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Atlantic Power Corporation Releases Fourth Quarter and Year End 2011 Results

 

BOSTON, Feb. 29, 2012 /PRNewswire/ -- Atlantic Power Corporation (NYSE: AT) (TSX: ATP) ("Atlantic Power" or the "Company") today announced its results for the three months and year ended December 31, 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 "Project Adjusted EBITDA" and "Cash Available for Distribution" as used in this news release.  

Highlights

  • Acquired Capital Power Income L.P., now Atlantic Power Limited Partnership (the "Partnership"), on November 5, 2011 for a total enterprise value of approximately $1.8 billion:
    • increasing outstanding shares by 64% and doubling the enterprise value of the Company to approximately $3.3 billion;
    • adding 18 generation projects and increasing the Company's net generating capacity by 143% to 2,116 MW;
    • diversifying the Company's portfolio by adding plants in new regions of the United States and eight Canadian plants in Ontario and British Columbia;
    • establishing Atlantic Power as the owner operator for approximately 50% of its projects; and
    • increasing Atlantic Power's employee count to 277 and adding offices in Toronto, Vancouver, Chicago and San Diego
  • Acquired a 30% interest in Rockland Wind, an 80 MW wind farm in American Falls, Idaho in December 2011, bringing the Company's total net generating capacity to 2,140 MW
  • Payout ratio is within the Company's guidance range for 2011
  • Announced agreement to acquire 51% of Canadian Hills, a 300 MW wind power project in Oklahoma in January 2012
  • Announced agreement with Primary Energy Recycling Corporation ("PERC") to sell Atlantic Power's 14.3% interest in Primary Energy Recycling Holdings ("PERH") in February 2012

"Since the close of the acquisition of the Partnership, we have made significant progress integrating the companies," commented Barry Welch, President and CEO.  "Our commercial development team, that we began augmenting since last year, has continued to identify strong opportunities accretive acquisitions, such as our recently announced Canadian Hills project.   Our access to growth capital has been further strengthened by our increased market cap and trading liquidity. We are also focusing on opportunities to rationalize the combined portfolio and both optimize and extend our existing contracts. In addition, our 2012 budgets for the Partnership facilities include capital expenditures for improvements in the reliability, efficiency and sustainability of our assets."

Operating Performance

The Company's financial results for 2011 include approximately two months of results from the Partnership and its projects.  Project Adjusted EBITDA, including earnings from equity investments, increased by $31.7 million or 94%  to $65.5 million for the quarter ended December 31, 2011 compared to $33.8 million for the quarter ended December 31, 2010, primarily due to contributions of $29.6 million from the 18 projects added to Atlantic Power's portfolio when it acquired the Partnership.

Project Adjusted EBITDA, including earnings from equity investments, increased by $32.7 million or 21.4% to $185.3 million for the year ended December 31, 2011 compared to $152.6 million for the year ended December 31, 2010, primarily due to contributions of $29.6 million from the 18 projects added to Atlantic Power's portfolio when it acquired the Partnership. Other significant contributors to 2011 EBITDA compared to 2010 include $8.9 million from Cadillac, which was purchased in the fourth quarter of 2010, and $4.3 million from Idaho Wind, which became operational in the first quarter of 2011.

Aggregate power generation in MWh's for 2011 increased approximately 24% from the previous year primarily due to increased generation from the newly acquired Partnership projects.  Weighted average availability of Atlantic Power's projects also increased by 1.3% to 96.5% for the year ended 2011.

Cash Available for Distribution

For the year ended December 31, 2011, Cash Available for Distribution increased by 25% or $16.7 million compared to the prior year, primarily due to cash received from the Partnership projects in November and December.  The payout ratio for the year ended December 31, 2011 was 105% compared to 100% for the prior year and is within the Company's guidance range for 2011.

The calculation of Cash Available for Distribution (in both US$ and Cdn$) and a summary of Project Adjusted EBITDA by segment for the year ended December 31, 2011, 2010 and 2009 are attached to this news release.

