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Press release from Marketwire

Macquarie Power & Infrastructure Income Fund Announces Third Quarter Results

Tuesday, November 02, 2010

Macquarie Power & Infrastructure Income Fund Announces Third Quarter Results17:35 EDT Tuesday, November 02, 2010TORONTO, ONTARIO--(Marketwire - Nov. 2, 2010) - Macquarie Power & Infrastructure Income Fund (TSX:MPT.UN)(TSX:MPT.DB.A) ("MPT" or the "Fund) today reported unaudited results for the quarter ended September 30, 2010. The Fund's Management's Discussion and Analysis and unaudited financial statements for the quarter are available on the Fund's website at www.macquarie.com/mpt and on SEDAR at www.sedar.com. "Overall, the Fund's businesses continued to perform well in the third quarter with high availability across the portfolio and higher power rates at Cardinal driving a 5.7% increase in revenue," said Michael Bernstein, President and Chief Executive Officer. "While our portfolio is operationally sound, our results continued to reflect the impact of the Leisureworld sale and higher than normal administrative costs. Notably, when Leisureworld distributions are excluded from the prior year period, our adjusted EBITDA and funds from operations in the third quarter of 2010 continued to show an improving trend, increasing 5.0% and 2.9%, respectively, over the third quarter of 2009." Financial Overview(in millions of Canadian dollars or on a per unit basis unless otherwise noted)Quarter ended Sep 30Nine Months ended Sep 3020102009 Variance20102009VarianceRevenue34.632.75.7%114.2105.68.2%Cash flows from operating activities6.86.013.4%29.528.53.5%Adjusted EBITDA110.212.2(16.6%)39.739.9(0.6%)Funds from operations15.78.0(29.3%)25.728.1(8.7%)Distributable cash15.38.3(36.4%)25.533.5(24.0%)Distributable cash per unit10.1060.166(36.1%)0.5100.671(24.0%)Distributions per unit0.1650.262(37.0%)0.4950.787(37.1%)Payout ratio1156%158%1.3%97%117%17.1%Electricity production (MWh)474,379480,152(1.2%)1,516,9991,480,2662.5%1 "EBITDA", "Adjusted EBITDA", "funds from operations", "distributable cash", "distributable cash per unit" and "payout ratio" are non-GAAP financial measures and do not have any standardized meaning prescribed by GAAP. As a result, these measures are unlikely to be comparable to similar measures presented by other issuers. Definitions of each measure are provided on page 4 of Management's Discussion and Analysis with reconciliation to GAAP measures provided on pages 9, 10 and 11, respectively.Key Drivers of Financial ResultsHigher revenueThe Fund achieved higher total revenue in the third quarter primarily due to a higher electricity price at the Cardinal gas cogeneration facility ("Cardinal"). Overall electricity production was slightly lower than in the third quarter last year due to lower production at Cardinal due to curtailment and atypically low water flows at the Wawatay hydro power facility in Ontario. These variables were partially offset by increased production at the Whitecourt biomass facility ("Whitecourt") as a result of fewer hours of maintenance compared with the same period last year and increased production at Erie Shores Wind Farm ("Erie Shores") due to higher wind speeds than in 2009. Additionally, the third quarter is historically a seasonally low period for the Fund, reflecting seasonal variations in wind and water flows, pricing provisions in certain of the Fund's power purchase agreements ("PPAs") and higher ambient temperatures at Cardinal during the warm summer months, which reduces production.Higher revenue in the year-to-date period primarily reflected higher electricity prices and increased electricity production due to less maintenance work in 2010 than in 2009. Sale of Leisureworld Senior Care LP ("Leisureworld")Adjusted distributable cash for the quarter and year to date was lower than last year due to decreased distributions from Leisureworld as a result of the sale of that business on March 23, 2010. The termination of the Leisureworld management agreement with Macquarie Power Management Ltd. ("MPML" or the "Manager"), which is also the administrator of the Fund, reduced management fees payable to the Manager in the third quarter and first nine months of the year. The Fund will continue to see the various impacts of this one-time event in subsequent quarters until the proceeds from this sale have been fully reinvested into new infrastructure businesses. Higher administrative expensesAdministrative expenses increased 46.8% and 40.3% in the quarter and year-to-date periods, respectively, over the same periods last year. This variance primarily reflected non-recurring costs related to the corporate conversion process and the transition to International Financial Reporting Standards as well as higher cost reimbursement fees paid to the Manager related to the Fund's business development initiatives. These factors were only partially offset by the decrease in management fees paid to the Manager following the sale of Leisureworld in the first quarter.Higher interest expenseInterest expense for the quarter and year to date increased by 7.7% and 18.9%, respectively, over the same periods last year. This primarily reflected a higher principal amount outstanding on the Fund's 6.50% convertible debentures compared with last year. For