Environmental Power Corporation (Amex: EPG)announced that revenue for the first quarter decreased by $807,000, or 5%, to $14.4 million, as compared to $15.2 million for the same period in 2005.
Billed power generation revenues at the Company’s subsidiary, Buzzard Power Corporation increased by $658,000 to $14.5 million as a result of increased power rates and improved operating capacity, as compared to $13.9 million for the previous year. Buzzard operated at 99.1% of capacity for this period, compared to 98.5% of capacity for the same period in 2005. However, this increase in billed power generation revenues was completely offset by a decrease in accrued power generation revenues of $1.1 million, as a result of the FASB 13 accounting treatment of the Scrubgrass lease. This adjustment has no effect on pre-tax income because it is completely offset by a decrease in accrued lease expense.
The Company’s subsidiary, Microgy, Inc. (“Microgy”), recognized $883,000 of revenues relating to the construction and management of its first three projects, compared to $1.3 million of such revenues in the same period in 2005. This decrease in sales is a result of the strategic move from a focus on the sale of facilities to a model focused on the ownership of facilities, pursuant to which Microgy will construct and own facilities for its own account and generate revenues from the ongoing sale of the biogas or pipeline-grade gas produced.
Total costs and expenses increased by $1.1 million, or 8%, to $15.8 million for the three months ended March 31, 2006, as compared to $14.7 million for the same period in 2005.
Total costs and expenses remained relatively flat at Buzzard, increasing to $13.2 million from $12.9 million. Operating expenses increased by $705,000, as a result of increased labor and supplies costs. This increase was offset by decreases in general and administrative expenses of $425,000 and in lease expenses of $56,000.
Total costs and expenses at Microgy decreased slightly to $2.2 million from $2.4 million. Cost of goods sold decreased by $773,000, as Microgy shifted focus to an ownership model as opposed to a sales model. This decrease was partially offset by increases in general and administrative expenses of $572,000.
All Other Segments reported an increase in total costs and expenses of $1.1 million, with $752,000 of that increase resulting from non-cash compensation expenses. The remainder of the increase was attributable to an increase in general and administrative expenses of $311,000.
Buzzard generated a pre-tax profit of $308,000 in the first quarter of 2006, as compared to pre-tax income of $977,000 in the same period in 2005. Pre-tax losses at Microgy totaled $1.3 million and $1.1 million for the respective periods.
The Company reported a net loss for the first quarter of 2006 of $1.4 million, or $0.15 per share, on 9.6 million weighted average common shares outstanding, as compared to net income of $406,000, or $0.06 per share, on 6.4 million weighted average common shares outstanding in the first quarter of 2005.
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. Microgy is a developer of renewable energy facilities for the production and commercial application of methane-rich biogas from agricultural and food industry wastes. The biogas can be used to produce pipeline-grade methane or marketable biogas, liquefied natural gas, or LNG, renewable electrical energy or thermal energy, as well as other useful by-products. Environmental Power’s other principal subsidiary, Buzzard Power Corporation, holds a 22-year leasehold interest in the waste-coal fired Scrubgrass facility. Scrubgrass generates 83 MW of electricity by burning more than 600,000 tons of waste coal annually from active and abandoned area mine waste dumps.
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