At a Glance / A Year in Highlights
At a Glance
538
employees
84
clean energy
facilities
4
countries
40
run-of-river
hydro facilities
35
wind
facilities
8
solar
facilities
1
battery energy
storage facility
4,184 MW
of net installed capacity
$8.6 B
Total Assets
10,792 GWh
of proportionate energy produced
A Year in
Highlights
January
Acquisition of San Andrés SpA, a 50.6 MW solar facility in Chile
February
Closing of $172.5 million bought deal equity financing and $37 million concurrent private placement
March
Sale of the Shannon wind facility in Texas
Launch of a partnership in a Hydrogen Research Chair with the Université du Québec à Trois-Rivières
April
May
June
July
August
Appointment of a new Chief Financial Officer
Two battery energy storage projects initiated in Chile for which battery systems were procured
Acquisition of Aela, three wind facilities in Chile for 332 MW of installed capacity
Innergex ranks 2nd in Canada’s Best 50 Corporate Citizens of 2022 by Corporate Knights
Commissioning of Innergex’s first stand-alone battery energy storage facility in France
Completion of Innergex’s Chilean portfolio refinancing with the issuance of CAN$912.6 million green
bonds in Chile
Signing of a long-term power purchase agreement for the Boswell Springs wind project in Wyoming, USA
September
Innergex holds its 2022 Investor Day
October
Acquisition of the remaining interests in Innergex’s wind portfolio in France adding 98.7 MW of net installed
capacity
November
Innergex issue its first Climate Assessment Report aligned with the Task Force on Climate-related Financial
Disclosures (“TCFD”)
December
Innergex receives bronze parity certifications by Women in Governance
Acquisition of the remaining interests in Innergex’s Mountain Air wind portfolio in Idaho adding 52 MW of net
installed capacity
At a Glance / A Year in Highlights
3
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
Financial KPIs
Production in comparison with Long-Term Average (“LTA”)
in megawatt/hours (“MWh”) and gigawatt/hours (“GWh”)
Revenues and Revenues Proportionate
Production and Production Proportionate
Adjusted EBITDA and Adjusted EBITDA Proportionate
Adjusted Net Earnings (Loss)
Free Cash Flow
Payout Ratio
Operational Key
Performance
Indicators
As at February 22, 2023,
the Corporation has four
geographic segments and
three operating segments.
Gross Installed Capacity by Country
Gross Installed Capacity by Source of Energy (MW)
France
7.7%
USA
29.9%
Hydro
Wind
Solar
2016
2017
2018
2019
2020
2021
2022
Key Figures
1,571
1,840
2,888
3,488
3,694
3,800
4,184
Canada
46.7%
Chile
15.7%
4
Financial Key
Performance
Indicators
Production and Production Proportionate (GWh)**
Production
Joint Ventures
9,590.1
9,853.4
10,792.0
8,073.9
9,055.2
10,254.0
2020
2021
2022
Revenues and Revenues Proportionate
Adjusted EBITDA and Adjusted EBITDA Proportionate ($M)**
Revenues
Joint Ventures
PTCs
Operating, General and Administrative
and Prospective Project Expenses
Adjusted EBITDA Proportionate
Adjusted EBITDA
913.1
673.7
525.6
995.8
696.4
584.9
781.5
560.3
422.1
613.2
191.1
747.2
221.6
870.5
285.6
2020
2021
2022
Cash Flows from Operating Activities and Free Cash Flow ($M)**
Cash Flows from Operating Activities
Free Cash Flow
235.1
93.3
265.5
2022 :
430.2
108.1
430.2
147.2
** Some of the 2021 key figures were impacted by the February 2021
Texas Events. Please refer to the “February 2021 Texas Events” section
for more information.
Key Figures
2020
Normalized 2021**
2022
5
Message to
Shareholders
Ready to Capitalize
on the Global
Energy Transition
The clean energy transition is here and will not be stopped. According to the International Energy Agency,
energy demand growth is expected to be met almost entirely by renewables as they become the largest
source of global electricity generation by 20251. And this is just the beginning.
Governments around the world are enacting new policies
to provide game-changing opportunities to drive the rapid
deployment of new renewable energy projects.
In Canada, the government is now developing regulations
to achieve its ambitious goal of a Net-Zero electricity supply
by 20352, with a proposal to implement a 30% Investment
Tax Credit for clean technologies including run-of-river,
wind, and solar as well as battery energy storage3. This is
likely to be a key driver for renewable energy projects in the
country, as provinces are expected to see the demand for
affordable electricity and a clean grid rising sharply.
In Quebec for example, utility Hydro-Québec anticipates
needs for an additional 100 TWh of clean electricity supply
by 20504. Coming from a province relying almost entirely on
non-emitting hydroelectricity, this shows us that the energy
transition is no longer just about cleaning electricity grids,
but about decarbonizing the entire energy system (including
heating systems, transportation, and industrial processes)
by using more clean electricity.
In the United States, the Inflation Reduction Act (“IRA”),
which includes a US$370 billion investment5 in clean energy
and solutions, brings a degree of long-term stability and
predictability to the sector that we have never seen before.
Over a 10-year horizon, attractive tax credits for wind, solar
and storage will render renewable energy more competitive
than ever and motivate utilities to add renewables in their
energy mix.
Russia’s illegal invasion of Ukraine in 2022 has also triggered
a global energy crisis. While prices for coal and methane
hit record levels and oil prices increased significantly, Europe
decided to accelerate its transition to renewable energy to
ensure access to sufficient clean and affordable energy
supplies. In this context, renewable energy is now becoming
synonymous with energy security and independence.
In France, the government is looking to add more
renewables to its energy mix, and measures to fast-track
development processes for renewable energy projects
are in discussion.
In Chile, the country has set an ambitious goal of converting
70% of its total energy consumption to renewables by 2030
and pledged to become carbon neutral by 20506. As a result,
the share of power generation from renewable sources
has reached 56% of all the energy produced in 2022,
compared to 46% in 20217, an impressive step forward.
In light of global shifts toward Net-Zero and transparency
around GHG emissions, the private sector is also driving
rapid demand for renewable electricity through corporate
Power Purchase Agreements (“PPAs”), while the financial
community is focusing on investing in clean infrastructure.
The market outlook for renewables is larger than ever
and will create abundant opportunities for renewable
energy players like Innergex to meet the growing demand.
We stand poised to meet these demands and look forward
with great optimism.
1 Source: https://iea.blob.core.windows.net/assets/830fe099-5530-48f2-a7c1-11f35d510983/WorldEnergyOutlook2t022.pdf
2 Source: https://www.canada.ca/en/environment-climate-change/services/canadian-environmental-protection-act-registry/achieving-net-zero-emissions-electricity-generation-discussion-paper.html
3 Source: https://www.budget.canada.ca/fes-eea/2022/report-rapport/chap2-en.html#a15
4 Source: https://www.hydroquebec.com/data/documents-donnees/pdf/plan-strategique.pdf?v=2022-03-25
5 Source: https://www.whitehouse.gov/wp-content/uploads/2022/12/Inflation-Reduction-Act-Guidebook.pdf
6 Source: https://www.weforum.org/agenda/2023/01/how-chile-is-becoming-a-leader-in-renewable-energy/
7 Source: http://generadoras.cl/prensa/la-electricidad-y-el-impulso-renovable-como-condicion-para-el-desarrollo
Message to Shareholders
6
Being Part
of the Solution
Despite worldwide challenges in the supply chain in 2022, our team successfully advanced greenfield
development and made significant strides on several projects.
Additionally, our team is actively pursuing development
and acquisition opportunities in Canada, the United States,
France and Chile. In total, we currently have 8,701 MW
of prospective projects in our portfolio, of which 1,093 MW
are at an advanced stage.
In Chile, we have become one of the largest pure-play
renewable energy producers in the country with the
acquisition of the San Andrés solar facility (50.6 MW)
and the Aela wind portfolio (332 MW). This allowed us to
complete a $1.032 billion investment-grade refinancing
of the Chilean portfolio non-recourse debt, the largest
private placement in Latin America in recent history.
We have also consolidated our position in France as well
as in our Mountain Air portfolio of wind assets in Idaho,
United States, by acquiring the remaining interests, to
generate additional accretive cash flows from assets
we already know and manage.
In terms of green hydrogen, we have launched the Innergex
Chair located at the Université du Québec à Trois-Rivières.
We hope this will help further develop the technology needed
to transition green hydrogen into viable long-term energy,
fuel and storage capabilities.
Thanks to our project development activities and acquisitions
throughout the year, we managed to increase our revenues
and adjusted EBITDA8.
In 2022, we commissioned Tonnerre, our first standalone
battery facility in France. This gave us valuable insights
and allowed us to fast-track our Salvador battery energy
storage system, a 50 MW/250 MWh (5-hour storage) project
in Chile, from development to construction in record time.
Another battery energy storage system in Chile, San Andrés
(35 MW/175 MWh, 5-hour storage), is also in development.
We are very proud of our growing storage portfolio and
the expertise we are gaining from it.
Construction at our 7.5 MW Innavik run-of-river hydro
project site is also progressing well, with several milestones
achieved, and a commissioning scheduled for Q3 2023.
This project embodies all of our values and is a proof that
our sustainable business model based on balancing the 3Ps
(People, Planet and Prosperity) can create wealth and be
good for the communities and the environment. This project
will not only bring economic benefits to the community,
it will also improve air quality by replacing the diesel,
currently use to produce electricity and heat houses, by
renewable energy.
In the United States, we are continuing to pursue
development in many states, especially with our Boswell
Springs wind project in eastern Wyoming, for which we
signed a 30-year PPA for 320 MW with PacifiCorp that will
deliver steady long-term returns. Other milestones reached
for this project include securing the procurement of GE
Renewable Energy wind turbine generators and completing
the permitting process and selection of the EPC contractor.
On-site construction activities will ramp up in the coming
months, and upon its commissioning targeted for Q4 2024,
the wind project should contribute to improving Innergex’s
free cash flow per share8.
8 These measures are 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 of this MD&A
for more information.
Message to Shareholders
7
Innergex’s
Competitive Edge
As renewable energy is entering a new age and production capacity is set to accelerate rapidly over
the next few years, Innergex will continue to be a key player to help transition energy systems globally
and create value.
To do this, Innergex will continue to rely on its best asset,
its employees. With over 30 years dedicated exclusively
to renewable energy, our team has accumulated the
experience, knowledge, and skills to take on the new
challenges the energy transition will bring.
continues its efforts to build resiliency, we are already
exploring mitigation solutions to optimize and maintain
availability of equipment and manage production with
fluctuating resource and market dynamics to maximize
revenues and mitigate impacts.
More than ever, being a responsible corporate citizen
drives our daily activities. Our Environmental, Social and
Governance (“ESG’’) performance is a pillar of our business
strategy, and we will continue to put People, our Planet
and Prosperity at the centre of everything we do.
In 2022, we launched our first Climate Assessment Report
aligned with the Task Force for Climate-Related Financial
Disclosures (“TCFD”) in an effort to release more information
on the risks and opportunities our company could face.
ESG is at the forefront of our business model and as we
implement and pursue initiatives, we also share a desire
to increase transparency on our practices.
Moreover, as a developer, builder, owner, and operator of
renewable energy facilities, we have extensive knowledge
of all aspects of the life cycle of a project and are more aware
of our impact at every stage. This allows us to manage our
assets in both a responsible and sustainable way.
As we have seen in the last few years especially, climate
change will have impacts on infrastructure and availability
of equipment and resources across the globe. As our team
Diversification across technologies and exposure to different
markets is also a key element in Innergex’s success. We
will continue to rely on acquisitions to further diversify our
portfolio and add cash accretive assets to balance cash flow
streams and support project development. Our acquisition
strategy brings quality additions to our existing portfolio, to
achieve material synergies that will increase performance
and reduce operating costs.
We are extremely proud of our team and all we have
accomplished during this past year. Their expertise and
passion for what Innergex stands for continues to inspire
us every day.
And to all our stakeholders, we thank you for your
unwavering support and participation to our successes.
We now turn our focus to making 2023 another successful
year during which we will continue working towards
achieving our Strategic Plan 2020-2025’s objectives.
Daniel Lafrance
Chair of the Board
Michel Letellier
President and Chief
Executive Officer
Message to Shareholders
8
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
Ross J. Beaty
Independent
Joined: February 2018
Pierre G. Brodeur
Independent
Joined: May 2020
Radha D. Curpen
Independent
Joined: December 2022
Nathalie Francisci
Independent
Joined: May 2017
Richard Gagnon
Independent
Joined: May 2017
Michel Letellier
Non-Independent
Joined: October 2002
Dalton McGuinty
Independent
Joined: May 2015
Monique Mercier
Independent
Joined: October 2015
Ouma Sananikone
Independent
Joined: February 2019
Louis Veci
Non-Independent
Joined: February 2020
Executive Management
Michel Letellier
President and Chief
Executive Officer
Joined: 1997
Jean Trudel
Chief Financial Officer
Joined: 2002
Yves Baribeault
Chief Legal Officer
and Secretary
Joined: 2009
Alexandra Boislard-Pépin
Chief Human Resources
Officer
Joined: 2020
Pascale Tremblay
Chief Asset Officer
Joined: 2021
Renaud de Batz
Senior Vice President -
Latin America
Joined: 2002
Patrick Beaudoin
Vice President -
Asset Optimization
and Procurement
Joined: 2018
Alex Couture
Vice President -
Development Canada
Joined: 2022
Jacques Desrochers
Vice President -
Information and
Operational Technologies
Joined: 2023
Matt Kennedy
Vice President
- Environment
Joined: 2011
Jaime Pino
Vice President
and Managing
Director - Chile
Joined: 2021
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
David Little
Vice President
and Managing
Director - USA
Joined: 2017
Niko Nikolaidis
Vice President -
Investments and
Financing
Joined: 2017
Julie Turgeon
Vice President -
Construction
Joined: 2023
Corporate Governance
9
Our ESG Commitments
Reflect Our Values
PEOPLE
Achieving Together
We work together to build the better world of tomorrow. Every day, our team collaborates to make
positive societal contributions while growing Innergex into a world leader in the renewable energy
sector. By providing our employees with the tools they need to succeed—a safe, inclusive, and dynamic
environment; a flexible work/life balance; fair and equitable compensation; generous benefits; career
development opportunities; and other perks—we are able to attract and retain a skilled and diverse
workforce and provide the leaders of tomorrow the chance to develop.
The physical and mental health of our employees is a key
priority. Promoting safe and secure working environments
is paramount to our daily operations. Our achievements
are accomplished together, and so is our safety. We look out
for each other, understand our responsibilities, and listen to
each other’s concerns. Overseen at the Senior Managmeent
level by the Chief Asset Officer, our Health and Safety
Management System has been structured in a Plan-Do-
Check-Act format which aligns to the recommendations
in ISO45001 Occupational Health and Safety Management
Systems Standard. Our target is to have zero lost days
due to injury and work-related fatalities.
Innergex promotes a culture where each employee – no
matter what level, role or responsibility – plays an active
role in creating an environment where people of diverse
backgrounds feel that their voice, views, ideas, and
contributions are heard and valued. Innergex has always
been an equal opportunity employer that provides
employees with a work environment free of discrimination
and harassment.
We are proud to provide a fair, equitable, and respectful
workplace where all employees are valued and given
recognition based on individual merit and are considered
for opportunities to advance and succeed. Our people
are our advantage and we would not be where we are
today without them.
Working collaboratively, learning collectively, and
communicating effectively, enables us to nurture
relationships and achieve our mission of building
a better world with renewable energy.
In 2022
31%
73%
of women
employees
of eligible employees
participated in
the Employee Share
Purchase Plan
Innergex’s approach
to employee satisfaction
• Diversity & Inclusion policy
• Paid sick leave
• Health & Safety policy
• Parental leave supplemental
• Whistle-Blowing policy
allowance
• Workplace Environment Free of
Harassment, Violence and Bullying
policy
• Employee Volunteer program
• Employee electric vehicle incentive
program
• Employee Share Purchase Plan
• Social events
• Retirement plan matching
• Summer hours program
contributions
• Telework policy
• Equal remuneration
• Advancing gender equality
• Career development opportunities
• Scholarships for employees’
children
Our ESG Commitments Reflect Our Values
10
PLANET
Following Our Passion
We are driven to make a positive impact. For over 30 years, Innergex has been developing and deploying
solutions to address the challenge of our time, climate change. Our renewable energy projects have
been and will continue to lead in the transition to a cleaner and more equitable world for all. We remain
committed to producing energy from 100% renewable sources while minimizing our footprint in our daily
activities. Our environmental performance is hardwired into our objectives and the results prove that we
are not only on the right path, but that everything we do matters. Building a better world with renewable
energy is in our DNA.
By harnessing the power of the sun’s rays, the natural flow
of water, and the motion of the air, we work with nature
to generate clean energy for a brighter future. Innergex is
committed to ensuring that the construction and operation
of facilities to harness these resources is conducted in
harmony with their host environments.
In 2022, Innergex released its first Task Force on Climate-
Related Financial Disclosures (“TCFD”) aligned climate
assessment report. This report outlines the risks and
opportunities for Innergex that climate change presents
to its operations. As we move forward, we expect these
disclosures to mature to reflect the evolving nature of
climate-related risks and opportunities and best practices.
It was developed with guidance from the TCFD, our
internal expertise, and an external consultant, and follows
a commitment we made in 2021 to further align our
disclosures with a globally recognized standard.
Our Sustainable Development Policy describes the
strategies to avoid, minimize and/or mitigate the effect
our facilities could have on local ecosystems. We also
consider remediation and restoration as a part of this
strategy for not only the land we build on, but adjacent
and protected areas.
As many of our projects are located in remote areas,
consideration of wildlife plays an important role in
the planning, construction and operation phases of our
projects. We have a successful record of partnering with
government, NGOs, conservation groups, academia and
local organizations to design and implement solutions
to mitigate human-wildlife interaction and disturbance of
important species.
In 2022
Environmental
Investments
of over
$2M
Total production of
10,792 GWh
of clean electricity
Innergex’s approach to
environmental management
• TCFD-aligned Climate
Assessment Report
• Sustainable Development policy
• Supplier Code of Conduct
• CDP Climate submissions
• SASB alignment
• UNSDGs alignment
• Climate change risk management
• GHG emission accounting
• Protecting biodiversity
• Stakeholder consultations
• Managing water resources
• Waste and hazardous waste
management programs
• Compliance with laws,
permits, and regulations
• Vegetation management
• Land management
Our ESG Commitments Reflect Our Values
11
PROSPERITY
Driving Opportunities
Our renewable energy projects often drive further economic and social opportunities in the communities
that host them. Whether through the establishment of community development funding, partnership
agreements, or our sponsorship and donation program, our impact in communities often brings tangible
and long-lasting benefits. Being a responsible, transparent, and active member in the communities that
host our projects is an important part of our development strategy. Sharing in the wealth we generate
moves us all forward and helps build resilient and autonomous communities.
When developing long-term relationships, it is imperative
that we understand and adapt to each community’s individual
needs and socio-economic priorities. Designed with clear
expectations, our partnerships are based on open lines
of communication and respect, and often act as a catalyst
for sustained prosperity.
Being a good neighbour is important to Innergex and we
take great pride in our track record of nurturing long-term
relationships with the communities where we conduct
operations. One of our Values, Get Involved, drives our
commitment to be a good neighbour and a responsible
corporate citizen by supporting the causes and efforts
that have a broader social impact. Our sponsorships and
donations have positively impacted communities and will
continue to do so. More than ever, we remain committed
to the values that have helped us share the benefits
renewable energy facilities generate.
As the country moves ahead on its path to reconciliation
with the Indigenous peoples of Canada, we continue to learn
about the injustices and trauma experienced by Indigenous
peoples. We believe that the private sector can play an
important role in reconciliation. We are grateful to have
the opportunity to draw on the knowledge and experience
of our Indigenous partners as we work to that harness the
power of water, sun and the wind sustainably.
When developing long-term relationships, it is imperative
that we understand and adapt to each community’s individual
needs and socio-economic priorities. Designed with clear
expectations, our partnerships are based on open lines of
communication and respect, and often act as a catalyst for
sustained prosperity.
In 2022
Close to
$3M
shared through
sponsorships,
donations and
voluntary
contributions
31 agreements
with Indigenous
communities
Innergex’s approach
to social well-being
• Safeguard and Promotion
of Human Rights policy
• Indigenous partnerships
• Sponsorship and Donation program
• Community social development
funding
• Community partnerships
• Legacy project funding
• Local contracting opportunities
• Contributing to local tax base
• Royalty agreements
• Employee Matching Donation
program
Our ESG Commitments Reflect Our Values
12
GOVERNANCE
Leading With Integrity
The members of our Board lead by example. Though each brings their own set of skills and experience
to the table, they all share a passion for renewable energy and a focus on conducting business activities
with the utmost integrity. These characteristics enable them to build and maintain trust among employees,
our partners, and our shareholders by fostering open and transparent decision-making guided by our core
principles and standards of behaviour.
The Board of Directors is composed of eleven members
– nine independent including the Chair, and two non-
independent, including the President and CEO. Board
members are recruited for their experience, skills, expertise,
and commitment to sustainable development. Three
committees, each composed of independent members and
chaired by experts in each committee’s oversight provide
ancillary advice and recommendations to the Board.
Our 17 policies ensure the sustainable growth of the
Corporation by supporting employees with information-
sharing and training, outlining our social and environmental
responsibilities, maintaining transparency with shareholders
and the public, and clearly laying out the Corporation’s vision
for ethical and acceptable behaviour.
In 2022, in response to Call to Action #92 from the Truth
and Reconciliation Commission of Canada, Innergex
amended its Safeguard and Promotion of Human Rights
Policy to include the principles laid out in UNDRIP.
As a renewable energy producer, we are keenly aware of
the importance our industry plays in people’s everyday
lives. Safeguarding the reliability and resiliency of the electric
grid, our intellectual property, and our offtaker information
is critical. Our IT department employs a comprehensive
cybersecurity program guided by our IT Security Policy, which
includes the industry standards, procedures, and controls to
mitigate the risk of incidents and breaches. We work diligently
to promote an internal culture that educates employees and
promotes awareness on cybersecurity issues.
In 2022
Combined
attendance at board
and committee
meetings
98%
36%
of Board members
were women
Innergex’s approach
to corporate governance
• Anti-Corruption and Anti-Bribery
Guidelines
• Board and committee
succession planning
• Board Diversity policy
• CEO Succession planning
• Code of Conduct and Ethicsline
• Board member recruitment
• Information Disclosure policy
• Insider Trading policy
• Majority Vote policy
and onboarding process
• Policy Regarding Minimum
Shareholding by Directors
and Officers
• Safeguard and Promotion of
• Yearly Board training
Human Rights
• Say on Pay policy
• Shareholder Engagement policy
• Whistle-Blowing policy
Our ESG Commitments Reflect Our Values
13
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, 35 wind facilities, 8 solar
facilities and 1 battery energy storage facility. The expertise and innovation developed by our skilled
team in various energies and different locations can be leveraged and shared across the Corporation
to maximize returns from our high-quality assets.
Progressing with its
Strategic Plan 2020-2025
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
Build Expertise
Become an expert in deploying energy storage technologies
Optimize Operations
Leverage expertise and innovation to maximize returns
from its high-quality assets
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.
Business Strategy
14
Portfolio
of Assets
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 Corporation owns interests in three
groups of projects at various stages:
the Operating Facilities, the Development
Projects and the Prospective Projects.
As at February 22, 2023, the Corporation
owns and operates 84 facilities in commercial
operation (the “Operating Facilities”).
Commissioned between 1986 and July 2022,
the facilities have a weighted average age
of approximately 9.8 years.
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 13.2 years (weighted average based
on gross long-term average production).
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 power
distribution companies and industrial
customers, or on the open market. Please
refer to the “Business Environment -
Inflation” section of this MD&A for a
discussion regarding inflation.
The Corporation also holds interests in
projects under development that are either
at an advanced development stage or under
construction (the “Development Projects”).
The table below outlines Operating Facilities and Development Projects as at February 22, 2023.
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
Chile
Subtotal
SOLAR
Canada
United States
Chile
Subtotal
STORAGE
France
Chile
Subtotal
Total
33
3
4
40
8
16
8
3
35
1
4
3
8
1
—
1
84
1
—
2
3
—
2
1
—
3
—
3
—
3
—
2
2
11
1,019
70
170
1,259
908
324
714
332
2,278
27
467
153
647
—
—
—
4,184
8
—
112
120
—
38
330
—
368
—
245
—
245
—
—
—
733
713
40
166
919
714
324
714
332
2,084
27
466
138
631
—
—
—
3,634
4
—
85
89
—
32
330
—
362
—
245
—
245
—
—
—
696
—
—
—
—
—
—
—
—
—
—
—
1504
150
9
—
9
159
—
—
—
—
—
—
—
—
—
—
1805
—
180
—
4256
425
605
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 (30 MW/120 MWh (4 hours)) and Paeahu (15 MW/60 MWh (4 hours)) solar projects.
6 Salvador battery storage capacity of 50 MW/250 MWh (5 hours) and San Andrés battery storage capacity of 35MW/175 MWh (5 hours).
More information on the Corporation’s Prospective Projects is available in the “Prospective Projects” section of the Management’s Discussion and Analysis.
Portfolio of Assets
15
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 23.2% as at February 22, 2023.
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
Mesgi’g Ugju’s’n (MU)
Wind Farm L.P.
Harrison Hydro Limited
Partnership and its
subsidiaries
Kwoiek Creek Resources
Limited Partnership
Innergex HQI USA LLC,
and its subsidiaries
Innergex Sainte-
Marguerite S.E.C
Cayoose Creek Power
Limited Partmership
Mesgi’g Ugju’s’n
Douglas Creek, Fire Creek,
Lamont Creek, Stokke Creek,
Tipella Creek and Upper
Stave River
Kwoiek Creek
Curtis Mills, Palmer Falls
Sainte-Marguerite
Walden North
Muko Partnership Holding
LLC
Kokomo
Energía Coyanco S.A.
