2015 RESULTS CONFERENCE CALL -...

TSX : AXY www.alterrapower.ca Page | 1 2 0 1 5 R E S U L T S C O N F E R E N C E C A L L 16 March 2016

Intake at Jimmie Creek construction site (March 2016)

TSX : AXY www.alterrapower.ca Page | 2

Forward-Looking Information

This presentation contains certain “forward-looking information” within the meaning of Canadian securities laws. All statements, other than statements of historical fact, are forward-looking information. Examples of such information in this presentation, include, but are not limited to, statements with respect to future events or future performance, management’s expectations regarding Alterra Power Corp.’s (“Alterra”) production capacity and expected generation, successful development and construction of Alterra’s projects and outlook on Alterra’s financial performance and the information found under the heading “Outlook”. These statements reflect the current views of Alterra with respect to future events and are necessarily based upon a number of assumptions and estimates that, while considered reasonable by Alterra, are inherently subject to significant operational, business, economic, regulatory, political and social uncertainties and contingencies. Many risks, both known and unknown, could cause Alterra’s actual results, performance or achievements to be materially different from the results, performance or achievements that are or may be expressed or implied by such forward-looking statements contained in this presentation, and Alterra has made assumptions based on or related to many of these factors. Such risks, assumptions and other factors include, without limitation: fluctuations in currency markets (particularly with respect to the Icelandic krona, the U.S. dollar and Canadian dollar), power and commodity pricing; assumptions related to expected generation; changes in national or regional governments, legislation, regulation, permitting or taxation; political or economic developments in Canada, the United States, Iceland or other countries where Alterra may carry on business; risks and hazards associated with the business of renewable energy generation and renewable energy resources; risks relating to the creditworthiness and financial condition of suppliers and other parties which Alterra will deal with; inadequate insurance or inability to obtain insurance to cover these risks and hazards; employee relations; contractual risks; relationships with and claims by local communities and First Nations; availability and costs of equipment and labour; litigation; the success and timely completion of planned expansion, construction and development programs; the growth rate in net electricity consumption; support and demand for renewable energy; government initiatives to support the development of renewable energy generation; the reliability of technical data and capital expenditure estimates; and availability of capital to fund development and expansion programs. Additional risks, assumptions and influential factors are set out in Alterra’s management discussion and analysis and more recent annual information form, copies of which are available on SEDAR at www.sedar.com. Alterra cautions readers to review such public disclosure materials in full. Forward-looking information and statements are also based upon the assumption that none of the identified risk factors that could cause actual results to differ materially from the forward-looking information and statements will occur. Although Alterra has attempted to identify important factors that could cause actual results to differ materially, there may be other factors that cause results not to be as anticipated, estimated, described or intended. There can be no assurance that the forward-looking information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. Accordingly, investors should not place undue reliance on forward-looking information. Other than as required by applicable securities laws, Alterra does not assume any obligation to update or revise such forward-looking information to reflect new events or circumstances. Cautionary Note Regarding Forward-Looking Financial Information The information provided in the “Outlook” section of this presentation constitutes forward-looking financial information within the meaning of applicable securities laws. Management has provided this information as of the date of this presentation in order to assist readers to better understand the expected results and impact of the Company’s operating and construction projects expected to be commissioned in the near term. Readers are cautioned that this information may not be appropriate for any other purpose, including investment purposes, and consequently, should not place undue reliance on this information. Forward-looking financial information also constitutes forward-looking statements within the context of applicable securities laws and as such, is subject to the same risks, uncertainties and assumptions as are set out above. Adjusted EBITDA ("Adjusted EBITDA") is defined by the Company as earnings before interest, taxes, foreign exchange, depreciation and amortization, as well as before adjustments for changes in the fair value of holding company bonds (Sweden) and derivatives, write-offs of development costs, other income (expense) except business interruption insurance proceeds, amortization of below market contracts, value assigned to options granted, share of results of equity investments, the Company’s proportionate interest in Adjusted EBITDA of its equity investments and non-recurring items (insurance deductibles, litigation and arbitration costs). Adjusted EBITDA has been calculated on a consistent basis with the prior year. The Company discloses Adjusted EBITDA as it is a measure used by analysts and by management to evaluate the Company's performance. As Adjusted EBITDA is a non-IFRS measure, it may not be comparable to Adjusted EBITDA calculated by others. In addition, Adjusted EBITDA is not a substitute for net earnings. Readers should consider net earnings in evaluating the Company’s performance. For a reconciliation of consolidated Adjusted EBITDA to Alterra’s consolidated financial statements refer to the Company’s Management’s Discussion and Analysis for the year ended December 31, 2015 available on SEDAR at www.sedar.com. “Net Interest” means the effective portion of operating results that the Company would have reported if each of HS Orka (66.6%), Toba Montrose GP (40%), Dokie GP (25.5%), Shannon Group LLC (50%) and Soda Lake (100% until the sale of Soda Lake on January 30, 2015) had been reported in accordance with the Company’s actual share ownership for the year, as opposed to consolidating 100% of HS Orka (with an allocation to non-controlling interest), and Soda Lake (until the date of sale) and equity accounting for Toba Montrose GP, Dokie GP and Shannon Group LLC.

