Pristine Power Inc. Announces Third Quarter Results

CALGARY, Nov. 10 /CNW/ - Pristine Power Inc. (TSX: PPX) ("Pristine" or the "Company"), an independent Canadian developer and operator of electricity and steam generation facilities, today reported its financial results for the three and nine-month periods ended September 30, 2009.

    
    Q3 2009 Summary
    ---------------

    -   Net production increased to 2,943 MWh from 821 MWh in Q3 2008;
    -   Revenue increased 21.4% to $624,000 from $514,000 in Q3 2008;
    -   Net loss of $2.8 million ($0.09 per share, basic and diluted)
        compared to net loss of $2.3 million in Q3 2008;
    -   Cash used in operations totaled $1.9 million compared to $3.5 million
        in Q3 2008;
    -   The Company had cash and cash equivalents of $16.1 million as at
        September 30, 2009, compared to $19.1 million as at June 30, 2009;
    -   Commissioning of the East Windsor Cogeneration Centre (EWCC)
        continued. Subsequent to the quarter's end, EWCC declared
        commencement of commercial operations on November 9, 2009.
    -   Statement of Completion for the York Energy Centre (YEC) project was
        filed on August 19, 2009, enabling the facility to apply for the
        necessary environmental permits;
    -   Finalized purchase agreement for two Siemens combustion turbine
        generator packages for the YEC project with delivery scheduled for
        early 2011;
    -   Signed a term sheet for non-recourse debt financing for the YEC
        project with a syndicate of financial institutions.

    Subsequent Events
    -----------------

    -   In October 2009, the Company increased its interest in the 600 MW
        run-of-river Kleana Power project from 10% to 57%;
    -   The Company executed the Partnership agreement with Harbert York
        Canada Company effective November 1, 2009, reducing its investment in
        York Energy Centre LP from 100% to 50%, as previously anticipated;
    -   On November 9, 2009, the EWCC declared commencement of commercial
        operations.
    

"The commencement of commercial operations at East Windsor marks a significant milestone for Pristine. Our success at East Windsor is a testament to over three years of hard work taking the project from the conceptual stage to reality," said Jeff Myers, President and CEO of Pristine. "On our York project, we continue to move toward key milestones and have made significant progress towards execution of all material contracts, completion of permitting and closing of the related project financing. From a development perspective, we are encouraged by the recent announcements by the British Columbia Government in support of clean and renewable power."

    
    Financial Summary

    -------------------------------------------------------------------------
                               For the three month        For the nine month
                                   period ended              period ended
                                   September 30,             September 30,
                                 2009         2008         2009         2008
    -------------------------------------------------------------------------
    Net production (MWh)(1)     2,943          821       15,130          821

                            C$ (000's)   C$ (000's)   C$ (000's)   C$ (000's)
    -------------------------------------------------------------------------
    Revenue                       624          514        2,082        1,209
    Expenses                    3,659        2,897       11,069        7,144
    Net loss and
     comprehensive loss        (2,845)      (2,323)      (8,486)      (6,107)
    Net loss per share
     (basic & diluted)          (0.09)       (0.07)       (0.28)       (0.23)

    Cash used in
     operations                (1,869)      (3,463)      (6,678)      (6,705)
    Funds used in
     operations(2)             (2,072)      (2,159)      (6,605)      (5,108)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Notes:
    (1) Before non-controlling interest share
    (2) Funds used in operations is a non-GAAP measure. Refer to the
        paragraph titled "Cash Flow from Operations" for an explanation of
        its use and reconciliation with the Company's GAAP measures


    For the Three Month Period Ended September 30
    ---------------------------------------------
    

Revenue for the third quarter of 2009 increased 21.4% to $624,000 from $514,000 in the third quarter of 2008. The increase in revenue is primarily attributable to: i) additional revenue from the commissioning of the 150 Mile House EnPower ERG(R) plant in October 2008; and ii) increased revenue from project development fees charged to Pristine's partners, reflecting increased activity related to East Windsor Centre LP (EWCLP) and other development initiatives during the quarter. Increased power and project development revenues were partially off-set by lower interest income as a result of lower cash balances in the third quarter of 2009 compared to the same period in 2008.

