Environmental Power Corporation Provides Business Update

PORTSMOUTH, N.H., Nov. 15  /PRNewswire-FirstCall/ -- Environmental Power is releasing the following information and comments of its President and Chief Executive Officer, Richard Kessel, regarding the Company and its wholly-owned subsidiary, Microgy, Inc. ("Microgy"), to help investors understand the impact of several recently announced developments and the status of various projects and initiatives.

Rich Kessel stated:

"As we have made significant progress on many initiatives that I described in my last business update, I firmly believe that we now have passed the point of inflection on our growth curve. Over the past several years we have invested heavily to refine our technology, develop our infrastructure, gain acceptance by the farming community, form strategic alliances and position ourselves as the recognized leader in large-scale biogas and RNG(TM) facilities and as a potentially significant participant in the emerging market for carbon offset credits.  RNG is our trademarked brand of pipeline-quality renewable natural gas.

  "We have accomplished the following:

  * Strong Financial Platform. We have secured a firm financial footing
    through the recently announced closing of the $60 million tax exempt
    bond offering in Texas, coupled with the closing of the strategic
    investment of $15 million of convertible preferred shares and warrants.
    This attractive financing structure is a template to be used in other
    locations across the country; for instance, we are actively pursuing its
    use in California.  Successful development of our current facility
    pipeline in accordance with our project assumptions will result in a
    positive cash flow for the company.

  * Accelerated Business Development. We have joined forces with Cargill to
    develop facilities across North America utilizing Cargill's extensive
    customer network. We believe that Cargill's strong reputation and market
    presence will be invaluable in accelerating our development efforts, as
    well as affording us assistance in legislative affairs, procurement of
    equipment, and also providing gas, electric and carbon offset credit
    market intelligence through its extensive commodity trading operations.
    In addition, a fund managed by one of Cargill's wholly owned
    subsidiaries is a major participant in the $15 million convertible
    preferred offering mentioned above.

  * Strong Market Appetite for Our Product. As a result of market acceptance
    of our business proposition, we have taken decisive steps to expand our
    facility backlog.  In addition to the four Texas RNG facilities already
    in development with a projected gas production of 2.6 billion cubic feet
    (bcf) per year, we have also signed agreements for the development of
    several RNG facilities in California with an additional projected 2.6
    bcf per year.  We continue to pursue additional projects in California,
    as well as projects in other states that have high concentrations of
    manure and substrate.

  * Unlocking Premium Value for RNG.  We seek long-term purchase agreements
    that capture the premium value of our RNG.  For example, we have signed
    agreements with PG&E which provide us not only with access to its
    extensive natural gas pipeline, but also a commitment to purchase, on a
    long term basis, up to nearly 3 bcf per year of gas from our planned
    California facilities.  In addition, another utility has documented its
    interest in the premium value of RNG, and we have had discussions with
    other utilities which have expressed the same interest in the green
    aspects of our gas.

  * Emerging Carbon Market.  We are positioning ourselves to become a
    significant participant in the emerging carbon offset market. We have
    executed transactions for the sale of credits from our Wisconsin
    facilities, and are in discussions with various market participants
    regarding the sale of credits from our facilities under development.  At
    full operation each of our standard eight tank digester facilities can
    capture approximately 200,000 metric tons of carbon dioxide equivalents
    per year. As the greenhouse gas market matures, we project these
    environmental attributes will provide significant value.



"As a result of these successes we have developed a robust platform which is extremely well-positioned to capitalize on the enormous and largely untapped potential for large scale biogas production in the dairy, beef and hog markets. Were these markets fully developed, we believe such facilities could generate annual gas sales on the order of $3 billion (based on gas price of $7 per MMBtu) and annually capture carbon credits worth approximately $450 million (based on current Chicago Climate Exchange protocols and trading prices).

"Microgy is the recognized leader in its field, and we are now entering the steep portion of the company's growth curve. Our focus now shifts to execution: making our many project opportunities and commitments a reality capable of sustainable results.  I am proud to be a member of the Environmental Power team at this exciting time in the company's history."

  Brief updates regarding facilities and development pipeline follow:

  Facility Updates

  Texas RNG Facilities.  We are currently developing four large-scale RNG
  facilities located in Texas, with a combined projected annual RNG
  production capacity of approximately 2.6 bcf.  Each of these facilities
  will utilize our standardized, large-scale, eight-digester modular design,
  and, at full operation, each facility will process the manure from
  approximately 10,000 cows.  The net proceeds from the recently completed
  bond and equity offerings will be used to fund construction of these
  facilities. These four facilities are:

  * Huckabay Ridge. We have begun commissioning the first grouping of
    digesters, have begun producing small quantities of gas, and continue to
    expect production of commercial quantities of biogas to occur in Q4
    2006.  We continue to expect that the facility will be fully operational
    by the end of Q1 2007.

  * Mission Dairy.  We have commenced engineering work, and continue to
    expect the Mission facility to commence gas sales near the end of 2007.

  * Cnossen.  We have advanced Cnossen in our build-out schedule, and expect
    the facility to commence gas sales at the end of 2007.

  * Rio Leche.  This project is in the early stages of development, and we
    expect the facility to commence gas sales in early 2008.

