DEDHAM, Mass., Aug. 2, 2018 /PRNewswire/ --
Second Quarter 2018 Financial Highlights
- Net loss attributable to Atlantic Power of $(0.6) million in Q2 2018 vs. $(21.9) million in Q2 2017
- Project income of $13.6 million
in Q2 2018 vs. project loss of $(12.1)
million in Q2 2017
- Both Net loss and Project income (loss) improved from Q2 2017
due primarily to the non-recurrence of $57.7
million impairment expense at Chambers and Selkirk recorded in 2017
- Cash from operating activities of $28.1
million in Q2 2018 decreased from $51.6 million in Q2 2017
- Project Adjusted EBITDA of $39.8
million in Q2 2018 decreased from $85.4 million in Q2 2017
- Lower operating cash flow and Project Adjusted EBITDA resulted
from Power Purchase Agreement (PPA) expirations in 2018,
non-recurrence of OEFC Settlement revenue recorded in 2017,
Manchief gas turbine overhaul in 2018 and Tunis re-start expenses in 2018, as
expected
- Repaid $26.4 million of term loan
and project debt in Q2 2018 and $58.8
million year to date; leverage ratio of 3.8 times at
June 30, 2018
- Repurchased and canceled approximately 1.3 million common
shares and 40,000 preferred shares in the second quarter of 2018,
at a total cost of approximately $3.4
million
- Liquidity at June 30, 2018 was
$203.4 million, including
approximately $42 million of
discretionary cash
Recent Developments (July
2018)
- Repurchased and canceled approximately 0.3 million common
shares and 46,695 preferred shares in July
2018, at a total cost of approximately $1.2 million
- On July 27, 2018, closed the
acquisition of Covanta's 50.00% interest in Koma Kulshan and now
own 100% of the project
2018 Guidance
- Reaffirmed 2018 Project Adjusted EBITDA guidance (see page 6 of
this news release)
Atlantic Power Corporation (NYSE: AT) (TSX: ATP) ("Atlantic
Power" or the "Company") today reported its financial results for
the three and six months ended June
30, 2018. Net loss attributable to Atlantic Power was
$(0.6) million for the three months
ended June 30, 2018 compared to
$(21.9) million in the year-ago
period. Project income was $13.6
million for the three months ended June 30, 2018 compared to project loss of
$(12.1) million in the year-ago
period. Cash provided by operating activities declined to
$28.1 million for the three months
ended June 30, 2018 from $51.6 million in the year-ago period.
Project Adjusted EBITDA for the three months ended June 30, 2018 declined to $39.8 million from $85.4
million in the year-ago period.
"Second quarter results declined primarily due to PPA
expirations, but exceeded our expectations and keep us on plan to
achieve our 2018 guidance," said James J.
Moore, Jr., President and CEO of Atlantic Power.
"During the quarter we repaid $26.4
million of debt, and remain on track to repay $100 million of debt this year. In
addition, we repurchased and canceled $3.4
million of common and preferred shares during the quarter,
taking us to a total of $13.7 million
for the year to date through June."
Mr. Moore continued, "In early July we announced the acquisition
of our partners' interests in the Koma Kulshan hydro facility for a
total of $13.2 million. This
was our first external growth investment after three years of
focusing on operations and balance sheet improvement. The
significant recurring cash flow from our existing businesses and
our strong liquidity enable us to continue delevering and buying
back shares when prices are below our estimates of intrinsic value,
as well as making additional growth investments when they are
accretive to intrinsic value per share."
Atlantic Power
Corporation
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Table 1 – Summary
of Financial Results
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(in millions of
U.S. dollars)
Unaudited
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Three months
ended
June 30,
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Six months
ended
June 30,
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2018
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2017
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2018
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2017
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Project
revenue
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$66.2
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$124.0
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$146.2
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$222.4
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Project income
(loss)
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13.6
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(12.1)
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41.8
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13.2
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Net (loss) income
attributable to Atlantic Power Corporation
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(0.6)
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(21.9)
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15.2
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(24.6)
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Cash provided by
operating activities
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28.1
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51.6
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78.4
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85.7
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Project Adjusted
EBITDA
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39.8
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85.4
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93.2
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149.3
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All amounts are in
U.S. dollars and are approximate unless otherwise indicated.
Project Adjusted EBITDA is not a recognized measure under
generally accepted accounting principles in the United States
("GAAP") and does not have a standardized meaning prescribed by
GAAP; therefore, this measure may not be comparable to similar
measures presented by other companies. Please refer to
"Non-GAAP Disclosures" on page 14 of this news release for an
explanation and a reconciliation of "Project Adjusted EBITDA" as
used in this news release to Project income (loss), the most
directly comparable measure on a GAAP basis, and Net Income
(loss).
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Financial Results for the Three Months Ended June 30, 2018
Key Business Drivers
The most significant business drivers in the second quarter of
2018 were the expirations of the PPAs at Kapuskasing and North Bay in Ontario at year-end 2017, the early
terminations of the PPAs for the three San Diego projects effective March 1, 2018, the short-term contract extension
at Williams Lake (less favorable
economics) effective April 2, 2018,
and maintenance costs associated with the Tunis re-start and the Manchief gas turbine
overhaul. The impact of these drivers on results was as
expected. Overall, though, results were modestly better than
anticipated due to positive variances (relative to expectations) at
Morris, which benefited from higher steam and ancillary services
revenues and lower gas prices; Mamquam, which experienced
significantly better than average water flows; Kenilworth, which benefited from higher
merchant energy and steam sales, and other projects. These
positive variances were partially offset by below-average water
flows at Curtis Palmer.
