“Corporation”) (TSX: S), the world leader in the mining and refining of nickel from lateritic ores, today reported its financial results for the year ended
For immediate release
FOR TO FOR
- Sherritt International Corporation (“Sherritt” or the
– “Corporation”) (TSX: S), the world leader in the mining and refining of nickel from lateritic ores, today reported its financial results for the year ended December 31, 2016.
“This year was about sticking to our strategic priority of liquidity preservation, negotiating a three-year extension of maturities on our public debentures and entering into an Ambatovy lender agreement to defer principal payments for three years,” said David Pathe, President and CEO, Sherritt International. “We have pushed out our first public debenture maturity to late 2021 and markets for our products have moved off the multi-year lows we saw in the first half of the year. I look forward to a year in which we expect increased production at our HPAL nickel operations and results from our first oil drilling in Block 10 in Cuba.”
Q 4 AND 2016
- In the second half of 2016, the maturity dates of the three senior unsecured debentures ($720 million principal value) were each extended by three years to 2021, 2023 and 2025. In the same timeframe, the Ambatovy Joint Venture financing lenders agreed to up to six principal payment deferrals totaling US$565.1 million (100% basis) which are to be repaid on a schedule starting in 2021, or earlier subject to cash flow generation.
- The 2016 nickel average reference price of US$4.36/lb was down 19% from the 2015 average reference price of US$5.37/lb, which in turn was down 30% from the 2014 average of US$7.65/lb. However, after two years of a steeply declining price, a change in trend appears to be emerging, with nickel prices ending 2016 at US$4.54/lb compared to US$3.93/lb at the end of 2015. Gulf Coast Fuel Oil No. 6 (GCF6) prices were also down 21% on average in 2016 to US$32.13/barrel, but fourth quarter average prices of US$41.12/barrel are up 38% over their comparable level in the fourth quarter of 2015.
- 2016 Net Direct Cash Costs (NDCC)(1) of US$3.42/lb at the Moa JV and US$4.27/lb at Ambatovy are both improvements over their prior year comparables of US$3.88/lb and US$4.83/lb respectively. Fourth quarter 2016 NDCC of US$3.10/lb at Ambatovy represent Ambatovy’s best cost performance since inception and an indication of the potential cost profile when operating close to design capacity, as Ambatovy produced 12,778 tonnes finished nickel (100% basis) in the fourth quarter. The Moa JV NDCC of US$3.80/lb in the fourth quarter of 2016 includes the impacts of a lower fertilizer credit and lower mixed sulphides production due to Hurricane Matthew and the subsequent bridge collapse.
- Cash, cash equivalents and short-term investments ended the year at $309.6 million, which is $125.8 million lower than the ending balance of 2015. The main uses of cash were $65.7 million to repay loans and borrowings, and $59.8 million in interest payments on the outstanding debentures.
- The net loss of $378.9 million for the year ended December 31, 2016 compares to a net loss of $2.1 billion for the same period a year ago, with most of the 2015 total relating to Ambatovy JV impairment losses of $1.6 billion, net of tax (40% basis). The adjusted net loss from continuing operations of $81.3 million or $0.28/share in the fourth quarter compares to an adjusted net loss from continuing operations of $113.8 million a year ago.
All amounts are Canadian dollars unless otherwise indicated.
(1) For additional information see the Non-GAAP measures section of this press release.
- On December 15, 2016, Energas received approval from the Cuban Executive Committee to extend the contract term of the Varadero power facilities (173 MW installed capacity), originally scheduled to terminate in 2018, to 2023.
- Subsequent to year end, on January 31, 2017, $76.3 million of the $90 million syndicated revolving-term credit facility was renewed to January 31, 2018 with the remaining $13.7 million due to mature in April 2017. The maximum credit available will further decrease by approximately 4% quarterly beginning April 28, 2017. Collectively, these reductions in available credit will result in outstanding credit of $63.6 million at January 30, 2018. A change in interest rates and covenants has been implemented as described in the MD&A, Investment Liquidity section, page 35.
