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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996 .
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ______________________ to ____________________
Commission File Number 0-18260 .
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The New World Power Corporation
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(Exact name of registrant as specified in its charter)
Delaware 52-1659436
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
500 Notre Dame, Lachine, Quebec, Canada H85 2B2
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (514) 634-3550
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Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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None Not Applicable
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.01 par value
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
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Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.[ X ]
The aggregate market value of the voting stock held by non-affiliates
of the registrant on April 11, 1997 was $1,015,586 based on the closing price of
$.50 per share. The number of shares outstanding of the registrant's Common
Stock as of April 11, 1997 was 2,321,367.
The information provided above shall in no way be construed as an
admission that any person whose holdings are excluded from the figure is an
affiliate or that any person whose holdings are not included is not an
affiliate, and any such admission is hereby disclaimed. The information
provided is included solely for record-keeping purposes of the Securities and
Exchange Commission.
DOCUMENTS INCORPORATED BY REFERENCE:
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Table of Contents
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PART I Page
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Item 1. Business 1
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security
Holders
PART II
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations
Item 8. Financial Statements and Supplementary
Data
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure
PART III
Item 10. Directors and Executive Officers of the
Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain
Beneficial Owners and Management
Item 13. Certain Relationships and Related
Transactions
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PART IV
Item 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K
Index to Consolidated Financial Statements and
Financial Statement Schedule
Signatures
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PART I
ITEM 1. BUSINESS
Private Securities Litigation Reform Act Safe Harbor Statement
When used in this Annual Report on Form 10-K and in other public
statements by the Company and Company officers, the words "expect," "estimate",
"project", "intend" and similar expressions are intended to identify
forward-looking statements regarding events and financial trends which may
affect the Company's future operating results and financial condition. Such
statements are subject to risks and uncertainties that could cause the Company's
actual results and financial condition to differ materially. Such factors
include, among others: (i) the intense competition and the bidding process in
which the Company competes, (ii) the risk that management will not be able to
sell the assets identified in its business plan with the time frame required or
for the amounts estimated, (iii) that the Company will have sufficient capital
to fund operations in the time necessary to effect such sales, (iv) the
Company's ability to obtain financing on satisfactory terms for its projects and
the degree to which the Company is leveraged, (v) the timing of completion of
projects, (vi) factors associated with the strength of the dollar compared to
the currencies in the countries in which the Company operates, (vii) the
sensitivity of the Company's business to general economic/environmental
conditions, (viii) changes in accounting principles, policies, or guidelines,
and (ix) other economic, competitive, governmental and technological factors
affecting the Company's operations, markets, projects, products and prices.
Additional factors are described in this Annual Report on Form 10-K and in the
Company's other public reports filed 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 made. The Company
undertakes no obligation to publicly release the result of any revision of these
forward-looking statements to reflect events or circumstances after the date
they are made or to reflect the occurrence of unanticipated events.
INTRODUCTION
The New World Power Corporation (the "Company") produces and sells
electric power generated from renewable resources, including wind, sun and
water, and develops renewable power generating projects. The Company also
assembles and sells renewable power generating systems, including stand-alone
systems for individuals, villages, and industrial and scientific applications.
The Company's operations are conducted through subsidiaries which are
organized into four segments: grid power production, grid power services,
wireless power sales and other products and services. The grid power
production division develops, owns and operates wind farms and hydroelectric
facilities which produce electricity (kilowatt hours) for sale to electric
utilities. Several of the Company's wind projects were sold in early 1997.
The grid power services division was discontinued and sold during 1995. The
wireless power division assembles, distributes and sells integrated renewable
power generating systems for commercial and industrial use where no service
from an electric utility is available or in areas where purchasing electricity
is not economical. In addition, the wireless power division includes village
power which develops, owns and operates integrated renewable power generating
systems which produce kilowatt hours for sale to small, electric utilities
which are generally diesel-powered and removed from the main grid. A majority
of the Company's wireless division was sold during 1996. The other products
and services division manufactures and develops wind turbines and related
products. Supplementary industry segment information may be found in the notes
and schedules to the Company's Consolidated Financial Statements.
Due to cash used in operating and investing activities as well as
unforeseen delays in two of its major projects (China and Texas), in late 1995,
the Company experienced severe liquidity and cash flow problems. This
necessitated, in early 1996, a revision of the business plan for the Company
calling for certain core and non-core asset sales, significant overhead and
other cost reductions, and a restructuring of the Company's secured debt with
its two principal lenders after events of default.
In the first quarter of 1996, the Board of Directors thoroughly
evaluated the Company's business, projects and personnel to refocus the Company
in areas which would solve short and long term liquidity problems and optimize
economic return. As a result of this evaluation, significant changes where made
in terms of project priority. In concert with its revised business plan, and to
further alleviate cash flow pressure, the Company substantially reduced
administrative and overhead expenses through downsizing of its corporate staff
and international offices to bare minimums necessary to sustain project
operations and development.
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The Company has proceeded with its primary course of action of asset
sales with full cooperation of the principal lenders and as per its covenants
under the restructured loan agreements with said principal secured lenders.
Short-term capital needs to fund the Company's operations during 1996, were made
available from an escrow account held by one of the principal lenders. The
Company marketed units that were developed and operating to pay down the
restructured debt and provide capital to fund new development activities. The
Company, in 1996, sold its wireless assets, in a less than favorable market
environment given the time constraints put on those sales by the secured
lenders.
In early 1997, the Company sold two of its windfarms in the United
Kingdom and its investment in an Irish windfarm. Proceeds from those sales
were used to payoff one of the Company's secured lenders while paying down a
portion of the indebtedness to the other secured lender.
Nonetheless, the financial statements for December 31, 1996 have been
prepared assuming that the Company will continue as a going concern. However,
the uncertainty associated with the above events raises substantial doubts
about the Company's abilities to continue as a going concern.
For a discussion of the development of the Company see Item 7
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Overview."
GRID POWER PRODUCTION DIVISION
Power Production
The following tables set forth the projects, greater than 1 MW in
generating capacity, acquired or developed by the Company and currently in
operation, those under construction, those in development, and the status of the
project as of the filing of this report. Projects in operation are those where
construction and financing have been completed and are operational. The Company
has sold some of these projects during 1996 and early 1997. Projects in
development are those in which the Company has a letter of intent or other firm
understanding with the site owner or the joint venture partners, or has been
awarded a bid and is in the process of negotiating the basic contracts.
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The Company generally develops new generating capacity only when it
has a commitment from a specific power purchaser, and, therefore, the capacity
of each project is usually committed only to a specified power purchaser.
Completion of projects under construction, any pending acquisition or project
in development is subject to the Company's obtaining suitable financing. There
can be no assurance that such financing will be obtained or that the Company
will be able to fund any project development activities in 1997.
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Approximate Power
Name Location Type Capacity Purchaser Status
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Projects in Operations:
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Painted Hills San Gorgonio Pass, California Wind 1.00 MW SCE (Sold 1996)
Los Vaqueros Altamont Pass, California Wind 2.90 MW PG&E (Pending Sale)
Wolverine Midland, Michigan Hydro 10.50 MW Consumers (Operating)
Altamont Altamont Pass, California Wind 20.00 MW PG&E (Held for Sale)
Makani Uwila Oahu, Hawaii Wind 10.30 MW HECO (Abandoned)
San Jacinto San Gorgonio Pass, California Wind 9.30 MW SCE (Sold in 1996)
Dyffryn Brodyn Dyfed, Wales Wind 5.60 MW SWALEC (Sold in 1997)
Caton Moor Lancashire, England Wind 3.00 MW NORWEB (Operating)
Bellacorick Bellacorick, Ireland Wind 6.40 MW ESB (Sold in 1997)
Four Burrows Cornwall, England Wind 4.50 MW SWEB (Sold in 1997)
Project under Construction:
Dona Julia Heredia, Costa Rica Hydro 16.00 MW ICE (Sold in 1997)
Fujian I Fujian, People's Republic of Hydro 39.00 MW State Utility (Under Development)
China
Projects in Development:*
Eolos I Mexico Wind 20.0 MW Government (Under Development)
Lerma Mexico City, Mexico Hydro 8.5 MW DGCOH (Pending Sale)
Big Spring Big Spring, Texas Wind 40.0 MW TU (Under Development)
Tierras Morenas Arenal, Costa Rica Wind 20.0 MW ICE (Held for Sale)
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* The "approximate capacity" of projects in development reflects the estimated
total capacity of the sites which is capable of being completed within the next
four years.
Projects in Operation
General. At any point during the fiscal year, the Company owned or
leased the following renewable energy generating facilities. As noted above,
certain of these projects were sold in 1996 or are held for sale in 1997. Each
facility is located on a site which is owned or leased on a long-term basis by a
project subsidiary. The facilities produce electricity which is sold to
utilities and other power consumers under long-term power sales contracts.
U.S. Facilities
Painted Hills Wind Farm. The Company's eight wind turbines aggregating
approximately 1.0 megawatt ("MW") of capacity at the Painted Hills Wind Farm in
the San Gorgonio Pass near Palm Springs, California were all sold in February
1996.
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Los Vaqueros Wind Farm. The Company owns and operates 38 wind turbines
and the related electrical infrastructure and leases 101 acres at its Los
Vaqueros Wind Farm in the Altamont Pass in California. The Los Vaqueros
windfarm was sold in August 1996.
Wolverine Hydroelectric Facilities. The Company owns four
hydroelectric facilities on the Tittabawassee River near Midland, Michigan.
The facilities were constructed between 1923 and 1925. One of the facilities
was substantially rebuilt in 1945. The others contain original
turbine-generators and power plant equipment. The facilities have a combined
generating capacity of approximately 10.5 MW. The power is sold to Consumers
Power Company ("Consumers") pursuant to a power purchase agreement which
expires in May 2013, but provides for renegotiation of the energy and capacity
prices every ten years commencing in 1996. The Company's current ten-year
moving average hydroelectric production rate for these facilities is
approximately 37.7 million kilowatt hours ("kW") per year. License
applications for the facilities are currently pending before the Federal Energy
Regulatory Commission (the "FERC"), and the Company does not know when the
licenses will be granted. Although it is not possible to predict what
conditions will be imposed by the FERC, the Company believes that the FERC will
require a change in the method of operation within the next three to five years
so as to release a minimum daily flow of water.
Altamont Wind Farm. The Company is currently holding for sale the Wind
Farm of approximately 250 first generation wind turbines at the Altamont Wind
Farm due to low avoided cost tariffs in the PG&E territory. The Company
operated the site in 1996 to mitigate some of the fixed costs at the wind farm.
The power generated by these turbines is sold to PG&E pursuant to the Company's
Standard Offer No. 1 ("SO1") Contract pursuant to which PG&E is obligated to
purchase annually 150 MW of electricity. The SO1 Contracts provide for a price
which is based upon the utility's short-term avoided cost of energy and the
avoided capital cost (the cost of generating equipment). The Company had plans
to retrofit the site as soon as the rate based on avoided cost of energy
increased.
Makani Uwila Wind Farm. The Company owned through December 31, 1996 the
Makani Uwila Wind Farm located at Kahuku on the north shore of Oahu in Hawaii.
The wind farm has a capacity of approximately 8.0 MW. The electricity from this
wind farm was sold to The Hawaiian Electric Company, Inc. ("HECO") pursuant to
an existing power purchase contract. The Company was negotiating an amendment
to its power purchase contract with HECO. Soon after the negotiations had
commenced, the Company's cash flow shortages as well as other external factors,
resulted in the Wind Farm being offered for sale. In January 1997, the land
owner, Campbell Estates, foreclosed on the property and put the site up for bid.
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San Jacinto Wind Farm. The Company owns an approximately 50% interest
in San Jacinto Power Company, Inc. ("San Jacinto Power"), a joint venture
between the Company and Nevada Energy Company, Inc. The 50% interest is for
sale.
U.K. Facilities
The following three wind farms represent the entire portfolio of sites
located in the United Kingdom. All three projects were offered for sale
throughout 1996. The Company received two bonafide offers and elected to sell
two of the facilities to a U. K. based wind farm developer RES, Ltd. Due to
mechanical problems associated with the Caton Moor facility, RES final offer
was for Dyffryn Brodyn and Four Burrows only. The Company elected to accept
the RES offer and retain ownership of Caton Moor. All debt on Caton Moor was
fully paid and the Company continues owning 100% of Caton Moor.
Dyffryn Brodyn Wind Farm. The Company owned and operated a 5.6 MW wind
farm on a 166 acre site near Whitland, Dyfed, Wales throughout 1996 and into
early 1997 when it was sold. The power generated at the wind farm is sold
pursuant to a 1991 renewable non-fossil fuel obligation power purchase agreement
with the Non-Fossil Fuel Purchasing Agency Limited ("NFPA") and South Wales
Electricity plc ("SWALEC"). The fixed, premium price period of the contract
expires in December 1998.
Caton Moor Wind Farm. The Company owns and operates a 3 MW wind farm
at Caton Moor, Lancashire in northwest England. The power generated at the
wind farm is sold pursuant to a 1991 renewable non-fossil fuel obligation power
purchase agreement with NFPA and NORWEB plc. The fixed, premium price period
of the contract expires in December 1998.
Four Burrows Wind Farm. The Company owned and operated a 4.5 MW wind
farm located at Four Burrows, near Truro, Cornwall, England throughout 1996 and
into early 1997 when it was sold. The power generated at the wind farm will be
sold pursuant to a 1991 renewable non-fossil fuel obligation power purchase
agreement with NFPA and South West Electricity plc. The fixed, premium price
period of the contract expires in December 1998.
Other Facilities
Bellacorick Wind Farm. The Company, during 1996, owned approximately
87.5% of the ordinary shares of Renewable Energy Ireland Limited, the owner and
operator of Ireland's first wind farm, which is located in Bellacorick, Ireland.
The Wind Farm was offered for sale in 1996. In early 1997, the Company sold its
interest in REIL.
For the two United Kingdom sales and the REIL sale, see the Subsequent
Events footnote in the audited financial statements.
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Projects Under Construction
Andersen Falls Hydroelectric Facility. The Company owns 60% of
Andersen ("Project Company") which has entered into a concession contract with
Energia Rio Negro Socieded del Estado ("ERSE"), the state utility of the State
of Rio Negro, Argentina, to design, reconstruct, operate and maintain a
hydroelectric facility to be located at Andersen Falls, State of Rio Negro,
Argentina. In connection with the proposal to construct this facility, the
Project Company posted a performance bond for $1 million, which was guaranteed
on a joint and several basis by the Project partners and the Company. Because
of the Company's limited capital resources, there is a risk that the Company
will have to pay under the terms of this performance bond. However, the
facility was abandoned in 1996 and the bond obligations are currently unclear.
The Company continues to seek a buyer for its interest, or a portion thereof,
in this project.
Dona Julia Hydroelectric Facility. The Company, on behalf of a Costa
Rican company in which it has a minority interest, developed a hydroelectric
facility located in Heredia, Costa Rica. The project is expected to have a
capacity of 16 MW of electricity, all of which is to be sold to the Costa Rican
state utility ICE under a 15-year power purchase contract. The Company has sold
its interest in the project for approximately $600,000, $400,000 which it
received in 1996 and the balance will be forthcoming in 1997.
Fujian I, China. In May 1995, the Company signed an agreement with
China Chang Jiang Energy Corporation ("CCJEC") to acquire an interest in Fujian
Chang Ping Hydro Project Company. Fujian Chang Ping Hydro Project Company is
constructing the 39 MW Fujian Nan Ping Xiayang Hydro Power Plant on the upper
Ming River in Xiayang, Fujian Province, People's Republic of China. The
project was originally expected to be operational by September 1997, but as a
result of significant flooding at the construction site, the operating date has
been postponed until the end of 1998.
Subsequent to the Company's initial investment, concern arose as to
whether adequate approvals had been obtained, under Chinese law, for the
acceptance of New World Power Corporation shares as payment for the Company's
interest in Fujian. The Company and CCJEC renegotiated the agreement resulting
in a 12% ownership in Fujian. Due to uncertainties involving, among other
things, significant project construction delays and Fujian's lack of liquidity,
the Company has recorded an other than temporary decline at December 31, 1995,
to adjust the carrying value of its investment to the estimated net realizable
value of the Company's continuing 12% interest in Fujian. Continued delays in
1996 and lack of capital for the project resulted in the Company writing off its
investment in CCJEC. The impact of this writedown is included as part of the
impairment charge in the accompanying Consolidated Statement of Operations at
December 31, 1996 and 1995 (see Note 3 and 10).
