Newalta Corporation
TSX : NAL

Newalta Corporation

August 06, 2008 17:18 ET

Newalta Income Fund Announces Second Quarter Results


CALGARY, ALBERTA--(Marketwire – August 6, 2008) - Newalta Income Fund ("Newalta" or the "Fund")
today announced financial results for the three and six months ended June 30, 2008.

"Solid returns on last year's investments combined with high crude oil
sales contributed to strong profitable growth in the quarter with revenue up
28% and EBITDA up 71%," said Al Cadotte, Newalta's President and Chief
Executive Officer. "Results were tempered by continued weakness in drilling
activity in western Canada as well as reduced market demand in Ontario.
"The outlook for the balance of the year is positive. The performance of
our existing operations in the west will improve as drilling activity recovers
in the quarters ahead. In addition, the investments we are making today will
continue to diversify and grow our business in 2009."

Financial results and highlights for the three and six months ended June
30, 2008:

- For the second quarter and first half of 2008, revenue improved 28%
to $142.9 million and $293.1 million, respectively, compared to 2007,
primarily due to investments in eastern Canada completed in 2007 and
strong crude oil sales.

- Net earnings of $11.8 million and EBITDA(1) of $26.6 million
increased 75% and 71%, respectively for the second quarter, compared
to 2007. Net earnings and EBITDA for the first half of 2008 improved
58% and 49%, respectively to $31.1 million and $60.7 million.

- Funds from operations(1) increased 67% to $20.3 million in the second
quarter compared to last year, and 37% to $47.5 million year-to-date.

- Cash distributed(1) as a percentage of funds from operations on a
year-to-date basis was reduced to 84% compared with 109% for the same
period last year.

- Western Division ("Western") revenue and net margin(1) increased 11%
to $83.5 million and 40% to $22.0 million, respectively for the
second quarter, compared to the same period in 2007. For the first
half of 2008, revenue and net margin increased 8% to $177.5 million
and 22% to $51.5 million, respectively, compared to 2007. Strong
crude oil prices combined with increases in waste receipts from SAGD
customers drove increased crude oil recovered and crude oil sales,
offsetting reduced drilling rig activity. Continued successful
expansion of our U.S. Drill Site services and growth in SAGD and
other onsite projects also contributed to the improved results.

- Eastern Division ("Eastern") second quarter revenue and net margin
increased 64% to $59.4 million and 150% to $11.2 million,
respectively, primarily due to contributions from acquisitions
completed in the second half of 2007. For the first six months of
2008, revenue and net margin increased 78% to $115.5 million and 182%
to $20.6 million, respectively. Year-to-date, Eastern's strong
performance was primarily the result of contributions from
investments completed in 2007, the effect of which was tempered by
the slowing economy in Ontario that resulted in substantially lower
event-based waste receipts at the landfill. We are confident
event-based volumes will improve in the second half of 2008.

- SG&A expenses in the second quarter were 11.2% of revenue at
$16.1 million, compared to 11.7% for the same period last year. For
the first half of 2008, SG&A expenses decreased to 10.3% of revenue,
compared to 11.1% in 2007. Management's objective for SG&A is to
maintain these expenses at 10%, or less, of revenue for the year.

- Maintenance capital expenditures(1) in the second quarter were
$4.2 million or 17% lower than the second quarter in 2007. Growth
capital expenditures in the quarter were $19.3 million compared to
$19.4 million in 2007. Capital expenditures are expected to remain on
budget for the year at $135.0 million, comprised of $25.0 million for
maintenance capital and $110.0 million for growth capital.

- Initiatives to improve productivity by selling idle or redundant
assets have resulted in proceeds of $6.6 million year-to-date.

- Newalta's balance sheet remains strong with a funded debt to EBITDA
ratio of 2.35:1 and working capital of $98.2 million. As at June 30,
2008, Newalta's unused capacity on its credit facility was
approximately $119.0 million.

- On a trailing twelve-month basis at June 30, 2008, our corporate
three-year average return on capital(1) was 17.3% compared to 20% for
the three-year average ended June 30, 2007. The decrease is primarily
attributable to the decline in the drilling activity combined with
the impact of acquisitions and growth capital investments made last
year which have not had a full year's contribution to EBITDA.

- The specified investment flow-through ("SIFT") legislation, announced
on October 31, 2006, was enacted in 2007. These rules will impose a
tax at the trust level on distributions of certain income from a SIFT
trust at a rate of tax comparable to the combined federal and
provincial corporate tax rate. Such distributions will be treated as
dividends to holders of trust units of a SIFT. The new distribution
tax will apply to Newalta commencing in 2011 assuming Newalta does
not exceed "normal growth" prior to that date and distributions
subject to the new distribution tax will be characterized as
dividends received from a taxable Canadian corporation for holders of
trust units of a SIFT. There was no immediate impact on the Fund's
consolidated financial statements.


FINANCIAL RESULTS AND HIGHLIGHTS
-------------------------------------------------------------------------
($000s except % %
per unit data) Q2 Q2 Increase YTD YTD Increase
(unaudited) 2008 2007 (Decrease) 2008 2007 (Decrease)
-------------------------------------------------------------------------

Revenue 142,939 111,594 28 293,115 229,431 28
Net earnings 11,776 6,716 75 31,080 19,682 58
per unit ($),
basic 0.28 0.17 65 0.75 0.50 50
per unit ($),
diluted 0.28 0.16 75 0.75 0.49 52
EBITDA(1) 26,573 15,511 71 60,712 40,791 49
Trailing 12
month EBITDA n/a n/a 116,148 104,328 11
Funds from
operations(1) 20,332 12,184 67 47,500 34,685 37
per unit ($) 0.49 0.30 63 1.14 0.87 31
Maintenance
capital
expenditures(1) 4,161 5,019 (17) 5,410 5,750 (6)
Distributions
declared 23,249 22,413 4 46,326 44,662 4
per unit - ($) 0.56 0.56 - 1.11 1.11 -
Cash
distributed(1) 20,614 18,983 9 39,750 37,707 5
Growth and
acquisition
capital
expenditures 19,301 45,355 (57) 36,025 59,485 (39)
Weighted
average units
outstanding
(000s) 41,822 40,361 4 41,683 39,790 5
Total units
outstanding
(000s) 42,002 40,485 4 42,002 40,485 4
Trust Unit
trading price
- high 21.10 27.50 (23) 21.10 28.25 (25)
Trust Unit
trading price
- low 17.00 23.39 (27) 14.21 23.39 (39)
Average daily
trust unit
trading
volume 119,903 178,429 (33) 130,289 154,141 (15)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) These financial measures do not have any standardized meaning
prescribed by Canadian generally accepted accounting principles
("Canadian GAAP"). Non-GAAP financial measures are identified and
defined in the attached Management's Discussion and Analysis.

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

Management will hold a conference call on Thursday, August 7, 2008 at
11:00 a.m. (EST) to discuss the Fund's performance for the second quarter of
2008. To participate in the teleconference, please call 416-695-6370 or
1-866-303-7746. 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
Thursday, August 14, 2008, by dialling 416-695-5800 or 1-800-408-3053 and
using the pass code 3268024 followed by the pound sign.

Newalta Income Fund 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 Income Fund's units trade on the TSX as NAL.UN. For more information,
visit www.newalta.com.


Management's Discussion and Analysis

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 Income Fund (the "Fund") and
Newalta Corporation (the "Corporation" and together with the Fund and its
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 trust unit price,
insurance, future capital needs, debt service, sales of additional trust
units, dependence on the Corporation, the nature of the trust units, unlimited
liability of unitholders, nature of the debentures issued by the Fund,
Canadian federal income tax, redemption of trust units, 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 and the unaudited consolidated
financial statements and notes thereto contain references to certain financial
measures that do not have any standardized meaning prescribed by Canadian
generally accepted accounting principles ("Canadian GAAP") and may not be
comparable to similar measures presented by other funds or entities. These
financial measures are identified and defined below:

"Cash distributed" is provided to assist management and investors in
determining the actual cash outflow to unitholders in each period and is used
to assist in analyzing liquidity. Cash distributed is calculated as follows:

-------------------------------------------------------------------------
($000s) Q2 2008 Q2 2007 YTD 2008 YTD 2007
-------------------------------------------------------------------------
Distributions 23,249 22,413 46,326 44,662
Add:
Opening distributions payable 7,707 7,448 7,662 6,835
Less:
Ending distributions payable (7,770) (7,490) (7,770) (7,490)
Distributions reinvested through
DRIP (2,572) (3,388) (6,468) (6,300)
-------------------------------------------------------------------------
Cash distributed 20,614 18,983 39,750 37,707
-------------------------------------------------------------------------
-------------------------------------------------------------------------

"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 Canadian 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 Western and Eastern. For further
clarity combined divisional net margin excludes inter-segment eliminations and
unallocated revenue and expenses.
"EBITDA" is a measure of the Newalta's operating profitability. EBITDA
provides an indication of the results generated by the Fund'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 and is calculated as follows:

-------------------------------------------------------------------------
($000s) Q2 2008 Q2 2007 YTD 2008 YTD 2007
-------------------------------------------------------------------------
Net earnings 11,776 6,716 31,080 19,682
Add back (deduct):
Current income taxes 339 461 575 663
Future income taxes (2,822) (3,389) (5,820) (2,892)
Interest expense 5,648 2,632 11,914 4,938
Interest revenue (39) (89) (80) (613)
Amortization and accretion 11,671 9,180 23,043 19,013
-------------------------------------------------------------------------
EBITDA 26,573 15,511 60,712 40,791
-------------------------------------------------------------------------
-------------------------------------------------------------------------

"Equipment in use" and "Rigs in use" are calculated by taking the product
of the total amount of equipment or rigs available and the utilization rate
for the period. Drilling and service rig information is derived from the
Canadian Association of Oilwell Drilling Contractors posted information on its
website and reflects activity in western Canada only. Equipment in use refers
to Newalta's Drill Site equipment and management uses this measure to assess
the allocation and use of its equipment. Rigs in use is an indicator of
drilling activity which drives the demand for Drill Site equipment and serves
as an independent source to compare the trend of Newalta's equipment usage
against the industry in western Canada.
"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 Canadian GAAP. Funds from operations
is derived from the consolidated statements of cash flows and is calculated as
follows:

-------------------------------------------------------------------------
($000s) Q2 2008 Q2 2007 YTD 2008 YTD 2007
-------------------------------------------------------------------------
Cash from operating activities 23,421 17,324 32,166 12,054
Add back (deduct):
Changes in working capital (4,043) (5,439) 13,768 22,134
Asset retirement expenditures
incurred 954 299 1,566 497
-------------------------------------------------------------------------
Funds from operations 20,332 12,184 47,500 34,685
-------------------------------------------------------------------------
-------------------------------------------------------------------------

"Maintenance capital expenditures" are expenditures required to maintain
current operating levels and are reported separately from growth activity by
management because these types of expenditures are not discretionary.
Maintenance capital expenditures are capital expenditures to replace and
maintain depreciable assets at current service 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 Canadian 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 Canadian GAAP. The closest
Canadian GAAP measure to operating income is net earnings. Operating income is
calculated from the statement of operations and comprehensive income and is
defined as revenue less operating, SG&A, finance 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 cash distributed, combined divisional net margin, EBITDA,
equipment in use, rigs in use, funds from operations, maintenance capital
expenditures, net margin, operating income and return on capital throughout
this document have the meanings set out above.
The Fund historically used cash available for growth and distributions, a
non-GAAP measure and often also referred to by other issuers and regulators as
distributable cash, to calculate the amount of funds which is available for
distribution to unitholders. Cash available for growth and distributions was
used by management to supplement funds from operations as a measure of cash
flow and leverage and was defined as funds from operations less maintenance
capital expenditures, principal repayments, asset retirement costs and
deferred costs incurred plus net proceeds on sales of fixed assets. In July
2007, the Canadian Securities Administrators provided guidance to standardize
the calculation of distributable cash which would require the inclusion of any
decrease (increase) in non-cash working capital and a different definition of
maintenance capital than that used by Newalta. Management is of the view that
calculating cash available for growth and distributions consistent with the
guidance provided by the CSA would not provide an accurate reflection of
available cash due to the variability in short term cash management.
Accordingly, the Fund has determined to cease calculating and reporting on
cash available for growth and distributions in its disclosure documents.
The following discussion and analysis should be read in conjunction with
(i) the consolidated financial statements of the Fund and the notes thereto
for the three and six months ended June 30, 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 the Fund, and (iv) the consolidated
interim financial statements of the Fund and the notes thereto and
Management's Discussion and Analysis for the three and six months ended June
30, 2007. Information for the three and six months ended June 30, 2008, along
with comparative information for 2007, is provided.
This Management's Discussion and Analysis ("MD&A") is dated August 5,
2008 and takes into consideration information available up to that date.

OVERALL PERFORMANCE

Investments to grow and diversify our business continued to drive
profitable growth in the second quarter despite weak drilling activity in
western Canada and a soft economy in Ontario. Investments, including the
development of steam assisted gravity drainage ("SAGD") onsite services and
the lead recycling facility in Québec, accounted for the majority of the
increase in revenue and EBITDA. Second quarter revenue, net earnings and
EBITDA improved by 28%, 75% and 71%, respectively, compared to 2007. On a
year-to-date basis, revenue, net earnings and EBITDA improved by 28%, 58% and
49%, respectively, compared to 2007.
Despite weak drilling activity in western Canada, the Western Division's
("Western's") revenue and net margin increased primarily due to: higher crude
oil sales; increased waste receipts from SAGD customers; and the redeployment
of drill site rental equipment to the U.S.
Improved results in the Eastern Division ("Eastern") for the first half
of 2008 were driven by contributions from our 2007 investments. The gains from
these investments were tempered by a weak economy in Ontario. The construction
industry in Ontario has been particularly slow in the first half of 2008
resulting in substantially lower event-based waste receipts at the Stoney
Creek landfill. We are confident even-based volumes will improve in the second
half of 2008.
Corporately, the second quarter's SG&A expense improved as a percentage
of revenue from 11.7% in 2007 to 11.2% in 2008. On a year-to-date basis, SG&A
expense improved to 10.3% in 2008, from 11.1% in 2007. We also continued a
program to identify and sell redundant or idle assets generating proceeds of
$6.6 million to date and maintained a strong balance sheet with a Funded Debt
to EBITDA ratio of 2.35:1. Overall, the improved performance on a year-to-date
basis improved the ratio of cash distributed as a percentage of funds from
operations to 84% compared to 109% in the same period in 2007 (94% for the
year ended December 31, 2007), consistent with our decision to maintain the
current level of distributions.
With expected strong natural gas pricing, we are optimistic that a
recovery in natural gas drilling will occur in the second half of 2008. We
anticipate this improved drilling activity will positively affect results late
in 2008. The changing outlook for drilling activity in western Canada is due
to a cold winter primarily in eastern North America, which left North American
storage levels at or slightly below the five-year average heading into the
natural gas injection season. In addition, the Petroleum Services Association
of Canada ("PSAC") revised its forecast in April 2008 for total wells to be
drilled in 2008 upward by approximately 14%.

RESULTS OF OPERATIONS

Western

Strong crude oil pricing, the continued development of SAGD onsite
services, and increasing demand for drill site equipment in the U.S. all
contributed to improved results year-over-year for both the second quarter and
the first half of 2008. Western's second quarter revenue and net margin
increased 11% and 40%, respectively over the second quarter of 2007. On a
year-to-date basis, Western's revenue improved 8% and net margin increased 22%
over 2007. The net margin growth was primarily attributable to higher crude
oil sales and growth initiatives.

The following table compares Western's second quarter and year-to-date
results for 2008 to the second quarter and year-to-date results for 2007:

-------------------------------------------------------------------------
% YTD YTD %
($000s) Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Revenue - external 83,528 75,201 11 177,501 163,906 8
Revenue - internal 240 433 (45) 541 433 (25)
Operating costs 56,044 55,593 1 115,180 112,780 2
Amortization and
accretion 5,699 4,292 33 11,360 9,425 21
-------------------------------------------------------------------------
Net margin 22,025 15,749 40 51,502 42,134 22
-------------------------------------------------------------------------
Net margin as %
of revenue 26 21 24 29 26 12
-------------------------------------------------------------------------
Maintenance
capital 1,665 3,171 (47) 2,725 3,661 (26)
-------------------------------------------------------------------------
Growth capital 8,169 7,829 4 14,532 13,499 8
-------------------------------------------------------------------------

Consistent with our diversification strategy over the last two years,
Western's relative contribution to consolidated revenue and combined
divisional net margin decreased. Second quarter contributions to consolidated
revenue and combined divisional net margin decreased to 58% and 66%,
respectively (67% and 78%, respectively in 2007). On a year-to-date basis,
Western's relative contributions to consolidated revenue and combined
divisional net margin decreased to 61% and 71%, respectively in 2008 (71% and
85%, respectively in 2007). This is in line with our expectation that Western
would represent approximately 70% of combined divisional net margin in 2008.
The Oilfield business unit accounted for approximately 59% of Western's
year-to-date revenue with the Drill Site and Industrial business units each
contributing approximately 13% and 28%, respectively.
The Oilfield business unit's performance improved significantly over the
second quarter and first half of 2007, with revenue increasing 41% and 29%,
respectively. The improvement was due to increased waste volumes, crude oil
sales, and growth in onsite services. The increase in waste volumes processed
at our fixed facility network was driven primarily by higher heavy oil waste
receipts from SAGD activity and higher crude oil content in the waste
received.
The table below reflects the increases in crude oil recovered for
Newalta's account and waste processed at fixed facilities as well as our
average price received for crude oil sales.

-------------------------------------------------------------------------
% YTD YTD %
Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Waste processing
volumes ('000 m3) 429.2 383.2 12 959.8 922.7 4
Recovered crude oil
('000 bbl)(1) 101.3 81.0 25 213.1 141.3 51
Average crude oil
price received
(CDN$/bbl) 105.06 52.74 99 91.39 56.22 63
-------------------------------------------------------------------------
(1) Represents the total crude oil recovered and sold for Newalta's
account.

Drill Site business unit revenue is generated from two main groupings of
services: (i) equipment rentals and (ii) environmental services comprised of:
drilling waste, site reclamation, and well abandonment services. In 2008, we
continued to grow our equipment rental business in the U.S. which offset
weakness in the Canadian equipment rental market. Environmental services
revenue was down in the second quarter of 2008 and for the first half of the
year compared to 2007 mainly due to decreased demand for our services.
Drill Site equipment rentals comprise 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 more specialized to 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.
The table below reflects the changes in Drill Site's Canadian rental
equipment-in-use compared to the drilling activity in western Canada as
reported by the Canadian Association of Oilwell Drilling Contractors (CAODC)
for the second quarter and first half of 2008 compared to the same periods in
2007:

-------------------------------------------------------------------------
% YTD YTD %
Canada Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
CAODC average active
drilling rigs in use
Drilling rigs -
western Canada 170 151 13 334 339 (1)
-------------------------------------------------------------------------
Average Drill Site
equipment-in-use
Solids control
equipment -
Canada 1 4 (75) 6 7 (14)
Drill cuttings
equipment - Canada 6 12 (50) 15 16 (17)
-------------------------------------------------------------------------
Average Drill Site
rental equipment-
in-use 7 16 (56) 21 23 (9)
-------------------------------------------------------------------------
Average Drill Site
rental equipment
available 92 118 (22) 99 119 (17)
-------------------------------------------------------------------------

Despite weak utilization in the first half for Canadian drill site
equipment, we expect the second half of 2008 to improve along with drilling
activity if natural gas prices are sustained at or above current levels.

