Primary Energy Reports Third Quarter 2012 Results

OAK BROOK, IL, Nov. 6, 2012 /PRNewswire/ - 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 three and nine months ended September 30, 2012.

Third Quarter Highlights

• Implemented a new dividend policy to pay a US$0.20 per share annual dividend, payable quarterly.  A quarterly dividend payment of US$0.05 was declared with a record date of November 15, 2012 and a payment date of November 30, 2012;
• Average availability of facility operations was strong at 99.1%; 
• Portside's boiler turn down project is substantially complete and operating as expected.  The Portside condensing economizer is on schedule and on budget;
• North Lake's upgrades are substantially complete and on budget. Performance testing and final check out of all systems is expected to be completed in the fourth quarter of 2012.
• Contract renewal discussions with the site host for Cokenergy continued. The current contract expires in October of 2013;
• Harbor Coal volumes remain below normal due to low cost natural gas.

"The announcement of our new dividend policy improved the liquidity of the Company's shares," said John Prunkl, President and Chief Executive Officer of Primary Energy. "The transition to self-management has gone smoothly, and the corporate costs are about the same as the costs experienced under the prior third party manager arrangement.  For the short term, the renewal of the Cokenergy contract remains our primary focus."

Third Quarter 2012 Financial Results

The Company's revenue of $13.7 million in the third quarter of 2012 decreased $0.1 million, or 1.1%, compared with revenue of $13.8 million for the third quarter of 2011. The North Lake facility had reduced host operations during the third quarter of 2012 compared to the third quarter of 2011 which had a negative impact on Energy Service revenue of $0.2 million. This decrease was partially offset by increased revenue at the Portside facility associated with increased operating levels at the host site.

The Company's revenue of $40.4 million in the first nine months of 2012 increased $0.5 million, or 1.4%, compared with revenue of $39.9 million for the first nine months of 2011.  Revenue increased at the North Lake and Ironside facilities as a result of increased host operations in the current year.

Operations and maintenance expense for the third quarter of 2012 was $4.4 million compared to $3.2 million for the third quarter of 2011, an increase of $1.2 million or 40%.  The Company incurred periodic costs during the third quarter of 2012 comprised of $1.2 million for boiler retubing work and $0.2 million for ductwork repairs compared to periodic costs for the third quarter of 2011 totaling $0.4 million for boiler retubing work. In addition, the Company incurred $0.2 million of additional general operations and maintenance expenses during the quarter.

Operations and maintenance expense for the first nine months of 2012 was $12.8 million compared to $10.0 million for the first nine months of 2011, an increase of $2.8 million or 27.7%.  The Company incurred periodic costs for the first nine months of 2012 comprised of $3.3 million for boiler retubing work and $0.6 million for ductwork repairs compared to periodic costs for the first nine months of 2011 totaling $1.1 million for boiler retubing work.

Equity in earnings of the Harbor Coal joint venture for the third quarter of 2012 was $0.5 million compared to $1.0 million for the third quarter of 2011, a decrease of $0.5 million.  Equity in earnings of the Harbor Coal joint venture for the first nine months of 2012 was $1.8 million compared to $3.1 million for the first nine months of 2011, a decrease of $1.3 million.  The decreases noted are the result of reduced pulverized coal deliveries in favor of natural gas injection due to its low cost.

Operating income for the third quarter of 2012 was $1.2 million compared to $3.5 million for the third quarter of 2011, a decrease of $2.3 million.  Operating loss for the first nine months of 2012 was $1.9 million compared to operating income of $5.0 million for the first nine months of 2011, a decrease of $6.9 million. The largest driver impacting year to date results was the $6.0 million fee paid to terminate the Management Agreement at time of the buy-out of the non-controlling interest.

Net loss and comprehensive loss for the third quarter of 2012 was $0.2 million compared to net income and comprehensive income of $0.4 million for the third quarter of 2011, a decrease of $0.6 million.  Net loss and comprehensive loss for the first nine months of 2012 was $5.1 million compared to $2.5 million for the first nine months of 2011, an increase of $2.6 million.

Conference Call and Webcast

Management will host a conference call to discuss the third quarter results on Wednesday, November 7, 2012 at 9:00 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 November 21, 2012 (ET) by calling (855) 859-2056 or (416) 849-0833. Please enter the passcode 38427835 when instructed. A webcast replay will be available for 90 days by accessing a link through the Investor Information 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% 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. 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, depreciation and amortization and certain other adjustments. EBITDA is reconciled to net (loss) income and comprehensive (loss) income 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, references to Adjusted EBITDA are to EBITDA as adjusted for certain non-recurring adjustments for major maintenance/outage work expenses, management agreement termination fee and non-cash stock based compensation that represent recorded expenses based on specific circumstances and are not expected to be part of the Company's ongoing business activity. Adjusted EBITDA is reconciled to net income (loss) and comprehensive income (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.

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.

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.

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 the Company's business.

SOURCE Primary Energy Recycling Corporation

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