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China Hydroelectric Corporation Announces Fiscal 2009 and First Quarter 2010 Results

May 12, 2010

NEW YORK, May 12 /PRNewswire-Asia-FirstCall/ — China Hydroelectric
Corporation (NYSE: CHC, CHCWS) (“China Hydroelectric” or “the Company”), an
owner and operator of small hydroelectric power projects in the People’s
Republic of China
(“PRC”), today announced its financial results for the
fiscal year ended December 31, 2009 and for the first quarter ended March 31,
2010
.

The Company completed a number of acquisitions of operating hydroelectric
power projects and commissioned certain additional hydroelectric power
projects during the year ended December 31, 2008 and 2009. Comparability of
the Company’s results of operations from one period to another and its
financial condition as at the end of two comparable periods may be difficult
due to the impact of those newly acquired or commissioned hydroelectric power
projects.

    Fiscal Year 2009 Financial and Operating Highlights
    -- Aggregate installed capacity increased by 39% to 376.6 megawatts ("MW")
       in 2009 compared to 271.0 MW in 2008, primarily due to the completion
       of construction of the Zhougongyuan I, II and III hydroelectric power
       projects (53.6 MW) in April 2009, the acquisition of the Ruiyang
       hydroelectric power project (32.0 MW) in August 2009, and the
       completion of construction of the Binglangjiang II hydroelectric power
       project (20.0 MW) in September 2009.
    -- Total revenues increased by 146% to $36.2 million in 2009, compared to
       $14.7 million in 2008.
    -- Gross profit increased by 118% to $19.0 million in 2009 compared to
       $8.7 million in 2008.
    -- Operating income increased by 421% to $9.9 million in 2009, compared to
       $1.9 million in 2008.
    -- Adjusted EBITDA (non GAAP), defined in this announcement as earnings
       before interest, taxes, depreciation and amortization and excluding
       certain non-cash charges, including exchange loss, change in fair value
       of derivative financial liabilities and warrant liability, increased by
       242% to $22.2 million in 2009, compared to $6.5 million in 2008.
    -- Net loss attributable to ordinary and preferred shareholders was $19.4
       million, compared to $4.0 million net loss in 2008. The 2009 net loss
       includes a loss of $13.8 million due to the change in fair value of
       derivative financial liabilities and warrant liability.

    First Quarter 2010 Financial and Operating Highlights
    -- Aggregate installed capacity increased to 376.6 MW in the first quarter
       of 2010 compared to 271.0 MW in the first quarter of 2009, primarily
       due to the completion of the Zhougongyuan and Binglangjiang II projects
       and the acquisition of the Ruiyang project.
    -- Total revenues increased by 243% to $15.8 million in the first quarter
       of 2010 compared to $4.6 million in the first quarter of 2009.
    -- Gross profit increased by 483% to $10.5 million in the first quarter of
       2010 compared to $1.8 million in the first quarter of 2009.
    -- Adjusted EBITDA, as defined above, increased by 339% to $10.1 million
       in the first quarter of 2010 compared to $2.3 million in the first
       quarter of 2009.
    -- Operating income was $6.3 million in the first quarter of 2010,
       compared to $67,000 in the first quarter of 2009.
    -- Net income attributable to ordinary and preferred shareholders, was
       $2.4 million in the first quarter of 2010, compared to a $2.2 million
       net loss in the first quarter of 2009.

Mr. John D. Kuhns, Chief Executive Officer and Chairman of the Board of
Directors of China Hydroelectric, said, “2009 was an important year for the
Company, with significant asset, revenues and personnel growth and prudent
cost management providing the platform for our initial public offering in
January 2010.

The first quarter of 2010 saw extraordinary rainfall in most of our
catchment areas, producing excellent runoff and a high level of reservoir
storage at many of our projects. This bodes well for our operations for future
quarters. During the balance of 2010, based on anticipated good financial
performance from abundant water, as well as the proceeds from the Company’s
IPO and the loan framework arrangement we have entered with the Bank of
China’s Fujian Branch, we expect to continue to expand our portfolio of
operating projects, and to also study the acquisition of other projects which
are either under construction or in development[0].”

Fiscal Year 2009 Results

Total Revenues

Total revenues net of value added taxes for the year ended December 31
2009 were $36.2 million, an increase of 146%, or $21.5 million, compared to
$14.7 million for the year ended December 31, 2008. The Company sold 798.9
million kilowatt hours (“kWh”) of electricity in 2009, an increase of 139%
from 334.0 million kWh in 2008. The revenue increase was primarily due to a
full year revenue contribution from the Banzhu (45.0 MW), Wangkeng (40.0 MW),
Yuanping (16.0 MW) and Yuheng (30.0 MW) hydroelectric power projects we
acquired in October 2008. The revenue increase also resulted from the
commencement of production at the Zhonggongyuan I, II and III (53.6 MW)
hydroelectric power projects in April 2009, Binglangjiang II (20.0 MW) power
plant in September 2009, and the acquisition of the Ruiyang project (32.0 MW)
in August 2009. Beginning in August 2009, the remaining 50% of Shapulong (25.0
MW) was acquired and consolidated. Prior to full consolidation, Shapulong was
accounted for under the equity method. The total revenue increase was
partially offset by the lower revenues from the hydroelectric power projects
in Zhejiang and Fujian provinces due to the lower than average precipitation
in 2009 and lower revenues from the Liyuan hydroelectric power project which
underwent repairs during the first half of 2009.

