Environmental Power Corporation Committed to 'Doing Well by Doing
Good' Announces 3rd Quarter Revenues from Waste Coal Operation to
Fuel 'Manure to Energy' Systems
PORTSMOUTH, N.H.--(BUSINESS WIRE)--Nov. 14, 2002--Environmental
Power Corporation (OTCBB: POWR), a leader in providing solutions for
the management of agricultural waste, production of renewable energy
and conventional power from a variety of alternative fuel sources,
continued to generate a steady stream of revenue from the
award-winning Scrubgrass waste coal facility while continuing to
deploy new technology which converts 'manure into energy'.
Joseph E. Cresci, Chairman and CEO, said, "Our Scrubgrass waste
coal power plant operated at record levels during the last quarter.
These revenues along with a successful private placement completed
during the quarter have provided us with cash flow to invest in the
ongoing roll-out of our anaerobic digestion technology."
"These divisions of Environmental Power form the linchpin of our
business strategy: "Doing Well By Doing Good". Scrubgrass with its
profitable record demonstrates our commitment to clean, resourceful
power production. Our highly efficient and proven 'manure to energy'
technology serves as our platform for growth as it addresses the
growing market needs for control of air and water pollution on
agricultural sites and the production of renewable energy." We are
well positioned to increase our profitability and address critical
societal needs."
Net Income (Loss)
Net income for the three months ended September 30, 2002 amounted
to $875,839, or 4 cents per share (basic and diluted), as compared to
net income of $922,030, or 6 cents per share (basic) and 5 cents per
share (diluted), for the three months ended September 30, 2001. Net
income for the nine months ended September 30, 2002 amounted to
$899,981, or 4 cents per share (basic and diluted), as compared to net
income $1,692,496, or 13 cents per share (basic and diluted), for the
nine months ended September 30, 2001.
Revenues
Power generation revenues for the three months ended September 30,
2002 amounted to $14,683,232 as compared to $13,914,475 for the same
period in 2001, an increase of 5.5%.
Power generation revenues for the nine months ended September 30,
2002 amounted to $40,773,693, as compared to $39,494,244 for the same
period in 2001, an increase of 3.2%.
Segments
The Company manages and evaluates its operations in two reportable
business segments: Scrubgrass project (Waste Coal) and Microgy
(Renewable Energy). These segments have been classified separately by
the chief operating decision maker because of the different
technologies used in the generation of energy and the future growth
prospects of those business technologies. Financial data for
reportable business segments (with Microgy results included beginning
July 23, 2001) is as follows:
Renewable
Waste Coal Energy
Scrubgrass Microgy Other Consolidated
Nine Months Ended 9/30/02:
Pre-tax income 4,562,581 (2,039,837) (268,362) 2,254,382
Identifiable assets 82,065,756 8,494,181 657,353 91,217,290
Nine Months Ended 9/30/01:
Pre-tax income 2,350,414 (137,041) 620,123 2,833,496
Identifiable assets 73,809,797 6,873,543 2,286,793 82,970,133
Acquired Technology
In July 2001, Environmental Power Corporation acquired Microgy
Cogeneration Systems, Inc., a development stage company offering
management of agricultural waste and renewable energy, a market with
an estimated target market of over $14 billion, including an initial
target market of $7 billion. The Company believes Microgy's business
compliments the Company's existing environmentally sound alternative
fuel power business. With the acquisition of Microgy, the Company
obtained the exclusive North American license for a highly efficient
anaerobic digestion technology that produces renewable energy
generated by methane derived from animal wastes.
Chairman Cresci stated, "We believe this technology provides a
unique solution to two critical market needs: the need for pollution
control by large animal feeding operations; and the rapidly growing
renewable energy market. In addition, we expect that the technology
will turn an expensive agricultural industry problem into a
profit-generating solution for farmers."
Chairman Cresci continued, "The Microgy business has continued to
accelerate. We are seeking to develop projects from Idaho to Florida.
