Polaris Infrastructure reaps reward from increase of capacity in Nicaragua

Pipes at San Jacinto geothermal plant, Nicaragua (source: Polaris Infrastructure)
Alexander Richter 8 Mar 2019

Having successfully increased its available net capacity of the San Jacinto-Tizate geothermal plant from 57 MW to 62 MW has helped Polaris Infrastructure Inc. to increase revenues by 14.5% in 2018 compared to last year.

In a release shared earlier this week, Polaris Infrastructure Inc. (TSX: PIF), reported its audited financial and operating results for the year ended December 31, 2018.  The full Consolidated Financial Statements and Management’s Discussion and Analysis of the company are available at and have been posted on SEDAR at  The dollar figures below are denominated in US Dollars unless noted otherwise.

The company reports:

  • Record-level annual power generation and revenue: The San Jacinto project achieved its highest ever annual levels of power generation and revenue in 2018. Total generation at San Jacinto was 543,312 MWh (net) (an average of 62.0 MW (net)) versus generation of 490,765 MWh (net) (an average of 56.0 MW (net)) in the prior year.  This increase in production drove a revenue increase of 14.5% to $68.8 million from the San Jacinto project.
  • Peruvian Acquisition Operating Facility: In addition, the Company’s recently purchased run-of-river project, Canchayllo, was consolidated for two months, which added 5,196 MWh, resulting in revenue recorded of $0.3 million in 2018.
  • Significant increase in Adjusted EBITDA: The Company generated Adjusted EBITDA (a non-GAAP measure) of $57.8 million in 2018, a 15% increase from 2017, driven primarily by increased San Jacinto project revenues. Adjusted EBITDA margins remained stable at 84% for 2018.  See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total income (loss) and comprehensive income (loss).
  • Completion of new well, 12-5, at the San Jacinto-Tizate Power Plant (the “San Jacinto project”): 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 in March 2018. 12-5 is currently flowing at a rate of approximately 8-10 MW, which makes it one of the stronger wells in the field.  As such, this was a very important milestone for the Company.  It is important to note that geothermal wells take time to reach stabilization, however at approximately one year from connection, management is of the view that we are at, or very close to, reaching a stable state for the well.
  • Completion of UEG Acquisition: The Company completed the acquisition of 100% of Union Energy Group Corp. on October 30, 2018. This acquisition added a portfolio of run-of-river hydro assets at different stages of development located in Peru. The portfolio includes a 5 MW operating project called Canchayllo, which has been in operation since 2015 and has a long-term US dollar-denominated power purchase agreement (“PPA”) until 2034.  The main focus of the acquisition was two projects, El Carmen (8 MW) and 8 de Agosto (20 MW), that are in late stages of construction.  These projects have long-term US dollar-denominated PPAs until 2039. Construction activities have now been fully-mobilized and we are targeting having both projects completed and connected to the grid in the fourth quarter of this year.  The portfolio also included earlier stage development projects with an estimated capacity of over 180 MW.  Further details on the construction progress of El Carmen and 8 de Agosto will be provided on future earnings calls.

For the three months ended December 31, 2018, the Company reported revenue of $18.3 million and Adjusted EBITDA of $14.9 million, compared to revenue of $15.6 million and Adjusted EBITDA of $12.9 million for the same period in 2017. The significant increase in revenue was as a result of exceptional power generation at the San Jacinto facility, as well as the 3% annual tariff increase under the power purchase agreement.  The higher average generation in the period resulted from higher than typical steam flows from two new wells connected to the San Jacinto facility in the first quarter of 2018.  See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total income (loss) and comprehensive income (loss).

For the year ended December 31, 2018, the Company reported revenue of $68.8 million and Adjusted EBITDA of $57.8 million, compared to revenue of $60.1 million and Adjusted EBITDA of $50.3 million, for the same period in 2017. The 14.5% increase in revenue was primarily owed to the increase in average generation, as well as the 3% annual tariff increase.  Adjusted EBITDA growth of $7.5 million was also primarily the result of the above-mentioned revenue growth at the San Jacinto facility. See Use of Non-GAAP Measures section below for reconciliation of Adjusted EBITDA to Total income (loss) and comprehensive income (loss).

For the year ended December 31, 2018, the Company had net operating cash inflows of $37.4 million, net investing cash outflows of $14.7 million (substantially related to the 2017/2018 San Jacinto drilling program) and net financing cash outflows of $22.1 million (related to dividends and repayment of debt).  As at December 31, 2018, the Company had consolidated cash of $37.8 million.

“We are very pleased with the financial results for 2018 which justify the investments made to optimize the San Jacinto project” noted Marc Murnaghan, Chief Executive Officer of Polaris Infrastructure.  “While there continue to be opportunities to optimize the San Jacinto project, we anticipate that 2019 will see lower capital investment into this facility, which will allow for increased emphasis on other growth opportunities.  This includes the capital investment required to complete the two key construction projects in Peru.  Once completed, our revenue and cash flow will become more diversified by both asset class and jurisdiction.  We strongly believe that such diversification will benefit all shareholders going forward.”

Source: Company release