Alterra Power Announces Results for the Quarter Ended March 31, 2017 and Annual General and Special Meeting
(under IFRS and all amounts in US dollars unless otherwise stated)
VANCOUVER, May 11, 2017 /PRNewswire/ - Alterra Power Corp. (TSX: AXY) ("Alterra" or the "Company") is pleased to report its financial and operating results for the quarter ended March 31, 2017. For further information on these results please see Alterra's Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis ("MD&A").
At March 31, 2017, Alterra consolidated 100% of the results of operations from its Icelandic subsidiary HS Orka, while Alterra's interests in the Toba Montrose, Dokie 1, Shannon, Jimmie Creek, and Kokomo renewable power projects were accounted for as equity investments. In certain statements in this news release, Alterra's results are disclosed as Alterra's "net interest", by which the Company means the effective portion of operating results that the Company would have reported if each of HS Orka (66.6%), Toba Montrose (40%), Dokie 1 (25.5%), Shannon (50% sponsor equity interest), Jimmie Creek (51%), and Kokomo (90% sponsor equity interest). Management believes that net interest reporting, although a non-IFRS measure, provides the clearest view of Alterra's performance. Refer to our MD&A for further information on non-IFRS measures. The Company also has disclosed information below regarding Adjusted EBITDA, another non-IFRS measure. Please refer to the Company's definition of Adjusted EBITDA and further commentary thereto, which is incorporated in the Financial Results table below.
Highlights for the quarter and subsequent period include:
- Revenue and Adjusted EBITDA: Consolidated revenue increased by 22% to $18.2 million in 2017, and net interest revenue increased by 19% to $16.6 million, predominantly due to increased retail sales and an increase in aluminum prices during the quarter at HS Orka (21% of sales at HS Orka are linked to the price of aluminum), and increased unit pricing received at Shannon under its power hedge. Adjusted EBITDA increased over 2% on a consolidated and net interest basis to $6.6 million and $4.4 million, respectively, primarily due to increased unit pricing at Shannon.
- Fleet generation: The Company achieved fleet-wide generation of 97.0% of its budgeted generation (net interest) for the current quarter.
- Geothermal field improvement at Reykjanes: Field enhancement efforts (including well venting and turbine pressure adjustments) have achieved positive results, arresting the previous generation decline and resulting in increased generation compared to the fourth quarter of 2016. The Company expects further field and plant output improvement from the drilling of planned new wells, well work-overs, and potentially from the recent deep drilling project well drilled in Iceland.
- Completion of potential high output well at Reykjanes field: A deep drilling program at Reykjanes was completed in January 2017 ("IDDP 2"), reaching a depth of 4,650 meters, making it the deepest well drilled in Iceland. Initial well readings (427oC temperature, 340 bars pressure) indicate supercritical conditions at the base of the well. Based on these early readings, if IDDP 2 is able to be utilized for electric production, it may produce as much as 30-50 MW of electrical output at the Reykjanes plant. The final production potential for the well will not be known until late 2018 after further tests and research are completed.
- 200 MW Flat Top wind project:
- Offtake: The Company is currently negotiating a power hedge as Flat Top's primary revenue contract and anticipates the agreement to be finalized in the second quarter of 2017.
- Project financing: The Company has agreed to terms and entered exclusivity with lenders and tax equity providers to provide 100% of the Flat Top project financing, and the drafting of definitive documents for the financing is nearly complete. The Company also plans on selling a 49% project partnership interest in conjunction with closing project financing, and has advanced to late-stage negotiations with select parties.
- Acquisition of Boswell Springs:
- In April, the Company acquired a 320 MW portfolio of wind development projects located in Albany County, Wyoming. The Company expects the project to achieve commercial operations in 2020, selling 100% of its output under a 20-year power purchase agreement with Rocky Mountain Power. The Company commenced construction of the project's main power transformers in 2016 in anticipation of closing the acquisition in 2017, and the project is expected to qualify for production tax credits at the full rate.
- The Company anticipates capital costs to be in-line with current industry standard for a project of this size and will be advancing the project in the normal course, with permitting, transmission and other customary project development-related work still to be completed. The Company expects that the project will generate approximately $20.0 million of Adjusted EBITDA per year over the first five full years of operations. This estimate of Adjusted EBITDA constitutes a "forward-looking statement" and "forward-looking financial information", subject to the cautionary notes discussed herein. Readers are cautioned that actual results may vary materially from this forward-looking financial information.
- Advancement of other USA wind projects: The Company continued advancement of several other wind projects in its USA development portfolio (comprised of projects that are owned and projects subject to cooperation with other developers), including resource and transmission studies, submissions into offtake requests for proposals and other development activities.
