Capstone Infrastructure Corporation Reports Strong First Quarter 2014 Performance

Capstone Infrastructure Corporation Reports Strong First Quarter 2014 
FOR: Capstone Infrastructure Corporation 
MAY 12, 2014 
Capstone Infrastructure Corporation Reports Strong First Quarter 2014
Highlights:  - Revenue increased by 21.4% over the same period in 2013 mostly
due to higher overall power production, and the favourable foreign currency
impact and higher regulated water rates at Bristol Water   - Adjusted EBITDA
increased by 28.9% and AFFO increased by 45.7% over the same period last year,
mostly due to the contribution from the expanded wind power portfolio   -
Entered into new long-term agreements for Cardinal with Ontario Power Authority
and Ingredion Canada Incorporated, supporting Capstone's dividend over the long
term   - Subsequent to quarter end, completed the financing for the Skyway 8
wind power project 
TORONTO, ONTARIO--(Marketwired - May 12, 2014) - Capstone Infrastructure
Corporation (TSX:CSE)(TSX:CSE.DB.A)(TSX:CSE.PR.A)(TSX:CPW.DB) (the
"Corporation") today reported unaudited results for the first quarter
of fiscal 2014 ended March 31, 2014. The Corporation's Management's
Discussion and Analysis and unaudited consolidated financial statements are
available at and on SEDAR at All
amounts are in Canadian dollars. 
Financial Review  
In millions of Canadian dollars or on a                                     
 per share basis unless otherwise noted    Quarter ended Mar 31     Variance 
2014       2013          (%)
Revenue                                        114.4       94.3         21.4
Net income                                      19.5       15.9         22.6
Adjusted EBITDA(1,2)                            41.7       32.3         28.9
AFFO(1,3)                                       19.9       13.6         45.7
AFFO per share(1,3)                            0.207      0.180         14.9
Dividends per share                            0.075      0.075            -
Payout ratio(1)                                  36%        42%       (13.0)
(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.                    
(2)  Adjusted EBITDA for investments in subsidiaries with non-controlling    
interests are included at Capstone's proportionate ownership interest. 
(3)  For businesses that are not wholly owned, the cash generated by the     
business is only available to Capstone through periodic dividends. For  
these businesses, AFFO is equal to distributions received.              
"Our operational performance was in line with our expectations while our
financial results were ahead of plan, largely due to the continuing positive
foreign currency exchange translation at Bristol Water," said Michael
Bernstein, President and Chief Executive Officer. "During the quarter, we
signed a new 20-year non-utility generator contract for our Cardinal gas
cogeneration facility with the Ontario Power Authority while entering into an
agreement to renew our energy savings agreement with Ingredion Canada, thereby
securing Cardinal's future and helping to support our dividend over the
long term. We are also advancing our near-term wind power pipeline on time and
budget, with two projects currently under construction and a third expected to
get underway in June. The value of our portfolio is growing and we are
confident in our ability to deliver an attractive total return to our
shareholders as we complete the build out of our development pipeline and
pursue new growth opportunities." 
Financial Highlights 
Revenue increased by 21.4%, or $20.1 million, over the same quarter in 2013.
The increase was mostly due to the Corporation's expanded operating wind
power portfolio following the acquisition of Renewable Energy Developers Inc.
("ReD") on October 1, 2013. The revenue variance at Bristol Water
reflected favourable foreign currency translation along with revenue growth
arising from higher regulated water rates, which increase annually, and higher
water consumption.  