- Production, capital spending and Unit Operating Cost guidance was released January 31, 2017 and is repeated in the “Outlook” table on page 15 of this document.
- Sherritt and its Ambatovy JV partners Sumitomo Corporation (Sumitomo) and Korea Resources Corporation (KORES) have agreed to a further extension of the waiver under the Shareholders Agreement to March 10, 2017. By agreement amongst the partners, Sherritt is not considered to be a defaulting shareholder for cash call amounts not funded through this date.
Q 4
For the three months ended For the years ended 2015 2015
| $ millions, except per share amount | December 31 | Change | December 31 | Change |
|---|---|---|---|---|
| Revenue | 76.5 | (8%) | $ 335.9 | (22%) |
| Combined Revenue(1) | 229.5 | 5% | 1,022.7 | (20%) |
| Net loss for the period | (1,757.3) | 94% | (2,076.7) | 82% |
| Adjusted EBITDA(1) | 6.1 | 513% | 113.1 | (65%) |
| Cash provided by continuing operations | 10.8 | (309%) | 64.5 | (98%) |
| Combined free cash flow(1) | (24.8) | (83%) | (98.8) | (13%) |
| Net loss from continuing operations per share | (5.99) | 94% | (7.05) | 82% |
| Combined adjusted operating cash flow per share(1) | (0.09) | 133% | 0.21 | (171%) |
(1) For additional information, see the Non-GAAP measures section of this release.
| $ millions, except as otherwise noted, as at December 31 | 2015 | Change |
| Cash, cash equivalents and short-term investments | 435.4 | (29%) |
| Non-recourse loans and borrowings | 1,303.2 | 5% |
| Other loans and borrowings | 959.9 | (10%) |
In 2016, operating cash flow came mainly from the Oil and Gas and Power operations ($84.4 million), partially offset by the Moa JV operations, which were free cash flow negative. There were no cash contributions to Ambatovy in 2016. During the year, interest received on the CSA Loan was $3.9 million compared to $37.9 million in 2015. Total energy receipts from the Cuban operations were US$129.6 million in 2016 compared to US$232.2 million in 2015, with Cuban overdue receivables of US$74.6 million at the end of 2016 compared to US$53.8 million at the end of 2015. Discussions continue to address the timing of ongoing Cuban payments, with new schedules expected from the Cubans addressing payment over the course of the coming year.
2015 December 31 For the three months ended December 31 $ millions $/share
Net loss from continuing operations (1,757.3) (5.99)
Adjusting items, net of tax:
| Impairments | 1,624.2 | 5.53 |
| Unrealized foreign exchange (gain) loss | 18.3 | 0.06 |
| Other | 1.0 | 0.00 |
| Adjusted net loss from continuing operations | (113.8) | (0.40) |
2015 December 31 For the years ended December 31 $ millions $/share
Net loss from continuing operations (2,071.7) (7.05)
Adjusting items, net of tax:
| Impairments | 1,704.8 | 5.80 |
| Unrealized foreign exchange (gain) loss | 44.3 | 0.15 |
| Other | (28.7) | (0.10) |
| Adjusted net loss from continuing operations | (351.3) | (1.20) |
(1) For additional information, see the Non-GAAP measures section of this release.
The net loss from continuing operations in the fourth quarter of 2016 was $109.6 million, which included $28.3 million of adjusting items, primarily a $25.7 million unrealized foreign exchange loss.
For the full year, the net loss from continuing operations was $381.8 million, with $51.9 million in pretax adjusting items, and $5.8 million in tax adjustment items for an adjusted net loss from continuing operations of $427.9. The main adjusting items on a full year basis were a $35.9 million unrealized foreign exchange gain, a further gain of $12.6 million on the repurchase of debentures, and a gain of $15.6 million relating to VAT adjustments.