- Spartan: Preliminary construction for the 13.5MWDC solar project in East Lansing, Michigan ("Spartan") commenced in March 2017, and commercial operations are expected to commence in the fourth quarter. The project will sell 100% of its power to Michigan State University for 25 years. Alterra will co-own the project with Inovateus Solar, LLC on completion of project financing, which is expected in mid-2017. The Company anticipates owning at least 85% of the project at closing.
- Distributions: The Company received distributions during the quarter from equity investments of $1.7 million and another $0.2 million subsequent to quarter-end. HS Orka declared a dividend of which the Company's share is $2.5 million and is expected to be paid in 2017.
- Shareholder dividends: A quarterly cash dividend of C$0.0125 per common share was paid on March 15, 2017. Subsequent to March 31, 2017, the Company approved a quarterly dividend in the amount of C$0.0125 per common share. The cash dividend will be distributed on or about June 15, 2017, to holders of record of common shares as of the close of business on May 31, 2017.
Financial Results
The following table shows Alterra's net interest in select operating and financial results for the quarter, in addition to key financial information extracted from the consolidated results.
| For the three |
HS Orka |
Toba |
Dokie 1 |
Shannon |
Jimmie |
Kokomo(c) |
Development |
Net interest |
Consolidated |
| (66.6)% |
(40%) |
(25.5%) |
(50%) |
(51%) |
(90%) |
||||
| Generation (MWh) |
180,683 |
3,708 |
19,818 |
104,266 |
724 |
1,390 |
— |
310,589 |
271,296 |
| Total revenue(b) |
12,119 |
341 |
1,956 |
1,982 |
98 |
113 |
— |
16,609 |
18,196 |
| Gross profit (loss) |
2,226 |
(1,104) |
1,235 |
(195) |
(824) |
(5) |
— |
1,333 |
3,343 |
| Adjusted EBITDA(d) |
4,395 |
(543) |
1,525 |
962 |
(252) |
58 |
(1,784) |
4,361 |
6,563 |
| For the three |
HS Orka |
Toba |
Dokie 1 |
Shannon |
Development |
Net interest |
Consolidated |
| (66.6%) |
(40%) |
(25.5%) |
(50%) |
||||
| Generation (MWh) |
205,386 |
10,167 |
20,139 |
102,106 |
— |
337,798 |
308,387 |
| Total revenue |
9,943 |
882 |
1,824 |
1,255 |
— |
13,904 |
14,930 |
| Gross profit |
2,567 |
(558) |
993 |
(854) |
— |
2,148 |
3,854 |
| Adjusted EBITDA(d) |
4,281 |
(75) |
1,314 |
162 |
(1,413) |
4,269 |
6,417 |
| (a) |
Here and elsewhere, all tabular amounts (except generation) are expressed in thousands of US dollars. |
| (b) |
Revenue for Shannon above excludes power hedge accounting adjustments. |
| (c) |
On March 3, 2017, the Company's ownership in Kokomo decreased from 93.8% to 90%. |
| (d) |
Here and elsewhere, adjusted EBITDA ("Adjusted EBITDA") is defined by the Company as earnings before interest, taxes, foreign exchange, depreciation and amortization, as well as adjustments for changes in the fair value of holding company bonds (Sweden) and derivatives, write-offs of development costs, other income (expense) except business interruption insurance proceeds, amortization of below market contracts, value assigned to options granted, share of results of equity investments, the Company's proportionate interest in Adjusted EBITDA of its equity investments, research and development costs for deep drilling program and non-recurring items (insurance deductibles, litigation and arbitration costs). Adjusted EBITDA has been calculated on a consistent basis with the comparative year. The Company discloses Adjusted EBITDA as it is a measure used by analysts and by management to evaluate the Company's performance. As Adjusted EBITDA is a non-IFRS measure, it may not be comparable to Adjusted EBITDA calculated by others. In addition, Adjusted EBITDA is not a substitute for net earnings. Readers should consider net earnings in evaluating the Company's performance. For a reconciliation of consolidated Adjusted EBITDA to Alterra's consolidated financial statements refer to the Company's Management's Discussion and Analysis for the three months ended March 31, 2017 available on SEDAR at www.sedar.com. |
Consolidated Results
Revenue was $18.2 million for the quarter, up 22% from the comparative quarter predominantly due to increased retail sales, an increase in aluminum prices during the quarter at HS Orka and favourable exchange rate movements.
The Company recorded a net loss of $0.3 million (comparative quarter $2.0 million loss), primarily due to non-cash changes including changes in the fair value of derivatives and bonds payable, and income tax expense along with finance costs.
Consolidated cash and cash equivalents at March 31, 2017 were $21.5 million of which $1.4 million is held in the Company's Icelandic subsidiary ($31.6 million and $0.3 million, respectively at December 31, 2016). The decrease in consolidated cash is primarily a result of development and construction activities.
