A New Current
We are renewing our approach to renewable energy,
driven by the conviction that every action counts.
We are helping the planet and our communities for
the benefit of this generation and those to come.
By harnessing energy from the sun, wind and water,
coupled with the energy of people willing to drive
change, we make a greener world go around.
Together, our collective energy is creating a new
current. A positive force for change.
For over 30 years, Innergex has believed in a world where abundant
renewable energy promotes healthier communities and creates shared
prosperity. In recognition of its leadership position in sustainability,
Innergex was proud to be named Canada’s Best Corporate Citizen in 2023
by Corporate Knights magazine. As an independent renewable power
producer which develops, acquires, owns and operates run-of-river
hydroelectric facilities, wind farms, solar farms and energy storage
facilities, Innergex is convinced that generating power from renewable
sources will lead the way to a better world.
Innergex conducts operations in Canada, the United States, France and
Chile and follows a sustainable development philosophy that balances
people, our planet and prosperity. Its approach to building shareholder
value is to generate sustainable and growing cash flows per share and
provide an attractive risk-adjusted return on invested capital.
The Corporation’s shares are listed on the Toronto Stock Exchange (“TSX”)
under the symbols INE, INE.PR.A and INE.PR.C and its convertible
debentures are listed under the symbols INE.DB.B and INE.DB.C.
Table of Contents
8
Message to Shareholders
24 Management’s Discussion and Analysis
87
Responsibility for Financial Reporting
88
Independent Auditor’s Report
93
Consolidated Financial Statements
99
Notes to the Consolidated
Financial Statements
1
2023 Annual Report
Why invest
A Global Presence
Focused on
Renewable
Energy
• We are a 100% renewable energy company involved in the development and operation of
hydroelectric, wind, solar, and battery storage projects across Canada, the United States,
France and Chile.
• Our strong ESG practices lead the transition to a cleaner economy, with a robust emphasis
on incorporating the best environmental behaviours and the highest social and governance
standards, as illustrated by our successful history of building long-term partnerships with
Indigenous and local communities.
• Our proactive approach not only allows us to seize opportunities, but also to create them,
strengthening our position as a leader in the attractive and growing renewable energy sector.
A Well-Diversified
Portfolio
with a Highly
Contracted
Profile
• We operate 87 facilities across diverse geographies and technologies, including a large
portfolio of high-quality run-of-river hydro assets. Our balanced portfolio is a core part
of our risk management strategy, with significant diversification helping mitigate natural
resource variability.
• Our installed capacity has almost quadrupled in the past 10 years to over 4,000 MW
of renewable energy, and our overall portfolio has a strong, highly contracted profile
providing predictable and inflation-protected revenues.
• We remain focused on developing sustainable and accretive renewable projects,
underpinned by rising global demand for clean energy.
A Disciplined
Approach with
Multiple Levers to
Deliver Attractive
Returns
• We have access to diverse sources of capital to continue executing on our growth strategy
while maintaining our Investment Grade credit rating through sound balance sheet
management.
• We look to pursue selective capital-raising initiatives to strengthen our balance sheet,
reduce risks and fund additional growth.
• Our value investment approach considers all aspects of market and project risks, and
we target double-digit levered after-tax returns.
4
countries: Canada,
United States, France
and Chile
+600+
employees
87
clean energy
facilities
4,234 MW
of gross installed capacity
$8.9 B
Total Assets
11,161 GWh
of proportionate energy produced
2023 Annual Report
2
Global Diversification
41
run-of-river
hydro facilities
35
wind facilities
9
2
solar facilities
battery energy
storage facilities
3
2023 Annual Report Key Figures
Financial Key Performance Indicators
Innergex measures its performance
using operating and financial key
performance indicators (“KPIs”).
Innergex believes that these
indicators provide management
and the reader with additional
information about its production
and cash-generating capabilities,
as well as its financial strength.
These indicators are not recognized
measures under IFRS, have no
standardized meaning prescribed
by IFRS and therefore may not be
comparable to those presented
by other issuers. Please refer to
the “Non-IFRS Measures” section
for more information.
** Some of the 2021 key figures were impacted by the February 2021
Texas Events. Please refer to the "February 2021 Texas Events" section
for more information.
1 This is not a recognized measure under IFRS and therefore may not
be comparable to those presented by other issuers. Please refer to
the “Non-IFRS Measures” section for more information.
Production and Production Proportionate
(GWh)**
Production
Joint Ventures
9,853.4
798.2
10,792.1
538.1
11,160.6
539.1
9,055.2
2021
10,254.0
2022
10,621.5
2023
Revenues and Revenues Proportionate
Adjusted EBITDA and Adjusted EBITDA
Proportionate ($M)**
Revenues and PTCs
Joint ventures
Adjusted EBITDA1
Adjusted EBITDA Proportionate1
117.9
913.1
500.0
469.7
795.2
2021
995.8
658.9
612.2
935.2
2022
1,102.7
61.6
60.6
735.3
687.7
1,041.6
2023
Cash Flows from Operating Activities and
Free Cash Flow1 ($M)**
Cash Flows from
Operating Activities
Free Cash Flow1
430.2
172.0
297.9
214.9
2022
2023
4
265.5
119.7
2021
2023 Annual Report Operational Key Performance Indicators
Gross Installed Capacity by Source
of Energy (MW)
Hydro
Wind
Solar
1,571
1,840
2,888
2016
2017
2018
2019
2020
2021
2022
2023
1,267
2,278
3,488
3,694
3,800
4,184
689
4,234
Gross Installed Capacity
by Country
Canada
47.7%
France
7.7%
Chile
15.5%
United States
29.1%
5
2023 Annual Report Environmental, Social and Governance (ESG) KPIs
(as at December 31)
Our mission to build a better world with renewable energy is told through our ESG journey.
Since 2016, we have made great progress on advancing the quality of our disclosures, and
the quantity and quality of metrics we provide. By sharing our sustainability initiatives and
performance efforts, we empower not only ourselves, but our investors, our partners, and
other stakeholders, to make informed decisions. The Board fully supports our ESG efforts
to help our stakeholders understand that sustainability is in our DNA. As a 100% renewable
energy company, we are proud to offer investors the opportunity to invest in projects that
help build a more sustainable future.
% Women in Management
Positions
Renewable Energy
Generation (GWH)1
2023
2022
2021
2023
2022
2021
28.3
27.5
25.0
11,161
10,792
9,853
Workdays Lost Due to
Occupational Injuries and Disease2
Average Training Hours
per Employee
2023
2022
2021
2023
2022
2021
0.18
0
8.05
43.8
40.0
40.1
Average Voluntary
Turnover Rate
% of Women
on the Board of Directors
2023
2022
2021
2023
2022
2021
7.1
10.3
12.5
40
36
30
1 Equivalent to Innergex's
Production Proportionate.
2 The lost day rate is the
number of calendar
days lost due to a work-
related injury or disease
(excluding contractors)
per 200,000 worked hours.
3 For Canadian and US
employees. Employees
in France and Chile are
covered by different
retirement systems.
Contributions to Employee
Retirement Plans3
2023
2022
2021
$1.8 M
$1.6 M
$1.3 M
2023 Annual Report
6
Positive energy
driving positive
impact
Message to Shareholders
In 2023, our team diligently and successfully pursued the development of profitable renewable energy
projects in all of our markets, while continuing to innovate and deliver optimal returns from our operating
assets. Diversification also remains a cornerstone of our growth strategy, allowing us to manage portfolio
risk, deliver sustainable growth to our shareholders, and alleviate potential resource-related challenges.
Innergex has significant competitive advantages, including its
ability to form strong long-term partnerships with Indigenous
and local communities, and its expertise as a full life-cycle
project developer and experienced long-term asset owner and
operator. Innergex also benefits from a large and high-quality
portfolio of diversified hydroelectric assets which underpins
its long-term cash flow profile and supports its balance sheet.
With over 30 years in the industry and a mission focused on
the sustainable development of 100% renewable energy
facilities, we are well positioned to pursue growth and generate
attractive risk-adjusted returns on invested capital.
Looking ahead, Innergex is excited about the accelerating path
of decarbonization in its core markets. In order to capitalize
on the rapidly expanding opportunity set and position ourselves
to seize numerous growth avenues, it is imperative to ensure
that our capital allocation priorities be strategically aligned with
our ambitions to generate sustainable value for our shareholders.
In this context, the Board of Directors has approved an updated
capital allocation strategy starting in 2024. Although our current
cash flows can fully cover our dividend, the decision to target
a recalibrated dividend payout ratio of 30% to 50% of Free Cash
Flow was made in order to increase financial flexibility, support
an accelerated pace of growth, and reduce reliance on external
funding sources. Innergex will prioritize organic growth
opportunities at attractive risk-adjusted returns, focusing on the
deployment of wind and solar capacity in North America, while
also actively pursuing storage and hydro opportunities. This
refreshed funding strategy will increase our ability to generate
sustainable growth, and combined with our disciplined approach
to capital deployment, allow Innergex to create long-term
value for our shareholders. Innergex is focused on expanding
our established leadership position in its preferred markets,
while continuing to capitalize on strong development
opportunities in a disciplined manner.
Canada’s Renewable Power Shift
Accelerates Growth in Home Market
In March 2023, the Federal Government of Canada announced
the creation of tax credits1 to foster a clean economy and support
the transition to a cleaner energy mix. These financial initiatives
are expected to become key drivers for renewable energy
projects in the country.
In addition, several provinces have taken significant steps to
plan new energy Requests for Proposals (“RFPs”) and increase
their overall procurement of renewable energy. Hydro-Québec
is leading the way with its ambitious 2035 Action Plan2, while
British Columbia and Ontario have also established impressive
targets to further deploy clean energy solutions in their
territories. We own and operate assets in all of these markets,
and our teams continue to develop future projects to be
submitted in upcoming RFPs to secure profitable growth.
Innergex is priviledged to be the partner of choice for
Indigenous and local communities, with whom we have and
will continue to develop successful and profitable projects in
partnership. This is an important part of our corporate culture,
and a significant differentiator in the development landscape
in Canada. Innergex’s ability to work effectively with the
Indigenous community led to the achievement of the 7.5 MW
Innavik hydro project in Inukjuak (Nunavik). The project, which is
the result of a 50-50 partnership with the Pituvik Landholding
Corporation, has been supplying the village with electricity since
the end of October 2023. The electricity produced, along with
the conversion of the residences’ heating systems, will replace
reliance on diesel fuel for almost all of Inukjuak energy needs.
Other examples of our partnership successes include the signing
of a 30-year power purchase agreement (“PPA”) for 102 MW to be
added to the Mesgi’g Ugju’s’n wind facility in the Regional County
Municipality (“RCM”) of Avignon. This second joint project with
the three Mi’gmaq communities in Quebec is a testament to
their ongoing confidence in Innergex. The project is expected to
reach commercial operation in 2026.
Hydro-Québec's recent selection of Innergex's two proposed
wind projects, totaling 400 MW, is a proof of our ability to work
with communities to drive sustainable and profitable growth. The
300 MW Manicouagan wind project led by the Innu Council of
Pessamit (39%) in partnership with Innergex (38%) and the RCM
of Manicouagan (23%), and the 100 MW MRC of Lotbinière wind
project, a partnership between Innergex (50%), the RCM of
Lotbinière (45%) and two First Nations communities, the Abenaki
Council of Odanak (2.5%) and the Abenaki Council of Wôlinak
(2.5%), were both selected in the call for tenders. Both projects
will be supported by a 30-year PPA to be concluded with
Hydro-Québec and indexed to a predefined percentage of the
Consumer Price Index (“CPI”). These two projects are expected
to begin commercial operations in 2029 and 2028, respectively.
We are proud of this 100% success rate and our ability to capture
new growth opportunities. These results give us confidence in
our development and growth ambitions.
In Canada, we also pursued growth and diversification in 2023
through the acquisition of the Sault Ste. Marie solar portfolio
(60 MW) in Ontario. This fully contracted project has an excellent
operating track record, attractive PPA terms, and brings solid
cash flows to Innergex. It also allowed the Corporation to
position itself for the upcoming wave of new clean power
projects in Ontario.
1 Source: https://www.budget.canada.ca/2023/report-rapport/chap3-en.html
2 Source: https://www.hydroquebec.com/data/a-propos/pdf/action-plan-2035.pdf
8
2023 Annual Report
Harnessing the Elements
in the U.S.
In the United States, our teams
are actively advancing on the
construction of the 330 MW
Boswell Springs wind project
in Wyoming and the 30 MW
Hale Kuawehi solar and 30 MW/
120 MWh (4 hours) battery storage
project in Hawaii, while continuing
our development efforts to
support additional growth.
The Boswell Springs wind project is well underway, with all
foundations poured and the main generation-tie line completed.
Our teams are focused on completing the project on schedule
and on budget with commissioning scheduled for Q4 2024.
Furthermore, the project has received all necessary funding,
and it is potentially eligible for up to 120% of Production Tax
Credits (“PTCs”) through the recently passed Inflation
Reduction Act (“IRA”).
With the passage of the IRA, investments into renewable
energy and related infrastructure are growing. At Innergex, our
ability to deliver competitive projects in our core markets and
to create highly effective tax equity structures positions us well
to capitalize on opportunities brought by the IRA.
The construction of the Hale Kuawehi solar and battery storage
project is also progressing with commissioning scheduled for
late 2024 or early 2025. The amended PPA, including a selling
price increase of 56%, was recently approved by the Public
Utilities Commission in Hawaii.
Our Palomino solar project's development activities are
advancing and the project received confirmation for its
qualification for the Fast Track interconnection by PJM in
the fourth quarter of 2023.
Strategic Partnership in France Validates
Portfolio Value
We were pleased to welcome Crédit Agricole Assurances as
a long-term partner with a 30% minority interest in Innergex’s
portfolio in France.
The long-term co-investment agreement with France’s leading
insurer will support Innergex’s growth in the country by providing
additional equity commitments for the development and
financing of future projects.
This strategic partnership is a vote of confidence in our devoted
team, in the quality of our existing assets, our development
activities and our strategy in France. As the new renewable
energy bill adopted by the French Parliament promises to
accelerate renewable energy development, this partnership
allows Innergex to not only unlock value from its existing portfolio,
but also increase its financial flexibility to accelerate greenfield
development activities.
We are very proud of the progress made in France with many
of our projects. With a focus on wind, solar and energy storage
technologies, we were able to advance our 9 MW Lazenay
wind project to construction and conclude the interconnection
agreements for the 29.4 MW Auxy Bois Régnier wind project,
for which we were also able to upgrade the PPA on more
favourable terms.
9
2023 Annual Report Reshaping Chile’s Energy
Mix With Advanced Energy
Storage Solutions
In October, we commissioned
Innergex’s largest energy
storage facility to date. The
Salvador battery energy storage
facility (50 MW/250 MWh
(5 hours)) is located on our
Salvador solar site in the
Atacama Desert.
The renewable energy produced by the solar facility is stored
during the day to be dispatched during the evening or early
morning hours, supporting the grid upon peak energy demand
and benefitting from higher prices on the merchant market
during those times.
The San Andrés battery energy storage project (35 MW/175 MWh
(5 hours)), located on the site of the San Andrés solar facility, is
another large-scale storage project soon to be commissioned
in the region.
We are very proud of our growing energy storage portfolio as
we believe it is an essential complement to renewable energy
generation. These projects will allow Innergex to benefit from
excess production and optimize revenues based on market
dynamics and demand in Chile. Overall, our ability to capitalize
on variable energy prices and receive capacity payments
allow Innergex to deliver a clean energy solution with both
a favourable risk profile and strong financial returns.
In 2023, Innergex became the sole owner of our 34 MW Pampa
Elvira solar thermal facility, which consists of 150 MWh of thermal
energy storage, and we also recently renewed a 10-year PPA with
Codelco. We believe that this technology has great potential to
support the mining industry in Chile.
The Path Forward for Innergex
With abundant opportunities in our existing target markets,
Innergex’s main focus in the coming years is on greenfield
development. Our development teams are hard at work to
enhance our development portfolio with competitive projects
and submit additional projects into upcoming RFPs.
Our large and diversified portfolio of prospective projects
continues to grow, reaching over 10 GW at the end of 2023,
16% higher than last year. With some of these projects at an
advanced stage, we are confident in our ability to deliver
sustainable growth.
To finance this growth, we have executed several funding
initiatives to increase liquidity and reduce financial risk. These
include the refinancing of a portfolio of unlevered Canadian
hydroelectric facilities to match their long-term PPA duration.
By strategically leveraging debt instruments and partnerships,
we also unlocked resources that are instrumental to propelling
our long-term strategic vision without compromising
our financial stability.
Our ability to finance our growth will further be supported by
the update to our capital allocation strategy. This action will free
up incremental capital that will serve to accelerate Innergex’s
growth profile on a self-funded basis. We will propose value-
added renewable energy projects in upcoming RFPs from
traditional utilities or corporate customers. We are confident that
recent project selections in Quebec and our progress made in
other markets are just the beginning of a strong growth path
ahead. We believe that our organic growth strategy will allow us
to deliver attractive and sustainable returns to our shareholders
over the long-term.
Looking ahead, the Innergex team remains focused steadfastly
on driving innovation, exploring new avenues for renewable
energy projects, and leveraging strategic partnerships to unlock
growth opportunities. We are committed to further enhancing
operational efficiency and profitability, embracing technological
advancements, and nurturing our culture of partnerships that
positions us at the forefront of the renewable energy industry.
Your confidence in Innergex empowers us to continue our pursuit
of excellence, sustainability and value creation.
Lastly, Innergex was honoured to be named Canada’s Best
Corporate Citizen by Corporate Knights magazine this year. The
Corporation’s commitment to sustainability is a driving force
in everything that we do. Together, we will continue on the road
ahead, steering Innergex toward a future where sustainability
and profitability coexist harmoniously.
Thank you for working with us to build a better world.
Daniel Lafrance
Chair of the Board of Directors
Michel Letellier
President and Chief
Executive Officer
10
2023 Annual Report Our 2023
Corporate
Achievements
Organic
Growth
From groundbreaking
advancements to new
collaborations, this year’s
journey radiates positive energy,
showcasing our unwavering
dedication, resilience, and
passion towards the clean energy
transition. Take a closer look
at the milestones that have
defined our year – whether the
progress achieved through our
construction activities, the
execution of significant funding
initiatives to accelerate our
growth, or the recognition of our
relentless pursuit of excellence
in sustainability.
• Innergex and MMBC’s joint 102 MW wind project was selected
in the request for proposals by Hydro-Québec and a 30-year
PPA was signed, demonstrating Innergex’s ability to grow in its
core markets.
• Commissioned the Salvador battery energy storage project
in Chile on time and on budget, adding a complementary
technology to Innergex’ Chilean asset base.
• Innavik, owned in partnership, started delivering power to the
Inukjuak residents, adding a key hydro project to our portfolio.
M&A
Activity
• Acquired 60 MW solar portfolio in Ontario, providing added
electricity production capacity in the province.
• Disposed of approximately 17 MW of non-core solar facilities,
streamlining our portfolio.
Financing
Initiatives
• Financial close of the San Andrés battery energy storage
project in Chile, positioning Innergex to become a leading
battery storage asset owner and operator in the country and
providing further portfolio diversification benefits.
• Construction financial and tax equity commitment close for
the large-scale Boswell Springs wind project in Wyoming,
supporting continued execution on the Corporation’s organic
growth strategy in the United States.
• Financed three hydro assets, unlocking value from unlevered
assets and providing a new internal funding lever.
• Divested a 30% minority interest in our French portfolio,
crystalizing value for shareholders and providing solid validation
for our growth strategy in the country.
Partnerships
& Other
• Executed on a partnership with Crédit Agricole Assurances,
welcoming a long-term strategic partner and enabling the
acceleration of our growth in France.
• Submitted two wind projects in Hydro-Québec's latest
RFP. The Manicouagan project is a partnership led by
the Innu Council of Pessamit with Innergex and the RCM of
Manicouagan. The MRC de Lotbinière project is a partnership
between Innergex, the RCM and the Abenaki Councils of
Odanak and Wôlinak.
• Innergex named Canada’s Best Corporate Citizen,
demonstrating our commitment to pursuing excellence
in sustainability.
11
2023 Annual Report Corporate Governance
Board of Directors
Innergex thrives under the
guidance of a Board of Directors
responsible for the stewardship
of the Corporation. Its mandate
is to oversee the management
of the business and affairs of
Innergex while championing the
highest sustainability standards
and shareholders’ best interests.
Members of the Board are
elected at each Annual General
Meeting of Shareholders.
Marc-André Aubé
Independent
Joined: December 2023
Pierre G. Brodeur
Independent
Joined: May 2020
Radha D. Curpen
Independent
Joined: December 2022
Daniel Lafrance
Independent Chair of the Board
Joined: March 2010
Nathalie Francisci
Independent
Joined: May 2017
Richard Gagnon
Independent
Joined: May 2017
Michel Letellier
Non-Independent
Joined: October 2002
Executive Management
Monique Mercier
Independent
Joined: October 2015
Ouma Sananikone
Independent
Joined: February 2019
Louis Veci
Non-Independent
Joined: February 2020
Michel Letellier
President and Chief Exe-
cutive 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
Patrick Beaudoin
Vice President - Asset
Optimization and
Procurement
Joined: 2018
Alex Couture
Senior Vice-President –
Development
North America
Joined: 2022
Jacques Desrochers
Vice President -
Information and Operational
Technologies
Joined: 2023
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
Chantal Lussier
Vice President – Taxation
Joined: 2004
Niko Nikolaidis
Vice President - Investments
and Financing
Joined: 2017
Jaime Pino
Vice President and
Managing Director - Chile
Joined: 2021
Julie Turgeon
Vice President -
Construction
Joined: 2023
12
2023 Annual Report Awards, Recognition
and Commitments
Awards
Recognition
Commitments
Innergex received four awards in 2023
related to the US$803.1 million portfolio
refinancing in Chile, which includes the
largest project bond ever issued by a Latin
American renewable energy company in
the U.S. private placement market (USPP).
1
2
3
4
Americas Power Deal of the
Year (PFI Award) by Refinitiv
Proximo Latin America Bond
Award by Proximo Infra
Latin America Portfolio
Refinance Deal of the Year
Award by IJGlobal
Bond of the Year Award by
LatinFinance
Innergex named #1
Best Corporate
Citizen in Canada by
Corporate Knights
Top-ranked in Corporate Knights
magazine’s 2023 Best 50 Corporate
Citizens in Canada, an annual
ranking of corporate sustainability
performance recognizing
corporations that conduct a more
humane form of capitalism,
prioritizing people and planet,
and transforming business into
a force for good.
Bronze Parity certification
by Women in Governance
The Bronze Parity Certification
recognizes Innergex's efforts
in advancing women’s careers
and closing the gender gap in
the corporate environment.
Signatory to the Equal
by 30 Campaign
Since 2019, Innergex has been
actively working towards equal
pay, equal leadership, and equal
opportunities for women in the clean
energy sector by 2030 through this
joint Clean Energy Ministerial (CEM)
and International Energy Agency
(IEA) initiative.
Signatory to the Action
Declaration on Climate
Policy Engagement
Innergex, long a leader in working
with policymakers on climate
change reduction strategies and
goals, committed to align its climate
policy activities in accordance with
the Paris Agreement, lending its
voice and leadership to a strategy to
close the say–do gap on countries’
emission reductions.
Signatory to the Solar
Industry Forced Labor
Prevention Pledge
Innergex is committed to
helping ensure that the solar supply
chain is free of forced labour by
supporting the development of an
industry-led solar supply chain
traceability protocol.
ESG Ratings
ISS ESG
TOP A+ | BOTTOM D-
MSCI ESG Ratings
TOP AAA | BOTTOM CCC
B
AA - Leader
Sustainalytics ESG Risk Rating
TOP 0 | BOTTOM 100
18.2 “Low Risk”
CDP Climate
TOP A | BOTTOM F
D
13
2023 Annual Report Changing the World
by Taking Care of the World
People
A culture built on relationships
Innergex works hard to create and maintain a culture
that lives up to its employees’ expectations. Our goal
is to ensure our team members feel valued, trusted,
and encouraged to develop both professionally and
personally. By focusing on transparency, fairness, and
accountability, we are proud to offer a workplace where
employees feel seen and heard, can be proud of the
work we do, and are excited to work together.
Promoting health and wellness plays a
critical role at Innergex. The physical and
mental health of our team members is not
only an expectation, but is essential to our
continued success. Our comprehensive
suite of programs and initiatives ensures
a safe and secure working environment
for all employees and offers the support
they need at work and at home to
continue to thrive.
Our team will continue to generate
innovative solutions to address
the challenges ahead. Innergex is
committed to supporting our employees’
career development, driving opportunities,
improving our diversity and inclusiveness,
and generating the prosperity that will
encourage the talent of tomorrow to
follow their passion. Sustainable energy is
nothing without sustainable relationships.
As opportunities in the renewable energy
sector rapidly expand, the need to attract
and retain a skilled team is increasingly
important at Innergex. In 2022, we
implemented a new career architecture to
address this need in a highly competitive
talent market. This framework provides
an essential foundation to manage jobs,
roles, competencies, and careers across
our organization. We will continue to
provide our employees with the tools
they need to succeed, including: a safe,
inclusive, and equitable workplace;
a flexible work/life balance; fair
compensation; generous benefits;
career development opportunities;
and other perks.
Innergex champions diversity and
inclusion at every level. This commitment
enables us to be a stronger and healthier
entity, and better positioned to fulfill our
Mission. A more inclusive and diversified
workforce leads to improved synergies,
a stronger team, and better decision
making, all of which position Innergex
for more success.
1 For Canadian and US employees. Employees in France and Chile
are covered by different retirement systems.
Innergex’s approach to
employee satisfaction
– Diversity & Inclusion
– Career development
policy
– Health & Safety policy
– Whistle-Blowing policy
– Workplace Environment
Free of Harassment,
Violence and
Bullying policy
– UNSDG alignment
– Employee Share
Purchase Plan
– Retirement plan
matching contributions
– Telework policy
– Equal remuneration
– Advancing gender
equality
opportunities
– Paid sick leave
– Parental leave
supplemental allowance
– Employee Volunteer
program
– Employee electric
vehicle incentive
program
– Employee recognition
program
– Social events
– Summer hours program
– Scholarship program for
employee dependants
30%
$1.8 M1
Percentage of
women employees
in 2023.
Innergex
contributions to
employee pension
plans in 2023.
The total value of the employee
retirement plans as at December 31,
2023 was $23.6 million in Canada and
US$1.7 million in the United States
14
2023 Annual Report Planet
A culture built on sustainable practices
Innergex believes that the transition from fossil fuels
to clean, renewable energy is the key to winning the
fight against climate change. We have demonstrated
for over 30 years that we know how to develop, build
and operate renewable energy facilities and that we
can play an important role in this transition.
As a pure play renewable energy
company, the clean energy we produce
ensures we have extremely low GHG
emissions compared to non-renewable
generation sources. In fact, we help
offset carbon emissions by replacing
other fossil fuel sources.
Advancing our battery storage expertise
and capabilities will allow energy from
renewables, like solar and wind, to be
stored and released when needed. Battery
storage also increases grid flexibility due
to its ability to charge quickly, store, and
provide electricity when it is most needed.
Moreover, battery storage solutions, when
positioned strategically on a grid, can
materially reduce the investment required
by grid operators for network upgrades.
Innergex continues to strengthen
its commitment to addressing the
environmental challenges that lie ahead.
While we have identified and assessed
the climate-related risks and opportunities
through a comprehensive scenario
analysis, we will continue to develop
our internal processes and strategies
to mitigate those risks and seize
those opportunities.
We are proud to align our disclosures with
several globally recognized frameworks
including the United Nations Sustainable
Development Goals (UNSDG), the Task
Force on Climate-related Disclosures
(TCFD), the Carbon Disclosure Project
(CDP), and the Sustainable Accounting
Standards Board (SASB).
We will continue to monitor global
developments in reporting frameworks
and regimes to ensure we remain at the
forefront of emerging regulatory changes.
Innergex remains committed to producing
100% of its energy from renewable sources
including water, wind, and solar, and
delivering the solutions to meet our
commitment of reaching Net Zero by 2050.
We are clean energy produced cleanly.
Innergex’s approach to
environmental management
– TCFD aligned Climate
Assessment Report
– CDP Climate
submissions
– SASB alignment
– UNSDG alignment
– Sustainable
Development policy
– 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
Environmental
expenditures
in 2023.
More than
$1.8 M
Total production
of clean electricity.
11,161 GWh
15
2023 Annual Report Prosperity
A culture built on
sharing prosperity
Thriving communities are critical to ensuring
both the support and skills needed for a clean
energy transition. Making a positive social impact
is a central part of our strategy. We strive to be
a trusted renewable energy partner to help build
the resilient communities of tomorrow.
We believe the success of renewable
energy projects should extend beyond
the clean electricity they generate
by enriching local communities with
employment opportunities, social
benefits, and a source of tax revenues,
all while contributing to the clean
energy transition. Our strategy is
designed to support the long-term health
of communities by working with them
to understand their individual needs
and finding solutions that meet
their expectations.
Innergex was one of the first independent
power producers in Canada to develop
long-term partnerships with Indigenous
communities, which have long played an
integral role in our success. Our approach
to reconciliation with Indigenous
communities has always been centered on
respect and understanding. It is important
that we work hard to ensure our activities
with our Indigenous partners, their land,
and the resources they share, follow the
principles contained within the United
Nations Declaration on the Rights of
Indigenous Peoples.
Generating sustainable, long-term value
for our shareholders not only ensures the
viability of our continued success, but
confirms the belief that our strategy of
growing a diversified and strong portfolio
of renewable energy assets in markets
across the globe is the right one.
