Boralex Power Income Fund: fourth quarter and fiscal 2007 - Financial results and reduction in distributions



    MONTREAL, Feb. 22 /CNW Telbec/ - Boralex Power Income Fund (the "Fund")
recorded revenue of $24.5 million in the fourth quarter of 2007, compared to
$30.0 million for the same period in 2006. Earnings before interest, taxes,
depreciation and amortization ("EBITDA") amounted to $12.4 million in the
fourth quarter of 2007, compared to $18.9 million for the same quarter a year
earlier. The Fund incurred a net loss of $5.5 million, versus net earnings of
$7.4 million for the fourth quarter of 2006. The net loss per trust unit
amounted to $0.09, compared to net earnings of $0.12 in the final quarter of
2006.
    The decrease in net earnings stems in part from the lower EBITDA, as
explained below, but also from the $14.0 million goodwill impairment charge
related to the natural gas cogeneration facility. Excluding the change in
Canadian tax legislation and the goodwill impairment charge, the Fund would
have recorded net earnings of $3.4 million or $0.06 per trust unit, in the
final quarter of 2007.
    Two factors also impacted revenue and EBITDA. The first being the lower
power generation in the hydroelectric segment due to lower hydrology than in
2006. Production was 13.7% below the historical averages, which translated
into a decrease of about $5.0 million in revenue and EBITDA. The second factor
being the steady rise in the Canadian dollar in the fourth quarter of 2007,
which had an impact of about $1.5 million on both revenue and EBITDA.
    For the fiscal year ended December 31, 2007, consolidated revenue and
EBITDA amounted to $102.2 million and $55.2 million respectively, compared to
$115.2 million and $70.9 million in 2006. Unlike the previous year, in which
earnings rose significantly due to exceptional hydrology, the Fund recorded a
net loss of $35.7 million, or $0.60 per trust unit in 2007. However, excluding
the impact of the change in Canadian tax legislation, which led to the
recording of $42.0 million in future income taxes taking effect in 2011, and
the goodwill impairment charge, the Fund's net earnings for fiscal 2007 would
have been $20.3 million or $0.34 per trust unit. Fiscal 2007 results were also
impacted by the following items: a 13.1% drop in total power generation, due
to poor hydrology in the last nine months of 2007, the negative translation
adjustment caused by the rise in the Canadian dollar versus its U.S.
counterpart and the cost of the strategic review process.
    In addition, the wood-residue supply, which was adequate in 2007, will be
more challenging in 2008 given the temporary closures of several sawmills with
which the Fund has supply contracts. As a result, wood-residue costs will
likely increase by about $2.5 million to $3.0 million in fiscal 2008 compared
to 2007. Furthermore, as disclosed following the second quarter of fiscal
2007, the dispute between the Fund and Bowater, operator of the Fund's Dolbeau
facility, is going in arbitration.

    Distributions

    The Fund is announcing a reduction in its distributions to unitholders to
$0.70 per trust unit on an annualized basis, starting with the distribution to
be declared in March 2008 and payable in April 2008. This decrease,
representing an annual saving of nearly $12 million, should bring
distributions at a level below estimated cash flow from operating activities.
"Despite the excellent quality of its assets and their long service life, the
Fund is preparing for the significant challenges in the forest industry
resulting in higher wood-residue costs, as well as the rise in the Canadian
dollar versus the U.S. dollar, which will likely continue in the medium term.
As the Fund's philosophy has always been to maintain financial flexibility and
cash reserves to cover potential operating risks, the decision to reduce the
distributions to unitholders became unavoidable and the most prudent approach
under the circumstances," said Claude Boivin, Chairman of the Board of
Trustees.

    About Boralex Power Income Fund

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

    Certain statements in this release, including statements 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 effect of
general economic conditions, decreased demand for the Fund's products,
increases in raw material costs, hydrology, fluctuations in currency exchange
rates, fluctuations in sales prices and adverse changes in general market and
industry conditions. The financial statements included in this press release
also contain certain financial measurements that are not recognized as
generally accepted accounting principles (GAAP).
    The Fund uses EBITDA, among other measures, as a performance measure with
respect to its operations. This term is not a defined financial measure
according to GAAP and it does not have a standardized meaning prescribed by
GAAP. Therefore, this measure may not be comparable to similar measures
presented by other enterprises. EBITDA is defined in the notes of the
financial statements accompanying this press release.


