Environmental Power Corp. (EPG, Financial) filed Quarterly Report for the period ended 2009-09-30.
Environmental Power Corporation is an entrepreneurial energy company that focuses on environmentally sound power generation, including waste coal, anaerobic digestion, biomass, and distributed generation. Environmental Power Corp. has a market cap of $5.77 million; its shares were traded at around $0.37 with and P/S ratio of 1.99. Environmental Power Corp. had an annual average earning growth of 92.3% over the past 5 years.
Interest expense. Interest expense increased to $1,600,000 for the nine months ended September 30, 2009, as compared to $705,000 for the nine months ended September 30, 2008. This increase was due to several factors. 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. Therefore we had nine full months of interest expense relating to the Huckabay Ridge facility in the nine months of 2009, whereas we had only eight months of such interest expense related to Huckabay Ridge in the first nine months of 2008. In the nine months of 2009, we also incurred $537,000 in interest expense on $8,000,000 original principal amount of our 14% convertible notes which were issued in March and May 2009. Finally, beginning in April 2009 we stopped capitalizing interest on our Swift facility in Grand Island, Nebraska due to the fact that we temporarily suspended construction as of April 1, 2009. As a result, we expensed $245,000 of interest related to the Swift facility in the second and third quarters of 2009.
Income from discontinued operations, net of taxes. The results for the nine months ended September 30, 2009 do not include the results of discontinued operations because these operations were disposed of in February 2008. The loss from discontinued operations of $1,011,000 in 2008 reflects the operations of Buzzard for the first two months of 2008 before we disposed of it. On February 29, 2008 we disposed of Buzzards interest in the Scrubgrass facility and recognized a one time gain of $8,000,000. With the exception of a cash payment of $375,000 the gain was non-cash and consisted primarily of recognition of a previously deferred gain in the amount of $2,570,000, forgiveness of indebtedness in the amount of $3,456,000 and elimination of other obligations of $1,630,000. There was no tax provision provided on the disposition because we believe that we have sufficient net operating loss carry-forwards at the federal and state levels to offset any potential tax liability with respect to the gain on disposition. Therefore the net result of income from discontinued operations for the nine months ended September 30, 2008 was income of $6,989,000.
Overview. For the three months ended September 30, 2009, we had a net loss applicable to common shareholders of $8,284,000 or a loss of $0.53 per common share compared to loss applicable to common shareholders of $5,088,000 or loss of $0.33 per common share for the three months ended September 30, 2008. In the three months ended September 30, 2009, we recorded impairment of assets, a non-cash event, in the amount of $5,886,000. Without this write-down, net loss applicable to common shareholders would have been $2,398,000. The improvement in results before the impairment write-down is primarily due to improved performance at our Huckabay Ridge facility and a reduction in general and administrative expenses consistent with our cost reduction plan. These results are explained in more detail below.
Property, plant and equipment, net and construction in progress. The property plant and equipment balances were $25,408,000 and $23,932,000 as of September 30, 2009 and December 31, 2008, respectively. The increase in property, plant and equipment is principally due to completion of capital additions at the Huckabay Ridge facility and the reclassification of the completed construction costs to property plant and equipment from construction in progress at December 31, 2008. The total additions to the Huckabay Ridge facility, added to property plant and equipment during the nine months of 2009, were $2,525,000 of which $2,283,000 was included in construction in progress at December 31, 2008. In the construction in progress account, this reclassification of costs associated with the Huckabay Ridge facility of $2,283,000 was offset by additions $11,577,000 resulting in net increase to the construction in progress account, before reductions for the impairment of assets, a non-cash event, of $9,294,000. Of total capital additions to the construction in progress account in the nine months of 2009, $6,639,000 reflects capitalized interest on our Texas, California and Nebraska projects and $1,054,000 reflects construction expenditures at our Grand Island facility. Included in construction in progress at September 30, 2009 is $3,000,000 to satisfy certain license fees to Xergi in May 2009.
Proceeds from long-term debt. We issued $5,000,000 original principal amount of our 14% convertible notes due January 1, 2014 for net proceeds of approximately $4.5 million in March 2009. We issued an additional $3,000,000 of these notes in May 2009. Since these latter notes were issued to pay license fees on projects in development, the $3,000,000 original principal amount is not included in proceeds from long-term debt but is shown as a supplemental non-cash disclosure on the consolidated statements of cash flow. In 2008 we issued $7,000,000 in tax-exempt Nebraska bonds and $62,425,000 in tax-exempt California bonds.
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Environmental Power Corporation is an entrepreneurial energy company that focuses on environmentally sound power generation, including waste coal, anaerobic digestion, biomass, and distributed generation. Environmental Power Corp. has a market cap of $5.77 million; its shares were traded at around $0.37 with and P/S ratio of 1.99. Environmental Power Corp. had an annual average earning growth of 92.3% over the past 5 years.
