PORTSMOUTH, N.H., Aug. 13 /PRNewswire-FirstCall/ -- Environmental
Power Corporation (Amex: EPG or the "Company") today announced
results for the quarter and six months ended June 30, 2007. The
Company is also announcing that its annual shareholders meeting
will be held on September 10, 2007 in Dallas, Texas. The Company is
further providing an update on its strategic business plan and
business activities Financial Results As announced on May 31, 2007,
the Company has entered into negotiations finalizing the
disposition of the leasehold interest held by the Company's
subsidiary Buzzard Power Corporation ("Buzzard") in the 83 megawatt
electric generating facility located in Venango County,
Pennsylvania, known as the Scrubgrass facility. Consistent with
that activity, the assets and liabilities of Buzzard have been
accounted for as discontinued operations for all periods presented
in this release and in the Company's Form 10Q. The disposition of
the Scrubgrass lease arrangements will result in the write-off of
Buzzard's net assets and forgiveness of the Arclight loan.
Additionally, we will be able to recognize the deferred gain from
the original sale of the facility. The Company estimates that the
net effect of the transaction will result in a gain of
approximately $3 million. The exact transaction value will vary
based upon the results of Buzzard's operations from now until the
final disposition date. Financial information for the discontinued
operations is presented in the Company's Form 10Q. Microgy, Inc.,
the other wholly owned subsidiary of EPG, is currently the sole
business segment of the Company. Six months ended June 30, 2007
compared to six months ended June 30, 2006 The Company reported a
loss from continuing and discontinued operations available to
common shareholders for the six months ended June 30, 2007 of $8.8
million, or $0.89 per share, on 9.9 million weighted average common
shares outstanding, as compared to net loss of $4.3 million, or
$0.45 per share, on 9.6 million weighted average common shares
outstanding for the same period in 2006. Continuing operations
reported a loss available to common shareholders of $5.9 million,
or $0.60 per share, driven in part by non-cash compensation expense
and severance expenses. Discontinued operations reported a loss
available to common shareholders of $2.9 million, or $0.29 per
share for 2007. For the six months ended June 30, 2006, continuing
operations reported a loss available to common shareholders of $4.1
million, or $0.43 per share, while discontinued operations reported
a loss of $231,000, or $0.02 per share. Revenues from continuing
operations decreased by $631,000, or 54%, to $542,000 in 2007, as
compared to $1.2 million for the same period in 2006. This decrease
in revenue is due mainly to the change in business model from one
where facilities are sold to the current ownership model. Revenues
from the operation and maintenance of facilities increased to
$542,000 in 2007 compared to $242,000 in 2006. This increase is
primarily due to increased gas production at the Wisconsin
facilities and the fact that not all of the Wisconsin facilities
were operational in 2006. We recognized $1.0 million from the sale
of the Wisconsin facilities in 2006 whereas there were no such
sales in 2007. Costs and expenses from continuing operations
increased by $1.0 million to $6.6 million for the six months ended
June 30, 2007, as compared to $5.6 million for the same period in
2006. This increase was a result of a $759,000 increase in non-cash
compensation expense and a $338,000 increase in payroll expenses
including severance, partially offset by a $152,000 decrease in
travel and entertainment expenses. Three months ended June 30, 2007
compared to three months ended June 30, 2006 The Company reported a
loss from continuing and discontinued operations available to
common shareholders for the three months ended June 30, 2007 of
$7.1 million, or $0.71 per share, on 10.0 million weighted average
common shares outstanding, as compared to net loss of $2.9 million,
or $0.30 per share, on 9.6 million weighted average common shares
outstanding for the same period in 2006. Continuing operations
reported a loss available to common shareholders of net loss of
$3.9 million, or $0.39 per share, while discontinued operations
reported a loss of $3.2 million, or $0.32 per share for the quarter
ended June 30, 2007. For the same period in 2006, continued
operations reported a loss available to common shareholders of $2.4
million, or $0.25 per shares, and discontinued operations reported
a loss of $496,000, or $0.05 per share. Revenues from continuing
operations increased slightly to $327,000 for the quarter ended
June 30, 2007 from $290,000 for 2006. These revenues are derived
from the operation and maintenance of the Wisconsin facilities.