OF
$ millions except as otherwise noted, for the three months ended December 31 2015 Moa JV and Ambatovy Fort Site(1) JV Other(2) Total Change
(1) (2)
(50%) (40%)
Revenue $ 101.1 $ 69.9 $ 12.8 $ 183.8 6% $ $
| (Loss) earnings from operations | (6.8) (1,785.5) | (0.6) (1,792.9) | 99% | ||
| Adjusted EBITDA(3) | 7.6 | (9.5) | - | (1.9) 1,689% | |
| Cash provided (used) by operations | 21.1 | (22.3) | 1.4 | 0.2 (1,900%) | |
| Free cash flow(3) | 1.3 | (26.6) | 1.4 | (23.9) | 28% |
(tonnes)
| Mixed Sulphides | 4,336 | 5,042 | - | 9,378 | 4% |
| Finished Nickel | 4,098 | 4,885 | - | 8,983 | (1%) |
| Finished Cobalt | 521 | 386 | - | 907 | (13%) |
| Fertilizer | 69,741 | 15,169 | - | 84,910 | (8%) |
| (%) | 89% | 86% |
(tonnes)
| Finished Nickel | 4,237 | 4,665 | - | 8,902 | - | |
| Finished Cobalt | 559 | 411 | - | 970 | (13%) | |
| Fertilizer | 60,461 | 14,814 | - | 75,275 | (19%) | |
| (CAD/US) | 1.335 | - |
(US$ per pound)
Nickel $ 4.27 15% Cobalt 11.34 19%
(3)
| Nickel ($ per pound) | $ 5.57 $ | 5.52 | $ 5.54 | 16% |
| Cobalt ($ per pound) | 14.08 | 11.31 | 12.91 | 37% |
| Fertilizer ($ per tonne) | 413 | 197 | 371 | (23%) |
(3) (US$ per pound)
| Nickel - net direct cash cost | $ | 2.90 $ | 4.07 | 3.51 | (3%) | |
| Sustaining | $ | 13.8 $ | 4.9 $ | - $ | 18.7 | 27% |
| Expansion | 6.7 | - | - | 6.7 (131%) | ||
| $ | 20.5 $ | 4.9 $ | - $ | 25.4 | (15%) |
(1) Includes results for certain 100% owned assets at Fort Saskatchewan plant.
(2) Includes results for Sherritt’s marketing organizations for certain Ambatovy and Moa Joint Venture sales.
(3) For additional information, see the Non-GAAP measures section of this release.
$ millions, except as otherwise noted, for the years ended December 31 2015 Moa JV and Ambatovy Fort Site(1) JV Other(2) Total Change (2)
(50%) (40%)
| Revenue $ | $ 412.6 $ | 332.0 $ | 60.5 $ | 805.1 (19%) |
|---|---|---|---|---|
| (Loss) earnings from operations | (4.4) | (1,934.1) | 0.5 | (1,938.0) 91% |
| Adjusted EBITDA(3) | 42.2 | (9.4) | 0.5 | 33.3 (60%) |
| Cash provided (used) by operations | 53.4 | (24.3) | 4.1 | 33.2 (203%) |
| Free cash flow(3) | (9.0) | (60.4) | 4.1 | (65.3) (33%) |
(tonnes)
| Mixed Sulphides | 18,510 | 19,598 | - | 38,108 | (8%) |
| Finished Nickel | 16,853 | 18,908 | - | 35,761 | (7%) |
| Finished Cobalt | 1,867 | 1,386 | - | 3,253 | (3%) |
| Fertilizer | 255,991 | 54,930 | - | 310,921 | - |
-
(%) 89% 86%
(tonnes)
| Finished Nickel | 16,980 | 18,857 | - | 35,837 | (7%) |
| Finished Cobalt | 1,885 | 1,362 | - | 3,247 | (4%) |
| Fertilizer | - 182,065 | 56,033 | - 238,098 | (8%) | |
| (CAD/USD) | 1.278 | 4% |
(US$ per pound)(3)
Nickel $ 5.37 (19%) Cobalt 12.99 (9%)
(3)
| Nickel ($ per pound) | $ 6.72 $ | 6.64 | $ 6.68 (15%) |
| Cobalt ($ per pound) | 15.69 | 14.50 | 15.20 1% |
| Fertilizer ($ per tonne) | 425 | 196 | 371 (12%) |
(3) (US$ per pound)
Nickel - net direct cash cost $ 3.88 $ 4.83 4.38 (12%)
(4)
| Sustaining | $ | 47.4 $ | 23.8 $ | - $ | 71.2 (22%) |
|---|---|---|---|---|---|
| Expansion | 16.7 | - | - | 16.7 (38%) | |
| $ | 64.1 $ | 23.8 $ | - $ | 87.9 (25%) |
(1) Includes results for certain 100% owned assets at Fort Saskatchewan plant.
