Newalta Corporation
TSX : NAL

Newalta Corporation

May 11, 2009 23:51 ET

Newalta Announces First Quarter 2009 Results


CALGARY, ALBERTA--(Marketwire – May 11, 2009) - Newalta Inc. ("Newalta") (TSX:NAL) today
announced financial results for the three months ended March 31, 2009.
"In Q1, revenue and EBITDA were down 25% and 65%, respectively, compared
to the same period last year. Combined divisional net margin dropped 59% to
$16 million, with the Western Division accounting for 69% of the decline. The
steep decline in lead and crude oil prices compared to last year caused
two-thirds of the drop in EBITDA. After a very slow start to the quarter, the
rest of the business realized a revenue drop of 14% and an EBITDA decline of
24%," said Al Cadotte, Newalta's President and CEO.
"Recent indications are positive as commodity prices are rising, our
markets are strengthening, and our onsite and heavy oil/SAGD services are
continuing to grow. We have also reduced our cost base and improved the
profitability of our operations. Our business has the capacity to generate
strong cashflow and excellent return on capital.
"We are at the early stages of a program to restructure and reposition
our business which began with the conversion to a corporation and with
organizational changes as well as significant reductions to our cost base. We
are now focused on driving strong bottom-line performance and reducing our
debt to reestablish benchmarks of performance and to position the business for
sustained profitable growth. Success will drive strong investor returns and
provide the financial resources to continue to build our company."

Financial results and highlights for the three months ended March 31,
2009

- Revenue decreased 25% to $112.5 million compared to Q1 2008. Net
earnings decreased 123% compared to Q1 2008, to a net loss of $4.4
million. EBITDA(1) decreased $22.1 million, or 65%, to $12.0 million
compared to Q1 2008. Excluding the change in commodity prices,
revenue, net earnings, and EBITDA in Q1 2009 were down from Q1 2008
by 14%, 51%, and 24%, respectively.
- Western's revenue and net margin(1) declined by 30% and 55% year-
over-year, respectively, due primarily to the decline in crude and
natural gas prices, which dropped 49% and 38%, respectively, and the
subsequent impact on North American drilling activity.
- Eastern's performance in Q1 declined with revenue and net margin down
17% and 74%, respectively, due to the 58% decline in lead pricing and
the weak Ontario economy.
- SG&A costs decreased, compared to last year by $1.2 million to $13.6
million. Q1 2009 SG&A also included non-recurring costs associated
with severance and organizational realignment.
- Maintenance capital expenditures(1) for the quarter were $2.0 million
compared to $1.2 million in 2008. Growth capital expenditures(1) were
$6.0 million compared to $16.7 million.

Other highlights

- We amended the terms of our credit facility with our Canadian lending
syndicate. The primary change to the credit facility is an increase
of the funded debt to EBITDA covenant from 3:00:1 to 3:50:1 for the
remainder of 2009. In addition, at the election of Newalta, the
principal amount of the credit facility was reduced from $425 million
to $375 million, leaving unused capacity of approximately $66
million. The maturity date remains October 12, 2010.
- Capital expenditures for 2009 have been reduced to $40 million,
comprised of $25 million for growth capital and $15 million for
maintenance capital. We continue to expect first half combined
capital spending to be $15 million.
- As we continue to be successful in securing new onsite project work
across Canada, including heavy oil/SAGD, we expect that a portion of
the $25 million in growth capital expenditures will be used to fund
these projects in the second half of the year.
- Prudent management of our balance sheet resulted in a reduction in
working capital to $32.4 million, an improvement of $68.0 million as
compared to March 31, 2008 and an improvement of $7.6 million as
compared to December 31, 2008.
- At the end of Q1 2009, senior long-term debt decreased $4.3 million
to $259.0 million, as compared to December 31, 2008. Excess cash will
be used to pay down debt.
- Management realigned the business with market conditions and reduced
the growth capital forecast and, as a result, 250 positions have been
eliminated. As well, effective April 1, Newalta suspended its
matching contributions to the Employee Profit Sharing Plan. These
actions are in addition to salary and hiring freezes and tight
controls on discretionary expenditures initiated in late 2008.
- Newalta's Board of Directors declared a dividend of $0.05 per share
to holders of record as at March 31, 2009 which was paid April 15,
2009.


FINANCIAL RESULTS AND HIGHLIGHTS

-------------------------------------------------------------------------
For the three months
ended March 31
-------------------------------
%
Increase
($000s except per share/unit data) 2009 2008 (Decrease)
-------------------------------------------------------------------------
Revenue 112,538 150,176 (25)
Net (loss) earnings (4,381) 19,304 (123)
- per share/unit ($) - basic (0.10) 0.47 (121)
- per share/unit ($) - diluted (0.10) 0.46 (122)
EBITDA(1) 12,030 34,139 (65)
- per share/unit ($)(1) 0.28 0.82 (66)
Funds from operations(1) 6,809 27,167 (75)
- per share/unit ($)(1) 0.16 0.65 (75)
Maintenance capital expenditures(1) 2,046 1,249 64
Dividends/Distributions declared(1) 2,126 23,077 (91)
- per share/unit - ($)(1) 0.05 0.56 (91)
Cash distributed(1) 7,560 19,136 (60)
Growth capital expenditures(1) 6,069 16,724 (64)
Weighted average share/units outstanding 42,402 41,543 2
Share/units outstanding, March 31,(2) 42,494 41,660 2
-------------------------------------------------------------------------
(1) These financial measures do not have any standardized meaning
prescribed by Canadian generally accepted accounting principles
("GAAP") and are therefore unlikely to be comparable to similar
measures presented by other issuers. Non-GAAP financial measures are
identified and defined in the attached Management's Discussion and
Analysis.
(2) Newalta has 42,498,860 shares outstanding as of May 11, 2009.

Management's Discussion and Analysis and Newalta's unaudited consolidated
financial statements and notes thereto are attached.

Management will hold a conference call on Tuesday, May 12, 2009 at 4:00
p.m. (ET) to discuss Newalta's performance for the three months ended March
31, 2009. To participate in the teleconference, please call 416-644-3423 or
1-800-732-9303. To access the simultaneous webcast, please visit
www.newalta.com. For those unable to listen to the live call, a taped
broadcast will be available at www.newalta.com and, until midnight on Tuesday,
May 19, 2009, by dialling 1-877-289-8525 using the pass code 21303582 followed
by the pound sign.
Newalta Inc. is Canada's largest industrial waste management and
environmental services provider and focuses on maximizing the value inherent
in industrial waste through the recovery of saleable products and recycling.
It also provides environmentally sound disposal of solid, non-hazardous
industrial waste. With talented people and a national network of facilities,
Newalta serves customers in the automotive, construction, forestry, lead,
manufacturing, mining, oil and gas, petrochemical, pulp and paper, refining,
steel and transportation service industries. Providing solid investor returns,
exceptional customer service, safe operations and environmental stewardship
has enabled Newalta to expand into new service sectors and geographic markets.
Newalta Inc. trades on the TSX as NAL. For more information, visit
www.newalta.com.

NEWALTA INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
Three months ended March 31, 2009 and 2008

Certain statements contained in this document constitute "forward-looking
statements". When used in this document, the words "may", "would", "could",
"will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and
similar expressions, as they relate to Newalta Inc., Newalta Income Fund (the
"Fund"), and Newalta Corporation (the "Corporation" and together with Newalta
Inc., the Fund, and other subsidiaries, "Newalta"), or their management, are
intended to identify forward-looking statements. Such statements reflect the
current views of Newalta with respect to future events and are subject to
certain risks, uncertainties and assumptions, including, without limitation,
general market conditions, oil and gas industry, commodity prices - oil,
battery manufacturing industry and commodity prices - lead, debt service,
future capital needs, exchange rates, dependence on senior management,
seasonality of operations, growth, acquisition strategy, integration of
businesses into Newalta's operations, potential liabilities from acquisitions,
regulation, landfill operations, competition, risk of pending and future legal
proceedings, employees, labour unions, fuel costs, access to industry and
technology, possible volatility of the common share price, insurance, debt
service, sales of additional shares, dependence on Newalta Corporation, nature
of the debentures issued by Newalta, Canadian federal income tax, redemption
of shares, and such other risks or factors described from time to time in the
reports filed with securities regulatory authorities by Newalta.
By their nature, forward-looking statements involve numerous assumptions,
known and unknown risks and uncertainties, both general and specific, that
contribute to the possibility that the predictions, forecasts, projections and
other forward-looking statements will not occur. Many other factors could also
cause actual results, performance or achievements to be materially different
from any future results, performance or achievements that may be expressed or
implied by such forward-looking statements and readers are cautioned that the
foregoing list of factors is not exhaustive. Should one or more of these risks
or uncertainties materialize, or should assumptions underlying the
forward-looking statements prove incorrect, actual results may vary materially
from those described herein as intended, planned, anticipated, believed,
estimated or expected. Furthermore, the forward-looking statements contained
in this document are made as of the date of this document and the
forward-looking statements in this document are expressly qualified by this
cautionary statement. Unless otherwise required by law, Newalta does not
intend, or assume any obligation, to update these forward-looking statements.

RECONCILIATION OF NON-GAAP MEASURES

This Management's Discussion and Analysis contains references to certain
financial measures, including some that do not have any standardized meaning
prescribed by Canadian generally accepted accounting principles ("GAAP") and
may not be comparable to similar measures presented by other corporations or
entities. These financial measures are identified and defined below:
"EBITDA" and "EBITDA per share" is a measure of Newalta's operating
profitability. EBITDA provides an indication of the results generated by
Newalta's principal business activities prior to how these activities are
financed, assets are amortized or how the results are taxed in various
jurisdictions. EBITDA is derived from the consolidated statements of
operations, comprehensive income and retained earnings. EBITDA per share is
derived by dividing EBITDA by the basic weighted average number of shares.
They are calculated as follows:

-------------------------------------------------------------------------
Three months ended
March 31,
($000s) 2009 2008
-------------------------------------------------------------------------
Net earnings (loss) (4,381) 19,304
Add back (deduct):
Current income taxes 195 236
Future income taxes (2,176) (2,998)
Finance charges 5,580 6,266
Interest revenue - (41)
Amortization and accretion 12,812 11,372
-------------------------------------------------------------------------
EBITDA 12,030 34,139
-------------------------------------------------------------------------
Weighted average number of shares/units 42,402 41,543
-------------------------------------------------------------------------
EBITDA per share 0.28 0.82
-------------------------------------------------------------------------

"Funds from operations" is used to assist management and investors in
analyzing cash flow and leverage. Funds from operations as presented is not
intended to represent operating funds from continuing operations or operating
profits for the period nor should it be viewed as an alternative to cash flow
from operating activities, net earnings or other measures of financial
performance calculated in accordance with GAAP. Funds from operations is
derived from the consolidated statements of cash flows and is calculated as
follows:

-------------------------------------------------------------------------
Three months ended
March 31,
($000s) 2009 2008
-------------------------------------------------------------------------
Cash from operations 30,042 8,745
Add back (deduct):
Changes in non-cash working capital (23,476) 17,810
Asset retirement costs incurred 243 612
-------------------------------------------------------------------------
Funds from operations 6,809 27,167
-------------------------------------------------------------------------
Weighted average number of shares/units 42,402 41,543
-------------------------------------------------------------------------
Funds from operations per share 0.16 0.65
-------------------------------------------------------------------------

"Net margin" and "Combined divisional net margin" are used by management
to analyze divisional operating performance. Net margin and combined
divisional net margin as presented are not intended to represent earnings
before taxes nor should it be viewed as an alternative to net earnings or
other measures of financial performance calculated in accordance with GAAP.
Net margin is calculated from the segmented information contained in the notes
to the consolidated financial statements and is defined as revenue less
operating and amortization and accretion expenses. Combined divisional net
margin is calculated from the segmented information contained in the notes to
the consolidated financial statements and is defined as revenue less operating
and amortization and accretion expenses for both the Western and Eastern
division. Combined divisional net margin excludes inter-segment eliminations
and unallocated revenue and expenses.

