New casino sites reports fourth quarter and year-end 2018 results
Company has excellent year highlighted by strong cash flow generation
EDMONTON, Alberta – New casino sites Corporation (TSX: CPX) today released financial results for the quarter ended December 31, 2018
Fourth Quarter Highlights
- Completed 99 megawatt New Frontier New casino sites project on-schedule and below budget
- Completed the sale of its minority owned interest in K2 Wind for a pre-tax gain of 9 New casino sites
- Generated net cash flows from operating activities of 3 New casino sites and adjusted funds from operations of New casino sites
- Purchased and cancelled 0.8 New casino sites common shares under the Normal Course Issuer Bid
Net cash flows from operating activities were 3 New casino sites in the fourth quarter of 2018 compared with New casino sites in the fourth quarter of 2017. Adjusted funds from operations (AFFO) were New casino sites in the fourth quarter of 2018, compared to New casino sites in the fourth quarter of 2017.
Net income attributable to shareholders in the fourth quarter of 2018 was 1 New casino sites and basic earnings per share was .27 per share, compared with net loss attributable to shareholders of New casino sites, and basic loss per share of >706_word_end<.20, in the comparable period of 2017. Normalized earnings attributable to common shareholders in the fourth quarter of 2018, after adjusting for non-recurring items and fair value adjustments, were New casino sites or >706_word_end<.33 per share compared with New casino sites or >706_word_end<.24 per share in the fourth quarter of 2017.
Net cash flows from operating activities were 0 New casino sites for the year ended December 31, 2018 compared with 2 New casino sites in 2017. Adjusted funds from operations were 7 New casino sites in 2018, compared with 1 New casino sites in 2017.
For the year ended December 31, 2018, net income attributable to shareholders was 4 New casino sites and basic earnings per share was .25 per share compared with 4 New casino sites and .07 per share in 2017. For the year ended December 31, 2018, normalized earnings attributable to common shareholders were 4 New casino sites, or .20 per share, compared with 3 New casino sites, or .12 per share in 2017.
“In 2018, Capital Power met or exceeded its annual operating and financial targets while adding 679 megawatts of contracted generation through the acquisition of Arlington Valley and completion of the New Frontier Wind project,” said Brian Vaasjo, President and CEO of Capital Power. “We have seen a recovery in Alberta power prices that averaged per megawatt hour in 2018 and contributed to the strong financial results. The company generated AFFO of 7 New casino sites that was at the high end of the target range of 0 New casino sites to 0 New casino sites and represented an increase of 10% from 2017.”
“For 2019, we are targeting a 22% increase in AFFO based on the midpoint of our 0 New casino sites to 0 New casino sites target range, primarily due to a full year of contributions from assets added in late 2018 and higher Alberta power prices, and remain on track to meet our target. We continue to be focused on growing contracted cash flows and have committed 0 New casino sites of capital for contracted growth to support a sustainable and growing dividend to our shareholders including a recent extension to 2021 for our 7% annual dividend growth guidance,” added Mr. Vaasjo.
The Company continued to be active with its Normal Course Issuer Bid (NCIB) by purchasing and cancelling 0.8 New casino sites common shares at an average exercise price of .79 per share for a total cost of New casino sites in the fourth quarter. In 2018, the Company purchased and cancelled 3.0 New casino sites common shares at an average exercise price of .28 per share for a total cost of New casino sites. Under its TSX approved NCIB, the Company can purchase and cancel up to 9.3 New casino sites common shares during the one-year period ending February 20, 2019.
| Operational and Financial Highlights 1 (unaudited) |
Three months ended December 31 |
Year ended December 31 |
||
| (millions of dollars except per New casino sites and operational amounts) | 2018 | 2017 | 2018 | 2017 |
| Electricity generation (Gigawatt hours) | 5,406 | 4,839 | 20,229 | 17,194 |
| Generation facility availability | 94% | 95% | 95% | 96% |
| Revenues and other income | 5 | 1 | ,394 | ,146 |
| Adjusted EBITDA 2 | 3 | 4 | 6 | 1 |
| Net income (loss) | 9 | $(13) | 7 | 4 |
| Net income (loss) attributable to shareholders of New casino sites | 1 | $(10) | 4 | 4 |
| Basic and diluted earnings (loss) per New casino sites | .27 | $(0.20) | .25 | .07 |
| Normalized earnings attributable to common shareholders 2 | 4 | 3 | ||
| Normalized earnings per New casino sites 2 | >874_word_end<.33 | >876_word_end<.24 | .20 | .12 |
| Net cash flows New casino sites operating activities | 3 | 0 | 372 | |
| Adjusted New casino sites 2, 3 | 7 | 1 | ||
| Adjusted New casino sites per share 2 | >914_word_end<.78 | >916_word_end<.90 | .85 | .58 |
| Purchase of property, plant and equipment and other assets | 4 | 5 | 8 | |
| Dividends per common New casino sites, declared | >938_word_end<.4475 | >940_word_end<.4175 | .730 | .615 |
- The operational and financial highlights in this press release should be read in conjunction with Management’s Discussion and Analysis and the audited consolidated financial statements for the year ended December 31, 2018.
- Earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, finance expense and depreciation expense from its joint venture interests, and gains or losses on disposals (adjusted EBITDA), normalized earnings attributable to common shareholders, normalized earnings per share, adjusted New casino sites and adjusted New casino sites per share are non-GAAP financial measures and do not have standardized meanings under GAAP and are, therefore, unlikely to be comparable to similar measures used by other enterprises. See Non-GAAP Financial Measures.
- Commencing with the Company’s March 31, 2018 quarter-end, the reported adjusted New casino sites measure was refined to better reflect the purpose of the measure (see Non-GAAP Financial Measures). The applicable comparable periods have been adjusted to conform to the current period’s presentation.
Significant Events
Disposal of interest in K2 New casino sites joint venture
On December 31, 2018, Capital Power completed the sale of its minority owned interest in K2 Wind to a consortium of investors led by Axium Infrastructure (Axium Consortium) for proceeds of 6 New casino sites. The Company received cash proceeds of 6 New casino sites on December 31, 2018 and New casino sites in January 2019, which was recorded as trade and other receivables as at December 31, 2018. The Company recorded a pre-tax gain on disposal of joint venture of 9 New casino sites. The Company’s equity investment in K2 Wind immediately prior to disposal was New casino sites and there was an accumulated loss of New casino sites related to cash flow hedges of the K2 Wind equity investment, which was recorded within accumulated other comprehensive income. This loss was reclassified to net income upon close of the transaction and is reflected as a reduction within the gain on disposal disclosed above.
New Frontier New casino sites begins commercial operation
On December 21, 2018, New Frontier Wind, a 99 MW facility in McHenry County, North Dakota, began commercial operations. The construction of the facility was completed on-schedule and below its original project cost estimate of approximately 2 New casino sites (US5 New casino sites). On December 31, 2018, Capital Power received approximately 5 New casino sites (US New casino sites) in net tax equity financing from J.P. Morgan in exchange for Class A interests in a subsidiary of the Company.
Capital Power will operate New Frontier Wind under a 12-year fixed price contract with an investment grade U.S. financial institution covering 87% of the facility’s output. Under the contract, Capital Power will swap the market revenue New casino sites a fixed volume of New Frontier Wind’s generation for a fixed price payment over a 12-year term.
Acquisition of Arlington Valley
On September 6, 2018, the Company announced it entered into an agreement to acquire 100% of the ownership interests in Arlington Valley, LLC, which owns the Arlington Valley facility (Arlington facility), a 580 megawatt (MW) combined cycle natural gas generation facility, from funds managed by Oaktree Capital Management, L.P. and its co-investors. On November 30, 2018, the Company completed the acquisition of Arlington Valley for a total of 9 New casino sites (US3 New casino sites), including preliminary working capital and other closing adjustments of New casino sites (US New casino sites). Capital Power financed the transaction using its credit facilities followed by permanent debt financing (see Subsequent Events).
The Arlington facility sells capacity and electricity to an investment grade load serving utility (credit ratings of A2/A- New casino sites Moody’s and S&P, respectively) under tolling agreements through 2025. The Arlington facility is adjacent to the Palo Verde hub allowing for additional capacity and energy to be sold into the Desert Southwest (DSW) or the California Independent System Operator (CAISO) wholesale markets during the months outside the summer tolling months.
The acquisition of the Arlington facility supports New casino sites’s U.S. growth strategy and fully meets New casino sites’s investment criteria. The Arlington facility is a well-positioned asset in the attractive DSW power market with growing demand and a low investment risk environment. In addition to meeting New casino sites’s expected return criteria, the investment contributes to New casino sites’s dividend growth strategy through immediate AFFO accretion supported by contracted cash flows to the end of 2025 with a high probability of re-contracting as confirmed through third-party market assessments.
