Atlantic Power Corporation (NYSE: AT ) Q1 2016 Earnings Conference Call May 06, 2016 08:30 AM ET Executives Edward Vamenta – Director of Financial Planning and Analysis Jim Moore – President and CEO Terry Ronan – CFO Dan Rorabaugh – SVP of Asset Management Analysts Rupert Merer – National Bank Sean Steuart – TD Securities Ben Pham – BMO Operator Good morning, and welcome to the Atlantic Power Corporation First Quarter 2016 Results Conference Call. All participants will be in listen-only mode. [Operator Instructions] Please note, today’s call is being recorded. I would now like to turn the conference over to Edward Vamenta, Director of Financial Planning and Analysis. Please go ahead. Edward Vamenta Welcome, and thank you for joining us this morning. Our results for the three ended March 31, 2016 were issued by press release yesterday afternoon and are available on our website www.atlanticpower.com and on EDGAR and SEDAR. The accompanying presentation to today’s call and webcast can be found in the Investor Relations section of our website. A replay of today’s call will be available on our website for a period of one year. Financial figures that we’ll be presenting are stated in U.S. dollars and are approximate unless otherwise noted. Please be advised that this conference call and presentation will contain forward-looking statements. As discussed in the company’s Safe Harbor statement on page 2 of today’s presentation, these statements are not guarantees of future performance and involve certain risks and uncertainties that are more fully described in our various securities filings. Actual results may differ materially from such forward-looking statements. In addition, the financial results in yesterday’s press release and today’s presentation include both GAAP and non-GAAP measures including project adjusted EBITDA, adjusted cash flows from operating activities, and adjusted free cash flow. For a reconciliations of these measures to the most directly comparable GAAP financial measures to the extent they are available without unreasonable effort, please refer to the press release, the appendix of today’s presentation, or our quarterly report on Form 10-Q, all of which are available on our website. Now I will turn the call over to Jim Moore, President and CEO of Atlantic Power. Jim Moore Good morning. With me this morning are Terry Ronan, our CFO; and Dan Rorabaugh, our Senior Vice President of Asset Management, as well as several other members of the Atlantic Power management team. In terms of this morning’s agenda, first I will recap recent progress, then Dan will review plant operating performance and provide an update on our capital expenditures. Terry will review the first quarter financial results, discuss the recent refinancing transaction, and provide an update to our 2016 guidance. I will wrap up the call with additional comments on strategy. As shown on slide 4, so far this year, our plants performed well and financial results for the first quarter were in line with our expectations. We have continued to repay debt using our strong operating cash flow. We also opportunistically repurchased convertible debentures and common shares under the NCIB. Just a little over three weeks ago, we closed a significant refinancing of both our term loan and revolving credit facility, although this a difficult significant market environment in which undertaking this transaction, we are pleased to have completed it. And our view of the positive aspects of this transaction outweigh the higher interest rate. Pro forma for the planned redemptions of our 2017 convertibles later this month, we have no corporate debt maturities prior to 2019. We also have a $105 million of remaining proceeds to further reshape our balance sheet and invest in growth. In addition, our new $200 million corporate revolver provides us with greater flexibility to finance growth or additional debt repurchases. Lastly, the pending shareholder asset in Quebec was dismissed in April with no payments by us consistent with the resolution of the US and Ontario actions earlier. This brings to a close all outstanding shareholder litigation. Now, I will turn the call over to Dan. Dan Rorabaugh Thanks, Jim and good morning everyone. Slide 5 summarizes our operational performance for the first quarter of 2016. This quarter we have added a report on safety to our operations reviews, where safety of our plants and our people is a high priority at Atlantic Power. Although we have a strong track record, we are continually striving for even better performance. This quarter we had one recordable incident in early January, but none in the four months since then. In comparing our results for the industry average, keep in mind that the average includes much larger companies for which the rate tends to be lower. Our loss time injury rate which we’ve not shown in the chart is typically lower than the industry average. I’d also note that we didn’t have any environmental or regulatory violations during the quarter. Our availability factor in the first quarter of 2016 was 96.6% versus 97.5% for the comparable period a year ago. The slight increase was due to maintenance outages at our three Navy plants and a utility requested outage at Naval training center. The impact of these outages on availability was partially offset by improved availability at Mamquam and Piedmont, both of which had scheduled maintenance outages in the prior period. Generation increased 4.4%, primarily due to Frederickson, which had increased