Newalta Corporation
TSX : NAL

Newalta Corporation

May 06, 2008 18:00 ET

Newalta Income Fund Announces Strong First Quarter Results


CALGARY, ALBERTA--(Marketwire – May 6, 2008) - Newalta Income Fund ("Newalta" or the "Fund")
today announced consolidated financial results for the three months ended March 31, 2008.

"Newalta delivered strong results with revenue up 27% and EBITDA up 35%,
despite challenging market conditions with reduced drilling in western Canada
and difficult winter weather in eastern Canada," said Al Cadotte, Newalta's
President and Chief Executive Officer. "We capitalized on strong crude oil and
lead prices and we successfully expanded our U.S. drill site business as well
as our SAGD centrifugation services in Canada. Initiatives to improve
productivity are also gaining traction.
"Our outlook for the remainder of the year is very positive. Higher
natural gas prices are anticipated to drive increased drilling in the second
half while commodity prices are expected to remain strong. We will continue to
exploit growth opportunities in U.S. drill site, SAGD centrifugation services,
the development of our national onsite operations, and we will maintain our
focus on improving the productivity of our existing operations.
"With four areas of growth opportunities, we are well positioned to
continue to deliver dynamic growth and superior returns to our investors for
many years."

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

- Revenue increased 27% to $150.2 million compared with the same period
in 2007, mostly due to acquisitions in eastern Canada completed in
2007.

- Net earnings of $19.3 million and EBITDA(1) of $34.1 million
increased 49% and 35%, respectively, compared with 2007.

- Funds from operations(1) increased by 21% over the first quarter last
year to $27.2 million and cash from operating activities increased by
266% to $8.7 million.

- Cash distributed(1) as a percentage of funds from operations
decreased to 70% compared with 83% in the first quarter of 2007 (94%
for the year ended December 31, 2007), confirming our decision to
maintain distributions at $0.185 per unit per month and also
highlighting the improved stability of our cash flow with the
successful diversification of our operations into eastern Canada.

- In the Western division ("Western"), revenue and net margin(1)
increased 6% and 12%, respectively, compared to the same period in
2007. Record high crude oil prices combined with increased waste
receipts drove higher crude oil recoveries and crude oil sales. The
successful expansion of our U.S. Drill Site services and SAGD and
other onsite projects also contributed to the improved results in
Western.

- The Eastern division's ("Eastern") first quarter produced revenue and
net margin increases of 96% and 232%, respectively, primarily due to
contributions from acquisitions completed in 2007. Strong lead prices
combined with full capacity throughput produced excellent results
from our lead-acid battery recycling operation, the effect of which
was reduced by the severe winter weather that impacted event-based
waste receipts at the Stoney Creek landfill.

- SG&A expense in the first quarter was 9.5% of revenue at $14.2
million, compared to 10.6% last year. The $14.2 million expense
includes a $0.6 million foreign exchange gain. After removing the
effect of the foreign exchange gain, SG&A for the first quarter of
2008 was 9.9% of revenue. Management's objective for SG&A remains to
maintain these expenses at 10%, or less, of revenue for the year.

- Maintenance capital expenditures(1) in the quarter were $1.2 million
or 71% higher than the first quarter in 2007. Growth capital
expenditures in the quarter were $16.7 million compared to $14.1
million in 2007.

- Initiatives to improve productivity by selling idle or redundant
assets in the first quarter resulted in proceeds of $4.5
million.

- Newalta's balance sheet remains strong with a funded debt to EBITDA
ratio of 2.17:1 and working capital of 2.09:1. As at March 31, 2008,
Newalta's unused capacity on its credit facility was approximately
$146.0 million, net of outstanding letters of credit in the amount of
$40.1 million.

- On a trailing twelve-month basis at March 31, 2008, the three-year
average return on capital(1) was 18% compared to the three year
average of 27% for the same period in 2007. The decrease is primarily
attributable to the effects of the decline in the natural gas
drilling market and the impact of acquisitions which have not fully
contributed to EBITDA.



FINANCIAL RESULTS AND HIGHLIGHTS

-------------------------------------------------------------------------
%
($000s except per unit data) Increase
(unaudited) Q1 2008 Q1 2007 (Decrease)
-------------------------------------------------------------------------
Revenue 150,176 117,837 27
Net earnings 19,304 12,966 49
per unit ($), basic 0.47 0.33 42
per unit ($), diluted 0.46 0.33 39
EBITDA(1) 34,139 25,280 35
Trailing 12 month EBITDA 105,087 115,832 (9)
Funds from operations(1) 27,167 22,499 21
per unit ($) 0.65 0.57 14
Maintenance capital expenditures(1) 1,249 731 71
Distributions declared 23,077 22,249 4
per unit - ($) 0.56 0.56 -
Cash distributed(1) 19,136 18,724 2
Growth and acquisition capital
expenditures 16,724 14,130 18
Weighted average units outstanding
(000s) 41,543 39,209 6
Total units outstanding (000s) 41,660 40,261 3
Trust Unit trading price - high 19.84 28.25 (30)
Trust Unit trading price - low 14.21 24.19 (41)
Average daily trust unit trading
volume 141,010 130,232 8
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) These financial measures do not have any standardized meaning
prescribed by Canadian generally accepted accounting principles
("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 Wednesday, May 7, 2008 at 11:00
a.m. (EST) to discuss the Fund's performance for the first quarter of 2008. To
participate in the teleconference, please call 416-644-3430 or
1-800-814- 4860. 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
Wednesday, May 14, 2008, by dialling 416-640-1917 or 1-877-289-8525 and using
the pass code 21270563 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 Months Ended March 31, 2008 and 2007

