BOSTON, MASSACHUSETTS -- (MARKET WIRE) -- 03/26/08 -- Atlantic Power Corporation (TSX: ATP.UN)(TSX: ATP.DB) (the "Company") today announced its results for the three months and year ended December 31, 2007. All amounts are in U.S. dollars unless otherwise indicated.
2007 Highlights:
- Distributable cash increased 23%
- Payout ratio remained conservative at 87%
- Completion of turbine upgrades at Lake Project to increase efficiency and output
- Accretive acquisition of remaining interest in Pasco Project to generate increased cash flow
"2007 was another year in which we demonstrated solid progress in all of our growth initiatives," commented Barry Welch, President and CEO. "A full year of results from the Path 15 transmission line acquired last fall made a strong contribution to our distributable cash in 2007, while upgrades to the gas turbines at Lake and the purchase of substantially all of the remaining 50.1% interest in Pasco with cash on hand will generate further increases going forward. Our strong financial performance has provided adequate cash flow to fund the Lake and Pasco investments and still leaves us with a substantial and growing amount of cash to facilitate further acquisitions. In addition, we extended and strengthened our Power Purchase Agreements at several Projects during the year, further enhancing the stability of our cash distributions."
Cash Flow Available for Distribution
For the year ended December 31, 2007, Cash Flow Available for Distribution rose 23% to $70.9 million compared to $57.9 million last year. Distributions declared for 2007 were $61.4 million, resulting in a payout ratio of 87%. The increase in Cash Flow Available for Distribution for the year was primarily due to substantially higher operating cash flows driven by increased Adjusted EBITDA at the Projects including a full year contribution from the Path 15 transmission line acquired on September 15, 2006. This increase was partially offset by adjustments related to income tax instalments recoverable, which reduced cash flow available for distribution when compared to the prior year. In addition, Project-level debt repayments were higher in 2007 than in the prior year due to the acquisition of Path 15. For the three months ended December 31, 2007, Cash Flow Available for Distribution was $17.6 million, a 51% increase compared to $11.6 million for the same period last year, driven by incremental distributions attributable to the increased interest in Pasco acquired in the fourth quarter of 2007. Distributions declared in the fourth quarter of 2007 were $16.7 million.
Strong Operating Performance
Adjusted EBITDA at the Projects, including earnings from equity investments, increased 11% to $166.9 million for the year ended December 31, 2007, compared to last year. The increase in Adjusted EBITDA for the year was due to the inclusion of the Path 15 Project acquired on September 15, 2006, increased revenues at Chambers as a result of increased generation and higher spot market electricity prices, benefits related to the turbine upgrade at Pasco and higher dispatch at Mid-Georgia due to warmer than average weather. These increases were partially offset by lower Adjusted EBITDA at the Orlando Project. In addition, lower Adjusted EBITDA was recognized at Selkirk in 2007 and none from Gregory because these Projects are being recorded under the cost method of accounting as of January 1, 2007. For the three months ended December 31, 2007, Adjusted EBITDA at the Projects decreased 5% to $40.7 million compared to the fourth quarter of 2006 due primarily to the lower Adjusted EBITDA at Gregory and Selkirk described above and the absence of any EBITDA from the Jamaica project, which was sold in 2007.
For 2007, the Company reported a project loss of $113.4 million, including non-cash charges related to the change in fair value of derivative instruments of $128.4 million and the impairment of goodwill at Chambers in the amount of $71.7 million. Excluding these non-cash charges and related future income taxes, project income of $86.7 million would have been reported, an increase of 15% compared to 2006 calculated under the same basis. The increase is due to higher revenues at Pasco attributable to higher volumes sold where the prior year included an outage, as well as higher revenues associated with the increased ownership of the Project for the last 7 days of 2007. In addition, increased revenues were realized at the Chambers Project as a result of increased generation and higher spot market prices, higher dispatch at Mid-Georgia due to warmer-than-average weather in the region, higher variable energy payments at Badger Creek under its power purchase agreement, and the contribution from the Path 15 project.
