DEDHAM, Mass., Aug. 6, 2020 /PRNewswire/ --
Second Quarter 2020 Financial Results
- Net loss attributable to Atlantic Power of $5.7 million or $0.06 per diluted share decreased from net income
of $1.2 million or $0.01 per diluted share in Q2 2019
- Cash from operating activities of $35.9
million compared to $38.9
million in Q2 2019
- Project Adjusted EBITDA of $36.7
million compared to $50.8
million in Q2 2019, primarily due to lower water flows at
Curtis Palmer, contractual curtailment and maintenance expense at
Williams Lake, Cadillac outage,
and extended maintenance outages at Craven and Grayling
- Repaid $15.8 million of term loan
and project debt and achieved a consolidated leverage ratio of 3.8
times, or 3.6 times net of cash; also repaid $3.9 million of debt at Chambers (equity
method)
- Liquidity at June 30, 2020 of
$140 million, including $9 million of discretionary cash, after using
$28.0 million of cash for common
share repurchases
Accelerated Return of Capital to Shareholders
- During the second quarter, invested $28.0 million in the repurchase of approximately
13.5 million common shares at an average price of $2.00 per share, including 12.5 million common
shares repurchased at $2.00 per share
under the Substantial Issuer Bid (SIB) concluded on May 1
- In July 2020, invested
$5.5 million in the repurchase of
approximately 2.7 million common shares at an average price of
$2.01 per share
- Year to date through July, have invested $41.6 million in the repurchase of approximately
20.0 million common shares at an average price of $2.04 per share
Operational and Commercial Updates
- Reconstruction of Cadillac plant completed in July; plant is in
process of being commissioned; cost in line with estimate;
expect to record business interruption insurance recoveries in Q3
2020
- Williams Lake plant in
contractual curtailment since April
9; replacement of cooling tower completed; targeting return
to service by September 1
- Executed six-month extension of Calstock Power Purchase
Agreement (PPA) to December 2020
- Oxnard under Reliability Must
Run (RMR) agreement through year-end 2020
- To date, no impact on operations from coronavirus pandemic
Reaffirming 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 and six months ended June 30,
2020.
"Financial results for the second quarter were solid, despite
lower water flows at Curtis Palmer and extended outages at several
plants. We are reaffirming our 2020 guidance," said James J. Moore, Jr., President and Chief
Executive Officer of Atlantic Power Corporation. "We came into the
year in a strong enough position to treat our employees and
shareholders well. We have not had to lay off any employees and we
have not cut benefits or salaries despite the pandemic. Meanwhile,
we continue to both deleverage our balance sheet and return capital
to shareholders via share repurchases. In the first six months of
this year, we paid down $37.3 million
of consolidated debt. Our leverage ratio at the end of June was 3.8
times, or 3.6 times net of cash. We accelerated the rate of share
repurchases as we viewed the share price opportunity to be
compelling. Year to date through July, we have repurchased a total
of 20.0 million shares at an average price of $2.04 per share, reducing shares outstanding by
18% from the year-end 2019 level."
(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.
Financial Review of the Three Months Ended June 30, 2020
Cadillac Insurance Recovery
Reconstruction of the Cadillac plant was completed in late July
and the plant is in the process of being commissioned. The Company
believes its insurance coverage will be adequate to cover the cost
of repairs and business interruption losses during the outage. In
the second quarter of 2020, the Company received $5.4 million from its insurers in payment of
claims related to the incident. This receipt is included in cash
flows from investing activities. Cumulatively through June 30, 2020, the Company has received
$24.0 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 $5.9 million of capital expenditures for repairs
in the second quarter of 2020 and a total of $20.7 million through June
30, 2020. The total cost to reconstruct the plant, including
amounts incurred in the third quarter, is in line with the
Company's estimate.
Payments from the Company's insurers are not allocated between
property insurance and business interruption insurance. The Company
estimates that approximately $3.6 million of
the $5.4 million payment represents recovery of business
interruption losses in the second quarter of 2020, and that
$8.9 million of the $24.0 million in payments through June 30, 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 is expected to
occur in the third quarter of 2020.