Guayacán
Pampa Elvira Solar SpA
Pampa Elvira
150
150
50
60
31
16
6
12
34
75
75
25
30
15
8
5.4
8.3
18.7
Wind
Quebec
50.00%1,2,3
Hydro
Hydro
British
Columbia
British
Columbia
50.01%
50.00%1,3
Hydro
New York
50.00%3
Hydro
Quebec
Hydro
Solar
Hydro
Solar
British
Columbia
Indiana
Chile
Chile
50.01%
49.00%
90.00%
69.47%
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.
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 Non-wholly owned subsidiaries represents 11.7% as at February 22, 2023.
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
East Toba and Montrose Creek
235
Toba Montrose General
Partnership
Dokie General
Partnership
Jimmie Creek Limited
Partnership
Parc éolien
communautaire Viger-
Denonville, S.E.C.
Dokie
Jimmie Creek
Viger-Denonville
Umbata Falls L.P.
Umbata Falls
94
37
32
12
11
Hydro
Wind
Hydro
British
Columbia
British
Columbia
British
Columbia
Wind
Quebec
Hydro
Ontario
40.00%1,2
25.50%
50.99%2
50.00%
49.00%
144
62
25
23
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.
Portfolio of Assets
16
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, 2022, and reflects all material events up to February 22, 2023, 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
year ended December 31, 2022.
The audited consolidated financial statements attached to this MD&A and the accompanying notes for year ended December
31, 2022, along with the 2021 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 2022 - Growth Initiatives .................
Financial Year 2022 - Selected Information ...........
Financial Year 2022 - Operating Performance ......
Financial Year 2022- Capital and Resources ........
Subsequent Events ...................................................
Financial Year 2021 ...................................................
2- Overview of Operations ................................................
Business Environment ..............................................
Operating Facilities ....................................................
Commissioning Activities ..........................................
Construction Activities ...............................................
Development Activities ..............................................
Prospective Projects ..................................................
3- Financial Performance and Operating Results .........
Hydroelectric Segment ..............................................
Wind Segment ............................................................
Solar Segment ............................................................
Net Earnings (Loss) ...................................................
Adjusted Net Loss ......................................................
Non-Controlling Interests ..........................................
4- Capital and Liquidity ......................................................
17
18
20
21
22
22
22
23
23
27
29
29
31
32
33
34
35
36
37
38
39
40
Capital Structure ........................................................
Tax Equity Investment ..............................................
Financial Position ......................................................
Contingencies ............................................................
Cash Flows ................................................................
Free Cash Flow and Payout Ratio .........................
Information on Capital Stock ...................................
Dividends ....................................................................
5- Outlook ............................................................................
2022 Guidance Achievements ................................
Strategic Plan 2020-2025 ........................................
6- Non-IFRS Measures .....................................................
7- Additional Consolidated Information ........................
Geographic Segments .............................................
Historical Quarterly Financial Information .............
February 2021 Texas Events ..................................
8- Accounting Policies and Internal Controls ...............
Significant Accounting Policies ...............................
Internal Controls ........................................................
9- Risk and Uncertainties ..............................................
10- Forward-Looking Information ....................................
40
41
43
45
47
49
51
52
53
53
53
55
61
61
61
62
68
68
68
70
82
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p17
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2022 – Growth Initiatives
On January, 28, 2022, Innergex completed the acquisition of the 50.6 MW San Andrés solar farm in Chile (the "San Andrés
Acquisition"). The facility, commissioned in 2014, is located in the Atacama Desert in northern Chile. San Andrés was acquired
for a total consideration of US$26.8 million ($34.1 million). The facility is expected to produce a gross long-term average of
approximately 118.9 GWh per year.
On February 10, 2022, Innergex entered into foreign exchange forward contracts with an aggregate notional amount of
US$100.0 million ($124.9 million) to manage its exposure to exchange rate fluctuations related to the purchase price of the
acquisition of Aela Generación S.A. and Aela Energía SpA (together “Aela”). In addition, in order to manage its exposure to the
risk of increasing interest rates on a portion of the expected refinancing of the Aela Acquisition and the existing Chilean
projects, Innergex entered into forward start interest rate swaps between February 17 and March 1, 2022, with an aggregate
notional amount of US$331.2 million ($413.9 million). Furthermore, to mitigate the interest rate risk related to the Alterra term
loan, Innergex entered into interest rate swaps between February 24 and February 28, 2022, with an aggregate notional
amount of $145.0 million.
On April 29, 2022, to take advantage of the currently favourable energy pricing environment in France, Innergex entered into
three power purchase agreements for its Antoigné, Porcien and Vallottes wind facilities (the “New PPAs”), in effect since
August 1, 2022, concurrently with the cancellation of the current power purchase agreements. In addition, the New PPAs
effectively increase the contracted period of the facilities to December 31, 2025.
On May 10, 2022, the Corporation amended its existing revolving term credit facility, extending the term from 2023 to 2027 and
increasing the borrowing limit to $950.0 million.
On May 10, 2022, Innergex announced that it has awarded Mitsubishi Power an order for two utility-scale battery energy
storage systems (“BESS”) in Chile. These projects will be colocated with solar energy and enable peak shifting by storing
excess solar energy during the day and dispatching at night. Innergex’s 68 MW Salvador solar photovoltaic facility will add
50 MW/250 MWh (5 hours) of energy storage, and its 50.6 MW San Andrés solar photovoltaic facility will add 35 MW/175 MWh
(5 hours) of energy storage.
On May 18, 2022, Innergex received approval from the TSX to proceed with a normal course issuer bid on its common shares,
Series A Preferred Shares, and Series C Preferred Shares.
On June 9, 2022, Innergex completed its previously announced acquisition of all of the ordinary shares of Aela (the "Aela
Acquisition"), a 332 MW portfolio of three newly-built operating wind assets in Chile, for a cash consideration of US$324.3
million ($408.2 million), and the assumption of the existing non-recourse debt.
On July 22, 2022, the Corporation announced the full commissioning of the 9 MW/9 MWh (1 hour) Tonnerre battery energy
storage system in France. Tonnerre has been awarded a 7-year contract for differences offering a fixed-price contract for
capacity certificate. The facility will generate additional revenues that will vary based on prevailing energy pricing. The facility
will provide grid stability and help balance and secure the French power transmission system.
On July 25, 2022, to take advantage of the currently favourable energy pricing environment in France, Innergex notified the
counterpart to the Longueval wind project's power purchase agreement of its intention to cancel the agreement. The project
will sell its electricity on a merchant price basis. The cancellation came into effect on November 1, 2022.
As part of Innergex's refinancing of the non-recourse debt of its Chilean facilities, the interest rate swaps, previously entered
into to mitigate the risk of interest rate fluctuations during the negotiation process, were settled on July 25, 2022 in favour of
Innergex, for US$ 41.2 million ($53.1 million).
On August 5, 2022, the Corporation announced the successful completion of a US$803.1 million ($1.032 billion) refinancing of
the non-recourse debt of its portfolio of wholly owned assets in Chile with the issuance of US$710.0 million ($912.6 million)
green bonds maturing in 2036 (with a balloon payment of US$139.0 million ($178.7 million)) and a US$93.1 million
($119.7 million) letter of credit facility. The refinanced portfolio is composed of a combination of solar, wind and hydro assets as
well as battery energy storage systems (“BESS’’) assets wholly owned by Innergex. Overall, the Chilean portfolio of assets
received an investment grade rating, and the green bonds were priced at competitive levels over United States Treasuries
(“UST”).
On August 16, 2022, the Corporation signed a 30-year, 320 MW PPA with PacifiCorp, a Berkshire Hathaway subsidiary, for the
electricity to be produced by the Boswell Springs wind project located in eastern Wyoming. The commercial operation date is
scheduled during Q4 2024.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p18
(in thousands of Canadian dollars, except as noted and amounts per share)
On October 4, 2022, the Corporation successfully completed the previously announced acquisition of the remaining 30.45%
minority interest in its wind portfolio of 16 assets in France (the "French Acquisition") for a total consideration of $96.4 million.
On October 5, 2022, concurrent with the closing of the French Acquisition, Innergex monetized its Euro/CAD foreign exchange
forward contracts for a total gain of $43.5 million and simultaneously amended the Euro/CAD foreign exchange forward
contracts for a total notional amount of $115.3 million amortizing until 2043 and allowing conversion at a fixed rate of CAD
1.4838/Euro.
On October 10, 2022, to take advantage of the currently favourable energy pricing environment in France, Innergex entered
into two power purchase agreements for its Bois d'Anchat and Beaumont wind facilities (the “New PPAs”), which took effect on
January 1, 2023, concurrently with the early termination of the current power purchase agreements. In addition, the New PPAs
effectively increase the contracted period of the facilities to December 31, 2032.
On December 14, 2022, the Corporation acquired all the Class A shares of its 138 MW Mountain Air wind portfolio in Idaho,
United States (the "Mountain Air Acquisition"), for a total consideration of US$47.5 million ($64.4 million) from its tax equity
partner. These shares represent the remaining 37.75% of the outstanding shares of the portfolio not already owned by
Innergex.
During 2022, the Corporation added 5 net new Prospective Projects for a total of 188 MW. Its portfolio now aggregates
79 projects for a total of 8,701 MW, with 15 projects currently at an advanced stage, for a total 1,093 MW of installed capacity.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p19
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2022 – Selected Information
Year ended December 31
2022
2021
February 2021
Texas Events
(9 days)3
2021
Normalized
2020
OPERATING RESULTS
Production (MWh)
Revenues
Operating, general, administrative and prospective
projects expenses
Adjusted EBITDA1
10,254,005
9,055,215
—
9,055,215
8,073,914
870,494
747,208
(54,967)
692,241
613,207
285,579
584,915
221,571
525,637
—
221,571
191,098
(54,967)
470,670
422,109
Net (Loss) Earnings
Adjusted Net (Loss) Earnings1
PROPORTIONATE
Production Proportionate (MWh)1
Revenues Proportionate1
Adjusted EBITDA Proportionate1
COMMON SHARES
(91,115)
(34,860)
(185,394)
(6,951)
64,219
(121,175)
(29,111)
—
(6,951)
22,311
10,792,047
9,853,366
—
9,853,366
9,590,140
995,758
696,362
913,147
673,745
(95,273)
(95,273)
817,874
781,466
578,472
560,328
Dividends declared on Common Shares
146,957
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
2,757
2,875
201,836
180,857
—
—
—
—
132,229
125,543
2,757
2,875
3,067
2,875
180,857
170,292
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
2022
2021
February 2021
Texas Events
(9 days)3
2021
Normalized
2020
430,243
147,248
265,498
92,315
17,093
15,789
282,591
235,108
108,104
93,260
100 %
85 %
143 %
98 %
(21) %
— %
122 %
98 %
135 %
114 %
As at December 31
2022
2021
2020
8,602,427
7,396,068
7,141,598
7,116,000
6,035,388
6,070,666
1,316,195
1,093,112
1,008,854
170,232
267,568
62,078
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, the Cash Flow From Operating Activities, Free Cash Flow and Payout Ratio are normalized to
exclude the impacts of the February 2021 Texas Events. Normalized measures are not recognized measures under IFRS and therefore may not be
comparable to those presented by other issuers. Please refer to the "February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p20
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2022 – Operating Performance
For the year ended December 31, 2022, Revenues were up 26% to $870.5 million compared with the same period last year,
for which Revenues were normalized to exclude the February 2021 Texas Events. The hydroelectric power generation
segment recorded an increase in revenues mainly attributable to the acquisitions of Curtis Palmer on October 25, 2021, of the
remaining 50% interest in Energía Llaima on July 9, 2021, for which results are now included in Innergex's consolidated
revenues, and of Licán on August 3, 2021. The increase is also explained by the BC Hydro Curtailment Payment mitigated by
exceptionally low production at the facilities in British Columbia due to drier weather. The increase in revenues in the wind
power generation segment compared with the same period last year, for which Revenues were normalized to exclude the
February 2021 Texas Events, is mainly due to the acquisition of the Aela wind farms on June 9, 2022, the commissioning of
the Griffin Trail facility on July 26, 2021, and to higher production from the facilities in Quebec. The increase in revenues from
the solar power generation segment compared with the same period last year, for which Revenues were normalized to
exclude the February 2021 Texas Events, was mostly due to the higher selling prices at the Phoebe facility, the San Andrés
Acquisition on January 28, 2022, and to the contribution of the Pampa Elvira facility following the acquisition of the remaining
50% interest in Energía Llaima on July 9, 2021. Revenues Proportionate1 were up 22% at $995.8 million compared with the
same period last year, for which Revenues Proportionate1 were normalized to exclude the February 2021 Texas Events.
For the year ended December 31, 2022, Operating, general, administrative and prospective projects expenses were up
29% to $285.6 million compared with the same period last year. The hydroelectric power generation segment recorded an
increase in expenses due to higher maintenance costs at some facilities in British Columbia following the floods that occurred
at the end of 2021, higher expenses following the acquisitions of Curtis Palmer, the remaining 50% interest in Energía Llaima
and of Licán. In the wind power generation segment, these expenses increased due mainly to the acquisition of the Aela wind
farms, the commissioning of the Griffin Trail facility and the impact of the 2022 Supplementary Budget Act in France. The
increase in the solar power generation segment is explained by higher operating expenses following the commissioning of the
Amazon Solar Farm Ohio - Hillcrest ("Hillcrest") facility, and the acquisition of the San Andrés and Pampa Elvira facilities.
As a result of the factors explained above, the Adjusted EBITDA1 was 24% higher at $584.9 million for the year ended
December 31, 2022 and the Adjusted EBITDA Proportionate1 was 20.4% higher at $696.4 million, compared with the same
period last year, for which the Adjusted EBITDA1 and the Adjusted EBITDA Proportionate1 were normalized to exclude the
February 2021 Texas Events.
Innergex recorded a net loss of $91.1 million ($0.43 net loss per share - basic and diluted) for the year ended December
31, 2022, compared with a net loss of $185.4 million ($1.09 net loss per share - basic and diluted) for the corresponding period
in 2021. In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, the
decrease in net loss is explained by the impacts of the February 2021 Texas Events in 2021, and by the impairment charges in
the Flat Top and Shannon joint ventures recognized during the same year. These items were partly offset by an $80.4 million
increase in depreciation and amortization and a $65.6 million increase in finance costs, mainly attributable to the recent
acquisitions and commissionings, and a $10.9 million increase in impairment of long-term assets following the impairment
charges recognized in 2022 on the Hawaiian projects and on the safe harbor solar modules, partly offset by the impairment
charges recognized in 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p21
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2022 – Capital and Resources
The increase in total assets results largely from the assets acquired following the San Andrés and Aela acquisitions and the
start of the Hale Kuawehi, Boswell Springs and Salvador and San Andrés battery storage construction activities. These items
were partly offset by depreciation and amortization and by an upward shift in interest rate curves, which contributed to the
decrease of the asset retirement obligation included in property, plant and equipment.
The increase in total liabilities results largely from the increase in the long-term loans and borrowings stemming from the long-
term loans and borrowings assumed in the Aela Acquisition and from net draws on the revolving term credit facility, used
toward the Aela Acquisition and the construction and development activities and from the increase in deferred taxes, mainly
related to the Aela Acquisition and the change in fair value of hedging instruments. These items were partly offset by the
decrease in derivative financial instruments' fair values.
The increase in equity attributable to owners results largely from the shares issued related to the public offering in
February 2022 and the concurrent Hydro-Québec private placement, and the total comprehensive income, partly offset by the
dividends declared on common and preferred shares and the distributions to non-controlling interests.
The increase in cash flows from operating activities before changes in non-cash operating working capital items for the three
months ended December 31, 2022, is mainly due to the realized gain on financial instruments following the settlement of the
foreign exchange forward contracts concurrent with the French Acquisition, partly offset by an increase in finance costs paid
mainly related to the Aela and San Andrés acquisitions. For the year ended December 31, 2022, Free Cash Flow1 was
impacted by the above, partly offset by 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.
1- HIGHLIGHTS | Subsequent Events
Acquisition of Sault Ste. Marie Solar Portfolio
On January 23, 2023, the Corporation announced that it has entered into an agreement to acquire the 60 MW Sault Ste. Marie
solar portfolio located in northwestern Ontario for a purchase price of $50.2 million, along with the assumption of $169.5 million
of existing debt. The portfolio is composed of the Sault Ste. Marie 1 (20 MW), Sault Ste. Marie 2 (30 MW) and Sault
Ste. Marie 3 (10 MW) solar facilities. The acquisition is expected to close in Q1 2023 and is subject to certain regulatory
approvals in Canada, key third party consents and other customary closing conditions.
Refinancing of the subordinated unsecured term loan
On February 1, 2023, Innergex has completed the refinancing of the subordinated unsecured term loan with a non-revolving
term credit facility of $75.0 million bearing interest at a fixed rate of 6.25% and maturing on February 1, 2025, and a non-
revolving term credit facility of $75.0 million bearing interest at a variable rate of 4.87%, based on the bankers’ acceptance
rates plus a spread of 1.85% which depends on leverage ratio, maturing on February 1, 2025. Concurrently, the Corporation
concluded an interest rate swap to hedge a $50.0 million portion of the credit facility notional that is subject to variable interest
rates.
1- HIGHLIGHTS | Financial Year 2021
For the year ended December 31, 2021, the increase in Production (MWh), Revenues, Operating, general and administrative
expenses, Adjusted EBITDA1 and Adjusted EBITDA Proportionate1 were attributable mostly to the acquisition of the remaining
50% interest in Energía Llaima, which is now included in Innergex's consolidated revenues, the Curtis Palmer Acquisition, the
first full year of contribution from the Mountain Air 2020 acquisition and the commissioning of the Griffin Trail wind facility.
The increase in loss from continuing operations in 2021 is mainly due to a net unfavourable impact from the February 2021
Texas events, the recognition of impairment charges in the Flat Top and Shannon joint ventures and in the Phoebe solar facility
in Texas, the increase in depreciation and amortization from the facilities commissioned in 2020 and the acquisitions in 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p22
(in thousands of Canadian dollars, except as noted and amounts per share)
an unfavourable change in the fair value of financial instrument and an increase in finance costs. These items were partly
offset by an 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 and an increase in the tax
attributes and PTCs allocated to the tax equity investors.
The increase in total assets results largely from the Energía Llaima, Licán and Curtis Palmer acquisitions and the construction
activities of the Hillcrest solar and Griffin Trail wind facilities, partly offset by an impairment charge recognized in the Phoebe
solar facility and the decrease in investments in joint ventures, mainly explained by the February 2021 Texas Events, the
impairment loss at the Shannon and Flat Top facilities and the acquisition of the remaining 50% interest in Energía Llaima.
The increase in long-term loans and borrowings 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 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.
Cash flows from operating activities before changes in non-cash operating working capital items increased, mainly due to the
Energía Llaima, Licán and Curtis Palmer acquisitions, to the facilities commissioned in 2021, and to the full-year impact of the
Salvador and Mountain Air acquisitions of 2020. Free Cash Flow was favourably impacted by the above, partly offset by an
increase in debt principal repayments 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 2020 acquisition.
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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p23
(in thousands of Canadian dollars, except as noted and amounts per share)
Key Geographic Markets
In Canada, growth opportunities for new renewable power generation have resulted from commitments to reduce greenhouse
gas (GHG) emissions; the national price on carbon pollution; public concern over fossil fuel power generation, air quality and
GHGs; and improvements in renewable energy technology and affordability. 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. The announced
investment tax credit for clean technologies is expected to continue to make renewable resources the most competitive option
for new electricity generation. The Government of Canada has committed to reduce GHG emissions by 40-45% from 2005
levels by 2030 and achieve net-zero emissions economy-wide by 2050. Federal clean growth and climate plans prioritise
expanding renewable electricity generation and its enabling infrastructure. Specific commitments in the electricity sector
include phasing out coal-fired electricity generation by 2030 and achieving a net-zero electricity grid by 2035. Canada’s
electricity grid is currently 82% emissions-free. Nationally, the largest source of power is hydroelectricity, with an installed
capacity of over 80 GW representing around 60% of annual power generation. Wind and solar power met approximately 6.3%
of Canada’s electricity demand in 2021 and continue to account for the largest share of new power generation additions
annually. It is anticipated that the phase-out of fossil fuel-fired electricity generation and increasing electrification across the
economy will lead to a significant increase in demand for renewable electricity, with multiple reports estimating that Canada will
require two to three times its current non-emitting generating capacity by 2050.
In the United States, electricity is sold under various types of contracts, including long-term PPAs, power hedges, and
commercial and retail contracts. Favourable costs for renewable electricity generation, combined with legislated commitments
toward GHG emissions reductions and renewable electricity generation at the federal and state levels, are expected to
continue driving demand for new renewable generation capacity. The 2022 enactment of the Inflation Reduction Act directed
nearly $400 billion in federal funding to clean energy in the form of tax credits designed to catalyze private investment in clean
energy. The U.S. Government aims to achieve a 50-52% reduction in economy-wide GHG emissions from 2005 levels by 2030
and reach net-zero by 2050. It has established a goal to reach 100% carbon pollution-free electricity generation by 2035.
States continue to be active in adopting and increasing renewable portfolio standards (RPS) policies that require electricity
suppliers to source a certain amount of their electricity from eligible technologies. As of November 2022, 36 states and the
District of Columbia have established an RPS or a renewable energy goal. In 12 of those states (and the District of Columbia),
the requirement is for 100% clean electricity by 2050 or earlier. Electricity generation in the U.S. is approximately 61% from
fossil fuels, 19% from nuclear energy, and 20% from renewable energy sources. Wind is the largest renewable source of
generation (9.2%), followed by hydropower (6%) and solar (2.8%). The share of renewables in electricity generation is
expected to more than double to 44% by 2050, surpassing methane as the leading source of power.
France is currently facing an energy crisis due to high methane prices and low nuclear availability, which drove energy prices
to record levels. This crisis has increased the demand for corporate PPAs, which could lead to more direct contracting
opportunities for new-build assets as well as contract renewal for older assets. Recent measures taken by the government
introduced a special contribution from renewable producers equal to 90% of all revenues generated when the price of energy
sold is above 100€/MWh. A new law (Loi sur l’Accélération des Énergies Renouvelables) that would change the regulatory
framework is also set to be passed in early 2023. This law is expected to foster renewable development in the country by
reducing the permitting timeline and accelerating the interconnection process. France will also announce later in 2023 its long-
term energy strategic plan (Programmation Pluriannuelle de l’Énergie or “PPE”). The French PPE is updated every 3 or 4
years. The 2023 version is expected to favour solar, offshore wind and nuclear power. Based on recent announcements by the
French government, it is believed that the target for solar power capacity will be raised to 100 GW by 2050 and the target of 35
GW for onshore wind will be postponed to 2050 (compared to 2035 previously). The French electricity system is largely
deregulated for production, ancillary services and electricity supply. It is, however, still a monopoly for distribution and
transmission. The transmission system operator (RTE) and the distribution operator (ENEDIS), both subsidiaries of Électricité
de France (EDF), are responsible for managing distribution and transport infrastructure and have a duty to provide
interconnection to renewable energy projects at standardized conditions. As such, the energy environment remains very
favourable to renewable developers. Although France is likely to reduce the availability of its feed-in tariff contracts, it has
committed to extend the RFP system for sourcing additional renewable power. In line with its strategic objectives of reaching
100 GW of solar and 35 GW of offshore wind, RFPs are expected to call for 1.5 to 2 GW of additional wind projects every year
and close to 2 GW of additional solar projects every year. Awarded-PPAs would still be offered through a government-backed
entity for a long period of time (20 years).
Renewable power continues to increase in Chile. In 2022, the production of solar and wind energy reached a total of 23,062
GWh, a 28.2% increase from 2021, and representing 27.7% of the total generated power. Meanwhile, hydroelectric facilities
accounts for 24% of the total generation (20,290 GWh). As of December 2022, there were 66 renewable energy facilities under
construction, representing 3,532 MW of capacity. Non-conventional renewable energies, which do not include hydropower with
reservoirs, now make up 41% of the country’s installed capacity, 33,218 MW, and contribute 28% 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p24
(in thousands of Canadian dollars, except as noted and amounts per share)
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. In Latin America, demand for electricity remains strong and
governments are seeking to increase the production of renewable energy, of which there is an ample resource. Chile has set
legislated commitments to renewable energy, which target increases in renewable energy generation to 60% by 2035 and 70%
by 2050. Its target under the Paris Agreement is to peak annual GHG emissions by 2025 and reduce them to 95 Megatonnes
by 2030. One of the most concrete actions to date has been the Retirement Plan and/or Reconversion of Units to Coal, which
aims to decommission remaining coal-fired power plants (which still provide 23% of Chile’s electricity) by 2040. Several coal-
fired units have already closed and the goal could be reached sooner, possibly in 2030 or 2025. The National Electric
Coordinator acts as the independent system operator for the National Electric System in Chile. It is charged with coordinating
electricity generation throughout the system to achieve operational and cost efficiency, while transmission and distribution
costs are regulated by law. It also preserves the security of electrical service and must guarantee open access to the
transmission system according to law. In 2013, only 5% of the electricity production in Chile was generated from non-
conventional renewable sources. In 2021, non-conventional renewable generation reached 28% of the total generation,
surpassing a 2013 law that mandated that 20% of the electricity produced in Chile come from renewable energy by 2025 and
now there is a draft law that increases to 40% by 2030. The solar and wind energy sectors are the most popular sectors since
Chile is geographically well positioned. The solar irradiation in the Atacama Desert and the winds from the Pacific coast and
the Andes Mountains make Chile a promising market for renewable energy production.
