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Alterra Power (TSX:AXY) reported audited financial and operating results for the year ended December 31, 2016 for its 66.6 percent owned Icelandic subsidiary, HS Orka hf. As quoted in the press release: Highlights for the year ended December 31, 2016 include (all amounts in US$): Generation: HS Orka fleet generation decreased 9% to 1,122,418 MWh primarily due …
Alterra Power (TSX:AXY) reported audited financial and operating results for the year ended December 31, 2016 for its 66.6 percent owned Icelandic subsidiary, HS Orka hf.
As quoted in the press release:
Highlights for the year ended December 31, 2016 include (all amounts in US$):
Generation: HS Orka fleet generation decreased 9% to 1,122,418 MWh primarily due to the previously announced generation decrease at the Reykjanes field, which is being mitigated through a field re-injection program and other means. Generation has stabilized over the last quarter of the year.
EBITDA: $19.8 million of Adjusted EBITDA (and $9.4 million of gross profit) in 2016 (2015: $22.3 million and $15.0 million, respectively), with the decline primarily related to an increased cost of sales per power purchases undertaken in light of the lower output at Reykjanes.
Revenue: Increased by 6% to $58.9 million due to strong retail sales and favorable exchange rates, partially offset by lower aluminum based contract sales and lower sales of geothermal water due to unusually warm weather in 2016.
Net income: Increased to $25.7 million (2015: net loss of $1.9 million) primarily due to an increase in aluminum futures price which drove a non-cash gain of $20.2 million in the fair value of the embedded derivative in power purchase agreements (2015: non-cash loss of $24.7 million).
Research and development expense: $2.1 million of costs were associated with the deep drilling program at Reykjanes. Drilling was completed in January 2017 reaching a depth of 4,650 meters, making it the deepest well drilled in Iceland. Initial well readings (427ºC temperature, 340 bars pressure) indicate supercritical conditions at the base of the well, comprising significantly higher energy content versus conventional high-temperature geothermal steam. The well will undergo further temperature, pressure and other tests for approximately 12 to 24 months.
Dividends received: HS Orka received a dividend of $3.3 million in the year from Blue Lagoon ehf. (2015: $2.7 million).
Blue Lagoon: HS Orka’s share of income from associates (primarily related to Blue Lagoon ehf.) decreased to $7.8 million (2015 – $8.9 million) due to the recognition of a $2.0 million dilution gain in 2015. Excluding the dilution gain, equity income increased by 13% from the prior year.
Debt paydown: HS Orka continues to use cash from operating activities to pay down loans and borrowings, with repayments of $18.2 million in 2016 (2015: $17.5 million) and a loan balance outstanding at year-end of $59.3 million. HS Orka is currently in late stage negotiations with potential lenders for a loan to more fully accommodate working capital needs plus provide expansion capital.
