Fort Chicago announces 2006 fourth quarter and annual results and changes in Board of Directors

    Trading Symbol: FCE.UN
    Exchange: TSX


    CALGARY, March 8 /CNW/ - Fort Chicago Energy Partners L.P. ("Fort
Chicago") today announced its results for the three and twelve months ended
December 31, 2006. Mr. Stephen H. White, President and Chief Executive Officer
commented, "Since Fort Chicago's inception, it has been our goal to create
value for our Unitholders by making prudent investments in businesses that
generate reliable streams of cash flows. In 2006, Fort Chicago's businesses
delivered record levels of distributable cash, providing a solid foundation
upon which we can build. This was also a year in which we made significant
progress in our efforts to achieve accretive growth and enhance Fort Chicago's
value by pursuing other, energy-related business opportunities."

    Operating and Financial Highlights

    Strong NGL market fundamentals during 2006 produced record earnings for
Aux Sable and higher than expected distributable cash and earnings for Fort
Chicago. Distributable cash for the three and twelve months ended December 31,
2006 was $41.9 million or $0.320 per Unit (2005 - $28.2 million or $0.218 per
Unit) and $151.5 million or $1.160 per Unit (2005 - $131.7 million or
$1.083 per Unit), respectively. These increases in distributable cash were
driven primarily by Aux Sable's strong performance, partially offset by the
impact of a stronger Canadian dollar and a depreciating Alliance investment
    Net income for the three and twelve months ended December 31, 2006 was
$10.1 million or $0.08 per Unit (2005 - $18.3 million or $0.14 per Unit) and
$81.0 million or $0.62 per Unit (2005 - $71.2 million or $0.59 per Unit),
respectively. These results reflect significantly higher earnings from Aux
Sable, which were tempered by the recognition of foreign exchange losses
previously deferred and recorded as a cumulative translation adjustment in
partners' equity, increased project development costs and future taxes, and a
stronger Canadian dollar.
    During 2006, 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 and achieving throughput of 1.592 bcf/d,
compared with 1.597 bcf/d in 2005. AEGS also performed well, increasing its
toll volumes from 308.3 thousand barrels per day in 2005 to 310.3 mbbls/d in
2006. Aux Sable facilities operated reliably and benefited from exceptionally
strong market conditions, which, in 2006, rebounded from the impact of the
severe U.S. Gulf Coast hurricanes in the second half of 2005. Record NGL
margins in the second and third quarters of 2006 supported higher volumes,
which increased from 66.7 mbbls/d in 2005 to 68.6 mbbls/d in 2006, and
contributed to strong financial performance from Aux Sable.
    Fort Chicago's financial position remained substantially unchanged during
2006. Fort Chicago continues to maintain a prudent capital structure comprised
primarily of fixed rate, non-recourse long-term debt, which contains terms to
maturity and amortization periods designed to approximate the applicable
depreciation associated with its underlying assets. These attributes, together
with the long-term cash flow generating capability of its assets, are key
components of its strategy to access cost effective capital, and support the
stability and investment grade credit ratings issued by Standard & Poor's
(stability rating - SR-2; credit rating - BBB stable outlook) and Dominion
Bond Rating Service (stability rating - STA-2 (low)). Looking forward, Fort
Chicago is well positioned to fund all of its project development activities
utilizing substantial undrawn committed revolving credit facilities,
non-recourse project financing, and, when appropriate, its distribution
reinvestment plan.

