UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 15, 2014
ATLANTIC POWER CORPORATION
(Exact name of registrant as specified in its charter)
British Columbia, Canada |
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001-34691 |
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55-0886410 |
(State or other jurisdiction of
incorporation or organization) |
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(Commission File Number) |
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(IRS Employer Identification No.) |
One Federal Street, Floor 30
Boston, MA |
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02110 |
(Address of principal executive offices) |
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(Zip Code) |
(617) 977-2400
(Registrants telephone number, including area code)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(a) Departure of Directors; (b) Departure of Certain Officers; (c) Appointment of Certain Officers; (e) Compensatory Arrangements of Certain Officers
As further described below, after the close of business on September 15, 2014, Atlantic Power Corporation (the Company) appointed Kenneth Hartwick, 51, as Interim President and Chief Executive Officer (CEO) effective immediately, following the mutual agreement for Barry Welch to step down as President, CEO and a Director of the Company. Mr. Hartwick will remain a member of the Companys Board of Directors (the Board of Directors). He will not be a candidate for the permanent President and CEO position and will continue his role as a member of the Board of Directors following the appointment of a new President and CEO. The Board of Directors has commenced a process to identify and evaluate candidates to serve as the Companys next President and CEO and will promptly engage a leading executive search firm to assist in the process.
Mr. Hartwick has served as a member of the Board of Directors since October 2004 and has more than 15 years of management experience in the energy sector and 20 years of experience in the financial sector. Mr. Hartwicks experience in the energy industry spans several markets, and he recently served as President and CEO for Just Energy Group Inc., an integrated retailer of commodity products that sells to residential and commercial businesses, from June 2008 until April 2014.
The Company expects to enter into an employment agreement with Mr. Hartwick for his services as interim President and CEO once the terms of such compensation arrangements are finalized and will file an amendment to this Current Report on Form 8-K to report any additional information required by Item 5.02(c)(3) of Form 8-K within four business days after such information is determined or becomes available.
The Company expects to enter into a separation agreement with Mr. Welch once the terms of such agreement are finalized and will file a Current Report on Form 8-K to report any additional information required by Item 5.02 of Form 8-K within four business days after such information is determined or becomes available.
Item 7.01. Regulation FD Disclosure.
On September 16, 2014, the Company issued a press release (the Press Release), which is attached to this Current Report on Form 8-K as Exhibit 99.1. Also on September 16, 2014, the Company posted to its website materials entitled Supplementary Investor Materials, dated September 16, 2014, which materials are attached to this Current Report on Form 8-K as Exhibit 99.2.
Information on the Companys website is not incorporated by reference in this Current Report on Form 8-K. The information in this Item 7.01 and Exhibits 99.1 and 99.2 shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that Section, nor shall they be deemed incorporated by reference in any registration statement or other filing under the Securities Act of 1933, as amended (the Securities Act), or the Exchange Act, unless the Company expressly states that such information is to be considered filed under the Exchange Act or incorporates such information by specific reference in a Securities Act or Exchange Act filing.
Item 8.01. Other Events.
Also on September 16, 2014, the Company announced in the Press Release that as part of its previously announced strategic review process, it has concluded that a sale or merger of the Company is not in the best interests of the Company or its stakeholders at this time. The Company also announced a reduction in its dividend rate to Cdn$0.12 from Cdn$0.40 on an annual basis.
With the assistance of its external financial advisors, Goldman, Sachs & Co. and Greenhill & Co., LLC, the Companys Board of Directors conducted a thorough review of the options available to the Company with respect to a possible sale or merger. The Board of Directors has determined that the interests of the Company and its stakeholders are best served at this time by continuing to operate as an independent company and executing the
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Companys business plan, including the objectives of enhancing the value of its existing assets through optimization investments and commercial activities, delivering its balance sheet to improve both its cost of capital and ability to compete for new investments, and utilizing the Companys core competencies to create proprietary investment opportunities. In addition, the Company will continue to assess other potential options, including asset sales or the contribution of assets to a joint venture in order to raise additional capital for growth and/or debt reduction.