Our sponsorships and donations
program furthers our positive social
impact by supporting initiatives and
groups that promote:
– Environment and Sustainability
– Community and Culture
– Health and Research
– Sports and Recreation
– Education and Engagement
Innergex’s approach to
social well-being
– Safeguard and
Promotion of Human
Rights policy
– Supplier Code of
Conduct
– UNSDG alignment
– Indigenous partnerships
– Community
engagement
– Sponsorship and
Donation program
– Community social
development funding
– Community
partnerships
– Generating shareholder
value
– Legacy project funding
– Local contracting
opportunities
– Contributing to local
tax base
– Royalty agreements
– Employee Matching
Donation program
More than
$4 M
29
Amount
shared through
sponsorships,
donations
and voluntary
contributions.
Number of agree-
ments signed
with Indigenous
communities.
16
2023 Annual Report Governance
A culture built on
exemplary leadership
Innergex’s governance ensures that our policies
and procedures operate fairly, transparently, and in
the best interests of our employees, shareholders,
partners, and the communities in which we conduct
operations. The leadership of the Board of Directors
not only inspires and motivates our daily activities,
but guides our path toward common goals and
our Mission of building a better world with
renewable energy.
Board members are recognized
for their skills built through decades
of experience, their commitment to
improving our environmental, social and
governance initiatives and reporting,
and their diversity that brings a host
of differing viewpoints and solutions to
the challenges that lie ahead.
The Board’s ESG oversight, managed
through the Corporate Governance
Committee, includes reviewing and
assessing material climate-related
physical and transitional risks which may
adversely affect Innergex, its activities,
financial condition, or reputation. The
Committee ensures that Innergex has
implemented systems to effectively
identify, manage, and monitor those
risks and to mitigate or reduce their
potential negative impacts. It receives
regular updates on ESG matters from
management and key ESG leads in order
to develop its strategy.
The Corporate Governance Committee is
tasked with managing the health, safety,
and environmental risk management
processes (including the emergency
response and crisis management plans),
current management systems to provide
safe working conditions and minimize
the impact of its operations on the
environment, and our ESG strategy,
performance, and reporting.
The 17 policies that guide our daily
activities ensure the sustainable growth
of the Corporation. These policies
outline our environmental, social and
governance priorities and responsibilities;
our commitment to the highest standards
of ethical operations and transparency;
avenues for employees to feel safe,
grow their careers, and share their
concerns; and address the expectations
of shareholders, communities, and
the public.
Innergex’s approach to
corporate governance
– Anti-Corruption and
Anti-Bribery policy
– Board Diversity policy
– Code of Conduct and
EthicsLine
– Information Disclosure
policy
– Insider Trading policy
– Majority Vote policy
– Safeguard and
Promotion of Human
Rights policy
– Say on Pay policy
– Shareholder
Engagement policy
– Whistle-Blowing policy
– UNSDG alignment
– ESG oversight
– Board and committee
succession planning
– CEO Succession
planning
– Board member
recruitment and
onboarding process
– Share ownership
guidelines for Board
members and
executives
– Yearly Board training
99%
40%
Combined
attendance
at board and
committee
meetings.
Percentage
of women
on the board.
17
2023 Annual Report Our Corporate Strategy
Responsible growth that balances
People, our Planet and Prosperity
Innergex develops, acquires,
owns, and operates renewable
power-generating facilities
including hydroelectric, wind,
and solar generation as well as
energy storage technologies.
Our fundamental goal is to create
wealth by efficiently managing
our high-quality renewable
energy and storage assets
and successfully pursuing
our sustainble growth strategy.
Innergex is committed to producing
energy exclusively from sustainable
renewable sources and to providing
energy storage solutions, guided by our
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 owns interests in over 4,000 MW
of renewable energy capacity, with
facilities in Canada, the United States,
France and Chile. The expertise and
innovation developed by our skilled team
in various energies and different locations
can be leveraged and shared across the
Corporation to optimize returns from our
high-quality assets. Our approach to
building shareholder value is to generate
sustainable and growing cash flow per
share and provide an attractive risk-
adjusted return on invested capital.
18
2023 Annual Report Progressing on our Strategic Plan
The transition to a carbon-neutral
economy will be led by the renewable
energy sector. Innergex is well-positioned
to continue our strategic growth and
contribute to climate protection by further
optimizing and growing our portfolio of
renewable energy facilities. To do so,
we have set four strategic goals.
Grow Responsibly
Focus growth on current markets.
Since 2020, 18 facilities totalling 738 MW
of renewable energy and 259 MWh of
storage capacity were added to our
operating fleet, representing an increase
of 21%. In 2023 alone, we acquired three
solar assets in Ontario and commissioned
our largest storage facility to date located
in Northern Chile.
Build Expertise
Become an expert in deploying energy
storage technologies.
Innergex has made progress in recent
years to develop a strong storage
portfolio. An in-house team dedicated to
electricity storage was put in place in 2021,
and since then two storage facilities were
commissioned, while 6 projects with a
storage component are at various stages
of development totaling 1,545 MWh
of storage capacity.
Optimize Operations
Leverage expertise and innovation
to maximize returns from its
high-quality assets.
Through performance analysis, our
team was able to optimize the energy
production at all facilities and identify
solutions to maximize the resources
available at all times. Our balanced
approach between self-operating our
facilities and entrusting O&M to a third
party allows us to optimize our practices
and challenge our suppliers to operate
our facilities efficiently.
Diversify Activities
Increase diversification of the
Corporation’s activities and assets.
Since 2020, we further diversified
our revenue sources across regions,
technologies, customers and contracted
profiles. We added more wind, hydro,
solar and/or storage facilities across
all our markets via strategic acquisitions
or greenfield development. Meanwhile,
several long-term PPAs signed or
renewed helped maintain a highly
contracted profile at 87% with an average
remaining contract duration of 12.2 years1,
ensuring strong long-duration cash
flows and continuing inflation-protected
revenue streams.
The Corporation relies on its experience to
pursue the development of new projects.
It adopts and masters new technologies,
mainly energy storage, expands its
customer base beyond traditional utilities
and deploys new business models through
which it offers more value for the
electrons produced or stored.
At Innergex we have a solid track record,
with decades of producing renewable
energy from high-quality assets. Our
existing renewable energy facilities are
operated by our dedicated team of
skilled professionals who continuously
optimize operations and provide timely
maintenance. As interest in the
development of renewable energy soars,
Innergex will always remain committed
to the approach that has long delivered
responsible and accretive growth.
Our belief in nurturing and maintaining
relationships to develop long-term
partnerships with Indigenous and local
communities and other stakeholders
has enabled us to develop unique,
value-creating renewable projects.
1 Remaining weighted average life of Power Purchase
Agreements, excluding projects under construction and in
development, before consideration of renewal options.
19
2023 Annual Report Portfolio of Assets
Innergex owns interests in three
groups of projects at various
stages: Operating Facilities,
Development Projects and
Prospective Projects.
As at February 21, 2024, Innergex owns
and operates 87 facilities in commercial
operation (the “Operating Facilities”).
Commissioned between 1986 and
October 2023, the facilities have a
weighted average age of approximately
10.6 years.
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).
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 merchant market. The PPAs
have a weighted average remaining life of
12.2 years (weighted average based on
gross long-term average production).
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.
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, as well as adjustments based on
the consumer price index to mitigate
inflation risk. For most Operating Facilities
The Corporation also holds interests
in projects under development that
are either at an advanced development
stage or under construction (the
“Development Projects”).
20
2023 Annual Report The table below outlines Operating Facilities and Development Projects as at February 21, 2024.
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
34
3
4
41
8
16
8
3
35
4
2
3
9
1
1
2
87
—
—
2
2
1
3
1
—
5
—
2
—
2
—
1
1
10
1,027
70
170
1,267
908
324
714
332
2,278
87
450
153
689
—
—
—
—
—
112
112
102
52
330
—
484
—
230
—
230
—
—
—
717
40
166
923
714
227
714
332
1,987
87
450
153
690
—
—
—
—
—
85
85
51
32
330
—
413
—
230
—
230
—
—
—
4,234
826
3,600
728
—
—
—
—
—
—
—
—
—
—
—
1504
150
9
2507
259
409
—
—
—
—
—
—
—
—
—
—
1205
—
120
—
1756
175
295
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 energy storage capacity related to Hale Kuawehi (30 MW/120 MWh (4 hours)) solar project.
6 San Andrés battery energy storage capacity of 35 MW/175 MWh (5 hours).
7 Salvador battery energy storage capacity of 50 MW/250 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.
21
2023 Annual Report 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.
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.
Mesgi’g Ugju’s’n
Harrison Hydro Limited
Partnership and its
subsidiaries
Douglas Creek, Fire Creek,
Lamont Creek, Stokke Creek,
Tipella Creek and Upper
Stave River
Kwoiek Creek Resources
Limited Partnership
Kwoiek Creek
Innergex HQI USA LLC,
and its subsidiaries
Curtis Mills, Palmer Falls
Innergex Sainte-
Marguerite S.E.C
SM-1
Cayoose Creek Power
Limited Partnership
Walden North
Energía Coyanco S.A.
Guayacán
150
150
50
60
31
16
12
75
75
25
30
15
8
Wind
Quebec
50.00%1,2,3
Hydro
British
Columbia
Hydro
British
Columbia
50.01%
50.00%1,3
Hydro
New York
50.00%3
Hydro
Quebec
50.01%
Hydro
British
Columbia
8.3
Hydro
Chile
49.00%
69.47%
Innergex France S.A.S.
and its subsidiaries
17 facilities
324
227
Wind
and
storage
France
70.00%
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 61.3% in 2023 (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.
22
2023 Annual Report 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.
Operating
Facilities
Gross
Installed
Capacity
(MW)
Net
Installed
Capacity
(MW)
Sources
of
Energy
Principal
Place of
Operation
Proportion of
Ownership Interest
and Voting Rights
Held by the
Corporation
Toba Montrose General
Partnership
East Toba and Montrose
Creek
Dokie General
Partnership
Jimmie Creek Limited
Partnership
Parc éolien
communautaire Viger-
Denonville, S.E.C.
Dokie
Jimmie Creek
Viger-Denonville
Umbata Falls L.P.
Umbata Falls
Innavik Hydro
Limited Partnership
Innavik
235
144
62
25
23
8
94
37
32
12
11
4
Hydro
Wind
Hydro
British
Columbia
British
Columbia
British
Columbia
40.00%1,2
25.50%
50.99%2
Wind
Quebec
50.00%
Hydro
Ontario
49.00%
Hydro
Quebec
50.00%
1 The Corporation holds a 51% voting interest and 40% participating economic interest. In 2046, the Corporation’s economic interest will increase to 51% for no additional consideration.
2 The Corporation does not consolidate the entity as it does not have control over the decision-making process.
23
2023 Annual Report Management’s
Discussion
and Analysis
24
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 months and year ended
December 31, 2023, and reflects all material events up to February 21, 2024, the date on which this MD&A was approved by
the Corporation's Board of Directors.
The MD&A should be read in conjunction with the audited consolidated financial statements and the accompanying notes for
the year ended December 31, 2023.
The audited consolidated financial statements attached to this MD&A and the accompanying notes for the year ended
December 31, 2023, along with the 2022 comparative figures, have been prepared in accordance with IFRS Accounting
Standards as issued by the International Accounting Standards Board (IASB). 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 sedarplus.ca 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 2023 - Growth Initiatives .................
Financial Year 2023 - Selected Information ............
Financial Year 2023 - Operating Performance .......
Financial Year 2023- Capital and Resources ..........
Subsequent Events .....................................................
Financial Year 2022 ....................................................
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 .......................................................
26
26
28
29
30
30
31
32
32
35
36
36
37
38
39
40
41
42
43
44
45
46
Capital Structure ........................................................
Tax Equity Financing .................................................
Financial Position .......................................................
Contingencies .............................................................
Cash Flows .................................................................
Free Cash Flow and Payout Ratio ..........................
Information on Capital Stock ....................................
Dividends .....................................................................
5- Outlook ............................................................................
2024 Growth Targets .................................................
6- Non-IFRS Measures .....................................................
7- Additional Consolidated Information ...........................
Geographic Segments- Revenues ..........................
Geographic Segments- Non-current Assets ..........
Historical Quarterly Financial Information ..............
February 2021 Texas Events ..................................
8- Accounting Policies and Internal Controls .................
Material Accounting Policies ....................................
Internal Controls .........................................................
Entities excluded from the Corporation's control
policies and procedures ............................................
9- Risk and Uncertainties ..................................................
10- Forward-Looking Information ....................................
46
47
48
51
51
53
56
56
57
57
58
63
63
63
63
64
70
70
72
72
73
85
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p25
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2023 – Growth Initiatives
On January 18, 2023, Innergex reached another milestone in the development of its 330 MW Boswell Springs wind project.
The conditions precedent to the thirty-year power purchase agreement with PacifiCorp were met.
On March 9, 2023, Innergex announced the closing of the acquisition of a 60 MW solar portfolio, consisting of three operating
facilities in Sault Ste. Marie, Ontario, for a purchase price of $51.3 million, along with the assumption of $164.3 million of
existing debt.
On March 15, 2023, Innergex and Mi'gmawei Mawiomi Business Corporation ("MMBC") announced that their 102 MW Mesgi’g
Ugju’s’n 2 ("MU2") wind project had been selected in Hydro-Québec’s Request for Proposals. The project is a 50-50
partnership with MMBC, an organization representing the three Mi'gmaq communities in Quebec.
On April 1, 2023, the battery energy storage system supply agreements for the Paeahu, Kahana and Barbers Point Hawaiian
solar energy and battery storage projects were terminated, while remaining in effect for the Hale Kuawehi project. As part of
the settlement, Innergex received a payment totalling US$13.3 million ($18.2 million) in the second quarter of 2023.
On April 12, 2023, the Corporation increased its existing letter of credit facility guaranteed by Export Development Canada up
to an amount of $200.0 million, an increase of $50.0 million from 2022, offering the Corporation greater flexibility to support its
development activities.
On April 19, 2023, Innergex disposed of the Kahana solar energy and battery storage project for a nominal amount, thereby
recouping its investment and potentially earning contingent payments should the project reach certain milestones in the future.
On April 21, 2023, Innergex entered into a US$49.5 million ($66.7 million) 2-year non-recourse construction bridge loan with
SMBC for the San Andrés battery energy storage project in Chile. This construction loan is expected to be repaid with the
proceeds from a future long-term non-recourse financing after the facility reaches commercial operation. The remaining
US$12.4 million ($16.7 million) that makes up the total construction costs of the facility will be financed from Innergex's
revolving credit facilities.
On May 31, 2023, Innergex entered into a 30-year "take-or-pay" power purchase agreement partially indexed to 30% inflation
with Hydro-Québec for the electricity to be produced by the MU2 wind project.
On July 14, 2023, the Corporation closed the construction financing of the Boswell Springs wind project totalling
US$533.6 million ($703.8 million) bearing interest at 1-month SOFR + 1% maturing in 2025, to be repaid by a a US$203.3
million ($268.1 million) 10-year non-recourse loan bearing interest at SOFR 180 days + 1.375% and by the proceeds from the
tax equity financing.
On July 17, 2023, the Corporation concluded three forward-starting interest rate swaps to hedge a US$152.5 million ($201.9
million) portion of the construction financing of the Boswell Springs wind project that is subject to variable interest rates.
On July 17, 2023, the Corporation disposed of the 6 MW Kokomo and 10.5 MW Spartan solar facilities for a nominal amount.
No significant income or expense were recognized pursuant to these transactions.
On August 7, 2023, the Corporation entered into an agreement to form a long-term partnership with Crédit Agricole
Assurances, in collaboration with Crédit Agricole Centre-Est, for a 30% non-controlling interest in Innergex's portfolio in
France. The transaction was completed on October 26, 2023, for total proceeds of €129.5 million ($187.7 million) investment,
which were used to reduce Innergex's revolving credit facilities and to fund the Corporation's development activities over the
coming years.
On October 19, 2023, the Corporation has closed a US$322.7 million ($441.6 million) tax equity commitment for the Boswell
Springs wind project. The proceeds will be received at substantial completion of the construction of the project and used to
repay the tax equity bridge loan previously concluded.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p26
(in thousands of Canadian dollars, except as noted and amounts per share)
On October 30, 2023, the Corporation announced that its 50 MW/250 MWh (5 hours) Salvador battery energy storage facility
located on the site of its existing Salvador solar facility in Chile began operations and is injecting energy to the grid. The facility
should start receiving capacity payments shortly. The facility is expected to generate annual revenues of approximately
US$8.2 million (CAN$11.4 million) in its first full year of operation, including the capacity payment, while operating, general and
administrative expenses are expected to reach US$0.9 million (CAN$1.2 million) during the same period.
On October 30, 2023, Innergex began supplying the residents of the village of Inukjuak with hydroelectricity. Construction of
the Innavik run-of-river Hydroelectric facility in the Nunavik community of Inukjuak is now completed and conversion of the
residences is currently being finalized. The facility will replace reliance on diesel fuel for almost all of the energy needs of
Inukjuak, in Quebec's Far North. The project stems from the community’s willingness to reduce greenhouse gas emissions and
is expected to have significant social and economic impacts for the 1,800 inhabitants of Inukjuak, Nunavik’s second most
populous community.
On November 14, 2023, the Corporation has closed a $185.5 million non-recourse project financing, including $179.9 million in
term loans at an effective interest rate of 6.14%, and a $5.5 million reserve facility, both with The Canada Life Assurance
Company, to finance a portfolio of unlevered Canadian hydroelectric facilities in operations comprising the Gilles-Lefrançois,
Miller Creek and Rutherford Creek facilities. The term loan facility is set to mature in two tranches, in 2038 and 2043,
respectively, corresponding to the remaining duration of the facilities’ power purchase agreements. The proceeds were used
mainly to repay the corporate revolving credit facility, thereby reducing the corporate leverage.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p27
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2023 – Selected Information
OPERATING RESULTS
Production (MWh)
Revenues and Production Tax Credits
Operating Income
Adjusted EBITDA1
Net Loss
Adjusted Net Loss1
PROPORTIONATE
Production Proportionate (MWh)1
Revenues and Production Tax Credits
Proportionate1
Adjusted EBITDA Proportionate1
COMMON SHARES
Dividends declared on Common Shares
Dividends declared on Series A Preferred
Shares
Dividends declared on Series C Preferred
Shares
Weighted Average Number of Common Shares
(in 000s)
Year ended December 31
2023
2022
2021
February 2021
Texas Events3
(9 days)
2021
Normalized
10,621,478
10,254,005
9,055,215
—
9,055,215
1,041,574
219,575
687,743
(105,814)
(2,052)
935,223
263,366
612,165
(91,115)
(32,503)
795,192
280,995
499,963
(185,394)
(6,951)
(54,967)
(54,967)
15,789
64,219
—
740,225
226,028
515,752
(121,175)
(6,951)
11,160,580
10,792,064
9,853,366
—
9,853,366
1,102,655
735,261
995,758
658,883
913,147
469,655
(95,273)
79,986
817,874
549,641
147,058
146,957
132,229
2,757
2,875
2,757
2,757
2,875
2,875
203,565
201,836
180,857
—
—
—
—
132,229
2,757
2,875
180,857
CASH FLOW AND PAYOUT RATIO
Cash Flow From Operating Activities2
Free Cash Flow1,2
Payout Ratio1,2
FINANCIAL POSITION
Total Assets
Total Liabilities
Equity Attributable to Owners
Non-Controlling Interests
Year ended December 31
2023
2022
2021
February 2021
Texas Events
(9 days)3
2021
Normalized
297,853
214,930
430,243
171,988
265,498
119,682
17,093
15,789
282,591
135,471
68 %
85 %
110 %
— %
98 %
As at
December 31,
2023
8,939,826
7,734,498
1,086,883
118,445
December 31,
2022
8,602,427
7,116,000
1,316,195
170,232
December 31,
2021
7,396,068
6,035,388
1,093,112
267,568
1.
2.
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 Section 6-
NON-IFRS MEASURES of this MD&A for more information.
For more information on the calculation and explanation, please refer to Section 4- CAPITAL AND LIQUIDITY | Free Cash Flow and Payout Ratio of this
MD&A.
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.
2023 Annual Report
Management's Discussion and Analysis p28
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2023 – Operating Performance
In 2023, the Corporation closed the acquisition of the Sault Ste. Marie solar portfolio in Ontario. It also achieved the
commissioning of its Salvador battery energy storage facility. The Innavik hydro facility has also been supplying power to the
residents of the Inukjuak village in Nunavik since Q4 2023. Innergex’s projects under construction are advancing well. The San
Andrés battery energy storage project represents a second investment in energy storage technology in Chile, further
supporting the Corporation's portfolio strategy in the country. Following financial close on Boswell Springs, the project
construction continues and remains on budget and on schedule. The amendment to the power purchase agreement ("PPA") to
increase the selling prices by 56% for the Hale Kuawehi solar and battery storage project was approved by the Public Utilities
Commission in Hawaii and construction activities are ongoing. The Lazenay wind project in France has also initiated the
construction work. The Corporation also made significant advancements with its projects under development, including signing
a 30-year PPA for the Mesg'ig Ugju's'n 2 ("MU2") wind project in Quebec, Canada, owned in a 50-50 partnership, and
successfully replaced its PPA for the Auxy Bois Régnier wind project in France at more favourable pricing conditions in July
2023.
For the year ended December 31, 2023, Revenues and Production Tax Credits were up 11% to $1,041.6 million compared with
the same period last year. The increase is mainly explained by the Aela and Sault Ste. Marie acquisitions, the higher
production at the Curtis Palmer hydro facilities in the United States and increased wind regime and revenues from new PPAs
in place at facilities in France. The increase is partly offset by lower wind regimes at the Quebec facilities, lower spot prices at
the Chilean hydro facilities and unfavourable pricing and lower production at the Griffin Trail wind facility. Revenues and
Production Tax Credits Proportionate1 were up 11% at $1,102.7 million compared with the same period last year.
For the year ended December 31, 2023, Operating, general, administrative and prospective projects expenses were up 15% to
$329.2 million compared with the same period last year. The higher expenses are mainly explained by the Aela and Sault Ste.
Marie acquisitions, the impact of the 2022 Supplementary Budget Act in France on French facilities, extraordinary maintenance
expenses at several wind facilities in Quebec, and higher operating costs in the United States.
The decrease in realized loss on the power hedges is mainly related to the decrease in merchant power prices for the power
hedge at the Phoebe solar facility in Texas.
As a result of the factors explained above, Adjusted EBITDA1 was 12% higher at $687.7 million for the year ended
December 31, 2023, and Adjusted EBITDA Proportionate1 was 12% higher at $735.3 million, compared with the same period
last year.
Innergex recorded a net loss of $105.8 million ($0.51 net loss per share, on a basic and diluted basis) for the year ended
December 31, 2023, compared with a net loss of $91.1 million ($0.43 net loss per share - basic and diluted) for the
corresponding period in 2022. The increase in net loss is largely explained by the impairment charges recognized on the Hale
Kuawehi and Hillcrest facilities, an unfavourable change in fair value of the contingent consideration provision included in the
Curtis Palmer purchase price, an increase in finance costs mainly related to the refinancing of the non-recourse debt in Chile
in Q3 2022 following the Aela Acquisition, and an increase in depreciation and amortization mainly attributable to the Aela and
Sault Ste. Marie acquisitions. These items were partly offset by a favourable shift in the merchant power curves for the Phoebe
power hedge and an increase in income tax recovery.
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
Section 6- NON-IFRS MEASURES of this MD&A for more information.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p29
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2023 – Capital and Resources
The increase in total assets compared with December 31, 2022, results largely from the Sault Ste. Marie Acquisition, the
construction activities on Hale Kuawehi, Boswell Springs, and Salvador and San Andrés battery energy storage projects, from
an increase in accounts receivable mainly due to the higher revenues from higher production from the hydroelectric facilities.
These items were partly offset by depreciation and amortization, by the safe harbor solar modules classified as held for sale in
2022 and sold during Q1 2023, and by the disposition of the Kokomo and Spartan solar facilities.
The increase in total liabilities compared with December 31, 2022, results largely from the increase in long-term loans and
borrowings stemming from the net draws made toward the construction of the Boswell Springs, Salvador and San Andrés
battery energy storage projects and the Hale Kuawehi solar project, and the Sault Ste. Marie Acquisition. The increase in total
liabilities is also explained by the increase in fair value of the contingent consideration provision included in the Curtis Palmer
purchase price. These items were partly offset by the scheduled principal repayments of long-term loans and borrowings.
The decrease in shareholders' equity compared with December 31, 2022, results largely from the dividends declared on
common and preferred shares, by the total comprehensive loss, and by the distributions to non-controlling interests, partly
offset by the proceeds from the disposition of a non-controlling interest in Innergex's portfolio in France.
The decrease in cash flows from operating activities before changes in non-cash operating working capital items for the year
ended December 31, 2023, is mainly due the realized gain on the settlement, in 2022, of the interest rate swaps as part of
Innergex's Chilean refinancing, and the foreign exchange forward contracts concurrent with the French Acquisition, as well as
by the increase in finance costs paid, stemming mainly from the Chile Green Bonds and the Sault Ste. Marie Acquisition. The
decrease was partly offset by the respective operating performance of the hydroelectric, wind and solar segments previously
discussed, including the respective contribution of the Aela and Sault Ste. Marie acquisitions. In addition, for the year ended
December 31, 2023, Free Cash Flow1 was favourably impacted by a gain realized upon disposition of a 30% non-controlling
interest in Innergex's portfolio in France, by the Aela and Sault Ste. Marie acquisitions, and the higher production at the Curtis
Palmer hydro facilities in the United States and increased wind regime and revenues from new PPAs in place at facilities in
France. The increase was partly offset by the lower wind regimes at the Quebec facilities, the lower spot prices at the Chilean
hydro facilities, an unfavourable pricing and lower production at the Griffin Trail wind facility, and by an increase in principal and
interest payments stemming from the acquisitions and construction activities.
1- HIGHLIGHTS | Subsequent Events
On January 26, 2024, Innergex announced that it was selected by Hydro-Québec for two projects: a 100 MW community wind
project in partnership with the regional county municipality of Lotbinière and the Abenaki Councils of Odanak and Wôlinak, and
a 300 MW community wind project led by the Innu Council of Pessamit, with the participation of the regional county
municipality of Manicouagan. Commercial operation is scheduled for 2028 and 2029, respectively. The power purchase
agreements, to be signed in 2024 with Hydro-Québec, are expected to be structured as 30-year take-or-pay contracts, indexed
to a predefined percentage of the Consumer Price Index (“CPI”).
On February 21, 2024, the Board of Directors approved an update to its capital allocation strategy and revised its annual
dividend for 2024 to $0.36 per common share to support its growth plans.
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
Section 6- NON-IFRS MEASURES of this MD&A for more information.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p30
(in thousands of Canadian dollars, except as noted and amounts per share)
1- HIGHLIGHTS | Financial Year 2022
For the year ended December 31, 2022, Revenues and Production Tax Credits were up 26% compared with the same period
in the previous year, which were normalized to exclude the February 2021 Texas Events. Operating, general, administrative
and prospective projects expenses were up 29% compared with the same period in the previous year. As a result, Adjusted
EBITDA1 was 19% higher at $612.2 million for the year ended December 31, 2022, and the Adjusted EBITDA Proportionate1
was 20% higher at $658.9 million, compared with the same period in the previous year, which were normalized to exclude the
February 2021 Texas Events. The increase was mainly attributable to the Aela and San Andrés acquisitions, the full-year
impact of the commissioning of the Griffin Trail wind facility in 2021, and the full-year impact of the Energía Llaima, Licán and
Curtis Palmer acquisitions made in 2021. The increase is also explained by the BC Hydro Curtailment Payment. These items
were partly offset by exceptionally low production at the facilities in British Columbia due to drier weather, and by the impact of
the 2022 Supplementary Budget Act in France.
The decrease in net loss compared to 2021 is mostly due to the impacts of the February 2021 Texas Events in the previous
year, 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 increase in depreciation, amortization and finance costs mainly related to the Energía Llaima, Aela,
San Andrés and Curtis Palmer acquisitions, and the Griffin Trail and Hillcrest commissionings in 2021. They were further offset
by an increase in the impairment charges recognized in 2022 compared with the previous year.
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 energy 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 long-term loans and borrowings stems principally from the Aela Acquisition and from net draws on the
revolving term credit facility, used toward construction and development activities.
The increase in Shareholders' equity 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 is primarily
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. 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
These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
Section 6- NON-IFRS MEASURES of this MD&A for more information.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p31
(in thousands of Canadian dollars, except as noted and amounts per share)
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;
ability to sell power on a merchant basis in its core markets;
its capacity to evaluate and secure attractive prospective sites for the development of new projects;
its ability to secure strong partnerships and work together with Indigenous and local communities;
its ability to adequately forecast total construction costs, expected revenues and expected expenses for each project;
its ability to adapt to rapidly evolving market dynamics;
its ability to finance its growth, including access to diverse funding sources; and
its ability to provide power with the increasing market readiness and cost effectiveness of renewable energy and
storage technologies.
Key Geographic Markets
In Canada, growth opportunities for new renewable power generation have resulted from commitments to reducing
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 provincial procurements that result in long-term fixed-price contracts with crown corporations,
incentives such as accelerated depreciation, investment tax credits and legislated commitments to renewable energy
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. 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 84%
emissions-free. Nationally, the largest source of power is hydroelectricity, representing around 60% of annual power
generation. Wind and solar power met approximately 6.9% 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, the Federal Energy Regulatory Commission regulates the transmission of electricity, and the wholesale
sale of electricity, in interstate commerce. 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 towards GHG emissions reductions and renewable electricity generation at the federal and state level, are
expected to continue driving demand for new renewable generation capacity. The 2022 enactment of the Inflation Reduction
Act ("IRA") 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 IRA combined with strong state renewable energy requirements is creating unprecedented
demand for new renewables of up to 750 GW by 2030 (compared to 240 GW cumulatively deployed through 2022). 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. To date, over 30 U.S. states have some form of renewable energy
standard or goal in place, with 23 states plus the District of Columbia aiming for 100% clean electricity by 2050 or earlier. 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.
