News Release

Capstone Infrastructure Corporation Announces Third Quarter Reuslts

  • 16.7% increase in revenue reflecting strong contribution from Amherstburg Solar Park along with higher electricity rates at Cardinal
  • 28.4% growth in Adjusted EBITDA excluding internalization costs
  • 21.4% growth in FFO excluding internalization costs
  • Subsequent to quarter end, completed acquisition of a majority interest in a regulated water utility in the United Kingdom followed by a $75 million common share offering

Toronto, Ontario (November 14, 2011) – Capstone Infrastructure Corporation (TSX: CSE; CSE.PR.A; CSE.DB.A – “CSE” or the “Corporation”) today reported financial results for the quarter ended September 30, 2011. The Management’s Discussion and Analysis and unaudited financial statements for the quarter are available on the Corporation’s website at and on SEDAR at

“Our portfolio performed well in the third quarter with higher overall electricity production,” said Michael Bernstein, President and Chief Executive Officer. “Excluding the one-time costs arising from the internalization of management and with the contribution from Amherstburg Solar Park and Värmevärden, our Adjusted EBITDA and FFO in the quarter increased by 28.4% and 21.4%, respectively. In early October, we made a platform investment in the water infrastructure sector with the acquisition of a 70% interest in Bristol Water, an established, core infrastructure business with regulated and predictable inflation-linked cash flow and a strong growth profile. Additionally, our recent common share offering bolsters our balance sheet while we continue to evaluate attractive growth opportunities consistent with our strategy to create long-term value for shareholders. We are successfully executing our strategy to build Canada’s pre-eminent diversified infrastructure company.”

Financial Overview
(in millions of Canadian dollars or on a per share basis unless otherwise noted)

1 "Adjusted EBITDA", “Funds From Operations”, “Adjusted Funds from Operations”, “Adjusted Funds from Operations per Share” and “Payout Ratio”. These measures are non-GAAP financial measures and do not have any standardized meaning prescribed by International Financial Reporting Standards (“IFRS”). As a result, these measures may not be comparable to similar measures presented by other issuers. Definitions of each measure are provided on page 6 of Management’s Discussion and Analysis with reconciliation to IFRS measures provided on pages 6 to 8.
2 For the year-to-date period, Capstone reported $19.3 million in one-time costs related to the internalization of management on April 15, 2011. Most of these costs were incurred in the second quarter of the year .

Key Drivers of Financial Results

Overall higher revenue
Total revenue increased by $5.8 million, or 16.7%, in the quarter over the same period last year, reflecting the start of production at the Amherstburg Solar Park, higher electricity rates at the Cardinal gas cogeneration facility (“Cardinal”) and slightly higher power production at the Whitecourt biomass power facility (“Whitecourt’) and the hydro power facilities. These drivers were partially offset by slightly lower production from Erie Shores Wind Farm (“Erie Shores”). For the year-to-date period, total revenue increased by $10.1 million, or 8.8%, over the first nine months of 2010. Total electricity production in the quarter increased by 5.2% from the prior period. For the year-to-date period, total electricity production increased by 2.5% over 2010.

Performance of core power infrastructure portfolio
Revenue in the third quarter from the Corporation’s core power infrastructure portfolio, composed of Cardinal, Erie Shores, Whitecourt and the hydro power facilities, increased 2.7% over the third quarter of 2010, reflecting significantly higher production at the hydro power facilities and Whitecourt as well as higher electricity prices at Cardinal. Adjusted EBITDA in the quarter declined 6.4% primarily due to higher fuel and gas transportation expenses at Cardinal. In the year-to-date period, revenue and Adjusted EBITDA from the core portfolio increased by 4.6% and 4.0%, respectively, due to higher production at the hydro power facilities and Erie Shores and higher electricity rates at Cardinal, which were partially offset by higher fuel and gas transportation expenses at Cardinal.

Interest income from district heating investment
During the quarter, the Corporation received $1.7 million in the form of interest income from Värmevärden, the Swedish district heating business in which it owns a 33.3% equity interest. Total interest income from Värmevärden in 2011 to date totalled $3.4 million.

Higher administrative expenses
Administrative expenses in the quarter increased by $2.3 million, or 81.1%, over 2010, primarily reflecting a 482.0% increase in business development costs and a 302.0% increase in other administrative expenses, which include corporate salaries and professional fees. For the year-to-date period, administrative expenses increased by $22.5 million, or 238.0%, over the first nine months of 2010, primarily reflecting $19.3 million in one-time costs related to the internalization of management on April 15, 2011. Excluding the one-time internalization costs, administrative expenses in the year-to-date period increased by 45.6% over 2010, primarily reflecting increased business development expenses that are required by IFRS to be expensed as they are incurred. Other administrative expenses were also higher in the year-to-date period.

