Alterra Power Announces Results for the Quarter Ended September 30, 2016

(under IFRS and all amounts in US dollars unless otherwise stated)

VANCOUVER, Nov. 8, 2016 /CNW/ - Alterra Power Corp. (TSX: AXY) ("Alterra" or the "Company") is pleased to report its financial and operating results for the three and nine months ended September 30, 2016. 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, 2016, Alterra consolidated 100% of the results of operations from its Icelandic subsidiary HS Orka, while Alterra's interests in the Toba Montrose, Jimmie Creek, Dokie 1 and Shannon 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 effective portion of operating results that the Company would have reported if each of HS Orka (66.6%), Toba Montrose (40%), Jimmie Creek (51%), Dokie 1 (25.5%), and Shannon (50% sponsor equity interest) had been reported in accordance with Alterra's actual share of ownership at September 30, 2016 and for the three and nine months then ended. 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.

Highlights for the quarter and subsequent period include:

  • Fleet Generation: Lower resource availability across the fleet drove generation to 91.9% of its budgeted generation (net interest) for the current quarter, and 95.4% year to date at September 30, 2016.

  • Strong generation at Jimmie Creek: Following commencement of operations on August 1, Jimmie Creek achieved 106% of plan in the current quarter.

  • Record drilling depth achieved at Reykjanes field: The deep drilling program at the Reykjanes plant in Iceland is underway to test the geothermal resources below the current field. Drilling has progressed beyond 3,850 meters of the 5,000 meter target depth, with the objective of increased production from this well. This is the deepest drilled well in Iceland and currently has an estimated well bottom temperature of approximately 400oC.

  • Jimmie Creek commercial operations achieved: Jimmie Creek commenced commercial operations on August 1 on time and under budget by approximately $4 million. The 62 MW project is now selling 100% of its power to the British Columbia Hydro and Power Authority under a 40-year power purchase agreement ("PPA") that expires in 2056. In September the C$176.5 million Jimmie Creek construction loan was converted to a 40 year term loan.

  • Advancement of the 200 MW Flat Top wind project:
    • Turbine selection: Turbine technology for the project has been selected and the Company is close to finalizing the project's turbine supply agreement.
    • Construction provider: A proposals process for project construction has been completed, and the Company has selected a contractor with local area familiarity.
    • Offtake: Alterra is in discussions with multiple potential counterparties on a hedge, PPA or combined offtake solution for the project.
    • Project financing: The Company is advancing project financing discussions with certain financing parties including tax equity and construction financing providers.
    • Interconnection security: On September 29, the Company placed a second security deposit of approximately $6.1 million with the local transmission provider.
    • Other: All required land for the project has been secured, and the Company is working on select parcels with the goal of further optimizing project layout.

  • Construction commences on the 7 MWDC Kokomo solar project: On October 11, the Company announced the closing of a $8.9 million construction loan facility for the Kokomo project, located in Kokomo, Indiana. Concurrently, the Company completed a partnership agreement with Inovateus Solar LLC to co-own the project and is actively developing a second solar project, a 13 MWDC project located in East Lansing, Michigan. Construction of Kokomo is well underway with all panels and inverters on site.

  • Completion of upsized equity financings: On October 26, the Company completed two equity financings with gross proceeds of approximately C$67.9 million (upsized from an originally announced amount of C$50.0 million).

  • Refinancing of US dollar Sweden holding company bond: In October, the Company refinanced into two tranches the $71.7 million bond originally held by Reykjavik Energy ("OR"). In the first tranche, held by OR, the principal has been reduced to $36.0 million, with an increase in coupon from 1.5% to 5%, and maturity has been extended to April 2018. The second $35.7 million tranche was issued to Alterra's Executive Chairman, Ross J. Beaty. The second tranche carries an 8.5% coupon and matures in October 2021. Both tranches carry no amortization and have no recourse to the Company, with security consisting solely of approximately 17% and 15% of the outstanding shares of HS Orka respectively.

  • Revenue and Adjusted EBITDA: Consolidated revenue increased by 15% to $14.1 million and net interest revenue increased by 26% to $28.1 million (from the comparative quarter of 2015) predominantly due to strengthening of the Icelandic Krona and revenue generated by the Company's new projects (Shannon and Jimmie Creek). Consolidated and net interest Adjusted EBITDA increased by 21% and 24% to $21.4 million and $19.0 million respectively, primarily due to foreign exchange gains and EBITDA generated by Shannon and Jimmie Creek.

  • Distributions: The Company received distributions during the quarter from equity investments of C$7.6 million from Toba Montrose, C$1.8 million from Dokie 1 and $0.4 million from Shannon.

  • Dividend approved: The Board of Directors of the Company has approved a quarterly cash dividend in the amount of C$0.0125 per common share. The cash dividend will be distributed on or about Thursday, December 15, 2016, to holders of record of common shares as of the close of business on Wednesday, November 30, 2016. Alterra's dividends are designated as eligible dividends for the purposes of the Income Tax Act (Canada), unless otherwise notified.

  • Common share consolidation: Effective September 6, 2016 the Company consolidated all of its issued and outstanding common shares on the basis of one (new) post-consolidation common share for each ten (old) pre-consolidation common shares.

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.










