Fort Chicago announces 2010 second quarter results and updated 2010 guidance

/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./

    
    Trading Symbol: FCE.UN
    Exchange: TSX
    

CALGARY, July 28 /CNW/ - Fort Chicago Energy Partners L.P. ("Fort Chicago" or "the Partnership") today announced its results for the three months ended June 30, 2010. Mr. Stephen H. White, President and Chief Executive Officer commented, "Our businesses delivered strong results from operations this quarter and this is reflected in our second quarter distributable cash. We are very pleased that Aux Sable has continued to benefit from favourable NGL market conditions, recognizing $22.1 million in margin-based lease revenues. An additional $8.0 million of margin-based lease revenues remains to be recognized in the remainder of this year. Our pipeline business continued to meet expectations, as did our power business, which generated improved operating income this quarter."

"These solid operating results are not as apparent in our second quarter net income when compared to the same period last year, primarily due to currency translation losses arising from our United States-based activities."

"We have also made recent announcements regarding several strategic initiatives. Our agreement to acquire Swift Power Corp. is an important step towards growing our renewable energy portfolio and provides us with additional expertise in this field. In July, we successfully issued $86.25 million of convertible debentures through a public offering, strengthening our overall capitalization. The majority of the proceeds from this offering were used to repay amounts drawn on our credit facilities. And we are very pleased that Aux Sable Canada has entered into a new supply agreement for its Heartland Off-gas Facility. This arrangement will contribute to our earnings and cash flows beginning in the latter part of 2011."

Highlights for the Three Months ended June 30, 2010

    
    -   Net income and adjusted net income of $18.4 million or $0.13 per Unit
    -   Distributable cash of $49.3 million or $0.34 per Unit
    -   Cash from operating activities of $41.1 million
    -   Aux Sable recognized $22.1 million of margin-based lease revenues;
        additional $8.0 million unrecognized as at June 30, 2010
    -   Agreement to acquire Swift Power Corp. announced in June
    -   $86.25 million convertible debenture offering completed in July
    -   New supply agreement for Heartland Off-gas Facility announced in July


    Financial Highlights
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands, except per
     Unit amounts)                  2010        2009        2010        2009
    -------------------------------------------------------------------------
    Revenues
    Pipeline(1)                  100,585     104,109     200,983     209,857
    NGL                           45,098      28,156      82,729      49,697
    Power                         22,203      16,903      44,151      39,842
    Fort Chicago - Corporate          79         122          79         698
    -------------------------------------------------------------------------
                                 167,965     149,290     327,942     300,094
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Net income (loss) before tax
    Pipeline                      24,584      26,065      49,163      54,026
    NGL                           20,944       5,889      30,334       3,349
    Power                         (3,180)     (2,213)     (1,800)     (4,199)
    Fort Chicago - Corporate     (17,329)     (7,919)    (34,557)    (19,325)
    -------------------------------------------------------------------------
                                  25,019      21,822      43,140      33,851
    Tax expense                   (6,600)     (1,863)    (10,647)     (2,588)
    -------------------------------------------------------------------------
    Net income                    18,419      19,959      32,493      31,263
      Per Unit ($)                  0.13        0.15        0.23        0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Adjustments to net income
     for non-recurring (gains)
     losses (net of tax)
      Power - Fair value loss
       reclassified from other
       comprehensive income            -           -           -       2,288
    -------------------------------------------------------------------------
    Adjusted net income(2)        18,419      19,959      32,493      33,551
      Per Unit ($)                  0.13        0.15        0.23        0.25
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) Net of intersegment eliminations.
    (2) This item is not a standard measure under GAAP and may not be
        comparable to similar measures presented by other entities. See
        reconciliation of adjusted net income to net income in the schedules
        attached to this news release. For more information about non-GAAP
        measures used by Fort Chicago, see the section entitled "Non-GAAP
        Financial Measures" contained in Fort Chicago's June 30, 2010
        Management's Discussion and Analysis.
    

