Maxim Power Corp.
TSX : MXG

Maxim Power Corp.

March 25, 2011 17:56 ET

Maxim Power Corp. Announces 2010 Financial and Operating Results

CALGARY, ALBERTA--(Marketwire - March 25, 2011) - Maxim Power Corp. (TSX:MXG) ("MAXIM" or the "Corporation") announced today the release of financial and operating results for its fourth quarter and year ended December 31, 2010. The audited financial statements, accompanying notes and Management Discussion and Analysis will be available on SEDAR on March 28, 2011 and on MAXIM's website. All figures reported herein are Canadian dollars unless otherwise stated.

FINANCIAL HIGHLIGHTS

  Three Months Ended
December 31
  Twelve Months Ended
December 31
($ in thousands except per share amounts)   2010       2009     2010     2009
                         
Revenue $ 36,694     $ 41,977   $ 151,249   $ 143,737
Adjusted EBITDA (1)   5,564       8,177     33,879     33,019
Net income   (416 )     505     1,128     2,129
  Per share basic and diluted $ (0.01 )   $ 0.01   $ 0.02   $ 0.04
Funds from operations (1)   4,702       7,084     25,872     23,724
  Per share basic and diluted $ 0.08     $ 0.13   $ 0.48   $ 0.44
                         
Electricity Deliveries (MWh)   323,551       365,221     1,322,037     1,226,634
Net Generation Capacity (MW) (2)   809       788     809     788
Average Alberta Power Prices ($ per MWh) $ 46     $ 46   $ 51   $ 48
                         
(1) Select financial information was derived from the audited consolidated financial statements and is prepared in accordance with Canadian generally accepted accounting principles ("GAAP"), except Adjusted EBITDA and Funds from operations ("FFO"). Adjusted EBITDA is provided to assist management and investors in determining the Corporation's approximate operating cash flows before interest, income taxes, and depreciation and amortization and FFO is provided to assist management and investors in determining the Corporation's cash flows generated by operations before the cash impact of working capital fluctuations. Adjusted EBITDA and FFO do not have any standardized meaning prescribed by Canadian GAAP and may not be comparable to similar measures presented by other companies. Refer to Non-GAAP measures for reconciliations between non-GAAP financial measures and comparable measures calculated in accordance with Canadian GAAP.
(2) Generation capacity is manufacturer's nameplate capacity net of minority ownership interests of third parties.

OPERATING RESULTS

MAXIM generated a record 1,322,037 MWh in 2010 compared to 1,226,634 MWh in 2009, which is an increase of 95,403 MWh or 7.8%. Revenue for 2010 increased $7.5 million or 5.2% to $151.2 million over 2009 revenue of $143.7 million attributable primarily to increased dispatches in the US Northeast where high summer temperatures resulted in increased electricity demand. 

Adjusted earnings before interest, taxes, depreciation and amortization (refer to Non-GAAP measures - "Adjusted EBITDA" in the MD&A), increased $0.9 million to $33.9 million in 2010 from $33.0 million in 2009. Funds from operations increased by $2.1 million to $25.9 million in 2010. Net income for 2010 was $1.1 million compared to 2009 of $2.1 million. These amounts were adversely affected by the unfavourable CVRI arbitration award in 2010.

During the fourth quarter of 2010, MAXIM earned revenue of $36.7 million compared to $42.0 million for 2009 and Adjusted EBITDA was $5.6 million compared to $8.2 million in 2009 due to lower production in Alberta and France and higher coal prices, partially offset by an increase in revenues in the US. Fourth quarter 2010 production decreased 41,670 MWh or 11% to 323,551 MWh compared to 365,221 MWh during the same quarter of 2009. The decrease is primarily due to a 31% or 89,581 MWh decrease at Milner, which was idled for extended periods at certain times during the quarter when spot prices fell below the facility's marginal costs. The decrease in Milner generation was largely offset by an increase from the US segment. During the fourth quarter of 2010, MAXIM's US plants generated more than twelve times the electricity they had produced in the same quarter of 2009, which was a result of the end of the Pittsfield facility's RMR contract in May 2010, along with increased demand in the ISO-NE marketplace.

On March 2, 2010, MAXIM amalgamated with EarthFirst Canada Inc. for a total investment of $7.2 million. The amalgamation provides MAXIM with a strategic development opportunity, the Buffalo Atlee Power Project, which has the potential for over 200 MW of wind generation capacity. The transaction also provides MAXIM with $117.4 million in Canadian tax pools related to the power business. 