Atlantic Power
Corporation
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Table 1 -
Financial Results
|
|
|
|
|
|
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(in millions of
U.S. dollars)
|
|
|
|
|
|
Unaudited
|
Three months
ended
|
|
Six months
ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2020
|
2019
|
Variance
|
2020
|
2019
|
Variance
|
Project
revenue
|
$62.3
|
$71.3
|
($9.0)
|
$135.0
|
$144.3
|
($9.3)
|
Project
income
|
19.7
|
21.7
|
(2.0)
|
44.4
|
52.2
|
(7.8)
|
Net (loss) income
attributable to Atlantic Power Corp.
|
(5.7)
|
1.2
|
(6.9)
|
23.8
|
10.1
|
13.7
|
(Loss) earnings per
share attributable to Atlantic Power Corp. - basic
|
(0.06)
|
0.01
|
(0.07)
|
0.23
|
0.09
|
0.14
|
(Loss) earnings per
share attributable to Atlantic Power Corp. - diluted
|
(0.06)
|
0.01
|
(0.07)
|
0.20
|
0.09
|
0.11
|
Project Adjusted
EBITDA
|
36.7
|
50.8
|
(14.1)
|
87.6
|
104.5
|
(16.9)
|
All amounts are in
U.S. dollars and are approximate unless otherwise indicated.
Project Adjusted EBITDA is not a recognized measure under generally
accepted accounting principles in the United States ("GAAP") and
does not have a standardized meaning prescribed by GAAP; therefore,
this measure may not be comparable to similar measures presented by
other companies. Please refer to "Non-GAAP Disclosures" on
page 14 of this news release for an explanation and a
reconciliation of "Project Adjusted EBITDA" as used in this news
release to Project income (loss).
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Consolidated Results
Project revenue in the second quarter of 2020 decreased
by $9.0 million to $62.3 million from $71.3
million, with decreases at Curtis Palmer, Cadillac,
Oxnard, Williams Lake and Morris partially offset by
increases at Allendale and
Dorchester, which were acquired in
July 2019, and at Kenilworth.
Project income in the second quarter of 2020 was
$19.7 million as compared to
$21.7 million in the second quarter
of 2019. The decrease of $2.0 million
was primarily attributable to the $9.0
million decrease in revenue, a $3.6
million increase in operation and maintenance expense,
primarily for Allendale and
Dorchester (acquired in
July 2019) and Williams Lake (cooling tower replacement), and
a $3.3 million decrease in equity
earnings from unconsolidated affiliates due to losses at Craven and
Grayling. These negative variances were partially offset by a
$10.1 million increase in the fair
value of derivative instruments.
Net loss attributable to Atlantic Power
Corporation in the second quarter of 2020 was $5.7 million as compared to net income of
$1.2 million in the second quarter of
2019. The decrease of $6.9 million
was primarily attributable to a $2.0
million decrease in project income and a $4.4 million increase in foreign exchange loss.
The foreign exchange loss was related to the revaluation of debt
denominated in Canadian dollars (the Canadian dollar appreciated
3.9% from March 31, 2020 to
June 30, 2020). These negative
variances were partially offset by reductions in administration and
interest expense of $0.5 and
$0.8 million, respectively.
Loss per diluted share in the second quarter of 2020 was
$0.06 as compared to earnings per
diluted share of $0.01 in the second
quarter of 2019. The decrease was attributable to a net loss (as
compared to net income in the prior period), partially offset by a
decrease in shares outstanding.
Project Adjusted EBITDA decreased $14.1 million to $36.7
million in the second quarter of 2020 from $50.8 million in the second quarter of 2019, with
most of the decrease attributable to lower water flows at Curtis
Palmer, the Williams Lake outage
and cooling tower replacement, the Cadillac extended outage
following the September 2019 fire,
and an extended maintenance outage at Craven, partially offset by
modest EBITDA increases at other projects.
Atlantic Power
Corporation
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Table 2 - Project
(Loss) Income 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
|
|
|
|
|
|
|
|
Three months
ended
|
|
Six months
ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2020
|
2019
|
Variance
|
2020
|
2019
|
Variance
|
Project (loss)
income
|
|
|
|
|
|
|
Solid Fuel
|
($7.9)
|
$1.6
|
($9.5)
|
($6.4)
|
$5.1
|
($11.5)
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Natural
Gas
|
17.4
|
10.0
|
7.4
|
36.8
|
28.4
|
8.4
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Hydroelectric
|
9.9
|
14.4
|
(4.5)
|
20.3
|
25.2
|
(4.9)
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Corporate
|
0.3
|
(4.3)
|
4.6
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(6.3)
|
(6.5)
|
0.2
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Total
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$19.7
|
$21.7
|
($2.0)
|
$44.4
|
$52.2
|
($7.8)
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Project Adjusted
EBITDA
|
|
|
|
|
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Solid Fuel
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($1.6)
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$8.3
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($9.9)
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$6.2
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$18.4
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($12.2)
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Natural
Gas
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23.8
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22.9
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0.9
|
52.0
|
51.0
|
1.0
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Hydroelectric
|
14.8
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19.3
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(4.5)
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30.1
|
34.9
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(4.8)
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Corporate
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(0.3)
|
0.3
|
(0.6)
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(0.7)
|
0.2
|
(0.9)
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Total
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$36.7
|
$50.8
|
($14.1)
|
$87.6
|
$104.5
|
($16.9)
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Segment Results
Solid Fuel
Project income decreased $9.5
million primarily due to a $3.6
million decrease at Williams
Lake, due to contractual curtailment of the project
beginning in April 2020 and
maintenance expense associated with a replacement of the cooling
tower. In addition, project income at Cadillac decreased
$2.8 million as a result of the
extended outage, and Craven and Grayling had project losses of
$2.5 million and $1.0 million, respectively, due to extended
outages attributable to rotor repairs.