For the three months ended June 30, 2010, Fort Chicago generated net income of $18.4 million or $0.13 per Unit compared to $20.0 million or $0.15 per Unit for the same period in 2009. The decrease primarily results from higher non-cash foreign exchange losses and a mark-to-market loss related to Fort Chicago Power's exchangeable debentures. In aggregate, the effect of foreign exchange and the mark-to-market exchangeable debenture loss resulted in a $10.2 million or $0.07 per Unit reduction in second quarter net income when compared to net income for the same period last year.

Aux Sable's earnings for the three months ended June 30, 2010 increased significantly compared to the same period last year. As a result of continued favourable NGL market conditions, Aux Sable recognized $22.1 million of margin-based lease revenues this quarter and deferred the recognition of an additional $8.0 million in margin-based lease revenues. This reflects a substantial improvement from the same period last year when Aux Sable recognized $6.8 million of margin-based lease revenues.

Earnings from the Partnership's power business, excluding the mark-to-market loss recorded in relation to Fort Chicago Power's exchangeable debentures, increased compared to the same period last year. This increase is due primarily to a contribution from the East Windsor cogeneration facility, which commenced operations in November 2009, and higher earnings from the Brush generation facility.

Earnings from the Partnership's pipeline businesses, Alliance and AEGS, were relatively consistent with the same period last year, although Alliance's U.S.-generated earnings were impacted by the effect of the stronger Canadian dollar.

The Partnership incurred higher corporate costs during the second quarter of 2010, reflecting increased interest costs related to the Partnership's July 2009 issuance of senior notes and foreign exchange losses. Corporate costs for the same period last year included foreign exchange gains. Taxes increased in the second quarter of 2010 compared to the same period last year due to higher Aux Sable earnings.

    
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands, except per
     Unit amounts)                  2010        2009        2010        2009
    -------------------------------------------------------------------------
    Distributable cash(1)
      Pipeline                    33,881      33,835      67,842      68,468
      NGL                         23,583       6,357      34,370       5,582
      Power                        2,669       4,767       4,451       9,829
      Fort Chicago - Corporate    (9,971)     (3,688)    (19,331)    (11,560)
      Taxes                         (886)     (2,652)     (6,347)     (2,690)
    -------------------------------------------------------------------------
                                  49,276      38,619      80,985      69,629
    -------------------------------------------------------------------------

        Per Unit ($)                0.34        0.29        0.57        0.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Cash from operating
     activities                   41,062      33,227     107,329      77,607
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    (1) This item is not a standard measure under GAAP and may not be
        comparable to similar measures presented by other entities. See
        reconciliation of distributable cash to cash from operating
        activities in the schedules attached to this news release. For more
        information about non-GAAP measures used by Fort Chicago, see the
        section entitled "Non-GAAP Financial Measures" contained in Fort
        Chicago's June 30, 2010 Management's Discussion and Analysis.
    

Distributable cash for the three months ended June 30, 2010 was $49.3 million or $0.34 per Unit, compared to $38.6 million or $0.29 per Unit for the same period in 2009, reflecting:

    
    -   consistent distributions from Alliance as higher income tax
        recoveries were offset by the effect of the stronger Canadian dollar
        and reduced return on investment base;
    -   comparable distributable cash from AEGS;
    -   higher distributions from Aux Sable, reflecting more favourable NGL
        market conditions;
    -   lower distributable cash from Fort Chicago Power, reflecting higher
        maintenance capital expenditures at the California cogeneration
        facilities and the effect of the stronger Canadian dollar, partially
        offset by higher capacity payments from the Brush facility and
        incremental cash flows from Glen Park;
    -   the absence of a foreign exchange gain realized in the second quarter
        of 2009;
    -   increased corporate interest costs, due primarily to the senior notes
        issued in July 2009; and
    -   lower current taxes, as the effect of increased Aux Sable earnings
        was mitigated as a result of loss utilization made available through
        corporate restructuring.
    

