/C O R R E C T I O N -- Primary Energy Recycling Corporation/

In TO920 disseminated at 22:08e today, an error occurred in the "Financial Results" table. In the row titled "Revenues" the figure in the first column incorrectly stated "9,8935" and should have read "9,835". Correct copy follows:

Primary Energy Reports Second Quarter 2014 Results

OAK BROOK, IL, Aug. 6, 2014 /PRNewswire/ - Primary Energy Recycling Corporation (TSX: PRI), a clean energy company that generates revenue from capturing and recycling recoverable heat and by-product fuels from industrial processes, today announced its financial and operational results for the three and six months ended June 30, 2014.

Second Quarter Summary

• Quarterly results were down due to the host facility's blast furnace reline plus additional and accelerated plant maintenance costs at Cokenergy preparing for the upcoming variable contract period.
• Announced it entered into a strategic review process to generate shareholder value. No agreement has been reached on any transaction, and there is no assurance that any transaction will be agreed to or consummated as a result of this process.
• The host's reline of blast furnace #7 began on June 1, 2014.  A reline is part of the normal maintenance cycle of the blast furnace and the last reline of blast furnace #7 occurred in 2003.  In May, the furnace production ramped down faster than anticipated in preparation for the reline work. As expected, the reline idled or substantially reduced operations for North Lake and Harbor Coal.  Subsequent to the end of the quarter, the blast furnace restarted ahead of schedule and continues its normal ramp up back to full production.
• Continued the acceleration of the retubing program for Cokenergy, the Company's combined heat and power facility having now completed 12 of the 16 boilers as of June 30, 2014. During the quarter, Cokenergy also incurred an additional $1.0 million of one-time plant refurbishment costs to ensure the facility is fully prepared for the October 1, 2014 switch to variable revenue per the contract.

"The second quarter of 2014 was an unusually heavy period for project maintenance at Cokenergy as we accelerated work to prepare for the switch to contractual variable revenue," said John Prunkl, President and Chief Executive Officer of Primary Energy. "We believe the successful execution of our project upgrade work positions the Company for strong and consistent financial results once the work is complete."

Second Quarter 2014 Financial Results

The Company's revenue was $9.8 million for the second quarter of 2014 compared to revenue of $13.6 million for the second quarter of 2013, a decrease of $3.8 million, or 27.5%.  $3.1 million of the decrease is the result of deferred revenue being recorded at the Cokenergy facility in accordance with lease accounting requirements.  Revenue at the North Lake facility decreased by $0.5 million primarily due to reduced host operating levels which were impacted by the blast furnace reline as well as operating challenges during the second quarter of 2014.  Revenue at the Portside facility decreased by $0.3 million primarily due to a reduction in the tiered pricing of steam which became effective upon exceeding a specified annual volume of production in accordance with the new contract which began on September 1, 2013. Revenue at the Ironside facility increased by $0.1 million primarily due to an unplanned outage beginning in May of 2013 that impacted prior year revenue.

The Company's revenue was $22.4 million for the first six months of 2014 compared to revenue of $28.3 million for the first six months of 2013, a decrease of $5.9 million, or 20.7%. $4.4 million of the revenue decrease is the result of deferred revenue being recorded at the Cokenergy facility in accordance with lease accounting requirements. Revenue at the North Lake facility decreased by $1.3 million primarily due to reduced host operating levels which were impacted by the blast furnace reline, weather and operating challenges and an unplanned outage.  Revenue at the Portside facility decreased by $0.3 million as previously noted. Revenue at the Ironside facility increased by $0.1 million primarily due to an unplanned outage beginning in May 2013 that impacted prior year revenue.

Operations and maintenance expense for the second quarter of 2014 was $11.3 million compared to $4.5 million for the second quarter of 2013, an increase of $6.8 million or 153.9%. The Company incurred periodic costs during the second quarter of 2014 of $5.8 million for boiler retubing work and $0.5 million of condenser retubing work along with $1.2 of plant refurbishment expenditures.  Periodic costs for the second quarter of 2013 were $1.2 million for boiler retubing work and $0.2 million for an emergency boiler repair. In addition, for the second quarter of 2014 the Company had increased operations and maintenance expenses related to boiler repair work of $0.4 million, general maintenance of $0.2 million and contracted services of $0.1 million. The increases in boiler repair costs and general maintenance during the quarter are primarily preventative in nature as well as timing related to ensure efficient operations as the Cokenergy facility leads up to the transition to variable based revenue under the new contract.