Net Loss, Project Income and Project Adjusted EBITDA
Net loss attributable to Atlantic Power Corporation for
the second quarter of 2018 was $(0.6)
million compared to $(21.9)
million in the second quarter of 2017. The
$21.3 million improvement was
primarily attributable to a $25.7
million increase in Project income (discussed below); an
$11.3 million increase in unrealized
foreign exchange gain ($5.4 million
gain versus a $5.9 million loss),
most of which was related to the revaluation of debt denominated in
Canadian dollars (due to the appreciation of the Canadian dollar
during the quarter, compared to a depreciation in the comparable
2017 period), and a $7.3 million
reduction in corporate interest expense as a result of debt
repayment and re-pricing of the Company's credit facilities.
These positive factors were partially offset by an increase in
income tax expense.
Project income for the second quarter of 2018 was
$13.6 million as compared to a
project loss of $(12.1) million in
the year-ago period. The most significant driver of the
$25.7 million improvement was the
non-recurrence of $57.7 million of
impairment expense recorded at Chambers and Selkirk in the 2017 period. In addition,
Frederickson and Orlando benefited
from lower maintenance expense in 2018, and several other projects
recorded modest increases in project income for various
reasons. These positive variances were partially offset by
lower project income at Kapuskasing, North
Bay, the three San Diego
projects and Williams Lake,
resulting from PPA expirations and terminations and (for
Williams Lake) a PPA extension on
less favorable terms; at Tunis,
from maintenance expense associated with the planned re-start of
the facility in 2018 and the non-recurrence of the OEFC Settlement
revenues recorded in 2017; at Manchief, due to the gas turbine
overhaul in 2018; and at Curtis Palmer, due to lower water flows
than the comparable 2017 period.
Project Adjusted EBITDA for the second quarter of 2018
declined to $39.8 million from
$85.4 million in the second quarter
of 2017. The $45.6 million
decrease was primarily attributable to the expiration of contracts
at Kapuskasing and North Bay at year-end 2017 (-$28.1 million); maintenance expenses incurred at
Tunis in preparation for re-start
incurred in 2018 and the absence of OEFC Settlement revenues
recorded in 2017 (-$8.1 million); the
early termination of the PPAs for the three San Diego projects effective March 1, 2018 (-$7.7
million); maintenance expenses associated with the Manchief
gas turbine overhaul in 2018 (-$7.2
million); lower water flows at Curtis Palmer (-$3.5 million), and a less favorable short-term
PPA at Williams Lake
(-$2.8 million). Partially
offsetting these decreases were increases at Frederickson
($3.0 million), due to maintenance
expense in 2017; Orlando
($2.0 million), due to higher
availability and higher contractual capacity rates; Morris
($1.7 million), due to a higher
capacity price realized in the PJM capacity auction for this year;
Mamquam ($1.6 million), due to higher
water flows and lower maintenance expense, and modest increases at
other projects.
Cash Flow
Cash provided by operating activities for the second
quarter of 2018 declined $23.5
million to $28.1 million from
$51.6 million in the second quarter
of 2017. Operating cash flow was negatively affected by the
$45.6 million reduction in Project
Adjusted EBITDA, but this was partially offset by $13.8 million of net favorable changes in working
capital, including decreases in working capital attributable to PPA
expirations and the cessation of operations at several projects
compared to the year-ago period, and an $8.7
million reduction in cash interest payments (resulting from
debt repayment and a lower spread on the Company's credit
facilities).
Cash used in investing activities for the second quarter
of 2018 was $(1.3) million compared
to $(2.2) million in the second
quarter of 2017. The Company used $(1.1) million of cash in the 2018 period to
acquire an additional ownership interest in Koma Kulshan; however,
the Company had lower capital expenditures than in the 2017
period.
Cash used in financing activities for the second quarter
of 2018 was $(32.5) million as
compared to $(32.4) million in the
year-ago period. The Company repaid $(26.4) million of term loan and project debt,
repurchased $(2.8) million of common
shares and $(0.6) million (US$
equivalent) of preferred shares. It also paid $(2.1) million of preferred dividends. In
the comparable 2017 period, the Company repaid $(29.5) million of term loan and project debt and
paid $(2.2) million of preferred
dividends.
During the second quarter, the Company had a $5.7 million net decrease in cash, restricted
cash and cash
equivalents.
Financial Results for the Six Months Ended June 30, 2018
Key Business Drivers
As with the second quarter, the most significant business
drivers in the first six months of 2018 were the expirations, early
terminations and short-term extensions of the PPAs at Kapuskasing, North
Bay, San Diego and
Williams Lake, as previously
described, maintenance costs associated with the Tunis re-start and Manchief gas turbine
overhaul, and lower water flows at Curtis Palmer than in the 2017
period. These declines were partially offset by increases at
Morris, Frederickson, Orlando,
Mamquam and Nipigon. Overall, results were modestly better
than anticipated.
Net Income, Project Income and Project Adjusted
EBITDA
Net income attributable to Atlantic Power Corporation for
the first six months of 2018 was $15.2
million compared to a net loss of $(24.6) million in the first six months of
2017. The $39.8 million
improvement was primarily attributable to a $28.6 million increase in Project income
(discussed below); a $21.9 million
increase in unrealized foreign exchange gain ($13.6 million gain versus an $8.3 million loss), most of which was related to
the revaluation of debt denominated in Canadian dollars (due to the
appreciation of the Canadian dollar during the first six months of
2018, compared to a depreciation in the comparable 2017 period); a
$9.6 million reduction in corporate
interest expense as a result of debt repayment and re-pricing of
the Company's credit facilities; a $4.4
million gain on the repurchase of the Company's preferred
shares; and a $2.3 million change in
fair value of the conversion option derivative related to the
Company's Series E convertible debentures. These positive
factors were partially offset by higher income tax
expense.
