2010 Second Quarter Financial Results

MONTREAL, Aug. 3 /CNW Telbec/ - The financial results of Boralex Power Income Fund (the "Fund") have been impaired in the second quarter 2010 by weak hydrology.

For the second quarter ended June 30, 2010, the Fund generated revenues from energy sales of $19.4 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $8.0 million, against respectively $25.0 million and $11.0 million for the second quarter 2009. The decreases stem from unfavorable hydrology and the raise of the Canadian dollar. The second quarter ended with a net loss of $0.3 million versus a net income of $1.0 million for the same period in 2009.

More specifically, the weak hydrology of the second quarter 2010 led to a 26.4% decrease in power generation by the hydroelectric power stations compared to the 2009 second quarter and to a 20% decrease compared to the historical average. As a result, revenues in the hydroelectric segment fell to $10.0 million, down 32.9% versus the same quarter in 2009. EBITDA amounted to $8.2 million, compared to $13.0 million in the second quarter a year earlier.

The wood-residue thermal power stations generated revenues of $3.3 million and EBITDA of $0.1 million for the three months ended June 30, 2010; whereas in the same period in 2009, this segment recorded revenues from energy sales of $4.5 million and a loss before interest, taxes, depreciation and amortization of $2.3 million. On April 2, 2010, production was shut down at the Dolbeau plant as part of the Fund's plan to operate the plant on a part-time basis to limit the impact of the extended shutdown of the AbitibiBowater pulp and paper mill. The AbitibiBowater decision regarding the future of this mill has not been disclosed and the Fund plans to continue operation for an undetermined period on a part-time basis during the winter. For the Senneterre power station, due to its access to old-bark piles in the region, the plant showed a 22% increase in power generation and a 29% increase in revenues.

The natural gas cogeneration plant generated revenues of $6.0 million and EBITDA of $2.1 million, up 7.1% and 5.0% respectively over the same quarter in 2009, due mainly to the 24.8% increase in the average price of steam.

Note that Boralex Inc. submitted an offer to purchase the Fund on May 3, 2010, an offer which was improved on July 12 and extended to August 13, 2010. Claude Boivin, Chairman of the Board of Trustees of Boralex Power Trust, said "the independent committee set up by the Board of Trustees is reiterating its support for Boralex's improved offer, because we believe it is a fair proposal and in the best interest of our unitholders."

About Boralex Power Income Fund

Boralex Power Income Fund (the "Fund") is an unincorporated open-ended trust that indirectly owns ten power generating stations located in the province of Québec and in the United States producing energy from different sources including wood-residue or natural gas thermal and cogenerating facilities as well as hydroelectric power stations. In total, these power stations have an installed capacity of 190 megawatts ("MW"). The Fund's units are listed on the Toronto Stock Exchange ("TSX") under the symbol BPT.UN.

Certain statements contained in this press release, including those regarding future results and performance, are forward-looking statements based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the general impact of economic conditions, raw material price increases and availability, currency fluctuations, prevailing electricity selling prices on long-term power sales contract renewal dates, the Fund's financing capacity, changes to laws and regulations affecting the Fund's operations particularly with respect to taxation and the environment, adverse changes in general market and industry conditions, as well as other factors listed in the Fund's filings with different securities commissions.

The summarized financial statements included in this press release also contain certain financial measurements that are not recognized as Generally Accepted Accounting Principles of Canada (GAAP). To assess the operating performance of its assets and reporting segments, the Fund uses earnings before interest, taxes, depreciation and amortization (EBITDA) and cash flows from operations as performance measurements. These measures are not defined under GAAP and do not have a standardized definition prescribed by GAAP. Therefore, they may not be comparable to similar measures presented by other companies. EBITDA is defined in the summarized financial statements included with this press release. Cash flows from operations corresponds to cash flows from operating activities before changes in non-cash working capital items as disclosed in the consolidated statements of cash flows attached in this press release.