In aggregate, the effect of the stronger Canadian dollar resulted in a $2.2 million or $0.02 per Unit reduction in distributable cash for the three months ended June 30, 2010 when compared to distributable cash for the same period last year.

Fort Chicago generated cash from operating activities of $41.1 million for the three months ended June 30, 2010, a $7.9 million increase from the same period last year, due primarily to increased operating cash flows from Aux Sable.

Operating Highlights

During the three months ended June 30, 2010, the Alliance pipeline continued to operate in a reliable manner, fully meeting its contracted 1.325 billion cubic feet per day of firm-service shipping capacity. Actual transportation deliveries averaged 1.582 bcf/d, approximating volumes delivered during the same period last year.

AEGS second quarter toll volumes of 283.1 thousand barrels per day increased slightly relative to 273.4 mbbls/d in the same period last year due to higher deliveries to Fort Saskatchewan.

During the three months ended June 30, 2010, Aux Sable processed 96 percent (2009 - 99 percent) of the natural gas delivered by Alliance. Modifications were successfully made to Aux Sable's Channahon Facility in the second quarter of this year to increase ethane recoveries. Aux Sable sold 74.6 mbbls/d of natural gas liquids during the second quarter of 2010, up from 70.8 mbbls/d for the same period in 2009. Average ethane volumes increased to 39.4 mbbls/d in the second quarter of 2010 from 36.4 mbbls/d in the second quarter of 2009 due to higher ethane recoveries. Propane plus volumes for the quarter increased to 35.2 mbbls/d from 34.4 mbbls/d in the second quarter of 2009.

Fort Chicago Power generated 97,308 megawatt hours of electricity, down from 112,525 MWh during the same period last year, primarily reflecting reduced dispatch at the California cogeneration facilities. Under the new Short Run Avoided Cost energy reimbursement formula, it is less economic to dispatch these facilities during non-peak periods. The decrease in electricity generated also reflects lower dispatch at the Brush facility. These decreases were partially offset by incremental electricity generated by Glen Park. As the earnings of most of Fort Chicago Power's facilities are comprised of fixed capacity payments, their earnings and cash flows are not significantly influenced by the volume of electricity generated.

NRGreen generated 34,731 MWh of electricity during the second quarter, approximating volumes generated during the same period last year. East Windsor Cogeneration, which commenced operations in November 2009, generated 52,810 MWh of electricity during the second quarter.

Agreement to Acquire Swift Power Corp.

On June 22, Fort Chicago announced that it had entered into an agreement with Swift Power Corp. ("Swift Power") pursuant to which Fort Chicago agreed to make an offer to acquire all of the issued and outstanding common shares (the "Swift Shares") of Swift Power by way of a take-over bid. The aggregate transaction value, not including the Swift Shares owned by Fort Chicago, is approximately $8.47 million. The offer is scheduled to close on August 9, 2010.

In April of this year, Swift Power was awarded a long-term Electricity Purchase Agreement by BC Hydro for the Dasque Cluster hydroelectric project, a 20 megawatt project located near Terrace, B.C. The Dasque Cluster project is planned to be in operation by late 2012, pending receipt of necessary regulatory approvals.

July 2010 Convertible Debenture Offering

On July 19, Fort Chicago issued through a public offering $75 million of 5.75 percent convertible unsecured subordinated debentures, Series C (the "Series C Debentures") at a price of $1,000 per Series C Debenture. The Series C Debentures, which mature on July 31, 2017, are convertible, at the option of the holder, at any time into fully paid Class A limited partnership units of Fort Chicago ("Class A Units") at a conversion price of $14.60 per Class A Unit. The Partnership used the net proceeds of approximately $71.5 million to repay amounts borrowed under its credit facilities.

