Capstone Infrastructure Corporation Announces Fourth Quarter and
Fiscal 2013 Results
Fiscal 2013 Highlights:
- Achieved an 8.9% increase in revenue, primarily reflecting
higher revenue at Bristol Water and greater power production
- Adjusted EBITDA and AFFO grew by 6.7% and 12.3%,
respectively
- Acquired Renewable Energy Developers Inc.
("ReD"), broadening company's renewable power
footprint and capabilities
- Commenced construction of the Skyway 8 and Saint-Philémon wind
power development projects
TORONTO, ONTARIO--(Marketwired - Mar 6, 2014) - Capstone
Infrastructure Corporation
(TSX:CSE)(TSX:CSE.DB.A)(TSX:CSE.PR.A)(TSX:CPW.DB) (the
"Corporation") today reported audited results for the fiscal year
ended December 31, 2013. The Corporation's 2013 Annual Report to
shareholders, including Management's Discussion and Analysis and
audited consolidated financial statements, is available at
www.capstoneinfrastructure.com and on SEDAR at www.sedar.com. All
amounts are in Canadian dollars.
"We achieved annual Adjusted EBITDA of $128.4 million, which was
at the high end of our forecasted range, reflecting strong
performance across our businesses as well as three months of
contribution from our recently acquired operating wind power
facilities. We successfully advanced our growth strategy, acquiring
Renewable Energy Developers and further expanding our power
development capabilities, and continued to enhance the cash flow
potential of our business," said Michael Bernstein, President and
Chief Executive Officer. "Over the past three years, we have
deliberately re-focused our portfolio to reduce risk, extend our
cash flow profile and establish a solid platform for the future. In
particular, our investments in Bristol Water and Värmevärden have
fundamentally changed Capstone's risk profile by offering
perpetual, increasing cash flow and the potential for considerable
organic growth. In addition, our growing power development platform
positions us to deliver value to our shareholders. We expect our
strategy to deliver steady long-term income and capital
appreciation to shareholders in the years ahead."
Financial
Review
In millions of Canadian dollars or on a per share basis unless
otherwise noted |
Quarter ended Dec 31 |
|
Variance |
|
Year ended Dec 31 |
|
Variance |
|
|
2013 |
|
2012 |
|
(%) |
|
2013 |
|
2012 |
|
(%) |
|
Revenue |
110.3 |
|
94.7 |
|
16.5 |
|
389.5 |
|
357.6 |
|
8.9 |
|
Expenses |
60.2 |
|
55.0 |
|
9.4 |
|
220.4 |
|
207.2 |
|
6.4 |
|
Net income |
16.0 |
|
16.9 |
|
(5.4 |
) |
67.2 |
|
46.0 |
|
46.2 |
|
Adjusted EBITDA(1), (2) |
38.0 |
|
31.3 |
|
21.5 |
|
128.4 |
|
120.3 |
|
6.7 |
|
AFFO(1), (3) |
13.9 |
|
13.6 |
|
2.8 |
|
39.9 |
|
35.6 |
|
12.3 |
|
AFFO per share(1), (3), (4) |
0.145 |
|
0.179 |
|
(18.9 |
) |
0.493 |
|
0.473 |
|
4.1 |
|
Dividends per share |
0.075 |
|
0.075 |
|
0.0 |
|
0.300 |
|
0.450 |
|
(33.3 |
) |
Payout ratio(1) |
52 |
% |
41 |
% |
- |
|
61 |
% |
95 |
% |
- |
|
(1) |
"Adjusted EBITDA", "Adjusted Funds from Operations", "Adjusted
Funds from Operations per Share" and "Payout Ratio" are non-GAAP
financial measures and do not have any standardized meaning
prescribed by International Financial Reporting Standards ("IFRS").
As a result, these measures may not be comparable to similar
measures presented by other issuers. Definitions of each measure
are provided on pages 22 and 23 of Management's Discussion and
Analysis with reconciliation to IFRS measures provided on page
23. |
(2) |
Adjusted EBITDA for investments in subsidiaries with
non-controlling interests are included at Capstone's proportionate
ownership interest. |
(3) |
For
businesses that are not wholly owned, the cash generated by the
business is only available to Capstone through periodic dividends.
