Western GeoPower Corp.
TSX VENTURE : WGP
FRANKFURT : WE6.F

Western GeoPower Corp.

September 06, 2005 23:33 ET

Western GeoPower Corp.: Financial Results for the Six Months Ended June 30,2005

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Sept. 6, 2005) -

This news release is not for dissemination in the United States of America or to United States of America news services.

Western GeoPower Corp. (TSX VENTURE:WGP)(FWB:WE6.F)(NOTC:WGEO), a renewable energy development company, announces the financial results for the six months ended June 30, 2005.

Results of Operations

The Company has continued the development of its geothermal project and invested a total of $28,494,002 to date. During the six months ended June 30, 2005, the Company invested a total of $10,478,914 in the technical program. During the six months ended June 30, 2005, the company completed the drilling of well MC-7, with total costs incurred in current period of $3.0 million for drilling and testing of MC-7. Following which the Company completed the drilling of the third well MC-8 with total costs incurred to June 30, 2005 for drilling and testing in the amount of $5.9 million. The Company is continuing with the testing of the three wells under the direction of the consultants, GeothermEx Inc.

The consolidated loss for the three and six months ended June 30, 2005 was $1.2 million (2004 - $2.9 million) or $0.04 (2004 - $0.13) per share and $1.8 million (2004 - $4.1 million) or $0.06 (2004 - $0.19) per share, respectively. A significant portion of the loss in June 30, 2004 is a reflection of stock-based compensation expense. During the six months ended June 30, 2004, the company granted 1,570,000 stock options to directors, officers, employees and consultants. The fair value of the options granted during the period amounted to $2,742,957 and has been reflected in the statement of operations. An additional stock-based compensation expense of $107,800 was included during the first quarter of 2004 for the portion of the 2003 options granted that vested in 2004.

General and administrative expenditures remained relatively unchanged from the previous period and are comprised of salaries, management and consulting fees and legal and accounting fees, shareholder information expense, as well as office and travel expenses.

On February 4, 2005, the Company entered into a $4.0 million short-term loan with Quest Capital Corp., with the due date being October 4, 2005 and bears interest at a rate of 12% per annum. The due date was subsequently extended to December 15, 2005. In consideration of the loan Quest received 436,363 common shares of the Company. Quest received an additional 377,992 common shares of the Company for the extension of the loan. The cost of the shares issued, are set up as deferred financing costs at the time the shares are issued and amortized over the term of the debt. During the three and six months ended June 30, 2005, the Company recorded total financing costs related to the debt in the amount of $429,702 (2004- Nil), and $568,086 (2004- Nil) respectively. Of which $188,055 relates to interest paid on the loan, and $380,031 relates to the amortization of the deferred financing costs (note 4).

Interest income of $51,982 for the six months ended June 30, 2005, (2004 -$58,665) is comprised of interest earned on cash balances.

The net losses are a reflection of the Company's status as a non-revenue producing energy company. As the Company has no source of income, losses are expected to continue.

Liquidity and Capital Resources

The Company does not have any cash flow from operations. The Company receives cash for use in operations principally from issuing common shares. The Company has been successful in accessing the equity markets during the last 16 months and while there is no guarantee that this will continue to be available, management has no reason to expect that this will diminish in the immediate term.

At June 30, 2005, the Company had working capital deficit of $2,847,323. In April the Company completed a $7,302,322 guaranteed agency financing. The proceeds of the offering are being used to continue the technical program with the drilling of the third production-size well. The ongoing development of the project will require the Company to raise additional capital through equity financings.

On February 4, 2005, the Company entered into a $4.0 million standby facility with Quest Capital Corp. ("Quest"), to ensure an uninterrupted continuation of the project activities while the Company secured a financing.

On April 5, 2005, the Company closed a $302,322 financing with Kaupthing ASA and Dundee, and on April 26, 2005, the Company closed a $7,000,000 financing with Dundee, for total gross proceeds of $7,302,322. The Company issued 6,310,000 flow-through shares and 992,322 non-flow through units, each priced at $1.00. The flow-through shares and 690,000 of the units are subject to a hold period expiring August 23, 2005 and 302,322 units are subject to a hold period expiring August 6, 2005. Each unit is comprised of one share and one warrant to purchase one additional common share at an exercise price of $1.20 per share until April 22, 2008. The warrants have an accelerator provision such that if the closing price of the Company's common shares exceeds $1.50 for 20 consecutive business days, the Company may issue a press release indicating the warrant expiry date will become the date 30 days following the date of issuance of the press release. In connection with the private placement, Dundee received 441,700 shares, which are subject to a hold period expiring August 23, 2005, as compensation for the sale of flow-through shares. In addition, compensation options to purchase an aggregate of 441,700 shares and 69,463 units, each priced at $1.00 for a period of three years have been granted to the agents. Each compensation unit is comprised of one share and one warrant to purchase one additional common share at an exercise price of $1.20 per share until April 22, 2008. The accelerator provisions described above also apply to these warrants.

