Innergex Renewable Energy Inc. and its partner, the Mi'gmaq communities of Quebec, have closed a $311.7-million non-recourse construction and term project financing for the Mesgi'g Ugju's'n wind project located in Quebec, Canada.
Troy Jerome, executive director of the Mi'gmawei Mawiomi Secretariat, said:
"Our assembly, the Mi'gmawei Mawiomi, has been anticipating reaching this critical milestone and today we are elated to have reached financial close. The Mesgi'g Ugju's'n project is a historic achievement and a testament of how Mi'gmaq communities can come together and reach their vision of funding their own government initiatives."
Michel Letellier, president and chief executive officer of the corporation, said:
"We are very pleased to have closed the financing for Mesgi'g Ugju's'n, which provides for fixed-rate debt at a very attractive rate and a term closely matching the project's power purchase agreement. The successful realization of this project is now well under way, with construction progressing on time and on budget. For Innergex, this financing also marks the completion of a major capital funding program of more than $1-billion that we began a year ago, in order to finance the five development projects we expect to commission by the end of 2016."
The $311.7-million financing has been arranged and underwritten by National Bank Financial Markets, as co-lead arranger and sole book runner, and SunLife Assurance Company of Canada, as co-lead arranger. It comprises three facilities, or tranches:
The financing also comprises two letter of credit facilities totalling approximately $51.3-million, one for the debt service reserve and the other for the letters of credit issued to Hydro-Quebec during the construction of the project.
Proceeds of the financing will be used to pay for the project's construction costs, as well as a loss of approximately $27.0-million realized upon settlement of the bond forward contracts used to fix the benchmark interest rate for the loans prior to closing and therefore protect the project's expected return. This loss results from a decrease in benchmark interest rates between the date the bond forwards were entered into (in March, 2014) and the valuation date (Sept. 28, 2015) and is compensated by lower interest payments for the duration of the loans.
The project is owned by the Mesgi'g Ugju's'n (MU) Wind Farm, L.P., an entity controlled 50:50 by the three Mi'gmaq communities of Quebec -- Gesgapegiag, Gespeg and Listuguj and by Innergex, which is also responsible for the management of the construction and the operation of the wind farm. The project is located on public lands in the Avignon Regional County Municipality in Quebec.
Construction began in May, 2015, and commercial operation is expected to begin in late 2016. The wind farm will have an installed capacity of 150 megawatts and an average annual production of approximately 515,000 megawatt hours, enough to power more than 30,000 Quebec households each year. All of the electricity the facility will produce is covered by a 20-year fixed-price power purchase agreement with Hydro-Quebec, which provides for an annual adjustment to the selling price based on a portion of the Consumer Price Index.