NewPower Holdings Inc., in a filing last week with the Securities and Exchange Commission (SEC), indicated that its auditors will state in the company’s annual report that there is a substantial doubt about the company’s ability to continue as a going concern. The auditors’ concern about NewPower’s viability was included in a filing notifying the SEC that it wouldn’t be able to file its annual report on time.

In the filing, NewPower said it believes it has enough liquidity to continue operations without additional financing into the third quarter of 2002, “assuming a broadly stable commodity price environment.” Cash and cash equivalents position at the end of 2001, including restricted and unrestricted cash, and inventory and imbalances, totaled approximately $163.4 million. Of that, $26.4 million was unrestricted cash.

NewPower said it was actively evaluating the impact on its business strategy, and its alternatives, and has indicated that other companies are interested in purchasing the company or its assets. Centrica plc backed out of a proposed merger in late March after the U.S. Bankruptcy Court for the Southern District of New York denied a request by NewPower to not be held liable for any of Enron Corp.’s liabilities (see NGI, April 1). NewPower was an Enron subsidiary for about two months before it was spun off as a separate company.

NewPower said it would file the annual report within the 15-day extension period provided by law.

On Tuesday, the company reported that it has begun trading on the over-the-counter “Pink Sheets” electronic quotation service under the symbol “NWPW.” The announcement followed a decision by the New York Stock Exchange on April 1 to suspend “immediately” the trading of the company’s securities because it had been trading below $1 a share for more than 30 consecutive days. NewPower advised the exchange that it would not “challenge the action and intends to seek an alternate trading venue for its common stock.” Application to the Securities and Exchange Commission to delist the issue is pending.

A spokeswoman said last week that the company can continue to operate through the second quarter before it considers any other action.

NewPower, which was initially set up in a deal between Enron, IBM Corp. and AOL (now AOL TimeWarner), to serve deregulated natural gas and electricity markets, currently serves about 800,000 residential and small business customers in states including Georgia, New Jersey, Ohio, Pennsylvania and Texas.

For the year ending Dec. 31, 2001, NewPower reported revenues of $369.9 million and net losses of $212.8 million before non-recurring items. It also reported net assets of $246 million as of Dec. 31, 2001. NewPower’s net losses “in part reflect the early stage of its business development, as operating expenses and infrastructure investments have substantially exceeded gross profits,” it said in the year-end statement.

Also, NewPower reported that its performance had been “adversely affected in 2001 by operational and switching delays in the Texas market which, combined with volatile energy trading conditions left NewPower with commitments to purchase commodity at prices well in excess of subsequent market levels. The volatility also reduced the credit available to NewPower in the market.”

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