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Capital Power Income L.P. provides 2010 outlook and business updates at Investor Day event

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  Published in Business and Finance on Thursday, December 3rd 2009 at 6:06 GMT by Market Wire
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EDMONTON, Dec. 3 /CNW/ - Capital Power Income L.P. (TSX: CPA.UN) (the Partnership) will be hosting its second annual Investor Day event in Toronto at the TMX Broadcast Centre starting at 2:00 pm Eastern Time today, where its executive leadership team will provide investors with a comprehensive review of its operations, strategy, and outlook. The event can be accessed through a webcast that will be available on the Partnership's website.

"The focus in 2010 will be on improving cash flows from existing operations and commercial arrangements," said Stuart Lee, President and CEO of the General Partner of the Partnership. "We have been successful in managing supply shortages at our two biomass facilities in a challenging forestry industry environment through various commercial arrangements. We are also close to finalizing amendments to the power purchase arrangement for the Tunis facility in Ontario, which is expected to mitigate the fuel supply risk at the plant."

The Partnership also announced that discussions with the Ontario Electricity Financial Corporation (OEFC) have resulted in a term sheet for amendments to the Tunis power purchase arrangement (PPA). The Partnership expects to sign an amended PPA for Tunis by the end of December 2009. The new PPA is expected to allow the Partnership to fix gas prices at existing rates through to 2014, while OEFC will have the right to curtail production for 65 per cent of the summer off-peak hours. The Partnership expects enhanced annual upside from the arrangement versus current forward gas prices

Outlook for 2010

Cash flow from operations in 2010 is expected to be lower than 2009 primarily due to the following items:

lower waste heat operating margins from Ontario natural gas facilities, resulting from lower waste heat availability

increased fuel costs due to increased transportation tolls on TransCanada's mainline system for Ontario natural gas facilities

lower California Oregon Border power pricing on excess energy at Williams Lake facility

higher financing costs from the issuance of preferred shares in November 2009, where net proceeds were used to fund growth initiatives and to strengthen the balance sheet

The Partnership expects to reduce utilization on its credit facilities by approximately $25 to $50 million by the end of 2010.

The Partnership has revised its expectation with respect to its future cash tax status after the specified investment flow-through (SIFT) tax becomes effective in 2011. Due to tax attributes consisting primarily of tax losses and undepreciated capital cost pools available to the Partnership to deduct against future taxable income, the Partnership does not expect to make any material cash income tax payments until 2015 or 2016 in both Canada and the U.S., at least two years later than earlier estimates. In addition, the Partnership expects that to the extent that its distributions are treated as eligible dividends starting in 2011, the year that the Partnership expects to be subject to the SIFT rules, as opposed to ordinary income, taxable unitholders may be able to realize higher after-tax proceeds from distributions, until at least such time that cash taxes are payable by the Partnership.

In part due to the Partnership's favourable tax position in conjunction with distribution and capital structuring actions taken in 2009, the Partnership believes it is well positioned to provide unitholders with distribution stability at the current $1.76 per unit level over its five year planning horizon.

Webcast

The general public are invited to listen to the live audio webcast of the investor day event. The webcast and presentation slides for the investor day event will be accessible on the company's website at [ www.capitalpowerincome.ca ]

About Capital Power Income L.P.

Established in 1997, Capital Power Income L.P. is a limited partnership organized under the laws of the Province of Ontario. The Partnership's portfolio includes 19 wholly-owned power generation assets located in Canada and the United States and a 50 per cent interest in a power generation asset in Washington State. 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. For more information on the Partnership, please visit: [ www.capitalpowerincome.ca ].

Forward-looking Information

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 75% of cash provided by operating activities less maintenance capital, (ii) expectations that amendments to the Tunis PPA will be signed for the Tunis facility, and expectations regarding the terms of the new PPA and its impact on the Partnership, (iii) expectations regarding reduced utilization of credit facilities at the end of 2010, (iv) expectations regarding the time at which the Partnership will be taxable and the impact of specified investment flow-through ("SIFT") taxes, changes to withholding obligations and other tax legislation, including on distributions received by taxable unitholders, (v) expectations for throughput on the TransCanada Canadian Mainline and related expectations regarding lower waste heat availability at the Ontario facilities and increased gas transportation costs, (vi) expectations regarding lower operating margins at Williams Lake and related expectations regarding prices for excess energy, (vii) expectations regarding the availability of growth and acquisition opportunities, including opportunities to partner with Capital Power Corporation, (viii) the Partnership's financial expectations for 2010, including cash provided by operating activities, and (ix) the Partnership's focus in 2010 on improving cash provided by operating activities from existing operations and commercial arrangements.

These statements are based on certain assumptions and analysis 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) the level of plant availability and dispatch, (ix) the performance of contractors and suppliers, * the renewal or replacement of PPAs and terms of PPAs, (xi) the ability of the Partnership to successfully integrate and realize the benefits of its acquisitions, (xii) the ability of the Partnership to implement its strategic initiatives and whether such initiatives will yield the expected benefits, (xiii) expected water flows, (xiv) that current third party expectations regarding throughput on the TransCanada Canadian Mainline will continue, (xv) management's analysis and due diligence of the Equistar Morris facility including the related purchase and supply agreements and Equistar reorganization under Chapter 11 of the U.S. Bankruptcy Code, and (xvi) the ability of the Partnership to adequately source alternative sources of supply of wood waste.

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) developments within the North American capital markets, (viii) the availability and cost of permanent long term financing in respect of acquisitions and investments, (ix) unanticipated maintenance and other expenditures, * the Partnership's ability to successfully realize the benefits of acquisitions and investments, (xi) changes in regulatory and government decisions including changes to emission regulations, (xii) waste heat availability and water flows, (xiii) changes in existing and proposed tax and other legislation in Canada and the United States ("U.S.") and including changes in the Canada U.S. tax treaty, (xiv) the tax attributes of and implications of any acquisitions, (xv) the availability and cost of equipment, (xvi) changing demand for natural gas in northern Ontario and areas further to the east and levels of natural gas supply in western Canada available for shipping on the TransCanada Canadian Mainline, (xvii) on-going compliance by the Partnership with its current debt covenants, (xviii) the ability of the Partnership to adequately source alternative sources of supply of wood waste, and (xix) the North Carolina Utilities Commission arbitration, negotiations or mediation with Progress Energy Carolinas, Inc. may not result in PPAs with satisfactory or expected financial terms, (xx) the ability to successfully negotiate growth and acquisition transactions on terms acceptable to the Partnership, (xxi) final negotiations regarding a new PPA at the Tunis facility may not result in a new PPA with satisfactory or expected terms, and (xxii) other risks and uncertainties discussed in the section entitled Risk Factors in other documents filed with provincial securities commissions in Canada.

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.