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EPCOR Power L.P. positions for long term distribution sustainability, stronger financial position and future growth as well as

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^{Published in Business and Finance on Sunday, June 7th 2009 at 18:44 GMT, Last Modified on 2009-06-07 18:47:29 by Market Wire}  

 EDMONTON, June 7 /CNW/ - EPCOR Power L.P. (TSX: EP.UN) (the Partnership) and EPCOR Power Equity Ltd. (TSX: EPP.PR.A) (the Corporation), a subsidiary of the Partnership, announces a reduction in distributions on the Partnership units from $0.63 per unit per quarter to $0.44 per quarter effective with the June 2009 distribution. EPCOR Power L.P. also announces the consent by its Independent Directors of the transfer of EPCOR Utilities' interests in the Partnership and certain contractual rights to the newly formed Capital Power Corporation and the strengthening of the Partnership's future relationship with Capital Power. "Today we are announcing an integrated approach to positioning the Partnership for long term distribution sustainability that addresses current financing requirements and positions it for future growth" said Brian Vaasjo, President of EPCOR Power Services Ltd., the General Partner of the Partnership. "The Partnership is committed to growth, stability and predictability of distributions and preservation of the credit worthiness of its balance sheet. In order to continue to fulfill these goals, we are lowering our distributions to a level where we can confidently assure sustainability while also strengthening our balance sheet, providing the capital necessary to maintain current operations and supporting future growth. On that basis, we are announcing a distribution reduction to $0.44 per quarter from $0.63 per quarter which targets a long term payout ratio of approximately 75 per cent of cash provided by operating activities less maintenance capital. We are also announcing our intention to establish a Premium Distribution Reinvestment Program (DRIP) to foster our capacity for growth. We believe the new distribution level is sustainable for at least the next five years based on existing cash flows regardless of whether we remain a partnership or convert to corporate form." (Payout ratio is Partnership distributions divided by cash provided by operating activities less maintenance capital). "Retaining a portion of cash to fund internal and external growth will be important to ensure the long term success of the Partnership," said Stuart Lee, CFO of EPCOR Power Services Ltd. "At the same time, we continue to expect investors will seek opportunities to invest in higher yield securities that are enhanced with good growth opportunities. We believe the Partnership's revised distribution level will meet both of these objectives. Past and future growth and enhancement investment opportunities include: - the enhancement projects at Southport and Roxboro for US$80 million, - repowering at North Island for US$18 million, - the Morris acquisition for US$73 million and, - the Board of Directors has recently approved the expenditure of US$20 million to repower the facilities at Oxnard, California." "The retained cash will be applied toward the permanent financing of the Southport and Roxboro construction, the North Island and Oxnard repowering projects and the Morris acquisition," said Mr. Lee. "The retained cash provides the opportunity to appropriately finance these activities. To the end of 2011, based on the current outstanding number of units, the distribution reduction will allow the Partnership to retain approximately $100 million of cash to fund these initiatives. This enhances our credit metrics, financial strength and financial flexibility. Beyond 2011, the retained cash and DRIP proceeds will be available to fund internal and external development opportunities as well as acquisitions." The Partnership continues to pursue development opportunities including an internal development project at the Queen Charlotte Islands. In March 2009, the Partnership filed a proposal with the Public Service Company of Colorado to construct additional facilities at Manchief with an in-service timeline of 2014. These two projects total approximately 220MW and could require up to $300 million of new investment. The Oxnard project consists of replacing the existing GE LM5000 natural gas turbine with a more efficient and reliable GE LM6000. The repowering is expected to be completed by May 2010 and is expected to have a levered pre-tax internal rate of return of approximately 20 per cent. The Oxnard project is similar to the repowering of the North Island facility which was completed in May 2009 on time and under budget. On May 8, 2009, EPCOR Utilities Inc. (EPCOR) announced its intention to spinoff its power generation assets to form a publicly traded independent power company, Capital Power Corporation (Capital Power). EPCOR's interests in the Partnership are also proposed to be transferred; however, EPCOR requires