Boralex Inc. — Annual Report 2020

Feb 25, 2021

Consolidated financial statements

Management’s report

The consolidated financial statements and other financial information included in this Annual Report are the responsibility of, and have been prepared by, the management of Boralex Inc. within reasonable limits of materiality. To fulfil this responsibility, management maintains appropriate systems of internal control, policies and procedures. These systems of internal control, policies and procedures help ensure that the Corporation’s reporting practices as well as accounting and administrative procedures provide reasonable assurance that the financial information is relevant, reliable and accurate and that assets are safeguarded and transactions are executed in accordance with proper authorization. These audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), which are summarized in the consolidated financial statements. Where appropriate, these consolidated financial statements reflect estimates based on management’s best judgment. Financial information presented elsewhere in this Annual Report is consistent, where applicable, with that reported in the accompanying consolidated financial statements.

The audited consolidated financial statements have been reviewed by the Board of Directors and by its Audit Committee. The Audit Committee consists exclusively of independent directors and meets periodically during the year with the independent auditor. The independent auditor has full access to and meets with the Audit Committee both in the presence and absence of management.

PricewaterhouseCoopers LLP has audited the consolidated financial statements of Boralex Inc. The independent auditor’s responsibility is to express a professional opinion on the fairness of the consolidated financial statement presentation. The Independent Auditor’s Report outlines the scope of its audits and sets forth its opinion on the consolidated financial statements.

(s) Patrick Decostre

Patrick Decostre

President and Chief Executive Officer

(s) Bruno Guilmette

Bruno Guilmette

Vice-President and Chief Financial Officer

Montréal, Canada February 24, 2021

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Independent auditor’s report

To the Shareholders of Boralex Inc.

Our opinion

In our opinion, the accompanying consolidated financial statements present fairly, in all material respects, the financial position of Boralex Inc. and its subsidiaries (together, the Company) as at December 31, 2020 and 2019, and its financial performance and its cash flows for the years ended in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS).

What we have audited

The Company’s consolidated financial statements comprise:

• the consolidated statements of financial position as at December 31, 2020 and 2019;

• the consolidated statements of profit or loss for the years ended;

• the consolidated statements of comprehensive income for the years ended;

• the consolidated statements of changes in equity for the years ended;

• the consolidated statements of cash flows for the years ended; and

• the notes to the consolidated financial statements, which include significant accounting policies and other explanatory information.

Basis for opinion

We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor’s responsibilities for the audit of the consolidated financial statements section of our report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Independence

We are independent of the Company in accordance with the ethical requirements that are relevant to our audit of the consolidated financial statements in Canada. We have fulfilled our other ethical responsibilities in accordance with these requirements.

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Independent auditor’s report (cont’d)

Key audit matters

Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the consolidated financial statements for the year ended December 31, 2020. These matters were addressed in the context of our audit of the consolidated financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.

Key audit matter

How our audit addressed the key audit matter

Our approach to addressing the matter included the following procedures, among others:

Valuation of intangible assets acquired in the business combination of Le Plateau I, Des Moulins I and Des Moulins II wind farms

• Tested how management estimated the fair value of intangible assets which included the following:

Refer to Note 3 – Significant accounting policies, Note 4 – Main sources of uncertainty and Note 5 – Business combinations to the consolidated financial statements.

• Read the purchase agreement to understand the transaction and key terms.

• Tested the mathematical accuracy of the discounted cash flows model.

On November 30, 2020, the Company acquired a 49% interest in the Le Plateau I, Des Moulins I and Des Moulins II wind farms, in which the Company already – held a 51% interest, for a cash consideration of $121 million ($98 million, net of cash acquired). The – preliminary fair value of assets acquired included $336 million of energy sales contracts. The determination of the fair value of the intangible assets, using a discounted cash flows model, included the following key – assumptions: anticipated production, earnings, costs and discount rate.

• Tested the underlying data used by management in the discounted cash flows model.

• Evaluated the reasonableness of the anticipated production, earnings and costs of the acquired business by considering the current and past performance of the acquired business.

• Professionals with specialized skill and knowledge in the field of valuation assisted in evaluating the reasonableness of the discounted cash flows model used and the discount rate applied by management based on available data of comparable companies.

We considered this a key audit matter due to the significant judgment applied by management in estimating the fair value of intangible assets, including the development of key assumptions. This, in turn, led to a high degree of auditor judgment and subjectivity in performing procedures relating to the key assumptions applied by management. Professionals with specialized skill and knowledge in the field of valuation assisted us in performing our procedures.

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Independent auditor’s report (cont’d)

Key audit matter

How our audit addressed the key audit matter

Our approach to addressing the matter included the following procedures, among others:

Impairment assessment of indefinite life water rights and goodwill

• Tested how management determined the recoverable amount of the CGU or groups of CGUs, which included the following:

Refer to Note 3 – Significant accounting policies, Note 4 – Main sources of uncertainty and Note 8 – Intangible assets and goodwill to the consolidated financial statements.

• Tested the mathematical accuracy and the underlying data used in the fair value less costs of disposal models.

The Company had $38 million of indefinite life water rights models. and $222 million of goodwill as at December 31, 2020. – Tested the Management conducts an impairment test as of August 31 of each year, or more frequently if events or circumstances indicate that the carrying value of indefinite life water rights or goodwill may not be recoverable.

• Tested the reasonableness of the anticipated production, earnings and costs used in the fair value less costs of disposal models by considering the current and past performance of the CGU or groups of CGUs and whether they were aligned with evidence obtained in other areas of the audit.

Indefinite life water rights and goodwill are monitored for impairment by management respectively on a cash generating unit (CGU) basis and group of CGUs basis. Where impairment exists, the indefinite life water rights and goodwill are written down to their recoverable amount. Recoverable amounts are determined using fair value less costs of disposal models. Key assumptions used when estimating recoverable amounts included anticipated production, earnings, costs and discount rates.

• Professionals with specialized skill and knowledge in the field of valuation assisted in evaluating the appropriateness of the fair value less costs of disposal models and the reasonableness of the discount rates applied by management based on available data of comparable companies.

We considered this a key audit matter due to the significant judgment applied by management in determining the recoverable amounts of CGUs or groups of CGUs, including the use of key assumptions. This has resulted in a high degree of subjectivity and audit effort in performing audit procedures to test the key assumptions. Professionals with specialized skill and knowledge in the field of valuation assisted us in performing our procedures.

Other information

Management is responsible for the other information. The other information comprises the Management’s Discussion and Analysis and the information, other than the consolidated financial statements and our auditor’s report thereon, included in the annual report.

Our opinion on the consolidated financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.

If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

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Independent auditor’s report (cont’d)

Responsibilities of management and those charged with governance for the consolidated financial statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with IFRS, and for such internal control as management determines is necessary to enable the preparation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s responsibilities for the audit of the consolidated financial statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these consolidated financial statements.

As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also:

• Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.

• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.

• Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the consolidated financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.

• Evaluate the overall presentation, structure and content of the consolidated financial statements, including the disclosures, and whether the consolidated financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business activities within the Company to express an opinion on the consolidated financial statements. We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.

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Independent auditor’s report (cont’d)

We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the consolidated financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

The engagement partner on the audit resulting in this independent auditor’s report is Yves Bonin.

• (s) PricewaterhouseCoopers s.r.l./s.e.n.c.r.l.[1]

Montréal (Québec)

February 24, 2021

• [1] FCPA auditor, FCA, public accountancy permit No. A110416

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Table of contents

Table of contents	Table of contents
CONSOLIDATED FINANCIAL STATEMENTS		92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS		97
NOTE 1	INCORPORATION AND NATURE OF BUSINESS	97
NOTE 2	BASIS OF PRESENTATION	97
NOTE 3	SIGNIFICANT ACCOUNTING POLICIES	97
NOTE 4	MAIN SOURCES OF UNCERTAINTY	108
NOTE 5	BUSINESS COMBINATIONS	110
NOTE 6	PROPERTY, PLANT AND EQUIPMENT	112
NOTE 7	LEASES	113
NOTE 8	INTANGIBLE ASSETS AND GOODWILL	114
NOTE 9	DEBT	115
NOTE 10	INCOME TAXES	116
NOTE 11	DECOMMISSIONING LIABILITY	118
NOTE 12	CAPITAL STOCK, CONTRIBUTED SURPLUS AND DIVIDENDS	118
NOTE 13	STOCK-BASED COMPENSATION	119
NOTE 14	EXPENSES BY NATURE	120
NOTE 15	IMPAIRMENT	120
NOTE 16	FINANCING COSTS	120
NOTE 17	NET EARNINGS (LOSS) PER SHARE	121
NOTE 18	CHANGE IN NON-CASH ITEMS RELATED TO OPERATING ACTIVITIES	121
NOTE 19	STATEMENT OF CASH FLOWS	121
NOTE 20	FINANCIAL INSTRUMENTS	122
NOTE 21	FINANCIAL RISKS	126
NOTE 22	CAPITAL MANAGEMENT	129
NOTE 23	COMMITMENTS AND CONTINGENCIES	131
NOTE 24	RELATED PARTY TRANSACTIONS	134
NOTE 25	SEGMENTED INFORMATION	135
NOTE 26	SUBSEQUENT EVENT	138

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Consolidated statements of financial position

Consolidated statements of financial	position
		As at	As at
		December 31,	December 31,
(in millions of Canadian dollars)	Note	2020	2019
ASSETS
Cash and cash equivalents		275	153
Restricted cash		2	15
Trade and other receivables	6	157	153
Other current financial assets	20	—	17
Other current assets	7	38	25
CURRENT ASSETS		472	363
Property, plant and equipment	6	3,112	2,715
Right-of-use assets	7	316	260
Intangible assets	8	1,027	700
Goodwill	8	222	188
Interests in the Joint Ventures and associates	10	74	236
Other non-current financial assets	20	70	76
Other non-current assets		21	19
NON-CURRENT ASSETS		4,842	4,194
TOTAL ASSETS		5,314	4,557
LIABILITIES
Trade and other payables	11	161	118
Current portion of debt	9	229	172
Current portion of lease liabilities	7	13	11
Other current financial liabilities	20	—	3
CURRENT LIABILITIES		403	304
Debt	9	3,287	2,895
Lease liabilities	7	243	197
Deferred income tax liability	10	137	136
Decommissioning liability	11	128	90
Other non-current financial liabilities	20	100	38
Other non-current liabilities		25	22
NON-CURRENT LIABILITIES		3,920	3,378
TOTAL LIABILITIES		4,323	3,682
EQUITY
Equity attributable to shareholders		989	860
Non-controllingshareholders		2	15
TOTAL EQUITY		991	875
TOTAL LIABILITIES AND EQUITY		5,314	4,557

The accompanying notes are an integral part of these consolidated financial statements.

The Board of Directors approved these audited annual consolidated financial statements on February 24, 2021.

(s) Alain Rhéaume

Alain Rhéaume , Director

(s) Lise Croteau

Lise Croteau , Director

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Consolidated statements of earnings (loss)

Consolidated statements of earnings (loss)
(in millions of Canadian dollars, unless otherwise specified)	Note	2020	2019
REVENUES
Revenues from energy sales		596	553
Feed-inpremium		23	11
Revenues from energy sales and feed-in premium		619	564
Other income		14	10
		633	574
COSTS AND OTHER
Operating	14	151	127
Administrative	14	44	35
Development		23	24
Amortization		237	244
Impairment	15	7	55
Othergains		(1)	(1)
		461	484
OPERATING INCOME		172	90
Acquisition costs	5, 26	4	—
Financing costs	16	113	143
Share in earnings of the Joint Ventures and associates	10	(25)	(14)
Loss on deemed disposal of interests in the Joint Ventures	5	7	—
Other		7	9
EARNINGS (LOSS) BEFORE INCOME TAXES		66	(48)
Income tax expense(recovery)	10	5	(5)
NET EARNINGS(LOSS)		61	(43)
NET EARNINGS (LOSS) ATTRIBUTABLE TO:
Shareholders of Boralex		55	(39)
Non-controllingshareholders		6	(4)
NET EARNINGS(LOSS)		61	(43)
NET EARNINGS (LOSS) PER SHARE ATTRIBUTABLE TO SHAREHOLDERS
OF BORALEX – BASIC AND DILUTED	17	$0.55	($0.43)

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated statements of comprehensive income (loss)

(in millions of Canadian dollars)	2020	2019
NET EARNINGS(LOSS)	61	(43)
Other comprehensive income (loss) to be subsequently reclassified to net earnings (loss)
when certain conditions are met
Translation adjustments:
Unrealized foreign exchange gain (loss) on translation of financial statements of self-
sustaining foreign operations	30	(44)
Net investment hedge:
Change in fair value	(32)	30
Income taxes	4	(2)
Cash flow hedges:
Change in fair value	(91)	(44)
Hedging items realized and recognized in net earnings (loss)	28	11
Income taxes	15	9
Cash flow hedges – Interests:
Change in fair value	(26)	(10)
Hedging items realized and recognized in net earnings (loss)	14	4
Income taxes	3	1
Total other comprehensive loss	(55)	(45)
COMPREHENSIVE INCOME(LOSS)	6	(88)
COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO:
Shareholders of Boralex	5	(82)
Non-controllingshareholders	1	(6)
COMPREHENSIVE INCOME(LOSS)	6	(88)

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated statements of changes in equity

		2020	2020	2020
		Equityattributable to shareholders
(in millions of Canadian dollars)	Capital stock	Contributed surplus Accumulated deficit Accumulated other comprehensive loss	Total	Non- controlling shareholders Total equity
BALANCE AS AT JANUARY 1, 2020	1,125	9 (233) (41)	860	15 875
Net earnings Other comprehensive loss	— —	— 55 — — — (50)	55 (50)	6 61 (5) (55)
COMPREHENSIVE INCOME(LOSS)	—	— 55 (50)	5	1 6
Dividends (note 12) Shares issued (note 12) Exercise of options (note 12) Transaction with a non-controlling shareholder Distributions paid to non-controlling shareholders Other	— 194 1 — — —	— (66) — — — — — — — — (5) — — — — — — —	(66) 194	— (66) — 194
			1	— 1
			(5)	3 (2)
			— —	(18) (18) 1 1
BALANCE AS AT DECEMBER 31, 2020	1,320	9 (249) (91)	989	2 991

	2019	2019	2019
	Equityattributable to shareholders
(in millions of Canadian dollars)	Capital stock Equity component of convertible debentures Contributed surplus Accumulated deficit Accumulated other comprehensive income(loss)	Total	Non- controlling shareholders Total equity
BALANCE AS AT JANUARY 1, 2019	984 4 9 (123) 2	876	31 907
Impact of adoptingIFRS 16 – net of taxes	— — — (9) —	(9)	(4) (13)
BALANCE AS AT JANUARY 1, 2019 – RESTATED	984 4 9 (132) 2	867	27 894
Net loss Other comprehensive loss	— — — (39) — — — — — (43)	(39) (43)	(4) (43) (2) (45)
COMPREHENSIVE LOSS	— — — (39) (43)	(82)	(6) (88)
Dividends (note 12) Issuance of shares and conversion of convertible debentures (note 12) Exercise of options (note 12) Distributions paid to non-controlling shareholders Other	— — — (60) — 138 (4) — — — 3 — — — — — — — — — — — — (2) —	(60) 134	— (60) — 134 — 3 (7) (7) 1 (1)
		3 — (2)
BALANCE AS AT DECEMBER 31, 2019	1,125 — 9 (233) (41)	860	15 875

The accompanying notes are an integral part of these consolidated financial statements.

