China Hydroelectric Corporation Announces Third Quarter 2011 Results
NEW YORK, Nov. 10, 2011 /PRNewswire-Asia-FirstCall/ — China Hydroelectric Corporation (NYSE: CHC, CHCWS) (“China Hydroelectric” or “the Company”), an owner, developer and operator of small hydroelectric power projects in the People’s Republic of China (“PRC”), today announced its financial results for the three and nine months ended September 30, 2011.
“We are pleased that overall precipitation levels in the third quarter were closer to historical average than was the case in the first half of this year, and all of our hydroelectric facilities were again fully operational throughout the period. In certain areas where we have facilities, during the third quarter we experienced precipitation that was close to or in excess of long-term averages for those regions. However, on a Company-wide basis hydrological conditions continued to be the factor with the greatest impact on our results of operations. Based on extensive historical precipitation data and our internal modeling capabilities, the likely final precipitation total for all of fiscal 2011 represents the very low 3-5% probability of occurring in any given year. This clearly indicates that 2011 is not a typical or representative year and the probability of precipitation levels in 2012 again being so far below average levels appears to be low,” reported Mr. John D. Kuhns, Chairman and Chief Executive Officer of the Company.
Mr. Kuhns added, “Another challenge we continue to confront in 2011 is the tight bank financing market in China due to central government policies intended to control inflation. This has prevented us from closing on certain previously agreed upon loans and refinancing certain existing project level bank loans as has historically been the practice. As a result, the Company has been required to seek to raise capital through other means.”
General
The following table presents data concerning precipitation levels for the regions and the periods indicated. Precipitation is the principal factor affecting revenue, profitability and cash provided by operations as it determines the amount of electric power produced and sold by the Company’s hydroelectric facilities. The various provinces in which the Company operates are subject to different weather patterns or systems within any given quarter and fluctuate from quarter to quarter. On a total Company basis, 2010 experienced above average precipitation whereas 2011 is experiencing below average precipitation.
Precipitation - Percent of Long-Term Average *
----------------------------------------------
Province Q3 2011 YTD 2011 Q3 2010 YTD 2010
-------- ------- -------- ------- --------
Zhejiang 89% 76% 112% 133%
Fujian 79% 64% 101% 118%
Yunnan 79% 78% N/M N/M
Precipitation - Percent of Long-Term Average *
----------------------------------------------
Fiscal Fiscal
Province 2010 2009
-------- ------- -------
Zhejiang 131.3% 90.5%
Fujian 114.2% 75.4%
Yunnan N/M N/M
*Source: Data collected by the Company as well as by provincial and
national meteorological recording stations
N/M - Not material
The following presents some key comparative financial and other
information:
First First
Nine Nine
% Months Months
Summary Data Q3 2011 Q3 2010 Change 2011 2010 % Change
------------ ------- ------- ------ ------ ------ --------
Electricity
sold (millions
kWh) 415.10 436.60 -5% 1,123.9 1,234.0 -9%
Effective
tariff (RMB/
kWh) $0.27 $0.30 -10% $0.30 $0.34 -12%
Average
effective
utilization
rate 33.0% 43.8% -25% 30.7% 46.2% -34%
Revenue
(millions) $16.3 $18.4 -11% $48.3 $56.7 -15%
Gross profit
(millions) $7.6 $12.0 -37% $24.0 $39.2 -39%
Adjusted EBITDA
(millions) (1) $10.3 $12.7 -19% $30.5 $40.2 -24%
GAAP Net
(loss)/income
(millions) ($4.1) $1.7 -341% ($11.1) ($5.9) 88%
GAAP Net
(loss)/income
per ADS ($0.08) $0.03 -367% ($0.21) ($0.13) 62%
Non-GAAP Net
(loss)/income
(millions) (2) ($3.2) $3.0 -207% ($7.8) $12.7 -161%
Non-GAAP Net
(loss)/income
per ADS (2) ($0.06) $0.06 -200% ($0.15) $0.27 -156%
(1) See "Net income / (loss) to adjusted EBITDA reconciliation" below
(2) See "GAAP net income /(loss) to non-GAAP net income /(loss)
reconciliation" below
Third Quarter 2011 Financial and Operational Results
Revenues
Revenues, net of value added taxes, for the three months ended September 30, 2011 were $16.3 million, a decrease of 11%, or $2.1 million, from $18.4 million for the three months ended September 30, 2010. This decrease was due principally to less than average hydrological conditions in the current quarter compared to the prior year quarter, which experienced better than average hydrological conditions, and, to a lesser extent, a lower effective tariff rate due to the mix of revenue from the respective provinces. These factors were partially offset by incremental revenue contributed in the current quarter by projects acquired after September 30, 2010.
The $2.1 million decrease in revenue for the three months ended September 30, 2011 was primarily attributable to the net effect of (i) a $3.8 million, or 21%, decrease in revenue contributed by projects owned as of September 30, 2010, principally due to hydrological factors, and (ii) a $1.7 million revenue contribution by projects acquired in the twelve month period since September 30, 2010. Such projects have a total installed capacity of 70.4 MW as set forth below.
