TARRYTOWN, N.Y., March 17 /PRNewswire-FirstCall/ -- Environmental
Power Corporation (NASDAQ:EPG) ("we", "us", or the "Company") today
announced results for the year ended December 31, 2008 and provided
a business update. Business Commentary During the last quarter, the
Company undertook a number of initiatives in its transformation
from a development based company to a sustainable operating
company. These initiatives include the following, which will be
further described later in this press release: -- Confirm Huckabay
Ridge Operating Performance - Completed system modifications to
Huckabay Ridge, and are presently in the performance test period
set forth in the California bond draw conditions, as we have
achieved targeted RNG(R) production levels. -- Enhanced Capital
Structure - Pursued a parallel strategy to raise the necessary
funds for our equity commitments related to our announced projects,
specifically: -- Closed on the sale of $5.0 million of our
convertible notes, and are seeking further corporate-level
financing. -- Hired an investment bank, Marathon Capital, LLC, to
assist us in identifying and managing discussions with entities
interested in investing in our projects. -- Evaluating the
availability of funds under the federal stimulus package and other
federal programs for our shovel-ready projects. -- Seek Parity with
Other Renewables and Biofuels - Supporting recently introduced
legislation creating tradable tax-credits for the production of
renewable natural gas from waste products. -- Project Costs -
Taking advantage of the decrease in the cost of commodities to
reduce our project capital costs and therefore improve project
returns. -- Reduce G&A Costs - Reduced G&A costs by 25% and
maintain reductions for 2009. These initiatives formed the
framework for our decision making and focused the organization at
the inflection point in its growth cycle, as we transform our
Company into a sustainable operating entity and maintain its
leadership position in the RNG(R) sector. Market Update We continue
to experience very positive market conditions for our RNG(R)
product as a source of carbon neutral gas for utilities and
industrials, and we also expect that the new administration with
its focus on increasing renewable energy production and addressing
the nation's carbon footprint through a mandatory cap and trade
program will enhance our business prospects. We anticipate federal
renewable energy incentives, increased demand for our RNG(R)
product with the establishment of a national Renewable Electricity
Standard, and a further enhancement of the value of our greenhouse
gas offset credits due to the anticipated mandatory cap and trade
program. Our recent announcement of the Xcel RNG(R) sales agreement
further reinforces the value of our carbon neutral gas as a long
term solution for utilities to meet their renewable goals at
appropriate renewable energy prices even during times of low
natural gas prices. The increased desire to improve environmental
stewardship by a broad range of industries, which have chosen to
voluntarily reduce their carbon footprint, has also increased the
demand for our RNG(R) product. While focusing on greenhouse gas
offset credits in the past, the availability of our RNG(R) product
has also generated a new market potential for their use of our
RNG(R) as their energy source to lower their carbon footprint. We
believe the market for our unique product which addresses the
environmental needs of the agriculture and food processing sectors
while creating a versatile and renewable energy product with
greenhouse gas offset credits will be a key component in addressing
the future energy and environmental needs of the US. Business
Update Financial Results The Company had a net loss applicable to
common shareholders of $17.3 million, or loss per common share of
$1.11, for the year ended December 31, 2008, as compared to a net
loss applicable to common shareholders of $18.9 million, or loss
per common share of $1.66, for the year ended December 31, 2007.
The net loss in 2008 includes income of $7.0 million on
discontinued operations in 2008, as compared to a loss from
discontinued operations of $6.2 million in 2007. The net income
from discontinued operations in 2008 is due to an $8.0 million
gain, substantially non-cash in nature, from the disposal of
discontinued operations in February 2008. This gain was partially
offset by a loss from discontinued operations of $1.0 million in
2008. The Company's net loss from continuing operations was $23.0
million for the year ended December 31, 2008, as compared to a net
loss from continuing operations of $11.2 million for the year ended
December 31, 2007. The net loss for 2008 includes a non-recurring,
non-cash charge for impairment of goodwill of $4.9 million.
Previously, the market price of the Company's common stock and,
consequently, its market capitalization were relatively high
compared to the book value per share of its common stock. However,
this year the Company's market value is substantially below its
book value, due principally to the current market price of its
common stock. As a result, accounting requirements require the
Company to determine whether there is enough market value after
covering other net assets on a book basis to cover any of its
goodwill. The Company determined that market value was insufficient
to cover goodwill, and determined that the write-off was required.