The effective tariff calculated by dividing revenues, before Value Added
Tax, or VAT, in RMB, (Renminbi), the functional currency of the hydroelectric
power projects, by the amount of electricity sold, was RMB 0.34 per kWh in
2009. This was an increase of 3% compared to RMB 0.33 per kWh in 2008. The
increase was mainly due to increased revenue contribution in 2009 from the
Company’s Zhejiang and Fujian projects which have higher tariff than the
Company’s existing projects in Yunnan and Sichuan provinces.

The effective utilization rate, calculated as the quantity of electricity
actually sold divided by theoretical quantities of electricity which could be
generated from the Company’s hydroelectric power projects, was 31% in 2009,
compared to 29% in 2008.

Cost of Revenues

Cost of revenues, which includes the operating costs at the hydroelectric
power projects, was $17.2 million in 2009, an increase of 187% or $11.2
million
from $6.0 million in 2008. The increase in cost of revenues was
primarily due to the increased number of operating hydroelectric power
projects the Company operated during 2009 as a result of the completion of the
Zhougongyuan, Binglangjiang II as well as the acquisition of the Ruiyang
project.

As a percentage of revenues, the cost of revenues was 48% in 2009,
compared to 41% in 2008. This increase of cost of revenues as a percentage of
revenues in 2009 was primarily attributable to the ramp-up costs at the
Company’s newly commissioned Zhougongyuan and Binglangjiang II projects as
well as lower revenue contribution from the Zhejiang and Fujian projects due
to lower than average rainfall in those regions during 2009. Additionally, the
increase was attributable to the lower revenues generated from the Liyuan
project which underwent repairs in the first half of 2009.

Gross Profit and Margin

Gross profit in 2009 was $19.0 million, an increase of $10.3 million or
118% from $8.7 million in 2008. The increase in the gross profit was primarily
due to the revenue contribution from new acquisitions and newly completed
projects. Gross margin for 2009 was 52%, compared to 59% in 2008. The slight
decrease in the gross margin was primarily caused by the ramp-up costs at the
Company’s newly commissioned Zhougongyuan and Binglangjiang II projects as
well as lower revenue contribution from the Zhejiang and Fujian projects due
to lower than average rainfall in those regions during 2009.

In addition, the decrease was partly attributable to the lower revenues
generated from the Liyuan project which underwent repairs in the first half of
2009.

General and Administrative Expenses

The Company’s operating expenses consist of general and administrative
expenses at the Company’s corporate as well as regional offices. The Company’s
general and administrative expenses were $9.1 million in 2009, an increase of
34%, or $2.3 million, from $6.8 million in 2008, primarily due to an increase
in the number of the Company’s employees as a result of the acquisition and
the resulting increase of the cost of employee salaries and benefits, an
increase in the employee stock option expenses and an increase in acquisition
related expenses.

As a percentage of revenues, general and administrative expenses in 2009
decreased to 25%, from 46% in 2008, primarily due to the increase in revenues
resulting from the acquisition of the new projects and the completion of the
under-construction projects in 2009.

Operating Income and Margin

Operating income was $9.9 million in 2009, compared to $1.9 million in
2008, primarily due to the increase in revenues as a result of the revenue
contribution from the acquisitions as well as the newly commissioned projects
in 2009 partly offset by higher cost of revenues and operating expenses as
aforementioned. As a result, operating margin increased to 27% in 2009, from
13% in 2008.

EBITDA and EBITDA Margin

Adjusted EBITDA, as defined above, was $22.2 million in 2009, an increase
of 242% over $6.5 million in 2008. Adjusted EBITDA margin, calculated by
dividing Adjusted EBITDA by the revenues, increased to 61% in 2009 from 44% in
2008. The increase in Adjusted EBITDA and the Adjusted EBITDA margin were the
results of the revenue contribution from the acquisitions and newly
commissioned projects in 2009, partly offset by higher cost of revenues and
operating expenses in 2009.

Interest Expense

Interest expense was $14.2 million in 2009, compared to $5.8 million in
2008, resulting from additional bank loans obtained in 2009 to support the
Company’s operations and acquisitions and bank loans assumed by the Company in
its 2008 and 2009 acquisitions.

Foreign Currency Exchange Loss

Foreign currency exchange loss was $23,000 in 2009, compared to $1.1
million
in 2008. The change was due to few U.S. dollar denominated deposits in
China in 2009, while there was a substantial number of deposits of dollars in
China in 2008, in which period, RMB appreciated by 6% relative to the U.S.
dollar, the Company’s reporting currency.

