VANCOUVER – Alterra Power Corp. (TSX: AXY) (“Alterra” or the “Company”) is pleased to report its financial and operating results for the quarter ended September 30, 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 September 30, 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 operating results that the Company would have reported if each of HS Orka (66.6% through July 27, 2017 and 53.9% thereafter), Toba Montrose (40%), Dokie 1 (25.5%), Shannon (50% sponsor equity interest), Jimmie Creek (51%), and Kokomo (90% sponsor equity interest) were reported in the proportional ownership interests shown above. 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 (note c).
Highlights for the quarter and subsequent period include:
Completion of the transaction with Innergex is subject to approval of at least 66.7% of the Alterra Common Shares represented in person or by proxy at a special meeting of the Company’s shareholders to be called to consider the transaction (expected to be held on December 14, 2017), and satisfaction of other customary approvals, including key third party consents, regulatory, stock exchange and court approvals. The transaction is expected to close in the first quarter of 2018.
More detailed information concerning the transaction and the special meeting of the Company’s shareholders will be included in a management information circular expected to be mailed to Alterra’s shareholders on or about November 16, 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 ($000):
For the three |
HS Orka |
Toba |
Dokie 1 |
Shannon |
Jimmie |
Kokomo |
Development |
Net interest |
Consolidated |
(53.9%)(a) |
(40%) |
(25.5%) |
(50%) |
(51%) |
(90%) |
||||
Generation (MWh) |
139,118 |
152,878 |
20,063 |
56,081 |
56,948 |
2,462 |
— |
427,550 |
242,779 |
Total revenue(b) |
9,748 |
13,510 |
1,711 |
1,360 |
5,595 |
200 |
— |
32,124 |
16,842 |
Gross profit (loss) |
615 |
11,193 |
916 |
(889) |
4,765 |
76 |
— |
16,676 |
1,255 |
Adjusted EBITDA(c) |
3,602 |
11,836 |
1,205 |
369 |
5,112 |
146 |
(1,509) |
20,761 |
24,185 |
For the three |
HS Orka |
Toba |
Dokie 1 |
Shannon |
Jimmie |
Development |
Net interest |
Consolidated |
(66.6%) |
(40%) |
(25.5%) |
(50%) |
(51%) |
||||
Generation (MWh) |
180,159 |
140,170 |
15,441 |
72,212 |
33,043 |
— |
441,025 |
270,509 |
Total revenue(b) |
9,391 |
11,852 |
1,337 |
1,628 |
3,897 |
— |
28,105 |
14,100 |
Gross profit (loss) |
1,516 |
9,693 |
472 |
(636) |
3,388 |
— |
14,433 |
2,323 |
Adjusted EBITDA(c) |
4,693 |
10,266 |
765 |
190 |
3,580 |
(483) |
19,011 |
21,367 |
(a) |
The operating results for HS Orka reflect 66.6% ownership through July 27, 2017, and 53.9% ownership thereafter. For comparative purposes the adjusted results for HS Orka reflecting ownership at 66.6% for the full three months would have been generation of 161,691 MWh, revenue of $11.2 million, gross profit of $0.8 million and Adjusted EBITDA of $4.7 million. |
(b) |
Revenue for Shannon excludes power hedge accounting adjustments. |
(c) |
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 period. 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 and nine months ended September 30, 2017 available on SEDAR at www.sedar.com. |
Consolidated Results
Revenue was $16.8 million for the quarter, up 19% from the comparative quarter predominantly due to foreign exchange, with the Icelandic Krona strengthening in the quarter, in addition to increased retail sales and an increase in aluminum prices.
The Company recorded net income of $51.6 million (comparative quarter $10.4 million), primarily due to the gain from the sale of 49% of Flat Top, as well as changes in the fair value of derivatives and foreign exchange movements.
Consolidated cash and cash equivalents at September 30, 2017 were $14.0 million of which $6.1 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 the significant development and construction activities undertaken by the Company during the period.
The Company’s consolidated working capital deficit at September 30, 2017 was $51.3 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 September 30, 2017 is $35.0 million, resulting primarily from one of the holding company bonds (Sweden) valued at $38.2 million being classified as current at September 30, 2017. Subsequent to the quarter, HS Orka received $8.9 million in additional funding from the $119.4 millionArion loan which was used in part to repay a portion of the short-term credit facility.
Net Interest Results
Alterra’s net interest revenue increased by 14% to $32.1 million and net interest Adjusted EBITDA increased 9% to $20.8 million in the current quarter primarily due to increased generation at Toba Montrose and Dokie 1, as well as inclusion of Jimmie Creekgeneration for the full quarter.
The net interest cash position at September 30, 2017 was $26.6 million.
Operating Results
The Company achieved fleet-wide generation of 95.5% of its budgeted generation (net interest) for the current quarter.