The Company's consolidated working capital deficit at March 31, 2017 was $77.5 million compared to a working capital deficit of $62.3 million at December 31, 2016. Excluding HS Orka, the Company's consolidated working capital deficit at March 31, 2017 was $55.4 million compared to a working capital deficit of $43.3 million at December 31, 2016, resulting primarily from one of the holding company bonds (Sweden) valued at $64.7 million being classified as current at March 31, 2017 ($60.0 million at December 31, 2016) and the Flat Top contingent developer fee of $9.9 million, which is expected to be paid at financial close with proceeds from project financing. Excluding the impact of these items, the Company would have had a positive working capital balance of $19.2 million at March 31, 2017.
Net Interest Results
Alterra's net interest revenue increased by $2.7 million to $16.6 million and net interest Adjusted EBITDA increased 2.2% to $4.4 million primarily due to increased retail sales and an increase in aluminum prices during the quarter, and increased unit pricing received at Shannon under its power hedge (the comparative quarter output received merchant pricing which was exceptionally low due to historically low natural gas prices) partially offset by the low generation at Toba Montrose.
The net interest cash position at March 31, 2017 was $28.0 million.
Operating Results
The Company achieved fleet-wide generation of 97.0% of its budgeted generation (net interest) for the current quarter.
| Q1 2017 Generation (MWh) |
|||||||||
| Total |
Net Interest |
||||||||
| Facility |
Budget |
Actual |
Budget |
Actual |
% of Budget |
||||
| Reykjanes |
140,646 |
142,449 |
93,670 |
94,871 |
101.3 % |
||||
| Svartsengi |
132,842 |
128,847 |
88,473 |
85,812 |
97.0 % |
||||
| Toba Montrose |
24,361 |
9,270 |
9,744 |
3,708 |
38.1 % |
||||
| Jimmie Creek |
1,376 |
1,420 |
702 |
724 |
103.1 % |
||||
| Dokie 1 |
90,872 |
77,718 |
23,172 |
19,818 |
85.5 % |
||||
| Shannon |
205,346 |
208,531 |
102,673 |
104,266 |
101.6 % |
||||
| Kokomo |
2,042 |
1,544 |
1,838 |
1,390 |
75.6 % |
||||
| TOTAL |
597,485 |
569,779 |
320,272 |
310,589 |
97.0 % |
||||
- Budgeted amounts include planned maintenance outages.
"While generation was down against the comparative quarter, resource utilization from our operating assets remained strong," said Lynda Freeman, CFO of Alterra. "2017 continues to be a year of growth, and we are looking forward to the next phase with Flat Top and Spartan expected to close project financing shortly"
Results of Annual General and Special Meeting
Alterra is also pleased to announce that, at its annual general and special meeting of shareholders held on May 11, 2017 (the "Meeting"), all nominees listed in the management information circular dated March 29, 2017, were re-elected as directors of the Company. The report of the vote by ballot is as follows:
| Name of Nominee |
Votes in Favour |
Votes Withheld |
||
| Ross J. Beaty |
25,170,284 |
99.6% |
92,908 |
0.4% |
| David W. Cornhill |
25,096,739 |
99.3% |
166,453 |
0.7% |
| Donald Shumka |
25,061,885 |
99.2% |
201,307 |
0.8% |
| Donald A. McInnes |
25,071,495 |
99.2% |
191,697 |
0.8% |
| James M.I. Bruce |
25,058,782 |
99.2% |
204,410 |
0.8% |
| John B. Carson |
24,998,185 |
99.0% |
265,007 |
1.0% |
| Kerri L. Fox |
25,064,029 |
99.2% |
199,163 |
0.8% |
By a majority vote, PricewaterhouseCoopers LLP was also re-appointed as the Company's auditors at the Meeting.
By a majority vote, the shareholders approved changes to the Company's stock option plan, all as more particularly described in the Company's management information circular dated March 29, 2017.
A formal report on voting results from the Meeting will be filed on Alterra's public profile at www.sedar.com in due course.