    Notice to unitholders

    These quarterly financial statements for the periods ended December 31,
2007 and 2006 were not reviewed by our auditors Ernst & Young LLP. The
financial statements are the responsibility of the Manager of Boralex Power
Income Fund, and were reviewed and approved by Boralex Power Trust's trustees
and the members of their audit committee.


    
    Boralex Power Income Fund
    Consolidated Balance Sheets
    (in thousands of dollars)
    (unaudited)

                                                           As at       As at
                                                           Decem-      Decem-
                                                          ber 31,     ber 31,
                                                            2007        2006
    -------------------------------------------------------------------------
    Assets

    Current assets
    Cash and cash equivalents                             10,740      25,877
    Accounts receivable                                   13,333      16,025
    Income taxes receivable                                1,949           -
    Inventories                                            2,405         667
    Prepaid expenses                                       1,248       1,350
    -------------------------------------------------------------------------
                                                          29,675      43,919
    Property, plant and equipment                        367,474     399,273
    Intangible assets                                     83,690      97,907
    Goodwill                                              16,243      30,240
    Other long-term assets                                 8,594      12,104
    -------------------------------------------------------------------------
                                                         505,676     583,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities and unitholders' equity

    Current liabilities
    Short-term revolving credit facility                   2,300       3,100
    Accounts payable and accrued liabilities               8,909      12,873
    Income taxes payable                                       -         393
    Distributions payable to unitholders                   4,430       4,430
    Current portion of obligation under capital lease        233           -
    -------------------------------------------------------------------------
                                                          15,872      20,796
    Future income tax liabilities                         48,817       6,463
    Fair value of derivative financial instruments             5          38
    Long-term debt                                       102,529     117,387
    Long-term lease accruals                               1,858       1,728
    -------------------------------------------------------------------------
                                                         169,081     146,412
    -------------------------------------------------------------------------

    Unitholders' equity
    Capital contribution                                 422,174     422,174
    Capital contribution - exchangeable Class B units    112,867     112,867
    Deficit                                             (170,982)    (82,128)
    Accumulated other comprehensive income               (27,464)    (15,882)
    -------------------------------------------------------------------------
                                                         336,595     437,031
    -------------------------------------------------------------------------
                                                         505,676     583,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Boralex Power Income Fund
    Consolidated Statements of Earnings
    (in thousands of dollars, except amounts per unit)
    (unaudited)

                                                                     For the
                                    For the quarters    Twelve-month periods
                                   ended December 31,      ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    Revenues                      24,544      30,008     102,168     115,226
    -------------------------------------------------------------------------
    Expenses
    Operating                     11,633      10,093      43,559      41,992
    Administrative                   519       1,039       3,368       2,359
    -------------------------------------------------------------------------
                                  12,152      11,132      46,927      44,351
    -------------------------------------------------------------------------
    Operating income before
     amortization                 12,392      18,876      55,241      70,875
    Amortization of property,
     plant and equipment           3,548       3,796      14,998      15,092
    Amortization of intangible
     assets                        1,592       2,119       7,068       8,196
    -------------------------------------------------------------------------
    Operating income               7,252      12,961      33,175      47,587
    Financial expenses, net        1,720       1,706       6,778       6,815
    Foreign exchange loss (gain)   1,217       1,254       4,072        (328)
    Change in fair value of
     derivative financial
     instruments                      (2)         22         (33)       (114)
    Impairment of goodwill        13,997           -      13,997           -
    -------------------------------------------------------------------------
    Earnings (Loss) before
     income taxes                 (9,680)      9,979       8,361      41,214
    Income taxes (Recovery)       (4,138)      2,609      44,054       7,248
    -------------------------------------------------------------------------
    Net earnings (Net loss)
     for the period               (5,542)      7,370     (35,693)     33,966
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Basic and diluted net
      earnings (net loss)
      per trust unit
      (in dollars)                 (0.09)       0.12       (0.60)       0.58
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Weighted average number
     of trust units
     outstanding              59,067,992  59,067,992  59,067,992  59,067,992
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Consolidated Statements of Deficit
    (in thousands of dollars)
    (unaudited)