The Company sold 415.1 million kWh in the three months ended September 30, 2011, a decrease of 21.5 million kWh, or 5%, from 436.6 million kWh sold in the three months ended September 30, 2010, attributable to a 51.9 million kWh contribution from projects acquired since September 30, 2010, offset by a 73.4 million kWh, or 18%, decline in power sold by existing projects.
The consolidated effective utilization rate for the three months ended September 30, 2011 was 33%, compared to 43.8% in the three months ended September 30, 2010. Average consolidated effective utilization rate was 39%. The lower consolidated effective utilization rate in the current period was principally the result of overall below average precipitation in all provinces we operate compared to above average precipitation in the three months ended September 30, 2010.
The effective tariff decreased from RMB 0.30/kWh in the three months ended September 30, 2010 to RMB 0.27/kWh in the three months ended September 30, 2011. The decrease of 10% was caused by a higher relative revenue contribution from projects located in Yunnan province, where tariffs are lower than in Fujian and Zhejiang.
Cost of Revenues
Cost of revenues for the third quarter of 2011 was $8.8 million, as compared to $6.3 million for the third quarter of 2010, primarily due to an increase in our operating projects as a result of acquisitions since the third quarter of 2010. Cost of revenues as a percentage of revenues increased to 54% for the third quarter of 2011, from 34% in the third quarter of 2010, as a result of lower revenue due to overall unfavorable hydrological conditions in the third quarter of 2011 and the fixed nature of expenses included therein. Depreciation, a non-cash expense included in cost of revenues, was $5.9 million for the third quarter of 2011, as compared to $4.3 million for the third quarter of 2010.
Gross Profit and Margin
Gross profit was $7.6 million for the third quarter of 2011, a decrease of $4.4 million, from $12.0 million in the third quarter of 2010. The $4.4 million decrease in gross profit reflects a $4.6 million decrease by existing projects as of September 30, 2010, offset by a $0.2 million increase contributed by projects acquired in the last twelve months. Gross margin for the third quarter of 2011 was 46% compared to 65% in the same period of 2010 due principally to lower revenue and the fixed nature of expenses included in cost of revenues.
General and Administrative Expenses
General and administrative expenses (“G&A expenses”) for the third quarter of 2011 were $4.5 million, or 28% of revenues, compared to $4.6 million, or 25% of revenues for the third quarter of 2010. The third quarter of this year included non-cash employee stock-based compensation expense of $0.9 million, compared to $1.0 million in the same period in 2010. The minor increase in G&A expenses was due to financing related costs and higher public company professional fees. G&A expenses increased as a percent of revenues due to the generally fixed nature of such expenses.
Adjusted EBITDA and EBITDA Margin
Adjusted EBITDA was $10.3 million for the third quarter of 2011 compared to $12.7 million for the third quarter of 2010. Adjusted EBITDA margin decreased to 63% for the third quarter of 2011 compared to 69% in the same period of 2010 due to the generally fixed nature of cost of revenue and G&A expenses.
Interest Expenses
Interest expense, net, was $7.3 million during the third quarter of 2011 compared to $4.0 million in the same period of 2010. The increase was primarily due to the higher balance of outstanding loans assumed from projects acquired after September 30, 2010.
GAAP and Non-GAAP Net Loss / Income
Net loss attributable to China Hydroelectric shareholders was $4.1 million in the third quarter of 2011 compared to net income of $1.7 million in the same period in 2010. Net loss attributable to ordinary shareholders was $4.1 million, or $0.08 net loss per ADS, for the third quarter of 2011 compared to net income of $1.7 million, or $0.03 net income per ADS for the third quarter of 2010.
Non-GAAP net loss was $3.2 million, or $0.06 net loss per ADS, for the third quarter of 2011 compared to net income of $3.0 million, or $0.06 net income per ADS, for the third quarter of 2010. For a reconciliation between GAAP and non-GAAP earnings, see the table entitled “GAAP Net Income / (Loss) to Non-GAAP Net Income / (Loss) Reconciliation.”
Weighted average American Depository Shares used in the third quarter 2011 and 2010 earnings per share calculation were 52.4 million ADS, representing 157.3 million ordinary shares and 51.1 million ADS, representing 153.3 million ordinary shares, respectively.
Nine Months Ending September 30, 2011 Financial and Operational Results
Revenues
Revenues, net of value added taxes, for the nine months ended September 30, 2011 were $48.3 million, a decrease of 15%, or $8.4 million, from $56.7 million for the nine months ended September 30, 2010. This decrease was due principally to less than average precipitation in the first nine months of 2011 compared to better than average precipitation in the same period last year and, to a lesser extent, the result of a lower effective tariff rate due to project mix. These factors were partially offset by incremental revenue contributed in the current year by projects acquired in the twelve month period since September 30, 2010.