-------------------------------------------------------------------------
Three months ended
March 31,
($000s) 2009 2008
-------------------------------------------------------------------------
Earnings (loss) before taxes (6,362) 16,542
Add back (deduct):
Selling,general, and administrative 13,607 14,835
Finance charges 5,580 6,266
-------------------------------------------------------------------------
Net margin 12,825 37,643
-------------------------------------------------------------------------
Unallocated(1) 3,204 1,860
-------------------------------------------------------------------------
Combined divisional net margin 16,029 39,503
-------------------------------------------------------------------------
(1) Management does not allocate selling, general and administrative,
taxes, and interest costs in the segment analysis.

References to, EBITDA, EBITDA per share, funds from operations, net
margin and combined divisional net margin, throughout this document have the
meanings set out above.
Throughout this document, unless otherwise stated, all currency is stated
in Canadian dollars and MT is defined as "tonnes" or "metric tons".
The following discussion and analysis should be read in conjunction with
(i) the consolidated financial statements of Newalta Inc. and the notes
thereto for the three months ended March 31, 2009, (ii) the consolidated
financial statements of Newalta Inc. and notes thereto and Management's
Discussion and Analysis of Newalta Inc. for the year ended December 31, 2008,
(iii) the most recently filed Annual Information Form of Newalta Inc., and
(iv) the consolidated interim financial statements of the Fund and the notes
thereto and Management's Discussion and Analysis for the three months ended
March 31, 2008. Information for the three months ended March 31, 2009 along
with comparative information for 2008, is provided.
This Management's Discussion and Analysis is dated May 11, 2009 and takes
into consideration information available up to that date.

FINANCIAL RESULTS AND HIGHLIGHTS

-------------------------------------------------------------------------
For the three months
ended March 31
-------------------------------
%
Increase
($000s except per share/unit data) 2009 2008 (Decrease)
-------------------------------------------------------------------------
Revenue 112,538 150,176 (25)
Net (loss) earnings (4,381) 19,304 (123)
- per share/unit ($) - basic (0.10) 0.47 (121)
- per share/unit ($) - diluted (0.10) 0.46 (122)
EBITDA 12,030 34,139 (65)
- per share/unit ($) 0.28 0.82 (66)
Funds from operations 6,809 27,167 (75)
- per share/unit ($) 0.16 0.65 (75)
Maintenance capital expenditures 2,046 1,249 64
Dividends/Distributions declared 2,126 23,077 (91)
- per share/unit - ($) 0.05 0.56 (91)
Cash distributed 7,560 19,136 (60)
Growth capital expenditures 6,069 16,724 (64)
Weighted average share/units outstanding 42,402 41,543 2
Share/units outstanding, March 31, 42,494 41,660 2
-------------------------------------------------------------------------

CORPORATE OVERVIEW

The year started off with a decline in our base business as commodity
prices continued to be soft and our customers deferred waste shipments and
projects to reduce costs and conserve cash. Market conditions and commodity
prices improved throughout the quarter; however, this recovery was not
sufficient to overcome the very weak start. The market appears to have
stabilized as waste shipments continue to improve and project work has been
initiated within our customer base. We responded aggressively through the
quarter to adapt our cost structure to the business environment and growth
investment opportunities. Our pricing for services across all service lines
was maintained.

Table 1: Consolidated Revenue and Consolidated EBITDA
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

Revenue, net earnings, and EBITDA in Q1 2009 were down from Q1 2008 by
25%, 123%, and 65%, respectively. Combined divisional net margin was down 59%
or $23.5 million, with the Western Division accounting for $16.2 million of
the decline, and Eastern Division down $7.2 million. Commodity price declines,
for lead and crude oil, in Q1 as compared to the prior year represented
approximately two-thirds of the combined margin decline. The remainder of the
decline was related to general weakness in our markets. Excluding the change
in commodity prices, revenue, net earnings, and EBITDA in Q1 2009 were down
from Q1 2008 by 14%, 51%, and 24%, respectively.

-------------------------------------------------------------------------
Impact of Impact of
change in market
commodity and other
Q1 2008 prices(1) changes Q1 2009
-------------------------------------------------------------------------
Revenue 150,176 (17,034) (20,604) 112,538
Expenses
Operating 101,161 (3,203) (11,057) 86,901
Selling, general and
administrative 14,835 - (1,228) 13,607
Finance charges 6,266 - (686) 5,580
Amortization and accretion 11,372 - 1,440 12,812
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Net earnings (loss) 19,304 (13,831) (9,854) (4,381)
-------------------------------------------------------------------------
EBITDA 34,139 (13,831) (8,278) 12,030
-------------------------------------------------------------------------

(1) The change in commodity prices is defined as the change in the price
received for recovered crude oil and the change in the price of lead,
in each instance, in Canadian dollars.

Since December 31, 2008, continued prudent management of our balance
sheet resulted in a reduction in working capital of $7.6 million to $32.4
million. Senior long-term debt decreased $4.3 million to $259.0 million. The
terms of our Credit Facility were amended on April 22, 2009 in order to
provide additional flexibility to manage our business in the quarters ahead.
The primary change was an increase of the funded debt to EBITDA covenant from
3.00:1 to 3.50:1 for 2009. Other amendments will provide greater flexibility
to manage working capital, issue performance bonds, and absorb restructuring
costs.
We continued our comprehensive cost control program that included hiring
restrictions, suspended salary increases and restricted travel and other
discretionary expenses. We remain committed to tightly managing costs
throughout 2009. Since November 2008, we have eliminated 250 positions or
12.5% of our workforce through a combination of normal attrition and targeted
staff reductions. Effective April 1, 2009, Newalta suspended its matching
contributions to the Employee Profit Sharing Plan ("EPSP"). Although these
changes did not materially affect our Q1 results, they establish a new cost
base consistent with the current market and projected growth of the business.
Our planned capital spending for 2009 has been reduced by approximately
60%, from $103 million to $40 million. Maintenance capital is now projected to
be $15 million compared to the previously announced $28 million. Growth
capital spending is now projected to be $25 million, compared to the
previously announced $75 million. As we continue to be successful in securing
new onsite project work across Canada, including heavy oil/SAGD, we expect
that a portion of the $25 million in growth capital expenditures will be used
to fund these projects in the second half of the year. Excess cash will be
used to pay down debt.

OUTLOOK

In Q2 2008, revenue was $142.9 million and EBITDA was $26.6 million.
Since the start of 2009, commodity prices have steadily increased. We
anticipate the improved performance experienced late in Q1 across our business
lines to continue in Q2. Aggressive pursuit of onsite projects, projects in
the Heavy Oil business unit and Stoney Creek Landfill volumes are also
anticipated to contribute to Q2 performance. Commissioning the second kiln at
Ville Ste. Catherine will continue through Q2 and is anticipated to be
completed early in the second half of the year.
The actions that we have taken have rationalized our cost structure in
line with current market conditions and growth investments. These initiatives
will positively impact results in Q2 2009. The Q1 2009 savings from the cost
containment program were mostly offset by the additional reorganization costs,
but we expect to realize the full cost reduction benefit from these
initiatives for the remainder of the year. Commencing in Q2, year over year
cost savings are estimated to be approximately $8 million per quarter. Gains
in managing working capital should also be maintained for the remainder of
2009. With commodity price levels and market activity at current levels, Q2
will demonstrate the continued improvement in performance we began to
experience at the end of Q1. We enter Q2 with improved financial flexibility,
a strengthened competitive position. We are poised to capitalize on
opportunities as the economy recovers.

RESULTS OF OPERATIONS - WESTERN DIVISION

Overview

Western operates more than 55 facilities with more than 750 people in
British Columbia, Alberta, Saskatchewan, Texas and Wyoming. We have
reorganized our business units within the Western Division to Facilities,
Heavy Oil and Drill Site to better align our structure with our key strategic
growth areas. Western is operated and managed as an integrated set of assets
to provide a broad range of seamless waste management and recycling services
to customers.

Western's performance is affected by the following factors:
- fluctuation in the price of crude oil
- the amount of waste generated by producers
- state of the oil and gas industry in western Canada
- natural gas drilling activity
- fluctuation in the U.S./Canadian dollar exchange rate
- the strength of other industries in western Canada, including:
construction, forestry, mining, petrochemical, pulp and paper,
refining, and transportation service industries

The business units contributed the following to division revenue:

-------------------------------------------------------------------------
Q1 2009 Q1 2008
-------------------------------------------------------------------------
Facilities 71% 75%
Heavy Oil 18% 16%
Drill Site 11% 9%
-------------------------------------------------------------------------

Table 2: Western Revenue and Western Net Margin
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

The following table compares Western's results for the periods indicated:

-------------------------------------------------------------------------
($000s) Q1 2009 Q1 2008 % Change
-------------------------------------------------------------------------
Revenue - external 65,970 93,973 (30)
Revenue - internal 156 301 (48)
Operating costs 46,376 58,936 (21)
Amortization and accretion 6,319 5,661 12
-------------------------------------------------------------------------
Net margin 13,431 29,677 (55)
-------------------------------------------------------------------------
Net margin as % of revenue 20% 32% (38)
-------------------------------------------------------------------------
Maintenance capital 1,330 1,060 25
-------------------------------------------------------------------------
Growth capital(1) 1,264 6,363 (80)
-------------------------------------------------------------------------
Assets employed(2) 431,311 399,319 8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Growth capital does not include acquisitions.
(2) "Assets employed" is provided to assist management and investors in
determining the effectiveness of the use of the assets at a
divisional level. Assets employed is the sum of capital assets,
intangible assets, and goodwill allocated to each division.

Our markets experienced weakness in demand in Q1 2009, especially within
the first half of the quarter, combined with reduced crude oil pricing.
Oilfield waste volumes were down 14%, as compared to the prior year, with a
26% decline at Facilities and flat Heavy Oil volumes. Customers reduced
expenditures as projects were postponed and waste shipments were delayed. In
addition, well completions in March were delayed to take advantage of the
April 1, 2009 Alberta Government royalty rebate.
In Q1 2009, crude oil sales and waste volumes accounted for approximately
two-thirds of the margin decline compared to Q1 2008. Recovered crude oil
volumes remained relatively flat in Q1 2009 at 108,000 bbls. Our crude oil
price received declined 50% from the prior year. In addition, off spec
production processed by us for our SAGD customers was down. As a result, crude
oil sales to our account declined approximately $8 million, year over year.
Drill site equipment-in-use was down in both Canada and the U.S., with
utilization dropping from 48% in Q1 2008 to 31% in Q1 2009.
Consistent with corporate initiatives, the Division's operating costs
were reduced and approximately 15% of positions, primarily in Facilities and
Drill Site, were eliminated by the end of Q1 2009. These actions, combined
with improved crude oil pricing and new Heavy Oil projects that are
anticipated to come on-line in Q2, will positively impact performance in Q2.

Facilities

The Facilities business unit is integral to our operations, providing the
operational expertise and management capacity to support key business
initiatives. Facilities revenue is primarily generated from:
- the processing and disposal of industrial and oilfield-generated
wastes, including collection, treatment, water disposal, clean oil
terminalling, custom treating, and landfilling
- sale of recovered crude oil for our account
- oil recycling, including the collection and processing of waste
lube oils and the sale of finished products
- onsite service in western Canada, excluding services provided by
Heavy Oil
- environmental services comprised of environmental projects and
drilling waste management services

With the temporary weakness in our markets, Facilities performance was
down. Revenue fell 34% from Q1 2008 driven primarily by the 50% year-over-year
change in recovered crude oil prices, and the fall in waste processing and
water disposal volumes, down 26% and 16%, respectively. The remainder of the
business unit revenue was also down in the quarter. However, base oil sales,
which had an extremely weak start to the year, recovered to normal volumes in
the last half of the quarter. Similarly, crude oil prices increased 45% in the
last month of the quarter versus the first month of the quarter.