Project Adjusted EBITDA decreased $9.9 million, primarily due to a $3.6 million decrease at Williams Lake due to the contractual
curtailment and maintenance expense, a $3.2
million decrease at Cadillac due to the extended outage
following the September 2019 fire and
a $3.2 million decrease at Craven and
Grayling on a combined basis due to extended maintenance outages.
With respect to Cadillac, the Company expects to record business
interruption insurance recoveries to income and Project Adjusted
EBITDA once the insurance claim is finalized, expected in the third
quarter of 2020.
Natural Gas
Project income increased $7.4
million primarily due to increases at Nipigon and Orlando. Project income increased $2.6 million at Nipigon, attributable to a $1.6 million gain in fair value on the fuel
agreement accounted for as a derivative and $0.9 million to favorable gas pricing and the
project's savings pool shared by Nipigon and the offtaker. Project income at
Orlando also increased
$2.6 million, primarily due to a
$3.7 million increase in the fair
value of natural gas swaps, partially offset by lower availability.
In addition, there were modest increases in project income at
several other projects.
Project Adjusted EBITDA increased $0.9 million primarily due to increases at
Nipigon of $1.0 million and Kenilworth of $0.9
million, partially offset by a $1.1
million decrease at Orlando
due to a maintenance outage. (Changes in the fair value of
derivatives are included in Project income but not Project Adjusted
EBITDA.)
Hydroelectric
Project income decreased $4.5
million primarily due to a $5.9
million decrease at Curtis Palmer. Generation at Curtis
Palmer was 6% below the historical second-quarter average, but 33%
below the comparable 2019 level. This decrease was partially offset
by modestly higher project income at the three other hydro
projects.
Project Adjusted EBITDA decreased $4.5 million primarily due to a $5.9 million decrease at Curtis Palmer, partially
offset by modest increases at the three other hydro projects.
Corporate
Project income increased $4.6
million primarily due to a $5.1
million increase in the fair value of interest rate swap
agreements related to the senior secured credit facility.
Project Adjusted EBITDA did not change materially
from the year-ago period.
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
|
Three months
ended
|
|
Six months
ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2020
|
2019
|
Variance
|
2020
|
2019
|
Variance
|
Net cash provided by
operating activities
|
$35.9
|
$38.9
|
($3.0)
|
$44.3
|
$68.1
|
($23.8)
|
Net cash (used in)
provided by investing activities
|
(0.3)
|
(0.1)
|
(0.2)
|
(2.9)
|
1.1
|
(4.0)
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Net cash used in
financing activities
|
(45.4)
|
(41.3)
|
(4.1)
|
(85.5)
|
(66.8)
|
(18.7)
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Cash Flow
Cash provided by operating activities of
$35.9 million decreased $3.0 million from $38.9
million in the second quarter of 2019. The decrease was
primarily due to a $14.1 million
reduction in Project Adjusted EBITDA and a $4.0 million reduction in distributions from
unconsolidated affiliates, partially offset by a $10.5 million favorable change in working
capital. The Chambers project distribution was reduced to
$2.3 million from $6.0 million due to increased debt service
payments. The majority of the change in working capital related to
the timing of payables and receivables, particularly with respect
to disbursements for reconstruction costs and insurance recoveries
at Cadillac and in preparation for a maintenance outage at Morris
in the fourth quarter.
Cash used in investing activities was $0.3 million for the second quarter of 2020 as
compared to $0.1 million for the
second quarter of 2019. Capital expenditures increased $6.4 million as compared to the second quarter of
2019, of which $5.9 million related
to the reconstruction of Cadillac. The Cadillac capital
expenditures were mostly offset by the receipt of $5.4 million of insurance proceeds.
Cash used in financing activities of $45.4 million increased $4.1 million from $41.3
million in the second quarter of 2019. The majority of the
increase was attributable to common share repurchases. In the
second quarter of 2020, the Company used $28.0 million to repurchase common shares as
compared to $0.7 million in the
second quarter of 2019. This increase was partially offset by an
$18.5 million reduction in use of
cash for the redemption of the Series D convertible debentures in
the second quarter of 2019, a $2.5
million reduction in use of cash for debt repayment and a
$1.9 million reduction in use of cash
payments for vested LTIP units withheld for taxes, all as compared
to the second quarter of 2019.