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Consolidated statements of cash flows

Consolidated statements of cash flows
(in millions of Canadian dollars) Note	2020 2019
Net earnings (loss) Distributions received from the Joint Ventures and associates 10 Financing costs Interest paid Income tax expense (recovery) Income taxes paid	61	(43) 54 143 (123) (5) (3)
	32
	113
	(102)
	5
	(5)
Non-cash items in earnings (loss): Amortization Share in earnings of the Joint Ventures and associates 10 Impairment Loss on deemed disposal of interests in the Joint Ventures Other Change in non-cash items related to operatingactivities 18	237 244 (25) (14) 7 55 7 — 8 2 24 (16)
NET CASH FLOWS RELATED TO OPERATING ACTIVITIES	362 294
Business acquisitions, net of cash acquired 5 Increase in the interests in the Joint Ventures and associates 10 Additions to property, plant and equipment Proceeds from disposal of assets Acquisition of energy sales contracts Change in restricted cash Change in reserve funds Other	(98) — — (5) (145) (159) — 13 (11) (18) 12 45 3 28 (8) (4)
NET CASH FLOWS RELATED TO INVESTING ACTIVITIES	(247) (100)
Increase in debt Repayments on debt Principal payments relating to lease liabilities 19 Distributions paid to non-controlling shareholders Change in restricted cash - Lanouée forest Redemption of convertible debentures Dividends paid to shareholders Shares issued Debt and share issuance costs 12 Settlement on financial instruments 20 Other	413 1,411 (509) (1,469) (11) (10) (6) (7) — 43 — (8) (66) (60) 201 — (12) (71) (9) (22) (1) 4
NET CASH FLOWS RELATED TO FINANCING ACTIVITIES	— (189)
TRANSLATION ADJUSTMENT ON CASH AND CASH EQUIVALENTS	7	(9)
NET CHANGE IN CASH AND CASH EQUIVALENTS	122	(4)
CASH AND CASH EQUIVALENTS – BEGINNING OF YEAR	153 157
CASH AND CASH EQUIVALENTS – END OF YEAR	275 153

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to consolidated financial statements

As at December 31, 2020

(in millions of Canadian dollars, unless otherwise specified)

Note 1. Incorporation and nature of business

Boralex Inc., its subsidiaries and its Joint Ventures and associates (“Boralex” or the “Corporation”) are dedicated to the development, construction and operation of renewable energy power facilities. As at December 31, 2020, the Corporation had interests in 88 wind farms, 16 hydroelectric power stations, two thermal power stations and three solar power stations, representing an asset base with a net installed capacity under its control and Boralex's share in entities over which it does not have control totalling 2,246 megawatts (“MW”). In addition, Boralex currently has new projects under development, representing an additional 64 MW of power and a portfolio of secured projects amounting to 380 MW. The Corporation also operates two hydroelectric power stations on behalf of R.S.P. Énergie Inc., an entity of which one of the three shareholders is a director of the Corporation. Revenues from energy sales are generated mainly in Canada, France and the United States. Since December 31, 2020, the Corporation added, through an acquisition, seven solar power stations with an installed capacity of 209 MW, bringing the Corporation's net installed capacity to 2,455 MW as at February 24, 2021. For more information, refer to note 26, Subsequent event .

The Corporation is incorporated under the Canada Business Corporations Act . Boralex’s head office is located at 36 Lajeunesse St., Kingsey Falls, Québec, Canada and its shares are listed on the Toronto Stock Exchange (“TSX”).

Note 2. Basis of presentation

These audited consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”), as published by the International Accounting Standards Board (“IASB”) and set out in the CPA Canada Handbook . The Corporation has consistently applied the same accounting policies for all of the periods presented except for the new standards adopted during the year.

The preparation of financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to exercise its judgment in the process of applying the Corporation’s accounting policies. These areas involving a higher degree of judgment or complexity, or areas where assumptions and estimates are significant to the consolidated financial statements, are disclosed in note 4.

Note 3. Significant accounting policies

The significant accounting policies used to prepare these audited consolidated financial statements are as follows:

Measurement basis

The consolidated financial statements have been prepared on a going concern basis, under the historical cost method, except for certain financial assets and financial liabilities that are remeasured at fair value.

Basis of consolidation

The consolidated financial statements include the accounts of the Corporation comprising:

Subsidiaries

The subsidiaries are entities over which the Corporation exercises control. The Corporation controls an entity when it has power to direct the relevant activities, when it is exposed, or has rights to variable returns, and when it has the ability to affect those returns through its power over the entity. Subsidiaries are fully consolidated from the date the Corporation acquires control and are deconsolidated on the date control ends. Intercompany transactions and balances as well as unrealized gains and losses on transactions between these entities are eliminated. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the group and comparability of financial information.

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Note 3. Significant accounting policies (cont’d)

The Corporation’s main subsidiaries as at December 31, 2020 were as follows:

Name of subsidiary	Voting rights held	Location
Boralex Europe Sàrl	100%	Luxembourg
Boralex Energie Verte S.A.S.	100%	France
Boralex Energie France S.A.S.	100%	France
Boralex Sainte Christine S.A.S.	100%	France
Boralex Production S.A.S.	100%	France
Boralex Ontario Energy Holdings L.P.	100%	Canada
Boralex Ontario Energy Holdings 2 L.P.	100%	Canada
Éoliennes Témiscouata II L.P.	100%	Canada
Boralex Power Limited Partnership	100%	Canada
FWRN LP	50%	Canada
NR Capital	100%	Canada
Des Moulins Wind Power L.P. (“DM I and II”)(1)	100%	Canada
Le Plateau Wind Power L.P. (“LP I”)(1)	100%	Canada

(1) On November 30, 2020, the Corporation acquired control of these entities, which were subsidiaries as at December 31, 2020. For further information see note 5, Business combinations.

Joint Ventures and associates

A Joint Venture is a joint arrangement in which the parties are bound by a contractual agreement that gives them joint control over the entity. The decisions about the relevant activities of the joint arrangement require the unanimous consent of the parties that exercise joint control.

An associate is a joint arrangement in which the parties are bound by a contractual agreement that gives them significant influence without control or joint control over the entity. The Corporation’s interests in the Joint Ventures and associates (“Interests”) are accounted for using the equity method. Under the equity method, investments are initially recorded at cost and the carrying amount is adjusted thereafter to include the Corporation’s pro rata share of post-acquisition earnings or losses of the investee in profit or loss and the Corporation’s share of changes in other comprehensive income. Dividends received or receivable from associates and joint ventures reduce the carrying amount of the investment. The Corporation’s Share in earnings of the Joint Ventures and associates is recorded as a separate line item in the consolidated statement of earnings (loss). Unrealized gains and losses on transactions between the Corporation and jointly controlled or significantly influenced entities are eliminated to the extent of the Corporation’s interest in those entities unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of equity-accounted investees have been changed where necessary to ensure consistency with the policies adopted by the group and comparability of financial information.

If an interest in a Joint Venture or an associate becomes negative, the carrying amount of such interest is reduced to zero and the adjustment is recognized under Excess of distributions received over the share of net earnings . If the carrying amount of the interest in the Joint Venture or an associate becomes positive during the subsequent period, Boralex will reverse such adjustment up to the accumulated amount previously recorded as excess of distributions received over the share of net earnings. The carrying amount of equity investments is tested for impairment in accordance with the policy described in the Impairment of assets section of this note.

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Note 3. Significant accounting policies (cont’d)

As at December 31, the Corporation’s main Joint Ventures and associates were as follows:

Name of entity Type of joint arrangement

% Boralex Location

Seigneurie de Beaupré Wind Farms 2 and 3 General Partnership (“SDB I”) Joint venture Seigneurie de Beaupré Wind Farm 4 General Partnership (“SDB II”) Joint venture Le Plateau Community Wind Power L.P. (“LP II”) Joint venture Roncevaux Wind Power L.P. (“Roncevaux”) Associate Hecate Energy New York Holdings LLC (“Hecate”) Joint venture Des Moulins Wind Power L.P. (“DM I and II”) Joint venture Le Plateau Wind Power L.P. (“LP I”) Joint venture Jammerland BayNearshore AIS(“Denmark”) Joint venture

2020 2019 50.00% 50.00% Canada 50.00% 50.00% Canada 59.96% 59.96% Canada 50.00% 50.00% Canada 50.00% 50.00% United States 0.00%(1) 51.00% Canada 0.00%(1) 51.00% Canada 0.00%(2) 50.00% Denmark

(1) On November 30, 2020, the Corporation became the sole owner of these entities. These entities were subsidiaries as at December 31, 2020.

(2) In 2020, the Corporation sold its interest in the joint venture.

Non-controlling shareholders

Non-controlling shareholders consist of interests held by third parties in the Corporation’s subsidiaries. The net assets of the subsidiary attributable to non-controlling shareholders are reported as a component of equity. Their share in net earnings (loss) and comprehensive income (loss) is recognized directly in equity. Any change in the Corporation’s interest in a subsidiary that does not result in an acquisition or a loss of control is accounted for as a capital transaction.

Business combinations

Business combinations are accounted for using the acquisition method. The consideration transferred by the Corporation to obtain control of a subsidiary is calculated as the sum of the fair values of assets transferred, liabilities assumed and the equity instruments issued by the Corporation, which includes the fair value of any asset or liability arising from a contingent consideration arrangement. Acquisition costs are expensed to earnings as incurred.

The Corporation recognizes identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have previously been recognized in the acquiree’s financial statements prior to the acquisition. Assets acquired and liabilities assumed are measured at their acquisition-date fair values.

Goodwill is determined after separate recognition of identifiable assets acquired. It is calculated as the excess of the sum of the fair value of the consideration transferred, the amount of any non-controlling interests in the acquiree and the fair value of any existing equity interest in the acquiree over the acquisition-date fair value of identifiable net assets. If the fair values of identifiable net assets exceed the sum calculated above, the excess amount (gain on a bargain purchase) is recognized through earnings immediately. If the business combination is achieved in stages, the acquisition-date carrying amount of the acquirer's previously held interest in the acquiree is remeasured at its acquisition-date fair value with any resulting gain or loss recognized in net earnings (loss).

Foreign currency translation

Functional and reporting currency

Items included in the financial statements of each of the Corporation’s entities are measured using the currency of the primary economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are presented in Canadian dollars, which is Boralex’s functional currency.

The financial statements of entities with a different functional currency from that of Boralex (foreign companies) are translated into Canadian dollars as follows: the assets and liabilities are translated at the prevailing year-end exchange rate. Revenues and expenses are translated at the average exchange rate for each period. Translation gains or losses are included in Other comprehensive income (loss) and deferred through Accumulated other comprehensive income (loss) . When a foreign company is disposed of, translation gains or losses accumulated in Accumulated other comprehensive income (loss) are maintained in comprehensive income (loss) until the Corporation’s net investment in that country has been entirely sold. Where applicable, translation gains or losses are recognized under Foreign exchange gain or loss in net earnings (loss). Goodwill and fair value adjustments arising on the acquisition of a net investment in a self-sustaining foreign operation are treated as assets and liabilities of the foreign operation and translated at the closing rate.

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Note 3. Significant accounting policies (cont’d)

Foreign currency transactions

Foreign currency transactions carried out by Canadian establishments are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies are translated at the exchange rate prevailing at the reporting date. Exchange differences resulting from transactions are recognized under Foreign exchange gain (loss) in net earnings (loss) except for those relating to qualifying cash flow hedges, which are deferred under Accumulated other comprehensive income (loss) in equity.

Financial instruments

Classification

The Corporation determines the classification of financial instruments at initial recognition and classifies its financial instruments in the following measurement categories:

• Those to be measured subsequently at fair value (either through profit or loss (“FVPL”) or through other comprehensive income (“FVOCI”));

• Those to be measured at amortized cost.

The classification of financial instruments is driven by the Corporation’s business model for managing the financial assets and their contractual cash flow characteristics. Assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest are measured at amortized cost. Equity instruments that are held for trading (including all equity derivative instruments) are classified as FVPL. For other equity instruments, on the day of acquisition, the Corporation can make an irrevocable election (on an instrument-by-instrument basis) to designate them as at FVOCI. Financial liabilities are measured at amortized cost, unless they are required to be measured at FVPL (such as instruments held for trading or derivatives) or the Corporation has opted to measure them at FVPL.

Financial instruments with embedded derivatives are considered in their entirety when determining whether their cash flows are solely payment of principal and interest.

Measurement

Financial instruments at amortized cost

Financial instruments at amortized cost are initially recognized at fair value, and subsequently carried at amortized cost less any impairment.

Currently, the Corporation classifies cash and cash equivalents, restricted cash, trade and other receivables, advance to a non-controlling shareholder, options to purchase a partner’s interests and reserve funds as financial assets measured at amortized cost, and trade and other payables, contingent considerations, amount due to a non-controlling shareholder, debt and lease obligations as financial liabilities measured at amortized cost.

Financial instruments at fair value

Financial instruments are initially recorded at fair value and transaction costs are expensed in the consolidated statements of net earnings (loss). The effective portion of gains and losses on financial instruments designated as hedges is included in the consolidated statements of comprehensive income (loss) in the period in which they arise. Where management has opted to recognize a financial liability at FVPL, any changes associated with the Corporation’s own credit risk will be recognized in Other comprehensive income (loss) .

Currently, the Corporation classifies other non-current financial assets (excluding reserve funds, advance to a non-controlling shareholder and options to purchase a partner’s interests) as financial assets measured at fair value, and other current financial liabilities and non-current financial liabilities (excluding contingent consideration and amount due to a non-controlling shareholder) as financial liabilities measured at fair value.

Impairment

The Corporation assesses on a forward-looking basis the expected credit losses associated with its debt instruments carried at amortized cost or at FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

For trade receivables, the Corporation applies the simplified approach permitted by IFRS 9, which requires lifetime expected losses to be recognized from initial recognition of the receivables.

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Note 3. Significant accounting policies (cont’d)

Derecognition

Financial assets

The Corporation derecognizes financial assets only when the contractual rights to cash flows from the financial assets expire, or when it transfers the financial assets and substantially all the associated risks and rewards of ownership to another entity. Gains and losses on derecognition are generally recognized in the consolidated statements of comprehensive income (loss).

Financial liabilities

The Corporation derecognizes financial liabilities only when its obligations under the financial liabilities are discharged, cancelled or expired. The difference between the carrying amount of the financial liability derecognized and the consideration paid or payable, including any non-cash assets transferred or liabilities assumed, is recognized in the consolidated statements of net earnings (loss).

Hedge accounting

Derivatives are initially recognized at fair value on the date a derivative contract is entered into and are subsequently measured at their fair value. The method of recognizing the resulting gain or loss depends on whether the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The derivatives are designated as hedges of a particular risk associated with a recognized asset or liability or a highly probable forecasted transaction (cash flow hedge).

The Corporation documents at the inception of the transaction the relationship between the hedging instruments and hedged items, as well as its risk management objectives and strategy for undertaking various hedging transactions. The Corporation also documents its assessment, both at hedge inception and on an ongoing basis, as to whether the derivatives used in hedging transactions are highly effective in offsetting changes in fair values or cash flows of the hedged items.

The full fair value of a derivative financial instrument is classified as a non-current asset or liability when the remaining life of the hedged item is more than 12 months and as a current asset or liability when the remaining life of the hedged item is less than 12 months. Held-for-trading derivative financial instruments are classified as current assets or liabilities.

Cash flow hedges

In a cash flow hedge relationship, the change in value of the effective portion of the derivative is recognized in Accumulated other comprehensive income (loss) . The gain or loss relating to the ineffective portion is recognized immediately in the statement of earnings (loss) under Net gain or loss on financial instruments .

