Northland Power Income Fund
TSX : NPI.UN
TSX : NPI.DB

Northland Power Income Fund

August 09, 2006 18:32 ET

Northland Power Income Fund Announces Results for the Period Ended June 30, 2006, Restates First Quarter Results and Increases Rate of Distributions by 3%

TORONTO, ONTARIO--(CCNMatthews - Aug. 9, 2006) - Northland Power Income Fund (the "Fund") (TSX:NPI.UN)(TSX:NPI.DB) today reported financial results for the six months ended June 30, 2006 and restated results for the three months ended March 31, 2006.



FINANCIAL AND OPERATING HIGHLIGHTS FOR THE PERIODS ENDED JUNE 30, 2006

------------------------------------------------------------------------
3 Months Ended 6 Months Ended
Jun. 30 Jun. 30
2006 2005 2006 2005
------------------------------------------------------------------------
FINANCIAL (thousands, except per
unit amounts)
Sales $ 40,600 $ 27,943 $ 76,392 $ 59,818
Net income $ 3,489 $ 10,335 $ 15,633 $ 26,909

Funds from operations before
changes in working capital (1) $ 17,302 $ 12,273 $ 33,609 $ 33,172
Distributable cash (1) $ 17,701 $ 12,452 $ 35,023 $ 33,860

Distributions declared to
Unitholders $ 16,286 $ 12,244 $ 30,391 $ 24,351

Units Outstanding at Quarter End 62,053 48,075 62,053 48,075
Average Number of Units
Outstanding - basic 61,935 47,989 56,373 47,963
Average Number of Units
Outstanding - diluted 64,676 53,116 59,439 53,116

Per Unit -- basic
Funds from operations before
changes in working capital (1) $ 0.2794 $ 0.2557 $ 0.5962 $ 0.6916
Distributable cash (1) $ 0.2858 $ 0.2595 $ 0.6213 $ 0.7060
Distributions declared to
Unitholders $ 0.2625 $ 0.2550 $ 0.5250 $ 0.5075
------------------------------------------------------------------------
OPERATIONS
Electricity sales volume
(megawatthours) 319,282 232,338 591,228 504,842
Steam sales volume (thousands of
pounds) 290,590 228,499 692,848 602,305
Fuel consumption (thousands of
gigajoules) 2,654 2,078 5,023 4,632
------------------------------------------------------------------------
(1) These are non-GAAP financial measures. Please refer to schedule of
Distributable Cash and Distributions to Unitholders in the Fund's
second quarter Management's, Discussion and Analysis ("MD&A") for
the calculations of funds from operations before changes in working
capital and distributable cash.


Consolidated sales of the Fund of $40.6 million in the second quarter were up $12.7 million from the same period in 2005 due to higher electricity and natural gas sales. Sales at the Kingston facility were higher than last year due to higher prices received for steam and natural gas. Production of electricity at Iroquois Falls was reduced during lower-priced off-peak periods due to the decrease in contracted natural gas deliveries associated with the default in January 2006 by Calpine Canada Natural Gas Partnership ("Calpine") under a long-term gas supply contract. During the quarter, Mont Miller's production fell short of expectations due primarily to unusually low local wind speeds compared to prior years. Net income for the quarter at $3.5 million was down from 2005 largely due to $6.4 million of higher amortization charges associated with this year's acquisitions (which don't affect cash) and $5.4 million of non-cash foreign exchange losses.

The Fund generated distributable cash of $17.7 million during the quarter ended June 30, 2006; $5.2 million higher than the prior year. Distributable cash exceeded distributions declared to Unitholders by $1.4 million. Readers should refer to the schedule of Distributable Cash and Distributions to Unitholders in the Fund's Q2 MD&A for the calculation of distributable cash (a non-GAAP financial measure).

Distributions to Unitholders declared for the quarter totaled $0.2625 per unit, 3% higher than 2005.

On April 25, 2006 the Fund purchased two operating wind farms in Germany with a total capacity of 21.5 megawatts ("MW") with an effective date of April 1, 2006. The investment was financed with cash on hand and the Fund's acquisition line of credit. The Kavelstorf and Eckolstadt wind farms (the "German wind farms") are projected to supply 33,800 megawatt-hours of electricity annually to regional power utilities and receive a fixed tariff for all energy delivered of Euro 9.1 cents/kWh (approximately CAD 13 cents/kWh) for a term of 20 years under the provisions of German renewable energy legislation. The German wind farms are expected to represent about 4% of the Fund's future distributable cash from its current portfolio and will further diversify the cash flow and asset base of the Fund.

During the quarter, a settlement was reached, subject to completion of final documentation, with one of the Iroquois Falls facility's natural gas suppliers concerning the delivery of gas under the backstop provision of a long-term supply contract. On May 10th, delivery of additional quantities of natural gas began under the backstop provision. The supplier has agreed to withdraw an unrelated claim for approximately $7.6 million plus interest that was filed in 2004. As part of the settlement both parties have agreed to certain changes to the contractual backstop provisions. The backstop volume will assist the Fund in mitigating the reduction in contracted gas supply that occurred in January 2006 when Calpine defaulted under a long-term contract.

