DBRS Updates Report on Innergex Renewable Energy Inc.

DBRS has today updated the report for Innergex Renewable Energy Inc. (Innergex or the Company), in relation to the rating action on August 9, 2012, when the trends on Innergex’s ratings were changed to Negative from Stable. Going forward, these are unsolicited ratings based on public information.

The trend change reflected a continuing decline in Innergex’s financial risk profile, driven by three main factors: (1) continued growth has put pressure on the balance sheet, due to increasing amounts of capital expenditure; (2) high dividend payouts are expected to continue decreasing Innergex’s equity base, limiting its ability to assume higher debt levels at the holding company level to support its growth strategy; and (3) growth has gradually caused increases in the usage and size of the corporate revolving credit facility, increasing leverage at the holding company level.

Considering Innergex’s business risk profile and the structural protections of non-recourse, project-financing strategy, DBRS views deconsolidated leverage (i.e., debt at the holding company level) of approximately 30% and consolidated leverage of 60% appropriate for maintaining an investment-grade rating. The Company needs to manage its debt-to-capital ratio on both a consolidated and deconsolidated basis in a way that provides the financial flexibility required for growth and consistent execution of project-level borrowing. A lack of material improvement in leverage (both on a consolidated and non-consolidated basis) could warrant a downgrade to the ratings in the near future.

Notes:
All figures are in Canadian dollars unless otherwise noted.

This is an unsolicited rating. These ratings were not initiated at the request of the issuer or rated entity and did not include participation by the issuer or any related third party.

The applicable methodologies are Rating Companies in the Non-Regulated Electric Generation Industry (May 2011), DBRS Criteria: Rating Parent/Holding Companies and Their Subsidiaries (March 2010) and DBRS Criteria: Preferred Share and Hybrid Criteria for Corporate Issuers (August 2009), which can be found on our website under Methodologies.