)
(65,554)
Professional and other fees - February 2021 Texas Events
During February 2021, the Corporation's facilities in Texas experienced unprecedented extreme winter weather conditions,
which had an impact on their ability to produce electricity. While some power generation continued throughout the events,
the combined effect of supply interruptions, abnormal market pricing conditions and contractual obligations to supply a
predetermined hourly generation under the power hedges, had a net unfavourable impact at the Corporation's Flat Top
wind facility in Mills County, the Shannon wind facility in Clay County, and the Phoebe solar facility located in Winkler
County.
The professional and other fees represent mainly legal fees incurred following the February 2021 Texas Events for the
year ended December 31, 2021.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p125
(in thousands of Canadian dollars, except as noted and amounts per share)
8. INVESTMENTS IN JOINT VENTURES AND ASSOCIATES
8.1 Details of material joint ventures and associates
Joint ventures and
associates
Principal activity
Place of creation
and principal
place of operation
Proportion of ownership interest and
voting rights held by the Corporation
December 31, 2021 December 31, 2020
Energía Llaima 2
Toba Montrose
Shannon
Flat Top 1,3
Dokie
Jimmie Creek 1
Umbata Falls
Viger-Denonville
Innavik
Own and operate three
hydroelectric facilities and a solar
facility
Own and operate two hydroelectric
facilities
Own and operate a wind facility
Own and operate a wind facility
Own and operate a wind facility
Own and operate a hydroelectric
facility
Own and operate a hydroelectric
facility
Own and operate a wind facility
Develop and construct a
hydroelectric facility
Chile
British Columbia
Texas
Texas
British Columbia
British Columbia
Ontario
Quebec
Quebec
100% 2
40 %
50 %
—
25.5 %
50.99 %
49 %
50 %
50 %
50 %
40 %
50 %
51 %
25.5 %
50.99 %
49 %
50 %
50 %
1. The Corporation does not consolidate these entities as it does not control the decision making.
2. The Corporation has acquired, effective July 9, 2021 the remaining 50% interest in Energía Llaima. Please refer to Note 4 -
Business acquisitions.
3. Effective December 28, 2021, the Corporation disposed of its ownership interests in Flat Top.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p126
(in thousands of Canadian dollars, except as noted and amounts per share)
The summarized financial information below represents amounts shown in the joint ventures' and associates' financial statements prepared in accordance with IFRS
adjusted for fair value adjustments at acquisition and differences in accounting policies.
Summary Statements of Earnings (Loss) and Comprehensive Income (Loss)
Year ended December 31, 2021
Revenues
14,123
72,287
68,908
20,271
40,809
23,457
5,921
10,583
256,359
Energía Llaima
(189-day period)
Toba
Montrose
Shannon
(90-day period)
Flat Top
(90-day period)
Dokie
Jimmie
Creek
Umbata Falls
Viger-
Denonville
Total
Operating, general and
administrative expenses
Finance costs
Production tax credits
Tax attributes allocated to
tax equity investors
Other net expenses
(income)
Depreciation and
amortization
Impairment of property,
plant and equipment
Unrealized portion of
change in fair value of
financial instruments
Realized portion of
change in fair value of
financial instruments
Income tax recovery
Net (loss) earnings
Other comprehensive
income
Total comprehensive
(loss) income
Net (loss) earnings
attributable to Innergex
Other comprehensive
income attributable to
Innergex
Total
5,828
8,295
3,248
—
—
760
16,399
55,888
22,887
—
—
(98)
2,770
66,138
3,459
(5,533)
745
506
2,174
18,097
3,734
(6,406)
186
448
9,369
31,440
6,367
—
—
(725)
3,620
19,837
9,302
—
—
17
2,012
3,909
2,434
—
—
96
1,236
9,347
2,890
—
—
43
43,408
212,951
54,321
(11,939)
931
1,047
6,064
19,852
3,257
3,628
14,031
4,289
4,003
2,751
57,875
—
—
117,702
105,408
—
—
—
—
223,110
—
697
—
—
—
—
(2,755)
(629)
(2,687)
—
(145)
(1,632)
—
114,615
143,380
—
12,550
—
(168,613)
—
(232,281)
—
—
11,767
—
—
6,229
—
—
131
—
257,995
—
4,292
(145)
(367,557)
—
10,872
—
—
—
—
—
1,909
12,781
(1,632)
23,422
(168,613)
(232,281)
11,767
6,229
131
6,201
(354,776)
(522)
5,018
(84,306)
(118,463)
3,000
3,176
65
2,143
(189,889)
—
(522)
4,348
9,366
—
(84,306)
—
(118,463)
—
3,000
—
3,176
—
65
955
3,098
5,303
(184,586)
1.For the 189-day period ended July 8, 2021, net loss attributable to the owners of Energía Llaima was $1,043 ($9,345 in 2020) and net loss attributable to non-controlling interests was
$589 ($2,126 in 2020).
Innergex Renewable Energy Inc.
Annual report 2020
Notes to the Consolidated Financial Statements p127
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Earnings (Loss) and Comprehensive Income (Loss)
Energía
Llaima
Toba
Montrose
Shannon
Flat Top
Dokie
Jimmie
Creek
Umbata
Falls
Viger-
Denonville
Innavik
Total
Year ended December 31, 2020
46,524
77,602
12,808
16,620
42,569
20,133
7,834
11,554
—
235,644
15,956
17,371
11,419
11,302
9,258
3,401
1,677
1,675
730
72,789
30,568
10,037
—
60,231
23,268
—
1,389
14,562
(23,231)
5,318
16,599
(29,433)
33,311
6,831
—
16,732
9,342
—
6,157
1,949
—
9,879
3,107
—
(730)
—
—
162,855
85,695
(52,664)
—
—
392
462
—
—
—
—
(25)
829
8,482
(158)
1,315
(4)
(295)
(25)
444
(38)
14,874
20,799
13,250
15,971
14,270
4,176
3,991
2,730
—
—
—
8,646
(11,471)
—
44
—
16,278
(9,537)
5,118
—
(10,017)
—
24,680
—
(22,957)
—
—
—
12,505
—
—
—
3,239
—
2,931
—
(3,158)
—
(422)
—
4,502
(2,666)
1,685
—
(2,390)
—
9,721
90,061
34,036
8,646
(13,469)
(12,203)
(11,471)
6,741
(10,017)
(22,957)
12,505
3,239
(3,158)
1,836
(2,390)
(25,672)
(4,673)
6,511
(5,009)
(11,708)
3,189
1,652
(1,547)
2,251
1,810
(7,524)
—
(4,673)
(3,815)
2,696
—
(5,009)
—
(11,708)
—
3,189
—
1,652
—
(1,547)
(1,333)
918
—
1,810
(5,148)
(12,672)
Revenues
Operating, general and
administrative expenses
Finance costs
Production tax credits
Tax attributes allocated to
tax equity investors
Other net expenses
(income)
Depreciation and
amortization
Change in fair value of
financial instruments
Income tax expense
Net (loss) earnings
Other comprehensive loss
Total comprehensive (loss)
income
Net (loss) earnings
attributable to Innergex
Other comprehensive
income attributable to
Innergex
Total
Innergex Renewable Energy Inc.
Annual report 2020
Notes to the Consolidated Financial Statements p128
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Financial Position
As at December 31, 2021
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Partner's equity interest (deficit)
Toba Montrose
Dokie
Jimmie Creek
Umbata Falls
Viger-Denonville
Innavik
31,338
691,581
722,919
418,462
120,700
183,757
722,919
14,767
199,962
214,729
112,269
15,456
87,004
214,729
9,995
219,012
229,007
169,279
165
59,563
229,007
1,300
44,912
46,212
5,663
30,316
10,233
46,212
3,810
48,276
52,086
5,640
42,680
3,766
52,086
15,963
101,631
117,594
20,607
102,888
(5,901)
117,594
Reconciliation of the above summarized financial information to the carrying amount of the interest in the joint ventures and associates recognized in the consolidated
financial statements:
Energía
Llaima
108,977
(94,013)
(522)
For the year ended December 31, 2021
Toba
Montrose Shannon
Flat Top
Dokie
Jimmie
Creek
Umbata
Falls
Viger-
Denonville
Innavik 1
Others
Total
Balance January 1, 2021
Business acquisition (Note 4)
Share of (loss) earnings
Share of other comprehensive
income
Impairment of equity
accounted investment
Foreign currency translation
differences
Distributions received
Balance December 31, 2021
72,533
—
5,018
84,490 118,651
—
(84,306) (118,463)
—
23,900
—
3,000
32,572
—
3,176
4,950
—
65
381
—
2,143
—
4,348
(6,314)
—
(2,065)
(6,063)
—
—
(8,400)
73,499
—
—
(184)
—
—
—
—
—
—
—
—
—
—
955
—
(188)
—
—
—
(4,654)
22,246
—
(5,355)
30,393
—
—
5,015
—
(1,600)
1,879
—
—
—
—
—
—
—
—
383 446,837
(94,013)
—
— (189,889)
—
5,303
—
(6,314)
(17)
—
(2,454)
(26,072)
366 133,398
1.Unrecognized share of loss of $2,951 in Innavik for the year ended December 31, 2021.
Innergex Renewable Energy Inc.
Annual report 2020
Notes to the Consolidated Financial Statements p129
(in thousands of Canadian dollars, except as noted and amounts per share)
As at December 31, 2020
Energía
Llaima
Toba
Montrose
Shannon
Flat Top
Dokie
Jimmie
Creek
Umbata
Falls
Viger-
Denonville
Innavik
Current assets
Non-current assets
57,011
500,573
557,584
31,216
710,886
742,102
32,500
342,995
375,495
9,308
453,659
462,967
18,089
213,872
231,961
8,520
223,301
231,821
Current liabilities
Non-current liabilities
Partner's equity (deficit) interest
Non-controlling interests
14,479
210,225
271,273
61,607
18,397
542,369
181,336
—
45,360
161,432
168,703
—
37,012
193,307
232,648
—
9,140
129,095
93,726
—
3,955
163,988
63,878
—
2,012
49,178
51,190
5,614
35,475
10,101
—
3,841
50,743
54,584
43,647
10,175
762
—
44,808
53,961
98,769
9,062
95,717
(6,010)
—
557,584
742,102
375,495
462,967
231,961
231,821
51,190
54,584
98,769
Reconciliation of the above summarized financial information to the carrying amount of the interest in the joint venture recognized in the consolidated financial
statements:
Balance January 1, 2020
Increase in investment
Share of (loss) earnings
Share of other comprehensive
loss
Impairment of equity accounted
investment
Foreign currency translation
differences
Distributions received
Balance December 31, 2020
Energía
Llaima
142,266
—
(4,673)
Toba
Montrose
78,237
—
6,511
For the year ended December 31, 2020
Shannon
Flat Top
Dokie
Jimmie
Creek
Umbata
Falls
Viger-
Denonville
Innavik
Others
Total
91,388 135,205 24,600 33,266
—
1,652
—
(5,009) (11,708)
—
3,189
—
7,794
—
(1,547)
863
—
2,251
(1,810)
—
1,810
90 511,899
277
(7,524)
277
—
—
(3,815)
(26,659)
—
—
—
—
—
—
—
—
—
—
(1,333)
—
—
(1,957)
—
108,977
—
(8,400)
72,533
(1,171)
(718)
—
(2,346)
84,490 118,651 23,900 32,572
(1,392)
(3,454)
—
(3,889)
—
(1,297)
4,950
—
(1,400)
381
—
—
—
—
—
—
(5,148)
— (26,659)
16
(4,504)
— (21,504)
383 446,837
Innergex Renewable Energy Inc.
Annual report 2020
Notes to the Consolidated Financial Statements p130
(in thousands of Canadian dollars, except as noted and amounts per share)
Flat Top and Shannon
In February 2021, unprecedented extreme winter weather conditions and related electricity market failure paralyzed
the State of Texas, United States (the “February 2021 Texas Events”). The storm disturbed production, transmission
and distribution of power, severely impacting prices. Because of the disturbance, wholesale electricity prices in the
Electric Reliability Council of Texas (“ERCOT”) reached their cap of US$9,000 per MWh and remained at such level
for a prolonged period of time. The February 2021 Texas Events lasted from February 11 to February 19, 2021.
Depressed power generation, combined with the unprecedented increase in merchant market prices, yielded
important losses, due to the committed hourly volumes under the projects’ respective power hedges.
i) Impairment
Following the February 2021 Texas Events, which caused important losses for facilities under power hedge contracts,
a general increase in the assessed risk has been observed throughout the industry for facilities subject to shape risk1
in this region. These factors contributed to increase discount rates to reflect higher risk premiums. During the first
quarter ended March 31, 2021, the Flat Top and Shannon joint ventures, each identified as separate cash generating
units ("CGU"), recognized impairment charges of US$83,005 ($105,408) and US$92,686 ($117,702), respectively.
The impairment charges were recognized by the Corporation through its share of loss of joint ventures and
associates, at USD$42,333 ($53,758) and USD$46,343 ( $58,851), for Flat Top and Shannon, respectively.
The recoverable amount of each CGU was determined based on a value in use calculation which uses cash flow
projections based on financial budgets approved by management covering a period extending to the period for which
the Corporation owns its rights on the site, and discounted at a rate of 12%.
Key assumptions used to determine the recoverable amount of assets are the following:
•
the discount rate considers the weighted average between the consolidated cost of debt and the consolidated cost
of equity, adjusted with alpha factors specific to the operating segment and country in which the facility operates;
the expected selling price of electricity once the power purchase agreements and power hedges are renewed, or
on the spot market;
a cash-generating unit is an individual facility; and
the future expected cash flows are based on the budgets before debt service and income tax of each cash-
generating unit. The budgets have been built using long-term averages of expected production. These long-term
averages are expected to approximate actual results.
•
•
•
1. Shape risk exists when there is a mismatch, or a potential mismatch, between the volume commitment under a power hedge
instrument, and the actual production of the facility at a given time. For various reasons, it may happen that a facility's electricity
output at a given time is below the contractual volume. In such instance, the project cannot fully cover its hub purchases with its
node sales and is therefore exposed to merchant prices on its purchases at the hub.
ii) Classification as held for sale and disposition of Flat Top
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of
the power hedges of the Flat Top and Shannon facilities in February, which were rejected by the recipient. To
preserve the Corporation’s and its partners’ rights with regard to the Flat Top and Shannon facilities, court
proceedings were initiated on April 21, 2021. On May 20, 2021, the District Court of Harris County, Texas denied the
temporary injunction application, directing the counterparty to the power hedges for the Flat Top and Shannon wind
facilities to suspend all remedies against the projects, including foreclosure, arising from an alleged default of
payment that was formally disputed by Innergex, following the February 2021 Texas Events. As a result of the Court’s
decision, the counterparty to the power hedges for the projects are not precluded from exercising any of its remedies,
including foreclosure.
During the year ended December 31, 2021, the underlying assets and liabilities of the Flat Top and Shannon
investments were classified as disposal groups held for sale. On December 28, 2021, the Corporation completed the
sale of its 51% interest in Flat Top for a non-material purchase price. The underlying assets and liabilities of the
Shannon investment remain held for sale as at December 31, 2021, as the carrying amount of its Class B shares will
be recovered principally through a sale transaction. As required, the disposal groups are measured at the lower of
their respective carrying amounts and fair values less costs to sell, which is estimated to be nil, on a net basis, as at
December 31, 2021.
Innergex Renewable Energy Inc.
Annual report 2020
Notes to the Consolidated Financial Statements p131
(in thousands of Canadian dollars, except as noted and amounts per share)
Energia Llaima
The Corporation has acquired, effective July 9, 2021 the remaining 50% interest in Energía Llaima. Please refer to
Note 4 - Business acquisitions. As required in business a combination achieved in stages, the previously held
interest in the acquiree held immediately before obtaining control was remeasured to fair value at the date of
acquisition. As such, the Corporation recognized an impairment charge of US$5,207 ($6,314).
Toba Montrose, Dokie and Jimmie Creek
The Toba Montrose, Dokie and Jimmie Creek facilities were in breach of their respective credit agreements due to a
non respect of a specific requirement of the insurance clause. The portion of the project loans that would otherwise
be classified as long-term was reclassified to the current portion of long-term loans and borrowings. Ongoing dialogue
and reporting are provided to the facility lenders until this situation is resolved.
8.2 Commitments of joint ventures and associates
As at December 31, 2021, the Corporation's share of the expected schedule of commitment payments for joint
ventures and associates are as follows:
Year of expected payment
Purchase obligations
Under 1 year
1 to 5 years
Thereafter
Total
5,893
30,987
89,898
126,778
Innergex Renewable Energy Inc.
Annual report 2020
Notes to the Consolidated Financial Statements p132
(in thousands of Canadian dollars, except as noted and amounts per share)
9. DERIVATIVE FINANCIAL INSTRUMENTS
a) Financial position
The following table shows a reconciliation from the opening balances to the closing balances for the derivative financial
instruments (refer to Note 27 – Financial risk management and fair value disclosures for details about key inputs,
judgements, assumptions and estimates involved in calculating fair values):
Financial assets (liabilities)
Foreign
exchange
forwards
(Level 2)
Interests
hedging
derivatives
(Level 2)
Power
hedges
(Level 3)
Currency
translation
of
intragroup
loans1
Total
As at January 1, 2021
Business acquisitions (Note 4)
(37,113)
(168,002)
54,082
—
(151,033)
—
2,738
—
2,738
Unrealized portion of change in fair value recognized
in earnings (loss) 2
Change in fair value recognized in other
comprehensive income (loss)
31,825
3,488
(36,412)
(17,403)
(18,502)
7,773
81,989
(3,337)
—
86,425
Amortization of accumulated other comprehensive
income recognized in revenue
Net foreign exchange differences
As at December 31, 2021
—
—
—
3,337
—
3,337
1,305
(1,111)
17,403
17,597
2,485
(78,482)
16,559
—
(59,438)
1. A loss of $17,403 results from the revaluation, into Canadian dollars, of foreign currency-denominated intragroup loans. On
consolidation, although the intragroup loans are eliminated from the consolidated statement of financial position, the foreign
subsidiaries' financial positions, including their loan balances towards the Corporation, are converted into Canadian dollars, with
currency translation differences being recorded within other comprehensive income (loss), therefore not eliminating the loss recognized
in earnings (loss).
