Executives: Karine Vachon - Communications Director Michel Letellier - President and CEO Jean Perron -

CFO
Analysts: Rupert Merer - National Bank Sean Stuart - TD Securities Nelson Ng - RBC Capital Markets David Quezada - Raymond James Ben Pham -

BMO
Operator: Good morning, ladies and gentlemen. Thank you for standing-by. Welcome to Innergex Renewable Energy's Conference Call for the 2016 Fourth Quarter And Fiscal Year Results. At this time, all participants on the phone and internet 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, Friday, February 24, 2017 at 9.00 AM Eastern Time. I will now turn the conference over to Karine Vachon, Communications Director. Please go ahead.

Karine Vachon: Thank you. Hello everyone and thank you for joining us today.

I’d like to specify that this conference will be held in English and that our listeners on their phone and Internet, as well as journalists are on the listen-only mode. Members of the media are invited to ask their questions by phone after this call. During this presentation, we will refer to financial measures, that are not recognized according to International Financial Reporting Standards. Please refer to the non-IFRS measure section of the financial review for more information. Our speakers today will be Mr.

Michel Letellier, President and CEO; and Mr. Jean Perron, Chief Financial Officer. I now turn the conference over to Mr. Perron.

Jean Perron: Thank you, Karine.

Good morning. The quarterly result for Q4, 2016 shows production that's 101% of the long-term average, due mainly to above average production in the hydroelectric sector. For the 12 month period ended December 31, 2016, production was 105% of the long-term average, due mainly to above average result in all markets, both hydroelectric market in Ontario and the wind sector in Quebec and France. Revenues for the quarter were $17 million higher than in 2015. This 30% 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 of the recently commissioned or acquired facilities, namely the Tretheway Creek Hydroelectric facility commissioned in November 2015, the Walden facility acquired in February 2016, the French acquisition made in April 2016, the Big Silver Creek facility commissioned in July 2016 and the MU project commissioned in December 2016, which were partly offset by lower revenues from the wind regime in Quebec For the 12 month period, revenues were $45.9 million higher than in 2015. This 19% increase is attributable mainly to better results in our BC hydroelectric markets, and to the contribution of the recently commissioned or acquired facilities, which were partly offset by lower revenues related from the wind regime in Quebec wind farms. Our Adjusted EBITDA for the quarter and 12 month periods were $11.4 million and $32.2 million higher than the same period in 2015 respectively for the same reasons explained as before. Finance cost for the quarter increased by $6.1 million compared to 2015. The increase is due mainly to the interest expense related to the commissioning of the Tretheway Creek, Big Silver Creek and MU facility, the French acquisition and to higher inflation compensation interest on the [indiscernible] real-return bonds attributable to higher inflation during the period.

For the 12 month period, finance cost increased by $12.1 million compared to 2015. The increase is due mainly to expense related to the recently commissioned or acquired facilities and to higher inflation compensation interest. For the three and 12 month periods, other net expense stood at $0.9 million and $0.3 million respectively, compared to a $2.9 million for the quarter and an expense of under $16 million for the 12 month period in 2015. This latest amount needs some explanation. The significant decrease in other net expense for the 12 month period compared to last year stemmed from the fact that the corporation had no realized gain compared with a realized loss of $119 million 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 at the closing of their respective project financing.

For the three and 12 month periods ended December 31, 2016, the corporation recognized an unrealized net gain of financial instruments of $2.2 million and $4.3 million respectively due mainly to foreign exchange rate swap and interest rate swaps. For the corresponding period last year, the corporation recognized unrealized net gains on derivatives of $2 million and $81.4 million respectively due mainly to interest rates swaps and to the reversal of the unrealized loss accrued through December 31, 2014 upon settlement of the bonds who are in contracts. For the closing of Boulder Creek, Upper Lillooet River Big Silver and Mesgi'g financings. For the period ended December 31, 2016, the corporation had no derivative to be settled upon the closing of any project financing as all the determined project financing were put in place in 2015. No impairment of long-term assets were we acquired in 2016.

Excluding the impact of derivatives and impairments and regulated income taxes, the net earnings for 2016 would have been $29.1 million compared to $19.7 million in 2015. The increase is due to higher EBITDA, partly offset the higher finance cost and depreciation and amortization. Overall for the year, a very good first six month period and for the quarter partly offset by below average third quarter, allowed us to record an excellent 12-month period mainly due to net and above average production in all sectors except [indiscernible]. Our 12-months free cash flows ending on December 31, reached $75.7 million compared to $74.4 million in 2015. Our payout ratio stood at 91% compared to 86% in 2015.

