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Alterra Power Announces Results for the Quarter Ended September 30, 2012

(under IFRS and all amounts in US dollars unless otherwise stated)

TSX: AXY

VANCOUVER, Nov. 14, 2012 /PRNewswire/ - Alterra Power Corp. (TSX: AXY) ("Alterra") today provided an update on its operations and reported its financial and operating results for the three months ended September 30, 2012 ("the current quarter"). For further information on these results please see Alterra's Unaudited Condensed Consolidated Interim Financial Statements ("consolidated results") and Management's Discussion and Analysis.

Under IFRS, Alterra consolidates 100% of the HS Orka and Soda Lake operations, while Alterra's interests in the Toba Montrose run of river hydro facility and the Dokie 1 wind facility are accounted for as equity investments. In certain statements in this news release, Alterra's results are disclosed as Alterra's "net interest", which means the effective portion of results that Alterra would have reported if each of HS Orka (66.6%), Toba Montrose (40%), Dokie 1 (51%) and Soda Lake (100%) had been reported in accordance with Alterra's actual share of ownership at September 30, 2012 and for the three months then ended.  Management believes that net interest reporting provides the clearest view of the Company's performance.

Highlights for the current quarter and subsequently include:

  • Power production from Alterra's six power plants of 762,570 MWh was ahead of plan (102% of budget) for the quarter, as strong performances at the Toba Montrose run of river hydro plant and the Svartsengi and Reykjanes geothermal plants offset lower than budget production from the Soda Lake geothermal plant and Dokie 1 wind farm. Alterra's net interest in generation totalled 399,007 MWh.

  • Alterra's net interest in revenue for the quarter was $29.2 million and net interest in EBITDA was $17.8 million.

  • Alterra entered into an agreement with Energy Development Corporation ("EDC"), a Philippines-based global leader in the geothermal power industry, which may be advanced into partnerships for the development of the Mariposa geothermal project in Chile and for the development of five geothermal concessions in Peru. The terms allow EDC to earn 70% interests in the partnerships in return for funding the next $58.3 million of expenditures at Mariposa and the next $8.0 million in Peru.

  • The Company entered into a development phase agreement with a contractor to perform project optimization and design work for the Upper Toba hydro project, and is planning to commence construction in the second quarter of 2013.  Other project advancements included drilling and seismic testing for the powerhouse and intake locations.

John Carson, Alterra's CEO, said, "I'm pleased with the progress we made this period with both the Upper Toba hydro project and the South American geothermal assets. Our advancement of all our other development assets is underpinned by our continued on-track operating performance, which is a tribute to our operating teams."

Financial Results

The results for Toba Montrose and Dokie 1 have been included since May 13, 2011, the date of their acquisition. The results for the current quarter are now fully comparable to the comparative quarter ended September 30, 2011 ("the comparative quarter").

The following table shows Alterra's net interest in selected operating and financial results for the current quarter, in addition to key financial information extracted from the consolidated results.

(expressed in thousands of US dollars, except for production)

     
  September 30, 2012 September 30, 2011
  Net Interest
Total
Consolidated
Results Total
Net Interest
Total
Consolidated
Results Total
Production (MWh) 399,007 310,215 441,409 304,710
Total Revenue  $ 29,244  $ 13,326  $ 36,079  $ 17,009
Gross Profit 15,743 2,189 20,207 4,856
EBITDA (a), (b)  17,764 19,808 20,456 22,104
Total Assets   729,044   723,149
Total Liabilities   341,230   360,681
Cash and Cash Equivalents   42,288   24,693
Working Capital   28,793   3,881

 

Net interest for the three months ended September 30, 2012 by entity has been broken out below:

             
  HS Orka
(66.6%)
Toba
Montrose
(40%)
Dokie
Wind
(51%)
Soda Lake
(100%)
Exploration
and Head
Office
Net Interest
Total
Production (MWh) 198,406 154,208 34,085 12,308 - 399,007
Total Revenue  $ 8,338  $ 16,210  $ 3,890  $ 806  $ -  $ 29,244
Gross Profit 2,439 13,259 1,518 (1,473) - 15,743
EBITDA (a), (b)  4,077 14,092 2,429 (998) (1,836) 17,764
Long Term Debt 96,139 189,988 93,133 - 120,744 500,004
Cash Interest Paid 759 2,973 1,549 - 19 5,300