Projects In Development
The Company is currently undertaking to develop the following
projects. Unless otherwise stated below, development of each of these projects
is subject to obtaining suitable financing. There can be no assurance that
such financing will be obtained. See Item 7 "Management's Discussion and
Analysis of Financial Condition and Results of Operations - Liquidity and
Capital Resources" for a discussion of the financing of development projects.
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Eolos I. The Company has secured the development rights to
approximately 37,500 acres of land for the development of a wind farm in the La
Ventosa region of the State of Oaxaca, Mexico. Power from this first phase 20
MW development will be sold to, CFE, the Mexican federal electric utility. The
power purchase agreements are in the preliminary stages of negotiation and are
subject to approval by the federal Ministry of Energy. This project is
expected to be developed through a Mexican company in which the Company will
have a minority interest.
Lerma Hydroelectric Facility. The Company, through Entec S.A. de C.V.,
has a contract with the Mexican Federal District Water Commission to develop an
8.5 MW hydroelectric facility powered by the flow of water from an aqueduct
which supplies part of the drinking water needs of Mexico City. Entec will be
paid for the electricity generated by the project by the Federal District Water
Commission under a long-term power purchase agreement. Entec is in
negotiations for sale of its interest in this facility.
Big Spring Wind Farm. The Company, through its limited partnership New
World Power Texas Renewable Energy Limited Partnership, has entered into a
15-year power purchase agreement with Texas Utilities Electric Company ("TU
Electric") to purchase power from a 40 MW wind farm which is to be built near
Big Spring, Texas. The agreement has been approved by the Public Utility
Commission of Texas. As of March 1997, the land lease and royalty agreement
terms have been set, and the tax abatement proposal has been accepted.
Remaining site development work is only in the areas of archeological surveys.
The Company is presently evaluating the potential use of newer generation of
the wind turbine technology in view of improving the economics of the project.
As part of the definitive Joint Venture Agreement entered into by the Company
and DB Power, Inc. (a wholly owned subsidiary of Dominion Bridge Corporation),
50% of the interest in the Texas Project was transferred to DB Power, Inc.
Tierras Morenas Wind Farm. The Company had been undertaking, through a
Costa Rican subsidiary in which it has a 35% minority interest, to develop a
wind farm to be located in Tierras Morenas near Lake Arenal, Costa Rica. The
project is expected to have a capacity of 20 MW of electricity, all of which is
to be sold to the Costa Rican state utility ICE under a 15-year power purchase
contract. In May, 1996 the Company's Costa Rican 65% majority partner in the
project entered into negotiations with a U.S. alternative energy development
company and sold its majority interest.
Carrickabrock Wind Farm. The Company, through a joint venture with Bord
Na Mona, was seeking to develop a 15 MW wind farm in the County of Tipperary,
Ireland, to be owned and operated by the joint venture. An unfavorable outcome
to the resiting efforts forced the Company to abandon the project.
Drumlough Hill Wind Farm. The Company has entered into a joint venture
with Bord Na Mona to develop a 5 MW wind farm at Drumlough Hill, Innishowen,
County Donegal, Ireland. The joint venture, in which the Company will have a
50% interest, will sell electricity to the ESB, the government-owned electric
utility of Ireland, under a 15-year power purchase agreement awarded through an
Irish AER bid process. The joint venture has been unable to secure the
essential site rights from a third party that are necessary to complete the
project. Inability to obtain these rights could force the Company to abandon
the project.
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Other Projects. The Company is currently in the preliminary stages of
developing additional wind farms. These are Woodstock, MN, Bozcaada, Turkey,
and Manatoulin Island. The Company can not predict whether any of these will
ever be further developed or constructed.
Seasonality of Revenues
Wind farm revenues are seasonal, with the wind season in North
American locations typically running from March to November. The European wind
season typically runs from October to March. Hydroelectric production is also
seasonal with spring, fall and winter providing proportionally higher revenues
than the summer. Both wind power and hydroelectric production can also vary
from year to year based on variations in meteorological conditions.
Strategic Alliances
In June 1994, the Company entered into a 15-year business alliance
agreement with Westinghouse Electric Corporation ("Westinghouse").
Westinghouse owns 790,000 shares (7.6%) of the Company's Common Stock. The
alliance has not been as beneficial as both parties originally envisioned and,
accordingly, the Company and Westinghouse have suspended joint pursuit of
opportunities pursuant to this agreement.
In October 1994, the Company entered into a joint venture contract
with China Chang Jiang Energy Corporation (Group) ("CCJEC") and Metropolitan
Enterprise Corporation ("MEC"). CCJEC is a manufacturer of electric generating
equipment and owns and operates numerous hydroelectric facilities, not only in
China but in the Philippines and other countries in Asia. The joint venture
contract is for a period of twenty-five years after the date of issuance of the
business license for the joint venture company. The parties have agreed to
deal exclusively with one another during the term of such contract in
connection with the development of wind, solar and hydroelectric power
generating projects in the PRC, and in the manufacturing and distribution in
the PRC of renewable power generating products developed by the Company. Any
pursuit of opportunities under this agreement is subject to successful
renegotiation of the Company's investment position in the Fujian project.
The Company, effective as of October 31, 1996 entered into a joint
venture agreement with Dominion Bridge Corporation (Dominion Bridge) to jointly
develop selected projects in its inventory. These projects include further
development of wind opportunities in North America. Pursuant to the agreement,
Dominion Bridge may invest up to $2.5 million in the projects in exchange for
50% of the Company's interest in such projects.
In addition, the Company has given an option to convert Dominion
Bridge interest in the joint venture into its common stock. In the event that
all such interest was earned and converted, Dominion Bridge's ownership of the
Company would reach 41% of the common stock.
Finally, effective August 5, 1996, the Company has entered into a
management services contract with Dominion Bridge, whereby one of its vice
presidents, Vitold Jordan, was appointed to the position of Interim CEO of the
Company and Nicholas Matiossian, COO of Dominion Bridge is acting as a senior
advisor to the Company. Pursuant to the Management services contract, Dominion
can receive, at the election of the Company, a portion of its management fee in
shares of common stock.
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GRID POWER SERVICES DIVISION
During 1995, as a result of continued losses and erosion of its
customer base, the Company discontinued its production services operations in
California. The operations, which constituted the Grid Power Services segment,
were sold in December 1995.
WIRELESS POWER DIVISION
The Company's Wireless Power Division sells and assembles solar
systems. These solar systems are powered by photovoltaic panels. Photovoltaic
panels are composed of silicon, semi conductor material applied in various
forms including wafers or films, to a flat panel. The photovoltaic panel
directly converts sunlight to electric current.
The Company, for most of 1996, was involved in assembling and selling
two basic types of systems using photovoltaic panels. "Photovoltaic Systems"
are those in which the sole form of power production is solar energy; these
systems range from a basic panel and controller to varied applications
involving lighting, water pumping and more sophisticated packages. Integrated
Renewable Power Generating Systems are those which also use photovoltaic power
for a portion of their power generation, but additionally incorporate other
forms of renewable generation like wind and battery power. These systems are
typically complex and much more expensive than the Company's Photovoltaic
Systems.
The Company distributes its Photovoltaic Systems through three
partially-owned subsidiaries and distributes its Integrated Renewable Power
Generating Systems through a wholly-owned subsidiary.
Photovoltaic Systems
Photovoltaic Systems are solar power systems assembled and sold by the
Company through its partially-owned subsidiaries. Photovoltaic Systems use
photovoltaic power to produce electricity, and range from simple panel
applications to more sophisticated, expensive packages.
The Company distributes its Photovoltaic Systems through Photocomm,
Inc. ("Photocomm"), Solartec, Inc. ("Solartec") and Entec ("Entec"), all
partially-owned subsidiaries. The Company sold both Photocomm and Solartec in
1996 in order to fulfill a portion of its obligations to its lenders and
concentrate on its core development business. The Company continues to review
its options regarding liquidation or abandonment of its investment in Entec,
which is experiencing significant financial hardship.
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At December 31, 1995, the Company owned 6,612,447 shares (representing
approximately 48.8%) of the issued and outstanding voting stock of Photocomm
which is a publicly traded company engaged in the development, manufacture and
marketing of photovoltaic systems and related products. The Company had an
option to purchase an additional 1,500,000 shares at $3.00 per share expired at
December 31, 1996. The Company is also a party to an agreement with other
shareholders of Photocomm under which, the Company is assured of the election
of three of Photocomm's seven directors. The Company also owns 51% of the
issued and outstanding capital stock of Solartec, an Argentine corporation
which is a fabricator and distributor of photovoltaic products in Argentina,
and 50% of the issued and outstanding stock of Entec, a power developer in
Mexico. During the fourth quarter of 1996, the Company concluded the sale
of the Photocomm shares together with its interest in Solartec for a
consideration of $12.5 million. The proceeds from the sale were used to reduce
the Company's obligations under the 8% Convertible Subordinate Notes.
Integrated Renewable Power Generating Systems
The Company designs, manufactures, assembles and installs Integrated
Renewable Power Generating Systems, including remote site and stand-alone
electric generating systems, for a wide variety of applications. Remote site
and stand-alone generating systems are generally complex, integrate many forms
of available power generation including not only photovoltaic power but also
wind is utilized for electric power generation at remote locations that are not
connected to an electric power grid.
The Company's Integrated Renewable Power Generating Systems are
distributed through its 100%-owned subsidiary New World Vermont, located in
Waitsfield, Vermont.
The Company has installed remote site and stand-alone generating
systems for commercial and residential customers in over 30 countries and on
all 7 continents. These systems provide power where reliability is crucial and
power is a necessary commodity that was not previously available. The primary
applications in the commercial sector are telecommunications, navigational
aids, offshore platforms, area lighting and SCADA power equipment. In
addition, the Company provides larger systems where renewable energy sources
augment the energy provided through the utility grid which would normally be
purchased from local utilities.
Village Power
The Company, through early 1996, developed, owned and operated
integrated generating systems, powered by renewable and traditional sources,
which produce kilowatt hours for sale to small electric utilities removed from
the main grid. These systems use proprietary software for integration and
control and utilize indigenous renewable resources, augmented by batteries, to
replace existing base-load diesel generators, which are then converted into
backup power sources. This division was closed during early 1996, and the
entire investment was written off in 1996.
10
<PAGE> 14
Wireless Backlog
As of December 31, 1996, the Company had a backlog of existing
purchase orders and government contracts, which it believes to be firm, for
products and development services representing approximately $2.2 million in
revenues. This compares to a backlog of approximately $688,000 as of December
31, 1995. Management expects that a majority of the current backlog will be
filled in fiscal 1997. The current backlog is not necessarily indicative of
the backlog, if any, in future periods.
Concentration
Sales of the Company's generating systems to customers outside of the
continental United States accounted for approximately 20% of product sales for
the last fiscal year. These sales are accomplished through the Company's own
sales force. In view of the diverse locations of the Company's foreign
customers, the Company does not believe there are any special risks
attributable to foreign sales beyond the normal business risks of sales abroad.
Key Suppliers
The Company's manufacturing operations require a number of mechanical,
electrical and electronic components and raw materials. The Company has
multiple commercial sources of supplies for most components and raw materials
that it uses.
Manufacturing Regulation
The Company's manufacturing facilities are subject to numerous laws
and regulations designed to protect the environment. In management's opinion,
compliance with these laws and regulations has not had and will not have a
material effect on the capital expenditures, earnings or competitive position
of the Company.
OTHER PRODUCTS AND SERVICES DIVISION
The Company currently manufactures a full line of wind turbines
including 1 kW, 3 kW, 12 kW and 100 kW machines, all in limited quantities, and
is developing a prototype for a 250 kW turbine. The Company maintains a
continuing development program for new turbines and related products and for
continued engineering of its existing products to improve efficiency and
reliability. Development has been concentrated on wind turbine machine design
(including blade design) and electronic system design. The Company's
predecessor began developing wind turbine technology in the mid-1970s.
Pursuant to government contracts and initiatives issued by the
Department of Energy ("DOE"), and through various agencies via the Small
Business Innovative Research Program, the Company and its predecessor have
engaged in advanced turbine design studies since the late 1970s. These
conceptual design studies involve practical improvements, including advancing
the state-of-the-art for wind farms and the development of a 100 kW polar
turbine for extremely cold temperature applications.
11
<PAGE> 15
The Company is currently a sub-contractor with the National Renewable
Energy Laboratory ("NREL") to develop "Advanced Wind Turbines" under a series
of contracts. The first contract calls for development of the "Near Term
Turbine," and is designed to produce hardware for sales and distribution in
1998. This contract is aimed at the development of an advanced,
commercial-scale wind turbine to be manufactured in the United States. This
turbine is designed for use in large-scale wind farm developments and other
similar applications. The first Advanced Wind Turbine which the Company is
developing will have a nameplate capacity of 250 kW with blades of 82 feet in
diameter. The first prototype began operation in the San Gorgonio Pass in the
spring of 1994. Continued improvements and redesign aimed at cost cutting is
ongoing at this time. The information and technology advances developed by the
Company in connection with the 250 kW Advanced Wind Turbine will be available
for use by the Company in all of its products. Three patents related to the
aileron control system were issued by the U.S. Patent and Trademark Office
during late 1995 and early 1996.
The Company owns several patents and patent applications relating to
wind turbine technology. Although these patents and patent applications have
value to the Company, they are not considered to be of material importance to
its business as a whole. The Company's patents will expire during the period
from 1997 to 2014.
The Technology Company is also involved with the development and
deployment of large tracking PV array structures, grid connected PV
applications and standalone wind/PV village power systems. Multiple projects
are on-going at this time and the technology and experience can be used by the
Company in the pursuit of it's business objectives.
DOMESTIC GOVERNMENT INCENTIVES
Federal Incentives. The Federal government encourages the use of
renewable energy resources through various financial and other incentives. The
most recent incentives at the Federal level were included in the Energy Policy
Act of 1992. The purposes of the Act include the promotion of (i) increases in
the production and utilization of energy from renewable energy resources; (ii)
further advances of renewable energy technologies; and (iii) exports of
renewable energy technologies and services.
The Federal Energy Regulatory Commission ("FERC") has authority under
the Energy Policy Act, in certain circumstances, to order any transmitting
utility to provide transmission service to independent power producers for the
purpose of selling electricity at wholesale. If adequate transmission capacity
is unavailable, the transmitting utility may be required to enlarge its
facilities. The FERC may not issue such an order if providing transmission
service would impair the reliability of the interconnected system, or if the
utility cannot obtain approval for new facilities that are necessary to provide
the service. These provisions could benefit the Company and other independent
(non-utility) power producers by facilitating access to utility transmission
systems and thus the transmission and sale of electrical power to purchasers
other than the local electric utility. With improved transmission access, the
number of potential customers for power produced by the Company's facilities
will be significantly increased.
12
<PAGE> 16
Under the Clean Air Act Amendments of 1991, the Environmental
Protection Agency ("EPA") has established sulfur dioxide ("SO2") emission
levels for each utility system that must be met by the year 2000, as well as
specific emission levels for certain coal-fired plants that must be met by
1995. In order to facilitate the transition to these new emission levels, a
trading mechanism has been created so that SO2 allowances can be traded. The
result of these regulatory initiatives is that wind energy is valuable to
utilities since wind generated electricity reduces fossil fuel generation by
the utilities and increases emission allowances which can be sold in the
market.
State Incentives. Under the Energy Policy Act, states must work with
regulated public utilities to develop an integrated resource plan which
implicitly includes development of renewable energy resources, such as wind and
solar power. Even prior to enactment of the Energy Policy Act, a number of
States had undertaken to develop renewable energy policies and initiatives in
response to increasing pressure from environmental groups which have focused on
the air and water pollution associated with the development of new fossil fuel
generating facilities.
REGULATION
The Company is subject to federal and state energy laws and
regulations and federal, state and local environmental laws and regulations in
connection with the development and operation of its generating facilities.
Domestic Regulation
Federal Regulation. Pursuant to authority granted to the FERC under
PURPA, the FERC has promulgated regulations which generally exempt small power
production facilities with capacities of less than 30 MW from the provisions of
the Federal Power Act ("FPA") (except for licensing requirements applicable to
hydroelectric projects and certain other matters), the Public Utility Holding
Company Act ("PUHCA"), and state laws respecting rates and financial and
organizational regulation of electric utilities. All of the Company's
hydroelectric and wind power generating facilities are believed to be entitled
to the full range of regulatory exemptions available under PURPA. The
Wolverine Hydroelectric Facilities are subject to licensing regulation pursuant
to the Federal Power Act.
