Macquarie Power & Infrastructure Income Fund Announces Strong Fourth Quarter and Year-End 2006 Results
TORONTO, ONTARIO (February 20, 2007) – Macquarie Power & Infrastructure Income Fund (TSX: MPT.UN – “MPT” or the “Fund”) today announced unaudited results for the fourth quarter and fiscal year ended December 31, 2006.
“The Fund continued to generate sustainable, increasing distributions to unitholders in 2006, reflecting the high quality and stability of our assets as well as the success of our operating strategies,” said Mr. Gregory Smith, President and Chief Executive Officer. “The growth in distributable cash reflected a strong contribution from Leisureworld due to improving occupancy levels, the optimization of preferred bed mix and increased government funding rates. Cardinal likewise performed reliably, benefiting from a sustained increase in electricity rates and lower gas transportation costs.”
For the quarter ended December 31, 2006, the Fund generated revenue of $25.6 million compared with $24.6 million in the same period last year, primarily reflecting a 1.4% increase in electricity rates. For the year ended December 31, 2006, the Fund’s revenue was $89.9 million compared with $90.2 million for 2005. The decrease, which reflects the 22-day outage in the second quarter to conduct scheduled major maintenance, was partially offset by a 3.2% increase in electricity rates for 2006 and the receipt of a Direct Consumer Rate (DCR) adjustment of approximately $1.0 million.
Income from operations1 for the Fund was $5.2 million for the quarter compared with $3.3 million for the same quarter in 2005. For the year, income from operations was $10.6 million compared with $13.6 million in 2005. This variance primarily reflected increased administration costs, which included higher management fees related to a full year of Leisureworld operations within the Fund’s portfolio, higher cost reimbursement due to business development activities and an increase in incentive fees arising from the Fund’s strong performance.
Distributable cash2 for the quarter was $10.0 million ($0.333 per fully diluted unit) compared with $7.8 million ($0.264 per fully diluted unit) for the same quarter last year. For the year, distributable cash was $34.1 million ($1.133 per fully diluted unit) compared with $26.0 million ($1.117 per fully diluted unit) for 2005.
Declared distributions to unitholders for the quarter were $7.7 million ($0.257 per unit), representing a payout ratio of 77% (2005 – 92%). Distributions to unitholders for the year were $30.4 million ($1.012 per unit), representing a payout ratio of 89% (2005 - 85%). In 2006, the Fund increased annual distributions to unitholders by $0.05 and $0.03 per unit effective in January and August, respectively. Distributions to unitholders are paid from cash flows from operations and unrestricted cash balances.
1 Income from operations is net income less unrealized gains or losses, interest and equity accounted income or loss.
2 Distributable cash is 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 and distributions from Leisureworld.
As at December 31, 2006, the Fund had working capital of $19.2 million, including cash and cash equivalents totalling $12.1 million, of which $6.3 million was allocated to its general, major maintenance and capital expenditure reserve accounts. The balance of this amount is maintained as free cash on hand and is available to finance the seasonality of operations and investment opportunities.
Mr. Smith continued, “We anticipate sustained, stable growth for Cardinal and Leisureworld during 2007. Cardinal’s cash flow is expected to increase due to higher electricity rates as well as less scheduled maintenance time. For Leisureworld, growth will be driven by improving occupancy. In February, occupancy of Leisureworld’s newest Class A home in Orillia exceeded 97%, and we expect that in 2007 all 19 LTC homes will achieve the 97% occupancy threshold that is required for full funding. Increased use of preferred accommodation across the portfolio will also be an important contributor to growth. In addition, the Fund has a solid financial position with the flexibility to pursue appropriate growth opportunities that will further contribute to long-term unitholder value.”
Cardinal Operational Performance
During the quarter, electricity generation was approximately 3% higher than in 2005, plant availability was 98.9% (2005 – 98.7%) and capacity was 96.6% (2005 – 93.7%). For the year, Cardinal had availability of 94.0% (2005 – 98.5%) and capacity of 91.6% (2005 – 95.4%). Electricity sales in 2006 amounted to 1,227,000 MWh compared with 1,282,000 MWh in 2005.
