AT Atlantic Power Corporation

Atlantic Power Corporation (NYSE: AT) (TSX: ATP) (“Atlantic Power” or the “Company”) today announced its results for the quarter ended March 31, 2011. All amounts are in U.S. dollars unless otherwise indicated. Please see “Regulation G Disclosures” attached to this news release for an explanation and US GAAP reconciliation of the terms “EBITDA”, “Adjusted EBITDA” and “Cash Available for Distribution” as used in this news release.

Highlights

• Operating results in line with annual guidance
• Construction at Piedmont Green Power is on schedule and on budget
• Closed sale of Topsham project for cash proceeds of $8.5 million
• Maintaining guidance to sustain current level of dividends into 2016, even with no positive impact from potential acquisitions or organic growth

“Our results for the quarter met our expectations and are in line with our guidance for the year,” commented Barry Welch, President and CEO. “We continue to focus on accretive development and acquisition opportunities to enhance our long-term cash flows and are confident that we can continue to execute on our growth strategy.”

Operating Performance

Project Adjusted EBITDA, including earnings from equity investments, decreased by $2.8 million to $36.0 million for the quarter ended March 31, 2011 compared to $38.8 million for the same period last year. The decrease was primarily attributable to maintenance at three of our projects, which was partially offset by an increase in EBITDA from acquisitions as well as from favorable energy prices at Lake and Auburndale. Project Adjusted EBITDA in the first quarter was affected by the following factors:

• EBITDA of $1.7 million at Cadillac, as the project was acquired in December 2010;
• increased EBITDA of $2.1 million at Lake and Auburndale due to increased contractual capacity payments under the project’s PPA and favorable energy prices; offset by
• decreased EBITDA of $2.5 million at Pasco primarily attributable to higher operations and maintenance expenses related to the unplanned replacement of gas turbine blades during a maintenance outage;
• decreased EBITDA of $2.4 million at Selkirk primarily attributable to lower capacity revenue. A planned outage was longer than expected resulting in a delay in the receipt of capacity payments until the second quarter; and
• decreased EBITDA of $1.3 million at Chambers attributable to higher maintenance costs associated with a planned outage in April and lower dispatch during the first quarter.

Cash Flow Available for Distribution

For the three months ended March 31, 2011, Cash Flow Available for Distribution decreased by $1.2 million compared to the same period last year. Our payout ratio for the first quarter 2011 was 114% as compared to 89% in the same period in 2010. The increase in our payout ratio is primarily attributable to the increased dividend obligation from our common share issuance in October of 2010. Our current payout ratio and project distributions are in line with our expectations and previous guidance for the full year 2011.

Construction of Piedmont Green Power

The construction of Piedmont Green Power, our 53 MW biomass project, is on schedule and on budget and the remainder of our equity has been contributed, bringing our total equity investment to $75 million. The remainder of the construction costs will be funded by the project-level financing that was closed in October 2010. Turnkey construction of the project is led by Zachry Industrial and we are managing construction risks jointly with our affiliate, Rollcast Energy. Cash distributions to the Company from the project are expected to average $8 million to $10 million for each full year of project operation after completion of construction in late 2012.

Sale of Topsham

On February 28, 2011, we entered into a purchase and sale agreement with an affiliate of ArcLight Capital Partners, LLC for the purchase of our lessor interest in the project. The transaction closed on May 6, 2011 and we received cash proceeds of $8.5 million, resulting in no gain or loss on the sale.

Guidance

Based on actual performance to date and projections for the remainder of the year, we confirm our previous guidance that we expect to receive distributions from our projects in the range of $80 million to $90 million for the full year 2011 compared to $83 million in 2010. We continue to expect overall levels of operating cash flows in 2011 to be improved over actual 2010 levels. Higher distributions from existing projects, initial distributions from our recent investments in Idaho Wind and Cadillac, and a slightly lower payment under the management termination agreement are expected to be partially offset by the non-recurrence of the cash tax refunds received in 2010. These increased operating cash flows in 2011, combined with the impact of our recent public offerings, are expected to result in a payout ratio of approximately 100% to 105% in 2011 subject to the financial performance of our projects. In 2012, additional increases in distributions from projects are expected to further increase operating cash flow compared to 2011, the most significant factor being increased distributions from Selkirk following the final payment of its non-recourse project level debt in mid-2012.

Based on management’s cash flow projections, we believe the current level of dividends is sustainable into 2016 before considering any positive impacts from potential future acquisitions or organic growth opportunities.

Outstanding Common Shares and Convertible Debentures

As of May 10, 2011, we had 68,531,901 common shares, Cdn$48.1 million principal amount of 6.50% convertible secured debentures due October 31, 2014, Cdn$75.0 million principal amount of 6.25% convertible debentures due March 15, 2017, and Cdn$80.5 million principal amount of 5.60% convertible debentures due June 30, 2017 outstanding. Holders of common shares currently receive a monthly dividend at an annual rate of Cdn$1.094 per common share.

