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Atlantic Power Corporation (NYSE: AT)

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Atlantic Power Corporation (NYSE: AT) (TSX: ATP) (“Atlantic Power” or the “Company”) declared recently its fiscal results for the three and nine months finished September 30, 2k19.

3rd-Quarter 2k19 Financial Highlights

  • Net income attributable to Atlantic Power increased to $12.60M or $0.100 for each diluted share from a net loss of $3.20M or ($0.030) for each diluted share in Q3 2k18
  • Project income increased to $27.90M from $26.20M in Q3 2k18
  • Cash from operating activities increased to $36.40M from $19.50M in Q3 2k18
  • Project Adjusted EBITDA increased to $48.90M from $45.40M in Q3 2k18
  • Repaid $18.30M of term loan and project debt; leverage ratio improved to 3.70 times
  • Liquidity at September 30, 2k19 of $181.00M, counting about $24.00M of discretionary cash, after using $29.00M for two acquisitions in July and August

3rd-Quarter 2k19 Developments

  • Accomplished the acquisition of the Allendale and Dorchester contracted biomass plants for $12.60M and the acquisition of equity interests in the Craven County and Grayling contracted biomass plants for $18.70M
  • Williams Lake biomass plant executed new 10-year contract with BC Hydro, effective Oct. 1, 2k19
  • Equipment malfunction and fire at Cadillac plant resulted in noteworthydamage; financial impact expected to be limited to insurance deductibles of about $2.50M to $3.00M

2k19 Updated Outlook

  • Increased 2k19 Project Adjusted EBITDA guidance to a range of $185.00M to $195.00M from a range of $175.00M to $190.00M(1)
  • Increased estimate of 2k19 operating cash flow (assuming working capital changes are nil) to a range of $115.00M to $125.00M from a range of $100.00M to $115.00M

Project income, Net income and Project Adjusted EBITDA

Project income for the 3rd-quarter of 2k19 was $27.90M, a $1.70M incline from $26.20M in the year-ago duration. Project revenue increased $5.70M as a result of the acquisition of Allendale and Dorchester in July 2k19, higher water flows at Curtis Palmer, the start-up of Tunis under a new Power Purchase Agreement (PPA) in October 2k18 and the consolidation of Koma Kulshan in July 2k18. Depreciation and amortization cost reduced $4.80M as the 2k18 duration included $5.30M of amortization cost for the remaining PPA intangible asset at Nipigon. These favourable comparisons were partially offset by the non-recurrence of the $6.70M step-up gain on the consolidation of Koma Kulshan in 2k18 and a $1.00M insurance loss on the Cadillac fire recorded in 2k19.

Net income attributable to Atlantic Power Corporation for the 3rd-quarter of 2k19 was $12.60M contrast to a $3.20M net loss in the 3rd-quarter of 2k18. The improvement of $15.80M was mainly attributable to the $1.70M incline in Project income, a $7.30M reduction in foreign exchange loss ($2.80M gain as compared to a $4.50M loss in 2k18), lower interest cost of $3.70M, a $2.80M incline in the fair value of the convertible debenture conversion option (included in “Other (income) cost, net”), and a $3.40M reduction in income tax cost. The foreign exchange gain of $2.80M was related to the revaluation of debt denominated in Canadian dollars (the Canadian dollar depreciated from June 30, 2k19 to September 30, 2k19).

Project Adjusted EBITDA for the 3rd-quarter of 2k19 increased $3.50M to $48.90M from $45.40M in the 3rd-quarter of 2k18. The incline was mainly driven by the acquisitions of Allendale, Dorchester, Craven and Grayling during the quarter (+$1.70M); Curtis Palmer (+$1.50M), which had a 30.00 percent incline in generation because of higher water flows; Cadillac (+$1.10M), which had an extended outage in the 2k18 duration; Frederickson (+$1.00M), because of higher dispatch and lower maintenance cost, and Tunis (+$1.00M), which incurred maintenance cost in the 2k18 duration in preparation for its October 2k18 start-up. Inclines at these projects were partially offset by declines at Williams Lake (-$1.70M), because of voluntary curtailment resulting from low fuel inventory; Oxnard (-$1.60M), because of gas turbine repairs, and Nipigon (-$1.20M), because of maintenance associated with an upgrade of the gas turbine control system.

Cash Flow

Cash offered by operating activities for the 3rd-quarter of 2k19 was $36.40M, a boost of $16.9M from $19.50M in the 3rd-quarter of 2k18. The incline was mainly attributable to higher Project Adjusted EBITDA, a $5.90M incline in distributions from unmerged associates (counting $3.80M related to the September distribution from Orlando, which in 2k18 was received in October), and a $1.20M reduction in cash interest payments because of lower debt balances. In addition, cash flow benefited from a $7.20M favourable year-over-year change in working capital.

Cash used in investing activities for the 3rd-quarter of 2k19 was $29.10M contrast to $14.50M in the 3rd-quarter of 2k18. In the 2k19 duration, the Company attained the Allendale and Dorchester biomass plants and equity interests in the Craven and Grayling biomass plants for $28.50M, whereas in 2k18, the Company attained the remaining 50.00 percent ownership of the Koma Kulshan hydro facility and bought out the operation and maintenance contract for an aggregate $11.70M. Also in the 2k18 duration, the Company made a $2.60M deposit for the acquisition of the Allendale and Dorchester plants.

