DEDHAM, Mass., May 7, 2020 /PRNewswire/ --
First Quarter 2020 Financial Results
- Net income attributable to Atlantic Power of $29.5 million or $0.23 per diluted share increased from
$8.9 million or $0.07 per diluted share in Q1 2019; increase
primarily attributable to a foreign exchange gain of $20.6 million vs. a foreign exchange loss of
$5.0 million in Q1 2019
- Cash from operating activities of $8.4
million declined from $29.2
million in Q1 2019, primarily due to unfavorable impact of
changes in working capital
- Project Adjusted EBITDA declined to $50.8 million from $53.7
million in Q1 2019, primarily due to the Cadillac outage,
partially offset by above-average water flows at Curtis Palmer
- Repaid $21.6 million of term loan
and project debt and achieved a leverage ratio of 3.6 times
- Liquidity at March 31, 2020 of
$149.7 million; on May 1, 2020, used $25
million of cash to purchase 12.5 million common shares
- In March 2020, extended maturity
of revolving credit facility by three years to April 2025 (coincident with term loan maturity);
revolver capacity reduced to $180
million from $200 million,
with the ability to increase to a maximum of $210 million, subject to certain conditions
Capital Allocation Initiatives
- Repurchased nearly 3.8 million common shares for a total
investment of nearly $8.2 million and
an average price of $2.17 per
share
- Repurchased 564,159 preferred shares at a total cost of
Cdn$8.9 million (US$6.4 million equivalent), representing an
average 39% discount to par
- On March 25, 2020, announced
substantial issuer bid for up to $25
million of common shares; completed offer on May 1, 2020, repurchasing 12.5 million common
shares at $2.00 per share
Operational and Commercial Updates
- To date, plant operations have not been affected by the
coronavirus pandemic
- Repairs to Cadillac plant on schedule for a targeted return to
service in Q3 2020
- Williams Lake plant operated
throughout the quarter; has been in a planned outage since
April 9
- Received recent indication from provincial government for a
six-month extension at Calstock
2020 Guidance
- Reaffirming Project Adjusted EBITDA guidance in the range of
$175 million to $190 million(1)
- Reaffirming estimate of cash from operating activities
(assuming working capital changes are nil) in the range of
$100 million to $115 million
Atlantic Power Corporation (NYSE: AT) (TSX: ATP) ("Atlantic
Power" or the "Company") today reported its financial results for
the three months ended March 31,
2020.
"Results for the first quarter modestly exceeded our
expectations, primarily due to above-average water flows at Curtis
Palmer. We are reaffirming the 2020 guidance we provided on
February 27," said James J. Moore, Jr., President and Chief
Executive Officer of Atlantic Power. "We came into this year well
positioned for turbulent markets following a five-year program of
reducing debt and cutting costs. Our Power Purchase Agreements
provide strong operating cash flow to continue delevering our
balance sheet while buying back our own securities or investing
opportunistically in growth. We expect to generate an estimated
$115 million to $165 million of discretionary cash flow over the
next five years, after repaying an estimated $423 million or more than 60% of our debt during
that period. This cash generation is very meaningful relative to
the current market values of $170
million for our common shares and $75
million for our preferred shares."
"In the past five years, during a period of significant debt
repayment, we invested $72 million in
repurchases of common shares and another US$25.5 million equivalent in repurchases of
preferred shares, including $33.2
million of common shares and US$6.4
million equivalent of preferred shares in 2020 alone. These
common share repurchases were done at prices below our estimates of
intrinsic value, while the preferred share repurchases carried
attractive after-tax yields," Mr. Moore continued. "We also are
continuing to seek additional external growth investments with
compelling returns such as the $45
million of investments that we made in 2018 and 2019."
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(1)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.
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Financial Results for the Three Months Ended March 31, 2020
Cadillac Insurance Recovery
As previously disclosed, the Cadillac plant has been out of
service following a fire at the plant in September 2019. The Company has insurance
coverage that it believes will be adequate to cover the cost of
repairs and lost profits (business interruption losses) during the
outage. In the first quarter of 2020, the Company received
$7.4 million from its insurers in
payment of its second claim related to the incident. The
$7.4 million is included in cash
flows from investing activities. Cumulatively through March 31, 2020, the Company has received
$18.6 million in payment of claims
related to the incident. The cost of repairs to the plant is
included in capital expenditures, a component of cash flows from
investing activities. The Company incurred $9.7 million of capital expenditures for repairs
in the first quarter of 2020 and a total of $14.8 million through March 31, 2020.
