Executives: Martine Benmouyal - Senior Communications Advisor Michel Letellier - President and CEO Jean Perron -

CFO
Analysts: Nelson Ng - RBC Capital Markets Sean Steuart - TD Securities Jeremy Rosenfield - Industrial Alliance Securities Unidentified Analyst - CIBC World Markets Ben Pham - BMO Capital Markets Steven Hong - National Bank

Financial
Operator: Good morning ladies and gentlemen, thank you for standing-by. Welcome to Innergex Renewable Energy's Conference Call for the Third Quarter 2016 Results. At this time, all participants are in a listen-only mode. Following the presentation, we will conduct a question-and-answer session for analysts and institutional investors, and instructions will be provided at that time for you to queue up for questions. [Operator Instructions].

I would like to remind everyone that this conference call is being recorded today, Thursday, November 10, 2016 at 9.00 AM Eastern Time. I will now turn the conference over to Martine Benmouyal, Senior Communications Advisor. Please go ahead.

Martine Benmouyal: Thank you. Good afternoon, ladies and gentlemen.

I'm here today with Mr. Michel Letellier, President and CEO of Innergex; and Mr. Jean Perron, Chief Financial Officer. Please note that the presentations will be in English. However, you are welcome to address your questions either in French or in English.

I would also like to point out that journalists are invited to call us afterwards if they wish to address any additional questions. In a minute, Mr. Perron will provide some details on our financial results for the quarter ended September 30, 2016. Next, Mr. Letellier will provide an overview of our operating activities and outlook.

We will then open the Q&A session with both senior executives. The financial statements and the MD&A have been filed on SEDAR and are readily accessible via the Internet. You may also access the press release, the financial statements and MD&A on the Innergex website in the Investor section. During this presentation, we will refer to financial measures such as adjusted EBITDA, free cash flow and payout ratio that are not recognized measures according to the International Financial Reporting Standards, the IFRS as they do not have a standardized meaning. Please be advised that this conference call will contain forward-looking information that reflects the Corporation's expectations with respect to future results or developments or explanations concerning the principle assumptions used by the Corporation to derive this forward-looking information and the principal risks and uncertainties that could cause actual results to differ materially from those anticipated.

I invite you to consult the first pages of the Company's MD&A, as well as its Annual Information Form. I now turn the conference over to Mr. Perron.

Jean Perron: Thank you, Martine. Good morning.

The quarterly results for Q3 2016 shows production of 90% of the long-term average, due mainly to -- average in the market. For the nine month period ended September 30, production was 106% of the long-term average due mainly to above average results in all markets both Ontario and France. Revenues for the quarter were 6.6 million higher than in 2015. This 10% increase is attributable mainly to better results from most of the British Columbia hydroelectric facilities compared with the same period last year. And to the contribution recently commissioned our acquired facilities mainly the BC Tretheway Creek Hydroelectric facility commissioned in November 2015, the BC Walden North Hydroelectric facility acquired in February 2016, the seventh French acquisition made in April 2016 and the BC Tretheway Creek facility commissioned this quarter which were partly offset by lower revenues from the hydroelectric and wind regimes in Quebec and the hydroelectric regime in Ontario.

For the nine month period, revenues were 28.9 million higher than in 2015. This 15% increase is attributable mainly to better results in our hydroelectric markets, except Ontario and to the contribution of the recently commissioned or acquired facilities, which were partly offset by lower revenues from the wind regime in Quebec. Adjusted EBITDA for the quarter in the nine month periods were 2.6 million and 20.8 million higher than for the same periods in 2015 respectively for the reasons explained above. Finance cost for the quarter increased by 2.8 million compared to 2015. The increase is due mainly to the French acquisition made last quarter and the interest expense of Tretheway Creek, partly offset by lower inflation compensation interest on the real-return bonds attributable to lower inflation during the quarter.

For the nine month period, finance cost increased by 6 million compared to 2015. The increase is mainly due to the acquisition made last quarter and BC Tretheway facilities and to the higher inflation compensation interest on the real return bonds. For the three and nine month periods, other net revenues totaled 0.2 million and 0.6 million respectively, compared to net expense of 27 million and under 20 million in 2015. The significant decrease in other interest expense for the quarter and the nine month period seems mainly from the fact that the commission realized losses of 27 million and under 20 million respectively for the same period last year. Upon the settlement of the Big Silver Creek, Boulder Creek, and Upper Lillooet and Mesgi'g Ugju's'n contracts for the closing of the project financings.

