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Press release from CNW Group

FORT CHICAGO ANNOUNCES 2010 THIRD QUARTER RESULTS AND UPDATED 2010 GUIDANCE

Tuesday, November 02, 2010

FORT CHICAGO ANNOUNCES 2010 THIRD QUARTER RESULTS AND UPDATED 2010 GUIDANCE17:27 EDT Tuesday, November 02, 2010/NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES./ << Trading Symbol: FCE.UN Exchange: TSX >>CALGARY, Nov. 2 /CNW/ - Fort Chicago Energy Partners L.P. ("Fort Chicago" or "the Partnership") today announced its results for the three months ended September 30, 2010. Mr. Stephen H. White, President and Chief Executive Officer commented, "I am proud to report that with the payment of our distribution for the month of October 2010, the Partnership will have paid an aggregate of over one billion dollars in distributions to Unitholders since our inception in 1997. This is a significant milestone for Fort Chicago and underscores the excellent cash-generating ability of our businesses.""I am also very pleased that the Partnership has delivered another quarter of solid results, supported by each of our businesses, which performed in line with or better than our expectations. The third quarter was also a period of tremendous activity for the Partnership wherein we successfully advanced a number of our key strategic initiatives."Highlights for the Three Months ended September 30, 2010 << - Net income and adjusted net income of $30.5 million or $0.21 per Unit - Distributable cash of $53.4 million or $0.37 per Unit - Cash from operating activities of $86.2 million - Aux Sable recognized $20.3 million of margin-based lease revenues - $86.25 million convertible debenture offering completed in July - Acquisition of Swift Power Corp. completed in August - Agreement to purchase B.C. run-of-river hydro power facilities from ENMAX Corporation announced in September - Agreement to acquire Pristine Power Inc. announced in September - Information Circular related to corporate conversion mailed to Unitholders in October Financial Highlights ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues Pipeline(1) 103,033 102,786 304,016 312,643 NGL 41,559 42,478 124,288 92,175 Power 27,893 17,840 72,044 57,682 Fort Chicago - Corporate 119 62 198 760 ------------------------------------------------------------------------- 172,604 163,166 500,546 463,260 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income (loss) before tax Pipeline 25,025 26,514 74,188 80,540 NGL 18,817 20,063 49,151 23,412 Power 9,936 5,719 8,136 1,520 Fort Chicago - Corporate (14,599) (10,553) (49,156) (29,878) ------------------------------------------------------------------------- 39,179 41,743 82,319 75,594 Tax expense (8,643) (10,977) (19,290) (13,565) ------------------------------------------------------------------------- Net income 30,536 30,766 63,029 62,029 Per Unit ($) 0.21 0.23 0.44 0.46 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Adjustments to net income for non-recurring (gains) losses (net of tax) Power - Fair value loss reclassified from other comprehensive income - - - 2,288 ------------------------------------------------------------------------- Adjusted net income(2) 30,536 30,766 63,029 64,317 Per Unit ($) 0.21 0.23 0.44 0.48 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 September 30, 2010 Management's Discussion and Analysis. >>Fort Chicago generated net income of $30.5 million or $0.21 per Unit for the third quarter of 2010, which approximated amounts generated from the same period last year. Net income reflects Aux Sable's continued strong financial performance, resulting from ongoing favourable NGL market conditions. Aux Sable recognized $20.3 million in margin-based lease revenues in the third quarter, down slightly from $22.1 million in the third quarter of 2009.Fort Chicago's pipeline businesses, Alliance and AEGS, continued their steady performance. Excluding the effect of the stronger Canadian dollar on Alliance's U.S.-generated results, Alliance and AEGS generated levels of net income before tax for the third quarter of 2010 comparable to the same period in 2009.Net income before tax from the Partnership's power business includes incremental earnings from the Glen Park hydro facility, acquired in March 2010, and the East Windsor Cogeneration facility, which commenced operations in November 2009. Third quarter earnings from the Partnership's other power facilities were generally consistent with amounts generated during the third quarter of 2009. Third quarter 2010 earnings were partially offset by project development costs related to the Partnership's new run-of-river projects in British Columbia. Power net income before tax for the third quarter also includes a $4.0 million non-cash mark-to-market gain related to Fort Chicago Power's exchangeable debentures, up from a $2.5 million gain recorded in the third quarter of 2009. As of November 1, 2010, all of the outstanding exchangeable debentures have been exchanged or redeemed, resulting in a realized gain which will be recognized in earnings for the three and 12 month period ending December 31, 2010. Going forward, the Partnership's earnings will no longer