Payments from the Company's insurers are not allocated between
property insurance and business interruption insurance. The Company
estimates that approximately $3.2 million of
the $7.4 million payment represents recovery of business
interruption losses in the first quarter of 2020, and that
$5.2 million of the $18.6 million in payments through March 31, 2020 represents recovery of business
interruption losses since the incident. Insurance recoveries
related to business interruption losses are accounted for as a gain
contingency and will not be recorded as income (or included in
Project Adjusted EBITDA) until final payment is made by the
Company's insurers and the claim is settled, which will occur only
after the plant is returned to service. Thus, although Cadillac is
expected to generate Project Adjusted EBITDA losses while it is out
of service, once it is returned to service and the claim is settled
later in 2020, there should not be a net impact on Project Adjusted
EBITDA for the year.
Atlantic Power
Corporation
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Table 1 - Summary
of Financial Results
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(in millions of
U.S. dollars)
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|
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Unaudited
|
Three months
ended
|
|
March
31,
|
|
2020
|
2019
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Variance
|
Project
revenue
|
$72.8
|
$73.0
|
($0.2)
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Project
income
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24.7
|
30.6
|
(5.9)
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Net income
attributable to Atlantic Power Corporation
|
29.5
|
8.9
|
20.6
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Earnings per share
attributable to Atlantic Power Corporation - basic
|
0.28
|
0.08
|
0.20
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Earnings per share
attributable to Atlantic Power Corporation - diluted
|
0.23
|
0.07
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0.16
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Project Adjusted
EBITDA
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50.8
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53.7
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(2.9)
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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 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).
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Three Months Ended March 31,
2020
Consolidated Results
Project revenue in the first quarter of 2020 decreased by
$0.2 million to $72.8 from $73.0
million, with decreases at Cadillac and Morris mostly offset
by increases at Allendale and
Dorchester, which were acquired in
July 2019, and at Williams Lake.
Project income in the first quarter of 2020 was
$24.7 million as compared to
$30.6 million in the first quarter of
2019. The decrease of $5.9 million
was primarily attributable to a $4.2
million increase in operation and maintenance expense,
including $2.5 million for
Allendale and Dorchester. The change in the fair value of
derivative instruments accounted for another $3.2 million of the decrease in project income.
These increased expenses were partially offset by a $0.8 million increase in equity in earnings from
unconsolidated investments, including $0.6
million from equity interests in the Craven and Grayling
projects that were acquired in August 2019.
Net income attributable to Atlantic Power
Corporation in the first quarter of 2020 was $29.5 million as compared to net income of
$8.9 million in the first quarter of
2019. The increase of $20.6 million
was primarily attributable to a foreign exchange gain of
$20.6 million as compared to a
foreign exchange loss of $5.0 million
in the comparable 2019 period. The foreign exchange gain was
related to the revaluation of debt denominated in Canadian dollars
(the Canadian dollar depreciated 9.2% from December 31, 2019 to March
31, 2020). This favorable variance of $25.6 million was partially offset by a
$5.9 million decline in project
income from the first quarter of 2019.
Diluted EPS in the first quarter of 2020 was $0.23 as compared to $0.07 in the first quarter of 2019. The increase
was attributable to higher net income and a reduction in diluted
shares to 134.8 million from 138.6 million.
Project Adjusted EBITDA decreased $2.9 million to $50.8
million in the first quarter of 2020 from $53.7 million in the first quarter of 2019, with
most of the decrease attributable to the Cadillac extended outage,
partially offset by EBITDA contributed by the biomass projects that
were acquired in July and August of 2019.
Atlantic Power
Corporation
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Table 2 - Project
Income (Loss) and Project Adjusted EBITDA by Segment
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(in millions of
U.S. dollars)
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|
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Unaudited
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|
|
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Three months
ended
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March
31,
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2020
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2019
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Variance
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Project income
(loss)
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Solid Fuel
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$1.5
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$3.5
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($2.0)
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Natural
Gas
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19.5
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18.4
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1.1
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Hydroelectric
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10.4
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10.7
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(0.3)
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Corporate
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(6.7)
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(2.0)
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(4.7)
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Total
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$24.7
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$30.6
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($5.9)
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Project Adjusted
EBITDA
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Solid Fuel
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$7.8
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$10.1
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($2.3)
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Natural
Gas
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28.2
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28.1
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0.1
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Hydroelectric
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15.3
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15.6
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(0.3)
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Corporate
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(0.5)
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(0.1)
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(0.4)
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Total
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$50.8
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$53.7
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($2.9)
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Segment Results
Project income
Solid Fuel: Project income decreased
$2.0 million primarily due to a
$3.9 million decrease at Cadillac as
a result of the extended outage. This decrease was partially offset
by increased project income at Williams
Lake, due to higher revenue under the Energy Purchase
Agreement that became effective in October
2019, and at the acquired biomass projects.