Amounts accumulated in equity are reclassified to net earnings (loss) in the periods in which the hedged item affects net earnings (loss) (for example, when a forecasted interest expense that is hedged occurs). The effective portion of the hedging derivative is recognized in the statement of earnings (loss) under Financing costs . The ineffective portion is recognized in the statement of earnings (loss) under Net gain or loss on financial instruments . However, when the forecasted transaction that is hedged results in the recognition of a non-financial asset (for example, Property, plant and equipment ), the gains and losses previously deferred in equity are transferred from equity and included in the initial measurement of the asset. The deferred amounts are recognized as amortization of property, plant and equipment.

When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognized when the forecasted transaction affects earnings (loss). When a forecasted transaction does not occur, the cumulative gain or loss that was reported in equity is immediately classified to the statement of earnings (loss) under Net gain or loss on financial instruments .

Hedge of a net investment in self-sustaining foreign operations

The Corporation designates its foreign exchange forward contracts and cross-currency swaps as hedges of a net investment in self-sustaining foreign operations in foreign currency. In this hedge relationship of a net investment in foreign currency, the change in value of the effective portion of the derivative financial instrument is recognized in Accumulated other comprehensive income (loss) and the change in the ineffective portion is recorded in the statement of earnings (loss), under Net gain or loss on financial instruments .

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Note 3. Significant accounting policies (cont’d)

Cash and cash equivalents

Cash includes cash on hand and bank balances. Cash equivalents are short-term investments that mature within three months and comprise bankers’ acceptances or deposit certificates guaranteed by banks. These instruments include highly liquid instruments that are readily convertible into known amounts of cash and subject to non-significant risk of changes in value.

Restricted cash

Restricted cash comprises mainly highly liquid investments designated as reserve to finance capital expenditures and funds held in trust for the purpose of meeting the requirements of certain debt agreements within a one-year period following each year-end.

Inventories

Inventories are measured at the lower of cost or net realizable value. Cost is determined using the average cost method. Net realizable value corresponds to replacement cost in the normal course of business. Inventories mainly consist of replacement parts and wood residues.

Property, plant and equipment

Property, plant and equipment, consisting mainly of power stations and energy production facilities, are recorded at cost, including interest incurred during the construction period of new power stations or facilities, less accumulated amortization and impairment losses. Amortization begins on the date the assets are commissioned using the following methods:

Type ofproperty, plant and equipment	Method of amortization	Useful life
Wind power stations	By component using the straight-line method	5 to 30 years
Hydroelectric power stations	By component using the straight-line method	20 to 40 years
Thermal power stations	By component using the straight-line method	20 to 25 years
Solar power stations	By component using the straight-line method	20 years
Major maintenance	Straight-line method over the scheduled maintenance frequency	3 to 5 years

Useful lives, residual values and amortization methods are reviewed every year according to asset type, expected usage and changes in technology. Impairment losses and reversals, if any, are recognized in net earnings (loss) under Impairment .

Other intangible assets

Energy sales contracts

Acquisition costs for energy sales contracts and associated rights are amortized on a straight-line basis over the contract terms, including one renewal period, as applicable, which ranges from 15 to 40 years.

Water rights

Water rights with finite lives are amortized on a straight-line basis over the contract terms, including one renewal period, which ranges from 20 to 30 years. Water rights with indefinite lives are not amortized.

Development projects

Project development costs include design and acquisition costs related to new projects. These costs are deferred until construction begins on the new power station or expansion of an existing power station, at which time they are transferred to property, plant and equipment and intangible assets, as appropriate. The Corporation defers costs for projects when it believes they are more likely than not to be completed, that is, secured projects in its portfolio of projects. Where it is no longer probable that a project will be carried out, the costs deferred to that date are expensed.

Goodwill

Goodwill , representing the excess of the consideration paid for entities acquired over the net amount allocated to assets acquired and liabilities assumed, is not amortized. Goodwill is tested for impairment annually on August 31. Tests are also carried out when events or circumstances indicate a possible impairment. Any impairment loss is charged to net earnings (loss) in the period in which it arises.

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Note 3. Significant accounting policies (cont’d)

Other non-current assets - Reserve funds

Reserve funds represent funds held in trust for the purpose of meeting the requirements of certain non-current debt agreements including the maintenance of reserves for debt servicing and to maintain property, plant and equipment. The reserve funds consist of deposit certificates and are valued at amortized cost.

Borrowing costs

The Corporation capitalizes borrowing costs directly attributable to the acquisition, construction or production of qualifying assets during their active construction. Borrowing costs that are directly attributable to the acquisition, construction or production of an eligible asset are capitalized over the period of time necessary to complete and prepare the asset for the intended use or sale. Eligible assets are assets that necessarily take a substantial period of time to prepare for the intended use or sale. Other borrowing costs are expensed during the period in which they are incurred.

Leases

The Corporation has chosen to account for each lease component and any non-lease components as a single lease component when disaggregated information is not readily available. The Corporation recognizes a right-of-use asset and a lease liability at the commencement date, which is the date the leased asset is available for use. Each lease payment is allocated between lease liabilities and financing costs. Financing costs are charged to the statement of earnings (loss) over the lease period so as to produce a constant periodic rate of interest on the remaining balance of lease liabilities for each period.

The right-of-use asset is initially measured at cost comprising the following:

• The amount of the initial measurement of the lease liability;

• Any lease payments made at or before the commencement date less any lease incentives received;

• Any initial direct costs;

• Restoration costs.

The right-of-use asset is subsequently depreciated over the shorter of the underlying asset’s useful life and the lease term on ‑ a straight line basis. The lease term includes periods covered by an option to extend if the Corporation is reasonably certain to exercise that option. Also, the lease term includes periods covered by an option to terminate if the Corporation is reasonably certain not to exercise that option.

The lease liability is initially measured at the present value of the lease payments that are not paid at the commencement date, discounted using the interest rate implicit in the lease or, if that rate cannot be readily determined, the Corporation’s incremental borrowing rate. Generally, the Corporation uses its incremental borrowing rate as the discount rate.

The lease liability includes the net present value of the following lease payments:

• Fixed payments (including in-substance fixed lease payments), less any lease incentives receivable;

• Variable lease payments that are based on an index or rate, initially measured using the index or the effective rate at the commencement date;

• Amounts expected to be payable by the Corporation under residual value guarantees;

• The exercise price of a purchase option if the Corporation is reasonably certain to exercise that option;

• Payments of penalties for terminating the lease, if the lease term reflects the exercise of that option by the Corporation.

Lease payments to be made under reasonably certain extension options are also included in the measurement of the liability.

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Note 3. Significant accounting policies (cont’d)

Remeasurement

The right-of-use asset is periodically reduced by impairment losses, if any, and adjusted for certain remeasurements of the lease liability. The lease liability is remeasured if there is a change in future lease payments arising from a change in an index or rate, there is a change in the Corporation’s estimate of the amount expected to be payable under a residual value guarantee, or the Corporation changes its assessment of whether it will exercise a purchase, extension or termination option. When the lease liability is remeasured in this way, a corresponding adjustment is made to the carrying amount of the right-ofuse asset, or is recorded in profit or loss if the carrying amount of the right-of-use asset has been reduced to zero.

Estimation uncertainty arising from variable lease payments

Some leases contain variable payment terms that are linked to sales or operating expenses. Variable lease payments are recognized in the statements of earnings (loss) in the period in which the condition that triggers those payments occurs.

Impairment of assets

Non-current assets with indefinite useful lives, specifically Goodwill and water rights of the Buckingham power station, as well as intangible assets that are not yet ready for use, are tested for impairment annually on August 31 or if trigger events occur. These assets are tested for impairment when particular events or changes in circumstances indicate that their carrying amount might not be recoverable. An impairment loss is recognized when the carrying amount exceeds the recoverable amount. The recoverable amount of an asset is the higher of that asset’s fair value less costs of disposal and its value in use.

At the end of each reporting period, if there is any indication that an impairment loss recognized in a prior period that no longer exists or has decreased, the loss is reversed up to its recoverable amount. The carrying amount following the reversal must not be higher than the carrying amount that would have prevailed (net of amortization) had the original impairment not been recognized in prior periods. Goodwill impairment charges may not be reversed.

Impairment testing of assets is conducted at the level of the cash-generating units (“CGUs”). A CGU is the smallest identifiable group of assets that generates cash inflows that are largely independent of the cash inflows from other assets or groups of assets. The Corporation’s assets are monitored separately by site, which corresponds to the CGUs of the smallest identifiable group.

The recoverable amount of an asset, a CGU or a combination of CGUs is the higher of its fair value less costs of disposal and its value in use. To calculate value in use, estimated future cash flows are discounted to their present value using a rate that reflects changes in the time value of money and the risks specific to the asset or the CGU. When determining fair value less costs of disposal, the Corporation considers whether there is a current market price for the asset. The income approach is based on the present value of future cash flows generated by an asset, a CGU or a combination of CGUs. The discounted cash flow method consists of projecting cash flows and converting them into present values by applying discount rates.

Provisions

A provision is recognized in the statement of financial position when the Corporation has a legal or constructive obligation as a result of a past event and it is probable that the settlement of the obligation will require a financial payment or cause a financial loss, and a reliable estimate can be made of the amount of the obligation. Provisions are measured using the Corporation’s management’s best estimate as to the outcome based on known facts as at the reporting date.

Contingent consideration

Contingent consideration accounted for upon asset acquisitions or business combinations consists of a contingent compensation agreement between the parties to the share sales contracts. Under the terms of the agreements, the Corporation will have future amounts payable to the seller based on the achievement of certain key milestones.

Contingent consideration relating to business combinations is measured at fair value at the acquisition date. Changes in fair value are recognized in net earnings (loss) under Net gain or loss on financial instruments. Contingent consideration relating to the asset acquisitions is capitalized to intangible assets when incurred.

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Note 3. Significant accounting policies (cont’d)

Litigation provisions

Litigation is regularly monitored on a case-by-case basis by the legal department of the Corporation with the assistance of external legal advisors for major and complex litigation. A provision is recognized as soon as it becomes likely that a current obligation resulting from a past event will require a settlement whose amount can be reliably estimated.

Decommissioning liability

A decommissioning liability is recognized at fair value in the period during which a legal or constructive obligation is incurred, when the amount of liability can be reliably estimated and it is probable that the settlement of the obligation will require a financial payment. Decommissioning costs are capitalized into the value of the related asset and are amortized over the asset’s remaining useful life. The liability is discounted using a pre-tax interest rate that reflects the assessment of the risks specific to the liability.

For the wind farms, the Corporation has a legal or contractual obligation to decommission its facilities when their commercial operations are discontinued. These costs are mostly related to the removal, transportation and disposal of the reinforced concrete bases that support the wind turbines, as well as revegetation.

The Corporation has no obligation to decommission hydroelectric power stations located on public land. Under facility leases, these power stations must be handed back to the lessor at the end of the lease term without any decommissioning. For the other hydroelectric power stations located on private properties belonging to Boralex, the likelihood of such an obligation arising is low since the decommissioning of such facilities would have significant consequences on the ecosystem and economic life in surrounding areas. It is usually more beneficial for the environment, local residents and companies to keep the dam. Given this low likelihood, no provision has been recognized.

The Corporation has environmental obligations with respect to its wood-residue thermal power station. If the power station were to be sold, the Corporation would be responsible for removing the piles of wood residue and environmental protection membranes. The Corporation has determined that the wood residue would be burned to produce electricity and that additional cleaning costs would not be material. Accordingly, the fair value of the liability is not material.

Lastly, the Corporation has an obligation to decommission its solar power stations at the end of the lease term. Decommissioning costs are non-significant.

Income taxes

The Corporation accounts for its income taxes using the deferred tax assets and liabilities method. Deferred income tax assets and liabilities are determined based on the difference between the carrying amount and the tax basis of the assets and liabilities. Any change in the net amount of deferred income tax assets and liabilities is charged to earnings (loss). Deferred income tax assets and liabilities are determined based on enacted or substantively enacted tax rates and laws for each jurisdiction that are expected to apply to taxable income for the periods in which the assets and liabilities will be recovered or settled. Deferred income tax assets are recognized when it is likely they will be realized. Deferred tax assets and liabilities are reported under non-current assets and liabilities.

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax assets and liabilities and when the deferred tax balances relate to the same tax authority. Current tax assets and liabilities are offset when the entity has a legally enforceable right to offset and intends to settle on a net basis or realize the asset and recognize the liability simultaneously.

The tax expense includes current and deferred taxes. This expense is recognized in net earnings (loss), except for income taxes related to the components of Accumulated other comprehensive income (loss) or in equity, in which case the tax expense is recognized in Accumulated other comprehensive income (loss) or in equity, respectively.

Current income tax assets or liabilities are obligations or claims for the current and prior periods to be recovered from (or paid to) taxation authorities that are still outstanding at the end of the reporting period and included under current assets or liabilities. Current tax is payable on taxable profit, which differs from net earnings (loss). This calculation is made using tax rates and laws enacted for each jurisdiction at the end of the reporting period.

The Corporation recognizes a deferred income tax asset or liability for all temporary differences generated by interests in subsidiaries and in the Joint Ventures, except where it is likely that the temporary difference will not reverse in the foreseeable future and the Corporation is able to control the date of the reversal of the temporary difference.

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Note 3. Significant accounting policies (cont’d)

The Corporation has elected to recognize initial future income taxes on temporary differences between the carrying amount and the tax basis resulting from the acquisition of transparent companies. As a result, the consideration has been added to the cost of the acquired interests.

Equity

Capital stock is presented at the value at which the shares were issued. Costs related to the issuance of stock, subscription receipts or stock options are presented in equity, net of taxes, as a deduction from issuance proceeds.

Stock-based compensation

Stock options granted to senior management are measured at fair value. This fair value is then recognized in net earnings (loss) over the vesting period based on service conditions for senior management with an offsetting increase in Contributed surplus . Fair value is determined using the Black-Scholes option pricing model, which was designed to estimate the fair value of exchange-traded options that have no restrictions as to vesting and are entirely transferable. Some of the outstanding options carry restrictions but, in the Corporation’s opinion, the Black-Scholes model provides an appropriate estimate of fair value in these cases. Any consideration paid by employees on the exercise of stock options is credited to Capital stock .

Expenses related to stock options are recorded under Administrative and the cumulative value of unexercised options outstanding is included under Contributed surplus .

Revenue recognition

The Corporation recognizes its revenue under the following policies:

Revenues from energy sales and feed-in premium

The Corporation recognizes its revenues, which consist of energy sales, when the energy is delivered to the buyer’s substation, and there is no unfulfilled obligation that could affect the buyer’s acceptance of energy. Energy sales are billed and paid on a monthly basis.

Variable consideration

Penalties for non-production of electricity are recorded at the time when it is highly probable that the amount will be payable as a reduction of revenues over the remaining term of the energy sales contract.

The Corporation recognizes deferred income for French wind farms whose energy selling prices vary according to the achievement of predetermined production levels under the rate order. The estimate is reviewed annually.

Other income

Other income mainly comprises management fee revenues from Joint Ventures and associates, and is recognized when the service is provided.

Net earnings (loss) per share

Net earnings (loss) per share (basic and diluted) is determined based on the weighted average number of Class A shares outstanding during the year. The calculation of diluted earnings (loss) per share takes into account the potential impact of the exercise of all dilutive instruments, i.e., stock options, on the theoretical number of shares. Diluted earnings (loss) per share is calculated using the treasury stock method to determine the dilutive effect of the stock options and the “if converted” method for convertible debentures. For options that have a dilutive effect, i.e., when the average share price for the period is higher than the exercise price of the options, these methods assume that the options have been exercised at the beginning of the period and that the resulting proceeds have been used to buy back common shares of the Corporation at their average price during the period.

