Atlantic Power Corporation Releases Second Quarter 2011 Results

BOSTON, Aug. 12, 2011  /PRNewswire/ -- Atlantic Power Corporation (NYSE: AT) (TSX: ATP) ("Atlantic Power" or the "Company") today announced its results for the three and six months ended June 30, 2011.  All amounts are in U.S. dollars unless otherwise indicated.  Please see "Regulation G Disclosures" attached to this news release for an explanation and US GAAP reconciliation of the terms "EBITDA," "Project Adjusted EBITDA" and "Cash Available for Distribution" as used in this news release.

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Highlights

• Financial results in line with expectations
• Maintaining 2011 project cash flow and payout ratio guidance
• Announced agreement to acquire Capital Power Income L.P. ("CPILP") and expect the transaction to close in Q4 2011
• Maintaining guidance to sustain current level of dividends into 2016, without including the positive impact of CPILP or any other acquisition

"We are pleased that the results for the quarter met our expectations and are in line with our guidance for the year," commented Barry Welch, President and CEO.  "Our big news for the second quarter was the announcement of the plan to acquire Capital Power Income L.P.  Investors can look forward to the benefits of a larger, more diversified company with significantly strengthened dividend sustainability along with our intended 5% dividend increase following closing in the fourth quarter. We have been diligently working on the approvals required to bring the proposed transaction to a shareholder vote, including the filing of a joint proxy on July 25.  The preliminary integration of the businesses is also progressing well, which helps to assure we can hit the ground running at the time of closing."

Operating Performance

Project Adjusted EBITDA, including earnings from equity investments, increased by $4.4 million to $42.9 million for the quarter ended June 30, 2011 compared to $38.5 million for the same period last year.  The change is in line with management's expectations and the primary drivers behind the increase were:

• contributions from the Cadillac Renewable facility, which was acquired in December 2010;
• contributions from Idaho Wind, which became operational in the first quarter of 2011;
• increased earnings at Auburndale due to the annual contractual escalation of capacity payments, as well as favorable gas transportation costs; and
• increased earnings at Lake due to decreased fuel costs attributable to the lower natural gas swap prices.  

These increases were partially offset by:

• lower capacity payments at Badger Creek under the new one year interim power purchase agreement entered into in April 2011; and
• higher operation and maintenance costs at Orlando attributable to a planned gas turbine overhaul in 2011.

Project Adjusted EBITDA, including earnings from equity investments, increased by $1.6 million to $78.9 million for the six months ended June 30, 2011 compared to $77.3 million for the same period last year.  The increase in EBITDA was attributable to the same factors provided in the analysis above in the results for the quarter ended June 30, 2011.  These increases were offset by the factors mentioned above, and additional offsets included:

• lower capacity revenue at Selkirk due to a planned outage that was longer than expected and resulted in a delay in recognition of capacity payments until the third quarter of 2011;
• higher operations and maintenance expenses at Pasco attributable to the unplanned replacement of gas turbine components during a maintenance outage;
• higher fuel costs and lower dispatch at Gregory; and
• lower dispatch at Chambers.

Cash Available for Distribution

For the three and six months ended June 30, 2011, Cash Available for Distribution increased by $10.5 million and $9.3 million, respectively, compared to the prior year.  The payout ratio for the six months ended June 30, 2011 was 111% compared to 125% for the same period in 2010.  The decrease in the payout ratio is attributable to the increase in EBITDA previously described and the release of $4.1 million previously trapped cash at Selkirk.  The current payout ratio and project distributions are in line with expectations and previous guidance for the full year 2011.  

The calculation of Cash Available for Distribution (in both US$ and Cdn$) and a summary of Project Adjusted EBITDA by individual project for the three and six months ended June 30, 2011 are attached to this news release.

Capital Power Income L.P.

On June 20, 2011, Atlantic Power, CPILP, CPI Income Services Ltd., the general partner of CPILP, and CPI Investments Inc., a unitholder of CPILP that is owned by EPCOR Utilities Inc. and Capital Power Corporation, entered into an Arrangement Agreement, which provides that Atlantic Power will acquire, directly or indirectly, all of the issued and outstanding CPILP units pursuant to the Plan of Arrangement under the Canada Business Corporations Act. Under the terms of the Plan of Arrangement, CPILP unitholders will be permitted to exchange each of their CPILP units for, at their election, Cdn$19.40 in cash or 1.3 Atlantic Power common shares. All cash elections will be subject to proration if total cash elections exceed approximately Cdn$506.5 million and all share elections will be subject to proration if total share elections exceed approximately 31.5 million Atlantic Power common shares.