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
1,787
330
2,656
14 %
28 %
21 %
22 %
Q2
1,257
1,564
443
3,264
33 %
24 %
29 %
28 %
Q3
1,219
1,352
449
3,020
32 %
21 %
29 %
26 %
Q4
825
1,762
316
2,903
Total
21 %
27 %
21 %
24 %
3,840
6,465
1,538
11,843
32 %
55 %
13 %
100 %
1. The consolidated long-term average production is the annualized LTA for the facilities in operation as of February 22, 2023. 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.
Innergex Renewable Energy Inc.
2022 Annual Report
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
Inflation
In the wake of the global pandemic and the current geopolitical context, the geographic segments in which Innergex operates
have been impacted by rising inflation pressure as a result of increased consumer spending, labour shortages and worldwide
supply chain disruptions. The Corporation's operating facilities have shown resiliency toward inflation as most of its long-term
PPAs contain partial or full indexation clauses that annually adjust for the effects of inflation. This also applies to Innergex's
development and construction projects, except for certain projects for which PPA repricing discussions are presently taking
place (please refer to the "Construction Activities" and "Development Activities" sections of this MD&A for more information).
As such, inflation pressures on the Corporation's operating, general and administrative expenses and construction costs are
generally absorbed by higher revenues.
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 has proven to disrupt 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, the Corporation considers 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.
This year, the Corporation released its first Task Force on Climate-related Financial Disclosures (“TCFD”) aligned climate
assessment report, an important step in its sustainability journey and essential in identifying and addressing the climate risks
and opportunities for Innergex. It was developed with guidance from the TCFD, internal expertise, and an external consultant,
and follows a commitment made in 2021 to further align disclosures with a globally recognized standard.
Through consultations with various levels of the Corporation, including the Board of Directors, the executives as well as
experts in each of the jurisdictions in which the Corporation operates, the team gained an understanding of the resilience of
the business in different potential climate futures by performing assessments, on a facility-by-facility basis, of their potential
physical and transition impacts. The bulk of this work included a deep dive of the business through climate-related scenario
analysis to inform business strategy and financial planning processes and assess the resilience of its strategies against
various climate-related scenarios. The report is available on sustainability.innergex.com.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p26
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Operating Facilities
Energy
segment
Location
Three months ended
December 31, 2022
Three months ended
December 31, 2021
Production
(MWh)
Production
as a % of
LTA
Production
(MWh)
Production
as a % of
LTA
Three
months
Production
% change
Year ended December
31, 2022
Year ended December
31, 2021
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 States3
Chile4
Subtotal
Quebec
France
United States
Chile6
Subtotal
Ontario
United States
Chile4,5
Subtotal
TOTAL PRODUCTION1
Innergex's share of production of joint
venture and associates
PRODUCTION PROPORTIONATE1,2
181,379
17,159
167,871
68,514
144,528
579,451
623,375
207,039
557,028
142,758
1,530,200
6,757
164,757
75,874
247,388
2,357,039
100 % 170,605
81 %
25,643
45 % 552,153
89,664
75 %
92 %
105,232
70 % 943,297
94 % 586,484
173,486
95 %
89 % 644,724
56 %
—
87 % 1,404,694
5,758
83 % 162,408
67,000
70 %
123 %
79 % 235,166
81 % 2,583,157
91,587
105 %
93,000
2,448,626
82 % 2,676,157
94 %
121 %
148 %
123 %
67 %
117 %
89 %
80 %
103 %
— %
93 %
104 %
84 %
94 %
87 %
100 %
106 %
100 %
716,024
6 %
(33) %
68,799
(70) % 1,767,031
332,113
(24) %
37 %
447,085
(39) % 3,331,052
6 % 2,284,974
659,974
19 %
(14) % 2,270,446
— %
419,996
9 % 5,635,390
39,080
980,356
268,127
17 %
1 %
13 %
688,416
102 %
92 %
75,105
80 % 2,152,452
125,012
88 %
91 %
215,843
87 % 3,256,828
99 % 2,124,480
646,208
88 %
93 % 1,938,737
72 %
—
92 % 4,709,425
38,994
853,798
196,170
108 %
86 %
79 %
5 % 1,287,563
(9) % 10,254,005
85 % 1,088,962
90 % 9,055,215
(2) %
538,042
100 %
798,151
(9) % 10,792,047
90 % 9,853,366
98 %
101 %
98 %
109 %
70 %
96 %
92 %
86 %
99 %
— %
94 %
107 %
84 %
94 %
87 %
94 %
97 %
94 %
4 %
(8) %
(18) %
166 %
107 %
2 %
8 %
2 %
17 %
— %
20 %
— %
15 %
37 %
18 %
13 %
(33) %
10 %
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, until their sale on
December 28, 2021, and March 4, 2022, respectively.
3. The Curtis Palmer Acquisition was completed on October 25, 2021.
4. 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.
5. The San Andrés Acquisition was completed on January 28, 2022.
6. The Aela Acquisition was completed on June 9, 2022.
Production for the three-month period ended December 31, 2022, was 81% of LTA. The result is mostly explained by exceptionally low water flows at the facilities in British
Columbia and at Curtis Palmer due to drier weather, mechanical issues at the Foard City wind facility, lower irradiation and economic curtailment at the Phoebe facility in
Texas and in Chile combined with below-average wind regimes in Quebec and France. These items were partly offset by higher production from the Quebec hydro facilities.
Innergex's share of production of joint ventures and associates was 105% of LTA, translating into a Production Proportionate at 82% of LTA.
Innergex Renewable Energy Inc.
2022 Annual Report
(in thousands of Canadian dollars, except as noted and amounts per share)
Management's Discussion and Analysis p27
Production for the year ended December 31, 2022, was 90% of LTA. The result is mostly explained by lower production at the facilities in British Columbia due to cooler
weather delaying the freshet followed by drier weather, lower irradiation and economic curtailment at the Phoebe facility in Texas and in Chile and below-average wind
regimes in France and mechanical issues at the Foard City facility in Texas. These items were partly offset by above-average wind regimes at the Griffin Trail facility in
Texas and the Quebec facilities. Excluding Phoebe's economic curtailment, production for the US solar segment would have reached 95% of LTA. Innergex's share of
production of joint ventures and associates was 100% of LTA, translating into a Production Proportionate at 90% of LTA.
Innergex Renewable Energy Inc.
2022 Annual Report
(in thousands of Canadian dollars, except as noted and amounts per share)
Management's Discussion and Analysis p28
2- OVERVIEW OF OPERATIONS | Commissioning Activities
On July 22, 2022, Innergex completed the full commissioning of the 9 MW/9 MWh (1 hour) Tonnerre battery energy storage
system in France. Tonnerre has been awarded a 7-year contract for differences offering a fixed-price contract for capacity
certificate. The facility will generate additional revenues that will vary based on prevailing energy pricing.
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)
Type
Ownership %
Hale Kuawehi (Hawaii, U.S.)
Innavik (QC, Canada)
Solar
Hydro
Boswell Springs (Wyoming, U.S.)
Wind
Salvador Battery Storage (Chile)
Storage
San Andrés Battery Storage (Chile)
Storage
100
50
100
100
100
Gross
installed
capacity
(MW)
Gross
estimated
LTA1 (GWh)
30.0 2
87.4 3
7.5
54.7
329.8
1,262.0
Note 4
Note 5
0.0
0.0
PPA term
(years)
Expected
COD
25
40
30
0
0
2024
2023
2024
2023
2023
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 30 MW/120 MWh (4 hours).
3. PPA is a fixed lump sum capacity payment for the availability of dispatchable energy.
4. Battery storage capacity of 50 MW/250 MWh (5 hours).
5. Battery storage capacity of 35 MW/175 MWh (5 hours).
Updated status for the following projects:
Hale Kuawehi:
▪ Major construction is still suspended until PPA repricing is agreed upon.
▪
▪
Tesla BESS supply amendment executed, guaranteeing all components delivered by Q4 2023.
An amendment to the PPA was executed with HECO and will be submitted to the Public Utility Commission
(PUC) for consideration of approval.
Project COD expected in Q3 2024.
Construction of the civil structures is almost completed, with the only remaining item to be completed being
to close the derivation structure in order to raise the water level in the upstream headpond.
The installation of the stoplogs in the derivation was postponed to Q2 2023 due to cold weather.
Installation of the electromechanical equipment is almost completed and is ready for dry commissioning.
The contractor has registered a legal hypothec in Q1 2023 claiming for payment of additional costs. The
Corporation intends to dispute that claim.
Project COD to be postponed to Q3 2023.
Boswell Springs
•
•
•
•
PPA approval from Wyoming PUC was obtained and PPA with PacifiCorp is effective since January 2023.
Engineering, Procurement and Construction Agreement nearing finalization and to be signed in Q1 2023.
Financial close is planned for Q1 2023.
Project COD expected in Q4 2024.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p29
(in thousands of Canadian dollars, except as noted and amounts per share)
▪
Innavik:
•
•
•
•
•
Salvador Battery Storage
•
•
•
•
•
•
•
Earth works, precast foundations installation and the substation extension are completed.
Electrical works, interconnections, equipment delivery and installation will continue until Q2 2023.
Transformers delivered and installation completed.
Auxiliary power generators received on-site in Q4 2022.
Electrical works began in Q4 2022 with grounding grid completed and electrical conduits started.
Battery storage containers delivery delayed by Mitsubishi to Q2 2023.
COD might be delayed to Q3 2023 due to delay in battery delivery, but the Corporation expects to be
compensated with liquidated damages from supplier.
San Andrés Battery Storage
•
•
•
•
Environmental permit confirmed.
Local building permits on-going.
Earth works initiated in Q1 2023.
Delivery of battery storage equipment planned for Q3 2023.
Innergex Renewable Energy Inc.
2022 Annual Report
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 projects in development stage with a gross installed capacity of approximately 365.4 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 Régnier (France)
Paeahu (Hawaii, U.S.)
Palomino (Ohio, U.S.)
Type
Hydro
Hydro
Wind
Wind
Solar
Solar
Gross
installed
capacity
(MW)
109.0
3.0
9.0
29.4
15.0 2
200.0
PPA term
(years)
Expected
COD
— 1
— 1
— 1
20
25
—
— 3
2025
2023
2025
— 3
2025
1. Power to be sold on the open market or through PPAs yet to be signed.
2. Solar project with a battery storage capacity of 15 MW/60 MWh (4 hours).
3. Project schedule under revision.
Updated status from the previous quarter for the following projects:
Auxy Bois Régnier
•
Appeal still in progress and interconnection announced for Q1 2025.
Lazenay
Easement contract signature underway, to be completed in Q1 2023.
•
• Wind turbine model has been selected and contract is under review.
Palomino
•
•
•
Commercial discussions are on-going with multiple offtakers.
Executed term sheet to secure the supply of panels for the Project.
Ohio Power Siting Board Staff Report of Investigation recommended the Certificate of Environmental
Compatibility and Public Need for the Project be issued.
Paeahu
•
The Corporation will be submitting a PPA price increase and an updated construction schedule to the utility
for consideration, pending a positive ruling on the contested case for the PUC.
Kahana and Barbers Point
•
The PPAs of these projects were canceled by the Corporation following significant construction cost
increases. These projects were moved back from projects in development stage to prospective advanced
stage to participate in future request for proposals processes in Hawaii.
Boswell Springs
•
This project was moved from projects in development stage to Project Under Construction.
Innergex Renewable Energy Inc.
2022 Annual Report
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
(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 their development maturity
leading to obtaining a final notice to proceed to the construction phase combined with a success probability factor that the
project will reach COD. Prospective projects are segregated into three different stages, i.e. early, mid and advanced.
Early Stage
Mid Stage
Advanced Stage
The prospective projects in this category have a LOW development maturity combined with a LOW
success probability factor; or a MID-stage development maturity combined with a LOW success
probability factor.
The prospective projects in this category have a MID-stage development maturity combined with a
MEDIUM success probability factor; or a HIGH-stage development maturity combined with a MEDIUM
success probability factor.
The prospective projects in this category have a HIGH development maturity combined with a HIGH
success probability factor; or a MID-stage development 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
500
280
2,723
111
3,614
573
—
5
578
30
45
75
29
32
72
133
15
5
13
1
34
6
—
1
7
2
2
4
2
1
2
5
—
—
2,400
—
2,400
300
400
—
700
—
108
108
—
—
—
—
—
—
6
—
6
1
1
—
2
—
6
6
—
—
—
—
—
—
—
—
—
705
—
—
705
85
149
234
154
—
—
154
—
—
—
—
—
5
—
—
5
1
8
9
1
—
—
1
500
280
5,123
111
6,014
1,578
400
5
1,983
115
302
417
183
32
72
287
4,400
50
3,208
14
1,093
15
8,701
+137
+2
(134)
—
+185
+3
+188
15
5
19
1
40
12
1
1
14
3
16
19
3
1
2
6
79
+5
CANADA
Hydro
Solar
Wind
Storage
Subtotal
UNITED STATES
Solar
Wind
Green hydrogen2
Subtotal
FRANCE
Solar
Wind
Subtotal
CHILE
Hydro
Solar
Wind
Subtotal
Total
Changes from Q3
2022
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.
Compared to Q3 2022, three new projects, one in Canada and two in France, were added to Early Stage projects. One
existing project in the Early Stage saw an increase in capacity in France and one was moved from Early Stage project to Mid
Stage. One project in the United States has advanced from Mid Stage to Advanced Stage. Two projects in the United States
were moved from Project Under Development to Advanced Stage.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p32
(in thousands of Canadian dollars, except as noted and amounts per share)
Finance costs
Other net income
Depreciation and amortization
Impairment of long-term assets
Share of (earnings) loss of joint
ventures and associates:2
Share of (earnings) loss, before
impairment charges
Share of impairment charges
Change in fair value of financial
instruments
Income tax (recovery)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS
Three months ended December 31
Year ended December 31
2022
2021
Change
2022
2021
February
2021 Texas
Events
(9 days)3
2021
Normalized3
Change
Revenues
Operating expenses
General and administrative
expenses
203,636
62,591
202,388
42,555
1,248
20,036
1 % 870,494
47 % 207,768
13,568
12,813
755
6 % 53,071
Prospective projects expenses
Adjusted EBITDA1
7,118
120,359
9,709
137,311
(2,591)
(16,952)
(27) % 24,740
(12) % 584,915
83,864
(23,236)
67,417
(34,565)
93,756
47,868
77,748
12
16,447
11,329
16,008
47,856
24 % 317,842
33 % (68,919)
21 % 336,053
— % 47,868
747,208
149,106
45,098
27,367
525,637
252,255
(89,621)
255,640
36,986
(54,967)
—
692,241
149,106
—
45,098
—
(54,967)
27,367
470,670
—
—
—
—
252,255
(89,621)
255,640
36,986
178,253
58,662
7,973
(2,627)
114,245
65,587
20,702
80,413
10,882
26 %
39 %
18 %
(10) %
24 %
26 %
23 %
31 %
29 %
286
—
(791)
1,077
136 % (14,382)
77,280
(64,197)
13,083
(27,465)
(210) %
—
—
— %
—
112,609
—
112,609
(112,609)
(100) %
Net (loss) earnings
(52,575)
5,743
(58,318)
(1,015) % (91,115)
(185,394)
64,219
(121,175)
(16,622)
(12,982)
(15,411)
37,158
(1,211)
(50,140)
(8) % 64,145
(6,577)
(135) %
92,122
(26,240)
(72,060)
17,071
20,062
(9,169)
44,083
2,592
30,060
220 %
28 %
25 %
(Net loss) earnings attributable to:
Owners of the parent
Non-controlling interests
Basic and diluted net loss per
share from continuing operations
attributable to owners ($)
(45,301)
(7,274)
(52,575)
(2,348)
8,091
5,743
(42,953)
(15,365)
(58,318)
(1,829) % (81,619)
(9,496)
(1,015) % (91,115)
(190) %
(191,805)
6,411
(185,394)
64,219
—
64,219
(127,586)
6,411
(121,175)
45,967
(15,907)
30,060
36 %
(248) %
25 %
(0.23)
(0.02)
(0.43)
(1.09)
0.35
(0.74)
1. Adjusted EBITDA is not a recognized measure under IFRS and therefore may not be comparable to such measures 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. Normalized measures are not recognized
measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p33
(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
PROPORTIONATE1
Production Proportionate (MWh)
Revenues Proportionate (in $M)
Adjusted EBITDA Proportionate (in $M)
Three months ended December 31
Year ended December 31
2022
579,451
824,540
61,082
19,513
41,569
631,088
67,264
45,614
2021
943,297
806,256
96,392
24,019
72,373
999,294
103,899
77,402
Change
(39) %
2 %
(37) %
(19) %
(43) %
(37) %
(35) %
(41) %
2022
3,331,052
3,838,290
336,645
86,135
250,510
3,743,181
380,973
285,064
2021
3,256,828
3,392,026
277,302
64,866
212,436
3,738,333
327,849
250,983
Change
2 %
13 %
21 %
33 %
18 %
— %
16 %
14 %
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, 2022, the decrease of 37% in Revenues in the hydroelectric segment compared with the same period last year is mainly
explained by exceptionally low production at the facilities in British Columbia and at Curtis Palmer due to drier weather. The decrease was partly offset by the higher spot
prices from the Chilean facilities. The decrease of 19% in Operating, general and administrative expenses is explained by lower maintenance costs at some facilities in
British Columbia, partly offset by higher expenses following the Curtis Palmer Acquisition on October 25, 2021. As a result, the Adjusted EBITDA1 decreased by 43% to
$41.6 million.
For the three-month period ended December 31, 2022, the decrease of 35% in Revenues Proportionate1 in the hydroelectric segment, mainly stems from the decrease in
consolidated revenues and revenues from the joint ventures and associates due to exceptionally low production at the facilities in British Columbia due to drier weather. The
proportionate impact of joint ventures and associates on Operating, general and administrative expenses decreased mainly due to the Toba Montrose facilities. As a result,
the Adjusted EBITDA Proportionate1 decreased by 41% to $45.6 million.
For the year ended December 31, 2022, the increase of 21% in Revenues in the hydroelectric segment compared with the same period last year is mainly explained by the
acquisitions of Curtis Palmer on October 25, 2021, of the remaining 50% interest in Energía Llaima on July 9, 2021, for which results are now included in Innergex's
consolidated revenues, and of Licán on August 3, 2021. The increase is also explained by the BC Hydro Curtailment Payment (refer to the "Contingencies" section for more
information) mitigated by exceptionally low production at the facilities in British Columbia due to drier weather. The increase of 33% in Operating, general and administrative
expenses is explained by higher maintenance costs at some facilities in British Columbia following the floods that occurred at the end of 2021, higher expenses following
the acquisitions of Curtis Palmer, of the remaining 50% interest in Energía Llaima and of Licán. As a result, the Adjusted EBITDA1 increased by 18% to $250.5 million.
For the year ended December 31, 2022, the increase of 16% in Revenues Proportionate1 in the hydroelectric segment, mainly stems from the increase in consolidated
revenues, which was partly offset by the decrease in joint ventures' and associates' Revenues compared to the same period last year. The decrease is mainly due to a
lower contribution from the facilities in Chile since their results are now included in the Corporation's consolidated results following the acquisition of the remaining 50%
interest in Energía Llaima. The proportionate impact of joint ventures and associates on Operating, general and administrative expenses decreased mainly at the Chilean
facilities for the reason previously stated. As a result, the Adjusted EBITDA Proportionate1 increased by 14% to $285.1 million.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p34
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Wind Segment
Three months ended December 31
Year ended December 31
Wind Segment
Production (MWh)
LTA (MWh)
2022
1,530,200
1,761,962
2021
1,404,694
1,506,858
Change
2022
9 % 5,635,390
17 % 6,094,820
2021
4,709,425
5,010,772
February 2021
Texas Events
(9 days)2
—
—
2021
Normalized2
4,709,425
5,010,772
Revenues (in $M)
Operating, general and administrative expenses
Adjusted EBITDA (in $M)1
127,024
39,113
87,911
90,280
16,262
74,018
41 %
141 %
19 %
420,529
103,042
317,487
349,786
72,927
276,859
(16,801)
—
(16,801)
332,985
72,927
260,058
PROPORTIONATE1
Production Proportionate (MWh)
Revenues Proportionate (in $M)
Adjusted EBITDA Proportionate (in $M)
1,570,150
148,786
108,467
1,441,697
111,436
94,632
9 % 5,761,303
501,465
394,380
34 %
15 %
5,020,531
464,293
385,866
—
(57,107)
(57,107)
5,020,531
407,186
328,759
Change
20 %
22 %
26 %
41 %
22 %
15 %
23 %
20 %
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. Normalized measures are not recognized measures
under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "February 2021 Texas Events" section for more information.
For the three-month period ended December 31, 2022, Revenues increased by 41% in the wind power generation segment compared with the same period last year,
mainly due to the Aela Acquisition on June 9, 2022, favourable market prices from the United States facilities, and the increase in revenues from new PPAs in place at
facilities in France. The increase of 141% in Operating, general and administrative expenses is mainly explained by higher expenses following the Aela Acquisition and by
the impact of the 2022 Supplementary Budget Act in France on French facilities. As a result, the Adjusted EBITDA1 increased by 19% to $87.9 million, compared with the
same period last year.
For the three-month period ended December 31, 2022, the increase of 34% in Revenues Proportionate1 mainly stems from the increase in consolidated revenues and from
the joint ventures' and associates' Revenues, which increased compared to the same period last year due to higher production. There were no significant impacts from joint
ventures and associates on Operating, general and administrative expenses compared with the same period last year. As a result, the Adjusted EBITDA Proportionate1
increased by 15% to $108.5 million.
For the year ended December 31, 2022, Revenues increased by 26% in the wind power generation segment compared with the same period last year, for which Revenues
were normalized to exclude the February 2021 Texas Events. The increase is mainly due to the Aela Acquisition on June 9, 2022, the commissioning of the Griffin Trail
facility on July 26, 2021, and to higher production from the facilities in Quebec. The increase of 41% in Operating, general and administrative expenses is due mainly to the
Aela Acquisition, the commissioning of the Griffin Trail facility and the impact of the 2022 Supplementary Budget Act in France. As a result, the Adjusted EBITDA1 increased
by 22% to $317.5 million, compared with the same period last year, for which the Adjusted EBITDA1 was normalized to exclude the February 2021 Texas Events.
For the year ended December 31, 2022, the increase of 23% in Revenues Proportionate1 in the wind power generation segment compared with the same period last year,
for which Revenues were normalized to exclude the February 2021 Texas Events, was explained by the consolidated facilities and the increase of PTCs generated by the
wind farms mostly due to the commissioning of the Griffin Trail facility on July 26, 2021.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p35
(in thousands of Canadian dollars, except as noted and amounts per share)
This increase was partly offset by the Flat Top and Shannon facilities, for which results have been excluded from April 1, 2021, onwards, following the February 2021 Texas
Events, until their effective disposal on December 28, 2021, and March 4, 2022, respectively. The proportionate impact of joint ventures and associates on Operating,
general and administrative expenses decreased for the same reasons stated above. As a result, the Adjusted EBITDA Proportionate1 increased by 20% to $394.4 million,
on a normalized basis.
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Solar Segment
Three months ended December 31
Year ended December 31
Solar Segment
Production (MWh)
LTA (MWh)
2022
247,388
313,118
Revenues (in $M)
Operating, general and administrative expenses
Adjusted EBITDA (in $M)1
15,530
6,747
8,783
PROPORTIONATE1
Production Proportionate (MWh)
Revenues Proportionate (in $M)
Adjusted EBITDA Proportionate (in $M)
247,388
15,530
8,783
2021
235,166
270,963
15,716
5,309
10,407
235,166
15,716
10,407
Change
2022
5 % 1,287,563
16 % 1,518,991
2021
1,088,962
1,257,038
February 2021
Texas Events
(9 days)2
—
—
2021
Normalized2
1,088,962
1,257,038
(1) % 113,320
24,299
27 %
89,021
(16) %
120,120
16,418
103,702
(38,166)
—
(38,166)
81,954
16,418
65,536
5 % 1,287,563
(1) % 113,320
89,021
(16) %
1,094,502
121,005
104,256
—
(38,166)
(38,166)
1,094,502
82,839
66,090
Change
18 %
21 %
38 %
48 %
36 %
18 %
37 %
35 %
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. Normalized measures are not recognized measures
under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "February 2021 Texas Events" section for more information.
For the three-month period ended December 31, 2022, Revenues decreased by 1% in the solar power generation segment compared with the same period last year, due
mainly to the lower selling prices at the Salvador facility partly offset by higher average selling prices at the Phoebe facility, and the San Andrés Acquisition on January 28,
2022. The increase of 27% in Operating, general and administrative expenses is explained by higher operating expenses following the commissioning of the Hillcrest facility
and by the San Andrés Acquisition. As a result, the Adjusted EBITDA1 decreased by 16% to $8.8 million, compared with the same period last year.
For the year ended December 31, 2022, Revenues increased 38% in the solar power generation segment compared with the same period last year, for which Revenues
were normalized to exclude the February 2021 Texas Events. The increase is mainly attributable to the higher selling prices at the Phoebe facility, the San Andrés
Acquisition on January 28, 2022, and to the contribution of the Pampa Elvira facility following the acquisition of the remaining 50% interest in Energía Llaima on July 9,
2021. The increase of 48% in Operating, general and administrative expenses is explained by higher operating expenses following the commissioning of the Hillcrest facility,
and the acquisition of the San Andrés and Pampa Elvira facilities. As a result, the Adjusted EBITDA1 increased by 36% to $89.0 million, compared with the same period last
year, for which the Adjusted EBITDA was normalized to exclude the February 2021 Texas Events.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p36
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS |
Net Earnings (Loss)
Net loss of $52.6 million ($0.23 net loss per share - basic and diluted) for the three-month period ended December 31, 2022,
compared with net earnings of $5.7 million ($0.02 net earnings per share - basic and diluted) for the corresponding period in
2021.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, the
$58.3 million increase in net loss mainly stems from:
•
•
•
•
a $47.9 million increase in impairment of long-term assets, mainly attributable to the impairment charges recognized in
2022 on the Hawaiian projects and on the safe harbor solar modules;
a $16.4 million increase in finance costs mainly related to the Aela Acquisition and the Griffin Trail and Hillcrest facilities;
a $16.0 million increase in depreciation and amortization, mainly attributable to the Aela and San Andrés acquisitions; and
an $11.3 million decrease in other net income, mainly related to a decrease in the tax attributes being allocated to tax
equity investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility, partly
offset by a favourable shift in foreign exchange rates in 2022, compared with the same period last year.
