Atlantic Power Corporation (TSX: ATP)(TSX: ATP.DB)(TSX:
ATP.DB.A)(NYSE: AT) (the "Company") today announced its results for
the three and six months ended June 30, 2010. All amounts are in
U.S. dollars unless otherwise indicated.
Highlights
-- NYSE dual-listing completed
-- Acquisition of an interest in first wind power project
-- Extending minimum dividend sustainability guidance from 2015 to 2016
-- Full year 2010 payout ratio guidance confirmed at approximately 100%
-- 2011 payout ratio guidance improved to range of 80% to 90%
"Our year-to-date results and outlook for the balance of the
year are improved and allowed us to raise our previous full year
2010 guidance," commented Barry Welch, President and CEO. "We have
recently completed several important initiatives, including the
acquisition of an interest in our first wind power project and our
dual listing on the New York Stock Exchange. In addition, we have
improved our long-term guidance to indicate that cash on hand and
projected cash flows from existing projects, including our recent
acquisition of an interest in Idaho Wind, is sufficient to maintain
the current level of dividends to common shareholders into 2016,
before considering any positive impact from further potential
acquisitions or organic growth opportunities."
Operating Performance
Adjusted EBITDA at the Projects, including earnings from equity
investments, increased by $4.5 million to $38.5 million for the
quarter ended June 30, 2010 compared to $34.0 million for the same
period last year. The change is in line with management's
expectations. The primary driver of the increase was improved
Project Adjusted EBITDA at the Chambers project, which had a major
planned outage in the second quarter of 2009. Due primarily to that
outage and lower operating margins in 2009, the terms of Chambers'
non-recourse project-level debt agreements are currently
restricting the project from making cash distributions to us. We
expect distributions from Chambers to resume in 2011.
For the six months ended June 30, 2010, Adjusted Project EBITDA,
including earnings from equity investments, increased by $2.3
million to $77.3 million from $75.0 million in the 2009
year-to-date period. In addition to the increase in Project
Adjusted EBITDA at Chambers described above, the six-month period
was affected by the following factors:
-- increased EBITDA at Auburndale due to increased contractual capacity
payments under the project's power purchase agreement;
-- the absence of EBITDA at Rumford in 2010 as the contract that provided
substantially all of the project's cash flow expired in the fourth
quarter 2009; and
-- decreased EBITDA at Lake attributable to higher fuel expense due to
natural gas purchases at higher prices than those under the supply
contract that expired in June 2009. We have a hedging strategy to
mitigate its future exposure to changes in natural gas prices.
Cash Available for Distribution
For the three and six months ended June 30, 2010, Cash Available
for Distribution decreased by $7.6 million and $13.9 million
compared to the respective periods in 2009, in line with prior
guidance. The decrease is due, in part, to lower distributions in
2010 from our Orlando project and no distributions from our Selkirk
project, both of which are equity investments. The decrease in
distributions from Orlando was the result of a one-time receipt of
insurance proceeds in 2009 related to an unplanned outage that
occurred in 2008. The Selkirk project is currently not making
distributions to partners as a result of restrictions in its
non-recourse project-level debt. As previously disclosed, we expect
to resume receiving distributions from Selkirk in 2011. An increase
in corporate general administrative expenses of $2.5 million, which
is primarily attributable to higher employee share-based
compensation costs, due to increases in the market price of our
common shares, and the cost of our initial U.S. listing, also
reduced operating cash flow in the six months ended June 30, 2010
compared to the first half of 2009.
The payout ratio for the three and six month periods ended June
30, 2010 is significantly higher than our expected payout ratio for
the full year 2010 of approximately 100%. Timing differences in
operating cash flows, including expected cash tax refunds, and
advance purchases of property, plant and equipment are the primary
contributors to the higher payout ratios for the first half of
2010. Approximately $9 million of net cash tax refunds are expected
in the second half of 2010 compared to approximately $1 million of
net cash tax payments in the first half of the year. Also, our
projects typically generate more operating cash flow in the second
half of the year, particularly in the third quarter, due to the
seasonality of electricity demand. In addition, purchases of
property, plant and equipment for planned maintenance at certain
projects were higher in the first half of the year due to the
advance procurement of capital property that will be installed in
the fall, which is the typical time for planned maintenance due to
lower electricity demand and prices related to milder weather at
that time of the year.
