FINANCIAL HIGHLIGHTS
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Three Months Ended Six Months Ended
June 30 June 30
($ in thousands except per share
amounts) 2014 2013 2014 2013
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Revenue $ 19,138 $ 36,383 $ 88,270 $ 91,887
Adjusted EBITDA (1) (3,604) 14,337 12,969 28,404
Adjusted net income (loss) (1) (4,566) 5,720 (751) 10,710
Per share - basic and diluted $ (0.08) $ 0.11 $ (0.01) $ 0.20
Net income (loss) attributable to
shareholders (4,325) 6,446 (838) 11,032
Per share - basic and diluted $ (0.08) $ 0.12 $ (0.02) $ 0.20
FFO (2) (3,922) 13,021 11,079 27,135
Per share - basic and diluted $ (0.07) $ 0.25 $ 0.20 $ 0.51
Electricity Deliveries (MWh) 219,644 191,683 557,865 493,885
Net Generation Capacity (MW) (3) 785 804 785 804
Average Alberta power price -
market ($ per MWh) $ 42.43 $ 123.41 $ 51.46 $ 94.52
Average Alberta power price -
Milner realized ($ per MWh) $ 51.73 $ 178.59 $ 65.06 $ 134.78
Average US power price - Northeast
U.S. realized (US$ per MWh) $ 56.65 $ 97.63 $ 234.02 $ 171.01
(1) Select financial information was derived from the unaudited condensed
consolidated interim financial statements and is prepared in accordance
with IFRS, except adjusted EBITDA and adjusted net income (loss).
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 certain
other income and expenses. Adjusted net income (loss) is used to compare
MAXIM's results among reporting periods without consideration of
unrealized gains and losses and to evaluate MAXIM's performance.
Adjusted EBITDA and adjusted net income (loss) do not have any
standardized meaning prescribed by IFRS and may not be comparable to
similar measures presented by other companies.
(2) Funds from operating activities before changes in working capital
("FFO") is an Additional GAAP measure provided to assist management and
investors in determining the Corporation's cash flows generated by
operations before the cash impact of working capital fluctuations.
(3) Generation capacity is manufacturer's nameplate capacity net of minority
ownership interests of third parties.
OPERATING RESULTS
Revenue, adjusted EBITDA, adjusted net income (loss), net income (loss) attributable to shareholders and FFO decreased in the second quarter of 2014 when compared to the second quarter of 2013. The decrease in these financial measures is primarily due to lower power prices in both Alberta and the Northeast U.S.
On a year to date basis, revenue, adjusted EBITDA, adjusted net income (loss), net income (loss) attributable to shareholders and FFO decreased in 2014 when compared to 2013. The decrease in these financial measures is primarily due to lower power prices in Alberta, partially offset by higher power prices and generation in the Northeast U.S.
ALBERTA UTILITIES COMMISSION ("AUC") LOSS FACTOR DECISION
As previously reported, the AUC has upheld the complaint made by the Corporation that the current ISO Line Loss Rules contravene the Transmission Regulation and are unjust, unreasonable, unduly preferential, arbitrarily or unjustly discriminatory and inconsistent with or in contravention of the 2003 Electric Utilities Act (AUC Decision 2014-110). The AUC is proceeding with the second phase of its consideration of Milner's complaint to determine the relief or remedy to be given and is expected to issue a process letter during the third quarter.
FEDERAL ENERGY REGULATORY COMMISSION ("FERC") INQUIRY
As previously reported, MAXIM and its external legal counsel have made a submission to FERC and FERC's Office of Enforcement refuting the allegations made in the Office of Enforcement's preliminary findings on this matter. Neither FERC nor its Office of Enforcement has responded to MAXIM's submission.
SALE OF MAXIM POWER (B.C.) INC.
On July 17, 2014, MAXIM closed the sale of its wholly-owned subsidiary, Maxim Power (B.C.) Inc. ("Maxim BC") to Village Farms International, Inc. Maxim BC owns and operates the Vancouver Landfill Power Project, a 7.4 MW electrical and 9.1 MW thermal energy landfill gas cogeneration project in Delta, BC. Proceeds from the sale are $5.2 million and will be utilized for strategic corporate purposes. This transaction concludes the sale of MAXIM's investments in British Columbia, with the sale of MAXIM's other B.C. asset, the Hartland Generating Facility, in 2013. The sale of these two investments resulted in an approximate net gain of $128 thousand.
