Alterra continues to consolidate 100% of the HS Orka and Soda Lake operations, while Alterra’s interests in the Toba Montrose run-of-river hydro facility ("Toba Montrose") and the Dokie wind facility ("Dokie 1") are accounted for as equity investments. In certain statements in this news release, the Company’s results are disclosed as Alterra’s "net interest", which means the effective portion of results that Alterra would have reported if each of HS Orka (66.6%), Toba Montrose (40%), Dokie 1 (51%) and Soda Lake (100%) had been reported in accordance with the Company’s actual share ownership at March 31, 2012.
Highlights for the current quarter include:
Power production from Alterra’s six power plants was 99% of budgeted forecast (446,845 MWh). Alterra’s net interest in generation totalled 302,719 MWh.
Alterra’s net interest in revenue and EBITDA was $18.2 million and $5.2 million, respectively.
Altera’s net interest in cash and cash equivalents increased from $20.7 to $50.9 million.
HS Orka received $37.5 million from the issuance of shares to Alterra’s partner in HS Orka, a group of Icelandic pension funds ("Jarðvarmi"). Jarðvarmi exercised an option in February 2012 to purchase the additional shares at a 15.6% premium to the original purchase price on a per share basis. Jarðvarmi previously held a 25% interest in HS Orka and now holds 33.4%.
The US Treasury Department awarded a grant of $2.1 million to the Company’s Soda Lake operations under the American Recovery and Reinvestment Act.
The Montrose Creek and East Toba River run-of-river hydro plants were offline for planned maintenance and warranty work during the current quarter, which was purposefully scheduled during this period when water flows and project revenues are seasonally very low. Both facilities are now fully operational and operated at 132% of the revised budget for the partial month of April.
The firm energy allotment under Dokie 1’s Power Purchase Agreement ("PPA") was increased by 10% and as a result annual revenue at Dokie 1 is expected to increase by 1.2%.
Dokie 1 achieved Final Completion, formally marking the conclusion of construction activities.
First Solar, Inc. received all of its Renewable Energy Approvals permits and is expected to begin construction of the ABW solar farm in May 2012. Completion is expected by the end of 2012.
John Carson, Alterra’s CEO, said, "I’m proud that we hit our operational targets again this period, in spite of taking our hydro assets offline for the entire quarter as planned. Meanwhile, the work to advance our immediate growth projects continues in full swing with the Upper Toba, Dokie 2 and Reykjanes expansions. Hitting all of our resource and economic goals for these projects will almost double our operating cash flow, building further value for our shareholders."
The comparative period of the three months ended March 31, 2011 ("the comparative quarter") are not fully comparable to the current quarter since it does not include results for Toba Montrose and Dokie 1.
The following table shows the Company’s net interest in selected operating and financial results for the current quarter, in addition to key financial information extracted from the consolidated results.
Consolidated revenue for the current quarter was $16.4 million compared to $18.9 million in the comparative quarter, due to lower revenue from our Icelandic operations as a result of lower aluminum prices, which declined 13.9% versus the comparative quarter. Alterra’s net interest in revenue was $18.2 million. This included Dokie 1 revenue which was higher than budgeted due to strong winds, and lower than forecasted revenue at Toba Montrose since the facilities were offline for planned maintenance and warranty work.
Consolidated gross profit was $4.7 million for the current quarter, compared to $5.5 million for the comparative quarter, a decrease of $0.8 million. This was primarily due to lower revenues and was partially offset by a lower cost of production in Iceland.
Alterra’s net interest in EBITDA for the current quarter totaled $5.2 million, reflecting among other things the strong generation performance of its operating assets (99% of budget), offset by the Toba Montrose Facility being offline as planned during the entire current quarter.
The Company recorded a net loss of $10.4 million for the current quarter compared to net income of $11.9 million for the comparative quarter, a decrease of $22.3 million which is attributable in large part to a number of non-cash items. The significant factors contributing to and offsetting this decrease include:
A non-cash change in the fair value of bonds and derivatives of $20.7 million related primarily to changes in the future price of aluminum.
An equity loss of $5.4 million, primarily due to a $7.4 million equity loss from Toba Montrose because the facility was offline for warranty and maintenance work.
A non-cash foreign exchange loss of $2.1 million.
A non-cash income tax recovery of $6.2 million.
