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Press release from CNW Group

Fort Chicago announces 2010 first quarter results and updated 2010 guidance

Thursday, April 29, 2010

Fort Chicago announces 2010 first quarter results and updated 2010 guidance14:18 EDT Thursday, April 29, 2010/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./Trading Symbol: FCE.UNExchange: TSXCALGARY, April 29 /CNW/ - Fort Chicago Energy Partners L.P. ("Fort Chicago" or "the Partnership") today announced its results for the three months ended March 31, 2010. Mr. Stephen H. White, President and Chief Executive Officer commented, "The continued strength of the NGL business environment resulted in record first quarter results from Aux Sable and a significant contribution to Fort Chicago's earnings and cash flows."Highlights for the Three Months ended March 31, 2010 << - Net income and adjusted net income of $14.1 million or $0.10 per Unit - Distributable cash of $31.7 million or $0.23 per Unit - Cash from operating activities of $66.3 million - Aux Sable generated $24.9 million of margin-based lease revenues, of which $11.9 million was recognized in the first quarter - Alliance interconnection with Prairie Rose Pipeline placed into operation, resulting in high heat content natural gas from the Bakken region being delivered to Aux Sable's Channahon facility - Acquisition of Glen Park, a 33 MW hydro-power generation facility, completed Financial Highlights ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts) 2010 2009 ------------------------------------------------------------------------- Revenues Pipeline(1) 100,398 105,748 NGL 37,631 21,541 Power 21,948 22,939 Fort Chicago - Corporate - 576 ------------------------------------------------------------------------- 159,977 150,804 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) before tax Pipeline 24,579 27,961 NGL 9,390 (2,540) Power 1,380 (1,986) Fort Chicago - Corporate (17,228) (11,406) ------------------------------------------------------------------------- 18,121 12,029 Tax expense (4,047) (725) ------------------------------------------------------------------------- Net income 14,074 11,304 Per Unit ($) 0.10 0.08 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjustments to net income for non-recurring (gains) losses (net of tax) Power - Fair value loss reclassified from other comprehensive income - 2,288 ------------------------------------------------------------------------- Adjusted net income(2) 14,074 13,592 Per Unit ($) 0.10 0.10 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Net of intersegment eliminations. (2) This item is not a standard measure under GAAP and may not be comparable to similar measures presented by other entities. See reconciliation of adjusted net income to net income in the schedules attached to this news release. For more information about non-GAAP measures used by Fort Chicago, see the section entitled "Non-GAAP Financial Measures" contained in Fort Chicago's March 31, 2010 Management's Discussion and Analysis. >> For the three months ended March 31, 2010, Fort Chicago generated net income of $14.1 million or $0.10 per Unit compared to $11.3 million or $0.08 per Unit for the same period in 2009. The increase was primarily driven by significantly higher earnings from Aux Sable, which benefited from the continued strength of NGL market conditions. Aux Sable generated $24.9 million of margin-based lease revenues, a first quarter record for Aux Sable, of which $11.9 million was recognized in first quarter earnings. Barring a significant downward shift in NGL market conditions, the Partnership expects Aux Sable will recognize the remaining $13.0 million of margin-based lease revenues over the balance of this year. In comparison, Aux Sable generated $4.7 million of margin-based lease revenues during the first quarter of 2009, none of which could be recognized during the period.Earnings from the Partnership's power business also increased compared to the first quarter of 2009, primarily due to the recognition of a non-cash fair value gain recorded in relation to Fort Chicago Power's exchangeable debentures, coupled with the effect of last year's $2.4 million pre-tax fair value loss related to the Partnership's investment in Pristine Power Inc. ("Pristine"). Power earnings for the first quarter of 2010 also reflect increased results from NRGreen and contributions from the Partnership's new power assets, the East Windsor cogeneration facility, which commenced operations in November 2009, and the Glen Park hydro-power facility, acquired on March 18, 2010. These increases were partially offset by the effect of the stronger Canadian dollar and by lower energy margins at Fort Chicago Power's California cogeneration facilities, due to the new Short Run Avoided Cost energy reimbursement formula ("SRAC") which came into effect in August 2009.Earnings from the Partnership's pipeline businesses, Alliance and AEGS, were relatively consistent with the same period last year, although Alliance's U.S.