The impairment of goodwill at the Chambers Project resulted from the significant increase in the book value of the reporting unit due to the Project's PPA being recorded as a financial instrument at fair value. The fair value accounting for the PPA and the impairment of goodwill do not reflect any change in the underlying economic value of or anticipated future cash distributions from the Chambers Project.
The net loss for the three months and year ended December 31, 2007 was $74.2 million or $1.21 per IPS and $149.2 million or $2.43 per IPS, respectively. Excluding non-cash charges related to changes in the fair value of derivative instruments and the impairments of Chambers goodwill and related future income taxes described above, the net loss for the three months and year ended December 31, 2007 would have been $8.1 million or $0.13 per IPS and $29.1 million or $0.47 per IPS, respectively.
Recent Transactions
On October 30, 2007 a subsidiary of the Company sold its equity investment in the Jamaica Project for $6.2 million. The carrying value of the Jamaica Project exceeded the sale price and an impairment charge in the amount of $5.1 million was recorded.
In October 2007, the Stockton Project extended its existing PPA with Pacific Gas and Electric by one year. The extended PPA expires in March 2009.
In December 2007, the Company acquired substantially all of the remaining 50.1% of the Pasco Project from its existing partners for approximately $25 million. Based on management's current expectations of operating cash flow and debt service reserve releases, the acquisition is expected to increase distributions to Atlantic Power from Pasco by $7.0 million in both 2008 and 2009. In 2010 through 2018, based on management's expectations of operating performance and the terms of the new tolling agreement that commences in 2009, the additional ownership in Pasco is expected to provide increased distributions to the Company of approximately $2 million per year. The Company financed the equity purchase price of approximately $25 million with cash on hand. The Company also assumed an additional $7.5 million of existing debt at Pasco which is non-recourse to Atlantic Power and matures on December 31, 2008.
In the fourth quarter of 2007, the Company completed an upgrade of the gas turbines at the Lake Project that is expected to increase the efficiency and the output of the Lake Project by approximately 4% and 10% respectively. The net cost of the upgrade was approximately $9.3 million. The turbines that were replaced were sold in December 2007 for cash proceeds of $3.1 million, resulting in a loss of approximately $8.6 million on the sale. Factoring in improved heat rate and output, projected gas and electricity prices plus changes to the turbine service agreement and major maintenance timing; the Company expects this investment to provide an internal rate of return in excess of 15%.
"Looking ahead, we will build on the solid growth and performance generated in 2007. We will continue to evaluate additional acquisition opportunities that result in an increase in cash available for our investors, and work with our project operators to enhance the operating and financial performance of our facilities. In addition, we will continue to look for opportunities to consolidate and increase our ownership in projects where we have partial interests," Mr. Welch concluded.
The calculation of Cash Flow Available for Distribution and a summary of Adjusted EBITDA by individual project for the three months and year ended December 31, 2007 are attached to this news release.
The Company's financial statements for the period and management's discussion and analysis for the three months and year ended December 31, 2007 are available on the Company's website at www.atlanticpowercorporation.com and on SEDAR at www.sedar.com.
Atlantic Power Corporation owns interests in a diversified portfolio of 14 power generation projects and one transmission line located in major markets in the United States. Atlantic Power's objectives are to sustain and grow its cash distributions over the long term by enhancing the performance of its existing assets and by making accretive acquisitions.
Certain statements in this news release may constitute "forward-looking statements", which reflect the expectations of Atlantic Power Management, LLC (the "Manager") regarding future growth, results of operations, performance and business prospects and opportunities of Atlantic Power Corporation (the "Company"), Atlantic Power Holdings, LLC ("Atlantic Holdings") and the Projects (as defined below). Such forward-looking statements reflect current expectations regarding future events and operating performance and speak only as of the date of this news release. 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. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to, the factors discussed under "Risk Factors" section in this the Company's management's discussion and analysis for the year ended December 21, 2007 and under "Risk Factors" in the Company's annual information form dated March 26, 2008. 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.