For the three months ended

September 30, 2016 (a)

HS Orka

Toba
Montrose

Jimmie
Creek

Dokie 1

Shannon

Development
and Head
Office

Net
Interest
Total

Consolidated
Results

(66.6%)

(40%)

(51%)

(25.5%)

(50%)

Generation (MWh)

180,159

140,170

33,043

15,441

72,212

441,025

270,509

Total revenue

9,391

11,852

3,897

1,337

1,628

28,105

14,100

Gross profit (loss)

1,516

9,693

3,388

472

(636)

14,433

2,323

Adjusted EBITDA (b)

4,693

10,266

3,580

765

190

(483)

19,011

21,367

 








For the three months ended

September 30, 2015

HS Orka

Toba
Montrose

Dokie 1

Development
and Head
Office

Net
Interest
Total

Consolidated
Results

(66.6%)

(40%)

(25.5%)

Generation (MWh)

191,992

149,927

19,981

361,900

288,275

Total revenue

8,147

12,422

1,696

22,265

12,232

Gross profit

1,911

10,098

854

12,863

2,870

Adjusted EBITDA (b)

4,680

10,617

1,193

(1,121)

15,369

17,718



(a)

Here and elsewhere, all tabular amounts (except generation) are expressed in thousands of US dollars.

(b)

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 quarter.  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 condensed consolidated interim financial statements refer to the Company's Management's Discussion and Analysis for the three and nine months ended September 30, 2016 available on SEDAR at www.sedar.com.

 

Consolidated Results

Revenue was $14.1 million for the quarter, up 15% from the comparative quarter predominantly due to the strengthening of the Icelandic Krona.

The Company recorded net income of $10.4 million, up from the comparative quarter ($2.3 million), primarily due to changes in non-cash items such as the share of results of equity investments, change in the fair value of the holding company bonds (Sweden) and embedded derivatives as well as foreign exchange.

Consolidated cash and cash equivalents at September 30, 2016 was $6.8 million of which $4.3 million is held in the Company's Icelandic subsidiary ($10.3 million and $6.4 million, respectively at December 31, 2015).

The Company's consolidated working capital deficit at September 30, 2016 was $165.3 million compared to a working capital deficit of $123.3 million at December 31, 2015.  The working capital deficit was primarily due to the fair value of the holding company bonds (Sweden) being classified as short-term (the bonds were all set to mature within twelve months). Had the OR bond refinancing been completed at September 30, 2016, the working capital deficit would have been reduced to approximately $92.4 million.

Net Interest Results

Alterra's net interest revenue increased by $5.8 million to $28.1 million primarily due to generation from Shannon and Jimmie Creek, and the strengthening of the Icelandic Krona. Net interest Adjusted EBITDA increased 24% to $19.0 million primarily due to generation from Shannon and Jimmie Creek which were not operational in the comparative quarter.

The net interest cash position at September 30, 2016 was $15.0 million.

Operating Results

The Company achieved 91.9% of its budgeted generation for the quarter, led by Toba Montrose.






Q3 2016 Generation (MWh)




Total


Net Interest



Facility

Budget (a)


Actual


Budget (a)


Actual


% of Budget

Reykjanes

168,920


144,409


112,501


96,176


85.5%

Svartsengi

133,500


126,100


88,911


83,983


94.5%

Toba Montrose

377,862


350,426


151,145


140,170


92.7%

Jimmie Creek (b)

61,136


64,790


31,179


33,043


106.0%

Dokie 1

71,909


60,553


18,337


15,441


84.2%

Shannon

155,736


144,423


77,868


72,212


92.7%

TOTAL

969,063


890,701


479,941


441,025


91.9%


(a)    Includes planned maintenance outages.

(b)    Measured from commencement of operations on August 1, 2016

 

"With the inclusion of Jimmie Creek and Shannon, we have increased our operating capacity by 48%," said Lynda Freeman, CFO of Alterra. "We are looking forward to the next phase of growth, and through the successful completion of our equity raise in October, Alterra is well positioned to further advance Flat Top and our other development assets".

Alterra will host a conference call to discuss financial and operating results on Wednesday, November 9, 2016 at 11:30 am ET (8:30 am PT).

North American participants dial 1-888-390-0546 and International participants dial 1-416-764-8688; the conference ID is 83023975

The call will also be broadcast live on the Internet at

http://event.on24.com/r.htm?e="1300851"&s="1"&k="979"B89875BB74AE61E1AA1CC9985F641

The call will be available for replay for one week after the call by dialing 1-416-764-8677 and entering replay PIN 023975#

 

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: success of the deep drilling program at Reykjanes, successful development, financing, and construction of our pre-operational projects and properties, including Flat Top and our solar development portfolio, and the timing of the same, successful completion of financing, turbine supply, offtake and other material components of the development of the Flat Top project, the use of proceeds from the Company's recent equity financings, marketing of power and ability to secure power purchase or offtake agreements in respect of the same; success, timing and receipt of future payments and financial milestones, and plans or expectations for the declaration of future dividends.

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 planned development, expansion and construction programs, and modeling and budgeting based on historical trends, our ability or inability to obtain financing or refinancing to pursue our growth strategy and business plans, project operating risks, availability of future cash flows, ability to meet corporate law requirements and board approval of, future dividends, 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, health, safety, social and environmental risks and risks related to reliance on third parties, availability of capital and future cash flows, project operating risks, the Company's future growth plans.  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: Peter Lekich, Corporate Communications, Alterra Power Corp., Phone: 604.235.6719, Email: info@alterrapower.ca

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