Boralex Power Income Fund: Financial Results for First Quarter 2010

MONTREAL, May 3 /CNW Telbec/ - In first quarter 2010, Boralex Power Income Fund (the "Fund") recorded consolidated revenues of $29.0 million and earnings before interest, taxes, depreciation and amortization (EBITDA) of $16.7 million, a decrease of $3.3 million and $2.0 million respectively compared to the same quarter in 2009. These results stem mainly from the rise in the Canadian dollar, the fact that Dolbeau power station recorded almost no steam revenues, and higher fuel costs.

As a result, for the first quarter 2010, the Fund recorded a net loss of $3.2 million ($0.05 per trust unit) compared to net earnings of $9.9 million ($0.17 per trust unit) in the corresponding quarter of 2009. First quarter results were essentially affected by an impairment on its property, plant and equipment of $16.0 million before taxes on the Dolbeau facility following an impairment test. Excluding specific items, the Fund generated net earnings of $8.5 million ($0.14 per trust unit) compared to $8.6 million ($0.15 per trust unit) for the same quarter in 2009.

More specifically, in the first quarter 2010, the hydroelectric segment recorded revenue of $11.0 million and EBITDA of $9.2 million, versus $12.7 million and $11.0 million respectively in the first quarter 2009. Benefiting from favourable hydrology, the Canadian power stations increased their power generation by 4.4% and outperformed their historical average by 8.6%. However, the U.S. power stations showed a 5.7% decrease in power generation compared to the first quarter of 2009. The lower EBITDA for the hydroelectric segment is primarily due to the rise in the Canadian dollar.

Revenue in the wood-residue segment amounted to $9.0 million in the first quarter 2010, compared to $11.1 million in the corresponding quarter 2009. EBITDA stood at $4.5 million, down $0.7 million from EBITDA for the same quarter in 2009. The Dolbeau and Senneterre facilities recorded a 12.0% combined increase in electricity production versus the first quarter of 2009. However, the almost total lack of steam production at the Dolbeau plant contributed significantly to the $2.4 million decrease in consolidated revenues for this segment.

The Kingsey Falls natural gas cogeneration plant reported revenues of $9.0 million, up 7.1%, and EBITDA of $4.7 million, up 11.9% compared to the same quarter in 2009. These increases stem mainly from the 49% increase in average stream prices, partially indexed to oil prices, and, to a lesser extent, to 3% indexing of electricity prices.

Lastly, for the first quarter of 2010, cash flows related to operating activities amounted to $12.5 million, compared to $11.4 million for the same quarter in 2009, an increase of 9.6%.

Note that Boralex Power Income Fund issued a press release with Boralex Inc., simultaneously with this release to announce the proposed acquisition of the Fund by Boralex. All individuals interested by the details of this proposal are invited to consult the press release on the Fund's website or on the Boralex's website.

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
                                                      March 31,  December 31,
                                                  -------------
    (in thousands of dollars) (unaudited)                 2010          2009
    -------------------------------------------------------------------------
    Assets
    Current assets
    Cash and cash equivalents                           17,247        15,867
    Accounts receivable                                 13,285        14,498
    Inventories                                          2,622         2,837
    Prepaid expenses                                     1,287           350
                                                  ---------------------------

                                                        34,441        33,552
                                                  ---------------------------
    Property, plant and equipment                      288,061       311,735
    Intangible assets                                   51,578        54,142
    Other long-term assets                               6,198         6,354
                                                  ---------------------------

                                                       380,278       405,783
                                                  ---------------------------
    Liabilities and unitholders' equity
    Current liabilities
    Short-term revolving credit facility                     -         3,100
    Accounts payable and accrued liabilities             7,152        10,125
    Income taxes payable                                   311           800
    Distributions payable to unitholders                 1,969         3,446
                                                  ---------------------------

                                                         9,432        17,471
                                                  ---------------------------
    Future income tax liabilities                       29,735        33,966
    Long-term debt                                     105,178       107,234
    Long-term lease accruals                             2,770         2,760
                                                  ---------------------------

                                                       147,115       161,431
                                                  ---------------------------
    Unitholders' equity
    Capital contribution                               422,174       422,174
    Capital contribution - exchangeable Class B
     units                                             112,867       112,867
    Deficit                                           (281,484)     (272,349)
    Accumulated other comprehensive loss               (20,394)      (18,340)
                                                  ---------------------------