Loss From Change in Fair Value of Derivative Financial Liabilities and
Warrant Liability

Loss from change in the fair value of derivative financial liabilities and
warrant liability was $13.8 million in 2009, compared to the gain of $0.4
million
in 2008. The change was related to a change in fair value related to
the warrants issued to Morgan Joseph & Co. in January 2008 in connection with
the issuance by the Company of $150.0 million of Series A convertible
preferred shares. This change was due to the significant difference of the
underlying common share price as of December 31, 2009, when the Company’s
initial public offering was imminent, from that as of December 31, 2008, based
on the evaluation of American Appraisal China Limited.

Income Tax Expense

Income tax expense was $1.5 million in 2009, compared to $0.4 million for
2008, primarily due to an increase of the deferred tax expenses.

Net Loss

As a result of the factors discussed above, net loss attributable to
ordinary and preferred shareholders was $19.4 million in 2009, compared to
$4.0 million in 2008. The net loss of $19.4 million in 2009 included the loss
of $13.8 million related to the change of fair value of the warrants issued to

Morgan Joseph & Co. in January 2008 as described above. Loss attributable to
ordinary shareholders was $55.9 million in 2009, as a result of the accrued
dividends of $34.6 million and the change in redemption value of $1.9 million
related to the Company’s convertible redeemable preferred shares. Loss
attributable to ordinary shareholders was $38.9 million in 2008, due to the
accrued dividends of $20.2 million and change in redemption value of $14.7
million
of the Company’s convertible redeemable preferred shares.

The basic and diluted loss per ordinary share, which was calculated based
on the loss attributable to the ordinary shareholders, was $3.59 in 2009,
compared to $2.50 in 2008. The number of weighted average shares outstanding
used in the calculation was 15.5 million in 2009, compared to 15.6 million in
2008. Pro forma basic and diluted net loss per share was $0.16 in 2009 and $
0.07
in 2008, assuming that the conversion of convertible and redeemable
preferred shares occurred on January 1, 2009 and 2008 respectively based on
the existing terms of the convertible redeemable preferred shares as of
December 31, 2009 and December 31, 2008 respectively. Shares used in the pro
forma basic and fully diluted net loss were 122.4 million shares in 2009 and
55.4 million shares in 2008.

Balance Sheets

Cash and cash equivalents were $31.6 million as of December 31, 2009,
compared to $38.7 million as of December 31, 2008.

Net property, plant and equipment totaled $423.2 million as of December 31,
2009
, compared to $365.2 million as of December 31, 2008.

Long term bank borrowings were $229.3 million as of December 31, 2009, an
increase of $62.1 million, from $167.2 million as of December 31, 2008,
primarily due to the new loans obtained by the projects in Zhejiang province
as well as the assumption of bank loans held by companies acquired by the
Company in 2009. The short term borrowings decreased by $1.7 million to $7.1
million
as of December 31, 2009, from $8.8 million as of December 31, 2008,
mainly due to the repayment of the short term loans by the hydroelectric power
projects in Fujian province.

The First Quarter of 2010 Results

Total Revenues

Total revenues net of value added taxes for the quarter ended March 31
2010 were $15.8 million, an increase of 243%, or $11.2 million, compared to
$4.6 million for the comparable period in 2009. The Company sold 315.5 million
kWh of electricity in the first quarter of 2010, an increase of 210% from
101.8 million kWh in the comparable period in 2009.The increase in revenues
was primarily attributable to the significant increase in electricity sold by
certain of the Company’s existing projects as a result of higher than average
rainfall in Zhejiang and Fujian provinces during a normally low water season
during the first quarter of 2010 which generally represents a low water season
for the Company. The actual precipitation was 120% and 100% of the long term
average precipitation in Zhejiang and Fujian province respectively in the
first quarter of 2010, compared to that of 100% and 50% respectively in the
first quarter of 2009.

The effective tariff in the first quarter of 2010 was RMB0.37 per kWh, an
increase of 9%, compared to RMB 0.34 per kWh in the first quarter of 2009. The
increase mainly resulted from higher revenue contribution of the Company’s
Zhejiang and Fujian projects which have higher tariffs than the Company’s
Sichuan and Yunnan projects.

The average effective utilization rate was 39% in the first quarter of
2010, compared to 20% in the first quarter of 2009. The higher utilization was
due to the above average precipitation in Zhejiang and Fujian provinces where
our hydroelectric power projects generate over 90% of the electricity sold of
the Company.

Cost of Revenues

Cost of revenues in the first quarter of 2010 was $5.3 million, an
increase of 89%, or $2.5 million from $2.8 million in the first quarter of
2009. The increase in the cost of revenues was mainly due to the increased
number of projects the Company operated during the first quarter of 2010 as
compared to the comparable period in 2009.

As a percentage of revenues, the cost of revenues was 34% in the first
quarter of 2010, compared to 61% in the first quarter of 2009. The decrease of
the cost of revenues as percentage of revenues was because the percentage
increase in revenue was much higher than the percentage increase in cost of
revenues.