Notice to Unitholders

The following financial information was extracted from the interim consolidated financial statements of Boralex Power Income Fund (the "Fund"). The complete interim financial statements were prepared in accordance with Canadian generally accepted accounting principles. They are available on the Fund's website (www.boralex.com/trust) and filed with SEDAR.

    
    Consolidated Balance Sheets

                                                         As at         As at
                                                       June 30,  December 31,
                                                  -------------
    (in thousands of dollars) (unaudited)                 2010          2009
    -------------------------------------------------------------------------
    Assets
    Current assets
    Cash and cash equivalents                           23,493        15,867
    Accounts receivable                                  8,304        14,498
    Income taxes receivable                                526             -
    Inventories                                          2,208         2,837
    Prepaid expenses                                     1,004           350
                                                  ---------------------------
                                                        35,535        33,552
                                                  ---------------------------
    Property, plant and equipment                      291,382       311,735
    Intangible assets                                   51,305        54,142
    Other long-term assets                               5,591         6,354
                                                  ---------------------------
                                                       383,813       405,783
                                                  ---------------------------
    Liabilities and unitholders' equity
    Current liabilities
    Short-term revolving credit facility                     -         3,100
    Accounts payable and accrued liabilities             9,469        10,125
    Income taxes payable                                     -           800
    Distributions payable to unitholders                 1,969         3,446
                                                  ---------------------------
                                                        11,438        17,471
                                                  ---------------------------
    Future income tax liabilities                       30,173        33,966
    Long-term debt                                     109,306       107,234
    Long-term lease accruals                             2,989         2,760
                                                  ---------------------------
                                                       153,906       161,431
                                                  ---------------------------
    Unitholders' equity
    Capital contribution                               422,174       422,174
    Capital contribution - exchangeable
     Class B units                                     112,867       112,867
    Deficit                                           (287,720)     (272,349)
    Accumulated other comprehensive loss               (17,414)      (18,340)
                                                  ---------------------------
                                                       229,907       244,352
                                                  ---------------------------
                                                       383,813       405,783
    -------------------------------------------------------------------------



    Consolidated Statements of Earnings (Loss)

    (in thousands of dollars,    For the quarters       For the six-month
     except per unit amounts      ended June 30,      periods ended June 30,
     and number of trust      -----------             -----------
     units) (unaudited)             2010        2009        2010        2009
    -------------------------------------------------------------------------
    Revenues from energy sales    19,364      25,003      48,338      57,253
                              -----------------------------------------------
    Expenses
    Operating                     10,015      13,125      21,564      26,020
    Administrative                 1,376         839       2,085       1,463
                              -----------------------------------------------
                                  11,391      13,964      23,649      27,483
                              -----------------------------------------------
    Operating earnings before
     amortization                  7,973      11,039      24,689      29,770
    Amortization of property,
     plant and equipment           4,411       5,004       9,027      10,087
    Amortization of intangible
     assets                        1,618       1,909       3,228       3,767
                              -----------------------------------------------
    Operating income               1,944       4,126      12,434      15,916
    Financing costs, net           1,823       1,986       3,718       3,876
    Foreign exchange loss (gain)      87        (103)       (159)       (136)
    Impairment of property,
     plant and equipment               -           -      15,970           -
                              -----------------------------------------------
    Earnings (loss) before
     income taxes                     34       2,243      (7,095)     12,176
    Income taxes (recovery)          364       1,223      (3,537)      1,270
                              -----------------------------------------------
    Net earnings (loss) for
     the period                     (330)      1,020      (3,558)     10,906
                              -----------------------------------------------
    Basic and diluted net
     earnings (loss) per trust
     unit (in dollars)             (0.01)       0.02       (0.06)       0.18
                              -----------------------------------------------
    Weighted average number
     of trust units
     outstanding              59,067,992  59,067,992  59,067,992  59,067,992
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Deficit