Total expenses increased by 15.0%, or $7.9 million, over the first quarter of
2013. The variance reflected higher operating expenses, primarily at Bristol
Water due to foreign currency translation and greater repairs and maintenance
activities. In the power segment, higher operating expenses reflected the
Corporation's expanded wind power portfolio, partially offset by lower gas
transportation and fuel costs at Cardinal. Administrative expenses in the
quarter increased by 100.6%, or $2.2 million, primarily reflecting the reversal
of an accrual in the first quarter of 2013, resulting in lower expenses for
that period, and increased compensation costs arising from growth in staffing
Adjusted EBITDA increased by 28.9%, or $9.3 million, primarily reflecting the
expansion of the Corporation's operating power portfolio and lower
operating costs at Cardinal, and the positive foreign currency impact and
higher revenue at Bristol Water. Adjusted Funds from Operations (AFFO)
increased by 45.7%, or $6.2 million, reflecting the growth in Adjusted EBITDA
partially offset by higher debt service and maintenance capital expenditures
resulting from the larger power portfolio. AFFO per common share increased by
15.0% to $0.207 from $0.180 in the same quarter last year, reflecting the
performance drivers described above as well as the greater number of common
shares outstanding compared with the first quarter of 2013.  
Financial Performance Highlights by Segment 
Power Infrastructure: 
In millions of Canadian dollars unless                                      
 otherwise noted                             Quarter ended Mar 31   Variance 
2014       2013        (%)
Power generated (GWh)                            558.8      510.6        9.4
Revenue                                           58.2       50.2       16.0
Adjusted EBITDA                                   31.9       23.4       36.4
AFFO                                              23.3       16.1       44.2
Revenue increased by 16.0%, or $8.0 million, mostly attributable to the
Corporation's larger operating wind power portfolio, higher production at
Amherstburg Solar Park and the hydro power facilities, and higher contractual
power rates at Cardinal.  
Adjusted EBITDA increased by 36.4%, or $8.5 million, reflecting higher revenue
and lower operating expenses at Cardinal primarily due to lower gas
transportation costs. AFFO increased by 44.2%, or $7.2 million, due to the
growth in Adjusted EBITDA, distributions received from the Amherst wind power
facility and lower maintenance expenditures at the hydro power facilities than
in the first quarter of 2013. These drivers were partially offset by additional
debt service and maintenance capital expenditures related to the
Corporation's expanded wind power portfolio.  
In millions of Canadian dollars unless                                      
 otherwise noted                             Quarter ended Mar 31   Variance 
2014       2013        (%)
 Water supplied (megalitres)                    19,638     19,238        2.1
 Revenue                                          56.2       44.1       27.5
 Adjusted EBITDA before non-controlling                                     
 interest                                         26.9       20.8       29.3
 Adjusted EBITDA                                  13.4       10.4       29.3
 AFFO(1)                                           1.9        1.6        N/A
(1)  Bristol Water's contribution to Capstone's AFFO consists of dividends   
and does not reflect the amount of cash generated by the business.      
Revenue increased by 27.5%, or $12.1 million. Excluding the foreign currency
impact, revenue increased by 9.2%, or $4.7 million, reflecting the annual
increase in regulated water rates that occurred on April 1, 2013, and increased
water consumption. Bristol Water's Adjusted EBITDA contribution to the
Corporation increased by 29.3%, or $3.0 million, reflecting higher revenue
partially offset by increased operating expenses.  
Bristol Water paid dividends of $1.9 million to the Corporation in the quarter
compared with $1.6 million in the same quarter last year, reflecting the effect
of a more favourable foreign exchange rate.  
During the quarter ended March 31, 2014, Bristol Water made $50 million in
capital expenditures as part of its approximately $542 million capital program
for the current five-year asset management plan ("AMP5"), which
concludes in March 2015. As at March 31, 2014, Bristol Water had cumulative
capital expenditures of $444 million over the AMP5 period, which was $13
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 dollars unless                                      
 otherwise noted                             Quarter ended Mar 31   Variance 
2014       2013        (%)
Heat production (GWh)                              367        432     (15.0)
Interest income                                    0.8        0.7       14.3
Adjusted EBITDA and AFFO(1)                        0.8        0.7       14.3
(1)  Varmevarden's contribution to Capstone's Adjusted EBITDA and AFFO       
consists of interest income and dividends and does not reflect the      
amount of cash generated by the business.                               