For these businesses, AFFO is equal to distributions received. |
(4) |
The
weighted average number of common shares outstanding at the end of
the fourth quarter and year ended December 31, 2013 was 95,830,743
and 81,033,357, respectively. |
Fiscal 2013
Highlights
Consolidated revenue for the year increased by 8.9%, or $31.9
million, primarily due to Bristol Water, where regulated water
tariffs and water consumption were higher than in 2012, and to
higher power production attributable to the Cardinal gas
cogeneration facility, Erie Shores and the contribution from the
operating wind power facilities acquired on October 1, 2013.
Total expenses increased by 6.4%, or $13.3 million, which was
largely attributable to higher operating expenses at Bristol Water,
the addition of ReD's operating wind facilities, and greater fuel
expenses at Cardinal due to increased production partially offset
by lower gas transportation costs. Project development costs
increased by $5.2 million, primarily due to acquisition-related
costs and expenses arising from the Corporation's power development
subsidiary and wind projects currently under construction.
Adjusted EBITDA increased by 6.7%, or $8.1 million, driven
primarily by Bristol Water's performance and higher power
production at Cardinal and Erie Shores along with the contribution
from the wind facilities acquired from ReD. These drivers were
partially offset by higher corporate project development costs.
AFFO increased by 12.3%, or $4.4 million, due to positive
contributions from the power segment, which was partially offset by
lower AFFO from Bristol Water due to the sale of a 20% interest in
the business in May 2012.
Fourth Quarter
Financial Highlights
During the fourth quarter, the Corporation's revenue increased
by 16.5%, or $15.6 million, over the same period in fiscal 2012,
primarily reflecting higher revenue at Bristol Water attributable
to an increase in the regulated water rate charged to customers.
Higher fourth quarter revenue also reflected revenue growth in the
power segment due to the contribution from the wind facilities
acquired with ReD. Total expenses increased by 9.4%, or $5.2
million, primarily due to higher operating expenses and
inflationary increases for energy, consumables, wages and salaries
at Bristol Water, and expenses related to the operation of the new
wind facilities and the acquisition of ReD. Adjusted EBITDA in the
quarter increased 21.5%, or $6.7 million, reflecting these various
drivers partially offset by higher corporate project development
costs. Fourth quarter AFFO increased by 2.8%, or $0.4 million,
reflecting the impact of higher corporate project development
expenses and additional interest expense for ReD project debt and
convertible debentures.
Financial Performance
Highlights by Segment
Power Infrastructure:
In millions of Canadian dollars unless otherwise noted |
Quarter ended Dec 31 |
Variance |
Year ended Dec 31 |
Variance |
|
2013 |
2012 |
(%) |
2013 |
2012 |
(%) |
Power generated (GWh) |
581.9 |
499.9 |
16.4 |
2,160.5 |
1,858.8 |
16.2 |
Revenue |
57.0 |
49.1 |
16.3 |
193.9 |
179.2 |
8.2 |
Adjusted EBITDA |
28.6 |
22.6 |
26.5 |
89.1 |
78.2 |
14.0 |
AFFO |
20.2 |
14.6 |
38.3 |
53.4 |
43.9 |
21.8 |
Fiscal 2013 power segment revenue increased 8.2%, or $14.7
million, in 2013, primarily attributable to increased power
production and power rates at Cardinal, which completed scheduled
maintenance in 2012, and to the contribution from the new wind
power facilities as well as Erie Shores.
Adjusted EBITDA increased by 14.0%, or $11.0 million, reflecting
increased revenue and lower gas transportation costs at Cardinal.
These drivers were partially offset by higher fuel expenses at the
facility as more fuel was consumed in production, and by higher
costs related to the Corporation's power development subsidiary,
which was established in December 2012. AFFO increased by 21.8%, or
$9.6 million, reflecting the same factors as well as lower
maintenance costs at Cardinal partially offset by higher debt
amortization at the hydro power facilities compared with 2012 as
well as debt service costs related to the wind facilities acquired
with ReD.
