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Boralex takes writedown after closing Quebec biomass plant

The wood-residue thermal power segment generated $17-million in revenue, down $11.1-million from the 2010 period.

Bob Galbraith/Associated Press/Bob Galbraith/Associated Press

Renewable energy producer Boralex Inc. is closing the door on its troubled Dolbeau, Que., wood-residue plant by permanently shutting the idle facility and taking a financial writeoff.

The 28-megawatt co-generation plant, which has operated sporadically since 2009, has been indefinitely closed since April, affecting 30 to 40 workers.

The closing of AbitibiBowater's adjoining mill disrupted the supply of wood and sale of steam, forcing the company to look for alternatives.

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"After analyzing a few scenarios, management came to the conclusion that … it made no sense to sporadically run this plant in the wintertime and that the best alternative was simply to permanently shut its operation," Boralex chief executive officer Patrick Lemaire said Wednesday during a conference call.

Boralex took a $6.5-million writeoff in the third quarter ($4.3-million after taxes) and has begun negotiations to end its electricity supply deal with Hydro-Québec.

The company's remaining Canadian biomass asset in Seneterre, Que., is running smoothly and remains part of the company's core portfolio.

Boralex's loss widened in the third quarter despite a big increase in revenue powered by acquisitions.

The company, which on Tuesday announced the closing of a financing deal with two partners to fund construction of a major wind farm in Quebec, said Wednesday that it lost $7.2-million or 19 cents a share in the three months ended Sept. 30.

That compared with a profit of $34.7-million or 92 cents in the same 2010 period, which included an extraordinary gain of $43.6-million related to the deemed disposal of investment in the Boralex Power Income Fund and related income tax recovery.

"The significant positive contribution of the new sites that were recently acquired and commissioned by Boralex was not able to offset the adverse impact, in particular, of the impairment charge against the property, plant and equipment at the Dolbeau power station," the company stated.

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Excluding one-time adjustments, Boralex lost $3.1-million or 8 cents a share in the quarter, compared with a loss of $5.4-million or 14 cents in 2010.

The results beat analyst forecasts, which estimated a loss of 19 cents a share.

Pierre Lacroix of Desjardins Group said the third quarter should be the last that the biomass segment will be a drag on results since the U.S. assets are being sold for $81-million in net proceeds.

The quarterly results were overshadowed by Tuesday's announcement of full financing for the Seigneurie de Beaupré wind project in Quebec, as well as the sale of the U.S. biomass facilities earlier this week.

"We continue to believe that Boralex's shares offer attractive potential upside return from their current price," Mr. Lacroix wrote in a report.

Revenue from energy sales was $50.1-million, up from $42.1-million with growth driven by the addition of 10 power stations acquired from Boralex Power Income Fund and the commissioning of new wind and solar power stations, offset by a decline in revenues at U.S. wood-residue power stations.

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Wind power revenue surged 45 per cent to $11.3-million, while the hydroelectric power segment generated $11.6-million in quarterly revenue, up four-fold from the prior year.

The wood-residue thermal power segment generated $17-million in revenue, down $11.1-million from the 2010 period. The natural gas co-generation thermal power segment reported $9.3-million in revenue while its new solar power stations contributed $900,000.

"These positive numbers reflect Boralex's growth strategy over the last few years," Mr. Lemaire told analysts.

"Considering the biomass announcement in combination with the completion of the debt financing for phase one of the Seigneurie project, our future looks better than ever."

Boralex is looking at wind opportunities in Canada and France in which to invest the proceeds from the U.S. biomass sale.

Chief financial officer Jean-François Thibodeau said the phone has been ringing off the hook since the announcement from those looking to sell their assets. "Knowing that cash attracts assets, I'm very positive that we'll get plenty of opportunities," he said.

On Tuesday, Boralex, Gaz Metro LP and Valener Inc. said they had closed a $725-million financing to fully fund construction of the Seigneurie de Beaupré Wind Farm project northeast of Quebec City.

The power project is expected to house 126 wind turbines by December, 2013, and have 20-year purchase agreements with Hydro-Québec. So far, 41 wind turbine foundations have been laid and 80 per cent of the access roads have been built, the companies said.

The Seigneurie de Beaupré Wind Farm is the largest wind power project in development in Canada, with total contracted capacity of 366 megawatts.

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