This change is due mainly to a slightly better free cash flow than in 2015, which was more than offset by higher dividend payments as a result of higher number of common share outstanding to the issuance of 3.9 million shares to Desjardins Bank, under private placement for the acquisition of French assets and to the issuance of shares following the exercise of stock option and the derivative. Innergex also announced an increase of $0.02 per share of the annual dividend, starting for the next quarter. This concludes my review of the results, I’ll be happy to answer your questions later on during the call. I now turn it back to Michel.

Michel Letellier: Thank you Jean and good morning everybody.

I think it's becoming a little of a tradition to the first quarter results, another first quarter result, so the end result is to come back to the objective that we had setup for ourselves in 2016. So if you have access to the webcast there is the presentation there, I am going to go through the deck, but if you don’t I think that my presentation will be quite clear and you will be also able to view that webcast on our internet site. So 2016 we said that the presentation is that -- we're coming back to what we said and we are reporting on what we actually did. So we said that we wanted to grow our production by 6% to 8%, grow revenue by 9% to 11%, grow our EBITDA by about 7% to 9% and also maintain our payout ratio below 100%. What we did, is that we increased our production by 18%, revenue by 19%, adjusted EBITDA by 18% and we did maintain the payout ratio at 91%.

So happy to report on this one. We also wanted to focus last year on delivering the project under construction. If you remember we had still four project under construction, three hydro in BC and one wind project in Quebec. So we wanted obviously to advance and put Big Silver and Mesgi'g Ugju's soon in COD, we did that, we put Big Silver in COD in July under the budget and new Mesgi'g Ugju's'n was put on December 29 within the budget. And I'll come back on this.

It’s not completely finished in terms of negotiation with the contractor. So is Upper Lillooet and Boulder. So that's why we having updated specifically those development costs. But as I can confirm that as a portfolio we are still into the budget that we have published. There is plus and minus in different area but as a whole we are still under budget in these development.

So we also are working pretty hard now also on Upper Lillooet and Boulder. If you remember we had the delay two years ago because of a fire. We were hoping to be in COD for Upper Lillooet in Q1 early - earlier on in Q1. But the main reason is it we are not meaning that is the winter came quite early in BC. That's why also the BC fourth quarter was a little bit weaker than we had anticipated.

December and even November in higher outage use we seen a lot of snow and that obviously has slowdown a little bit the construction activities. Nonetheless we are very happy to start the filing of the penstock and the tunnel, as we are speaking for Upper Lillooet. So we are still focusing on early COD for Upper Lillooet in March. So hopefully we’ll make the Q1 target for Upper Lillooet, and Boulder will follow very early in Q2. As you know BC is important to be on and running for the Boulder for the fresh ice [ph] and the fresh ice is coming in those altitudes somewhere beginning of May.

So, we want to make sure that we’ll catch the flow when it comes. I touch -- if I flip the page I’m going to update on project development. I just did Boulder and Upper Lillooet. Like I said, well I guess I covered it on the other page. We are maintaining the output in the construction, we are not changing neither the forecast for the production and the EBITDA, neither on those projects.

If I’m flipping to objective with project financing, we -- as you know it’s important for us to focus on our cost of capital in the structure of our capital. So we always trying to, I guess improve our capital structure and we -- in that sense we did refinance Fitzsimmons Creek with a better interest rate. Fitzsimmons was financed during the financing crisis way back then when we started construction. So obviously we had a better deal now. Market is much more receptive now than it was at that time.

Stardale, interesting fact. We were able to put more than $12 million over the previous financing with fairly a good interest rate as well. So that was good. The other thing that we’re working on the existing facilities, the Saint-Paulin and Windsor PPA are under negotiation, and to some degree arbitration with Hydro Quebec. We’re not the only one.

It’s a file that is go -- I guess is under negotiation with other developer as well. So we are quite optimist to see some resolution during the year on those. Now I think that everybody is focusing on our growth. Thank you for the coverage of the coverage of the early call for the analysts looked at it. We understand that and thank you for the good words on our facility.

I understand that people are focusing on the growth and believe me we are working on it. We said that we wanted to consolidate our leadership position in Canada and we wanted to get a foothold in the international market. What we’ve done is that whenever we have the ability in Canada to acquire a hydro facility we are trying to do it. We did an acquisition of 16 megawatt in BC called Walden. We also for the first time, entered the France market with the first acquisition of seven operating facility.

We call it Wabiti [ph] , that project. Acquisition also at the end of the year of 24 megawatt in France again. And we're still working in France and trying to develop a project. As you remember we have a team of development that we have done a joint venture. These guys are working.

We have over a 100 megawatt of Greenfield project that we have started to initiate the permitting process. So it's a learning period for us. We're learning fast and we intend to grow that pipeline of Greenfield project. We also are very interested in looking into other project obviously and other acquisition. As we speak -- well not as we speak, this week we have also announced the conclusion of the Yonne transaction that was part of the first acquisition.