Certain statements contained in this document constitute "forward-looking
statements". When used in this document, the words "may", "would", "could",
"will", "intend", "plan", "anticipate", "believe", "estimate", "expect", and
similar expressions, as they relate to Newalta 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 ("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) Q1 2008 Q1 2007
-------------------------------------------------------------------------
Distributions declared 23,077 22,249
Add:
Opening distributions payable 7,662 6,834
Less:
Ending distributions payable (7,707) (7,448)
Distributions reinvested through DRIP (3,896) (8,911)
-------------------------------------------------------------------------
Cash distributed 19,136 18,724
-------------------------------------------------------------------------
-------------------------------------------------------------------------

"Combined divisional net margin" is used by management to analyze
combined divisional operating performance. Combined divisional net margin as
presented is not intended to represent operating income nor should it be
viewed as an alternative to net earnings or other measures of financial
performance calculated in accordance with GAAP. Combined divisional net margin
is calculated from the segmented information contained in the notes to the
consolidated financial statements and is defined as revenue less operating and
amortization and accretion expenses for both 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 Fund'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) Q1 2008 Q1 2007
-------------------------------------------------------------------------
Net earnings 19,304 12,966
Add back (deduct):
Current income taxes 236 202
Future income taxes (2,998) 497
Interest expense 6,266 2,306
Interest revenue (41) (524)
Amortization and accretion 11,372 9,833
-------------------------------------------------------------------------
EBITDA 34,139 25,280
-------------------------------------------------------------------------
-------------------------------------------------------------------------

"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) Q1 2008 Q1 2007
-------------------------------------------------------------------------
Cash from operating activities 8,745 (5,271)
Add back (deduct):
Changes in working capital 17,810 27,572
Asset retirement costs incurred 612 198
-------------------------------------------------------------------------
Funds from operations 27,167 22,499
-------------------------------------------------------------------------
-------------------------------------------------------------------------

"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 GAAP. The closest 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 months ended March 31, 2008, (ii) the consolidated financial
statements of the Fund and notes thereto and Management's Discussion and
Analysis of the Fund for the year ended December 31, 2007, (iii) the most
recently filed Annual Information Form of 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 months ended March 31,
2007. Information for the three months ended March 31, 2008, along with
comparative information for 2007, is provided.
This Management's Discussion and Analysis ("MD&A") is dated May 5, 2008
and takes into consideration information available up to that date.

OVERALL PERFORMANCE

First quarter revenue, net earnings and EBITDA improved by 27%, 49% and
35%, respectively, compared to the same period in 2007 despite difficult
market conditions across Canada. Our strategy to diversify earnings through
acquisitions completed in eastern Canada contributed to the majority of the
increase in revenue and EBITDA. The gains from these acquisitions were reduced
by severe winter weather in eastern Canada which hindered activity, especially
receipts from event-based work at the Stoney Creek landfill.
Western operations continued to be affected by reduced drilling activity
in western Canada. However, the increase in crude oil prices year-over-year
led to increased crude oil sales, and increased waste receipts drove higher
volumes of recovered crude oil which contributed to an overall increase in
Western's revenue and net margin.
Corporately, SG&A expense decreased as a percentage of revenue from 10.6%
in 2007 to 9.5% in 2008 (9.9% after removing the effect of a foreign exchange
gain). We also initiated a program to identify and sell redundant or idle
assets generating proceeds of $4.5 million to date and maintained a strong
balance sheet with a Funded Debt to EBITDA ratio of 2.17:1. Overall, the
improved performance both operationally and corporately reduced cash
distributed as a percentage of funds from operations to 70% compared to 83% in
the same period in 2007 (94% for the year ended December 31, 2007), consistent
with our decision to maintain the level of distributions.
We expect an increase in drilling activity in the second half of 2008
which is anticipated to positively affect results for the balance of 2008. The
changing horizon for drilling activity in western Canada is due to a cold
winter primarily in eastern North America, which left North American storage
levels below the five-year average heading into the natural gas injection
season. The lower than average storage levels are anticipated to lead to
bullish activity for natural gas prices, which in turn is expected to lead to
greater drilling activity. As a result, the Petroleum Services Association of
Canada ("PSAC") has revised its forecast for the 2008 total wells drilled
upward by approximately 14%.

RESULTS OF OPERATIONS

Western

Continued weakness in natural gas drilling in western Canada was offset
by higher crude oil prices and volumes recovered in combination with better
utilization of our Drill Site equipment through redeployment to the U.S.
Western's net margin for the first three months of 2008 increased by 12% to
$29.5 million despite a decrease in the number of wells drilled and completed
by 15% and 24%, respectively, when compared to the first quarter of 2007.
Service rig utilization rates, which affect waste volumes received at our
fixed facility network, were also down to 63% from 73% last year.
The following table compares Western's first quarter of 2008 results to
the first quarter of 2007:

-------------------------------------------------------------------------
($000s) Q1 2008 Q1 2007 % Change
-------------------------------------------------------------------------
Revenue - external 93,973 88,705 6
Revenue - internal 301 - N/A
Operating costs 59,136 57,187 3
Amortization and accretion 5,661 5,133 10
-------------------------------------------------------------------------
Net margin 29,477 26,385 12
-------------------------------------------------------------------------
Net margin as % of revenue 31 30 3
-------------------------------------------------------------------------
Maintenance capital 1,060 491 116
-------------------------------------------------------------------------
Growth capital 6,363 5,670 12
-------------------------------------------------------------------------
-------------------------------------------------------------------------