In France, the 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. Government seems committed to maintaining the
current RFP program to foster additional power generation through a Contract for Difference (CfD) mechanism. However, it is
still possible for renewable developers to sell electricity to consumers through direct contract (Corporate PPA). Despite the
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p32
(in thousands of Canadian dollars, except as noted and amounts per share)
strong political will, social acceptability continues to be the main constraint to renewable development in France as particularly
evidenced by the number of claims filed against wind projects. Development time remains very long for onshore wind
(7-8 years on average) and solar (4-5 years on average). The Corporation expects that the new decree specifying the
conditions to use agricultural lands for solar projects will help on this matter at least for PV projects. On the tax side, France
has watered down its special taxes on record profit to 50% of all revenues generated when the price of energy sold is above
105€/MWh for 2024 (vs. 90% above 100€/MWh in 2023).
Renewable power continues to increase in Chile. As of December 2023, there were 71 renewable energy facilities under
construction, representing 5,631 MW of capacity. In 2023, non-conventional renewable energies reached 37% of the total
generation, surpassing a 2013 law which mandated that 20% of the electricity produced in Chile come from renewable energy
by 2025. Mining, which consumes about a third of Chile’s overall power production, is an industry that consumes most of the
new renewable energy. Since 2014, the price of building solar energy projects has dropped by more than 60%, prompting the
mining sector and other sectors to invest in renewable energy to reduce their energy consumption expenses. Chile has set
legislated commitments to renewable energy, which target increases in renewable energy generation to 80% by 2030 and
100% 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 remove remaining coal-fired power plants (which still provide 19% of Chile’s electricity) by 2040. 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.
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.
In 2022, 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.
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.
2023 Annual Report
Management's Discussion and Analysis p33
(in thousands of Canadian dollars, except as noted and amounts per share)
Seasonality of Operations
The Corporation aims to maintain a diversified portfolio of assets in terms of geography and sources of energy to alleviate any
seasonal and production variations. The amount of electricity generated by the Operating Facilities is generally dependent on
the availability of water flows, wind regimes and solar irradiation. Lower-than-expected resources in any given quarter could
have an impact on the Corporation's revenues and hence on its profitability.
Fortunately, the complementary nature of hydroelectric, wind and solar energy production partially offsets any seasonal
variations, as illustrated in the following table:
In GWh and %
HYDRO
WIND
SOLAR
Total
Consolidated LTA and Quarterly Seasonality1
Q1
538
1,779
336
2,653
14 %
28 %
21 %
22 %
Q2
1,256
1,553
461
3,270
33 %
24 %
29 %
28 %
Q3
1,219
1,334
465
3,018
32 %
21 %
29 %
25 %
Q4
824
1,756
319
2,899
Total
3,837
6,422
1,581
11,840
21 %
27 %
20 %
24 %
1.
The consolidated long-term average production is the annualized LTA for the facilities in operation as at February 21, 2024. 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 of this
MD&A.
Inflation
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. As such, inflation pressures on the Corporation's operating,
general and administrative expenses are generally absorbed by higher revenues.
Interest rate
Interest rate fluctuations are of particular concern to a capital-intensive industry such as the electric power business. The
Corporation generally uses a high proportion of long-term loans and borrowings to finance the capital requirements of its
facilities. The Corporation is exposed to interest rate risk principally through floating-rate long-term loans and borrowings. It
mitigates this risk by entering into fixed-rate financing agreements or interest rate swap agreements concurrently with entering
into floating-rate loan facilities, typically with matching notional and amortization periods. As at December 31, 2023, excluding
the construction financing of the Boswell Springs wind project which is subject to a forward-starting interest rate swap,
approximately 3.3% of the Corporation's total long-term loans and borrowings was exposed to interest rate fluctuations. The
Corporation's long-term loans and borrowings have a weighted-average maturity of 12.8 years, therefore near-term
fluctuations in interest rates have a limited effect on the Corporation's future cash flows.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p34
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Operating Facilities
Energy
segment
Location
WIND
HYDRO
Quebec
Ontario
British Columbia
United States
Chile
Subtotal
Quebec
France
United States
Chile3
Subtotal
Ontario4
United States
Chile2
Subtotal
TOTAL PRODUCTION1
Innergex's share of production of
joint ventures and associates
SOLAR
Production
(MWh)
174,378
16,825
405,409
100,928
156,023
853,563
613,819
268,059
545,508
180,140
1,607,526
20,455
158,843
62,898
242,196
2,703,285
Three months ended
December 31, 2023
Three months ended
December 31, 2022
Production
as a % of
LTA
Production
(MWh)
Production
as a % of
LTA
Three
months
Production
% change
Year ended
December 31, 2023
Year ended
December 31, 2022
Production
(MWh)
Production
as a % of
LTA
Production
(MWh)
Production
as a % of
LTA
Twelve
months
Production
% change
127 %
96 %
79 %
109 %
110 %
99 %
104 %
93 %
181,379
17,159
167,871
68,514
144,528
579,451
623,375
207,039
557,028
86 %
75 %
142,758
92 % 1,530,200
6,757
164,757
80 %
75,874
59 %
76 %
247,388
94 % 2,357,039
139 %
100 %
81 %
45 %
75 %
92 %
70 %
94 %
95 %
89 %
56 %
87 %
123 %
83 %
70 %
79 %
81 %
(4) %
(2) %
47 %
8 %
732,107
68,660
142 % 1,838,825
431,205
489,057
47 % 3,559,854
(2) % 2,000,953
772,334
29 %
(2) % 2,239,051
770,101
26 %
5 % 5,782,439
111,804
931,339
236,042
(2) % 1,279,185
15 % 10,621,478
203 %
(4) %
(17) %
112 %
114 %
100 %
716,024
105 %
92 %
68,799
84 % 1,767,031
332,113
447,085
93 % 3,331,052
87 % 2,284,974
659,974
91 % 2,270,446
81 %
419,996
90 % 5,635,390
39,080
980,356
82 %
68 %
268,127
81 % 1,287,563
90 % 10,254,005
103 %
102 %
92 %
80 %
88 %
91 %
87 %
99 %
88 %
93 %
72 %
92 %
108 %
86 %
79 %
85 %
90 %
2 %
— %
4 %
30 %
9 %
7 %
(12) %
17 %
(1) %
83 %
3 %
186 %
(5) %
(12) %
(1) %
4 %
— %
3 %
105,592
116 %
91,590
105 %
15 %
539,102
98 %
538,059
100 %
PRODUCTION PROPORTIONATE1
2,808,877
94 % 2,448,629
82 %
15 % 11,160,580
90 % 10,792,064
90 %
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.
The San Andrés Acquisition was completed on January 28, 2022.
The Aela Acquisition was completed on June 9, 2022.
2.
3.
4. The Acquisition of Sault Ste. Marie was completed on March 9, 2023.
Production for the three months ended December 31, 2023, was 94% of LTA. The result is mostly explained by below-average wind regimes across facilities in Quebec,
the United States and Chile as well as lower irradiation and economic curtailment at the Phoebe facility in Texas and at the Salvador and San Andrés facilities in Chile.
These items were partly offset by higher production at the wind facilities in France as well as higher water flows at the United States and British Columbia hydro facilities.
Innergex's share of production of joint ventures and associates was 116% of LTA, translating into a Production Proportionate at 94% of LTA.
Production for the year ended December 31, 2023, was 90% of LTA. The result is mostly explained by low water flows in British Columbia combined with below-average
wind regimes in Quebec and in the United States, lower wind regimes and economic curtailment at the facilities in Chile, lower irradiation and economic curtailment at the
Phoebe facility in Texas and at the Salvador and San Andrés facilities in Chile. These items were partly offset by higher production from the Quebec hydro facilities, the
Curtis Palmer hydro facilities in the United States and the wind facilities in France. Innergex's share of production of joint ventures and associates was 98% of LTA,
translating into a Production Proportionate at 90% of LTA.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p35
(in thousands of Canadian dollars, except as noted and amounts per share)
2- OVERVIEW OF OPERATIONS | Commissioning Activities
On October 30, 2023, Innergex began supplying the residents of the village of Inukjuak with hydroelectricity. Construction of
the Innavik run-of-river Hydroelectric facility in the Nunavik community of Inukjuak is now completed and conversion of the
residences is currently being finalized. The facility will replace reliance on diesel fuel for almost all of the energy needs of
Inukjuak, in Quebec's Far North. The project stems from the community’s willingness to reduce greenhouse gas emissions and
is expected to have significant social and economic impacts for the 1,800 inhabitants of Inukjuak, Nunavik’s second most
populous community.
On October 30, 2023, Innergex executed the commissioning of its 50 MW/250 MWh (5 hours) Salvador battery storage
project. The facility is located on the site of Innergex’s existing Salvador solar facility in Northern Chile has begun operations
and is injecting energy to the grid. The Salvador battery facility is Innergex’s first utility-scale battery storage site and among
the first installed in Chile.
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
(%)
San Andrés Battery Energy Storage
(Chile)
Storage
Lazenay (France)
Hale Kuawehi (Hawaii, U.S.)
Wind
Solar and
storage
Boswell Springs (Wyoming, U.S.)
Wind
100
25
100
100
Gross
installed
capacity
(MW)
Gross
estimated
LTA1 (GWh)
Note 4
—
9.0
27.8
30.0 2
87.4 3
329.8
1,262.0
PPA term
(years)
Expected
COD
—
—
25
30
2024
2024
2024
2024
1.
2.
3.
4.
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.
Solar project with a battery storage capacity of 30 MW/120 MWh (4 hours).
PPA is a fixed lump sum capacity payment for the availability of dispatchable energy.
Battery storage capacity of 35 MW/175 MWh (5 hours).
Updated status for the following projects:
San Andrés Battery Energy Storage
•
•
•
Interconnection completed.
Permitting in progress with the National Electric Coordinator.
Project COD expected in Q1 2024.
Lazenay
•
•
•
• Wind turbine delivery is expected in Q2 2024
•
Construction going well despite adverse weather conditions in Q4 2023.
All three turbine foundations poured and backfillings are completed.
Underground cabling works will end in Q1 2024.
Project COD expected in Q4 2024.
Hale Kuawehi
•
•
Deliveries of major components in progress.
Project COD expected in Q4 2024.
Boswell Springs
Construction activities on schedule, site closed for the winter season.
Request sent for limited operation to allow commissioning to begin earlier than initially scheduled.
•
•
• Major components delivery schedule slightly accelerated with suppliers.
•
Project COD expected in Q4 2024.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p36
(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 the development stage with a gross installed capacity of approximately 457.1 MW. The
table below outlines their status as at the date of this MD&A.
Name
(Location)
Mesgi’g Ugju’s’n 2 (Canada)
Palomino (Ohio, U.S.)
Auxy Bois Régnier (France)
Montjean 2 (France)
Frontera (Chile)
Rucacura (Chile)
1.
Power to be sold on the open market or through PPAs yet to be signed.
Updated status from the previous quarter for the following projects:
Mesgi’g Ugju’s’n 2 (MU2)
Type
Wind
Solar
Wind
Wind
Hydro
Hydro
Gross
installed
capacity
(MW)
102.2
200.0
29.4
13.5
109.0
3.0
PPA term
(years)
Expected
COD
30
—
20
20
— 1
— 1
2026
2025
2025
2028
2028
2025
•
•
•
•
•
Interconnection agreement signed in Q1 2024.
Notice of admissibility received for environmental impact and public information session held in Q4 2023.
Decision expected in Q1 2024 concerning the memorandum of understanding and the pre-project
agreement with Hydro-Québec Transport.
The early contractor involvement agreement is ongoing.
Expecting the project to benefit from ITC federal government program that is not finalized yet.
Palomino
•
•
•
Commercial discussions ongoing with multiple interested offtakers.
Palomino received confirmation for interconnection Fast Track qualification by PJM in Q4 2023.
Road Use Agreement received from the Highland County Engineer.
Auxy Bois Régnier
•
•
Favourable court decision obtained in Q1 2024 and interconnection expected for Q1 2025.
Geotechnical studies completed, awaiting receipt of study reports.
Montjean 2
•
•
PPA is in place since Q2 2021.
The project is ready to build, however various options for grid interconnection are under investigation to
advance the project to an earlier COD.
Frontera
•
•
Transmission line point of connection in permitting. In negotiation with Electricity Substation owner.
Preparation of the documentation to obtain building permits from the local administration.
Rucacura
•
•
Interconnection permit approved.
Electromechanical equipment under negotiation with various suppliers.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p37
(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
CANADA
Hydro
Solar
Wind
Storage
Subtotal
UNITED STATES
Solar
Wind
Green hydrogen2
Subtotal
FRANCE
Solar
Wind
Storage
Subtotal
CHILE
Hydro
Solar
Wind
Storage
Subtotal
Total
Change from
Q3 2023
Changes from
Q4 2022
497
480
3,071
100
4,148
364
—
5
369
57
66
19
142
—
32
236
—
268
15
6
13
1
35
4
—
1
5
3
3
1
7
—
1
1
—
2
—
—
2,750
—
2,750
300
400
—
700
42
114
—
156
—
—
—
—
—
—
—
8
—
8
1
1
—
2
3
5
—
8
—
—
—
—
—
—
—
400
—
400
685
—
—
685
86
163
—
249
154
—
—
50
204
—
—
2
—
2
4
—
—
4
1
9
—
10
1
—
—
1
2
497
480
6,221
100
7,298
1,349
400
5
1,754
185
343
19
547
154
32
236
50
472
4,927
49
3,606
18
1,538
18
10,071
+74
+3
-371
-1
+429
+2
+132
+527
(1)
+398
+4
+445
+3
+1,370
15
6
23
1
45
9
1
1
11
7
17
1
25
1
1
1
1
4
85
+4
+6
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 2023, two projects in Canada progressed to the advanced stage. In the United States, one 15 MW project
was added. In France, five new projects were added for a net increase of 105 MW. In Chile, a net 12 MW was added. In total,
132 MW of net new prospective projects were added in the quarter.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p38
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS
Revenues
Production Tax Credits
Revenues and Production Tax Credits
Operating expenses
General and administrative expenses
Prospective projects expenses
ERP implementation
Depreciation and amortization
Impairment of long-term assets
Operating Income
Finance costs
Other net expenses (income)
Share of (earnings) loss of joint ventures and
associates1
Change in fair value of financial instruments
Recovery of income tax
Net loss
Net Loss attributable to:
Owners of the parent
Non-controlling interests
Three months ended December 31
Year ended December 31
2023
2022
Change
2023
2022
Change
243,523
18,003
261,526
63,653
14,941
9,084
3,558
87,927
118,857
(36,494)
88,420
26,170
(4,004)
6,973
(32,089)
203,636
16,576
220,212
39,887
1,427
41,314
20 %
9 %
19 %
969,890
71,684
1,041,574
870,494
64,729
935,223
99,396
6,955
106,351
62,591
13,568
7,118
1,815
93,756
47,868
(6,504)
1,062
1,373
1,966
1,743
(5,829)
70,989
(29,990)
83,864
(8,475)
4,556
34,645
2 %
10 %
28 %
96 %
(6) %
148 %
(461) %
5 %
409 %
232,795
69,242
27,162
12,651
361,292
118,857
219,575
207,768
53,071
24,740
2,357
336,053
47,868
263,366
25,027
16,171
2,422
10,294
25,239
70,989
(43,791)
348,386
27,031
317,842
(6,547)
30,544
33,578
286
(16,622)
(12,982)
(4,290)
23,595
(19,107)
(1,500) %
142 %
(147) %
(16,791)
13,676
(46,913)
(14,382)
64,145
(6,577)
(2,409)
(50,469)
(40,336)
(121,964)
(52,575)
(69,389)
(132) %
(105,814)
(91,115)
(14,699)
(113,939)
(8,025)
(45,301)
(7,274)
(68,638)
(751)
(152) %
(10) %
(98,451)
(7,363)
(81,619)
(9,496)
(16,832)
2,133
(121,964)
(52,575)
(69,389)
(132) %
(105,814)
(91,115)
(14,699)
11 %
11 %
11 %
12 %
30 %
10 %
437 %
8 %
148 %
(17) %
10 %
513 %
(17) %
(79) %
(613) %
(16) %
(21) %
22 %
(16) %
Basic net loss per share
attributable to owners ($)
Diluted net loss per share attributable to
owners ($)
(0.57)
(0.23)
(0.57)
(0.23)
(0.51)
(0.43)
(0.51)
(0.43)
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p39
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Hydroelectric Segment
Three months ended December 31
Year ended December 31
Hydroelectric Segment
Production (MWh)
LTA (MWh)
LTA (%)
2023
853,563
824,442
2022
579,451
824,540
104 %
70 %
Change
2023
47 % 3,559,854
— % 3,837,919
47 %
93 %
2022
3,331,052
3,838,290
87 %
Revenues
Operating, general and administrative expenses
Adjusted EBITDA1
88,679
21,567
67,112
61,082
19,513
41,569
45 %
11 %
61 %
358,210
82,097
276,113
336,645
86,135
250,510
PROPORTIONATE1
Production Proportionate (MWh)
LTA Proportionate (%)
Revenues Proportionate
Adjusted EBITDA Proportionate
918,172
631,091
104 %
97,805
73,735
72 %
67,262
45,613
45 % 3,982,006
45 %
45 %
62 %
403,517
311,715
93 %
3,743,198
88 %
380,973
285,064
Change
7 %
— %
7 %
6 %
(5) %
10 %
6 %
6 %
6 %
9 %
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 Section 6- NON-IFRS MEASURES of this MD&A for more information.
For the three months ended December 31, 2023, the increase of 45% in Revenues in the hydroelectric segment compared with the same period last year is mainly
explained by higher production at the facilities in British Columbia and at Curtis Palmer. The increase is partly offset by lower spot prices at the Chilean facilities. The
increase of 11% in Operating, general and administrative expenses is mainly explained by higher maintenance costs at some facilities in Quebec. As a result, Adjusted
EBITDA1 increased by 61% to $67.1 million.
For the three months ended December 31, 2023, the increase of 45% in Revenues Proportionate1 in the hydroelectric segment mainly stems from the increase in
consolidated revenues and revenues from the joint ventures and associates due to the Innavik facility now delivering power to the Inukjuak village and to higher production
at the facilities in British Columbia. 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, Adjusted EBITDA Proportionate1 increased by 62% to $73.7 million.
For the year ended December 31, 2023, the increase of 6% in Revenues in the hydroelectric segment compared with the same period last year is mainly explained by the
higher production at the Curtis Palmer facilities and at the Duqueco facilities. The increase is partly offset by lower spot prices at the Chilean facilities. The decrease of 5%
in Operating, general and administrative expenses is explained by lower maintenance costs at some facilities in British Columbia and Chile. As a result, Adjusted EBITDA1
increased by 10% to $276.1 million.
For the year ended December 31, 2023, the increase of 6% in Revenues Proportionate1 in the hydroelectric segment mainly stems from the increase in consolidated
revenues and revenues from the joint ventures and associates due to the Innavik facility now delivering power to the Inukjuak village and higher production at the facilities in
British Columbia. 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, Adjusted EBITDA Proportionate1 increased by 9% to $311.7 million.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p40
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Wind Segment
Wind Segment
Production (MWh)
LTA (MWh)
LTA (%)
Revenues and production tax credits
Operating, general and administrative expenses
Adjusted EBITDA1
PROPORTIONATE1
Production Proportionate (MWh)
Revenues and Production Tax Credits Proportionate
LTA Proportionate (%)
Adjusted EBITDA Proportionate
Three months ended December 31
2023
Change
1,607,526
1,745,617
2022
1,530,200
1,761,962
92 %
87 %
2023
5 % 5,782,439
(1) % 6,422,505
5 %
90 %
Year ended December 31
2022
5,635,390
6,094,820
Change
153,456
35,542
117,914
143,600
39,113
104,487
7 %
(9) %
13 %
536,238
131,520
404,718
1,648,509
159,029
1,570,150
148,784
93 %
87 %
122,317
108,466
5 % 5,899,389
7 %
552,012
6 %
13 %
416,634
90 %
92 %
485,258
103,042
382,216
5,761,303
501,465
93 %
394,380
3 %
5 %
(2) %
11 %
28 %
6 %
2 %
10 %
(3) %
6 %
1.
These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production and Production Proportionate are key performance indicators for the
Corporation that cannot be reconciled with an IFRS measure. Please refer to the Section 6- NON-IFRS MEASURES of this MD&A for more information.
For the three months ended December 31, 2023, Revenues and production tax credits increased by 7% in the wind power generation segment compared with the same
period last year, mainly due to higher production at facilities in France, favourable pricing at the Foard City facility and at the Chilean facilities. The increase was partly offset
by lower production from the facilities in the United States and Quebec, as well as lower merchant prices at the Griffin Trail facility. The decrease of 9% in Operating,
general and administrative expenses is mainly explained by lower major repairs in Quebec. As a result, Adjusted EBITDA1 increased by 13% to $117.9 million, compared
with the same period last year.
For the three months ended December 31, 2023, the increase of 7% in Revenues and Production Tax Credits Proportionate1 mainly stems from the increase in consolidated
revenues but slightly helped by 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, Adjusted
EBITDA Proportionate1 increased by 13% to $122.3 million.
For the year ended December 31, 2023, Revenues and production tax credits increased by 11% in the wind power generation segment compared with the same period last
year, mainly due to the Aela Acquisition on June 9, 2022, increased wind regimes and revenues from new PPAs in place at facilities in France, and favourable pricing at the
Foard City facility. The increase was partly offset by lower production from the facilities in Quebec and by lower production and merchant prices at the Griffin Trail facility.
The increase of 28% in Operating, general and administrative expenses is mainly explained by higher expenses following the impact of the 2022 Supplementary Budget Act
in France, higher maintenance expenses in Quebec facilities, the Aela Acquisition, and higher operating costs in the United States. As a result, Adjusted EBITDA1 increased
by 6% to $404.7 million, compared with the same period last year.
For the year ended December 31, 2023, the increase of 10% in Revenues and Production Tax Credits Proportionate1 mainly stems from the increase in consolidated
revenues slightly offset by the joint ventures' and associates' revenues, which decreased compared to the same period last year due to lower 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, Adjusted
EBITDA Proportionate1 increased by 6% to $416.6 million.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p41
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Solar Segment
Solar Segment
Production (MWh)
LTA (MWh)
LTA (%)
Revenues
Operating, general and administrative expenses
Realized (gain) loss on power hedges
Adjusted EBITDA1
Three months ended December 31
2022
247,388
313,117
2023
242,196
319,871
Change
76 %
79 %
19,391
9,111
(1,573)
11,853
15,530
6,747
1,559
7,224
Year ended December 31
2022
1,287,563
1,518,991
2023
1,279,185
1,587,757
81 %
85 %
147,126
27,496
24,632
94,998
113,320
24,299
37,479
51,542
Change
(1) %
5 %
(4) %
30 %
13 %
(34) %
84 %
(2) %
2 %
(3) %
25 %
35 %
(201) %
64 %
1.
These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Production and Production Proportionate are key performance indicators for the
Corporation that cannot be reconciled with an IFRS measure. Please refer to the Section 6- NON-IFRS MEASURES of this MD&A for more information.
For the three months ended December 31, 2023, Revenues increased by 25% in the solar power generation segment compared with the same period last year, mainly due
to the Sault Ste. Marie Acquisition on March 9, 2023, and higher selling prices in Chile from the Salvador battery energy storage facility offsetting the lower production. The
increase of 35% in Operating, general and administrative expenses is explained mainly by increased expenses from the Sault Ste. Marie Acquisition and by higher toll
expenses in Chile. The increase in realized gain on the power hedges is mainly related to the decrease in merchant prices for the Phoebe power hedge. As a result,
Adjusted EBITDA1 increased by 64% to $11.9 million, compared with the same period last year.
For the year ended December 31, 2023, Revenues increased by 30% in the solar power generation segment compared with the same period last year, mainly due to the
Sault Ste. Marie Acquisition on March 9, 2023, and by higher selling prices at the Phoebe and Hillcrest facilities. The increase of 13% in Operating, general and
administrative expenses is explained mainly by the Sault Ste. Marie Acquisition on March 9, 2023 and by higher maintenance costs at the Phoebe facility. The decrease in
realized loss on the power hedges is mainly related to the decrease in merchant prices for the Phoebe power hedge. As a result, Adjusted EBITDA1 increased by 84% to
$95.0 million, compared with the same period last year.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p42
(in thousands of Canadian dollars, except as noted and amounts per share)
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Net Earnings
(Loss)
Net loss of $122.0 million ($0.57 net loss per share, on a basic and diluted basis) for the three months ended
December 31, 2023, compared with net loss of $52.6 million ($0.23 net loss per share - basic and diluted) for the
corresponding period in 2022.
The $69.4 million increase in net loss mainly stems from :
•
•
•
a $71.0 million increase in impairment of long-term assets attributable to the impairment charges recognized on the Hale
Kuawehi and Hillcrest facilities, compared with the impairment charges recognized on the Hawaiian facilities in the
comparative period
a $34.6 million increase in other net expenses, mainly due to an unfavourable change in fair value of the contingent
consideration provision included in the Curtis Palmer purchase price; and
an unfavourable $23.6 million change in the fair value of financial instruments, mainly related to an unfavourable shift in
the merchant power curves for the Phoebe power hedge.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, these items
were partly offset by:
•
•
a $19.1 million increase in income tax recovery, mainly due to an increase in net loss and a favourable change in
unrecognized deferred tax assets in Chile, partly offset by an unfavourable change in unrecognized deferred tax assets in
the United States and an adjustment recognized in the current year in relation to the deferred tax of prior years in the
United States; and
a $5.8 million decrease in depreciation and amortization, mainly attributable to a revision of the useful lives estimates for
the wind and solar facilities.
Net loss of $105.8 million ($0.51 net loss per share - basic and diluted) for the year ended December 31, 2023, compared with
net loss of $91.1 million ($0.43 net loss per share - basic and diluted) for the corresponding period in 2022.
The $14.7 million increase in net loss mainly stems from:
•
•
•
•
•
a $71.0 million increase in impairment of long-term assets attributable to the impairment charges recognized on the Hale
Kuawehi and Hillcrest facilities, compared with the impairment charges recognized on the Hawaiian facilities in the
previous year;
a $33.6 million increase in other net expenses, mainly due to an unfavourable change in fair value of the contingent
consideration provision included in the Curtis Palmer purchase price;
a $30.5 million increase in finance costs mainly related to the refinancing of the non-recourse debt in Chile in Q3 2022
following the Aela Acquisition, partly offset by a decrease in inflation compensation interests on the Harrison Hydro real
return bonds;
a $25.2 million increase in depreciation and amortization, mainly attributable to the Aela and Sault Ste. Marie acquisitions,
partly offset by a revision of the useful lives estimates for the wind and solar facilities; and
an increase in general and administrative expenses stemming mainly from the Aela Acquisition and increased salaries
from additional employees to support the Corporation's development and growth.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, these items
were partly offset by:
•
•
a favourable $50.5 million change in the fair value of financial instruments, mainly related to a favourable shift in the
merchant power curves for the Phoebe power hedge, partly offset by an unfavourable shift in the foreign exchange
forward curves; and
a $40.3 million increase in income tax recovery, mainly due to an increase in net loss and a favourable change in
unrecognized deferred tax assets, partly offset by adjustments recognized in the current year in relation to the deferred tax
of prior years in the United States.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p43
(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 loss on the termination of interest
rate swaps, realized gain on foreign exchange forward contracts, impairment charges, Enterprise Resource Planning ("ERP")
implementation, items that are outside of the normal course of the Corporation's cash generating operations, 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 Loss1 (Please refer to the Section 6- NON-IFRS MEASURES for
a reconciliation to the consolidated statements of earnings :
Revenues and production tax credits
Expenses:
Operating
General and administrative
Prospective projects
Depreciation and amortization
Earnings before the following:
Finance costs
Other net expenses (income)
Share of (earnings) losses of joint ventures and associates
Realized (gain) loss on power hedges
Income tax (recovery) expense
Adjusted Net Loss1
Three months ended
December 31
Year ended December 31
2023
2022
2023
2022
261,526
220,212
1,041,574
935,223
63,653
14,941
9,084
87,927
85,921
88,420
26,241
(3,260)
(1,573)
(16,741)
(7,166)
62,591
13,568
7,118
93,756
43,179
83,864
(8,475)
500
1,559
(6,800)
(27,469)
232,795
69,242
27,162
361,292
351,083
348,386
27,480
(15,581)
24,632
(31,782)
(2,052)
207,768
53,071
24,740
336,053
313,591
317,842
(3,333)
(12,501)
37,479
6,607
(32,503)
1.
Adjusted Net Loss is not a recognized measure under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
Section 6- NON-IFRS MEASURES for more information.
Adjusted Net Loss1 of $7.2 million for the three months ended December 31, 2023, compared with an Adjusted Net Loss1 of
$27.5 million for the corresponding period in 2022.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, the
$20.3 million decrease in Adjusted Net Loss1 mainly stems from:
•
a $9.9 million increase in the income tax recovery, mainly due to a favourable change in unrecognized deferred tax assets
in Chile, partly offset by an unfavourable change in unrecognized deferred tax assets in the United States and an
adjustment recognized in the current year in relation to the deferred tax of prior years in the United States; and
a $5.8 million decrease in depreciation and amortization mainly attributable to a revision of the useful lives estimates for
the wind and solar facilities.
•
These items were partly offset by:
•
a $34.7 million increase in other net expenses, mainly due to an unfavourable change in fair value of the contingent
consideration provision included in the Curtis Palmer purchase price.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p44
(in thousands of Canadian dollars, except as noted and amounts per share)
Adjusted Net Loss1 of $2.1 million for the year ended December 31, 2023, compared with an Adjusted Net Loss1 of
$32.5 million for the corresponding period in 2022.
