Newalta Corporation
TSX : NAL

Newalta Corporation

March 05, 2009 01:30 ET

Newalta Announces Results for the Fourth Quarter and Year-Ended 2008 and Declares Dividend of $0.05 Per Share


CALGARY, ALBERTA--(Marketwire – March 5, 2009) - Newalta Inc. ("Newalta") (TSX:NAL)
today announced financial results for the three months and year ended December 31,
2008.
"Performance in 2008 was strong, despite deteriorating market conditions
and slumping commodity prices in the second half. Revenue was up 19% and
EBITDA was up $29.5 million, or 31%, compared to 2007 and EBITDA per share
increased to $3.00," said Al Cadotte, President and CEO of Newalta. "The
volume of crude oil that we recovered to our account from waste increased 11%
and the average price that we realized was up from $62.20/bbl to $86.20/bbl.
As a result of the volume and price improvement, the revenue generated from
crude oil sales was up $12.5 million. Investments made in 2007, including the
acquisition of the lead-acid battery recycling operation ("VSC"), contributed
solid bottom-line results for the year. In 2008, we invested $104 million to
expand services, to diversify the business, and to improve profitability.
These investments will contribute to 2009 performance.
"Activity remained relatively strong in the fourth quarter with revenue
up $8.2 million and EBITDA up $1.1 million compared to 2007, despite a drop in
crude oil sales of $2.0 million due to reduced prices, as well as
non-recurring charges in excess of $3 million. Waste volumes were higher
overall in 2008 and drill site equipment utilization improved from 28% in 2007
to 45% in 2008.
"Compared to the third quarter of 2008, EBITDA declined $10 million from
$37.4 million in Q3 to $27.6 million in Q4. The decline in crude oil prices
from Q3 to Q4 of more than 50% resulted in reduced crude sales of $5.9 million
which, combined with the non-recurring charges, accounted for the bulk of the
decline in performance. Waste volumes and activity levels were generally
comparable quarter-over-quarter.
"Our markets have changed dramatically over the past six months with
declining commodity prices and deteriorating market conditions across all
Canadian sectors. In determining the dividend to be paid to our shareholders,
the Board reviews, among other things, our historical financial performance
and internal forecasts for the near term, including capital requirements, as
well as the current economic environment. After review of all factors, and in
light of volatility of our markets, our Board has declared a dividend of $0.05
per share to holders of record as at March 31, 2009. The Board will continue
to review future dividends as financial performance is known and conditions
stabilize.
"We have taken prudent and responsible steps to manage expenses, improve
profitability and productivity, strengthen our balance sheet, restrict capital
expenditures, and review all of our business practices, as well as our
organization. Our focus on strengthening the business through this challenging
environment will better position Newalta to capitalize on opportunities as the
economy recovers in the future."

Financial results and highlights for the three months ended December 31,
2008

- Revenue increased 6% to $145.3 million compared to 2007. Net earnings
decreased 62% to $9.1 million primarily due to higher recoveries of
future income taxes in 2007. Combined divisional net margin(1) was up
2% over the prior year, to $33 million. EBITDA(1) increased
$1.1 million, or 4%, to $27.6 million compared to Q4 2007.

- Western's revenue and net margin(1) declined by 13% and 14%
year-over-year, respectively, due primarily to the decline in crude
prices, which dropped 29%. Waste processing volumes increased
year-over-year as a result of growth in heavy oil business.
Utilization of our drill site equipment was up in both Canada and the
U.S. with total equipment in use up from 40 in 2007, to 73 in 2008.
In Q4, the average equipment-in-use in the U.S. increased by 186%
compared to Q4 2007. Gains made in drill site were offset by a steep
decline in environmental services.

- Eastern's performance in Q4 was strong with revenue and net margin up
43% and 57%, respectively, due to the contribution of acquisitions
completed in Québec and Atlantic Canada in 2007 and strong
event-based activity at the Stoney Creek Landfill ("SCL").

- Cash distributed(1) to unitholders in Q4 was up 20% compared to last
year, to $22.1 million.

- SG&A costs increased, compared to last year by $2.5 million to
$17.8 million. The increase was largely due to non-recurring costs of
$1.7 million associated with the conversion.

- Maintenance capital expenditures(1) for the quarter were $8.5 million
compared to $6.2 million in 2007. Growth and acquisition capital
expenditures(1) were $38.2 million.

Financial results and highlights for the year ended December 31, 2008

- Revenue increased 19% to $597.0 million from $499.9 million in 2007.
Net earnings decreased 4% to $58.9 million while EBITDA increased
$29.5 million, or 31%, to $125.7 million. The increase in EBITDA was
primarily a result of strong commodity prices in the first three
quarters of the year, combined with solid contributions from
investments made in 2007 to grow and diversify our business.

- Western's revenue and net margin were up $7.7 million and
$12.7 million respectively, compared to 2007. Oilfield's results
improved due to strong crude oil pricing and an increase of 11% in
waste volumes compared to 2007. Overall drill site processing
equipment utilization increased from 27% to 40%, mainly from
continued improvement in Canada and equipment transfers to the U.S.
These improvements were offset by reduced demand for environmental
services. Industrial's performance was flat with higher finished
product sales offset by reduced volumes.

- Eastern's revenue and net margin were up 60% and 87%, respectively.
These increases were primarily due to the full year contribution of
acquisitions completed in 2007. Eastern's contribution as a
percentage of total revenue grew to 40% in 2008, compared with 30% in
2007, largely due to the contribution from VSC. The full integration
of 2006 and 2007 acquisitions contributed to growth of net margin as
a percentage of revenue to 17% in 2008 compared to 15% for the same
period in 2007.

- Cash distributed(1) to shareholders increased 9%, to $82.1 million.
In 2008, monthly distributions per unit were $0.185 per unit for a
total of $2.22 per unit for the year.

- SG&A costs increased by $7.8 million to $62.1 million compared with
$54.3 million in 2007. The increase was mostly due to the impact of
acquisitions completed in 2007 and non-recurring costs.

- Maintenance capital expenditures in the year were $20.8 million, a
20% increase over 2007. Improved utilization of our drill site
processing equipment and upgrades at our western fixed facilities
resulted in higher maintenance capital expenditures and accounted for
most of the increase.

- Growth and acquisition capital expenditures in the year were
$104.4 million. The internal growth spending in 2008 related to
expanding capacity at fixed facilities, equipment to expand Onsite
and Drill Site services, improving productivity and enhancing market
coverage across North America. Corporate growth spending was focused
on Eastern's SAP implementation and leasehold improvements.

- In 2009, capital investments in the first half of the year will be
tightly controlled and are expected to total approximately
$15 million, comprised of growth capital expenditures of $10 million,
and maintenance capital of $5 million. The capital program for the
remainder of 2009 will be established in the second quarter based on
the performance of the business and the market outlook.

Other highlights for the three months and year ended December 31, 2008

- Newalta's funded debt to EBITDA ratio is 2.46:1 and current ratio is
1.34:1 as of December 31, 2008. Newalta's funded debt consists of
$264.7 million of senior long-term debt and $49.2 million of Letters
of Credit which have been provided as security to certain
environmental regulatory authorities to satisfy asset retirement
obligations. Management is working with these authorities to provide
alternative security arrangements to eliminate the need for the
majority of the Letters of Credit. In addition, management is taking
steps to improve working capital management, sell redundant assets,
and tightly control capital investments. These initiatives are
intended to reduce year-end funded debt throughout 2009.

- On October 12, 2008, Newalta amended its $425.0 million extendible
revolving credit facility to October 2012. The funded debt to EBITDA
ratio was increased to 3:1 for the term of the credit agreement. As
at December 31, 2008, Newalta's unused capacity on its credit
facility was $111.1 million.

- Effective December 31, 2008, Newalta successfully completed its
conversion from an income trust structure to a corporate structure
(the "Conversion") whereby all outstanding trust units of Newalta
Income Fund were exchanged for common shares of Newalta Inc. on a
one-for-one basis. The amalgamation of various subsidiary operating
entities of Newalta in connection with the Conversion was completed
on January 1, 2009.


FINANCIAL RESULTS AND HIGHLIGHTS

-------------------------------------------------------------------------

Three Months Ended Year Ended
December 31 December 31
-------------------------------------------------------
($000s except % %
per share/unit Increase Increase
data) 2008 2007 (Decrease) 2008 2007 (Decrease)
-------------------------------------------------------------------------
Revenue 145,341 137,075 6 597,035 499,864 19
Net earnings 9,085 23,613 (62) 58,882 61,189 (4)
- per share/unit
($) - basic 0.21 0.57 (63) 1.40 1.52 (8)
- per share/unit
($) - diluted 0.21 0.53 (60) 1.40 1.51 (7)
EBITDA(1) 27,600 26,456 4 125,753 96,228 31
- per share/
unit ($) 0.65 0.64 2 3.00 2.39 26
Funds from
operations(1) 17,510 20,528 (15) 95,887 79,970 20
- per share/unit
($) 0.41 0.50 (18) 2.29 1.98 16
Maintenance capital
expenditures(1) 8,461 6,227 36 20,762 17,235 20
Distributions
declared 23,472 22,929 2 93,180 90,117 3
- per share/
unit - ($) 0.56 0.56 - 2.22 2.22 -
Cash
distributed(1) 22,111 18,438 20 82,093 75,356 9
Growth and
acquisition capital
expenditures 38,193 99,478 (62) 104,440 193,046 (46)
Weighted average
share/units
outstanding 42,266 41,191 3 41,935 40,342 4
Share/units
outstanding,
December 31,(2) 42,400 41,417 2 42,400 41,417 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 currently has 42,400,472 units outstanding as of March 5,
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 Friday, March 6, 2009 at 2:00
p.m. (EST) to discuss Newalta's performance for Q4 and year ended December 31,
2008. To participate in the teleconference, please call 416-644-3423 or
1-800-595-8550. 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 Friday,
March 13, 2009, by dialling 1-877-289-8525 and using the pass code 21297342
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, 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

Years ended December 31, 2008 and 2007

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, commodity prices, interest rates, exchange rates,
seasonality of operations, growth, acquisition strategy, integration of
businesses into Newalta's operations, potential liabilities from acquisitions,
dependence on senior management, regulation, landfill operations, competition,
risk of pending and future legal proceedings, employees, labour unions, fuel
costs, access to industry and technology, possible volatility of share price,
insurance, future capital needs, debt service, sales of additional shares,
dependence on Newalta, the nature of the shares/trust units, unlimited
liability of shareholders, nature of the debentures issued by Newalta,
Canadian federal income tax, redemption of shares, loss of mutual fund trust
status, the effect of Canadian federal government proposals regarding
non-resident ownership, 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.
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:
"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.
"Cash distributed" is provided to assist management and investors in
determining the actual cash outflow to shareholders/unitholders in each period
and is used to assist in analyzing liquidity. Cash distributed is calculated
as follows:

-------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
($000s) 2008 2007 2008 2007
-------------------------------------------------------------------------
Distributions declared 23,472 22,930 93,180 90,117
Add:
Opening distributions payable 7,804 7,519 7,662 6,834
Less:
Ending distributions payable (7,560) (7,662) (7,560) (7,662)
DRIP units issued but
not distributed (275) - (275) -
Distributions reinvested
through DRIP(1) (1,330) (4,348) (10,914) (13,933)
-------------------------------------------------------------------------
Cash distributed 22,111 18,438 82,093 75,356
-------------------------------------------------------------------------
(1) Distribution Reinvestment Plan of the Fund.

"Combined divisional net margin" is used by management to analyze
combined divisional operating performance. Combined divisional net margin as
presented is not intended to represent operating income nor should it be
viewed as an alternative to net earnings or other measures of financial
performance calculated in accordance with GAAP. 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.
"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, accumulated other 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 Year ended
December 31, December 31,
($000s) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net earnings 9,085 23,613 58,882 61,189
Add back (deduct):
Current income taxes 21 479 949 1,351
Future income taxes (3,490) (16,308) (9,339) (22,778)
Finance charges 6,238 5,309 24,104 13,879
Interest revenue - (42) (80) (697)
Amortization and accretion 15,746 13,405 51,237 43,284
-------------------------------------------------------------------------
EBITDA 27,600 26,456 125,753 96,228
-------------------------------------------------------------------------
Weighted average number
of shares/units 42,266 41,191 41,935 40,342
-------------------------------------------------------------------------
EBITDA per share 0.65 0.64 3.00 2.39
-------------------------------------------------------------------------

"Funded debt" is a measure of our long-term debt position. Funded debt is
calculated by adding the senior long-term debt to the amount of letters of
credit outstanding at the period end date.
"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 Year ended
December 31, December 31,
($000s) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash from operations 54,764 21,675 128,922 54,058
Add back (deduct):
Changes in working capital (37,468) (2,028) (35,066) 24,201
Asset retirement costs incurred 214 881 2,031 1,711
-------------------------------------------------------------------------
Funds from operations 17,510 20,528 95,887 79,970
-------------------------------------------------------------------------

"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.
"Net margin" is used by management to analyze divisional operating
performance. Net margin as presented is not intended to represent operating
income 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.
"Operating income" is used by management to analyze corporate operating
performance before taxes. Operating income is not intended to represent net
earnings nor should it be viewed as an alternative to other measures of
financial performance calculated in accordance with GAAP. Operating income is
calculated from the statement of operations and comprehensive income and is
defined as revenue less: operating expenses; selling, general and
administrative expenses ("SG&A"); finance charges; and amortization and
accretion expenses.
"Return on capital" is used by management to analyze the operating
performance of investments in capital assets, intangibles and goodwill. Return
on capital is calculated by dividing EBITDA, excluding reorganization costs,
by the average net book value of capital assets, intangibles and goodwill.
References to assets employed, cash distributed, combined divisional net
margin, EBITDA, EBITDA per share, funds from operations, funded debt, growth
capital and growth and acquisition capital expenditures, maintenance capital
expenditures, net margin, operating income and return on capital 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".
On December 31, 2008, Newalta completed its conversion from a trust
structure to a corporate structure (the "Conversion"). The Conversion resulted
in the reorganization of Newalta Inc. into a publicly-listed corporation that
owns, directly, all of the units of the Newalta Income Fund and, indirectly,
all of the shares of Newalta Corporation. Pursuant to the Conversion, holders
of trust units of Newalta Income Fund received, for each unit held, one common
share of Newalta Inc. Throughout this document references to shares includes
trust units prior to the Conversion.
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 year ended December 31, 2008, (ii) the consolidated financial
statements of the Fund and notes thereto and Management's Discussion and
Analysis of the Fund for the year ended December 31, 2007, (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 quarters ended March 31,
2008, June 30, 2008 and September 30, 2008. Information for the year ended
December 31, 2008 along with comparative information for 2007, is provided.
This Management's Discussion and Analysis is dated March 5, 2009 and
takes into consideration information available up to that date.

