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WGL Holdings’ (WGL) CEO Terry McCallister on Q4 2015 Results – Earnings Call Transcript

WGL Holdings, Inc. (NYSE: WGL ) Q4 2015 Earnings Conference Call November 16, 2015 10:30 AM ET Executives Douglas Bonawitz – Head of Investor Relations Terry McCallister – Chairman and Chief Executive Officer Vincent Ammann – Senior Vice President and Chief Financial Officer Adrian Chapman – President and Chief Operating Officer Gautam Chandra – Vice President of Business Development, Strategy and Non-Utility Operations Analysts Q – Operator Good morning and welcome to WGL Holdings, Inc., Fourth Quarter Fiscal Year 2015 Earnings Conference Call. At this time, I would like to inform you that this conference is being recorded and that all participants are in a listen-only mode. We will open the conference call for question-and-answers after the presentation. The call will be available for rebroadcast today at 1:00 PM Eastern Time, running through November 23, 2015. You may access the replay by dialing 1-855-859-2056 and entering the pin number of 72356565. I will now turn the conference over to Doug Bonawitz. Please go ahead. Douglas Bonawitz Good morning, everyone, and thank you for joining our call. Before we begin, I would like to point out that this conference call will include forward-looking statements under the federal securities laws. Forward-looking statements inherently involve risks and uncertainties that could cause our actual results to differ materially from those predicted in such forward-looking statements. Statements made on this conference call should be considered together with cautionary statements and other information contained in our most recent Annual Report on Form 10-K and other documents we have filed with or furnished to the SEC. Forward-looking statements speak only as of today and we assume no duty to update them. This morning’s comments will reference a slide presentation. Our earnings release and earnings presentation are available on our website. To access these materials, please go to www.wglholdings.com, click on the Investor Relations tab and choose events and webcasts from the dropdown menu. The slide presentation highlights the results for our fourth quarter of fiscal year 2015 and the drivers of those results. On today’s call, we’ll make reference to certain non-GAAP financial measures, including operating earnings of WGL Holdings on a consolidated basis and adjusted EBIT of our operating segments. A reconciliation of these financial measures to the nearest comparable measures reported in accordance with Generally Accepted Accounting Principles or GAAP is provided as an attachment to our press release and is available in the Quarterly Results section of our website. This morning, Terry McCallister, our Chairman and Chief Executive Officer will provide some opening comments. Following that, Vince Ammann, Senior Vice President and Chief Financial Officer will review fiscal year 2015 results. Adrian Chapman, President and Chief Operating Officer, will discuss key issues affecting our business and the status with some of our principal initiatives. In addition, Gautam Chandra, Senior Vice President of Strategy, Business Development and Non-Utility Operations, is also with us this morning to answer questions. And with that, I would like to turn the call over to Terry McCallister. Terry McCallister Thank you Doug, and good morning to everyone. Today, we’ll briefly look back on the past fiscal year to review our full-year financial results. We will also discuss recent events affecting our business and introduce guidance for fiscal year 2016. I am happy to report to you full-year 2015 financial results that exceeded our initial earnings target for the year as well as our most recent guidance. As shown on Slide 5 of our presentation, we ended fiscal year 2015 with consolidated non-GAAP operating earnings of a $158.2 million or $3.16 per share. This compares to a $139 million in the prior fiscal year of $2.68 per share. This was record income for WGL Holdings and an 18% increase in earnings per share over the prior year. We have now realized a 9% compound annual growth rate and earnings per share since 2011. If you recall, we first established a goal for long-term earnings growth in 2012 when we communicated an expectation of 7% earnings growth over five years from 2011 base. This year we increased our goal to 7% to 10% up of 2014 base. We believe we are establishing a track record of delivering exceptional earnings growth and value for our shareholders. Performance of our utility exceeded initial earnings targets for the year, but utility earnings were slightly lower year-to-year primarily due to higher operations and maintenance expense. The utility results benefited from higher revenues from customer growth, strong asset optimization opportunities and rate recovery related to accelerated pipeline replacement programs. We added approximately 12,800 active utility customer meters in 2015, which represents an overall annual growth of 1.1%. The performance of our non-utility businesses as a whole also exceeded our initial expectations. With both Retail Energy Marketing and Commercial Energy Systems setting new highs in earnings, while the Midstream Energy Services business came in below initial expectations. Our Retail Energy Marketing business performed well with electric margins significantly higher than last year as we forecast at the end of 2014. This business is on a solid path back to long-term historical levels or profitability. In fact this year’s business exceeded those levels. Results from this segment during the fiscal year 2015 exceeded our expectations partially due to specific marketing opportunities that were higher than historical average this fiscal year. Over the long-term, we are still targeting adjusted EBIT for the Retail Marketing Energy segment in the range of $50 million to $55 million per year. The Commercial Energy Systems business delivered a 37% increase in adjusted EBIT compared to last year driven by the utility license distributed generation assets that we now have in place across the country. We now have $500 million in capital invested in this segment and invested a record amount of a $158 million in fiscal year 2015. Turning to Midstream Energy Services, this business underperformed somewhat this year primarily due to lack of optimization opportunities in the marketplace. However, from a long-term perspective, the business accomplished an incredible amount this year announcing the GAIL of transaction and opportunity to invest in a large gathering system and an investment in the Mountain Valley Pipeline. These three developments will create significant shareholder value for many years to come. Turning to fiscal year 2016, in our earnings release Friday, we introduced consolidated non-GAAP earnings guidance for fiscal year 2016 in the range of $3.00 to $3.20 per share. While the midpoint of our guidance reflects lower earnings than our 2015 results, we are solidly within the range of 7% to 10% earnings growth from 2014 results that we established as a goal earlier this year. I’ll now turn the call over to Vince. Vincent Ammann Thank you, Terry. Turning first to our Utility segment, adjusted EBIT