Macquarie Power & Infrastructure Income Fund Announces Fourth Quarter and Fiscal Year 2008 Results
- Continuing stable portfolio
- Conservative financial position
- Capacity for selective growth
TORONTO, ONTARIO (February 19, 2009) – Macquarie Power & Infrastructure Income
Fund (TSX: MPT.UN; MPT.DB – “MPT” or the “Fund”), which owns and operates essential
infrastructure assets, today reported unaudited results for the fiscal year and fourth quarter
ended December 31, 2008. Unaudited fourth quarter financial information is available on the
Fund’s website at www.macquarie.com/mpt and on SEDAR at www.sedar.com.
“MPT delivered stable performance through 2008, which reflects the resilience of our regulated
and contractually-defined infrastructure assets throughout the economic cycle,” said Mr.
Gregory Smith, President and Chief Executive Officer of the Fund. “We experienced higher
power prices at Cardinal and increased production at Erie Shores, which were offset by lower
water flows at the Wawatay hydro power facility as well as increased outages at Whitecourt.
Our ability to manage through these fluctuations and deliver on our guidance for the year
demonstrates the importance and value of having a diversified portfolio.”
Mr. Smith continued, “As a result of this inherent stability, we met our targeted 100% payout
ratio for the year. For 2009, we are continuing to focus on operational excellence and
efficiency across our portfolio and on enhancing the overall performance of our businesses.”
Fiscal 2008 Financial Performance
Revenue for the year was $150.4 million compared with $122.8 million in 2007. The increase
reflected a full year of contribution from the wind, hydro and biomass facilities acquired at the
end of the second quarter in 2007 as well as continuing higher power prices at the Cardinal
gas cogeneration facility (“Cardinal”). These factors were partially offset by lower production at
Cardinal that was primarily due to higher outage hours and increased gas mitigation to
capitalize on a favourable spot market price for gas.
The Fund’s distributable cash1 was $52.2 million ($1.046 per unit) compared with $48.8 million
($1.210 per unit) in 2007. This variance reflects the higher revenue in 2008, which was
partially offset by increased gas transportation costs at Cardinal as well as higher
administration expenses for the Fund. Declared distributions to unitholders were $52.5 million
($1.050 per unit) compared with $42.9 million ($1.030 per unit) in 2007 for a payout ratio of
100% (2007 – 88%). The variance in payout ratio between 2007 and 2008 reflects the $0.02
per unit increase in distributions to unitholders that became effective in January 2008 and the
prepayment by Caithness Western Wind Holdings LLC of subordinated debt (the “U.S. Wind
Loan”) held by the Fund, which resulted in a one-time gain of $5.4 million in 2007 (excluding
the impact of the prepayment of the U.S. Wind Loan, the 2007 payout ratio would have been
Income from operations2 for the Fund was $26.1 million compared with $23.3 million in 2007,
reflecting a full year of contribution from the wind, hydro and biomass assets and higher power
prices at Cardinal. These factors were offset by increased gas transportation costs at Cardinal
as well as by higher administrative costs and depreciation. The increase in administrative
expenses was due to higher management fees and cost reimbursement expenses, which
reflected the additional finance and asset management resource requirements following the
acquisition of the wind, hydro and biomass assets in 2007, as well as to higher business
Fourth Quarter Financial Performance
Revenue for the quarter was $41.7 million (Q4 2007 – $41.8 million), reflecting power
generation of 545,506 MWh (Q4 2007 – 562,595 MWh). Cardinal benefitted from increased
power prices while Erie Shores Wind Farm (“Erie Shores”) achieved higher production due to
greater average wind speeds in the quarter. These factors were offset by a 11.4% decrease in
production at the Whitecourt biomass facility (“Whitecourt”) due to increased outages required
for repairs and maintenance. Production at the hydro facilities was 30.5% lower than in the
same period last year, reflecting lower water flows due to colder temperatures.
For the quarter, distributable cash was $14.7 million (Q4 2007 - $20.4 million) while declared
distributions to unitholders were $13.1 million (Q4 2007 - $12.9 million), representing a payout
ratio of 89% (Q4 2007 – 63%).
Income from operations for the quarter was $8.2 million (Q4 2007 - $8.8 million), reflecting
higher operating expenses due to increased gas transportation costs at Cardinal as well as
increased outages at Whitecourt, which were partially offset by lower depreciation and
amortization expenses. Administrative expenses were lower due to decreased incentive fees,
which were partially offset by higher cost reimbursement expenses, a portion of which was
previously deferred in the year but expensed in the quarter, and increased business
Globally, the economic crisis has resulted in a significant revaluation of assets, including
infrastructure assets. While the Fund’s portfolio continues to generate stable cash flow, the
Fund has not been immune to the turbulence in global capital markets, as evidenced by the
Fund’s unit price performance in the last quarter of 2008.