-------------------------------------------------------------------------
Q1 2009 Q1 2008 % change
-------------------------------------------------------------------------
Waste processing volumes ('000 m(3)) 100 135 (26)
Recovered crude oil ('000 bbl)(1) 56 65 (14)
Average crude oil price
received (CDN$/bbl) 44.90 89.70 (50)
Recovered oil sales ($ millions) 2.5 5.8 (57)
Edmonton par price (CDN$/bbl)(2) 49.36 96.61 (49)
-------------------------------------------------------------------------
(1) Represents the total crude oil recovered and sold for our account.
(2) Edmonton par is an industry benchmark for conventional crude oil.
The average trailing twelve month price we received for recovered
crude oil has averaged between 89% and 92% of Edmonton Par


Table 3: Facilities - Waste processing volumes
http://files.newswire.ca/788/2009_Q1_Graphs.pdf


Table 4: Facilities - Recovered crude oil
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

Heavy Oil

Newalta's heavy oil services business began 15 years ago with facilities
at Hughenden and Elk Point, Alberta. Using the centrifugation experience
gained at processing heavy oil waste streams, Newalta launched a new onsite
service for customers in the heavy oil market. This business has evolved from
managing heavy oil in Newalta's facility network to operating equipment on
customers' sites. Leveraging our facilities as staging areas, Newalta delivers
a broad range of specialized services at numerous customer sites under short
and long-term arrangements.
Heavy Oil business unit revenue is generated from three main areas:

- specialized onsite services under short and long-term arrangements
- processing and disposal of oilfield-generated wastes, including
water disposal, and landfilling
- sale of recovered crude oil for our account

Apart from the decline in crude oil prices, Heavy Oil experienced
reasonably strong performance. Recovered crude oil volumes increased 21% but
price declined 45%. Waste processing volumes were flat year over year. As a
result, revenue fell 20% from Q1 2008.
We continue to be successful in securing new onsite projects. In April,
we commissioned a new long-term contract, and we are negotiating our first ten
year agreement. Fees received for onsite services are generally based on
processing volumes and are not directly susceptible to fluctuations in crude
oil pricing.

-------------------------------------------------------------------------
Q1 2009 Q1 2008 % change
-------------------------------------------------------------------------
Waste processing volumes ('000 m(3)) 127 130 (2)
Recovered crude oil ('000 bbl)(1) 52 43 21
Average crude oil price
received (CDN$/bbl) 36.43 68.69 (47)
Recovered oil sales ($ millions) 1.9 3.0 (37)
Bow River Hardisty (CDN$/bbl)(2) 45.41 76.66 (41)
-------------------------------------------------------------------------
(1) Represents the total crude oil recovered and sold for our account.
(2) Bow River Hardisty is an industry benchmark for heavy crude oil. The
average trailing twelve month price we received for recovered crude
oil has averaged between 93% and 96% of Bow River Hardisty.


Table 5: Heavy Oil - Waste processing volumes
http://files.newswire.ca/788/2009_Q1_Graphs.pdf


Table 6: Heavy Oil - Recovered crude oil
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

Drill Site

Our Drill Site strategy is to develop a fully integrated service offering
in the U.S. including fixed facility waste processing as well as onsite and
drill site services that are similar to Newalta's western Canadian business.
Although Newalta's current market share is very small, we expect to continue
to expand services and establish operations in these markets through steady
organic development.
Drill Site business unit revenue is presently generated primarily from
the supply and operation of drill site processing equipment, including
equipment for solids control and drill cuttings management. Currently, Drill
Site delivers 11% of divisional revenue or 6% of consolidated revenue.
In both the U.S. and Canada, drilling fell significantly in March due
primarily to reduced activity from low natural gas prices. As a result,
revenue in Q1 2009 fell by 12% as compared to the prior year. Our
equipment-in-use fell from 67 to 52 units in Q1 2009, with the U.S. operations
representing approximately 60% of the decline.

The table below reflects the changes in average drill site equipment-in-
use and utilization:

-------------------------------------------------------------------------
Q1 2009 Q1 2008 % change
-------------------------------------------------------------------------
Average equipment-in-use(1)
Canada 31 37 (16)
U.S. 21 30 (30)
-------------------------------------------------------------------------
52 67 (22)
-------------------------------------------------------------------------
Average equipment available 170 141 20
-------------------------------------------------------------------------
Utilization 31% 48% (33)
-------------------------------------------------------------------------
(1) "Average equipment in use" is calculated by taking the product of the
total amount of average processing equipment and the utilization rate
for the period. Average equipment available is adjusted by 10% for
maintenance and transportation. Maximum utilization of 100%
represents 90% of the total number of processing days.

Table 7 - Drill Site
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

RESULTS OF OPERATIONS - EASTERN DIVISION

Overview

Eastern provides industrial waste management, recycling and other
environmental services to markets located in eastern Canada through its
integrated network of over 30 facilities with more than 715 employees. This
network has two business units, Québec/Atlantic and Ontario, and features
Canada's largest lead-acid battery recycling facility with two long body
kilns, located in Ville Ste-Catherine, Québec ("VSC") with a combined annual
capacity of approximately 80,000MT. The network also includes an engineered
non-hazardous solid waste landfill located in Stoney Creek, Ontario ("SCL")
with an annual permitted capacity of 750,000MT of waste per year and, based on
current volumes, has an estimated remaining life of 10 years. The business
units contributed the following to division revenue:

-------------------------------------------------------------------------
Q1 2009 Q1 2008
-------------------------------------------------------------------------
Québec/Atlantic 74% 70%
Ontario 26% 30%
-------------------------------------------------------------------------

Eastern's performance is affected by the following factors:
- fluctuations in the LME trading price of lead
- supply and demand in the North American battery manufacturing
industry
- fluctuation in the U.S./Canadian dollar exchange rate
- market conditions in eastern Canada and bordering U.S. states,
including: automotive, construction, forestry, manufacturing,
mining, oil and gas, petrochemical, pulp and paper, refining,
steel, and transportation service industries


The following table compares Eastern's results for the periods indicated:

-------------------------------------------------------------------------
($000s) Q1 2009 Q1 2008 % Change
-------------------------------------------------------------------------
Revenue - external 46,568 56,162 (17)
Operating costs 40,681 42,526 (4)
Amortization and accretion 3,289 3,810 (14)
-------------------------------------------------------------------------
Net margin 2,598 9,826 (74)
-------------------------------------------------------------------------
Net margin as % of revenue 6% 17% (65)
-------------------------------------------------------------------------
Maintenance capital 717 161 345
-------------------------------------------------------------------------
Growth capital(1) 3,398 6,106 (44)
-------------------------------------------------------------------------
Assets employed(2) 352,399 328,857 7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Growth capital does not include acquisitions.
(2) "Assets employed" is provided to assist management and investors in
determining the effectiveness of the use of the assets at a
divisional level. Assets employed is the sum of capital assets,
intangible assets, and goodwill allocated to each division.

Table 8: Eastern Revenue and Western Net Margin
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

Eastern's weaker performance in Q1 2009 compared to Q1 2008 was largely
attributable to the 60% decline in LME lead prices. Improvements in
Québec/Atlantic, excluding VSC, substantially offset the decline in Ontario.
The impact of lower lead prices represented approximately 80% of the margin
decline in the east. Signs of a moderate recovery within the quarter were
evidenced by improved LME lead pricing throughout the quarter and a steady
recovery in activity levels in Ontario during the last half of the quarter.
Consistent with corporate initiatives, the Division's operating costs
were reduced and approximately 8% of positions, predominantly in Ontario, were
eliminated by the end of Q1 2009. These actions, combined with improving lead
prices, continued strength in Québec/Atlantic facilities, ongoing improvement
in event-based Ontario landfill tonnages, and increased onsite projects,
should positively impact performance in Q2.

Québec/Atlantic

The Québec/Atlantic Canada business unit revenue is derived from:
- VSC, a lead-acid battery recycling facility in Québec
- waste treatment and transfer fixed facilities that process,
consolidate, and bulk hazardous waste
- onsite services, including a fleet of specialized vehicles and
equipment for waste transport and onsite processing

Overall, the decline in revenue was due primarily to the weak average LME
price for lead. Excluding VSC, the Québec/Atlantic facilities and onsite
services delivered improved performance in Q1 compared to the same period in
2008 despite a weaker economic environment.
LME lead prices for the quarter were 60% lower than in Q1 2008. Excluding
lead tonnage produced by Kiln 2, lead tonnage sold increased 6%, to 11,300 MT.
During the commissioning process of Kiln 2, we capitalized the costs, net of
any revenue. The split between direct sales and tolling was 71% direct sales
and 29% tolling in Q1 2009. Kiln 1 operated 82 days out of 90 available days,
with eight days of scheduled maintenance at the beginning of January.
Commissioning of Kiln 2 is anticipated to be completed early in the
second half of the year. Utilization of Kiln 2 will be dependant on the
availability of feedstock, stable LME pricing at or above current levels, and
solid demand for finished product.

The table below highlights the lead sold in 2009 and the percentage by
weight of direct sales and tolling.

-------------------------------------------------------------------------
Q1 2009 Q1 2008 % change
-------------------------------------------------------------------------
Lead sold ('000 MT)(1) 13.9 10.7 30
% of lead by weight
Direct 71 67 6
Tolling 29 33 (12)
-------------------------------------------------------------------------
Average price - direct sales ($/MT)(2) 1,515 3,014 (50)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average lagged LME price (U.S.$/MT)(3) 1,157 2,899 (60)
-------------------------------------------------------------------------
(1) Q1 2009 includes 2,600 MT sold to the LME that relates to production
during the commissioning phase of Kiln 2.
(2) Average price received means all direct sales of finished products,
including finished products that are alloyed to customer
specifications.
(3) Average LME price is based on a one-month lag consistent with our
pricing structure.

We continue to aggressively pursue onsite project work and have been
successful at securing new business. Onsite projects secured to date for 2009
are equal to the work completed in all of 2008.

Ontario

The Ontario business unit revenue is derived from:
- SCL, an engineered non-hazardous solid waste landfill
- waste treatment and transfer fixed facilities that process,
consolidate, and bulk hazardous waste
- onsite services, including a fleet of specialized vehicles and
equipment for emergency response, waste transport, and onsite
processing

Ontario activity fell along with the Ontario economy. While pricing
remained flat in Q1 2009, revenue dropped 28% due to declining volumes.
Tonnage at SCL fell 35% in Q1 2009. However, tonnage received in March
recovered significantly, with more than half of the quarter's tonnage
landfilled during the month. Tonnage at Ontario facilities was down only 13%.
We are continuing to aggressively pursue a number of event-based projects
for SCL as well as a number of onsite projects that are anticipated to
contribute to performance in Q2.

-------------------------------------------------------------------------
Q1 2009 Q1 2008 % change
-------------------------------------------------------------------------
Landfill waste ('000 MT) 77.0 119.2 (35)
-------------------------------------------------------------------------

Table 9: Ontario - Volume of waste collected
http://files.newswire.ca/788/2009_Q1_Graphs.pdf

CORPORATE AND OTHER

-------------------------------------------------------------------------
($000s) Q1 2009 Q1 2008 % Change
-------------------------------------------------------------------------
Selling, general and
administrative expenses 13,607 14,835 (8)
as a % of revenue 12.1% 9.9% 22
Amortization and accretion 12,812 11,372 13
as a % of revenue 11.4% 7.6% 50
-------------------------------------------------------------------------

Selling, general and administrative expenses were down 8%, to $13.6
million, due primarily to the cost containment program. We eliminated over 50
positions from SG&A to balance resources with current business activity and
growth capital investments. As a result of these actions, normalized quarterly
SG&A expense run rate is anticipated to be approximately $13.0 million for the
remainder of the year, netting a 15% reduction in our full year SG&A from
2008.
Amortization and accretion in Q1 2009 increased primarily due to the
growth in our capital asset base from our 2008 capital expenditure program.
The net loss on the disposal of assets for the quarter was $0.7 million and
was netted against amortization and accretion.