In addition to the hydroelectric, wind and solar segments' respective operating performance previously discussed, the
$30.4 million decrease in Adjusted Net Loss1 mainly stems from:
•
a $38.4 million increase in income tax recovery, mainly due to a net favourable change in unrecognized deferred tax
assets, partly offset by adjustments recognized in the current year in relation to the deferred tax of prior years; and
a $12.8 million decrease in the realized loss on power hedges attributable to a favourable shift in the merchant power
curve for the Phoebe power hedge in 2023.
•
These items were partly offset by:
•
a $30.8 million increase in other net expenses, mainly due to an unfavourable change in fair value of the contingent
consideration provision included in the Curtis Palmer purchase price;
a $30.5 million increase in finance costs mainly related to the refinancing of the non-recourse debt in Chile in Q3 2022
following the Aela Acquisition, partly offset by a decrease in inflation compensation interests on the Harrison Hydro real
return bonds;
a $25.2 million increase in depreciation and amortization, mainly attributable to the Aela and Sault Ste. Marie acquisitions,
partly offset by a revision of the useful lives estimates for the wind and solar facilities; and
an increase in general and administrative expenses stemming mainly from the Aela Acquisition and increased salaries
from additional employees to support the Corporation's development and growth.
3- FINANCIAL PERFORMANCE AND OPERATING RESULTS | Non-Controlling
Interests
Attribution of loss of $8.0 million to non-controlling interests for the three months ended December 31, 2023, compared with an
attribution of loss of $7.3 million for the corresponding period in 2022.
The $0.8 million increase in loss attributed to non-controlling interests is mainly due to:
•
•
a higher allocation of loss to the non-controlling interests at the Curtis Palmer facilities, mainly due to an unfavourable
change in fair value of the contingent consideration provision included in the Curtis Palmer purchase price during Q4
2023; and
the acquisition of the non-controlling interests in Innergex Europe and Mountain Air in Q4 2022.
These items were partly offset by:
•
a lower allocation of losses to the non-controlling interests of Harrison Hydro and Kwoiek Creek, mainly attributable to the
higher production at those facilities; and
the allocation of earnings to the non-controlling interest in Innergex France following the closing of the 30% non-controlling
interest in Q4 2023.
Attribution of loss of $7.4 million to non-controlling interests for the year ended December 31, 2023, compared with an
attribution of loss of $9.5 million for the corresponding period in 2022.
The $2.1 million decrease in loss attributed to non-controlling interests is mainly due to:
•
•
a lower allocation of loss to the non-controlling interests of Harrison Hydro, largely due to a decrease in the inflation
compensation interest on the real return bonds; and
the allocation of earnings to the non-controlling interest in Innergex France following the closing of the 30% non-controlling
interest in Q4 2023.
These items were partly offset by:
•
•
a decrease in revenues mainly attributable to the lower production at the Mesgi'g Ugju's'n wind facility;
a higher allocation of loss to the non-controlling interests at the Curtis Palmer facilities, mainly due to an unfavourable
change in fair value of the contingent consideration provision included in the Curtis Palmer purchase price during the
fourth quarter, partly offset by the higher production at those facilities; and
the acquisition of the non-controlling interests in Innergex Europe and Mountain Air in Q4 2022.
•
•
•
•
•
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p45
(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:
As at
Equity1
Common shares2
Preferred shares3
Non-controlling interests
Long-term loans and borrowings1
Corporate revolving credit facility
Other corporate debts
Project-level debts
Tax Equity financing
Convertible debentures
Deferred financing costs
December 31, 2023
December 31, 2022
1,877,713
81,480
118,445
2,077,638
473,725
325,000
4,889,469
383,100
285,105
(75,252)
6,281,147
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
1.
2.
3.
Common and preferred shares are presented at their fair value as at December 31, 2023, and December 31, 2022, while non-controlling interests and long-
term loans and borrowings are presented at their respective book value.
Consists of the number of common shares outstanding as at December 31, 2023, and December 31, 2022, multiplied by the prevailing share price of $9.19
(2022 - $16.20) at the close of markets.
Consists of the number of preferred shares outstanding as at December 31, 2023, and December 31, 2022, multiplied by the prevailing share price of $12.20
and $20.00 (2022 - $13.40 and $21.04), for the Series A and Series C preferred shares, respectively, at the close of markets.
Innergex's strategy in managing its capital is: (i) to develop or acquire high-quality renewable power production and storage
facilities that generate sustainable and stable cash flows, with the objective of achieving a high return on invested capital, and
(ii) to pay a dividend.
8,358,785
9,324,034
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 dividend while maintaining an acceptable level of indebtedness.
Generally, 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 lower share price. The preferred shares structure remained
consistent compared to December 31, 2022, and the fair value was impacted by a lower preferred shares price. The decrease
in non-controlling interests stems mainly from the distributions allocated to the non-controlling interests during the year, partly
offset by the issuance of a 30% non-controlling interest in Innergex's portfolio in France.
The increase in long-term loans and borrowings is mainly due to the net draws made toward the construction of the Boswell
Springs wind project, Salvador and San Andrés battery energy storage projects and the Hale Kuawehi solar project, and the
Sault Ste. Marie Acquisition, partly offset by the scheduled principal repayments of long-term loans and borrowings.
The effective all-in interest rate on the Corporation's long-term loans and borrowings was 5.26% as at December 31, 2023,
(5.06% as at December 31, 2022). The increase is mainly due to new indebtedness at higher interest rates.
Credit Agreements – Material Financial and Non-Financial Conditions
As at December 31, 2023, 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p46
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Tax Equity Financing
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 facilities'
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 revenues and
production tax credits 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”)
The Inflation Reduction Act (“IRA”) was signed into law in August 2022 by the United States Government. Among other things,
the IRA provides an extension of the ITC and PTC programs for facilities that begin construction prior to January 1, 2025. In
addition, solar projects starting construction before January 1, 2025, may qualify to receive PTCs in lieu of ITCs. For projects
commencing construction after January 1, 2025, the IRA initiates the transition toward a technology-neutral tax credit system,
which is essentially the same in function and amount as the ITC/PTC programs. This new technology-neutral structure extends
until power sector emissions are reduced by 75% from the 2022 level or begin stepping down after 2032, whichever is later.
As at December 31, 2023, facilities benefiting from the PTC program earn US$28/MWh generated, subject to annual CPI
inflation adjustment. In addition, the current ITC rates represent 30% of allowable capital costs.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p47
(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
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, 2023
December 31, 2022
159,244
40,099
318,763
—
518,106
6,560,814
1,273,059
130,009
176,608
281,230
8,421,720
8,939,826
162,971
54,670
250,301
59,217
527,159
6,212,371
1,268,960
135,786
139,676
318,475
8,075,268
8,602,427
566,447
650,824
6,032,269
1,135,782
7,168,051
7,734,498
1,086,883
118,445
1,205,328
8,939,826
5,384,813
1,080,363
6,465,176
7,116,000
1,316,195
170,232
1,486,427
8,602,427
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p48
(in thousands of Canadian dollars, except as noted and amounts per share)
Working Capital Items
As at December 31, 2023, working capital1 was negative at $48.3 million, from negative $123.7 million on December 31, 2022,
mainly explained by:
•
•
•
Current assets amounted to $518.1 million as at December 31, 2023, a decrease of $9.1 million compared with
December 31, 2022, mainly explained by the safe harbor solar modules, classified as held for sale in 2022 and sold
during the first quarter of 2023, and by a $14.6 million decrease in restricted cash mainly related to the release of
cash restrictions. The decrease in current assets was partly offset by the assets acquired as part of the Sault Ste.
Marie Acquisition, by a $53.4 million increase in accounts receivable, mainly due to the higher revenues from higher
production from the hydroelectric facilities in British Colombia, compared with the same period last year, and by a
$10.9 million increase in prepaid and others, mainly due to a battery procurement prepayment in Chile.
Current liabilities amounted to $566.4 million as at December 31, 2023, a decrease of $84.4 million compared with
December 31, 2022, mainly due to a $124.9 million decrease in the current portion of long-term loans and
borrowings, which primarily relates to the reclassification of the $150.0 million subordinated unsecured term loan as
non-current following its refinancing, partly offset by the current portion of the debt assumed in the Sault Ste. Marie
Acquisition. The decrease in current liabilities was partly offset by a $31.7 million increase in accounts payable,
mainly due to holdbacks payable related to construction activities and to timing of payments in trade payables.
Derivative financial instruments also contributed unfavourably to the working capital balance (please refer to the
"Financial Position – Derivative Financial Instruments and Risk Management" subsection below for more information).
As at December 31, 2023, the Corporation had $950.0 million in revolving term credit facility and had drawn $473.7 million as
cash advances, while $6.1 million had been used to issue letters of credit, leaving $470.2 million available. The Corporation
considers its current level of working capital1 and revolving term credit facility availability to be sufficient to meet its needs.
Non-Current Assets
Non-current assets amounted to $8,421.7 million as at December 31, 2023, an increase of $346.5 million compared with
December 31, 2022. The increase is mainly due to the construction and development activities, contributing to an increase in
property, plant and equipment and project development costs by an aggregate amount of $679.5 million, including the inital
measurement of the right-of-use assets related to the Boswell Springs land leases. Moreover, the Sault Ste. Marie Acquisition
contributed to an aggregate addition of $197.7 million to property, plant and equipment and intangibles, along with an increase
of $30.0 million in goodwill.
These items were partially offset by depreciation and amortization expenses of $361.3 million, by the recognition of an
impairment charge at the Hale Kuawehi solar and battery energy storage project located in Hawaii, by the disposition of the
Kokomo and Spartan solar facilities, and by the $20.6 million decrease in other long-term assets mainly due to a decrease in
reserves.
Derivative financial instruments also unfavourably impacted non-current assets (please refer to the "Financial Position –
Derivative Financial Instruments and Risk Management" subsection below for more information).
Non-Current Liabilities
Non-current liabilities amounted to $7,168.1 million as at December 31, 2023, an increase of $702.9 million compared with
December 31, 2022. The increase is mainly due to a $647.5 million increase in the non-current portion of long-term loans and
borrowings. This increase stems from the reclassification of the $150.0 million subordinated unsecured term loan as non-
current following its refinancing, the net draws made toward the construction of the Boswell Springs wind project, Salvador and
San Andrés battery energy storage projects and the Hale Kuawehi solar project, and the Sault Ste. Marie Acquisition. The
increase in non-current liabilities is also expained by a $76.7 million increase in other liabilities mainly due to an unfavourable
change in fair value of the contingent consideration provision included in the Curtis Palmer purchase price, by an increase in
the asset retirement obligation due to a decrease in interest rates since December 2022, and by the initial measurement of the
lease obligation related to Boswell Springs. These items were partly offset by the scheduled principal repayments of long-term
loans and borrowings, and by the disposition of the Kokomo and Spartan solar facilities.
Derivative financial instruments also favourably impacted non-current liabilities (please refer to the "Financial Position –
Derivative Financial Instruments and Risk Management" subsection below for more information).
1 Working capital represents the excess or deficiency of current assets over current liabilities.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p49
(in thousands of Canadian dollars, except as noted and amounts per share)
Shareholders' Equity
As at December 31, 2023, Shareholders' equity decreased by $281.1 million compared with December 31, 2022. The
decrease is mainly due to the dividends declared on common and preferred shares totalling $152.7 million, the total
comprehensive loss of $173.4 million, and the distributions to non-controlling interests totalling $42.4 million, partly offset by
the proceeds from the disposition of a non-controlling interest in the Innergex portfolio in France.
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 $4.3 million as at December 31, 2023,
from a net asset of $25.3 million as at December 31, 2022. The unfavourable change relates mainly to the interest hedging
derivatives, unfavourably impacted by a downward shift in the interest rate curves.
Off-Balance-Sheet Arrangements
As at December 31, 2023, the Corporation had issued letters of credit totalling $439.0 million, including $6.1 million from its
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 $87.6 million in corporate guarantees used mainly
to guarantee certain activities of prospective projects. The corporate guarantees were also used for payment security related
to its development activities in Hawaii and to meet obligations under PPAs for the Antoigné, Porcien and Vallottes wind
facilities in France.
Tax equity investors in U.S. projects generally require sponsor guarantees as a condition to their investment. To support the
tax equity investments at Foard City, Phoebe, Hillcrest, Griffin Trail and Boswell, Innergex, either directly or through Alterra
Power Corp, a subsidiary, has executed guarantees 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p50
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Contingencies
Innavik EPC Agreement
During 2023, legal hypothecs were registered by the contractor against the Innavik hydroelectric project ("Innavik" or "the
project"), a joint venture company, in the aggregate amount of $61.3 million, representing the contractor's claim for payment of
additional costs under the engineering, procurement and construction ("EPC") agreement with Innavik, and interests thereon.
The Corporation disputes that claim in good faith and has taken legal action to cause the legal hypothecs to be removed from
title. As at December 31, 2023, the project recognized a provision for the legal fees to be incurred regarding the claim.
Senvion GmbH claims under insolvency proceedings
During 2019, Senvion GmbH ("Senvion"), an insolvent German company and service provider under the turbine supply
agreement at Innergex's Mesgi'g' Ugju's'n wind facility, filed for bankruptcy. Certain of the performance obligations under the
turbine supply agreement were covered, subject to terms and conditions precedent, by a $19.6 million letter of credit. The
Corporation availed itself of the full amount on April 27, 2021. Such proceeds are to be used to remediate Senvion's unfulfilled
performance obligations under the turbine supply agreement.
On May 17, 2023, Senvion issued a claim through the Ontario Superior Court of Justice (the "Court") against Mesgi'g Ugju's'n
(MU) Wind Farm L.P. and Mesgi'g Ugju's'n (MU) Wind Farm Inc. (together, "MU"), alleging that MU drew down on a
$19.6 million letter of credit held in its favour in violation of a stay of proceedings imposed by the Court under the Companies
Creditors’ Arrangement Act. The Corporation considers that this procedure has no basis and is disputing the claim. No
provision in respect of this litigation has been recorded as at December 31, 2023.
4- CAPITAL AND LIQUIDITY | Cash Flows
OPERATING ACTIVITIES
Cash flows from operating activities
FINANCING ACTIVITIES
Cash flows from (used in) 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 year
Cash and cash equivalents, end of year
Three months ended
December 31
2023
2022
Year ended December 31
2023
2022
80,370
93,631
297,853
430,243
256,955
(88,391)
333,279
133,154
(328,898)
(63,386)
(633,709)
(571,384)
721
9,148
150,096
159,244
4,266
(53,880)
216,851
162,971
(1,150)
(3,727)
162,971
159,244
4,692
(3,295)
166,266
162,971
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p51
(in thousands of Canadian dollars, except as noted and amounts per share)
Cash Flows from Operating Activities
For the three months ended December 31, 2023, cash flows from operating activities totalled $80.4 million, compared with
$93.6 million in the same period last year. The decrease is mainly due to the realized gain on financial instruments following
the monetization of the foreign exchange forward contracts concurrent with the closing of the French Acquisition in 2022, and
by the increase in finance costs paid, stemming mainly from the Chile Green Bonds and to the timing of interest payments for
certain project debts. These items were partly offset by the respective operating performance of the hydroelectric, wind and
solar segments previously discussed, including the contribution of the Aela and Sault Ste. Marie acquisitions.
For the year ended December 31, 2023, cash flows from operating activities totalled $297.9 million, compared with
$430.2 million in the same period last year. The decrease relates primarily to 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 in 2022, and the foreign exchange forward contracts concurrent with the closing of the French Acquisition in
2022. Moreover, the increase in finance costs paid, stemming mainly from the Chile Green Bonds and the Sault Ste. Marie
Acquisition, as well as the timing of interest payments for certain project and corporate loans, also contributed to the decrease.
These items were partly offset by the respective operating performance of the hydroelectric, wind and solar segments
previously discussed, including the respective contribution of the Aela and Sault Ste. Marie acquisitions.
Cash Flows from (used in) Financing Activities
For the three months ended December 31, 2023, cash flows from financing activities totalled $257.0 million, compared with
cash flows used in financing activities of $88.4 million in the same period last year. The increase stems mainly from the net
$212.5 million increase in long-term loans and borrowings in 2023, mainly due to the net draws made toward the construction
of the Boswell Springs project, and from the disposition of a non-controlling interest in the Innergex portfolio in France,
compared with the consideration paid towards Mountain Air Acquisition in 2022. The increase is partly offset by the scheduled
principal repayments of long-term loans and borrowings.
For the year ended December 31, 2023, cash flows from financing activities totalled $333.3 million, compared with
$133.2 million in the same period last year. The increase is mainly due to a net increase of $443.8 million in long-term loans
and borrowings in 2023, mainly explained by the net draws made toward the construction of the Boswell Springs wind project,
Salvador and San Andrés battery energy storage projects, the Sault Ste. Marie Acquisition, toward the Hale Kuawehi solar
project, and by the disposition of a non-controlling interest in the Innergex portfolio in France, compared with the consideration
paid towards the Mountain Air Acquisition in 2022, partly offset by the scheduled principal repayments of long-term loans and
borrowings, and by the issuance of common shares as part of the public offering and the concurrent private placement to
Hydro-Québec in February 2022 for a total amount of $202.2 million.
Cash Flows used in Investing Activities
For the three months ended December 31, 2023, cash flows used in investing activities totalled $328.9 million, compared with
$63.4 million in the same period last year. This increase is mainly due to the additions to property, plant and equipment made
toward the Boswell Springs wind project and Hale Kuawehi solar project in 2023.
For the year ended December 31, 2023, cash flows used in investing activities totalled $633.7 million, compared with
$571.4 million in the same period last year. This increase is mainly due to the additions to property, plant and equipment made
toward the Boswell Springs wind project, the Salvador and San Andrés battery energy storage projects in 2023, and toward the
Hale Kuawehi solar project. The increase was partially offset by the consideration paid for the Sault Ste. Marie Acquisition in
2023, compared with the consideration paid for the Aela and San Andrés acquisitions in 2022, and by the proceeds obtained
on the sale of safe harbor solar modules during the first quarter of 2023.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p52
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Free Cash Flow and Payout Ratio
Free Cash Flow and Payout Ratio1
Cash flows from operating activities2
Add (Subtract) the following items:
Changes in non-cash operating working
capital items
Prospective projects expenses
Maintenance capital expenditures, net of
proceeds from dispositions
Scheduled debt principal payments
Free Cash Flow attributed to non-controlling
interests3
Dividends declared on Preferred shares
Chile portfolio refinancing - hedging impact5
Add (subtract) the following specific items4:
Realized loss on contingent considerations
Realized (gain) loss on termination of
interest rate swaps5
Realized gain on termination of foreign
exchange forwards6
Principal and interest paid related to pre-
acquisition period
Acquisition, integration and ERP
implementation expenses
Realized gain on the Phoebe basis hedge
Gain on disposition of non-controlling
interests7
Free Cash Flow1,8
Year ended December 31
2023
2022
2021
February 2021
Texas Events
(9 days)8
2021
Normalized8
297,853
430,243
265,498
17,093
282,591
33,401
27,162
14,518
24,740
21,455
27,367
(25,316)
(186,458)
(11,051)
(156,862)
(8,029)
(160,973)
(38,377)
(5,632)
4,578
(29,271)
(5,632)
2,578
(25,076)
(5,632)
—
—
—
547
2,405
(71,735)
2,508
—
(43,458)
1,312
15,948
—
—
17,918
—
—
—
4,563
(2,546)
88,054
214,930
—
171,988
—
119,682
—
—
—
—
—
—
—
—
—
—
—
21,455
27,367
(8,029)
(160,973)
(25,076)
(5,632)
—
547
2,508
—
—
—
(1,304)
—
15,789
4,563
(3,850)
—
135,471
—
— %
132,229
98 %
Dividends declared on common shares
Payout Ratio1,8
Normalized Payout Ratio1
147,058
146,957
132,229
68 %
69% - 75%
85 %
110 %
1.
2.
3.
4.
5.
6.
7.
Free Cash Flow, Payout Ratio and Normalized Payout Ratio are not recognized measures under IFRS and therefore may not be comparable to those
presented by other issuers. Please refer to Section 6- NON-IFRS MEASURES for more information.
Cash flows from operating activities for the year ended December 31, 2022 include the one-time BC Hydro Curtailment Payment received during Q1 2022.
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.
Certain 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, ERP implementation expenses, 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. Gains realized on strategic transactions, which allow the Corporation to finance its growth
without having to increase leverage or dilute shareholders, are also added to the Free Cash Flow and Payout Ratio.
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.
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.
The Free Cash Flow for the year ended December 31, 2023, includes a gain realized following the disposition of a 30% non-controlling participation in
Innergex's French operating and development portfolio. This amount represents a gain over funds invested in operations and development, including the
historical prospective project expenses, net of the current income tax payable following the transaction. As such, this amount is not comparable to the gain
recognized in equity attributable to owners of the Corporation.
8. 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.
2023 Annual Report
Management's Discussion and Analysis p53
(in thousands of Canadian dollars, except as noted and amounts per share)
Changes in the measure
On January 1, 2023, the Corporation revised the calculation of its Free Cash Flow and Payout Ratio measures to exclude the
prospective project expenses. The comparative figures have been adjusted to conform with the revised measures.
On October 26, 2023, Innergex disposed of a non-controlling 30% participation in its French portfolio. Until recently, Innergex
relied on leverage and equity issuance to fund its capital requirements. The Corporation amended the presentation of its Free
Cash Flow and Payout Ratio to include the gains realized on strategic transactions, which allow the Corporation to finance its
growth without having to increase leverage or dilute shareholders. The change was applied retrospectively with no impact on
comparative information.
The amendments are aimed at increasing relevance of the measure, allowing investors to understand how the operations
contribute to funding the Corporation’s growth and its dividend. The revised measure also enhances comparability with current
industry practices.
Free Cash Flow
For the year ended December 31, 2023, the Corporation generated Free Cash Flow1 of $214.9 million, compared with
$172.0 million for the corresponding period last year.
Free Cash Flow1 increased by $42.9 million compared with Free Cash Flow1 in the comparative period, mainly due to:
•
•
•
a gain realized upon disposition of a 30% non-controlling interest in Innergex's portfolio in France, which crystallizes
value to Innergex's shareholders, mainly derived from the development portfolio, and from certain operational
improvements, showcasing the ability of the development and operational teams to create tangible value;
the contribution to cash flows from operating activities before changes in non-cash operating working capital items
from the Aela and Sault Ste. Marie acquisitions; and
the higher production at the Curtis Palmer hydro facilities in the United States and increased wind regime and
revenues from new PPAs in place at facilities in France.
These items were partly offset by:
•
a decrease in cash flows from operating activities before changes in non-cash operating working capital items
attributable to lower wind regimes at the Quebec facilities, lower spot prices at the Chilean hydro facilities and
unfavourable pricing and lower production at the Griffin Trail wind facility;
an increase in scheduled debt principal payments mainly stemming from the Sault Ste. Marie, Mountain Air and
French acquisitions;
an increase in maintenance capital expenditures mainly stemming from the recent acquisitions, from the recent
weather-related damages at the Foard City facility, and from major component replacements at the wind facilities in
Quebec;
the timing of principal and interest payments for certain project debts; and
an increase in Free Cash Flow1 attributed to non-controlling interests mainly attributable to the performance of the
Curtis Palmer hydro facilities.
•
•
•
•
Payout Ratio
For the year ended December 31, 2023, the dividends on common shares declared by the Corporation amounted to 68% of
Free Cash Flow1, compared with 85% for the corresponding period last year.
Normalized Payout Ratio
Had production levels been equal to their long-term average during the year ended December 31, 2023, excluding Chile and
the gain realized in the French portfolio, Free Cash Flow and Payout Ratio would have been in a range of $197 million to
$212 million and 69% to 75%, respectively.
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 Section
6- NON-IFRS MEASURES for more information.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p54
(in thousands of Canadian dollars, except as noted and amounts per share)
Scheduled debt principal payments
Innergex’s facilities have useful lives exceeding the current amortization period for existing debt. The below table presents a
comparison of the project-level debt maturities compared to their power purchase agreements' ("PPA") maturities and useful
lives:
As at December 31, 2023
Long-term loans
and borrowings,
before deferred
financing costs
Remaining years
to debt Maturity1
Remaining years
to PPA Maturity1
Remaining useful
life1
Corporate debt and convertible debentures
1,083,830
3.3
5.9
37.4
Project-level debt:
Chile Green Bonds
Hydro
Wind
Solar
Tax equity financing
939,046
1,808,771
1,682,149
459,503
383,100
6,356,399
12.5
25.1
9.8
3.7
6.0
12.8
12.0
27.7
9.0
9.0
8.1
12.2
34.8
63.2
20.9
27.0
26.9
40.4
1.
Figures provided in years on a weighted average basis.
Assuming debt amortization schedules were aligned with the useful lives of the assets, and and including the gain realized in
the French portfolio, the Free Cash Flow and Payout Ratio for the year ended December 31, 2023, would have been $248.2
million and 59%, respectively ($201.4 million and 73%, respectively for the same period last year).
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p55
(in thousands of Canadian dollars, except as noted and amounts per share)
4- CAPITAL AND LIQUIDITY | Information on Capital Stock
The Corporation’s Equity Securities
Number of common shares
Number of 4.75% convertible debentures1
Number of 4.65% convertible debentures1
Number of Series A Preferred Shares
Number of Series C Preferred Shares
Number of stock options outstanding
February 20, 2024
As at
December 31, 2023
December 31, 2022
204,401,736
148,023
142,056
3,400,000
2,000,000
282,417
204,321,381
148,023
142,056
3,400,000
2,000,000
289,111
204,132,833
148,023
142,056
3,400,000
2,000,000
284,769
1.
The 4.75% and the 4.65% debentures mature on June 30, 2025, and October 31, 2026, respectively.
As at the closing of the market on February 20, 2024, and since December 31, 2023, the increase in the number of common
shares of the Corporation is attributable to the issuance of 80,355 common shares related to the Corporation's Dividend
Reinvestment Plan ("DRIP").
As at December 31, 2023, the increase in the number of common shares since December 31, 2022, was due to the issuance
of 188,548 common shares related to the DRIP.
4- CAPITAL AND LIQUIDITY | Dividends
The Corporation's dividend policy is determined by its Board of Directors and is based on the Corporation's operating results,
cash flows, financial condition, debt covenants, long-term growth prospects, solvency test imposed under corporate law for the
declaration of dividends and other relevant factors.
The following dividends were declared by the Corporation:
Three months ended December 31
2023
2022
Year ended December 31
2022
2023
($/share)
Total
($/share)
Total
($/share)
Total
($/share)
Total
Dividends declared on common
shares1
Dividends declared on Series A
Preferred Shares
Dividends declared on Series C
Preferred Shares
0.1800 36,778 0.1800 36,741
0.7200 147,058 0.7200 146,957
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 issuance of common shares under the DRIP.
The following dividends will be paid by the Corporation on April 15, 2024:
Date of
announcement
Record date
Payment date
Dividend per
common share
Dividend per Series A
Preferred Share
Dividend per Series C
Preferred Share
February 21, 2024
March 28, 2024
April 15, 2024
$0.0900
$0.2028
$0.3594
On February 21, 2024, the Board of Directors approved an update to its capital allocation strategy and revised its annual
dividend for 2024 to $0.36 per common share to support its growth plans.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p56
(in thousands of Canadian dollars, except as noted and amounts per share)
5- OUTLOOK | 2024 Growth Targets
Adjusted EBITDA Proportionate1
Free Cash Flow per Share1 ($/share)
2024
Target Range
725,000
775,000
0.70
0.85
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.
As a results of recent macroeconomic trends, Innergex is withdrawing its previously provided 2025 financial targets.
The Corporation presents its 2024 growth targets for which it used certain assumptions to provide readers with an indication of
its business activities and operating performance. These assumptions include:
•
•
•
•
•
•
•
•
•
•
•
•
Average hydrology, wind regimes and solar irradiation projections corresponding to 100% LTA target at our operating
facilities;
No material changes in the assumed U.S. dollar to Canadian dollar and Euro to Canadian dollar exchange rate;
Assets availability corresponding approximately to 95%;
Full-year contribution of the acquisitions completed in 2023;
Full-year contribution of the Salvador battery energy storage project in Chile commissioned in 2023 and the Innavik
hydro facility supplying customers since October 30, 2023;
Success in commissioning projects under construction with COD expected in 2024;
Availability of capital resources and timely performance by third parties of contractual obligations;
No significant event occurring outside the ordinary course of business such as a natural disaster, pandemic or other;
Average merchant spot prices consistent with external price curves and internal forecasts;
No significant variability in interest rates;
An average inflation rate based on banking institution forecasted inflation; 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 21, 2024, may prove to be
inaccurate. Important risks and uncertainties may cause actual results or performance to be materially different from the
Corporation’s expectations as set forth in this section. The risks and uncertainties are referred to in the "Risks and
Uncertainties" section of this MD&A.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p57
(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 pay a dividend and its ability to fund its growth. These indicators also facilitate the
comparison of results over different periods. Revenues and Production Tax Credits Proportionate, Adjusted EBITDA, Adjusted EBITDA Proportionate, Adjusted Net Loss,
Free Cash Flow, Adjusted Free Cash Flow and Payout Ratio are not measures recognized by IFRS and have no standardized meaning prescribed by IFRS.
Revenues and Production Tax Credits Proportionate, Adjusted EBITDA and Adjusted EBITDA Proportionate
Changes in the Non-IFRS measures effective January 1, 2023
On January 1, 2023, the Corporation amended the presentation of its consolidated statements of earnings to enhance relevance of the financial statements. As a result,
production tax credits ("PTCs"), previously recognized in other net income (expenses), have been reclassified directly below revenues to better represent the nature of
PTCs as income arising in the course of the Corporation's ordinary activities through the generation of electricity. In addition, certain subtotals have been removed from the
consolidated statements of earnings, which now includes an operating income subtotal.