-generated earnings were impacted by the effect of the stronger Canadian dollar.The Partnership incurred higher corporate costs during the first quarter of 2010, reflecting increased interest costs related to the Partnership's July 2009 issuance of senior notes, project development costs, and foreign exchange losses previously deferred and recorded in other comprehensive income. Increased taxes in the first quarter of 2010 correspond with the increase in Aux Sable's earnings this period.For the three months ended March 31, 2010, net income equaled adjusted net income. During the same period last year, net income was adjusted for the fair value decrease of Fort Chicago's investment in Pristine, considered non-recurring, resulting in adjusted net income of $13.6 million or $0.10 per Unit. << ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts) 2010 2009 ------------------------------------------------------------------------- Distributable cash(1) Pipeline 33,961 34,633 NGL 10,787 (775) Power 1,782 5,062 Fort Chicago - Corporate (9,360) (7,872) Taxes (5,461) (38) ------------------------------------------------------------------------- 31,709 31,010 ------------------------------------------------------------------------- Per Unit 0.23 0.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash from operating activities 66,267 44,380 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) This item is not a standard measure under GAAP and may not be comparable to similar measures presented by other entities. See reconciliation of distributable cash to cash from operating activities in the schedules attached to this news release. For more information about non-GAAP measures used by Fort Chicago, see the section entitled "Non-GAAP Financial Measures" contained in Fort Chicago's March 31, 2010 Management's Discussion and Analysis. >> Distributable cash for the three months ended March 31, 2010 was $31.7 million or $0.23 per Unit, which approximated amounts generated for the same period in 2009, reflecting: << - consistent distributions from Alliance as higher income tax recoveries were offset by the effect of the stronger Canadian dollar; - comparable distributable cash from AEGS; - higher distributions from Aux Sable, reflecting continued strength in NGL markets; - lower distributable cash from Fort Chicago Power, reflecting lower energy margins at the California cogeneration facilities and the effect of the stronger Canadian dollar; - lower corporate general and administrative costs; - increased corporate interest costs, due primarily to the senior notes issued in July 2009; and - increased current taxes related to Aux Sable's first quarter 2010 earnings. Fort Chicago generated cash from operating activities of $66.3 million for the three months ended March 31, 2010, a $21.9 million increase from the same period last year, due primarily to: - increased cost of service recoveries from Alliance; - increased operating cash flows from Aux Sable; and - lower corporate income tax payments. >> Operating HighlightsDuring the three months ended March 31, 2010, the Alliance pipeline continued to operate in a reliable manner, fully meeting its contracted 1.325 billion cubic feet per day of firm-service shipping capacity. Actual transportation deliveries averaged 1.680 bcf/d, a slight decrease from volumes of 1.690 bcf/d delivered during the same period last year. In February 2010, Pecan Pipeline (North Dakota) Inc. ("Pecan"), a subsidiary of EOG Resources Inc., completed construction of a gathering pipeline connecting to a new gas receipt point on the Alliance pipeline, to bring rich gas from the Bakken formation on to the Alliance system for delivery to Aux Sable's Channahon facility. Pecan holds a 10-year firm transportation contract with Alliance for an initial contracted capacity of 40 mmcf/d for the first year, increasing to 80 mmcf/d for the remainder of the contract term.AEGS first quarter toll volumes of 283.7 thousand barrels per day decreased slightly relative to 284.1 mbbls/d in the same period last year, due primarily to lower gas flows across Alberta during the quarter, which limited ethane production.During the three months ended March 31, 2010, Aux Sable processed nearly 100 percent (2009 - 93 percent) of the natural gas delivered by Alliance. There was no downtime for maintenance in the first quarter of 2010, while minor maintenance was performed in the same period in 2009. After performing detailed external assessments of remaining facilities to be internally inspected, Aux Sable has determined it will complete required inspection work in 2011. Aux Sable sold 76.7 mbbls/d of natural gas liquids during the first quarter of 2010, up from 53.9 mbbls/d for the same period in 2009. Average ethane volumes increased to 45.0 mbbls/d in the first quarter of 2010 from 22.4 mbbls/d in the first quarter of 2009 due to higher ethane recoveries. As a result of weak market conditions in the first six weeks of 2009, Aux Sable reinjected ethane for that period.Fort Chicago Power generated 87,510 megawatt hours of electricity, down from 182,686 MWh during the same period last year, primarily reflecting reduced dispatch at the California cogeneration facilities. Under the new SRAC, it is less economic to dispatch these facilities during non-peak periods.Planning is underway for the Partnership's conversion to a taxable Canadian corporation by January 1, 2011. A special Unitholder meeting will be held in the fourth quarter of 2010 to approve the conversion.Updated 2010 GuidanceFort Chicago today updated its guidance for 2010 