-------------------------------------------------------------------------
($000s) Q1 2009 Q1 2008 % Change
-------------------------------------------------------------------------
Bank fees and interest 3,264 3,948 (17)
Convertible debentures interest and
accretion of issue costs 2,316 2,318 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Finance charges 5,580 6,266 (11)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The decrease in finance charges was primarily driven by lower interest
rates. Finance charges associated with the Debentures include an annual coupon
rate of 7%, the accretion of issue costs and discount on the debt portion of
the debentures. See "Liquidity and Capital Resources" in this MD&A for
discussion of our long-term borrowings.

-------------------------------------------------------------------------
($000s) Q1 2009 Q1 2008 % Change
-------------------------------------------------------------------------
Current tax 195 236 (17)
Future income tax (2,176) (2,998) 27
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Provision for (recovery of) income taxes (1,981) (2,762) 28
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Current tax expense for Q1 2009 was $0.2 million, similar to Q1 2008. We
had a future income tax recovery of $2.2 million, compared to a future income
tax recovery of $3.0 million in 2008. While the trust structure was in place,
Newalta generated approximately $150 million of tax loss carryforwards. Other
than provincial capital taxes and U.S. state and federal income taxes, we do
not anticipate paying any cash taxes for at least three years.
See "Critical Accounting Estimates - Income Taxes" in this MD&A for
further discussion on the impact of the Conversion.

LIQUIDITY AND CAPITAL RESOURCES

The term liquidity refers to the speed with which a company's assets can
be converted into cash, as well as cash on hand. Our liquidity risk may arise
from general day-to-day cash requirements, and in the management of our
assets, liabilities and capital resources. Liquidity risk is managed against
our financial leverage to meet obligations and commitments in a balanced
manner.

Our debt capital structure is as follows:

-------------------------------------------------------------------------
($000s) March 31, December 31,
2009 2008
-------------------------------------------------------------------------
Use of credit facility:
Senior long-term debt(1) 260,039 264,687
Letters of credit 48,439 49,249
-------------------------------------------------------------------------
Funded senior debt A 308,478 313,936
Unused credit facility capacity 66,522 111,064
-------------------------------------------------------------------------
Debentures B 115,000 115,000
-------------------------------------------------------------------------
Total Debt equals A+B 423,478 428,936
-------------------------------------------------------------------------
(1) Senior long-term debt is presented in this table gross of issue
costs. Issue costs were $1.1 million in Q1 2009 and $1.4 million
in Q4 2008.

Despite the year over year decline in EBITDA, the impact of improved
working capital, reduced cash distributions, and reduced capital expenditures
resulted in a $4.3 million decrease in our senior long-term debt as compared
to December 31, 2008.
Our working capital at March 31, 2009 was $32.4 million compared with
$40.0 million at December 31, 2008 and $100.4 million at March 31, 2008. This
improvement highlights the degree of progress over the last 12 months by
addressing the following key areas:

- business process initiatives to improve the timeliness and
accuracy of invoices
- improved collection processes
- strengthened credit risk management

As a result of these initiatives, notwithstanding a more challenging
economic environment, days' sales outstanding in receivables were reduced by
an additional 4 days since year end, building upon a 10 day improvement at
December 31, 2008 over the previous year. In addition, over 90 day accounts
were reduced by $2.4 million. Days' sales outstanding in payables were also
managed in order to better align payment terms with the market.
At current activity levels, working capital of $32.4 million is expected
to be sufficient to meet our ongoing commitments and operational requirements
of the business. Management will continue to aggressively manage working
capital in order to protect and build upon improvements made over the last 12
months.
The Current Ratio is defined as the ratio of total current assets to
total current liabilities. As a result of the ongoing process improvements in
the management and collection of receivables, and management and payment of
payables, this ratio remained relatively flat to the end of the prior year,
1.36 times at March 31, 2009 as compared to 1.34 times at December 31, 2008.
The current ratio was 2.09 times at March 31, 2008, again highlighting the
magnitude of the improvement between periods. This ratio, at March 31, 2009,
exceeds our bank covenant minimum requirement of 1.10:1.

SOURCES OF CASH

Our liquidity needs can be sourced in several ways including: funds from
operations, borrowings against our credit facility, proceeds from the sale of
assets, and the issuance of securities from treasury.

Credit Facility

The Credit Facility is available to fund growth capital expenditures and
for general corporate purposes as well as to provide letters of credit to
third parties for financial security up to a maximum amount of $60.0 million.
The aggregate dollar amount of outstanding letters of credit is not
categorized in the financial statements as long-term debt; however, the issued
letters of credit reduce the amount available under the Credit Facility and
are included in the definition of funded debt for covenant purposes.
On April 22, 2009, in order to provide additional flexibility to manage
our business during these difficult market conditions, we amended the terms of
our Credit Facility with our Canadian lending syndicate. The primary change
was an increase of the funded debt to EBITDA covenant restriction from 3.00:1
to 3.50:1 for all of 2009. Other amendments negotiated will provide greater
flexibility to manage working capital, issue performance bonds, and absorb
restructuring costs without impacting EBITDA within the definition of funded
debt. Additional detail on the changes made to the current ratio and treatment
of performance bonds is noted below:

- Our current ratio covenant restriction has been reduced from
1.20:1 to 1.10:1. This change acknowledges the gains management
has made to date in managing its cash processes. Because there is
no current portion to the revolving credit line, reductions to
bank debt do not improve the current ratio but rather will reduce
the ratio. The revised covenant will enable management more room
to optimize its current ratio through ongoing process
improvements.
- Surety bonds (including performance and bid bonds) under the
credit facility are excluded from the definition of funded debt.
The aggregate amount of surety bonds is limited to $125 million.
Management has identified new business opportunities from the
various infrastructure spending programs that may arise from
government stimulus spending. Such programs will typically require
performance bonds and, as a result, the new amendment will allow
management greater flexibility to participate in such new
projects.

Management elected to reduce the principal amount of the Credit Facility
from $425 million to $375 million, leaving unused capacity of $66.5 million at
the end of the first quarter. Consistent with our cost containment program,
this reduction in capacity will reduce our bank fees. The maturity date
remains October 12, 2010.
Included within our funded senior debt are letters of credit in the
amount of $48.4 million ($49.2 million at December 31, 2008, and $40.1 million
at March 31, 2008) which have been provided as security to third parties,
including environmental regulatory authorities to satisfy asset retirement
obligations.

Financial performance relative to the financial ratio covenants(1) under
the Credit Facility is reflected in the table below:

-------------------------------------------------------------------------
March 31, 2009 Threshold
-------------------------------------------------------------------------
Current Ratio(2) 1.36 1.10:1 minimum
Funded Debt(3) to EBITDA(4) 2.88 3.50:1 maximum
Fixed Charge Coverage(5) 1.13 1.00:1 minimum
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) We are restricted from declaring dividends if we are in breach of the
covenants under our Credit Facility.
(2) Current Ratio means, the ratio of consolidated current assets to
consolidated net current liabilities (excluding the current portion
of long-term debt and capital leases outstanding, if any).
(3) Funded debt is a non-GAAP measure, the closest measure of which is
long-term debt. Funded debt is calculated by adding the senior long-
term debt to the amount of letters of credit outstanding at the
reporting date.
(4) Funded Debt to EBITDA means the ratio of consolidated Funded Debt to
the aggregate EBITDA for the trailing twelve-months. Funded Debt is
generally defined as long-term debt and capital leases including any
current portion thereof but excluding future income taxes and future
site restoration costs. EBITDA is defined as the trailing twelve-
months of EBITDA for Newalta Inc. which is normalized for any
acquisitions completed during that time frame and excluding any
dispositions incurred as if they had occurred at the beginning of the
trailing twelve-months. Funded debt to EBITDA will remain at 3.50:1
for the remainder of 2009. The ratio will revert to 3.00:1 in 2010.
(5) Fixed Charge Coverage Ratio means, based on the trailing twelve month
period, EBITDA less unfinanced capital expenditures and cash taxes to
the sum of the aggregate of principal payments (including amounts
under capital leases, if any), interest (excluding accretion for the
convertible debentures), dividends paid for such period, other than
cash payments in respect of a dividend reinvestment plan, if any.
Unlike the Funded Debt to EBITDA ratio, the Fixed Charge Coverage
ratio trailing twelve month EBITDA is not normalized for acquisitions
or dispositions.

As at March 31, 2009, our funded senior debt was $308.5 million resulting
in unused capacity of $66.5 million on our Credit Facility and a funded debt
to EBITDA ratio of 2.88:1. Management continues to focus on reducing funded
senior debt through the following initiatives:
- reduction in the amount of outstanding letters of credit
- continued improvement in the management of working capital
- restricted capital spending in 2009
- reduced expenses with the implementation of our cost control
program, including: staff reductions, hiring restrictions,
postponement of salary increases and restrictions on travel and
discretionary expenses, and the suspension of our matching
contributions to the EPSP
- sale of redundant, idle, or non-core assets

The actions we have undertaken positively impacted our funded debt
position at the end of Q1 2009, and we anticipate a continued positive impact
throughout 2009, better positioning Newalta within this challenging economic
environment. Management anticipates these actions will strengthen our balance
sheet and better position us to capitalize on opportunities as the economy
recovers. Management remains confident that we will be able to manage within
our covenants for 2009 and 2010.
At March 31, 2009, we have $48.4 million of outstanding letters of credit
issued to various environmental regulatory authorities of which $34.1 million
have been issued in connection with our operations in Alberta. We have been
participating with industry and regulatory authorities over the past several
years in connection with changing the security requirements for permitted
oilfield waste facilities in Alberta. The Alberta Energy Resources
Conservation Board (ERCB) is awaiting approval of amendments to the Alberta
Energy Statutes Amendment Act that will allow it to implement the Oilfield
Waste Liability (OWL) Program. The OWL Program will replace the current fully
funded liability management program for oilfield waste facilities with a
facility specific asset to liability risk based assessment that is backed by
the existing upstream oil and gas industry liability management program. If
enacted in its present form, we anticipate that outstanding letters of credit
in the amount of approximately $29 million will be returned to us in 2009 with
no additional security required to be posted. There can be no assurance that
the draft legislation will be enacted in its proposed form or at all and the
timing related thereto. In addition, there can be no assurance as to the
timing of the enactment of the draft legislation or the respective timing of
the release of our letters of credit.

Debentures

The Debentures have a maturity date of November 30, 2012 and bear
interest at a rate of 7.0% payable semi-annually in arrears on May 31 and
November 30 each year beginning May 31, 2008. Each $1,000 debenture is
convertible into 43.4783 shares, at a conversion price of $23.00 per share, at
any time at the option of the holders of the Debentures. The Debentures are
not included in calculating financial covenants in the Credit Facility.
There have been no redemptions of the Debentures in Q1 2009.

USES OF CASH

Our primary uses of funds include maintenance and growth capital
expenditures as well as acquisitions, payment of distributions, and operating
and SG&A expenses.

Capital Expenditures

"Growth capital expenditures" or "growth and acquisition capital
expenditures" are capital expenditures that are intended to improve Newalta's
efficiency and productivity, allow Newalta to access new markets, and
diversify its business. Growth capital or growth and acquisition capital are
reported separately from maintenance capital by management because these types
of expenditures are discretionary. "Maintenance capital expenditures" are
capital expenditures to replace and maintain depreciable assets at current
service levels. Maintenance capital expenditures are reported separately from
growth activity by management because these types of expenditures are not
discretionary and are required to maintain current operating levels. Capital
expenditures for Q1 2009 and Q1 2008 were:

-------------------------------------------------------------------------
($000s) Q1 2009 Q1 2008
-------------------------------------------------------------------------
Growth capital expenditures(1) 6,069 16,724
Maintenance capital expenditures 2,046 1,249
-------------------------------------------------------------------------
Total capital expenditures(2) 8,115 17,973
-------------------------------------------------------------------------
(1) Acquisitions in Q1 2008 and Q1 2009 were nil.
(2) The numbers in this table differ from the consolidated statement of
cash flows because the numbers above do not reflect the net change in
working capital related to acquisitions.