Higher operating expenses
Operating expenses in the quarter increased by $2.0 million, or 9.2%, primarily due to a $2.3 million, or 13.9%, increase in fuel expenses at Cardinal due to higher fuel prices as well as a higher TransCanada Pipelines Limited (“TCPL”) gas transportation toll of $2.24 per gigajoule (“GJ”), effective March 1, 2011, compared with $1.64 per GJ in 2010. Year-to-date operating expenses were $3.7 million, or 5.4%, higher than last year, mostly due to a 10.4% increase in fuel and gas transportation expenses.

Financial Position
As at September 30, 2011, the Corporation had cash and cash equivalents of $55.0 million.

Following the acquisition of Bristol Water in October and subsequent common share offering, the Corporation has approximately $30 million in capital to execute on current business development opportunities. Following these two initiatives, the Corporation’s debt to capitalization ratio1, which was 44.1% as at September 30, 2011, is now approximately 59%, which is consistent with the relatively low risk profile of core infrastructure businesses.

An outlook for each of the Corporation’s assets is provided on pages 24 to 29 of the third quarter report.  The Corporation expects continuing strong operational performance from its businesses in 2011. Excluding the impact of one-time internalization costs, Adjusted EBITDA and FFO are expected to be higher than in 2010. This outlook is based on performance in the year to date and assumes the following factors:

  • Continuing stable performance from Cardinal and Whitecourt;
  • Continuation of more normal wind patterns and water flows; and
  • The partial year cash flow from Amherstburg Solar Park and Värmevärden. 

With the addition of Bristol Water to the Corporation’s portfolio, and excluding internalization costs, fiscal 2011 Adjusted EBITDA is expected to be approximately $75 million. With the recent common share offering, the Corporation expects its 2011 payout ratio, which is based on AFFO, to be in the range of 120% to 125%.

The Corporation’s 2012 outlook reflects a full year of contribution from Amherstburg Solar Park, Vämevärden and Bristol Water and assumes a return to 2010 gas transportation rates. For 2012, the Corporation expects Adjusted EBITDA to be approximately $140 million. The 2012 payout ratio, which is based on AFFO, is currently expected to be in the range of 85% to 90%.

Bristol Water’s growing regulated cash flow helps to support the Corporation’s ability to sustain its current dividend of $0.66 per share on an annualized basis through 2014, subject to any significant unexpected events or an unfavourable resolution on the terms of a new contract at Cardinal. Based on the Corporation’s existing portfolio, outlook and current dividend level, it is anticipated that the Corporation’s payout ratio is expected to be less than 100% through 2014, subject to the continuing execution of the Corporation’s growth strategy, which could include development projects or businesses with a strong growth profile that may cause the payout ratio to fluctuate in any given year.

(1) The fair value of shareholders’ equity reflected the Corporation’s market capitalization as at September 30, 2011 based on a share price of $6.33 (December 31, 2010 - $8.22) and shares outstanding of 61,999,698 (December 31, 2010 - 56,352,461 shares). Shares outstanding include Class B exchangeable units of MPT LTC Holding LP, a subsidiary of Capstone, of which there were 3,249,390 outstanding at December 31, 2010, which were classified as a liability on the interim consolidated statements of financial position. Fair value of the preferred shares issued on September 30, 2011 is based on a share price of $20.10 and total shares outstanding of 3,000,000. Following the acquisition of Bristol Water in October and subsequent common share offering completed in November, the Corporation’s current debt to capitalization ratio of approximately 59% includes the impact of assuming Bristol Water’s long-term debt, the implied market value of the minority interest, the issuance of 12,000,000 common shares and the repayment of a portion of the senior credit facility used to fund the acquisition of Bristol Water.

(2) The outlook for 2011 excludes the impact of internalization costs. The outlook for both 2011 and 2012 includes the impact of the recent common share issuance and is subject primarily to the final accounting treatment for Bristol Water transaction costs and Bristol Water’s business under International Financial Reporting Standards, the actual results of the business, and foreign currency rates for financial reporting purposes. Other assumptions underlying the 2012 outlook also include: (i) a full year of contribution from the Amherstburg Solar Park, Värmevärden and Bristol Water; and (ii) a return to the 2010 TransCanada Pipelines Limited gas transportation rate of $1.64 per gigajoule.

Dividend Reinvestment Plan (DRIP)
More information about Capstone Infrastructure’s new DRIP and how to enrol is available at:

Conference Call and Webcast
Management will hold a conference call (with accompanying slides) to discuss third quarter results on Tuesday, November 15, 2011 at 8:30 a.m. ET. The event will be accessible via webcast through the Corporation’s website with accompanying slides at and by telephone. 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 November 29, 2011. For the replay, from Canada or the United States, dial 1-800-319-6413 and enter the code 1385#. From elsewhere, dial +1-604-638-9010 and enter the code 1385#.

About Capstone Infrastructure Corporation
Capstone Infrastructure Corporation’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 through a combination of stable dividends and capital appreciation. The Corporation’s portfolio currently includes investments in gas cogeneration, wind, hydro, biomass and solar power generating facilities, representing approximately 370 MW of installed capacity, a 33.3% interest in a district heating business in Sweden, and a 70% interest in a regulated water utility in the United Kingdom. Please visit for more information.