Selected Financial Information

Selected Annual Information
-------------------------------------------------------------------------
($000s except per unit data) 2008 2007 2006
-------------------------------------------------------------------------
Revenue(1) 597,035 499,864 441,041
Operating income(1) 50,492 39,762 76,891
Net earnings 58,882 61,189 75,565
- per unit ($), basic 1.40 1.52 2.14
- per unit ($), diluted 1.40 1.51 2.11
Net earnings from continuing operations 58,882 61,189 74,080
- per unit ($), continuing operations 1.40 1.52 2.10
- per unit ($), discontinued operations - - 0.04
Funds from operations 95,887 79,970 112,510
- per unit ($), basic 2.29 1.98 3.18
- per unit ($), diluted 2.29 1.98 3.14
- per unit ($), continuing operations 2.29 1.98 3.16
- per unit ($), discontinued operations - - 0.02
Total assets 1,051,910 1,023,481 802,844
Senior long-term debt -
net of issue costs 263,251 206,940 166,271
Convertible debentures - face value 115,000 115,000 -
Distributions declared 93,180 90,117 75,923
Distributions declared per unit 2.22 2.22 2.14
-------------------------------------------------------------------------
(1) Amounts reflected exclude 2006 discontinued operations.

The factors that impacted revenue and profitability are outlined under
the heading entitled "Results of Operations". Total assets increased by $28.4
million or 3% in 2008 primarily due to acquisitions and growth capital
spending. Total growth and acquisition capital expenditures in 2008 were
$104.4 million as compared to $193.0 million in 2007 and $286.3 million in
2006. Growth capital investments for 2008 were funded by drawing on our credit
facility. In 2007, growth capital and acquisitions were funded by drawing on
our credit facility and proceeds from the issuance of $115.0 million in
convertible debentures (the "Debentures").
Segmented information is discussed in further detail under "Results of
Operations".

CORPORATE OVERVIEW

For the year, revenue was up 19% and EBITDA increased 31% compared to
2007. Profitability improved as EBITDA was 21% of revenue compared to 19% last
year. The strong performance in 2008 was largely attributable to high
commodity prices and solid returns from investments made in 2007.
The diversification of the business over the past 4 years is illustrated
in the charts below.

To view the Revenue Contribution by Division chart, please visit:
http://files.newswire.ca/788/Newalta_RevContrib_by_Division.doc

In Q4 2008, revenue and EBITDA were both up modestly at 6% and 4% from
the prior year, respectively. In the quarter, non-recurring charges were more
than $3 million including conversion costs, reorganization costs, and changes
in estimated revenues associated with certain environmental projects.
Excluding these charges, EBITDA would have been approximately $31 million, or
up 17%, compared to last year. Combined divisional net margin was up $0.6
million, with the Western Division down $3.6 million and the Eastern Division
up $4.2 million. In the Western Division, the volumes of waste processed was
up 6% and crude oil recovered to our account was flat compared to last year,
but the realized value of the crude oil was down 30% from $73.80/bbl in Q4
2007 to $51.30/bbl in Q4 2008. The Eastern Division acquisitions, including
the lead acid battery recycling operation ("VSC"), delivered strong results,
while at the Stoney Creek landfill ("SCL"), tonnage was up due to strong
event-based activity.
Compared to Q3 2008, for Q4 2008 revenue was down 8% and EBITDA was down
$10 million, or 27%. Key factors in the decline were the $6.0 million drop in
crude oil sales and non-recurring charges. Combined divisional net margin was
down $9.6 million with the Western Division down $12.1 million and the Eastern
Division up $2.5 million. In the Western Division, volumes of waste processed
and crude oil recovered to our account were both down about 7%. The revenue
and margin from the crude oil recovered was down almost $6 million as the
realized price decreased from $105.40/bbl to $51.30/bbl. In the Eastern
Division, the amount of lead sold was up 16%, while the average price per
tonne was down 8%. SCL receipts were up sharply in the fourth quarter compared
to the third quarter. The increase in SG&A costs was largely attributable to
the non-recurring costs associated with the Conversion. Funded debt to EBITDA
at year-end was below 2.5.
On December 31, 2008, Newalta completed the Conversion from a trust
structure to a corporate structure. The Conversion has resulted in the
reorganization of Newalta Inc. into a publicly-listed corporation that owns
all of the units of the Fund and all of the shares of the corporation.

Outlook

In Q1 2008, revenue was $150.2 million and EBITDA was $34.1 million. Our
markets were extremely volatile over the past year with crude oil, lead prices
and industrial production declining dramatically. In Q1 2009, we anticipate a
reduction in waste volumes in all business units and a steep decline in the
value of the products that we recover from waste. The outlook beyond Q1 2009
is uncertain. We have taken prudent and responsible steps to manage expenses,
improve profitability and productivity, strengthen our balance sheet, restrict
capital expenditures, and review all of our business practices, as well as our
organization. The steps that we are taking will reduce our cost structure and
enable us to deliver improved results as our markets recover.

WESTERN DIVISION

Overview

The Western Division operates more than 55 facilities with more than 920
people in British Columbia, Alberta, Saskatchewan, Texas and Wyoming. The
division is comprised of three business units: Oilfield, Drill Site and
Industrial. The division 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:

- state of the oil and gas industry in western Canada

- the amount of waste generated by crude oil producers

- fluctuation in the price of crude oil

- 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

In 2008, the business units contributed the following to division revenue:

- Oilfield 59%

- Drill Site 13%

- Industrial 28%

To view the Western Revenue and Net Margin charts, please visit:
http://files.newswire.ca/788/Newalta_Western_Revenue_NetMargin.doc


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

-------------------------------------------------------------------------
% %
($000s) Q4 2008 Q4 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Revenue - external 79,645 91,025 (13) 356,146 348,424 2
Revenue - internal 250 114 119 919 652 41
Operating costs 53,120 60,499 (12) 229,423 234,896 (2)
Amortization and
accretion 5,545 5,823 (5) 21,614 20,852 4
-------------------------------------------------------------------------
Net margin 21,230 24,817 (14) 106,028 93,328 14
-------------------------------------------------------------------------
Net margin as %
of revenue 27% 27% - 30% 27% 11
-------------------------------------------------------------------------
Maintenance capital 6,163 3,909 58 12,342 11,373 9
-------------------------------------------------------------------------
Growth capital(1) 20,512 10,861 89 51,456 30,510 69
-------------------------------------------------------------------------
Assets employed(2) n/a n/a n/a 470,121 441,234 7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Growth capital does not include acquisitions.

(2) "Assets employed" is the sum of capital assets, intangible assets and
goodwill.


For the full year versus the prior year:

- revenue increased 2%

- net margin increased 14%

- net margin as a percent of revenue increased from 27% to 30%

Western's strong performance in 2008 resulted from increased recovered
crude oil volumes and strong oil prices. Compared to 2007, recovered crude oil
volumes for our account increased by 11% and crude oil prices were up 39%. Oil
recovered increased in 2008 due to heavy oil/SAGD volumes. In 2008, we
returned to 2006 levels of recovered oil volumes and reduced the volatility in
recovered volumes with our increased focus in the heavy oil/SAGD market. Our
exposure to the more volatile drilling industry was offset by an increased
focus on waste oil streams from heavy oil/SAGD producers.
Compared to Q4 2007, Western's Q4 2008 revenue and net margin were
negatively impacted by declines in crude oil sales, which were down $2.0
million. Recovered oil volumes were flat year-over-year and the average price
was down 30%. Drill Site benefited from improved utilization in both the U.S.
and Canada, while demand for environmental services weakened significantly.
Declines in Industrial waste volumes were offset by improvement in oil
recycling product sales.
Compared to Q3 2008, Q4 was negatively impacted by a 51% decline in crude
oil price which resulted in a decline in revenue of $5.9 million.
By the end of Q1 2009, we will have reorganized our business units within
the Western Division (currently Oilfield, Industrial, and Drill Site) into
Facilities, Drill Site and Heavy Oil.

Capital Spending
----------------

Western's growth capital expenditures in Q4 2008 were $20.5 million and
$51.5 million for 2008. Projects included expansion of services in drill site
and heavy oil/SAGD services as well as productivity improvements to existing
Oilfield facilities, including expanding onsite activities in heavy oil/SAGD.
Maintenance capital expenditures were $6.2 million and $12.3 million, for the
quarter and year, respectively.
Total capital investments in the first half of 2009 are planned to be
$9.0 million.

Western Outlook
---------------

In Q1 2008, the Western Division delivered $94 million revenue and $29.5
million net margin. Current drilling rig utilization rates in western Canada
are down about 25% in 2009 compared to 2008 and this decline in activity will
impact waste volumes processed and crude oil recovered. In addition, the value
of the crude oil recovered to our account in 2009 is down approximately
$45.00/bbl from $81.20/bbl realized in Q1 last year.

Results of Operations - Oilfield
--------------------------------
Oilfield business unit revenue is primarily generated from:

- fees from the processing and disposal of oilfield-generated wastes,
including water recycling and disposal, clean oil terminalling,
custom treating, landfill, and onsite services

- sale of recovered crude oil for our account

For 2008 compared to 2007, Oilfield business unit's revenue increased 14%
as a result of high oil prices and increased waste volumes.
Waste and recovered crude oil volumes both declined in 2007 compared to
2006 due to reduced drilling activity in western Canada. In 2008, volumes
increased due to higher volumes of waste derived from SAGD production. Over
the past three years:

- the annual volume of recovered crude oil as a percent of the annual
volume of waste processed has been consistent at approximately 6%

- the average annual price we received for recovered crude oil has
averaged approximately 83% of the Edmonton Par price(1)

-------------------------
(1) Edmonton par is a more accurate comparator than WTI. Our recovered
crude oil is sold in Canadian dollars.

To view the Recovered Crude and Waste processing volumes charts, please
visit:
http://files.newswire.ca/788/Newalta_RecovrdCrude_&_Volumes.doc


-------------------------------------------------------------------------
2008 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Waste processing volumes
('000 m(3)) 1,027 259 276 209 283
Recovered crude oil
('000 bbl)(1) 410.4 95.1 102.3 101.3 111.7
Average crude oil price
received (CDN$/bbl) 86.20 51.30 105.40 105.10 81.20
Recovered oil sales
($ millions) 35.4 4.9 10.8 10.6 9.1
Edmonton par price (CDN$/bbl) 102.60 66.40 122.90 124.60 96.60
-------------------------------------------------------------------------

-------------------------------------------------------------------------
2007 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Waste processing volumes
('000 m(3)) 927 244 232 180 270
Recovered crude oil
('000 bbl)(1) 368.3 95.4 100.0 87.2 85.7
Average crude oil price
received (CDN$/bbl) 62.20 73.80 66.10 52.70 54.30
Recovered oil sales
($ millions) 22.9 7.0 6.6 4.6 4.7
Edmonton par price (CDN$/bbl) 75.70 85.30 79.10 71.3 67.00
-------------------------------------------------------------------------

-------------------------------------------------------------------------
2006 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Waste processing volumes
('000 m(3)) 1,030 241 284 208 297
Recovered crude oil
('000 bbl)(1) 406.4 99.6 93.2 110.9 102.7
Average crude oil price
received (CDN$/bbl) 59.80 51.40 68.00 66.20 53.70
Recovered oil sales
($ millions) 24.3 5.1 6.3 7.3 5.5
Edmonton par price (CDN$/bbl) 72.60 63.80 79.10 78.40 69.00
-------------------------------------------------------------------------
(1) Represents the total crude oil recovered and sold for our account.


Results of Operations - Drill Site

Drill Site business unit revenue is primarily generated from:

- the supply and operation of drill site processing equipment

- fees for environmental services comprised of environmental
projects and drilling waste management services

Drill site processing equipment comprises two main groups of equipment:
solids control and drill cuttings. Solids control equipment consists of
centrifuges and ancillary equipment that can be used on any drilling location
to remove unwanted solids from any type of drilling fluid and operate closed
loop systems where the drilling muds and water can be reused. Drill cuttings
equipment is specialized to gas wells drilled using oil-based drilling muds.
This equipment is used to recover oil-based fluids for reuse in the active mud
system and to manage the drill cuttings to minimize transportation and
disposal of solid waste.
In 2008, we increased our fleet by approximately 9% while at the same
time we improved utilization from 27% to 40%. Our strategy of deploying idle
drill site equipment to the U.S. market more than tripled the active units
while utilization in Canada was relatively flat. The revenue gains generated
from the drill site processing equipment were offset by weak demand for
environmental services.
In Q4 2008, utilization was 45%, compared to 28% in Q4 2007 and up from
41% in Q3 2008 as we continue to gain new business in both Canada and the U.S.
The table below reflects the changes in average drill site
equipment-in-use and utilization:

-------------------------------------------------------------------------
Drill Site Utilization 2008 2007
--------------------------------------------------
2008 Q4 Q3 Q2 Q1 2007 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Average
equipment-in-use(1)
Canada 24 33 20 7 37 25 26 24 16 35
U.S. 35 40 41 29 30 11 14 11 14 5
-- -- -- -- -- -- -- -- -- -
59 73 61 36 67 36 40 35 30 40
-------------------------------------------------------------------------
Average equipment
available(2) 148 162 147 142 141 136 141 137 137 129
-------------------------------------------------------------------------
Utilization 40% 45% 41% 25% 48% 27% 28% 26% 22% 31%
-------------------------------------------------------------------------
(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.