Rockland

The Rockland Wind Project LLC ("Rockland") is an 80 MW wind power generating facility located near American Falls, Idaho, which commenced commercial operation in December 2011.  Atlantic Power acquired a 30% ownership interest in Rockland in December 2011 for $12.5 million. Rockland's other owners include Ridgeline Energy, LLC, the project developer, and an affiliate of Diamond Generating Corporation. Electricity is sold to Idaho Power Company under a 25-year fixed-price PPA expiring in 2036.  

Canadian Hills

On January 31, 2012, Atlantic Power invested approximately $23 million of late-stage development capital to acquire 51% of Canadian Hills Wind, LLC ("Canadian Hills"). Canadian Hills owns an approximately 300 MW wind power project in development, located approximately 20 miles west of Oklahoma City, Oklahoma. It has executed long-term power purchase agreements with investment grade offtakers for 250 MW and is currently negotiating a similar PPA for the remaining 48 MW.  Construction is expected to begin by April 2012 with commercial operations expected in November 2012. The Company will be responsible for operations and the asset management of the Project. Total project costs are expected to be approximately $460 million. Subject to final due diligence, Board approval and other conditions, Atlantic Power will have the right to invest 100% of the project's non-tax equity, or approximately $170 million.  The balance of approximately $290 million will be funded by tax equity and the Company expects no project-level debt.

Primary Energy Recycling Holdings

On February 16, 2012, Atlantic Power entered into an agreement with Primary Energy Recycling Corporation whereby PERC will purchase the Company's 14.3% common membership interests in PERH for approximately $24 million, plus a management agreement termination fee of approximately $6.1 million for a total price of $30.1 million.  The transaction remains subject to pricing adjustment or termination under certain circumstances and financing, and is expected to occur in the second quarter of 2012.  

Change in Reporting Segments for 10-K

As a result of the acquisition of the Partnership, Atlantic Power revised its reportable business segments during the fourth quarter of 2011. The new operating segments are Northeast, Southeast, Northwest, Southwest and Un-allocated Corporate.  Financial results for the years ended December 31, 2010 and 2009 have been presented to reflect the change in operating segments. Atlantic Power revised its segments to align with changes in management's resource allocation and assessment of performance. These changes reflect the Company's current operating focus.

Outlook

Based on actual performance to date and projections for the remainder of the year, Atlantic Power expects to receive distributions from its projects in the range of $250 to $265 million for the full year 2012. The Company expects overall levels of operating cash flows in 2012 to be improved over actual 2011 levels due primarily to full year contributions from the Partnership assets and increased distributions from Selkirk following the final payment of its non-recourse projectlevel debt by mid-2012. These increased operating cash flows in 2012, in addition to the smaller and final management termination fee to ArcLight and a one-time realized gain from the termination of a portion of our aggregate foreign currency forward contracts from the combined company, are expected to result in a significant increase in cash available for distribution.  Atlantic Power anticipates a 2012 payout ratio of approximately 90% to 97%, subject to the financial performance of its projects.

Investor Conference Call and Webcast

A telephone conference call hosted by Atlantic Power's management team will be held on Thursday, March 1, 2012 at 10:00 AM ET.  The telephone numbers for the conference call are: U.S. Toll Free: 1-877-317-6789; Canada Toll Free: 1-866-605-3852; International Toll: +1 412-317-6789.  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 U.S. Toll Free: 1-877-344-7529; International Toll: +1-412-317-0088. Please enter conference call number 10009044. The conference call will also be archived on Atlantic Power's website.

About Atlantic Power

Atlantic Power is a leading publicly traded, power generation and infrastructure company with a well diversified portfolio of assets in the United States and Canada. 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.  The net generating capacity of the Company's projects is approximately 2,140 MW, consisting of interests in 31 operational power generation projects across 11 states and 2 provinces, one 53 MW 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 in Charlotte, NC.  Atlantic Power is incorporated in British Columbia, headquartered in Boston and has offices in Chicago, Toronto, Vancouver and San Diego.

Our corporate strategy is to increase the value of the company through accretive acquisitions in North American markets while generating stable, contracted cash flows from our existing assets to sustain our dividend payout to shareholders. Our dividend is currently paid monthly at an annual rate of Cdn$1.15 per share.