On July 22, the underwriters exercised the over-allotment option in full and purchased an additional $11.25 million principal amount of Series C Debentures. The Partnership intends to use the net proceeds of approximately $10.8 million to repay amounts borrowed under its credit facilities, to finance its ongoing acquisition and development activities and for general corporate purposes.

New Supply Agreement for Aux Sable Canada's Heartland Off-gas Facility

On July 6, Aux Sable Canada announced the execution of a long-term off-gas processing agreement with Shell Canada Products, securing a new feedstock source for Aux Sable Canada's Heartland Off-gas Facility. Under the agreement, the Heartland Off-gas Facility will process up to 20 million cubic feet per day of off-gas and produce hydrogen, ethane and a propane-plus mix, which will be delivered via pipeline to Shell's Scotford Refinery. Fort Chicago expects the Heartland Off-gas Facility to be operational in the summer of 2011.

Updated 2010 Guidance

Fort Chicago today updated its guidance for 2010 distributable cash to be in the range of $1.00 per Unit to $1.30 per Unit, compared to previously issued guidance of $0.95 per Unit to $1.40 per Unit. The updated range reflects Aux Sable's strong year-to-date performance and the Partnership's updated outlook for NGL market conditions. Further details concerning 2010 guidance can be found in the "Investor Information" section of Fort Chicago's website - www.fortchicago.com.

Conference Call

Fort Chicago Energy Partners L.P. will hold a conference call at 8:00 a.m. Mountain time (10:00 a.m. Eastern time) on Thursday, July 29, 2010 to discuss the 2010 second quarter results. The call can be accessed at 1-888-231-8191 or 1-647-427-7450 (conference ID 80979020 followed by the pound sign).

A replay will be available shortly thereafter at 1-800-642-1687 and 1- 416-849-0833. The access code is 80979020 (followed by the pound sign).

Fort Chicago is a publicly traded limited partnership based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Its Class A Units are listed on the TSX under the symbol FCE.UN and its 6.75% convertible unsecured subordinated debentures, Series B and the Series C Debentures are listed on the TSX under the symbols FCE.DB.B and FCE.DB.C, respectively. Fort Chicago is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; an NGL extraction business which includes an interest in a world-class extraction facility near Chicago; and a power business with power facilities in Ontario, New York, Colorado and California, district energy systems in Ontario and Prince Edward Island, and waste heat power facilities along the Alliance Pipeline. Fort Chicago and each of its pipeline, NGL extraction and power businesses are also actively developing a number of greenfield investment opportunities that will be a key source of future growth. In the normal course of its business, Fort Chicago and each of its businesses regularly evaluate and pursue acquisition and development opportunities.

    
                     Class A Unit Ownership Restrictions
    

Fort Chicago is organized in accordance with the terms and conditions of a limited partnership agreement which provides that no Class A Units may be transferred to, among other things, a person who is a "non-resident" of Canada, a person in which an interest would be a "tax shelter investment" or a partnership which is not a "Canadian partnership" for purposes of the Income Tax Act (Canada).

Certain information contained herein relating to, but not limited to, Fort Chicago and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Fort Chicago expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to: the ability of Aux Sable to recognize margin-based lease revenues over the balance of the year; the timing of in-service of Swift Power's Dasque Cluster hydroelectric project; the timing of in-service of Aux Sable Canada's Heartland Off-gas Facility and its ability to generate earnings and cash flows; and the ability of each of its businesses to generate distributable cash in 2010. The risks and uncertainties that may affect the operations, performance, development and results of Fort Chicago's businesses include, but are not limited to, the following factors: the ability of Fort Chicago to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Fort Chicago's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, NGL and power industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect Fort Chicago's operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time. Although Fort Chicago believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material. Fort Chicago makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Fort Chicago does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.

Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in Canada and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in Canada. For further information on non-GAAP financial measures used by Fort Chicago see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Fort Chicago with Canadian securities regulators.

