DEDHAM, Mass., Feb. 28, 2019 /PRNewswire/ --
Full Year 2018 Highlights
- Net income attributable to Atlantic Power of $36.8 million vs. net loss of $(98.6) million in 2017
- Cash from operating activities of $137.5
million decreased from $169.2
million in 2017, but was modestly above Company's
expectation
- Project Adjusted EBITDA of $185.1
million in 2018 decreased from $288.8
million in 2017, but was at the high end of Company's
guidance range of $170 million to
$185 million
- Repaid $100.3 million of term
loan and project debt; achieved leverage ratio of 4.5 times at
December 31, 2018
- Executed two re-pricings of credit facilities, resulting in
additional interest cost savings
- Repurchased and canceled approximately 7.8 million common
shares and approximately 645 thousand preferred shares, at a total
cost of approximately $24.6
million
- Liquidity at December 31, 2018 of
$191.4 million, including
approximately $39 million of
discretionary cash
- Returned Tunis to commercial
operation under 15-year contract
- Announced two acquisitions that will add to capacity, average
contract life and Project Adjusted EBITDA
Fourth Quarter 2018 Financial Results
- Net income attributable to Atlantic Power of $24.7 million vs. net loss of $(41.1) million in Q4 2017
- Cash from operating activities of $39.7
million vs. $30.5 million in
Q4 2017
- Project Adjusted EBITDA of $46.6
million vs. $62.1 million in
Q4 2017
Atlantic Power Corporation (NYSE: AT) (TSX: ATP) ("Atlantic
Power" or the "Company") today reported its financial results for
the three months and year ended December
31, 2018. Net income in 2018 compared favorably with a
net loss in 2017 primarily because the Company recorded
$187.1 million of impairment expense
in 2017 but none in 2018. Cash from operating activities and
Project Adjusted EBITDA declined in 2018 primarily because of Power
Purchase Agreement (PPA) expirations in late 2017 and early 2018
and the non-recurrence of OEFC Settlement revenue recorded in 2017,
as expected. (Impairment expense is not included in Project
Adjusted EBITDA or cash flow.)
"Project Adjusted EBITDA of $185.1
million was at the high end of our 2018 guidance range, and
Operating Cash Flow of $137.5 million
modestly exceeded our expectations," said James J. Moore, Jr., President and CEO of
Atlantic Power. "We used the majority of that cash flow to
repay $100 million of debt, further
strengthening our balance sheet and reducing our interest
costs. During the year we executed two re-pricings of our
term loan for additional cost savings. We also invested more
than $24 million in common and
preferred share repurchases in 2018 at attractive price-to-value
levels, and announced two acquisitions, representing our first
external growth investments after three years of intense focus on
our costs and balance
sheet."
Mr. Moore continued, "In 2019, we expect to repay another
$86 million of debt, continuing the
ongoing reduction in our debt levels and leverage ratio. In
addition, we have liquidity of $191
million, including approximately $39
million of discretionary cash, that we will allocate to
growth investments and common and preferred share repurchases, when
these are accretive to intrinsic value per share."
Atlantic Power
Corporation
|
Table 1 – Summary
of Financial Results
|
(in millions of
U.S. dollars)
Unaudited
|
|
|
Three months
ended
December 31,
|
|
Twelve
months ended
December 31,
|
|
|
2018
|
2017
|
|
2018
|
2017
|
Project
revenue
|
|
$70.7
|
$100.0
|
|
$282.3
|
$431.0
|
Project income
(loss)
|
|
20.1
|
(39.7)
|
|
88.2
|
(47.4)
|
Net income (loss)
attributable to Atlantic Power Corporation
|
|
24.7
|
(41.1)
|
|
36.8
|
(98.6)
|
|
|
|
|
|
|
|
Cash provided by
operating activities
|
|
39.7
|
30.5
|
|
137.5
|
169.2
|
Cash (used in)
provided by investing activities
|
|
(0.1)
|
1.4
|
|
(17.0)
|
(4.3)
|
Cash (used in)
financing activities
|
|
(27.1)
|
(81.9)
|
|
(135.0)
|
(178.9)
|
|
|
|
|
|
|
|
Project Adjusted
EBITDA
|
|
46.6
|
62.1
|
|
185.1
|
288.8
|
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 15 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).
|
Financial Results for the Three Months Ended December 31, 2018
Key Drivers
The most significant drivers of fourth quarter results 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 higher maintenance expense at Oxnard due to gas turbine repairs. The
impact of PPA expirations was expected. On the positive side,
Curtis Palmer benefited from stronger water flows and Tunis returned to service under a new PPA in
October 2018.
Net Income (Loss), Project Income (Loss) and Project Adjusted
EBITDA
Net income attributable to Atlantic Power
Corporation for the fourth quarter of 2018 was
$24.7 million compared to a net loss
of $(41.1) million in the fourth
quarter of 2017. The $65.8
million swing from loss to income was primarily attributable
to $72.2 million of impairment
expense recorded in 2017 that did not recur, $10.4 million lower project interest expense due
to the repayment of Piedmont
project debt in October 2017 (the
2017 period included a $9.4 million
swap termination cost), and a $12.3
million increase in unrealized foreign exchange gain, which
was related to the revaluation of debt denominated in Canadian
dollars (the Canadian dollar depreciated during the quarter).