    Key Accomplishments and Growth Initiatives

    In 2006, Alliance focused on initiatives that will optimize the pipeline
system, maximize efficiency, and strengthen its competitive position, while
continuing to perform in a reliable manner. These activities included
upgrading Alliance's compressor units so as to reduce fuel requirements,
increase power availability and extend component life. Alliance also continued
to evaluate opportunities to increase its natural gas receipt capabilities,
extend its market reach, and increase throughput, including the utilization of
the higher operating pressure now allowed on the U.S. portion of the pipeline.
In February 2007, Alliance announced it filed an application with the National
Energy Board in connection with its proposal to enhance its natural gas
receipt capacity in British Columbia.
    During 2006, Aux Sable finalized a long-term NGL sales agreement with BP,
which provides Aux Sable with an assured base level of earnings and a
meaningful share of net margins in excess of specified thresholds. Aux Sable
is now better positioned to pursue a broader range of opportunities in the gas
processing and NGL midstream industry, including the development of a
centralized off-gas processing centre and an ethane extraction facility on
strategically located land positions in Alberta. In October, Aux Sable
announced its first off-gas facility, referred to as the Heartland Off-Gas
Facility, a multi-phased deep-cut natural gas processing plant in the Fort
Saskatchewan area that will extract NGL from the off-gas stream of BA Energy
Inc.'s Heartland Upgrader. Construction is expected to begin in the spring of
2007, with the commencement of commercial operations to coincide with the
start-up of the Heartland Upgrader in 2008.
    Outside of its existing businesses, Fort Chicago is making tangible
progress in the development of a number of attractive greenfield investment
opportunities, which are expected to generate a new stream of steady cash
flow. In December 2006, NRGreen Power Limited Partnership, a
non-rate-regulated waste heat power business in which Fort Chicago hold a 50
percent ownership interest, placed into commercial service the Kerrobert
facility, the first of four such facilities being constructed pursuant to
Saskatchewan Power Corporation's Environmental Preferred Power Program.
Construction of the remaining three units is expected to be completed in the
third quarter of 2008. Power generated from these facilities will be sold to
SaskPower under long-term power purchase agreements. In October 2006, Fort
Chicago announced that East Windsor Cogeneration L.P., a partnership in which
Fort Chicago and its 20 percent owned partner, Pristine Power Inc., each hold
a 50 percent ownership interest, was awarded a 20-year combined heat and power
contract by the Ontario Power Authority, under which East Windsor will
construct an 84-megawatt cogeneration plant located in Windsor, Ontario, at an
estimated cost of $175 million. Commercial operations are scheduled to
commence in the first quarter of 2009.
    In terms of Fort Chicago's longer-term initiatives, including the
proposed Jordan Cove LNG terminal in Coos County, Oregon and the proposed
Pacific Connector pipeline, efforts in 2006 were focused on evaluating
long-term potential sources of LNG supply and on the Federal Energy Regulatory
Commission pre-filing review process and preparation of various regulatory
applications, approval of which is expected to be received in the first half
of 2008. These facilities are currently on track to be in service as early as
the first half of 2011. Fort Chicago has also been participating in the
development of a potential natural gas storage site located near Truro, Nova
Scotia, through Alton Natural Gas Storage L.P., a partnership in which Fort
Chicago holds a 50 percent ownership interest, and expects to be in a position
to confirm the commercial viability of this project by the second half of

    Distributions and Tax Allocations

    During 2006, monthly distributions were maintained at $0.0775 per Unit,
which on an annualized basis represented $0.93 per Unit. These cash
distributions were underpinned by record cash flows generated by Aux Sable, as
well as the continued stable cash flows generated by Alliance and AEGS. For
2006, a Unitholder holding a Fort Chicago Unit throughout the year will be
allocated taxable income of approximately $0.91 per Unit, representing a
taxable income allocation as a percentage of cash distributions paid for 2006
of approximately 98 percent.
    Fort Chicago remains committed to using its distribution account to
maintain a stable distribution and to paying out, over time, 100 percent of
distributable cash to Unitholders, after providing for the funding of project
development costs. As at December 31, 2006, the distribution account had a
balance of $31.0 million, up $15.3 million from 2005.

    2007 Guidance

    For 2007, Fort Chicago's distributable cash is currently forecasted to be
in the range of $0.91 to $1.00 per Unit and a taxable income allocation as a
percentage of cash distributions paid in the range of 85 percent to
100 percent. These ranges reflect Fort Chicago's expectation that the 2007
earnings from Aux Sable will not repeat the record earnings achieved in 2006.
For 2007, Fort Chicago's payout ratio is expected to be between 93 percent and
102 percent. Further details concerning 2007 guidance can be found in the
"Investor Information" section of Fort Chicago's website -

    Recent Tax Developments

    While this was a successful year for Fort Chicago in terms of cash flow
generation and growth initiatives, the market value of Fort Chicago, as well
as the market value of other funds in the trust sector, was negatively
impacted by the federal government's October 31, 2006 announcement of its
intent to impose a 31.5 percent tax on certain flow-through entities,
including Fort Chicago, commencing in 2011. Fort Chicago, along with its
advisors, has reviewed the draft legislation released for comment by the
federal government on December 21, 2006, and continues to assess its impact on
Fort Chicago and its Unitholders. Through the Canadian Energy Infrastructure
Group, Fort Chicago has also been active in lobbying the government for
clarifications and changes to the proposed legislation in order to address
inherent uncertainties and perceived unintended consequences in the
legislation, and to mitigate its potential adverse effects. Fort Chicago will
continue to closely monitor all developments in connection with this proposed
legislation and will carefully assess the impact of any enacted legislation
with a view to developing a strategy that optimizes Unitholder value.