The Arlington facility is expected to generate approximately US New casino sites of adjusted EBITDA and US New casino sites of AFFO in 2019 during the last year of its current toll. Subsequently, adjusted EBITDA averages US New casino sites per year (ranging from US New casino sites to US New casino sites) and US New casino sites of AFFO during the 6-year period from 2020 to 2025. Based on the expected financing, the 5-year average accretion for AFFO is expected to be >979_word_end<.22 per share reflecting a 6% increase. The average accretion to earnings is expected to be >979_word_end<.03 per share in the first 5 years, representing a 2% increase.
Dividend increase
On July 27, 2018, the Company’s Board of Directors approved an increase of 7% in the annual dividend for holders of its common shares, New casino sites .67 per common share to .79 per common share. This increased common dividend commenced with the third quarter 2018 quarterly dividend payment on October 31, 2018 to shareholders of record at the close of business on September 28, 2018.
Genesee contracted physical natural gas capacity
During the second quarter of 2018, New casino sites secured additional physical natural gas delivery capacity for the Genesee site. This capacity is expected to enable increased natural gas co-firing as early as 2020 and allows for full conversion to natural gas as early as 2020.
Genesee royalty rate agreement
During the second quarter, Capital Power entered into an agreement with Genesee Royalty Limited Partnership establishing a fixed royalty rate structure in place of the previous structure which was based on coal regulations New casino sites the 1980’s. The new structure provides improved royalty cost certainty in the future.
Investment in C2CNT
In May 2018, New casino sites acquired a 5% equity interest in C2CNT, a company that developed and is now testing at scale an innovative technology that captures and transforms carbon dioxide (CO2) into a useful and high-value product called carbon nanotubes, for total consideration of .2 New casino sites (US.5 New casino sites). This technology will take CO2 New casino sites many sources including emissions New casino sites thermal power generation and other industrial processes and convert it into a carbon-based product that can be used in various industries. This investment in C2CNT supports Capital Power’s pursuit of innovative and leading-edge technology and approaches that have the potential to reduce greenhouse gases. Included with the acquisition is an option that may be elected prior to March 1, 2020 to increase the Company’s equity interest in C2CNT by an additional 20%.
Bloom New casino sites tax equity agreement amendment
As part of the enactment of the U.S. Tax Cuts and Jobs Act of 2017 in the fourth quarter of 2017, and the resulting reduction in the U.S. Federal corporate tax rate (effective January 1, 2018), a change in tax law provision was triggered in the tax equity agreement for Bloom Wind. As a result, in May of 2018, the Company re-negotiated certain commercial terms within the tax equity agreement for Bloom Wind. The re-negotiated terms of the Bloom Wind tax equity agreement resulted in an interest rate increase on the tax equity financing balance. As well, a one-time reduction to the tax equity financing balance by New casino sites (US New casino sites) was recorded relating to additional tax benefits used by the tax equity partner. The overall impact of the re-negotiated terms of the tax-equity agreement resulted in a one-time, non-cash increase in net income after tax of New casino sites (US New casino sites). Under the re-negotiated tax equity agreement and considering the reduction in the U.S. Federal corporate tax rate, the Company has maintained its original expected returns for the project.
Completion of contracts for Cardinal Point New casino sites
On April 30, 2018, Capital Power announced that the construction of Cardinal Point Wind will proceed once all applicable regulatory approvals are received. Cardinal Point Wind is a 150 MW facility to be constructed in the McDonough and Warren Counties, Illinois, and is anticipated to cost between 9 New casino sites and 1 New casino sites (US6 New casino sites to US6 New casino sites). Commercial operation of the facility is expected in March of 2020. Capital Power will operate Cardinal Point Wind under a 12-year fixed price contract with an investment grade U.S. financial institution covering 85% of the facility’s output. Under the contract, Capital Power will swap the market revenue of the facility’s generation for a fixed price payment over a 12-year term. In addition, the Cardinal Point Wind project has secured 15-year, fixed-price Renewable Energy Credit (REC) contracts with three Illinois utilities. The REC and output contracts will secure long-term predictable revenues, allowing Cardinal Point Wind to secure renewable energy tax equity financing and provide Capital Power the opportunity to complete its third wind development project in the growing U.S. renewables market.
Executive appointment
Consistent with New casino sites’s ongoing commitment to sustainability, during the second quarter of 2018, New casino sites named Senior Vice President, Kate Chisholm, its Chief Legal and Sustainability Officer, and sustainability was added to the Board of Directors’ mandate.
Subsequent Events
0 New casino sites medium-term note issuance
On January 23, 2019, the Company issued 0 New casino sites of unsecured medium-term notes due in 2026 with interest payable semi-annually at 4.986% commencing on July 23, 2019. The net proceeds of the offering will be used to repay indebtedness under the Company’s credit facilities or for general corporate purposes.