The Company intends to continue to allocate a portion of its Free Cash Flow (as defined by the Company) to optimization investments in its existing projects that are expected to produce attractive returns. As part of its commercial optimization efforts, the Company is proactively seeking extensions of existing power purchase agreements at several of its projects prior to their expiration dates in 2018 and later. The Company also intends to pursue external growth opportunities with accretive returns, to the extent available. The Company also intends to continue its efforts to reduce general and administrative and other corporate expenses.
As previously disclosed, the allocation of a significant portion of the Companys available cash flow to mandatory debt amortization reduces the amount of cash flow available for other corporate purposes. As part of the strategic review process, the Board of Directors, together with management, assessed the best uses of currently anticipated Free Cash Flow in order to meet the Companys objectives, including enhancing the value of existing assets, delivering its balance sheet to improve both its cost of capital and ability to compete for new investments, and providing a current return to its shareholders. After taking into consideration all of these objectives, the Board of Directors has determined to set a dividend level of Cdn$0.12 per share on an annual basis, equivalent to approximately US$13 million annually.
Going forward, the Company intends to pay dividends on a quarterly basis. As previously announced, the monthly dividend of Cdn$0.03333 declared August 15, 2014 will be paid September 30, 2014. The Company will then move to a quarterly dividend rate of Cdn$0.03, with the first quarterly dividend to be declared in November and paid at the end of December 2014. Dividends to shareholders are paid, if and when declared by, and subject to the discretion of, the Board of Directors.
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Cautionary Note Regarding Forward-Looking Statements
To the extent any statements made in this Current Report on Form 8-K contain information that is not historical, these statements are forward-looking statements or forward-looking information, as applicable, within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and under Canadian securities law (collectively forward-looking statements).
Forward-looking statements can generally be identified by the use of words such as should, intend, may, expect, believe, anticipate, estimate, continue, plan, project, will, could, would, target, potential and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Although the Company believes that the expectations reflected in such forward-looking statements are reasonable, such statements involve risks and uncertainties and should not be read as guarantees of future performance or results, and undue reliance should not be placed on such statements. Please refer to the factors discussed under Risk Factors and Forward-Looking Information in the Companys periodic reports as filed with the Securities and Exchange Commission from time to time for a detailed discussion of the risks and uncertainties affecting the Company, including, without limitation, the Companys ability to evaluate and/or implement potential options, including asset sales or joint ventures to raise additional capital for growth and/or potential debt reduction, and the impact any such potential options may have on the Company or the Companys stock price. Although the forward-looking statements contained in this Current Report on Form 8-K are based upon what are believed to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. These forward-looking statements are made as of the date of this Current Report on Form 8-K and, except as expressly required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances.
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Item 9.01. Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number |
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Description |
99.1 |
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Press Release of the Company, dated September 16, 2014 |
99.2 |
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Supplementary Investor Materials, dated September 16, 2014 |
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Atlantic Power Corporation |
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Dated: September 16, 2014 |
By: |
/s/ Terrence Ronan |
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Name: Terrence Ronan |
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Title: Chief Financial Officer |
EXHIBIT INDEX
Exhibit Number |
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Description |
99.1 |
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Press Release of the Company, dated September 16, 2014 |
99.2 |
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Supplementary Investor Materials, dated September 16, 2014 |
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Exhibit 99.1
Atlantic Power Provides Update on Outcome of Strategic Review Process;
Announces Revised Dividend Rate of Cdn$0.12 Annually;
Announces President and CEO Transition
· Update on outcome of strategic review
· Sale or merger of Company not in best interests of Company or its stakeholders at this time
· Continue to operate independently and execute on business plan
· Continue to assess other potential options, including asset sales or joint ventures
· Dividend reduced to Cdn$0.12 annually from Cdn$0.40
· August dividend of Cdn$0.03333 to be paid as scheduled on September 30
· Company to move to quarterly dividend rate of Cdn$0.03, with first quarterly dividend to be declared in November and paid at the end of December 2014
· Company announces President and CEO transition and appoints Director Ken Hartwick as Interim President and CEO
· Targeting additional corporate expense reductions of approximately $7 million annually, for total run-rate savings of approximately $15 million annually in 2015
· Reaffirmed 2014 guidance for Project Adjusted EBITDA and Free Cash Flow
· Strong liquidity as of June 30, 2014 of $261 million, including $158 million of unrestricted cash
BOSTON, MASSACHUSETTS September 16, 2014 Atlantic Power Corporation (NYSE: AT) (TSX: ATP) (Atlantic Power or the Company) announced today that as part of its previously announced strategic review process, it has concluded that a sale or merger of the Company is not in the best interests of the Company or its stakeholders at this time. Atlantic Power also announced a reduction in its dividend rate to Cdn$0.12 from Cdn$0.40 on an annual basis.