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Note 3. Significant accounting policies (cont’d)

Change in accounting estimates

Change in useful life of certain wind turbine components

Management has reassessed the useful life of certain components for the wind power stations with concrete towers. As of October 1, 2020, the estimated useful life of most of the components will be 30 years. This change in amortization period reflects the best estimate by the management of the Corporation considering recently available expert reports that support this revision in estimated useful life, based on the current conditions of the wind assets. This prospective change in accounting estimate resulted in a $2 million decrease in amortization expense and a negligible impact on the share in earnings of the Joint Ventures and associates, giving rise to a $2 million increase in net earnings before income taxes for the fiscal year ended December 31, 2020.

In 2021, the amortization expense will decrease by approximately $13 million and the share in earnings of the Joint Ventures and associates will increase by approximately $1 million, for a total impact of $14 million on the Corporation's net earnings (loss) before income taxes.

Changes in accounting policies

IFRS 3, Business Combinations

In October 2018, the IASB issued amendments to the definition of a business in IFRS 3, Business Combinations . The amendments are intended to assist entities in determining whether a transaction should be accounted for as a business combination or as a group of assets. The amendments apply prospectively to acquisitions made during annual periods beginning on or after its implementation. The amendments are effective for annual periods beginning on or after January 1, 2020, the date at which the Corporation adopted this standard.

IAS 1, Presentation of Financial Statements, and IAS 8, Accounting Policies,

Changes in Accounting Estimates and Errors

In October 2018, the IASB issued amendments to IAS 1, Presentation of Financial Statements , and IAS 8, Accounting Policies , Changes in Accounting Estimates and Errors , to align the definition of “material” across the standards and to clarify certain aspects of the definition. The amendments are intended to improve financial reporting by promoting a better understanding of the existing requirements and should not significantly impact an entity’s materiality judgments. The amendments apply prospectively to annual periods beginning on or after its implementation. The amendments are effective for annual periods beginning on or after January 1, 2020, the date at which the Corporation adopted this standard, and this change had no material impact on the Corporation’s consolidated financial statements.

Conceptual Framework for Financial Reporting

In March 2018, the IASB issued a comprehensive set of concepts for financial reporting: the revised Conceptual Framework for Financial Reporting (“ Conceptual Framework ”), which replaces its previous version. It assists companies in developing accounting policies when no IFRS standard applies to a particular transaction and more broadly helps stakeholders to better understand the standards. The amendments are effective for annual periods beginning on or after January 1, 2020, the date at which the Corporation adopted this new framework, and this change had no material impact on the Corporation’s consolidated financial statements.

IFRS 16, Leases

In response to the COVID-19 pandemic, IASB released amendments to IFRS 16, Leases , allowing entities not to consider rent concessions received arising from the pandemic as contract amendments under certain conditions. During the fiscal year, the Corporation early adopted this amended standard and this change had no impact on the Corporation's consolidated financial statements as no such concessions were received.

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Note 3. Significant accounting policies (cont’d)

Future changes in accounting policies

Phase 2)

In August 2020, the IASB issued Interest Rate Benchmark Reform - Phase 2, which amends IFRS 9, Financial instruments , IAS 39, Financial Instruments: Recognition and Measurement , IFRS 7, Financial Instruments: Disclosures , IFRS 4, Insurance Contracts and IFRS 16, Leases . The amendments included in Phase 2 address issues that might affect financial reporting after the reform of an interest rate benchmark, including its replacement with alternative benchmark rates. These amendments complete those issued in 2019 and focus on issues that might affect financial reporting during the reform of an interest rate benchmark, including the effects of changes to contractual cash flows or hedging relationships arising from the replacement of an interest rate benchmark with an alternative benchmark rate (replacement issues). The amendments are effective for annual periods beginning on or after January 1, 2021. The Corporation is currently assessing the extent of the impact of this change on its consolidated financial statements.

Note 4. Main sources of uncertainty

The preparation of financial statements in conformity with IFRS requires management to make estimates and judgments that can materially affect revenues, expenses, comprehensive income, assets and liabilities, and the information reported in the consolidated financial statements.

The following items require management to make the most critical estimates and judgments:

Main sources of uncertainty relating to management’s key estimates

Management determines its estimates based on a number of factors, namely its experience, current events and measures the Corporation could subsequently take, as well as other assumptions it deems reasonable given the circumstances. By their nature, these estimates are subject to measurement uncertainty and actual results may differ from them. Underlying estimates and assumptions are periodically reviewed and the impact of any changes is recognized immediately.

Recoverable amount - Impairment of assets

Every year, on August 31, management tests its CGUs and groups of CGUs for impairment with respect to intangible assets with indefinite useful lives and Goodwill . Also, at each reporting date, if any evidence of impairment exists, the Corporation must perform impairment tests on its assets with indefinite and finite useful lives and Goodwill to assess whether their carrying amounts are recoverable. Recoverable amounts are determined based on discounted cash flows projected over the terms of projects using rates that factor in current economic conditions and management’s estimates based on past experience. Expected future cash flows are inherently uncertain and could materially change over time. They are significantly affected by a number of key estimates, including anticipated production, earnings, costs and discount rates. Impairment tests require the use of various assumptions based on management’s best estimates including in particular discount rates and anticipated production. For fair value measurement of Level 3 financial instruments, the Corporation uses measurement techniques to determine fair value less costs of disposal.

Discount rate

The discount rate estimated and used by management represents the weighted average cost of capital determined for a group of CGUs.

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Note 4. Main sources of uncertainty (cont’d)

Anticipated production

For each facility, the Corporation determines long-term average annual energy production over the expected life of the facility, based on engineering studies that consider several important factors: in the wind power segment, past wind and weather conditions and turbine technology; in the hydroelectric power segment, historical water flow and head height, technology used and aesthetic and ecological instream flows; in the solar power segment, historical sunlight conditions, panel technology and their expected degradation. Other factors considered include site topography, installed capacity, energy losses, operational characteristics and maintenance. Although varying from year to year, production is expected to approximate estimated longterm average production.

Amortization expense of property, plant and equipment and intangible assets with

finite useful lives

In determining the amortization expense of property, plant and equipment and intangible assets with finite useful lives, management takes into account estimates of the expected use period of the asset. Such estimates of useful life are reviewed annually and the impacts of any changes are accounted for prospectively.

Lease liabilities

Lease liabilities are calculated by discounting future lease payments over the lease term. To do so, management must estimate the discount rates and lease terms taking into account any applicable renewal and termination options.

Decommissioning liability

Future remediation costs, whether required under contract or by law, are recognized based on management’s best estimates. These estimates are calculated at the end of each period taking into account expected discounted outflows for each asset in question. Estimates depend on labour costs, efficiency of site restoration and remediation measures, and discount rates. Management also estimates the timing of expenses, which may change depending on the type of continuing operations. Expected future costs are inherently uncertain and could materially change over time. Given current knowledge, it is reasonably possible that, in upcoming fiscal years, actual costs could differ from the assumptions, requiring significant adjustments to the related liability’s carrying amount.

Fair value of financial instruments

Fair value is determined using discounted cash flow models. Fair value determined using such valuation models requires the use of assumptions concerning the amount and timing of estimated future cash flows, as well as for numerous other variables. These assumptions are determined using external, readily observable market inputs. Since they are based on estimates, fair values may not be realized in an actual sale or immediate settlement of the instruments. See note 20 of these financial statements for a more detailed explanation of the bases for the calculations and estimates used.

Fair value of business combinations

The Corporation makes a number of key assumptions when allocating fair values to the assets and liabilities acquired in a business acquisition. Fair values are estimated using valuation techniques, such as the discounted cash flows method, that take into account key assumptions such as anticipated production, earnings, costs and discount rate.

Main sources of uncertainty relating to management’s key judgments

Evidence of asset impairment

At each reporting date, management is required to use its judgment to assess whether there is any evidence that property, plant and equipment and intangible assets may be impaired. If applicable, the Corporation performs impairment tests on its CGUs or groups of CGUs to assess whether the carrying amounts of assets are recoverable. As described in the previous section, various estimates made by management are used in the impairment tests.

109 | BORALEX - 2020 Annual Report

Note 4. Main sources of uncertainty (cont’d)

Management is required to exercise judgment and assess whether any events or changes in circumstances could have affected the recoverability of the carrying amount of assets. In making these assessments, management uses various indicators including, but not limited to, adverse changes in the industry or economic conditions, changes in the degree or method of use of the asset, a lower‑than‑expected economic performance of the asset or a significant change in market returns or interest rates.

Determining the development phase

The Corporation capitalizes project development costs during the period preceding commissioning, that is, those of secured projects in its project portfolio. Recognition of an intangible asset resulting from the development phase starts when a given project meets IFRS capitalization criteria. This determination requires significant judgment by management. Deciding whether an event or a change in circumstances indicates that a project has reached the development phase depends on various factors, including the technical feasibility of completing the intangible asset, management’s intention to complete the intangible asset and its ability to commission the project, how the intangible asset will generate probable future economic benefits, the availability of adequate technical and financial resources to complete the development, and management’s ability to reliably measure the expenditures attributable to the project during its development.

Business combination or asset acquisition

When a development project is acquired, management is required to exercise its judgment to determine whether the transaction constitutes a business combination under IFRS 3, Business Combinations , or an asset acquisition. Management determines that a transaction is defined as a business combination when an acquired development project has completed the key steps required to obtain construction permits, financing and an energy sales contract. Management must also use its judgment in determining the amount of contingent consideration to be recognized as part of the final allocation of a business combination. Management evaluates the future amounts to be paid to the seller under the terms of the agreements based on the likelihood that the milestones will be met for payment.

Consolidation

Significant judgment is required to assess whether the structure of certain investments represents control or joint control of, or significant influence over, an investee. Management’s assessment of control or joint control of, or significant influence over, an investee has a material impact on the accounting treatment required for our investment in the investee. Management is required to make significant judgments as to whether it has power over the relevant activities of an investee.

Note 5. Business combinations

2020

Acquisition of Le Plateau I, Des Moulins I and Des Moulins II wind farms

On November 30, 2020, Boralex announced the closing of the acquisition of the Caisse's 49% interest in three wind farms in Québec, in which Boralex already held 51%, for a consideration of $121 million ($98 million net of cash acquired), plus a $4 million contingent consideration subject to the settlement of certain future conditions.

The Caisse's 49% interest represents 145 MW of additional net installed capacity while the three wind farms represent a total of 296 MW. These wind farms are covered by long-term power purchasing agreements (PPAs) entered into with HydroQuébec Distribution, expiring between 2032 and 2033. The consideration was paid by Boralex from its revolving credit facility.

This transaction gave rise to acquisition costs of $1 million, which were recognized under acquisition costs in the 2020 consolidated statement of earnings (loss). The acquisition was accounted for by the Corporation using the acquisition method set out in IFRS 3, Business Combinations . The statement of financial position and the results of this acquisition are consolidated as of November 30, 2020.

110 | BORALEX - 2020 Annual Report

Note 5. Business combinations (cont’d)

Deemed disposal of interests in the Joint Ventures

The loss on fair value remeasurement of 51% interests in LP I, DM I and II amounted to $7 million and the tax impacts of the transaction related to the acquired wind farms are recognized under Other and Income tax expens e (recovery) , respectively, in the consolidated statements of earnings (loss).

	Total
Carrying amount of interests in the Joint Ventures	147
Fair value of interests in the Joint Ventures	140
Loss on fair value remeasurement of interests previously held by Boralex	(7)
Tax impact of transaction	16
Totalgain on remeasurement	9

LP I and DM I and II

The following table shows the preliminary allocation of the purchase price between the net identifiable assets acquired:

	Preliminary
	allocation
Cash and cash equivalents	23
Trade and other receivables	11
Property, plant and equipment	356
Right-of-use asset	23
Energy sales contracts	336
Goodwill	27
Other non-current assets	22
Current liabilities	(9)
Assumed non-current debt	(435)
Lease liability	(23)
Deferred income tax liabilities	(27)
Decommissioning liability	(17)
Other non-current financial liabilities	(13)
Net assets acquired	274
Less:
Cash and cash equivalents	(23)
Non-current contingent consideration	(4)
Value of cash flows after expiry of the energy sales contract	(9)
Fair value of interestspreviouslyheld byBoralex(51%)	(140)
Net considerationpaid for the acquisition	98

The preliminary allocation of the purchase price between the net identifiable assets was established based on fair values as at acquisition date. Although the valuation process was well underway as at December 31, 2020, the Corporation has not yet finalized the determination of fair values for certain items of the net assets acquired. The balance sheet items that would be subject to change following the final determination of fair values as at acquisition date are Property, plant and equipment , Energy sales contracts , Goodwill and Deferred income tax liabilities . The measurement process of these items will continue during the next few months. The final recognition of the business combination could significantly differ from amounts presented and could result in favourable or unfavourable impacts, among others, on the currently recorded amortization and income tax expenses. These changes would be recorded retrospectively as at the acquisition date.

Trade and other receivables acquired as part of the acquisition has a fair value of $11 million and the Corporation expects to collect the entire amount during 2021. Goodwill represents differed taxes and is not deductible for income tax purposes.

As part of the acquisition of the 51% interest in 2018, Boralex had acquired options to purchase the minority interest held by the Caisse in LP I and DM I and II at the expiry of the initial term of the energy sales contracts. These purchase options were cancelled and derecognized when the Caisse's interests were acquired.

111 | BORALEX - 2020 Annual Report

Note 5. Business combinations (cont’d)

In 2020, as of the acquisition date, the acquired entity contributed $9 million to revenues from energy sales and generated a net loss of $2 million. If the acquisition had occurred on January 1, 2020, management estimates that consolidated revenues from energy sales and feed-in premium, as at December 31, 2020, would have increased by $79 million to $698 million and net earnings would have amounted to $60 million. These estimates are based on the assumption that the fair market value adjustments that were made on the date of acquisition would have been the same had the acquisition occurred on January 1, 2020.

Note 6. Property, plant and equipment

	Wind power stations Hydroelectric power stations Thermal power stations Solar power stations Corporate Total
As at January 1, 2019: Net carryingamount	2,502 345 21 30 20 2,918
Impact of adoptingIFRS 16	(52) — — — — (52)
Year ended December 31, 2019: Balance – beginning of year Translation adjustment Additions Disposals Impairment (note 15) Amortization Other	2,450 345 21 30 20 2,866 (84) (5) (1) (2) (1) (93) 89 40 3 4 8 144 (7) — — — — (7) (18) — — — — (18) (153) (15) (4) (2) (3) (177) 2 (1) — — (1) —
Balance – end ofyear	2,279 364 19 30 23 2,715
As at December 31, 2019: Cost Accumulated amortization	3,031 454 63 43 38 3,629 (752) (90) (44) (13) (15) (914)
Net carryingamount	2,279 364 19 30 23 2,715
Year ended December 31, 2020 Balance – beginning of year Translation adjustment Additions Additions through business combinations (note 5) Amortization Impairment Other	2,279 364 19 30 23 2,715 75 (2) — 1 1 75 123 3 — 6 2 134 356 — — — — 356 (141) (14) (4) (2) (3) (164) (2) — (3) — — (5) 1 — — — — 1
Balance – end ofyear	2,691 351 12 35 23 3,112
As at December 31, 2020: Cost Accumulated amortization	3,584 455 60 50 41 4,190 (893) (104) (48) (15) (18) (1,078)
Net carryingamount	2,691 351 12 35 23 3,112

December 31, 2019).

An amount of $10 million relating to additions to property, plant and equipment still unpaid as at December 31, 2020 ($19 million as at December 31, 2019) was included under Trade and other payables .

