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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of November 2010
Commission File Number 001-34609
CHINA HYDROELECTRIC CORPORATION
(Exact name of registrant as specified in its charter)
25B,
New Poly Plaza, No. 1 North
Chaoyangmen Street
Dongcheng District, Beijing
Peoples Republic of China 100010
Tel: (86-10) 6492-8483
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F
or
Form 40-F: þ Form 20-F o Form 40-F
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(1): o
Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by
Regulation S-T Rule 101(b)(7): o
Indicate by check mark whether the registrant by furnishing the information contained in this Form
is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934: o Yes þ No
If Yes is marked, indicate below the file number assigned to the registrant in connection with
Rule 12g3-2(b): N/A
CHINA HYDROELECTRIC CORPORATION
FORM 6-K
China Hydroelectric Corporation is furnishing under the cover of Form 6-K the following:
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Exhibit 99.1 |
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Press release dated November 10, 2010 |
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly
caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
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CHINA HYDROELECTRIC CORPORATION
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By: |
/s/ James Tie Li
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James Tie Li, Chief
Financial Officer and Exectuvie Vice President |
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Date: November 10, 2010
Exhibit 99.1
China Hydroelectric Corporation Announces Third Quarter 2010 Results
GAAP earnings of $0.03 per ADS
Non-GAAP earnings of $0.06 per ADS
Revenue increased by 42% compared to the third quarter of 2009
Installed capacity increased by 62.9 MW during the third quarter of 2010
NEW YORK, Nov. 10, 2010 /PRNewswire-Asia-FirstCall/ China Hydroelectric Corporation (NYSE: CHC,
CHC.WS) (China Hydroelectric or the Company), an owner, developer and operator of small
hydroelectric power projects in the Peoples Republic of China (PRC), today announced its
financial results for the third quarter and the first nine months ended September 30, 2010.
The Company completed three acquisitions of four operating hydroelectric power projects with an
aggregate of 116.8 MW of installed capacity during the first nine months of 2010. As of September
30, 2010, the Companys installed capacity was 493.4 megawatts (MW) as compared to 376.6 MW as of
September 30, 2009. Comparing the Companys results of operations from one period to another and
its financial condition at the end of two comparable periods may be difficult due to the impact of
those newly acquired hydroelectric power projects.
Third Quarter 2010 Financial and Operating Highlights
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As of the end of the third quarter of 2010, aggregate installed capacity was 493.4 MW,
representing an increase of 116.8 MW, or 31%, from the end of the third quarter of 2009, as
well as an increase of 62.9 MW, or 15%, from the end of second quarter of 2010. This
increase was primarily due to the acquisition of the following projects: the Husahe project
(18.7 MW, acquired April 2010); the Minrui projects (54.1 MW) consisting of Aluhe (10.0 MW,
acquired June 2010), Zilenghe (25.2 MW, acquired June 2010), and Latudi (18.9 MW, acquired
August 2010); and the Xiaopengzu project (44 MW, acquired September 2010). |
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Revenue increased by 42% to $18.4 million for the third quarter of 2010 compared to
$13.0 million for the third quarter of 2009. |
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Gross profit increased by 41% to $12.0 million in the third quarter of 2010 compared to
$8.5 million for the third quarter of 2009. Gross margin remained at 65% for the third
quarter of 2010, the same as the third quarter of 2009. |
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Operating income increased by 17% to $7.4 million in the third quarter of 2010 compared
to $6.3 million in the third quarter of 2009. |
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Adjusted EBITDA (see the table entitled Adjusted EBITDA to Net Income Reconciliation
for detailed information) increased by 30% to $12.7 million for the third quarter of 2010
compared to $9.8 million for the third quarter of 2009. Adjusted EBITDA margin was 69% for
the third quarter of 2010 compared to 76% for the same period in 2009. |
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GAAP net income attributable to ordinary shareholders of $1.7 million, or $0.03 per
American Depository Share (ADS) (each representing three ordinary shares) for the third
quarter of 2010 compared to GAAP net loss attributable to ordinary shareholders of $7.5
million for the same period in 2009. Net loss attributable to ordinary shareholders in the
third quarter of 2009 was impacted by a non-cash charge of $8.8 million in cumulative
dividends on the redeemable preferred shares outstanding in that period that were
converted into |
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ordinary shares at the time of the Companys IPO in January 2010. |
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Non-GAAP net income (see the table entitled GAAP Net Income (loss) to Non-GAAP Net
Income (loss) Reconciliation for detailed information) of $3.0 million, or $0.06 per ADS
for the third quarter of 2010 compared to $1.5 million for the same period in 2009. |
Nine Months Ended September 30 2010 Financial and Operating Highlights
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Increased aggregate installed capacity by 116.8 MW, or 31%, to 493.4 MW as of September
30, 2010 compared to 376.6 MW as of September 30, 2009, see the paragraph above. |
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Revenue increased by 86% to $56.7 million for the nine months ended September 30, 2010,
compared to $30.5 million for the same period in 2009. |
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Gross profit increased by 107% to $39.2 million for the nine months ended September 30,
2010, compared to $18.9 million for the same period in 2009. Gross margin was 69% for the
nine months ended September 30, 2010, compared to 62% for the same period in 2009. |