But we have the commitment to buy it when it was in COD. So happy to report just last week -- or this week, I'm sorry that we have concluded on that one. We also said that we wanted to explore other market. We've been quite active in Mexico. We have participated in two Subasta.

That's how they call their RFP in Mexico. A little bit disappointed in the fact that it's -- it was very, very, very competitive and we'll not name one of the leader that was winning a big portion of the RFP in that market, has been very, very aggressive and it's funny, now they're selling their asset in Mexico. So we are still very interested in the Mexican market. It's just that we have to find a good balance between the type of the risk that we perceive in Mexico and the rate of return that is acceptable to that type of risk. So we have learned quite a lot in the last year and a half in Mexico.

So we are still hoping and I guess interested, but we have to find a good relationship with our return and risk. As you know we are long term investor. We don't want to rush into a market or just grow for the sake of growing. We want to be accretive, we wanted to comfortable with our projects. So what we would say in French it's prudence in Mexico.

So we just want to make sure that we're prudent in Mexico. Peru is also a market that we have been active. We've been studying at least six, seven, eight project in Peru. Some have more potential than others. We're actively working on one.

It's not a big project, it's around 20 megawatt, but interesting thing in Mexico -- not in Mexico, in Peru, if you remember we are looking into very high capacity project. So a 20 megawatt in Peru would produce at roughly 90%, 95%. So it's almost the equivalent of a 40 megawatt in BC or in Ontario. So quite interested in Peru. A little bit of a challenge and like I said, we are committed in one project but it’s conditional on some permitting being finalized, though quite optimistic to have something in Peru during the year.

If I'm flipping to the objective of 2017, I think I covered some on the different market, but I’ll back. But having now the Mesgi'g Ugju's'n project being fully operational for the full year. We'll see a good benefit from there, with the -- also the COD of Upper Lillooet and Boulder will produce a lot more cash flow, and of course the Big Silver full year will also contribute to the growth. So we're forecasting a growth for production by about 31%, our revenue by 44% and our EBITDA by 48% and we want to maintain a target payout ratio between 70% and 80%. We'll come back later on to the target of free cash flow, but we're very in line into these target and probably much lower in terms of payout ratio.

The development we want obviously to focus on making sure the Upper and Boulder are put in service. We want to finalize the PPA in Quebec and we also have Brown Lake PPA, came into an end. We’re right now negotiating with BC Hydro. We think we can find a way to propose a product that is linked to capacity in that area. BC Hydro seems to need some capacity.

So working with them in order to change a little bit the profile of production to Brown and possibly even increase the capacity if we can come up with an agreement with BC Hydro on that one. In terms of growth opportunity Canada is always in our radar obviously. It’s home and if we can find growth opportunity in Canada we’ll be aggressive on those. There is three market that have some activities in Canada. There's Saskatchewan.

At Saskatchewan we have a project, we have a joint venture with the First Nation and we’ll be participating in the next RFP. It’s a project between a 100 and 200 megawatt of wind. New Brunswick will also participate in the small call for community participation project that will be coming this year. Alberta is also on the -- I guess on the activity list. Although Alberta will be very, very, very competitive for the first call.

We haven’t have a lot of activity in the past in Alberta so we’re trying to look at into some ways to find an angle to be competitive in Alberta. It’s a market that seems to be promising for the long term. So we’ll be trying to find an angle where we can create value for ourselves. The other market, the International market I spoke a little bit about Latin America, Mexico and Peru. But we also want to focus on U.S.

even if the U.S. right now is a little bit into some kind of uncertainty because Mr. Trump is talking about cutting the corporate tax rate which create a little bit of noise in the U.S. But for us I always said that the PTC in my view was great, but I think that now that the cost of electricity both for wind and solar are becoming more and more competitive. I would be happier without PTC and I think that Canadian company can do better without PTC obviously utility will have to pay up a little bit more for their renewable energy.

But I think they can. And for us we see that as an opportunity to be little bit more competitive, because PTC and tax equity provider and structure are a little bit cumbersome and we like things that can be a little bit same [ph] here. That being said, we have now understand or much better understand of the tax equity. We have made contacts also. So we’re willing to pay that structure as well but like I said I think that this will go slowly into fade and we’ll have a better angle for us to attack the U.S.

market. So we want to have a team in place in the U.S. this year. We’re looking into year small acquisition or hire our own team. We have already started to participate in organic prepare to participate in RFP.

We have secured some land in Alabama and Georgia in light of their future RFP. So we have initiate the, I would say the development activities in the U.S. and we want to be there and ready for the long term. Coming back to the projection I just said that the EBITDA growth now for next year for 2017 is expected to be about $320 million, which represent 48% increase from last year. And the free cash flow will stand at $110 million, which is about 45% increase.