Costs and expenses from continuing operations increased by $1.1
million to $4.0 million for the second quarter of 2007, as compared
to $2.9 million for the same period in 2006. The increase was
primarily attributable to a $1.2 million increase in general and
administrative expenses, including a $385,000 increase in non-cash
compensation expense related to FAS123R calculations and a $571,000
increase in severance expenses. These increases were partially
offset by a $93,000 decrease in costs of revenue at Microgy. Sale
of Carbon Credits for the Wisconsin Facilities Microgy, Inc. has
recently entered into an agreement to sell an estimated 65,000 tons
of carbon credits per year generated from the three Wisconsin
projects it operates, for the period 2007 through 2011. Microgy
will use the proceeds of the sales, in accordance with operating
agreements with the farms, toward repayment of the notes owed to
Microgy. The agreement with the carbon credit purchaser does not
allow the terms of the sale to be disclosed but the quality of the
credits from the projects did allow the Company to lock in
favorable pricing that will allow for an acceleration of payments
on the notes. Richard Kessel further stated, "The methane emissions
offset by our projects produce high-quality carbon offset credits
that can be traded on the Chicago Climate Exchange (CCX) or through
other bi-lateral transactions. This sale also re-affirms our belief
that carbon credits and the sale of other environmental attributes
will be a meaningful contributor to our revenues in the near and
long-term." Business Update Results of our Strategic Planning
Process The Company, recognizing the increased interest and
attention on renewable energy and the evolution of the carbon
market, has recently completed the first phase of a strategic
review of its operations and opportunities resulting in refinements
to its business plan. The value of our RNG(TM) and the potential
value of carbon credits create a number of new opportunities for
the Company due to its strong relationships with the agriculture
and food processing industries. The Company holds the exclusive
North American rights to the DBT co- digestion process in use at
the Wisconsin and Huckabay Ridge projects and we plan to use this
technology on most of the projects already under development as we
build an RNG(TM) portfolio to create a stable revenue base. At the
same time, the Company is investigating the expansion of its
commercial offering to include a wider array of proven technologies
for production of energy from animal and organic wastes, leveraging
our existing RNG(TM) regional presence and establishing strategic
relationships, where appropriate, to better serve our potential
customers' needs. Our overarching intent is to control the waste
streams and then determine the best and highest use in building out
our portfolio. Although we are evaluating, and are likely to make,
some changes within our announced portfolio of projects, we are
confirming that by the end of the first quarter of 2009, we expect
to be earning recurring annual revenue of $40 million as the
project pipeline is robust and diverse, giving us ample opportunity
to deliver on these expectations. Our business development
relationship with Cargill, Inc. continues to generate a significant
number of leads which are being actively pursued by our staff with
a focus on continuing to strategically build out our large RNG(TM)
projects. A broader offering that will evolve over time will enable
us to work potentially with Cargill and others to offer a wider
array of solutions across North America - solutions that always
focus on utilizing waste as a means to create useful products. As a
reminder of market potential, nearly 3 billion pounds per day of
manure is produced by dairy cows and hogs. For the carbon credit
market, approximately 6 billion metric tons of carbon dioxide and
other greenhouse gases are emitted annually. Huckabay Ridge Status
Management currently believes the Huckabay Ridge facility will
reach full commercial operations late in the third quarter or early
in the fourth quarter of 2007. Despite achieving biogas levels
which met expectations earlier this year when the gas conditioning
and compression equipment was not operating reliably, we are not
currently able to achieve targeted biogas output on five of the
eight digesters. The main cause of the diminished production is the
excessive recycling of water used for conditioning dry-lot manure.