be subject to the mark-to-market volatility of these securities.Fort Chicago incurred higher corporate costs during third quarter of 2010 primarily reflecting higher interest and project development costs. Taxes decreased in the third quarter of 2010 compared to the same period last year due to lower pre-tax earnings.Net income for third quarter of 2010 reflects the effect of a stronger Canadian dollar, which, in aggregate, resulted in a $0.8 million or less than $0.01 per Unit reduction in comparison to third quarter 2009 net income. The impact of this foreign exchange movement is reflected in the results of each of the Partnership's business segments. << ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts) 2010 2009 2010 2009 ------------------------------------------------------------------------- Distributable cash(1) Pipeline 38,496 33,295 106,338 101,763 NGL 19,630 21,068 54,000 26,650 Power 8,691 7,018 13,142 16,847 Fort Chicago - Corporate (9,853) (8,356) (29,184) (19,787) Taxes (3,589) (7,588) (9,936) (10,407) ------------------------------------------------------------------------- 53,375 45,437 134,360 115,066 ------------------------------------------------------------------------- Per Unit ($) 0.37 0.33 0.94 0.85 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cash from operating activities 86,211 89,449 193,540 167,056 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 September 30, 2010 Management's Discussion and Analysis. >>Distributable cash for the three months ended September 30, 2010 was $53.4 million or $0.37 per Unit compared to $45.4 million or $0.33 per Unit for the same period last year. This reflects: << - higher distributions from Alliance primarily due to the third quarter 2010 receipt of funds related to the settlement of claims that arose during the initial construction of the pipeline; - slightly lower distributions from Aux Sable, reflecting the effect of the stronger Canadian dollar; - higher distributable cash from Fort Chicago Power, reflecting the receipt of funds for the settlement of an insurance claim, and incremental cash flows from Glen Park, partially offset by higher maintenance capital expenditures at the California cogeneration facilities; - increased corporate interest costs; and - lower current taxes as a result of loss utilization made available through corporate restructuring, which occurred in the second quarter of 2010. >>In aggregate, the effect of the stronger Canadian dollar amounted to a $2.2 million or $0.02 per Unit reduction in distributable cash for the three months ended September 30, 2010 when compared to distributable cash for the same period last year.Fort Chicago generated cash from operating activities of $86.2 million for third quarter of 2010, a $3.2 million decrease from the same period last year, due primarily to lower operating cash flows from Alliance and Aux Sable driven by the effect of the stronger Canadian dollar and higher corporate interest payments. These decreases were partially offset by the receipt of funds related to an insurance settlement claim in the Partnership's power business.Operating HighlightsDuring the third quarter of 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 1.551 bcf/d, approximating volumes delivered during the same period last year.AEGS third quarter toll volumes of 282.5 thousand barrels per day increased slightly relative to 278.8 mbbls/d in the same period last year due to higher deliveries to Fort Saskatchewan.During third quarter of 2010, Aux Sable processed 98.5 percent (2009 - 97.5 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 69.0 mbbls/d of natural gas liquids during the third quarter of 2010, up from 66.3 mbbls/d for the same period in 2009. Average ethane volumes increased to 42.2 mbbls/d in the third quarter of 2010 from 35.5 mbbls/d in the third quarter of 2009 due to higher ethane recoveries. Propane plus volumes for the quarter decreased to 26.8 mbbls/d from 30.8 mbbls/d in the third quarter of 2009 due to a local supply decrease and a buildup of system inventory.Fort Chicago Power generated 121,640 megawatt hours of electricity during the third quarter of 2010, up from 115,131 MWh during the same period last year, primarily reflecting increased dispatch at the California cogeneration facilities. This variance reflects reduced third quarter 2009 volumes, driven by plant shut downs required to facilitate equipment repairs at the California cogeneration facilities. The increase in electricity generated also reflects incremental electricity generated by Glen Park and higher output from the London Cogeneration facility, partially offset by lower dispatch at the Brush facility. 