China Hydroelectric Corporation Announces Record Results for the Fourth Quarter and Fiscal Year 2012

Wed Apr 10, 2013 4:30pm EDT

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- Quarterly Revenue Increased 25% to $12.4 Million -
BEIJING,  April 10, 2013  /PRNewswire-FirstCall/ -- China Hydroelectric
Corporation (NYSE: CHC, CHCWS) ("China Hydroelectric" or "the Company"), an
owner, developer and operator of small hydroelectric power projects in  the
People's Republic of China, today announced its unaudited financial results for
the fourth quarter and twelve months ended  December 31, 2012.

Mr.  Amit Gupta, Chairman of China Hydroelectric, stated, "We are pleased with
CHC's progress and achievements during 2012.  We entered the year with the
intent of recovering from the difficulties caused by an unusually dry year in
2011 in  Fujian  and  Zhejiang  provinces, and succeeded due to favorable
hydrological conditions and the focus and determination of our workforce. CHC's
revenue grew to record levels, and we generated meaningful cash flow, thus
improving our financial health.  We strive to ensure that 2013 is another year
of meaningful improvement on several levels, as we strengthen our management
team, optimize our operating capability, and further strengthen our balance
sheet."  

Dr. You Su-Lin, interim Chief Executive Officer noted, "During the quarter we
exceeded our core operational goals by improving production efficiency and
rationalizing costs. Combined with favorable rainfall in  Fujian  and  Zhejiang 
provinces, and the impact of several tariff increases during the year, we were
able to achieve record revenue. We also improved our liquidity position through
the sale of the Yuheng hydroelectric project and the refinancing of  $121.8
million  of debt. We are working on additional non-dilutive financing
opportunities and aim to resolve any remaining liquidity challenges in the near
future."

General

The following table presents precipitation levels for the regions as a
percentage of historical long term average for the periods indicated.
Precipitation is one of the principal factors affecting the Company's revenues,
profitability and cash generated by operations. Other factors include, but are
not limited to: upstream reservoir conditions; the cascading effects of multiple
hydroelectric power projects on a single waterway; and upstream precipitation
levels in the Company's river basins. The various provinces in which the Company
operates are subject to different weather patterns or systems and precipitation
fluctuates from region to region and quarter to quarter. On a total portfolio
basis the Company's facilities experienced below average precipitation in 2011
and above average precipitation in 2012.

Precipitation - Percentage of Long-Term Average [1][2]

 Province         Q4 2012  Q4 2011    Fiscal    Fiscal    Fiscal    
                                      2012      2011      2010      
 Zhejiang         168%     117%       134%      70%       130%      
 Fujian           211%     111%       128%      62%       114%      
 Yunnan           65%      82%        87%       86%       N/M       
 Total Company    152%     110%       121%      84%       120%      
 [1] Source: Data collected by the Company and by provincial and national meteorological recording stations 
 
                                                                         
 
[2] The Company has refined collection of precipitation data since our last press release and believes refined collections are more representative of historical data. 
 
                                                                         
 N/M - Not material.                                                       


The following table presents some key comparative financial and other
information (in US$ millions, except for electricity sold, effective tariff, per
ADS data and percentages):

 Summary Data                                    Q4 2012    Q4 2011    %  Change    Fiscal  Year 2012    Fiscal  Year 2011    %        
                                                                                                                              Change   
 Continuing Operations                                                                                                                 
 Electricity sold (millions kWh)                 282.1      224.3      26%          1,768.0              1,262.3              40%      
 Effective tariff (RMB/kWh)                      0.29       0.30       -3%          0.33                 0.30                 10%      
 Average effective utilization rate              24.7%      19.6%      26%          39.2%                28.1%                40%      
 Revenues                                        12.4       9.9        25%          85.4                 54.6                 56%      
 Gross profit                                    2.7        1.3        108%         49.6                 23.3                 113%     
 Adjusted EBITDA(1)                              4.4        2.4        83%          58.5                 31.5                 86%      
 Impairment loss on long-lived assets            -          (11.6)     100%         -                    (11.6)               100%     
 Impairment loss on goodwill                     -          (11.4)     100%         -                    (11.4)               100%     
 Stock-based compensation expense                (0.1)      (7.6)      99%          (0.2)                (10.5)               98%      
 GAAP net (loss)                                 (8.1)      (34.3)     76%          (1.2)                (45.4)               97%      
 GAAP net (loss) per ADS                         (0.15)     (0.64)     77%          (0.02)               (0.87)               98%      
 Non-GAAP net (loss)/gain (2)                    (7.1)      (11.2)     37%          0.10                 (19.0)               101%     
 Non-GAAP net (loss) per ADS (2)                 (0.13)     (0.21)     38%          (0.00)               (0.36)               100%     
 Net gain/(loss) from discontinued operations    1.1        (0.2)      650%         3.9                  (0.3)                1400%    
 (1) See "Net (loss) to adjusted EBITDA reconciliation" below                                                                                      
 
        (2) See "GAAP net (loss) to non-GAAP net (loss) reconciliation" below                                                                    


Fourth Quarter Ended  December 31, 2012  Financial and Operational Results

Revenues

Revenues, net of value added taxes, from continuing operations for the fourth
quarter of 2012 were  $12.4 million, an increase of 25%, or  $2.5 million, from 
$9.9 million  for the fourth quarter of 2011. This increase was principally due
to better than average hydrological conditions in  Zhejiang  and  Fujian 
provinces in the current quarter compared to the fourth quarter of 2011.