Gross Profit and Margin

Gross profit in the first quarter of 2010 was $10.5 million, an increase
of $8.7 million from $1.8 million in the comparable period in 2009 due to the
higher revenues from the Company’s existing operating projects and revenue
contribution from the completed projects in 2009. Gross margin for the first
quarter of 2010 was 66%, compared to 39% for the comparable period in 2009.
The increase in gross margin was primarily attributable to high gross margin
for the existing projects in Yunnan, Fujian and Zhejiang provinces during the
first quarter of 2010.

General and Administrative Expenses

General and administrative expenses for the first quarter 2010 were $4.3
million
, an increase of 153%, or $2.6 million, from $1.7 million in the first
quarter of 2009, primarily due to the increase in the cost of employee
salaries and benefits, the increase in employee stock option expenses and the
increase in the professional fees.

As a percentage of revenues, general and administrative expenses in the
first quarter of 2010 were 27%, a decrease of 10% from that of 37% in the
comparable period in 2009.

Operating Income and Margin

Due to the foregoing factors, operating income in the first quarter of
2010 was $6.3 million, compared to $67,000 in the comparable period in 2009.
Operating margin was 40%, compared to 1% in the first quarter of 2009,
primarily due to the higher profit margin contribution from the existing
projects in Zhejiang and Fujian provinces, and the contribution from the
acquired projects in 2009, partly offset by the lower profit margin of the
projects in Sichuan and Yunnan provinces.

Adjusted EBITDA and EBITDA Margin

Adjusted EBITDA, as defined above, was $10.1 million, an increase of 339%
over $2.3 million in 2009. Adjusted EBITDA margin increased to 64% in the
first quarter of 2010 from 50% during the comparable period in 2009.

Interest Expense

Interest expense for the first quarter of 2010 was $3.7 million, compared
to $2.7 million in the comparable period in 2009, due to additional bank loans
obtained in 2009 to support the Company’s operations and acquisitions and bank
loans assumed by the Company in connection with its acquisitions.

Foreign Currency Exchange Loss

Foreign currency exchange loss was $10,000 for the first quarter of 2010,
compared to $4,000 for the comparable period in 2009.

Loss From Change in Fair Value of Derivative Financial Liabilities and
Warrant Liability

Gain from change in the fair value of derivative financial liabilities and
warrant liability was $0.4 million in the first quarter of 2010, compared to
the loss of $0.2 million in the comparable period in 2009. The change was
related to the fair value fluctuation of the warrants issued to Morgan Joseph & Co. in January 2008, exercisable for the purchase of the Series A
convertible redeemable preferred shares.

Income Tax Expense (Benefit)

Income tax expense was $1.1 million in the first quarter of 2010, compared
to the income tax benefit of $0.4 million for the comparable period in 2009.

Net Income (Loss)

As a result of the factors discussed above, net income attributable to
ordinary and preferred shareholders, was $2.4 million in the first quarter of
2010, compared to $2.2 million of net loss in the comparable period in 2009.
As the results of accrued dividends of $3.6 million for preferred shares in
January, and the beneficiary conversion features of $12.3 million, whose fair
value was recognized due to the Company’s initial public offering in January
of 2010 during which all of the Company’s convertible preferred shares were
converted into the Company’s ordinary shares at the respective discount to the
IPO price, net loss attributable to ordinary shareholders was $13.5 million,
compared to net loss of 9.6 million for the comparable period in 2009.

As a result, basic and diluted net loss per ordinary share was $0.12 for
the first quarter of 2010, compared to $0.62 for the comparable period of 2009.
Weighted average shares used in the earning per share calculation were 112.6
million shares for first quarter of 2010 and 15.5 million shares for the first
quarter of 2009.

Basic and diluted loss per ADS, each of which represents three ordinary
shares, was $0.36 for the first quarter of 2010.

Pro forma basic and fully diluted income per ordinary share were $0.02 and
$0.01 respectively for the first quarter in 2010, as compared to basic and
diluted loss per share of $ 0.04 in the comparable period in 2009. The number
of ordinary shares used in the pro forma basic and diluted calculation for the
first quarter 2010 was 153.3 million and 210.4 million respectively, assuming
that as of January 1, 2010, all the convertible redeemable preferred shares
had converted into ordinary shares based on the existing terms of the
convertible redeemable preferred shares as of January 28, 2010, the initial
public offering had occurred on January 1, 2010, and the warrants and options
converted to ordinary shares on January 1, 2010 based on the conversion price
stated in their agreements. The number of ordinary shares used in the pro
forma calculation of for the first quarter 2009 was 58.3 million, assuming the
conversion of convertible redeemable preferred shares to ordinary shares had
occurred on January 1, 2009, based on the existing terms of the convertible
redeemable preferred shares as of March 31, 2009.

Pro forma basic and fully diluted earnings per ADS for the first quarter
of 2010 were $0.05 and $0.03 respectively. Basic and fully diluted ADS used in
the calculation were 51.1 million and 70.1 million respectively, based on the
conversion of three ordinary shares to one ADS.

Balance Sheets

Cash and cash equivalents were $120.6 million as of March 31, 2010,
compared to $31.6 million as of December 31, 2009. The increase in cash
balance was mainly due to the Company’s cash proceeds from the Company’s IPO
in January 2010.