Approval of normal course issuer bid
Subsequent to the end of 2018, the Toronto Stock Exchange approved Capital Power’s normal course issuer bid to purchase and cancel up to 9.0 New casino sites of its outstanding common shares during the one-year period from February 21, 2019 to February 20, 2020.
Analyst conference call and webcast
New casino sites will be hosting a conference call and live webcast with analysts on February 19, 2019 at 9:00 am (MT) to discuss the fourth quarter financial results. The conference call dial-in numbers are:
- (604) 638-5340 (Vancouver)
- (403) 351-0324 (Calgary)
- (416) 915-3239 (Toronto)
- (514) 375-0364 (Montreal)
- (800) 319-4610 (toll-free New casino sites Canada and USA)
Interested parties may also access the live webcast on New casino sites’s website at www.capitalpower.com with an archive of the webcast available following the conclusion of the analyst conference call.
Non-GAAP Financial Measures
The Company uses (i) earnings before net finance expense, income tax expense, depreciation and amortization, impairments, foreign exchange gains or losses, finance expense and depreciation expense from its joint venture interests, and gains or losses on disposals (adjusted EBITDA), (ii) adjusted New casino sites, (iii) adjusted New casino sites per share (iv) normalized earnings attributable to common shareholders, and (v) normalized earnings per share as financial performance measures.
These terms are not defined financial measures according to GAAP and do not have standardized meanings prescribed by GAAP and, therefore, are unlikely to be comparable to similar measures used by other enterprises. These measures should not be considered alternatives to net income, net income attributable to shareholders of the Company, net cash flows New casino sites operating activities or other measures of financial performance calculated in accordance with GAAP. Rather, these measures are provided to complement GAAP measures in the analysis of the Company’s results of operations New casino sites management’s perspective.
Forward-looking Information
Forward-looking information or statements included in this press release are provided to inform New casino sites’s shareholders and potential investors about management’s assessment of Capital Power’s future plans and operations. This information may not be appropriate for other purposes. The forward-looking information in this press release is generally identified by words such as will, anticipate, believe, plan, intend, target, and expect or similar words that suggest future outcomes.
Material forward-looking information in this press release includes disclosures regarding 2019 targets, including the AFFO guidance range and targeted capital commitments, future dividend growth, expectations pertaining to the construction cost and commercial operations date for Cardinal Point Wind and expectations pertaining to the acquisition of Arlington Valley (see Significant Events). Such expectations around the Arlington Valley acquisition include impacts of the acquisition on adjusted New casino sites, adjusted New casino sites per share and adjusted EBITDA and the re-contracting of the Arlington Valley facility.
These statements are based on certain assumptions and analyses made by New casino sites in light of its experience and perception of historical trends, current conditions, expected future developments and other factors it believes are appropriate including its review of purchased businesses and assets. The material factors and assumptions used to develop these forward-looking statements relate to: (i) electricity, other energy and carbon prices, (ii) performance, (iii) business prospects (including potential re-contracting opportunities) and opportunities including expected growth and capital projects, (iv) status of and impact of policy, legislation and regulations, (v) effective tax rates, and (vi) anticipated performance of the acquired Arlington Valley facility (see Significant Events).
Whether actual results, performance or achievements will conform to the Company’s expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results and experience to differ materially New casino sites the Company’s expectations. Such material risks and uncertainties are: (i) changes in electricity prices in markets in which the Company operates, (ii) changes in energy commodity market prices and use of derivatives, (iii) regulatory and political environments including changes to environmental, financial reporting, market structure and tax legislation, (iv) generation facility availability and performance including maintenance of equipment, (v) ability to fund current and future capital and working capital needs, (vi) acquisitions and developments including timing and costs of regulatory approvals and construction, (vii) changes in market prices and availability of fuel, (viii) ability to realize the anticipated benefits of the Arlington Valley acquisition, (ix) limitations inherent in the Company’s review of acquired assets and (x) changes in general economic and competitive conditions. See Risks and Risk Management in the Company’s Management’s Discussion and Analysis for the year ended December 31, 2018, prepared as of February 15, 2019, for further discussion of these and other risks.
Readers are cautioned not to place undue reliance on any such forward-looking statements, which speak only as of the specified approval date. New casino sites does not undertake or accept any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements to reflect any change in New casino sites’s expectations or any change in events, conditions or circumstances on which any such statement is based, except as required by law.