During the second quarter of 2020, the net decrease in the
Company's cash, restricted cash and cash equivalents was
$9.8
million.
Liquidity, Balance Sheet and Capital Allocation
Liquidity
As shown in Table 4, the Company's liquidity at June 30, 2020 was $140.1
million, a decrease of $9.6
million from $149.7 million at
March 31, 2020. The decrease was
attributable to a $17.9 million
reduction in cash at the parent, partially offset by an
$8.1 million increase in cash at the
projects. During the quarter, the Company used $28.0 million in parent cash for repurchases of
common shares. Cash at the projects increased in part because of
favorable changes in working capital balances, which had been a use
of cash in the first quarter. Also, the Company elected to retain a
higher level of cash at the projects in the second quarter based on
forecasted needs in the third and fourth quarters, including
decommissioning of the San Diego
sites.
Atlantic Power
Corporation
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Table 4 -
Liquidity
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(in millions of
U.S. dollars)
|
|
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Unaudited
|
|
|
|
June 30,
2020
|
Mar. 31,
2020
|
Cash and cash
equivalents, parent (1)
|
$16.1
|
$34.0
|
Cash and cash
equivalents, projects (2)
|
21.9
|
13.8
|
Total cash and cash
equivalents
|
38.0
|
47.8
|
Revolving credit
facility
|
180.0
|
180.0
|
Letters of credit
outstanding
|
(77.9)
|
(78.1)
|
Availability under
revolving credit facility
|
102.1
|
101.9
|
Total liquidity
(1)
|
$140.1
|
$149.7
|
Excludes restricted
cash of (3) :
|
$0.5
|
$0.5
|
(1) On May 1, 2020, the Company
utilized $25.8 million of cash to repurchase and cancel 12.5
million shares under the Substantial Issuer Bid.
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(2)
Includes $0 million and $2.1 million at June 30, 2020 and March 31,
2020, respectively, from Cadillac insurance proceeds for use in
reconstruction of the plant.
|
(3) Includes $0.2 million and $0.2
million at June 30, 2020 and March 31, 2020, respectively, from
Cadillac insurance proceeds for use in reconstruction of the
plant.
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Balance Sheet
Debt Repayment
During the second quarter of 2020, the Company repaid
$15.0 million of the APLP Holdings
term loan and amortized $0.8 million
of project-level debt at Cadillac. At June
30, 2020, the Company's consolidated debt was $599.9 million, excluding unamortized discounts
and deferred financing costs, and the Company's consolidated
leverage ratio (consolidated gross debt to trailing 12-month
consolidated Adjusted EBITDA) was 3.8 times. On a net debt basis
(debt net of $38.0 million of cash),
the consolidated leverage ratio at June 30,
2020 was 3.6 times.
For the full year 2020, the Company expects to repay
approximately $72.5 million of term
loan and $3.9 million of Cadillac
project debt, including $37.3 million
repaid in the first half of 2020. In addition, the Company expects
to repay $7.8 million of its share of
Chambers project debt, including $3.9
million repaid in the first six months of 2020 (all in the
second quarter). (Chambers is accounted for on the equity
method.)
Capital Allocation
Substantial Issuer Bid (SIB)
As previously disclosed, on May 1,
2020, the Company completed a substantial issuer bid for its
common shares, repurchasing 12.5 million common shares at a price
of $2.00 per share. The shares
repurchased have been canceled. The total cost of the SIB including
transaction costs was $25.8
million.
Normal Course Issuer Bid (NCIB) Update
The Company was required to suspend the NCIB for its common
shares in late March, when it launched the SIB, through mid-May.
From mid-May through the end of June, the Company repurchased and
canceled approximately 1.0 million common shares at a cost of
$2.2 million, or an average price of
$2.06 per share.
In July 2020, the Company
repurchased and canceled approximately 2.7 million common shares at
a cost of $5.5 million, or an average
price of $2.01 per share.
Year to date through July under the NCIB and the SIB, the
Company has repurchased and canceled approximately 20.0 million
common shares at a total cost of $41.6
million, or an average price of $2.04 per share. Common shares outstanding have
been reduced to 89,222,568 as of August 5,
2020.
There were no repurchases of preferred shares or convertible
debentures under the NCIB in the second quarter of 2020. Year to
date through July under the NCIB, the Company has invested
$6.4 million (US$ equivalent) to
repurchase preferred shares at an average discount to par of 39%,
all in the first quarter of the year.