The Energy Policy Act amended PUHCA to allow independent power
producers, under certain circumstances, to own and operate eligible facilities
not exempted by PURPA in the United States or foreign countries without
subjecting these producers to registration or regulation under PUHCA and
without jeopardizing the qualifying status of their existing exempt projects.
A company exclusively in the business of owning or operating generating
facilities and selling electricity at wholesale or retail in a foreign country
is also eligible for this exemption, as long as neither the company nor its
subsidiaries sell electricity retail within the United States. These
provisions are expected to enhance the development of facilities not exempted
by PURPA in the United States which do not have to meet the fuel, production
and ownership requirements of PURPA, as well as the development of foreign
generating companies. The Energy Policy Act could benefit the Company by
expanding its ability to own and operate facilities not exempted by
13
<PAGE> 17
PURPA but may also result in increased competition by allowing utilities and
other independent power producers to develop such facilities which are not
subject to the constraints of PUHCA.
14
<PAGE> 18
In the absence of exemptions from the regulations discussed above, the
activities of the Company would be subject to a pervasive framework of federal
and state regulation applicable to public utilities, including regulation of
power sales prices, encumbrances of property, accounting practices and all
other activities deemed necessary and convenient in the regulation of public
utilities. Should this occur, the Company could be subject to regulation as a
public utility holding company under PUHCA, which would have a material adverse
effect on the Company's business. The Company intends to conduct its operations
so that it continues to qualify for the applicable exemptions under PUHCA and
has no reason to believe that these exemptions will be changed by legislative
or regulatory action. Congress now has under consideration legislation that
would reduce or eliminate the PUCHA restrictions.
State Regulation. State public utility commissions ("PUCs") have
broad authority to regulate both the price and financial performance of
electric utilities. Since a power sales contract will become a part of a
utility's cost structure (and therefore is generally reflected in its rates),
power sales contracts between an independent power producer, such as the
Company, and a regulated utility, some PUC's assert and exercise the right to
approve these contracts at the outset.
Local Permits. County governments in California and other states
require wind farm operators to apply for and obtain permits before erecting and
installing wind turbine generators. Applications may be considered at a public
hearing. The permits generally terminate after a fixed period of time, twenty
years from the date of approval in California, although the permits are
revocable for cause. Permits frequently contain numerous conditions, including
safety setback requirements, noise setback requirements, environmental
requirements and annual reporting requirements. The Company believes that it
has or will be able to obtain and renew all necessary permits subject to any
requirements relating to the siting and operation of each individual wind farm.
Environmental Regulation. The Company is subject to environmental
laws and regulation at the federal, state and local levels in connection with
the development, ownership and operation of its electrical generating
facilities. The laws and regulations applicable to the Company primarily
involve environmental concerns associated with the siting of wind power
generating facilities such as noise, visibility of wind turbines and threats to
endangered or migratory birds or wildlife. Many of such laws and regulations
require that wind turbines be located in remote areas or shielded from view,
that turbines not be located in flyways or in areas where endangered species
might be threatened, or that other mitigating actions be implemented. The
Company believes that its existing electric generating facilities are in
compliance with such environmental laws and regulations. If such laws and
regulations are altered, however, and the Company's facilities are not
grandfathered, the Company may be required to incur significant expenses to
comply with such laws and regulations. Furthermore, the existence of certain
environmental laws and regulations may have an adverse effect on the Company's
ability to find suitable sites for new renewable energy generating facilities,
although generally speaking suitable wind resource areas are not near
residential areas.
15
<PAGE> 19
International Regulation
The Company only engages in business in countries that have statutes
which permit the private production and sale of electricity. All the countries
in which the Company is currently doing business have such laws. Certain
countries have restrictions on the percentage of a stock a foreign corporation
may own of a domestic corporation and certain countries require permission of
the government to own more than a designated percentage of stock in a domestic
corporation. The Company complies with all such requirements.
The Company believes that the countries in which it is seeking to do
business are encouraging independent power producers to supply the electrical
power needs their growing economies face. The relatively short time periods
for construction as well as the modular nature of wind farms permit the Company
to comply with construction and environmental regulations in a more expeditious
fashion and with lower construction risks than power produced through
traditional thermal methodologies.
COMPETITION
Revenue derived from the Company's existing electrical generating
facilities is sold under long-term power contracts, therefore competition is
not a significant business risk. New utility power sales contracts are,
however, generally subject to an arduous, expensive and competitive process.
Many states require power sales contracts to be awarded by competitive bidding,
and the Company competes with other independent power producers, subsidiaries
of fuel supply companies, engineering companies, equipment manufacturers and
affiliates of other industrial companies in the process. In addition, a number
of regulated utilities have created subsidiaries, utility affiliates, which
compete with independents such as the Company.
Competition for acquisitions of existing wind farms and development of
new ones may significantly reduce the Company's opportunity to acquire or
develop any such wind farms. Most of the other companies in the wind power
generation industry are larger and have more financial resources than the
Company. Furthermore, other large, well-capitalized entities from outside the
wind power generation industry may choose to enter the industry, creating the
potential for significant additional competition.
The markets for the Company's wireless power products are highly
competitive. The Company faces a number of competitors in this market, some of
which may have significantly greater financial resources than the Company.
EMPLOYEES
As of December 31, 1996, the Company and its subsidiaries employed
approximately 30 people.
16
<PAGE> 20
ITEM 2. PROPERTIES
ADMINISTRATIVE
The Company, at December 31, 1996, leased office space for executive
and administrative functions at various locations around the country.
GRID POWER
The Company, at December 31, 1996, leased or owned the following:
Wolverine. The Company owns approximately 4,000 acres of land, most
of which is under water, in Gladwin and Midland counties in Michigan. The
Company's dikes, dams, spillways and power plants are located on this property.
Operating and maintenance personnel are based in a 1,000 square foot
Company-owned building and a 5,000 square foot maintenance and storage facility
in Edenville, Michigan.
Altamont Wind Farm. The Altamont Wind Farm is located on
approximately 4,000 acres of leased land in the Altamont Pass, California. The
Company owns approximately 305 miles of power lines, one substation and a 5,000
square foot maintenance building on the property.
Dyffryn Brodyn Wind Farm. The Dyffryn Brodyn Wind Farm is located on
approximately 166 acres of leased land near Whitland, Dyfed, Wales. (Sold in
1997)
Caton Moor Wind Farm. The Caton Moor Wind Farm is located on
approximately 100 acres of leased land in Caton Moor, Lancashire, England.
Bellacorick Wind Farm. The Bellacorick Wind Farm is located on
approximately 300 acres of leased land in Bellacorick, Ireland. (Sold in 1997)
Four Burrows Wind Farm. The Four Burrows Wind Farm is located on
approximately 500 acres of leased land in Truro, Cornwall, England. (Sold in
1997)
OTHER PRODUCTS AND SERVICES
17
<PAGE> 21
The Company's manufacturing facilities for renewable power generating
systems, including its design and system assembly departments, are housed in a
7,200 square foot Company-owned facility in Waitsfield, Vermont.
18
<PAGE> 22
ITEM 3. LEGAL PROCEEDINGS
On January 30, 1995, Kenetech Windpower, Inc. ("Kenetech") filed a
patent infringement suit in the United States District Court for the Northern
District of California against the Company and Enercon GmbH ("Enercon")
relating to the proposed use of Enercon E-40 wind turbines at the Company's
planned wind power generating facility in Big Spring, Texas. The suit alleges
that the use of the Enercon turbines in the United States would violate certain
Kenetech patents and seeks an injunction and unspecified damages. The Company
reviewed the Kenetech patents in detail and thoroughly investigated the Enercon
technology well before the suit was filed and, based on such reviews and
investigations, believes that neither the Enercon turbine nor its mode of
operation infringes on any claim of any of Kenetech's patents. In January 1996
the Court granted the Company's motion and dismissed Kenetech's claim for
relief based on actual patent infringement.
Kenetech has also initiated proceedings against the Company and
Enercon before the International Trade Commission. On May 31, 1996, an
Administrative Law Judge of the U.S. International Trade Commission rendered an
Initial Determination decision in which he held that the Commission has subject
matter jurisdiction over the Company and its co- respondent, Enercon, in
Investigation No. 337-TA-376 because the Company has purchased for importation,
and Enercon has sold to the Company for importation, certain wind turbines, the
use of which in the United States would infringe one claim of one Kenetech
patent. This Initial Determination is subject to review by the Commission,
which must be requested on or before June 13, 1996, and to further appeal
thereafter.
The Company and Enercon have requested review by the Commission. The
Company believes that both Kenetech suits are without merit. The Company
intends to vigorously contest them. There can be no assurance, however, that
the Company will prevail in its defense.
On November 12, 1996, Dwight Kuhns, brother of the former Chairman of
the Board, commenced an action against New World Power Corporation in the
Superior Court, Alameda County, California. This action is based upon a
consulting agreement that Mr. Kuhns had entered into with the Company at the
start of January, 1996. The action seeks unspecified damages and alleges the
Company failed to pay Mr. Kuhns amounts believed to be due under his consulting
agreement. That agreement provided for a stated monthly fee and additional
incentive fees should Mr. Kuhns effect savings in closing and/or selling certain
assets and business units of the Company. The Company intends to vigorously
contest the action and believes the suit is without merit. There can be no
assurance, however, that the Company will prevail in its defense.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its Annual Meeting of Stockholders on October 21,
1996. The October 21, 1996 meeting was adjourned to October 31, 1996 as a
quorum was not reached. At the further session on October 31, 1996, the
following actions were taken:
1) The following slate of directors were elected to serve on the Board
of Directors until the 1997 Annual Meeting of Stockholders and
until their respective successors are duly elected and qualify or
until an earlier resignation or removal.
Gerald R. Cummins
Robert W. MacDonald
Nazir Memon, M.D.
Herbert L. Oakes, Jr.
Gerard Prevost
(FOR - 6,072,832; WITHHELD - 718,161)
2) Approval of the one-for-five reverse stock split.
(FOR - 6,244,656; OPPOSED - 398,564; ABSTAINED - 147,773)
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<PAGE> 23
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
There was no established public trading market for the Company's Common
Stock prior to October 23, 1992. Since that date, the Common Stock has been
quoted on the National Association of Securities Dealers Automated Quotation
("NASDAQ") System under the symbol NWPC. On March 23, 1994, the Common Stock
was approved for listing on the NASDAQ National Market System. In November,
1996, the common stock was deleted from the National Market System and was
approved for listing on the NASDAQ Small Cap Market System. The following table
sets forth the high and low closing prices for the Common Stock as reported by
NASDAQ during the periods shown below.
<TABLE>
<CAPTION>
*High *Low
----- ----
<S> <C> <C>
Quarter ended December 31, 1993 64 45
Quarter ended March 31, 1994 69 51
Quarter ended June 30, 1994 59 45
Quarter ended September 30, 1994 56 46
Quarter ended December 31, 1994 53 30
Quarter ended March 31, 1995 38 23
Quarter ended June 30, 1995 33 22
Quarter ended September 30, 1995 31 12
Quarter ended December 31, 1995 19 8
Quarter ended March 31, 1996 12 5
Quarter ended June 30, 1996 4 3/4 2 1/2
Quarter ended September 30, 1996 3 3/4 1 1/4
Quarter ended December 31, 1996 2 3/4
Quarter ended March 31, 1997 1 9/32
</TABLE>
* Price adjustments have been made to reflect the 1 for 5 reverse
stock split. The effective date of the reverse stock split is
November 4, 1996.
The foregoing represents inter-dealer prices, without retail mark-up,
mark-down or commission and may not necessarily represent actual transactions.
As of April 11, 1997, there were approximately 367 holders of record of Common
Stock.
The Company has not paid any cash dividends on its Common Stock since
its incorporation in June 1989. The Company is currently prohibited from
declaring or paying any cash dividends on the Common Stock under the Company's
loan restructuring agreements entered into early 1996. In addition, the
Company's United Kingdom project subsidiaries including Bellacorick and
Wolverine subsidiary are prohibited from declaring or paying dividends and
making cash advances or loans to the parent Company pursuant to loan documents
entered into by the Company.
20
<PAGE> 24
ITEM 6. SELECTED FINANCIAL DATA
The following selected consolidated financial data with respect to the
Company's statements of operations for the year ended December 31, 1996 are
based upon the internal unaudited financial statements of the Company. The
Company has been unable to complete its audit for the year ended December 31,
1996 due to financial problems and the resignation of its previous auditors. The
unaudited financial statement information contained herein is subject to
adjustment during the audit. The 1995 and 1994 and its balance sheets as of
December 31, 1996, 1995 and 1994 and September 30, 1993 and 1992 are derived
from the Company's audited Consolidated Financial Statements. The Company's
statements of operations for the year ended December 31, 1996, 1995 and 1994,
the three month period ended December 31, 1993 and the year ended September 30,
1993, and such balance sheets as of December 31, 1995 and 1994, and the
auditors' report thereon with exception of the 1996 results, are included
elsewhere in this report. Such data should be read in conjunction with the
Company's Consolidated Financial Statements, the related notes and the
independent auditors' reports and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included elsewhere herein.
21
<PAGE> 25
<TABLE>
<CAPTION>
Year Ended December 31,
Unaudited 1995 1994
1996
---------------------------- ----------
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C>
Operating revenue:
Grid Power Production $ 7,896 $ 7,735 $ 3,129
Wireless Power Sales 7,468 8,647 18,878
Other Products and Services 23 (9) 901
-------- -------- -------
Total operating revenue 15,387 16,373 22,908
-------- -------- -------
Operating expenses:
Cost of operations 12,404 13,102 17,237
Research & Development 6 426 339
Project development 706 4,361 2,052
Selling, general and administrative expenses 6,783 7,627 9,222
Equity loss of non-consolidated affiliates (77) 4,199 912
Impairment charge 7,762 24,431 -
-------- -------- -------
Operating loss (12,197) (37,773) (6,854)
======== ======== =======
Net (loss) income from continuing operations
before extraordinary items $(18,833) $(39,851) $(6,240)
======== ======== =======
Net (loss) income attributable to common shares $(18,833) $(41,751) $(7,793)
-------
<CAPTION>
Three Months
Ended Year Ended September 30,
December 31, 1993 1993 1992
----------------- -------- ----------
(in thousands, except per
share data)
STATEMENT OF OPERATIONS DATA:
<S> <C> <C> <C>
Operating revenue:
Grid Power Production $ 275 $ 1,730 $ 1,955
Wireless Power Sales 430 1,432 1,785
Other Products and Services (15) 810 -
------- ------- -------
Total operating revenue 690 3,972 3,740
------- ------- -------
Operating expenses:
Cost of operations 689 2,516 2,488
Research & Development 165 52 -
Project development 259 779 -
Selling, general and administrative expenses 1,023 2,841 3,332
Equity loss of non-consolidated affiliates 112 - -
Impairment charge - - -
------- ------- -------
Operating loss (1,558) (2,216) (2,080)
======= ======= =======
Net (loss) income from continuing operations
before extraordinary items $(1,464) $ 67 $ 1,153
======= ======= =======
Net (loss) income attributable to common shares $(1,576) $ 537 1,153
------- ------- -------
</TABLE>
*Audit to be completed shortly, financial information subject to change.
22
<PAGE> 26
<TABLE>
<CAPTION>
Year Ended December 31,
Unaudited* 1995 1994
1996
---------- ---------- ----------
<S> <C> <C>
STATEMENT OF OPERATIONS DATA (CONTINUED):
Earnings (loss) per common and
common equivalent share:
Net loss from Continuing operations
attributable
$(8.11) $(19.15) $(3.80)
to common shares
(Loss) income from discontinued operations - (0.70) (0.70)
Primary and fully diluted** $(8.11) $(19.85) $(4.50)
====== ======= ======
Weighted average number of shares** 2,321 2,105 1,730
====== ======= ======
<CAPTION>
Three Months
Ended Year Ended September 30,
December 31, 1993 1993 1992
----------------- ----------- ------------
(in thousands, except per
share data)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA (CONTINUED):
Earnings (loss) per common and
common equivalent share:
Net loss from Continuing operations
attributable
$(1.35) $ 0.20 $3.15
to common shares
(Loss) income from discontinued operations (0.05) 0.45 -
Primary and fully diluted** $(1.40) $ 0.65 $3.15
====== ====== =====
Weighted average number of shares** 1,142 852 335
====== ====== =====
</TABLE>
<TABLE>
<CAPTION>
As of December 31,
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
BALANCE SHEET DATA:
Cash $ 449 $ 861 $ 3,889
Cash restricted in use 2,410 4,670 -
Working capital (deficiency) (9,910) (16,762) 2,535
Plant, property & equipment, net 21,483 29,375 35,730
Deferred Series B preferred stock offering costs - - 121
Total assets 30,249 65,396 74,174
Current portion of long-term debt 6,324 17,966 187
Due to related parties 4,333 4,628 3,585
Current portion of capital lease obligations 14 84 12
Long-term portion of long-term debt 5,721 7,650 7,905
Long-term portion of capital lease obligations 8 76 17
Redeemable preferred stock - - 3,184
Stockholders' equity (deficiency) 2,911 21,023 46,366
<CAPTION>
As of September 30,
1993 1992
--------- ----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash $ 1,985 $ 210
Cash restricted in use - -
Working capital (deficiency) 3,386 (8,946)
Plant, property & equipment, net 9,018 5,983
Deferred Series B preferred stock offering costs 171 1,014
Total assets 22,978 19,054
Current portion of long-term debt 250 5,247
Due to related parties - -
Current portion of capital lease obligations 3,182 4,307
Long-term portion of long-term debt 451 1,343
Long-term portion of capital lease obligations 118 3,379
Redeemable preferred stock 2,827 -
Stockholders' equity (deficiency) 12,063 (2,877)
</TABLE>
*Audit to be completed shortly, financial information subject to change.