The $8.4 million decrease in revenue for the nine months ended September 30, 2011 was primarily attributable to the net effect of (i) a $13.7 million, or 24%, decrease in revenue contributed by the projects owned as of September 30, 2010, principally due to hydrological factors, and (ii) a $5.3 million revenue contribution by the projects acquired in the twelve month period since September 30, 2010. Such projects have a total installed capacity of 70.4 MW as set forth below.
The Company sold 1,123.9 million kWh in the nine months ended September 30, 2011, a decrease of 110.1 million kWh, or 9%, from 1,234.0 million kWh sold in the nine months ended September 30, 2010. Sales from existing projects decreased by 261.8 million kWh, or 21%, partially offset by the sale of 151.7 million kWh produced by projects acquired since September 30, 2010.
The consolidated effective utilization rate in the nine months ended September 30, 2011 was 30.7%, a decrease from 46.2% in the same period of 2010. Average consolidated effective utilization rate was 39%. The decrease was principally the result of below average precipitation in the current nine month period in all provinces, compared to above average precipitation in all provinces in the nine months ended September 30, 2010.
The effective tariff decreased from RMB 0.34/kWh in the nine months ended September 30, 2010, to RMB 0.30/kWh, or 12%, in the nine months ended September 30, 2011, attributable to a higher revenue contribution from projects located in Yunnan province, where tariffs are lower than in the two eastern provinces.
The Company’s equipment availability was excellent throughout the nine months ended September 30, 2011 and 2010, and, therefore, had no negative impact on utilization rates. Similarly, the Company experienced no material grid connectivity or transmission constraints negatively impacting the delivery of power to customers in the current and prior year periods.
Cost of Revenues
Cost of revenues for the nine months ending September 30, 2011 was $24.3 million, as compared to $17.5 million for the same period of 2010, primarily due to the acquisition of operating assets since September 30, 2010. Cost of revenues as a percentage of revenues increased to 50% for the nine months ending September 30, 2011, from 31% in the same period of 2010, as a result of lower revenue due to unfavorable hydrological conditions in the first nine months of 2011 and the fixed nature of expenses included therein. Depreciation, a non-cash expense included in cost of revenues, was $17.1 million for the nine months ending September 30, 2011, as compared to $11.9 million for the same period of 2010.
Gross Profit and Margin
Gross profit was $24.0 million for the nine months ending September 30, 2011, a decrease of $15.2 million, from $39.2 million in the same period of 2010. The $15.2 million decrease in gross profit reflects a $16.7 million decrease contributed by existing projects as of September 30, 2010, offset by a $1.5 million increase contributed by projects acquired in the last twelve months. Gross margin for the nine months ending September 30, 2011 was 50% compared to 69% in the same period of 2010 due principally to lower revenue and the fixed nature of expenses included in cost of revenues.
General and Administrative Expenses
General and administrative expenses (“G&A expenses”) for the nine months ending September 30, 2011 were $14.8 million, or 31% of revenues, compared to $13.8 million, or 24% of revenues for the same period of 2010. G&A expenses in the nine months ending September 30, 2011 included an employee stock-based compensation expense of $2.9 million, compared to $2.6 million in 2010. The increase in G&A expenses was also due to financing costs and higher professional fees associated with being a public company. G&A expenses increased as a percent of revenues due to the generally fixed nature of such expenses.
Adjusted EBITDA and EBITDA Margin
Adjusted EBITDA was $30.5 million for the nine months ending September 30, 2011 compared to $40.2 million for the same period of 2010. Adjusted EBITDA margin decreased to 63% for the nine months ending September 30, 2011 compared to 71% in the same period of 2010 due to the generally fixed nature of cost of revenue and G&A expenses.
Interest Expenses
Interest expense, net, was $18.7 million during the nine months ending September 30, 2011 compared to $10.5 million in the same period of 2010. The increase in the interest expenses was primarily due the higher balance of outstanding loans due to the addition of loans assumed from projects acquired after September 30, 2010.
GAAP and Non-GAAP Net Loss/ Income
Net loss attributable to China Hydroelectric Corporation shareholders was $11.1 million in the nine months ending September 30, 2011, compared to a net income of $9.9 million in the comparable period in 2010. Net loss attributable to ordinary shareholders was $11.1 million, or $0.21 net loss per ADS, for the nine months ending September 30, 2011 compared to a net loss attributable to ordinary shareholders of $5.9 million, or $0.13 net loss per ADS for the same period of 2010.
Non-GAAP net loss was $7.8 million, or $0.15 net loss per ADS, for the nine months ending September 30, 2011 compared to a net income of $12.7 million, or $0.27 net income per ADS, for the same period of 2010. For reconciliation between GAAP and non-GAAP net income, see the table entitled “GAAP Net Income / (Loss) to Non-GAAP Net Income / (Loss) Reconciliation.”
