Innergex Renewable Energy : In Review 2016

INNERGEX RENEWABLE ENERGY INC. / ANNUAL REVIEW 2016

SUSTAINABLE BY NATURE

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FORWARD-LOOKING INFORMATION

To inform readers of Innergex Renewable Energy Inc.'s ("Innergex" or the "Corporation") future prospects, this review contains forward-looking information within the meaning of applicable securities laws ("Forward-Looking Information"). Forward-Looking Information can generally be identified by the use of words such as "approximately", "may", "will", "could", "believes", "expects", "intends", "should", "plans", "potential", "project", "anticipates", "estimates", "sched- uled" or "forecasts", or other comparable terminology that state that certain events will or will not occur. It represents the projections and expectations of the Corporation relating to future events or results, as of the date of this document. FUTURE-ORIENTED FINANCIAL INFORMATION: Forward-Looking Information includes future-oriented financial information or financial outlook within the meaning of securities laws, such as projected revenues, projected Adjusted EBITDA, and projected Free Cash Flow, to inform readers of the potential financial impact of expected results, of the expected commissioning of development projects, of the Corporation's ability to sustain current dividends and dividend increases and of its ability to fund its growth. Such information may not be appropriate for other purposes. ASSUMPTIONS: Forward-Looking Infor- mation is based on certain key assumptions made by the Corporation, including those concerning hydrology, wind regimes and solar irradiation, performance of operating facilities, financial market conditions and the Corporation's success in developing new facilities. RISKS AND UNCERTAINTIES: Forward-Looking Information involves risks and uncertainties that may cause actual results or performance to be materially different from those expressed, implied or presented by the Forward-Looking Information. These are referred to in the Corporation's Annual Information Form in the "Risk Factors" section and include, without limitation: the ability of the Corporation to execute its strategy for building shareholder value; its ability to raise additional capital and the state of capital markets; liquidity risks related to derivative financial instru- ments; variability in hydrology, wind regimes and solar irradiation; delays and cost overruns in the design and construction of projects; health, safety and environmental risks; uncertainties surrounding the development of new facilities; obtainment of permits; variability of installation performance and related penalties; equipment failure or unexpected operations and mainten- ance activity; interest rate fluctuations and refinancing risk; financial leverage and restrictive covenants governing current and future indebtedness; the possibility that the Corporation may not declare or pay a dividend; the ability to secure new power purchase agreements or to renew any power purchase agreement; changes in governmental support to increase electricity to be generated from renewable sources by independent power producers; the ability to attract new talent or to retain officers or key employees; litigation; performance of major counterparties; social acceptance of renewable energy projects; relationships with stakeholders; equipment

Innergex Renewable Energy Inc.

("Innergex" or the "Corporation") is a leading independent renewable power producer.

supply; changes in general economic conditions; regulatory and political risks; the ability to secure appropriate land; reliance on power purchase agreements; availability and reliability of transmission systems; increases in water rental cost or changes to regulations applicable to water use; assessment of water, wind and sun resources and associated electricity production; dam failure; natural disasters and force majeure; foreign exchange fluctuations; sufficiency of insurance coverage limits and exclusions; a credit rating that may not reflect actual performance of the Corporation or a lowering (downgrade) of the credit rating; potential undisclosed liabilities associated with acquisitions; integration of the facilities and projects acquired and to be acquired; failure to realize the anticipated benefits of acquisitions; reliance on shared transmis- sion and interconnection infrastructure; and the fact that revenues from the Miller Creek facility will vary based on the spot price of electricity. Although the Corporation believes that the expectations and assumptions on which Forward-Looking Information is based are reasonable under the current circumstances, readers are cautioned not to rely unduly on this Forward- Looking Information since no assurance can be given that it will prove to be correct. Forward- Looking Information contained herein is made as at March 21, 2017 and the Corporation does not undertake any obligation to update or revise any Forward-Looking Information, whether as a result of events or circumstances occurring after the date hereof, unless so required by legis- lation. The principal assumptions, risks and uncertainties concerning specific Forward-Looking Information contained in this document are more fully outlined from page 26 of this document.