The calculation of Cash Available for Distribution and a summary of Adjusted EBITDA by individual project for the quarter ended March 31, 2011 are attached to this news release.

Copies of financial data and other publicly filed documents, including the Company’s annual information form, are available on SEDAR at www.sedar.com under “Atlantic Power Corporation” or on the Company’s website at www.atlanticpower.com.

Investor Conference Call and Webcast

A telephone conference call hosted by Atlantic Power's management team will be held on Thursday, May 12, 2011 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 377980# when instructed. The conference call will also be archived on Atlantic Power's web site.

About Atlantic Power

Atlantic Power Corporation owns and operates a diverse fleet of power generation and infrastructure assets in the United States. Our power generation projects sell electricity to utilities and other large commercial customers under long-term power purchase agreements, which seek to minimize exposure to changes in commodity prices. Our power generation projects in operation have an aggregate gross electric generation capacity of approximately 1,948 megawatts in which our ownership interest is approximately 871 MW. Our corporate strategy is to generate stable cash flows from our existing assets and to make accretive acquisitions to sustain our dividend payout to shareholders, which is currently paid monthly at an annual rate of Cdn$1.094 per share. Our current portfolio consists of interests in 12 operational power generation projects across nine states, one biomass project under construction in Georgia, and an 84-mile,500 kilovolt electric transmission line located in California. Atlantic Power also owns a majority interest in Rollcast Energy, a biomass power plant developer with several projects under development.

Atlantic Power trades on the New York Stock Exchange under the symbol AT, on the Toronto Stock Exchange under the symbol ATP and has a market capitalization of approximately $1.0 billion. For more information, please visit the Company’s website at www.atlanticpower.com.

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 belief that, based on management’s cash flow projections, the current level of dividends is sustainable into 2016 without additional acquisitions or organic growth opportunities;
• The expectation that distributions from our projects will be in the range of $80 million to $90 million for the full year 2011;
• The expectation that overall levels of operating cash flows in 2011 will be improved over actual 2010 levels;
• The expectation that the payout ratio in 2011 will be approximately 100%-105% and that improvements in cash flow and payout ratio are expected in 2012;
• The expectation that cash distributions from Piedmont are expected to average $8 million to $10 million for each full year of project operation; and
• The expectation that Piedmont will complete construction in late 2012.

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 periodic reports as filed with the Securities and Exchange Commission from time to time 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)

     

March 31,2011

       

December 31,2010

   

(Unaudited)

      Assets Current assets: Cash and cash equivalents $ 28,258 $ 45,497 Restricted cash 23,268 15,744 Accounts receivable 19,781 19,362 Note receivable - related party 17,671 22,781 Current portion of derivative instruments asset 9,340 8,865

Prepayments, supplies and other

8,583 8,480 Refundable income taxes     2,079           1,593   Total current assets 108,980 122,322  

Property, plant and equipment, net

284,018 271,830 Transmission system rights 186,171 188,134 Equity investments in unconsolidated affiliates 294,231 294,805 Other intangible assets, net 82,933 88,462 Goodwill 12,453 12,453 Derivative instruments asset 22,461 17,884 Other assets     16,554           17,122   Total assets   $ 1,007,801         $ 1,013,012    

Liabilities and Shareholders’ Equity

Current liabilities:

Accounts payable and accrued liabilities $ 22,857 $ 20,530 Current portion of long-term debt 24,394 21,587 Current portion of derivative instruments liability 8,940 10,009 Interest payable on convertible debentures 3,759 3,078 Dividends payable 6,430 6,154 Other current liabilities     124           5   Total current liabilities 66,504 61,363  

Long term debt

240,692 244,299 Convertible debentures 210,005 220,616 Derivative instruments liability 20,214 21,543 Deferred income taxes 31,632 29,439 Other non-current liabilities 1,949 2,376 Commitments and contingencies - -  

Shareholders’ equity

Common shares

642,453 626,108 Accumulated other comprehensive income 527 255 Retained deficit     (209,528 )         (196,494 ) Total Atlantic Power Corporation shareholders' equity     433,452           429,869   Noncontrolling interest     3,353           3,507   Total equity     436,805           433,376   Total liabilities and equity   $ 1,007,801         $ 1,013,012    

Atlantic Power Corporation

Consolidated Statements of Operations (in thousands of U.S. dollars)

(Unaudited)

   