(2) The average equipment available in the U.S. in Q4 2008 and the year
ended December 31, 2008 was 73 and 56 units respectively. In Q4 2007
and for the year ended December 31, 2007, there were 23 and 18 units
in the U.S., respectively.


Results of Operations - Industrial

Industrial business unit revenue is generated from two main areas:

- oil recycling, including the collection and processing of waste lube
oils and the sale of finished products

- industrial fixed facilities, including our service centres and
transport

In 2008 performance was relatively consistent with 2007, with oil
recycling revenue up modestly for the year, driven by increases in volume and
price. The performance of fixed facilities was flat, excluding the impact of
the sale of non-core assets.

EASTERN DIVISION

Overview

Eastern was established through acquisitions with operations in Ontario
in 2006 and the subsequent expansion into Québec and Atlantic Canada in late
2006 and 2007. Eastern provides industrial waste management, recycling and
other environmental services to markets located in eastern Canada and the
United States through its integrated network of over 30 facilities with more
than 775 employees. This network features an engineered non-hazardous solid
waste landfill located in Stoney Creek ("SCL") with an annual permitted
capacity of 750,000 metric tonnes of waste per year and, based on current
volumes, has an estimated remaining life of 10 years. The network also
includes a lead-acid battery recycling facility with two long body kilns,
located in Ville Ste-Catherine, Québec ("VSC") with an annual capacity of
approximately 80,000 MT.
Key factors that impact on the performance of the Eastern Division
include:

- market conditions in eastern Canada and bordering U.S. states,
including the automotive, construction, forestry, manufacturing,
mining, oil and gas, petrochemical, pulp and paper, refining, steel,
and transportation service industries

- fluctuation in the U.S./Canadian dollar exchange rate

- supply and demand in the North American battery manufacturing
industry

- fluctuations in the trading price of lead

In 2008, the business units contributed the following to division revenue:

- Québec/Atlantic 68%

- Ontario 32%

To view the Eastern Revenue and Net Margin charts, please visit:
http://files.newswire.ca/788/Newalta_Eastern_Revenue_NetMargin.doc

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

-------------------------------------------------------------------------
% %
($000s) Q4 2008 Q4 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Revenue - external 65,696 46,008 43 240,809 150,743 60
Operating costs 47,137 34,983 35 180,569 114,416 58
Amortization and
accretion 6,798 3,513 94 18,718 14,160 32
-------------------------------------------------------------------------
Net margin 11,761 7,512 57 41,522 22,167 87
-------------------------------------------------------------------------
Net margin as % of
revenue 18% 16% 13 17% 15% 13
-------------------------------------------------------------------------
Maintenance capital 2,266 1,270 78 8,312 4,412 88
-------------------------------------------------------------------------
Growth capital(1) 12,993 13,146 (1) 36,036 32,555 11
-------------------------------------------------------------------------
Assets employed(2) - - - 351,617 327,663 7
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Growth capital does not include acquisitions.

(2) "Assets employed" is the sum of capital assets, intangible assets and
goodwill.


For the full year versus the prior year:

- revenue increased 60%

- net margin increased 87%

- net margin as a percent of revenue improved from 15% to 17%

Contributions from 2007 acquisitions and growth capital investments drove
revenue and net margin growth in 2008.
In Q4 2008, revenue was up 43% and net margin was up 57%. Strong
performance of VSC and SCL contributed to improved results.
In Q4 2008, net margin was up 28%, compared to Q3 2008. The improved
results were attributable to a 45% increase in landfill activity, improved
results from the Québec/Atlantic facilities, and an increase in lead tonnage
sold.

Capital Expenditures
--------------------
Eastern's growth capital expenditures were $13.0 million in Q4 and $36.0
million for the year. Growth capital was mainly invested in productivity
improvement across the division and the restart of the second kiln at VSC.
Maintenance capital expenditures were $2.3 million and $8.3 million, for the
quarter and year, respectively.
Eastern's growth and maintenance capital expenditures in the first half of
2009 are planned to be approximately $6.0 million.

Eastern Outlook
---------------
In Q1 2008, the Eastern Division delivered $56.2 million revenue and $9.4
million net margin. The steep decline in the lead price in 2008 will impact
the performance of our VSC operation in Q1 2009. In addition, the Ontario
economy is weak and the performance of our operations in this market is
anticipated to be reduced in the near term, particularly at the SCL.

Results of Operations - 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

For 2008 compared to 2007, revenue for the Québec/Atlantic business unit
was up 117%, primarily from the 2007 acquisitions of VSC and other locations
in Atlantic Canada. We acquired VSC in the fourth quarter of 2007 with one
kiln producing finished lead and the second kiln sitting idle. The revenue
generated by the sale of finished lead products produced at this facility is
tied to the trading price of soft lead, a commodity traded through the London
Metals Exchange ("LME"), and the trading prices of the alloys added to the
finished product to meet our customers' specifications. Our produced lead is
primarily used in the production of automobile and industrial batteries.
We invested approximately $10 million in 2008 to restart the second kiln.
Commissioning of the second kiln at VSC has continued in the first quarter and
is proceeding as expected.
This facility generates revenue from direct lead sales and from the
receipt of tolling fees. Direct lead sales occur where we purchase waste
batteries from a network of scrap dealers and battery manufacturers. The cost
of the waste batteries to us generally lags behind the trading price of lead
on the LME. Once processed, direct lead products are sold at the current LME
trading prices, with a premium based on the alloys incorporated into the
finished product. As a result, our financial performance related to direct
sales is directly linked to market fluctuations in the trading price of lead.
Tolling is a processing fee charged to customers for recycling their
lead-acid batteries into recycled lead. In tolling arrangements, the customer
provides the battery feedstock and our processing fees are generally fixed,
but may fluctuate with the price of lead on the LME within a specified range.
Financial performance from tolling is therefore much less susceptible to
fluctuations in the trading price of lead. Historically, the tonnage of lead
sold generated from direct sales and tolling has been approximately a 60/40
split. To take advantage of increased tolling prices implemented in Q1 2008,
and to manage the risk of declining LME prices, we increased our tolling
tonnage to 43% by year end. Based on the operation of two kilns, our objective
in 2009 is to achieve a 50/50 split between direct sales and tolling.
In 2008, the kiln operated 327 days in the year, with scheduled
maintenance in January, July, and December. Lead tonnage sold was stable
throughout 2008, averaging 11,600 MT per quarter. This business typically has
a steady demand throughout the year and therefore reduces seasonal variability
in cash from consolidated operating activities of Newalta. Finished product
inventory turns over approximately 1 to 1.5 times per month.
The table below highlights the lead sold in 2008 and the percentage by
weight of direct sales and tolling.

-------------------------------------------------------------------------
2008 Q4 2008 Q3 2008 Q2 2008 Q1 2008
-------------------------------------------------------------------------
Lead sold ('000 MT) 46.3 12.6 10.9 12.1 10.7
% of lead by weight
Direct 61 57 62 58 67
Tolling 39 43 38 42 33
-------------------------------------------------------------------------
Average price - direct sales
($/MT)(1) 2,480 2,001 2,175 2,717 2,991
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Average lagged LME price
(U.S.$/MT)(2) 2,218 1,547 1,911 2,653 2,760
-------------------------------------------------------------------------
(1) Average price received means all direct sales of finished products,
including finished products that are alloyed to customer
specifications.

(2) Average LME price is based on a one-month lag consistent with our
pricing structure.


Results of Operations - 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

For the full year versus 2007, Ontario revenue increased marginally,
supported by strong event-based activity in the second half of 2008. The
performance of the fixed facilities was relatively flat.
Over the past three years, annual tonnage at SCL has remained between
640,000 to 700,000 MT per year. Event-based tonnage, which historically
represents approximately half of our annual tonnage, varies significantly
quarter to quarter. This was particularly evident in 2008 with the increase in
event-based business in the second half of the year. Permitted annual capacity
is 750,000 MT.

-------------------------------------------------------------------------
(in '000 MT) Annual Receipts
-------------------------------------------------------------------------
2008 654.7
2007 693.0
2006 638.4
-------------------------------------------------------------------------

To view the "Volume of waste collected" chart, please visit:
http://files.newswire.ca/788/Newalta_Volume_of_Waste_Collected.doc


Corporate and Other

-------------------------------------------------------------------------
% %
($000s) Q4 2008 Q4 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Selling, general
and administrative
expenses 17,734 15,209 17 62,129 54,279 14
as a % of revenue 12.2% 11.1% 10 10.4% 10.9% (5)
Amortization and
accretion 15,746 13,405 17 51,237 43,284 18
as a % of revenue 10.8% 9.8% 10 8.6% 8.7% (1)
-------------------------------------------------------------------------

Included in SG&A for the first 3 quarters was foreign exchange of $1.2
million which was reclassified in Q4 to the Western and Eastern Divisions to
better reflect the impact foreign exchange exposure has on operations. In
2007, foreign exchange was not material and therefore not reclassified.
During Q4, we initiated a comprehensive cost control program that
implemented hiring restrictions, postponed salary increases and restricted
travel and other discretionary items. Non-recurring costs incurred in the
quarter related to the Conversion from an income trust structure to a
corporate structure and to restructuring costs. Excluding the impact of these
non-recurring costs, SG&A as a percent of revenue would have been 10.8% for
the quarter.
On an annual basis, the increase in SG&A was due primarily to the costs
associated with the acquisitions completed in 2007. Excluding the impact of
non-recurring costs, SG&A as a percent of revenue would have been 10% for the
full year. With our continued focus on cost control, management expects SG&A
costs to be reduced in 2009.
Amortization in Q4 increased primarily due to the inclusion of a full
quarter of amortization for VSC and an asset impairment write-down in Eastern.
For the year, the increase in amortization was due to growth capital
expenditures, the full year's amortization for VSC, net gains on the disposal
of assets, and an asset impairment write-down. The net gain on the disposal of
assets for the year of $2.7 million was offset by the impairment write-down of
$2.5 million.
The following table reflects the breakdown of Newalta's finance charges.

-------------------------------------------------------------------------
% %
($000s) Q4 2008 Q4 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Bank fees and
interest 3,928 4,198 (6) 14,900 12,768 17
Convertible
debentures interest
and accretion of
issue costs 2,310 1,111 108 9,204 1,111 728
-------------------------------------------------------------------------
Finance charges 6,238 5,309 17 24,104 13,879 74
-------------------------------------------------------------------------

The increase in finance charges was primarily driven by higher average
debt levels as compared to 2007. 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 Newalta's long-term borrowings.

-------------------------------------------------------------------------
% %
($000s) Q4 2008 Q4 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Current tax 21 479 96 949 1,351 30
Future income tax (3,490) (16,308) (79) (9,339) (22,778) (59)
-------------------------------------------------------------------------
Provision for
(recovery of)
income taxes (3,469) (15,829) (78) (8,390) (21,427) (61)
-------------------------------------------------------------------------

Current tax expense for the year was $1.0 million, compared to current
tax of $1.4 million in 2007. The decrease in current tax expense was due to
lower provincial capital tax rates. 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 3 years.
Newalta had a future income tax recovery of $9.4 million, compared to a
future income tax recovery of $22.8 million in 2007. The change was
attributable to the reduction in future federal income tax rate changes
announced in 2007, as well as the earlier reversal of tax loss carryforwards
due to the change to our structure.
See "Critical Accounting Estimates - Income Taxes" in this MD&A for
further discussion on the impact of the Conversion.
As at March 5, 2009, Newalta had 42,400,472 shares outstanding,
outstanding options to purchase up to 2,840,575 shares and a number of shares
that may be issuable pursuant to the $115.0 million in Debentures (see Sources
of Cash - Debentures).

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:

-------------------------------------------------------------------------
December 31, December 31,
($000s) 2008 2007
-------------------------------------------------------------------------

Working capital 39,953 74,529
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Use of credit facility:
Senior long-term debt 264,687 207,417
Letters of credit 49,249 40,095
-------------------------------------------------------------------------
Funded senior debt A 313,936 247,512
Unused credit facility capacity 111,064 177,488
-------------------------------------------------------------------------

Debentures B 115,000 115,000
-------------------------------------------------------------------------
Total Debt equals A+B 428,936 362,512
-------------------------------------------------------------------------
-------------------------------------------------------------------------

As a result of 2008 growth capital expenditures in excess of funds from
operations and increased requirements for letters of credit, funded senior
debt increased by $66.4 million to $313.9 million at the end of 2008.
Our working capital at December 31, 2008 was $40.0 million compared with
$74.5 million at December 31, 2007. The decrease in working capital was a
result of the following initiatives:

- 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 19% increase in
revenue, net trade receivables improved by $25.5 million, day sales
outstanding were reduced by 10 days and over 90 day accounts were reduced by
$15.2 million.
In the first quarter of 2009, to provide flexibility in managing our
levels of finished lead inventory, we sold lead into LME warehouses at the
current market price. We anticipate continuing to access this market over the
remainder of the year.
At current activity levels, working capital of $39.9 million is expected
to be sufficient to meet our ongoing commitments and operational requirements
of the business.
The Current Ratio is defined as the ratio of total current assets to
total current liabilities. As a result of the improvement in the management
and collection of receivables, this ratio declined from 1.65 times at December
31, 2007 to 1.34 times at December 31, 2008. This ratio exceeds our bank
covenant minimum requirement of 1.20:1.
We have not purchased any asset-backed commercial paper investments.