                                                        For the six-month
                                                      periods ended June 30,
                                                  -------------
    (in thousands of dollars) (unaudited)                 2010          2009
    -------------------------------------------------------------------------
    Deficit - beginning of period                     (272,349)     (220,137)
    Net earnings (loss) for the period                  (3,558)       10,906
    Distributions to unitholders                       (11,813)      (20,674)
                                                  ---------------------------
    Deficit - end of period                           (287,720)     (229,905)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Comprehensive Income (Loss)

                                 For the quarters       For the six-month
                                  ended June 30,      periods ended June 30,
                              -----------             -----------
    (in thousands of dollars)
     (unaudited)                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Net earnings (loss) for
     the period                     (330)      1,020      (3,558)     10,906
    Other comprehensive income
     (loss):
    Translation adjustments
    Unrealized foreign
     exchange gains (losses)
     on translation of
     financial statements of
     self-sustaining foreign
     operations                    2,835      (7,369)        908      (4,675)
    Reclassification of
     accumulated foreign
     exchange losses on
     translation of financial
     statements of self-
     sustaining foreign
     operations following a
     reduction in net
     investment                      542           5         671          98
    Future income taxes              288        (515)        143        (324)
    Hedging of net investment
     in self-sustaining
     foreign operations
    Change in fair value of
     derivatives designated as
     hedges of net investment
     in self-sustaining
     foreign operations             (225)      1,261          63         658
    Hedging instruments
     realized and recognized
     in earnings                    (460)       (147)       (859)       (211)
                              -----------------------------------------------
                                   2,980      (6,765)        926      (4,454)
                              -----------------------------------------------
    Comprehensive income
     (loss) for the period         2,650      (5,745)     (2,632)      6,452
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Cash Flows

                                 For the quarters       For the six-month
                                  ended June 30,      periods ended June 30,
                              -----------             -----------
    (in thousands of dollars)
     (unaudited)                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Operating activities
    Net earnings (loss) for
     the period                     (330)      1,020      (3,558)     10,906
    Items not affecting cash:
      Amortization of property,
       plant and equipment         4,411       5,004       9,027      10,087
      Amortization of
       intangible assets           1,618       1,909       3,228       3,767
      Amortization of deferred
       financing costs                95          99         196         208
      Long-term lease accruals        93         109         187         226
      Future income taxes            380        (366)     (3,762)     (1,270)
      Realized translation
       adjustments                   542           4         671          97
      Impairment of property,
       plant and equipment             -           -      15,970           -
      Other                           39           -         338           -
                              -----------------------------------------------
                                   6,848       7,779      22,297      24,021
    Net change in non-cash
     working capital balances      6,173       6,384       3,199       1,537
                              -----------------------------------------------
    Cash flows related to
     operating activities         13,021      14,163      25,496      25,558
                              -----------------------------------------------

    Investing activities
    Additions to property,
     plant and equipment          (2,410)       (185)     (2,621)     (1,052)
    Acquisition of other
     assets                           (7)        (19)        (11)        (26)
                              -----------------------------------------------
    Cash flows related to
     investing activities         (2,417)       (204)     (2,632)     (1,078)
                              -----------------------------------------------

    Financing activities
    Net change in short-term
     revolving credit facility         -      (1,300)     (3,100)      2,400
    Increase in long-term debt       900           -         900           -
    Repayment of capital
     lease obligation                  -           -           -         (20)
    Distributions paid to
     unitholders                  (5,907)    (10,337)    (13,290)    (20,674)
                              -----------------------------------------------
    Cash flows related to
     financing activities         (5,007)    (11,637)    (15,490)    (18,294)
                              -----------------------------------------------
    Translation adjustments
     on cash and cash
     equivalents                     649      (1,649)        252      (1,116)
                              -----------------------------------------------
    Net change in cash and
     cash equivalents during
     the period                    6,246         673       7,626       5,070
    Cash and cash equivalents
     - beginning of period        17,247      23,243      15,867      18,846
                              -----------------------------------------------
    Cash and cash equivalents
     - end of period              23,493      23,916      23,493      23,916
                              -----------------------------------------------

    Supplemental information
    Interest paid                  1,695       1,344       3,530       3,892
    Income taxes paid                811         857       1,508       1,652
    -------------------------------------------------------------------------
    

Impairment test of property, plant and equipment

Subsequent to an impairment test carried out by the Fund at the end of the first quarter of 2010, a $15,970,000 impairment charge was recorded against property, plant and equipment related to the Dolbeau power station. Due to changes in this power station's operating environment, the Fund concluded that the power station's aggregate value over a long-term horizon had declined.

