Capstone Infrastructure Corporation Reports Strong Second Quarter 2013 Performance

  Capstone Infrastructure Corporation Reports Strong Second Quarter 2013
  Performance

Business Wire

TORONTO -- August 12, 2013

Capstone Infrastructure Corporation (TSX: CSE; CSE.DB.A; CSE.PR.A):

Highlights:

  *Quarterly and year-to-date revenue increased by 9.0% and 5.5%,
    respectively, due to increased production from the power segment and a
    higher regulated water rate at Bristol Water
  *Quarterly Adjusted EBITDA increased by 15.7%, mostly due to higher
    production in the power segment and a higher dividend from Värmevärden
    while year-to-date Adjusted EBITDA declined by 0.9%, reflecting the
    Corporation's lower ownership interest in Bristol Water
  *Quarterly and year-to-date AFFO increased by 143.2% and 21.7%,
    respectively, reflecting higher Adjusted EBITDA, lower maintenance
    expenses at Cardinal and a higher dividend from Värmevärden
  *Subsequent to quarter end, announced acquisition of Renewable Energy
    Developers Inc., which is expected to enhance Capstone's scope, scale and
    long-term value for shareholders

Capstone Infrastructure Corporation (TSX: CSE; CSE.DB.A; CSE.PR.A – the
“Corporation”) today reported unaudited results for the second quarter of
fiscal 2013 ended June 30, 2013. The Corporation’s Management’s Discussion and
Analysis and unaudited consolidated financial statements are available at
www.capstoneinfrastructure.com and on SEDAR at www.sedar.com. All amounts are
in Canadian dollars.

Financial Review

In millions
of Canadian    Quarter ended Jun                   Six months ended
dollars or    30                                Jun 30           
on a per                               Variance                       Variance
share basis                            (%)                            (%)
unless
otherwise     2013        2012                 2013      2012  
noted
Revenue       93.5       85.8     9.0       187.8    178.0  5.5    
Net income    14.6       —        n.m.f.     30.5     16.7   83.3   
Adjusted      31.8       27.5     15.7      64.2     64.7   (0.9   )
EBITDA^1,2
AFFO^1,3      9.0        3.7      143.2     22.7     18.6   21.7   
AFFO per      0.119      0.049    141.9     0.298    0.249  19.8   
share^1,3
Dividends     0.075      0.135    (44.6  )   0.150    0.300  (50.0  )
per share
Payout        63     %    276    %  (77.1  )   50     %  121%   (58.4  )
ratio^1

^1"Adjusted EBITDA", “Adjusted Funds from Operations”, and “Payout Ratio” are
non-GAAP financial measures and do not have any standardized meaning
prescribed by International Financial Reporting Standards (“IFRS”). As a
result, these measures may not be comparable to similar measures presented by
other issuers. Definitions of each measure are provided on page 6 of
Management’s Discussion and Analysis with reconciliation to IRFS measures
provided on page 7.

^2While Bristol Water’s revenue and expenses are fully consolidated into
Capstone’s financial results, its Adjusted EBITDA was adjusted to reflect
Capstone’s 70% ownership interest, which was held between October 5, 2011 and
May 10, 2012, and subsequent 50% interest following the sale of a 20% interest
to ITOCHU Corporation on May 10, 2012.

^3Consolidated AFFO includes dividends received from Bristol Water, which is
more reflective of the cash flow available to Capstone from the operating
activities of Bristol Water.

“We achieved strong overall business performance in the quarter, reflecting
the quality of our businesses and sound operations across our portfolio," said
Michael Bernstein, President and Chief Executive Officer. "Adjusted EBITDA and
AFFO were both higher than in 2012 primarily due to increased power production
at Cardinal and Erie Shores, lower maintenance costs at Cardinal, and a higher
dividend from Värmevärden. During the quarter, we continued to work toward a
new contract for Cardinal and focused on identifying ways to maximize the
value of our businesses, including investing in a software tool at Erie Shores
to help boost the facility's annual energy production and working with Bristol
Water to advance its capital expenditure program. As we build value at our
existing businesses, we are also continuing to pursue acquisition
opportunities, most recently reaching an agreement to acquire Renewable Energy
Developers Inc., an established developer and owner of wind power projects
across Canada. Once completed, we expect this transaction to contribute to
long-term cash flow growth for Capstone and our shareholders."

Financial Highlights
Revenue increased by 9.0%, or $7.7 million, over the same quarter in 2012, and
by 5.5%, or $9.8 million, on a year-to-date basis. The increase was mostly due
to higher power generation at Cardinal and Erie Shores and to increased
revenue at Bristol Water arising from a higher regulated water rate, which
increases annually.