These items were partly offset by:
•
a $50.1 million decrease in income tax expense mainly due to a decrease in the tax attributes being allocated to tax equity
investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility and to the
classification of the safe harbor solar modules as assets held for sale.
Net loss of $91.1 million ($0.43 net loss per share - basic and diluted) for the year ended December 31, 2022, compared with a
net loss of $185.4 million ($1.09 net loss per share - basic and diluted) for the corresponding period in 2021.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, the
$94.3 million decrease in net loss mainly stems from:
•
a $204.3 million decrease in the share of loss of joint ventures and associates, mainly related to:
◦
◦
◦
the recognition of $112.6 million in impairment charges through the Corporation's share of loss of the Flat Top
and Shannon joint venture facilities in 2021;
the February 2021 Texas Events, resulting in a net unfavourable impact of $64.2 million on the Flat Top and
Shannon joint venture facilities in 2021 (refer to the "February 2021 Texas Events" section of this MD&A for more
information); and
the recognition of a $26.9 million mark-to-market loss through the Corporation's share of loss of the Flat Top and
Shannon joint venture facilities in 2021, compared to nil in 2022.
•
a favourable $28.0 million change in the fair value of financial instruments, mainly related to the net unfavourable impact
of the February 2021 Texas Events in 2021 and the favourable change in foreign exchange forward and interest rate
curves in 2022 compared with the same period last year, partly offset by an increase in merchant power curves for the
Phoebe power hedge.
These items were partly offset by:
•
•
•
•
•
an $80.4 million increase in depreciation and amortization, mainly attributable to the Energía Llaima, Aela, San Andrés
and Curtis Palmer acquisitions, and the Griffin Trail and Hillcrest commissionings in 2021;
a $65.6 million increase in finance costs mainly related to the Energía Llaima and Aela acquisitions, an increase in
inflation compensation interests on the Harrison Hydro real-return bonds and to the Griffin Trail and Hillcrest facilities
commissioned in 2021;
a $20.7 million decrease in other net income, mainly related to a decrease in the tax attributes being allocated to tax
equity investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility, partly
offset by a favourable shift in foreign exchange rates and the increase in PTCs generated due to a full production year at
the Griffin Trail facility in 2022, compared with 2021;
a $19.7 million increase in income tax expense, mainly related to the impacts of the February 2021 Texas Events, the Flat
Top and Shannon impairment charges in 2021, and the non-recognition of deferred tax assets on projects classified as
assets held for sale, partly offset by a decrease in income tax expense due to the accelerated tax depreciation taken in
2021 on the Griffin Trail facility; and
a $10.9 million increase in impairment of long-term assets following the impairment charges recognized in 2022 on the
Hawaiian projects and on the safe harbor solar modules, partly offset by the impairment charges recognized in 2021 on
the Phoebe solar facility, the Energía Llaima investment following the purchase of the remaining equity interests, and a
minority equity investment in France.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p37
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE ON OPERATING RESULTS |
Adjusted Net Loss
The Adjusted Net Loss1 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 Loss1 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 Loss1" 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, items that are outside of the normal course of the Corporation's cash generating operations 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 (Loss):
Revenues
Expenses:
Operating expenses
General and administrative expenses
Prospective project expenses
Adjusted EBITDA1
Finance costs
Other net income
Depreciation and amortization
Share of loss (earnings) of joint ventures and
associates
Realized loss on power hedges
Income tax (recovery) expense
Adjusted Net Loss1
Three months ended December 31
Year ended December 31
2022
2021
2022
2021
Normalized2
203,636
202,388
870,494
692,241
62,591
13,568
7,118
120,359
83,864
(23,236)
93,756
500
1,559
(6,800)
(29,284)
42,555
12,813
9,709
137,311
67,417
(32,372)
77,748
(272)
1,672
33,092
(9,974)
207,768
53,071
24,740
584,915
317,842
(65,705)
336,053
(12,501)
37,479
6,607
(34,860)
149,106
45,098
27,367
470,670
252,255
(85,547)
255,640
(12,423)
2,902
64,794
(6,951)
1. Adjusted Net Loss 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.
2. For the year ended December 31, 2021, the revenues are normalized to exclude the impacts of the February 2021 Texas Events. Normalized measures are not
recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the "February 2021 Texas Events"
section for more information.
Adjusted Net Loss1 of $29.3 million for the three-month period ended December 31, 2022, compared with an Adjusted Net
Loss1 of $10.0 million for the corresponding period in 2021.
The $19.3 million increase in Adjusted Net Loss1 mainly stems from:
▪
a $9.1 million decrease in other net income, mainly related to a decrease in the tax attributes being allocated to tax equity
investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility, partly offset by a
favourable shift in foreign exchange rates in 2022, compared with the same period last year;
a $16.4 million increase in finance costs mainly related to the Aela Acquisition, and the Griffin Trail and Hillcrest facilities;
and
a $16.0 million increase in depreciation and amortization, mainly attributable to the Aela and San Andrés acquisitions.
▪
▪
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p38
(in thousands of Canadian dollars, except as noted and amounts per share)
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, these items
were partly offset by:
▪
a $39.9 million decrease in income tax expense mainly due to a decrease in the tax attributes being allocated to tax equity
investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility.
Adjusted Net Loss1 of $34.9 million for the year ended December 31, 2022, compared with an Adjusted Net Loss1 of
$7.0 million for the corresponding period in 2021.
The $27.9 million increase in Adjusted Net Loss1 mainly stems from:
▪
▪
▪
▪
an $80.4 million increase in depreciation and amortization, mainly attributable to the Energía Llaima, Aela, San Andrés
and Curtis Palmer acquisitions, and the Griffin Trail and Hillcrest commissionings in 2021;
a $65.6 million increase in finance costs mainly related to the Energía Llaima and Aela acquisitions, an increase in
inflation compensation interests on the Harrison Hydro real return bonds and to the Griffin Trail and Hillcrest facilities
commissioned in 2021;
an unfavourable $34.6 million realized change in the Phoebe power hedge, mainly related to the higher merchant prices in
2022; and
a $19.8 million decrease in other net income, mainly related to a decrease in the tax attributes being allocated to tax
equity investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility, partly
offset by a favourable shift in foreign exchange rates and the increase in PTCs generated due to a full production year at
the Griffin Trail facility in 2022, compared with 2021.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, these items
were partly offset by:
▪
a $58.2 million decrease in income tax expenses mainly due to a decrease in the tax attributes being allocated to tax
equity investors, largely attributable to the accelerated tax depreciation taken in 2021 on the Griffin Trail facility.
3- FINANCIAL PERFORMANCE ON OPERATING RESULTS |
Non-Controlling Interests
Attribution of loss of $7.3 million to non-controlling interests for the three-month period ended December 31, 2022, compared
with an attribution of earnings of $8.1 million for the corresponding period in 2021.
The $15.4 million increase in loss attributed to non-controlling interests for the three-month period ended December 31, 2022,
is mainly due to:
•
a decrease in revenues mainly attributable to exceptionally low production at Harrison Hydro, Kwoiek Creek and at Curtis
Palmer facilities due to drier weather; and
no allocation to the non-controlling interest in Innergex Europe in the fourth quarter of 2022 due to the French Acquisition
on October 4, 2022.
•
Attribution of loss of $9.5 million to non-controlling interests for the year ended December 31, 2022, compared with an
attribution of earnings of $6.4 million for the corresponding period in 2021.
The $15.9 million increase in loss attributed to non-controlling interests for the year ended December 31, 2022, is mainly due
to:
•
a decrease in revenues mainly attributable to exceptionally low production at Harrison Hydro and Kwoiek Creek facilities
due to drier weather;
a higher allocation of loss 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
no allocation to the non-controlling interest in Innergex Europe in the fourth quarter of 2022 due to the French Acquisition
on October 4, 2022.
•
•
These items were partly offset by:
•
a favourable movement in the unrealized change in the fair value of derivative financial instruments in Innergex Europe.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p39
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Capital Structure
The Corporation's 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, 2022
As at December 31, 2021
3,306,952
87,640
170,232
3,564,824
718,232
305,000
4,088,456
443,147
282,678
(78,303)
5,759,210
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
1.Common and preferred shares are presented at their fair value as at December 31, 2022, and December 31, 2021, 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, 2022, and December 31, 2021, multiplied by the prevailing share
price of $16.20 (2021 - $18.60) at the close of markets.
3.Consists of the number of preferred shares outstanding as at December 31, 2022, and December 31, 2021, multiplied by the prevailing
share price of $13.40 and $21.04 (2021 - $17.20 and $25.30), for the Series A and Series C preferred shares, respectively, at the close of
markets.
9,324,034
8,881,471
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 price, and by the shares
issued related to the February 2022 public offering and the concurrent Hydro-Québec private placement (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, 2021. The fair value was therefore impacted by a net unfavourable change in the price of preferred
shares. The decrease in non-controlling interests stems mainly from the French and the Mountain Air acquisitions, respectively,
the distributions allocated to the non-controlling interests and an increase in the loss allocated to the non-controlling interests
in the Harrison Hydro and Kwoiek Creek facilities during the year.
The increase in long-term loans and borrowings is mainly due to the Aela Acquisition and the subsequent refinancing of the
non-recourse debt of the Chilean facilities, and the net draws from the revolving credit facility.
The effective all-in interest rate on the Corporation's long-term loans and borrowings was 5.06% as at December 31, 2022
(4.62% as at December 31, 2021).
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p40
(in thousands of Canadian dollars, except as noted and amounts per share)
Credit Agreements – Material Financial and Non-Financial Conditions
As at December 31, 2022, the Corporation and its subsidiaries have met all material financial and non-financial conditions
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.
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. The TEIs are allocated a portion of the renewable energy facilites'
taxable income (losses), PTCs/ITCs 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.
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 TEIs 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
Inflation Reduction Act of 2022 (IRA)
In August 2022, the Inflation Reduction Act (IRA) was passed. Among other things, the IRA provides an extension of the
current ITC and PTC for projects that begin construction prior to January 1, 2025. In addition, solar projects can choose the
PTC instead of just the ITC for projects starting construction before January 1, 2025. For projects placed in service after
January 1, 2025, there is a transition to a new technology-neutral tax credit system, which is essentially the same in function
and amount as the ITC/PTC. This new technology-neutral structure extends until power sector emissions are reduced by 75%
from 2022 level or begin stepping down after 2032, whichever is later.
As at December 31, 2022, the PTC amounts to US$26/MWh generated, and subject to annual CPI inflation adjustment, and
the ITC represents 30% of allowable capital costs.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p41
(in thousands of Canadian dollars, except as noted and amounts per share)
Production Tax Credit Program (“PTC”)
Current United States tax law allows wind energy projects to receive tax credits that are earned for each MWh of generation
during the first 10 years of the projects' operation. Both Foard City and Griffin Trail were eligible for the full PTC credit.
Commercial
Operation
Date
Expected TEI
Flip Point5
TEI
Investment
(M$)
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
45.9
29.3
4.9
5.1
99.00 %
99.00 %
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 2022.
2. TEIs in U.S. projects generally require certain sponsor guarantees as a condition for their investment. To support the tax equity investments at Foard City and
Griffin Trail, 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$26/MWh generated for the period from COD to Flip Point, translated into Canadian dollars at
1.3544. PTCs generation will vary depending on actual production. PTCs are subject to annual CPI inflation.
4. Average annual Pay-go Contributions estimate is based on PTCs generated on gross estimated LTA for each year from COD to Flip Point, translated into
Canadian dollars at 1.3544. Pay-go Contributions will be earned on actual production in excess of a specified annual threshold, subject to a contractual
cumulative maximum.
5. Represents the expected TEI Flip Point as estimated at the date of final funding from the TEI. Actual Flip Point may differ, subject to the facilities' respective
operating performance.
Investment Tax Credit Program (“ITC”)
Current United States tax law allows wind and solar facilities to receive a one-time federal tax credit, calculated on the basis of
the facility's capital cost. Both Phoebe and Hillcrest were eligible for the full 30% ITC.
Commercial
Operation Date
Expected TEI Flip
Point7
TEI Investment
(M$)
Phoebe1,2,3,7
Hillcrest1,4,5,6,7
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. Phoebe 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 ($122.4 million) was received upon commissioning of the project on November 2021.
5. Hillcrest allocation of taxable income (loss) and ITCs is 99.00% to the TEI. From January 1, 2027, allocation of taxable income (loss) to the TEI will be 5.00%.
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.
2022 Annual Report
Management's Discussion and Analysis p42
(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
Assets held for sale
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, 2022
December 31, 2021
162,971
54,670
1,282
249,019
59,217
527,159
6,212,371
1,268,960
135,786
139,676
318,475
8,075,268
8,602,427
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
650,824
733,527
5,384,813
1,080,363
6,465,176
7,116,000
1,316,195
170,232
1,486,427
8,602,427
4,411,239
890,622
5,301,861
6,035,388
1,093,112
267,568
1,360,680
7,396,068
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p43
(in thousands of Canadian dollars, except as noted and amounts per share)
Working Capital Items
As at December 31, 2022, working capital1 was negative at $123.7 million, from negative $344.9 million in 2021, mainly
explained by:
•
•
•
Current assets amounted to $527.2 million as at December 31, 2022, an increase of $138.5 million compared with
December 31, 2021, mainly due to a $61.4 million increase in accounts receivable, attributable mainly to the Aela
Acquisition and the timing of collection therewith, the reclassification of the safe harbor solar modules as held for sale,
and an $11.3 million increase in prepaid and other, attributable mainly to the Aela Acquisition.
Current liabilities amounted to $650.8 million as at December 31, 2022, a decrease of $82.7 million compared with
December 31, 2021, mainly due to a $137.7 million decrease in the current portion of long-term loans and
borrowings, which primarily relates to the resolution of breaches under the Phoebe, Duqueco, Beaumont and
Vallottes project loans, partly offset by the classification of the $150.0 million subordinated unsecured term loan as
current, due to its February 6, 2023 maturity and by the Aela and San Andrés acquisitions.
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 and revolving term credit facility availability to be sufficient to
meet its needs, also considering the $150.0 million subordinated unsecured term loan, effectively refinanced on
February 1, 2023, classified as current as at December 31, 2022. As at December 31, 2022, the Corporation had
$950.0 million in revolving term credit facility and had drawn $718.2 million as cash advances, while $56.9 million had been
used to issue letters of credit, leaving $174.9 million available.
Non-Current Assets
Non-current assets amounted to $8,075.3 million as at December 31, 2022, an increase of $1,067.9 million compared with
December 31, 2021. The increase is mainly due to an aggregate addition of $939.8 million to property, plant and equipment
and intangible assets as part of the Aela and San Andrés acquisitions. Moreover, the construction and development activities
also contributed to an increase in property, plant and equipment and project development costs by an aggregate amount of
$175.2 million, net of the ITC recoverable recognized against the project construction costs of Hale Kuawehi. An increase of
$73.1 million in goodwill, following the Aela Acquisition, an increase in the right of use of assets following an upward revision in
the wind and solar facilities' useful lives and an increase of $18.3 million in deferred tax assets mainly related to the Mountain
Air Acquistion and tax losses allocated to Phoebe, partly offset by the reversal of previously recognized tax losses in Chile,
also contributed to the increase in non-current assets. Derivative financial instruments also favourably impacted non-current
assets (please refer to the "Financial Position – Derivative Financial Instruments and Risk Management" subsection below for
more information). In addition, the increase is also explained by a weakening of the Canadian dollar against the United States
dollar and the Euro.
These items were partly offset by depreciation and amortization of $336.1 million, by an upward shift in interest rate curves,
which contributed to the decrease of the asset retirement obligations included in property, plant and equipment, and by the
impairment charges recognized on the Hawaiian projects and on the safe harbor solar modules.
Non-Current Liabilities
Non-current liabilities amounted to $6,465.2 million as at December 31, 2022, an increase of $1,163.3 million compared with
December 31, 2021. The increase is mainly due to a $973.6 million increase in the non-current portion of long-term loans and
borrowings, stemming from the long-term loans and borrowings assumed in the Aela Acquisition and the subsequent
refinancing of the non-recourse debt of the Chilean facilities, and from net draws on the revolving term credit facility, used
toward the San Andrés Acquisition and the construction and development activities.
The classification of project loans as non-current following the resolution of breaches under the Phoebe, Duqueco, Beaumont
and Vallottes credit agreements also contributed to the increase in the non-current portion of long-term loans and borrowings
(see the "Capital Structure" section of this MD&A for more information). In addition, the increase in non-current liabilities is also
explained by a $136.2 million increase in deferred tax liabilities, largely related to the Aela Acquisition and to a favourable
change in the fair value of the derivative financial instruments, the lease liabilities acquired in the Aela Acquisiton and an
increase in the lease liabilities following an upward revision in the wind and solar facilities' useful lives.
1 Working capital represents the excess or deficiency of current assets over current liabilities.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p44
(in thousands of Canadian dollars, except as noted and amounts per share)
These items were partly offset by the scheduled principal repayments of long-term loans and borrowings, and the classification
of the subordinated unsecured term loan as current due to its February 6, 2023 maturity. In addition, the upward shift in
interest rate curves contributed to a decrease of the asset retirement obligations.
Shareholders' Equity
As at December 31, 2022, Shareholders' equity increased by $125.7 million compared with December 31, 2021, mainly
attributable to the shares issued as part of the public offering in February 2022 and the concurrent Hydro-Québec private
placement (please refer to the "Information on Capital Stock" section of this MD&A for more information), and the total
comprehensive income of $176.1 million, partly offset by the dividends declared on common and preferred shares totalling
$152.6 million, the distributions to non-controlling interests totalling $48.7 million, and the acquisition of non-controlling
interests through the French and the Mountain Air acquisitions.
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.
The aggregate fair value of derivative financial instruments amounted to a net asset of $25.3 million as at December 31, 2022,
from a net liability of $59.4 million as at December 31, 2021. The favourable change relates mainly to the interest hedging
derivatives, favourably impacted by an upward shift in the interest rate curves, 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, and the monetization of
the Euro/CAD foreign exchange forward contracts concurrent with the closing of the French Acquisition.
Off-Balance-Sheet Arrangements
As at December 31, 2022, the Corporation had issued letters of credit totalling $300.6 million, including $56.9 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 $113.4 million in corporate guarantees
used mainly to guarantee certain activities of prospective projects. The corporate guarantees were also used to support the
long-term currency hedging instruments of its operations in France, payment security related to its development activities in
Hawaii, 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 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 | Contingencies
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.
2022 Annual Report
Management's Discussion and Analysis p45
(in thousands of Canadian dollars, except as noted and amounts per share)
BC Hydro cited the 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 was taking to
address the reduced electricity demand during the COVID-19 pandemic and related challenges to the safe operation of its
hydroelectric system.
Innergex disputed that the pandemic and related governmental measures in any way prevented BC Hydro from fulfilling its
obligations to accept and purchase energy under the EPAs or enabled 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 complied with BC Hydro’s curtailment request,
but did 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 amounted to $12.5 million ($14.2 million on a Revenues Proportionate1 basis). The dispute was settled in the
first quarter of 2022 to Innergex's satisfaction.
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. 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; the appeal
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 interest, was received by the Corporation during the first quarter of 2022.
Innavik EPC Agreement
On January 25, 2023 a legal hypothec has been registered by the contractor against the Innavik hydroelectric project
("Innavik" or "the project"), a joint venture company, in the amount of $57.8 million, representing the contractor's claim for
payment of additional costs under the EPC Agreement with Innavik. The Corporation disputes that claim in good faith and,
unless the contractor discharges the legal hypothec at its request, will take legal action to cause the legal hypothec to be
removed from title. As at December 31, 2022, while continuing to dispute the claim, the project recognized a provision for
construction cost overruns, estimated based on a range of possible outcomes that are materially lower than the amounts
claimed by the contractor.
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 the
"Non-IFRS Measures" section of this MD&A for more information.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p46
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Cash Flows
Three months ended
December 31
2022
2021
2022
2021
Year ended December 31
February
2021 Texas
Events
(9 days)
2021
Normalized
1
93,631
75,837
430,243
265,498
17,093 282,591
(24,009)
366,228
197,536
414,077
— 414,077
(127,768)
(446,083)
(635,766)
(667,054)
—
(667,054)
4,266
(4,766)
4,692
(7,720)
—
(7,720)
(53,880)
(8,784)
(3,295)
4,801
17,093
21,894
216,851
175,050
166,266
161,465
— 161,465
162,971
166,266
162,971
166,266
17,093 183,359
OPERATING ACTIVITIES
Cash flows from operating activities
FINANCING ACTIVITIES
Cash flows (used in) from financing
activities
INVESTING ACTIVITIES
Cash flows used in investing activities
Effects of exchange rate changes on
cash and cash equivalents
Net change in cash and cash
equivalents
Cash and cash equivalents, beginning of
period
Cash and cash equivalents, end of
period
1.Normalized measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. 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, 2022, cash flows from operating activities totalled $93.6 million, compared
with $75.8 million in the same period last year. The increase relates primarily to the realized gain on financial instruments
following the monetization of the foreign exchange forward contracts concurrent with the closing of the French Acquisition, to
the Aela and San Andrés acquisitions, and to the timing of interest payments for certain BC project debts in Q4 2022, partly
offset by an increase in finance costs paid relative to the Green Bonds issued as part of a refinancing of the non-recourse debt
in Chile following the Aela Acquisition.
For the year ended December 31, 2022, cash flows from operating activities totalled $430.2 million, compared with
$265.5 million in the same period last year. The increase relates primarily to the contribution from the Energía Llaima, Licán,
Curtis Palmer, San Andrés and Aela acquisitions, the Hillcrest and Griffin Trail commissionings, and the BC Hydro Curtailment
Payment. The realized gain on financial instruments following the settlement of both the interest rate swaps, as part of
Innergex's refinancing of the non-recourse debt of its Chilean facilities and the foreign exchange forward contracts concurrent
with the closing of the French Acquisition, the net unfavourable impact of the February 2021 Texas Events, and the timing of
interest payments for certain BC project debts in Q4 2022, also contributed to increased cash flows from operating activities.
These items were partly offset by an increase in finance costs paid mainly related to the Griffin Trail and Hillcrest facilities
commissioned in 2021 and to the Green Bonds issued as part of a refinancing of the non-recourse debt in Chile following the
Aela Acquisition and from the unfavourable difference between sales at the Phoebe node and purchases at the ERCOT South
hub.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p47
(in thousands of Canadian dollars, except as noted and amounts per share)
Cash Flows (used in) from Financing Activities
For the three-month period ended December 31, 2022, cash flows used in financing activities totalled $24.0 million, compared
with cash flows from financing activities of $366.2 million in the same period last year. The decrease stems mainly from the
$196.7 million investment made by HQI US Holding LLC, a subsidiary of Hydro-Québec, in the Curtis Palmer Acquisition in
2021 and by a net $23.9 million increase in long-term loans and borrowings in 2022, mainly explained by lower scheduled debt
principal repayments, compared to a net increase of $217.1 million in 2021, mainly related to draws made on the corporate
revolving credit facility toward the Curtis Palmer Acquisition.
For the year ended December 31, 2022, cash flows from financing activities totalled $197.5 million, compared with
$414.1 million in the same period last year. The decrease stems mainly from the $196.7 million investment made by HQI US
Holding LLC, a subsidiary of Hydro-Québec in the Curtis Palmer Acquisition in 2021, and from the $202.4 million cash inflow in
2022 from shares issued related to the Aela Acquisition, compared to the $267.8 million cash inflow in 2021 from shares
issued related to the Curtis Palmer Acquisition. These items were partly offset by the net $208.0 million increase in long-term
loans and borrowings in 2022, mainly explained by the San Andrés and Aela acquisitions, the Green Bonds issued as part of a
refinancing of the non-recourse debt in Chile following the Aela Acquisition, and the additions to property, plant and equipment,
compared to an increase of $114.6 million in 2021, mainly related to net draws made toward the construction of the Griffin Trail
and Hillcrest facilities.
Cash Flows Used in Investing Activities
For the three-month period ended December 31, 2022, cash flows used in investing activities totalled $127.8 million, compared
with $446.1 million in the same period last year. This decrease is mainly due to the consideration paid toward the Curtis
Palmer Acquisition in 2021.
For the year ended December 31, 2022, cash flows used in investing activities totalled $635.8 million, compared with
$667.1 million in the same period last year. The decrease in cash flows used in investing activities is mainly due to the
additions to property, plant and equipment of the Griffin Trail and Hillcrest facilities in 2021, partly offset by the consideration
paid toward the San Andrés and Aela acquisitions and the Mountain Air Acquisition in 2022, compared with the consideration
paid toward the Curtis Palmer Acquisition in 2021.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p48
(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
Year ended December 31
February 2021
Texas Events
(9 days)7
2021
Normalized7
2020
2022
2021
430,243
265,498
17,093
282,591
235,108
Cash flows from operating activities2
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 interests3
Dividends declared on Preferred shares
Chile portfolio refinancing - hedging
impact4
Add (subtract) the following specific items5:
Realized loss on contingent considerations
Realized (gain) loss on termination of
interest rate swaps4
Realized (gain) loss on termination of
foreign exchange forwards6
Acquisition, integration and restructuring
costs
Realized gain on the Phoebe basis hedge
Free Cash Flow7
14,518
21,455
(11,051)
(156,862)
(8,029)
(160,973)
(29,271)
(5,632)
(25,076)
(5,632)
2,578
—
—
547
(71,735)
2,508
(43,458)
—
—
—
—
—
—
—
—
—
—
21,455
7,765
(8,029)
(160,973)
(2,828)
(151,623)
(25,076)
(5,632)
(13,491)
(5,942)
—
547
2,508
—
—
3,021
1,664
—
—
19,586
93,260
17,918
—
147,248
4,563
(2,546)
92,315
—
(1,304)
15,789
4,563
(3,850)
108,104
Dividends declared on common shares
Payout Ratio7
146,957
132,229
100 %
143 %
—
(21) %
132,229
125,543
122 %
135 %
Adjust for the following items:
Prospective projects expenses
Adjusted Free Cash Flow
24,740
171,988
27,367
135,471
16,708
109,968
Adjusted Payout Ratio
85 %
98 %
114 %
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. Cash flows from operating activities for the year ended December 31, 2022 include the one-time BC Hydro Curtailment Payment received during the first quarter
of 2022.