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 35,636 MWh of electricity during the third quarter, up from 34,195 MW generated during the same period last year. East Windsor Cogeneration, which commenced operations in November 2009, generated 61,312 MWh of electricity during the third quarter.Third Quarter Acquisition ActivityDuring the third quarter, the Partnership continued to advance its strategy to grow its power business. The Partnership announced in September that it had entered into agreements to acquire (i) three operating run-of-river hydroelectric facilities and other development projects in B.C. from ENMAX Corporation and (ii) all of the issued and outstanding common shares of Pristine Power Inc. ("Pristine"), an electricity power developer and operator in the provinces of B.C. and Ontario. These acquisitions are expected to close in the fourth quarter of 2010. "The addition of these high quality power generation assets with stable, long-term contracted cash flows is consistent with Fort Chicago's overall investment strategy," said Mr. White. "We expect that the resulting stable cash flows will create long-term value for Fort Chicago."In August 2010, the Partnership completed its previously announced acquisition of Swift Power Corp. Swift Power continues to advance the development of the Dasque Cluster hydroelectric project, a 20 MW project located near Terrace B.C.Proposed Conversion to a Corporation and Change of NameOn October 25, 2010 the Partnership mailed out to Unitholders an Information Circular with respect to the Partnership's proposed conversion to a corporation (the "Arrangement"). Fort Chicago intends to seek approval of the Arrangement and other matters from Unitholders at a special meeting of Unitholders scheduled for November 23, 2010. The Partnership's conversion to a corporation, named Veresen Inc., is expected to become effective on January 1, 2011.Updated 2010 GuidanceFort Chicago today updated its guidance for 2010 distributable cash to be in the range of $1.16 per Unit to $1.22 per Unit, compared to previously issued guidance of $1.00 per Unit to $1.30 per Unit. The updated range reflects Aux Sable's strong year-to-date performance, and the Partnership's updated outlook for NGL market conditions. This range also assumes the Pristine acquisition closes on November 8, 2010 and the ENMAX transaction closes before the end of this year. 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 11:00 a.m. Mountain time (1:00 p.m. Eastern time) on Wednesday, November 3, 2010 to discuss the 2010 third quarter results. The call can be accessed at 1-888-231-8191 or 1- 647-427-7450 (conference ID 18351953 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 18351953 (followed by the pound sign).Fort ChicagoFort 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 the Series B Debentures 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, waste heat power facilities along the Alliance Pipeline in Saskatchewan and renewable power projects in British Columbia. 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 RestrictionsFort 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).Forward-Looking StatementsCertain 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 Partnership's ability to complete the proposed acquisition of ENMAX Corporation's B.C. run-of-river hydroelectric assets and the timing of such completion; the ability of the Partnership to complete the proposed acquisition of Pristine Power Inc. and the timing of such completion; 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 ------------------------------------------------------------------------- September 30, December 31, ($ Thousands; unaudited) 2010 2009 ------------------------------------------------------------------------- Assets Current assets Cash and short-term investments 98,384 57,945 Restricted cash - 3,084 Transportation security deposits and revenue adjustments 4,127 8,538 Receivables 64,932 59,155 Inventory 4,985 5,071 Prepaid expenses and other 4,912 9,848 ------------------------------------------------------------------------- 177,340 143,641 Long-term receivables 348,939 351,629 Pipeline, plant and other capital assets 2,231,703 2,286,255 Intangible assets 103,035 59,647 Other assets 33,590 23,727 ------------------------------------------------------------------------- 2,894,607 2,864,899 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Liabilities Current liabilities Payables 93,164 91,264 Transportation security deposits 3,019 4,008 Distribution payable 3,975 6,406 Current portion of long-term senior debt 185,673 145,014 Subordinated convertible debentures and exchangeable debentures 44,221 49,302 ------------------------------------------------------------------------- 330,052 295,994 Long-term senior debt 1,416,700 1,534,689 Subordinated convertible debentures 82,263 - Future taxes 295,218 291,279 Other long-term liabilities 43,470 44,211 ------------------------------------------------------------------------- 2,167,703 2,166,173 ------------------------------------------------------------------------- Partners' Equity Partners' capital account 1,126,968 1,057,239 Cumulative other comprehensive loss (52,474) (54,624) Cumulative net income 646,747 583,718 Cumulative distributions (994,337) (887,607) ------------------------------------------------------------------------- 726,904 698,726 ------------------------------------------------------------------------- 2,894,607 2,864,899 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Income and Cumulative Income ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands, except per Unit