Atlantic Power has a market capitalization of approximately $1.6 billion and trades on the New York Stock Exchange under the symbol AT and on the Toronto Stock Exchange under the symbol ATP.  For more information, please visit the Company's website at www.atlanticpower.com or contact:

Atlantic Power Corporation 
Amanda Wagemaker, Investor Relations
(617) 977-2700 
info@atlanticpower.com

Copies of financial data and other publicly filed documents get filed 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.

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 expectation that distributions from our projects will be in the range of $250 million to $265 million for the full year 2012;
  • The expectation that overall levels of operating cash flows in 2012 will be improved over actual 2011 levels;
  • The expectation that the payout ratio in 2012 will be approximately 90% to 97%;
  • The expectation that the PERH transaction will close in the second quarter of 2012;
  • The expectation that Canadian Hills will commence construction by April 2012 and achieve commercial operation in November of 2012; and
  • The expectation that financing for Canadian Hills will not include project level debt.

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.


Atlantic Power Corporation

Consolidated Balance Sheets (in thousands of U.S. dollars)





December 31,

December 31,


2011

2010




Assets



Current assets:



Cash and cash equivalents

$60,651

$45,497

Restricted cash

21,412

15,744

Accounts receivable

79,008

19,362

Note receivable – related party

-

22,781

Current portion of derivative instruments asset

10,411

8,865

Inventory

18,628

5,498

Prepayments and other

7,615

2,982

Refundable income taxes

3,042

1,593

Total current assets

200,767

122,322




Property, plant and equipment, net

1,388,254

271,830

Transmission system rights

180,282

188,134

Equity investments in unconsolidated affiliates

474,351

294,805

Other intangible assets, net

584,274

88,462

Goodwill

343,586

12,453

Derivative instruments asset

22,003

17,884

Other assets

54,910

17,122

Total assets

$3,248,427

$1,013,012




Liabilities and Shareholders' Equity



Current liabilities:



Accounts payable

$18,122

$8,608

Accrued interest

19,916

3,975

Other accrued liabilities

43,968

11,025

Revolving credit facility

58,000

-

Current portion of long-term debt

20,958

21,587

Current portion of derivative instruments liability

20,592

10,009

Dividends payable

10,733

6,154

Other current liabilities

165

5

Total current liabilities

192,454

61,363




Long-term debt

1,404,900

244,299

Convertible debentures

189,563

220,616

Derivative instruments liability

33,170

21,543

Deferred income taxes

182,925

29,439

Power purchase and fuel supply agreement liabilities, net

71,775

-

Other non-current liabilities

57,859

2,376

Commitments and contingencies

-

-

Total liabilities

2,132,646

579,636




Equity



Common shares, no par value, unlimited authorized shares; 113,526,182 and 67,118,154 issued and outstanding December 31, 2011 and 2010, respectively

1,217,265

626,108

Preferred shares issued by a subsidiary company

221,304

-

Accumulated other comprehensive income (loss)

(5,193)

255

Retained deficit

(320,622)

(196,494)

Total Atlantic Power Corporation shareholders' equity

1,112,754

429,869

Noncontrolling interest

3,027

3,507

Total equity

1,115,781

433,376

Total liabilities and equity

$3,248,427

$1,013,012





Atlantic Power Corporation

Consolidated Statements of Operations (in thousands of U.S. dollars, except per share amounts)



Years Ended December 31,

Three months

ended Dec 31,


2011

2010

2009

2011

2010

Project revenue:




Unaudited

Energy sales

$106,062

$69,116

$58,953

$52,591

$13,831

Energy capacity revenue

131,362

93,567

88,449

49,503

23,982

Transmission services

30,087

31,000

31,000

7,314

7,814

Other

17,384

1,573

1,115

16,231

465


284,895

195,256

179,517

125,639

46,092







Project expenses:






Fuel

93,993

65,553

59,522

47,791

13,947

Operations and maintenance

56,832

31,237

28,153

29,314

11,989

Depreciation and amortization

63,638

40,387

41,374

30,927

10,163


214,463

137,177

129,049

108,032

36,099

Project other income (expense):






