Renegy Provides Update on Snowflake Biomass Plant
14 February 2008 - 4:20AM
Marketwired
TEMPE, AZ (NASDAQ: RNGY) announced today that its Snowflake
White Mountain Power ("Snowflake") biomass plant is on schedule to
begin commercial operations during the second quarter of 2008. The
remaining milestones to achieve commercial operation of the plant,
and their target completion dates, are as follows:
-- First fire of boiler - February
-- Steam turbine started - March
-- Plant begins generating electrical power - May
-- Full commercial operations - June
As the plant nears completion, Renegy currently expects that the
final cost of the facility will exceed its original budget by
approximately $12.5 million. Approximately half of this increase is
attributable to cost overruns resulting from rising costs of labor,
building materials and other construction challenges, while the
remainder is attributable to new investments in the plant including
a complete overhaul of the turbine, condenser and other used
components, as well as new buildings and equipment added to the
scope of the project over the past few months. As previously
contemplated by the Contribution and Merger Agreement (the "CMA"),
Renegy will contribute $2.0 million toward the total amount of cost
overruns. In addition, Renegy will pay for $6.0 million of the new
capital investments described above that have been, or may be,
incurred relating to the acquisition of new assets and other plant
enhancements that are expected to further increase the efficiency,
reliability and long-term operating performance of the plant. The
balance of any costs in excess of the original budget will be paid
by Renegy's Chairman and CEO Bob Worsley as outlined in the
CMA.
Despite the amount of cost overruns and investment in plant
upgrades as outlined above, the capital cost of the 24 megawatt
plant, excluding financing and other soft costs, is currently
expected to total $58.5 million, which remains below industry
estimates of the cost to build a new biomass plant, which range
from $2,500 to $3,000 per kilowatt. Furthermore, Renegy's $6.0
million investment in plant enhancements is expected to be
substantially offset by a projected reduction in the costs expected
to be necessary to refurbish and commission a recently acquired
biomass facility in Susanville, California, resulting from its
plans to maintain the plant at its current location. More
information on the Company's Susanville plant can be found in a
separate release issued today.
"We are rapidly approaching some key milestones relating to the
completion and commissioning of our Snowflake facility that should
enable us to begin generating electrical power in the second
quarter of this year," stated Bob Worsley. "While disappointed in
the cost increases, I am pleased to report that we are on track to
fire the boiler later this month and to complete a performance test
of the entire plant during April. The additional investment we have
elected to make is expected to improve the economics of the plant
over the long-term by increasing its potential to achieve higher
performance and greater availability, while at the same time
reducing operating and maintenance costs. While our original cost
projections have been impacted by a variety of internal and
external forces, including a significant rise in the cost of
building materials being generally experienced in national and
global markets, we remain focused on completing the plant in both a
timely and quality manner to meet the obligations under our
financing, insurance and power purchase agreements."
Worsley continued, "In addition to the impending start-up of our
first plant, we continue to be enthusiastic about the growth
prospects for biomass energy and the many opportunities we have
identified in the marketplace to acquire existing biomass to
electricity facilities and related businesses that complement our
current business activities."
As a result of the increased capital investment in the plant,
combined with its growth objectives, Renegy may seek additional
debt or equity financing in 2008 to fund the refurbishment of its
Susanville biomass plant and other strategic opportunities, as well
as for general corporate purposes. In the interim, to neutralize
the impact of the $6.0 million of additional investment in the
Snowflake plant, Bob Worsley has agreed to provide the Company with
a $6.0 million revolving line of credit from which the Company may
draw, if needed, for any near-term cash needs. In parallel, Bob
Worsley has agreed to personally guarantee up to $6.0 million
should the Company choose to pursue an alternate revolving line of
credit with a financial institution. Access to either such credit
line will allow Renegy to seek additional financing at a measured
pace as growth opportunities arise. The Company is also continuing
its search for the addition of a chief operating officer with
significant power industry and plant construction experience to add
depth to its management team and oversee the development and
commissioning of future biomass power generating facilities.
