Xinergy Ltd. announces second quarter 2011 operating results

Toronto Stock Exchange: XRG
(All Amounts in $US unless otherwise stated)

• Adjusted EBITDA and EBITDA of $7.1 and $18.1 Million respectively on revenues of $40.6 Million
• Recorded gain of $11.0 Million from sale of Elk Horn equity interest
• Repurchased 3,297,572 shares and 945,516 warrants for an aggregate Cdn$16.7 Million pursuant to previously announced Repurchase Program
• Completed issuance of $200 Million senior secured notes
• Entered into long-term Coal Supply Agreement with JP Morgan
• Expanded scope of Met Coal operations through the acquisition of True Energy, LLC

KNOXVILLE, TN, Aug. 10, 2011 /PRNewswire/ - Xinergy Ltd., (TSX:XRG and XRG.WT) ("Xinergy" or the "Company"), a US Central Appalachian producer of high quality coal, today announced operating results for the three months ended June 30, 2011, together with its Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for the corresponding period.  These documents are posted on SEDAR at www.sedar.com and on the Company's website at www.xinergycorp.com.

Jon E. Nix, Xinergy's Chairman and CEO, said, "We are pleased to announce continued momentum with our second quarter results, despite significant impact from delayed deliveries to one of our major customers as previously disclosed.  Q2 was a particularly active quarter for this young company which included authorization from our Board of Directors for a stock and warrant repurchase program, a significant return on our Elk Horn investment and the closing of senior secured notes financing.  These positive developments, coupled with the mid-quarter resumption of deliveries to the aforementioned customer, positions us well for the remainder of 2011 and beyond."

Quarterly Results

The following table highlights operating results for the quarter ended June 30, 2011 (in 000's except per ton amounts).

Committed Sales Position

The following tables show our contracted sales position for the remainder on 2011 as well as calendar years 2012-2014.

Highlights for the Quarter Ended June 30, 2011 and Subsequent Events 

• Coal sales increased 161% to $40.6 million from $25.2 million in same quarter of 2010 on sales of 510,000 tons as compared to sales of 292,000 tons in same quarter of 2010.
  
  
• Adjusted EBITDA and EBITDA of $7.1 million and $18.1 million respectively, for the quarter as compared to $4.7 million and $11.6 million in same quarter of 2010.
  
  
• In February 2011, we had a major customer temporarily idle a facility that was receiving coal from our Kentucky mining operations. The customer has re-opened this facility and the Company resumed shipments on May 28, 2011. This deferral impacted the second quarter by approximately $4.5 to $5.0 million in EBITDA.  While the customer has been consistently increasing scheduled coal deliveries since late May, the Company continued to experience increases in production costs associated with temporary changes in mine plans and production schedules, as well as additional coal handling costs throughout the later part of the second quarter.  The Company has since begun to benefit from better production planning and efficiencies from the Kentucky operations as a result of the resumption of shipments to this customer.  The Company shipped this customer 34,000 tons in June and 58,000 tons in July.
  
  
• In July 2011, we acquired 100% of the membership interest of True Energy, LLC an active high volatility metallurgical surface mining operation in southwestern Virginia.  The aggregate purchase price was $18.0 million consisting of $16.0 million in cash and an additional $2.0 million due upon the issuance of a pending surface mining permit.
  
  
• In July 2011, we entered into a long term coal supply agreement with J.P. Morgan Ventures Energy Corporation ("J.P. Morgan") for the delivery period beginning January 1, 2012 through December 31, 2014.  The Agreement provides for the delivery of an aggregate 2.16 million tons of thermal coal or 720,000 tons per year from the company's Raven Crest / Brier Creek mines in West Virginia. The specifics of the agreement represent a minimum aggregate value of approximately $170 million (or $78.70 per ton) in revenue over the term with significant potential upside from index-based escalators and fuel cost adjustments.
  