For the three and nine month periods ended September 30, the commission recognized an unrealized net loss on derivative of 1.2 million and unrealized net gain of 2.1 million respectively due mainly to the foreign exchange rate swaps and interest rate swaps. For the corresponding period last year the commission recognized unrealized net gains on derivatives of 24 million and 29 million respectively due mainly to do reversal of the unrealized loss accrued to December 31, 2014 upon settlement of the bonds void contracts continuity with the closing of Boulder Creek operated with Big Silver Creek and Mesgi'g Ugju's'n financings. For the period ended September 30, the commission had no derivative to be settled on closing of the project financing as all the different project financing were put in place in 2015. Excluding the impact of derivatives and derivative income taxes on the results, net earnings will have been 1.2 million and 22.7 million respectively for the three month and nine month period compared to 3.9 million and 17.5 million in 2015. Overall the below average third quarter added to a very good first six month period allowing us to report an excellent nine month period mainly due to a real good production in most of our sectors.

Our trailing 12 months free cash flow ending on September 30, reached 75.8 million compared to 84.2 million for the same period ending in Q3 2015. The decrease is due mainly to higher cash flows from operations before we announced loss [ph] on derivative financial instruments in 2015 which were more than offset by greater scheduled debt principal payments. Our payout ratio was still at 89% compared to 74% in 2015. This negative change is due mainly to decrease in free cash flow explained and due to the higher number of common shares outstanding mainly due to the issuance of 3.9 million shares under private placement common shares and to the derivative -- partly offset by the purchase and cancellation of 483,000 shares under the normal course issued. Since the beginning of Q4 2016 our production has overall been above the long-term average especially for the BC Hydro sector.

This concludes my review of the results. I will be happy to answer any questions you might have on the call. I will now turn it back to Michel.

Michel Letellier: Good morning everybody and I guess that today we had the time to digest the U.S. elections so a little bit in a better shape than yesterday morning.

Just to go back little bit on our development activities, mainly the construction activities, the MU project, the Mesgi’g Ugju’s’n project is advancing very well. We have been producing our first electricity during the commissioning of the wind turbine. So it is advancing well. We need good weather in order to speed up the work but we should be done by mid-December, better if weather permits. There is something also that I would like to stress about the MU project is the fact that we have had a record of 113 Mi'kmaq workers on site which represent roughly a third of the total workforce.

So this is very good for the Mi'kmaq but it is also showing that if developer and contractor works together with First Nation it is possible to have a big portion of the worker being First Nations. So, I think that this is a good leeway in future development in joint venture throughout Canada with First Nation. It is very important I think to make sure that First Nation has some direct work during the construction. Upper Lillooet and Boulder, most of the civil work is done except for some commissioning and the intake for both power intake and the last piece of stock that is embedded in the boulder tunnel. So everything is advancing very well.

We are waiting, we are working for the mechanical commissioning and finalizing the adjustment on the turbine and final commissioning of the automation system. If everything permits we should be in operation or COD early in Q1 for Upper Lillooet and early Q2 for Boulder. So that would conclude our construction activities for Canada when those two will be built. Again just to stress out, the fact that these developments have been a long process but finally we will have lower payout ratio next year. I think everybody knows that we are very happy to report that we will have something around $110 million to $115 million of free cash flow next year.

So this is going to be exciting for Innergex. We will be able to make now our attention on the developments. So I will talk about the development, now I can assure you that this is going to be our highest priority for us. It is important to make sure that we filled up the pipeline after 2017. We have talked about our strategy, international strategy.

We said that we were focusing on Mexico, France, U.S. is not necessarily international although we don’t know with Mr. Trump naturally but also Canada is showing some interesting development lately. So if I come back to Mexico, we have been busy there participating in the last Subasta that ended in September. For people that haven’t seen it, it has been very competitive.

But we were getting closer and closer to the winning price so we are learning quite a bit in Mexico. But we are continuing our effort but we are prudent in Mexico considering that competition. And the perseverance that we have in that particular market but you have to remember the average price for the win was around 3.5 cents U.S. and so there was even lower in the lower 3.1 cents 3.2 cents per kilowatt hour. That didn’t necessarily include the capacity so I think that there will be also a future market for capacity that could enhance a little bit that selling price.

