Alterra Power Announces Results for the Quarter Ended March 31, 2013

(under IFRS and all amounts in US dollars unless otherwise stated)

TSX : AXY

VANCOUVER, May 10, 2013 /PRNewswire/ - Alterra Power Corp. (TSX: AXY) is pleased to report its financial and operating results for the three months ended March 31, 2013. For further information on these results please see Alterra's Unaudited Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis.

Alterra's financial statements consolidate 100% of the HS Orka and Soda Lake operations, while Alterra's interests in the Toba Montrose run of river hydro facility and the Dokie 1 wind facility are accounted for as equity investments. In certain statements in this news release, Alterra's results are disclosed as Alterra's "net interest", which means the effective portion of results that Alterra would have reported if each of HS Orka (66.6%), Toba Montrose (40%), Dokie 1 (51%) and Soda Lake (100%) had been reported in accordance with Alterra's actual share of ownership at March 31, 2013 and for the three months then ended. Management believes that net interest reporting provides the clearest view of the Company's performance.

Highlights for the current quarter and subsequent period include:

  • Consistent revenue and EBITDA (net interest): Revenue and EBITDA of $17.6 million and $6.4 million respectively were largely in line with the comparative quarter ($17.3 million and $7.3 million) on a pro forma basis (see "pro forma comparative numbers" below). EBITDA was down by $0.9 million primarily due to off-season repairs at the Toba Montrose facility and lower revenue at Dokie 1.
  • Steady gross margin: Gross margins of 29.1% of revenues, up slightly from 28.6% in the comparative quarter.
  • Reliable power production: 441,558 MWh of clean power production from Alterra's six power plants, consistent with the comparative quarter's output of 442,152 MWh. Alterra's net interest in generation totalled 285,737 MWh.
  • New geothermal production wells: Two wells were completed at Alterra's Reykjanes facility in Iceland, with positive resource indications and costs of $1.1 million less than the budgeted amount.
  • ABW Solar acquisition: The 50 MW Ontario solar facility began commercial operations. Alterra expects to complete the acquisition of its 10% interest in the second quarter.
  • Montrose rockslide repairs: Repair work is fully underway with return to service expected in the summer of 2013. The damage and lost revenue will be fully covered by insurance other than $0.6 million of deductibles that were recorded in December 2012.
  • South America partnership: Alterra is in final-stage negotiations for the next-phase joint venture agreement with Energy Development Corporation ("EDC"). Current plans call for EDC to invest over $65 million for a 70% stake of the Chile/Peru partnership.
  • HS Orka dividend: Alterra's Icelandic subsidiary HS Orka declared a dividend of $1.2 million during the quarter. Alterra's share is 66.6% and the cash is expected to be received by Alterra's Swedish subsidiary in the second quarter of 2013.
  • New solar partnership: Alterra has partnered with Greenbriar Capital Corp. to develop 100 MW of solar facilities in Puerto Rico.

John Carson, Alterra's CEO, said, "I'm pleased to report another strong quarter of operational performance, substantially in line with last year. We're looking forward to resuming full production at the Toba Montrose facility by August, and beginning construction on the Jimmie Creek hydro facility later this year."

Financial Results

The following table shows key financial information extracted from the consolidated results.

(expressed in thousands of US dollars, except for production)

     
Consolidated Results 3 months ended
March 31, 2013
3 months ended
March 31, 2012
Production (MWh) 347,653 341,066
Total Revenue  $ 17,184 16,388
Gross Profit 4,997 4,682
EBITDA (a) 6,195 7,004
Interest Paid 1,154 976
Financial Position  March 31, 2013   Dec 31, 2012 
Total Assets 718,395 712,530
Total Liabilities 357,222 348,483
Long Term Debt 259,655 269,443
Cash and Cash Equivalents 35,745 39,211
Working Capital 14,119 29,300

 

Note (a) - Here and elsewhere, EBITDA is defined by Alterra as earnings before interest, taxes, foreign exchange, depreciation and amortization, as well as before deductions for change in fair value of bonds payable and derivatives, foreign exchange gain (loss), write off of development costs and other income (expense), amortization of below market contracts, and value assigned to options granted less share of income (loss) of equity accounted investees plus the Company's interest in EBITDA of its equity accounted investees. Alterra discloses EBITDA as it is a measure used by analysts and by management to evaluate Alterra's performance. As EBITDA is a non-IFRS measure, it may not be comparable to EBITDA calculated by others. In addition, as EBITDA is not a substitute for net earnings, readers should consider net earnings in evaluating Alterra's performance. For a reconciliation of consolidated EBITDA to Alterra's consolidated financial statements refer to the Company's Management's Discussion and Analysis for the quarter ended March 31, 2013.