In the first quarter, consistent with the diversification in eastern
Canada, we saw a decrease in Western's relative contribution to total assets,
revenue and combined divisional net margin to 54%, 63% and 76%, respectively,
compared with 65%, 75% and 90%, respectively, for the same period in 2007. The
Oilfield business unit contributed approximately 59% of Western's total
year-to-date revenue with Drill Site and Industrial contributing approximately
16% and 25%, respectively. Overall net margin as a percentage of revenue
remained flat compared to the same period in 2007.
The Oilfield business unit's performance improved significantly over the
first quarter of 2007 driven primarily by increased crude oil sales and crude
oil recovered. Newalta's portion of recovered crude oil increased by 30% in
2008 and prices increased by 40%. The increase in recovered crude oil was
driven by higher heavy oil waste receipts. The receipt of these waste streams
also increased the total waste processing volumes received at our fixed
facility network, offsetting the impact of the decrease in service rig
utilization rates and the number of wells drilled and completed. Onsite
services also saw a boost in revenue in the first three months of 2008
compared to the same period in 2007 due to our increased focus on the use of
centrifugation technology for SAGD customers and other industrial onsite
projects.
Drill Site's performance was flat year-over-year, as gains made from the
increase in equipment deployed to the U.S. were offset by lower well
abandonment services provided in Canada. As reflected by the table below,
despite an overall decrease in the number of CAODC rigs in use for the first
quarter of 2008 in western Canada, we saw increased equipment usage in Canada.
The table below reflects the changes in the Drill Site business unit's rental
equipment-in-use compared to the drilling activity in western Canada derived
from information posted by the Canadian Association of Oilwell Drilling
Contractors (CAODC) for the current quarter compared to the first quarter of
2007:

-------------------------------------------------------------------------
Q1 2008 Q1 2007 % Change
-------------------------------------------------------------------------
CAODC Average Drilling rigs in use
Drilling rigs - western Canada 667 767 (13)
-------------------------------------------------------------------------
Newalta Average Drill Site
equipment-in-use
Equipment in Canada 37 35 6
Equipment in the U.S. 30 5 500
-------------------------------------------------------------------------
Average Drill Site rental 67 40 68
equipment-in-use
-------------------------------------------------------------------------
Average Drill Site rental
equipment available 141 129(A) 9
-------------------------------------------------------------------------
(A) Previous disclosure for Q1 2007 used period end information for the
total fleet size.

Activity levels and performance in the Industrial business unit were
consistent with last year's first quarter. Revenue remained flat as volumes
and prices were consistent with the first quarter of 2007.
Maintenance capital expenditures increased marginally by $0.5 million
when compared with the first quarter of 2007. Growth capital of $6.4 million
increased by $0.7 million and consisted primarily of progress payments to
increase our fleet of centrifuges for both Drill Site and SAGD onsite services
as well as productivity improvements to existing Oilfield facilities. As
discussed in our MD&A for the year ended December 31, 2007, our plan for
growth capital expenditures is to spend approximately 70% in the second half
of 2008.

Eastern

Challenging weather throughout eastern Canada restricted activities while
high lead prices boosted the profitability of the lead-acid battery recycling
operations. Generally the facilities performed well in the first quarter while
the Stoney Creek landfill event-based waste receipts were significantly
reduced. The average London Metals Exchange (LME) lead price was $1.31U.S/lb
for the first quarter of 2008. In the first quarter, Eastern's contribution to
total assets, revenue and combined divisional net margin each increased to
39%, 37% and 24%, respectively, compared with 29%, 24% and 10% respectively,
in the same period in 2007.
The following table compares Eastern's first quarter of 2008 results to
the first quarter of 2007:

-------------------------------------------------------------------------
($000s) Q1 2008 Q1 2007 % Change
-------------------------------------------------------------------------
Revenue - external 56,162 28,608 96
Revenue - internal - - -
Operating costs 42,934 22,327 92
Amortization and accretion 3,810 3,447 11
-------------------------------------------------------------------------
Net margin 9,418 2,834 232
-------------------------------------------------------------------------
Net margin as % of revenue 17 10 70
-------------------------------------------------------------------------
Maintenance capital 161 198 (19)
-------------------------------------------------------------------------
Growth capital 6,106 5,193 18
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The performance of Eastern in the first quarter was consistent with
market and weather conditions. Typically the first quarter is the weakest
quarter for Eastern because colder weather restricts the ability to transport
aqueous wastes and to perform onsite work. However, the acquisition of the
lead-acid battery facility is anticipated to reduce this impact since the
recycling of lead-acid batteries and the price of lead aren't generally
affected by seasonality. For the quarter, revenue was up 96% and net margin
increased 232%. The increases were driven entirely by the strong results of
the lead-acid battery facility and acquisitions completed in 2007.
The Québec/Atlantic Canada business unit produced excellent results for
the first quarter due to the contributions of the lead-acid battery operations
and solid performance from fixed facilities. The lead-acid battery facility
generates two types of revenue: direct lead sales and tolling which
historically contributed evenly to production. Direct lead sales occur where
we purchase the feedstock and take on the price risk of lead and the recycled
finished product is sold at current market prices adjusted for quality.
Tolling is a processing fee charged to customers for recycling the lead-acid
batteries into recycled lead where the customer provides and retains ownership
of the battery feedstock and the processing fees are fixed. The total recycled
lead produced during the quarter was 10.7 thousand tonnes of which 67% related
to direct lead sales and the balance was produced under tolling contracts. The
kiln operated at full capacity for 83 days in the quarter. Performance from
other facilities in Québec/Atlantic Canada performed in line with management's
expectations.
The Ontario business unit's facility network processed increased volumes
at higher prices compared to the first quarter of 2007 while event-based waste
receipts at the Stoney Creek landfill were down significantly due to severe
winter weather. As disclosed in our MD&A for the year ended December 31, 2007,
event-based business represents approximately 45% of the landfill's waste
receipts and will vary significantly from quarter to quarter. Compared to the
first quarter of 2007, waste receipts at the landfill decreased by 34% which
was offset by an increase in waste receipts at Ontario facilities network
supported by a 3% increase in average prices. In the first quarter of 2008,
vehicle utilization also increased to 49% from 42%.
Maintenance capital expenditures for the quarter was minimal at only
$0.2 million consistent with the prior year. Growth capital of $6.1 million
increased by $0.9 million compared to the same period in 2007 and was mainly
invested in productivity improvements at facilities in Ontario and Québec. As
discussed in our MD&A for the year ended December 31, 2007, our plan for
growth capital expenditures is to spend approximately 70% in the second half
of 2008, and our spending in the first quarter of 2007 continues to support
this. Eastern's capital expenditures will include approximately $10.0 million
to put the second kiln of the lead-acid battery recycling facility back into
operation. Sufficient market demand exists to justify the economics of this
project.

Outlook

The outlook for the remainder of the year is very positive. Higher
natural gas prices are anticipated to drive increased drilling in the second
half of the year while crude oil and lead prices are anticipated to remain
strong. This is supported by the revised PSAC forecast of the number of wells
to be drilled in 2008, which was increased by approximately 14%. 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. We will maintain our focus on improving the productivity of
our existing operations. In addition, we have determined there is sufficient
market demand to justify the investment to restart the second kiln at our
lead-acid battery recycling facility which is anticipated to be operational in
the first quarter of 2009.
As disclosed in our MD&A for the year ended December 31, 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.

CORPORATE AND OTHER

-------------------------------------------------------------------------
($000s) Q1 2008 Q1 2007 % Change
-------------------------------------------------------------------------
Selling, general and administrative
expenses 14,227 12,519 14
as a % of revenue 9.5 10.6 (10)
Amortization and accretion 11,372 9,833 16
as a % of revenue 7.6 8.3 (9)
-------------------------------------------------------------------------

The increase in selling, general and administrative ("SG&A") expense is
attributable to increased staff to support the growth of the business compared
to the first quarter of 2007. SG&A includes a net $0.6 million foreign
exchange gain, which 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. If the effect of this foreign exchange
gain were removed, then SG&A would have been 9.9% of revenue which is in line
with our objective to maintain these expenses at 10%, or less, of revenue for
the year.
The increase in amortization was attributable to recent acquisitions and
growth capital expenditures. As a percentage of revenue, amortization and
accretion have 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. In 2008, management is focusing on
consolidating operations and identifying and disposing of these redundant and
idle assets. In the first quarter, redundant assets were sold for total
proceeds of $4.5 million and a net gain of approximately $0.9 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.

-------------------------------------------------------------------------
($000s) Q1 2008 Q1 2007 % Change
-------------------------------------------------------------------------
Bank fees and interest 3,948 2,306 71
Convertible debentures interest and
accretion 2,318 - n/a
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Finance charges 6,266 2,306 172
-------------------------------------------------------------------------
-------------------------------------------------------------------------

The increase in interest expense for the three months ended March 31,
2008 compared to the same period in 2007 was due to an increase in the average
senior debt level. In addition, we issued $115.0 million in convertible
debentures ("Debentures") in November 2007. At March 31, 2008, senior
long-term debt was $238.0 million compared with $146.1 million at March 31,
2007. The increase in the average debt level is due to acquisitions and growth
capital expenditures completed in 2007. Since December 31, 2007, senior
long-term debt has increased by $31.0 million which was mainly attributable to
an increase in working capital and the funding of growth capital.

-------------------------------------------------------------------------
($000s) Q1 2008 Q1 2007 % Change
-------------------------------------------------------------------------
Current tax 236 202 17
Future income tax (2,998) 497 (703)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Provision for (recovery of) income taxes (2,762) 699 (495)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

Current tax expense for the quarter was consistent with the provision
compared to the prior year. The future income tax recovery for 2008 versus a
future income tax expense in 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 in the corporate structure. 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 May 5, 2008, the Fund had 41,708,571 trust units outstanding,
outstanding rights to acquire up to 2,942,925 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
-------------------------------------------------------------------------
($000s except per unit
data) Q1 Q4 Q3 Q2 Q1
------------------------------------------------------------------------
Revenue 150,176 137,075 133,358 111,594 117,837
------------------------------------------------------------------------
Operating income 16,542 7,784 14,524 3,799 13,665
------------------------------------------------------------------------
Net earnings 19,304 23,613 17,893 6,716 12,966
Continuing Operations 19,304 23,613 17,893 6,716 12,966
Discontinued Operations - - - - -
------------------------------------------------------------------------
Earnings per unit ($) 0.47 0.57 0.44 0.17 0.33
Continuing Operations 0.47 0.57 0.44 0.17 0.33
Discontinued Operations - - - - -
Diluted earnings per unit ($) 0.46 0.54 0.43 0.16 0.33
Continuing Operations 0.46 0.54 0.43 0.16 0.33
Discontinued Operations - - - - -
-------------------------------------------------------------------------
Weighted average units -
basic 41,543 41,191 40,579 40,361 39,209
-------------------------------------------------------------------------
Weighted average units -
diluted 41,635 43,779 40,725 40,562 39,445
-------------------------------------------------------------------------
-------------------------------------------------------------------------