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, which
assumes average water flows for Curtis Palmer and Mamquam. Year to
date through June 30, water flows at
both Curtis Palmer and Mamquam were favorable relative to average,
although some of that upside has since reversed as July conditions
for Curtis Palmer were below average. The extension of the Calstock
PPA and the RMR contract for Oxnard are modestly favorable to the Company's
guidance, while the extended maintenance outages at Craven and
Grayling have been unfavorable. The Company's guidance assumes that
insurance recoveries related to business interruption losses
associated with the Cadillac outage will be recorded to revenues
and Project Adjusted EBITDA in 2020, expected in the third quarter
of the year.
Atlantic Power
Corporation
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Table 5 - Bridge
of 2020 Project Adjusted EBITDA Guidance to Cash Provided by
Operating Activities
|
(in millions of
U.S. dollars)
|
|
|
Unaudited
|
|
|
|
2020
Guidance
|
2019
Actual
|
|
(Initiated
2/27/20)
|
|
Project Adjusted
EBITDA
|
$175 -
$190
|
$196.1
|
Adjustment for equity
method projects(1)
|
(8)
|
(3.5)
|
Corporate G&A
(cash)
|
(23)
|
(22.4)
|
Cash interest
payments
|
(36)
|
(37.6)
|
Cash taxes
|
(4)
|
(2.3)
|
Decommissioning (San
Diego projects)
|
(4)
|
(1.0)
|
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 in the
Company's 2020 estimate.
|
(1) For equity method projects,
represents difference between Project Adjusted EBITDA and cash
distribution.
|
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, an
assumption of nil working capital (versus a benefit to cash flow 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).
Operational Updates
Coronavirus Pandemic
With power generation deemed an essential service, to date, the
coronavirus 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 regular
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 continues to
be a rapidly evolving situation, we continue to monitor it and
cannot predict what its ultimate impact will be on our
business.
Cadillac
Reconstruction of the plant was completed in late July and the
plant is in the process of being commissioned.
Williams Lake Operations
Under the terms of the Energy Purchase Agreement with BC Hydro,
the plant is subject to a contractual curtailment during the months
of May, June and July. The plant was taken down on April 9. During the current outage, the Company
completed a replacement of the plant's cooling tower in late July.
Maintenance expense during the quarter totaled approximately
$1.7 million. During the
outage, the Company has been rebuilding the plant's fuel supply.
The availability of fuel remains challenging, although fuel costs
to date have been in line with the Company's expectations. The
Company is targeting a return to service by September 1. The plant is contractually required
to operate in November through February. Considering the additional
maintenance expense and expected run time for the plant, the
Company continues to estimate that Project Adjusted EBITDA will be
approximately breakeven for the year.
Craven and Grayling Extended Outages
The Company acquired a 50% equity interest in the 48 megawatt
Craven biomass plant and a 30% equity interest in the 37 megawatt
Grayling biomass plant in 2019.
Craven and Grayling were taken down for planned maintenance
outages in late April and mid-March, respectively. Both outages
were considerably extended when inspections of the steam turbines
revealed significant erosion to the rotor blades. At Craven,
repairs have been completed and the plant was returned to service
on July 31.
Following its extended outage, Grayling was returned to service
on June 24. However, on July 3, Grayling experienced a failure of the
generator. A generator rewind is being scheduled and the plant is
expected to be out of service for the remainder of this year. The
Grayling plant has business interruption insurance, which is
subject to a 60-day deductible. The insurance claim is being filed
by the plant operator.
The outages and additional maintenance expense resulted in
Project Adjusted EBITDA losses of $2.3
million and $0.9 million in
the second quarter for Craven and Grayling, respectively.
The Company does not expect to receive distributions from either
project in 2020. Notwithstanding these recent developments, the
Company's aggregate investment in the four biomass plants acquired
in 2019 is still exceeding its return criteria.
Decommissioning of San Diego Projects
Demolition of the Naval Training Center site in San Diego has begun and preparations for
demolition of the Naval Station and North Island sites are under
way. The work is expected to be completed by year-end 2020. 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 second quarter of 2020, the Company incurred $11.6 million of maintenance expense and
$0.9 million of capital expenditures.
These figures exclude capital expenditures for repairs and
replacement of equipment at Cadillac of $5.9
million. In the first six months of 2020, maintenance
expense and capital expenditures totaled $17.2 million and $1.2
million, respectively. Capital expenditures for repairs and
replacement of equipment at Cadillac totaled $15.6 million, which are expected to be covered
by the Company's insurance.
