DEDHAM, Mass., Aug. 28, 2017 /CNW/ -- Atlantic Power
Corporation (NYSE: AT) (TSX: ATP) ("Atlantic Power" or the
"Company") announced today that it recently received notification
from the U.S. Navy that proposals involving the Company's Naval
Station and North Island projects were not selected in the final
round of the Navy's solicitation for energy security and resiliency
at the two naval bases in San
Diego on which these projects are located.
Naval Station, North Island and Naval Training Center ("NTC")
sell power to San Diego Gas & Electric ("SDG&E") under
Power Purchase Agreements ("PPAs") that are scheduled to expire in
December 2019. In addition, the three projects supply steam
to the Navy under agreements that provide the Company with the
right to use the property at the respective sites on which each
project is located (the "Navy agreements"). The Navy
agreements are scheduled to expire in February 2018. A
successful outcome in the Navy solicitation would have provided the
Company with the right to use the Naval Station and North Island
sites beyond that date ("site control"). The timing and final
arrangements for decommissioning the sites have not been
determined.
Following notification of the outcome of the Navy solicitation,
the Company undertook an evaluation of the carrying values of the
long-lived assets, which include intangible assets (primarily
associated with the underlying PPAs) and property, plant and
equipment at all three San Diego
projects. In conducting this assessment, the Company
determined that it is likely that the PPAs for all three projects
will terminate ahead of their scheduled December 2019 expiration dates, potentially as
early as February 2018, coincident
with the expiration of the Navy agreements. Accordingly, the
Company expects to record a long-lived asset impairment of
approximately $50 million in the
third quarter of 2017, subject to further estimation of
decommissioning costs. Subsequent to recording the
impairment, the Company will continue to amortize the approximate
remaining $16 million of carrying
value of the three projects through February 2018. Both the
accelerated amortization and the impairment are non-cash expenses
that do not affect cash flow, nor are they included in Project
Adjusted EBITDA.
As disclosed in the Company's 2016 Report on Form 10-K, the
Company could be subject to potential liabilities under the early
termination provisions of the PPAs. Although the outcome of
this issue is not yet determined, the Company believes that it will
not be required to pay any liquidated damages associated with early
termination because it believes that the circumstances of the
termination and the agreements in place between the Company and the
PPA counterparty relieve the Company of such potential
liabilities.
As disclosed in its August 1, 2017
press release, in July 2017 the
Company executed seven-year Power Purchase Tolling Agreements
("PPTAs") with SDG&E for Naval Station and North Island, which
were conditioned upon site control and regulatory approval.
The outcome of the Navy solicitation makes it unlikely that the
Company will be able to meet the site control requirement of the
PPTAs. Although the Company is continuing to pursue
contractual arrangements for NTC, which is located on a Marine
Corps base in San Diego that was
not included in the Navy solicitation, any such contractual
arrangements for NTC also would be subject to the Company retaining
site control. Similarly, the Resource Adequacy agreements
entered into for all three projects were subject to retaining site
control.
Project Adjusted EBITDA for the Naval Station and North Island
projects under the PPTAs was estimated to be approximately
$6 million annually for the
seven-year term of the contracts. However, this estimate was
predicated on an investment in the projects of approximately
$22 million that would have been made
in 2018.
"If we must close these facilities in 2018, we will be
disappointed as the expected returns on incremental investment were
attractive, the new PPTAs might have bridged us to a potentially
better power market in that location in eight years, and we would
have been able to keep our people employed at these plants," said
James J. Moore, Jr., President and
CEO of Atlantic Power. "However, the investment of
$22 million required to generate
EBITDA post-2018 is now available for other uses, both internally
(such as other projects or our balance sheet) and externally, and
we currently have an excess of attractive uses of that
capital. Thus, we expect that this development will not have
a material impact on our estimates of the intrinsic value of our
business."
About Atlantic Power
Atlantic Power owns and operates a diverse fleet of twenty-three
power generation assets across nine states in the United States and two provinces in
Canada. The Company's 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. The
aggregate gross electric generation capacity of this portfolio is
approximately 2,138 megawatts (MW), and the Company's aggregate net
ownership interest is approximately 1,500 MW. Nineteen of the
projects are currently operational, totaling 1,975 MW on a gross
capacity basis and 1,337 MW on a net ownership basis. The
remaining four projects, all in Ontario, are not operational, three due to
revised contractual arrangements with the offtaker and the other,
Tunis, has a forward-starting
15-year contractual agreement that will commence between
November 2017 and June
2019.
Atlantic Power's shares trade 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 Company's
website at www.atlanticpower.com or contact:
Atlantic Power Corporation
Investor Relations
(617) 977-2700
info@atlanticpower.com
Copies of the Company's financial data and other publicly filed
documents are available on SEDAR at www.sedar.com or on EDGAR at
www.sec.gov/edgar.shtml under "Atlantic Power Corporation" or on
the Company's website.
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 Company's 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 outcome of the Navy solicitation process makes it unlikely
the Company will be able to retain control of the Naval Station and
North Island sites beyond February
2018;
- the Company's determination that it is likely that the PPAs for
Naval Station, North Island and NTC will terminate ahead of their
scheduled December 2019 expiration
dates, potentially as early as February
2018, coincident with the expiration of the Navy
agreements;
- the Company expects to record a long-lived asset impairment of
approximately $50 million in the
third quarter of 2017, subject to further estimation of
decommissioning costs;
- the Company's expectation that it will continue to amortize
through February 2018 the remaining
carrying value of the three projects, totaling approximately
$16 million;
- the Company's belief that it will not be required to pay any
liquidated damages associated with early termination of the
PPAs;
- the Company's estimation that it is unlikely to be able to meet
the site control requirement of the Naval Station and North Island
PPTAs;
- the Company's estimation that, subject to an investment in the
projects of approximately $22 million
that would have been made in 2018, Project Adjusted EBITDA for the
Naval Station and North Island projects under the PPTAs was
expected to decline to approximately $6
million annually; and
- the Company's expectation that this development will not have a
material impact on its estimates of the intrinsic value of its
business.
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 Company's periodic reports as filed with the
U.S. Securities and Exchange Commission (the "SEC") from time to
time for a detailed discussion of the risks and uncertainties
affecting the Company. 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.
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SOURCE Atlantic Power Corporation