for fiscal year 2015 was $235.7 million, a decrease of $9 million compared to last year. The drivers of this change are detailed on Slide 7. We continue to grow and add new meters. The addition of 12,800 average active customer meters improved adjusted EBIT by $5.3 million. Higher results from our Asset Optimization program added $12.1 million in adjusted EBIT. Revenues from new rates in Maryland added adjusted EBIT of $2.6 million as new base rates were not effective in Maryland during the first two months of fiscal year 2014. Higher revenues from our accelerated pipe replacement programs added $9.7 million in adjusted EBIT. The favorable effects of changes in natural gas consumption patterns in the District of Columbia added $5.3 million in adjusted EBIT. These items were offset by higher O&M expenses driven primarily by higher labor and outside services in large part due to the cold weather and employee incentives cost, partially mitigated by lower employee benefit costs. These impacts collectively reduced adjusted EBIT by $28.4 million. Higher appreciation expense also reduced adjusted EBIT by $6.4 million, reflecting growth in our investment and utility plan. Other miscellaneous items reduced adjusted EBIT by $8.9 million. I would also like to highlight the performance of our Asset Optimization program for the full-year. This program generated total of $38 million in adjusted EBIT for the utility this year and also delivered approximately $47 million in benefits to our customers through sharing mechanisms. Asset optimization activity this year will also deliver results in 2016 due to deferred storage earnings which I will discuss further when addressing fiscal year 2016 guidance. Turning to the Retail Energy Marketing segment adjusted EBIT for fiscal year 2015 was $68.5 million, an increase of $57.8 million compared to the same period last year. On Slide 8, you will see that the increase was driven primarily by significantly higher electric gross margins. Natural gas gross margins were also slightly higher compared to the prior year. Electric margins increased by $56.5 million, driven by lower capacity charges from the regional power grid operator PJM as well as lower ancillary cost in PJM. Electric margins in the prior year were negatively affected by adverse market dynamics created by the polar vortex weather event that led to a dramatic spike in ancillary and energy charges. Our internal data indicates an ancillary charges in PJM in January 2014. The procedural changes that PJM implemented in the wake of the polar vortex began to take effect in late fiscal year 2014 and continued into fiscal year 2015. The ancillary costs were incurred this year where generally in line with cost levels seen through the – during the three years before the spike caused by extreme weather. In the natural gas business, gross margins were $2 million higher, due to lower natural gas purchase cost and favorable gas supply and pricing opportunities. As stated throughout the year, our Retail Energy Marketing business has increased its focus on large commercial and government account relationships. As a result the overall number of electric and natural gas accounts both declined compared to the prior year. As of September 30, we have approximately $138,000 electric accounts and $144,000 natural gas accounts declined to 15% and 8% respectively. However, indicative of our revised thorough focus electric volumes increased 3% versus the prior year and natural gas volumes only decreased 1% versus the prior year. The increase in commercial loan in both electric and natural gas offset the decline in mass market customers on a biometric basis. Operating expenses for fiscal year 2015 were slightly higher than the prior year. Next, I will move to the Commercial Energy Systems segment, adjusted EBIT for fiscal year 2015 was $16.8 million compared to $12.3 million last year. The increase reflects growth in distributed generation assets in service, as well as higher income from state rebate programs for certain projects. These favorable variances were partially offset by higher operating expenses, including fixed expenses to support future growth. Our commercial distributed generation assets generated over 147,000 megawatt hours of clean electricity during the fiscal year 2015, which is sold to customers through power purchase agreements. This represents a 73% increase in megawatt hours compared to fiscal year 2014. As of September 30, the Commercial Energy Systems segment owned $369 million of operating distributed generation assets. In addition, our alternative energy investments, which include ASD, Nextility and SunEdison represent $128 million in capital investments since inception. In total, we now have approximately $500 million invested in distributed generation assets. Also note, that as of September 30, our assets in service have generated over a $122 million in investment tax credits and grants. These credits and grants are recognized as reductions in tax expense by amortizing them over the useful life for the underlying assets, which is typically 30 years. Next, I’ll move to the Midstream Energy Services segment. Results for the fiscal year 2015 reflect an adjusted EBIT loss of $3.6 million, compared to adjusted EBIT of $5.1 million last year. The decrease primarily reflects lower storage and transportation spreads in fiscal year 2015, partially offset by lower development expenses and higher income related to our pipeline investments. Results for our other non-utility activities reflecting adjusted EBIT loss of $4 million compared to a loss of $8 million for the prior year. The improvement is primarily related to lower business development and legal expenses. I’ll discuss interest expense on a consolidated basis. Interest expense increased to $50.5 million this year compared to $37.7 million in the prior year. The increase was primarily driven by interest expense on long-term debt issued by both Washington Gas and WGL. I’ll now move to our initial guidance for fiscal year 2016 earnings. We will continue to use adjusted earnings before interest and taxes or adjusted EBIT to provide guidance on the segment level. Guidance regarding non-GAAP operating earnings at the consolidated level was still be provided using an expected range of earnings per share. As Terry have stated earlier, our consolidated non-GAAP earnings guidance for fiscal year 2016 within a range of $3 to $3.20 per share. This earnings guidance includes dilution from the planned issuance of equity in fiscal year 2016. For the utility as shown on Slide 11, the favorable effect of the continued growth of new customers will improve utility results in 2016. In addition, increased revenues from accelerated investment programs will improve utility earnings, lower operating and maintenance expense is also forecast. These improvements will be offset by lower asset optimization revenue and higher depreciation expense due to the increased plant additions. Based on deferred storage earnings from this winter and other hedging opportunities deployed $13 million of the adjusted EBIT we expect from utility asset optimization in fiscal year 2016 is already locked in. The $20 million of total asset optimization EBIT forecasted in fiscal year 2016 assumed normal