Expenses increased 26.3% in the third quarter of 2009 to $3.7 million compared to $2.9 million for the same period in 2008. Increased expenses reflect primarily: i) higher plant operating costs as the 150 Mile House plant began commercial operations in October 2008; ii) higher general and administrative expenses for staff additions to support increased development activity and to meet the Company's reporting obligation; iii) increased stock-based compensation as the Company issued 150,000 new options to employees and directors in Q3 2009 compared to 20,000 options issued in Q3 2008; and iv) foreign exchange loss during the quarter, largely reflecting unrealized losses associated with US dollar cash balances held as an economic hedge against US dollar costs to be incurred in the development and construction of YEC.

Note that plant operating costs on a per MWh basis increased 29.1% to $45.59 in Q3 2009 compared to $35.32 in Q3 2008. The increased per MWh costs reflect production impact from lower pipeline flows and an extended outage during scheduled maintenance when issues were encountered by the supplier of waste heat used to operate the plant.

Net loss in Q3 2009 totaled $2.8 million compared to $2.3 million in Q3 2008. On a per share basis (basic and fully diluted), net loss in Q3 2009 increased to $0.09 from $0.07 in Q3 2008. Increased expenses incurred in 2009 as a result of additional staffing, increased stock-based compensation, foreign exchange loss, and higher plant operating costs were partially offset by increased revenues with contribution from the 150 Mile House facility that began commercial operations in October 2008.

Cash Flow from Operations

Funds used in operations of $2.1 million in Q3 2009 was 4.0% lower than $2.2 million in Q3 2008, primarily reflecting lower development expenditures and interest income, partially offset by higher general and administrative and interest charges, as well as increased revenue from project management fees and operating cash flow from the two EnPower facilities. While funds used in operations is a non-GAAP performance measure, management believes that it 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. A reconciliation of funds used in operations to cash used in operations is set out below:

    
    Reconciliation of Funds Used in Operations
    -------------------------------------------------------------------------
                               For the three month        For the nine month
                                   period ended              period ended
                                   September 30,             September 30,
    -------------------------------------------------------------------------
                                 2009         2008         2009         2008
                            C$ (000's)   C$ (000's)   C$ (000's)   C$ (000's)
    -------------------------------------------------------------------------
    Funds used in
     operations                (2,072)      (2,159)      (6,605)      (5,108)
    Change in operating
     working capital              203       (1,304)         (73)      (1,597)
    -------------------------------------------------------------------------
    Cash used in operations    (1,869)      (3,463)      (6,678)      (6,705)
    -------------------------------------------------------------------------


    For the Nine Month Period Ended September 30
    --------------------------------------------
    

For the nine month period ended September 30, revenue for the Company increased 75% to $2.1 million in 2009 compared to $1.2 million in 2008; expenses increased 56.3% to $11.1 million from $7.1 million in 2008; and net loss of $8.5 million (or $0.28 per basic and diluted share) in 2009 compares with net loss of $6.1 million (or $0.23 per basic and diluted share) in 2008. Cash used in operations of $6.7 million for the nine month period ended September 30, 2009 was in line with the same period in 2008 of $6.7 million.

    
    Project Highlights

    East Windsor Cogeneration Centre (EWCC)
    ---------------------------------------
    

During the third quarter ended September 30, 2009, commissioning of the 84 MW EWCC continued with the facility achieving its first steam blows, the passing of high pressure steam blow, and receiving approval and performance testing of its Auxillary boilers. Subsequent to the quarter's end, EWCC successfully completed performance testing of its gas turbines and the facility declared commencement of commercial operations on November 9, 2009.

    
    York Energy Centre (YEC)
    ------------------------
    

Development of the YEC project continued in Q3 2009 with the Company receiving confirmation from the Minster of Environment that an individual environmental assessment was not required at the 393 MW natural gas fired peaking facility. The Company filed its Statement of Completion on August 19, 2009.