2. Refer to Note 9 b) for a reconciliation to the change in fair value recognized in earnings (loss).
Financial assets (liabilities)
Foreign
exchange
forwards
(Level 2)
Interests
hedging
derivatives
(Level 2)
Power and
basis
hedges
(Level 3)
Currency
translation
of
intragroup
loans1
Total
As at January 1, 2020
Business acquisitions
Unrealized portion of change in fair value recognized
in earnings (loss) 2
Change in fair value recognized in other
comprehensive income (loss)
Amortization of accumulated other comprehensive
income recognized in revenue
Net foreign exchange differences
As at December 31, 2020
(24,269)
—
(83,536)
(2,070)
27,757
26,308
—
—
(80,048)
24,238
(10,716)
2,839
2,664
13,542
8,329
(2,128)
(86,085)
(3,464)
—
(91,677)
—
—
—
3,464
—
3,464
850
(2,647)
(13,542)
(15,339)
(37,113)
(168,002)
54,082
—
(151,033)
No transfer between level 2 and level 3 during the years ended December 31, 2021 and December 31, 2020.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p133
(in thousands of Canadian dollars, except as noted and amounts per share)
Reported in the consolidated statements of financial position:
As at
Current assets
Non-current assets
Current liabilities
Non-current liabilities
December 31, 2021
December 31, 2020
17,024
39,917
(41,315)
(75,064)
(59,438)
9,039
92,040
(72,958)
(179,154)
(151,033)
b) Change in fair value of financial instruments recognized in the consolidated statements
of earnings (loss)
Recognized in the consolidated statements of earnings (loss):
Unrealized portion of change in fair value of financial instruments
18,502
(8,329)
Year ended December 31
2021
2020
Realized portion of financial instruments:
Realized loss on the interest rate swaps
Realized loss (gain) on the power hedges
Realized (gain) loss on Phoebe basis hedge
Change in fair value of financial instruments
2,508
73,658
(2,546)
92,122
—
(9,232)
19,586
2,025
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p134
(in thousands of Canadian dollars, except as noted and amounts per share)
10. PROVISION FOR INCOME TAXES
a. Income taxes recognized in the consolidated statements of earnings (loss)
The following table summarizes the reconciliation of the income tax expense calculated at the Canadian statutory
income tax rate and the income tax expense recognized in the consolidated statements of earnings (loss):
Loss before income taxes
Canadian statutory income tax rate
Income tax expense calculated at the statutory rate
Items affecting the statutory rate:
Non-taxable income
Change in classification of assets held for sale
Deferred tax asset not recognized on impairment of investment
Effect of previously unrecognized tax losses balances used in
the year
Amounts attributable to Tax Equity Investors
Change in deferred tax assets not recognized
Income taxable at a different rate than the Canadian statutory
rate
Decrease in deferred income tax rates
(Decrease) increase in taxable temporary differences in relation
to investments in subsidiaries and in joint ventures
Tax on dividends on preferred shares
Adjustments recognized in the current year in relation to the
current tax of prior years
Adjustments recognized in the current year in relation to the
deferred tax of prior years
Income tax on earnings allocated to minority interests on non-
taxable entities
Others
Provision for income taxes recognized in the current year
Current income taxes
Deferred income taxes
December 31, 2021
December 31, 2020
(211,634)
26.6 %
(56,295)
(10,214)
26.6 %
(2,717)
(23,037)
(50,391)
1,525
(1,501)
75,444
13,558
11,037
(2,943)
2,416
147
742
5,082
(4,342)
2,318
(26,240)
3,776
(30,016)
(329)
—
7,091
(344)
20,141
(192)
(1,317)
(314)
(568)
35
(306)
(938)
(2,149)
804
18,897
7,326
11,571
The tax rate used for 2021 and 2020 reconciliations above is the average combined corporate tax rate payable by
corporate entities in Canada on taxable profits under federal and provincial tax laws.
b. Deferred income tax balances
The following is the analysis of deferred income tax assets (liabilities) presented in the consolidated statements of
financial position:
Assets
Liabilities
December 31, 2021
December 31, 2020
50,484
(401,215)
(350,731)
25,129
(410,555)
(385,426)
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p135
(in thousands of Canadian dollars, except as noted and amounts per share)
As at January 1,
2021
Recognized in
statement of
earnings
Recognized in
other
comprehensive
loss
Acquired in
business
acquisition
Recognized
directly in
equity
Net exchange
differences
As at December
31, 2021
Deferred income tax assets (liabilities) in
relation to:
Property, plant and equipment
Intangible assets
Project development costs
Investments into subsidiaries and in joint
ventures and associates
Derivative financial instruments
Long-term loans and borrowings
Capitalized investment tax credits
Convertible debentures
Other liabilities
Financing fees
Share-based payment
Disallowed interest carried forward
Others
(349,713)
(165,727)
27,438
(117,827)
65,827
7,232
12,273
(661)
4,634
(5,432)
2,563
1,112
3
(518,278)
(112,491)
8,122
3,255
50,429
2,244
(7,312)
11,363
591
1,809
(1,792)
(773)
1,949
(2,206)
(44,812)
—
—
—
(1,394)
(21,883)
—
—
—
—
—
—
—
—
(23,277)
5,630
—
—
—
—
—
—
—
(436)
—
—
—
—
5,194
Tax losses carried forward
132,852
(385,426)
74,828
30,016
—
(23,277)
12,884
18,078
—
—
—
—
—
—
—
—
—
2,354
—
—
—
2,354
—
2,354
1,930
6,407
(24)
712
(417)
162
22
—
(7)
33
—
12
(29)
8,801
(1,277)
7,524
(454,644)
(151,198)
30,669
(68,080)
45,771
82
23,658
(70)
6,000
(4,837)
1,790
3,073
(2,232)
(570,018)
219,287
(350,731)
As at December 31, 2021, the Corporation, its subsidiaries and joint ventures and associates have non-capital losses totaling approximately $881,000 that may be
applied against future taxable income. The non-capital losses in Canada and losses incurred before 2018 in the United-States expire gradually between 2022 and 2041.
The non-capital losses in France are subject to restrictions over time but have no expiration date.The non-capital losses in Chile and losses incurred after 2017 in United
States have no expiration date.
The Corporation recognized a deferred income tax asset on non-capital losses because it is probable that sufficient taxable profit and taxable capital gains will be
available from hydroelectric, solar and wind projects currently in operation.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p136
(in thousands of Canadian dollars, except as noted and amounts per share)
Deferred income tax assets (liabilities) in
relation to:
Property, plant and equipment
Intangible assets
Project development costs
Investments into subsidiaries and in joint
ventures and associates
Non-repatriated income from foreign
subsidiaries
Derivative financial instruments
Long-term loans and borrowings
Capitalized investment tax credits
Convertible debentures
Other liabilities
Financing fees
Share-based payment
Disallowed interest carried forward
Others
Tax losses carried forward
As at January 1,
2020
Recognized in
statement of
earnings
Recognized in
other
comprehensive
loss
Acquired in
business
acquisition
Recognized
directly in
equity
Net
exchange
differences
As at December 31,
2020
(324,083)
(158,277)
23,029
(39,983)
10,241
4,432
—
—
—
(121,612)
1,655
974
(2,279)
53,593
1,178
13,872
(1,362)
2,357
(7,023)
1,961
1,131
108
(517,407)
118,878
(398,529)
967
(3,597)
(382)
(1,354)
699
1,731
981
601
—
—
(24,009)
12,438
(11,571)
—
22,168
—
—
—
—
—
—
—
—
23,142
—
23,142
(Note 33)
10,018
(10,987)
—
—
—
(7,104)
6,755
—
—
698
—
—
—
—
(620)
—
(620)
—
—
—
—
—
—
—
—
—
—
672
—
—
—
672
—
672
4,335
(6,704)
(23)
1,156
1,312
767
(319)
(245)
2
(152)
(62)
1
(19)
(105)
(56)
1,536
1,480
(349,713)
(165,727)
27,438
(117,827)
—
65,827
7,232
12,273
(661)
4,634
(5,432)
2,563
1,112
3
(518,278)
132,852
(385,426)
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p137
(in thousands of Canadian dollars, except as noted and amounts per share)
c. Unrecognized deductible temporary differences, unused tax losses and unused tax
credits
Non-capital tax losses
Capital tax losses
Tax credits
Transaction costs
December 31, 2021
December 31, 2020
136,853
23,581
24,117
477
185,028
138,429
927
—
477
139,833
The unrecognized tax losses will expire gradually between 2026 and 2041. The unrecognized tax credits will expire
gradually between 2035 and 2041.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p138
(in thousands of Canadian dollars, except as noted and amounts per share)
11. EARNINGS (LOSS) PER SHARE
Basic
Net loss attributable to owners of the parent
Dividends declared on preferred shares
Net loss attributable to common shareholders
Weighted average number of common shares
Basic net loss per share ($)
Diluted
Net loss attributable to common shareholders
Diluted weighted average number of common shares
Diluted net loss per share ($)
Instruments that are excluded from the dilutive elements:
Stock options
Shares held in trust related to the Performance Share Plan
Convertible debentures
Year ended December 31
2021
2020
(191,805)
(5,632)
(197,437)
(32,628)
(5,942)
(38,570)
180,856,774
(1.09)
170,292,471
(0.23)
Year ended December 31
2021
2020
(197,437)
(38,570)
180,856,774
170,292,471
(1.09)
(0.23)
Year ended December 31
2021
2020
265,570
541,261
13,604,473
14,411,304
233,539
557,091
13,709,043
14,499,673
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p139
(in thousands of Canadian dollars, except as noted and amounts per share)
12. RESTRICTED CASH
As at
Restricted proceeds account
Restricted cash accounts
Debt service payment accounts
December 31, 2021
December 31, 2020
35,260
17,201
9,198
61,659
20,049
9,802
37,626
67,477
As required under several projects' credit agreements, the Corporation maintains restricted cash accounts and restricted
proceeds accounts. The unused portion of the loans proceeds are held in restricted proceeds accounts managed by the
lenders and amounts are transferred from time to time into the restricted cash accounts to finance the construction of the
projects. The restricted cash accounts are used to pay the current construction costs of the projects and to hold the
construction holdback amounts that will be released at the end of the construction of the respective projects. The
Corporation also maintains debt service payment accounts.
13. ACCOUNTS RECEIVABLE
As at
Trade
Interest receivable on preferred shares
Commodity taxes
Advances to related parties
Income taxes receivable
Other
December 31, 2021
December 31, 2020
84,246
5,687
4,056
3,678
4,511
15,728
117,906
63,746
4,975
3,445
9,463
703
10,414
92,746
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p140
(in thousands of Canadian dollars, except as noted and amounts per share)
14. PROPERTY, PLANT AND EQUIPMENT
Cost
As at January 1, 2021
Additions 1
Investment tax credits 2
Business acquisitions (Note 4)
Transfer of assets upon commissioning
Transfer from project development costs
Reclassification
Dispositions
Other changes
Net foreign exchange differences
As at December 31, 2021
Accumulated depreciation
As at January 1, 2021
Depreciation 3
Reclassification
Dispositions
Impairment charge
Net foreign exchange differences
As at December 31, 2021
Lands
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Facilities
under
construction
Other
Total
176,831
—
—
22,983
—
—
—
—
(12,050)
(2,664)
185,100
(10,482)
(6,557)
—
—
—
238
(16,801)
2,091,345
5,157
—
491,704
—
—
—
(2,227)
9
8,792
2,594,780
2,596,633
10,552
—
—
358,537
—
—
(2,957)
(7,915)
(62,886)
2,891,964
(348,109)
(43,306)
(445,896)
(114,839)
—
—
352
—
(30)
(391,093)
332
—
10,423
(549,980)
516,989
225
—
10,039
291,636
—
(644)
—
(2,422)
3,798
819,621
(69,382)
(21,441)
249
—
(24,729)
(228)
(115,531)
529,484
214,715
(14,070)
—
(650,217)
682
104
—
—
(7,821)
72,877
33,970
7,973
—
712
44
—
540
(267)
2,273
(181)
45,064
5,945,252
238,622
(14,070)
525,438
—
682
—
(5,451)
(20,105)
(60,962)
6,609,406
—
—
—
—
—
—
—
(18,258)
(4,430)
(249)
298
—
30
(22,609)
(892,127)
(190,573)
—
982
(24,729)
10,433
(1,096,014)
Carrying amounts as at December 31, 2021
168,299
2,203,687
2,341,984
704,090
72,877
22,455
5,513,392
All of the property, plant and equipment are given as security under the respective project financing or for corporate financing.
1.
The financing costs related to a specific project financing are entirely capitalized to the specific property, plant and equipment. Financing costs related to the revolving credit facilities
are capitalized for the portion of the financing actually used for a specific property, plant and equipment. Additions in the current period include $9,982 ($9,426 in 2020) of capitalized
financing costs incurred prior to commissioning.
The Corporation accrued for US$10,092 ($14,070) in investment tax credits recoverable in relation to the construction of the Hillcrest solar project, which were recognized as a
reduction in the cost of the Hillcrest property, plant and equipment. As at December 31, 2021, the balance of investments tax credits recoverable amounts to US$947 ($1,200).
An amount of $1,719 ($1,374 in 2020) of the depreciation expense for the land leases is capitalized as a construction cost in facilities under construction.
2.
3.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p141
(in thousands of Canadian dollars, except as noted and amounts per share)
Cost
As at January 1, 2020
Additions 1
Investment tax credits 2
Business acquisitions
Transfer from projects under development
Dispositions
Other changes
Net foreign exchange differences
As at December 31, 2020
Accumulated depreciation
As at January 1, 2020
Depreciation 3
Dispositions
Net foreign exchange differences
As at December 31, 2020
Lands
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Facilities
under
construction
Other
Total
120,809
71,538
—
660
—
—
(14,224)
(1,952)
176,831
2,091,034
637
—
—
—
(128)
(7)
(191)
2,091,345
2,514,434
1,347
—
22,614
—
(871)
20,274
38,835
2,596,633
(4,672)
(5,884)
—
74
(10,482)
(310,000)
(38,004)
62
(167)
(348,109)
(328,004)
(112,824)
381
(5,449)
(445,896)
466,078
1,620
—
60,362
—
—
1,509
(12,580)
516,989
(50,593)
(19,363)
—
574
(69,382)
102,952
535,053
(114,341)
—
28,110
—
—
(22,290)
529,484
32,462
599
—
—
—
—
916
(7)
33,970
5,327,769
610,794
(114,341)
83,636
28,110
(999)
8,468
1,815
5,945,252
—
—
—
—
—
(14,475)
(3,739)
—
(44)
(18,258)
(707,744)
(179,814)
443
(5,012)
(892,127)
Carrying amounts as at December 31, 2020
166,349
1,743,236
2,150,737
447,607
529,484
15,712
5,053,125
Impairment of Phoebe
As at September 30, 2021, the carrying value of Phoebe solar facility, located in Texas, exceeded its estimated recoverable amount resulting in an impairment charge of
US$19,622 ($24,729), reflecting an outlook of higher than expected congestion charges.
The Phoebe solar facility recoverable amount of $260,521 as at September 30, 2021 was determined using VIU, which was calculated based on projected future cash flows
utilizing the latest information available and Management’s estimates, including; Energy production, revenues, operating costs, general and administrative costs, energy
price forecasts and foreign exchange rates.
These projected cash flows were prepared using a 2% inflation estimate and discounted using a post‑tax discount rate of 8.5% representing the estimated weighted
average cost of capital.
Sensitivities
The projected cash flows and estimated VIU can be affected by any one or more changes in the estimates used. Changes in discount rate, energy price forecasts and
inflation rate have the most substantial influence on Phoebe’s valuation. A 1% change in inflation rate would change VIU by approximately $26,100, while a 0.5% increment
in the discount rate would change VIU by approximately $11,700 and a change of one dollar in energy price would change the VIU by approximately $8,300.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p142
(in thousands of Canadian dollars, except as noted and amounts per share)
Right-of-use assets
Included in property, plant and equipment are right-of-use assets pursuant to lease agreements. Below is a reconciliation of the carrying amounts:
Cost
As at January 1, 2021
Business acquisition
Dispositions
Other changes
Net foreign exchange differences
As at December 31, 2021
Accumulated depreciation
As at January 1, 2021
Depreciation
Dispositions
Net foreign exchange differences
As at December 31, 2021
Land
Hydroelectric
facilities
Other
Total
173,670
445
—
(12,050)
(2,926)
159,139
(10,482)
(6,556)
—
238
(16,800)
109
—
—
9
—
118
(4)
(2)
—
—
(6)
9,166
—
(176)
2,274
(117)
11,147
(2,226)
(1,322)
176
11
(3,361)
182,945
445
(176)
(9,767)
(3,043)
170,404
(12,712)
(7,880)
176
249
(20,167)
Carrying amounts as at December 31, 2021
142,339
112
7,786
150,237
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p143
(in thousands of Canadian dollars, except as noted and amounts per share)
Cost
As at January 1, 2020
Additions
Business acquisition
Other changes
Net foreign exchange differences
As at December 31, 2020
Accumulated depreciation
As at January 1, 2020
Depreciation
Net foreign exchange differences
As at December 31, 2020
Land
Hydroelectric
facilities
Other
Total
117,660
71,542
660
(14,224)
(1,968)
173,670
(4,672)
(5,884)
74
(10,482)
116
—
—
(7)
—
109
(2)
(2)
—
(4)
8,252
—
—
916
(2)
9,166
(1,183)
(1,275)
232
(2,226)
126,028
71,542
660
(13,315)
(1,970)
182,945
(5,857)
(7,161)
306
(12,712)
Carrying amounts as at December 31, 2020
163,188
105
6,940
170,233
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p144
(in thousands of Canadian dollars, except as noted and amounts per share)
15.
