Etrion releases 2015 results and 2016 guidance

Operational Highlights
· Development: Advanced the development of three projects in Japan for a total
capacity of 76 megawatts (“MW”). Management expects to have these backlog
projects shovel ready, close the financing and break ground in 2016. The Company
is advancing the development of additional projects in Japan which are targeted
to be shovel ready in the 2017-2018 time frame.
· Construction: The Company is advancing on the construction of the 24.7 MW
Shizukuishi project in northern Japan. The project is on budget and on schedule,
with estimated connection to the electricity grid in the third quarter of 2016.
· Operations and Maintenance (“O&M”): The Company completed the renegotiation
of the O&M agreements for all the Group’s Italian and Chilean operating
subsidiaries, representing an aggregate capacity of 130 MW, reducing costs by
approximately 35% on average and securing annual savings of US$2.8 million.
· Production: Produced approximately 265 Gigawatt hours (“GWh”) in 2015
compared to 100.7 GWh in 2014, from the Company’s 139 MW portfolio comprising 23 solar power plants in Italy, Chile and Japan. When broken down by country, in
Italy the Company produced 102.4 GWh (2014: 100.7 GWh), in Chile produced 157.0
GWh (2014: nil) and in Japan produced 5.5 GWh (2014: nil) representing an
overall production increase of 163% year-over-year.
· Corporate: The Company’s headquarters relocated from Geneva, Switzerland to
Miami, Florida, United States and relocated its Italian operations from Rome to
Rovereto as part of its cost optimization plan.
Financial Highlights
· Revenue: Generated revenues of US$50.4 million (2014: US$49.6 million)
during the year ended December 31, 2015, from the Company’s 139 MW portfolio
comprising 23 solar power plants in Italy, Chile and Japan.
· EBITDA: Recognized earnings before interest, taxes, depreciation and
amortization (“EBITDA”) of US$27.4 million (2014: US$32.5 million) during the
year ended December 31, 2015.
· Cash and Working Capital: Closed the year ended December 31, 2015 with a
cash balance of US$52.5 million, of which US$17.6 million is unrestricted
(December 2014: US$95.3 million) and positive working capital of US$1.5 million
(December 2014: US$36.5 million).
· VAT Reimbursement: Fully repaid Project Salvador’s total outstanding VAT
credit facility of US$24 million five months ahead of schedule following cash
reimbursement from the Chilean tax authorities for VAT credits accumulated
during construction.
· Italian refinancing: In December 2015, the Company completed the refinancing
of a majority of its Italian solar parks. The refinancing included a project
bond listed on the Italian Exchange, a project finance loan and a debt service
reserve facility. The Company’s previous outstanding project debt and associated
interest rate swap contracts were repaid and the Company entered into new
contracts to hedge 90% of interest payments for both the project bond and loan
for the entire new tenor.
Management Comments
Marco A. Northland, the Company’s Chief Executive Officer, commented, “I am very
excited about 2016; Japan should continue to be a terrific market for Etrion.
Our target is to have over 100 MW of projects connected or under construction
and a larger pipeline for realization in subsequent years. Project economics
continue to be very attractive and the partnership with Hitachi High-Tech
remains very strong. Italy continues to deliver strong cash flows, which were
significantly improved through a series of initiatives, including a
comprehensive refinancing, introduction of several cost cutting measures and
successful commercial activities. We still have additional upside in Italy which
we expect to secure. We will communicate this as it is implemented.
In Chile, the team has done a great job by securing a Power Purchase Agreement
(“PPA”) for 70 GWh for Project Salvador, starting January 2016. The team
continues to work around the clock to secure additional PPAs for the remaining
capacity of Project Salvador and our pipeline as well. In summary, our
diversification strategy is paying off and I look forward to exiting 2016 with a
stronger platform and substantial growth opportunities.”
Results
During 2015, Etrion reported a net loss of US$18.7 million (loss per share of
US$0.05) compared to a net loss of US$16.5 million (loss per share of US$0.05)
during 2014. Despite negative consolidated net results, primarily attributable
to lower than expected spot electricity prices, exchange rate movements and the
impairment of US$2.9 million in capitalized development costs, the Company
reported a gross profit of US$16.9 million (2014: US$25.9 million) and generated
adjusted operating cash flow of US$29.4 million (2014: US$31.6 million). In
addition, the net results for 2015 were adversely impacted by non-cash finance
costs of US$6.6 million of accelerated amortization of transactions costs
(associated the previous outstanding project debt) upon completion of the
Italian refinancing transaction.