Natural Gas: Project income increased
$1.1 million primarily due to a
$2.7 million increase at Nipigon, mostly driven by a $2.1 million gain in fair value on the fuel
agreement accounted for as a derivative. This increase was
partially offset by decreases in project income at Orlando and Morris.
Hydroelectric: Project income decreased
$0.3 million as slightly lower
generation at Curtis Palmer and higher expenses at Moresby Lake
more than offset increased generation at Mamquam. Generation
declined 2% at Curtis Palmer from the comparable 2019 level, but
was 29% above the historical first-quarter average. Mamquam
generation increased 31% from the comparable 2019 level and was 23%
above the historical first-quarter average.
Project Adjusted EBITDA
Solid Fuel: Project Adjusted EBITDA
decreased $2.3 million, primarily due
to a $4.3 million decrease at
Cadillac due to the extended outage. This decrease was partially
offset by increased Project Adjusted EBITDA at Allendale and Dorchester ($0.9
million), Craven and Grayling ($0.8
million), and Williams Lake
($0.8 million).
Natural Gas: Project Adjusted EBITDA
increased $0.1 million, primarily due
to increases at Nipigon due to a
contractual rate escalation and at Oxnard due to gas turbine repairs in the
comparable 2019 period, partially offset by a decrease at
Orlando due to a maintenance
outage in March 2020.
Hydroelectric: Project Adjusted EBITDA
decreased $0.3 million, as decreases
at Moresby Lake (higher maintenance expenses related to a
replacement of the transformer) and Curtis Palmer more than offset
an increase at Mamquam.
Atlantic Power
Corporation
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Table 3 - Cash
Flow Results
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(in millions of
U.S. dollars)
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Unaudited
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Three months
ended
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|
March
31,
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2020
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2019
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Variance
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Net cash provided by
operating activities
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$8.4
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$29.2
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($20.8)
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Net cash (used in)
provided by investing activities
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(2.6)
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1.2
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(3.8)
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Net cash used in
financing activities
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(40.1)
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(25.5)
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(14.6)
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Cash Flow
Cash provided by operating activities of
$8.4 million decreased $20.8 million from $29.2
million in the first quarter of 2019. The decrease was
primarily due to a $16.8 million
unfavorable impact from changes in working capital and a
$2.9 million reduction in Project
Adjusted EBITDA. The unfavorable change in working capital was
primarily due to the timing of cash receipts at Williams Lake, Morris and Nipigon, as well as larger cash disbursements
for repair work at Cadillac and in preparation for a maintenance
outage at Morris later in 2020.
Cash used in investing activities was $2.6 million for the first quarter of 2020 as
compared to a $1.2 million source of
cash for the first quarter of 2019. The $3.8
million unfavorable change was primarily due to a
$9.7 million increase in capital
expenditures (primarily for Cadillac repairs), which was mostly
offset by the receipt of $7.4 million
of insurance proceeds related to the Cadillac fire. In the 2019
period, the Company received $1.5
million of cash proceeds from the sale of equipment at the
San Diego projects, which did not
recur.
Cash used in financing activities of $40.1 million increased $14.6 million from $25.5
million in the first quarter of 2019. The majority of the
increase was attributable to higher uses of cash for common share
repurchases and debt repayment. In the first quarter of 2020, the
Company used $8.2 million to
repurchase common shares as compared to $0.1
million in the first quarter of 2019, and $21.6 million for repayment of term loan and
project debt as compared to $15.8
million in the first quarter of 2019. The Company also
incurred $1.5 million of deferred
financing costs related to the amendment of its credit facilities
in the first quarter of 2020. These increases were partially offset
by a $1.3 million reduction in use of
cash for preferred share repurchases as compared to the first
quarter of 2019.
During the first quarter of 2020, the net decrease in the
Company's cash, restricted cash and cash equivalents was
$34.3
million.
Liquidity, Balance Sheet and Capital Allocation
Liquidity
In March 2020, as previously
reported, the Company executed an amendment to its revolving credit
facility, extending the maturity by three years to April 2025, coincident with the maturity of the
APLP Holdings term loan. In conjunction with the extension, the
revolver capacity was reduced to $180
million from $200 million previously. The amendment
allows an upsizing of the revolver capacity by up to $30
million, to a maximum aggregate amount of $210 million,
subject to conditions. Such an upsizing would not require a further
amendment.