Consolidated revenue for the current quarter was up 5% from the comparative quarter ($17.2 million compared to $16.4 million) while gross profit increased by 6%. The increase was largely due to the increased production at HS Orka and Soda Lake resulting in higher revenue, as well as the timing of portfolio energy credit sales.

Alterra recorded a consolidated net loss of $11.9 million for the current quarter compared to a net loss of $9.8 million for the comparative quarter, an increase in loss of $2.1 million. The change is largely attributable to the following items:

  • A net negative non-cash change in the fair value of bonds and  derivatives of $11.3 million, related primarily to a decline in the forecast future price of aluminum.
  • A non-cash improvement in foreign exchange gain (loss) of $5.1 million, with the current quarter's $2.9 million foreign exchange gain being contrasted to the comparative quarter's loss of $2.1 million.
  • A reduction in loss recorded in the current quarter from equity accounted investees of $3.8 million against $5.4 million in the comparative quarter.

At March 31, 2013, Alterra had consolidated cash and cash equivalents of $35.8 million (December 31, 2012: $39.2 million) and ended the quarter with consolidated working capital of $14.1 million compared to $29.3 million at December 31, 2012. The decrease in both cash and working capital that occurred in the first quarter of 2013 was primarily due to expenses for the two new geothermal wells and the purchase of other items of plant and equipment at HS Orka, in addition to the classification of Alterra's revolving credit facility as short term at March 31, 2013.

The following table shows Alterra's net interest in selected operating and financial results for the current quarter:

(expressed in thousands of US dollars, except for production)

           
For the 3 months ended
March 31, 2013
HS Orka
(66.6%) 
Toba Montrose
(40%)
Dokie 1
(51%)
Soda Lake
(100%) 
Total
Production (MWh)   218,652   556   47,182   19,347   285,737
Revenue  $ 10,482  $ 64  $ 5,620  $ 1,445   17,611
EBITDA   4,086   (2,214)   4,224   344   6,440

 

Due to the change in ownership of HS Orka in the prior year, the net interest total shown in the table above is not comparable to the quarter ended March 31, 2012. The following pro forma results represent what Alterra's net interest of production, revenue and EBITDA would have been had Alterra held a 66.6% ownership interest in HS Orka for the comparative quarter:

           
For the 3 months ended
March 31, 2012
HS Orka
(66.6%) (a)
Toba Montrose
(40%) 
Dokie 1
(51%) 
Soda Lake
(100%) 
Total
Production (MWh)   214,717   -   51,554   18,668   284,939
Revenue  $ 10,131  $ -  $ 6,036  $ 1,177   17,344
EBITDA   4,205   (1,793)   4,660   238   7,310

Net interest in generation and revenue marginally increased quarter on quarter, due to new sales contracts at HS Orka entered into in late 2012 and early 2013, increased production at Soda Lake as a result of a new well coming on line in late 2012, offset by lower generation at Dokie 1 due to higher winds in the comparative quarter of 2012.

Alterra's net interest in project EBITDA decreased by $0.9 million primarily due to off season repairs at the Toba Montrose facility and a weakening of the Icelandic Krona.

Iceland Operations (66.6% Interest)

The 100 MW Reykjanes plant generated 203,056 MWh of electricity (99% of budget), and the 72 MW Svartsengi plant generated 125,250 MWh of electricity (103% of budget), and continued to supply thermal energy for district heating. Two new geothermal production wells were completed at the Reykjanes facility. Initial indications for the wells are positive and the final cost for the wells will be an estimated $1.1 million lower than budgeted. The new capacity expected to result from the drilling will be used as reserve capacity for the facility.

Toba Montrose Operations (40% Interest)

The 146 MW East Toba River and 89 MW Montrose Creek run of river hydro plants generated 1,391 MWh of electricity, or 8% of forecast. Performance was under budget due to both the temperature being colder than forecast at site in addition to the Montrose facility being offline for the whole period.

On December 13, 2012 a naturally occurring rockslide damaged a 300 meter section of the five kilometer penstock (which supplies water from the intake to the power generating plant) at the Montrose facility. Preparation for access into the rockslide area of the Montrose hydro facility was completed in March 2013, and excavation for the replacement of the 300 meter penstock segment and related work began in April 2013. The Company expects the facility to return to service during the summer of 2013. The project's insurers have confirmed that the incident is covered by property and business interruption insurance.  Deductibles totalling $0.6 million were recorded in December 2012.