3. 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.
4. The Free Cash Flow for the year ended December 31, 2022 excludes the $71.7 million realized gain on settlement of the interest rate hedges entered into to
manage the Corporation's exposure to the risk of increasing interest rates during the negotiations surrounding the refinancing of the non-recourse debt
assumed in the Aela Acquisition and at Innergex’s existing Chilean projects. Instead, the gain is amortized in the Free Cash Flow using the effective interest rate
method over the period covered by the unwound hedging instruments.
5. These items are excluded from the Free Cash Flow and Payout Ratio calculations as they are deemed not representative of the Corporation's long-term cash-
generating capacity, and include items such as gains and losses on the Phoebe basis hedge due to their limited occurrence (maturity attained on December 31,
2021), realized gains and losses on contingent considerations related to past business acquisitions, transaction costs related to realized acquisitions, realized
losses or gains on refinancing of certain borrowings or derivative financial instruments used to hedge the interest rate on certain borrowings or the exchange
rate on equipment purchases, and tax payments related to fiscal strategies for the purpose of improving the long-term cash generating capacity of Innergex.
6. The Free Cash Flow for the year ended December 31, 2022 excludes the $43.5 million realized gain on settlement of the foreign exchange forward contracts
concurrent with the closing of the French Acquisition.
7. 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.
Normalized measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
"February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p49
(in thousands of Canadian dollars, except as noted and amounts per share)
Free Cash Flow
For the year ended December 31, 2022, the Corporation generated Free Cash Flow1 of $147.2 million, compared with
$92.3 million for the corresponding period last year (Normalized Free Cash Flow1,2 of $108.1 million, when excluding the
impacts from the February 2021 Texas Events - refer to the "February 2021 Texas Events" section of this MD&A for more
information).
Free Cash Flow1 increased $39.1 million compared with Normalized Free Cash Flow1,2 in 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, Curtis Palmer, San Andrés and Aela acquisitions, and from the Hillcrest and Griffin
Trail commissionings;
the timing of principal and interest payments for certain BC project debts; and
an increase in revenues from the BC Hydro Curtailment Payment.
These items were partly offset by:
•
•
•
an increase in Free Cash Flow attributed to non-controlling interests, stemming mainly from the Curtis Palmer
Acquisition, partly offset by a decrease attributed to the Harrison Hydro facilities, mainly explained by exceptionally
low production in British Columbia in Q4 2022 due to drier weather;
an increase in the interest paid relative to Chile refinancing Green Bonds in Q4 2022; 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.
Payout Ratio
For the year ended December 31, 2022, the dividends on common shares declared by the Corporation amounted to 100% of
Free Cash Flow1, compared with 143% for the corresponding period last year. Excluding the impacts from the February 2021
Texas Events (please refer to the "February 2021 Texas Events" section of this MD&A for more information), the dividends on
common shares declared by the Corporation for the corresponding period last year amounted to 122% of Normalized Free
Cash Flow1,2.
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.
2 Normalized measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
"February 2021 Texas Events" section for more information.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p50
(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 21, 2023 December 31, 2022 December 31, 2021
192,493,999
148,023
142,056
3,400,000
2,000,000
265,570
204,160,610
148,023
142,056
3,400,000
2,000,000
284,769
204,132,833
148,023
142,056
3,400,000
2,000,000
284,769
As at the closing of the market on February 21, 2023, and since December 31, 2022, the increase in the number of common
shares of the Corporation is attributable mainly to the issuance of 27,777 common shares related to the Corporation's Dividend
Reinvestment Plan ("DRIP").
As at December 31, 2022, the increase in the number of common shares since December 31, 2021, was mainly due to the
following:
–
the issuance of 9,718,650 common shares as part of the public offering closed on February 22, 2022. Concurrently
with the closing of the offering, the Corporation issued 2,100,000 common shares to Hydro-Québec to maintain its
ownership;
the issuance of 57,949 common shares related to the DRIP.
–
These items were partly offset by:
–
the 253,681 common shares purchased and cancelled by the Corporation under the Normal Course Issuer Bid
terminated on May 23, 2022, for a total cash consideration of $4.6 million.
New Normal Course issuer Bid
The Corporation received approval from the Toronto Stock Exchange ("TSX") to renew the normal course issuer bid on its
common shares and to commence a normal course issuer bid on its Series A preferred shares and Series C preferred shares
(the "New Bid"). Under the New Bid, the Corporation could purchase for cancellation up to 4,082,073 of its common shares,
representing approximately 2% of the 204,103,658 issued and outstanding common shares of the Corporation as at May 11,
2022. The Corporation could purchase for cancellation up to 68,000 of its Series A preferred shares, representing
approximately 2% of the 3,400,000 issued and outstanding Series A preferred shares of the Corporation as at May 11, 2022.
The Corporation could purchase for cancellation up to 40,000 of its Series C preferred shares, representing approximately 2%
of the 2,000,000 issued and outstanding Series C preferred shares of the Corporation as at May 11, 2022. The New Bid
commenced on May 24, 2022, and will terminate on May 23, 2023.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p51
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Dividends
The Corporation's dividend policy is determined by its Board of Directors and is based on the Corporation's operating results,
cash flows, financial condition, debt covenants, long-term growth prospects, solvency test imposed under corporate law for the
declaration of dividends and other relevant factors.
The following dividends were declared by the Corporation:
Dividends declared on common
shares1
Dividends declared on Series A
Preferred Shares
Dividends declared on Series C
Preferred Shares
Three months ended December 31
Year ended December 31
2022
2021
2022
2021
($/share)
Total
($/share)
Total
($/share)
Total
($/share)
Total
0.180 36,744
0.180 34,649
0.7200 146,957 0.7200 132,229
0.2028
689 0.2028
689
0.8110
2,757 0.8110
2,757
0.3594
719 0.3594
719
1.4375
2,875 1.4375
2,875
1. The increase in dividends declared on common shares was attributable to the issuances of common shares upon acquisitions, public
offerings, Hydro-Québec private placements, and to the issuance of common shares under the DRIP, partly offset by common shares
purchased and cancelled under the NCIB.
The following dividends will be paid by the Corporation on April 17, 2023:
Date of
announcement
Record date
Payment date
Dividend per
common share
Dividend per Series A
Preferred Share
Dividend per Series C
Preferred Share
February 22, 2023
March 31, 2023
April 17, 2023
$0.180
$0.202750
$0.359375
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p52
(in thousands of Canadian dollars, except as noted and amounts per share)
5- OUTLOOK | 2022 Guidance Achievements
In 2022, the Corporation partly met its 2022 Growth Targets.
2022
Actual
Target3
2021
Actual Normalized2
Production (GWh)1
Revenues
10,254
+13 % +22 %
870,494
+26 % +25 %
Operating, general, administrative and prospective projects expenses
285,579
+29 % +27 %
Adjusted EBITDA1
Adjusted EBITDA Proportionate1
Free Cash Flow per Share1
Number of facilities in operation
Net installed capacity (MW)
584,915
+24 % +25 %
696,362
+20 % +21 %
0.72
84
3,634
0.75
84
3,484
9,055
692,241
221,571
470,670
578,472
0.6
79
3,101
1. 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.
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.
3. Target revised in August 2022. Please refer to the MD&A for the period ended June 30, 2022.
The Production target was not met mainly due to:
▪
▪
▪
Exceptionally low hydrology levels in British Columbia during the later part of 2022;
Lower generation from the US facilities; and
Other weather-related events.
The financial targets were partly met due to the following factors:
▪
▪
Exceptionally low hydrology levels in British Columbia during the later part of 2022;
The enactment of the new 2022 Supplementary Budget Act in France, which aims to share additional revenues
recognized for certain power purchase agreements with the French government.
Partly mitigated by higher prices at the Chilean and US facilities.
5- OUTLOOK | Strategic Plan 2020-2025
The targets of the Corporation are to achieve, on a run rate basis, an Adjusted EBITDA Proportionate1 compound annual
growth rate of approximately 14% by 2025 to $1.062 billion and a Free Cash Flow1 per Share compound annual growth rate of
approximately 13% by 2025 to $1.01.
The following graphs present the targets for 2025 on a run rate basis.
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.
2022 Annual Report
Management's Discussion and Analysis p53
(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 includes 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 6,000 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 22, 2023, 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.
2022 Annual Report
Management's Discussion and Analysis p54
(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. Revenues Proportionate, Adjusted EBITDA, Adjusted EBITDA Proportionate, Adjusted Net Loss, 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.
Revenues Proportionate, Adjusted EBITDA and corresponding Proportionate measures
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 "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.
Innergex believes that the presentation of these measures enhances the understanding of the Corporation's operating performance. Adjusted EBITDA is used by
investors to evaluate the operating performance and cash generating operations, and to derive financial forecasts and valuations. Revenues Proportionate and Adjusted
EBITDA Proportionate measures are used by investors to evaluate the contribution of the joint ventures and associates to the Corporation’s operating performance and
cash generating operations, and the contribution of such for financial forecasts and valuations purposes. In addition, Revenues Proportionate and Adjusted EBITDA
Proportionate measures help investors seize the relative importance of PTCs generated by the operations, and evaluate their contribution to the Corporation’s operating
performance, as PTCs form an important part of certain wind projects’ economics in the United States. Readers are cautioned that Revenues Proportionate, should not
be construed as an alternative to Revenues, as determined in accordance with IFRS. Readers are also cautioned that Adjusted EBITDA and Adjusted EBITDA
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.
2022 Annual Report
Management's Discussion and Analysis p55
(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:
Three months ended December 31, 2022
Three months ended December 31, 2021
Consolidation
Share of joint
ventures
PTCs
Proportionate Consolidation
Share of joint
ventures
PTCs
Proportionate
Revenues
203,636
11,368
16,576
231,580
202,388
12,259
16,404
231,051
Net earnings (loss)
Income tax expense
Finance costs
Depreciation and amortization
Impairment of long-term assets
EBITDA
Other net expense (income), before PTCs
Production tax credits ("PTCs")
Share of earnings of joint ventures and
associates
Change in fair value of financial
instruments
Adjusted EBITDA
(52,575)
(12,982)
83,864
93,756
47,868
159,931
(6,660)
(16,576)
—
—
4,362
4,155
—
8,517
(105)
—
—
—
—
—
—
—
—
16,576
(52,575)
(12,982)
88,226
97,911
47,868
168,448
(6,765)
—
5,743
37,158
67,417
77,748
12
188,078
(18,161)
(16,404)
—
—
4,541
4,241
—
8,782
219
—
—
—
—
—
—
—
—
16,404
5,743
37,158
71,958
81,989
12
196,860
(17,942)
—
286
(286)
—
—
(791)
791
—
—
(16,622)
120,359
(101)
8,025
—
16,576
(16,723)
144,960
(15,411)
137,311
(553)
9,239
—
16,404
(15,964)
162,954
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p56
(in thousands of Canadian dollars, except as noted and amounts per share)
Year ended December 31, 2022
Year ended December 31, 2021
Consolidation
Share of joint
ventures
PTCs
Proportionate Consolidation
Share of joint
ventures
PTCs
Proportionate
Revenues
870,494
60,535
64,729
995,758
747,208
111,921
54,018
913,147
Net loss
Recovery of Income tax
Finance costs
Depreciation and amortization
Impairment of long-term assets
EBITDA
Other net expense (income), before PTCs
Production tax credits ("PTCs")
Share of (earnings) loss of joint ventures
and associates
Change in fair value of financial
instruments
Adjusted EBITDA
(91,115)
(6,577)
317,842
336,053
47,868
604,071
(4,190)
(64,729)
—
—
17,757
16,801
—
34,558
(342)
—
—
—
—
—
—
—
—
64,729
(14,382)
14,382
—
(91,115)
(6,577)
335,599
352,854
47,868
638,629
(4,532)
—
—
(185,394)
(26,240)
252,255
255,640
36,986
333,247
(41,637)
(47,984)
—
(31)
23,382
23,051
112,609
159,011
1,947
—
—
—
—
—
—
—
(6,034)
54,018
189,889
(189,889)
—
(185,394)
(26,271)
275,637
278,691
149,595
492,258
(39,690)
—
—
64,145
584,915
(1,880)
46,718
—
64,729
62,265
696,362
92,122
525,637
129,055
94,090
—
54,018
221,177
673,745
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p57
(in thousands of Canadian dollars, except as noted and amounts per share)
Adjusted Net Loss
References to "Adjusted Net Loss" 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 derivative 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, items that are outside of the normal course of the Corporation's cash generating operations such as the
February 2021 Texas Events, the net income tax expense (recovery) related to these items, and the share of loss (earnings) of joint ventures and associates related to
the above items, net of related income tax.
The Adjusted Net Loss seeks to provide a measure that eliminates the earnings impacts of certain derivative financial instruments and other items that are outside of the
normal course of the Corporation's cash generating operations, 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. Adjusted Net Loss is used by investors
to evaluate and compare Innergex’s profitability before the impacts of the unrealized portion of the change in fair value of derivative financial instruments and other items
that are outside of the normal course of the Corporation's cash generating operations. Readers are cautioned that Adjusted Net Loss 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.
Below is a reconciliation of Adjusted Net Loss to its closest IFRS measure:
Net (loss) earnings
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 on settlement of foreign exchange forwards
Realized (gain) loss on termination of interest rate swaps
Realized gain on the Phoebe basis hedge
Realized gain on foreign exchange forward contracts
Income tax recovery related to above items
Adjusted Net loss
Three months ended December 31
2022
2021
Year ended December 31
2021
2022
(52,575)
5,743
(91,115)
(185,394)
—
—
—
—
(76)
25,336
47,868
(43,458)
(59)
—
—
(6,320)
(29,284)
—
—
—
—
(377)
(15,751)
12
—
(377)
(955)
(2,193)
3,924
(9,974)
—
—
—
—
(1,381)
141,859
47,868
(43,458)
(71,735)
—
(3,214)
(13,684)
(34,860)
(54,967)
70,756
64,197
112,609
20,226
18,502
36,986
—
2,508
(2,546)
(4,074)
(85,754)
(6,951)
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p58
(in thousands of Canadian dollars, except as noted and amounts per share)
Below is a reconciliation of Adjusted Net Loss adjustments to each line item of the consolidated statements of earnings:
Three months ended December 31
2022
2021
Year ended December 31
2022
2021
IFRS
Adj.
Non-IFRS
IFRS
Adj.
Non-IFRS
IFRS
Adj.
Non-IFRS
IFRS
Adj.
Non-IFRS
203,636
62,591
— 203,636 202,388
42,555
—
62,591
— 202,388 870,494
42,555 207,768
—
— 870,494 747,208 (54,967) 692,241
— 149,106
— 207,768 149,106
13,568
7,118
120,359
83,864
(23,236)
13,568
7,118
12,813 53,071
—
12,813
—
—
9,709 24,740
—
9,709
— 137,311 584,915
— 120,359 137,311
67,417 317,842
67,417
—
—
(32,372) (68,919)
(34,565) 2,193
—
83,864
(23,236)
53,071 45,098
24,740 27,367
— 45,098
—
—
— 27,367
— 584,915 525,637 (54,967) 470,670
— 252,255
— 317,842 252,255
(85,547)
(65,705) (89,621)
4,074
3,214
93,756
—
47,868 (47,868)
93,756
—
77,748
12
—
(12)
77,748 336,053
— 336,053 255,640
— 47,868 (47,868)
— 36,986 (36,986)
— 255,640
—
286
214
500
(791)
519
(272) (14,382)
1,881
(12,501) 189,889 (202,312)
(12,423)
(16,622) 18,181
(12,982) 6,182
(52,575) 23,291
1,559
(6,800)
(29,284)
(15,411) 17,083
(4,066)
37,158
5,743 (15,717)
1,672 64,145 (26,666)
33,092
(6,577) 13,184
(9,974) (91,115) 56,255
37,479 92,122 (89,220)
2,902
6,607 (26,240) 91,034 64,794
(6,951)
(34,860) (185,394) 178,443
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 (recovery) expense
Net (loss) earnings
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p59
(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 refinancing of certain borrowings or derivative financial instruments used to hedge the interest rate on certain
borrowings or the exchange rate on equipment purchases, and tax payments related to fiscal strategies for the purpose of improving the long-term cash generating
capacity of Innergex.
The Payout Ratio is a measure of the Corporation's ability to sustain current dividends as well as its ability to fund its growth from its cash generating operations, in the
normal course of business. 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. Free Cash Flow is used by investors in this regard. 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. Adjusted Free Cash Flow is used by investors to evaluate the
Corporation's cash generation capabilities and its ability to sustain current dividends, before the impacts of the Corporation's decision to invest yearly in its growth through
investing in the development of its Prospective Projects.
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. Payout Ratio is used by investors in this regard.
References to "Adjusted Payout Ratio" are to dividends declared on common shares divided by Adjusted Free Cash Flow. Adjusted Payout Ratio is used by investors to
evaluate the Corporation's ability to sustain current dividends, before the impacts of the Corporation's decision to invest yearly in its growth through investing in the
development of its Prospective Projects.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p60
(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
Chile
France
1. Includes the investments in joint ventures and associates.
As at
December 31, 2022 December 31, 2021
3,246,979
2,364,160
1,549,679
753,161
7,913,979
3,390,029
2,301,353
423,856
801,752
6,916,990
7- ADDITIONAL CONSOLIDATED INFORMATION | Geographic Segments –
Revenues
Revenues
Canada
United States
Chile
France
Year ended December 31
2022
2021
427,910
229,446
121,021
92,117
870,494
433,192
187,332
38,091
88,593
747,208
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p61
(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,
2022
Sept 30,
2022
June 30,
2022
March 31,
2022
Dec 31,
2021
Sept 30,
2021
June 30,
2021
March 31,
2021
Production (MWh)
Revenues
Operating, general and administrative and prospective
projects expenses
Adjusted EBITDA1
Net (loss) earnings
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
2,357,039 2,736,471 2,855,891 2,304,600 2,583,157 2,290,086 2,396,027 1,785,947
189.7
258.4
203.6
219.7
188.7
184.6
170.6
202.4
83.3
120.4
(52.6)
(45.3)
(0.23)
36.7
77.2
181.2
21.0
23.3
0.11
36.7
66.9
152.9
(24.6)
(25.2)
(0.13)
36.7
58.2
130.5
(34.9)
(34.4)
(0.18)
36.7
65.1
137.3
5.7
(2.3)
(0.02)
34.6
62.1
122.5
(23.5)
(16.4)
(0.10)
34.7
47.9
122.7
50.2
41.1
0.23
31.4
46.6
143.1
(217.9)
(214.2)
(1.24)
31.4
0.180
Dividends declared on common shares, $ per share
0.180
0.180
0.180
0.180
0.180
0.180
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.
2022 Annual Report
Management's Discussion and Analysis p62
(in thousands of Canadian dollars, except as noted and amounts per share)
FEBRUARY 2021 TEXAS EVENTS – SUPPLEMENTAL INFORMATION
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$9,000 per MWh and remained at such level for a prolonged period of time.
The February 2021 Texas Events lasted from February 11 to February 19, 2021, and the figures provided hereinafter
are normalized for this period.
1.1 Summary of Impacts per Facility
The following table presents a reconciliation of the Production and financial impacts, before income tax, resulting from the
February 2021 Texas Events, detailed by facility:
For the 9-day period from February 11 to February 19, 2021
Production
(MWh)
LTA
(MWh)
Hedge
obligation
(MWh)1
Hedge
price
(US$)
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.
2022 Annual Report
Management's Discussion and Analysis p63
(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 facility is subject to power hedges. In addition, prior to their sale on December 28, 2021, and March 4, 2022,
respectively, the Flat Top and Shannon facilities were 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.
2022 Annual Report
Management's Discussion and Analysis p64
(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 Revenues2
Revenues Proportionate1
Impacts from the February 2021 Texas Events
Normalized Revenues Proportionate1,2
Adjusted EBITDA1
Impacts from the February 2021 Texas Events
Normalized Adjusted EBITDA1,2
Adjusted EBITDA Proportionate1
Impacts from the February 2021 Texas Events
Normalized Adjusted EBITDA Proportionate1,2
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. Normalized measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers.
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
Normalized2
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 gain 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.
2. Normalized measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p65
(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, 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 that 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 instances, 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.
2022 Annual Report
Management's Discussion and Analysis p66
(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.
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.
On March 4, 2022, the Corporation completed the sale of its 50% interest in Shannon for a nominal amount.
The impact of the sale of the Flat Top and Shannon facilities on the Corporation's Free Cash Flow1, based on the
facilities' respective 2020 contribution, represents a reduction of approximately $4.2 million annually.
The sale of the Flat Top and Shannon facilities also represents 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 had 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.
2022 Annual Report
Management's Discussion and Analysis p67
(in thousands of Canadian dollars, except as noted and amounts per share)
8- ACCOUNTING POLICIES AND INTERNAL CONTROLS | Significant
Accounting Policies
New Accounting Standards and Interpretations Adopted During the Year
On January 1, 2022, the Corporation adopted the following new standards and interpretations:
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.
The Corporation adopted the amendments on January 1, 2022, with no impact to the consolidated financial statements.
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 October 31, 2022, the IASB issued Non-current Liabilities with Covenants
(Amendments to IAS 1) (the "2022 amendments"), to improve the information a company provides about long-term debt with
covenants. The 2020 amendments and the 2022 amendments (collectively “the Amendments”) are effective for annual periods
beginning on or after January 1, 2024. Early adoption is permitted. The impact for the Corporation is being assessed by
management.
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 do 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.
8- ACCOUNTING POLICIES AND INTERNAL CONTROLS | Internal Controls
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 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p68
(in thousands of Canadian dollars, except as noted and amounts per share)
The President and Chief Executive Officer and the Chief Financial Officer of the Corporation have evaluated, or caused it to be
evaluated under their supervision, the effectiveness of the Corporation’s DC&P and ICFR as at December 31, 2022, and have
concluded that they were effective at the financial year-end. During the period beginning on October 1, 2022, and ended on
December 31, 2022, there was no change to the ICFR that has materially affected, or is reasonably likely to materially affect,
the Corporation's ICFR.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p69
(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. The Investment and
Risk Oversight Committee, which is comprised of senior management members, reviews all existing and emerging risks and
assesses appropriate mitigation measures. The Committee also 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 processes, 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.
2022 Annual Report
Management's Discussion and Analysis p70
(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 the 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 in Canada, Idaho and New York 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.
2022 Annual Report
Management's Discussion and Analysis p71
(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 its 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 that may provoke unforeseen deviations from 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.
2022 Annual Report
Management's Discussion and Analysis p72
(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, which may result in governments around the world implementing
increasingly stringent measures to help control the spread of pathogens, 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 may enact fiscal and monetary stimulus measures to counteract the impacts of such
public health emergencies. Business disruptions could impact our suppliers, which in turn could impact the operating results of
the Corporation. Should an outbreak become 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.
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.
2022 Annual Report
Management's Discussion and Analysis p73
(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.
2022 Annual Report
Management's Discussion and Analysis p74
(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 that are in part driven by
environmental regulations, and by 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 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 Licán 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.
2022 Annual Report
Management's Discussion and Analysis p75
(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 of 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. Those
changes could also adversely affect the revenues of the Corporation.
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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p76
(in thousands of Canadian dollars, except as noted and amounts per share)
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
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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p77
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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 that 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p78
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
Other Risks
Possibility that the Corporation May Not Declare a Dividend or May Rreduce the Amount of the 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 and the amount 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p79
(in thousands of Canadian dollars, except as noted and amounts per share)
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
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 a lack of support for our activities in local
communities in the vicinity of Innergex's 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 the Corporation's
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 Innergex's 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 Confidentiality 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p80
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p81
(in thousands of Canadian dollars, except as noted and amounts per share)
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 | Strategic Plan
2020-2025 regarding the assumptions used with respect to the 2025 growth targets.
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
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 a dividend or may reduce the amount of the 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
Innergex Renewable Energy Inc.
2022 Annual Report
Management's Discussion and Analysis p82
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
2022 Annual Report
Management's Discussion and Analysis p83
(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 Trudel
Jean Trudel, MBA
Chief Financial Officer
Innergex Renewable Energy Inc.
Longueuil, Canada, February 22, 2023
Innergex Renewable Energy Inc.
2022 Annual Report
Responsibility for Financial Reporting p84
(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, 2022 and December 31, 2021;
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, 2022 and December 31, 2021, 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, 2022. 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.
2022 Annual Report
Independent Auditors' Report p85
(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 June 9, 2022, the Entity acquired all of the ordinary
shares of Aela Generacion S.A. and Aela Energia SpA, for an aggregate consideration of $408,160.
In connection with this transaction, the Entity recorded intangible assets of $283,778 and property, plant and equipment of
$620,453.
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 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.
2022 Annual Report
Independent Auditors' Report p86
(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 facilities subject to market price risk exposure and for facilities under
construction in Hawaii
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
$6,212,371. A portion of these non-financial assets are related to facilities that are subject to market price risk exposure and to
facilities under construction in Hawaii.