Weighted average American Depository Shares used in the earnings per share calculation was 51.6 million ADS, representing 154.7 million ordinary shares and 46.6 million ADS, representing 139.9 million ordinary shares, for the nine months ended September 30, 2011 and 2010, respectively.
Liquidity
The Company’s cash and cash equivalents as of September 30, 2011 amounted to $18.4 million compared to $33.5 million as of December 31, 2010, a decrease of $15.1 million. This decrease was primarily attributable to the excess of cash flow used in investing activities of $23.3 million, principally consisting of acquisition-related payments, over cash provided by financing activities of $3.2 million. Cash provided by financing activities was adversely impacted by central government policy in effect during the current year period that effectively delayed new bank financing. Cash flow provided by operating activities was $5.2 million for the nine months ended September 30, 2011, which compares favorably to cash flow used in operating activities of $9.9 million in the prior year period. Cash flow provided by operating activities in the current period was unfavorably impacted by a $9.7 million decrease in adjusted EDITDA that resulted from lower revenue and profitability due to our relatively fixed expense levels, as well as working capital requirements.
Historically, the Company has partially relied on the ready availability of credit in China to fund its operations and expansion. However, in 2011 the Company’s ability to obtain financing from its principal lenders in China has been constrained by restrictions on bank lending imposed by the central government in an effort to contain inflation. It is currently not clear when this policy will likely end. As a result, to best assure that the Company will be in a position to continue to meet working capital and debt service requirements through cash flow from operations, Management has commenced discussions with certain lenders about restructuring near term (including certain fourth quarter) principal payments. Based on discussions to date, Management is cautiously optimistic that the Company’s creditors will agree to such restructurings. In addition, based on the assumption that bank lending in China does not become less restrictive in the near term, Management is seeking additional debt and/or equity financing from alternative sources. To this end, in August 2011, the Company entered into a transaction with one of its largest shareholders, Vicis Capital, pursuant to which Vicis exercised certain warrants it held for ordinary shares of the Company at an agreed upon reduced exercise price, thereby providing the Company with $10 million in equity financing. In addition, the Company continues to engage in active discussions with other potential sources of debt and/or equity financing. Any such financing, as to which there currently can be no assurances, may be dilutive to existing shareholder. If no agreement on restructuring is obtained and no alternative source of financing can be obtained, it may have an adverse impact on the operations of certain of the Company’s subsidiaries and projects.
Business Updates
The following table shows the operating projects acquired since the end of the third quarter of 2010.
Date
Project Name Acquired Capacity
------------ -------- --------
Jinwei (74% December
interest) 30, 2010 16.0 MW
Jintang (74% December
interest) 30, 2010 11.6 MW
Jinlong (55% December
interest) 30, 2010 10.0 MW
Qianling (100% December
interest) 30, 2010 13.0 MW
Dongguan (100% December
interest) 30, 2010 4.8 MW
Dazhaihe (100% April 10,
interest) 2011 15.0 MW
-------
Current Total 70.4 MW
-------
Business Outlook for Full Year 2011
Although Yunnan and Zhejiang experienced higher than normal precipitation in the current quarter, both have experienced below average precipitation for of the nine months ended September 30, 2011. The precipitation to be realized in the fourth quarter of 2011 will not affect the likelihood that 2011 will be a less than average year in terms of precipitation.
Non-GAAP Net Income Figures
Non-GAAP net income for the third quarter of 2011 and the third quarter of 2010, excludes the following non-cash charges: stock-based compensation expenses; non-cash cumulative dividends and beneficial conversion features on convertible redeemable preferred shares; exchange gains or losses; and, the change in fair value of warrant liability. A reconciliation of GAAP and non-GAAP items is provided in the table entitled “GAAP Net Income / (Loss) to Non-GAAP Net Income / (Loss) Reconciliation.”
Net Income to Adjusted EBITDA Reconciliation
Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and amortization and excluding certain non-cash charges, including: stock-based compensation expenses, exchange losses, change in fair value of warrant liability. For further details, see the table entitled “Net income / (loss) to adjusted EBITDA reconciliation.”
Conference Call
China Hydroelectric will host a conference call at 6:00 am (Pacific) /9:00 am (Eastern) / 10:00 pm (Beijing/Hong Kong) on Friday, November 11, 2011 to discuss its third quarter 2011 financial results and recent business activities. To access the live teleconference, please dial (US) +1-877-941-8416 or (International) +1-480-629-9808, and enter pass code 4485752. This call is being webcast by ViaVid Broadcasting and can be accessed by clicking on this link: http://viavid.net/dce.aspx?sid=00008F60, or at ViaVid’s website at http://www.viavid.net.
A replay of the conference call will be available from 12:00 pm (Eastern) on November 11, 2011 to 11:59pm (Eastern) on November 25, 2011, by dialing (US) +1-877-870-5176 or (International) +1-858-384-5517 and entering the pass code 4485752.