These positive factors were partially offset by lower gross margins
resulting from the PPA expirations previously discussed, the
non-recurrence of the OEFC settlement revenues, a $9.2 million unfavorable change in the fair value
of derivative instruments and a $12.2
million reduction in income tax benefit.
Project income for the fourth quarter of 2018 was
$20.1 million as compared to a
project loss of $(39.7) million in
the year-ago period. The most significant drivers of the
$59.8 million improvement were the
non-recurrence of impairment expense recorded at Curtis Palmer,
Williams Lake and Frederickson in
the 2017 period, and lower project interest expense due primarily
to the repayment of Piedmont
project debt in full in the fourth quarter of 2017 and the
non-recurrence of a related swap termination cost. These
positive factors were partially offset by lower gross margins
resulting from the PPA expirations previously discussed, the
non-recurrence of the OEFC settlement revenues and an unfavorable
change in the fair value of derivative
instruments.
Project Adjusted EBITDA for the fourth quarter of
2018 declined to $46.6 million from
$62.1 million in the fourth quarter
of 2017. The $15.5 million
decrease was primarily attributable to the expiration of contracts
at Kapuskasing and North Bay at year end 2017 (-$17.1 million); the early termination of the PPAs
for the three San Diego projects
effective March 1, 2018
(-$2.3 million); a less favorable
short-term PPA at Williams Lake
(-$1.6 million), and gas turbine
repairs at Oxnard (-$1.2 million). These decreases were
partially offset by higher water flows at Curtis Palmer
($3.6 million) and the return of
Tunis to commercial operation
under the new PPA and the absence of start-up expenses incurred in
2017 ($1.8 million).
Cash Flow
Cash provided by operating activities for the fourth
quarter of 2018 increased to $39.7
million from $30.5 million in
the fourth quarter of 2017. Results were positively affected
by a $16.8 million reduction in cash
interest payments, due primarily to the Piedmont swap termination expense in the 2017
period, the timing of payments on the new Series E convertible
debentures (one in July 2018 and two
annually going forward in January and July), the reduction in debt
levels and the reduced spread on the Company's credit
facilities. Distributions from unconsolidated affiliates
increased $7.9 million, but this was
partly a timing issue as the September distribution from
Orlando was not received until
October 1 ($3.6 million); Chambers had an increase of
$4.2 million due to lower operation
and maintenance expenditures and a release of working
capital. These factors, which positively affected cash flow,
were partially offset by lower Project Adjusted EBITDA for the
quarter, as previously discussed.
Cash used in investing activities for the fourth
quarter of 2018 was $0.1 million
compared to a $1.4 million source of
funds in the fourth quarter of 2017.
Cash used in financing activities for the fourth
quarter of 2018 was $27.1 million as
compared to $82.1 million in the
year-ago period. The Company repaid $20.8 million of term loan and project debt,
repurchased $4.3 million of common
shares and paid $2.0 million of
preferred dividends. In the comparable 2017 period, the
Company repaid $79.6 million of term
loan and project debt (including Piedmont, in full) and paid $2.2 million of preferred dividends.
During the fourth quarter, the Company had a $12.5 million net increase in cash, restricted
cash and cash
equivalents.
Financial Results for the Year Ended December 31, 2018
Key Drivers
The most significant drivers of full year results were the
expirations, early terminations and short-term extensions of the
PPAs at Kapuskasing and
North Bay; the San Diego projects and Williams Lake and, as previously described,
maintenance costs associated with the Tunis re-start in the first six months of 2018
and the Manchief gas turbine overhaul in the second quarter of
2018, and lower water flows at Curtis Palmer than in 2017 (though
they were very close to average). These declines were
partially offset by increases at Morris, Mamquam, Frederickson,
Orlando and Nipigon.
Net Income (Loss), Project Income (Loss) and Project Adjusted
EBITDA
Net income attributable to Atlantic Power
Corporation for 2018 was $36.8
million compared to a net loss of $(98.6) million in 2017. The $135.4 million improvement was primarily
attributable to a $135.6 million
increase in Project income (discussed below); a $39.1 million increase in unrealized foreign
exchange gain ($22.8 million gain
versus a $16.3 million loss), which
was related to the revaluation of debt denominated in Canadian
dollars (due to the depreciation of the Canadian dollar during the
year, compared to an appreciation in 2017, and to higher Canadian
debt instruments due to the issuance of the Series E convertible
debenture in January 2018); an
$11.5 million reduction in corporate
interest expense as a result of debt repayment and re-pricing of
the Company's credit facilities, and a $3.2
million unrealized gain on the fair value of the conversion
option of the Series E debentures. These positive factors
were partially offset by a $58.3
million reduction in income tax
benefit.
Project income for 2018 increased to $88.2 million from a project loss of $(47.4) million in 2017. The $135.6 million improvement was primarily
attributable to the non-recurrence of $187.1
million of impairment expense recorded in 2017, a
$15.7 million reduction in interest
expense due to lower debt balances and the reduced spread on the
Company's credit facilities. In addition, the Company
recorded a purchase accounting gain of $7.2
million on the acquisition of the remaining ownership
interests in Koma Kulshan. Also, Morris, Orlando and other projects had increases in
project income. These positive variances were partially
offset by lower gross margins resulting from the PPA expirations
previously discussed, the non-recurrence of the OEFC settlement
revenues and maintenance expense associated with the Tunis re-start, and the Manchief gas turbine
overhaul.