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 or
cash-generating unit ("CGU") is estimated. 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).
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 the Entity’s significant assumptions, such as discount rates and:
•
•
For facilities subject to market price risk exposure: selling prices.
For facilities under construction in Hawaii: timing and costs to complete the construction and renegotiation of selling
prices.
Why the matter is a key audit matter
We identified the evaluation of impairment analysis for facilities subject to market price risk exposure and facilities under
construction in Hawaii as a key audit matter. This matter represented an area of significant risk of material misstatement given
the magnitude of such non-financial assets 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:
•
•
For facilities subject to market price risk exposure, we evaluated the appropriateness of the Entity’s future selling
price assumptions by comparing to forecasts specific to the regions.
For facilities under construction in Hawaii, we evaluated the appropriateness of the Entity’s significant assumptions:
◦
for revised timing and costs to complete the construction of the facilities in Hawaii by examining source
documentation for a selection of expected costs and by inquiring of project managers to evaluate progress to
date and factors impacting the amount of time and costs to complete the project;
for renegotiation of selling prices by inspecting correspondence between the Entity and the customer.
◦
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.
2022 Annual Report
Independent Auditors' Report p87
(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 "2022 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 2022 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 "2022 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 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.
2022 Annual Report
Independent Auditors' Report p88
(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.
2022 Annual Report
Independent Auditors' Report p89
(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 22, 2023
*CPA auditor, public accountancy permit No. A109612
Innergex Renewable Energy Inc.
2022 Annual Report
Independent Auditors' Report p90
(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 and amortization
Impairment of long-term assets
Earnings before the following:
Finance costs
Other net income
Share of (earnings) losses of joint ventures and associates:
Share of (earnings) losses, before impairment charges
Share of impairment charges
Change in fair value of financial instruments
Loss before income tax
Recovery of income tax
Net loss
(Net loss) earnings 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
2022
2021
870,494
747,208
207,768
53,071
24,740
584,915
336,053
47,868
200,994
317,842
(68,919)
(14,382)
—
64,145
(97,692)
149,106
45,098
27,367
525,637
255,640
36,986
233,011
252,255
(89,621)
77,280
112,609
92,122
(211,634)
(6,577)
(91,115)
(26,240)
(185,394)
(81,619)
(9,496)
(91,115)
(191,805)
6,411
(185,394)
(0.43)
(0.43)
(1.09)
(1.09)
Notes
5
5
5
14, 15
8, 14, 16, 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.
2022 Annual report
Consolidated Statements of Earnings (loss) p91
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE
(LOSS)
INCOME
Net loss
Items of comprehensive income (loss) that will be subsequently reclassified to
earnings:
Foreign currency translation differences for foreign operations
Change in fair value of financial instruments designated as net investment
hedges
Change in fair value of financial instruments designated as cash flow hedges
Change in fair value of financial instruments of joint ventures and associates
designated as cash flow hedges
Related deferred income tax
Other comprehensive income
Total comprehensive income (loss)
Total comprehensive income (loss) attributable to:
Owners of the parent
Non-controlling interests
Notes
23
9, 23
9, 23
8, 23
23
Year ended December 31
2022
2021
(91,115)
(185,394)
97,131
778
(3,484)
220,511
7,773
78,652
9,683
5,303
(56,598)
(23,277)
267,243
69,229
176,128
(116,165)
159,372
16,756
176,128
(130,733)
14,568
(116,165)
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2022 Annual Report
Consolidated Statements of Comprehensive Income (Loss) p92
(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
Assets held for sale
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, 2022
December 31, 2021
Notes
12
13
9
14
14
14
15
16
8
9
10
17
18
19
9
20, 21
9
20
21
10
25
162,971
54,670
179,299
33,833
1,282
35,887
59,217
527,159
6,212,371
1,268,960
41,151
135,786
92,504
68,785
139,676
116,035
8,075,268
8,602,427
248,659
22,018
380,147
650,824
79,069
5,384,813
463,863
537,431
6,465,176
7,116,000
1,316,195
170,232
1,486,427
8,602,427
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
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2022 Annual Report
Consolidated Statements of Financial Position p93
(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, 2022
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, 2022
360,936 2,022,540 131,069
2,819 (1,373,628)
(50,624) 1,093,112 267,568 1,360,680
Net loss
Other comprehensive income
Total comprehensive (loss) income
—
—
—
—
—
—
—
—
—
Common shares issued on public offering (Note 22)
Common shares issued on private placement
(Note 22)
Issuance fees (net of $1,978 of deferred income tax)
Common shares issued through dividend
reinvestment plan
Reduction of capital on common shares (Note 22)
Buyback of common shares
Share-based payments and Performance Share
Plan
Shares vested - Performance Share Plan
Shares purchased - Performance Share Plan
Buyback of non-controlling interests (net of $17,100
of deferred income tax) (Note 4 c)
Dividends declared on common shares (Note 22)
Dividends declared on preferred shares (Note 22)
Distributions to non-controlling interests (Note 25)
172,506
—
—
37,275
(5,432)
1,301
—
—
—
(560,532) 560,532
—
(4,417)
—
2,114
(3,266)
2,598
(4,883)
386
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(81,619)
—
(81,619)
—
240,991
240,991
(81,619)
240,991
159,372
(9,496)
26,252
16,756
(91,115)
267,243
176,128
—
—
—
—
—
—
—
—
—
—
172,506
—
172,506
—
—
—
—
—
—
—
—
37,275
(5,432)
1,301
—
(4,417)
2,598
(2,769)
(2,880)
—
—
—
—
—
—
—
—
37,275
(5,432)
1,301
—
(4,417)
2,598
(2,769)
(2,880)
11,815
(146,957)
(5,632)
—
6,303
—
—
—
18,118
(146,957)
(5,632)
—
(65,400)
—
—
(48,692)
(47,282)
(146,957)
(5,632)
(48,692)
Balance December 31, 2022
485 2,581,173 131,069
2,819 (1,596,021)
196,670 1,316,195 170,232 1,486,427
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2022 Annual Report
Consolidated Statements of Changes in Shareholders' Equity p94
(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
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, 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
Other comprehensive income
Total comprehensive (loss) income
Common shares issued on July 9, 2021:
upon acquisition
Issuance fees (net of $47 of deferred income tax)
Common shares issued on Sept 3, 2021 :
public offering
Issuance fees (net of $2,282 of deferred income tax)
Common shares issued on private placements
Issuance fees (net of $25 of deferred income tax)
Business acquisition
Common shares issued through dividend
reinvestment plan
—
—
—
89,437
(129)
201,259
(6,334)
75,396
(70)
—
3,312
(9,002)
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
(2,622)
372
—
2,073
2,330
—
3,174
(6,320)
—
—
—
—
—
—
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)
Balance December 31, 2021
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(191,805)
—
— (191,805)
61,072
61,072
6,411
8,157
(185,394)
69,229
—
(191,805)
61,072 (130,733)
14,568
(116,165)
—
—
—
—
—
—
—
—
—
—
(24)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
89,437
(129)
—
—
89,437
(129)
— 201,259
(6,334)
—
75,396
—
(70)
—
—
—
—
—
3,312
(9,002)
—
2,073
2,306
(3,146)
(2,250)
—
—
—
—
—
—
—
—
8,989
201,259
(6,334)
75,396
(70)
8,989
—
—
—
—
—
—
3,312
(9,002)
2,073
2,306
(3,146)
(2,250)
(132,229)
(5,632)
(14,771)
1,360,680
—
(132,229)
— (132,229)
—
(5,632)
—
(5,632)
—
—
— 196,704
196,704
—
—
360,936 2,022,540 131,069
—
—
—
2,819 (1,373,628)
—
(14,771)
(50,624) 1,093,112 267,568
—
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2022 Annual Report
Consolidated Statements of Changes in Shareholders' Equity p95
(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 (earnings) 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
Recovery of income tax
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
Payment for buyback of common shares
Purchase of common shares under the Performance Share Plan
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 intangible assets
Additions to project development costs
Investments in joint ventures and associates
Buyback of non-controlling interests
Change in other long-term assets
Effects of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of period
Cash and cash equivalents, end of period
Notes
14, 15
8, 14, 16
8
9
7
6
24 b)
8
10
24 a)
24 c)
24 c)
21
4
4
Year ended December 31
2022
2021
(91,115)
(185,394)
336,053
47,868
(14,382)
141,859
(67,182)
91
255,640
36,986
189,889
18,502
(91,275)
4,502
317,842
252,255
(228,361)
(189,857)
22,028
(6,577)
(2,730)
(10,633)
444,761
(14,518)
430,243
26,072
(26,240)
(5,870)
1,743
286,953
(21,455)
265,498
(149,193)
(131,411)
(48,692)
—
(14,771)
196,704
1,717,541
1,682,752
(1,509,591)
(1,568,183)
(4,834)
202,371
(4,417)
(2,880)
(4,384)
267,768
(11,252)
—
(2,769)
(3,146)
197,536
414,077
(418,044)
(387,434)
9,256
7,886
(119,189)
(250,621)
(2,508)
(29,632)
(325)
(64,382)
(10,942)
—
(38,554)
—
—
1,669
(635,766)
(667,054)
4,692
(3,295)
166,266
162,971
(7,720)
4,801
161,465
166,266
Additional information is presented in Note 24.
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2022 Annual Report
Consolidated Statements of Cash Flows p96
(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 22, 2023.
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. Historical cost is
generally based on the fair value of the consideration given in exchange for assets.
Functional Currency and Presentation Currency
These consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional currency.
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.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p97
(in thousands of Canadian dollars, except as noted and amounts per share)
Name of subsidiaries
Principal activity
Place of
creation and
operation
Own and operate a hydroelectric facility Canada
Own and operate hydroelectric and wind
Canada
facilities
Own and operate a hydroelectric facility Canada
Own and operate wind facilities
Canada/Europe
100.00%
Own and operate wind facilities
Canada
Own and operate hydroelectric facilities
Canada
Upper Lillooet Limited Partnership
Innergex Inc.
Big Silver Creek Power Limited
Partnership
Innergex Europe (2015) Limited
Partnership, and its subsidiaries
Innergex Cartier Energy LP
Harrison Hydro L.P., and its
subsidiaries
subsidiaries
Foard City Holdings, LLC
Phoebe Energy Project, LLC
Hillcrest Solar I, LLC
Griffin Trail Wind, LLC
Innergex HQI USA LLC1
Duqueco SpA
Aela Generación S.A., and its
subsidiaries
Kwoiek Creek Resources L.P. 1
Mesgi'g Ugju's'n (MU) Wind Farm L.P.1 Own and operate a wind facility
Mountain Air Alternatives LLC, and its
Own and operate wind facilities
Own and operate a hydroelectric facility Canada
Canada
United States
United States
United States
United States
United States
United States
Own and operate a wind facility
Own and operate a solar facility
Own and operate a solar facility
Own and operate a wind facility
Own and operate hydroelectric facilities
Own and operate hydroelectric facilities
Chile
Own and operate wind facilities
Chile
Proportion of
ownership interest
and voting rights
held by the
Corporation
100.00%
100.00%
100.00%
100.00%
50.01%
50.00%
50.00%
100.00%
100.00%
100.00%
100.00%
100.00%
50.00%
100.00%
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
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).
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p98
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
2022 Annual Report
Notes to the Consolidated Financial Statements p99
(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 20 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.
2022 Annual Report
Notes to the Consolidated Financial Statements p100
(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.
2022 Annual Report
Notes to the Consolidated Financial Statements p101
(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.
2022 Annual Report
Notes to the Consolidated Financial Statements p102
(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.
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.
•
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
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p103
(in thousands of Canadian dollars, except as noted and amounts per share)
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 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.
2022 Annual Report
Notes to the Consolidated Financial Statements p104
(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
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.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p105
(in thousands of Canadian dollars, except as noted and amounts per share)
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 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.
2022 Annual Report
Notes to the Consolidated Financial Statements p106
(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 at grant date at fair value, which is expensed 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
value of the liability is remeasured at the end of each reporting period and at the date of settlement, with any changes in
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p107
(in thousands of Canadian dollars, except as noted and amounts per share)
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, 2022
1.4458
1.3544
December 31, 2021
1.4391
1.2678
2022
2021
1.3696
1.3013
1.4336
1.2570
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.
2022 Annual Report
Notes to the Consolidated Financial Statements p108
(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 share 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.
Changes in accounting policies
On January 1, 2022, the Corporation adopted the following new standards and interpretations which did not have an
impact on these consolidated financial statements:
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. The Corporation adopted the amendments on January 1, 2022, with no impact to the consolidated
financial statements.
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 October 31, 2022, the IASB issued Non-current Liabilities with
Covenants (Amendments to IAS 1) (the 2022 amendments), to improve the information a company provides about long-
term debt with covenants. The 2020 amendments and the 2022 amendments (collectively “the Amendments”) are effective
for annual periods beginning on or after January 1, 2024. Early adoption is permitted. The impact for the Corporation is
being assessed by management.
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 do 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.
2022 Annual Report
Notes to the Consolidated Financial Statements p109
(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 determination 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. The Corporation calculates fair values using
appropriate valuation techniques, which are generally 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.
On December 31, 2022, the Corporation revised its useful lives estimates for its wind and solar facilities to 30 and 35
years, respectively, reflecting Management’s best estimate, which is supported by our internal expertise in the
maintenance of such facilities, as well as independent expert reports on certain facilities and general market observations
made in the course of our recent successful and unsuccessful mergers and acquisitions initiatives for similar assets.
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 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,
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p110
(in thousands of Canadian dollars, except as noted and amounts per share)
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. 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.
2022 Annual Report
Notes to the Consolidated Financial Statements p111
(in thousands of Canadian dollars, except as noted and amounts per share)
4. BUSINESS ACQUISITIONS
a. Acquisition of Aela
Innergex acquired on June 9, 2022 all of the ordinary shares of Aela Generación S.A. and Aela Energía SpA (together
“Aela”), a 332 MW portfolio of three operating wind assets in Chile, for a total cash consideration of US$324,348
($408,160).
The Aela’s portfolio consists of the Sarco wind farm (170 MW), the Aurora wind farm (129 MW) and the Cuel wind farm
(33 MW). Revenues from these facilities are anchored by two power purchase agreements with 25 Chilean distribution
companies, maturing at the end of 2036 and 2041, for an average remaining tenor of 16 years. The facilities are expected
to produce a long-term average of 954.7 GWh per year.
The following table reflects the preliminary amounts recognized for the assets acquired and liabilities assumed, on a fair
value basis, at the acquisition date:
Cash and cash equivalents
Accounts receivable
Prepaid and other
Property, plant and equipment
Intangible assets
Derivative financial instruments
Goodwill
Accounts payable and other payables
Long-term loans and borrowings
Other liabilities
Deferred tax liability
Net assets acquired
Acquisition accounting
US$
CA$
18,088
18,959
5,812
493,050
225,507
5,218
58,066
(17,511)
(380,235)
(44,517)
(58,089)
324,348
22,762
23,859
7,313
620,453
283,778
6,567
73,070
(22,034)
(478,488)
(56,021)
(73,099)
408,160
The acquisition gave rise to transaction costs of $11,587 which were expensed as incurred in other net income in the
consolidated statements of earnings (loss).
The goodwill arises from the recognition of deferred tax liabilities. No amount of goodwill is expected to be deductible for
tax purposes.
The acquisition 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 $40,089 and $56,416, respectively for the 206-day period ended December 31, 2022.
Had the acquisition taken place on January 1, 2022, revenues and net loss included in the consolidated statements of
earnings (loss) for the period from January 1, 2022 to December 31, 2022 would have been $39,311 and $8,634 higher,
respectively.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p112
(in thousands of Canadian dollars, except as noted and amounts per share)
b. Acquisition of San Andrés SpA
Innergex acquired on January, 28, 2022 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$28,372 ($36,068). The facility is expected to produce a gross long-term average of approximately
118.9 GWh per year.
The following table reflects the amounts recognized for the assets acquired and liabilities assumed, on a fair value basis,
at the acquisition date:
Cash and cash equivalents
Accounts receivable
Prepaid and other
Property, plant and equipment
Intangible assets
Accounts payable and other payables
Other liabilities
Net assets acquired
Acquisition accounting
US$
CA$
2,692
499
526
17,454
10,562
(1,000)
(2,361)
28,372
3,422
634
669
22,189
13,426
(1,271)
(3,001)
36,068
The acquisition gave rise to transaction costs of $149 which were expensed as incurred in other net income in the
consolidated statements of earnings (loss).
The acquisition 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 $7,805 and $2,262, respectively for the 336-day period ended December
31, 2022. Had the acquisition taken place on January 1, 2022, revenues and net earnings included in the consolidated
statements of earnings (loss) for the period from January 1, 2022 to December 31, 2022 would have been $501 higher
and $449 lower, respectively.
c. Purchase of Non-Controlling Interests
Innergex Europe (2015) Limited Partnership
Innergex acquired on October 4, 2022 the remaining 30.45% interests in its Innergex Europe (2015) Limited Partnership
subsidiary and its wind portfolio of 16 assets in France for a total consideration of $96,350. The acquisition also settles the
outstanding Innergex Europe debentures and all previously accrued and unpaid interest thereon, with an aggregate
carrying value of $101,272, resulting in a $4,922 gain recognized in other net income.
Mountain Air Alternatives LLC
Innergex acquired on December 14, 2022 all of the outstanding Class A shares, which are entitled to 37.75% of the cash
distributions of its Mountain Air Alternatives LLC subsidiary and its wind portfolio of six assets in Idaho for a total
consideration of US$47,525 ($64,382).
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p113
(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
Insurance
Other expenses
Prospective expenses
Professional fees
Administrative expenses
Year ended December 31
2022
2021
125,994
53,585
46,229
18,423
16,176
13,010
10,686
1,476
85,243
46,163
41,301
13,076
8,338
17,028
8,560
1,862
Total of Operating, General and Administrative and Prospective
Projects
285,579
221,571
6. FINANCE COSTS
Interest expense on long-term corporate and project loans
Interest expense on tax equity financing
Inflation compensation interest
Amortization of financing fees
Interest expense on convertible debentures
Interest on lease liabilities
Accretion of long-term loans and borrowings and other liabilities
Other
Interest income on preferred shares of equity-accounted investees
Year ended December 31
2022
2021
216,945
30,700
18,834
15,255
13,637
7,612
7,482
9,400
(2,023)
317,842
176,945
27,020
12,504
8,308
13,642
4,371
5,823
4,275
(633)
252,255
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p114
(in thousands of Canadian dollars, except as noted and amounts per share)
7. OTHER NET INCOME
Production tax credits income
Gain on foreign exchange
(Gain) loss on repayment of loans
Interest revenues
Tax attributes allocated to tax equity investors income
Acquisition, integration and restructuring costs
Other income, net
Year ended December 31
2022
2021
(64,729)
(13,848)
(4,922)
(3,167)
(2,453)
17,918
2,282
(68,919)
(47,985)
(2,331)
1,317
(438)
(43,290)
4,563
(1,457)
(89,621)
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, 2022 December 31, 2021
Toba Montrose
Dokie
Jimmie Creek 1
Own and operate two hydroelectric
facilities
Own and operate a wind facility
Own and operate a hydroelectric
facility
British Columbia
British Columbia
British Columbia
Shannon 2
Own and operate a wind facility
Texas
Umbata Falls
Viger-Denonville
Innavik
Own and operate a hydroelectric
facility
Own and operate a wind facility
Develop and construct a
hydroelectric facility
Ontario
Quebec
Quebec
1. The Corporation does not consolidate these entities as it does not control the decision making.
2. On March 4, 2022, the Corporation disposed of its ownership interests in Shannon.
40 %
25.5 %
50.99 %
— %
49 %
50 %
50 %
40 %
25.5 %
50.99 %
50 %
49 %
50 %
50 %
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p115
(in thousands of Canadian dollars, except as noted and amounts per share)
Disposition of Shannon
On March 4, 2022, the Corporation completed the sale of its 50% interest in Shannon for a nominal amount.
8.2 Commitments of joint ventures and associates
As at December 31, 2022, the Corporation's share of the expected 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
2,952
15,486
38,005
56,443
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p116
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Earnings (Loss) and Comprehensive Income (Loss)
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.