Change in fair value of derivative instruments

(22,776)

(14,047)

(6,813)

(10,279)

6,899

Equity in earnings of unconsolidated affiliates

6,356

13,777

8,514

709

1,227

Gain on sales of equity investments, net

-

1,511

13,780

-

1,511

Interest expense

(20,053)

(17,660)

(18,800)

(6,369)

(4,776)

Other income (expense), net

20

219

1,266

60

(14)


(36,453)

(16,200)

(2,053)

(15,879)

4,847

Project income

33,979

41,879

48,415

1,728

14,840







Administrative and other expenses (income):






Administration

38,108

16,149

26,028

17,447

4,103

Interest, net

25,998

11,701

55,698

15,183

3,682

Foreign exchange loss (gain)

13,838

(1,014)

20,506

(6,545)

(1,193)

Other (income) expense, net

-

(26)

362

-

-


77,944

26,810

102,594

26,085

6,592

Income (loss) from operations before income taxes

(43,965)

15,069

(54,179)

(24,357)

8,248

Income tax expense (benefit)

(8,324)

18,924

(15,693)

2,357

6,819

Net (loss) income

(35,641)

(3,855)

(38,486)

(26,714)

1,429

Net loss attributable to noncontrolling interest

(480)

(103)

-

(131)

125

Preferred share dividends of a subsidiary company

3,247

-

-

3,247

-

Net (loss) income attributable to Atlantic Power Corporation

$(38,408)

$(3,752)

$(38,486)

$(29,830)

$1,304







Net (loss) income per share attributable to Atlantic Power Corporation Shareholders:






Basic

$(0.50)

$(0.06)

$(0.63)

$(0.26)

$0.02

Diluted

$(0.50)

$(0.06)

$(0.63)

$(0.26)

$0.02





Atlantic Power Corporation

Consolidated Statements of Cash Flows (in thousands of U.S. dollars)



             Years ended December 31,


2011

2010

2009

Cash flows from operating activities:




Net loss

$(35,641)

$(3,855)

$(38,486)

Adjustments to reconcile to net cash provided by operating activities




Depreciation and amortization

63,638

40,387

41,374

Common share conversions recorded in interest expense

-

-

4,508

Subordinated note redemption premium recorded in interest expense

-

-

1,935

Long-term incentive plan expense

3,167

4,497

-

Gain on sale of assets

-

(1,511)

(12,847)

Earnings from unconsolidated affiliates

(7,878)

(16,913)

(14,213)

Impairment of equity investments

1,522

3,136

5,500

Distributions from unconsolidated affiliates

21,889

16,843

27,884

Unrealized foreign exchange loss

8,636

5,611

24,370

Change in fair value of derivative instruments

22,776

14,047

6,813

Change in deferred income taxes

(9,908)

17,964

(6,436)

Other

-

(210)

106

Change in other operating balances




Accounts receivable

(15,563)

1,729

10,520

Prepayments, refundable income taxes and other assets

1,653

9,311

(3,454)

Accounts payable and accrued liabilities

4,931

(6,551)

2,959

Other liabilities

(3,287)

2,468

(84)

Net cash provided by operating activities

55,935

86,953

50,449





Cash flows (used in) provided by investing activities:




Acquisitions and investments, net of cash acquired

(591,583)

(78,180)

(3,068)

Proceeds from (loan to) Idaho Wind

22,781

(22,781)

-

Change in restricted cash

(5,668)

945

575

Biomass development costs

(931)

(2,286)

-

Proceeds from sale of assets

8,500

2,000

29,467

Purchase of property, plant and equipment

(115,107)

(46,695)

(2,016)

Net cash (used in) provided by investing activities

(682,008)

(146,997)

24,958





Cash flows (used in) provided by financing activities:




Proceeds from issuance of long term debt

460,000

-

-

Proceeds from issuance of equity, net offering costs

155,424

72,767

-

Proceeds from issuance of convertible debenture, net of offering costs

-

74,575

-

Deferred financing costs

(26,373)

(7,941)

-

Repayment of project-level debt

(21,589)

(18,882)

(12,744)