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Operating income increased by 91% to $25.4 million for the nine months ended September
30, 2010, compared to $13.3 million for the same period in 2009. |
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Adjusted EBITDA increased by 80% to $40.2 million for the nine months ended September
30, 2010, compared to $22.3 million for the same period in 2009. Adjusted EBITDA margin
decreased to 71% for the nine months ended September 30, 2010 from 73% for the same period
in 2009. |
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GAAP net loss attributable to ordinary shareholders was $5.9 million, or $0.13 net loss
per ADS, for the nine months ended September 30, 2010, compared to a net loss of $23.4
million for the same period in 2009. Net loss attributable to ordinary shareholders for
the nine months ended September 30, 2010 was impacted by non-cash charges of $3.6 million
in cumulative dividends on the convertible redeemable preferred shares and $12.3 million
on the beneficial conversion features triggered by the conversion of the convertible
redeemable preferred shares to commons shares on IPO. Net loss attributable to ordinary
shareholders for the nine months ended September 30, 2009 resulted from a non-cash charge
of $24.2 million in cumulative dividends on the convertible redeemable preferred shares. |
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Non-GAAP net income of $12.7 million, or $0.27 per ADS, for the nine months ended
September 30, 2010 compared to $1.5 million non-GAAP net income for the same period in
2009. |
We are pleased with the progress we continued to make in the third quarter of this year towards
meeting our operational and acquisition goals for the year. The first half of 2010 saw favorable
rainfall in most of our catchment areas, producing excellent runoff and a high level of reservoir
storage at many of our projects. The third quarter continued to see favorable rainfall at our
Fujian and Yunnan projects, while our Zhejiang projects saw slightly less than favorable rainfall.
However, due to our geographic diversification, less than favorable rainfall in one region does not
significantly impact our operations. However, the latter half of the year promises to be much drier
than the first half.
In the first nine months of this year, we expanded our geographic diversification by completing
three acquisitions in Yunnan province of four operating projects, with a combined installed
capacity totaling 116.8 MW, said Mr. John D. Kuhns, Chief Executive Officer and Chairman of the
Board of Directors of the Company.
For the remainder of 2010, we continue to expand our geographically diverse portfolio through the
evaluation and acquisition of operational, construction and development hydroelectric projects in
the PRC. We seek to continue to utilize our IPO proceeds, cash generated from operations, and funds
expected to be available under the loan framework arrangement we have with the Bank of Chinas
Fujian Branch to further expand our asset base.
Third Quarter 2010 Financial and Operational Results
Key Drivers of Growth in the Third Quarter 2010
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Increase of 116.8 MW installed capacity to 493.4 MW from 376.6 MW at the beginning of
2010. |
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Electricity sold was 436.6 million kilowatt hours (kWh) for the third quarter of 2010
compared to 291.7 million kWh for the third quarter of 2009. |
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The average effective utilization rate was 43.8% for the third quarter of 2010 compared
to |
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39.4% for the third quarter of 2009. Average effective utilization rate is calculated by
dividing the quantity of electricity actually sold by the theoretical quantities of
electricity which could be generated from the Companys hydroelectric power projects. |
Revenues
Revenues, net of value added taxes, for the third quarter of 2010 were $18.4 million, an increase
of 42%, or $5.4 million from $13.0 million for the third quarter of 2009. The Company sold 436.6
million kWh for the third quarter of 2010, an increase of 50% from 291.7 million kWh for the same
period in 2009. The increase in revenues is mainly due to favorable precipitation at the Companys
Fujian projects, offset by less than favorable precipitation at the Zhejiang projects, during the
third quarter of 2010, and partially due to the revenue contribution from newly acquired projects
since the end of the third quarter of 2009. Of the $5.4 million increase in revenue for the third
quarter, $3.7 million was contributed by existing projects as of September 30, 2009 and $1.7
million was contributed by the newly acquired projects mentioned above, a total of 116.8 MW.
The effective tariff, calculated by dividing revenues, before Value Added Tax, or VAT, in RMB
(Renminbi), the functional currency of the hydroelectric power projects, by the amount of
electricity sold, for the third quarter of 2010 was RMB 0.30 per kWh, a decrease of 12% from RMB
0.34 per kWh in the third quarter of 2009. The decrease was caused by slightly lower revenue
contribution from operating projects in Zhejiang province, a relatively high tariff region, and
revenue contribution from newly acquired projects in Yunnan, a lower tariff region. Tariffs vary at
the Companys individual hydroelectric power projects, which causes effective tariffs, which are a
consolidated figure, to vary based on different revenue contribution mixes.
The average effective utilization rate was 43.8% for the third quarter of 2010, compared to 39.4%
for the third quarter of 2009. The higher average effective utilization rate was mainly the result
of the favorable precipitation in Fujian and Yunnan provinces, offset by less than favorable
precipitation in Zhejiang province in the third quarter of 2010.
Cost of Revenues
Cost of revenues for the third quarter of 2010 was $6.3 million, as compared to $4.5 million for
the third quarter of 2009, primarily due to the operating assets the Company has acquired since the
end of the third quarter of 2009. Cost of revenues as a percentage of revenues decreased to 34% for
the third quarter of 2010, from 35% for the same period in 2009, as a result of higher revenue
contribution from the projects in Fujian and Yunnan provinces in the third quarter of 2010.