Total expenses increased by 6.9%, or $3.5 million, in the second quarter, and
by 5.0%, or $5.1 million, in the first six months of the year. The variance
reflected higher operating expenses, primarily due to higher fuel costs at
Cardinal, increased project development costs mostly related to the planned
acquisition of Renewable Energy Developers Inc. ("ReD"), and higher operations
and maintenance fees at Bristol Water. These factors were partially offset by
lower administrative expenses, which declined by 30.9%, or $1.1 million, in
the quarter and by 18.7%, or $1.1 million, in the first six months of 2013.

Adjusted EBITDA increased by 15.7%, or $4.3 million, in the quarter,
reflecting higher power production and a higher dividend from Värmevärden.
Adjusted EBITDA for the first six months of the year declined by 0.9%, or $0.6
million, primarily reflecting the Corporation's lower interest in Bristol
Water effective May 10, 2012 and lower electricity production in the first
quarter of 2013.

AFFO increased by 143.2%, or $5.3 million, in the quarter and by 21.7%, or
$4.0 million, in the year-to-date period, reflecting lower maintenance
expenses at Cardinal, the higher dividend from Värmevärden, lower
administrative expenses and the repayment of the Corporation's senior credit
facility in the second quarter of 2012.

Financial Performance Highlights by Segment

Power Infrastructure:

In millions
of Canadian  Quarter ended Jun                 Six months        
dollars       30                      Variance    ended Jun 30        Variance
unless                                (%)                             (%)
otherwise    2013        2012                 2013     2012    
noted
Power
generated    482.2      424.2    13.7   %   992.8   940.5   5.6   %
(GWh)
Revenue      46.2       40.1     15.1   %   96.4    90.8    6.2   %
Adjusted     20.3       15.9     27.6   %   43.7    40.5    7.9   %
EBITDA
AFFO         10.6       4.0      164.6  %   26.8    22.8    17.3  %

Revenue increased by 15.1%, or $6.1 million, in the quarter and by 6.2%, or
$5.6 million, in the year-to-date period, primarily reflecting increased power
production at Cardinal and Erie Shores due to fewer maintenance outages and
improved wind conditions, respectively. In addition, Whitecourt benefited from
higher power pool prices. These drivers were partially offset by lower power
production at the hydro power facilities and Amherstburg as a result of
unfavourable water and sunlight conditions, respectively, in both the quarter
and year-to-date period. However, total power production of 482.2 gigawatt
hours (“GWh”) in the three months ended June 30, 2013 exceeded the average
long-term production of 450.2 GWh for the second quarter of the year.

Adjusted EBITDA increased by 27.6%, or $4.4 million, in the quarter and by
7.9%, or $3.2 million in the first six months of the year, primarily
reflecting higher power production and significantly lower maintenance costs
at Cardinal. AFFO increased by 164.6%, or $6.6 million, in the quarter and by
17.3%, or $3.9 million, in the first six months of the year.

Utilities:

Water

In millions of    Quarter ended Jun                Six months ended
Canadian         30                   Variance  Jun 30               Variance
dollars unless                          (%)                              (%)
otherwise noted  2013      2012                2013      2012 ^1  
Water supplied   20,695   21,359   (3.1  )%  39,933   41,122   (2.9  )%
(megalitres)
Revenue          47.3     45.7     3.6   %   91.4     87.2     4.8   %
Adjusted EBITDA
before           23.3     23.3     (0.2  )%  44.0     42.5     3.5   %
non-controlling
interest
Adjusted EBITDA  11.6     13.6     (14.7 )%  22.0     27.1     (18.8 )%
AFFO             1.5      4.9      N/A       3.1      4.9      (36.6 )%

^1 The Corporation acquired a 70% interest in Bristol Water on October 5, 2011
and subsequently sold a 20% indirect interest in the business on May 10, 2012.

The Corporation initially acquired a 70% interest in Bristol Water on October
5, 2011 and subsequently sold a 20% indirect interest in the business on May
10, 2012.

Revenue increased by 3.6%, or $1.6 million, in the quarter and by 4.8%, or
$4.2 million, in the year-to-date period. Bristol Water's Adjusted EBITDA
contribution to the Corporation declined by 14.7%, or $2.0 million, in the
quarter and by 18.8%, or $5.1 million, in the year-to-date period, reflecting
the Corporation's reduced interest in the business. Adjusted EBITDA before
non-controlling interest declined by 0.2%, or $36.0 thousand, in the quarter
and increased by 3.5%, or $1.5 million, in the first six months of the year,
reflecting revenue growth partially offset by increased operating expenses.