In light of these factors, the Fund has established various scenarios to assess the future profitability outlook of the power station. These scenarios incorporated different assumptions as to electricity and steam output as well as steam prices in the event the current contract is renegotiated. A complete shutdown of the ABI plant was one of the scenarios also considered. The reader is cautioned that these scenarios were not drawn up based on actual discussions with ABI but rather on a number of forecasts arising from reasonable assessments made by the Fund manager.

Since the aggregate value of expected cash flows under the assumptions made did not match the carrying amount of the assets in question, the Fund recorded a partial write-down of property, plant and equipment in the amount of $15,970,000. Since the Fund, under these scenarios, reduced its long-term forecasts of contractual volume and steam prices, and increased its potential operating costs forecasts, residual profitability was insufficient to support the existing carrying amount of property, plant and equipment.

However, the Fund continues to assess its options to ensure this power station's profitability. While the impairment charge reflects management's assumptions and estimates, it should be borne in mind that the current economic environment entails a special series of combined adverse risks that could affect the financial performance of the power station.

As at June 30, 2010, as the Fund has received no additional material information regarding the status of the ABI pulp and paper plant that would justify changing variables and/or the weightings of the various scenarios, the Fund deems that at this time no additional impairment charge is required.

Segmented information

The Fund's power stations are grouped into three distinct segments - hydroelectric power, wood-residue thermal power and natural gas thermal power - and are engaged mainly in power generation. The classification of these segments is based on the different cost structures relating to each type of power station. The Fund allocates its revenues by geographical region based on the point of delivery of the power. The significant accounting policies that apply to the operating segments are the same as those described in Note 2 in the Fund's 2009 Annual Report.

The Fund analyzes the performance of its operating segments based on earnings before interest, taxes, depreciation and amortization ("EBITDA"). EBITDA is not a measure of performance defined under Canadian GAAP; however, management uses this measure to assess the operating performance of its reportable segments. Results for each segment are presented on the same basis as those of the Fund. In the consolidated statement of earnings, EBITDA is represented by operating income before amortization.

The following table reconciles EBITDA with net earnings or net loss:

    
                                 For the quarters       For the six-month
                                  ended June 30,      periods ended June 30,
                              -----------             -----------
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Net earnings (loss)             (330)      1,020      (3,558)     10,906
    Income taxes (recovery)          364       1,223      (3,537)      1,270
    Impairment of property,
     plant and equipment               -           -      15,970           -
    Foreign exchange loss (gain)      87        (103)       (159)       (136)
    Financing costs, net           1,823       1,986       3,718       3,876
    Amortization of intangible
     assets                        1,618       1,909       3,228       3,767
    Amortization of property,
     plant and equipment           4,411       5,004       9,027      10,087
                              -----------------------------------------------
    EBITDA                         7,973      11,039      24,689      29,770
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information by operating segment