distributable cash to be in the range of $0.95 per Unit to $1.40 per Unit, up from previously issued guidance of $0.85 per Unit to $1.30 per Unit. The updated range reflects Aux Sable's strong year-to-date performance and the anticipation of continued favourable market fundamentals. Further, Aux Sable's decision to complete inspection work in 2011 instead of 2010 is expected to have a positive impact on forecasted 2010 production levels, earnings and cash flows. The updated guidance range also reflects the assumption of a stronger Canadian dollar relative to previous assumptions. Further details concerning 2010 guidance can be found in the "Investor Information" section of Fort Chicago's website - www.fortchicago.com.Conference CallFort Chicago Energy Partners L.P. will hold a conference call at 9:00 a.m. Mountain time (11:00 a.m. Eastern time) on Friday, April 30, 2010 to discuss the 2010 first quarter results. The call can be accessed at 1-888-231-8191 or 1-647-427-7450 (conference ID 68223314).A replay will be available shortly thereafter at 1-800-642-1687 and 1-416-849-0833. The access code is 68223314 (followed by the pound sign).Fort Chicago is a publicly traded limited partnership based in Calgary, Alberta, that owns and operates energy infrastructure assets across North America. Its Class A Units are listed on the TSX under the symbol FCE.UN. Fort Chicago is engaged in three principal businesses: a pipeline transportation business comprised of interests in two pipeline systems, the Alliance Pipeline and the Alberta Ethane Gathering System; an NGL extraction business which includes a significant interest in a world-class extraction facility near Chicago; and a power business with cogeneration facilities in Ontario, Colorado and California, district energy systems in Ontario and Prince Edward Island, a hydro generation facility in upstate New York, and waste heat power facilities along the Alliance Pipeline. Fort Chicago and its businesses are also actively developing a number of greenfield investment opportunities that will be a key source of future growth, including LNG and pipeline facilities on the U.S. west coast, Alberta-based ethane and NGL extraction facilities, repowering and expansion opportunities at the California power facilities and a Nova Scotia-based underground natural gas storage and pipeline facilities. << Class A Unit Ownership Restrictions >> Fort Chicago is organized in accordance with the terms and conditions of a limited partnership agreement which provides that no Class A Units may be transferred to, among other things, a person who is a "non-resident" of Canada, a person in which an interest would be a "tax shelter investment" or a partnership which is not a "Canadian partnership" for purposes of the Income Tax Act (Canada).Certain information contained herein relating to, but not limited to, Fort Chicago and its businesses constitutes forward-looking information under applicable securities laws. All statements, other than statements of historical fact, which address activities, events or developments that Fort Chicago expects or anticipates may or will occur in the future, are forward-looking information. Forward-looking information typically contains statements with words such as "may", "estimate", "anticipate", "believe", "expect", "plan", "intend", "target", "project", "forecast" or similar words suggesting future outcomes or outlook. Forward-looking statements in this news release include, but are not limited to, statements with respect to: the ability of Aux Sable to recognize margin-based lease revenues over the balance of the year; the timing of inspection work to be performed at Aux Sable's Channahon facility; and the ability of each of its businesses to generate distributable cash in 2010. The risks and uncertainties that may affect the operations, performance, development and results of Fort Chicago's businesses include, but are not limited to, the following factors: the ability of Fort Chicago to successfully implement its strategic initiatives and achieve expected benefits; levels of oil and gas exploration and development activity; the status, credit risk and continued existence of contracted customers; the availability and price of capital; the availability and price of energy commodities; the availability of construction services and materials; fluctuations in foreign exchange and interest rates; Fort Chicago's ability to successfully obtain regulatory approvals; changes in tax, regulatory, environmental, and other laws and regulations; competitive factors in the pipeline, NGL and power industries; operational breakdowns, failures, or other disruptions; and the prevailing economic conditions in North America. Additional information on these and other risks, uncertainties and factors that could affect Fort Chicago's operations or financial results are included in its filings with the securities commissions or similar authorities in each of the provinces of Canada, as may be updated from time to time. Readers are also cautioned that the foregoing list of factors and risks is not exhaustive. The impact of any one risk, uncertainty or factor on a particular forward-looking statement is not determinable with certainty as these factors are independent and management's future course of action would depend on its