Capital Power Income L.P. reports fourth quarter and year-end results

EDMONTON, AB, March 4 /CNW/ - (TSX: CPA.UN) - CPI Income Services Ltd., the general partner of Capital Power Income L.P. (the Partnership), today released the Partnership's quarterly results for the period ended December 31, 2009.

"The Partnership's fourth quarter operating cash flows were in line with our expectations," said Stuart Lee, President of the General Partner. "Cash provided by operating activities from continuing operations before working capital changes in the fourth quarter was $35.3 million in 2009, compared to $34.5 million the previous year. For the year as a whole, it was $143 million compared with $144 million in 2008." Working capital decreased by $3.8 in the fourth quarter of 2009, compared to $22.0 million in 2008.

"Despite numerous market challenges such as low waste heat availability at our Ontario facilities, shortages in waste wood supply and low natural gas prices, the strength of the Partnership's diversified portfolio, both in terms of geography and fuel types, helped produce stable performance in 2009," added Mr. Lee. "The payout ratio for the year was 86 per cent, which represents a more conservative payout level when compared to the 111 per cent in 2008."

In the past year, the Partnership successfully completed several initiatives including amending the power purchase arrangements at the Tunis facility to mitigate a natural gas exposure, collaborating with BC Hydro to optimize available wood supplies at Williams Lake, completing a $100 million preferred share offering, repowering the North Island facility, and completing the majority of the upgrades to the North Carolina facilities.

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

    
    -------------------------------------------------------------------------
                                     Three months ended  Twelve months ended
    Operational and Financial            December 31         December 31
           Highlights                    (unaudited)
    -------------------------------------------------------------------------
    (millions of dollars except
     per unit and operational
     amounts)                            2009      2008      2009       2008
    -------------------------------------------------------------------------
    Power generated (GWh)               1,405     1,384     4,963      4,955
    -------------------------------------------------------------------------
    Weighted average plant
     availability                         92%       94%       92%        93%
    -------------------------------------------------------------------------
    Revenue                             138.2     103.8     586.5      499.3
    -------------------------------------------------------------------------
    Cash provided by operating
     activities of continuing
     operations                          39.1      56.5     139.7      157.5
    -------------------------------------------------------------------------
      Per unit(1)                       $0.72     $1.05     $2.59      $2.92
    -------------------------------------------------------------------------
    Cash distributions                   23.8      33.9     105.2      135.8
    -------------------------------------------------------------------------
      Per unit                          $0.44     $0.63     $1.95      $2.52
    -------------------------------------------------------------------------
    Payout ratio(1)(2)(3)                 76%      124%       86%       111%
    -------------------------------------------------------------------------
    Capital expenditures                 30.0      21.5     105.9       40.0
    -------------------------------------------------------------------------
    Weighted average units
     outstanding (millions)              54.0      53.9      53.9       53.9
    -------------------------------------------------------------------------

    (1) Cash provided by operating activities of continuing operations per
        unit and payout ratio are non-GAAP financial measures. See "Non-GAAP
        Measures".
    (2) Payout ratio is cash distributions divided by cash provided by
        operating activities of continuing operations excluding working
        capital changes less maintenance capital expenditures.
    (3) Payout ratio would have been 77% for the year ended December 31, 2009
        had the current distribution of $1.76 per unit been in effect for the
        full year.
    

The annual management discussion and analysis and annual 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 for the three month period ended December 31, 2009 was $138.3 million compared to $103.8 for the same period in 2008. The increase was primarily due to net gains on the change in the fair value of foreign exchange contracts in 2009 compared to losses in 2008. Offsetting these net gains were lower electricity prices at the California plants driven by lower natural gas prices and lower dispatch at the North Carolina plants.

The Partnership reported cash provided by operating activities of continuing operations of $39.1 million for the three months ended December 31, 2009 compared to $56.5 million for the same period in 2008. Excluding changes in working capital, cash provided by operating activities of continuing operations increased by $0.8 million in the fourth quarter of 2009 compared to the same period in 2008 primarily due to the acquisition of Morris in the fourth quarter of 2008 and higher pricing and production at Curtis Palmer, partly offset by lower production at the North Carolina plants and lower waste heat availability at the Ontario plants.