The write-off of goodwill is not a reflection on the economics of
the Company's projects, which the Company continues to stand
behind, but is simply the result of the application of accounting
requirements associated with goodwill impairment. Other factors
that affected our operating results from continuing operations in
2008 include: -- An increase in revenues from $1.2 million for the
year ended December 31, 2007 to $2.9 million in the year ended
December 31, 2008. The increase in revenues reflects revenues from
the Company's Huckabay Ridge facility which began operations in
February 2008 and had revenues of $1.7 million for 2008, during
which it was in service from February 2008 to August 2008, when it
was taken out of service for repairs and equipment upgrades.
Huckabay resumed commercial operations in December 2008. --
Operations and maintenance expenses increased from $0.9 million for
the year ended December 31, 2007 to $7.1 million in 2008. The
increase was due to activity at Huckabay Ridge and included a
substantial amount of non-recurring expenses and start up costs
relating principally to the repairs and upgrades mentioned above.
-- General and administrative expenses declined to $12.0 million in
2008 from $12.4 million in 2007. The reduction was due primarily to
reductions in payroll expenses and non-cash compensation expense
from the issuance of stock options and stock appreciation rights.
-- Depreciation and amortization expense increased to $1.4 million
for the year ended December 31, 2008 from $0.3 million for the year
ended December 31, 2007, reflecting principally eleven months of
depreciation expense for 2008 on the Huckabay Ridge facility, which
we began depreciating following its completion in February 2008.
Other income and expense declined from income of $1.4 million in
2007 to expense of $0.5 million in 2008. The components of the
change include: -- Decline in interest income in 2008 of $0.3
million from $0.8 million in 2007 to $0.5 million in 2008 due to
lower investment earnings rates. -- Interest expense increased to
$1.0 million in 2008 from $0.01 million in 2007 because, beginning
in February 2008, the Company began to expense the interest costs
related to the construction of Huckabay Ridge, when this facility
began commercial operations. -- The results for 2007 include a one
time income amount of $0.6 million from the expiration of the
statute of limitations on a contingent obligation. On February 29,
2008, Buzzard Power Corporation, a wholly owned subsidiary of
Environmental Power Corporation, completed an agreement with
Scrubgrass Generating Company, L.P., to terminate Buzzard's
leasehold interest in the Scrubgrass waste coal facility. The
company recognized a gain of $8.0 million for accounting purposes,
of which all but $375,000 was non-cash. The Company is pleased to
report that the Company's Annual Report on Form 10-K for the year
ended December 31, 2008 will include disclosure that the Company's
internal control over financial reporting was effective at the
reasonable assurance level as of December 31, 2008. In 2007, the
Company had reported several material weaknesses related to
internal control over financial reporting. These weaknesses were
remediated during 2008. The Company's conclusion that internal
controls were effective as of December 31, 2008 is attested to by
the report of the Company's Independent Registered Accounting Firm
of Vitale Caturano & Company, P.C. The Company's unrestricted
cash and cash equivalents amounted to $3,157,938 as of December 31,
2008. However, as indicated previously in the risk factors included
in the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 2008, the Company will need to raise
substantial outside capital in the near future to avoid curtailing
or ending our business operations. As a result of this, the report
of Vitale Caturano & Company, P.C., our independent registered
public accounting firm, on the Company's audited financial
statements included in our Annual Report on Form 10-K for the year
ended December 31, 2008 contains a paragraph that indicates that,
while the Company's financial statements have been prepared on a
going concern basis, there is substantial doubt about its ability
to continue as a going concern, and that no adjustments have been
made to the financial statements that might result from the outcome
of this uncertainty. The Company is aggressively pursuing capital
from a number of sources, and hopes to obtain the financing it
requires by the end of the first half of 2009. Nevertheless, the
Company cannot assure you that all of the necessary additional
financing will be available on reasonable terms or in a timely
fashion, particularly in the current economic environment, in which
capital raising activities are especially challenging. The level of
funds the Company is able to raise will determine the level of
development and construction activity that it can pursue and
whether it will be able to continue as a going concern. A complete
presentation of the Company's financial results for the year ended
December 31, 2008, and management's discussion and analysis
thereof, is included in the Company's Annual Report on Form 10-K
for the year ended December 31, 2008, which was filed with the
Securities and Exchange Commission on March 16, 2009 and is
available on the Company's web site. Corporate Expenses The Company
has undertaken a prioritization of its activities to focus on the
build-out of its announced projects, while maintaining oversight of
the other projects in its development pipeline. Specifically, our
previously announced plan to reduce cash G&A by 25% has been
implemented. Financing Initiatives Convertible Note Closing The
company had previously announced its intention to issue convertible
bonds as a source of capital. On March 13, 2009, the Company
