Maxim Power Corp. — Interim / Quarterly Report 2024

May 8, 2024

Condensed Consolidated Interim Financial Statements of

MAXIM POWER CORP.

For the First Quarter Ended March 31, 2024 (Unaudited)

MAXIM POWER CORP.

Unaudited Condensed Consolidated Interim Statements of Financial Position

(in thousands of Canadian dollars)

		March 31,	December 31,
As at	Note	2024	2023
ASSETS
Cash and cash equivalents		85,207	32,258
Trade and other receivables	3	8,317	47,877
Current tax asset		3,915	4,685
Risk management asset	11	2,196	1,584
Prepaid expenses and deposits		4,028	5,919
Total current assets		103,663	92,323
Property, plant and equipment, net	4	310,106	313,461
Restricted cash		18,518	16,518
Prepaid expenses and deposits		3,151	3,538
Total non-current assets		331,775	333,517
TOTAL ASSETS		435,438	425,840
LIABILITIES
Trade and other payables		13,812	13,287
Risk management liability	11	6,032	8,405
Loans and borrowings	5	6,427	4,828
Total current liabilities		26,271	26,520
Provisions for decommissioning		10,553	10,760
Lease obligation		104	111
Loans and borrowings	5	74,355	76,375
Deferred tax liabilities		16,305	14,329
Total non-current liabilities		101,317	101,575
TOTAL LIABILITIES		127,588	128,095
EQUITY
Share capital		143,692	143,963
Contributed surplus		13,261	13,194
Retained earnings		150,897	140,588
TOTAL EQUITY		307,850	297,745
Commitments	9
TOTAL LIABILITIES AND EQUITY		435,438	425,840

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

On behalf of the Board:

M. Bruce Chernoff	Michael Mayder
Chairman of the Board	Director

MAXIM POWER CORP.

Unaudited Condensed Consolidated Interim Statements of Operations and Comprehensive Income

For the three months ended March 31

(in thousands of Canadian dollars, except for per share amounts)

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Note 2024 2023
Revenues
-
Power generation 34,768
Realized gain on power swaps 11 1,171 -
Unrealized gain on power swaps 11 648 -
-
Total power generation and swaps 36,587
Expenses
Operating 17,561 5,006
Realized loss on natural gas swaps 11 955 -
Unrealized gain on natural gas swaps 11 (2,337) -
General and administrative 1,765 1,561
Depreciation and amortization 4 3,629 2,009
Total expenses 21,573 8,576
Operating income (loss) 15,014 (8,576)
Other income, net 6 32 19,963
Finance expense, net 7 (1,344) (1,356)
Income before income taxes 13,702 10,031
Income tax expense
Current income tax 1,239 1,432
Deferred income tax 1,976 848
Total income tax expense 3,215 2,280
Net and comprehensive income 10,487 7,751
Earnings per share 8
Basic 0.21 0.15
Diluted 0.18 0.14
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The accompanying notes are an integral part of these condensed consolidated interim financial statements.

MAXIM POWER CORP.

Unaudited Condensed Consolidated Interim Statements of Changes in Equity

(in thousands of Canadian dollars, except common share data)

Number of common shares (thousands) Share capital Contributed surplus Retained earnings Total	Number of common shares (thousands) Share capital Contributed surplus Retained earnings Total
Equity at December 31, 2023 50,593 143,963 13,194 140,588 297,745 Net income - - - 10,487 10,487 Repurchase of common shares for cancellation (86) (311) - (178) (489) Share-based compensation - - 264 - 264 Stock options settled 154 - (193) - (193) Stock options exercised 20 40 (4) - 36
Equity at March 31, 2024 50,681	143,692 13,261 150,897 307,850
Equity at December 31, 2022 50,168 143,473 12,831 112,350 268,654 Net income - - - 7,751 7,751 Repurchase of common shares for cancellation (7) (14) - (10) (24) Share-based compensation - - 148 - 148 Stock options settled 73 - (58) - (58) Stock options exercised 35 95 (14) - 81
Equity at March 31, 2023 50,269	143,554 12,907 120,091 276,552

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

MAXIM POWER CORP.