From an overall cash flow perspective, we also expect to receive
$2.5 million of proceeds from the sale of our interest in the
Rumford project before the end of 2010 and approximately $3 million
to $4 million in distributions of restricted cash from our projects
as a result of more efficient management of project working
capital. However, both the proceeds from Rumford and the restricted
cash releases are classified as cash flows from investing
activities in our consolidated statements of cash flows. Because
only operating cash flows are included in the definition of cash
available for distribution, these positive investing cash inflows
will not be reflected as an increase in cash available for
distribution or as a benefit to the presentation of the payout
ratio.
Recent Developments
In April 2010, we filed an initial registration statement on
Form 10 with the U.S. Securities and Exchange Commission. Our
registration statement was declared effective on July 21, 2010 and
our common shares began trading on the New York Stock Exchange on
July 23, 2010. Beginning with the first quarter 2010, we began
reporting under U.S. GAAP. Amounts reported in previous periods
under Canadian GAAP have been conformed to U.S. GAAP in this news
release and in our current period securities filings.
In April 2010, we invested an additional $0.8 million in
Rollcast to bring our total ownership interest to 60%. During the
second quarter of 2010, Rollcast executed an engagement letter and
term sheet with two banks to co-arrange debt financing and also
entered into a construction agreement for its first 50 MW biomass
project in Barnesville, Georgia.
On July 2, 2010, we acquired a 27.6% equity interest in Idaho
Wind Partners 1, LLC for approximately $40 million. Idaho Wind
recently commenced construction of a 183 MW wind power project
located near Twin City, Idaho, which is expected to be completed in
late 2010 or early 2011. Idaho Wind has 20-year power purchase
agreements with Idaho Power Company, which increases the average
power contract life at our plants by nearly 10%. Our investment in
Idaho Wind was funded with cash on hand and a $20 million borrowing
under our senior credit facility. Upon completion of construction,
we expect Idaho Wind to provide after-tax cash flows to us of $4.5
million to $5.5 million for each full year of operations.
Guidance
Based on management's projections, cash on hand and projected
cash flows from existing projects are sufficient to meet the
current level of dividends to common shareholders into 2016 before
considering any positive impact from further potential acquisitions
or organic growth opportunities. This time horizon has been
extended from our previous guidance that such dividends could be
continued into 2015. The updated guidance is based on improvements
in our most recent long-term cash flow projections from our
existing assets, as well as the anticipated cash flows from our
recent Idaho Wind acquisition.
Based on year-to-date results and the Company's projections for
the remainder of the year, we expect to receive distributions from
our projects in the range of $75 million to $80 million for the
full year 2010. This range represents an increase from our previous
guidance range of $70 million to $77 million for current year
project distributions. The improvement is primarily attributable to
stronger than expected operating and financial performance at our
plants in Florida, as well as higher expected distributions from
Path 15 due to a one-time permanent improvement in the timing of
revenue collections.
At the corporate level, management expects a net cash tax refund
in 2010 in the range of $7 million to $9 million compared to
insignificant net cash taxes in 2009. Included in 2010
corporate-level costs will be the $5 million payment under the
previously disclosed terms of our management agreement termination
with Atlantic Power Management, LLC, down from the $6 million
payment in 2009.
Looking ahead to 2011, management expects overall levels of cash
flow to improve and projects a payout ratio in the range of 80% to
90%, an improvement from our previous guidance of approximately
100%. In 2011, higher distributions from existing projects, initial
distributions from Idaho Wind and a slightly lower payment under
the management agreement termination are expected to be partially
offset by the non-recurrence of the cash tax refunds that are
anticipated in 2010. In 2012, higher distributions from projects
are expected to further increase operating cash flow and reduce the
payout ratio compared to 2011. The most significant factor in the
expected higher operating cash flow in 2012 is increased
distributions from Selkirk following the final payment of its
non-recourse project-level debt in mid-2012.
The calculation of Cash Available for Distribution and a summary
of Adjusted EBITDA by individual project for the three and six
months ended June 30, 2010 are attached to this news release.
Investor Conference Call and Webcast
A telephone conference call hosted by Atlantic Power's
management team will be held on Wednesday, August 11, 2010 at 10:00
AM ET. The telephone numbers for the conference call are:
Local/International: (416) 849-2698, North American Toll Free:
(866) 400-2270. The Conference Call will also be broadcast over
Atlantic Power's website at www.atlanticpower.com. Please call or
log in 10 minutes prior to the call. The telephone numbers to
listen to the conference call after it is completed (Instant
Replay) are Local/International: (416) 915-1035, North American
Toll Free (866) 245-6755. Please enter the passcode 533680# when
instructed. The conference call will also be archived on Atlantic
Power's web site.
