Capstone Infrastructure Corporation (TSX: CSE)(TSX: CSE.PR.A)(TSX:
CSE.DB.A) ("CSE" or the "Corporation") today reported financial
results for the quarter ended June 30, 2011. The Management's
Discussion and Analysis and unaudited financial statements for the
quarter are available on the Corporation's website at
www.capstoneinfrastructure.com and on SEDAR at www.sedar.com.
"Our power infrastructure portfolio performed well in the second
quarter with higher production overall," said Michael Bernstein,
President and Chief Executive Officer. "Excluding the one-time
costs arising from the internalization of management, Adjusted
EBITDA and Adjusted FFO increased by 23.3% and 39.7%, respectively.
This performance reflects the stability and quality of our
businesses. During the second quarter, the Amherstburg Solar Park
achieved commercial operations and we also received our first
distribution from Varmevarden, the district heating business in
Sweden. In addition, we completed a preferred share issuance,
raising gross proceeds of $75 million. Our portfolio has a solid
foundation and we are well capitalized to pursue growth
opportunities across a range of core infrastructure
categories."
Financial Overview
(in millions of Canadian dollars or on a per share basis unless otherwise
noted)
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Quarter Six Months
ended June 30 Variance ended June 30 Variance
2011 2010 2011 2010
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Revenue 37.0 35.5 4.3% 83.9 79.6 5.4%
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Cash flows from
operating activities (8.4) 7.4 (213.4%) 5.8 21.2 (72.9%)
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Adjusted
EBITDA(1)excluding
internalization
costs(2) 12.0 9.8 23.3% 30.5 29.7 3.0%
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FFO(1)excluding
internalization
costs(2) 7.7 5.1 50.9% 23.1 22.3 3.8%
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AFFO(1)excluding
internalization
costs(2) 5.0 3.5 39.7% 18.8 18.7 0.5%
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AFFO(1)per share
excluding
internalization
costs(2) 0.081 0.072 12.5% 0.308 0.375 (17.9%)
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Dividends per share 0.165 0.165 - 0.33 0.33 -
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Payout
ratio(1)excluding
internalization
costs(2) 203.7% 214.4% 5.0% 107.6% 82.4% (30.6%)
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Electricity
production (MWh) 440,710 437,254 0.8% 938,926 927,210 1.3%
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1. "Adjusted EBITDA", "Funds From Operations", "Adjusted Funds from
Operations", "Adjusted Funds from Operations per Share" and "Payout
Ratio. These measures are non-GAAP financial measures and do not have
any standardized meaning prescribed by International Financial Reporting
Standards ("IFRS"). As a result, these measures may not be comparable to
similar measures presented by other issuers. Definitions of each measure
are provided on page 5 of Management's Discussion and Analysis with
reconciliation to IFRS measures provided on pages 12 to 13.
2. During the quarter, the Corporation reported $18.6 million in one-time
costs related to the internalization of management on April 15, 2011.
For the year-to-date period, these one-time costs amounted to $19.2
million.
Key Drivers of Quarterly Financial Results
Higher revenue
Total revenue increased by $1.5 million, or 4.3%, in the quarter
over the same period last year, reflecting higher electricity rates
at the Cardinal gas cogeneration facility ("Cardinal") and higher
power production at the hydro power facilities. These drivers were
partially offset by slightly lower production from Erie Shores Wind
Farm ("Erie Shores") and decreased production at Cardinal and the
Whitecourt biomass facility ("Whitecourt") largely due to planned
maintenance outages at both facilities completed in seven days in
April and May, respectively. For the year-to-date period, total
revenue increased by $4.3 million, or 5.4%, over the first six
months of 2010. Total electricity production in the quarter
increased by 0.8% from the prior period. For the year-to-date
period, total electricity production increased by 1.3% over
2010.
First distribution from district heating investment
During the quarter, the Corporation received a distribution of
$1.7 million in the form of interest income from Varmevarden, the
Swedish district heating business in which it owns a 33.3% equity
interest.
Higher administrative expenses
Administrative expenses in the quarter increased by $18.2
million, or 526%, over 2010, including $18.6 million of
internalization costs, which included the termination payment to
Macquarie Group Limited, certain one-time payments to staff, and
professional fees. For the year-to-date period, administrative
expenses increased by $20.3 million, or 304%, over the first six
months of 2010. Excluding the one-time internalization costs,
administrative expenses in the quarter decreased by 3.4% and
increased by 25.4% in the year-to-date period from the respective
periods of 2010. The year-to-date increase primarily reflected
increased business development expenses, which, under IFRS, are
expensed as they are incurred.
Higher operating expenses
Operating expenses in the quarter increased by $843,000, or
3.7%, primarily due to a 12.8% increase in fuel expenses at
Cardinal, which reflected increased fuel prices as well as a higher
TransCanada Pipelines Limited ("TCPL") gas transportation toll of
$2.24 per gigajoule ("GJ"), effective March 1, 2011, compared with
$1.64 per GJ in 2010. Year-to-date operating expenses were $1.7
million, or 3.6%, higher than last year, mostly due to a 9.5%
increase in fuel and gas transportation expenses.
