MONTREAL - Boralex Inc. has decided to permanently close a troubled wood residue plant in Dolbeau, Que., and hopes to sell the operation, the alternative energy producer announced Wednesday.
The 28-megawatt co-generation facility has operated only four months a year since 2009 in order to receive higher winter energy rates. It has been on indefinite shutdown since April, affecting 30 to 40 workers.
The closure of AbitibiBowater's (TSX:ABH) adjoining mill disrupted the supply of wood and sale of steam, forcing Boralex to look for alternatives.
Boralex (TSX:BLX) 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-Quebec.
"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," CEO Patrick Lemaire said Wednesday during a conference call.
During the quarter, it accounted for a couple hundred thousand dollars of Hydro-Quebec penalties for the year.
There have been no discussions with AbitibiBowater, which is contemplating whether to partially reopen its mill. Preliminary talks have instead focused on local players.
"We prefer to sell it or find another way that it could to operate, dismantling is not the main option at the moment," spokeswoman Patricia Lemaire said in an interview.
The company's remaining Canadian biomass asset in Seneterre, Que., is running smoothly and remains part of the company's core portfolio.
Boralex widened its loss 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 per share in the three months ended Sept. 30.
That compared with a profit of $34.7 million or 92 cents per share 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.
Excluding one-time adjustments, Boralex lost $3.1 million or eight cents per share in the quarter, compared with a loss of $5.4 million or 14 cents per share in 2010.
The results beat analyst forecasts, which estimated a loss of 19 cents per share.
Pierre Lacroix of Desjardins Capital Markets said Q3 should be the last quarter 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 Beaupre wind project in Quebec, as well as the sale of the US biomass facilities earlier this week.
"We continue to believe that Boralex's shares offer attractive potential upside return from their current price," 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.
Wind power revenues surged 45 per cent to $11.3 million, while the hydroelectric power segment generated $11.6 million in quarterly revenues, up fourfold from the prior year.
Wood residue thermal power segment generated $17 million in revenues, down $11.1 million from the 2010 period. The natural gas co-generation thermal power segment reported $9.3 million revenues while its new solar power stations contributed $900,000.
"These positive numbers reflect Boralex's growth strategy over the last few years," Lemaire told analysts.
"Considering the biomass announcement in combination with the completion of the debt financing for phase 1 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-Francois 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 Beaupre 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-Quebec. 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 Beaupre Wind Farm is the largest wind power project in development in Canada, with total contracted capacity of 366 megawatts.
On the Toronto Stock Exchange, Boralex shares closed down 10 cents to $6.75 in Wednesday trading.