Proceeds from revolving credit facility borrowings

58,000

20,000

-

Repayments of revolving credit facility borrowings

-

(20,000)

(55,000)

Dividends paid

(85,029)

(65,028)

(24,955)

Equity contributions from noncontrolling interest

-

200

-

Proceeds from issuance of project level debt

100,794

-

78,330

Redemption of IPSs under normal course issuer bid

-

-

(3,369)

Redemption of subordinated notes

-

-

(40,638)

Costs associated with common share conversion

-

-

(4,508)

Net cash provided by (used in) financing activities

641,227

55,691

(62,884)

Net (decrease) increase in cash and cash equivalents

15,154

(4,353)

12,523

Cash and cash equivalents at beginning of year

45,497

49,850

37,327

Cash and cash equivalents at end of year

$60,651

$45,497

$49,850

Supplemental cash flow information




Interest paid

$40,238

$26,687

$69,186

Income taxes paid (refunded), net

$1,109

$(8,000)

$(216)

Accruals for capital expenditures

$4,095

$-

$-








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 is defined as project income plus interest, taxes, depreciation and amortization (including non-cash impairment charges) and changes in fair value of derivative instruments.  Project Adjusted EBITDA 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.


Atlantic Power Corporation

Cash Available for Distribution

(In thousands of U.S. dollars, except as otherwise stated)

(Unaudited)


Years ended December 31,



2011

2010

2009

Cash flows from operating activities

$55,935

$86,953

$50,449

Project-level debt repayments

(21,589)

(18,882)

(12,744)

Interest on IPS portion of subordinated notes(1)

-

-

30,639

Purchase of property, plant and equipment(2)

(2,035)

(2,549)

(2,016)

Transaction Costs(3)

33,402

-

-

Realized foreign currency losses on hedges associated with Partnership transaction(4)

16,492

-

-

Cash Available for Distribution(5)

82,205

65,522

66,328





Interest on subordinated notes

-

-

30,639

Dividends on common shares

86,357

65,648

27,988

Total dividends declared to shareholders

86,357

65,648

58,627





Payout ratio

105%

100%

88%





Expressed in Cdn$




Cash Available for Distribution

81,363

67,540

75,673





Total dividends declared to shareholders

85,437

67,914

66,325

(1)   Prior to the common share conversion in November 2009, a portion of our monthly distribution to IPS holders was paid in the form of interest on the subordinated notes comprising a part of the IPSs. Subsequent to the conversion, the entire monthly cash distribution is paid in the form of a dividend on our common shares.

(2)   Excludes construction-in-progress costs related to our Piedmont biomass project.

(3)    Represents costs incurred associated with the Partnership acquisition.

(4)   Realized foreign currency losses associated with foreign exchange forwards entered into in order to hedge a portion of the foreign currency exchange risks associated with the closing of the Partnership acquisition.

(5)   Cash Available for Distribution is not a recognized measure under GAAP and does not have any standardized meaning prescribed by GAAP. Therefore, this measure may not be comparable to similar measures presented by other companies. See "Supplementary Non-GAAP Financial Information" above.







Atlantic Power Corporation

Project Adjusted EBITDA (in thousands of U.S. dollars)

(Unaudited)








Years ended December 31,

Three months ended

Dec 31,


2011

2010

2009

2011

2010

Project Adjusted EBITDA by segment






Northeast

$59,299

$36,030

$32,435

$31,617

$9,235

Southeast

79,445

78,245

75,265

15,554

14,890

Northwest

11,363

736

822

7,757

206

Southwest

37,717

37,867

35,891

11,948

9,794

Un-allocated corporate

(2,546)

(294)

(234)

(1,425)

(359)

Total

185,278

152,584

144,179

65,451

33,766







Reconciliation to project income






Depreciation and amortization

95,564

65,791

67,643

42,642

16,460

Interest expense, net

27,990

23,628

31,511

8,038

5,844

Change in the fair value of derivative instruments

25,334

17,643

5,047

12,421

(5,792)

Other (income) expense

2,411

3,643

(8,437)

622

2,414

Project income

$33,979

$41,879

$48,415

$1,728

$14,840




SOURCE Atlantic Power Corporation

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