SOURCE: Polaris Infrastructure Inc.

Polaris Infrastructure Inc.

November 16, 2015 07:30 ET

Polaris Infrastructure Announces 2015 Third Quarter Results

TORONTO, ON--(Marketwired - November 16, 2015) - Polaris Infrastructure Inc. (TSX: PIF) ("Polaris Infrastructure" or the "Company"), a Toronto-based company engaged in the operation, acquisition and development of renewable energy projects in Latin America, is pleased to announce its operating results for the quarter ended September 30, 2015. This earnings release should be read in conjunction with Polaris Infrastructure's financial statements and management's discussion and analysis, which are available on the Company's website at www.polarisinfrastructure.com and have been posted on SEDAR at www.sedar.com. The dollar figures below are denominated in US Dollars unless noted otherwise.

HIGHLIGHTS

San Jacinto-Tizate Project Highlights

  • The San Jacinto-Tizate Power Plant (the "San Jacinto project") generated 112,210 MWh (net) (an average of 50.8 MW (net)), resulting in revenue of $12.9 million for the three months ended September 30, 2015, effectively unchanged from the three months ended September 30, 2014. The San Jacinto project generated 328,741 MWh (net) (an average of 50.1 MW (net)) resulting in revenue of $38.0 million for the nine months ended September 30, 2015 compared to revenue of $35.3 million for the nine months ended September 30, 2014, an increase of 8%. The revenue increase was primarily due to higher average production in 2015 as well as the impact of the 3% annual tariff increase during 2015.
  • The Company generated Adjusted EBITDA (a non-GAAP measure) in the third quarter 2015 of $10.1 million, a 12% increase from $9.1 million generated in the third quarter 2014. Adjusted EBITDA for the nine months ended September 30, 2015 of $29.7 million increased 19% from the same period in 2014, driven by increased San Jacinto project revenues combined with a modest reduction in plant operating costs, as well as reduced general and administrative expenses. See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total loss and comprehensive loss.
  • Drilling commenced on October 12, 2015, with respect to well SJ 6-3, the first of three planned new production wells, which we expect to drive incremental production at the San Jacinto project in the second half of 2016 and throughout 2017. We anticipate drilling of SJ 6-3 to be complete in mid-December 2015, with thermal recovery and production testing to occur in January 2016, following a 30 day heating-up period.

Corporate Highlights

  • Following the previously announced equity financing and recapitalization transaction, which closed in May 2015, the new senior management team, led by Marc Murnaghan, Chief Executive Officer, has moved quickly to focus efforts on the San Jacinto project drilling program, while also streamlining and simplifying core operations, with a focus on Latin America, and away from North America.
  • The Company, through its 95%-owned subsidiary, Cerro Colorado Power, S.A., has entered into discussions with The World Bank Group with respect to financing for purposes of completing an initial drilling program at the Casita-San Cristobal project. Further details should be known early in 2016, but management's intention, should financing discussions proceed as hoped, is to deploy the rig that is currently deployed at the San Jacinto project to complete the Casita drilling program, realizing significant time and cost synergies as a result.

FINANCIAL OVERVIEW

The financial results of Polaris Infrastructure for the three and nine months ended September 30, 2015 and 2014 are summarized below:

                  
   Three months ended   Nine Months Ended  
(all $ figures in thousands except loss per share)  September 30, 2015   September 30, 2014   September 30, 2015   September 30, 2014  
Average production   50.8 MW (net )  52.2 MW (net )  50.1 MW (net )  47.9 MW (net )
Total revenue  $12,896   $12,883   $38,048   $35,326  
Adjusted EBITDA (1)   10,144    9,088    29,723    24,970  
Finance costs (2)   (3,627 )  (5,179 )  (13,280 )  (15,833 )
Impairment loss   (30,345 )  -    (40,440 )  -  
Other (losses) gains   (139 )  1,744    (1,950 )  3,508  
Total loss and comprehensive loss   (24,543 )  (3,636 )  (33,208 )  (15,994 )
Total loss and comprehensive loss per share   ($1.56 )  ($19.60 )  ($6.19 )  ($85.84 )
                      
              As at September 30, 2015    As at December 31, 2014  
Total assets            $427,533   $422,501  
Long-term debt             173,757    44,637  
Total liabilities             215,378    283,891  
Cash             64,334    15,292  
Working capital             59,136    (179,406 )
(1) Refer to Use of Non-GAAP Measures section for further details with respect to calculation of Adjusted EBITDA. 
  