The table below reflects the changes in Drill Site's U.S. rental
equipment-in-use for the second quarter and first half of 2008 compared to the
same periods in 2007:

-------------------------------------------------------------------------
% YTD YTD %
U.S. Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Average Drill Site
equipment-in-use
Solids control
equipment - U.S. 27 14 93 29 9 222
Drill cuttings
equipment - U.S 2 - n/a 2 - n/a
-------------------------------------------------------------------------
Average Drill
Site rental
equipment-in-use 29 14 107 31 9 244
-------------------------------------------------------------------------
Average Drill
Site rental
equipment
available 50 19 163 43 14 207
-------------------------------------------------------------------------

Activity levels and performance in the Industrial business unit remained
relatively flat for the three and six months ended June 30, 2008. In the
second quarter of 2008, Industrial's used oil volumes collected were down 7%
to 13.6 million litres, from 14.7 million litres in 2007. On a year-to-date
basis, used oil volumes collected were 8% lower at 27.2 million litres, from
29.5 million litres in 2007. Finished products sold in the second quarter and
first of half of 2008 totalled 14.7 million litres and 27.5 million litres,
respectively, at an average price of $0.60 per litre for both periods. In
2007, finished products sold totalled 15.9 million litres and 29.0 million
litres, respectively, at an average price of $0.59 per litre for the second
quarter of 2007 and $0.60 per litre for the first half.
Maintenance capital expenditures decreased in both the second quarter and
year-to-date 2008 by $1.5 million and $0.9 million, respectively. Our growth
capital expenditures were essentially flat year-over-year, in line with our
plan. We continued to focus on growing our Drill Site and SAGD onsite services
as well as productivity improvements to existing Oilfield facilities.

Eastern

Our 2007 investments enhanced Eastern's overall profitability. However,
challenging economic conditions in Ontario restricted our growth in 2008.
Acquisitions in the Québec/Atlantic Canada business unit contributed to
revenue and net margin growth while fixed facilities' performance was flat and
the Stoney Creek landfill's event-based waste receipts were significantly
lower for the three and six month periods ended June 30, 2008.
Consistent with our diversification strategy over the last two years,
Eastern's relative contributions to consolidated revenue and combined
divisional net margin increased year-over-year. Second quarter contributions
to consolidated revenue and combined divisional net margin increased to 42%
and 34% respectively in 2008, from 33% and 22%, respectively in 2007. On a
year-to-date basis, Eastern's relative contributions to consolidated revenue
and combined divisional net margin increased to 39% and 29%, respectively in
2008, from 29% and 15% in 2007. This is in line with our expectation that
Eastern would represent approximately 30% of combined divisional net margin in
2008.
The following table compares Eastern's second quarter and year-to-date
results for 2008 to the second quarter and year-to-date results for 2007:

-------------------------------------------------------------------------
% YTD YTD %
($000s) Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Revenue - external 59,372 36,304 64 115,534 64,912 78
Revenue - internal - - - - - -
Operating costs 44,452 27,828 60 87,386 50,155 74
Amortization and
accretion 3,758 4,016 6 7,568 7,463 1
-------------------------------------------------------------------------
Net margin 11,162 4,460 150 20,580 7,294 182
-------------------------------------------------------------------------
Net margin as %
of revenue 19 12 58 18 11 64
-------------------------------------------------------------------------
Maintenance capital 2,464 1,586 55 2,625 1,785 47
-------------------------------------------------------------------------
Growth capital 7,604 5,821 31 13,709 11,014 24
-------------------------------------------------------------------------

The Québec/Atlantic Canada business unit produced excellent results for
the second quarter due to the contributions from our 2007 acquisitions and
flat performance from fixed facilities. Compared to the first quarter of 2008
our volume of lead delivered in the second quarter increased 13% to 12.1
thousand metric tonnes ("MT"), as noted in the table below. However, revenue
in the second quarter of 2008 decreased slightly compared to the first quarter
of 2008 due to a decrease in the average price received for our direct sales
volumes of recycled lead, consistent with the decrease in the average London
Metals Exchange ("LME") price. The kiln operated at 96% of capacity for the
first half of 2008 and operated at full capacity for 91 days in the second
quarter of 2008 compared to 83 days in the first quarter of 2008, for a total
of 174 days for the first half of 2008. Scheduled maintenance on the kiln was
completed in July 2008 and will decrease the number of operating days in the
third quarter of 2008. However, we anticipate that the volume of lead
delivered to customers will not be affected as inventories built up prior to
the planned maintenance should offset any kiln downtime. Performance from
other facilities in Québec/Atlantic Canada performed in line with management's
expectations.

-------------------------------------------------------------------------
Q2 2008 Q1 2008 % Change YTD 2008
-------------------------------------------------------------------------
Volume of lead delivered
('000 MT) 12.1 10.7 13 22.8
% of lead delivered
Direct Sales 58 67 - 62
Tolling 42 33 - 38
-------------------------------------------------------------------------
Average price received -
direct sales (CDN$/MT)(1) 2,717 2,991 (9) 2,863
-------------------------------------------------------------------------
Average LME price
(U.S.$/MT)(2) 2,653 2,760 (4) 2,706
-------------------------------------------------------------------------
(1) Average price received includes all directs 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.

The Ontario business unit's performance in the second quarter continued
to be affected by continued weakness in the Ontario economy. Performance from
the fixed facilities was generally flat for both the second quarter and first
half of 2008 as price increases offset lower waste volumes received. Overall
waste receipts at the Stoney Creek landfill were down by 32% and 33%,
respectively. The most significant impact at the landfill was a decrease in
event-based volumes from the construction industry. Event-based volumes, which
have historically averaged approximately 40-45% of the total waste volumes,
were 17% in the second quarter of 2008 and 34% for the six months ended June
30, 2008. We are confident event-based volumes will improve in the second half
of 2008.
Maintenance capital expenditures for the second quarter and year-to-date
each increased by $0.8 million to $2.5 million and $2.6 million respectively.
Growth capital of $7.6 million increased by $1.8 million compared to the
second quarter of 2007. Growth capital of $13.7 million increased by
$2.7 million compared to the first half of 2007 which was mainly invested in
productivity improvements at facilities in Ontario and Québec and restarting
the second kiln at the lead recycling facility.

OUTLOOK

The outlook for the remainder of the year is positive. Higher natural gas
prices are anticipated to drive increased drilling in the second half of the
year while crude oil prices are expected to remain high. The revised 2008 PSAC
forecast of the number of wells to be drilled in 2008 was increased by
approximately 14% at mid-year. We will continue to exploit opportunities to
expand drill site services in the U.S., centrifugation services for SAGD
customers and national onsite services to grow our business. In addition, we
are confident event-based volumes at the Stoney Creek landfill will improve in
the second half. We will maintain our focus on improving the productivity of
our existing operations.
As disclosed in our MD&A for the year ended December 31, 2007, the Board
of Trustees intends to maintain monthly distributions at $0.185 per trust unit
during 2008. We have the financial capacity to fund our growth opportunities
while remaining a mutual fund trust through 2008.

CORPORATE AND OTHER

-------------------------------------------------------------------------
% YTD YTD %
($000s) Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Selling, general
and administrative
expenses 16,071 13,006 24 30,298 25,525 19
as a % of revenue 11.2 11.7 - 10.3 11.1 -
Amortization and
accretion 11,671 9,180 27 23,043 19,013 21
as a % of revenue 8.2 8.2 - 7.9 8.3 -
-------------------------------------------------------------------------

The increase in selling, general and administrative ("SG&A") expense was
attributable to increased staff to support the growth of the business compared
to the second quarter of 2007. SG&A includes a net $0.1 million foreign
exchange loss and a net $0.5 million foreign exchange gain for the three and
six month periods ended June 30, 2008, respectively. Foreign exchange gains
and losses will vary from period to period depending on the movement of the
Canadian dollar versus the U.S. dollar and the amount of U.S. denominated
receivables and payables outstanding.
The increase in amortization was attributable to recent acquisitions and
growth capital expenditures. As a percentage of revenue, amortization and
accretion was flat during the second quarter and decreased modestly
year-over-year. Over the past two years, we have acquired a total of 14
businesses, and with these businesses we acquired some redundant or idle
assets. We are focusing on consolidating operations and identifying and
disposing of redundant and idle assets. In the second quarter, redundant
assets were sold for total proceeds of $2.1 million and a net gain of
approximately $0.2 million. Year-to-date, redundant assets were sold for total
proceeds of $6.6 million with a net gain of $1.1 million. This gain was offset
by an impairment write-down of some idle assets of $1.0 million. Both the net
gain and the impairment write-down are reflected in amortization and
accretion.

-------------------------------------------------------------------------
% YTD YTD %
($000s) Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Bank fees and
interest 3,376 2,632 28 7,323 4,938 48
Convertible
debentures interest
and accretion of
issue costs 2,272 - n/a 4,591 - n/a
-------------------------------------------------------------------------
Finance charges 5,648 2,632 115 11,914 4,938 141
-------------------------------------------------------------------------

The increase in interest expense for the three and six months ended June
30, 2008 compared to the same periods in 2007 was due to an increase in the
average senior long-term debt level. In addition, we issued $115.0 million in
convertible debentures ("Debentures") in November 2007. At June 30, 2008,
senior long-term debt was $255.8 million compared with $206.9 million at
December 31, 2007. From January 1, 2008, senior long-term debt increased by
$48.9 million which was attributable to an increase in working capital and the
funding of growth capital expenditures.

