Alterra Power Announces Results for the Quarter Ended September 30, 2014

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Nov 12, 2014, 11:05 ET

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

TSX : AXY

VANCOUVER, Nov. 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 nine months ended September 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 September 30, 2014 and for the three and nine 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 events include:

Increased revenue: Consolidated revenue increased 15% against the comparative quarter ($16.2 million against $14.1 million) as a result of favorable aluminum price movements and an increase in retail sales at HS Orka and increased generation at Soda Lake.
Consistent EBITDA: Consolidated EBITDA remained steady at $20.4 million and net interest EBITDA increased by 1% to $17.8 million against the comparative quarter, primarily due to increased revenue at HS Orka.
Improved cash flow: Cash flow from operations was $15.5 million for the nine months ended September 30, 2014, an increase of 15% from the comparative period due to distributions received from Toba Montrose and Blue Lagoon in the period.
On plan power generation: Alterra's fleet of power projects generated 390,278 MWh of clean power (net interest), achieving 100% of budgeted generation.
Completion of holding company financing: On August 12, 2014 the Company completed a C$110 million holding company loan facility. The first tranche of three tranches was funded three days later with the Company receiving C$64.5 million (C$67.3 million less financing fees). The first tranche of the facility is secured by the equity cash flows from the Toba Montrose and Dokie 1 projects, with subsequent tranches to be secured by the Jimmie Creek and Shannon projects. Following the closing of the holding company loan facility, the Company repaid in full the C$49.6 million outstanding under the revolving credit facility.
Jimmie Creek hydro project:
- Project financing: The Company successfully closed a C$176.5 million non-recourse loan facility on October 14, 2014. The facility is priced at a fixed rate of 5.26% and will amortize over 40 years commencing at commercial operations (expected in the third quarter of 2016), except for the final 10% of principal which will be paid at maturity. Upon closing the project financing, the Company and its partner Fiera Axium Infrastructure Inc. formed the Jimmie Creek Limited Partnership under which they now jointly own the project at 51% and 49% shares respectively. At financial closing, Alterra received proceeds of C$22.9 million as a refund of certain development and construction expenses previously paid by Alterra. The Company does not expect to make any further equity contributions towards the construction of Jimmie Creek, which is now being funded by project financing proceeds and contributions from Fiera Axium.
- Construction activities: Road, bridge and camp construction is 100% complete, and work is well underway at the intake and powerhouse locations. Penstock installation is 30% complete. Excavation at all project sites is progressing well and is completed at the powerhouse, nearly complete at the switchyard and well underway at the intake. In October the temporary river diversion channel at the intake was completed. Commencement of commercial operations is targeted for July 1, 2016.

Shannon wind farm:
- Current activities: The Company is currently working to finalize terms with several financing parties and now expects to close construction financing in the first quarter of 2015. Project design is nearly complete, and the Company is finalizing all remaining project contracts (construction, turbine supply, operation and maintenance, etc.). The Company expects to own up to 50% of the project in partnership with a large energy infrastructure fund.

Toba Montrose:
- Release of lender waiver: On July 17, 2014 the Toba Montrose credit agreement was amended to remove an insurance-related waiver, paving the way for the resumption of regular equity distributions from the project. The project partnership had previously agreed with its lenders to temporarily suspend distributions until satisfactory resolution of project insurance matters related to a 2012 rockslide. The project has now secured new insurance, effective immediately, at substantially the same coverage terms that existed prior to the 2012 rockslide.
- Regular equity distributions resume: Following the release of the lender waiver, Toba Montrose declared and paid a $17.3 million equity distribution of which the Company's share was $6.9 million.
- Early achievement of generation target: On October 21, 2014, Toba Montrose met its annual generation target for calendar year 2014. The plant has run at 115% of capacity over the six-month period ending October 31.