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

During Q4, despite the weakened credit market, Newalta extended the
maturity of its $425.0 million credit facility (the "Credit Facility") to
October 2010 and improved the funded debt to EBITDA covenant to 3.00:1 for the
term of the 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.
At December 31, 2008, Newalta had senior long-term debt of $264.7
million, compared to $207.4 million at December 31, 2007, an increase of $57.3
million. The increase was used to fund growth capital expenditures.
Included within our funded senior debt are letters of credit in the
amount of $49.2 million ($40.1 million - 2007) which have been provided as
security to third parties, including environmental regulatory authorities to
satisfy asset retirement obligations.
Performance bonds, if less than $25.0 million in total, are not required
to be offset against the borrowing amount available under the Credit Facility
and are not included in the definition of funded debt. As at December 31,
2008, performance bonds totalled $15.2 million.
Financial performance relative to the financial ratio covenants under the
current Credit Facility is reflected in the table below:

-------------------------------------------------------------------------
December 31, 2008 Threshold
-------------------------------------------------------------------------
Current Ratio(1) 1.34:1 1.20:1 minimum
Funded Debt(2) to EBITDA(3) 2:46:1 3.00:1 maximum
Fixed Charge Coverage Ratio(4) 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
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 the Fund 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.

(4) Fixed Charge Coverage Ratio means, based on the trailing 12-month
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.


We are restricted from declaring dividends if we are in breach of the
covenants under the Credit Facility.
As at December 31, 2008, our funded senior debt was $313.9 million
resulting in unused capacity of $111.1 million on our Credit Facility and a
funded debt to EBITDA ratio of 2.46:1. In late 2008, we formalized a program
to reduce funded senior debt through the following initiatives:

- reduction in the amount of outstanding letters of credit

- continued improvement in the management of working capital

- sale of idle, redundant or non-core assets

- restricted capital spending in the first half of 2009

- reduced expenses with the implementation of our cost control program,
which, included: hiring restrictions, postponement of salary
increases and restrictions on travel and discretionary expenses

The actions we have undertaken positively impacted our funded debt
position at the end of 2008, and we anticipate a continued positive impact
throughout 2009, better positioning Newalta within this challenging economic
environment.
We have $49.2 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 with no additional
security required to be posted in 2009. 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.
In addition, we have letters of credit in the amount of approximately
$5.0 million which under existing regulations can be replaced with performance
bonds. We are currently replacing these letters of credit with performance
bonds.

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.
Upon maturity or redemption of the Debentures, we may pay the outstanding
principal of the Debentures in cash or may, elect to satisfy our obligations
to repay all or a portion of the principal amount of the Debentures which have
matured or been redeemed by issuing and delivering that number of shares
obtained by dividing the aggregate amount of principal of the Debentures which
have matured or redeemed by 95% of the weighted average trading price of the
shares on the Toronto Stock Exchange for the 20 consecutive trading days
ending five trading days preceding the date fixed for redemption or the
maturity date, as the case may be. We may also elect, subject to regulatory
approval, from time to time, to satisfy our obligation to pay all or any part
of the interest on the Debentures, on the date interest is payable under the
Debenture Indenture, by delivering a sufficient number of shares to the
debenture trustee to satisfy all or any part, as the case may be, of the
interest obligation.

USES OF CASH

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

Capital Expenditures

Capital expenditures for 2008 and 2007 were:

-------------------------------------------------------------------------
($000s) 2008 2007
-------------------------------------------------------------------------
Growth capital 103,820 96,380
Acquisitions(2) 620 96,666
-------------------------------------------------------------------------
Total growth capital and acquisitions 104,440 193,046
Maintenance capital expenditures 20,762 17,235
-------------------------------------------------------------------------
Total capital expenditures(1) 125,202 210,281
-------------------------------------------------------------------------
(1) 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.

(2) Acquisitions do not include deferred payments related to the 2007 VSC
acquisition.

Total capital expenditures for the year were $125.2 million, as compared
to our budget of $135.0 million. Growth and acquisition capital expenditures
in 2008 were funded by the Credit Facility as well as funds from operations
and proceeds from the sale of assets.
Growth and acquisition capital investments of $86.6 million included
productivity improvements in our fixed facility network and purchasing
additional drill site centrifuges, SAGD equipment and onsite processing
businesses.
Maintenance capital increased $3.6 million to $20.8 million. This
increase relates to our increased asset base and increased activity at our
fixed facility network and onsite operations, as well as the increased
utilization of our drill site processing equipment.
The remaining capital expenditures related primarily to the SAP
implementation in the Eastern Division as well as leasehold improvements.
Capital expenditures in the first half of 2009 are expected to total
approximately $15 million, comprised of growth capital expenditures of $10
million, and maintenance capital of $5 million. The capital program for the
second half of 2009 will be established in the second quarter based on our
financial performance and the outlook for our markets. We expect to continue
to restrict growth capital spending until we see a significant improvement in
our markets. These investments will be funded entirely from funds from
operations.

Distributions and Dividends

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, and in light of
the volatility in our markets, the Board has declared a dividend of $0.05 per
share, payable April 15th to shareholders of record as at March 31, 2009. The
ex-dividend date is March 27th, 2009. The Board will continue to review future
dividends as financial performance is known and conditions stabilize.
Although we changed our structure to a corporate structure on December
31, 2008 we have provided the following table as additional information as it
provides another perspective on the sourcing of cash to fund distributions:

-------------------------------------------------------------------------
Three Months Ended Year Ended
December 31 December 31
($000s) 2008 2007 2008 2007 2006
-------------------------------------------------------------------------
Cash flows generated from
operating activities 54,764 21,675 128,922 54,058 111,963
Distributions declared (23,472) (22,929) (93,180) (90,117) (75,923)
-------------------------------------------------------------------------
Cash excess (shortfall) 31,292 (1,254) 35,742 (36,059) 36,040
-------------------------------------------------------------------------

Net earnings 9,085 23,613 58,882 61,189 75,565
Distributions declared (23,472) (22,929) (93,180) (90,117) (75,923)
-------------------------------------------------------------------------
Net earnings (shortfall)
excess (14,387) 684 (34,298) (28,928) (358)
-------------------------------------------------------------------------

For Q4 and the year-ended December 31, 2008, cash flow generated from
operating activities was greater than distributions declared, while net
earnings were less than distributions declared. Declared
distributions/dividends and cash distributed levels are monitored and assessed
through internal forecasts which incorporate the most recent operating and
financial results, maintenance and growth capital requirements as well as
market activity and conditions.
Due to strong cash flow generated from operating activities,
distributions declared were funded from our cash flows for the three months
and year ended December 31, 2008. The cash excess was driven mainly by a
decrease in working capital of $34.6 million for the year ended December 31,
2008. In addition, these calculations do not include proceeds from the Fund's
DRIP through which $1.3 million and $10.9 million in distributions were
reinvested by unitholders for the three months and year-ended December 31,
2008, respectively. It also does not include cash proceeds received through
the sale of idle, redundant and non-core assets of $15.2 million in 2008.
The net earnings shortfall is mainly attributable to amortization and
accretion expense, a non-cash expense, of $15.7 million and $51.2 million for
the three months and year-ended December 31, 2008, respectively. Management
does not believe that the shortfalls in the table above have resulted in an
economic return of capital.
Newalta Inc. has not adopted a dividend reinvestment plan.

Contractual Obligations

Our contractual obligations, as at December 31, 2008, are:

-------------------------------------------------------------------------
Less
than one 1-3 4-5 There-
($000s) Total year years years after
-------------------------------------------------------------------------
Office leases 72,289 7,618 13,532 12,911 38,228
Operating leases 25,606 8,702 12,580 4,324 -
Surface leases 4,852 1,056 2,174 1,370 252
Convertible debentures 146,494 8,015 16,100 122,379 -
Senior long-term debt(1) 264,687 - 264,687 - -
-------------------------------------------------------------------------
Total commitments 513,928 25,391 309,073 140,984 38,480
-------------------------------------------------------------------------
(1) Senior long-term debt is gross of transaction costs. Interest
payments are not included.

Office building leases are our most significant near term portion of our
long-term obligation which range from 5 to 17 years. The total estimated
future cost for asset retirement obligations at December 31, 2008 was $9.8
billion. The net present value of this amount, $21.1 million (using a discount
rate of 8%), has been accrued on the consolidated balance sheet at December
31, 2008. The majority of the undiscounted future asset retirement obligations
relates to SCL in Ontario, which are expected to be incurred over the next 300
years. Excluding SCL, the total future costs are $36.3 million.

SUMMARY OF QUARTERLY RESULTS

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


-------------------------------------------------------------------------
($000s except per 2007
share/unit data) -------------------------------------------
Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Revenue 137,075 133,358 111,594 117,837
-------------------------------------------------------------------------
Operating income 7,784 14,524 3,799 13,665
-------------------------------------------------------------------------
Net earnings 23,613 17,893 6,716 12,966
-------------------------------------------------------------------------
Earnings per share/unit ($) 0.57 0.44 0.17 0.33
-------------------------------------------------------------------------
Diluted earnings per
share/unit ($) 0.54 0.43 0.16 0.33
-------------------------------------------------------------------------
Weighted average
share/units - basic 41,191 40,579 40,361 39,209
-------------------------------------------------------------------------
Weighted average
share/units - diluted 43,779 40,725 40,562 39,445
-------------------------------------------------------------------------
EBITDA 26,457 28,980 15,511 25,280
-------------------------------------------------------------------------

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
Q1 2007 which continued into 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 operating income. In Q3
2007 operations returned to seasonal levels but operating income 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. Operating income
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, operating income, and net earnings
compared to Q1, Q2, and Q3 2007 are mainly due to full quarter contributions
from acquisitions in each quarter as well as higher crude oil and lead
revenues, 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 January 2007, the Fund issued 3.0 million trust units for net proceeds
of $73.9 million, which accounts for the majority of the increase in the
weighted average shares/trust units from Q1 2007 to Q2 2007. The proceeds from
this issuance were used to repay indebtedness incurred to fund the
acquisitions and growth capital completed in the second half of 2006. From Q2
2007 to Q4 2008, the increase in the weighted average number of shares/trust
units is related to the DRIP program. As a part of the Conversion, 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.
Seasonality has a different effect on Western and Eastern, reflecting the
different types of services that each provides. The following seasonality
factors describe the typical quarterly fluctuations in operating results in
the absence of growth and acquisition capital.
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 they 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.

TRANSACTIONS WITH RELATED PARTIES

Bennett Jones LLP provides us with legal services. Mr. Vance Milligan, a
Director of Newalta Inc. is counsel to the law firm of Bennett Jones LLP. The
total cost of these legal services during the three months and year ended
December 31, 2008 was $0.5 million and $0.8 million, respectively (2007 - $0.4
million and $0.8 million, respectively).
We provide oilfield services to Paramount Resources Ltd., an oil and gas
company. Mr. Clayton Riddell, a Director of Newalta Inc. is the Chairman and
Chief Executive Officer of Paramount Resources Ltd. The total revenue for
services provided by us to this entity for the quarter and twelve months ended
December 31, 2008 was $0.3 million and $1.2 million, respectively (2007 - $0.3
million and $1.5 million, respectively).
These transactions were incurred during the normal course of operations
on similar terms and conditions to those entered into with unrelated parties.
These transactions are measured at the exchange amount, which is the amount of
consideration established and agreed to by the related parties.

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.
The following table provides management's estimates of fluctuations in
key inputs and prices and the direct impact on revenue from product sales:

-------------------------------------------------------------------------
Change in benchmark Impact on Revenue ($)
-------------------------------------------------------------------------
LME lead price (U.S.$/MT)(1) $220 6.0 million
Edmonton Par oil price ($/bbl)(2) $1.00 0.4 million
Gulf Coast Base oil ($/litre)(3) $0.05 0.8 million
-------------------------------------------------------------------------
(1) Based on approximately 27,500 tonnes of direct lead sales and the
Canadian dollar at par with the U.S. dollar.

(2) The impact on cash flow is estimated for oil sales only using 2008
volumes sold to Newalta's account of approximately 400,000 barrels.

(3) Based on approximately 18 million litres of base oil sales.

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.

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 2008 compared to those provided in Newalta's annual consolidated
financial statements for the year ended December 31, 2007.

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
December 31. We determined that no further impairment testing was necessary as
at December 31, 2008. 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 was no need
for additional impairment testing.

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.
Prior to the elimination of the trust structure on December 31, 2008,
Newalta Income Fund itself was sheltered from any current tax liability as all
of its taxable income was distributed to unitholders.
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.
As a result of the elimination of the trust structure, there have been a
number of one time future income tax adjustments in relation to tax losses and
other tax assets that are now expected to reverse sooner, at higher tax rates,
than they would under the trust regime. The effect has been an increase to the
future income tax asset and corresponding decrease to the future income tax
expense.

Stock-Based Compensation

Prior to the Conversion, we had two long-term incentive plans: the
Incentive Plan adopted on March 1, 2003 (the "2003 Plan"); and the Incentive
Plan adopted on May 18, 2006 (the "2006 Plan" and together with the 2003 Plan,
the "Converted 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.
On December 31, 2008, Newalta adopted a new long-term incentive plan
under which Incentive Options may be granted (the "Option Plan" and together
with the Converted Incentive Plans, the "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 2008, a total of 960,000 options were granted under the 2006 Plan.
No options were granted under the 2003 Plan and the Option Plan in 2008.
Subsequent to year end, (i) 894,675 options held by certain employees
pursuant to the Converted Incentive Plans were surrendered for cancelation and
842,500 options were granted to directors, officers and certain employees of
Newalta under the Option Plan, and (ii) 470,000 share appreciation rights were
surrendered for cancelation and 791,500 share appreciation rights were granted
to certain employees and an officer of Newalta.

Adoption of New Accounting Standards in 2008

Effective January 1, 2008, Newalta adopted new accounting recommendations
of the Canadian Institute of Chartered Accountants ("CICA") Handbook section
3862, Financial Instruments-Disclosures and section 3863, Financial
Instruments-Presentation. The incremental disclosure requirements for Newalta
are addressed in Note 22 to the interim consolidated financial statements for
the years ended December 31, 2008 and 2007.
Effective January 1, 2008, Newalta adopted CICA handbook section 3031
Inventories, which replaces section 3030. There was no effect on Newalta's
inventory balances. However, going forward, the new handbook section provides
for the ability to reverse impairment losses previously recognized if the
underlying assumption for that impairment has changed.
The CICA issued section 1535, Capital Disclosures, which requires both
qualitative and quantitative disclosures to provide users of the financial
statements with information to evaluate an entity's objectives, policies and
processes for managing capital. Effective January 1, 2008, Newalta adopted
this new accounting standard and the related disclosure is found in Note 14.