http://www.sedar.com/


Participants

• Ross Beaty

Executive Chairman

• John Carson

CEO

• Lynda Freeman

CFO

• Jay Sutton

VP Hydro Power

• Paul Rapp

VP Wind and Geothermal Power

• Jay Sutton

• John Carson

CEO

Introduction

Financials

Operations

Construction

Growth Opportunities / Summary


• Consolidated revenue was $13.2 MM lower than prior year, resulting in a $5.2 MM reduction in Adjusted EBITDA

Currency exchange rates were the main driver, as well as the $6 million revenue impact of transferring certain employees to former affiliate HS Veitur (no impact to operating cash flow), and offset by increased retail sales; revenue was up 9% for the year when measured in local currency

• Equity income increased by $9.9 MM to a record high of $22.1 MM

Driven by increases in the valuation of the power hedge at Shannon (non-cash), results from the Blue Lagoon and Dokie 1 partially offset by the weakening of the Canadian dollar

• Other expenses decreased by $0.2 MM

Predominantly due to non-cash items including unfavorable movements in foreign exchange and changes in the fair value of Icelandic power purchase agreements (expressed through “embedded derivatives”) due to a decrease in forecasted future aluminum prices offset by write-downs of certain assets in 2014

2015 Annual Consolidated Results:

Alterra Power 2015 Results Call

Financials | Lynda Freeman, CFO

Consolidated Results ($MM)

2015 2014

Revenue 57.8 71.0

Gross profit 16.1 17.1

Equity income 22.1 12.2

Other income (expenses) (59.3) (59.5)

Loss before tax (21.1) (30.2)

Adjusted EBITDA

46.4 51.6


Commercial Operations Achieved at Shannon:



• Financial closing: On June 30, the Company closed a $287.0 million construction loan which was supported by a $218.8 million tax equity investment commitment

• Partnership agreement: On the same day, the Company entered into a partnership agreement which resulted in Alterra owning 50% of the project (a) and equity accounting for Shannon

• Commercial operations: On December 10, construction of the 204 MW wind farm was completed and Shannon commenced commercial operations

• Tax equity funding: On December 14, the tax equity investment was fully funded, with proceeds used to retire the construction loan facility in full resulting in Shannon now applying hypothetical liquidated book value (HLBV) method of accounting

• Initial return of capital: On December 29, Alterra received a $3.5 million return of capital from Shannon representing unused construction contingency funds ($7.0 million returned to the sponsors).

Note: (a) Here and elsewhere, 50% represents the Company’s share in sponsor equity. Under the partnership agreement between the Shannon sponsors and tax equity investors, 99% of taxable earnings

(losses) and tax credits will be allocated from the project to the tax equity investors, as well as a minority allocation of cash that will vary under certain conditions, until the tax equity investors achieve an agreed yield, which is expected to occur within ten years of the commercial operations date.


