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Liquidity & Capital Resources
Cash generated by operating activities, supplemented by additional borrowings as necessary, is expected to be sufficient to meet the forecast liquidity and capital resource requirements of the Fund. Forecasted liquidity requirements include monthly cash distributions to unitholders, including ordinary and subordinated unitholders of the Fund as well as preferred unitholders of ECT.
The Fund's current liabilities routinely exceed current assets. Current liabilities include current maturities of long-term debt, which are typically refinanced with long-term debt. Excluding current maturities of long-term debt, the Fund does not have a working capital deficit. The Fund's cash balance at December 31, 2007 of $14.7 million includes $2.4 million held in trust in Alliance Canada, pursuant to finance agreements within Alliance Canada.
In July 2007, Alliance Canada acquired a $12.4 million investment in asset backed commercial paper, issued by a structured investment trust (the Trust). The investment is held in trust with Alliance Canada's Security Trustee as part of Alliance Canada's current debt service requirement. As a result of deteriorating liquidity in the asset backed commercial paper market in mid 2007, the Trust was unable to redeem this investment upon its maturity on August 31, 2007. Pursuant to a restructuring plan, conversion of the commercial paper into long-term notes is expected to occur in the first quarter of 2008.
The Fund does not anticipate that the treatment of Alliance Canada's investment in asset backed commercial paper will have any significant impact on its operations or ability to meet upcoming debt obligations.
OPERATING ACTIVITIES
Cash provided by operating activities was $80.6 million for the year ended December 31, 2007, compared with $86.5 million in the prior year. The decrease reflected changes in working capital and lower earnings from operations.
INVESTING ACTIVITIES
Cash used for investing activities for the year ended December 31, 2007 was $71.2 million, a decrease of $8.3 million from the prior year. The decrease reflected the acquisition of the Wind Power projects in 2006.
Capital expenditures are categorized as either maintenance or enhancement. Maintenance capital expenditures are determined based on the capital requirements necessary to maintain the service capability of the existing assets and include the replacement of system components and equipment that are worn, obsolete or completing their useful life. Enhancement expenditures include capital expansion projects and other projects that improve the service capability of existing assets, extend asset useful lives, increase capacities from existing levels, reduce costs or enhance revenues, or enable the Fund to respond to governmental regulations and developing industry standards. Maintenance capital expenditures are funded through cash from operations, whereas enhancement capital expenditures are funded through debt and, as required, the issuance of equity.
FINANCING ACTIVITIES
Financing activities for the year ended December 31, 2007 related to monthly distributions to ordinary and subordinated unitholders as well as changes in outstanding indebtedness under the credit facility and non-recourse debt funding for Alliance Canada.
In June 2007, Alliance Canada amended the maturity date of its existing credit facility from 2011 to 2012. In September 2007, the Fund increased its available credit under its existing unsecured credit facility from $105.0 million to $150.0 million under the same terms and conditions. The Fund's credit facility matures in 2010. The additional available credit will support the Fund's current expansion initiatives. The credit facility may be used to provide working capital to the Fund, to finance acquisitions and development projects or for general purposes. At December 31, 2007, the Fund had $51.3 million (2006 – $35.1 million) in undrawn credit facilities for liquidity requirements.
Payments due for contractual obligations for each of the next five years and thereafter are as follows:
|
(millions of Canadian dollars) |
Total |
Less than 1 year |
2 years |
3 years |
4 years |
5 years |
After 6 years |
|---|---|---|---|---|---|---|---|
Long-Term Debt |
1,039.2 |
28.7 |
130.9 |
132.4 |
36.3 |
81.9 |
629.0 |
Operating Leases |
36.0 |
3.1 |
2.9 |
3.2 |
3.2 |
2.8 |
20.8 |
Other Long-Term Obligations |
8.1 |
8.1 |
- |
- |
- |
- |
- |
|
1,083.3 |
39.9 |
133.8 |
135.6 |
39.5 |
84.7 |
649.8 |