Operations and maintenance expense for the first six months of 2014 was $18.4 million compared to $9.5 million for the first six months of 2013, an increase of $8.9 million or 93.9%.  The Company incurred periodic costs for the first six months of 2014 of $9.5 million for boiler retubing work and $0.5 million of condenser retubing work along with $1.4 of plant refurbishment expenditures.  Periodic costs for the first six months of 2013 were $2.9 million for boiler retubing work, $0.7 million for an emergency boiler repair and $0.1 million for ductwork repairs.  In addition, for the first six months of 2014 the Company had increased operations and maintenance expenses related to general maintenance of $0.5 million, boiler repair work of $0.5 million and contracted services of $0.2 million. The increases in general maintenance and boiler repair costs during the year are primarily preventative in nature as well as timing related to ensure efficient operations as the Cokenergy facility leads up to the transition to variable based revenue under the new contract as well as maintenance performed at the North Lake facility. 

General and administrative expense for the second quarter of 2014 was $2.2 million compared to $2.0 million for the second quarter of 2013, an increase of $0.2 million or 6.9%. The Company had increased professional fees of $0.4 million (of which $0.3 million was related to the strategic review) and other general and administrative expenses of $0.1 million. These increased expenses were offset by reduced accrued property taxes of $0.3 million. General and administrative expense for the first six months of 2014 was $4.6 million compared to $3.9 million for the first six months of 2013, an increase of $0.7 million or 16.9%. The Company had increased professional fees of $0.7 million (of which $0.4 million was related to the strategic review), plant and liability insurance expenses of $0.1 million and other general and administrative expenses of $0.1 million. These increased expenses were offset by a reduction in IT expenses of $0.1 million and reduced accrued property taxes of $0.1 million.  

Employee benefits expense for the second quarter of 2014 was $1.7 million compared to $1.5 million for the second quarter of 2013, an increase of $0.2 million.  The increase of $0.2 million is due to stock based compensation of $0.1 million and employee cost of $0.1 million.  Employee benefits expense for the first six months of 2014 was $3.6 million compared to $3.1 million for the first six months of 2013, an increase of $0.5 million.  The increase of $0.5 million is due to stock based compensation of $0.4 million and employee cost of $0.1 million.

Equity in earnings of the Harbor Coal joint venture for the second quarter of 2014 was $(0.4) million compared to $(0.05) million for the second quarter of 2013, a decrease of $0.4 million.  Equity in earnings of the Harbor Coal joint venture for the first six months of 2014 was $(0.2) million compared to $0.4 million for the first six months of 2013, a decrease of $0.6 million.  Both the quarterly and year to date totals were impacted by reduced blast furnace operations which negatively impacted revenue generated by the joint venture.

Operating loss for the second quarter of 2014 was $8.3 million compared to $0.01 million for the second quarter of 2013, an increase of $8.3 million.  Operating loss for the first six months of 2014 was $9.6 million compared to operating income of $1.2 million for the first six months of 2013, an increase of $10.8 million.  The increases noted in both periods are the result of the net effect of the respective items discussed above.

Net loss and comprehensive loss for the second quarter of 2014 was $5.8 million compared to $0.9 million for the second quarter of 2013, an increase of $4.9 million.  Net loss and comprehensive loss for the first six months of 2014 was $6.3 million compared to $1.0 million for the first six months of 2013, an increase of $5.3 million.  The increases noted are the result of the net effect of the items discussed above.

Conference Call and Webcast

A telephone conference call hosted by management to discuss the financial results will be held Thursday, August 7, 2014 at 10 am ET. The telephone numbers for the conference call are: (888) 231-8191 /or (647) 427-7450.

A digital conference call replay will be available until midnight on Thursday, August 21, 2014 (ET) by calling (855) 859-2056 or (416) 849-0833. Please enter the password 71015505 when instructed. A webcast replay will be available for 365 days by accessing a link through the Events section at www.primaryenergyrecycling.com.

Forward-Looking Statements

When used in this news release, the words "intend", "likely", "anticipate", "expect", "project", "believe", "estimate", "forecast", "outlook" and similar expressions, are intended to identify forward-looking statements, including statements regarding maintenance and capital expenditures. Such statements are subject to certain risks, uncertainties and assumptions pertaining, but not limited, to recovery in the steel industry, continued strong performance from the mills we serve consistent with historical patterns, timely renewal of contracts at the Company's facilities, no protracted outages (planned or unplanned) for any of our facilities, operating and maintenance costs and general and administrative costs being similar to recent years except as described in this press release, regulatory parameters, weather and economic conditions and other factors discussed in the Company's public filings available on SEDAR at www.sedar.com. Additional risks and uncertainties not currently known or that are currently deemed to be immaterial may also materially and adversely affect the Company's business operations and outlook. Any of the matters highlighted in the Company's risk factor disclosure could have a material adverse effect on the Company's results of operations, business prospects and outlook, financial condition or cash flow, in which case, the market price or value of the Company's Common Shares could be adversely affected. 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, except as required by applicable securities laws.