    
    Fort Chicago Energy Partners L.P.
    -------------------------------------------------------------------------
    Consolidated Statement of Financial Position
    -------------------------------------------------------------------------
                                                         June 30,   December
    ($ Thousands; unaudited)                                2010    31, 2009
    -------------------------------------------------------------------------

    Assets
    Current assets
      Cash and short-term investments                     48,156      57,945
      Restricted cash                                      1,313       3,084
      Transportation security deposits and revenue
       adjustments                                         7,465       8,538
      Receivables                                         66,648      59,155
      Inventory                                            4,545       5,071
      Prepaid expenses and other                           5,651       9,848
    -------------------------------------------------------------------------
                                                         133,778     143,641

    Long-term receivables                                353,177     351,629
      Pipeline, plant and other capital assets         2,290,260   2,286,255
      Intangible assets                                   93,497      59,647
      Other assets                                        23,205      23,727
    -------------------------------------------------------------------------
                                                       2,893,917   2,864,899
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Liabilities
    Current liabilities
      Payables                                            76,908      91,264
      Transportation security deposits                     3,195       4,008
      Distribution payable                                 4,891       6,406
      Current portion of long-term senior debt           246,843     145,014
      Subordinated convertible debentures and
       exchangeable debentures                            52,062      49,302
    -------------------------------------------------------------------------
                                                         383,899     295,994

    Long-term senior debt                              1,460,723   1,534,689
    Future taxes                                         294,283     291,279
    Other long-term liabilities                           44,014      44,211
    -------------------------------------------------------------------------
                                                       2,182,919   2,166,173
    -------------------------------------------------------------------------

    Partners' Equity
    Partners' capital account                          1,099,398   1,057,239
    Cumulative other comprehensive loss                  (46,428)    (54,624)
    Cumulative net income                                616,211     583,718
    Cumulative distributions                            (958,183)   (887,607)
    -------------------------------------------------------------------------
                                                         710,998     698,726
    -------------------------------------------------------------------------
                                                       2,893,917   2,864,899
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Fort Chicago Energy Partners L.P.
    -------------------------------------------------------------------------
    Consolidated Statement of Income and Cumulative Income
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands, except per
     Unit amounts; unaudited)       2010        2009        2010        2009
    -------------------------------------------------------------------------

    Revenues
      Operating revenues         166,959     148,564     326,472     297,384
      Interest and other           1,006         726       1,470       2,710
    -------------------------------------------------------------------------
                                 167,965     149,290     327,942     300,094
    -------------------------------------------------------------------------
    Expenses
      Operations and maintenance  48,795      45,767     102,736      97,040
      Depreciation and
       amortization               34,841      35,750      68,626      71,995
      Interest and other finance  27,672      25,400      55,284      51,526
      General, administrative and
       project development        23,624      21,077      49,304      43,489
      Foreign exchange and other   8,014        (526)      8,852       2,193
    -------------------------------------------------------------------------
                                 142,946     127,468     284,802     266,243
    -------------------------------------------------------------------------
    Net income before taxes       25,019      21,822      43,140      33,851
      Current taxes                1,040       2,717       6,602       2,819
      Future taxes                 5,560        (854)      4,045        (231)
    -------------------------------------------------------------------------
    Net income                    18,419      19,959      32,493      31,263
    Cumulative net income at the
     beginning of the period     597,792     557,447     583,718     546,143
    -------------------------------------------------------------------------
    Cumulative net income at the
     end of the period           616,211     577,406     616,211     577,406
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Net income per Unit
      Basic and diluted             0.13        0.15        0.23        0.23
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Consolidated Statements of Comprehensive Income and Cumulative Other
    Comprehensive Income
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands; unaudited)        2010        2009        2010        2009
    -------------------------------------------------------------------------