certain approvals from the Partnership's Independent Directors. "In light of the clarified and enhanced relationship with Capital Power Corporation, I am pleased to announce that the Independent Directors of the Partnership have determined that the transfer of EPCOR's interests in the Partnership to Capital Power is in the best interest of the Partnership," stated Allen Hagerman, the Partnership's Lead Director. "Capital Power will bring to the Partnership a focus and vitality that a diverse and capital constrained EPCOR was unable to." The Partnership and Capital Power have revised the relationship in a manner that is intended to improve the position of the Partnership with the Manager, Capital Power, going forward. The improvements include an approach by both partners to work together early in the process to review Capital Power development opportunities that the Partnership might have an interest in participating and acquisitions under the Partnership's right of first look. The Partnership has been granted a right of first look on the sale of Capital Power generation assets. The method by which the manager will be compensated has also been adjusted to better align the incentives of the manager to increase the amount of cash available for distribution to unitholders. Furthermore, the Partnership and each of EPCOR and Capital Power have agreed to a standstill whereby Capital Power is not able to increase its ownership in EPLP without the consent of the Independent Directors until July 1, 2010. These arrangements provide very complimentary commercial interests between the Partnership and Capital Power which should be beneficial to both parties. The synergistic relationship with Capital Power, and an improved balance sheet, liquidity position and sustainable distribution policy, should result in increased deal flow from Capital Power and an improved growth profile for the Partnership. The Partnership has also enhanced its financial flexibility by providing limited relief to Capital Power with respect to maintaining its minimum 30 per cent interest relating to new equity issues and the DRIP. Analyst Conference Call/Webcast EPCOR Power L.P. will be hosting a conference call to discuss the press release with analysts. The details of the conference call and simultaneous Internet webcast are as follows: Monday, June 8, 2009 Time: 1:00 pm (Eastern time) Dial-in Numbers: (416) 695-7848 or 1-888-789-0150 (toll free) The webcast can be accessed at [ www.epcorpowerlp.ca ] A replay of the conference call will be available 30 minutes after the conference call ends and is available until midnight, June 15, 2009. To access the replay, dial (416) 695-5800 or 1-800-408-3053 (toll free) followed by the passcode 1781238. Forward-Looking Statements Certain information in this press release is forward-looking and related to anticipated financial performance, events and strategies. When used in this context, words such as "will", "anticipate", "believe", "plan", "intend", "target" and "expect" or similar words suggest future outcomes. By their nature, such statements are subject to significant risks, assumptions and uncertainties, which could cause the Partnership's actual results and experience to be materially different than the anticipated results. In particular, forward-looking information and statements include: (i) the sustainability of distributions, including relative to a long-term payout ratio target of approximately 75 per cent of cash provided by operating activities less maintenance capital, (ii) expectations regarding enhancement projects at Southport and Roxboro for US$80 million, (iii) expectations regarding the cost to repower the facilities at Oxnard, California, (iv) expectations regarding the cash to be retained by the Partnership as a result of the distribution reduction and the expected uses of that cash, (v) expectations regarding the in-service timeline and the expected required new investment for additional facilities at Manchief and the development project at the Queen Charlotte Islands, (vi) expectations regarding the time of completion of the repowering of the Oxnard facility and that the repowering will have a levered pre-tax internal rate of return of approximately 20 per cent, and (vii) that the Partnership will have an improved balance sheet, liquidity position, sustainable distribution policy, increased deal flow from Capital Power, improved growth profile and financial flexibility. These statements are based on certain assumptions and analyses made by the Partnership in light of its experience and perception of historical trends, current conditions and expected future developments and other factors it believes are appropriate. The material factors and assumptions used to develop these forward-looking statements include: (i) the Partnership's operations, financial position and available credit facilities, (ii) the Partnership's assessment of commodity, currency and power markets, (iii) the markets and regulatory environment in which the Partnership's