(2) Includes results for Sherritt’s marketing organizations for certain Ambatovy and Moa Joint Venture sales.
(3) For additional information, see the Non-GAAP measures section of this release.
(4) Spending on capital includes accruals.
On a year-over-year basis, the 2016 nickel average reference price of US$4.36/lb declined by 19% over the 2015 average, with roughly 27% of global production remaining underwater on a cash margin basis at this price. Despite the negative margins experienced by many producers, more significant supply cuts have been slow to materialize, and global inventory levels remain high.
In the second half of 2016, prices recovered significantly from the lows of US$3.50/lb reached in the first quarter of 2016 and remained generally above US$4.50/lb through the fourth quarter of 2016. Recent market activity remains bullish on a fundamental basis, as market analysts continue to reinforce projected deficits and forecast stronger prices carrying over from 2016 into 2017.
Fundamental supply challenges that have emerged with the Philippines ongoing environmental audits on all mining operations in the country, closures of uneconomic operations, and healthy stainless steel results from North America and Europe have helped propel LME prices to levels previously reached in 2015. After peaking at 470,000 tonnes in June 2015, nickel inventories held in London Metals Exchange warehouses have declined by close to 100,000 tonnes but the year end balance of 372,000 tonnes remains high compared to historical levels. The announced mine closures in the Philippines coupled with improved stainless steel demand are both seen as near-term catalysts for continued strength in the nickel market, although this is being tempered by the ramp up of Nickel Pig Iron (NPI) operations in Indonesia and the announced easing of the ban on ore exports allowing quotas of low grade nickel containing ore to be exported by Indonesian miners who meet criteria which have not yet been fully articulated.
The average reference price for cobalt in 2016 was US$11.77/lb or down only 9% from its 2015 comparable, with the outlook remaining positive. The cobalt price recovery from the lows early in 2016 has been more significant than nickel, moving from approximately US$9.85/lb in the first quarter to end the year at approximately US$14.92/lb. While nickel prices experienced a correction in the month of December and since, cobalt prices have gone on to make new highs in January 2017. Refined cobalt supply contracted in 2016 with the suspension of production from Votorantim (Tocantins) in Brazil and Queensland Nickel in Australia. Indications are that the market is approaching balance or slight deficit. Overall cobalt demand is supported by the longer-term outlook for cobalt in rechargeable batteries, a market that utilizes refined forms of cobalt with purity being an important factor in customer demand, and environmental and sustainability concerns from African sourced mines becoming increasingly important. These concerns received media attention after an Amnesty International report in January 2016 which focused on human rights abuses in Democratic Republic of Congo (DRC) cobalt mining operations. Because the DRC is the world’s largest producer of cobalt, cobalt customers have responded by requiring more stringent certification of origin procedures, to restrict or prohibit buying cobalt sourced from the DRC. Superalloy demand also remains strong, along with other applications such as magnets, diamond cutting tools, soaps and paint driers which continue to provide strong demand for cobalt. As a result of the positive medium term outlook for cobalt, and the knowledge that most cobalt supply comes as a by-product of copper and nickel production, speculative interest has picked up.
The Moa JV finished nickel production of 3,782 tonnes (50% basis) in the fourth quarter is 8% lower than its level last year and 12% lower than third quarter 2016 production. The shutdown of the processing plant during Hurricane Matthew had a modest impact, which was compounded by the bridge collapse in November, and the corresponding impacts on haulage time and distance using secondary access roads. Full year production of finished nickel was relatively flat from 2015, down only 2% despite the impacts in the fourth quarter. The lower mixed sulphides production was partly offset by utilization of third party feed. On a yearly basis, cobalt production was similar to 2015 levels as the third party feed was and continues to be cobalt rich.