Just a small reminder that, that free cash flow is after spending the -- what we call our development or prospective expenses. We have raised the amount of expenses that we want to do from roughly $10 million this year to about $15 million. We’re projecting to spend about $15 million this year. So hence, the increase could have been a little bit higher if you are comparing to last year, given the fact that we have acquired some French asset, but we are raising the budgeted development money or investment. So this is why the $110 million has not grown to maybe $115 million.

But we think that it’s important for us to focus and making sure that we can replenish the future pipeline. So we think it’s a good investment. The overview of 2017 to 2020, just it’s a reminder. I know that most of you know but it’s a good thing to recap what we want to do. There is one thing is for sure is that we want to remain exclusively in renewable energy.

We have been saying that for a long time. Now it’s starting to be a good place to be in. Maintain our diversification of energy sources, we love hydro, wind and solar. We want to make sure that we keep diversified in this sense. I've talked about the international development.

We want to focus on France and perhaps some proximity countries around France, but our focus is France for the time being. Latin America is mainly Mexico and Peru for the time being. And obviously we want to consolidate our position in Canada. Hence the participation in the Saskatchewan, New Brunswick and looking into also Alberta and whenever there is an acquisition that makes sense in Canada, especially in hydro we’ll be interested. So again we want to focus on high quality of asset, that’s what we have in our portfolio.

We don’t want to dilute this type of portfolio. We want to maintain a low risk business model. We have been known to be conservative and being able to deliver on our promises. That will not be changed. Maintain a long-term outlook, that’s also very important for us, even though shorter and shorter PPA will be available in France and in the U.S.

We’ll be cautious on our assumption for post PPA prices and this is the name of the game I think. If you want to make acquisition and you want to get yourself on very nice and fat return you just have to be very positive on future merchant prices and then acquisition and development is very easy. But if you’re conservative and making sure that you’re looking into the long-term and you don’t want to have to cut back the dividend, than you have to be prudent and that’s what we are. We want to focus on partnership. If it’s in Canada, we think First Nation is a part of a great way to develop future project in Canada, but somewhere else we are also very open to do partnership.

We have proved in the past that we can be a good partner. We want to maintain and disciplined acquisition. We’ll be focusing on acquisition and but they will have to be accretive to our cash flow. I always said that acquisition that are well done, are part of a good balanced portfolio. I always said that I want to have a strong portfolio, generating cash flow.

We want to be involved with project under construction. We want to also have a healthy pipeline of project under development and always looking to have prospective project in order to develop the future. So in summary again, I think we have a sustainable dividend. By now you know Innergex, you know us, we want to grow the dividend. We have now a yield about 4.6%, 4.8%.

We just increased our dividend by 3% this year. And this is obviously something we want to continue to do. We have a visible growth to our EBITDA of 48% and 45% our cash flow this year. We've been talking about 2017 for a long time. It's finally arrived.

So for this year we -- if everything goes well, we'll have a payout ratio well below 70%. And this is a first from the last time we merged with the income funds. So I'm very, very proud of my team that we have been able to be -- able to deliver growth and also being able to keep the dividend and reduce the payout ratio. So we've done it .Very happy and now we're looking for the future. Thank you very much.

Karine Vachon: This completes our presentation. We now invite you to ask your question.

Operator: Thank you. Ladies and gentlemen we will now conduct the question-and-answer session. [Operator Instructions] Your first question comes from the line Rupert Merer of National Bank.

Please go ahead.

Rupert Merer: Hi, good morning, everyone.

Michel Letellier: Good morning.

Jean Perron: Hey Rupert, how are you?

Rupert Merer: I'm very well. Thanks and Michel you ended by talking about the dividend and your target payout ratio is 70% to 80%.

Now with the current dividend it does look like we're heading for about a 65% payout ratio based on your forecasted cash flow estimate of $110 million for 2017. So can you talk about the decision process on the amount of the dividend increase and what's the outlook for future dividend increases. When do you think we'll be in that 70% to 80% range?

Michel Letellier: That's a good question. We have obviously, discussion at the Board level. Yes, we are going to be -- if everything stays as they are predicted below 70% this year, it's comfortable.

We've never been there. So it is comfortable, but we don't want to stay, I guess too conservative. But on the other end, we're seeing a lot of activities in terms of acquisition and also in terms of development. So we want to stay flexible. We want to -- our first focus is to replenish the pipeline.

The dividend will come, and the increase of the dividend will come. As you know we've been quite disciplined in the past to increase it on a yearly basis. We are very confident in our ability to grow that dividend especially that now that the payout ratio as you are mentioning will be below 70%. But our first priority and you guys are telling me all the time and the investor, doing the same thing is to replenish the growth. So we are focusing on that.

Rupert Merer: Okay. Excellent.