About Primary Energy Recycling Corporation

Primary Energy Recycling Corporation, headquartered in Oak Brook, Illinois, owns and operates four recycled energy projects and a 50 percent interest in a pulverized coal facility (collectively, the "Projects"). The Projects have a combined electrical generating capacity of 298 megawatts and a combined steam generating capacity of 1.8M lbs/hour. Primary Energy Recycling Corporation 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 resale back to its customers. For more information, please see www.primaryenergy.com.

¹As used herein, EBITDA means earnings before interest, taxes and depreciation and amortization.  EBITDA is reconciled to net loss and comprehensive loss in the table below.  EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other companies and may differ materially.

²As used herein, references to Adjusted EBITDA are to EBITDA as adjusted for the change in deferred revenue, certain adjustments for major maintenance expenses, loss on derecognition, realized and unrealized gain or loss on derivative contracts and stock-based compensation that represent recorded expenses based on specific circumstances and are not considered by management to reflect the underlying operating performance of the Company. The Company adjusts for these amounts as they may be non-cash, unusual in nature and are not used by management for evaluating the operating performance of the Company on a consistent basis from period to period.  Adjusted EBITDA is reconciled to net loss and comprehensive loss in the table below. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other companies and may differ materially.

³As used herein, Free Cash Flow means net cash provided by operating activities as adjusted for capital expenditures.  Free Cash Flow is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Free Cash Flow may not be comparable to similar measures presented by other companies and may differ materially.

⁴Total Gross Electric Production means the aggregate amount of electricity produced by all of the Company's facilities during the period. The amount is gross generation and is not reduced by internal electric usage of the facilities' auxiliary equipment. The unit of measure is megawatt hours (MWh).  Due to the fixed and variable nature of customer contracts, MWh production cannot be directly tied to financial performance.

⁵Total Thermal Energy Delivered means the aggregate amount of heat energy contained in the steam and heated water delivered to customers by all of the Company's facilities during the period. The unit of measure is million of British Thermal Units (MMBTU). Due to the fixed and variable nature of customer contracts, MMBTU production cannot be directly tied to financial performance.

⁶Harbor Coal Utilization is a factor that incorporates the production level of a blast furnace and the amount of coal utilization per unit of blast furnace production as compared to a reference blast furnace production level and coal utilization rate per unit of blast furnace production. The measurement unit is a ratio expressed as a percentage.

Management believes that EBITDA, Adjusted EBITDA, Free Cash Flow, Total Gross Electric Production, Total Thermal Energy Delivered and Harbor Coal Utilization provide useful supplemental information regarding the performance of the Company, facilitate comparisons of historical periods and are indicative of the Company's operating results.  Note however, that these items are performance measures only, and do not provide any measure of the Company's cash flow or liquidity, and are not a substitute for IFRS financial measures.

Use of Non-IFRS Measures

Management believes that EBITDA, Adjusted EBITDA and Free Cash Flow are important measures in evaluating the underlying performance of the Company's business and allow for comparison of operating performance to historical results.

EBITDA
EBITDA is a non-IFRS metric used by many investors to compare companies on the basis of ability to generate cash from operations.  EBITDA represents the Company's capacity to generate income from operations before taking into account management's financing decisions and costs of consuming tangible capital assets and intangible assets which vary according to asset type and management's estimate of useful lives.  The Company also uses this calculation as a metric to evaluate cash generation as compared to the amount of dividends paid by Company.  Additionally EBITDA is a key metric used in the Company's debt covenant computations and provides insight into liquidity of the business.

Adjusted EBITDA
Adjusted EBITDA is used to assess operating performance based on results from the Company's recurring business operations without the effects of (as applicable): depreciation and amortization expense, interest expense, loss on derecognition, realized and unrealized gain or loss on derivative contracts, income tax expense as well as net change in deferred revenue and other items that are viewed as expenses based on specific circumstances and are not considered by management to reflect the underlying operating performance of the Company (major maintenance expense and non-cash stock-based compensation expense).  The Company adjusts for these factors as they may be non-cash, unusual in nature and are not factors used by management for evaluating the operating performance of the Company on a consistent basis from period to period.  The Company believes that presentation of this measure enhances an investor's understanding of the Company's operating performance on a normalized basis that allows for comparison to historical periods.  Additionally, management and its board use Adjusted EBITDA as a metric in making determinations about future business activity of the Company.  Adjusted EBITDA is not intended to be representative of cash provided by operating activities or results of operations determined in accordance with IFRS.

Free Cash Flow
Management uses Free Cash Flow to evaluate the Company's cash flow from operations after capital expenditures in order to evaluate cash available for other purposes, such as additional capital expenditures, debt repayment, common stock distributions, or other corporate purposes.

Non-IFRS Measures

The Company reports its financial results in accordance with IFRS. The Company's management also evaluates and makes operating decisions using various other measures.  Three such measures are EBITDA, Adjusted EBITDA and Free Cash Flow, which are non-IFRS financial measures. We believe these measures provide useful supplemental information regarding the performance of Company's business.

SOURCE Primary Energy Recycling Corporation

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