Net property, plant and equipment was $429.0 million as of March 31, 2010,
compared to $423.2 million as of December 31, 2009.

Long term bank borrowings were $ 227.7 million as of March 31, 2010, a
decrease of $1.6 million, compared to $229.3 million as of December 31, 2009,
mainly due to the repayment of the long term loan in the Wuliting
hydroelectric power project. The short term borrowings increased by $15.8
million to $22.9 million
as of March 31, 2010, from $7.1 million as of
December 31, 2009, mainly resulting from the short term loan borrowing by the
hydroelectric power projects in Fujian province.

Business Outlook for Full Year 2010

Regarding ongoing operations, based on high year-to-date precipitation,
ample reservoir levels and excellent facility availability, we expect during
2010 to generate electricity from the Company’s existing operating
hydroelectric projects at the high range of their potential, a level
considerably above long term annual average.

Regarding incremental acquisition, construction and development activity,
assuming we close on the Company’s previously announced project acquisitions,
the Company’s total installed generating capacity is expected to increase from
397 MW to 610 MW. During the remainder of 2010, we intend to add incremental
capacity in all modes–operating, under construction and in development–
subject to the availability of debt and equity capital.

Currency Conversion

Solely for the convenience of readers, certain Renminbi amounts have been
translated into U.S. dollar amounts at the rate of RMB 6.8282 to US $1.00, the
Bank of China Middle Rate as of December 31, 2009 and RMB 6.8263 to US $1.00,
the Bank of China Middle rate of March 31, 2009. No representation is intended
to imply that the Renminbi amounts could have been, or could be, converted,
realized or settled into U.S. dollar amounts at such rate, or at any other
rate.

Conference Call

China Hydroelectric will host a conference call at 5:00 am (Pacific) /8:00
am
(Eastern) / 8:00 pm (Beijing/Hong Kong) on Thursday, May 13, 2010 to
discuss its fiscal 2009 and first quarter 2010 financial results and recent
business activities. To access the live teleconference, please dial (US)

+1-877-941-4778 or International + 1-480-629-9763, and enter pass code
4298678.

A replay of the conference call will be available from 11:00 am (Eastern)
on May 13, 2010 to 11:59pm (Eastern) on May 27, 2010, by dialing
(US)+1-800-406-7325 or (International) +1-303-590-3030 and entering the pass
code 4298678.

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. Led by an international management
team, the Company’s primary business is to identify, evaluate, acquire,
develop, construct and finance hydroelectric power projects in China. China
produces approximately 22% of its total energy from hydroelectric energy. The
Company currently owns twelve operating hydroelectric power projects in China
with total installed capacity of 396.0 MW. These hydroelectric power projects
are located in four provinces: Zhejiang, Fujian, Yunnan and Sichuan.

Cautionary Note Regarding Forward-looking Statements

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 Prospectus dated
January 25, 2010 and filed with the Securities and Exchange Commission (the
“SEC”) 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

Notes to Unaudited Financial Information

This release contains unaudited financial information which is subject to
year-end audit adjustments. Adjustments to the financial statements may be
identified when the audit work is completed, which could result in significant
differences between the Company’s audited financial statements and this
unaudited financial information.

About non GAAP Financial Measures

To supplement China Hydroelectric consolidated financial results presented
in accordance with GAAP, China Hydroelectric uses Adjusted EBITDA and Adjusted
EBITDA Margin defined as non-GAAP financial measures by the SEC. 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 table captioned “Adjusted EBITDA
and Adjusted EBITDA Margin Measures” below. Non-GAAP financial measures also
include pro forma basic and fully diluted net earnings (loss) attributable to
ordinary shareholders per share and ADS, respectively for the first quarter of
2010. For more information on these non-GAAP financial measures, please see
Note 1 and Note 2 of the unaudited condensed consolidated statements of
operations for the quarter ended March 31, 2010.

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 the same consistent method as in the
registration statement for its initial public offering and the prospectus
included therein. We believe these non-GAAP financial measures are useful to
investors in allowing for 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 to be for the
foreseeable future significant expenses in the Company’s results of operations.

    For further information, please contact:

    Company:

     Mary Fellows, EVP and Secretary
     China Hydroelectric Corporation
     Phone: +1-860-435-7000
     Email: mfellows@chinahydroelectric.com

    Investor Relations:

     Scott Powell
     HC International, Inc.
     Phone: +1-917-721-9480
     Email: scott.powell@hcinternational.net

    CHINA HYDROELECTRIC CORPORATION
    Condensed Consolidated Statements of Operations
    (In US$ 000's, except for share and per share data)