INTANGIBLE ASSETS
Cost
As at January 1, 2021
Business acquisitions (Note 4)
Other changes
Net foreign exchange
As at December 31, 2021
Accumulated amortization
As at January 1, 2021
Amortization
Net foreign exchange
As at December 31, 2021
Carrying amounts as at
December 31, 2021
Cost
As at January 1, 2020
Business acquisitions
Other changes
Net foreign exchange
As at December 31, 2020
Accumulated amortization
As at January 1, 2020
Amortization
Net foreign exchange
As at December 31, 2020
Carrying amounts as at
December 31, 2020
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Total
575,536
206,388
(6,190)
4,688
780,422
667,832
—
—
(19,241)
648,591
(201,295)
(22,892)
(57)
(224,244)
(133,042)
(40,847)
5,928
(167,961)
15,009
—
—
(23)
14,986
(4,717)
(3,047)
(36)
(7,800)
1,258,377
206,388
(6,190)
(14,576)
1,443,999
(339,054)
(66,786)
5,835
(400,005)
556,178
480,630
7,186
1,043,994
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Total
568,193
—
7,394
(51)
575,536
388,760
282,125
—
(3,053)
667,832
(185,678)
(15,576)
(41)
(201,295)
(96,107)
(33,503)
(3,432)
(133,042)
10,803
4,676
—
(470)
15,009
(3,744)
(1,007)
34
(4,717)
967,756
286,801
7,394
(3,574)
1,258,377
(285,529)
(50,086)
(3,439)
(339,054)
374,241
534,790
10,292
919,323
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p145
(in thousands of Canadian dollars, except as noted and amounts per share)
16. PROJECT DEVELOPMENT COSTS
As at
Cost
Beginning of year
Business acquisitions (Note 4)
Additions
Transfer to property, plant and equipment
Net foreign exchange
End of year
17. GOODWILL
Allocation of goodwill to each significant CGU or group of CGUs is as follows:
December 31, 2021
December 31, 2020
14,092
16,417
40,428
(682)
574
70,829
11,135
—
32,273
(28,110)
(1,206)
14,092
As at January 1, 2021
Net foreign exchange
As at December 31, 2021
As at January 1, 2020
Business acquisition
Net foreign exchange
As at December 31, 2020
Hydroelectric
facilities
Wind farm
facilities
Total
20,291
—
20,291
43,007
(2,440)
40,567
63,298
(2,440)
60,858
Hydroelectric
facilities
Wind farm
facilities
Total
20,291
—
—
20,291
40,375
620
2,012
43,007
(Note 33)
60,666
620
2,012
63,298
On December 31, 2021, the Corporation conducted its annual goodwill impairment tests. Based on the result of these tests,
no impairment charge was required.
The recoverable amount of each CGU was determined based on a value in use calculation which uses cash flow
projections based on financial budgets approved by management covering a period extending to the lesser of 50 years or
the period for which the Corporation owns its rights on the site and discount rates of 4.63% to 7.14% (4.22% to 8.75% in
2020).
Key assumptions used to determine the recoverable amount of assets are the following:
•
•
•
•
The discount rate considers the weighted average between the consolidated cost of debt and the consolidated cost of
equity, adjusted with alpha factors specific to each operating segment and country in which the facility operates.
The expected selling price of electricity once the power purchase agreements are renewed or on the spot market.
A cash-generating unit is an individual facility.
The future expected cash flows are based on the budgets before debt service and income tax of each cash-generating
unit. The budgets have been built using long-term averages of expected production. These long-term averages are
expected to approximate actual results.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p146
(in thousands of Canadian dollars, except as noted and amounts per share)
18. OTHER LONG-TERM ASSETS
As at
Hydrology/ wind power reserve
Major maintenance reserve
Security deposits
Other
December 31, 2021
December 31, 2020
49,001
9,784
7,391
28,343
94,519
53,757
8,125
5,929
7,491
75,302
The availability of $ 58,785 ($61,047 in 2020) in the reserve accounts is restricted by credit agreements.
As at December 31, 2021, the Corporation recognized an impairment charge related to a minority equity investment in
France, totaling $5,943.
19. ACCOUNTS PAYABLE AND OTHER PAYABLES
As at
Trade and other payables
Dividends payable to shareholders
Interest payable
Construction holdbacks
Salaries and benefits
Commodity taxes
Income taxes payable
December 31, 2021
December 31, 2020
71,887
36,048
30,906
18,672
7,814
5,318
3,719
174,364
84,796
32,910
24,326
35,317
6,589
3,995
2,400
190,333
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p147
(in thousands of Canadian dollars, except as noted and amounts per share)
20.
LONG-TERM LOANS AND BORROWINGS
Currency
Interest rates
Maturity
December 31,
2021
December 31,
2020
Corporate indebtedness
Revolving term credit facility
Subordinated unsecured term loan
Alterra loans
Convertible debentures
4.65% Convertible Debentures3
4.75% Convertible Debentures4
Tax equity financing1,2
Wind segment
Foard City
Griffin Trail
Solar Segment
Hillcrest
Phoebe
Others
Project loans
Hydroelectric segment
Boulder Creek and Upper Lillooet
Harrison Operating Facilities
Big Silver Creek
Kwoiek Creek
Tretheway Creek
Ashlu Creek
Northwest Stave River
Sainte-Marguerite
Magpie
Rutherford Creek
Fitzsimmons Creek
Duqueco
Licán
Guayacán
Others
Wind segment
Innergex Cartier Energie
Mesgi'g Ugju's'n
Innergex Europe
Yonne and Yonne II
Rougemont 2
Vaite
Rougemont 1
Plan Fleury
Les Renardières
Beaumont
Montjean
Theil Rabier
CAD
CAD
CAD
CAD
USD
USD
USD
USD
USD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
USD
USD
CAD/USD
1.46% - 2.80%
2023
2023
5.13 %
3.02 % 2028-2031
4.65 %
4.75 %
2026
2025
398,758
150,000
145,000
693,758
136,985
143,273
280,258
182,996
150,000
116,627
449,623
137,592
142,483
280,075
7.50 %
6.80 %
20295
20315
240,696
166,257
259,498
—
5.15 %
20285
20265
8.00 % 2022-2023
7.14 %
4.22%-4.46% 2042-2056
3.81%-5.56%
2049
4.57%-4.76% 2041-2056
5.08%-10.07% 2052-2054
4.99 %
1.99 %
5.30 %
2055
2025
2053
7.40%-8.00% 2025-2064
6.36%-15.5% 2025-2031
6.88 %
2.30 %
3.65 %
3.26 %
4.19 %
3.20 %
2024
2026
2033
2026
2032
2022
CAD
CAD
CAD
EURO
EURO
EURO
EURO
EURO
EURO
EURO
EURO
EURO
2.02 %
2032
2.14% - 4.28% 2026-2036
8.00 %
2046
1.30%-1.65% 2031-2039
0.86 %
0.86 %
0.86 %
2035
2035
2035
1.65 % 2032-2034
1.70 % 2032-2034
2.42%-3.78% 2027-2031
1.15%-2.73% 2026-2031
1.15%-2.73% 2026-2031
25,063
23,080
871
28,751
26,575
1,134
455,967
315,958
487,490
442,474
193,501
163,520
91,999
77,051
71,094
55,080
40,091
14,045
18,311
141,798
32,963
11,601
9,598
446,555
223,113
77,957
95,236
69,242
62,476
60,585
40,491
35,672
23,509
17,746
17,746
491,643
440,054
195,056
165,514
92,327
80,451
71,569
58,222
43,274
19,022
18,829
—
—
—
—
489,991
232,088
77,957
103,226
80,401
72,928
70,469
48,037
42,377
28,273
21,299
21,299
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p148
(in thousands of Canadian dollars, except as noted and amounts per share)
(continued)
Griffin Trail
Foard City
Mountain Air
Others
Solar segment
Hillcrest
Phoebe
Stardale
Pampa Elvira
Others
Total long-term loans and borrowings
Deferred financing costs
Current portion of long-term loans and borrowings
Long-term loans and borrowings
Currency
Interest rates
Maturity
December 31,
2021
December 31,
2020
USD
USD
USD
0.90 %
1.97 %
2021
2026
3.48%-6.00% 2029-2032
EURO
1.48 %-4.75 % 2024-2030
USD
USD
CAD
USD
USD
1.98 %
2.22 %
1.89 %
2.89 %
2028
2026
2032
2022
3.70 % 2024-2026
—
20,741
151,350
54,178
89,214
132,161
75,256
2,828
15,708
3,562,380
4,992,363
(67,928)
4,924,435
(513,196)
204,436
24,922
159,708
67,449
187,212
137,688
77,430
—
16,648
3,839,799
4,885,455
(71,574)
4,813,881
(767,167)
4,411,239
4,046,714
1.
2.
3.
4.
The interest rates reflect the internal rate of return required by the respective tax equity investors.
The maturity date of these obligations are driven by the dates on which the tax equity investor reaches the agreed upon target rate of
return.
The 4.65% Convertible Debentures are convertible at the holder’s option into common shares of the Corporation at a conversion price
of $22.90 per share.
The 4.75% Convertible Debentures are convertible at the holder’s option into common shares of the Corporation at a conversion price
of $20.00 per share.
5. Represents the expected Flip Point date as estimated at the date of final funding from the tax equity investor. Actual Flip Point may
differ, subject to the facilities' respective operating performance.
The carrying amount of assets pledged to secure the loans totalled $5,044,788 ($4,814,218 in 2020).
Letters of credit under revolving term credit facility and project loans amount to $207,147 ($223,474 in 2020).
Tax equity investors in U.S. wind projects generally require sponsor guarantees as a condition to their investment. To
support the tax equity investments, the Corporation executed guarantees indemnifying the tax equity investors against
certain breaches of project level representations, warranties and covenants and other events. The Corporation believes
these indemnifications cover matters which are substantially under its control, and are very unlikely to occur.
As at December 31, 2021, the Corporation and its subsidiaries have met all material financial and non-financial conditions
related to their credit agreements, except for the following:
•
•
•
the Beaumont and Vallottes facilities were not meeting their respective targeted ratios, which triggered a breach
under their respective credit agreement. The aggregate amount of €17,906 ($25,769) that would otherwise be
classified as long-term was reclassified to the current portion of long-term loans and borrowings. Negotiations are
currently underway to resolve this situation.
the Phoebe solar facility was in breach of its credit agreement due to a non respect of a specific requirement of the
insurance clause. The US$100,345 ($127,217) portion of the loan that would otherwise be classified as long-term
was reclassified to the current portion of long-term loans and borrowings. Ongoing dialogue and reporting are
provided to the facility lenders until this situation is resolved.
the Duqueco facility was in breach of its credit agreement following the acquisition of the remaining 50% interest in
Energía Llaima since the former Chilean equity investors ceased to jointly hold direct ownership of fifty percent of the
company's shares. The US$110,748 ($140,406) portion of the loan that would otherwise be classified as long-term
was reclassified to the current portion of long-term loans and borrowings. Negotiations are currently underway to
resolve this situation.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p149
(in thousands of Canadian dollars, except as noted and amounts per share)
a. Corporate Indebtedness
Revolving Term Credit Facility
The Corporation has access to a revolving term credit facility maturing in 2023. The available facility amount is $700,000
with an option, subject to the lender’s consent, to increase to a total amount of up to $900,000. The facility has covenants
requiring a minimum interest coverage and a maximum debt coverage ratios. The applicable interest rate on this revolving
credit facility is variable, based on the bank’s prime rate, bankers’ acceptance rates, US Base Rate, LIBOR or EURIBOR
plus a spread which depends on leverage ratio. As of December 31, 2021, an amount of $48,288 has been used to issue
letters of credit.
Moreover, the Corporation has access to a letter of credit facility of an amount of up to $90,000 guaranteed by Export
Development Canada. As of December 31, 2021, letters of credit have been issued for an amount of $38,143.
Subordinated Unsecured Term Loan
The Corporation has a subordinated unsecured term loan maturing in 2023 and repayable in full at maturity.
b. Financing of the Hillcrest Solar Project
On November 17, 2021, the construction loan, which principal amount then aggregated to US$74,913 ($94,975) was
converted into a term loan carrying an interest rate of 3-month LIBOR +1.75% (approximately 1.885% fixed through an
interest rate swap entered into in May 2020 and amended in November 2021 resulting in a fixed interest rate of 2.695% as
at December 31, 2021). In addition, the tax equity bridge loan, which principal amount then aggregated to US$109,784
($139,184), was reimbursed with the proceeds from the tax equity investor’s contribution following the completion of
commissioning activities.
Tax equity financing
On November 17, 2021, the Hillcrest Solar Partners received US$90,374 ($114,576) from the tax equity investor in return
for its Class A membership interest following the completion of commissioning activities, for an aggregate tax equity
financing received of US$112,748 ($142,942). The interest in the Class A shares is accounted for as a debt instrument by
the Corporation. The outstanding balance as at December 31, 2021 is US$19,769 ($25,063). The Corporation anticipates
the Flip Point date of the Hillcrest tax equity financing to occur in 2028.
The tax equity investors' taxable income (losses), ITCs and cash distributions allocations are detailed in the table below.
After the Flip Point, the Hillcrest tax equity investors will retain a 3% financial interest in the project which will be
accounted for as non-controlling interests.
Taxable income (losses) and ITCs
Cash distributions
Tax Equity Investor
99.0 % 1
Various 2
1.
Allocation of taxable income (loss) and ITCs is 99.0% to the tax equity investor. From January 1, 2025 to December 31, 2025,
allocation of taxable income (loss) to the tax equity investor will be 67.0%, and 5.0% thereafter.
2. Hillcrest’s cash distribution amounts to the tax equity investor are fixed and defined within the partnership agreement. All amounts of
distributable cash above these fixed and defined distributions are distributed at the rate of 4.23% to the tax equity investor, until the
Flip Point date.
c. Refinancing of Alterra loans
On January 11, 2021, the Corporation reimbursed the outstanding balance of the Alterra term loans, which included a
CAD and a USD tranche, for an amount of $90,839 and US$21,359 ($26,725) of principal and accrued interests,
respectively. A loss of $1,317 was recognized in Other net income. Also, on the same day, two related interest rate swaps
were unwound for a net cash outflow of $3,154, comprising a realized loss of $2,885 on the terminal value of the
derivatives recognized in Change in fair value of financial instruments, and accrued interests.
On December 29, 2021, Innergex refinanced the Alterra project loan facilities with a non revolving term credit of $175,000
of which was drawn $145,000. Those loan facilities were refinanced into two new tranches:
•
•
•
a $32,500 loan bearing a variable interest rate at CDOR +2.50% to 3.00%, repayable at maturity in 2028;
a $112,500 loan bearing a variable interest rate at CDOR +2.50% to 3.00%, repayable at maturity in 2028; and
a $30,000 delayed draw facility, which remained undrawn as at December 31, 2021, bearing a variable interest
rate at CDOR +2.50% to 3.00%, repayable at maturity in 2028.
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p150
(in thousands of Canadian dollars, except as noted and amounts per share)
d. Financing of the Griffin Trail Wind Project
The construction loan of US$256,201 ($318,970) was repaid on July 30, 2021 by a US$169,155 ($210,598) tax equity
investment, while the Corporation contributed US$115,512 ($143,812) in sponsor equity. The excess contribution of the
tax and sponsor equity funding will be used to fund construction related spending and for holdback amounts following the
end of the construction activities.
Tax equity financing
The interest in the Class A shares is accounted for as a debt instrument by the Corporation.The Corporation anticipates
the Flip Point date of the Griffin Trail tax equity financing to occur in 2031.
The tax equity investors' taxable income (losses), PTCs and cash distributions allocations are detailed in the table below.
After the Flip Point, the Griffin Trail tax equity investors will retain a 5% financial interest in the project which will be
accounted for as non-controlling interests.
Taxable income (losses) and PTCs
Cash distributions
Tax Equity Investor
Various 1
5.0 %
1.
Allocation of taxable income (loss) and PTCs is 93.75% to the tax equity investor during 2021. From January 1, 2022 to Flip Point,
allocation of taxable income (loss) to the tax equity investor will be 99.0%, and 5.0% thereafter.
e. Acquisition of Licán
As part of the acquisition of Licán, the Corporation assumed the related loan facility for a total fair value of US$26,000
($32,617). The term loan bears interest at Libor 180 days + 3.1% and matures in September 2026.
The outstanding balance as at December 31, 2021 is US$26,000 ($32,963).
f. Acquisition of Energía Llaima
As part of the acquisition of the remaining 50% interest in Energía Llaima, the Corporation assumed the related loan
facilities for a total fair value of US$130,744 ($163,888) which are comprised mainly of:
• US$110,502 ($138,514) term loan bearing interest at Libor 180 days + 3.5% payable semi-annually and maturing in
March 2033.
• US$9,503 ($11,912) term loan bearing interest at Libor 180 days + 3.9%
• US$5,151 ($6,457 term loan bearing interest at 3.2%
• US$3,168 ($3,971) term loan bearing interest at Libor 180 days + 2.65%
• US$2,420 ($3,034) term loan bearing interest at 3.2%
The outstanding balance as at December 31, 2021 is US$130,798 ($165,825).
Innergex Renewable Energy Inc.
