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Capstone Infrastructure Corporation Announces Fourth Quarter and Fiscal 2017 Results

TORONTO, March 06, 2018 (GLOBE NEWSWIRE) -- Capstone Infrastructure Corporation (TSX:CSE.PR.A) (the "Corporation" or "Capstone") today reported results for the fourth quarter and fiscal year ended December 31, 2017. The Corporation’s 2017 Management’s Discussion and Analysis and unaudited interim consolidated financial statements are available at www.capstoneinfrastructure.com and on SEDAR at www.sedar.com. All amounts are in Canadian dollars.

Financial Review

In millions of Canadian dollarsQuarter ended Dec 31Change
($)
Year ended Dec 31Change
($)
2017201620172016
Revenue41.6 40.1 1.5 154.2 172.9 (18.7)
Expenses12.9 15.3 (2.4) 53.1 92.1 (39.0)
EBITDA128.5 36.6 (8.1) 110.1 108.2 1.9
Net income (loss) from continuing operations2.1 19.9 (17.8) (10.9) 18.8 (29.7)
Net income (loss) from discontinued operations 1.7 (1.7) 129.3 (34.4) 163.7
Net income (loss)2.1 21.6 (19.5) 118.4 (15.5) 133.9

1 "EBITDA" is an additional GAAP financial measure, which includes items other than Revenue and Expenses, as defined above. EBITDA is defined as earnings (loss) before financing costs, income tax expense, depreciation and amortization. A definition of EBITDA is provided on page 3 of Management’s Discussion and Analysis.

Operational and Strategic Highlights

In 2017, Capstone made a strategic shift to focus the business as a North American independent power producer. Notable achievements this year include: the sale of Capstone's 33.3% indirect interest in Värmevärden, changes to the management team and board of directors, the completion of a major refurbishment project at Whitecourt, the acquisition of the remaining interests in the Glen Dhu and Fitzpatrick Mountain wind facilities and achieving commercial operation at Settlers Landing, resulting in an overall increase in Capstone's net capacity to 541 MW.

In addition, Capstone achieved the following operational and financial highlights:

  • Refinanced the CPC credit facilities, providing greater flexibility and lower costs to Capstone;
  • Received funding under Alberta's Bioenergy Producer Program at Whitecourt;
  • Signed a new Electricity Purchase Agreement for the Sechelt Creek Hydro facility with BC Hydro on March 1, 2018, subject to regulatory approval; and
  • Executed a 20-year power purchase agreement ("PPA") with SaskPower for the 10 MW Riverhurst development project.

Fourth Quarter and Fiscal 2017 Financial Highlights

During the fourth quarter of 2017, revenue increased by $1.5 million, or 4%, compared to the same period in 2016. For the year, revenue decreased by $18.7 million, or 11%. The decrease for the year reflects higher net Ontario Electricity Financial Corporation ("OEFC") proceeds awarded for retroactive payments to Cardinal and the Ontario hydro facilities in the third quarter of 2016, partially offset in 2017 by higher revenue from the existing wind facilities and new wind facilities added since January 1, 2016, consisting of Ganaraska, Grey Highlands ZEP, Grey Highlands Clean, Snowy Ridge and Settlers Landing, and the government grant funding at Whitecourt.

Expenses decreased by $2.4 million, or 15%, for the fourth quarter and by $39.0 million, or 42%, for the year. The decrease for the year was primarily due to lower operating expenses relating to Cardinal's fuel expenses for commitments relating to the OEFC settlement in the third quarter of 2016, and lower corporate staff costs and professional fees associated with iCON's 2016 acquisition. This was partially offset by higher operating expenses from the new wind facilities.

EBITDA in the fourth quarter of 2017 decreased by $8.1 million, or 22%, but increased by $1.9 million, or 2%, for the year. The increase for the year reflects the factors noted above, as well as the increase in the fair value of the Whitecourt embedded derivative in 2017.

Net income decreased by $19.5 million for the quarter, but increased $133.9 million for the year. The increase for the year primarily reflects a gain of $128.1 million from the sale of Värmevärden in the first quarter, partially offset by the 2016 contributions from Bristol Water, which Capstone sold in December 2016.