Project Adjusted EBITDA for 2018 declined to
$185.1 million from $288.8 million in 2017. The $103.7 million decrease was primarily
attributable to the expiration of contracts at Kapuskasing and North Bay at year end 2017 (-$71.3 million); the early termination of the PPAs
for the three San Diego projects
effective March 1, 2018
(-$24.0 million); maintenance
expenses incurred at Tunis in
preparation for re-start incurred in 2018 and the non-recurrence of
OEFC Settlement revenues recorded in 2017 (-$9.0 million); a less favorable short-term PPA at
Williams Lake, partially offset by
cost reductions (-$8.4 million);
maintenance expenses associated with the Manchief gas turbine
overhaul in the second quarter of 2018 (-$5.5 million), and lower water flows at Curtis
Palmer (-$2.8 million).
Partially offsetting these decreases were increases at Morris
($7.4 million), due to a higher
capacity price realized in the PJM capacity auction for this year,
higher steam and ancillary services revenues, higher merchant
dispatch and lower expenses; Mamquam ($3.3
million), due to higher water flows and lower maintenance
expense; Frederickson ($3.0 million),
due to maintenance expense in 2017; and Orlando ($2.9
million), due to higher availability and higher contractual
capacity rates.
Cash Flow
Cash provided by operating activities declined
$31.7 million to $137.5 million in 2018 from $169.2 million in 2017. Results were
negatively affected by the $103.7
million reduction in Project Adjusted EBITDA. However,
this impact was partially offset by $39.3
million of net favorable changes in working capital,
particularly a $20.6 million decrease
in working capital at Kapuskasing,
North Bay and the three
San Diego projects, as they were
not in operation at year end 2018. In addition, cash interest
payments were $30.7 million lower in
2018 than in 2017, as a result of debt repayment and a lower spread
on the Company's credit facilities, and distributions from
unconsolidated affiliates increased $14.3
million (mostly at Chambers and Orlando).
Cash used in investing activities in 2018 was
$17.0 million compared to
$4.3 million in 2017. In 2018,
the Company used $12.8 million of
cash (net of cash received) to acquire additional ownership
interests in Koma Kulshan and buy out the operation and maintenance
contract and $2.6 million for the
deposit required under the agreement to acquire the two
South Carolina biomass
plants. Capital expenditures in the 2018 period were
$1.8 million as compared to
$5.3 million in 2017.
Cash used in financing activities in 2018 was
$135.0 million as compared to
$178.9 million in 2017. In
2018, the Company issued $92.2
million (US$ equivalent) of new convertible debentures and
used the proceeds to redeem $88.1
million of existing convertible debentures. It also
repaid $100.3 million of term loan
and project debt, repurchased $16.6
million of common shares and $8.0
million (US$ equivalent) of preferred shares, paid
$8.3 million of preferred dividends
and incurred $5.1 million of deferred
financing costs. In 2017, the Company repaid $165.9 million of term loan and project debt,
repurchased $3.3 million (US$
equivalent) of preferred shares and paid $8.7 million of preferred dividends.
For the full year 2018, the Company had a $14.5 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 December 31, 2018 was $191.4 million, up $10.8
million from $180.6 million at
September 30, 2018. Cash
increased $10.7 million while
revolver availability was nearly unchanged. The increase in
cash was attributable to discretionary cash flow generated during
the quarter after debt repayment, capital expenditures and
preferred dividends. During the quarter the Company used
$4.3 million of cash for repurchases
of common shares. At December 31,
2018, there was $45.9 million
of cash at the parent, of which the Company considers approximately
$39 million to be discretionary cash
available for general corporate purposes.
Atlantic Power
Corporation
|
Table 2 –
Liquidity
(in millions of
U.S. dollars)
|
Unaudited
|
|
|
|
Dec. 31,
2018
|
Sept. 30,
2018
|
Cash and cash
equivalents, parent
|
|
|
$45.9
|
$39.1
|
Cash and cash
equivalents, projects
|
|
|
22.4
|
18.5
|
Total cash
and cash equivalents
|
|
|
68.3
|
57.6
|
Revolving credit
facility
|
|
|
200.0
|
200.0
|
Letters of credit
outstanding
|
|
|
(76.9)
|
(77.0)
|
Availability under revolving credit facility
|
|
|
123.1
|
123.0
|
Total
liquidity
|
|
|
$191.4
|
$180.6
|
|
|
|
|
|
Excludes restricted
cash of:
|
|
|
$2.1
|
$0.3
|
|
|
Balance Sheet
Debt Repayment
During the fourth quarter of 2018, the Company repaid
$20 million of the APLP Holdings term
loan and amortized $750 thousand of
project-level debt. For the full year 2018, the Company
repaid $90 million of the term loan
and $10.3 million of project
debt.
At December 31, 2018, the
Company's consolidated debt was $727.4
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 4.5 times.