Project income for the first six months of 2018 increased
to $41.8 million from $13.2 million in the year-ago period. The
$28.6 million increase was primarily
attributable to the non-recurrence of $57.7
million of impairment expense recorded at Chambers and
Selkirk in 2017, lower maintenance
expense at Frederickson and Orlando, and modest increases at several other
projects. These positive variances were partially offset by
lower project income at Kapuskasing, North
Bay, and the three San
Diego projects resulting from PPA expirations and
terminations; at Tunis, from
maintenance expense associated with the planned re-start of the
facility and the non-recurrence of the OEFC Settlement revenues
recorded in 2017; at Manchief, due to the gas turbine overhaul in
2018; and at Curtis Palmer, due to lower water flows than the
comparable 2017 period.
Project Adjusted EBITDA for the first six months of 2018
declined to $93.2 million from
$149.3 million in the first six
months of 2017. The $56.1
million decrease was primarily attributable to the
expiration of contracts at Kapuskasing and North Bay at year-end 2017 (-$42.9 million); maintenance expenses incurred at
Tunis in preparation for re-start
incurred in 2018 and the absence of OEFC Settlement revenues
recorded in 2017 (-$10.7 million);
the termination of the PPAs for the three San Diego projects effective March 1, 2018 (-$10.4
million); maintenance expenses associated with the Manchief
gas turbine overhaul in 2018 (-$6.8
million); lower water flows at Curtis Palmer (-$3.2 million), and a less favorable short-term
PPA at Williams Lake
(-$1.8 million). Partially
offsetting these decreases were increases at Morris ($5.4 million), due to a higher capacity price
realized in the PJM capacity auction for this year, higher merchant
dispatch and higher steam and ancillary services revenues;
Frederickson ($3.1 million), due to
maintenance expense in 2017; Orlando ($2.4
million), due to higher availability and higher contractual
capacity rates; Mamquam ($2.5
million), due to higher water flows and lower maintenance
expense; Nipigon ($2.3 million), due to a contractual rate increase
and other factors, and modest increases at other
projects.
Cash Flow
Cash provided by operating activities for the first six
months of 2018 declined $7.3 million
to $78.4 million from $85.7 million in the first six months of
2017. Operating cash flow was negatively affected by the
$56.1 million reduction in Project
Adjusted EBITDA. However, this impact was mostly offset by
$34.7 million of net favorable
changes in working capital, particularly a $17.7 million decrease in working capital at
Kapuskasing, North Bay and the three San Diego projects, as they were not in
operation at June 30, 2018. In
addition, cash interest payments were $13.2
million lower in the first six months of 2018 than in the
comparable 2017 period, as a result of debt repayment and a lower
spread on the Company's credit facilities.
Cash used in investing activities for the first six
months of 2018 was $(2.4) million
compared to $(4.2) million in the
first six months of 2017. The Company used $(1.1) million of cash in the 2018 period to
acquire an additional ownership interest in Koma Kulshan.
Capital expenditures in the 2018 period were $2.9 million lower than in the 2017 period.
Cash used in financing activities for the first six
months of 2018 was $(78.2) million as
compared to $(61.9) million in the
year-ago period. In the 2018 period, the Company issued
$92.2 million (US$ equivalent) of new
convertible debentures and used the proceeds to redeem ($88.0) million of existing convertible
debentures. It also repaid $(58.8)
million of term loan and project debt, repurchased
$(9.2) million of common shares and
$(4.5) million (US$ equivalent) of
preferred shares, and paid $(4.3)
million of preferred dividends. In the comparable 2017
period, the Company repaid $(56.9)
million of term loan and project debt and paid $(4.3) million of preferred dividends.
During the first six months of 2018, the Company had a
$2.2 million net decrease in cash,
restricted cash and cash
equivalents.
Liquidity and Balance Sheet
Liquidity
As shown in Table 2, the Company's liquidity at June 30, 2018 was $203.4
million, a decrease of $1.7
million from the March 31,
2018 level. The Company's unrestricted cash of
$80.8 million includes $49.2 million at the parent, of which the Company
considers approximately $42 million
to be discretionary cash available for general corporate
purposes. The $10 million net
increase in cash at the parent as compared to the March 31, 2018 level was primarily due to a
release of cash from the projects. Following the expiration
of several PPAs and the shutdown of the three San Diego projects, the Company's need for
working capital at certain projects has been reduced. During
the quarter, the Company used discretionary cash to repurchase
$3.4 million of common and preferred
shares and to fund the $1.1 million
acquisition of an additional 0.25% interest in Koma
Kulshan.
Atlantic Power
Corporation
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Table 2 –
Liquidity
(in millions of
U.S. dollars)
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Unaudited
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June 30,
2018
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Mar. 31,
2018
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Cash and cash
equivalents, parent
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$49.2
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$39.2
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Cash and cash
equivalents, projects
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31.6
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43.4
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Total cash
and cash equivalents
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80.8
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82.6
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Revolving credit
facility
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200.0
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200.0
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Letters of credit
outstanding
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(77.4)
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(77.5)
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Availability under revolving credit facility
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122.6
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122.5
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Total
liquidity
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$203.4
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$205.1
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Excludes restricted
cash of:
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$1.9
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$5.7
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Balance Sheet
Debt Repayment
During the second quarter of 2018, the Company repaid
$20 million of the APLP Holdings term
loan and amortized $6.4 million of
project-level debt, including the $5.6
million of remaining debt at Epsilon Power Partners
(EPP). The EPP debt was repaid ahead of schedule.
