Capital Power Income L.P. reports first quarter results

EDMONTON, April 27 /CNW/ - (TSX: CPA.UN) - CPI Income Services Ltd., the general partner of Capital Power Income L.P. (the Partnership), today released the Partnership's quarterly results for the period ended March 31, 2010.

"I'm pleased to report that the Partnership's operating cash flows in the first quarter of 2010 were in line with management's expectations and increased 16 per cent compared with the same period a year ago, reflecting strong plant availability at 95% across the portfolio, up from 94% last year," said Stuart Lee, President of the General Partner. "Cash provided by operating activities from continuing operations before working capital changes was $36.9 million in the first quarter of 2010, compared to $31.9 million for the same period in 2009. First quarter results also benefitted from low maintenance capital expenditures of approximately $1 million and favorable settlement prices from foreign exchange contracts resulting in a payout ratio of 67 per cent."

Highlights of Capital Power Income L.P.'s operational and financial performance included:

    
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           Operational and Financial Highlights           Three months ended
                                                                March 31
                                                              (unaudited)
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    (millions of dollars except per unit and operational
     amounts)                                               2010       2009
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    Power generated (GWh)                                  1,268      1,299
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    Weighted average plant availability                      95%        94%
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    Revenue                                                144.2      127.6
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    Cash provided by operating activities of continuing
     operations                                             44.6       33.7
    -------------------------------------------------------------------------
    Per unit (1)                                           $0.82      $0.63
    -------------------------------------------------------------------------
    Distributions                                           23.9       34.0
    -------------------------------------------------------------------------
        Per unit                                           $0.44      $0.63
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    Payout ratio (1)(2)                                      67%       122%
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    Capital expenditures                                    11.7       17.0
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    Weighted average units outstanding (millions)           54.3       53.9
    -------------------------------------------------------------------------
    (1) Cash provided by operating activities of continuing operations per
        unit and payout ratio are non-GAAP financial measures. See "Non-GAAP
        measures".
    (2) Payout ratio is distributions divided by cash provided by operating
        activities of continuing operations excluding working capital changes
        less maintenance capital expenditures.
    

The March 31, 2010 interim management's discussion and analysis and interim consolidated financial statements are available on the Capital Power Income L.P. website (www.capitalpowerincome.ca) and will be available on SEDAR (www.sedar.com).

Revenue for the three month period ended March 31, 2010 was $144.2 million compared to $127.6 million for the same period in 2009. The increase was primarily due to net gains on the change in the fair value of foreign exchange contracts in 2010 compared to losses in 2009.

The Partnership reported cash provided by operating activities of continuing operations of $44.6 million for the three months ended March 31, 2010 compared to $33.7 million for the same period in 2009. Excluding changes in working capital, cash provided by operating activities of continuing operations increased by $5.0 million in the first quarter of 2010 compared to the same period in 2009. This was primarily due to higher contract prices on foreign exchange contracts that settled in the first quarter of 2010 and higher operating margin at the California and BC hydroelectric plants.

In line with the Partnership's expectations, the plan of reorganization (the Plan) for LyondellBasell's US subsidiaries, including Equistar Chemicals, L.P. (Equistar), under Chapter 11 of the US Bankruptcy Code was approved on April 23, 2010. Pursuant to the Plan, Equistar will assume the energy services agreement (ESA) with Morris Cogeneration, LLC and as a result the Partnership expects that during the second quarter, the Morris facility will receive approximately US$12 million from Equistar, representing payments for pre-petition services under the Morris ESA along with interest as stipulated in the ESA.

The Partnership completed the enhancements to the second unit at Southport in April 2010 and expects to complete the material handling improvements at Southport by June 30, 2010. The Partnership is currently completing the Oxnard repowering and expects the plant to be back online in May 2010.