Farmers are excited about our animal waste control system and power
companies are anxious to work with us with our renewable and
distributed energy."
ABOUT ENVIRONMENTAL POWER CORPORATION
Environmental Power Corporation (OTCBB: POWR) is an
entrepreneurial energy company established in 1982 with annual
revenues in excess of $50 million. The Company focuses on
environmentally sound power generation and anaerobic digestion
systems, a development stage business in a market with an estimated
target market of over $14 billion, including an initial target market
of $7 billion.
CAUTIONARY STATEMENT
The Private Securities Litigation Reform Act of 1995 (the "Act")
provides a "safe harbor" for forward-looking statements. Certain
statements contained in this press release such as statements
concerning future growth prospects, estimated target markets, beliefs
as to Microgy's business complimenting Environmental Power
Corporation's existing business, beliefs as to the our licensed
technology providing a unique solution to two critical market needs,
the technology turning an expensive agricultural industry problem into
a profit-generating solution for farmers and other statements
contained herein regarding matters that are not historical facts are
forward looking statements as such term is defined in the Act. 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, financing requirements and
uncertainties, difficulties involved in developing and executing on a
business plan, technological uncertainties, risks relating to managing
and integrating acquired businesses, volatile and 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 POWR's or Microgy's projects, uncertainties
relating to general economic and industry conditions, the amount and
rate of growth in expenses, uncertainties relating to government and
regulatory policies, the legal environment, intellectual property
issues, the competitive environment in which POWR and Microgy operate
and other factors, including those described in the Company's filings
with the Securities and Exchange Commission, including the section
``Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Certain Factors That May Impact Future
Results'' of POWR's Quarterly Report on Form 10-Q for the period ended
September 30, 2002. Readers are cautioned not to place undue reliance
on these forward-looking statements, which speak only as of their
dates. POWR undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise.
ENVIRONMENTAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended
September 30 September 30
2002 2001 2002 2001
POWER GENERATION
REVENUES $14,683,232 $13,914,475 $40,773,693 $39,494,244
COSTS AND EXPENSES:
Operating expenses 5,564,303 5,292,285 18,178,847 17,779,358
Lease expenses 5,332,121 5,988,593 18,407,178 17,862,716
General and
administrative
expenses 1,774,198 1,101,420 4,108,740 2,589,900
Depreciation and
amortization 136,719 111,870 409,379 284,981
12,807,341 12,494,168 41,104,144 38,516,955
OPERATING INCOME
(LOSS) 1,875,891 1,420,307 (330,451) 977,289
OTHER INCOME
(EXPENSE):
Interest income 12,350 17,944 34,382 59,688
Interest expense (41,355) (43,047) (111,916) (145,474)
Amortization of
deferred gain 77,103 77,103 231,308 231,308
Sales of NOx
emission credits 0 -- 2,428,200 --
Other income 0 32,723 2,859 1,710,685
48,098 84,723 2,584,833 1,856,207
INCOME BEFORE
INCOME TAXES 1,923,989 1,505,030 2,254,382 2,833,496
INCOME TAX EXPENSE (1,048,150) (583,000) (1,354,401) (1,141,000)
NET INCOME $ 875,839 $ 922,030 $ 899,981 $ 1,692,496
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING:
Basic 20,600,872 15,547,945 20,298,245 12,802,339
Diluted 20,707,675 17,063,405 20,382,005 13,322,677
EARNINGS PER
COMMON SHARE:
Basic $ 0.04 $ 0.06 $ 0.04 $ 0.13
Diluted $ 0.04 $ 0.05 $ 0.04 $ 0.13
ENVIRONMENTAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30 December 31
2002 2001
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 596,900 $ 468,271
Restricted cash 923,842 1,014,580