dispatch and Curtis Palmer and Mamquam, which had higher water flows as compared to below normal levels in 2015. These increases were partially offset by reduction at Manchief, due to reduced dispatch, and at the Navy plants, due to reduced availability. Waste heat production in Ontario was down approximately 3.9% from very high levels in 2015. Our 2016 forecast has assumed a reduction from 2015 levels, but results for the quarter were ahead of our expectations. Our Mamquam facility is benefiting from significantly higher snow pack this year than last. In addition, spring has come early and run-off is ahead of schedule. Slide 6 summarizes our 2016 planned optimization investments as well as capital expenditures related to PPA extensions. On the optimization side, we have not made any significant changes since our fourth quarter call in March. At Morris, we are in the process of adding past our capability to one of our boilers with commissioning expected late in the second quarter. The objective it to improve the reliability of steam delivery to the customer. We also plan to upgrade certain components for two of the gas turbines this year during the extended customer outage in late summer and for the third in 2017. This is being done in order to increase output and improve fuel efficiency from the turbines as well as enhance the reliability of steam delivery for the customer. Total optimization investments for this year are expected to be approximately $4 million with most of it for the Morris projects and the balance for spillway upgrade project at Curtis Palmer we have undertaken in late summer. On our March conference call, I indicated that we have budgeted approximately $7 million for CapEx related for repowering and PPA extension related investments at Tunis and Williams Lake, most of which was for Williams Lake. However, it now appears that there may be a delay in the availability of gas transportation for Tunis, which have affected timing of the restart of the project and therefore the timing of the required investment in the project to convert it to simple cycle operation. Accordingly, we have reduced our CapEx budget for this year, which includes the optimization investments to approximately $14 million from $16 million with most of the reduction related to Tunis. I would also note that whether we begin work on a new fuel shredder for Williams Lake this year, it depends on the timing of receipt of an amendment to the air permit currently expected in the third quarter or potentially subject to appeal and the status of discussions with BC Hydro on an extension of the existing contract. Initial outweighs for this project were approximately $6 million of our capital expenditure forecast for this year. We will provide an update on the timing of that investment on our second quarter call. I will close by providing a brief update on our efforts to extend our PPAs. We are continuing to aggressively pursue opportunities to extend or renew our existing PPAs in California. Due to non-disclosure provisions in the more formal processes, we cannot provide any detail on our efforts or specific bids. The PPA market is difficult, but we believe that our assets, particularly those in San Diego are well positioned to continue to provide necessary capacity close [indiscernible]. At Williams Lake, as I mentioned earlier, we expect to provide more of an update on our second quarter call. Now I will turn it over to Terry. Terry Ronan Thanks, Dan, and good morning everyone. I will begin with a review of our first quarter results, then discuss our refinancing transaction and close with an update on our guidance. Turning to slide 7, as Jim mentioned, results for the first quarter were in line with our expectations. We reported project adjusted EBITDA of $62.5 million, up $3.9 million from $58.6 million in the year-ago period. The 2015 results excludes our Wind business, which we sold in June of last year. The increase was primarily attributable to higher water flows in our Curtis Palmer and Mamquam hydro projects and lower expenses in our unallocated corporate segment. This was partially offset by a stronger US dollar, which reduced results by approximately $3 million. Slide 8 shows our cash flow results for the first quarter of 2016. The 2015 numbers are presented excluding the Wind business, which contributed $10.8 million of operating cash flow in the first quarter of last year. On a continuing operations basis, as shown on the slide, operating cash flow increased $5 million to $29 million from $24 million a year ago. The increase was primarily attributable to higher project adjusted EBITDA and lower interest payments resulting from the redemption of our 9% senior unsecured notes last year and continued amortization of the APLP term loan. Adjusted cash flow from operating activities, which excludes changes in working capital and severance and restructuring charges increased $6 million to $37 million from $31 million, again due to higher project adjusted EBITDA and lower interest payments. Adjusted free cash flow, which is after principal payments on the APLP term loan and project level debt increased approximately $8 million to $11.8 million from $3.9 million a year ago. This increase was attributable to higher adjusted cash flows from operating activities and receipt of cost reimbursement for customer-owned construction project, which helped cash flow by $4.7 million. These positive factors were partially offset by higher debt repayments on the term loan and project level