                                        For the Year Ended  For the Year Ended
                                         December 31, 2008   December 31, 2009
                                                   Audited          Unaudited
    Revenues                                        14,715             36,175
    Cost of revenues                                (6,025)           (17,183)
    Gross profit                                     8,690             18,992
    Operating expenses:
    General and administrative expenses             (6,761)            (9,099)
    Total operating expenses                        (6,761)            (9,099)
    Operating income                                 1,929              9,893
    Interest income                                  1,340                510
    Interest expenses                               (5,847)           (14,228)
    Change in fair value of derivative
     financial liabilities and warrant
     liability                                         420            (13,793)
    Exchange loss                                   (1,067)               (23)
    Share of losses in an equity investee             (503)               (70)
    Other income, net                                  144               (225)
    Loss before income tax expenses                 (3,584)           (17,936)
    Income tax expenses                               (444)            (1,492)
    Consolidated net loss                           (4,028)           (19,428)
    Less:
    Net loss attributable to
     noncontrolling interests                           41                 32
    Net loss attributable to China
     Hydroelectric Corporation
     shareholders                                   (3,987)           (19,396)
    Less:
    Cumulative dividends on Series A
     convertible redeemable preferred
     shares                                        (14,680)           (19,836)
    Cumulative dividends on Series B
     convertible redeemable preferred
     shares                                         (5,531)           (14,412)
    Cumulative dividends on Series C
     convertible redeemable preferred
     shares                                             --               (356)
    Changes in redemption value of Series
     A convertible redeemable preferred
     shares                                        (10,569)                --
    Changes in redemption value of Series
     B convertible redeemable preferred
     shares                                         (4,134)                --
    Changes in redemption value of Series
     C convertible redeemable preferred
     shares                                             --             (1,872)
    Loss attributable to ordinary
     shareholders                                  (38,901)           (55,872)
    Basic and diluted net loss
     attributable to ordinary
     shareholders per share                          (2.50)             (3.59)
    Weighted average ordinary shares used
     in basic and diluted net loss
     attributable to ordinary
     shareholders per share computation         15,554,416         15,541,666
    Pro forma basic and diluted net loss
     attributable to ordinary
     shareholders per share on an as
     converted basis                                 (0.07)             (0.16)
    Shares used in pro forma basic and
     diluted net loss attributable to
     ordinary shareholders per share
     computation (Note 1)                       55,415,130        122,427,137

    Note 1: On January 23, July 24, August 15, 2008, and October 27, 2009, the
            Company issued convertible redeemable preferred shares, which will
            be converted automatically into ordinary shares upon the
            completion of IPO. This calculation assumed that the conversion
            had occurred on January 1, 2008 and 2009 respectively, based on
            existing terms of the convertible redeemable preferred shares as
            of December 31, 2008 and December 31, 2009.

     CHINA HYDROELECTRIC CORPORATION
     Condensed Consolidated Balance Sheets
     (In US$ 000's)
                                         As of December 31,  As of December 31
                                                    2008              2009
                                                  Audited           Unaudited
    ASSETS
    Current Assets:
    Cash and cash equivalents                       38,693             31,618
    Accounts receivable (net of allowance
     for doubtful accounts of US$ nil as
     of December 31, 2008 and 2009)                  3,137              8,434
    Deferred tax assets                              1,166                489
    Amounts due from related parties                    13                 --
    Amounts due from an equity investee              4,534                 --
    Prepayments and other current assets             9,437              4,582
    Total current assets                            56,980             45,123

    Non-current Assets:
    Investment in an equity investee                 4,295                 --
    Deferred initial public offering
     costs                                           6,032             12,774
    Property, plant and equipment, net             365,190            423,200
    Intangible assets, net                           3,666              4,513
    Goodwill                                        96,533            107,824
    Deferred tax assets                                 --              1,231
    Other non-current assets                           872                399
    Total non-current assets                       476,588            549,941

    TOTAL ASSETS                                   533,568            595,064

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
    Accounts payable                                 6,259              1,305
    Short-term loans                                 8,781              7,098
    Current portion of long-term loans              29,037             56,809
    Warrant liability                                  540             14,333
    Amounts due to related parties                     242                242
    Amounts due to an equity investee                    2                 --
    Deferred tax liabilities                            --                  1
    Accrued expenses and other current
     liabilities                                    32,424             22,704
    Total current liabilities                       77,285            102,492

    Non-current Liabilities:
    Long-term loans                                138,133            172,469
    Deferred tax liabilities                        13,415             18,805
    Other non-current liabilities                      568                104
    Total non-current liabilities                  152,116            191,378

    Total liabilities                              229,401            293,870

    Convertible redeemable preferred
     shares
    Series A (par value US$0.001 per
     share; 2,500,000 shares authorized;
     152,193 shares issued and
     outstanding as of December 31, 2008
     and 2009)                                     164,705            184,541
    Series B (par value US$0.001 per
     share; 2,500,000 shares authorized;
     129,000 shares issued and
     outstanding as of December 31, 2008
     and 2009)                                     134,531            148,943
    Series C (par value US$0.001 per
     share; 1,000,000 shares authorized;
     nil and 20,000 shares issued and
     outstanding as of December 31, 2008
     and 2009)                                          --             20,356

    Shareholders' equity
    Ordinary shares (par value US$ 0.001
     per share, 130,000,000 shares
     authorized; 15,541,666 shares issued
     and outstanding as of December 31,
     2008 and 2009)                                     16                 16
    Additional paid-in capital                      38,241             36,251
    Accumulated other comprehensive
     income                                         10,819             11,065
    Accumulated deficit                            (44,895)          (100,767)

