Capital Power Income L.P. reports third quarter results

EDMONTON, Oct. 26 /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 September 30, 2010.

"The Partnership's third quarter operating cash flows were in line with management's expectations," said Stuart Lee, President of the General Partner. "Cash provided by operating activities from continuing operations before working capital changes was $32.0 million in the third quarter of 2010, down 13% from the same period in 2009. In the nine-month period, cash provided by operating activities from continuing operations before working capital changes decreased from $107.5 million in 2009 to $99.2 million in 2010, a decrease of 7.7%. The 83% payout ratio for the nine months of the year was in line with our expectations and represents a more conservative payout level when compared to the 89% payout level for the corresponding period in 2009."  

Earlier this month, the Partnership and Capital Power Corporation announced that the Partnership is initiating a process to evaluate its strategic alternatives to maximize value for unitholders and shareholders of each respective organization. This process is anticipated to take place over the next several months and during this period the Partnership does not expect any changes to monthly distributions paid to unitholders.

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

Operational and Financial Highlights	Three months ended September 30 (unaudited)		Nine months ended September 30 (unaudited)
(millions of dollars except per unit and operational amounts)	2010	2009	2010	2009
Power generated (GWh)	1,304	1,228	3,703	3,560
Weighted average plant availability	97%	93%	94%	92%
Revenue excluding fair value changes	129.9	122.8	385.2	397.8
Cash provided by operating activities of continuing operations before working capital changes	32.0	37.3	99.2	107.5
Per unit ^(1)	$0.58	$0.69	$1.81	$1.99
Distributions	24.3	23.7	72.4	81.4
Per unit	$0.44	$0.44	$1.32	$1.51
Payout ratio ^(1) (2)	90%	71%	83%	89%
Capital expenditures	10.4	33.0	35.9	75.9
Weighted average units outstanding (millions)	55.2	53.9	54.8	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 September 30, 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 excluding fair value changes for the three and nine months ended September 30, 2010 were $129.9 million and $385.2 million compared to $122.8 million and $397.8 million for the same periods in 2009. The increase during the quarter was the result of higher revenue and dispatch at the North Carolina facilities partially offset by lower prices on settled foreign exchange contracts. The decrease during the nine months ended September 30, 2010 was the result of lower foreign exchange rates, lower prices on settled foreign exchange contracts and lower revenue at Kenilworth due to lower fuel recovery revenues due to lower natural gas supply prices which also results in a decrease in fuel costs.

The Partnership reported cash provided by operating activities of continuing operations before working capital changes of $32.0 million and $99.2 million for the three and nine months ended September 30, 2010 compared to $37.3 million and $107.5 million for the same periods in 2009. The decreases were primarily due to lower contract prices on foreign exchange contracts that settled in 2010 and lower operating margins at Curtis Palmer, Oxnard and the Ontario plants partially offset by the reversal of a provision on the receivable from Equistar and recognition of interest income as Equistar emerged from Chapter 11 protection and higher operating margins at the Naval facilities.

On October 5, 2010, the Partnership and CPC announced that the Partnership will initiate a process to review its strategic alternatives. This decision is the result of separate strategic review processes undertaken by the Special Committee of the independent directors of the Partnership to maximize value for the Partnership's unitholders and by CPC to maximize value for CPC's shareholders. The initiation of the strategic review is not in response to any proposed transaction for the Partnership and there is no assurance that it will lead to a transaction. The process to review strategic alternatives is anticipated to take place over the next several months. During this period it is anticipated that the Partnership will continue to provide the same amount of monthly distributions to its unitholders and maintain the same investor proposition supported by its high quality portfolio of contracted power assets. Also during this period, CPC will continue to manage the Partnership's assets, seek growth opportunities that fit the Partnership's strategy and deliver on business plan priorities.

The Partnership is currently completing the material handling improvements at Southport and now expects to complete these improvements by December 31, 2010.

The power purchase arrangements (PPAs) for the North Carolina facilities expired on December 31, 2009. The Partnership now expects the arbitration ruling decision to be made late in the fourth quarter of 2010. The Partnership remains optimistic that an arbitration ruling 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 operating margin as a performance measure, 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 nine months ended September 30, 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 Southport facility modifications and the impact thereof on the operation of the facilities and the financial results of the Partnership, (ii) 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, (iii) expectations of the timing of the process to review strategic alternatives and expectations that CPC will continue to manage the Partnership's assets, seek growth opportunities that fit the Partnership's strategy and deliver on business plan priorities during the strategic review process, and (iv) the monthly distributions of the Partnership while the strategic review process is underway.

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 Partnership's operations, financial position, available credit facilities and ability to access capital markets, (ii) the Partnership's assessment of commodity, currency and power markets, (iii) the markets and regulatory environment in which the Partnership's facilities operate, (iv) the state of capital markets, (v) the assumption that counterparties to fuel supply and power purchase agreements will continue to perform their obligations under the agreements taking account of the matters described herein, (vi) the level of plant availability and dispatch, (vii) the performance of contractors and suppliers, (viii) the renewal or replacement of PPAs and terms of PPAs including the terms and timing of new PPAs at the North Carolina facilities, (ix) the ability of the Partnership to successfully integrate and realize the benefits of its capital projects, * the ability of the Partnership to implement its strategic initiatives and whether such initiatives will yield the expected benefits, (xi) expected water flows, (xii) the ability of the Partnership to adequately source alternative sources of supply of wood waste, and (xiii) the Partnership's assessment of the strategic alternatives that may be available to it.

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) the availability and price of energy commodities including natural gas and wood waste, (iv) the performance of counterparties in meeting their obligations under PPAs, (v) competitive factors in the power industry, (vi) economic conditions, including in the markets served by the Partnership's facilities, (vii) changing demand for natural gas transportation on the TransCanada Canadian Mainline, (viii) ongoing compliance by the Partnership with its current debt covenants, (ix) developments within the North American capital markets, * the availability and cost of permanent long-term financing in respect of acquisitions and investments, (xi) unanticipated maintenance and other expenditures, (xii) the Partnership's ability to successfully realize the benefits of its capital projects, (xiii) changes in regulatory and government decisions including changes to emission regulations in Canada and the US, (xiv) waste heat availability and water flows, (xv) the availability and cost of equipment, (xvi) the ability of the Partnership to adequately source alternative sources of supply of wood waste, (xvii) the North Carolina Utilities Commission arbitration may not result in PPAs with satisfactory financial terms, and (xviii) the strategic review process could take more or less time than anticipated.

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:

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]