COU.UN, NPI.UN, CLE.UN
Alternative power CanRoy:
www3.telus.net
finance.yahoo.com
Primrily biomass
DBRS gave them a low-ish rating due to large exposure to biomass (the reserve life is 30 years, yield is 11%):
Press Release: Countryside Power Income Fund
Date of Release: Apr 6, 2004
Rates at STA-4 (high)
Monday, September 6, 2004
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Issuer Debt Rated Rating Action Rating Trend Notes Latest Event
Countryside Power Income Fund
Income Fund
New Rating
STA-4 (high)
Stb
Apr 6, 2004
The full text of the press release:
Income Funds/416-593-5577/incomefunds@dbrs.com
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A stability rating of STA-4 (high) has been assigned to Countryside Power Income Fund (the “Fund”). The rating is based on moderate rankings for all categories except size and market position, where the Fund ranks as weak/small given that its total electricity generating capacity is about 56 MW and its market capitalization is $150 million.
The operating characteristics of the Fund that support the rating include: (1) the Fund’s investment in the biogas-to-power business (“USEB”), which is the dominant source of cash flow to the Fund (about 75% of EBITDA), is structured as senior, secured amortizing notes and a convertible royalty interest. The debt provides stability and a degree of downside protection in that it is senior to USEB equity, while the royalty interest provides some upside earnings/cash flow potential. (2) USEB has medium-term to long-term electricity sales contracts with creditworthy counterparties, its fuel source is biogas (which is low cost and currently receives renewable energy subsidies), and USEB has long-term servicing contracts for the majority of its power generation equipment (engines). Taken together, these factors provide a degree of stability to USEB’s operating cash flows. Other factors supporting the rating include the following: (3) The average life of the current biogas-to-power portfolio is relatively long (about 30 years), despite biogas being a declining resource, while the district energy system assets have very long operating lives with low maintenance capital expenditure requirements. (4) Financial flexibility is moderate, with relatively low debt levels, good coverage ratios, and access to liquidity through various reserve accounts. (5) The Fund is managed by the senior management of U.S. Energy Systems, Inc. (“USEY”), which has a significant equity ownership interest in USEB and thus, ensures that management’s interests are aligned with those of unitholders. However, the Fund lacks the clout of a larger and financially stronger sponsor compared with some of its higher-rated peers.
The rating relative to other power income funds is limited by its small size and a number of risk factors that may impact USEB’s ability to meet its debt servicing obligations to the Fund. Key risks include the following: (1) All of USEB’s power purchase agreements (PPAs) expire within the next ten years, which creates uncertainty at renewal. (2) The current renewable energy subsidy programs begin to expire in 2007. While it is expected that USEB will continue to earn a “green” premium on its electricity sales at that time, there is no guarantee that this will be the case. (3) USEB has foreign exchange exposure given that its earnings are in U.S. dollars but its debt servicing payments are in Canadian dollars. USEB is establishing a debt service reserve account to partially protect against these risks. Over the long term, biogas is a declining resource. Unless new assets, including expansion of existing facilities, are added to the portfolio, cash available for distribution will not be sustainable beyond 20 years.
Dominion Bond Rating Service (DBRS) will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, please contact us at: info@dbrs.com.
NPI.UN: One of the leaders in putting wind power in CanRoys
What is the RLI of a wind farm?
Heavy volume:
finance.yahoo.com
www2.ccnmatthews.com
FOR: NORTHLAND POWER INCOME FUND
TSX SYMBOL: NPI.UN
AUGUST 5, 2004 - 15:05 ET
Northland Power Income Fund Announces Investment in
Quebec Wind Power Project and an Offering of Convertible
Unsecured Subordinated Debentures
TORONTO, ONTARIO--(CCNMatthews - Aug. 5, 2004) -
Not for distribution to U.S. newswire services or for
dissemination in the United States. Any failure to comply with
this restriction may constitute a violation of U.S. securities
law.
Northland Power Income Fund (the "Fund") (TSX: NPI.UN) today
announced that it has acquired a 54 MW wind power project to be
constructed in the Gaspe region of Quebec. The acquisition
represents an opportunity to increase the size of the Fund's
assets and to provide diversification with respect to fuel type,
technology, and location. The Manager of the Fund expects that
the investment will be accretive once the project is operational.
The Fund intends to finance the construction phase of the project
in part through an offering of convertible unsecured subordinated
debentures.
The Fund also announced that a syndicate of underwriters led by
CIBC World Markets Inc. has agreed to purchase $65 million
principal amount of 6.50% convertible unsecured subordinated
debentures due June 30, 2011, and convertible, at the option of
the holder, into trust units of the Fund at $12.50 per trust
unit. The offering will be made in all provinces of Canada and is
expected to close on or about August 26th, subject to regulatory
approval. The net proceeds from the issue will be used by the
Fund primarily to partially finance the construction of the
Project. The convertible unsecured subordinated debentures have
not been and will not be registered under the United States
Securities Act of 1933 and may not be offered or sold in the
United States absent registration or applicable exemption from
the registration requirement of such Act.