MAXIM's wholly-owned French subsidiary, Comax France SAS ("COMAX"), entered into power purchase agreements to provide 74 MW of electrical peaking services to Electricité de France for a term of eight years. During 2010, COMAX added to its growing portfolio of peaking service assets by purchasing an additional power project site. A portion of the contracted capacity began commercial operations in December 2010, with the remainder scheduled to come online over the first and second quarters of 2011.

GROWTH INITIATIVES

HR Milner Life Extension

MAXIM has entered into an agreement whereby MAXIM can operate the Milner generating facility indefinitely. MAXIM is no longer required to cease operations of the facility by December 31, 2015. MAXIM has assumed the obligation to reclaim the site upon the eventual decommissioning of the power plant, the cost of which will be financed in part by $15 million currently held in trust for this purpose with the remainder funded by MAXIM. MAXIM has posted security of $3 million for the estimated cost of remediation in excess of the funds already held in trust. The amount of security will be reviewed annually and will be adjusted if the obligation changes. MAXIM considers the Milner site to be a strategic development site for generation facilities given its proximity to transmission lines, water, natural gas lines, and coal resources.

Mine 14

Mine 14 represents a valuable metallurgical coal resource and source of fuel for Milner. This site has 13 million tonnes of recoverable metallurgical coal and it is estimated that the  by-product from processing this coal is sufficient to satisfy fuel requirements of the existing Milner generating facility for 10 years. MAXIM obtained approval in 2009 from the Energy Resources Conservation Board ("ERCB") and authorization from the Lieutenant Governor in Council for the permit to develop Mine 14 and a license to commence commercial operations. 

Milner Expansion

MAXIM is proposing to develop a new generating facility at the existing Milner location with the addition of 500 MW of clean coal-fired generating capacity. The Environmental Impact Assessment for the project was deemed complete by Alberta Environment on November 24, 2010, allowing the project to progress to the final regulatory phase. The regulatory review process has commenced and is expected to conclude in the second quarter of 2011.

Deerland Peaking Station

As previously announced, MAXIM has received regulatory approvals from the Alberta Utilities Commission and Alberta Environment to construct and operate the Deerland Peaking Station, a 190 MW natural gas-fired peaking facility. The station is to be located immediately adjacent to the existing Deerland high voltage substation in Alberta's industrial heartland, an area expected to experience significant growth in electrical demand. MAXIM expects peaking requirements to continue to grow to meet overall demand growth and to provide firm backup for additional intermittent wind resources. Arrangements are subject to improving power prices and market heat rates. Construction of the facility is expected to take approximately twelve months once key commercial arrangements have been concluded. 

Buffalo Atlee

MAXIM acquired the Buffalo Atlee Power Project ("Buffalo Atlee"), situated near Brooks, Alberta, through an amalgamation with EarthFirst Canada Inc. This project has the potential for development of over 200 MW of wind generation capacity. Wind data has been collected on the site for approximately four years and supports project development based on higher power prices than those realized during recent months. MAXIM holds an exploratory Crown land permit with a term of five years, expiring on January 1, 2016. The addition of wind generation to MAXIM's existing portfolio of assets will diversify MAXIM's generation fuel types and provides the potential to offset the impact of proposed carbon legislation. MAXIM plans to advance the development of this project once greater clarity on carbon policy is provided by the government. 

OUTLOOK

2011 Guidance

MAXIM is providing the following guidance for 2011. MAXIM's results are significantly impacted by Alberta spot power prices. In preparing its guidance, management uses Alberta forward electricity prices as a proxy for Alberta spot electricity prices. The market for forward contracts is relatively illiquid and forward prices may not be a good predictor of settled prices as they may not factor in events such as unplanned outages that can cause a significant increase in settled power prices. Notwithstanding, MAXIM prepares its guidance using forward electricity prices from independent sources.

