Capstone Infrastructure Corporation (TSX: CSE; CSE.DB.A;
CSE.PR.A – the “Corporation”) today provided its financial outlook
for fiscal 2013 and announced the establishment of a new group
focused on sourcing, developing and pursuing power projects in
Canada and the United States.
“Capstone has a strong, diversified portfolio that is performing
in line with expectations and represents a solid platform from
which to grow. This platform is complemented by a strengthened
balance sheet and a lower payout ratio, which provides us with
flexibility to pursue growth opportunities,” said Michael
Bernstein, President and Chief Executive Officer. “In the year
ahead, we expect solid performance from our current portfolio and
increased business development activity as we focus on building the
scale and value of our company through the acquisition of operating
infrastructure businesses as well as development-stage power
projects.”
Outlook for 20131
The Corporation expects continuing stable performance from its
portfolio of power generation and utilities businesses and a return
to a lower effective gas transportation toll in 2013 to transport
gas to the Cardinal gas cogeneration facility (“Cardinal”).
Adjusted Earnings before Interest, Taxes, Depreciation and
Amortization (“Adjusted EBITDA”) in 2013 is anticipated to be
approximately $110 million to $120 million, which, while consistent
with the outlook provided for 2012, represents an approximately $6
million increase in Adjusted EBITDA over 2012 on a pro forma basis
had the Corporation held its 50% interest in Bristol Water for the
full 2012 year. The Corporation’s 2013 outlook reflects the
following assumptions:
- Holding a 50% interest in Bristol Water
for the full year following a partial sale of the Corporation’s
previously 70% interest in May 2012;
- Increased business development activity
compared with 2012, which is expected to result in higher corporate
costs consistent with historical levels; and
- Modest overhead costs related to the
Corporation’s new power development activities.
The Corporation continues to negotiate with the Ontario Power
Authority (“OPA”) to achieve a fair contract outcome for Cardinal
that balances value for Ontario ratepayers, value Cardinal’s
industrial partner and value for the Corporation’s shareholders.
While negotiations are ongoing, the Corporation no longer expects
the process to conclude in 2012. Cardinal’s current power purchase
agreement expires at the end of 2014.
Capstone Power
Development
The Corporation today also announced the formation of a new
power development subsidiary, Capstone Power Development, based in
Vancouver, British Columbia under the leadership of Michael
Chapin.
Mr. Chapin is an accomplished energy professional with more than
30 years of experience in the North American power industry and
most recently co-founded GreenWing Energy Management Ltd. Over his
career, Mr. Chapin has led the development and acquisition of more
than 3 gigawatts of clean energy projects (wind, solar, hydro and
natural gas) in North America, including the 100 megawatt (“MW”)
St. Leon Wind Energy Project in Manitoba, the 187.5 MW High Plains
Wind Energy Project in Wyoming, and the sale of a 1,400 MW
portfolio of wind projects located in California, Nevada, Colorado,
New Mexico and North Dakota. Mr. Chapin has also advised a number
of industry-leading energy developers, including Tenaska, El Paso
Corporation, AES Corp. and Cogentrix, and has held senior positions
at a number of major utilities, including Vice President of B.C.
Gas Inc.’s non-regulated subsidiary and as a member of the team
that started CU Power International (now Atco Power). Mr. Chapin
holds a Bachelor of Applied Science degree in Electrical
Engineering from the University of British Columbia.
“We are delighted to launch a new development initiative with
Michael, who is a seasoned professional with a proven record of
successfully developing power projects, building partnerships and
creating value for shareholders,” said Mr. Bernstein. “Michael’s
efforts will focus on developing and acquiring renewable and clean
electricity generation projects in western Canada and the United
States where there are significant greenfield and brownfield
project opportunities.”
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 by providing reliable income
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 50% interest in a regulated water utility
in the United Kingdom. Please visit www.capstoneinfrastructure.com
for more information.
