Boralex and Gaz Metro line up financing for Quebec wind energy project

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

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

"The conclusion of the financing for the first phase of our Seigneurie de Beaupre Wind Farms, an investment of approximately $750 million, reflects the quality and great value of our wind site, even more so in the current highly uncertain and turbulent financial markets," Boralex president Patrick Lemaire and Gaz Metro Sophie Brochu said in a joint statement.

The new financing agreement consists of a two-year construction loan of $590 million, including a bridge loan and a credit facility of $135 million to finance costs to be repaid to Hydro-Quebec. A total of $260 million of the financing is covered by a guarantee from the German government.

Other lenders include KfW IPEX-Bank, Bank of Tokyo-Mitsubishi, Deutsche Bank, Sumitomo Mitsui Banking Corp., Landesbank Baden-Wurttemberg, Mizuho Corporate Bank, Siemens Financial Services and the Caisse de depot et placement du Quebec.

The Quebec pension fund manager will contribute $25 million of financing.

"This financing enables us to support established business partners and offers us a long-term opportunity ideally aligned to our investment strategy," said Marc Cormier, utive vice-president of fixed income at the Caisse.

"With our investment in this project, we are contributing to a renewable energy initiative in Quebec while generating a return that meets the objectives of our depositors."

Pierre Lacroix of Desjardins Capital Markets said the financing deal was positive since the partners will be able to obtain a very favourable long-term rate of about 5.5 per cent.

That will likely secure and after-tax equity return in the low teens as targeted when the partners were originally awarded the project.

"We view the announcement as a positive catalyst for both Boralex (TSX:BLX) and Valener (TSX:VNR), given it materially reduces financing risk associated with the contracted wind energy project," Lacroix wrote in a report.

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

Boralex develops renewable energy power stations. Gaz Metro is a major gas distributor in Quebec and Valener holds a 29 per cent stake in Gaz Metro.