Polaris Infrastructure Announces 2015 Year End Results

TORONTO, ON--(Marketwired - March 14, 2016) -  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 report its audited financial and operating results for the year ended December 31, 2015. This earnings release should be read in conjunction with Polaris Infrastructure's Consolidated 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

• Record power generation and revenue: The San Jacinto-Tizate Power Plant (the "San Jacinto project") generated 433,988 MWh (net) (an average of 49.5 MW (net)), resulting in revenue of $50.1 million for the year ended December 31, 2015, versus revenue of $48.2 million on generation of 429,740 MWh (net) (an average of 49.0 MW (net)) in the prior year. The 4.1% revenue increase was due to higher average production in 2015 as well as the impact of the 3% annual tariff increase. 
• Significant increase in Adjusted EBITDA: The Company generated Adjusted EBITDA (a non-GAAP measure) of $39.2 million in 2015, a 14% increase from 2014, driven by increased San Jacinto project revenues combined with a significant reduction in general and administrative expenses (net of share-based compensation). See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total loss and comprehensive loss.
• Progress continues with 2015/2016 Drilling Program: The first new production well, SJ 6-3, was completed in late December 2015 and is currently in the midst of thermal recovery, after which production testing will be completed. We are confident that SJ 6-3 is a commercial well and will provide specific guidance as to estimated additional steam flows and hence MW contribution once production testing is complete. Drilling of the second new production well, SJ14-1, is ongoing, with the timeline having been extended by mechanical issues. We have achieved circulation losses however, and expect to complete drilling of SJ 14-1 by the end of March 2016. Once SJ 14-1 drilling is complete, we look forward to continuing with the balance of the 2015/2016 Drilling Program, including a third new production well.

Corporate Highlights

• Efforts of the new senior management team have significantly reduced corporate general and administrative expenses ("G&A") as well as other operating costs (associated with non-strategic North American properties):
  • Actual 2015 G&A (reflecting seven months under the new senior management team) came in approximately 31% ($1.1 million) below original 2015 budget, while other operating costs came in 26% ($0.2 million) below original 2015 budget;
  • Corporate G&A for 2016 is expected to be reduced an additional 20% relative to 2015, reflecting the full-year impact of G&A reduction efforts.
• The Company, through its 95%-owned subsidiary, Cerro Colorado Power, S.A., continues to engage in discussions and due diligence with both the Nicaragua Ministry of Energy and Mines as well as The World Bank Group ("World Bank") with respect to advancing the Casita-San Cristobal geothermal project. We remain optimistic with respect to accessing attractive risk mitigation financing for purposes of completing an initial drilling program, and will provide further updates as they become available.

FINANCIAL OVERVIEW

The financial results of Polaris Infrastructure for the year ended December 31, 2015 and 2014 are summarized below:

For the three months ended December 31, 2015, the Company reported revenue of $12.1 million and Adjusted EBITDA of $9.4 million, compared to revenue of $12.9 million and Adjusted EBITDA of $9.5 million, for the same period in 2014. The decrease in revenue resulted from lower power generation at the San Jacinto project in November and December 2015, being partially offset by the impact of the 3% annual tariff increase during 2015. Despite the modest year over year decline in revenue, Adjusted EBITDA remained virtually unchanged, as a result of a decrease in 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 year ended December 31, 2015, the Company reported revenue of $50.1 million and Adjusted EBITDA of $39.2 million, compared to revenue of $48.2 million and Adjusted EBITDA of $34.4 million, for the same period in 2014. The 4% 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 $4.7 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 year ended December 31, 2015, the Company had net operating cash inflows of $25.6 million, net investing cash outflows of $15.6 million and net financing cash inflows of $36.4 million. The Company expended $14.5 million with respect to investment in the San Jacinto and Casita projects, principally related to the 2015/2016 San Jacinto drilling program. At December 31, 2015, the Company had cash of $61.6 million, of which $30.8 million was held for current use in the San Jacinto project.

"We are satisfied with the operating results of the fourth quarter, and for 2015 overall, 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 have made considerable progress with respect to the San Jacinto drilling campaign and remain optimistic that our production capacity will be enhanced as a result. Combined with our earlier announcement with respect to a quarterly dividend, it is an exciting time for our Company, and we remain committed to delivering strong returns to our shareholders."

Polaris Infrastructure will hold its earnings call to discuss financial and operating results for the year ended December 31, 2015 on Tuesday, March 15, 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.

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.