EPCOR Power L.P. announces settlement of Tunis power plant natural gas supply contract litigation
EDMONTON, Alberta - January 28, 2008 - EPCOR Power L.P. (TSX: EP.UN) (the Partnership), today announced that it has reached a settlement with NAL Resources Ltd. (NAL), a subsidiary of Manulife Financial Corporation, in respect of NAL's claim of frustration of the contract pursuant to which NAL supplies natural gas to the Partnership's Tunis power plant located in Ontario. Settlement of the NAL claim concludes all outstanding litigation which commenced in 2003 with respect to Tunis natural gas supply contracts.
As a result of the settlement with NAL, the Partnership has made a one-time payment to NAL of approximately $4.2 million for periods up to December 31, 2007. Amounts owing up to September 30, 2007 were previously estimated and accrued by the Partnership in its third quarter interim financial statements.
The settlement with NAL follows settlement of a similar but separate claim by Devon Canada Corporation (Devon) that was resolved in July of 2007 regarding its Tunis gas supply agreement. All retroactive amounts owing under the Devon settlement were previously paid in 2007.
Based on the settlements reached with NAL and Devon, the Partnership expects that its cost for natural gas for the Tunis facility will increase by approximately $6 million in each of 2008 and 2009 and by $3 million in 2010 from what they would otherwise have been under the previous contract terms. Amounts recorded up to September 30, 2007 for natural gas costs at the Tunis facility have been recorded and accrued based on the terms of the amended contracts. Under the amended terms of the natural gas supply contracts for the Tunis facility, the natural gas prices are at fixed rates that escalate 4 per cent per annum.
Had the claims by NAL and Devon been successful, the natural gas supplying the Partnership's Tunis plant would have been purchased at prevailing market prices for the period 2003 to 2010 and the Partnership estimated that the total resulting incremental cost would have been in excess of $100 million.
"We are pleased to have the long standing Tunis natural gas supply litigation behind us and it represents another step in securing the long-term stability of our cash flows," said Brian Vaasjo, President, EPCOR Power Services Limited, the general partner for EPCOR Power L.P. "It removes what was a large financial exposure and will allow us to continue to focus on ongoing operational, commercial and growth opportunities."
About EPCOR Power L.P.
Established in 1997, EPCOR Power L.P. is a limited partnership organized under the laws of the Province of Ontario. The Partnership's portfolio consists of 19 wholly-owned power generation assets located in Canada and the United States, a 50 per cent interest in a power generation asset in Washington State, and a 15.4 per cent interest in Primary Energy Recycling Holdings LLC ("PERH"). The Partnership's assets have a total net generating capacity of 1,287 megawatts and more than three million pounds per hour of thermal energy. PERH wholly owns four recycled energy assets in the United States with an aggregate generation capacity of 284 megawatts and nearly two million pounds per hour of thermal energy, and has a 50 per cent interest in a pulverized coal facility. Primary Energy Ventures LLC, a subsidiary of the Partnership, manages and operates these facilities for PERH. For more information on the Partnership, please visit: http://www.epcorpowerlp.ca/
Forward-looking Information
Certain information in this news release is forward-looking and related to anticipated financial performance, events and strategies. When used in this context, words such as "will", "anticipate", "believe", "plan", "intend", "target", and "expect" or similar words suggest future outcomes. By their nature, such statements are subject to significant risks, assumptions and uncertainties, which could cause the Partnership's actual results and experience to be materially different than the anticipated results. Such risks, assumptions and uncertainties include, but are not limited to, the ability of the Partnership to successfully integrate and realize the financial benefits of acquisitions, the ability of the Partnership to implement its strategic initiatives and whether such strategic initiatives will yield the expected benefits, the availability and price of energy commodities, plant availability, waste heat availability and water flows, regulatory and government decisions, the renewal and terms of power purchase contracts, competitive factors in the power industry, the current and future economic conditions in North America and the performance of contractors and suppliers.
Readers are cautioned not to place undue reliance on forward-looking statements as actual results could differ materially from the plans, expectations, estimates or intentions expressed in the forward-looking statements. Except as required by law, the Partnership disclaims any intention and assumes no obligation to update any forward-looking statement even if new information becomes available, as a result of future events or for any other reason.
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