Alterra Power Announces Results for the Quarter Ended June 30, 2014
(under IFRS and all amounts in US dollars unless otherwise stated)
TSX : AXY
VANCOUVER, Aug. 12, 2014 /PRNewswire/ - Alterra Power Corp. (TSX: AXY) ("Alterra" or the "Company") is pleased to report its financial and operating results for the three and six months ended June 30, 2014. For further information on these results please see Alterra's Unaudited Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis.
Alterra consolidates 100% of the results of operations at HS Orka and Soda Lake, 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 (25.5%), and Soda Lake (100%) had been reported in accordance with Alterra's actual share of ownership at June 30, 2014 and for the three and six months then ended. While management monitors the consolidated results closely, it believes that net interest reporting provides the clearest view of Alterra's performance.
Highlights for the current quarter and subsequent period include:
- Increase in revenue and gross profit: Consolidated revenue increased against the comparative quarter by 9% to $16.5 million and gross profit increased by $0.7 million to $2.7 million, primarily due to increased generation at HS Orka. Net interest in revenue and gross profit fell against the comparative quarter due to lower generation at Toba Montrose and Dokie 1.
- Reliable power generation: Alterra's fleet of power projects generated 334,960 MWh of clean power (net interest), achieving 101% of budgeted generation.
- Equity distributions: The Company recognized equity distributions declared during the quarter from Dokie 1 and Blue Lagoon in the amounts of $0.6 million and $2.8 million, respectively.
- Jimmie Creek hydro project highlights:
- Current activities: The Company has executed all major contracts and full construction is underway, with nearly 100 workers currently active at the site. Road and bridge construction is now complete and work is well underway at the intake and powerhouse locations. Clearing for penstock excavation is nearly complete and subsurface conditions are in line with expectations. In 2014, the Company has invested C$34.2 million in the project, which is expected to be in excess of the Company's required equity contribution. All amounts invested in excess of the Company's equity contribution will be returned to the Company at financial close.
- Partnership update: The Company entered into a partnership agreement with an affiliate of Fiera Axium Infrastructure Inc. ("Fiera Axium"). Under the agreement, at financial close, subject to certain conditions precedent, Fiera Axium will cover 49% of all partnership costs from January 1, 2014 forward in exchange for a 49% interest in the project. The Company, together with Fiera Axium is documenting a credit agreement with a group of four long-term fixed-rate lenders, and expects to close construction financing later in 2014.
- Current activities: The Company has executed all major contracts and full construction is underway, with nearly 100 workers currently active at the site. Road and bridge construction is now complete and work is well underway at the intake and powerhouse locations. Clearing for penstock excavation is nearly complete and subsurface conditions are in line with expectations. In 2014, the Company has invested C$34.2 million in the project, which is expected to be in excess of the Company's required equity contribution. All amounts invested in excess of the Company's equity contribution will be returned to the Company at financial close.
- Shannon wind farm highlights:
- Current activities: Work continued on design and geotechnical investigation. The Company is in the process of documenting and executing project contracts (operation and maintenance, turbine supply agreement, etc.), documenting a power hedge for project output, and negotiating terms with tax equity investors. The Company is expecting to close construction financing for the project with two lenders later in 2014. Alterra is expected to own up to 50% of the project under a partnership agreement currently being negotiated with a large energy infrastructure fund under the terms of a previously executed letter of intent.
- Interconnection security: The Company placed an additional $5.5 million (total $10.1 million) cash security with Oncor Electric Delivery Company LLC, the project's transmission service provider, which has begun the design and equipment procurement for the project's interconnection substation.
- Current activities: Work continued on design and geotechnical investigation. The Company is in the process of documenting and executing project contracts (operation and maintenance, turbine supply agreement, etc.), documenting a power hedge for project output, and negotiating terms with tax equity investors. The Company is expecting to close construction financing for the project with two lenders later in 2014. Alterra is expected to own up to 50% of the project under a partnership agreement currently being negotiated with a large energy infrastructure fund under the terms of a previously executed letter of intent.
- Toba Montrose: The Company satisfactorily settled all insurance claims related to the 2012 naturally occurring rockslide. The project has obtained new insurance coverage, effective immediately, at substantially the same coverage terms as existed prior to the rockslide. Subsequent to the quarter, the distribution waiver under the project loan agreement was extinguished. The Company expect to receive an equity distribution of $7.1 million from Toba Montrose in August 2014 (from a total distribution of $17.8 million).
- Mariposa (Chile) development project: Summer construction activities were completed at the Mariposa project in preparation for planned drilling in late 2015. These activities included upgrades to existing site access roads, construction of new roads, and upgrades of site camp facilities.