(unaudited) 2006
-------------------------------------------------------
($000s except per unit
data) Q4 Q3 Q2
-------------------------------------------------------
Revenue 122,498 120,297 96,082
-------------------------------------------------------
Operating income 16,209 24,846 14,363
-------------------------------------------------------
Net earnings 15,356 20,136 22,685
Continuing Operations 15,528 20,136 21,213
Discontinued Operations (172) - 1,472
-------------------------------------------------------
Earnings per unit ($) 0.42 0.55 0.62
Continuing Operations 0.42 0.55 0.58
Discontinued Operations (0.00) - 0.04
Diluted earnings per unit
($) 0.41 0.54 0.61
Continuing Operations 0.41 0.54 0.57
Discontinued Operations (0.00) - 0.04
-------------------------------------------------------
Weighted average units -
basic 36,860 36,734 36,381
-------------------------------------------------------
Weighted average units -
diluted 37,282 37,279 37,000
-------------------------------------------------------
-------------------------------------------------------

Quarterly performance is affected by seasonal variation as described
below. However, in the past eight quarters this is difficult to quantify due
to the aggressive acquisition and internal growth capital program pursued by
Newalta during that time. In 2006, revenue does not appear to reflect seasonal
trends because we acquired four businesses in the last four months of 2006
which contributed to higher revenue in the fourth quarter compared to our
seasonally stronger Q3. Net earnings in Q2 of 2006 were positively impacted by
an $8.7 million recovery of future income taxes due to the reduction in future
federal and provincial income tax rates. Net earnings for the third quarter
were improved over the second quarter once the effect of the future income tax
recovery is removed from the second quarter results. The fourth quarter of
2006 saw a decrease in net earnings 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. The increase in the weighted average
number of trust units in the second quarter was mainly attributable to the
7.0 million trust units issued as a result of the equity financing completed
in March 2006.
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
the first quarter which continued in the second quarter. 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 the third quarter 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. Fourth quarter operating income in 2007 was lower than third
quarter 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
revenue gains. Net earnings 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, revenue, operating income and net earnings gains compared to Q1
2007 are mainly due to a full quarter of contribution from acquisitions,
higher crude oil sales for Western and a $3.0 million future income tax
recovery.

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. Each of the Western and Eastern division is affected differently
based on the types of services that are provided. The following seasonality
descriptions provide the typical quarterly fluctuations in operating results
in the absence of growth and acquisition capital.
For Western, the frozen ground during the winter months 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. 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-acid battery 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
been: 20-24% in the first quarter, approximately 24% in the second quarter,
24-29% in the third quarter and approximately 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) March December
31, 2008 31, 2007
-------------------------------------------------------------------------
Working capital 100,362 74,529
-------------------------------------------------------------------------
Use of credit facility:

Senior long-term debt (before related costs) 238,445 207,417
Letters of credit 40,135 40,095
-------------------------------------------------------------------------
Funded senior debt A 278,580 247,512
Unused credit facility capacity 146,420 177,488
-------------------------------------------------------------------------
Debentures B 115,000 115,000
-------------------------------------------------------------------------
Total Debt 393,580 362,512
= A + B
-------------------------------------------------------------------------

The Fund's net working capital was $100.4 million at March 31, 2008
compared with $74.5 million at December 31, 2007. At current activity levels,
working capital of $100.4 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-acid battery 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 March 31, 2008 reflected that Newalta had
sufficient current assets to cover its current liabilities by 2.09 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 largely 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 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 March 31,
2008, letters of credit and bonds issued as financial security to third
parties totalled $52.2 million. Of this amount, $40.1 million is committed on
the Credit Facility which provides for $60.0 million in letters of credit.
Bonds, if less than $25 million in total, are not required to be offset
against the borrowing amount available under the Credit Facility.
At March 31, 2008, Newalta had funded senior debt of $278.6 million,
compared to $247.5 million at December 31, 2007, an increase of $31.1 million.
The increase was primarily due to growth capital funding requirements and an
increase in working capital requirements.
Newalta is restricted from declaring distributions and distributing cash
if the Corporation is in breach of the covenants under its credit facility.
Financial performance relative to the financial ratio covenants under the
current Credit Facility is reflected in the table below:

-------------------------------------------------------------------------
March 31, 2008 Threshold
-------------------------------------------------------------------------
Current Ratio(1) 2.09:1 1.20:1 minimum
Funded Debt to EBITDA(2) 2.17:1 3.00:1 maximum(3)
Fixed Charge Coverage Ratio(4) 1.12:1 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

Debentures were issued in November 2007 which mature on November 30, 2012
and bear an interest rate of 7% that is 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 during the three month
period ended March 31, 2008.