Q3 2017 Generation (MWh) |
|||||||||
Total |
Net Interest |
||||||||
Facility |
Budget |
Actual |
Budget |
Actual |
% of Budget |
||||
Reykjanes |
125,560 |
120,873 |
70,902 |
68,459 |
96.6% |
||||
Svartsengi |
127,919 |
121,906 |
74,010 |
70,659 |
95.5% |
||||
Toba Montrose |
380,930 |
382,194 |
152,372 |
152,878 |
100.3% |
||||
Jimmie Creek |
101,222 |
111,663 |
51,623 |
56,948 |
110.3% |
||||
Dokie 1 |
71,909 |
78,680 |
18,337 |
20,063 |
109.4% |
||||
Shannon |
155,736 |
112,161 |
77,868 |
56,081 |
72.0% |
||||
Kokomo |
3,040 |
2,736 |
2,736 |
2,462 |
90.0% |
||||
TOTAL |
966,316 |
930,213 |
447,848 |
427,550 |
95.5% |
• Budgeted amounts include planned maintenance outages. |
“This is a very exciting time for the Company with the announcement of the acquisition by Innergex and the continued progress of our construction and development projects,” said Lynda Freeman, Alterra’s CFO. “With Spartan nearly complete and Flat Top well underway, our success of bringing projects in on time and on budget looks set to continue.”
Alterra will host a conference call to discuss financial and operating results on Friday, November 10, 2017 at 12:00 pm ET (9:00 am PT). |
North American participants dial 1-888-390-0605 and International participants dial 1-416-764-8609; the conference ID is 05734740 |
The call will also be broadcast live on the Internet at http://event.on24.com/r.htm?e=1528363&s=1&k=A92DCD956D83156D28A7D3056656AB58 |
The call will be available for replay for one week after the call by dialing 1-416-764-8677 and entering replay PIN 734740# |
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 all 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 (or achievement of conditions precedent related to equity funding thereto) of the Flat Top wind project, the Spartan solar project, and the Brúarvirkjun hydro project, and the timing of each of the same, timing for commercial operations for the Flat Top, Brúarvirkjun and Spartan projects, the equity ownership expectations of the Spartan project, Alterra’s continued management of the Flat Top project, potential to increase production resulting from deep drilling, programs to upgrade, return capacity 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, 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, all statements regarding the Company’s plans and expectations for the declaration of future dividends, including the timing and amount thereof, the timing of HS Orka distributions, refinancing, repayment or the return of collateral of other the holding company bonds, all statements relating to the potential sale or retention of the Blue Lagoon, including the purchase price in respect thereof, if any, all statements relating to the successful closing of the Innergex Transaction, including the timing, effect, results and completion thereof, the timing of the Company’s special meeting and the mailing of the related management information circular, and the final pro-ration of the consideration paid to shareholders upon closing, 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 (including satisfaction of conditions precedent to release of capital related thereto), 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, risks associated with the recently announced proposed changes to the U.S. federal tax plan, including prospective reduction in the corporate tax rate and reduction, retroactive repeal and/or modification of the PTC program, specifically, under certain proposed tax changes this could result in less valuable project capital investment deductions, reduction in tax equity investment appetite and/or a reduction in PTC value for wind projects not yet under construction, each of which could have a material effect on Alterra’s financial position and results of operations and its ability to fund growth prospects, 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, that the Company and its partners will continue to retain the Blue Lagoon, that the Innergex Transaction will proceed to closing as anticipated, including timely receipt of shareholder, court, regulatory and other third party approvals, liquidity risks associated with the near term maturity of the holding company bond (Sweden) and the refinancing or retirement thereof and the failure of the Innergex Transaction to close, expectations and assumptions concerning availability of capital resources, 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 development of each of the wind development projects, including the financing thereof and if applicable, completion of third party infrastructure, within a timeframe that permits Alterra to obtain the value of such PTCs with respect to each project, future issuances of equity securities, future declarations of dividends and the amounts thereof, risks related to the financing or refinancing of holding company bonds, health, safety, social and environmental risks, risks inherent to the Innergex Transaction, including satisfaction of the closing conditions thereto, receipt of shareholder, court, regulatory and other third party approvals, whether assessments of value made by Alterra and Innergex are ultimately correct, realization of any strategic, operational or financial benefits from the Innergex Transaction, and timing thereof, risks related to the announcement of the Innergex Transaction and devotion of Company resources to completion of the same, capital resources, derivative financial instruments, interest and exchange rates, financial leverage and restrictive covenants, and risks related to reliance on, and relationships with, 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.
SOURCE Alterra Power Corp.
For further information: Luke Pangman, Legal Counsel, Alterra Power Corp., Phone: 604.235.6706, Email: info@alterrapower.ca