About Atlantic Power
Atlantic Power Corporation is an independent power producer,
with power projects located in major markets in the United States.
Our current portfolio consists of interests in 12 operational power
generation projects across eight states, one wind project under
construction in Idaho, a 500 kilovolt 84-mile electric transmission
line located in California, and six development projects in five
states. Our power generation projects in operation have an
aggregate gross electric generation capacity of approximately 1,823
megawatts (or "MW"), in which our ownership interest is
approximately 808 MW.
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 our Company
and our projects. These statements, which are based on certain
assumptions and describe our 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 expectation that the Company's cash on hand and projected future
cash flows from existing projects will be adequate to meet the current
level of dividends to shareholders into 2016 without additional
acquisitions or growth opportunities;
-- The amount of distributions expected to be received from the projects
for the full year 2010;
-- The expectation that the payout ratio in 2011 will be in the range of
80% to 90% and that further improvements in cash flow and payout ratio
are expected in 2012;
-- The expectation that we will begin to receive distributions from our
investment in Idaho Wind in 2011 and the level of after-tax cash flows
from Idaho Wind in each complete year of operations following
construction; and
-- The expectation that distributions from the Selkirk and Chambers
projects will resume in 2011.
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" in the Company's
registration statement on Form 10, as filed with the Securities and
Exchange Commission on July 21, 2010, for a detailed discussion of
the risks and uncertainties affecting our 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. 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 Company's ability to pay its current level of distributions
into the future. Readers are cautioned that such information may
not be appropriate for other purposes.
Atlantic Power Corporation
Consolidated Balance Sheets (in thousands of U.S. dollars)
June 30, December 31,
2010 2009
----------------------------------------------------------------------------
(unaudited)
Assets
Current assets:
Cash and cash equivalents $ 63,314 $ 49,850
Restricted cash 14,579 14,859
Accounts receivable 18,433 17,480
Current portion of derivative
instruments asset 4,251 5,619
Prepayments, supplies and other 4,019 3,019
Deferred income taxes 15,106 17,887
Refundable income taxes 10,588 10,552
----------------------------------------------------------------------------
Total current assets 130,290 119,266
Property, plant and equipment, net 189,916 193,822
Transmission system rights 192,059 195,984
Equity investments in unconsolidated
affiliates 259,443 259,230
Other intangible assets, net 64,810 71,770
Goodwill 12,453 8,918
Derivative instruments asset 7,952 14,289
Other assets 5,602 6,297
----------------------------------------------------------------------------
Total assets $ 862,525 $ 869,576
----------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $ 18,513 $ 21,661
Revolving credit facility 20,000 -
Current portion of long-term debt 18,330 18,280
Current portion of derivative
instruments liability 5,108 6,512
Interest payable on convertible
debentures 3,332 800
Dividends payable 5,184 5,242
Other current liabilities 10 752
----------------------------------------------------------------------------
Total current liabilities 70,477 53,247
Long term debt 214,527 224,081
Convertible debentures 137,376 139,153
Derivative instruments liability 17,011 5,513
Deferred income taxes 33,697 28,619
Other non-current liabilities 4,802 4,846
Shareholders' equity
Common shares 544,647 541,917
Accumulated other comprehensive loss (194) (859)
Retained deficit (163,299) (126,941)
Noncontrolling interest 3,481 -
----------------------------------------------------------------------------
Total shareholders' equity 384,635 414,117
----------------------------------------------------------------------------
Commitments and contingencies
Subsequent events - -
----------------------------------------------------------------------------
Total liabilities and shareholders'
equity $ 862,525 $ 869,576
----------------------------------------------------------------------------
Atlantic Power Corporation
Consolidated Statements of Operations (in thousands of U.S. dollars)
(unaudited)
Three months ended Six months ended
June 30, June 30,
2010 2009 2010 2009
----------------------------------------------------------------------------
Project revenue:
Energy sales $ 16,659 $ 14,090 $ 32,572 $ 30,015
Energy capacity revenue 23,195 22,112 46,389 44,224
Transmission services 7,729 7,708 15,373 15,416
Other 321 360 791 649