New Accounting Standards in 2009 and Onward

The CICA issued the following sections:

- Section 3064, Goodwill and intangible assets, replacing Section 3062,
Goodwill and other intangible assets and Section 3450, Research and
development costs. Various changes have been made to other sections
of the CICA Handbook for consistency purposes. The new Section is
applicable to financial statements relating to fiscal years beginning
on or after October 1, 2008. Accordingly, the new standards will be
adopted for fiscal year beginning January 1, 2009. It establishes
standards for the recognition, measurement, presentation and
disclosure of goodwill subsequent to its initial recognition and of
intangible assets by profit-oriented enterprises. Standards
concerning goodwill are unchanged from the standards included in the
previous Section 3062. We are currently evaluating the impact of the
adoption of this new Section on Newalta's consolidated financial
statements. We do not expect that the adoption of this new Section
will have a material impact on the consolidated financial statements.

- Section 1582, Business Combinations. This new section will be
applicable to business combinations for which the acquisition date is
on or after interim and fiscal periods beginning January 1, 2011.
Early adoption is permitted. This section improves the relevance,
reliability and comparability of the information that a reporting
entity provides in its financial statements about a business
combination and its effects. The Corporation has not yet determined
the impact of the adoption of this new section on the consolidated
financial statements.

- Section 1601, Consolidated Financial Statements. This new Section
will be applicable to financial statements relating to interim and
fiscal periods beginning on or after January 1, 2011. Early adoption
is permitted. This section establishes standards for the preparation
of consolidated financial statements. Newalta has not yet determined
the impact of the adoption of this new section on the consolidated
financial statements.

- Section 1602, Non-Controlling Interests. This new section will be
applicable to financial statements relating to interim and fiscal
periods beginning on or after January 1, 2011. Early adoption is
permitted. This section establishes standards for accounting for a
non-controlling interest in a subsidiary in consolidated financial
statements subsequent to a business combination. Newalta has not yet
determined the impact of the adoption of this new section on the
consolidated financial statements.

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. Our
structure includes a steering committee consisting of senior management, a
project team to manage and implement the change, and individual working groups
to focus on specific issues and areas. The steering committee regularly
reports to senior executive management, the Audit Committee and Board. We have
engaged an external expert advisor to assist with the implementation.
The following table summarizes our key activities, related milestones,
and our accomplishments to date.

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

- Investor relations Renegotiation of:
- Financial covenants
- Compensation - Financial covenants -
packages by Q2 - 2010
- Compensation
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.
The Annual Information Form is available through the internet on the
Canadian System for Electronic Document Analysis and Retrieval ("SEDAR") which
can be accessed at www.sedar.com. Copies of the Annual Information Form may be
obtained, on request without charge, from Newalta Corporation at 211 - 11th
Avenue S.W., Calgary, Alberta T2R 0C6 or by facsimile at (403) 806-7032.

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

The Chief Executive Officer and the Chief Financial Officer (collectively
the "Certifying Officers") have evaluated the effectiveness of Newalta's
disclosure controls and procedures as of December 31, 2008 and have concluded
that such disclosure controls and procedures were effective. In addition, the
Certifying Officers have evaluated the effectiveness of Newalta's internal
control over financial reporting as of December 31, 2008 and have concluded
that such internal controls over financial reporting were effective. There
have not been any changes in the internal control over financial reporting in
Q4 of 2008 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. at 211 - 11th Avenue S.W.,
Calgary, Alberta T2R 0C6 or by facsimile at (403) 806-7032.

Consolidated Balance Sheets

December December
($000s) (unaudited) 31, 2008 31, 2007
-------------------------------------------------------------------------
Assets
Current assets
Accounts receivable 120,884 159,749
Inventories (Note 5) 29,781 24,122
Prepaid expenses and other 6,546 6,129
-------------------------------------------------------------------------
157,211 190,000

Note receivable (Note 6) 1,160 1,424
Capital assets (Note 7) 724,788 661,605
Intangible assets (Note 8) 64,003 66,855
Goodwill (Note 4) 103,597 103,597
Future tax asset (Note 11) 1,151 -
-------------------------------------------------------------------------
1,051,910 1,023,481
-------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 109,698 107,809
Distributions payable (Note 17) 7,560 7,662
-------------------------------------------------------------------------
117,258 115,471

Senior long-term debt (Note 9) 263,251 206,940
Convertible debentures - debt portion (Note 10) 109,419 108,336
Future income taxes (Note 11) 40,039 49,840
Asset retirement obligations (Note 12) 21,094 20,985
-------------------------------------------------------------------------
551,061 501,572
-------------------------------------------------------------------------
Shareholders' Equity (Notes 10 and 13)
Shareholders' capital 509,369 496,027
Convertible debentures - equity portion 1,850 1,850
Contributed surplus 988 1,092
Retained earnings (deficit) (11,358) 22,940
-------------------------------------------------------------------------
500,849 521,909
-------------------------------------------------------------------------
1,051,910 1,023,481
-------------------------------------------------------------------------
-------------------------------------------------------------------------



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


For the Three Months For the Year Ended
($000s except per share/ Ended December 31 December 31
unit data) (unaudited) 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue 145,341 137,075 597,035 499,864
Expenses
Operating 100,007 95,368 409,073 348,660
Selling, general and
administrative 17,734 15,209 62,129 54,279
Finance charges 6,238 5,309 24,104 13,879
Amortization and accretion 15,746 13,405 51,237 43,284
-------------------------------------------------------------------------
139,725 129,291 546,543 460,102
-------------------------------------------------------------------------
Earnings before taxes 5,616 7,784 50,492 39,762
Provision for (recovery of)
income taxes
Current 21 479 949 1,351
Future (3,490) (16,308) (9,339) (22,778)
-------------------------------------------------------------------------
(3,469) (15,829) (8,390) (21,427)
-------------------------------------------------------------------------
Net earnings and
comprehensive income 9,085 23,613 58,882 61,189
Retained earnings,
beginning of period 3,029 22,256 22,940 51,868
Distributions (Note 17) (23,472) (22,929) (93,180) (90,117)
-------------------------------------------------------------------------
Retained earnings
(deficit), end of period (11,358) 22,940 (11,358) 22,940
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Net earnings per
share/unit (Note 16) 0.21 0.57 1.40 1.52
-------------------------------------------------------------------------
Diluted earnings per
share/unit (Note 16) 0.21 0.53 1.40 1.51
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Cash Flows

For the Three Months For the Year Ended
Ended December 31, December 31,
($000s) (unaudited) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net inflow (outflow) of cash
related to the following
activities:
Operating Activities
Net earnings 9,085 23,613 58,882 61,189
Items not requiring cash:
Amortization and accretion 15,746 13,405 51,237 43,284
Future income tax recovery (3,490) (16,308) (9,339) (22,778)
Other (3,831) (182) (4,893) (1,725)
-------------------------------------------------------------------------
Funds from Operations 17,510 20,528 95,887 79,970
Increase (decrease) in
non-cash working
capital (Note 21) 37,468 (2,028) 35,066 (24,201)
Asset retirement
expenditures incurred (214) (881) (2,031) (1,711)
-------------------------------------------------------------------------
54,764 21,675 128,922 54,058
-------------------------------------------------------------------------
Investing Activities
Additions to capital
assets (Note 21) (36,580) (43,474) (117,472) (125,335)
Net proceeds on sale
of capital assets (Note 7) 1,581 272 15,200 2,120
Acquisitions (Note 4) (715) (46,074) (2,662) (82,882)
-------------------------------------------------------------------------
(35,714) (89,276) (104,934) (206,097)
-------------------------------------------------------------------------
Financing Activities
Issuance of shares/units - (170) 1,913 77,158
Issuance of convertible
debentures - 110,050 - 110,050
Increase (decrease) in debt 2,975 (23,910) 55,847 40,668
Settlement of acquired
debt (Note 4) - - - (784)
Decrease in note receivable 86 69 345 303
Distributions to
unitholders (Note 17) (22,111) (18,438) (82,093) (75,356)
-------------------------------------------------------------------------
(19,050) 67,601 (23,988) 152,039
-------------------------------------------------------------------------
Net cash flow - - - -
Cash - beginning of period - - - -
-------------------------------------------------------------------------
Cash - end of period - - - -
-------------------------------------------------------------------------
Supplementary information:
Interest Paid 3,562 4,077 18,420 12,260
Income taxes paid 400 172 1,500 889
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Notes to the Interim Consolidated Financial Statements

FOR THE THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008 AND 2007
(all tabular data in $000s except per share and ratio data) (unaudited)

NOTE 1. CORPORATE STRUCTURE AND THE ARRANGEMENT

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 subsidiaries Newalta Corporation (the "Corporation") and
Newalta Industrial Services Inc. ("NISI", and together with Newalta Inc.
and the Corporation, 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, forestry,
manufacturing, mining, oil and gas, petrochemical, pulp and paper, 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 (see Note 11).
On December 17, 2008, unitholders of Newalta Income 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").

Pursuant to the Arrangement, the following steps were undertaken:

On December 31, 2008:

- Newalta Inc. assumed all the covenants and obligations of the Fund
for the convertible debentures (the "Debentures") in accordance with
the terms of the Debenture Indenture. As a result, each Debenture
became convertible into shares of Newalta Inc. rather than units of
the Fund.

- Each outstanding trust unit of the Fund was transferred to
Newalta Inc. in exchange for one common share of Newalta Inc.
Accordingly, the terms "shares" and "units" are used interchangeably
throughout these financial statements.

- All outstanding incentive rights to acquire trust units of the Fund
became incentive options to acquire an equivalent number of common
shares of Newalta Inc. on the same terms and conditions.

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
have been prepared on a continuity of interests basis, which recognizes
Newalta Inc. as the successor entity to the Fund.

NOTE 2. BASIS OF PRESENTATION

The consolidated financial statements include the accounts of
Newalta Inc. and its wholly-owned subsidiaries. The consolidated
financial statements have been prepared by management in accordance with
Canadian generally accepted accounting principles and include the
following significant accounting policies:

a) Cash and cash equivalents

Cash is defined as cash and short-term deposits with maturities of three
months or less, when purchased.

b) Inventory

Inventory is comprised of oil, lead and other recycled products, spare
parts and supplies, and is recorded at the lower of cost and net
realizable value. Cost of finished goods includes the laid down cost of
materials plus the cost of direct labour applied to the product and the
applicable share of overhead expense. Cost of other items of inventory
comprises the laid down cost.

c) Capital and intangible assets

Capital and intangible assets are stated at cost, less accumulated
amortization. The carrying values of capital assets and intangible assets
are reviewed at least annually to determine if the value of any asset is
impaired. Any amount so determined is written off in the year of
impairment. Amortization rates are calculated to amortize the costs, net
of salvage value, over the assets' estimated useful lives. Plant and
equipment includes buildings, site improvements, tanks and mobile
equipment and is principally depreciated at rates of 5-10% of the
declining balance or from 5-14 years straight line, depending on the
expected life of the asset. Some equipment is depreciated based on
utilization rates. The utilization rate is determined by dividing the
cost of the asset (net of estimated salvage value) by the estimated
future hours of service.

Landfill assets represent the costs of landfill available space,
including original acquisition cost, incurred landfill construction and
development costs, including gas collection systems installed during the
operating life of the site, and capitalized landfill closure and post-
closure costs. The cost of landfill assets, together with projected
landfill construction and development costs for permitted capacity, is
amortized on a per unit basis as landfill space is consumed. Management
annually updates landfill capacity estimates, based on survey information
provided by independent engineers, and projected landfill construction
and development costs. The impact on annual amortization expense of
changes in estimated capacity and construction costs is accounted for
prospectively. As at December 31, 2008, there was no impairment in the
value of the landfill assets.

Intangible assets consist of certain production processes, trademarks,
permits and agreements, which are amortized over the period of the
contractual benefit of 3-20 years, straight line. Certain permits are
deemed to have indefinite lives and therefore are not amortized. There
are no costs to renew these permits provided that Newalta remains in good
standing with regulatory authorities. As such, management reviews any
changes in the regulatory environment that could cause impairment in the
value ascribed to these permits. As at December 31, 2008, there was no
impairment in the value of these permits.

d) Goodwill

Goodwill represents the excess of the purchase price over the fair value
of the net identifiable assets of acquired businesses. Newalta, at least
annually, on September 30, assesses goodwill, and its potential
impairment, on a reporting unit basis by determining whether the balance
of goodwill can be recovered through the estimated discounted operating
cash flows of each reporting unit over their remaining lives.
Management's determination as at September 30, 2008 and December 31, 2008
was that goodwill was not impaired.

e) Asset retirement obligations

Newalta provides for estimated future asset retirement costs for all of
the facilities of the Corporation and NISI based on the useful lives of
the assets and the long-term commitments of certain sites (20 to 300
years). Over this period, Newalta recognizes the liability for the future
retirement obligations associated with property, plant and equipment.
These obligations are initially measured at fair value, which is the
discounted future value of the liability. This fair value is capitalized
as part of the cost of the related asset and amortized to expense over
the asset's useful life. The balance of the liability accretes until the
date of expected settlement of the retirement obligations. The accretion
expense has been included in amortization and accretion expense. Asset
retirement costs are estimated by management, in consultation with the
Corporation's engineers, on the basis of current regulations, costs,
technology and industry standards. Actual asset retirement costs are
charged against the provision as incurred.

f) Revenue recognition

The major sources of revenue relate to the processing of waste material
and the sale of recycled products recovered from the waste. Revenue is
recognized when waste material is received and a liability is assumed for
the waste. Revenue on recycled products is recognized when products are
delivered to customers or pipelines. For construction projects and well
abandonment work, revenue is recognized on a percentage of completion
basis.

g) Income taxes

Newalta Inc. and its wholly owned subsidiaries follow the liability
method of accounting for income taxes. Future income tax assets and
liabilities are measured based upon temporary differences between the
carrying values of assets and liabilities and their tax basis. Future
income tax expense is computed based on the change during the year in the
future income tax assets and liabilities. Effects of changes in tax laws
and tax rates are recognized when substantively enacted.