Total capital expenditures for the quarter were $8.1 million. Growth
capital expenditures of $6.1 million were primarily used to complete projects
that were underway at the end of 2008. Growth capital expenditures in Q1 2009
were funded by funds from operations and working capital. Maintenance capital
increased $0.8 million, to $2.0 million.
Management has restricted capital expenditures in 2009 to $40 million,
comprised of $25 million for growth capital and $15 million for maintenance
capital. As we continue to be successful in securing new onsite project work
across Canada, including heavy oil/SAGD, we expect that a portion of the $25
million in growth capital expenditures will be used to fund these projects in
the second half of the year. This compares to an initial 2009 capital budget
of $75 million for growth capital and $28 million for maintenance capital and
to a total capital spend in 2008 of $127 million. These investments will be
funded entirely from funds from operations.

Dividends and Share Capital

In determining the dividend to be paid to our shareholders, the Board of
Directors considers a number of factors including the forecasts for operating
and financial results, maintenance and growth capital requirements as well as
market activity and conditions. After review of all factors, the Board
declared a dividend of $0.05 per share, paid April 15 to shareholders of
record as at March 31, 2009.
The Board will continue to review future dividends, taking into account
all factors noted above.
As at May 11, 2009, Newalta had 42,498,860 shares outstanding,
outstanding options to purchase up to 2,830,200 shares and a number of shares
that may be issuable pursuant to the $115.0 million in Debentures (see Sources
of Cash - Debentures).
On March 31, 2009, certain officers and directors of Newalta Inc.
subscribed for 93,766 shares at a price of $2.65 per share for gross proceeds
of $248,480. On April 1, 2009, an additional director subscribed for 4,622
shares at a price of $2.65 per share for gross proceeds of $12,248.

Contractual Obligations

For the three months ended March 31, 2009, there have been no significant
changes in our contractual obligations. For a summary of our contractual
obligations, see page 28 of the MD&A for the year ended December 31, 2008.

SUMMARY OF QUARTERLY RESULTS


($000s except per 2009 2008
share/unit data) ---------------------------------------------
Q1 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Revenue 112,538 145,341 158,579 142,939 150,176
Earnings (loss)
before taxes (6,362) 5,616 19,041 9,293 16,542
Net earnings (loss) (4,381) 9,085 18,717 11,776 19,304
Earnings (loss) per
share/unit ($) (0.10) 0.21 0.44 0.28 0.47
Diluted earnings (loss) per
share/unit ($) (0.10) 0.21 0.44 0.28 0.46
Weighted average
share/units - basic 42,402 42,266 42,102 41,822 41,543
Weighted average
share/units - diluted 42,402 42,266 42,111 41,950 41,635
EBITDA 12,030 27,600 37,441 26,573 34,139
-------------------------------------------------------------------------



($000s except per 2007
share/unit data) ---------------------------
Q4 Q3 Q2
-------------------------------------------------------
Revenue 137,075 133,358 111,594
Earnings (loss)
before taxes 7,784 14,524 3,799
Net earnings (loss) 23,613 17,893 6,716
Earnings (loss) per
share/unit ($) 0.57 0.44 0.17
Diluted earnings (loss) per
share/unit ($) 0.54 0.43 0.16
Weighted average
share/units - basic 41,191 40,579 40,361
Weighted average
share/units - diluted 43,779 40,725 40,562
EBITDA 26,457 28,980 15,511
-------------------------------------------------------

Quarterly performance is affected by seasonal variation as described
below.
In 2007, acquisitions completed in eastern Canada in the second half of
2006 helped to partially offset the weak natural gas drilling environment in
western Canada. Western endured a weak natural gas drilling environment during
Q2 2007. This weakness was further compounded by the spring breakup road bans
and an extended wet season preventing the transportation of waste from well
workovers and therefore reducing processing volumes. This resulted in lower
revenue, earnings and earnings before taxes. In Q3 2007, operations returned
to seasonal levels but earnings before taxes remained lower when compared to
the same period in 2006, as a result of the continued weakness in the western
Canadian natural gas drilling market. Earnings before taxes in Q4 2007 was
lower than Q3 2007 due to a $2 million loss on the disposal of leasehold
improvements associated with the early termination of office space leases as
well as increased SG&A and interest expense incurred in anticipation of
growth. Net earnings in Q4 2007 improved over Q3 2007 attributable to a future
income tax recovery due to a reduction in the estimated future income tax
rate.
In 2008, the increase in revenue, earnings before taxes, and net earnings
compared to the first three quarters of 2008 were mainly due to full quarter
contributions from acquisitions in each quarter as well as higher crude oil
and lead revenue, driven both by increases in volume and commodity prices.
Natural gas drilling remained at near 2007 levels in 2008. In Q4 2008,
commodity prices declined significantly, negatively impacting revenue and
margin in both divisions.
In 2009, the decrease in revenue, earnings before taxes, and net earning
as compared to prior period was mainly due to weakening economic conditions
experienced in Q1 2009. Lead and crude oil prices fell from historic highs
achieved in 2008, continuing the negative impact on revenue and margin from Q4
2008.
From Q2 2007 to Q4 2008, the increase in the weighted average number of
shares/trust units is related to the former DRIP program of the Newalta Income
Fund. As a part of the conversion to a corporation on December 31, 2008,
Newalta eliminated the DRIP program in January 2009.

Seasonality of Operations

Quarterly performance is affected by, among other things, weather
conditions, commodity prices, foreign exchange, market demand and the timing
of our growth capital investments as well as acquisitions and the
contributions from those investments. Acquisitions and growth capital
investments completed in the first half of the year will tend to strengthen
the second half financial performance.
In 2009, the volatility of commodity prices combined with the impact of
management's cost cutting initiatives may have an effect on seasonality of
combined divisional net margin and EBITDA.
For Western, the frozen ground during the winter months in western Canada
provides an optimal environment for drilling activities and consequently, the
first quarter is typically strong. As warm weather returns in the spring, the
winter's frost comes out of the ground rendering many secondary roads
incapable of supporting the weight of heavy equipment until the roads have
thoroughly dried out. Road bans, which are generally imposed in the spring,
restrict waste transportation which reduces demand for the Western Division's
services and therefore, the second quarter is generally the weakest quarter of
the year for Western. The third quarter is typically the strongest quarter for
Western due to favourable weather conditions and market cyclicality. The
expansion into the U.S. is anticipated to somewhat reduce the impact that
weather conditions have on drilling related activities as the areas in the
U.S. in which we operate are not affected by frozen ground requirements for
winter drilling nor are they impacted by the spring thaw. For Western, over
the past two years, quarterly revenue as a percentage of annual Western
revenue was: 26% for the first quarter, 23% for the second quarter, 27% for
the third quarter, and the fourth quarter was 24%.
Eastern's services are generally curtailed by colder weather in the first
quarter, which is typically its weakest quarter as aqueous wastes and onsite
work are restricted by colder temperatures. The third quarter is typically the
strongest for Eastern due to the more favourable weather conditions and market
cyclicality. The addition of VSC to Eastern has reduced the significance of
this variability, as the demand for recycled lead is not generally affected by
seasonality. Eastern's quarterly revenue as a percentage of annual Eastern
revenue has not been affected by the trends discussed above due to the effect
of acquisitions. Based on the last two years of operations, including
historical information acquired by management for acquisitions completed in
2007, we estimate that quarterly revenue as a percentage of annual revenue for
Eastern would have approximately been: 23% in the first quarter, 25% in the
second quarter, 25% in the third quarter and 27% in the fourth quarter.

OFF-BALANCE SHEET ARRANGEMENTS

We currently do not have any off-balance sheet arrangements.

SENSITIVITIES

Our revenue is sensitive to changes in commodity prices for crude oil,
base oils, and lead. These factors have both a direct and indirect impact on
our business. The direct impact of these commodity prices is reflected in the
revenue received from the sale of products such as crude oil, base oils and
lead. The indirect impact is the effect that the variation of these factors,
including natural gas, has on activity levels of our customers and, therefore,
demand for our services. The indirect impact of these fluctuations previously
discussed are not quantifiable.
We do not see any significant variation to the sensitivities provided in
the MD&A for the year ended December 31, 2008.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements in accordance with GAAP
requires management to make estimates with regard to the reported amounts of
revenue and expenses and the carrying values of assets and liabilities. These
estimates are based on historical experience and other factors determined by
management. Because this involves varying degrees of judgment and uncertainty,
the amounts currently reported in the financial statements could, in the
future, prove to be inaccurate.

Amortization and Accretion

Amortization of capital assets and intangible assets incorporates
estimates of useful lives and residual values. These estimates may change as
more experience is obtained or as general market conditions change impacting
the operation of plant and equipment. Accretion expense is the increase in the
asset retirement obligation over time. The asset retirement obligation is
based on estimates that may change as more experience is obtained or as
general market conditions change impacting the future cost of abandoning
Newalta's facilities. Amortization of capital assets and intangible assets
incorporates estimates of useful lives and residual values. These estimates
may change as more experience is obtained or as general market conditions
change impacting the operating of plant and equipment. Estimates for the three
months ended March 31, 2009 are consistent with those disclosed in the MD&A
for the year ended December 31, 2008.

Asset Retirement Obligations

Asset retirement obligations are estimated by management based on the
anticipated costs to abandon and reclaim all Newalta facilities, landfills and
the projected timing of the costs to be incurred in future periods.
Management, in consultation with Newalta's engineers, estimates these costs
based on current regulations, costs, technology, and industry standards. The
fair value estimate is capitalized as part of the cost of the related asset
and amortized to expense over the asset's useful life. There were no
significant changes in the estimates used to prepare the asset retirement
obligation in 2009 compared to those provided in Newalta's annual consolidated
financial statements for the year ended March 31, 2008.

Goodwill

Management performs a test for goodwill impairment annually and whenever
events or circumstances make it possible that impairment may have occurred.
Determining whether impairment has occurred requires a valuation of the
respective reporting unit, based on its future discounted cash flows. In
applying this methodology, management relies on a number of factors, including
actual operating results, future business plans, economic projections and
market data. Management tests the valuation of goodwill as at September 30 and
did not see any impairment in the goodwill balance recorded. In addition,
management assesses the reasonableness of assumptions used for the September
30 valuation to determine if further impairment testing is required as at
March 31. We determined that no further impairment testing was necessary as at
March 31, 2009. However, in light of the current economic conditions, we
undertook an additional review of assumptions used for the test of the
valuation of goodwill and reconfirmed our assessment that there were no
indicators of impairment.

Income Taxes

Current income tax expense represents capital taxes paid in Central and
Eastern Canada by the Canadian subsidiaries and U.S. taxation imposed on the
U.S. subsidiary.
Future income taxes are estimated based on temporary differences between
the book value and tax value of assets and liabilities using the applicable
future income tax rates under current law. The change in these temporary
differences results in a future income tax expense or recovery. The most
significant risk in this estimate is the future income tax rate used for each
entity based on provincial allocation calculations and the timing of reversal
of temporary differences.
Estimates for the three months ended March 31, 2009 are consistent with
those disclosed in the MD&A for the year ended December 31, 2008.

