Maxim Power Corp.
TSX : MXG

Maxim Power Corp.

November 15, 2010 08:00 ET

Maxim Power Corp. Announces Third Quarter 2010 Results

CALGARY, ALBERTA--(Marketwire - Nov. 15, 2010) - Maxim Power Corp. ("MAXIM" or the "Corporation") (TSX:MXG) announced today that it released its financial and operating results for the third quarter of 2010. The unaudited consolidated financial statements, accompanying notes and Management's Discussion and Analysis ("MD&A") will be available on SEDAR and MAXIM's website on November 16, 2010. All figures reported herein are in Canadian dollars unless otherwise stated.



FINANCIAL HIGHLIGHTS

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Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
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($ in thousands except per share
amounts)
Revenue $ 31,123 $ 27,628 $114,555 $101,761
Adjusted EBITDA (1) 6,058 6,696 28,332 24,844
Net income (loss) (139) 848 1,544 1,624
Per share-basic and diluted $ (0.00) $ 0.02 $ 0.03 $ 0.03
Funds from (used in) operations 5,532 6,430 21,170 16,639
Per share-basic and diluted $ 0.10 $ 0.12 $ 0.39 $ 0.31

Electricity Deliveries (MWh) 351,910 329,301 998,487 861,413
Net Generation Capacity (MW) (2) 809 778 809 778
Average Alberta Prices ($ per MWh) $ 36 $ 50 $ 52 $ 48
Average Milner Realized Electricity
Price ($ per MWh) $ 52 $ 50 $ 60 $ 51

(1) Select financial information was derived from the unaudited interim
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, depreciation and amortization and certain other non-recurring
items 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 in MAXIM's MD&A 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

During the third quarter of 2010, MAXIM increased its electrical generation from 329,301 MWh in 2009 to 351,910 in 2010, an increase of 7%, resulting from the increased production from MAXIM's northeast US power plants. During the quarter the average power price realized at HR Milner facility ("Milner") was $52 per MWh in 2010 compared to $50 per MWh in 2009 for an increase of $2 per MWh. As a result, revenue for the quarter increased $3.5 million or 13% from $27.6 million in 2009 to $31.1 million in 2010. Adjusted EBITDA decreased $0.6 million to $6.1 million in 2010 compared to $6.7 million in 2009 and net income decreased $1.0 million to a loss of $0.1 million in 2010 compared to income of $0.9 million in 2009 resulting primarily from reduced margins at Milner due to the arbitration award on May 25, 2010 that resulted in an increase in coal costs in excess of inflation.

Increases over the first nine months of 2010 compared to 2009 in revenue and adjusted EBITDA were primarily due to the increase in the average Milner realized power price, $60 per MWh in 2010 compared to $51 per MWh in 2009, and the increase in electrical generation in 2010 compared to 2009. Production for the first nine months of 2010 totaled 998,487 MWh compared to 861,413 MWh in 2009 due to the increased generation at MAXIM's northeast US facilities. MAXIM also benefited from a $1.4 million gain on the sale of carbon dioxide emission credits generated but not required at Milner.

GROWTH INITIATIVES

Mine 14 Project

During 2010, MAXIM initiated a process to sell its interest in Mine 14. Management has commissioned a plan to sell the asset and has engaged a third party to assist in completing the process. MAXIM anticipates the sale to be completed within the next three to six months.

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. Construction of the facility is expected to take approximately twelve months once key commercial arrangements have been concluded.

Milner Expansion

MAXIM continues to propose to construct and operate a 500 MW coal-fired generation facility adjacent to its existing Milner facility. The regulatory review process has commenced and is expected to conclude early 2011. Development is contingent upon higher Alberta power prices.

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. Buffalo Atlee 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.