The completion of the Plan of Arrangement is subject to the receipt of all necessary court and regulatory approvals in Canada and the United States and certain other closing conditions. Atlantic Power and CPILP currently expect to complete the Plan of Arrangement in the fourth quarter of 2011, subject to receipt of required shareholder/unitholder, court and regulatory approvals and the satisfaction or waiver of conditions to the Plan of Arrangement described in the Arrangement Agreement.

Atlantic Power filed a preliminary joint proxy statement/circular with the SEC relating to the proposed transaction on July 25, 2011.  When available, additional information will be available in the Atlantic Power/CPILP definitive joint proxy statement/circular that we intend to file with the SEC .  The definitive joint proxy statement/circular will be available on SEDAR at www.sedar.com, on EDGAR at www.sec.gov/edgar.shtml under "Atlantic Power Corporation" or on the Company's website. See "Additional Information" below.

Guidance

Based on our actual performance to date and projections for the remainder of the year, we continue to expect to receive distributions from our projects in the range of $80 million to $90 million for the full year 2011. We expect overall levels of operating cash flows in 2011 to be improved over actual 2010 levels. Higher distributions from existing projects, initial distributions from our recent investment in Idaho Wind and Cadillac, and a slightly lower payment under the management termination agreement are expected to be partially offset by the one-time cash tax refund of $8.0 million received in 2010. These increased operating cash flows in 2011, combined with the impact of our public offerings in 2010, are expected to result in a payout ratio of approximately 100% to 105% in 2011 subject to the financial performance of our projects.  In 2012, additional increases in distributions from projects are expected to further increase operating cash flow compared to 2011. The most significant factor in the expected higher operating cash flow in 2012 is increased distributions from Selkirk following the final payment of its non-recourse projectlevel debt in 2012.

Based on management's cash flow projections, we believe the current level of dividends is sustainable into 2016, before considering any positive impacts from the acquisition of CPILP, other potential future acquisitions or organic growth opportunities.

Outstanding Common Shares and Convertible Debentures

As of August 12, 2011, we had 68,964,741 common shares, Cdn$45.2 million principal amount of 6.50% convertible secured debentures due October 31, 2014, Cdn$72.4 million principal amount of 6.25% convertible debentures due March 15, 2017, and Cdn$80.5 million principal amount of 5.60% convertible debentures due June 30, 2017 outstanding. Holders of common shares currently receive a monthly dividend at an annual rate of Cdn$1.094 per common share.

Investor Conference Call and Webcast

A telephone conference call hosted by Atlantic Power's management team will be held on Monday, August 15, 2011 at 10:00 AM ET.  The telephone numbers for the conference call are: Local/International: (416) 849-2698, North American Toll Free: (866) 400-2270.  The Conference Call will also be broadcast over Atlantic Power's website. Please call or log in 10 minutes prior to the call. The telephone numbers to listen to the conference call after it is completed (Instant Replay) are Local/International: (416) 915-1035, North American Toll Free (866) 245-6755. Please enter the passcode 80924# when instructed. The conference call will also be archived on Atlantic Power's website.

About Atlantic Power

Atlantic Power Corporation owns and operates a diverse fleet of power generation and infrastructure assets in the United States.  Our power generation projects sell electricity to utilities and other large commercial customers under long-term power purchase agreements, which seek to minimize exposure to changes in commodity prices.  Our power generation projects in operation have an aggregate gross electric generation capacity of approximately 1,948 megawatts in which our ownership interest is approximately 871 MW.  Our corporate strategy is to generate stable cash flows from our existing assets and to make accretive acquisitions to sustain our dividend payout to shareholders, which is currently paid monthly at an annual rate of Cdn$1.094 per share.   Our current portfolio consists of interests in 12 operational power generation projects across nine states, one biomass project under construction in Georgia, and an 84-mile, 500 kilovolt electric transmission line located in California.  Atlantic Power also owns a majority interest in Rollcast Energy, a biomass power plant developer with several projects under development.

