UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Date of Report (Date of earliest event reported): November 26, 2002
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Environmental Power Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-15472 04-2782065
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Cate Street, 4th Floor, Portsmouth, New Hampshire 03801
(Address of principal executive offices)
(603) 431-1780
(Registrant's telephone number, including area code)
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
99 Letter to Shareholders of Environmental Power Corporation ("POWR"),
dated November 15, 2002, to be included in Third Quarter 2002
brochure to shareholders.
Item 9. Regulation FD Disclosure
The Shareholders Letter for the 3rd Quarter attached as Exhibit 99 hereto
is furnished pursuant to Regulation FD. It is not filed.
Cautionary Statement
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements. Certain statements made in the
exhibit to this report, such as statements concerning estimated market potential
and target markets, expectations as to Microgy's profitable production of
renewable energy, beliefs as to investment in the future which will greatly
increase shareholder value in the long-term, beliefs as to the growth segment of
our business being the generation of electricity from agricultural wastes,
efforts relating to our Wisconsin contract, expectations concerning the New
England/New York dairy shed, as well as efforts in Florida, Idaho and
California, debt and equity financing for Microgy and continued aggressive
growth strategy and anticipated demand for our product and services and other
statements contained herein which are not historical facts are forward looking
statements as such term is defined in the Act. Without limiting the foregoing,
the words "believes", "anticipates", "plans", "expects", "will" and similar
expressions are intended to identify forward-looking statements. 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 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 Cogeneration Systems, Inc.'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
POWR'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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ENVIRONMENTAL POWER CORPORATION
November 26, 2002 By:
/s/ R. Jeffrey Macartney
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R. Jeffrey Macartney
Treasurer and
Chief Financial Officer
(principal accounting officer
and authorized officer)
Exhibit 99
November 15, 2002
Dear Shareholders,
Environmental Power Corporation ("POWR") reported net income for the three
months ended September 30, 2002 of $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. The average outstanding shares used to determine basic earnings per share
for the three months ended September 30 were 20,600,872 shares in 2002 versus
15,547,945 shares in 2001. The average outstanding shares used to determine
basic earnings per share for the nine months ended September 30 were 20,298,245
shares in 2002 versus 12,802,339 shares in 2001.
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.
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.
When reviewing the "numbers", it is critical to separate the results of our
two business segments - Scrubgrass Generating Facility ("Scrubgrass") and
Microgy Cogeneration Systems, Inc. ("Microgy") - in order to gain a clearer
picture of our true financial performance. Scrubgrass, the 83MW waste coal fired
generating facility in which we own a 22-year leasehold interest, is a
profitable, established business. Microgy, our new anaerobic digestion
enterprise that we expect will in the future profitably produce renewable energy
from extracted methane gas found in animal wastes, is a development stage
business with an estimated target market of approximately $14 billion, including
an initial target market of $7 billion. Basically, nearly all of our profits and
cash flow from Scrubgrass are being used to build Microgy. Although, in the
short run our profits are depressed when compared to the prior year, we believe
that this is reflecting an investment in the future which will greatly increase
shareholder value in the long-term.
Scrubgrass has been operating at record levels of capacity, production and
revenues during the quarter and for the year to date. Pre-tax profits for the
first nine months of 2002 have increased 94% from $2,350,414 in 2001 to
$4,562,581 for the current year.
At Scrubgrass, we use an alternative fuel, waste coal, to power our plant.
Waste coal was not commercially usable and generally was left behind at mining
sites after commercial operations ceased. At this plant, we implemented a power
generation technology which allows us to be commercially profitable burning the
waste coal which, over time, would otherwise continue to leach acid drainage
into the regional aquifer. As we pick up and combust our "waste" fuel, we clean
the surface of the polluted site. When we return our ash to that site, the land
is neutralized by its alkalinity and the site is further reclaimed to a meadow.
The state of Pennsylvania estimates that we save the state one to two million
dollars in clean up cost each year we operate the Scrubgrass plant, while at the
same time we provide power to 83,000 Pennsylvania residents and a positive
return to our shareholders.
The attributes and success of Scrubgrass exemplify our mission: "Doing Well
by Doing Good."
The following table will help you understand the results of Scrubgrass and
our investment in the future of Microgy (with Microgy results included beginning
July 23, 2001 when we acquired Microgy).
Renewable
Waste Coal Energy
Scrubgrass Microgy Other Consolidated
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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
As reiterated many times to shareholders, we believe that the growth
segment of our business will be the generation of electricity from agricultural
wastes. EPC is making large investments of both our human capital and financial
resources into our Microgy subsidiary in order to implement our business plan
strategy for a national "roll out" of our anaerobic digestion/ electric
generation technology. We are encouraged by our progress to date despite a
veritable crisis in the energy sector of our already weak economy and the
related difficulty in project and corporate finance. There is continued progress
with the engineering and documentation, as well as discussions with funding
sources needed to implement the previously announced contract with Wisconsin
Public Service Corp, and bring that potential transaction to economic reality.
Our role in that project has already led us to discussion with other upper
mid-west utilities and has and will continue to serve as an anchor to our
presence in this important agricultural region.
We have also succeeded in producing a very important relationship with
Vermont Public Power Supply Authority (VPPSA) which we expect will allow us to
"plant our flag" in the important New England/ New York dairy shed. Further, we
have established a key dialogue with Florida utilities to establish our presence
in the southeastern agricultural region, as well as in Idaho, the Nation's 4th
largest dairy state. As to California, our largest potential market, we are
studying, planning and interviewing management executives with an eye to a major
entry into that market when we have completed our current efforts to attract
additional capital and credit facilities for Microgy.
During the third quarter, we completed a small private placement of EPC
shares which generated over $1 million of new corporate equity. In addition, we
are seeking debt and equity financing for Microgy. We believe that these funds,
if secured, will enable our continued aggressive growth strategy and permit us
to respond to the anticipated demand for our product and services.
Finally, during the third quarter, we assisted Harvard Business School with
preparation of its case study materials describing EPC's plans and strategies as
well as the questions which are raised by our attempts to grow dramatically
through deployment of our manure to energy systems. This case will be presented
to select world leaders from agribusiness and government at conferences in
November and January. We are honored to have been selected as a worthy "case
subject" and we are excited to have our ideas and strategies tested by the
world's leaders of the agricultural community. Even more importantly, we look
forward to gaining valuable insights and advice from a multitude of the best
minds in our field.
Things remain very active at our offices and the atmosphere and prospects
are very exhilarating to our team. However, we must all recognize that this is a
very difficult economic environment which has significantly impacted the
availability of debt and equity capital within our industry. We believe strongly
that we can "make it happen", but the risks are great and we are forced to
maintain a "plan B" option as well.
Please keep an eye on our website and watch for our new releases to remain
informed of timely, appropriate information about our Company and its progress.
Also, feel free to contact us and we will make every effort to respond to your
questions and inquiries.
Sincerely,
/s/ Joseph E. Cresci /s/ Donald A. Livingston
Joseph E. Cresci Donald A. Livingston
Chairman and CEO President