Cash used in financing activities for the 3rd-quarter of 2k19 was $20.30M as contrast to $29.70M in the 3rd-quarter of 2k18. In 2k19, the Company repaid $18.30M of term loan and project debt, paid $1.80M of preferred dividends and repurchased $0.10M of common and preferred shares. In the comparable 2k18 duration, the Company repaid $20.80M of term loan and project debt, repurchased $6.60M of common and preferred shares and paid $2.00M of preferred dividends.

During the 3rd-quarter of 2k19, the net decline in the Company’s cash, restricted cash and cash equivalents was $13.00M.

Project income, Net income and Project Adjusted EBITDA

Project income for the 1st-nine months of 2k19 was $80.10M, a $12.10M incline from $68.00M in the comparable 2k18 duration. Project revenue increased $3.80M due mainly to revenue inclines at Curtis Palmer, which benefited from higher water flows; the acquisitions of Allendale, Dorchester, Craven and Grayling in the 3rd-quarter of 2k19; Tunis, which re-started operations in October 2k18, and Koma Kulshan, which was merged in July 2k18. These revenue inclines were partially offset by declines at the San Diego projects, which ceased operations in February 2k18; Williams Lake, because of the short-term contract extension and lower dispatch; and Kenilworth, because of a steam revenue adjustment. Operations and maintenance cost reduced $11.90M, mostly at Manchief, the San Diego projects and Tunis. Depreciation and amortization cost reduced $17.20M because of lower amortization at Nipigon and the shutdown of the San Diego projects. Declines in these costs were partially offset by an $11.90M unfavourable change in the fair value of derivative instruments and the non-recurrence of the $6.70M step-up gain on the consolidation of Koma Kulshan in 2k18.

Net income attributable to Atlantic Power Corporation for the 1st-nine months of 2k19 was $22.70M contrast to $12.10M in the comparable 2k18 duration. The incline of $10.60M was mainly attributable to the $12.10M incline in Project income, a $7.70M reduction in interest cost, and a $5.30M reduction in income tax cost. These favourable drivers were partially offset by a foreign exchange loss of $7.10M as contrast to a $9.10M gain in the comparable 2k18 duration, related to the revaluation of debt denominated in Canadian dollars as the Canadian dollar appreciated from December 31, 2k18 to September 30, 2k19.

Project Adjusted EBITDA for the 1st-nine months of 2k19 increased $14.70M to $153.20M from $138.50M in the comparable 2k18 duration. The incline was mainly driven by Curtis Palmer (+$10.10M), Manchief (+$7.50M), and Tunis (+$6.60M), for reasons formerly described; Orlando (+$1.80M), because of a capacity rate escalation and lower fuel prices; the acquisitions of Allendale, Dorchester, Craven and Grayling (+$1.70M); Frederickson (+$1.40M), because of higher dispatch, and the San Diego projects (+$1.40M), because of severance and related costs incurred in the 2k18 duration. Inclines at these projects were partially offset by declines at Williams Lake (-$6.60M), because of the short-term contract extension and voluntary curtailment; Oxnard (-$2.90M), because of gas turbine repairs; Chambers (-$2.80M), because of lower energy and steam demand in addition to lower excess energy pricing; and modest declines at Mamquam and Nipigon.

Cash Flow

Cash offered by operating activities for the 1st-nine months of 2k19 was $104.50M, a $6.70M incline from $97.80M in the comparable 2k18 duration. The incline was mainly because of the $14.70M incline in Project Adjusted EBITDA, a $4.00M incline in distributions from unmerged associates and a $3.30M reduction in cash interest payments because of lower debt balances and a lower rate on the Company’s credit facilities. These positive variances were partially offset by a $17.30M adverse impact from changes in working capital. The 2k18 duration included a $29.20M release of working capital by Kapuskasing, North Bay and the three San Diego projects when they ceased operation.

Cash used in investing activities for the 1st-nine months of 2k19 was $28.00M as contrast to $16.90M in the comparable 2k18 duration. In 2k19, the Company used $28.70M to acquire Allendale and Dorchester and equity interests in Craven and Grayling and realized $1.60M of salvage proceeds from the San Diego projects. In 2k18, the Company used $12.80M to acquire the remaining ownership interests in Koma Kulshan and $2.60M for a deposit on the purchase of Allendale and Dorchester.

Cash used in financing activities for the 1st-nine months of 2k19 was $87.10M as contrast to $107.90M in the comparable 2k18 duration. In 2k19, the Company repaid $52.3M of term loan and project debt, redeemed $18.50M (US$ equivalent) of the remaining Series D convertible debentures, repurchased $8.80M of common and preferred shares, paid $5.50M of preferred dividends and made $2.00M of cash payments for vested LTIP units withheld for taxes. In the comparable 2k18 duration, the Company issued $92.20M of Series E convertible debentures, redeemed $88.10M of Series C and Series D convertible debentures, repaid $79.50M of term loan and project debt, repurchased $20.30M of common and preferred shares, incurred $5.10M of deferred financing costs and paid $6.30M of preferred dividends.

During the 1st-nine months of 2k19, the net decline in the Company’s cash, restricted cash and cash equivalents was $10.60M.

Liquidity and Balance Sheet 

Liquidity

As shown in Table 2, the Company’s liquidity at September 30, 2k19 was $181.20M, a decline of $13.20M from $194.40M at June 30, 2k19. The reduction was mainly attributable to the use of cash for the two acquisitions that closed in the 3rd-quarter. At September 30, 2k19, there was $31.20M of cash at the parent, of which the Company considers about $24.00M to be discretionary cash available for general corporate purposes.

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