112 | BORALEX - 2020 Annual Report

Note 7. Leases

The following table shows the change and the breakdown of the Corporation’s right-of-use assets:

	Note	Land(1)	Buildings	Other	Total
Year ended December 31, 2019:
Balance – beginning of year		222	13	7	242
Translation adjustment		(3)	(1)	1	(3)
Revised cash flow estimates		22	—	—	22
Additions		7	7	—	14
Amortization		(13)	(1)	(1)	(15)
Balance – end ofyear		235	18	7	260
As at December 31, 2019:
Cost		264	19	8	291
Accumulated amortization		(29)	(1)	(1)	(31)
Net carryingamount	3	235	18	7	260
Year ended December 31, 2020:
Balance – beginning of year		235	18	7	260
Translation adjustment		7	—	—	7
Revised cash flow estimates	11, (a)	29	—	—	29
Additions		13	1	3	17
Disposals		(1)	—	—	(1)
Additions through business combinations	5	23	—	—	23
Amortization		(15)	(3)	(1)	(19)
Balance – end ofyear		291	16	9	316
As at December 31, 2020:
Cost		337	20	11	368
Accumulated amortization		(46)	(4)	(2)	(52)
Net carryingamount		291	16	9	316

(1) Includes land restoration costs of $83 million as at December 31, 2020 ($71 million as at December 31, 2019).

(a) Management reviewed the probability of exercising renewal options for some leases as well as land restoration costs for wind farms with concrete towers and performed its annual review of inflation and discount rates. The term of leases with renewal options was increased to 30 years. Following the revision of these assumptions, Right-of-use assets and Decommissioning liability increased by $10 million, and Right-of-use assets and Lease liabilities increased by $19 million.

As at December 31, 2020, cash flows were discounted using pre-tax interest rates that reflect the assessment of the risks specific to the lease agreement, ranging from 0.26% to 5.40% to determine the right-of-use asset and liability.

Cash outflows related to lease liabilities totalled $20 million in 2020 ($17 million in 2019).

113 | BORALEX - 2020 Annual Report

Note 8. Intangible assets and Goodwill

	Other intangible assets Energy sales contracts Water rights Development projects Other intangible assets Total Goodwill
Year ended December 31, 2019: Balance – beginning of year Translation adjustment Additions Amortization Impairment(note 15)	695 92 6 5 798 195 (32) — — — (32) (7) 18 — 1 2 21 — (49) (3) — — (52) — (33) — (2) — (35) —
Balance – end ofyear	599 89 5 7 700 188
As at December 31, 2019: Cost Accumulated amortization	846 117 5 10 978 188 (247) (28) — (3) (278) —
Net carryingamount	599 89 5 7 700 188
Year ended December 31, 2020: Balance – beginning of year Translation adjustment Additions through business combinations (note 5) Additions Amortization Other	599 89 5 7 700 188 24 — — — 24 7 336 — — — 336 27 11 — 8 4 23 — (50) (3) — (1) (54) — — — (2) — (2) —
Balance – end ofyear	920 86 11 10 1,027 222
As at December 31, 2020: Cost Accumulated amortization	1,223 117 11 14 1,365 222 (303) (31) — (4) (338) —
Net carryingamount	920 86 11 10 1,027 222

The weighted average amortization period of intangible assets with finite useful lives is as follows:

Energy sales contracts	17 years
Water rights	26years

Water rights of the Buckingham hydroelectric power station, which amounted to $38 million in 2020 and 2019, are not amortized given their indefinite useful life. Development projects consist primarily of wind power projects in Europe. Other intangible assets consist primarily of an enterprise resource planning system and licences for wind power projects under development.

The following table shows the allocation of Goodwill by groups of CGUs:

	As at	As at
	December 31,	December 31,
	2020	2019
Wind power Canada	84	56
Wind power France	98	92
Hydroelectric Canada and United States	40	40
	222	188

As at August 31, 2020, goodwill and water rights with indefinite useful life relating to the Buckingham power station were tested for impairment. For all tests, the recoverable amounts of the CGUs determined using the fair value less costs of disposal method exceeded the carrying amounts. A discount rate ranging from 3.92% to 4.90% was used for these impairment tests.

114 | BORALEX - 2020 Annual Report

Note 9. Debt

Note 9. Debt
					As at	As at
					December 31,	December 31,
(in millions of Canadian dollars, unless otherwise specified)	Note	Maturity	Rate(1)	Currency of origin(2)	2020	2019
Revolving credit facility		2023	1.96		119	242
Subordinated debt(3)		2028	5.64		300	300
Term loan payable:
Ocean Falls hydroelectric power station		2024	6.55		4	5
Thames River wind farms		2031	7.05		112	120
Témiscouata I wind farm		2032	5.20		39	41
LP I wind farm	(a)	2032	3.89		176	—
Témiscouata II wind farm		2033	5.61		102	106
DM I and II wind farm	(a)	2033	5.80		252	—
Niagara Region Wind Farm (“NRWF”)	(b)	2034	3.04		759	685
Port Ryerse wind farm		2034	3.86		26	27
Frampton wind farm		2035	4.15		59	63
Côte-de-Beaupré wind farm		2035	4.21		51	52
Moose Lake wind farm		2043	4.62		47	49
Jamie Creek hydroelectric power station		2054	5.42		55	55
Yellow Falls hydroelectric power station		2056	4.89		72	73
Other debt		—	—		6	4
CANADA					2,179	1,822
Term loan payable:
CDPQ Fixed Income Inc. (''Caisse'')		2024	4.05	40	62	58
Boralex Production portfolio of wind farms and projects		2030	0.90	139	216	237
Val aux Moines wind farm		2034	1.33	14	22	23
Boralex Énergie France portfolio of wind farms and projects		2036	1.50	212	329	330
Sainte-Christine portfolio of wind farms and projects		2039	1.45	484	752	623
Other debt		—	—	3	4	4
FRANCE	(c)			892	1,385	1,275
Senior secured U.S. note		2026	3.51	35	45	52
UNITED STATES				35	45	52
			3.20		3,609	3,149
Current portion of debt					(229)	(172)
Transaction costs,net of accumulated amortization					(93)	(82)
					3,287	2,895

(1) Weighted average rates, adjusted to reflect the impact of interest rate swaps and calculated using the effective interest method, where applicable.

(2) Currencies of origin are CAD (Canada), EUR (France) and USD (United States).

(3) Lenders are CDPQ Fixed Income Inc., a subsidiary of a shareholder of the Corporation, and the Fonds de solidarité FTQ.

(a) Financing of DM I and II and LP I wind farms

On November 30, 2020, Boralex closed the acquisition of CDPQ's 49% interest in the DM I and II and LP I wind farms, in which Boralex already held 51%. The acquisition included two project financing facilities. These term loans secured by the underlying assets of each of these projects are repayable on a quarterly or half-yearly basis over periods ending from 2025 to 2033 and bearing interest at rates between 2.33% and 6.30% or a weighted average rate between 3.89% and 5.80% over the term of the loan, considering the impact of interest rate swaps.

115 | BORALEX - 2020 Annual Report

Note 9. Debt (cont’d)

(b) NRWF refinancing

Niagara Region Wind Farm located on the Niagara Peninsula, Ontario, Canada. This new financing facility comprises a $558 million uncovered term loan tranche maturing in November 2036, a $211 million covered term loan tranche, under a guarantee from the Federal Republic of Germany through its export credit agency, Euler Hermes, maturing in November 2034, as well as a $37 million letter of credit facility for debt service. The non-current debt has a variable interest rate based on CDOR, plus a margin, and is repayable in quarterly payments. In order to reduce exposure to rate changes, interest rate swaps were entered into to cover 90% of the total long-term debt, as required by the credit agreement. For the Corporation, this refinancing represents a two-year extension on its unsecured portion. The refinancing allowed the Corporation to free up financial resources of $72 million, which were used to pay down the Corporation's credit facility.

(c) French revolving credit facility

On January 29, 2020, Boralex closed a revolving credit facility amounting to $182 million (€125 million) to finance the construction of future wind and solar power projects in France. This credit facility was undrawn as at December 31, 2020.

Current portion of debt

Current portion of debt
	As at	As at
	December 31,	December 31,
(in millions of Canadian dollars)	2020	2019
Term loan payable – projects	217	167
Value added tax bridge financingfacility	12	5
	229	172

Financial ratios and guarantees

The debt agreements include certain covenants restricting the use of cash resources of the Corporation’s subsidiaries. Certain financial ratios, such as debt service coverage ratios and debt/equity ratio, must be met on a quarterly, semi-annual or annual basis.

As at December 31, 2020, the carrying amount of assets pledged to secure the loans was $3,927 millions ($3,551 millions as at December 31, 2019). Project term loans are non-recourse to the parent company.

As at December 31, 2020 and December 31, 2019, management considers that Boralex and its subsidiaries were in compliance with all their ratios and financial commitments.

Note 10. Income taxes

The breakdown of income tax expense (recovery) is as follows:

	2020	2019
Current taxes:
Current income tax expense	9	5
Income tax recoveryforprioryears recorded in the currentyear	—	(2)
	9	3
Deferred taxes:
Differences between the current tax rate and deferred income tax rates	(1)	1
Deferred tax savings relating to temporary differences for prior years	(4)	(11)
Income tax expense forprioryears recorded in the currentyear	1	2
	(4)	(8)
Income tax expense(recovery)	5	(5)

116 | BORALEX - 2020 Annual Report

Note 10. Income taxes (cont’d)

The reconciliation of income tax expense (recovery), calculated using the statutory income tax rates prevailing in Canada, with the income tax expense reported in the financial statements is as follows:

the income tax expense reported in the financial statements is as follows:
	2020	2019
Net earnings(loss)before income taxes	66	(48)
Combined basic Canadian andprovincial income tax rate	26.59%	26.59%
Income tax expense (recovery) at the statutory rate	18	(13)
Increase (decrease) in income taxes arising from the following:
Non-taxable/non-deductible items	(11)	8
Difference in foreign operations' statutory income tax rates	1	(2)
Differences between the current tax rate and deferred income tax rates	(2)	1
Foreign income taxes payable on dividends	—	2
Income tax asset notpreviouslyrecognized and other items	(1)	(1)
Effective income tax expense(recovery)	5	(5)
	2020	2019
Deferred income tax liability	(137)	(136)

The changes in deferred taxes by nature are as follows:

	As at					As at
	January 1,	Recorded in		Business		December 31,
	2020	comprehensive income	Recorded in net earnings	acquisitions (note 5)	Recorded in capital stock	2020
Deferred income tax asset related
to loss carryforwards	213	—	(32)	—	—	181
Financial instruments	3	19	(5)	3	—	20
Provisions	2	—	(3)	8	—	7
Interests in the Joint Venture and
associates	(113)	3	40	—	—	(70)
Temporary differences between
accounting and tax amortization	(236)	—	13	(39)	—	(262)
Translation adjustments	3	(2)	(3)	—	—	(2)
Financingand other costs	(8)	—	(6)	1	2	(11)
Total deferred income tax liabilities	(136)	20	4	(27)	2	(137)
	As at		As at			As at
	December 31,		January 1,	Recorded in		December 31,
	2018	Impact of adopting IFRS 16	2019	comprehensive income	Recorded in net earnings	2019
Deferred income tax asset related
to loss carryforwards	211	—	211	—	2	213
Financial instruments	9	—	9	7	(13)	3
Provisions	1	—	1	—	1	2
Interests in the Joint Venture and
associates	(122)	—	(122)	1	8	(113)
Temporary differences between
accounting and tax amortization	(255)	3	(252)	—	16	(236)
Translation adjustments	(3)	—	(3)	3	3	3
Financingand other costs	1	—	1	—	(9)	(8)
Total deferred income tax liabilities	(158)	3	(155)	11	8	(136)

Given that future taxable income is expected to be sufficient, deductible temporary differences, unused loss carryforwards and tax credits have been recorded as a deferred tax asset in the statement of financial position. A deferred tax asset of $1 million ($2 million in 2019) in Canada was not recognized in respect of the $7 million capital loss carryforwards, as no unrealized capital gain is expected. The capital losses have no expiry date.

117 | BORALEX - 2020 Annual Report

Note 11. Decommissioning liability

For the wind power sites, the Corporation has a legal or contractual obligation to decommission its facilities when their commercial operations are discontinued. These costs are mostly related to the removal, transportation and disposal of the reinforced concrete bases that support the wind turbines, as well as the revegetation. In 2020, the Corporation revised the useful life of property, plant and equipment up to the decommissioning date to 30 years for wind farms with concrete towers. The useful lives ranged from 21 to 25 years as at December 31, 2019. As at December 31, 2020 cash flows were discounted using pre-tax interest rates that reflect the assessment of the risks specific to the liability, ranging from 0.66% to 2.87% (1.31% and 3.43% as at December 31, 2019) to determine the non-current decommissioning liability.

The following table shows the changes related to the decommissioning liability:

	Note	2020	2019
Balance as at January 1, 2020		90	69
Translation adjustment		5	(3)
Liability assumed as part of the business acquisition	5	17	—
Revised cash flow estimates	3, 7	10	22
New obligations		4	2
Accretion expense included in financingcosts		2	2
Balance as at December 31, 2020		128	92
Currentportion of decommissioningliability(1)		—	(2)
		128	90

(1) Included in Trade and other payables.

Note 12. Capital stock, contributed surplus and dividends

Boralex’s capital stock is composed of an unlimited number of Class A common shares and an unlimited number of preferred shares. The Class A shares have no par value and confer on each shareholder the right to vote at any meeting of shareholders, receive any dividends declared by the Corporation thereon and share in the residual property upon dissolution of the Corporation. The preferred shares have no par value and were created to provide the Corporation with additional flexibility with respect to future financing, strategic acquisitions and other transactions. The preferred shares are issuable in series with the number of shares in each series to be determined by the Board of Directors prior to issuance. No preferred shares had been issued as at December 31, 2019 and 2020.

The Corporation’s contributed surplus is equal to the cumulative value of unexercised stock options granted to members of management and to key employees.

The following changes occurred in the Corporation’s capital stock between December 31, 2019 and 2020:

Note	Capital stock	Capital stock
	Number of shares Amount
Balance as at January 1, 2019	89,184,175 984
Issuance of shares on debenture conversions Equity component of convertible debentures Exercise of options 13	6,939,347 134 — 4 340,938 3
Balance as at December 31, 2019	96,464,460 1,125
Issuance of shares, net of share issuance costs (a) Exercise of options 13	6,081,200 194 70,993 1
Balance as at December 31, 2020	102,616,653	1,320

a) On August 28, 2020, the Corporation announced the closing of a public offering of Class A shares for gross proceeds of $201 million, and net proceeds of $194 million were recognized (net of issuance costs and taxes of $7 million).

Dividends paid

($60 million in 2019).

On February 8, 2021, a dividend of $0.1650 per common share was declared and will be paid on March 15, 2021 to holders of record at the market close on February 26, 2021.

118 | BORALEX - 2020 Annual Report

Note 13. Stock-based compensation

The Corporation has a long-term incentive plan under which stock options are issuable to members of management and certain key employees of the Corporation. Under this plan, 4,500,000 Class A shares have been reserved for issuance. The exercise price of the options granted prior to March 2, 2017 is equal to the closing listed market price of the Class A shares on the day preceding the option grant date, whereas the exercise price for options granted on or after March 2, 2017 is equal to the average listed market price of Class A shares for the five days preceding the option grant date. Options vest at the rate of 25% per year beginning the year after they are granted. All of the options have a ten-year term. This plan has been determined to be equity settled.