For the full year 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
Calstock (Ontario)
The Calstock PPA with the Ontario Electricity Financial
Corporation, which had been scheduled to expire in June 2020, was recently extended to December 16, 2020 on existing terms. The
extension provides the provincial government additional time to
evaluate the future role of the Calstock plant and biomass generation in the
province. The extension is expected to result in a modest
contribution to Project Adjusted EBITDA in the second half of
2020.
Oxnard (California)
Following the expiration of the Oxnard PPA with Southern
California Edison in May, the Company executed an RMR agreement
with the California Independent System Operator (CAISO) that became
effective June 1, 2020 and will
expire December 31, 2020. The RMR is
conditioned upon the approval of the Federal Energy Regulatory
Commission (FERC); the application for approval was submitted to
the FERC on May 28, 2020 and is
pending. The Company expects a minimal contribution to Project
Adjusted EBITDA during the term of the RMR. The Company plans to
evaluate the market opportunity for a Resource Adequacy contract
for 2021, or pursue another RMR with the CAISO.
Financial Results by Project
A schedule of Project income, Project Adjusted EBITDA and Cash
Distributions by project for the three and six months ended
June 30, 2020 and the comparable 2019
period can be found in the second 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 14 of this release.
Investor Conference Call and Webcast
Atlantic Power's management team will host a telephone
conference call and webcast on Friday,
August 7, 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, August 7, 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
10146289 at the following telephone numbers:
U.S. (Toll Free): 1-877-344-7529
Canada (Toll Free):
1-855-669-9658
International (Toll): 1-412-317-0088
The replay will be available one hour after the end of the
conference call through September 7,
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 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 that the Company will record recovery
of business interruption losses to income in 2020;
- the Company's plans for returning the Williams Lake plant to service by September 1, 2020, its view of fuel market
conditions and its expectation that the project will have an
approximately breakeven level of Project Adjusted EBITDA in
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 statement that it accelerated share repurchases
earlier this year as it viewed the share price opportunity as
compelling;
- 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 six months of
2020;
- the Company's expectation that the Grayling plant will be out
of service for the remainder of this year;
- the Company's view that notwithstanding recent developments at
Craven and Grayling, the aggregate investment in the four biomass
plants acquired by the Company in 2019 is still exceeding its
return criteria;
- 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 be completed by
year-end, 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 estimations of Project Adjusted EBITDA
contributions resulting from the extension of the Calstock PPA and
the Oxnard RMR; 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
|
|
|
|
June
30,
|
December
31,
|
|
2020
|
2019
|
Assets
|
|
|
Current
assets:
|
|
|
Cash and cash
equivalents
|
$38.0
|
$74.9
|
Restricted
cash
|
0.5
|
7.7
|
Accounts
receivable
|
26.3
|
30.4
|
Insurance recovery
receivable
|
0.8
|
13.5
|
Current portion of
derivative instruments asset
|
-
|
0.7
|
Inventory
|
17.7
|
18.6
|
Prepayments
|
4.5
|
3.8
|
Income taxes
receivable
|
2.9
|
1.8
|
Lease
receivable
|
-
|
0.9
|
Other current
assets
|
0.2
|
0.4
|
Total current
assets
|
90.9
|