Financial Position

As at December 31, 2017, the Corporation had unrestricted cash and cash equivalents of $64.1 million, which along with Capstone's refinanced corporate credit facilities provides greater financial flexibility. In addition, Capstone has adequate financial flexibility to continue to evaluate refinancing options for the $38.7 million of project debt maturing in August 2018, for SkyGen and Skyway 8.

Dividend Declarations

The board of directors today declared a quarterly dividend on the Corporation’s Cumulative Five-Year Rate Reset Preferred Shares, Series A (the “Preferred Shares”) of $0.2044 per Preferred Share to be paid on or about April 30, 2018 to shareholders of record at the close of business on April 13, 2018. The dividend on the Preferred Shares covers the period from January 31 to April 29, 2018.

The dividends paid by the Corporation on its Preferred Shares are designated “eligible” dividends for the purposes of the Income Tax Act (Canada). An enhanced dividend tax credit applies to eligible dividends paid to Canadian residents.

About Capstone Infrastructure Corporation

Capstone's mission is to provide investors with an attractive total return from responsibly managed long-term investments in power generation in North America. Capstone’s strategy is to develop, acquire and manage a portfolio of high quality power assets. Capstone owns and operates, approximately net 541 MW of installed capacity across 23 facilities in Canada, including wind, hydro, solar, biomass, and natural gas power plants. Please visit www.capstoneinfrastructure.com for more information.

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 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 use forward-looking words, such as “anticipate”, “continue”, “could”, “expect”, “may”, “will”, “intend”, “estimate”, “plan”, “believe” or other similar words, and include, among other things, statements found in “Results of Operations” and "Financial Position Review". These statements 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, accordingly, should not be read as guarantees of future performance or results. The forward-looking statements 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, 2017 under the headings "Changes in the Business", “Results of Operations” and "Financial Position Review", as updated in subsequently filed MD&A of the Corporation (such documents are available under the Corporation’s SEDAR profile at www.sedar.com).

Other potential material factors or assumptions that were applied in formulating the forward-looking statements 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 the preferred shares will remain outstanding and that dividends will continue to be paid on the preferred shares; that there will be no material delays in the Corporation’s wind development projects achieving commercial operation; that the Corporation’s power facilities will experience normal wind, hydrological and solar irradiation conditions, and ambient temperature and humidity levels; that there will be no material changes to the Corporation’s facilities, equipment or contractual arrangements; that there will be no material changes in the legislative, regulatory and operating framework for the Corporation’s businesses; that there will be no material delays in obtaining required approvals for the Corporation’s power facilities; that there will be no material changes in environmental regulations for the power facilities; that there will be no significant event occurring outside the ordinary course of the Corporation’s businesses; the refinancing on similar terms of the Corporation’s and its subsidiaries’ various outstanding credit facilities and debt instruments which mature during the period in which the forward-looking statements relate; that the conversion rights pursuant to the convertible debenture issued in connection with the Grey Highlands ZEP, Ganaraska, Snowy Ridge and Settlers Landing wind facilities are exercised; market prices for electricity in Ontario and the amount of hours that Cardinal is dispatched; and the price that Whitecourt will receive for its electricity production considering the market price for electricity in Alberta, and Whitecourt’s agreement with Millar Western, which includes sharing mechanisms regarding the price received for electricity sold by the facility.

Although the Corporation believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons, including: risks related to the Corporation’s securities (controlling shareholder, dividends on common shares and preferred shares are not guaranteed; and volatile market price for the Corporation’s securities); 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, development and integration; environmental, health and safety; changes in legislation and administrative policy; and reliance on key personnel); and risks related to the Corporation’s power facilities (market price for electricity; power purchase agreements; completion of the Corporation’s wind development projects; operational performance; contract performance and reliance on suppliers; land tenure and related rights; environmental; and regulatory environment).

For a comprehensive description of these risk factors, please refer to the “Risk Factors” section of the Corporation’s Annual Information Form dated March 24, 2017, as supplemented by disclosure of risk factors contained in any subsequent annual information form, material change reports (except confidential material change reports), business acquisition reports, interim financial statements, interim management's discussion and analysis and information circulars filed by the Corporation with the securities commissions or similar authorities in Canada (which are available under the Corporation’s SEDAR profile at 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. The forward-looking statements 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.

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.

For further information, please contact:

Andrew Kennedy
Chief Financial Officer
(416) 649-1300
akennedy@capstoneinfra.com

Source: Capstone Infrastructure Corporation