Higher costs were also associated with increased power generation and labor costs associated with
the previously mentioned acquisitions.
Gross Profit and Margin
Gross profit was $12.0 million for the third quarter of 2010, an increase of $3.5 million, or 41%,
from $8.5 million for the same period in 2009. This increase was due to higher revenues from the
Companys operating projects and from the newly acquired operating projects. Of the $3.5 million
increase in gross profit, $2.4 million was contributed by existing projects as of September 30,
2009 and $1.1 million was contributed by the newly acquired projects mentioned above. Gross margin
of 65% for the third quarter of 2010 remained unchanged, compared with the same period in 2009.
General and Administrative Expenses
General and administrative expenses (G&A expenses) for the third quarter of 2010 were $4.6
million, or 25% of revenues, compared to $2.2 million, or 17% of revenues for the third quarter of
2009. The G&A expenses in the third quarter of 2010 included an employee stock-based compensation
expense of $1.0 million, compared to $0.1 million in the same period in 2009. The increase in G&A
expenses was also due to acquisition costs and higher professional fees associated with being a
public company.
Adjusted EBITDA and EBITDA Margin
Adjusted EBITDA was $12.7 million for the third quarter of 2010, an increase of 30%, or $2.9
million, over $9.8 million for the third quarter of 2009. Adjusted EBITDA margin decreased to 69%
for the third quarter of 2010 from 76% for the same period in 2009.
Interest Expenses
Interest expenses for the third quarter of 2010 were $4.3 million, or 23% of revenues, compared to
$3.9 million, or 30% of revenues for the same period in 2009. The increase was the result of
additional borrowing since the fourth quarter of 2009.
GAAP and Non-GAAP Net Income
As a result of the factors discussed above, net income attributable to ordinary and preferred
shareholders, was $1.7 million in the third quarter of 2010, compared to $1.3 million in the
comparable period in 2009. Net income attributable to ordinary shareholders (or GAAP net income
attributable to ordinary shareholders) was $1.7 million, or $0.03 per ADS, for the third quarter
of 2010 compared to a GAAP net loss attributable to ordinary shareholders of $7.5 million, for the
third quarter of 2009.
Non-GAAP net income was $3.0 million, or $0.06 per ADS, for the third quarter of 2010 compared to
$1.5 million, or $0.01 per ordinary share, for the third quarter of 2009. For reconciliation
between GAAP and non-GAAP earnings, see the table entitled GAAP Net Income (loss) to Non-GAAP Net
Income Reconciliation.
Weighted average American depository shares used in the earnings per share calculation was 51.1
million ADS, representing 153.3 million ordinary shares, for the third quarter of 2010 and 121.8
million ordinary shares for the third quarter of 2009.
Nine
Months Ended September 30 2010 Financial and Operational
Results
Key Drivers of Growth in the First Nine Months of 2010
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Increase of 116.8 MW of installed capacity to 493.4 MW in the nine months ended
September 30, 2010. |
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Electricity sold was 1,234.0 million kWh for the nine months ended September 30, 2010
compared to 667.4 million kWh for the nine months ended September 30, 2009. |
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The average effective utilization rate was 46.2% for the nine months ended September
30, 2010 compared to 35.9% for the nine months ended September 30, 2009. |
Revenues
Revenues, net of value added taxes, were $56.7 million for the nine months ended September 30,
2010, an increase of 86%, or $26.2 million, compared to $30.5 million for the same period in 2009.
The Company sold 1,234.0 million kWh for the nine months ended September 30, 2010, an increase of
85% from 667.4 million kWh for the same period in 2009. The increase in revenues is mainly due to
favorable precipitation at the Companys operating projects in the Fujian and Zhejiang provinces in
the first half of 2010 and partially due to increased operating capacity as a result of
acquisitions. Of the $26.2 million increase in revenues, $24.2 million was contributed by existing
projects as of September 30, 2009, and $2.0 million was contributed by the newly acquired projects
mentioned above, a total of 116.8 MW.
The effective tariff of RMB 0.34 per kWh, for the nine months ended September 30, 2010, remained
unchanged, compared to the same period ended in 2009. Tariffs vary at the Companys individual
hydroelectric power projects, which causes effective tariffs, which are a consolidated figure, to
vary based on different revenue contribution mixes.
The average effective utilization rate was 46.2% for the nine months ended September 30, 2010
compared to 35.9% for the nine months ended September 30, 2009. The increase in average effective
utilization rate is due to favorable precipitation in the Fujian and Zhejiang provinces in the
first half of 2010 and the new acquisitions in Yunnan province.
Cost of Revenues
Cost of revenues was $17.5 million for the nine months ended September 30, 2010 compared to $11.5
million for the same period in 2009. The increase in cost of revenues was primarily due to the
additional operating projects the Company acquired since the end of the third quarter of 2009. Cost
of revenues as a percentage of revenues decreased to 31% for the first nine months ended September
30, 2010 from 38% for the same period in 2009, mainly as a result of higher revenue contribution
from the Fujian and Zhejiang projects in the first half of 2010.
