Macquarie Power & Infrastructure Income Fund Announces Continuing Strong Performance in First Quarter
TORONTO, ONTARIO (May 9, 2007) – Macquarie Power & Infrastructure Income Fund (TSX: MPT.UN – “MPT” or the “Fund”), which invests in essential infrastructure assets in North America, today announced unaudited results for the first quarter of fiscal 2007 ended March 31, 2007.
“MPT achieved excellent results in the first quarter, which reflects the high quality and stability of Cardinal and Leisureworld as well as the skill of the management teams at each asset,” said Mr. Gregory Smith, Chief Executive Officer. “Cardinal’s cash flow increased due to sustained, higher electricity rates and increased power production. Leisureworld continued to perform strongly due to improved occupancy, greater use of preferred accommodation across the portfolio and increased government funding.”
In the quarter ended March 31, 2007, the Fund generated revenue of $29.0 million compared with $27.7 million in the same period last year, reflecting increased power production as well as a 4.4% increase in electricity rates under Cardinal’s Purchase Power Agreement (“PPA”) with the Ontario Electricity Financial Corporation (“OEFC”). In addition, during the quarter Cardinal received a payment of $1.3 million from the OEFC for an adjustment in the 2006 Direct Customer Rate (“DCR”). This compares with a $1.1-million DCR adjustment received in the first quarter last year.
Income from operations1 for the Fund was $7.6 million for the quarter compared with $4.4 million for the first quarter of 2006, reflecting increased revenue and decreased operating and administration costs.
The Fund’s distributable cash2 was $12.1 million ($0.402 per fully diluted unit) compared with $10.8 million ($0.359 per fully diluted unit) in same quarter last year, reflecting increased electricity production and the continuing impact of electricity rate increases under Cardinal’s PPA.
Declared distributions to unitholders for the quarter were $7.7 million ($0.257 per unit) compared with $7.5 million in the same period last year ($0.250 per unit), representing a payout ratio of 64% (Q1 2006 – 70%). Distributions to unitholders are paid from cash flows from operations and unrestricted cash balances.
As at March 31, 2007, the Fund had working capital of $23.1 million, an uncommitted cash balance of $17.3 million and fully funded general, major maintenance and capital expenditure reserve accounts.
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.
Cardinal Operational Performance
During the quarter, plant availability was 99.2% (Q1 2006 – 100%) and capacity was 97.9% (Q1 2006 – 97.5%). Electricity sales amounted to 345,000 MWh compared with 343,000 MWh in the first quarter last year.
Leisureworld Operational Performance
The Fund owns an indirect 45% interest in Leisureworld Senior Care LP (“Leisureworld”), which it accounts for as an equity investment.
All 19 of Leisureworld’s long-term care homes are considered mature. Annual average total occupancy for the quarter was 97.5% (Q1 2006 – 94.7%), reflecting the ramp up of the Vaughan and Orillia homes. Preferred bed average total occupancy was 79.5% (Q1 2006 – 76.2%).
Mr. Smith continued, “Cardinal and Leisureworld are positioned to deliver strong performance through 2007, reflecting the growth inherent in both assets. In addition, we are continuing to explore infrastructure investment opportunities that complement MPT’s cash flow profile and that will deliver an attractive, increasing total return to unitholders.”
In 2007, Cardinal is expected to generate increased cash flow due to higher revenue from increased electricity rates and reduced scheduled maintenance time, which will be partially offset by higher gas transportation costs. Subsequent to quarter end, Cardinal successfully completed its planned combustion inspection within four days instead of the five-day outage typically required. Cardinal’s maintenance and capital expenditure requirements are fully funded by established reserve accounts.
Improving occupancy and increased use of preferred accommodation by residents are expected to drive continuing growth for Leisureworld in 2007. Management expects all 19 LTC homes to achieve the 97% annual occupancy threshold that is required for full funding. Leisureworld will also benefit from continuing increases in government funding. In April, government funding for nursing and personal care and programs and support services increased overall by 4.49%. A funding increase in the accommodation envelope is expected in July. Subsequent to quarter end, Leisureworld reached a definitive agreement to sell Spencer House, which was closed at the time the new home in Orillia opened, for $3.1 million. The sale is expected to be completed on or before June 11, 2007.
The Fund anticipates maintaining an annual payout ratio of 90% to 95% in 2007, providing unitholders with stability and the potential for growth. Management expects the return of capital portion to be approximately 70% for the 2007 fiscal year, based on current operations and barring any significant external shocks.
Offer to Acquire Clean Power Income Fund
On April 18, 2007, MPT entered into a support agreement with Clean Power Income Fund (“CPIF”) under which MPT has agreed to make an offer (the “Offer”) to acquire all of the outstanding units of CPIF. The consideration represents a total value of approximately $6.39 per CPIF unit based on MPT’s closing price of $11.11 on Friday, April 13, 2007, representing an overall transaction value of approximately $226 million. CPIF agreed to support the Offer upon the terms and conditions set out in the MPT support agreement. A take-over bid circular containing the full terms of the Offer will be mailed to CPIF’s unitholders and holders of its 6.75% convertible debentures, along with the circular of the Board of Trustees of CPOT and other related documents, by mid-May.
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.
The Fund’s complete first quarter report, 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 first quarter results on Thursday, May 10, 2007 at 8:30 a.m. ET 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 416-695-9745 (Canada) or 1-877-888-3490 (North America). A replay of the call will be available until May 24, 2007 by dialling 416-695-5275 or 1-888-509-0081 and entering the passcode 643743.
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, risks associated with the structure of MPT, risks associated with the possibility that an offer may not be made by MPT for the CPIF units, the possibility that any offer made by MPT may not be completed, the possible delay in the completion of the offer, the possibility that the anticipated benefits from the acquisition cannot be fully realized, the possibility that the costs or difficulties related to the integration of CPIF’s business with MPT will be greater than expected, and business, regulatory and economic conditions. 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