New Innergex

By Richard Blackwell, Globe and Mail

Investors looking for a pure-play, mid-sized Canadian renewable energy company will have another place to put their money, now that Innergex Renewable Energy Inc. and its income trust arm are planning to merge into a single entity. The Quebec-based corporation said yesterday it is combining with Innergex Power Income Fund, a trust in which it holds a 16% stake.

The merged operation, which will use the Innergex Renewable Energy name and stock symbol, will together own 14 hydroelectric plants and three wind farms, in Quebec, Ontario, British Columbia and Idaho. There is also a pipeline of projects under development.

The simplified corporate entity will not only be a larger and more liquid asset for investors, it will also eliminate the trust structure and along with it any worries about the end of tax breaks that many trusts will face in 2011.

"By this transaction we're leaving behind all the uncertainties that were created under the trust structure," chairman Jean La Couture said on a conference call with analysts. Both entities are currently run by the same management group.

In the transaction, the trust's unitholders will get 1.46 of the combined company's shares for each unit they own. The dividend to be paid to those unitholders by the merged company will be roughly equivalent to what they are getting now in distributions. Current shareholders of the corporate entity will see their holdings unchanged, but they will start to collect dividends.

While the combined business will eventually be taxable, the company has access to about $750-million in tax credits which should keep it from having to pay anything until at least 2018.