Gross Profit and Margin
Gross profit was $39.2 million for the nine months ended September 30, 2010; an increase of $20.3
million, or 107%, from $18.9 million for the same period in 2009 due to higher revenues from the
Companys operating projects and from the newly acquired operating projects. Of the $20.3 million
increase in gross profit, $19.1 million was contributed by existing projects as of September 30,
2009
and $1.2 million was contributed by the newly acquired projects mentioned above. Gross margin
increased to 69% for the nine months ended September 30, 2010 from 62% for the same period in 2009.
The gross margin increase is due to the higher revenue contribution as a result of favorable
precipitation at the Companys Fujian and Zhejiang projects in the first half of 2010.
General and Administrative Expenses
The Companys general and administrative expenses (G&A expenses) were $13.8 million for the nine
months ended September 30, 2010, or 24% of revenues, compared to $5.7 million, or 19% of revenues,
for the same period in 2009. The G&A expenses in the first nine months of 2010 included an employee
stock-based compensation expense of $2.6 million, compared to $0.3 million in the same period in
2009. The increase in G&A expenses was also due to acquisition costs for new projects as well as
higher professional fees associated with being a public company.
Adjusted EBITDA and EBITDA Margin
Adjusted EBITDA was $40.2 million for the nine months ended September 30, 2010, an increase of 80%,
or $17.9 million, compared to $22.3 million for the same period in 2009. Adjusted EBITDA margin
decreased to 71% for the nine months ended September 30, 2010 from 73% in the same period in 2009.
Interest Expenses
Interest expenses for the nine months ended September 30, 2010 were $11.6 million or 20% of
revenues compared to $10.2 million or 34% of revenues for the same period in 2009. The increase was
the result of additional borrowings since the fourth quarter of 2009.
GAAP and Non-GAAP Net Income
As a result of the factors discussed above, net income attributable to ordinary and preferred
shareholders, was $9.9 million in the first nine months of 2010, compared to of $0.8 million in the
comparable period in 2009. Net loss attributable to ordinary shareholders (or GAAP net loss
attributable to ordinary shareholders) was $5.9 million, or $0.13 net loss per ADS, for the nine
months ended September 30, 2010, which included cumulative dividends on convertible redeemable
preferred shares of $3.6 million and the beneficial conversion features on such shares of $12.3
million that occurred upon the consummation of the Companys IPO in the first quarter of 2010,
compared to a GAAP net loss attributable to ordinary shareholders of $23.4 million for the same
period in 2009, which included a $24.2 million cumulative dividend on convertible redeemable
preferred shares.
Non-GAAP net income was $12.7 million, or $0.27 per ADS for the nine months ended September 30,
2010 compared to $1.5 million, or $0.01 per ordinary share, for the same period in 2009. For a
complete reconciliation between GAAP and non-GAAP earnings, see the table entitled GAAP Net Income
(loss) to Non-GAAP Net Income Reconciliation.
Weighted average American depository shares used in the earnings per share calculation was 46.6
million ADS, representing 139.9 million ordinary shares, for the nine months ended September 30,
2010 and 116.6 million ordinary shares for the same period in 2009.
Business Outlook for Full Year 2010
Although Yunnan and Fujian continued to experience favorable rainfall during the third quarter of
2010, less than favorable rainfall was realized in Zhejiang as a result of fewer than normal
impacting typhoons. However, the impact that fourth quarter results will have on the Companys full
year results remains uncertain at this time.
In addition to our 493.4 MW capacity as of September 30, 2010, as of today, we have signed
definitive agreements to acquire the first five of seven Taiyu Projects, totaling 55.4 MW, as well
as the Dazhaihe project, a 15 MW facility in Yunnan. Consummation of these two acquisitions is
expected to be completed in November of 2010. Due to the length of bank financing processes, the
remaining 44 MW to complete our overall 607.8 MW post IPO capacity target will likely be delayed
until December 2010 or possibly the first quarter of 2011.
Non-GAAP Net Income Figures
Non-GAAP net income for the third quarter of 2010, the third quarter of 2009, the first nine months
of 2010 and the first nine months of 2009 excludes the following non-cash charges: stock-based
compensation expenses; non-cash dividends and conversion features on convertible redeemable
preferred shares; exchange gains or losses; and, the change in fair value of derivative financial
liabilities and warrant liability. A reconciliation of GAAP and non-GAAP items is provided in the
table entitled GAAP Net Income (loss) to Non-GAAP Net Income Reconciliation.
Adjusted EBITDA to Net Income Reconciliation
Adjusted EBITDA is defined by the Company as earnings before interest, taxes, depreciation and
amortization and excluding certain non-cash charges, including: stock-based compensation expenses,
exchange losses, change in fair value of derivative financial liabilities and warrant liability.
For further details, see the table entitled Adjusted EBITDA to Net Income Reconciliation.
Comparability
As the Company continues to complete acquisitions of hydroelectric power projects certain
additional hydroelectric power projects during the first nine months of 2010, comparability of the
Companys results of operations from one period to another and its financial condition at the end
of two comparable periods may be difficult due to the impact of those newly acquired or
commissioned hydroelectric power projects.
The 2009 GAAP net income (loss) per share basic and diluted and weighted average common
shares basic and diluted on the table entitled Unaudited Condensed Consolidated Statement of
Operations and GAAP Net Income (Loss) to Non-GAAP Net Income Reconciliation are based on the
assumption that all preferred shares were converted into ordinary shares for the purpose of
providing investors with meaningful supplement and comparative information.