Utilities:
Water
In millions of Canadian dollars unless otherwise noted |
Quarter ended Dec 31 |
Variance |
|
Year ended Dec 31 |
Variance |
|
|
2013 |
2012(1) |
(%) |
|
2013 |
2012(1) |
(%) |
|
Water supplied (megalitres) |
20,372 |
19,875 |
2.5 |
|
82,125 |
81,245 |
1.1 |
|
Revenue |
53.3 |
45.6 |
16.8 |
|
195.6 |
178.4 |
9.6 |
|
Adjusted EBITDA before non-controlling interest |
26.5 |
20.6 |
28.7 |
|
95.8 |
85.2 |
12.5 |
|
Adjusted EBITDA |
13.2 |
10.1 |
31.5 |
|
47.9 |
48.2 |
(0.7 |
) |
AFFO(2) |
1.8 |
3.2 |
(45.0 |
) |
6.5 |
8.1 |
(19.1 |
) |
(1) |
Capstone's interest in Bristol Water was reduced to 50% from 70% on
May 10, 2012 following the sale of an interest representing 20% of
Bristol Water to a subsidiary of ITOCHU Corporation. |
(2) |
Bristol Water's contribution to Capstone's AFFO consists of
dividends and does not reflect the amount of cash generated by the
business. |
In 2013, revenue increased by 9.6%, or $17.2 million, in 2013
primarily due to a 6.9% annual increase in water tariffs, which
occurred on April 1, 2013, along with higher water consumption.
Foreign exchange appreciation represented $3.4 million of the
variance. Bristol Water's Adjusted EBITDA contribution to the
Corporation's results declined by 0.7%, or $0.3 million, primarily
reflecting the Corporation's lower ownership interest. Adjusted
EBITDA before non-controlling interests increased by 12.5%, or
$10.6 million, reflecting revenue growth partially offset by
increased operating expenses. Capstone's AFFO from Bristol Water
declined by 19.1%, or $1.5 million, reflecting the reduced
ownership interest.
During 2013, Bristol Water made $167 million in capital
expenditures, thereby reducing its capital expenditure shortfall by
60%, as part of its approximately $520 million capital program for
the current five-year asset management plan ("AMP5"), which
concludes in March 2015. As at December 31, 2013, Bristol Water had
cumulative capital expenditures of $394.0 million over the AMP5
period, which was $20 million lower than the regulatory plan
approved in 2010 but consistent with management's expectations.
Bristol Water expects to achieve its planned cumulative capital
expenditures by the end of the AMP5 period.
District Heating
In millions of Canadian dollars unless otherwise noted |
Quarter ended Dec 31 |
Variance |
|
Year ended Dec 31 |
Variance |
|
|
2013 |
2012 |
(%) |
|
2013 |
2012 |
(%) |
|
Heat production (GWh) |
323 |
352 |
(8.2 |
) |
1,091 |
1,078 |
1.2 |
|
Interest income |
0.7 |
0.7 |
8.1 |
|
2.9 |
3.4 |
(14.7 |
) |
Adjusted EBITDA and AFFO(1) |
0.7 |
1.7 |
(56.7 |
) |
6.0 |
5.4 |
11.3 |
|
(1) |
Värmevärden's contribution to Capstone's Adjusted EBITDA and AFFO
consists of interest income and dividends and does not reflect the
amount of cash generated by the business. |
In 2013, Värmevärden paid $2.9 million of interest income to the
Corporation compared with $3.4 million in 2012. The variance
reflected the Corporation's repatriation of approximately $49.4
million of its initial investment in March 2012, thereby reducing
the balance outstanding on the shareholder loan receivable.
Värmevärden also paid $3.1 million in dividends during 2013
compared with $2.0 million in 2012. As a result, Värmevärden
contributed $6.0 million to the Corporation's Adjusted EBITDA and
AFFO during the year compared with $5.4 million in 2012.
