News Release

Capstone Infrastructure Corporation Provides 2015 Outlook

TORONTO, ONTARIO--(Marketwired - Dec. 18, 2014) - Capstone Infrastructure Corporation (TSX:CSE)(TSX:CSE.DB.A)(TSX:CSE.PR.A)(TSX:CPW.DB) (the "Corporation") today provided its financial outlook for fiscal 2015 and an update on Bristol Water's recent regulatory outcome.

"The evolution of Capstone's business and portfolio is generally proceeding according to our expectations," said Michael Bernstein, President and Chief Executive Officer. "Our wind development projects are steadily coming on line, with the Skyway 8 Wind Farm having reached commercial operations this year, Saint-Philémon in Quebec in the final stages of commissioning and our Goulais wind farm in Ontario expected to reach commercial operations in the second quarter of 2015. The medium-term wind development projects are progressing through their respective approvals. Our operating power facilities are performing well, including the Cardinal plant, which will begin operating as a cycling plant on January 1, 2015. On the utilities side, the Värmevärden district heating system continues to deliver good performance. At Bristol Water, the December 12 release of the UK regulator's final determination for the upcoming five-year regulatory period (AMP6) was disappointing and significantly different from what Bristol's management had proposed. Discussions are now underway to determine whether to refer the matter to the Competition and Markets Authority (CMA) for a binding review."

Outlook for 20151

The Corporation expects a higher contribution from its growing portfolio of wind power generation businesses, a lower contribution from Cardinal and a return to normal dividends from its district heating utility. Bristol Water will operate under the final determination issued by Ofwat, the economic regulator for water utilities in the UK, after the first quarter of 2015. Adjusted Earnings before Interest, Taxes, Depreciation and Amortization ("Adjusted EBITDA")2 in 2015 is anticipated to be approximately $115 million to $125 million. This compares with the 2014 outlook of $150 million to $160 million and reflects the lower contribution from Cardinal under its non-utility generator contract, and the impact of the final determination at Bristol Water.

Capstone's operating portfolio along with its strong liquidity will support the $0.30 per share dividend. The Corporation has no plans to change its dividend policy. Management's expectation is that Capstone will achieve its target Adjusted Funds from Operations ("AFFO")2 payout ratio of 80% with the development of the Corporation's medium-term wind projects, and other initiatives that impact AFFO, in 2017 or before.

The assumptions underlying the Corporation's 2015 outlook include but are not limited to:

  • Cardinal operates as a dispatchable facility under the incoming 20-year contract with the Ontario Power Authority;
  • That existing water rates at Bristol Water will remain in place for the first quarter, until the AMP6 final determination takes effect on April 1, 2015, reducing rates by 14% (real) for the remainder of the year;
  • Full year of contributions from the newly completed Skyway 8 Wind Farm;
  • Contribution from the Saint-Philémon and Goulais wind projects, expected to reach commercial operations in January and April of 2015 respectively;
  • Whitecourt generates $3 million in Adjusted EBITDA based on projected Alberta power pool prices and successfully working with stakeholders;
  • That the Swedish krona to Canadian dollar and British pound to Canadian dollar exchange rates remain consistent with recent rates.

Bristol Water

The Corporation also provided an overview of the final determination for the AMP6 period, issued on December 12, 2014 by Ofwat. The Corporation holds a 50% interest in Bristol Water.

Highlights of the differences between the final determination for AMP6, which commences on April 1, 2015 and concludes on March 31, 2020, and Bristol Water's proposed plan include:

  • Total expenditure of £409 million, compared with Bristol Water's proposal of ~£500 million (excluding new reservoir);
  • A phased-in 21% real reduction in customer rates, compared with Bristol Water's proposed 4.5% real reduction;
  • Weighted average cost of capital of 3.6%, in contrast to Bristol Water's proposal of 4.4%.

"The final determination is not the outcome Bristol Water had sought in the extensively vetted and diligently prepared business plan it submitted, which was developed in consultation with its customers, 92% of whom viewed the plan as favourable," said Mr. Bernstein. "The decision of whether to reject Ofwat's final determination and have the matter referred to the CMA for a binding review will be reached among the Board of Directors of Bristol Water, the management team and the owners, including Capstone. However, our view is that the final determination is based on a methodology that did not factor in Bristol Water's unique attributes, lacked consistency with previous decisions and analysis, and did not adequately reflect the wishes of Bristol Water's customers. Regardless of the final determination, Bristol Water remains a well-run company, delivering high quality drinking water to more than a million customers, while providing good service for good value."

Bristol Water has until February 12, 2015 to decide whether to reject the final determination, and the subsequent CMA process is expected to conclude in August 2015. There is precedent for this process at Bristol Water, which rejected the final determination for the previous regulatory period, AMP5. That outcome was appealed to the Competition Commission, the predecessor organization to the CMA, with the ultimate result that Bristol Water received a significantly improved business plan.

Conference Call

  • Capstone will host an investor call on Friday, December 19 at 8:30 a.m. EST.
  • The call will be hosted by Michael Bernstein, President and Chief Executive Officer, and Michael Smerdon, Executive Vice President and Chief Financial Officer.
  • To listen to the call from Canada or the United States, dial 1-800-319-4610. If calling from elsewhere, dial +1-604-638-5340. A replay of the call will be available until January 26, 2015.
  • The event will be webcast live with an accompanying slide presentation on the Corporation's website at

About Capstone Infrastructure Corporation

Capstone's mission is to build and responsibly manage a high quality portfolio of infrastructure businesses in Canada and internationally in order to deliver a superior total return to shareholders by providing reliable income and capital appreciation. Capstone's portfolio comprises investments in Canada's power infrastructure, including gas cogeneration, wind, hydro, biomass and solar power generating facilities, representing approximately net 449 megawatts3 of installed capacity, and contracted wind power development projects totaling an expected net 86.9 megawatts of capacity. Capstone also invests in utilities, including a 33.3% interest in a district heating business in Sweden, and a 50% interest in a regulated water utility in the United Kingdom. Please visit for more information.