amounts; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Revenues Operating revenues 170,419 162,081 496,891 459,465 Interest and other 2,185 1,085 3,655 3,795 ------------------------------------------------------------------------- 172,604 163,166 500,546 463,260 ------------------------------------------------------------------------- Expenses Operations and maintenance 50,200 44,451 152,936 141,491 Depreciation and amortization 34,964 34,334 103,590 106,329 Interest and other finance 28,068 25,578 83,352 77,104 General, administrative and project development 25,389 20,385 74,693 63,874 Foreign exchange and other (5,196) (3,325) 3,656 (1,132) ------------------------------------------------------------------------- 133,425 121,423 418,227 387,666 ------------------------------------------------------------------------- Net income before taxes 39,179 41,743 82,319 75,594 Current taxes 3,729 7,588 10,331 10,407 Future taxes 4,914 3,389 8,959 3,158 ------------------------------------------------------------------------- Net income 30,536 30,766 63,029 62,029 Cumulative net income at the beginning of the period 616,211 577,406 583,718 546,143 ------------------------------------------------------------------------- Cumulative net income at the end of the period 646,747 608,172 646,747 608,172 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Net income per Unit Basic and diluted 0.21 0.23 0.44 0.46 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Consolidated Statements of Comprehensive Income and Cumulative Other Comprehensive Income ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net income 30,536 30,766 63,029 62,029 Other comprehensive income (loss), net of taxes Cumulative translation adjustment Unrealized foreign exchange loss on translation of self- sustaining foreign operations (12,777) (36,288) (4,053) (62,174) Deemed realization of cumulative translation adjustment reclassified to net income (390) 1,097 5,106 2,135 Gain (loss) on hedge of self-sustaining foreign operation 1,913 6,514 (1,225) 14,384 Fair value loss transferred to net income - - - 1,427 Other 5,208 187 2,322 1,056 ------------------------------------------------------------------------- (6,046) (28,490) 2,150 (43,172) ------------------------------------------------------------------------- Comprehensive income 24,490 2,276 65,179 18,857 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Cumulative other comprehensive loss at the beginning of the period (46,428) (21,988) (54,624) (7,306) Other comprehensive income (loss), net of taxes (6,046) (28,490) 2,150 (43,172) ------------------------------------------------------------------------- Cumulative other comprehensive income (loss) at the end of the period (52,474) (50,478) (52,474) (50,478) ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Consolidated Statement of Cash Flows ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Operating Net income 30,536 30,766 63,029 62,029 Non-cash transportation revenue 1,990 (2,192) 4,069 (3,444) Depreciation, amortization and other non-cash items 36,447 35,642 104,773 109,484 Unrealized foreign exchange loss (gain) (6,135) (4,866) 3,003 (4,644) Future taxes 4,914 3,389 8,959 3,158 Changes in non-cash working capital 18,459 26,710 9,707 473 ------------------------------------------------------------------------- 86,211 89,449 193,540 167,056 ------------------------------------------------------------------------- Financing Long-term debt issued, net of issue costs - 198,115 - 198,115 Convertible debentures issued, net of issue costs 82,148 - 82,148 - Long-term debt repaid (2,658) (929) (40,692) (38,216) Net change in credit facilities (86,418) (205,852) (30,913) (199,395) Distributions paid (13,363) (21,258) (43,302) (76,810) Other - 472 - (40) ------------------------------------------------------------------------- (20,291) (29,452) (32,759) (116,346) ------------------------------------------------------------------------- Investing Acquisition of Northbrook New York, LLC, net of cash acquired - - (80,708) - Acquisition of Swift Power Corp, net of cash acquired (9,150) - (9,150) - Pipeline, plant and other capital assets (6,628) (8,017) (21,152) (22,091) Restricted cash 1,307 4,852 3,077 16,763 Other (963) 858 (3,419) (150) Changes in non-cash investing working capital 455 (534) (9,172) (9,335) ------------------------------------------------------------------------- (14,979) (2,841) (120,524) (14,813) ------------------------------------------------------------------------- Increase in cash and short- term investments before the effect of foreign exchange rate changes on cash and short-term investments 50,941 57,156 40,257 35,897 Effect of foreign exchange rate changes on cash and short-term investments (713) (1,347) 182 (3,924) Cash and short-term investments at the beginning of the period 48,156 32,228 57,945 56,064 ------------------------------------------------------------------------- Cash and short-term investments at the end of the period 98,384 88,037 98,384 88,037 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Distributable Cash(1) ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 