    Fort Chicago's long-term strategy to optimize existing assets and invest
in long-life, stable cash flow generating assets remains intact. Significant
progress was made in 2006 and Fort Chicago is confident it is well positioned
to deliver growth in the future. While the proposed income tax legislation has
impacted the value of Fort Chicago's units and created significant market
uncertainty, it does not impact the growth prospects of Fort Chicago's
businesses or the strong market fundamentals in the energy infrastructure
sector, which have supported a track record of delivering stable and growing
distributions and made Fort Chicago one of the premier income-generating funds
in Canada. In closing, Fort Chicago, and each of its businesses, is focused on
and committed to a growth-oriented strategy that delivers value to its

    Changes in Board of Directors

    Fort Chicago also announced changes to the Board of Directors of its
General Partner, Fort Chicago Energy Management Ltd. Arthur V. Mauro, a
director of Fort Chicago since its inception in 1997, has advised he will not
be standing for re-election at the annual meeting of the Partnership to be
held on May 10, 2007. Mr. Guy J. Turcotte, Chairman of Fort Chicago, commented
"Art Mauro has been a valued member of the Board and its Committees. Everyone
at Fort Chicago wishes Art the very best in the future and thanks him for his
dedicated service over the years." Mr. Turcotte has also advised that he
anticipates this will be the last year he stands for election as a director of
the General Partner. Mr. Turcotte commented "In order to spend more time with
my family while my children are young, I have decided to substantially reduce
the public board positions I hold and to reduce my work commitments."
    The Board, with the assistance of its Corporate Governance and Nominating
Committee, has identified two candidates for election as directors of Fort
Chicago at the May 10, 2007 annual meeting of Unitholders: Robert J. Iverach
of Calgary and Robert T.F. Reid of Vancouver. Mr. Turcotte commented "Bob
Iverach is a very experienced and well-respected lawyer who will bring to the
Board a strong background in the practice of tax law and of business in
Calgary and Canada. Bob Reid provides the Board with geographic diversity and
comes to the Partnership with valuable experience in the pipeline business,
most notably with Duke Energy Transmission Ltd. (now Spectra Energy) and its
predecessor companies. I am very confident the addition of these gentlemen to
the Fort Chicago Board will bring new and diverse ideas which will be of
substantial benefit to the business going forward."

    Fort Chicago Energy Partners L.P. will hold a conference call and webcast
at 11:00 a.m. Mountain time (1:00 p.m. Eastern time) on Thursday, March 8,
2007, to discuss the 2006 fourth quarter and annual results. The call can be
accessed at 1-866-249-1964 or 1-416-644-3415 and will be broadcast live on the
Internet. This can be accessed either through a link contained in the "Event"
section located on the home page of Fort Chicago's website or through the
following URL:
    A replay will be available shortly thereafter at 1-877-289-8525 and
1-416-640-1917. The access code is 21216621 (followed by the pound sign).

    Fort Chicago is a publicly traded limited partnership. Its Class A Units
are listed on the TSX under the symbol FCE.UN and have been assigned a
stability rating by Dominion Bond Rating Service and Standard & Poor's of
STA-2 (low) and SR-2, respectively. Together with its affiliates, Fort Chicago
presently owns a 50.0% interest in the Alliance Pipeline, an approximate 42.7%
interest in Aux Sable and Alliance Canada Marketing and a 100% interest in the
Alberta Ethane Gathering System ("AEGS"). The Alliance Pipeline is a
3,000 kilometre mainline natural gas pipeline, which extends from northeastern
British Columbia to delivery points near Chicago, Illinois. Aux Sable operates
natural gas liquids extraction, fractionation and delivery facilities near
Chicago. AEGS is a 1,324 kilometre ethane pipeline system, which delivers
ethane feedstock to Alberta's petro-chemical industry.
    Fort Chicago's consolidated financial statements and Management's
Discussion and Analysis for the year ended December 31, 2006 are available on
Fort Chicago's website at

                     Class A Unit Ownership Restrictions

    Fort Chicago is organized in accordance with the terms and conditions of
a limited Fort Chicago 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
Fort Chicago which is not a "Canadian Fort Chicago" for purposes of the Income
Tax Act (Canada).