the year-to-date period, higher interest expense also reflected higher rates on the new credit facility established in May 2009. Financial PositionAs at September 30, 2010, the Fund's unrestricted cash and cash equivalents totalled $63.4 million (December 31, 2009 - $53.1 million) of which $51.5 million (December 31, 2009 - $42.5 million) was not designated for major maintenance, capital expenditure or general reserves. The Fund was conservatively leveraged relative to the low risk profile and long life of its assets, with a debt to capitalization2 ratio of 43.3% as at September 30, 2010 (December 31, 2009 – 49.9%). With cash on hand, cash accumulation as a result of the lower distribution to unitholders, and amounts available under the Fund's credit facility, the Fund currently has access to approximately $100 million in capital to pursue growth opportunities. Fiscal 2010 OutlookFor 2010, the Fund expects improved performance from its portfolio compared with 2009, which will be partially offset by an increase in Fund-level administrative and interest costs. Despite these increased expenses, the Fund's operating cash flow is expected to be higher in 2010 than in 2009. An outlook for each of the Fund's assets is provided on pages 18 to 22 of the Management's Discussion and Analysis for the quarter ended September 30, 2010.(2) The fair value of unitholders' equity reflected the Fund's market capitalization as at September 30, 2010 based on a unit price of $7.30 (December 31, 2009 - $6.11) and units outstanding of 49,911,347 (December 31, 2009 – 49,914,927 units). Units outstanding include Class B exchangeable units of a subsidiary of the Fund of which there were 3,249,390 outstanding at September 30, 2010 (December 31, 2009 – 3,249,390 units).Based on the Fund's current portfolio and outlook, the Fund's distribution policy of $0.66 cents per unit annually is expected to be sustainable through 2014. This distribution level is expected to result in a payout ratio of approximately 70% to 75% over this five-year period based on the Fund's current portfolio. With the sale of Leisureworld, the 2010 payout ratio will be above 80% and could move higher in future years as the Fund executes its growth strategy, which could include development opportunities or operating assets with low current yields but strong growth prospects. Conversion to a CorporationOn October 12, 2010, the Fund's Board of Trustees unanimously approved the conversion of the Fund into a publicly-traded corporation (the "Conversion") effective on or about January 1, 2011. The Conversion will be effected by way of a statutory plan of arrangement (the "Arrangement"), which is subject to unitholder and court approval. If the Arrangement is completed, units of the Fund will be automatically exchangeable for common shares of the newly-formed Macquarie Power and Infrastructure Corporation ("MPIC") on a one-for-one basis. It is expected that MPIC's dividend policy will initially be set at $0.055 per common share per month, which is consistent with the Fund's current policy. MPIC common shares will be listed on the Toronto Stock Exchange under the symbol "MPT". A Special Meeting of Unitholders will be held on November 15, 2010 at 9 a.m. at One King West Hotel in Toronto. Conference Call and WebcastManagement of the Fund will hold a conference call (with accompanying slides) to discuss third quarter results on Wednesday, November 3, 2010 at 8:30 a.m. ET. The conference call will be accessible via webcast through the Fund's website with accompanying slides at www.macquarie.com/mpt and by telephone at 416-340-8527 (Canada) or 1-877-440-9795 (North America). A replay of the call will be available until November 17, 2010 by dialling 416-695-5800 or 1-800-408-3053 and entering the passcode 8150706.Distribution Reinvestment Plan (DRIP)Eligible unitholders may elect to participate in the Fund's Distribution Reinvestment Plan. For more information about the DRIP, please visit the Fund's website at www.macquarie.com/mpt. About Macquarie Power & Infrastructure Income FundMacquarie Power & Infrastructure Income Fund's mandate is to invest in core infrastructure businesses in Canada and internationally. MPT aims to acquire and actively manage a high quality portfolio of long-life infrastructure businesses that will generate sustainable, long-term distributions and an attractive total return for investors. MPT's portfolio currently includes investments in gas cogeneration, wind, hydro and biomass power generating facilities, representing approximately 350 MW of installed capacity. MPT is also developing a 20 MW solar power facility in Ontario. MPT is managed by an affiliate of Macquarie Group Limited. Please visit www.macquarie.com/mpt for additional information.DisclaimerThis news release is not an offer or invitation for subscription or purchase of or a recommendation of securities. It does not take into account the investment objectives, financial situation and particular needs of the investor. Before making an investment in the Fund, the investor or prospective investor should consider whether such an investment is appropriate to their particular investment needs, objectives and financial circumstances and consult our investment adviser if necessary. None of the entities noted in this news release is an authorized deposit-taking institution for the purposes of the Banking Act 1959 (Commonwealth of Australia). The obligations of these entities do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542. Macquarie Bank Limited does not guarantee or otherwise provide assurance in respect of the obligations of these entities.Certain of the statements contained in this news release are forward-looking and reflect management's expectations regarding the Fund's future growth, results of operations, performance and business based on information currently available to the Fund. 