Pristine Power Announces Second Quarter 2009 Results



    
    Company Provides Update on Operations, Construction, and Development
    Activities
    

    CALGARY, Aug. 7 /CNW/ - Pristine Power Inc. ("Pristine" or the "Company")
(TSX: PPX), an independent Canadian developer and operator of electricity and
steam generation facilities, today announced its financial and operating
results for the three and six months ended June 30, 2009. The Company's
financial statements and Management's Discussion and Analysis are available
for review at www.pristinepower.ca, and have been filed on SEDAR. Unless
otherwise noted, all dollar amounts are expressed in Canadian dollars except
share and per share amounts.

    
    Financial Review:
    -------------------------------------------------------------------------
                                     For the three month   For the six month
                                            period ended        period ended
    -------------------------------------------------------------------------
                                       June 30,  June 30,  June 30,  June 30,
                                          2009      2008      2009      2008
    -------------------------------------------------------------------------

    Net production (MWh)(1)              5,700         -    12,187         -

                                             $         $         $         $
    Revenue                                575       516     1,458       695
    Expenses                             3,897     2,517     7,410     4,248
    Net loss and comprehensive loss     (3,100)   (1,936)   (5,641)   (3,784)
    Net loss per share -
     basic and diluted                   (0.10)    (0.06)    (0.19)    (0.16)

    Cash used in operations             (3,405)   (1,855)   (5,304)   (3,243)
    Funds used in operations(2)         (2,380)   (1,553)   (4,533)   (2,949)

    Notes:
    (1) Before non-controlling interest share.
    (2) Funds used in operations is a non-GAAP measure. Refer to the
        section titled "Cash Flow from Operations" for an explanation on its
        use and a reconciliation with the Company's GAAP measures.

    -------------------------------------------------------------------------
    Key Facts About the Quarter

    -   Pristine Power generated 5,700 megawatt hours of net production in
        the three months ended June 30, 2009, and 12,187 megawatt hours in
        the first half of 2009;
    -   The Company entered into an agreement with Siemens Energy Inc. to
        reserve manufacturing slots for two Siemens STG6-PAC-5000F combustion
        turbine generator packages to be used in the York Energy Centre
        project;
    -   Both GE LM6000 turbines at the East Windsor Cogeneration Centre
        project achieved first fire and delivered the project's first
        commissioning megawatts to the local electricity grid;
    -   Net loss for the second quarter increased to $3.1 million ($0.10 per
        share, basic and fully diluted) compared with loss of $1.9 million
        ($0.06 per share, basic and fully diluted) for the same period of the
        previous year;
    -   Cash used in operations during the second quarter of 2009 was $3.4
        million compared with $1.9 million in 2008; and
    -   The Company had $19.1 million in cash and cash equivalents at June
        30, 2009.
    

    "The reservation of the required generators and the advancement of
permitting for York, combined with the first fire and power generation at the
East Windsor Cogeneration Centre, demonstrate good progress for the quarter,"
said Jeff Myers, President and Chief Executive Officer of Pristine Power Inc.
"We were on schedule and on budget for our EnPower projects last year, and we
are duplicating that success on a much larger scale at East Windsor.
Legislative changes relating to carbon regulations and the failure of the
feasibility of nuclear in Ontario will favour Pristine's portfolio of natural
gas fired and renewable generation and continue to drive growth in Pristine's
project development pipeline. Finally I would like to welcome Toby Austin, who
joined our management team on August 4th, as Vice President and General
Counsel. Toby is a strong addition to our team, and brings to Pristine more
than 20 years of legal experience in the securities, banking and electricity
industries."

    Second Quarter 2009 Financial Highlights:

    Revenue for the three months ended June 30, 2009 increased by 11% to
$575,000 compared with $516,000 for the same period in 2008. For the six
months ended June 30, 2009, revenue increased by 110% to $1.5 million compared
with $695,000 in the first half of 2008. Revenue consists of sales from power
generation, management fees earned from developing projects and interest
earned on cash invested in short-term investments held during the year. In the
second quarter of 2009, revenue from power generation totalled $423,000 or
$74.21 per megawatt hour (MWh) on net production of 5,700 MWh. On a
year-to-date basis, revenue from power generation totalled $972,000 or $79.76
per MWh on net production of 12,187 MWh. Under the terms of the electricity
purchase agreement, EnPower receives lower fixed prices per MWh in the off
peak summer months. These plants commenced commercial operations in the third
and fourth quarters of 2008 and accordingly there were no operations for the
three and six months ended June 30, 2008.
    Project development and other revenue was $152,000 in the second quarter
of 2009 compared with $516,000 in the second quarter of 2008. For the first
six months of 2009, project development and other revenue was $486,000 down
from $695,000 in the comparable period of 2008 due primarily to lower interest
income on lower cash balances.
    General and administrative expenses increased 44% to $1.7 million in the
second quarter of 2009, up from $1.2 million in the second quarter of 2008,
but consistent with the $1.8 million incurred in the first quarter of 2009. In
the first six months of 2009, general and administrative expenses increased
68% to $3.5 million compared with $2.1 million in the first six months of
2008. When compared with 2008, general and administrative expenses increased
due to a larger staff complement to support increased development activity,
and to meet the Company's reporting obligations. To accommodate the increased
head count, the Company added office space in Vancouver to better support
development activity in the west, and in the greater Toronto area to mobilize
to build the York project. In addition, in 2009 Pristine incurred higher
consulting costs related to its International Financial Reporting Standards
conversion project and CEO/CFO certification processes.
    During the second quarter of 2009, project development costs increased
13% to $1.1 million compared with $948,000 incurred in the second quarter of
2008. For the first six months of 2009, development costs increased by 28% to
$1.9 million compared with $1.5 million incurred in the first six months of
2008. Development costs are a function of the number of bids under development
for submission, the type of project and the jurisdictional process into which
the bid is submitted. In the first six months of 2009, Pristine submitted six
bids and continued to actively develop potential projects in BC and Ontario,
compared with three bids submitted in the same period of 2008.
    Interest, bank and financing charges in the second quarter of 2009
increased to $220,000 compared with $2,000 in the second quarter of 2008. For
the first six months of 2009, interest, bank and financing charges increased
to $448,000 compared with $13,000 in the same period of 2008. Interest, bank
and financing charges in the first half of 2009 were almost entirely comprised
of the Company's share of interest incurred on EnPower's $24.6 million, 6.65%
ten-year debt facility obtained in the fourth quarter of 2008. Interest
expense was lower in 2008 as the Company had a higher cash balance on hand
from its initial share offering and almost all interest incurred related to
the construction of the East Windsor Cogeneration Centre which was capitalized
to the project.
    Plant operating costs for the three months ended June 30, 2009 were
$94,000 or $16.49 per MWh, and were $293,000 or $24.04 per MWh for the first
half of 2009. No plant operating costs were incurred in the corresponding
periods of 2008 as no facilities were operational at that time. Plant
operating costs in 2009 relate entirely to the Company's EnPower ERG(R) plants
and consist of fees paid to Spectra Energy for waste heat, land leasing, and
personnel for managing the plant operations at Savona and 150 Mile House. Also
included are other administrative costs directly attributable to the projects
but exclude amortization and financing charges.
    Stock based compensation expenses for the three months ended June 30,
2009 decreased 37% to $123,000 compared with $194,000 for the second quarter
of 2008. The decrease in stock based compensation expenses for the quarter
reflects a lower weighted average fair value of the options granted in the
second quarter of 2009 compared with prior period grants. For the six months
ended June 30, 2009, stock based compensation expenses decreased 77% to
$237,000 compared with $1.0 million for the first half of 2008. The reduction
in this expense for the first half of 2009, in addition to the reason
described above, is also related to the options that were granted to two new
Directors at the time of the Initial Public Offering in 2008 that vested upon
award.
    Expenses related to the unrealized losses on derivative financial
instruments for the three months ended June 30, 2009 decreased 32% to $101,000
compared with a loss of $149,000 in the same period of 2008. For the six
months ended June 30, 2009, the unrealized loss on derivative financial
instruments was $196,000 compared with an unrealized gain on derivative
financial instruments of $221,000 in the first half of 2008.
    Foreign exchange loss for the three months ended June 30, 2009 was
$274,000 compared with a foreign exchange gain of $23,000 in the corresponding
period of 2008. For the six months ended June 30, 2009, foreign exchange loss
was $269,000 compared with a foreign exchange gain of $221,000 in the first
half of 2008. The foreign exchange loss included losses related to US dollar
cash balances purchased in April and May 2009 to partially mitigate the
Company's exposure to foreign exchange fluctuations on US dollar priced
equipment and services to be incurred in the development and construction of
the York Energy Centre. Since these monies were purchased, the Canadian dollar
has strengthened, resulting in the foreign exchange loss.
    Depreciation and amortization expense in the second quarter of 2009
increased to $282,000 compared with $45,000 in 2008. For the six months ended
June 30, 2009, depreciation and amortization expenses were $556,000 compared
with $59,000 for the first half of 2008. Higher depreciation and amortization
expenses in 2009 are related depreciation charges for the Company's EnPower
plants that began operating during the first half of 2008. These plants are
depreciated on a straight-line basis over twenty years, which coincides with
the term of the power purchase agreements with BC Hydro and the related
underlying leases with Spectra. Also included in depreciation and amortization
expense in 2009 is depreciation of leasehold improvements made in the latter
half of 2008 on the Company's new premises. These costs are being depreciated
over five years, the remaining term of the Company's office leases.
    For the second quarter of 2009 the Company incurred a loss of $3.1
million ($0.10 per share, basic and diluted) compared with loss of $1.9
million ($0.06 per share, basic and diluted) in the second quarter of 2008.
Higher expenditures on development activities and salaries, reflecting
increased staffing levels, primarily attributed to the increased loss in 2009
over the comparable period in 2008. On a year-to-date basis, Pristine incurred
a net loss of $5.6 million ($0.19 per share, basic and diluted) compared with
a loss of $3.8 million in the comparative period ended June 30, 2008 ($0.16
per share, basic and diluted). Increased costs were partially offset by higher
revenues from power generated at the Company's two operating plants which
commenced operations in the last half of 2008.
    At the end of June 30, 2009 the Company's cash and cash equivalents had
decreased to $19.1 million compared to $37.7 million as at December 31, 2008.
The decrease in cash and cash equivalents reflects ongoing capital
expenditures related to the York project, development and general and
administrative expenditures as well as the pledging of $7.3 million of cash as
security for letters of credit. Such cash pledged as security has been
presented as current restricted cash, of which $5.3 million will be released
for general purposes upon completion of the non-recourse debt financing
related to the York project. Working capital decreased to $22.8 million at
June 30, 2009 compared with $37.1 million at December 31, 2008.