 

(a) EBITDA is defined by Alterra as earnings before interest, taxes, foreign exchange, depreciation and amortization, as well as before deductions for other gains and losses, amortization of below market contracts, and value assigned to options granted less share of income (loss) of equity accounted investees plus the Company's interest in EBITDA of its equity accounted investees. Alterra discloses EBITDA as it is a measure used by analysts and by management to evaluate Alterra's performance. As EBITDA is a non-IFRS measure, it may not be comparable to EBITDA calculated by others. In addition, as EBITDA is not a substitute for net earnings, readers should consider net earnings in evaluating Alterra's performance.

   
(b) Income for the period to EBITDA reconciliation  
      Three months ended
      September 30, 2012
Income for the period     $ 14,669
Adjustments:        
Income tax expense       3,373
Share of income of equity investees       (10,374)
Share of EBITDA of equity investees       17,323
Other gains and losses       (10,034)
Finance costs       2,162
Finance income       (535)
Amortization of below market contracts       (566)
Amortization, depreciation, depletion and accretion     3,582
Stock based compensation       208
EBITDA     $ 19,808

 

Alterra's net interest in EBITDA for the current quarter totaled $17.8 million compared to $20.5 million in the comparative quarter while net interest in revenue was $29.2 million compared to $36.1 in the comparative quarter.  The decrease in both was primarily due to a reduction in our net interest in HS Orka from 75% to 66.6%, devaluation of the Icelandic Krona and aluminium linked power sales contracts, lower than expected winds at Dokie 1 and higher costs of sales at Soda Lake for pump repairs and maintenance.

Consolidated revenue for the current quarter was $13.3 million compared to $17.0 million in the comparative quarter.  Gross profit was $2.2 million for the current quarter, compared to $4.9 million for the comparative quarter, due to lower revenue offset by lower production costs.

Alterra recorded consolidated net income of $14.7 million for the current quarter compared to a net loss of $11.4 million for the comparative quarter. The improvement in the quarter is largely attributable to $1.4 million of savings in general and administrative costs as well as a number of non-cash items including:

  • A net positive non-cash change in the fair value of bonds and embedded derivatives of $29.5 million, related primarily to changes in the forecast future price of aluminum.

  • A non-cash improvement in foreign exchange gain (loss) of $7.4 million, with the current quarter's $2.9 million foreign exchange gain being contrasted to the comparative quarter's loss of $4.5 million.

At September 30, 2012, Alterra had consolidated cash and cash equivalents of $42.3 million (December 31, 2011: $22.2 million) and our net interest in cash and cash equivalents was $35.0 million. Alterra ended the quarter with consolidated working capital of $28.8 million (December 31, 2011: $4.6 million), $32.6 million on a net interest basis. The increase in both cash and working capital occurred in the first quarter of 2012 and was primarily due to the investment of $37.5 million in HS Orka by Alterra's pension fund partners (Jarðvarmi slhf) and the receipt of the US government grant of $2.1 million by Soda Lake.

Iceland Operations (66.6% Interest)

The 100 MW Reykjanes plant generated 182,431 MWh of electricity (104% of budget), and the 72 MW Svartsengi plant generated 115,476 MWh of electricity (110% of budget), and continued to supply thermal energy for district heating.

Toba Montrose Operations (40% Interest)

The 146 MW East Toba River and 89 MW Montrose Creek run of river hydro plants generated 385,521 MWh of electricity, or 101% of budget.

Toba Montrose achieved a new daily production record in July of 5,504 MWh, and generated in excess of 5,000 MWh on five days in the current quarter.

Dokie 1 Operations (51% Interest)

The 144 MW Dokie 1 wind farm generated 71,909 MWh of electricity for the current quarter, or 93% of budget.  The shortfall was primarily due to lower than expected wind.

Soda Lake Operations (100% Interest)

The 15 MW Soda Lake geothermal plant generated a net 12,308 MWh of electricity for the current quarter, or 80% of budget. The lower than expected performance was primarily attributable to higher than average ambient summer temperatures in Nevada, which reduced the plant's net production.