Annual Report 2021
Notes to the Consolidated Financial Statements p151
(in thousands of Canadian dollars, except as noted and amounts per share)
21. OTHER LIABILITIES
Contingent
considerations
Asset
retirement
obligations
Interest
payable on
SM S.E.C.
debenture
Future
ownership
rights
Deferred
income
Lease
liabilities
Total
As at January 1, 2021
1,861
162,625
26,461
40,031
— 172,807 403,785
Liabilities assumed as part of
the business acquisitions
(Note 4)
New obligations
Interest expense included in
finance costs
Accretion expense included
in finance costs
Remeasurement
Amortization
Payment of other liabilities
Impact of foreign exchange
fluctuations
As at December 31, 2021
Current portion of other
liabilities
Long-term portion of other
liabilities
—
9,746
1,558
8,447
—
—
—
—
4,749
—
—
—
—
19,642
472
—
2,030
37,835
—
—
4,749
36
—
—
(761)
4,167
(7,791)
—
—
—
—
—
—
1,276
(6,190)
—
—
—
—
(940)
—
—
(9,767)
—
(3,623)
5,479
(23,748)
(940)
(4,384)
167
11,049
(3,198)
165,808
—
31,210
—
35,117
—
(5,811)
18,702 157,109 418,995
(2,780)
(515)
—
—
—
—
(4,137)
(4,652)
10,534
165,808
31,210
35,117
18,702 152,972 414,343
Contingent
considerations
Asset
retirement
obligations
Interest
payable on
SM S.E.C.
debenture
Future
ownership
rights
Lease
liabilities
Total
As at January 1, 2020
Liabilities assumed as part of the
business acquisitions
New obligations
Interest expense included in finance costs
Accretion expense included in finance
costs
Remeasurement
Payment of lease liabilities
Impact of foreign exchange fluctuations
As at December 31, 2020
Current portion of other liabilities
Long-term portion of other liabilities
1,816
121,371
22,066
31,400
119,788
296,441
—
—
—
6,259
8,598
—
45
—
—
—
1,861
(1,018)
843
3,830
21,783
—
784
162,625
—
162,625
—
—
4,395
—
—
—
—
26,461
—
26,461
—
—
—
665
71,542
—
6,924
80,140
4,395
1,237
7,394
—
—
40,031
—
40,031
—
(13,315)
(3,841)
(2,032)
172,807
(5,254)
167,553
5,112
15,862
(3,841)
(1,248)
403,785
(6,272)
397,513
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p152
(in thousands of Canadian dollars, except as noted and amounts per share)
a. Asset retirement obligations
Asset retirement obligations primarily arise from obligations to retire wind farms and the solar facilities upon expiry of
the site leases. The wind farms and solar facilities were constructed on sites held under leases expiring, after
exercising its term renewal options, at least 25 years after the signing date.
The cash flows were discounted at rates between 0.99% and 4.87% as at December 31, 2021 (0.57% to 4.88% in
2020) to determine the obligations.
b.
Interest payable on SM S.E.C. debenture
This debenture carries an interest rate of 8.00%; it has no predetermined repayment schedule and matures in 2064.
The partner, Régime de Rentes du Mouvement Desjardins (''RRMD''), is considered a related party. Unpaid interests
are compounded and are recorded in other long-term liabilities.
c. Future ownership rights
Other liabilities include various liabilities related to future ownership rights owned by First Nations for the Upper
Lillooet River, Boulder Creek, Big Silver Creek and Tretheway Creek facilities, the counterpart of which is capitalized
into the intangible assets.
d. Lease liabilities
The Corporation enters into various leases for the conduct of its operations. The main portion of the leases relate to
the right of use of land, mainly for the Corporation's installed wind turbines and solar panels. The land leases run for
various number of years, with subsequent options to renew, which the Corporation expects to exercise up to its
projects' respective expected useful lives. The majority of leases provide for additional rent payments that are based
on changes in local price indices.
e. Mesgi'g Ugju's'n letter of credit
During 2019, the service provider under the turbine supply agreement at Mesgi'g' Ugju's'n filed for bankruptcy. Certain
of the performance obligations under the turbine supply agreement were covered, subject to terms and conditions
precedent, by a $19,642 letter of credit. The Corporation availed itself of the full amount on April 27, 2021. The
proceeds are subject to restrictions under the Mesgi'g Ugju's'n credit agreement and as such, have been recognized
as other long-term assets and the associated obligation as other non-current liabilities. The proceeds are to be used in
the future to remediate the unfulfilled performance obligations under the turbine supply agreement. During the year
ended December 31, 2021, an amount of $940 of the liability was amortized in relation to remediation work performed.
f. Contigent considerations
Innergex has entered into a stock purchase agreement pursuant to which it has acquired, effective July 9, 2021, the
remaining 50% interest in Energía Llaima SpA (“Energía Llaima”). The purchase price includes a contingent
consideration evaluated at US$3,650 ($4,575), calculated on the fair value of the lands owned by Inversiones La
Frontera Sur SpA and Inversiones San Carlos SpA as of the closing Date. The contingent consideration is to be paid
within five to six years following the closing of the acquisition.
On October 25, 2021, Innergex and HQI US Holding LLC, a subsidiary of Hydro-Québec, have acquired the Curtis
Palmer hydroelectric portfolio located in Corinth, New York. The purchase price includes a contingent consideration
provision evaluated at US$3,169 ($3,916), based on the evolution of the New York Independent System Operator
("NYISO") market pricing during calendar years 2023 and 2024, limited to US$30,000.
On August 3, 2021, Innergex acquired Licán, an 18 MW run-of-river hydro facility in Chile. The purchase price includes
a contingent consideration evaluated at US$1,000 ($1,255), based on the development of the Company's business
between August 1, 2021 and July 30, 2022
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p153
(in thousands of Canadian dollars, except as noted and amounts per share)
22. SHAREHOLDERS' CAPITAL
Authorized
The authorized capital of the Corporation consists of an unlimited number of common shares and an unlimited number of
preferred shares, non-voting, retractable and redeemable. This includes up to 3,400,000 Cumulative Rate Reset Preferred
Shares, Series A (the "Series A Preferred Shares"), up to 3,400,000 Cumulative Floating Rate Preferred Shares, Series B
(the "Series B Preferred Shares") and up to 2,000,000 Cumulative Redeemable Fixed Rate Preferred Shares, Series C
(the ''Series C Preferred Shares'').
Issued and outstanding shares
As at
Number of common shares
Number of Series A Preferred Shares
Number of Series C Preferred Shares
a) Common shares
The change in the number of common shares was as follows:
As at
Issued and fully paid
Beginning of the year
Issued upon acquisition (Note 4)
Issued on public offering
Issued following the Strategic Alliance with Hydro-Québec
Issued through dividend reinvestment plan
Exercise of stock options
Conversion of debentures
Buybacks
End of year
Held in trust under the Performance Share Plan
Beginning of the year
Purchased
Distributed
End of year
Common shares outstanding at end of the year
Issuance of common shares
December 31, 2021
December 31, 2020
192,493,999
3,400,000
2,000,000
174,582,586
3,400,000
2,000,000
December 31, 2021
December 31, 2020
174,582,586
4,048,215
10,374,150
3,729,050
146,621
—
104,569
(491,192)
192,493,999
(557,091)
(118,562)
134,392
(541,261)
191,952,738
139,405,832
—
—
34,636,823
279,648
192,033
68,250
—
174,582,586
(300,724)
(317,777)
61,410
(557,091)
174,025,495
As part of the Energía Lliama Acquisition on July 9, 2021, the Corporation issued 4,048,215 common shares at a price
of $22.09 for a value of $89,437 (see Note 4c). Concurrently with the closing of the acquisition, the Corporation issued
1,148,050 common shares, for total proceeds of $25,325, in order for Hydro-Québec to maintain its 19.9% ownership.
As part of the public offering in September 2021, the Corporation issued 10,374,150 common shares at a price of
$19.40 for cash proceeds of $201,259. Concurrently with the closing of the public offering, Hydro-Québec subscribed
2,581,000 common shares of the common shares of the Corporation for cash proceeds of $50,071, in order for Hydro-
Québec to maintain its 19.9% ownership of the Corporation's common shares.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p154
(in thousands of Canadian dollars, except as noted and amounts per share)
Normal course issuer bid renewal
The Corporation received the approval from the Toronto Stock Exchange ("TSX") to proceed with a normal course
issuer bid on its common shares (the "New Bid"). Under the New Bid, the Corporation could purchase for cancellation
up to 2,000,000 of its common shares, representing approximately 1.15% of the 174,692,091 issued and outstanding
common shares of the Corporation as at May 11, 2021. The New Bid commenced on May 24, 2021 and will terminate
on May 23, 2022.
Buyback of common shares
During the year ended December 31, 2021, 180,602 common shares have been purchased and cancelled under the
normal course issuer bid terminated May 23, 2021, at an average price of $18.90. In addition, during the year ended
December 31, 2021, 310,590 common shares have been purchased and cancelled under the New Bid at an average
price of $17.98.
Strategic Alliance and Private Placement with Hydro-Québec
On February 6, 2020, Hydro-Québec invested $660,870 through a Private Placement in common shares of the
Corporation at a price of $19.08 per share, representing a total of 34,636,823 shares (19.9% of the then-issued and
outstanding common shares on a non-diluted basis).
Contributed surplus from reduction of capital account on common shares
A special resolution to approve the reduction of the legal stated capital account maintained in respect of the common
shares of the Corporation, without any payment or distribution to the shareholders was adopted on May 12, 2020. This
resulted in a decrease of the shareholders' capital account of $754,355 and an equivalent increase of the contributed
surplus.
b) Preferred shares
Series A Preferred Shares
The holders of Series A Preferred Shares are entitled to receive fixed cumulative preferential cash dividends, as and
when declared by the Board of Directors. The dividends are payable quarterly on the 15th day of January, April, July
and October each year. The annual dividend rate for the five-year period starting January 15, 2021, equals $0.8110 per
share.
At its option, each holder of Series A Preferred Shares has the right to convert all or any of its Series A Preferred Shares
into the Series B Preferred Shares of the Corporation on the basis of one Series B Preferred Share for each Series A
Preferred Share converted, subject to certain conditions, on January 15, 2021, and every five years thereafter. In
addition, the Corporation has the right to redeem all or any number of the outstanding Series A Preferred Shares on
January 15, 2021, and every five years thereafter.
Series B Preferred Shares
The holders of Series B Preferred Shares will be entitled to receive floating rate cumulative preferential cash dividends
as and when declared by the Board of Directors. The dividends will be payable quarterly in an annual amount per
Series B Preferred Share equal to the Treasury Bill rate for the preceding quarterly period plus 2.79% per annum
determined on the 30th day prior to the first day of the applicable quarterly floating rate period multiplied by $25.00.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p155
(in thousands of Canadian dollars, except as noted and amounts per share)
Series C Preferred Shares
The holders of Series C Preferred Shares are entitled to receive fixed cumulative preferential cash dividends, as and
when declared by the Board of Directors. The dividends are payable quarterly on the 15th day of January, April, July
and October each year at an annual rate equal to $1.4375 per share. The Corporation has the right to redeem all or any
number of the outstanding Series C Preferred Shares.
Equity-based compensation
a) Stock option plan
The Corporation has a stock option plan providing for the granting of options by the Board of Directors to employees,
officers, directors and certain consultants of the Corporation and its subsidiaries to purchase common shares. Options
granted under the stock option plan will have an exercise price of not less than the market price of the common shares
at the date of grant of the option, calculated as the volume weighted average trading price of the common shares on the
Toronto Stock Exchange for the five trading days immediately preceding the date of grant. The maximum number of
common shares of the Corporation available for issuance pursuant to options granted under the share option plan is
4,064,123. Any common shares subject to an option that expires or terminates without having been fully exercised may
be subject to a further option. The number of common shares issuable to non-executive directors of the Corporation
under the stock option plan cannot at any time exceed 1% of the issued and outstanding common shares. Options must
be exercised during a period established by the Board of Directors, which may not be greater than 10 years after the
date of grant. Options granted under the stock option plan vest in equal amounts on a yearly basis over a period of four
to five years following the grant date.
December 31, 2021
December 31, 2020
Number of options
Weighted average
exercise price ($)
Number of options
Weighted average
exercise price ($)
Outstanding - beginning of year
Granted during the year
Exercised during the year
Cancelled during the year
Outstanding - end of year
Options exercisable - end of year
233,539
32,031
—
—
265,570
159,936
15.78
24.49
—
—
16.83
15.00
737,977
51,895
(553,660)
(2,673)
233,539
129,286
11.52
20.52
10.53
20.52
15.78
14.56
The following options were outstanding as at December 31, 2021:
Year of granting
Number of options
outstanding
Exercise price ($)
Number of options
exercisable
Year of maturity
2016
2017
2019
2020
2021
56,531
54,411
73,375
49,222
32,031
265,570
14.65
14.52
14.41
20.52
24.49
56,531
54,411
36,688
12,306
—
159,936
2023
2024
2026
2027
2028
The weighted average contractual life of the outstanding stock options is five years.
A compensation expense of $87 was recorded during the year ended December 31, 2021 with respect to the stock
option plan ($76 in 2020).
Granted
During the year ended December 31, 2021, 32,031 options were granted. The options granted vest in four equal
tranches until March 2, 2024 and must be exercised before March 2, 2028 at an exercise price of $24.49.
Fair value is determined at the date of the grant and each tranche is recognized on a graded-vesting basis over the
period during which the options vest and is measured using the Black-Scholes pricing model taking into account the
terms and conditions upon which the options were granted.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p156
(in thousands of Canadian dollars, except as noted and amounts per share)
The following assumptions were used to estimate the fair value of the options issued to grantees during the year:
Risk-free interest rate
Expected annual dividend per common share
Expected life of options
Expected volatility
December 31, 2021
December 31, 2020
$
$
0.97 %
0.72
6
26.03 %
1.14 %
0.72
6
19.84 %
Expected volatility is estimated by considering historic average share price volatility of the Corporation.
b) Performance Share Plan (the ''PSP'') and Deferred Share Unit Plan (the “DSU”)
Performance Share Plan
The goal of the PSP is to motivate the key employees and officers to create long-term economic value for the
Corporation and its shareholders. This portion of the Equity-Based Incentive Plan focuses key employees and officers
on delivering business performance over the next three years against the total shareholder value and relative to a peer
group. The award is paid out at the end of the three years, depending on how well the Corporation performed against
targets set at the beginning of the three-year period.
The vesting date of the performance share rights is determined on the grant date which shall not exceed three years
thereafter. The fair value of the performance share rights is determined on the grant date, based on the Corporation's
estimate of the number of performance share rights that will eventually vest. On the vesting date, each performance
share right entitles its holder to one Common Share of the Corporation with all the reinvested dividends accrued thereon
from the grant date, such dividend being either paid in cash, in shares or in a combination of both at the sole discretion
of the Corporation.
From time to time, the Corporation provides instructions to a trustee under the terms of a Trust Agreement to purchase
common shares of the Corporation in the open market in connection with the PSP. These shares are held in Trust for
the benefit of the beneficiaries until the Performance share rights become vested or cancelled. The cost of these
purchases has been deducted from share capital.
Deferred Share Unit Plan
Under the Corporation’s DSU, directors receive a portion of their compensation in DSUs in lieu of cash compensation.
Officers may elect to receive all or a portion of their bonus in DSU in lieu of cash compensation. A DSU is a unit that has
a value based upon the value of one Common Share. When a dividend is paid on Common Shares, the director’s and
the officer's DSU account is credited with additional DSUs equivalent to the dividend paid.
DSUs cannot be redeemed for cash or shares until the director or the officer leaves the Corporation. DSUs are not
shares, cannot be converted to shares, and do not carry voting rights. DSUs received by directors and officers in lieu of
cash compensation and held by them represent an at-risk investment in the Corporation. The value of DSUs is based
on the value of the Common Shares, and therefore is not guaranteed.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p157
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary
Balance beginning of year
Granted during the year
Paid out during the year
Expired during the year
Dividend reinvestment during the year
Balance end of year
December 31, 2021
DSU
PSP
December 31, 2020
DSU
PSP
504,004
177,435
(170,089)
(5,742)
20,911
526,519
118,490
45,573
(6,321)
—
4,770
162,512
462,559
152,994
(121,028)
(7,393)
16,872
504,004
81,498
35,513
(2,601)
—
4,080
118,490
A compensation expense of $1,966 was recorded during the year ended December 31, 2021 with respect to the PSP
and DSU plans ($3,268 in 2020).