-------------------------------------------------------------------------
% YTD YTD %
($000s) Q2 2008 Q2 2007 Change 2008 2007 Change
-------------------------------------------------------------------------
Current tax 339 461 (26) 575 663 (13)
Future income tax (2,822) (3,389) (17) (5,820) (2,892) 101
-------------------------------------------------------------------------
Provision for
(recovery of)
income taxes (2,483) (2,928) (15) (5,245) (2,229) 135
-------------------------------------------------------------------------

Current tax expense for the second quarter and first half 2008 was
consistent with the provision for the same periods in 2007. The increase in
future income tax recovery for 2008 compared to 2007 is due to an increase in
the amount of income sheltered between the Fund and its subsidiaries. Based on
projected levels of capital spending and anticipated earnings, Newalta has a
Canadian income tax horizon of approximately two years. This tax horizon is
dependent on a number of factors including, but not limited to, the amount of
tax loss carryforwards and total undepreciated capital cost ("UCC") and
eligible cumulative expense ("ECE") pools accumulated. As at December 31,
2007, we had approximately $77.0 million in tax loss carryforwards and
approximately $309.3 million in UCC and ECE pools. Please refer to CRITICAL
ACCOUNTING ESTIMATES - FUTURE INCOME TAXES in the MD&A for the year ended
December 31, 2007 relating to the taxation of specified investment
flow-through ("SIFT") entities.
As at August 5, 2008, the Fund had 42,073,532 trust units outstanding,
outstanding rights to acquire up to 2,798,375 trust units and a number of
trust units that may be issuable pursuant to the Debentures (see the MD&A for
the year ended December 31, 2007 LIQUIDITY AND CAPITAL RESOURCES - Sources of
Cash - Convertibles).

SUMMARY OF QUARTERLY RESULTS

(unaudited) 2008 2007
-------------------------------------------------------------------------
($000s except per unit
data) Q2 Q1 Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Revenue 142,939 150,176 137,075 133,358 111,594 117,837
-------------------------------------------------------------------------
Operating income 9,293 16,542 7,784 14,524 3,788 13,665
-------------------------------------------------------------------------
Net earnings 11,776 19,304 23,613 17,893 6,716 12,966
Continuing
operations 11,776 19,304 23,613 17,893 6,716 12,966
Discontinued
operations - - - - - -
-------------------------------------------------------------------------
Earnings per
unit ($) 0.28 0.47 0.57 0.44 0.17 0.33
Continuing
operations 0.28 0.47 0.57 0.44 0.17 0.33
Discontinued
operations - - - - - -
Diluted earnings
per unit ($) 0.28 0.46 0.54 0.43 0.16 0.33
Continuing
operations 0.28 0.46 0.54 0.43 0.16 0.33
Discontinued
operations - - - - - -
-------------------------------------------------------------------------
Weighted average
units - basic 41,822 41,543 41,191 40,579 40,361 39,209
-------------------------------------------------------------------------
Weighted average
units - diluted 41,950 41,635 43,779 40,725 40,562 39,445
-------------------------------------------------------------------------
-------------------------------------------------------------------------


(unaudited) 2006
--------------------------------------
($000s except per unit
data) Q4 Q3
--------------------------------------
Revenue 122,498 120,297
--------------------------------------
Operating income 16,209 24,846
--------------------------------------
Net earnings 15,356 20,136
Continuing
operations 15,528 20,136
Discontinued
operations (172) -
--------------------------------------
Earnings per
unit ($) 0.42 0.55
Continuing
operations 0.42 0.55
Discontinued
operations (0.00) -
Diluted earnings
per unit ($) 0.41 0.54
Continuing
operations 0.41 0.54
Discontinued
operations (0.00) -
--------------------------------------
Weighted average
units - basic 36,860 36,734
--------------------------------------
Weighted average
units - diluted 37,282 37,279
--------------------------------------
--------------------------------------

Quarterly performance is affected by seasonal variation as described
below. In Q4 2006 net earnings declined due to the decrease in the demand for
Drill Site services consistent with the 40% drop in overall drilling activity
when compared to the same period in 2005.
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 $2.1 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 January 2007, the Fund issued 3.0 million
trust units for net proceeds of $74.1 million, which accounts for the majority
of the increase in trust units outstanding from Q4 2006 to Q1 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.
In 2008, the increase in revenue, operating income, and net earnings
compared to Q1 and Q2 2007 are mainly due to full quarter contributions from
acquisitions in each quarter as well as higher crude oil sales and
contributions from growth initiatives in Western.

Seasonality of Operations

Quarterly performance is affected by, among other things, weather
conditions, commodity prices, market demand and the timing of 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 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 reduce the significance of weather
conditions on drilling related activities. 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 and therefore drilling can take place at
any time of year. For Western, over the past two years, quarterly revenue as a
percentage of annual Western revenue was: 25% for the first quarter, 22% for
the second quarter, 27% for the third quarter and finally fourth quarter
revenue was 26%.
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 the lead recycling facility to the Eastern
division is anticipated to reduce 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 visibly
reflected the trends discussed above due to the effect of acquisitions. Based
on historical information acquired by management for acquisitions completed in
eastern Canada in 2006 and 2007, we estimate that quarterly revenue as a
percentage of annual revenue for Eastern would have approximately been: 22% in
the first quarter, 24% in the second quarter, 27% in the third quarter and,
27% in the fourth quarter.
Quarterly financial results have been prepared by management in
accordance with Canadian GAAP as set out in the notes to the annual audited
consolidated financial statements of the Fund for the year ended December 31,
2007.

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. Liquidity risk for the Fund
may arise from its general day-to-day cash requirements, and in the management
of its assets, liabilities and capital resources. Liquidity risk is managed
against Newalta's financial leverage to meet its obligations and commitments
in a balanced manner.

Our debt capital structure is as follows:

-------------------------------------------------------------------------
($000s) June 30, 2008 December 31, 2007
-------------------------------------------------------------------------
Working capital 98,171 74,529
-------------------------------------------------------------------------
Use of credit facility:
Senior long-term debt (before
related costs) 256,226 207,417
Letters of credit 49,738 40,095
-------------------------------------------------------------------------
Funded senior debt A 305,964 247,512
Unused credit facility capacity 119,036 177,488
-------------------------------------------------------------------------
Debentures B 115,000 115,000
-------------------------------------------------------------------------
Total Debt (equals) A + B 420,964 362,512
-------------------------------------------------------------------------

The Fund's net working capital was $98.2 million at June 30, 2008
compared with $74.5 million at December 31, 2007. At current activity levels,
working capital of $98.2 million is expected to be sufficient to meet the
ongoing commitments and operational requirements of the business. The increase
in working capital from December 31, 2007 related to higher working capital
requirements to support the lead recycling operations, the settlement of
related purchase price adjustments and the settlement of capital expenditures
accrued for at year end. The credit risks associated with accounts receivable
are viewed as normal for the industry. We have not purchased any asset-backed
commercial paper investments and have had no direct impact from the collapse
of the sub-prime mortgage markets in the United States. A measure we use as an
indication of liquidity is the Current Ratio, which is defined as the ratio of
total current assets to total current liabilities. The Current Ratio at June
30, 2008 reflected that Newalta had sufficient current assets to cover its
current liabilities by 2.13 times (at December 31, 2007 the ratio was 1.65
times). This ratio exceeds Newalta's bank covenant minimum requirement of
1.20:1.

SOURCES OF CASH

The Fund's liquidity needs can be sourced in several ways including:
funds from operations, short and long-term borrowings against our credit
facility and the issuance of securities from treasury. The components of the
capital structure remained the same compared to December 31, 2007.

Credit Facility

On October 12, 2007, we arranged an amended $425.0 million extendible
revolving credit facility (the "Credit Facility") which matures on October 11,
2009. The Credit Facility is used to fund growth capital expenditures and for
general corporate purposes as well as to issue letters of credit to third
parties up to a maximum amount of $60.0 million. The aggregate dollar amount
of letters of credit that have been issued and are outstanding under the
Credit Facility are not categorized in the financial statements as long term
debt of Newalta; however, the amount of funds that can be drawn on the Credit
Facility by Newalta is reduced by the amount of the outstanding letters of
credit. Newalta is currently required to issue either letters of credit or a
bond with various environmental regulatory authorities to ensure that the
eventual asset retirement obligations for facilities are fulfilled. These
letters of credit or bonds will not be utilized unless Newalta defaults on its
obligation to restore the lands to a condition acceptable by these
authorities. At June 30, 2008, letters of credit and bonds issued as financial
security to third parties totalled $62.6 million. Of this amount,
$49.7 million is committed on the Credit Facility. Bonds, if less than
$25.0 million in total, are not required to be offset against the borrowing
amount available under the Credit Facility.
At June 30, 2008, Newalta had funded senior debt of $306.0 million,
compared to $247.5 million at December 31, 2007, an increase of $58.5 million.
The increase was primarily due to growth capital funding requirements and an
increase in working capital requirements on a year-to-date basis.
Newalta is restricted from declaring distributions and distributing cash
if the Corporation is in breach of the covenants under the Credit Facility.
Financial performance relative to the financial ratio covenants under the
current Credit Facility is reflected in the table below:

-------------------------------------------------------------------------
June 30, 2008 Threshold
-------------------------------------------------------------------------
Current Ratio(1) 2.13:1 1.20:1 minimum
Funded Debt to EBITDA(2) 2.35:1 3.00:1 maximum(3)
Fixed Charge Coverage Ratio(4) 1.18:1 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 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.
(3) In the third quarter of 2008, the threshold amount will decrease to
2.75:1.00 and in the first quarter of 2009 this threshold will
decrease to 2.50:1.00.
(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 and cash distributions paid by the
Fund for such period, other than cash payments in respect of the DRIP
program of the Fund. Unlike the Funded Debt to EBITDA ratio, the
Fixed Charge Coverage ratio trailing twelve month EBITDA is not
normalized for acquisitions.

Debentures

In November 2007, $115.0 million in Debentures were issued which mature
on November 30, 2012 and bear an interest rate of 7.0%, payable semi-annually
in arrears on May 31 and November 30 beginning May 31, 2008. Each $1,000
debenture is convertible into 43.4783 trust units (or a conversion price of
$23.00 per trust unit (the "Conversion Price") at any time at the option of
the holders of the Debentures. The Debentures are not included in the
definition of funded debt for the purposes of calculating related financial
covenants pursuant to the Credit Facility.
Upon maturity or redemption of the Debentures, the Fund may pay the
outstanding principal of the Debentures in cash or may elect to satisfy its
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 trust units obtained by dividing the aggregate amount of principal
of the Debentures which have matured or been redeemed by 95% of the weighted
average trading price of the trust units 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. The Fund may also
elect, subject to regulatory approval, from time to time, to satisfy its
obligation to pay all or any part of the interest on the Debentures (the
"Interest Obligation"), on the date it is payable under the Debenture
Indenture, by delivering a sufficient number of trust units to the debenture
trustee to satisfy all or any part, as the case may be, of the Interest
Obligation.
There have been no redemptions of the Debentures.