Debt Maturity Profile
The Company plans to use liquidity to redeem the remaining
Cdn$24.7 million of 6.00% Series D
Debentures (US$18.1 million
equivalent) at or before their December
2019 maturity date.
The Company's $200 million
revolving credit facility matures in April 2022. Although
approximately $77 million is being
used for letters of credit, there are no borrowings outstanding
under the revolver.
The $450 million APLP Holdings
term loan is being repaid through amortization and the sweep, with
approximately $125 million of the
principal expected to be remaining at the April 2023 maturity date.
Re-pricing of Term Loan and Revolver
As previously reported, the Company executed two re-pricings of
the APLP Holdings term loan and revolving credit facility in 2018,
reducing the interest rate margin on the term loan and revolver by
a combined 75 basis points, to LIBOR plus 275 basis points.
Interest cost savings attributable to these two re-pricings are
estimated to be approximately $3.6
million in 2019. There have been a total of four
re-pricings since April 2017,
resulting in a cumulative reduction in the spread of 225 basis
points. The interest cost savings associated with the
cumulative reduction are expected to be approximately $44.4 million from the time of re-pricing through
the remaining terms of the facilities.
Normal Course Issuer Bid (NCIB) Update
The NCIB that the Company had put in place on December 29, 2017 expired on December 28, 2018. Under this program, the
Company repurchased and canceled approximately 7.8 million common
shares at a total cost of $16.6
million, or an average price of $2.13 per share. The Company also
repurchased and canceled 475,000 shares of the 4.85% Cumulative
Redeemable Preferred, Series 1 at Cdn$15.27 per share; 5,000 shares of the
Cumulative Rate Reset Preferred, Series 2 at Cdn$17.99 per share; and 164,790 shares of the
Cumulative Floating Rate Preferred, Series 3 at Cdn$17.89 per share, for a total cost of
Cdn$10.3 million (US$8.0 million equivalent). The Company
reached the 10% limit on Series 1 and Series 3 repurchases under
this NCIB.
In the fourth quarter of 2018, the Company repurchased and
canceled nearly 2.0 million common shares at a total cost of
$4.3 million, or an average price of
$2.15 per share. There were no
repurchases of preferred shares during the fourth
quarter.
On December 31, 2018, the Company
put in place a new NCIB for common shares, preferred shares and
convertible unsecured subordinated debentures. Details of
this program can be found in the Company's December 20, 2018 press
release.
In January 2019, under the new
NCIB, the Company repurchased 427,500 shares of the 4.85%
Cumulative Redeemable Preferred, Series 1 at Cdn$14.26 per share; 27,777 shares of the
Cumulative Rate Reset Preferred, Series 2 at Cdn$18.00 per share; and 148,311 shares of the
Cumulative Floating Rate Preferred, Series 3 at Cdn$17.69 per share, for a total cost of
Cdn$9.2 million. With these
repurchases, the Company has reached the 10% limit on Series 1 and
Series 3 repurchases under this NCIB.
2019 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 has initiated guidance for 2019 Project Adjusted
EBITDA in the range of $175 million
to $190 million. The midpoint
of this guidance range is in line with the 2018 actual result of
$185.1 million. The most
significant factor negatively affecting 2019 results is the
short-term contract extension at Williams
Lake, which became effective in April
2018 and is scheduled to expire in June or possibly as late
as September of this year. In 2018, Williams Lake had Project Adjusted EBITDA of
$8.0 million, but this included three
months under the previous contract. Results in 2019 are
expected to be significantly lower. Project Adjusted EBITDA
for Tunis and Manchief is expected
to be significantly higher this year due to start-up and
overhaul-related expenses, respectively, incurred in 2018.
The Company's guidance assumes average water conditions for its
hydro projects. In 2018, water flows at Curtis Palmer were
very close to average while those for Mamquam were better than
average.
Table 3 provides a bridge of the Company's 2019 Project Adjusted
EBITDA guidance to an estimate of 2019 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 decline in 2019 estimated Cash provided by
operating activities from the 2018 level of $137.5 million is largely attributable to the
working capital assumption, Chambers project debt amortization of
$5.2 million (captured in the
adjustment for equity method projects), and expected
decommissioning outlays.
Atlantic Power
Corporation Table 3 – Bridge of 2019 Project Adjusted
EBITDA Guidance to Cash Provided by Operating
Activities (in millions of U.S.
dollars) Unaudited
|
|
|
2019
Guidance
(initiated
2/28/19)
|
2018
Actual
|
Project Adjusted
EBITDA
|
$175 -
$190
|
$185.1
|
Adjustment for equity
method projects(1)
|
(5)
|
(0.0)
|
Corporate G&A
expense
|
(22)
|
(23.9)
|
Cash interest
payments
|
(39)
|
(41.3)
|
Cash taxes
|
(4)
|
(3.1)
|
Decommissioning (San
Diego projects)
|
(5)
|
(0.5)
|
Other (including
changes in working capital)
|
-
|
21.2
|
Cash provided by
operating activities
|
$100 -
$115
|
$137.5
|
Note: For the
purpose of providing 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.