About China Hydroelectric
China Hydroelectric Corporation (NYSE: CHC, CHCWS) (“China Hydroelectric” or “the Company”) is an owner and operator of small hydroelectric power projects in the People’s Republic of China. Through its geographically diverse portfolio of operating assets, the Company generates and sells electric power to local power grids. Led by an international management team, the Company’s primary business is to identify, evaluate, acquire, develop, construct and finance hydroelectric power projects. The Company currently owns 27 operating hydropower stations in China with total installed capacity of 563.8 MW, of which it acquired 23 operating stations and constructed 4. These hydroelectric power projects are located in four provinces: Zhejiang, Fujian, Yunnan and Sichuan. Hydropower is an important factor in meeting China’s electric power needs, accounting for approximately 22% of total nation-wide capacity.
Cautionary Note Regarding Forward-looking Statements and Weather Data
Statements contained herein that address operating results, performance, events or developments that we expect or anticipate will occur in the future are forward-looking statements. The forward-looking statements include, among other things, statements relating to the Company’s business strategies and plan of operations, the Company’s ability to acquire hydroelectric assets, the Company’s capital expenditure and funding plans, the Company’s operations and business prospects, projects under development, construction or planning and the regulatory environment. The forward-looking statements are based on the Company’s current expectations and involve a number of risks, uncertainties and contingencies, many of which are beyond the Company’s control, which may cause actual results, performance or achievements to differ materially from those anticipated. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those anticipated, estimated or projected. Among the factors that could cause actual results to materially differ include: supply and demand changes in the electric markets, changes in electricity tariffs, hydrological conditions, the Company’s relationship with and other conditions affecting the power grids we service, the Company’s production and transmission capabilities, availability of sufficient and reliable transmission resources, our plans and objectives for future operations and expansion or consolidation, interest rate and exchange rate changes, the effectiveness of the Company’s cost-control measures, the Company’s liquidity and financial condition, environmental laws and changes in political, economic, legal and social conditions in China, and other factors affecting the Company’s operations that are set forth in the Company’s Annual Report on Form 20-F for the year ended December 31, 2010 filed with the Securities and Exchange Commission (the “SEC”) on April 4, 2011 and in the Company’s future filings with the SEC. Unless required by law, the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
This release also contains statistical data and estimates that we obtained from provincial and national meteorological recording stations. Although we believe that this data is reliable and consistent with our experience, we have not independently verified it.
Interim Financial Information
This release contains unaudited financial information which in the opinion of management includes all adjustments and normal accruals necessary for a fair presentation of financial position and the comparative results of operations and cash flows which are subject to year-end audit adjustments which could be significant. Results of operations for interim periods are not necessarily indicative of those to be achieved or expected for the entire year. Certain information and footnote disclosures, normally included in financial statements prepared in accordance with Generally Accepted Accounting Principles (“GAAP”), have been condensed or omitted.
About Non-GAAP Financial Measures
To supplement China Hydroelectric consolidated financial results presented in accordance with GAAP, China Hydroelectric uses non-GAAP net income and adjusted EBITDA, which are non-GAAP financial measures. The presentation of these non-GAAP financial measures is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with GAAP. For more information on these non-GAAP financial measures, please see the tables captioned “Net income / (loss) to adjusted EBITDA reconciliation” and “GAAP Net Income / (Loss) to Non-GAAP Net Income / (Loss) Reconciliation” below.
China Hydroelectric believes that these non-GAAP financial measures provide meaningful supplemental information regarding its performance and liquidity by excluding certain expenses that may not be indicative of its operating performance and financial condition from a cash perspective. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing the Company’s performance and when planning and forecasting future periods. These non-GAAP financial measures also facilitate management’s internal comparisons to China Hydroelectric historical performance and liquidity. China Hydroelectric has computed its non-GAAP financial measures using methods consistent with the Company’s annual report on Form 20-F. We believe these non-GAAP financial measures are useful for investors because they permit greater transparency with respect to supplemental information used by management in its financial and operational decision making. A limitation of using these non-GAAP financial measures is that they exclude certain charges that have been and may continue for the foreseeable future to be significant expenses in the Company’s results of operations.
