OAK BROOK, IL, Aug. 9, 2012 /CNW/ - Primary Energy Recycling Corporation (the "Company" or "Primary Energy") (TSX: PRI), a clean energy company that generates revenue from capturing and recycling recoverable heat and byproduct fuels from industrial processes, today announced its financial and operational results for the three and six months ended June 30, 2012.

Second Quarter Highlights

• The Board of Directors has established a new dividend policy. The Board is satisfied that the financial flexibility provided by the Company's recent financing, together with the Board's confidence in the expected renewal of the Cokenergy contract, will support a sustainable US$0.20 per share annual dividend, payable quarterly.  With respect to the third quarter of 2012, a US$0.05 per common share dividend is expected to be declared for payment on or about November 30, 2012 to shareholders of record on November 15, 2012.  Declarations and payments of dividends will be made in US dollars.  Declaration of any dividends will be at the discretion of the Board.
  
  
• Closed its transaction with Atlantic Power Corporation to purchase the 7,462,830 (14.3%) common membership interests in Primary Energy Recycling Holdings LLC not currently held by the Company and terminated the Management Agreement between the two companies for a total cost of approximately US$30.2 million. This transaction provides the Company with a clean, simple corporate structure, greater operational autonomy, and flexibility going forward;
  
  
• Announced the closing of a US$110 million senior secured credit facility of which US$85 million was drawn at close with the remaining US$25 million readily available under a revolving credit arrangement. The proceeds of the new credit facility have been applied to fully retire the Company's US$36.4 million term loan that was previously outstanding, to fund the purchase of the Primary Energy Recycling Holdings LLC common membership interests and for other corporate purposes.  The interest rate for the new credit facility is effectively 5.0%, a reduction from the 6.9% effective rate of the previous loan;
  
  
• Continued early stage contract renegotiation discussions with the site host for Cokenergy. The current contract expires in the third quarter of 2013;
  
  
• Substantially completed work on Phase II of the North Lake plant upgrade by the end of the quarter. As previously disclosed, the renewal contract requires the facility to be upgraded from its current rating of 75 MW to 90 MW.

"The second quarter was a transformational period for the Company," said John Prunkl, President and Chief Executive Officer of Primary Energy. "We now have more operational independence, improved financial flexibility and a dividend policy that should improve our cost of capital which in turn will help us excel as leaders in the energy recycling space. The renewal of the Cokenergy contract and execution of our capital programs remain our top priorities."

Second Quarter 2012 Financial Results

The Company's revenue of $12.6 million in the second quarter of 2012 decreased $0.7 million, or 5.6%, compared with revenue of $13.3 million for the second quarter of 2011.  The North Lake facility was out of service for the entire month of May 2012 due to a planned turbine upgrade but was fully operational during the second quarter of 2011, which had a negative impact on variable Energy Service revenue of $0.8 million.  Harbor Coal's utilization was reduced primarily due to the injection of low cost spot market natural gas and coal management strategies.  The Company's revenue of $26.8 million in the first six months of 2012 increased $0.7 million, or 2.7%, compared with revenue of $26.1 million for the first six months of 2011.  The Company's revenue of $26.8 million in the first six months of 2012 increased $0.7 million, or 2.7%, compared with revenue of $26.1 million for the first six months of 2011 primarily due to the North Lake facility being fully operational for five months of 2012 compared to three months in 2011 as a result of service outages for overhaul and upgrade activity. 

Operations and maintenance expense for the second quarter of 2012 was $4.2 million compared to $4.1 million for the second quarter of 2011, an increase of $0.1 million or 1.0%.  The Company incurred periodic costs during the second quarter of 2012 comprised of $1.1 million for boiler retubing work and $0.3 million for ductwork repairs compared to periodic costs for the second quarter of 2011 totaling $0.7 million for boiler retubing work. Operations and maintenance expense for the first six months of 2012 was $8.4 million compared to $6.8 million for the first six months of 2011, an increase of $1.6 million or 22.0%.  The Company incurred periodic costs for the first six months of 2012 comprised of $2.1 million for boiler retubing work and $0.4 million for ductwork repairs compared to periodic costs for the first six months of 2011 totaling $0.7 million for boiler retubing work.

Equity in earnings of the Harbor Coal joint venture for the second quarter of 2012 was $0.5 million compared to $1.1 million for the second quarter of 2011 and $1.2 million and $2.1 million for the six months ended June 30, 2012 and 2011 respectively.  Harbor Coal's utilization was reduced primarily due to the injection of low cost spot market natural gas and coal supply management strategies.