Financial Position
As at June 30, 2011, the Corporation's unrestricted cash and
cash equivalents totalled $109.4 million (December 31, 2010 -
$131.4 million), including the net proceeds from the issue of
preferred shares on June 30, 2011. The Corporation remained
conservatively leveraged relative to the low risk profile and long
life of its assets, with a debt to capitalization(3) ratio of 39.3%
as at June 30, 2011 (December 31, 2010 - 37.9%).
Fiscal 2011 Outlook
An outlook for each of the Corporation's assets is provided on
pages 23 to 28 of the second quarter report.
The Corporation expects continuing strong operational
performance from its businesses in 2011. Excluding the impact of
one-time internalization costs, Adjusted EBITDA and FFO are
expected to be higher than in 2010. This outlook is based on
performance in the year to date and assumes the following
factors:
-- Continuing stable performance from Cardinal and Whitecourt;
-- Continuation of more normal wind patterns and water flows;
(3)The fair value of shareholders' equity reflected the Corporation's market
capitalization as at June 30, 2011 based on a share price of $7.82 (December
31, 2010 - $8.22) and shares outstanding of 61,951,153 (December 31, 2010 -
56,352,461 share). Shares outstanding include Class B exchangeable units of
MPT LTC Holding LP, a subsidiary of Capstone, of which there were 3,249,390
outstanding at December 31, 2010, which were classified as a liability on
the interim consolidated statements of financial position. Fair value of the
preferred shares issued on June 30, 2011 is based on a share price of $24.19
and total shares outstanding of 3,000,000.
-- The partial year cash flow from Amherstburg Solar Park and Varmevarden;
and
-- That TCPL tolls continue at the current level for the balance of 2011.
Including the one-time impact of the internalization costs, the
Corporation currently expects its fiscal 2011 Adjusted EBITDA to be
approximately $40 million compared with $55.0 million in fiscal
2010. Excluding the impact of the internalization costs, Adjusted
EBITDA is expected to be approximately $60 million in fiscal 2011.
Excluding the internalization costs, the Corporation expects its
2011 payout ratio, which is based on AFFO, to be in the range of
120% compared with previous guidance of 110 - 120%, reflecting the
impact of the preferred share issuance on June 30, 2011.
For 2012, the Corporation currently expects Adjusted EBITDA to
be approximately $80 million, reflecting the full-year contribution
from the Amherstburg Solar Park and Varmevarden as well as a return
to 2010 TCPL rates. The Corporation currently expects to achieve a
payout ratio in 2012 of approximately 85% to 90%. As the
Corporation executes its growth strategy, which could include
development projects or businesses with a strong growth profile,
its payout ratio may fluctuate in any given year.
Based on the Corporation's current portfolio and outlook and
barring any significant unexpected events, the Corporation's
dividend policy of $0.66 per share on an annualized basis is
expected to be sustainable through 2014.
New Dividend Reinvestment Plan
The Corporation also today announced a new dividend reinvestment
plan ("DRIP") that will become effective with the dividend that
will be declared in August and payable in September. Eligible
holders of the Corporation's common shares (the "Shares") may elect
to participate in the DRIP, which provides shareholders with the
opportunity to invest the cash dividends paid on the Shares to
purchase additional Shares without incurring brokerage commissions,
service charges or brokerage fees. The Shares acquired under the
DRIP will, at the discretion of the Corporation, either be
purchased on the open market ("Market Purchases") through the
Toronto Stock Exchange ("TSX") and/or any alternative market or
issued by the Corporation from Treasury ("Treasury Purchases").
Accordingly, the DRIP provides an effective means by which the
Corporation may retain and reinvest dividends by issuing additional
equity.
In the case of Treasury Purchases, the price of Shares purchased
under the DRIP will be the average of the daily volume weighted
average price of Shares traded on the TSX for the five trading days
immediately preceding the applicable Share dividend payment date
less a discount, if any, of up to 5% at the Corporation's election.
In the case of Market Purchases, the price of Shares purchased
under the DRIP will be the average weighted cost of all Shares so
purchased for the DRIP participants at prevailing market prices,
excluding any brokerage commissions which will be paid by the
Corporation. The Shares will be purchased over a period of five
trading days following the Share dividend payment date.
The Shares of the Corporation purchased under the DRIP are not
registered under the United States Securities Act of 1933, as
amended. As a result, participation in the DRIP cannot be accepted
from any person who is, or who the Corporation has reason to
believe is, a resident of the United States. Shareholders resident
outside Canada, in countries other than the United States, are
eligible to participate in the DRIP unless the laws of their
countries of residence prohibit their participation.
Shareholders who were enrolled in the Corporation's prior DRIP
are automatically enrolled in the new plan. More information about
the DRIP and how to enrol is available on the Corporation's website
at the following location:
http://www.capstoneinfrastructure.com/InvestorCentre/StockInformation/DRIP.aspx.
