News Release

Capstone Infrastructure Corporation Announces First Quarter Results

  • Strong operational performance from power infrastructure portfolio
  • Achieved a 6.3% increase in revenue and increases of 8.4% and 8.6% in adjusted EBITDA and FFO, respectively, from core assets
  • Completed acquisition of district heating investment, adding new category of infrastructure
  • Access to approximately $50 million in capital to support continuing growth
  • Internalization of management strongly positions capstone infrastructure for the future

TORONTO, ONTARIO--(Marketwire - June 9, 2011) - Capstone Infrastructure Corporation (TSX:CSE)(TSX:CSE.DB.A) ("CSE" or the "Corporation") today reported financial results for the quarter ended March 31, 2011. Beginning with the first quarter of 2011, the Corporation has adopted International Financial Reporting Standards ("IFRS"). All results are reported under IFRS unless otherwise noted. 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

"Operationally, our portfolio performed strongly in the first quarter, with better wind conditions at Erie Shores and stable production from Cardinal and Whitecourt, both of which also benefitted from higher power prices," said Michael Bernstein, President and Chief Executive Officer. "Compared with the first quarter of 2010, our results reflect the absence of distributions from Leisureworld as well as higher costs related to business development, certain costs related to the internalization of management, and higher gas transportation tolls at Cardinal. While these higher costs resulted in lower Adjusted EBITDA, FFO and AFFO compared with the same quarter last year, Adjusted EBITDA and FFO from our core businesses increased by 8.4% and 8.6%, respectively, which highlights the underlying strength and quality of our portfolio. During the quarter, we completed our conversion to a corporation as well as the acquisition of a 33.3% interest in Värmevärden, the Swedish district heating business. More recent initiatives include the refinancing of the Erie Shores Tranche C debt and the internalization of management, which was completed on April 15. The internalization enhances the alignment of management with shareholders and secures a seasoned team to execute the Corporation's strategy for growth and shareholder value creation." 

Financial Overview
(in millions of Canadian dollars or on a per share basis unless otherwise noted)
  Three Months Ended March 31   Variance (%)  
  2011   2010      
Revenue 46.9   44.2   6.3  
Cash flows from operating activities 14.1   13.9   1.4  
Adjusted EBITDA(1) 17.9   19.9   (10.1 )
FFO(1) 14.8   17.1   (13.5 )
AFFO(1) 13.2   15.1   (12.6 )
AFFO per share(1) 0.217   0.303   (28.4 )
Dividends per share 0.165   0.165   -  
Payout ratio(1) 75.8 % 54.5 % 39.1  
Electricity production (MWh) 498,410   489,956   1.7  
(1) "Adjusted EBITDA", "Funds From Operations", "Adjusted Funds from Operations", "Adjusted Funds from Operations per Share" and "Payout Ratio" are non-GAAP financial measures and do not have any standardized meaning prescribed by 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 14 and 15, respectively.

Summary of IFRS Impact on Financial Reporting

With the adoption of IFRS, the Corporation has restated its fiscal 2010 financial results to conform to IFRS standards. The fiscal 2010 financial statements were originally prepared in accordance with Canadian generally accepted accounting principles. Key differences under IFRS are that major maintenance that are periodically undertaken at the Corporation's facilities are no longer expensed as incurred but instead capitalized and depreciated. Additionally, business development activities and transaction costs under IFRS are now expensed as incurred rather than capitalized. There are also certain one-time changes to opening amounts and comparators. Further detail on IFRS adjustments impacting historical and prospective financial reporting is provided on pages six to eight of the quarterly report.

Key Drivers of Quarterly Financial Results

Higher revenue

Total revenue increased by $2.8 million, or 6.3%, over the first quarter of 2010, reflecting improved wind conditions at Erie Shores Wind Farm ("Erie Shores") and stable electricity production from the Cardinal gas cogeneration ("Cardinal") and Whitecourt biomass power ("Whitecourt') facilities. Cardinal and Whitecourt additionally benefitted from higher power prices. These drivers were partially offset by lower production at the hydro power facilities, reflecting the unusually early spring run-off that occurred in the first quarter of 2010, although hydrological conditions at the 14 MW Wawatay hydro facility are continuing to improve. Total electricity production increased 1.7% from the prior period. 

Higher operating expenses

Operating expenses increased by $824,000, or 3.5%, primarily due to an 8.2% increase in fuel expenses at Cardinal, which reflected increased 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. 

Higher administrative expenses

Administrative expenses increased by $2.1 million, or 65.2%, over 2010. This variance primarily reflected increased business development expenses, which, under IFRS, are expensed as they are incurred. Other administrative expenses were also higher due primarily to costs for the internalization of management and residual expenses for the corporate conversion and reorganization that was completed on January 1, 2011.

Sale of Leisureworld Senior Care LP ("Leisureworld")

Adjusted EBITDA, FFO and distributable cash for the year were lower than in 2010, largely due to the absence of distributions from Leisureworld, which contributed $2.1 million to the Corporation in the first quarter of 2010. While the Corporation has now reinvested the proceeds from the sale of Leisureworld to acquire its 33.3% interest in Värmevärden, distributions to the Corporation from this new investment have not yet commenced but are anticipated to begin in the second quarter.

Financial Position

As at March 31, 2011, the Corporation's unrestricted cash and cash equivalents totalled $39.1 million (December 31, 2010 - $131.4 million). The Corporation was conservatively leveraged relative to the low risk profile and long life of its assets, with a debt to capitalization(2) ratio of 40.4% as at March 31, 2011 (December 31, 2010 – 37.9%). After giving effect to its investment in the Amherstburg Solar Park, the Corporation will have access to over $50 million in capital, including cash and available credit, to pursue additional acquisitions. 

