Macquarie Power & Infrastructure Income Fund Announces Continuing Strong Results in Third Quarter
- Portfolio performing in line with expectations
- Conservative financial position
- Capacity for continuing growth
TORONTO, ONTARIO (November 11, 2008) – Macquarie Power & Infrastructure Income
Fund (TSX: MPT.UN; MPT.DB – “MPT” or the “Fund”), which invests in essential
infrastructure assets, today reported results for the third quarter ended September 30, 2008.
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
“The Fund’s portfolio is continuing to deliver strong performance, which reflects the stability of
infrastructure assets throughout the economic cycle,” said Mr. Gregory Smith, President and
Chief Executive Officer of the Fund. “We continued to benefit from higher power rates at our
Cardinal facility and strong availability across our power generation businesses. In addition,
Leisureworld continued to achieve predictable results. Importantly, the Fund has a solid
financial position and no refinancing requirements in either 2008 or 2009. As we head into the
seasonally strong performing fourth quarter, we are on track to achieve our 2008 payout ratio
guidance of approximately 100%, which provides for the stability of distributions.”
Revenue for the quarter was $31.5 million compared with $30.4 million in the third quarter of
2007. The increase primarily reflected improved wind speed and availability at Erie Shores
Wind Farm (“Erie Shores”), increased water flows at the hydro power facilities and higher
power prices at the Cardinal facility (“Cardinal”) attributable to the continuing impact of
electricity rate increases under Cardinal’s Power Purchase Agreement (“PPA”). These growth
drivers were partially offset by lower production at Cardinal as the facility increased gas
mitigation to capitalize on a favourable spot market price for gas.
The Fund’s distributable cash1 was $9.8 million ($0.197 per unit) compared with $9.0 million
($0.180 per unit) in 2007, reflecting stable growth in revenue and lower administrative
expenses partially offset by higher gas transportation costs at Cardinal. The increase in gas
transportation costs was mitigated by the curtailment of Cardinal’s production in order to sell
gas at a favourable spot market price. Declared distributions to unitholders were $13.1 million
($0.262 per unit) compared with $12.9 million ($0.257 per unit) in 2007, representing a payout
ratio of 133% (Q3 2007 – 143%) for the quarter. For the nine-month period ended September
30, 2008, the Fund achieved a payout ratio of 105% (2007 – 106%). This payout ratio reflects
the increase in distributions to unitholders in 2008 of $0.02 per unit on an annualized basis.
Income from operations2 for the Fund was $4.1 million for the quarter compared with $4.4
million for the same period last year, reflecting a $1.2-million increase in operating costs, which
was primarily due to higher gas transportation costs at Cardinal, and the impact of higher
depreciation, which is a non-cash expense, than in the same period last year. These factors
were offset by higher revenue during the quarter as well as lower administrative expenses than
in the same period last year, primarily due to higher legal and transaction costs last year
related to the acquisition of Clean Power Income Fund (“CPIF”).
As at September 30, 2008, the Fund had positive working capital of $52.3 million and cash on
hand and short-term investments of $53.2 million, including fully funded general, major
maintenance and capital expenditure reserve accounts in the aggregate amount of $17.0
million. The Fund is conservatively leveraged, with a debt to capitalization ratio of 42.8%.
Total power production for the quarter was 479,348 MWh compared with 475,586 MWh in the
same period last year.
Cardinal produced 297,301 MWh of electricity (Q3 2007 – 306,448 MWh). Cardinal achieved
availability of 100%, which reflected zero outages (Q3 2007 – 17.9 hours). Cardinal curtailed
production for 448 hours (Q3 2007 – nil) to capitalize on the favourable spot market price for
gas, resulting in a capacity factor of 95.4% (Q3 2007 – 97.2%).
Erie Shores performed in line with expectations, producing 34,679 MWh (Q3 2007 – 28,002
MWh) of power, reflecting strong winds during the period. The facility achieved an overall
availability of 94.8% (Q3 2007 – 91.3%) and a capacity factor of 16.0% (Q3 2007 – 12.8%).
The Fund’s hydro power facilities achieved a 1.3% increase in production to 36,680 MWh (Q3
2007 – 36,200 MWh). All of the hydro power facilities experienced increased water flows,
which was partially offset by a decrease in production at the Wawatay facility, where 276.7
outage hours (Q3 2007 – nil) were required for annual electrical and civil inspections as well as
maintenance work, and by lower production at the Hluey Lakes facility due to an outage of 60
hours (Q3 2007 – 1 hour) required for repair work. Overall, the hydro power facilities had a
weighted average availability of 93.6% (Q3 2007 – 95.1%) for the quarter and a capacity factor
of 46.8% (Q2 2007 – 45.9%).
The Whitecourt biomass facility (“Whitecourt”) operated at 100% availability (Q3 2007 –
96.8%) and achieved a capacity factor of 99.8% (Q3 2007 – 96.5%). Total production at
Whitecourt was 53,301 MWh (Q3 2007 – 49,921 MWh).
The Chapais biomass facility (“Chapais”), in which the Fund holds a minority preferred equity
and debt interest, experienced availability of 96.5% (Q3 2007 – 98.4%). Production at Chapais
was 57,387 MWh (Q3 2007 – 55,015 MWh) as the facility was operated at an increased
capacity factor to achieve the maximum annual production target provided for in the facility’s
PPA for each 12-month period ended November 30. Should the facility exceed this maximum
production amount, the PPA rate paid on any excess production is significantly reduced.
Therefore, the facility is operated throughout the year so that the total production for each 12-
month period ending November 30 approximates the maximum provision in the PPA.