Year ended December 31, 2022
Revenues
67,565
40,491
24,940
9,355
11,764
154,115
Toba Montrose
Dokie
Jimmie Creek
Umbata Falls
Viger-Denonville
Total
Operating, general and administrative
expenses
Finance costs
Other net income
Depreciation and amortization
Change in fair value of financial
instruments
Net earnings
Other comprehensive income
Total comprehensive income
Net earnings attributable to Innergex
Other comprehensive income attributable
to Innergex
Total
16,927
50,638
22,362
(314)
19,474
(33)
9,149
20,544
29,693
10,697
29,794
6,043
(224)
14,035
—
9,940
—
9,940
3,934
21,006
9,228
(182)
4,159
—
7,801
—
7,801
2,036
7,319
2,466
(50)
4,027
(3,199)
4,075
—
4,075
2,631
9,133
2,716
(83)
2,675
(600)
4,425
2,931
7,356
36,225
117,890
42,815
(853)
44,370
(3,832)
35,390
23,475
58,865
3,660
2,535
3,979
1,996
2,212
14,382
8,218
11,878
—
2,535
—
3,979
—
1,996
1,465
3,677
9,683
24,065
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p117
(in thousands of Canadian dollars, except as noted and amounts per share)
Energía Llaima
(189-day
period)
Toba
Montrose
Shannon
(90-day
period)
Flat Top
(90-day
period)
Dokie
Jimmie
Creek
Umbata
Falls
Viger-
Denonville
Total
Year ended December 31, 2021
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
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
14,123
72,287
68,908
20,271
40,809
23,457
5,921
10,583
256,359
5,828
8,295
3,248
—
—
760
6,064
16,399
55,888
22,887
—
—
(98)
19,852
2,770
66,138
3,459
(5,533)
745
506
3,257
2,174
18,097
3,734
(6,406)
186
448
3,628
9,369
31,440
6,367
—
—
(725)
14,031
3,620
19,837
9,302
—
—
17
4,289
2,012
3,909
2,434
—
—
96
4,003
1,236
9,347
2,890
—
—
43
2,751
43,408
212,951
54,321
(11,939)
931
1,047
57,875
—
—
117,702
105,408
—
—
—
—
223,110
—
697
—
—
—
—
(2,755)
(629)
(2,687)
—
(145)
(1,632)
—
—
—
12,550
10,872
114,615
—
(168,613)
—
143,380
—
(232,281)
—
—
—
11,767
—
—
—
6,229
—
—
—
131
—
—
—
4,292
1,909
257,995
(145)
(367,557)
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 and net loss attributable to non-controlling interests was $589. The
Corporation acquired the remaining 50% interest in Energía Llaima on July 9, 2021.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p118
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Financial Position
As at December 31, 2022
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
38,724
673,101
711,825
20,159
498,215
193,451
711,825
19,625
186,017
205,642
11,772
113,137
80,733
205,642
5,706
214,853
220,559
6,000
162,195
52,364
220,559
2,741
39,855
42,596
4,960
25,130
12,506
42,596
4,313
45,590
49,903
4,543
36,836
8,524
49,903
5,133
148,536
153,669
34,034
125,581
(5,946)
153,669
As at December 31, 2021
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Partner's equity (deficit) interest
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
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p119
(in thousands of Canadian dollars, except as noted and amounts per share)
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:
For the year ended December 31, 2022
Toba Montrose
Dokie
Jimmie Creek
Umbata Falls
Viger-
Denonville
Others
Total
Balance January 1, 2022
Increase in investment
Share of earnings (loss)
Share of other comprehensive income
Foreign currency translation differences
Distributions received
Balance December 31, 2022
73,499
—
3,660
8,218
—
(8,000)
77,377
22,246
—
2,535
—
—
(4,195)
20,586
30,393
—
3,979
—
—
(7,650)
26,722
5,015
—
1,996
—
—
(883)
6,128
1,879
—
2,212
1,465
—
(1,300)
4,256
366
325
—
—
26
—
717
133,398
325
14,382
9,683
26
(22,028)
135,786
Balance January 1, 2021
Business disposal
Share of (loss) earnings
Energía
Llaima
108,977
(94,013)
(522)
Toba
Montrose
72,533
—
5,018
For the year ended December 31, 2021
Shannon
Flat Top
Dokie
Jimmie
Creek
Umbata
Falls
84,490 118,651 23,900 32,572
—
3,176
—
(84,306) (118,463)
—
3,000
—
Viger-
Denonville Others
381
—
2,143
383
—
—
4,950
—
65
Share of other comprehensive income
Impairment of equity accounted
investment
Foreign currency translation differences
Distributions received
Balance December 31, 2021
—
4,348
(6,314)
—
(2,065)
(6,063)
—
—
(8,400)
73,499
—
—
(184)
—
—
—
—
—
—
—
—
—
955
—
—
—
(4,654)
(188)
—
(5,355)
—
— 22,246 30,393
—
—
5,015
—
(1,600)
1,879
—
—
(17)
—
366
Total
446,837
(94,013)
(189,889)
5,303
(6,314)
(2,454)
(26,072)
133,398
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p120
(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 :
Financial assets (liabilities)
As at January 1, 2022
Business acquisitions (Note 4)
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, 2022
Foreign
exchange
forwards
(Level 2)
Interests
hedging
derivatives
(Level 2)
Power
hedges
(Level 3)
Currency
translation
of
intragroup
loans1
Total
2,485
(78,482)
16,559
—
6,567
—
—
—
(59,438)
6,567
(2,556)
(57,082)
(82,072)
(149)
(141,859)
(3,484)
223,862
(3,351)
—
217,027
—
—
—
3,351
3,273
(3,820)
—
149
3,351
(398)
(3,555)
98,138
(69,333)
—
25,250
1. Loss 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
hedges
(Level 3)
Currency
translation
of
intragroup
loans1
Total
As at January 1, 2021
(37,113)
(168,002)
54,082
—
(151,033)
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, 2021
—
2,738
—
—
2,738
31,825
3,488
(36,412)
(17,403)
(18,502)
7,773
81,989
(3,337)
—
86,425
—
—
—
3,337
—
3,337
1,305
(1,111)
17,403
17,597
2,485
(78,482)
16,559
—
(59,438)
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p121
(in thousands of Canadian dollars, except as noted and amounts per share)
b) Change in fair value of financial instruments recognized in the consolidated statements
of earnings (loss)
Unrealized portion of change in fair value of financial instruments
141,859
18,502
Year ended December 31
2022
2021
Realized portion of financial instruments:
Realized gain on the foreign exchange forwards
Realized loss on the power hedges
Realized (gain) loss on the interest rate swaps
Realized gain on Phoebe basis hedge
Change in fair value of financial instruments
(43,458)
37,479
(71,735)
—
64,145
—
73,658
2,508
(2,546)
92,122
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p122
(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):
December 31, 2022
December 31, 2021
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
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 loss (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
(97,692)
26.6 %
(25,986)
(23,528)
—
—
—
12,215
22,344
5,772
(818)
2,248
170
(775)
(5,095)
5,131
1,745
(6,577)
483
(7,060)
(211,634)
26.6 %
(56,295)
(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)
The tax rate used for 2022 and 2021 reconciliations above is the average combined corporate tax rate payable by
corporate entities in Canada on taxable profits under federal and provincial tax laws.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p123
(in thousands of Canadian dollars, except as noted and amounts per share)
b. Deferred income tax balances
The following is the analysis of deferred income tax assets (liabilities) presented in the consolidated statements of financial position:
Deferred income tax assets (liabilities) in
relation to:
Assets held for sale
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
Tax losses carried forward
As at January 1,
2022
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, 2022
—
(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)
2,947
(59,245)
333
6,861
4,865
39,706
8,936
3,327
1,683
(2,097)
(10,011)
(986)
1,680
2,257
256
—
—
—
—
(2,608)
(53,990)
—
—
—
—
—
—
—
—
(56,598)
—
(27,687)
(77,758)
—
—
(1,773)
(27,386)
—
—
4,476
(2,280)
—
—
—
(132,408)
—
2,550
14,567
—
—
—
—
—
—
—
1,972
—
—
—
19,089
115
(19,082)
(6,846)
560
(1,416)
(92)
(1,765)
1,906
—
423
(161)
—
268
3
(26,087)
6,804
7,060
—
(56,598)
59,309
(73,099)
—
19,089
11,720
(14,367)
3,062
(558,108)
(220,902)
38,090
(67,239)
29,622
(20,133)
28,891
1,613
8,802
(15,317)
804
5,021
28
(765,766)
297,120
(468,646)
As at December 31, 2022, the Corporation, its subsidiaries and joint ventures and associates have non-capital losses totaling approximately $1,188 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 2023 and 2042. 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 renewable energy projects currently in operation.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p124
(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
(349,713)
(112,491)
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
Tax losses carried forward
(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)
8,122
3,255
50,429
2,244
(7,312)
11,363
591
1,809
(1,792)
(773)
1,949
(2,206)
(44,812)
74,828
30,016
—
—
—
(1,394)
(21,883)
—
—
—
—
—
—
—
—
(23,277)
—
(23,277)
(Note 33)
5,630
—
—
—
—
—
—
—
(436)
—
—
—
—
5,194
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)
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p125
(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, 2022
December 31, 2021
318,780
70,562
25,044
477
414,863
136,853
23,581
24,117
477
185,028
The unrecognized tax losses will expire gradually between 2026 and 2042. The unrecognized tax credits will expire
gradually between 2035 and 2042.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p126
(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 ($)
Year ended December 31
2022
2021
(81,619)
(5,632)
(87,251)
201,835,956
(0.43)
(191,805)
(5,632)
(197,437)
180,856,774
(1.09)
Diluted
Year ended December 31
2022
2021
Net loss attributable to common shareholders
Diluted weighted average number of common shares
Diluted net loss per share ($)
(87,251)
201,835,956
(0.43)
(197,437)
180,856,774
(1.09)
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
2022
2021
284,769
592,257
13,604,473
14,481,499
265,570
541,261
13,604,473
14,411,304
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p127
(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, 2022
December 31, 2021
33,556
11,677
9,437
54,670
35,260
17,201
9,198
61,659
As required under several projects' credit agreements, the Corporation maintains restricted cash accounts and restricted
proceeds accounts. The unused portion of loan 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
Dividends receivable on preferred shares
Commodity taxes
Advances to related parties
Income taxes receivable
Other
December 31, 2022
December 31, 2021
124,349
7,875
19,012
6,240
5,191
16,632
179,299
84,246
5,687
4,056
3,678
4,511
15,728
117,906
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p128
(in thousands of Canadian dollars, except as noted and amounts per share)
14. PROPERTY, PLANT AND EQUIPMENT
Cost
As at January 1, 2022
Additions 1
Investment tax credits 2
Business acquisitions (Note 4)
Transfer of assets upon commissioning
Transfer from project development costs
Reclassification
Assets classified as held for sale
Impairment
Dispositions
Other changes3
Net foreign exchange differences
As at December 31, 2022
Accumulated depreciation
As at January 1, 2022
Depreciation4
Dispositions
Net foreign exchange differences
As at December 31, 2022
Lands
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Facilities
under
construction
Other
Total
185,100
12,373
—
48,170
—
—
—
—
—
—
41,977
13,474
301,094
2,594,780
5,243
—
—
—
—
—
—
—
(322)
293
34,932
2,634,926
2,891,964
3,520
—
572,275
—
—
(1,274)
—
—
(7,325)
(52,768)
105,344
3,511,736
819,621
2,450
—
22,184
—
—
—
—
—
—
(15,690)
46,872
875,437
72,877
142,089
(8,535)
(6,840)
40,660
(59)
(59,899)
(25,226)
—
—
10,372
165,439
45,064
5,601
—
13
6,840
—
1,333
—
—
(390)
(21)
1,383
59,823
6,609,406
171,276
(8,535)
642,642
—
40,660
—
(59,899)
(25,226)
(8,037)
(26,209)
212,377
7,548,455
(16,801)
(7,222)
—
(865)
(24,888)
(391,093)
(53,478)
37
(1,270)
(445,804)
(549,980)
(128,889)
1,438
(6,353)
(683,784)
(115,531)
(32,221)
—
(5,030)
(152,782)
—
—
—
—
—
(22,609)
(6,385)
367
(199)
(28,826)
(1,096,014)
(228,195)
1,842
(13,717)
(1,336,084)
Carrying amounts as at December 31, 2022
276,206
2,189,122
2,827,952
722,655
165,439
30,997
6,212,371
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 used for a specific property, plant and equipment. Additions in the current period include $4,055 of capitalized financing costs incurred
prior to commissioning.
The Corporation accrued for US$6,712 ($8,535) in investment tax credits recoverable in relation to the construction of the Hale Kuawehi solar project, which were recognized as a
reduction in the cost of property, plant and equipment. As at December 31, 2022, the current balance of investments tax credits recoverable, on the Hillcrest and the Hale Kuawehi
projects, amounts to US$947 ($1,282), while the non current balance amounts to US$6,712 ($9,091).
Includes remeasurements of the right-of-use assets and the asset retirement obligations of $41,977 and $(66,594), respectively.
An amount of $227 of the depreciation expense for the land leases is capitalized as a construction cost in facilities under construction.
2.
3.
4.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p129
(in thousands of Canadian dollars, except as noted and amounts per share)
Cost
As at January 1, 2021
Additions
Investment tax credits
Business acquisitions
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
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
Disposal of Safe Harbor Solar Modules
The company entered an agreement on December 8, 2022 to dispose of safe harbor solar modules in early 2023 for cash proceeds of US$44,124 ($60,450). An impairment
charge of US$8,335 ($11,419) was recorded in 2022 to decrease the carrying amount of the modules to the expected fair value less costs to sell pursuant to the sale of the
modules. The decision to sell these modules follows the publication of the Inflation Reduction Act (“IRA”) supporting renewable energy projects, allowing Innergex to secure
tax incentives for its development project portfolio without the use of the safe harbor modules previously secured under the former tax incentive program.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p130
(in thousands of Canadian dollars, except as noted and amounts per share)
Impairment of Hale Kuawehi
An impairment charge of US$10,226 ($13,807) was recognized on the Hale Kuhawehi construction project located in Hawaii for which uncertainties exist regarding the
timing and costs to complete the construction, the renegotiation of selling prices and the profitability of the project.
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, 2022
Additions
Business acquisition
Other changes
Net foreign exchange differences
As at December 31, 2022
Accumulated depreciation
As at January 1, 2022
Depreciation
Net foreign exchange differences
As at December 31, 2022
Land
Hydroelectric
facilities
Other
Total
159,139
11,453
48,170
41,977
11,919
272,658
(16,800)
(7,222)
(865)
(24,887)
118
—
—
—
—
118
(6)
(2)
—
(8)
11,147
—
—
—
184
11,331
(3,361)
(1,506)
(77)
(4,944)
170,404
11,453
48,170
41,977
12,103
284,107
(20,167)
(8,730)
(942)
(29,839)
Carrying amounts as at December 31, 2022
247,771
110
6,387
254,268
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p131
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
2022 Annual Report
Notes to the Consolidated Financial Statements p132
(in thousands of Canadian dollars, except as noted and amounts per share)
15.
INTANGIBLE ASSETS
Cost
As at January 1, 2022
Additions
Business acquisitions (Note 4)
Other changes1
Net foreign exchange
As at December 31, 2022
Accumulated amortization
As at January 1, 2022
Amortization
Net foreign exchange
As at December 31, 2022
Carrying amounts as at
December 31, 2022
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Total
780,422
2,380
—
(16,659)
14,977
781,120
648,591
128
283,778
—
40,200
972,697
(224,244)
(57,450)
(2,810)
(284,504)
(167,961)
(51,340)
(3,280)
(222,581)
14,986
—
13,426
—
1,251
29,663
(7,800)
705
(340)
(7,435)
1,443,999
2,508
297,204
(16,659)
56,428
1,783,480
(400,005)
(108,085)
(6,430)
(514,520)
496,616
750,116
22,228
1,268,960
1. Includes remeasurements of the future ownership rights of $(16,659).
Cost
As at January 1, 2021
Business acquisitions
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
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
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p133
(in thousands of Canadian dollars, except as noted and amounts per share)
16. PROJECT DEVELOPMENT COSTS
As at
Beginning of year
Business acquisitions
Additions
Transfer to property, plant and equipment
Impairment of project development costs
Net foreign exchange
End of year
December 31, 2022
December 31, 2021
70,829
—
30,178
(40,660)
(22,642)
3,446
41,151
14,092
16,417
40,428
(682)
—
574
70,829
An impairment charge of $22,642 was recognized on development projects located in Hawaii for which uncertainties exist
regarding the timing and profitability of these projects. For the year ended December 31, 2021, no impairment charge was
recognized.
17. GOODWILL
Allocation of goodwill to each significant CGU or group of CGUs is as follows:
As at January 1, 2022
Business acquisition (Note 4)
Net foreign exchange
As at December 31, 2022
As at January 1, 2021
Net foreign exchange
As at December 31, 2021
Hydroelectric
facilities
Wind farm
facilities
Total
20,291
—
—
20,291
40,567
73,070
5,748
119,385
60,858
73,070
5,748
139,676
Hydroelectric
facilities
Wind farm
facilities
Total
20,291
—
20,291
43,007
(2,440)
40,567
63,298
(2,440)
60,858
On December 31, 2022, 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 4.20% to 8.50% (4.63% to 8.50% in
2021).
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.
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.
2022 Annual report
Notes to the Consolidated Financial Statements p134
(in thousands of Canadian dollars, except as noted and amounts per share)
18. OTHER LONG-TERM ASSETS
As at
Hydrology/ wind power reserve 1
Major maintenance reserve
Security deposits
Investments in preferred shares of equity-accounted investees
Other
1.The availability in the reserve accounts is restricted by credit agreements.
December 31, 2022
December 31, 2021
46,434
7,333
7,322
15,797
39,149
116,035
49,001
9,784
7,391
—
28,343
94,519
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, 2022
December 31, 2021
139,900
38,152
28,395
21,758
10,304
8,269
1,881
248,659
71,887
36,048
30,906
18,672
7,814
5,318
3,719
174,364
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p135
(in thousands of Canadian dollars, except as noted and amounts per share)
20. LONG-TERM LOANS AND BORROWINGS
Currency
Interest rates
Maturity
December 31,
2022
December 31,
2021
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-level indebtedness
Chile green bonds (c)
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 (d), Note 4 c))
Yonne and Yonne II
Rougemont 2
Vaite
Rougemont 1
Plan Fleury
Les Renardières
Beaumont
CAD/USD
3.34%-6.18%
5.13 %
2027
2023
5.01%-5.10% 2028-2031
4.65 %
4.75 %
2026
2025
718,232
150,000
155,000
1,023,232
138,028
144,650
282,678
398,758
150,000
145,000
693,758
136,985
143,273
280,258
7.50 %
6.80 %
20295
20315
238,734
160,349
240,696
166,257
5.15 %
7.14 %
8.00 %
20285
20265
2023
23,274
19,940
850
25,063
23,080
871
443,147
455,967
6.28 %
2036
887,572
—
4.22%-4.46% 2042-2056
4.07%-5.88%
2049
4.57%-4.76% 2041-2056
5.08%-10.07% 2052-2054
4.99 %
6.18%-6.93%
5.30 %
2055
2025
2053
7.40%-8.00% 2025-2064
6.36%-15.50% 2025-2031
6.88 %
4.70%-5.16%
3.65 %
3.26 %
4.91%-9.03%
7.17 %
2024
2026
2022
2022
2032
2023
4.33%-6.44%
2032
3.54%-4.28% 2026-2036
8.00 %
2022
1.30%-1.65% 2031-2039
2.85%-4.30%
2.83%-4.30%
2.85%-4.30%
2035
2035
2035
1.65 % 2032-2034
1.70 % 2032-2034
2.42%-3.78% 2027-2031
487,307
450,279
193,501
161,501
91,957
73,414
71,065
51,760
36,767
8,714
17,805
—
—
11,875
5,345
402,965
209,929
—
88,229
64,556
57,939
56,420
36,869
32,431
20,943
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
CAD
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
USD
USD
CAD
CAD
CAD
EURO
EURO
EURO
EURO
EURO
EURO
EURO
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p136
(in thousands of Canadian dollars, except as noted and amounts per share)
(continued)
Montjean
Theil Rabier
Foard City
Mountain Air
Others
Solar segment
Hillcrest
Phoebe
Stardale
Hale Kuawehi (b)
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,
2022
December 31,
2021
EURO
EURO
USD
USD
1.15%-2.73% 2026-2031
1.15%-2.73% 2026-2031
3.82%-4.18%
2026
2.03%-6.00% 2029-2032
EURO
1.66%-4.75 % 2024-2030
USD
USD
CAD
USD
USD
USD
2.70 %
5.07%-8.73%
5.10%-6.44%
5.81 %
2.89 %
2028
2026
2032
2023
2022
5.35%-5.81% 2024-2026
15,812
15,812
18,165
153,282
46,645
89,363
136,591
72,934
4,897
—
15,812
17,746
17,746
20,741
151,350
54,178
89,214
132,161
75,256
—
2,828
15,708
4,088,456
5,837,513
(78,303)
5,759,210
(374,397)
3,562,380
4,992,363
(67,928)
4,924,435
(513,196)
5,384,813
4,411,239
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 $5,792,466 ($5,044,788 in 2021).
Letters of credit under revolving term credit facility and project loans amount to $302,059 ($207,147 in 2021).
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, 2022, the Corporation and its subsidiaries have met all material financial and non-financial conditions
related to their credit agreements.
a. Corporate Indebtedness
Revolving Term Credit Facility
The Corporation has access to a revolving term credit facility maturing in 2027. The available facility amount is $950,000.
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, SOFR or EURIBOR plus a spread which depends on interest coverage ratio and leverage ratio. As of
December 31, 2022, an amount of $56,891 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 $150,000 guaranteed by Export
Development Canada. As of December 31, 2022, letters of credit have been issued for an amount of $45,672.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p137
(in thousands of Canadian dollars, except as noted and amounts per share)
Subordinated Unsecured Term Loan
The Corporation has a subordinated unsecured term loan maturing in 2023 and repayable in full at maturity. The
Corporation reclassified the $150,000 subordinated unsecured term loan as current, following the upcoming maturity on
February 1, 2023.
On February 1, 2023, Innergex has completed the refinancing of the subordinated unsecured term loan with a non-
revolving term credit facility of $75,000 bearing interest at a fixed rate of 6.25% and maturing on February 1, 2025, and a
non-revolving term credit facility of $75,000 bearing interest at a variable rate of 4.87%, based on the bankers’ acceptance
rates plus a spread of 1.85% which depends on leverage ratio, maturing on February 1, 2025. Concurrently, the
Corporation concluded an interest rate swap to hedge a $50,000 portion of the credit facility notional that is subject to
variable interest rates.
b. Financing of the Hale Kuawehi project
On March 16, 2022, the Corporation entered into a financing agreement for the construction of the Hale Kuawehi solar
and battery storage project in Hawaii consisting of a US$54,543 construction loan bearing interest at 1-month SOFR +
1.375% maturing in 2023, and a US$61,630 tax equity bridge loan bearing interest at 1-month SOFR + 0.75% maturing in
2023.
c. Aela Acquisition and Refinancing of the Chilean project debts
As part of the Aela Acquisition, the Corporation assumed the facilities non-recourse debt, with an outstanding principal
balance of US$380,235 ($478,488) at acquisition date, bearing interest at Libor 180 days + 2.70%, and payable semi-
annually in February and August. The non-recourse debt matures on February 15, 2035.
Subsequently, on August 5, 2022, the Corporation completed, through its Aela Generación subsidiary, the US$803,116
($1,032,326) refinancing of the non-recourse debt of its portfolio of wholly owned assets in Chile, comprised of the Aela,
Duqueco and Licán loans, with the issuance of US$710,000 ($912,634) senior secured notes (the "Green Bonds") and a
US$93,116 ($119,682) letter of credit facility. The Green Bonds bear interest at a hedged rate of 5.54% with semi-annual
principal repayments to begin in December 2025 and mature in 2036 (with a balloon payment of US$139,000 ($178,671)).
d. Acquisition of remaining interests in wind portfolio in France
On October 4, 2022, Innergex completed the acquisition of the remaining 30.45% non-controlling interest in its wind
portfolio of 16 assets in France and concurrently reimbursed the outstanding debentures for a total consideration of
$96,350.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p138
(in thousands of Canadian dollars, except as noted and amounts per share)
21. OTHER LIABILITIES
Contingent
considerati
ons
Asset
retirement
obligations
Interest
payable on
SM S.E.C.
debenture
Future
ownership
rights
Deferred
income
Lease
liabilities
Total
11,049 165,808
31,210
35,117
18,702 157,109 418,995
—
—
—
11,914
—
—
—
—
5,039
—
—
—
—
—
—
47,108
11,453
59,022
11,453
—
5,039
27
—
—
(520)
5,748
(66,594)
—
—
—
—
—
—
1,242
(16,659)
—
—
—
—
(799)
—
—
41,977
—
(3,515)
7,017
(41,276)
(799)
(4,035)
677
1,825
11,233 118,701
—
36,249
—
19,700
—
14,197
11,695
17,903 265,827 469,613
(256)
—
—
—
—
(5,494)
(5,750)
10,977 118,701
36,249
19,700
17,903 260,333 463,863
As at January 1, 2022
Business acquisitions
(Note 4)
New obligations
Interest expense included in
finance costs
Accretion expense included in
finance costs
Remeasurement
Amortization
Payments
Impact of foreign exchange
fluctuations
As at December 31, 2022
Current portion of other
liabilities
Long-term portion of other
liabilities
As at January 1, 2021
Business acquisitions
New obligations
Interest expense included in
finance costs
Accretion expense included in
finance costs
Remeasurement
Amortization
Payments
Impact of foreign exchange
fluctuations
As at December 31, 2021
Current portion of other
liabilities
Long-term portion of other
liabilities
Contingent
considerati
ons
Asset
retirement
obligations
Interest
payable on
SM S.E.C.
debenture
Future
ownership
rights
Deferred
income
Lease
liabilities
Total
1,861 162,625
1,558
8,447
—
9,746
26,461
—
—
40,031
—
—
— 172,807 403,785
2,030
472
—
37,835
—
19,642
—
4,749
—
—
—
4,749
—
36
—
4,167
(7,791)
(761)
—
—
—
—
1,276
(6,190)
—
—
—
(940)
—
—
(9,767)
(3,623)
5,479
(23,748)
(940)
(4,384)
167
(3,198)
11,049 165,808
—
31,210
—
35,117
—
(5,811)
(2,780)
18,702 157,109 418,995
(515)
—
—
—
—
(4,137)
(4,652)
10,534 165,808
31,210
35,117
18,702 152,972 414,343
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p139
(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 30 and 35 years, respectively, after the signing date.
The cash flows were discounted at rates between 4.42% and 7.90% as at December 31, 2022 (0.99% to 4.87% in
2021) to determine the obligations.
b.
Interest payable on the Sainte-Marguerite 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, 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 2021, the Corporation availed itself of the full amount under a $19,642 letter of credit to cover certain unfulfilled
performance obligations following the bankruptcy of the service provider under the turbine supply agreement at
Mesgi'g' Ugju's'n. 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.
f. Contigent considerations
On July 9, 2021, Innergex acquired the remaining 50% interest in Energía Llaima SpA (“Energía Llaima”). The
purchase price included 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 at the date of acquisition. 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, acquired the Curtis Palmer
hydroelectric portfolio located in Corinth, New York. The purchase price included 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.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p140
(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 business acquisitions
Issued on public offering
Issued following the Strategic Alliance with Hydro-Québec
Issued through dividend reinvestment plan
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, 2022
December 31, 2021
204,132,833
3,400,000
2,000,000
192,493,999
3,400,000
2,000,000
December 31, 2022
December 31, 2021
192,493,999
—
9,718,650
2,100,000
73,865
—
(253,681)
204,132,833
(541,261)
(178,597)
127,601
(592,257)
203,540,576
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
As part of the public offering that closed on February 22, 2022, the Corporation issued 9,718,650 common shares at a
price per share of $17.75 for cash proceeds of $172,506. Concurrently with the closing of the public offering, Hydro-
Québec subscribed for 2,100,000 common shares of the Corporation for cash proceeds of $37,275.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p141
(in thousands of Canadian dollars, except as noted and amounts per share)
Buyback of common shares
During the year ended December 31, 2022, 253,681 common shares have been purchased and cancelled under the
normal course issuer bid terminated on May 23, 2022, at an average price of $17.40 per share.
New Normal Course issuer Bid
The Corporation received the approval from the Toronto Stock Exchange ("TSX") to renew the normal course issued bid
on its common shares and to commence a normal course issuer bid on its Series A preferred shares and Series C
preferred shares (the "New Bid"). Under the New Bid, the Corporation could purchase for cancellation up to 4,082,073
of its common shares, representing approximately 2% of the 204,103,658 issued and outstanding common shares of
the Corporation as at May 11, 2022. The Corporation could purchase for cancellation up to 68,000 of its Series A
preferred shares, representing approximately 2% of the 3,400,000 issued and outstanding Series A preferred shares of
the Corporation as at May 11, 2022. The Corporation could purchase for cancellation up to 40,000 of its Series C
preferred shares, representing approximately 2% of the 2,000,000 issued and outstanding Series C preferred shares of
the Corporation as at May 11, 2022. The New Bid commenced on May 24, 2022 and will terminate on May 23, 2023.
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 10, 2022. This
resulted in a decrease of the shareholders' capital account of $560,532 and an equivalent increase of the contributed
surplus from reduction of capital on common shares account.
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.
2022 Annual report
Notes to the Consolidated Financial Statements p142
(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 $1.4375 per share. The Corporation has the right to redeem all or any
number of the outstanding Series C Preferred Shares.
Equity-based compensation
a) Stock option plan
The Corporation has a stock option plan providing for the granting of options by the Board of Directors to employees,
officers, directors and certain consultants of the Corporation and its subsidiaries to purchase common shares. Options
granted under the stock option plan will have an exercise price of not less than the market price of the common shares
at the date of grant of the option, calculated as the volume weighted average trading price of the common shares on the
Toronto Stock Exchange for the five trading days immediately preceding the date of grant. The maximum number of
common shares of the Corporation available for issuance pursuant to options granted under the share option plan is
4,064,123. Any common shares subject to an option that expires or terminates without having been fully exercised may
be subject to a further option. The number of common shares issuable to non-executive directors of the Corporation
under the stock option plan cannot at any time exceed 1% of the issued and outstanding common shares. Options must
be exercised during a period established by the Board of Directors, which may not be greater than 10 years after the
date of grant. Options granted under the stock option plan vest in equal amounts on a yearly basis over a period of four
to five years following the grant date.
December 31, 2022
December 31, 2021
Number of options
Weighted average
exercise price ($)
Number of options
Weighted average
exercise price ($)
Outstanding - beginning of year
Granted during the year
Cancelled during the year
Outstanding - end of year
Options exercisable - end of year
265,570
51,352
(32,153)
284,769
186,088
16.83
17.50
18.59
16.75
15.55
233,539
32,031
—
265,570
159,936
15.78
24.49
—
16.83
15.00
The following options were outstanding as at December 31, 2022:
Year of granting
Number of options
outstanding
Exercise price ($)
Number of options
exercisable
Year of maturity
2016
2017
2019
2020
2021
2022
56,531
54,411
63,878
41,374
26,201
42,374
284,769
14.65
14.52
14.41
20.52
24.49
17.50
56,531
54,411
47,909
20,687
6,550
—
186,088
2023
2024
2026
2027
2028
2029
The weighted average contractual life of the outstanding stock options is five years.