The Miller Mountain Project (the "Project") is located near the
town of Murdochville, Quebec. Vestas A/S, the largest
manufacturer of wind turbines in the world, through its Canadian
subsidiary, will supply 30 1.8 MW Vestas V80 wind turbines to the
Project, will be responsible for its construction under a fixed
price engineering, procurement and construction contract, and
will provide an extended warranty for the wind turbines,
including availability and power performance, as well as
maintenance services for the first five years of operations. The
Project is scheduled to start construction immediately and be
operational in March 2005. When construction is complete, the
Project will sell all the electricity it produces to Hydro-Quebec
pursuant to the terms of a 21 year power purchase agreement under
which the initial price escalates at 1.5% a year. The Project is
expected to qualify for payments under the federal government's
Wind Power Production Incentive program, of which Hydro-Quebec
will receive half.
The total cost to the Fund of acquiring and constructing the
Project (collectively, the "Transaction") will be approximately
$95 million (the "Transaction Value"). The Transaction is
expected to be financed using the proceeds of the offering of
convertible unsecured subordinated debentures and a $40 million
non-recourse construction and term loan with a major Canadian
financial institution; the Fund's acquisition line of credit will
be used to bridge to the closing of the permanent financing. The
developer of the Project, a company jointly owned by 3Ci Inc., an
experienced developer of wind projects in Quebec, and Northland
Power Inc., will provide construction management services and
will fund any construction cost overruns in return for certain
cash payments at close, an entitlement to the excess of the
Transaction Value over the total actual cost to the Fund of
acquiring and constructing the Project, if any, and an interest
in the on-going cash flows of the Project subordinated to that of
the Fund.
In light of Northland Power Inc.'s role as owner of the Manager
and its involvement in the development of the Project, the NPIF
Commercial Trust ("NPIFCT") Trustees formed a committee of the
independent trustees (the "Independent Committee") who
unanimously determined that the payments to Northland Power Inc.
and the Manager relating to the sale of the Project to the Fund
and their entitlement to cash distributions and management fees
over the life of the Project are fair and reasonable to the Fund,
its affiliates and Unitholders. In making its determination, the
Independent Committee received advice from independent legal
counsel and obtained independent financial advice as to the
fairness and reasonableness of such payments. As required by the
Fund's trust indenture, the investment in the Project was
recommended by the Manager and reviewed and unanimously approved
by the trustees of NPIFCT.
The Manager believes that the investment in the Project conforms
to the Fund's investment objective of producing stable and
sustainable levels of cash available for distribution to
Unitholders from energy-related projects, and meets the Fund's
guidelines for permitted acquisitions.
The Transaction is scheduled to close today in order that Vestas
may be released immediately to commence construction, which
requires a substantial initial payment under the EPC contract.
The Manager of the Fund considers it reasonable and necessary and
in the best interests of Unitholders for construction to commence
as soon as possible to minimize the potential impact of weather
delays on the capital cost and scheduled startup of the Project.
Northland Power Income Fund is a trust whose objective is to
produce stable and sustainable levels of cash available for
distribution to its unitholders from energy-related businesses.
The Fund indirectly owns interests in four combined-cycle
cogeneration power plants that efficiently and cleanly produce
electricity and steam for sale. Two plants are located in
Ontario: the 120 MW Iroquois Falls Facility that has been
wholly-owned by the Fund since its inception in 1997, and the 110
MW Kingston Facility of which the Fund owns 25%. Late in 2003,
the Fund acquired 19% of Panda Energy Corporation and extended a
loan to its wholly-owned subsidiary to provide the Fund with an
interest in two U.S. power plants totaling 410 MW. For the
combined cycle plants, electricity and steam sales are made under
long-term contracts with creditworthy entities to ensure revenue
stability. Long-term contracts also assure the supply and price
of natural gas, which is the Fund's largest cost.
FORWARD LOOKING STATEMENTS
The above disclosure contains certain forward-looking statements,
including in particular the Manager's expectation that the Miller
Mountain investment will be accretive. Although these
forward-looking statements are based upon current expectations
and assumptions, they are subject to numerous risks and
uncertainties, many of which are beyond the Fund's control,
including those that have been disclosed in the Fund's latest
annual report and annual information form, as well as additional
risks and uncertainties that will be disclosed in the prospectus
qualifying the offering of convertible unsecured subordinated
debentures. No assurances can be given that any of the events
anticipated by the forward-looking statements will transpire or
occur, or if any of them do so, what benefits, including the
amount of distributions, the Fund and Unitholders will derive
therefrom.
-30-
FOR FURTHER INFORMATION PLEASE CONTACT:
Northland Power Income Fund Management Inc.
Tony Anderson
Chief Financial Officer
(416) 962-6262 x120
(416) 962-6266 (FAX)
Clean Power Income (CLE_U.TO)
investdb.theglobeandmail.com
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