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Article Excerpt
OPERATOR: Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Boralex Inc.'s fourth-quarter 2008 results conference call. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session. Instructions will be provided at that time for you to queue up for questions. (Operator Instructions) I would like to remind everyone that this conference call is being recorded on Thursday, February 26, 2009, at 10 a.m. Eastern Time.
I will now turn the conference over to Patricia Lemaire, Director of Communications. Please go ahead.
PATRICIA LEMAIRE, DIRECTOR, PUBLIC AFFAIRS & COMMUNICATIONS, BORALEX INC.: Thank you, operator. Good morning, ladies and gentlemen. Welcome to the fourth quarter and fiscal 2008 conference call of Boralex. Joining me today are Mr. Patrick Lemaire, President and CEO, Jean-Francois Thibodeau, Vice President and CFO, and Mr. Guy D'Aoust, Director of Finance and Treasury. Mr. Lemaire will begin with his comments, afterwards Mr. Thibodeau will complete with some financial highlights.
During this call, we will discuss historical as well as forward-looking matters. When we talk about the future, there are a variety of risk factors that have been listed in our different filings with securities regulators that can materially change our actual results. These documents are all available for consultation at SEDAR.com.
Also, the financial statements included in our press release contain certain non-GAAP financial measures. Such information is reconciled to the most directly comparable financial measures in the notes to the completed financial statements. The financial statements, our press release, and a copy of today's presentation are posted on the Boralex website at Boralex.com. If you wish to receive a copy of either of these documents, please do not hesitate to contact us.
Please take note that the annual report 2008 including the MD&A and the consolidated financial statements will be available on Boralex website and our SEDAR website by the end of March. Finally, I would like to remind you that the media and Internet users are in a listen-only mode and that we will only take questions from financial analysts. If you have any questions, please feel free to call us after the session.
Mr. Lemaire will now start with his comments. Patrick?
PATRICIA LEMAIRE: Thank you, Patricia. Good morning, everyone. For the fourth quarter of 2008, Boralex is pleased to report higher production and revenues as the diversification of its asset base allowed for the wood and hydro segment to compensate for a lesser contribution from the wind segment. Also considering a specific item in regards to Q4 2007, REC sales on which Jean-Francois will provide later provide details, EBITDA increased on a comparable basis.
Overall, Boralex profited from a better price and power premium from the devaluation of the Canadian dollar and from an increase in production. Boralex also benefited from its portfolio of forward electricity sales contracts which translated into an increase of the average US selling price per megawatt hour, despite a downward trend in the spot price. This strategy is expected to continue to favor Boralex as a significant portion of 2009 electricity sales within the wood residue segment are hedged way above the current market price.
Boralex also continued to be rewarded from its strategy in regards to the qualification of its wood residue plants REC market. Boralex sold in this market more than $7.5 million of the RECs in the quarter and still had at the end of the year for the Connecticut market $35 million of RECs sold forward for the period before January 2009 and December 2012, including more than 80% of its 2009 expected production.
Looking at a few recent transactions in this market, we witnessed a relatively quiet and stable spot market for RECs trade. However, the fundamentals remain excellent as the state of Connecticut increased on January 1, 2009, the minimum green energy proportion imposed on distributors from 5% to 6% increasing steadily this percentage to 20% by 2020.
Finally, in regards to the construction of four wind sites totaling 40 megawatts in southwestern Ontario which began early in the fourth quarter, we are pleased to announce that we have received full credit approval from a European lender for a project financing of all four sites. This financing, one of the first project financing for alternative energy in several months in Canada, will provide Boralex with the necessary flexibility to complete these projects while allowing to considering new growth opportunities in Canada.
Jean-Francois will later provide additional details on this important financial milestone realized in the midst of a very challenging credit environment. I will be available later for the question period. And now I will ask our CFO, Jean-Francois Thibodeau, to further discuss our results and briefly review our operation and financial situation. Jean-Francois.
JEAN-FRANCOIS THIBODEAU, VP & CFO, BORALEX INC.: Thank you, Patrick. Good morning, everyone. Starting with slide eight, I will first discuss the specific item Patrick referred to earlier and reconcile with you net earnings for the quarter and for the year.
Starting with the quarter, you will recall that last year's results took into account the cumulative recognition of Livermore Falls RECs which became eligible on April 1, 2007. The revenue, which was accounted for in the fourth quarter and applied it to this retroactive period, amounts to CAD4.6 million or $2.8 million after-tax. Including this specific item, net earnings for Q4 '07 stand at CAD3.2 million or CAD0.08 per share compared to CAD0.12 per share in 2008, a 50% increase on a comparable basis.
Now for the year, 2007 net earnings included a CAD5.9 million pretax profit on swap contracts, relating to the refinancing of our long-term debt in France and its related tax expense of CAD1.9 million. Excluding these specific items, 2007 net earnings stand at CAD17.6 million or CAD0.51 per share. Taking into consideration these nonrecurring items, Boralex actually realized an increase of its net profit of 16% against 2007 and on a comparable and per-share basis this increase is 6%.
Now let's have a look at the quarter-over-quarter EBITDA numbers by sector on slide nine. As you can see the only sector showing improvement this quarter is natural gas. Thanks to the sale of about one million of CO2 quotas the co-gen was able to compensate for the higher national gas costs.
Lower wind conditions and the effect of the REC adjustment of 2007, as discussed earlier, led to decreases in EBITDA for the wind and residue sector. But if we exclude the CAD4.6 million REC adjustment from the reported Q4 '07 wood residue EBITDA, of CAD10.7 million, we then compare an EBITDA of CAD9.1 million for Q4 of '08 to an adjusted number of CAD6.1 million in Q4 '07 thus an increase of almost 50%.
Excluding this adjustment, the overall consolidated EBITDA would show a growth of CAD1.5 million, or almost 11% higher from the CAD14.1 million on an adjusted basis in 2007. I will go through each segment is more detail later.
If we look at the numbers on a full-year basis, the story clearly appears very positive as all operating segments achieved moderate to significant growth. And on a consolidated basis, Boralex is pleased to report a growth of 12% to reach almost CAD69 million, a record level for the Company.
First, the Wind segment showed improvement with the contribution from La Citadelle site, which was commissioned in July '07, the contribution from the expansion of the Avignognet-Lauragais sites in April 2008,...
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