Leisureworld Operational Performance
The Fund owns an indirect 45% interest in Leisureworld Senior Care LP (“Leisureworld”), which it accounts for as an equity investment.
During 2006, Leisureworld operated in line with expectations, demonstrating steady growth in revenue and income from operations. Of Leisureworld’s 19 long-term care (“LTC”) homes, 17 homes were considered mature and had an annual average total occupancy of 98.5% (2005 – 93.5%) for the year ended December 31, 2006. The Vaughan home, which was in ramp up during the year, achieved an annual average total occupancy of 79.4% (2005 – 38.3%). The Spencer House home was closed and replaced by a new home in Orillia in November 2006. Spencer House’s average total occupancy for the year was 53.2% (2005 – 93.2%). At December 31, 2006, Orillia had achieved occupancy of 56.3% and preferred bed occupancy of 40.4%. Preferred bed average total occupancy for the seventeen mature homes was 83.4% for the year (2005 – 78.3%).
For 2007, the Fund anticipates maintaining an annual payout ratio of 90% to 95%, providing unitholders with stability and the potential for growth. For 2006, 79% of the distributions paid to unitholders will be non-taxable as a return of capital. Management expects the return of capital portion to be approximately 70% for the 2007 fiscal year, barring any significant external shocks.
Tax information will be forwarded to the Canadian Depository for Securities (CDS) and posted on the Fund’s website no later than February 28, 2007. Brokerage firms, which receive the tax information from the Canadian Depository System, are responsible for preparing the required tax slips (T5013) for mailing to unitholders by March 31, 2007.
The Fund’s complete fourth quarter report for 2006, including Management’s Discussion and Analysis and unaudited financial statements, is available in the Investor Centre section of the Fund’s website at www.macquarie.com/mpt or on SEDAR at www.sedar.com.
Conference Call and Webcast
The Fund will hold a conference call to discuss the fourth quarter and year-end results on Wednesday, February 21, 2007 at 8:30 a.m. The conference call will be accessible via webcast (with accompanying slides) through the Fund’s website at www.macquarie.com/mpt and by telephone at 416-695-6120 (Canada) or 1-877-888-4210 (North America). A replay of the call will be available until February 28, 2007 by dialling 416-695-5275 or 1-888-509-0081 and entering the passcode 639493.
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 infrastructure assets with an emphasis on power infrastructure. MPT seeks to acquire and actively manage a high-quality portfolio of long-life infrastructure assets to improve their financial performance and provide growing, sustainable distributions to unitholders for the long term. MPT’s infrastructure portfolio includes Cardinal, a 156MW gas-fired cogeneration power station in Ontario, and a 45% interest in Leisureworld, a leading long-term care provider in Ontario with over 30 years operating experience. MPT is managed by Macquarie Power Management Limited, which is a wholly owned subsidiary of Macquarie Bank Limited and member of the Macquarie group.
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. Forward-looking statements use such words as “may”, “will”, “anticipate”, “believe”, “expect”, “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. 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 Cardinal facility and the power industry, risks associated with MPT’s interest in Leisureworld and the long-term care sector, and risks associated with the structure of MPT. The risks and uncertainties described above are not exhaustive and other events and risk factors including risk factors disclosed in MPT’s filings with Canadian securities regulatory authorities could cause actual results to differ materially from the results discussed in the forward-looking statements.
The forward-looking statements contained in this news release are based upon information currently available and what the Fund currently believes are reasonable assumptions. 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 and the Manager assume no obligation to update or revise them to reflect new events or circumstances. The Fund cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.
Non-GAAP Financial Measures
"Income from operations" and "distributable cash" do not have any standardized meaning under Canadian Generally Accepted Accounting Principles (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:
Chief Financial Officer
Tel: (416) 607 5198
Tel: (416) 649 1325