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Q3 2008 Atlantic Power Corporation Earnings Conference Call - Final.

Article Excerpt
OPERATOR: Good morning, ladies and gentlemen. Welcome to the Atlantic Power third-quarter 2008 results conference call. Following the formal comments, we will hold a question-and-answer session. Please be advised that this call is being recorded.

I would now like to turn the meeting over to Mr. Barry Welch, President and CEO of Atlantic Power Corporation. Please go ahead, Mr. Welch.

BARRY WELCH, PRESIDENT AND CEO, ATLANTIC POWER CORPORATION: Good morning. Thank you for joining us today. Our results for the three and nine months ended September 30, 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 on the call you may hear -- contain forward-looking statements. These statements are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our various securities filings.

Let me start by saying that we are pleased with our operating and financial results for the first nine months of the year. For the period ended September 30, 2008, cash flow available for distribution increased to $66.6 million or CAD1.03 per diluted IPS, a 76% increase from the prior year, resulting in a conservative payout ratio of 72%.

Cash flow available for distribution in the third quarter of 2008 was lower than last year, due primarily to a number of timing differences and other factors that impacted adjusted EBITDA at the projects, including the absence of revenue from Onondaga as the plant was shut down in the second quarter this year.

We had previously disclosed since our IPO that this plant would not be economical after its financial contracts expired due to its efficiency in the regional electricity market, which is not, by the way, our expectation for any of our other projects. We continue to evaluate the feasibility with our joint venture partner of converting the project in a 35- to 40-megawatt biomass plant.

We had higher fuel costs at Pasco following the expiration of it fuel supply agreement at the end of the second quarter; a temporary delay in the timing of distributions from Selkirk as a result of restrictions under the terms of the project's nonrecourse debt. We are expecting to receive those funds in the fourth quarter and in 2009. And distributable cash was adversely impacted by negative changes in working capital, primarily due to the buildup of cash at the projects until scheduled debt payments are made.

Partially offsetting these negative factors were the following -- higher adjusted EBITDA at Pasco due to the acquisition of the additional 50% interest in the project in December of last year, as well as higher power prices at the project, and increased adjusted EBITDA at Lake in 2008 due to higher power prices and higher plant efficiency as a result of the turbine upgrades performed in the fourth quarter of 2007.

As a result of these factors, adjusted EBITDA at the projects in the third quarter of 2008, including earnings from equity investments, was $32.6 million compared to $41.8 million last year.

For the nine months ended September 30, 2008, adjusted EBITDA increased 3.4% to $125.2 million compared to the same period last year. In addition to the factors impacting the Q3 results that I mentioned earlier, adjusted EBITDA for the first nine months of 2008 was also affected by the receipt of an $8.9 million distribution from the Gregory Project resulting from a release of debt service reserves that was anticipated after the signing of a new PPA last year; the absence of adjusted EBITDA from Jamaica due to its sale in the fourth quarter of last year; lower adjusted EBITDA at Chambers due to a planned boiler outage in the second quarter of 2008; and reduced adjusted EBITDA from Stockton attributable to a planned outage in the second quarter of this year.

Looking ahead at the balance of the year, we remain confident that we are on track to deliver an increase in distributions from our projects in 2008 of at least 10% compared to 2007. More importantly, based on our cash on hand and projected future cash flows from our current projects, we have sufficient resources to meet our current level of cash distributions into 2015, before considering any positive impact for potential acquisitions, including the pending acquisition of Auburndale, or organic growth opportunities.

There were a number of other positive achievements during and subsequent to...