The Company sold 282.1 million kWh from continuing operations in the fourth
quarter of 2012, an increase of 57.8 million kWh, or 26%, from 224.3 million kWh
sold in the fourth quarter of 2011.

The consolidated effective utilization rate from continuing operations for the
fourth quarter of 2012 was 24.7%, compared to 19.6% in the fourth quarter of
2011. The higher consolidated effective utilization rate in the current period
was principally the result of above average precipitation in  Zhejiang  and 
Fujian  provinces, partially offset by below average precipitation in  Yunnan 
province.

The effective tariff for the fourth quarter of 2011 and 2012 were  RMB 0.296/kWh
and  RMB 0.292/kWh, respectively.

Cost of Revenues

Cost of revenues for the fourth quarter of 2012 was  $9.7 million, as compared
to  $8.6 million  for the fourth quarter of 2011, primarily due to higher
variable costs as a result of increased rainfall in the fourth quarter of 2012.
Such variable costs primarily include (i) an increase in repairs and maintenance
costs to  $2.0 million  in the fourth quarter of 2012 from  $1.2 million  in the
fourth quarter of 2011, (ii) an increase in operating expense and labor cost to 
$1.4 million  in the fourth quarter of 2012 from  $1.3 million  in the fourth
quarter of 2011, and (iii) an increase in depreciation and amortization
(non-cash expenses included in cost of revenues from continuing operations) to 
$5.7 million  for the fourth quarter of 2012 compared to  $5.5 million  for the
fourth quarter of 2011.

Gross Profit and Margin

Gross profit for the fourth quarter of 2012 increased 108% to  $2.7 million,
from  $1.3 million  in the prior year fourth quarter period. Gross margin for
the fourth quarter of 2012 increased to 22% compared to 13% in the same period
of 2011 primarily due to increased revenues and the fixed nature of certain
expenses included in cost of revenues.

Operating Expenses

General and administrative expenses ("G&A expenses") for the fourth quarter of
2012 decreased 55% to  $6.4 million, from  $14.3 million  for the fourth quarter
of 2011. The decrease was due to lower non-cash employee stock-based
compensation expense of  $0.06 million  in the fourth quarter of 2012 compared
to  $7.6 million  in the same period in 2011 due to the unamortized cost of
stock-based compensation pertaining to 2009 and 2010 stock option grants that
were written off in the fourth quarter of 2011, partially offset by
approximately  $1.8 million  in termination expenses for the Company's former
senior management in the fourth quarter of 2012.

Adjusted EBITDA and EBITDA Margin

Adjusted EBITDA attributable to China Hydroelectric Corporation shareholders
increased 83% to  $4.4 million  in the fourth quarter of 2012 compared to  $2.4
million  in the same period of 2011. Adjusted EBITDA margin increased to 36% for
the fourth quarter of 2012 compared to 22% in the same period of 2011 due to
favorable hydrological conditions and higher tariffs as previously mentioned.

Interest Expenses

Interest expenses, net, were  $6.7 million  during the fourth quarter of 2012
compared to  $7.9 million  in the same period of 2011. The decrease was
primarily due to a decrease in interest payments owed to original shareholders
of acquired subsidiaries.

GAAP and Non-GAAP Net Income / Loss

Net loss attributable to China Hydroelectric Corporation shareholders declined
to  $8.1 million  in the fourth quarter of 2012 compared to net loss of  $34.3
million  in the same period in 2011. The fourth quarter is historically a dry
season with lower revenue. We have also accrued  $1.8 million  termination
expenses for the Company's former management.

Non-GAAP net loss was  $7.1 million, or  $0.13  net loss per diluted ADS, for
the fourth quarter of 2012 compared to net loss of  $11.2 million, or  $0.21 
net loss per diluted ADS, for the fourth quarter of 2011. For reconciliation
between GAAP and non-GAAP earnings, see the table entitled "GAAP Net (Loss) to
Non-GAAP Net (Loss) Reconciliation."

Weighted average American depository shares ("ADSs") used in the fourth quarter
of 2012 and 2011 earnings per share calculation were 54.0 million ADSs,
representing 162.0 million ordinary shares, and 54.0 million ADSs, representing
162.0 million ordinary shares, respectively.

Year Ended  December 31, 2012  Financial and Operational Results

Revenues

Revenues, net of value added taxes, from continuing operations for the year
ended  December 31, 2012  were  $85.4 million, an increase of 56%, or  $30.8
million, from  $54.6 million  for the year ended  December 31, 2011. This
increase was principally due to better than average hydrological conditions in 
Zhejiang  and  Fujian  provinces in the year 2012 compared to 2011 and a higher
effective tariff rate due to the tariff increases at some of the projects in 
Fujian  and  Yunnan  provinces.

