Primary Energy Reports First Quarter Results
OAK BROOK, IL, May 10 /PRNewswire-FirstCall/ - Primary Energy Recycling Corporation (the "Company" or "Primary Energy") (TSX: PRI), a clean energy company that generates revenue from capturing and recycling recoverable heat and byproduct fuels from industrial processes, today announced its financial and operational results for the first quarter ended March 31, 2011.
Financial Highlights
| (in 000's of US$) | Q1 2011 | Q1 2010 | Change |
| Revenue | $12,782 | $13,260 | (3.6)% |
| Operations and maintenance expense | $ 2,743 | $ 2,057 | 33.3% |
| Operating income | $ 601 | $ 1,582 | (62.0)% |
| Net loss and comprehensive loss | $(2,258) | $ (1,688) | (33.8)% |
| 1EBITDA | $ 9,168 | $10,157 | (9.7)% |
| Net cash provided by operating activities | $ 9,707 | $ 9,363 | 3.7% |
| 2Free Cash Flow | $ 9,113 | $ 9,363 | (2.7)% |
| Cash & cash equivalents | $24,585 | $22,878 | 7.5% |
| Credit facility debt | $64,135 | $94,838 | (32.4)% |
First Quarter Highlights
- The financials for the quarter ended March 31, 2011 are reported in accordance with IFRS. The most noticeable impact is that revenue is decreased by $2.1 million in both Q1 2011 and 2010 because Harbor Coal is now reported using the equity method rather than proportional consolidation;
- Completed the Phase I North Lake upgrade on schedule. The outage duration was 30 days and the new third and fourth rows of low pressure turbine blading were installed as part of the 90MW upgrade, and to replace the row damaged in July, 2010. The generator and cooling tower received extensive cleaning and other extra work was performed to ensure the Phase II upgrade's success. The performance of the unit post-outage returned to near like-new levels;
- Paid down 10.1% of its secured term loan to a balance of $64.1 million, down from the $71.4 million remaining at December 31, 2010;
- Subsequent to quarter end, announced that it finalized a long-term 30+ year contract for energy services with the host for Primary Energy's North Lake Energy facility. The host mill will supply North Lake with steam produced from waste blast furnace gas, including steam from the host's new $63.2 million boiler, which is currently under construction. North Lake is required to increase its plant capacity by 20% to 90 MW in a two phase project estimated to cost $10 to $12 million;
- Subsequent to the end of the quarter, the Company announced a 3 to 1 common share consolidation that will reduce the number of outstanding common shares from 134.1 million to approximately 44.7 million. The indirect percentage interest in Primary Energy Recycling Holdings LLC held by Capital Power Income L.P. remains unchanged at 14.3%, which is effectively equivalent to approximately 7.5 million post-consolidation common shares of the Company;
- The second blast furnace supplying fuel to the Ironside facility was restarted at the end of March, 2011 after an extended shut down. Increased electric production is expected.
"Management's top priority is to effectively move key customer agreements forward," said John Prunkl, President and Chief Executive Officer of Primary Energy Recycling. "We achieved that in the renewed North Lake deal subsequent to quarter end. While the agreement caused year-over-year quarterly numbers to be down primarily as a result of the required North Lake outage for Phase 1 of the upgrade, the long-term North Lake agreement provides a strong foundation for Primary Energy to continue pursuing extensions for its other two contracts. With the new agreement in place, we intend to continue building our energy recycling franchise, which should help solidify our emerging leadership position in the North American cleantech sector."
Operational Highlights
| Q1 2011 | Q1 2010 | Change | |
| 3Total Gross Electric Production Megawatt Hours (MWh) | 247,606 | 255,730 | (3.2)% |
| 4Total Thermal Energy Delivered (MMBtu) | 1,431,963 | 1,699,799 | (15.8)% |
| 5Harbor Coal Utilization (%) | 90.2% | 83.9% | 6.3% |
Total Gross Electric Production was impacted from the loss of North Lake production during the March Phase I upgrade outage. Thermal Energy deliveries were lower as a result of a larger portion of mill steam being provided by the host during the North Lake outage which displaced Cokenergy's thermal delivery. Harbor Coal utilization percentage results were the highest in over three years.
International Financial Reporting Standards ("IFRS) Impact
The three months ended March 31, 2011 was the Company's first reporting period under IFRS. As anticipated and disclosed in the fourth quarter of 2010, the adoption of IFRS had an impact on the presentation of the Company's 2011 first quarter financial results. From an income standpoint, the Company now has a higher amount of depreciation as a result of the componentization of the major aspects of property plant and equipment along with the capitalization of overhaul activity that previously had been expensed as part of operations and maintenance expenses.