As shown in Table 4, the Company's liquidity at March 31, 2020 was $149.7
million, a decrease of $46.9
million from $196.6 million at
December 31, 2019. The decrease was
attributable to the $20 million
reduction in revolver capacity, a $14.9
million reduction in cash at the parent and a $12.2 million reduction in cash at the projects.
During the quarter, the Company used $14.6
million in parent cash for repurchases of common and
preferred shares. Cash at the projects was reduced because of the
changes in working capital balances.
Atlantic Power
Corporation
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Table 4 -
Liquidity
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|
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(in millions of
U.S. dollars)
|
|
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|
Unaudited
|
|
|
|
|
March 31,
2020
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Dec. 31,
2019
|
|
Cash and cash
equivalents, parent (1)
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$34.0
|
$48.9
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Cash and cash
equivalents, projects (2)
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13.8
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26.0
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Total cash and cash
equivalents
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47.8
|
74.9
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Revolving credit
facility (3)
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180.0
|
200.0
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Letters of credit
outstanding
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(78.1)
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(78.3)
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Availability under
revolving credit facility
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101.9
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121.7
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Total liquidity
(1)
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$149.7
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$196.6
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Excludes restricted
cash of (4) :
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$0.5
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$7.7
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(1) On May 1, 2020, the Company
utilized $25.0 million of cash to repurchase and cancel 12.5
million shares under the Substantial Issuer Bid.
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(2)
Includes $2.1 million and $4.0 million at March 31, 2020 and
December 31, 2019, respectively, from Cadillac insurance proceeds
for use in reconstruction of the plant.
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(3) On March18, 2020, the borrowing
capacity under the Revolver was reduced to $180 million.
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(4) Includes $0.2 million and $7.3
million at March 31, 2020 and December 31, 2019, respectively, from
Cadillac insurance proceeds for use in reconstruction of the
plant.
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Balance Sheet
Debt Repayment
During the first quarter of 2020, the Company repaid
$20.0 million of the APLP Holdings
term loan and amortized $1.6 million
of project-level debt at Cadillac. At March
31, 2020, the Company's consolidated debt was $606.3 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 3.6 times, which was improved
from 3.8 times a year ago. On a net debt basis (debt net of
$47.8 million of cash), the
consolidated leverage ratio at March 31,
2020 was 3.3 times.
The Company expects to repay approximately $72.5 million of term loan and $3.9 million of Cadillac project debt in 2020. In
addition, the Company expects to repay $7.8
million of its share of Chambers project debt (Chambers is
accounted for on the equity method).
Capital Allocation
Normal Course Issuer Bid (NCIB) Update
In the first quarter of 2020, under the NCIB that was put in
place on December 31, 2019, the
Company repurchased approximately 3.76 million common shares at a
cost of $8.17 million, or an average
price of $2.17 per share. In
addition, the Company repurchased 381,794 shares of the 4.85%
Cumulative Redeemable Preferred, Series 1, at an average price of
Cdn$15.17 per share; 62,365 shares of
the 7.0% Cumulative Rate Reset Preferred, Series 2, at an average
price of Cdn$15.20 per share; and
120,000 shares of the Cumulative Floating Rate Preferred, Series 3
at an average price of Cdn$17.90 per
share. The total cost to the Company of preferred share repurchases
during the quarter was Cdn$8.9
million (US$6.4 million
equivalent) and the average discount to par was 39%.
Substantial Issuer Bid (SIB)
As previously disclosed, on March 25,
2020, the Company announced a substantial issuer bid for up
to $25 million of common shares at a
price not less than $1.95 per share
and not to exceed $2.20 per share.
The Company completed the offer on May 1,
2020, repurchasing 12.5 million common shares at a price of
$2.00 per share. The shares
repurchased have been canceled. As a result, the Company's shares
outstanding were reduced approximately 12% to
93,002,338.
Year to date under the NCIB and recently completed SIB, the
Company has repurchased approximately 16.3 million common shares at
a total cost of $33.2 million, or an
average price of $2.04 per share.
2020 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 2020 Project
Adjusted EBITDA in the range of $175
million to $190 million.