In accordance with Canadian Generally Accepted Accounting Principles (“GAAP”), the Fund
evaluates the carrying value of its goodwill annually and more frequently if events or changes
in circumstances, including the market environment, warrant a reassessment prior to the
annual impairment test. As of December 31, 2008, the Fund recognized a goodwill impairment
charge of $43.3 million due to the revaluation of its assets, which is reflective of the decline in
the Fund’s market valuation relative to the book value of its equity. This non-cash charge has
no impact on the Fund’s liquidity, the stability of cash flow from operations or distributable
As of December 31, 2008, the Fund had positive working capital of $51.9 million and cash on
hand and short-term investments of $51.9 million, including fully-funded general, major
maintenance and capital expenditure reserve accounts in the aggregate amount of $17.1
million. The Fund is conservatively leveraged, with a debt to capital ratio of 46.4%.
Fiscal 2008 Operational Highlights
Total power production in 2008 was 2,084,376 MWh compared with 1,687,059 MWh in 2007,
reflecting a full year of contribution from the wind, hydro and biomass assets.
Cardinal produced 1,259,737 MWh of electricity (2007 – 1,291,876 MWh). The facility
achieved an availability of 97.2% (2007 – 98.2%). Cardinal curtailed production for 504 hours
(2007 – 23 hours) to capitalize on the favourable spot market price for gas and had 240 hours
of outage (2007 – 150 hours), resulting in a capacity factor of 94.9% (2007 – 96.7%).
Erie Shores produced 253,927 MWh (2007 – 243,423 MWh) of power, reflecting a strong
average wind speed during the year, particularly in the fourth quarter. The facility achieved an
overall availability of 95.0% (2007 – 95.1%) and a capacity factor of 29.2% (2007 – 28.1%).
The Fund’s hydro power facilities produced 162,783 MWh (2007 – 174,300 MWh) of electricity.
The hydro power facilities generally experienced colder than normal temperatures, particularly
at Wawatay, which resulted in lower water flows than in 2007. During the year, there were
1,017 hours of outage (2007 – 837 hours), reflecting annual electrical and civil inspections as
well as increased maintenance work at Wawatay and Sechelt. Overall, the hydro power
facilities had a weighted average availability of 96.3% (2007 – 98.2%) and a capacity factor of
51.9% (2007 – 55.7%).
Whitecourt produced 186,528 MWh of electricity (2007 – 192,080 MWh), reflecting 1,059
hours of outage (2007 – 462 hours) that included the 23-day major maintenance program,
which occurs on a seven-year cycle, as well as additional unplanned repair work required in
the fourth quarter. As a result, the facility operated at an availability of 88.4% (2007 – 93.4%)
and achieved a capacity factor of 88.0% (2007 – 93.1%).
The Chapais biomass facility (“Chapais”), in which the Fund holds a minority preferred equity
and debt interest produced 221,401 MWh (2007 – 218,955 MWh) of electricity. The facility
experienced availability of 93.4% (2007 – 94.8%), reflecting 588 hours of outage (2007 – 458
hours), and achieved a capacity factor of 90.0% (2007 – 89.3%).
The Fund owns an indirect 45% equity interest in Leisureworld Senior Care LP
(“Leisureworld”), which the Fund accounts for as an equity investment. In 2008, Leisureworld
achieved a 36.9% increase in revenue and a 10.5% increase in income from operations over
2007. This reflected the contribution of the seven homes acquired in January 2008, improved
occupancy and greater use of private accommodation across its portfolio, and increased
government funding. Average total occupancy in 2008 was 98.4% (2007 – 98.4%). The
average occupancy of private rooms was 92.9% (2007 – 86.3%).
Fiscal 2009 Outlook
“Our top priority in 2009 is to continue enhancing the performance of our portfolio,” Mr. Smith
continued. “While we remain open to growth opportunities that would increase the size and
long-term value of the Fund, we are being selective in what transactions we assess and
choose to pursue given the challenging market climate and longer time horizon to bring deals
to a successful close.”
