Maine & Maritimes Corporation Reports Third Quarter 2005 Results

Maine & Maritimes Corporation (AMEX: MAM) (the "Corporation" or "MAM") reported a third quarter 2005 loss per share of $0.57, or $926,000, compared to a third quarter 2004 loss of $0.26 per share, or $432,000. This quarter's reduced earnings were attributable to a number of factors, including, but not limited to, lower earnings from its regulated utility, Maine Public Service Company ("MPS"), as well as the Corporation's continued investment in its diversification and transformation initiatives related to its unregulated portfolio of businesses. Consolidated results for the nine-month period ended September 30, 2005 were a loss of $0.27 per share, or $447,000, compared with income of $0.50 per share, or $801,000, in the prior year.

"The strategic need to increase the scale of unregulated operations, diversify our post-deregulation revenue model, and expand our unregulated market focus remains our primary objective," stated J. Nick Bayne, President and Chief Executive Officer of MAM. "While we are never pleased with a quarterly loss, we are encouraged by the progress in our unregulated operations and believe our investments in new business lines will lead to increased shareholder value. During the quarter, we undertook significant efforts to acquire Cornwallis Court Developments Ltd, which closed on October 7, 2005; released a new version of our Building Blocks(TM) software; and continued our due diligence related to the proposed acquisition of Steven Winter Associates, Inc. Maine Public Service earnings are impacted by the rate design approved by the Maine Public Utilities Commission, resulting in a lower revenue and earnings performance during the second and third quarters of each year. Further, the cost impact of compliance with the Sarbanes-Oxley Act has had and may continue to have a significant impact on quarterly and year-to-date earnings," stated Bayne. "We are seeing expansion and meaningful progress in our unregulated operations. Its pipeline of short-term contract opportunities and longer-term asset related opportunities is improving as we see an increasing market demand for energy efficiency, green or sustainable facility services, and on-site energy asset solutions. Continued investment in new products, services, and assets has impacted our earnings in the near term. However, we believe our continued investments in unregulated operations will result in long-term improvement of our financial performance."

"Direct and targeted actions are being taken to improve earnings performance. We are seeing strong indications that the overall value proposition for our unregulated operations is on target and growing in market significance. It's reaffirmed every day as overall market trends reinforce the demand for energy efficiency, lifecycle asset management, and building sciences services. Our challenge is to ensure that we increase the unregulated pace of growth, expanding to achieve the necessary scale to ensure continued and growing shareholder value, while controlling costs associated within regulated operations," stated Bayne. "Given ongoing strategic efforts, we remain confident in our long-term performance and are committed to our sustainability value propositions."

Business Unit Results

Holding Company Allocations and Decentralization

As a holding company, costs associated with corporate governance, centralized human resources, accounting and finance, and information technology services, SEC compliance, shareholder services, enterprise-related insurances, and other holding company costs are allocated to each subsidiary using an allocation methodology or through direct charges. Formerly, the majority of these costs would have been borne exclusively by Maine Public Service Company. Consequently, such corporate costs and direct charges allocated to unregulated subsidiaries reduce the cost burden on Maine Public Service. Losses within the unregulated business units are significantly attributable to these charges and allocations.

During the third quarter and year-to-date, a substantial amount of effort and cost has been placed toward compliance with the Sarbanes-Oxley Act, particularly Section 404. Through September 2005 such direct compliance costs have been in excess of $600,000. As a smaller publicly traded company, such compliance costs tend to be a significantly higher percentage of total revenues than larger companies. While we are dedicated to full compliance with Sarbanes-Oxley, it is also evident that the cost of compliance is significantly out of balance with the scale of our organization. Currently, the SEC is evaluating recommendations that may lessen the economic burden of Section 404 on smaller publicly traded companies. While we are hopeful that changes will limit the cost of compliance, we cannot be assured of such.

"In order to create a more responsive behavior to cost control, efforts are under way to decentralize, in whole or in part, corporate services related to human resources, accounting and finance, and information technology," stated Bayne. "We believe decentralization will lead to potential cost savings, but, more importantly, a behavior that encourages increased cost control and revenue focus within the Corporation's individual business units. In addition, we believe the implementation of a decentralized approach will simplify and clarify segment or business unit reporting. Our decentralization goals include pushing decision-making closer to the profit and loss centers, while minimizing inter-company transactions and allocations that hold potential for reducing corporate overhead."