    Cash Flow from Operations

    During the second quarter of 2009, funds used in operations were
$2,380,000, an increase from $1,553,000 in the second quarter of the previous
year. Funds used in operations is a non-GAAP performance measure and
represents funds provided by or used in operations before changes in non-cash
working capital and, in management's opinion, is a useful complementary
measure of the Company's ability to generate the funds necessary to repay debt
or fund future growth through capital investment.
    Funds used in operations increased in the second quarter of 2009 compared
with 2008 due to increased general and administrative and development
expenditures. These expenditures were partially offset by funds generated from
project management fees and operating cash flow contributed by EnPower. As the
Company's projects become operational and begin to generate cash flow, funds
used in operations is expected to decrease as cash flow distributions from
projects increasingly cover the Company's administrative costs and project
development expenditures.
    A reconciliation of funds used in operations to cash used in operations
is set out below. Refer to "Non-GAAP Measures" under the Advisories section of
Management's Discussion Analysis for the three and six months ended June 30,
2009.

    
    Reconciliation of Funds Used in Operations
    -------------------------------------------------------------------------
                                     For the three month   For the six month
                                            period ended        period ended
    -------------------------------------------------------------------------
                                       June 30,  June 30,  June 30,  June 30,
                                          2009      2008      2009      2008
    -------------------------------------------------------------------------
                                             $         $         $         $

    Funds used in operations            (2,380)   (1,553)   (4,533)   (2,949)
    Change in operating
     working capital                    (1,025)     (302)     (771)     (294)
    -------------------------------------------------------------------------
    Cash used in operations             (3,405)   (1,855)   (5,304)   (3,243)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Subsequent Events:
    

    On August 4, 2009, Pristine Power welcomed Toby Austin to the role of
Vice President and General Counsel at Pristine Power. Toby comes to Pristine
with more than 20 years of experience providing legal counsel in the
securities, banking and electricity industries in Canada and the UK. He served
as Managing Counsel of Calpine Canada starting in 2001, and subsequently
served as President of Calpine Power Income Fund from 2004 until its sale in
2007 to private equity buyers. Prior to Calpine, he was employed by a major
Canadian power developer as General Counsel of its independent power division.
Toby began his legal career in Calgary with MacLeod Dixon.