(2) Includes debt service costs only (interest and return enhancement) and excludes accretion, derivative valuation gains and losses and other finance costs. Refer to Note 7 of the September 30, 2015 Financial Statements for further detail.
  

For the three months ended September 30, 2015, the Company reported revenue of $12.9 million and Adjusted EBITDA of $10.1 million, compared to revenue of $12.9 million and Adjusted EBITDA of $9.1 million, for the same period in 2014. The effectively unchanged revenue resulted from a spike in production following the overhaul of the Unit 3 turbine in June 2014, which allowed for natural recharge of the resource, being offset by the impact of the 3% annual tariff increase during 2015. Adjusted EBITDA growth was driven primarily by a decrease in general and administrative expenses combined with decreased San Jacinto project operating expenses. See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total loss and comprehensive loss.

For the nine months ended September 30, 2015, the Company reported revenue of $38.0 million and Adjusted EBITDA of $29.7 million, compared to revenue of $35.3 million and Adjusted EBITDA of $25.0 million, for the same period in 2014. The 8% increase in revenue was primarily due to certain wells being offline in the first and second quarters of 2014 as the Company completed the drilling remediation program as well as the 3% annual tariff increase. Adjusted EBITDA growth of $4.8 million was primarily the result of revenue growth at the San Jacinto project, combined with lower general and administrative expenses. See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total loss and comprehensive loss.

For the nine months ended September 30, 2015, the Company had net operating cash inflows of $16.4 million, net investing cash outflows of $8.8 million, and net financing cash inflows of $41.5 million and foreign exchange loss on cash held in foreign currency of $0.2 million,. The Company expended $7.7 million for additions to the San Jacinto project and Casita, principally related to the launch of the 2015/2016 San Jacinto drilling program, as well as final payments on the 2013/2014 drilling remediation program and costs related to the turbine overhaul in February 2015. At September 30, 2015, the Company had cash of $64.3 million, of which $32.7 million was held for current use in the San Jacinto project.

As at September 30, 2015, the recoverable amount of the San Jacinto project, which was calculated on a value in use basis using an updated cash flow forecast prepared in the normal course, was $330,818,513. This resulted in an impairment loss of $30,379,690 for the three months ended September 30, 2015, and $38,975,246 for the nine months then ended, which is recognized in the consolidated statements of operations and comprehensive loss as impairment loss. This impairment loss is viewed by Management as resulting from a refinement of assumptions and valuation inputs, as opposed to a significant underlying deterioration in the quality of the San Jacinto plant. We do not anticipate further impairment losses at this time, assuming continued generally consistent production levels from the San Jacinto plant and modest levels of success with respect to the drilling program.

"We are pleased with the operating results of the third quarter, as they continue to demonstrate the Company's ability to generate cash flow, while also investing significantly for the future," said Marc Murnaghan, Chief Executive Officer of Polaris Infrastructure. "We are using our much improved balance sheet strength to support the recently launched San Jacinto drilling campaign and remain optimistic that our production capacity will be enhanced as a result. In addition, the potential of a binary unit at San Jacinto and the Casita project, provide additional growth avenues for the Company in the medium-term."

 
Polaris Infrastructure will hold its earnings call to discuss the quarter ended September 30, 2015 financial and operating results on Tuesday, November 17, 2015 at 10:00 am EST. To listen to the call, please dial +1 (647) 788-4919 or +1 (877) 291-4570.
 

About Polaris Infrastructure

Polaris Infrastructure is a Toronto-based company engaged in the operation, acquisition and development of renewable energy projects in Latin America. Currently, the Company operates a 72MW geothermal project located in Nicaragua.

USE OF NON-GAAP MEASURES

Certain measures in this document do not have any standardized meaning as prescribed by International Financial Reporting Standards ("IFRS") and, therefore, are not considered generally accepted accounting principles ("GAAP") measures. Where non-GAAP measures or terms are used, definitions are provided. In this document and in the Company's consolidated financial statements, unless otherwise noted, all financial data is prepared in accordance with IFRS.