    Total China Hydroelectric Corporation
     Shareholders' equity (deficit)                  4,181            (53,435)

    Noncontrolling interests                           750                789

    Total shareholders' equity                       4,931            (52,646)

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                        533,568            595,064

    CHINA HYDROELECTRIC CORPORATION
    Adjusted EBITDA and Adjusted EBITDA Margin Measures

                                               For the year ended December 31,
                                              2008 Unaudited    2009 Unaudited

    Net loss                                        (3,987)           (19,396)
    Interest expenses, net                           4,507             13,695
    Other non cash charges, including
     exchange loss, change in fair value
     of derivative financial liabilities
     and warrant liability                             647             13,816
    Income tax expenses                                444              1,492
    Depreciation of property, plant and
     equipment                                       4,755             12,399
    Amortization of intangible assets                  108                182
    EBITDA, as adjusted                              6,474             22,188
    Revenue                                         14,715             36,175
    EBITDA Margin, as adjusted                         44%                61%

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 derivatives financial liabilities and warrant
liability. We believe that EBITDA is widely used by other companies in the
power industry and may be used by 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 Condensed Consolidated Statements of Operations
    (In US$ 000's, except for share and per share data)

                                             Quarter Ended      Quarter Ended
                                            March 31, 2009      March 31, 2010

    Revenues                                         4,593             15,821
    Cost of revenues                                (2,791)            (5,278)
    Gross profit                                     1,802             10,543
    Operating expenses:
    General and administrative expenses             (1,735)            (4,272)
    Total operating expenses                        (1,735)            (4,272)
    Operating income                                    67              6,271
    Interest income                                    219                483
    Interest expenses                               (2,720)            (3,674)
    Change in fair value of derivative
     financial liabilities and warrant
     liability                                        (179)               365
    Exchange loss                                       (4)               (10)
    Share of losses in an equity investee             (150)                --
    Other income, net                                    0                 18
    Loss before income tax expenses                 (2,767)             3,453
     Income tax benefits (expenses)                    427             (1,055)
    Consolidated net income (loss)                  (2,340)             2,398
    Less:
    Net (income) loss attributable to
     noncontrolling interests                           94                (43)
    Net income (loss) attributable to
     China Hydroelectric Corporation
     shareholders                                   (2,246)             2,355
    Less:
    Cumulative dividends on Series A
     convertible redeemable preferred
     shares                                         (4,012)            (1,989)
    Cumulative dividends on Series B
     convertible redeemable preferred
     shares                                         (3,329)            (1,412)
    Cumulative dividends on Series C
     convertible redeemable preferred
     shares                                             --               (162)
    Beneficial conversion feature on
     Series A convertible redeemable
     preferred shares                                   --             (6,990)
    Beneficial conversion feature on
     Series B convertible redeemable
     preferred shares                                   --             (5,040)
    Beneficial conversion feature on
     Series C convertible redeemable
     preferred shares                                   --               (222)
    Loss attributable to ordinary
     shareholders                                   (9,587)           (13,460)
    Basic and diluted net loss
     attributable to ordinary
     shareholders per share                          (0.62)             (0.12)
    Weighted average ordinary shares used
     in basic and diluted net loss
     attributable to ordinary
     shareholders per share computation         15,541,666        112,569,361
    Pro forma basic net earnings (loss)
     attributable to ordinary
     shareholders per share                          (0.04)              0.02
    Shares used in pro forma basic net
     earnings (loss) attributable to
     ordinary shareholders per share
     computation (Note 1)                       58,289,666        153,295,516
    Pro forma fully diluted net earnings
     (loss) attributable to ordinary
     shareholders per share                          (0.04)              0.01
    Shares used in Pro forma fully
     diluted net earnings attributable to
     ordinary shareholders per share
     computation (Note 2)                       58,289,666        210,440,081
    Pro forma basic net earnings
     attributable to ordinary
     shareholders per ADS                               N/A              0.05
    Shares used in Pro forma basic net
     earnings attributable to ordinary
     shareholders per ADS computation
     (Note 3)                                           N/A        51,098,505
    Pro forma fully diluted net earnings
     attributable to ordinary
     shareholders per ADS                               N/A              0.03
    Shares used in Pro forma fully
     diluted net earnings attributable to
     ordinary shareholders per ADS
     computation (Note 4)                               N/A        70,146,694

    Note 1: The shares for the first quarter of 2010 were calculated assuming
            that i) all the outstanding convertible redeemable preferred
            shares as of January 28, 2010 were converted into ordinary shares
            on January 1, 2010, based on the existing terms of the convertible
            redeemable preferred shares as of January 28, 2010; and ii) the
            initial public offering had occurred on January 1, 2010. The
            shares for the first quarter of 2009 were calculated assuming that
            all the outstanding convertible redeemable preferred shares were
            converted into ordinary shares on January 1, 2009 , based on the
            existing terms of the convertible redeemable preferred shares as
            of March 31, 2009.