High levels of recycling were necessary because of the
unprecedented rainfall and flooding that had filled onsite storage
lagoons and limited options to add freshwater to the system. We
have identified and begun implementing an alternate strategy which
will add some operating costs but which will facilitate our
reaching commercial operations and support uninterrupted operations
in the future. While this process is ongoing, we will be continuing
to improve the reliability of the gas conditioning and compression
system and delivering RNG(TM) to the pipeline to the maximum extent
possible. In addition, we have received the Type V permit which
will allow us to receive a wider variety of organic waste
materials, such as grease-trap waste, for use as a source of
substrate. The ability to use these materials will help us to
manage ongoing costs and ensure a reliable supply of substrate for
our co-digestion process. As of June 30, 2007 the company incurred
expenditures of $18.4 million related to the construction of the
Huckabay Ridge facility, including $3.5 million of capitalized
commissioning costs due to the delay of six months in reaching
commercial operations. In the three months ended June 30, 2007, we
received proceeds of approximately $156,000 from RNG(TM) produced
by the Huckabay Ridge facility, even though the plant operated
intermittently. Richard E. Kessel, the Company's Chief Executive
Officer, commented, "While disappointed with the continued
commissioning challenges of the Huckabay project, we have proven
that we can produce pipeline grade RNG(TM) and remain confident in
the digester technology we are deploying and the base- case
business model that it supports. Our team has been working
tirelessly to bring the facility on line and they have my full
support in taking an approach that ensures the long-term, reliable
operations of the facility. Merely claiming commercial operations,
without being able to sustain production in a credible fashion,
does not serve the purposes of our investors, Huckabay bondholders,
or our employees. As at any facility under development, it is
critical that the proper steps be taken at the onset to assure
long-term operational reliability. We are committed to that
process, rather than a band-aid approach that will require more
serious undertakings in the future." Status of Other Development
Projects Construction of the Rio Leche, Mission and Cnossen
facilities in Texas is pending final analysis of lessons associated
with the commissioning of Huckabay including permitting, substrate
management and supply, and off-take opportunities. We are pursuing
these projects aggressively to maintain our schedule of RNG(TM)
production by the end of 2008. In parallel with the ongoing
development of these projects, we are in the process of analyzing
possible additions or adjustments which could improve the economics
of this portfolio. The Texas bondholders are partners in the
decision making process and we look forward to working with them to
advance the projects in the form that is in the best interest of
our shareholders and customers. Progress is continuing on the
announced projects in California. The Gallo-Columbard
inside-the-fence project has received its Conditional Use Permit
and air permit and is in the final stages of permitting by the
California Water Board. At this time, Gallo-Columbard is working
with the Water Board to resolve a non-Microgy project related
issue. Once this is complete, we expect to be issued the water
permit for this project. All but one of the Conditional Use Permits
for the Bar-20, Riverdale and Hanford projects have been filed and
Air Permits are being filed by next week. The remaining water
permit applications are expected to be submitted by the end of
August. We will be filing for the volume cap for our allocation of
funding for these projects when these permits are close in hand.
The previously identified Gallo-RNG(TM) project, a separate project
from the Gallo-Columbard inside-the-fence project, is currently
under engineering review to address material-handling at the dairy.
The total estimated biogas production from the projects under
active development (not including the Gallo RNG(TM) project) is 1.9
million mmbtu/year. The company anticipates heightened capital
expenditures late in the fourth quarter associated with the
commencement of the construction phase of these and other projects.