Expansion and Development Projects

Alterra has agreed to purchase for approximately $6.0 million, subject to a number of closing conditions, 10% of a 50 MW portfolio of five photovoltaic solar facilities being built in Ontario ("ABW Solar") by First Solar, Inc. Alterra will serve as the managing partner for the project. Construction has begun on the project and completion is expected by the end of 2012 for three of the facilities and by the end of January 2013 for the remaining two facilities. Long term fixed rate project debt financing arrangements are expected to be completed before the end of 2012.

Alterra is finalizing plant design of the Upper Toba Valley run of river hydro project and plans to commence construction in second quarter of 2013. Geotechnical investigations including drilling and seismic testing were performed in the current quarter at the powerhouse and intake locations on the Jimmie Creek and Upper Toba sites.  The Company has entered into a development phase agreement with a contractor to perform project optimization and preliminary design work. The proposed facility would share much of the infrastructure already in place for Toba Montrose, and is currently configured for up to 124 MW of capacity and annual generation of up to 345,000 MWh, though final size and projected output are currently being optimized. The project has a 40 year PPA in place with BC Hydro.

Preparations continue for the two expansions at the Reykjanes plant that would increase capacity to 180 MW and annual average generation by approximately 700,000 MWh. The key issues remaining prior to construction are to conclude the ongoing PPA amendment negotiations and to obtain project financing.

Alterra holds a 51% interest in a planned expansion of the Dokie 1 wind farm ("Dokie 2") with projected additions to capacity of up to 156 MW and annual production of up to 357,000 MWh.  During the current quarter Alterra continued to advance the resource assessment and planning of the project.

Exploration Projects

Alterra signed an agreement with EDC that outlines the terms of partnerships for the development of the Mariposa geothermal project in Chile and further exploration at five of Alterra's geothermal concessions in Peru (the South American projects).  If EDC advances into a formal arrangement then they will be entitled to earn 70% interests in the partnerships by funding the next $58.3 million in project expenditures at Mariposa and the next $8.0 million in project expenditures on the five Peruvian concessions.

Alterra continued to advance its early stage geothermal exploration projects in Italy, British Columbia and Peru with field work, data assessment and continued community consultations.

Alterra also continued to advance its Bute Inlet project and other early stage run of river and pumped storage hydro projects in British Columbia.

Outlook

Ross Beaty, Alterra's Chairman, said, "The third quarter was a good one for our operating assets. We have a strong clean energy platform in geothermal, wind and hydro and will soon add a solar business through ABW Solar. We are busy planning for more growth in 2013 through our Upper Toba and Iceland expansions, while also reviewing acquisition and divestment opportunities that result from today's market conditions. I look forward to executing on these opportunities in the near future."

Alterra Power will host a conference call to discuss financial and operating results on:
Thursday, November 15, 2012 at 11:30 am ET (8:30 am PT).
North American participants dial 1-888-231-8191 and International participants dial
1-647-427-7450, the conference ID is 6008 9943. The call will also be broadcast live
on the Internet at http://www.newswire.ca/en/webcast/detail/1061061/1153511. The
call will be available for replay until November 22 by dialing 1-416-849-0833 and
entering replay pin number 6008 9943.

Cautionary Note regarding Forward-Looking Statements and Information

Certain statements included in this news release may contain information that is forward-looking within the meaning of certain securities laws, including information and statements regarding prospective results of operations, financial position, cash flows or growth potential.  These statements are based on factors or assumptions that were applied in drawing a conclusion or making a forecast or projection, including assumptions based on historical trends, current conditions and expected future developments. Since forward-looking statements relate to future events and conditions, by their very nature they require making assumptions and involve inherent risks and uncertainties. Alterra cautions that although it is believed that the assumptions are reasonable in the circumstances, these risks and uncertainties give rise to the possibility that actual results may differ materially from the expectations set out in the forward-looking statements. Material risk factors include those set out in the management's discussion and analysis section of Alterra's most recent annual report and quarterly report, and in Alterra's Annual Information Form. Given these risks, undue reliance should not be placed on these forward-looking statements, which apply only as of their dates. Other than as specifically required by law, Alterra undertakes no obligation to update any forward-looking statements or information to reflect new information, subsequent or otherwise.

 

SOURCE Alterra Power Corp.

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