USES OF CASH

Our primary uses of funds are operational and administrative expenses,
distributions, maintenance and growth capital spending, and acquisitions.

Capital Expenditures

Total capital expenditures for the current year and comparative periods
are summarized as follows:

-------------------------------------------------------------------------
($000s) Q2 2008 Q2 2007 YTD 2008 YTD 2007
-------------------------------------------------------------------------
Growth capital 19,301 19,358 36,025 33,488
Acquisitions - 25,997 - 25,997
-------------------------------------------------------------------------
Total growth capital and
acquisitions 19,301 45,355 36,025 59,485
Maintenance capital
expenditures 4,161 5,019 5,410 5,750
-------------------------------------------------------------------------
Total capital expenditures(1) 23,462 50,374 41,435 65,235
-------------------------------------------------------------------------
(1) The numbers in this table differ from the interim consolidated
statement of cash flows because the numbers above do not reflect the
net change in working capital related to capital expenditures.

Growth capital expenditures in 2008 were funded by funds from operations
in excess of distributions, proceeds from the disposition of redundant assets
and finally by drawing on our Credit Facility. Growth capital expenditures
consisted primarily of productivity improvements at several facilities,
progress payments on additional centrifuges to support both the growing demand
in the U.S. for drill site services and onsite SAGD services and corporate
office leasehold improvements.
For 2008, we have planned a total of $135.0 million in capital spending
comprised of $110.0 million in growth capital expenditures and $25.0 million
in maintenance capital expenditures. Of the growth capital amount,
$90.0 million will be directed towards internal growth projects and $20.0
million is planned for corporate investments in innovation projects,
information technology and office space (before tenant improvement
recoveries). Approximately 70% of the growth capital investments are planned
for the second half of 2008. These projects will be funded out of excess funds
from operations, if any, and bank borrowings. The operations growth projects
are planned as follows:

-------------------------------------------------------------------------
Division Approximate Use of funds
% of growth
capital(1)
-------------------------------------------------------------------------
Western 10% Average project is $0.5 million and targets high
Eastern 25% return/low risk projects which improve
productivity or expand capacity in our existing
operations.
-------------------------------------------------------------------------
Western 15% Investment in infrastructure and productivity
improvements in the facility network.
-------------------------------------------------------------------------
Eastern 20% Continued expansion and upgrading of facilities
to meet the waste handling requirements of LDR
in Ontario and expanding the recently acquired
lead recycling facility.
-------------------------------------------------------------------------
Western 30% Investments in mobile equipment to support
onsite services for SAGD customers as well as
drill site equipment.
-------------------------------------------------------------------------
(1) Newalta continuously assesses the allocation of growth capital
expenditures and, as such, the dollar amounts allocated to each
operating division may be reallocated between the divisions and
specific projects.

Maintenance capital expenditures are capital expenditures to replace and
maintain depreciable assets at current service levels. Management continues to
estimate that the total maintenance capital expenditures for the year will be
approximately $25.0 million. Maintenance capital expenditures for fixed
facilities tend to be relatively consistent year-over-year, whereas
maintenance capital expenditures for equipment that is rented out to customers
fluctuate based on usage. Maintenance capital expenditures are budgeted
annually and revised throughout the year to reflect the impact of actual
utilization rates. These expenditures are funded out of funds from operations.

Distributions

On a per unit basis Newalta declared monthly distributions of $0.185 to
unitholders from January through June 2008 or $2.22 annually, consistent with
the same period in 2007. The Board of Trustees intends to maintain
distributions at $0.185 per trust unit during 2008. We have the financial
capacity to fund our growth opportunities while remaining a mutual fund trust
through 2008. Newalta has maintained the monthly distribution of $0.185 per
unit in anticipation that investments made in 2007 will continue to contribute
to stronger results in 2008 consistent with the first half.

The following table is recommended by the Canadian Securities
Administrators as additional information to users of income fund and mutual
fund trust financial statements. It provides another perspective on the
sourcing of cash to fund distributions:

-------------------------------------------------------------------------
Q2 Q2 YTD Fiscal Fiscal Fiscal
($000s) 2008 2007 2008 2007 2006 2005
-------------------------------------------------------------------------
Cash flow generated
from operating
activities 23,421 17,324 32,166 54,058 111,963 71,732
Distributions
declared (23,249) (22,413) (46,236) (90,117) (75,923) (49,602)
-------------------------------------------------------------------------
Cash excess
(shortfall) 172 (5,089) (14,070) (36,059) 36,040 22,130
-------------------------------------------------------------------------

Net earnings 11,776 6,716 31,080 61,189 75,565 46,978
Distributions
declared (23,249) (22,413) (46,236) (90,117) (75,923) (49,602)
-------------------------------------------------------------------------
Net earnings
(shortfall)
excess (11,473) (15,697) (15,156) (28,928) (358) (2,624)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

On a year-to-date basis cash flow generated from operating activities and
net earnings were less than distributions declared. Declared distributions 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.
Distributions declared on a year-to-date basis in excess of cash flow
generated from operating activities in the short term have been funded by
drawing on the Credit Facility. The cash shortfall above was driven mainly by
the increase in operating working capital requirements of $13.8 million for
the six months ended June 30, 2008. In addition for the six months ended
June 30, 2008, the calculation does not include proceeds from the Fund's
Distribution Reinvestment Plan ("DRIP") through which $6.5 million in
distributions were reinvested by unitholders. It also does not include cash
proceeds received through the sale of redundant assets of $6.6 million. The
net earnings shortfall is mainly attributable to amortization and accretion
expense, a non-cash expense, of $23.0 million for the six months ended
June 30, 2008. The majority of the assets related to this expense are funded
by drawing on our Credit Facility in the absence of excess cash from
operations. Therefore, management expects that there will continue to be a net
earnings shortfall which will decrease as cash flow generated from operating
activities increases and does not believe that the shortfalls in the table
above have resulted in an economic return of capital.

Contractual Obligations

For the three and six month periods ended June 30, 2008, there have been
no significant changes in Newalta's contractual obligations. For a summary of
Newalta's contractual obligations, please refer to page 26 of the MD&A for the
year ended December 31, 2007.

OFF-BALANCE SHEET ARRANGEMENTS

Newalta currently has no off-balance sheet arrangements.

TRANSACTIONS WITH RELATED PARTIES

Bennett Jones LLP provides legal services to Newalta. Mr. Vance Milligan,
a Trustee of the Fund, is counsel to Bennett Jones LLP. The total cost of
these legal services during the three and six month periods ended June 30,
2008 was $0.1 million and $0.2 million, respectively ($0.1 million and $0.3
million for the same periods in 2007).
Newalta provides oilfield services to Paramount Resources Ltd., an oil
and gas company. Mr. Clayton Riddell, a Trustee and Chairman of the Board of
the Fund, is Chairman and Chief Executive Officer of Paramount Resources Ltd.
The total revenue for services provided by Newalta to this entity during the
three and six month periods ended June 30, 2008 were $0.2 million and
$0.6 million respectively ($0.2 million and $1.0 million for the same periods
in 2007).
These transactions were in 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,
natural gas, base oils, and lead. Cash from operating activities is also
sensitive to changes in interest rates as well as the exchange rate between
the Canadian and U.S. dollars. These factors have both a direct and indirect
impact on our business. The direct impact of the 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 has on activity levels of our customers and therefore the demand for
services. The indirect impact of fluctuations in the commodity prices and
other factors previously discussed are not quantifiable.
With the acquisition of the lead recycling facility in the fourth quarter
of 2007, our revenue is now exposed to the variability of lead prices
established by the London Metal Exchange. The contribution of total lead
produced between direct lead sales and tolling services was approximately 65%
direct sales and 35% tolling on a trailing twelve month basis. The variability
of lead prices is partially offset because our feedstock to produce recycled
lead for direct lead sales is obtained through the procurement of waste
batteries, the cost of which also fluctuates with the price of lead but
historically the adjustment to feedstock has lagged the change in the price of
lead by up to six months. Therefore the impact of an increase in lead prices
will not have the same dollar for dollar impact of a decrease in lead prices.
Tolling revenue is not subject to the same variation in lead prices because
the fees are generally fixed.
As of the time of writing this MD&A we do not see any significant
variation to the sensitivities provided in the MD&A for the year ended
December 31, 2007.

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 the Fund 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 at www.newalta.com, or by facsimile
at (403) 806-7032.

CRITICAL ACCOUNTING ESTIMATES

The preparation of the financial statements in accordance with Canadian
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.

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 have been no
significant changes in the estimates used to prepare the asset retirement
obligation in the second quarter and first six months of 2008 compared to
those provided in the Fund'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 more likely than not that an impairment may
have occurred. Determining whether an impairment has occurred requires a
valuation of the respective reporting unit, which is estimated using a
discounted cash flow method. 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 at each September 30 period end and did not see any impairment in the
goodwill balance recorded nor were there any factors that changed since that
period which would lead management to believe that any impairment has
occurred.

Stock-based compensation

Newalta has three stock-based compensation plans: a Trust Unit Rights
Incentive Plan adopted in 2003 (the "2003 Plan"); a Trust Unit Rights
Incentive Plan adopted in 2006 (the "2006 Plan") and a Trust Unit Appreciation
Rights Incentive arrangement granted in 2008 (the "2008 Plan"). The 2003 Plan
and 2006 Plan differ in the manner in which they may be settled by the
grantee. The rights granted under the 2003 Plan may only be settled in Trust
Units, while the rights granted under the 2006 Plan may by settled net in cash
by the grantee. Rights under the 2008 Plan may only be settled in cash. As
such, rights granted under the 2003 Plan are accounted for in accordance with
the fair value recognition provisions of Canadian 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 rights
(including the number of stock-based awards that are expected to be
forfeited), the expected volatility of the Fund's units and the expected
distributions.
The rights granted under the 2006 Plan and 2008 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.