    Net income                    18,419      19,959      32,493      31,263
    Other comprehensive income
     (loss), net of taxes
      Cumulative translation
       adjustment
        Unrealized foreign
         exchange gain (loss) on
         translation of self-
         sustaining foreign
         operations               18,851     (38,882)      8,904     (25,886)
        Deemed realization of
         cumulative translation
         adjustment reclassified
         to net income             2,143         377       5,496       1,038
        Gain (loss) on hedge of
         self-sustaining foreign
         operation                (3,636)     11,430      (3,138)      7,870
      Fair value loss transferred
       to net income                   -           -           -       1,427
      Other                       (1,404)        607      (2,886)        869
    -------------------------------------------------------------------------
                                  15,954     (26,468)      8,376     (14,682)
    -------------------------------------------------------------------------
    Comprehensive income (loss)   34,373      (6,509)     40,869      16,581
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Cumulative other comprehensive
     income (loss) at the
     beginning of the period     (62,202)      4,480     (54,624)     (7,306)
    Other comprehensive income
     (loss), net of taxes         15,954     (26,468)      8,376     (14,682)
    -------------------------------------------------------------------------
    Cumulative other comprehensive
     income (loss) at the end of
     the period                  (46,248)    (21,988)    (46,248)    (21,988)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Fort Chicago Energy Partners L.P.
    -------------------------------------------------------------------------
    Consolidated Statement of Cash Flows
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands; unaudited)        2010        2009        2010        2009
    -------------------------------------------------------------------------

    Operating
      Net income                  18,419      19,959      32,493      31,263
      Non-cash transportation
       revenue                     1,031      (1,683)      2,079      (1,252)
      Depreciation, amortization
       and other non-cash items   39,362      39,290      68,326      73,842
      Unrealized foreign exchange
       loss (gain)                 8,667         445       9,138         222
      Future taxes                 5,560        (854)      4,045        (231)
    Changes in non-cash working
     capital                     (31,977)    (23,930)     (8,752)    (26,237)
    -------------------------------------------------------------------------
                                  41,062      33,227     107,329      77,607
    -------------------------------------------------------------------------
    Financing
      Long-term debt repaid      (36,553)    (36,300)    (38,034)    (37,287)
      Net change in credit
       facilities                (17,038)    (12,533)     55,505       6,457
      Distributions paid         (12,538)    (22,037)    (29,939)    (55,552)
      Other                            -        (512)          -        (512)
    -------------------------------------------------------------------------
                                 (66,129)    (71,382)    (12,468)    (86,894)
    -------------------------------------------------------------------------
    Investing
      Acquisition of Northbrook
       New York, LLC, net of
       cash acquired                   -           -     (80,708)          -
      Pipeline, plant and other
       capital assets             (7,483)     (5,555)    (14,524)    (14,074)
      Restricted cash                  7       4,291       1,770      11,911
      Other                         (676)          -      (2,456)     (1,008)
      Changes in non-cash
       investing working capital    (806)     (1,586)     (9,627)     (8,801)
    -------------------------------------------------------------------------
                                  (8,958)     (2,850)   (105,545)    (11,972)
    -------------------------------------------------------------------------
    Decrease in cash and short-
     term investments before the
     effect of foreign exchange
     rate changes on cash and
     short-term investments      (34,025)    (41,005)    (10,684)    (21,259)
    Effect of foreign exchange
     rate changes on cash and
     short-term investments        1,401      (3,085)        895      (2,577)
    Cash and short-term
     investments at the
     beginning of the period      80,780      76,318      57,945      56,064
    -------------------------------------------------------------------------
    Cash and short-term
     investments at the end of
     the period                   48,156      32,228      48,156      32,228
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Fort Chicago Energy Partners L.P.
    -------------------------------------------------------------------------
    Distributable Cash(1)
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands, except where
     noted; unaudited)              2010        2009        2010        2009
    -------------------------------------------------------------------------