Financial
Position
As at December 31, 2013, the Corporation had unrestricted cash
and cash equivalents of $45.8 million, including $29.0 million from
the power segment and $9.1 million from Bristol Water with the
balance at corporate. Bristol Water also has $70.5 million of
credit available to support Bristol Water's capital investment
program. Approximately $18.5 million of the Corporation's total
cash and cash equivalents is available for general corporate
purposes. As at December 31, 2013, the Corporation's debt to
capitalization ratio was 65.7%, which primarily reflects the
increase in Bristol Water's debt to fund ongoing capital
expenditures, foreign exchange appreciation and depreciation in the
Corporation's share price partially offset by the acquisition of
ReD, where the ratio of debt assumed to equity issued was lower
than that of the Corporation prior to the transaction.
Subsequent
Events
In January 2014, the Corporation increased the amount of credit
available under its new corporate credit facility, which was
established in November 2013, to $50 million from $32.5 million.
The facility, which has a three-year term maturing in October 2016,
is structured as a revolver and bears an initial effective interest
rate of approximately 3.5%.
Outlook(1)
The Corporation expects continuing stable performance from its
power facilities, some growth from its utilities businesses, and a
full year of contribution from the operating wind power facilities
acquired from ReD. Adjusted EBITDA in 2014 is anticipated to be
between $140 million and $150 million. The assumptions underlying
the Corporation's 2014 outlook include but are not limited to:
- That the Corporation's internally generated cash and credit is
deployed into its new development projects and that the projects
proceed as expected;
- That the Swedish krona to Canadian dollar and British pound
sterling to Canadian dollar exchange rates remain consistent with
recent rates;
- That Bristol Water plc implements its allowed real 3.8% (plus
retail price index, or "RPI") price increase effective April 1,
2014; and
- Business development activity that is consistent with
historical levels.
The Corporation's strategic priorities for 2014 include:
Completing a new PPA for Cardinal.
The Corporation anticipates securing a new 20-year PPA for
Cardinal and is working to bring the process to a conclusion in
advance of the December 31, 2014 expiry of Cardinal's current PPA.
The Corporation is advancing its plans to convert the facility and
prepare it for dispatchable operations.
Advancing its pipeline of development projects.
The Corporation is focused on advancing its near-term wind power
projects on time and on budget. The 10 MW Skyway 8 and and 24 MW
Saint-Philémon projects, currently under construction in Ontario
and Quebec, respectively, are expected to achieve commercial
operations in 2014. The balance of the pipeline is currently
anticipated to enter commercial operations over 2015 and 2016.
Maximizing the performance of its existing
businesses.
The Corporation is focused on further enhancing the operational
performance of its businesses, which includes preventive and
predictive maintenance, detailed planning for capital expenditures
that boost value, and finding new ways to increase cash flow such
as the use of WindBOOST at Erie Shores in 2013.
Pursuing organic growth initiatives.
The Corporation is working closely with management at Bristol
Water to complete the company's capital expenditure program for the
current regulatory period, which commenced in April 2010 and
concludes in March 2015. This program is driving significant growth
in Bristol Water's regulated capital value, which supports growing
revenue and cash flow over time, which in turn increases the value
of the Corporation's investment.
Pursuing new investment opportunities.
The Corporation's strategy is to develop, acquire and manage a
portfolio of high quality power, utilities and transportation
infrastructure businesses and public-private partnerships.
Geographically, the Corporation is focusing its business
development efforts primarily on North America, the United Kingdom,
and Western and Northern Europe with Australia and New Zealand
remaining markets of interest.
Dividend
Declarations
The Board of Directors today declared a quarterly dividend of
$0.075 per common share for the quarter ending March 31, 2014 on
the Corporation's outstanding common shares. The dividend will be
payable on April 30, 2014 to shareholders of record at the close of
business on March 31, 2014.
The Board of Directors also declared a dividend on its
Cumulative 5-Year Rate Reset Preferred Shares, Series A (the
"Preferred Shares") of $0.3125 per Preferred Share to be paid on or
about April 30, 2014 to shareholders of record at the close of
business on April 14, 2014. The dividend on the Preferred Shares
covers the period from February 1, 2014 to April 30, 2014.
In respect of the Corporation's April 30, 2014 common share
dividend payment, the Corporation will issue common shares in
connection with the reinvestment of dividends to shareholders
enrolled in the Corporation's Dividend Reinvestment Plan. The price
of common shares purchased with reinvested dividends will be the
previous five-day volume weighted average trading share price on
the Toronto Stock Exchange, less a 5% discount.