**Adjustment made to reflect 1 for 5 reverse stock split.
23
<PAGE> 27
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company is engaged in the production and sale of electric power generated
from renewable sources and, to a lesser extent, the sale of products related to
the renewable energy industry. The Company focuses on the acquisition and
development of renewable power generating facilities from wind, solar and
hydroelectric sources.
Business Environment
The Company adopted a new business strategy and plan which was
approved by the Board of Directors in January of 1996. After abandoning its
previous strategy of aggressive expansion through acquisition of existing
renewable energy projects and the development of new projects throughout the
world, the Company embarked on a 1996 campaign to sell assets to satisfy its
debt obligations. Partly in connection with the prior strategy of
acquisitions, the Company issued approximately $15 million of debt.
In the latter part of 1995, liquidity became extremely constrained and
it became apparent to management that operating cash flow would not be
sufficient for the Company to meet its debt service payments due in the early
part of 1996. As a result, the Board of Directors appointed a new Interim Chief
Executive Officer and management developed a revised business strategy with the
objectives to reduce debt, increase equity and alleviate the Company's
short-term liquidity problems and improve long-term liquidity. Key elements of
the revised business plan include:
-- The Company is focusing on a selected, limited number of
development projects.
-- The Company is selling off certain of its existing
hydroelectric and wind projects currently under development or
construction.
-- The Company used the proceeds from the sale its ownership
interests to meet its current and other debt service
requirements.
-- The Company did not pursue any new wind farm development
projects in the United States. This element of the business
plan does not affect projects for which the Company has
completed the bidding process or has been selected through a
competitive process to operate a wind farm.
-- The Company sold a majority of its wireless business including
its Photocomm subsidiary.
-- The Company reduced administrative staff.
Management believes that its revised business plan will achieve the
Company's objectives of reducing debt, increasing equity and improving both
short-term and long-term liquidity. However there are numerous risks and
uncertainties surrounding management plans, principally the risk that
management will not be able to sell investments identified in its business plan
within the time frame required by the restructured loan agreement, or for the
amounts estimated by management. If management is not successful in
implementing this plan, it is possible that the Company will not continue as a
going concern.
24
<PAGE> 28
Shortly after management approved the revised business plan, the
Company defaulted on several of its debt obligations and restructured those
obligations with its lenders. Part of the terms of the restructured loans
included a release of up to $3.3 million cash collateral held by the lender,
additional collateral, additional finance charges and the requirement that the
Company raise $10 million in net proceeds from the sale of assets or securities
by July 31, 1996 and raise an additional $17 million in net proceeds from the
sale of assets or securities by November 30, 1996. Further, a significant
portion of the proceeds from the sale of assets or securities will be placed in
a sinking fund for the purpose of debt retirement.
Throughout 1996 and into early 1997, management continues to operate
under constrained liquidity and operating cash flow. As of April 20, 1997 the
Company has completed the sales of Photocomm and Solartec interests, two UK
windfarms and the Irish windfarm. Proceeds from asset sales of approximately
$19 million were used to reduce the Company's obligations to Fleming and
Sundial debt holders and to pay the expenses associated with the sale. As of
April 20, 1997 approximately $4.5 million of debt obligation remains in favor
of Fleming while the Sundial debt holders have been paid in full.
In 1996, the Company made its interest payments, due January 31, 1996
and July 31, 1996, on its Secured Subordinated Notes in the form of additional
notes and warrants rather that cash as permitted under the restructured loan
agreements. Those interest notes as well as the interest payment due January
31, 1997 were paid by the Company from proceeds of asset sales.
Brief History
The Company was formed in 1989 through the acquisition of
hydroelectric facilities in Michigan and a wind farm in the Altamont Pass in
California. The Company expanded into renewable energy technology through its
1991 acquisition of Northern Power Systems, Inc., a manufacturer of wind
turbines and remote site and stand-alone renewable power generating systems. In
1992, the Company acquired Field Service Maintenance & Supply, Inc. in Palm
Springs, California (subsequently renamed "Grid Power Services Division"),
which provides engineering, installation and operation services to owners of
wind turbines and related equipment. See "Discontinued Operations" in Notes to
Financial Statements.
The Company continued to expand in 1993 through the acquisition and
development of several wind farms; the acquisition of 49% of Entec S.A. de
C.V., a Mexican corporation engaged in the rural electrification industry; and
the acquisition of 29% of Photocomm, Inc., a manufacturer and distributor of
solar electric systems and related products. In 1994, the Company increased
its ownership in Photocomm to a majority of its voting stock and increased its
ownership in Entec to approximately 50%, while also purchasing 51% of Solartec
S.A., the solar products distributor in Argentina. During 1995, the Company's
ownership in Photocomm decreased to below 50% of the outstanding stock.
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<PAGE> 29
In 1994 the Company signed a business alliance with Westinghouse to
jointly develop, market, construct and own renewable power projects, such as
utility-scale wind farms, off-grid generating systems and wireless photovoltaic
systems as well as jointly market the Company's renewable power projects and
products. Westinghouse will also have the option to participate with the
Company in renewable power projects. The alliance has not been as beneficial
as both parties originally visioned and, accordingly, the Company and
Westinghouse are discussing the mutual cessation of the business relationship..
During 1994, the Company entered into a joint venture with China Chang Jiang
Energy Company Ltd. to develop renewable energy projects in China.
The Company completed construction in December 1994 of the Dyffryn
Brodyn and Caton Moor wind farms in the United Kingdom which have a combined
capacity of 8.6 MW, and completed in March 1995 the Four Burrows wind farm in
the United Kingdom which has a capacity of 4.5 MW. Also, the Company was
selected in 1994 by Texas Utilities to develop a 40 MW wind power facility in
Big Spring, Texas, and commenced the development of a 16 MW hydroelectric
facility in Costa Rica.
In January 1995, the Company acquired approximately 87% of the stock
of an Irish wind farm having a capacity of 6.4 MW. Also, during 1995, the
Company commenced development of a 16 MW hydroelectric facility and commenced
development of a 22 MW wind power facility both in Costa Rica. In addition,
the Company purchased a 12% equity interest in the 39 MW hydroelectric facility
located in the Fujian province of China.
During 1996, the Company embarked upon a new business plan that required, among
other things, the sale of many of the Company's assets to repay its principal
lenders. In 1996, the Company entered into an agreement to sell its interest
in the 16 MW hydroelectric facility in Costa Rica. That sale is expected to
close in early 1997. In addition, the Company closed on the sale of its
investments in Los Vaqueros, Solartec, New World Power do Brazil and Photocomm
during 1996 for gross proceeds of approximately $12.6 million. All proceeds
were paid to the secured lenders.
In early 1997, the Company closed on the sale of two of its windfarms
in the United Kingdom and the sale of its investments in the windfarm in
Ireland. Proceeds form the sale of approximately $6.6 million were repaid to
the principal secured lenders. With the sales completed in Ireland and the
United Kingdom, two of the Company's three secured lenders have been repaid in
full.
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OTHER RISKS
Increasing Competition and Regulatory Developments Affecting the Domestic
Electric Utility Industry
The electric utility industry in the United States is in the midst of
a transition to a more competitive wholesale power market in which numerous
states are considering granting independent power producers direct access to
retail customers. This transition is being implemented by changes in
regulations and policies of the FERC and state utility commissions. Congress is
considering the termination of power purchase mandates under PURPA and FERC has
acted to negate some state approved power contracts. Due to the increasing
competition and regulatory uncertainty in the domestic markets coupled with the
downward pressure on the price utilities will pay for electric power based upon
their avoided cost, management believes that the most attractive opportunities
for independent power development in the immediate future are outside of the
United States.
Risks of International Project Development Activities
Participation in the development and acquisition of foreign facilities
may expose the Company to the effects of potentially adverse economic,
political and labor developments, including political instability,
nationalization of assets, local inflation, and currency fluctuations and
restrictions. The Company will attempt to minimize these risks through various
measures but there can be no assurance that it will be able to successfully
reduce or eliminate them. In addition, the application of foreign
environmental, tax and labor laws to the operations of foreign facilities may
adversely affect any foreign facility earnings of the Company.
General Risks of Project Acquisition and Development
The Company's acquisition and development projects are subject to
normal development risks, including locating suitable sites, negotiation of
definitive agreements, obtaining favorable power purchase contracts, final
permitting, the availability of financing on acceptable terms, and construction
risks. The Company is currently engaged in the process of developing and
acquiring renewable power generating facilities in foreign countries.
The Company expects that many of its power production projects will be
outside the United States, and will be subject to all of the factors above.
Resource Variability
The Company's wind and hydroelectric generating facilities are located
at sites where, based on the average wind speed and water flow gathered over an
extended period, the Company has determined that there are favorable energy
resources available. Operating results, however, can vary significantly from
year to year and from the historical average.
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<PAGE> 31
Renewable energy resources also vary from place to place during the
same season of each year. The Company's existing domestic wind farms are
located primarily in California where the strongest winds occur during the
spring and summer. The Company began operation of its wind farms in the United
Kingdom in December 1994. The wind is generally strongest in the United
Kingdom during the fall and winter. As a result of the increasing geographic
diversity of the Company's power production operations, power production
revenue of the Company is more balanced throughout the year than in prior
years.
Inflation
The electricity produced by the Company's power production facilities
is sold under long-term fixed rate power sales contracts. The effects of
inflation on the Company's income are partially offset by periodic adjustments
to the rates set forth in the contracts which give effect, in part, to changes
in operating and capital costs incurred by the utilities as a result of
inflation. Because the majority of operating expenses related to power
production are relatively stable, management does not feel any special concern
about the long-term impact of inflation in the United States or the United
Kingdom. Local inflation in countries the Company does business can vary
widely, in particular Mexico and Costa Rica have experienced historical high
inflation.
RESULTS OF OPERATIONS
General
The results of operations for 1995 compared to 1994 reflect
significant fluctuations resulting from the methods of accounting used for the
Company's investment in Photocomm. During the year ended December 31, 1994, the
Company acquired additional shares of common stock and other securities of
Photocomm and the Company had control of over 51% of Photocomm's voting stock
at December 31, 1994. Accordingly, the Company consolidated Photocomm into its
financial statements for the year ended December 31, 1994.
The summarized balance sheet and statement of operations information for
Photocomm of December 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Balance:
Current assets $ 7,334,984 $5,556,770
Total assets 10,361,409 8,081,819
Current liabilities 2,676,483 1,985,526
Total liabilities 3,069,579 2,787,397
Statement of operations:
Sales $21,765,765 15,691,847
Cost of Sales 16,527,670 11,868,453
Selling, general & administrative 4,377,383 3,278,093
Net income 839,889 491,068
</TABLE>
At December 31, 1995, the Company owns 6,612,447 shares of Photocomm,
representing less than 50% of the voting shares of Photocomm. The decrease in
the Company's ownership percentage from December 31, 1994 results principally
from various Photocomm equity transactions in which the Company did not
participate. As a result of the Company no longer
28
<PAGE> 32
having a controlling interest in Photocomm, the investment in Photocomm is
accounted for under the equity method for the years ended December 31, 1995 and
1996.
29
<PAGE> 33
1996
Management's Discussion and Analysis on 1996 results will be included
upon completion of the audit.
1995
Revenues
Revenues decreased $6.5 million (29%) during 1995 compared to 1994.
The deconsolidation of Photocomm was attributable for $15.7 million of the
decrease. This decrease was partially offset by a $3.0 million increase in
Solartec revenues resulting from the first full year of consolidation of
Solartec. Additionally, Grid Power reported a $4.6 million increase in
revenues, resulting primarily from the acquisition of REIL (Bellacorick Wind
Farm) and the first full year of operations for the U.K. windfarms. See
further discussion under Item 1 and Segment Analysis.
Cost of Operations
Cost of operations decreased $4.1 million (24%) during 1995 as
compared to 1994. Deconsolidation of Photocomm was attributable for $11.9
million of the fluctuation. This decrease was partially offset by an increase
of $2 million reported by Solartec resulting from the first full year of
consolidation. Additionally, the acquisition of Bellacorick and the first full
year of operations for the Company's U.K. wind farms resulted in increased cost
of operations during 1995.
Research and Development Expense
Research and development expenses increased $88,000 during 1995 over
1994 related primarily to the Company's research into developing a new high
capacity advanced wind turbine.
Project Development Expenses
Development of a power production facility requires extensive
preparatory work that includes identifying and acquiring the rights to suitable
wind or hydroelectric sites, obtaining an economically viable power purchase
contract, fulfilling all legal requirements and obtaining financing for the
project on favorable terms. All of this precedes equipment selection, contract
negotiation and actual construction.
Project development expenses increased by $2.3 million (113%) during
1995 over 1994 which was primarily attributable to the Company's investigation
into potential projects in China and, to a lesser extent, various domestic
projects and Chile and Argentina.
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<PAGE> 34
Selling, general and administrative
Selling, general and administrative expenses decreased $1.6 million
(17%) primarily due to the deconsolidation of Photocomm ($3.3 million). This
decrease was partially offset by Solartec which reported an increase of $.6
million and the acquisition of Bellacorick and the first full year of
operations for the U.K. wind farms which will attribute for $.3 million in
aggregate. Corporate selling, general and administrative expenses decreased
$.4 million while Other Products and Services increased $.3 million.
Impairment Charge
In 1995, the Company recorded an impairment charge of $24.4 million.
The impairment charge was reflected as a reduction of the following financial
statement captions:
<TABLE>
<S> <C>
Property, plant and equipment, net $ 13.4 million
Goodwill, net 4.1 million
Investments 5.9 million
Inventories and other non-current assets 1.0 million
--------------
$ 24.4 million
==============
</TABLE>
As previously described, the Company has undertaken a business plan to
sell certain of its assets and investments and to abandon various development
projects. The following investments have been written-down, as applicable, to
their estimated fair value at December 31, 1995. The aggregate carrying value
of assets held for sale as of December 31, 1995 is approximately $25.6 million
and includes:
Photocomm Makani Uwila Wind Farm
United Kingdom Wind Farms Arcadian Wind Farm
Tierras Morenas, Development Project Los Vaqueros
Solartec S.A. San Jacinto
Dona Julia, Development Project Bellacorick
Andersen Falls Painted Hills Wind Farm
In determining the amount of impairment charge for assets held for
sale, the Company's policy is to compared the carrying value of its assets and
investments to the estimated fair value. In determining fair value, the Company
used market values for publicly traded investments (i.e., Photocomm), or
correspondence with potential buyers as an indication of market value. In
circumstances where the Company's negotiations to sell assets and investments
have not included correspondence with potential buyers in sufficient detail to
indicate a market value, the Company has used the projected future cash flows
from these investments and assets. These projected cash flows have been
discounted at rates commensurate with the risk of the respective investment,
and generally range from rates of 16% to 21%.
The Company has estimated the December 31, 1995 impairment charge
based upon the best information available to management. It is at least
reasonably possible that actual losses may be materially higher or lower than
the amounts recognized following execution of management's plans, based on the
actual agreements the Company negotiates with potential buyers, etc.
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<PAGE> 35
Equity loss of non-consolidated affiliates. The increase of
$3,287,441 to $4,199,184 relates primarily to the equity loss of $4,331,000
related to the Company's New World Entec S.A. investment. See further
discussion in Item 1 and Segment Analysis.