As a result of these changes to the consolidated statements of earnings, certain Non-IFRS measures have been amended as follows:
•
•
•
•
PTCs are presented directly in Revenues and Production Tax Credits (a subtotal presented in the primary financial statements of the Corporation, thus excluded
from the Non-IFRS Measures);
PTCs are presented directly in Adjusted EBITDA, along with the realized portion of the change in fair value of power hedges;
Other income related to PTCs has been retreated from the Revenues Proportionate and Adjusted EBITDA Proportionate measures; and
Proportionate measures include only Innergex's share of Revenues and Production Tax Credits, and Adjusted EBITDA, of the joint ventures and associates.
The comparative figures have also been adjusted to conform with the revised measures. The above amendments seek to improve the clarity of the measures, and to
enhance comparability with current industry practices. In addition, the inclusion of the realized portion of the change in fair value of power hedges to the Adjusted EBITDA
measure enhances comparability of the Corporation's performance over time.
Description of the measures
References in this document to "Revenues and Production Tax Credits Proportionate" are to Revenues and Production Tax Credits, plus Innergex's share of Revenues and
Production Tax Credits of the joint ventures and associates.
References in this document to “Adjusted EBITDA” are to operating income, to which are added (deducted) depreciation and amortization, ERP implementation, impairment
charges, and the realized portion of the change in fair value of power hedges. 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.
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 and Production Tax Credits
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. Readers are cautioned that Revenues
and Production Tax Credits Proportionate, should not be construed as an alternative to Revenues and Production Tax Credits, 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 operating income, as determined in
accordance with IFRS. Please refer to Section 3- FINANCIAL PERFORMANCE AND OPERATING RESULTS for more information.
Innergex Renewable Energy Inc.
2023 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 the non-IFRS measures to their closest IFRS measures:
Three months ended December 31, 2023
Share of joint
ventures
Proportionate
Consolidation
Three months ended December 31, 2022
Share of joint
ventures
Proportionate
Consolidation
Revenues
Production tax credits
Revenues and Production Tax Credits
Operating income
Depreciation and amortization
ERP implementation
Impairment of long-term assets
Realized loss on power hedges
Adjusted EBITDA
Revenues
Production tax credits
Revenues and Production Tax Credits
Operating income
Depreciation and amortization
ERP implementation
Impairment of long-term assets
Realized loss on power hedges
Adjusted EBITDA
243,523
18,003
261,526
(36,494)
87,927
3,558
118,857
1,573
175,421
14,699
—
14,699
6,681
4,345
—
—
—
11,026
258,222
18,003
276,225
(29,813)
92,272
3,558
118,857
1,573
186,447
203,636
16,576
220,212
(6,504)
93,756
1,815
47,868
(1,559)
135,376
11,364
—
11,364
3,870
4,153
—
—
—
8,023
215,000
16,576
231,576
(2,634)
97,909
1,815
47,868
(1,559)
143,399
Year ended December 31, 2023
Share of joint
ventures
Consolidation
Proportionate
Consolidation
Year ended December 31, 2022
Share of joint
ventures
Proportionate
969,890
71,684
1,041,574
219,575
361,292
12,651
118,857
(24,632)
687,743
61,081
—
61,081
30,962
16,556
—
—
—
47,518
1,030,971
71,684
1,102,655
250,537
377,848
12,651
118,857
(24,632)
735,261
870,494
64,729
935,223
263,366
336,053
2,357
47,868
(37,479)
612,165
60,535
—
60,535
29,919
16,799
—
—
—
46,718
931,029
64,729
995,758
293,285
352,852
2,357
47,868
(37,479)
658,883
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p59
(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 loss on the termination of interest rate swaps, realized gain on foreign exchange forward contracts,
impairment charges, ERP implementation, items that are outside of the normal course of the Corporation's cash generating operations, 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 be marked-to-market. When hedge accounting is not applied,
changes in the fair value of the derivatives are 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 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 do 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 Section 3- Adjusted Net Earnings (Loss) for more information.
Below is a reconciliation of Adjusted Net Loss to its closest IFRS measure:
Net loss
Add (Subtract):
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 (French Acquisition)
Realized loss (gain) on termination of interest rate swaps
ERP implementation
Realized gain on foreign exchange forward contracts
Income tax (recovery) expense related to above items
Adjusted Net loss
Three months ended December 31
2023
2022
Year ended December 31
2022
2023
(121,964)
(52,575)
(105,814)
(91,115)
(1,186)
6,141
118,857
—
2,405
3,558
(71)
(14,906)
(7,166)
(76)
25,336
47,868
(43,458)
(59)
1,815
—
(6,320)
(27,469)
(1,917)
(9,649)
118,857
—
(1,307)
12,651
(449)
(14,424)
(2,052)
(1,381)
141,859
47,868
(43,458)
(71,735)
2,357
(3,214)
(13,684)
(32,503)
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p60
(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, 2023
Three months ended
December 31, 2022
Year ended December 31, 2023 Year ended December 31, 2022
IFRS
Adj.
Non-IFRS
IFRS
Adj.
Non-IFRS
IFRS
Adj.
Non-IFRS
IFRS
Adj.
Non-IFRS
Revenues
Production Tax Credits
243,523
18,003
— 243,523 203,636
16,576
—
18,003
— 203,636 969,890
16,576 71,684
—
— 969,890 870,494
— 71,684 64,729
— 870,494
64,729
—
Operating expenses
General and administrative
expenses
Prospective projects expenses
ERP implementation
Depreciation and amortization
Impairment of long-term assets
63,653
—
63,653
62,591
—
62,591 232,795
— 232,795 207,768
— 207,768
—
14,941
9,084
—
3,558 (3,558)
—
118,857 (118,857)
87,927
14,941
9,084
—
87,927
—
13,568
—
7,118
—
1,815
(1,815)
—
93,756
47,868 (47,868)
13,568 69,242
7,118 27,162
— 12,651
93,756 361,292
— 69,242 53,071
— 27,162 24,740
2,357
—
— 361,292 336,053
(12,651)
— 118,857 (118,857)
— 47,868 (47,868)
—
—
(2,357)
53,071
24,740
—
— 336,053
—
Operating income
(36,494) 122,415
85,921
(6,504) 49,683
43,179 219,575 131,508 351,083 263,366 50,225 313,591
Finance costs
Other net expenses (income)
Share of (earnings) losses of
joint ventures and associates
Change in fair value of financial
instruments
Income tax (recovery) expense
Net loss
88,420
26,170
—
71
88,420
26,241
83,864
(8,475)
—
—
83,864 348,386
(8,475) 27,031
— 348,386 317,842
(6,547)
449 27,480
— 317,842
(3,333)
3,214
(4,004)
744
(3,260)
286
214
500 (16,791)
1,210
(15,581)
(14,382)
1,881
(12,501)
6,973 (8,546)
(32,089) 15,348
(121,964) 114,798
(1,573)
(16,741)
(7,166)
(16,622) 18,181
(12,982)
6,182
(52,575) 25,106
1,559 13,676 10,956 24,632 64,145 (26,666)
(6,577) 13,184
(6,800) (46,913) 15,131
(91,115) 58,612
(27,469) (105,814) 103,762
(31,782)
(2,052)
37,479
6,607
(32,503)
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p61
(in thousands of Canadian dollars, except as noted and amounts per share)
Free Cash Flow, Payout Ratio and Normalized Payout Ratio
Changes in the Non-IFRS measures effective January 1, 2023
On January 1, 2023, the Corporation revised the calculation of its Free Cash Flow and Payout Ratio measures to exclude the prospective project expenses. The
comparative figures have been adjusted to conform with the revised measures.
On October 26, 2023, Innergex disposed of a non-controlling 30% participation in its French portfolio. Until recently, Innergex relied on leverage and equity issuance to fund
its capital requirements. The Corporation amended the presentation of its Free Cash Flow and Payout Ratio to include the gains realized on strategic transactions, which
allow the Corporation to finance its growth without having to increase leverage or dilute shareholders. The change was applied retrospectively with no impact on
comparative information.
The amendments are aimed at increasing relevance of the measure, allowing investors to understand how the operations contribute to funding the Corporation’s growth and
its dividend. The revised measure also enhances comparability with current industry practices.
Description of the measures
References to “Free Cash Flow” are to cash flows from operating activities before changes in non-cash operating working capital items, less prospective projects expenses,
maintenance capital expenditures net of proceeds from dispositions, scheduled debt principal payments, the portion of Free Cash Flow attributed to non-controlling
interests, preferred share dividends declared, and gains realized on strategic transactions, 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, expenses related to the implementation of a cloud-based ERP
solution, 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.
Free Cash Flow is a measure of the Corporation's ability to pay a dividend and its ability to fund its growth from its cash generating operations, in the normal course of
business, and through strategic transactions.
Innergex believes that the presentation of this measure enhances the understanding of the Corporation's cash generation capabilities, its ability to pay a dividend 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 Section 4- Free Cash Flow and Payout Ratio for the reconciliation of Free Cash
Flow.
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 pay a
dividend and its ability to fund its growth. Payout Ratio is used by investors in this regard.
References to “Normalized Payout Ratio” are to dividends declared on common shares divided by the estimated Free Cash Flow had production levels been equal to their
long-term average in all jurisdictions, excluding Chile, and excluding gains realized on strategic transactions. Innergex believes that this is a measure of its ability to pay a
dividend and its ability to fund its growth, free from circumstantial impacts on production and the immediate benefits of strategic transactions. Normalized Payout Ratio is
used by investors in this regard.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p62
(in thousands of Canadian dollars, except as noted and amounts per share)
7- ADDITIONAL CONSOLIDATED INFORMATION | Geographic Segments –
Revenues
Revenues and Production Tax Credits
Canada
United States
Chile
France
Year ended December 31
2023
2022
441,631
323,293
151,040
125,610
1,041,574
427,910
294,175
121,021
92,117
935,223
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.
December 31, 2023
December 31, 2022
As at
3,355,393
2,597,848
1,585,033
731,897
8,270,171
3,246,979
2,364,160
1,549,679
753,161
7,913,979
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p63
(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,
2023
Sep 30,
2023
Jun 30,
2023
Three months ended
Dec 31,
Mar 31,
2022
2023
Sep 30,
2022
Jun 30,
2022
Mar 31,
2022
Production (MWh)
Revenues and Production Tax Credits
Operating income (loss)
Adjusted EBITDA1
Net (loss) earnings
Net (loss) earnings attributable to owners of the
parent
Basic net (loss) earnings attributable to owners of
the parent ($ per share)
Diluted net (loss) earnings attributable to owners
of the parent ($ per share)
Dividends declared on common shares
Dividends declared on common shares,
$ per share
2,703,285
261.5
(36.5)
175.4
(122.0)
2,654,439
292.2
99.8
180.2
4.4
2,951,098
269.5
93.3
187.0
24.8
2,312,655
218.3
63.0
145.1
(13.0)
2,357,039
220.2
(4.7)
135.4
(52.6)
2,736,471
268.7
108.5
167.6
21.0
2,855,891
238.5
92.5
159.3
(24.6)
2,304,600
207.7
69.3
149.8
(34.9)
(113.9)
9.1
20.7
(14.3)
(45.3)
23.3
(25.2)
(34.4)
(0.57)
0.04
0.10
(0.08)
(0.23)
0.11
(0.13)
(0.18)
(0.57)
36.8
0.04
36.8
0.10
36.8
(0.08)
36.7
(0.23)
36.7
0.11
36.7
(0.13)
36.7
(0.18)
36.7
0.180
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 Section 6- NON-IFRS MEASURES 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.
On January 1, 2023, the Corporation amended the presentation of its consolidated statements of earnings (refer to Section 8- Material Accounting Policies for more
information). Concurrently, certain Non-IFRS measures have been amended (refer to Section 6- NON-IFRS MEASURES for more information). The following table provides
a summary of the amendments to the historical financial information:
(in millions of dollars, unless otherwise stated)
Previously reported Revenues
Production Tax Credits
Revenues and Production Tax Credits
Previously reported Adjusted EBITDA1
Production Tax Credits
Realized (loss) gain on power hedges
Adjusted EBITDA1
Three months ended
Dec 31,
2022
Sep 30,
2022
Jun 30,
2022
Mar 31,
2022
203.6
16.6
220.2
120.4
16.6
(1.6)
135.4
258.4
10.3
268.7
181.2
10.3
(23.9)
167.6
219.7
18.8
238.5
152.9
18.8
(12.3)
159.3
188.7
19.0
207.7
130.5
19.0
0.3
149.8
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 Section 6- NON-IFRS MEASURES for more information.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p64
(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
Mills County
Clay County
Knox and Baylor Counties
Solar
Wind
Wind
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
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)
Joint venture facilities
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.
2023 Annual Report
Management's Discussion and Analysis p65
(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 and Production tax credits
795,192
(54,967)
740,225
Operating Income
2 Adjusted EBITDA1
280,995
(54,967)
226,028
499,963
15,789
515,752
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.
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 Section 6-
NON-IFRS MEASURES of this MD&A 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 Adjusted EBITDA and change in fair value of financial instruments were unfavourably impacted by a $70.8
million realized loss on the Phoebe power hedge, and $1.3 million on the Phoebe basis hedge, respectively, for an
aggregate impact of $142.8 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.
2023 Annual Report
Management's Discussion and Analysis p66
(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 and Production tax credits
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
397,770
(16,801)
380,969
464,293
(57,107)
407,186
324,843
(16,801)
308,042
255,434
47,396
302,830
120,120
(38,166)
81,954
121,005
(38,166)
82,839
30,044
32,590
62,634
30,598
32,590
63,188
—
—
—
—
—
—
(67,360)
—
(67,360)
(67,360)
—
(67,360)
795,192
(54,967)
740,225
913,147
(95,273)
817,874
499,963
15,789
515,752
469,655
79,986
549,641
1.
2.
These measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers. Please refer to the
"Non-IFRS Measures" section for more information.
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
Foard City
Phoebe
Phoebe
Phoebe
Flat Top
Shannon
Revenues
Revenues
Power hedge
Basis hedge
Share of loss
Share of loss
For the 9-day period from February 11 to February 19, 2021
Non-Cash
Cash
Total
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)
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p67
(in thousands of Canadian dollars, except as noted and amounts per share)
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)
119,682
137,517
110 %
(1,304)
15,789
—
(21) %
(3,850)
135,471
137,517
98 %
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.
Normalized measures are not recognized measures under IFRS and therefore may not be comparable to those presented by other issuers.
2.
(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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p68
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
2023 Annual Report
Management's Discussion and Analysis p69
(in thousands of Canadian dollars, except as noted and amounts per share)
8- ACCOUNTING POLICIES AND INTERNAL CONTROLS | Material Accounting
Policies
Changes in presentation
Consolidated statements of earnings
On January 1, 2023, the Corporation amended the presentation of its consolidated statements of earnings to enhance
relevance of the financial statements. Comparative figures have been adjusted to conform to the current year's presentation.
As a result, production tax credits ("PTCs"), previously recognized in other net income (expenses), have been reclassified
directly below revenues to better represent the nature of PTCs as income arising in the course of the Corporation's ordinary
activities through electricity generation. The reclassification also goes alongside the Inflation Reduction Act ("IRA"), signed into
law in August 2022 by the United States Government, extending the PTC program for wind facilities, and introducing a PTC
program for solar facilities. For projects commencing construction after January 1, 2025, the IRA initiates the transition toward
a technology-neutral tax credit system in the United States, allowing zero carbon emission facilities to receive tax credits
similar to current PTCs and ITCs.
In addition, certain subtotals have been removed from the consolidated statements of earnings, which now includes an
operating income subtotal.
The Corporation has also reclassified the Enterprise Resource Planning (“ERP”) implementation expenses, from other net
expenses, to a separate account in the statement of earnings, to conform with the addition of the operating income subtotal.
The table below presents a summary of the reclassifications:
Three months ended
December 31, 2022
Year ended December 31, 2022
Legacy
presentation Adjustment
Amended
presentation
Legacy
presentation Adjustment
Amended
presentation
Revenues
Production Tax Credits
Revenues and Production Tax Credits
203,636
—
N/A
—
16,576
N/A
203,636
16,576
220,212
870,494
—
N/A
—
64,729
N/A
870,494
64,729
935,223
Expenses
Operating
General and administrative
Prospective projects
ERP implementation
Depreciation and amortization
Impairment of long-term assets
Operating income
Finance costs
Other net (income) expenses
Share of losses of joint ventures and
associates
Change in fair value of financial
instruments
Loss before income tax
Income tax recovery
Net loss
62,591
13,568
7,118
—
93,756
47,868
N/A
—
—
—
1,815
—
—
N/A
62,591
13,568
7,118
1,815
93,756
47,868
(6,504)
207,768
53,071
24,740
—
336,053
47,868
N/A
—
—
—
2,357
—
—
N/A
207,768
53,071
24,740
2,357
336,053
47,868
263,366
83,864
(23,236)
—
14,761
83,864
(8,475)
317,842
(68,919)
—
62,372
317,842
(6,547)
286
(16,622)
(65,557)
(12,982)
(52,575)
—
—
—
—
—
286
(14,382)
—
(14,382)
(16,622)
(65,557)
64,145
(97,692)
(12,982)
(52,575)
(6,577)
(91,115)
—
—
—
—
64,145
(97,692)
(6,577)
(91,115)
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p70
(in thousands of Canadian dollars, except as noted and amounts per share)
Consolidated statements of cash flows
The Corporation corrected the presentation of the buyback of non-controlling interests in the comparative period amounting to
($64.4 million), from cash flows used in investing activities to cash flows from financing activities. As a result, cash flows from
financing activities were reduced by $64,382 and cash flows used in investing activities were reduced by ($64.4 million), with a
nil effect on the net change in cash and cash equivalents subtotal. This reclassification reflects that these transactions
represent a change in ownership interest between equity holders, which shall be classified as financing activities.
Changes in accounting policies
On January 1, 2023, the Corporation adopted the following new standards and interpretations:
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; and
clarifying that not all accounting policies that relate to material transactions, other events or conditions are themselves
material to a company’s financial statements.
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
On May 7, 2021, the IASB published "Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(Amendments to IAS 12)" that clarify how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The Corporation has applied these amendments to transactions occurring on or after January 1,
2022, resulting in no impact on the net deferred tax for temporary differences related to leases and decommissioning
obligations and retained earnings. The reconciliation of the Income taxes recognized in the consolidated statements of
earnings (loss) presented in Note 11 – Income Taxes of the consolidated financial statements was amended to disclose
separately the resulting deferred tax liabilities and assets.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p71
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, 2023, and have
concluded that they were effective at the financial year-end. During the period beginning on October 1, 2023, and ended on
December 31, 2023, there was no change to the ICFR that has materially affected, or is reasonably likely to materially affect,
the Corporation's ICFR.
The President and Chief Executive Officer and the Chief Financial Officer have also limited the scope of the Corporation's
design of DC&P and ICFR to exclude the controls, policies and procedures of the Sault Ste. Marie solar portfolio composed of
the Sault Ste. Marie 1, Sault Ste. Marie 2, and Sault Ste. Marie 3 solar facilities (collectively "entities excluded from the
Corporation's control policies and procedures"). The evaluation of the design and the operating effectiveness of the DC&P and
ICFR for these entities will be completed in the 12 months following their dates of acquisition. A summary of the financial
information about the entities excluded is presented in the "Entities Excluded from the Corporation’s control policies and
procedures" section of this MD&A.
8- ACCOUNTING POLICIES AND INTERNAL CONTROLS | Entities excluded
from the Corporation's control, policies and procedures
As stated in the "Internal controls'' section of this MD&A, the scope of the Corporation's design of DC&P and ICFR exclude the
controls, policies and procedures of the Sault Ste. Marie solar portfolio. The following tables present a summary of the entities
excluded from the Corporation's control policies and procedures:
Summary Statements of Earnings (Loss) and Comprehensive Income (Loss)
Revenues
Net earnings
Total comprehensive income
Summary Statement of Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity
Year ended December 31, 2023
31,055
5,933
5,144
As at
December 31, 2023
7,268
216,687
223,956
19,063
159,520
45,373
223,956
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p72
(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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p73
(in thousands of Canadian dollars, except as noted and amounts per share)
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 concerning
complete fulfilment, in due time, of equipment supply. Mitigation measures may be necessary to offset delays, supply chain
disruptions or any other circumstance emanating from suppliers, such as putting in place partnerships with suppliers or
advancing equipment acquisitions. Legal recourses may also be necessary to compensate the Corporation’s development and
construction projects and its operating facilities. 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.
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, Unexpected Operations and Maintenance Activity and Increased Asset Maintenance
on Ageing Equipment
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. Maintenance due to ageing
equipment could also result in more costly repairs and longer downtime periods.
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 and 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p74
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
Resource Assessment and Performance Variability
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.
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.
Resource and operating sites performance variability could result in the Corporation delivering less than the required quantity
of electricity as agreed in a given contract year and therefore be in default under its respective PPA. Penalty payments could
then be payable to the relevant purchaser by the Corporation and the payment of any such penalties could adversely affect the
revenues and profitability of the Corporation.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p75
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, workforce, 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 many 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 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
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p76
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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 pay a
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,
virtual 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p77
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p78
(in thousands of Canadian dollars, except as noted and amounts per share)
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 required 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.
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 partially 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p79
(in thousands of Canadian dollars, except as noted and amounts per share)
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 the Inflation Reduction Act passed in 2022) 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 or ITCs.
Qualification of the projects for PTCs or ITCs is critical to obtaining tax equity financing for wind and solar projects. The
inability to qualify the projects for PTCs or ITCs, in whole or in part, would adversely affect the financing options for those
projects. If the qualification of a project for PTCs or ITCs is not successful, there may be a material impairment of the
Corporation’s investment in that project.
Other government actions could be taken that could, directly or indirectly, inhibit the Corporation’s ability to raise tax equity
financing. For example, following the tax reform enacted in late-2017, lower corporate tax rates in the U.S. may impact the
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 First Nations and Indigenous communities, local communities and local stakeholders 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 Indigenous Communities and 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
groups, including Indigenous communities, landowners, municipalities and other stakeholders. 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p80
(in thousands of Canadian dollars, except as noted and amounts per share)
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 markets.
Risks Related to Financing
Liquidity Risks Related to Derivative Financial Instruments
Derivative financial instruments are entered into with major financial institutions and their effectiveness is dependent on the
performance of these institutions. Failure by one of them to perform its obligations could involve a liquidity risk. Liquidity risks
related to derivative financial instruments also include the settlement of bond forward contracts on their maturity dates and the
early termination option included in some interest rate swap contracts and foreign exchange contracts.
The occurrence of any of the foregoing could have a material adverse effect on the Corporation’s business, financial condition
and results of operations. The Corporation uses derivative financial instruments to manage its exposure to the risk of an
increase in interest rates on its debt financing, of foreign currency variation or of electricity market price variation. The
Corporation does not own or issue financial instruments for speculation purposes.
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
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p81
(in thousands of Canadian dollars, except as noted and amounts per share)
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 often purchases equipment from foreign suppliers. As such, the Corporation may be exposed to changes in
the Canadian dollar in relation to the foreign currency-denominated equipment purchases. Our development work and
operations in Canada, France, the U.S. and Latin America make us subject to foreign currency fluctuations.
Some of our revenue and costs are denominated in currencies other than the Canadian dollar. Foreign exchange fluctuations
may impact our results as they are reported in Canadian dollars.
Our functional and reporting currency is the Canadian dollar. As such, our foreign investments, operations costs and assets will
be exposed to net changes in currency exchange rates. Volatility in exchange rates could have an adverse effect on our
business, financial condition and operating results.
Other Risks
Possibility that the Corporation May Not Declare a Dividend or May Reduce 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p82
(in thousands of Canadian dollars, except as noted and amounts per share)
Ability to Attract New Talent or to Retain Officers or Key Employees
The Corporation’s officers and other key employees play a significant role in the Corporation’s success. The conduct of the
Corporation’s business and the execution of the Corporation’s growth strategy rely heavily on teamwork and the Corporation’s
future performance and development depend to a significant extent on the abilities, experience and efforts of its management
team. The Corporation’s ability to retain its management team or attract suitable replacements should key members of the
management team leave is dependent on the competitive nature of the employment market.
The loss of services from key members of the management team or a limitation in their availability could adversely impact the
Corporation’s prospects, financial condition and cash flow.
Further, such a loss could be negatively perceived in the capital markets. The Corporation’s success also depends largely
upon its continuing ability to attract, develop and retain skilled employees to meet its needs from time to time.
Litigation
In the normal course of its operations, the Corporation may become involved in various legal actions, including but not limited
to those involving claims relating to contract disputes, personal injuries, property damage, property taxes and land rights. The
Corporation maintains adequate provisions for its outstanding or pending claims. The final outcome with respect to
outstanding, pending or future actions cannot be predicted with certainty, and therefore there can be no assurance that their
resolution will not have an adverse effect on the financial position or results of operation of the Corporation in a particular
quarter or financial year.
Credit Rating May Not Reflect Actual Performance of the Corporation or a Lowering (Downgrade) of the
Credit Rating
The credit ratings applied to the Corporation, the Cumulative Rate Reset Preferred Shares, Series A and Cumulative
Redeemable Fixed Rate Preferred Shares, Series C (the “Credit Ratings”) are an assessment, by the rating agencies, of the
Corporation’s ability to pay its obligations. The Credit Ratings are based on certain assumptions about the future performance
and capital structure of the Corporation that may or may not reflect the actual performance or capital structure of the
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p83
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
2023 Annual Report
Management's Discussion and Analysis p84
(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 and production tax credits, targeted Revenues and Production Tax Credits 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 pay a dividend 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; availability of capital resources and timely performance by third parties of contractual obligations;
favourable economic and financial market conditions; average merchant spot prices consistent with external price curves and
internal forecasts; no material changes in the assumed U.S. dollar to Canadian dollar and Euro to Canadian dollar exchange
rate; no significant variability in interest rates; the Corporation’s success in developing and constructing new facilities; no
adverse political and regulatory intervention; 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.
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, unexpected operations and maintenance activity and increased asset maintenance
on ageing equipment; 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; resource assessment and performance
variability; 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 Indigenous communities and 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,
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p85
(in thousands of Canadian dollars, except as noted and amounts per share)
social and political conditions; adverse claims to property title; reliance on intellectual property and confidential agreements to
protect the Corporation's rights and confidential information; and reputational risks arising from misconduct of representatives
of the Corporation.
Although the Corporation believes that the expectations and assumptions on which Forward-Looking Information is based are
reasonable under the current circumstances, readers are cautioned not to rely unduly on this Forward-Looking Information, as
no assurance can be given that it will prove to be correct. Forward-Looking Information contained herein is provided as at the
date of this MD&A, and the Corporation does not undertake any obligation to update or revise any Forward-Looking
Information, whether as a result of events or circumstances occurring after the date hereof, unless so required by law.
Innergex Renewable Energy Inc.
2023 Annual Report
Management's Discussion and Analysis p86
(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 IFRS Accounting Standards as
issued by the IASB 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 21, 2024
Innergex Renewable Energy Inc.
2023 Annual Report
Responsibility for Financial Reporting p87
(in thousands of Canadian dollars, except as noted and amounts per share)
KPMG LLP
Tour KPMG
600 de Maisonneuve Blvd West, Suite 1500
Montréal, QC H3A 0A3
Canada
Telephone 514 840 2100
Fax 514 840 2187
INDEPENDENT AUDITOR'S 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, 2023 and December 31, 2022;
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 material accounting policy information.
(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, 2023 and December 31, 2022, and its consolidated financial performance and its
consolidated cash flows for the years then ended in accordance with IFRS Accounting Standards as issued by the
International Accounting Standards Board.
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 "Auditor’s Responsibilities for the Audit of the Financial Statements" section of our
auditor’s 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, 2023. 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 matter described below to be the key audit matter to be communicated in our auditor’s report.
Innergex Renewable Energy Inc.
2023 Annual Report
Independent Auditor's Report p88
(in thousands of Canadian dollars, except as noted and amounts per share)
Evaluation of the impairment analysis for facilities subject to market price risk exposure and for a facility under
construction in Hawaii
Description of the matter
We draw attention to Notes 2, 3 and 15 to the financial statements. The Entity has property, plant and equipment of $6,560,814
and recorded an impairment charge of $118,857 during the year ended December 31, 2023. A portion of these non-financial
assets are related to facilities that are subject to market price risk exposure and to a facility 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: future selling prices.
For the facility under construction in Hawaii: timing and costs to complete the construction and future 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 for a facility 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 third party industry forecasts specific to the regions.
For the facility under construction in Hawaii, we evaluated the appropriateness of the Entity’s significant assumptions:
◦
◦
for timing and costs to complete the construction 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 future selling prices by comparing to the agreement.
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.
2023 Annual Report
Independent Auditor's Report p89
(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 auditor’s report thereon, included in a document likely to
be entitled "2023 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 Management’s Discussion and Analysis filed with the relevant Canadian Securities
Commissions and the information, other than the financial statements and the auditor’s report thereon, included in a document
likely to be entitled “2023 Annual Report” as at the date of this auditor’s 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 auditor’s 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
Accounting Standards as issued by the International Accounting Standards Board, 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.
Auditor’s 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 auditor’s 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Independent Auditor's Report p90
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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 auditor’s 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 auditor’s 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.
2023 Annual Report
Independent Auditor's Report p91
(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 auditor’s 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 auditor’s
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 auditor’s report is Mathieu Lefebvre.
Montréal, Canada
February 21, 2024
*CPA auditor, public accountancy permit No. A134987
Innergex Renewable Energy Inc.
