Primary Energy Recycling Corporation Announces Third Quarter 2008 Results
OAK BROOK, IL, Oct. 23 /PRNewswire-FirstCall/ — Primary Energy Recycling Corporation (TSX:ÂÂÂ PRI.UN) (the “Company” or “PERC”) today released its financial results for the three months ended September 30, 2008. All amounts are in U.S. dollars unless otherwise indicated.
Key Points – Continued solid financial performance and operational stability for the third consecutive quarter – Distributable cash for the quarter was Cdn$8.1 million or Cdn$0.22 per Enhanced Income Security (EIS). The payout ratio was 91.7% – Successfully resolved Cokenergy’s NOV with IDEM – The Board of Directors with full cooperation of EPCOR Power LP initiated a sales process that could lead to the sale of the Company and/or Primary Energy Recycling Holdings LLC (“PERH”).
“In the third quarter, results provided continued validation of Harbor Coal amendments completed earlier this year. Results remained relatively stable and near anticipated levels with the new contract. Strong performance at all PERC facilities yielded improved earnings relative to last year and resulted in the 91.7% payout ratio,” said V. Michael Alverson, Interim President and Chief Financial Officer of the Company’s Manager.
“After studying options for enhancing unitholder value, the Board of Directors initiated a sales process that is intended to result in the sale of the Company. We will be working closely with the Board and its consultant, John Prunkl, former president of the Company and the investment bankers to achieve a successful sale.”
The Harbor Coal amendments fundamentally changed the way revenue and operation and maintenance expenses are shared by the Partnership effective January 1, 2008, thus direct 2008 versus 2007 comparison is difficult. Operating and maintenance expense reductions are greater than revenue reductions, thus a favorable result.
In the third quarter of 2008, the Company earned revenue of $15.6ÂÂ million, a decrease of 18.9% from the third quarter of 2007 primarily due to a decline in Energy Service revenue at the Company’s Harbor Coal facility totaling $4.1 million, offset by additional revenue of $0.5 million recorded at other facilities due to higher levels of generation compared to the same period in the prior year. For the first nine months of 2008, the Company generated revenue of $47.4 million reflecting a decrease of 12.0%, from the same period of the prior year primarily due to a decline in Energy Service revenue at the Harbor Coal facility totaling $8.3 million, offset by increased revenue of $1.8 million at other facilities.
Operating and maintenance expense for the third quarter of 2008 was $3.0ÂÂ million, down 62.4% from the third quarter of 2007 due to a decline in maintenance expenses of $4.5 million at the Company’s Harbor Coal facility. The third quarter of 2007 also reflected increased maintenance expenses of $0.7 million associated with outage repair activity at other facilities. Additionally, third quarter of 2008 reflects a $0.3 million increase in maintenance expenses. For the first nine months of 2008, operating and maintenance expense was $8.5 million compared to $22.5 million for the same period in the prior year, a decrease of 62.5% due to a decrease of $13.1ÂÂ million at Harbor Coal for the reasons stated above. Additionally, the first nine months of 2007 reflected increased maintenance expenses of $1.6ÂÂ million associated with outage repair activity. These amounts are offset by a $0.7 million increase in current year maintenance expenses.
General and administrative expense for the third quarter of 2008 was $3.0 million, compared to $2.7 million for the third quarter of 2007, an increase of 10.6% due to additional professional fees of $0.1 million and increases in other general and administrative expenses. For the first nine months of 2008, general and administrative expense was $8.8 million, compared to $8.1 million for the first nine months of 2007, a 8.3% increase due to additional professional fees of $0.3 million, board compensation fees of $0.2 million and other general and administrative expenses of $0.2 million. The additional expenses incurred in 2008 are primarily due to the strategic review process.
Distributable Cash for the third quarter and the first nine months of 2008 was Cdn$8.1 million or Cdn$0.22 per EIS, and Cdn$25.2 million or Cdn$0.67 per EIS, respectively. Distributions declared in the quarter and nine-month period were Cdn$7.4 million or Cdn$0.20 per EIS and Cdn$22.3 million or Cdn$0.60 per EIS, respectively.
At the end of the third quarter 2008, the Company had cash on-hand of $14.9 million.
The industrial hosts which are also the customers of the Company’s facilities are all steel production facilities. Major participants in the North American steel industry have recently announced planned reductions in production. The impact of production reductions on the operations of PERC is not known at this time.