Income tax assets are also recognized for the benefits from tax losses
and deductions with no accounting basis, provided those benefits are more
likely than not to be realized. Future income tax assets and liabilities
are determined based on the tax laws and rates that are anticipated to
apply in the period of estimated realization.

h) Earnings per share/unit

Basic earnings per share/unit is calculated using the weighted average
number of shares/units outstanding during the year. Diluted earnings per
share/unit is calculated by adding the weighted average number of
shares/units outstanding during the year to the additional shares/units
that would have been outstanding if potentially dilutive shares/units had
been issued, using the "treasury stock" method and the "if converted"
method for the Debentures.

i) Incentive Plans

Newalta Inc. has three share-based compensation plans, the 2003 Option
Plan (the "2003 Plan"), the 2006 Option Plan (the "2006 Plan") and the
2008 Option Plan (the "2008 Plan"). Under the option plans, Newalta Inc.
may grant to directors, officers, employees and consultants of Newalta
Inc. or any its affiliates, rights to acquire up to 10% of the issued and
outstanding shares. Newalta Inc. uses the fair value method to account
for the rights granted pursuant to the 2003 Plan and recognizes the share
based compensation expense over the vesting period of the rights, with a
corresponding increase to contributed surplus. When rights are exercised,
the proceeds, together with the amount recorded in contributed surplus,
are transferred to shareholders' capital. Forfeitures are accounted for
as incurred.

The 2006 Plan and the 2008 Plan allow for individuals to settle their
rights in cash. Accordingly, Newalta Inc. uses the intrinsic value method
to account for these rights. The intrinsic value reflects the net cash
liability calculated as the difference between the market value of the
shares and the exercise price of the right. This is re-measured at each
reporting date and stock based compensation expense is increased or
decreased accordingly. Decreases or reversals of stock based compensation
expense are limited to previously recognized stock based compensation
expense.

j) Financial Instruments

Classification

Under Section 3855, all financial instruments are classified into one of
five categories and are initially recognized at fair value and
subsequently measured as noted in the table below.

-------------------------------------------------------------------------
Category Subsequent Measurement
-------------------------------------------------------------------------
Held-for-trading Fair value and changes in fair value are
recognized in net earnings

Held-to-maturity Amortized cost, using the effective interest
investments method

Loans and receivables Amortized cost, using the effective interest
method

Available-for-sale Fair value and changes in fair value are
financial assets recorded in other comprehensive income until the
instrument is derecognized or impaired

Other financial Amortized cost
liabilities
-------------------------------------------------------------------------

Accounts receivable and note receivable are classified as loans and
receivables. Senior long-term debt, Debentures, accounts payable and
distributions payable are classified as other financial liabilities.
Newalta does not have any derivatives or embedded derivatives.

Convertible Debentures

Newalta presents outstanding Debentures in their debt and equity
component parts on the consolidated balance sheets. The debt component
represents the total discounted present value of the semi-annual interest
obligations to be satisfied by cash and the principal payment due at
maturity, using the rate of interest that would have been applicable to a
non-convertible debt instrument of comparable term and risk at the date
of issue. Typically, this results in an accounting value assigned to the
debt component of the convertible debentures which is less than the
principal amount due at maturity. The debt component presented on the
consolidated balance sheets increases over the term of the relevant
debenture to the full face value of the outstanding debentures at
maturity. The difference is reflected as increased interest expense with
the result that adjusted interest expense reflects the effective yield of
the debt component of the Debentures. The equity component of the
Debentures is presented under Shareholders' Equity on the consolidated
balance sheets. The equity component represents the value ascribed to the
conversion right granted to the holder, which remains a fixed amount over
the term of the related debentures. Upon conversion of the debentures
into shares by the holders, a proportionate amount of both the debt and
equity components are transferred to Shareholders' Capital. Accretion and
interest expense for the Debentures are reflected as finance charges on
the consolidated statements of operations, comprehensive income and
retained earnings (deficit).

Transaction Costs

Transaction costs associated with Other Liabilities are netted against
the related liability.

k) Measurement uncertainty

The preparation of Newalta's financial statements in a timely manner and
in accordance with Canadian generally accepted accounting principles
requires the use of estimates, assumptions, and judgment regarding
assets, liabilities, revenue and expenses. Such estimates relate to
unsettled transactions and events as of the date of the financial
statements. Accordingly, actual results may differ from estimated amounts
as transactions are settled in the future. Amounts recorded for
amortization, accretion, future asset retirement obligations, the equity
component of Debentures and impairment calculations are based on
estimates. By their nature, these estimates are subject to measurement
uncertainty, and the impact of the difference between the actual and the
estimated costs on the financial statements of future periods could be
material.

NOTE 3. ACCOUNTING CHANGES

a) Adopted Changes

The Canadian Institute of Chartered Accountants ("CICA") issued
section 3862, Financial Instruments - Disclosures and section 3863,
Financial Instruments - Presentation which are required to be adopted for
fiscal years beginning on or after October 1, 2007. Newalta adopted these
standards effective January 1, 2008 and the related disclosure is found
in Note 20 to these consolidated financial statements. This new section
provides additional disclosures regarding the significance of financial
instruments for the entity's financial position and performance, and the
nature, extent and management of risks arising from financial instruments
to which the entity is exposed.

The CICA issued section 1535, Capital Disclosures, which requires both
qualitative and quantitative disclosures to provide users of the
financial statements with information to evaluate an entity's objectives,
policies and processes for managing capital. Effective January 1, 2008,
Newalta adopted this new accounting standard and the related disclosure
is found in Note 14.

Effective January 1, 2008, Newalta adopted section 3031, Inventories,
which replaces section 3030. This section requires the measurement of
inventories at the lower of cost and net realizable value and the
consistent use of either first-in, first-out or a weighted average method
for determining cost. The reversal of previous net realizable value
write-downs is permitted when there is a subsequent increase to the value
of inventories. Newalta measures inventory at the lower of cost and net
realizable value, and cost is determined using a weighted average cost
formula. Application of the new section did not have a significant impact
on the consolidated financial statements.

b) Future Accounting Changes

In February 2008, the CICA issued section 3064, Goodwill and Intangible
Assets, replacing section 3062, Goodwill and Other Intangible Assets and
section 3450, Research and Development Costs. Various changes have been
made to other sections of the CICA Handbook for consistency purposes. The
new Section will be applicable to financial statements relating to fiscal
years beginning on or after October 1, 2008. Accordingly, Newalta will
adopt the new standards for its fiscal year beginning January 1, 2009.
The new standards establish standards for the recognition, measurement,
presentation and disclosure of goodwill subsequent to its initial
recognition and of intangible assets by profit-oriented enterprises.
Standards concerning goodwill are unchanged from the standards included
in the previous section 3062. Newalta is currently evaluating the impact
of the adoption of this new section on its consolidated financial
statements. Newalta does not expect the adoption of this new section to
have a material impact on its financial statements.

In February 2008, the Canadian Accounting Standards Board ("AcSB")
confirmed that Canadian publicly accountable enterprises would be
required to adopt International Financial Reporting Standards ("IFRS")
for fiscal years beginning on or after January 1, 2011. IFRS uses a
conceptual framework similar to Canadian Generally Accepted Accounting
Principles ("GAAP"), but there are differences in recognition,
measurement and disclosures. At this time, the impact on Newalta's future
consolidated balance sheets and consolidated statements of operations,
comprehensive income and retained earnings (deficit) and cash flows is
not reasonably determinable or estimable.

Section 1582, Business Combinations. This new section will be applicable
to business combinations for which the acquisition date is on or after
interim and fiscal periods beginning January 1, 2011. Early adoption is
permitted. This section improves the relevance, reliability and
comparability of the information that a reporting entity provides in its
financial statements about a business combination and its effects. The
Corporation has not yet determined the impact of the adoption of this new
section on the consolidated financial statements.

Section 1601, Consolidated Financial Statements. This new Section will be
applicable to financial statements relating to interim and fiscal periods
beginning on or after January 1, 2011. Early adoption is permitted. This
section establishes standards for the preparation of consolidated
financial statements. Newalta has not yet determined the impact of the
adoption of this new section on the consolidated financial statements.

Section 1602, Non-Controlling Interests. This new section will be
applicable to financial statements relating to interim and fiscal periods
beginning on or after January 1, 2011. Early adoption is permitted. This
section establishes standards for accounting for a non-controlling
interest in a subsidiary in consolidated financial statements subsequent
to a business combination. Newalta has not yet determined the impact of
the adoption of this new section on the consolidated financial
statements.

NOTE 4. ACQUISITIONS

a) On December 19, 2008, the Eastern Division acquired a bioremediation
facility from Newpark Canada Inc. ("Newpark") for a total purchase
price of $0.6 million in cash. The facility, located in Antigonish
County, Nova Scotia, delivers bioremediation services for treatment
of hydrocarbon contaminated drilling wastes. The fair value of the
assets acquired were $0.2 million for building and equipment and
$0.4 million for permits recorded as intangible assets.

b) On April 1, 2007, the Western Division acquired all of the assets of
Panaco Fluid Filtration Systems Ltd. ("Panaco") for a total purchase
price of $6.0 million in cash. Panaco and its 15 people based out of
Rocky Mountain House, Alberta, deliver onsite fluid filtration
services to refineries and gas plants as well as oil and gas
exploration drilling locations. Panaco provides services to western
Canada and the United States.

Effective May 1, 2007, the Eastern Division acquired the operating
assets of three private entities (collectively referred to as Groupe
Envirex ("Envirex")), based out of Québec for a collective purchase
price of $8.1 million in cash. This acquisition adds four centrifuges
to Eastern servicing the Québec refinery and petrochemical market.
The acquired operations include a fleet of eight vacuum trucks and
pressure washers and a household waste, small industrial waste
generator and soil treatment business.

Effective May 1, 2007, the Eastern Division acquired a portion of the
operating assets of EcoloSite Inc. ("EcoloSite"), based in London,
Ontario, for a total purchase price of $3.1 million, comprised of
$2.4 million in cash and the assumption of $0.7 million in debt.
EcoloSite operates one facility with 13 people servicing customers
across Ontario and the Maritimes in mobile onsite treatment and the
management of industrial and municipal waste.

The assets of Eastern Environmental Services Ltd. ("EES") were
acquired by the Eastern Division effective June 1, 2007 for a total
purchase price of $9.4 million in cash. The acquired operations
include 30 experienced people, a fleet of mobile services, a transfer
station and processing facility located in Sussex, New Brunswick and
a satellite office in Bedford, Nova Scotia.

The assets of New West Fluid Management Inc. ("New West") were
acquired by the Western Division effective July 5, 2007 for a total
purchase price of $9.8 million in cash. The acquired operations
include a fleet of 15 vacuum trucks, 30 people and 12 technical field
consultants that provide site remediation and abandonment services.

The Eastern Division acquired the assets of Bucke Environmental
Services & Transportation Inc. ("BEST") effective July 6, 2007 for a
total purchase price of $1.4 million, comprised of $1.4 million in
cash and the assumption of $47 thousand in debt. The acquired assets
include four vacuum trucks and related assets in the Windsor area.

On October 16, 2007, the Eastern Division completed the acquisition
of a lead recycling facility business in Ville Ste. Catherines,
Quebec ("VSC") for total consideration of $58.8 million comprised of
$45.8 million in cash paid at closing, $0.5 million in cash paid in
2008, $2.5 million in working capital adjustments and the balance was
funded through the issuance of 510,690 shares which were valued using
the average price of Newalta's units for the day of and the two days
before and after announcement of the acquisition.

The amount of the consideration paid and the fair value of the assets
acquired and liabilities assumed during 2007 were:

-------------------------------------------------------------------------
Panaco Envirex EcoloSite EES
-------------------------------------------------------------------------
Cash consideration 5,963 8,090 2,409 9,393
Debt assumed - - 737 -
Equity issued - - - -
Deferred payments - - - -
-------------------------------------------------------------------------
Total purchase price 5,963 8,090 3,146 9,393
-------------------------------------------------------------------------
Net working capital 294 (52) - 225
Capital assets:
Land 45 400 - 202
Plant & equipment 2,305 5,142 2,572 3,986
Intangibles 500 1,000 10 1,000
Goodwill 2,819 1,600 580 4,020
Asset retirement obligations - - (16) (40)
Future income tax liability - - - -
-------------------------------------------------------------------------
5,963 8,090 3,146 9,393
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
New West BEST VSC Total
-------------------------------------------------------------------------
Cash consideration 9,806 1,401 45,820 82,882
Debt assumed - 47 - 784
Equity issued - - 10,000 10,000
Deferred payments - - 3,000 3,000
-------------------------------------------------------------------------
Total purchase price 9,806 1,448 58,820 96,666
-------------------------------------------------------------------------
Net working capital 20 - 2,676 3,163
Capital assets:
Land - - 1,115 1,762
Plant & equipment 4,286 1,098 39,354 58,743
Intangibles 1,000 350 16,000 19,860
Goodwill 4,500 - - 13,519
Asset retirement obligations - - (617) (673)
Future income tax liability - - 292 292
-------------------------------------------------------------------------
9,806 1,448 58,820 96,666
-------------------------------------------------------------------------
-------------------------------------------------------------------------

With the exception of VSC, the operating results of the businesses
acquired are consolidated from the respective closing dates of the
transactions. Since certain inventory relating to operations prior to
November 1, 2007 was sold for the account of Nova Pb after November 1,
2007, we did not begin to see contribution from these operations until
December 2007.

