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Press release from CNW Group

Fort Chicago announces 2010 second quarter results and updated 2010 guidance

Wednesday, July 28, 2010

Fort Chicago announces 2010 second quarter results and updated 2010 guidance16:35 EDT Wednesday, July 28, 2010/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./ << Trading Symbol: FCE.UN Exchange: TSX >> CALGARY, July 28 /CNW/ - Fort Chicago Energy Partners L.P. ("Fort Chicago" or "the Partnership") today announced its results for the three months ended June 30, 2010. Mr. Stephen H. White, President and Chief Executive Officer commented, "Our businesses delivered strong results from operations this quarter and this is reflected in our second quarter distributable cash. We are very pleased that Aux Sable has continued to benefit from favourable NGL market conditions, recognizing $22.1 million in margin-based lease revenues. An additional $8.0 million of margin-based lease revenues remains to be recognized in the remainder of this year. Our pipeline business continued to meet expectations, as did our power business, which generated improved operating income this quarter.""These solid operating results are not as apparent in our second quarter net income when compared to the same period last year, primarily due to currency translation losses arising from our United States-based activities.""We have also made recent announcements regarding several strategic initiatives. Our agreement to acquire Swift Power Corp. is an important step towards growing our renewable energy portfolio and provides us with additional expertise in this field. In July, we successfully issued $86.25 million of convertible debentures through a public offering, strengthening our overall capitalization. The majority of the proceeds from this offering were used to repay amounts drawn on our credit facilities. And we are very pleased that Aux Sable Canada has entered into a new supply agreement for its Heartland Off-gas Facility. This arrangement will contribute to our earnings and cash flows beginning in the latter part of 2011."Highlights for the Three Months ended June 30, 2010 << - Net income and adjusted net income of $18.4 million or $0.13 per Unit - Distributable cash of $49.3 million or $0.34 per Unit - Cash from operating activities of $41.1 million - Aux Sable recognized $22.1 million of margin-based lease revenues; additional $8.0 million unrecognized as at June 30, 2010 - Agreement to acquire Swift Power Corp. announced in June - $86.25 million convertible debenture offering completed in July - New supply agreement for Heartland Off-gas Facility announced in July Financial Highlights ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues Pipeline(1) 100,585 104,109 200,983 209,857 NGL 45,098 28,156 82,729 49,697 Power 22,203 16,903 44,151 39,842 Fort Chicago - Corporate 79 122 79 698 ------------------------------------------------------------------------- 167,965 149,290 327,942 300,094 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) before tax Pipeline 24,584 26,065 49,163 54,026 NGL 20,944 5,889 30,334 3,349 Power (3,180) (2,213) (1,800) (4,199) Fort Chicago - Corporate (17,329) (7,919) (34,557) (19,325) ------------------------------------------------------------------------- 25,019 21,822 43,140 33,851 Tax expense (6,600) (1,863) (10,647) (2,588) ------------------------------------------------------------------------- Net income 18,419 19,959 32,493 31,263 Per Unit ($) 0.13 0.15 0.23 0.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjustments to net income for non-recurring (gains) losses (net of tax) Power - Fair value loss reclassified from other comprehensive income - - - 2,288 ------------------------------------------------------------------------- Adjusted net income(2) 18,419 19,959 32,493 33,551 Per Unit ($) 0.13 0.15 0.23 0.25 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 June 30, 2010 Management's Discussion and Analysis. >> For the three months ended June 30, 2010, Fort Chicago generated net income of $18.4 million or $0.13 per Unit compared to $20.0 million or $0.15 per Unit for the same period in 2009. The decrease primarily results from higher non-cash foreign exchange losses and a mark-to-market loss related to Fort Chicago Power's exchangeable debentures. In aggregate, the effect of foreign exchange and the mark-to-market exchangeable debenture loss resulted in a $10.2 million or $0.07 per Unit reduction in second quarter net income when compared to net income for the same period last year.Aux Sable's earnings for the three months ended June 30, 2010 increased significantly compared to the same period last year. As a result of continued favourable NGL market conditions, Aux Sable recognized $22.1 million of margin-based lease revenues this quarter and deferred the recognition of an additional $8.0 million in margin-based lease revenues. This reflects a substantial improvement from the same period last year when Aux Sable recognized $6.8 million of margin-based lease revenues.Earnings from the Partnership's power business, excluding the mark-to-market loss recorded in relation to Fort Chicago Power's exchangeable debentures, increased compared to the same period last year. This increase is due primarily to a contribution from the East Windsor cogeneration facility, which commenced operations in November 2009, and higher earnings from the Brush generation facility.Earnings from the Partnership's pipeline businesses, Alliance and AEGS, were relatively consistent with the same period last year, although Alliance's U.S.