TORONTO, ONTARIO (May 11, 2010) – Macquarie Power & Infrastructure Income Fund
(TSX: MPT.UN; MPT.DB.A – “MPT” or the “Fund) today reported unaudited results for the
quarter ended March 31, 2010. The Fund’s Management’s Discussion and Analysis and
unaudited financial statements are available on the Fund’s website at
www.macquarie.com/mpt and on SEDAR at www.sedar.com.
“Overall, the Fund’s portfolio performed strongly during the first quarter,” said Michael
Bernstein, the Fund’s President and Chief Executive Officer. “We benefited from increased
revenue, reflecting higher power rates at Cardinal, normal operations at Whitecourt following
last year’s maintenance work and higher water flows at the hydro power facilities, partially
offset by lower than average wind speeds at Erie Shores Wind Farm.”
On March 23, 2010, the Fund divested of its 45% interest in Leisureworld Senior Care LP
(“Leisureworld”) through an initial public offering (“IPO”) of Leisureworld Senior Care
Corporation (“LSCC”), resulting in initial net cash proceeds to the Fund of approximately $50
million. As the over-allotment option granted to the IPO underwriters was not exercised,
Macquarie Long Term Care LP (“MLTCLP”) owns 958,649 common shares of LSCC, which
were issued at $10 per share with a dividend yield of 8.5%. The Fund indirectly owns 431,392
of these shares through its 45% interest in MLTCLP. MPT’s interest, currently worth
approximately $4 million, represents 2.2% of the outstanding common shares of LSCC.
Mr. Bernstein continued, “The Fund is now well positioned to pursue growth in core
infrastructure categories such as power generation, distribution and transmission, and utilities
and transportation, including through public-private partnerships. We have access to
approximately $150 million of capital, including about $85 million available under our credit
facility, net proceeds from the successful IPO of LSCC and the balance of proceeds from our
convertible debenture issue earlier this year. Additionally, we expect to accumulate cash
annually due to our lower distribution policy. We are actively evaluating a number of growth
opportunities with the goal of extending our cash flow profile beyond 2014 and creating value
for our unitholders.”
First Quarter Financial Performance
Revenue for the quarter was $44.2 million compared with $40.3 million in the first quarter of
2009, reflecting a 1.6% increase in electricity production due to fewer outage hours at the
Whitecourt biomass facility (“Whitecourt”) and increased water flows at the hydro power
facilities, partially offset by lower production at Erie Shores Wind Farm (“Erie Shores”). In
addition, the Cardinal gas cogeneration facility (“Cardinal”) received higher power prices under
its Power Purchase Agreement (“PPA”). Cardinal also received a $1.8 million adjustment in
the Direct Customer Rate (“DCR”) from the Ontario Electricity Financial Corporation (“OEFC”)
compared with a DCR adjustment in the first quarter of 2009 that required Cardinal to pay $0.2
million to the OEFC.
Macquarie Power & Infrastructure Income Fund is not an authorised deposit taking institution for the purposes of the Banking
Act (Cth) 1959 and Macquarie Power & Infrastructure Income Fund’s obligations do not represent deposits or other liabilities
of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of
the obligations of Macquarie Power & Infrastructure Income Fund.
The Fund’s distributable cash was $14.7 million ($0.295 per unit) compared with $15.0 million
($0.300 per unit) in the first quarter of 2009, reflecting lower distributions received from
Leisureworld following the divestment on March 23, 2010 as well as higher administrative and
net interest expenses. Declared distributions to unitholders were $8.2 million ($0.165 per unit)
compared with $13.1 million ($0.262 per unit) in 2009, representing a payout ratio of 56%
compared with a payout ratio of 88% in the first quarter of 2009. The lower payout ratio
reflects the Fund's new policy, effective January 2010, to distribute $0.66 per unit annually to
unitholders compared with $1.05 per unit annually previously.
Income from operations2 for the Fund was $9.6 million compared with $6.1 million in the first
quarter last year. This variance reflected higher revenue at Cardinal, Whitecourt and the hydro
power facilities and lower operating costs at Whitecourt compared with the same period last
year, partially offset by lower production at Erie Shores and higher gas transportation costs at
Cardinal. Administrative expenses increased as a result of reorganization costs related to the
Fund’s conversion to a corporate structure, which is expected to occur prior to January 1,
As at March 31, 2010, the Fund had positive working capital of $31.6 million (December 31,
2009 - $17.0 million), which includes cash and cash equivalents of $73.4 million (December
31, 2009 - $53.1 million3). The Fund is conservatively leveraged relative to the low risk profile
and long life of its assets, with a debt to capital4 ratio of 47.5%.