Dividends
a) Dividend Reinvestment Plan (''DRIP'')
The Corporation implemented a DRIP for its shareholders. The plan allows eligible common shareholders the
opportunity to reinvest a portion or all of the dividends they receive to purchase additional common shares of the
Corporation, without paying fees such as brokerage commissions and service charges. Shares will either be purchased
on the open market or issued from treasury. During the year ended December 31, 2021, 146,621 shares (279,648
shares in 2020) were issued from treasury under the DRIP.
b) Dividend Declared
The following dividends were declared by the Corporation:
Dividends declared on common shares
Dividends declared on Series A preferred shares
Dividends declared on Series C preferred shares
Year ended December 31
2021
($/share)
0.7200
0.8110
1.4375
Total
132,229
2,757
2,875
2020
($/share)
0.7200
0.9020
1.4375
Total
125,543
3,067
2,875
Dividend Declared not recognized at the end of the reporting period
The following dividends will be paid by the Corporation on April 15, 2022:
Date of
announcement
Record date
Payment date
Dividend per
common
share
Dividend per
Series A
Preferred
Share
Dividend per
Series B
Preferred
Share
Dividend per
Series C
Preferred
Share
February 23, 2022 March 31, 2022
April 15, 2022
$
0.1800 $
0.2028 $
0.181875 $
0.359375
c) Dividend Rates on Preferred Shares
The applicable dividend rates for the Corporation's Series A and Series B preferred shares were reset during the year
ended December 31, 2021. For Series A preferred shares, the dividend rate for the five-year period commencing on
January 15, 2021, to but excluding January 15, 2026, is 3.244% per annum, or $0.202750 per share per quarter. For
Series B shares, the dividend rate for each quarterly period commencing on January 15, 2021, is equal to the sum of
the T-Bill Rate plus 2.79% per annum, calculated on a quarterly basis. As at December 31, 2021, there were no
outstanding Series B Preferred Shares.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p158
(in thousands of Canadian dollars, except as noted and amounts per share)
23. ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
Foreign currency
translation
differences for
foreign operations
Changes in fair
value of financial
instruments
designated as net
investment hedges
Cash flow hedge -
interest rate and
power price risks
Share of cash flow
hedge of joint
ventures and
associates - interest
rate and power
price risks
Total
Balance as at January 1, 2021
Exchange differences on translation of foreign operations
Hedging gain
Share of non-controlling interest
Related deferred tax expense
Balance as at December 31, 2021
(32,294)
778
—
(3,044)
—
(34,560)
(4,809)
—
7,773
(2,367)
—
597
(67,352)
—
78,652
(2,746)
(21,883)
(13,329)
(7,241)
—
5,303
—
(1,394)
(3,332)
(111,696)
778
91,728
(8,157)
(23,277)
(50,624)
Foreign currency
translation
differences for
foreign operations
Changes in fair
value of financial
instruments
designated as net
investment hedges
Cash flow hedge -
interest rate and
power price risks
Share of cash flow
hedge of joint
ventures and
associates - interest
rate and power
price risks
Total
Balance as at January 1, 2020
Exchange differences on translation of foreign operations
Hedging loss
Share of non-controlling interest
Related deferred tax recovery
Balance as at December 31, 2020
(7,256)
(27,032)
—
1,994
—
(32,294)
(3,329)
—
(2,128)
648
—
(4,809)
(1,579)
—
(89,549)
1,608
22,168
(67,352)
(3,067)
—
(5,148)
—
974
(7,241)
(15,231)
(27,032)
(96,825)
4,250
23,142
(111,696)
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p159
(in thousands of Canadian dollars, except as noted and amounts per share)
24. ADDITIONAL INFORMATION TO THE CONSOLIDATED STATEMENTS OF
CASH FLOWS
a) Changes in non-cash operating working capital items
Accounts receivable
Prepaids and other
Accounts payable and other payables
b) Additional information
Finance costs paid relative to operating activities before interest on
leases
Interest on leases paid relative to operating activities
Capitalized interest relative to investing activities
Capitalized interest on leases relative to investing activities
Total finance costs paid
Non-cash transactions:
Change in unpaid property, plant and equipment
Investment tax credits
Change in other long-term assets
Change in unpaid project development costs
Remeasurement of other liabilities
Initial measurement of other liabilities
New obligation under financing agreement
Common shares issued through the conversion of convertible
debentures
Common shares issued through equity based compensation
Common shares issued through dividend reinvestment plan
Common shares issued upon acquisition
Year ended December 31
2021
2020
(3,984)
(5,472)
(11,999)
(21,455)
(6,977)
(1,313)
525
(7,765)
Year ended December 31
2021
2020
(185,324)
(4,533)
(3,025)
(1,815)
(194,697)
(29,012)
14,070
—
1,874
(23,748)
8,447
19,642
2,306
3,174
3,312
89,437
(182,960)
(2,760)
(7,836)
(1,632)
(195,188)
10,756
114,341
12,892
146
15,862
80,140
—
1,365
1,440
5,474
—
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p160
(in thousands of Canadian dollars, except as noted and amounts per share)
c) Changes in liabilities arising from financing activities
Changes in long-term loans and borrowings
Long-term debt at beginning of period
Increase in long-term debt
Repayment of long-term debt
Payment of deferred financing costs
Business acquisitions (Note 4)
Investment tax credits
Tax attributes
Production tax credits
Other non-cash finance costs
Convertible debentures converted into common shares
Accretion of convertible debentures
Net foreign exchange differences
Long-term loans and borrowings at end of period
Year ended December 31
2021
2020
4,813,881
1,686,133
(1,568,183)
(3,381)
196,505
(117,904)
(43,290)
(47,985)
52,532
(2,306)
2,490
(44,057)
4,924,435
4,691,669
998,639
(1,005,864)
(15,471)
172,252
—
(21,050)
(43,850)
35,642
(1,365)
2,613
666
4,813,881
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p161
(in thousands of Canadian dollars, except as noted and amounts per share)
25. NON-WHOLLY-OWNED SUBSIDIARIES
Name of subsidiaries
Harrison Hydro L.P. and
its subsidiaries
Kwoiek Creek
Resources, L.P. (1,2)
Mesgi'g Ugju's'n (MU)
Wind Farm L.P. (1,2)
Innergex Sainte-
Marguerite, S.E.C.
Innergex Europe (2015)
Limited Partnership, and
its subsidiaries
Mountain Air Alternatives
LLC, and its subsidiaries
Innergex HQI USA LLC,
and its subsidiaries (2)
Others
Place of
creation
and
operation
Proportion of ownership
interests and voting rights
held by non-controlling
interests
Earnings (loss) allocated
to non-controlling
interests for the year
ended
Non-controlling interests
(deficit)
Dec. 31,
2021
Dec. 31,
2020
Dec. 31,
2021
Dec. 31,
2020
Dec. 31,
2021
Dec. 31,
2020
Canada
49.99 %
49.99 %
(6,044)
(1,270)
37,921
43,965
Canada
50.00 %
50.00 %
(1,471)
(443)
(14,884)
(13,413)
Canada
50.00 %
50.00 %
11,402
9,006
(6,189)
(8,671)
Canada
49.99 %
49.99 %
(1,750)
(2,673)
(15,691)
(13,941)
Canada/
Europe
United
States
United
States
Various
30.45 %
30.45 %
715
(2,001)
(2,244)
(5,035)
37.75 %
37.75 %
2,446
1,063
57,537
59,804
50.00 %
— %
1,319
—
203,189
—
Various
Various
(206)
6,411
(165)
3,517
7,929
267,568
(631)
62,078
1. The Corporation owns more than 50% of the economic interest in the subsidiary.
2. Based on the terms of agreements under which these entities were established, the Corporation is exposed to, and has right to,
variable returns from its involvement with the investee, and has the current ability to direct these entities's activities that most
significantly affect the returns.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p162
(in thousands of Canadian dollars, except as noted and amounts per share)
Summarized financial information in respect of each of the Corporation's subsidiaries that has material non-controlling interests is set out below. The summarized
financial information below represents amounts before intragroup eliminations.
Year ended December 31, 2021
Harrison
Kwoiek
Mesgi'g Ugju's'n
Sainte-
Marguerite
Innergex Europe Mountain Air
Innergex HQI
USA
Summary Statements of Earnings (Loss) and
Comprehensive Income (Loss)
Revenues
Expenses
Net (loss) earnings
Other comprehensive income (loss)
Total comprehensive (loss) income
Net (loss) earnings attributable to:
Owners of the parent
Non-controlling interests
51,296
63,386
(12,090)
—
(12,090)
18,216
21,158
(2,942)
—
(2,942)
56,761
25,363
31,398
2,339
33,737
11,611
15,111
(3,500)
—
(3,500)
(6,046)
(6,044)
(12,090)
(1,471)
(1,471)
(2,942)
19,996
11,402
31,398
(1,750)
(1,750)
(3,500)
Total comprehensive (loss) income attributable to:
Owners of the parent
Non-controlling interests
(6,046)
(6,044)
(12,090)
(1,471)
(1,471)
(2,942)
21,486
12,251
33,737
(1,750)
(1,750)
(3,500)
88,593
86,245
2,348
6,818
9,166
1,633
715
2,348
6,375
2,791
9,166
36,101
29,609
6,492
(258)
6,234
15,678
13,040
2,638
10,332
12,970
4,046
2,446
6,492
1,319
1,319
2,638
3,880
2,354
6,234
6,485
6,485
12,970
Summary Statements of Cash Flows
Cash flows from operating activities
Cash flows used in financing activities
Cash flows used in investing activities
Effects on exchange rate changes on cash and
cash equivalents
Net change in cash and cash equivalents
19,912
(12,295)
(1,885)
—
5,732
551
(1,996)
(2,115)
—
(3,560)
39,227
(40,337)
(356)
—
(1,466)
2,339
(2,637)
(2)
—
(300)
40,376
14,636
10,870
(35,642)
(14,002)
(2,961)
(4,125)
(2,352)
—
—
634
—
—
274
11,144
Distributions paid to non-controlling interests
—
—
9,769
—
—
4,617
—
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p163
(in thousands of Canadian dollars, except as noted and amounts per share)
Harrison
Kwoiek
Mesgi'g Ugju's'n Sainte-Marguerite Innergex Europe
Mountain Air
Year ended December 31, 2020
Summary Statements of Earnings (Loss) and
Comprehensive Income (Loss)
Revenues
Expenses
Net (loss) earnings
Other comprehensive loss
Total comprehensive (loss) income
Net (loss) earnings attributable to:
Owners of the parent
Non-controlling interests
Total comprehensive (loss) income attributable to:
Owners of the parent
Non-controlling interests
Summary Statements of Cash Flows
Cash flows from (used in) operating activities
Cash flows used in financing activities
Cash flows used in investing activities
Effects on exchange rate changes on cash and
cash equivalents
Net change in cash and cash equivalents
47,985
50,526
(2,541)
—
(2,541)
(1,271)
(1,270)
(2,541)
(1,271)
(1,270)
(2,541)
17,577
(11,564)
(832)
—
5,181
18,990
19,875
(885)
—
(885)
(442)
(443)
(885)
(442)
(443)
(885)
(2,746)
(1,742)
(127)
—
(4,615)
61,401
28,806
32,595
(3,117)
29,478
23,589
9,006
32,595
21,333
8,145
29,478
49,351
(45,254)
(4,805)
—
(708)
Distributions paid to non-controlling interests
—
—
10,153
10,066
15,413
(5,347)
—
(5,347)
(2,674)
(2,673)
(5,347)
(2,674)
(2,673)
(5,347)
2,547
(2,384)
(167)
—
(4)
—
95,485
102,057
(6,572)
154
(6,418)
(4,569)
(2,001)
(6,570)
(4,456)
(1,955)
(6,411)
41,268
(35,406)
(3,810)
2,981
5,033
16,995
14,180
2,815
(8,695)
(5,880)
1,752
1,063
2,815
(3,662)
(2,218)
(5,880)
8,157
(8,971)
—
(441)
(1,255)
—
1,147
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p164
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Financial Position
Harrison
Kwoiek
Mesgi'g Ugju's'n Sainte-Marguerite Innergex Europe
Mountain Air
Innergex HQI
USA
As at December 31, 2021
Current assets
Non-current assets
Current liabilities
Non-current liabilities
33,400
550,515
583,915
7,640
164,945
172,585
29,661
441,383
12,139
198,442
Equity (deficit) attributable to owners
74,950
(23,112)
Non-controlling interests (deficit)
37,921
583,915
(14,884)
172,585
20,327
272,273
292,600
16,188
246,488
36,113
(6,189)
292,600
2,237
118,392
120,629
8,759
126,690
871
(15,691)
120,629
63,729
802,868
866,597
142,878
776,687
(50,724)
(2,244)
866,597
16,154
300,334
316,488
7,151
150,819
100,981
57,537
316,488
22,345
388,646
410,991
587
4,018
203,197
203,189
410,991
As at December 31, 2020
Harrison
Kwoiek
Mesgi'g Ugju's'n
Sainte-Marguerite
Innergex Europe
Mountain Air
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity (deficit) attributable to owners
Non-controlling interests (deficit)
20,670
562,075
582,745
20,288
437,471
81,021
43,965
582,745
7,348
167,201
174,549
9,145
200,457
(21,640)
(13,413)
174,549
22,571
265,911
288,482
242,088
23,311
31,754
(8,671)
288,482
1,173
121,361
122,534
8,673
125,262
2,540
(13,941)
122,534
60,268
917,529
977,797
158,016
882,068
(57,252)
(5,035)
977,797
14,314
292,767
307,081
158,851
18,331
70,095
59,804
307,081
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p165
(in thousands of Canadian dollars, except as noted and amounts per share)
26. RELATED PARTY TRANSACTIONS
a) Key management personnel compensation
The following are transactions that the Corporation engaged with its key management personnel. The members of the
Board of Directors as well as the President and CEO, CFO, CIO, CAO and all the Senior Vice Presidents and Vice
Presidents are key management personnel of the Corporation.
Salaries and short-term benefits
Board of Directors' fees
Performance share plan
Share-based payments
b) Transactions with partners
Year ended December 31
2021
2020
7,188
1,072
3,205
87
11,552
6,258
1,026
1,294
76
8,654
Related party transactions conducted in the normal course of operations are measured at an exchange amount, which
is the amount established and agreed to by the related parties, unless specific requirements within IFRS require
different treatment.
The Corporation's subsidiaries have entered into the following transactions with partners:
•
•
•
•
Common shares issued to Hydro-Québec in 2020 and 2021 (see Note 22 - Shareholders' Capital)
Curtis Palmer Acquisition in a 50-50 partnership with Hydro-Québec (see Note 4 - Business acquisitions)
Sales made under PPAs with Hydro-Québec (see Note 32 - Major Customers)
EVLO, a subsidiary of Hydro-Québec, to provide battery at the Tonnerre Energy storage project (see below)
Tonnerre Energie SAS signed a Memorandum of understanding with EVLO, a Hydro-Québec subsidiary, for the 9 MWh
stand-alone energy storage project in France.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p166
(in thousands of Canadian dollars, except as noted and amounts per share)
27. FINANCIAL RISK MANAGEMENT AND FAIR VALUE DISCLOSURES
Fair value disclosures
The following table shows the carrying amounts and fair values of financial assets and financial liabilities, including their
levels in the fair value hierarchy. It does not include fair value information for financial assets and financial liabilities not
measured at fair value if the carrying amount is a reasonable approximation of fair value. The Corporation determined that
the carrying values of its current financial assets and liabilities, as well as their government-backed securities included in
reserve accounts, was within reasonable proximity of their respective fair values due to their shorter-term maturities and
high liquidity.
Fair value
level
As at December 31, 2021
Carrying
amount
Fair value
As at December 31, 2020
Carrying
amount
Fair value
Non-current financial liabilities measured at
amortized cost
Long-term loans and borrowings
Level 2
4,924,435
5,027,286
4,813,881
5,289,788
Derivative financial instruments measured
at fair value
Interest rate swaps
Foreign exchange forwards
Power and basis hedges
Level 2
Level 2
Level 3
(78,482)
2,485
16,559
(78,482)
2,485
16,559
(168,002)
(37,113)
54,082
(168,002)
(37,113)
54,082
Other investments
The valuation model considers the present value of expected payments, discounted using a risk-adjusted discount rate.
Long-term loans and borrowings
The fair value of each debt instrument is estimated utilizing standard financial industry practices where future expected
cash flows are discounted at discount rates based on the interest rate and credit conditions prevailing in the financial
markets as of the valuation date. Notably, for fixed rate instruments, contractual cash flows are discounted at an
appropriate yield to maturity. For floating rate instruments, future expected contractual interest payments represent the
sum of future expected levels of the reference interest rate index and the instrument’s quoted margin, whereas discount
rates represent the sum of future expected levels of the reference index and an appropriate discount margin. Appropriate
yields to maturity and discount margins are estimated utilizing the available quoted or indicative pricing of individual debt
instruments or indices whose credit is deemed comparable to the debt instruments being evaluated.
Interest rate swaps
The fair value is calculated as the present value of the estimated future cash flows. Estimated cash flows are discounted
using a yield curve constructed from similar sources and which reflects the relevant benchmark interbank rate used by
market participants for this purpose when pricing interest rate swaps. The fair value estimate is subject to a credit risk
adjustment that reflects the credit risk of the Corporation and of the counterparty.
Foreign exchange forwards
The fair value is calculated as the present value of the estimated future cash flows, representing the differential between
the value of the contract at maturity and the value determined using the exchange rate the financial institution would use if
the same contract was renegotiated at the statement of financial position date. The fair value estimate is subject to a
credit risk adjustment that reflects the credit risk of the Corporation and of the counterparty, considering the offsetting
agreements, as applicable.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p167
(in thousands of Canadian dollars, except as noted and amounts per share)
Power hedges
The fair values of the power hedges are calculated using a discounted cash flow model. The fair value calculation of
power hedges gives rise to measurement uncertainty as the power price curves are constructed using various
methodologies and assumptions, which consider certain unobservable inputs. As at December 31, 2021, the forward
power prices used in the calculation of fair value were as follows:
With respect to the Phoebe power hedge, ERCOT South Hub forward power prices are expected to be in a range of
US$21.20 to US$83.08 per MWh between January 1, 2022 and June 30, 2031.
With respect to the Salvador power hedges, Polpaico node future power prices are expected to be in a range of US $4.09
to US$73.21 per MWh between January 1, 2022 and December 31, 2030.
Further information is provided below with regard to the methodology for constructing the forward power price curves.
Phoebe power hedge: The fair value of the power hedge is derived from forward power prices that are not based on
observable market data for the entirety of the contracted period. The power ERCOT South Hub forward price curves are
constructed using various assumptions depending on the following observable market data available as of the valuation
date: (1) a combination of observable exchange prices and over-the-counter broker quotes obtained through November
2030; (2) for the seven remaining months until June 2031, extrapolated prices based on the growth rate implicit in traded
NYMEX Natural Gas Futures prices.