weather. As shown on Slide 12, our non-utility guidance reflects an increase in electric margins, a decrease in natural gas margins and higher operating expenses at our Retail Energy Marketing business. Electric margins are forecasted to be higher due to the growth in the large commercial segment. The increase in volumes will be partially offset by higher capacity costs that negatively impact the timing of margins through the first eight months of the fiscal year. Gas margins are expected to be lower as several highly favorable items that occurred in fiscal year 2015 are not expected to recur including higher levels of retail and wholesale portfolio optimization as well as declining prices throughout the latter half of fiscal year 2015 that positively impacted natural gas margins. The forecast for fiscal year 2016 is based on historical levels of these activities and benefits. Operating expenses in this segment are expected to increase primarily driven by the increase in commercial electric volume. Higher costs related to volume include broker expense, bad debt expense and increased billing services and staffing costs. The Commercial Energy Systems segment is forecasting higher earnings in fiscal year 2016. In fiscal year 2015, our distributed generation assets produced 147,000 megawatt hours of electricity. In fiscal year 2016, we expect our distributed generation assets will produce over 230,000 megawatt hours of electricity representing a 50% increase in generation. Our Midstream Energy Services segment is forecasting higher earnings at fiscal year 2016 of the $15 million in additional EBIT expected in this segment approximately $6 million is driven by improved storage and transportation spreads, $6 million is related to higher earnings from our pipeline investments and $3 million is driven by decreased expenses primarily non-recurring transaction fees. Please note that the increase related to pipeline investments assumes that our option related to the gathering system will be exercised during the first half of fiscal year 2016. I’ll now turn the call over to Adrian for his comments. Adrian Chapman Thank you, Vince and good morning everyone. I am pleased to provide you with an update on our operations and regulatory initiatives. In the District of Columbia, the settlements have resulted in a surcharge mechanism to recover accelerated pipe replacement investments included requirement to the filings of two rate cases, one no later than August 1, 2016 and the second no later than April 30, 2020. Accordingly, we currently planned to file a rate case during the first half of fiscal year 2016. The anticipated filing will allow us to rebalance our revenues, expenses and other utility investment in the District of Columbia. One item in particular that supports the rate case is our need to recover previously deferred pension tracker costs that were not addressed in our last rate case. As a reminder, our last rate case in the district was filed in February 2012 with rates effective in June 2013. The Public Service Commission in the District of Columbia has no time limitation in which it must make decisions regarding modifications to base rates. The commission targets resolving pending rate cases within three months of the close of the record in the case. In Maryland, you may recall that we received approval in July of an amendment that expands our currently approved STRIDE plan. We received approval to spend an additional $4 million to $5 million per year on distribution and transmission replacements through 2018. However, the commission excluded from the accelerated recovery program cost related to transmission system replacements physically located outside of Maryland. This treatment was contrary to how common transmission related costs have been recovered in rate cases. Washington Gas filed an appeal with the circuit court from Montgomery County on July 30 to challenge the PSC decision to deny recovery through the surcharge mechanism of cost related to transmission system replacement projects located outside of Maryland. On August 10, the Maryland Office of People’s Counsel filed a notice with the circuit court that it intense to participate in the appeal case. Washington Gas filed an initial brief on October 23, the responsive briefs of the PSC and Office of People’s Counsel are due on November 30. In Virginia, Washington Gas entered into an agreement with Energy Corporation of America in May of this year to acquire natural gas reserves through non-operating working interest in 25 producing wells located in Pennsylvania. Virginia law now allows local distribution companies to recover a return of and return on investments in physical gas reserves that benefit customers by reducing cost, price volatility or supply risk. On May 12, Washington Gas filed an application with the SEC for approval of the gas reserves purchase agreement as part of a natural gas supply investment plan. On November 6, the SEC of Virginia issued an order denying the application by asserting that due to questions regarding issues such as the certainty of volumes delivered and the reasonableness of pricing forecast we used to establish benefits to customers the gas reserve application did not meet the public interest standard. The SEC of Virginia did not close the record in the proceeding and we are reviewing the order with our gas reserve counterparty to determine whether there is an opportunity to file an amendment to the reserve proposal within the 60-day period provided under the law. The SEC will then have 60 days to review and issue a decision on such an amendment. I would also like to update you on the WGL Holdings capital spending forecast. Our current forecast as shown on Slide 14 in the presentation cause for us to spend $835 million in 2016 and $3.3 billion cumulatively in the 2016 to 2020 timeframe. This represents an increase of $275 million for 2016 compared to our prior forecast and an increase of $520 million for the full-year period of 2016 through 2019. The primary drivers of the increase for fiscal year 2016 include $178 million increase related to our pipeline investments primarily related to the Mountain Valley pipeline and the gathering system option and $100 million increase in distributed generation projects at our Commercial Energy Systems segment. The primary drivers of the increase over the extended period are the three previously mentioned items as well as $115 million in additional spending related to our utility accelerated recovery program. For our utility the 2016 to 2020 period includes approximately $650 million of plant expenditures to meet the requirements of the accelerated pipe replacement programs in place in all three of our jurisdictions. Finally, a quick update on the development related to our utility operations. Some of you may recall Washington Gas outsourced many of its customer service, information technology and other functions in 2007 through a multi-year business process outsourcing agreement with Accenture. We’ve recently signed a new agreement with Faneuil, a call center services company that specializes in customer care for the Utility industry. Through this agreement, more than 200 new jobs will be established in Virginia as Washington Gas transitions from offshore