COMAX FRANCE S.A.S. ("COMAX") CAPITAL PROGRAM
COMAX has secured debt financing of $8.8 million (6.0 million Euro) for four of its five 2014 renovation projects. The terms of the loans are favorable with leverage ranging from 80% to 91% of the project investment and fixed interest rates ranging from 3.0% to 4.5%. MAXIM anticipates securing the debt financing for the fifth project in August 2014. Total 2014 capital expenditures related to the renovation program in COMAX are anticipated to be $14.4 million (9.8 million Euro) of which $12.0 million (8.2 million Euro) will be financed with debt. COMAX has revised the scope of two of its 2014 renovation projects in addition to deferring two additional renovation projects, originally included in the 2014 renovation program scope, to early 2015.
GROWTH INITIATIVES
Summit Coal Limited Partnership ("SUMMIT")
SUMMIT is MAXIM's development initiative located north of Grande Cache, Alberta that owns metallurgical coal leases for Mine 14 ("M14") and Mine 16S ("M16S"). This initiative is construction ready and is the most advanced metallurgical coal mine development project in North America.
Current estimates for M14 are 18.9 million tonnes of low-mid volatile metallurgical coal reserves with a mine life of 17 years based on the NI 43-101 Technical Report filed on SEDAR on March 21, 2013. M16S is located 30 kilometers northwest of M14 and represents 1,792 hectares or 29% of SUMMIT's total area of coal leases. A NI 43-101 Technical Report has not been prepared for the Mine 16S property. The coal quality of M14 has been tested by numerous potential buyers and independent labs and is a very coveted mid to low volatility coking coal with other attributes which are best-in-class.
The Corporation considers the advancement of the M14 and M16S development projects strategic for MAXIM primarily because of the value of metallurgical coal and partially due to Milner's ability to utilize tailings and lower quality fuels, which are by-products of the beneficiation of coal, to produce electricity. All monetization options including: i) construction, own and operate, ii) joint venture or iii) outright sale, have been preserved for SUMMIT and the evaluation of these options is ongoing.
Deerland Peaking Station ("D1")
MAXIM is actively pursuing commercial arrangements that will allow for the full-scale construction of the 190 MW D1 Station. This project is attractive due to an anticipated contraction of reliable base load supply in the Alberta power market. MAXIM had previously received regulatory approvals to construct and operate D1 and has entered into an agreement to secure firm natural gas transportation services. The D1 site is located near Bruderheim in Alberta's Industrial Heartland, and it is in close proximity to the entry point of the proposed Gateway pipeline and adjacent to the existing Deerland high voltage substation. This area is expected to experience significant growth in electrical demand.
Milner Expansion ("M2")
On June 4, 2014, the AUC approved MAXIM's application to convert the fuel source for the M2 project from coal to natural gas and to increase the generating capacity of the proposed expansion from 500 MW to 520 MW. The M2 facility would be adjacent to the existing 150 MW Milner generating facility. The existing infrastructure at the Milner site allows MAXIM to leverage benefits including electrical connection, fuel delivery, water licenses and a skilled operations team. The Corporation incurred costs in 2014 related to engineering and consulting work for permit amendments and will incur further costs in 2014 on engineering consultation.
Buffalo Atlee ("B1")
MAXIM acquired the B1 Power Project, 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 six years and supports project development based on expected new provincial greenhouse gas legislation and/or higher power prices than currently forecasted. 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 provide the potential to offset the impact of expected new provincial greenhouse gas legislation.
CONFERENCE CALL FOR Q2 2014 RESULTS
MAXIM will host a conference call for analysts and investors on Wednesday, August 6, 2014 at 11:00 am MDT. 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 (877) 223-4471 or (647) 788-4922 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 August 6, 2014 to August 13, 2014. To access the replay, dial (800) 585-8367 or (416) 621-4642 followed by the passcode 79725472. In addition, the recording will be available commencing August 6, 2014 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 and power related projects. MAXIM currently owns and operates 39 power plants in Alberta, the United States and France, having 777 MW of electric generating capacity. 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.
Contacts: Maxim Power Corp. John R. Bobenic President and CEO (403) 750-9300 Maxim Power Corp. Michael R. Mayder Vice President, Finance and CFO (403) 750-9311 www.maximpowercorp.com