assessment of all information at that time. Although Fort Chicago believes that the expectations conveyed by the forward-looking information are reasonable based on information available on the date of preparation, no assurances can be given as to future results, levels of activity and achievements. Undue reliance should not be placed on the information contained herein, as actual result achieved will vary from the information provided herein and the variations may be material. Fort Chicago makes no representation that actual results achieved will be the same in whole or in part as those set out in the forward-looking information. Furthermore, the forward-looking statements contained herein are made as of the date hereof, and Fort Chicago does not undertake any obligation to update publicly or to revise any forward-looking information, whether as a result of new information, future events or otherwise. Any forward-looking information contained herein is expressly qualified by this cautionary statement.Certain financial information contained in this news release may not be standard measures under Generally Accepted Accounting Principles ("GAAP") in Canada and may not be comparable to similar measures presented by other entities. These measures are considered to be important measures used by the investment community and should be used to supplement other performance measures prepared in accordance with GAAP in Canada. For further information on non-GAAP financial measures used by Fort Chicago see Management's Discussion and Analysis, in particular, the section entitled "Non-GAAP Financial Measures" contained in the annual Management Discussion and Analysis, filed by Fort Chicago with Canadian securities regulators. << Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Financial Position ------------------------------------------------------------------------- March 31, December 31, ($ Thousands; unaudited) 2010 2009 ------------------------------------------------------------------------- Assets Current assets Cash and short-term investments 80,780 57,945 Restricted cash 1,306 3,084 Transportation security deposits and revenue adjustments 6,871 8,538 Receivables 63,742 59,155 Inventory 5,468 5,071 Prepaid expenses and other 13,947 9,848 ------------------------------------------------------------------------- 172,114 143,641 Long-term receivables 346,689 351,629 Pipeline, plant and other capital assets 2,282,249 2,286,255 Intangible assets 92,992 59,647 Other assets 23,504 23,727 ------------------------------------------------------------------------- 2,917,548 2,864,899 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Payables 112,177 91,264 Transportation security deposits 3,385 4,008 Distribution payable 3,931 6,406 Current portion of long-term senior debt 168,436 145,014 Subordinated convertible debentures and exchangeable debentures 47,671 49,302 ------------------------------------------------------------------------- 335,600 295,994 Long-term senior debt 1,567,638 1,534,689 Future taxes 284,093 291,279 Other long-term liabilities 39,912 44,211 ------------------------------------------------------------------------- 2,227,243 2,166,173 ------------------------------------------------------------------------- Partners' Equity Partners' capital account 1,077,334 1,057,239 Cumulative other comprehensive loss (62,202) (54,624) Cumulative net income 597,792 583,718 Cumulative distributions (922,619) (887,607) ------------------------------------------------------------------------- 690,305 698,726 ------------------------------------------------------------------------- 2,917,548 2,864,899 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Income and Cumulative Income ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts; unaudited) 2010 2009 ------------------------------------------------------------------------- Revenues Operating revenues 159,513 148,820 Interest and other 464 1,984 ------------------------------------------------------------------------- 159,977 150,804 ------------------------------------------------------------------------- Expenses Operations and maintenance 53,941 51,273 Depreciation and amortization 33,785 36,245 Interest and other finance 27,612 26,126 General, administrative and project development 25,680 22,412 Foreign exchange and other 838 2,719 ------------------------------------------------------------------------- 141,856 138,775 ------------------------------------------------------------------------- Net income before taxes 18,121 12,029 Current taxes 5,562 102 Future taxes (1,515) 623 ------------------------------------------------------------------------- Net income 14,074 11,304 Cumulative net income at the beginning of the period 583,718 546,143 ------------------------------------------------------------------------- Cumulative net income at the end of the period 597,792 557,447 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income per Unit Basic and diluted 0.10 0.08 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Comprehensive Income and Cumulative Other Comprehensive Income ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 ------------------------------------------------------------------------- Net income 14,074 11,304 Other comprehensive income (loss), net of taxes Cumulative