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Newalta to sell industrial division for C$300 mln, unveils 2015 capital budget

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Newalta (TSE:NAL), a provider of recycling services, has agreed to sell its industrial division for $300 million cash to a Toronto-based private equity firm.

The division employs 950 people in more than 35 locations across Canada that handle various types of industrial waste, the Calgary, Alberta-based company said in a statement late yesterday.

The division operates a Montreal-area lead-acid battery recycling facility, a solid waste landfill near Hamilton and a used-oil recycling facility in North Vancouver.

In addition to making the cash payment to Newalta, Birch Hill Equity Partners will assume the division’s asset retirement obligation.

Newalta said it will use money from the sale to cut debt and fund growth in its remaining business areas, which include oilfield services and new markets.

“The transaction is an excellent outcome for Newalta, the employees and customers of the Industrial Division,” chief executive officer John Barkhouse said in the statement. “The Industrial Division is a solid business and has outstanding people but no longer fits with our strategic vision.”

Birch Hill manages $2 billion in assets with 20 partner companies that collectively employ more than 30,000 people and generate more than $5 billion in total revenue.

The transaction is expected to close in the first quarter.

Also yesterday, Newalta said its 2015 capital budget is $190 million, comprised of $165 million in growth capital and $25 million in maintenance capital expenditures.

Growth capital will be prioritized and allocated towards the $50 million in carryover projects initiated in 2014 as well as those capital projects supporting contract opportunities.

Carryover projects include Newalta's new full-scale heavy oil facility in Fort McMurray, Alberta, new oilfield satellite facilities in both Canada and the U.S., and an additional drill cuttings treatment unit.

The company said that all carryover projects are expected to be commissioned and contributing cash flow in 2015.

The 2015 capital program will be funded from both funds from operations and proceeds from the sale of the Industrial Division.

"Investments from 2014 will drive growth in 2015, while our investments in 2015 will contribute to strong, profitable growth in 2016 and the years ahead," Barkhouse said.

Shares of Newalta closed at C$16.61 yesterday, up 1.7 percent on the day and down 4.7 percent this year.

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TSX:NAL
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