Notice to Readers:
Certain of the statements contained within this document are forward-looking and reflect management’s expectations regarding Capstone Infrastructure Corporation’s (the “Corporation”) future growth, results of operations, performance and business based on information currently available to the Corporation. Forward-looking statements and the 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 use forward-looking words, such as “anticipate”, “continue”, “could”, “expect”, “may”, “will”, “estimate”, “believe” or other similar words. These statements 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, 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 for each of the Corporation’s assets 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, 2010 under the heading “Asset Performance”, as updated in subsequently filed interim MD&A of the Corporation (such documents are available under the Corporation’s profile on Other material factors or assumptions that were applied in formulating the forward-looking statements and financial outlook contained herein include 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 unplanned material changes to the Corporation’s facilities, equipment or contractual arrangements, no unforeseen changes in the legislative and operating framework for the Corporation’s businesses, no delays in obtaining required approvals, no unforeseen changes in rate orders or rate structures for the Corporation’s power business, district heating business (“Värmevärden”) or water distribution business (“Bristol Water”), no unfavourable changes in environmental regulation, and no significant event occurring outside the ordinary course of business; that there will be a stable regulatory environment and favourable decisions will be received from regulatory bodies concerning outstanding rate and other applications; that the Corporation’s senior credit facility, used to partially fund the Bristol Water acquisition, will be repaid on or prior to its maturity on October 4, 2012; and that Bristol Water will operate and perform in a manner consistent with the regulatory assumptions underlying its current asset management plan (“AMP”), including, among others: a 7% increase in Bristol Water’s 2011/2012 revenue (including a 4% real increase as provided by the UK Water Services Regulation Authority (“Ofwat”) and an approximately 3% inflationary increase); a 3% increase in Bristol Water’s 2011/2012 expenses in line with inflation; UK pound sterling to Canadian dollar exchange rate of £0.625:$1.00; and capital investment, leakage, customer service standards and asset serviceability targets.

Although the Corporation believes that it has a reasonable basis for the expectations reflected in these forward-looking statements and the financial outlook, actual results may differ from those suggested by the forward-looking statements and financial outlook for various reasons, including risks related to: power infrastructure (operational performance; power purchase agreements; fuel costs and supply; contract performance; development risk; technology risk; default under credit agreements; land tenure and related rights; regulatory regime and permits; environmental, health and safety requirements; climate change and the environment; and force majeure) the Corporation (tax-related risks; variability and payment of dividends, which are not guaranteed; geographic concentration and non-diversification; insurance; environmental, health and safety regime; availability of financing; shareholder dilution; and the unpredictability and volatility of the common share price of the Corporation); the Corporation’s investment in Värmevärden (general business risks inherent in the district heating business; fuel costs and supply; reliance on industrial customers and ability of residential customers to cancel contracts on short notice; geographic concentration; government regulation; environmental health and safety liabilities; reliance on key personnel; labour relations; enforcement of indemnities against the vendors of Värmevärden; minority interest; foreign exchange; and that Värmevärden may not achieve expected results); and Bristol Water’s business (revenue is substantially influenced by price determinations made by Ofwat; failure to deliver capital investment programs; failure to deliver water leakage targets; the imposition of penalties under Ofwat’s new comparative incentive mechanism; the economic downturn impacting the lending environment, as well as debt and capital markets, resulting in more costly financing and inflation negatively impacting leverage and key financial ratios, which may have a negative impact on credit ratings, as well as increasing the cost of capital expenditures; pension plan obligations may require Bristol Water to make additional contributions; failure to meet existing regulatory requirements and the potentially adverse impact of future legislative and regulatory changes; the ability for a Special Administrator to be appointed by the UK Secretary of State or Ofwat in certain circumstances (including the breach by Bristol Water of its license); foreign exchange; operational risks (including significant interruption of the provision of its services and catastrophic damage resulting in loss of life, environmental damage or economic and social disruption); development of competition within the water sector; reliance on key personnel; default under its Artesian loans, bonds, debentures or credit facility; geographic concentration; potential seasonality and climate change; labour relations; and enforcement of indemnities against the vendors of Bristol Water).

For a more comprehensive description of these and other possible risks, please see the risks set out in the annual information form of the Corporation for the year ended December 31, 2010, under the heading “Risk Factors”, as updated in subsequently filed interim MD&A of the Corporation and the business acquisition report filed June 14, 2011 in respect of the Corporation’s acquisition of Värmevärden (such documents are available under the Corporation’s profile on 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 Canadian law, the Corporation does not undertake any obligation to publicly update or revise any forward-looking statements or financial outlook.

For further information, please contact:

Aaron Boles
Vice President, Communications and Investor Relations
T: 416-607-5009

Michael Smerdon
Executive VP and CFO
T: 416-607-5167