customer service operations to two call centers in Hampton and Martinsville, Virginia by the end of next year. Faneuil has a well-established track record of success in the utility sector and I am confident that we have selected our partner that will help us achieve the new heights in customer satisfaction. I would like to now turn the call back to Terry for his closing comments. Terry McCallister Thank, Adrian. I would like to now highlight a few recent developments and provide an update over the status of our midstream and distributed generation investments. First, an update on our investments in the Constitution Pipeline project. We continue to wait with our partners for a permit from the New York State Department of Environmental Conservation. As of September 30, WGL Midstream has invested approximately $29 million in the Constitution Pipeline project based on updated cost estimate, WGL Midstream now expects to invest $83 million in total for its 10% share in the project. Regarding our investment in the Central Penn line, the Central Penn line is a Greenfield pipeline segment of Transco’s Atlantic Sunrise Project. The project is on track and the development activities are proceeding as expected. The Central Penn line has a projected in service date in the second half of calendar year 2017. WGL Midstream will invest approximately $412 million in the project as of September 30, our subsidiaries have invested approximately $31 million. Next I’ll provide an update on our investment in the Mountain Valley pipeline project. Mountain Valley pipeline is a 300 mile pipeline in West Virginia and Virginia that will help to meet increasing demand for natural gas in the Mid-Atlantic and Southeast markets. This project is on track and development activities are proceeding as expected. On October 23, Mountain Valley pipeline formally applies to the FERC for authorization to build the pipeline. Pending regulatory approval, construction has anticipated to begin at late 2016 with full and service targeted for the fourth quarter of calendar year 2018. Also please note that on October 1, RGC Midstream acquired a 1% interest in Mountain Valley Pipeline LLC and Roanoke Gas Company will become a Shipper on the pipeline. WGL Midstream will invest between $210 million and $245 million in the Mountain Valley Pipeline project. As of September 30, WGL Midstream has invested approximately $10 million. Finally, an update on an additional opportunity to invest in infrastructure that we first announced last December. As we have discussed previously, we have an option for 30% interest and a $400 million plus gas gathering system in West Virginia, but gathering system will help move gas out of the production fields of West Virginia to an interstate pipeline system for transportation to the Mid-Atlantic region. Construction is nearly complete substantially within our original cost projection. Therefore, our guidance assumption includes the exercise of this option during fiscal year 2016. Turning to our Commercial Energy Systems business, our portfolio of distributed generation assets continue to grow in fiscal year 2015. As of September 30, we have 130 megawatts of capacity in service with an additional 40 megawatts contracted are under construction. We invested $158 million in capital this year which is a 46% increase over last year. And as Adrian mentioned, we plan to invest an additional $200 million in fiscal year 2016. We see a strong pipeline of potential business across the country. And we’ll continue to invest in utility-like distributed generation assets that will generate long-term shareholder value. Our recent agreement with the Architect of the Capitol demonstrates the strong competitive position of diversified energy solutions portfolio and well established position in the government and commercial segment. The Architect of the Capitol is responsible for the maintenance operation and new development of over 17 million square feet of federal buildings. The Architect of the Capitol has selected WGL Energy Systems to develop 7.5 megawatt natural gas co-generation systems for its electricity and heating and cooling requirements. This innovative solution will deliver significant energy efficiency benefits and will help support the federal government’s sustainability goals while reducing its carbon footprint. Regarding sustainability goals, I’d like to provide a quick update on WGL’s accomplishments. We continue to make excellent progress in achieving the aggressive sustainability goals that we set for ourselves four years ago. We are on track to achieve an 18% reduction in Greenhouse gas emissions for every unit of natural gas delivered by our 2020 target base. I am also very pleased to report that given progress to date we expect to achieve the 70% reduction in Greenhouse gas emissions from our fleet facilities earlier than our 2020 target date, reducing our carbon footprint and simplifies the fact that we are using energy efficiently while also improving safety and reliability. As we closed the 2015 fiscal year and looked to 2016, I am proud of our progress and excited about the future. We delivered exceptional financial performance this year delivering earnings per share of $0.36 higher than our initial guidance. Our guidance for 2016 reflects higher utility revenues driven by strong customer growth and accelerated replacement programs. Our guidance for 2016 also reflects the growth potential we see in our non-utility businesses as both energy systems and midstream will began to generate a larger share of total non-utility earnings creating a balanced non-utility portfolio. While we already have a very active capital spending plan in place over the next few years, we continue to look for opportunities to invest in businesses and projects that are in line with our strategic vision and that will add shareholder value with consistent long-term earnings. We are well-positioned to deliver on the 7% to 10% earnings growth target introduced earlier this year and we look forward to providing additional details during our analyst meeting scheduled for March 2016 in New York. This concludes our prepared remarks and we’ll now be happy to answer your questions.

Alterra Power’s (MGMXF) CEO John Carson on Q3 2015 Results – Earnings Call Transcript