Varmevarden paid interest income of $0.8 million in the quarter compared with
$0.7 million in the same quarter last year, reflecting favourable foreign
currency translation. Varmevarden was not scheduled to pay a dividend in the
first quarter of 2014, which was consistent with 2013. 
Financial Position 
As at March 31, 2014, the Corporation had unrestricted cash and cash
equivalents of $67.3 million, including $38.5 million from the power segment
and $14.6 million from Bristol Water. Bristol Water has an additional $57.1
million in credit capacity to support its capital expenditure program.
Approximately $34.3 million of the Corporation's total cash and cash
equivalents is available for general corporate purposes. In addition, during
the quarter, the Corporation increased the amount of credit available under its
new corporate credit facility, which was established in November 2013, to $50
million from $32.5 million. As at March 31, 2014, the Corporation's debt
to capitalization ratio was 63.6%.  
Subsequent Events 
On April 17, 2014, the Corporation secured $21.4 million in project-level
financing for the construction of the Skyway 8 wind project. The construction
term of the credit facility matures no later than February 28, 2015 and bears
an interest rate of 5.25%. Upon maturity, the debt, which will fully amortize
over 20 years, converts to a three-year term facility bearing interest at a
variable rate based on 1.05% over the lender's posted three-year
commercial mortgage rate. 
The Corporation expects continuing stable performance from its power
facilities, some growth from its utilities businesses, and a full year of
contribution from its expanded wind power portfolio. Based on the greater than
anticipated favourable impact of foreign exchange rates at Bristol Water in the
first quarter and the expectation of better economics from Cardinal, the
Corporation now expects Adjusted EBITDA in 2014 to be between $150 million and
$160 million compared with $140 million to $150 million previously. Other
assumptions underlying the Corporation's 2014 outlook include but are not
limited to: 
--  The Corporation deploying its internally generated cash and credit into 
its development projects and that the projects proceed as expected;  
--  That the Swedish krona to Canadian dollar and British pound sterling to 
Canadian dollar exchange rates remain consistent with recent rates;  
--  The implementation of Bristol Water plc's allowed real 3.8% (plus retail 
price index, or "RPI") price increase, which was effective April 1, 
2014; and  
--  Business development activity that is consistent with historical levels. 
A detailed outlook for the Corporation's power, utilities and corporate
segments is available on pages 15 to 19 of the quarterly report. The
Corporation's strategic priorities for 2014 include: 
Advancing its pipeline of power development projects. 
The Corporation is focused on advancing its near-term wind power projects on
time and on budget. The 10 MW Skyway 8 and 24 MW Saint-Philemon projects,
currently under construction in Ontario and Quebec, respectively, are expected
to achieve commercial operations in 2014. On April 17, 2014, the Environmental
Review Tribunal delivered a decision upholding the Renewable Energy Approval
issued by the Ministry of Environment for the Corporation's 25-megawatt
Goulais wind project, enabling the project to proceed with construction
starting in June 2014. The balance of the pipeline is currently anticipated to
enter commercial operations over 2015 and 2016, assuming the projects receive
the various regulatory approvals and permits they require to proceed with
Maximizing the performance of its existing businesses. 
The Corporation is focused on further enhancing the operational performance of
its businesses, which includes preventive and predictive maintenance, detailed
planning for capital expenditures that boost value, and finding new ways to
increase cash flow. 
Advancing organic growth initiatives. 
The Corporation is working with management at Bristol Water to complete the
company's capital expenditure program for the current regulatory period,
which commenced in April 2010 and concludes in March 2015 ("AMP5").
This program is driving significant growth in Bristol Water's regulated
capital value, which supports growing revenue and cash flow over time, which in
turn increases the value of the Corporation's ownership interest. The
Corporation is also supporting the Bristol Water team on the company's
regulatory submission for the next five-year regulatory period, which commences
in April 2015 and concludes in March 2020 ("AMP6"). During the price
review process, UK Water Services Regulation Authority (Ofwat) will approve
Bristol Water's capital program and set the rates Bristol Water may charge
customers in AMP6. 