Year to date through June 30,
2018, the Company has repaid $50
million of the term loan and $8.8
million of project debt. This is consistent with the
Company's plan to repay $90 million
of the term loan and amortize $10
million of project debt in 2018.
At June 30, 2018, the Company's
consolidated debt was $778 million,
excluding unamortized discounts and deferred financing costs, and
the Company's consolidated leverage ratio (consolidated gross debt
to trailing 12-month consolidated Adjusted EBITDA) was 3.8
times.
Debt Maturity Profile
As a result of the first quarter 2018 convertible debenture
issuance and redemption transactions, the Company has no bullet
maturities until December 2019, when
the remaining Cdn$24.7 million of
Series D Debentures mature. The Series D Debentures are
callable at par at any time prior to maturity. The Company
has no bullet maturities in 2020 or 2021. The Company's
$200 million revolving credit
facility matures in April 2022. The $490 million APLP Holdings term loan has an
April 2023 maturity, although it is
expected to be more than 80% repaid by the maturity date. The
Cdn$115.0 million of Series E
Debentures issued in January 2018
have a January 2025 maturity
date.
Normal Course Issuer Bid (NCIB) Update
The Company has in place an NCIB for its common and preferred
shares and convertible debentures. In June 2018, it amended the NCIB to increase the
amount of preferred shares that it could repurchase to 10% of the
public float from the previous amount of 5% of the public
float.
In the second quarter of 2018, the Company repurchased and
canceled approximately 1.3 million common shares at a total cost of
$2.8 million, or an average price of
$2.14 per share. In
June 2018, the Company repurchased
and canceled 40,000 shares of the Cumulative Floating Rate
Preferred, Series 3 at Cdn$18.00 per
share, for a total cost of Cdn$0.7
million.
In July 2018, the Company
repurchased and canceled another 0.3 million common shares at a
total cost of $0.6 million, or an
average price of $2.14 per
share. The Company also repurchased and canceled 5,000 shares
of the Cumulative Rate Reset Preferred, Series 2 at Cdn$17.99 per share and 41,695 shares of the
Cumulative Floating Rate Preferred, Series 3 at Cdn$17.95 per share, for a total cost of
Cdn$0.8 million.
Year to date through July 31,
2018, the Company has repurchased and canceled a total of
approximately 4.6 million common shares at a total cost of
$9.8 million, or an average price of
$2.11 per share. It also has
repurchased and canceled 237,500 shares of the 4.85% Cumulative
Redeemable Preferred, Series 1; 5,000 shares of the Cumulative Rate
Reset Preferred, Series 2; and 164,790 shares of the Cumulative
Floating Rate Preferred, Series 3, at a total cost of Cdn$6.7 million.
2018 Guidance
The Company has not provided guidance for Project income or Net
income because of the difficulty of making accurate forecasts and
projections without unreasonable efforts with respect to certain
highly variable components of these comparable GAAP metrics,
including changes in the fair value of derivative instruments and
foreign exchange gains or losses. These factors, which
generally do not affect cash flow, are not included in Project
Adjusted EBITDA.
The Company is reaffirming its guidance for 2018 Project
Adjusted EBITDA in the range of $170
to $185 million. The expected
decline from 2017 Project Adjusted EBITDA of $288.8 million is primarily attributable to the
impact of PPA expirations in 2017 and 2018 and the non-recurrence
of revenues received under the OEFC Settlement in 2017. Other
factors contributing to lower Project Adjusted EBITDA include
maintenance expense associated with the gas turbine overhaul at
Manchief in the second quarter of 2018 and re-start costs for
Tunis, most of which were incurred
and expensed in the first six months of 2018. The Company's
2018 guidance assumes average water conditions as compared to
favorable conditions in 2017. These negative factors are
expected to be partially offset by increases at several other
projects, including Morris (a higher PJM capacity price) and
Frederickson (maintenance outage in 2017).
Table 3 provides a bridge of the Company's 2018 Project Adjusted
EBITDA guidance to Cash provided by operating activities. For
purposes of providing this bridge to a cash flow measure, the
impact of changes in working capital is assumed to be nil.
The impact of lower Project Adjusted EBITDA on cash provided by
operating activities is expected to be partially mitigated by a
$27 million reduction in cash
interest payments in 2018 relative to 2017. The
reduction in cash interest payments is attributable to a full year
benefit from the $166 million of debt
repaid in 2017, a partial year benefit from the expected debt
repayment of $100 million in 2018,
the lower interest rate on the term loan and revolver resulting
from re-pricings in 2017 and 2018, and the non-recurrence of the
Piedmont interest rate swap
termination cost incurred in 2017.
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Atlantic Power
Corporation Table 3 – Bridge of 2018 Project Adjusted
EBITDA Guidance to Cash Provided by Operating
Activities (in millions of U.S.
dollars) Unaudited
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2018
Guidance
(initiated
3/1/18)
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Project Adjusted
EBITDA
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$170 -
$185
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Adjustment for equity
method projects(1)
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(2)
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Corporate G&A
expense
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(22)
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Cash interest
payments
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(45)
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Cash taxes
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(4)
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Other (including
changes in working capital)
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-
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Cash provided by
operating activities
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$95 -
$110
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Note: For the
purpose of providing a bridge of Project Adjusted EBITDA guidance
to a cash flow measure, the impact of
changes in working capital on Cash provided by operating activities
is assumed to be nil.
