Capstone Infrastructure Corporation Reports Strong Third Quarter 2013 Performance

  Capstone Infrastructure Corporation Reports Strong Third Quarter 2013
  Performance

Business Wire

TORONTO -- November 12, 2013

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

Highlights:

  *Quarterly and year-to-date revenue increased by 7.6% and 6.2%,
    respectively, mostly due to higher overall power production and higher
    regulated water rates at Bristol Water
  *Quarterly and year-to-date Adjusted EBITDA increased by 7.0% and 1.3%,
    respectively, mostly due to higher revenue at Bristol Water and in the
    power segment
  *Quarterly AFFO declined by 1.0% in the quarter as a result of higher
    operating and project development expenses and debt amortization, but
    increased by 18.2% in the year to date due to higher Adjusted EBITDA and
    lower maintenance expenses
  *Subsequent to quarter end, completed acquisition of Renewable Energy
    Developers Inc. and established new corporate credit facility

Capstone Infrastructure Corporation (TSX: CSE; CSE.DB.A; CSE.PR.A; RDZ.DB –
the “Corporation”) today reported unaudited results for the third quarter of
fiscal 2013 ended September 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 dollars  Quarter ended Sep            Nine months      
or on a per        30                  Variance   ended Sep 30       Variance
share                                  (%)                           (%)
basis unless       2013      2012                2013     2012
otherwise noted
Revenue            91.4      85.0     7.6%       279.2    263.0    6.2%
Net income         20.7       12.4     66.9%      51.2      29.0     76.3%
Adjusted           26.3       24.5     7.0%       90.4      89.3     1.3%
EBITDA^1,2
AFFO^1,3           3.3        3.4      (1.0)%     26.0      22.0     18.2%
AFFO per           0.044      0.045    (2.1)%     0.342     0.294    16.5%
share^1,3
Dividends per      0.075      0.075    0.1%       0.225     0.375    (40.0)%
share
Payout ratio^1     171%       167%     2.2%       66%       128%     (48.6)%

[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 are pleased with the performance of our business during the quarter and in
the year-to-date period, which was slightly better than we expected," said
Michael Bernstein, President and Chief Executive Officer. "A key focus for us
during the quarter was completing our acquisition of Renewable Energy
Developers Inc. We successfully closed the transaction on October 1st, thereby
gaining new operating wind facilities and contracted development projects that
we expect to contribute to long-term cash flow growth for Capstone and our
shareholders. We look forward to starting construction on at least two of our
new development projects later this fall."

Financial Highlights
Revenue increased by 7.6%, or $6.5 million, over the same quarter in 2012, and
by 6.2%, or $16.2 million, on a year-to-date basis. The increase was mostly
due to higher overall power production and revenue growth at Bristol Water
arising from higher regulated water rates, which increase annually, and higher
water consumption.

Total expenses increased by 5.9%, or $3.0 million, in the third quarter, and
by 5.3%, or $8.1 million, in the first nine months of the year. The variance
in both periods reflected higher operating expenses, due to higher operations
and maintenance costs and inflationary increases for energy, consumables,
wages and salaries at Bristol Water. In addition, project development costs
were higher, reflecting business development activities related to the
acquisition of Renewable Energy Developers Inc. ("ReD"). The quarterly
increase was partially offset by lower operating expenses at Cardinal
reflecting the decline in gas transportation costs and lower gas consumption
due to the facility's scheduled combustion inspection. On a year-to-date
basis, Cardinal's fuel expenses were higher as a result of increased power
production.

Administrative expenses increased by 10.9%, or $0.2 million, in the quarter
due to higher professional fees, but declined by 10.4%, or $0.8 million, on a
year-to-date basis, reflecting overall lower staff costs and professional
fees.

