Boralex Power Income Fund: Fourth Quarter and Fiscal 2007 – Financial Results and Reduction in Distributions
MONTREAL, Feb. 22 /PRNewswire-FirstCall/ — Boralex Power Income Fund (the “Fund”) recorded revenue of $24.5 million in the fourth quarter of 2007, compared to $30.0 million for the same period in 2006. Earnings before interest, taxes, depreciation and amortization (“EBITDA”) amounted to $12.4 million in the fourth quarter of 2007, compared to $18.9 million for the same quarter a year earlier. The Fund incurred a net loss of $5.5 million, versus net earnings of $7.4 million for the fourth quarter of 2006. The net loss per trust unit amounted to $0.09, compared to net earnings of $0.12 in the final quarter of 2006.
The decrease in net earnings stems in part from the lower EBITDA, as explained below, but also from the $14.0 million goodwill impairment charge related to the natural gas cogeneration facility. Excluding the change in Canadian tax legislation and the goodwill impairment charge, the Fund would have recorded net earnings of $3.4 million or $0.06 per trust unit, in the final quarter of 2007.
Two factors also impacted revenue and EBITDA. The first being the lower power generation in the hydroelectric segment due to lower hydrology than in 2006. Production was 13.7% below the historical averages, which translated into a decrease of about $5.0 million in revenue and EBITDA. The second factor being the steady rise in the Canadian dollar in the fourth quarter of 2007, which had an impact of about $1.5 million on both revenue and EBITDA.
For the fiscal year ended December 31, 2007, consolidated revenue and EBITDA amounted to $102.2 million and $55.2 million respectively, compared to $115.2 million and $70.9 million in 2006. Unlike the previous year, in which earnings rose significantly due to exceptional hydrology, the Fund recorded a net loss of $35.7 million, or $0.60 per trust unit in 2007. However, excluding the impact of the change in Canadian tax legislation, which led to the recording of $42.0 million in future income taxes taking effect in 2011, and the goodwill impairment charge, the Fund’s net earnings for fiscal 2007 would have been $20.3 million or $0.34 per trust unit. Fiscal 2007 results were also impacted by the following items: a 13.1% drop in total power generation, due to poor hydrology in the last nine months of 2007, the negative translation adjustment caused by the rise in the Canadian dollar versus its U.S. counterpart and the cost of the strategic review process.
In addition, the wood-residue supply, which was adequate in 2007, will be more challenging in 2008 given the temporary closures of several sawmills with which the Fund has supply contracts. As a result, wood-residue costs will likely increase by about $2.5 million to $3.0 million in fiscal 2008 compared to 2007. Furthermore, as disclosed following the second quarter of fiscal 2007, the dispute between the Fund and Bowater, operator of the Fund’s Dolbeau facility, is going in arbitration.
Distributions
The Fund is announcing a reduction in its distributions to unitholders to $0.70 per trust unit on an annualized basis, starting with the distribution to be declared in March 2008 and payable in April 2008. This decrease, representing an annual saving of nearly $12 million, should bring distributions at a level below estimated cash flow from operating activities. “Despite the excellent quality of its assets and their long service life, the Fund is preparing for the significant challenges in the forest industry resulting in higher wood-residue costs, as well as the rise in the Canadian dollar versus the U.S. dollar, which will likely continue in the medium term. As the Fund’s philosophy has always been to maintain financial flexibility and cash reserves to cover potential operating risks, the decision to reduce the distributions to unitholders became unavoidable and the most prudent approach under the circumstances,” said Claude Boivin, Chairman of the Board of Trustees.
About Boralex Power Income Fund
Boralex Power Income Fund is an unincorporated open-ended trust that indirectly owns ten power generating stations located in the province of Quebec and the United States producing energy from different sources including wood-residue or natural gas-fired thermal and cogenerating facilities as well as hydroelectric power stations. In total, these power stations have an installed capacity of 190 MW. The Fund’s units are listed for trading on The Toronto Stock Exchange under the symbol BPT.UN.