With the assistance of its external financial advisors, Goldman, Sachs & Co. and Greenhill & Co., LLC, Atlantic Powers Board of Directors conducted a thorough review of the options available to the Company with respect to a possible sale or merger. The Board of Directors has determined that the interests of the Company and its stakeholders are best served at this time by continuing to operate as an independent company and executing the Companys business plan, including the objectives of enhancing the value of its existing assets through optimization investments and commercial activities, delevering its balance sheet to improve both its cost of capital and ability to compete for new investments, and utilizing the Companys core competencies to create proprietary investment opportunities. In addition, the Company will continue to assess other potential options, including asset sales or the contribution of assets to a joint venture in order to raise additional capital for growth and/or debt reduction.
The Company intends to continue to allocate a portion of its Free Cash Flow to optimization investments in its existing projects that are expected to produce attractive returns. As previously disclosed, Atlantic Power is on target to invest $17 million in such optimization projects in 2014 (for total 2013-2014 investments of $27 million) to boost output, improve efficiency and reduce costs, with an expected cash return of at least $8 million annually beginning in 2015. As part of its commercial optimization efforts, the Company is proactively seeking extensions of existing power purchase agreements at several of its projects prior to their expiration dates in 2018 and later. The Company also intends to pursue external growth opportunities with accretive returns, to the extent available.
The Company also intends to continue its efforts to reduce general and administrative and other corporate expenses. In particular, the Company disclosed in its second quarter (Q2) 2014 earnings call presentation that it expected reductions in the areas of development and other corporate expenses to exceed the $8 million goal that was initially communicated on the Companys Q2 2013 earnings call. Since the Q2 2014 earnings call, the Company has identified additional cost savings such that annual run-rate cost savings are expected to total approximately $15 million in 2015 relative to 2013. Certain expenses related to todays announcements may affect 2014 Free Cash Flow.
At June 30, 2014, the Company had a strong liquidity position of $261 million, including $158 million of unrestricted cash, out of which the Company plans to use $41 million to repay a Cdn$45 million convertible debenture maturity in October 2014. After that debt repayment, the Company will not have any maturities of non-amortizing debt for almost thirty months, when the next convertible debenture maturity occurs in March 2017.
As discussed on the Q2 2014 earnings call, Atlantic Power continues to expect 2014 Project Adjusted EBITDA of $280 to $305 million and Free Cash Flow of $0 to $25 million, which is net of approximately $52 to $55 million of term loan amortization and approximately $17 million of discretionary optimization investments.
Revised Dividend Rate
As previously disclosed, the allocation of a significant portion of the Companys available cash flow to mandatory debt amortization reduces the amount of cash flow available for other corporate purposes. As part of the strategic review process, the Board of Directors, together with management, assessed the best uses of currently anticipated Free Cash Flow in order to meet the Companys objectives, including enhancing the value of existing assets, delevering its balance sheet to improve both its cost of capital and ability to compete for new investments, and providing a current return to its shareholders. After taking into consideration all of these objectives, the Board of Directors has determined to set a dividend level of Cdn$0.12 per share on an annual basis, equivalent to approximately US$13 million annually.