Jean Perron: Maybe something to add to this is that, it's sort of the DPS [ph], it may seem to be under 70%. But if ever we do some development, it's always that you need to add equity in order to make the development and in the case that we have to building something there then we need equity. We may have to issue more shares and building something takes a few years, before you get the rewards of the income.

So it takes only one or two project and it may shift the payout ratio easily.

Rupert Merer: Okay.

Michel Letellier: Yeah. And this is a good thing. Obviously if we get busy in developing project, as you know if you're putting the equity first it takes two, three years to get the dividend from a Greenfield project.

So we are -- we're conservative we know that we'll be able to grow the dividend is just that as you know us, we don't want to cut back the dividend ever.

Rupert Merer: Right.

Michel Letellier: So we are cautious and we'll be raising the dividend. But we're focusing on developing the pipeline.

Rupert Merer: Okay.

Great and then secondly on growth, can you talk a little more about France? Do you have a pipeline for biding into a new RFP process in France and what's the outlook for those sorts of opportunities in 2017?

Michel Letellier: While we are very active now in France, first of all we have now people on the ground. We are opening an office in Lyon. We are seeing a lot more transaction, obviously since we have started the acquisition. We’re working on many angle. We are also hiring more people to do Greenfield project.

We have a small portfolio now of over a 100 megawatt, where we are initiating all the permitting and then bring this project forward. Will they be ready for early COD? As you know France can easily takes four, five years to develop a project, so we have been working for almost a full year now in some. So depending on the COD date requirement, we may have some few project of our own already beyond being a prospect to submit in future RFPs. But we also are talking to developer or other player in the market to joined force. Definitely - French for -- is a place we want to see some growth.

Acquisition are great. I think with the -- our friend Desjardins we are managing to get a decent return, which in a way is not bad when we are able to acquire asset with bringing -- when we bring the cash flow here in Canada and we’re high single digit in the 9% to close to 10%. I am quite happy with that type of acquisition given the fact that we want to have some kind of a balance between operating and development asset. So we were seeing a lot of activities and hopefully we’ll be able to come back to you in a short period of time with more activities from that side.

Rupert Merer: Very good.

I'll leave it there. Thank you.

Michel Letellier: Thank you, Rupert.

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

Sean Stuart: Thanks, good morning everyone.

Michel Letellier: Good morning Sean.

Sean Stuart: Follow-up on France, in the notes on the MD&A you referenced an ongoing fit regime for projects up to six turbines. Trying to any gauge, how much of what you’re pursuing for perspective growth in France would be those smaller scale projects versus budget scale projects that I guess would be bid into the contract for different structure that’ll be a place going forward and then further to that, as you look at that more competitive procurement framework moving forward in France, how do you think about returns for perspective growth in that country?

Michel Letellier: It’s a good point. The obviously six units these days can fetch a project in the range of 15 megawatt, which is not bad.

In terms of France, there is a lot of those type of project 10, 15, 20 megawatt in France. Bigger project in France are a little bit more complicated, although there are some. So if we’re able to get the FIT contract target, we will with some project, we want to develop an approach where we’ll be standardizing the construction, supervision and supply of turbine. So that even a small project can be -- cannot be burdened by a very heavy head office expenses and what have you. So we want to be flexible and nimble to be able also to create and build also a small project.

And obviously we’ll be looking and maybe joint venturing with local partners for bigger project. Some of the developer have been I would say spoiled in France by the FIT contract. So certainly they are a little bit more nervous about RFP, and the competition. And I think that is to some degree some good opportunity for us, because it used to be in France that people were starting the Greenfield development, they were bringing into project to a certain point and then they were selling to private equity or a bigger player. But this is a little bit more difficult now to do for them obviously because on a RFP basis it’s a little bit harder to get a premium on non-PPA project.

So for us we think that this is an opportunity. Now yield in France will be probably tighter than some windmill project or developed under the FIT program, but it will not be much different than Canada or other places. And probably like I said I think France has have a lot of player but on the other end those are not huge project. And to some degree I think that the competition will be strong, but fair. Alberta might be more competitive in that sense.

Those projects can be 300, 400 megawatt project in Alberta and that is again where a lot of big, big player are interested. We’re developing 25, 30 megawatt, 35 megawatt is not necessarily the cup of tea of all the big players so we think that France can be a sweet spot for us. We can help local developer and yet not necessarily having to compete against the planet.

Sean Stuart: Understood. And one other question on Mexico, you referenced the competitive RFPs.

Any update you can provide on the partnership you had with the federal electricity commission on the Hydro opportunity side in Mexico?
Michel Letellier : Yeah, that is still going on. But it has been slowed to some degree because I think that CFE is digesting what’s happening on the market. There is a few project that they wanted to look in Hydro side for capacity mainly. For the time being, we haven’t seen a healthy premium for capacity these days. So we’ll see how it goes.