First Quarter Operational Highlights
Total power production increased 1.6% to 550,177 MWh from 541,603 MWh in the first quarter
Cardinal produced 340,708 MWh of electricity (Q1 2009 – 340,594 MWh), reflecting three
hours (Q1 2009 – 22 hours) of outage for repairs and maintenance. For the quarter, Cardinal
achieved an availability of 99.9% (Q1 2009 – 98.9%) and a capacity factor of 97.9% (Q1 2009
Erie Shores produced 60,518 MWh of electricity (Q1 2009 – 71,910 MWh), reflecting a lower
than average wind speed. The facility operated at an overall availability of 97.9% (Q1 2009 –
96.1%) and a capacity factor of 28.3% (Q1 2009 – 33.6%).
The Fund’s hydro power facilities produced 36,816 MWh of electricity (Q1 2009 – 23,635
MWh), reflecting increased production at the Sechelt, Wawatay and Dryden facilities as a
result of higher precipitation and above seasonal temperatures. The hydro power facilities
achieved a weighted average availability of 97.4% (Q1 2009 – 99.2%), reflecting 844 hours of
outage (Q1 2009 – 197 hours) at the Dryden facility’s 1 MW Wainwright station. The hydro
power facilities operated at a capacity factor of 47.7% (Q1 2009 – 30.7%).
Whitecourt produced 51,914 MWh of electricity (Q1 2009 – 44,232 MWh), reflecting a return to
normal operations at the facility following last year’s maintenance outage. The facility
operated at an availability of 99.2% (Q1 2009 – 87.2%) and achieved a capacity factor of
98.8% (Q1 2009 – 86.6%).
The Chapais biomass facility (“Chapais”), in which the Fund holds minority preferred equity
and debt interests, produced 60,221 MWh of electricity (Q1 2009 – 61,232 MWh). The facility
experienced availability of 97.3% (Q1 2009 – 100.0%), reflecting 58 hours of outage (Q1 2009
– nil), and achieved a capacity factor of 99.6% (Q1 2009 – 99.5%). Chapais receives a
monthly capacity premium during the four-month period from December to March provided that
the facility meets the minimum 95% capacity requirement for both peak and off-peak hours.
Fiscal 2010 Outlook
The Fund expects to maintain stable distributions to unitholders of $0.66 per unit through 2014
based on its current portfolio. This distribution level is expected to result in an average payout ratio of approximately 70 to 75% of distributable cash over a five-year period. As a result of the divestment of Leisureworld, the 2010 payout ratio is anticipated to be above 80%.
Revenue at Cardinal is expected to be higher in 2010 than in 2009 due to less scheduled
maintenance and the continuing escalation in the DCR, which results in a higher power price
under Cardinal’s PPA. Cardinal completed its planned combustion inspection in April 2010 on
schedule in four days. Higher power rates and increased production compared with 2009 are
expected to partially offset the impact of higher gas transportation rates, which increased to
$1.64 per gigajoule in 2010 from $1.19 per gigajoule in 2009. As a result, Cardinal’s annual
cash flow is expected to be slightly higher than in 2009
As a result of unfavourable wind conditions in the first quarter of the year, revenue and cash
flow at Erie Shores is currently expected to be in line with or slightly below 2009. Erie Shores’
long-term annual production target is 249,800 MWh. At the end of July 2010, Erie Shores will
internalize operations and maintenance (“O&M”) following the expiry of its existing O&M
contract with GE Canada, which is expected to result in lower operating costs over time. As a
result of the internalization, Erie Shores expects to incur approximately $800,000 in one-time
expenses and capital expenditures primarily related to building up an inventory of spare parts
as well as end-of-contract inspections.<
Revenue and cash flow from the hydro power facilities is expected to be higher based on the
expectation of improved hydrological conditions as well as price escalators in the facilities’
PPAs. The average long-term annual production of the hydro power facilities is 166,360 MWh.
Capital expenditures across the facilities are expected to be significantly lower than in 2009.
Value enhancement projects at the hydro power facilities planned for a seasonally low period
in 2010 include upgrading the SCADA (Supervisory Control and Data Acquisition) software
systems at Hluey Lakes and Wawatay. These systems monitor the facilities’ operations to
collect the operational and technical data required to improve operational efficiency.
Revenue and cash flow at Whitecourt is expected to be significantly higher in 2010 than in
2009. Whitecourt is expected to achieve an availability factor of approximately 95% in 2010 in
line with its historical performance. Whitecourt’s turbine is expected to operate reliably until
the facility’s next scheduled major maintenance inspection in 2016. Approximately $1 million
in capital expenditures are planned for 2010 to support the facility’s ongoing reliability, which
includes replacing the boiler feedwater pumps and air compressor. Whitecourt is expected to
have a continuing stable and adequate supply of wood waste fuel in 2010.
