Mr. Christopher Fanella reports

PRIMARY ENERGY REPORTS FIRST QUARTER 2014 RESULTS

Primary Energy Recycling Corp. has released its financial and operational results for the first quarter ended March 31, 2014.

First quarter highlights

• The company announced the signing of a new 10-year tolling agreement between Cokenergy and its site host. The company's next contract expiration is in 2020. Further, the company accelerated the upgrade work at Cokenergy to position the project to take advantage of the variable nature of the economics in the new contract beginning in October, 2014.
• The company announced a 40-per-cent increase in its quarterly dividend rate from five cents to seven cents, or from 20 cents to 28 cents annually, due to confidence in the long-term stability in the company's cash flows from operations.
• The extremely cold weather and reduced furnace operations leading up to the imminent reline impacted waste heat, byproduct fuel and steam delivery to the company's operations. These events had a negative impact estimated at $1.2-million on the company's results for the first quarter of 2014 as compared with first quarter of 2013.

"While we strengthened our foundation in the first quarter with the new Cokenergy deal, our operations, and those of our host and partners, were challenged with the extremely cold winter weather and the imminent reline of our host's blast furnace," said John Prunkl, president and chief executive officer of Primary Energy. "Despite the short-term operational challenges we faced this quarter, the completion of the Cokenergy contract provides for a stronger base business and allowed us to increase our dividend. Going forward, our near-term focus is to complete the Cokenergy retubing program and prepare for our host's major reline. Additionally, our long-term contracts provide us with flexibility to evaluate other opportunities to build greater value for shareholders."

Beginning in June, 2014, the blast furnace supporting North Lake and Harbor Coal will undergo a major refurbishment or reline. The work is expected to last approximately 60 days and will idle both North Lake and Harbor Coal. The estimated impact on revenue is projected to range from $1.5-million to $2.5-million assuming a 60-day time horizon for the outage to be completed. North Lake will also be upgrading its condenser in June at an expected cost of $600,000.

                             OPERATIONAL HIGHLIGHTS                  
                                                          Three months ended March 31,
                                                               2014              2013     
                                                                                        
Total gross electric production megawatt hours (MWh)        282,729           384,360
Total thermal energy delivered (MMBtu)                      910,054         1,188,324
Harbor Coal utilization (%)                                    53.5%             67.4%

Matters affecting comparability

New Cokenergy tolling contract

On Feb. 20, 2014, Cokenergy executed a new 10-year contract with its site host. Under international financial reporting interpretations committee interpretation 4, Cokenergy's new tolling agreement is subject to lease accounting guidance as specified in IAS 17 leases. As a result, a portion of the revenue received under the Cokenergy's contract will be deferred and recognized over the life of the contact. Consequently, revenue recognized under the old contract is not directly comparable with revenue recognized under the new contract. The terms of the new tolling agreement do not transfer the risks and rewards of ownership from Cokenergy to the customer, and therefore the contract is classified as an operating lease. The pricing structure under the new contract for the period from Feb. 20, 2014, to Sept. 30, 2014, consists of fixed payments that are defined as minimum lease payments. Additionally, for the contract period from October, 2014, to September, 2023, Cokenergy will receive additional minimum lease payments based on an expected level of operation. IAS 17 requires that total minimum lease payments are recognized on a straight-line basis over the term of the contract. For the period from Feb. 20, 2014, to March 31, 2014, the amount of fixed billings from the Cokenergy facility was $3.3-million. The amount of minimum lease revenue recognized during this period was $2.0-million. The difference of $1.3-million was recorded as deferred revenue. For the period from Feb. 20, 2014, to Sept. 30, 2014, the company will bill a total of $18.4-million from the Cokenergy facility, which will be in excess of the $10.9-million of minimum lease payment revenue to be recognized during that time period. The difference between the fixed billings and minimum lease revenue recognized during the period ending Sept. 30, 2014, will be recorded as deferred revenue totalling $7.5-million. The total deferred revenue balance as of Sept. 30, 2014, will be recognized over time as incremental revenue from October of 2014 through September, 2023.

