GREENVALE, N.Y., Oct. 17, 2016 /PRNewswire/ -- Power Efficiency Corporation (OTC PINK: PEFF), has previously announced that it had participated in the Brooklyn Queens Demand Management Auction (BQDM), held by Con Edison, Inc. July 27 - 28, 2016 and won a bid to provide 12 Megawatts (MW) of Demand Response Energy in the summer months of 2017 and 2018.
Also as previously announced, participants in the Consolidated Edison program are required to enter into certain contractual agreements with Consolidated Edison which set forth the parameters of the demand reduction requirements which will be accepted by Consolidated Edison, and Power Efficiency Corporation, as with all participants, was required to deliver a standby letter of credit to support its contract with Consolidated Edison.
Power Efficiency has entered into a formal agreement and arrangement with a project and financial partner, a newly formed special purpose vehicle which has provided approximately half of the required $793,000 of funds to back the issuance of the letter of credit in favor of Consolidated Edison. Power Efficiency Corporation raised the remaining half with funds obtained in a private placement offering of notes and shares of common stock, and certain management members participated in the funding. As a result, the requirements for the letter of credit under the contract with Consolidated Edison have been satisfied and Power Efficiency Corporation is working with its partner to identify sites and procure equipment to satisfy the 2017 BDQM contract requirements.
Under the agreement, the financial and project partner agreed to provide a credit facility of up to $15,000,000 to support purchase of equipment and installation of the equipment at sites. The parties have agreed that performance of the contract with Consolidated Edison and project development will be made through the special purpose vehicle entity. Power Efficiency Corporation is an economic participant in the revenue and income of the spv and not an equity owner of the spv.
Power Efficiency Corporation assigned its rights under the Consolidated Edison contract to the spv entity. In consideration for assigning the BQDM contract to the spv, Power Efficiency will be entitled to a funding fee or success fee of 5% of funds lent to the special purpose vehicle based on program costs to install equipment and 30% of the projects combined EBITDA basis, after the financial and project partner's receipt of repayment of funds and a rate of return of 20% of funds lent and expenses incurred provided to procure and install equipment and operate each project and fund one-half of the letter of credit.
Funding of particular projects under the BDQM program is subject to various closing conditions, including completion by the parties of pro forma projections and an acceptable projected rate of return for each project.
The contract with Consolidated Edison requires that PEC and its partner deliver 4 megawatts of energy savings in the summer of 2017 and an additional 8 megawatts of energy savings in 2018. The equipment at any particular project site may be a mix of battery storage, natural gas generators, or demand response and is required to be operational by April 2017 for the summer of 2017 and by April 2018 for the summer of 2018 but will be deployed for up to 7 to 10 years for Con Edison and other programs.
The Consolidated Edison BQDM program will reduce electricity usage during peak summer hours in order to defer $1.2 billion in substation upgrades in certain areas of Brooklyn and Queens. Power Efficiency Corporation is appreciative of the opportunity to offer distributed energy resources to facilitate the implementation of this innovative solution.
Power Efficiency Corporation President and COO, R. Scott Caputo commented, "This was a big effort and coordination on the part of our team, our partners and the Con Edison staff. I'd like to thank them all for the opportunity. Now the hard work begins."
While we are highly confident in the skills and abilities of our partner and project team, there can be no assurance that the parties will be able to satisfy the terms of the BDQM program.
Power Efficiency Corporation CEO, Gary Weiss, stated "This is an important first step in the rebirth of the company. We look forward to building our partner relationships while continuing to focus on bringing PEC back to fully reporting status."
Power Efficiency filed a Form 8-K with the SEC on October 14, 2016 with a complete copy of the agreement with its financial and project partner, and a complete copy of the Consolidated Edison BQDM program agreements.
Update on SEC Reporting Requirements
Power Efficiency Corporation is continuing to work towards becoming a full reporting company with the SEC under the Securities and Exchange Act of 1934. The company originally filed a Form 10 registration statement on August 11, 2016. Under SEC rules, the Form 10 became effective 60 days thereafter (October 10, 2016), however, the company must update the Form 10 filing with an updated business description and more recent financial statements, as well as to respond to SEC comments received with respect to the original filing. A Form 10Q for the quarter ended September 30, 2016 will also be filed on or before November 24, 2016, as required under SEC Rule 13a-13.
About Power Efficiency Corporation
Power Efficiency Corporation (PEC) provides comprehensive one-stop solutions to the grid stability problems and takes advantage of large and actively growing market opportunity for energy storage, which is projected to reach $45 billion by 2020. PEC offers solutions to grid operators, utilities, and Commercial and Industrial (C&I) customers. Our focus is on renewable Distributed Energy Resources (DER) and Battery Energy Storage Systems (BESS) for grid balancing services to the Independent System Operators (ISOs); load shifting for utilities; energy management through storage for C&I customers; and micro grids for energy security. We intend to build, own, partner with third parties, enter into joint ventures and operate these facilities to develop a portfolio of income producing projects.
In addition to historical statements, this press release contains statements relating to future events and our future results. These statements are "forward-looking" statements within the meaning of the Private Securities Litigation Reform Act of 1995, and Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. While these forward-looking statements represent our judgments and future expectations concerning our business, a number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. These factors include, but are not limited to: difficult economic conditions, the possibility of increased or adverse government regulation, and the risk that we may be unable to obtain necessary capital investment and financing to install generator and battery storage systems and otherwise complete projects, and other risks and uncertainties. As a result, these forward-looking statements may turn out to be incorrect. We are under no obligation to (and expressly disclaim any obligation to) update or alter these forward-looking statements whether as a result of new information, future events or otherwise. Such forward-looking statements by definition involve risks, uncertainties and other factors, which may cause the actual results, performance or achievements of Power Efficiency Corporation to be materially different from the statements made herein.
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SOURCE Power Efficiency Corporation