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Article Excerpt
OPERATOR: Good morning, ladies and gentlemen. Welcome to the Atlantic Power fourth quarter 2008 results conference call. Following the formal comments, we will hold a question and answer session. Please be advised, this call is being recorded. I would like to now turn the meeting over to Mr. Barry Welch, President and CEO of Atlantic Power Corporation. Please go ahead.
BARRY WELCH, PRESIDENT, CEO, ATLANTIC POWER CORPORATION: Good morning and thank you for joining us today. Our results for the three months and year-ended December 31, 2008, were issued by Press Release yesterday afternoon and are available on our website and on SEDAR. Financial figures referred to are stated in US dollars unless otherwise noted. Joining me on today's call is Patrick Welch, Atlantic Power's Chief Financial Officer, and Paul Rapisarda , our Managing Director for Acquisitions and Asset Management. Before we begin let me remind everyone this conference call may contain forward-looking statements. These statements are not guarantees on of future performance and involve certain risks and uncertainties that are more fully described in our various securities filings.
Allow me to start by saying we're very pleased with our operating and financial results in 2008. For the year-ended December 31, 2008, cash flow available for distribution increased to $103.7 million, or $1.62 per diluted IPS, a significant increase from the prior year resulting in a pay out ratio of 59%. Cash flow available for distribution in the fourth quarter of 2008 was lower than last year, primarily due to a larger income tax refund in the 2007 fourth quarter, partially offset by the release of debt service reserves at Pasco in the fourth quarter of 2008, which resulted from a final payment of the project's debt. In addition, the working capital change in the fourth quarter of 2007 was positively impacted by a timing difference and the receipt of revenues at the Lake and Orlando projects. For the year ended December 31, 2008, cash flow available for distribution rose to $103.7, million compared to $80.1 million for the same period last year. The increase is attributable to higher operating cash flow in 2008, which reflects the higher project adjusted EBITDA and the positive impact of certain non-recurring cash flows in 2008.
The most significant of the non-recurring cash flow items in 2008 were the release of debt service reserves at Pasco and Gregory and the reduced working capital investment at Onondaga associated with the shut down of that facility. Adjusted EBITDA at the projects in the fourth quarter of 2008, including earnings from equity investments, increased by $2.9 million, or 7% compared to the same period last year. The increase was due to a number of factors, including our acquisition of the Auburndale project in November 2008, the absence of revenue at Onondaga as the contracts that provided substantially all the project's cash flow expired in the second quarter of 2008, offset by a delay in the timing of a portion of the planned distribution from the Selkirk project, that was due to restrictions on the terms of the project's non-recourse debt, but the project passed the test again beginning in December, and we believe the remaining restricted cash will become available for distribution in 2009, and finally the receipt of a partial settlement of business interruption and property insurance claims at Orlando related to the unplanned outage earlier in 2008.
For the year ended December 31, 2008, adjusted EBITDA increased 1% to $169 million, compared to $167 million in the prior year. In addition to the factors impacting the Q4 results, adjusted EBITDA for 2008 was affected by the receipt of an $8.2 million distribution from the Gregory Project in the second quarter, resulting from release of its debt service reserves, increased adjusted EBITDA at Lake, due to higher power prices and higher plant efficiency, which resulted from the turbine upgrades we performed in the fourth quarter of 2007, higher adjusted EBITDA at Pasco due to the acquisition of the additional 50% interest in the project in December of 2007, and higher power prices at Pasco, offset by higher fuel costs as a result of market price purchases following the expiration of its fuel supply agreement on July 30, 2008. Beginning in January of this year, a new 10 year BPA at Pasco requires the counterparty to provide natural gas to operate the plant, and as a result it will no longer be exposed to changes in market price of natural gas. Based on our current cash on hand and projected future cash flows from our current projects, we can reaffirm our previous guidance, that we can meet our current level of cash distributions into 2015 without any further acquisitions or organic growth opportunities.
There were a number of other positive achievements during and subsequent to the fourth quarter, which bode well for Atlantic Power going forward. First, on November 21 we indirectly acquired 100% of the Auburndale facility, a 155-megawatt natural gas combined cycle co-generation project in central Florida. The purchase price was approximately $140 million and was funded by cash on hand, a $55 million borrowing under our credit facility, and $35 million of non-recourse acquisition debt. The purchase brings a number of benefits to Atlantic Power. The asset was immediately accretive to cash flow, contributing $4.5 million in adjusted EBITDA and a $6 million cash distribution in the fourth quarter of 2008. It has a power purchase agreement through 2013 with Progress Energy Florida, and a fuel supply agreement with El Paso Corporation, through mid 2012, which substantially hedges natural gas prices.
As a result of the Auburndale acquisition and in light of our long term cash flow projections, in November we increased the dividend on the common share portion of our IPS by 8%. With this increase, the total IPS distribution is Canadian $1.094 per year. We took our Onondaga project off line in April, an event that's been expected since our IPO. Since the shut down, we've successfully sold its gas turbines, spare parts and other equipment for proceeds of $7.5 million in 2008. We're currently making good progress, working with an experienced developer to redevelop the site into a 35 to 40-megawatt biomass plant and will continue to update you...
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