152.7
|
Property, plant, and
equipment, net
|
493.6
|
502.1
|
Equity method
investments in unconsolidated affiliates
|
94.8
|
96.6
|
Power purchase
agreements and intangible assets, net
|
131.3
|
144.3
|
Goodwill
|
21.3
|
21.3
|
Operating lease
right-of-use assets
|
5.4
|
6.3
|
Deferred income
taxes
|
11.0
|
10.4
|
Other
assets
|
0.6
|
1.9
|
Total
assets
|
$848.9
|
$935.6
|
Liabilities
|
|
|
Current
liabilities:
|
|
|
Accounts
payable
|
$3.7
|
$8.9
|
Accrued
interest
|
2.3
|
2.6
|
Other accrued
liabilities
|
17.5
|
20.8
|
Current portion of
long-term debt
|
86.0
|
76.4
|
Current portion of
derivative instruments liability
|
17.3
|
12.0
|
Operating lease
liabilities
|
2.1
|
2.0
|
Other current
liabilities
|
0.5
|
0.2
|
Total current
liabilities
|
129.4
|
122.9
|
Long-term debt, net
of unamortized discount and deferred financing costs
|
420.1
|
473.5
|
Convertible
debentures, net of discount and unamortized deferred financing
costs
|
77.7
|
81.1
|
Derivative
instruments liability
|
14.1
|
15.9
|
Deferred income
taxes
|
24.9
|
23.7
|
Power purchase
agreements and intangible liabilities, net
|
18.4
|
19.8
|
Asset retirement
obligations, net
|
50.7
|
51.5
|
Operating lease
liabilities
|
3.8
|
4.8
|
Other long-term
liabilities
|
4.1
|
4.7
|
Total
liabilities
|
$743.2
|
$797.9
|
Equity
|
|
|
Common shares, no par
value, unlimited authorized shares; 91,952,348 and 108,675,294
issued and outstanding at June 30, 2020 and December 31,
2019
|
1,224.6
|
1,259.9
|
Accumulated other
comprehensive loss
|
(147.3)
|
(140.7)
|
Retained
deficit
|
(1,140.4)
|
(1,164.2)
|
Total Atlantic Power
Corporation shareholders' deficit
|
(63.1)
|
(45.0)
|
Preferred shares
issued by a subsidiary company
|
168.8
|
182.7
|
Total
equity
|
105.7
|
137.7
|
Total liabilities and
equity
|
$848.9
|
$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
|
Six months
ended
|
June
30,
|
June
30,
|
|
2020
|
2019
|
2020
|
2019
|
Project
revenue:
|
|
|
|
|
Energy
sales
|
$31.1
|
$36.5
|
$71.7
|
$73.5
|
Energy capacity
revenue
|
27.1
|
31.6
|
55.1
|
61.8
|
Other
|
4.1
|
3.2
|
8.2
|
9.0
|
|
62.3
|
71.3
|
135.0
|
144.3
|
Project
expenses:
|
|
|
|
|
Fuel
|
14.1
|
15.8
|
33.8
|
35.8
|
Operations and
maintenance
|
22.2
|
18.6
|
42.7
|
35.1
|
Depreciation and
amortization
|
15.2
|
16.1
|
30.8
|
32.3
|
|
51.5
|
50.5
|
107.3
|
103.2
|
Project other income
(loss):
|
|
|
|
|
Change in fair value
of derivative instruments
|
3.1
|
(7.0)
|
(2.5)
|
(9.4)
|
Equity in earnings of
unconsolidated affiliates
|
6.1
|
9.4
|
19.8
|
22.3
|
Interest,
net
|
(0.3)
|
(0.2)
|
(0.6)
|
(0.6)
|
Other income
(expense), net
|
-
|
(1.3)
|
-
|
(1.2)
|
|
8.9
|
0.9
|
16.7
|
11.1
|
Project
income
|
19.7
|
21.7
|
44.4
|
52.2
|
|
|
|
|
|
Administrative and
other expenses:
|
|
|
|
|
Administration
|
4.5
|
5.0
|
11.2
|
11.8
|
Interest expense,
net
|
10.2
|
11.0
|
21.0
|
22.1
|
Foreign exchange loss
(gain)
|
9.3
|
4.9
|
(11.3)
|
9.9
|
Other (income)
expense, net
|
(1.5)
|
(3.7)
|
1.1
|
0.9
|
|
22.5
|
17.2
|
22.0
|
44.7
|
(Loss) income from
operations before income taxes
|
(2.8)
|
4.5
|
22.4
|
7.5
|
Income tax
expense
|
1.2
|
1.6
|
2.7
|
2.2
|
Net (loss)
income
|
(4.0)
|
2.9
|
19.7
|
5.3
|
Net income (loss)
attributable to preferred shares of a subsidiary company
|
1.7
|
1.7
|
(4.1)
|
(4.8)
|
Net (loss) income
attributable to Atlantic Power Corporation
|
($5.7)
|
$1.2
|
$23.8
|
$10.1
|
Net (loss) earnings
per share attributable to Atlantic Power Corporation
shareholders:
|
|
|
|
|
Basic
|
($0.06)
|
$0.01
|
$0.23
|
$0.09
|
Diluted
|
($0.06)
|
$0.01
|
$0.20
|
$0.09
|
Weighted average
number of common shares outstanding:
|
|
|
|
Basic
|
97.6
|
109.7
|
102.4
|
109.3
|
Diluted
|
97.6
|
110.2
|
130.3
|
138.0
|
Atlantic Power
Corporation
|
|
|
Table 8 -
Consolidated Statements of Cash Flows
|
|
(in millions of
U.S. dollars)
|
Six months
ended
|
Unaudited