completed an offering of $5.0 million of its 14% Convertible Notes
due January 1, 2014, resulting in net proceeds of approximately
$4.4 million. The conversion price schedule of the bonds starts at
an initial conversion price of $5.40 which increases to $11.00 by
the maturity of the bonds. Our financing plans include the
possibility of future financings on similar terms. Project Level
Investment In addition, we have been discussing investment at the
project level with potential financial and strategic investors. To
that end, the Company recently hired Marathon Capital, LLC to act
as our investment advisor to assist us in managing this process and
evaluating various potential investments. Capital raised through
these initiatives will be applied toward the Company's required
equity contribution for each of our projects. As highlighted in
previous announcements, the company has five projects in Texas and
California that are fully permitted, debt financed, and ready to
begin construction upon our securing additional financing and
meeting draw conditions. Project Status Huckabay Ridge As
previously announced, our Huckabay Ridge facility in Stephenville,
Texas resumed the sale of RNG(R) to Pacific Gas & Electric on
December 22, 2008 as we began to ramp up the digesters and the
modified gas conditioning equipment. During the last week,
Huckabay's digesters have been operating at targeted levels, the
gas conditioning system has been adjusted for variations in biogas
production levels and we are in the performance test period as
required by the bondholders as one of the conditions for release of
proceeds from the sale of bonds for the Hanford and Riverdale
projects in California. We are extremely satisfied that the efforts
made by our team to bring Huckabay Ridge to the level we have
always believed could be achieved has been realized. The dedication
of our staff and the support and patience that we have received
from our shareholders is greatly appreciated. We, as an
organization, have learned many things from this experience that
will make us a better and stronger company going forward. This
experience also better prepares us for the roll-out of our next
generation of projects based on an improved design. We believe that
our experience at this level of biogas production will
differentiate us from all other participants in the market. Other
Texas Facilities The previously announced Rio Leche and Cnossen
projects are slated to begin construction in the second quarter of
2009, pending the timing of the financing initiatives presently
underway. Both facilities are fully permitted and have undergone
partial site preparation and other precursor-steps to construction.
The tax-exempt bond financing for these projects has already been
completed, and the Company is in the process of securing the
remaining equity required by the Company to supplement that which
the Company has already invested. We expect the facilities to be
operational at the end of the second quarter/beginning of third
quarter of 2010. We expect to benefit from the decreases in raw
material prices, as commodities such as steel and copper are a
significant component of our facilities. In addition, we are
presently analyzing the most appropriate contracting philosophy and
timing of orders as we prepare for our extensive construction
program. California In September of last year, Microgy Holdings,
our subsidiary, completed a $62.4 million dollar tax-exempt bond
financing in support of the new Riverdale and Hanford facilities in
California. All permits are in place for these projects, and final
engineering specifications are being completed. Construction is
anticipated to begin in the third quarter of 2009, with commercial
operations commencing during the fourth quarter of 2010 pending the
achievement of performance and funding obligations at Huckabay
Ridge. Bar 20, the third announced facility in California, has
received its tax-exempt bond allocation from the California Debt
Limit Allocation Committee. We expect to pursue this financing as
we have done with the prior projects once there is adequate
improvement in the tax-exempt bond market and pending our other
financing initiatives. Nebraska Our new facility at the JBS Swift
meat processing plant in Grand Island, Nebraska, is expected to
begin commercial operations during the third quarter of this year.
Pending future capital raising results and improvement in seasonal
weather conditions, the company expects to resume construction
shortly. Development Opportunity Colorado On March 3, 2009, the
Company, through its subsidiary Microgy, announced a long-term
RNG(R) supply agreement to Xcel Energy (NYSE:XEL). The 10-year
contract, which is renewable for an additional 10 years, is
fixed-price at a premium to the current market for conventional
natural gas. RNG(R) to satisfy the agreement will come from
Microgy's first Colorado facility, which is expected to begin
construction during the first half of 2010. Microgy estimates that
all permits, design and funding for the project will have been
completed by the end of the first quarter 2010. The project is
expected to produce 915,000 MMBtu of RNG(R) per year, enough to
generate 125,000 megawatt-hours of electricity, or the equivalent
power use of 17,000 homes in Colorado on an annual basis. Xcel
Energy will use the RNG(R) to generate carbon-neutral electricity
at the company's Fort St. Vrain Generating Station near
Platteville, Colo. The agreement will help Xcel Energy continue to
meet its mandates under the state's Renewable Energy Standard (RES)
and support the company's efforts to reduce carbon dioxide
emissions. Federal Initiatives Update As we have previously
mentioned, we are pursuing a number of initiatives at the federal
level in order to secure parity with other biofuel producers.