    Note 2: The shares for the first quarter of 2010 were calculated assuming
            that i) all the outstanding convertible redeemable preferred
            shares as of January 28, 2010 were converted into ordinary shares
            on January 1, 2010, based on the existing terms of the convertible
            redeemable preferred shares as of January 28, 2010; ii) the
            initial public offering had occurred on January 1, 2010; and iii)
            all the warrants and options were converted to ordinary shares
            based on the existing conversion price stated in their respective
            agreements.  The shares for the first quarter of 2009 were
            calculated assuming that all the outstanding convertible
            redeemable preferred shares were converted into ordinary shares as
            of January 1, 2009, based on the existing terms of the convertible
            redeemable preferred shares as of March 31, 2009.

    Note 3: The number of ADS was calculated as 153,295,516 divided by 3.

    Note 4: The number of ADS was calculated as 210,440,081 divided by 3.

    CHINA HYDROELECTRIC CORPORATION
     Unaudited Condensed Consolidated Balance Sheets
     (In US $ 000's)
                                         As of December 31,    As of March 31,
                                                    2009              2010
    ASSETS
    Current Assets:
    Cash and cash equivalents                       31,618           120,551
    Accounts receivable (net of allowance
     for doubtful accounts of US$ nil as
     of March 31, 2009 and 2010)                     8,434            17,665
    Deferred tax assets                                489               656
    Amounts due from related parties                    --                --
    Amounts due from an equity investee                 --                --
    Prepayments and other current assets             4,582            16,464
    Total current assets                            45,123           155,336
    Non-current Assets:
    Deferred initial public offering cost           12,774                --
    Property, plant and equipment, net             423,200           429,017
    Intangible assets, net                           4,513             4,479
    Goodwill                                       107,824           107,825
    Deferred tax assets                              1,231             1,211
    Other non-current assets                           399               579
    Total non-current assets                       549,941           543,111
    TOTAL ASSETS                                   595,064           698,447

    LIABILITIES AND SHAREHOLDERS' EQUITY
    Current Liabilities:
    Accounts payable                                 1,305             2,126
    Short-term loans                                 7,098            22,918
    Current portion of long-term loans              56,809            54,187
    Warrant liability                               14,333                --
    Amounts due to related parties                     242               242
    Deferred tax liabilities                             1                12
    Accrued expenses and other current
     liabilities                                    22,704            26,991
    Total current liabilities                      102,492           106,476
    Non-current Liabilities:
    Long-term loans                                172,469           173,542
    Deferred tax liabilities                        18,805            18,903
    Other non-current liabilities                      104               137
    Total non-current liabilities                  191,378           192,582
    Total liabilities                              293,870           299,058

    Convertible redeemable preferred
     shares
    Series A (par value US$0.001 per
     share; 2,500,000 shares authorized;
     152,193 shares issued and
     outstanding as of December 31, 2008
     and 2009)                                     184,541                --
    Series B (par value US$0.001 per
     share; 2,500,000 shares authorized;
     129,000 shares issued and
     outstanding as of December 31, 2008
     and 2009)                                     148,943                --
    Series C (par value US$0.001 per
     share; 1,000,000 shares authorized;
     nil and 20,000 shares issued and
     outstanding as of December 31, 2008
     and 2009)                                      20,356                --

    Shareholders' equity
    Ordinary shares (par value US$ 0.001
     per share, 130,000,000 and
     400,000,000 shares authorized as of
     December 31, 2009 and March 31,
     2010, respectively; 15,541,666 and
     153,295,516 shares issued and
     outstanding as of December 31, 2009
     and March 31, 2010, re                             16               154
    Additional paid-in capital                      36,251           495,187
    Accumulated other comprehensive
     income                                         11,065            11,143
    Accumulated deficit                           (100,767)         (114,226)

    Total China Hydroelectric Corporation
     Shareholders' equity (deficit)                (53,435)          392,258

    Noncontrolling interests                           789             7,131

    Total shareholders' equity                     (52,646)          399,389

    TOTAL LIABILITIES AND SHAREHOLDERS'
     EQUITY                                        595,064           698,447

    CHINA HYDROELECTRIC CORPORATION
    Adjusted EBITDA and Adjusted EBITDA Margin Measures

                                        Unaudited three months ended March 31,
                                                     2009              2010
                                                        (in US $ 000's)

    Net income (loss)                               (2,246)            2,355
    Interest expenses, net                           2,501             3,191
    Other non cash charges,
     including exchange loss(gain), change
     in fair value of derivative financial
     liabilities, and warrant liability                183              (355)
    Income tax expenses (benefits)                    (427)            1,055
    Depreciation of property, plant and
     equipment                                       2,242             3,794
    Amortizations of intangible assets                  31                34
    EBITDA, as adjusted                              2,284            10,074
    Revenue                                          4,593            15,821
    EBITDA Margin, as adjusted                         50%               64%

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 derivatives financial liabilities and warrant
liability. We believe that EBITDA is widely used by other companies in the
power industry and may be used by 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.

SOURCE China Hydroelectric Corporation


Source: newswire



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