-generated earnings were impacted by the effect of the stronger Canadian dollar.The Partnership incurred higher corporate costs during the second quarter of 2010, reflecting increased interest costs related to the Partnership's July 2009 issuance of senior notes and foreign exchange losses. Corporate costs for the same period last year included foreign exchange gains. Taxes increased in the second quarter of 2010 compared to the same period last year due to higher Aux Sable earnings. << ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts) 2010 2009 2010 2009 ------------------------------------------------------------------------- Distributable cash(1) Pipeline 33,881 33,835 67,842 68,468 NGL 23,583 6,357 34,370 5,582 Power 2,669 4,767 4,451 9,829 Fort Chicago - Corporate (9,971) (3,688) (19,331) (11,560) Taxes (886) (2,652) (6,347) (2,690) ------------------------------------------------------------------------- 49,276 38,619 80,985 69,629 ------------------------------------------------------------------------- Per Unit ($) 0.34 0.29 0.57 0.52 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash from operating activities 41,062 33,227 107,329 77,607 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 June 30, 2010 Management's Discussion and Analysis. >> Distributable cash for the three months ended June 30, 2010 was $49.3 million or $0.34 per Unit, compared to $38.6 million or $0.29 per Unit 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 and reduced return on investment base; - comparable distributable cash from AEGS; - higher distributions from Aux Sable, reflecting more favourable NGL market conditions; - lower distributable cash from Fort Chicago Power, reflecting higher maintenance capital expenditures at the California cogeneration facilities and the effect of the stronger Canadian dollar, partially offset by higher capacity payments from the Brush facility and incremental cash flows from Glen Park; - the absence of a foreign exchange gain realized in the second quarter of 2009; - increased corporate interest costs, due primarily to the senior notes issued in July 2009; and - lower current taxes, as the effect of increased Aux Sable earnings was mitigated as a result of loss utilization made available through corporate restructuring. >> In aggregate, the effect of the stronger Canadian dollar resulted in a $2.2 million or $0.02 per Unit reduction in distributable cash for the three months ended June 30, 2010 when compared to distributable cash for the same period last year.Fort Chicago generated cash from operating activities of $41.1 million for the three months ended June 30, 2010, a $7.9 million increase from the same period last year, due primarily to increased operating cash flows from Aux Sable.Operating HighlightsDuring the three months ended June 30, 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 1.582 bcf/d, approximating volumes delivered during the same period last year.AEGS second quarter toll volumes of 283.1 thousand barrels per day increased slightly relative to 273.4 mbbls/d in the same period last year due to higher deliveries to Fort Saskatchewan.During the three months ended June 30, 2010, Aux Sable processed 96 percent (2009 - 99 percent) of the natural gas delivered by Alliance. Modifications were successfully made to Aux Sable's Channahon Facility in the second quarter of this year to increase ethane recoveries. Aux Sable sold 74.6 mbbls/d of natural gas liquids during the second quarter of 2010, up from 70.8 mbbls/d for the same period in 2009. Average ethane volumes increased to 39.4 mbbls/d in the second quarter of 2010 from 36.4 mbbls/d in the second quarter of 2009 due to higher ethane recoveries. Propane plus volumes for the quarter increased to 35.2 mbbls/d from 34.4 mbbls/d in the second quarter of 2009.Fort Chicago Power generated 97,308 megawatt hours of electricity, down from 112,525 MWh during the same period last year, primarily reflecting reduced dispatch at the California cogeneration facilities. Under the new Short Run Avoided Cost energy reimbursement formula, it is less economic to dispatch these facilities during non-peak periods. The decrease in electricity generated also reflects lower dispatch at the Brush facility. These decreases were partially offset by incremental electricity generated by Glen Park. As the earnings of most of Fort Chicago Power's facilities are comprised of fixed capacity payments, their earnings and cash flows are not significantly influenced by the volume of electricity generated.NRGreen generated 34,731 MWh of electricity during the second quarter, approximating volumes generated during the same period last year. East Windsor Cogeneration, which commenced operations in November 2009, generated 52,810 MWh of electricity during the second quarter.Agreement to Acquire Swift Power Corp.On June 22, Fort Chicago announced that it had entered into an agreement with Swift Power Corp. ("Swift