FY14 Interim Financial Results
Infigen Energy (ASX: IFN) today released its interim financial results for the 2014 financial year.
Infigen’s improved financial performance for the six month period ended 31 December 2013 was primarily a result of higher production in Australia and an increase in income from US institutional equity partnerships (IEPs) partially offset by interest rate swap termination costs (due to swap counterparties exercising their early termination rights), which were a significant item during the period.
As a consequence the Statutory Loss for the half year was $15.3 million (after taking into account $16.8 million in interest rate swap termination costs*, an improvement of $12.5 million compared to the Statutory Loss of $27.8 million for the prior corresponding period (pcp).
Summary of Performance (Economic Interest)
A summary of key measures of continuing business performance on an economic interest basis compared to the pcp are outlined below:
- Production: Increased 4% to 2,242 GWh
- Revenue: Increased 11% to $149.3 million
- Operating EBITDA: Increased 13% to $90.1 million
- EBITDA: Increased 11% to $79.0 million
- EBIT: Increased 42% to $8.5 million
- Net Loss: Improved $12.5 million to $15.3 million
- Interest rate swap termination costs of $16.8 million were recorded as significant items
- Net Operating Cash Flow before significant items: Increased 62% to $37.3 million
- Net Operating Cash Flow: Decreased $2.5 million to $20.5 million
Infigen’s Managing Director, Miles George said, “It was pleasing to see good wind conditions in Australia that assisted in delivering a strong first half result. We continue to focus on controlling our operating and corporate costs, and our targeted savings are being achieved. In the US we incurred one-off transaction costs related to an acquisition, while in Australia the strong production performance and high turbine availability triggered incentive payments to our service providers that were more than offset by the additional revenue realised as a result.”
“During the period we amortised $10.1 million across our Global Facility and Woodlawn Facility, used $14.2 million of cash to reduce Class A tax equity liabilities and closed out $16.8 million of interest rate swaps” he said.
Group revenue was $149.3 million, up 11% or $15.1 million reflecting higher Australian revenue and a depreciation of the AUD against the USD, partially offset by lower US revenue. Higher production and higher SA merchant electricity prices in Australia, and higher merchant electricity and REC prices in the US were partially offset by lower LGC prices, lower compensated revenue in Australia and lower production in the US.
Operating Earnings Before Interest, Tax, Depreciation and Amortisation (Operating EBITDA) was $90.1 million, up 13% or $10.5 million. This was due to:
- Australia: higher revenue partially offset by higher operating costs primarily due to the incentive payments to Vestas resulting from improved availability, production and associated revenue; and
- US: marginally lower revenues partially offset by lower asset management and other direct costs.
The net loss decreased by $12.5 million to $15.3 million. The result reflects higher EBITDA, higher income from US IEPs, lower financing costs and a marginally higher income tax benefit partially offset by interest rate swap termination costs.
Acquisition of US Class A Interests
During the period Infigen entered into agreements to acquire various Class A interests in nine of its US wind farm projects for US$95 million, inclusive of upfront financing costs. The acquired interests are primarily the relevant future Class A cash flows from those projects.
This acquisition is a good strategic fit with our existing US business. We have an intimate knowledge of the underlying assets, which allowed us to appropriately assess the risks of this investment.
Infigen’s Managing Director, Miles George said, “A key challenge for Infigen is to remove the constraints of our existing capital structure in order to grow our business and resume distributions to our securityholders.”
“One avenue to remove that constraint is to separate the financing of our US and Australian businesses. This transaction represents a useful step towards addressing that challenge,” he said.
Consistent with long-term seasonal variation, second half production is expected to increase in the US and decrease in Australia.
In the US, similar merchant electricity prices in the PJM and ERCOT markets are expected for the remainder of FY14. In Australia, slightly higher bundled prices are expected in the second half due to seasonal variations and forward contracted LGC sales.
Full year operating costs in the US and Australia are expected to remain within the US$73‑76 million and A$35-37 million guidance ranges respectively.
Subject to these operating conditions, Infigen is currently on track to exceed its guidance of having approximately $80 million of cash flow available to repay Global Facility borrowings, distribute to Class A tax equity members, and close out interest rate swaps in FY14.
Infigen’s investment in financial assets (US Class A interests) will generate additional cash flow to Infigen.
Infigen’s Managing Director, Miles George said, “Notwithstanding the steady outlook for the business for the remainder of FY14, the regulatory uncertainty resulting from the upcoming review of the renewable energy target in Australia has significantly weakened investor appetite in the sector, with many investors factoring sovereign risk into their investment decisions for the first time. We encourage the Australian Government to conduct an evidence-based review in a timely manner, and establish a predictable regulatory environment that supports steady investment in long term renewable energy assets that are necessary to transition Australia’s electricity sector.”
* In prior periods these were recognised in shareholders’ equity and therefore had no net effect on the balance sheet.
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Investor Relations Manager
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