(2) The fair value of shareholders' equity reflected the Corporation's market capitalization as at March 31, 2011 based on a share price of $7.94 (December 31, 2010 - $8.22) and shares outstanding of 57,759,736 (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 where classified as a liability on the statement of financial position.

Fiscal 2011 Outlook

An outlook for each of the Corporation's assets is provided on pages 24 to 28 of the first quarter report. Notably, the Amherstburg Solar Park is progressing on schedule and is expected to start commercial operations at the end of June 2011.  

The Corporation expects continuing strong operational performance from its businesses in 2011.

Excluding the impact of approximately $20 million in one-time total internalization costs, Adjusted EBITDA and FFO are expected to be higher than in 2010. This outlook is based on first quarter performance and assumes the following factors:

  • Continuing stable performance from Cardinal and Whitecourt;
  • Continuation of more normal wind patterns and water flows;
  • The partial year cash flow from Amherstburg Solar Park and Värmevärden; and
  • That TCPL tolls continue at the current level for the balance of 2011. 

However, the Corporation expects its 2011 payout ratio, which is based on AFFO, to be approximately 110% to 120% (excluding internalization costs) compared with previous guidance of slightly more than 100%, which was on a distributable cash basis. This revised payout ratio expectation additionally reflects the impact of a greater number of shares outstanding, including shares issued to Macquarie Group Limited under the terms of the internalization agreement as well as the conversion of convertible debentures by certain debenture holders into shares, and higher business development costs. For 2012, the Corporation currently expects to achieve a payout ratio of approximately 85% to 90%, which reflects the full year contribution from the Amherstburg Solar Park and Värmevärden as well as a return to 2010 TCPL rates. As the Corporation executes its growth strategy, which could include development projects or businesses with a strong growth profile, its payout ratio may fluctuate in any given year. 

Including the one-time impact of the internalization costs, the Corporation currently expects its fiscal 2011 Adjusted EBITDA to be approximately $40 million compared with $55.0 million in fiscal 2010. Excluding the impact of the internalization costs, Adjusted EBITDA is expected to be approximately $60 million in fiscal 2011. For 2012, the Corporation currently expects Adjusted EBITDA to be approximately $80 million, reflecting the full year contribution from the Amherstburg Solar Park and Värmevärden.

Based on the Corporation's current portfolio and outlook and barring any significant unexpected events, the Corporation's dividend policy of $0.66 cents per share on an annualized basis is expected to be sustainable through 2014. 

Conference Call and Webcast

Management will hold a conference call (with accompanying slides) to discuss first quarter results on Friday, June 10, 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 at 416-695-7848 (Canada) or 1-800-952-6845 (North America). A replay of the call will be available until June 24, 2011 by dialling 905-694-9451 or 1-800-408-3053 and entering the passcode 8460400.

Dividend Reinvestment Plan (DRIP)

Eligible shareholders may elect to participate in the Corporation's Dividend Reinvestment Plan. For more information about the DRIP, please visit the Corporation's website at

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 and biomass power generating facilities, representing approximately 350 MW of installed capacity, and a 33.3% interest in a district heating business in Sweden. The Corporation is also currently developing a 20 MW solar power facility in Ontario. Please visit the Corporation's website at for more information.

Notice to Readers

Certain of the statements contained in this news release are forward-looking and reflect management's expectations regarding the Corporation's future growth, results of operations, performance and business based on information currently available to the Corporation. Forward-looking 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 Corporation currently believes are reasonable assumptions, including the material assumptions for each of the Corporation's assets set out in its fiscal 2010 Annual Report under the heading "Asset Performance" as updated in subsequently filed Quarterly Financial Reports of the Corporation and other filings made by the Corporation with the Canadian securities regulatory authorities (such documents are available on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval ("SEDAR") at 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 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. 

Although the Corporation 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 costs and supply; contract performance; development risk; technology risk; default under credit agreements; land tenure and related rights; regulatory regime and permits; and force majeure) and the Corporation (variability and payment of dividends, which are not guaranteed; geographic concentration and non-diversification; reliance on key personnel; insurance; environmental, health and safety regime; availability of financing; shareholder dilution; the volatile market price for common shares of the Corporation; changes in legislation and administrative policy; and International Financial Reporting Standards). There are also a number of risks related to the Corporation's investment in the district heating business in Sweden, including: general business risks inherent in the district heating business; fuel costs and availability; seasonality; regulatory environment; environmental matters; industrial contracts; geographic concentration; regulation; environmental health and safety; reliance on key personnel; labour relations and cost; acquisition-related risks; minority interest; and foreign exchange risk. There is also a risk that the district heating business may not achieve expected results.

For a more comprehensive description of these and other possible risks, please see the Corporation's Annual Information Form dated March 24, 2011 for the year ended December 31, 2010 as updated in subsequently filed Quarterly Financial Reports and other filings made by the Corporation with the Canadian securities regulatory authorities. These filings are available on SEDAR. 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 Corporation as at the date of this news release and speak only as at the date of this news release. Except as may be required by applicable law, the Corporation does not undertake any obligation to publicly update or revise any forward-looking statements.


Capstone Infrastructure Corporation
Aaron Boles
VP, Communications
Capstone Infrastructure Corporation
Michael Smerdon
Executive VP and CFO