----------------------------------------------------------------------------
47,904 44,270 95,125 90,304
Project expenses:
Fuel 15,771 12,627 31,928 27,588
Operations and maintenance 5,459 4,712 10,500 9,650
Project operator fees and
expenses 983 758 1,902 2,031
Depreciation and amortization 10,071 10,588 20,142 21,254
----------------------------------------------------------------------------
32,284 28,685 64,472 60,523
Project other income (expense):
Change in fair value of
derivative instruments 992 469 (11,202) 360
Equity in earnings of
unconsolidated affiliates 3,026 (982) 8,462 3,969
Interest expense, net (4,308) (4,816) (8,719) (9,320)
Other income, net 211 1,205 211 1,205
----------------------------------------------------------------------------
(79) (4,214) (11,248) (3,786)
----------------------------------------------------------------------------
Project income 15,541 11,461 19,405 25,995
Administrative and other
expenses (income):
Management fees and
administration 3,843 3,105 7,943 5,484
Interest, net 2,518 10,553 5,312 20,170
Foreign exchange loss 4,224 12,929 2,432 9,506
Other income, net (26) (14) (26) (30)
----------------------------------------------------------------------------
10,559 26,573 15,661 35,130
----------------------------------------------------------------------------
Income (loss) from operations
before income taxes 4,982 (15,112) 3,744 (9,135)
Income tax expense (benefit) 3,618 (4,383) 8,491 (2,649)
----------------------------------------------------------------------------
Net income (loss) 1,364 (10,729) (4,747) (6,486)
Net loss attributable to
noncontrolling interest (81) - (129) -
----------------------------------------------------------------------------
Net income (loss) attributable
to Atlantic Power Corporation $ 1,445 $ (10,729) $ (4,618) $ (6,486)
Net income (loss) per share attributable to Atlantic
Power Corporation Shareholders:
Basic $ 0.02 $ (0.18) $ (0.08) $ (0.11)
Diluted $ 0.04 $ (0.18) $ (0.08) $ (0.11)
Atlantic Power Corporation
Consolidated Statements of Cash Flows (in thousands of U.S. dollars)
(unaudited)
Six months ended
June 30,
2010 2009
----------------------------------------------------------------------------
Cash flows from operating activities:
Net loss $ (4,747) $ (6,486)
Adjustments to reconcile to net cash provided
by operating activities:
Depreciation and amortization 20,142 21,254
Loss on sale of property, plant and
equipment - 333
Gain on step-up valuation of Rollcast
acquisition (211) -
Earnings from unconsolidated affiliates (8,462) (3,969)
Distributions from unconsolidated affiliates 5,718 13,021
Unrealized foreign exchange loss 5,199 9,630
Change in fair value of derivative
instruments 11,202 (360)
Change in deferred income taxes 7,416 564
Change in other operating balances
Accounts receivable (953) 7,880
Prepayments, refundable income taxes and
other assets (481) (5,859)
Accounts payable and accrued liabilities (956) (5,767)
Other liabilities 2,111 283
----------------------------------------------------------------------------
Cash provided by operating activities 35,978 30,524
Cash flows used in investing activities:
Acquisitions and investments, net of cash
acquired 324 (3,000)
Change in restricted cash 280 347
Biomass development costs (948) -
Proceeds from the sale of property, plant
and equipment - 167
Purchase of property, plant and equipment (1,520) (933)
----------------------------------------------------------------------------
Cash used in investing activities (1,864) (3,419)
Cash flows used in financing activities:
Shares acquired in normal course issuer bid - (3,369)
Proceeds from revolving credit facility
borrowings 20,000 -
Equity investment from noncontrolling
interest 200 -
Dividends paid (31,709) (11,672)
Repayment of project-level debt (9,141) (6,414)
----------------------------------------------------------------------------
Cash used in financing activities (20,650) (21,455)
----------------------------------------------------------------------------
Increase in cash and cash equivalents 13,464 5,650
Cash and cash equivalents at beginning of
period 49,850 37,327
----------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 63,314 $ 42,977
----------------------------------------------------------------------------
Supplemental cash flow information
Interest paid $ 11,437 $ 29,162
Income taxes paid (refunded), net $ 1,045 $ 651
Regulation G Disclosures
Cash Available for Distribution is not a measure recognized
under U.S. generally accepted accounting principles ("GAAP") and
does not have a standardized meaning prescribed by GAAP. Management
believes Cash Available for Distribution is a relevant supplemental
measure of the Company's ability to earn and distribute cash
returns to investors. A reconciliation of Cash Flows from Operating
Activities to Cash Available for Distributions is provided below.
Investors are cautioned that the Company may calculate this measure
in a manner that is different from other companies.
