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Algonquin Power Income Fund Strengthens Utility Division Through a Strategic Partnership with Emera Inc.

Posted on: Thursday, 23 April 2009, 06:00 CDT

OAKVILLE, ON, April 23 /PRNewswire-FirstCall/ - Algonquin Power Income Fund ("Algonquin Power") (TSX: APF.UN) today announced that it plans to co-acquire an electrical generation and regulated distribution utility through a strategic partnership with Emera Inc. ("Emera") (TSX:EMA). Algonquin Power and Emera will each own 50% of the newly formed California Pacific Electric Company ("Calpeco"), which intends to acquire the California-based electricity distribution and related generation assets (the "California Utility") of NV Energy, Inc. (NYSE: NVE) for the purchase price of approximately US $116 million, subject to certain working capital and other closing adjustments.

Algonquin Power and Emera will jointly own and operate the California Utility through Calpeco, leveraging Algonquin Power's utility and power generating capabilities and Emera's proven electrical utility operational expertise. The California Utility currently provides electric distribution service to approximately 47,000 customers in the Lake Tahoe region, and owns a newly re-powered 12 MW generation plant. Calpeco intends to make employment offers to all current operation and customer service employees for the California Utility. Ownership of the California Utility is anticipated to provide Algonquin Power and Emera the opportunity for future investment in both regulated utility assets and development of renewable power generation because the California Utility is located in one of the United States' most popular and affluent tourism destinations and will benefit from the growing California renewable portfolio standards.

Closing of the transaction is subject to usual closing conditions, and state and federal regulatory approval, and is expected to occur in mid 2010. Following the closing of the transaction, Algonquin Power will proportionally consolidate Calpeco into its financial statements. Algonquin Power's share of Calpeco's operations is expected to add approximately US$15 million of revenue and US$10 million of EBITDA based on current rate case filings before the regulator.

Through Calpeco, Algonquin Power and Emera will jointly seek debt financing for approximately half of the purchase price of the California Utility, with the balance being satisfied through equal equity contributions from each of Algonquin Power and Emera. As an element of the California Utility strategic partnership, Emera has also agreed to a treasury subscription of approximately 8.5 million trust units of Algonquin Power at a price of $3.25 per unit, which is expected to represent 9.9% of the outstanding units after the subscription. Funding under the private placement is planned to occur simultaneously with the acquisition of the California Utility and Algonquin Power intends to use the proceeds received to largely fund Algonquin Power's equity commitment for the acquisition of the California Utility of approximately USD $27 million.

"The acquisition represents an important element in the strengthening of Algonquin Power's low-risk utility infrastructure portfolio, and the highly predictable, long-term regulated returns from these assets will contribute to the stability of our earnings for years to come", commented Ian Robertson, Executive Director of the manager of Algonquin Power. "The unique transaction structure allows Algonquin Power to complete the acquisition of the California Utility assets at an attractive valuation while preserving the ability to use internally generated cash flows to strengthen its liquidity position."

"The partnership with Algonquin Power positions Emera to increase our holdings of renewable energy in North America and introduces us to a new market" said Chris Huskilson, President and CEO, Emera Inc. "It also allows us to increase value of jointly-owned energy infrastructure assets with Algonquin Power. We look forward to working with Algonquin to build on our portfolio in the utilities and renewable energy sectors."

Terms of the private placement with Emera include customary anti-dilution rights for Emera, requirements on voting, and a standstill agreement under which Emera agrees to not increase its 9.9% holding in Algonquin Power to more than 15% for two years following the anticipated California Utility closing.

Robertson continued, "to further support our strategy and corporate governance activities, we are also very pleased to announce that Chris Huskilson, President and CEO, Emera Inc., will be invited by the Chairman of the Trustees, Ken Moore, to join the Board of Trustees of Algonquin Power."

A summary fact sheet on the assets being acquired can be found on Algonquin Power's web site at www.algonquinpower.com.

Algonquin Power will hold a conference call on this matter at 10:00 a.m. eastern time today, Thursday, April 23, 2009, hosted by executive directors of the manager Ian Robertson, Dave Kerr, Chris Jarratt, and Chief Financial Officer David Bronicheski.

Conference call details are as follows: Date: Thursday, April 23, 2009 Start Time: 10:00 a.m. eastern Phone Number: Toll free within North America: 1-800-587-1893 or local 416-644-3424. Conference ID #: 21304685

For those unable to attend the live call, a digital recording will be available for replay two hours after the call by dialing 1-877-289-8525 or 416-640-1917 access code 21304685 followed by the number sign from April 23, 2009 until April 30, 2009.

About Algonquin Power

Algonquin Power owns and operates a diverse portfolio of approximately $1 billion of clean, renewable power generation and sustainable utility infrastructure assets across North America. Algonquin Power's generation portfolio includes 42 renewable energy facilities and 11 thermal energy facilities representing more than 400MW of installed capacity and Algonquin Power provides regulated utility services to more than 70,000 customers through its portfolio of 18 water distribution and wastewater treatment utility companies. Algonquin Power's trust units and convertible debentures are traded on the Toronto Stock Exchange under the symbols APF.UN, APF.DB & APF.DB.A. Visit Algonquin Power on the web at www.AlgonquinPower.com.

Caution Regarding Forward Looking Information

Any information contained in this News Release that relates to future events or expected financial position or that otherwise speaks to the future should be considered forward looking information. The information was developed based on specific and general factors and assumptions. Specific factors and assumptions relate to the electric utility business and the regulatory climate in California. These include assumptions that the rate base of the California Utility will remain substantially constant, and that the California regulator will provide rates of return, processes and timelines consistent with recent rates, processes and timelines. Specific risks exist that the California regulator could act in a manner inconsistent with or more onerous than past rate cases. The general factors and assumptions relate to the performance of Algonquin Power's assets and business, interest and exchange rates, commodity market prices, and the financial and regulatory climate in which it operates. They include assumptions as to Algonquin Power's own base case profitability and its continued access to debt and equity. Risks exist that Algonquin Power's business may be less profitable than expected and it may not have access to the capital and debt that it expects, and risks are present in the continued volatility of world financial markets, the impact of movements in exchange rates and interest rates, the effects of changes in environmental and other laws and regulatory policy, decisions taken by regulators on monetary policy and the taxation of income funds, and the state of the Canadian and the US economy and accompanying business climate. Risk factors may affect the actual results and the assumptions made may prove to not be accurate, and accordingly Algonquin Power cautions that actual results may vary from the forward looking information. Algonquin Power updates forward looking information as required by law.

SOURCE Algonquin Power Income Fund

Source: PR Newswire

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