Guidance for 2020 assumes average water flows for the year for
Curtis Palmer, which accounts for most of the anticipated decline
from the 2019 level of $196.1
million. Guidance also assumes that PPAs for Oxnard and Calstock are not extended and expire as
scheduled in May and June of this year, respectively. Lastly,
maintenance expense associated with a planned hot gas path
inspection at Morris also is a factor in the projected decline from
2019. These negative variances are expected to be partially offset
by a full year contribution by the acquired biomass projects and
modest increases at several other projects. The Company's 2020
guidance assumes that Cadillac is returned to service later this
year and that the Company records to revenues and Project Adjusted
EBITDA those insurance recoveries related to business
interruption.
Table 5 provides a bridge of the Company's 2020 Project Adjusted
EBITDA guidance to an estimate of 2020 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 2020 estimated Cash provided by operating
activities to a range of $100 million
to $115 million from the 2019 level
of $144.7 million is largely
attributable to lower expected Project Adjusted EBITDA, the working
capital assumption discussed above (versus a favorable contribution
in 2019), modestly higher project debt repayment at Chambers
(captured in the adjustment for equity method projects) and higher
decommissioning outlays for the San
Diego projects (majority of the cash outlays occurring in
2020 rather than in 2019).
Atlantic Power
Corporation
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Table 5 - Bridge
of 2020 Project Adjusted EBITDA Guidance to Cash Provided by
Operating Activities
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(in millions of
U.S. dollars)
|
|
|
Unaudited
|
|
|
|
2020
Guidance
|
2019
Actual
|
|
(Initiated
2/27/20)
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Project Adjusted
EBITDA
|
$175 -
$190
|
$196.1
|
Adjustment for equity
method projects(1)
|
(8)
|
(3.5)
|
Corporate G&A
(cash)
|
(24)
|
(22.4)
|
Cash interest
payments
|
(36)
|
(37.6)
|
Cash taxes
|
(4)
|
(2.3)
|
Decommissioning (San
Diego projects)
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(4)
|
(1.0)
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Other (including
changes in working capital)
|
-
|
15.4
|
Cash provided by
operating activities
|
$100 -
$115
|
$144.7
|
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.
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(1) For equity method projects,
represents difference between Project Adjusted EBITDA and cash
distribution.
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Operational Updates
Coronavirus Pandemic
With power generation deemed a critical and essential
service, to date, the pandemic has not materially affected the
Company's ability to continue operating its plants safely and
reliably. The Company has taken appropriate steps at its plants to
ensure that health and safety guidelines are being followed,
including frequent plant sanitization. Non-essential personnel are
not permitted access to the sites. The Company is monitoring fuel
supply for its biomass plants (which generally have multiple
suppliers including mills and other sources) to ensure that
potential supply disruptions are minimized. As the coronavirus
pandemic is a rapidly evolving situation, we continue to monitor it
and cannot predict what its ultimate impact will be on our
business.
Cadillac Reconstruction
The plant remains out of service following the September 2019 fire. Repairs and replacement of
equipment are ongoing, with both the replacement generator and the
steam turbine having arrived on site earlier this month. To date
the impact of the coronavirus pandemic on the schedule has been
minimal. Construction crews have been granted travel and site
access. The Company continues to target a return of the plant to
service in the third quarter of this year.
Williams Lake Operations
The plant returned to service in mid-December and operated
continuously until April 9, when the
Company took it down for a planned outage. Under the terms of the
Energy Purchase Agreement with BC Hydro, the plant will not operate
during the months of May, June and July. During the current outage,
the Company expects to undertake significant maintenance, including
a replacement of the cooling tower, and rebuild fuel supply for the
plant. Fuel availability remains challenging, although fuel costs
to date have been in line with the Company's expectations.
Considering the planned maintenance (which will be expensed) and
expected run time for the plant, the Company continues to estimate
that Project Adjusted EBITDA will be approximately breakeven for
the year.
Decommissioning of San Diego Projects
Demolition of the three project sites in San Diego (Naval Station, Naval Training
Center and North Island) is now expected to begin in June, due to
coronavirus-related delays in site access, and should be completed
within approximately six months. The Company's estimate of the cash
outlay to decommission these projects is $6.6 million, or approximately $5 million net of salvage proceeds received to
date. Approximately $4 million of
this is expected to be incurred to complete the work this year.
These decommissioning expenditures are not included in Project
Adjusted EBITDA.
Maintenance and Capex
In the first quarter of 2020, the Company incurred $5.5 million of maintenance expense and
$0.3 million of capital expenditures.
These figures exclude capital expenditures for repairs and
replacement of equipment at Cadillac of $9.7
million, which are expected to be covered by the Company's
insurance, excluding the deductible.
For 2020, the Company is projecting maintenance expense of
$32.8 million and capital
expenditures of approximately $4.0
million (excluding Cadillac). These figures include the
Company's proportional share of maintenance expenses and capital
expenditures at equity method investments.