The dividends paid by the Corporation on its common shares and
the Preferred Shares are designated "eligible" dividends for
purposes of the Income Tax Act (Canada). An enhanced
dividend tax credit applies to eligible dividends paid to Canadian
residents.
A distribution of $0.075 per unit will also be paid on April 30,
2014 to holders of record on March 31, 2014 of Class B Exchangeable
Units of MPT LTC Holding LP, which is a subsidiary entity of the
Corporation.
Dividend Reinvestment
Plan
Learn more about the Corporation's Dividend Reinvestment Plan
("DRIP") at
www.capstoneinfrastructure.com/InvestorCentre/StockInformation/DRIP.aspx.
Fiscal 2013 Results
Conference Call and Webcast
The Corporation will hold a conference call and webcast (with
accompanying slides) on Friday, March 7, 2014 at 8:30 a.m. EST to
discuss fiscal 2013 results. To listen to the call from Canada or
the United States, dial 1-800-319-4610. If
calling from elsewhere, dial +1-604-638-5340. A
replay of the call will be available until March 21, 2014. For the
replay, from Canada or the United States, dial 1-800-319-6413 and
enter the code 1385#. From elsewhere, dial +1-604-638-9010 and
enter the code 1385#. The event will be webcast live with an
accompanying slide presentation on the Corporation's website at
www.capstoneinfrastructure.com.
About Capstone
Infrastructure Corporation
Our mission is to provide investors with an attractive total
return from responsibly managed long-term investments in core
infrastructure in Canada and internationally. Capstone's portfolio
comprises investments in Canada's power infrastructure, including
gas cogeneration, wind, hydro, biomass and solar power generating
facilities, representing approximately net 439(2) megawatts of
installed capacity, and contracted wind power development projects
totaling an expected net 79 megawatts of capacity. Capstone also
invests in utilities, including a 33.3% interest in a district
heating business in Sweden, and a 50% interest in a regulated water
utility in the United Kingdom. Please visit
www.capstoneinfrastructure.com for more information.
(1) |
See
Notice to Readers. |
(2) |
Reflects Capstone's economic interest in its various power
facilities. |
Notice to Readers
Certain of the statements contained within this document are
forward-looking and reflect management's expectations regarding the
future growth, results of operations, performance and business of
Capstone Infrastructure Corporation (the "Corporation") based on
information currently available to the Corporation. Forward-looking
statements and financial outlook 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. These
statements and financial outlook use forward-looking words, such as
"anticipate", "continue", "could", "expect", "may", "will",
"estimate", "plan", "believe" or other similar words, and include,
among other things, statements found in the "Message to
Shareholders", "Strategic Overview" and "Results of Operations".
These statements and financial outlook are subject to known and
unknown risks and uncertainties that may cause actual results or
events to differ materially from those expressed or implied by such
statements and financial outlook and, accordingly, should not be
read as guarantees of future performance or results. The
forward-looking statements and financial outlook within this
document are based on information currently available and what the
Corporation currently believes are reasonable assumptions,
including the material assumptions set out in the management's
discussion and analysis of the results of operations and the
financial condition of the Corporation ("MD&A") for the year
ended December 31, 2013 under the heading "Results of Operations",
as updated in subsequently filed MD&A of the Corporation (such
documents are available under the Corporation's profile on
www.sedar.com).