Focusing on acquisitions that will increase the Corporation's value. 
The Corporation is focused on building its portfolio across four targeted core
infrastructure categories: utilities, power, public-private partnerships and
transportation. The Corporation's business development efforts are
concentrated primarily on North America, the United Kingdom, and Western and
Northern Europe, with Australia and New Zealand remaining markets of interest. 
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 June 30, 2014. The dividend will be payable on July 31, 2014 to
shareholders of record at the close of business on June 30, 2014. 
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 July 31,
2014 to shareholders of record at the close of business on July 15, 2014. The
dividend on the Preferred Shares covers the period from May 1, 2014 to July 31,
In respect of the Corporation's July 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 July 31, 2014 to holders
of record on June 30, 2014 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 
Q1 Conference Call and Webcast 
The Corporation will hold a conference call and webcast (with accompanying
slides) on Tuesday, May 13, 2014 at 8:30 a.m. EDT to discuss first 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 May 27, 2014. 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 
About Capstone Infrastructure Corporation 
Capstone's mission is to provide investors with an attractive total return
from responsibly managed long-term investments in core infrastructure in Canada
and internationally. The company's strategy is to develop, acquire and
manage a portfolio of high quality utilities, power and transportation
businesses, and public-private partnerships that operate in a regulated or
contractually-defined environment and generate stable cash flow. Capstone
currently has investments in utilities businesses in Europe and owns, operates
and develops thermal and renewable power generation facilities in Canada with a
total installed capacity of net 439 megawatts(2). Please visit for more information. 
(1) - See Notice to Readers. 
(2) - Reflects Capstone's economic interest in its various power
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 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", "intend",
"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 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, 2013 under the heading
"Results of Operations", as updated in subsequently filed MD&A of
the Corporation (such documents are available under the Corporation's
SEDAR profile at 
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 wind 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 TCPL gas transportation toll of
approximately $1.65 per gigajoule in 2014; that there will be no material
changes to the Corporation's facilities, equipment or contractual
arrangements; that there will be no material changes in the legislative,
regulatory and operating framework for the Corporation's businesses, that
there will be no material delays in obtaining required approvals and no
material changes in rate orders or rate structures for the Corporation's
power infrastructure facilities, Varmevarden or Bristol Water, that there will
be no material changes in environmental regulations for power infrastructure
facilities, Varmevarden or Bristol Water; that there will be no significant
event occurring outside the ordinary course of the Corporation's
businesses; the refinancing on similar terms of the Corporation's and its
subsidiaries' various outstanding credit facilities and debt instruments
which mature during the period in which the forward-looking statements and
financial outlook relate; market prices for electricity in Ontario and Alberta;
the re-contracting of the PPA for the Sechelt hydro power generating station;
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 asset management plan
("AMP") 5 and those expected under AMP6, 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, development and integration;
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; completion of the
Corporation's wind development projects; operational performance; fuel
costs and supply; contract performance and reliance on suppliers; land tenure
and related rights; environmental; and regulatory environment); risks related
to Varmevarden (operational performance; fuel costs and availability;
industrial and residential contracts; environmental; regulatory environment;
and labour relations); and risks related to Bristol Water (Ofwat price
determinations and changes to Instrument of Appointment; 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). For a comprehensive description of these risk factors, please refer
to the "Risk Factors" section of the Corporation's Annual
Information Form dated March 26, 2014 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 under the Corporation's SEDAR profile at 
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
Capstone Infrastructure Corporation
Sarah Borg-Olivier
Senior Vice President, Communications
(416) 649-1325 
INDUSTRY:  Financial Services - Investment Services and Trading, Financial
Services - Personal Finance 
-0- May/12/2014 20:15 GMT
Press spacebar to pause and continue. Press esc to stop.