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) Q1 2008 Q1 2007
-------------------------------------------------------------------------
Growth capital 16,724 14,130
Acquisitions - -
-------------------------------------------------------------------------
Total growth capital and acquisitions 16,724 14,130
Maintenance capital expenditures 1,249 731
-------------------------------------------------------------------------
Total capital expenditures(1) 17,973 14,861
-------------------------------------------------------------------------
(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.
Of this amount, $90.0 million will be directed towards operations 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:

-------------------------------------------------------------------------
Approximate
% of growth
Division capital(1) Use of funds
-------------------------------------------------------------------------
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-acid battery recycling facility.
-------------------------------------------------------------------------
Western 30% Investments in mobile equipment to support
onsite services for SAGD customers and U.S.
markets.
-------------------------------------------------------------------------
(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 March 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 quarter trend.
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:

-------------------------------------------------------------------------
($000s) Fiscal Fiscal Fiscal
Q1 2008 Q1 2007 2007 2006 2005
-------------------------------------------------------------------------
Cash flow generated
from operating
activities 8,745 (5,271) 54,058 111,963 71,732
Distributions declared (23,077) (22,249) (90,117) (75,923) (49,602)
-------------------------------------------------------------------------
Cash excess (shortfall) (14,332) (27,520) (36,059) 36,040 22,130
-------------------------------------------------------------------------

Net earnings 19,304 12,966 61,189 75,565 46,978
Distributions declared (23,077) (22,249) (90,117) (75,923) (49,602)
-------------------------------------------------------------------------
Net earnings (shortfall)
excess (3,773) (9,283) (28,928) (358) (2,624)
-------------------------------------------------------------------------
-------------------------------------------------------------------------

First quarter 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.
Based on this analysis, management does not believe that the shortfalls in the
table above have resulted in an economic return of capital.
Distributions declared 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
working capital requirements of $17.5 million in the first quarter of 2008. In
addition, the calculation above does not include proceeds from the Fund's
Distribution Reinvestment Plan ("DRIP") which produced $3.9 million in
distributions that were reinvested by unitholders year to date and cash
proceeds received through the sale of redundant assets of $4.5 million. The
net earnings shortfall is mainly attributable to amortization and accretion
expense, a non-cash expense, of $11.4 million. 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.

Contractual Obligations

For the three month period ended March 31, 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 months ended March 31, 2008 was
$0.1 million ($0.2 million for the same period 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 for the
quarter ended March 31, 2008 was $0.4 million ($0.8 million for the same
period 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-acid battery 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 has been about
equal 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 first three 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 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 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 and 2008 Plans 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
March 31, 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.

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 first three
months of 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 12 to the interim consolidated financial statements for
March 31, 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 4 to the interim consolidated
financial statements for March 31, 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. An exposure draft with the IFRS was issued in
April 2008 with comments required by July 31, 2008. At this stage management
is completing initial scoping of this project to determine the significant
areas which will affect Newalta's financial statements and related disclosure.

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 March 31, 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

March December
($000s) (unaudited) 31, 2008 31, 2007
-------------------------------------------------------------------------
Assets

Current assets
Accounts receivable 157,228 159,749
Inventories 29,860 24,122
Prepaid expenses and other 5,012 6,129
-------------------------------------------------------------------------
192,100 190,000
Note receivable 1,410 1,424
Capital assets 664,923 661,605
Intangible assets 66,076 66,855
Goodwill 103,597 103,597
-------------------------------------------------------------------------
1,028,106 1,023,481
-------------------------------------------------------------------------
Liabilities

Current liabilities
Accounts payable and accrued liabilities 84,031 107,809
Distributions payable 7,707 7,662
-------------------------------------------------------------------------
91,738 115,471
Long-term debt (Note 2) 237,976 206,940
Convertible debentures - debt portion 108,576 108,336
Future income taxes 46,842 49,840
Asset retirement obligations (Note 8) 20,835 20,985
-------------------------------------------------------------------------
505,967 501,572
-------------------------------------------------------------------------
Unitholders' Equity

Unitholders' capital (Note 3) 499,992 496,027
Convertible debentures - equity portion 1,850 1,850
Contributed surplus 1,130 1,092
Retained earnings 19,167 22,940
-------------------------------------------------------------------------
522,139 521,909
-------------------------------------------------------------------------
1,028,106 1,023,481
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Consolidated Statements of Operations,
Comprehensive Income and Retained Earnings

For the Three Months
Ended March 31,
($000s except per unit data) (unaudited) 2008 2007
-------------------------------------------------------------------------
Revenue 150,176 117,837
Expenses
Operating 101,769 79,514
Selling, general and administrative 14,227 12,519
Finance charges 6,266 2,306
Amortization and accretion 11,372 9,833
-------------------------------------------------------------------------
133,634 104,172
-------------------------------------------------------------------------
Earnings before taxes 16,542 13,665
Provision for (recovery of) income taxes
Current 236 202
Future (2,998) 497
-------------------------------------------------------------------------
(2,762) 699
-------------------------------------------------------------------------
Net earnings and comprehensive income 19,304 12,966
Retained earnings, beginning of period 22,940 51,868
Distributions (Note 7) (23,077) (22,249)
-------------------------------------------------------------------------
Retained earnings, end of period 19,167 42,585
-------------------------------------------------------------------------

-------------------------------------------------------------------------
Net earnings per unit (Note 6) 0.47 0.33
-------------------------------------------------------------------------
Diluted earnings per unit (Note 6) 0.46 0.33
-------------------------------------------------------------------------
-------------------------------------------------------------------------