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(1) For
equity method projects, represents difference between Project
Adjusted EBITDA and cash distribution from equity method
projects.
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Commercial and Operational Updates
Acquisition of Partners' Interests in Koma Kulshan
In June 2018, the Company acquired
an additional 0.25% ownership interest in the Koma Kulshan hydro
facility for $1.1 million. On
July 27, 2018, it acquired the
remaining 50.00% ownership interest from Covanta and bought out the
operation and maintenance contract held by Covanta for a total of
$12.1 million. The purchase was
funded from discretionary cash. As a result, the Company now
owns 100% of the project and will consolidate it beginning in the
third quarter of 2018. The Company will also become the
project operator.
Koma Kulshan is a 13 megawatt run-of-river hydro facility in
Washington State. The PPA with Puget Sound Energy runs
through March 2037. The project has no debt. The total
purchase price of $13.2 million
represents a multiple of approximately 10 times the Company's
estimate of pro forma Project Adjusted EBITDA and approximately 11
times the Company's estimate of pro forma cash distributions, both
based on average water conditions.
2018-2019 PPA Expirations
The Company has five projects with PPAs that expired in 2018 or
are scheduled to expire in 2019:
Naval Station, North Island and NTC (San Diego). As previously reported,
the projects ceased operations on February
7, 2018 when the land use agreements with the U.S. Navy that
provided the Company the right to use the sites expired. The
PPAs with San Diego Gas & Electric (SDG&E) were terminated
effective March 1, 2018. The
Company executed new power contracts for all three projects that
were conditioned on California Public Utilities Commission (CPUC)
approval and the Company obtaining the right to remain on the Navy
sites for the contract term ("site control"). Although the
CPUC approved the Naval Station and North Island PPAs earlier this
year, in late July it rejected the SCE contract for NTC. The
Company remains engaged in discussions with the Navy regarding site
control for Naval Station and North Island, but the probability of
success at either site remains low. The Company is required
by its land use agreements with the Navy to decommission the
sites. It intends to proceed with the decommissioning of NTC
and it is making preparations to decommission both Naval Station
and North Island as well. The cost and timing of
decommissioning are dependent on the scope of work, which will be
determined together with the Navy.
Williams Lake (British Columbia). Since
April 2, 2018, the project has been
operating under an amended energy purchase agreement with BC Hydro,
which provides for a short-term extension beyond the original
expiration date of April 1,
2018. The amended contract will expire on June 30, 2019, or September 30, 2019 at the option of BC
Hydro. The amended contract is subject to the approval of the
BC Utilities Commission (BCUC). The schedule for BCUC review
was recently extended. If the BCUC has not approved the
amended contract by September 17,
2018, either party will have the right to terminate the
contract, although this date may be extended at the option of BC
Hydro.
Kenilworth. As
previously reported, with the April
2018 exercise by Merck of a one-year extension option, the
Energy Services Agreement will expire on September 30, 2019. Merck has two
additional successive one-year extension options under the
contract.
Tunis Planned Re-start
The Company has completed the commissioning of the Tunis plant, including installing an upgrade
to the control system. Most of the estimated $5 million cost (US$ equivalent) of the re-start
was incurred in the first six months of 2018 and all of it was
expensed. Re-start of operations under the 15-year PPA has
been delayed about three months pending review and acceptance by
the Ontario Independent Electricity System Operator (IESO) of the
commissioning report that was submitted by the independent engineer
at the end of July. Approval by the IESO will allow the
project to operate in dispatchable mode. The targeted
re-start for Tunis is now in the
October timeframe. Under the PPA, Tunis will receive monthly capacity payments
and will earn energy revenues for those periods during which it
operates.
Manchief Outage
The Company undertook a major gas turbine outage at its Manchief
project in mid-April through late May. This is similar to the
one undertaken in 2015 for the project's other gas turbine.
The costs were expensed and reduced Project Adjusted EBITDA for
Manchief by approximately $7.4
million in the second quarter of 2018.
Maintenance and Capex
There has been no change to the Company's planned maintenance
expenses of approximately $34.8
million and capital expenditures of approximately
$1.4 million for 2018. In the
second quarter of 2018, the Company incurred $15.1 million of maintenance expense, a
significant portion of which was for the Tunis re-start and the Manchief outage.
Through June 30 of this year, the
Company has incurred maintenance expense of $22.0 million and made capital expenditures of
$0.3 million. (These figures
include the Company's proportional share of maintenance expenses
and capital expenditures at equity method investments.)
Supplementary Information Regarding Non-GAAP
Disclosures
A discussion of non-GAAP disclosures and schedules reconciling
Project Adjusted EBITDA, a non-GAAP measure, to the comparable GAAP
measure, can be found on page 14 of this release.
Information by Project
A schedule of Project income (loss), Project Adjusted EBITDA and
Cash Distributions by project can be found in the second quarter
2018 presentation on the Company's website. Cash
Distributions from Projects is the amount of cash distributed by
the projects to the Company out of available project cash flow
after all project-level operating costs, interest payments,
principal repayment, capital expenditures and working capital
requirements.