In other news, it was announced Monday that AbitibiBowater
("Abitibi") has agreed to sell its Snowflake, Arizona newsprint
mill, the site of Renegy's Snowflake biomass plant, to British
Columbia-based Catalyst Paper Corp., a leading North American
producer of mechanical printing papers. According to the
announcement, Catalyst Paper intends to continue operating the
Snowflake paper mill as a means to strengthen its competitive
position and market share by having a greater presence on the west
coast of North America. Renegy currently has a 25-year lease and
operating agreement (including a 25-year option) in place with
Abitibi associated with its Snowflake biomass plant. As part of
these agreements, Abitibi will supply recycled paper sludge
produced by the mill, which is estimated to make up approximately
50% by weight (25% by energy content) of the biomass fuel to be
used by Renegy's Snowflake plant. All such agreements currently in
place with Abitibi remain intact and are enforceable under the new
ownership scenario.
Renegy is also announcing today that it has completed its
determination of final transaction costs and working capital
adjustments associated with the $9.6 million sale of its SCR-Tech
subsidiary last November. As previously noted, current stockholders
of Renegy (other than the Robert M. Worsley and Christi M. Worsley
Revocable Trust (the "Worsley Trust")) will receive additional
value through an increased percentage of ownership in Renegy common
stock based on the net cash proceeds of the SCR-Tech sale, which
have been calculated at $9.3 million. After expenses and working
capital adjustments required under the CMA relating to the
combination of the businesses of Catalytica Energy Systems and the
renewable energy divisions of NZ Legacy, LLC (the "Renegy Merger")
last October, the final net effect is an approximate 1.5% reduction
in Renegy common stock currently owned by the Worsley Trust.
Accordingly, current stockholders of Renegy (other than the Worsley
Trust) now own approximately 42.8% of the outstanding common stock
of Renegy and the Worsley Trust approximately 57.2% (compared with
41.3% and 58.7% ownership, respectively, at the effective time of
the Renegy Merger).
Additional information relating to the Snowflake plant and risk
factors can be found in a Form 8-K filed by the Company today with
the Securities and Exchange Commission. The Company expects that
any securities offered as part of any capital raising activities as
described in this press release will not be registered under the
Securities Act of 1933 and therefore may not be offered or sold in
the United States absent registration or an applicable exemption
from registration requirements. This press release shall not
constitute an offer to sell or solicitation of an offer to buy
securities and is issued pursuant to Rule 135c under the Securities
Act of 1933.
About Renegy
Renegy, based in Tempe, Arizona, is a green energy company
focused on acquiring, developing and operating a growing portfolio
of biomass to electricity power generation facilities. Renegy seeks
to rapidly grow its renewable energy assets with the goal of
becoming the leading independent power producer (IPP) of biomass
electricity in North America. Its first project is Snowflake White
Mountain Power (Snowflake), a 24 megawatt (MW) biomass facility
under construction near Snowflake, Arizona. This facility is
scheduled to begin supplying electrical power to Arizona's two
leading utility companies in the second quarter of 2008, and serves
as a solid foundation for the Company's growth. Find Renegy on the
Worldwide Web at www.renegy.com.
This news release contains forward-looking statements within the
meaning of the Securities Act of 1933, as amended, and the
Securities Exchange Act of 1934, as amended, and is subject to the
safe harbors created therein. These statements include, but are not
limited to, those regarding the Company's expectations regarding
the amount of additional investment necessary to complete its
Snowflake plant; the prospects and timing associated with
completing target milestones and commencing commercial operation of
the plant; the Company's growth strategy and future opportunities;
its ability to secure additional financing to fund strategic growth
opportunities and other corporate purposes; and the prospects
associated with the addition of a chief operating officer. These
statements are subject to risks and uncertainties that could cause
actual results and events to differ materially from those expressed
in the forward-looking statements. These risks and uncertainties
include, among others, the risk of further cost overruns or delays
associated with completing construction and commissioning of the
Snowflake plant; that we will not be able to secure additional
financing, or financing on acceptable terms, to fund strategic
growth opportunities and other corporate purposes; diversion of
management's attention away from other business concerns; the risks
associated with the development, generally, of the Company's
overall strategic objectives; the existence of unanticipated
technical, commercial or other setbacks related to the Company's
power generating facilities, including construction delays and the
ability of the Company to secure adequate fuel for its biomass
plants; changes in the environmental requirements relating to
certain emissions; and the other risks set forth in the Company's
most recent Form 10-QSB filed with the Securities and Exchange
Commission. The Company undertakes no obligation to update any
forward-looking statements to reflect new information, events, or
circumstances occurring after the date of this release.
CONTACT: Megan Meloni Investor Relations (650) 631-2847
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