Salvador power hedges: The fair value of the power hedges is derived from future power price forecasts that are not
based on observable market data. Such forecasts are constructed using various assumptions depending on historical
market prices, supply, demand and congestion volumes observed on the Chilean grid, as well as econometric models. In
addition, as the notional volume of the power hedges is not contractually fixed, the estimated volume is determined using
various assumptions such as the expected demand and volume of power to be successfully settled through the market
bidding process.
The fair value estimates are subject to a credit risk adjustment that reflects the credit risk of the Corporation or of the
counterparty.
The changes in the fair value of the derivative instrument are recognized in the consolidated statements of earnings (loss),
as change in fair value of financial instruments.
Interest rate benchmark reform
The Corporation holds interest rate swaps for risk management purposes that are designated in cash flow hedging
relationships. The interest rate swaps have floating legs that are indexed to either LIBOR, CDOR, or EURIBOR.
London Interbank Offered Rate ("LIBOR")
On March 5, 2021, the Financial Conduct Authority (UK), announced that all LIBOR settings for all currencies will either
cease or no longer be representative after i) December 31, 2021, for Sterling, Euro, Swiss Franc and Japanese Yen
LIBOR settings, and certain USD LIBOR tenors; and ii) June 30, 2023 for the USD LIBOR 1-month, 3-month, 6-month and
12-month tenors. The Corporation’s LIBOR swaps and cash flow hedging relationships extend beyond the anticipated
cessation date for LIBOR.
The Corporation has evaluated the extent to which its cash flow hedging relationships are subject to uncertainty driven by
the IBOR reform. The Corporation’s hedged items and hedging instruments continue to be indexed to LIBOR. The
benchmark rates are quoted each day and the LIBOR cash flows are exchanged with counterparties as usual.
There is uncertainty about when and how replacement may occur with respect to the relevant hedged items and hedging
instruments. Such uncertainty may impact the hedging relationship, which may experience ineffectiveness attributable to
market participants’ expectations of when the shift from the existing IBOR benchmark rate to an alternative benchmark
interest rate will occur. This transition may occur at different times for the hedged item and hedging instrument, which may
lead to hedge ineffectiveness. The Corporation has measured its hedging instruments indexed to LIBOR using available
quoted market rates for LIBOR-based instruments of the same tenor and similar maturity and has measured the
cumulative change in the present value of hedged cash flows attributable to changes in LIBOR on a similar basis. The
Corporation’s notional amount exposure to LIBOR designated in hedging relationships is US$312,179 ($395,780) as at
December 31, 2021.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p168
(in thousands of Canadian dollars, except as noted and amounts per share)
Canadian Dollar Offered Rate ("CDOR")
While CDOR is not anticipated to immediately be retired, the Bank of Canada expects its relevance to decline, like other
credit-based benchmarks, as markets globally move to risk-free rates. While the 1-month, 2-month and 3-month tenors
are not expected to be affected for the foreseeable future, the calculation and publication of the 6-month and 12-month
CDOR tenors ceased from May 17, 2021 onwards, with no impact for the Corporation.
Euro Interbank Offered Rate ("EURIBOR")
In 2019, the EURIBOR has been authorized by the competent authority under the European Union Benchmarks
Regulation. This allows market participants to continue to use EURIBOR for both existing and new contracts and the
Corporation expects that EURIBOR will continue to exist as a benchmark rate for the foreseeable future.
Financial risk management
The Corporation is exposed to a variety of financial risks: market risk (e.g. interest rate, foreign exchange, and power price
and others), credit risk and liquidity risk. The Corporation’s objective with respect to financial risk management is to secure
the long-term internal rate of return of its energy projects by mitigating uncertainty related to the fluctuation of certain key
variables.
Management is responsible for establishing controls and procedures to ensure that financial risks are managed within
acceptable levels. The Corporation does not use derivative financial instruments for speculative purposes.
a. Market risk
Market risk is related to fluctuations in the fair value or future cash flows of a financial instrument because of market price
variations. Market risk includes interest rate, foreign exchange, and power price risks.
(i)
Interest rate risk
Interest rate risk is the risk that the future cash flows or fair value of a financial instrument will fluctuate due to
changes in market interest rates. Financial assets and liabilities with variable interest rates expose the Corporation to
interest rate risk with respect to its cash flows. The risk that the Corporation will realize a loss as a result of a decline
in the fair value of any short‑term securities included in cash and cash equivalents and short-term investments is
limited because these investments, although readily convertible into cash, are generally held‑to‑maturity.
The Corporation’s cash flow exposure to interest rate risk relates principally to floating rate long-term loans and
borrowings. Management mitigates this risk by entering into fixed rate financing agreements or interest rate swap
agreements related to its floating rate financing agreements. From time to time, the Corporation may enter into bond
forward contracts to pre-hedge the interest rate risk related to future debt issuances by locking-in an interest rate
during the period leading to the execution of the financing agreement.
The Corporation has designated the following derivative financial instruments as cash flow hedges1:
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p169
(in thousands of Canadian dollars, except as noted and amounts per share)
Project
Notional
Currency 2
Variable
rate
Swap
Rate
Maturity
Early
termination
option
Notional Amounts
December
31, 2021
December 31,
2020
Corporate
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Alterra
Alterra
Hydroelectric segment
Ashlu Creek
Ashlu Creek
Fitzsimmons Creek
Duqueco
Coyanco
Wind segment
Rougemont 1
Rougemont 2
Rougemont 2
Vaites
Cartier
Mesgi'g Ugju's'n
Cholletz
Foard City
Foard City
Mountain Air
Solar Segment
Stardale
Phoebe
Kokomo
Spartan
Hillcrest
Pampa Elvira
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
EUR
EUR
EUR
EUR
CAD
CAD
EUR
USD
USD
USD
CAD
USD
USD
USD
USD
USD
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
LIBOR
LIBOR
2.18% 2027
2.33% 2028
2.33% 2028
2.33% 2024
2.30% 2024
4.25% 2031
1.89% 2029
1.92% 2029
2.08% 2034
2.12% 2034
2.24% 2049
2.19% 2049
2.16% 2023
2.32% 2023
4.70% 2035
4.70% 2035
2.85% 2041
1.05% 2033
1.01% 2031
EURIBOR 1.30% 2032
EURIBOR 1.30% 2032
EURIBOR 1.48% 2032
EURIBOR 1.28% 2032
2.83% 2032
1.91% 2026
EURIBOR 2.64% 2030
2.07% 2029
2.43% 2029
2.03% 2029
LIBOR
LIBOR
LIBOR
CDOR
CDOR
CDOR
LIBOR
LIBOR
LIBOR
LIBOR
LIBOR
3.60% 2032
3.07% 2037
1.85% 2026
2.31% 2024
0.95% 2041
1.90% 2022
2023
2023
2023
None
None
2022
2023
2023
2029
2023
2029
2029
None
None
2025
2025
2022
None
None
None
None
None
None
None
None
None
2026
2026
None
None
2026
None
None
2028
None
20,000
30,000
52,600
20,000
20,000
28,855
20,000
20,000
20,000
20,000
20,000
25,000
—
—
39,588
39,588
16,821
114,966
7,621
53,645
32,781
29,758
57,046
445,905
63,654
10,387
11,442
9,299
19,311
66,613
125,968
4,861
10,846
89,214
2,252
20,000
30,000
52,600
20,000
20,000
31,105
20,000
20,000
20,000
20,000
20,000
25,000
29,000
49,000
41,406
41,406
17,244
—
—
62,240
37,970
34,469
66,423
489,216
76,735
12,433
13,275
11,647
20,821
69,125
129,939
5,190
11,458
93,999
—
1. The Corporation applies a hedge ratio of 1:1 and determines the existence of an economic relationship between the hedging
instrument and hedged item based on the reference interest rates, maturities and the notional amounts. The Corporation
assesses whether the derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash
flows of the hedged item using the hypothetical derivative method.
2. USD swaps are converted at a fixed rate of CAD 1.2678 and EURO swaps are converted at a fixed rate of CAD 1.4391.
1,548,021
1,611,701
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p170
(in thousands of Canadian dollars, except as noted and amounts per share)
Sensitivities
A reasonably possible change of 10 basis points in interest rates at the reporting date would have increased
(decreased) earnings (loss) and other comprehensive income (loss) by the amounts shown below. This analysis
assumes that all other variables remain constant.
Earnings (loss)
Other comprehensive income
(loss)
10 bps
increase
10 bps
decrease
10 bps
increase
10 bps
decrease
150
(23)
8,568
(8,758)
51
(46)
10,795
(11,462)
December 31, 2021
Interest rate swaps
December 31, 2020
Interest rate swaps
(ii) Foreign exchange risk
Foreign exchange risk is the risk that future cash flows or fair value of a financial instrument will fluctuate because of
changes in foreign exchange rates, namely the U.S. dollar and Euro against the Canadian dollar.
The Corporation is exposed to transactional foreign currency risk to the extent that there is a mismatch between the
currencies in which sales, purchases, receivables and borrowings are denominated and the respective functional
currencies of the Corporation and its subsidiaries. Other than during the construction of renewable energy projects,
such transactional risks are limited, given the majority of transactions are made in the respective functional currencies
of the Corporation or its subsidiaries.
The Corporation has subsidiaries in Europe for which the revenues, net of the expenses incurred, are repatriated to
Canada. The Corporation's foreign exchange forwards are denominated in Euros. Repatriated funds that are not used
to service the Euro denominated foreign exchange forwards are converted into Canadian dollars at the exchange rate
in effect on the conversion date.
The Corporation has designated the following derivative financial instruments as net investment hedges1:
Contracts
Contracts used to hedge the foreign exchange risk
Foreign exchange forwards amortizing until 2041,
allowing conversion at a fixed rate of
CAD 1.7220/Euro
Foreign exchange forwards amortizing until 2042,
allowing conversion at a fixed rate of
CAD 1.7196/Euro
Foreign exchange forwards amortizing until 2041,
allowing conversion at a fixed rate of
CAD 1.6650/Euro
Foreign exchange forwards amortizing until 2043,
allowing conversion at a fixed rate of CAD
1.7516/Euro
Foreign exchange forwards amortizing until 2043,
allowing conversion at a fixed rate of CAD
1.7698/Euro
Maturity
Early
termination
option
Notional Amounts
December
31, 2021
December 31,
2020
2022
none
147,097
150,505
2022
none
42,817
44,353
2023
none
97,509
99,822
2023
none
143,753
149,247
2023
none
69,436
72,106
500,612
516,033
1. The Corporation applies a hedge ratio of 1:1. The Corporation determines the existence of an economic relationship between the
hedging instrument and hedged item based on the currency and notional amounts. The Corporation assesses whether the
derivative designated in each hedging relationship is expected to be effective in offsetting changes in cash flows of the hedged
item using the hypothetical derivative method.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p171
(in thousands of Canadian dollars, except as noted and amounts per share)
Sensitivities
A reasonably possible 1% strengthening (weakening) of the Euro against the Canadian Dollar at the reporting date
would have increased (decreased) earnings (loss) and other comprehensive income (loss) by the amounts shown
below. This analysis assumes that all other variables remain constant.
Earnings (loss)
Other comprehensive income
(loss)
1% increase
1% decrease
1% increase
1% decrease
(3,127)
3,126
(854)
855
(3,948)
3,997
(742)
695
December 31, 2021
Foreign exchange forwards
December 31, 2020
Foreign exchange forwards
(iii) Power price risk
Power price risk is the risk that future cash flows or fair value of a financial instrument will fluctuate because of
changes in market prices of electricity.
Most sales of electricity are made pursuant to long-term agreements where the offtakers are committed to take and
pay for the total production at pre-determined prices, up to certain annual limits and generally subject to annual
inflation. For some of the Corporation’s facilities, power generated is sold on the open market and supported by
power hedges to address market price risk exposure.
Phoebe power hedge
The Corporation is subject, under the Phoebe solar project, to a 12-year power hedge, effective from July 1, 2019 to
June 30, 2031. The power hedge was designated for hedge accounting purposes until September 30, 2019. In light of
new information, Management revised, effective October 1, 2019, its methodology to derive forward node prices in
order to more accurately reflect the basis differential risk, which resulted in the Phoebe power hedge no longer
meeting the hedge effectiveness criteria. The Phoebe power hedge is accounted for at fair value, with changes
recognized as changes in fair value of financial instruments. The unrealized net loss recognized as change in fair
value of financial instruments amounts to a $58,804 for the year ended December 31, 2021.
Sensitivities
A reasonably possible change of 10% in the forward ERCOT South Hub prices at the reporting date would have
increased (decreased) earnings (loss) and other comprehensive income (loss) by the amounts shown below. This
analysis assumes that all other variables remain constant.
December 31, 2021
Power hedge
December 31, 2020
Power hedge
Earnings (loss)
10 % increase
10% decrease
(25,672)
26,329
(18,541)
18,541
Salvador power hedges
On May 14, 2020, the Corporation acquired, when it acquired Salvador, a portfolio of synthetic power purchase
agreements ("PPA"), which act as power hedges. Salvador power hedges are accounted for at fair value, with
subsequent changes being recognized as change in fair value of derivative financial instruments. The unrealized net
gain recognized as change in fair value of financial instruments amounts to $$32 for the year ended December 31,
2021.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p172
(in thousands of Canadian dollars, except as noted and amounts per share)
Sensitivities
A reasonably possible change of 10% in the Polpaico node projected prices at the reporting date would have
increased (decreased) earnings (loss) and other comprehensive income (loss) by the amounts shown below. This
analysis assumes that all other variables remain constant.
December 31, 2021
Power hedge
December 31, 2020
Power hedge
(iv) Hedge accounting
Earnings (loss)
10 % increase
10% decrease
(1,312)
1,312
(1,065)
1,065
All the hedging instruments are accounted for in the current or non-current portion of derivative financial instruments
in the consolidated statements of financial position. As at December 31, 2021 the following items were designated as
hedging instruments to mitigate the interest rate risk and the foreign exchange risk:
Cash-flow hedges:
Interest rate risk
Interest rate swaps
Net investment hedges:
Foreign exchange risk
Foreign exchange forwards
Carrying amount of the hedging
instrument
Assets
Liabilities
Notional amount
of the hedging
instrument
1,431,644
6,089
(83,850)
88,411
4,408
(1,688)
The following table summarizes the impact of hedge ineffectiveness and hedging gains (losses) as at December
31, 2021:
Changes in fair
value of the
hedging
instrument
recognized in
other
comprehensive
income
Hedge
ineffectiveness
recognized in
profit or loss
Amount
reclassified from
the cash flow
hedge reserve to
profit or loss
80,569
735
(1,241)
—
—
3,337
Cash-flow hedge:
Interest rate risk
Interest rate swaps
Power price risk
Power hedge 1
Hedge of net investment in a foreign operation:
Foreign exchange risk
Foreign exchange forwards
(7,773)
—
—
1. The balance of cash flow hedge reserve relating to power price risk for which hedge accounting is no longer applied is $29,433.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p173
(in thousands of Canadian dollars, except as noted and amounts per share)
Ineffectiveness is accounted for in the change in fair value of financial instruments in the consolidated statements of
earnings.
For the hedge relationships covering the interest rate risk and the foreign exchange risk, ineffectiveness can result
from the credit valuation adjustment applied to the fair value of hedging derivatives as well as the designation of
hedging derivatives with a non-zero fair value at the inception of a hedging relationship.
b. Credit risk
Credit risk is the risk of financial loss to the Corporation that may arise from a party’s failure to meet its contractual
obligations. The maximum exposure to credit risk at the reporting date is the carrying value of the Corporation’s
financial assets.
(i) Cash and cash equivalents, restricted cash and reserves
As at December 31, 2021, the Corporation was holding cash and cash equivalents, restricted cash (Note 12) and
reserves included in other long-term assets (Note 18). The Corporation limits its counterparty credit risk on these
assets by dealing with highly rated, large Canadian financial institutions and, to a lesser degree, at major U.S. and
European financial institutions. The Corporation recorded no impairment on these financial assets.
(ii) Accounts receivable
Most of the Corporation's trade receivables relate to electricity sold to public utilities, including Hydro-Québec, British
Columbia Hydro and Power Authority, Hydro One Inc. and its affiliates, Idaho Power Company and Électricité de
France. These utility companies are highly rated by the various rating agencies.
Accounts receivable also include commodity taxes and investment tax credits which are receivable from
governments, mainly in relation with the development and construction of projects.
As at December 31, 2021, $5,434 ($9,547 in 2020) of trade and other receivables were more than 90 days overdue
and a total write-off of impaired receivables of $nil ($176 in 2020) was recorded during the year. Given that expected
credit losses are minimal, the expected credit losses by trade accounts receivable aging have not been presented.
(iii) Derivatives
A counterparty is deemed qualified to transact with the Corporation in interest rate or currency hedging transactions if
and so long as the counterparty is a bank, insurance company, investment dealer, investment bank or other financial
institution, or any affiliate of any of them whose long-term debt is rated ‘A-‘(stable) (or its equivalent) or better from
any of (i) Standard & Poor’s Corporation (ii) Moody’s Investor Services Inc. (iii) DBRS Limited or (iv) Fitch Ratings.
c. Liquidity risk
Liquidity risk relates to the capacity of the Corporation to meet liabilities as they become due. Certain covenants of
long-term borrowing contracts could prevent the Corporation from repatriating funds from certain subsidiaries.
Some hedging instruments have embedded early termination options. The triggering of these options could pose a
liquidity risk. Should the early termination option be triggered, a presumed realized loss would be offset by the
savings realized on future expenses, as a negative value would be the result of an environment in which actual rates
are more beneficial than the rates embedded in the swap.