Adjusted EBITDA increased by 7.0%, or $1.7 million, in the quarter, and by
1.3%, or $1.2 million in the first nine months of the year, primarily
reflecting higher revenue at Bristol Water and in the power segment overall.
Adjusted EBITDA growth was partially offset by corporate project development
expenses, mostly related to the acquisition of ReD, which were $1.5 million
and $2.8 million higher in the quarter and year-to-date period, respectively.
Adjusted EBITDA in the first nine months of the year also reflected the
Corporation's reduced 50% ownership interest in Bristol Water compared with
its 70% interest for part of 2012.

Adjusted Funds from Operations (AFFO) declined by 1.0% in the quarter,
reflecting higher Adjusted EBITDA offset by higher maintenance capital
expenditures related to Cardinal's combustion inspection in September 2013 and
higher scheduled debt principal repayments compared with last year. AFFO
increased by 18.2% in the first nine months of the year due to higher Adjusted
EBITDA and lower maintenance capital expenditures at Cardinal, which completed
a hot gas path inspection in the second quarter of 2012.

Financial Performance Highlights by Segment

Power Infrastructure:

In millions
of Canadian    Quarter ended               Nine months ended    
dollars         Sep 30             Variance   Sep 30                 Variance
unless                             (%)                               (%)
otherwise       2013     2012                2013       2012
noted
Power
generated       428.6    418.2    2.5%       1,420.5    1,358.9    4.5%
(GWh)
Revenue         40.5      39.4     2.8%       136.9       130.2      5.2%
Adjusted        16.8      15.1     11.5%      60.5        55.6       8.9%
EBITDA
AFFO            6.5       6.4      2.3%       33.3        29.3       13.6%

Revenue increased by 2.8%, or $1.1 million, in the quarter and by 5.2%, or
$6.7 million, in the year-to-date period, primarily reflecting increased power
production at Cardinal and the hydro power facilities. In addition, Cardinal
and Whitecourt benefited from rate increases and higher power pool prices,
respectively. These drivers were partially offset by lower power production at
Amherstburg as a result of unfavourable sunlight conditions, respectively, in
both the quarter and year-to-date period. Total power production of 428.6
gigawatt hours ("GWh") in the three months ended September 30, 2013 was
consistent with average long-term production for the third quarter of the
year.

Adjusted EBITDA increased by 11.5%, or $1.7 million, in the quarter primarily
reflecting higher power production and significantly lower maintenance and gas
transportation costs at Cardinal. In the first nine months of the year,
Adjusted EBITDA increased by 8.9%, or $4.9 million, reflecting higher power
production, increased power rates and lower gas transportation costs at
Cardinal, which were partially offset by higher fuel expenses due to increased
fuel consumption. AFFO increased by 2.3%, or $0.1 million, in the quarter and
by 13.6%, or $4.0 million, in the first nine months of the year.

Utilities:

Water

In millions of     Quarter ended Sep            Nine months     
Canadian dollars    30                  Variance   ended Sep 30      Variance
unless otherwise    2013     2012      (%)        2013    2012     (%)
noted                                                       ^1
Water supplied      21,820    20,248    7.8%       61,753  61,370   0.6%
(megalitres)
Revenue             50.9      45.6      11.7%      142.3    132.8    7.2%
Adjusted EBITDA
before              25.3      22.1      14.6%      69.3     64.6     7.3%
non-controlling
interest
Adjusted EBITDA     12.6      11.0      14.5%      34.6     38.1     (9.2)%
AFFO                1.7       —         N/A        4.8      4.9      (1.9)%

[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.]

Revenue increased by 11.7%, or $5.3 million, in the quarter and by 7.2%, or
$9.5 million, in the year-to-date period, reflecting the annual increase in
water rates and increased consumption. Bristol Water's Adjusted EBITDA
contribution to the Corporation increased by 14.5%, or $1.6 million, in the
quarter, reflecting higher revenue partially offset by increased operating
expenses. For the first nine months of the year, Bristol Water's Adjusted
EBITDA contribution declined by 9.2%, or $3.5 million, reflecting the
Corporation's reduced 50% interest in the business. Adjusted EBITDA before
non-controlling interest increased by 14.6%, or $3.2 million, in the quarter
by 7.3%, or $4.7 million, in the first nine months of the year, reflecting
revenue growth partially offset by increased operating expenses.

