ENERFLEX SYSTEMS LTD. ANNUAL INFORMATION FORM For the ...

ENERFLEX SYSTEMS LTD. – ANNUAL INFORMATION FORM
Foreign currency exchange
Enerflex, a Canadian company, is exposed to foreign exchange risk when it buys or sells goods or services in foreign
currencies. As these foreign currencies depreciate against the Canadian dollar, it makes the Company’s products
exported from Canada more expensive in the foreign currency, while reducing the relative cost of inputs purchased
in the same currency.
The Company manages most of this inherent risk through a variety of contractual means, but currency risk cannot be
eliminated entirely. Enerflex has foreign subsidiaries in Australia, Indonesia, the Netherlands and the United States,
and interests in joint ventures in Pakistan and Germany. These expose the Company to changes in the exchange
rates for the currencies of each country in addition to changes in the Canadian and U.S. dollar.
The following table highlights Bank of Canada noon rates for years ended December 31, 2004 and 2003:
Currency December 31, 2004 December 31, 2003
US Dollar 1.2036 1.2924
Australian Dollar 0.9388 0.9731
EURO 1.6292 1.6280
UK Pounds 2.3062 2.3066
Foreign operations
Enerflex sells products and services throughout the world. While this diversification is desirable, it can expose the
Company to risks related to cultural, political and economic factors of foreign jurisdictions which are beyond the
control of the Company. Other issues, such as the quality of receivables may also arise. Enerflex seeks to mitigate
these risks by using staff experienced in foreign operations and closely monitoring the exposure it maintains in
foreign currencies and international operations.
Distribution agreements
One of the Company’s strategic assets is its distribution and Original Equipment Manufacturer agreements with
leading manufacturers, notably the Waukesha Engine, division of Dresser Inc., for engines and parts, and Ariel
Corporation for compressors. In the event that one or more of these agreements were to be terminated, Enerflex
would lose a competitive advantage.
Enerflex and its people make it a priority to maintain and enhance these strategic relationships.
Competition
The Company has a number of competitors in all aspects of its business, both domestically and abroad. Some of
these competitors, particularly in the Fabrication segment, are large, multi-national companies with greater access to
resources and more experience in international operations then Enerflex. Within Canada, particularly in the Service
segment, the Company has a number of small to medium sized competitors as well, who may not have access to the
capital and resources that Enerflex has, but may also face lower overhead costs than the Company.
Availability of Raw Materials, Component Parts or Finished Products
Enerflex purchases a broad range of materials and components in connection with its manufacturing and service
activities. The Company purchases most of its compressors and engines through distribution agreements with Ariel
Corporation for compressors and Waukesha Engine, a division of Dresser Inc., for natural gas engines and parts.
The Company has had a relationship with both of these companies since 1980. Additionally, the Company has
relationships with a number of other suppliers including Kobelco Compressors (America) Inc., Mycom Group Inc.,
and Caterpillar Inc. The availability of the component parts and the delivery schedules provided by these suppliers
affect the assembly schedules of the Company’s production and services.
Enerflex purchases coolers for its compression packages from a limited number of suppliers. The production
schedules and delivery time tables from these suppliers affects the assembly schedule of the Company’s products.
Though the Company is generally not dependent on any single source of supply, the ability of suppliers to meet
performance, quality specifications and delivery schedules is important to the maintenance of customer satisfaction.
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