debt of $27.5 million versus $23.8 million in the year-ago period. Slide 9 summarizes the key aspects of the refinancing transactions that we completed last month. We refinanced our existing APLP term loan with a new $700 million term loan at APLP Holdings, which has a maturity date of April 2023, two years later then the maturity of the term loan that replaced. We used 112 million of the proceeds to call all of our 2017 convertible debentures. After that redemption closes on the May 13, we will have no remaining corporate debt maturities prior to our next convertible debenture maturity in June 2019. Net proceeds remaining after paying transactional related fees are probably 105 million which are available to us for debt and equity purchases as well as growth investments. Debt reduction remains a very high priority for the company and we plan to use at least 65 million of the proceeds for the repurchase of 2019 convertible debentures. Although the initial impact of the refinancing was to increase our leverage to approximately 6.4 times from 5.8 times at year-end 2050, we expect to drop below 6 times by the end of this year due to the additional convertible repurchases I mentioned and to amortization of new term loan. As shown on slide 10, as part of this transaction, we also closed on a new 200 million revolving credit facility which replaces our previous 210 million revolver. The maturity date of the new facility is April 2021, a three-year maturity extension versus the one it replaced. The new revolver is a more traditional one and we can use it for general corporate purposes subject to certain limitations. It does provide us more flexibility to fund growth both internal and external including acquisitions. Slide 11 provides some additional details of the new term loan, two features of which I’d like to elaborate on. First interest-rate, the spread is 500 basis points over LIBOR as compared to the rate on the previous term loan of L+375. The LIBOR portion of the rate is a minimum of 1%. We’re required to fix a certain portion of our floating rate exposure through interest rate swaps for the 90 days of closing and that’s something we’re working on now. We expect the all-in rate will be approximately 6.25% to 6.50% as compared to slightly less than 5% on the previous term loan. Second, amortization, the term loan has a 1% mandatory annual amortization just as the previous term loan did. Repayments under the cash sweep works somewhat differently however, each quarter the amount of debt repayment is determined by the greater of a 50% cash sweep for the amount of repayment required to achieve the targeted quarter-end debt balances specified in the credit agreement which declined over time. Thus the minimum is 50%. We expect the cash sweep to average at 65% of 70% over the life of the loan, although it is higher in the early years and there was a fair amount of variability year-to-year but that target schedule envisions that approximately 80% of the loan will be paid down by maturity through mandatory and targeted amortization. Although the interest rate and debt repayment terms are less favorable than under our previous term loan, we believe these considerations are far outweighed by the positive aspects of this transaction as Jim indicated. Specifically we’ve extended the maturity of the term loan and revolver to 2023 and 2021 respectively, remove the overhang caused by the near term maturity of 2017 converts and obtain greater flexibility regarding revolver use of proceeds. We view the more aggressive debt repayment schedule into the new term loan as consistent with our goal of further deleveraging. In addition, we completed a tax restructuring concurrent with the closing of the refinancing moving both Atlantic Power Generation and Atlantic Power Transmission into the APLT structure which we believe will help us make more efficient use of our NOLs going forward. On the bottom of slide 11, we presented our current debt maturity profile split between both maturities on the left and amortizing debt on the right. Pro forma for the transaction and redemption of the 2017 convertible debentures approximately 67% of our debt is now amortizing rather than bullet maturities. Slide 12 provides details on each of our debt instruments and preferred securities including where in the organization they reside maturity date and interest rate. The changes arriving from the refinancing transaction are highlighted in yellow, separately I would note that during the quarter we repurchased 18.8 million principal amount of convertible debentures, primarily those with 2019 maturities under our normal course issuer bid. Slide 13 presents our liquidity at March 31 2016, both on an actual and pro-forma basis, several items of note. As I mentioned on the year-end call in March, we received approximately 6 million in cash in February representing a reimbursement for a customer owned construction project that we undertook on their behalf. We’re also able to reduce our letters of credit posted by 10 million following S&P’s upgrade of our corporate credit rate into B+ in February. During the quarter we used cash to repurchase convertible debentures and common shares under the NCIB. Thus we ended the quarter with 178 million of liquidity including 64 million of unrestricted cash. The pro forma column in slide 13 adjust for the refinancing transaction. Cash is increased by 105 million of net proceeds. However this is partially offset by the 10 million reduction in capacity under the new revolver