Macquarie Power & Infrastructure Income Fund
TSX : MPT.UN
TSX : MPT.DB

Macquarie Power & Infrastructure Income Fund

August 12, 2008 17:44 ET

Macquarie Power & Infrastructure Income Fund Announces Strong Second Quarter Results

- Portfolio performing in line with expectations - Conservative financial position - Capacity for continuing growth

TORONTO, ONTARIO--(Marketwire - Aug. 12, 2008) - Macquarie Power & Infrastructure Income Fund (TSX:MPT.UN)(TSX:MPT.DB) ("MPT" or the "Fund"), which invests in essential infrastructure assets, today reported results for the second quarter ended June 30, 2008. The Fund's Management's Discussion and Analysis and unaudited financial statements are available on the Fund's website at www.macquarie.com/mpt and on SEDAR at www.sedar.com.

"The Fund's portfolio performed in line with expectations, which reflects the diversity, stability and quality of our power and social infrastructure assets," said Mr. Gregory Smith, President and Chief Executive Officer of the Fund. "The Fund continued to benefit from increased power production and higher power rates as well as predictable results from Leisureworld. Moreover, the Fund's financial position remains strong, which will enable us to capitalize on growth opportunities that contribute to the long-term value of the portfolio."

Financial Performance

Revenue for the quarter was $33.5 million compared with $21.6 million in the second quarter of 2007. The increase reflected the contribution from the wind, hydro and biomass power assets that the Fund acquired as part of the unit exchange takeover of Clean Power Income Fund ("CPIF") on June 27, 2007. It also reflected higher power prices attributable to the continuing impact of electricity rate increases under the Cardinal facility's ("Cardinal") Power Purchase Agreement ("PPA"), which was partially offset by lower production at Cardinal.

Income from operations(1) for the Fund was $3.1 million for the quarter compared with $2.4 million for the same period last year, reflecting higher revenue as well as gas mitigation at Cardinal. The increase in revenue was partially offset by a $6.4-million increase in operating costs, which was due to the addition of the CPIF assets to the portfolio and higher gas transportation costs at Cardinal. It was also offset by a small increase in administrative expenses, which included additional management fees and cost reimbursement associated with the acquisition of CPIF as well as ongoing business development activities.

The Fund's distributable cash(2) was $11.2 million ($0.224 per unit) compared with $7.3 million ($0.237 per unit) in 2007. Declared distributions to unitholders were $13.1 million ($0.262 per unit) compared with $9.5 million ($0.257 per unit) in 2007, representing a payout ratio of 117% (Q2 2007 - 129%) for the quarter. For the six-month period ended June 30, 2008, the Fund achieved a payout ratio of 95% (2007 - 89%). Distributions to unitholders are paid from cash flows from operations and unrestricted cash balances. For 2008, the Fund anticipates achieving a payout ratio of approximately 100%.

Financial Position

As at June 30, 2008, the Fund had positive working capital of $53.3 million and cash on hand of $56.2 million, including fully funded general, major maintenance and capital expenditure reserve accounts in the aggregate amount of $16.6 million. The Fund is conservatively leveraged, with a debt to capitalization ratio of 42.2%.

Operational Performance

Total power production for the quarter increased 61% to 490,684 MWh compared with 304,293 MWh in the same period last year.

Cardinal produced 285,727 MWh of electricity (Q2 2007 - 304,293 MWh). During the quarter, the facility had 180 hours of outages (Q2 2007 - 93 hours) and 56 hours of curtailment (Q2 2007 - nil). Cardinal curtailed production and extended outage hours to capitalize on the favourable spot market price for gas. As a result, Cardinal achieved availability of 91.6% (Q1 2007 - 95.7%) and capacity of 89.1% (Q2 2007 - 93.7%).

Erie Shores Wind Farm ("Erie Shores") performed in line with expectations with production of 53,976 MWh (Q2 2007 - 51,301 MWh), reflecting strong winds during the period. The facility achieved an overall availability of 96.5% (Q2 2007 - 97.3%) and a capacity factor of 24.9% (Q2 2007 - 23.7%).