Distributable Cash Summary (in 000′s of US$, except per share data and as otherwise indicated) Three Months Ended Nine Months Ended September 30, September 30, ——————— ——————— 2008 2007 2008 2007 ———- ———- ———- ———- Distributable Cash $ 6,938 $ 5,440 $ 21,471 $ 13,577 ———- ———- ———- ———- ———- ———- ———- ———- Per Common and equivalent Common Share $ 0.19 $ 0.15 $ 0.58 $ 0.36 ———- ———- ———- ———- ———- ———- ———- ———- Interest on EIS Subordinated Notes $ 1,944 $ 1,944 $ 5,832 $ 5,832 Distributions on Common Shares 3,350 2,233 10,050 12,057 Distributions on non-controlling Class B preferred interest 380 380 1,140 1,140 Distributions on non-controlling Class B common interest 685 456 2,055 2,464 ———- ———- ———- ———- Total distributions $ 6,359 $ 5,013 $ 19,077 $ 21,493 ———- ———- ———- ———- ———- ———- ———- ———- Per Common and equivalent Common Share $ 0.17 $ 0.13 $ 0.51 $ 0.58 ———- ———- ———- ———- ———- ———- ———- ———- Hedge rate (Cdn$ per US$) $ 1.1712 $ 1.1712 $ 1.1712 $ 1.1694 Distributable Cash (Cdn$) $ 8,126 $ 6,371 $ 25,147 $ 15,877 ———- ———- ———- ———- ———- ———- ———- ———- Per Common and equivalent Common Share (Cdn$) $ 0.22 $ 0.17 $ 0.67 $ 0.43 ———- ———- ———- ———- ———- ———- ———- ———- Hedge rate (Cdn$ per US$) $ 1.1712 $ 1.1712 $ 1.1712 $ 1.1694 Total distributions (Cdn$) $ 7,448 $ 5,871 $ 22,343 $ 25,133 ———- ———- ———- ———- ———- ———- ———- ———- Per Common and equivalent Common Share (Cdn$) $ 0.20 $ 0.16 $ 0.60 $ 0.67 ———- ———- ———- ———- ———- ———- ———- ———- Excess (shortfall) distributable cash (Cdn$) $ 678 $ 500 $ 2,804 $ (9,256) ———- ———- ———- ———- ———- ———- ———- ———- Per Common and equivalent Common Share (Cdn$) $ 0.02 $ 0.01 $ 0.08 $ (0.25) ———- ———- ———- ———- ———- ———- ———- ———- Payout Ratio 91.7% 92.2% 88.9% 158.3%
The Company’s full financial statements and Management’s Discussion and Analysis, are available at http://www.sedar.com/ or the Company’s website at http://www.primaryenergyrecycling.com/.
Conference Call and Webcast
Management will also host a conference call to further discuss the third quarter results on Friday, October 24, at 11:00 a.m. (ET). Following management’s presentation, there will be a question and answer session. To participate in the conference call, please dial 416-644-3414 or 1-800-733-7571. A conference call replay will be available until 12 a.m. on October 31, 2008 (ET). The replay can be accessed by dialing 416-640-1917 or 1-877-289-8525 and entering passcode 21284377 followed by the number sign. A webcast replay will also be available for 90 days by accessing a link through the Investor Information section at http://www.primaryenergyrecycling.com/.
Non-GAAP Measures
Distributable Cash is not a recognized measure under Canadian GAAP and does not have a standardized meaning prescribed by Canadian GAAP. Therefore, Distributable Cash may not be comparable to similar measures presented by other companies. See the definitions of Distributable Cash in the Company’s MD&A.
Forward-Looking Statements
When used in this news release, the words “anticipate”, “expect”, “project”, “believe”, “estimate”, “forecast” and similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks, uncertainties and assumptions pertaining, but not limited, to operating performance, regulatory parameters, weather and economic conditions and the factors discussed in the Company’s public filings available on SEDAR at http://www.sedar.com/. These forward-looking statements are made as of the date of this press release and the Company assumes no obligation to update or revise them to reflect new events or circumstances.
About Primary Energy Recycling Corporation
Primary Energy Recycling Corporation owns a majority interest in Primary Energy Recycling Holdings LLC (“PERH”). PERH, headquartered in Oak Brook, Illinois, indirectly owns and operates four recycled energy projects and a 50ÂÂ per cent interest in a pulverized coal facility (collectively, the “Projects”). The Projects have a combined electrical generating capacity of 283 megawatts and a combined steam generating capacity of 1.8 MMlbs/hour. PERH creates value for its customers by capturing and recycling waste energy from industrial and electric generation processes and converting it into reliable and economical electricity and thermal energy for its customers’ use. For more information, please see http://www.primaryenergyrecycling.com/.
Primary Energy Recycling Corporation
CONTACT: V. Michael Alverson, Interim President, Primary EnergyRecycling Corporation, (630) 371-0505, investorinfo@primaryenergy.com