During the quarter, the contract to acquire two Siemens combustion turbine generator packages was executed with delivery scheduled for early 2011. In addition, agreements with the preferred Engineering procurement and Construction contractor are near completion. In August 2009, a term sheet for non-recourse debt financing of the YEC project was signed with a syndicate of financial institutions and due diligence is ongoing. The permitting and site plan process is continuing at YEC, and necessary approvals required for construction will depend on the timing and approval by the municipality. A delay in receipt of permits could delay the expected commercial operations date.

In November 2009, the Company executed the Partnership agreement with Harbert York Caanda Company related to YEC, effective November 1, 2009. Upon execution of the Partnership agreement the Company reduced its investment in YEC to 50% as previously anticipated.

    
    Mackenzie Green Energy Centre (MGEC)
    ------------------------------------
    

The Company continues to evaluate its options regarding the MGEC project, a proposed 65 MW biomass facility located in Mackenzie, British Columbia. Although under the Forest Act, MGEC has a designated bioenergy supply contract with BC Hydro and could apply for a non-replaceable forest license to supply a portion of the necessary fuel requirements; additional long term biomass feedstock supply contract is required to ensure profitability and the project's overall viability. During the quarter and while such negotiations are ongoing, BC Hydro agreed to remove contract performance security requirements until February 15, 2010. If the security requirements are not replaced by such date or the deadline extended, the MGEC contract will terminate with no additional financial liabilities to Pristine.

    
    Other Development Activities
    ----------------------------
    

During the third quarter of 2009, Pristine continued to pursue development opportunities of dependable, cost effective, environmentally responsible power generation facilities.

In Ontario, the Company continues to develop gas fired peaking sites at strategic locations and gas fired combined heat and power sites in anticipation of future Ontario Power Authority administered competitive process.

In British Columbia, the Company continued to develop projects for bid into the Bioenergy Call for Power (Phase II). In addition, and subsequent to the quarter's end, Pristine acquired an additional 47% interest in 0755748 BC Ltd. through the purchase of all issued and outstanding shares of ANE Power Holding Inc. 0755748 BC Ltd. owns the 600 MW run-of-river Kleana Power project, and fractional interests in several early stage hydroelectric development projects in B.C. Together with its existing 10% interest in Kleana, Pristine now holds a 57% interest in the Kleana Power project. The Kleana power project was submitted to BC Hydro's Clean Power Call in November 2008. Announcements of awards under the Clean Power Call are expected in the fourth quarter of 2009.

Balance Sheet

As at September 30, 2009, the Company had working capital of $20.9 million, including cash and cash equivalents of $16.1 million, compared to working capital of $37.1 million, including cash and cash equivalents of $37.7 million as at December 31, 2008. Long-term debt of the Company, including the current portion, was $100.0 million as at September 30, 2009, compared to $100.3 million as at December 31, 2008.

As at September 30, 2009, there were 30,710,886 shares issued and outstanding.

Cautionary Statement Regarding Forward-Looking Information

Certain statements in this news release may constitute "forward-looking information" or "forward-looking statements" which involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company or industry results to be materially different from any future results, performance or achievements expressed or implied by such forward-looking information. When used in this news release, such information uses such words as "estimates", "expects", "plans", "anticipates" and other similar terminology. This information reflects the Company's current expectations regarding future events, including the development, construction and operation of the York Energy Centre and the Kleana project as well as development of other projects in Ontario and BC. Forward-looking information involves significant uncertainties, should not be read as a guarantee of future performance or results, and will not necessarily be an accurate indication of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking information. Although the forward-looking information in this news release is based upon what management of the Company believes are reasonable assumptions, the Company cannot assure investors that actual results will be consistent with this forward-looking information. This forward-looking information is provided as of the date of this news release, and, subject to applicable securities laws, the Company assumes no obligation to update or revise such information to reflect new events or circumstances.

About Pristine

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 strategic regions of North America. Visit www.pristinepower.ca for more information.

SOURCE PRISTINE POWER INC.

For further information: For further information: The Equicom Group Inc., Alice Dunning, Telephone: (416) 815-0700 x255, adunning@equicomgroup.com

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PRISTINE POWER INC.

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