A compensation expense of $35 was recorded during the year ended December 31, 2022 with respect to the stock
option plan ($87 in 2021).
Granted
During the year ended December 31, 2022, 51,352 options were granted. The options granted vest in four equal
tranches until February 25, 2026 and must be exercised before February 25, 2029 at an exercise price of $17.50.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p143
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, 2022
December 31, 2021
$
$
1.78 %
0.72
6
26.77 %
0.97 %
0.72
6
26.03 %
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.
2022 Annual report
Notes to the Consolidated Financial Statements p144
(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, 2022
DSU
PSP
December 31, 2021
DSU
PSP
526,519
251,650
(185,910)
(84,261)
23,353
531,351
162,512
44,745
—
—
8,355
215,612
504,004
177,435
(170,089)
(5,742)
20,911
526,519
118,490
45,573
(6,321)
—
4,770
162,512
A compensation expense of $3,171 was recorded during the year ended December 31, 2022 with respect to the PSP
and DSU plans ($1,966 in 2021).
Dividends
a) Dividend Reinvestment Plan (''DRIP'')
The Corporation implemented a DRIP for its shareholders. The plan allows eligible common shareholders the
opportunity to reinvest a portion or all of the dividends they receive to purchase additional common shares of the
Corporation, without paying fees such as brokerage commissions and service charges. Shares will either be purchased
on the open market or issued from treasury. During the year ended December 31, 2022, 73,865 shares (146,621 shares
in 2021) were issued from treasury under the DRIP.
b) Dividend Declared
The following dividends were declared by the Corporation:
Year ended December 31
2022
2021
($/share)
Total
($/share)
Total
Dividends declared on common shares
Dividends declared on Series A preferred shares
Dividends declared on Series C preferred shares
0.7200
0.8110
1.4375
146,957
2,757
2,875
0.7200
0.8110
1.4375
132,229
2,757
2,875
Dividend Declared not recognized at the end of the reporting period
The following dividends were paid by the Corporation on April 17, 2023:
Date of
announcement
Record date
Payment date
Dividend per
common
share
Dividend per
Series A
Preferred
Share
Dividend per
Series B
Preferred
Share 1
Dividend per
Series C
Preferred
Share
February 22, 2023 March 31, 2023
April 17, 2023
$
0.180 $ 0.202750 $
0.181875 $
0.359375
1. As at December 31, 2022, there were no outstanding Series B Preferred Shares.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p145
(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, 2022
Exchange differences on translation of foreign operations
Hedging (loss) gain
Share of non-controlling interest
Buyback of non-controlling interests
Related deferred tax expense
Balance as at December 31, 2022
(35,878)
97,131
—
(15,633)
(2,609)
—
43,011
574
—
(3,484)
(3,453)
5,040
—
(1,323)
(11,987)
—
220,511
(7,166)
3,872
(53,990)
151,240
(3,333)
—
9,683
—
—
(2,608)
3,742
(50,624)
97,131
226,710
(26,252)
6,303
(56,598)
196,670
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 recovery
Balance as at December 31, 2021
(33,612)
778
—
(3,044)
—
(35,878)
(4,832)
—
7,773
(2,367)
—
574
(66,010)
—
78,652
(2,746)
(21,883)
(11,987)
(7,242)
—
5,303
—
(1,394)
(3,333)
(111,696)
778
91,728
(8,157)
(23,277)
(50,624)
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p146
(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
2022
2021
(27,704)
(1,493)
14,679
(14,518)
(3,984)
(5,472)
(11,999)
(21,455)
Year ended December 31
2022
2021
(221,662)
(6,699)
(1,654)
(397)
(230,412)
(185,324)
(4,533)
(3,025)
(1,815)
(194,697)
36,444
8,535
261
546
(41,276)
11,453
—
—
2,114
1,301
—
(29,012)
14,070
—
1,874
(23,748)
8,447
19,642
2,306
3,174
3,312
89,437
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p147
(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
Reclassification of interest payable
Payment of deferred financing costs
Business acquisitions (Note 4)
Investment tax credits
Tax attributes
Production tax credits
Convertible debentures converted into common shares
Other non-cash finance costs
Net foreign exchange differences
Long-term loans and borrowings at end of period
Year ended December 31
2022
2021
4,924,435
1,737,819
(1,509,591)
23,315
(20,278)
478,488
—
(2,453)
(64,729)
—
62,715
129,489
5,759,210
4,813,881
1,686,133
(1,568,183)
—
(3,381)
196,505
(117,904)
(43,290)
(47,985)
(2,306)
55,022
(44,057)
4,924,435
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p148
(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.
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,
2022
Dec. 31,
2021
Dec. 31,
2022
Dec. 31,
2021
Dec. 31,
2022
Dec. 31,
2021
Canada
49.99 %
49.99 %
(18,770)
(6,044)
19,151
37,921
Canada
50.00 %
50.00 %
(2,942)
(1,471)
(17,826)
(14,884)
Canada
50.00 %
50.00 %
11,303
11,402
(5,391)
(6,189)
Canada
49.99 %
49.99 %
(3,003)
(1,750)
(18,694)
(15,691)
Innergex Europe (2015)
Limited Partnership, and
its subsidiaries3
Mountain Air Alternatives
LLC, and its
subsidiaries4
Innergex HQI USA LLC,
and its subsidiaries (2)
Canada/
Europe
United
States
United
States
— %
30.45 %
3,999
715
—
(2,244)
— %
37.75 %
2,044
2,446
—
57,537
50.00 %
50.00 %
(423)
1,319
186,595
203,189
Others
Various
Various
Various
(1,704)
(9,496)
(206)
6,411
6,397
170,232
7,929
267,568
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.
3. On October 4, 2022, the Corporation acquired the remaining ownership interests in Innergex Europe (2015) Limited Partnership.
Refer to note 4 c)
4. On December 14, 2022, the Corporation acquired the remaining ownership interests in Mountain Air Alternatives LLC.
Refer to note 4 c)
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p149
(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, 2022
Harrison
Kwoiek
Mesgi'g Ugju's'n
Sainte-
Marguerite
Innergex
Europe
(277-day
period)1 2
Mountain Air
(348-day
period) 3
Innergex HQI
USA
Summary Statements of Earnings (Loss)
and Comprehensive Income (Loss)
Revenues
Expenses
Net (loss) earnings
Other comprehensive income
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 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
38,130
75,675
(37,545)
—
(37,545)
(18,775)
(18,770)
(37,545)
(18,775)
(18,770)
(37,545)
1,177
(13,342)
(2,650)
—
(14,815)
14,870
20,753
(5,883)
—
(5,883)
(2,941)
(2,942)
(5,883)
(2,941)
(2,942)
(5,883)
6,294
(2,021)
(1,745)
—
2,528
58,966
28,841
30,125
2,602
32,727
9,484
15,491
(6,007)
—
(6,007)
58,311
45,176
13,135
24,491
37,626
35,392
29,974
5,418
10,577
15,995
54,525
55,371
(846)
24,885
24,039
18,822
11,303
30,125
(3,004)
(3,003)
(6,007)
9,136
3,999
13,135
3,374
2,044
5,418
(423)
(423)
(846)
20,447
12,280
32,727
(3,004)
(3,003)
(6,007)
26,169
11,457
37,626
9,958
6,037
15,995
12,020
12,019
24,039
44,634
(45,016)
(689)
—
(1,071)
2,817
(2,913)
731
—
635
—
91,860
19,573
43,212
(71,036)
(17,365)
(57,225)
58
(330)
—
(3,547)
17,335
742
2,620
445
(13,568)
—
7,387
28,613
Distributions paid to non-controlling interests
—
—
11,482
1. On October 4, 2022, the Corporation acquired the remaining ownership interests in Innergex Europe (2015) Limited Partnership.
2.The cash flows from operating activities include a realized gain of $43,458 related to the monetization of the Euro/CAD foreign exchange forward contracts. The cash flows from financing
activities include the reimbursement of the debentures for a total consideration of $96,350, partially offset by a capital contribution from the parent company in the amount of $53,042.
3.On December 14, 2022, the Corporation acquired the remaining ownership interests in Mountain Air Alternatives LLC.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p150
(in thousands of Canadian dollars, except as noted and amounts per share)
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
Total comprehensive (loss) income
attributable to:
Owners of the parent
Non-controlling interests
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
Harrison
Kwoiek
Mesgi'g
Ugju's'n
Sainte-
Marguerite
Innergex
Europe
Mountain Air
Innergex HQI
USA
Year ended December 31, 2021
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)
(6,046)
(6,044)
(12,090)
(1,471)
(1,471)
(2,942)
21,486
12,251
33,737
(1,750)
(1,750)
(3,500)
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)
88,593
86,245
2,348
6,818
9,166
1,633
715
2,348
6,375
2,791
9,166
40,376
(35,642)
(2,961)
(4,125)
(2,352)
36,101
29,609
6,492
(258)
6,234
4,046
2,446
6,492
3,880
2,354
6,234
14,636
(14,002)
—
—
634
15,678
13,040
2,638
10,332
12,970
1,319
1,319
2,638
6,485
6,485
12,970
10,870
—
—
274
11,144
Distributions paid to non-controlling interests
—
—
9,769
—
—
4,617
—
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p151
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Financial Position
As at December 31, 2022
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity (deficit) attributable to owners
Non-controlling interests (deficit)
Harrison
Kwoiek
Mesgi'g Ugju's'n
Sainte-Marguerite
Innergex HQI USA
14,035
539,070
553,105
29,399
448,380
56,175
19,151
553,105
6,014
164,068
170,082
17,409
196,552
(26,053)
(17,826)
170,082
21,937
260,700
282,637
17,252
233,333
37,443
(5,391)
282,637
2,319
114,685
117,004
9,608
128,223
(2,133)
(18,694)
117,004
11,877
368,126
380,003
2,512
4,292
186,604
186,595
380,003
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
Equity (deficit) attributable to owners
Non-controlling interests (deficit)
33,400
550,515
583,915
29,661
441,383
74,950
37,921
583,915
7,640
164,945
172,585
12,139
198,442
(23,112)
(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
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p152
(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, CAO, Chief Legal Officer and Secretary, Chief Human
Resources Officer 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
2022
2021
7,670
1,016
3,172
35
11,893
7,188
1,072
3,205
87
11,552
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 2022 and 2021 (see Note 22 - Shareholders' Capital)
Sales made under PPAs with Hydro-Québec (see Note 31 - Major Customers)
EVLO, a subsidiary of Hydro-Québec, provided battery at the Tonnerre Energy storage project
Acquisition of the remaining interests in Innergex Europe (2015) Limited Partnership from its partner Régime
de Rentes du Mouvement Desjardins (see Note 4 - Business acquisitions)
Acquisition of the remaining interests in Mountain Air Alternatives LLC from its partner, an affiliate of MetLife
Investment Management (see Note 4 - Business acquisitions)
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p153
(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, 2022
Carrying
amount
Fair value
As at December 31, 2021
Carrying
amount
Fair value
Level 2
17,178
17,178
1,420
1,420
Non-current financial assets measured at
amortized cost
Other investments included in other long-
term assets
Non-current financial liabilities measured
at amortized cost
Long-term loans and borrowings
Level 2
5,759,210
5,934,241
4,924,435
5,027,286
Derivative financial instruments measured
at fair value
Interest rate swaps
Foreign exchange forwards
Power and basis hedges
Level 2
Level 2
Level 3
98,138
(3,555)
(69,333)
98,138
(3,555)
(69,333)
(78,482)
2,485
16,559
(78,482)
2,485
16,559
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.
2022 Annual report
Notes to the Consolidated Financial Statements p154
(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, 2022, 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$30.48 to US$100.10 per MWh between January 1, 2023 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 $0.19
to US$127.44 per MWh between January 1, 2023 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$207,200 ($280,632) as at
December 31, 2022.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p155
(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.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p156
(in thousands of Canadian dollars, except as noted and amounts per share)
The Corporation has designated the following derivative financial instruments as cash flow hedges1:
Project
Notional
Currency 2
Variable
rate
Swap
Rate
Maturity
Early
termination
option
Notional Amounts
December 31,
2022
December
31, 2021
Corporate
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Alterra
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
HP Solar I
Pampa Elvira
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
EUR
EUR
EUR
EUR
CAD
CAD
EUR
USD
USD
USD
CAD
USD
USD
USD
USD
USD
USD
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
SOFR
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
3.97% 2025
3.00% 2051
2.57% 2031
2.60% 2031
2.51% 2028
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
SOFR
LIBOR
3.60% 2032
3.07% 2037
1.85% 2026
2.31% 2024
0.95% 2041
2.40% 2048
1.90% 2022
2023
2023
2023
None
None
2022
2023
2023
2029
2023
2029
2029
None
2023
None
None
None
2025
2025
2022
None
None
None
None
None
None
None
None
None
2026
2026
None
None
2026
None
None
2028
2041
None
20,000
30,000
52,600
20,000
20,000
26,585
20,000
20,000
20,000
20,000
20,000
25,000
50,000
81,854
100,000
12,500
42,500
37,654
37,654
16,372
—
7,487
49,787
30,455
27,647
52,746
402,430
50,470
9,296
10,466
7,699
19,051
64,021
130,753
4,854
10,957
89,363
55,519
—
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
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 1.3544 and EURO swaps are converted at a fixed rate of CAD 1.4458.
1,695,720
1,548,021
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p157
(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
27
(27)
8,470
(8,554)
150
(23)
8,568
(8,758)
December 31, 2022
Interest rate swaps
December 31, 2021
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 2043,
allowing conversion at a fixed rate of
CAD 1.4838/Euro
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
December 31, 2022
December 31, 2021
Notional Amounts
2024
2022
2022
2023
2023
2023
115,317
—
—
—
—
—
—
115,317
147,097
42,817
97,509
143,753
69,436
500,612
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.
2022 Annual report
Notes to the Consolidated Financial Statements p158
(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
(140)
140
(642)
643
(3,127)
3,126
(854)
855
December 31, 2022
Foreign exchange forwards
December 31, 2021
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 maturing on June 30, 2031.
The power hedge was designated for hedge accounting purposes until September 30, 2019. 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 $74,805
for the year ended December 31, 2022.
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, 2022
Power hedge
December 31, 2021
Power hedge
Earnings (loss)
10 % increase
10% decrease
(29,895)
29,895
(25,672)
26,329
Salvador power hedges
The Corporation is subject, under the Salvador solar project, to 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 $7,267 for the year ended December 31, 2022.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p159
(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, 2022
Power hedge
December 31, 2021
Power hedge
(iv) Hedge accounting
Earnings (loss)
10 % increase
10% decrease
(2,318)
2,318
(1,312)
1,312
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, 2022 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
1,653,908
107,040
(4,023)
92,246
95
(3,013)
The following table summarizes the impact of hedge ineffectiveness and hedging gains (losses) as at December
31, 2022:
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
224,168
2,756
1,165
—
—
3,351
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
3,484
206
452
1. The balance of cash flow hedge reserve relating to power price risk for which hedge accounting is no longer applied is $26,081.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p160
(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, 2022, 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.
Most of the Corporation's trade receivables in Chile relate to electricity sold to distribution companies, with the
majority being sold to large distribution companies 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, 2022, $15,199 ($5,434 in 2021) of trade and other receivables were more than 90 days overdue
and a total write-off of impaired receivables of $2,341 (nil in 2021) 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 $123,665 as at December 31, 2022 (negative working capital of
$344,850 in 2021). The Corporation considers its current level of working capital and revolving term credit facility
availability to be sufficient to meet its needs, also considering the $150,000 subordinated unsecured term loan,
effectively refinanced on February 1, 2023, classified as current as at December 31, 2022 (see Note 20). The
Corporation limits its excess cash position through repayments of its revolving term credit facility. When required, the
Corporation can use its revolving term credit facility of which $174,877 was available as at December 31, 2022
($252,954 in 2021). 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.
2022 Annual report
Notes to the Consolidated Financial Statements p161
(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
Foreign exchange forwards
Power Hedge
Total
Less than 1 year
Between 1 year
and 5 years
Over 5 years
Total
248,659
593,353
254
4,878
3,050
—
17,891
868,085
—
1,948,790
9,603
15,135
—
4,188,134
36,249
53,729
248,659
6,730,277
46,106
73,742
13,698
6,874
24,830
2,018,930
7,230
—
13,548
4,298,890
23,978
6,874
56,269
7,185,905
1. The contractual cash flows include debt principal and interest payments.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p162
(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 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 ended on October 31, 2022. The Corporation signed a three-month extension, expiring on
February 1, 2023. A decision was made to not renew the Brown Lake PPA with BC Hydro at this time. Discussions
regarding various offtake oppotunities are currently in progress.
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 10 of the 16 wind facilities located in France.
Under PPA's with terms of three years, expiring in 2025, an offtaker agreed to purchase the electrical energy produced by
the facilities of Antoigné, Porcien and Vallottes, located in France.
Under PPA's with terms of 10 years expiring in 2032, an offtaker agreed to purchase the electrical energy produced by
Beaumont and Bois d'Anchat wind facilities located in France.
The Tonnerre energy storage project has been awarded a 7-year contract for differences offering a fixed-price contract for
capacity certificate.
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.
2022 Annual report
Notes to the Consolidated Financial Statements p163
(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 March 2023, the client agreed to purchase all of the energy produced by
the Pampa Elvira solar facility located in Chile. Management is currently negotiating the extension of the contract until
December 31, 2032; this process is currently with an agreed binding offer in process of drafting and signing contracts.
Under a PPA with terms varying from 4 to 8 years and expiring between 2023 and 2026, clients agreed to purchase all of
the electricity produced by the Peuchen and Mampil Hydro facilities located in the Bio-Bio region.
Under a PPA with terms varying from 2 to 4 years and expiring between 2025 and 2026, clients agreed to purchase all of
the electricity produced by the Guayacan Hydro facility.
Under PPAs with 20-year terms expiring between 2036 and 2041, clients agreed to purchase a portion of the electricity
produced by the Sarco, Cuel and Aurora Wind facilities.
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 financial 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.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p164
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
c. Summary of commitments
As at December 31, 2022, 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
36,437
2,095
38,532
175,830
8,720
184,550
369,293
5,436
374,729
581,560
16,251
597,811
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p165
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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 was taking to address the reduced electricity demand during the COVID-19 pandemic and related challenges
to the safe operation of its hydroelectric system.
Innergex disputed that the pandemic and related governmental measures in any way prevented BC Hydro from fulfilling its
obligations to accept and purchase energy under the EPAs or enabled 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 amounted to $12,456 ($14,183 on a Revenues Proportionate1
basis), respectively. The dispute was settled in the first quarter of 2022 to Innergex's satisfaction.
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. 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 $3,385, including interests, was received by the Corporation during the first
quarter of 2022.
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 31, Segment Information, for more information.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p166
(in thousands of Canadian dollars, except as noted and amounts per share)
Innavik EPC Agreement
On January 25, 2023 a legal hypothec has been registered by the contractor against the Innavik hydroelectric project
("Innavik" or "the project"), a joint venture company, in the amount of $57,768, representing the contractor’s claim for
payment of additional costs under the EPC Agreement with Innavik. The Corporation disputes that claim in good faith and,
unless the contractor discharges the legal hypothec at its request, will take legal action to cause the legal hypothec to be
removed from title. As at December 31, 2022, while continuing to dispute the claim, the project recognized a provision for
construction cost overruns, estimated based on a range of possible outcomes that are materially lower than the amounts
claimed by the contractor.
30. 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 $7,245,637 as at December 31, 2022.
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.
Innergex Renewable Energy Inc.
2022 Annual report
Notes to the Consolidated Financial Statements p167
(in thousands of Canadian dollars, except as noted and amounts per share)
All debt covenants are monitored on a regular basis by the Corporation. As at December 31, 2022, the Corporation and
its subsidiaries have met all material financial and non-financial conditions, 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.
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.
2022 Annual report
Notes to the Consolidated Financial Statements p168
(in thousands of Canadian dollars, except as noted and amounts per share)
31. 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.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p169
(in thousands of Canadian dollars, except as noted and amounts per share)
Year ended December 31, 2022
Operating segments
Segment revenues
Innergex's share of revenues of joint ventures and associates
PTCs and Innergex's share of PTCs generated
Segment Revenues Proportionate
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
Hydroelectric
Wind
Solar
Segment results
336,645
44,328
—
380,973
250,510
34,554
—
285,064
420,529
16,207
64,729
501,465
317,487
12,164
64,729
394,380
113,320
—
—
113,320
89,021
—
—
89,021
870,494
60,535
64,729
995,758
657,018
46,718
64,729
768,465
Year ended December 31, 2022
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
1. Segment totals include only operating projects.
110,181
—
5,502
24,840
572,284
5,313
—
22,188
1,814
135,021
594,472
12,629
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p170
(in thousands of Canadian dollars, except as noted and amounts per share)
Year ended December 31, 2021
Operating segments
Segment revenues
Innergex's share of revenues of joint ventures and associates
PTCs and Innergex's share of PTCs generated
Segment Revenues Proportionate
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
Hydroelectric
Wind
Solar
Segment results
277,302
50,547
—
327,849
212,436
38,547
—
250,983
349,786
60,489
54,018
464,293
276,859
54,989
54,018
385,866
120,120
885
—
121,005
103,702
554
—
104,256
747,208
111,921
54,018
913,147
592,997
94,090
54,018
741,105
Year ended 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
499,024
—
5,826
24,130
—
358,581
13,677
—
10,069
291,636
945
133,041
509,093
650,217
20,448
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p171
(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:
Year ended December 31, 2022
Year ended December 31, 2021
Consolidation
Share of joint
ventures
PTCs
Proportionate Consolidation
Share of joint
ventures
PTCs
Proportionate
Revenues
870,494
60,535
64,729 995,758
747,208
111,921
54,018
913,147
Net loss
Income tax expense (recovery)
Finance costs
Depreciation and amortization
Impairment of long-term assets
EBITDA
Other net income, before PTCs
Production tax credits ("PTCs")
Share of (earnings) losses of joint
ventures and associates:
Change in fair value of financial
instruments
Adjusted EBITDA
Unallocated expenses:
General and administrative
Prospective projects
(91,115)
(6,577)
317,842
336,053
47,868
604,071
(4,190)
(64,729)
—
—
17,757
16,801
—
34,558
(342)
(91,115)
—
(6,577)
—
— 335,599
— 352,854
—
47,868
— 638,629
(4,532)
—
—
64,729
(14,382)
14,382
—
—
—
(185,394)
(26,240)
252,255
255,640
36,986
333,247
(41,637)
—
(31)
23,382
23,051
112,609
159,011
1,947
(47,984)
(6,034)
—
—
—
—
—
—
—
54,018
(185,394)
(26,271)
275,637
278,691
149,595
492,258
(39,690)
—
189,889
(189,889)
—
—
64,145
584,915
(1,880)
46,718
—
62,265
64,729 696,362
92,122
525,637
129,055
94,090
—
54,018
221,177
673,745
47,363
24,740
—
—
—
—
47,363
24,740
39,993
27,367
—
—
—
—
39,993
27,367
Segment Adjusted EBITDA
657,018
46,718
64,729 768,465
592,997
94,090
54,018
741,105
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p172
(in thousands of Canadian dollars, except as noted and amounts per share)
Geographic segments
As at December 31, 2022, 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 and 1 storage facility in France, and 3 hydroelectric
facility, 8 wind farms and 4 solar farms in the United States, and 4 hydroelectric facilities, 3 wind farms and 3 solar farms in Chile. The Corporation operates in four
principal geographical areas, which are detailed below:
Revenues
Canada
United States
Chile
France
As at
Non-current assets, excluding derivative financial instruments and deferred tax assets 1
Canada
United States
Chile
France
1. Includes the investments in joint ventures and associates
Major Customers
Year ended December 31
2022
2021
427,910
229,446
121,021
92,117
870,494
433,192
187,332
38,091
88,593
747,208
December 31, 2022
December 31, 2021
3,246,979
2,364,160
1,549,679
753,161
7,913,979
3,390,029
2,301,353
423,856
801,752
6,916,990
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
Hydro-Québec
British Columbia Hydro and Power authority
Électricité de France
Segment
Hydroelectric and wind
Hydroelectric generation
Wind
Year ended December 31
2022
2021
235,234
158,325
89,675
483,234
219,942
187,973
88,593
496,508
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p173
(in thousands of Canadian dollars, except as noted and amounts per share)
32. SUBSEQUENT EVENTS
Acquisition of Sault Ste. Marie Solar Portfolio
On January 23, 2023, Innergex has entered into an agreement to acquire the 60 MW Sault Ste. Marie solar portfolio located in
northwestern Ontario from Fengate Asset Management for a purchase price of $50,200, along with the assumption of
$169,500 of existing debt. The acquisition is expected to close in Q1 2023 and is subject to certain regulatory approvals in
Canada, key third party consents and other customary closing conditions.
Refinancing of the subordinated unsecured term loan
On February 1, 2023, Innergex has completed the refinancing of the subordinated unsecured term loan with a non-revolving
term credit facility of $75,000 bearing interest at a fixed rate of 6.25% and maturing on February 1, 2025, and a non-revolving
term credit facility of $75,000 bearing interest at a variable rate of 4.87%, based on the bankers’ acceptance rates plus a
spread of 1.85% which depends on leverage ratio, maturing on February 1, 2025. Concurrently, the Corporation concluded an
interest rate swap to hedge a $50,000 portion of the credit facility notional that is subject to variable interest rates.
Innergex Renewable Energy Inc.
2022 Annual Report
Notes to the Consolidated Financial Statements p174
(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 Trudel
Chief Financial Officer
Tel. 450 928-2550 x1252
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 204,132,833
common shares outstanding as at December 31,
2022, with a closing price of $16.20 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
Innergex Renewable Energy
Inc. currently has
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
convertible at
Innergex
the holder's option
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
are redeemable since 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
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