PORTSMOUTH, N.H., March 17 /PRNewswire-FirstCall/ -- Environmental
Power Corporation (Nasdaq: EPG or the "Company") today announced
results for the year ended December 31, 2007. Business Commentary
Environmental Power's progress during the last six months has
proven that its business model can address the market demands for
domestic, renewable supplies of energy. We achieved commercial
operation of the largest renewable natural gas (RNG(R)) facility of
its kind in the world thereby reconfirming the unique role of our
technology and approach to providing pipeline grade methane.
Further, we are poised to begin the rollout of our pipeline of
projects with our Nebraska and Texas projects followed closely by
the California portfolio. The Company sees market conditions
continuing to improve for our offering with increased prices for
natural gas, which forms the baseline for our renewable natural gas
contracts, as well as increased demand, and therefore prices, for
greenhouse gas offset credits which we generate as part of our
process. Our goals are to maintain our first mover status in the
biogas market, continue to execute on our identified project
pipeline of 4.9 million MMBtu of annual generation and finalize the
development of the 6.8 million MMBtu of projects under various
earlier stages of development. We are also fortunate that the
nature of our projects allows us to utilize a tax- exempt financing
model which we anticipate will not be materially impacted by
current market concerns affecting other forms of tax-exempt
financing. Overall, the Company is well positioned for growth and
will continue to focus on both the construction of our announced
projects and identifying additional project opportunities
throughout North America. Financial Results For the year ended
December 31, 2007, we had a net loss applicable to common
shareholders of $18.9 million, or loss applicable per common share
of $1.66, compared to net loss applicable to common shareholders of
$18.4 million, or loss per common share of $1.91, for the year
ended December 31, 2006. The increase in net loss applicable to
common shareholders was primarily attributable to a $3.5 million
increase in loss from discontinued operations, and an increase in
preferred dividend requirements of $1.2 million. These changes were
partially offset by a decrease in the amortization of the
beneficial conversion feature associated with our series A
preferred stock offering in November, 2006 of $4.1 million, and a
$915,000 increase in other income. We have one continuing business
segment, Microgy. The results of operations for this business
segment, which is presented as continuing operations, as well as
our discontinued operations, consisting of the results of our
Buzzard subsidiary, are discussed below. A complete presentation of
the Annual Results and the Management's Discussion and Analysis is
included in the Annual Report on Form 10K that is being filed today
with the Securities and Exchange Commission and will be available
on the Company's website. Continuing Operations Revenues from
continuing operations decreased by $1.04 million, or 47%, to
$1,175,000 for the year ended December 31, 2007, as compared to
$2.2 million for the year ended December 31, 2006. This decrease in
revenue is due mainly to the change from a business model where we
sell facilities to third parties, to the current ownership model,
where we build, own, and operate facilities for our own account.
Revenues from the operation and maintenance of facilities increased
to $1,175,000 for the year ended December 31, 2007, compared to
$825,000 for the year ended December 31, 2006. The increase in
operations and maintenance revenue in the year ended December 31,
2007 is a result of the three Wisconsin facilities being fully
operational in 2007 as compared to 2006, when only two facilities
were fully operational. Our cost of goods sold decreased to
$942,000 for the year ended December 31, 2007 as compared to $2.1
million for the year ended December 31, 2006. This decrease is due
primarily to the shift in emphasis from a sales model to an
ownership model. In the year ended December 31, 2007, we did not
recognize any expenses from the construction of facilities. In the
year ended December 31, 2006, $812,000 of the $2.1 million in costs
of revenue was related to the construction of electric generating
facilities constructed for sale to Dairyland. Operations and
maintenance costs decreased from $1.3 million in the year ended
December 31, 2006 to $942,000 in the year ended December 31, 2007,
due primarily to lower repair and maintenance costs at the
Wisconsin facilities. General and administrative expenses from
continuing operations increased by $1.2 million to $12.4 million
for the year ended December 31, 2007, as compared to $11.2 million
for in the year ended December 31, 2006. This increase was
primarily due to a $762,000 increase in non-cash compensation
expense and a $1.5 million increase in payroll related expenses,
including severance. These increases were partially offset by a
$992,000 decrease in professional service expenses. In the year
ended December 31, 2007, we recognized $2.8 million of non-cash
compensation expenses due primarily to the FAS 123R treatment of
options and stock appreciation rights granted to employees, as
compared to non-cash compensation expense of $2.0 million in the