2016 Guidance (1)
Etrion will prepare and update on a regular basis forecasts for project level
revenues and EBITDA information regarding its operational and fully-funded solar
parks. The purpose of these forecasts is to provide investors with management’s
view on the expected performance of the Company’s solar assets. Readers are
advised to not place undue reliance on these forecasted financial and
operational information because it may not be appropriate to use for purposes
other than indicated. Etrion’s consolidated project-level forecast for 2016 is
in the following ranges:
US$ million otherwise stated Low end High end

Energy generation (GWh) 219 231
Revenue 50 52
Project-level EBITDA 39 41
(1) Forecasts are presented on a net basis (Net to Etrion’s interest)
ITALY
Revenue, project-level EBITDA and production forecast for the Italian operating
platform, incorporated in the above consolidated guidance, are based on Etrion’s
100%-owned, 60 MW solar portfolio in Italy. The weighted average FiT price
applicable to the Italian portfolio is €0.30 per kWh for the 15 years remaining
contract average life. The Italian spot price, currently €0.05 per kWh, has been
projected based on independent third party estimates. Italian project-level
EBITDA forecast is net of asset management service fees that are recharged to
the operating projects as part of operational expenses. In Italy, revenues are
received in Euros and are translated using the €/US$ exchange rate of the
corresponding period. Consequently, revenues expressed in US dollars may
fluctuate according to exchange rate variations.
CHILE
Revenue, project-level EBITDA and production forecast for the Chilean platform,
incorporated in the above consolidated guidance, are based on Etrion’s 70%
-owned, 70 MW operational solar park, Project Salvador, located in northern
Chile, and are incorporated on a net basis. Electricity production in Chile
assumes curtailments on 25% of the total production capacity of the Project
Salvador power plant. Revenue has been calculated using the PPA price of US$0.10
per kWh for the first 70 GWh of production and a spot price forecast prepared by
the Chilean grid operator for the remaining electricity production of Project
Salvador. Chilean project-level EBITDA is net of asset management service fees
that are recharged to the operating project as part of operational expenses. In
Chile, revenues are calculated with reference to the US dollar, which is also
the reporting currency of the Group and therefore revenues forecast are not
subject to exchange rate fluctuations.
JAPAN
Revenue, project-level EBITDA and production forecast for the Japanese platform,
incorporated in the above consolidated guidance, are based on Etrion’s 87%
-owned, 34 MW operational and under construction Japanese portfolio comprising
the Mito and the Shizukuishi solar parks, located in central and northern Japan,
respectively, and are incorporated on a net basis. These projects benefits from
20-year PPAs with the Japanese public utility, Tokyo Electric Power Company and
the Tohoku Electric Power utility, respectively, under which they will receive
¥40 per kWh produced (approximately US$0.33 per kWh). Shizukuishi construction
-related work began in October 2014, and the solar project is expected to
connect to the grid in the third quarter of 2016. In Japan, revenues are
received in Japanese Yen and are translated using the ¥/US$ exchange rate of the
corresponding period. Consequently, revenues expressed in US dollars may
fluctuate according to exchange rate variations.
Project economics forecasts
Etrion has forecasted revenue, EBITDA and electricity production at the project
level for the fiscal year ending December 31, 2016 based on the assumptions set
out below. These forecasts include financial measures not defined under IFRS,
specifically EBITDA. Non-IFRS measures have no standardized meaning prescribed
under IFRS and therefore such measures may not be comparable with those used by
other companies. Such forecasted financial information provides a financial
outlook on the basis and for the year described above, and this information may
not be appropriate for any other purposes.
Basis of preparation of the forecasts
The revenue forecasts have been prepared on a basis consistent with the
accounting policies that are expected to be used in the Group’s consolidated
financial statements for the year to be then ended. These policies are
consistent with those set out in the accounting policies in the Group’s
consolidated financial statements for the years ended December 31, 2015 and
2014.
The project-level EBITDA forecasts have been prepared using a non-IFRS widely
accepted methodology which consist of earnings before interest, tax,
depreciation and amortization and is useful to analyze and compare profitability
between companies and industries because it eliminates the effects of financing
and certain accounting policy decisions.
Electricity production forecasts have been prepared using the installed
production capacity of the solar power plants, the guaranteed availability and
irradiation levels based on historical data from the various solar park
locations.
Revenue and project-level EBITDA forecasts have been prepared using the project
currency and translated, where applicable, to US dollars using the expected
prevailing exchange rate of €/US$ 1:1.099 and ¥/US$ 1:121.2 based on projections
made by the Company.
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