Revenue in the quarter is down by 9% on a year-over-year basis reflecting lower fertilizer revenue. Fourth quarter fertilizer sales are down $10.1 million or 40% from their prior year level, as the early onset of winter compared to last year resulted in a lower harvest for Fort Site fertilizer customers, and average realized prices for fertilizer were also depressed. On a full year basis, revenue was down 18% over 2015, consistent with the average reference price decline of 19% in nickel.
Although the year-over-year price decline was the main factor influencing Moa’s results, we have seen an improvement over the course of the year as nickel and cobalt prices have recovered from their lows earlier in 2016. Nickel average reference prices of US$4.90/lb in the fourth quarter of 2016 compare to US$4.27/lb in the comparable quarter of 2015. Cobalt average reference prices of US$13.51/lb in the fourth quarter of 2016 are up 19% from their comparable quarter of 2015.
The NDCC of US$3.80/lb of nickel in the fourth quarter is US$0.90/lb higher on a year-over-year basis primarily due to lower production volumes and the lower fertilizer credit, which was approximately US$0.55/lb lower than the prior year’s fertilizer credit. These negative effects were partly offset by the benefits from the newly constructed acid plant, which is expected to deliver a further cost benefit in 2017. The cobalt credit in the fourth quarter was US$1.55/lb, the highest experienced since second quarter 2012. Moa’s 2017 NDCC guidance range of US$3.20/lb to US$3.70/lb takes into account the acid plant cost benefit, along with higher forecasted energy prices and planned maintenance spending, including an annual refinery shutdown and acid plant shutdown.
Cash used by operations of $6.1 million in the fourth quarter reflects the lower production and higher costs, although for the full year, cash used by operations was $2.7 million at full year average reference nickel prices of approximately US$4.36/lb.
Capital spending of $2.6 million in the quarter and $32.9 million (US$25 million) in 2016 is significantly lower compared to the same periods last year due to lower planned spending on sustaining capital and the completion of the acid plant which is expected to be approximately US$10 million (100% basis) under budget. Expansion capital spending in the fourth quarter includes a credit for the transfer of spare parts to inventory which is included in Sustaining Capital. Capital spending guidance for 2017 is approximately US$28 million.
The Ambatovy JV fourth quarter 2016 finished nickel production was 5,111 tonnes (40% basis), and was the highest for the year, up 39% from third quarter 2016 levels and 5% compared to the fourth quarter of 2015. PAL ore throughput operated at 93% of design capacity during the quarter.
This result contributed strongly to full year finished nickel production of 16,842 tonnes (40% basis), down year-over-year following the tailings pipe blockage and subsequent total plant maintenance shutdown that affected second and third quarter production. PAL ore throughput operated at 78% of nameplate capacity for the full year, with refinery nickel averaging 70% of nameplate capacity.
Higher cobalt and nickel reference prices in the fourth quarter combined with higher production were the main drivers of increased revenue in the quarter, with cobalt sales benefiting from provisional price adjustments. On a full year basis, overall revenue is down by 20% following the trend in nickel prices and the production impacts described above.
The NDCC of US$3.10/lb for the fourth quarter is Ambatovy’s best quarterly cost performance since inception, and was significantly under the previous best quarterly NDCC (US$4.07/lb in fourth quarter, 2015). This result demonstrates the cash cost profile achievable when operating at levels closer to 85% of design capacity. Compared to fourth quarter 2015 levels, the 2016 quarterly and yearly NDCC benefited from lower input prices, especially sulphur, ammonia and fuel, and from further fixed cost savings and efficiencies throughout the operations. The full year NDCC of US$4.27/lb is a 12% improvement over 2015 NDCC, despite the lower production volumes. Net Direct Cash Cost guidance for 2017 is a range of US$3.10 – 3.70/lb.