Future Income Taxes

Future income taxes are estimated based upon temporary differences
between the book value and the 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 rates used for
each entity. On June 22, 2007, new tax legislation modifying the taxation of
certain flow-through entities including mutual fund trusts such as Newalta and
its unitholders was enacted (the "New Tax Legislation"). The New Tax
legislation will apply a tax at the trust level on distributions of certain
income from the Fund at a rate of tax of 31.5%. Such distributions will be
treated as dividends to the unitholders. There was no impact on the Fund at
June 30, 2008 as a result of the enactment of the New Tax Legislation. It is
expected that the new distribution tax (subject to any undue expansion) will
apply to the Fund commencing in 2011. For further discussion on the impact of
the New Tax Legislation please refer to pages 30 and 31 of the Fund's MD&A for
the year ended December 31, 2007.
On July 14, 2008, the Federal Government released the draft legislative
proposals to allow for the tax-deferred conversion of specified investment
flow-through entities ("SIFT") into corporations. The main objectives of the
legislation is to: (i) allow unitholders of an income trust to sell their
units to a taxable Canadian corporation on a tax-deferred basis and (ii)
provide alternatives for eliminating, on a tax-deferred basis, the trusts in
the existing fund structures so that the operating businesses can be owned in
corporate form by shareholders. These proposals, in their current form, will
expire on December 31, 2012.

Amortization and Accretion

Amortization of the Fund's 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 the Fund's 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 the Fund's facilities. Estimates for the three and
six months ended June 30, 2008 are consistent with those disclosed in the
Management's Discussion and Analysis for the year ended December 31, 2007.

ADOPTION OF NEW ACCOUNTING STANDARDS IN 2008

Effective January 1, 2008, Newalta adopted the requirements of the
Canadian Institute of Chartered Accountants ("CICA") new handbook sections
3862 Financial Instruments - Disclosures and 3863 Financial Instruments -
Presentation. The incremental disclosure requirements for Newalta are
addressed in Note 14 to the interim consolidated financial statements for the
three and six months ended June 30, 2008.
The CICA issued an additional new accounting standard, section 1535
Capital Disclosures which requires both qualitative and quantitative
disclosures to provide users of financial statements with information to
evaluate the 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 5 to the interim consolidated
financial statements for June 30, 2008.
Effective January 1, 2008, the Fund adopted CICA handbook section 3031
Inventories, which replaces section 3030. There was no effect on the Fund'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.

New accounting standards for future adoption

In February 2008, 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, the Fund will adopt the
new standards for its 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. Management is currently
evaluating the impact of the adoption of this new section on its consolidated
financial statements and does not expect that the adoption of this new section
will have a material impact on its financial statements.
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. We will be regularly reporting to
senior executive management, the Audit Committee and Board. We have also
engaged an external expert advisor to assist with the implementation.
At this stage, we have completed initial scoping of this project by
completing a high-level review of the major differences between Canadian GAAP
and IFRS. Based on this review, our project team is developing our
implementation plan, identifying our individual working groups, and developing
training programs with our external advisor to develop the appropriate
knowledge to accommodate the change to IFRS.

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

DISCLOSURE CONTROLS AND PROCEDURES AND INTERNAL CONTROL OVER FINANCIAL
REPORTING

During the three months ended June 30, 2008, the Fund did not make any
changes to its internal controls over financial reporting that would have
materially affected, or would likely materially affect, the effectiveness of
such controls.

ADDITIONAL INFORMATION

Additional information relating to the Fund, including 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 of the Fund may be
obtained from Newalta Corporation at 211-11th Avenue S.W., Calgary, Alberta
T2R 0C6, or at www.newalta.com, or by facsimile at (403) 806-7032.

Consolidated Balance Sheets

June 30, December 31,
($000s) (unaudited) 2008 2007
-------------------------------------------------------------------------
Assets
Current assets
Accounts receivable 142,643 159,749
Inventories 33,954 24,122
Prepaid expenses and other 8,756 6,129
-------------------------------------------------------------------------
185,353 190,000
Note receivable 1,343 1,424
Capital assets 675,720 661,605
Intangible assets 65,288 66,855
Goodwill 103,597 103,597
-------------------------------------------------------------------------
1,031,301 1,023,481
-------------------------------------------------------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 79,412 107,809
Distributions payable 7,770 7,662
-------------------------------------------------------------------------
87,182 115,471
Senior long-term debt (Note 2) 255,826 206,940
Convertible debentures - debt portion 108,830 108,336
Future income taxes 43,998 49,840
Asset retirement obligations (Note 9) 20,343 20,985
-------------------------------------------------------------------------
516,179 501,572
-------------------------------------------------------------------------
Unitholders' Equity
Unitholders' capital (Note 4) 504,649 496,027
Convertible debentures - equity portion 1,850 1,850
Contributed surplus 929 1,092
Retained earnings 7,694 22,940
-------------------------------------------------------------------------
515,122 521,909
-------------------------------------------------------------------------
1,031,301 1,023,481
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Operations, Comprehensive Income and Retained
Earnings

For the Three Months For the Six Months
($000s except per unit data) Ended June 30, Ended June 30,
(unaudited) 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue 142,939 111,594 293,115 229,431

Expenses
Operating 100,256 82,988 202,025 162,502
Selling, general and
administrative 16,071 13,006 30,298 25,525
Finance charges 5,648 2,632 11,914 4,938
Amortization and accretion 11,671 9,180 23,043 19,013
-------------------------------------------------------------------------
133,646 107,806 267,280 211,978
-------------------------------------------------------------------------
Earnings before taxes 9,293 3,788 25,835 17,453
Provision for (recovery of)
income taxes
Current 339 461 575 663
Future (2,822) (3,389) (5,820) (2,892)
-------------------------------------------------------------------------
(2,483) (2,928) (5,245) (2,229)
-------------------------------------------------------------------------
Net earnings and comprehensive
income 11,776 6,716 31,080 19,682
Retained earnings, beginning of
period 19,167 42,585 22,940 51,868
Distributions (Note 8) (23,249) (22,413) (46,326) (44,662)
-------------------------------------------------------------------------
Retained earnings, end of period 7,694 26,888 7,694 26,888
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Net earnings per unit (Note 7) 0.28 0.17 0.75 0.50
-------------------------------------------------------------------------
Diluted earnings per unit (Note 7) 0.28 0.16 0.75 0.49
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Consolidated Statements of Cash Flows

For the Three Months For the Six Months
Ended June 30, Ended June 30,
($000s) (unaudited) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net inflow (outflow) of cash
related to the following
activities:
Operating Activities
Net earnings 11,776 6,716 31,080 19,682
Items not requiring cash:
Amortization and accretion 11,671 9,180 23,043 19,013
Future income taxes (recovery) (2,822) (3,389) (5,820) (2,892)
Other (293) (323) (803) (1,118)
-------------------------------------------------------------------------
20,332 12,184 47,500 34,685
Increase (decrease) in non-cash
working capital 4,043 5,439 (13,768) (22,134)
Asset retirement expenditures
incurred (954) (299) (1,566) (497)
-------------------------------------------------------------------------
23,421 17,324 32,166 12,054
-------------------------------------------------------------------------
Investing Activities
Additions to capital assets (24,605) (24,954) (49,762) (57,323)
Net proceeds on sale of capital
assets (Note 10) 2,130 1,654 6,590 1,715
Acquisitions (Note 3) - (25,260) - (25,260)
-------------------------------------------------------------------------
(22,475) (48,560) (43,172) (80,868)
-------------------------------------------------------------------------
Financing Activities
Issuance of units 1,851 956 1,913 77,332
Issuance of convertible
debentures (139) - (205) -
Increase in debt 17,851 49,921 48,887 29,799
Settlement of acquired debt
(Note 3) - (737) - (737)
Decrease in note receivable 105 79 161 127
Distributions to unitholders
(Note 8) (20,614) (18,983) (39,750) (37,707)
-------------------------------------------------------------------------
(946) 31,236 11,006 68,814
-------------------------------------------------------------------------
Net cash inflow - - - -
Cash - beginning of period - - - -
-------------------------------------------------------------------------
Cash - end of period - - - -
-------------------------------------------------------------------------
Supplementary information:
Interest paid 7,644 2,501 11,426 4,717
Income taxes paid 544 216 740 507
-------------------------------------------------------------------------



Notes to the Interim Consolidated Financial Statements

FOR THE THREE AND SIX MONTHS ENDED June 30, 2008 AND 2007
(all tabular data in $000s except per unit and ratio data) (unaudited)

Newalta Income Fund (the "Fund") is a Canadian mutual fund trust engaged,
through its wholly-owned operating subsidiaries Newalta Corporation (the
"Corporation") and Newalta Industrial Services Inc. ("NISI" and together
with the Fund and the Corporation, "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,
lead, manufacturing, mining, oil and gas, petrochemical, pulp and paper,
refining, steel and transportation services.

NOTE 1. BASIS OF PRESENTATION

The interim consolidated financial statements include the accounts of
Newalta. The interim consolidated financial statements have been prepared
by management in accordance with Canadian generally accepted accounting
principles ("GAAP"). Certain information and disclosures normally
required to be included in the notes to the audited annual financial
statements have been omitted or condensed. These interim financial
statements and the notes thereto should be read in conjunction with the
consolidated financial statements of the Fund for the year ended
December 31, 2007 as contained in the Annual Report for fiscal 2007.

The accounting principles applied are consistent with those as set out in
the Fund's annual financial statements for the year ended December 31,
2007 except as noted in the following paragraphs.

a) Financial Instruments

Effective January 1, 2008, Newalta adopted the requirements of the
Canadian Institute of Chartered Accountants ("CICA") new handbook
sections 3862 Financial Instruments - Disclosures and 3863 Financial
Instruments - Presentation. The incremental disclosure requirements for
Newalta are addressed in Note 14 to these interim consolidated financial
statements.

b) Capital Disclosures

The CICA issued a new accounting standard, section 1535 Capital
Disclosures which requires both qualitative and quantitative disclosures
to provide users of 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 5 to these interim
consolidated financial statements.

c) Inventories

Effective January 1, 2008, the Fund retrospectively adopted CICA handbook
section 3031 Inventories, which replaces section 3030. There was no
effect on the Fund's inventory balances. However, going forward the new
handbook section provides for the ability to reverse impairment losses
previously recognized if the underlying assumptions for that impairment
have changed.