NOTE 5. INVENTORIES

Inventories consist of the following:

-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Lead 15,989 7,322
Recycled and processed products 4,969 4,598
Recovered oil 2,508 3,366
Parts and supplies 4,797 7,080
Burner fuel 1,518 1,756
-------------------------------------------------------------------------
Total inventory 29,781 24,122
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The cost of inventory expensed in operating expenses for the three months
and year ended December 31, 2008 was $15.2 million and $62.4 million
($6.6 million and $28.3 million for the same periods in 2007).

NOTE 6. NOTE RECEIVABLE

Included in an acquisition in 2005 were certain capital costs relating to
landfill construction that are recoverable from a third party based on
usage of the landfill. These unsecured amounts are shown as a note
receivable.

NOTE 7. CAPITAL ASSETS

a) Capital assets consist of the following:

-------------------------------------------------------------------------
2008
-------------------------------------------------------------------------
Accumulated Net Book
Cost Amortization Value
-------------------------------------------------------------------------
Land 14,455 - 14,455
Plant and equipment 814,976 (176,200) 638,776
Landfill 102,395 (30,838) 71,557
-------------------------------------------------------------------------
Total 931,826 (207,038) 724,788
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
2007
-------------------------------------------------------------------------
Accumulated Net Book
Cost Amortization Value
-------------------------------------------------------------------------
Land 14,513 - 14,513
Plant and equipment 718,390 (144,546) 573,844
Landfill 94,721 (21,473) 73,248
-------------------------------------------------------------------------
Total 827,624 (166,019) 661,605
-------------------------------------------------------------------------
-------------------------------------------------------------------------

b) Disposal of capital assets

During the year ended December 31, 2008, Newalta disposed of certain
transport vehicles, land and buildings with a net book value of
$7.8 million for proceeds of $9.0 million. The resulting net gain of
$1.2 million is included in amortization and accretion in the
consolidated statements of operations, comprehensive income and retained
earnings (deficit).

On September 11, 2008, the Western Division disposed of its non-core bin
business, which provides onsite collection and transportation of waste
services to the upstream and midstream oil and gas industry for proceeds
of $6.2 million in cash. The resulting $1.5 million gain on disposition
is included in amortization and accretion in the consolidated statements
of operations, comprehensive income and retained earnings (deficit).

c) Asset impairment

Management performs impairment testing on its property, plant and
equipment at least annually and whenever events or changes in
circumstances indicate that the carrying value of an asset, or group of
assets, may not be recoverable. During the year, management identified
transport vehicles and equipment for which carrying value exceeded fair
value. Fair value for these assets was determined based on management's
review of equipment utilization and prices for similar assets. The total
impairment of $2.5 million ($0.9 million in the Western segment and
$1.6 million in the Eastern segment) is included with amortization and
accretion in the consolidated statements of operations, comprehensive
income and retained earnings (deficit).

NOTE 8. INTANGIBLE ASSETS

-------------------------------------------------------------------------
2008
-------------------------------------------------------------------------
Accumulated Net Book
Cost Amortization Value
-------------------------------------------------------------------------
Non-competition contracts 9,070 (7,009) 2,061
Expiring permits/rights 11,602 (2,697) 8,905
Indefinite permits 53,037 - 53,037
-------------------------------------------------------------------------
Total 73,709 (9,706) 64,003
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
2007
-------------------------------------------------------------------------
Accumulated Net Book
Cost Amortization Value
-------------------------------------------------------------------------
Non-competition contracts 9,070 (4,583) 4,487
Expiring permits/rights 11,602 (1,881) 9,721
Indefinite permits 52,647 - 52,647
-------------------------------------------------------------------------
Total 73,319 (6,464) 66,855
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 9. SENIOR lONG-TERM DEBT

On October 12, 2008 Newalta extended the maturity of its $425.0 million
extendible revolving credit facility (the "Credit Facility") to
October 12, 2010. 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. Interest on the facilities is
subject to certain conditions and may be charged at a prime, U.S. base
rate, Bankers' Acceptance ("BA") or LIBOR, at the option of the
Corporation. The Credit Facility bears interest at a base rate plus an
increment (depending on certain criteria) as follows:

-------------------------------------------------------------------------
Base Rate Type Range of increment
-------------------------------------------------------------------------
Prime Rate 0.35% to 1.75%
U.S. Base Rate 0.35% to 1.75%
BA Rate 1.5% to 2.75%
LIBOR 1.5% to 2.75%
-------------------------------------------------------------------------

The incremental interest rate as at December 31, 2008 was 2.25%.

The Credit Facility is secured by a fixed and floating charge debenture
to the lenders on the assets of the Corporation and material
subsidiaries, an unlimited subsidiary guarantee from each material
subsidiary of the Corporation, a limited recourse guarantee from Newalta
Inc. and an assignment of insurance naming the lenders as first loss
payee in relation to business interruption, property and inventory
insurance.

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 on October 12, 2010. The
facility also requires Newalta to be in compliance with certain
covenants. At December 31, 2008, Newalta was in compliance with all
covenants.

December 31, December 31,
2008 2007
-------------------------------------------------------------------------
Amount drawn on credit facility 264,687 207,417
Issue costs (1,436) (477)
-------------------------------------------------------------------------
Senior long-term debt 263,251 206,940
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 10. CONVERTIBLE DEBENTURES

In November 2007, the Fund issued $115.0 million of convertible unsecured
subordinated debentures (the "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 (or a conversion price of $23.00 per share) at any time at
the option of the holders of the Debentures. The net proceeds of the
offering were used to repay outstanding indebtedness of the Corporation
incurred to fund acquisitions and growth capital. As subordinated debt,
the issuance of the Debentures does not affect the borrowing capacity on
the Credit Facility. On the consolidated balance sheets, the Debentures
are presented net of the costs to issue. The equity portion of the
Debentures will be reclassified into Shareholders' Capital as the
Debentures are converted into shares.

The Debentures are redeemable by Newalta Inc. after November 30, 2010 and
on or before November 30, 2011 if the current market price of the shares
on the notice date is greater than $28.75 and may be redeemed after
November 30, 2011 for a redemption price of $1,000 per debenture with
30-60 days notice. The obligation may be settled in cash or shares at the
discretion of Newalta Inc.

The following table compares the face and fair values of the Debentures
to the carrying value. The fair value of the Debentures was determined by
reference to the trading price on December 31, 2008. The effective
interest rate is 8.44%.
-------------------------------------------------------------------------
Carrying
value
Face Fair Equity Debt
value value portion portion
-------------------------------------------------------------------------
7% Debentures due 2012 115,000 88,550 1,850 109,419
-------------------------------------------------------------------------

NOTE 11. INCOME TAX

Future income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
Significant components of Newalta Inc.'s future income tax liabilities
and assets are as follows:

Canadian Tax Jurisdiction:
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Future income tax liabilities:
Capital assets 83,006 71,604
Intangible assets 12,552 13,757
Deferred costs 40 202
-------------------------------------------------------------------------
95,598 85,563
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Future income tax assets:
Non-capital loss carry forwards 41,778 20,729
Goodwill 7,839 8,573
Asset retirement obligation 5,548 5,754
Equity issuance costs 394 667
-------------------------------------------------------------------------
55,559 35,723
-------------------------------------------------------------------------
Net future income tax liability 40,039 49,840
-------------------------------------------------------------------------
-------------------------------------------------------------------------

US Tax Jurisdiction:
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Future income tax assets:
Non-capital loss carry forwards 1,151 -
-------------------------------------------------------------------------
Net future income tax asset from US operations 1,151 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The non-capital loss carry forwards relating to Canadian operations will
expire beginning in 2027 and in 2026 for those relating to U.S.
operations.

Immediately prior to giving effect to the Arrangement, on December 31,
2008, the Fund itself was not subject to income tax provided it
distributed all of its taxable income to unitholders. Therefore no future
income taxes were recorded. For taxation purposes the Fund was considered
a specified investment flow-through ("SIFT") entity and was to become
subject to tax commencing January 1, 2011. For accounting purposes, the
Fund computed future income tax based on temporary differences that were
expected to reverse after 2010, at the tax rate expected to apply for
those periods. Realization of future income tax assets is dependent on
generating sufficient taxable income during the period in which the
temporary differences are deductible. Although realization is not
assured, management believes it is more likely than not that all future
income tax assets will be realized based on reversals of temporary timing
differences, projections of operating results and tax planning strategies
available to Newalta and its subsidiaries. Effective December 31, 2008,
after giving effect to the Arrangement, Newalta Inc. became subject to
tax on taxable income earned from that date forward.

The income tax expense differs from the amount computed by applying
Canadian statutory rates to operating income for the following reasons:

-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Consolidated earnings of Newalta Inc.
before taxes and distributions to shareholders 50,492 39,762
Current statutory income tax rate 31.2% 33.6%
-------------------------------------------------------------------------
Computed tax expense at statutory rate 15,754 13,360
Increase (decrease) in taxes resulting from:
Reduction resulting from distributions
to unitholders (28,948) (25,729)
Capital taxes 951 1,126
Non-deductible costs 158 1,099
Foreign tax losses and tax credits paid 1,613 -
Acceleration of tax loss utilization 1,500 -
Other 582 (944)
Effect of substantively enacted tax rate change - (10,339)
-------------------------------------------------------------------------
Reported income tax expense (8,390) (21,427)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Note 12. 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
net present value of this amount, $21.1 million ($21.0 million at
December 31, 2007) has been accrued on the consolidated balance sheets at
December 31, 2008. The total estimated future cost for asset retirement
obligations at December 31, 2008 was $9,769.5 million. The majority of
the undiscounted future asset retirement obligations relate to the Stoney
Creek landfill in Ontario, which are expected to be incurred over the
next 300 years. Excluding the landfill, the total future cost is
$36.3 million. Newalta uses a discount rate of 8% and an inflation rate
of 2% to calculate the present value of the asset retirement obligations.

-------------------------------------------------------------------------
Three months ended Year ended
December 31, December 31,
2008 2007 2008 2007
-------------------------------------------------------------------------
Asset retirement
obligations, beginning
of period 20,843 20,816 20,985 18,484
Additional retirement
obligations added
through acquisitions - 617 - 673
Additional retirement
obligations added through
development activities - - 289 664
Additional retirement
obligations added through
a change of estimate - - - 1,182
Expenditures incurred to
fulfill obligations (214) (881) (2,031) (1,711)
Accretion 465 433 1,851 1,693
-------------------------------------------------------------------------
Asset retirement
obligations, end of year 21,094 20,985 21,094 20,985
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 13. SHAREHOLDERS' CAPITAL

a) Unitholders' capital

Authorized capital of the Fund consists of a single class of an unlimited
number of trust units. The following table is a summary of the changes in
Unitholders' capital during the period:

(000s) Units (No.) Amount ($)
-------------------------------------------------------------------------
Units outstanding as at December 31, 2006 36,942 394,601
Units issued 3,000 73,936
Units issued as consideration for Nova Pb assets 511 10,000
Contributed surplus on rights exercised - 335
Rights exercised 289 3,222
Units issued under the DRIP(1) 675 13,933
-------------------------------------------------------------------------
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 774 11,188
Units cancelled under the Arrangement (42,400) (509,369)
-------------------------------------------------------------------------
Units outstanding as at December 31, 2008 - -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Distribution Reinvestment Plan of the Fund

b) 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:

(000s) 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
-------------------------------------------------------------------------
-------------------------------------------------------------------------

c) Retained earnings (deficit) and contributed surplus

The following table provides a breakdown of the components of retained
earnings (deficit):

-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Accumulated earnings 360,081 301,199
Accumulated cash distributions (371,439) (278,259)
-------------------------------------------------------------------------
Retained Earnings (Deficit) (11,358) 22,940
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The following tables provide a summary of the changes to contributed
surplus during the period:

-------------------------------------------------------------------------
Amount ($)
-------------------------------------------------------------------------
Contributed surplus as at December 31, 2006 1,226
Stock based compensation expense 201
Amounts transferred to equity on exercise of rights (335)
-------------------------------------------------------------------------
Contributed surplus as at December 31, 2007 1,092
Stock based compensation expense 137
Amounts transferred to equity on exercise of rights (241)
-------------------------------------------------------------------------
Contributed surplus as at December 31, 2008 988
-------------------------------------------------------------------------
-------------------------------------------------------------------------

d) Convertible debentures - equity portion

The equity portion of the Debentures was recorded on the initial
recognition of the Debentures issued in November 2007. The equity portion
will be reclassified to Shareholder's capital on a pro-rata basis as the
Debentures are exercised.

NOTE 14. CAPITAL DISCLOSURES

Newalta's capital structure currently consists of:
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Senior long-term debt pursuant to the Credit
Facility 263,251 206,940
Letters of Credit or bonds issued as financial
security to third parties 64,457 51,640
Convertible debentures, debt portion 109,419 108,336
Shareholders' equity 500,849 521,909
-------------------------------------------------------------------------
-------------------------------------------------------------------------
937,976 888,825
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The objectives in managing the capital structure are to:

- Utilize an appropriate amount of leverage to maximize return on
Shareholders' equity, and
- To provide for borrowing capacity and financial flexibility to
support Newalta's operations.

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, and/or
- 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:

-------------------------------------------------------------------------
December 31, December 31,
Ratio 2008 2007 Threshold
-------------------------------------------------------------------------
Current(1) 1.34:1 1.65:1 1.20:1 minimum
Funded Debt(2) to EBITDA(3) 2.46:1 1.89:1 3.00:1 maximum
Fixed Charge Coverage(4) 1.19:1 1.07:1 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
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 the Fund 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.
(4) Fixed Charge Coverage Ratio means, based on the trailing 12-month
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
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.