For further information, please
contact:
Company: Investor Relations firm:
John E. Donahue, VP of Investor
Relations Scott Powell, Senior Vice President
China Hydroelectric Corporation MZ Group
Phone: +1-646-467-9810 Phone: +1-212-301-7130
Email: Email:
john.donahue@chinahydroelectric.com scott.powell@hcinternational.net
CHINA HYDROELECTRIC CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$ 000's, except for share and per share data)
Three Months Ended
------------------
September September
30, 2011 30, 2010
---------- ----------
Revenues 16,315 18,365
Cost of revenues (8,764) (6,321)
------ ------
Gross profit 7,551 12,044
----- ------
Operating expenses
General and administrative
expenses (4,549) (4,636)
------ ------
Total operating expenses (4,549) (4,636)
------ ------
Operating income 3,002 7,408
----- -----
Interest income 24 275
Interest expenses (7,320) (4,308)
Change in fair value of warrant
liability 319 -
Exchange loss (278) (299)
Other (expense)/income, net (91) (225)
--- ----
(Loss)/income before income tax
expenses (4,344) 2,851
------ -----
Income tax expenses (133) (1,071)
---- ------
Consolidated net (loss)/income (4,477) 1,780
Net income /(loss) attributed to
non-controlling interest 410 (82)
Net (loss)/income attributable to
China Hydroelectric Corporation
shareholders (4,067) 1,698
Less:
Cumulative dividends on Series A
convertible redeemable preferred
shares - -
Cumulative dividends on Series B
convertible redeemable preferred
shares - -
Cumulative dividends on Series C
convertible redeemable preferred
shares - -
Accretion of beneficial conversion
feature on Series A convertible
redeemable preferred shares - -
Accretion of beneficial conversion
feature on Series B convertible
redeemable preferred shares - -
Accretion of beneficial conversion
feature on Series C convertible
redeemable preferred shares - -
--- ---
Net (loss)/income attributable to
ordinary shareholders (4,067) 1,698
====== =====
GAAP net (loss)/income per ADS -
basic and diluted (0.08) 0.03
GAAP net (loss)/income per share -
basic and diluted (0.03) 0.01
Weighted average American
Depository Shares -basic and
diluted 52,448,099 51,098,505
Weighted average ordinary shares -
basic and diluted 157,344,297 153,295,516
Nine Months Ended
-----------------
September September
30, 2011 30, 2010
---------- ----------
Revenues 48,309 56,702
Cost of revenues (24,262) (17,455)
Gross profit 24,047 39,247
------ ------
Operating expenses
General and administrative
expenses (14,750) (13,816)
------- -------
Total operating expenses (14,750) (13,816)
Operating income 9,297 25,431
----- ------
Interest income 84 1,118
Interest expenses (18,750) (11,619)
Change in fair value of warrant
liability 319 365
Exchange loss (742) (554)
Other (expense)/income, net 68 175
(Loss)/income before income tax
expenses (9,724) 14,916
------ ------
Income tax expenses (1,977) (4,748)
Consolidated net (loss)/income (11,701) 10,168
Net income /(loss) attributed to
non-controlling interest 642 (262)
Net (loss)/income attributable to
China Hydroelectric Corporation
shareholders (11,059) 9,906
Less:
Cumulative dividends on Series A
convertible redeemable preferred
shares - (1,989)
Cumulative dividends on Series B
convertible redeemable preferred
shares - (1,412)
Cumulative dividends on Series C
convertible redeemable preferred
shares - (162)
Accretion of beneficial conversion
feature on Series A convertible
redeemable preferred shares - (6,990)
Accretion of beneficial conversion
feature on Series B convertible
redeemable preferred shares - (5,040)
Accretion of beneficial conversion
feature on Series C convertible
redeemable preferred shares - (222)
Net (loss)/income attributable to
ordinary shareholders (11,059) (5,909)
======= ======
GAAP net (loss)/income per ADS -
basic and diluted (0.21) (0.13)
GAAP net (loss)/income per share -
basic and diluted (0.07) (0.04)
Weighted average American
Depository Shares -basic and
diluted 51,553,313 46,623,104
Weighted average ordinary shares -
basic and diluted 154,659,940 139,869,311
CHINA HYDROELECTRIC CORPORATION
GAAP NET INCOME / (LOSS) TO NON-GAAP NET INCOME / (LOSS) RECONCILIATION
(In US $ 000's)
Three Months Ended
------------------
September September
30, 2011 30, 2010
---------- ----------
Net (loss)/income attributable to
ordinary shareholders (4,067) 1,698
Non-GAAP adjustments:
Non-cash cumulative dividends on
convertible redeemable preferred
shares (1) - -
Non-cash beneficial conversion
feature on convertible redeemable
preferred shares (1) - -
Stock-based compensation expense
(2) 936 991
Exchange losses 278 299
Change in fair value of warrant
liability (319) -
---- ---
Non-GAAP (loss)/ income (3,172) 2,988
====== =====
Non-GAAP net (loss)/income per
ADS - basic and diluted (3) (0.06) 0.06
Non-GAAP net (loss)/income per
ordinary share - basic and
diluted (0.02) 0.02
Weighted average American
depository shares -basic and
diluted 52,448,099 51,098,505
Weighted average ordinary shares -
basic and diluted 157,344,297 153,295,516
(1) Non-cash equity charges
Cumulative dividends on Series A
convertible redeemable preferred
shares - -
Cumulative dividends on Series B
convertible redeemable preferred
shares - -
Cumulative dividends on Series C
convertible redeemable preferred
shares - -
Accretion of beneficial conversion
feature on Series A convertible
redeemable preferred shares - -