Additionally, the reporting of the financial activity of the Company's investment in the PCI partnership is impacted due to the use of the equity method versus the proportionate consolidation method.
Additional IFRS information can be found in Primary Energy's full financial statements and Management's Discussion and Analysis for the quarter ended March 31, 2011.
First Quarter Financial Results
The Company reported revenue of $12.8 million in the first quarter of 2011, a decrease of $0.5 million, or 3.6%, compared with revenue of $13.3 million for the first quarter of 2010. The decrease is related to the variable portion of energy service revenue attributable primarily to the North Lake outage.
Operating and maintenance expense for the first quarter of 2011 was $2.7 million compared to $2.1 million for the first quarter of 2010, an increase of $0.6 million or 33.3%. The increase was primarily due to additional expenses of $0.6 million associated with boiler repairs, cooling tower system work, environmental control system repairs and general maintenance and labor.
Equity in earnings of joint venture for the first quarter of 2011 was $1.0 million compared to $0.8 million in 2010, an increase of $0.2 million. The increase was the result of a reduction in expenses of $0.2 million in the current year from the Company's investment in PCI Associates.
Operating income for the first quarter of 2011 was $0.6 million compared to $1.6 million for the first quarter of 2010, a decrease of $1.0 million.
Interest expense for the first quarter of 2011 was $1.8 million compared to $2.8 million for the first quarter of 2010, a decrease of $1.0 million. This decrease is primarily due to the reduced level of debt outstanding partially offset by increased amortization of deferred finance fees during the first quarter of 2011.
Net loss and comprehensive loss for the first quarter of 2011 was $2.3 million compared to $1.7 million for the first quarter of 2010, an increase of $0.6 million.
The Company's full financial statements and Management's Discussion and Analysis for the quarter ended March 31, 2011 are available at www.sedar.com or the Company's website at www.primaryenergy.com.
Conference Call and Webcast
Management will host a conference call to discuss the first quarter results on Wednesday, May 11, 2011, at 10 am ET. Following management's presentation, there will be a question and answer session. To participate in the conference call, please dial (888) 231-8191 or (647) 427-7450.
A digital conference call replay will be available until midnight on May 18, 2011 (ET) by calling (800) 642-1687 or (416) 849-0833. Please enter the pass code 57978633 when instructed.
A webcast replay will be available for 90 days by accessing a link through the Investor Information section at www.primaryenergy.com.
Forward-Looking Statements
When used in this news release, the words "anticipate", "expect", "project", "believe", "estimate", "forecast", "outlook" 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 recovery in the steel industry, continued strong performance from the mills we serve consistent with historic patterns, timely renewal of contracts at the Company's facilities, no protracted outages (planned or unplanned) for any of our facilities (except as described in this press release), 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 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 50 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 1.8M lbs/hour. PERH creates value for its customers by recycling recoverable heat and byproduct fuels 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.primaryenergyrecycling.com.
1As used herein, EBITDA means earnings before interest, taxes, depreciation and amortization and certain other adjustments as noted in the table below. 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.
2As used herein, Free Cash Flow means net cash provided by operating activities as adjusted for capital expenditures. These amounts are derived from those reflected in the consolidated statements of cash flows in the Company's publicly filed unaudited interim consolidated financial statements. 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.
3 Total 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.
4 Total 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.
5 Harbor 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, 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 historic 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.
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. Two such measures are 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.