MAXIM 2011 Guidance is as follows:

($000's, except per share amounts) For the year ending December 31, 2011
Adjusted EBITDA (1)   37,972
Funds from operations (1)   34,853
Funds from operations per share – basic and diluted (1) (2) $ 0.65
Net income (loss)   6,436
Net income per share - basic and diluted (2) $ 0.12

The forecast 2011 results are based upon the following assumptions:

($000's, except as otherwise noted) For the year ending December 31, 2011
Electricity deliveries (MWh)    
  HR Milner   1,016,791
  Other facilities   598,237
Net generation capacity at year end (MW)   822
Capital expenditures (excluding acquisitions)    
  France repowering and peaking facilities   16,922
  Development projects   1,693
  Other assets   1,871
  HR Milner   1,000
Average 2011 Alberta spot electricity price ($/MWh) $ 73.21
Average annual foreign exchange rates    
  C$/USD $ 1.00
  C$/Euro $ 1.35
Weighted average shares outstanding (000's)   54,033
  1. The following measures are not measures under Canadian Generally Accepted Accounting Principles ("GAAP") and may not be comparable to similar measures presented by other companies. Refer to MAXIM's MD&A dated March 25, 2011 for a reconciliation of these non-GAAP measures.
  • Adjusted EBITDA is a measure of earnings before interest, taxes, depreciation and amortization, and certain other expenses
  • Funds from operations is a measure of cash flow from operations before working capital requirements
  1. Per share amounts are calculated using average weighted shares outstanding consistent with the table below

In addition to the above assumptions, the 2011 forecast assumes all sales of Milner output at Alberta spot market prices, with the exception of an average of 72 MW sold at contracted prices during the first quarter.

The forecast average 2011 Alberta power price of $73.21 per MWh is based upon settled prices to date and forward wholesale prices. Average Alberta power prices are forecast to settle higher in 2011 than in 2010 as a result of recent occurrences in the Alberta marketplace, including the potential permanent retirement of Sundance units #1 and #2 (576 MW total) and extended unplanned outages of other natural gas fired power facilities. The positive impact of these generation outages on first and second quarter 2011 power prices will be partially offset by the anticipated commissioning of the Keephills #3 generating station (450 MW) in the third quarter of 2011.

The forecast also assumes turnaround maintenance at Milner will occur during the second quarter and will last 21 days. Forecast results include the assumption that MAXIM will continue its development initiatives related to Mine 14, the Milner expansion, and other projects and do not include the impact of any acquisitions or the monetization of Mine 14. An increase in net generation capacity is based upon the assumption that all planned France peaking plants will be in service by December 31, 2011.

CONFERENCE CALL FOR 2010 RESULTS

MAXIM will host a conference call for analysts and investors on April 5, 2011 at 9:00 am MT. The call will be hosted by John Bobenic, MAXIM's President and Chief Executive Officer, and by Mike Mayder, Vice President, Finance and Chief Financial Officer. To participate in this conference call, please dial (866) 223-7781 or (416) 340-8018 in the Toronto area. It is recommended that participants call at least ten minutes prior to start time.

A recording of the conference call will be available from April 5 to April 12, 2011. To access the replay dial (800) 408-3053 or (905) 694-9451 followed by the passcode 1133684. In addition, the webcast will be available commencing April 6, 2011 in the Investor Relations section of MAXIM's website at www.maximpowercorp.com.

About MAXIM

Based in Calgary, Alberta, MAXIM is an independent power producer, which acquires or develops, owns and operates innovative and environmentally responsible power projects. MAXIM currently owns and operates 44 power plants in western Canada, United States and France, having 809 MW of electric and 117 MW of thermal net generating capacity. Approximately 80% of MAXIM's current portfolio is comprised of clean burning natural gas, high efficiency cogeneration, waste heat and landfill gas fuelled generation. MAXIM trades on the TSX under the symbol "MXG". For more information about MAXIM, visit our website at www.maximpowercorp.com.

Statements in this release which describe MAXIM's intentions, expectations or predictions, or which relate to matters that are not historical facts are forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties which may cause the actual results, performances or achievements of MAXIM to be materially different from any future results, performances or achievements expressed in or implied by such forward-looking statements. MAXIM may update or revise any forward-looking statements, whether as a result of new information, future events or changing market and business conditions and will update such forward-looking statements as required pursuant to applicable securities laws.

Contact Information

  • Maxim Power Corp.
    John R. Bobenic
    President and CEO
    (403) 750-9300
    or
    Maxim Power Corp.
    Michael R. Mayder
    Vice President, Finance and CFO
    (403) 750-9311
    www.maximpowercorp.com