year ended December 31, 2006. We experienced an increase in
preferred security dividend requirements related to our series A 9%
cumulative convertible preferred stock issued in November, 2006,
from $193,000 for the year ended December 31, 2006, to $1.3 million
for the year ended December 31, 2007, representing dividends either
accrued or paid in the year ended December 31, 2007. The foregoing
expenses were offset in part by other income of $1.4 million for
the year ended December 31, 2007, compared to other income of
$439,000 for the year ended December 31, 2006. The increase in
other income is primarily due to the expiration of the statute of
limitations regarding potential liability related to the Sunnyside
project, and the resulting release of a reserve therefore (in the
amount of $583,000). Additionally, interest income increased by
$335,000 to $783,000 in the twelve months ended December 31, 2007,
primarily as a result of a higher average cash balance due to the
common stock offering. Discontinued Operations In accordance with
previous announcements, on February 29, 2008, Buzzard Power
Corporation, a wholly owned subsidiary of Environmental Power,
completed an agreement with Scrubgrass Generating Company, L.P., to
terminate Buzzard's leasehold interest in the Scrubgrass waste coal
facility. The Company will recognize a benefit of $6.0 million for
accounting purposes to reflect forgiveness of debt and recognition
of deferred gain associated with the facility during the first
quarter of 2008. We experienced a pre-tax loss from discontinued
operations of $6.2 million for the year ended December 31, 2007,
compared to a $2.7 million pre-tax loss for the year ended December
31, 2006. This increase in pre-tax loss is primarily due to an
increase in operating expenses of $3.1 million, and a $177,000
increase in other expenses. Business Update Huckabay Ridge
Commercial Operations On January 22, 2008, the Company announced
that the Huckabay Ridge facility achieved full-capacity production
levels of pipeline-quality renewable natural gas (RNG(R)) and had
moved into full-scale commercial operation. "The Huckabay Ridge
project is operating well following our announcement of achieving
commercial operations in January," said Richard Kessel, President
and CEO of Environmental Power. "All performance tests have been
successfully completed and we are already engaged in evaluating
several operational improvements to further enhance performance. I
don't think we can overstate the importance of achieving full
capacity at the largest project of its kind in the world, for our
customers and our shareholders." Grand Island Project in
Construction On December 11, 2007, the Company held a
groundbreaking ceremony for its biogas plant at the JBS Swift beef
processing facility in Grand Island, Nebraska. The Microgy Grand
Island Biogas Facility will generate biogas to offset a portion of
JBS Swift's natural gas consumption and will improve that plant's
waste management practices. Environmental Power's subsidiary
Microgy, Inc. will construct, own and operate the renewable energy
production facility and sell its biogas to JBS Swift pursuant to a
15-year purchase agreement. At capacity, the facility is expected
to generate 235,000 MMBtu per year. The Benham Companies, LLC of
St. Louis, Missouri has been selected to provide design and
construction services for the project and construction is
proceeding on schedule with biogas deliveries to JBS Swift expected
to begin in October, 2008 and ramp up to through the end of the
year. Microgy, Inc. has submitted an application for volume-cap
allocation to the Nebraska Investment Finance Authority (NIFA) in
support of the issuance of up to $7 million of tax exempt bonds to
provide debt financing for the facility. The tax exempt bonds will
be issued under the jurisdiction of the City of Grand Island,
Nebraska which has already approved an intent resolution. The
application is expected to be considered during NIFA's March 28
meeting. The Company anticipates approval of the tax-exempt
financing by the end of April and financial closing in June, 2008.
Texas Permitting and Construction Progress continues in the build
out of the Company's announced Texas portfolio. The Company has
entered into an agreement with MWH Constructors to finalize design
and initiate procurement of equipment for the Cnossen and Rio Leche
projects. The Company intends to move forward with these two
projects with the objective of maintaining a target in-service date
for these projects of the first quarter of 2009. The third
announced project, known as Mission, remains subject to further
evaluation of feedstock and off-take arrangements. The Company is
in late-stage discussions for another similarly sized RNG(R)
project in Texas that could be initiated ahead of the Mission
project but no final decisions have been made at this time. "As I
have consistently said we would do, we are moving ahead with the
projects in Texas where we know we can deliver on the expectations
of our bondholders and shareholders," said Rich Kessel. "We need a
little more time to determine the most profitable path regarding
the next Texas project but we are working hard to ensure that the
work completed by MWH for Cnossen and Rio Leche can be directly
leveraged for the next project, thereby minimizing any delays."