The Company sold 1,768.0 million kWh from continuing operations in the year
ended  December 31, 2012, an increase of 505.7 million kWh, or 40%, from 1,262.3
million kWh sold in the year ended  December 31, 2011.

The consolidated effective utilization rate from continuing operations for the
year ended  December 31, 2012  was 39.2%, compared to 28.1% in the year ended 
December 31, 2011. The higher consolidated effective utilization rate was
principally the result of above average precipitation in  Zhejiang  and  Fujian 
provinces compared to below average precipitation in 2011, offset by below
average precipitation in  Yunnan  province.

The effective tariff increased from  RMB 0.30/kWh in 2011 to  RMB 0.33/kWh in
the year ended  December 31, 2012. The increase is attributed to the tariff
increases the Company has received, and higher revenue contribution from
projects located in  Fujian  and  Zhejiang  provinces, where tariffs are higher
than in  Yunnan  province.

Cost of Revenues

Cost of revenues for the year ended  December 31, 2012  was  $35.8 million, as
compared to  $31.3 million  for the year ended  December 31, 2011, primarily due
to higher variable costs as a result of more favorable rainfall in the year 2012
as well as corresponding increases in maintenance expenses. The increases
include primarily: (i) an increase in repair and maintenance costs to  $3.3
million  in 2012 from  $2.3 million  in 2011, (ii) an increase in operating and
labor costs to  $7.2 million  in 2012 from  $5.5 million  in 2011, (iii) an
increase in depreciation and amortization, non-cash expenses from continuing
operations to  $22.6 million  in 2012, as compared to  $21.6 million  in 2011.

Gross Profit and Margin

Gross profit for the year ended  December 31, 2012  increased 113% to  $49.6
million, from  $23.3 million  in the year ended  December 31, 2011. Gross margin
for the year ended  December 31, 2012  was 58% compared to 43% in the same
period of 2011 primarily due to increased revenues and the fixed nature of
certain expenses included in cost of revenues.

Operating Expenses

G&A expenses for the year ended  December 31, 2012  decreased to  $20.3 million,
or 24% of revenues, compared to  $28.9 million, or 53% of revenues for the year
ended  December 31, 2011. Stock-based compensation expenses were  $0.2 million 
in 2012 compared to  $10.5 million  in 2011 as a result of the unamortized cost
of stock-based compensation pertaining to 2009 and 2010 stock option grants that
were written off in the fourth quarter of 2011, offset by non-recurring costs
related to the Extraordinary General Meeting of shareholders ("EGM") of
approximately  $1.6 million  and termination expenses of approximately  $1.8
million  for the company's former senior management.

Adjusted EBITDA and EBITDA Margin

Adjusted EBITDA attributable to China Hydroelectric Corporation shareholders
increased 86% to  $58.5 million  for the year ended  December 31, 2012  from 
$31.5 million  for the year ended  December 31, 2011. Adjusted EBITDA margin
increased to 65% for the year ended  December 31, 2012  compared to 53% in the
same period of 2011 due to the effect of favorable hydrological factors in 
Zhejiang  and  Fujian  provinces.

Interest Expenses

Interest expenses, net, were  $28.0 million  during the year ended  December 31,
2012  compared to  $24.7 million  in the same period of 2011. The increase was
primarily due to an increase in interest payments on loans from unrelated
parties carried forward from 2011.

GAAP and Non-GAAP Profit/Loss

Net loss attributable to China Hydroelectric Corporation shareholders was  $1.2
million  for the year ended  December 31, 2012  compared to a net loss of  $45.4
million  in the same period in 2011 principally due to more favorable
hydrological conditions and a gain from the sale of the Company's Yuanping
hydroelectric power project, partially offset by the accrual of EGM-related
costs and executive-level termination costs. For the year ended  December 31,
2011, the Company recorded impairment losses on long-lived assets and impairment
loss on goodwill of  $11.6 million  and  $11.4 million, respectively.

The Company recorded a non-GAAP net gain of  $0.1 million, or  $0.00  per ADS,
for the year ended  December 31, 2012  compared to net loss of  $19.0 million,
or  ($0.36)  per ADS, for the year ended  December 31, 2011. For reconciliation
between GAAP and non-GAAP earnings, see the table entitled "GAAP Net (Loss) to
Non-GAAP Net (Loss) Reconciliation."

Weighted average ADSs used in the year ended  December 31, 2012  and 2011
earnings per share calculation were 54.0 million ADSs, representing 162.0
million ordinary shares, and 52.2 million ADSs, representing 156.5 million
ordinary shares, respectively.

Liquidity

Over the course of 2012, the company reduced its working capital deficiency by
42% to  $81 million, from  $138.7 million  at the close of 2011.  The Company
raised  $121.8 million  through borrowings from banks and other institutions. 
In addition, the company generated consideration of  RMB 279.0 million  ($44.3
million) by entering a Share Transfer Agreement with a third party to sell
Yuheng, a 30 megawatt project located in  Fujian  province.  The consideration
includes assumption of debt by the purchaser.  Cash flow improved during the
year due to the favorable revenue effect of above-average precipitation, and the
cost reduction efforts initiated in the fourth quarter of 2012.