Currency Conversion
Solely for the convenience of readers, certain Renminbi amounts have been translated into U.S.
dollar amounts at the rate of RMB 6.829 to US $1.00, the Bank of China Middle Rate as of September
30, 2009 and RMB 6.7011 to US $1.00, the Bank of China Middle rate of September 30, 2010. No
representation is intended to imply that the Renminbi amounts could have been, or could be,
converted, realized or settled into U.S. dollar amounts at such rate, or at any other rate.
Conference Call
China Hydroelectric will host a conference call at 6:00 am (Pacific) /9:00 am (Eastern) / 10:00 pm
(Beijing/Hong Kong) on Thursday, November 11, 2010 to discuss its third quarter 2010 financial
results and recent business activities. To access the live teleconference, please dial (US)
+1-877-941-2324 or International + 1-480-629-9716, and enter pass code 4383391.
A replay of the conference call will be available from 12:00 pm (Eastern) on November 12, 2010 to
11:59 pm (Eastern) on November 25, 2010, by dialing (US)+1-877-870-5176 or (International)
+1-858-384-5517 and entering the pass code 4383391.
About China Hydroelectric
China Hydroelectric Corporation (NYSE: CHC, CHC.WS) (China Hydroelectric or the Company) is an
owner and operator of small hydroelectric power projects in the Peoples Republic of China. Led by
an international management team, the Companys primary business is to identify, evaluate, acquire,
develop, construct and finance hydroelectric power projects. China produces approximately 22% of
its total energy from hydroelectric power. The Company currently owns 16 operating hydropower
subsidiaries in China with total installed capacity of 493.4 MW. These hydroelectric power projects
are located in four provinces: Zhejiang, Fujian, Yunnan and Sichuan.
www.chinahydroelectric.com
Cautionary Note Regarding Forward-looking Statements
Statements contained herein that address operating results, performance, events or developments
that we expect or anticipate will occur in the future are forward-looking statements. The
forward-looking statements include, among other things, statements relating to the Companys
business strategies and plan of operations, the Companys ability to acquire hydroelectric assets,
the Companys capital expenditure and funding plans, the Companys operations and business
prospects, projects under development, construction or planning and the regulatory environment. The
forward-looking statements are based on the Companys current expectations and involve a number of
risks, uncertainties and contingencies, many of which are beyond the Companys control, which may
cause actual results, performance or achievements to differ materially from those anticipated.
Should one or more of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may vary materially from those anticipated, estimated or projected.
Among the factors that could cause actual results to materially differ include: supply and demand
changes in the electric markets, changes in electricity tariffs, hydrological conditions, the
Companys relationship with and other conditions affecting the power grids we service, the
Companys production and transmission capabilities, availability of sufficient and reliable
transmission resources, our plans and objectives for future operations and expansion or
consolidation, interest rate and exchange rate changes, the effectiveness of the Companys cost-
control measures, the Companys liquidity and financial condition, environmental laws and changes
in political, economic, legal and social conditions in China, and other factors affecting the
Companys operations that are set forth in the Companys Prospectus dated January 25, 2010 and
filed with the Securities and Exchange Commission (the SEC) and in the Companys future filings
with the SEC. Unless required by law, the Company undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new information, future events or
otherwise.
Notes to Unaudited Financial Information
This release contains unaudited financial information which is subject to year-end audit
adjustments. Adjustments to the financial statements may be identified when the audit work is
completed, which could result in significant differences between the Companys audited financial
statements and this unaudited financial information.
About Non-GAAP Financial Measures
To supplement China Hydroelectric consolidated financial results presented in accordance with GAAP,
China Hydroelectric uses non-GAAP net income (loss) and adjusted EBITDA, which are non-GAAP
financial measures. The presentation of these non-GAAP financial measures is not intended to be
considered in isolation or as a substitute for the financial information prepared and presented in
accordance with GAAP. For more information on these non-GAAP financial measures, please see the
tables captioned Adjusted EBITDA to Net Income Reconciliation and GAAP Net Income (Loss) to
Non-GAAP Net Income Reconciliation below.
China Hydroelectric believes that these non-GAAP financial measures provide meaningful supplemental
information regarding its performance and liquidity by excluding certain expenses that may not be
indicative of its operating performance and financial condition from a cash perspective. We believe
that both management and investors benefit from referring to these
non-GAAP financial measures in assessing the Companys performance and when planning and forecasting future periods.
These non-GAAP financial measures also facilitate managements internal comparisons to China
Hydroelectric historical performance and liquidity. China Hydroelectric has computed its non-GAAP
financial measures using methods consistent with the Companys F-1 registration statement. We
believe these non-GAAP financial measures are useful for investors because they permit greater
transparency with respect to supplemental information used by management in its financial and
operational decision making. A limitation of using these non-GAAP financial measures is that they
exclude certain charges that have been and may continue for the foreseeable future to be
significant expenses in the Companys results of operations.