Executives Ross Beaty – Executive Chairman John Carson – CEO Lindsay Murray – Interim CFO Jay Sutton – VP, Hydro Power Paul Rapp – VP, Wind and Geothermal Power Analysts Rupert Mercer – National Bank Financial Jonathan Lo – Raymond James Marin Katusa – KCR Fund Mike Plaster – Salman Partners Aram Fuchs – Fertilemind Capital Alterra Power Corp ( OTCPK:MGMXF ) Q3 2015 Earnings Conference Call November 11, 2015 11:30 AM ET Operator Welcome to the Alterra Power Corp Third Quarter Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to Ross Beaty. Please go ahead. Ross Beaty Thank you very much operator and good morning ladies and gentlemen and welcome to Alterra’s Q3 financial and operating results conference call. It’s an absolutely beautiful day in Vancouver today between storms I should add. We have a room full on people of Alterra’s senior management team with John starting [ph] just a moment. But I first to recognize we’re doing this on National Holiday in Canada for Remembrance Day, remembering [indiscernible] and also I want to remind everybody that we do have forward-looking statements today and our materials will be saying something’s about our future plans and we do seek Safe Harbor for these comments. Q3 was a reasonable quarter for us, had a lot of normal operational results I would say, no big surprises. I will go through those of course and the real highlight was continuing successful development of our Shannon and Jimmie Creek development projects and those are really progressing well and you’ll get a flavor of those as we go through the presentations today. So without any further comments from me I’d like to turn the meeting over to John Carson, Alterra’s Chief Executive Officer. John? John Carson Thanks, Ross. I echo your comments about the quarter and we are indeed very excited about the advancement of Jimmie Creek and Shannon. This time in the room with me I’d like to introduce folks on the phone, we’ll have Lindsay Murray, our interim CFO who will lead the financial discussion along with Ben King [ph]. Then on the engineering side we have Paul Rapp, of Head of Geothermal and Wind and then Jay Sutton, our Head of Hydro. Also in the room with me is Shannon Webber, our General Counsel, Murray Kroeker, who heads up our solar activities and John Schintler, who is our VP of Project Finance. And from Iceland joining us is our CEO of that business, Oscar Martison [ph]. So we’re fully equipped to answer questions today and we look forward to fielding any questions that you may have. With that I will like to start the discussion. Over to Lindsay for wrap up of our financials. Lindsay Murray Thanks, John. As you all have seen from our financial statement and MD&A released yesterday, Q3 was another great quarter for Alterra, our operating facilities achieved fleet wide generation of 97% of budget while our construction projects progressed on schedule and on budget. Although our generation was down quarter on quarter at total amount Toba Montrose and in Iceland our operating facilities have achieved 101% of budgeted generation for the nine months ended September 30, with Toba Montrose leading the way. Toba has had record high generation for the year meeting its annual generation target on October 8, and generation subsequent to this remaining strong. For those of you that are following the presentation on our website. I refer you to slide 4, third quarter consolidated results. Consolidated revenue and EBITDA decreased 25% and 17% respectively due to foreign exchange, the sale of so Soda Lake in January 2015 as well as decreased generation at Toba Montrose and Reykjanes plant. Although our operating results are down quarter-on-quarter this is largely due to foreign exchange as the Canadian dollar weakened 19% and the Icelandic krona weakened 13% against the U.S. dollar. You will see on slide 5 our operating results in each entity is functional currency which are down quarter on quarter but significantly higher than in our reporting currency. I’d also like to highlight what an amazing quarter Dokie had, in Dokie’s functional currency the Canadian dollar, revenues and EBITDA increased 38% and 71% respectively due to higher winds coupled with lower repair and maintenance costs. Turning back to the consolidated results. You will see equity income increased significantly compared to the third quarter of 2014. As a reminder we closed our project financing and a partnership agreement in the second quarter of 2015 with respect to our Shannon project and have been accounting for the project as an equity investment since then. As a result equity income increased $5.2 compared primarily due to a large non-cash gain at Shannon associated with movements in the power hedge. Other significant changes against the comparative quarter continue to be movements in other income and expenses which declined by 6 million against 2014, this decrease is predominantly due to noncash items including the unfavorable movements in foreign exchange and the fair value of the embedded derivative due to decrease forecasted future aluminum prices. The end result for the quarter was a profit before tax of $1.4 million versus 2.4 million in the comparative quarter. Moving on slide 6 and 7 show that the company’s net interest in generation revenue and EBITDA of our operating assets, these numbers reflect the company’s 66.6% interest in HS Orka, 40% interest in Toba Montrose and 25.5% in Dokie. Turning to the balance sheet on slide 8, total assets decreased 4% to 600 million since December 31. This is due to the sale of Soda Lake, repayments of loans and foreign exchange. Loan repayments in the period amounted to 13.9 million with a majority of that being at HS Orka. Current liabilities look uncharacteristically high this quarter due to the classification of the ISK denominated holding company bond in Sweden from long term to current as it is maturing in July 2016. The company plans to retire this bond through a refinancing and negotiations are well underway. Interest of 1.9 million was paid on this holding company bond during the quarter. The company’s revolving credit facility was also repaid in full during the quarter and the company currently has CAD20 million available under this facility. The reclassification of the bond and spend associated with the construction of Shannon has also impacted our working capital which is sitting at a deficit of 49.4 million compared with working capital 46.2 million at December 31. If we were to exclude the short term bond which is expected to be refinanced working capital of 3.2 million. Well speaking about the balance sheet I’d like to draw your attention to the embedded derivative, the derivative rose due to the power sale contracts in Iceland that are linked to the price of aluminum which expire in 2019 and 2026. This balance is currently a $59 million liability with the noncash loss of 5.5 million recorded for the quarter in the statement of operations. The accounting treatment for this derivative is complex but I’d like to remind users that the liability is headed toward zero as the contract approach maturity and the gains and losses seen in the income statement are non-cash in nature. These gains and losses arise from marking to market the future prices of aluminum each quarter. That concludes my update on the third quarter results and I’ll hand it back to John. John Carson Thank you, Lindsay. I appreciate that and at this time we will turn it over to discuss our operations beginning with Jay Sutton, our VP, Hydro Power. Jay, over to you. Jay Sutton Thanks, John. Referring to slide eleven, TMGP had a successful third quarter of 2015 producing 375 gigawatt hours of versus our forecast of 380 gigawatt hours. The extended hot summer and rainfall in September results in continuing high flows allowing team TMGP to achieve 99% of it’s forecast in the third quarter and 111% of its forecast generation year to date. Our strong generation has continued into the fourth quarter and we achieved a 127% of the forecast for the month of October. As Lindsay mentioned for 2015 we had reached our full year forecast generation on 8th of October which is 10 days ahead of 2014 dates and is the earliest since [indiscernible] start operations in 2010. At the plants the third quarter are generating period so we performed a routine maintenance and started preparing for the upcoming order season. We continue to make improvements on the plants to increase the amount of water we’re capturing and decrease the amount of sediment entering the facilities. Our crews continue to operate and maintain the plant safely and within our environmental commitments and we have now operated for over two years without a recordable incident for employees or our contractors. That’s all for Toba Montrose, John. John Carson Thanks, Jay. I would like to remind folks that the same exact crew that works on our Toba Montrose plant has done such an incredible job. We will also be managing and operating the Jimmie Creek plant. So, good news all around there and to the asset continues to perform exceptionally well, we had a record breaking year and it looks like we’re going to break last year’s record this year. Paul, over to you for wind. Paul Rapp Thanks very much, John. So moving to slide 12 for our Dokie operations, The Dokie wind farm had a great third quarter and we produced. 