Certain statements in this release, including statements regarding future results and performance, are forward-looking statements based on current expectations. The accuracy of such statements is subject to a number of risks, uncertainties and assumptions that may cause actual results to differ materially from those projected, including, but not limited to, the effect of general economic conditions, decreased demand for the Fund’s products, increases in raw material costs, hydrology, fluctuations in currency exchange rates, fluctuations in sales prices and adverse changes in general market and industry conditions. The financial statements included in this press release also contain certain financial measurements that are not recognized as generally accepted accounting principles (GAAP).
The Fund uses EBITDA, among other measures, as a performance measure with respect to its operations. This term is not a defined financial measure according to GAAP and it does not have a standardized meaning prescribed by GAAP. Therefore, this measure may not be comparable to similar measures presented by other enterprises. EBITDA is defined in the notes of the financial statements accompanying this press release.
Notice to unitholders
These quarterly financial statements for the periods ended December 31, 2007 and 2006 were not reviewed by our auditors Ernst & Young LLP. The financial statements are the responsibility of the Manager of Boralex Power Income Fund, and were reviewed and approved by Boralex Power Trust’s trustees and the members of their audit committee.
Boralex Power Income Fund Consolidated Balance Sheets (in thousands of dollars) (unaudited) As at As at Decem- Decem- ber 31, ber 31, 2007 2006 ————————————————————————- Assets Current assets Cash and cash equivalents 10,740 25,877 Accounts receivable 13,333 16,025 Income taxes receivable 1,949 – Inventories 2,405 667 Prepaid expenses 1,248 1,350 ————————————————————————- 29,675 43,919 Property, plant and equipment 367,474 399,273 Intangible assets 83,690 97,907 Goodwill 16,243 30,240 Other long-term assets 8,594 12,104 ————————————————————————- 505,676 583,443 ————————————————————————- ————————————————————————- Liabilities and unitholders’ equity Current liabilities Short-term revolving credit facility 2,300 3,100 Accounts payable and accrued liabilities 8,909 12,873 Income taxes payable – 393 Distributions payable to unitholders 4,430 4,430 Current portion of obligation under capital lease 233 – ————————————————————————- 15,872 20,796 Future income tax liabilities 48,817 6,463 Fair value of derivative financial instruments 5 38 Long-term debt 102,529 117,387 Long-term lease accruals 1,858 1,728 ————————————————————————- 169,081 146,412 ————————————————————————- Unitholders’ equity Capital contribution 422,174 422,174 Capital contribution – exchangeable Class B units 112,867 112,867 Deficit (170,982) (82,128) Accumulated other comprehensive income (27,464) (15,882) ————————————————————————- 336,595 437,031 ————————————————————————- 505,676 583,443 ————————————————————————- ————————————————————————- Boralex Power Income Fund Consolidated Statements of Earnings (in thousands of dollars, except amounts per unit) (unaudited) For the For the quarters Twelve-month periods ended December 31, ended December 31, 2007 2006 2007 2006 ————————————————————————- Revenues 24,544 30,008 102,168 115,226 ————————————————————————- Expenses Operating 11,633 10,093 43,559 41,992 Administrative 519 1,039 3,368 2,359 ————————————————————————- 12,152 11,132 46,927 44,351 ————————————————————————- Operating income before amortization 12,392 18,876 55,241 70,875 Amortization of property, plant and equipment 3,548 3,796 14,998 15,092 Amortization of intangible assets 1,592 2,119 7,068 8,196 ————————————————————————- Operating income 7,252 12,961 33,175 47,587 Financial expenses, net 1,720 1,706 6,778 6,815 Foreign exchange loss (gain) 1,217 1,254 4,072 (328) Change in fair value of derivative financial instruments (2) 22 (33) (114) Impairment of goodwill 13,997 – 13,997 – ————————————————————————- Earnings (Loss) before income taxes (9,680) 9,979 8,361 41,214 Income taxes (Recovery) (4,138) 2,609 44,054 7,248 ————————————————————————- Net earnings (Net loss) for the period (5,542) 7,370 (35,693) 33,966 ————————————————————————- ————————————————————————- Basic and diluted net earnings (net loss) per trust unit (in dollars) (0.09) 0.12 (0.60) 0.58 ————————————————————————- ————————————————————————- Weighted average number of trust units outstanding 59,067,992 59,067,992 59,067,992 