For further information, please contact:
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Company:
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Investor Relations: |
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Mary Fellows, EVP and Secretary
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Scott Powell |
China Hydroelectric Corporation
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HC International, Inc. |
Phone: +1-860-435-7000
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Phone: +1-917-721-9480 |
Email: mfellows@chinahydroelectric.com
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Email: scott.powell@hcinternational.net |
CHINA HYDROELECTRIC CORPORATION
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In US$ 000s, except for share and per share data)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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September 30, |
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September 30, |
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2010 |
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2009 |
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2010 |
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2009 |
Revenues |
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18,365 |
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13,007 |
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56,702 |
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30,453 |
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Cost of revenues |
|
|
(6,321 |
) |
|
|
(4,511 |
) |
|
|
(17,455 |
) |
|
|
(11,526 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit |
|
|
12,044 |
|
|
|
8,496 |
|
|
|
39,247 |
|
|
|
18,927 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative expenses |
|
|
(4,636 |
) |
|
|
(2,231 |
) |
|
|
(13,816 |
) |
|
|
(5,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses |
|
|
(4,636 |
) |
|
|
(2,231 |
) |
|
|
(13,816 |
) |
|
|
(5,653 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income |
|
|
7,408 |
|
|
|
6,265 |
|
|
|
25,431 |
|
|
|
13,274 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
|
275 |
|
|
|
119 |
|
|
|
1,118 |
|
|
|
444 |
|
Interest expenses |
|
|
(4,308 |
) |
|
|
(3,906 |
) |
|
|
(11,619 |
) |
|
|
(10,239 |
) |
Change in fair value of derivative financial
liability and warrant liability |
|
|
|
|
|
|
(53 |
) |
|
|
365 |
|
|
|
(443 |
) |
Exchange loss |
|
|
(299 |
) |
|
|
(7 |
) |
|
|
(554 |
) |
|
|
(20 |
) |
Share of gain/(loss) in an equity investee |
|
|
|
|
|
|
5 |
|
|
|
|
|
|
|
(70 |
) |
Other income/(expense), net |
|
|
(225 |
) |
|
|
5 |
|
|
|
175 |
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit before income tax expenses |
|
|
2,851 |
|
|
|
2,428 |
|
|
|
14,916 |
|
|
|
2,948 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expenses |
|
|
(1,071 |
) |
|
|
(1,073 |
) |
|
|
(4,748 |
) |
|
|
(2,167 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated net income |
|
|
1,780 |
|
|
|
1,355 |
|
|
|
10,168 |
|
|
|
781 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributed to noncontrolling interest |
|
|
(82 |
) |
|
|
(58 |
) |
|
|
(262 |
) |
|
|
(18 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to China
Hydroelectric Corporation shareholders |
|
|
1,698 |
|
|
|
1,297 |
|
|
|
9,906 |
|
|
|
763 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative dividends on Series A convertible
redeemable preferred shares |
|
|
|
|
|
|
(5,243 |
) |
|
|
(1,989 |
) |
|
|
(13,828 |
) |
Cumulative dividends on Series B convertible
redeemable preferred shares |
|
|
|
|
|
|
(3,560 |
) |
|
|
(1,412 |
) |
|
|
(10,326 |
) |
Cumulative dividends on Series C convertible
redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
(162 |
) |
|
|
|
|
Beneficial conversion feature on Series A
convertible redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
(6,990 |
) |
|
|
|
|
Beneficial conversion feature on Series B
convertible redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
(5,040 |
) |
|
|
|
|
Beneficial conversion feature on Series C
convertible redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
(222 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income/(loss) attributable to ordinary
shareholders |
|
|
1,698 |
|
|
|
(7,506 |
) |
|
|
(5,909 |
) |
|
|
(23,391 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income/(loss) per ADS basic and
diluted |
|
|
0.03 |
|
|
|
n/a |
|
|
|
(0.13 |
) |
|
|
n/a |
|
GAAP net income/(loss) per share basic and
diluted |
|
|
0.01 |
|
|
|
0.01 |
|
|
|
(0.04 |
) |
|
|
0.01 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average American depository shares
basic and diluted |
|
|
51,098,505 |
|
|
|
n/a |
|
|
|
46,623,104 |
|
|
|
n/a |
|
Weighted average ordinary shares basic and
diluted |
|
|
153,295,516 |
|
|
|
121,821,776 |
|
|
|
139,869,311 |
|
|
|
116,635,592 |
|
CHINA HYDROELECTRIC CORPORATION
GAAP NET INCOME (LOSS) TO NON-GAAP NET INCOME RECONCILIATION
(In US $ 000s)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Net income/(loss) attributable to ordinary shareholders |