Unaudited Condensed Consolidated Interim Statements of Cash Flows

For the three months ended March 31 (in thousands of Canadian dollars)

	Note	2024	2023
Cash flows from operating activities:
Net income		10,487	7,751
Adjustments for items not involving cash or operations:
Depreciation and amortization	4	3,629	2,009
Share-based compensation		264	148
Unrealized gain on commodity swaps	11	(2,985)	-
Stock option settlement		(193)	(58)
Income tax expense		3,215	2,280
Income tax paid		(469)	(5,170)
Finance expense,net	7	1,344	1,356
Funds generated from operating activities before change in non-
cash working capital		15,292	8,316
Change in non-cash workingcapital	10	43,175	1,449
Net cashgenerated from operatingactivities		58,467	9,765
Cash flows from financing activities:
Repayment of loans and borrowings	5	(713)	(713)
Proceeds from exercise of stock options		36	81
Repurchase of common shares for cancellation		(489)	(24)
Interest and bank charges	7	(2,060)	(2,097)
Net cash used in financingactivities		(3,226)	(2,753)
Cash flows from investing activities:
Property, plant and equipment additions	4	(570)	(4,285)
Interest income	7	1,069	685
Change in non-cash workingcapital	10	(2,818)	(3,471)
Net cash used in investingactivities		(2,319)	(7,071)
Foreign exchangegain on cash and cash equivalents	7	27	16
Increase (decrease) in cash and cash equivalents		52,949	(43)
Cash and cash equivalents,beginningofperiod		32,258	51,378
Cash and cash equivalents, end of period		85,207	51,335

The accompanying notes are an integral part of these condensed consolidated interim financial statements.

MAXIM POWER CORP.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements, Page 1

For the three months ended March 31, 2024 and 2023 (Amounts in thousands of Canadian dollars except as otherwise noted)

1. Reporting entity

Maxim Power Corp. is incorporated in the province of Alberta, Canada. Maxim Power Corp., together with its subsidiaries ("MAXIM" or the "Corporation") is an independent power producer, which acquires or develops, owns and operates power and power related projects in Alberta. The Corporation’s common shares trade on the Toronto Stock Exchange under the symbol "MXG". MAXIM’s registered office is Suite 1800, 715 – 5 Avenue S.W., Calgary, Alberta, Canada, T2P 2X6.

2. Basis of preparation and statement of compliance

• (a) Statement of compliance

These unaudited condensed consolidated interim financial statements are prepared in accordance with International Accounting Standard (“IAS”) 34 Interim Financial Reporting. The unaudited condensed consolidated interim financial statements do not include all the information required for annual financial statements and should be read in conjunction with the Corporation’s December 31, 2023 annual audited consolidated financial statements available at www.sedarplus.ca.

MAXIM’s Board of Directors approved these unaudited condensed consolidated interim financial statements on May 7, 2024.

• (b) Material accounting policies and use of judgements and estimates

The use of judgments and estimates in the preparation of these unaudited condensed consolidated interim financial statements have been applied consistently for all periods presented and are unchanged from the judgments and estimates disclosed in the notes to the consolidated financial statements for the year ended December 31, 2023.

The material accounting policies used in the preparation of these unaudited condensed consolidated interim financial statements have been applied consistently for all periods presented and are unchanged from the policies disclosed in the notes to the consolidated financial statements for the year ended December 31, 2023.

3. Trade and other receivables

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March 31, December 31,
2024 2023
Trade receivables 7,196 28,371
Insurance receivable - 18,031
Other receivables 33 45
Realized risk management receivable 1,088 1,430
Total accounts receivable 8,317 47,877
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MAXIM POWER CORP.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements, Page 2

For the three months ended March 31, 2024 and 2023

(Amounts in thousands of Canadian dollars except as otherwise noted)

4. Property, plant and equipment, net

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Facilities Assets
and Right-of-use under
Equipment Asset Construction Total
Cost
Balance, December 31, 2022 241,844 202 147,335 389,381
Additions 531 - 26,890 27,421
Capitalized interest - - 1,473 1,473
Assets in-service 164,886 - (164,886) -
- -
Impairment (2,002) (2,002)
- -
Disposal of equipment (195) (195)
Revisions to decommissioning provisions (89) - - (89)
Balance, December 31, 2023 406,977 202 8,810 415,989
Additions 570 - - 570
Revisions to decommissioning provisions (296) - - (296)
Balance, March 31, 2024 407,251 202 8,810 416,263
Accumulated depreciation
Balance, December 31, 2022 92,778 55 - 92,833
Depreciation 9,665 30 - 9,695
Balance, December 31, 2023 102,443 85 - 102,528
.
Depreciation 3,621 8 - 3,629
Balance, March 31, 2024 106,064 93 - 106,157
Property, plant and equipment, net
December 31, 2023 304,534 117 8,810 313,461
March 31, 2024 301,187 109 8,810 310,106
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5. Loans and borrowings