Investors should expect the company to have a working capital deficit in the
foreseeable future, due to the use of leverage to finance the construction and
acquisition of hydroelectric projects.  The Company regularly raises funds
through various means, such as new borrowings from banks and other non-financial
institutions.  New borrowings are used for multiple purposes, such as daily
operating liquidity, to fund new projects or acquisitions, and to refinance
existing short-term loans into longer-term debt.

Historically, the Company relied on the ready availability of credit in  China 
to fund its operations and expansion. Commencing in 2011 and extending into
2012, the Company's ability to obtain financing from its principal lenders in 
China  was constrained by restrictions on bank lending imposed by the central
government in an effort to contain inflation.  The Company has started exploring
wider forms of financing since Q4 2012 and is currently in various stages of
negotiations with a number of financial institutions that could provide
refinancing packages to extend the duration of the company's debt obligations.

Management remains confident in the company's ability to secure capital in order
to fund its liquidity needs, debt obligations and growth plans, but obtaining
financing cannot be guaranteed.  In the event that CHC fails to raise funds
sufficient to meet its liquidity needs, the company may be forced to
substantially curtail its operations or otherwise take measures that would
materially and adversely affect its current operations and business prospects.

Business Updates

The following table shows the projects acquired and sold in 2011 and 2012.

 Project Name                            Date Acquired/(Sold)    Capacity   
 Dazhaihe Acquisition (100% interest)    April 10, 2011          15.0 MW    
 Yuanping Sale (100% interest)           (March 2, 2012)         (16.0 MW)  
 Yuheng Sale(100% interest)              (October 31, 2012)      (30.0 MW)  


The sale of the Yuanping and Yuheng power projects provided the Company with a
gain of  $1.4 million  and  $1.4 million, net of taxes, respectively.  

First Quarter 2013 Precipitation Update

Subject to an update on detailed precipitation changes of the first quarter of
2013 in our next quarter press release, regional precipitation imbalances
continued into the first quarter 2013.  Yunnan  continued to face drought
conditions and  Fujian  and  Zhejiang  experienced at- or above-average levels
of precipitations.

Non-GAAP Net (Loss) Figures

Non-GAAP net (loss) for the year ended  December 31, 2011  and 2012 and the
fourth quarter of 2011 and 2012, excludes the following non-cash charges:
stock-based compensation expenses, exchange gains or losses and the change in
fair value of warrant liabilities. A reconciliation of GAAP and non-GAAP items
is provided in the table entitled "GAAP Net (Loss) to Non-GAAP Net (Loss)
Reconciliation."

Net Income to Adjusted EBITDA 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
warrant liabilities, provision for impairment allowance for doubtful accounts on
amount due from related party and prepayments and other current assets,
impairment loss on long-lived assets, and impairment loss on goodwill. For
further details, see the table entitled "Net income/(loss) to adjusted EBITDA
reconciliation."

Conference Call

China Hydroelectric will host a conference call at  6:00 am  (Pacific) /9:00 am 
(Eastern) /  9:00 pm  (Beijing/Hong Kong) on  Thursday, April 11, 2013  to
discuss its fourth quarter and full year 2012 financial results and recent
business activities. To access the live teleconference, please dial (US)
+1-888-417-8516 or (International) +1-719-457-1512, and enter pass code 4663764.
This call is being webcast by ViaVid Broadcasting and can be accessed by
clicking on this link:  http://public.viavid.com/index.php?id=104110, or at
ViaVid's website at  http://viavid.com.

A playback will be available through  April 25, 2013, by dialing (US)
+1-877-870-5176 or (International) +1-858-384-5517 and entering the pass code
4663764.

About China Hydroelectric Corporation

China Hydroelectric Corporation (NYSE: CHC, CHCWS) ("China Hydroelectric" or
"the Company") is an owner, developer and operator of small hydroelectric power
projects in  the People's Republic of China. Through its geographically diverse
portfolio of operating assets, the Company generates and sells electric power to
local power grids. The Company's primary business is to identify, evaluate,
acquire, develop, construct and finance hydroelectric power projects. The
Company currently owns 25 operating hydropower stations in  China  with total
installed capacity of 517.8 MW, of which it acquired 21 operating stations and
constructed four. These hydroelectric power projects are located in four
provinces:  Zhejiang,  Fujian,  Yunnan  and Sichuan.  Hydropower is an important
factor in meeting  China's electric power needs, accounting for approximately
22% of total nation-wide capacity.

For further information about China Hydroelectric Corporation, please visit the
Company's website at  http://www.chinahydroelectric.com.