|
June
30,
|
|
2020
|
2019
|
Cash provided by
operating activities:
|
|
|
Net income
|
$19.7
|
$5.3
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
Depreciation and
amortization
|
30.8
|
32.3
|
Share-based
compensation
|
0.8
|
0.8
|
Other gain
|
-
|
(0.9)
|
Asset retirement
obligations
|
-
|
1.4
|
(Gain) loss on sale of
assets
|
(0.8)
|
-
|
Equity in earnings
from unconsolidated affiliates
|
(19.8)
|
(22.3)
|
Distributions from
unconsolidated affiliates
|
21.6
|
25.4
|
Unrealized foreign
exchange (gain) loss
|
(11.7)
|
10.2
|
Change in fair value
of derivative instruments
|
4.5
|
11.2
|
Amortization of debt
discount and deferred financing costs
|
3.3
|
3.6
|
Non-cash operating
lease expense
|
0.9
|
0.8
|
Deferred income
taxes
|
0.3
|
(0.7)
|
Change in other
operating balances
|
|
|
Accounts
receivable
|
4.1
|
4.1
|
Inventory
|
0.7
|
0.1
|
Prepayments and other
assets
|
0.5
|
(0.6)
|
Accounts
payable
|
(6.2)
|
0.1
|
Accruals and other
liabilities
|
(4.4)
|
(2.7)
|
Cash provided by
operating activities
|
44.3
|
68.1
|
|
|
|
Cash (used in)
provided by investing activities:
|
|
|
Insurance
proceeds
|
12.7
|
-
|
Proceeds from sales of
assets
|
0.9
|
1.5
|
Purchase of property,
plant and equipment
|
(16.5)
|
(0.4)
|
Cash (used in)
provided by investing activities
|
(2.9)
|
1.1
|
|
|
|
Cash used in
financing activities:
|
|
|
Common share
repurchases
|
(36.1)
|
(0.8)
|
Preferred share
repurchases
|
(6.4)
|
(7.9)
|
Repayment of corporate
and project-level debt
|
(37.3)
|
(34.0)
|
Repayment of
convertible debentures
|
-
|
(18.5)
|
Cash payments for
vested LTIP withheld for taxes
|
(0.7)
|
(1.9)
|
Deferred financing
costs
|
(1.6)
|
-
|
Dividends paid to
preferred shareholders
|
(3.4)
|
(3.7)
|
Cash used in
financing activities:
|
(85.5)
|
(66.8)
|
|
|
|
Net (decrease)
increase in cash, restricted cash and cash equivalents
|
(44.1)
|
2.4
|
Cash, restricted cash
and cash equivalents at beginning of period
|
82.6
|
70.4
|
Cash, restricted cash
and cash equivalents at end of period
|
$38.5
|
$72.8
|
|
|
|
Supplemental cash
flow information
|
|
|
Interest
paid
|
$18.2
|
$18.7
|
Income taxes paid,
net
|
$2.3
|
$2.4
|
Accruals for
construction in progress
|
$0.6
|
$-
|
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, 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 (loss)
and to Net income (loss) on a consolidated basis is provided in
Table 9 below.
Atlantic Power
Corporation
|
|
|
|
|
Table 9 -
Reconciliation of Net (Loss) Income to Project Adjusted
EBITDA
|
|
|
(in millions of
U.S. dollars)
|
|
|
|
|
Unaudited
|
|
|
|
Three months
ended
|
Six months
ended
|
|
June
30,
|
June
30,
|
|
2020
|
2019
|
2020
|
2019
|
Net (loss) income
attributable to Atlantic Power Corporation
|
($5.7)
|
$1.2
|
$23.8
|
$10.1
|
Net income (loss)
attributable to preferred share dividends of a subsidiary
company
|
1.7
|
1.7
|
(4.1)
|
(4.8)
|
Net (loss)
income
|
($4.0)
|
$2.9
|
$19.7
|
$5.3
|
Income tax
expense
|
1.2
|
1.6
|
2.7
|
2.2
|
(Loss) income from
operations before income taxes
|
(2.8)
|
4.5
|
22.4
|
7.5
|
Administration
|
4.5
|
5.0
|
11.2
|
11.8
|
Interest expense,
net
|
10.2
|
11.0
|
21.0
|
22.1
|
Foreign exchange loss
(gain)
|
9.3
|
4.9
|
(11.3)
|
9.9
|
Other (income)
expense, net
|
(1.5)
|
(3.7)
|
1.1
|
0.9
|
Project
income
|
$19.7
|
$21.7
|
$44.4
|
$52.2
|
|
|
|
|
|
Reconciliation to
Project Adjusted EBITDA
|
|
|
|
|
Change in the fair
value of derivative instruments
|
($3.1)
|
$7.0
|
$2.5
|
$9.4
|
Depreciation and
amortization
|
19.4
|
20.0
|
39.3
|
40.2
|
Interest,
net
|
0.7
|
0.8
|
1.4
|
1.5
|
Other project
expense
|
-
|
1.3
|
-
|
1.2
|
Project Adjusted
EBITDA
|
$36.7
|
$50.8
|
$87.6
|
$104.5
|
View original
content:http://www.prnewswire.com/news-releases/atlantic-power-corporation-releases-second-quarter-2020-results-301108106.html
SOURCE Atlantic Power Corporation