Operating Loss
Operating loss increased $30.9 million to $37.8 million including an
impairment charge of approximately $24.4 million. Exclusive of the impairment
charge, the 1995 operating loss increased $6.5 million. The increase in equity
loss of non-consolidated affiliates of $3.3 million was primarily attributable
to the equity loss in Entec and increased project development expense.
Other Income (Expense)
Interest expense increased by $2.0 million during 1995 which was
attributable to approximately $15 million of debt the Company issued during the
year as well as to the first full year of consolidation of the U.K. windfarms
and the acquisition of Bellacorick.
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<PAGE> 36
Impact of Foreign Operations Currency Translation
The Company continues to pursue overseas development opportunities,
and is affected by changes to the net investment value of its activities as the
functional currency denominated financial statements of its foreign
subsidiaries are translated into U.S. dollars for purposes of consolidation.
In the year ended December 31, 1996, 1995 and 1994, the Company
recognized in the stockholders' equity section of the balance sheet currency
translation adjustments of approximately $19,626, $778,838 and $646,580,
respectively, related primarily to the United Kingdom, Ireland and Mexico. The
currency has remained stable in those other countries where the Company has
significant local currency denominated investments.
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<PAGE> 37
Segment Analysis
Grid Power Production
Revenue. Power production revenue is dependent upon the Company's
installed capacity, the availability of the renewable resources used to produce
the power, and the rate at which the produced electricity is sold.
Grid Power Production revenue increased by $4.6 million (147%) during
1995 over 1994. The increase in revenues is attributed to the first full year
of operation of the U.K. wind farms as well as the acquisition of the
Bellacorick.
Power production revenue increased in 1994 by $742,000 (31%) compared
to Fiscal 1993. Wind speeds at the Company's wind farms increased to more
normal levels during 1994, while water flow at its Michigan hydroelectric
facilities was much lower in 1994 than in the prior fiscal year. This increase
principally reflect the increase in revenue attributable to the increase from
one wind farm in service in fiscal 1993 to six in service in 1994.
Operating (Loss) Profits. Segment operating loss increased $26.5 million
including a $20.9 million impairment charge. Additionally, in 1995, the
Company recorded approximately $4.5 million related to the Company's Mexican
operation. The change is further impacted by $2.0 million of project
development expenses related to China, the U.K. and Chile, partially offset by
operating profits of the Company's U.K. and Irish wind farms. See geographic
discussion below.
Segment operating profits decreased $1.2 million during 1994 from
1993, primarily attributable to the operating results of the Arcadian wind farm
and Makani wind farm.
Wireless Power Sales
Revenue. Revenue from Wireless power decreased by $10.2 million (54%)
from 1994. The decrease in revenues is attributable primarily to the
de-consolidation of Photocomm ($15.7 million). This decrease was partially
offset by Solartec which reported an increase of $3.0 million due to the first
full year of operation under the Company's control for both subsidiaries. An
additional $900,000 was generated by the Company's new Santa Fe Argentina
project.
The Company increased revenues in 1994 over fiscal 1993 by $17.4
million, which included $11.9 million from Photocomm, which was consolidated
for the first time.
Operating Income (Loss). Operating income (loss) decreased $1.8
million during 1995 including an impairment charge of $2.3 million. Excluding
the impairment charge, the operating income increased $500,000. The increase
was primarily attributable to Solartec ($383,000). The remaining increase was
primarily attributable to the Company's NPS subsidiary.
Operating income increased $564,000 during 1994 over fiscal 1993 which
was substantially attributable to the inclusion of Photocomm in the Company's
results for the first time.
34
<PAGE> 38
Geographic
Due to poor business conditions in Mexico and the poor financial
performance of Entec, the Company recorded a loss of $4.3 million and
approximately $950,000 for Entec in 1995 and 1994, respectively. Prior to
1994, $113,385 in losses were recorded. The Company, in late 1995, recognized
that Entec would not generate profits and began negotiations for a new partner
which would provide the Company with the capability to retain its rights and
develop wind projects in Mexico. In early 1996, a preliminary agreement was
reached providing for the formation of a new company which will be owned 42% by
the Company. As part of their agreement, the new company assumed a $1.5
million loan (repayment contingent on future profits) from New World to Entec
in exchange for the rights to develop wind projects. The new company will be
managed by the Mexican partners. As a result of the above, in 1995, the
Company wrote off its remaining investment in Entec ($131,000) as well as the
remaining balance of its loan receivable from Entec ($3,700,000) during 1995.
Management believes that there is significant long term potential for
development of independent power production facilities in Mexico. Demand for
electrical power is substantially in excess of the current capacity in Mexico,
and that country's need for clean power is especially pressing.
In May of 1995, the Company entered into a Share Transfer Agreement
with China Chang Jiang Electric Company (CCJEC) which provided for CCJEC to
transfer 40% of its shares in the Fujian Chang Ping Hydro Project Company Ltd.
to the Company in exchange for Rmb 120,720,000 (approximately $15 million).
This transfer would represent 40% ownership of Fujian by the Company. The
total consideration is payable in three trauches of 30%, 30% and 40% and the
Company may contribute 50% of its consideration in the form of New World Power
Corporation shares of common stock. In August 1995, the Company contributed
$8.4 million (the first two trauches), half in cash and half in New World Power
Corporation stock. The final trauch of cash and shares was held in escrow, the
cash included in the balance sheet as "Restricted Cash.".
Late in the fourth quarter of 1995, the Company was experiencing cash
flow problems and, at the same time, the Fujian project was experiencing delays
in construction resulting from unusual flooding of the construction area. At
the Board of Directors of CCJEC meeting held January 31, 1996, a formal plan
was adopted to complete the project in early 1998. As a result of the delay in
completion and other events, the Company has recorded a charge against the
Company's investment in China. The impairment charge, included within the grid
power production, approximately $6,400,000, was recorded in December 1995. See
Note 4 to the Consolidated Financial Statements.
Subsequently, in July 1996, the Company was entered into a modified
joint venture agreement with CCJEC, consenting to retraction of the NWPC share
contribution into the projects capitalization. As a result the common shares
previously converted to CCJEC were canceled prior to the Company's Annual
Meeting.
In January 1997, the Company was advised of the Board resolution of
the Fujian Chang Ping Hydro Project Company Ltd. calling for conversion of the
Company's project entity equity holding into project company debt. The Company
is contesting such proposal while attempting to arrive at a mutually beneficial
business solution.
35
<PAGE> 39
Notwithstanding, as of December 31, 1996 the remaining investment of $3.5
million was written down to zero on the Company's books.
LIQUIDITY AND CAPITAL RESOURCES
In December 1995, The New World Power Company Ltd. sold 0% Senior
Secured Note due March 31, 1996 in the original amount of $550,000 to Sundial
International Fund LTD., a significant stockholder in the Company. The
proceeds of the Note were used as working capital. Subsequent to December 31,
1995, the due date of the Note was extended and the Note was exchanged for a
new Note due on or before December 1, 1996.
On December 1, 1995, in accordance with the terms of Series B
Preferred, the Company transferred and endorsed to Sundial International Fund
Ltd. a First Mortgage Note collateralized by the property of Wolverine Power
Company in the principal amount of $3,615,370 along with the Mortgage and
Security Agreements in exchange for its Class B Preferred Stock. The Note is
payable together with interest at the LIBOR+2% points in full on December 31,
1997. Principal and interest are due in seven quarterly installments of
principal (each equal to five percent of the principal balance). The Note was
restructured subsequent to December 31, 1995 and is now due in four payments
due December 1, 1996, March 1, 1997, June 1, 1997 and July 31, 1997.
On August 15, 1995, the Company entered into an agreement to issue
$15,750,000 of its 8% Convertible Subordinated Notes due July 31, 2000 and
warrants to purchase up to 787,500 shares of its common stock pursuant to the
terms of the Note and Warrant Purchase Agreement. The notes are payable
semi-annually on January 31 and July 31 of each year commencing on January 31,
1996. The proceeds of the notes were used as follows: $6,500,000 for a 24%
interest in the Fujian Chang Ping Hydro Power Company, Ltd. (of which
$3,300,000 was held in escrow and later (1996) used for working capital),
$2,200,000 for loan repayment to Sundial International Fund Ltd., $1,000,000 to
repay loan to stockholder, $397,490 to pay construction costs in Costa Rica,
$128,665 for legal fees and $5,523,845 for general working capital.
In February 1995, the Company completed the sale of 1,500,000 units of
common stock and 3,000,000 common stock purchase warrants and received net
proceeds of $8,259,279.
In 1995 and 1994, the Company completed project financings for the
Dyffryn Brodyn, Caton Moor and Four Burrows wind farms in the United Kingdom.
The net proceeds from these loans was $3,440,221 in 1995 and $6,150,450 in 1994
which was used to complete the construction of those wind farms. The loan
agreements for these loans require repayment over a four year period and
contain various covenants restricting the use of project revenue during this
period. This revenue must be applied first to fund a reserve account in an
amount equal to debt service payable during the next six months. Amounts
available after the payment of debt service and normal operating expenses of
the respective wind farms and other costs, provided in the loan agreement are
available for semi-annual distributions to the Company, subject to certain
restrictions.
During 1996, the Company restructured its debt agreements with two
lenders that restrict upstreaming of available amount to the parent Company.
36
<PAGE> 40
Throughout 1996 and into early 1997, management continues to operate
under constrained liquidity and operating cash flow. As of April 15, 1997 the
Company has completed the sales of Photocomm and Solartec interests, two UK
windfarms and the Irish windfarm. Proceeds from asset sales of approximately
$19 million were used to reduce the Company's obligations to Fleming and
Sundial debt holders and to pay the expenses associated with the sale. As of
April 16, 1997 approximately $4.5 million of debt obligation remains in favor
of Fleming while the Sundial debt holders have been paid in full.
In 1996, the Company made its interest payments, due January 31, 1996
and July 31, 1996, on its Secured Subordinated Notes in the form of additional
notes and warrants rather that cash as permitted under the restructured loan
agreements. Those interest notes as well as the interest payment due January
31, 1997 were paid by the Company from proceeds of asset sales.
During 1996, the Company embarked upon a new business plan that required, among
other things, the sale of many of the Company's assets to repay its principal
lenders. In 1996, the Company entered into an agreement to sell its interest
in the 16 MW hydroelectric facility in Costa Rica. That sale is expected to
close in early 1997. In addition, the Company closed on the sale of its
investments in Los Vaqueros, Solartec, New World Power do Brazil and Photocomm
during 1996 for gross proceeds of approximately $12.6 million. All proceeds
were paid to the secured lenders.
In early 1997, the Company closed on the sale of two of its windfarms
in the United Kingdom and the sale of its investments in the windfarm in
Ireland. Proceeds form the sale of approximately $6.6 million were repaid to
the principal secured lenders. With the sales completed in Ireland and the
United Kingdom, two of the Company's three secured lenders have been repaid in
full.
The Company received net proceeds of $27,198,146 in 1994 from the sale
of common stock and common stock purchase warrants and options, and received an
additional $5,880,400 during the three-month transition period following the
end of the Company's prior fiscal year on September 30, 1993. In December
1994, the Company received net proceeds of $2,037,200 from the sale by its
English subsidiary of a $2.2 million exchangeable guaranteed secured promissory
note.
At December 31, 1995, the Company had a working capital deficit of
$16,762,000. The deficit in working capital is the result of inclusion of
certain debt obligations on which the Company defaulted subsequent to December
31, 1995 and for which the Company's restructured debt agreements require
certain levels of assets sales to be completed by certain dates. Uncertainties
exist as to whether the aforementioned provisions can be met. Net working
capital at December 31, 1994, was $2,535,034, giving a current ratio of 1.20.
As of September 30, 1993, net working capital was $3,386,343 yielding a current
ratio of 1.48.
During 1995, net cash flows used in operating activities was
$4,794,191 compared to net cash flows used in operating activities of
$2,940,379 during 1994.
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<PAGE> 41
In 1995 and 1994, $16,679,309 and $31,971,650 was used in investing
activities, principally for property plant and equipment, and the acquisition
of the interest in Solartec and the additional stock in Photocomm. These
amounts were significant increases over the previous years.
In 1995, $18,027,183 was provided by financing activities primarily
from the net proceeds from the issuance of common stock and the net increase in
long-term debt. In 1994, $35,726,352 was provided by financing activities. In
addition to the proceeds from the equity offerings, the Company received net
proceeds of $6,150,450 in 1994 from project financings of its two United
Kingdom wind farms. Lesser amounts were provided in the two previous fiscal
years.
The data for 1995 is affected by the consolidation of Solartec and
1994 is affected by the consolidation of Photocomm and Solartec, which
significantly increased inventory, accounts receivable and accounts payable
over 1993 financial information. Entec, which is 50% owned by the Company is
reducing the size of its rural electrification business and focusing on project
development, and the production services group is moving to a support role for
the Company's project development. Losses experienced by Entec exceeded
management's expectations, and the Company reduced its project development
efforts at Entec during 1995. Entec continues to experience significant
financial hardship, which results in concerns as to its ability to continue as
a going concern. As the Company has no ability to continue to fund the
operating losses of Entec, management wrote-off its remaining investment in,
and advances to, Entec as of December 31, 1995.
The Company expects to need financing for the construction of wind
farm and hydroelectric facilities in 1996, which will require project equity
and debt financing. The Company plans to raise substantially all of the
financing for these projects from external sources, through equity syndications
and non-recourse debt financing based at the operating subsidiary level. There
can be no assurance, however, that the Company will succeed in obtaining such
financing. If the Company's operating subsidiaries do not have access to
capital markets on a substantially non-recourse basis, the Company itself may
have to make larger equity investments in or provide more financial support for
its projects, however, there is uncertainty as to the ability of the Company to
make such investments, if needed. If the Company was unable to finance a
project on a non-recourse basis, its ability to obtain other types of debt
financing may be adversely affected by the Company's history of operating
losses. If adequate financing were not available it would be likely to
adversely affect the future of the Company.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Report of Independent Accountants, consolidated financial
statements and financial statement schedules that are listed in the Index to
Consolidated Financial Statements and Financial Statements Schedule on page F-1
will be filed by the Company upon completion of the audit.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants
required to be reported herein, except as set forth below:
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During the Company's two most recent fiscal years and in the fiscal
period subsequent to the Company's most recent fiscal year end, there were no
"reportable events" as defined in subparagraph (a)(1)(v) of Item 304 of
Regulation S-K.
During the Company's 1993 and 1994 fiscal years and through October
30, 1995, the Company has not consulted with Price Waterhouse on items which
(1) were or should have been subject to SAS 50 or (2) concerned the subject
matter of a disagreement or reportable event with the former auditors, as
described in Regulation S-K, Item 304(a)(2). In September 1996, Price
Waterhouse resigned as the Company's auditors. No disagreements with them
caused their resignation.
In March 1997, the Company's Board of Directors authorized a
resolution appointing Lazar, Levine & Company as the auditors for the year
ended December 31, 1996. During the two most recent fiscal years and through
March 1997, the Company has not consulted with Lazar, Levine & Company on items
which (1) were or should have been subject to SAS 50 or (2) concerned the
subject matter of a disagreement or reportable event with the former auditors,
as described in Regulation S-K, Item 304(a)(2).
40
<PAGE> 43
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
DIRECTORS
The following sets forth certain information with respect to the
Directors of the Company:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION
FOR THE PAST FIVE YEARS FIRST YEAR BECAME
NAME AND CURRENT PUBLIC DIRECTORSHIPS AGE A DIRECTOR
- ---- -------------------------------- --- -----------------
<S> <C> <C> <C>
Gerald R. Cummins DIRECTOR AND CHAIRMAN OF THE BOARD. Mr. Cummins 70 1990
has been a director since October 1990 and a
private investor and independent business
consultant for more than five years. He is a
political strategist who has served as chairman of
The New York State Thruway Authority. He was the
campaign manager for the Honorable Hugh L. Carey,
the former Governor of New York. Mr. Cummins is
also a director of Photocomm. Mr. Cummins
received a bachelor's degree from Manhattan
College.
Nazir Memon, M.D. DIRECTOR. Dr. Memon has been a practicing 51 1992
physician for more than the last five years. He
is a pulmonologist on the medical staff of Shore
Memorial Hospital in Somers Point, New Jersey;
Bettry Bacharach Rehabilitation Hospital, Popmona,
New Jersey; and Kessler Memorial Hospital,
Hammonton, New Jersey. Dr. Memon is also the
President of the Atlantic Pulmonary Critical Care
Association. Dr. Memon is a graduate of Liaquat
Medical College in Pakistan and the Government
Science College, Pakistan.