Stock-Based Compensation

Newalta has three stock-based compensation plans: the incentive plan
adopted on March 1, 2003 (the "2003 Plan"); the incentive plan adopted on May
18, 2006 (the "2006 Plan" and together with the 2003 Plan, the "Converted
Incentive Plans"); and the incentive option plan adopted on December 31, 2008
(the "Option Plan" and together with the Converted Incentive Plans, the
"Incentive Plans").
In connection with the Conversion, the Converted Incentive Plans were
amended such that the holders of such rights now have the right to receive,
upon vesting and the payment of the exercise price related thereto, common
shares of Newalta Inc. instead of trust units of the Fund, on a one-for-one
basis. No further option based awards will be granted under the Converted
Incentive Plans. Under the Incentive Plans, we may grant options to acquire up
to 10% of the issued and outstanding shares to directors, officers, employees
and consultants of Newalta or any its affiliates. The 2003 Plan differs from
the 2006 Plan and the Option Plan in the manner in which they may be settled
by the grantee. The options under the 2003 Plan may only be settled in common
shares, while the options under the 2006 Plan and Option Plan may be settled
net in cash by the grantee. As such, options under the 2003 Plan are accounted
for in accordance with the fair value recognition provisions of GAAP.
Accordingly, stock-based compensation expense is measured at the grant date
based on the fair value of the award and is recognized as an expense over the
vesting period. Determining the fair value of stock-based awards at the grant
date requires judgment, including estimating the expected term of the options
(including the number of stock-based awards that are expected to be
forfeited), the expected volatility of the underlying security and the
expected dividends. The options granted under the 2006 Plan and the Option
Plan are accounted for as stock appreciation rights since they may be subject
to a net cash settlement provision. Accordingly, they are re-measured at each
balance sheet date to reflect the net cash liability at that date.
During Q1 2009, a total of 842,500 options were granted under the Option
Plan at an exercise price of $5.31 per share.
During Q1 2009, 894,675 options held by certain employees pursuant to the
Converted Incentive Plans were surrendered for cancelation.

New Accounting Standards in 2010 and Onward

Our assessment of new accounting standards for 2010 and onward are
consistent with those disclosed in the MD&A for the year ended December 31,
2008.

2011 Changeover to IFRS

On March 11, 2008, the Accounting Standards Board of Canada ("AcSB")
confirmed that effective January 1, 2011, International Financial Reporting
Standards ("IFRS") will become Canadian GAAP for publicly accountable
enterprises such as Newalta. At this time, the impact on our future
consolidated balance sheets and statements of operations, comprehensive income
and retained earnings are not reasonably determinable or estimable.
We have commenced our IFRS project and have established a formal project
governance structure with a target implementation date of January 1, 2011. The
following table summarizes our key activities, related milestones, and our
accomplishments to date.

-------------------------------------------------------------------------
Status Status
(as at (as at
December 31, March 31,
Key Activity Milestones 2008) 2009)
-------------------------------------------------------------------------
Accounting Complete new Accounting Assessment
policies: financial policy processes are
Identification policies choices have ongoing, with
of differences and procedures been significant
between Canadian manual addressing identified and progress in the
GAAP/IFRS IFRS requirements. the assessment areas identified
- Accounting Key milestones of the financial in our high-level
policy include: statement impact scoping review.
choices - Opening is ongoing.
under IFRS balances
- Financial estimates
statement - Q3 2009
impact - Testing phase
- Opening - Q3/Q4 2009
balances - SAP parallel
- Final run - Q4 2009
implementation - Finalize
decisions opening
- Financial balances
policies - Q4 2009/
and procedures Q1 2010
-------------------------------------------------------------------------
Detailed policy Develop working Working groups Training in the
assessment: groups and have been key impact areas
Identification training to identified and is complete.
of areas that implement changes are involved in Working groups
may have a for significant the assessment continue to be
significant impact items. of significant involved in the
impact. Key milestones impact items. assessment of
include: Training is significant impact
- Develop and ongoing. items.
implement
training
programs
for working
groups
- Q1 2009
- Identify and
recommend
systemic
process
changes
- Q2/Q3 2009
-------------------------------------------------------------------------
IT Ensure readiness Strategy for Analysis of issues
Infrastructure: for parallel parallel is ongoing.
Identify key processing of 2010 processing Parallel testing
changes in the financial results completed. of the dual
following and IFRS-compliant Analysis of reporting system
areas: reporting in 2011 issues is has begun.
- IT system - Q4 2009 ongoing.
changes and
upgrades
- Systemic
process
changes for
data
collection
for G/L,
disclosures,
and
consolidation
- One-time
processes due
to IFRS 1
-------------------------------------------------------------------------
Control Complete final Identifying and Assessment is
environment: signoff and review documenting key ongoing.
Internal control of accounting changes in
over financial policy changes policy.
reporting by Q4 2010 Working groups
- Accounting Update are assessing
policy certification the impact and
changes and process developing the
approval by Q4 2010 implementation
- Changes to processes to be
certification followed
process operationally.
-------------------------------------------------------------------------
Control Publish material Early assessment Early assessment
environment: changes in ongoing. is ongoing.
Disclosure policies and known Key stakeholder Key stakeholder
controls and impacts of IFRS communications communications
procedures throughout 2009 & will begin will begin late
- MD&A 2010 MD&A's - Q2 2009. Q2 2009.
communications starting Q2 -
package 2009
- IFRS Publish
adjustments impact of
to Canadian conversion
GAAP (with
statements reconciliation to
(2010) GAAP) on key
- 2011 measures by
financial Q1 2011.
statement Publish
presentation disclosure of
2010 comparative
information
(with
reconciliation
to GAAP) in the
interim and annual
financial
statements
- Q1 2011
-------------------------------------------------------------------------
Other Issues: Develop investor Early assessment Early assessment
Address impacts relations ongoing. is still ongoing.
to operations communication
due to IFRS: plan by Q3 2009
- Investor Renegotiation of:
relations - Financial
- Financial covenants
covenants - by Q2 - 2010
- Compensation - Compensation
packages packages
- by Q3 - 2010
-------------------------------------------------------------------------

BUSINESS RISKS

The business of Newalta is subject to certain risks and uncertainties.
Prior to making any investment decision regarding Newalta, investors should
carefully consider, among other things, the risks described herein (including
the risks and uncertainties listed in the first paragraph of this Management's
Discussion and Analysis) and the risk factors set forth in the most recently
filed Annual Information Form of Newalta which are incorporated by reference
herein.

FINANCIAL AND OTHER INSTRUMENTS

The carrying values of accounts receivable and accounts payable
approximate the fair value of these financial instruments due to their short
term maturities. Newalta's credit risk from its customers is mitigated by its
broad customer base and diverse product lines. In the normal course of
operations, Newalta is exposed to movements in U.S. dollar exchange rates
relative to the Canadian dollar. Newalta sells and purchases some products in
U.S. dollars. Newalta does not utilize hedging instruments but rather chooses
to be exposed to current U.S. exchange rates as increases or decreases in
exchange rates are not considered to be significant over the period of the
outstanding receivables and payables. The floating interest rate profile of
Newalta's long-term debt exposes Newalta to interest rate risk. Newalta does
not use hedging instruments to mitigate this risk. The carrying value of the
long-term debt approximates fair value due to its floating interest rates.

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL
REPORTING

During the three months ended March 31, 2009, Newalta did not make any
changes in the internal controls and procedures relating to disclosure and
financial reporting that have materially affected, or are reasonably likely to
materially affect, Newalta's internal control over financial reporting.

ADDITIONAL INFORMATION

Additional information relating to Newalta, including the Annual
Information Form, is available through the internet on the Canadian SEDAR
which can be accessed at www.sedar.com. Copies of the Annual Information Form
of Newalta may be obtained from Newalta Inc. on the internet at
www.newalta.com, by mail at 211 - 11th Avenue S.W., Calgary, Alberta T2R 0C6,
or by facsimile at (403) 806-7032.

Consolidated Balance Sheets

March December
($000s) (unaudited) 31, 2009 31, 2008
-------------------------------------------------------------------------
Assets
Current assets
Accounts receivable 88,521 120,884
Inventories 27,854 29,781
Prepaid expenses and other 5,209 6,546
-------------------------------------------------------------------------
121,584 157,211
Note receivable 1,081 1,160
Capital assets 720,363 724,788
Intangible assets 63,483 64,003
Goodwill 103,597 103,597
Future tax asset 1,870 1,151
-------------------------------------------------------------------------
1,011,978 1,051,910
-------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 87,068 109,698
Dividends/distributions payable 2,125 7,560
-------------------------------------------------------------------------
89,193 117,258
Senior long-term debt (Note 3) 258,956 263,251
Convertible debentures - debt portion 109,757 109,419
Future income taxes 38,420 40,039
Asset retirement obligations (Note 4) 21,299 21,094
-------------------------------------------------------------------------
517,625 551,061
-------------------------------------------------------------------------
Shareholders' Equity
Shareholders' capital (Note 5) 509,617 509,369
Convertible debentures - equity portion 1,850 1,850
Contributed surplus 751 988
Retained earnings (deficit) (17,865) (11,358)
-------------------------------------------------------------------------
494,353 500,849
-------------------------------------------------------------------------
1,011,978 1,051,910
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Operations, Comprehensive Income and
Retained Earnings (Deficit)

For the Three Months
Ended March 31,
($000s except per share/unit data) (unaudited) 2009 2008
-------------------------------------------------------------------------
Revenue 112,538 150,176
Expenses
Operating (Note 14) 86,901 101,161
Selling, general and administrative (Note 14) 13,607 14,835
Finance charges 5,580 6,266
Amortization and accretion (Note 2) 12,812 11,372
-------------------------------------------------------------------------
118,900 133,634
-------------------------------------------------------------------------
Earnings (loss) before taxes (6,362) 16,542
Provision for (recovery of) income taxes
Current 195 236
Future (2,176) (2,998)
-------------------------------------------------------------------------
(1,981) (2,762)
-------------------------------------------------------------------------
Net earnings (loss) and comprehensive income (loss) (4,381) 19,304
Retained earnings (deficit), beginning of period (11,358) 22,940
Dividends/distributions (Note 9) (2,126) (23,077)
-------------------------------------------------------------------------
Retained earnings (deficit), end of period (17,865) 19,167
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Net earnings (loss) per share/unit (Note 8) (0.10) 0.47
-------------------------------------------------------------------------
Diluted earnings (loss) per share/unit (Note 8) (0.10) 0.46
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Cash Flows

For the Three Months
Ended March 31,
($000s) (unaudited) 2009 2008
-------------------------------------------------------------------------
Net inflow (outflow) of cash related to the
following activities:
Operating Activities
Net earnings (loss) (4,381) 19,304
Items not requiring cash:
Amortization and accretion (Note 2) 12,812 11,372
Future income tax recovery (2,176) (2,998)
Other 554 (511)
-------------------------------------------------------------------------
Funds from Operations 6,809 27,167
Increase (decrease) in non-cash working capital
(Note 12) 23,476 (17,810)
Asset retirement expenditures incurred (243) (612)
-------------------------------------------------------------------------
30,042 8,745
-------------------------------------------------------------------------
Investing Activities
Additions to capital assets (Note 12) (18,727) (25,157)
Net proceeds on sale of capital assets 606 4,460
-------------------------------------------------------------------------
(18,121) (20,697)
-------------------------------------------------------------------------
Financing Activities
Issuance of shares/units 248 62
Issuance of convertible debentures - (66)
Increase (decrease) in debt (4,688) 31,036
Decrease in note receivable 79 56
Distributions to unitholders (Note 9) (7,560) (19,136)
-------------------------------------------------------------------------
(11,921) 11,952
-------------------------------------------------------------------------
Net cash flow - -
Cash - beginning of period - -
-------------------------------------------------------------------------
Cash - end of period - -
-------------------------------------------------------------------------
Supplementary information:
Interest paid 2,540 3,782
Income taxes paid - 196
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Notes to the Interim Consolidated Financial Statements

For the three months ended March 31, 2009 and 2008

(all tabular data in $000s except per share and ratio data) (unaudited)

Newalta Inc. was incorporated on October 29, 2008 pursuant to the laws of
the Province of Alberta. Newalta Inc. is engaged, through its wholly
owned operating subsidiary Newalta Corporation (the "Corporation", and
together with Newalta Inc., collectively "Newalta"), in adapting
technologies to maximize the value inherent in industrial waste through
the recovery of saleable products and recycling. Newalta also provides
environmentally sound disposal of solid, non-hazardous industrial waste.
With an integrated network of facilities, Newalta provides waste
management solutions to a broad customer base of national and
international corporations in a range of industries, including
automotive, construction, forestry, manufacturing, mining, oil and gas,
petrochemical, pulp and paper, refining, steel and transportation
services.