At the Fund level, management expects higher administrative and interest costs in 2010 than
in 2009. Administrative costs are expected to be higher due to the process of converting the
Fund to a dividend-paying corporation, the implementation of International Financial Reporting
Standards, and increased business development activity as the Fund pursues its growth
strategy. Increased interest costs in 2010 will reflect higher rates on the Fund’s credit facility
as well as the higher principal amount outstanding on the convertible debentures. Despite
these costs, the Fund expects to achieve slightly increased cash flow overall in 2010
compared with 2009.
Conference Call and Webcast
Management of the Fund will hold a conference call (with accompanying slides) to discuss first
quarter results on Wednesday, May 12, 2010 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 416-340-2216 (Canada) or 1-866-226-1792
(North America). A replay of the call will be available until May 26, 2010 by dialling 416-695-
5800 or 1-800-408-3053 and entering the passcode 4680588.
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 Macquarie Power & Infrastructure Income Fund
Macquarie Power & Infrastructure Income Fund’s mandate is to invest in core infrastructure
businesses in Canada and internationally. MPT aims to acquire and actively manage a high
quality portfolio of long-life infrastructure businesses that will generate sustainable, long-term
distributions and an attractive total return for investors. MPT’s portfolio currently includes
investments in gas cogeneration, wind, hydro and biomass power generating facilities,
representing approximately 350 MW of installed capacity. MPT is also currently developing a
20 MW solar power facility in Ontario. MPT is managed by an affiliate 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. Distributable cash also
reflects the impacts of: cash taxes; 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,
impairment of goodwill and taxes.
3 On January 11, 2010, the Fund fully redeemed its 6.75% convertible unsecured subordinated debentures that were coming due on
December 31, 2010 with proceeds from the issuance of its $57.5 million offering of 6.50% convertible unsecured subordinated
debentures due December 31, 2016. The total amount paid was equal to the principal outstanding of $38.9 million plus accrued
interest. As a result, the Fund’s proforma cash and short-term investments at December 31, 2009 was approximately $23.7 million.
4 The Fund’s total debt includes long-term debt, capital lease obligations, convertible debentures and levelization amounts as at March
31, 2010. The fair value of the Fund’s convertible debentures as at March 31, 2010 was based on a unit price of $105.00 and
debentures outstanding of 57,500 units. As at December 31, 2009 the fair value of the Fund’s 2010 and 2016 Debentures was based
on a unit price of $100.05 and $101.00, respectively, and debentures outstanding of 38,918 and 50,000 units, respectively. The fair
value of unitholders’ equity reflects the Fund’s market capitalization as at March 31, 2010 based on a unit price of $7.21 (December 31,
2009 - $6.11) and units outstanding of 49,914,369 (December 31, 2009 – 49,914,927), including 3,249,390 Class B exchangeable units
(December 31, 2009 – 3,249,390 units).
This news release is not an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into
account the investment objectives, financial situation and particular needs of the investor. Before making an investment in the Fund, the
investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs,
objectives and financial circumstances and consult our investment adviser if necessary.
None of the entities noted in this news release is an authorized deposit-taking institution for the purposes of the Banking Act 1959
(Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited
ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of
Certain of the statements contained in this news release are forward-looking and reflect management’s expectations regarding the
Fund’s future growth, results of operations, performance and business based on information currently available to the Fund. Forwardlooking
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”, “estimate”, “believe” or other similar words.
These statements are subject to significant 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 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 2009 Annual Report under the heading “Outlook” on page 42, as updated in subsequently filed Quarterly Financial Reports of
the Fund (such documents are available on the Canadian Securities Administrators’ System for Electronic Document Analysis and
Review (“SEDAR”) at www.sedar.com). Other material factors or assumptions that were applied in formulating the forward-looking
statements contained herein include the assumption that the business and economic conditions affecting the Fund’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 and that there will be no unplanned material changes to the Fund’s facilities, equipment
and contractual arrangements. Although the Fund 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: power infrastructure (operational performance; power purchase agreements; fuel; contract performance;
default under credit agreements; land tenure and related rights; regulatory regime and permits and force majeure) and the Fund
(changes in federal tax rules for flow through entities; other tax related risks; variability of distributions; geographic concentration and
non-diversification; dependence on the Manager and potential conflicts of interest; insurance; environmental, health and safety regime;
availability of financing; unitholder dilution; volatile market price for units; international financial reporting standards; nature of units;
unitholder liability). For a more comprehensive description of these and other possible risks, please see the Fund’s Annual Information
Form dated March 25, 2010 for the year ended December 31, 2009 as updated in subsequently filed Quarterly Financial Reports and
other filings of the Fund with the Canadian securities regulators. These filings are available on SEDAR 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. These forward-looking statements reflect
current expectations of the Fund as at the date of this news release and speak only as at the date of this news release. The Fund does
not undertake any obligation to publicly update or revise any forward-looking statements except as may be required by applicable law.
Non-GAAP Financial Measures
"Income from operations", "distributable cash" and “contribution margin” 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