Herbert L. Oakes, Jr. DIRECTOR. Mr. Oakes has served as Managing 50 1993
Director of Oakes, Fitzwilliams & Co. Limited, a
member of the Securities and Future Authority
Limited and the London Stock Exchange, since 1988.
Mr. Oakes is also President of H.L. Oakes & Co.,
Inc., a corporate advisor and dealer in securities
which he founded in 1982. He also serves on the
board of directors of Shared Technologies, Inc.
and Harcor Energy, Inc. Mr. Oakes received a B.A.
in Economics from the University of the South.
</TABLE>
41
<PAGE> 44
<TABLE>
<S> <C> <C> <C>
Gerard Prevost DIRECTOR AND VICE CHAIRMAN OF THE BOARD. Mr. 57 1996
Prevost is a Managing Partner of Dominion World
Power, the for energy projects Independent Joint
Venture between the Company and Dominion Bridge
Power, Inc., since August 1996. During the
previous 33 years Mr. Prevost had a distinguished
career with the Hydro Quebec, where he served as
the president of Nouveler from 1992 to 1996, an
investment arm of the utility and vice president
of operations and equipment division of the utility.
Mr. Prevost's career with Hydro Quebec was inter-
rupted for four years starting in 1988 when he
served as deputy minister of energy for the Province
of Quebec. Mr. Prevost received a MBA from Laval
University in Quebec City.
Lucien Ruby DIRECTOR. Since 1985, Mr. Ruby has been the 53 1990
Managing General Partner of Quest Ventures, a San
Francisco-based venture capital firm. Currently,
Mr. Ruby serves on the board of directors of
various privately held corporations including
RESNA Industries, an environmental services
company, and Aqua Air Environmental, Inc., a
manufacturer of pollution control systems. Mr.
Ruby received a B.S.C.E. from Duke University and
an M.B.A. from Harvard University.
</TABLE>
EXECUTIVE OFFICERS
The following table contains the name, position and age of the
executive officer of the Company who is not director.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION FOR THE PAST FIVE YEARS
NAME AND CURRENT PUBLIC DIRECTORSHIPS AGE
- ---- -------------------------------------------- ---
<S> <C> <C>
Vitold Jordan Interim Chief Executive Officer. 42
Since January 1995, Mr. Jordan is a president of Dominion Bridge
Technology, Inc. and as Vice President of the parent, Dominion
Bridge Corp. Prior to 1995, Mr. Jordan served as a Managing
Partner of the Professional Services at AT&T GIS Canada and prior
to December 1993 he was an independent business consultant. Mr.
Jordan is a graduate of Laval University and a chartered
accountant.
Frederic A. Mayer Acting Chief Financial Officer 38
Since January 1995, Mr. Mayer is an Independent Business
Consultant. From 1993 to 1995, Mr. Mayer was president of O'Brien
Energy Services Company and from 1989 to 1993 was the Chief
Financial Officer for O'Brien Energy Services Company and prior to
that was a manager of Coopers and Lybrand. Mr. Mayer graduated
from Pennsylvania State University and is a certified public
accountant.
</TABLE>
42
<PAGE> 45
ITEM 11. EXECUTIVE COMPENSATION
Summary Compensation Table. The following table sets forth, for the
fiscal years indicated, all compensation awarded to, earned by or paid to (I)
the former chief executive officer ("CEO") of the Company (Mr. John D. Kuhns,
the Chairman of the Board of the Company) and (ii) the four most highly
compensated executive officers of the Company other than the CEO whose salary
and bonus exceeded $100,000 with respect to the fiscal year ended December 31,
1996 and who were employed by the Company during the fiscal year ended December
31, 1996 (together with the CEO, the "Named Executive Officers").
Summary Compensation Table
<TABLE>
<CAPTION>
Annual Compensation
--------------------------------------------------------
Name and Other Annual
Principal Position Year Salary Bonus Compensation
------------------ ---- ------ ----- ------------
<S> <C> <C> <C> <C>
John D. Kuhns 1996 To be included upon completion of audit.
Chairman of the Board(3) 1995 $476,000(2) $0 $0
1994 480,000(2) 0 0
Vitold Jordan
Interim Chief Executive Officer 1996
<CAPTION>
Long Term
Compensation
------------
Name and Securities Underlying All other
Principal Position Options (#)(1) Compensation
------------------ -------------- ------------
<S> <C> <C>
John D. Kuhns
Chairman of the Board(3) 1,000,000 $0
0 0
0 0
</TABLE>
(1) The options listed expired unexercised upon the named individual's
termination of employment with the Company.
(2) All of Mr. John Kuhns' compensation from the Company was paid in the
form of management fees to a company controlled by Mr. John Kuhns.
This arrangement was established prior to the Company's first
underwritten public offering. Effective August 1, 1995, the Company
terminated the related management agreements and entered into an
employment agreement with Mr. Kuhns. See "John D. Kuhns Employment
Agreement."
(3) Mr. John Kuhns resigned as Chief Executive Officer of the Company on
April 11, 1996.
43
<PAGE> 46
Option Grants Table. The following table sets forth certain
information regarding stock option grants made to each of the Named Executive
Officers during the fiscal year ended December 31, 1996.
<TABLE>
<CAPTION>
Option Grants in Last Fiscal Year
---------------------------------
Potential
Individual Grants Realizable Value at
-------------------------------------------------------- Assumed Annual
Number of % of Total Rates of Stock
Securities Options Price Appreciation
Underlying Granted to for Option Term
Options Employees Exercise Expiration ---------------
Name Granted (#) Fiscal Year Price ($/sh) Date 5%($) 10%($)
---- ----------- ----------- ------------ ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
NONE
</TABLE>
Aggregated Option Exercises in Last Fiscal Year
and Fiscal Year-End Option Values
The following table sets forth certain information concerning
unexercised stock options held by the Named Executive Officers as of December
31, 1995.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Shares Underlying Unexercised In-the Money Options
Acquired Options at 1996 FY-End (#) at 1996 FY-End ($)(1)
On Value -------------------------- ---------------------
Name Exercise(#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
John D. Kuhns -- -- 308,519 981,481 -- --
</TABLE>
(1) On December 29, 1996, the last reported sales price of the Company's
Common Stock as reported on the NASDAQ Small Cap was $.31
44
<PAGE> 47
Long-Term Incentive and Pension Plans.
In April 1993, the Company adopted the 1993 Stock Incentive Plan (the
"1993 Plan") which was approved by the Company's stockholders in May 1993. The
1993 Plan replaced the Company's previous stock option plan, the 1989 Stock
Incentive Plan (the "1989 Plan"), except as to options outstanding under the
1989 Plan. Under the 1993 Plan, the Company may reward to employees, directors
and consultants of the Company and its subsidiaries incentive and non-
qualified stock options, stock appreciation rights, restricted stock grants,
performance awards and any combination of any or all of such awards. The Board
of Directors has delegated its powers under the 1993 Plan to the Company's
Compensation Committee. Awards may not be granted under the 1993 Plan after
December 31, 2003. An aggregate of 500,000 shares of Common Stock may be issued
under the 1993 Plan, except that any shares as to which awards granted under
the 1989 Plan may lapse, expire or be canceled be available for issuance under
the 1993 Plan. If any awards expire or terminate for any reason, the shares
subject to such awards are again available for future awards under the 1993
Plan. Awards are not transferable except by will or the laws of descent and
distribution. Whether an award may be exercised after termination of
employment is determined by such Committee, subject to certain limitations.
Employment Agreements.
Mr. John D. Kuhns was employed as Chief Executive Officer of the
Company and Chairman of the Board prior to April 11, 1996 and until October
1996 served only as Chairman of the Board.
Mr. Kuhns was compensated for his services as Chairman pursuant to an
employment agreement dated as of August 1, 1995 which has been amended on two
occasions. The initial Employment Agreement hired Mr. Kuhns to serve as Chief
Executive Officer for a five year term continuing through July 31, 2000,
subject to renewal unless terminated by either party. The Employment Agreement
provided Mr. Kuhns customary benefits and expense reimbursements and contained
customary confidentiality and noncompetition covenants. The initial Employment
Agreement further provided that as a "severance benefit" Mr. Kuhns might
receive, upon certain conditions, three years base salary and that, upon
termination, Mr. Kuhns had an option to purchase, and the Company had an option
to sell to him, the building and improvements that comprise its executive
offices in Lime Rock, Connecticut (the "Farmhouse Property") at a purchase
price equal to the Company's then depreciated cost basis. Effective March 1,
1996, Mr. Kuhns entered into Amendment No. 1 to the Employment Agreement
("Amendment No. 1") which provided that until such time as the Company paid in
full its 8% Convertible Subordinated Notes, his base salary would be at the
annual rate of $220,000 and that the Company would use its best efforts to sell
shares of common stock to provide additional compensation, not to exceed
$12,000 per month. Amendment No. 1 further provided that Mr. Kuhns would
receive a bonus based upon a percentage of value received from the Company from
the sale of a certain of its assets, provided that his annual compensation from
all sources shall not exceed $480,000. In this amendment Mr. Kuhns also agreed
to accept in lieu of any severance benefit or other unpaid compensation due
upon termination, the Farmhouse Property. The amendment further provided that
the Company shall set aside 3,250 shares of common stock per month for Mr.
Kuhns, for
45
<PAGE> 48
twelve months, commencing March 1, 1996, for delivery on January 31, 1997, or,
for shares accruing after that date, on January 31, 1998. Effective March 1,
1996 Mr. Kuhns entered into Amendment No. 2 to his Employment Agreement with
the Company ("Amendment No. 2"), which superseded and replaced Amendment No. 1.
Pursuant to Amendment No. 2, Mr. Kuhns resigned as Chief Executive Officer and
agreed to serve as Chairman of the Company through October 1996. Mr. Kuhns'
base compensation under Amendment No. 2 is at the rate of $18,000 per month
with additional compensation at $12,000 per month and a bonus derived from the
sale of certain assets. The other compensation and severance benefits remain
substantially the same as in Amendment No. 1. Pursuant to Mr. Kuhn's decision
to not to seek reelection at the Company's Annual Meeting has employment
agreement was terminated as of October 21, 1996 and as a result the Farmhouse
property was transferred to Mr. Kuhns as the termination benefit. Accordingly
the Company wrote off the net book value of the leasehold improvements and
furniture and fixtures of approximately $1.5 million during the year ended
December 31, 1996.
Board of Directors Report on Executive Compensation.
This report, prepared by the Company's Board of Directors, addresses
the Company's compensation policies with respect to its executive officers for
the fiscal year ended December 31, 1996.
Salary. The Compensation Committee is responsible for determining the
salaries of all executive officers of the Company. Salaries paid to executive
officers reflect their responsibilities, diligence and determination in working
toward the achievement of established corporate objectives. Management
compensation guidelines were established by the Compensation Committee in
consultation with independent advisors with experience in the field.
Stock Incentives. The Compensation Committee has full power,
discretion and authority in administering the Company's 1993 Stock Incentive
Plan. The Committee believes that stock ownership by employees, including
officers, of the Company, is important as a means of rewarding outstanding
performance and promoting the achievement of long-term corporate goals by
giving those persons a greater proprietary interest in the Company. No options
were granted to officers or employees of the Company in 1996.
Comparative Stock Performance Graph
The graph shown below sets forth the cumulative stockholder return of
the Company's Common Stock from October 23, 1992, through the last trading day
of 1996. Although the Company's Common Stock was first registered under
Section 12 of the Securities Exchange Act of 1934, as amended, on January 25,
1990, there was no established public trading market for the Common Stock prior
to October 23, 1992. This graph assumes an investment of $100 on October 23,
1992, in (i) the Company's Common Stock, (ii) the Center for Research in
Security Prices ("CRSP") Total Return Index for the NASDAQ Stock Market (U.S.)
and (iii) a composite peer group composed of the following companies in the
independent power business: AES Corporation, Destec Energy, Inc., Magma Power
Company (acquired by California Energy Company March 20, 1995), O'Brien
Environmental Energy Inc., OESI Power Corporation, Ogden Projects, Inc.
(acquired by Ogden Corp. January 16, 1995), and Thermo Power Corporation
(collectively, the "Peer Group"). The graph assumes dividends, if any, were
reinvested. The comparisons in this graph are required by the Securities and
Exchange
46
<PAGE> 49
Commission and therefore are not intended to forecast or be indicative of
possible future performance of the Company's Common Stock.
47
<PAGE> 50
TOTAL SHAREHOLDER RETURNS - DIVIDENDS REINVESTED
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information concerning ownership of the
Common Stock of the Company outstanding as at March 31, 1997, by (i) each
person known by the Company to be the beneficial owner of more than five
percent of the Common Stock, (ii) each director, (iii) each of the Named
Executive Officers and (iv) by all directors and executive officers of the
Company as a group. Unless otherwise indicated, each stockholder has sole
voting power and sole dispositive power with respect to the indicated shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS PERCENTAGE
OF BENEFICIAL OWNER(1) SHARES BENEFICIALLY OWNED** OF CLASS(2)
---------------------- --------------------------- -----------
<S> <C> <C>
Sundial International Fund Limited (4) 393,985 15.4
c/o Euro Canadian Trust Company Limited
P.O. Box 393750, Shirley Street
Nassau, Bahamas
Gartmore Investment Limited(5) 269,592 11.6
Gartmore House
P.O. Box 65, 16-18 Monument Street
London EC5R 8QQ, England
Westinghouse Electric Corporation(6) 158,159 6.8
11 Stanwix Street
Pittsburgh, Pennsylvania 15222
Herbert L. Oakes, Jr.(7) 280,403 10.8
John D. Kuhns(8) 188,482 7.9
Robert W. MacDonald(9) 60,599 2.5
Gerald R. Cummins(10) 1,997 *
Nazir Memon, M.D.(11) 2,673 *
Lucien Ruby(12) 64,683 2.8
Vitold Jordan(13) 0 *
Frederic A. Mayer(14) 0 *
Dominion Bridge Corporation(15) 2,046,441 47.0
All Directors and Executive Officers as a Group (10 602,161 22.0
persons)(16)
</TABLE>
* less than one percent.
**Adjusted to reflect the 1 for 5 reverse stock split
48
<PAGE> 51
(1) Each director and executive officer has sole voting power and sole
investment power with respect to all shares beneficially owned by him,
unless otherwise indicated.
(2) Based upon 2,321,367 shares of Common Stock outstanding on April 11,
1997.
(3) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
Securities and Exchange Commission ("SEC") on February 6, 1996 by
Foreign & Colonial Management Limited ("F&C"). Includes 272,000
shares issuable upon exercise of currently exercisable warrants.
(4) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
SEC on February 21, 1995 by Sundial International Fund Limited
("Sundial"). Includes 989,918 shares issuable upon exercise of
currently exercisable warrants and 583,000 shares plus 200,000
warrants issuable upon the exchange of a promissory note issued by a
subsidiary of the Company. Does not give effect to the Restructuring
Agreement discussed under Item 13 "Certain Relationships and Related
Transactions."
(5) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
SEC by Gartmore Investment Limited ("GIL") on November 14, 1994.
(6) Based upon a Statement on Schedule 13D Amendment No. 1 filed with the
SEC on September 14, 1994 by Westinghouse Electric Corp.
("Westinghouse").
(7) Consists of: (i) 7,197 shares issuable upon exercise of currently
exercisable options; (ii) 17,500 shares held in and 41,847 shares
issuable upon exercise of currently exercisable options held in Oakes,
Fitzwilliams & Co. Executive Death Benefit & Retirement Scheme No.2
(HLO) Mr. Oakes' personal pension fund ("OFHLO"); (iii) 20,000 shares
owned by and 183,316 shares issuable upon exercise of currently
exercisable options held by H.L. Oakes & Co., Inc. ("HLO"); (iv)
14,000 shares owned by and 2,000 shares issuable upon exercise of
currently exercisable options held by Oakes, Fitzwilliams & Co.
Limited ("OFL"); (v) 17,500 shares owned by and 1,046,953 shares
issuable upon exercise of currently exercisable options held by Oakes,
Fitzwilliams & Co. S.A. ("OFLSA"); and (vi) 7,100 shares owned by and
44,600 shares issuable upon exercise of currently exercisable options
held by Purbrook Corporation ("Purbrook"). Mr. Oakes is the Managing
Director of, and owns a controlling interest in, OFL and OFLSA. He is
also President of HLO, a company owned 100% by his wife. Purbrook is
owned by HLO. Mr. Oakes disclaims any beneficial ownership in the
shares described in (ii) through (vi).
