Capital Power Income L.P. reports first quarter results

EDMONTON, April 27 /CNW/ - (TSX: CPA.UN) - CPI Income Services Ltd., the general partner of Capital Power Income L.P. (the Partnership), today released the Partnership's results for the quarter ended March 31, 2011.

"I'm pleased that we have made progress in the negotiation of replacement long-term power purchase agreements (PPAs) for the North Carolina plants by signing an interim agreement with Progress Energy Inc.", said Stuart Lee, President of the General Partner. "We expect to finalize long-term PPAs for these facilities later in the second quarter."

"While the first quarter results were lower than in the prior year, they were generally in line with our expectations," continued Lee. "Curtis Palmer experienced lower water flows than normal, but is expected to benefit from a deeper than normal snow pack in the second quarter. First quarter financial results were also impacted by a current income tax expense, which is expected to partially reverse during the balance of the year. Overall, there are no significant changes in the Partnership's expectations that 2011 funds from operations will be higher compared to 2010."

The process to review the Partnership's strategic alternatives to maximize value for unitholders continues to progress. The Partnership expects to provide an update on the process later in the second quarter of this year.

Highlights of Capital Power Income L.P.'s operational and financial performance included:

Operational and Financial Highlights Three months ended March 31
(unaudited)
(millions of dollars except per unit and operational amounts) 2011 2010
Power generated (GWh) 1,139 1,268
Weighted average plant availability 92% 95%
Revenue excluding fair value changes 128.3 138.8
Funds from operations(1) 26.8 36.9
      Per unit (1) $0.48 $0.68
Distributions 24.7 23.9
      Per unit $0.44 $0.44
Payout ratio (1) (2) 116% 67%
Capital expenditures 7.2 4.6
Weighted average units outstanding (millions) 56.0 54.3

(1) Funds from operations and funds from operations per unit and payout ratio are non-IFRS financial measures. See "Non-IFRS measures".

(2) Payout ratio is distributions divided by funds from operations less maintenance capital expenditures.

The March 31, 2011 interim management's discussion and analysis and condensed interim consolidated financial statements are available on the Capital Power Income L.P. website (www.capitalpowerincome.ca) and will be available on SEDAR (www.sedar.com).

Revenue excluding fair value changes for the three months ended March 31, 2011 was $128.3 million compared to $138.3 million for the same period in 2010. The decrease was primarily due to lower fuel recovery revenues at the California, Kenilworth and Morris plants caused by lower natural gas supply prices and lower generation which also results in a decrease in fuel costs.

The Partnership reported funds from operations of $26.8 million for the three months ended March 31, 2011 compared to $36.9 million for the same period in 2010. Funds from operations is a non-IFRS financial measure, see non-IFRS measures. The decrease was primarily due to an increase in current taxes, which are expected to partially reverse over the remaining nine months of 2011 and lower operating margins at the Ontario, hydroelectric, Northwest US and California plants.

In March 2011, the Partnership executed an interim power purchase agreement (Interim PPA) with Progress Energy Inc. (Progress) for the Partnership's two North Carolina facilities that will be in effect to the earlier of replacement with long term power purchase agreements (Long-Term PPAs) or July 31, 2011. The terms of the Interim PPA, effective April 1, 2011, follow the guidelines set forth in the January 26, 2011 Order on Arbitration issued by the North Carolina Utilities Commission but are not binding on the terms of the expected Long-Term PPAs. The Partnership continues to negotiate terms of the Long-Term PPAs with Progress. The Partnership will specifically quantify and disclose the project's financial expectations once PPA terms have been finalized, which is expected to be later in the second quarter.

Non-IFRS measures

The Partnership uses operating margin as a performance measure, funds from operations as a cash flow measure and payout ratio as a distribution sustainability measure. These terms are not defined financial measures according to International Financial Reporting Standards (IFRS) and do not have standardized meanings prescribed by IFRS. Therefore, these measures may not be comparable to similar measures presented by other enterprises. See "Non-IFRS Measures" in the Partnership's interim management's discussion & analysis for the three months ended March 31, 2011 filed on SEDAR.

The Partnership uses funds from operations as a measure of cash available to fund capital expenditures, debt repayments and distributions. This measure excludes working capital changes and includes interest and current tax expense recorded during the period, not interest and taxes paid as these differences are expected to be largely reversed in future periods or represent reversals from prior periods.

Funds from operations per unit is funds from operations divided by the weighted average number of units outstanding in the period.

Payout ratio is defined as distributions divided by funds from operations less maintenance capital expenditures. Non-maintenance capital spending has been excluded from this measure as capital expenditures related to an expansion of the productive capacity of the business represent a long-term investment beyond the maintenance capital requirements of the existing business.

