Primary Energy Recycling Corporation announces third quarter 2008 results



    OAK BROOK, IL, Oct. 23 /CNW/ - Primary Energy Recycling Corporation
(TSX: PRI.UN) (the "Company" or "PERC") today released its financial results
for the three months ended September 30, 2008. All amounts are in U.S. dollars
unless otherwise indicated.

    
    Key Points

    -   Continued solid financial performance and operational stability for
        the third consecutive quarter
    -   Distributable cash for the quarter was Cdn$8.1 million or Cdn$0.22
        per Enhanced Income Security (EIS). The payout ratio was 91.7%
    -   Successfully resolved Cokenergy's NOV with IDEM
    -   The Board of Directors with full cooperation of EPCOR Power LP
        initiated a sales process that could lead to the sale of the Company
        and/or Primary Energy Recycling Holdings LLC ("PERH").
    

    "In the third quarter, results provided continued validation of Harbor
Coal amendments completed earlier this year. Results remained relatively
stable and near anticipated levels with the new contract. Strong performance
at all PERC facilities yielded improved earnings relative to last year and
resulted in the 91.7% payout ratio," said V. Michael Alverson, Interim
President and Chief Financial Officer of the Company's Manager.
    "After studying options for enhancing unitholder value, the Board of
Directors initiated a sales process that is intended to result in the sale of
the Company. We will be working closely with the Board and its consultant,
John Prunkl, former president of the Company and the investment bankers to
achieve a successful sale."
    The Harbor Coal amendments fundamentally changed the way revenue and
operation and maintenance expenses are shared by the Partnership effective
January 1, 2008, thus direct 2008 versus 2007 comparison is difficult.
Operating and maintenance expense reductions are greater than revenue
reductions, thus a favorable result.
    In the third quarter of 2008, the Company earned revenue of
$15.6 million, a decrease of 18.9% from the third quarter of 2007 primarily
due to a decline in Energy Service revenue at the Company's Harbor Coal
facility totaling $4.1 million, offset by additional revenue of $0.5 million
recorded at other facilities due to higher levels of generation compared to
the same period in the prior year. For the first nine months of 2008, the
Company generated revenue of $47.4 million reflecting a decrease of 12.0%,
from the same period of the prior year primarily due to a decline in Energy
Service revenue at the Harbor Coal facility totaling $8.3 million, offset by
increased revenue of $1.8 million at other facilities.
    Operating and maintenance expense for the third quarter of 2008 was
$3.0 million, down 62.4% from the third quarter of 2007 due to a decline in
maintenance expenses of $4.5 million at the Company's Harbor Coal facility.
The third quarter of 2007 also reflected increased maintenance expenses of
$0.7 million associated with outage repair activity at other facilities.
Additionally, third quarter of 2008 reflects a $0.3 million increase in
maintenance expenses. For the first nine months of 2008, operating and
maintenance expense was $8.5 million compared to $22.5 million for the same
period in the prior year, a decrease of 62.5% due to a decrease of
$13.1 million at Harbor Coal for the reasons stated above. Additionally, the
first nine months of 2007 reflected increased maintenance expenses of
$1.6 million associated with outage repair activity. These amounts are offset
by a $0.7 million increase in current year maintenance expenses.
    General and administrative expense for the third quarter of 2008 was
$3.0 million, compared to $2.7 million for the third quarter of 2007, an
increase of 10.6% due to additional professional fees of $0.1 million and
increases in other general and administrative expenses. For the first nine
months of 2008, general and administrative expense was $8.8 million, compared
to $8.1 million for the first nine months of 2007, a 8.3% increase due to
additional professional fees of $0.3 million, board compensation fees of
$0.2 million and other general and administrative expenses of $0.2 million.
The additional expenses incurred in 2008 are primarily due to the strategic
review process.
    Distributable Cash for the third quarter and the first nine months of
2008 was Cdn$8.1 million or Cdn$0.22 per EIS, and Cdn$25.2 million or Cdn$0.67
per EIS, respectively. Distributions declared in the quarter and nine-month
period were Cdn$7.4 million or Cdn$0.20 per EIS and Cdn$22.3 million or
Cdn$0.60 per EIS, respectively.
    At the end of the third quarter 2008, the Company had cash on-hand of
$14.9 million.
    The industrial hosts which are also the customers of the Company's
facilities are all steel production facilities. Major participants in the
North American steel industry have recently announced planned reductions in
production. The impact of production reductions on the operations of PERC is
not known at this time.