Investor Conference Call and Webcast
Atlantic Power's management team will host a telephone
conference call and webcast on Friday,
August 3, 2018 at 8:30 AM
ET. Management's prepared remarks and an accompanying
presentation will be available on the Conference Calls page of the
Company's website prior to the call.
Conference Call / Webcast Information:
Date: Friday, August
3, 2018
Start Time: 8:30 AM
ET
Phone Number: U.S. (Toll Free) 1-855-239-3193;
Canada (Toll Free) 1-855-669-9657;
International (Toll) 1-412-542-4129.
Conference Access: Please request access to the
Atlantic Power conference call.
Webcast: The call will be broadcast over Atlantic
Power's website at www.atlanticpower.com.
Replay/Archive Information:
Replay: Access conference call number
10122183 at the following telephone numbers: U.S.
(Toll Free) 1-877-344-7529; Canada
(Toll Free) 1-855-669-9658; International (Toll)
1-412-317-0088. The replay will be available one hour after
the end of the conference call through September 3, 2018 at 11:59
PM ET.
Webcast archive: The conference call will be archived
on Atlantic Power's website at www.atlanticpower.com for a period
of 12 months.
About Atlantic Power
Atlantic Power is an independent power producer that owns power
generation assets in nine states in the
United States and two provinces in Canada. The
generation projects sell electricity and steam to investment-grade
utilities and other creditworthy large customers predominantly
under long‑term PPAs that have expiration dates ranging from 2019
to 2037. The Company seeks to minimize its exposure to
commodity prices through provisions in the contracts, fuel supply
agreements and hedging arrangements. The projects are
diversified by geography, fuel type, technology, dispatch profile
and offtaker (customer). The majority of the projects in
operation are 100% owned and directly operated and maintained by
the Company. The Company has expertise in operating most fuel
types, including gas, hydro, and biomass, and it owns a 40%
interest in one coal project.
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 Company's expectation that it will repay $100 million of debt in 2018;
- the Company's assessment of its cash flow and liquidity and its
ability to continue delevering, repurchasing shares and making
growth investments;
- the Company's view that its second quarter and year-to-date
June 2018 results were modestly
better than anticipated;
- the Company's view that approximately $42 million of cash at the parent is available
for discretionary purposes;
- the Company's assessment of its working capital needs at its
projects;
- the Company's estimate that it will have repaid more than 80%
of its term loan by the April 2023
maturity date;
- the Company's guidance for 2018 Project Adjusted EBITDA in the
range of $170 to $185 million;
- the Company's estimate that the majority of the expected
decline in 2018 Project Adjusted EBITDA is attributable to the
impact of PPA expirations in 2017 and 2018 and the non-recurrence
of revenues received under the OEFC Settlement;
- the Company's estimate that decreases to 2018 Project Adjusted
EBITDA, including the impact of PPA expirations and lower expected
results at Tunis and Manchief,
will be partially offset by increases at several other projects,
including Morris and Frederickson;
- the Company's estimate for 2018 Cash provided by operating
activities in the range of $95 to
$110 million, assuming for this
purpose that changes in working capital are nil;
- the Company's estimate that cash interest payments in 2018 will
be approximately $45 million, or
$27 million lower than the 2017
level, with the decline attributable to debt repayment in 2017 and
2018, the re-pricings of the Company's credit facilities, and the
non-recurrence of the Piedmont
interest rate swap termination cost incurred in October 2017;
- the Company's estimates of pro forma Project Adjusted EBITDA
and pro forma cash distributions for the acquired interests in the
Koma Kulshan project;
- the Company's view that it is unlikely to obtain site control
at any of its three San Diego
projects;
- the Company's expectations with respect to the estimated cost
and timing of a planned re-start of its Tunis project;
- the Company's estimation that, in 2018, including its share of
equity-owned projects, maintenance expense will total approximately
$34.8 million and capital
expenditures will total approximately $1.4
million; and
- the results of operations and performance of the Company's
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 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.