| Reconciliation of Net Loss and Comprehensive Loss to EBITDA | ||||||||
| (in 000's of US$) | Three Months Ended March 31, | |||||||
| 2011 | 2010 | |||||||
| Net loss and comprehensive loss | $ (2,258) | $ (1,688) | ||||||
| Adjustment to net loss and comprehensive loss: | ||||||||
| Depreciation and amortization | 7,558 | 7,566 | ||||||
| Depreciation and amortization included in equity in earnings of joint venture | 1,009 | 1,009 | ||||||
| Interest expense | 1,843 | 2,808 | ||||||
| Realized and unrealized loss on derivative contracts | 4 | 147 | ||||||
| Loss on derecognition | 500 | - | ||||||
| Income tax expense | 512 | 315 | ||||||
| EBITDA | $ 9,168 | $ 10,157 | ||||||
| Reconciliation of Net Cash Provided By Operating Activities to Free Cash Flow | ||||||||
| (in 000's of US$) | Three Months Ended March 31, | |||||||
| 2011 | 2010 | |||||||
| Net cash provided by operating activities | $ 9,707 | $ 9,363 | ||||||
| Less: capital expenditures | (594) | - | ||||||
| Free Cash Flow | $ 9,113 | $ 9,363 | ||||||
| Primary Energy Recycling Corporation | ||||||||||||
| CONSOLIDATED STATEMENTS OF FINANCIAL POSITION | ||||||||||||
| (In thousands of U.S. dollars) | ||||||||||||
| (Unaudited) | ||||||||||||
| ASSETS | March 31, 2011 | December 31, 2010 | January 1, 2010 | |||||||||
| Current assets: | ||||||||||||
| Cash and cash equivalents | $ 24,585 | $ 22,405 | $ 24,290 | |||||||||
| Accounts receivable | 6,924 | 7,836 | 7,604 | |||||||||
| Inventory, net | 1,000 | 1,005 | 991 | |||||||||
| Other current assets | 1,492 | 1,243 | 833 | |||||||||
| Total current assets | 34,001 | 32,489 | 33,718 | |||||||||
| Non-current assets: | ||||||||||||
| Property, plant and equipment, net | 179,738 | 180,503 | 188,286 | |||||||||
| Intangible assets, net | 34,737 | 40,166 | 61,881 | |||||||||
| Restricted cash | 2,693 | 2,991 | 3,729 | |||||||||
| Deferred tax asset, net | 4,432 | 4,941 | - | |||||||||
| Investment in joint venture | 66,197 | 66,721 | 71,329 | |||||||||
| Other non-current assets | 1 | 4 | 220 | |||||||||
| Total assets | $ 321,799 | $ 327,815 | $ 359,163 | |||||||||
| LIABILITIES AND EQUITY | ||||||||||||
| Current liabilities: | ||||||||||||
| Accounts payable | $ 867 | $ 361 | $ 253 | |||||||||
| Short-term debt | 32,476 | 30,343 | 24,451 | |||||||||
| Due to affiliates | 624 | 639 | 478 | |||||||||
| Accrued property taxes | 2,615 | 1,965 | 2,356 | |||||||||
| Accrued expenses | 3,757 | 2,068 | 2,232 | |||||||||
| Total current liabilities | 40,339 | 35,376 | 29,770 | |||||||||
| Non-current liabilities: | ||||||||||||
| Long-term debt | 29,028 | 37,796 | 73,777 | |||||||||
| Deferred income tax liability, net | - | - | 13,507 | |||||||||
| Asset retirement obligations | 2,651 | 2,604 | 2,426 | |||||||||
| Total liabilities | 72,018 | 75,776 | 119,480 | |||||||||
| Equity | ||||||||||||
| Equity attributable to equity owners of the company | ||||||||||||
| Common stock: no par value, unlimited shares authorized; | ||||||||||||
| 134,118,561 issued and outstanding at March 31, 2011, December 31, 2010 and January 1, 2010 |
274,479 | 274,479 | 274,479 | |||||||||
| Contributed surplus | 3,316 | 3,316 | - | |||||||||
| Accumulated shareholders' deficit | (109,065) | (107,784) | (120,656) | |||||||||
| 168,730 | 170,011 | 153,823 | ||||||||||
| Non-controlling interest | 81,051 | 82,028 | 85,860 | |||||||||
| Total equity | 249,781 | 252,039 | 239,683 | |||||||||
| Total liabilities and equity | $ 321,799 | $ 327,815 | $ 359,163 | |||||||||
| Primary Energy Recycling Corporation | ||||||||
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME | ||||||||
| (In thousands of U.S. dollars, except share and per share amounts) | ||||||||
| (Unaudited) | ||||||||
| Three Months Ended March 31, | ||||||||
| 2011 | 2010 | |||||||
| Revenue: | ||||||||
| Capacity | $ 9,018 | $ 9,018 | ||||||
| Energy service | 3,764 | 4,242 | ||||||
| 12,782 | 13,260 | |||||||
| Expenses: | ||||||||
| Operations and maintenance | 2,743 | 2,057 | ||||||
| General and administrative | 2,331 | 2,324 | ||||||
| Employee benefits | 560 | 566 | ||||||