Forward-looking information

Certain information in this news release is forward-looking and related to anticipated financial performance, events and strategies. When used in this context, words such as "will", "anticipate", "believe", "plan", "intend", "target" and "expect" or similar words suggest future outcomes. By their nature, such statements are subject to significant risks, assumptions and uncertainties, which could cause the Partnership's actual results and experience to be materially different than the anticipated results. In particular, forward-looking information and statements include information and statements with respect to: (i) expectations regarding the Partnership's annual funds from operations in 2011, (ii) expectations of the timing of the process to review strategic alternatives, (iii) expectations with respect to income taxes, and (iv) expectations with respect to water flows at Curtis Palmer.

These statements are based on certain assumptions and analysis made by the Partnership in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. The material factors and assumptions used to develop these forward-looking statements include, but are not limited to: (i) the Partnership's operations, financial position, available credit facilities and access to capital markets, (ii) the Partnership's assessment of commodity, currency and power markets, (iii) the markets and regulatory environment in which the Partnership's facilities operate, (iv) the state of capital markets, (v) management's analysis of applicable tax legislation, (vi) the assumption that the currently applicable and proposed tax laws will not change and will be implemented, (vii) the assumption that counterparties to fuel supply, power purchase and other agreements will continue to perform their obligations under the agreements, (viii) that current expectations regarding throughput on the TransCanada Canadian Mainline will continue, (ix) the level of plant availability and dispatch, * the performance of contractors and suppliers, (xi) the renewal or replacement and terms of PPAs including the terms and timing of Long-Term PPAs at the North Carolina facilities, (xii) the ability of the Partnership to successfully realize the benefits of its capital projects, (xiii) the ability of the Partnership to implement its strategic initiatives and whether such initiatives will yield the expected benefits, (xiv) expected water flows, (xv) the ability of the Partnership to adequately source alterative sources of supply of wood waste, (xvi) currently applicable and proposed environmental regulation will be implemented, and (xvii) the Partnership's assessment of the strategic alternatives that may be available to it.

Whether actual results, performance or achievements will conform to the Partnership's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Partnership's expectations. Such risks and uncertainties include, but are not limited to risks and uncertainties relating to (i) the operation of the Partnership's facilities, (ii) plant availability and performance, (iii) the availability and price of energy commodities including natural gas and wood waste, (iv) the performance of counterparties in meeting their obligations under fuel supply, power purchase and other agreements, (v) competitive factors in the power industry, (vi) economic conditions, including in the markets served by the Partnership's facilities, (vii) changing demand for natural gas transportation on the TransCanada Canadian Mainline, (viii) ongoing compliance by the Partnership with its current debt covenants, (ix) developments within the North American capital markets, * the availability and cost of permanent long term financing in respect of acquisitions and investments, (xi) unanticipated maintenance and other expenditures, (xii) the Partnership's ability to successfully realize the benefits of its capital projects, (xiii) changes in regulatory and government decisions including changes to emission regulations, (xiv) waste heat availability and water flows, (xv) changes in existing and proposed tax and other legislation in Canada and the US and including changes in the Canada-US tax treaty, (xvi) the tax attributes of and implications of any acquisitions, (xvii) the availability and cost of equipment (xviii) the ability of the Partnership to adequately source alternative sources of supply of wood waste, (xix) the ability of the Partnership to obtain Long-Term PPAs for the North Carolina facilities with satisfactory financial terms, (xx) seasonal contract pricing, (xxi) seasonal weather conditions, (xxii) fluctuations in US dollar exchange rates relative to the Canadian dollar, (xxiii) attainment of firm energy requirements, and (xxiv) the strategic review process could take more or less time than anticipated.

Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Forward-looking statements are provided for the purpose of presenting information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Except as required by law, the Partnership disclaims any intention and assumes no obligation to update any forward-looking statement.

About Capital Power Income L.P.

Established in 1997, Capital Power Income L.P. is a limited partnership organized under the laws of the Province of Ontario. The Partnership's portfolio includes 19 wholly-owned power generation assets located in Canada and the United States and a 50.15 per cent interest in a power generation asset in Washington State. The Partnership's assets have a total net generating capacity of 1,400 megawatts and more than four million pounds per hour of thermal energy.

 

 

SOURCE Capital Power Income L.P.

For further information:

For further information on the Partnership visit www.capitalpowerincome.ca or contact:

Media Inquiries:    Mike Long    (780) 392-5207
Unitholder & Analyst Inquiries:    Randy Mah    (780) 392-5305
    Toll Free    (866) 896-4636

 

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Capital Power Income L.P.

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