As a result of changes in tax rules for specified investment flow-though
entities, Newalta Income Fund (the "Fund") undertook steps to convert the
Fund's income trust structure into a corporate structure. On December 17,
2008, unitholders of the Fund voted and approved the reorganization by
way of a plan of arrangement under the Business Corporations Act
(Alberta), into a corporation pursuant to an arrangement agreement dated
November 12, 2008 (as amended) between Newalta Inc., Newalta Income Fund,
Newalta Corporation, Newalta Industrial Services Inc. and Newalta
Services Holdings Inc. (the "Arrangement").

On January 1, 2009, Newalta Corporation, Newalta Industrial Services Inc.
and Newalta Services Holdings Inc. were amalgamated to form Newalta
Corporation.

Prior to the Arrangement on December 31, 2008, the consolidated financial
statements included the accounts of the Fund and its subsidiaries. After
giving effect to the Arrangement, the consolidated financial statements
were prepared on a continuity of interests basis, which recognizes
Newalta Inc. as the successor entity to the Fund.

NOTE 1. BASIS OF PRESENTATION

The interim consolidated financial statements include the accounts of
Newalta. The interim consolidated financial statements have been prepared
by management in accordance with Canadian generally accepted accounting
principles ("GAAP"). Certain information and disclosures normally
required to be included in the notes to the audited annual financial
statements have been omitted or condensed. These interim financial
statements and the notes thereto should be read in conjunction with the
consolidated financial statements of Newalta Inc. for the year ended
December 31, 2008 as contained in the Annual Report for fiscal 2008.

The accounting principles applied are consistent with those as set out in
the annual financial statements of Newalta Inc. for the year ended
December 31, 2008 except as noted in the following paragraph.

Goodwill and Intangible Assets

Effective January 1, 2009, Newalta adopted the Canadian Institute of
Chartered Accountants ("CICA") new accounting standard, section 3064,
Goodwill and Intangible Assets, replacing section 3062, Goodwill and
Other Intangible Assets. The new Section establishes standards for the
recognition, measurement, presentation and disclosure of goodwill and
intangible assets. The standards concerning goodwill are unchanged from
the standards included in the previous section 3062. The adoption of this
new section did not have a material impact on Newalta's interim financial
statements.

USE OF ESTIMATES AND ASSUMPTIONS

Accounting measurements at interim dates inherently involve reliance on
estimates and the results of operations for the interim periods shown in
these financial statements are not necessarily indicative of results to
be expected for the fiscal year. In the opinion of management, the
accompanying unaudited interim consolidated financial statements include
all adjustments necessary to present fairly the consolidated results of
Newalta Inc.'s operations and cash flows for the periods ended March 31,
2009 and 2008.

NOTE 2. DISPOSAL OF CAPITAL ASSETS

During the quarter, Newalta disposed of certain transport vehicles and
building assets with a net book value of $1.3 million for proceeds of
$0.6 million. The resulting net loss of $0.7 million is included in
amortization and accretion in the consolidated statements of operations,
comprehensive income and retained earnings.

NOTE 3. SENIOR LONG-TERM DEBT

-------------------------------------------------------------------------
March 31, December 31,
2009 2008
-------------------------------------------------------------------------
Amount drawn on credit facility 260,039 264,687
Issue costs (1,083) (1,436)
-------------------------------------------------------------------------
Senior long-term debt 258,956 263,251
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The Credit Facility's maturity date is October 12, 2010. An extension of
the Credit Facility may be granted at the option of the lenders. If an
extension is not granted, the entire amount of the outstanding
indebtedness would be due in full at the maturity date. The facility also
requires Newalta to be in compliance with certain covenants. At March 31,
2009, Newalta was in compliance with all covenants.

Subsequent to the end of the quarter and effective April 22, 2009,
Newalta amended the terms of its Credit Facility. The primary changes
were an increase of the funded debt to EBITDA covenant restriction from
3.00:1 to 3.50:1 for the remainder of 2009 (3.00:1 for the remaining term
thereafter) and a decrease to the current ratio covenant restriction from
1.20:1 to 1.10:1 for the remainder of the term of the Credit Facility.
Newalta also elected to reduce the principal amount of the Credit
Facility from $425.0 million to $375.0 million.

NOTE 4. RECONCILIATION OF ASSET RETIREMENT OBLIGATIONS

The total future asset retirement obligations were estimated by
management based on the anticipated costs to abandon and reclaim
facilities and wells, and the projected timing of these expenditures. The
reconciliation of estimated and actual expenditures for the period is
provided below:

-------------------------------------------------------------------------
Three months
ended March 31,
2009 2008
-------------------------------------------------------------------------
Asset retirement obligations, beginning of period 21,094 20,985
Expenditures incurred to fulfill obligations (243) (612)
Accretion 448 462
-------------------------------------------------------------------------
Asset retirement obligations, end of period 21,299 20,835
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 5. SHAREHOLDERS' CAPITAL

a) Shareholders' capital

Authorized capital of Newalta Inc. consists of an unlimited number of
common shares and an unlimited number of preferred shares issuable in
series. The following table is a summary of the changes in Shareholders'
capital during the period:

-------------------------------------------------------------------------
Shares (No.) Amount ($)
-------------------------------------------------------------------------
Shares outstanding as at October 29, 2008 - -
-------------------------------------------------------------------------
Shares issued pursuant to the Arrangement 42,400 509,369
-------------------------------------------------------------------------
Shares outstanding as at December 31, 2008 42,400 509,369
-------------------------------------------------------------------------
Shares issued 94 248
-------------------------------------------------------------------------
Shares outstanding as at March 31, 2009 42,494 509,617
-------------------------------------------------------------------------

b) Unitholders' capital

-------------------------------------------------------------------------
Units (No.) Amount ($)
-------------------------------------------------------------------------
Units outstanding as at December 31, 2007 41,417 496,027
Contributed surplus on rights exercised - 241
Rights exercised 209 1,913
Units issued under the DRIP(1) 774 11,188
Units cancelled under the Arrangement (42,400) (509,369)
-------------------------------------------------------------------------
Units outstanding as at December 31, 2008 and
March 31, 2009 - -
-------------------------------------------------------------------------
(1) Distribution Reinvestment Plan of the Fund

NOTE 6. CAPITAL DISCLOSURES

Newalta's capital structure consists of:

-------------------------------------------------------------------------
March 31, December 31,
2009 2008
-------------------------------------------------------------------------
Senior long-term debt 258,956 263,251
Letters of Credit or bonds issued as financial
security to third parties (Note 10) 62,954 64,457
Convertible debentures, debt portion 109,757 109,419
Shareholders' equity 494,353 500,849
-------------------------------------------------------------------------
-------------------------------------------------------------------------
926,020 937,976
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The objectives in managing the capital structure are to:

- Utilize an appropriate amount of leverage to manage risk and optimize
the return on shareholders' equity

- Provide borrowing capacity and financial flexibility

Management and the Board of Directors review and assess Newalta's capital
structure and dividend/distribution policy at least at each regularly
scheduled board meeting which are held at a minimum four times annually.
The financial strategy may be adjusted based on the current outlook of
the underlying business, the capital requirements to fund growth
initiatives and the state of the debt and equity capital markets. In
order to maintain or adjust the capital structure, Newalta may:

- Issue shares from treasury

- Issue new debt securities

- Cause the return of letters of credit with no additional financial
security requirements

- Replace outstanding letters of credit with bonds or other types of
financial security

- Amend, revise, renew or extend the terms of its then existing
long-term debt facilities

- Enter into new agreements establishing new credit facilities

- Adjust the amount of dividends paid to shareholders

- Sell idle, redundant or non-core assets

Management monitors the capital structure based on measures required
pursuant to the Credit Facility agreement which restricts Newalta from
declaring dividends and distributing cash if the Corporation is in breach
of a covenant under the Credit Facility. These measures include:

-------------------------------------------------------------------------
March 31, December 31,
Ratio 2009 2008 Threshold
-------------------------------------------------------------------------
Current(1) 1.36:1 1.34:1 1.10:1 minimum
Funded Debt(2) to EBITDA(3) 2.88:1 2.46:1 3.50:1 maximum
Fixed Charge Coverage(4) 1.13:1 1.19:1 1.00:1 minimum
-------------------------------------------------------------------------
(1) Current Ratio means, the ratio of consolidated current assets to
consolidated net current liabilities (excluding the current portion
of long-term debt and capital leases outstanding, if any).
(2) Funded debt is a non-GAAP measure, the closest measure of which is
long-term debt. Funded debt is calculated by adding the senior long-
term debt to the amount of letters of credit outstanding at the
reporting date.
(3) Funded Debt to EBITDA means the ratio of consolidated Funded Debt to
the aggregate EBITDA for the trailing twelve-months. Funded Debt is
generally defined as long-term debt and capital leases including any
current portion thereof but excluding future income taxes and future
site restoration costs. EBITDA is defined as the trailing twelve-
months of EBITDA for Newalta Inc. which is normalized for any
acquisitions completed during that time frame and excluding any
dispositions incurred as if they had occurred at the beginning of the
trailing twelve-months. Funded debt to EBITDA will remain at 3.50:1
for the remainder of 2009. The ratio will revert to 3.00:1 in 2010.
(4) Fixed Charge Coverage Ratio means, based on the trailing twelve month
period, EBITDA less unfinanced capital expenditures and cash taxes to
the sum of the aggregate of principal payments (including amounts
under capital leases, if any), interest (excluding accretion for the
convertible debentures), dividends paid for such period, other than
cash payments in respect of a dividend reinvestment plan, if any.
Unlike the Funded Debt to EBITDA ratio, the Fixed Charge Coverage
ratio trailing twelve month EBITDA is not normalized for acquisitions
or dispositions.

NOTE 7. LONG-TERM INCENTIVE PLANS

a) The 2008 Option Plan

On January 2, 2009 a total of 842,500 options were granted to certain
directors, officers and employees of the Corporation. The options were
granted at the market price of $5.31 per share. Each tranche of the
options vest over a four year period (with a five year life), and the
holder of the option can exercise the option for either a share of
Newalta Inc. or an amount of cash equal to the difference between the
exercise price and the market price at the time of exercise. The options
granted under the 2008 Plan have therefore been accounted for as stock
appreciation options and the total compensation expense for these options
was nil for the three months ended March 31, 2009, (nil for the same
period in 2008).

b) Share Appreciation Rights

On January 2, 2009, 791,500 share appreciation rights were granted to
certain employees and an officer of the Corporation at the market price
of $5.31. Each tranche of these rights vests over a four year period
(with a five year life). The holder of the right has the option to
exercise the right for an amount of cash equal to the difference between
the exercise price and the market price at the time of exercise. The
rights granted have been accounted for as stock appreciation rights.
Total compensation expense for these rights was nil for the three months
ended March 31, 2009 (nil for the same period in 2008).

NOTE 8. EARNINGS PER SHARE/UNIT

Basic earnings per share/unit calculations for the three months ended
March 31, 2009 and 2008 were based on the weighted average number of
shares/units outstanding for the periods. Diluted earnings per share/unit
include the potential dilution of the outstanding options to acquire
shares and from the conversion of the Debentures.

The calculation of dilutive earnings per share does not include anti-
dilutive options. These options would not be exercised during the period
because their exercise price is higher than the average market price for
the period. The inclusion of these options would cause the diluted
earnings per share to be overstated. The number of excluded options for
the three months ended March 31, 2009 was 2,830,200 (2,110,000 in 2008).