| Depreciation and amortization | 7,558 | 7,566 | ||||||
| Total operating expenses | 13,192 | 12,513 | ||||||
| Equity in earnings of joint venture | 1,011 | 835 | ||||||
| Operating income | 601 | 1,582 | ||||||
| Other (expense) income | ||||||||
| Interest expense | (1,843) | (2,808) | ||||||
| Realized and unrealized loss on derivative contracts | (4) | (147) | ||||||
| Loss on derecognition | (500) | - | ||||||
| Loss before income taxes | (1,746) | (1,373) | ||||||
| Income tax expense | (512) | (315) | ||||||
| Net loss and comprehensive loss | $ (2,258) | $ (1,688) | ||||||
| Net loss and comprehensive loss attributable to: | ||||||||
| Owners of the Company | $ (1,281) | $ (770) | ||||||
| Non-controlling interest | (977) | (918) | ||||||
| $ (2,258) | $ (1,688) | |||||||
| Net loss and comprehensive loss per share attributable to owners of the company: |
||||||||
| Weighted average number of shares outstanding - basic and diluted | 134,118,561 | 134,118,561 | ||||||
| Basic and diluted net loss per share | $ (0.01) | $ (0.01) | ||||||
| Primary Energy Recycling Corporation | ||||||
| CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY | ||||||
| (In thousands of U.S. dollars) | ||||||
| (Unaudited) | ||||||
| Attributable to equity owners of the company | ||||||
| |
Common stock |
Contributed surplus |
Accumulated deficit |
Total |
Non-controlling interest |
Total equity |
| Balance - January 1, 2010 | $ 274,479 | $ - | $ (120,656) | $ 153,823 | $ 85,860 | $ 239,683 |
| Net loss and comprehensive loss for the three months ended March 31, 2010 |
- |
- |
(770) |
(770) |
(918) |
(1,688) |
| Balance - March 31, 2010 | $ 274,479 | $ - | $ (121,426) | $ 153,053 | $ 84,942 | $ 237,995 |
| Balance - January 1, 2011 | $ 274,479 | $ 3,316 | $ (107,784) | $ 170,011 | $ 82,028 | $ 252,039 |
| Net loss and comprehensive loss for the three months ended March 31, 2011 |
- |
- |
(1,281) |
(1,281) |
(977) |
(2,258) |
| Balance - March 31, 2011 | $ 274,479 | $ 3,316 | $ (109,065) | $ 168,730 | $ 81,051 | $ 249,781 |
| Primary Energy Recycling Corporation | ||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||
| (In thousands of U.S. dollars) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended March 31, | ||||||||||
| 2011 | 2010 | |||||||||
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||||
| Net loss and comprehensive loss for the period | $ (2,258) | $ (1,688) | ||||||||
| Adjustments for: | ||||||||||
| Depreciation and amortization | 7,558 | 7,566 | ||||||||
| Loss on derecognition | 500 | - | ||||||||
| Realized and unrealized loss on derivative contracts | 4 | 147 | ||||||||
| Equity in (earnings) of joint venture | (1,011) | (835) | ||||||||
| Non-cash interest expense | 690 | 1,108 | ||||||||
| Income tax expense | 512 | 315 | ||||||||
| Distributions from investment in joint venture | 1,535 | 2,071 | ||||||||
| 7,530 | 8,684 | |||||||||
| Net change in non-cash working capital balances | 2,177 | 679 | ||||||||
| Net cash provided by operating activities | 9,707 | 9,363 | ||||||||
| CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||||
| Change in restricted cash | 298 | - | ||||||||
| Capital expenditures | (594) | - | ||||||||
| Net cash used in investing activities | (296) | - | ||||||||
| CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||||
| Payments of deferred financing costs | - | (319) | ||||||||
| Payments for stock issuance costs associated with the Rights Offering | - | (285) | ||||||||
| Payments of fees associated with the Recapitalization | - | (9) | ||||||||
| Repayment of debt | (7,231) | (10,162) | ||||||||
| Net cash used in financing activities | (7,231) | (10,775) | ||||||||
| Net increase (decrease) in cash | 2,180 | (1,412) | ||||||||
| Cash and cash equivalents - beginning of period | 22,405 | 24,290 | ||||||||
| Cash and cash equivalents - end of period | $ 24,585 | $ 22,878 | ||||||||
| Supplemental disclosure of cash flow information: | ||||||||||
| Cash paid during the period for interest | $ 1,160 | $ 1,706 | ||||||||
SOURCE Primary Energy Recycling Corporation
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