78.4 gigawatt hours of electricity or 109% of the planned generation. Production year to date is a 100% of plan and generation is very strong month to-date in November. Vestas, our service contractor at site has completed all their scheduled maintenance for the year and this is going to help us maximize production for the remainder of the year. And overall the Dokie facility continues to operate well, no safety or environmental issues. No equipment issues and continuing to exceed our availability targets. John Carson Thank you, Paul. And we’re really cheering the generation on at Dokie. If we achieve 100% by years end we stand to earn in and earn out of $750,000 so we’re all cheering for that over here in the business. With that let’s look at our geothermal side. Paul? Paul Rapp Sure. So at our Svartsengi and Reykjanes plant in Iceland, both plants performed well in the third quarter and production was at 97% of plan where 96% year-to-date, production is below plan due to the exceptionally high hot water demand we had an early 2015 due to the very cold weather meaning that less steam is available then for electricity production and also due to reduced production at the Reykjanes plant. We’ve seen a decline in the reservoir pressure at Reykjanes and we have work in progress that we’ve reported on previously to increase reinjection to provide the needed pressure support for the field. So further on that, work is nearly completed on a pipeline at Reykjanes s which will transport geothermal fluid from the power production to the previously drilled RN33, 34 drill hole area north of the plant for reinjection. This new reinjection site will provide pressure support for the Reykjanes geothermal field and will increase the long term stability for the plant. At Svartsengi, earlier this week we completed the first of two planned production drill holes the first holes for Svartsengi 25 is a makeup hole to provide additional steam to the plant and logging testing in that hole is underway early indications are very good for that hole. The second hole Svartsengi 26 is an exploratory hole to look to expand the field and drilling about second hole will commence shortly after the testing on Svartsengi 25. Also at Svartsengi we continued work on a new fluid disposal pipeline to the ocean and including completion of the outlook works at the seashore and construction of the pipeline and this pipeline will be completed in Spring of 2016 and will allow better control of the fluid discharge at Svartsengi and will allow for increased power production at the plant. And back over to you John. John Carson Thanks, Paul. Let’s look at our construction assets both of which are been on time and on budget. Let’s get to the good news starting with you, Jay. Jay Sutton Okay. So referring to slide 14, contracts at Jimmie Creek made great progress in the third quarter. At a high level we’re expecting to complete the civil work on the project by the end of this year and continue the electrical and mechanical installations through to the spring when we will begin our commissioning. At the intake we’ve completed the concrete for the intake and rubber dam in our schedule to divert the flows back into the new and take structure next week and finish the overflow spillway by the end of this year. As you can see in the photo on the slide the rubber dam down was commissioned in October and the installation and the commissioning of the gates have started. On the Penstock construction over 95% of the Penstock is complete, on the final two pieces are scheduled to be installed by the end of November. The contractors install all of this Penstock on the challenging steep section is commenced remediating to site. Finally down to powerhouse, the installation of the generating [ph] equipment has started with the installation of the housings and distributor, both generators have arrived in Vancouver and will be delivered to the site at the end of November. All the switchyard equipment including the transformers have been stalled and the contractors now starting to pull and terminate the cables. Project has achieved a high standard of quality, safety and environmental compliance and it remains on budget and schedule and we’re looking forward to generating electricity in the third quarter of 2016. Thanks, John. John Carson Paul, Shannon? Paul Rapp Sure. Moving on to slide 15 for our Shannon wind projects look at North Texas, construction at Shannon has moved along very well and the project is very close to reaching commercial operations. We remain on budget and on schedule at Shannon. As of this morning we have only three of the total of 19 turbines left to complete erection and the project cranes are at the final turbine locations, commission and energization of the turbines is progressing well behind the turbine erection and the remainder of the balance of plant is completed. And we expect to reach commercial operations at Shannon in early December. At that point our tax equity — our $212 million tax equity fund will close and the proceeds from this funding will pay off our construction loan. Things are going very well at Shannon. John Carson Thanks, Paul. Really happy to hear the construction news on both fronts. With that we’ll take you to slide 16, and just a bit about looking ahead. First of all what we’re focused on is wind development with two prongs, number one greenfield development on some projects in United States our team is actively working on right now and number two multiple new development projects that we’re currently analyzing for prospective acquisition etcetera. So two different methods of development there, but we’re active we haven’t actually added any team members, we’re all just working very hard to get these new opportunities. Number two, as we mentioned on our last call we’re also advancing multiple hydro development projects not only here in our own field here in British Columbia, also in Iceland and other places so team remains very active and the photograph that you see on the slide is actually work that’s being done at our Tahumming site, a beautiful site in British Columbia that are type of run a river projects can work very well and are very