NON-IFRS FINANCIAL MEASURES DISCLAIMER

Some measures referred to in this report are not recognized measures under IFRS and therefore may not be comparable to those presented by other companies. Innergex believes that these indicators are important, as they provide management and the reader with additional information about the Corporation's production and cash generation capabilities, its ability to sustain current dividends and dividend increases and its ability to fund its growth. These indicators also facilitate the comparison of results over different periods. Adjusted EBITDA, Free Cash Flow and Payout Ratio are not measures recognized by IFRS and have no standardized meaning prescribed by IFRS. References in this document to "Adjusted EBITDA" are to revenues less operating expenses, general and administrative expenses and prospective project expenses. References to "Free Cash Flow" are to cash flows from operating activities before changes in non-cash oper- ating working capital items, less maintenance capital expenditures net of proceeds from disposals, scheduled debt principal payments, preferred share dividends declared and the portion of Free Cash Flow attributed to non-controlling interests, plus cash receipts by the Harrison Hydro Limited Partnership for the wheeling services to be provided to other facilities owned by the Corporation over the course of their PPA, plus or minus other elements that are not representative of the Corporation's long-term cash-generating capacity, such as transaction costs related to realized acquisitions (which are financed at the time of the acquisition) and realized losses or gains on derivative financial instruments used to hedge the interest rate on project-level debts or the exchange rate on equipment purchases. References to "Payout Ratio" are to dividends declared on common shares divided by Free Cash Flow. Readers are cautioned that Adjusted EBITDA should not be construed as an alternative to net earnings and Free Cash

Active since 1990, the Corporation develops, owns, and operates run-of-river hydroelectric facilities, wind farms, and solar photovoltaic farms. It carries out operations in Quebec, Ontario, British Columbia, France, and Idaho (USA). In 2016, Innergex produced 3,522 GWh of elec- tricity, generating revenues of

$292.8 million1.

The Corporation owns interests in 47 operating facilities with a total net installed capacity of 939 MW² (gross 1,576 MW)

and two projects under con- struction (with secured power purchase agreements) with a

1 All financial data are in Canadian dollars.

total net installed capacity of 71 MW (gross 107 MW).

Innergex also owns interests in several prospective projects with an aggregate net capacity totalling more than 3,560 MW (gross 3,940 MW).

Its common shares are listed on the Toronto Stock Exchange under the symbol "INE".

All data in this publication are

for the year ended December 31, 2016, with the exception of the number of sites and the net and gross installed capacity, which include the acquisition of a

wind farm in France completed on February 21, 2017.

Flow should not be construed as an alternative to cash flows from operating activities, as determined in accordance with IFRS.

2 Net capacity represents the proportional share of the total capacity attributable to Innergex based on its ownership interest in each facility.

INNERGEX RENEWABLE ENERGY INC.

IN REVIEW 2016

3

INSTALLED CAPACITY

AND ELECTRICITY PRODUCED

INNERGEX IS

electricity produced from renewable energy sources

employees1

operating facilities

in revenues and

in Adjusted EBITDA

in Enterprise Value,

including $2.7 billion in

long-term debt and $1.6 billion in market capitalization

SOLAR - 33 - - - 33

TOTAL 900 69 442 155 10 1,576

CONSOLIDATED ENERGY OUTPUT (GWH)

Consolidated energy output as reported in the Corporation's 2016 Management Discussion and Analysis, to which is added the French wind farm acquired on February 21, 2017. Takes into

1 Includes employees of Cartier Wind Energy Inc.

account the full or proportionate consolidation of facilities and excludes the Umbata Falls and Viger-Denonville facilities, which are treated as joint ventures under the International Financial Reporting Standards (IFRS).

OUR VALUES

Conscientious innovators who are respectful of their partners, the members of the Innergex team champion fundamental values that earn them the respect of their partners and the communities that host their projects.

INTEGRITY

We are guided in our decisions by a set of clear principles which ensure that our values and actions are congruent. These principles are articulated in a series of policies.

RESPONSIBILITY

We are accountable to our stakeholders for the economic, social, and environ- mental impacts of the sites we develop and operate, as well as the energy we produce. We are also accountable for the successful implementation of our business plan and the achievement of our established objectives.

TRANSPARENCY

We encourage and value open bidirectional communication with our stakeholders, and we strive to provide complete and accurate information on our activities and our performance that is easily accessible to the general public.

COLLABORATION

We build solid relationships with our external stakeholders, including First Nations and local communities, suppliers and service providers, as well as government and regulatory agencies - successful partnerships that form the foundation of our long-term success.

Internally, we promote a culture of teamwork and cooperation among our employees.

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OVERVIEW OF OUR OPERATING SEGMENTS

HYDROELECTRICITY

Innergex is a Canadian leader in the development and operation of run-of-river hydroelectric facilities. As such facilities are not equipped with a reservoir, they are directly fed by a stream and produce energy from the natural flow of the water. This significantly reduces the impact on the landscape, ecosystem, and neighbouring communities.

Innergex currently operates a portfolio of 29 run-of-river hydroelectric facilities with a total net installed capacity of 488 MW (gross 625 MW), including 16 facilities located in British Columbia, 9 in Quebec, 3 in Ontario, and 1 in the United States.

Hydroelectricity remains Innergex's primary source of renewable energy, representing 63% of the long-term average amount of electricity it generates annually.

The Corporation is currently developing 2 hydroelectric projects with power purchase agreements in British Columbia. Both should be in service in the first and second quarters of 2017.

BIG SILVER CREEK HYDRO FACILITY, BC