Primary Energy Reports Third Quarter 2013 Results

OAK BROOK, IL, Oct. 29, 2013 /CNW/ - Primary Energy Recycling Corporation (TSX: PRI), a clean energy company that generates revenue from capturing and recycling recoverable heat and byproduct fuels from industrial processes, today announced its unaudited financial and operational results for the three and nine months ended September 30, 2013.

Third Quarter Review

• Portside continued to perform as expected by generating $0.5 million of additional revenue in the third quarter of 2013 compared to the third quarter of 2012;
  
  
• Reported improved operations at North Lake and Harbor Coal compared to the second quarter of 2013 due to stronger customer blast furnace availability. However, compared to the third quarter of 2012, Harbor Coal produced lower operational results;
  
  
• Completed Ironside's forced turbine outage. The turbine should be back in service by early November 2013;
  
  
• Continued to work through the re-negotiation process for the Cokenergy agreements. The Company intends to provide an update as further developments occur;
  
  
• Subsequent to quarter end, on October 29, 2013, declared a $0.05 per Common Share dividend for payment on November 29, 2013 to shareholders of record on November 15, 2013.

"We experienced improved host operations during the third quarter, which resulted in increased production when compared to the second quarter of 2013," said John Prunkl, President and Chief Executive Officer of Primary Energy. "The Company had positive contributions from Cokenergy, North Lake and Portside during the reporting period. The repair of the Ironside turbine is almost complete and it will be back in service shortly. Portside successfully completed its planned October 2013 turbine overhaul and is back in service."

Third Quarter 2013 Financial Results

The Company's revenue of $14.1 million for the third quarter of 2013 increased $0.4 million, or 2.9%, compared with revenue of $13.7 million for the third quarter of 2012. Revenue at the Portside facility increased by $0.5 million during the third quarter of 2013 due to fuel cost savings of $0.4 million generated from the condensing economizer and boiler turndown capability and $0.1 million related to increased host operating levels.  Revenue at the Ironside facility was impacted by a net decrease of $0.1 million due to an unplanned outage starting in May of 2013.

The Company's revenue of $42.3 million for the first nine months of 2013 increased $1.9 million, or 4.6%, compared with revenue of $40.4 million for the first nine months of 2012.  Revenue at the Portside facility increased by $1.8 million during 2013 primarily due to fuel cost savings of $1.6 million generated from the condensing economizer and boiler turndown capability and $0.2 million related to increased host operating levels.  Revenue at the North Lake facility increased by $0.5 million primarily due to being fully operational for the first nine months in 2013 compared to only eight months of operation in 2012.  Revenue at the Ironside facility was impacted by a net decrease of $0.3 million due to an unplanned outage starting in May of 2013 and a decrease of $0.1 million due to reduced host operating levels.

Operations and maintenance expense for the third quarter of 2013 was $5.1 million compared to $4.4 million for the third quarter of 2012, an increase of $0.7 million or 14.9%. Operations and maintenance expense for the first nine months of 2013 was $14.6 million compared to $12.8 million for the first nine months of 2012, an increase of $1.8 million or 14.1%. The Company incurred periodic costs for the first nine months of 2013 comprised of $4.7 million for boiler retubing work, $0.6 million for an emergency boiler repair and $0.1 million for ductwork repairs compared to periodic costs for the first nine months of 2012 of $3.3 million for boiler retubing work and $0.6 million for ductwork repairs.

General and administrative expense totaled $2.1 million for the third quarter of 2013 and was flat when compared to the third quarter of 2012. General and administrative expense for the first nine months of 2013 was $6.0 million compared to $6.7 million for the first nine months of 2012, a decrease of $0.7 million or 9.9%. The Company did not incur management fees for the first nine months of 2013 resulting in a net cost savings totaling $1.1 million when compared to the same period in 2012.  In addition, the Company had reduced professional fees of $0.1 million compared to the prior nine month period offset by increased plant and liability insurance expenses of $0.2 million, IT expenses of $0.1 million, other general and administrative expenses of $0.1 million and accrued property taxes of $0.1 million.

