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

Macquarie Power & Infrastructure Income Fund

May 06, 2009 18:37 ET

Macquarie Power & Infrastructure Income Fund Announces First Quarter Results

- Maintained stable distributions to unitholders - Continuing conservative financial position

TORONTO, ONTARIO--(Marketwire - May 6, 2009) - Macquarie Power & Infrastructure Income Fund (TSX:MPT.UN)(TSX:MPT.DB)("MPT" or the "Fund"), which owns and operates essential infrastructure assets, today reported unaudited results for the first quarter ended March 31, 2009. 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.

"We delivered stable distributions to unitholders in the first quarter of 2009, reflecting the essential nature and underlying reliability of our infrastructure businesses," said Michael Bernstein, the Fund's interim President and Chief Executive Officer. "While our businesses are fundamentally sound, operating results from our power infrastructure portfolio reflected seasonal fluctuations in wind speed and water flows as well as outages at our Whitecourt and Cardinal facilities due to maintenance activities. Leisureworld continued to perform consistently with stable occupancy across its homes and growth in the accommodation rate of premium private rooms."

For 2009, the Fund currently anticipates maintaining distributions to unitholders of $1.05 per unit, barring any significant events or growth initiatives. Based on management's current operational outlook for the balance of the year, the Fund currently expects its 2009 payout ratio to slightly exceed 100% of the Fund's distributable cash.(1) The Fund's general reserve account ensures the Fund's ability to support distributions to unitholders in 2009 if required.

Mr. Derek Brown, Chairman of the Fund's Board of Trustees, thanked Mr. Gregory Smith for his contribution to the Fund as President and Chief Executive Officer since 2005 and before that as Trustee from 2004, saying, "Under Greg's leadership, the Fund has evolved from just one asset to a diversified portfolio of infrastructure businesses. The continuing resilience of the Fund's operational performance is a strong reflection of both the quality of our businesses as well as how they have been managed. On behalf of the Board of Trustees, I would like to thank Gregory for his commitment to the Fund and to our unitholders."

First Quarter Financial Performance

Revenue for the quarter was $40.3 million compared with $43.7 million in the first quarter of 2008. The decrease reflected lower power production, which was attributable to lower water flows at the hydro power facilities, a lower average wind speed at Erie Shores Wind Farm ("Erie Shores") and increased outages at the Whitecourt biomass ("Whitecourt") and Cardinal gas cogeneration ("Cardinal") facilities than in the same period last year. These factors were partially offset by higher power prices at Cardinal under its Power Purchase Agreement ("PPA"). In addition, revenue in the first quarter of 2008 reflected a $1.1-million payment received from the Ontario Electricity Financial Corporation ("OEFC") due to an adjustment in the Direct Consumer Rate ("DCR") while the Fund paid a $0.3-million DCR adjustment to the OEFC in the first quarter of 2009.

The Fund's distributable cash was $15.0 million ($0.300 per unit) compared with $16.5 million ($0.330 per unit) in 2008. Declared distributions to unitholders were $13.1 million ($0.262 per unit), representing a payout ratio of 87.6%. Declared distributions to unitholders in the first quarter of 2008 were also $13.1 million ($0.262 per unit), representing a payout ratio of 79.5%.

Income from operations(2) for the Fund was $6.1 million compared with $10.7 million in the first quarter of 2008. This variance reflected lower revenue as well as higher operating expenses due to increased outages at Whitecourt, increased maintenance costs and higher gas transportation costs than in the same quarter last year. These factors were partially offset by lower administrative expenses, which primarily reflected lower business development costs.

Financial Position

As at March 31, 2009, the Fund had positive working capital of $45.5 million and cash on hand and short-term investments of $30.3 million as well as fully funded general, major maintenance and capital expenditure reserve accounts in the aggregate amount of $14.9 million. The Fund is conservatively leveraged relative to the low risk profile and long life of its assets, with a debt to capital ratio of 46.6%.

First Quarter Operational Highlights

Total power production was 541,603 MWh compared with 568,838 MWh in the first quarter of 2008.

Cardinal produced 340,594 MWh of electricity (Q1 2008 - 346,244 MWh), reflecting 22 hours of outage (Q1 2008 - nil) for maintenance as well as higher average ambient temperatures compared with the same period last year. The facility achieved an availability of 98.9% (Q1 2008 - 99.9%) and a capacity factor of 97.9% (Q1 2008 - 98.5%).

Erie Shores produced 71,910 MWh (Q1 2008 - 81,933 MWh) of power, reflecting unseasonably low wind speed and density during the quarter. The facility achieved an overall availability of 96.1% (Q1 2008 - 97.4%) and a capacity factor of 33.6% (Q1 2008 - 38.1%).

The Fund's hydro power facilities produced 23,635 MWh (Q1 2008 - 29,937 MWh) of electricity. The hydro power facilities generally experienced colder than normal temperatures and less precipitation, which resulted in lower water flows than in the first quarter of 2008. As a result, the hydro power facilities operated at a capacity factor of 30.7% (Q1 2008 - 38.6%). Overall, the hydro power facilities achieved a weighted average availability of 99.2% (Q1 2008 - 92.9%), reflecting 197 hours of outage (Q1 2008 - 384).

Whitecourt produced 44,232 MWh of electricity (Q1 2008 - 52,109 MWh), primarily reflecting 276 hours of outage (Q1 2008 - nil) for repairs and maintenance. As a result, the facility operated at an availability of 87.2% (Q1 2008 - 100.0%) and achieved a capacity factor of 86.6% (Q1 2008 - 98.7%).

