Alterra Power announces results for the quarter ended June 30, 2017

Announced Date :  Aug 10, 2017


Alterra Power Corp. is pleased to report its financial and operating results for the quarter ended June 30, 2017. For further information on these results please see Alterra's Condensed Consolidated Interim Financial Statements and Management's Discussion and Analysis.
At June 30, 2017, Alterra consolidated 100% of the results of operations from its Icelandic subsidiary HS Orka, while Alterra's interests in the Toba Montrose, Dokie 1, Shannon, Jimmie Creek, and Kokomo renewable power projects were accounted for as equity investments. In certain statements in this news release, Alterra's results are disclosed as Alterra's "net interest", by which the Company means the operating results that the Company would have reported if each of HS Orka (66.6%), Toba Montrose (40%), Dokie 1 (25.5%), Shannon (50% sponsor equity interest), Jimmie Creek (51%), and Kokomo (90% sponsor equity interest) were reported in the proportional ownership interests shown above. Management believes that net interest reporting, although a non-IFRS measure, provides the clearest view of Alterra's performance. Refer to our MD&A for further information on non-IFRS measures. The Company also has disclosed information below regarding Adjusted EBITDA, another non-IFRS measure. Please refer to the Company's definition of Adjusted EBITDA and further commentary thereto, which is incorporated in the Financial Results table below.

Highlights for the quarter and subsequent period include:

Record generation: The Company achieved its highest second quarter generation ever (8% over the comparative quarter), due primarily to increased output at Shannon and first-time second quarter output from Jimmie Creek. The Company achieved 97.2% of its budgeted generation (net interest) for the quarter, with strong hydro performance offsetting continued unusually low wind production.

Over 20% increase in revenue and Adjusted EBITDA: Consolidated revenue increased by 24% to $17.2 million in 2017, and net interest revenue increased by 20% to $22.2 million predominantly due to a strengthening Icelandic krona in the quarter and first-time output from Jimmie Creek and Kokomo, and increased winds at Shannon. Consolidated Adjusted EBITDA increased by 26% to $13.6 million, and net interest Adjusted EBITDA increased by 31% to $11.2 million, primarily due to increased generation at Shannon and first time output from Jimmie Creek.

Geothermal field improvement at Reykjanes: Recent field enhancement efforts (including well venting and turbine pressure adjustments) have resulted in increased generation (plant currently running at highest output level in 14 months, 75 MW). Quarterly generation increased 5% compared to the fourth quarter of 2016 and 3% over the previous quarter. The Company expects further increases in plant output in 2018 from the drilling of planned new wells, well work-overs, and potentially from the recent deep drilling project.

200 MW Flat Top wind project:

New partner: On July 19, the Company entered into a partnership agreement under which a fund managed by BlackRock Real Assets acquired a 49% sponsor equity interest in the project. Alterra will continue to own 51% of the sponsor equity and will continue to manage the project.

Project financing completed: On July 19, the Company closed a $287.2 million non-recourse credit facility for Flat Top supplied by Citi, Santander and the Royal Bank of Canada, consisting of a $216.7 million construction loan plus $70.5 million in letters of credit. The loan facility is expected to be retired by a $221.1 million tax equity investment to be supplied by subsidiaries of Berkshire Hathaway Energy and Citi (subject to typical conditions precedent). Alterra's total equity contribution for its 51% sponsor equity stake was $43.2 million.

Construction activities: The final phase of on-site construction activities commenced in June 2017 including excavation and concrete work for the turbine foundations, yard construction, maintenance building and substation. All transmission line equipment has been received and line work has commenced. The Company expects commercial operations to commence in the first half of 2018.

Acquisition of Boswell Springs: In April, the Company acquired the 320 MW Boswell Springs project, a four-project portfolio of wind development projects located in Albany County, Wyoming. The Company expects the project to achieve commercial operations in 2020, selling 100% of its output under four 20-year power purchase agreements with PacifiCorp. The Company commenced construction of the project's main power transformers in 2016 in anticipation of closing the acquisition in 2017, and the project is expected to qualify for production tax credits at the full rate.

Spartan acquisition and financing completed:

In June, the Company acquired the Spartan solar project in conjunction with the execution of a partnership agreement with Inovateus Solar, LLC. The final net equity contribution was $3.4 million, with ownership of at least 85% of the project subject to final project economics and other factors.

Subsequent to the quarter, the Company secured a non-recourse project financing for the project. The financing features a $19.8 million construction loan, which will be retired by a $10.2 million term loan and a $9.7 million tax equity investment provided by 1st Source Bank, a subsidiary of 1st Source Corporation subject to typical conditions precedent. Construction commenced in March 2017, and the project is expected to achieve commercial operations in late 2017.

Construction begins on Brúarvirkjun project: The Company has commenced construction on the 10 MW Brúarvirkjun hydro project in southern Iceland, and is in final stage documentation with an Icelandic lender for a construction loan for the project (the loan will serve other corporate purposes as well). The project and the loan will be held in the Company's Icelandic subsidiary, HS Orka.

Advancement of other USA wind projects: The Company continued advancement of several other wind projects in its USA development portfolio (comprised both of projects that are owned and projects subject to cooperation with other developers), including transformer construction, meteorological tower procurement, resource and transmission studies, submissions into offtake requests for proposals and other activities.

Settlement of $71 million Icelandic bond: On July 27, the Company's subsidiary Magma Energy Sweden signed an agreement to fully settle and extinguish the $71.3 million liability associated with the Reykjanesbær bond. Under the terms of the settlement agreement, the Company obtained a release of the $71.3 million liability under the bond and delivered the collateral (a 12.7% ownership stake in HS Orka).

Expansion of AMP loan facility: On July 19, the Company received funding for an expansion of its North American holding company loan (provided by affiliates of AMP Capital Investors Limited). The proceeds ($21.1 million, gross) funded a portion of Alterra's sponsor equity contribution for Flat Top and $3.1 million for working capital purposes. The interest rate for the new tranche is LIBOR plus 5.75% and in conjunction with funding the loan expansion, the interest rate for existing two tranches of the facility was reduced from CDOR plus 6.5% to 5.75%.

Termination of Blue Lagoon sales process: The Company ended the sales process for the 30% stake in the Blue Lagoon held by HS Orka. Although multiple offers were received in excess of €90 million, Alterra's partner, Jarðvarmi slhf, whose consent was required, decided against selling the stake at this time.

Distributions: The Company received distributions during the quarter from equity investments of $5.0 million and another C$7.2 million subsequent to quarter-end.

Shareholder dividends: On June 15, the Company paid its regular quarterly cash dividend of C$0.0125 per common share, and subsequent to the quarter approved the next regular dividend (also C$0.0125 per common share), which will be distributed in cash on or about September 15, 2017 to common shareholders of record as of the close of business on August 31, 2017.

Dividend increase: The Company expects to increase its quarterly dividend in 2018 following completion of the Flat Top wind project.

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