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. These statements use forward-looking words, such as "anticipate", "continue", "could", "expect", "may", "will", "estimate", "believe" or other similar words, and include, among other things, statements relating to the Fund's Plan of Arrangement (the "Arrangement) and conversion to a dividend-paying corporation (the "Conversion), including: the Conversion; the Fund's distributions and distribution policy; the anticipated effects and benefits of the Arrangement; and the anticipated dividend policy of Macquarie Power and Infrastructure Corporation ("MPIC") if the Arrangement is implemented.The forward-looking statements in this news release are based on information currently available and what the Fund currently believes are reasonable assumptions, including the material assumptions for each of the Fund's assets set out in the Fund's 2009 Annual Report under the heading "Outlook" on page 42, as updated in subsequently filed Quarterly Financial Reports of the Fund (such documents are available on the Canadian Securities Administrators' System for Electronic Document Analysis and Retrieval ("SEDAR") at www.sedar.com). Other material factors or assumptions that were applied in formulating the forward-looking statements contained herein include the assumption that the business and economic conditions affecting the Fund's operations will continue substantially in their current state, including, with respect to industry conditions, general levels of economic activity, regulations, weather, taxes and interest rates and that there will be no unplanned material changes to the Fund's facilities, equipment or contractual arrangements. Although the Fund believes that it has a reasonable basis for the expectations reflected in these forward-looking statements, actual results may differ from those suggested by the forward-looking statements for various reasons, including risks related to: power infrastructure (operational performance; power purchase agreements; fuel costs and supply; contract performance; development risk; technology risk; default under credit agreements; land tenure and related rights; regulatory regime and permits; environmental, health and safety; climate change and the environment; force majeure; the Fund (changes in federal tax rules for flow-through entities; other tax-related risks; variability of distributions; geographic concentration and non-diversification; dependence on Macquarie Power Management Ltd. ("MPML" or the "Manager") and potential conflicts of interest; insurance; environmental, health and safety regime; availability of financing; unitholder dilution; volatile market price for units; international financial reporting standards; nature of units; unitholder liability). There are also a number of risks related to the Arrangement and to the activities of MPIC or the ownership of MPIC common shares, including risks relating to: changes to the Arrangement structure; the assessment of fair market value of the Fund units and MPIC common shares; the satisfaction of conditions precedent to the Arrangement; the receipt of regulatory approvals affecting the Arrangement; the realization of the anticipated benefits of the Arrangement; the impact on the Fund's unit price and future business operations of the Fund should the Arrangement not be completed; dilution of MPIC shareholders; the payment of dividends by MPIC, which are not guaranteed; and unpredictability and volatility of the common share price of MPIC.For a more comprehensive description of these and other possible risks, please see the Fund's Annual Information Form dated March 25, 2010 for the year ended December 31, 2009 as updated in subsequently filed Quarterly Financial Reports and other filings of the Fund with the Canadian securities regulators. These filings are available on SEDAR at www.sedar.com. The assumptions, risks and uncertainties described above are not exhaustive and other events and risk factors could cause actual results to differ materially from the results and events discussed in the forward-looking statements. These forward-looking statements reflect current expectations of the Fund as at the date of this news release and speak only as at the date of this news release. Except as may be required by law, the Fund does not undertake any obligation to publicly update or revise any forward-looking statements. FOR FURTHER INFORMATION PLEASE CONTACT: Michael SmerdonMacquarie Power & Infrastructure Income FundVice President and Chief Financial Officer(416) 607 5167michael.smerdon@macquarie.comORSarah Borg-OlivierMacquarie Power & Infrastructure Income FundVice President, Investor Relations(416) 607 5009sarah.borg-olivier@macquarie.com