NOTE 15. LONG-TERM INCENTIVE PLANS

a) The 2006 Option Plan

On March 14, 2008 a total of 630,000 options were granted to certain
directors, officers and employees of the Corporation. The options were
granted at the market price of $16.65 per share/unit. A further 147,500
options were granted at an exercise price of $25.19 per share/unit. On
May 15, 2008, an additional 7,500 options were granted to an employee at
an exercise price of $25.50. On July 14, 2008, 75,000 options were
granted to an officer of the Corporation at the market price of $18.03
per unit. On October 1, 2008, a total of 100,000 options were granted to
certain employees of the Corporation at the market price of $14.00 per
share/unit. 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 2006 Plan have therefore
been accounted for as stock appreciation options and the total
compensation expense for these options was nil for the three and twelve
months ended December 31, 2008, respectively ($0.0 in 2007). Subsequent
to year end, 894,675 options held by certain employees of the Corporation
under the 2003 Plan and 2006 Plan were cancelled.

b) The 2008 Option Plan

No options were granted under the 2008 Option Plan, which was established
December 31, 2008. Subsequent to year end, 842,500 options were granted
to directors, officers and certain employees of the Corporation under the
2008 Plan at the market price of $5.31.

-------------------------------------------------------------------------
Weighted Weighted
Average Average
2006 Exercise 2003 Exercise
Options Price Options Price
(000s) ($/share) (000s) ($/share)
-------------------------------------------------------------------------
At December 31, 2006 665 32.35 1,216 17.69
-------------------------------------------------------------------------
Granted 1,075 24.88 - -
Exercised - - (289) 11.16
Forfeited (300) 28.97 (104) 23.24
-------------------------------------------------------------------------
At December 31, 2007 1,440 27.47 823 19.29
-------------------------------------------------------------------------
Granted 960 17.86 - -
Exercised - - (209) 9.31
Forfeited (117) 27.84 (4) 25.95
-------------------------------------------------------------------------
At December 31, 2008 2,283 23.41 610 22.65
-------------------------------------------------------------------------
Exercisable at
Dec. 31, 2008 446 28.71 360 21.79
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
Options Weighted Weighted Options Weighted
Range of Outstanding Average Average exercisable Average
Exercise December Remaining Exercise December Exercise
Prices 31, 2008 Life Price 31, 2008 Price
($/share) (000s) (years) ($/share) (000s) ($/share)
-------------------------------------------------------------------------
9.08 - 9.30 20 1.3 9.27 20 9.27
14.00 - 19.46 1,040 4.1 16.91 123 18.18
22.75 - 32.38 1,833 3.3 27.00 663 27.50
-------------------------------------------------------------------------
2,893 3.5 23.25 806 25.61
-------------------------------------------------------------------------
-------------------------------------------------------------------------

c) Share Appreciation Rights

On March 14, 2008, 125,000 share appreciation rights were granted to an
officer of the Corporation at the market price of $16.65. These rights
vest in three equal tranches over 33 months. In addition, 372,500 share
appreciation rights were granted to certain employees of the Corporation
at the market price of $16.65. On October 1, 2008, a further 127,500
rights were granted to certain employees of the Corporation at the market
price of $14.00. 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 and
twelve months ended December 31, 2008, respectively (nil in 2007).
Subsequent to year end, 470,000 share appreciation rights were cancelled
and 791,500 share appreciation rights were granted to certain employees
and an officer of the Corporation at the market price of $5.31.

NOTE 16. EARNINGS PER SHARE/UNIT

Basic earnings per share/unit calculations for the three months and years
ended December 31, 2008 and 2007 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
2008 was 2,772,500 (1,794,500 in 2007).

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 2008 was 5,000,000 (5,000,000 in
2007).

Three Months Year Ended
(000s) Ended December 31, December 31,
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Weighted average
number of shares/
units 42,266 41,191 41,935 40,342
Net additional shares
if rights exercised - 2,500 - -
Net additional shares
if debentures
converted - 88 - 131
-------------------------------------------------------------------------
Diluted weighted
average number of
shares/units 42,266 43,779 41,935 40,473
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 17. UNITHOLDER DISTRIBUTIONS DECLARED AND PAID

Prior to the Arrangement, 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 Year Ended
Ended December 31, December 31,
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Unitholder
distributions declared 23,472 22,930 93,180 90,117
per unit - $ 0.555 0.555 2.220 2.220
Unitholder
distributions - paid
in cash 22,111 18,438 82,093 75,356
Unitholder
distributions - value
paid in units 1,330 4,348 10,914 13,933
paid in cash - per
unit $ 0.523 0.448 1.958 1.868
issued units - per
unit $ 0.031 0.106 0.260 0.345
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 18. TRANSACTIONS WITH RELATED PARTIES

Bennett Jones LLP provides legal services to Newalta. Mr. Vance Milligan,
a Director of Newalta is counsel to the law firm of Bennett Jones LLP.
The total cost of these legal services during the three months and year
ended December 31, 2008 was $0.5 million and $0.8 million respectively
(2007 - $0.4 million and $0.8 million respectively).

The Corporation provides oilfield services to Paramount Resources Ltd.,
an oil and gas company. Mr. Clayton Riddell, a Director of Newalta Inc.
is the Chairman and Chief Executive Officer of Paramount Resources Ltd.
The total revenue for services provided by Newalta to this entity for the
quarter and twelve months ended December 31, 2008 was $0.3 million and
$1.2 million respectively (2007 - $0.3 million and $1.5 million
respectively).

These transactions were incurred during the normal course of operations
on similar terms and conditions to those entered into with unrelated
parties. These transactions are measured at the exchange amount, which is
the amount of consideration established and agreed to by the related
parties.

NOTE 19. COMMITMENTS

a) Debt and Lease Commitments

Newalta has annual commitments for senior long-term debt, Debentures,
leased property and equipment and short term amounts payable as
follows:

-------------------------------------------------------------------------
There-
2009 2010 2011 2012 2013 after Total
-------------------------------------------------------------------------
Senior long
term debt(1)
(note 9) - 264,687 - - - - 264,687
Convertible
debentures
(note 10) 8,015 8,050 8,050 122,379 - - 146,494
-------------------------------------------------------------------------
Total debt
commit-
ments 8,015 272,737 8,050 122,379 - - 411,181
-------------------------------------------------------------------------
Office
leases 7,618 7,008 6,524 6,384 6,527 38,228 72,289
Operating
leases 8,702 7,128 5,452 3,182 1,142 - 25,606
Surface
leases 1,056 1,077 1,097 1,118 252 252 4,852
Accounts
payable and
accrued
liabil-
ities 109,698 - - - - - 109,698
Distributions
payable 7,834 - - - - - 7,834
-------------------------------------------------------------------------
Total debt
and other
commit-
ments 142,923 287,950 21,123 133,063 7,921 38,480 631,460
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Gross of transaction costs. Interest payments are not reflected.

b) Letters of Credit and Surety bonds

As at December 31, 2008, Newalta had issued letters of credit and
surety bonds in respect of compliance with environmental licenses in
the amount of $49.2 million and $15.2 million respectively.

NOTE 20. FINANCIAL INSTRUMENTS

Fair Values

Newalta's financial instruments include accounts receivable, note
receivable, accounts payable and accrued liabilities, distributions
payable, senior long-term debt and Debentures. The fair values of
Newalta's financial instruments that are included in the consolidated
balance sheet, with the exception of the 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
December 31, 2008 are as follows:

-------------------------------------------------------------------------
Total
Held for Loans and Available Other Carrying
trading Receivables for sale Liabilities Value
-------------------------------------------------------------------------
Accounts
receivable - 120,884 - - 120,884
Note receivable - 1,160 - - 1,160
Accounts payable
and accrued
liabilities - - - 109,698 109,698
Distributions
payable - - - 7,560 7,560
Senior
long-term
debt(1) - - - 263,251 263,251
-------------------------------------------------------------------------
(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:

-------------------------------------------------------------------------
December 31, 2008
Carrying Quoted
value(1) fair value
-------------------------------------------------------------------------
7% Convertible debentures due November 30, 2012 111,269 88,550
-------------------------------------------------------------------------
(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 4% 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 $6.5
million which are considered to be outstanding beyond normal repayment
terms at December 31, 2008. A provision of $1.5 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.

-------------------------------------------------------------------------
Aging Trade Receivables
aged by Allowance for
invoice date doubtful accounts Net Receivables

December December December December December December
31, 2008 31, 2007 31, 2008 31, 2007 31, 2008 31, 2007
-------------------------------------------------------------------------
Current 58,049 63,680 9 - 58,040 63,680
31-60 days 28,953 29,860 7 - 28,946 29,860
61-90 days 6,608 10,338 52 16 6,556 10,322
91 days + 6,503 22,511 1,465 2,247 5,038 20,264
-------------------------------------------------------------------------
Total 100,113 126,389 1,533 2,263 98,580 124,126
-------------------------------------------------------------------------

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 2008 are
as follows:

-------------------------------------------------------------------------
Allowance for doubtful accounts 2008 2007
-------------------------------------------------------------------------
Balance, beginning of year 2,263 1,295
Additional amounts provided for 1,502 1,320
Amounts written off as uncollectible (2,294) (357)
Amounts recovered during the period 62 5
-------------------------------------------------------------------------
Balance, end of year 1,533 2,263
-------------------------------------------------------------------------

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
Corporations's 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 Debentures will need to be repaid or
refinanced. The table below provides an interest rate sensitivity
analysis for the three and twelve months ended December 31, 2008:

Three
Months Ended Year Ended
December 31, December 31,
-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If interest rates increased by 1% with all
other variables held constant (478) (1,834)
-------------------------------------------------------------------------

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, recognised 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 December 31, 2008:

-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If the value of the U.S. dollar increased by $0.01 with
all other variables held constant (176)
-------------------------------------------------------------------------

NOTE 21. CASH FLOW STATEMENT INFORMATION

The following tables provide supplemental information.

-------------------------------------------------------------------------
Change in non-cash operating net assets 2008 2007
-------------------------------------------------------------------------
Changes in current assets 32,789 (56,412)
Changes in current liabilities 1,787 17,987
Distributions payable 102 (828)
Other 4,882 498
Working capital acquired - 3,163
Changes in capital asset accruals (4,494) 11,391
-------------------------------------------------------------------------
Decrease (increase) in non-cash working capital 35,066 (24,201)
-------------------------------------------------------------------------
-------------------------------------------------------------------------


-------------------------------------------------------------------------
Net additions to capital assets 2008 2007
-------------------------------------------------------------------------
Cash additions to capital assets (121,966) (136,726)
Changes in capital asset accruals 4,494 11,391
-------------------------------------------------------------------------
Additions to capital assets (117,472) (125,335)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 22. 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.

For the Three Months Ended December 31, 2008

Consol-
Inter- Unallo- idated
Western Eastern segment cated(3) Total
-------------------------------------------------------------------------
External
revenue 79,645 65,696 - - 145,341
Inter segment
revenue(1) 250 - (250) - -
Operating
expense 53,120 47,137 (250) - 100,007
Amortization
and accretion
expense 5,545 6,798 - 3,403 15,746
-------------------------------------------------------------------------
Net margin 21,230 11,761 - (3,403) 29,588
Selling,
general and
administrative - - - 17,734 17,734
Finance charges - - - 6,238 6,238
-------------------------------------------------------------------------
Earnings before
taxes 21,230 11,761 - (27,375) 5,616
-------------------------------------------------------------------------
Capital
expenditures
and
acquisitions(2) 26,677 15,878 - 4,099 46,654
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 552,132 425,233 - 74,545 1,051,910
-------------------------------------------------------------------------
-------------------------------------------------------------------------


For the Three Months Ended December 31, 2007

Consol-
Inter- Unallo- idated
Western Eastern segment cated(3) Total
-------------------------------------------------------------------------
External
revenue 91,025 46,008 - 42 137,075
Inter segment
revenue(1) 114 - (114) - -
Operating
expense 60,499 34,983 (114) - 95,368
Amortization
and accretion
expense 5,823 3,513 - 4,069 13,405
-------------------------------------------------------------------------
Net margin 24,817 7,512 - (4,027) 28,302
Selling,
general and
administrative - - - 15,209 15,209
Finance charges - - - 5,309 5,309
-------------------------------------------------------------------------
Earnings before
taxes 24,817 7,512 - (24,545) 7,784
-------------------------------------------------------------------------
Capital
expenditures
and
acquisitions(2) 14,843 73,418 - 17,446 105,707
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 566,133 380,712 - 76,636 1,023,481
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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.


For the Twelve Months Ended December 31, 2008

Consol-
Inter- Unallo- idated
Western Eastern segment cated(3) Total
-------------------------------------------------------------------------
External
revenue 356,146 240,809 - 80 597,035
Inter segment
revenue(1) 919 - (919) - -
Operating
expense 229,423 180,569 (919) - 409,073
Amortization
and accretion
expense 21,614 18,718 - 10,905 51,237
-------------------------------------------------------------------------
Net margin 106,028 41,522 - (10,825) 136,725
Selling,
general and
administrative - - - 62,129 62,129
Finance charges - - - 24,104 24,104
-------------------------------------------------------------------------
Earnings before
taxes 106,028 41,522 - (97,058) 50,492
-------------------------------------------------------------------------
Capital
expenditures
and
acquisitions(2) 63,799 44,967 - 16,436 125,202
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 552,132 425,233 - 74,545 1,051,910
-------------------------------------------------------------------------
-------------------------------------------------------------------------


For the Twelve Months Ended December 31, 2007

Consol-
Inter- Unallo- idated
Western Eastern segment cated(3) Total
-------------------------------------------------------------------------
External
revenue 348,424 150,743 - 697 499,864
Inter segment
revenue(1) 652 - (652) - -
Operating
expense 234,896 114,416 (652) - 348,660
Amortization
and accretion
expense 20,852 14,160 - 8,272 43,284
-------------------------------------------------------------------------
Net margin 93,328 22,167 - (7,575) 107,920
Selling,
general and
administrative - - - 54,279 54,279
Finance charges - - - 13,879 13,879
-------------------------------------------------------------------------
Earnings before
taxes 93,328 22,167 - (75,733) 39,762
-------------------------------------------------------------------------
Capital
expenditures
and
acquisitions(2) 57,653 117,865 - 34,764 210,282
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 566,133 380,712 - 76,636 1,023,481
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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