To address a contract expiry mismatch between long-term fuel supply contracts for Tunis, one of which expired in January 2010 and the other that expires in December 2010, and the Tunis power purchase agreement (PPA), the Partnership reached an agreement with the Ontario Electricity Financial Corporation (OEFC) to amend the Tunis PPA effective January 16, 2010 to allow the Partnership to flow-through any deviation of natural gas and transportation costs from benchmark amounts to OEFC and extends OEFC the right to curtail the plant during summer off-peak periods through the remaining term of the PPA in 2014.

In the fourth quarter, the capital upgrades at Roxboro and for one of the two units at Southport were completed. The Partnership expects to invest an additional $17 million in first half of 2010 to complete the enhancements to the second unit at Southport and to complete the material handling improvements at Southport. The PPAs for the North Carolina facilities expired on December 31, 2009. The Partnership and Progress Energy Inc. (Progress) have been in negotiations but, to date, have been unable to finalize new PPAs that are acceptable to both parties. The Partnership filed for arbitration with the North Carolina Utilities Commission (NCUC) and is seeking long-term PPAs with pricing terms consistent with Progress's actual avoided costs. The Partnership expects that a decision is likely to be made late in the second quarter or early in the third quarter of 2010. The NCUC has ordered that Progress continue to pay for the output of the Roxboro and Southport facilities pursuant to the terms of the PPAs that expired December 31, 2009 until the arbitration is finalized and NCUC issued a confirmation order for rate purposes. The Partnership remains optimistic that either a NCUC arbitration ruling or further negotiations with Progress will result in new PPAs for the Roxboro and Southport facilities. It is not certain at this time whether the final contract terms will result in positive cash provided by operating activities for the facilities or achieve previous expectations of accretion from the North Carolina enhancement project. The Partnership's long-term outlook for the North Carolina plants remains positive as current modifications to the facilities significantly reduce coal use and replace it with more wood waste that will substantially reduce greenhouse gas emissions and increase the production of renewable energy to meet North Carolina's renewable energy requirements.

Non-GAAP measures

The Partnership uses cash provided by operating activities of continuing operations per unit as a cash flow measure and payout ratio as a distribution sustainability measure. These terms are not defined financial measures according to Canadian generally accepted accounting principles (GAAP) and do not have standardized meanings prescribed by GAAP. Therefore, these measures may not be comparable to similar measures presented by other enterprises. See "Non-GAAP Measures" in the Partnership's annual Management's Discussion & Analysis for its year ended December 31, 2009 filed on SEDAR.

Cash provided by operating activities of continuing operations per unit is cash provided by operating activities of continuing operations divided by the weighted average number of units outstanding in the period.

Payout ratio is defined as cash distributions divided by cash provided by operating activities of continuing operations excluding working capital changes less maintenance capital expenditures. Working capital changes have been excluded from this measure as short-term changes in working capital are expected to be largely reversed in future periods or represent reversals from prior periods. 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: (i) planned capital upgrades at Southport included the expected cost, (ii) expectations in respect of new PPA's for the North Carolina facilities and the Partnership's long-term outlook for the North Carolina plants, and (iii) anticipated completion of the Southport facility modifications and the impact of the Southport and Roxboro facility modifications on the operation and economic performance of the facilities and their emissions.

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 markets and regulatory environment in which the Partnership's facilities operate, (ii) the performance of contractors and suppliers, (iii) the renewal or replacement and terms of PPAs including the terms and timing of new PPAs at the North Carolina facilities, (iv) the ability of the Partnership to successfully realize the benefits of its capital projects.

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 relating to (i) the operation of the Partnership's facilities, (ii) plant availability and performance, (iii) competitive factors in the power industry, (iv) economic conditions, including in the markets served by the Partnership's facilities, (v) the Partnership's ability to successfully realize the benefits of its capital projects, and (vi) the availability and cost of equipment. See "Business Risks" in the annual Management's Discussion & Analysis and "Risk Factors" in the Partnership's Annual Information Form for its year ended December 31, 2009 filed on SEDAR.

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. 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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