Conference Call and Webcast
Management will hold a conference call (with accompanying
slides) to discuss second quarter results on Monday, August 15,
2011 at 8:30 a.m. ET. The event will be accessible via webcast
through the Corporation's website with accompanying slides at
www.capstoneinfrastructure.com and by telephone. To listen to the
call from Canada or the United States, dial 1-800-319-4610. If
calling from elsewhere, dial +1-604-638-5340. A replay of the call
will be available until August 29, 2011. For the replay, from
Canada or the United States, dial 1-800-319-6413 and enter the code
1385#. From elsewhere, dial +1-604-638-9010 and enter the code
1385#.
About Capstone Infrastructure Corporation
Capstone Infrastructure Corporation's mission is to build and
responsibly manage a high quality portfolio of infrastructure
businesses in Canada and internationally in order to deliver a
superior total return to shareholders through a combination of
stable dividends and capital appreciation. The Corporation's
portfolio currently includes investments in gas cogeneration, wind,
hydro, biomass and solar power generating facilities, representing
approximately 370 MW of installed capacity, and a 33.3% interest in
a district heating business in Sweden. Please visit
www.capstoneinfrastructure.com for more information.
Notice to Readers
Certain of the statements contained in this news release are
forward-looking and reflect management's expectations regarding the
Corporation's future growth, results of operations, performance and
business based on information currently available to the
Corporation. Forward-looking statements are provided for the
purpose of presenting information about management's current
expectations and plans relating to the future and readers are
cautioned that such statements may not be appropriate for other
purposes. These statements use forward-looking words, such as
"anticipate", "continue", "could", "expect", "may", "will",
"estimate", "believe" or other similar words. These statements are
subject to significant known and unknown risks and uncertainties
that may cause actual results or events to differ materially from
those expressed or implied by such statements and, accordingly,
should not be read as guarantees of future performance or results.
The forward-looking statements in this news release are based on
information currently available and what the Corporation currently
believes are reasonable assumptions, including the material
assumptions for each of the Corporation's assets set out in its
fiscal 2010 Annual Report under the heading "Asset Performance" as
updated in subsequently filed Quarterly Financial Reports of the
Corporation and other filings made by the Corporation with the
Canadian securities regulatory authorities (such documents are
available on the Canadian Securities Administrators' System for
Electronic Document Analysis and Retrieval ("SEDAR") at
www.sedar.com). Other material factors or assumptions that were
applied in formulating the forward-looking statements contained
herein include the assumption that the business and economic
conditions affecting the Corporation's operations will continue
substantially in their current state, including, with respect to
industry conditions, general levels of economic activity,
regulations, weather, taxes and interest rates, and that there will
be no unplanned material changes to the Corporation's facilities,
equipment or contractual arrangements.
Although the Corporation believes that it has a reasonable basis
for the expectations reflected in these forward-looking statements,
actual results may differ from those suggested by the
forward-looking statements for various reasons, including risks
related to: power infrastructure (operational performance; power
purchase agreements; fuel costs and supply; contract performance;
development risk; technology risk; default under credit agreements;
land tenure and related rights; regulatory regime and permits;
environmental, health and safety; climate change and the
environment; and force majeure) and the Corporation (tax-related
risks; variability and payment of dividends, which are not
guaranteed; geographic concentration and non-diversification;
insurance; environmental, health and safety regime; availability of
financing; shareholder dilution; and the unpredictability and
volatility of the common share price of the Corporation). There are
also a number of risks related to the Corporation's investment in
Varmevarden, the district heating business in Sweden, including:
fuel costs and availability; industrial and residential contracts;
geographic concentration; regulatory environment; environmental,
health and safety; reliance on key personnel; labour relations;
assumption of liabilities; minority interest; and foreign exchange.
There is also a risk that Varmevarden may not achieve expected
results.
For a more comprehensive description of these and other possible
risks, please see the Corporation's Annual Information Form dated
March 24, 2011 for the year ended December 31, 2010 as updated in
subsequently filed Quarterly Financial Reports and other filings
made by the Corporation with the Canadian securities regulatory
authorities. These filings are available on SEDAR. The assumptions,
risks and uncertainties described above are not exhaustive and
other events and risk factors could cause actual results to differ
materially from the results and events discussed in the
forward-looking statements. These forward-looking statements
reflect current expectations of the Corporation as at the date of
this news release and speak only as at the date of this news
release. Except as may be required by law, the Corporation does not
undertake any obligation to publicly update or revise any
forward-looking statements.
Contacts: Capstone Infrastructure Corporation Sarah Borg-Olivier
VP, Communications 416-607-5009
sborg-olivier@capstoneinfrastructure.com Capstone Infrastructure
Corporation Michael Smerdon Executive VP and CFO 416-607-5167
msmerdon@capstoneinfrastructure.com
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