The Fund's hydro power facilities produced 59,411 MWh (Q2 2007 - 55,095 MWh), representing an increase of approximately 8% from the same period last year. The two hydro facilities in Ontario experienced increased water flows, which was offset by unplanned outages at the Sechelt facility in British Columbia due to an outage on B.C. Hydro's transmission line. In addition, colder than usual weather at Sechelt resulted in decreased water flows. Overall, the hydro power facilities had a weighted average availability of 98.8% (Q2 2007 - 99.4%) for the quarter and a capacity factor of 76.5% (Q2 2007 - 70.7%).

The Whitecourt biomass facility ("Whitecourt") operated at 74.9% availability (Q2 2007 - 94.5%) and achieved a capacity factor of 74.5% (Q2 2007 - 94.0%). During the quarter, Whitecourt completed its major maintenance shutdown and overhaul in 23 days instead of the expected 24 days. As a result, total production at Whitecourt was 38,941 MWh (Q2 2007 - 47,813 MWh).

The Chapais facility ("Chapais"), in which the Fund holds a minority preferred equity and debt interest, experienced availability of 90.9% (Q2 2007 - 92.9%). Production at Chapais was 52,629 MWh (Q2 2007 - 53,606 MWh), primarily reflecting an outage required for the facility's annual spring maintenance.

The Fund owns an indirect 45% equity interest in Leisureworld Senior Care LP ("Leisureworld"), which the Fund accounts for as an equity investment. During the quarter, Leisureworld achieved a 37% increase in revenue and a 30% increase in income from operations, reflecting the contribution of the seven homes acquired earlier this year, improved occupancy and greater use of private accommodation across its portfolio, and increased government funding. Average total occupancy for the quarter was 98.1% (Q2 2007 - 98.1%). The average occupancy of private rooms was 92.2% (Q2 2007 - 84.9%).

Outlook

"Demand for the services provided by essential infrastructure assets is inelastic, which means they deliver predictable performance throughout the economic cycle. This stability is what makes infrastructure so compelling to investors seeking to diversify their portfolios," said Mr. Smith. "The Fund's outlook for the balance of fiscal 2008 is positive. In addition, we have substantial financial capacity for growth and are actively reviewing a range of opportunities. Our goal is to build a significant, diversified portfolio of infrastructure assets that returns exceptional long-term value to unitholders."

In 2008, Cardinal will continue to benefit from higher electricity rates under its PPA. This will be offset by higher gas transportation costs, reflecting the impact of a final regulated rate increase to $1.40/GJ awarded to TransCanada Pipelines Limited, which transports gas to the Cardinal facility, effective June 1, 2008. This followed an earlier interim rate increase on April 1, 2008 to $1.31/GJ from $1.09/GJ previously.

Erie Shores is performing in line with the Fund's forecast and is expected to deliver annual production of approximately 245,600 MWh, subject to wind speed and density, which are typically greatest during the fall and winter months. Plant availability of 97% is guaranteed by GE, the turbine supplier, and Erie Shores is entitled to direct revenue reimbursement if that threshold is not met. Erie Shores' annual maintenance, which typically requires approximately four to five days of outage, is expected to be completed during the seasonally low third quarter.

At the hydro facilities, water flows are typically strongest during the spring and fall months. The impact of fluctuating water flows on revenue is mitigated by the geographic diversification of the hydro assets across the Arctic, Atlantic and Pacific watersheds. Additionally, the PPAs at Wawatay and Dryden provide for higher electricity rates during the months of October to March.

The hydro facilities are expected to generate long-term average production of 166,360 MWh per year, which represents average actual historical production at each of the plants. This long-term average includes the impact of outages required for mechanical and electrical inspections at the plants, which are typically scheduled for seasonally low periods.

Whitecourt continues to operate reliably, reflecting the stability of its fuel supply and strong maintenance program. Routine major maintenance costs at each of the Fund's power plants are fully funded through the Fund's major maintenance reserve account and have no impact on distributable cash.

Leisureworld expects to receive approval from the Ontario Ministry of Health and Long-Term Care for the acquisition of the Good Samaritan Seniors Complex by the end of 2008. Leisureworld focuses on providing a high quality of care, accommodation and services, which contributes to the continuing high occupancy across its 26 homes. In addition, a growing number of residents are choosing private accommodation, for which Leisureworld receives a regulated premium. As the third largest provider of long-term care in Ontario, Leisureworld is well positioned to capitalize on complementary acquisition opportunities that will further enhance the stability and quality of the portfolio.