translation adjustment Unrealized foreign exchange gain (loss) on translation of self-sustaining foreign operations (9,947) 12,996 Deemed realization of cumulative translation adjustment reclassified to net income 3,353 661 Gain (loss) on hedge of self-sustaining foreign operation 498 (3,560) Fair value loss transferred to net income - 1,427 Other (1,482) 262 ------------------------------------------------------------------------- (7,578) 11,786 ------------------------------------------------------------------------- Comprehensive income 6,496 23,090 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cumulative other comprehensive loss at the beginning of the period (54,624) (7,306) Other comprehensive income (loss), net of taxes (7,578) 11,786 ------------------------------------------------------------------------- Cumulative other comprehensive income (loss) at the end of the period (62,202) 4,480 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Cash Flows ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 ------------------------------------------------------------------------- Operating Net income 14,074 11,304 Non-cash transportation revenue 1,048 431 Depreciation, amortization and other non-cash items 28,964 34,552 Unrealized foreign exchange loss (gain) 471 (223) Future taxes (1,515) 623 Changes in non-cash working capital 23,225 (2,307) ------------------------------------------------------------------------- 66,267 44,380 ------------------------------------------------------------------------- Financing Long-term debt repaid (1,481) (987) Net change in credit facilities 72,543 18,990 Distributions paid (17,401) (33,515) ------------------------------------------------------------------------- 53,661 (15,512) ------------------------------------------------------------------------- Investing Acquisition of Northbrook New York, LLC, net of cash acquired (80,708) - Pipeline, plant and other capital assets (7,041) (8,519) Restricted cash 1,763 7,620 Other (1,780) (1,008) Changes in non-cash investing working capital (8,821) (7,215) ------------------------------------------------------------------------- (96,587) (9,122) ------------------------------------------------------------------------- Increase in cash and short-term investments before the effect of foreign exchange rate changes on cash and short-term investments 23,341 19,746 Effect of foreign exchange rate changes on cash and short-term investments (506) 508 Cash and short-term investments at the beginning of the period 57,945 56,064 ------------------------------------------------------------------------- Cash and short-term investments at the end of the period 80,780 76,318 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Distributable Cash(1) ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands, except where noted; unaudited) 2010 2009 ------------------------------------------------------------------------- Cash inflows Alliance distributions, prior to withholdings for capital expenditures and net of debt service 30,426 30,888 AEGS distributable cash, after non-recoverable capital expenditures and debt service 3,535 3,745 Aux Sable distributions, net of support payments, non-recoverable debt service costs and maintenance capital 10,787 (775) Fort Chicago Power distributable cash, after maintenance capital expenditures and debt service 1,217 4,622 NRGreen distributions, prior to withholding for project development costs 565 440 Realized foreign exchange gains, interest income and other - 656 ------------------------------------------------------------------------- 46,530 39,576 Cash outflows General and administrative 3,904 4,629 Interest and other finance 4,667 2,963 Taxes 5,461 38 Principal repayments on senior debt 789 936 ------------------------------------------------------------------------- 14,821 8,566 ------------------------------------------------------------------------- Distributable cash(1) 31,709 31,010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable cash per Unit ($)(2) 0.23 0.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions paid/payable(3) 35,012 31,513 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions paid/payable per Unit ($) 0.25 0.25 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Distributable cash is not a standard measure under generally accepted accounting principles in Canada and may not be comparable to similar measures presented by other entities. Distributable cash represents the cash available to Fort Chicago for distribution to holders of Units after providing for debt service obligations and any capital expenditures that are not growth-oriented or recoverable but does not include distribution reserves, if any, available in Fort Chicago's jointly held businesses, or project development costs, which represent discretionary costs, the recoverability of which has not been established, incurred to assess the commercial viability of new greenfield business initiatives unrelated to the Partnership's operating businesses. Distributable cash is an important measure used by the investment community to assess the source and sustainability of Fort Chicago's cash distributions and should be used to supplement other performance measures prepared in accordance with generally accepted accounting principles