The Corporation has a negative working capital of $344,850 as at December 31, 2021 (negative working capital of
$584,278 in 2020). The Corporation considers its current level of working capital to be sufficient to meet its needs,
considering that a total amount of $293,392 that would otherwise be classified as long-term was reclassified to the
current portion of long-term loans and borrowings (see Note 20). If necessary, the Corporation can use its revolving
credit facilities of which $252,954 was available as at December 31, 2021 ($457,806 in 2020). In addition, in the event
of lower revenue due to a decline in production or to a major equipment breakdown, the Corporation has available
reserve accounts (as described in Note 18) and is covered by insurance plans.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p174
(in thousands of Canadian dollars, except as noted and amounts per share)
The following table presents the contractual cash flows of the financial liabilities:
Non-derivative financial liabilities
Accounts payable and other payables
Long-term loans and borrowings1
Other liabilities
Lease liabilities
Derivative financial liabilities
Interests rate swaps
Power Hedge
Total
Less than 1 year
Between 1 year
and 5 years
Over 5 years
Total
174,364
326,811
1,783
10,178
—
2,339,595
9,266
—
4,335,633
31,210
174,364
7,002,039
42,259
42,087
202,781
255,046
24,360
7,937
545,433
38,881
11,070
2,440,899
20,048
(8,410)
4,581,262
83,289
10,597
7,567,594
1. As disclosed in Note 20, certain long-term loans and borrowings are subject to financial and non-financial conditions which could
result in certain contractual cash flows to be payable significantly earlier than indicated in the table above.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p175
(in thousands of Canadian dollars, except as noted and amounts per share)
28. COMMITMENTS
a. Power Purchase Agreements
Quebec facilities
Under PPAs with terms varying from 20 to 25 years and expiring between 2024 and 2046, Hydro-Québec agreed to
purchase all of the electrical energy produced by the facilities and wind farms located in the Province of Quebec. Certain
facilities have an agreed maximum quantity of electricity and a minimum quantity of electricity to deliver during each of the
consecutive 12-month periods. Expiring PPA's are being renegotiated under the renewal rights of the Corporation.
The PPA for the Ste-Marguerite facility reached the end of its initial 25-year term in December 2018. In 2021, the
Corporation renewed for an additional 25-year term the initial PPA with Hydro-Québec.
The PPA for Montmagny reached the end of there inital 25-year term in may 2021. In 2021, the Corporation renewed for
an additional 25-year term the initial PPA with Hydro-Québec.
The PPA for Portneuf reached the end of there inital 25-year term in May 2021. The Corporation sent to Hydro-Québec its
notice of automatic renewal for an additional 25-year term. Discussions on the renewal terms and conditions are
underway, in accordance with the renewal process of the initial PPA.
British Columbia facilities
Under PPAs with terms varying from 20 to 40 years and expiring between 2023 and 2057, British Columbia Hydro and
Power Authority agreed to purchase all of the electrical energy produced by the facilities located in the Province of British
Columbia.
On April 16, 2018, the Corporation and Sekw’el’was Cayoose Creek Band announced that they reached an agreement
with BC Hydro for the renewal of the Walden North Facility’s electricity purchase agreement (the “Walden EPA Renewal”).
Cayoose Creek Power Limited Partnership and BC Hydro agreed to terminate the Walden EPA Renewal pursuant to its
terms and to continue to transact pursuant to the terms of the original electricity purchase agreement initially entered into
between BC Hydro and ESI Power Corp., dated August 16, 1990 and the forbearance agreement initially entered into
between BC Hydro and ESI Power-Walden Corporation, dated April 1, 2014. The Corporation expects EPA negotiations to
resume with BC Hydro shortly as BC Hydro filed its new Integrated Resource Plan with the BCUC.
On April 16, 2018, the Corporation announced that it reached an agreement with BC Hydro for the renewal of the EPA of
the Brown Lake Facility for a 40-year term (the “Brown Lake EPA Renewal”). The Corporation and BC Hydro amended the
Brown Lake EPA Renewal as suggested by the BCUC so that the Brown Lake EPA Renewal would have a term no longer
than three years and ending on October 31, 2022. The amended Brown Lake EPA Renewal was submitted by BC Hydro
to the BCUC for acceptance and was accepted by the BCUC.
Ontario facilities
Under PPAs with terms varying from 20 to 30 years and expiring between 2025 and 2032, Hydro One inc. and its affiliates
agreed to purchase all of the electrical energy produced by the facilities located in Ontario.
Europe facilities
Under PPAs with terms of 15 years expiring between 2024 and 2032, Électricité de France and S.I.C.A.E Oise agreed to
purchase all of the electrical energy produced by the facilities located in France.
USA facilities
Under a PPA with a 35-year term and expiring in 2030, Idaho Power Company agreed to purchase all of the electricity
produced by Horseshoe Bend Hydroelectric Corporation.
Under PPAs with terms of 20 to 25 years expiring between 2036 and 2042, clients agreed to purchase all of the electricity
produced by the Kokomo and Spartan solar facilities.
Under a PPA with a 15-year term and expiring in 2034, a client agreed to purchase all of the electricity produced by the
Hillcrest solar facility.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p176
(in thousands of Canadian dollars, except as noted and amounts per share)
Under a PPA with a 20-year term and expiring in 2033, Idaho Power Company agreed to purchase all of the electricity
produced by the Mountain Air wind farm facilities.
Under a PPA with a 6-year term and expiring in 2027, Niagara Mohawk Power Corporation agreed to purchase all of the
electricity produced by the Curtis Mills and Palmer Falls hydro facilities located in the state of New York.
Chile facilities
Under a PPA with a 10-year term and expiring in 2023, Codelco, Gabriela Mistral Division agreed to purchase all of the
electricity produced by the Pampa Elvira solar facility located in Chile. the management of the company is in a negotiation
for the extension of the contract with Codelco Gabriela Mistral Division for a period of at least 7 years from the expiration
of the current contract for the same services that are currently provided.
Under a PPA with terms varying from 4 to 8-years and expiring between 2022 and 2026 the clients agreed to purchase all
of the electricity produced by the Peuchen and Mampil Hydro facilities located in the Bio-Bio region, Chile.
Under a PPA with terms varying from 2 to 4-years and expiring between 2025 and 2026 the clients agreed to purchase all
of the electricity produced by the Guayacan Hydro facility located in Chile.
b. Other Commitments
(i) Hydroelectric facilities
The Corporation and its subsidiaries entered into royalties and other commitments related to surrounding municipalities,
land owners and the operation of the hydroelectric facilities.
Ashlu Creek facility
The ownership of the assets of the project will be transferred to a First Nation in 2049 for a nominal financial
consideration.
Boulder Creek facility
40% of the Corporation's ownership of the project will be transferred to the First Nation partner in 2057 for no financial
consideration.
Big Silver facility
A 50% ownership of the assets of the project will be transferred to one of the First Nations partners in 2056 for no financial
consideration.
Glen Miller facility
Glen Miller Power, Limited Partnership entered into a 30-year lease agreement, ending in December 2035, for the site that
is in commercial operation. The lease has a 15-year extension option upon terms and conditions to be negotiated.
Glen Miller Power, Limited Partnership is committed to remit the facility to the lessor of the site, at the end of the lease
agreement, for no consideration.
Harrison Hydro L.P.
The ownership of Douglas Creek Project L.P. and Tipella Creek Project L.P. will be transferred to a First Nation in 2069 for
no financial consideration.
Kwoiek Creek facility
The Corporation's ownership of the project will be transferred to the First Nation partner in 2054 for no financial
consideration.
Rutherford Creek facility
Rutherford L.P. agreed to make payments to the former owners, following the expiry of the Rutherford Creek PPA in 2024.
This payment is based on the difference between the then selling price of electricity and the last selling price of electricity
under the agreement, adjusted annually following the expiry of the agreement by 50% of the increase or decrease in the
CPI over the previous 12 months. This amount will correspond to 35% of the gross revenues attributable to the difference
for the 20-year period following the expiry of the power purchase agreement. After the 20-year period, that portion of the
payment will correspond to 30% of the gross revenues attributable to the difference. This commitment is secured by the
Rutherford L.P. facility but is subordinated to the term loan.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p177
(in thousands of Canadian dollars, except as noted and amounts per share)
Tretheway facility
50% of the Corporation's ownership will be transferred to a First Nation in 2055 for no financial consideration.
Upper Lillooet facility
40% of the Corporation's ownership of the project will be transferred to the First Nation partner in 2057 for no financial
consideration.
(ii) Wind farm facilities
The Corporation and its subsidiaries entered into royalties and other commitments related to amounts to set aside for the
dismantling of wind farm components, commitments to surrounding municipalities and land owners and the operation of
the wind farms.
Europe
The French subsidiaries entered into commitments related to land leases, maintenance and management contracts for the
operations of the wind farms.
(iii) Solar facilities
Stardale Solar L.P. and Phoebe Energy Project LLC have entered into contracts for the operations and maintenance of the
respective solar farms.
Hale Kuawehi Solar LLC has entered into a engineering , procurement, and supply agreement to construct the solar
project in Hawaii, U.S.
(iV) Storage facilities
Tonnerre Energie has entered into a engineering , procurement, and supply agreement to construct the storage project in
France.
c. Summary of commitments
As at December 31, 2021, the expected schedule of commitment payments is as follows:
Year of expected payment
Purchase obligations
Variable payments on lease contracts
Total
Under 1 year
1 to 5 years
Thereafter
Total
26,560
8,838
35,398
125,722
41,800
167,522
229,520
4,214
233,734
381,802
54,852
436,654
29. CONTINGENCIES
The Corporation is subject to various claims that arise in the normal course of business. Management believes that
adequate provisions have been made in the accounts where required. Although it is not possible to estimate the extent of
potential costs and losses, if any, management believes that the ultimate resolution of such contingencies will not have an
adverse effect on the financial position of the Corporation.
BC Hydro curtailment notices
In May 2020, Innergex received notices from BC Hydro in relation to six of the Corporation’s hydroelectric facilities in
British Columbia stating that BC Hydro would not accept and purchase energy under the applicable electricity purchase
agreements (“EPAs”) above a specified curtailment level for the period from May 22, 2020 to July 20, 2020. The specified
curtailment levels were 0.0 MW/h for the Jimmie Creek (accounted for using the equity method), Upper Lillooet River,
Northwest Stave River, and Boulder Creek facilities, 2.0 MW/h for the Tretheway Creek facility and 4.0 MW/h for the Big
Silver Creek facility.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p178
(in thousands of Canadian dollars, except as noted and amounts per share)
BC Hydro cited the current COVID-19 pandemic and related governmental measures taken in response to it as
constituting a “force majeure” event under the EPAs, and resulting in a situation in which BC Hydro was allegedly unable
to accept or purchase energy under the EPAs. The notices to Innergex followed public statements by BC Hydro regarding
measures it w taking to address the reduced electricity demand during the COVID-19 pandemic and related challenges to
the safe operation of its hydroelectric system.
Innergex disputes that the current pandemic and related governmental measures in any way prevent BC Hydro from
fulfilling its obligations to accept and purchase energy under the EPAs or enable it to invoke “force majeure” provisions
under the EPAs to suspend these obligations. Innergex acknowledges that BC Hydro retains “turn-down” rights under the
EPAs, which enable it to require Innergex to turn down or shut off its facilities in certain circumstances, including in order
to avoid a safety or stability risk. Where BC Hydro exercises this right, it is required under the EPAs to compensate
Innergex for energy that would have been produced at the facilities in the absence of the curtailment. Innergex has
complied with BC Hydro’s curtailment request, but has done so under protest, seeking to enforce its rights under the EPAs
on the basis described above. For the period from May 22, 2020 to July 20, 2020, actual eligible energy revenue that
would have been produced at the facilities in the absence of the curtailment amounts to $12,456 ($14,183 on a Revenues
Proportionate1 basis), respectively. The dispute is expected to conclude in 2022.
Harrison Hydro L.P. Water Rights
On March 23, 2017, the Comptroller of the Water Rights issued adjusted rental statements to the Harrison Hydro L.P. and
its subsidiaries for the years 2011 and 2012 for an amount of $3,181 in aggregate regarding water rental rates to be
charged under the Water Act. The amount claimed was paid under protest and Harrison Hydro L.P. and its subsidiaries
filed a notice of appeal of the decision to the Environmental Appeal Board.
On July 26, 2019, the Environmental Appeal Board of British Columbia rendered a decision granting the appeal and
ordering the Comptroller of Water Rights to reimburse to each of the Limited Partnerships its proportionate share of the
adjusted water rental amounts of $3,181 overcharged to Harrison Hydro L.P. and its subsidiaries for the years 2011 and
2012. On November 22, 2019, the Environmental Appeal Board of British Columbia rendered another decision confirming
that the sum will accrue interest starting June 28, 2017 until the date it is refunded. On January 20, 2020, the Comptroller
of Water Rights filed with the Supreme Court of British Columbia a petition for judicial review of the Environmental Appeal
Board’s order to return the amount in water rental fees to Harrison Hydro L.P. and its subsidiaries, with interest. On
January 31, 2020, the Comptroller of Water Rights transferred an amount of $3,318, representing the principal of $3,181
with interest accrued between June 28, 2017 and January 31, 2020, to a trust account established by Harrison Hydro L.P.
and its subsidiaries’ external legal counsel, bearing interest in favor of the Appellants. The Limited Partnerships have filed
their response to petition on April 14, 2020. The hearing took place in Victoria in the last week of September 2020. A
decision was rendered on February 9, 2021 by the Supreme Court of British Columbia, which concluded that the
Environmental Appeal Board's decision was reasonable, and dismissed the Comptroller of Water Rights' petition
accordingly. The Comptroller of Water Rights subsequently appealed the decision of the Supreme Court of British
Columbia, which was unanimously dismissed by the British Columbia Court of Appeal on January 7, 2022. The
Corporation recognized the amount of $3,181 in the consolidated statements of earnings (loss) during the year ended
December 31, 2019. A total amount of $3,384, including interests, is receivable as at December 31, 2021.
February 2021 Texas Events
In February 2021, unprecedented extreme winter weather conditions and related electricity market failure paralyzed the
state of Texas, United States. These unprecedented extreme winter weather events pushed the Texas Government to
declare disaster and the US Government to declare a state of emergency. The storm disturbed production, transmission
and distribution of power, severely impacting prices. Because of the disturbance, wholesale electricity prices in the Electric
Reliability Council of Texas (ERCOT) reached their cap of US$9,000 per MWh and remained at such a level for a
prolonged period of time. The February 2021 Texas Events lasted from February 11 to February 19, 2021. The combined
effect of supply interruptions, abnormal market pricing conditions and contractual obligations to supply a predetermined
daily generation under the power hedges, have had a net unfavourable impact at the Corporation's Phoebe solar facility
located in Winkler County, Flat Top wind facility in Mills County, and Shannon wind facility in Clay County.
Phoebe
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of the
power hedge of the Phoebe facility in February, which was rejected by the recipient.
1 Revenues Proportionate is not a recognized measure under IFRS and therefore, may not be comparable to those presented by other
issuers. Please refer to Note 32, Segment Information, for more information.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p179
(in thousands of Canadian dollars, except as noted and amounts per share)
On July 19, 2021, Innergex reached an agreement to settle the amounts that remained unpaid by the Phoebe solar facility
following the February 2021 Texas Events. The aggregate cash disbursement of US$23,956 ($29,691) comprises the
agreed-upon settlement payment for the amounts disputed following the February 2021 Texas Events, and a payment on
the project’s tracking account balance1, net of unpaid energy sold by the project during the negotiation process.
1. Renewable energy projects selling energy under a power hedge structure are exposed to mismatch risk mainly driven by: (1) volume/
shape risk, which represents the risk of a shortfall in the actual energy produced in comparison to the contractual hourly quantities; and
(2) basis risk, which represents a price differential risk between hub and node per MWh of contracted energy. To cover for temporary
unfavourable mismatches, counterparties provide projects with a tracking account; a working capital loan that is repaid with
subsequent favourable mismatches or cash payments
Flat Top and Shannon
As a consequence of the February 2021 Texas Events, a claim of Force Majeure was notified to the counterparty of the
power hedges of the Flat Top and Shannon facilities in February, which were rejected by the recipient. To preserve the
Corporation’s and its partners’ rights with regard to the Flat Top and Shannon facilities, court proceedings were initiated on
April 21, 2021. On May 20, 2021, the District Court of Harris County, Texas denied the temporary injunction application,
directing the counterparty to the power hedges for the Flat Top and Shannon wind facilities to suspend all remedies
against the projects, including foreclosure, arising from an alleged default of payment that was formally disputed by the
Innergex, following the February 2021 Texas Events.
The carrying amount of the Flat Top and Shannon investments was decreased to nil following the $53,758 and $58,851
respective impairment charges recognized by the Corporation through its share of loss of joint ventures and associates in
March 31, 2021. During the period ended June 30, 2021, the underlying assets and liabilities of the Flat Top and Shannon
investments were classified as disposal groups held for sale. In addition, following the classification as held for sale, the
deferred tax liabilities related to the Corporation's equity investments in Flat Top and Shannon were decreased to nil, with
$24,390 and $15,101 deferred tax recoveries, respectively.
On December 28, 2021, the Corporation completed the sale of its 51% interest in Flat Top for nominal amount. The
underlying assets and liabilities of the Shannon investment remain held for sale as at December 31, 2021, as the carrying
amount of its Class B shares will be recovered principally through a sale transaction. As required, the disposal groups are
measured at the lower of their respective carrying amounts and fair values less costs to sell, which is estimated to be nil,
on a net basis, as at December 31, 2021. On the basis that the project is non-recourse to the Corporation, the financial
exposure of the Corporation is limited to the non-cash impacts on the reversal of exchange differences in accumulated
other comprehensive income related to the project.
30. COVID-19
To combat the spread of the COVID-19, authorities in all regions where the Corporation operates have put in place
restrictive measures for businesses. However, with the exception of the curtailment notices received from BC Hydro, as
described in Note 29, Contingencies, these measures have not impacted the Corporation in a material way to date, as
electricity production has been deemed an essential service in every region where the Corporation operates. The
renewable power production is sold mainly through power purchase agreements with public utilities and corporate entities
with high credit ratings.