    Cash inflows
      Alliance distributions,
       prior to withholdings for
       capital expenditures and
       net of debt service        30,166      30,285      60,592      61,173
      AEGS distributable cash,
       after non-recoverable
       capital expenditures and
       debt service                3,715       3,550       7,250       7,295
      Aux Sable distributions,
       net of support payments,
       non-recoverable debt
       service costs and
       maintenance capital        23,583       6,357      34,370       5,582
      Fort Chicago Power
       distributable cash, after
       maintenance capital
       expenditures and debt
       service                     2,104       4,327       3,321       8,949
      NRGreen distributions,
       prior to withholding for
       project development costs     565         440       1,130         880
      Realized foreign exchange
       gains, interest income
       and other                       -       3,691           -       4,347
    -------------------------------------------------------------------------
                                  60,133      48,650     106,663      88,226
    Cash outflows
      General and administrative  (3,845)     (3,825)     (7,749)     (8,454)
      Interest and other finance  (5,348)     (2,669)    (10,015)     (5,632)
      Taxes                         (886)     (2,652)     (6,347)     (2,690)
      Principal repayments on
       senior debt                  (778)       (885)     (1,567)     (1,821)
    -------------------------------------------------------------------------
                                 (10,857)    (10,031)    (25,678)    (18,597)
    -------------------------------------------------------------------------

    Distributable cash (1)        49,276      38,619      80,985      69,629
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributable cash per Unit
     ($)(2)                         0.34        0.29        0.57        0.52
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions paid/
     payable(3)                   35,564      33,788      70,576      67,301
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    Distributions paid/payable
     per Unit ($)                   0.25        0.25        0.25        0.50
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Distributable cash is not a standard measure under generally accepted
        accounting principles in Canada and may not be comparable to similar
        measures presented by other entities. Distributable cash represents
        the cash available to Fort Chicago for distribution to holders of
        Units after providing for debt service obligations and any capital
        expenditures that are not growth-oriented or recoverable but does not
        include distribution reserves, if any, available in Fort Chicago's
        jointly held businesses, or project development costs, which
        represent discretionary costs, the recoverability of which has not
        been established, incurred to assess the commercial viability of new
        greenfield business initiatives unrelated to the Partnership's
        operating businesses. Distributable cash is an important measure used
        by the investment community to assess the source and sustainability
        of Fort Chicago's cash distributions and should be used to supplement
        other performance measures prepared in accordance with generally
        accepted accounting principles in Canada. See the following table for
        the reconciliation of distributable cash to cash flow from operating
        activities.
    (2) The number of Units used to calculate distributable cash per Unit is
        based on the average number of Units outstanding at each record date.
        For the three months ended June 30, 2010, the average number of Units
        outstanding for this calculation was 142,312,387 and 144,574,000
        (2009 - 135,207,357 and 137,468,978) on a basic and diluted basis,
        respectively. For the six months ended June 30, 2010, the average
        number of Units outstanding for this calculation was 141,207,060 and
        143,468,681 (2009 - 134,659,117 and 136,920,738) on a basic and
        diluted basis, respectively. The number of Units outstanding would
        increase by 2,261,621 (2009 - 2,261,621) Units if the outstanding
        Convertible Debentures as at June 30, 2010 were converted into Units.
    (3) Includes $22.1 million and $42.2 million of distributions for the
        three and six months ended June 30, 2010, respectively, (2009 - $11.9
        million and $15.7 million) satisfied through the issuance of Units
        under the Partnership's Distribution Reinvestment Plan.



    Fort Chicago Energy Partners L.P.
    -------------------------------------------------------------------------
    Reconciliation of Distributable Cash to Cash Flow from Operating
    Activities
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands; unaudited)        2010        2009        2010        2009
    -------------------------------------------------------------------------

    Consolidated cash flow from
     operating activities         41,062      33,227     107,329      77,607
    Adjusted for: Cash flow
     (generated from) used for
     operating activities
     applicable to jointly held
     businesses(1)                 1,877      (3,914)    (42,996)    (40,883)
    -------------------------------------------------------------------------
    Cash flow from operating
     activities applicable to
     wholly-owned businesses(2)   42,939      29,313      64,333      36,724