Risks and Uncertainties

Geothermal resource exploration and development involves a high degree of risk. Until the balance of the development program is completed, the viability of the South Meager Geothermal Project is undetermined. The long-term success of the Company relies on various factors, such as the technical characteristics of the geothermal resource, the cost to develop the facilities, the pricing of the electricity and financing the project. Other factors include the ability of the Company to obtain and maintain appropriate licenses and permits as well as addressing environmental and aboriginal issues. The Company will require additional capital to pursue its objective of developing the South Meager Project.

Outlook

The longer-term outlook for the Company continues to be dependent on the successful results from the three production-size wells. Upon completion of drilling and testing the three production-size wells the Company will proceed with the finalization of the feasibility study. It is the Company's intention to proceed to the project design and financing stage, with the objective of constructing the plant facilities, leading to commercial production by 2008. Alternatively, upon completion of the feasibility study, the Company may seek an industry partner to jointly fund, develop and operate the project, if that course of action is deemed more beneficial to shareholders.

The Board of Directors of Western GeoPower Corporation announces the retirement of John M. Darch from the Board effective August 31, 2005. The Board is most appreciative of Mr. Darch's longstanding dedication to the Company and fully supports his decision to pursue his personal interests.

Additional Information

Additional information relating to the Company, including its Annual Audited Financial Statements and Annual Information Form, are available on SEDAR at www.sedar.com

Corporate Overview:

Western GeoPower Corp. is dedicated to the development of its 100% owned, South Meager Geothermal Project, held under a geothermal lease for the commercial production of electricity. The project, located 170 km north of Vancouver, B.C., is in close proximity to Whistler, the location of the 2010 Winter Olympic Games, and is the most advanced geothermal project in Canada. The Company currently is conducting a feasibility study to confirm the commercial viability of the South Meager Project to support an initial generation of 100 megawatts of electricity by 2008. The estimated development potential is 200 megawatts of electricity, which is equivalent to the power consumption of 160,000 households.

On behalf of Western GeoPower Corp.

"Kenneth MacLeod"

Kenneth MacLeod, President and CEO

Statements in this release that are forward-looking are subject to various risks and uncertainties concerning the specific factors identified above and in the corporation's periodic filings with the British Columbia Securities. Such information contained herein represents management's best judgment as of the date hereof based on information currently available. The corporation does not intend to update this information and disclaims any legal liability to the contrary.



WESTERN GEOPOWER CORP.
Consolidated Balance Sheets
(Expressed in Canadian dollars)

------------------------------------------------------------------------
------------------------------------------------------------------------
June 30 December 31
2005 2004
(Unaudited) (Audited)
------------------------------------------------------------------------

Assets

Current assets:
Cash and short-term investments
(note 3) $ 2,981,582 $ 5,082,484
Amounts receivable 478,603 711,762
Prepaid expenses and deposits 115,208 130,751
Deferred financing costs (note 4) 372,073 -
------------------------------------------------------------------------
3,947,466 5,924,997

Equipment 323,866 247,679

Geothermal property (note 5) 28,494,002 17,994,502

Reclamation deposit (note 5) 150,000 150,000
------------------------------------------------------------------------

$ 32,915,334 $ 24,317,178
------------------------------------------------------------------------
------------------------------------------------------------------------

Liabilities and Shareholders' Equity

Current liabilities:
Accounts payable and accrued
liabilities $ 2,794,789 $ 3,994,705
Short term debt (note 4) 4,000,000 -
------------------------------------------------------------------------
6,794,789 3,994,705

Long term debt (note 6) 833,078 833,078

Provision for site reclamation
and closure costs (note 8) 468,238 445,941

Future income taxes (note 9(c)) 3,843,092 598,311
------------------------------------------------------------------------
11,939,197 5,872,035

Shareholders' equity:
Share capital (note 9) 26,718,027 22,380,159
Contributed surplus 4,987,758 4,987,758
Deficit (10,729,648) (8,922,774)
------------------------------------------------------------------------
20,976,137 18,445,143
------------------------------------------------------------------------

$ 32,915,334 $ 24,317,178
------------------------------------------------------------------------
------------------------------------------------------------------------

Commitments and contingencies (notes 3, 5, 6, 8, 9 and 11)

See accompanying notes to the consolidated financial statements

Approved on behalf of the Board:

"Kenneth MacLeod" Director "John Copeland" Director
----------------- ---------------
KENNETH MACLEOD JOHN COPELAND


WESTERN GEOPOWER CORP.
Consolidated Statements of Operations and Deficit
(Expressed in Canadian dollars)

Six months ended June 30, 2005 and 2004 and three months ended June 30,
2005 and 2004
------------------------------------------------------------------------
------------------------------------------------------------------------

Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Expenses:
Advertising
and promotion 342,837 388,987 379,090 436,577
Amortization and
accretion 15,715 6,545 31,431 13,089
Consulting and
advisory fees 58,496 52,337 85,541 114,939
General and
Administration 59,083 83,495 112,875 139,589
Directors' fees
(note 7) 7,500 7,500 15,000 15,000
Interest and bank
charges, net 2,412 838 8,669 2,043
Financing costs
(note 4) 429,702 - 568,086 -
Management fees
(note 7) 67,500 67,500 135,000 169,167

Professional fees 54,256 63,404 72,987 104,688
Regulatory fees,
transfer agent
and shareholder
communications 39,567 10,990 60,919 45,029
Rent 6,399 6,798 12,798 12,141
Salaries 139,102 135,133 307,212 169,929
Travel & related 49,949 68,534 69,248 130,690
Loss on disposal
of equipment - - - -
Stock-based
Compensation
(note 9(e)) - 2,165,575 - 2,850,757
------------------------------------------------------------------------

Loss before the
undernoted (1,272,518) (3,057,637) (1,858,856) (4,203,639)

Interest income 29,789 46,249 51,982 58,665
------------------------------------------------------------------------

Loss for the
period (1,242,729) (3,011,389) (1,806,874) (4,144,974)

Deficit, beginning
of period (9,486,919) (4,840,781) (8,922,774) (3,399,796)

Cumulative effect
of changes in
Accounting policy
(note 9 (e)) - - - (307,400)
------------------------------------------------------------------------
Deficit, end
of period $(10,729,648) $(7,852,170) $(10,729,648) $(7,852,170)
------------------------------------------------------------------------
------------------------------------------------------------------------

Basic and diluted
loss per share $ (0.04) $ (0.14) $ (0.06) $ (0.19)

Weighted average
number of shares
outstanding 31,160,206 22,018,501 31,160,206 22,018,501
------------------------------------------------------------------------
------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements.



WESTERN GEOPOWER CORP.
Consolidated Statements of Cash Flows
(Expressed in Canadian dollars)

Six months ended June 30, 2005 and 2004 and three months ended June 30,
2005 and 2004


------------------------------------------------------------------------
------------------------------------------------------------------------

Three months ended Six months ended
June 30, June 30,
2005 2004 2005 2004
------------------------------------------------------------------------
(unaudited) (unaudited) (unaudited) (unaudited)

Cash provided by
(used in):

Operations:
Loss for the
period $(1,242,729) $(3,011,389) $(1,806,874) $(4,144,974)
Items not
involving cash:
Amortization
and accretion 15,715 6,545 31,431 13,089
Amortization
of deferred
financing costs 320,031 380,031
Stock-based
compensation - 2,165,575 - 2,850,757
Changes in non-cash
operating
working capital
Amounts receivable (14,699) (58,452) 233,159 (66,418)
Prepaid expenses
and deposits (14,202) (76,546) 15,543 (99,299)
Accounts payable
and accrued
liabilities (17,096) 741,686 (1,199,916) 159,513
------------------------------------------------------------------------
(952,980) (232,581) (2,346,626) (1,287,332)
------------------------------------------------------------------------

Investments:
Geothermal
property costs (5,863,051) (983,860) (10,478,914) (1,047,814)
Purchase
of equipment (87,472) (15,534) (105,907) (39,090)
------------------------------------------------------------------------
(5,950,523) (999,394) (10,584,821) (1,086,904)
------------------------------------------------------------------------

Financing:
Issuance of share
capital, net
of issue costs 7,030,783 13,796,100 6,830,545 15,289,395
Receipt of share
subscriptions
held in trust - - - 60,000
Short term loan - - 4,000,000 -
------------------------------------------------------------------------
7,030,783 13,796,100 10,830,545 15,349,395
------------------------------------------------------------------------

Increase (decrease)
in cash 127,280 12,564,125 (2,100,902) 12,975,159

Cash, beginning
of period 854,302 4,577,773 3,082,484 4,166,739

------------------------------------------------------------------------
Cash, end of period $981,582 $17,141,898 $981,582 $17,141,898
------------------------------------------------------------------------
------------------------------------------------------------------------

Cash $981,582 $17,141,898 $981,582 $17,141,898
Restricted
cash (note 3) 2,000,000 - 2,000,000 -
------------------------------------------------------------------------

Cash and short-term
investments $2,981,582 $17,141,898 $2,981,582 $17,141,898
------------------------------------------------------------------------

Supplementary
cash flow
information
Interest paid $119,671 - $188,055 166
Interest received 29,789 46,269 51,982 58,665

------------------------------------------------------------------------

See accompanying notes to the consolidated financial statements


The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.

Contact Information

  • Western GeoPower Corp.
    (604) 662-3338 or
    US/Canada Toll Free: 1-866-662-3322
    info@geopower.ca