But it’s also a show and this is positive for renewable energy that renewable energy is becoming really competitive in the marketplace. So specially solar in places like Mexico where you have good sun exposure. This is becoming a reality, renewable energy in many places are becoming more competitive than other form of electricity. France has been very good for us lately in terms of M&A activities and also early stage development. We are quite focused on France, matter of fact we’re going to have our first office outside Canada in Q1 being in France.

So we will have Innergex employees in France early Q1. This is good for us, I think that having some of our employees there will help develop the French market. In the meantime we have as you remember made a small joint venture with local developer and we’re advancing. We said that we have at least a 100 megawatt of portfolio of early stage development. We are continuing developing those and making the studies.

So we’re advancing that portfolio quite on a good pace. We are seeing a lot of small M&A transaction which makes sense for us because there is maybe a less crowded and less competitive compared to bigger process that we can see somewhere else. So we are still focusing on making M&A accretive acquisition. As we mentioned in the past we’re willing also to use the joint venture and partnering with financial institution to enhance our return and I think we’re making good progress on that. Also if you remember when we announced the first acquisition in France we also had a letter of intent to acquire the 44 megawatt Eon project in France after CUD.

We anticipate that the CUD should happen before the end of 2016. So we’re getting ready to takeover that project. We have been following the construction so that’s also is helping us understand the layout of the land there for construction. So getting a cost and more and more with all the trades and the execution in France. So it’s a good year in terms of getting to know France and getting our boots on the ground.

We are also looking in Peru, I forgot about Peru at the beginning. Peru is an interesting country for us as we like as you know we like hydro. There is an opportunity in Peru to try to take advantage of the small developer that have had some challenge to develop their projects, some project there with existing PPA have run into longer development period and need little bit of help in order to put those project back on track. One of the challenges to make sure that the existing EPA will be amended by the Peru government, so we’re working with a local developer to make sure that this could happen and we’re busy in looking at two or three of small hydro in a range of 20 megawatt that have a quite a high utilization factor. That’s I guess specific to Peru.

The EPA are kind of a firm energy so this strategy to develop small hydro there is to have basically you under equip a river so you end up having a very high utilization factor in to 85% to 95% and then you sell 80% or 85% of your production under the EPA and the balance you can sell it into the spot market. So that’s an interesting view so just to compare the 20 megawatt in BC or in Canada would probably have between 40% and 50% utilization factor. So in fact 20 megawatt in Peru is almost a 40 megawatt in comparison into production in Canada or in BC. So like that market and it seemed promising for us. USA is even if Mr.

Trump has been elected I think that there will still be some good interesting development and growth in the U.S. Also the PDC and the tax incentive that has been voted for the next four years so I think that there will be some momentum still in the U.S. And furthermore I think that wind and solar are quite competitive in the States and getting even more competitive as technology evolves. So I am still positive about U.S. and we are focusing more on that market.

For a change Canada had some good news lately. Alberta last week came up with their structure of the -- the next RFP and it is basically a long-term contract for 20 years which makes a lot of sense for us. So, we like that structure. We are looking for opportunity to do early stage development there or to GV with existing small developer or other developer that are in Alberta. So, that is a good news for Canada.

And also we haven’t spoken about it too much but Saskatchewan has healthy program as well. There is a 200 megawatt RFC coming which will basically be a straight EPA with assessed power. So we like that market as well. And we have successfully GV with a First Nation on the large wind farm that we intend to put into the RFP. So this concludes little bit with my executive summary on what we are doing and I will be welcoming any future questions.

Thank you.

Martine Benmouyal: Operator?

Operator: [Operator Instructions]. Your first question comes from the line of Nelson Ng with RBC Capital Markets. Please go ahead.

Nelson Ng: Great, thanks.

Good morning everyone.

Michel Letellier: Hey, good morning Nelson.

Nelson Ng: Just a quick question on the French tariff system, I believe there will be like a change starting next year in terms of the fixed tariff, potentially moving to competitive system. I was just wondering whether -- like what your strategy there on development is and whether any of your developments are in a position to kind of lock in the feed in tariff price by the end of the year or are you looking to essentially participate in like a potentially competitive process?

Michel Letellier: The one that we have initiated this year will not be ready for the said contract although they are talking about maybe having another system where smaller project could have some kind of a fit program for the next few years. So we will follow and we will track that but they will be much smaller project.

Project made probably under 10 megawatt or so could have a specific fit contracts so we will track that. It is not as -- it has not been finalized yet but we were following this. Also looking definitely for joint venture with developer that needs to speed up their process in order to meet the deadline. And eventually we would be happy to participate with our future development project in future RFP or competitive bidding. It will be like in any other places in the world.

