EPG » Topics » Background

This excerpt taken from the EPG 8-K filed Sep 4, 2008.

Background

On September 3, 2008, Microgy Holdings, LLC (“Holdings”), a Delaware limited liability company and a wholly owned subsidiary of Environmental Power Corporation (“Environmental Power” or “EPC”), completed a first closing (the “First Closing”) of the sale of tax-exempt bonds (the “First Tranche Bonds”) through the California Statewide Communities Development Authority (the “Issuer”) resulting in gross proceeds of $62.425 million (the “Bond Financing”), to be used to finance part of the construction costs for three multi-digester, renewable natural gas facilities in California. The First Closing is under Holdings’ initial volume cap allocation for tax-exempt bond financing for its proposed Riverdale and Hanford RNG® facilities in California.

The Bond Financing contemplates the possible sale and issuance of up to an additional estimated amount of $26.02 million in bonds on substantially the same terms as the First Tranche Bonds (the “Second Tranche Bonds” and, together with the First Tranche Bonds, the “Bonds”) at an additional closing currently anticipated to occur in October 2008 (the “Second Closing”) under Holdings’ additional volume cap allocation for its proposed Bar 20 RNG® facility in California. Marketing of the Second Tranche Bonds is expected to commence shortly. The exact amount of any Second Tranche Bonds that may be issued is not yet known, and the interest rate on any Second Tranche Bonds issued may differ from the interest rate on the First Tranche Bonds, in which case the Second Tranche Bonds would be designated as a separate series of bonds under the Trust Indenture (as defined below).

Holdings is a Delaware limited liability company formed for the purpose of owning the equity interests in (i) Microgy Hanford, LLC, a California limited liability company (“Microgy Hanford”), Microgy Riverdale, LLC, a California limited liability company (“Microgy Riverdale” and, together with Microgy Hanford, the “California Subsidiary Guarantors”), and (ii) MST Production Ltd., a Texas limited liability company (together with its general partner, MST GP, LLC, a Texas limited liability company owned by Holdings, and MST Estates, LLC, a Texas limited liability company owned by Holdings, “MST”), Mission Biogas, L.L.C., a Texas limited liability company (“Mission”), Hereford Biogas, L.L.C., a Texas limited liability company (“Hereford”) and Rio Leche Estates, L.L.C., a Texas limited liability company, (collectively, the “Texas Subsidiary Guarantors” and, together with the California Subsidiary Guarantors, the “Subsidiary Guarantors”). In the event that the Second Closing occurs, Microgy Bar 20, LLC, a California limited liability company formed to own the proposed Bar 20 RNG® facility, will become a California Subsidiary Guarantor and a Subsidiary Guarantor. Each of the Subsidiary Guarantors is a special purpose entity organized to own and operate facilities for the large-scale production and sale of RNG® and sale of carbon sequestration credits and other marketable environmental benefits, or to own an interest in one of the other Subsidiary Guarantors or related real estate. The multi-digester biogas production and gas conditioning facilities to be owned by the California Subsidiary Guarantors (the “Facilities”) will be developed, constructed and operated by Microgy, Inc., a Colorado corporation (“Microgy”), and based on Microgy’s anaerobic digester technology. The Issuer will loan the proceeds of the Bonds to Holdings for the acquisition, construction and improvement of the Facilities.


A brief description of the material terms of the Bond Financing is set forth below.

These excerpts taken from the EPG 8-K filed Jul 28, 2008.

Background

WHEREAS, the Company is engaged in the construction, development and operation of facilities (the “Facility”) consisting of an anaerobic digester system used to extract combustible biogas from organic waste streams produced by the beef processing operations of Swift; and

WHEREAS, the Company and Swift have entered a Biogas Purchase and Supply Agreement dated as of September 1, 2006, as amended (the “Biogas Agreement”), providing for the operation of the Facility and for the payment by Swift to the Company for the biogas produced at the Facility and supplied to Swift; and

WHEREAS, the Company is the obligor with respect to $7,000,000 The City of Grand Island, Nebraska Solid Waste Disposal Facilities Revenue Bonds (Microgy Grand Island, LLC Project) Series 2008 (the “Bonds”) issued under the Trust Indenture dated as June 1, 2008 by and between the City of Grand Island, Nebraska (“Issuer”) and the Trustee (the “Indenture”); and

