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To Stellarstocks Subscribers:

Here is our May Profile:

As always, this edition contains just the highlights on the Company.  To read a more detailed profile, please click on the link at the end, and a web page will open with the full Profile.

Engineering Power Systems Limited (OTC BB: EGPDF)

• Stock Symbol: EGPDF
• Exchange: OTC Bulletin Board
• Share Issued and Outstanding: 12.12 million (5/99)
• Approximate Public Float: 3.2 million (5/99)
• 52 Week High/Low: $.875 x $10.40
• Closing Price and Volume: $1.90 bid, $1.94 ask: 45,500 shares traded
• Market Capitalization: $23 million
• Corporate Web Site: www.epsx.com
• Corporate Profile: http://www.epsx.com/corp_profile.html
• Engineering Power Systems mailing list: Click Here (please register if you have an interest in this company)

• Current revenue run rate is $40 million(CDN) annually.  The business, as it exists today, is probably worth considerably more than the current level of the stock (just under $2 at the date of publication).
• With 12.12 million shares issued and outstanding, the $2 level places a $24 million value on the Company.  $40 million in annual sales and a $24 million valuation is grossly out of proportion, suggesting much higher levels for this stock in the future.
• If they are successful in launching their current project, the Company will skyrocket to over $200 million in high margin sales.  From a risk/reward perspective, this is one of the most exciting opportunities any of our editors have ever come across.

In July of 1997, Engineering Power, through its subsidiaries, signed a contract to build, own, and operate two barge mounted power plants which will be built to provide electrical power in Kakinada, Andhra-Pradesh, India.

Power Barges are electrical power generating plants that are built on a barge platform in a ship yard, and then delivered to a location where they are permanently moored.  Constructions costs are considerably lower than building a land based power plant.

After nearly two years of development time, the project looks as if it will finally get underway this summer.  The beginning of this project means the following to shareholders of Engineering Power:

• The Power Barge project will take approximately 13 months to complete, and the cost of the project will be over $200 million.  Nearly all of this revenue will flow to Engineering Power.
• This means that in fiscal 2,000 (JULY 1), Engineering Power has the potential to enjoy over $200 million in revenues.  This is the type of growth, that when recognized by Wall Street, lends itself to huge price increases in stock values.
• Once completed and operational, Engineering Power estimates that the two barges will generate approximately $60 million in annual revenues.  It is anticipated that Engineering Power will own 50% of the ongoing operation once deployed.
• This is not new technology.  There are currently two electric producing power barges located on the Hudson River owned by New York Edison, and numerous other power barges around the world.  Enron (NYSE: ENE) has a power barge in Puerto Rico.  If you wish to learn more about their specifications, link to their web site by clicking on Barge Pictures.

With the contract in hand in the summer of 1997, Engineering Power went out and raised $5 million in two private placements of its stock.  The holders of these shares have a cost basis of over $20, which is 1/10th the current market for the stock. Click Here to read the press release.

The next step for Engineering Power was to find a strategic partner with long standing credibility and international contacts to create a joint venture to pursue the project.

Strategic Alliances

Engineering Power recognized early on that the completion of this project would require some strong strategic alliances.  The following relationships have been established to execute the Power Barge Project:

• Everen Securities, the 12th largest brokerage firm in the US, was retained as their investment banker in September of 1997. Everen has been instrumental in arranging some strategic alliances, which position Engineering Power to launch this project in 1999.   Click Here to read the press release.
• SNC Lavalin, a multi-billion dollar International engineering and construction firm with extensive experience in India will supervise the construction and installation of the power barges as their joint venture partner on the Engineering Procurement & Construction contract. Click Here to read the press release.
• On July 2, 1998 CMS Energy (NYSE: CMS) announced the formation of a joint venture with Engineering Power to develop, finance, construct, own, and operate barge mounted electrical generating units throughout the world.  CMS is the 4th largest utility in the US.  They are the 7th largest independent power producer in the world.  They have $10 billion in assets, and do $5 billion in sales.  They operate in 21 countries, and own the largest independent power plants in North America, Australia, and Africa.  They were the first independent power producer to generate electricity in India.  Click Here to read the press release.

Discussions with senior management at the Company reveal that Engineering Power plans to begin construction of the power barges later in 1999.  The final regulatory review and permitting by the Indian Government is underway. Engineering Power's subsidiaries will be handling the following parts of the project:

• Merlin Engineering of Norway is working on the blue prints and design engineering, and Engineering Power has already invested nearly $4 million in this phase of the project.
• Atlantic Seaboard Industries, another subsidiary, owns the shipyard where the power barges will be outfitted in Port Aux Basques, Newfoundland.
• M & M Engineering, a third subsidiary, will perform the installation of the power generating turbines.

The Future of Power Barges and CMS Energy

Looking out further this story becomes even more exciting.  The Joint Venture agreement between Engineering Power and CMS Energy (NYSE: CMS) calls for each company to have the first right of refusal to jointly build, own, and operate additional barge mounted power plants internationally.  If you, as a shareholder, can visualize Engineering Power  five years from now, owning 50% of ten or twenty of these barges, pumping power to third world countries around the Globe, the potential price of the stock goes into the $20 to $50 range, depending on any number of events that can occur between now and then.

Our mission at www.stellarstocks.com is to find small, undiscovered companies with businesses that have the potential to provide enormous returns to shareholders.  Here are the key features of Engineering Power:

• On a year-to-year basis, the Company we present you with today has gone from revenues of $7 million, to $30 million, to $40 million, to what could be over $200 million in just over four years.
• They have entered into a business in partnership with CMS Energy (NYSE: CMS), a Company that has nearly $10 billion in power generation assets.
• They have entered into a partnership with SNC Lavalin, a multi-billion dollar construction and engineering firm.
• They have entered into a business that has billion dollar potential over the coming years.