and increased letters of credit associated with their larger debt service reserve requirement because of the large size of the term loan. On balance, our liquidity is approximately 86 million higher at 263.5 million including 169 million of cash. As we previously indicated, we believe that a base cash reserve of 50 million to 60 million is adequate for our business. Slide 14 presents our 2016 guidance updated to incorporate the impact of the refinancing transactions to our cash flow metrics. There is no impact on our project adjusted EBITDA guidance and we still expect to be in the range of 200 million to 220 million. Relative to our previous guidance, we expect cash interest to be higher as a result of a wider spread and the larger side of the new term loan partially offset by interest savings associated with the redemption of the 2017 convertibles and other debt reduction. Accordingly, we’ve lowered our guidance for adjusted cash flows from operating activities by 15 million, most of which is attributable to higher cash interest payments. The revised range is 95 million to 115 million. The other impact of the refinancing is on our adjusted free cash flow metric which is after debt repayment. We expect the higher level of amortization under the new term loan. In the first quarter, we amortized 25 million of the previous term loan and we expected to be amortize approximately 57 million to 60 million for the full year. In contrast, under the targeted sweep positions of a new term loan, we expect to repay through mandatory amortization the sweep approximately 60 million in the remaining nine months of this year representing an increase of approximately 25 million relative to previous expectations. Accordingly, we have reduced our adjusted free cash flow guidance by 40 million driven by higher interest payments and higher debt repayment. Our revised guidance is a range of negative 20 million to zero. Our adjusted cash flow from operating activities is what we focus on when we think of cash flow metrics. The guidance for adjusted free cash flow is based on us paying off 96 million of principal which helps us meet our deleveraging priorities. As Jim discussed elsewhere in his remarks, the refinancing leave us in a position we have more liquidity to debt repurchases, equity repurchases and capitalize opportunities we are pursuing. Slide 15 is an update of the guidance bridge that we typically provide for project adjusted EBITDA to our cash adjusted cash flow metrics. As I just discussed, the primary changes are higher interest payments and higher debt amortization partially offset by a slightly lower CapEx forecast. Now I will turn the call back to Jim. Jim Moore Thanks, Terry. We are an important turning point for Atlantic Power Corporation. In the past two years, we have one, paying executive management, two, refresh the board, three cut corporate overhead in half, a reduction of $27 million, four reduce debt by $879 million and interest expense by $65 million prior to the impact of the term loan financing, five resolve all pending shareholder litigation without having to make any cash payments to plaintiffs, six, sold off one quarter of our assets at a good price and use the proceeds to redeem our most expensive debt thereby removing our exposure to volatile win results and the overhand of a 2018 maturity, while still realizing a slight benefit from our ongoing cash flow. Seven, we eliminated common dividend to free up cash for uses such as debt repurchases, equity repurchases and investments in our fleet. Eight, invested $22 million in discretionary capital upgrade to the fleet, which we expect will generate approximately $10 million this year in tax returns. Nine, we brought an EVP of Commercial Development with power and energy storage expertise. Ten, we closed four of our offices and consolidated the corporate staff into one office. We moved that office from Boston’s financial district to that of Massachusetts. We also reduced corporate staff from 109 to 48. Eleven, we negotiated 11-year extension of our PPA at Morris. The first PPA extension in more than two years. The changes to that PPA are modestly accretive to expected projected adjusted EBITDA, project adjusted EBITDA. Twelve, refinanced our term loan and corporate revolver despite very difficult markets for energy companies, which resulted in longer terms for both, increased liquidity and additional flexibility. Although, additionally this will result in increased debt and interest expense, we expect both the decline over time as a result of debt repayment using our cash flow. Thirteen, we restarted our external growth efforts. Fourteen, insiders have been making significant equity purchases in these open market. As a result of these efforts, we are in a very different place than we were two years ago. On the defensive side, we have a much improved balance sheet in terms of leverage ratios and maturity profile. Our leverage ratio has improved from 8.9 times at year end 2013 to 6.4 times on a pro-forma basis for the refinancing transaction. We received $645 million of debt maturing in 2017 and 2018, leaving us with a manageable medium-term maturity in 2019 and the longer term maturity at 2036. As a result, our corporate credit rating has been upgraded by both Moody’s and S&P. We expect to further de-lever by amortizing debt from our strong operating cash flows. Our guidance is midpoint $105 million and using a portion of our liquidity to further redeem or repurchase debt. The power business is in