    Certain information contained herein relating to, but not limited to,
Fort Chicago and its Pipeline and NGL 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. The following discussion
is intended to identify certain factors, although not necessarily all factors,
which could cause future outcomes to differ materially from those set forth in
the forward-looking information. 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; the status, credit risk and continued existence of
customers having contracts with Alliance, Aux Sable or AEGS; the availability
and price of energy commodities; fluctuations in foreign exchange and interest
rates; the regulatory environment; competitive factors in the pipeline and NGL
industries; and the prevailing economic conditions in North America. The
reader is cautioned that these factors and risks are difficult to predict and
that the assumptions used in the preparation of such information, although
considered reasonably accurate by Fort Chicago at the time of preparation, may
prove to be incorrect or may not occur. Accordingly, readers are cautioned
that the actual results achieved will vary from the information provided
herein and the variations may be material. Readers are also cautioned that the
foregoing list of factors and risks is not exhaustive. Additional information
on these and other risks, uncertainties and factors that could affect Fort
Chicago's operations or financial results are included in Fort Chicago's
filings with the securities commissions or similar authorities in each of the
provinces of Canada, as may be updated from time to time. There is no
representation by Fort Chicago 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 the annual Management
Discussion and Analysis, in particular, the section entitled "Non-GAAP
Financial Measures" filed by Fort Chicago with Canadian securities regulators.

    Fort Chicago Energy Partners L.P.

    Consolidated Statement of Financial Position
                                                    December 31, December 31,
    ($ Thousands)                                          2006         2005

    Current assets
      Cash and short-term investments                    44,718       21,373
      Transportation security deposits and revenue
       adjustments                                        9,510       15,558
      Receivables                                        41,738       75,123
      Inventory                                             698       17,539
      Prepaid expenses                                    4,190        6,844
                                                        100,854      136,437

    Long-term receivables                               217,523      175,439
    Pipeline, plant and other capital assets          2,384,360    2,465,444
    Other assets                                         16,185       17,714
                                                      2,718,922    2,795,034

    Current liabilities
      Payables                                           65,216       86,512
      Transportation security deposits                    6,298        7,678
      Distribution payable                               10,049       10,309
      Deferred revenue                                      821        2,986
      Current portion of long-term senior debt
       and capital leases                                64,398       72,542
                                                        146,782      180,027

    Long-term senior debt and capital leases          1,484,582    1,531,321
    Subordinated convertible debentures                  52,922       61,713
    Future taxes                                        172,268      157,675
    Other long-term liabilities                          43,872       39,201
                                                      1,900,426    1,969,937

    Partners' Equity
    Partners' capital account                           985,595      972,425
    Cumulative translation adjustment                   (70,892)     (91,571)
    Cumulative net income                               398,487      317,533
    Cumulative distributions                           (494,694)    (373,290)
                                                        818,496      825,097
                                                      2,718,922    2,795,034

    Fort Chicago Energy Partners L.P.

    Consolidated Statement of Income and Cumulative Income
                                Three months ended                Year ended
                                       December 31               December 31
    ($ Thousands,
     except per unit amounts)    2006         2005         2006         2005

      Transportation           99,925      101,748      389,148      401,137
      Natural gas liquids      36,352      128,973      169,658      475,757
      Interest and other        1,510          938        4,302        2,815
                              137,787      231,659      563,108      879,709
      Natural gas, natural
       gas liquids and
       transportation          11,140      121,293       75,653      436,439
      Operations and
       maintenance             23,163       18,113       83,378       61,421
      Depreciation and
       amortization            28,848       29,284      116,098      119,640
      Interest and other
       finance                 27,518       29,201      110,948      122,237
      General, administrative
       and project
       development costs       17,723       11,222       60,600       40,316
      Foreign exchange loss
       and other               12,155        2,406       20,660       12,630
                              120,547      211,519      467,337      792,683
    Net income before taxes    17,240       20,140       95,771       87,026
      Current taxes               450          492        1,144        3,606
      Future taxes              6,723        1,368       13,673       12,219
    Net income                 10,067       18,280       80,954       71,201
    Cumulative net income
     at the beginning of
     the period               388,420      299,253      317,533      246,332
    Cumulative net income
     at the end of the
     period                   398,487      317,533      398,487      317,533

    Net income per Unit
      Basic and diluted          0.08         0.14         0.62         0.59

    Fort Chicago Energy Partners L.P.

    Consolidated Statement of Cash Flows
                                Three months ended                Year ended
                                       December 31               December 31
    ($ Thousands)                2006         2005         2006         2005