Dokie 1 Operations (51% Interest)

The 144 MW Dokie 1 wind farm generated 92,514 MWh of electricity for the quarter, or 102% of budget.  The surplus was primarily due to higher than expected winds.

Soda Lake Operations (100% Interest)

The 15 MW Soda Lake geothermal plant generated 19,347 MWh of electricity for the current quarter, or 103% of budget.  The higher than expected performance was primarily a result of the installation of an additional production well put into operation at the end of 2012 which increased generation in the current quarter.

Expansion and Development Projects

Alterra has agreed to purchase for approximately $6.0 million, subject to a number of closing conditions, 10% of a 50 MW solar generation project built in Ontario by First Solar, Inc., ABW Solar.  Alterra will serve as the managing partner for ABW Solar. In April 2013 the project entered commercial operations and Alterra together with our partner General Electric Energy Financial Services and First Solar Inc. are currently in late-stage negotiations with lenders for the required debt financing and expect the project to close in the second quarter of 2013.

During the quarter, Alterra continued to advance the Upper Toba project. Alterra is currently finalizing plant design for the Jimmie Creek run of river hydro project (the first half of the Upper Toba project) and plans to commence construction in 2013. The project is based on a 40 year Power Purchase Agreement ("PPA") with BC Hydro.

Preparations continue for the two expansions at the Reykjanes plant that would increase capacity to 180 MW and annual average generation by approximately 700,000 MWh. The key matters remaining prior to construction are concluding the ongoing PPA discussions, obtaining project financing and confirmation of resource.

Alterra holds a 51% interest in a planned expansion of the Dokie 1 wind farm ("Dokie 2") with projected additions to capacity of up to 156 MW. During the quarter Alterra continued to collect data, conduct engineering work and perform other studies to complete the assessment of the project.

Other Development Projects

Alterra signed an agreement with EDC that outlines the terms of partnerships for the development of the Mariposa geothermal project in Chile and further exploration of Alterra's geothermal concessions in Peru. If EDC advances into a formal arrangement then they will be entitled to earn 70% interests in the partnerships by funding the next $58.3 million in project expenditures at Mariposa and the next $8.0 million in project expenditures on the Peruvian concessions. Alterra and EDC continue to document a joint venture agreement which will govern any subsequent shareholder agreements, which will control the individual projects. Alterra expects any final arrangements to be completed within the second quarter of 2013.

Alterra continues to advance other early stage geothermal projects in Italy and Peru, including exploration field work, data assessment and continued community consultations. Alterra also continues to advance its British Columbia hydro projects in 2013 through collection of hydrology data for the Bute Inlet project and other early stage run of river and pumped storage hydro projects. In Iceland, Alterra began an environmental assessment on the Bulandsvirkjun hydroelectric project.

Alterra Power will host a conference call to discuss financial and operating results on Monday, May 13, 2013 at 11:30 am ET (8:30 am PT).  North American participants dial 1-888-390-0546 and International participants dial 1-416-764-8688, the conference ID is 5225 3417. The call will also be broadcast live on the Internet at http://www.newswire.ca/en/webcast/detail/1159431/1266503. The call will be available for replay for one week after the call by dialing 1-416-764-8677 and entering replay PIN 253417.


Cautionary Note regarding Forward-Looking Statements and Information

Certain statements included in this news release may contain information that is forward-looking within the meaning of certain securities laws, including information and statements regarding prospective results of operations, financial position, cash flows or growth potential. These statements are based on factors or assumptions that were applied in drawing a conclusion or making a forecast or projection, including assumptions based on historical trends, current conditions and expected future developments. Since forward-looking statements relate to future events and conditions, by their very nature they require making assumptions and involve inherent risks and uncertainties. Alterra cautions that although it is believed that the assumptions are reasonable in the circumstances, these risks and uncertainties give rise to the possibility that actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors include those set out in the management's discussion and analysis section of Alterra's most recent annual report and quarterly report, and in Alterra's Annual Information Form. Given these risks, undue reliance should not be placed on these forward-looking statements, which apply only as of their dates. Other than as specifically required by law, Alterra undertakes no obligation to update any forward-looking statements or information to reflect new information, subsequent or otherwise.

 

SOURCE Alterra Power Corp.



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