Conference Call and Webcast

Management of the Fund will hold a conference call (with accompanying slides) to discuss second quarter results on Wednesday, August 13, 2008 at 8:30 a.m. ET. The conference call will be accessible via webcast through the Fund's website at www.macquarie.com/mpt and by telephone at 416-641-6139 (Canada) or 1-866-542-4262 (North America). A replay of the call will be available until August 27, 2008 by dialling 416-695-5800 or 1-800-408-3053 and entering the passcode 3265537.

Distribution Reinvestment Plan (DRIP)

Eligible unitholders may elect to participate in the Fund's Distribution Reinvestment Plan. For more information about the DRIP, please visit the Fund's website at www.macquarie.com/mpt.

About the Fund

Macquarie Power & Infrastructure Income Fund invests in essential infrastructure assets in North America with an emphasis on power infrastructure. MPT's strategy is to acquire and actively manage a diverse, high quality portfolio of infrastructure assets to improve their financial performance and provide growing and sustainable distributions to unitholders. MPT's portfolio includes investments in gas cogeneration, wind, hydro and biomass power generating facilities, representing approximately 350 MW of installed capacity, and a 45% interest in Leisureworld Senior Care LP, a leading provider of long-term care, or social infrastructure, in Ontario. MPT is managed by a wholly-owned subsidiary of Macquarie Group Limited. Please visit www.macquarie.com/mpt for additional information.

(1) Income from operations refers to income before net interest, foreign exchange, share of income (losses) from long-term investments, unrealized gains (losses) on swap contracts and on embedded derivatives in gas purchase contracts, and taxes.

(2) Distributable cash is defined as cash flows from operating activities after removing changes in working capital and reflecting the impacts of releases from maintenance reserves, allocations to major maintenance and capital expenditure reserves, non-discretionary payments and receipts, and distributions from Leisureworld.

Forward-looking Statements

Certain statements in this news release may constitute forward-looking statements, which involve known and unknown risks, uncertainties and other factors that may cause the actual results to be materially different from any future results expressed or implied by such forward-looking statements. Forward-looking statements use such words as "may", "will", "anticipate", "believe", "expect", "plan" and other similar terminology. These statements reflect current expectations regarding future events and operating performance and speak only as of the date of this news release. Forward-looking statements involve significant risks and uncertainties, should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether or not such results will be achieved. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, including, but not limited to: including risks associated with: the operational performance of the Fund's assets; power purchase agreements; fuel costs, supply and transportation; default under credit agreements; regulatory regime and permits; land tenure and related rights; government regulation and funding; acquisition-related risks for Leisureworld; LTC home ownership and operation; minority ownership interest in Leisureworld; reliance on key personnel; default under Leisureworld's long-term debt and credit facility; labour relations and cost; the variability of distributions; unitholder liability; dependence on Macquarie Power Management Ltd. ("MPML" or the "Manager"), the Manager of the Fund, and potential conflicts of interest; insurance; and risks related to the environmental, health and safety regimes within which the Fund's assets operate. The risks and uncertainties described above are not exhaustive and other events and risk factors including risk factors disclosed in MPT's filings with Canadian securities regulatory authorities could cause actual results to differ materially from the results discussed in the forward-looking statements.

The forward-looking statements contained in this news release are based upon information currently available and what the Fund currently believes are reasonable assumptions. These assumptions include that the business and economic conditions affecting the Fund'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 and that there will be no unplanned material changes to the Fund's facilities, equipment and contractual arrangements. However, the Fund cannot assure investors that actual results will be consistent with these forward-looking statements. These forward-looking statements are made as of the date of this news release, and the Fund and MPML assumes no obligation to update or revise them to reflect new events or circumstances. The Fund cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made.

Non-GAAP Financial Measures

"Income from operations" and "distributable cash" do not have any standardized meaning under Canadian Generally Accepted Accounting Principles. Management believes they are useful measures of performance as they provide investors with indications of income from operations and the amount of cash available for distribution to unitholders. The Fund's method of calculating "income from operations" and "distributable cash" may not be comparable to other similarly named calculations.

Macquarie Power & Infrastructure Income Fund is not an authorised deposit taking institution for the purposes of the Banking Act (Cth) 1959 and Macquarie Power & Infrastructure Income Fund's obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL). MBL does not guarantee or otherwise provide assurance in respect of the obligations of Macquarie Power & Infrastructure Income Fund.

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