| 02/14/08 - Renegy Holdings, Inc. announced that it has entered into a Lease and Option Agreement with Sierra Pacific Industries to lease, with the option of purchasing, approximately 40 acres of land in Susanville, California where a 13 megawatt biomass power plant acquired by the Company in November 2007 is currently located. Renegy intends to use this property for the operation of the presently idle biomass facility, and estimates the plant could be fully operational by the end of 2008, subject to securing necessary financing to refurbish the plant, obtaining any required construction, operation and environmental permits, identifying and securing necessary fuel sources at a cost-effective rate, entering into a power purchase agreement for the entire power output of the plant, and other activities necessary to restart and operate the plant. "Preliminary results of our studies indicate that a sufficient supply of wood waste fuel may exist in the Susanville area, and as such, we intend to restart the plant in its current location," stated Bob Worsley, chairman and CEO of Renegy. "We are currently in discussions with a local forest products and timber company for the supply of wood waste. We are also in discussions with government agencies, local green waste sites and other parties relating to long-term forest thinning and other contracts that may enable us to secure additional fuel. By avoiding the costs associated with relocating and reassembling the plant, we anticipate that our investment in the refurbishment and re-commissioning of the plant will be substantially less than the $15.0 million previously projected. Including acquisition costs, we now estimate the total cost of refurbishing and commissioning this plant at less than $800 per kilowatt, whereas the cost to build a new plant can range from $2,500 to $3,000 per kilowatt. Based on the attractive economics of this investment, exploring opportunities to acquire other idled biomass facilities will continue to be an important component of our growth strategy." Renegy is continuing discussions with utility companies who have expressed an interest in securing the electrical output of the plant through a long-term power purchase agreement. The Company is also pursuing various financing opportunities it has identified to help fund the project. The terms of the Lease Agreement provide for monthly lease payments of $750 per acre per month commencing January 31, 2008. Simultaneously with entering into the Lease, for consideration of $100,000, Renegy entered into an Option Agreement, which provides Renegy the option to acquire the 40-acre site for a purchase price of $80,000 per acre, subject to a price escalation of 1.5% per annum. The Option Agreement terminates on January 31, 2013, subject to certain exceptions. The Option Agreement provides that the initial $100,000 payment shall be credited against the purchase price of the property upon exercise of the Option. In addition, the Lease Agreement provides that 100% of the first 24 months of lease payments made by Renegy shall apply to the purchase price under the Option Agreement if Renegy elects to exercise its purchase option. More information on the Lease and Option Agreement can be found in a Form 8-K that will be filed by the Company today with the Securities and Exchange Commission. |