The Fund owns an indirect 45% equity interest in Leisureworld Senior Care LP
(“Leisureworld”), which the Fund accounts for as an equity investment. During the quarter,
Leisureworld achieved a 43.2% increase in revenue and a 3.9% increase in income from
operations over the same period last year, reflecting the contribution of the seven homes
acquired earlier this year, improved occupancy and greater use of private accommodation
across its portfolio, and increased government funding. Average total occupancy for the
quarter was 98.7% (Q3 2007 – 98.4%). The average occupancy of private rooms was 93.3%
(Q3 2007 – 87.3%).
“Our performance in the third quarter clearly demonstrates the stability of our underlying
assets,” said Mr. Smith. “Moreover, we have more than $100 million available in cash and
acquisition facilities to pursue prudent growth opportunities that will enhance the long-term
value of the Fund for our unitholders. Investors can be confident that the Fund has a solid
business with a positive outlook for the balance of 2008 and 2009.”
Cardinal will continue to benefit from higher electricity prices under its PPA, which provides for
higher power rates during the months of October to March. Moreover, the facility can generate
more electricity during the winter months when the gas turbine attains its peak output as a
result of lower ambient temperatures. Higher electricity rates will be offset by higher gas
transportation costs. Cardinal is continuing to work with its peers through the Association of
Power Producers of Ontario to communicate its views on the impact of higher gas
transportation costs and to reinforce the need for toll stabilization. It is currently expected that
transportation tolls in 2009 will be consistent with or below the average 2008 rate.
Erie Shores is performing in line with the Fund’s forecast and is expected to deliver annual
production of approximately 245,600 MWh, subject to wind speed and density, which are
typically greatest during the fall and winter months. Plant availability of 97% is guaranteed by
GE, the turbine supplier, and Erie Shores is entitled to direct revenue reimbursement if that
threshold is not met.
At the hydro power facilities, water flows are typically strongest during the spring and autumn
months. The impact of fluctuating water flows on revenue is mitigated by the geographic
diversification of the hydro assets across the Arctic, Atlantic and Pacific watersheds.
Additionally, the PPAs at Wawatay and Dryden facilities provide for higher electricity rates
during the months of October to March. The hydro power facilities are expected to generate
long-term average production of 166,360 MWh per year, which represents actual historical
production at each of the plants. This long-term average includes the impact of outages
required for mechanical and electrical inspections at the plants, which are typically scheduled
for seasonally low periods.
Whitecourt continues to operate reliably, reflecting the stability of its fuel supply and strong
maintenance program. Production in the fourth quarter of the year is expected to be
consistent with the facility’s historical performance.
Leisureworld continues to advance the regulatory process for the acquisition of the Good
Samaritan Seniors Complex with the Ontario Ministry of Health and Long-Term Care.
Leisureworld continues to focuses on providing a high quality of care, accommodation and
services, which contributes to the continuing high occupancy across its 26 long-term care
homes. In addition, a growing number of residents are choosing private accommodation, for
which Leisureworld receives a regulated premium.
Guidance for Payout Ratio
For fiscal 2008, the Fund expects to achieve a payout ratio of approximately 100%.
Management expects the return of capital portion to be approximately 60% for the 2008 fiscal
year, based on current operations and barring any significant external shocks.
Conference Call and Webcast
Management of the Fund will hold a conference call (with accompanying slides) to discuss
third quarter results on Wednesday, November 12, 2008 at 8:30 a.m. ET. The conference call
will be accessible via webcast through the Fund’s website at www.macquarie.com/mpt and by
telephone at 416-641-6139 (Canada) or 1-866-542-4262 (North America). A replay of the call
will be available until November 26, 2008 by dialling 416-695-5800 or 1-800-408-3053 and
entering the passcode 3272978.
The Fund will hold its annual Investor Day on November 20, 2008 in Toronto. For further
information and to register, please email us at email@example.com or call 416-607-5166.
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 essential infrastructure assets in
North America with an emphasis on power infrastructure. MPT’s strategy is to acquire and
actively manage a diverse, high quality portfolio of infrastructure assets to improve their
financial performance and provide growing and sustainable distributions to unitholders. MPT’s
portfolio includes investments in gas cogeneration, wind, hydro and biomass power generating
facilities, representing approximately 350 MW of installed capacity, and a 45% interest in
Leisureworld Senior Care LP, a leading provider of long-term care, or social infrastructure, in
Ontario. MPT is managed by a wholly-owned subsidiary 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 and reflecting the
impacts of 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,
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: including risks associated with: the operational performance of the Fund’s
assets; power purchase agreements; fuel costs, supply and transportation; default under credit agreements; regulatory
regime and permits; land tenure and related rights; government regulation and funding; acquisition-related risks for
Leisureworld; LTC home ownership and operation; minority ownership interest in Leisureworld; reliance on key
personnel; default under Leisureworld’s long-term debt and credit facility; labour relations and cost; the variability of
distributions; unitholder liability; dependence on Macquarie Power Management Ltd. (“MPML” or the “Manager”), the
Manager of the Fund, and potential conflicts of interest; insurance; and risks related to the environmental, health and
safety regimes within which the Fund’s assets operate. 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
The forward-looking statements contained in this news release are presented for the purpose of assisting the Fund’s
unitholders and the investment community in understanding the Fund’s financial position, strategic priorities and
objectives as at and for the periods ended on the dates presented and may not be appropriate for other purposes.
The forward-looking statements are based upon information currently available and what the Fund currently believes
are reasonable assumptions. These assumptions include 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. 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 MPML do not undertake to update any
forward-looking information that may be made from time to time by or on its behalf, except as required under
applicable securities legislation. 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. 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:
Vice President & Chief Financial Officer
Tel: (416) 607 5198
Vice President, Communications and Investor Relations
Tel: (416) 649 1325