the midst of a downcycle today. We can’t predict how low or how long it will go. So our best defense has been to reduce debt, reduce interest payments and overheads and extend our debt maturities. We expect our improved balance sheet and maturity profile will put us in a much stronger position to ride through the downcycles in energy and power markets. This allows us to be patient and disciplined on PPA renewals or asset sales. On the PPA front, we’re engaged in discussions across the fleet, particularly for those projects for which PPAs are scheduled to expire in the next several years. It is a difficult pricing environment, so we are being disciplined. We’ve had a poor outcome on Selkirk at a disappointing one at Tunis, but a good result at Morris. Although we can’t provide much guidance on PPA renewals in advance of reaching agreements, we are cautiously optimistic. We expect this to play out over the coming quarters and years. On the offensive side, we remain focused on growth in intrinsic value per share. That’s growth in absolute terms. We have approximately $700 million of debt and equity securities that we view as attractively priced. Repurchase of these at or near current levels carries more certain returns than those available on M&A markets. The refinancing transaction puts us in better position to undertake these repurchases. In addition, we see the potential for growth through internal investments in our own fleet. As we ramp down on discretionary optimization investments, we will be increasing our focus on PPA related investments or repowering projects. Some of these internal investments can be funded with operating cash flow pre-sweep and other larger projects at some of our plants can be funded by borrowings under the revolver. Between repurchasing securities and making internal investments in the fleet, we have more traffic uses than we had discretionary capital. We are reviewing the best options for deploying the $105 million in net proceeds from the refinancing. We are targeting the use of the leased $65 million for repurchase of 2019 convertibles. Further deleveraging of the balance sheet is an important priority. As always, our capital allocation decisions will be made with price to value relationships being the determining factor. Now, looking at external growth, given the returns in risks of external M&A markets for power generation versus what we see for internal investments, we’re still highly focused on growing intrinsic value per share organically. However, power asset markets tend to be volatile. This management team has had its strong record of investing and selling at a counter cyclical manner. The management team members also have had success in building IPP businesses in early mover ways since the 1980s with the most recent being a wind energy growth strategy at another company in 2001 through 2008. We are looking for undervalued assets that are too small for the average or large size M&A players, but are significant enough to move the needle for us. We will be disciplined, patient and optimistic in that effort — opportunistic in that effort. We are also looking at capital light early mover opportunities such as energy storage, but we have nothing specific to report yet. We also now have improved liquidity to capitalize on the growth opportunities that we identify, including proceeds from the recent refinancings that are available to us for security repurchases, internal and external growth. The new $200 million revolver is also more flexible with respect to financing debt repurchases for growth investments as Terry discussed. As I began my remarks by saying we have reached the turning point, we have taken the key steps necessary to strengthen our financial position, reduce near-term maturity risk and remove the overhang of litigation. We believe that we are now not only in a much stronger defensive position, but we are credibly positioned to allocate capital to debt reduction, share repurchases, internal capital expenditures and capital light external investments. The refinancing provides us with the dry powder we need for those purposes. As we have for three decades, and as we did at Atlantic Power with the timely sale of or wind business and the redemption of our high yield notes, we will be disciplined and patient, punctuated by occasional bold moves and a sense of urgency when the math is compelling for our shareholders. We won’t try to make genius decisions, as the management team to tell you genius is well outside my circle of competence, but our goal is to make rational decisions, even in unpopular and patiently build value over the long haul. If you are a patient, value oriented investor, the management team is likeminded. From here, it is all about continued execution. That concludes my prepared remarks. We are now pleased to take any questions you may have. Question-and-Answer Session Operator [Operator Instructions] Our first question comes from Rupert Merer of National bank. Please go ahead. Rupert Merer Good morning, everyone and thanks for all the detail so far. On the PPA renewals, you touched on that briefly and I realize there is probably not much more information you can give us, but can you provide some thoughts on the outlook for your Ontario projects, the Kapuskasing and North Bay projects. I think those are your next contract expires in December later this year? Dan Rorabaugh Sure. This is Dan Rorabaugh. Happy to. You are right, they do expire at the end of next year. And as we’ve discussed in past