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 three months ended	HS Orka	Toba Montrose	Dokie 1	Soda Lake	Development and Head Office	Net Interest Total	Consolidated Results
September 30, 2014 ^(a)	(66.6%)	(40%)	(25.5%)	(100%)	Development and Head Office	Net Interest Total	Consolidated Results
Generation (MWh)	200,223	161,337	14,802	13,916	—	390,278	314,551
Total revenue	10,198	15,895	1,477	896	—	28,466	16,209
Gross profit	2,357	13,185	441	(433)	—	15,550	3,105
EBITDA ^(d)	5,186	13,709	837	(344)	(1,555)	17,833	20,433


For the three months ended	HS Orka	Toba Montrose		Pro forma Dokie 1		Soda Lake		ABW	Development and Head Office	Net Interest Total		Consolidated Results
September 30, 2013 ^(a)	(66.6%)	(40%)		(25.5%)^(b)		(100%)		(10%) ^(c)	Development and Head Office	Net Interest Total		Consolidated Results
Generation (MWh)	206,791		113,474		13,212		12,631	1,072	—		347,180		323,128
Total revenue	8,821		12,143		1,389		817	434	—		23,604		14,062
Business interruption proceeds	—		5,052		—		—	—	—		5,052		—
Gross profit (loss)	2,171		9,387		195		(1,035)	298	—		11,016		2,225
EBITDA ^(d)	4,787		14,541		633		(430)	268	(2,179)		17,620		20,385

(a)	All tabular amounts in the table above are expressed in thousands of US dollars with the exception of generation
(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)	The comparative quarter includes the results of ABW Solar, a solar generation project located in Ontario, Canada, that was acquired by the Company on August 23, 2013 and subsequently sold on November 29, 2013.
(d)	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 nine months ended September 30, 2014.

Consolidated Results

Revenue was up 15.3% at $16.2 million for the quarter ended September 30, 2014, due to increased revenues at HS Orka as a result of favourable aluminum price movements and increased retail sales, and increased generation at Soda Lake, which resulted in an increase in gross profit of $0.9 million.

Net income was $2.4 million, a decline against the comparative quarter ($16.4 million). This change is largely due to insurance proceeds received in the comparative quarter at Toba Montrose and changes in non-cash items including:

A $1.2 million non-cash loss ($8.5 million gain in the comparative quarter) in the value of the embedded derivative liabilities resulting from aluminum price fluctuations and foreign exchange.
A $5.4 million non-cash loss resulting from the change in the fair value of the long-term bonds payable in the current quarter (comparative quarter: $2.8 million loss) resulting from an increase in the long-term forecast aluminum prices from June 30, 2014.
A reduction in share of results of equity investees to $12.1 million, from $17.9 million in the comparative quarter. The reduction is primarily due to the recognition of insurance proceeds at Toba Montrose in the comparative quarter (property insurance proceeds of $6.3 million and business interruption proceeds of $5.1 million).

Consolidated cash and cash equivalents at September 30, 2014 were $31.5 million of which $29.2 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 in revenue marginally decreased by $0.2 million to $28.5 million against the comparative quarter (when including business interruption proceeds related to the 2012 rockslide). EBITDA increased by 1% to $17.8 million primarily due to increased revenue at HS Orka.

The net interest cash position at September 30, 2014 was $24.9 million.

Operating Results

For the three months ended September 30, 2014, the Company's fleet wide generation was 100% of budget on a net interest basis.


	Q3 2014 Generation (MWh)
				Net Interest
Facility	Budget	Actual		Budget		Actual		% of Budget
Reykjanes	193,639		169,591		128,964		112,948		88 %
Svartsengi	119,995		131,044		79,917		87,275		109 %
Soda Lake	11,400		13,916		11,400		13,916		122 %
Toba Montrose	380,493		403,342		152,197		161,337		106 %
Dokie 1	71,909		58,047		18,337		14,802		81 %
TOTAL	777,436		775,940		390,815		390,278		100 %

Outlook

John Carson, Alterra's CEO, said, "With the completion of our holdco financing, we've delivered on our promise to meet all our capital needs at low cost and without diluting shareholders. Meanwhile the Jimmie Creek construction is proceeding on time and on budget, and the Shannon wind project is close behind it. We are now fully into our next growth phase, supported by our existing operations which are running at 100% of target"

Alterra Power will host a conference call to discuss financial and operating results on Thursday, November 13, 2014 at 11:30 am ET (8:30 am PT).

North American participants dial 1-888-390-0549 and International participants dial 1-416-764-8682; the conference ID is 49705275

The call will also be broadcast live on the Internet at http://www.newswire.ca/en/webcast/detail/1432464/1591816

The call will be available for replay for one week after the call by dialing 1-416-764-8677 and entering replay PIN 705275

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.