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                                                                   EXHIBIT 99.01

August 15, 2002



Dear Shareholders,

Environmental Power Corporation ("POWR") reported that for the six months ended
June 30, 2002 ("2002'), power generation revenues were $26,090,461 and net
income was $24,141 or 0 cents per share. For the corresponding six months ended
June 30, 2001 ("2001"), power generation revenues were $25,579,769 and net
income was $770,466, or 7 cents per share. The average outstanding shares used
to determine basic earnings per share were 20,144,423 shares in 2002 versus
11,406,783 shares in 2001.

Shareholders should bear in mind that the 2nd Quarter traditionally is the
period in which we shut down for annual maintenance and incur losses for the
period. POWR reported that for the three months ended June 30, 2002 ("2002'),
power generation revenues were $11,977,205 and we incurred a net loss of
($1,742,509) or 9 cents per share. For the corresponding three months ended June
30, 2001 ("2001"), power generation revenues were $12,096,878 with a net loss of
($217,471) or 2 cents per share. The average outstanding shares used to
determine basic earnings per share were 20,038,591 shares in 2002 versus
11,406,783 shares in 2001.

When reviewing the "numbers", it is critical to separate the results our two
business segments - Scrubgrass Generating Facility ("Scrubgrass") and Microgy
Cogeneration Systems, Inc. ("Microgy") - in order to gain a clearer picture of
our true financial performance. Scrubgrass, the 83MW waste coal fired generating
facility in which we own a 22-year leasehold interest, is a profitable,
established business. Microgy, our new anaerobic digestion enterprise that we
expect will profitably produce renewable energy from extracted methane gas found
in animal wastes, is a development stage business with an estimated target
market of approximately $14 billion, with an initial target market of $7
billion. Basically, nearly all of our profits and cash flow from Scrubgrass are
being used to build Microgy. Although, in the short run our profits are
depressed when compared to the prior year, we believe that this is reflecting an
investment in the future which will greatly increase shareholder value in the
long term.

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When looking at our business segments before consolidation, Scrubgrass generated
revenues of $26,090,461 for the six months ended June 30, 2002 as compared to
$25,579,769 for the comparable period in 2001. Scrubgrass had strong net income
before consolidation of $1,137,708 for the six-month period ended June 30, 2002
as compared to $110,392 for the comparable period in 2001. Additionally,
Scrubgrass provided gross cash flows to us of $3,776,536 for the six-month
period ending June 30, 2002 as compared to $610,232 for the comparable period in
2001. Both low interest rates and the solid operating performance of the plant
drove these strong results. Scrubgrass's performance for the most recent quarter
was similarly impressive.

As previously mentioned, Microgy is a development stage business and EPC's
general and administrative expenses for the combination of our corporate
overhead and Microgy expansion costs were $1,718,505 as compared to $707,877 for
the comparable six month periods in 2002 and 2001. The 2001 period did not
include Microgy costs.

As reiterated many times to shareholders, we see great potential in the
generation of electricity from agricultural wastes and, in accordance with our
business plan, are making large investments of both our human capital and our
financial resources to bring that potential to economic reality. Despite very
difficult energy and capital markets and a hostile business environment, much
has been realized. First, we have succeeded in executing a very important
long-term power contract in Wisconsin, one of our strategic markets, and are in
active negotiations for others. Further, we have signed 6 Wisconsin farms to
conditional letters of intent and have begun engineering. We are confident that
other farms will follow. We have also tightened up our construction estimates
and have made considerable progress toward arrangements with important
construction contractors, who will build the facilities at these farms and
others. Finally, we are working very actively to finance this multi-farm
Wisconsin project and are encouraged, despite a very difficult project finance
environment.

Concurrently, we have strengthened our corporate staff and leadership. Most
importantly, the shareholders in July elected three very capable new directors
along with highly valued incumbent directors to our Board. We have only 2 of 8
directors who are members of management and, of

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the 6 outside directors, one is former CEO of a major utility, another is
recently a California utility commissioner, two are former presidents of major
lending institutions, another is the former Undersecretary of the United States
Department of Agriculture and the final outside director is currently the
Chairman of the largest dairy coop in America. These are not only prestigious
individuals but experienced experts with skills and resources in areas critical
to POWR's success.

We have also built key staff with the addition of Ed Chapman, Senior Vice
President, formerly head of tax exempt project finance at Goldman Sachs; Jeff
Macartney, CFO, who formerly served at Pitney Bowes and Wally Long, Vice
President, formerly of R.W. Beck. These men greatly strengthen our capability in
key disciplines and, along with others to come, will constitute the core from
which our business can expand rapidly to meet the demands of our markets.

We believe that our successes to date and to follow are and will continue to be
largely attributable to our business focus: "Doing Well by Doing Good." In this
environment, it helps us overcome the general distrust in the business community
and may even encourage better transaction terms because we do "good" in the
regions where our business partners live and work.

At POWR, we believe deeply in the free enterprise system and the ability and
efficiency of profit driven, private sector businesses to serve the demand for a
better environment. POWR is at the confluence of the markets for two major
environmental solutions: waste management at concentrated animal farms and clean
air from renewable energy. Both of these markets have exceptional potential for
growth and both, to date, mostly have been the province of marginal,
experimental, government subsidized solutions. We believe that our anaerobic
digestion electricity product will be competitive with all other sources of
electric generation, not just subsidized renewables. We believe that our
agricultural waste solutions will be profitable to farmers rather than
alternative solutions which are costly, even if government assisted. We believe
that the free enterprise system will work here and that we can grow dramatically
and profitably from it.

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"Doing Well by Doing Good" is our mantra and we believe it will be the focus of
many businesses of the 21st Century. As a result of huge pressure on businesses
and their leaders to act responsibly, as well as rampant demand for solutions to
social problems that go beyond providing goods and services to individuals and
institutions, we believe we should and will see free enterprise turn toward
these "opportunities". The profit motive is a powerful one and new dynamic
markets are profits' seminal source. Add the desire and need for business to
re-establish its reputation and rightful role of leadership in our society and
you have the recipe for a new, 21st century business paradigm. Little EPC
believes it has found its place in this movement and can and will lead in its
market sectors, which the Company believes to have the potential to be
approximately $14 billion, with an initial target market of $7 billion.

Please keep an eye on our website and watch for our new releases. We remain
committed to providing our investors with timely, appropriate information about
our Company and its progress. Also, feel free to contact us ad we will make
every effort to respond to your questions and inquiries `subject to securities
law restrictions."

Sincerely,

/s/ Donald A. Livingston                      /s/ Joseph E. Cresci

Donald A. Livingston, President               Joseph E. Cresci, Chairman and CEO