Cautionary Note Regarding Forward-looking Statements and Weather Data

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 Company's business strategies and plan of
operations, the Company's ability to acquire hydroelectric assets, the Company's
capital expenditure and funding plans, the Company's operations and business
prospects, projects under development, construction or planning, the Company's
ability to meet its short-term liquidity needs, the availability of
restructuring measure or of lending by financing sources, including banks in 
China, the regulatory environment, and the business outlook for 2013. The
forward-looking statements are based on the Company's current expectations and
involve a number of risks, uncertainties and contingencies, many of which are
beyond the Company's 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 Company's relationship with
and other conditions affecting the power grids we service, the Company's
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 Company's cost-control measures, the Company's liquidity
and financial condition, environmental laws and changes in political, economic,
legal and social conditions in  China, the availability of financing from
lenders in  China  due to bank restrictions or otherwise, and other factors
affecting the Company's operations that are set forth in the Company's Annual
Report on Form 20-F for the year ended  December 31, 2012  to be filed with the
Securities and Exchange Commission (the "SEC") on or about  April 10, 2013  and
in the Company's 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.

This release also contains statistical data and estimates that we obtained from
provincial and national meteorological recording stations. Although we believe
that this data is reliable and consistent with our experience, we have not
independently verified it.

About Non-GAAP Financial Measures

To supplement China Hydroelectric consolidated financial results presented in
accordance with GAAP, China Hydroelectric uses non-GAAP net income 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 "Net (loss) to adjusted EBITDA reconciliation" and "GAAP
Net (Loss) to Non-GAAP Net (Loss) 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 Company's performance and when planning and
forecasting future periods. These non-GAAP financial measures also facilitate
management's internal comparisons to China Hydroelectric historical performance
and liquidity. China Hydroelectric has computed its non-GAAP financial measures
using methods consistent with the Company's annual report on Form 20-F. 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 Company's results of operations.

Statement Regarding Unaudited Financial Information

The financial information set forth in this press release is unaudited and
subject to adjustments. Adjustments to the financial statements may be
identified when our annual financial statements are prepared and audit work is
performed for the year end audit, which could result in significant differences
from this unaudited financial information.

For further information, please contact:

 China Hydroelectric Corporation                   James Hull                        
 
                                                 Financial Analyst                 
 
Scott Powell                                     Phone (China): +86-10-6408-2341   
 Investor Relations and Corporate Communications                                     
 Phone (U.S.): +1-646-650-1351                                                       
 Email:  ir@chinahydroelectric.com                                                   
 
                                                                                   
 
ICR, LLC                                                                           
 
                                                                                   
 
William Zima                                                                       
 Managing Director                                                                   
 Phone (U.S.): +1-646-308-1635                                                       
 Phone (China): +86-10-6583-7511                                                     
 Email:  william.zima@icrinc.com                                                     


 CHINA HYDROELECTRIC CORPORATION                                                                                                                                             
 
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS                                                                                                                  
 
(In US$ 000's, except for share and per share data)                                                                                                                        
                                                                                 Three Months Ended                           Year Ended                                
                                                                                 December 31,             December 31,      December 31,          December 31,      
                                                                                 2012                     2011              2012                  2011              
 Continuing Operations:                                                                                                                                             
 Revenues                                                                        12,375                   9,912             85,388                54,597            
 Cost of revenues                                                                (9,667)                  (8,615)           (35,795)              (31,314)          
 Gross profit                                                                    2,708                    1,297             49,593                23,283            
 Operating expenses                                                                                                                                                 
 General and administrative expenses                                             (6,390)                  (14,324)          (20,348)              (28,896)          
 Impairment loss on long-lived assets                                            -                        (11,590)          -                     (11,590)          
 Impairment loss on goodwill                                                     -                        (11,388)          -                     (11,388)          
 Total operating expenses                                                        (6,390)                  (37,302)          (20,348)              (51,874)          
 Operating (loss) income                                                         (3,682)                  (36,005)          29,245                (28,591)          
 Interest income                                                                 64                       43                84                    101               
 Interest expense                                                                (6,733)                  (7,923)           (28,070)              (24,757)          
 Changes in fair value of warrant liabilities                                    (43)                     632               (399)                 951               
 Exchange (loss) gain                                                            (40)                     (109)             28                    (851)             
 Other income (loss), net                                                        475                      (415)             507                   (334)             
 (Loss) income before income tax expenses                                        (9,959)                  (43,777)          1,395                 (53,481)          
 Income tax expense                                                              709                      381               (6,451)               (1,527)           
 Net (loss) from continuing operations                                           (9,250)                  (43,396)          (5,056)               (55,008)          
                                                                                                                                                                    
 Net income(loss) from discontinued operations                                   1,138                    (193)             3,907                 (282)             
                                                                                                                                                                    
 Net(loss)                                                                       (8,112)                  (43,589)          (1,149)               (55,290)          
                                                                                                                                                                    
 Net loss (income) attributable to non-controlling interests                     48                       9,259             (94)                  9,901             
                                                                                                                                                                    
 Net (loss) gain attributable to China Hydroelectric Corporation shareholders    (8,064)                  (34,330)          (1,243)               (45,389)          
 - Continuing operations                                                         (9,202)                  (34,137)          (5,150)               (45,107)          
 - Discontinued operations                                                       1,138                    (193)             3,907                 (282)             
                                                                                                                                                                    