Adjusted EBITDA, earnings before interest, taxes, depreciation
and amortization (including non-cash impairment charges), is not a
measure recognized under GAAP and is therefore unlikely to be
comparable to similar measures presented by other issuers and does
not have a standardized meaning prescribed by GAAP. Management uses
Adjusted EBITDA at the Project-level to provide comparative
information about project performance. A reconciliation of Project
Adjusted EBITDA to project income is provided on the following
page. Investors are cautioned that the Company may calculate this
measure in a manner that is different from other issuers.
Atlantic Power Corporation
Cash Available for Distribution
(In thousands of U.S. dollars, except as otherwise stated)
Three months ended Nine months ended
June 30, June 30,
(unaudited) 2010 2009 2010 2009
----------------------------------------------------------------------------
Cash flows from operating
activities(1) 15,139 12,171 35,978 30,524
Project-level debt repayments (6,441) (5,108) (9,141) (6,414)
Interest on IPS portion of
subordinated notes(2) - 8,365 - 16,078
Purchase of property, plant and
equipment (1,201) (311) (1,520) (933)
----------------------------------------------------------------------------
Cash Available for Distribution 7,497 15,117 25,317 39,255
Interest on subordinated notes - 8,365 - 16,078
Dividends on Common Shares 15,913 6,079 31,714 11,672
----------------------------------------------------------------------------
Total distributions to
shareholders 15,913 14,444 31,714 27,750
Payout ratio 212% 96% 125% 71%
Expressed in Cdn$
Cash Available for Distribution 7,710 17,642 26,187 47,320
Total distributions to
shareholders 16,556 16,561 33,083 33,234
----------------------------------------------------------------------------
(1) Beginning in the first quarter of 2010, changes in restricted cash in
the consolidated statement of cash flows has been reported as an investing
activity to reflect the use of the restricted cash in the current period.
In previous periods, changes in restricted cash were reported as cash flow
from operating activities. The prior period amounts have been reclassified
to conform with the current year presentation. This reclassification does
not impact the consolidated balance sheet or the consolidated statements of
operations. We have changed the classification of restricted cash because
the revised presentation is more widely used by companies in our industry.
(2) Prior to the common share conversion completed in November 2009,
holders of Income Participating Securities (IPSs) received monthly cash
distributions in the form of interest payments on subordinated notes and
dividends on common shares. Subsequent to the conversion, holders of the
Company's new common shares receive monthly cash distributions in the form
of a dividend at the annual rate of Cdn$1.094, which amount is unchanged
from the annual distribution rate before the conversion.
Atlantic Power Corporation
Project Adjusted EBITDA (in thousands of U.S. dollars)
Three months Six months
ended June 30, ended June 30,
(unaudited) 2010 2009 2010 2009
----------------------------------------------------------------------------
Project Adjusted EBITDA by
individual segment
Auburndale $ 10,431 $ 10,386 $ 19,802 $ 18,547
Lake 7,299 7,723 14,612 15,621
Pasco 1,002 901 2,417 2,869
Path 15 7,062 6,931 14,115 13,833
Chambers 4,141 (1,128) 10,129 5,024
----------------------------------------------------------------------------
Total 29,935 24,813 61,075 55,894
Other Project Assets
Mid-Georgia - 628 - 1,386
Stockton - (1,259) - (1,114)
Badger Creek 774 512 1,510 1,732
Koma Kulshan 434 455 553 412
Orlando 1,870 2,136 3,671 3,975
Topsham 548 703 963 1,118
Delta Person 540 391 904 824
Gregory 1,428 1,113 2,283 2,271
Rumford 1 652 (7) 1,308
Selkirk 3,526 4,080 7,056 7,650
Other (530) (239) (733) (401)
----------------------------------------------------------------------------
Total adjusted EBITDA from Other
Project Assets segment 8,591 9,172 16,200 19,161
Project income
Total adjusted EBITDA from all
Projects 38,526 33,985 77,275 75,055
Amortization 16,596 17,422 32,982 35,005
Interest expense, net 6,097 8,487 11,878 15,613
Change in the fair value of
derivative instruments 210 (2,321) 12,729 (589)
Other (income) expense 82 (1,064) 281 (969)
----------------------------------------------------------------------------
Project income as reported in the
statement of operations $ 15,541 $ 11,461 $ 19,405 $ 25,995
Contacts: Atlantic Power Corporation Patrick Welch (617)
977-2700 info@atlanticpower.com www.atlanticpower.com
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