1 - See Notice to Readers.

2 - "Adjusted EBITDA", "Adjusted Funds from Operations", and "Payout Ratio" are non-GAAP financial measures and do not have any standardized meaning prescribed by International Financial Reporting Standards ("IFRS").
Adjusted EBITDA is calculated as revenue less operating and administrative expenses and project development costs plus interest income and dividends or distributions received from equity accounted investments. Operating expenses are adjusted to actual costs by transferring the portion of Cardinal gas payments included in other gains and losses as required by IFRS. Amounts attributed to any non-controlling interest are deducted. Adjusted EBITDA for investments in subsidiaries with non-controlling interests is included at Capstone's proportionate ownership interest.

Adjusted Funds from Operations (AFFO)

Capstone's definition of AFFO measures cash generated by activities of infrastructure business investments which is available for dividends and general corporate purposes. For wholly owned businesses, AFFO is equal to Adjusted EBITDA less interest paid, repayment of principal on debt income, taxes paid, scheduled repayment of debt principal, preferred share dividends and maintenance capital expenditures. For businesses that are not wholly owned, the cash generated by the business is only available to Capstone through periodic dividends. For these businesses, AFFO is equal to dividends received. Also deducted are corporate expenses, taxes paid and dividends on preferred shares.

AFFO is calculated from Adjusted EBITDA by:

Deducting: -Adjusted EBITDA generated from businesses with significant non-controlling interests

Adding: -Distributions received from businesses with significant non-controlling interests

-Scheduled repayments of principal on loans receivable from equity accounted investments

Deducting items, for corporate and businesses without significant non-controlling interests: interest paid, income taxes paid, dividends paid on the preferred shares included in shareholders' equity, maintenance capital expenditure payments and scheduled repayments of principal on debt.

3 - Reflects Capstone's economic interest in its various power facilities.

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 the Capstone Infrastructure Corporation (the "Corporation") based on information currently available to the Corporation. Forward-looking statements and financial outlook 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 and financial outlook use forward-looking words, such as "anticipate", "continue", "could", "expect", "may", "will", "intend", "estimate", "plan", "believe" or other similar words. These statements and financial outlook 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 financial outlook and, accordingly, should not be read as guarantees of future performance or results. The forward-looking statements and financial outlook 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, 2013 under the heading "Results of Operations", as updated in subsequently filed MD&A of the Corporation (such documents are available under the Corporation's SEDAR profile at

Other potential material factors or assumptions that were applied in formulating the forward-looking statements and financial outlook 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 there will be no material delays in the Corporation's wind development projects achieving commercial operation; that the Corporation's power infrastructure facilities will experience normal wind, hydrological and solar irradiation conditions, and ambient temperature and humidity levels; an effective TCPL gas transportation toll of approximately $1.65 per gigajoule in 2014; 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 and no material changes in rate orders or rate structures for the Corporation's power infrastructure facilities other than Whitecourt, or Värmevärden, that there will be no material changes in environmental regulations for power infrastructure facilities, Värmevärden or Bristol Water; 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 and financial outlook relate; the financing for wind development projects and other subsidiaries; market prices for electricity in Ontario and Alberta; the re-contracting of the PPA for the Sechelt hydro power generating station; the new commercial operating structure for Whitecourt; that there will be no material change to the accounting treatment for Bristol Water's business under International Financial Reporting Standards, particularly with respect to accounting for maintenance capital expenditures; that there will be no material change to the amount and timing of capital expenditures by Bristol Water; that there will be no material changes to the Swedish krona to Canadian dollar and UK pound sterling to Canadian dollar exchange rates; and that Bristol Water will operate and perform in a manner consistent with the regulatory assumptions underlying asset management plan ("AMP") 5 and achieving financial performance through major efficiencies and capex deferral, or potential Competition and Markets Authority referral, including, among others: real and inflationary changes in Bristol Water's revenue, Bristol Water's expenses changing with inflation and efficiency measures, and capital investment, leakage, customer service standards and asset serviceability targets being achieved.

Although the Corporation believes that it has a reasonable basis for the expectations reflected in these forward-looking statements and financial outlook, actual results may differ from those suggested by the forward-looking statements and financial outlook for various reasons, including: risks related to the Corporation's securities (dividends on common shares and preferred shares are not guaranteed; volatile market price for the Corporation's securities; shareholder dilution; and convertible debentures credit risk, subordination and absence of covenant protection); 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); risks related to the Corporation's power infrastructure facilities (power purchase agreements; completion of the Corporation's wind development projects; operational performance; fuel costs and supply; contract performance and reliance on suppliers; land tenure and related rights; environmental; and regulatory environment); risks related to Värmevärden (operational performance; fuel costs and availability; industrial and residential contracts; environmental; regulatory environment; and labour relations); and risks related to Bristol Water (Ofwat price determinations and changes to Instrument of Appointment; failure to deliver capital investment programs; economic conditions; operational performance; failure to deliver water leakage target; service incentive mechanism ("SIM") and the serviceability assessment; pension plan obligations; regulatory environment; competition; seasonality and climate change; and labour relations). For a comprehensive description of these risk factors, please refer to the "Risk Factors" section of the Corporation's Annual Information Form dated March 26, 2014 as supplemented by risk factors contained in any 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 securities commissions or similar authorities in Canada (which are available under the Corporation's SEDAR profile at

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 and financial outlook. The forward-looking statements and financial outlook 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 and financial outlook.