Cash used by operations was $34.6 million for the full year, compared to $24.3 million in 2015.
Most of the 2016 capital spending of $33.1 million on a 40% basis (US$25 million) was incurred in the fourth quarter and capital spending guidance for 2017 is expected to increase to $61 million (US$45 million), with most of the expenditure relating to new mining development and fleet upgrades.
Sherritt has not funded any cash calls since achieving financial completion, with total post-completion funding provided by Sumitomo and KORES of US$173 million as of December 31, 2016. This includes US$20 million in the fourth quarter 2016 and US$143 million in the full year 2016. Funding is intended to cover operating losses, capital spending and interest (US$56 million annually) on the Ambatovy Joint Venture financing as described in Note 6, Investment in an Associate, to the consolidated financial statements. As of December 31, 2016, the cash position at Ambatovy was $76.7 million (100% basis).
By agreement amongst the partners, Sherritt is not considered to be a defaulting shareholder under the Shareholders Agreement for amounts not funded through March 10, 2017 after a further extension granted February 16, 2017. Discussions continue regarding the partnership structure and future funding arrangements.
For the three months ended For the years ended 2015 2015
| $ millions, except as otherwise noted | December 31 | Change | December 31 | Change | ||
|---|---|---|---|---|---|---|
| Revenue | $ | 30.5 | - | $ | 162.6 | (33%) |
| (Loss) earnings from operations | $ | (1.2) | 333% | $ | (71.6) | 77% |
| Adjusted EBITDA(1) | 9.7 | 81.9 |
20% (57%) Cash provided by operations 30.2 (62%) 80.7 (5%) Free cash flow(1) 23.3 (86%) 21.4 136%
(bopd)
| Gross working-interest (GWI) - Cuba | 17,045 | (15%) | 18,257 | (15%) |
| Total net working-interest (NWI) | 10,727 | (24%) | 11,158 | (15%) |
| (CAD/USD) | 1.335 | - | 1.278 | 4% |
(US$ per barrel)
| West Texas Intermediate (WTI) | $ 42.05 | 17% | $ 48.69 | (11%) |
| Gulf Coast Fuel Oil No. 6 | 29.86 | 38% | 40.68 | (21%) |
| Brent | 43.45 | 12% | 52.08 | (17%) |
(1) (NWI)
Cuba ($ per barrel) $ 29.38 35% $ 38.35 (22%)
(1) (GWI)
| Cuba ($ per barrel) | $ | 10.82 | 1% | $ | 9.53 | 2% |
| Development, facilities and other | $ | (1.2) | 133% | $ | 53.1 | (83%) |
| Exploration | 0.5 1460% | 1.4 1114% | ||||
| $ | (0.7) 1271% | $ | 54.5 | (52%) |
(1) For additional information, see the Non-GAAP measures section of this release.
(2) Spending on capital includes accruals.
Cuba gross working-interest oil production of 15,452 bopd in 2016 is 15% below its 2015 level, reflecting natural reservoir declines and the absence of any contribution from development drilling during the year.
Revenue in the fourth quarter of 2016 was stable compared to the same quarter a year ago, as lower production was offset by higher realized prices. On a full year basis, revenue is 33% below 2015 as both production and realized prices are lower by 15% and 22% respectively.
The average reference price of GCF6 in 2016 was down 21% from its 2015 comparable level, which is similar to the price decline in nickel over the same period. The recovery in WTI and fuel oil prices over the course of 2016 has been more significant, with fourth quarter 2016 GCF6 prices being up 38% over their comparable quarter in 2015. GCF6 prices have climbed steadily since their lows in the first quarter of 2016, and the spread between GCF6 and WTI prices has narrowed. GCF6 prices averaged 84% of WTI prices in the fourth quarter, compared to only 63% in the first quarter of 2016.
Cuba unit operating costs remain competitive, at $10.95/barrel for the fourth quarter and $9.75/barrel for the full year 2016, as lower aggregate operating costs offset the decline in production.