59,067,992 ————————————————————————- ————————————————————————- Consolidated Statements of Deficit (in thousands of dollars) (unaudited) For the Twelve-month periods ended December 31, 2007 2006 ———————————————————————— Deficit – beginning of period (82,128) (62,933) Net earnings (Net loss) for the period (35,693) 33,966 Distributions to unitholders (53,161) (53,161) ———————————————————————— Deficit – end of period (170,982) (82,128) ———————————————————————— ———————————————————————— Consolidated Statements of Comprehensive Income (in thousands of dollars) (unaudited) For the For the quarters Twelve-month periods ended December 31, ended December 31, 2007 2006 2007 2006 ————————————————————————- Net Earnings (Net loss) for the period (5,542) 7,370 (35,693) 33,966 Other comprehensive income : Translation adjustments Unrealized foreign exchange gains (losses) on translation of the financial statements of self-sustaining foreign operations (575) 5,506 (17,445) (164) Reclassification of accumulated foreign exchange losses on translation of financial statements of self-sustaining foreign operations following a reduction in net investment 1,938 1,481 6,858 1,648 Future income taxes on unrealized foreign exchange gain (49) 14 (1,019) 14 Hedging of net investment in self-sustaining foreign operations Change in fair value of derivatives designated as hedges of net investment in self-sustaining foreign operations (42) (921) 2,165 132 Hedging items realized and recognized in net earnings (585) (379) (2,141) (1,839) ————————————————————————- 687 5,701 (11,582) (209) ————————————————————————- Comprehensive income for the period (4,855) 13,071 (47,275) 33,757 ————————————————————————- ————————————————————————- Boralex Power Income Fund Consolidated Statements of Cash Flows (in thousands of dollars) (unaudited) For the For the quarters Twelve-month periods ended December 31, ended December 31, 2007 2006 2007 2006 ————————————————————————- Operating activities Net earnings (Net loss) for the period (5,542) 7,370 (35,693) 33,966 Items not affecting cash: Amortization of property, plant and equipment 3,548 3,796 14,998 15,092 Amortization of intangible assets 1,592 2,119 7,068 8,196 Amortization of deferred financing costs 3 109 320 432 Long-term lease accruals 94 114 425 461 Future income taxes (5,010) 141 42,127 407 Realized currency translation adjustments 1,938 1,481 6,858 1,648 Impairment of goodwill 13,997 – 13,997 – Other (2) 384 184 248 ————————————————————————- 10,618 15,514 50,284 60,450 Net change in non-cash working capital balances (1,197) (3,781) (4,018) (2,832) ————————————————————————- Cash flows related to operating activities 9,421 11,733 46,266 57,618 ————————————————————————- Investing activities Additions to property, plant and equipment (1,246) (477) (3,710) (2,341) Acquisition of other assets (6) (283) (205) (782) Other (14) (18) (86) (5) ————————————————————————- Cash flows related to investing activities (1,266) (778) (4,001) (3,128) ————————————————————————- Financing activities Distributions paid to unitholders (13,290) (13,290) (53,161) (53,161) Net change in short-term revolving credit facility 1,000 3,100 (800) (400) Repayment of capital lease obligation (57) – (235) – Proceeds from sale of options on foreign exchange forward contracts 101 102 555 561 ————————————————————————- Cash flows related to financing activities (12,246) (10,088) (53,641) (53,000) ————————————————————————- Translation adjustments on cash and cash equivalents 50 1,332 (3,761) 311 ————————————————————————- Net change in cash and cash equivalents during the period (4,041) 2,199 (15,137) 1,801 Cash and cash equivalents – beginning of period 14,781 23,678 25,877 24,076 ————————————————————————- Cash and cash equivalents – end of the period 10,740 25,877 10,740 25,877 ————————————————————————- ————————————————————————- Supplementary information Interest paid 1,149 1,384 7,508 7,637 Income taxes paid 125 630 4,518 7,359 ————————————————————————- ————————————————————————- Boralex Power Income Fund Segmented Information (tabular amounts are in thousands of dollars, unless otherwise specified) (unaudited, unless otherwise specified)
The Fund’s power stations are grouped into three distinct segments: hydroelectric power, wood-residue thermal power and natural gas thermal power, and are engaged mainly in power generation. The classification of these segments is based on the different cost structures relating to each type of power station. The Fund allocates its revenues by geographical region based on the point of delivery of the power.