Three months ended Mar. 31,

    2011     2010   Project revenue:   Energy sales $ 18,502 $ 15,913 Energy capacity revenue 27,138 23,194 Transmission services 7,644 7,644 Other     381       470   53,665 47,221 Project expenses: Fuel 17,068 16,157 Operations and maintenance 8,833 5,041 Project operator fees and expenses 2,239 919 Depreciation and amortization     10,879       10,071   39,019 32,188 Project other income (expense): Change in fair value of derivative instruments 3,561 (12,194 ) Equity in earnings of unconsolidated affiliates 1,311 5,436 Interest expense, net (4,647 ) (4,411 ) Other expense, net     (2 )     -         223       (11,169 ) Project income 14,869 3,864 Administrative and other expenses (income): Administration 4,054 4,100 Interest expense, net 3,968 2,794 Foreign exchange gain     (658 )     (1,792 )       7,364       5,102   Income (loss) from operations before income taxes 7,505 (1,238 ) Income tax expense     1,523       4,873   Net income (loss) 5,982 (6,111 ) Net loss attributable to noncontrolling interest     (154 )     (48 ) Net income (loss) attributable to Atlantic Power Corporation $ 6,136 $ (6,063 )  

Net income (loss) per share attributable to Atlantic Power Corporation Shareholders:

Basic $ 0.09 $ (0.10 ) Diluted $ 0.09 $ (0.10 )  

Atlantic Power Corporation

Consolidated Statements of Cash Flows (in thousands of U.S. dollars)

(Unaudited)

  Three months ended March 31,     2011     2010   Cash flows from operating activities:  

Net (loss) income

$ 5,982 $ (6,111 ) Adjustments to reconcile to net cash provided by operating activities: Depreciation and amortization 10,879 10,071 Long-term incentive plan expense 825 1,420

Equity in earnings from unconsolidated affiliates

(1,311 ) (5,436 ) Distributions from unconsolidated affiliates 1,450 1,334 Unrealized foreign exchange loss (gain) 1,878 (623 ) Change in fair value of derivative instruments (3,561 ) 12,194 Change in deferred income taxes 2,011 4,829 Change in other operating balances Accounts receivable (419 ) 350 Prepayments, refundable income taxes and other assets 176 (372 ) Accounts payable and accrued liabilities 1,937 1,276 Other liabilities     500       1,907   Net cash provided by operating activities 20,347 20,839   Cash flows used in investing activities: Acquisitions and investments, net of cash acquired - 324 Change in restricted cash (7,524 ) (7,526 ) Proceeds from related party loan 5,110 - Biomass development costs (308 ) (317 ) Purchase of property, plant and equipment     (15,393 )     (319 ) Net cash used in investing activities (18,115 ) (7,838 )   Cash flows used in financing activities: Repayment of project-level debt (3,400 ) (2,700 )

Proceeds from project-level debt borrowings

2,781 - Dividends paid     (18,852 )     (15,795 ) Net cash used in financing activities     (19,471 )     (18,495 ) Net decrease in cash and cash equivalents (17,239 ) (5,494 ) Cash and cash equivalents at beginning of period     45,497       49,850   Cash and cash equivalents at end of period $ 28,258 $ 44,356 Supplemental cash flow information Interest paid $ 4,659 $ 1,450 Income taxes paid (refunded), net $ 14 $ (26 )  

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)

(Unaudited)

 

Three months ended March 31,

 

  2011     2010   Cash flows from operating activities 20,347   20,839 Project-level debt repayments (3,400 ) (2,700 ) Purchases of property, plant and equipment (1)   (308 )   (319 ) Cash Available for Distribution(2) 16,639 17,820  

Dividends on Common Shares

  18,992     15,801     Payout ratio 114 % 89 %   Expressed in Cdn$ Cash Available for Distribution 16,407 18,540  

Total distributions to shareholders

  18,623     16,527     (1)     Excludes construction-in-progress costs related to our Piedmont biomass project.   (2) Cash Available for Distribution is not a recognized measure under GAAP and does not have any standardized meaning prescribed by GAAP. Therefore, this measure may not be comparable to similar measures presented by other companies.  

Atlantic Power Corporation

Project Adjusted EBITDA (in thousands of U.S. dollars)

(Unaudited)

  Three months ended March 31,

 

  2011     2010   Project Adjusted EBITDA by individual segment   Auburndale $ 10,313 $ 9,371 Lake 8,490 7,313 Pasco (1,077 ) 1,415 Path 15 6,570 7,053 Chambers     4,724       5,988  

Total

29,020 31,140  

Other Project Assets Segment

Cadillac 1,747 - Piedmont (29 ) - Idaho Wind 806 - Badger Creek 760 736 Koma Kulshan 60 119 Orlando 1,891 1,801 Topsham - 415 Delta Person 399 364 Gregory 772 855 Rumford - (8 ) Selkirk 1,109 3,530 Rollcast (467 ) - Other     (75 )     (157 )

Total adjusted EBITDA from Other Project Assets segment

6,973 7,655   Project income Total adjusted EBITDA from all Projects 35,993 38,795 Depreciation and amortization 17,437 16,386 Interest expense, net 6,240 5,778 Change in the fair value of derivative instruments (2,784 ) 12,520 Other (income) expense     231       247  

Project income as reported in the statement of operations

$ 14,869 $ 3,864