  California RNG Facilities. We believe California represents an enormous
  market opportunity for our systems: it is the largest dairy state and the
  largest energy-consuming state. We have signed agreements with PG&E which
  provide Microgy with access to PG&E's pipelines and commit PG&E to
  purchase nearly 3 bcf per year (the equivalent of approximately four
  Huckabay-sized facilities) of RNG from facilities to be developed.  The
  following RNG facilities are in development in California:

  * Gallo-RNG.  A proposed eight-digester RNG facility for pipeline
    interconnection to be located at Gallo's dairies in Atwater, California.

  * Bar 20 Partners.  A proposed eight-digester RNG facility for pipeline
    interconnection to be located at the Bar 20 Partners dairy in Kerman,
    California.

  * Maddox Dairy.  A proposed four to eight digester RNG facility for
    pipeline interconnection to be located at the Maddox dairy in Riverdale,
    California.

  * Hollandia Farms; Lancing; and Cloverdale Dairy.  A proposed twelve-
    digester RNG facility for pipeline interconnection to be located at a
    cluster of dairies in Hanford, California.



"Inside-the-Fence" Facilities.  Inside-the-fence facilities in development include:

  * Gallo-Columbard.  The Gallo-Columbard facility is a proposed two-
    digester biogas production facility designed for on-site use of the
    biogas as a replacement for propane in Gallo's cheese manufacturing
    operations. We have completed, and have submitted to the regulatory
    authorities, all applications for the required permits. We believe that
    permits will be granted later this year or early in the first quarter of
    2007, allowing us to begin construction in the first quarter of 2007.

  * Swift.  We have signed definitive documentation relating to a facility
    to be located at Swift's Grand Island, Nebraska meat processing plant.
    This facility is expected to generate approximately 250,000 MMBtu per
    year of biogas, which will be purchased by Swift for use in its
    operations. In addition, if this first project is successfully launched,
    we believe there to be the potential to develop additional projects
    across Swift's processing plant network.

  Facility Pipeline & Metrics


With current development projects and the continued expansion of our project pipeline, we believe we are on course with our internal growth plan. Our ongoing development efforts confirm our belief in the substantial size and appetite of the market for our renewable energy solutions.  The table below lists the projects for which we have signed definitive documentation:

  Facility                          Location         Type Gas Production (a)

  RNG
  Huckabay Ridge                       TX             RNG        650,000
  Mission                              TX             RNG        650,000
  Rio Leche                            TX             RNG        650,000
  Cnossen                              TX             RNG        650,000
  Maddox                               CA             RNG        325,000
  Bar 20                               CA             RNG        650,000
  Gallo-RNG                            CA             RNG        650,000
  Hollandia/Lancing/Cloverdale         CA             RNG        975,000

  Inside the Fence
  Gallo-Columbard                      CA     Inside-the-Fence   125,000
  Swift-Grand Island                   NE     Inside-the-Fence   250,000

  Total                                                        5,575,000

  (a) Expected gas production in MMBtu / year at full operation.

  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 for the extraction of methane gas from animal wastes for its use to generate energy. For more information visit the Company's web site at http://www.environmentalpower.com/.

CAUTIONARY STATEMENT

The Private Securities Litigation Reform Act of 1995, referred to as the PSLRA, provides a "safe harbor" for forward-looking statements. Certain statements contained in this press release, such as statements concerning planned manure-to-energy systems, our sales pipeline, our backlog, our projected sales and financial performance, statements containing the words "may," "assumes," "forecasts," "positions," "predicts," "strategy," "will," "expects," "estimates," "anticipates," "believes," "projects," "intends," "plans," "budgets," "potential," "continue," "targets" "proposed," and variations thereof, and other statements contained in this press release regarding matters that are not historical facts are forward-looking statements as such term is defined in the PSLRA. 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; uncertainties regarding project financing, the lack of binding commitments and/or the need to negotiate and execute definitive agreements for the construction and financing of projects, the sale of project output, the supply of substrate and other requirements and for other matters; financing and cash flow requirements and uncertainties; inexperience with the development of multi-digester projects; risks relating to fluctuations in the price of commodity fuels like natural gas, and our inexperience with managing such risks; uncertainties regarding the development of  the market for carbon credits and other environmental attributes; difficulties involved in developing and executing a business plan; difficulties and uncertainties regarding acquisitions; technological uncertainties; including those relating to competing products and technologies; risks relating to managing and integrating acquired businesses; 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 our projects; uncertainties relating to general economic and industry conditions, and the amount and rate of growth in expenses; uncertainties relating to government and regulatory policies and the legal environment; uncertainties relating to the availability of tax credits, deductions, rebates and similar incentives; intellectual property issues; the competitive environment in which Environmental Power Corporation and its subsidiaries operate and other factors, including those described in our most recent Annual Report on Form 10-K or Quarterly Report on Form 10-Q, well as in other filings we make with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date that they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

  CONTACT

  Rich Kessel, President and CEO of Environmental Power Corporation
  [phone]
  

  Public Relations Contact:
  John Abrashkin, Ricochet Public Relations
  [phone] x121
  

  Investor Relations Contact:
  John Baldissera, BPC Financial Marketing
  1-800-368-1217


DATASOURCE: Environmental Power Corporation



CONTACT:  Rich Kessel, President and CEO of Environmental Power

Corporation, [phone], ; or Public

Relations Contact, John Abrashkin, Ricochet Public Relations, [phone]

x121, , or Investor Relations Contact, John

Baldissera, BPC Financial Marketing, 1-800-368-1217



Web site:  http://www.environmentalpower.com/ 

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