Accretion of beneficial conversion
feature on Series B convertible
redeemable preferred shares - -
Accretion of beneficial conversion
feature on Series C convertible
redeemable preferred shares - -
--- ---
Total - -
=== ===
Nine Months Ended
-----------------
September September
30, 2011 30, 2010
---------- ----------
Net (loss)/income attributable to
ordinary shareholders (11,059) (5,909)
Non-GAAP adjustments:
Non-cash cumulative dividends on
convertible redeemable preferred
shares (1) - 3,563
Non-cash beneficial conversion
feature on convertible redeemable
preferred shares (1) - 12,252
Stock-based compensation expense
(2) 2,858 2,597
Exchange losses 742 554
Change in fair value of warrant
liability (319) (365)
Non-GAAP (loss)/ income (7,778) 12,692
====== ======
Non-GAAP net (loss)/income per
ADS - basic and diluted (3) (0.15) 0.27
Non-GAAP net (loss)/income per
ordinary share - basic and
diluted (0.05) 0.09
Weighted average American
depository shares -basic and
diluted 51,553,313 46,623,104
Weighted average ordinary shares -
basic and diluted 154,659,940 139,869,311
(1) Non-cash equity charges
Cumulative dividends on Series A
convertible redeemable preferred
shares - 1,989
Cumulative dividends on Series B
convertible redeemable preferred
shares - 1,412
Cumulative dividends on Series C
convertible redeemable preferred
shares - 162
Accretion of beneficial conversion
feature on Series A convertible
redeemable preferred shares - 6,990
Accretion of beneficial conversion
feature on Series B convertible
redeemable preferred shares - 5,040
Accretion of beneficial conversion
feature on Series C convertible
redeemable preferred shares - 222
Total - 15,815
=== ======
(2) Stock-Based Compensation Related Items: We provide non-GAAP
information relative to our expense for stock-based compensation.
We include stock-based compensation expense in our GAAP financial
measures in accordance with Financial Accounting Standards Board
("FASB") Accounting Standards Codification ("ASC") Topic 718,
Compensation - Stock Compensation ("FASB ASC Topic 718"). Because of
varying available valuation methodologies, subjective assumptions
and the variety of award types, which affect the calculations of
stock-based compensation, we believe that the exclusion of stock-
based compensation allows for more accurate comparisons of our
operating results to our peer companies. Stock-based compensation
is very different from other forms of compensation. The expense
associated with granting an employee a stock option is spread over
multiple years unlike other compensation expenses which are more
proximate to the time of award or payment. For example, we may
recognize expense on a stock option in a year in which the stock
option is significantly underwater and typically would not be
exercised or would not generate any compensation for the employee.
The expense associated with an award of a stock option for 1,000
shares of stock by us in one quarter, for example may have a very
different expense than an award of an identical number of shares in
a different quarter. Further, the expense recognized by us for such
an option may be very different than the expense recognized by other
companies for the award of a comparable option. This makes it
difficult to assess our operating performance relative to our
competitors. Because of these unique characteristics of stock-based
compensation, management excludes these expenses when analyzing the
organization's business performance. We also believe that
presentation of such non-GAAP information is important to enable
readers of our financial statements to compare current period
results with future periods.
(3) The Company's American depository shares ("ADS") convert to
ordinary shares at a rate of one ADS to three ordinary shares.
CHINA HYDROELECTRIC CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In US $ 000's)
As of September As of December
30, 31,
2011 2010
--- ---
ASSETS (unaudited) (audited)
Current assets:
Cash and cash equivalents 18,434 33,457
Accounts receivable 7,627 4,359
Deferred tax assets 1,793 1,260
Amounts due from related parties 1,323 5,950
Prepayments and other current assets 5,383 9,486
Total current assets 34,560 54,512
------ ------
Non-current assets:
Property, plant and equipment, net 609,685 583,686
Long term assets - Land, net 50,551 48,944
Intangible assets, net 6,351 6,249
Goodwill 147,967 135,219
Deferred tax assets 781 512
Other non-current assets 796 709
Total non-current assets 816,131 775,319
------- -------
TOTAL ASSETS 850,691 829,831
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable 5,259 4,784
Short-term loans 15,356 17,742
Current portion of long-term loans 53,675 60,798
Amounts due to related parties 11,803 12,866
Accrued expenses and other current
liabilities 65,799 66,905
Total current liabilities 151,892 163,095
------- -------
Non-current liabilities:
Long term loans 242,585 224,297
Warrant liability 1,071 -
Deferred tax liabilities 27,006 25,350
Other non-current liabilities 183 106
Total non-current liabilities 270,845 249,753
------- -------
TOTAL LIABILITIES 422,737 412,848
======= =======
Shareholders' equity
Ordinary shares (par value US$0.001
per share, 130,000,000 and
400,000,000 shares authorized as of
December 31, 2010 and September 30,
2011, respectively; 153,295,516
shares issued and outstanding as of
December 31, 2010 and September 30,