Mr. Smith added, “With our Board of Trustees, we are also continuing to evaluate MPT’s
strategic options as SIFT taxation approaches, including the conversion to a high dividendpaying
corporation in 2011. We expect that 2010 will be a transitional year for the Fund as we
seek to position our portfolio and capital structure for 2011. Our focus is on maintaining a high
quality portfolio of infrastructure assets that will sustain a high yield in the post-SIFT
environment, which we know is important to our unitholders, while creating the potential for
In 2009, the Fund expects to maintain a distribution to unitholders of $1.05 per unit, barring
any significant external factors or growth initiatives, representing a payout ratio of
approximately 100%. The return of capital portion of distributions in 2009 is expected to be
In 2009, Cardinal will generate lower revenue, which primarily reflects a planned hot gas path
inspection that will require approximately 12 days of outage. In addition, Cardinal will continue
to experience higher gas transportation costs, with the 2009 rate expected to be consistent
with or below the average 2008 level. As a result, cash flow from Cardinal will be slightly lower
on a year-over-year basis.
Erie Shores is expected to generate annual long-term production of 249,800 MWh, subject to
wind speed and density. This represents a 1.7% increase over previous guidance, reflecting
an independent assessment of Erie Shores’ wind energy production based on two full years of
actual operating data. Erie Shores expects to enhance its availability with a connection to a
second transmission line, which will enable the facility to continue delivering its power to the
grid during periods of outage on the existing Hydro One line.
The hydro power facilities are expected to produce average long-term annual production of
166,360 MWh, which is in line with previous guidance. A key efficiency initiative in 2009 is to
automate the storage and release of water in the lake that serves the Sechelt facility, which will
enable the facility to remotely control water flows, and, accordingly, maximize production.
Whitecourt is continuing to address operational challenges identified in the fourth quarter of
2008, primarily a higher than normal vibration of the turbine, which is expected to result in
approximately 12 days of outage in the first quarter of 2009. Whitecourt typically schedules
regular maintenance work in the spring and fall periods, each of which usually requires four
days of outage. Whitecourt plans to enhance and extend its spring 2009 maintenance
program by 8 to 20 days to ensure that recent operating challenges are fully and successfully
addressed. Whitecourt is expected to achieve an availability of approximately 86% to 90% for
In early February, the Millar Western Group of Companies (“Millar Western”) informed
Whitecourt of its intention to reduce the scale of its operations as a result of the impact of the
global economic crisis on its business. This may affect the volume of wood waste fuel that
Millar Western provides to Whitecourt. Under the terms of Whitecourt’s wood waste fuel supply
contract with Millar Western, in the event that Millar Western does not supply the minimum
required quantity of wood waste it must pay Whitecourt’s cost to source replacement fuel.
Leisureworld will continue to focus on enhancing the quality of care and accommodation for
residents. Leisureworld is expected to maintain full occupancy and to continue to attract more
residents to private accommodation, which contributes to operating profitability. In the first
quarter of 2009, Leisureworld extended the outside date to close its previously announced
acquisition of the Good Samaritan Seniors Complex (“Good Samaritan”) to March 16, 2009.
The acquisition of Good Samaritan remains subject to regulatory approval by the Ontario
Ministry of Health and Long-Term Care. Management currently expects that Leisureworld’s
distribution policy will be maintained for fiscal 2009.
In fiscal 2009, management expects Cardinal to contribute approximately 52% of the Fund’s
distributable cash; Erie Shores, 12%; the hydro power facilities, 12%; the biomass facilities,
6%; and Leisureworld, 18%.
The Fund has approximately $100 million available in cash and acquisition facilities to pursue
growth opportunities that meet its investment and return criteria. These opportunities could
include: power generation, particularly in the renewable energy sector; electricity transmission
and distribution; additional long-term care homes; and other essential infrastructure assets
such as water distribution, schools, hospitals and roads, including through public-private
Conference Call and Webcast
Management of the Fund will hold a conference call (with accompanying slides) to discuss
fourth quarter results on Friday, February 20, 2009 at 8:30 a.m. ET. The conference call will
be accessible via webcast through the Fund’s website with accompanying slides at
www.macquarie.com/mpt and by telephone at 416-641-6139 (Canada) or 1-866-542-4262
(North America). A replay of the call will be available until March 6, 2009 by dialling 416-695-
5800 or 1-800-408-3053 and entering the passcode 3279641.
For fiscal 2008, approximately 60% of distributions paid to unitholders are expected to be nontaxable
as a return of capital.