oans and borrowings
		Fixed Rate
	Bank Term	Constuction	Convertible Loan
	Facility #1	Facility	Facility	Total
Balance,December 31,2022(1)	26,362	30,000	29,438	85,800
Repayment of loans and borrowings	(2,850)	-	-	(2,850)
Balance, December 31, 2023	23,512	30,000	29,438	82,950
Less: deferred financingcosts				(1,747)
Net loans and borrowings, net of deferred financing costs				81,203
Less: currentportion,net of deferred financingcosts				(4,828)
Balance December 31, 2023, non-current portion, net	of deferred financing costs			76,375
(1) Excluding def erred f inancings costs.

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Fixed Rate
Bank Term Constuction Convertible Loan
Facility #1 Facility Facility Total
Balance, December 31, 2023 [(1)] 23,512 30,000 29,438 82,950
Repayment of loans and borrowings (713) - - (713)
Balance, March 31, 2024 22,799 30,000 29,438 82,237
Less: deferred financing costs (1,455)
Net loans and borrowings, net of deferred financing costs 80,782
Less: current portion, net of deferred financing costs (6,427)
Balance March 31, 2024, non-current portion net, of deferred financing costs 74,355
(1) Excluding def erred f inancings costs.
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MAXIM POWER CORP.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements, Page 3

For the three months ended March 31, 2024 and 2023 (Amounts in thousands of Canadian dollars except as otherwise noted)

5. Loans and borrowings (continued)

• (a) Senior Credit Facility Financial Debt Covenants

Commencing on March 31, 2024, the Corporation is required to maintain an annualized debt service coverage ratio of not less than 1.25:1.00 determined as at the last day of each financial quarter. On December 31, 2024, four quarters of results will be achieved, and the calculation will be determined as at the last day of each financial quarter on a rolling four quarter basis.

Commencing on March 31, 2024, the Corporation is required to maintain an annualized debt (Senior Credit Facilities) to earnings before interest, taxes, depreciation and amortization below 3.00:1.00, determined as at the last day of each financial quarter. On December 31, 2024, four quarters of results will be achieved, and the calculation will be determined as at the last day of each financial quarter on a rolling four quarter basis.

MAXIM shall ensure that, as at the end of each financial quarter, the tangible assets of MAXIM, Milner Power II LP, Miner Power LP, and Prairie Lights Power LP, are not less than the lesser of: (a) 95% of consolidated tangible assets; and (b) consolidated tangible assets (less any consolidated tangible assets attributed to Summit Coal Inc. and Summit Coal LP).

In addition, MAXIM is subject to customary non-financial covenants in its Senior Credit Facility and Subordinated Credit Facility. As at March 31, 2024, MAXIM is in compliance with all applicable debt covenants.

6. Other income, net

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March 31, March 31,
2024 2023
-
Business interruption insurance claim 18,150
-
Property insurance claim 5,807
-
Demolition, incidental and investigation costs (3,977)
Other income (expenses) 32 (17)
Total other income, net 32 19,963
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7. Finance expense, net

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March 31, March 31,
2024 2023
Interest expense and bank charges (a) 2,060 1,642
Amortization of deferred financing costs 291 335
Accretion of provisions 89 80
Foreign exchange gain (27) (16)
Finance expense 2,413 2,041
Interest income (1,069) (685)
Total finance expense, net 1,344 1,356 .
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(a) During the first three months of 2024, the Corporation paid interest and fees of $1,068 (March 31 2023 - $1,059) under the convertible loan facility, provided by two significant shareholders of the Corporation, one of whom is also the Chair of the Board and the other of whom is the Vice Chair of the Board.