So, at this point it is little bit about the -- I guess the end of the program or the fit program but excited about the future need for renewable energy in Europe and in France in particular.

Nelson Ng: I see and then the focus is on wind but I was just wondering whether you are starting to kind of poke around into the offshore wind site I think given the price reductions we have seen in offshore wind, I think the last one was about 50 Euros per megawatt hour like that’s a lot more competitive then onshore wind in France at the moment, just one in terms of feed-in tariff price. I was just wondering like whether you think there is going to be a trend towards offshore and whether that’s an area you would consider going into the future?

Michel Letellier: I think that it has been a tremendous change in terms of return and risk and as you know this is always what I am trying to focus. I am willing to take lower return if the risk are lower. Obviously I think that the industry, the offshore wind industry has managed to decrease the risk exposed to the developer by their experience, a feedback, and some turbine manufacturer and balance of plant supplier are able to take more risk in terms of construction and delivery time and what have you.

But I think it’s been extreme, the relationship between what used to make sense in terms of return and why don’t -- so I am not the big fan of this change, this fast change. I would be prudent on that aspect because I think that offshore wind although it’s becoming more and more relatable and more and more known on cost and operation I think there is still quite a bit more risk than managing the onshore development. So be very cautious on that aspect.

Nelson Ng: Okay and then it looks like you’re pursuing a number of developments which could have like a several years of lead time. In terms of the use of excess cash like how do you think about in terms of I guess pursuing developments doing M&A or like just simply reducing debt or reducing one of your debt facilities?

Michel Letellier: I’d be very disappointed if we have to use our internal cash flow to reduce debt.

I think that I am confident on the development and M&A activities that we can still create value. One of the question that I received quite often when I am talking to investors that are we still -- do we still make sense but as a company what I see, even this spread as and equity return has been under pressure. I think that if you’re looking at the long bond, I mention it quite often the long bond are Canadian long bond 30 years or below 2%. So if we can provide anything between 8% and 10 % return on a very well balanced portfolio and will manage in terms of risk and exposure I think we’re still creating something in the range to 600 to 800 basis point of spread on equity. We have seen in the past when we started in the business so many years ago, the bonds were in 8%, 9%, 10% range and we were hoping to do 15%, 20%.

So I think that we are -- our business is to create a spread and I believe that a spread between 600 to 800 basis point is not bad at all in terms of creation of values. So I feel that if I can do that with our internal cash flow my perception is that we’re still creating value in deploying that capital.

Nelson Ng: Okay, thanks Michel, those are my questions for now.

Operator: Your next question comes from the line of Sean Steuart with TD Securities. Please go ahead.

Sean Steuart: Thanks, good morning. Couple of questions with respect to Mexico and I guess Latin America in general are there still opportunities for bilateral PPA negotiations with governments there or is it all competitive at this stage?

Michel Letellier: There is some maybe some places that might be. But I am not aware of our really strong possibility that way. We are not seeing that often. What is still possible is bilateral with industrial company or mining company.

That could be a little bit riskier but it depends on how its structured. But that has been quite normal or I guess active segment in Mexico and to some degree in Peru but the mining activities slow down. Mind you that the commodity is picking up in some ways so we might have bottom up on that cycle. So Peru could see the mining activities picking up. We’re not a huge fan of those bilateral contract with industrial, but we could undertake some if the right conditions are there but it’s not our first pick though.

Sean Steuart: Okay and second question, any update on the arbitration process with Hydro Quebec for your assets there?

Michel Letellier: No, it's progressing. As you may know we have frozen the first one, waiting for the other arbitration with the third party with Hydro Quebec. And in terms of winds are we have only started to initiate the process so no active meeting has been happening in the last quarter.

Sean Steuart: Okay, that’s all I have for now. Thanks very much.

Michel Letellier: Thank you.

Operator: Your next question comes from the line of Jeremy Rosenfield with Industrial Alliance. Please go ahead.

Jeremy Rosenfield: Thanks, just a couple of questions. First, just turning back to Mexico I think you have the agreement there to look at small hydro opportunities, I am just wondering if there has been anything that’s come out of that.

I know it was a longer term opportunity so maybe there is some color you could provide?