Receivable from utility 8,620,084 7,905,864
Other current assets 701,664 607,590
TOTAL CURRENT ASSETS 10,842,490 9,996,305
PROPERTY, PLANT AND EQUIPMENT, NET 934,164 652,830
LEASE RIGHTS, NET 2,049,750 2,161,503
ACCRUED POWER GENERATION REVENUES 68,556,991 63,648,995
GOODWILL 4,912,866 4,912,866
LICENSED TECHNOLOGY RIGHTS, NET 3,489,433 3,628,177
OTHER ASSETS 431,596 565,570
TOTAL ASSETS $ 91,217,290 $85,566,246
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 7,713,352 $ 9,382,471
Secured promissory note payable to
related party 750,000 750,000
Other current liabilities 2,097,260 1,363,108
TOTAL CURRENT LIABILITIES 10,560,612 11,495,579
DEFERRED GAIN, NET 4,240,647 4,471,955
SECURED PROMISSORY NOTES PAYABLE
AND OTHER BORROWINGS 1,383,148 1,420,467
DEFERRED INCOME TAX LIABILITY 184,556 146,396
ACCRUED LEASE EXPENSES 68,556,991 63,648,995
TOTAL LIABILITIES 84,925,954 81,183,392
SHAREHOLDERS' EQUITY:
Preferred Stock ($.01 par value;
2,000,000 shares authorized
as of September 30, 2002 and
December 31, 2001, respectively;
no shares issued) 0 0
Preferred Stock (no par value,
10 shares authorized; 10 shares
issued as of September 30, 2002
and December 31, 2001,
respectively) 100 100
Common Stock ($.01 par value;
50,000,000 shares authorized;
22,410,293 and 21,370,293 issued;
and 21,912,839 and 20,251,653
outstanding as of September 30,
2002 and December 31, 2001) 224,103 213,702
Additional paid-in capital 7,665,601 6,850,046
Accumulated deficit (618,409) (1,518,390)
Accumulated other comprehensive loss (60,385) (60,385)
7,211,010 5,485,073
Treasury stock (497,454 and 1,118,640
common shares, at cost, as of September
30, 2002 and December 31, 2001) (273,726) (456,271)
Notes receivable from officers
and board members (645,948) (645,948)
TOTAL SHAREHOLDERS' EQUITY 6,291,336 4,382,854
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 91,217,290 $85,566,246
ENVIRONMENTAL POWER CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
Nine Months Ended
September 30
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 899,981 $ 1,692,496
Adjustments to reconcile
net income to net cash
Provided by operating activities:
Depreciation and amortization 409,379 284,981
Deferred income taxes 38,160 52,000
Amortization of deferred gain (231,308) (231,308)
Non-cash & Stock Based Compensation 49,706 3,916
Accrued power generation revenues (4,907,996) (5,595,636)
Accrued lease expenses 4,907,996 5,595,636
Changes in operating assets
and liabilities:
Increase in receivable from utility (714,220) (716,219)
Increase in other current assets (113,593) (241,532)
Decrease (Increase) in other assets 107,244 (6,754)
(Decrease) increase in accounts
payable and accrued expenses (1,669,119) 303,984
Decrease in long-term debt to supplier 0 (94,411)
Net cash provided by
operating activities (1,223,770) 1,047,153
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease (Increase) in restricted cash 90,738 (217,927)
Acquisition related expenditures (210,465)
Property, plant and equipment expenditures (393,967) (1,000)
Net cash used in investing
activities (303,229) (429,392)
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividend payments (3,750) (174,852)
Private Placement Common Stock 780,000
Net borrowings (repayments) under
working capital loan 734,152 (662,794)
Sale of Treasury Stock 182,545
Proceeds from short-term note payable 750,000
Advances on notes receivable from officers (200,000)
Repayment of secured promissory notes
payable and other borrowings (37,319) (76,974)
Net cash generated (used)
in financing activities 1,655,628 (364,620)
INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 128,629 (253,141)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 468,271 307,666
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 596,900 $ 560,807
CONTACT: Environmental Power Corporation
Investor Contact:
R. Jeffrey Macartney, 603/431-1780
jmacartney@environmentalpower.com
or
Media Contact:
Brecca Loh, 603/431-1780
brecca@environmentalpower.com
www.environmentalpower.com