Going forward, Atlantic Power intends to pay dividends on a quarterly basis. As previously announced, the monthly dividend of Cdn$0.03333 declared August 15, 2014 will be paid September 30, 2014. The Company will then move to a quarterly dividend rate of Cdn$0.03, with the first quarterly dividend to be declared in November and paid at the end of December 2014.
President and CEO Transition
Atlantic Powers Board of Directors also announced today that it has appointed Director Ken Hartwick, 51, as Interim President and CEO effective immediately, following the mutual agreement for Barry Welch to step down as President, CEO and a Director of the Company. Mr. Hartwick will remain a member of Atlantic Powers Board. He will not be a candidate for the permanent President and CEO position and will continue his role as a member of the Board following the appointment of a new President and CEO. The Board has commenced a process to identify and evaluate candidates to serve as the Companys next President and CEO and will promptly engage a leading executive search firm to assist in the process.
Mr. Hartwick has served as a member of the Board of Atlantic Power since 2004 and has more than 15 years of management experience in the energy sector and 20 years of experience in the financial sector. Mr. Hartwicks experience in the energy industry spans several markets, and he recently served as President and CEO for Just Energy Group Inc., an integrated retailer of commodity products that sells to residential and commercial businesses.
The Board, following a comprehensive review of options available to Atlantic Power, has determined that the interests of the Company and its stakeholders are best served at this time by continuing to operate as an independent company and executing the Companys business plan, said Irving Gerstein, Chairman of the Board of Atlantic Power. As part of this process, and in order for the Company to be better positioned to achieve its objectives, the Board has reset the dividend. Additionally, we are pleased that Ken has agreed to assume the role of Interim President and CEO and are confident that his in-depth knowledge of Atlantic Power and his expertise as a successful senior executive in the energy sector will allow us to effect a seamless transition as we search for a permanent President and CEO. Ken has been a valuable member of our Board since 2004. Under his leadership, Atlantic Power will focus on enhancing the value of its existing assets, deleveraging the balance sheet and utilizing the Companys core competencies to create proprietary investment opportunities. Atlantic Power has a diverse set of power generating assets and we are confident that this is the best path forward to drive value for shareholders. Lastly, we thank Barry for his years of service and wish him the best in his future endeavors.
Project Adjusted EBITDA and Free Cash Flow are not recognized measures under generally accepted accounting principles in the United States (GAAP) and do not have standardized meanings prescribed by GAAP. Therefore, these measures may not be comparable to similar measures presented by other companies. The Company has not provided a reconciliation of forward-looking non-GAAP measures due
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primarily to variability and difficulty in making accurate forecasts and projections, as not all information necessary for quantitative reconciliation is available to the Company without unreasonable efforts. As previously disclosed, the Companys Free Cash Flow guidance for 2014 excludes approximately $49 million of costs related to its debt refinancing and repurchase transactions and $8 million of Piedmont debt repayment.
About Atlantic Power
Atlantic Power owns and operates a diverse fleet of power generation assets in the United States and Canada. Atlantic Powers power generation projects sell electricity to utilities and other large commercial customers largely under long-term power purchase agreements, which seek to minimize exposure to changes in commodity prices. Its power generation projects in operation have an aggregate gross electric generation capacity of approximately 2,945 MW in which its aggregate ownership interest is approximately 2,024 MW. Its current portfolio consists of interests in twenty-eight operational power generation projects across eleven states in the United States and two provinces in Canada.
Atlantic Power trades on the New York Stock Exchange under the symbol AT and on the Toronto Stock Exchange under the symbol ATP. For more information, please visit the Companys website at www.atlanticpower.com or contact:
Atlantic Power Corporation
Amanda Wagemaker, Investor Relations
(617) 977-2700
info@atlanticpower.com
Copies of financial data and other publicly filed documents are filed on SEDAR at www.sedar.com or on EDGAR at www.sec.gov/edgar.shtml under Atlantic Power or on Atlantic Powers website. Supplemental investor information related to the revised dividend rate and the outcome of the Companys strategic review can be found in the Investors Section of the Companys website.