Bristol Water paid dividends of $1.5 million and $3.1 million to the
Corporation in the quarter and year-to-date periods, respectively, reflecting
the Corporation's lower ownership interest compared with the same periods last
year and the change in dividend frequency from semi-annually to quarterly.

During the quarter ended June 30, 2013, Bristol Water made $38 million in
capital expenditures, thereby reducing its capital expenditure shortfall by
11%, as part of its approximately $460 million capital program for the current
five-year asset management plan ("AMP5"), which concludes in March 2015. As at
June 30, 2013, Bristol Water had cumulative capital expenditures of $299
million over the AMP5 period, which was $34 million lower than the regulatory
plan but consistent with management's expectations. Bristol Water expects to
achieve its planned cumulative capital expenditures by the end of the AMP5
period.

District Heating

In millions
of Canadian    Quarter ended                 Six months        
dollars         Jun 30              Variance    ended Jun 30        Variance
unless                              (%)                             (%)
otherwise      2013      2012               2013      2012   
noted
Heat
production     209      209    —      %   641      602    6.5    %
(GWh)
Interest       0.7      0.7    8.0    %   1.4      2.0    (29.9  )%
income
Adjusted
EBITDA and     3.8      1.6    132.7  %   4.5      3.0    50.9   %
AFFO

During the second quarter of 2013, the dividend paid by Värmevärden to the
Corporation increased by 215.8%, or $2.1 million, as Värmevärden distributed
excess cash rising arising in part from strong prior year performance.
Värmevärden paid interest income of $0.7 million in the quarter and $1.4
million in the year-to-date period compared with $0.7 million and $2.0
million, respectively, in 2012. The variance in the six-month period reflected
the lower balance outstanding on the shareholder loan receivable as a result
of the return of approximately $50 million in capital from Värmevärden in
March 2012.

Financial Position
As at June 30, 2013, the Corporation had cash and cash equivalents of $49.5
million, including $26.7 million from the power segment and $9.1 million from
Bristol Water. Bristol Water has an additional $83.1 million in credit
capacity to support its capital expenditure program.

Approximately $27.8 million of the Corporation’s total cash and cash
equivalents is available for general corporate purposes. As at June 30, 2013,
the Corporation’s debt to capitalization ratio was 64.0%.

Subsequent Events
On July 3, 2013, the Corporation entered into a definitive agreement to
acquire 100% of the issued and outstanding shares of ReD by issuing common
shares of Capstone pursuant to a plan of arrangement (the “Transaction”).
Under the terms of the Transaction, shareholders of ReD will receive 0.26 of a
Capstone common share and $0.001 in cash for each share of ReD. Closing of the
Transaction is subject to the approval of both Capstone and ReD shareholders
and consents from certain third parties.

Outlook^1
The Corporation expects continuing stable performance from its power
generation and utilities businesses. With the completion of the acquisition of
ReD (the "Transaction"), in fiscal 2013 the Corporation expects to deliver
Adjusted EBITDA of approximately $115 million to $125 million, reflecting the
partial year contribution from ReD's operating wind power facilities offset by
higher administration expenses as well as transaction-related costs and
assuming the Transaction is completed by the end of the third quarter of 2013.
Other assumptions underlying the Corporation's 2013 outlook include:

  *Holding a 50% interest in Bristol Water for the full year following a
    partial sale of the Corporation's previous 70% interest in May 2012;
  *A lower average effective gas transportation rate in 2013 of $1.95 per
    gigajoule ("GJ") compared with $2.24 per GJ in 2012; and
  *Increased business development activity compared with 2012, which is
    expected to result in higher corporate costs.

A detailed outlook for the Corporation's power, utilities and corporate
segments is available on pages 14 to 18 of the quarterly report. The
Corporation's strategic priorities for 2013 include:

Securing a new power purchase agreement ("PPA") for Cardinal.
During the quarter, the Corporation held regular meetings with the Ontario
Power Authority that focused on a long-term solution for Cardinal, which will
enable the Corporation to proceed with its plans to reconfigure and expand the
facility, rather than on extending the existing PPA.

Maximizing the performance of its existing businesses.
The Corporation continues to focus on further enhancing the operational
performance of its businesses, which includes preventive maintenance, detailed
planning for capital expenditures that boost value, and finding ways to
increase cash flow such as the sale of RECs by Whitecourt and the investment
in WindBOOST at Erie Shores, a software tool that is expected to result in a
1% to 3% increase in annual energy output.