                                                       233,163       244,352
                                                  ---------------------------

                                                       380,278       405,783
    -------------------------------------------------------------------------


    Consolidated Statements of Earnings (Loss)
                                                           For the quarters
    (in thousands of dollars, except per unit               ended March 31,
     amounts and number of trust units)           -------------
     (unaudited)                                          2010          2009
    -------------------------------------------------------------------------
    Revenues from energy sales                          28,974        32,250
                                                  ---------------------------
    Expenses
    Operating                                           11,549        12,895
    Administrative                                         709           624
                                                  ---------------------------
                                                        12,258        13,519
                                                  ---------------------------
    Operating earnings before amortization              16,716        18,731
    Amortization of property, plant and equipment        4,616         5,083
    Amortization of intangible assets                    1,610         1,858
                                                  ---------------------------
    Operating income                                    10,490        11,790
    Financing costs, net                                 1,895         1,890
    Foreign exchange gain                                 (246)          (33)
    Impairment of property, plant and equipment         15,970             -
                                                  ---------------------------
    Earnings (loss) before income taxes                 (7,129)        9,933
    Income taxes (recovery)                             (3,901)           47
                                                  ---------------------------
    Net earnings (loss) for the period                  (3,228)        9,886
                                                  ---------------------------

    Basic and diluted net earnings (loss) per
     trust unit (in dollars)                             (0.05)         0.17
    Weighted average number of trust units
     outstanding                                    59,067,992    59,067,992
    -------------------------------------------------------------------------


    Consolidated Statements of Deficit                     For the quarters
                                                            ended March 31,
                                                  -------------
    (in thousands of dollars) (unaudited)                 2010          2009
    -------------------------------------------------------------------------
    Deficit - beginning of period                     (272,349)     (220,137)
    Net earnings (loss) for the period                  (3,228)        9,886
    Distributions to unitholders                        (5,907)      (10,337)
                                                  ---------------------------
    Deficit - end of period                           (281,484)     (220,588)
    -------------------------------------------------------------------------


    Consolidated Statements of Comprehensive
     Income (Loss)                                         For the quarters
                                                            ended March 31,
                                                  -------------
    (in thousands of dollars) (unaudited)                 2010          2009
    -------------------------------------------------------------------------
    Net earnings (loss) for the period                  (3,228)        9,886
    Other comprehensive income (loss):
    Translation adjustments
    Unrealized foreign exchange gains (losses) on
     translation of financial statements of
     self-sustaining foreign operations                 (1,927)        2,694
    Reclassification of accumulated foreign
     exchange losses on translation of financial
     statements of self-sustaining foreign
     operations following a reduction in net
     investment                                            129            93
    Future income taxes                                   (145)          191
    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                                    288          (603)
    Hedging instruments realized and recognized in
     earnings                                             (399)          (64)
                                                  ---------------------------
                                                        (2,054)        2,311
                                                  ---------------------------
    Comprehensive income (loss) for the period          (5,282)       12,197
    -------------------------------------------------------------------------



    Consolidated Statements of Cash Flows                  For the quarters
                                                            ended March 31,
                                                  -------------
    (in thousands of dollars) (unaudited)                 2010          2009
    -------------------------------------------------------------------------
    Operating activities
    Net earnings (loss) for the period                  (3,228)        9,886
    Items not affecting cash:
      Amortization of property, plant and
       equipment                                         4,616         5,083
      Amortization of intangible assets                  1,610         1,858
      Amortization of deferred financing costs             101           109
      Long-term lease accruals                              94           117
      Future income taxes                               (4,142)         (904)
      Realized translation adjustments                     129            93
      Impairment of property, plant and equipment       15,970             -
      Other                                                299             -
                                                  ---------------------------
                                                        15,449        16,242
    Net change in non-cash working capital
     balances                                           (2,974)       (4,847)
                                                  ---------------------------
    Cash flows related to operating activities          12,475        11,395
                                                  ---------------------------

    Investing activities
    Additions to property, plant and equipment            (211)         (867)
    Acquisition of other assets                             (4)           (7)
                                                  ---------------------------
    Cash flows related to investing activities            (215)         (874)
                                                  ---------------------------