The stock options are as follows for the years ended December 31:

	2020	2020	2019	2019
		Weighted average		Weighted average
	Number of options	exerciseprice	Number of options	exerciseprice
Outstanding- beginningofyear	312,213	16.29	605,065	12.61
Granted	52,609	29.41	64,530	18.45
Exercised	(70,993)	14.62	(340,938)	10.03
Expired	—	—	(456)	22.00
Cancelled	(16,124)	23.53	(15,988)	19.28
Outstanding- end ofyear	277,705	18.78	312,213	16.29
Options exercisable - end ofyear	168,364	15.87	193,457	14.79

The following options were outstanding as at December 31, 2020:

Granted in	Options outstanding	Options exercisable ~~Exercise~~
	Number of options Exercise price	Number of options price Year of expiry
2013 2014 2015 2016 2017 2018 2019 2020	10,750 10.29 32,990 12.90 37,382 13.87 36,355 16.65 25,149 22.00 30,295 18.91 59,434 18.44 45,350 29.41	10,750 10.29 2023 32,990 12.90 2024 37,382 13.87 2025 36,355 16.65 2026 18,563 22.00 2027 16,693 18.91 2028 15,631 18.44 2029 — 29.41 2030
	277,705 18.78	168,364 15.87

The fair value of each option granted was determined using the Black-Scholes model. The assumptions used to calculate the fair values of options are detailed below:

fair values of options are detailed below:
	2020		2019
Share price on grant date	28.45		18.32
Exercise price	29.41		18.45
Expected annual dividend rate	3.98	%	6.78	%
Term	10 years		10 years
Expected volatility	32.96	%	20.39	%
Risk-free interest rate	0.93	%	2.13	%
Weighted average fair valueper option	7.80		2.63

Determination of the volatility assumption is based on a historic volatility analysis over a period equal to the options’ lifetime.

119 | BORALEX - 2020 Annual Report

Note 14. Expenses by nature

Operating and administrative

Note 14. Expenses by nature Operating and administrative
	2020	2019
Raw material and consumables	15	16
Maintenance and repairs	53	45
Employee benefits	64	49
Rental expenses and permits	10	8
Taxes	26	26
Other expenses	27	18
	195	162

Note 15. Impairment

2019

Moulins du Lohan

In December 2019, the Corporation was notified by the Ministère de la Transition Écologique et Solidaire that the 1,500 MW threshold for the support mechanism for 2016 or 2016 FiP would soon be reached. Once the volume exceeds 1,800 MW (notified volume of 1,500 MW plus 20%), the support would likely be qualified as new support. This would apply to the 51 MW Moulins du Lohan project’s FiP. In light of this notification and ongoing litigation (note 23, Commitments and contingencies ) that caused the interruption of construction work on the wind farm (litigation pending before the Conseil d'État), impairment losses of $18 million (€12 million) on Property, plant and equipment and $33 million (€22 million) on Intangible assets have been recognized to write down the carrying amount of assets to their recoverable amount. The Corporation has maintained a $17 million (€12 million) portion of the value of assets under construction and land as it intends to submit this project under upcoming requests for proposals in France. This situation applies only to the Moulins du Lohan project.

Note 16. Financing costs

Note 16. Financing costs
	Note	2020	2019
Interest on non-current debt, net of the impact of interest rate swaps		102	112
Interest on lease liabilities	7	8	7
Refinancing of term loans - net impact	(a)	(12)	13
Amortization of borrowing costs	9	15	5
Interest on convertible debentures		—	6
Other		3	4
		116	147
Interest capitalized toqualifyingassets	(b)	(3)	(4)
		113	143

(a) In 2020, following refinancing of NRWF debt, a $12 million gain was recorded on debt modification. As part of refinancing in France, deferred financing costs related to the former debt as well as net non-recurring financing costs were expensed for a total amount of $13 million in 2019.

(b) The weighted average annual rate for the capitalization of borrowing costs under qualifying assets was 4.84% per annum (3.91% in 2019).

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Note 17. Net earnings (loss) per share

(a) Net earnings (loss) per share – basic

Note 17. Net earnings (loss) per share (a) Net earnings (loss) per share – basic
(in millions of Canadian dollars, unless otherwise specified)	2020	2019
Net earnings(loss)attributable to shareholders of Boralex	55	(39)
Weighted average number of shares - basic	98,547,826	90,604,799
Net earnings(loss) per share attributable to shareholders of Boralex - basic	$0.55	($0.43)

(b) Net earnings (loss) per share – diluted

(b) Net earnings (loss) per share – diluted
(in millions of Canadian dollars, unless otherwise specified)	2020	2019
Net earnings(loss)attributable to shareholders of Boralex - diluted	55	(39)
Weighted average number of shares - basic	98,547,826	90,604,799
Dilutive effect of stock options	120,295	—
Weighted average number of shares - diluted	98,668,121	90,604,799
Net earnings(loss) per share attributable to shareholders of Boralex - diluted	$0.55	($0.43)

The table below shows the items that could dilute basic net earnings (loss) per common share in the future, but that were not reflected in the calculation of diluted net earnings (loss) per common share due to their anti-dilutive effect:

	2020	2019
Stock options excluded due to their anti-dilutive effect	—	312,213

Note 18. Change in non-cash items related to operating activities

	2020	2019
Decrease (increase) in:
Trade and other receivables	25	(12)
Other current assets	(13)	—
Increase (decrease) in:
Trade and otherpayables	12	(4)
	24	(16)

Note 19. Statement of cash flows

Note 19. Statement of cash	flows
	As at December 31, 2020
Balance – beginning ofyear Cash	Non-cash items
	Business acquisitions (note 5) Additions Translation adjustment Amortization Imputed interest Other items(3) Balance – end ofyear
Debt(1) 3,067 (99) 435 — 79 15 1 18 3,516 Lease liabilities(2) 208 (11) 23 32 4 — — — 256 Derivative financial instruments 3 (9) 13 — — — — 76 83
3,278(119) 471 32 83 15 1 94 3,855

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Note 19. Statement of cash flows (cont’d)

As at December 31, 2019

	2019
Balance – beginning of year Cash Additions	Non-cash items Share issuance Translation adjustment Amortization Imputed interest Other items(3) Balance – end ofyear
Debt(1) 3,271 (103) — Lease liabilities(2) 207 (10) 12 Convertible debentures 140 (8) — Derivative financial instruments 17 (22) —	— (91) 4 1 (15) 3,067 — (3) — — 2 208 (134) — 1 1 — — — — — — 8 3
3,635 (143) 12	(134) (94) 5 2 (5) 3,278

(1) Including Debt and Current portion of debt .

(2) Including Lease liabilities and Current portion of lease liabilities .

(3) Mainly including debt related transaction costs and changes in fair value of derivative financial instruments.

Note 20. Financial instruments

The table of financial instruments, complete with their respective carrying amounts and fair values, is as follows:

Note		As at December 31,	As at December 31, 2019
		2020
	Carrying amount	Fair value	Carrying amount Fair value
OTHER CURRENT FINANCIAL ASSETS
Cross-currency swaps (EUR for CAD) Foreign exchange forward contracts(EUR for CAD)	— —	— 16 16 — 1 1
	—	— 17 17
OTHER NON-CURRENT FINANCIAL ASSETS Advance to a non-controlling shareholder Reserve funds Interest rate swaps	29 34 7	29 37 39 34 15 15 7 15 15
Options topurchase apartner's interests 10	—	—	9 9
	70	70	76 78
OTHER CURRENT FINANCIAL LIABILITIES
Cross-currencyswaps(USD for CAD)	—	— 3 3
DEBT(1) 9	3,516	3,703 3,067 3,264
OTHER NON-CURRENT FINANCIAL LIABILITIES Interest rate swaps Amount due to a non-controlling shareholder 5 Cross-currency swaps (EUR for CAD) Foreign exchange forward contracts (EUR for CAD)	82 6 8 —	82 31 31 7 6 6 8 — — — 1 1
Contingent consideration	4	4	— —
	100	101 38 38

(1) Includes Debt and Current portion of debt.

The fair value of a financial instrument is the amount of consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act.

The fair values of cash and cash equivalents, restricted cash, trade and other receivables as well as trade and other payables approximate their carrying amounts due to their short-term maturities or high liquidity.

The fair value of reserve funds is equivalent to their carrying amounts as they bear interest at market rates.

122 | BORALEX - 2020 Annual Report

Note 20. Financial instruments (cont’d)

The fair values of the advance to a non-controlling shareholder, options to purchase a partner’s interests, contingent consideration, debt and the amount due to a non-controlling shareholder are essentially based on discounted cash flows. Discount rates, ranging from 0.42% to 7.51% (1.10% to 8.00% as at December 31, 2019), were determined based on local government bond yields adjusted for the risks specific to each of the borrowings and for credit market liquidity conditions.

Interest rate swaps

Cash flows are discounted using a curve that reflects the credit risk of the Corporation or the counterparty, as applicable. The following table summarizes the Corporation’s commitments under interest rate swaps:

As at December 31,
2020	Currency	Fixed-ratepayer	Floating-rate receiver	Maturity	Current notional (in CAD)	Fair value (in CAD)
Interest rate swaps	EUR	-0.16% to 1.79%	3-month EURIBOR	2030-2039	1,045	(46)
Interest rate swaps	USD	1.01%	3-month USD LIBOR	2046	166	2
Interest rate swaps	CAD	1.12% to 2.68%	3-month CDOR	2025-2043	1,060	(31)
As at December 31,
2019	Currency	Fixed-ratepayer	Floating-rate receiver	Maturity	Current notional (in CAD)	Fair value (in CAD)
Interest rate swaps	EUR	-0.16% to 1.79%	3 month EURIBOR	2030-2039	1,069	(27)
Interest rate swaps	CAD	1.81% to 2.68%	3-month CDOR	2034-2043	753	11

Foreign exchange forward contracts

The fair values of foreign exchange forward contracts are determined using a generally accepted technique, namely the discounted value of the difference between the value of the contract at expiry calculated using the contracted exchange rate and the value determined using the exchange rate the financial institution would use if it renegotiated the same contract under the same conditions as at the statement of financial position date. Discount rates are adjusted for the credit risk of the Corporation or of the counterparty, as applicable. When determining credit risk adjustments, the Corporation considers offsetting agreements, if any.

offsetting agreements, if any.
As at December 31,
2019	Exchange rate	Maturity	Current notional (in CAD)	Fair value (in CAD)
Foreign exchange forward contracts(EUR for CAD)	1.5475	2020-2025	93	—

Cross-currency swaps

The Corporation also entered into cross-currency swaps. These derivatives mainly cover the Corporation’s net investment in France, as they allow financing issued in Canada for investment in France to be synthetically translated into euros. In addition to mitigating the risk related to foreign currency fluctuations, these instruments also allow Boralex to currently benefit in part from interest rates lower than those prevailing in Europe. The Corporation can also enter into similar transactions pertaining to US dollars. These short-term transactions provide access to lower interest rates on drawdowns under the revolving credit facility. To measure the fair value of these instruments, the Corporation uses a technique that is a combination of the techniques used to measure the fair value of interest rate swaps and foreign exchange forward contracts.

As at December 31,
2020	Exchange rate	Maturity	Current notional (in CAD)	Fair value (in CAD)
Cross-currencyswaps(EUR for CAD)	1.5324	2023	472	(8)
As at December 31,
2019	Exchange rate	Maturity	Current notional (in CAD)	Fair value (in CAD)
Cross-currency swaps (EUR for CAD)	1.5071	2020	479	16
Cross-currencyswaps(USD for CAD)	1.3171	2020	245	(3)

123 | BORALEX - 2020 Annual Report

Note 20. Financial instruments (cont’d)

Hierarchy of financial assets and liabilities measured at fair value

Financial instruments measured at fair value in the financial statements are classified according to the following hierarchy of levels:

• Level 1 Consists of measurements based on quoted prices (unadjusted) in markets for identical assets or liabilities;

• Level 2 Consists of measurement techniques based mainly on inputs, other than quoted prices, that are observable h9hh either directly or indirectly in the market;

• Level 3 Consists of measurement techniques that are not based mainly on observable market data.

The level in the fair value hierarchy within which the fair value measurement is categorized in its entirety is to be determined on the basis of the lowest level input that is significant to the financial instrument fair value measurement in its entirety.

For debt, interest rate swaps, foreign exchange forward contracts and cross-currency swaps, the Corporation classified the fair value measurements as Level 2, as they are based mainly on observable market data, namely government bond yields, interest rates and exchange rates.

For contingent consideration, the advance to a non-controlling shareholder and the amount due to a non-controlling shareholder, the Corporation classified fair value measurements as Level 3 because they are based on unobservable market data, namely the probability of achieving certain project development or cash flow milestones determined using project entity data.

For the options to purchase a partner’s interests, the Corporation classified fair value measurements as Level 3 because they are primarily based on power production and selling prices upon expiry of the energy sales contract and other unobservable market data. The fair value of these options was determined based on the future cash flows generated by the projects to which a Monte-Carlo simulation was applied to factor in the uncertainty pertaining to production.

The following table classifies the Corporation’s financial instruments by level in the fair value hierarchy:

	Fair value hierarchy levels
	As at December 31, 2020 Level 1 Level 2 Level 3
NON-DERIVATIVE FINANCIAL ASSETS Advance to a non-controllingshareholder	29 — — 29
	29 — — 29
DERIVATIVE FINANCIAL ASSETS Interest rate swaps	7 — 7 —
	7 — 7 —
NON-DERIVATIVE FINANCIAL LIABILITIES Debt(1) Amount due to a non-controllingshareholder	3,703 — 3,703 — 7 — — 7
	3,710 — 3,703 7
DERIVATIVE FINANCIAL LIABILITIES Interest rate swaps Cross-currency swaps (EUR for CAD) Contingent consideration	82 — 82 — 8 — 8 — 4 — — 4
	94 — 90 4

(1) Includes Debt and Current portion of debt.

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Note 20. Financial instruments (cont’d)

	Fair value hierarchy levels
	As at December 31, 2019 Level 1 Level 2 Level 3
NON-DERIVATIVE FINANCIAL ASSETS Advance to a non-controllingshareholder	39 — — 39
	39 — — 39
DERIVATIVE FINANCIAL ASSETS Cross-currency swaps (EUR for CAD) Interest rate swaps Options to purchase a partner’s interests Foreign exchange forward contracts(EUR for CAD)	16 — 16 — 15 — 15 — 9 — — 9 1 — 1 —
	41 — 32 9
NON-DERIVATIVE FINANCIAL LIABILITIES Debt(1) Amount due to a non-controllingshareholder	3,264 — 3,264 — 6 — — 6
	3,270 — 3,264 6
DERIVATIVE FINANCIAL LIABILITIES Interest rate swaps Cross-currency swaps (USD for CAD) Foreign exchange forward contracts(EUR for CAD)	31 — 31 — 3 — 3 — 1 — 1 —
	35 — 35 —

(1) Includes Debt and Current portion of deb t.

The financial instrument classified as Level 3 which is measured at fair value through profit or loss has changed as follows:

		Options to
		purchase a	Contingent
	Note	partner’s interests	consideration
Balance as at January 1, 2019		15	—
Changes in fair value		(6)	—
Balance as at December 31, 2019	10	9	—
Reversal following the acquisition of the partner's interests	5	(9)	—
Business combination	5	—	4
Balance as at December 31, 2020		—	4

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Note 21. Financial risks

The Corporation is exposed in the normal course of business to various financial risks: market risk (including foreign exchange risk, price risk and interest rate risk), credit risk and liquidity risk.

Market risk

Foreign exchange risk

The Corporation generates foreign currency liquidity through the operation of its power stations in France and the United States. The Corporation benefits from partial natural coverage from this risk exposure, as revenues, expenses and financing are in the local currency. Accordingly, foreign exchange risk arises particularly from the residual liquidity that can be distributed to the parent company.

In France, given the above, the Corporation entered into cross-currency swaps. These derivatives cover the Corporation's net investment in France, as they allow financing issued in Canada for investment in France to be synthetically translated into euros. In addition, to mitigate the risk related to foreign currency fluctuations, these instruments also allow Boralex to benefit in part from lower interest rates prevailing in Europe. To measure the fair value of these instruments, the Corporation uses a technique that is a combination of the techniques used to measure interest rate swaps and foreign exchange forward contracts.