                                 For the quarters       For the six-month
                                  ended June 30,      periods ended June 30,
                              -----------             -----------
                                    2010        2009        2010        2009
    -------------------------------------------------------------------------
    Production (in MWh)
    Hydroelectric power
     stations                    122,998     167,186     237,136     284,318
    Wood-residue thermal power
     stations                     57,154      46,482     141,979     122,228
    Natural gas thermal power
     station                      43,628      45,801      97,855     106,991
                              -----------------------------------------------
                                 223,780     259,469     476,970     513,537
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Revenues from energy sales
    Hydroelectric power
     stations                     10,037      14,902      20,989      27,614
    Wood-residue thermal power
     stations                      3,311       4,473      12,304      15,617
    Natural gas thermal power
     station                       6,016       5,628      15,045      14,022
                              -----------------------------------------------
                                  19,364      25,003      48,338      57,253
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    EBITDA
    Hydroelectric power
     stations                      8,215      13,007      17,441      23,973
    Wood-residue thermal power
     stations                         83      (2,295)      4,626       2,859
    Natural gas thermal power
     station                       2,073       1,955       6,730       6,156
    Corporate and eliminations    (2,398)     (1,628)     (4,108)     (3,218)
                              -----------------------------------------------
                                   7,973      11,039      24,689      29,770
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Additions to property,
     plant and equipment
    Hydroelectric power
     stations                        129         156         138         908
    Wood-residue thermal power
     stations                      1,853          11       1,908         106
    Natural gas thermal power
     station                         428          18         575          38
                              -----------------------------------------------
                                   2,410         185       2,621       1,052
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


                                                         As at         As at
                                                       June 30,  December 31,
                                                  -------------
                                                          2010          2009
    -------------------------------------------------------------------------
    Total assets
      Hydroelectric power stations                     251,415       246,387
      Wood-residue thermal power stations               97,840       106,845
      Natural gas thermal power station                 29,627        37,308
      Corporate and eliminations                         4,931        15,243
                                                  ---------------------------
                                                       383,813       405,783
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Property, plant and equipment
      Hydroelectric power stations                     180,165       181,497
      Wood-residue thermal power stations               91,656       107,033
      Natural gas thermal power station                 19,561        23,205
                                                  ---------------------------
                                                       291,382       311,735
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

Transaction with Boralex

On May 3, 2010, the Fund and Boralex Inc. ("Boralex") jointly announced that they have entered into a definitive support agreement, pursuant to which Boralex, through one of its wholly owned subsidiaries, has offered to acquire by way of a take-over bid (the "Offer") all of the issued and outstanding trust units in the capital of the Fund (the "Units") in exchange for $5 cash equivalent value per Unit in the form of 6.25% Convertible Unsecured Subordinated Debentures of Boralex (the "Debentures"). Boralex has agreed to offer holders of Units ("Unitholders") a $100 principal amount of Debentures for each 20 units held.

The special committee of independent trustees of Boralex Power Trust (the "Special Committee") and the Board of Trustees have unanimously determined that the Offer is fair to Unitholders other than Boralex and is in the best interest of the Fund and such Unitholders.

A take-over bid circular containing the full details of the Offer and other related documents was mailed to Unitholders on May 19, 2010.

The Offer is contingent on the tendering to the Offer of at least 66 2/3% of the outstanding Units, and a majority of the Units not controlled by Boralex, receipt of any necessary regulatory approvals and compliance with or waiver of other customary conditions.

Under the terms of the support agreement, the Fund has agreed that it will not solicit or initiate any competing third-party proposals. In the event that the transaction is not completed in certain circumstances, the Fund has agreed to pay Boralex a termination fee of approximately $6,800,000.

This transaction was described in more detail in the information circular filed on May 19, 2010 with the regulatory authorities.

On July 12, 2010, Boralex improved its Offer to acquire all of the Units in light of changes in market conditions, by increasing the interest rate of the Debentures to 6.75% per year (instead of 6.25% per year) and offering a conversion price of $12.50 (instead of $17.00) per share of Boralex. The Offer had been extended until July 30, 2010 at 7:00 p.m. This improved Offer has been once again extended until August 13, 2010 at 7:00 p.m.

SOURCE BORALEX POWER INCOME FUND

For further information: For further information: Ms. Patricia Lemaire, Director, Public Affairs and Communications, Boralex Power Inc., 514-985-1353, patricia.lemaire@boralex.com

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BORALEX POWER INCOME FUND

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