Cash Flow Available for Distribution is not a measure recognized under Canadian generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP. Management believes Cash Flow Available for Distributions is a relevant supplemental measure of the Company's ability to earn and distribute cash returns to investors. A reconciliation of Cash Flows from Operating Activities to Cash Flow Available for Distributions is attached to this news release and is also included in the Company's management's discussion and analysis for the three months and year ended December 31, 2007. Investors are cautioned that the Company may calculate this measure in a manner that is different from other companies.
Adjusted EBITDA, earnings before interest, taxes, depreciation and amortization (including non-cash impairment charges), is not a measure recognized under GAAP and is therefore unlikely to be comparable to similar measures presented by other issuers and does not have a standardized meaning prescribed by GAAP. Management uses Adjusted EBITDA at the Project-level to provide comparative information about Project performance. Investors are cautioned that the Company may calculate this measure in a manner that is different from other issuers.
Cash Available for Distribution
(In thousands of U.S. dollars, Three months ended Years ended
except as otherwise stated) December 31, December 31,
(unaudited) 2007 2006 2007 2006
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Cash flows from operating activities 47,184 23,883 85,901 57,521
Project-level debt repayment (13,156) (11,441) (37,581) (27,185)
Interest on IPS portion of
Subordinated Notes 9,968 7,723 36,726 26,464
Income tax installments
recoverable (net)(1)(2) (21,638) (8,124) (6,120) 4,734
Purchase of property, plant
and equipment(3) (4,754) (415) (7,993) (3,641)
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Cash Flow Available for
Distribution, US$(4) 17,604 11,626 70,933 57,893
Cash Flow Available for
Distribution, Cdn$(4) 17,287 13,272 76,147 67,399
Interest on IPS Subordinated Notes 9,968 7,723 36,726 26,464
Dividends on IPS Common Shares 6,693 5,187 24,662 16,985
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Total IPS distributions, US$ 16,661 12,910 61,388 43,449
Total IPS distributions, Cdn$ 16,296 14,776 65,181 49,151
Cash Flow Available for
Distribution per basic IPS, Cdn$(4) $0.28 $0.25 $1.24 $1.45
Cash Flow Available for
Distribution per diluted IPS,
Cdn$(4) $0.27 $0.23 $1.20 $1.42
Total distribution declared
per IPS, US$ $0.27 $0.25 $1.00 $0.94
Total distribution declared
per IPS, Cdn$ $0.27 $0.27 $1.06 $1.04
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(1) Income tax installments recoverable represents management's estimate of
U.S. federal income tax installment payments that will be recovered in
future periods. The amount presented is comprised of installment
payments made during the period, offset by the current tax provision
recorded in the consolidated statement of operations and deficit and any
income tax refunds received. These adjustments have the effect of
removing changes in working capital resulting from the timing of
quarterly tax payments and annual refund from the calculation of cash
flow available for distribution. In addition, during the third quarters
of both 2007 and 2006, the respective prior year tax returns were
finalized. As a result, the previously recorded tax provisions were
adjusted to reflect the actual tax liability on the final tax returns.
These amounts are included in this table as additions to income tax
installments recoverable in the amounts of $1,544 and $2,195 for the
three and twelve months ended December 31, 2007 and 2006 respectively.
(2) During the second quarter of 2007, the Company settled a long-term
gas transportation contract liability for a $9.75 million cash payment.
The cash payment was previously expected to create a taxable loss in
2007 that would be carried back to prior years and result in a refund
of approximately $3.2 million. This expected refund was previously
included in income tax installments recoverable for the period ended
second quarter of 2007. During the fourth quarter of 2007, management
revised its estimates of taxable income for 2007 and determined that
the Company is likely to have taxable income during the year rather than
the taxable loss that resulted from the analysis in the second quarter.
Accordingly, the Company does not expect to realize the $3.2 million
cash tax benefit that was added to cash available for distribution in
the second quarter and this amount has been subtracted from cash
available for distribution in the fourth quarter.
(3) Capital expenditures exclude amounts spent at the Lake Project to
purchase and install upgraded gas turbines in the amount of $1,483 and
$9,277 for the three and twelve months ended December 31, 2007. Proceeds
from the sale of the replaced turbines in the amount of $3,061 are also
excluded from cash available for distribution for the three and twelve
month periods ended December 31, 2007.