|
|
1,698 |
|
|
|
(7,506 |
) |
|
|
(5,909 |
) |
|
|
(23,391 |
) |
Non-GAAP Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash cumulative dividends on convertible
redeemable preferred shares (1) |
|
|
|
|
|
|
8,803 |
|
|
|
3,563 |
|
|
|
24,154 |
|
Non-cash beneficial conversion feature on convertible
redeemable preferred shares (1) |
|
|
|
|
|
|
|
|
|
|
12,252 |
|
|
|
|
|
Stock-based compensation expense (2) |
|
|
991 |
|
|
|
131 |
|
|
|
2,597 |
|
|
|
311 |
|
Exchange losses |
|
|
299 |
|
|
|
7 |
|
|
|
554 |
|
|
|
20 |
|
Change in fair value of derivative financial
liabilities and warrant liability |
|
|
|
|
|
|
53 |
|
|
|
(365 |
) |
|
|
443 |
|
Non-GAAP net income |
|
|
2,988 |
|
|
|
1,488 |
|
|
|
12,692 |
|
|
|
1,537 |
|
Non-GAAP net income per ADS basic and diluted (3) |
|
|
0.06 |
|
|
|
n/a |
|
|
|
0.27 |
|
|
|
n/a |
|
Non-GAAP net income per ordinary share basic and
diluted |
|
|
0.02 |
|
|
|
0.01 |
|
|
|
0.09 |
|
|
|
0.01 |
|
Weighted average American depository shares basic
and diluted |
|
|
51,098,505 |
|
|
|
n/a |
|
|
|
46,623,104 |
|
|
|
n/a |
|
Weighted average ordinary shares basic and diluted |
|
|
153,295,516 |
|
|
|
121,821,776 |
|
|
|
139,869,311 |
|
|
|
116,635,592 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Non-cash equity charges |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cumulative dividends on Series A convertible
redeemable preferred shares |
|
|
|
|
|
|
5,243 |
|
|
|
1,989 |
|
|
|
13,828 |
|
Cumulative dividends on Series B convertible
redeemable preferred shares |
|
|
|
|
|
|
3,560 |
|
|
|
1,412 |
|
|
|
10,326 |
|
Cumulative dividends on Series C convertible
redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
162 |
|
|
|
|
|
Beneficial conversion feature on Series A convertible
redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
6,990 |
|
|
|
|
|
Beneficial conversion feature on Series B convertible
redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
5,040 |
|
|
|
|
|
Beneficial conversion feature on Series C convertible
redeemable preferred shares |
|
|
|
|
|
|
|
|
|
|
222 |
|
|
|
|
|
Total |
|
|
|
|
|
|
8,803 |
|
|
|
15,815 |
|
|
|
24,154 |
|
(2) Stock-Based Compensation Related Items: We provide non-GAAP information relative to our expense for stock-based compensation. We include stock-based compensation expense in our
GAAP financial measures in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Compensation Stock Compensation
(FASB ASC Topic 718). Because of varying available valuation methodologies, subjective assumptions and the variety of award types, which affect the calculations of stock-based
compensation, we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our operating results to our peer companies. Stock-based compensation
is very different from other forms of compensation. The expense associated with granting an employee a stock option is spread over multiple years unlike other compensation expenses
which are more proximate to the time of award or payment. For example, we may recognize expense on a stock option in a year in which the stock option is significantly underwater and
typically would not be exercised or would not generate any compensation for the employee. The expense associated with an award of a stock option for 1,000 shares of stock by us in
one quarter, for example may have a very different expense than an award of an identical number of shares in a different quarter. Further, the expense recognized by us for such an
option may be very different than the expense recognized by other companies for the award of a comparable option. This makes it difficult to assess our operating performance relative
to our competitors. Because of these unique characteristics of stock-based compensation, management excludes these expenses when analyzing the organizations business performance. We
also believe that presentation of such non-GAAP information is important to enable readers of our financial statements to compare current period results with future periods.
(3) The Companys American depository shares (ADS) convert to ordinary shares at a rate of one ADS to three ordinary shares.
CHINA HYDROELECTRIC CORPORATION
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In US $ 000s)
|
|
|
|
|
|
|
|
|
|
|
As of September 30, |
|
As of December 31, |
|
|
2010 |
|
2009 |
|
|
(unaudited) |
|
(audited) |
ASSETS |
|
|
|
|
|
|
|
|
Current Assets: |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
|
41,826 |
|
|
|
31,618 |
|
Accounts receivable |
|
|
8,501 |
|
|
|
8,434 |
|
Deferred tax assets |
|
|
1,204 |
|
|
|
489 |
|
Prepayments and other current assets |
|
|
6,669 |
|
|
|
4,582 |
|
|
|
|
|
|
|
|
|
|
Total current assets |
|
|
58,200 |
|
|
|
45,123 |
|
|
|
|
|
|
|
|
|
|
Non-current Assets: |
|
|
|
|
|
|
|
|
Deferred initial public offering costs |
|
|
|
|
|
|
12,774 |
|
Property, plant and equipment, net |
|
|
550,576 |
|
|
|
423,200 |
|
Intangible assets, net |
|
|
4,953 |
|
|
|
4,513 |
|
Goodwill |
|
|
125,806 |
|
|
|
107,824 |
|
Deferred tax assets |
|
|
1,919 |
|
|
|
1,231 |