The financial results for 2006 include the financial contribution of 100% of the Kingston project from March 22, 2006, including the impact of the repayment of the levelization account and reduction in management fees (compared to 50% in 2005); operation of the Mont Miller project for the whole period (compared to the 22 days from June 9 to June 30 in 2005); and results from the German wind farms effective from April 1, 2006. The one-time impact of the sale of the Panda-Rosemary project in the first quarter of 2005 was included in the results for the first six months of 2005.

The president of the Fund's Manager, John Brace, said, "We expect the Fund's overall financial performance during the remainder of 2006 to continue to exceed that of 2005, as a result of the Fund's increased, accretive investment in the Kingston facility in March 2006, the contribution from the Mont Miller and German wind farms, and increased contracted electricity rates at Iroquois Falls, among other reasons."

3% INCREASE IN DISTRIBUTIONS

The Fund's Trustees have approved a 3% increase in the rate of distributions to $0.09/unit per month effective in August 2006, which is equivalent to an annual rate of $1.08 per unit.

RESTATED FIRST QUARTER RESULTS

The Fund has filed amended consolidated financial statements and MD&A as at and for the three months ended March 31, 2006. The Fund's first quarter results have been adjusted to eliminate certain non-cash future tax amounts totaling $3.8 million that were incorrectly recorded. The adjustment does not affect distributable cash, cash flow from operations or income before taxes, but does reduce future tax recoveries, net income and future tax assets by that amount. All future tax amounts arising from the acquisition of Kingston CoGen Limited Partnership ("KCLP") on March 23, 2006 and the related public offering to finance the acquisition will be recorded upon the final determination of the fair value of assets acquired and liabilities assumed and of the tax characteristics of certain of the acquired assets.

A copy of the Fund's amended first quarter report and related MD&A and second quarter report and MD&A can be found at www.sedar.com and the Fund's web site at www.NPIFund.com.

ABOUT THE FUND

Northland Power Income Fund indirectly owns interests in six power generating facilities: three natural gas-fired combined-cycle cogeneration power plants that efficiently and cleanly produce electricity and steam for sale, and three wind farms. Two cogeneration plants are located in Ontario: the 120 megawatts (MW) Iroquois Falls facility which has been wholly-owned by the Fund since its inception in 1997, and the 110 MW Kingston facility which has been wholly-owned by the Fund since it acquired an additional 50% interest on March 23, 2006. Through its 19% equity interest in Panda Energy Corp. (PEC) and loan to a PEC subsidiary, the Fund has an interest in the 230 MW Panda-Brandywine cogeneration plant located just outside Washington, D.C. Electricity produced from the cogeneration plants is sold under long-term power purchase agreements (PPAs) with creditworthy entities to ensure revenue stability, and long-term contracts assure the supply and price of natural gas, which is the Fund's largest cost. The 54 MW Mont Miller wind farm in the Gaspesie region of Quebec supplies electricity to Hydro-Quebec under the terms of a 21-year PPA. The Fund also owns two wind farms in Germany with a total capacity of 21.5 MW, where the electricity is sold to regional power utilities under the provisions of German renewable energy legislation.

The Fund's trust units and convertible debentures, which trade on the Toronto Stock Exchange under the symbols NPI.UN and NPI.DB respectively, are qualified investments for RRSPs and DPSPs under the Canadian Income Tax Act. The Fund has in place a distribution re-investment plan that allows unitholders who are residents of Canada to automatically have their monthly cash distributions reinvested in additional units. Participants do not pay any costs associated with the plan, including brokerage commissions. For further information or to join the plan, contact your financial advisor or broker.

FORWARD LOOKING STATEMENTS

The above disclosure contains certain forward-looking statements. Although these forward-looking statements are based upon Northland Power Income Fund's Manager's current reasonable expectations and assumptions, they are subject to numerous risks and uncertainties including those set out in the management's discussion and analysis section of the Fund's 2005 annual report and in the Fund's Annual Information Form dated March 7, 2006, certain of which are beyond the Manager's control. For this purpose, any statements that are contained herein that are not statements of historical fact may be forward-looking statements. The Fund's actual results could differ materially from those expressed in, or implied by, these forward-looking statements and, accordingly, no assurances can be given that any of the events anticipated by the forward-looking statements will transpire or occur, or what benefits, including the amount of distributions, the Fund and Unitholders will derive therefrom.

Contact Information

  • Northland Power Income Fund Management Inc.
    Barb Bokla
    Manager, Investor Relations
    (416) 962-6262 x156
    or
    Northland Power Income Fund Management Inc.
    Tony Anderson
    Chief Financial Officer
    (416) 962-6262 x120
    (416) 962-6266 (FAX)
    info@NPIFund.com
    www.NPIFund.com