Environmental Power Announces 2008 Annual Results and Provides Business Update
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
Californiabond 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 millionof 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.
- Closed on the sale of
- 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.
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.
The Company had a net loss applicable to common shareholders of
The Company’s net loss from continuing operations was
Other factors that affected our operating results from continuing operations in 2008 include:
- An increase in revenues from
$1.2 millionfor the year ended December 31, 2007to $2.9 millionin the year ended December 31, 2008. The increase in revenues reflects revenues from the Company’s Huckabay Ridge facility which began operations in February 2008and had revenues of $1.7 millionfor 2008, during which it was in service from February 2008to 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 millionfor the year ended December 31, 2007to $7.1 millionin 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 millionin 2008 from $12.4 millionin 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 millionfor the year ended December 31, 2008from $0.3 millionfor 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
- Decline in interest income in 2008 of
$0.3 millionfrom $0.8 millionin 2007 to $0.5 millionin 2008 due to lower investment earnings rates.
- Interest expense increased to
$1.0 millionin 2008 from $0.01 millionin 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 millionfrom the expiration of the statute of limitations on a contingent obligation.
The Company is pleased to report that the Company’s Annual Report on Form 10-K for the year ended
The Company’s unrestricted cash and cash equivalents amounted to
A complete presentation of the Company’s financial results for the year ended
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.
Convertible Note Closing
The company had previously announced its intention to issue convertible bonds as a source of capital. On
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
As previously announced, our Huckabay Ridge facility in
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.
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.
In September of last year, Microgy Holdings, our subsidiary, completed a
Bar 20, the third announced facility in
Our new facility at the JBS Swift meat processing plant in
RNG(R) to satisfy the agreement will come from Microgy’s first
Xcel Energy will use the RNG(R) to generate carbon-neutral electricity at the company’s Fort St. Vrain Generating Station near
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
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.
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
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.
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 firstname.lastname@example.org John Abrashkin Public Relations Contact Ricochet Public Relations (212) 679-3300 x121 email@example.com
SOURCE Environmental Power Corporation