    Project Update:

    East Windsor Cogeneration Centre (84 MW gross capacity, 25% interest)

    Construction of the $207 million 84 MW EWCC continued in the second
quarter of 2009, remaining on schedule and on budget. All major equipment is
now on site and installed. During the second quarter, work continued on piping
and the plant's electrical systems, and the initial commissioning of the plant
was commenced. In addition, both of the GE LM6000 turbines at the EWCC project
achieved first fire and delivered the project's first megawatts to the local
electricity grid in the quarter. Commissioning of the project is ongoing, and
the facility is expected to commence commercial operations by the end of the
third quarter of 2009.

    York Energy Centre (393 MW gross capacity, 50% interest)

    In December 2008, the Company was awarded a 20 year contract by the
Ontario Power Authority to construct and operate the York Energy Centre, a 393
MW natural gas fired peaking generation facility, located in the Township of
King, Region of York, Ontario. Pristine expects to hold a 50% interest in the
project with total project costs expected to be up to $365 million. The
Company has received confirmation from municipal and regional authorities that
the facility complies with both zoning by-law requirements and the "Region of
York Official Plan," which provides policies, land use designations and
criteria to direct economic, environmental and community-building decisions
affecting the use of land.
    During the first quarter of 2009, the Ontario Ministry of the Environment
denied all requests for elevation of the project to a full environmental
assessment. In the second quarter of 2009, during the normal appeal period,
appeals of this decision were received by the Ministry of the Environment and
are currently under review by the Minister. The Company continues to work
towards the completion of the necessary provincial environmental assessment,
permitting, and site plan process to obtain the necessary approvals required
for construction, with completion of the permitting process expected in the
fourth quarter of 2009.
    On June 15, 2009 the Company entered into an agreement with Siemens
Energy, Inc. ("Siemens") to reserve two Siemens STG6-PAC-5000F combustion
turbine generator packages to be used at the YEC. A definitive purchase
agreement with Siemens is expected to be entered into in the third quarter of
2009. Delivery of the turbines is scheduled for early 2011. The Company is
continuing the process of finalizing agreements with the preferred
Engineering, Procurement, and Construction ("EPC") contractor. Discussions
have continued with potential lenders for long-term non-recourse financing,
with such financing expected to be in place following receipt of all necessary
environmental permits. Construction is expected to commence in mid 2010 with
completion anticipated late in 2011.

    Mackenzie Green Energy Centre (65 MW gross capacity, 35% interest)

    The Mackenzie Green Energy Centre is a proposed 65 MW (thermal
equivalent) biomass fired project to be located in Mackenzie, British
Columbia. The closing of several mills in the region has jeopardized the
availability of the biomass fuel required for the project. Pristine Power is
currently evaluating several strategies to mitigate the fuel risk for this
project. The British Columbia Ministry of Forests and Range advised Pristine
that Mackenzie Green Energy Inc.'s current energy supply contract with BC
Hydro, dated August 31, 2006, was designated as a bioenergy supply contract
under the Forest Act and accordingly could apply for a non-replaceable forest
license, supplying a portion of the necessary fuel requirements. This is a
step towards securing adequate fuel supplies for the project, however,
additional fuel supplies must be obtained. The Company continues to assess its
options regarding the project site and the ability to mitigate the project's
fuel price risk. To ensure long term profitability, and the project's overall
viability, several issues must be resolved before Pristine will proceed with
the project.

