TARRYTOWN, N.Y., July 31 /PRNewswire-FirstCall/ -- Environmental
Power Corporation (Nasdaq: EPG or the "Company") today announced
results for the second quarter ended June 30, 2008. Business
Commentary The Company is pleased to report that market conditions
for our business model remain robust and that we have achieved
substantial progress in the last several months on key projects in
Texas, California and Nebraska as well as significant growth in our
development pipeline. As further described in the Market Conditions
section of this news release, demand for our renewable natural gas
(RNG(R)) has historically been driven by utility strategies to
comply with Renewable Portfolio Standards and remains our main
focus. This market is robust and has resulted in a 60% increase in
our development pipeline since last quarter. In addition, the
biogas and RNG(R) we create has tremendous versatility and can be
used in many ways including as a transportation fuel which is the
current focus of policy makers seeking alternatives to increased
prices of traditional gasoline and diesel fuel. Increased interest
in more environmentally sustainable operations for many types of
businesses and industries has also created new opportunities. These
new avenues for marketing RNG(R) should further enhance our markets
and potential for growth. The Company remains firmly on course to
be a respected leader in the biogas and RNG(R) markets and will
continue to take advantage of the momentum created by the financing
and construction activities of the last several months, a summary
of which follows: -- Construction has begun on the Rio Leche RNG(R)
project in Dublin Texas and the Hereford RNG(R) project at the
Cnossen Dairy in Hereford, Texas. -- Approval of the volume cap
allocations for tax exempt bond financing in California for all
three of the Company's currently planned large-scale RNG(R)
projects in that state has allowed the Company to commence
marketing of the bonds with closing of the financing currently
expected to occur by the end of August, subject to obtaining
purchase commitments. -- The Company completed the tax-exempt bond
financing for its Grand Island Biogas Project at the JBS Swift
plant in Nebraska and construction of this facility is proceeding
on schedule. Operational improvements for the gas conditioning
system are being implemented at the Huckabay Ridge facility, with a
goal of completing all the needed improvements by the end of
October, which is expected to result in operations achieving
targeted levels. -- The State of Texas has approved the
distribution of liquid effluent from Texas projects as commercial
fertilizer, providing a potential revenue source and giving the
projects greater operational flexibility. -- Sale of the remaining
greenhouse gas offset credits from the Wisconsin projects for 2007
was also completed in the quarter. Market Conditions The Company
continues to experience increased demand for RNG(R) - our
trademarked brand for our pipeline-grade methane - due not only to
utilities' needs to meet their Renewable Portfolio Standards (RPS),
but also to address the demand by energy users for a green energy
product. The Company believes that the increased desire to improve
environmental stewardship by industry has also increased the demand
and, therefore, the potential value of the greenhouse gas offset
credits it produces. As with gas pricing, the Company believes that
continued demand in the voluntary market for greenhouse gas offset
credits, and the expectation of an eventual compliance/mandatory
market, will have a positive influence on future pricing for these
credits. Pressure to promote technologies that reduce carbon
emissions has greatly increased. The Company anticipates that there
will be numerous efforts with the new Congress to pass legislation
to promote renewable energy and the Company continues to have
dialogue with policymakers about the opportunity to include biogas
production more broadly in new policy initiatives. At the same
time, there continue to be broad concerns about traditional
renewable transportation fuels like ethanol and biodiesel because
of the pressure on grain prices. The Governor of Texas recently
requested relief from obligations to use ethanol on a short term
basis and a decision is expected from the EPA Administrator soon.
T. Boone Pickens' widely promoted strategy to shift use of natural
gas to fuel vehicles, in lieu of petroleum- based gasoline, fits
well with the nature of biogas production and there has been an
increase in media interest in biogas as a transportation fuel. The
Company believes that this media interest will translate into even
more interest on the part of policymakers. The Company believes
that all these factors bode well as it seeks to maintain its first
mover status in the biogas market and continues to execute on its
identified projects, totaling 4.9 million MMBtu per year of energy
production. In addition to the Company's announced projects, its
development pipeline has increased by 60% to over 10.7 million
MMBtu of energy production per year with 30 additional projects
that are in various stages of development. Some of these new
opportunities are located near the Company's other projects, which
the Company believes will allow it to utilize existing operations
and maintenance resources and thereby achieve economy of scale. The
new regions include the upper Midwest and the Rocky Mountain
states. New project announcements will be forthcoming, as soon as
EPC finalizes key project agreements for feed stocks and off-take
and when anticipated construction dates can be announced. Financial
Results For the three months ended June 30, 2008, the Company had a
net loss applicable to common shareholders of $5,293,000 or loss
per share of $0.34, compared to a net loss applicable to common
shareholders of $7,089,000 or loss per share of $0.71 for the three
months ended June 30, 2007. The net loss applicable to common
shareholders declined in 2008 because, for the three months ended
June 30, 2007, the Company had a loss from discontinued operations
of $3,235,000 whereas these operations were discontinued prior to
the second quarter of 2008 and, therefore, did not affect the
Company's results in that quarter. Revenue for the three months
ended June 30, 2008 increased to $1,112,000 from $327,000 for the
three months ended June 30, 2007 an increase of 240%. The increase
is attributable to revenues from the Huckabay Ridge facility which
began operations in February 2008 and had revenues of $790,000 for
the quarter ended June 30, 2008, whereas such facility was still
under construction and had no such revenues in the quarter ended
June 30, 2007. For the quarter ended June 30, 2008, operations and
maintenance expense was $1,937,000 as compared to $244,000 for the
same period in 2007, an increase of $1,693,000. The increase was
due to operations and maintenance expense of $1,924,000 at Huckabay
Ridge during the second quarter of 2008. Huckabay Ridge began
commercial operation in February 2008 and therefore did not have
any operations and maintenance expense in 2007, as these expenses
were capitalized during that period. General and administrative
expenses from continuing operations were essentially the same,
decreasing by $44,000 to $3,611,000 for the three months ended June
30, 2008, as compared to $3,656,000 for the same period in 2007.