The Fund’s tax information will be forwarded to the Canadian Depository for Securities (CDS)
and posted on the Fund’s website by February 27, 2009. Brokerage firms are responsible for
preparing the required tax slips (T5013) for mailing to unitholders by March 31, 2009.
Distribution Reinvestment Plan (DRIP)
Eligible unitholders may elect to participate in the Fund’s Distribution Reinvestment Plan. For
more information about the DRIP, please visit the Fund’s website at www.macquarie.com/mpt.
About the Fund
Macquarie Power & Infrastructure Income Fund invests in essential infrastructure assets in
North America with an emphasis on power infrastructure. MPT’s strategy is to acquire and
actively manage a diverse, high quality portfolio of infrastructure assets to improve their
financial performance and provide growing and sustainable distributions to unitholders. MPT’s
portfolio includes investments in gas cogeneration, wind, hydro and biomass power generating
facilities, representing approximately 350 MW of installed capacity, and a 45% interest in
Leisureworld Senior Care LP, a leading provider of long-term care, or social infrastructure, in
Ontario. MPT is managed by a wholly-owned subsidiary of Macquarie Group Limited. Please
visit www.macquarie.com/mpt for additional information.
1 Distributable cash is defined as cash flows from operating activities after removing changes in working capital and reflecting the
impacts of releases from maintenance reserves, allocations to major maintenance and capital expenditure reserves, non-discretionary
payments and receipts, and distributions from Leisureworld.
2 Income from operations refers to income before net interest, foreign exchange, share of income (losses) from long-term investments,
unrealized gains (losses) on swap contracts and on embedded derivatives in gas purchase contracts, gain on sale of capital assets,
Certain statements in this news release may constitute “forward-looking” statements, which involve known and
unknown risks, uncertainties and other factors that may cause the actual results to be materially different from any
future results expressed or implied by such forward-looking statements. When used in the this news release, such
statements use such words as “may”, “will”, “expect”, “believe”, “plan” and other similar terminology. These statements
reflect current expectations regarding future events and operating performance and speak only as of the date of this
news release. Forward-looking statements involve significant risks and uncertainties, should not be read as
guarantees of future performance or results and will not necessarily be accurate indications of whether or not such
results will be achieved. The forward-looking statements contained in this news release are based on information
currently available and what the Fund currently believes are reasonable assumptions, including the material
assumptions for each of the Fund’s assets set out in the Fund’s 2007 Annual Report under the headings “Outlook” on
pages 8 to 12, as updated in subsequently filed quarterly Financial Reports of the Fund. However, the Fund cannot
assure investors that actual results will be consistent with these forward-looking statements. These forward-looking
statements are made as of the date of this news release and the Fund does not undertake to update any forwardlooking
information that may be made from time to time by or on its behalf, except as required under applicable
securities legislation. The forward-looking information contained in this news release is presented for the purposes of
assisting investors and analysts in understanding the Fund’s financial position and our stated priorities and objectives
may not be appropriate for other purposes. The Fund cautions readers not to place undue reliance on any forwardlooking
statements, which speak only as of the date made. A number of factors could cause actual results to differ
materially from the results discussed in the forward-looking statements, including, but not limited to, risks associated
with: the operational performance of the Fund’s assets; power purchase agreements; fuel costs, supply and
transportation; default under credit agreements; regulatory regime and permits; land tenure and related rights;
government regulation and funding; the ability to complete future acquisitions; Leisureworld’s ability to complete the
acquisition of the Good Samaritan Seniors Complex; LTC home ownership and operation; minority ownership interest
in Leisureworld; reliance on key personnel; default under Leisureworld’s long-term debt and credit facility; labour
relations and cost; the variability of distributions; unitholder liability; dependence on Macquarie Power Management
Ltd., the manager of the Fund, and potential conflicts of interest; insurance; and risks related to the environmental,
health and safety regimes within which the Fund’s assets operate. The risks and uncertainties described above are
not exhaustive and other events and risk factors, including risk factors disclosed in Fund’s filings with Canadian
securities regulatory authorities, could cause actual results to differ materially from the results discussed in the
Non-GAAP Financial Measures
"Income from operations" and "distributable cash" do not have any standardized meaning under Canadian GAAP.
Management believes they are useful measures of performance as they provide investors with indications of income
from operations and the amount of cash available for distribution to unitholders. The Fund's method of calculating
"income from operations" and "distributable cash" may not be comparable to other similarly named calculations.
For further information, please contact:
Vice President & Chief Financial Officer
Tel: (416) 607 5198
Vice President, Communications and Investor Relations
Tel: (416) 649 1325