The Fund analyzes the performance of its operating segments based on their EBITDA, which is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is not a measure of performance defined under Canadian generally accepted accounting principles; however, management uses this performance measure to assess the operating performance of its reportable segments. Results for each segment are presented on the same basis as those of the Fund. In the consolidated statement of earnings, EBITDA is represented by Operating income before amortization.
The following table reconciles EBITDA with net earnings or net loss: For the For the quarters Twelve-month periods ended December 31, ended December 31, 2007 2006 2007 2006 ————————————————————————- Net earnings (Net loss) (5,542) 7,370 (35,693) 33,966 Income taxes (Recovery) (4,138) 2,609 44,054 7,248 Impairment of goodwill 13,997 – 13,997 – Change in fair value of derivative financial instruments (2) 22 (33) (114) Foreign exchange loss (gain) 1,217 1,254 4,072 (328) Financial expenses, net 1,720 1,706 6,778 6,815 Amortization of intangible assets 1,592 2,119 7,068 8,196 Amortization of property, plant and equipment 3,548 3,796 14,998 15,092 ————————————————————————- EBITDA 12,392 18,876 55,241 70,875 ————————————————————————- ————————————————————————- Information by operating segment For the For the quarters Twelve-month periods ended December 31, ended December 31, 2007 2006 2007 2006 ————————————————————————- PRODUCTION (in MWh) Hydroelectric power stations 107,801 163,130 457,939 598,240 Wood-residue thermal power stations 82,444 90,265 366,072 374,879 Natural gas power station 53,092 53,538 200,015 204,849 ————————————————————————- 243,337 306,933 1,024,026 1,177,968 ————————————————————————- ————————————————————————- REVENUES Hydroelectric power stations 8,984 14,856 40,521 54,570 Wood-residue thermal power stations 8,459 9,003 35,747 35,688 Natural gas power station 7,101 6,149 25,900 24,968 ————————————————————————- 24,544 30,008 102,168 115,226 ————————————————————————- ————————————————————————- EBITDA Hydroelectric power stations 7,580 13,100 33,925 48,050 Wood-residue thermal power stations 2,865 5,219 16,512 18,018 Natural gas power station 3,459 2,968 12,524 12,107 Corporate and eliminations (1,512) (2,411) (7,720) (7,300) ————————————————————————- 12,392 18,876 55,241 70,875 ————————————————————————- ————————————————————————- ADDITIONS TO PROPERTY, PLANT AND EQUIPMENT Hydroelectric power stations 268 266 621 654 Wood-residue thermal power stations 840 121 1,169 722 Natural gas power station 138 90 1,920 965 ————————————————————————- 1,246 477 3,710 2,341 ————————————————————————- ————————————————————————- Boralex Power Income Fund Segmented Information (continued) (tabular amounts are in thousands of dollars, unless otherwise specified) (unaudited, unless otherwise specified) As at As at Decem- Decem- ber 31, ber 31, 2007 2006 ————————————————————————- (audited) ASSETS Hydroelectric power stations 262,881 315,631 Wood-residue thermal power stations 190,541 195,970 Natural gas power station 47,003 62,878 Corporate and eliminations 5,251 8,964 ————————————————————————- 505,676 583,443 ————————————————————————- ————————————————————————-
BORALEX POWER INCOME FUND
CONTACT: Ms. Mylene Masse, Director, Communications, Boralex Power Inc,(514) 985-1353, mylene.masse@boralex.com