Primary Energy Recycling Corporation (Primary Energy) has reported total revenues of $60.9 million for the year-end 2008, compared with the total revenues of $75.03 million in the previous year-end. It has also reported a net loss of $22.8 million, or $0.73 loss per share, for the year-end 2008, compared with the net loss of $21.05 million, or $0.68 loss per share, in the previous year-end.

Cash and Cash Equivalents

Cash and cash equivalents include all cash balances and highly liquid investments with an original maturity of three months or less at the date of purchase.

Spare Parts Inventory

The company maintains a certain level of spare parts inventory at its facilities. The parts on-hand are stated at lower of cost or net realizable value and are included in the current assets of the company. Inventory at December 31, 2008 and 2007 is reflected net of a reserve of $0.2 million for estimated obsolescence. The company expenses parts as they are used.

Property, Plant and Equipment

Property, plant and equipment have been adjusted, giving effect to the purchase method of accounting. Depreciation for all asset classes is recorded on a straight-line basis over the estimated useful lives of the assets. Generally, the estimated useful lives are 30 years for buildings, plant and equipment. The estimated useful life of office furniture and equipment is 7 years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Expenditures for maintenance and repairs are charged to operations and maintenance expense as incurred. The carrying amount for long-lived assets is reviewed for impairment whenever events or changes in circumstances indicate that impairment may have occurred.

Intangible Assets

Identifiable intangible assets were fair valued based on valuation techniques for the purpose of applying purchase accounting to the acquisition of PERH on August 24, 2005 and represent contract rights associated with customer contracts and nitrogen oxide allowances. The respective intangible values are amortized over specified time horizons and evaluated for impairment if events or changes in circumstances indicate that the asset might be impaired. Fair value under Canadian GAAP is defined as “the amount of the consideration that would be agreed upon in an arm’s length transaction between knowledgeable, willing parties who are under no compulsion to act”. Assessing the fair value of intangible assets requires management estimates on future cash flows to be generated by the assets.

Intangible assets consist of contract rights on leases and nitrogen oxide (NOx) allowances. As of August 24, 2005, $219.5 million was assigned to contract rights and $0.9 million was assigned to NOx allowances representing fair value.

Contract rights represent the value assigned to existing customer contracts at the date of the acquisition and are amortized on a straight line basis over an average term of eight years. NOx allowances amortize through 2009. For the years ended December 31, 2008 and 2007, the company has recorded contract value amortization of $24.2 million and $29.7 million, respectively. For each of the years ended December 31, 2008 and 2007, the company recorded NOx allowance amortization of $0.2 million.

Credit Facility

The company has a $135.0 million four-year term loan facility expiring in August of 2009. The company has classified all borrowings and deferred finance fees under this facility as short-term debt at December 31, 2008. The Credit Facility bears interest at a rate equal to LIBOR or U.S. Base Rate, plus an applicable margin. The borrower may elect from time to time to convert Eurodollar rate loans to base rate loans or base rate loans to Eurodollar rate loans by providing appropriate notice to the Administrative Agent of the Credit Facility. For the year ended December 31, 2008, the interest rate was defined using an average LIBOR rate of 3.06% plus 3.78%.

For the year ended December 31, 2007, the interest rate was defined using an average LIBOR rate of 5.41% plus 2.75% for the period January 1, 2007 through November 30, 2007, and the base rate of 7.5% plus 2.75% for the period December 1, 2007 through December 10, 2007. For the period December 11, 2007 through December 31, 2007, the interest rate was defined using an average LIBOR rate of 5.17% plus 3.75%. The Credit Facility is collateralized by the company’s interests in, and the assets of, all subsidiaries and Projects and requires the company to meet certain financial covenants including, among other things, maintaining certain defined leverage and coverage ratios. The Credit Facility was amended twice during 2007 to modify specified covenant levels. As of December 31, 2008, the company was in compliance with its debt covenants under its Credit Facility.