California Permitting and Financing The Company has obtained
necessary operating permits and environmental approvals for most of
its proposed projects in California. With regard to the Riverdale
Cluster, a project involving anaerobic digesters at three adjacent
dairies with a combined expected output of 550,000 MMBtu/year of
RNG(R), all required permits have been issued by state and local
authorities and all opportunities for appeal have expired. With
regard to the Hanford Cluster, a project involving three dairies
with a combined expected output of 605,000 MMBtu/year of RNG(R),
conditional use and air permits have been issued by local and state
authorities. Further, the California Regional Water Quality Control
Board (CRWQCB) unanimously approved the issuance of water discharge
permits for this project. The Company fully expects these permits
to be issued next month. With regard to the Bar 20 project, which
has an expected output of 570,000 MMBtu/year of RNG(R), there is a
series of permits pending for a dairy expansion as well as for our
anaerobic digester project. The conditional use permit for the Bar
20 project and the environmental review of the project were
completed and issued by Fresno County in February. The air permit
for the digester project was issued for 30-day public comment by
the San Joaquin Air Pollution Control District (SJAPCD) and no
comments were received. The water permit was issued for 30-day
public comment by the CRWQCB and no comments were received. SJAPCD,
which is the local authority responsible for the environmental
review of the dairy expansion, recently decided to recirculate for
a 30-day comment period, the environmental, or "CEQA," document
specifically related to the dairy expansion. Since both the CRWQCB
and the SJAPCD must await the completion and issuance of the CEQA
document specifically related to the dairy expansion before either
agency can issue the air or water permits, the earliest that the
SJAPCD can issue the pending air permit for the digester project is
approximately April 15, 2008, and the earliest that the CRWQCB can
issue the pending water permit is at its April 24, 2008 business
meeting. There has been no change regarding the permitting status
of the Gallo- Columbard project. "We have all the permits in hand
to proceed with the Riverdale project in California and with the
actions by the Air Quality Control District and the Water Pollution
Control Board last week, we will have all the permits needed to
commence construction of the Hanford project shortly," said Rich
Kessel. "As many of you know, this is a significant milestone and
there have been many in the industry who thought that we could not
be successful in permitting co-digestion projects in California.
However, with the hard work of numerous local and state permitting
officials and a lot of perseverance by our staff, we have set an
important precedent and template that will benefit all the projects
that come next." The Company has decided to submit an application
for an allocation of tax-exempt bond financing in California to
support the construction of the Riverdale and Hanford projects. We
anticipate that the application will be submitted before the end of
March. With the permits for Riverdale in hand, and the expectation
that we will have all final permits for Hanford shortly following
the recent CRWQCB action, we have initiated geotechnical and design
work at these facilities. The Company will be ready to ramp up
construction activities once the allocation is made. The Company
expects this to occur at the end of May 2008, which is somewhat
later than had been expected when we had given earlier guidance as
to the in service date of the Hanford and Riverdale projects. We
are hopeful that we will be able to submit a separate application
quickly for the Bar 20 project if the SJAPCD and CRWQCB are able to
issue the permits for the Bar 20 project in April. Other
Development Projects With regard to the previously announced
Cargill project in Colorado, we continue to work on securing
off-take and feedstock arrangements. Once these are secured, we
will announce our expected construction schedule. In Idaho,
progress on the Cargill project has slowed because of a potential
ownership change at the dairy. We continue to pursue off-take
arrangements while monitoring the situation with the dairy. In
addition to the projects described above, the Company has
additional projects under consideration that are at earlier stages
of development. Projects in this category have an expected annual
production of approximately 6.8 million MMBtu/year. "We are very
pleased with the progress made at the end of the year with the
Huckabay and Grand Island projects," said Rich Kessel.
"Improvements in the outlook in price and demand for natural gas
along with increased interest in RNG(R) at premium prices from
numerous parties give us more options than we have had in the past.
The market for greenhouse gas offsets also continues to strengthen
and we have seen prices of over $5 per metric ton on the Chicago
Climate Exchange and higher for recent bi-lateral transactions for
methane offsets. At the same time, I am certainly sensitive to
investor concerns regarding any delay in the previously announced
construction schedule, and while we will do what we can do to make
up time, we now believe that we will be bringing most of our
announced portfolio of projects on line during the first and second
quarters of 2009 and expect to achieve our targeted $40 million of
annualized revenue run rate by July of 2009." Management Conference
Call Mr. Richard Kessel, Chief Executive Officer, and Mr. Michael
Thomas, Chief Financial Officer, will comment on these and related
items and will also answer questions from interested investors in
the Conference Call scheduled for Monday, March 17, 2007, at 10
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 VK77210 Replay Access#:
800-355-2355 Replay Passcode: 77210# The call will be available for
3 business days by accessing the number above 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 livestock wastes
and other organic waste 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: Company Contact
Investor Relations Contact Mark Hall, Senior Vice President Jeff
Berman Environmental Power Corporation Ricochet Public Relations
(630) 573-2926 (212) 679-3300 x126 DATASOURCE: Environmental Power
Corporation CONTACT: Mark Hall, Senior Vice President of
Environmental Power Corporation, +1-630-573-2926, ; Investor
Relations, Jeff Berman of Ricochet Public Relations,
+1-212-679-3300 x126, Web site: http://www.environmentalpower.com/
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