Use of estimates and assumptions

Accounting measurements at interim dates inherently involve reliance on
estimates and the results of operations for the interim periods shown in
these financial statements are not necessarily indicative of results to
be expected for the fiscal year. In the opinion of management, the
accompanying unaudited interim consolidated financial statements include
all adjustments necessary to present fairly the consolidated results of
the Fund's operations and cash flows for the periods ended June 30, 2008
and 2007.

NOTE 2. SENIOR LONG-TERM DEBT

June 30, December 31,
2008 2007
-------------------------------------------------------------------------
Amount drawn on credit facility 256,226 207,417
Issue costs (400) (477)
-------------------------------------------------------------------------
Senior long-term debt 255,826 206,940
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The facility's maturity date is October 11, 2009. An extension of the
credit facility may be granted at the option of the lenders. If an
extension is not granted, the entire amount of the outstanding
indebtedness would be due in full at the maturity date. The facility also
requires Newalta to be in compliance with certain covenants. At June 30,
2008, Newalta was in compliance with all covenants.

NOTE 3. ACQUISITIONS

On April 1, 2007, Western acquired all of the assets of Panaco Fluid
Filtration Systems Ltd. ("Panaco") for a total purchase price of
$5.9 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, Eastern 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 $7.9 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, Eastern acquired a portion of the operating assets
of Ecolosite Inc. ("Ecolosite"), based in London, Ontario, for a total
purchase price of $3.0 million, comprised of $2.3 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 Inc. were acquired by the Eastern
division effective June 1, 2007 for a total purchase price of $9.2
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 amount of the consideration paid and the fair value of the assets
acquired and liabilities assumed were:

Eastern
Environ-
Panaco Envirex Ecolosite mental Total
-------------------------------------------------------------------------
Cash consideration 5,909 7,948 2,240 9,163 25,260
Debt assumed - - 737 - 737
-------------------------------------------------------------------------
Total Purchase Price 5,909 7,948 2,977 9,163 25,997
-------------------------------------------------------------------------
Net working capital 412 (52) - 224 584
Capital assets:
Land 45 800 - 202 1,047
Plant & equipment 2,252 4,600 2,413 3,757 13,022
Intangibles 500 1,000 - 1,000 2,500
Goodwill 2,700 1,600 580 4,020 8,900
Asset retirement
obligations - - (16) (40) (56)
-------------------------------------------------------------------------
5,909 7,948 2,977 9,163 25,997
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The operating results of the businesses acquired are consolidated from
the respective closing dates of the transactions.

NOTE 4. 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 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 376 6,468
-------------------------------------------------------------------------
Units outstanding as at June 30, 2008 42,002 504,649
-------------------------------------------------------------------------
-------------------------------------------------------------------------


NOTE 5. Capital disclosures

The Fund's capital structure currently consists of:

- Senior long term debt pursuant to the credit facility agreement
- Letters of Credit or bonds issued as financial security to third
parties
- Convertible debentures, debt portion; and
- Unitholders' equity.

The objectives in managing the capital structure are to:

- Utilize an appropriate amount of leverage to maximize return on
unitholders' equity, and
- To provide for borrowing capacity and financial flexibility to
finance Newalta's growth strategy.

Management and the Board of Trustees review and assess the Fund's capital
structure and 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, the Fund may:

- Issue new trust units

- Issue new debt securities

- 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, and/or

- Adjust the amount of distributions paid to unitholders.

Management monitors the capital structure based on measures required
pursuant to the Corporation's credit facility agreement which restricts
Newalta from declaring distributions and distributing cash if the
Corporation is in breach of a covenant under its credit facility. These
measures include:

-------------------------------------------------------------------------
Ratio June 30, December 31, Threshold
2008 2007
-------------------------------------------------------------------------
Current 2.13:1 1.65:1 1.20:1 minimum
Funded Debt(1) to EBITDA(2) 2.35:1 1.89:1 3.00:1 maximum(3)
Fixed Charge Coverage(4) 1.18:1 1.07:1 1.00:1 minimum
-------------------------------------------------------------------------
(1) 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.
(2) EBITDA or earnings before interest, taxes, depreciation and
amortization is a non-GAAP measure. The nearest GAAP measure is net
earnings. For the purposes of the credit facility, 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.
(3) In the third quarter of 2008, the threshold amount will decrease to
2.75:1.00 and in the first quarter of 2009 this threshold will
decrease to 2.50:1.00.
(4) Fixed charge coverage ratio means, based on the trailing twelve-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, dividends and cash distribution
paid by the Fund for such period, other than cash payments in respect
of the DRIP program of the Fund. Unlike the funded debt to EBITDA
ratio, the calculation of EBITDA pursuant to the fixed charge
coverage ratio is not normalized for acquisitions or dispositions.

On June 22, 2007, new tax legislation modifying the taxation of specified
investment flow-through entities including mutual fund trusts such as the
Fund and its unitholders was enacted (the "New Tax Legislation"). The New
Tax legislation will apply a tax at the trust level on distributions of
certain income from the Fund. The New Tax Legislation permits "normal
growth" for the Fund through the transitional period which ends December
31, 2010. However, "undue expansion" could cause the transitional relief
to be revisited, and the New Tax Legislation to be effective at a date
earlier than January 1, 2011. On December 15, 2006, the Department of
Finance released guidelines on normal growth for income trusts and other
flow-through entities (the "Guidelines"). Under the Guidelines, the Fund
will be able to increase its equity capital each year during the
transitional period by an amount equal to a safe harbour amount. The safe
harbour amount is measured by reference to Newalta's market
capitalization as of the end of trading on October 31, 2006. Newalta's
market capitalization at the close of trading on October 31, 2006 was
$1.218 billion.

The safe harbour for years up to 2011 will be as follows:

-------------------------------------------------------------------------
Time Period Newalta's Annual Remaining Safe Harbour
Safe Harbour Limit ($) Limit Available ($)
-------------------------------------------------------------------------
November 1, 2006 to Dec 31,
2008 730,800 500,445(1)
2009 243,600 243,600
2010 243,600 243,600
-------------------------------------------------------------------------
Total 1,218,000 987,645
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The amount reflects the net effect of gross proceeds raised from the
issuance of trust units issued from treasury as a result of an equity
financing in January 2007 and to finance a portion of the purchase
price of the Nova Pb asset acquisition in October 2007, gross
proceeds from the issue of Debentures, proceeds from the exercise of
rights granted pursuant to the Trust Unit Rights Incentive Plans and
the reinvestment by unitholders of distributions pursuant to the
DRIP. Canada's Department of Finance ("Finance") has not provided
guidance on how units issued as a result of the exercise of TURIPs
are to be handled for the purpose of determining the safe harbour
limit. Therefore, the amount calculated above may be subject to
adjustment upon further clarification from Finance.

In addition, the Fund also has commitments to issue up to 2,732,750 trust
units from treasury in connection with the 2003 and 2006 Trust Unit
Rights Incentive Plans (the "2003 Plan" and the "2006 Plan") as at
June 30, 2008.

NOTE 6. LONG-TERM INCENTIVE PLANS

a) The 2006 Trust Unit Rights Incentive Plan

On March 14, 2008 a total of 630,000 rights were granted to certain
directors, officers and employees of the Corporation. The rights were
granted at the market price of $16.65 per unit. A further 147,500 rights
were granted at an exercise price of $25.19 per unit. On May 15, 2008, an
additional 7,500 rights were granted to an employee at an exercise price
of $25.50. Each tranche of the rights vest over a four year period (with
a five year life), and the holder of the right has the option to exercise
the right for either a unit of the Fund or an amount of cash equal to the
difference between the exercise price and the market price at the time of
exercise. The rights granted under the 2006 Plan have therefore been
accounted for as stock appreciation rights and the total compensation
expense for these rights was $0.3 million for the three and six months
ended June 30, 2008 ($0.0 in 2007).

b) Trust Unit Appreciation Rights

On March 14, 2008, 125,000 trust unit 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 trust
unit appreciation rights were granted to certain employees of the
Corporation at the market price of $16.65. 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 for these rights was $0.3 million
for the three and six months ended June 30, 2008 (nil in 2007).

NOTE 7. EARNINGS PER UNIT

Basic per unit calculations for the three and six months ended June 30,
2008 and 2007 were based on the weighted average number of units
outstanding for the periods. Diluted earnings per unit include the
potential dilution of the outstanding rights to acquire trust units and
Debentures.

The calculation of dilutive earnings per unit does not include anti-
dilutive rights. These rights 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 rights would cause the diluted
earnings per unit to be overstated. The number of excluded rights for the
three and six months ended June 30, 2008 were 1,848,000 and 1,938,000
respectively (731,000 for the three and six months ended June 30, 2007).

The dilutive earnings per unit calculation does not include the impact of
anti-dilutive Debentures. The number of trust units issuable on
conversion of the Debentures excluded for the three and six months ended
June 30, 2008 was 5.0 million (nil for the three and six months ended
June 30, 2007).

Three Months Six Months
(000s) Ended June 30, Ended June 30,
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Weighted average number of units 41,822 40,361 41,683 39,790
Net additional units if rights
exercised 128 201 10 190
Net additional units if
debentures converted - - - -
-------------------------------------------------------------------------
Diluted weighted average number
of units 41,950 40,562 41,693 39,980
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 8. UNITHOLDER DISTRIBUTIONS DECLARED AND PAID

The Fund makes monthly distributions to its holders of trust units.
Determination of the amount of cash distributions for any period is at
the sole discretion of the Board of Trustees of the Fund and is based on
certain criteria including financial performance as well as the projected
liquidity and capital resource position of the Fund. Distributions are
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 is not a business day, the next following business day).

Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Unitholder distributions declared 23,249 22,413 46,326 44,662
per unit - $ 0.555 0.555 1.110 1.110
Unitholder distributions
- paid in cash 20,614 18,983 39,750 37,707
Unitholder distributions
- value paid in units 2,572 3,388 6,468 6,300
paid in cash - per unit $ 0.493 0.470 0.954 0.948
issued units - per unit $ 0.061 0.084 0.155 0.158
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 9. RECONCILIATION OF ASSET RETIREMENT OBLIGATIONS

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

Three Months Six Months
Ended June 30, Ended June 30,
-------------------------------------------------------------------------
2008 2007 2008 2007
-------------------------------------------------------------------------
Asset retirement obligations,
beginning of period 20,835 18,694 20,985 18,484
Additional retirement obligations
added through acquisitions - 56 - 56
Additional retirement obligations
added through development activities - 664 - 664
Additional retirement obligations
added through a change of estimate - 1,182 - 1,182
Expenditures incurred to fulfill
obligations (954) (299) (1,566) (497)
Accretion 462 418 924 826
-------------------------------------------------------------------------
Asset retirement obligations,
end of period 20,343 20,715 20,343 20,715
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 10. DISPOSAL OF CAPITAL ASSETS

During the six months ended June 30, 2008, Newalta disposed of certain
transport vehicles, land and buildings with a net book value of
$5.5 million for proceeds of $6.6 million. The resulting net gain of
$1.1 million is included in amortization and accretion in the
consolidated statement of operations, comprehensive income and retained
earnings.

NOTE 11. 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 first three months of 2008,
management identified a group of transport vehicles 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 $1.0 million ($0.8 million in the
Western segment and $0.2 million in the Eastern segment) is included with
amortization and accretion in the consolidated statements of operations,
comprehensive income and retained earnings.

NOTE 12. TRANSACTIONS WITH RELATED PARTIES

Bennett Jones LLP provides legal services to the Fund. Mr. Vance
Milligan, a Trustee of the Fund, is counsel to Bennett Jones LLP. The
total cost of these legal services during the three and six month period
ended June 30, 2008 was $0.1 million and $0.2 million, respectively
($0.1 million and $0.3 million for the same periods in 2007).

Newalta provides oilfield services to Paramount Resources Ltd., an oil
and gas company. Mr. Clayton Riddell, a Trustee and Chairman of the Board
of the Fund, is Chairman and Chief Executive Officer of Paramount
Resources Ltd. The total revenue for services provided by Newalta to this
entity during the three and six months ended June 30, 2008 were $0.2
million and $0.6 million respectively ($0.2 million and $1.0 million for
the same periods in 2007).

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 13. COMMITMENTS

Letters of Credit and Surety Bonds

At June 30, 2008, Newalta had issued Letters of Credit and Bonds with
respect to compliance with environmental licenses and contracts with
third parties in the amounts of $49.7 million and $12.9 million
respectively.

NOTE 14. 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 convertible debentures. The fair
values of the Fund's financial instruments that are included in the
consolidated balance sheet, with the exception of the convertible
debentures, approximate their recorded amount due to the short term
nature of those instruments for accounts receivable, accounts payable and
accrued liabilities and for senior long-term debt and the note receivable
due to the floating nature of the interest rate. The carrying values of
Newalta's financial instruments at June 30, 2008 are as follows:

-------------------------------------------------------------------------
Total
Held for Loans and Available Other Carrying
trading Receivables for sale Liabilities Value
-------------------------------------------------------------------------
Accounts
receivable - 142,643 - - 142,643
Note
receivable - 1,343 - - 1,343
Accounts
payable and
accrued
liabilities - - - 79,412 79,412
Distributions
payable - - - 7,770 7,770
Senior long-
term debt(1) - - - 255,826 255,826
-------------------------------------------------------------------------
(1) Net of related costs.

The fair value of the convertible debentures is based on the closing
trading price on the TSX as follows:

-------------------------------------------------------------------------
June 30, 2008
Carrying Quoted
value(1) fair value
-------------------------------------------------------------------------
7% Convertible debentures due November 30, 2012 110,680 115,000
-------------------------------------------------------------------------
(1) Includes both the debt and equity portions.

Financial Instrument Risk Management

Credit risk

The Fund is subject to risk from its trade accounts receivables balances.
The customer base is large and diverse and no single customer balance
exceeds 9% of total accounts receivable. The Fund views the credit risks
on these amounts as normal for the industry. Credit risk is minimized by
the Fund'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 Fund's trade
receivable balance, are receivables totalling $13.9 million which are
considered to be outstanding beyond normal repayment terms at June 30,
2008. A provision of $1.8 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. The Fund does not hold any
collateral over these balances.

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

June December June December June December
30, 31, 30, 31, 30, 31,
2008 2007 2008 2007 2008 2007
-------------------------------------------------------------------------
Current 66,187 63,680 - - 66,187 63,680
31-60 days 22,510 29,860 5 - 22,505 29,860
61-90 days 7,946 10,338 50 16 7,896 10,322
91 days + 13,898 22,511 1,721 2,247 12,177 20,264
-------------------------------------------------------------------------
Total 110,541 126,389 1,776 2,263 108,765 124,126
-------------------------------------------------------------------------

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
-------------------------------------------------------------------------
Balance, December 31, 2007 2,263
Additional amounts provided for 686
Amounts written off as uncollectible (1,215)
Amounts recovered during the period 42
-------------------------------------------------------------------------
Balance, June 30, 2008 1,776
-------------------------------------------------------------------------

Liquidity risk

Ultimate responsibility for liquidity risk management rests with the
Board of Trustees of the Fund, which has built an appropriate liquidity
risk management framework for the management of the Fund'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 convertible debentures have a
fixed interest rate until November 30, 2012, at which point, any
remaining convertible debentures will need to be repaid or refinanced.
The table below provides an interest rate sensitivity analysis for the
three and six months ended June 30, 2008:


Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If interest rates increased by
1% with all other variables
held constant (428) (895)
-------------------------------------------------------------------------

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.
Components of market risk to which we are exposed are discussed below:

Foreign exchange 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 June 30, 2008:

-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If the value of the U.S. dollar increased by $0.01
with all other variables held constant (170)
-------------------------------------------------------------------------


NOTE 15. SEGMENTED INFORMATION

The Fund 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 abandonment and
remediation services, 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 the Fund.


For the Three Months Ended June 30, 2008

Consol-
Inter- Unalloc- idated
Western Eastern segment ated(3) Total
-------------------------------------------------------------------------
External revenue 83,528 59,372 - 39 142,939
Inter segment revenue(1) 240 - (240) - -
Operating expense 56,044 44,452 (240) - 100,256
Amortization and
accretion expense 5,699 3,758 - 2,214 11,671
-------------------------------------------------------------------------
Net margin 22,025 11,162 - (2,175) 31,012
Selling, general and
administrative - - - 16,071 16,071
Finance charges - - - 5,648 5,648
-------------------------------------------------------------------------
Operating income 22,025 11,162 - (23,894) 9,293
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 9,834 10,068 - 3,560 23,462
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 552,672 424,167 - 54,462 1,031,301
-------------------------------------------------------------------------
-------------------------------------------------------------------------



For the Three Months Ended June 30, 2007

Consol-
Inter- Unalloc- idated
Western Eastern segment ated(3) Total
-------------------------------------------------------------------------
External revenue 75,201 36,304 - 89 111,594
Inter segment revenue(1) 433 - (433) - -
Operating expense 55,593 27,828 (433) - 82,988
Amortization and
accretion expense 4,292 4,016 - 872 9,180
-------------------------------------------------------------------------
Net margin 15,749 4,460 - (783) 19,426
Selling, general and
administrative - - - 13,006 13,006
Finance charges - - - 2,632 2,632
-------------------------------------------------------------------------
Operating income 15,749 4,460 - (16,421) 3,788
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 16,911 27,496 - 5,970 50,377
-------------------------------------------------------------------------
Goodwill 57,661 41,317 - - 98,978
-------------------------------------------------------------------------
Total assets 541,300 278,590 - 49,476 869,366
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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 Six Months Ended June 30, 2008

Consol-
Inter- Unalloc- idated
Western Eastern segment ated(3) Total
-------------------------------------------------------------------------
External revenue 177,501 115,534 - 80 293,115
Inter segment revenue(1) 541 - (541) - -
Operating expense 115,180 87,386 (541) - 202,025
Amortization and
accretion expense 11,360 7,568 - 4,115 23,043
-------------------------------------------------------------------------
Net margin 51,502 20,580 - (4,035) 68,047
Selling, general
and administrative - - - 30,298 30,298
Finance charges - - - 11,914 11,914
-------------------------------------------------------------------------
Operating income 51,502 20,580 - (46,247) 25,835
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 17,257 16,334 - 7,844 41,435
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 552,672 424,167 - 54,462 1,031,301
-------------------------------------------------------------------------
-------------------------------------------------------------------------



For the Six Months Ended June 30, 2007

Consol-
Inter- Unalloc- idated
Western Eastern segment ated(3) Total
-------------------------------------------------------------------------
External revenue 163,906 64,912 - 613 229,431
Inter segment revenue(1) 433 - (433) - -
Operating expense 112,780 50,155 (433) - 162,502
Amortization and
accretion expense 9,425 7,463 - 2,125 19,013
-------------------------------------------------------------------------
Net margin 42,134 7,294 - (1,512) 47,916
Selling, general
and administrative - - - 25,525 25,525
Finance charges - - - 4,938 4,938
-------------------------------------------------------------------------
Operating income 42,134 7,294 - (31,975) 17,453
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 23,072 32,887 - 9,279 65,238
-------------------------------------------------------------------------
Goodwill 57,661 41,317 - - 98,978
-------------------------------------------------------------------------
Total assets 541,300 278,590 - 49,476 869,366
-------------------------------------------------------------------------
-------------------------------------------------------------------------

(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

  • Ron Sifton
    Executive Vice-President
    Phone: (403) 806-7020;

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