Maxim Power Corp. provided an update regarding the return to service of the Milner 2 (“M2”) facility following the non-injury fire incident (the “Incident”) that occurred on September 30, 2022, a project update on the Combined Cycle Gas Turbine (“CCGT”) expansion of M2, and an update on insurance information related to the Incident. Following the Incident, MAXIM is continuing the process of disassembling and replacing M2’s damaged air inlet filter house. At this time, the Corporation’s most probable return to service date for the M2 facility is late July 2023. MAXIM continues to actively work with counterparties to improve on this schedule. Material updates regarding the return to service schedule will be provided as they become known. As previously reported, start up of the CCGT expansion project will be delayed due to the Incident. Construction of the CCGT expansion project is currently greater than 99% complete, however, hot-commissioning activities cannot occur until M2 is returned to service. MAXIM anticipates that the hot commissioning activities will commence following the return to service of M2.
As previously noted, completion of the CCGT expansion of M2 will allow capture of waste heat that would otherwise exhaust into the atmosphere and turn it into useful low carbon electricity for the Alberta power grid. The CCGT expansion of M2 will reduce the intensity of carbon emissions by more than 60% compared to the legacy coal-fired H.R. Milner facility.
At this time, MAXIM forecasts it has sufficient liquidity to complete both the CCGT expansion of M2 and the replacement of the air inlet filter house and will fund these costs using cash on hand, available funds through the existing senior and subordinated credit facilities, and anticipated insurance proceeds, as required. MAXIM reaffirms insurance coverage for the Incident, subject to the terms and conditions of the Corporation’s Property Insurance (“PI”) policy, including Business Interruption (“BI”) provisions. The Corporation continues to progress an insurance claim for property damage and lost earnings under the PI policy. The PI policy provides $200 million in total coverage, including BI. PI insurance coverage related to the property damage from the Incident is subject to a customary deductible. Sub-limitations on the BI provision of the PI policy include a 45-day deductible, a monthly cap of $5.5 million gross margin (plus 10% margin allowance), and a policy cap of $66 million total gross margin. The Corporation is comfortable that the PI policy limit of $200 million, less any coverage related to the BI provision, is more than adequate to cover the property damage related to the Incident.
Additionally, MAXIM has submitted a claim for a delay in start up related to the Incident under its Course of Construction (“COC”) insurance policy, which includes a provision for Delay in Start Up (“DSU”) coverage. The Corporation is awaiting confirmation of coverage under this policy. The COC policy provides $170 million in total coverage, including DSU. Sub-limitations on the DSU provision of the COC policy include a 45-day deductible (beyond the original commercial operation date of December 15, 2022) and a 18-month coverage term with a monthly cap of $3.5 million gross margin up to a maximum DSU sub-limit of $62 million. MAXIM is of the view that the DSU coverage applies to the Incident and is additional to the BI coverage, however notes that confirmation of coverage related to the DSU has not been received and proceeds from this policy are not assured.