                                                                     For the
                                                        Twelve-month periods
                                                           ended December 31,
                                                            2007        2006
    ------------------------------------------------------------------------

    Deficit - beginning of period                        (82,128)    (62,933)
    Net earnings (Net loss) for the period               (35,693)     33,966
    Distributions to unitholders                         (53,161)    (53,161)
    ------------------------------------------------------------------------
    Deficit - end of period                             (170,982)    (82,128)
    ------------------------------------------------------------------------
    ------------------------------------------------------------------------


    Consolidated Statements of Comprehensive Income
    (in thousands of dollars)
    (unaudited)

                                                                     For the
                                    For the quarters    Twelve-month periods
                                   ended December 31,      ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Net Earnings (Net loss)
     for the period               (5,542)      7,370     (35,693)     33,966

    Other comprehensive income :

    Translation adjustments
    Unrealized foreign exchange
     gains (losses) on
     translation of the
     financial statements
     of self-sustaining
     foreign operations             (575)      5,506     (17,445)       (164)

    Reclassification of
     accumulated foreign
     exchange losses on
     translation of financial
     statements of
     self-sustaining foreign
     operations following a
     reduction in net investment   1,938       1,481       6,858       1,648

    Future income taxes on
     unrealized foreign
     exchange gain                   (49)         14      (1,019)         14

    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                      (42)       (921)      2,165         132

    Hedging items realized
     and recognized in
     net earnings                   (585)       (379)     (2,141)     (1,839)
    -------------------------------------------------------------------------
                                     687       5,701     (11,582)       (209)
    -------------------------------------------------------------------------
    Comprehensive income for
     the period                   (4,855)     13,071     (47,275)     33,757
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Boralex Power Income Fund
    Consolidated Statements of Cash Flows
    (in thousands of dollars)
    (unaudited)

                                                                    For the
                                    For the quarters    Twelve-month periods
                                   ended December 31,      ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Operating activities
    Net earnings (Net loss)
     for the period               (5,542)      7,370     (35,693)     33,966
    Items not affecting cash:
      Amortization of property,
       plant and equipment         3,548       3,796      14,998      15,092
      Amortization of
       intangible assets           1,592       2,119       7,068       8,196
      Amortization of deferred
       financing costs                 3         109         320         432
      Long-term lease accruals        94         114         425         461
      Future income taxes         (5,010)        141      42,127         407
      Realized currency
       translation adjustments     1,938       1,481       6,858       1,648
      Impairment of goodwill      13,997           -      13,997           -
      Other                           (2)        384         184         248
    -------------------------------------------------------------------------
                                  10,618      15,514      50,284      60,450
    Net change in non-cash
     working capital balances     (1,197)     (3,781)     (4,018)     (2,832)
    -------------------------------------------------------------------------
    Cash flows related to
     operating activities          9,421      11,733      46,266      57,618
    -------------------------------------------------------------------------

    Investing activities
    Additions to property,
     plant and equipment          (1,246)       (477)     (3,710)     (2,341)
    Acquisition of other assets       (6)       (283)       (205)       (782)
    Other                            (14)        (18)        (86)         (5)
    -------------------------------------------------------------------------
    Cash flows related to
     investing activities         (1,266)       (778)     (4,001)     (3,128)
    -------------------------------------------------------------------------

    Financing activities
    Distributions paid to
     unitholders                 (13,290)    (13,290)    (53,161)    (53,161)
    Net change in
     short-term revolving
     credit facility               1,000       3,100        (800)       (400)
    Repayment of capital
     lease obligation                (57)          -        (235)          -
    Proceeds from sale of
     options on foreign
     exchange forward
     contracts                       101         102         555         561
    -------------------------------------------------------------------------
    Cash flows related to
     financing activities        (12,246)    (10,088)    (53,641)    (53,000)
    -------------------------------------------------------------------------