Pursuing new investment opportunities.
With the addition of ReD, the Corporation will be a larger infrastructure
company with power generation facilities across Canada totaling approximately
net 465 MW of installed capacity and an attractive pipeline of contracted
development opportunities in Nova Scotia, Ontario, Saskatchewan and Quebec
representing net 79 MW of capacity. In addition, the Corporation expects the
Transaction to bolster its ability to successfully source, pursue and execute
earlier-stage power opportunities.

The Corporation primarily concentrates its business development efforts on
Canada, the United States, the United Kingdom, Western Europe and Australia,
including operating infrastructure businesses and development opportunities
that offer an appropriate risk-adjusted rate of return.

^1See Notice to Readers

Dividend Declarations
The Board of Directors today declared a quarterly dividend of $0.075 per
common share on the Corporation's outstanding common shares for the quarter
ending September 30, 2013. The dividend will be payable on October 31, 2013 to
shareholders of record at the close of business on September 30, 2013.

The Board of Directors also declared a dividend on its Cumulative 5-Year Rate
Reset Preferred Shares, Series A (the “Preferred Shares”) of $0.3125 per
Preferred Share to be paid on or about October 31, 2013 to shareholders of
record at the close of business on October 15, 2013. The dividend on the
Preferred Shares covers the period from August 1, 2013 to October 31, 2013.

In respect of the Corporation’s October 31, 2013 common share dividend
payment, the Corporation will issue common shares in connection with the
reinvestment of dividends to shareholder enrolled in the Corporation’s
Dividend Reinvestment Plan. The price of common shares purchased with
reinvested dividends will be the previous five-day volume weighted average
trading share price on the Toronto Stock Exchange, less a 5% discount.

The dividends paid by the Corporation on its common shares and the Preferred
Shares are designated “eligible” dividends for purposes of the Income Tax Act
(Canada). An enhanced dividend tax credit applies to eligible dividends paid
to Canadian residents.

A distribution of $0.075 per unit will also be paid on October 31, 2013 to
holders of record on September 30, 2013 of Class B Exchangeable Units of MPT
LTC Holding LP, which is a subsidiary entity of the Corporation.

Dividend Reinvestment Plan
Learn more about the Corporation’s Dividend Reinvestment Plan (“DRIP”) at
http://www.capstoneinfrastructure.com/InvestorCentre/StockInformation/DRIP.aspx.

Q2 Conference Call and Webcast
The Corporation will hold a conference call and webcast (with accompanying
slides) on Tuesday, August 13, 2013 at 8:30 a.m. EDT to discuss second quarter
results. To listen to the call from Canada or the United States, dial
1-800-319-4610. If calling from elsewhere, dial +1-604-638-5340. A replay of
the call will be available until August 27, 2013. For the replay, from Canada
or the United States, dial 1-800-319-6413 and enter the code 1385#. From
elsewhere, dial +1-604-638-9010 and enter the code 1385#. The event will be
webcast live with an accompanying slide presentation on the Corporation’s
website at www.capstoneinfrastructure.com.

About Capstone Infrastructure Corporation
Capstone Infrastructure Corporation’s mission is to build and responsibly
manage a high quality portfolio of infrastructure businesses in Canada and
internationally in order to deliver a superior total return to shareholders by
providing reliable income and capital appreciation. The Corporation’s
portfolio currently includes investments in gas cogeneration, wind, hydro,
biomass and solar power generating facilities, representing approximately 370
MW of installed capacity, a 33.3% interest in a district heating business in
Sweden, and a 50% interest in a regulated water utility in the United Kingdom.
Please visit www.capstoneinfrastructure.com for more information.

Notice to Readers
Certain of the statements contained within this news release are
forward-looking and reflect management's expectations regarding the future
growth, results of operations, performance and business of Capstone
Infrastructure Corporation (the “Corporation”) based on information currently
available to the Corporation. Forward-looking statements and financial outlook
are provided for the purpose of presenting information about management's
current expectations and plans relating to the future and readers are
cautioned that such statements may not be appropriate for other purposes.
These statements and financial outlook use forward-looking words, such as
“anticipate”, “continue”, “could”, “expect”, “may”, “will”, “estimate”,
“plan”, “believe” or other similar words. These statements and financial
outlook are subject to known and unknown risks and uncertainties that may
cause actual results or events to differ materially from those expressed or
implied by such statements and financial outlook and, accordingly, should not
be read as guarantees of future performance or results. The forward-looking
statements and financial outlook within this news release are based on
information currently available and what the Corporation currently believes
are reasonable assumptions, including the material assumptions set out in the
management's discussion and analysis of the results of operations and the
financial condition of the Corporation (“MD&A”) for the year ended December
31, 2012 under the heading “Results of Operations”, as updated in subsequently
filed MD&A of the Corporation  (such documents are available under the
Corporation's profile on www.sedar.com).