Commercial Updates
2020 PPA Expirations
The Company has two projects with PPAs that are scheduled to
expire in 2020.
Oxnard (California)
The PPA with Southern California Edison will expire in late
May 2020. The Company is continuing
to pursue potential short-term offtake structures for the project.
Depending on the outcome of these re-contracting efforts, the plant
may be mothballed when its PPA expires.
Calstock (Ontario)
The PPA with the Ontario Electricity Financial Corporation will
expire in June 2020. The Company
recently received an indication from the provincial government that
it plans to extend the Calstock PPA for a six-month period while
the government evaluates the future role of biomass in the
province. The extension has not yet been executed.
Financial Results by Project
A schedule of Project income, Project Adjusted EBITDA and Cash
Distributions by project for the three months ended March 31, 2020 and the comparable 2019 period can
be found in the first quarter 2020 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, May
8, 2020 at 11:00 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, May 8,
2020
Start Time: 11:00 AM
ET
Phone Numbers:
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
10143620 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 June 8, 2020
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 eleven 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 2020 to 2043. 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). Approximately
75% 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
forward-looking information 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," "should," "project," "continue," "believe,"
"intend," "anticipate," "expect," "estimate," "target" 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 impact of the coronavirus pandemic on the economy and the
Company's operations, including the measures taken by governmental
authorities to address it, which may precipitate or exacerbate
other risks and/or uncertainties;
- the Company's expectation that its designation as essential
will allow it to continue to operate through the coronavirus
pandemic; the Company's view that first quarter results modestly
exceeded its expectations;
- the Company's view that it is well positioned for turbulent
markets;
- the Company's expectation that its Power Purchase Agreements
will produce strong operating cash flow;
- the Company's estimate of cumulative discretionary cash flow of
$115 million to $165 million over the 2020-2024 period;
- the Company's expectation that it will repay $423 million or more than 60% of its debt during
the 2020-2024 period;
- the Company's view that common share repurchases over the past
four and a half years were done at prices below its estimates of
intrinsic value per share, and that preferred share repurchases
during this period carried attractive after-tax yields;
- the Company's expectation that the cost of repairs and business
interruption losses at its Cadillac plant following the
September 2019 fire will be mostly
covered by its insurance, and the Company's target of returning the
plant to service in the third quarter of 2020;
- the Company's guidance for 2020 Project Adjusted EBITDA in the
range of $175 million to $190 million, and its views of the underlying
drivers;
- the Company's estimate for 2020 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 estimate that there should be no net impact on
Project Adjusted EBITDA in 2020 from the Cadillac outage, assuming
the plant returns to service this year;
- the Company's expectation that it will repay $72.5 million of its term loan and $3.9 million of Cadillac project debt in 2020,
and another $7.8 million of project
debt at Chambers (equity-owned project) from project-level cash
flow, including amounts already repaid in the first quarter of
2020;
- the Company's estimate that Williams
Lake will have approximately a breakeven level of Project
Adjusted EBITDA in 2020;
- the Company's estimation that cash outlays associated with the