Initiatives include the introduction of a renewable gas production
tax credit as well as seeking to secure stimulus funds or other
federal funding related to our shovel ready projects. In addition,
pressure has greatly increased at the federal level to promote
technologies that reduce carbon emissions. We anticipate that there
will be numerous efforts to pass legislation to promote renewable
energy and we continue to have dialogue with policymakers about the
opportunity to include biogas production more broadly in new policy
initiatives. As a reminder, we do not rely on such subsidies in our
project economics but will pursue them where possible. Two bills
have been introduced in Congress, Senate Bill S306 and House Bill
HR1158, which provide for tax credits for renewable gas, manure
based projects such as ours, landfill projects and woody biomass
based projects. The production tax credit for manure based projects
is proposed to be the $4.27 per MMbtu tax credit that we previously
discussed. A broad coalition has been formed including such firms
as Gas Technology Institute, American Gas Association, Waste
Management and utilities such as PG&E and Sempra to support
this initiative. Meetings with Congressional staff have been
on-going. In addition, we are seeking access to the funds available
from the stimulus package or other federal funding. The process is
evolving as to how these funds will be deployed on behalf of our
new industry but we are excited about the prospect of working with
new partners and new applications of our product to address the
need for versatile renewable energy. The other federal initiative
that would accelerate our business model is the national Renewable
Electricity Standard which has been introduced in the Senate. Our
RNG(R) continues to be one of the most cost effective renewable
sources of energy, as it is available 24/7, it utilizes the
existing gas pipeline infrastructure, and it can be used as a fuel
source in existing electric production facilities. Closing
Statement The organization has been focused and committed to
transforming itself from a late stage development company to a
sustainable operating entity and leader in its field. In spite of
these turbulent times, the uniqueness of our Company, having
projects that are shovel ready with the necessary permits and debt
financing in place, the commitment of our staff and our
predominance in the RNG(R) sector, form the foundation for the
interest of others to participate and invest in our projects. We
have sought and will always seek to maximize shareholder value and
we thank all the shareholders who have supported our organization,
especially during these turbulent economic times. Management
Conference Call Mr. Richard Kessel, President and CEO, and Mr.
Michael Thomas, Senior Vice President and CFO, will comment on
these and related items and will also answer questions from
interested investors in the conference call scheduled for Tuesday,
March 17, 2009, at 10:00 a.m. EDT. Conference Call details:
Conference Call Details When: 10:00am Eastern Time; March 17, 2009
Dial-in: U.S. Toll Free: 888-299-4099 Canadian Toll Free:
866-682-1172 International Toll: 302-709-8337 Verbal Passcode:
VK73434 Replay Access #: U.S. 800-355-2355 Code 73434# Int. &
Canadian Toll: 402-220-2946 Code 73434# ABOUT ENVIRONMENTAL POWER
CORPORATION Environmental Power Corporation is a developer, owner,
and operator of renewable energy production facilities. Our
principal operating subsidiary, Microgy, Inc., develops and
operates proven large scale, commercial anaerobic digestion based
projects which produce a versatile methane-rich biogas from
livestock waste and other organic sources. 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 financing, our 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 corporate and project financing
and our ability to continue as a going concern, 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. Company Contact Scott
Tetenman, Manager of Project Financing and Treasury Environmental
Power Corporation 914 631-1435 x42 John Abrashkin Public Relations
Contact Ricochet Public Relations (212) 679-3300 x121 DATASOURCE:
Environmental Power Corporation CONTACT: Scott Tetenman, Manager of
Project Financing and Treasury of Environmental Power Corporation,
+1-914-631-1435, ext. 42, , or John Abrashkin, Public Relations
Contact, Ricochet Public Relations, +1-212-679-3300 ext. 121, Web
Site: http://www.environmentalpower.com/
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