Atlantic Power
Corporation
Table 4 –
Consolidated Balance Sheet
(in millions of
U.S. dollars)
Unaudited
|
|
|
|
|
|
June
30,
|
December
31,
|
|
|
2018
|
2017
|
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$80.8
|
$78.7
|
|
Restricted
cash
|
1.9
|
6.2
|
|
Accounts
receivable
|
25.3
|
52.7
|
|
Current portion of
derivative instruments asset
|
5.9
|
2.7
|
|
Inventory
|
14.0
|
17.7
|
|
Prepayments
|
4.3
|
6.9
|
|
Income taxes
receivable
|
0.5
|
1.0
|
|
Other current
assets
|
3.6
|
3.1
|
|
Total current
assets
|
136.3
|
169.0
|
|
Property, plant and
equipment, net
|
573.1
|
602.3
|
|
Equity investments in
unconsolidated affiliates
|
160.9
|
163.7
|
|
Power purchase
agreements and intangible assets, net
|
166.3
|
191.2
|
|
Goodwill
|
21.4
|
21.3
|
|
Derivative
instruments asset
|
2.6
|
2.8
|
|
Other
assets
|
7.2
|
8.5
|
|
Total
assets
|
$1,067.8
|
$1,158.8
|
|
|
|
|
|
Liabilities
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$1.4
|
$2.2
|
|
Accrued
interest
|
0.2
|
0.3
|
|
Other accrued
liabilities
|
16.9
|
25.5
|
|
Current portion of
long-term debt
|
78.0
|
99.5
|
|
Current portion of
derivative instruments liability
|
6.1
|
4.4
|
|
Other current
liabilities
|
0.7
|
1.0
|
|
Total current
liabilities
|
103.3
|
132.9
|
|
Long-term debt, net
of unamortized discount and deferred financing costs
|
574.6
|
616.3
|
|
Convertible
debentures, net of discount and unamortized deferred financing
costs
|
97.0
|
105.4
|
|
Derivative
instruments liability
|
17.7
|
19.9
|
|
Deferred income
taxes
|
14.3
|
11.7
|
|
Power purchase and
fuel supply agreement liabilities, net
|
22.5
|
24.1
|
|
Asset retirement
obligations, net
|
44.7
|
45.3
|
|
Other long-term
liabilities
|
5.8
|
6.4
|
|
Total
liabilities
|
$879.9
|
$962.0
|
|
|
|
|
|
Equity
|
|
|
|
Common shares, no par
value, unlimited authorized shares; 111,666,941 and 115,211,976
issued and outstanding at June 30, 2018 and December 31, 2017,
respectively
|
1,266.8
|
1,274.8
|
|
Accumulated other
comprehensive loss
|
(141.9)
|
(134.8)
|
|
Retained
deficit
|
(1,143.3)
|
(1,158.4)
|
|
Total Atlantic Power
Corporation shareholders' equity
|
(18.4)
|
(18.4)
|
|
Preferred shares
issued by a subsidiary company
|
206.3
|
215.2
|
|
Total
equity
|
187.9
|
196.8
|
|
Total liabilities and
equity
|
$1,067.8
|
$1,158.8
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic Power
Corporation
|
Table 5 –
Consolidated Statements of Operations
|
(in millions of
U.S. dollars, except per share amounts)
|
Unaudited
|
|
Three months
ended
June 30,
|
Six months
ended
June
30,
|
|
|
2018
|
2017
|
|
2018
|
2017
|
Project
revenue:
|
|
|
|
|
|
|
Energy
sales
|
|
$31.4
|
$40.0
|
|
$69.8
|
$77.1
|
Energy
capacity revenue
|
|
23.3
|
28.3
|
|
43.4
|
47.8
|
Other
|
|
11.5
|
55.7
|
|
33.0
|
97.5
|
|
|
66.2
|
124.0
|
|
146.2
|
222.4
|
Project
expenses:
|
|
|
|
|
|
|
Fuel
|
|
15.0
|
24.0
|
|
37.2
|
52.9
|
Operations and
maintenance
|
|
27.2
|
23.3
|
|
48.5
|
43.6
|
Depreciation
and amortization
|
|
21.0
|
29.5
|
|
44.7
|
59.0
|
|
|
63.2
|
76.8
|
|
130.4
|
155.5
|
Project other income
(loss):
|
|
|
|
|
|
|
Change in fair
value of derivative instruments
|
|
(0.2)
|
(2.7)
|
|
3.5
|
(3.9)
|
Equity in
earnings (loss) of unconsolidated affiliates
|
|
11.2
|
(54.4)
|
|
23.5
|
(45.4)
|
Interest,
net
|
|
(0.4)
|
(2.2)
|
|
(1.0)
|
(4.4)
|
|
|
10.6
|
(59.3)
|
|
26.0
|
(53.7)
|
Project income
(loss)
|
|
13.6
|
(12.1)
|
|
41.8
|
13.2
|
Administrative and
other expenses:
|
|
|
|
|
|
|
Administration
|
|
6.2
|
5.7
|
|
12.2
|
12.1
|
Interest
expense, net
|
|
11.1
|
18.4
|
|
26.1
|
35.7
|
Foreign
exchange (gain) loss
|
|
(5.4)
|
5.9
|
|
(13.6)
|
8.3
|
Other income,
net
|
|
(0.2)
|
-
|
|
(2.2)
|
-
|
|
|
11.7
|
30.0
|
|
22.5
|
56.1
|
Income (loss) from
operations before income taxes
|
|
1.9
|
(42.1)
|
|
19.3
|
(42.9)
|
Income tax expense
(benefit)
|
|
0.9
|
(22.3)
|
|
4.2
|
(22.6)
|
Net income
(loss)
|
|
1.0
|
(19.8)
|
|
15.1
|
(20.3)
|
Net income (loss)
attributable to preferred share dividends of a subsidiary
company
|
|
1.6
|
2.1
|
|
(0.1)
|
4.3
|
Net (loss) income
attributable to Atlantic Power Corporation
|
|
($0.6)
|
($21.9)
|
|
$15.2
|
($24.6)
|
Net (loss) income per
share attributable to Atlantic Power Corporation
shareholders:
|
|
|
|
|
|
|
Basic
|
|
($0.01)
|
($0.19)
|
|
$0.13
|
($0.21)
|
Diluted
|
|
(0.01)
|
(0.19)
|
|
0.13
|
(0.21)
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
112.4
|
115.2
|
|
113.6
|
115.0
|
Diluted
|
|
112.4
|
115.2
|
|
140.1
|
115.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic Power
Corporation
|
Table 6 –
Consolidated Statements of Cash Flow
(in millions of
U.S. dollars)
Unaudited
|
|