Employee benefits expense for the third quarter of 2013 was $1.9 million compared to $1.2 million for the third quarter of 2012, an increase of $0.7 million. The increase is due to an additional payroll cost of $0.2 million, $0.1 million related to dividends paid on stock options and $0.4 million of stock based compensation inclusive of a one-time board compensation award.  Employee benefits expense for the first nine months of 2013 was $5.0 million compared to $2.7 million for the first nine months of 2012, an increase of $2.3 million. The increase is due to additional compensation cost of $1.1 million primarily associated with transferred employees hired by the Company upon termination of the Management Agreement, $0.4 million related to dividends paid on stock options, $0.4 million of cost recovery provided to the Company under the Management Agreement in the first nine months of 2012 that did not recur in the first nine months of 2013 and $0.4 million of stock based compensation inclusive of a one-time board compensation award.  Prior to June 1, 2012, the transferred employees were employees of the Company's former manager who previously provided operational and administrative services to the Company under the Management Agreement.  For the first nine months of 2012, management fees incurred by the Company of $1.1 million were recorded as general and administrative expenses.

On a combined basis, general and administrative expense and employee benefits expense for the third quarter of 2013 was $4.0 million compared to $3.3 million for the third quarter of 2012, an increase of $0.7 million.  The increase in expenses is comprised of $0.4 million of stock based compensation inclusive of a one-time board compensation award, $0.2 million of payroll cost related to new employees, $0.2 million of consulting fees and 0.1 million related to dividends paid on stock options.  The increase in expenses was offset by reduced professional fees of $0.1 million and other general and administrative expenses of $0.1 million.

On a combined basis, general and administrative expense and employee benefits expense for the first nine months of 2013 was $11.0 million compared to $9.4 million for the first nine months of 2012, an increase of $1.6 million.  The increase in expenses is comprised of $0.4 million related to dividends paid on stock options, $0.4 million of stock based compensation inclusive of a one-time board compensation award, $0.2 million of plant compensation expense, $0.2 million of corporate compensation expense, $0.2 million of plant and liability insurance, $0.1 million of IT expenses, $0.1 million of other general and administrative expenses and $0.1 million of accrued property taxes. The increase in expenses was offset by reduced professional fees of $0.1 million. 

Equity in earnings of the Harbor Coal joint venture for the third quarter of 2013 was $0.2 million compared to $0.5 million for the third quarter of 2012, a decrease of $0.3 million.  Equity in earnings of the Harbor Coal joint venture for the first nine months of 2013 was $0.7 million compared to $1.8 million for the first nine months of 2012, a decrease of $1.1 million.  The decrease is the result of reduced revenue based on increased natural gas injection and reductions to coal through-put for the current year as well as reduced blast furnace operation that began in the second quarter of 2013.

Operating loss for the third quarter of 2013 was $0.1 million compared to operating income of $1.2 million for the third quarter of 2012, a decrease of $1.3 million. The decrease was the result of the net effect of the items discussed above.

Operating income for the first nine months of 2013 was $1.1 million compared to an operating loss of $1.9 million for the first nine months of 2012, an increase of $3.0 million. The increase was the result of the net effect of the items discussed above.

Net loss and comprehensive loss for the third quarter of 2013 was $0.7 million compared to $0.2 million for the third quarter of 2012, an increase of $0.5 million. The increase was the result of the net effect of the items discussed above.

Net loss and comprehensive loss for the first nine months of 2013 was $1.7 million compared to $5.1 million for the first nine months of 2012, a decrease of $3.4 million. The decrease was the result of the net effect of the items discussed above.

Conference Call and Webcast

Management will host a conference call to discuss the third quarter results on Wednesday, October 30, 2013 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 November 13, 2013 (ET) by calling (855) 859-2056 or (416) 849-0833. Please enter the password 71653061 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 and the acquisition of the minority interest in PERH and the termination of Primary Energy's management agreement. 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

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 Company's business.

SOURCE Primary Energy Recycling Corporation