 Other Comprehensive income (loss), net of taxes                                                                                                                    
 Foreign currency translation adjustments                                        2,004                    2,890             (1,413)               20,394            
 Defined benefit pension and postretirement plans                                33                       (33)              33                    (33)              
 Other comprehensive income (loss)                                               2,037                    2,857             (1,380)               20,361            
 Comprehensive (loss)                                                            (6,075)                  (40,732)          (2,529)               (34,929)          
 Less: comprehensive loss (income) attributable to                               65                       8,944             (85)                  9,586             
     non-controlling interest                                                                                                                                       
 Comprehensive (loss) attributable to CHC shareholders                           (6,010)                  (31,788)          (2,614)               (25,343)          
 GAAP net(loss) per ADS - basic and diluted                                      (0.15)                   (0.64)            (0.02)                (0.87)            
 From continuing operation                                                       (0.17)                   (0.64)            (0.09)                (0.86)            
 From discontinued operation                                                     0.02                     0.00              0.07                  (0.01)            
 GAAP net (loss) per share - basic and diluted                                   (0.05)                   (0.21)            (0.01)                (0.29)            
 From continuing operation                                                       (0.06)                   (0.21)            (0.03)                (0.29)            
 From discontinued operation                                                     0.01                     0.00              0.02                  0.00              
                                                                                                                                                                    
 Weighted average American Depository Shares - basic and diluted                 53,996,366               53,993,439        53,996,366            52,168,359        
 Weighted average ordinary shares  - basic and diluted                           161,989,097              161,980,316       161,989,097           156,505,076       
                                                                                                                                                                    


 CHINA HYDROELECTRIC CORPORATION                                                                                                                                         
 
GAAP NET (LOSS) TO NON-GAAP NET (LOSS) RECONCILIATION                                                                                                                  
 
(In US$ 000's)                                                                                                                                                         
                                                                    Three Months Ended                                 Year Ended                                    
                                                                    December 31, 2012           December 31, 2011    December 31, 2012        December 31, 2011  
 Net (loss) attributable to CHC shareholders                        (8,064)                     (34,330)             (1,243)                  (45,389)           
 Non-GAAP adjustments:                                                                                                                                           
 Stock-based compensation expense (1)                               59                          7,621                166                      10,479             
 Exchange (gain) loss                                               40                          109                  (28)                     851                
 Change in fair value of warrant liabilities(2)                     43                          (632)                399                      (951)              
 Bad debt                                                           792                         1,256                792                      1,256              
 Assets impairment loss                                             -                           4,984                -                        4,984              
 Goodwill impairment loss                                           -                           9,795                -                        9,795              
 Non-GAAP net (loss)/gain                                           (7,130)                     (11,197)             86                       (18,975)           
                                                                                                                                                                 
 Non-GAAP net (loss) per ADS - basic and diluted (3)                (0.13)                      (0.21)               0.00                     (0.36)             
 From continuing operation                                          (0.15)                      (0.21)               (0.07)                   (0.35)             
 From discontinued operation                                        0.02                        0.00                 0.07                     (0.01)             
 Non-GAAP net (loss) per ordinary share - basic and diluted         (0.04)                      (0.07)               0.00                     (0.12)             
 From continuing operation                                          (0.05)                      (0.07)               (0.02)                   (0.12)             
 From discontinued operation                                        0.01                        0.00                 0.02                     0.00               
                                                                                                                                                                 
 Weighted average American depository shares - basic and diluted    53,996,366                  53,993,439           53,996,366               52,168,359         
 Weighted average ordinary shares - basic and diluted               161,989,097                 161,980,316          161,989,097              156,505,076        
 (1)   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 organization's 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. 
 
                                                                                                                                                                       
 
(2)   Warrant liabilities Related Items: We provide non-GAAP information relative to the change in fair value of warrant liabilities. We include the change in fair value of warrant liabilities in our GAAP financial measures in accordance with Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 815, Derivatives and Hedging ("FASB ASC Topic 815"). Because of varying available valuation methodologies, and subjective assumptions, which affect the calculations of the 
 change in fair value of warrant liabilities, we believe that the exclusion of the change in fair value of warrant liabilities allows for more accurate comparisons of our operating results to our peer companies. Because of the characteristics of warrant liabilities, management excludes the change in fair value when analyzing the organization's 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 Company's American depository shares ("ADS") convert to ordinary shares at a rate of one ADS to three ordinary shares.                                       
 
                                                                                                                                                                       
 
(4)   All the reconciliation items are attributed to China Hydroelectric Corporation Shareholders.                                                                     


 CHINA HYDROELECTRIC CORPORATION                                                                                                                                                                                                              
 
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS                                                                                                                                                                                             
 
(In US$ 000's)                                                                                                                                                                                                                              
                                                                                                                                                                                                 As of December 31,    As of December 31,  
                                                                                                                                                                                                 2012                  2011                
 ASSETS                                                                                                                                                                                                                                    
 Current assets:                                                                                                                                                                                                                           
 Cash and cash equivalents                                                                                                                                                                       13,138                8,391               
 Accounts receivable (net of allowance for doubtful accounts of nil as of                                                                                                                        5,772                 4,246               
 
