Capstone to source renewable deals with Macquarie

The Toronto-listed investor, formerly known as the Macquarie Power and Infrastructure Corporation, spun out from its parent firm earlier this year, but its executives will continue to look at renewable energy opportunities with Macquarie.

Despite having recently split from Macquarie, the Capstone Infrastructure Corporation will continue to have “dialogue” with its former parent firm, Capstone executives said in a conference call to investors last week.

Toronto-listed Capstone, formerly the Macquarie Power and Infrastructure Corporation, completed its spin out from Macquarie in April. Michael Bernstein, Capstone chief executive, said that Macquarie provides “continuing access to international deal flow” for Capstone.

The costs of “internalization of management” are about C$20 million (€14.2 million $20.4 million), the bulk of which will fall in the second quarter, Capstone chief financial officer Michael Smerdon said in the conference call.  Smerdon said only C$600,000 of those costs had been accounted for in the first quarter of 2011.

Capstone has invested in natural gas, wind energy and wood waste-fire power assets in Canada. Executives said during the conference call that they viewed Canadian renewable energy projects as “primary opportunities”, and the company is currently developing a solar project in Ontario, according to the Capstone website.

When asked by an analyst if Macquarie’s plans to raise a fund dedicated to North American renewable energy would complicate Capstone’s ability to pursue deals, Bernstein said he saw Macquarie as “more of a benefit and opportunity for us than a competitor”.

“There are a billion dollars worth of opportunities, so in fact we view it as good potential partners to look at a variety of projects,” Bernstein said, adding that there remains “an active dialogue” between Macquarie and Capstone.

Capstone reported a 6.3 percent increase in revenue for the first quarter as compared to the first quarter of 2010, but a 10.1 percent decrease in adjusted EBITDA (earnings before interest, taxes, depreciation and amortisation), and 13.5 percent decrease in adjusted funds from operations, primarily due to higher costs, according to Bernstein.  The company currently has more than C$50 million in capital to pursue acquisitions, Smerdon said.

In the first quarter, Capstone also completed the C$109 million acquisition of 33.3 percent of a district heating business in Sweden that provides both heat production and distribution, according to Bernstein. The remaining 66.6 percent of the business was acquired by the Macquarie European Infrastructure Fund II.