unobtrusive. Next we are continuing to work on that solar opportunity we mentioned on our last call and hoping that we can achieve success there and finally we did have a blow come against us down in South America we had planned to begin drilling this South American Summer it’s going to be moved until next South America summer, our partner elected to make that delay. So in the meantime we and they are continuing to work on engineering and environmental permitting and other activities. So we are fully remaining busy we’re not hanging up the [indiscernible] by any stretch, we are merely delaying that program for a year. So that’s where our focus is today. We love the fact that we’re developing and growing our ownership of capacity here and generating more clean power. There are headwinds in the business, things like lower oil prices make it more difficult to get new projects but we know and believe that with our skills for development and ability to step into a project and make it happen. As we’ve proven multiple times, we know that we will get new growth opportunities and we’ll be telling you about those as they come. With that Ross, I will turned it back to you. Ross Beaty Thanks, John. I think I’ll end it there as well and open the call to questions now. Thank you very much, Operator. Question-and-Answer Session Operator [Operator Instructions]. and your first question will be coming from Rupert Mercer of National Bank Financial. Please go ahead. Rupert Mercer Wondering if you could give us a little more color on the South Toba projects that you’re looking to acquire if you can talk a little about the economics of those projects maybe a little color on what permitting might be required to bring them to the point of construction and how long could it take to get those to market from where you stand today? John Carson Sure. So silver [ph] projects are located under a transmission line. There just south of the Toba inlet. We expect them all to be between 10 and 15 megawatt so which fit under the standing offer program that BC Hydro offers they’re very early in the development phase so we have to do hydrology work and environmental work on them still so I would suspect that they would be at least three to four years out and we would like to put them on after our Tahumming project center. So right now we’re looking at Tahumming starting hopefully in 2017 and then we would look at these South Toba projects to come in line after that once completed. Rupert Mercer And how much excess liquidity does the company have today to fund to organic growth or project acquisition? John Carson Now let me start by answering that by saying that we have a lot of financial dry powder that we have not tapped in the company. We well publicized the fact that our original credit agreement with AMP Capital Partners had a Tranche C [ph] that we never closed on. We deliberately chose not to, we felt that we could actually perhaps get a larger amount if and when we needed it. So what we’ve done is we’ve kept that dry powder dry, it remains poised and they are anxious to move ahead and grow that loan if we wanted to. There are other financing options that we could look at as well and we’ll look at. We also have had a good appreciation on our equity side. So we feel as if we have a good liquidity all around in the business and a lot of financing capacity to tap. Operator Your next question will be from Jonathan Lo at Raymond James. Please go ahead. Jonathan Lo Can you talk about potential dividend? Last quarter you said maybe you might have an update this quarter? John Carson There’s no new update. What we’re looking at is something which we could roll out in 2016 in sometime, but it’s still very much an active discussion for us. Jonathan Lo And is there a ramp up period for Shannon or once December comes, commercial operation is that like fully running or is there period of like six months or something that or? Paul Rapp Yes there is no ramp up, we will put all turbines in service and we will be fully operational at that point, sometime in December. John Carson Yes, should be full steam out the gate. Operator Your next question will be from Marin Katusa of KCR Fund. Please go ahead. Marin Katusa On page 19 of your MD&A you quite touched on John, regarding the Tranche C, what would that look like — what are we talking about size wise, and more cost to that capital and I’m assuming that that would go either towards potentially the Canadian projects for U.S. but I’m wondering what that cost of capital would look like? John Carson You will recall in the original facility with AMP, we were in mid-7s on all in cost to capital until we swapped it out. We swapped it up to about 8.5% and that’s where that sits today. To us that was an acceptable cost of capital and I’ll remind everyone that that piece of financing accepted construction risk so it was a little higher than the others you might see. Now having Shannon put into operation everything will be — have been significantly derisked. So one could contend that if we were to go out and refinance or renegotiate with AMP we could probably get to significantly lower cost of capital than what we experience there. If you look around at other financings in this space for derisked projects i.e. operating assets, assets that are operating well you’ll see that probably you’ve got at least a couple of 100 basis points of headroom on that AMP piece. So long term we think we have a lot of different options to look at, we enjoy the relationship with AMP and we certainly plan to continue that. But we’ll see what the future holds just in terms of when we finance. We’re mindful lastly that the Shannon wind farm is fully outside of that facility and is again part of the dry powder that we’d have to finance from. Marin Katusa Okay. Now second question regarding the eco-logo [ph] credit with the liberals coming in, I’ve talked to a couple of government that expect some new infrastructure incentives or stimulus however you want to call it. Have you guys touched base with any of the federal legislators regarding what the evolution of the eco-logo credit will be? John Carson No we haven’t, Marin. Marin Katusa Okay. I’m just wondering if that will change Dokie 2s destiny at all? John Carson Dokie 2s destiny is significantly impacted by BC Hydro’s needs for power, not for anything else really and right now BC Hydro is pretty full up with development of the Site C [ph] project. For the time being anyway and the real change in BC’S energy demand is going to come from either development of the LNG business and/or advancement of other large load sources like electric vehicles, new mines that kind of thing. Marin Katusa My last question is regarding Iceland, looking at the expansion from a 100 megawatts to 180, any updates on how the tie-in is going or how you expect to move — what’s the next 12 to 18 months look like on that expansion program and also the arbitration status? John Carson We have Oscar Martinson on the phone, Oscar do want to give a quick run through some of our growth projects in Iceland and how they look over the next 12 months? Unidentified Company Representative Absolutely. First of all we have been working on bringing one of the two steps in expansion close to construction and that is a