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Cautionary Note Regarding Forward-Looking Statements
To the extent any statements made in this news release contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended, and under Canadian securities law (collectively, forward-looking statements).
Certain statements in this news release may constitute forward-looking statements, which reflect the expectations of management regarding the future growth, results of operations, performance and business prospects and opportunities of the Company and its projects. These statements, which are based on certain assumptions and describe the Companys future plans, strategies and expectations, can generally be identified by the use of the words may, will, project, continue, believe, intend, anticipate, expect or similar expressions that are predictions of or indicate future events or trends and which do not relate solely to present or historical matters. Examples of such statements in this press release include, but are not limited, to statements with respect to the following:
· the Company will continue to assess other potential options, including asset sales or the contribution of assets to a joint venture in order to raise additional capital for growth and/or debt reduction;
· the Company intends to continue to allocate a portion of its Free Cash Flow to optimization investments in its existing projects that are expected to produce attractive returns;
· the Companys ability to execute its business plan, including the objectives of enhancing the value of its existing assets through optimization investments and commercial activities, delevering its balance sheet to improve both its cost of capital and ability to compete for new investments, and utilizing the Companys core competencies to create proprietary investment opportunities;
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· the Company is on target to invest $17 million in such optimization projects in 2014 (for total 2013-2014 investments of $27 million) to boost output, improve efficiency and reduce costs, with an expected cash return of at least $8 million annually beginning in 2015;
· the Companys ability to seek extensions of existing power purchase agreements at several of its projects prior to their expiration dates in 2018 and later;
· the Company intends to pursue external growth opportunities with accretive returns, to the extent available;
· the Company intends to continue its efforts to reduce general and administrative and other corporate expenses;
· the Company expects reductions in the areas of development and other corporate expenses in 2014 to exceed the $8 million goal that was initially communicated on the Companys Q2 2013 earnings call. Together with subsequent savings expected to be realized in 2015, the Company expects this will result in total run-rate cost savings of approximately $15 million annually in 2015 relative to 2013;
· certain expenses related to todays announcements may affect 2014 Free Cash Flow;
· the Company plans to use $41 million to repay a Cdn$45 million convertible debenture maturity in October 2014;
· 2014 Project Adjusted EBITDA will be in the range of $280 to $305 million;
· 2014 Free Cash Flow will be in the range of $0 to $25 million, excluding refinancing and debt repurchase transaction costs and principal repayment of Piedmont construction debt and including $17 million of discretionary optimization investments;
· the dividend to be paid on September 30, 2014 will be paid as scheduled;
· dividend payments will be made on a quarterly basis beginning at the end of December 2014, if and when declared by, and subject to the discretion of, the Companys Board of Directors; and
· the results of operations and performance of the Companys projects, business prospects, opportunities and future growth of the Company will be as described herein.
Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not or the times at or by which such performance or results will be achieved. Please refer to the factors discussed under Risk Factors and Forward-Looking Information in the Companys periodic reports as filed with the Securities and Exchange Commission from time to time for a detailed discussion of the risks and uncertainties affecting the Company, including, without limitation, the Companys ability to evaluate and/or implement potential options, including asset sales or joint ventures to raise additional capital for growth and/or potential debt reduction, and the impact any such potential options may have on the Company or the Companys stock price. Although the forward-looking statements contained in this news release are based upon what are believed to be reasonable assumptions, investors cannot be assured that actual results will be consistent with these forward-looking statements, and the differences may be material. These forward-looking statements are made as of the date of this news release and, except as expressly required by applicable law, the Company assumes no obligation to update or revise them to reflect new events or circumstances. The financial outlook information contained in this news release is presented to provide readers with guidance on the cash distributions expected to be received by the Company and to give readers a better understanding of the Companys ability to pay its current level of distributions into the future. Readers are cautioned that such information may not be appropriate for other purposes.