calls, there was a report on non-utility generators that came out last year that was essentially very negative to the idea of renewing these PPAs, but these projects do have value in particular, Kapuskasing and Calstock were called out as being important to local reliability. We’ve approached the idea, so and the OEFC and we are actually in discussions right now with alternatives to extract some of that value and get some value back to them and to us in terms of sending those PPAs. Rupert Merer And is it likely that they would need some sort of capital reinvestment before you would get a contract expiry and is that something you consider in your long-term capital plans? Dan Rorabaugh We do consider the kinds of investments that we would be looking at are more in the course of the normal gas turbine maintenance kind of investments and not large capital expenditures. Rupert Merer Okay, great. And then secondly, you’ve talked a little bit about the M&A market and your focus on organic growth and deleveraging. I understand it may not be the best market for an asset seller. Are you still contemplating select asset sales for debt reduction or capital recycling? Dan Rorabaugh It’s not a great market for an asset buyer. So we look at the returns that are clearing the market when you go out and buy assets and then we’d look at the returns we can get on our old balance sheet and/or investing in our old fleet. And even the returns on the debt are pretty closer to returns you could get in investing in external M&A markets and of course the returns are a lot more certain. And then the returns we’ve gotten from our discretionary CapEx is much better than what’s available on the external M&A markets. We sold a quarter of the business last year and this management team has sold large counts of businesses and demerge businesses and sold entire companies before. So we’re always actively looking at buy and sell opportunities and we’re happy to do those when it makes sense. We ended any large-scale book set, selling assets when we sold off the wind projects, but we do look at individual offers on individual assets as things come up and we consider that as part of our long-term planning, but we don’t have anything we can update you on today. Operator And our next question comes from Sean Steuart of TD Securities. Please go ahead. Sean Steuart Thanks. Good morning, everyone and thanks for all the detail. Question on the revolver, I know there is a lot more flexibility post the refinancing activity, but you mentioned some limitations on use, can you go into detail on what that would pertain to? Terry Ronan Sure. I can give you a couple of things, Sean. First of all, the biggest qualifier is we can use the revolver which were in the covenant compliance which is always the case I guess. Secondly, we are able to use the revolver for debt purchases of the converts. However, there is cap on that usage of $100 million and that we are not able to buy back equity or preferred using the revolver proceeds. And then finally, we can use the revolver for growth purposes. Sean Steuart Okay, thanks. Terry Ronan On a general corporate basis. Sean Steuart Got it. And of the $105 million of net proceeds you said $65 million towards convert repurchases I presume that’s all the December 2019 that you’d be focused on correct? Terry Ronan I would say that we haven’t completely determined what that’s going to be, the number will be at least $65 million. We will be looking at both series potentially a combination of both, but we haven’t fully made that decision yet. Sean Steuart Okay. Rest of my questions were addressed. Thanks very much. Terry Ronan Thanks, Sean. Operator And our next question comes from Ben Pham of BMO. Please go ahead. Ben Pham Okay, thanks and good morning everybody. I may have missed this at the beginning some of the commentary. On the credit facility, the new credit facility, it seems like there’s quite a dramatic interest rate and even size relative to maybe some of your initial commentary on that and I’m wondering from your side in your discussions with the debt investors and the credit, what was kind of the main issues they had. I mean you secured more assets on the debt and you spent like you said a good job of paying down debt over time. I am just wondering what were folks concern about your discussions with them as you move through your process? Terry Ronan Well, there is lot of questions there. Let me try and walk through that here, Ben. One, the interest rate is obviously higher. We can’t call the market, we wish it was lower, but that’s the market where it is today. We talked about the reasons why we think that that this is a good transaction for us because it expands the maturities, it also allows us more flexibility. It removes the 2017 overhang. So those are the good things. If you look at where the lenders were coming from if I had to step into their shoes for a moment, I think their concern was ensuring that the overall outstandings were amortized down by maturity to somewhere in the $125 million range which would be approximately 80% of the principal amount of the $700 million. Thus we have the introduction of the greater of 50% sweep for these targeted debt levels which is the equivalent of a 65% to 70% sweep. It’s a little lumpy as we go over time with that. And that’s just a market. That was the market that we faced. It was a difficult market. The market has been difficult since last summer, but it was important to us when the window opened and there was an opportunity