Six months ended
June 30,
|
|
2018
|
2017
|
Cash provided by
operating activities:
|
|
|
Net income
(loss)
|
$15.1
|
($20.3)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
44.7
|
59.0
|
Stock-based
compensation
|
1.1
|
1.1
|
Equity in (earnings)
loss from unconsolidated affiliates
|
(23.5)
|
45.4
|
Distributions from
unconsolidated affiliates
|
27.3
|
17.2
|
Unrealized foreign
exchange (gain) loss
|
(13.3)
|
8.3
|
Change in fair value
of derivative instruments
|
(3.6)
|
3.9
|
Change in fair value
of convertible debenture conversion option derivative
|
(2.3)
|
-
|
Amortization of debt
discount and deferred financing costs
|
5.4
|
5.2
|
Change in deferred
income taxes
|
2.0
|
(24.9)
|
Change in other
operating balances
|
|
|
Accounts
receivable
|
27.4
|
(5.0)
|
Inventory
|
3.7
|
(3.4)
|
Prepayments and other
assets
|
3.8
|
(0.3)
|
Accounts
payable
|
(1.9)
|
(1.4)
|
Accruals and other
liabilities
|
(7.5)
|
0.9
|
Cash provided by
operating activities
|
78.4
|
85.7
|
|
|
|
Cash used in
investing activities:
|
|
|
Investment in
unconsolidated affiliate
|
(1.1)
|
-
|
Purchase of property,
plant and equipment
|
(1.3)
|
(4.2)
|
Cash used in
investing activities
|
(2.4)
|
(4.2)
|
|
|
|
Cash used in
financing activities:
|
|
|
Proceeds from
convertible debenture issuance
|
92.2
|
-
|
Repayment of
convertible debentures
|
(88.0)
|
-
|
Common share
repurchases
|
(9.2)
|
-
|
Preferred share
repurchases
|
(4.5)
|
-
|
Repayment of corporate
and project-level debt
|
(58.8)
|
(56.9)
|
Cash payments for
vested LTIP units withheld for taxes
|
(0.8)
|
(0.7)
|
Deferred financing
costs
|
(4.8)
|
-
|
Dividends paid to
preferred shareholders
|
(4.3)
|
(4.3)
|
Cash used in
financing activities:
|
(78.2)
|
(61.9)
|
|
|
|
Net (decrease)
increase in cash, restricted cash and cash equivalents
|
(2.2)
|
19.6
|
Cash, restricted cash
and cash equivalents at beginning of period
|
84.9
|
98.8
|
Cash, restricted cash
and cash equivalents at end of period
|
$82.7
|
$118.4
|
|
|
|
Supplemental cash
flow information
|
|
|
Interest
paid
|
$20.2
|
$33.4
|
Income taxes paid,
net
|
$1.9
|
$2.2
|
Accruals for
construction in progress
|
$0.1
|
$1.3
|
Non-GAAP Disclosures
Project Adjusted EBITDA is not a measure recognized under
GAAP and does not have a standardized meaning prescribed by GAAP,
and is therefore unlikely to be comparable to similar measures
presented by other companies. Investors are cautioned that
the Company may calculate this non-GAAP measure in a manner that is
different from other companies. The most directly comparable
GAAP measure is Project income (loss). Project Adjusted
EBITDA is defined as Project income (loss) plus interest, taxes,
depreciation and amortization (including non-cash impairment
charges), and changes in the fair value of derivative
instruments. Management uses Project Adjusted EBITDA at the
project level to provide comparative information about project
performance and believes such information is helpful to
investors. A reconciliation of Project Adjusted EBITDA to
Project income (loss) and to Net income (loss) on a consolidated
basis is provided in Table 7 below.
Atlantic Power
Corporation
Table 7 –
Reconciliation of Net income (loss) to Project Adjusted
EBITDA
|
(in millions of
U.S. dollars)
|
Unaudited
|
|
Three months ended
June 30,
|
|
Six months ended
June 30,
|
|
2018
|
2017
|
|
2018
|
2017
|
Net (loss) income
attributable to Atlantic Power Corporation
|
($0.6)
|
($21.9)
|
|
$15.2
|
($24.6)
|
Net income (loss)
attributable to preferred share dividends of a subsidiary
company
|
1.6
|
2.1
|
|
(0.1)
|
4.3
|
Net income
(loss)
|
$1.0
|
($19.8)
|
|
$15.1
|
($20.3)
|
Income tax expense
(benefit)
|
0.9
|
(22.3)
|
|
4.2
|
(22.6)
|
Income (loss) from
operations before income taxes
|
1.9
|
(42.1)
|
|
19.3
|
(42.9)
|
Administration
|
6.2
|
5.7
|
|
12.2
|
12.1
|
Interest expense,
net
|
11.1
|
18.4
|
|
26.1
|
35.7
|
Foreign exchange
(gain) loss
|
(5.4)
|
5.9
|
|
(13.6)
|
8.3
|
Other income,
net
|
(0.2)
|
-
|
|
(2.2)
|
-
|
Project income
(loss)
|
$13.6
|
($12.1)
|
|
$41.8
|
$13.2
|
|
|
|
|
|
|
Reconciliation to
Project Adjusted EBITDA
|
|
|
|
|
|
Depreciation and
amortization
|
$25.1
|
$34.7
|
|
$53.1
|
$69.3
|
Interest expense,
net
|
0.9
|
2.5
|
|
1.9
|
5.3
|
Change in the fair
value of derivative instruments
|
0.2
|
2.6
|
|
(3.6)
|
3.8
|
Impairment
|
-
|
57.7
|
|
-
|
57.7
|
Project Adjusted
EBITDA
|
$39.8
|
$85.4
|
|
$93.2
|
$149.3
|
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content:http://www.prnewswire.com/news-releases/atlantic-power-corporation-releases-second-quarter-2018-results-300691492.html
SOURCE Atlantic Power Corporation