      Net income               10,067       18,280       80,954       71,201
      Less: Non-cash
       revenue                 (9,569)      (6,630)     (30,970)     (20,882)
      Add:  Depreciation,
             and other
             non-cash items    31,876       30,574      120,545      121,946
           Unrealized foreign
            exchange losses    11,159        2,267       20,357       12,045
           Future taxes         6,723        1,368       13,673       12,219
      Changes in non-cash
       operating working
       capital                (32,566)     (35,834)      23,904      (12,080)
                               17,690       10,025      228,463      184,449
      Class A Units, net
       of issue costs               -           (3)           -      152,515
      Long-term debt, net
       of issue costs          (8,471)      12,106       14,029      132,163
      Long-term debt repaid   (25,907)     (40,661)     (67,449)    (356,273)
      Distributions paid      (30,168)     (31,084)    (117,123)    (112,112)
      Other                         -            -          986            -
                              (64,546)     (59,642)    (169,557)    (183,707)
      Pipeline, plant and
       other capital assets   (19,269)      (5,539)     (42,121)     (10,620)
      Investment in Alberta
       Ethane Gathering System      -            -            -         (576)
      Other assets             (1,497)           -       (1,497)      (3,000)
      Changes in non-cash
       investing working
       capital                  3,018         (122)       7,497         (499)
                              (17,748)      (5,661)     (36,121)     (14,695)
    Increase (decrease)
     in cash and short-term
     investments before the
     effect of foreign
     exchange rate changes
     on cash and short-term
     investments              (64,604)     (55,278)      22,785      (13,953)
    Effect of foreign
     exchange rate changes
     on cash and short-term
     investments                1,751          397          560          344
    Cash and short-term
     investments at the
     beginning of the period  107,571       76,254       21,373       34,982
    Cash and short-term
     investments at the end
     of the period             44,718       21,373       44,718       21,373

    Fort Chicago Energy Partners L.P.

    Distributable Cash(1)
                                Three months ended                Year ended
                                       December 31               December 31
    ($ Thousands except
     where noted                 2006         2005         2006         2005

    Cash inflows
      Alliance distributions,
       prior to withholdings
       for capital
       expenditures, and
       net of debt service     27,314       29,504      110,388      124,866
      Aux Sable
       distributions, net
       of support payments,
       non-recoverable debt
       service costs and
       maintenance capital     15,263           37       44,456       18,378
      AEGS distributable
       cash, after non-
       recoverable capital
       expenditures and debt
       service                  4,671        4,365       17,003       19,481
      Interest income             286           55          853          264
                               47,534       33,961      172,700      162,989
    Cash outflows
      General and
       administrative          (1,613)      (1,548)      (6,170)      (7,336)
      Realized foreign
       exchange gains (losses)   (167)         (38)          24           80
      Interest and other
       finance                 (1,565)      (1,806)      (6,444)     (10,254)
      Interest on convertible
       debentures                (962)      (1,025)      (4,061)      (6,687)
      Taxes                      (456)        (442)      (1,136)      (3,452)
      Principal repayments
       on senior debt            (856)        (883)      (3,400)      (3,634)

    Distributable cash(1)      41,915       28,219      151,513      131,706

    Distributable cash per
     Unit($)(2)                 0.320        0.218        1.160        1.083

     payable/paid              30,458       31,104      121,404      115,125

     payable/paid per Unit($)  0.2325       0.2400       0.9300       0.9450
    (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 and does not
        include distribution reserves, if any, available in Alliance and Aux
        Sable. 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 reconciliation of distributable
        cash to cash flow from operating activities contained in Fort
        Chicago's 2006 Management Discussion and Analysis.

    (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 December 31, 2006, the average number of
        Units outstanding for this calculation was 131,002,454 (2005 -
        129,596,130) and 136,479,170 (2005 - 136,072,730) on a basic and
        diluted basis, respectively. For the twelve months ended December 31,
        2006 the average number of Units outstanding for this calculation was
        130,542,971 (2005 - 121,643,206) and 136,329,208 (2005 - 130,821,313)
        on a basic and diluted basis, respectively. The number of Units
        outstanding would increase by 5,452,717 (2005 - 6,402,802) Units if
        the outstanding Convertible Debentures as at December 31, 2006 were
        converted into Units.

    Distribution Account
                                Three months ended                Year ended
                                       December 31               December 31
    ($ Thousands)                2006         2005         2006         2005
    Beginning balance          24,345       19,973       15,691        2,354
    Distributions under
     (over) distributable
     cash                      11,457       (2,885)      30,109       16,581
    Project development
     costs(3)                  (4,813)      (1,397)     (14,811)      (3,244)
    Ending balance             30,989       15,691       30,989       15,691
    (3) Project development costs relate primarily to Jordan Cove, Pacific
        Connector and Alton.

For further information:

For further information: Stephen H. White, President and C.E.O.; Hume D.
Kyle, Vice President, Finance and C.F.O., Fort Chicago Energy Partners L.P.,
Stock Exchange Tower, 2150, 300 Fifth Avenue S.W., Calgary, AB, T2P 3C4,
Phone: (403) 296-0140, Fax: (403) 213-3648,

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