2011, respectively) 162 153
Additional paid in capital 501,838 495,652
Accumulated other comprehensive
income 40,431 22,922
Accumulated deficit (123,899) (112,840)
-------- --------
Total China Hydroelectric Corporation
shareholders' equity 418,532 405,887
Non-controlling interests 9,422 11,096
Total shareholders' equity 427,954 416,983
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY 850,691 829,831
======= =======
CHINA HYDROELECTRIC CORPORATION
NET (LOSS)/ INCOME TO ADJUSTED EBITDA RECONCILIATION
Three Months Ended
------------------
September September
30, 2011 30, 2010
---------- ---------
Net (loss)/income attributable to
China Hydroelectric Corporation
shareholders (4,067) 1,698
Interest expenses, net 7,296 4,033
Other non cash charges, including
exchange losses, change in fair
value of warrant liability, and
stock-based compensation expense 895 1,290
Income tax expenses 133 1,071
Depreciation of property, plant and
equipment and amortization of land
use rights and intangible assets 6,059 4,571
----- -----
EBITDA, as adjusted 10,316 12,663
====== ======
EBITDA margin, as adjusted 63% 69%
Nine Months Ended
-----------------
September September
30, 2011 30, 2010
---------- ---------
Net (loss)/income attributable to
China Hydroelectric Corporation
shareholders (11,059) 9,906
Interest expenses, net 18,666 10,501
Other non cash charges, including
exchange losses, change in fair
value of warrant liability, and
stock-based compensation expense 3,281 2,786
Income tax expenses 1,977 4,748
Depreciation of property, plant and
equipment and amortization of land
use rights and intangible assets 17,636 12,268
EBITDA, as adjusted 30,501 40,209
====== ======
EBITDA margin, as adjusted 63% 71%
Adjusted EBITDA is defined as earnings before interest, taxes,
depreciation and amortization and certain non-cash charges
including exchange loss, change in fair value of warrant liability
and stock-based compensation. We believe that EBITDA is widely used
by other companies in the power industry and may be useful to
investors as a measure of the Company's financial performance. Given
the significant investments that we have made in net property, plant
and equipment, depreciation and amortization expense comprises a
meaningful portion of the Company's cost structure. We believe that
EBITDA will provide a useful tool for comparability between periods
because it eliminates depreciation and amortization expenses
attributable to capital expenditures and business acquisitions. The
presentation of EBITDA should not be construed as an indication that
the Company's future results will be unaffected by other charges and
gains we consider to be outside the ordinary course of our business.
CHINA HYDROELECTRIC CORPORATION
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In US $ 000's)
Nine Months Ended
-----------------
September 30, September
2011 30, 2010
-------------- ----------
Cash flows from operating activities:
Consolidated net (loss)/income (11,701) 10,168
Adjustments to reconcile consolidated
net income to net cash used in
operating activities:
Depreciation of property, plant and
equipment and amortization of land use
rights and intangible assets 17,636 12,268
Deferred income taxes (625) (484)
Change in fair value of derivative
financial liabilities and warrant
liability (319) (365)
Amortization of debt issuance costs 14 14
Accretion of guarantee deposit - 389
Amortization of unfavorable contract
obligations - (583)
Stock-based compensation expense 2,858 2,597
Loss from disposal of property, plant
and equipment 73 48
Exchange losses 742 554
Changes in operating assets and
liabilities:
Accounts receivable (2,870) 983
Prepayments and other current assets 135 (41,668)
Other non-current assets (57) (121)
Accounts payable 76 (436)
Amounts due to related parties - 4
Change in other non-current liabilities 77 716
Accrued expenses and other current
liabilities (828) 6,023
---- -----
Net cash provided by (used in) operating
activities 5,211 (9,893)
----- ------
Cash flows from investing activities:
Acquisition of subsidiaries, net of cash
acquired (18,979) (42,778)
Cash deposit for potential acquisitions (694) (2,957)
Acquisition of property, plant and
equipment (1,381) (1,885)
Proceeds from disposal of property,
plant and equipment 92 1
Payment to contractors for construction
projects (2,301) (2,889)
Net cash used in investing activities (23,263) (50,508)
------- -------
Cash flows from financing activities:
Proceeds from short-term loans 11,841 1,922
Proceeds from long-term loans 45,324 19,838
Proceeds of loans from related party 999 -
Purchase of subsidiary shares from non-
controlling interests (1,204) -
Proceeds from initial public offering - 96,000
Proceeds from exercised warrants 9,639 -
Payment of deferred initial public
offering costs - (10,012)
Repayment loans from related parties (2,360) -
Repayment of short-term loans (14,910) (4,435)
Repayment of long-term loans (46,156) (32,529)
Net cash provided by financing
activities 3,173 70,784
----- ------
Net (decrease)/increase in cash and cash
equivalents (14,879) 10,383
------- ------
Effect of changes in exchange rate on
cash and cash equivalents (144) (175)
---- ----
Cash and cash equivalents at the
beginning of the year 33,457 31,618
------ ------
Cash and cash equivalents at the end of
the year 18,434 41,826
====== ======
SOURCE China Hydroelectric Corporation