    
    Distributable Cash Summary
    (in 000's of US$, except per share data and as otherwise indicated)

                                   Three Months Ended     Nine Months Ended
                                      September 30,         September 30,
                                  --------------------- ---------------------
                                     2008       2007       2008       2007
                                  ---------- ---------- ---------- ----------
    Distributable Cash            $   6,938  $   5,440  $  21,471  $  13,577
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    Per Common and equivalent
     Common Share                 $    0.19  $    0.15  $    0.58  $    0.36
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Interest on EIS
     Subordinated Notes           $   1,944  $   1,944  $   5,832  $   5,832
    Distributions on Common
     Shares                           3,350      2,233     10,050     12,057
    Distributions on
     non-controlling Class B
     preferred interest                 380        380      1,140      1,140
    Distributions on
     non-controlling Class B
     common interest                    685        456      2,055      2,464
                                  ---------- ---------- ---------- ----------
    Total distributions           $   6,359  $   5,013  $  19,077  $  21,493
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    Per Common and equivalent
     Common Share                 $    0.17  $    0.13  $    0.51  $    0.58
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Hedge rate (Cdn$ per US$)     $  1.1712  $  1.1712  $  1.1712  $  1.1694

    Distributable Cash (Cdn$)     $   8,126  $   6,371  $  25,147  $  15,877
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    Per Common and equivalent
     Common Share (Cdn$)          $    0.22  $    0.17  $    0.67  $    0.43
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Hedge rate (Cdn$ per US$)     $  1.1712  $  1.1712  $  1.1712  $  1.1694

    Total distributions (Cdn$)    $   7,448  $   5,871  $  22,343  $  25,133
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    Per Common and equivalent
     Common Share (Cdn$)          $    0.20  $    0.16  $    0.60  $    0.67
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Excess (shortfall)
     distributable cash (Cdn$)    $     678  $     500  $   2,804  $  (9,256)
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------
    Per Common and equivalent
     Common Share (Cdn$)          $    0.02  $    0.01  $    0.08  $   (0.25)
                                  ---------- ---------- ---------- ----------
                                  ---------- ---------- ---------- ----------

    Payout Ratio                      91.7%      92.2%      88.9%     158.3%
    


    The Company's full financial statements and Management's Discussion and
Analysis, are available at www.sedar.com or the Company's website at
www.primaryenergyrecycling.com.

    Conference Call and Webcast

    Management will also host a conference call to further discuss the third
quarter results on Friday, October 24, at 11:00 a.m. (ET). Following
management's presentation, there will be a question and answer session. To
participate in the conference call, please dial 416-644-3414 or
1-800-733-7571. A conference call replay will be available until 12 a.m. on
October 31, 2008 (ET). The replay can be accessed by dialing 416-640-1917 or
1-877-289-8525 and entering passcode 21284377 followed by the number sign. A
webcast replay will also be available for 90 days by accessing a link through
the Investor Information section at www.primaryenergyrecycling.com.

    Non-GAAP Measures

    Distributable Cash is not a recognized measure under Canadian GAAP and
does not have a standardized meaning prescribed by Canadian GAAP. Therefore,
Distributable Cash may not be comparable to similar measures presented by
other companies. See the definitions of Distributable Cash in the Company's
MD&A.

    Forward-Looking Statements

    When used in this news release, the words "anticipate", "expect",
"project", "believe", "estimate", "forecast" 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 operating performance, regulatory parameters, weather and economic
conditions and the factors discussed in the Company's public filings available
on SEDAR at www.sedar.com. 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.

    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 1.8 MMlbs/hour. PERH
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 its customers' use. For more
information, please see www.primaryenergyrecycling.com.





For further information:

For further information: V. Michael Alverson, Interim President, Primary
Energy Recycling Corporation, (630) 371-0505, investorinfo@primaryenergy.com

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