Consolidated Statements of Cash Flows

For the Three Months
Ended March 31,
($000s) (unaudited) 2008 2007
-------------------------------------------------------------------------
Net inflow (outflow) of cash related to the
following activities:

Operating Activities

Net earnings 19,304 12,966
Items not requiring cash:
Amortization and accretion 11,372 9,833
Future income taxes (recovery) (2,998) 497
Other (511) (797)
-------------------------------------------------------------------------
27,167 22,499
Increase in non-cash working capital (17,810) (27,572)
Asset retirement expenditures incurred (612) (198)
-------------------------------------------------------------------------
8,745 (5,271)
-------------------------------------------------------------------------
Investing Activities

Additions to capital assets (25,157) (32,369)
Net proceeds on sale of capital assets 4,460 61
-------------------------------------------------------------------------
(20,697) (32,308)
-------------------------------------------------------------------------
Financing Activities

Issuance of units 62 76,376
Issuance of Convertible Debentures (66) -
Increase (decrease) in debt 31,036 (20,122)
Decrease in note receivable 56 49
Distributions to unitholders (Note 7) (19,136) (18,724)
-------------------------------------------------------------------------
11,952 37,579
-------------------------------------------------------------------------
Net cash inflow - -
Cash - beginning of period - -
-------------------------------------------------------------------------
Cash - end of period - -
-------------------------------------------------------------------------
Supplementary information:
Interest paid 3,782 2,216
Income taxes paid 196 290
-------------------------------------------------------------------------
-------------------------------------------------------------------------



Notes to the Interim Consolidated Financial Statements
FOR THE THREE MONTHS ENDED March 31, 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 12 to these interim consolidated financial
statements.

b) Capital Disclosures

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 4 to these interim
consolidated financial statements.

c) Inventories

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 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 March 31, 2008
and 2007.

NOTE 2. SENIOR LONG-TERM DEBT

March 31, December 31,
2008 2007
-------------------------------------------------------------------------
Amount drawn on credit facility 238,445 207,417
Issue costs (469) (477)
-------------------------------------------------------------------------
Senior long-term debt 237,976 206,940
-------------------------------------------------------------------------
-------------------------------------------------------------------------

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 March 31,
2008, Newalta was in compliance with all covenants.

NOTE 3. 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 - 7
Rights exercised 6 62
Units issued under the DRIP 237 3,896
-------------------------------------------------------------------------
Units outstanding as at March 31, 2008 41,660 499,992
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 4. 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 a minimum at each board meeting
which are held at least 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:

-------------------------------------------------------------------------
March 31, December 31,
Ratio 2008 2007 Threshold
-------------------------------------------------------------------------
Current 2.09:1 1.65:1 1.20:1 minimum
Funded Debt(1) to EBITDA(2) 2.17:1 1.89:1 3.00:1 maximum(3)
Fixed Charge Coverage(4) 1.12:1 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:

-------------------------------------------------------------------------
Newalta's Annual Remaining Safe Harbour
Time Period Safe Harbour Limit ($) Limit Available ($)
-------------------------------------------------------------------------
November 1, 2006 to Dec 31,
2008 730,800 504,962(1)
2009 243,600 243,600
2010 243,600 243,600
-------------------------------------------------------------------------
Total 1,218,000 992,162
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) The amount reflects the net effect of gross proceeds issued 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 2,966,050 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
March 31, 2008.

NOTE 5. 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. 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 nil for the three months ended March 31, 2008 (nil 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 nil for the
three months ended March 31, 2008 (nil in 2007).

NOTE 6. EARNINGS PER UNIT

Basic per unit calculations for the three months ended March 31, 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 months ended March 31, 2008 was 2,110,000 (731,000 for the three
months ended March 31, 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 months ended
March 31, 2008 was 5.0 million (nil for the three months ended March 31,
2007).

Three Months
(000s) Ended March 31,
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Weighted average number of units 41,543 39,209
Net additional units if rights exercised 92 236
Net additional units if debentures converted - -
-------------------------------------------------------------------------
Diluted weighted average number of units 41,635 39,445
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 7. 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
Ended March 31,
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Unitholder distributions declared 23,077 22,249
per unit - $ 0.555 0.555
Unitholder distributions - paid in cash 19,136 18,724
Unitholder distributions - value paid in units 3,896 2,911
paid in cash - per unit $ 0.461 0.481
issued units - per unit $ 0.094 0.074
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 8. RECONCILIATION OF ASSET RETIREMENT OBLIGATIONS

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

Three Months
Ended March 31,
-------------------------------------------------------------------------
2008 2007
-------------------------------------------------------------------------
Asset retirement obligations, beginning of period 20,985 18,484
Expenditures incurred to fulfill obligations (612) (198)
Accretion 462 408
-------------------------------------------------------------------------
Asset retirement obligations, end of period 20,835 18,694
-------------------------------------------------------------------------
-------------------------------------------------------------------------

NOTE 9. 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 in the Eastern segment) is included with
amortization and accretion in the consolidated statements of operations,
comprehensive income and retained earnings.

NOTE 10. 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 month period ended
March 31, 2008 was $0.1 million ($0.2 million for the same period 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 months ended March 31, 2008 were $0.4 million
($0.8 million for the same period 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 11. COMMITMENTS

Letters of Credit and Surety Bonds

At March 31, 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 $40.1 million and $12.0 million
respectively.