matter of very few months now, people are excited to move on with that [indiscernible]. Then we’re working actively on some smaller hydro projects aiming to start construction of one of these in 2016. We’re just about getting ready and full permitted for exploration drilling at geothermal [indiscernible] and we’re working on few other projects in hydro a little bit further out in time or development status as of now. So hopefully starting construction with two projects during next year. John Carson And on the question regarding arbitration, the arbitration is in progress, the hearing will be next Spring and it’s very much proceed in accordance with the procedures for typical international arbitrations. Operator And your next question will be coming from Mike Plaster at Salman Partners. Please go ahead. Mike Plaster Just continuing on with HS Orka, the new 32 megawatt PPA that you announced, are able to give any more detail on that in terms of when it might get underway and how you sort of meet that additional supplies from some of the additional construction work? John Carson Right, no at this time really we’re — it is subject to several conditions that need to be fulfilled first. We’re really not divulging in any other detail that’s not relevant yet to discuss those details so that’s really just where we’ll leave it for now on that contract. Mike Plaster Presumably it doesn’t have any implications though for the arbitration proceedings at this point? John Carson No. Mike Plaster And just I guess back at the corporate level. Are you able to provide some detail on how your CapEx budget is shaping up overall for 2016? John Carson CapEx on non-Iceland side is really next to zero until and when we make a new project announcement for example if we move forward on the project in South America, Chile that would indeed jump onto the screen and we’d have all the details and good economics around that, but moving over across the pond to Iceland. We are still completing some capital projects which we can get into in detail with Oscar if you would like but we’ve already mentioned them for example the new effluent system as far as singing and the new rejections at Reykjanes, those projects will be either wrapped up right at the end of the year or will extend a bit in 2016. Any other larger project for example the Reykjanes 4 project which Oscar mentioned will likely — you know first of all be pushed into 2017 or if it’s a — that would be a subsequent after much research and analysis. So that’s what’s on cap for CapEx for the company right now. Mike Plaster Okay. And on the Iceland ones are you able to sort of quantify what we might expect next year? Jay Sutton I would say not yet. We are working very actively. I was in Iceland day before yesterday to meet with the team and the board on this, it’s going to be a very significant program that we expect going forward for the next few years. They’ll be coming here next week, we’re going back there in December so we’re really very active in that area right now but we haven’t sort of finalized anything for the market, we will let you know as soon as we can. John Carson That’s right, we’re working on it right now. Operator Your next question will be from Aram Fuchs at Fertilemind Capital. Please go ahead. Aram Fuchs Couple of questions, John you’re able to really come in to Shannon and show value there. I’m curious with all the yield-cos now coming in with very cheap capital, what you see you know without showing your hand what you see as a strategy to get U.S. development because the power prices I see don’t seem to be too attractive. So can you just talk about your strategy there? John Carson There is a lot of variation that we’re seeing Aram, in power prices. You’re right generally it’s a challenge to get to the kind of return levels that we want to get to and we have as I’ve referenced earlier made some acquisition attempts in the last year we didn’t win them all and we were beaten by some yield-cos at various times. You’ve probably seen though like we have that yield-cos are suddenly faced with a big question mark and the economics and the growth stories that they had been called into question and their stocks have tumbled significantly since about mid-year. So I think that they are now retreating to the sidelines in terms of project acquisition, that doesn’t mean that everything’s going to turn back to the way it was. There are still lots of appetite amongst infrastructure investors etcetera who aren’t public, who don’t have the yield-co story overhang that currently exists. So we don’t think that all the competition is going to suddenly head for the exits but I think there will be some easing from the froth or the frenzy I guess you’d say that we faced. So we feel a little confident. We actually feel like going back and checking on a couple of opportunities that we pursued vigorously this year and we’ll see what that does. So I feel good about our ability to get projects and I feel like the what we’ve faced in the market this past year that was daunting is going to subside a bit. Aram Fuchs And then this might be for you or Oscar, but can you just talk about — it was nice little surprise to have that pressure by PPA in Iceland and seems like the demand there might be an uptick in demand in Iceland and I was wondering is that true and just talk about why that might be when you don’t see demand increases in other jurisdictions? John Carson We won’t be able to talk with too much given, we’ve got this arbitration with an order all coming, but maybe you can put some context on the Icelandic market together Oscar and provide what you can. Unidentified Company Representative First of all, as we would after class post-2008 was a time of very little investment and development within the different industries and services. Now we have totally changed the economic client, there is a lot of investment going on. Tourism booming, different industries are doing well and the silicon industries are investing, the data centers are developing also and even new ones popping up. This all needs power. The power production industry as such has not picked up in the same pace mainly because the time to develop a power project is much longer than to develop industrial project. So the optimism [ph] is quicker to develop than the producers and this is part of the reasons for there is shortage foreseen in the market, buyers are lining up and there is a great opportunity now to produce more and sell at higher prices than before. This is kind of the short version of the story. Operator [Operator Instructions]. And at this time Mr. Beaty we’ve no further questions registered. You may proceed. Ross Beaty Very good. Thank you, Operator and again thanks to everybody who joined us today and asked questions and if you’ve any further ones by all means contact us and we will do our best to answer further questions over the telephone. Thanks again for joining us and good day. Operator Thank you, sir. Ladies and gentlemen this does conclude your conference call for today. We want to thank you again for participating and ask that you please disconnect your lines. Have yourselves a great day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. 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