The dilutive earnings per share calculation does not include the impact
of anti-dilutive Debentures. These debentures would not be converted to
shares during the period because the current period interest (net of tax)
per share obtainable on conversion exceeds basic earnings per share. The
inclusion of the Debentures would cause the diluted earnings per share to
be overstated. The number of shares issuable on conversion of the
Debentures excluded for the three months ended March 31, 2009 was
5,000,000 (5,000,000 in 2008).

-------------------------------------------------------------------------
Three Months
Ended March 31,
2009 2008
-------------------------------------------------------------------------
Weighted average number of shares/units 42,402 41,543
Net additional shares if rights exercised - 92
Net additional shares if debentures converted - -
-------------------------------------------------------------------------
Diluted weighted average number of shares/units 42,402 41,635
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 9. UNITHOLDER DIVIDENDS/DISTRIBUTIONS DECLARED AND PAID

a) Dividends

During the quarter, Newalta declared a dividend of $0.05 per share to
holders of shares of record on March 31, 2009. These dividends were paid
on April 15, 2009.

b) Distributions

Prior to conversion to a corporation on December 31, 2008, the Fund made
monthly distributions to its holders of trust units. Determination of the
amount of cash distributions for any period was at the sole discretion of
the Board of Trustees of the Fund and was based on certain criteria
including financial performance as well as the projected liquidity and
capital resource position of the Fund. Distributions were declared to
holders of trust units of record on the last business day of each month,
and paid on the 15th day of the month following (or if such day was not a
business day, the next following business day).

-------------------------------------------------------------------------
Three Months Ended March 31,
2008
-------------------------------------------------------------------------
Unitholder distributions declared 23,077
per unit - $ 0.555
Unitholder distributions - paid in cash 19,136
Unitholder distributions - value paid in units 3,896
paid in cash - per unit $ 0.461
issued units - per unit $ 0.094
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 10. COMMITMENTS

a) Letters of Credit and Surety Bonds

As at March 31, 2009, Newalta had issued letters of credit and surety
bonds in respect of compliance with environmental licenses in the amount
of $48.4 million and $14.5 million respectively.

NOTE 11. FINANCIAL INSTRUMENTS

FAIR VALUES

Newalta's financial instruments include accounts receivable, note
receivable, accounts payable and accrued liabilities, dividends payable,
senior long-term debt and convertible debentures. The fair values of
Newalta's financial instruments that are included in the consolidated
balance sheet, with the exception of the convertible debentures,
approximate their recorded amount due to the short term nature of those
instruments for accounts receivable, accounts payable and accrued
liabilities and for senior long-term debt and the note receivable due to
the floating nature of the interest rate. The fair values incorporate an
assessment of credit risk. The carrying values of Newalta's financial
instruments at March 31, 2009 are as follows:

-------------------------------------------------------------------------
Total
Held for Loans and Available Other Carrying
trading Receivables for sale Liabilities Value
-------------------------------------------------------------------------
Accounts receivable - 88,521 - - 88,521
Note receivable - 1,081 - - 1,081
Accounts payable
and accrued
liabilities - - - 87,068 87,068
Dividends payable - - - 2,125 2,125
Senior long-term
debt(1) - - - 258,956 258,956
-------------------------------------------------------------------------
(1) Net of related costs.

The fair value of the Debentures is based on the closing trading price on
the Toronto Stock Exchange as follows:


-------------------------------------------------------------------------
As at
March 31, 2009
Carrying Quoted fair
value(1) value
-------------------------------------------------------------------------
7% Convertible debentures due November 30, 2012 111,607 77,338
-------------------------------------------------------------------------
(1) Includes both the debt and equity portions.

FINANCIAL INSTRUMENT RISK MANAGEMENT

Credit risk

Newalta is subject to risk from its trade accounts receivable balances.
The customer base is large and diverse and no single customer balance
exceeds 5% of total accounts receivable. Newalta views the credit risks
on these amounts as normal for the industry. Credit risk is minimized by
Newalta's broad customer base and diverse product lines and is mitigated
by the ongoing assessment of the credit worthiness of its customers as
well as monitoring the amount and age of balances outstanding.

Based on the nature of its operations, established collection history,
and industry norms, receivables are not considered past due until 90 days
after invoice date although standard payment terms require payment within
30 to 120 days. Depending on the nature of the service and/or product,
customers may be provided with extended payment terms while Newalta
gathers certain processing or disposal data. Included in the
Corporation's trade receivable balance, are receivables totalling
$4.1 million which are considered to be outstanding beyond normal
repayment terms at March 31, 2009. A provision of $1.0 million has been
established as an allowance against doubtful accounts. No provision has
been made for the remaining balance as there has not been a significant
change in credit quality and the amounts are still considered
collectable. Newalta does not hold any collateral over these balances.

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Aging Trade Receivables Allowance for Net Receivables
aged by doubtful accounts
invoice date
March December March December March December
31, 2009 31, 2008 31, 2009 31, 2008 31, 2009 31, 2008
-------------------------------------------------------------------------
Current 52,348 58,049 23 9 52,325 58,040
31-60 days 17,506 28,953 21 7 17,485 28,946
61-90 days 4,668 6,608 71 52 4,597 6,556
91 days + 4,134 6,503 992 1,465 3,142 5,038
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Total 78,656 100,113 1,107 1,533 77,549 98,580
-------------------------------------------------------------------------

To determine the recoverability of a trade receivable, management
analyzes accounts receivable, first identifying customer groups that
represent minimal risk (large oil and gas and other low risk large
companies, governments and municipalities). Impairment of the remaining
accounts is determined by identifying specific accounts that are at risk,
and then by applying a formula based on aging to the remaining amounts
receivable. All amounts identified as impaired are provided for in an
allowance for doubtful accounts. The changes in this account for three
months ended March 31, 2009 are as follows:

-------------------------------------------------------------------------
Allowance for doubtful accounts March 31, 2009
-------------------------------------------------------------------------
Balance, beginning of period 1,533
Additional amounts provided for 108
Amounts written off as uncollectible (549)
Amounts recovered during the period 15
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Balance, end of period 1,107
-------------------------------------------------------------------------

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the
Board of Directors of Newalta Inc., which has built an appropriate
liquidity risk management framework for the management of the short,
medium and long-term funding and liquidity management requirements.
Management mitigates liquidity risk by maintaining adequate reserves,
banking facilities and other borrowing facilities, by continuously
monitoring forecast and actual cash flows and matching the maturity
profiles of financial assets and liabilities. Newalta is exposed to
interest rate risk to the extent that its Credit Facility has a variable
interest rate. Management does not enter into any derivative contracts to
manage the exposure to variable interest rates. The Debentures have a
fixed interest rate until November 30, 2012, at which point, any
remaining convertible debentures will need to be repaid or refinanced.
The table below provides an interest rate sensitivity analysis for the
three months ended March 31, 2009:

-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If interest rates increased by 1% with all other variables
held constant (518)
-------------------------------------------------------------------------

Market risk

Market risk is the risk that the fair value or future cash flows of our
financial instruments will fluctuate because of changes in market prices.
Newalta is exposed to foreign exchange market risk.

Foreign exchange risk refers to the risk that the value of a financial
commitment, recognized asset or liability will fluctuate due to changes
in foreign currency exchange rates. The risk arises primarily from firm
commitments for receipts and payments settled in U.S. dollars. Management
does not enter into any financial instruments to manage the risk for the
foreign currency exposure. The table below provides a foreign currency
sensitivity analysis on accounts receivable and accounts payable
outstanding as at March 31, 2009:

-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If the value of the U.S. dollar increased by $0.01 with
all other variables held constant 87
-------------------------------------------------------------------------

NOTE 12. SUPPLEMENTARY CASH FLOW INFORMATION

The following tables provide supplemental information.

-------------------------------------------------------------------------
Change in non-cash operating net assets Three Months Ended
March 31,
2009 2008
-------------------------------------------------------------------------
Changes in current assets 35,627 (2,101)
Changes in current liabilities (28,065) (23,733)
Dividends/distributions payable 5,435 (45)
Other (223) 820
Changes in capital asset accruals 10,702 7,249
-------------------------------------------------------------------------
Decrease (increase) in non-cash working capital 23,476 (17,810)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Net additions to capital assets Three Months Ended
March 31,
2009 2008
-------------------------------------------------------------------------
Capital expenditures during the quarter (8,115) (17,973)
Changes in capital asset accruals (10,702) (7,249)
Other 90 65
-------------------------------------------------------------------------
Additions to capital assets (18,727) (25,157)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 13. COMPARATIVE FIGURES

Income Statement

2008 comparative information reflects the reclassification of foreign
exchange gains and losses from selling, general and administrative
expenses to operating expenses. Prior to the fourth quarter of 2008,
gains and losses as a result of fluctuations in the U.S. dollar exchange
rate were immaterial, and Newalta tracked and reported the effects of
these fluctuations centrally as an administrative cost. The reclassified
foreign exchange gain for the first quarter in 2008 was $0.6 million.

Segmented Information

The Western and Eastern Division and Unallocated 2008 comparative
information in Note 14 reflects the reclassification of foreign currency
exchange gains and losses from selling, general and administrative
expenses to operating expenses.

NOTE 14. SEGMENTED INFORMATION

Newalta has two reportable segments. The reportable segments are distinct
strategic business units whose operating results are regularly reviewed
by the Corporation's executive officers in order to assess financial
performance and make resource allocation decisions. The reportable
segments have separate operating management and operate in distinct
competitive and regulatory environments. The Western segment recovers and
resells crude oil from oilfield waste, rents drill cuttings management
and solids control equipment, provides environmental services comprised
of environmental projects and drilling waste management, collects liquid
and semi-solid industrial wastes as well as automotive wastes, including
waste lubricating oil, and provides mobile site services in western
Canada. Recovered materials are processed into resalable products. The
Eastern segment provides industrial waste collection, pre-treating,
transfer, processing and disposal services and operates a fleet of
specialized vehicles and equipment for waste transport and onsite
processing, a lead recycling facility and an emergency response service
in central and eastern Canada. The accounting policies of the segments
are the same as those of Newalta.

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For the Three Months Ended March 31, 2009
Consol-
Inter- Unallo- idated
Western Eastern segment cated(3) Total
-------------------------------------------------------------------------
External revenue 65,970 46,568 - - 112,538
Inter segment
revenue(1) 156 - (156) - -
Operating expense 46,376 40,681 (156) - 86,901
Amortization and
accretion expense 6,319 3,289 - 3,204 12,812
-------------------------------------------------------------------------
Net margin 13,431 2,598 - (3,204) 12,825
Selling, general
and administrative 13,607 13,607
Finance charges 5,580 5,580
-------------------------------------------------------------------------
Earnings (loss)
before taxes 13,431 2,598 - (22,391) (6,362)
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 2,654 4,115 - 1,346 8,115
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 533,025 406,770 - 72,183 1,011,978
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
For the Three Months Ended March 31, 2008
Consol-
Inter- Unallo- idated
Western Eastern segment cated(3) Total
-------------------------------------------------------------------------
External revenue 93,973 56,162 - 41 150,176
Inter segment
revenue(1) 301 - (301) - -
Operating expense 58,936 42,526 (301) - 101,161
Amortization and
accretion expense 5,661 3,810 - 1,901 11,372
-------------------------------------------------------------------------
Net margin 29,677 9,826 - (1,860) 37,643
Selling, general
and administrative - - - 14,835 14,835
Finance charges - - - 6,266 6,266
-------------------------------------------------------------------------
Earnings (loss)
before taxes 29,677 9,826 - (22,961) 16,542
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 7,423 6,266 - 4,284 17,973
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 553,826 401,894 - 72,386 1,028,106
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Inter-segment revenue is recorded at market, less the costs of
serving external customers.
(2) Includes capital asset additions and the purchase price of
acquisitions.
(3) Management does not allocate selling, general and administrative,
taxes, and interest costs in the segment analysis.

Contact Information

  • Anne M. MacMicken
    Executive Director, Investor Relations
    Phone: (403) 806-7019