Financial Strength and Growth Potential

Engineering Power's 1998 audit showed $29 million is assets, and $5.6 million in shareholders' equity.  Sales for fiscal 1998 came in at $33 million (CDN), with losses of $4.3 million.  Of those losses, $3.1 million were directly attributable to pre-paid development costs for the Power Barge Project.

To get to the financial statements of Engineering Power Click Here.

The future of the Company revolves around the Power Barge Project.   Over $200 million needs to be invested to bring this project to completion.  The project will be funded as follows:

• 50% of the project will be vendor financed.  This means that suppliers who manufacture the components that go into the construction of the Power Barges will be providing loans.
• Export Credit Agencies can provide capital and/or loan guarantees for about $100 million, which will require a down payment of 15%.  These are government agencies designed to help promote commerce in their regions.
• Management estimates that the Joint Venture between Engineering Power and CMS Energy (NYSE: CMS) will provide somewhere between $30 to $40 million to complete the project.  This should be easily accomplished when you consider that your partner has over $10 billion in assets.
• Once financed and started, most of the revenues generated by the cost of building the power barges flow to Engineering Power and its subsidiaries.  Management estimates that there will be a profit margin of about 15% on the $200 million project.  Engineering Power's share could equate to $15 million in profits during the construction phase.

There are about 12.2 million shares issued and outstanding on Engineering Power.  At $2 per share, the stock market places a value on this Company of $25 million.

If Engineering Power can successfully put all the pieces of this project together, and begin building the power barges in mid 1999, the Company could potentially earn $15 million during the construction phase of the power barges.  This equates to approximately $1.22 per share in earnings.  The PE multiple for the S&P 500 is about 27.  If Engineering does earn $1.22 per share, and the stock were to enjoy the same multiple as the S&P 500, it would trade at nearly $33 per share.

If there are delays or Engineering Power fails to launch this venture, you still have a Company doing over $40 million in annual revenues, which is clearly worth more than $2 per share.

Potential For Institutional Participation In EGPDF

The Company has relationships in place that virtually assure the attention of Wall Street if they are successful in the Power Barge venture.  This profile is the first in a series of public awareness events upcoming to alert the investing community about this Company.  The Management of the Company has a total commitment to have this stock trade above the $4 level in the near term in order to meet the requirements for a NASDAQ listing.  They will be applying as soon as the stock trades above $4, as Engineering Power meets every criteria for listing with the exception of the $4 price.

They have Everen Securities in place as their Investment Banker.  That factor alone would assure them of institutional coverage once they meet Everen's criteria for a recommendation.

The joint venture with CMS Energy (NYSE: CMS) also assures them of a Wall Street following.  There are probably 25 analysts covering CMS Energy (NYSE: CMS).  Once the Power Barge project begins, all these analysts will be aware of Engineering Power's critical role, and we believe it is likely that someone will pick up coverage.

Conclusion

Shares of Engineering Power, adjusted for the four for one reverse split in January, traded near the $20 level two years ago when the Power Barge Project was first announced.  The Company is closer than ever to actually begin the construction phase of the project.  Management feels that all the pieces will be in place by the summer of 1999 pending some final environmental approvals required by the Indian Government.

At today's level, investors can own this stock for 10% of the price sophisticated institutional investors paid nearly two years ago.  It has taken Engineering Power two years to get this close to launching the venture to build the power barges.  Although most of the development work has been accomplished, there could be other delays.  As a shareholder, this is out of your control.

However, as an investor, if you can see the potential this Business has over the next five to ten years, and you can visualize a Company which jointly owns five to ten of these power barges, you should be able to see a huge winner in your portfolio over the long term.  With sophisticated and experienced partners like SNC Lavalin, and CMS Energy (NYSE: CMS), you have to like their chance of launching these power barges.

• 1st Net and InterVu Audience Management Software
• InterVu EyeQ Multimedia Manager

The Stellarstocks.com Newsletter is an independent electronic publication committed to providing our readers with factual information on selected publicly traded companies. All companies are chosen on the basis of certain financial analysis and other pertinent criteria with a view toward maximizing the upside potential for investors while minimizing the downside risk, whenever possible. All statements and expressions are the sole opinions of the editors and are subject to change without notice. This profile is neither an offer nor solicitation to buy or sell any securities mentioned. This newsletter is owned by SSP Management, Inc, a wholly owned subsidiary of 1st Net Technologies, Inc ("1st Net").  While we believe all sources of information to be factual and reliable, in no way do we represent or guarantee the accuracy thereof, nor the statements made herein. The editor, members of the editor's family, and/or entities with which they are affiliated, may own stock in and have other financial dealings with the companies who appear in the publication.  To that degree, this newsletter should not be regarded to be an independent publication.   SSP Management has received the following compensation from Engineering Power Systems: 125,000 options, exercisable at $1.75.  As part if the Agreement, Engineering Power has paid $83,750 in fees for Web-Site development, proprietary database management systems, and Internet Marketing Technologies which have been provided by 1st Net, the parent company of SSP Management. To date, SSP Management has exercised 25,000 options, and as of the date of the release of this profile holds 4,000 shares.  SSP Management reserves the right to exercise its options at anytime, and may sell shares of Engineering Power anytime at its sole discretion.  This should be viewed as a potential conflict of interest.   The Stellarstocks.com critiques may contain forward looking statements relating to the expected capabilities of the companies mentioned herein.

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