| Alterra will host a conference call to discuss financial and operating results on Friday, May 12, 2017 at 11:30 am ET (8:30 am PT). |
| North American participants dial 1-888-390-0605 and International participants dial 1-416-764-8609; the conference ID is 55243946 |
| The call will also be broadcast live on the Internet at http://event.on24.com/r.htm?e=1417017&s=1&k=93DA09B14A80295307177CBF13464A93 |
| The call will be available for replay for one week after the call by dialing 1-416-764-8677 and entering replay PIN 243946# |
Cautionary Note Regarding Forward-Looking Statements and Information
Certain of the statements and information included in this news release constitute forward-looking statements and information within the meaning of applicable securities laws. All statements, other than statements of historical fact, are forward-looking statements or information. This information may involve known and unknown risks, assumptions and uncertainties, and other factors which may cause the Company's actual results, performance or achievements to be materially different from the future results, performance or achievements implied by such statements or information. Specifically, forward-looking statements within this news release relate to, among other things: successful development, financing (including construction debt, tax equity and sponsor interest sales) and construction of our pre-operational projects and properties, Alterra's successful acquisition from or partnership with the owners of projects currently owned by other developers, marketing of power and ability to secure power purchase or offtake agreements in respect of the same and the expected timing to implement such agreements; successful development, construction and financing of the Flat Top wind project, the Spartan solar project and the Boswell Springs wind project, and the timing of each of the same, potential to increase production resulting from deep drilling, programs to upgrade and develop the Company's geothermal resources, including expectations for further field and plant output improvements and the continued success thereof, estimates of recoverable geothermal energy resources or power generation capacities, the success of Alterra's project acquisition, development and expansion programs and greenfield development efforts, all statements regarding the Company's plans and expectations for the declaration of future dividends, including the timing and amount thereof, whether the wind development projects actually or ultimately qualify for all, or a portion of, the production tax credits, the number of projects and generation capacity that may ultimately achieve commercial operations, Alterra's successful acquisition from or partnership with the owners of projects currently owned by other developers, the success of Alterra's project acquisition and greenfield development efforts, prospective generation, and management's assumptions related to, and all instances of, forward-looking financial information.
These statements and information reflect the Company's current views with respect to future events and are necessarily based upon a number of assumptions that, while considered reasonable by the Company, are inherently subject to significant operational, business, economic and regulatory uncertainties and contingencies. These assumptions include, among others, the expected power generation from our operations, the success and timely completion of financing efforts, the success and timely completion of planned development, expansion and construction programs, and modeling and budgeting based on historical trends, whether Alterra's on-site and off-site early-stage construction activities will be sufficient to qualify the wind development projects for the full value of the PTCs; rules, regulation or other guidance may be promulgated pursuant to the Internal Revenue Code of 1986 (as the same may be amended, updated or otherwise modified from time to time) that could jeopardize or otherwise impede the effectiveness of such on-site and off-site early-stage construction activities qualifying such projects for the full value of the PTCs and securing tax equity financing on such basis, our use of proceeds from any equity financings is as currently forecasted, that third party transmission infrastructure will be operational within projected timelines, the expected timing for realizing the output capacity of the well, if any, due to the conceptual nature of the deep drilling preliminary output potential, the risk that there has been insufficient testing to define geothermal resource, assumptions concerning temperature and underground fluids, current conditions and expected future developments. Forward-looking statements and information also involve known and unknown risks that may cause actual results to differ materially from those expressed by such statements or information, and the Company has made assumptions and estimates based on or related to many of these factors. These risks include volatility of renewable energy resources, inherent risks in operating and constructing power plants and development programs related to the same, contractual risks related to credit facilities, partnership and power purchase agreements, prospective power, currency and commodity price fluctuations, the implementation of lower corporate tax rates may impede our ability to obtain sufficient amounts of tax equity investment or achieve desired economic returns, successful closing of the acquisition of certain of the wind development projects including without limitation successful completion of due diligence on such projects, negotiation of definitive purchase agreements, satisfaction or waiver of all conditions precedent thereto and the approval of Alterra's Board of Directors, future issuances of equity securities, health, safety, social and environmental risks and risks related to reliance on third parties (including with respect to transmission). Additional risks, assumptions and influential factors are set out in the Company's management discussion analysis and Alterra's most recent annual information form, copies of which are available on SEDAR at www.sedar.com.
Although the Company has attempted to identify important factors that could cause actual results to differ materially, given the inherent uncertainties in such forward-looking statements and information, there may be other factors that cause results not to be as anticipated, estimated, described or intended. Investors are cautioned against undue reliance on any such forward-looking statements or information, 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.
Cautionary Note Regarding Forward-Looking Financial Information
Certain information provided in this press release constitutes forward-looking financial information within the meaning of applicable securities laws. Management has provided this information as of the date of this document in order to assist readers to better understand the expected results and impact of Alterra's operating, construction and development projects. Readers are cautioned that this information may not be appropriate for any other purpose, including investment purposes, and consequently, should not place undue reliance on this information. Readers are further cautioned to review the full description of risks, uncertainties and management's assumption in the Company's most recent Management's Discussion and Analysis available on SEDAR at www.sedar.com. Forward-looking financial information also constitutes forward-looking statements within the context of applicable securities laws and as such, is subject to the same risks, uncertainties and assumptions as are set out in the cautionary note above.
SOURCE Alterra Power Corp.
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