Management considers that the cash flows generated in the United States do not represent a significant risk at present. A hedging strategy could be developed in due course.

In connection with Canadian project development, certain future expenditures may be in foreign currencies. For example, certain equipment purchases in Canada are partly denominated in euros or U.S. dollars. Where applicable, the Corporation’s objective is to protect its anticipated return on its investment by entering into hedging instruments to reduce volatility in expected expenditures and, in turn, stabilize significant costs such as those for turbines.

On December 31, 2020, a $0.05 fall in the Canadian dollar against the U.S. dollar, assuming that all other variables had remained the same, would have led to a $0.3 million increase in the Corporation’s net earnings for the year ended December 31, 2020 ($0.2 million increase in net loss in 2019) and to a $4.2 million after-tax decrease in Accumulated other comprehensive income (deterioration of $4.4 million in 2019).

On December 31, 2020, a $0.05 fall in the Canadian dollar against the euro, assuming that all other variables had remained the same, would have led to a $0.8 million decrease in the Corporation’s net earnings for the year ended December 31, 2020 ($1.7 million decrease in net loss in 2019) and to a $0.6 million after-tax decrease in Accumulated other comprehensive income (deterioration of $0.6 million in 2019).

Price risk

As at December 31, 2020, substantially all of the French and Canadian power stations and two power stations in the United States had long-term energy sales contracts, the vast majority of which were subject to partial or full indexation clauses tied to inflation. Consequently, only 2% of Boralex’s net installed capacity is exposed to price risk at present. Energy prices vary according to supply, demand and certain external factors, including weather conditions, and the price from other sources of power. As a result, prices may fall too low for the power stations to yield an operating profit.

On December 31, 2020, a 5% fall in the price of energy, assuming that all other variables had remained the same, would have led to a $0.2 million decrease in Corporation’s net earnings for the year ended December 31, 2020 (deterioration of $0.2 million in 2019) while Accumulated other comprehensive loss would have remained unchanged (nil in 2019).

Interest rate risk

A large portion of debt bears interest at variable rates. To mitigate interest rate risk, the Corporation has entered into interest rate swaps to fix the interest rate on the portion of the corresponding variable rate debt. These agreements involve the periodic exchange of interest payments without any exchange of the notional amount on which payments are calculated. Since credit is drawn gradually and the loans are periodically repaid following site commissioning, the swaps have been structured to mirror the terms of the underlying credit arrangements and to always cover a significant portion of the arrangements.

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Note 21. Financial risks (cont'd)

As at December 31, 2019, substantially all of these financial instruments were subject to hedge accounting. Accordingly, unrealized gains and losses resulting from changes in the fair value of the effective portion of these contracts are included in Accumulated other comprehensive loss until the corresponding hedged item is recognized in earnings (loss). They are then recognized in earnings as an adjustment to Financing costs .

The impact of interest rate swaps on the Corporation’s financial position and performance were as follows:

		2020	2019
Net fair value		(83)	(16)
Unfavourable fair value		(90)	(27)
Favourable fair value		7	11
Notional		2,271	1,822
Interest rate swaps	EUR	1,045	1,069
Interest rate swaps	USD	166	—
Interest rate swaps	CAD	1,060	753
Maturity		2023-2046	2030-2043
Sensitivity
0.25% increase in interest rates (Net earnings (loss) impact)		(1)	(1)
0.25% increase in interest rates (Accumulated other comprehensive income
(loss) impact)		28	20
Consolidated impacts
Reduction in the proportion of variable rate debt		78%-13%	80%-10%
Covered debt proportion	EUR	71%-90%	87%-90%
	CAD	85%-95%	83%-95%
Receiver rate	EUR	3-month EURIBOR	3 month EURIBOR
	USD	3-month LIBOR	—
	CAD	3-month CDOR	3-month CDOR
Payer rate	EUR	-0.16% to 1.79%	-0.16% to 1.79%
	USD	1.01 %	—
	CAD	1.12% to 2.68%	1.81% to 2.68%

Credit risk

Credit risk stems primarily from the potential inability of clients to meet their obligations. Given the nature of the Corporation’s business, its clients are few in number. However, they generally have high credit ratings. The electricity markets that the Corporation serves in Canada and France are limited to very large corporations or monopolies. Steam generated in France is used in the paper-making process. Accordingly, the Corporation’s client is in the private sector, which makes for a higher credit risk. The U.S. market is more deregulated, and the Corporation transacts some business through the New York State regional producers’ association, NYISO, which enjoys a very high credit rating. In the U.S. market, the Corporation can also negotiate private agreements directly with electricity distributors, usually large corporations which typically have investment grade credit ratings. The Corporation regularly monitors the financial position of these clients.

The Corporation’s counterparties for derivative financial instruments, as well as cash and cash equivalents and restricted cash, consist mainly of large corporations. Before entering into a derivative transaction, the Corporation analyzes the counterparty’s credit rating and assesses the overall risk based on the counterparty’s weighting in the Corporation’s portfolio.

Where these analyses produce unfavourable results because the partner’s credit rating has changed significantly or its portfolio weighting has become too high, the Corporation does not pursue the transaction. Furthermore, if a company does not have a public credit rating, the Corporation assesses the risk and may require financial guarantees.

127 | BORALEX - 2020 Annual Report

Note 21. Financial risks (cont'd)

Liquidity risk

Liquidity risk is the risk that the Corporation will experience difficulty meeting its obligations as they fall due. The Corporation has a Treasury Department in charge, among other things, of ensuring sound management of available cash resources, of securing financing and meeting maturity obligations for all of the Corporation’s activities. With senior management oversight, the Treasury Department manages the Corporation’s cash resources based on financial forecasts and expected cash flows.

The contractual maturities of the Corporation’s non-derivative financial liabilities and derivative financial instruments as at December 31, 2020 and 2019 are detailed in the following tables:

As at December 31, 2020 Carrying amount	Undiscounted cash flows(principal and interest)
	Year 1 Year 2 Years 3 to 5 Over 5years Total
Non-derivative financial liabilities: Trade and other payables 161 Debt 3,516 Lease liabilities 256 Derivative financial instruments: Financial swaps – interest rates 75 Cross-currencyswaps(EUR for CAD) 8	161 — — — 161 344 399 1,344 3,505 5,592 19 20 55 261 355 24 21 38 (1) 82 (3) (4) 16 — 9
4,016	545 436 1,453 3,765 6,199
As at December 31, 2019 Carrying amount	Undiscounted cash flows(principal and interest)
	Year 1 Year 2 Years 3 to 5 Over 5years Total
Non-derivative financial liabilities: Trade and other payables 118 Debt 3,067 Lease liabilities 208 Derivative financial instruments: Financial swaps – interest rates 31 Cross-currency swaps (USD for CAD) 3 Foreign exchange forward contracts 1	118 — — — 118 268 296 1,147 2,340 4,051 16 16 46 198 276 7 8 13 (2) 26 3 — — — 3 — — 1 1 2
3,428	412 320 1,207 2,537 4,476

Undiscounted cash flows of non-derivative financial liabilities are determined using expected principal repayments and interest payments. Undiscounted cash flows of derivatives are determined using the values of underlying indices at the balance sheet reporting date. Since these indices are highly volatile, the undiscounted cash flows presented could vary significantly until realized.

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Note 22. Capital management

The Corporation’s objectives when managing capital are as follows:

• Safeguard the Corporation’s ability to pursue its operations and development;

• Maintain financial flexibility to enable the Corporation to seize opportunities when they arise;

• Safeguard the Corporation’s financial flexibility with a view to offsetting the seasonal nature of its operations primarily for the cyclical variations in hydroelectric and wind power generation;

• Maximize the terms of borrowings in line with the useful lives of its assets or underlying contracts;

• Ensure continuous access to capital markets; and

• Diversify its financing sources to optimize its capital cost.

The Corporation manages its capital structure and makes adjustments to it in light of changes in economic conditions and the risk characteristics of the underlying assets. In order to maintain its capital structure, the Corporation prioritizes the use of less costly financing sources, such as cash flows from operations, borrowings, hybrid instruments such as convertible debentures, equity issuance and, as a last resort, the sale of assets. In managing liquidity, the Corporation’s policy is to earmark in priority its available cash resources for (i) growth projects and (ii) the payment of a quarterly dividend. Generally, Boralex expects to pay common share dividends on an annual basis representing a ratio of 40% to 60% of its discretionary cash flows (defined as “net cash flows related to operating activities” before changes in “non-cash items related to operating activities,” less (i) distributions paid to non-controlling interests, (ii) additions to property, plant and equipment (maintaining operations), and (iii) repayments on non-current debt (projects); (iv) principal payments made related to lease liabilities, (v) adjustments for temporary or non-recurring elements not related to current operations to maintain a comparable ratio between periods; plus (vi) development costs (from the statement of earnings (loss)).

The Corporation’s investment policy governing cash resources is limited to investments with maturities of less than one year that are guaranteed by financial institutions. For instance, bankers’ acceptances guaranteed by a Canadian chartered bank meet these criteria. The Corporation deems its current financing sources to be sufficient to support its plans and its operating activities.

The Corporation monitors its capital on a quarterly and annual basis based on various financial ratios and non-financial performance indicators. It is also required to meet certain ratios under its non-current financial commitments. More specifically, the Corporation must meet ratios pertaining to debt coverage, debt service and interest coverage in relation to the measures specified in the respective credit agreements.

financial commitments.

The Corporation’s capital management objectives have remained unchanged from the previous year. The Corporation relies mainly on the net debt ratio for capital management purposes. Cash and cash equivalents available are also a key factor in capital management, as the Corporation must retain sufficient flexibility to seize potential growth opportunities. To achieve this objective, the Corporation establishes long-term financial forecasts to determine future financing requirements in line with its strategic business development plans.

For calculation purposes, net debt is defined as follows:

For calculation purposes, net debt is defined as follows:
	As at December 31, As at December 31, 2020 2019
Debt Current portion of debt Borrowing costs, net of accumulated amortization Less: Cash and cash equivalents Restricted cash	3,287 2,895 229 172 93 82 275 153 2 15
Net debt	3,332 2,981

129 | BORALEX - 2020 Annual Report

Note 22. Capital management (cont'd)

The Corporation defines total market capitalization as follows:

The Corporation defines total market capitalization as follows:
(in millions of Canadian dollars, unless otherwise specified)	As at December 31, As at December 31, 2020 2019
Number of outstanding shares (in thousands) Share marketprice(in $per share)	102,617 96,464 47.24 24.46
Market value of equity attributable to shareholders Non-controlling shareholders Net debt	4,848 2,360 2 15 3,332 2,981
Total market capitalization	8,182 5,356

The Corporation computes the net debt to market capitalization ratio as follows:

The Corporation computes the net debt to market capitalization ratio as follows:
	As at	As at
	December 31,	December 31,
(in millions of Canadian dollars)	2020	2019
Net debt	3,332	2,981
Total market capitalization	8,182	5,356
NET DEBT RATIO(market capitalization)	41 %	56 %

At present, the net debt to capitalization ratio stands at 41% and the Corporation wishes to maintain this ratio below 65%. It is important to specify that the Corporation uses a project-based financing approach whereby each project leverage is maximized up to nearly 80% of amounts invested. However, those financing arrangements are generally repayable over the life of the contract. Consequently, as other projects or large projects are added, the debt level could increase above this target but the Corporation would ensure to reduce the ratio below the set threshold within a reasonable time frame.

130 | BORALEX - 2020 Annual Report

Note 23. Commitments and contingencies

Note	Payments	Payments
	Current portion From 1 to 5years Over 5years	Total
Purchase and construction contracts (a) Maintenance contracts (b) Contingent consideration (c) Other (d)	82 3 — 28 74 74 10 16 — 6 11 25	85 176 26 42
	126 104 99	329

(a) Purchase and construction contracts

The Corporation has entered into turbine purchase, construction and grid connection contracts for projects under development.

(b) Maintenance contracts

The Corporation has entered into wind turbine maintenance contracts with initial terms of 15 years in Canada and from two to 20 years in France.

(c) Contingent consideration

Upon completion of certain phases in the development of projects acquired, Boralex will be required to pay these amounts to the seller.

(d) Other commitments

The Corporation is bound by First Nations royalty and community agreements expiring between 2036 and 2059. The community agreements include clauses relating to the preservation of the natural habitat, use of roads and the community fund.

The Corporation is bound by royalty contracts and is subject to other variable conditional royalties related to the operation of its wind farms and hydroelectric power stations. The commitments table above does not include these amounts.

Energy sales contracts

The Corporation is committed to sell its power output under long-term contracts. Most of these contracts are subject to variable annual indexation. These contracts have the following characteristics:

		Contract term
Wind	Canada	2029 - 2059
	France	2021 - 2040
Hydroelectric	Canada	2023 - 2059
	United States	2034 - 2035

For secured projects, the Corporation has energy sales agreements for terms of 20 years. These contracts will take effect when the facilities are commissioned.

131 | BORALEX - 2020 Annual Report

Note 23. Commitments and contingencies (cont’d)

Contingencies

COVID-19 outbreak

The COVID-19 epidemic has resulted in governments worldwide enacting emergency measures to combat the spread of the coronavirus, including confinement, mandatory closure of various businesses considered non-essential under the circumstances and implementation of travel restrictions. These measures have caused material disruption to many businesses globally.

Current or future governmental restrictions and measures, and their impact on the financial stability of the Corporation’s suppliers and other counterparties, could have an adverse effect on the Corporation’s operating results and financial position. The procurement of equipment and spare parts, issuance of permits and other authorizations, launch of requests for proposals, negotiation and finalization of agreements or contracts with stakeholders or partners and the construction of assets under development could be delayed or suspended, which could adversely affect the Corporation’s development opportunities, operating results and financial position.

Since restrictions were enforced by authorities to combat COVID-19, Boralex implemented a crisis management plan for continuity of its business, considered essential in all the regions it operates. Administrative personnel have been working remotely since mid-March 2020 and we continue to support operations in their day-to-day needs and comply with the Corporation's different business and regulatory requirements.

The Corporation continues to monitor the evolution of COVID-19. The governmental restrictions and measures have not impacted the Corporation's revenues in a material way to date as its production has been maintained and is generally under contract at fixed and indexed prices with major government corporations.

Since the beginning of governmental restrictions, health measures have continued to evolve in regions where Boralex operates its assets and develops it projects. In line with applicable deconfinement policies and where possible, Boralex employees have gradually begun their return to the Corporation's offices and places of business while complying with the measures indicated by the various public health authorities. For now, current construction projects are going ahead as planned.

Lastly, different levels of government have mentioned that they intend to use renewable energy in their respective recovery plans.

France – Contingency

On September 16, 2016, the Corporation completed the acquisition of a portfolio of wind power projects of about 200 MW in France and Scotland, including the 51 MW Moulins du Lohan project in Brittany, France. The building permits had been obtained in 2014 from the Morbihan department administrative authorities (the “Administration”) and construction had already begun before the acquisition by the Corporation.

Project opponents had filed an interim application against the project on April 14, 2017 seeking to halt construction pending a decision of the courts regarding a petition for cancellation of the permits issued by the Préfet of Morbihan. Since then, construction has ceased amidst proceedings on the merits of the case. On July 7, 2017, the Administrative Tribunal of Rennes cancelled the authorizations for the Moulins du Lohan project based on its subjective risk assessment of landscape damage to the interests protected under the Environmental Code. The Corporation appealed the decision. The Administrative Court of Nantes ruled in favour of Boralex on March 5, 2019. In May 2019, the Société pour la protection des paysages et de l’esthétique de la France filed an appeal in cassation of these rulings of the Administrative Appeal Court of Nantes. A decision is expected from the Conseil d'État in 2021.