See comment in preceding paragraph.
|
(1) For equity method projects,
represents difference between Project Adjusted EBITDA and cash
distribution from equity method projects.
|
|
|
|
|
Commercial and Operational Updates
2019-2021 PPA Expirations
The Company has four projects with PPAs that are scheduled to
expire in 2019 and 2020. There are no PPAs expiring in
2021.
Williams Lake (British Columbia). Since
April 2, 2018, the project has been
operating under an amended energy purchase agreement with BC Hydro,
which provided for a short-term extension to 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. A recent report prepared for the
Ministry of Energy on contracted power purchases by BC Hydro
includes commentary that is supportive of biomass re-contracting in
the province and provides some guidance to BC Hydro on this
topic. The Company regards this as a positive development and
expects that it may begin discussions with BC Hydro on a potential
longer-term contract in the next couple of
months.
Kenilworth (New Jersey). Merck recently executed
the second of its three successive one-year renewal options under
the Energy Services Agreement, which extended the expiration date
to September 2020. The Company is in discussions with Merck
regarding potential execution of the third extension as well as
longer-term options. In 2018, Kenilworth generated $2.0 million of Project Adjusted
EBITDA.
Oxnard (California). The PPA with Southern
California Edison will expire in May
2020 unless extended prior to that date. The Company
has pursued re-contracting opportunities but has not been
successful to date. In 2018, Oxnard generated $2.1
million of Project Adjusted EBITDA.
Calstock (Ontario). The PPA with the Ontario
Electricity Financial Corporation will expire in June 2020 unless extended prior to that
date. Ontario remains a
challenging market from a re-contracting perspective, as wholesale
power prices are low. The Company will continue to focus its
efforts on advocating with the government in support of biomass and
pursuing creative approaches that may benefit all parties. In
2018, Calstock generated
$5.5 million of Project Adjusted
EBITDA.
Decommissioning of San Diego Projects
Naval Station, North Island and NTC (San Diego). As previously reported,
the Company is required by its land use agreements with the Navy to
decommission its three project sites in San Diego. The
Company has made significant progress with the Navy in defining the
scope of work for each of the three sites. Based on current
cost estimates, which could increase upon finalization of scope and
receipt of final bids for the work, the Company recorded an
additional $3.5 million of
decommissioning expense in the fourth quarter of 2018
(decommissioning expense is not included in Project Adjusted
EBITDA). Based on these estimates, the Company anticipates
cash outlays for decommissioning of approximately $5 million, nearly all of which will be incurred
in 2019, with expected completion of the work in the third quarter
of this year. To date, the Company has realized approximately
$1.7 million of salvage proceeds,
most of which was received in January 2019.
Update on Tunis and Nipigon
Operations
Tunis (Ontario). The project was returned
to commercial operation under a 15-year PPA with the Ontario
Independent Electricity System Operator (IESO) in October 2018; prior to that, it had not been in
operation since December 2014. Costs associated with
preparing the project for re-start totaled approximately
Cdn$5.1 million (US$4 million equivalent), most of which were
incurred in the first six months of 2018 and all of which were
expensed. Under the PPA, Tunis operates as a dispatchable facility and
receives monthly capacity payments based on an average contracted
capacity of 36.5 MW. It also will earn energy revenues for
those periods during which it operates, although it has not
operated since returning to service.
Nipigon (Ontario). Nipigon is now under a Long-Term Enhanced
Dispatch Contract (LTEDC) that went into effect in November 2018, replacing the original PPA while
retaining the same contract expiration date (December 2022).
Nipigon receives monthly
capacity-type payments, with adjustment for operational savings
that will be shared with the IESO. It will operate on a
flexible basis (when needed or economic), earning energy revenues
for those periods during which it operates, although it has not
operated since the LTEDC went into effect. The Company plans
to install upgrades to some of the project's components and systems
in 2019.
Maintenance and Capex
In the fourth quarter of 2018, the Company incurred $6.0 million of maintenance expense. For
the full year, maintenance expense totaled approximately
$33.7 million and capital
expenditures approximately $1.5
million. The most significant of these expenses this
year were for the Tunis start-up
(in the first six months of 2018) and the Manchief gas turbine
overhaul (in the second quarter). For 2019, the Company is
projecting maintenance expense of approximately $23.1 million (no major outages planned) and
capital expenditures of approximately $1.2
million. (All of these figures include the Company's
proportional share of maintenance expenses and capital expenditures
at equity method investments.)
Financial Results by Segment and by Project
A schedule of Project income (loss) and Project Adjusted EBITDA
by segment for the fourth quarter and full year 2018 and the
comparable 2017 periods can be found on page 14 of this
release.
A schedule of Project income (loss), Project Adjusted EBITDA and
Cash Distributions by project for the fourth quarter and full year
2018 and the comparable 2017 periods can be found in the fourth
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.
Supplementary Information Regarding Non-GAAP
Disclosures
A discussion of non-GAAP disclosures and a schedule reconciling
Project Adjusted EBITDA, a non-GAAP measure, to the comparable GAAP
measure, can be found on page 15 of this release.