facilities operate, (iv) the state of capital markets, (v) management's analysis of applicable tax legislation, (vi) the assumption that the currently applicable and proposed tax laws and emissions regulations will not change and will be implemented, (vii) the assumption that counterparties to fuel supply and power purchase agreements will continue to perform their obligations under the agreements, (viii) that current third party expectations regarding throughput on the TransCanada Canadian Mainline will continue, (ix) the level of plant availability and dispatch, (*) the performance of contractors and suppliers, (xi) the renewal and terms of PPAs, (xii) the ability of the Partnership to successfully integrate and realize the benefits of its acquisitions, (xiii) the ability of the Partnership to implement its strategic initiatives and whether such initiatives will yield the expected benefits, and (xiv) expected water flows. Whether actual results, performance or achievements will conform to the Partnership's expectations and predictions is subject to a number of known and unknown risks and uncertainties which could cause actual results to differ materially from the Partnership's expectations. Such risks and uncertainties include, but are not limited to risks relating to (i) the operation of the Partnership's facilities, (ii) plant availability and performance, (iii) the availability and price of energy commodities including natural gas and wood waste, (iv) the performance of counterparties in meeting their obligations under PPAs, (v) competitive factors in the power industry, (vi) economic conditions, including in the markets served by the Partnership's facilities, (vii) ongoing compliance by the Partnership with its current debt covenants, (viii) developments within the North American capital markets, (ix) the availability and cost of permanent long term financing in respect of acquisitions and investments, (*) unanticipated maintenance and other expenditures, (xi) the Partnership's ability to successfully realize the benefits of acquisitions and investments, (xii) changes in regulatory and government decisions including changes to emission regulations, (xiii) waste heat availability and water flows, (xiv) changes in existing and proposed tax and other legislation in Canada and the US and including changes in the US tax treaty, (xv) the tax attributes of and implications of any acquisitions, and (xvi) the availability and cost of equipment. Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Forward-looking statements 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. Except as required by law, the Partnership disclaims any intention and assumes no obligation to update any forward-looking statement. About EPCOR Power L.P. Established in 1997, EPCOR Power L.P. is a limited partnership organized under the laws of the Province of Ontario. The Partnership's portfolio consists of 19 wholly-owned power generation assets located in Canada and the United States, a 50.15 per cent interest in a power generation asset in Washington State, and an overall 15.4 per cent equity interest in Primary Energy Recycling Holdings LLC (PERH). The Partnership's assets have a total net generating capacity of 1,400 megawatts and more than four million pounds per hour of thermal energy. PERH wholly owns four recycled energy assets in the United States with an aggregate generation capacity of 283 megawatts and nearly two million pounds per hour of thermal energy, and has a 50 per cent interest in a pulverized coal facility. EPCOR USA Ventures LLC, formerly Primary Energy Ventures LLC, a wholly-owned subsidiary of the Partnership, manages and operates these facilities for PERH. For more information on the Partnership, please visit: [ www.epcorpowerlp.ca ]. About EPCOR Power Equity Ltd. The Corporation was incorporated under the laws of the Province of Alberta on June 26, 1998 and is a subsidiary of the Partnership. The Corporation operates as a holding company and indirectly holds all of the Partnership's business and power generation and other assets in the United States, including the Partnership's Curtis Palmer, Manchief, Frederickson, Naval Station, North Island, Naval Training Center, Oxnard, Greeley, Kenilworth, Roxboro, Southport and Morris power generating facilities. These facilities have a total generating capacity of approximately 1,080 megawatts (representing approximately 77 per cent of the total generating capacity of the Partnership's assets) and more than four million pounds per hour of thermal energy (representing 100 per cent of the total thermal energy capacity of the Partnership's assets). In addition, the Corporation holds, through a wholly-owned subsidiary, the Partnership's overall 15.4 per cent equity interest in PERH. For more information on the Corporation, please visit: [ www.epcorpowerlp.ca ].

For further information: Media inquiries: Tim LeRiche, (780) 969-8238; Unitholder and analyst inquiries: Randy Mah, (780) 412-4297, (866) 896-4636 (toll-free)