December 31, 2011 and 2012)                                                                                                                                                                                                              
 Notes receivable                                                                                                                                                                                1,877                 -                   
 Deferred tax assets                                                                                                                                                                             1,659                 1,799               
 Amounts due from related parties(net of allowance for doubtful accounts of US$1,334 and                                                                                                         86                    -                   
      US$1,338 as of December 31, 2011 and 2012, respectively)                                                                                                                                                                             
 Prepayments and other current assets (net of provision for impairment allowance of US$714 and                                                                                                   14,150                2,999               
      US$1,560 as of December 31, 2011 and 2012, respectively)                                                                                                                                                                             
 Assets classified as held-for-sale                                                                                                                                                              -                     21,693              
 Total current assets                                                                                                                                                                            36,682                39,128              
                                                                                                                                                                                                                                           
 Non-current assets:                                                                                                                                                                                                                       
 Property, plant and equipment, net                                                                                                                                                              548,511               580,964             
 Land use right, net                                                                                                                                                                             48,640                50,666              
 Intangible assets, net                                                                                                                                                                          4,660                 5,788               
 Goodwill                                                                                                                                                                                        112,481               135,651             
 Deferred tax assets                                                                                                                                                                             1,329                 1,767               
 Other non-current assets                                                                                                                                                                        2,013                 951                 
 Total non-current assets                                                                                                                                                                        717,634               775,787             
                                                                                                                                                                                                                                           
 TOTAL ASSETS                                                                                                                                                                                    754,316               814,915             
                                                                                                                                                                                                                                           
 LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                                                                      
 Current liabilities:                                                                                                                                                                                                                      
 Accounts payable                                                                                                                                                                                3,124                 5,251               
 Short-term loans                                                                                                                                                                                21,676                20,881              
 Current portion of long-term loans                                                                                                                                                              35,537                51,651              
 Amounts due to related parties                                                                                                                                                                  12,705                12,174              
 Accrued expenses and other current liabilities                                                                                                                                                  43,825                75,002              
 Deferred tax liabilities                                                                                                                                                                        -                     536                 
 Warrant liabilities                                                                                                                                                                             839                   440                 
 Liabilities directly associated with the assets classified as held-for-sale                                                                                                                     -                     11,920              
 Total current liabilities                                                                                                                                                                       117,706               177,855             
                                                                                                                                                                                                                                           
 Non-current liabilities:                                                                                                                                                                                                                  
 Long term loans                                                                                                                                                                                 212,970               215,382             
 Deferred tax liabilities                                                                                                                                                                        24,345                26,563              
 Other non-current liabilities                                                                                                                                                                   6,780                 237                 
 Total non-current liabilities                                                                                                                                                                   244,095               242,182             
                                                                                                                                                                                                                                           
 TOTAL LIABILITIES                                                                                                                                                                               361,801               420,037             
                                                                                                                                                                                                                                           
 Shareholders' equity                                                                                                                                                                                                                      
 Ordinary shares (par value US$0.001 per share, 400,000,000 shares authorized as of December 31, 2011 and 2012; 161,989,097 shares issued and outstanding as of and December 31, 2011 and 2012)  162                   162                 
 Additional paid in capital                                                                                                                                                                      509,665               509,499             
 Accumulated other comprehensive income                                                                                                                                                          41,597                42,968              
 Accumulated deficit                                                                                                                                                                             (159,472)             (158,229)           
 Total China Hydroelectric Corporation shareholders' equity                                                                                                                                      391,952               394,400             
 Non-controlling interests                                                                                                                                                                       563                   478                 
 TOTAL SHAREHOLDER'S EQUITY                                                                                                                                                                      392,515               394,878             
                                                                                                                                                                                                                                           
 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                                                                                                                                                      754,316               814,915             


 CHINA HYDROELECTRIC CORPORATION                                                                                                                                                                                                                
 
NET (LOSS) TO ADJUSTED EBITDA RECONCILIATION                                                                                                                                                                                                  
                                                                                                                                        Three Months Ended                                 Year Ended                                      
                                                                                                                                        December 31, 2012           December 31, 2011    December 31, 2012        December 31, 2011    
 Net (loss) attributable to China Hydroelectric                                                                                         (8,064)                     (34,330)             (1,243)                  (45,389)             
 Corporation shareholders                                                                                                                                                                                                              
 Interest expenses, net                                                                                                                 6,450                       7,674                27,145                   23,710               
 Other non-cash charges, including exchange loss, change in fair value of warrant liabilities, and stock-based compensation expense     142                         7,098                537                      10,379               
 Income tax expenses                                                                                                                    (647)                       (340)                6,295                    1,556                
 Interest expenses, income tax expenses, depreciation and amortization related to discontinued operations                               139                         1,043                2,743                    3,974                
 Provision for impairment allowances for doubtful accounts on amount due from related party and prepayments and other current assets    792                         1,256                792                      1,256                
 Impairment loss on long-lived assets                                                                                                   -                           4,984                -                        4,984                
 Impairment loss on goodwill                                                                                                            -                           9,795                -                        9,795                
 Depreciation of property, plant and equipment and amortization of land use rights and intangible assets                                5,627                       5,211                22,222                   21,225               
 EBITDA, attributable to China Hydroelectric Corporation shareholders, as adjusted                                                      4,439                       2,391                58,491                   31,490               
                                                                                                                                                                                                                                       