    Development Activities

    In June 2009, Pristine submitted two bids in Colorado in response to the
Black Hills/Colorado Electric Utility Company, LP ("BH/CO Electric")
Non-Intermittent Resource Solicitation for the development of two 100 MW
plants, each utilizing gas-fired reciprocating engines. If awarded, Pristine
expects to hold a 100% interest in each of the projects. Should these projects
be selected by BH/CO Electric in its short list of potential suppliers, a
contract negotiation process will follow. The short list is expected to be
announced by BH/CO Electric in the third quarter of 2009.
    With respect to the two bids to the Southwestern Public Service ("SPS")
in New Mexico made in the first quarter of 2009, for the development of two
200 MW natural gas peaking power plants that Pristine would hold 50% interest
in, the SPS has delayed its award as it reviews its demand growth situation in
light of the economic downturn.
    As disclosed in the first quarter 2009, Pristine submitted two bids for
the development of two 200 MW gas-fired generation plants to the Public
Service Company of Colorado ("PSCO") All Source Solicitation in April 2009. In
July, 2009 the Company was informed that these proposals had not been
shortlisted by PSCO. Despite this, the Company has four bids outstanding in
the United States, comprised of the two bids to BH/CO Electric and the two
bids to SPS.
    During the second quarter of 2009, in response to the introduction of the
Green Energy Act by the Province of Ontario, the Ontario Power Authority
proposed the establishment of a Feed-in Tariff Program ("FIT"), providing
fixed and known prices to promote the development of onshore and offshore
wind, bioenergy, small hydroelectric and solar resources. The objectives of
the proposed FIT program are to increase capacity of renewable energy supply
to ensure adequate generation and to reduce emissions while simplifying the
method to procure and develop generation. Pristine is participating in
consultations for the establishment of the rules of engagement for FIT, and
the Company is evaluating resources and projects to offer under the FIT
program for bioenergy and other technologies. The FIT program is expected to
launch in later 2009.
    Pristine continues to develop gas fired peaking sites at strategic
locations and gas fired combined heat and power sites in anticipation of
future OPA administered competitive processes. The Company considers natural
gas generation to be a critical part of the future grid operation in Ontario,
and it is notable that during the quarter, the new nuclear plant initiative in
Ontario was put on hold due to excessive costs and risks associated with this
technology.
    In March 2009, BC Hydro announced the launch of the second phase of the
Bioenergy Call for Power ("Phase II"). In June 2009, BC Hydro provided an
update on the Phase II process, stating that it was continuing to advance and
develop the draft request for proposal, and analyzing potential mechanisms for
fuel risk sharing as well as the impacts of other regulatory decisions.
Accordingly, BC Hydro advised that the release of the draft request for
proposal and a new schedule would be deferred until September 2009. Phase II
is expected to be conducted in two streams, the first stream targeting 1,000
GWh per year from larger-scale biomass projects, and the second stream
targeting at least two smaller-scale, community-driven biomass projects.
During the quarter Pristine continued to develop projects for potential bid
into Phase II.
    The Company continues to await announcements in regards to submissions
made to BC Hydro's Clean Power Call. In November, 2008, Kleana Power
Corporation, a company in which Pristine holds a 10% equity interest,
submitted a proposal to build a 600 MW Run of River hydroelectric project. If
selected, the total projected cost of the project is anticipated to be
approximately $2.5 to $3.0 billion.
    In July 2009, BC Hydro received the BC Utilities Commission ("BCUC")
decision on its 2008 Long Term Acquisition Plan application. In its decision,
the BCUC did not approve the Plan and as a result, the implementation of the
Clean Call and Phase II could be affected. The decision, however, does not
restrict the ability of BC Hydro to award contracts from the Clean Call
bidding process, although such contracts would be subject to BCUC approval.
The Company is awaiting further guidance with respect of these processes and
is currently evaluating the impact on its current and future BC development
activities.

    Conference Call Information

    Pristine Power's conference call will take place on Friday, August 7th at
11:00 a.m. Eastern Daylight Time (EDT). Prior to the conference call, the
Company will release its financial results at 8:30 a.m. EDT and post them to
the investor relations section of their website at www.pristinepower.ca.
    President and Chief Executive Officer Jeff Myers and Chief Financial
Officer Geoff Krause will discuss Pristine Power's financial and operating
results for the quarter and then take questions from participants.
    Interested parties may access the conference call by dialing
1-800-814-4861 (domestic) or 416-644-3420 (international). If you are unable
to participate, an audio replay of the call will be available from 1:00 p.m.
EDT, August 7, 2009 until 11:59 p.m. EDT, August 21, 2009. To access the
replay dial 877-289-8525 (domestic) or 416-640-1917 (international) pass code
21311619.

    About Pristine Power

    Pristine (TSX: PPX) is in the business of developing, owning and
operating independent power plants that produce and sell electricity and in
some cases, sell process steam to industrial users. Pristine capitalizes on
opportunities in the independent power market by actively pursuing the
development of dependable, cost-effective and environmentally responsible
power generation facilities utilizing technology with proven past performance.
Pristine pursues a mix of large gas-fired, bioenergy and hydroelectric
projects, and smaller replicable waste heat recovery ERG(R) and bioenergy
projects. Pristine currently has two projects in operation, one under
construction, and two under contract and in advanced development. Pristine is
developing projects in Ontario, British Columbia and the Western United
States. Visit www.pristinepower.ca for more information.





For further information:

For further information: For media and investor inquiries please contact
Thomas McMillan, Equicom Group, (403) 536-5903, tmcmillan@equicomgroup.com

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