Polaris Infrastructure reports record annual geothermal power generation & revenue

Pipes at San Jacinto geothermal plant, Nicaragua (source: Polaris Infrastructure)

Alexander Richter 9 Mar 2018

Canadian Polaris Infrastructure has released its 2017 year end results, providing details on the financial results and corporate highlights.

The company has substantially completed the 2017/ 2018 drilling program at its San Jacinto-Tizate geothermal plant in Nicaragua.

• Production well SJ 12-5 was completed in early January 2018 and successfully flow-tested later that month. SJ 12-5 was connected to the plant on February 27, 2018, though due to separation capacity constraints, the well has been restricted and SJ 12-3 was temporarily taken out of service. Accordingly, it remains difficult to meaningfully estimate the sustained level of generation to expect from SJ 12-5. Based on testing completed to date, as well as the limited ability to draw conclusions while connected to the plant, we remain confident that the estimated productive capacity of SJ 12-5 is between 8 to 12 MW. It is important to note that geothermal wells take time to reach stabilization and hence initial estimates for SJ 12-5 may change.
• SJ 12-4 meanwhile, the other new production well, was completed in early November 2017, with favourable temperature and permeability readings. The well was successfully flow-tested in late January 2018, through to mid-February 2018, when it was shut-in to facilitate completion of the Unit 3 turbine maintenance process, as discussed below. Management’s expectation continues to be that SJ 12-4 will contribute average generation in the 4 to 6 MW range.

The company also reported record level annual power generation and revenue.

The San Jacinto project achieved its highest ever annual levels of power generation and revenue in 2017. Total generation was 490,765 MWh (net) (an average of 56.0 MW (net)), resulting in revenue of $60.1 million for the year ended December 31, 2017, versus revenue of $54.7 million on generation of 459,990 MWh (net) (an average of 52.4 MW (net)) in the prior year. The 10% revenue increase was due to higher average production in 2017 as well as the impact of the 3% annual tariff increase.

Significant increase in Adjusted EBITDA

The Company generated Adjusted EBITDA (a non-GAAP measure) of $50.3 million in 2017, an 11% increase from 2016, driven by increased San Jacinto project revenues. Adjusted EBITDA margins improved slightly, from 83% for 2016, to 84% for 2017. See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total income (loss) and comprehensive income (loss).

Successful conclusion of annual turbine maintenance

Comprehensive preventative maintenance was completed on the Unit 3 turbine at the San Jacinto project over the course of two and a half weeks in February 2018. This exercise was completed ahead of schedule and under budget, and leaves us well positioned for consistent turbine performance throughout 2018 and 2019, given that the Unit 4 turbine was likewise serviced in February 2017. Along with performance of various maintenance activities throughout the steam-field during the turbine maintenance period, we will commission a new separator station with increased capacity and efficiency in May 2018, on pad 12, which is expected to further contribute towards optimizing above-ground operations.

“We are pleased with the progress we’ve made this year towards our most immediate objective, being the optimization of the San Jacinto project” noted Marc Murnaghan, Chief Executive Officer of Polaris Infrastructure. “We are optimistic that the wells we recently drilled, once connected, will bring us very close to the 72 MW (net) level we have been targeting since we initiated the 2015 recapitalization transaction. Our expectation therefore, is that 2018 will see lower investment into the San Jacinto project, allowing increased emphasis on new and compelling growth opportunities. We remain optimistic with respect to our ability to create further value for our shareholders going forward.”

Source: Polaris Infrastructure