Atlantic Power trades on the New York Stock Exchange under the symbol AT, on the Toronto Stock Exchange under the symbol ATP and has a market capitalization of approximately $1.0 billion.  For more information, please visit the Company's website at www.atlanticpower.com or contact:

Atlantic Power Corporation
Barry Welch, President & Chief Executive Officer
(617) 977-2700
[email protected]

Copies of financial data and other publicly filed documents are available on SEDAR at www.sedar.com or on EDGAR at www.sec.gov/edgar.shtml under "Atlantic Power Corporation" or on the Company's website.

Additional Information

This communication may be deemed to be solicitation materials with respect to the Plan of Arrangement with CPILP.  In connection with the Plan of Arrangement, Atlantic Power filed a preliminary joint proxy statement/circular with the SEC on July 25, 2011. When available, a definitive joint proxy statement/circular and forms of proxy will be mailed to Atlantic Power shareholders and holders of CPILP limited partnership units. The definitive joint proxy statement/circular will contain important information about the Plan of Arrangement and related matters. INVESTORS ARE URGED TO READ THE JOINT PROXY STATEMENT/CIRCULAR AND ALL OTHER RELEVANT MATERIALS THAT MAY BE FILED WITH THE SEC WHEN THEY BECOMES AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. You will be able to obtain the joint proxy statement/circular, as well as other filings containing information about Atlantic Power and CPILP, free of charge, at the website maintained by the SEC at www.sec.gov, at the website maintained by the Canadian Securities Administrators ("CSA") at www.sedar.com or at Atlantic Power's website, www.atlanticpower.com or by writing Atlantic Power at the following: Atlantic Power Corporation, 200 Clarendon Street, Floor 25, Boston, Massachusetts 02116, or telephoning Atlantic Power at (617) 977-2400.

The respective directors and executive officers of Atlantic Power and CPILP, and other persons, may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information regarding Atlantic Powers' directors and executive officers is available in its definitive proxy statement filed with the SEC on May 2, 2011, and information regarding CPILP's directors and executive officers is available in its Annual Information Form filed on March 11, 2011 at www.sedar.com. These documents can be obtained free of charge from the sources indicated above. Other information regarding the interests of the participants in the proxy solicitation will be included in the joint proxy statement/prospectus and other relevant materials to be filed with the SEC and CSA when they become available.

Cautionary Note Regarding Forward-looking Statements  

To the extent any statements made in this news release contain information that is not historical, these statements are forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended and under Canadian securities law (collectively, "forward-looking statements").

Certain statements in this news release may constitute "forward-looking statements", which reflect the expectations of management regarding the future growth, results of operations, performance and business prospects and opportunities of our Company and our projects.  These statements, which are based on certain assumptions and describe our future plans, strategies and expectations, can generally be identified by the use of the words "may," "will," "project," "continue," "believe," "intend," "anticipate," "expect" or similar expressions that are predictions of or indicate future events or trends and which do not relate solely to present or historical matters.  Examples of such statements in this press release include, but are not limited, to statements with respect to the following:

• The belief that, based on management's cash flow projections, the current level of dividends is sustainable into 2016 without additional acquisitions or organic growth opportunities;
• The expectation that distributions from our projects will be in the range of $80 million to $90 million for the full year 2011;  
• The expectation that overall levels of operating cash flows in 2011 will be improved over actual 2010 levels;
• The expectation that the payout ratio in 2011 will be approximately 100%-105% and that improvements in cash flow and payout ratio are expected in 2012; and
• The expectation to complete the Plan of Arrangement for the CPILP acquisition in the fourth quarter.

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.  Please refer to the factors discussed under "Risk Factors" in the Company's periodic reports as filed with the Securities and Exchange Commission from time to time for a detailed discussion of the risks and uncertainties affecting our Company.  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.  The financial outlook information contained in this news release is presented to provide readers with guidance on the cash distributions expected to be received by the Company and to give readers a better understanding of the Company's ability to pay its current level of distributions into the future.  Readers are cautioned that such information may not be appropriate for other purposes.

Regulation G Disclosures

Cash Available for Distribution is not a measure recognized under U.S. generally accepted accounting principles ("GAAP") and does not have a standardized meaning prescribed by GAAP.  Management believes Cash Available for Distribution 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 Available for Distributions is provided below.  Investors are cautioned that the Company may calculate this measure in a manner that is different from other companies.

Project 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 Project Adjusted EBITDA at the Project-level to provide comparative information about project performance.  A reconciliation of Project Adjusted EBITDA to project income is provided on the following page.  Investors are cautioned that the Company may calculate this measure in a manner that is different from other issuers.

SOURCE Atlantic Power Corporation

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