Power") pursuant to which Fort Chicago agreed to make an offer to acquire all of the issued and outstanding common shares (the "Swift Shares") of Swift Power by way of a take-over bid. The aggregate transaction value, not including the Swift Shares owned by Fort Chicago, is approximately $8.47 million. The offer is scheduled to close on August 9, 2010.In April of this year, Swift Power was awarded a long-term Electricity Purchase Agreement by BC Hydro for the Dasque Cluster hydroelectric project, a 20 megawatt project located near Terrace, B.C. The Dasque Cluster project is planned to be in operation by late 2012, pending receipt of necessary regulatory approvals.July 2010 Convertible Debenture OfferingOn July 19, Fort Chicago issued through a public offering $75 million of 5.75 percent convertible unsecured subordinated debentures, Series C (the "Series C Debentures") at a price of $1,000 per Series C Debenture. The Series C Debentures, which mature on July 31, 2017, are convertible, at the option of the holder, at any time into fully paid Class A limited partnership units of Fort Chicago ("Class A Units") at a conversion price of $14.60 per Class A Unit. The Partnership used the net proceeds of approximately $71.5 million to repay amounts borrowed under its credit facilities.On July 22, the underwriters exercised the over-allotment option in full and purchased an additional $11.25 million principal amount of Series C Debentures. The Partnership intends to use the net proceeds of approximately $10.8 million to repay amounts borrowed under its credit facilities, to finance its ongoing acquisition and development activities and for general corporate purposes.New Supply Agreement for Aux Sable Canada's Heartland Off-gas FacilityOn July 6, Aux Sable Canada announced the execution of a long-term off-gas processing agreement with Shell Canada Products, securing a new feedstock source for Aux Sable Canada's Heartland Off-gas Facility. Under the agreement, the Heartland Off-gas Facility will process up to 20 million cubic feet per day of off-gas and produce hydrogen, ethane and a propane-plus mix, which will be delivered via pipeline to Shell's Scotford Refinery. Fort Chicago expects the Heartland Off-gas Facility to be operational in the summer of 2011.Updated 2010 GuidanceFort Chicago today updated its guidance for 2010 distributable cash to be in the range of $1.00 per Unit to $1.30 per Unit, compared to previously issued guidance of $0.95 per Unit to $1.40 per Unit. The updated range reflects Aux Sable's strong year-to-date performance and the Partnership's updated outlook for NGL market conditions. 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 8:00 a.m. Mountain time (10:00 a.m. Eastern time) on Thursday, July 29, 2010 to discuss the 2010 second quarter results. The call can be accessed at 1-888-231-8191 or 1-647-427-7450 (conference ID 80979020 followed by the pound sign).A replay will be available shortly thereafter at 1-800-642-1687 and 1- 416-849-0833. The access code is 80979020 (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 and its 6.75% convertible unsecured subordinated debentures, Series B and the Series C Debentures are listed on the TSX under the symbols FCE.DB.B and FCE.DB.C, respectively. 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 an interest in a world-class extraction facility near Chicago; and a power business with power facilities in Ontario, New York, Colorado and California, district energy systems in Ontario and Prince Edward Island, and waste heat power facilities along the Alliance Pipeline. Fort Chicago and each of its pipeline, NGL extraction and power businesses are also actively developing a number of greenfield investment opportunities that will be a key source of future growth. In the normal course of its business, Fort Chicago and each of its businesses regularly evaluate and pursue acquisition and development opportunities. << 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 in-service of Swift Power's Dasque Cluster hydroelectric project; the timing of in-service of Aux Sable Canada's Heartland Off-gas Facility and its ability to generate earnings and cash flows; 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 ------------------------------------------------------------------------- June 30, December ($ Thousands; unaudited) 2010 31, 2009 ------------------------------------------------------------------------- Assets Current assets Cash and short-term investments 48,156 57,945 Restricted cash 1,313 3,084 Transportation security deposits and revenue adjustments 7,465 8,538 Receivables 66,648 59,155 Inventory 4,545 5,071 Prepaid expenses and other 5,651 9,848 ------------------------------------------------------------------------- 133,778 143,641 Long-term receivables 353,177 351,629 Pipeline, plant and other capital assets 2,290,260 2,286,255 Intangible assets 93,497 59,647 Other assets 23,205 23,727 ------------------------------------------------------------------------- 2,893,917 2,864,899 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Payables 76,908 91,264 Transportation security deposits 3,195 4,008 Distribution payable 4,891 6,406 Current portion of long-term senior debt 246,843 145,014 Subordinated convertible debentures