• Fleet-wide performance against budget is 99.6% for the year lead by record high generation at both Toba Montrose and Dokie 1

• Revenue and Adjusted EBITDA decreased by 16% and 10% respectively, primarily due to the weakening of the Canadian dollar by 19%; other factors included reduced generation at the Reykjanes facility and the exclusion of Soda Lake from our results following the sale of the facility in January 2015

2015 Annual Comparative Information (Net Interest) ($000)



For the year ended December 31, 2015

HS Orka (66.6%)

Toba Montrose

(40%) Dokie 1 (25.5%)

Soda Lake (100%) (a)

Shannon (50%)

Development and head office

Total

Generation (MWh) 818,488 316,976 86,648 6,991 19,192 - 1,248,295

Revenue 38,219 24,738 7,906 449 273 - 71,585

Adjusted EBITDA 18,800 18,825 5,735 152 35 (6,564) 36,983

(a) The Soda Lake facility was sold on January 30, 2015

For the year ended December 31, 2014

HS Orka (66.6%)

Toba Montrose

(40%)

Dokie 1 (25.5%)

Soda Lake (100%) (a)

Development and head office

Total

Generation (MWh) 846,208 315,376 72,949 68,555 - 1,303,088

Revenue 43,890 28,597 7,631 5,050 - 85,168

Adjusted EBITDA 20,543 21,029 5,065 948 (6,308) 41,277



2015


2015 Annual Comparative Information (Net Interest) 2014

150

300

450

600

750

900

HS Orka TobaMontrose

Dokie 1 Soda Lake Shannon

Production (GWh)

10.0

20.0

30.0

40.0

50.0



Revenue

5.0

10.0

15.0

20.0

25.0



Adjusted EBITDA

Record Production in 2015


• Gross profit and Adjusted EBITDA increased in 2015 for the Icelandic operations and the Canadian projects

• HS Orka revenue increased 9% as a result of increased retail sales

• Toba Montrose revenue and Adjusted EBITDA increased by 1% and 4%, respectively due to record generation in 2015

• Dokie 1 revenue and Adjusted EBITDA increased by 20% and 31%, respectively, due to record generation in 2015

2015 Annual Comparative Information (Net Interest) in Originating Currency (000s)



For the year ended December 31, 2015 ISK C$ C$

HS Orka (66.6%)

Toba Montrose

(40%) Dokie 1 (25.5%)

Revenue 5,038,850 31,741 10,080

Adjusted EBITDA 2,476,900 24,068 7,332

For the year ended December 31, 2014 ISK C$ C$

HS Orka (a)

(66.6%)

Toba Montrose

(40%)

Dokie 1 (25.5%)

Revenue 4,643,472 31,402 8,397

Adjusted EBITDA 2,395,930 23,233 5,596

(a) Excludes HS Veitur recharged staff costs for comparability purposes.


Balance Sheet Highlights (Consolidated Basis)

(a) Excludes assets held for sale.

• Cash decreased by $52.9 MM primarily due to repayment of loans, capital spend and foreign exchange losses

• Repayment of loans of $19.7 MM and foreign exchange losses resulted in a decline in total assets of $30.2 MM

• Working capital decreased primarily due to the reclassification of the holding company bonds (Sweden) of $118.0 MM to short-term (the bonds mature in 2016 ) as well as the reduction in cash due to repayment of loans and capital spend



Select Balance Sheet Statistics ($MM) December 31, 2015 December 31, 2014

Cash 10.3 63.2

Total assets 593.0 623.2

Total debt 255.5 290.1

Total liabilities 393.8 409.2

Net assets 199.3 214.0

Current assets 45.7 93.1

Current liabilities 168.9 46.9

Working capital(a)

(123.2) 46.2


Holding Company Bonds (Sweden)

• The holding company bonds (Sweden) mature in July and December 2016.

• The Company is currently in negotiations to refinance both bonds

• Should the Company not be able or elect to refinance the ISK denominated bond, the Company would own 53.9% of HS Orka and would continue to consolidate their results

• If the Company lost the collateral supporting both bonds, the Company’s share of HS Orka would be reduced to 21.8%, resulting in loss of control and the Company would no longer consolidate their results

• The company expects to refinance both bonds in 2016

Head Office Liquidity

• Excluding HS Orka and the impact of the Sweden bonds above: working capital was $2.2 million

• Subsequent to year end C$5.1 million was received related to distributions from Toba Montrose and Dokie 1

• The Company has use of a $20.0 million revolving line of credit facility with a maturity of March 31, 2017 if needed for unbudgeted development spend



Holding Company Bonds (Sweden) ISK denominated bond USD denominated bonds

Balance at December 31, 2015 ($000s) $48,642 $69,335

Maturity July 16, 2016 December 14, 2016

Interest rate 1.5% 3.5%

Number of shares of HS Orka pledged as security 996,821,339 2,515,640,459

% of outstanding HS Orka shares pledged as security 12.7% 32.1%




• Alterra holds the following non-recourse holding company debt:

— $118.0 MM Holding company bonds (Sweden)

— $ 62.4 MM Holding company loan (North America)

• $261.8 MM total non-recourse project debt includes:

— $ 27.7 MM Dokie 1

— $127.7 MM Toba Montrose

— $ 56.3 MM Jimmie Creek

— $ 50.1 MM HS Orka

• Debt service paid during the year:

— $ 10.6 MM Toba Montrose ($1.6 MM principal)

— $ 3.3 MM Dokie 1 ($1.0 MM principal)

— $ 13.1 MM HS Orka ($11.7 MM principal)

— $ 4.5 MM NA Holdco ($nil principal)

— $ 3.1 MM Sweden Holdco ($nil principal)

• There is no debt associated with the Shannon project; however the project has certain requirements with respect to the allocation of cash distributions, taxable income and tax credits amongst the sponsor and tax equity investors.

• See Appendix 1 for further information on long-term debt

Long Term Debt (net interest)

Alterra Power Corp.

NA Holdco

$62.4 MM (matures 2023)

Jimmie Creek (matures 2054)

$56.3 MM

Sweden Holdco

$118.0 MM (matures 2016)

Dokie 1 (matures 2030)

$27.7 MM

Toba Montrose (matures 2045)

$127.7MM

HS Orka (matures 2016-

2031)

$50.1 MM

100% 100%

51% 66.6% 25.5%

40%

Holding Companies

Project Companies


• The Company is forecasting generation to be up 29% and 37% for 2016 and 2017 respectively, primarily due to the inclusion of a full year of Shannon generation and the inclusion of Jimmie Creek’s generation beginning in the summer of 2016, as well as a projected increase in generation at Reykjanes, primarily in 2017

• Adjusted EBITDA is forecast to grow 10% in 2016 and 30% in 2017, primarily due to the increased generation from Jimmie Creek and Shannon as well as a projected reduction in power purchases as generation increases at Reykjanes.

• For Management’s key assumptions related to this section, see Management’s Discussion and Analysis for December 31, 2015 available on SEDAR

Outlook:



Consolidated Results ($MM)

2016 2017

Generation (GWh) 1,610 1,706

Total Revenue 92.1 100.5

Adjusted EBITDA

40.7 48.3

For 2016 and 2017, based on internal budgets and forecasts, Management expects the Company to achieve (net interest):


Operations | Jay Sutton, VP Hydro Power


Toba Montrose – Highlights

• Generation:

– Annual: 111% of plan (792.4 GWh), achieving record generation for the second year in a row

– Quarterly: 106% of plan (88.4 GWh)

• Higher water flows than budgeted

– YTD: 91% of plan (14.8 GWh) through Feb 2016

• 2015 availability: 98%

• 2016 annual maintenance work ongoing at both plants during low flow period

Location: British Columbia

Capacity: 235 MW

Ownership: 40% Alterra

Installation of dust extraction system on East Toba Unit 2 (February 2016)


Operations| Paul Rapp, VP Wind and Geothermal Power


Location: Clay County, Texas

Capacity: 204.1 MW


Turbines C-09 and C-10 (February 2016)

Shannon - Highlights

• Operations commenced 10 December 2015

• Generation:

– 99% of plan (38.4 GWh) for 2015

– 97% of plan (123.2 GWh) through Feb 2016

• Plant operating well with no equipment issues

• GE providing turbine and balance-of-plant O&M services

• Construction completed on schedule and budget

– Final site restoration being completed

• Availability (YTD through Feb): 97%

• Pre-hedge merchant pricing lower than forecast due to historically low gas prices

– Hedge will commence in June 2016


Operations | Paul Rapp, VP Wind and Geothermal Power



Capacity: 144 MW

Ownership: 25.5% Alterra

Turbine JC08; photo taken from above the turbine (November 2015)

Dokie 1 – Highlights

• Generation:

– Annual 103% of plan (339.8 GWh), achieving record generation

– Quarterly: 111% of plan (11.5 GWh)

– YTD: 98% of plan (65.5 GWh) through Feb 2016

• 2015 availability: 96%

• Plant operating well with no equipment issues


Operations | Paul Rapp, VP Wind and Geothermal Power


Location: Iceland

Capacity: 174 MW

Ownership: 66.6% Alterra

Drilling at Svartsengi; “Thor” rig on well SV 26 (January 2016)

