Environmental Power Corp. Q2 results well below the Street
Shares of Environmental Power Corp. (Amex: EPG) are trading lower today following weak second quarter results that fell below Wall Street’s estimates and reported delays on its projects.
For the three months ended June 30, the Portsmouth, NH.-based owner and operator of renewable energy production facilities recorded a net loss of from continuing and discontinued operations of $7.1 million, or $0.71 per share, well below the consensus of three analysts polled by Thomson Financial of a loss of $0.32 per share. The company incurred a net loss from continuing operations of $3.9 million, or $0.39 per share, compared with a net loss of $2.9 million, or $0.30 per share, a year earlier.
Environmental in May announced that it was in the process of finalizing negotiations to divest a leasehold interest held by the company’s subsidiary, Buzzard Power Corp. Environmental said it accounted for the divestiture as part of discontinued operations and will write off Buzzard’s net assets, which Environmental estimates will result in a gain of $3 million for the quarter.
Revenues for the quarter increased slightly, to $327,000 from 290,000, in the second quarter of 2006.
Environmental owns a license in North America for a technology known as anaerobic digestion technology, which is used to generate energy by extracting methane gas from animal waste.
“When looking at a company like this, EPS and revenue are not meaningful because it’s a developmental company, there are other measures to consider,” said Avondale Partners analyst Daniel Mannes. “The stock is reacting on the delays the Ridge project has incurred.”
Management updated the status of its projects today, including its Huckabay Ridge facility. Company officials said they expect Huckabay will reach full commercial operations status by late in the third quarter or the beginning of the fourth quarter. Environmental said it’s currently not able to achieve targeted biogas output on five of its eight digesters, attributing waning production to excessive recycling of water used for conditioning dry-lot manure.
Going forward, the company says it intends to capitalize on the heightened interest and attention surrounding renewable energy, with a particular focus on the carbon market. Environmental says it perceives that the carbon credit business should provide ample opportunities for the company, especially in conjunction with its strong relationships with the agriculture and food processing industries.
The company reported that Microgy, Inc., Environmental’s wholly owned subsidiary and current sole business, has entered into an agreement to sell approximately 65,000 tons of carbon credits per year generated from three Wisconsin projects it operates for 2007 through 2011. Environmental said the proceeds from carbon sales will be used for repayment of notes owed to Microgy.
Further, in addition to the company’s anaerobic digestion technology used to generate energy by extracting methane gas from animal waste, Environmental said it is continuing to explore more technologies for the production of energy from animal and organic wastes. Environmental says it wants to control waste streams and then determine the best use for turning such waste into power.
Environmental management said it expects to be able to capitalize on the projects in its pipeline and earn annual revenue of $40 million by the first quarter of 2009.
Mannes said he thinks reaching this level of revenue is possible. “So far Environmental has fallen behind a bit,” said Mannes. “I think [Environmental] would need crisper execution to achieve that level.”
Shares of Environmental fell 21%, or $1.40, to $5.20.