in Canada. See the following table for the reconciliation of distributable cash to cash flow from operating activities. (2) The number of Units used to calculate distributable cash per Unit is based on the average number of Units outstanding at each record date. For the three months ended March 31, 2010, the average number of Units outstanding for this calculation was 140,101,723 (2009 - 134,110,877) and 142,363,354 (2009 - 136,372,498) on a basic and diluted basis, respectively. The number of Units outstanding would increase by 2,261,621 (2009 - 2,261,621) Units if the outstanding Convertible Debentures as at March 31, 2010 were converted into Units. (3) Includes $20.1 million (2009 - $3.8 million) of distributions for the three months ended March 31, 2010 satisfied through the issuance of Units under the Partnership's Distribution Reinvestment Plan. Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Reconciliation of Distributable Cash to Cash Flow from Operating Activities ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 ------------------------------------------------------------------------- Consolidated cash flow from operating activities 66,267 44,380 Deduct: Cash flow generated from operating activities applicable to jointly held businesses(1) (44,873) (36,969) ------------------------------------------------------------------------- Cash flow from operating activities applicable to wholly-owned businesses(2) 21,394 7,411 Add (deduct) amounts applicable to wholly-owned businesses: Project development costs(3) 4,499 2,764 Change in non-cash working capital 4,610 16,953 Principal repayments on senior notes (1,446) (1,564) Maintenance capital expenditures (867) (213) Distributions earned greater than distributions received(4) 3,519 5,659 ------------------------------------------------------------------------- Distributable cash 31,709 31,010 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Represents the cash flow from operating activities applicable to jointly held businesses which is not under the sole control of the Partnership and, as a consequence, is not included in distributable cash until such time as distributions are declared by the jointly held businesses. (2) Net of support payments made to Alliance Canada Marketing of $2.8 million for the three months ended March 31, 2010 (2009 - $2.8 million). (3) Represents costs incurred by the Partnership and its wholly-owned businesses in relation to projects where the recoverability of such costs has not yet been established. Amounts incurred for the three months ended March 31, 2010 relate primarily to the Jordan Cove LNG terminal project, the Pacific Connector Gas Pipeline project, and the Alton Gas Storage project. (4) Represents the difference between distributions declared by jointly held businesses and distributions received. Reconciliation of Adjusted Net Income(1) to Net Income ------------------------------------------------------------------------- Three months ended March 31 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 ------------------------------------------------------------------------- Net income 14,074 11,304 Adjustments to net income for non-recurring (gains) losses: Power - fair value loss reclassified from other comprehensive income(2) - 2,442 Taxes(3) - (154) ------------------------------------------------------------------------- Adjusted net income 14,074 13,592 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Adjusted net income is not a standard measure under generally accepted accounting principles in Canada and may not be comparable to similar measures presented by other entities. Adjusted net income represents net income adjusted for specific items that are significant, but are not reflective of Fort Chicago's underlying operations. Specific items are subjective, however, the Partnership uses its judgement and informed decision-making when identifying items to be included or excluded in calculating adjusted net income. Specific items may include, but are not limited to, certain income tax adjustments, bankruptcy settlements, gains or losses on sales of assets, certain fair value adjustments, and asset impairment losses. Fort Chicago believes its use of adjusted net income provides useful information to management and its investors by improving the ability to compare financial results among reporting periods, and by enhancing the understanding of its operating performance and ability to fund distributions. (2) Net income for the three months ended March 31, 2009 included a non- cash expense transferred from other comprehensive income to net income, representing the fair value decrease of the Partnership's investment in Pristine Power Inc. from Pristine's initial public offering in March 2008. As the Partnership considers such permanent decreases in the fair value of its investments to be non-typical, it has added this amount back to net income in arriving at adjusted net income. (3) Represents the related taxes on the adjusted item described above. >> For further information: Stephen H. White, President and C.E.O., Richard G. Weech, Vice President, Finance and C.F.O., Fort Chicago Energy Partners L.P., Livingston Place, Suite 440, 222 - 3rd Avenue S.W., Calgary, AB, T2P 0B4, Phone: (403) 296-0140, Fax: (403) 213-3648, www.fortchicago.com