Michel Letellier: Yeah, actually we’re meeting with CFE next week. We have one of our engineer meeting with their team to try to focused on couple of projects. Obviously hydro has some challenge seeing solar and wind in the range of 3.2 and 3.5 cents. So CFE is also participating to some degree in those call with combined cycle and some capacity. So it’s a little bit early in the process.

I think that Mexico has been very excited with the latest result. I don’t think those Subasta are producing a lot of capacity especially if solar continued to win that much there will be some need for managing the electricity during the day and especially in early night, early in evening. The peak in Mexico is roughly around 7, 8, 9 o clock, little bit later than in the U.S. So obviously with solar it could be an issue. We’re still thinking that in the future mix of portfolios especially with CFE.

There will be some room for hydro development but I think that we have to understand a little bit the dynamic with the Subasta. Also how many of those project will be put in CUD. So CFE is accessing their alternatives and I know by experience that they would to love to keep developing hydro. It’s just a matter of finding the right product for it.

Jeremy Rosenfield: Okay, then just turning -- like turn back to BC for a second, has your outlook for potential new capacity developments in BC changed much, some LNG -- one LNG project is and after they’re going to move forward.

I think there is still some talk that obviously there could be problems with site see or timing of site see. Do you have any perspective in terms of the DC market at this point?

Michel Letellier: Yes, but they are not super positive in terms of big RFP. I think that BC might need some capacity is site see is delayed. The customer base in BC industrial base has slowed down although there is a squeamish small LNG that has been announced and they said that they will use e-drive, they will electricity in order to compress the gas. So that is positive.

We will see how industrial, other big industrial development comes along. But I don’t expect a big RFP in the next two years. I expect -- well I am sorry, I am trying to find my English word, except if site see is delayed for some reason, by whatever situation if they are really delayed then they might need some energy or some call before that. Other than that I think that government, development government are really committed to develop site see.

Jeremy Rosenfield: And just picking in BC I know, just in terms of weather conditions I know it has been from what I hear quite a rainy Q4 so far this year.

I am just curious if you have a perspective in terms of how much of that has actually translated into production so far through the quarter?

Michel Letellier: It is big time. BC right now is in November. October was not too strong but November is just amazing where it came to 200 basis [ph]. So, total hydro for Canada so far is about 150% of budget including Quebec. Wind is down around 80% for Quebec and France and Solar is up 105.

So, totally we’re close to over 110% of our budget for this quarter to date.

Jeremy Rosenfield: So the facilities have been running well and have been able to capture a lot of the rain that has been falling?

Michel Letellier: Yes, but sometimes too much is too much. But this time around its been okay. Although the Upper Lillooet area which is not creating any problem for operation but the road has been flooded in few places because rain and snow melt. But no big trouble to report but you’ll see probably if you look into the BC area that it’s been very, very wet in the last few days.

Jeremy Rosenfield: Yes, that’s what I hear. Okay, thank you Michel.

Jean Perron: Pleasure.

Operator: Your next question comes from the line of Abad Kettley [ph] with CIBC World Markets. Please go ahead.

Unidentified Analyst : Hi, good morning and thank you for the very detailed update on your development by market. I was wondering if you could spend a little bit more time on the U.S. maybe you can start by detailing how much of your development portfolio was actually in the U.S. market? And then second just talk about what President elect Trump might mean for the U.S. market in terms of how renewables develop and I know it’s a little bit speculative at this point but given what he has said in this platform how do you see the U.S.

market evolving?

Michel Letellier: Well, it’s not a good news having him elected for our industry. But like I said there is a lot of initiative that lies with this States. So I think that the States are more progressive in many ways and more active. Also if he looks into the free market I think that the coal has not been killed by renewable energy, it has been killed lately by natural gas price. I don’t think that trend will change.

And also I think that renewable energy is becoming like I said at the beginning more and more competitive and after the numbers I have shown you for Mexico, that market doesn’t have any tax advantage and they were below $0.04. So I think by itself renewable energy can compete and will compete and also the tax advantage has been voted for the next four to five years. I doubt that they would change that although everything is possible I guess with Mr. Trump but I think it will still the momentum in the U.S. And for a Canadian perspective I would say that if you take out all those tax credit that can only be taken by an American company actually I would be happier to have less opportunity.