2023 Annual Report
Independent Auditor's Report p92
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)
Revenues
Production tax credits
Revenues and production tax credits
Expenses
Operating
General and administrative
Prospective projects
ERP implementation
Depreciation and amortization
Impairment of long-term assets
Operating income
Finance costs
Other net expenses (income)
Share of earnings of joint ventures and associates
Change in fair value of financial instruments
Loss before income tax
Income tax recovery
Net loss
Net loss attributable to:
Owners of the parent
Non-controlling interests
Net loss per share attributable to owners:
Basic net loss per share ($)
Diluted net loss per share ($)
Year ended December 31
2022
(Note 2)
2023
969,890
71,684
1,041,574
232,795
69,242
27,162
12,651
361,292
118,857
219,575
348,386
27,031
(16,791)
13,676
(152,727)
(46,913)
(105,814)
(98,451)
(7,363)
(105,814)
870,494
64,729
935,223
207,768
53,071
24,740
2,357
336,053
47,868
263,366
317,842
(6,547)
(14,382)
64,145
(97,692)
(6,577)
(91,115)
(81,619)
(9,496)
(91,115)
(0.51)
(0.51)
(0.43)
(0.43)
Notes
6
6
6
6
15, 16
15, 17
7
8
9
10 b)
11
26
12
12
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2023 Annual Report
Consolidated Statements of Earnings (loss) p93
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
Year ended December 31
2023
2022
Notes
Net loss
(105,814)
(91,115)
Items of comprehensive (loss) income 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 (loss) income
5, 24
(27,705)
97,131
10, 24
5, 10, 24
9, 24
24
(4,530)
(41,792)
(3,705)
10,168
(3,484)
220,511
9,683
(56,598)
(67,564)
267,243
Total comprehensive (loss) income
(173,378)
176,128
Total comprehensive (loss) income attributable to:
Owners of the parent
Non-controlling interests
(160,337)
(13,041)
(173,378)
159,372
16,756
176,128
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2023 Annual Report
Consolidated Statements of Comprehensive Income (Loss) p94
(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
Prepaids 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, 2023
December 31, 2022
Notes
13
14
10
15
15
16
17
9
10
11
18
19
20
10
21, 22
10
21
22
11
26
159,244
40,099
232,694
38,017
48,052
—
518,106
6,560,814
1,273,059
34,255
130,009
63,689
87,860
176,608
95,426
8,421,720
8,939,826
280,382
30,780
255,285
566,447
66,610
6,032,269
540,550
528,622
7,168,051
7,734,498
1,086,883
118,445
1,205,328
8,939,826
162,971
54,670
179,299
33,833
37,169
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
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2023 Annual Report
Consolidated Statements of Financial Position p95
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Year ended December 31, 2023
Equity attributable to owners
Contributed
surplus
Preferred
shares
Convertible
debentures
Deficit
Common
share
capital
account
Accumulated
other
comprehensive
Income
Total
Non-
controlling
interests
Total
shareholders’
equity
Balance January 1, 2023
485 2,581,173 131,069
2,819 (1,596,021)
196,670 1,316,195 170,232 1,486,427
Net loss
Other comprehensive loss
Total comprehensive loss
Common shares issued through dividend reinvestment
plan
Reduction of capital on common shares (Note 23)
Share-based payments and Performance Share Plan
Shares vested - Performance Share Plan
Shares purchased - Performance Share Plan
Business dispositions (Note 5)
Buyback of non-controlling interests (Note 4)
Investments from non-controlling interests (Note 26)
Dividends declared on common shares (Note 23)
Dividends declared on preferred shares (Note 23)
Distributions to non-controlling interests
—
—
—
—
—
—
2,541
(1,103)
—
1,991
(2,647)
—
—
—
—
—
—
—
1,103
3,274
(3,041)
459
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(98,451)
—
(98,451)
—
(61,886)
(61,886)
(98,451)
(61,886)
(160,337)
(7,363)
(5,678)
(13,041)
(105,814)
(67,564)
(173,378)
—
—
—
—
—
—
—
—
—
—
—
—
—
2,541
—
2,541
—
—
—
—
—
(5,468)
88,500
(147,058)
(5,632)
—
—
—
—
—
—
332
(2,226)
—
—
—
—
3,274
(1,050)
(2,188)
—
(5,136)
86,274
(147,058)
(5,632)
—
—
—
—
—
119
(2,298)
5,792
—
—
(42,359)
—
3,274
(1,050)
(2,188)
119
(7,434)
92,066
(147,058)
(5,632)
(42,359)
Balance December 31, 2023
1,267 2,582,968 131,069
2,819 (1,764,130)
132,890 1,086,883 118,445 1,205,328
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2023 Annual Report
Consolidated Statements of Changes in Shareholders' Equity p96
(in thousands of Canadian dollars, except as noted and amounts per share)
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
Year ended December 31, 2022
Equity attributable to owners
Contributed
surplus
Preferred
shares
Convertible
debentures
Deficit
Common
shares
capital
account
Accumulated
other
comprehensive
(loss) income
Total
Non-
controlling
interests
Total
shareholders’
equity
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
Common shares issued on private placement
Issuance fees (net of $1,978 of deferred income tax)
Common shares issued through dividend reinvestment
172,506
37,275
(5,432)
—
—
—
—
—
—
plan
Reduction of capital on common shares
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)
Dividends declared on common shares
Dividends declared on preferred shares
Distributions to non-controlling interests
Balance December 31, 2022
1,301
—
(560,532) 560,532
—
2,598
(4,883)
386
(4,417)
—
2,114
(3,266)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(81,619)
—
—
(81,619)
240,991 240,991
(9,496)
26,252
(91,115)
267,243
(81,619)
240,991 159,372
16,756
176,128
—
—
—
—
—
—
—
—
—
— 172,506
37,275
—
(5,432)
—
—
—
—
—
—
—
1,301
—
(4,417)
2,598
(2,769)
(2,880)
—
—
—
—
—
—
—
—
—
172,506
37,275
(5,432)
1,301
—
(4,417)
2,598
(2,769)
(2,880)
(47,282)
(146,957)
(5,632)
(48,692)
1,486,427
—
—
—
—
—
—
—
—
485 2,581,173 131,069
—
—
—
—
—
—
—
—
11,815
(146,957)
(5,632)
—
2,819 (1,596,021)
6,303
18,118
— (146,957)
(5,632)
—
—
—
(65,400)
—
—
(48,692)
196,670 1,316,195 170,232
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2023 Annual Report
Consolidated Statements of Changes in Shareholders' Equity p97
(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 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
Change in fair value of contingent consideration
Other
Finance costs
Finance costs paid
Distributions received from joint ventures and associates
Income tax recovery
Income tax paid
Effect of exchange rate fluctuations
Notes
15, 16
15, 17
9
10
22
7
25 b)
9
11
Changes in non-cash operating working capital items
25 a)
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
Buyback of non-controlling interests
Payment of other liabilities
Proceeds from issuance of common shares, net of issuance fees
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
Proceeds from BESS supply agreements termination payments
Proceeds from disposition of assets held for sale
Other
Effects of exchange rate changes on cash and cash equivalents
Net change in cash and cash equivalents
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
26
25 c)
25 c)
4
22
4
17
15
Year ended December 31
2022
2023
(Adjusted - Note 2)
(105,814)
(91,115)
361,292
118,857
(16,791)
(9,649)
(73,460)
25,563
587
348,386
(284,387)
18,930
(46,913)
(5,929)
582
331,254
(33,401)
297,853
336,053
47,868
(14,382)
141,859
(67,182)
—
91
317,842
(228,361)
22,028
(6,577)
(2,730)
(10,633)
444,761
(14,518)
430,243
(150,114)
(42,359)
99,759
1,469,145
(1,025,345)
(149,193)
(48,692)
—
1,717,541
(1,509,591)
(7,434)
(7,135)
—
—
(2,188)
(1,050)
333,279
(47,810)
17,528
(685,089)
(2,113)
(8,488)
—
18,159
59,426
14,678
(633,709)
(1,150)
(3,727)
162,971
159,244
(64,382)
(4,834)
202,371
(4,417)
(2,880)
(2,769)
133,154
(418,044)
9,256
(119,189)
(2,508)
(29,632)
(325)
—
—
(10,942)
(571,384)
4,692
(3,295)
166,266
162,971
Additional information is presented in Note 25 – Additional Information to the Consolidated Statements of Cash Flows
The accompanying notes are an integral part of these audited consolidated financial statements.
Innergex Renewable Energy Inc.
2023 Annual Report
Consolidated Statements of Cash Flows p98
(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 21, 2024.
1. BASIS OF PRESENTATION AND STATEMENT OF COMPLIANCE
Statement of Compliance
These consolidated financial statements have been prepared in accordance with IFRS Accounting Standards (“IFRS”),
as issued by the International Accounting Standards Board (“IASB”). The Corporation’s material 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.
Functional Currency and Presentation Currency
These consolidated financial statements are presented in Canadian dollars, which is the Corporation’s functional
currency.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p99
(in thousands of Canadian dollars, except as noted and amounts per share)
2. MATERIAL 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 disposition or loss of control.
Details of the Corporation's significant subsidiaries at the end of the reporting period are set out below.
Name of subsidiaries
Principal activity
Place of
creation and
operation
Upper Lillooet Limited Partnership
Innergex Inc.
Big Silver Creek Power Limited
Partnership
Innergex Cartier Energy LP
Innergex SSMarie Holdco LP
Harrison Hydro L.P., and its
subsidiaries
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
Own and operate a solar facility
Canada
Canada
Own and operate hydroelectric facilities
Canada
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
Proportion of
ownership interest
and voting rights
held by the
Corporation
100.00%
100.00%
100.00%
100.00%
100.00%
50.01%
50.00%
subsidiaries
Foard City Holdings, LLC
Phoebe Energy Project, LLC
Hillcrest Solar I, LLC
Griffin Trail Wind, LLC
Innergex HQI USA LLC1
Boswell Springs
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
Construction of a wind facility
Innergex France S.A.S.
Own and operate wind facilities
Aela Generación S.A., and its
subsidiaries
Own and operate hydroelectric, wind
and solar facilities
Canada
United States
100.00%
United States
United States
United States
United States
United States
United States
France
Chile
100.00%
100.00%
100.00%
100.00%
50.00%
100.00%
70.00%
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p100
(in thousands of Canadian dollars, except as noted and amounts per share)
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).
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.
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).
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.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p101
(in thousands of Canadian dollars, except as noted and amounts per share)
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 disposition or when no future economic benefits are
expected to arise from the continued use of the asset. Any gain or loss arising on the disposition 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.
(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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p102
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p103
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p104
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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.
(i) Financial assets measured at fair value
These assets are measured at fair value and changes therein, including any interest or dividend income, are
recognized in net earnings unless hedge accounting is used in which case the changes are recognized in other
comprehensive income.
The Corporation currently classifies its derivative financial instruments as financial assets measured at fair value.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p105
(in thousands of Canadian dollars, except as noted and amounts per share)
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:
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 revenues and production tax credits
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 and contingent considerations payable as
financial liabilities measured at fair value.
The Corporation derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p106
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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).
When a derivative is designated as the hedging instrument in a hedge of the foreign currency exposure on the carrying
amount of the net assets of the foreign operation, 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 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. Any ineffective portion of changes in the hedging
instruments is recognized directly in net earnings. Amounts previously recognized in accumulated other comprehensive
income are recognized in earnings when there is a reduction in the net investment.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p107
(in thousands of Canadian dollars, except as noted and amounts per share)
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. Amounts previously recognized in accumulated other
comprehensive income are recognized in earnings when there is a reduction in the net investment.
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.
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 revenues and production
tax credits.
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 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, 2023
1.4626
1.3226
December 31, 2022
1.4458
1.3544
2023
2022
1.4597
1.3497
1.3696
1.3013
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p108
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, 2023, the Corporation adopted the following new standards and interpretations:
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.
•
Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12)
On May 7, 2021, the IASB published "Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(Amendments to IAS 12)" that clarify how companies account for deferred tax on transactions such as leases and
decommissioning obligations. The Corporation has applied these amendments to transactions occurring on or after
January 1, 2022, resulting in no impact on the net deferred tax for temporary differences related to leases and
decommissioning obligations and retained earnings. The reconciliation of the Income taxes recognized in the
consolidated statements of earnings (loss) presented in Note 11 – Income Taxes was amended to disclose separately
the resulting deferred tax liabilities and assets.
Changes in presentation
Consolidated statements of earnings
On January 1, 2023, the Corporation amended the presentation of its consolidated statements of earnings to enhance
relevance of the financial statements. Comparative figures have been adjusted to conform to the current year's
presentation.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p109
(in thousands of Canadian dollars, except as noted and amounts per share)
As a result, production tax credits ("PTCs"), previously recognized in other net (income) expenses, have been
reclassified directly below revenues to better represent the nature of PTCs as income arising in the course of the
Corporation's ordinary activities through electricity generation. The reclassification also goes alongside the Inflation
Reduction Act ("IRA"), signed into law in August 2022 by the United States Government, extending the PTC program for
wind facilities, and introducing a PTC program for solar facilities. For projects commencing construction after
January 1, 2025, the IRA initiates the transition toward a technology-neutral tax credit system in the United States,
allowing zero carbon emission facilities to receive tax credits similar to current PTCs and ITCs.
In addition, certain subtotals have been removed from the consolidated statements of earnings, which now includes an
operating income subtotal.
The Corporation has also reclassified the Enterprise Resource Planning (“ERP”) implementation expenses, from other
net expenses, to a separate account in the consolidated statement of earnings, to conform with the addition of the
operating income subtotal.
The table below presents a summary of the reclassifications:
Revenues
Production tax credits
Revenues and production tax credits
Expenses
Operating
General and administrative
Prospective projects
ERP implementation
Depreciation and amortization
Impairment of long-term assets
Operating income
Finance costs
Other net income
Share of losses of joint ventures and associates
Change in fair value of financial instruments
Loss before income tax
Income tax recovery
Net loss
Consolidated statements of cash flows
Year ended December 31, 2022
Legacy
presentation Adjustment
Amended
presentation
870,494
—
N/A
—
64,729
N/A
870,494
64,729
935,223
207,768
53,071
24,740
—
336,053
47,868
N/A
317,842
(68,919)
(14,382)
64,145
(97,692)
(6,577)
(91,115)
—
—
—
2,357
—
—
N/A
—
62,372
—
—
—
207,768
53,071
24,740
2,357
336,053
47,868
263,366
317,842
(6,547)
(14,382)
64,145
(97,692)
—
—
(6,577)
(91,115)
The Corporation corrected the presentation of the buyback of non-controlling interests in the comparative period
amounting to ($64,382), from cash flows used in investing activities to cash flows from financing activities. As a result,
cash flows from financing activities were reduced by $64,382 and cash flows used in investing activities were reduced
by ($64,382), with a nil effect on the net change in cash and cash equivalents subtotal. This reclassification reflects that
these transactions represent a change in ownership interest between equity holders, which shall be classified as
financing activities.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p110
(in thousands of Canadian dollars, except as noted and amounts per share)
New accounting standards and interpretations issued but not yet effective
Classification of Liabilities as Current or Non-current (Amendments to IAS 1)
On January 23, 2020, the IASB issued amendments to IAS 1 Presentation of Financial Statements, to clarify the
classification of liabilities as current or non-current. On 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.
3. USE OF JUDGMENTS AND ESTIMATES
The preparation of consolidated financial statements in conformity with IFRS requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could differ from these estimates. 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.
Impairment of non-financial assets
The Corporation is required to make judgments in assessing at the end of each reporting period whether there is any
indication that an asset may be impaired. In making this assessment, the Corporation uses various indicators including,
but not limited to, adverse changes in the industry or economic conditions, a lower-than-expected economic
performance of the asset or a significant change in market returns or interest rates. When such an indication exists, or
at least annually for goodwill, 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p111
(in thousands of Canadian dollars, except as noted and amounts per share)
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,
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 28 –
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.
2023 Annual Report
Notes to the Consolidated Financial Statements p112
(in thousands of Canadian dollars, except as noted and amounts per share)
4. BUSINESS ACQUISITIONS
a) Acquisition of Sault Ste.Marie
On March 9, 2023, Innergex acquired all of the ordinary shares of the 60MW Sault Ste. Marie solar portfolio in Ontario
for a total cash consideration of $51,270.
The Sault Ste. Marie portfolio consists of the Sault Ste. Marie 1 solar facility (20 MW), the Sault Ste. Marie 2 solar
facility (30 MW) and the Sault Ste. Marie 3 solar facility (10 MW). Revenues from these facilities are anchored by long
term power purchase agreements with the Independent Electricity System Operator, maturing between 2030 and 2031.
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
Restricted cash
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 (Note 21)
Other liabilities
Deferred tax liability
Net assets acquired
Acquisition
Accounting
3,460
2,833
3,421
379
36,961
160,691
10,242
30,021
(992)
(164,262)
(1,463)
(30,021)
51,270
The acquisition gave rise to transaction costs of $3,053 which were expensed as incurred in other net expenses
(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 $31,055 and $5,933, respectively for the 298-day period ended
December 31, 2023. Had the acquisition taken place on January 1, 2023, revenues and net earnings included in the
consolidated statements of earnings (loss) for the period from January 1, 2023 to December 31, 2023 would have been
$2,805 higher and $1,193 lower, respectively.
b) Purchase of Non-Controlling Interests
Pampa Elvira Solar SpA
On November 9, 2023, Innergex acquired the remaining 45.00% interests in its Pampa Elvira solar thermal facility in
Chile for a total consideration of US$5,500 ($7,434).
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p113
(in thousands of Canadian dollars, except as noted and amounts per share)
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). The transaction was accounted for directly in equity, as a transaction with equity
holders.
c) Acquisition of Aela
On June 9, 2022, the Corporation acquired Aela Generación S.A. and Aela Energía SpA (together “Aela”). The
purchase price for Aela consisted of a cash consideration of US$324,348 ($408,160). Subsequently, during 2023, the
Corporation updated its acquisition accounting for Aela. The adjustments made resulted in a US$6,377 ($8,025)
increase in the net deferred tax liability recognized on acquisition, with a corresponding adjustment to goodwill.
5. BUSINESS DISPOSITIONS
Disposition of the Kokomo and Spartan solar facilities
On July 17, 2023, the Corporation disposed of its ownership interest in the Kokomo and Spartan solar facilities. No
significant gain or loss on disposition was recognized pursuant to this transaction.
The following table presents the carrying amount of assets and liabilities disposed:
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Non-controlling interests
Net assets disposed
July 17, 2023
582
27,278
27,860
1,085
22,143
23,228
(119)
4,751
Cumulative gains of $1,133 and $948 in foreign currency translation differences and change in fair value of financial
instruments designated as cash flow hedges, respectively, are included in accumulated other comprehensive income
relating to the disposal group.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p114
(in thousands of Canadian dollars, except as noted and amounts per share)
6. EXPENSES BY NATURE
Operating, general and administrative, prospective projects expenses and ERP implementation costs, as reported in the
consolidated statements of earnings (loss), have been grouped by nature of expenses as follows:
Operation and maintenance
Salaries and benefits1
Property taxes, other taxes and royalties
Insurance
Professional fees2
Other expenses
Prospective expenses
Administrative expenses
Year ended December 31
2023
2022
120,681
77,296
61,516
28,190
23,171
18,252
11,203
1,541
125,994
54,360
46,229
18,423
12,268
16,176
13,010
1,476
Total of Operating, General and Administrative, Prospective
Projects and ERP Implementation
341,850
287,936
1.
2.
Includes $4,533 in salaries and benefits recognized as ERP implementation expenses ($775 in 2022).
Includes $8,118 in professional fees recognized as ERP implementation expenses ($1,582 in 2022).
7. FINANCE COSTS
Interest expense on long-term corporate and project loans
Interest expense on tax equity financing
Interest expense on convertible debentures
Amortization of financing fees
Inflation on compensation interest
Interests on lease liabilities
Accretion of long-term loans and borrowings and other liabilities
Other
Year ended December 31
2023
2022
261,014
29,450
13,611
12,796
8,836
9,194
8,822
4,663
348,386
216,945
30,700
13,637
15,255
18,834
7,612
7,482
7,377
317,842
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p115
(in thousands of Canadian dollars, except as noted and amounts per share)
8. OTHER NET EXPENSES (INCOME)
Interest revenues
Tax attributes allocated to tax equity investors
Change in fair value of contingent consideration (Note 22)
Acquisition and integration costs
Loss (gain) on foreign exchange
Gain on repayment of loans
Other expenses, net
Year ended December 31
2022
(Note 2)
2023
(7,494)
(1,776)
25,563
3,297
133
—
7,308
27,031
(3,167)
(2,453)
—
15,561
(13,848)
(4,922)
2,282
(6,547)
9.
INVESTMENT IN JOINT VENTURE AND ASSOCIATES
a) 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, 2023
December 31, 2022
Toba Montrose
Dokie
Jimmie Creek 1
Umbata Falls
Viger-Denonville
Innavik
Own and operate two
hydroelectric facilities
British Columbia
Own and operate a wind facility British Columbia
Own and operate a
hydroelectric facility
Own and operate a
hydroelectric facility
Own and operate a wind facility
Own and operate a
hydroelectric facility
British Columbia
Quebec
Quebec
Ontario
40 %
25.5 %
50.99 %
49 %
50 %
50 %
40 %
25.5 %
50.99 %
49 %
50 %
50 %
1. The Corporation does not consolidate these entities as it does not control the decision making.
b) Commitments of joint ventures and associates
As at December 31, 2023, 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
2,998
12,479
37,988
53,465
Innergex Renewable Energy Inc.
2023 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 material joint ventures' and associates' financial statements prepared in accordance
with IFRS adjusted for fair value adjustments at acquisition and differences in accounting policies.
Revenues
70,028
42,398
24,585
Toba Montrose
Year ended December 31, 2023
Jimmie Creek
Dokie
Umbata Falls
Viger-Denonville
9,925
7,663
Expenses
Operating, general and administrative expenses
Depreciation and amortization
Operating income
Finance costs
Other net (income) expenses
Change in fair value of financial instruments
Net earnings
Other comprehensive loss
Total comprehensive income
Net earnings attributable to Innergex
Other comprehensive loss attributable to Innergex
Total
15,978
19,191
34,859
21,880
(671)
(5,473)
19,123
(8,228)
10,895
7,649
(3,291)
4,358
11,014
14,030
17,354
5,487
(330)
—
12,197
—
12,197
3,110
—
3,110
3,767
3,804
17,014
9,159
29
—
7,826
—
7,826
3,992
—
3,992
2,053
4,182
1,428
2,124
(323)
(472)
99
—
99
48
—
48
2,099
2,028
5,798
2,490
(228)
(406)
3,942
(827)
3,115
1,972
(413)
1,559
Innergex Renewable Energy Inc
2023 Annual Report
Notes to the Consolidated Financial Statements p117
(in thousands of Canadian dollars, except as noted and amounts per share)
Revenues
67,565
40,491
24,940
Toba Montrose
Year ended December 31, 2022
Jimmie Creek
Dokie
Umbata Falls
Viger-Denonville
11,764
9,355
Expenses
Operating, general and administrative expenses
Depreciation and amortization
Operating Income
Finance costs
Other net income
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
19,474
31,164
22,362
(314)
(33)
9,149
20,544
29,693
3,660
8,218
11,878
10,697
14,035
15,759
6,043
(224)
—
9,940
—
9,940
2,535
—
2,535
3,934
4,159
16,847
9,228
(182)
—
7,801
—
7,801
3,979
—
3,979
2,036
4,027
3,292
2,466
(50)
(3,199)
4,075
—
4,075
1,996
—
1,996
2,631
2,675
6,458
2,716
(83)
(600)
4,425
2,931
7,356
2,212
1,465
3,677
Innergex Renewable Energy Inc
2023 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
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Partner's equity interest (deficit)
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
As at December 31, 2023
35,757
656,960
692,717
27,284
481,286
184,147
692,717
22,979
171,985
194,964
19,316
94,918
80,730
194,964
6,966
211,211
218,177
6,946
161,642
49,589
218,177
1,474
35,901
37,375
5,582
20,789
11,004
37,375
3,394
42,202
45,596
4,032
33,025
8,539
45,596
8,702
147,550
156,252
24,711
138,637
(7,096)
156,252
Toba Montrose
Dokie
Jimmie Creek
Umbata Falls
Viger-
Denonville
Innavik
As at December 31, 2022
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
Innergex Renewable Energy Inc
2023 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:
Toba Montrose
Dokie
Jimmie Creek
Umbata Falls
Viger-
Denonville
Others
Total
Year ended December 31, 2023
As at January 1, 2023
Increase in investment
Share of earnings
Share of other comprehensive loss
Foreign currency translation differences
Distributions received
As at December 31, 2023
77,377
—
7,649
(3,291)
—
(8,080)
73,655
20,586
—
3,110
—
—
(3,111)
20,585
26,722
—
3,992
—
—
(5,405)
25,309
6,128
—
48
—
—
(784)
5,392
4,256
—
1,972
(413)
—
(1,550)
4,265
717
58
20
(1)
9
—
803
135,786
58
16,791
(3,705)
9
(18,930)
130,009
Toba Montrose
Dokie
Jimmie Creek
Umbata Falls
Viger-
Denonville
Others
Total
Year ended December 31, 2022
As at January 1, 2022
Increase in investment
Share of earnings
Share of other comprehensive income
Foreign currency translation differences
Distributions received
As at 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
Innergex Renewable Energy Inc
2023 Annual Report
Notes to the Consolidated Financial Statements p120
(in thousands of Canadian dollars, except as noted and amounts per share)
10. 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)
Foreign
exchange
forwards
(Level 2)
Interests
hedging
derivatives
(Level 2)
Power hedges
(Level 3)
Total
As at January 1, 2023
Business acquisitions (Note 4)
Business dispositions (Note 5)
Unrealized portion of change in fair value recognized
in earnings (loss)1
Change in fair value recognized in other
comprehensive income
Amortization of accumulated other comprehensive
income recognized in revenue
Net foreign exchange differences
As at December 31, 2023
(3,555)
—
—
98,138
10,242
(547)
(69,333)
—
—
25,250
10,242
(547)
(531)
8,720
1,460
9,649
(4,530)
(37,402)
(3,442)
(45,374)
—
—
(8,616)
—
(49)
79,102
3,442
1,703
(66,170)
3,442
1,654
4,316
1. Refer to Note 10 b) – Derivative Financial Instruments for a reconciliation to the change in fair value recognized in earnings (loss).
Financial assets (liabilities)
As at January 1, 2022
Business acquisitions
Unrealized portion of change in fair value recognized
in earnings (loss)1
Change in fair value recognized in other
comprehensive income
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
loans
Total
2,485
—
(78,482)
6,567
16,559
—
—
—
(59,438)
6,567
(2,556)
(57,082)
(82,072)
(149) (141,859)
(3,484)
223,862
(3,351)
— 217,027
—
—
(3,555)
—
3,273
98,138
3,351
(3,820)
(69,333)
—
149
—
3,351
(398)
25,250
b) Change in fair value of financial instruments recognized in the consolidated
statements of earnings (loss)
Year ended December 31
2022
2023
Unrealized portion of change in fair value of financial instruments
(9,649)
141,859
Realized portion of change in fair value of financial instruments:
Realized gain on the foreign exchange forwards
Realized loss on power hedges
Realized gain on the interest rate swaps
Change in fair value of financial instruments
—
24,632
(1,307)
13,676
(43,458)
37,479
(71,735)
64,145
Innergex Renewable Energy Inc
2023 Annual Report
Notes to the Consolidated Financial Statements p121
(in thousands of Canadian dollars, except as noted and amounts per share)
11. 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, 2023
December 31, 2022
Loss before income tax
Canadian statutory income tax rate
Income tax expense calculated at the statutory rate
Items affecting the statutory rate:
Non-taxable income
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 non-controlling
interests on non-taxable entities
Others
Provision for income taxes recognized in the current year
Current income taxes
Deferred income taxes
(152,727)
26.6 %
(40,625)
(14,607)
13,598
(20,351)
5,932
(1,930)
1,143
157
(20)
12,148
3,074
(5,432)
(46,913)
8,161
(55,074)
(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)
The tax rate used for 2023 and 2022 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
2023 Annual Report
Notes to the Consolidated Financial Statements p122
(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 in 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, 2023
Recognized in
statement of
earnings
Recognized in
other
comprehensive
loss
Acquired in
business
acquisition
Recognized
in business
dispositions
Recognized
directly in
equity
Net exchange
differences
As at
December 31,
2023
3,062
(627,305)
(220,902)
38,090
(67,239)
29,622
(20,133)
28,891
1,613
77,999
(15,317)
804
5,021
28
(765,766)
297,120
(468,646)
(3,050)
(27,794)
18,670
4,437
3,996
(5,142)
(1,455)
(1,876)
517
17,226
4,774
36
(4,274)
(2,757)
3,308
51,766
55,074
—
—
—
—
(63)
10,231
—
—
—
—
—
—
—
—
10,168
—
7,288
(42,811)
—
—
(2,725)
—
—
—
—
202
—
—
—
(38,046)
10,168
(38,046)
—
7,132
—
—
—
123
(111)
(967)
—
—
—
—
—
—
6,177
—
6,177
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(12)
6,152
1,758
(214)
424
(437)
606
(623)
—
(1,272)
91
—
(34)
52
6,491
—
(634,527)
(243,285)
42,313
(62,882)
31,672
(21,093)
25,425
2,130
93,953
(10,250)
840
713
(2,677)
(777,668)
(6,684)
(6,684)
(5,296)
1,195
336,906
(440,762)
As at December 31, 2023, the Corporation, its subsidiaries and joint ventures and associates have non-capital losses totalling approximately $1,329 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 2024 and 2043. 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.