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Exhibit 99.2
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CONFIDENTIAL
Supplementary Investor Materials September 16, 2014
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Cautionary Note
Regarding Forward-looking Statements 2 To the extent any statements made in
this presentation contain information that is not historical, these
statements are forward-looking statements or forward-looking information, as
applicable, within the meaning of Section 27A of the U.S. Securities Act of
1933, as amended, and Section 21E of the U.S. Securities Exchange Act of
1934, as amended, and under Canadian securities law (collectively forward-looking
statemennts) Forward-looking statements can generally be identified by the
use of words such as shoukd, intend, may, expect, believe,
anticipate, estimate, continue, plan, project, will, could,
would, target, potential and other similar expressions. In addition,
any statements that refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. Although Atlantic Power Corporation (AT, Atlantic Poweror the
Company believes that the expectations reflected in such forward-looking
statements are reasonable, such statements involve risks and uncertainties
and should not be read as guarantees of future performance or results, and
undue reliance should not be placed on such statements. Please refer to the
factors discussed under Risk Factorsand Forward-Looking Information in
the Companys periodic reports as filed with the Securities and Exchange
Commission from time to time for a detailed discussion of the risks and
uncertainties affecting the Company, including, without limitation, the Companys
ability to evaluate and/or implement potential options, including asset sales
or joint ventures to raise additional capital for growth and/or potential
debt reduction and the impact any such potential options may have on the
Company or the Companys stock price. Although the forward-looking statements
contained in this presentation are based upon what are believed to be
reasonable assumptions, investors cannot be assured that actual results will
be consistent with these forward-looking statements, and the differences may
be material. These forward-looking statements are made as of the date of this
presentation and, except as expressly required by applicable law, the Company
assumes no obligation to update or revise them to reflect new events or
circumstances. Free Cash Flow is not a measure recognized under GAAP and does
not have a standardized meaning prescribed by GAAP. Free Cash Flow is defined
as cash flows from operating activities less capex; project-level debt
repayments, including amortization of the term loan; and distributions to
noncontrolling interests, including preferred share dividends. Management
believes that Free Cash Flow is a relevant supplemental measure of the
Company's ability to earn and distribute cash returns to investors. Investors
are cautioned that the Company may calculate these measures in a manner that
is different from other companies. Project Adjusted EBITDA is defined as
project income (loss) plus interest, taxes, depreciation and amortization
(including non-cash impairment charges) and changes in fair value of
derivative instruments. Project Adjusted EBITDA is not a measure recognized
under GAAP and is therefore unlikely to be comparable to similar measures
presented by other companies and does not have a standardized meaning
prescribed by GAAP. Management uses Project Adjusted EBITDA at the project
level to provide comparative information about project performance and
believes such information is helpful to investors. Investors are cautioned
that the Company may calculate this measure in a manner that is different
from other companies. The Company has not reconciled non-GAAP financial
measures relating to individual projects to the directly comparable GAAP
measures due to the difficulty in making the relevant adjustments on an
individual project basis. The Company has not provided a reconciliation of
forward-looking non-GAAP measures, because not all of the information
necessary for a quantitative reconciliation is available to the Company
without unreasonable efforts primarily as a result of the variability and
difficulty in making accurate forecasts and projections. All amounts in this
presentation are in US$ and approximate unless otherwise stated. Disclaimer Non-GAAP
Measures
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Update on outcome of strategic review - Sale
or merger of Company not in best interests of Company or its stakeholders at
this time - Continue to operate independently and execute on business plan -
Continue to assess other potential options, including asset sales or joint
ventures Dividend reduced to Cdn$0.12 annually from Cdn$0.40 - Previously