EBITDA is a non-GAAP metric used by many investors to compare companies on the basis of ability to generate cash from operations. The Company uses Adjusted EBITDA to assess its operating performance without the effects of (as applicable): current and deferred tax expense, finance costs, interest income, other gains and losses, impairment loss, depreciation and amortization of plant assets, share-based compensation and other non-recurring items. The Company adjusts for these factors as they may be non-cash, unusual in nature and are not factors used by management for evaluating the performance of the Company. The Company believes the presentation of this measure will enhance an investor's understanding of its operating performance. Adjusted EBITDA is not intended to be representative of cash provided by operating activities or results of operations determined in accordance with GAAP. The table below reconciles between Adjusted EBITDA and Net loss and comprehensive loss, calculated in accordance with IFRS.

                  
Reconciliation of Adjusted EBITDA to total loss and comprehensive loss       
   Three Months Ended   Nine Months Ended  
(in thousands)  September 30, 2015   September 30, 2014   September 30, 2015   September 30, 2014  
Net loss and comprehensive loss attributable to owners of the Company  $(24,264 ) $(3,636 ) $(32,929 ) $(15,925 )
Add (deduct):                     
 Net loss attributable to non-controlling interest   (279 )  -    (279 )  (69 )
 Current and deferred tax expense   (7,174 )  1,871    (6,044 )  5,623  
 Finance costs   4,509    6,009    5,619    19,357  
 Interest income   (25 )  (19 )  (53 )  (181 )
 Other losses (gains)   139    (1,744 )  1,950    (3,508 )
 Impairment loss   30,345    -    40,440    -  
 Depreciation and amortization of plant assets   6,558    6,607    19,865    19,536  
 Share-based compensation   334    -    1,154    136  
Adjusted EBITDA  $10,143   $9,088   $29,723   $24,969  
                 

Cautionary Statements

This news release contains certain "forward-looking information" which may include, but is not limited to, statements with respect to future events or future performance, management's expectations regarding the Company's growth, results of operations, estimated future revenue, requirements for additional capital, revenue and production costs, future demand for and prices of electricity, business prospects and opportunities. In addition, statements relating to estimates of recoverable geothermal energy "reserves" or "resources" or energy generation are forward-looking information, as they involve implied assessment, based on certain estimates and assumptions, that the geothermal resources and reserves described can be profitably produced in the future. Such forward-looking information reflects management's current beliefs and is based on information currently available to management. Often, but not always, forward-looking statements can be identified by the use of words such as "plans", "expects", "is expected", "budget", "scheduled", "estimates", "forecasts", "predicts", "intends", "targets", "aims", "anticipates" or "believes" or variations (including negative variations) of such words and phrases or may be identified by statements to the effect that certain actions "may", "could", "should", "would", "might" or "will" be taken, occur or be achieved. A number of known and unknown risks, uncertainties and other factors may cause the actual results or performance to materially differ from any future results or performance expressed or implied by the forward-looking information. Such factors include, among others, general business, economic, competitive, political and social uncertainties; the actual results of current geothermal energy production, development and/or exploration activities and the accuracy of probability simulations prepared to predict prospective geothermal resources; changes in project parameters as plans continue to be refined; possible variations of production rates; failure of plant, equipment or processes to operate as anticipated; accidents, labor disputes and other risks of the geothermal industry; political instability or insurrection or war; labor force availability and turnover; delays in obtaining governmental approvals or in the completion of development or construction activities, or in the commencement of operations; the ability of the Company to continue as a going concern and general economic conditions, as well as those factors discussed in the section entitled "Risk Factors" in the Company's Annual Information Form. These factors should be considered carefully and readers of this news release should not place undue reliance on forward-looking information.

Although the forward-looking information contained in this news release is based upon what management believes to be reasonable assumptions, there can be no assurance that such forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, readers should not place undue reliance on forward-looking information. The information in this news release, including such forward-looking information, is made as of the date of this news release and, other than as required by applicable securities laws, Polaris Infrastructure assumes no obligation to update or revise such information to reflect new events or circumstances.

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