2023 Annual Report
Notes to the Consolidated Financial Statements p123
(in thousands of Canadian dollars, except as noted and amounts per share)
Deferred income tax assets (liabilities) in
relation to:
Assets held for sale
Property, plant and equipment
Intangible assets
Project development costs
Investments in 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
(Note 2)
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
—
(505,123)
(151,198)
30,669
(68,080)
45,771
82
23,658
(70)
56,479
(4,837)
1,790
3,073
(2,232)
(570,018)
219,287
(350,731)
2,947
(62,441)
333
6,861
4,865
39,706
8,936
3,327
1,683
1,099
(10,011)
(986)
1,680
2,257
256
—
—
—
—
(2,608)
(53,990)
—
—
—
—
—
—
—
—
(56,598)
—
(40,597)
(77,758)
—
—
(1,773)
(27,386)
—
—
17,386
(2,280)
—
—
—
(132,408)
—
2,550
14,567
—
—
—
—
—
—
—
1,972
—
—
—
19,089
115
(21,693)
(6,846)
560
(1,416)
(92)
(1,765)
1,906
—
3,034
(161)
—
268
3
(26,087)
6,804
7,060
—
(56,598)
59,309
(73,099)
—
19,089
11,720
(14,367)
3,062
(627,304)
(220,902)
38,090
(67,239)
29,622
(20,133)
28,891
1,613
77,998
(15,317)
804
5,021
28
(765,766)
297,120
(468,646)
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p124
(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
Disallowed interests
Property, Plant and Equipment
Tax credits
Derivative financial instruments
Transaction costs
December 31, 2023
December 31, 2022
379,339
72,833
72,187
69,468
13,342
10,069
477
617,715
318,780
70,562
—
—
25,044
—
477
414,863
The unrecognized tax losses will expire gradually between 2026 and 2040. The unrecognized tax credits will expire
gradually between 2035 and 2042.
12. EARNINGS (LOSS) PER SHARE
Basic
Net loss attributable to owners of the parent
Dividends declared on preferred shares
Net loss attributable to common shareholders
Weighted average number of common shares
Basic net loss per share ($)
Diluted
Net loss attributable to common shareholders
Diluted weighted average number of common shares
Diluted net loss per share ($)
Instruments that are excluded from the dilutive elements
Stock options
Shares held in trust related to the Performance Share Plan
Convertible debentures
Year ended December 31
2022
2023
(98,451)
(5,632)
(104,083)
203,565,046
(0.51)
(81,619)
(5,632)
(87,251)
201,835,956
(0.43)
Year ended December 31
2022
2023
(104,083)
203,565,046
(0.51)
(87,251)
201,835,956
(0.43)
Year ended December 31
2022
2023
289,111
713,732
13,604,473
14,607,316
284,769
592,257
13,604,473
14,481,499
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p125
(in thousands of Canadian dollars, except as noted and amounts per share)
13. RESTRICTED CASH
As at
Restricted proceeds account
Restricted cash accounts
Debt service payment accounts
December 31, 2023
December 31, 2022
26,935
5,653
7,511
40,099
33,556
11,677
9,437
54,670
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 required under certain financing agreements.
14. ACCOUNTS RECEIVABLES
As at
Trade
Commodity taxes
Advances to related parties
Dividends receivable on Innavik preferred shares
Income taxes receivable
Other
December 31, 2023
December 31, 2022
149,480
26,046
12,684
12,094
5,454
26,936
232,694
124,349
19,012
6,240
7,875
5,191
16,632
179,299
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p126
(in thousands of Canadian dollars, except as noted and amounts per share)
15. PROPERTY, PLANT AND EQUIPEMENT
Cost
As at January 1, 2023
Additions1,2
Investment tax credits3
Business acquisitions (Note 4)
Transfer of assets upon commissioning
Business dispositions (Note 5)
Reclassification
Dispositions
Other changes4
Net foreign exchange differences
As at December 31, 2023
Accumulated depreciation
As at January 1, 2023
Depreciation5
Business dispositions (Note 5)
Reclassification
Dispositions
Impairment
Net foreign exchange differences
As at December 31, 2023
Carrying amounts as at
December 31, 2023
Lands
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Storage
facilities
Facilities
under
construction
Other
Total
301,094
21,855
—
8,200
—
(1,322)
—
—
2,907
(5,305)
327,429
(24,888)
(9,444)
162
—
—
—
394
(33,776)
2,634,926
9,377
—
—
—
—
—
(3,270)
—
(12,876)
2,628,157
3,511,736
20,309
—
—
—
—
—
(5,812)
12,648
(28,210)
3,510,671
875,437
2,547
—
28,674
—
(29,050)
(3,562)
(556)
(520)
(15,570)
857,400
—
7,009
—
—
93,042
—
7,689
—
—
(2,468)
105,272
190,665
654,775
9,201
—
(93,042)
—
—
(1,746)
—
(17,594)
742,259
59,823
14,887
—
87
—
(1,439)
(4,127)
(429)
(837)
(122)
67,843
7,573,681
730,759
9,201
36,961
—
(31,811)
—
(11,813)
14,198
(82,145)
8,239,031
(445,804)
(53,560)
—
—
968
—
890
(497,506)
(683,784)
(118,120)
—
—
1,385
—
922
(799,597)
(152,782)
(25,390)
5,367
—
120
(25,362)
2,408
(195,639)
—
(525)
—
(214)
—
10
(729)
(25,226)
—
—
—
—
(93,495)
3,293
(115,428)
(28,826)
(7,853)
442
214
426
—
55
(35,542)
(1,361,310)
(214,892)
5,971
—
2,899
(118,857)
7,972
(1,678,217)
293,653
2,130,651
2,711,074
661,761
104,543
626,831
32,301
6,560,814
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 $26,612 of capitalized financing costs incurred
prior to commissioning.
Additions in lands include initial measurement of right-of-use assets of $21,855.
2.
3. Represents the reversal of accrued investment tax credits recoverable related to the construction of the Hale Kuawehi solar project, following the revision of estimated cash flows
and taxable income from the project, which no longer support the recognition of tax credits.
Includes remeasurements of right-of-use assets and asset retirement obligations of $2,070 and $12,128, respectively.
An amount of $664 of the depreciation expense for the land leases is capitalized as a construction cost in facilities under construction.
4.
5.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p127
(in thousands of Canadian dollars, except as noted and amounts per share)
Cost
As at January 1, 2022
Additions
Investment tax credits
Business acquisitions
Transfer of assets upon commissioning
Transfer from project development costs
Reclassification
Assets classified as held for sale
Dispositions
Other changes
Net foreign exchange differences
As at December 31, 2022
Accumulated depreciation
As at January 1, 2022
Depreciation
Dispositions
Impairment
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
(16,801)
(7,222)
—
—
(865)
(24,888)
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
(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)
72,877
142,089
(8,535)
—
(6,840)
40,660
(59)
(59,899)
—
—
10,372
190,665
—
—
—
(25,226)
—
(25,226)
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)
(8,037)
(26,209)
212,377
7,573,681
(22,609)
(6,385)
367
—
(199)
(28,826)
(1,096,014)
(228,195)
1,842
(25,226)
(13,717)
(1,361,310)
Carrying amounts as at December 31, 2022
276,206
2,189,122
2,827,952
722,655
165,439
30,997
6,212,371
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p128
(in thousands of Canadian dollars, except as noted and amounts per share)
Disposition of Safe Harbor Solar Modules
The safe harbor solar modules, classified as held for sale in 2022, were sold during the first quarter of 2023 for cash proceeds of US$43,722 ($59,426), net of selling
costs. The decision to sell these modules follows the enactment 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.
Impairment of Hale Kuawehi
During the year ended December 31, 2023, as a result of uncertainties regarding the timing and costs to complete the construction and the profitability of the Hale
Kuawehi construction project (located in Hawaii), an impairment test was performed. Management estimated the recoverable amount of the project, based on its
value in use, and determined, using a pre-tax discount rate of 10.0%, an impairment charge of US$68,200 ($93,495).
Impairment of Hillcrest
As at December 31, 2023, the carrying value of the Hillcrest solar facility, located in Ohio, exceeded its estimated recoverable amount resulting in an impairment
charge of US$18,500 ($25,362), reflecting an outlook of lower than expected capacity revenues.
Management estimated the recoverable amount of the project, based on its value in use, which was calculated based on projected future cash flows, utilizing the
latest information available and Management’s estimates, including: energy production, revenues from production and capacity, operating costs, general and
administrative costs and energy price forecasts. These projected cash flows were discounted using a pre-tax discount rate of 6.11%.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p129
(in thousands of Canadian dollars, except as noted and amounts per share)
Right-of-use assets
Included in property, plant and equipment are right-of-use assets pursuant to lease agreements. Below is a reconciliation of the carrying amounts:
Cost
As at January 1, 2023
Additions
Business dispositions (Note 5)
Dispositions
Other changes
Net foreign exchange differences
As at December 31, 2023
Accumulated depreciation
As at January 1, 2023
Depreciation
Business dispositions (Note 5)
Dispositions
Net foreign exchange differences
As at December 31, 2023
Land
Other
Total
272,658
21,855
(1,322)
—
2,907
(4,531)
291,567
(24,887)
(9,444)
162
—
394
(33,775)
11,449
2,558
—
(358)
(837)
(71)
12,741
(4,952)
(1,552)
—
358
37
(6,109)
284,107
24,413
(1,322)
(358)
2,070
(4,602)
304,308
(29,839)
(10,996)
162
358
431
(39,884)
Carrying amounts as at December 31, 2023
257,792
6,632
264,424
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p130
(in thousands of Canadian dollars, except as noted and amounts per share)
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
Other
Total
159,139
11,453
48,170
41,977
11,919
272,658
(16,800)
(7,222)
(865)
(24,887)
11,265
—
—
—
184
11,449
(3,367)
(1,508)
(77)
(4,952)
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
6,497
254,268
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p131
(in thousands of Canadian dollars, except as noted and amounts per share)
16. INTANGIBLES ASSETS
Cost
As at January 1, 2023
Additions
Business acquisitions (Note 4)
Business dispositions (Note 5)
Reclassification
Other changes1
Net foreign exchange
As at December 31, 2023
Accumulated amortization
As at January 1, 2023
Amortization
Business dispositions (Note 5)
Reclassification
Net foreign exchange
As at December 31, 2023
Carrying amounts as at
December 31, 2023
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Total
781,120
2,113
—
—
(1,694)
3,582
(5,462)
779,659
(284,504)
(59,315)
—
1,694
2,191
(339,934)
972,697
—
—
—
—
—
(11,261)
961,436
(222,581)
(69,365)
—
—
885
(291,061)
29,663
—
160,691
(1,317)
—
(444)
188,593
1,783,480
2,113
160,691
(1,317)
(1,694)
3,582
(17,167)
1,929,688
(7,435)
(18,384)
63
(514,520)
(147,064)
63
—
1,694
122
(25,634)
3,198
(656,629)
439,725
670,375
162,959
1,273,059
1.
Includes remeasurements of the future ownership rights of $3,582.
Cost
As at January 1, 2022
Additions
Business acquisitions
Other changes
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
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p132
(in thousands of Canadian dollars, except as noted and amounts per share)
17. PROJECT DEVELOPMENT COSTS
As at
Beginning of year
Additions
Transfer to property, plant and equipment
Dispositions
Impairment of project development costs
Net foreign exchange
End of year
December 31, 2023
December 31, 2022
41,151
7,267
—
(13,632)
—
(531)
34,255
70,829
30,178
(40,660)
—
(22,642)
3,446
41,151
Termination of certain BESS supply agreements in Hawaii
On April 1, 2023, the battery energy storage systems ("BESS") supply agreements for the Paeahu, Kahana and Barbers
Point Hawaiian solar energy and battery storage projects were terminated, while remaining in effect for the Hale
Kuawehi project. As part of the settlement, Innergex received payments totalling US$13,272 ($18,159) in the second
quarter of 2023. No significant gain or loss was recognized pursuant to this transaction.
Sale of the Kahana solar energy and battery storage project
On April 19, 2023, Innergex has disposed of the Kahana solar energy and battery storage project for a nominal amount.
No significant gain or loss was recognized pursuant to this transaction.
18. GOODWILL
Allocation of goodwill to each significant CGU or group of CGUs is as follows:
As at January 1, 2023
Business acquisition (Note 4)
Net foreign exchange
As at December 31, 2023
As at January 1, 2022
Business acquisition
Net foreign exchange
As at December 31, 2022
Hydroelectric
facilities
Wind farm
facilities
Solar facilities
Total
20,291
—
—
20,291
119,385
8,025
(1,114)
126,296
—
30,021
—
30,021
139,676
38,046
(1,114)
176,608
Hydroelectric
facilities
Wind farm
facilities
20,291
—
—
20,291
40,567
73,070
5,748
119,385
Total
60,858
73,070
5,748
139,676
On December 31, 2023, 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 until the end of the estimated life of the site, and
discount rates of 4.03% to 10.00% (4.20% to 8.50% in 2022).
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p133
(in thousands of Canadian dollars, except as noted and amounts per share)
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,
and risks relating to the facility itself.
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.
19. OTHER LONG TERM ASSETS
As at
Hydrology/ wind power reserve1
Major maintenance reserve1
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, 2023
December 31, 2022
33,572
1,759
7,986
21,859
30,250
95,426
46,434
7,333
7,322
15,797
39,149
116,035
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.
The Corporation holds two types of reserve accounts designed to help ensure its financial stability. The first is the
hydrology/wind power 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,
which also includes dismantlement reserve aiming to have sufficient funding available for the decommissioning of wind
farms at the end of the projects. 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.
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.
20. ACCOUNTS PAYABLES 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, 2023
December 31, 2022
149,148
38,186
32,978
29,637
15,866
9,458
5,109
280,382
139,900
38,152
28,395
21,758
10,304
8,269
1,881
248,659
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p134
(in thousands of Canadian dollars, except as noted and amounts per share)
21. LONG-TERM LOANS AND BORROWINGS
Currency
Interest rates1
Maturity December 31, 2023 December 31, 2022
Corporate indebtedness (a)
Revolving term credit facility
Subordinated unsecured term loan
Alterra loans
Convertible debentures
4.65% Convertible Debentures4
4.75% Convertible Debentures5
Tax equity financing2,3
Wind segment
Foard City
Griffin Trail
Solar Segment
Hillcrest
Phoebe
Others
Project-level indebtedness
Chile green bonds (b)
Hydroelectric segment
Upper Lillooet
Harrison Operating Facilities
Big Silver Creek
Hydro Finance (c)
Kwoiek Creek
Tretheway Creek
Northwest Stave River
Ashlu Creek
Sainte-Marguerite
Magpie
Fitzsimmons Creek
Rutherford Creek
Guayacán
Others
Wind segment
Innergex Cartier Energie
Mesgi'g Ugju's'n
Yonne and Yonne II
Innergex France (d)
Rougemont 2
Vaite
Rougemont 1
Plan Fleury
Les Renardières
Beaumont
Montjean
Theil Rabier
CAD
CAD
CAD
CAD
CAD
USD
USD
USD
USD
USD
USD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
USD
CAD
CAD
EURO
EURO
EURO
EURO
EURO
EURO
EURO
EURO
EURO
EURO
4.80 %
6.40 %
2027
2025
5.05 % 2028-2031
4.65 %
4.75 %
2026
2025
7.50 %
6.80 %
20296
20316
5.15 %
7.14 %
8.00 %
20286
20266
2023
473,725
150,000
175,000
798,725
139,078
146,027
285,105
206,284
141,695
19,515
15,606
—
383,100
718,232
150,000
155,000
1,023,232
138,028
144,650
282,678
238,734
160,349
23,274
19,940
850
443,147
6.28 %
2036
939,046
887,572
4.37 % 2042-2056
4.99 %
2049
4.71 % 2041-2056
6.12 % 2038-2043
5.19 % 2052-2054
4.99 %
5.30 %
6.60 %
2055
2053
2025
7.93 % 2025-2064
7.23 % 2025-2031
4.95 %
6.88 %
6.85 %
7.17 %
2026
2023
2032
2025
4.46 %
2032
4.14 % 2026-2036
1.35 % 2031-2039
5.67 %
3.15 %
3.02 %
3.12 %
2033
2035
2035
2035
1.65 % 2032-2034
1.70 % 2032-2034
2.59 % 2027-2031
1.32 % 2026-2031
1.32 % 2026-2031
482,748
447,184
192,988
179,915
159,416
91,500
70,533
69,525
48,253
33,636
17,194
—
10,985
4,894
356,817
196,333
81,804
81,079
60,180
53,669
52,521
33,450
29,371
18,331
13,940
13,940
487,307
450,279
193,501
—
161,501
91,957
71,065
73,414
51,760
36,767
17,805
8,714
11,875
5,345
402,965
209,929
88,229
—
64,556
57,939
56,420
36,869
32,431
20,943
15,812
15,812
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p135
(in thousands of Canadian dollars, except as noted and amounts per share)
(continued)
Others
Boswell (e)
Mountain Air
Foard City
Solar segment
Sault Ste. Marie (f)
Stardale
Phoebe
Hillcrest
San Andrés (g)
Hale Kuawehi
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, 2023 December 31, 2022
EURO
USD
USD
USD
CAD
CAD
USD
USD
USD
USD
USD
3.33 % 2024-2030
6.51 %
2034
5.47 % 2029-2032
3.91 %
2026
3.62 %
5.38 %
5.06 %
2.66 %
7.38 %
5.81 %
5.67 %
2026
2032
2026
2028
2025
2023
2023
39,105
497,599
139,687
14,323
146,301
70,471
128,764
81,827
32,140
—
—
4,889,469
6,356,399
(75,252)
6,281,147
(248,878)
6,032,269
46,645
—
153,282
18,165
—
72,934
136,591
89,363
—
4,897
15,812
4,088,456
5,837,513
(78,303)
5,759,210
(374,397)
5,384,813
1.
2.
3.
4.
5.
The interest rates include the effects of the hedging instruments. As at December 31, 2023, excluding the construction financing
of the Boswell Springs wind project, which is subject to a forward-starting interest rate swap, approximately 96.7% of the
Corporation's total long-term loans and borrowings was either fixed or hedged. Refer to Note 28 a) (i) - Interest rate risk.
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.
6. 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 $6,087,083 ($5,792,466 in 2022).
Letters of credit under revolving term credit facility and project loans amount to $439,019 ($302,059 in 2022). Moreover,
the Corporation has access to a letter of credit facility guaranteed by Export Development Canada ("EDC"). On April 12,
2023, the Corporation increased by $50,000 its existing letter of credit facility, up to an amount of $200,000. As of
December 31, 2023, letters of credit have been issued for an amount of $178,722.
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, 2023, the Corporation and its subsidiaries have met all material financial and non-financial
conditions related to their credit agreements.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p136
(in thousands of Canadian dollars, except as noted and amounts per share)
a) Corporate Indebtedness
Revolving term credit facility
The Corporation has access to a revolving term credit facility maturing in 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, 2023, an amount of $6,059 has been used to issue letters of credit.
On March 14, 2023, the Corporation concluded two interest rate swaps to hedge a $100,000 portion of the credit facility
notional that is subject to variable interest rates.
Subordinated Unsecured Term Loan
On February 1, 2023, Innergex 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, based on the bankers’ acceptance rates plus
a spread of 1.85% which depends on a 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.
Alterra Loans
On March 30, 2023, the Corporation has drawn the remaining $20,000 availability on the Alterra loans' delayed-draw
facility.
b) Chile Green Bonds
On March 10, 2023, the Corporation has drawn the remaining funds available from the Green Bonds, aggregating to
US$54,675 ($73,538), to complete the construction of the Salvador battery energy Storage System project in Chile.
c) Hydro Finance
On November 14, 2023, the Corporation closed a $185,459 non-recourse project financing, including a $179,915 term
loan facility bearing an effective interest rate of 6.12%, and a $5,544 reserve facility, to finance a portfolio of unlevered
Canadian hydroelectric facilities in operations comprising the Gilles-Lefrançois, Miller Creek and Rutherford Creek
facilities. The term loan facility comprises a $59,400 tranche set to mature in 2038, and a $120,500 tranche set to
mature in 2043, corresponding to the remaining duration of the facilities’ power purchase agreements.
d) Innergex France
On October 26, 2023, concurrently with the completion of the non-controlling investment in Innergex's portfolio in
France, a 30 % portion of the shareholders loan, previously due to Innergex and eliminated upon consolidation, for a
total amount of €55,435 ($80,064) and €2,559 ($3,696) in accrued interests recognized in accounts payables and other
payables, was issued to Crédit Agricole Assurances. The shareholders loan bears interest at 5.67% and matures on
June 30, 2033. A total of €55,435 ($81,079) was outstanding under long-term loans and borrowings as at
December 31, 2023.
As at December 31, 2023, an equivalent shareholders loan, bearing interest at 5.67% and maturing on June 30, 2033,
aggregating to €129,348 ($189,184), was payable to Innergex and eliminated upon consolidation.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p137
(in thousands of Canadian dollars, except as noted and amounts per share)
e) Boswell Springs financing
On July 14, 2023, the Corporation closed the construction financing of the Boswell Springs wind project totalling
US$533,631 ($703,753) bearing interest at 1-month SOFR + 1% maturing in 2025, which consists of a construction
loan of US$207,002 ($272,995) and a tax equity bridge loan of US$326,629 ($430,758), and a US$49,200 ($64,885)
letter of credit facility bearing interest at 1.31 %. The construction loan will be repaid by a US$203,268 ($268,070) 10-
year non-recourse loan bearing interest at SOFR 180 days + 1.375% and it is expected that the tax equity bridge loan
will be repaid with the proceeds from the tax equity financing.
The Corporation concluded three forward-start interest rate swaps, which will become effective upon term conversion of
the construction bridge loan into a 10-year non-recourse loan, on or about December 2024, for an aggregate hedged
notional of US$152,490 ($206,166) at a fixed rate of 3.268%.
f) Acquisition of Sault Ste.Marie
As part of the acquisition of Sault Ste. Marie on March 9, 2023, the Corporation assumed the related term loans. The
outstanding principal on acquisition was $164,262. The term loans bear interest at 3-months CDOR + 1.25%, are
payable quarterly and $139,680 of the principal is hedged at a fixed interest rate of 1.80%. The term loans mature in
April 2026.
g) Financing of the San Andrés Battery Energy Storage project
On April 21, 2023, the Corporation closed a US$49,500 ($66,672) 2-year non-recourse construction bridge loan for the
San Andrés BESS project, carrying an interest rate of 1-month SOFR + 2%.).
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p138
(in thousands of Canadian dollars, except as noted and amounts per share)
22. OTHER LIABILITIES
Contingent
considerations
Asset
retirement
obligations
Interest
payable on
SM S.E.C.
debenture
Future
ownership
rights
Deferred
income
Lease
liabilities
Total
As at January 1, 2023
Business acquisitions
(Note 4)
Business dispositions
(Note 5)
New obligations
Interest expense included
in finance costs
Accretion expense
included in finance costs
Remeasurement
Payments
Impact of foreign
exchange fluctuations
As at December 31, 2023
Current portion of other
liabilities
Long-term portion of other
liabilities
11,233 118,701
36,249
19,700
17,903 265,827 469,613
—
1,463
—
5,462
—
—
—
—
—
—
—
—
—
—
—
5,384
16
25,563
(1,622)
6,942
12,128
—
—
—
—
1,118
3,582
—
—
—
1,463
—
4,270
(1,290)
24,413
(1,290)
34,145
—
—
—
—
—
5,384
—
2,070
(5,513)
8,076
43,343
(7,135)
(1,113)
(1,017)
34,077 143,679
—
41,633
—
24,400
—
(6,642)
(4,512)
22,173 280,995 546,957
(257)
—
—
—
—
(6,150)
(6,407)
33,820 143,679
41,633
24,400
22,173 274,845 540,550
Contingent
considerations
Asset
retirement
obligations
Interest
payable on
SM S.E.C.
debenture
Future
ownership
rights
Deferred
income
Lease
liabilities
Total
As at January 1, 2022
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, 2022
Current portion of other
liabilities
Long-term portion of other
liabilities
11,049 165,808
11,914
—
—
—
31,210
—
—
35,117
—
—
18,702 157,109 418,995
59,022
47,108
11,453
11,453
—
—
—
—
5,039
—
—
—
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
Innergex Renewable Energy Inc.
2023 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 3.52% and 7.17% as at December 31, 2023 (4.42% to 7.90% in
2022) 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) Contingent 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 ($4,827), 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, based on the evolution of the New York Independent System Operator ("NYISO") market pricing during
calendar years 2023 and 2024, limited to US$30,000. On December 31, 2023, the provision for contingent
consideration was remeasured at US$21,816 ($28,854).
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p140
(in thousands of Canadian dollars, except as noted and amounts per share)
23. 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 through dividend reinvestment plan
Issued on public offering
Issued following the Strategic Alliance with Hydro-Québec
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
December 31, 2023
December 31, 2022
204,321,381
3,400,000
2,000,000
204,132,833
3,400,000
2,000,000
December 31, 2023
December 31, 2022
204,132,833
188,548
—
—
—
204,321,381
(592,257)
(185,410)
63,935
(713,732)
203,607,649
192,493,999
73,865
9,718,650
2,100,000
(253,681)
204,132,833
(541,261)
(178,597)
127,601
(592,257)
203,540,576
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 9, 2023. This
resulted in a decrease of the shareholders' capital account of $1,103 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p141
(in thousands of Canadian dollars, except as noted and amounts 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.
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 $1.4375 per share. The Corporation has the right to redeem all or any
number of the outstanding Series C Preferred Shares.
Equity-based compensation
a) Stock option plan
The Corporation has a stock option plan providing for the granting of options by the Board of Directors to employees,
officers, directors and certain consultants of the Corporation and its subsidiaries to purchase common shares. Options
granted under the stock option plan will have an exercise price of not less than the market price of the common shares
at the date of grant of the option, calculated as the volume weighted average trading price of the common shares on the
Toronto Stock Exchange for the five trading days immediately preceding the date of grant. The maximum number of
common shares of the Corporation available for issuance pursuant to options granted under the share option plan is
4,064,123. Any common shares subject to an option that expires or terminates without having been fully exercised may
be subject to a further option. The number of common shares issuable to non-executive directors of the Corporation
under the stock option plan cannot at any time exceed 1% of the issued and outstanding common shares. Options must
be exercised during a period established by the Board of Directors, which may not be greater than 10 years after the
date of grant. Options granted under the stock option plan vest in equal amounts on a yearly basis over a period of four
to five years following the grant date.
December 31, 2023
December 31, 2022
Number of options
Weighted average
exercise price ($) Number of options
Weighted average
exercise price ($)
Outstanding - beginning of year
Granted during the year
Cancelled during the year
Outstanding - end of year
Options exercisable - end of year
284,769
60,873
(56,531)
289,111
173,015
16.75
15.08
14.65
16.81
16.49
265,570
51,352
(32,153)
284,769
186,088
16.83
17.50
18.59
16.75
15.55
The following options were outstanding as at December 31, 2023:
Year of granting
Number of options
outstanding
Exercise price ($)
Number of options
exercisable
Year of maturity
2017
2019
2020
2021
2022
2023
54,411
63,878
41,374
26,201
42,374
60,873
289,111
14.52
14.41
20.52
24.49
17.50
15.08
54,411
63,878
31,031
13,101
10,594
—
173,015
2024
2026
2027
2028
2029
2030
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p142
(in thousands of Canadian dollars, except as noted and amounts per share)
The weighted average contractual life of the outstanding stock options is five years.
A compensation expense of $59 was recorded during the year ended December 31, 2023, with respect to the stock
option plan ($35 in 2022).
Granted
During the year ended December 31, 2023, 60,873 options were granted. The options granted vest in three equal
tranches from February 24, 2026, to February 24, 2028 and must be exercised before February 24, 2030 at an exercise
price of $15.08.
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, 2023
December 31, 2022
$
$
3.46 %
0.72
6
27.94 %
1.78 %
0.72
6
26.77 %
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
During the year ended December 31, 2023, 325,708 share rights were granted during the year ended
December 31, 2023. The performance share rights vest on December 31, 2025.
In addition 145,001 performance share rights vested during the year ended December 31, 2023.
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
During the year ended December 31, 2023, 62,219 units were granted.
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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p143
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, 2023
DSU
PSP
December 31, 2022
DSU
PSP
531,351
325,708
(145,001)
(40,177)
46,060
717,941
215,612
62,219
—
—
16,915
294,746
526,519
251,650
(185,910)
(84,261)
23,353
531,351
162,512
44,745
—
—
8,355
215,612
A compensation expense of $2,400 was recorded during the year ended December 31, 2023, with respect to the PSP
and DSU plans ($3,171 in 2022).
Dividends
a) Dividend Reinvestment Plan (''DRIP'')
The Corporation implemented a DRIP for its shareholders. The plan allows eligible common shareholders the
opportunity to reinvest a portion or all of the dividends they receive to purchase additional common shares of the
Corporation, without paying fees such as brokerage commissions and service charges. Shares will either be purchased
on the open market or issued from treasury. During the year ended December 31, 2023, 188,548 shares (73,865 shares
in 2022) were issued from treasury under the DRIP.
b) Dividend Declared
The following dividends were declared by the Corporation:
Year ended December 31, 2023
2023
2022
($/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
147,058
2,757
2,875
0.7200
0.8110
1.4375
146,957
2,757
2,875
Dividend declared subsequent to period end and not recognized at the end of the reporting period.