declared August dividend of Cdn$0.03333 to be paid on September 30 - Company
to move to quarterly dividend rate of Cdn$0.03, with first quarterly dividend
to be declared in November and paid at the end of December 2014 Company
announces President and CEO transition and appoints Director Ken Hartwick as
Interim President and CEO Targeting additional corporate expense reductions
of approximately $7 million annually for a run-rate savings of approximately
$15 million in 2015 Reaffirmed 2014 guidance for Project Adjusted EBITDA and
Free Cash Flow Strong liquidity as of June 30, 2014 of $261 million,
including $158 million of unrestricted cash Strategic Review Outcomes 3
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Enhance value of existing assets through
optimization investments and commercial activities - Optimization investments
in existing projects with strong risk-adjusted return potential o $17 million
in 2014, for a total of $27 million in 2013-2014 o Expected cash return of at
least $8 million annually beginning in 2015, including about half to be
realized in 2014 - Seek extensions of existing PPAs prior to their expiration
dates to create additional value where possible o 5-year extension at
Kenilworth in 2013; working on several where PPAs are scheduled to expire in
2018 and later Reduce debt with goals of de-risking balance sheet and
lowering cost of capital - Plan to repay Oct. 2014 convertible maturity using
cash (~$41 million) - No other maturities of non-amortizing debt until next
convertible debenture maturity in March 2017 - On track for total reduction
in net debt of ~$80 million in 2014 - APLP term loan repayment of at least
$60 million annually on average in 2015 through maturity (2021) Targeted uses
of Free Cash Flow to drive value - Dividend, equivalent to ~$13 million
annually - Discretionary optimization investments of $5 to $10 million
annually - Potential investments in accretive growth projects - Discretionary
debt reduction Will consider potential asset sales or joint ventures to raise
additional capital for growth and/or potential debt reduction Business Plan
Objectives 4 Enhance value of assets; reduce costs; de-risk balance sheet;
better position the Company to deliver value over time
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Q2 2013: Announced cost reduction target of
$8 million annually on a run-rate basis in 2014 - Expect to realize at least
$8 million on a run-rate basis in 2014 Sept. 2014: Have identified another
approximate $7 million of run-rate cost savings to be realized beginning in
2015 - Expect total run-rate cost savings of approximately $15 million in
2015 relative to 2013 Further G&A and Other Corporate Expense Reductions
5 Will continue to review level of costs and take actions as appropriate Certain
expenses related to todays announcements may affect 2014 Free Cash Flow
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Annual dividend rate reduced to Cdn$0.12,
equivalent to approximately US$13 million - Current income an important
component of shareholder return - Dividend is based on assessment of
currently anticipated Free Cash Flow Maintaining 2014 Free Cash Flow guidance
of $0 to $25 million - Net of $52 to $55 million of APLP debt amortization
and $17 million of discretionary optimization spending - Excludes $49 million
of debt refinancing related costs (not expected to recur) and $8 million of
Piedmont principal repayment when loan converted to term, both funded out of
refinancing proceeds and Company cash 2015 Free Cash Flow factors to
consider: - PPA expirations at Selkirk (August 2014; now fully merchant) and
Tunis (December 2014) + Realization of cash returns on 2013-2014 optimization
investments ($8 million annual benefit, including ~$4 million already realized
in 2014) + Lower G&A and other corporate expenses of approximately $7
million in 2015 (incremental to $8 million already realized in 2014) + Lower
cash interest payments of approximately $8 million in 2015 (incremental to
2014 reduction from refinancing and repurchase transactions and APLP term
loan repayment; includes full-year benefit of Oct. 2014 convertible repayment
and partial-year benefit of APLP term loan repayment in 2015) + Lower capital
expenditures ($16 million in 2014, which includes $11 million for Nipigon
steam generator replacement and upgrade) Dividend and Free Cash Flow 6
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As previously announced, September monthly
dividend of Cdn$0.03333 - Declared August 15, 2014 - Will be paid as
scheduled on September 30, 2014 Atlantic Power will then move to paying
dividends on a quarterly basis - Quarterly rate of Cdn$0.03, equivalent to
Cdn$0.12 annually - First quarterly dividend of Cdn$0.03 to be declared in
November and paid at the end of December Move to Quarterly Payment of Dividends
7 irectors.
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