2010 Guidance

MAXIM is updating guidance issued on May 25, 2010:
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Guidance Provided Updated 2010
($000's, except per share amounts) on May 25, 2010 Guidance
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Adjusted EBITDA (1) 40,000 31,000
Funds from operations (1) 30,900 23,000
Funds from operations per share - basic
and diluted (1) (2) $ 0.57 $ 0.43
Net income (loss) 4,500 (2,000)
Net income per share - basic and diluted (2) $ 0.08 $ (0.04)
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(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.
- 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
(2) Per share amounts are calculated using average weighted shares
outstanding consistent with the table below


These projections are based on MAXIM's existing portfolio of assets, do not include the impact of possible acquisitions or commercialization of development initiatives, for the sale of the Corporations interest in Mine 14, and are based on the following assumptions:



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Guidance Provided Updated 2010
($000's, except as otherwise noted) on May 25, 2010 Guidance
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Electricity deliveries (MWh) 1,341,900 1,326,100
HR Milner 961,100 880,800
Other facilities 380,800 445,300
Net generation capacity at year ending (MW) 809 809
Capital expenditures (excluding acquisitions)
France repowering and peaking facilities 7,300 6,800
Development projects 3,500 2,200
Other assets 2,100 2,000
HR Milner 1,200 1,900
Average 2010 Alberta spot electricity price
($/MWh) $ 64.00 $ 49.34
Average annual foreign exchange rates
C$/USD $ 1.01 $ 1.03
C$/Euro $ 1.36 $ 1.43
Weighted average shares outstanding (000's) 54,030 54,035
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Adjusted EBITDA forecast for 2010 decreases $9 million, from $40 million per guidance provided on May 25, 2010 to $31 million per updated guidance. This decrease is primarily attributable to the lower than estimated Alberta power prices experienced during the majority of 2010. Funds from operations and net income forecast for 2010 decrease from $30.9 million and $4.5 million, respectively, from May 25, 2010 guidance to $23.0 million and to a loss of $2.0 million, respectively, per revised guidance.

MAXIM anticipates that the unfavorable impact to its overall cash position from lower Alberta power prices and the aforementioned arbitration award will be mitigated by the monetization of MAXIM's Mine 14 coal leases. On December 2, 2009, the Alberta Energy Resources Conservation Board ("ERCB") granted Milner a permit to develop the underground coal mine referred to by the Corporation as Mine 14. Mine 14 is to be located north of Grande Cache, Alberta and is estimated to contain 13 million recoverable tonnes of high quality metallurgical coal. (Refer to Technical Report on The No. 14 Mine Project filed on SEDAR on March 22, 2005.) MAXIM has held discussions with numerous counterparties to advance the Corporation's goal of identifying the highest value commercial use for Mine 14 and is significantly advanced in its process to realize value from this resource. MAXIM anticipates that it will close a transaction with one of the counterparties within the next six months.

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 expected future 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. The above guidance incorporates an average 2010 Alberta power price of $49 per MWh, versus $64 per MWh as incorporated in the May 25, 2010 guidance.

Forward-Looking Information

Certain information in this press release is forward-looking and is subject to important risks and uncertainties. The results or events predicted in this information including the aforementioned guidance for 2010 and prospects relating to capitalization and operation of Mine 14 may differ materially from actual results or events. Factors which could cause actual results or events to differ materially from current expectations include the ability of the Corporation to implement its strategic initiatives, the availability and price of energy commodities, government and regulatory decisions, plant availability, competitive factors in the power industry and prevailing economic conditions in the regions that the Corporation operates. Forward-looking statements are often, but not always, identified by the use of words such as "anticipate", "expected", "plan", "estimate", "may", "project", "predict", "potential", "could", "might", "should" and other similar expressions. The Corporation disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise except as required pursuant to applicable securities laws.

Readers are cautioned that management's expectations, estimates, projections and assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking statements.

CONFERENCE CALL FOR THIRD QUARTER 2010 RESULTS

MAXIM will host a conference call for analysts and investors on November 18, 2010 at 11:00 a.m. MT (1:00 p.m. ET). The call will be hosted by John R. Bobenic, MAXIM's President and Chief Executive Officer and Michael R. Mayder, MAXIM's Vice President, Finance and Chief Financial Officer.

To participate in this conference call, please dial (800) 952-6845 or (416) 695-6622 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 2:00 p.m. MT (4:00 p.m. ET) on November 18, 2010 until November 25, 2010 at 9:59 p.m. MT (11:59 p.m. ET). To access this replay, please dial (800) 408-3053 or (905) 694-9451 followed by the passcode 8838246. In addition, the recording will be available 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