But I feel that a Canadian company could be more competitive without PDC and RTC in the States. So maybe I am wrong, maybe its wishful thinking but to be honest if they wouldn’t have those tax subsidies that in my mind are basically a trade barrier compared to what we can do as Canadian company. I think that we could see little bit more opportunities, especially if those weren’t there. I think that BC Hydro or Hydro Quebec will have a lot more opportunity to sell electricity in the Northeast and the Northwest. So I am not too pessimistic about the new elect President.

I think that we’ll be able to find future development. One thing we have realized to some degree is that we were looking to partner with local individual or small company. Still active to try to do a joint venture in a good fit but we have decided also to put our feet on the ground and develop our own project. Right now in Alabama there has -- in RFP 500 megawatt of solar so we decided to kick the tire there and have some project being secured, some land being secured, and we’ll see. I think that we’ve learned a lot in the Mexico market by actually participating in Subasta and RFP.

So this is our intention for the next year is to be underground in U.S. and participate in project and learn the other way, be on the ground and maybe we’ll make some mistake. But I think that we’ll learn a lot and we’ll be in a better position to participate in future projects in the States.
Unidentified Analyst : Okay, so when you talk about the Alberta power market and look at the changes that they are making there, still that’s quite a bit that’s on the side that is unknown but with what you know about the structure of like proposed is not enough to give you a confidence to bid into that market given the market's recent history? Maybe another way to look at it if you were bidding on a contractor difference, is there any -- do you have any willingness to take on energy pricing risk in order to meet your targeted returns?

Michel Letellier: You mean for Alberta?
Unidentified Analyst : Yes.

Michel Letellier: Yes, well obviously we are not the most aggressive company in terms of spot market.

I’ve been surprised to see some asset in the U.S. being sold on merchant basis at prices that defy my comprehension. It’s something that we have to be I guess open to idea at some degree but with the right price. I think that some people are very bullish on future prices but I’m humble versus the technology and the ability of the industry and the new technology to improve prices and efficiency. So I have to be careful on that aspect.

There is one positive aspect if few carbon facts gets in and at the right price then obviously price of energy could see some strength in them. But the way technology is evolving for Shell Gas and Shell Oil, these guys have been showing some very resilience in terms of finding ways to lower their cost all the time. So I am very cautious on that aspect and hence I like maybe sometimes to take maybe a little bit lower return on firm contract and hoping to have a better return on something I don’t control at all.
Unidentified Analyst : That’s a very helpful answer. Thank you very much.

Michel Letellier: My pleasure.

Operator: Your next question comes from the line of Ben Pham with BMO. Your line is open.

Ben Pham: Thank you. Question on France, the 60% long-term average, can you comment on what conditions you saw that was driving at its if you don’t see when underperformed by that much that’s more of a hydro story and was that number or under performance is that in a range of outcomes you may have looked at when you first acquired the French portfolio?

Michel Letellier: I think it’s fairly streamed.

What we’ve done is we obviously it’s our first investment in France and the Board and myself are saying, hey how are we going to get it wrong. So our expert in wind made a good study on the correlation between our production and the existing wind prevailing in those areas. And its availability was there, the machine were just okay, there is no bugs just the wind was not there for the last two quarter. Mind you that the first quarter which we are not reporting because we only acquire the assets in the Q2 was over the long-term average. So as a whole they are just slightly below on a year-to-date basis.

It just happened that we bought it at the early Q2 and we are reporting two really bad quarters. And I am sad to report also that October and November -- October has seen a little bit more pickup but November so far is still weak. So we are not concerned yet on the wind in France. I think it is just a blip in the long-term average. I think that all the expert in wind are reassuring me that this is not a big concern and I think we should be focusing on long-term averages and I guess that wind will come back in France.

Ben Pham: Okay, so some individual data points even though it is only a few data points, it doesn’t result in causing maybe a slow down on how you think about capital in France versus excellent areas like Peru?

Michel Letellier: Well, I think that France has some very -- well, remind you that whenever we have been looking in a lot of M&A and a lot of them we have reduced the long-term forecast in our own due diligence. Some seller or vendor had pushed back and we only made one acquisition. So it shows you that I think we are diligent in the wind study that we are doing. But again we have been in that business for so long, we are seeing some downturn and I strongly believe that long-term average is what you have to focus. Remind you that you have to have liquidity on the side.

If there is few backorders and those are project finance so you have to have the ability to have hydrology or wind reserve in order to meet your component. But other than that I am still a very firm believer of long-term investment and I obviously am happy when we have a good quarter and I am sad when we don’t have a good quarter. But, our thesis of investment is on the long-term basis.