At March 31, 2012, the Company had consolidated cash and cash equivalents of $52.6 million (December 31, 2011: $22.2 million), versus net interest of $50.9 million. The Company ended the quarter with consolidated working capital of $39.3 million (net interest $35.2 million), compared to $4.6 million at December 31, 2011. The increase in both cash and working capital was primarily due to the investment in HS Orka by Jarðvarmi and the receipt of the US government grant by Soda Lake.
Iceland Operations (66.6% Interest at March 31, 2012)
The 100 MW Reykjanes plant generated 206,535 MWh of electricity, 99% of budget, and the 72 MW Svartsengi plant generated 115,863 MWh of electricity, 114% of budget, and continued to supply thermal energy for district heating.
The newly invested funds from Jarðvarmi are currently being held at HS Orka in preparation for the Reykjanes expansion project.
Toba Montrose Operations (40% Interest)
The 146 MW East Toba River and 89 MW Montrose Creek run-of-river hydro plants were offline for planned maintenance and warranty work during the current quarter. The penstock coatings at both the East Toba and Montrose Creek facilities were inspected and repaired under warranty by the contractor, requiring curtailment of both facilities from November 2011 to March 2012, a time when water flows and project revenues are seasonally very low. Both facilities are now fully operational and generated 21,875 MWh during the partial month of April (132% of plan for the period).
Dokie Operations (51% Interest)
The 48 turbine 144 MW Dokie wind farm generated 101,086 MWh of electricity for the period, or 111% of budget. The operating subsidiary for the wind farm, Dokie General Partnership, also reached agreement with the project lenders for term conversion of its loans, with final maturity in 2030 and the first possibility for a partnership dividend in June 2012.
The Dokie General Partnership exercised a one-time right in its PPA to increase its firm energy allotment by 10%, commencing in May 2012. This is expected to result in an average 1.2% increase to annual net revenue.
Soda Lake Operations (100% Interest)
The 15 MW Soda Lake geothermal plant generated a net 18,668 MWh of electricity for the period, or 92% of budget. Soda Lake also received a grant of $2.1 million from the US Department of the Treasury under Section 1603 of the American Recovery and Reinvestment Act of 2009.
Expansion and Development Projects
Preparations continue for the expansion of the Reykjanes plant’s capacity to 180 MW and thereby increase annual average generation by nearly 700,000 MWh, subject to satisfactory resolution of all PPA issues and obtaining project financing. Permitting is now in place for all construction-related activities.
The Company is currently in final negotiations on a partnership agreement for the Upper Toba Valley run-of-river hydro project. The Company is finalizing plant design and planning to commence construction by the end of 2012. The proposed facility would share much of the infrastructure already in place for Toba Montrose, and is currently configured for 124 MW of capacity and producing annual generation of 345,000 MWh. The project already has a 40 year PPA with BC Hydro. In April 2012, an interconnection agreement was signed for joint use of the transmission line with the Toba Montrose facility.
Alterra holds a 51% interest in a planned expansion of the Dokie Wind Farm with a projected addition to capacity of 156 MW and annual production of 357,000 MWh. The project has already received a BC Provincial Environmental Assessment Certificate. Data collection for a resource assessment of the project remains on schedule to be completed by mid-2012 and Alterra is planning to commence construction in early 2013.
Alterra has agreed to purchase for approximately $6.0 million, subject to a number of closing conditions, 10% of a 50 MW portfolio of five photovoltaic solar facilities to be built in Ontario ("ABW Solar") by First Solar, Inc. Alterra will serve as the managing partner for the project. All of the Renewable Energy Approvals for the project have been received and construction is expected to begin in May 2012, with completion of construction expected by the end of 2012.
Alterra continues to advance its geothermal energy exploration projects in Chile, Peru and Italy, and is in active discussions with prospective industry partners at each project to fund the next phase of exploration and development costs.
The Company also continues to advance its early stage run-of-river hydro projects in British Columbia, including the Bute Inlet project which has an estimated potential annual generation of 2.9 million MWh.
Ross Beaty, Alterra’s Chairman, said, "The highlight of the quarter was the purchase for $38 million of new shares in HS Orka by our Icelandic pension fund partners. This will finance our geothermal expansion plans there and free up Alterra’s funds for our hydro and wind power expansions in British Columbia. I look forward to all three projects being construction-ready by the end of 2012 while we continue to drive excellent operating results at our six existing clean power plants.