(4) Cash Flow Available for Distribution is not a recognized measure under
GAAP and does not have any standardized meaning prescribed by GAAP.
Therefore, this measure may not be comparable to similar measures
presented by other issuers. See "Non-GAAP Financial Measures".
Project Adjusted EBITDA(1) Three months ended Years ended
(in thousands of U.S. dollars) December 31, December 31,
(unaudited) 2007 2006 2007 2006
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Adjusted EBITDA(1) from consolidated
and proportionately
consolidated Projects
Badger Creek 1,314 1,290 4,109 4,188
Chambers 4,962 3,684 28,028 23,984
Koma Kulshan 323 107 1,196 758
Lake 6,633 6,612 28,042 28,970
Mid-Georgia 982 688 5,587 4,461
Onondaga 4,681 6,244 21,966 23,500
Orlando 2,214 2,361 8,336 10,040
Pasco 3,633 3,226 14,225 9,761
Stockton 968 1,014 3,505 1,915
Topsham 470 812 2,031 2,523
Path 15 8,175 7,815 31,564 9,270
Other 248 164 987 645
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Total adjusted EBITDA(1) from
consolidated and proportionately
consolidated Projects 34,603 34,017 149,576 120,015
Amortization 9,792 11,965 48,188 40,676
Interest expense, net 8,868 6,298 26,975 16,795
Change in the fair value of
derivative instruments 38,730 5,306 128,377 18,233
Other expense 77,934 - 67,897 (2,499)
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Earnings (loss) from consolidated
and proportionately
consolidated Projects (100,721) 10,448 (121,861) 46,810
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Adjusted EBITDA(1) from equity and
cost method Projects
Delta-Person 558 529 2,255 2,457
Gregory(2) - 2,176 - 6,066
Jamaica - 741 2,381 3,432
Rumford 655 237 2,585 1,479
Selkirk(2) 4,821 5,443 10,350 16,838
Other 16 (136) (205) (229)
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Total adjusted EBITDA(1) from
equity and cost method Projects 6,051 8,990 17,366 30,043
Amortization 463 3,369 1,948 13,061
Interest expense, net 223 1,488 1,172 5,892
Other Expense(3) - (72) (5,115) 170
Income tax 73 48 665 482
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Equity income from cost and
equity investments 5,292 4,157 8,466 10,438
Project income
Total adjusted EBITDA(1) from
all Projects 40,654 43,007 166,942 150,058
Amortization 10,255 15,334 50,136 53,737
Interest expense, net 9,091 7,786 28,148 22,687
Other (income) expense 77,936 (72) 73,011 (2,329)
Change in the fair value of
derivative instruments 38,728 5,306 128,376 18,233
Income taxes 73 48 665 482
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Project income (loss) as reported
in the statement of income (95,430) 14,605 (113,395) 57,248
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Earnings (loss) from consolidated
and proportionately consolidated
Projects 100,722 10,448 (121,861) 46,810
Income from cost and equity
method Projects 5,292 4,157 8,466 10,438
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Project income (loss) as reported
in the statement of income 95,430 14,605 (113,395) 57,248
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(1) Adjusted EBITDA is not a measure recognized under GAAP and does not
have a standardized meaning prescribed by GAAP. Adjusted EBITDA is
defined as earnings before interest, taxes, depreciation, amortization
(including non-cash impairment charges) and changes in fair value of
derivative instruments. Management uses adjusted EBITDA at the Projects
to provide comparative information about Project performance. See
Non-GAAP Financial Measures in this MD&A.
(2) Effective January 1, 2007, the Gregory and Selkirk Projects are
accounted for under the cost method of accounting. See "Changes in
Accounting Policies" in this MD&A for additional information.
(3) Sale of the Company's equity investment in the Jamaica Project for $6.2
million closed on October 30, 2007. Other expense includes an impairment
in the amount of $5.1 million recorded in the second quarter of 2007.
Contacts:
Atlantic Power Corporation
Barry Welch
(617) 977-2700
Email: info@atlanticpowercorporation.com
Source: Atlantic Power Corporation