WHEREAS, Issuer and the Company have entered into a Lease Agreement dated as of June 1, 2008 (the “Lease Agreement”) pursuant to which the proceeds derived from the issuance of the Bonds are to be provided to the Company for the payment of the costs of the acquisition, construction, improving and equipping of the Facility being leased by the Company from Issuer; and

WHEREAS, pursuant to the Lease Agreement, the Company has agreed to make Rent Payments to the Issuer, which the Issuer has pledged to the Trustee for the benefit of the holders of the Bonds; and for the purpose of making such Rent Payments, the Company wishes to pledge its interest in payments due from Swift under the Biogas Agreement to the Trustee; and

WHEREAS, in connection with the issuance of the Bonds, the Company has entered into a letter agreement with the Trustee dated July 24, 2008 in the form attached hereto (the “Biogas Letter Agreement”), pursuant to which the Company has granted to the Trustee the right, following an Event of Default under the Indenture, to exercise all of the Company’s rights and fulfill its obligations under the Biogas Agreement.


Background

On July 24, 2008, Microgy Grand Island, LLC (the “Company”), a Nebraska limited liability company and a wholly owned subsidiary of Environmental Power Corporation (“Environmental Power” or “EPC”), closed the sale of tax-exempt bonds (the “Bonds”) through the City of Grand Island, Nebraska (the “Issuer”) resulting in gross proceeds of $7 million (the “Bond Financing”), to be used to finance part of the construction costs for its proposed biogas facility (the “Facility”) to be located at the flagship Grand Island, Nebraska beef processing facility of JBS Swift & Co. (“Swift”).

The Company is a Nebraska limited liability company formed for the purpose of owning and operating the Facility. The Facility will be developed, constructed and operated by Microgy, Inc., a Colorado corporation, and certain subsidiaries of Microgy, Inc. (collectively, “Microgy”), and based on Microgy’s anaerobic digester technology. The Issuer will make the proceeds of the Bonds available to the Company for the acquisition, construction and improvement of the Facility.

A brief description of the material terms of the Bond Financing is set forth below.

This excerpt taken from the EPG 8-K filed Nov 14, 2006.

Background

On November 9, 2006, Microgy Holdings, LLC (the “Company”), a Delaware limited liability company and a wholly owned subsidiary of Environmental Power Corporation (“Environmental Power” or “EPC”), closed the sale of tax-exempt bonds (the “Bonds”) through the Gulf Coast Industrial Development Authority of Texas (the “Issuer”) resulting in gross proceeds of $60 million (the “Bond Financing”), to be used to finance part of the construction costs for four multi-digester, renewable natural gas facilities in Texas.

The Company is a Delaware limited liability company formed for the purpose of owning the equity interests in MST Production Ltd., a Texas limited liability company (“MST”), Mission Biogas, L.L.C., a Texas limited liability company (“Mission”), Hereford Biogas, L.L.C., a Texas limited liability company (“Hereford”) and Rio Leche Estates, L.L.C., a Texas limited liability company (“Rio Leche” and, together with MST, Mission and Hereford, the “Principal Subsidiary Guarantors”), as well as MST GP, LLC, the general partner of MST, and MST Estates, LLC, which owns the real estate on which the Huckabay Ridge Facility (as defined below) is located (together, the “Additional Subsidiary Guarantors” and, together with the Principal Subsidiary Guarantors, the “Subsidiary Guarantors”). Each of the Principal Subsidiary Guarantors is a special purpose entity organized to own and operate facilities for the large-scale production and sale of RNG™ and sale of carbon sequestration credits and other marketable environmental benefits. The Facilities will be developed, constructed and operated by Microgy, Inc., a Colorado corporation, and certain subsidiaries of Microgy, Inc. (collectively, “Microgy”), and based on Microgy’s anaerobic digester technology. The Issuer will loan the proceeds of the Bonds to the Company for the acquisition, construction and improvement of multi-digester biogas production and gas conditioning facilities (each, a “Facility”). One Facility, near Stephenville, Texas (the “Huckabay Ridge Facility”) is currently under construction. The Company plans to construct another Facility in Dublin, Texas (the “Rio Leche Facility”), and two Facilities in Hereford, Texas (the “Mission Facility” and the “Cnossen Facility”). Each Facility is expected to replicate substantially the design of the Huckabay Ridge Facility.

A brief description of the material terms of the Bond Financing is set forth below.

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