and exchangeable debentures 52,062 49,302 ------------------------------------------------------------------------- 383,899 295,994 Long-term senior debt 1,460,723 1,534,689 Future taxes 294,283 291,279 Other long-term liabilities 44,014 44,211 ------------------------------------------------------------------------- 2,182,919 2,166,173 ------------------------------------------------------------------------- Partners' Equity Partners' capital account 1,099,398 1,057,239 Cumulative other comprehensive loss (46,428) (54,624) Cumulative net income 616,211 583,718 Cumulative distributions (958,183) (887,607) ------------------------------------------------------------------------- 710,998 698,726 ------------------------------------------------------------------------- 2,893,917 2,864,899 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Income and Cumulative Income ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues Operating revenues 166,959 148,564 326,472 297,384 Interest and other 1,006 726 1,470 2,710 ------------------------------------------------------------------------- 167,965 149,290 327,942 300,094 ------------------------------------------------------------------------- Expenses Operations and maintenance 48,795 45,767 102,736 97,040 Depreciation and amortization 34,841 35,750 68,626 71,995 Interest and other finance 27,672 25,400 55,284 51,526 General, administrative and project development 23,624 21,077 49,304 43,489 Foreign exchange and other 8,014 (526) 8,852 2,193 ------------------------------------------------------------------------- 142,946 127,468 284,802 266,243 ------------------------------------------------------------------------- Net income before taxes 25,019 21,822 43,140 33,851 Current taxes 1,040 2,717 6,602 2,819 Future taxes 5,560 (854) 4,045 (231) ------------------------------------------------------------------------- Net income 18,419 19,959 32,493 31,263 Cumulative net income at the beginning of the period 597,792 557,447 583,718 546,143 ------------------------------------------------------------------------- Cumulative net income at the end of the period 616,211 577,406 616,211 577,406 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income per Unit Basic and diluted 0.13 0.15 0.23 0.23 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Comprehensive Income and Cumulative Other Comprehensive Income ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net income 18,419 19,959 32,493 31,263 Other comprehensive income (loss), net of taxes Cumulative translation adjustment Unrealized foreign exchange gain (loss) on translation of self- sustaining foreign operations 18,851 (38,882) 8,904 (25,886) Deemed realization of cumulative translation adjustment reclassified to net income 2,143 377 5,496 1,038 Gain (loss) on hedge of self-sustaining foreign operation (3,636) 11,430 (3,138) 7,870 Fair value loss transferred to net income - - - 1,427 Other (1,404) 607 (2,886) 869 ------------------------------------------------------------------------- 15,954 (26,468) 8,376 (14,682) ------------------------------------------------------------------------- Comprehensive income (loss) 34,373 (6,509) 40,869 16,581 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cumulative other comprehensive income (loss) at the beginning of the period (62,202) 4,480 (54,624) (7,306) Other comprehensive income (loss), net of taxes 15,954 (26,468) 8,376 (14,682) ------------------------------------------------------------------------- Cumulative other comprehensive income (loss) at the end of the period (46,248) (21,988) (46,248) (21,988) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Cash Flows ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Operating Net income 18,419 19,959 32,493 31,263 Non-cash transportation revenue 1,031 (1,683) 2,079 (1,252) Depreciation, amortization and other non-cash items 39,362 39,290 68,326 73,842 Unrealized foreign exchange loss (gain) 8,667 445 9,138 222 Future taxes 5,560 (854) 4,045 (231) Changes in non-cash working capital (31,977) (23,930) (8,752) (26,237) ------------------------------------------------------------------------- 41,062 33,227 107,329 77,607 ------------------------------------------------------------------------- Financing Long-term debt repaid (36,553) (36,300) (38,034) (37,287) Net change in credit facilities (17,038) (12,533) 55,505 6,457 Distributions paid (12,538) (22,037) (29,939) (55,552) Other - (512) - (512) ------------------------------------------------------------------------- (66,129) (71,382) (12,468) (86,894) ------------------------------------------------------------------------- Investing Acquisition of Northbrook New York, LLC, net of cash acquired - - (80,708) - Pipeline, plant and other capital assets (7,483) (5,555) (14,524) (14,074) Restricted cash 7 4,291 1,770 11,911 Other (676) - (2,456) (1,008) Changes in non-cash investing working capital (806) (1,586) (9,627) (8,801) ------------------------------------------------------------------------- (8,958) (2,850) (105,545) (11,972) ------------------------------------------------------------------------- Decrease in cash and short- term investments before the effect of foreign exchange rate changes on cash and short-term investments (34,025) (41,005) (10,684) (21,259) Effect of foreign exchange rate changes on cash and short-term investments 1,401 (3,085) 895 (2,577) Cash and short-term investments at the beginning of the period 80,780 76,318 57,945 56,064 ------------------------------------------------------------------------- Cash and short-term investments at the end of the period 48,156 32,228 48,156 32,228 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Distributable Cash(1) ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands, except where noted; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Cash inflows Alliance distributions, prior to withholdings for capital expenditures and net of debt service 30,166 30,285 60,592 61,173 AEGS distributable cash, after non-recoverable capital expenditures and debt service 3,715 3,550 7,250 7,295 Aux Sable distributions, net of support payments, non-recoverable debt service costs and maintenance capital 23,583 6,357 34,370 5,582 Fort Chicago Power distributable cash, after maintenance capital expenditures and debt service 2,104 4,327 3,321 8,949 NRGreen distributions, prior to withholding for project development costs 565 440 1,130 880 Realized foreign exchange gains, interest income and other - 3,691 - 4,347 ------------------------------------------------------------------------- 60,133 48,650 106,663 88,226 Cash outflows General and administrative (3,845) (3,825) (7,749) (8,454) Interest and other finance (5,348) (2,669) (10,015) (5,632) Taxes (886) (2,652) (6,347) (2,690) Principal repayments on senior debt (778) (885) (1,567) (1,821) ------------------------------------------------------------------------- (10,857) (10,031) (25,678) (18,597) ------------------------------------------------------------------------- Distributable cash (1) 49,276 38,619 80,985 69,629 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable cash per Unit ($)(2) 0.34 0.29 0.57 0.52 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions paid/ payable(3) 35,564 33,788 70,576 67,301 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions paid/payable per Unit ($) 0.25 0.25 0.25 0.50 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 June 30, 2010, the average number of Units outstanding for this calculation was 142,312,387 and 144,574,000 (2009 - 135,207,357 and 137,468,978) on a basic and diluted basis, respectively. For the six months ended June 30, 2010, the average number of Units outstanding for this calculation was 141,207,060 and 143,468,681 (2009 - 134,659,117 and 136,920,738) 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 June 30, 2010 were converted into Units. (3) Includes $22.1 million and $42.2 million of distributions for the three and six months ended June 30, 2010, respectively, (2009 - $11.9 million and $15.7 million) satisfied through the issuance of Units under the Partnership's Distribution Reinvestment Plan. Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Reconciliation of Distributable Cash to Cash Flow from Operating Activities ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Consolidated cash flow from operating activities 41,062 33,227 107,329 77,607 Adjusted for: Cash flow (generated from) used for operating activities applicable to jointly held businesses(1) 1,877 (3,914) (42,996) (40,883) ------------------------------------------------------------------------- Cash flow from operating activities applicable to wholly-owned businesses(2) 42,939 29,313 64,333 36,724 Add (deduct) amounts applicable to wholly-owned businesses: Project development costs(3) 3,152 3,202 7,651 5,966 Change in non-cash working capital 2,985 756 7,595 17,709 Principal repayments on senior notes (1,448) (1,516) (2,894) (3,080) Maintenance capital expenditures (2,059) (231) (2,926) 18 Distributions earned greater than distributions received(4) 3,707 6,633 7,226 12,292 ------------------------------------------------------------------------- Distributable cash 49,276 38,157 80,985 69,629 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (1) Represents the net of (i) 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; and (ii) distributions received from jointly held businesses. (2) Net of support payments made to Alliance Canada Marketing of $2.4 million and $5.1 million for the three and six months ended June 30, 2010 (2009 - $1.3 million and $4.1 million). (3) Represents costs incurred by the Partnership and its wholly-owned businesses in relation to projects where the recoverability of such costs has not yet been established. Amounts incurred for the three months ended June 30, 2010 relate primarily to the Jordan Cove LNG terminal project, the Pacific Connector Gas Pipeline project, and the Alton Gas Storage project. (4) Represents the difference between distributions declared by jointly held businesses and distributions received. Reconciliation of Adjusted Net Income(1) to Net Income ------------------------------------------------------------------------- Three months ended Six months ended June 30 June 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net income 18,419 19,959 32,493 31,263 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 18,419 19,959 32,493 33,551 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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