Investor Conference Call and Webcast
Atlantic Power's management team will host a telephone
conference call and webcast on Friday, March
1, 2019 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, March
1, 2019
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 10128680 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 March 31, 2019 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
Company's 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 view that the two acquisitions announced in 2018
will add to capacity, average contract life and Project Adjusted
EBITDA;
- the Company's view that its 2018 Project Adjusted EBITDA was at
the high end of its guidance range and that Operating Cash Flow
modestly exceeded its expectations;
- the Company's expectation that it will repay $86 million of consolidated debt and $5 million of Chambers debt in 2019;
- the Company's view that approximately $39 million of cash at the parent is available
for discretionary purposes;
- 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 plan to redeem the Series D convertible
debentures at or before their December
2019 maturity;
- the Company's estimate that approximately $125 million of
its term loan will be outstanding at the April 2023 maturity date, with the balance having
been repaid previously through amortization and the sweep;
- the Company's estimates of interest cost savings resulting from
the re-pricing of its term loan and revolver;
- the Company's guidance for 2019 Project Adjusted EBITDA in the
range of $175 million to $190 million;
- the Company's estimate for 2019 Cash provided by operating
activities in the range of $100
million to $115 million,
assuming for this purpose that changes in working capital are
nil;
- the Company's estimation that 2019 Project Adjusted EBITDA for
Williams Lake will be
significantly lower than in 2018, and its expectations for
re-contracting for that project;
- the Company's estimation that 2019 Project Adjusted EBITDA for
Tunis and Manchief will be
significantly higher than in 2018;
- the Company's assumption in its 2019 guidance of average water
conditions for its hydro projects;
- the Company's estimation that cash outlays associated with the
decommissioning of the three San
Diego projects will total approximately $5 million and will be mostly incurred in
2019;
- the Company's estimation that, in 2019, including its share of
equity-owned projects, maintenance expense will total approximately
$23.1 million and capital
expenditures will total approximately $1.2
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
|
|
Dec.
31,
|
Dec.
31,
|
|
2018
|
2017
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$68.3
|
$78.7
|
Restricted
cash
|
2.1
|
6.2
|
Accounts
receivable
|
35.7
|
52.7
|
Current portion of
derivative instruments asset
|
4.2
|
2.7
|
Inventory
|
15.8
|
17.7
|
Prepayments
|
4.0
|
6.9
|
Income taxes
receivable
|
0.3
|
1.0
|
Other current
assets
|
5.9
|
3.1
|
Total current
assets
|
136.3
|
169.0
|
Property, plant and
equipment, net
|
549.5
|
602.3
|
Equity investments in
unconsolidated affiliates
|
140.8
|
163.7
|
Power purchase
agreements and intangible assets, net
|
170.1
|
191.2
|
Goodwill
|
21.3
|
21.3
|
Derivative
instruments asset
|
0.3
|
2.8
|
Other
assets
|
6.2
|
8.5
|
Total
assets
|
$1,024.5
|
$1,158.8
|
|
|
|
Liabilities
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$2.5
|
$2.2
|
Accrued
interest
|
2.3
|
0.3
|
Other accrued
liabilities
|
20.2
|
25.5
|
Current portion of
long-term debt
|
68.1
|
99.5
|
Current portion of
derivative instruments liability
|
4.5
|
4.4
|
Convertible
debentures
|
18.1
|
-
|
Other current
liabilities
|
0.2
|
1.0
|
Total current
liabilities
|
115.9
|
132.9
|
Long-term debt, net
of unamortized discount and deferred financing costs
|
540.7
|
616.3
|
Convertible
debentures, net of discount and unamortized deferred financing
costs
|
75.7
|
105.4
|
Derivative
instruments liability
|
15.4
|
19.9
|
Deferred income
taxes
|
9.0
|
11.7
|
Power purchase
agreements and intangible liabilities, net