132 | BORALEX - 2020 Annual Report

Note 23. Commitments and contingencies (cont’d)

Canada – Contingencies

Local content

Under the energy sales contracts entered into with Hydro-Québec Distribution for its wind power projects, the Corporation’s project entities must comply with certain regional content requirements regarding the costs associated with wind farm turbines (the “regional content requirements”) and certain Québec content requirements regarding overall wind farm costs (collectively with the regional content requirements, the “local content requirements”). These requirements apply to all Québec wind power projects built by the Corporation’s project entities or other producers under requests for proposals issued from 2005 to 2009. Failure to comply with these requirements may result in penalties being imposed under these energy sales contracts.

‑ In accordance with customary practices, in circumstances where the compliance or non compliance with local content requirements under an energy sales contract primarily depends on the wind turbine manufacturer’s compliance, the Québec projects of Boralex had obtained a commitment from Enercon Canada inc. (“Enercon Canada”) to pay any associated penalties. Enercon Canada’s obligations under the wind turbine purchase contracts are guaranteed by its parent company, Enercon GmbH. There is a dispute between Hydro-Québec on one hand, and Enercon Canada and Enercon GmbH on the other hand, regarding in particular the costing calculation methodology for wind turbines and wind turbine components to be used to determine project compliance with regional content requirements.

In connection with this dispute, Hydro-Québec filed an originating application on April 18, 2019 with the Superior Court of Québec against Le Plateau Wind Power L.P. (a partnership operating the Le Plateau I wind farm in which the Corporation indirectly held 51% of the outstanding units at the time and holds 100% of the outstanding units as of November 30, 2020), Enercon Canada and Enercon GmbH to determine the applicable calculation methodology and to obtain documents in the possession of Enercon Canada and Enercon GmbH. The application also seeks to order the defendants, in solidum , to pay Hydro-Québec an amount of less than $1 million together with interest and additional indemnities. Hydro-Québec specifies that this amount represents the minimum penalty only, that is, the difference of one percentage point between the regional content requirements and the regional content actually achieved, and that this amount needs to be adjusted as it considers that the actual difference is greater than one percentage point.

Le Plateau Wind Power L.P. impleaded Enercon Canada and Enercon GmbH in warranty under the turbine purchase agreement, requiring Enercon Canada and Enercon GmbH to pay the applicable penalties. Moreover, Enercon contends that Invenergy Wind Canada Development ULC (“Invenergy”) failed to meet its obligations under a separate agreement, which constituted a quid pro quo for Enercon Canada in respect of its commitment to increase guaranteed regional content to 51%. In the circumstances, Invenergy made an application for voluntary intervention on the grounds of this allegation by Enercon. All actions filed will be dealt with simultaneously in order to settle the issue. In the event of non-payment, Hydro-Québec Distribution may exercise its right to offset any penalty against the amounts payable to Le Plateau Wind Power L.P. for the energy delivered by the wind farm in question, which would affect the revenues received by those wind farms until Enercon Canada and Enercon GmbH have paid the penalties in full. It should be noted that such amounts deducted by Hydro-Québec should be limited to an amount that would not cause a default on the payment under the facility's credit agreement. Based on the above information and at this stage of the matter, the Corporation is not able to determine the eventual outcome of this dispute or to reliably estimate the amount of penalties to be claimed due to the preliminary stage of the matter. However, in the Corporation’s opinion, it is not likely that it would be subject to significant penalties, if any, under these energy sales contracts. Accordingly, no contingent loss has been recognized with respect to this contingency in the consolidated statements of earnings.

Canada – DM I

On March 31, 2016, an application for authorization of a class action against DM I and Hydro-Québec was granted.

According to the plaintiffs, the DM I project (i) causes abnormal neighbourhood disturbances during the construction and operation period, including traffic, dust, pollution, continuous noise, vibrations and strobe effects, presence of flashing and visible red lights from their residences, negative consequences on the landscape, moving shadows and health consequences, (ii) negatively affects the value of their properties and (iii) is an intentional infringement of their rights, including their right to property.

The plaintiffs, on behalf of the members of the class, are seeking (i) compensatory damages for the alleged abnormal annoyances suffered during the construction and operation period, (ii) punitive damages for the alleged intentional infringement of their rights, and (iii) the destruction of all wind turbines that have already been built less than three kilometres from a residence. Claims arising from an eventual judgment in favour of the plaintiffs could be paid in whole or in part by the insurers, depending on their nature and taking into account the exclusions set out in the insurance policy. Based on this information, the Corporation assessed that the outcome of this class action is not expected to have a material impact on the Corporation’s financial position. Accordingly, no provision has been recorded for this contingency.

133 | BORALEX - 2020 Annual Report

Note 24. Related party transactions

Related parties include the Corporation’s subsidiaries, affiliates, Joint Ventures, key management personal and principal shareholders. Excluding the acquisition of the Caisse's 49% interest in three wind farms in Québec, in which Boralex already held 51% (note 5), related party transactions were as follows:

held 51% (note 5), related party transactions were as follows:
	2020	2019
OTHER REVENUES
R.S.P. Énergie Inc. – Entity for which one of three shareholders is a director of the Corporation	1	1
Joint Ventures (“SDB I” and “SDB II”)	2	1
Joint Ventures (“DM I and II”, “LP I”, “LP II” and “Roncevaux”)	9	4
INTEREST INCOME
9710612 Canada Inc. (Six Nations) – Minority shareholder of a subsidiary	2	2
INTEREST EXPENSE
The Caisse – Shareholder of the Corporation	17	16
RENTAL EXPENSE
Ivanhoé Cambridge – Subsidiaryof the Caisse	1	—

These transactions were made on terms equivalent to those that prevail under normal terms in arm’s length transactions.

Balance sheet amounts comprising transactions between related parties are as follows:

	As at	As at
	December 31,	December 31,
	2020	2019
RELATED PARTY ACCOUNTS RECEIVABLE
Joint Ventures (“SDB I and SDB II)	1	1
Joint Ventures and associates (“DM I and II”, “LP I”, “LP II” and “Roncevaux”)	—	5
RELATED PARTY LONG-TERM ADVANCES
9710612 Canada Inc. (Six Nations) – Minority shareholder of a subsidiary	29	37
RELATED PARTY ACCOUNTS PAYABLE
Nordex Employee Holding GmbH – Minority shareholder of a subsidiary	7	7
The Caisse – Main shareholder of the Corporation	312	308
RELATED PARTY OTHER LIABILITIES
Ivanhoé Cambridge – Subsidiary of the Caisse – Lease liabilities	10	11
The Caisse – Main shareholder of the Corporation – Contingent consideration	4	—

Executive compensation

Compensation allocated to senior executives and to members of the Board of Directors is detailed in the following table:

	2020	2019
Current salaries and benefits	3	2
Other long-term benefits	7	3
	10	5

134 | BORALEX - 2020 Annual Report

Note 25. Segmented information

The Corporation’s operations are grouped into four distinct operating segments – wind, hydroelectric, thermal and solar power. The Corporation operates under one identifiable industry sector: power generation. The classification of these segments is based on the different cost structures relating to each of the four types of operating activities. The same accounting rules are used for segmented information as for the consolidated financial statements.

The operating segments are presented according to the same criteria used to prepare the internal report submitted to the segment leader, who allocates resources and assesses operating segment performance. The President and Chief Executive Officer is considered the segment leader, who assesses segment performance based on power production, revenues from energy sales and feed-in premium and EBITDA(A).

EBITDA(A) represents earnings before interest, taxes and amortization, adjusted to exclude other items such as acquisition costs, other gains, net loss (net gain) on financial instruments and foreign exchange loss (gain), the last two items being included under Other. EBITDA(A) does not have a standardized meaning under IFRS; accordingly, it may not be comparable to similarly named measures used by other companies. Investors should not view EBITDA(A) as an alternative measure to, for example, net earnings, or as a measure of operating results, which are IFRS measures.

A reconciliation of IFRS data with data compiled on a Combined basis is also presented where the results of the Interests in the Joint Ventures and associates (“Interests”) are accounted for according to the ownership interest. Management considers this information to be useful information for investors, as it is used to assess the Corporation’s performance. For more details, see the Interests in the Joint Ventures and associates section in note 3. Significant accounting policies to these financial statements.

EBITDA and EBITDA(A) are reconciled to the most comparable IFRS measure, namely net earnings, and are presented in the following table.

		2020 2019
	IFRS	Reconciliation(1) Combined IFRS Reconciliation(1) Combined
Net earnings (loss) Income tax expense (recovery) Financing costs Amortization Impairment	61	(5) 56 (43) — (43) (1) 4 (5) — (5) 34 147 143 36 179 47 284 244 55 299 — 7 55 — 55
	5
	113 237
	7
EBITDA	423	75 498 394 91 485
Adjustments: Acquisition costs Other gains Excess of distributions received over the share in net earnings of Joint Venture SDB I Loss on deemed disposal of interests in the Joint Ventures Other		— 4 — — — (2) (3) (1) (2) (3) 6 — — — — — 7 — — — — 7 9 1 10
	4
	(1)
	(6)
	7
	7
EBITDA(A)	434	79 513 402 90 492

(1) Includes the respective contribution of Joint Ventures and associates as a percentage of Boralex's interest, less adjustments to reverse recognition of these interests under IFRS .

135 | BORALEX - 2020 Annual Report

Note 25. Segmented information (cont’d)

Information on principal clients

Revenues are allocated according to the client’s country of domicile. In 2020 and 2019, the Corporation had three clients accounting for 10% or more of its revenues.

The tables below show the respective percentage of consolidated revenues from each of these clients as well as the segments in which they operate:

in which they operate:
2020	2019
% of sales attributable to one client Segments % of sales attributable to one client Segments
49 Wind, thermal and solar 47 Wind, thermal and solar 16 Wind, hydroelectric and thermal 15 Wind, hydroelectric and thermal 19 Wind,hydroelectric and solar 20 Wind

Energy produced by only five hydroelectric power stations in the United States and three wind farms in France and Canada, which account for 1% of Boralex’s total installed capacity, is sold at market prices, which are more volatile. For the year ended December 31, 2020, revenues from energy sales for facilities not covered by energy sales contracts amounted to $4 million ($6 million for the same period of 2019). The Corporation estimates that only 368 MW (15% of installed capacity or 11% of expected current production) covered by contracts expiring December 2025 will then be sold at market prices if new contracts have not been negotiated beforehand.

have not been negotiated beforehand.
		2020 2019
	Canada	France and other(1)	United States Total Canada France and other(1) United States Total
Power production (GWh) Wind power stations NRWF compensation			— 3,613 1,153 2,106 — 3,259 — 181 175 — — 175
	1,275 181	2,338 —
Hydroelectric power stations Thermal power stations Solarpower stations	1,456 409 135 —	2,338 — 31 21	— 3,794 1,328 2,106 — 3,434 337 746 289 — 467 756 — 166 127 31 — 158 — 21 1 22 — 23
	2,000	2,390	337 4,727 1,745 2,159 467 4,371
Revenues from energy sales and feed-in premium Wind power stations Hydroelectric power stations Thermal power stations Solarpower stations	210 40 14 —	316 — 11 5	— 526 195 276 — 471 23 63 29 — 31 60 — 25 14 14 — 28 — 5 — 5 — 5
	264	332	23 619 238 295 31 564
EBITDA(A) Wind power stations Hydroelectric power stations Thermal power stations Solar power stations Corporate and eliminations	210 30 1 — (37)	254 — 1 5 (37)	— 464 187 225 — 412 15 45 21 — 23 44 — 2 5 2 — 7 (2) 3 — 4 — 4 (6) (80) (24) (36) (5) (65)
	204	223	7 434 189 195 18 402
Additions to property, plant and equipment Wind power stations Hydroelectric power stations Thermal power stations Solar power stations Corporate			— 124 22 89 — 111 — 12 34 — 1 35 — — 1 1 — 2 2 3 — — 4 4 — 6 2 5 — 7
	—	124
	12	—
	— —	— 1
	6	—
	18	125	2 145 59 95 5 159

(1) United Kingdom and Denmark.

136 | BORALEX - 2020 Annual Report

Note 25. Segmented information (cont’d)

	As at December 31 As at December 31 2020 2019
	Canada France and other(1) United States Total Canada France and other(1) United States Total
Total assets Wind power stations Hydroelectric power stations Thermal power stations Solar power stations Corporate	2,441 2,082 — 4,523 1,878 1,854 — 3,732 426 — 155 581 437 — 168 605 14 11 — 25 18 15 — 33 2 32 24 58 2 30 11 43 39 64 24 127 54 53 37 144
	2,922 2,189 203 5,314 2,389 1,952 216 4,557
Non-current assets(2) Wind power stations Hydroelectric power stations Thermal power stations Solar power stations Corporate	2,251 1,835 — 4,086 1,568 1,685 — 3,253 408 — 152 560 417 — 163 580 8 6 — 14 10 10 — 20 1 28 15 44 1 28 4 33 28 20 16 64 29 28 15 72
	2,696 1,889 183 4,768 2,025 1,751 182 3,958
Total liabilities Wind power stations Hydroelectric power stations Thermal power stations Solar power stations Corporate	1,972 1,591 — 3,563 1,424 1,401 — 2,825 140 — 96 236 151 — 105 256 5 3 — 8 4 3 — 7 — 3 4 7 — 4 — 4 411 88 10 509 511 73 6 590
	2,528 1,685 110 4,323 2,090 1,481 111 3,682

(1) United Kingdom and Denmark.

(2) Excludes Interests in the Joint Ventures and associates.

Reconciliation	2020 2019
	IFRS Reconciliation(1) Combined IFRS Reconciliation(1) Combined
	Canada Total Canada Total
Power production (GWh)(2) Wind power stations(2) Revenues from energy sales and feed-in premium Wind power stations EBITDA(A) Wind power stations Additions to property, plant and equipment Windpower stations	4,727 1,107 5,834 4,371 1,173 5,544 3,794 1,107 4,901 3,434 1,173 4,607 619 119 738 564 123 687 526 119 645 471 123 594 434 79 513 402 90 492 464 77 541 412 87 499 145 — 145 159 2 161 124 — 124 111 2 113

(1) Includes the respective contribution of Joint Ventures and associates as a percentage of Boralex's interest, less adjustments to reverse recognition of these interests under IFRS .

(2) Includes the compensation for the equivalent of 181 GWh in light of the power limitation imposed on the NRWF facility for fiscal 2020 (175 GWh for fiscal 2019).

137 | BORALEX - 2020 Annual Report

Note 26. Subsequent event

Acquisition of interests in seven solar power stations in the United States

On January 29, 2021 and as announced in December 2020, the Corporation acquired the majority interests in a portfolio of seven solar power stations in the United States for a cash consideration of $277 million (US$216.5 million), subject to adjustments provided for in the acquisition agreements. The Corporation's interest in these power stations in operation represents 209 MWac, while the interests acquired represent a net installed capacity of 118 MWac for Boralex. Five of the solar power stations are located in California, one in Alabama and the other in Indiana. They were commissioned between 2014 and 2017 and are covered by long-term power purchase agreements expiring between 2029 and 2046 with a weighted average remaining term of nearly 21.5 years. As at December 31, 2020 transaction costs amounted to $3 million.

At the same time as the acquisition, Boralex closed a long-term financing arrangement of $201 million (US$145 million). The loan interest rate is variable and is based on the LIBOR, plus a margin. The Corporation entered into an interest rate swap for this loan to cover approximately 90% of expected future interest cash flows. With this swap, the fixed portion of the rate is set at 2.51%. The loan, which covers about 71% of the acquisition price, will be amortized by quarterly payments over a 25year period.

The Corporation is currently assessing the fair value of net assets acquired and will publish the preliminary purchase price allocation with fiscal 2021 first quarter results.

138 | BORALEX - 2020 Annual Report