But we need to see a little bit more willingness to pay for capacity before seeing Hydro being competitive again. Just a smaller reminder that solar prices were in the range of low $0.03 per kilowatt hour in the last Subasta. So that doesn’t leave a lot of room to be competitive for Hydro unless they put a capacity premium on it. So and I think that Mexico these days is little bit on the shock after the election of Trump. We have seen the pesos being hit and the bond, local bond being hit as well.

So 150 basis points on the bond and we’ve seen the pesos going from 11 to 1 for Canadian dollar to close to 16 in less than three months. So I think that people will have to readjust a little bit to what’s happening in Mexico and that might be an opportunity also so certainly people might realize that Mexico needs a little bit of a premium in terms of return.

Sean Stuart: That’s useful content. Thanks very much Michel.
Michel Letellier : Thank you.

Operator: Your next question comes from the line of Nelson Ng of RBC Capital Markets. Please go ahead.

Nelson Ng: Great thanks. Michel you mentioned that you’re negotiating PPA for Brown Lake. I believe the Walden Hydro facility doesn’t have a PPA, is there a process to get a contract there and how is it currently being compensated?
Michel Letellier : That’s a good question.

Obviously we’re selling our electricity to BC Hydro but we’re not allowed to talk about it. But there’s something going on with BC Hydro. I think that BC Hydro was really focused to pass some first project in front of the BC UC. That has been done. And BC UC has supported the renewal of some project that BC Hydro has proposed.

So I think that BC Hydro now has a better feeling of what can be accepted by BC UC and I think things are going to speed up from now but we show that we are not allow to talk about the negotiation around the Walden PPA.

Nelson Ng: Okay. My next question is in terms of your budgeted I guess $15 million of development expenses for 2017. Is there where you going to big picture breakdown of whether to Canada, France, Latin America, in terms of how -- where you intent like how you intent to spend that $15 million?

Michel Letellier: Good point, we are hoping to be able to spend -- it’s a good question. It’s almost I would say a quarter in each market.

But that $15 million is somewhat flexible. If we -- this is only for prospective project in a sense that if we are starting to have a project that has a PPA or an acquisition or joint venture, that project as PPA then we are not limited -- I am not saying that we are limiting ourselves to '15 but this is a target for really prospective project. So as soon as we’re in into a real project, meaning real project with the PPA or joint venture, then those perspective expenses switch to development expenses and it can be a lot more if we are signing a joint venture with somebody that has already a PPA or a project then obviously it’s not part of that $15 million. So we are hoping to spend more than a quarter of our money in France because we are saying that we’ll be able to allocate the expenses in the different category in our reporting. In the U.S., we would love to be able to spend, is it that if we are not making an acquisition, building an office in the space can take a little bit of time.

So, even if we want to put a lot more activities it’s going to take maybe before the second quarter when we will have some people on the ground Americans working for Innergex underground. So and Peru we are not spending too much money in terms of perspective. We’re looking into making a joint venture and the ability also to start a project to start the construction on one or two project. So as soon as we get into that phase, then it’s not prospective, it's development expenses and then the $15 million can obviously can be much greater in that. I don’t know if I helped you to the some degree.

Nelson Ng: Yes, that's useful. And just to follow-up on Peru, could you just talk about how the projects are concentrated whether those -- I presume there is like a long-term contract and which currency is the project concentrated in?

Michel Letellier: The reason why we like Peru is that there is a 20 years contract provided by the government on U.S. currency within U.S. inflation. So we like that aspect and we like the fact that hydro can still be competitive to some degree because like I said the design or the resources is generous enough to have run of the river project being almost firm energy in the range of 90%, 93%, 95% utilization factor.

So the way it works is that you sign a contract with the government where you have firm energy. But in order not to put yourself into a default position and [indiscernible] the electricity, you would sell typically 80% to 85% of your production under a long-term PPA and then you would sell 10% to 15% of your production on a merchant plan. So, basically the energy that you are selling under the long-term PPA with the government is firm energy, and typically with hydro it’s ranging from $0.04 to $0.06 U.S. depending on the project. And then the merchant in Peru has been healthy in the past, now is weak because the economy slowed down, given the fact that Peru is really heavy in terms of mining activities.

So the spot price is in the range of $0.02 now but it's coming from $0.06, $0.07, $0.08. So I'll review that the merchant price in Peru will pick up as soon as some mining activities will come back. And we think that the economics of the project are not bad considering the type of risk that we're taking.

Nelson Ng: Okay. And then just one last question.

In France you had about $8.5 million high yield loan from a infrastructure fund. I think it cost like about 7.25%. I think you guys mentioned that that was more of a kind of like a relationship loan. So I was wondering so is the infrastructure fund, is there a potential for that fund to potentially take equity in future acquisitions, or provide additional loans in future projects and acquisitions.