|
Other non-current assets |
|
|
526 |
|
|
|
399 |
|
|
|
|
|
|
|
|
|
|
Total non-current assets |
|
|
683,780 |
|
|
|
549,941 |
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
|
|
741,980 |
|
|
|
595,064 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
|
|
|
|
|
|
Current Liabilities: |
|
|
|
|
|
|
|
|
Accounts payable |
|
|
2,508 |
|
|
|
1,305 |
|
Short-term loans |
|
|
1,940 |
|
|
|
7,098 |
|
Current portion of long-term loans |
|
|
50,029 |
|
|
|
56,809 |
|
Warrant liability |
|
|
|
|
|
|
14,333 |
|
Amounts due to related parties |
|
|
246 |
|
|
|
242 |
|
Accrued expenses and other current liabilities |
|
|
28,316 |
|
|
|
22,704 |
|
Deferred tax liabilities |
|
|
1 |
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
Total current liabilities |
|
|
83,040 |
|
|
|
102,492 |
|
|
|
|
|
|
|
|
|
|
Non-current Liabilities: |
|
|
|
|
|
|
|
|
Long term loans |
|
|
224,135 |
|
|
|
172,469 |
|
Deferred tax liabilities |
|
|
20,908 |
|
|
|
18,805 |
|
Other non-current liabilities |
|
|
138 |
|
|
|
104 |
|
|
|
|
|
|
|
|
|
|
Subtotal of non-current liabilities |
|
|
245,181 |
|
|
|
191,378 |
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES |
|
|
328,221 |
|
|
|
293,870 |
|
|
|
|
|
|
|
|
|
|
Convertible redeemable preferred shares |
|
|
|
|
|
|
|
|
Series A (par value US$0.001 per share; 2,500,000 shares
authorized; 152,193 shares issued and outstanding as of December
31, 2009) |
|
|
|
|
|
|
184,541 |
|
Series B (par value US$0.001 per share; 2,500,000 shares
authorized; 129,000 shares issued and outstanding as of December
31, 2009) |
|
|
|
|
|
|
148,943 |
|
Series C (par value US$0.001 per share; 1,000,000 shares
authorized; nil and 20,000 shares issued and outstanding as of
December 31, 2009) |
|
|
|
|
|
|
20,356 |
|
Shareholders equity |
|
|
|
|
|
|
|
|
Ordinary shares (par value US$0.001 per share, 130,000,000 and
400,000,000 shares authorized as of December 31, 2009 and September
30, 2010, respectively; 15,541,666 and 153,295,516 shares issued
and outstanding as of December 31, 2009 and September 30, 2010,
respectively) |
|
|
153 |
|
|
|
16 |
|
Additional paid in capital |
|
|
494,635 |
|
|
|
36,251 |
|
Accumulated other comprehensive income |
|
|
18,262 |
|
|
|
11,065 |
|
Accumulated deficit |
|
|
(106,674 |
) |
|
|
(100,767 |
) |
|
|
|
|
|
|
|
|
|
Total China Hydroelectric Corporation Shareholders equity/(deficit) |
|
|
406,376 |
|
|
|
(53,435 |
) |
Noncontrolling interests |
|
|
7,383 |
|
|
|
789 |
|
|
|
|
|
|
|
|
|
|
Equity (deficit) attributable to equity holders of the Company |
|
|
413,759 |
|
|
|
(52,646 |
) |
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND SHAREHOLDERS EQUITY |
|
|
741,980 |
|
|
|
595,064 |
|
|
|
|
|
|
|
|
|
|
CHINA HYDROELECTRIC CORPORATION
ADJUSTED EBITDA TO NET INCOME RECONCILIATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
|
2010 |
|
2009 |
|
2010 |
|
2009 |
Net income available to
China Hydroelectric
Corporation shareholders |
|
|
1,698 |
|
|
|
1,297 |
|
|
|
9,906 |
|
|
|
763 |
|
Interest expenses, net |
|
|
4,033 |
|
|
|
3,787 |
|
|
|
10,501 |
|
|
|
9,795 |
|
Other non cash charges,
including exchange loss,
change in fair value of
derivative financial
liabilities and warrant
liability, and
stock-based compensation |
|
|
1,290 |
|
|
|
191 |
|
|
|
2,786 |
|
|
|
774 |
|
Income tax expenses |
|
|
1,071 |
|
|
|
1,073 |
|
|
|
4,748 |
|
|
|
2,167 |
|
Depreciation of property,
plant and equipment and
amortization of
intangible assets |
|
|
4,571 |
|
|
|
3,487 |
|
|
|
12,268 |
|
|
|
8,752 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA, as adjusted |
|
|
12,663 |
|
|
|
9,835 |
|
|
|
40,209 |
|
|
|
22,251 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA margin, as adjusted |
|
|
69 |
% |
|
|
76 |
% |
|
|
71 |
% |
|
|
73 |
% |
Adjusted EBITDA is defined as earnings before interest, taxes, depreciation and amortization and
certain non-cash charges including exchange loss, change in fair value of derivatives financial
liabilities and warrant liability, and stock-based compensation. We believe that EBITDA is widely
used by other companies in the power industry and may be useful to investors as a measure of the
Companys financial performance. Given the significant investments that we have made in net
property, plant and equipment, depreciation and amortization expense comprises a meaningful portion
of the Companys cost structure. We believe that EBITDA will provide a useful tool for
comparability between periods because it eliminates depreciation and amortization expenses
attributable to capital expenditures and business acquisitions. The presentation of EBITDA should
not be construed as an indication that the Companys future results will be unaffected by other
charges and gains we consider to be outside the ordinary course of our business.
CONTACT: Company: Mary Fellows, EVP and Secretary, China Hydroelectric Corporation,
+1-860-435-7000, mfellows@chinahydroelectric.com; or Investor Relations: Scott Powell, HC
International, Inc., +1-917-721-9480, scott.powell@hcinternational.net, for China Hydroelectric
Corporation