    Add (deduct) amounts
     applicable to wholly-owned
     businesses:
      Project development
       costs(3)                    3,152       3,202       7,651       5,966
      Change in non-cash working
       capital                     2,985         756       7,595      17,709
      Principal repayments on
       senior notes               (1,448)     (1,516)     (2,894)     (3,080)
      Maintenance capital
       expenditures               (2,059)       (231)     (2,926)         18
      Distributions earned
       greater than distributions
       received(4)                 3,707       6,633       7,226      12,292
    -------------------------------------------------------------------------

    Distributable cash            49,276      38,157      80,985      69,629
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Represents the net of (i) cash flow from operating activities
        applicable to jointly held businesses which is not under the sole
        control of the Partnership and, as a consequence, is not included in
        distributable cash until such time as distributions are declared by
        the jointly held businesses; and (ii) distributions received from
        jointly held businesses.
    (2) Net of support payments made to Alliance Canada Marketing of $2.4
        million and $5.1 million for the three and six months ended June 30,
        2010 (2009 - $1.3 million and $4.1 million).
    (3) Represents costs incurred by the Partnership and its wholly-owned
        businesses in relation to projects where the recoverability of such
        costs has not yet been established. Amounts incurred for the three
        months ended June 30, 2010 relate primarily to the Jordan Cove LNG
        terminal project, the Pacific Connector Gas Pipeline project, and the
        Alton Gas Storage project.
    (4) Represents the difference between distributions declared by jointly
        held businesses and distributions received.



    Reconciliation of Adjusted Net Income(1) to Net Income
    -------------------------------------------------------------------------
                                  Three months ended        Six months ended
                                             June 30                 June 30
    -------------------------------------------------------------------------
    ($ Thousands; unaudited)        2010        2009        2010        2009
    -------------------------------------------------------------------------

    Net income                    18,419      19,959      32,493      31,263
    Adjustments to net income
     for non-recurring (gains)
     losses:
      Power - fair value loss
       reclassified from other
       comprehensive income(2)         -           -           -       2,442
      Taxes(3)                         -           -           -        (154)
    -------------------------------------------------------------------------

    Adjusted net income           18,419      19,959      32,493      33,551
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------

    (1) Adjusted net income is not a standard measure under generally
        accepted accounting principles in Canada and may not be comparable to
        similar measures presented by other entities. Adjusted net income
        represents net income adjusted for specific items that are
        significant, but are not reflective of Fort Chicago's underlying
        operations. Specific items are subjective, however, the Partnership
        uses its judgement and informed decision-making when identifying
        items to be included or excluded in calculating adjusted net income.
        Specific items may include, but are not limited to, certain income
        tax adjustments, bankruptcy settlements, gains or losses on sales of
        assets, certain fair value adjustments, and asset impairment losses.
        Fort Chicago believes its use of adjusted net income provides useful
        information to management and its investors by improving the ability
        to compare financial results among reporting periods, and by
        enhancing the understanding of its operating performance and ability
        to fund distributions.
    (2) Net income for the three months ended March 31, 2009 included a non-
        cash expense transferred from other comprehensive income to net
        income, representing the fair value decrease of the Partnership's
        investment in Pristine Power Inc. from Pristine's initial public
        offering in March 2008. As the Partnership considers such permanent
        decreases in the fair value of its investments to be non-typical, it
        has added this amount back to net income in arriving at adjusted net
        income.
    (3) Represents the related taxes on the adjusted item described above.
    

SOURCE Veresen Inc.

For further information: For further information: Stephen H. White, President and C.E.O.; Richard G. Weech, Vice President, Finance and C.F.O.; Fort Chicago Energy Partners L.P., Livingston Place, Suite 440, 222 - 3rd Avenue S.W., Calgary, AB, T2P 0B4, Phone: (403) 296-0140, Fax: (403) 213-3648, www.fortchicago.com

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Veresen Inc.

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