decommissioning of the three San
Diego projects will total approximately $6.6 million, or approximately $5 million net of salvage proceeds, and that
approximately $4 million of this will
be incurred in 2020, with the work expected to start in June,
subject to potential coronavirus-related delays;
- the Company's estimation that, in 2020, including its share of
equity-owned projects, maintenance expense will total approximately
$32.8 million and capital
expenditures will total approximately $4.0
million (excluding capital expenditures for repairs to
Cadillac);
- the Company's views with respect to the re-contracting and
post-PPA outlook for Oxnard and
Calstock, 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 6 –
Consolidated Balance Sheet
|
|
|
(in millions of
U.S. dollars)
|
|
|
Unaudited
|
|
|
|
March
31,
|
December
31,
|
|
2020
|
2019
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$47.8
|
$74.9
|
Restricted
cash
|
0.5
|
7.7
|
Accounts
receivable
|
32.6
|
30.4
|
Insurance recovery
receivable
|
6.1
|
13.5
|
Current portion of
derivative instruments asset
|
-
|
0.7
|
Inventory
|
15.8
|
18.6
|
Prepayments
|
6.7
|
3.8
|
Income taxes
receivable
|
2.5
|
1.8
|
Lease
receivable
|
0.4
|
0.9
|
Other current
assets
|
0.3
|
0.4
|
Total current
assets
|
112.7
|
152.7
|
Property, plant, and
equipment, net
|
490.5
|
502.1
|
Equity investments in
unconsolidated affiliates
|
103.7
|
96.6
|
Power purchase
agreements and intangible assets, net
|
137.5
|
144.3
|
Goodwill
|
21.3
|
21.3
|
Operating lease
right-of-use assets
|
5.9
|
6.3
|
Deferred income
taxes
|
9.8
|
10.4
|
Other
assets
|
0.6
|
1.9
|
Total
assets
|
$882.0
|
$935.6
|
Liabilities
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$4.7
|
$8.9
|
Accrued
interest
|
3.2
|
2.6
|
Other accrued
liabilities
|
13.6
|
20.8
|
Current portion of
long-term debt
|
78.5
|
76.4
|
Current portion of
derivative instruments liability
|
18.0
|
12.0
|
Operating lease
liabilities
|
2.0
|
2.0
|
Other current
liabilities
|
0.2
|
0.2
|
Total current
liabilities
|
120.2
|
122.9
|
Long-term debt, net
of unamortized discount and deferred financing costs
|
436.3
|
473.5
|
Convertible
debentures, net of discount and unamortized deferred financing
costs
|
74.2
|
81.1
|
Derivative
instruments liability
|
16.5
|
15.9
|
Deferred income
taxes
|
24.1
|
23.7
|
Power purchase
agreements and intangible liabilities, net
|
18.5
|
19.8
|
Asset retirement
obligations, net
|
49.8
|
51.5
|
Operating lease
liabilities
|
4.3
|
4.8
|
Other long-term
liabilities
|
4.1
|
4.7
|
Total
liabilities
|
$748.0
|
$797.9
|
Equity
|
|
|
Common shares, no par
value, unlimited authorized shares; 105,502,338 and 108,675,294
issued and outstanding at March 31, 2020 and December 31,
2019
|
1,252.1
|
1,259.9
|
Accumulated other
comprehensive loss
|
(152.2)
|
(140.7)
|
Retained
deficit
|
(1,134.7)
|
(1,164.2)
|
Total Atlantic Power
Corporation shareholders' equity
|
(34.8)
|
(45.0)
|
Preferred shares
issued by a subsidiary company
|
168.8
|
182.7
|
Total
equity
|
134.0
|
137.7
|
Total liabilities and
equity
|
$882.0
|
$935.6
|
Atlantic Power
Corporation
|
|
|
Table 7 -
Consolidated Statements of Operations
|
|
|
(in millions of
U.S. dollars, except per share amounts)
|
|
|
Unaudited
|
|
|
|
Three months
ended
|
March
31,
|
|
2020
|
2019
|
Project
revenue:
|
|
|
Energy
sales
|
$40.7
|
$37.0
|
Energy capacity
revenue
|
28.0
|
30.2
|
Other
|
4.1
|
5.8
|
|
72.8
|
73.0
|
Project
expenses:
|
|
|
Fuel
|
19.6
|
20.0
|
Operations and
maintenance
|
20.7
|
16.5
|
Depreciation and
amortization
|
15.6
|
16.2
|
|
55.9
|
52.7
|
Project other income
(loss):
|
|
|
Change in fair value
of derivative instruments
|
(5.6)
|
(2.4)
|
Equity in earnings of
unconsolidated affiliates
|
13.7
|
12.9
|
Interest,
net
|
(0.3)
|
(0.3)
|
Other income,
net
|
-
|
0.1
|
|
7.8
|
10.3
|
Project
income
|
24.7
|
30.6
|
|
|
|
Administrative and
other expenses:
|
|
|
Administration
|
6.7
|
6.8
|
Interest expense,
net
|
10.8
|
11.1
|
Foreign exchange
(gain) loss
|
(20.6)
|
5.0
|
Other expense,
net
|
2.6
|
4.7
|
|
(0.5)
|
27.6
|
Income from