Richard Kessel, CEO continued, "Our development pipeline is robust
and I am very pleased with the steps we are taking to improve the
strength of the portfolio. It is in the long-term best interests of
our shareholders and bondholders to put the right projects in the
right place to maximize their potential for economic and
operational success." Annual Shareholder Meeting The Company has
scheduled its 2007 Annual Meeting of Shareholders for Monday,
September 10, 2007, in Dallas, Texas at 10:30 am CDT at the
Marriott Dallas Fort Worth Airport South. Further information
regarding the location of the Annual Meeting will be included in
proxy materials to be filed with the Securities and Exchange
Commission. The Company's Board of Directors has set a record date
of August 7, 2007, for the Annual Meeting. Following the Annual
Meeting the Company will sponsor a tour of the Huckabay Ridge
facility, near Stephenville, Texas. All Shareholders are invited
but will be asked to register in advance. Transportation between
Dallas and the plant will be provided by the Company. Management
Conference Call Mr. Richard Kessel, Chief Executive Officer, and
Mr. Michael Thomas, Chief Financial Officer, will comment on these
and related items in the Conference Call scheduled for Tuesday,
August 14, 2007, at 11 a.m. EDT. Conference Call details: Dial-in:
U.S. Toll Free: 800-391-2548 Canadian Toll Free: 866-627-1646
International Toll: 302-709-8328 Access Code: Verbal Passcode
VK75202 Replay Access#: 800-355-2355 Replay Passcode: 75202# (The
call will be available for 3 days after which it will be available
on our website http://www.environmentalpower.com/) ABOUT
ENVIRONMENTAL POWER CORPORATION Environmental Power Corporation is
a developer, owner and operator of renewable energy production
facilities. Its principal operating subsidiary, Microgy, Inc.,
holds an exclusive license in North America for the development and
deployment of a proprietary anaerobic digestion technology for the
extraction of methane gas from animal wastes for its use to
generate energy. For more information visit the Company's web site
at http://www.environmentalpower.com/. CAUTIONARY STATEMENT The
Private Securities Litigation Reform Act of 1995, referred to as
the PSLRA, provides a "safe harbor" for forward-looking statements.
Certain statements contained in this press release, such as
statements concerning planned manure-to-energy systems, our sales
pipeline, our backlog, our projected sales and financial
performance, statements containing the words "may," "assumes,"
"forecasts," "positions," "predicts," "strategy," "will,"
"expects," "estimates," "anticipates," "believes," "projects,"
"intends," "plans," "budgets," "potential," "continue," "targets"
"proposed," and variations thereof, and other statements contained
in this press release regarding matters that are not historical
facts are forward-looking statements as such term is defined in the
PSLRA. Because such statements involve risks and uncertainties,
actual results may differ materially from those expressed or
implied by such forward-looking statements. Factors that could
cause actual results to differ materially include, but are not
limited to: uncertainties involving development-stage companies;
uncertainties regarding project financing, the lack of binding
commitments and/or the need to negotiate and execute definitive
agreements for the construction and financing of projects, the sale
of project output, the supply of substrate and other requirements
and for other matters; financing and cash flow requirements and
uncertainties; inexperience with the development of multi-digester
projects; risks relating to fluctuations in the price of commodity
fuels like natural gas, and our inexperience with managing such
risks; difficulties involved in developing and executing a business
plan; difficulties and uncertainties regarding acquisitions;
technological uncertainties; including those relating to competing
products and technologies; risks relating to managing and
integrating acquired businesses; unpredictable developments;
including plant outages and repair requirements; the difficulty of
estimating construction, development, repair and maintenance costs
and timeframes; the uncertainties involved in estimating insurance
and implied warranty recoveries, if any; the inability to predict
the course or outcome of any negotiations with parties involved
with our projects; uncertainties relating to general economic and
industry conditions, and the amount and rate of growth in expenses;
uncertainties relating to government and regulatory policies and
the legal environment; uncertainties relating to the availability
of tax credits, deductions, rebates and similar incentives;
intellectual property issues; the competitive environment in which
Environmental Power Corporation and its subsidiaries operate and
other factors, including those described in our most recent Annual
Report on Form 10-K or Quarterly Report on Form 10-Q, well as in
other filings we make with the Securities and Exchange Commission.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date that
they are made. We undertake no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise. CONTACT Mark Hall, Senior
Vice President (630) 292-3914 Public Relations Contact: John
Abrashkin, Ricochet Public Relations (212) 679-3300 x121 Investor
Relations Contact: John Baldissera, BPC Financial Marketing
1-800-368-1217 DATASOURCE: Environmental Power Corporation CONTACT:
Mark Hall, Senior Vice President of Environmental Power
Corporation, +1-630-292-3914, ; Public Relations, John Abrashkin,
Ricochet Public Relations, +1-212-679-3300 x121, , for
Environmental Power Corporation; Investor Relations, John
Baldissera, BPC Financial Marketing, 1-800-368-1217, for
Environmental Power Corporation Web site:
http://www.environmentalpower.com/
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