Michel Letellier: It's always a possibility.

That the fact that it's 7.25 it's not so aggressive in terms of yield. The nice thing about it was that they have given us already on principle. So that's the feature that is interesting. But sure we could we're talking with a lot of players in Europe. But I must say that given the fact that when we add the euro and bring it back in Canada, I think that the sub-debt or an arrangement with pension fund in Canada is probably a better structure in terms of increasing or reducing our cost of capital and hence increasing our return.

But we're open to all kinds of structure. We're trying to obviously work into financing the engineering around the capital structure is as important as the construction cost and so forth. So always looking to inventive or creative structure that can enhance our return.

Nelson Ng: Okay, thanks for sharing. Those are all my questions.

Operator Your next question comes from the line of David Quezada of Raymond James. Please go ahead.

Michel Letellier: Hello David.

David Quezada: Hello thanks, good morning guys. My first question just digging into your comment on the U.S.

a little bit, and appreciate that your preference for non-PTC scenario. Should we interpret that as judging that would be a longer term development for you, or if you were considering participating sooner how do you think about the competitiveness of the projects that are now that the PTC has stepped down from 2016 levels?

Michel Letellier: Obviously I would like to see some cash flow earlier on and be involved earlier than post-2020. Right now it's a little bit complicated to conclude tax equity deals when the tax rate is not set. So who's going to take the risk of that, certainly not me. So it's something that might be cleared in the next six months or so if the Trump administration comes up with a plan and end.

And so it will be easier to structure the deal. Not sure I understand the second part of your question David?

David Quezada: Well I guess just a lot of companies have prequalified projects with the $23 per megawatt rate. So I'm just wondering how those how new projects under the 80 megawatts per hour PTC would stake up if they can be competitive?

Michel Letellier: Obviously it will be harder for sure. But I think on the long run the US market will be able to pay up to a price that makes a little bit of a sense. With the PDC we are seeing some wind farm or some wind PPA as low as $0.02 even breaking the $0.02 so it's very nice for the utility for sure.

And it was great to introduce renewable energy in the states. But do they really need that PTC anymore I don't think so. I think without PTC and having some good projects and then I think price of electricity for wind can be in the range of $0.35 which I think is still comparative compared to new combined cycle especially if you introducing eventually the carbon cost to do natural gas project. So I think that we're confident that we'll find places in the States to establish a long-term presence with the thinking that project will have to be comparative and without PTC of course it may take little bit more time. But like I said, the PTC structure can be nice.

But if too much risk is put into the developer then is it worth it. We're cautious on that aspect.

David Quezada: Okay fair enough. I appreciate those thoughts. My only other question just on the outlook or what you're seen so far for the hydrology in BCF like you mentioned a lot of snow out here.

So I'm wondering what do you think that means for the hydrology looking into 1Q, '17.

Michel Letellier: Well I'm pretty sure that the peer [ph] in BCR very happy. That there is a lot of snow especially in elevation and even in lower mainland, there is fairly good snowpack on the top of the mountain. So actually I think that the spring will be and early summer will be very good, because that snow will melt. It just a matter of how fast it will melt.

But so far there is a lot of potential kilowatts high up in the mountain range. That's why we want to make sure that border and upper level wet [ph] will be ready to catch it when it comes. Right now it's even a challenge because the river in altitude are very low, mind you that last week there were a lot of rain so that did help. But January was weak in BC February now is over our long-term budget. And hopefully once we have passed mid-February usually things are starting to melt and create a little bit more revenue.

So now I'm very positive about what's happening in BC in terms of snowpack. But in our business since we're run up the river the spring run up is always something to -- well it's quite variable, because if it starts to rain heavily and it’s warm and suddenly the snow goes fast and obviously there is big flood. But then you cannot catch the full benefit of that snow up there. So we're very optimistic and of course our guys in BC are all ready to make sure that the spring -- the power plant will be ready to capture spring run up. And in Quebec it's been great all winter and we have early spring to some degree now in Quebec.

It's forecast today is again fairly warm with rain, and same thing for tomorrow. So I think that most of the south project of Quebec will see quite a bit of water in the next few days. So Quebec is good, Ontario is good as well. The wind is a little bit slow in this winter both in Quebec and in France. So kind of -- not worry but that I have high hope that wind will pick up in the next few weeks in Quebec and in France as well.

David Quezada: Excellent, thank you very much. That's all I have for now.

Michel Letellier: Thank you.

Operator: Your next question comes from the line of Robert [indiscernible] of CIBC World Markets. Please go ahead.