1 Please see Notice to Readers on page 2.
Notice to Readers
Certain of the statements contained within this document are
forward-looking and reflect management’s expectations regarding the
future growth, results of operations, performance and business of
the Corporation based on information currently available to the
Corporation. Forward-looking statements and 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 and financial
outlook may not be appropriate for other purposes. These statements
and financial outlook use forward-looking words, such as
“anticipate”, “continue”, “could”, “expect”, “may”, “will”,
“estimate”, “plan”, “believe” or other similar words, and include,
among other things, forward-looking statements concerning the
Corporations new dividend policy, the outlook for the Corporation's
power infrastructure facilities; Swedish district heating business
("Värmevärden") and the UK water utility ("Bristol Water"). These
statements and financial outlook 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 financial outlook 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 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, 2011 under the heading “Results of Operations”,
as updated in subsequently filed interim MD&A of the
Corporation (such documents are available under the Corporation’s
profile on www.sedar.com).
Other material factors or assumptions that were applied in
formulating the forward-looking statements and financial outlook
contained herein include or relate to 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 the Corporation’s power businesses experience normal wind,
hydrology, solar irradiation and ambient temperatures and humidity
levels; the contribution from Bristol Water reflecting the
Corporation’s reduced ownership interest as at May 10, 2012; an
effective TransCanada Pipelines (“TCPL”) gas transportation toll of
approximately $1.76 per gigajoule in 2013; no material change in
the level of gas mitigation revenue earned by the Cardinal
facility; that there will be no unplanned material changes to the
Corporation’s facilities, equipment or contractual arrangements, no
unforeseen changes in the legislative, regulatory 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 infrastructure facilities,
Värmevärden or Bristol Water, no unfavourable changes in
environmental regulation and no significant event occurring outside
the ordinary course of business; that there will be no further
amendments by the Ontario government to the regulations governing
the mechanism for calculating the Global Adjustment (which affects
the calculation of the price escalators under each power purchase
agreement (a “PPA”) for the Cardinal facility and the hydro power
facilities located in Ontario); the accounting treatment for
Bristol Water’s business under International Financial Reporting
Standards, particularly with respect to accounting for maintenance
capital expenditures; the amount and timing of capital expenditures
by Bristol Water; no material change to the Swedish Krona to
Canadian dollar exchange rate; no material change to the UK pound
sterling to Canadian dollar exchange rate; and that Bristol Water
will operate and perform in a manner consistent with the regulatory
assumptions underlying its current asset management plan,
including, among others: real and inflationary increases in Bristol
Water’s revenue, Bristol Water’s expenses increasing in line with
inflation, and capital investment, leakage, customer service
standards and asset serviceability targets being achieved.
Although the Corporation believes that it has a reasonable basis
for the expectations reflected in these forward-looking statements
and financial outlook, actual results may differ from those
suggested by the forward-looking statements and financial outlook
for various reasons, including risks related to: variability and
payments of dividends on the Corporation’s common shares, which are
not guaranteed; volatile market price for the Corporation’s
securities; availability of debt and equity financing; default
under credit agreements; credit risk, prior ranking indebtedness
and absence of covenant protection for holders of the Corporation’s
convertible debentures; dependence on subsidiaries and investees;
acquisitions; geographic concentration and non-diversification;
foreign exchange risk; reliance on key personnel; insurance;
shareholder dilution; derivatives risks; changes in legislation and
administrative policy; competition; private companies and illiquid
securities; operational performance; PPAs; fuel costs and supply;
contract performance; Amherstburg Solar Park technology risk; land
tenure and related rights; environmental, health and safety regime;
regulatory regime and permits; force majeure; influence of the UK
water regulator (“Ofwat”) price determinations; failure of Bristol
Water to deliver capital investment programs; failure of Bristol
Water to deliver water leakage target; Ofwat’s introduction of the
Service Incentive Mechanism and the serviceability assessment;
economic environment, inflation and capital market conditions;
pension plan obligations; operational risks; competition; default
under Bristol Water’s artesian loans, bonds, debentures and credit
facility; seasonality and climate change; labour relations; special
administration; general risks inherent in the district heating
sector; industrial and residential contracts; default under
Värmevärden’s bonds; and minority interest. Further information
regarding these risk factors is contained in the Corporation’s
Annual Information Form (which is available under the Corporation’s
profile on www.sedar.com).
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 law, the
Corporation does not undertake any obligation to publicly update or
revise any forward-looking statements or financial outlook.
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