Capital spending of $8.2 million in the fourth quarter and $25.9 million for the full year are both lower than expected based on 2016 published guidance due to lower equipment expenditures. Drilling and testing of the first well in Block 10 is now scheduled to be completed in the first quarter of 2017, with results to be disclosed shortly thereafter. A second well is planned to be drilled and tested in the second half of 2017. Test results from these two wells will determine whether or not Sherritt will proceed with commercialization of Block 10.
In 2016, Sherritt deferred the expenditures relating to a seismic program on another Block, 8A, which will now be carried out in 2017. Completion of this seismic survey is required to satisfy the first exploration commitment for Block 8A. After the seismic results are known, a decision will be made as to whether or not to proceed to the next exploration phase.
For the three months ended For the years ended 2015 2015
| $ millions (33⅓% basis), except as otherwise noted | December 31 | Change | December 31 | Change | ||
|---|---|---|---|---|---|---|
| Revenue | $ | 13.7 | - | $ | 52.7 | 11% |
| (Loss) earnings from operations | (3.3) | 61% | (3.7) | (43%) | ||
| Adjusted EBITDA(1) | 5.5 | 35% | 30.0 | (2%) | ||
| Cash provided by operations | 6.5 (151%) | 61.4 | (87%) | |||
| Free cash flow(1) | 4.4 (184%) | 57.0 | (88%) | |||
| Electricity (GWh) | 226 | (1%) | 902 | (1%) |
(1)
Electricity ($/MWh) $ 56.53 (1%) $ 54.26 3%
(1) ($/MWh)
| Base | 23.77 | (6%) | 17.57 | 1% | ||
| Non-base(2) | 10.11 | (77%) | 3.43 | 53% | ||
| 33.88 | (27%) | 21.00 | 9% | |||
| 69 | - | 70 | (1%) | |||
| Sustaining | $ | 2.2 | (82%) | $ | 4.4 | (77%) |
| Service concession arrangements | (0.2) | 150% | (0.3) 1,633% | |||
| $ | 2.0 | (75%) | $ | 4.1 | 37% |
(1) For additional information see the Non-GAAP measures section of this release.
(2) Costs incurred at the Boca de Jaruco and Puerto Escondido facilities that otherwise would have been capitalized if these facilities were not accounted for as service concession arrangements.
(3) Includes service concession arrangements and accruals.
Power production in the fourth quarter of 224 GWh and 894 GWh for the full year are both consistent with last year’s production. Average realized prices are also consistent as they are covered by longterm contracts fixing the tariff rates at US$45/MWh while construction capital provided by Sherritt is still being repaid, and US$38/MWh for the Base facilities, when all capital costs have been recovered. Thus the change in realized price is usually a function of the US$/C$ exchange rate, as is the case in 2016 compared to 2015.
Fourth quarter 2016 revenue of $13.7 million is consistent with its comparable quarter in 2015 and full year revenue is higher this year counting revenue related to the construction of the Puerto Escondido/Yumuri pipeline, under a service concession arrangement.
Overall, unit operating costs are up on a year-over-year basis primarily due to a planned major inspection of a gas turbine at Boca de Jaruco. Unit operating cost guidance for 2017 is a range of $18.75 - $19.50/MWh, which is approximately a 15% decline from 2016 levels, mainly because of lower gas turbine maintenance.
Cash provided by operations of $8.0 million in 2016 is down from the $61.4 million recorded in 2015, with most of the change being the absence of interest payments received on the CSA loan in 2016.
Adjusted EBITDA of $29.5 million for the full year is down marginally from 2015, with the higher unit operating costs. The loss from operations of $5.3 million for the year includes depreciation charges of $34.8 million.
Spending on capital and service concession agreements for the year primarily relate to the construction of the new pipeline that delivers gas to be processed at the Puerto Escondido facility, and which became operational in September.
On December 15, 2016, Energas received approval from the Cuban Executive Committee to extend the contract term of the Varadero power facilities (173 MW total installed capacity), which was to terminate in 2018, to 2023.