The following dividends will be paid by the Corporation on April 15, 2024:
Date of
announcement
Record date
Payment date
Dividend per
common share
Dividend per Series
A Preferred Share
Dividend per Series
C Preferred Share
February 21, 2024 March 28, 2024
April 15, 2024
$
0.0900 $
0.2028 $
0.3594
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p144
(in thousands of Canadian dollars, except as noted and amounts per share)
24. ACCUMULATED OTHER COMPREHENSIVE INCOME
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, 2023
Business dispositions (Note 5)
Investments from non-controlling interests (Note 26)
Exchange differences on translation of foreign operations
Hedging loss
Share of non-controlling interest
Buyback of non-controlling interests (Note 4)
Related deferred tax expense
Balance as at December 31, 2023
43,011
(1,133)
1,021
(26,572)
—
3,677
332
—
20,336
(1,323)
—
—
—
(4,530)
—
—
—
(5,853)
151,240
(948)
(3,247)
—
(40,844)
2,001
—
9,170
117,372
3,742
—
—
—
(3,705)
—
—
998
1,035
196,670
(2,081)
(2,226)
(26,572)
(49,079)
5,678
332
10,168
132,890
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
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p145
(in thousands of Canadian dollars, except as noted and amounts per share)
25. 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
Common shares issued through equity based compensation
c) Changes in liabilities arising from financing activities
Changes in long-term loans and borrowings
Long-term debt at beginning of period
Business dispositions
Increase in long-term debt
Repayment of long-term debt
Reclassification of interest payable
Payment of deferred financing costs
Business acquisitions (Note 4)
Tax attributes
Production tax credits
Other non-cash finance costs
Net foreign exchange differences
Long-term loans and borrowings at end of period
Year ended December 31
2022
2023
(44,108)
(11,443)
22,150
(33,401)
(27,704)
(1,493)
14,679
(14,518)
Year ended December 31
2022
2023
(274,538)
(9,849)
(19,511)
(1,164)
(305,062)
7,126
(9,201)
(204)
(1,220)
17,779
29,876
1,991
(221,662)
(6,699)
(1,654)
(397)
(230,412)
36,444
8,535
261
546
(41,276)
11,453
2,114
Year ended December 31
2022
2023
5,759,210
(16,108)
1,485,589
(1,025,345)
—
(16,444)
164,262
(1,776)
(71,684)
58,164
(54,721)
6,281,147
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
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p146
(in thousands of Canadian dollars, except as noted and amounts per share)
26. NON-WHOLLY-OWNED SUBSIDIARIES
Name of subsidiaries
Harrison Hydro L.P. and
its subsidiaries
Kwoiek Creek
Resources, L.P.1,2
Mesgi'g Ugju's'n (MU)
Wind Farm L.P.1,2
Innergex Sainte-
Marguerite, S.E.C.
Innergex Europe (2015)
Limited Partnership,
and its subsidiaries4
Innergex France S.A.S,
and its subsidiaries3
Mountain Air
Alternatives LLC, and
its subsidiaries5
Innergex HQI USA LLC,
and its subsidiaries2
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)
December 31
December 31
December 31
2023
2022
2023
2022
2023
2022
Canada
49.99 %
49.99 %
(8,961)
(18,770)
10,190
19,151
Canada
50.00 %
50.00 %
(2,970)
(2,942)
(20,796)
(17,826)
Canada
50.00 %
50.00 %
9,178
11,303
(5,193)
(5,391)
Canada
49.99 %
49.99 %
(3,241)
(3,003)
(21,935)
(18,694)
Canada/
Europe
— %
— %
—
3,999
—
Europe
30.00 %
— %
1,795
—
6,160
United States
— %
— %
—
2,044
—
—
—
—
United States
50.00 %
50.00 %
(2,530)
(423) 147,639
186,595
Others
Various
Various
Various
(634)
(7,363)
2,380
(1,704)
(9,496) 118,445
6,397
170,232
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 26, 2023, the Corporation disposed of a 30% non-controlling interest in Innergex France S.A.S.
4. On October 4, 2022, the Corporation acquired the remaining ownership interests in Innergex Europe (2015) Limited Partnership.
5. On December 14, 2022, the Corporation acquired the remaining ownership interests in Mountain Air Alternatives LLC.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p147
(in thousands of Canadian dollars, except as noted and amounts per share)
Investment from non-controlling interests in Innergex's portfolio in France
On October 26, 2023, the Corporation has completed the long-term partnership with Crédit Agricole Assurances, in
connection with Crédit Agricole Centre-Est, for a 30% non-controlling interest in Innergex France S.A.S, and its
subsidiaries, representing a €129,546 ($187,676) investment.
The investment is composed of a 30% equity investment of €71,552 ($103,916) and a shareholders loan of €55,435
($80,064), with €2,559 ($3,696) in accrued and unpaid interests. In connection with this transaction, the Corporation
recognized an amount of $5,792 under non-controlling interests, a shareholders loan of $83,760, and a gain on a
transaction with a non-controlling interest of $86,274 under equity attributable to owners. Transaction costs and income
taxes amounting to $4,157 and $7,693 respectively, related to the transaction were directly recognized in equity.
A total of €55,435 ($81,079) in sharedolders loan to Crédit Agricole was outstanding under long-term loans and
borrowings as at December 31, 2023. An equivalent shareholders loan aggregating to €129,348 ($189,184), was
payable to Innergex and eliminated upon consolidation.
The following table presents the impact on equity attributable to owners of the Corporation during the period.
Total consideration received
Shareholders loan, including interest payable
Consideration received for the equity investment
Transaction costs
Consideration received for the equity investment, net of transaction costs
Carrying amount of the investment sold
Increase in equity attributable to owners
Tax impact
Increase in equity attributable to owners, net of income tax
Year ended
December 31, 2023
187,676
83,760
103,916
(4,157)
99,759
5,792
93,967
(7,693)
86,274
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p148
(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.
Harrison
Kwoiek
Mesgi'g Ugju's'n Sainte-Marguerite
Innergex France
(67-day period)
Innergex
HQI USA
Year ended December 31, 2023
Summary Statements of Earnings (Loss) and
Comprehensive Income (Loss)
Revenues
Expenses
Net (loss) earnings
Other comprehensive (loss) 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 (used in) from operating activities
Cash flows used in financing activities
Cash flows from (used in) investing activities
Effects on exchange rate changes on cash and
cash equivalents
Net change in cash and cash equivalents
40,808
58,734
(17,926)
—
(17,926)
(8,965)
(8,961)
(17,926)
(8,965)
(8,961)
(17,926)
(210)
(14,237)
20,562
—
6,115
15,755
21,695
(5,940)
—
(5,940)
(2,970)
(2,970)
(5,940)
(2,970)
(2,970)
(5,940)
3,953
(2,087)
(850)
—
1,016
51,980
28,281
23,699
(989)
22,710
14,521
9,178
23,699
13,915
8,795
22,710
34,348
(36,293)
(3,830)
—
(5,775)
Distributions paid to non-controlling interests
—
—
8,597
9,143
15,623
(6,480)
—
(6,480)
(3,239)
(3,241)
(6,480)
(3,239)
(3,241)
(6,480)
3,862
(3,213)
(1,432)
—
(783)
—
34,259
28,253
6,006
(4,583)
1,423
4,211
1,795
6,006
1,003
420
1,423
6,972
(16,101)
(1,173)
888
(9,414)
77,324
82,384
(5,060)
(6,909)
(11,969)
(2,530)
(2,530)
(5,060)
(5,985)
(5,984)
(11,969)
65,885
(65,944)
(175)
(71)
(305)
—
32,972
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p149
(in thousands of Canadian dollars, except as noted and amounts per share)
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) from 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
18,822
11,303
30,125
20,447
12,280
32,727
44,634
(45,016)
(689)
—
(1,071)
Distributions paid to non-controlling interests
—
—
11,482
9,484
15,491
(6,007)
—
(6,007)
(3,004)
(3,003)
(6,007)
(3,004)
(3,003)
(6,007)
2,817
(2,913)
731
—
635
—
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
9,136
3,999
13,135
3,374
2,044
5,418
(423)
(423)
(846)
26,169
11,457
37,626
9,958
6,037
15,995
12,020
12,019
24,039
91,860
19,573
43,212
(71,036)
(17,365)
(57,225)
58
(330)
(3,547)
17,335
742
2,620
—
445
(305)
—
7,387
28,613
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.
2023 Annual Report
Notes to the Consolidated Financial Statements p150
(in thousands of Canadian dollars, except as noted and amounts per share)
Summary Statements of Financial Position
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity (deficit) attributable to owners
Non-controlling interests (deficit)
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 France
Innergex HQI USA
As at December 31, 2023
14,509
512,090
526,599
25,973
443,225
47,211
10,190
526,599
8,450
161,276
169,726
25,347
194,198
(29,023)
(20,796)
169,726
16,839
254,882
271,721
17,846
221,311
37,757
(5,193)
271,721
2,408
113,011
115,419
12,818
129,908
(5,372)
(21,935)
115,419
80,753
734,955
815,708
86,026
709,148
14,374
6,160
815,708
12,727
313,711
326,438
2,297
28,854
147,648
147,639
326,438
Harrison
Kwoiek
As at December 31, 2022
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
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p151
(in thousands of Canadian dollars, except as noted and amounts per share)
27. 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
2023
2022
8,790
989
1,283
59
11,121
7,670
1,016
3,172
35
11,893
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 dividend payments in 2023 and 2022.
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 in 2022.
Acquisition of the remaining interests in Pampa Elvira Solar from its partner Denmark’s Investment Fund for
Developing Countries (see Note 4 - Business acquisitions)
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p152
(in thousands of Canadian dollars, except as noted and amounts per share)
28. 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.
As at December 31, 2023 As at December 31, 2022
Fair value
level
Carrying
amount
Fair value
Carrying
amount
Fair value
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
Contingent considerations included in
other long-term liabilities
Derivative financial instruments
measured at fair value
Interest rate swaps
Foreign exchange forwards
Power and basis hedges
Level 2
23,803
23,803
17,178
17,178
Level 2
6,281,147 6,347,187 5,759,210 5,934,241
Level 3
28,854
28,854
4,292
4,292
Level 2
Level 2
Level 3
79,102
(8,616)
(66,170)
79,102
(8,616)
(66,170)
98,138
(3,555)
(69,333)
98,138
(3,555)
(69,333)
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.
Contingent considerations
The purchase price of the Curtis Palmer acquisition on October 25, 2021, included a contingent consideration provision,
based on the evolution of the New York Independent System Operator ("NYISO") market pricing during calendar years
2023 and 2024, limited to US$30,000. The fair value calculation of the contingent consideration gives rise to
measurement uncertainty as the market pricing curves are constructed using certain unobservable inputs, such as
capacity revenues that are derived from the NYISO seasonal auction capacity prices and the trading prices for voluntary
Renewable Energy Certificates.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p153
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, 2023, the forward
power prices used in the calculation of fair value were as follows:
With respect to the Phoebe power hedge, the ERCOT South Hub forward power prices are expected to be in a range of
US$26.46 to US$117.67 per MWh between January 1, 2024 and June 30, 2031.
With respect to the Salvador power hedges, the withdrawal node future power prices are expected to be in a range of
US $0.00 to US$191.19 per MWh between January 1, 2024 and December 31, 2030.
The fair value estimates are subject to a credit risk adjustment that reflects the credit risk of the Corporation or of the
counterparty.
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 historical market prices and a combination of observable
exchange prices and over-the-counter broker quotes obtained through June 2031.
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.
Interest rate benchmark reform
The Corporation holds interest rate swaps for risk management purposes that are designated in cash flow hedging
relationships.
London Interbank Offered Rate ("LIBOR")
Effective June 30, 2023, the remaining USD LIBOR 1-month, 3-month, 6-month and 12-month tenors have either
ceased, or ceased being representative. The LIBOR administrator will continue to publish the 1-month, 3-month and 6-
month tenors under an unrepresentative synthetic methodology until September 30, 2024.
All of the USD LIBOR financial instruments were transitioned to secured overnight financing rate ("SOFR").
Canadian Dollar Offered Rate ("CDOR")
The Corporation currently holds interest rate swaps that have floating legs indexed to CDOR. On June 28, 2024 the
remaining CDOR 1-month, 2-month and 3-month tenors will either cease or no longer be representative. The
Corporation’s CDOR swaps and cash flow hedging relationships extend beyond the anticipated cessation date of
CDOR.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p154
(in thousands of Canadian dollars, except as noted and amounts per share)
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 CDOR. The
benchmark rates are quoted each day and the CDOR 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 the
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 CDOR using available quoted market rates for CDOR-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
CDOR on a similar basis. The Corporation’s notional amount exposure to CDOR designated in hedging relationships is
$1,282,565 as at December 31, 2023.
Financial risk management
The Corporation is exposed to a variety of financial risks: market risk (e.g. interest rate, foreign exchange, and power
price), 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.
2023 Annual Report
Notes to the Consolidated Financial Statements p155
(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,
2023
December 31,
2022
Corporate
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Innergex
Alterra
Alterra
Alterra
Hydroelectric segment
Ashlu Creek
Fitzsimmons Creek
Coyanco
Wind segment
Rougemont
Vaites
Cartier
Mesgi'g Ugju's'n
Cholletz
Foard City
Boswell
Mountain Air
Solar Segment
Stardale
Sault Ste. Marie
Phoebe
Kokomo
Spartan
Hillcrest
HP Solar I
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
CAD
USD
CAD
CAD
CAD
CAD
CAD
USD
EUR
EUR
CAD
CAD
EUR
USD
USD
USD
CAD
CAD
USD
USD
USD
USD
USD
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
CDOR
N/A
CDOR
CDOR
CDOR
CDOR
CDOR
SOFR
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
3.24% 2028
3.18% 2030
3.00% 2051
2.57% 2031
2.60% 2031
2.51% 2028
4.70% 2035
2.85% 2041
1.01% 2031
CDOR
CDOR
EURIBOR 1.35% 2032
EURIBOR 1.28% 2032
2.83% 2032
1.91% 2026
EURIBOR 2.64% 2030
2.01% 2029
3.27% 2052
1.77% 2029
SOFR
SOFR
SOFR
CDOR
CDOR
SOFR
N/A
N/A
SOFR
N/A
3.60% 2032
1.82% 2030
2.82% 2037
1.85% 2026
2.31% 2024
0.69% 2041
2.40% 2048
2027
2027
2027
None
None
2024
2027
2027
2029
2027
2029
2029
None
2027
2027
None
None
None
None
2025
2026
None
None
None
None
None
None
2026
2034
None
None
2026
2026
None
None
2028
2041
20,000
30,000
52,600
20,000
20,000
24,161
20,000
20,000
20,000
20,000
20,000
25,000
50,000
50,000
50,000
—
100,000
12,500
62,500
71,194
15,895
6,700
99,408
48,371
356,388
36,874
8,193
14,323
201,683
16,695
61,425
124,028
123,901
—
—
81,827
—
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
75,309
16,372
7,487
107,889
52,746
402,430
50,470
9,296
18,165
—
19,051
64,021
—
130,753
4,854
10,957
89,363
55,519
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 1.3226 and EURO swaps are converted at a fixed rate of CAD 1.4626.
1,883,666
1,695,721
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p156
(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.
Interest rate swaps
Earnings (loss)
Other comprehensive income
(loss)
December 31, 2023
December 31, 2022
(ii) Foreign exchange risk
10 bps
increase
10 bps
decrease
10 bps
increase
10 bps
decrease
10
27
(13)
(27)
9,309
8,470
(9,401)
(8,554)
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 2043,
allowing conversion at a fixed rate of
CAD 1.5321/Euro
Maturity
December 31, 2023
December 31, 2022
Notional Amounts
2024
2024
109,345
115,317
112,905
222,250
—
115,317
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 value of the hedged item
using the hypothetical derivative method.
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.
Foreign exchange forwards
Earnings (loss)
Other comprehensive income
(loss)
1% increase
1% decrease
1% increase
1% decrease
December 31, 2023
December 31, 2022
(158)
(140)
161
140
(1,459)
(642)
1,456
643
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p157
(in thousands of Canadian dollars, except as noted and amounts per share)
(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, after which the Phoebe
power hedge was no longer meeting the hedge effectiveness criteria. The Phoebe power hedge is 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 $3,429 for the year ended
December 31, 2023.
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.
Power hedge
December 31, 2023
December 31, 2022
Earnings (loss)
10 % increase
10% decrease
(27,001)
(29,895)
27,001
29,895
Salvador power hedges
The Corporation is subject, under the Salvador solar project, to a portfolio of power hedges maturing on
December 31, 2030. The 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 loss recognized as change
in fair value of financial instruments amounts to $1,969 for the year ended December 31, 2023.
Sensitivities
A reasonably possible change of 10% in the withdrawal nodes 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.
Power hedge
December 31, 2023
December 31, 2022
Earnings (loss)
10 % increase
10% decrease
(2,284)
(2,318)
2,284
2,318
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p158
(in thousands of Canadian dollars, except as noted and amounts per share)
(iv) Hedge accounting
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, 2023 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
1,883,666
84,661
(5,637)
196,376
252
(8,318)
The following table summarizes the impact of hedge ineffectiveness and hedging gains (losses) as at
December 31, 2023:
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
(34,015)
(1,307)
4,936
—
—
3,442
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
(4,530)
(211)
14
1.
The balance of cash flow hedge reserve relating to power price risk for which hedge accounting is no longer applied is $22,639.
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, 2023, the Corporation was holding cash and cash equivalents, restricted cash (Note 13) and
reserves included in other long-term assets (Note 19). The Corporation limits its counterparty credit risk on these
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p159
(in thousands of Canadian dollars, except as noted and amounts per share)
assets by dealing with highly rated, large Canadian financial institutions and, to a lesser degree, at major U.S.,
European and Chilean 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, 2023, $6,359 ($15,199 in 2022) of trade and other receivables were more than 90 days overdue
and a total write-off of impaired receivables of $3,437 ($2,341 in 2022) was recorded during the year. Given that
expected credit losses are minimal, the expected credit losses by trade accounts receivable ageing 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 $48,341 as at December 31, 2023, (negative working capital of
$123,665 in 2022). 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 $467,948 was available as at
December 31, 2023 ($174,877 in 2022). The Corporation considers its current level of working capital and revolving
term credit facility availability to be sufficient to meet its needs. 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 19) and is covered by insurance plans.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p160
(in thousands of Canadian dollars, except as noted and amounts per share)
The following table presents the contractual cash flows of non-derivative financial liabilities and derivative financial
instruments:
Non-derivative financial liabilities
Accounts payable and other payables
Long-term loans and borrowings1
Other liabilities
Lease liabilities
Derivative financial instruments2
Interests rate swaps
Foreign exchange forwards
Power Hedge
Total
Less than 1 year
Between 1 year
and 5 years
Over 5 years
Total
280,382
502,004
257
15,504
(36,346)
(180)
19,013
780,634
—
3,006,462
33,820
67,550
—
5,131,078
41,633
411,135
280,382
8,639,544
75,710
494,189
(24,366)
189
34,927
3,118,582
(32,828)
14,183
10,871
5,576,072
(93,540)
14,192
64,811
9,475,288
1. The contractual cash flows include debt principal and interest payments.
2. The contractual cash flows are presented at the net of cash receipts and disbursements for each derivative financial instrument.
The amounts may fluctuate from the actual cash flows at settlement due to the volatility of these instruments.
29. COMMITMENTS
a) Power Purchase Agreements
Quebec facilities
Under PPAs with terms varying from 20 to 25 years and expiring between 2026 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 the 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 2024 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.
On March 3, 2023, the Corporation and BC Hydro have renewed the Brown Lake EPA for an additional 20-year term,
which commenced on June 1, 2023.
On May 14, 2023, the Corporation and BC Hydro have renewed the Miller Creek EPA for an additional 20-year term,
which commenced on October 2, 2023.
On May 31, 2023, the Corporation and BC Hydro have renewed the Rutherford Creek EPA for an additional 20-year
term, which commences on May 31, 2024.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p161
(in thousands of Canadian dollars, except as noted and amounts per share)
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 initial 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 initial 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 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.
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 renewed in March 2023, the client agreed to purchase all of the energy produced
by the Pampa Elvira solar facility located in Chile.
Under a PPA with terms varying from 4 to 6 years and expiring between 2024 and 2030, 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 2030 and 2041, Chilean energy distributors agreed to purchase a
portion of the electricity produced by the PV Salvador solar facility and 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p162
(in thousands of Canadian dollars, except as noted and amounts per share)
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.
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, 2023, 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
39,030
2,503
41,533
138,309
6,790
145,099
376,954
5,436
382,390
554,293
14,729
569,022
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p163
(in thousands of Canadian dollars, except as noted and amounts per share)
30. 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.
Innavik EPC Agreement
During 2023, legal hypothecs were registered by the contractor against the Innavik hydroelectric project ("Innavik" or
"the project"), a joint venture company, in the amount of $61,251, representing the contractor’s claim for payment of
additional costs under the engineering, procurement and construction ("EPC") agreement with Innavik, and interests
thereon. The Corporation disputes that claim in good faith and has taken legal action to cause the legal hypothecs to be
removed from title. As at December 31, 2023, the project recognized a provision for the legal fees to be incurred
regarding the claim.
Senvion GmbH claims under insolvency proceedings
During 2019, Senvion GmbH ("Senvion"), an insolvent German company and service provider under the turbine supply
agreement at Innergex's Mesgi'g' Ugju's'n wind facility, filed for bankruptcy. Certain of the performance obligations under
the turbine supply agreement were covered, subject to terms and conditions precedent, by a $19,642 letter of credit.
The Corporation availed itself of the full amount on April 27, 2021. Such proceeds are to be used to remediate
Senvion's unfulfilled performance obligations under the turbine supply agreement.
On May 17, 2023, Senvion issued a claim through the Ontario Superior Court of Justice (the "Court") against Mesgi'g
Ugju's'n (MU) Wind Farm L.P. and Mesgi'g Ugju's'n (MU) Wind Farm Inc. (together, "MU"), alleging that MU drew down
on a $19,642 letter of credit held in its favour in violation of a stay of proceedings imposed by the Court under the
Companies Creditors’ Arrangement Act. The Corporation considers that this procedure has no basis and is disputing the
claim. No provision in respect of this litigation has been recorded as at December 31, 2023.
31. CAPITAL MANAGEMENT
The Corporation's strategy in managing its capital is: (i) to develop or acquire high-quality renewable power production
and storage facilities that generate sustainable and stable cash flows, with the objective of achieving a high return on
invested capital, and (ii) to pay a 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 pay a 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.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p164
(in thousands of Canadian dollars, except as noted and amounts per share)
The Corporation's capital is composed of long-term loans and borrowings and shareholders' equity. Total capital
amounts to $7,486,475 as at December 31, 2023.
The Corporation uses equity primarily to finance the development of projects. The Corporation uses long-term loans
and borrowings to finance the construction of its facilities. The Corporation expects to finance 70% to 85% of its
construction costs mostly through non-recourse long-term debt financing or, for qualifying projects in the United States,
through tax equity financing.
Future development and construction of new facilities, development of projects, expenses on prospective projects and
other capital expenditures will be financed out of cash generated from the Corporation's operating facilities, borrowings
and/or issuance of additional equity. To the extent that external sources of capital, including issuance of additional
securities of the Corporation, become limited or unavailable, the Corporation's ability to make necessary capital
investment to construct new or maintain existing project facilities will be impaired. There is no certainty that sufficient
capital will be available on acceptable terms to fund further development or expansion.
Under the terms of the Revolving credit facilities, the Corporation needs to maintain a leverage ratio and an interest
coverage ratio. If the ratios are not met, the lender has the ability to recall the facility.
Regarding the respective non-recourse projects financing, some subsidiaries of the Corporation need to maintain
minimum debt coverage ratios. If the ratios of a particular project financing are not met, the lenders could have the
ability to recall the particular debt. Certain financial restrictive clauses could prevent the subsidiaries from making
distributions to the Corporation.
All debt covenants are monitored on a regular basis by the Corporation. As at December 31, 2023, 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 are 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 sustainability of the
dividend payable to its shareholders and the development or acquisition of power production facilities.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p165
(in thousands of Canadian dollars, except as noted and amounts per share)
32. SEGMENT INFORMATION
Operating segments
The Corporation produces and sells electricity generated by its hydroelectric, wind and solar facilities to publicly-owned utilities or other creditworthy counterparties.
The Corporation’s Management analyzes the results and manages operations based on the type of technology, resulting in different cost structures and skill set
requirements for the operating teams. The Corporation consequently has three operating segments: (a) hydroelectric power generation (b) wind power generation
and (c) solar power generation.
"Revenues and Production Tax Credits Proportionate" are Revenues and Production Tax Credits plus Innergex's share of Revenues and Production Tax Credits of
the operating joint ventures and associates. “Adjusted EBITDA” represents operating income, to which are added (deducted) depreciation and amortization, ERP
implementation, impairment charges and the realized portion of the change in fair value of power hedges. "Adjusted EBITDA Proportionate" represents Adjusted
EBITDA plus Innergex’s share of Adjusted EBITDA of the operating joint ventures and associates. Revenues and Production Tax Credits 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 these measures should not be construed as an alternative to net
earnings (loss), as determined in accordance with IFRS.
Except for Revenues and Production Tax Credits 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.
Operating segments
Segment Revenues and Production Tax Credits
Segment Revenues and Production Tax Credits Proportionate
Segment Adjusted EBITDA
Segment Adjusted EBITDA Proportionate
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.
Hydroelectric
Wind
Solar
Segment results
Year ended December 31, 2023
358,210
403,517
276,113
311,715
536,238
552,012
404,718
416,634
147,126
147,126
94,998
94,998
1,041,574
1,102,655
775,829
823,347
Hydroelectric
Wind
Solar
Segment totals 1
Year ended December 31, 2023
104,361
—
10,391
24,868
—
22,154
—
28,761
2,749
129,229
28,761
35,294
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p166
(in thousands of Canadian dollars, except as noted and amounts per share)
Operating segments
Segment Revenues and Production Tax Credits
Segment Revenues and Production Tax Credits Proportionate
Segment Adjusted EBITDA
Segment Adjusted EBITDA Proportionate
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.
Hydroelectric
Wind
Solar
Segment results
Year ended December 31, 2022
336,645
380,973
250,510
285,064
485,258
501,465
382,216
394,380
113,320
113,320
51,542
51,542
935,223
995,758
684,268
730,986
Year ended December 31, 2022
Hydroelectric
Wind
Solar
Segment totals 1
110,181
—
5,502
24,840
572,284
5,313
—
22,188
1,814
135,021
594,472
12,629
The following table presents a reconciliation of the non-IFRS measures to their closest IFRS measures:
Year ended December 31, 2023
Year ended December 31, 2022
Consolidation
Share of joint
ventures
Proportionate Consolidation
Share of joint
ventures
Proportionate
Revenues
Production tax credits
Revenues and production tax credits
969,890
71,684
1,041,574
61,081
—
61,081
1,030,971
71,684
1,102,655
Operating income
Depreciation and amortization
ERP implementation
Impairment of long-term assets
Realized loss on power hedges
Adjusted EBITDA
Unallocated expenses:
General and administrative
Prospective projects
Segment Adjusted EBITDA
219,575
361,292
12,651
118,857
(24,632)
687,743
60,924
27,162
775,829
30,962
16,556
—
—
—
47,518
250,537
377,848
12,651
118,857
(24,632)
735,261
—
—
47,518
60,924
27,162
823,347
870,494
64,729
935,223
263,366
336,053
2,357
47,868
(37,479)
612,165
47,363
24,740
684,268
60,535
—
60,535
29,919
16,799
—
—
—
46,718
—
—
46,718
931,029
64,729
995,758
293,285
352,852
2,357
47,868
(37,479)
658,883
47,363
24,740
730,986
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p167
(in thousands of Canadian dollars, except as noted and amounts per share)
Geographic segments
As at December 31, 2023, excluding its investments in joint ventures and associates which are accounted for as equity method, the Corporation had interests in the
following operating assets: 34 hydroelectric facilities, 8 wind farms and 4 solar farms in Canada, 16 wind farms and 1 storage facility in France, 3 hydroelectric
facilities, 8 wind farms and 2 solar farms in the United States, and 4 hydroelectric facilities, 3 wind farms and 3 solar farms and 1 storage facility in Chile. The
Corporation operates in four principal geographical areas, which are detailed below:
Revenues and production tax credits
Canada
United States
Chile
France
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
2023
2022
441,631
323,293
151,040
125,610
1,041,574
As at
427,910
294,175
121,021
92,117
935,223
December 31, 2023
December 31, 2022
3,355,393
2,597,848
1,585,033
731,897
8,270,171
3,246,979
2,364,160
1,549,679
753,161
7,913,979
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
Segment
Hydroelectric and wind
Hydroelectric generation
Year ended December 31
2023
2022
215,184
171,232
386,416
235,234
158,325
393,559
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p168
(in thousands of Canadian dollars, except as noted and amounts per share)
33. SUBSEQUENT EVENTS
On February 21, 2024, the Board of Directors approved an update to its capital allocation strategy and revised its
annual dividend for 2024 to $0.36 per common share to support its growth plans.
Innergex Renewable Energy Inc.
2023 Annual Report
Notes to the Consolidated Financial Statements p169
(in thousands of Canadian dollars, except as noted and amounts per share)
Investor Relations
Jean Trudel
Chief Financial Officer
Naji Baydoun
Director - IR
Tel. 450 928-2550 x1263
inverstorrelations@innergex.com
into
SHAREHOLDER INFORMATION
Head Office
1225 St-Charles West,
10th floor
Longueuil QC J4K 0B9
Tel. 450 928.2550
Fax 450 928.2544
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 204,321,381
common
at
December 31, 2023, with a closing price of $9.19 per
share.
outstanding
shares
as
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.
Convertible Debentures - TSX: INE.DB.C
Inc. currently has
Innergex Renewable Energy
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.
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
Credit Rating by Fitch Rating
Innergex Renewable Energy Inc.
Series A Preferred Shares
Series C Preferred Shares
BBB-
BB
BB
Independent Auditor
KPMG LLP
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Contact
1225, Saint-Charles Street West, 10th Floor
Longueuil, Quebec, Canada J4K 0B9
info@innergex.com
T 450 928-2550 F 450 928-2544
innergex.com