(8) Includes 284,400 shares issuable upon exercise of currently
exercisable options. Also includes 178,845 shares owned by third
parties for which he holds voting power pursuant to irrevocable
proxies and certain rights of first refusal, purchase options and
come-along-rights of which shares Mr. John Kuhns disclaims beneficial
ownership.
(9) Consists of shares issuable upon exercise of currently exercisable
options. Does not include an option to purchase 61,611 shares of
Common Stock granted by Mr. John Kuhns to Mr. MacDonald pursuant to an
agreement between the two parties which shares are included in the
shares beneficially owned by Mr. John Kuhns.
(10) Includes 9,864 shares issuable upon exercise of currently exercisable
options.
(11) Consists of shares issuable upon exercise of currently exercisable
options and warrants.
(12) Includes 3,844 shares issuable upon exercise of currently exercisable
options. Also includes 189,220 shares of Common Stock owned by Quest
Ventures II and 129,332 shares of Common Stock owned by Quest Ventures
International, two investment partnerships of which Mr. Ruby is a
general partner, all of shares which Mr. Ruby disclaims beneficial
ownership.
(13) Mr. Jordan was appointed Interim Chief Executive Officer on August 5,
1996.
(14) Mr. Mayer was appointed Acting Chief Financial Officer on September 1,
1996.
(15) Reflects 2,000,000 shares of Common Stock issuable upon conversion of
the Initial Funding of the Joint Venture Agreement and the subsequent
exercise of the warrants.
(16) Includes a total of 2,041,507 shares issuable upon the exercise of
currently exercisable warrants.
49
<PAGE> 52
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In December 1995, The New World Power Company Ltd. sold 0% Senior
Secured Note due March 31, 1996 in the original amount of $550,000 to Sundial
International Fund LTD., a significant stockholder in the Company. The
proceeds of the Note were used as working capital. The note was reimbursed in
full in February 11, 1997.
On December 1, 1995, the Company transferred and endorsed to Sundial
International Fund Ltd. a First Mortgage Note in the principal amount of
$3,615,370 along with the Mortgage and Security Agreements in exchange for its
Class B Preferred Stock. The Note was payable together with interest at the
LIBOR+4% points in full on December 1, 1996. Principal and interest are due in
seven quarterly installments of principal (each equal to five percent of the
principal balance). The Note was restructured subsequent to December 31, 1995
and is now due in four payments due December 1, 1996, March 1, 1997, June 1,
1997 and July 31, 1997.
In June 1994, the Company entered into a 15-year business alliance
agreement with Westinghouse Electric Corporation ("Westinghouse"), a beneficial
owner of more than five percent of the Company's Common Stock, jointly to
develop, market, construct and own renewable power projects, such as
utility-scale wind farms, off-grid generating systems and wireless photovoltaic
systems. Under the agreement, the Company and Westinghouse will have the
option to participate with the Company in renewable power projects. In
consideration of Westinghouse's obligations under the agreement, the Company
agreed to issue to Westinghouse up to 459,770 shares of the Company's Common
Stock, in installments, over a four-year period (of which shares were to be but
have not been issued) and an Incentive Warrant which will enable Westinghouse
to purchase up to 819,778 shares of the Company's Common Stock, based upon
certain operating revenue targets for the Company. The Company and
Westinghouse are currently discussing the mutual cessation of the business
relationship.
In October 1994, the Company and Robert R. Kauffman, then a director
of the Company, entered into a short-term voting agreement pursuant to which
Mr. Kauffman agreed to vote certain shares of Photocomm preferred stock owned
by him in the same manner as the Company votes its shares of Photocomm common
stock. The voting rights of Photocomm preferred stock subject to the agreement
were equivalent to the voting rights of 503,052 shares of Photocomm common
stock and represented approximately 3.8% of the total voting power of
Photocomm's capital stock. The voting agreement terminated by its terms in
1995.
In February 1995, the Company issued a warrant to purchase 150,000
units of the Company to Oakes, Fitzwilliams & Co. S.A. ("OFLSA"), a company
controlled by Herbert L. Oakes, Jr., in its capacity as the placement agent in
connection with the placement of 1,500,000 units in an offering to offshore
investors. Each unit consists of one share of Common Stock and two warrants,
each to purchase one share of Common Stock at an initial exercise price of
$7.50 per share. The warrant entitles OFLSA to purchase the units at $7.20 per
unit and expires on January 14, 2000. The Company also paid to OFLSA a fee of
$720,000 in connection with the offering which was subsequently used by OFLSA
to purchase an additional 120,000 units from the Company.
50
<PAGE> 53
In connection with this offering, certain entities affiliated with F&C
purchased an aggregate of 325,000 units at $6.00 per unit plus the surrender of
a prior warrant to purchase one share of Common Stock at an initial exercise
price of $15.00 per share. In addition, certain entities affiliated with GIL
purchased an aggregate of 255,000 units of $6.00 per unit plus the surrender of
a prior warrant to purchase one share of Common Stock at an initial exercise
price of $15.00 per share.
The directors of the Company entered into an agreement to vote the
shares issued to them by the Company for services rendered to the Company,
including shares purchased under options granted under the 1993 Stock Incentive
Plan. The agreement provides that the shares will be voted in the manner that
John D. Kuhns directs and have granted Mr. Kuhns an irrevocable proxy in
connection with such voting agreement. In addition, the agreement grants to
the Company a right of first refusal and a purchase option prior to any
transfer of such shares and upon termination of employment or service on the
Board.
As previously discussed under Liquidity and Capital Resources, the
Company entered into an agreement (the "Fleming Agreement") to issue
$15,750,000 of its 8% Convertible Subordinated Notes due July 31, 2000 and
warrants to purchase up to 787,500 shares of its common stock pursuant to the
terms of the Note and Warrant Purchase Agreement. In connection therewith, the
Company granted a security interest in all the shares of common stock (both
owned beneficially or of record) of New World China Company Limited and
Photocomm. The Company also granted certain demand and registration rights.
Approximately $2,622,000 of the 8% Convertible Subordinated Notes were issued
to OFLSA.
On December 28, 1995, the Company repaid its obligations to Sundial
International under its 0% Exchangeable Senior Secured Guaranteed Notes due
December 28, 1995 in the original principal amount of $2.2 million. Upon
repayment of this note, Sundial International released from escrow 2.9 million
shares of pledged Photocomm common stock which shares were then pledged and
delivered to Robert Fleming & Co., Ltd. as agent for the Fleming Purchasers.
On May 31, 1996, the Company entered into a Forbearance, Warrant
Exchange, Note Conversion and Amendatory Agreement (the "Sundial Amendment
Agreement"), dated as of March 1, 1996, among the Sundial International Fund
Limited ("Sundial"), the Company, The New World Power Company Limited ("NWP
Ltd."), and Wolverine Power Corporation ("Wolverine") regarding the Company's
0% Senior Secured Note in the amount of $550,000, dated December 20, 1995 and
due March 31, 1996 issued by NWP Ltd. to Sundial (the "Senior Secured Note")
and the Wolverine Power Corporation First Mortgage Note in the outstanding
principal amount as of March 1, 1996 of $3,434,692, dated December 31, 1992,
issued by Wolverine to the Company and assigned by the Company to Sundial (the
"Wolverine Note" and together with the Senior Secured Note, the "Notes").
Pursuant to the terms of the Sundial Amendment Agreement, the maturity of the
Senior Secured Note was extended to December 1, 1996 and the maturities of
certain installments of the Wolverine Note were extended. Also pursuant to the
Sundial Amendment Agreement certain warrants of which Sundial is the owner or
the agent for the owners have been re-priced from exercise prices ranging from
$37.50 to
51
<PAGE> 54
$75.00 per share to an exercise of $8.75 per share. Also pursuant to the
Sundial Amendment Agreement, Sundial has been given an option to exchange the
Notes for certain Exchange Notes to be issued by the Company. The company is
required also to effect certain asset sales and offer to redeem the Notes with
the proceeds from such sales. Sundial also received additional security from
the Company and the right to nominate one member of the Board of Directors in
connection with the Sundial Amendment Agreement.
The Company also entered into Amendment No. 3 to Note and Warrant
Purchase Agreement, and Modification of Letter Agreement, dated as of March 1,
1996 by and between NWP Corp. and each of the Purchasers thereto whereby the
Company and the Purchasers agreed to modify certain of the terms of the Note
and Warrant Purchase Agreement, dated as August 15, 1995, amended by Amendment
No. 1 to Note and Warrant Purchase Agreement dated as of October 13, 1995 by
and between the Company and the Purchasers and by Amendment No. 2 to Note and
Warrant Purchase Agreement ("Amendment No. 2") dated as February 29, 1996 by
and between the Company and the Purchasers.
On June 11, 1996, the Company and Oakes, Fitzwilliams & Co. S.A.
("OFLSA") executed a financial advisory services letter agreement ("Financial
Advisory Services Agreement") pursuant to which the Company agreed that for (1)
services rendered during 1995 and 1996 relating to the restructuring of the
Company's management and capitalization ("Restructuring Services") and (2)
services to be rendered in connection with the anticipated negotiations with
Dominion Bridge Corporation ("Dominion") or other entity ("Financial Advisory
Services") that: (a) OFLSA is be issued 240,000 shares of the Company's Common
Stock (in lieu of $125,000 in cash), (b) OFLSA would be paid its expenses
already incurred, some of which have been submitted to the Company but not paid,
in the approximate amount of $85,000 and (c) the warrants to purchase shares of
Common Stock of the Company received in the past of OFLSA as compensation would
be exchanged for New Warrants, and (d) at the closing of a transaction with
Dominion, the Company will pay to OFLSA a cash fee in an amount equal to 2.5% of
the value of the total consideration of the Transaction and reimburse OFLSA its
reasonable out-of-pocket expenses not incurred in the normal course of business.
Effective as of February 29, 1996, the Company entered into Amendment
No. Two (the "Amendment") to the Fleming Agreement. Pursuant to the terms of
the Amendment, the maturity of the 8% Notes was accelerated to July 31, 1997,
with interest payments permitted in pay-in-kind securities prior to the
interest payment due January 31, 1997. Also pursuant to the Amendment the
warrants originally issued under the Fleming Agreement were repriced from an
exercise price of $7.50 per share to an exercise of $1.75 per share. Also
pursuant to the Amendment, the Company is required to effect certain asset
sales and offer to redeem the 8% Notes with the proceeds from such sales. The
Noteholders also received additional security from the Company in connection
with the Amendment in exchange for allowing the Company to access the $3.3
million held in escrow as collateral, subject to certain restrictions.
52
<PAGE> 55
George P. Petrenko is an employee of Glass & Associates, Inc.
("Glass"). The Company has entered into a Consulting Agreement with Glass
dated February 7, 1996, pursuant to which Glass provides management
consultation services at an hourly rate for George Petrenko and one or more
additional Glass employees. The Consulting Agreement was amended effective
April 15, 1996 to provided for the services of Mr. Petrenko and another Glass
employee at the rate of $10,000 a week, plus out-of-pocket expenses. Under the
revised agreement, Glass may receive a bonus based upon the percentage of the
net proceeds that the Company receives from the sale of certain assets. The
Company has paid Glass the sum of $310,086 through August 2, 1996. This
Agreement was terminated on August 2, 1996. In addition, Glass initiated an
action against the Company alleging the Company failed to make certain bonus
payments due to Glass for asset sales. The Company and Glass reached a
settlement in which Glass would receive $17,500 in cash and 25,000 shares of
the Company's stock in exchange for full and complete mutual releases.
Effective January 1, 1996, the Company entered into a Consulting
Agreement with Condor Management Associates, Inc. ("Condor"), a corporation
owned by Dwight Kuhns, the brother of John D. Kuhns. The Consulting Agreement
provides for monthly compensation to Condor to supervise the shutdown and sale
of the Company's wind farms in California and Hawaii. The Consulting Agreement
further provides for commissions upon the sale of certain assets and upon the
favorable conclusion of negotiations with creditors of the Company's California
and Hawaii operations. Certain of these commissions may be paid in shares of
the Company's stock. The Consulting Agreement is terminable on thirty days
notice. The Company has paid Condor $113,750 through August 15, 1996. As noted
above, Dwight Kuhns has commenced litigation against the Company with respect
to an alleged breach of the agreement.
Compliance with Section 16(a) of the Securities Exchange Act of 1934
Section 16(a) of the Securities Exchange Act of 1934 and regulations
of the Securities Exchange Commission thereunder require the Company's
executive officers and directors and persons who own more than ten percent of
the Company's stock, as well as certain affiliates of such persons, to file
initial reports of ownership and changes in ownership with the Securities and
Exchange Commission and the National Association of Securities Dealers.
Executive officers, directors and persons owning more than ten percent of the
Company's stock are required by the Securities and Exchange Commission
regulations to furnish he Company with copies of all Section 16(a) forms they
file. Based solely on its review of the copies of Forms 3, 4 and 5 and
amendments thereto received by the Company and written representations that no
other reports were required for those persons, the company believes that,
during the fiscal year ended December 31, 1995, all filing requirements
applicable to its executive officers, directors and owners or more than ten
percent of the Company's stock were complied with.
53
<PAGE> 56
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) and (2) Financial Statements and Schedules
The Report of Independent Accountants and consolidated financial
statements listed in the Index to Consolidated Financial Statements and
Financial Statement Schedule will be filed by the Company as soon as they are
completed. The Report of Independent Accountants and the consolidated
Financial Statements are not being filed at this time as the auditors have not
completed their work as of the date of this filing. The Company has been
unable to complete its audit for the year ended December 31, 1996 due to
financial problems and the resignation of its previous auditors. In addition,
the Company completed two asset sales in early 1997 (the latest being April 20,
1997) which significantly effect the disclosure requirements by the Company in
its December 31, 1996 financial statements. The Company believes it is making
every effort to file these reports by April 30, 1997.
(a)(3) Exhibits
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ -----------
<S> <C>
2.1 Agreement and Plan of Merger by and among Arcadian Power Corporation, an Utah corporation, The New
World Power Corporation and Arcadian Power Corporation, a Delaware corporation, dated as of January 13,
1994. (Incorporated herein by reference to Exhibit 2.01 to the Company's Form 10-K for the year ended
September 30, 1993 (the "1993 10-K")).
2.2 Purchase Agreement, dated as of July 29, 1994, by and between The New World Power Corporation and
Westinghouse Electric Corporation (Incorporated herein by reference to Exhibit 2.1 to Form 8-K dated
August 30, 1994 (the "August 30, 1994 8-K")).
2.3 Exchange Agreement and Consent, dated as of July 29, 1994, by and between The New World Power
Corporation and Photocomm, Inc. (Incorporated herein by reference to Exhibit 2.2 to the August 30, 1994
8-K).
2.4 Stock Purchase Agreement, dated as of June 27, 1994, by and among The New World Power Corporation and
Solartec S.A., Jose Emilo Salgado, Nilda Raquel Filoso de Salgado, Fernando J. Salgado and Juan Esteban
Zellner (Incorporated herein by reference to Exhibit 2.1 to the August 30, 1994 8-K).
2.5 Amendment to Stock Purchase Agreement, dated as of July 1, 1994 (Incorporated herein by reference to
Exhibit 2.2 to the dated August 30, 1994 8-K).
2.6 Share Purchase Agreement, dated as of June 9, 1994, by and among Nordtank af 1987 A/S, The New World
Power Company Limited and The New World Power Corporation. (Incorporated herein by reference to Exhibit
2.04(a) to the Company's Form 10-K for the year ended December 31, 1994 (the "1994 10-K")).
</TABLE>
54
<PAGE> 57
<TABLE>
<S> <C>
2.7 Deed of Variation, dated as of November 3, 1994, by and among Nordtank af 1987 A/S, The New World Power
Company Limited and The New World Power Corporation. (Incorporated herein by reference to Exhibit
2.04(b) to the 1994 10-K).
3.1 Third Amended and Restated Certificate of Incorporation of The New World Power Corporation.
(Incorporated herein by reference to Exhibit 3.01 to the Company's Form 10-Q for the quarter ended June
30, 1995 (the "June 30, 1995 10-Q")).
3.2 Amended and Restated By-laws of The New World Power Corporation. (Incorporated by reference herein to
the 1994 10-K.)
4.1 Specimen certificate for Common Stock of the Company. (Incorporated herein by reference to Exhibit No.
4.01 to the Company's Form S-1, Registration Statement No. 33-49576 ("Form S-1")).