Bristol Water paid dividends of $1.7 million to the Corporation in the
quarter, reflecting the change in dividend frequency from semi-annually to
quarterly. Dividends paid in the first nine months of the year totaled $4.8
million, which was slightly lower than in 2012 reflecting the Corporation's
lower ownership interest.

During the quarter ended September 30, 2013, Bristol Water made $45 million in
capital expenditures, thereby reducing its capital expenditure shortfall by
32%, as part of its approximately $475 million capital program for the current
five-year asset management plan ("AMP5"), which concludes in March 2015. As at
September 30, 2013, Bristol Water had cumulative capital expenditures of
$344.0 million over the AMP5 period, which was $23.0 million lower than the
regulatory plan approved in 2010 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       Quarter ended Sep              Nine months
Canadian dollars    30                 Variance  ended Sep 30    Variance
unless otherwise                         (%)                         (%)
noted                2013      2012                2013    2012
Heat production      127       125      1.6%       768     726     5.8%
(GWh)
Interest income      0.7        0.7      -          2.1      2.7     (20.5)%
Adjusted EBITDA      0.7        0.7      -          5.2      3.7     42.9%
and AFFO

Värmevärden paid interest income of $0.7 million in the quarter and $2.1
million in the year-to-date period compared with $0.7 million and $2.7
million, respectively, in 2012. The variance in the nine-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. In the first nine months of 2013, Värmevärden's
dividends to Capstone increased by 216%, reflecting the distribution of
surplus cash attributable to prior years' performance.

Financial Position
As at September 30, 2013, the Corporation had unrestricted cash and cash
equivalents of $41.4 million, including $20.4 million from the power segment
and $2.4 million from Bristol Water. Bristol Water has an additional $73.2
million in credit capacity to support its capital expenditure program.

Approximately $29.7 million of the Corporation’s total cash and cash
equivalents is available for general corporate purposes. As at September 30,
2013, the Corporation’s debt to capitalization ratio was 64.0%.

Subsequent Events
On October 1, 2013, the Corporation completed its acquisition of ReD, which is
now a wholly-owned subsidiary of the Corporation. As a result, the Corporation
has increased its power portfolio to net 465 MW of installed capacity across
Canada and gained an attractive pipeline of contracted development
opportunities, primarily in Ontario and Quebec, representing an expected net
79 MW of capacity. The Corporation has agreed to provide credit support for
the obligations of ReD under its 6.75% convertible unsecured subordinated
debentures (TSX: RDZ.DB) due December 31, 2017 (which are convertible into
Capstone common shares) and ReD has agreed to provide credit support for the
obligations of Capstone under its 6.50% convertible unsecured subordinated
debentures (TSX: CSE.DB.A) due December 31, 2016.

On November 12, 2013, the Corporation entered into a new corporate credit
facility with a three-year term maturing in October 2016, and repaid the
CPC-Cardinal credit facility. The new facility is structured as a revolver and
bears an initial effective interest rate of approximately 3.5%.

Outlook^1
The Corporation expects continuing stable performance from its power
generation and utilities businesses. In fiscal 2013, the Corporation now
expects to deliver Adjusted EBITDA of approximately $120 million to $130
million compared to our previously disclosed financial outlook of $115 million
to $125 million. This revised outlook reflects strong performance from our
businesses to date in 2013 and the expected contribution from ReD's operating
wind power facilities in the fourth quarter of the year, which will be
partially offset by higher administration expenses as well as
transaction-related costs. 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;
  *Increased business development activity compared with 2012, which is
    expected to result in higher corporate costs consistent with historical
    levels; and
  *Modest overhead costs related to power development activities.