Operating loss for the second quarter of 2012 was $5.4 million compared to operating income of $1.4 million for the second quarter of 2011, a decrease of $6.8 million. $6.0 million of the decrease was attributed to the Management Agreement termination fee.  Operating loss for the first six months of 2012 was $3.1 million compared to operating income of $1.5 million for the first six months of 2011, a decrease of $4.6 million.

Net loss and comprehensive loss for the second quarter of 2012 was $5.4 million compared to $0.7 million for the second quarter of 2011, a decrease of $4.7 million. Net loss and comprehensive loss for the first six months of 2012 was $4.9 million compared to $2.9 million for the first six months of 2011, a decrease of $2.0 million.

Conference Call and Webcast

Management will host a conference call to discuss the second quarter results on Friday, August 10, 2012 at 10:00 a.m. ET. Following management's presentation, there will be a question and answer session. To participate in the conference call, please dial (888) 231-8191 or (647) 427-7450.

A digital conference call replay will be available until midnight on August 24, 2012 (ET) by calling (800) 642-1687 or (416) 849-0833. Please enter the passcode 12698664 when instructed. A webcast replay will be available for 90 days by accessing a link through the Investor Information section at www.primaryenergyrecycling.com

Forward-Looking Statements

When used in this news release, the words "intend", "likely", "anticipate", "expect", "project", "believe", "estimate", "forecast", "outlook" and similar expressions, are intended to identify forward-looking statements, including statements regarding maintenance and capital expenditures and the declaration and payment of any dividends. 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 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 1.8M lbs/hour. Primary Energy Recycling Corporation creates value for its customers by capturing and recycling waste energy from industrial and electric generation processes and converting it into reliable and economical electricity and thermal energy for resale back to its customers. For more information, please see www.primaryenergy.com

¹As used herein, EBITDA means earnings before interest, taxes, depreciation and amortization and certain other adjustments.   EBITDA is reconciled to net income (loss) and comprehensive income (loss) in the table below.  EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, EBITDA may not be comparable to similar measures presented by other companies.

²As used herein, references to Adjusted EBITDA are to EBITDA as adjusted for certain non-recurring adjustments for major maintenance/outage work expenses, management termination fee and non-cash stock based compensation that represent recorded expenses based on specific circumstances and are not expected to be part of the Company's ongoing business activity. Adjusted EBITDA is reconciled to net income (loss) and comprehensive income (loss) in the table below. Adjusted EBITDA is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Adjusted EBITDA may not be comparable to similar measures presented by other companies.

³As used herein, Free Cash Flow means net cash provided by operating activities as adjusted for capital expenditures.  Free Cash Flow is reconciled to net cash (used in) provided by operating activities in the table below.  Free Cash Flow is not a recognized measure under IFRS and does not have a standardized meaning prescribed by IFRS. Therefore, Free Cash Flow may not be comparable to similar measures presented by other companies.

⁴Total Gross Electric Production means the aggregate amount of electricity produced by all of the Company's facilities during the period. The amount is gross generation and is not reduced by internal electric usage of the facilities' auxiliary equipment. The unit of measure is megawatt hours (MWh).  Due to the fixed and variable nature of customer contracts, MWh production cannot be directly tied to financial performance.

⁵Total Thermal Energy Delivered means the aggregate amount of heat energy contained in the steam and heated water delivered to customers by all of the Company's facilities during the period. The unit of measure is millions of British Thermal Units (MMBTU). Due to the fixed and variable nature of customer contracts, MMBTU production cannot be directly tied to financial performance.

⁶Harbor Coal Utilization is a factor that incorporates the production level of a blast furnace and the amount of coal utilization per unit of blast furnace production as compared to a reference blast furnace production level and coal utilization rate per unit of blast furnace production. The measurement unit is a ratio expressed as a percentage.

Management believes that EBITDA, Adjusted EBITDA, Free Cash Flow, Total Gross Electric Production, Total Thermal Energy Delivered and Harbor Coal Utilization provide useful supplemental information regarding the performance of the Company, facilitate comparisons of historical periods and are indicative of the Company's operating results.  Note, however, that these items are performance measures only, and do not provide any measure of the Company's cash flow or liquidity, and are not a substitute for IFRS financial measures.

Non-IFRS Measures

The Company reports its financial results in accordance with IFRS. The Company's management also evaluates and makes operating decisions using various other measures.  Three such measures are EBITDA, Adjusted EBITDA and Free Cash Flow, which are non-IFRS financial measures. We believe these measures provide useful supplemental information regarding the performance of the Company's business.