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 34,563 29,403 95,155 90,576 AEGS distributable cash, after non-recoverable capital expenditures and debt service 3,933 3,892 11,183 11,187 Aux Sable distributions, net of support payments, non-recoverable debt service costs and maintenance capital 19,630 21,068 54,000 26,650 Fort Chicago Power distributable cash, after maintenance capital expenditures and debt service 8,191 6,578 11,512 15,527 NRGreen distributions, prior to withholding for project development costs 500 440 1,630 1,320 Interest income and other 1,772 (358) 1,772 3,989 ------------------------------------------------------------------------- 68,589 61,023 175,252 149,249 Cash outflows General and administrative (4,842) (3,463) (12,591) (11,917) Interest and other finance (6,011) (3,854) (16,026) (9,486) Taxes (3,589) (7,452) (9,936) (10,142) Principal repayments on senior debt (772) (817) (2,339) (2,638) ------------------------------------------------------------------------- (15,214) (15,586) (40,892) (34,183) ------------------------------------------------------------------------- Distributable cash(1) 53,375 45,437 134,360 115,066 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributable cash per Unit ($)(2) 0.37 0.33 0.94 0.85 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions paid/ payable(3) 36,154 34,240 106,730 101,541 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Distributions paid/payable per Unit ($) 0.25 0.25 0.75 0.75 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 September 30, 2010, the average number of Units outstanding for this calculation was 144,674,764 and 152,723,392 (2009 -136,796,843 and 139,058,843) on a basic and diluted basis, respectively. For the nine months ended September 30, 2010, the average number of Units outstanding for this calculation was 142,362,962 and 146,553,585 (2009 - 135,371,692 and 137,633,313) on a basic and diluted basis, respectively. The number of Units outstanding would increase by 7,931,496 (2009 - 2,261,621) Units if the outstanding Convertible Debentures as at September 30, 2010 were converted into Units. (3) Includes $23.7 million and $65.9 million of distributions for the three and nine months ended September 30, 2010, respectively, (2009 - $13.4 million and $29.1 million) satisfied through the issuance of Units under the Partnership's Distribution Reinvestment Plan. Fort Chicago Energy Partners L.P. ------------------------------------------------------------------------- Reconciliation of Distributable Cash to Cash Flow from Operating Activities ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Consolidated cash flow from operating activities 86,211 89,449 193,540 167,056 Adjusted for: Cash flow (generated from) used for operating activities applicable to jointly held businesses (1) (38,858) (41,148) (81,854) (82,031) ------------------------------------------------------------------------- Cash flow from operating activities applicable to wholly-owned businesses(2) 47,353 48,301 111,686 85,025 Add (deduct) amounts applicable to wholly- owned businesses: Project development costs(3) 3,845 2,442 11,496 8,408 Change in non-cash working capital (9) (3,553) 7,586 14,156 Principal repayments on senior notes (1,460) (1,464) (4,354) (4,544) Maintenance capital expenditures (1,487) (603) (4,413) (585) Distributions earned greater than distributions received(4) 5,133 314 12,359 12,606 ------------------------------------------------------------------------- Distributable cash 53,375 45,437 134,360 115,066 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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, consequently, is not included in distributable cash until 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 and Sable NGL Services of $1.8 million and $7.0 million for the three and nine months ended September 30, 2010 (2009 - $2.4 million and $6.5 million). (3) Represents costs incurred by the Partnership and its wholly-owned businesses in relation to projects where the recoverability of such costs has not yet been established. Amounts incurred for the three months ended September 30, 2010 relate primarily to the Jordan Cove LNG terminal project, the Pacific Connector Gas Pipeline project, and the Alton Gas Storage project. (4) Represents the difference between distributions declared by jointly held businesses and distributions received. Reconciliation of Adjusted Net Income(1) to Net Income ------------------------------------------------------------------------- Three months ended Nine months ended September 30 September 30 ------------------------------------------------------------------------- ($ Thousands; unaudited) 2010 2009 2010 2009 ------------------------------------------------------------------------- Net income 30,536 30,766 63,029 62,029 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 30,536 30,766 63,029 64,317 ------------------------------------------------------------------------- ------------------------------------------------------------------------- (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 nine months ended September 30, 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