    Translation adjustments
     on cash and cash
     equivalents                      50       1,332      (3,761)        311
    -------------------------------------------------------------------------
    Net change in cash
     and cash equivalents
     during the period            (4,041)      2,199     (15,137)      1,801
    Cash and cash
     equivalents -
     beginning of period          14,781      23,678      25,877      24,076
    -------------------------------------------------------------------------
    Cash and cash equivalents
     - end of the period          10,740      25,877      10,740      25,877
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Supplementary information

      Interest paid                1,149       1,384       7,508       7,637
      Income taxes paid              125         630       4,518       7,359
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Boralex Power Income Fund
    Segmented Information
    (tabular amounts are in thousands of dollars, unless otherwise specified)
    (unaudited, unless otherwise specified)

    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 Fund analyzes the performance of its operating segments based on their
EBITDA, which is defined as earnings before interest, taxes, depreciation and
amortization. EBITDA is not a measure of performance defined under Canadian
generally accepted accounting principles; however, management uses this
performance 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
                                    For the quarters    Twelve-month periods
                                   ended December 31,      ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------

    Net earnings (Net loss)       (5,542)      7,370     (35,693)     33,966
    Income taxes (Recovery)       (4,138)      2,609      44,054       7,248
    Impairment of goodwill        13,997           -      13,997           -
    Change in fair value of
     derivative financial
     instruments                      (2)         22         (33)       (114)
    Foreign exchange loss (gain)   1,217       1,254       4,072        (328)
    Financial expenses, net        1,720       1,706       6,778       6,815
    Amortization of intangible
     assets                        1,592       2,119       7,068       8,196
    Amortization of property,
     plant and equipment           3,548       3,796      14,998      15,092
    -------------------------------------------------------------------------
    EBITDA                        12,392      18,876      55,241      70,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    Information by operating segment

                                                                     For the
                                    For the quarters    Twelve-month periods
                                   ended December 31,      ended December 31,
                                    2007        2006        2007        2006
    -------------------------------------------------------------------------
    PRODUCTION (in MWh)
    Hydroelectric
     power stations              107,801     163,130     457,939     598,240
    Wood-residue thermal
     power stations               82,444      90,265     366,072     374,879
    Natural gas power station     53,092      53,538     200,015     204,849
    -------------------------------------------------------------------------
                                 243,337     306,933   1,024,026   1,177,968
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    REVENUES
    Hydroelectric
     power stations                8,984      14,856      40,521      54,570
    Wood-residue thermal
     power stations                8,459       9,003      35,747      35,688
    Natural gas power station      7,101       6,149      25,900      24,968
    -------------------------------------------------------------------------
                                  24,544      30,008     102,168     115,226
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------


    EBITDA
    Hydroelectric
     power stations                7,580      13,100      33,925      48,050
    Wood-residue thermal
     power stations                2,865       5,219      16,512      18,018
    Natural gas power station      3,459       2,968      12,524      12,107
    Corporate and eliminations    (1,512)     (2,411)     (7,720)     (7,300)
    -------------------------------------------------------------------------
                                  12,392      18,876      55,241      70,875
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    ADDITIONS TO PROPERTY,
     PLANT AND EQUIPMENT
    Hydroelectric power stations     268         266         621         654
    Wood-residue thermal
     power stations                  840         121       1,169         722
    Natural gas power station        138          90       1,920         965
    -------------------------------------------------------------------------
                                   1,246         477       3,710       2,341
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Boralex Power Income Fund
    Segmented Information (continued)
    (tabular amounts are in thousands of dollars, unless otherwise specified)
    (unaudited, unless otherwise specified)
                                                           As at       As at
                                                           Decem-      Decem-
                                                          ber 31,     ber 31,
                                                            2007        2006
    -------------------------------------------------------------------------
                                                                    (audited)
    ASSETS
    Hydroelectric power stations                         262,881     315,631
    Wood-residue thermal power stations                  190,541     195,970
    Natural gas power station                             47,003      62,878
    Corporate and eliminations                             5,251       8,964
    -------------------------------------------------------------------------
                                                         505,676     583,443
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    




For further information:

For further information: Ms. Mylène Masse, Director, Communications,
Boralex Power Inc, (514) 985-1353, mylene.masse@boralex.com

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BORALEX POWER INCOME FUND

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