Ben Pham: Okay, and you mentioned some optimism on smart M&A in your comments Michel, is that -- I mean if you go is that more of sort of maybe magpie type of acquisitions or maybe a little bit bigger like it was in French one?

Michel Letellier: Well, the French one was nice. It was a nice size 80 something megawatt and with Eon it was up to 130 megawatt.

So that was a fair bunch. But we are seeing the 20 megawatt to 30 megawatt wind farms that are for sale in France. It is small but we are trying to have a process where it will not be too cumbersome to do this type of approach and we have already made the structure with Desjardin in French and I think that structure is efficient both in terms of enhancing our return and it is efficient also tax wise. As you remember the -- we are willing to take the hedge on -- the long-term hedge onto euro and that still provides a healthy 50 basis point positive return in Canadian dollar. It takes a little bit of place on our balance sheet but I think we can manage.

So, at the end of the day buying these things if we are able to be consistent and disciplined in the long-term average win as you were mentioning, I think we can make a decent return on those facilities. We have too much risk exposure so, I like that approach.

Ben Pham: And maybe my last question is more of a clarification, the 8% to 10% return that you highlighted, do you guys talk like that on a full cycle basis where you are including some construction, some of the predevelopment cost, and then on the benefits and maybe some FX as you put that in?

Michel Letellier: For each project, yes. When I mentioned 8% to 10% if those we could make acquisition. I am hoping and still hoping that we can manage to do a little bit better sometimes when we have our own development.

Mind you that in some places like Mexico that can be challenged. So, sometimes it is crazy. You can buy in France some existing asset with the same type of return that you would get into a full development cycle in some other market. So, that is why we are interested in the small M&A. The way we are doing it in joint venture and tax efficiency and focusing on small deal that can create value.

So I am always very focused on that type of approach of risk profile. And although we love to develop, we love to permit and build but when there is opportunity to create as much value with less time and less risk exposure I am all in to take that route. If for some reason the market is little bit crazy we want to be disciplined.

Ben Pham: Okay, so you do include the predevelopment cost, so it is not just -- mentioning to determine the value right, or you don’t?

Michel Letellier: We do it, we do it the older way. Whenever we start a project Jean can assess.

We track that money and we put it against any future return.

Ben Pham: Okay, got it. Okay, thanks guys.

Operator: [Operator Instructions]. Your next question comes from the line of Rupert Merer with National Bank Financial.

Please go ahead.

Steven Hong: Good morning, this is Steven Hong filling in on behalf of Rupert Merer. Most of my questions have been answered but just want to follow-up on the French market, can you just give us a bit more color on how Innergex can stay maybe more competitive in France with contractual differences?

Michel Letellier: Well, it is the same as it is anywhere else. I think that we can be nimble. We have good relationship with turbine manufacturer and those are not, I think the French market will be competitive but it is hard to make huge wind farm in France.

It could happen but most of them will be between 20 megawatt to 80 megawatt to 85 megawatt. It is a big wind farm in France. So, I think the -- it is just a little bit less crowded. I think that Mexico has brought the world to Mexico and the big corporation would love to see those 200 megawatt to 400 megawatt. Same time sometimes in the U.S.

where you see those big wind farm or solar farm being developed those are very, very competitive at the end of the day. This is not necessarily our market, I am not saying that I will never participate in trying to develop a big wind farm but I think that for us we are not big and 50 megawatt is still very attractive for us and still can make a difference at the bottom line. So, I think that by focusing and making sure that we have an efficient structure, an efficient team to build and develop project, I don’t see why we wouldn’t be competitive. Our cost of capital is fairly similar to many of the player in terms of development and we are using project finance. Project finance you would put in a French development, we would put 70% to 75% of project finance.

We are competing only with 25% equity. I don’t think our cost of equity is that bad. So I don’t see why we wouldn’t be competitive in that market at all.

Steven Hong: Okay, thank you, I will leave it there. Thank you very much.

Michel Letellier: My pleasure.

Operator: Ms. Benmouyal there are no further questions at this time.

Martine Benmouyal: Thank you everyone. We appreciate this opportunity to provide an update about our company.

Please do not hesitate to contact us if you have any other questions.

Operator: Ladies and gentlemen that concludes the conference call. Please note that a replay of the conference call will be available on the Innergex's website. The press release, financial statements, and the management's discussion and analysis are also available on the Innergex website at www.innergex.com in the investor section. Thank you, you may now disconnect your lines.