Unidentified Analyst: Hi, congratulations on the results and thank you for the presentation. I just have two quick follow questions here. When you look at your development expense for perspective projects at $15 million, unless something changes can we expect that to be the run rate for other years as well, is this is the new level of spending you expect?
Michel Letellier : That’s what we’re forecasting. Like I said, this prospective expenses is something that obviously we have to be up from the previous year maybe three, four years ago we were spending 3, 4, 5 million obviously we were more focused on delivering our existing development portfolio. But I think that $15 million is the type of money we have to spend in order to get busy in the greenfield development.

But we will adjust that amount if we feel that we need a little bit more we will, and if we have too much success then we’ll slow down on it. But obviously we’re very focusing in the next few years to fill up the pipeline.

Unidentified Analyst: Okay and I think in your comments in the presentation you discussed your willingness to consider opportunities for Hydro acquisitions in Canada. So I was wondering if you could just discuss the state of the market in terms of number of opportunities and relative valuations?
Michel Letellier : There is -- that’s the problem in Canada. It’s a good problem because I think that and actually some of you are seeing that as a great asset for Innergex, the existing long term PPA that we have for our Hydro is great and hence there is not that many and the price for new Hydro assets or existing Hydro asset under a long term PPA in Canada is very expensive although, we have been able in the past to find little opportunity and Walden was a good one.

We’re still looking into BC. There’s a couple of possibility here and there. And also one thing that we’re starting to create a little bit more knowledge inside the company is to be exposed to some degree for merchant market in the States if we acquire existing hydro facility that needs a little bit of reinvestment or re-permitting under FERC. So this is a segment that we could try to be a little bit more focused and aggressive. Mind you that we’re very cautious.

We don’t want to have too much exposure on merchant but as we grow our portfolio can support a little bit of exposures, specifically if it’s a good long term asset in terms of Hydro in the states. But we’ll be cautious. We’ve seen few transaction that we thought were expensive. I think that some people are seeing the price of electricity in the states going up little bit faster than we think. So this is where we have a little bit of difficulty to be competitive to acquire existing Hydro facilities in the states and there’s a lot of opportunity up there.

There’s all kinds -- there’s always a transaction here and there in the States that can be looked in for merchant hydro. So we’re starting to warm up to the idea. It’s just that we have to find some comfort in the risk and reward relationship.

Unidentified Analyst: Okay thank you.

Operator: [Operator Instructions] Your next question comes from the line of Ben Pham of BMO.

Please go ahead. Michel Letellier : Hello Ben.
Ben Pham : Hey hello, good morning. I was wondering if I could follow up on your some of your comments for the payout ratio and I understand that you want to retain as much cash as you could for development. That’s always a good signal but it seems like the sub-70% you guys are adding 40 hydro contracts.

It seems very conservative to me and I was wondering how do you guys think about the think about the potential positive benefit on your valuation by paying out 75%. It seems like your cost equity can improve by almost 1% or 2% versus retaining cash because it seems like paying out 75%, you only really, paying almost $10 million of free cash and you're still retaining $25 million. So I mean how do you guys kind of reconcile the two opposing deltas there?

Michel Letellier: I’d love to have a private chat with you to make sure that if we raise the dividend, we'll have a direct positive on the valuation. We are kind of -- and I agree with you Ben. Obviously, if we have a better cost of capital, it's easier to make acquisition, it's easier to issue stock in the future in order to support the development.

I completely agree with this, it's just that it's not that easy to understand where is the sweet spot. And to some degree, we are seeing our peers trading at a much lower yield than ourselves because they have a much lower payout ratio. So hence people are thinking that they are -- they have the ability to grow their pipeline and they have a vision on future pipeline. So it's a -- it's a dedicate matter that we're really focused in trying to understand and find the good equilibrium. Mind you that we are forecasting 2017 being around below 70%, but we haven’t achieved it yet.

So it would be nice to have a full report year to show that we have actually reached that type of payout ratio and then we could readjust perhaps the payment of the dividend. So we thought it would be prudent to not get excited about raising the dividend too fast, making sure that we still deploy the strategy of putting the -- all the project in commercial operation and start to see the benefit from our investigation and investment abroad mainly in France and other places. But I agree with you Ben, I always been an advocate of thinking that in our business equity and cost of capital is king, and obviously even if we have a healthy payout ratio, we cannot support fully by internal cash flow all the development in acquisition, we would like to do because it's a capital intensive business. So the gain is to make sure that you have a good currency in order to be successful in future development. I agree with you Ben.

It's just that it's not that easy to find the sweet spot in the perfect formula.

Ben Pham: Okay. All right. Thanks for color, Michel. That's all I had today.

Thank you.

Michel Letellier: Pleasure.

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

Karine Vachon: Thank you.

And we thank you for taking part in this conference call. Please do not hesitate to contact us should you have any other questions.

Michel Letellier: Thank you very much, everybody and have a good weekend.

Operator: Ladies and gentlemen, that concludes our 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.