Financial Results
The following table shows Alterra's net interest in selected operating and financial results for the quarter, in addition to key financial information extracted from the consolidated results.
| For the 3 months ended June 30, 2014 (a) |
HS Orka (66.6%) |
Toba Montrose (40%) |
Dokie 1 (25.5%) |
Soda Lake (100%) |
Exploration and Head Office |
Net Interest Total |
Consolidated Results |
||||||
| Generation (MWh) | 208,384 | 96,653 | 13,743 | 16,180 | — | 334,960 | 329,069 | ||||||
| Total revenue | 10,258 | 7,285 | 1,208 | 1,051 | — | 19,802 | 16,453 | ||||||
| Gross profit | 1,861 | 5,268 | 139 | (90) | — | 7,178 | 2,704 | ||||||
| EBITDA (c) | 3,805 | 5,450 | 494 | 114 | (1,834) | 8,029 | 9,955 |
| For the 3 months ended June 30, 2013 (a) |
HS Orka (66.6%) |
Toba Montrose (40%) |
Pro forma Dokie 1 (25.5%) (b) |
Soda Lake (100%) |
Exploration and Head Office |
Net Interest Total |
Consolidated Results |
||||||
| Generation (MWh) | 202,604 | 63,975 | 16,443 | 15,992 | — | 299,014 | 320,202 | ||||||
| Total revenue | 9,373 | 6,233 | 1,775 | 1,022 | — | 18,403 | 15,096 | ||||||
| Business interruption proceeds | — | 1,936 | — | — | — | 1,936 | — | ||||||
| Gross profit (loss) | 1,688 | 4,117 | 589 | (539) | — | 5,855 | 1,996 | ||||||
| EBITDA (c) | 3,341 | 7,059 | 1,009 | 59 | (1,712) | 9,756 | 12,440 |
| (a) | All tabular amounts in the table above are expressed in thousands of US dollars with the exception of generation that is expressed in MWh's. |
| (b) | For comparison purposes, the 2013 operating results shown here for Dokie 1 have been adjusted to show a pro forma 25.5% interest for the comparative quarter (actual ownership during the comparative quarter was 51.0%). |
| (c) | Here and elsewhere, Adjusted EBITDA ("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 goodwill, and other income (expense) except business interruption proceeds, 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 three and six months ended June 30, 2014. |
Consolidated Results
Revenue was up 9% at $16.5 million for the quarter ended June 30, 2014, due to increased generation at both HS Orka and Soda Lake which resulted in an increase in gross profit by $0.7 million.
Net income was $6.0 million, an improvement against the comparative quarter ($2.3 million loss) resulting from the increase in revenue and a reduction in general and administrative expenses, as well as certain non-cash items including:
- A $4.0 million non-cash gain ($6.8 million loss in the comparative quarter) resulting from an increase in long-term forecast aluminum prices from March 31, 2014, which caused a reduction in the value of the embedded derivative liabilities.
- A $4.3 million non-cash gain ($2.4 million loss in the comparative quarter) on foreign exchange due to favorable movements in exchange rates.
The increases were offset by a reduction in the share of results of equity investees to $2.9 million, from $7.2 million in the comparative quarter. The reduction is due to the recognition of property insurance proceeds at Toba Montrose of $4.1 million in the comparative quarter, against $0.8 million recognized in the three months to June 30, 2014, as well as lower winds at Dokie 1 in the current quarter and lower water flows at Toba Montrose.
Consolidated cash and cash equivalents at June 30, 2014 were $38.6 million of which $36.1 million is held in the Company's Icelandic subsidiary ($41.7 million and $33.9 million respectively at December 31, 2013).
Net Interest Results
Alterra's net interest revenue decreased 3% to $19.8 million compared to $20.3 million in the comparative quarter, which included business interruption proceeds related to the 2012 rockslide. EBITDA decreased by 18% to $8.0 million as a result of the lower generation at Toba Montrose and Dokie 1.
The net interest cash position at June 30, 2014 was $33.1 million.
Operating Results
For the three months ended June 30, 2014, the Company's fleet wide generation was 101% of budget on a net interest basis.
| Q2 2014 Generation (MWh) | ||||||||||
| Net Interest | ||||||||||
| Facility | Budget | Actual | Budget | Actual | % of Budget | |||||
| Reykjanes | 205,150 | 189,771 | 136,630 | 126,387 | 93% | |||||
| Svartsengi | 106,099 | 123,118 | 70,662 | 81,997 | 116% | |||||
| Soda Lake | 16,925 | 16,180 | 16,925 | 16,180 | 96% | |||||
| Toba Montrose | 228,551 | 241,633 | 91,420 | 96,653 | 106% | |||||
| Dokie 1 | 68,132 | 53,893 | 17,374 | 13,743 | 79% | |||||
| TOTAL | 624,857 | 624,595 | 333,011 | 334,960 | 101% | |||||
Outlook
John Carson, Alterra's CEO, said, "Our team produced strong results on all fronts this quarter. Our operators safely produced clean power above our targeted amount, and our development and financing teams made solid gains on our growth projects. Looking ahead our team remains fully focused on achieving positive growth and results for our shareholders."
| Alterra Power will host a conference call to discuss financial and operating results on Wednesday, August 13, 2014 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 68495512 The call will also be broadcast live on the Internet at http://www.newswire.ca/en/webcast/detail/1389013/1541135 The call will be available for replay for one week after the call by dialing 1-416-764-8677 and entering replay PIN 495512 |
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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