|
21.2
|
24.1
|
Asset retirement
obligations, net
|
49.2
|
45.3
|
Other long-term
liabilities
|
5.0
|
6.4
|
Total
liabilities
|
$832.1
|
$962.0
|
|
|
|
Equity
|
|
|
Common shares, no par
value, unlimited authorized shares; 108,341,738 and 115,211,976
issued and outstanding at Dec. 31, 2018 and Dec. 31, 2017,
respectively
|
1,260.9
|
1,274.8
|
Accumulated other
comprehensive loss
|
(146.2)
|
(134.8)
|
Retained
deficit
|
(1,121.6)
|
(1,158.4)
|
Total Atlantic Power
Corporation shareholders' equity
|
(6.9)
|
(18.4)
|
Preferred shares
issued by a subsidiary company
|
199.3
|
215.2
|
Total
equity
|
192.4
|
196.8
|
Total liabilities and
equity
|
$1,024.5
|
$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
December 31,
|
|
Twelve months
ended
December
31,
|
|
|
2018
|
2017
|
|
2018
|
2017
|
Project
revenue:
|
|
|
|
|
|
|
Energy
sales
|
|
$36.1
|
$35.3
|
|
$130.9
|
$148.9
|
Energy
capacity revenue
|
|
25.0
|
20.1
|
|
97.9
|
105.8
|
Other
|
|
9.6
|
44.6
|
|
53.5
|
176.3
|
|
|
70.7
|
100.0
|
|
282.3
|
431.0
|
Project
expenses:
|
|
|
|
|
|
|
Fuel
|
|
19.1
|
27.2
|
|
73.1
|
106.3
|
Operations and
maintenance
|
|
18.6
|
24.4
|
|
85.0
|
87.8
|
Depreciation
and amortization
|
|
18.1
|
22.7
|
|
83.7
|
113.1
|
|
|
55.8
|
74.3
|
|
241.8
|
307.2
|
Project other income
(loss):
|
|
|
|
|
|
|
Change in fair
value of derivative instruments
|
|
(1.3)
|
7.9
|
|
2.2
|
2.1
|
Equity in
earnings (loss) of unconsolidated affiliates
|
|
9.4
|
(18.7)
|
|
43.2
|
(54.8)
|
Interest,
net
|
|
(0.4)
|
(10.8)
|
|
(1.8)
|
(17.5)
|
Impairment
|
|
-
|
(43.9)
|
|
-
|
(101.1)
|
Other
(expense) income, net
|
|
(2.5)
|
0.1
|
|
4.1
|
0.1
|
|
|
5.2
|
(65.4)
|
|
47.7
|
(171.2)
|
Project income
(loss)
|
|
20.1
|
(39.7)
|
|
88.2
|
(47.4)
|
Administrative and
other expenses:
|
|
|
|
|
|
|
Administration
|
|
5.9
|
6.0
|
|
23.9
|
23.6
|
Interest
expense, net
|
|
12.0
|
14.7
|
|
52.7
|
64.2
|
Foreign
exchange (gain) loss
|
|
(13.7)
|
(1.4)
|
|
(22.8)
|
16.3
|
Other income,
net
|
|
(3.4)
|
(0.4)
|
|
(3.0)
|
(0.4)
|
|
|
0.9
|
18.9
|
|
50.8
|
103.7
|
Income (loss) from
operations before income taxes
|
|
19.2
|
(58.6)
|
|
37.4
|
(151.1)
|
Income tax (benefit)
expense
|
|
(7.5)
|
(19.7)
|
|
0.2
|
(58.1)
|
Net income
(loss)
|
|
26.7
|
(38.9)
|
|
37.2
|
(93.0)
|
Net income
attributable to preferred share dividends of a subsidiary
company
|
|
2.0
|
2.2
|
|
0.4
|
5.6
|
Net income (loss)
attributable to Atlantic Power Corporation
|
|
$24.7
|
($41.1)
|
|
$36.8
|
($98.6)
|
Net earnings (loss)
per share attributable to Atlantic Power Corporation
shareholders:
|
|
|
|
|
|
|
Basic
|
|
$0.23
|
($0.36)
|
|
$0.33
|
($0.86)
|
Diluted
|
|
0.18
|
(0.36)
|
|
0.29
|
(0.86)
|
Weighted average
number of common shares outstanding:
|
|
|
|
|
|
|
Basic
|
|
109.6
|
115.2
|
|
112.0
|
115.1
|
Diluted
|
|
140.7
|
115.2
|
|
141.8
|
115.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Atlantic Power
Corporation
Table 6 – Consolidated Statements of Cash Flow
(in millions of U.S. dollars)
Unaudited
|
|
Twelve months
ended Dec.31,
|
|
2018
|
2017
|
Cash provided by
operating activities:
|
|
|
Net income
(loss)
|
$37.2
|
($93.0)
|
Adjustments to
reconcile net income (loss) to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
83.7
|
113.1
|
(Gain) loss on
disposal of fixed assets and inventory
|
(0.4)
|
0.1
|
Asset retirement
obligations
|
3.5
|
-
|
Gain on purchase and
cancellation of convertible
debentures
|
-
|
-
|
Gain on step
acquisition of equity investment
|
(7.2)
|
-
|
Share-based
compensation
|
2.7
|
2.1
|
Long-lived asset and
goodwill impairment
|
-
|
101.1
|
Equity in (earnings)
loss from unconsolidated affiliates
|
(43.2)
|
54.8
|
Distributions from
unconsolidated affiliates
|
61.6
|
47.3
|
Unrealized foreign
exchange (gain) loss
|
(22.0)
|
15.2
|
Change in fair value
of derivative instruments
|
(5.5)
|
(2.1)
|
Amortization of debt
discount and deferred financing costs
|
9.4
|
10.8
|
Change in deferred
income taxes
|
(3.6)
|
(62.2)
|
Change in other
operating balances
|
|
|
Accounts
receivable
|
18.8
|
(15.4)
|
Inventory
|
