Innergex in deal to buy Chilean hydro project

23 May 2018

Innergex Renewable Energy Inc and Energía Llaima are partnering to acquire the 140MW Duqueco hydro power project in Chile.

The two firms won a competitive bid process to buy the project, which includes two hydro facilities. The deal is subject to certain regulatory approvals in Chile and to reaching a final partnership agreement between the parties. In addition, Innergex has signed an exclusivity agreement with Energía Llaima for a joint venture partnership to acquire a 50% stake in the company.

“We are very pleased to finally enter the Chilean market through the acquisition of hydro assets where we can leverage our substantial experience and expertise. With this partnership, we intend to pursue a growth trajectory in this market and to expand our development platform throughout South America with a focus on high quality renewable energy projects,” said Michel Letellier, President and Chief Executive Officer of Innergex. “These transactions mark Innergex’s entry into South America through the building of a strong partnership with a solid company with expansion plans. Energía Llaima is a perfect fit for us as they share a similar approach to sustainable development, working with local communities and indigenous groups to ensure projects are socially acceptable and are deeply integrated in Chile’s business sector.”

“We are very pleased to welcome Innergex as a partner in Energía Llaima and in acquiring two strong hydro assets,” added Ian Nelson, Chief Executive Officer of Energía Llaima. “We are a growing company with high quality projects in operation as well as in development and we intend to become a larger player in the Chilean industry and throughout South America. We look forward to having Innergex’s vast experience and diversified expertise to help bring many of our exciting development opportunities online.”

Upon signing a final partnership agreement, Innergex would own 50% of Energía Llaima for a total commitment of US$110 million (C$140.5 million) to be invested in the next three years. In addition to the investment in the Duqueco project, Innergex will invest an additional US$10 million (C$12.8 million) in Energía Llaima to contribute to its working capital.

The expected acquisition of the Duqueco hydro project includes two hydro facilities commissioned in 2001, Peuchen (85MW) and Mampil (55MW), located on the Duqueco river, 60 km east of Los Angeles city, Chile.

The Peuchen plant has a reservoir upstream with a 4-hour regulation at full capacity and up to 12-hour regulation at partial capacity, which also benefits Mampil. The aggregated average annual power generation is expected to reach over 350,000 MWh. Electricity produced by these hydro facilities is sold under power purchase agreements (PPAs) at fixed prices until 2020 and on the spot market. Innergex is expecting an Adjusted EBITDA of approximately US$21 million (C$26.8 million) annually for the Duqueco project.

The purchase price, net of an estimated US$10 million (C$12.8 million) of cash, is approximately US$210 million (C$268 million), subject to certain adjustments and a financing of US$140 million (C$178.8 million) is to be granted by South America bank, Itaú, to cover a portion of the purchase price. Innergex’s net share of the remaining purchase price will amount to about US$80 million (C$102.2 million). In addition, the Corporation made a deposit to secure financing of US$10 million (C$12.8 million). Both amounts will be paid through available funds under its corporate revolving credit facility.



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