operations before income taxes
|
25.2
|
3.0
|
Income tax
expense
|
1.5
|
0.6
|
Net income
|
23.7
|
2.4
|
Net loss attributable
to preferred shares of a subsidiary company
|
(5.8)
|
(6.5)
|
Net income
attributable to Atlantic Power Corporation
|
$29.5
|
$8.9
|
Net earnings per
share attributable to Atlantic Power Corporation
shareholders:
|
|
|
Basic
|
$0.28
|
$0.08
|
Diluted
|
$0.23
|
$0.07
|
Weighted average
number of common shares outstanding:
|
|
Basic
|
107.2
|
108.9
|
Diluted
|
134.8
|
138.6
|
Atlantic Power
Corporation
|
|
|
Table 8 -
Consolidated Statements of Cash Flows
|
|
(in millions of
U.S. dollars)
|
Three months
ended
|
Unaudited
|
March
31,
|
|
2020
|
2019
|
Cash provided by
operating activities:
|
|
|
Net income
|
$23.7
|
$2.4
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
15.6
|
16.2
|
Share-based
compensation
|
0.4
|
0.6
|
Equity in earnings
from unconsolidated affiliates
|
(13.7)
|
(12.9)
|
Distributions from
unconsolidated affiliates
|
6.0
|
5.8
|
Unrealized foreign
exchange (gain) loss
|
(20.9)
|
5.3
|
Change in fair value
of derivative instruments
|
8.2
|
7.1
|
Amortization of debt
discount and deferred financing costs
|
2.0
|
1.9
|
Non-cash operating
lease expense
|
0.5
|
0.4
|
Deferred income
taxes
|
0.3
|
(0.7)
|
Change in other
operating balances
|
|
|
Accounts
receivable
|
(2.1)
|
5.1
|
Inventory
|
2.8
|
2.7
|
Prepayments and other
assets
|
(1.7)
|
(1.4)
|
Accounts
payable
|
(5.7)
|
1.9
|
Accruals and other
liabilities
|
(7.0)
|
(5.2)
|
Cash provided by
operating activities
|
8.4
|
29.2
|
|
|
|
Cash (used in)
provided by investing activities:
|
|
|
Insurance
proceeds
|
7.4
|
-
|
Proceeds from sales of
assets and equity investments, net
|
-
|
1.5
|
Purchase of property,
plant and equipment
|
(10.0)
|
(0.3)
|
Cash (used in)
provided by investing activities
|
(2.6)
|
1.2
|
|
|
|
Cash used in
financing activities:
|
|
|
Common share
repurchases
|
(8.2)
|
(0.1)
|
Preferred share
repurchases
|
(6.4)
|
(7.7)
|
Repayment of corporate
and project-level debt
|
(21.6)
|
(15.8)
|
Cash payments for
vested LTIP withheld for taxes
|
(0.7)
|
-
|
Deferred financing
costs
|
(1.5)
|
-
|
Dividends paid to
preferred shareholders
|
(1.7)
|
(1.9)
|
Cash used in
financing activities:
|
(40.1)
|
(25.5)
|
|
|
|
Net (decrease)
increase in cash, restricted cash and cash equivalents
|
(34.3)
|
4.9
|
Cash, restricted cash
and cash equivalents at beginning of period
|
82.6
|
70.4
|
Cash, restricted cash
and cash equivalents at end of period
|
$48.3
|
$75.3
|
|
|
|
Supplemental cash
flow information
|
|
|
Interest
paid
|
$8.3
|
$8.2
|
Income taxes paid,
net
|
$0.7
|
$0.8
|
Accruals for
construction in progress
|
$0.3
|
$-
|
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. Project Adjusted EBITDA is defined as
Project income (loss) plus interest, taxes, depreciation and
amortization, impairment charges, insurance loss (gain), other
(income) expenses 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 and to
Net income on a consolidated basis is provided in Table 9
below.
Atlantic Power
Corporation
|
|
|
Table 9 -
Reconciliation of Net Income to Project Adjusted
EBITDA
|
(in millions of
U.S. dollars)
|
|
|
Unaudited
|
|
|
Three months
ended
|
|
March
31,
|
|
2020
|
2019
|
Net income
attributable to Atlantic Power Corporation
|
$29.5
|
$8.9
|
Net loss attributable
to preferred share dividends of a subsidiary company
|
(5.8)
|
(6.5)
|
Net income
|
$23.7
|
$2.4
|
Income tax
expense
|
1.5
|
0.6
|
Income from
operations before income taxes
|
25.2
|
3.0
|
Administration
|
6.7
|
6.8
|
Interest expense,
net
|
10.8
|
11.1
|
Foreign exchange
(gain) loss
|
(20.6)
|
5.0
|
Other expense,
net
|
2.6
|
4.7
|
Project
income
|
$24.7
|
$30.6
|
|
|
|
Reconciliation to
Project Adjusted EBITDA
|
|
|
Depreciation and
amortization
|
$19.8
|
$20.2
|
Interest expense,
net
|
0.7
|
0.7
|
Change in the fair
value of derivative instruments
|
5.6
|
2.4
|
Other income,
net
|
-
|
(0.2)
|
Project Adjusted
EBITDA
|
$50.8
|
$53.7
|
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SOURCE Atlantic Power Corporation