4.2 Preferred Stock and Warrant Purchase Agreement by and among The New World Power Corporation, Wolverine
Power Corporation and Sundial International Fund Limited dated as of December 31, 1992. (Incorporated
herein by reference to Exhibit 4.01 to the Company's Form 10-Q for the quarter ended March 31, 1993
(the "March 31, 1993 10-Q")).
4.3 Form of Wolverine Power Corporation Fourteen Year Variable Rate Subordinated Debenture Due 2000 and
Schedule of Debenture Holders. (Incorporated herein by reference to Exhibit No. 19.1 to the Company's
Form 10-Q for the quarter ended June 30, 1989 (the "June 30, 1989 10-Q").
4.4 Facility Agreement by and between The New World Power Company (Dyffryn Brodyn) Limited and Hambros Bank
Limited, et. al., dated October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(a) to the
1994 10-K).
4.5 Debenture granted by The New World Power Company (Dyffryn Brodyn) Limited to Hambros Bank Limited,
dated October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(b) to the 1994 10-K).
4.6 Security Coordination Agreement by and among The New World Power Company (Dyffryn Brodyn) Limited, The
New World Power Company (Caton Moor) Limited, The New World Power Company (Four Burrows) Limited, The
New World Power Company Limited and Hambros Bank Limited, et. al., dated October 14, 1994.
(Incorporated herein by reference to Exhibit 4.04(c) to the 1994 10-K).
4.7 Mortgage of Shares by and between The New World Power Company Limited and Hambros Bank Limited, dated
October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(d) to the 1994 10-K).
</TABLE>
55
<PAGE> 58
<TABLE>
<S> <C>
4.8 Inter-Creditor Deed by and among The New World Power Company (Dyffryn Brodyn) Limited, The New World
Power Corporation, The New World Power Company Limited and Hambros Bank Limited, et. al., dated October
14, 1994. (Incorporated herein by reference to Exhibit 4.04(d) to the 1994 10-K).
4.9 Cross Guarantee and Debenture by and among The New World Power Company (Dyffryn Brodyn) Limited, The
New World Power Company (Caton Moor) Limited, The New World Power Company (Four Burrows) Limited and
Hambros Bank Limited, dated October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(f) to
the 1994 10-K).
4.10 Shortfall Undertaking by and between The New World Power Corporation and The New World Power Company
(Dyffryn Brodyn) Limited, dated October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(g)
to the 1994 10-K).
4.11 Acknowledgment of Notice of Assignment re: Shortfall Undertaking by The New World Power Corporation,
dated October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(h) to the 1994 10-K).
4.12 Additional Funding Agreement by and between The New World Power Corporation and The New World Power
Company (Dyffryn Brodyn) Limited, dated October 14, 1994. (Incorporated herein by reference to Exhibit
4.04(i) to the 1994 10-K).
4.13 Acknowledgment of Notice of Assignment re: Additional Funding Agreement by The New World Power
Corporation, dated October 14, 1994. (Incorporated herein by reference to Exhibit 4.04(j) to the 1994
10-K).
4.14 Facility Agreement by and between The New World Power Company (Caton Moor) Limited and Hambros Bank
Limited, et. al., dated November 11, 1994. (Incorporated herein by reference to Exhibit 4.05(a) to the
1994 10-K).
4.15 Debenture granted by The New World Power Company (Caton Moor) Limited to Hambros Bank Limited, dated
November 11, 1994. (Incorporated herein by reference to Exhibit 4.05(b) to the 1994 10-K).
4.16 Mortgage of Shares by and between The New World Power Company Limited and Hambros Bank Limited, dated
November 11, 1994. (Incorporated herein by reference to Exhibit 4.05(c) to the 1994 10-K).
4.17 Inter-Creditor Deed by and among The New World Power Company (Caton Moor) Limited, The New World Power
Corporation, The New World Power Company Limited and Hambros Bank Limited, et. al., dated November 11,
1994. (Incorporated herein by reference to Exhibit 4.05(d) to the 1994 10-K).
</TABLE>
56
<PAGE> 59
<TABLE>
<S> <C>
4.18 Cross Guarantee and Debenture by and among The New World Power Company (Caton Moor) Limited, The New
World Power Company (Dyffryn Brodyn) Limited, The New World Power Company (Four Burrows) Limited and
Hambros Bank Limited, dated November 11, 1994. (Incorporated herein by reference to Exhibit 4.05(e) to
the 1994 10-K).
4.19 Additional Funding Agreement by and between The New World Power Corporation and The New World Power
Company (Caton Moor) Limited, dated November 11, 1994. (Incorporated herein by reference to Exhibit
4.05(f) to the 1994 10-K).
4.20 Acknowledgment of Notice of Assignment re: Additional Funding Agreement by The New World Power
Corporation, dated November 11, 1994. (Incorporated herein by reference to Exhibit 4.05(g) to the 1994
10-K).
4.21 Facility Agreement by and between The New World Power Company (Four Burrows) Limited and Hambros Bank
Limited, et. al., dated March 21, 1995. (Incorporated herein by to Exhibit 4.06(a) reference to the
1994 10-K).
4.22 Debenture granted by The New World Power Company (Four Burrows) Limited and Hambros Bank Limited, dated
March 17, 1995. (Incorporated herein by reference to Exhibit 4.06(b) to the 1994 10-K).
4.23 Side Letter, dated March 17, 1995, to Security Coordination Agreement by and among The New World Power
Company (Dyffryn Brodyn) Limited, The New World Power Company (Caton Moor) Limited, The New World Power
Company (Four Burrows) Limited, The New World Power Company Limited and Hambros Bank Limited, et. al.,
dated October 14,1994. (Incorporated herein by reference to Exhibit 4.06(c) to the 1994 10-K).
4.24 Mortgage of Shares by and between The New World Power Company Limited and Hambros Bank Limited, dated
March 17, 1995. (Incorporated herein by reference to Exhibit 4.06(d) to the 1994 10-K).
4.25 Inter-Creditor Deed by and among The New World Power Company (Four Burrows) Limited, The New World
Power Corporation, The New World Power Company Limited and Hambros Bank Limited, et. al., dated March
17, 1995. (Incorporated herein by reference to Exhibit 4.06(e) to the 1994 10-K).
4.26 Cross Guarantee and Debenture by and among The New World Power Company (Four Burrows) Limited, The New
World Power Company (Dyffryn Brodyn) Limited, The New World Power Company (Caton Moor) Limited and
Hambros Bank Limited, dated March 17, 1995. (Incorporated herein by reference to Exhibit 4.06(f) to the
1994 10-K).
</TABLE>
57
<PAGE> 60
<TABLE>
<S> <C>
4.27 Additional Funding Agreement by and between The New World Power Corporation and The New World Power
Company (Four Burrows) Limited, dated March 17, 1995. (Incorporated herein by reference to Exhibit
4.06(g) to the 1994 10-K).
4.28 Acknowledgment of Notice of Assignment re: Additional Funding Agreement by The New World Power
Corporation, dated March 17, 1995. (Incorporated herein by reference to Exhibit 4.06(h) to the 1994 10-
K).
10.1 Management Agreement between Fayette Energy Corporation and East Rock Partners, Inc. dated December 1,
1989. (Incorporated herein by reference to Exhibit No. 10.05(b) to the Company's Form 10-K for the year
ended September 30, 1991 (the "1991 10-K")).
10.2 Management Agreement between Wolverine Hydroelectric Corporation and East Rock Partners, Inc. dated
December 1, 1989. (Incorporated herein by reference to Exhibit No. 10.05(d) to the 1991 Form 10-K).
10.3 The New World Power Corporation's 1989 Stock Incentive Plan. (Incorporated herein by reference to
Exhibit No. 10.09 to the Company's Form 10-K for the year ended September 30, 1990 (the "1990 10-K")).
10.4 The New World Power Corporation's 1993 Stock Incentive Plan. (Incorporated herein by reference to
Exhibit 10.1 to the Company's Form 10-Q for the quarter ended June 30, 1993 (the "June 30, 1993 10-
Q")).
10.5 Lease between White Hollow Farms, Inc. and The New World Power Corporation, dated as of December 1,
1992. (Incorporated herein by reference to Exhibit 10.33 to the 1993 10-K).
10.6 Stock Purchase Agreement among The New World Power Corporation, Photocomm, Inc., Westinghouse Electric
Corporation, Programmed Land, Inc. and Robert R. Kauffman dated as of October 15, 1993. (Incorporated
herein by reference Exhibit A to the Company's Form 8-K dated November 23, 1993 (the "November 12, 1993
8-K")).
10.7 Placement Agent Agreement by and between The New World Power Corporation and Oakes, Fitzwilliams & Co.
Limited, dated November 8, 1993. (Incorporated herein by reference to Exhibit 10.35(a) to the 1993 10-
K).
10.8 Warrant issued to Oakes, Fitzwilliams & Co. Limited. (Incorporated herein by reference to Exhibit
10.35(b) to the 1993 10-K).
10.9 Form of Purchase Agreement by and between The New World Power Corporation and Purchaser. (Incorporated
herein by reference to Exhibit 10.35(c) to the 1993 10-K).
</TABLE>
58
<PAGE> 61
<TABLE>
<S> <C>
10.10 Form of Warrant issued to Purchaser. (Incorporated herein by reference to Exhibit 10.35(d)) to the 1993
10-K).
10.11 Schedule of Purchasers. (Incorporated herein by reference to Exhibit 10.35(e) to the 1993 10-K).
10.12 Form of Management Shareholders' Agreement by and among The New World Power Corporation; John D. Kuhns;
Dwight C. Kuhns; Robert W. MacDonald; Lucien Ruby; Herbert L. Oakes, Jr.; Michael H. Best; Nazir Memon;
Gerald R. Cummins and any other person who agrees to be bound by the terms of the Agreement, dated as
of November 12, 1993. (Incorporated herein by reference to Exhibit 10.38 to the 1993 10-K).
10.13 Placement Agent Agreement by and between The New World Power Corporation and Oakes, Fitzwilliams & Co.,
Limited, dated February 28, 1994. (Incorporated herein by reference to Exhibit 10.01(a) to the
Company's Form 10-Q for the quarter ended March 31, 1994 (the "March 31, 1994 10-Q")).
10.14 Warrant issued to Oakes, Fitzwilliams & Co., Limited. (Incorporated herein by reference to Exhibit
10.01(b) to the March 31, 1994 10-Q).
10.15 Form of Purchase Agreement by and between The New World Power Corporation and Purchaser. (Incorporated
herein by reference to Exhibit 10.01(c) to the March 31, 1994 10-Q).
10.16 Form of Warrant issued to Purchaser. (Incorporated herein by reference to Exhibit 10.01(d) to the March
31, 1994 10-Q).
10.17 Schedule of Purchasers. (Incorporated herein by reference to Exhibit 10.01(e) to the March 31, 1994 10-
Q).
10.18 Business Alliance Agreement between The New World Power Corporation and Westinghouse Electric
Corporation dated as of June 15, 1994. (Incorporated herein by reference to Exhibit 10.01 to the
Company's Form 10-Q for the quarter ended June 30, 1994 (the "June 30, 1994 10-Q")).
10.19 Placement Agent Agreement by and between The New World Power Corporation and Oakes, Fitzwilliams & Co.
Limited, dated August 22, 1994. (Incorporated herein by reference to Exhibit 10.01(a) to the Company's
Form 10-Q for the quarter ended September 30, 1994 (the "September 30, 1994 10-Q")).
10.20 Amendment to Placement Agent Agreement dated August 30, 1994. (Incorporated herein by reference to
Exhibit 10.01(b) to the September 30, 1994 10-Q).
10.21 Warrant issued to Oakes, Fitzwilliams & Co., Limited. (Incorporated herein by reference to Exhibit
10.01(c) to the September 30, 1994 10-Q).
</TABLE>
59
<PAGE> 62
<TABLE>
<S> <C>
10.22 Form of Purchase Agreement by and between The New World Power Corporation and Purchaser. (Incorporated
herein by reference to Exhibit 10.01(d) to the September 30, 1994 10-Q).
10.23 Form of Warrant issued to Purchaser. (Incorporated herein by reference to Exhibit 10.01(e) to the
September 30, 1994 10-Q).
10.24 Schedule of Purchasers. (Incorporated herein by reference to Exhibit 10.01(f) to the September 30, 1994
10-Q).
10.25 Option Agreement by and between The New World Power Corporation and Robert R. Kauffman, dated as of
October 7, 1994. (3) 10.26 0% Exchangeable Senior Secured Guaranteed Note due 29 December 1995 in the
original principal amount of Two Million Two Hundred Thousand and No/100 U.S. Dollars issued by The New
World Power Company Limited. (3) 10.27 Option Agreement by and among The New World Power Company
Limited, Sundial International Fund Limited and Oakes, Fitzwilliams & Co., Limited, dated December 30,
1994. (3) 10.28 Guaranty Agreement by The New World Power Corporation in favor of Sundial International
Fund Limited, dated December 30, 1994.
10.29 Stock Pledge Agreement by and among The New World Power Corporation, Sundial International Fund Limited
and Gilmartin, Poster & Shafto, dated December 30, 1994.
10.30 exchange Agreement by and between The New World Power Corporation and Sundial International Fund
Limited, dated December 30, 1994.
10.31 Warrant issued to Sundial International Fund Limited.
10.32 Placement Agent Agreement by and between The New World Power Corporation and Oakes, Fitzwilliams & Co.
S.A., dated February 10, 1995.
10.33 Warrant issued to Oakes, Fitzwilliams & Co. S.A.
10.34 Form of Purchase Agreement by and between The New World Power Corporation and Purchaser, dated February
10, 1995.
10.35 Form of Amendment to Purchase Agreement by and between The New World Power Corporation and Purchaser,
dated February 10, 1995.
10.36 Form of Warrant issued to Purchaser.
10.37 Schedule of Purchasers.
10.38 Subscription Agreement by and between The New World Power Corporation and Oakes, Fitzwilliams & Co.
S.A., dated February 10, 1995.
10.39 Warrant issued to Oakes, Fitzwilliams & Co. S.A.
</TABLE>
60
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<TABLE>
<S> <C>
10.40 Employment Agreement, dated as of August 1, 1995, by and between the Company and John D. Kuhns.
10.41 Amendment No. 1 to Employment Agreement, dated as of March 1, 1996, by and between the Company and John
D. Kuhns.
10.42 Amendment No. 2 to Employment Agreement, dated as of March 31, 1996, by and between the Company and
John D. Kuhns.
10.43 Amendment Agreement, dated August 3, 1995, between China Chang Jiang Energy (Group) and the Company.
10.44 Share Transfer Agreement between China Chang Jiang Energy Corporation (Group) and the Company for the
Fujian Chang Ping Hydro Power Company.
10.45 Consulting Agreement, dated as of February 7, 1996, between the Company and Glass & Associates, Inc.
10.46 Agreement Engaging the Services of Glass & Associates, Inc. As Interim Manager, dated April 18, 1996,
between the Company and Glass & Associates, Inc.
10.47 Financial Advisory Services Agreement, dated June 11, 1996, between the Company and Oakes Fitzwilliams
& Co.
10.48 Management Services Agreement with Dominion Bridge Corporation (Incorporated by reference to exhibit 6 of
Schedule 13D of Dominion Bridge, filed on November 12, 1996) (the "Schedule 13D").
10.49 Joint Venture Agreement between DB Power Inc. and the Company (Incorporated by reference to exhibit 1 of the
Schedule 13D).
10.50 Conversion Agreement between DB Power Inc. and the Company (Incorporated by reference to exhibit 3 of the
Schedule 13D).
22.1 Subsidiaries of the registrant.
</TABLE>
- -------------------
The consents of the predecessor auditors will be provided in Form
10-K/A to be filed shortly by the Company.
* Incorporated by reference.
(b) Reports on Form 8-K/A
One current report on Form 8-K dated October 28, 1996 was filed during
the quarter ended December 31, 1996.
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<PAGE> 64
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
THE NEW WORLD POWER CORPORATION
Dated: April 30, 1997
By: /s/ Vitold Jordan
-------------------------------
Vitold Jordan
Interim Chief Executive Officer
By: /s/ Frederic A. Mayer
-------------------------------
Frederic A. Mayer
Acting Chief Financial and
Principal Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this Form 10-K has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C>
/s/ Vitold Jordan Interim Chief Executive April 30, 1997
----------------- Officer
Vitold Jordan
/s/ Gerald R. Cummins Chairman and Director April 30, 1997
---------------------
Gerald R. Cummins
/s/ Gerard Prevost Director April 30, 1997
------------------
Gerard Prevost
/s/ Lucien Ruby Director April 30, 1997
---------------
Lucien Ruby
</TABLE>