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.
The Corporation continues to hold meetings with the Ontario Power Authority
with the goal of achieving a fair, long-term solution for Cardinal that
recognizes the value of the facility and its industrial, economic, social and
community importance. The Ontario Ministry of Energy is expected to release
its updated Long-Term Energy Plan ("LTEP") before the end of 2013. While
gas-fired generation is expected to continue to play a role in Ontario's
electricity mix, the timing of the LTEP may affect the timing of a resolution
on Cardinal.

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. The Corporation is currently focused on working with
Bristol Water to plan the company's regulatory submission to the UK Water
Services Regulation Authority ("Ofwat”) for Price Review 14, during which
Ofwat will approve Bristol Water's capital program and set the rates Bristol
Water may charge customers in the five-year AMP6 period commencing in April
2015.

Pursuing new investment opportunities.
The Corporation is currently focused on integrating ReD into its operations
and to advancing its new wind power development pipeline, with construction
expected to start on at least two projects this fall. 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.

[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 December 31, 2013. The dividend will be payable on January 31, 2014 to
shareholders of record at the close of business on December 31, 2013.

The Board of Directors also declared a dividend on the Corporation's
Cumulative 5-Year Rate Reset Preferred Shares, Series A (the “Preferred
Shares”) of $0.3125 per Preferred Share to be paid on or about January 31,
2014 to shareholders of record at the close of business on January 15, 2014.
The dividend on the Preferred Shares covers the period from November 1, 2013
to January 31, 2014.

In respect of the Corporation’s January 31, 2014 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 January 31, 2014 to
holders of record on December 31, 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.

Q3 Conference Call and Webcast
The Corporation will hold a conference call and webcast (with accompanying
slides) on Wednesday, November 13, 2013 at 8:30 a.m. EDT to discuss third
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 November 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’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. Capstone’s portfolio comprises investments in Canada’s
power infrastructure, including gas cogeneration, wind, hydro, biomass and
solar power generating facilities, representing approximately net 465
megawatts of installed capacity, and contracted wind power development
projects totaling an expected net 79 megawatts of capacity. Capstone also
invests in utilities, including 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 document are forward-looking
and reflect management's expectations regarding the future growth, results of
operations, performance and business of 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, and include, among other things,
statements found in "Message to Shareholders" and “Results of Operations”
concerning the guidance provided on the Corporation's post transaction
profile. 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 document 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 business and economic
conditions affecting the Corporation'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 the Corporation's power
infrastructure development projects achieving commercial operation; that the
Corporation's power infrastructure facilities will experience normal wind,
hydrological and solar irradiation conditions, and ambient temperature and
humidity levels; an effective TransCanada pipeline ("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 facilities, equipment or contractual arrangements, no material
changes in the legislative, regulatory and operating framework for the
Corporation's businesses, no material delays in obtaining required approvals
and no material changes in rate orders or rate structures for the
Corporation'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 direct customer rate ("DCR") escalator
under the power purchase agreement ("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 British pound
to Canadian dollar exchange rates; and that Bristol Water will operate and
perform in a manner consistent with the regulatory assumptions underlying
asset management plan 5 ("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: 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
(including risks related to the integration of the business operated by
Renewable Energy Developers Inc.); environmental, health and safety; changes
in legislation and administrative policy; and reliance on key personnel);
risks related to the Corporation's power infrastructure facilities (power
purchase agreements; operational performance; fuel costs and supply; contract
performance; land tenure and related rights; environmental; and 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; service
incentive mechanism ("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). For a
comprehensive description of these risk factors, please refer to the “Risk
Factors” section of the Corporation’s Annual Information Form dated March 21,
2013 as supplemented by risk factors contained in any material change reports
(except confidential material change reports), business acquisition reports,
interim financial statements, interim management’s discussion and analysis and
information circulars filed by the Corporation with securities commissions or
similar authorities in Canada, which are available on the SEDAR website at
www.sedar.com

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 document 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 document 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
investor. 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
sborgolivier@capstoneinfra.com
 
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