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NEW YORK, Oct. 24, 2006 - U.S. Energy Systems, Inc. (Nasdaq: USEY) today reported that, consistent with SEC requirements related to purchase accounting transactions, it has filed a Form 8-K providing management's initial estimates of the Company's financial results and financial position in recent periods as if those periods included the effects of the Company's recent UK natural gas transactions ("initial pro forma financial estimates").
As previously announced, during the 2006 third quarter USEY closed a series of transactions that launched its UK natural gas exploration, production and power business, complementing the Company's U.S.-based "green" energy landfill gas-to-energy business. These transactions included the purchase of related gas licenses, processing and collection infrastructure and a gas-fired power plant, as well as commercial gas and power purchase agreements with ScottishPower.
USEY's initial pro forma financial estimates show that the UK transactions (including the estimated effects of financing and tax expenses) increased the Company's net income on a pro forma basis for the six months ended June 30, 2006, as well as its total assets and total stockholders equity on a pro forma basis as of June 30, 2006, compared with the Company's reported financial results for the same period (which included only its U.S. business).
"As these initial pro forma estimates demonstrate, we were able to create immediate value for USEY's shareholders by acquiring assets with significant upside potential and unlocking their value with favorable commercial agreements," said Asher Fogel, USEY's Chief Executive Officer. "USEY's executive team is committed to growing long-term shareholder value by acquiring and enhancing undervalued, high potential "clean and green" energy assets; supporting our businesses with strong and experienced managers; improving our capital structure to reduce cost of funds and increase available growth capital; and maximizing USEY's after-tax income. We are very excited about the growth potential in both of our operating businesses, and by the opportunities we have to execute our corporate growth strategies."
USEY's initial pro forma financial estimates indicate an after-tax extraordinary gain in the first half of 2006 of $19.6 million, or $0.90 per share. The gain reflects immediate increase in the value of the acquired assets from their purchase price, as a result of the gas and power purchase agreements that USEY completed concurrently with the asset transactions. USEY's initial pro forma financial estimates reflect income for the first six months of 2006 of $8.9 million, or $0.60 per share, compared with USEY's reported loss in the period of $5.2 million, or $0.34 per share.
According to USEY's initial pro forma financial estimates, the Company's total assets and total stockholders equity increased by $204.1 million and $19.6 million, respectively, as a result of the UK transactions. USEY's initial pro forma financial estimates reflect total assets and total stockholders equity as of June 30, 2006 of $371.2 million and $32.0 million, respectively, compared with USEY's reported total assets and total stockholders equity at the same date of $167.1 million and $12.4 million, respectively.
USEY stated that its filing reflects management's initial estimates, which it believes are based upon reasonable assumptions. The Company said that it is working with an independent valuation company to determine the fair market value of all assets acquired, which could result in revisions to the pro forma financial information when USEY finalizes the accounting treatment of the acquisition. Financial Accounting Standards provide USEY one year from the August 7, 2006 acquisition date to finalize the accounting treatment, but USEY anticipates it will be finalized prior to the completion of its 2006 year end financial statements.
Additional pro forma financial information is contained in USEY's Form 8-K filed with the SEC on October 23, 2006. USEY's Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 2006 estimate the operations of USEY as if the acquisition had occurred on January 1, 2006. The Pro Forma Condensed Consolidated Balance Sheet as of June 30, 2006 estimates the financial position of USEY as if the acquisition had occurred on June 30, 2006.
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, 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, changes in market conditions, the inability to commence planned projects in a timely manner, the impact of competition, the ability to complete acquisitions, and access to needed financing or refinancing on acceptable terms, 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 June 30, 2006. We do not undertake to update any of the information set forth in this press release.
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