to do this that we do it particularly with the first of the 17s coming due in March of 2017. And it has also allowed us to extend the revolver into a five-year facility out to 21. So from our perspective it’s a very good transaction. The positives outweigh the negatives. Jim Moore This is Jim Moore. I think I heard you ask something too, I will try to add answer maybe you didn’t ask it, but I will answer it anyhow. But so we got done with the sale and then high yield redemption and in that case I think we really kind of [indiscernible] the market, but that kind of timing is usually locked, not prescience and we went right to work on the TLB side of it. It takes a while to get everything and put together. So we weren’t making a market judgment call at that point. We were going as fast as we could. When we were ready to go market things had gotten very dicey in the energy markets, so our advice was to – from our financial advisors was to deposit that and when we saw the market opening up a bit, we went back out with this transaction. The feedback we got was very good. The fact that we were able to raise $700 million in this kind of environment I think was every good. But some of the people on the debt side felt very good about the credit that they were looking at although we were facing a market where across-the-board people are trying to reduce high yield energy and power market exposure. So we were – I think the clean insured and a bunch dirty shirts sectors so we didn’t make a judgment to try to play games with the market. We got ready to go as quickly as we could. And then we had opportunity we went. The rates obviously have moved up since the last refinancing and we didn’t touch the bottom of the rate cycle, but we think overall the rates not a bad rate on a historical basis. We do have the higher sweep, but with the 17s fast approaching we didn’t want to make the perfect enemy of the good. So instead of sitting near and waiting for the opportune time or trying to play to markets a bit on rates, we decided let’s go ahead and do this deal because it eliminates the 17s. When I showed up in January, the big concern I had about this company was we had three walls of debt coming at us, we had a wall of debt in 17, we had a wall of high yield. That cost us 9%, that was coming at 18 and then we had to convert to 19. With the completion of this refinancing we’ve now once we redeem the ’17 to May eliminated the 17 wall, eliminated the 18 wall, as Terry pointed out we are on a good path for 19 wall. So all of that was important to us that we not get too cute on trying to play the rates. We were viewed as the strong credit which enabled us to go get this $700 million with increased flexibility. Another important thing in addition to avoiding the 17 by getting too cute was that the revolvers are difficult to replace in any market particularly this market and we came out with a very good outcome on the revolver. So in addition we extended the term of the revolver, we extended the term for the TLB and even after the higher suite with this $105 million to allocate to debt, equity and internal uses, so we would have preferred to have gotten more rates or hit the bottom of a market, but I think we were very well received which allowed us to raise a total of $900 million of debt in debt revolver in a very difficult market. And I’m actually very optimistic at this point about being able to get off our back foot and as a theme of my remarks was go from a – completely defensive mode to where we can play a little bit of offense. And we don’t need tons of liquidity. I mean our market cap is $310 million or so, so we don’t need tons of liquidity to make meaningful debt repurchases or common repurchases or investments in capital. And if you look at our $105 million with the new more flexible $200 million revolver and a cap that we already have on the balance sheet for working capital, we think our liquidity positions is now very strong relative to the opportunity sizes that we see in front of us. Ben Pham Okay, thanks for the color. And the only other thing I want to check on looking through the slides, the covenants in slide 27 specifically and it looks like you expected to I guess get down to 4.25 times leverage here at about 6 today, does that contemplate any change in PPA re-contracting rates or you feel like you are factoring that in, but maybe there’s some positive offsets that looks like you think the 80% debt profit today look likes it’s [indiscernible] what you are seeing in this year. You can add bit more color there. Terry Ronan So it does assume that in those numbers, but at a very conservative re-contracting assumption. Ben Pham Okay, so you are assuming some decline, but is that what you said? Terry Ronan Yes, that’s exactly what I said. Ben Pham Okay, all right. Thanks everybody. Terry Ronan Thank you. Operator [Operator Instructions] Showing no further questions, I would like to turn the conference back over to the management team for any closing remarks. Jim Moore Okay. Well, thank you for your time and attention today and your continued it interest in Atlantic Power. We look forward to updating you on our progress on our next conference call in August. Thank you. Operator Thank you. And everyone have a – today’s conference has now concluded. We thank you all for attending today’s presentation. You may now disconnect your lines and have a wonderful day. Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. 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