The power purchase arrangements (PPAs) for the North Carolina facilities expired on December 31, 2009. As a result of delays in the arbitration process to replace these PPAs, the Partnership now expects that a decision is likely to be made late in the third quarter of 2010. The Partnership remains optimistic that either an arbitration ruling or further negotiations with Progress Energy Inc. will result in new PPAs for the Roxboro and Southport facilities. However, it is not certain at this time whether the final contract terms will result in positive cash provided by operating activities for the facilities or achieve previous expectations of accretion from the North Carolina enhancement project.

Non-GAAP measures

The Partnership uses cash provided by operating activities of continuing operations per unit as a cash flow measure and payout ratio as a distribution sustainability measure. These terms are not defined financial measures according to Canadian generally accepted accounting principles (GAAP) and do not have standardized meanings prescribed by GAAP. Therefore, these measures may not be comparable to similar measures presented by other enterprises. See "Non-GAAP Measures" in the Partnership's interim management's discussion & analysis for the three months ended March 31, 2010 filed on SEDAR.

Cash provided by operating activities of continuing operations per unit is cash provided by operating activities of continuing operations divided by the weighted average number of units outstanding in the period.

Payout ratio is defined as distributions divided by cash provided by operating activities of continuing operations excluding working capital changes less maintenance capital expenditures. Working capital changes have been excluded from this measure as short-term changes in working capital are expected to be largely reversed in future periods or represent reversals from prior periods. Non-maintenance capital spending has been excluded from this measure as capital expenditures related to an expansion of the productive capacity of the business represent a long-term investment beyond the maintenance capital requirements of the existing business.

Forward-looking information

Certain information in this news release is forward-looking and related to anticipated financial performance, events and strategies. When used in this context, words such as "will", "anticipate", "believe", "plan", "intend", "target" and "expect" or similar words suggest future outcomes. By their nature, such statements are subject to significant risks, assumptions and uncertainties, which could cause the Partnership's actual results and experience to be materially different than the anticipated results. In particular, forward-looking information and statements include information and statements with respect to: (i), anticipated completion of the Oxnard and Southport facility modifications and the Oxnard facility being back online in May 2010 (ii) expectations relating to the emergence of Equistar from Chapter 11 proceedings, including that Equistar will assume the Morris ESA and that Morris will receive approximately US$12 million of payments for pre-petition services and interest, and (iii) managements expectations regarding the arbitration process in respect of PPAs at the North Carolina facilities and expectations in respect of new PPAs for the North Carolina facilities.

These statements are based on certain assumptions and analyses made by the Partnership in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. The material factors and assumptions used to develop these forward-looking statements include, but are not limited to: (i) the markets and regulatory environment in which the Partnership's facilities operate, (ii) the performance of contractors and suppliers, (iii) the renewal or replacement of PPAs including terms and timing of new PPAs at the North Carolina facilities, (iv) the Partnership's assessment of power markets, and (v) management's analysis of the Equistar reorganization under Chapter 11 of the US Bankruptcy Code.

Whether actual results, performance or achievements will conform to the Partnership's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Partnership's expectations. Such risks and uncertainties include, but are not limited to, risks relating to: (i) the operation of the Partnership's facilities, (ii) plant availability and performance, (iii) competitive factors in the power industry, (iv) economic conditions, including in the markets served by the Partnership's facilities, (v) the availability and cost of equipment, (vi) unanticipated maintenance and other expenditures, and (vii) the arbitration proceedings in respect of the North Carolina facilities or negotiations with Progress Energy Inc. may not result in PPAs with satisfactory financial terms.

Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Except as required by law, the Partnership disclaims any intention and assumes no obligation to update any forward-looking statement.

About Capital Power Income L.P.

Established in 1997, Capital Power Income L.P. is a limited partnership organized under the laws of the Province of Ontario. The Partnership's portfolio includes 19 wholly-owned power generation assets located in Canada and the United States and a 50.15 per cent interest in a power generation asset in Washington State. The Partnership's assets have a total net generating capacity of 1,400 megawatts and more than four million pounds per hour of thermal energy.

For further information: on the Partnership visit www.capitalpowerincome.ca or contact: Media Inquiries: Mike Long, [phone]; Unitholder & Analyst Inquiries: Randy Mah, [phone], Toll Free, [phone]