Highlight of Business Operations:
General and administrative expenses. General and administrative expenses from continuing operations declined by $4,553,000 to $5,185,000 for the nine months ended September 30, 2009, as compared to $9,738,000 for the same period in 2008. The decline is attributable primarily to lower salary expenses in the 2009 period, reflecting the reductions in staffing, lower non-cash compensation expense in the 2009 period due to reduced expense from stock based compensation and reductions in development expense in the 2009 period as we slowed development efforts to conserve cash pending our fundraising initiatives. Without the inclusion of non-cash compensation expense, general and administrative expenses would have been $4,856,000 and $8,056,000 for the nine months ended September 30, 2009 and 2008, respectively.Interest expense. Interest expense increased to $1,600,000 for the nine months ended September 30, 2009, as compared to $705,000 for the nine months ended September 30, 2008. This increase was due to several factors. 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. Therefore we had nine full months of interest expense relating to the Huckabay Ridge facility in the nine months of 2009, whereas we had only eight months of such interest expense related to Huckabay Ridge in the first nine months of 2008. In the nine months of 2009, we also incurred $537,000 in interest expense on $8,000,000 original principal amount of our 14% convertible notes which were issued in March and May 2009. Finally, beginning in April 2009 we stopped capitalizing interest on our Swift facility in Grand Island, Nebraska due to the fact that we temporarily suspended construction as of April 1, 2009. As a result, we expensed $245,000 of interest related to the Swift facility in the second and third quarters of 2009.
Income from discontinued operations, net of taxes. The results for the nine months ended September 30, 2009 do not include the results of discontinued operations because these operations were disposed of in February 2008. The loss from discontinued operations of $1,011,000 in 2008 reflects the operations of Buzzard for the first two months of 2008 before we disposed of it. On February 29, 2008 we disposed of Buzzards interest in the Scrubgrass facility and recognized a one time gain of $8,000,000. With the exception of a cash payment of $375,000 the gain was non-cash and consisted primarily of recognition of a previously deferred gain in the amount of $2,570,000, forgiveness of indebtedness in the amount of $3,456,000 and elimination of other obligations of $1,630,000. There was no tax provision provided on the disposition because we believe that we have sufficient net operating loss carry-forwards at the federal and state levels to offset any potential tax liability with respect to the gain on disposition. Therefore the net result of income from discontinued operations for the nine months ended September 30, 2008 was income of $6,989,000.
Overview. For the three months ended September 30, 2009, we had a net loss applicable to common shareholders of $8,284,000 or a loss of $0.53 per common share compared to loss applicable to common shareholders of $5,088,000 or loss of $0.33 per common share for the three months ended September 30, 2008. In the three months ended September 30, 2009, we recorded impairment of assets, a non-cash event, in the amount of $5,886,000. Without this write-down, net loss applicable to common shareholders would have been $2,398,000. The improvement in results before the impairment write-down is primarily due to improved performance at our Huckabay Ridge facility and a reduction in general and administrative expenses consistent with our cost reduction plan. These results are explained in more detail below.
Property, plant and equipment, net and construction in progress. The property plant and equipment balances were $25,408,000 and $23,932,000 as of September 30, 2009 and December 31, 2008, respectively. The increase in property, plant and equipment is principally due to completion of capital additions at the Huckabay Ridge facility and the reclassification of the completed construction costs to property plant and equipment from construction in progress at December 31, 2008. The total additions to the Huckabay Ridge facility, added to property plant and equipment during the nine months of 2009, were $2,525,000 of which $2,283,000 was included in construction in progress at December 31, 2008. In the construction in progress account, this reclassification of costs associated with the Huckabay Ridge facility of $2,283,000 was offset by additions $11,577,000 resulting in net increase to the construction in progress account, before reductions for the impairment of assets, a non-cash event, of $9,294,000. Of total capital additions to the construction in progress account in the nine months of 2009, $6,639,000 reflects capitalized interest on our Texas, California and Nebraska projects and $1,054,000 reflects construction expenditures at our Grand Island facility. Included in construction in progress at September 30, 2009 is $3,000,000 to satisfy certain license fees to Xergi in May 2009.
Proceeds from long-term debt. We issued $5,000,000 original principal amount of our 14% convertible notes due January 1, 2014 for net proceeds of approximately $4.5 million in March 2009. We issued an additional $3,000,000 of these notes in May 2009. Since these latter notes were issued to pay license fees on projects in development, the $3,000,000 original principal amount is not included in proceeds from long-term debt but is shown as a supplemental non-cash disclosure on the consolidated statements of cash flow. In 2008 we issued $7,000,000 in tax-exempt Nebraska bonds and $62,425,000 in tax-exempt California bonds.
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