- Agreement Eliminates Significant USEB Balance Sheet Liability, Creating Pre- Tax Gain of Around $30 Million -
NEW YORK, March 22 /PRNewswire-FirstCall/ -- U.S. Energy Biogas Corp. ("USEB" or "the Subsidiary"), a U.S.-based renewable energy business, announced today that it has reached an agreement in principle with the State of the Illinois and the Illinois Commerce Commission (together, the "ICC") resolving the principal remaining outstanding issue in USEB's Chapter 11 filing in the United States Bankruptcy Court for the Southern District of New York, and eliminating a significant balance sheet liability for USEB and its parent, U.S. Energy Systems, Inc. (NASDAQ:USEY).
As a result of the agreement with the ICC, along with USEB's previously announced Court-approved agreement with Countryside Power Income Fund, USEB soon expects to be able to file a Plan of Reorganization with the Court that will have the overwhelming support of its creditors, enabling USEB to exit Chapter 11 in the first half of 2007 in a position to pursue its growth plans and strategies. The ICC agreement is subject to Court approval, which USEB and the ICC expect to pursue jointly next month.
In addition, by eliminating about $63 million in balance sheet liabilities over the next 13 years, the agreement will cause USEB and USEY each to recognize pre-tax gains of around $30 million in the first quarter of 2007.
"USEB's agreement with the ICC removes the final meaningful obstacle from USEB's remarkably short path to a new financial structure, and eliminates significant liabilities for USEB over the next 13 years," said Asher E. Fogel, Chairman of USEB and Chief Executive Officer of USEY. "It therefore is positive for our creditors, who will receive full payment for their valid claims upon the conclusion of USEB's restructuring, and for our shareholders, as restructured USEB pursues its growth opportunities and plans." The agreement in principle provides, among other things, for the ICC not to pursue any and all of its claims in USEB's Chapter 11 cases, and to withdraw certain of its motions that may otherwise have the effect of prolonging USEB's cases. Specifically, the ICC will not pursue repayment of approximately $63 million in interest-free loans, which currently are carried on USEB's balance sheet as a more than $38 million obligation on a present value basis. In return, USEB or its subsidiaries have agreed to pay to the ICC $5 million on the effective date of USEB's Plan of Reorganization, and no later than May 31, 2007. USEB also has agreed to establish and fund a $250,000 escrow account that will be used to pay any and all claims for payments by utilities for retroactive rate adjustments that occur during the six-month period immediately following the effective date. Any residual amounts remaining in the escrow at the end of the six-month period after the payment of such rate-adjustment claims will be transferred to the ICC. In addition, USEB's Illinois subsidiaries shall withdraw from the ICC's Subsidy Program effective May 31, 2007, thereby eliminating approximately $30 million in interest-free loan payments to USEB over the next three years. Mutual general releases will be exchanged among the parties involved.
Hunton & Williams LLP serves as legal advisor to USEB.
USEB's Chapter 11 filing does not include USEB's parent company, USEY, or the parent company's other subsidiary, a UK-based natural gas exploration and development business, UK Energy Systems (UKES). Moreover, neither USEY's nor UKES's operations are affected by USEB's Chapter 11 filing.
The USEB Chapter 11 case number is 06-12827(RDD).
Additional information is available on the Company's website at: http://www.useyinc.com/ .
About U.S. Energy Systems, Inc.
U.S. Energy Systems, Inc. is an owner of green power and clean energy and resources. USEY owns and operates energy projects in the United States and United Kingdom that generate electricity, thermal energy and gas production.
Certain matters discussed in this press release are forward-looking statements, and certain important factors may affect the Company's actual results and could cause actual results to differ materially from any forward- looking statements made in this release, or which are otherwise made by or on behalf of the Company. Such factors include, but are not limited to, the effect of the USEB's Chapter 11 filing, access to needed financing or refinancing on acceptable terms, our ability to continue as a going concern, revisions in the initial estimates in the fair market value of the acquired assets, failure to realize the estimated savings or operating results of the acquisition, and other risks associated with acquisitions generally, including risks relating to managing and integrating acquired businesses, changes in market conditions, the impact of competition, changes in local or regional economic conditions, and the amount and rate of growth in expenses, dependence on management and key personnel, changes in federal or state laws and their interpretation with respect to regulation, energy policy and other business issues, the inability to commence planned projects in a timely manner, our ability to continue our growth strategy, and the ability to complete acquisitions, as well as other risks detailed from time to time in U.S. Energy's Securities and Exchange Commission filings, including its Annual Report on Form 10-K for the year ended December 31, 2005 as well as the 10-Q for the period ended September 30, 2006. We do not undertake to update any of the information set forth in this press release.
http://www.useyinc.com/news_2006_08_10.html Investors Media
U.S. Energy Systems, Inc. Kekst and Company
Adam D. Greene, 212-588-8901 Adam Weiner / Joel Steinhaus
212-521-4800
DATASOURCE: U.S. Energy Systems, Inc.
CONTACT: investors, Adam D. Greene, U.S. Energy Systems, Inc., +1-212-588-8901, ; media, Adam Weiner / Joel Steinhaus, Kekst and Company, +1-212-521-4800 Web site: http://www.useyinc.com/
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