1.6
|
(1.6)
|
Prepayments and other
assets
|
8.7
|
0.4
|
Accounts
payable
|
(1.2)
|
(0.9)
|
Accruals and other
liabilities
|
(6.6)
|
(0.5)
|
Cash provided by
operating activities
|
137.5
|
169.2
|
|
|
|
Cash used in
investing activities:
|
|
|
Proceeds from sale of
assets and equity investments, net
|
-
|
1.0
|
Cash paid for
acquisition, net of cash received
|
(12.8)
|
-
|
Reimbursement of costs
for third party construction project
|
-
|
-
|
Deposit for
acquisition
|
(2.6)
|
-
|
Proceeds from asset
sales
|
0.2
|
-
|
Purchase of property,
plant and equipment
|
(1.8)
|
(5.3)
|
Cash used in
investing activities
|
(17.0)
|
(4.3)
|
|
|
|
Cash used in
financing activities:
|
|
|
Proceeds from
convertible debenture issuance
|
92.2
|
-
|
Repayment of
convertible debentures
|
(88.1)
|
-
|
Common share
repurchases
|
(16.6)
|
(0.2)
|
Preferred share
repurchases
|
(8.0)
|
(3.1)
|
Repayment of corporate
and project-level debt
|
(100.3)
|
(165.9)
|
Cash payments for
vested LTIP units withheld for taxes
|
(0.8)
|
(0.7)
|
Deferred financing
costs
|
(5.1)
|
(0.3)
|
Dividends paid to
preferred shareholders
|
(8.3)
|
(8.7)
|
Cash used in
financing activities:
|
(135.0)
|
(178.9)
|
|
|
|
Net (decrease)
increase in cash, restricted cash and cash equivalents
|
(14.5)
|
(14.0)
|
Cash, restricted cash
and cash equivalents at beginning of period
|
84.9
|
98.9
|
Cash, restricted cash
and cash equivalents at end of period
|
$70.4
|
$84.9
|
|
|
|
Supplemental cash
flow information
|
|
|
Interest
paid
|
$41.3
|
$72.0
|
Income taxes paid,
net
|
$3.1
|
$4.4
|
(Receivables) accruals
for equipment sales and construction in progress
|
($1.5)
|
$1.2
|
Atlantic Power
Corporation
Table 7 – Project Income (Loss) and Project Adjusted EBITDA by
Segment
(in millions of U.S. dollars)
Unaudited
|
|
|
Three months
ended
|
|
Twelve months
ended
|
|
December
31
|
|
December
31
|
|
2018
|
2017
|
|
2018
|
2017
|
Project income
(loss)
|
|
|
|
|
|
East U.S.
|
$19.2
|
($0.7)
|
|
$70.9
|
($17.0)
|
West U.S.
|
(3.5)
|
(25.8)
|
|
0.9
|
(72.0)
|
Canada
|
7.4
|
(12.7)
|
|
17.0
|
38.8
|
Un-allocated
Corporate
|
(3.0)
|
(0.5)
|
|
(0.6)
|
2.8
|
Total
|
$20.1
|
($39.7)
|
|
$88.2
|
($47.4)
|
Project Adjusted
EBITDA
|
|
|
|
|
|
East U.S.
|
$30.9
|
$25.7
|
|
$120.8
|
$112.5
|
West U.S.
|
5.0
|
7.6
|
|
21.9
|
49.1
|
Canada
|
10.4
|
28.5
|
|
41.9
|
125.8
|
Un-allocated
Corporate
|
0.2
|
0.3
|
|
0.5
|
1.4
|
Total
|
$46.6
|
$62.1
|
|
$185.1
|
$288.8
|
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 8 below.
Atlantic Power
Corporation
Table 8 –
Reconciliation of Net Income (loss) to Project Adjusted
EBITDA
(in millions of
U.S. dollars)
Unaudited
|
|
Three months
ended
December 31,
|
|
Twelve months
ended December 31,
|
|
2018
|
2017
|
|
2018
|
2017
|
Net income (loss)
attributable to Atlantic Power Corporation
|
$24.7
|
($41.1)
|
|
$36.8
|
($98.6)
|
Net income
attributable to preferred share dividends of a subsidiary
company
|
2.0
|
2.2
|
|
0.4
|
5.6
|
Net income
(loss)
|
$26.7
|
($38.9)
|
|
$37.2
|
($93.0)
|
Income tax (benefit)
expense
|
(7.5)
|
(19.7)
|
|
0.2
|
(58.1)
|
Income (loss) before
income taxes
|
19.2
|
(58.6)
|
|
37.4
|
(151.1)
|
Administration
|
5.9
|
6.0
|
|
23.9
|
23.6
|
Interest expense,
net
|
12.0
|
14.7
|
|
52.7
|
64.2
|
Foreign exchange
(gain) loss
|
(13.7)
|
(1.4)
|
|
(22.8)
|
16.3
|
Other income,
net
|
(3.4)
|
(0.4)
|
|
(3.0)
|
(0.4)
|
Project income
(loss)
|
$20.1
|
($39.7)
|
|
$88.2
|
($47.4)
|
|
|
|
|
|
|
Reconciliation to
Project Adjusted EBITDA
|
|
|
|
|
|
Depreciation and
amortization
|
$21.8
|
$27.6
|
|
$99.7
|
$133.2
|
Interest expense,
net
|
0.8
|
11.2
|
|
3.4
|
19.2
|
Change in the fair
value of derivative instruments
|
1.3
|
(8.0)
|
|
(2.2)
|
(2.1)
|
Impairment
|
-
|
72.1
|
|
-
|
187.1
|
Other (expense)
income, net
|
2.5
|
(1.1)
|
|
(4.0)
|
(1.2)
|
Project Adjusted
EBITDA
|
$46.6
|
$62.1
|
|
$185.1
|
$288.8
|
View original
content:http://www.prnewswire.com/news-releases/atlantic-power-corporation-releases-fourth-quarter-and-year-end-2018-results-300804624.html
SOURCE Atlantic Power Corporation