 EBITDA margin attributable to China Hydroelectric Corporation shareholders, as adjusted                                                36%                         22%                  65%                      53%                  
 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 warrant liability, stock-based compensation, bad debt, impairment loss on long-lived assets, and impairment loss on goodwill. 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 Company's 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 Company's 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 Company's future results will be unaffected by other charges and gains we consider to 
 be outside the ordinary course of our business.                                                                                                                                                                                                
 
                                                                                                                                                                                                                                              
 All the reconciliation items are attributed to China Hydroelectric Corporation Shareholders.                                                                                                                                                   
                                                                                                                                                                                                                                                
 EBITDA margin attributable to China Hydroelectric Corporation shareholders, as adjusted, is calculated by dividing the period's EBITDA by net revenue including discontinued operations.                                                       


 CHINA HYDROELECTRIC CORPORATION                                                                                                                
 
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                               
 (In US$ 000's)                                                                                                                                 
                                                                                          Year Ended                                    
                                                                                          December 31, 2012        December 31, 2011  
 Cash flows from operating activities:                                                                                                
 Net  (loss)                                                                              (1,149)                  (55,290)           
 Adjustments to reconcile net  (loss) to net cash generated from operating activities:                                                
 Depreciation of property, plant and equipment and amortization of land use               23,780                   23,341             
                     rights and intangible assets                                                                                     
 Impairment loss on goodwill                                                              -                        11,388             
 Impairment loss on long-lived assets                                                     -                        11,590             
 Deferred income taxes                                                                    (163)                    (485)              
 Changes in fair value of warrant liabilities                                             399                      (951)              
 Amortization of debt issuance costs                                                      191                      19                 
 Authorization of government grant                                                        (3)                      (3)                
 Stock-based compensation expense                                                         166                      10,479             
 Loss from disposal of property, plant and equipment                                      508                      266                
 Exchange (gain)loss                                                                      (28)                     851                
 Gain from disposal of discontinue operation                                              (2,767)                  -                  
 Gain from extinguishment of amounts due to original shareholders of                      (462)                    -                  
                      acquired subsidiaries                                                                                           
 Provision for impairment allowance on prepayments and other current assets               843                      696                
 Provision for impairment allowance on doubtful accounts on amount due                    -                        1,302              
                     from related party                                                                                               
 Net pension cost recognized                                                              33                       173                
 Changes in operating assets and liabilities:                                                                                         
 Accounts receivable                                                                      (1,797)                  242                
 Notes receivable                                                                         (1,874)                  -                  
 Prepayments and other current assets                                                     (463)                    310                
 Other non-current assets                                                                 779                      (344)              
 Accounts payable                                                                         (345)                    (42)               
 Amounts due to related parties                                                           (2)                      -                  
 Other non-current liabilities                                                            6,578                    5                  
 Accrued expenses and other current liabilities                                           (1,524)                  (1,903)            
 Net cash provided by operating activities                                                22,700                   1,644              
 Cash flows from investing activities:                                                                                                
 Acquisition of subsidiaries, net of cash acquired                                        (8,923)                  (19,330)           
 Advances to an acquired business prior to the acquisition date                           -                        -                  
 Proceeds from the disposal of subsidiaries                                               20,212                   -                  
 Cash deposit for potential acquisitions                                                  -                        (696)              
 Acquisition of property, plant and equipment                                             (7,091)                  (1,490)            
 Proceeds from disposal of property, plant and equipment                                  35                       112                
 Payment to contractors for construction projects                                         (6,931)                  (3,330)            
 Loans to a related party                                                                 (86)                     -                  
 Net cash used in investing activities                                                    (2,784)                  (24,734)           
 Cash flows from financing activities:                                                                                                
 Purchase of subsidiary shares from non-controlling interests                             -                        (1,204)            
 Proceeds from short-term loans                                                           28,070                   23,066             
 Proceeds from long-term loans                                                            72,947                   45,823             
 Proceeds from loans from related parties                                                 572                      1,263              
 Proceeds from loans from third party                                                     20,161                   17,456             
 Proceeds from exercised warrants                                                         -                        10,036             
 Payment of debt issuance costs                                                           (704)                    -                  
 Repayment of loans from related party                                                    (69)                     -                  
 Repayment of loans from third party                                                      (38,136)                 (10,637)           
 Repayment of short-term loans                                                            (28,051)                 (20,889)           
 Repayment of long-term loans                                                             (69,986)                 (66,955)           
 Net cash used in financing activities                                                    (15,196)                 (2,041)            
 Net increase (decrease) in cash and cash equivalents                                     4,720                    (25,131)           
 Effect of changes in exchange rate on cash and cash equivalents                          16                       76                 
 Cash and cash equivalents at the beginning of the year                                   8,402                    33,457             
 Cash and cash equivalents at the end of the year                                         13,138                   8,402              
                                                                                                                                      


SOURCE  China Hydroelectric Corporation

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