It is not excluded that current or future restrictive measures might have an adverse effect on the financial stability of the
Corporation’s suppliers and other partners, or on the Corporation’s operating results, financial position, liquidity or capital
expenditures. The issuance of permits and authorizations, negotiations and finalization of agreements with regard to
development and acquisition projects, construction activities and procurement of equipment could be adversely impacted
by the COVID-19 restrictive measures. The full potential impact of COVID-19 on the Corporation's business is unknown as
it may continue for an extended period and will depend on future developments that are uncertain and cannot be predicted
including, and without limitations, the duration and severity of the pandemic, the duration of government mitigation
measures, the effectiveness of the actions taken to contain and treat the disease, and the length of time it takes for normal
economic and operating conditions to resume.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p180
(in thousands of Canadian dollars, except as noted and amounts per share)
31. CAPITAL MANAGEMENT
The Corporation's strategy in managing its capital is: (i) to develop or acquire high-quality renewable power production
facilities that generate sustainable and stable cash flows, with the objective of achieving a high return on invested capital,
and (ii) to distribute a stable dividend.
The Corporation seeks to achieve its objectives by:
• Maintaining the generating capacity and enhancing the operation of its hydroelectric facilities, wind farms and solar
farms; and
Acquiring and developing new renewable electricity generating facilities.
•
The Corporation maintains its generating capacity by investing the necessary funds to maintain and continually upgrade
its equipment. The Corporation also invests amounts on an annual basis in major maintenance reserve in order to fund
any major maintenance of hydroelectric facilities, wind farms or solar farms which may be required to preserve the
Corporation's generating capacity.
The Corporation determines the amount of capital required, and its allocation between debt and equity, for the acquisition
and development of new electricity-generating facilities by considering the specific characteristics of stability and growth of
each facility. This determination is made in order to distribute a stable dividend while maintaining an acceptable level of
indebtedness.
The Corporation has a hydrology/wind power reserve. This reserve could be used in the event that the net available cash
for any given year is less than expected, due to normal changes in hydrology or wind conditions or other unpredictable
factors.
The Corporation's capital is composed of long-term loans and borrowings and shareholders' equity. Total capital amounts
to $6,285,115 as at December 31, 2021.
The Corporation uses equity primarily to finance the development of projects. The Corporation uses long-term loans and
borrowings to finance the construction of its facilities. The Corporation expects to finance 70% to 85% of its construction
costs mostly through non-recourse long-term debt financing or, for qualifying projects in the United States, through tax
equity financing.
Future development and construction of new facilities, development of projects, expenses on prospective projects and
other capital expenditures will be financed out of cash generated from the Corporation's operating facilities, borrowings
and/or issuance of additional equity. To the extent that external sources of capital, including issuance of additional
securities of the Corporation, become limited or unavailable, the Corporation's ability to make necessary capital
investment to construct new or maintain existing project facilities will be impaired. There is no certainty that sufficient
capital will be available on acceptable terms to fund further development or expansion.
Under the terms of the Revolving credit facilities, the Corporation needs to maintain a leverage ratio and an interest
coverage ratio. If the ratios are not met, the lender has the ability to recall the facility.
Regarding the respective non-recourse projects financing, some subsidiaries of the Corporation need to maintain
minimum debt coverage ratios. If the ratios of a particular project financing are not met, the lenders could have the ability
to recall the particular debt. Certain financial restrictive clauses could prevent the subsidiaries from making distributions to
the Corporation.
All debt covenants are monitored on a regular basis by the Corporation. As at December 31, 2021, the Corporation and
its subsidiaries have met all material financial and non-financial conditions, unless indicated below, related to their credit
agreements, trust indentures and PPAs. Were they not met, certain financial and non-financial covenants included in the
credit agreements, trust indentures, PPAs entered into by various subsidiaries of the Corporation could limit the capacity
of these subsidiaries to transfer funds to the Corporation. These restrictions could have a negative impact on the
Corporation's ability to meet its obligations. As at December 31, 2021, the Phoebe, Beaumont, Vallottes and Duqueco
facilities were in breach of their credit agreements (See Note 20 – Long-term loans and other borrowings for details).
The Corporation's capital management objectives, policies and procedures are to ensure the stability and sustainability of
the dividend payable to its shareholders and the development or acquisition of power production facilities.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p181
(in thousands of Canadian dollars, except as noted and amounts per share)
32. SEGMENT INFORMATION
Operating segments
The Corporation produces and sells electricity generated by its hydroelectric, wind and solar facilities to publicly-owned
utilities or other creditworthy counterparties. The Corporation’s Management analyzes the results and manages operations
based on the type of technology, resulting in different cost structures and skill set requirements for the operating teams.
The Corporation consequently has three operating segments: (a) hydroelectric power generation (b) wind power
generation and (c) solar power generation.
"Revenues Proportionate" are Revenues plus Innergex's share of Revenues of the operating joint ventures and
associates, other income related to PTCs, and Innergex's share of the operating joint ventures and associates' other
income related to PTCs. “Adjusted EBITDA” represents net earnings (loss), to which are added (deducted) income tax
expense (recovery), finance costs, depreciation and amortization, impairment charges, other net income, share of
(earnings) loss of joint ventures and associates, and change in fair value of financial instruments. "Adjusted EBITDA
Proportionate" represents Adjusted EBITDA plus Innergex’s share of Adjusted EBITDA of the operating joint ventures and
associates, other income related to PTCs, and Innergex's share of the operating joint ventures and associates' other
income related to PTCs. Revenues Proportionate, Adjusted EBITDA and Adjusted EBITDA Proportionate are not
recognized measures under IFRS and have no standardized meaning prescribed by IFRS. They may therefore not be
comparable to similar measures presented by other issuers. Readers are cautioned that Revenues Proportionate,
Adjusted EBITDA and Adjusted EBITDA Proportionate should not be construed as an alternative to net earnings (loss), as
determined in accordance with IFRS.
Except for Revenues Proportionate, Adjusted EBITDA and Adjusted EBITDA Proportionate described above, the
accounting policies for these segments are the same as those described in the significant accounting policies. The
Corporation accounts for inter-segment and management sales at the carrying amount.
The below segment results exclude results from the Shannon and Flat Top joint venture facilities, from April 1, 2021
onwards, as a result of the projects' assets and liabilities being classified as disposal groups held for sale.
Year ended December 31, 2021
Operating segments
Hydroelectric
Wind
Solar
Segment revenues
Innergex's share of revenues of joint ventures and
associates
PTCs and Innergex's share of PTCs generated
Segment Revenues Proportionate
277,302
349,786
120,120
50,547
—
327,849
60,489
54,018
464,293
885
—
121,005
Segment
results
747,208
111,921
54,018
913,147
Segment Adjusted EBITDA
Innergex's share of Adjusted EBITDA of joint ventures and
associates
PTCs and Innergex's share of PTCs generated
Segment Adjusted EBITDA Proportionate
212,436
276,859
103,702
592,997
38,547
—
250,983
54,989
54,018
385,866
554
—
104,256
94,090
54,018
741,105
Segment Adjusted EBITDA Margin
76.6 %
79.2 %
86.3 %
79.4 %
As at December 31, 2021
Hydroelectric
Wind
Solar
Segment
totals 1
Investments in joint ventures and associates
Property, plant and equipment acquired through business
acquisitions
Transfer of assets upon commissioning
Acquisition of property, plant and equipment during the year
1. Segment totals include only operating projects.
108,911
24,130
—
133,041
499,024
—
5,826
—
358,581
13,677
10,069
291,636
945
509,093
650,217
20,448
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p182
(in thousands of Canadian dollars, except as noted and amounts per share)
Year ended December 31, 2020
Operating segments
Hydroelectric
Wind
Solar
Segment revenues
Innergex's share of revenues of joint ventures and
associates
PTCs and Innergex's share of PTCs generated
Segment Revenues Proportionate
229,102
333,795
50,310
64,395
—
293,497
31,512
70,477
435,784
1,875
—
52,185
Segment
results
613,207
97,782
70,477
781,466
Segment Adjusted EBITDA
Innergex's share of Adjusted EBITDA of joint ventures and
associates
PTCs and Innergex's share of PTCs generated
Segment Adjusted EBITDA Proportionate
173,869
263,945
39,214
477,028
49,826
—
223,695
16,840
70,477
351,262
1,076
—
40,290
67,742
70,477
615,247
Segment Adjusted EBITDA Margin
75.9 %
79.1 %
77.9 %
77.8 %
As at December 31, 2020
Hydroelectric
Wind
Solar
Segment
totals 1
Investments in joint ventures and associates
Property, plant and equipment acquired through business
acquisitions
Acquisition of property, plant and equipment during the year
150,009
227,422
12,732
390,163
—
637
22,614
1,347
61,022
1,620
83,636
3,604
1. Segment totals include only operating projects.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p183
(in thousands of Canadian dollars, except as noted and amounts per share)
The following table presents a reconciliation of the non-IFRS measures to their closest IFRS measures:
Revenues
Innergex's share of revenues of joint ventures and associates
PTCs and Innergex's share of PTCs generated
Revenues Proportionate
Net loss
Income tax (recovery) expense
Finance costs
Depreciation and amortization
Impairment of long-term assets
EBITDA
Other net income
Share of losses of joint ventures and associates
Change in fair value of financial instruments
Adjusted EBITDA
Unallocated expenses:
General and administrative
Prospective projects
Segment Adjusted EBITDA
Innergex's share of Adjusted EBITDA of joint ventures and associates
PTCs and Innergex's share of PTCs generated
Segment Adjusted EBITDA Proportionate
Year ended December 31
2020
2021
747,208
111,921
54,018
913,147
(185,394)
(26,240)
252,255
255,640
36,986
333,247
(89,621)
189,889
92,122
525,637
39,993
27,367
592,997
94,090
54,018
741,105
613,207
97,782
70,477
781,466
(29,111)
18,897
233,143
228,526
26,659
478,114
(65,554)
7,524
2,025
422,109
38,211
16,708
477,028
67,742
70,477
615,247
Segment Adjusted EBITDA Margin
79.4 %
77.8 %
Geographic segments
As at December 31, 2021, excluding its investments in joint ventures and associates which are accounted for as equity
method, the Corporation had interests in the following operating assets: 33 hydroelectric facilities, 8 wind farms and 1
solar farm in Canada, 16 wind farms in France, and 3 hydroelectric facility, 8 wind farms and 4 solar farms in the United
States, and 4 hydroelectric facilities and 3 solar farm in Chile. The Corporation operates in four principal geographical
areas, which are detailed below:
Revenues
Canada
United States
France
Chile
Year ended December 31
2020
2021
433,192
187,332
88,593
38,091
747,208
439,224
73,802
95,485
4,696
613,207
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p184
(in thousands of Canadian dollars, except as noted and amounts per share)
As at
Non-current assets, excluding derivative financial instruments and
deferred tax assets 1
December 31, 2021 December 31, 2020
Canada
United States
France
Chile
1. Includes the investments in joint ventures and associates
Major Customers
3,390,029
2,301,353
801,752
423,856
6,916,990
3,504,403
1,978,363
922,330
166,881
6,571,977
A major customer is defined as an external customer whose transactions with the Corporation amount to 10% or more of
the Corporation's annual revenues. The Corporation has identified three major customers. The sales of the Corporation to
these major customers are the following:
Major customer
Segment
Hydro-Québec
British Columbia Hydro and Power authority
Électricité de France
Hydroelectric and wind
Hydroelectric generation
Wind
Year ended December 31
2021
2020
219,942
187,973
88,593
496,508
244,505
172,722
92,261
509,488
33. COMPARATIVE FIGURES
Certain reclassifications have been made to the prior year's consolidated financial statements.
During the year ended December 31, 2021, the deferred tax liabilities recognized related to the acquisition of Mountain Air
Alternatives, LLC on July 15, 2020, and the corresponding goodwill which arose from the recognition of the deferred tax
liabilities, were revised downward by an amount of $12,634. As a result, these line items have been amended in the
statement of financial position and the related notes to the financial statements.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p185
(in thousands of Canadian dollars, except as noted and amounts per share)
34. SUBSEQUENT EVENTS
Acquisition of San Andrés SpA
Innergex has completed on January, 28, 2022 the acquisition of the 50.6 MW San Andrés solar farm in Chile ("San Andrés").
The facility, commissioned in 2014, is located in the Atacama Desert in northern Chile. San Andrés was acquired for a total
consideration of US$25,772 ($32,730), net of cash acquired. The facility is expected to produce a gross long-term average of
approximately 118.9 GWh per year.
Acquisition of Aela Generación S.A. and Aela Energía SpA
On February 3, 2022, Innergex has entered into an agreement to acquire 100% of the ordinary shares of Aela Generación S.A.
and Aela Energía SpA (together “Aela”), a 332 MW portfolio of three newly-built operating wind assets in Chile, for a purchase
price of US$685,528 ($870,621), including the assumption of US$385,528 ($489,621) of existing debt, subject to customary
closing adjustments. This acquisition is expected to be completed in Q2 2022.
On February 10, 2022, Innergex has entered into two foreign exchange forward contracts with an aggregate notional amount
of US$100,000 ($126,805) to manage its exposure to exchange rate fluctuations related to the purchase price. In addition, in
order to manage its exposure to the risk of increasing interest rates on a portion of the expected refinancing of the non-
recourse debt assumed in the acquisition and at Innergex’s existing Chilean projects, Innergex has entered into two forward
start interest rate swaps on February 17 and February 18, 2022, respectively, with an aggregate notional amount of
US$172,824 ($219,106).
Closing of equity offering
As part of the public offering closed on February 22, 2022 the Corporation issued 9,718,650 common shares at a price of
$17.75 for cash proceeds of $172,506. Concurrently with the closing of the public offering, Hydro-Québec subscribed
2,100,000 common shares of the Corporation for cash proceeds of $37,275.
Innergex Renewable Energy Inc.
Annual report 2021
Notes to the Consolidated Financial Statements p186
(in thousands of Canadian dollars, except as noted and amounts per share)
SHAREHOLDER INFORMATION
Head Office
1225 St-Charles West,
10th floor
Longueuil QC J4K 0B9
Tel. 450 928.2550
Fax 450 928.2544
innergex.com
Investor Relations
Jean-François Neault
Chief Financial Officer
Tel. 450 928-2550 x1207
inverstorrelations@innergex.com
Transfer Agent and Registrar
For information
concerning share
certificates, dividend
payments, a change of
address, or electronic
delivery of shareholder
documents, please
contact:
Computershare Investor
Services Inc.
1500 Robert-Bourassa
Blvd, Suite 700
Montreal QC H3A 3S8
Tel. 1 800 564.6253
514 982.7555
service@computershare.com
Common Shares - TSX: INE
Innergex Renewable Energy Inc. had 192,493,999
common shares outstanding as at December 31,
2021, with a closing price of $18.60 per share.
Series A Preferred Shares - TSX: INE.PR.A
Innergex Renewable Energy
Inc. currently has
3,400,000 Series A preferred shares outstanding, with
a nominal value of $25 and a fixed cumulative
preferential annual cash dividend of $0.8110 per
share, payable quarterly on the 15th day of January,
April, July and October. Series A preferred shares are
redeemable by the Corporation since January 15,
2021.
Series C Preferred Shares - TSX: INE.PR.C
Innergex Renewable Energy
Inc. currently has
2,000,000 Series C preferred shares outstanding,
fixed-rate
with a nominal value of $25 and a
cumulative preferential annual cash dividend of
$1.4375 per share, payable quarterly on the 15th day
of January, April, July and October. Series C preferred
shares are redeemable by the Corporation since
January 15, 2018.
Convertible Debentures - TSX: INE.DB.B
Inc. currently has
Innergex Renewable Energy
convertible debentures outstanding for an aggregate
principal amount of $148.0 million, bearing interest at
a rate of 4.75% per annum, payable semi-annually on
June 30 and December 31 of each year, commencing
on December 31, 2018. The debentures are
Innergex
the holder's option
convertible at
common shares at a conversion price of $20.00 per
share, representing a conversion rate of 50 common
shares per each thousand dollars of principal amount
of debentures. The debentures will mature on
June 30, 2025 and are redeemable since June 30,
2021.
into
Convertible Debentures - TSX: INE.DB.C
Innergex Renewable Energy
Inc. currently has
convertible debentures outstanding for an aggregate
principal amount of $142.1 million, bearing interest at
a rate of 4.65% per annum, payable semi-annually on
October 31 and April 30 of each year, commencing on
April 30, 2020. The debentures are convertible at the
holder's option into Innergex common shares at a
conversion price of $22.90 per share, representing a
conversion rate of 43.6681 common shares per each
thousand dollars of principal amount of debentures.
The debentures will mature on October 31, 2026 and
will not be redeemable before October 31, 2022.
Credit Rating by Fitch Rating
Innergex Renewable Energy Inc.
Series A Preferred Shares
Series C Preferred Shares
BBB-
BB
BB
Dividend Reinvestment Plan (DRIP)
Innergex Renewable Energy Inc. offers a Dividend
Reinvestment Plan (DRIP) for its shareholders of
common shares. This plan enables eligible holders of
common shares to acquire additional common shares
of the Corporation by reinvesting all or part of their
cash dividends. For more information about the
Corporation's DRIP, please visit our website at
innergex.com or contact the DRIP administrator:
Computershare Trust Company of Canada. Please
note that if you wish to enrol in the DRIP but own your
shares
financial
institution, you must contact this intermediary and ask
them to enrol in the DRIP on your behalf.
through a broker or
indirectly
Independent Auditor
KPMG LLP
Ce document est disponible en français.
Pour la version numérique, visitez innergex.com
Pour la version papier, écrivez-nous à info@innergex.com