NOTE 12. 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 March 31, 2008 are as follows:

-------------------------------------------------------------------------
Total
Held for Loans and Available Other Carrying
trading Receivables for sale Liabilities Value
-------------------------------------------------------------------------
Accounts
receivable - 157,228 - - 157,228
Note
receivable - 1,410 - - 1,410
Accounts
payable and
accrued
liabilities - - - 84,031 84,031
Distributions
payable - - - 7,707 7,707
Senior long-
term debt(1) - - - 237,976 237,976
-------------------------------------------------------------------------
(1) Net of related costs.

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

-------------------------------------------------------------------------
March 31, 2008
Carrying Quoted
value(1) fair value
-------------------------------------------------------------------------
7% Convertible debentures due November 30, 2012 110,426 115,000
-------------------------------------------------------------------------
(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 8% 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 $19.2 million which are
considered to be outstanding beyond normal repayment terms at March 31,
2008. A provision of $2.4 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.

-------------------------------------------------------------------------
Trade Receivables aged Allowance for doubtful
by invoice date accounts
March 31, December 31, March 31, December 31,
Aging 2008 2007 2008 2007
-------------------------------------------------------------------------
0-90 days 101,357 103,878 2 16
90-180 days 9,007 7,859 127 200
180-365 4,963 11,146 569 1,061
365 days + 5,210 3,507 1,681 985
-------------------------------------------------------------------------
Total 120,537 126,389 2,379 2,263
-------------------------------------------------------------------------

-----------------------------------------------
Net Receivables
March 31, December 31,
Aging 2008 2007
-----------------------------------------------
0-90 days 101,355 103,862
90-180 days 8,880 7,659
180-365 4,394 10,084
365 days + 3,529 2,521
-----------------------------------------------
Total 118,158 124,126
-----------------------------------------------

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 March 31, 2008
-------------------------------------------------------------------------
Balance, beginning of period 2,263
Additional amounts provided for 483
Amounts written off as uncollectible (367)
Amounts recovered during the period -
-------------------------------------------------------------------------
Balance, end of period 2,379
-------------------------------------------------------------------------

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 it's 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 months ended March 31, 2008:

-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If interest rates increased by 1% with all
other variables held constant (429)
-------------------------------------------------------------------------

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 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 for the
three months ended March 31, 2008:

-------------------------------------------------------------------------
Net earnings
-------------------------------------------------------------------------
If the value of the U.S. dollar increased by $0.01
with all other variables held constant (201)
-------------------------------------------------------------------------

Commodity risk

Newalta's 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. dollar. 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.

Newalta's revenue is also exposed to the variability of lead prices. The
production contribution between direct lead sales and tolling
(processing) services is approximately the same. The variability of lead
prices is partially offset because the 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.
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 fixed.

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

-------------------------------------------------------------------------
Impact
Change in on Annual
benchmark Revenue ($)
-------------------------------------------------------------------------
LME lead price (Cdn$/lb)(1) $0.10 6.4 million
WTI oil price (Cdn$/bbl)(2) $1.00 0.4 million
Gulf Coast Base oil ($Cdn/litre)(3) $0.05 0.8 million
-------------------------------------------------------------------------
(1) Based on approximately 29,000 tonnes of direct lead sales and the
Canadian dollar at par with the U.S. dollar.
(2) The impact on cash flow is estimated for oil sales only using 2007
volumes sold to Newalta's account of approximately 369,000 barrels.
(3) Based on approximately 51.0 million litres of finished product sold.

NOTE 13. 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-acid battery recycling faclity
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 March 31, 2008
Consoli-
Inter- Un- dated
Western Eastern segment allocated(3) Total
-------------------------------------------------------------------------
External revenue 93,973 56,162 - 41 150,176
Inter segment
revenue(1) 301 - (301) - -
Operating expense 59,136 42,934 (301) - 101,769
Amortization and
accretion expense 5,661 3,810 - 1,901 11,372
-------------------------------------------------------------------------
Net margin 29,477 9,418 - (1,860) 37,035
Selling, general
and administrative - - - 14,227 14,227
Finance charges - - - 6,266 6,266
-------------------------------------------------------------------------
Operating income 29,477 9,418 - (22,353) 16,542
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 7,423 6,266 - 4,284 17,973
-------------------------------------------------------------------------
Goodwill 62,280 41,317 - - 103,597
-------------------------------------------------------------------------
Total assets 553,826 401,894 - 72,386 1,028,106
-------------------------------------------------------------------------
-------------------------------------------------------------------------


For the Three Months Ended March 31, 2007
Consoli-
Inter- Un- dated
Western Eastern segment allocated(3) Total
-------------------------------------------------------------------------
External revenue 88,705 28,608 - 524 117,837
Inter segment
revenue(1) - - - - -
Operating expense 57,187 22,327 - - 79,514
Amortization and
accretion expense 5,133 3,447 - 1,253 9,833
-------------------------------------------------------------------------
Net margin 26,385 2,834 - (729) 28,490
Selling, general
and administrative - - - 12,519 12,519
Finance charges - - - 2,306 2,306
-------------------------------------------------------------------------
Operating income 26,385 2,834 - (15,554) 13,665
-------------------------------------------------------------------------
Capital expenditures
and acquisitions(2) 6,161 5,391 - 3,309 14,861
-------------------------------------------------------------------------
Goodwill 54,961 35,117 - - 90,078
-------------------------------------------------------------------------
Total assets 533,008 237,541 - 50,600 821,149
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(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

  • Ronald L. Sifton
    Executive Vice President & CFO
    Phone: (403) 806-7020;

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