First quarter 2014 financial results

The company's revenue of $12.6-million for the first quarter of 2014 decreased $2.1-million, or 14.4 per cent, compared with revenue of $14.7-million for the first quarter of 2013. Capacity revenue at the Cokenergy facility decreased by $1.3-million due to the lease accounting requirements for the new long-term contract with its host steel mill. The company has recorded $1.3-million of deferred revenue as of March 31, 2014. Revenue at the North Lake facility decreased by $800,000 primarily due to reduced host operating levels, which were impacted by weather and operating challenges and an unplanned outage during the first quarter of 2014.

Operations and maintenance expense for the first quarter of 2014 was $7.2-million compared with $5.1-million for the first quarter of 2013, an increase of $2.1-million or 41.3 per cent. The company incurred periodic costs during the first quarter of 2014 of $3.7-million for boiler retubing work. Periodic costs for the first quarter of 2013 were $1.7-million for boiler retubing work, $400,000 for an emergency boiler repair and $100,000 for ductwork repairs. In addition, for the first quarter of 2014, the company had increased operations and maintenance expenses related to contracted services of $300,000 and general maintenance of $300,000.

General and administrative expense for the first quarter of 2014 was $2.4-million compared with $1.9-million for the first quarter of 2013, an increase of $500,000 or 28.0 per cent. The company had increased accrued property tax expense of $200,000. The increase, on a comparative basis, is due to a property tax accrual reduction recorded in the first quarter of 2013. In addition, the company had increased professional fees of $300,000 and plant and liability insurance expenses of $100,000. These increased expenses were offset by a reduction in IT expenses of $100,000.

Employee benefits expense for the first quarter of 2014 was $1.9-million compared with $1.6-million for the first quarter of 2013, an increase of $300,000. The increase of $300,000 is due to stock-based compensation.

Equity in earnings of the Harbor Coal joint venture for the first quarter of 2014 was $200,000 compared with $500,000 for the first quarter of 2013, a decrease of $300,000. Reduced blast furnace operations during the first quarter of 2014 negatively impacted revenue generated by the joint venture.

Operating loss for the first quarter of 2014 was $1.3-million compared with operating income of $1.2-million for the first quarter of 2013, a decrease of $2.5-million. The decrease was the result of the net effect of the items discussed herein.

Net loss and comprehensive loss for the first quarter of 2014 were $500,000 compared with $100,000 for the first quarter of 2013, an increase of $400,000. The increase was the result of the net effect of the items discussed herein.

Conference call and webcast

A telephone conference call hosted by management to discuss the financial results will be held April 23, 2014, at 10 a.m. ET. The telephone numbers for the conference call are 888-231-8191 or 647-427-7450.

A digital conference call replay will be available until midnight (ET) on May 7, 2014, by calling 855-859-2056 or 416-849-0833. Please enter the password 22005360 when instructed. A webcast replay will be available for 365 days by accessing a link through the events section at the company's website.

                       
                   CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME                   
              (in thousands of U.S. dollars, except per-share amounts)  

                                                           Three months ended March 31,
                                                                    2014          2013
Revenue
Capacity                                                     $     7,979    $    9,018
Energy service                                                     4,582         5,657
Total revenue                                                     12,561        14,675
Expenses
Operations and maintenance                                         7,163         5,070
General and administrative                                         2,382         1,860
Employee benefits                                                  1,926         1,613
Depreciation and amortization                                      2,545         5,393
Total operating expenses                                          14,016        13,936
Equity in earnings of Harbor Coal joint venture                      171           481
Operating (loss) income                                           (1,284)        1,220
Other expense
Interest expense                                                    (703)       (1,332)
Realized and unrealized (loss) gain on derivative
contracts                                                            (57)           60
(Loss) before income taxes                                        (2,044)          (52)
Income tax benefit (expense)                                       1,503           (57)
Net (loss) and comprehensive (loss)                          $      (541)   $     (109)
Net (loss) per share
Basic and diluted net (loss) per share                       $     (0.01)   $    (0.00)

We seek Safe Harbor.