Svartsengi / Reykjanes – Highlights • Generation:

– Annual: 95.5% of plan (1,229.0 GWh)

– Quarterly: 92.5% of plan (308.4 GWh)

– YTD: 101.3% of plan (202.5 GWh) through Feb 2016

• Svartsengi drilling program

Drilling of wells 25 and 26 are both now complete

Both wells indicate positive results for potential production

At least one well to be tied in during 2016

• Other Svartsengi improvements

New discharge system projected to be completed in Q2 2016

New pump station to increase hot water for the municipality of Grindavik in operation Q2 2016

• Reykjanes reinjection commenced

Ramping to full injection capacity in Q2 2016

Projected to provide increased generation and enhanced field stability


Construction | Jay Sutton, VP Hydro Power



Capacity: 62 MW


Stator installation (February 2016)

Jimmie Creek - Highlights

• Construction update

— Intake construction complete

— Penstock installation complete

— Transmission tie in completed in February 2016

— Installation of turbine/generator equipment underway

• Procurement

— All major equipment is on site

• Project on budget and on schedule

— First generation expected Q2 2016


Looking Ahead | John Carson, CEO


Looking ahead

• Strong development focus in USA reflecting recent extension of renewable generation incentives

— 2-year plus extension of PTC and ITC

• Greenfield wind development:

— Leases signed for two new USA projects (up to 350 MW)

— Other greenfield projects currently under analysis

• Analyzing several development-stage acquisition opportunities

— Primarily wind, some solar; all in USA

• Advancing multiple hydro development projects in Canada and Iceland

Proposed location of the Brúarvirkjun hydro project powerhouse (Iceland)


Project debt (all non-recourse)

• Alterra’s project debt (net interest) at December 31, 2015 was $261.8 MM, and includes:

— Toba Montrose fixed rate debt (6.17% - 6.69%) with annual repayments until 2045 — Dokie 1 fixed rate debt (7.24%) with bi-annual repayments until 2030 — HS Orka debt with weighted average interest rates of 0.9% – 4.4%, expiring between 2016 and 2031 — Jimmie Creek fixed rate debt (5.26%) with annual repayments beginning in 2017 until 2054

• Alterra also has $118.0 MM of non-recourse holding company bonds issued for the acquisition of HS Orka with interest rates of 1.5% and 3.5%, maturing in July and December 2016 (bullet maturities), and a $62.4 MM holding company loan facility with a floating interest rate at CDOR + 6.5%, maturing on February 5, 2023

• Alterra entered into two interest rate swaps, related to the holding company loan facility, locking in CDOR interest rates of 2.3% for a notional amount of $49.0 million and 2.2% for a notional amount $29.0 million

APPENDIX 1: Alterra Power 2015 Results Call


Project Debt Service: 2016-2025 ($ MM)

Toba Montrose (40%) Dokie 1 (25.5%) HS Orka (66.6%) Jimmie Creek (51%) Total Net Interest

Principal Interest Principal Interest Principal Interest Principal Interest Principal Interest

2016 1.7 8.9 1.0 2.2 11.6 1.3 0.0 2.7 14.2 15.1

2017 1.8 8.8 0.8 2.1 9.9 1.0 1.2 3.7 13.9 15.5

2018 1.9 8.6 1.5 2.0 8.4 0.7 0.3 3.6 12.1 15.0

2019 2.1 8.5 1.5 1.9 8.4 0.5 0.4 3.6 12.4 14.6

2020 2.2 8.4 1.7 1.8 5.6 0.3 0.4 3.6 10.0 14.0

2021 2.3 8.2 1.6 1.7 4.1 0.1 0.5 3.6 8.6 13.6

2022 2.5 8.1 1.4 1.6 1.6 0.1 0.6 3.6 6.1 13.3

2023 2.7 7.9 1.9 1.5 0.8 0.1 0.2 3.5 5.7 13.0

2024 2.8 7.8 2.1 1.3 0.1 0.0 0.3 3.5 5.2 12.6

2025 3.0 7.6 2.1 1.2 0.1 0.0 0.3 3.5 5.4 12.3

2015 RESULTS CONFERENCE CALL -...

Documents

Transcript of 2015 RESULTS CONFERENCE CALL -...