The Chapais biomass facility ("Chapais"), in which the Fund holds a minority preferred equity and debt interest, produced 61,232 MWh (Q1 2008 - 58,615 MWh) of electricity. The facility experienced availability of 100.0% (Q1 2008 - 96.6%), reflecting zero hours of outage (Q1 2008 - 75 hours), and achieved a capacity factor of 99.5% (Q1 2008 - 95.0 %).

The Fund owns an indirect 45% equity interest in Leisureworld Senior Care LP ("Leisureworld"), which the Fund accounts for as an equity investment. In the first quarter, Leisureworld achieved a 15.3% increase in revenue, reflecting a full quarter of results from the seven homes acquired on January 31, 2008, and continued to benefit from increases in private accommodation and government funding rates. Average total occupancy in the first quarter was 98.1% (Q1 2008 - 98.1%). The average occupancy of private rooms was 94.4% (Q1 2008 - 91.9%).

Outlook

"Our primary emphasis in 2009 is on enhancing the operational performance of our businesses to maintain their cash flow stability. We are also focused on developing a firm strategy to address the impact of taxation in 2011 on the Fund's structure and future distribution profile and expect to provide more guidance on our direction by the end of 2009. We continue to expect that fiscal 2010 will be a transitional year for the Fund," said Mr. Bernstein.

Mr. Bernstein added, "At the same time, we have the financial flexibility to pursue appropriate small- to mid-sized growth opportunities that meet our investment and return criteria, which could include power infrastructure assets, particularly in the renewable energy sector, additional long-term care homes or new categories of infrastructure, such as water distribution, schools, hospitals and roads, including through public-private partnerships. We are committed to building MPT into Canada's leading infrastructure investment vehicle and to delivering an attractive total return to our investors through 2011 and beyond."

In 2009, Cardinal is expected to generate lower revenue than in 2008, which primarily reflects the hot gas path inspection that required 13 days of outage in April. While Cardinal will continue to experience higher gas transportation costs, the confirmed 2009 rate of $1.19/GJ is below the average 2008 level. As a result of these factors, cash flow from Cardinal will be slightly lower on a year-over-year basis.

Erie Shores is expected to generate average annual long-term production of 249,800 MWh, subject to wind speed and density, which are typically strongest during the fall and winter months. During April, Erie Shores completed work on a connection to a second transmission line, which will enable the facility to continue delivering its power to the grid during periods of outage on the existing Hydro One line, thereby helping to maximize availability.

The hydro power facilities are expected to produce average long-term annual production of 166,360 MWh, subject to water flows, which are typically strongest during the spring and fall months. A key efficiency initiative in 2009 is to automate the storage and release of water in the lake that serves the Sechelt facility, which will enable the facility to remotely control water flows, and, accordingly, maximize production.

Whitecourt is scheduled for an approximately 24-day outage commencing in June to address a higher than normal vibration of the turbine, which was identified in the fourth quarter of 2008. Regular maintenance work, typically requiring four days of outage, is also scheduled for the autumn. Whitecourt continues to work closely with the Millar Western Group of Companies ("Millar Western"), which supplies a majority of the facility's wood waste fuel, to ensure a continuing stable and adequate supply of wood waste. Under the terms of Whitecourt's supply contract with Millar Western, in the event that Millar Western does not supply the minimum required quantity of wood waste it must pay Whitecourt's cost to source replacement fuel, subject to certain exceptions. For the year, Whitecourt is expected to achieve an availability of approximately 86% to 90%, which is generally consistent with 2008.

Leisureworld is continuing to focus on enhancing the quality of care and accommodation for residents, which contributes to the continuing high occupancy of its homes. In addition, Leisureworld is continuing to attract a growing number of residents to private accommodation, for which Leisureworld receives a regulated premium. Leisureworld's agreement to acquire the Good Samaritan Seniors Complex ("Good Samaritan"), which was signed on February 1, 2008, was terminated in accordance with its terms on March 16, 2009, which was the outside date to close the transaction, as approval from the Ministry of Health and Long-Term Care had not yet been obtained. The Fund currently anticipates that Leisureworld's distribution policy will be maintained for fiscal 2009.

Conference Call and Webcast

Management of the Fund will hold a conference call (with accompanying slides) to discuss first quarter results on Thursday, May 7, 2009 at 8:30 a.m. ET. The conference call will be accessible via webcast through the Fund's website with accompanying slides 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 May 21, 2009 by dialling 416-695-5800 or 1-800-408-3053 and entering the passcode 5405583.

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) 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.

(2) 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, gain on sale of capital assets, and taxes.

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. When used in the this news release, such statements use such words as "may", "will", "expect", "believe", "plan" and other similar terminology. 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. The forward-looking statements contained in this news release are based on information currently available and what the Fund currently believes are reasonable assumptions, including the material assumptions for each of the Fund's assets set out in the Fund's 2008 Annual Report under the headings "Outlook" on pages 23 to 24, as updated in subsequently filed quarterly Financial Reports of the Fund. 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, except as required by law, the Fund does not undertake any obligation to update publicly or to revise any of the included forward-looking statements, whether as a result of new information, future events or otherwise. The Fund cautions readers not to place undue reliance on any forward-looking statements contained in this news release. The forward-looking statements contained in this news release are expressly qualified by this cautionary statement.

The forward-looking information contained in this news release is presented for the purposes of assisting investors and analysts in understanding the Fund's financial position and our stated priorities and objectives may not be appropriate for other purposes. The Fund cautions readers not to place undue reliance on any forward-looking statements, which speak only as of the date made. 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, 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; the ability to complete future acquisitions; 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., 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 Fund's filings with Canadian securities regulatory authorities, could cause actual results to differ materially from the results discussed in the forward-looking statements.

Non-GAAP Financial Measures

"Income from operations" and "distributable cash" do not have any standardized meaning under Canadian GAAP. 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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