  
• In June 2011, the Board of Directors authorized the repurchase of up to US$17.6 million of the Company's common stock in the open market pursuant to a normal course issuer bid.  The period of the normal course issuer bid commenced on July 4, 2011 and will terminate on July 3, 2012.  To date, the Company has purchased 3,297,572 common shares for Cdn$15.8 million and 945,516 warrants for Cdn$0.9 million.  All common shares and warrants purchased under the normal course issuer bid either have been cancelled or are in the process of being cancelled.  The Company expects to have the normal course issuer bid completed, including the cancellation of all purchased common stock and warrants and required filings, in August 2011.
  
  
• In June 2011, we sold our 1,852,367 membership units representing approximately 17.5% of the outstanding equity of Elk Horn Coal Company, LLC ("Elk Horn") and received $17.9 million in proceeds and incurred $0.2 million in fees.  In addition, $1.1 million was set aside in escrow by Elk Horn to cover indemnification claims and related fees and expenses.  As a result, we recognized a gain on the sale of the investment of $11.0 million during the second quarter of 2011.
  
  
• In May 2011, we issued at par $200.0 million face amount of our 9.25% senior secured notes due May 15, 2019.  Interest payments are required semi-annually beginning November 2011.  We may redeem the notes, in whole or in part, at any time on or after May 15, 2015 at redemption prices ranging from 104.625% beginning May 15, 2015 to 100% beginning on May 15, 2018.  We used a portion of the net proceeds from the offering to repay in full the existing 9.75% senior secured notes due 2015 (including prepayment penalties of 10% of the principal amount thereof).  The remaining funds are being used for the construction of a preparation plant, the purchase of underground mining equipment along with support equipment as well as necessary infrastructure development at the recently acquired Brier Creek underground mining property in West Virginia, the construction of a rail siding and loading facility and surface mining equipment at the recently acquired Greenbrier County, West Virginia metallurgical property, and for general corporate purposes.
  
  
• In May 2011, we retained a nationally recognized investment banking firm to assist in our efforts to list our common stock on a United States securities exchange.  We expect this listing to be completed during the third quarter of 2011.
  
  
• In April 2011, we entered into a coal reserve lease with Michael Dean for 7,000 acres of a tract of land adjacent to and west of our Straight Creek properties in Bell County, Kentucky (referred to herein as the Dean property).
  

Financial Overview

The following tables present selected balance sheet, statement of operations and sales and operating statistics for Xinergy.

About Xinergy Ltd.

Headquartered in Knoxville, Tennessee, Xinergy Ltd., through its wholly owned subsidiary Xinergy Corp. and its subsidiaries, is engaged in coal mining in eastern Kentucky, West Virginia and Virginia. Currently, Xinergy sells high quality coal to electric utilities and industrial companies throughout the south-eastern United States. For more information, please visit www.xinergycorp.com.

Forward-Looking Information

This release contains "forward-looking information" that includes information relating to future events and future financial and operating performance, including management's assessment of Xinergy's future outlook.  Forward-looking information should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by which, that performance or those results will be achieved. Forward-looking information is based on information available at the time it is made and/or management's good faith belief as of that time with respect to future events, and such information is subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking information. Important factors that could cause these differences include but are not limited to: changes in contracted sales, the business of the Company may suffer as a result of uncertainty surrounding the coal market; the Company may be adversely affected by other economic, business, and/or competitive factors; the worldwide demand for coal; the price of coal; the price of alternative fuel sources; the supply of coal and other competitive factors; the costs to mine and transport coal; the ability to obtain new mining permits; the costs of reclamation of previously mined properties; the risks of expanding coal production; the ability to bring new mines on line on schedule; industry competition; the Company's ability to continue to execute its growth strategies; and general economic conditions. These and other risks are more fully described in the Company's filings with the Canadian Securities Administrators, including its Annual Information Form for the year ended December 31, 2010, available on SEDAR at www.sedar.com. You should not put undue reliance on any forward-looking information. We assume no obligation to update forward-looking information to reflect actual results, changes in assumptions or changes in other factors affecting forward looking information, except to the extent required by applicable securities laws. If we do update one or more forward-looking information, no inference should be drawn that we will make additional updates with respect to those or other forward-looking information.

SOURCE Xinergy Ltd.