    Financing activities
    Net change in short-term revolving credit
     facility                                           (3,100)        3,700
    Repayment of capital lease obligation                    -           (20)
    Distributions paid to unitholders                   (7,383)      (10,337)
                                                  ---------------------------
    Cash flows related to financing activities         (10,483)       (6,657)
                                                  ---------------------------
    Translation adjustments on cash and cash
     equivalents                                          (397)          533
                                                  ---------------------------
    Net change in cash and cash equivalents during
     the period                                          1,380         4,397

    Cash and cash equivalents - beginning of
     period                                             15,867        18,846
                                                  ---------------------------
    Cash and cash equivalents - end of period           17,247        23,243
                                                  ---------------------------

    Supplemental information
    Interest paid                                        1,835         2,548
    Income taxes paid                                      697           795
    -------------------------------------------------------------------------
    

Impairment test of property, plant and equipment

At the end of the first quarter of 2010, subsequent to an impairment test carried out by the Fund, 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 explore alternatives 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. Future changes in certain conditions would likely affect the power station's financial performance.

Note that a $29,591,000 impairment charge had already been recorded against property, plant and equipment related to the Dolbeau power station in the fourth quarter of 2009, subsequent to the annual impairment test carried out by the Fund.

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
                                                            ended March 31,
                                                  -------------
                                                          2010          2009
    -------------------------------------------------------------------------
    Net earnings (loss)                                 (3,228)        9,886
    Income taxes (recovery)                             (3,901)           47
    Impairment of property, plant and equipment         15,970             -
    Foreign exchange gain                                 (246)          (33)
    Financing costs, net                                 1,895         1,890
    Amortization of intangible assets                    1,610         1,858
    Amortization of property, plant and equipment        4,616         5,083
                                                  ---------------------------
    EBITDA                                              16,716        18,731
    -------------------------------------------------------------------------


    Information by operating segment
                                                           For the quarters
                                                            ended March 31,
                                                  -------------
                                                          2010          2009
    -------------------------------------------------------------------------
    Production (in MWh)
    Hydroelectric power stations                       114,138       117,132
    Wood-residue thermal power stations                 84,825        75,746
    Natural gas thermal power station                   54,227        61,190
                                                  ---------------------------
                                                       253,190       254,068
    -------------------------------------------------------------------------
    Revenues from energy sales
    Hydroelectric power stations                        10,952        12,712
    Wood-residue thermal power stations                  8,993        11,144
    Natural gas thermal power station                    9,029         8,394
                                                  ---------------------------
                                                        28,974        32,250
    -------------------------------------------------------------------------
    EBITDA
    Hydroelectric power stations                         9,226        10,966
    Wood-residue thermal power stations                  4,543         5,154
    Natural gas thermal power station                    4,657         4,201
    Corporate and eliminations                          (1,710)       (1,590)
                                                  ---------------------------
                                                        16,716        18,731
    -------------------------------------------------------------------------
    Additions to property, plant and equipment
    Hydroelectric power stations                             9           752
    Wood-residue thermal power stations                     55            95
    Natural gas thermal power station                      147            20
                                                  ---------------------------
                                                           211           867
    -------------------------------------------------------------------------


                                                         As at         As at
                                                      March 31,  December 31,
                                                  -------------
                                                          2010          2009
    -------------------------------------------------------------------------
    Total assets
    Hydroelectric power stations                       242,159       246,387
    Wood-residue thermal power stations                 96,887       106,845
    Natural gas thermal power station                   30,908        37,308
    Corporate and eliminations                          10,324        15,243
                                                  ---------------------------
                                                       380,278       405,783
    -------------------------------------------------------------------------
    Property, plant and equipment
    Hydroelectric power stations                       177,137       181,497
    Wood-residue thermal power stations                 89,842       107,033
    Natural gas thermal power station                   21,082        23,205
                                                  ---------------------------
                                                       288,061       311,735
    -------------------------------------------------------------------------
    

Subsequent Event

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, will offer 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") $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 are expected to be mailed to Unitholders no later than May 21, 2010.

The Offer is conditional on the deposit in response to the Offer of at least 66 2/3% of the outstanding Units, and a majority of the Units not controlled by Boralex, the receipt of any necessary regulatory approvals and satisfaction 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 will be described in more detail in the joint information circular which will be filed no later than May 21, 2010 with the regulatory authorities.

SOURCE BORALEX POWER INCOME FUND

For further information: For further information: Ms. Patricia Lemaire, Director, Publics 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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