Other potential material factors or assumptions that were applied in
formulating the forward-looking statements and financial outlook contained
herein include or relate to the following: that the acquisition (the “ReD
Acquisition”) of all of the common shares of Renewable Energy Developers Inc.
(“ReD”) will be completed by the end of the third quarter of 2013; that the
business and economic conditions affecting the Corporation's and ReD's
operations will continue substantially in their current state, including, with
respect to industry conditions, general levels of economic activity,
regulations, weather, taxes and interest rates; that there will be no material
delays in ReD's power infrastructure development projects achieving commercial
operation; that Capstone's and ReD's power infrastructure facilities will
experience normal wind, hydrological and solar irradiation conditions, and
ambient temperature and humidity levels; an effective TCPL gas transportation
toll of approximately $1.95  per gigajoule in 2013; that there will be no
material change in the level of gas mitigation revenue historically earned by
the Cardinal facility; that there will be no material changes to the
Corporation's or ReD's facilities, equipment or contractual arrangements, no
material changes in the legislative, regulatory and operating framework for
the Corporation's or ReD's businesses, no material delays in obtaining
required approvals and no material changes in rate orders or rate structures
for Capstone's and ReD's power infrastructure facilities, Värmevärden or
Bristol Water, no material changes in environmental regulations for power
infrastructure facilities, Värmevärden or Bristol Water and no significant
event occurring outside the ordinary course of business; that the amendments
to the regulations governing the mechanism for calculating the Global
Adjustment (which affects the calculation of the DCR escalator under the PPA
for the Cardinal facility and price escalators under the PPAs for the hydro
power facilities located in Ontario) will continue in force; that there will
be no material change to the accounting treatment for Bristol Water's business
under International Financial Reporting Standards, particularly with respect
to accounting for maintenance capital expenditures; that there will be no
material change to the amount and timing of capital expenditures by Bristol
Water; that there will be no material changes to the Swedish Krona to Canadian
dollar and UK pound sterling to Canadian dollar exchange rates; and that
Bristol Water will operate and perform in a manner consistent with the
regulatory assumptions underlying AMP5, including, among others: real and
inflationary increases in Bristol Water's revenue, Bristol Water's expenses
increasing in line with inflation, and capital investment, leakage, customer
service standards and asset serviceability targets being achieved.

Although the Corporation believes that it has a reasonable basis for the
expectations reflected in these forward-looking statements and financial
outlook, actual results may differ from those suggested by the forward-looking
statements and financial outlook for various reasons, including: the
conditions of the ReD Acquisition not being satisfied; risks related to the
integration of the Corporation's and ReD's businesses; risks related to the
Corporation's securities (dividends on common shares and preferred shares are
not guaranteed; volatile market price for the Corporation's securities;
shareholder dilution; and convertible debentures credit risk, subordination
and absence of covenant protection); risks related to the Corporation and its
businesses (availability of debt and equity financing; default under credit
agreements and debt instruments; geographic concentration; foreign currency
exchange rates; acquisitions and development; environmental, health and
safety; changes in legislation and administrative policy; and reliance on key
personnel); risks related to the Power Infrastructure Facilities (power
purchase agreements; operational performance; fuel costs and supply; contract
performance; land tenure and related rights; environmental; regulatory
environment); risks related to Bristol Water (Ofwat price determinations;
failure to deliver capital investment programs; economic conditions;
operational performance; failure to deliver water leakage target; SIM and the
serviceability assessment; pension plan obligations; regulatory environment;
competition; seasonality and climate change; and labour relations); and risks
related to Värmevärden (operational performance; fuel costs and availability;
industrial and residential contracts; environmental; regulatory environment;
and labour relations)

The assumptions, risks and uncertainties described above are not exhaustive
and other events and risk factors could cause actual results to differ
materially from the results and events discussed in the forward-looking
statements and financial outlook. The forward-looking statements and financial
outlook within this news release reflect current expectations of the
Corporation as at the date of this document and speak only as at the date of
this document. Except as may be required by applicable law, the Corporation
does not undertake any obligation to publicly update or revise any
forward-looking statements and financial outlook.

This news release is not an offer or invitation for the subscription or
purchase of or a recommendation of securities. It does not take into account
the investment objectives, financial situation and particular needs of any
investors. Before making an investment in the Corporation, an investor or
prospective investor should consider whether such an investment is appropriate
to their particular investment needs, objectives and financial circumstances
and consult an investment adviser if necessary.

Contact:

Capstone Infrastructure Corporation
Sarah Borg-Olivier, 416-649-1325
Senior Vice President, Communications
sborg-olivier@capstoneinfrastructure.com
 
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