MAXIM POWER CORP.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements, Page 4

For the three months ended March 31, 2024 and 2023 (Amounts in thousands of Canadian dollars except as otherwise noted)

8. Earnings per share

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March 31, March 31,
2024 2023
Weighted average number of common shares (basic) 50,578,826 50,203,194
Effect of convertible loan facility 13,083,736 13,083,736
Effect of exercisable stock options 493,393 764,548
Weighted average number of common shares (diluted) 64,155,955 64,051,478
March 31, March 31,
2024 2023
Net income (basic) 10,487 7,751
Finance expense on the convertible loan facility, net of tax 895 902
Net income (diluted) 11,382 8,653
March 31, March 31,
2024 2023
Earnings per share:
Basic 0.21 0.15
Diluted 0.18 0.14
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9. Commitments

• (a) The Corporation has entered into contracts for maintenance and equipment of M2. These contracts have a remaining minimum commitment totaling $550 as at March 31, 2024.

• (b) The Corporation has entered into a natural gas transportation service agreement from June 1, 2020 to May 31, 2025 to deliver natural gas to M2. The total remaining commitment from this five-year contract as at March 31, 2024 is $5,152 over the next two years as follows:

contract as at March 31, 2024 is $5,152 over the	next two years as follows:
2024	3,312
2025	1,840
	5,152

10. Change in non-cash working capital

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March 31, March 31,
2024 2023
Operating activities
Trade and other receivables 39,560 1,264
Prepaid expenses and deposits 2,278 567
Trade and other payables 1,337 (382)
43,175 1,449
March 31, March 31,
2024 2023
Investing activities
Trade and other payables (818) (3,471)
Restricted cash (2,000) -
(2,818) (3,471)
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MAXIM POWER CORP.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements, Page 5

For the three months ended March 31, 2024 and 2023 (Amounts in thousands of Canadian dollars except as otherwise noted)

11. Financial risk management

The Corporation’s risk management process, oversight and techniques are the same as those described in the Corporation’s 2023 annual consolidated financial statements.

The fair value measurement of a financial instrument or derivative contract is included in one of three levels as follows:

• Level I: unadjusted quoted prices in active markets for identical assets or liabilities

• Level II: inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly

• Level III: inputs for the asset or liability that are not based on observable market data (unobservable inputs)

The Corporation is required to recognize and disclose the fair value of financial assets and liabilities. The Corporation’s financial assets and financial liabilities that are not risk management swaps or options or loans and borrowings are all classified as Level I under the fair value hierarchy as they are based on unadjusted quoted prices in active markets for identical instruments.

The fair value of the loans and borrowings are classified as Level II under the fair value hierarchy as the fair values are based on observable market data. The fair value of loans and borrowings at March 31, 2024 is $79,969 (December 31, 2023 - $80,255).

(a) Commodity risk management swaps

The fair values of the power and natural gas commodity swaps are classified as Level II under the fair value hierarchy as the fair values are based on observable market data. The Corporation determined the fair value of the swaps by applying the market approach using market settled forward prices as reported by the Natural Gas Exchange for forward contracts of comparable term at the reporting date.

Realized gain on commodity swaps

Realized gain on commodity swaps
	March 31,	March 31,
	2024	2023
Realized gain on power swaps	(1,171)	-
Realized loss on naturalgas swaps	955	-
Total realized gain on commodity swaps	(216)	-

Unrealized gain on commodity swaps

Unrealized gain on commodity swaps
	March 31,	March 31,
	2024	2023
Unrealized gain on power swaps	(648)	-
Unrealizedgain on naturalgas swaps	(2,337)	-
Total unrealized gain on commodity swaps	(2,985)	-
Gain on commodity swaps
Total realized and unrealized gain on commodity swaps	(3,201)	-

MAXIM POWER CORP.

Notes to the Unaudited Condensed Consolidated Interim Financial Statements, Page 6

For the three months ended March 31, 2024 and 2023 (Amounts in thousands of Canadian dollars except as otherwise noted)

11. Financial risk management (continued)

• (b) Carrying amount of risk management asset and liabilities

Current risk management asset

Current risk management asset
March 31,	December 31,
2024	2023
Power commodityswaps 2,196	1,584
Total carrying amount of current risk management asset 2,196	1,584

The carrying amount of current risk management asset represents the unrealized asset from the power commodity swaps.

Current risk management liability

Current risk management liability
	March 31,	December 31,
	2024	2023
Natural gas commodity swaps	6,032	8,369
Power commodityswaps	-	36
Total carrying amount of current risk management liability	6,032	8,405

The carrying amount of current risk management liability represents the unrealized liability from the power and natural gas commodity swaps.