G&A expenses include FAS 123R non-cash expenses of $1,115,000
this quarter compared to $898,000 in the second quarter of 2007.
Depreciation and amortization expense increased to $354,000 for the
three months ended June 30, 2008, as compared to $77,000 for the
three months ended June 30, 2007. The increase in depreciation and
amortization expense was principally due to the fact that the
second quarter of 2008 included three months' depreciation of the
Huckabay Ridge facility, which began commercial operations in
February 2008, whereas no such depreciation and amortization
expense was recorded for the same period of 2007. As a result of
the changes described above, our operating loss from continuing
operations increased to $4,789,000 in the second quarter of 2008
from $3,650,000 in the same period in 2007. Interest income for the
three months ended June 30, 2008 was $100,000, as compared to
$132,000 for the three months ended June 30, 2007. Interest income
decreased primarily due to lower interest rates on lower invested
cash balances. Interest expense, net, increased to $265,000 for the
three months ended June 30, 2008, as compared to $2,000 for the
three months ended June 30, 2007. This increase was due principally
to the fact that we ceased the capitalization of interest expense
related to the Huckabay Ridge facility when it began commercial
operations in February 2008. The interest expense related to the
portion of the bonds allocated to finance the Huckabay Ridge
facility is now recorded as interest expense. A complete
presentation of the Company's financial results for the second
quarter of 2008, and management's discussion and analysis thereof,
is included in the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2008, which is being filed today with the
Securities and Exchange Commission and will be available on the
Company's website. Business Update Huckabay Ridge Operations
Modifications designed to insure an efficient and reliable gas
conditioning system have commenced with an expected completion by
the end of October, 2008. Three areas of improvement are planned
and include adding heating capacity, cooling capacity and enhanced
instrumentation and controls. Orders have been placed for the
necessary equipment and installation over the next several months
will be coordinated to minimize interconnection downtime. "With
these changes implemented, we fully expect to see a sharp reduction
in operating costs related to consumables, non-recurring labor and
consulting expenditures and other variable costs such that Huckabay
Ridge's financial performance will meet our previous expectations,"
said Richard Kessel, President and CEO of Environmental Power. "All
the experience gained from Huckabay Ridge, including those items
just discussed, have already been incorporated into the design of
the new Texas facilities that are currently under construction, as
well as our planned California projects." Approval from the State
of Texas to distribute the liquid effluents from Texas facilities
as a fertilizer has also been obtained. This will provide the Texas
projects potential revenues as well as important operational
flexibility in an environment where fertilizer costs have risen
significantly. Rio Leche and Cnossen Projects Under Construction
Site construction work has commenced at both the Rio Leche and
Cnossen projects. Our groundbreaking ceremony for Rio Leche
occurred on June 10, 2008. The ground breaking ceremony for Cnossen
will occur next week on August 6, 2008. The Company expects
Commissioner Todd Staples of the Texas Department of Agriculture
and a number of other state and local officials to participate in
this ground breaking ceremony. The Company anticipates that these
projects will be producing RNG(R) during the second quarter of
2009. California Projects Update On May 28, 2008 the Company
received CDLAC approval of its volume cap allocation for $65
million in the tax-exempt bond financing for the Hanford and
Riverdale projects and, on July 16, 2008, the Company received
approval for an additional $26 million in volume cap allocation for
the Bar 20 project. This financing is expected to be on terms
similar to those of the tax-exempt bond financing previously
obtained in Texas. The bonds are currently being marketed and
closing of this financing is currently expected to occur by the end
of August, subject to obtaining purchase commitments. "By achieving
these milestones, we have shown the support our projects have with
state officials and agencies and their respective staffs in
addressing environmental concerns while being a source of renewable
energy," said Richard Kessel. JBS Swift Grand Island Project This
week, the Company announced that Microgy Grand Island, LLC, has
completed a financing involving the sale of $7 million of
tax-exempt bonds issued by the City of Grand Island, Nebraska. The
proceeds of the bonds will be used to finance construction of the
Grand Island Biogas Project at the JBS Swift Plant in Grand Island,
Nebraska. With this closing the Company has fully secured financing
for the project. The biogas facility is already under construction
and is expected to begin producing biogas by the end of the year.
Summary "We are very pleased by the continued progress in financing
and constructing our projects," said Rich Kessel. "We believe that
the market for our RNG(R) product is continuing to improve with
increased demand for natural gas for a myriad of uses, as shown by
our 60% increase in the Company's development pipeline. We will
remain focused on completing the construction of our announced
pipeline of projects, and continuing to grow our development
pipeline." 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 Thursday July 31, 2008, at 10 a.m. EDT. Conference
Call details: When: 10am Eastern Time; July 31, 2008 Dial-in: U.S.
Toll Free: 877-737-1669 Canadian Toll Free: 800-501-6064
International Toll: 302-709-8008 Verbal Passcode VK34741 Replay
Access #: U.S. 800-355-2355 Code 34741# Int. & Canadian Toll:
402-220-2946 Code 34741# The call will be available for 3 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
Mark Hall, Senior Vice President Environmental Power Corporation
(630) 573-2926 DATASOURCE: Environmental Power Corporation CONTACT:
Mark Hall, Senior Vice President of Environmental Power
Corporation, +1-630-573-2926, Web site:
http://www.environmentalpower.com/
Copyright
