Newalta Income Fund (Newalta) updates on its capital expenditures for 2008 and 2009. Total capital expenditures in 2008 are anticipated to be CAD125 million, including growth capital expenditures of about CAD105 million, and maintenance capital of about CAD20 million. The capital investments in the first half of 2009 will be highly controlled and are anticipated about CAD15 million, including growth capital expenditures of CAD10 million, and maintenance capital of CAD5 million.
The management remains much disciplined in committing to the capital investments in these times of market turmoil. A wide range of initiatives are underway to maximize performance of the business and also improve financial flexibility.
The management deferred orders on the long delivery of equipment and as a result, outstanding commitments are very modest. The capital program for remainder of 2009 will be established in the second quarter based on the performance of business and outlook for the market.
Actions to control costs and reduce debt including the control of all discretionary spending, travel and hiring restrictions, and the suspension of salary increases are expected to have a positive impact in the first quarter. As certain areas of the company’s business are continuing to grow while others are facing weakened demand, management will reallocate people to retain the talent developed throughout the company, wherever possible.
The funded debt at the end of 2008 is anticipated to be substantially unchanged from the third quarter of 2008 at about CAD315 million. The company’s funded debt consists of about CAD265 million of senior long term debt and CAD50 million of letters of credit which have been offered as security to certain environmental regulatory authorities to satisfy asset retirement obligations. The management is working with these authorities to offer alternative security arrangements to remove the need for the majority of the letters of credit. In addition, the management is taking steps to improve working capital management, sell redundant assets, and tightly control capital investments. These initiatives are intended to decrease funded debt throughout 2009.
Our priorities include driving performance from 2008 investments, controlling variable costs, minimizing capital investments and reducing funded debt, said Al Cadotte, president and chief executive officer of Newalta. We will remain disciplined in assessing investment opportunities in the current uncertain environment. Our focus is on strengthening our business as we deal with market challenges in the short term and position Newalta for improved markets in the future.