Other potential material factors or assumptions that were
applied in formulating the forward-looking statements and financial
outlook contained herein include or relate to the following: that
the business and economic conditions affecting the Corporation's
operations will continue substantially in their current state,
including, with respect to industry conditions, general levels of
economic activity, regulations, weather, taxes and interest rates;
that there will be no material delays in the Corporation's power
infrastructure development projects achieving commercial operation;
that the Corporation's power infrastructure facilities will
experience normal wind, hydrological and solar irradiation
conditions, and ambient temperature and humidity levels; an
effective TCPL gas transportation toll of approximately $1.65 per
gigajoule in 2014; that there will be no material change in the
level of gas mitigation revenue historically earned by the Cardinal
facility; that there will be no material changes to the
Corporation's facilities, equipment or contractual arrangements, no
material changes in the legislative, regulatory and operating
framework for the Corporation's businesses, no material delays in
obtaining required approvals and no material changes in rate orders
or rate structures for the Corporation's power infrastructure
facilities, Värmevärden or Bristol Water, no material changes in
environmental regulations for the power infrastructure facilities,
Värmevärden or Bristol Water and no significant event occurring
outside the ordinary course of business; that the amendments to the
regulations governing the mechanism for calculating the Global
Adjustment (which affects the calculation of the DCR escalator
under the PPA for the Cardinal facility and price escalators under
the PPAs for the hydro power facilities located in Ontario) will
continue in force; that there will be no material change to the
accounting treatment for Bristol Water's business under
International Financial Reporting Standards, particularly with
respect to accounting for maintenance capital expenditures; that
there will be no material change to the amount and timing of
capital expenditures by Bristol Water; that there will be no
material changes to the Swedish krona to Canadian dollar and UK
pound sterling to Canadian dollar exchange rates; and that Bristol
Water will operate and perform in a manner consistent with the
regulatory assumptions underlying AMP5, including, among others:
real and inflationary increases in Bristol Water's revenue, Bristol
Water's expenses increasing in line with inflation, and capital
investment, leakage, customer service standards and asset
serviceability targets being achieved.
Although the Corporation believes that it has a reasonable basis
for the expectations reflected in these forward-looking statements
and financial outlook, actual results may differ from those
suggested by the forward-looking statements and financial outlook
for various reasons, including: risks related to the Corporation's
securities (dividends on common shares and preferred shares are not
guaranteed; volatile market price for the Corporation's securities;
shareholder dilution; and convertible debentures credit risk,
subordination and absence of covenant protection); risks related to
the Corporation and its businesses (availability of debt and equity
financing; default under credit agreements and debt instruments;
geographic concentration; foreign currency exchange rates;
acquisitions and development (including risks related to the
integration of the business operated by Renewable Energy Developers
Inc.; environmental, health and safety; changes in legislation and
administrative policy; and reliance on key personnel); risks
related to the Power Infrastructure Facilities (power purchase
agreements; operational performance; fuel costs and supply;
contract performance; land tenure and related rights;
environmental; and regulatory environment); risks related to
Bristol Water (Ofwat price determinations; failure to deliver
capital investment programs; economic conditions; operational
performance; failure to deliver water leakage target; SIM and the
serviceability assessment; pension plan obligations; regulatory
environment; competition; seasonality and climate change; and
labour relations); and risks related to Värmevärden (operational
performance; fuel costs and availability; industrial and
residential contracts; environmental; regulatory environment; and
labour relations). For a comprehensive description of these risk
factors, please refer to the "Risk Factors" section of the
Corporation's annual information form dated March 21, 2013, as
supplemented by disclosure of risk factors contained in any
subsequent annual information form, material change reports (except
confidential material changes reports), business acquisition
reports, interim financial statements, interim MD&A and
information circulars filed by the Corporation with the securities
commissions or similar authorities in Canada (which are available
under the Corporation's profile on profile on www.sedar.com).
The assumptions, risks and uncertainties described above are not
exhaustive and other events and risk factors could cause actual
results to differ materially from the results and events discussed
in the forward-looking statements and financial outlook. The
forward-looking statements and financial outlook within this
document reflect current expectations of the Corporation as at the
date of this document and speak only as at the date of this
document. Except as may be required by applicable law, the
Corporation does not undertake any obligation to publicly update or
revise any forward-looking statements and financial outlook.
This document is not an offer or invitation for the subscription
or purchase of or a recommendation of securities. It does not take
into account the investment objectives, financial situation and
particular needs of any investors. Before making an investment in
the Corporation, an investor or prospective investor should
consider whether such an investment is appropriate to their
particular investment needs, objectives and financial circumstances
and consult an investment adviser if necessary.
Capstone Infrastructure CorporationSarah Borg-OlivierSenior Vice
President, Communications(416)
649-1325sborgolivier@capstoneinfra.com
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