Environmental Power Corporation (Amex: EPG) has announced results for the quarter and six months ended June 30, 2007.
As announced on May 31, 2007, the Company has entered into negotiations finalizing the disposition of the leasehold interest held by the Company’s subsidiary Buzzard Power Corporation (“Buzzard”) in the 83 megawatt electric generating facility located in Venango County, Pennsylvania, known as the Scrubgrass facility. Consistent with that activity, the assets and liabilities of Buzzard have been accounted for as discontinued operations for all periods presented in this release and in the Company’s Form 10Q. The disposition of the Scrubgrass lease arrangements will result in the write-off of Buzzard’s net assets and forgiveness of the Arclight loan.
Additionally, we will be able to recognize the deferred gain from the original sale of the facility. The Company estimates that the net effect of the transaction will result in a gain of approximately $3 million. The exact transaction value will vary based upon the results of Buzzard’s operations from now until the final disposition date. Financial information for the discontinued operations is presented in the Company’s Form 10Q. Microgy, Inc., the other wholly owned subsidiary of EPG, is currently the sole business segment of the Company.
Six months ended June 30, 2007 compared to six months ended June 30, 2006:
The Company reported a loss from continuing and discontinued operations available to common shareholders for the six months ended June 30, 2007 of $8.8 million, or $0.89 per share, on 9.9 million weighted average common shares outstanding, as compared to net loss of $4.3 million, or $0.45 per share, on 9.6 million weighted average common shares outstanding for the same period in 2006. Continuing operations reported a loss available to common shareholders of $5.9 million, or $0.60 per share, driven in part by non-cash compensation expense and severance expenses. Discontinued operations reported a loss available to common shareholders of $2.9 million, or $0.29 per share for 2007. For the six months ended June 30, 2006, continuing operations reported a loss available to common shareholders of $4.1 million, or $0.43 per share, while discontinued operations reported a loss of $231,000, or $0.02 per share.
Revenues from continuing operations decreased by $631,000, or 54%, to $542,000 in 2007, as compared to $1.2 million for the same period in 2006. This decrease in revenue is due mainly to the change in business model from one where facilities are sold to the current ownership model. Revenues from the operation and maintenance of facilities increased to $542,000 in 2007 compared to $242,000 in 2006. This increase is primarily due to increased gas production at the Wisconsin facilities and the fact that not all of the Wisconsin facilities were operational in 2006. We recognized $1.0 million from the sale of the Wisconsin facilities in 2006 whereas there were no such sales in 2007.
Costs and expenses from continuing operations increased by $1.0 million to $6.6 million for the six months ended June 30, 2007, as compared to $5.6 million for the same period in 2006. This increase was a result of a $759,000 increase in non-cash compensation expense and a $338,000 increase in payroll expenses including severance, partially offset by a $152,000 decrease in travel and entertainment expenses.
Three months ended June 30, 2007 compared to three months ended June 30, 2006:
The Company reported a loss from continuing and discontinued operations available to common shareholders for the three months ended June 30, 2007 of $7.1 million, or $0.71 per share, on 10.0 million weighted average common shares outstanding, as compared to net loss of $2.9 million, or $0.30 per share, on 9.6 million weighted average common shares outstanding for the same period in 2006. Continuing operations reported a loss available to common shareholders of net loss of $3.9 million, or $0.39 per share, while discontinued operations reported a loss of $3.2 million, or $0.32 per share for the quarter ended June 30, 2007. For the same period in 2006, continued operations reported a loss available to common shareholders of $2.4 million, or $0.25 per shares, and discontinued operations reported a loss of $496,000, or $0.05 per share.
Revenues from continuing operations increased slightly to $327,000 for the quarter ended June 30, 2007 from $290,000 for 2006. These revenues are derived from the operation and maintenance of the Wisconsin facilities.
Costs and expenses from continuing operations increased by $1.1 million to $4.0 million for the second quarter of 2007, as compared to $2.9 million for the same period in 2006. The increase was primarily attributable to a $1.2 million increase in general and administrative expenses, including a $385,000 increase in non-cash compensation expense related to FAS123R calculations and a $571,000 increase in severance expenses. These increases were partially offset by a $93,000 decrease in costs of revenue at Microgy.