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| 8-K - FORM 8-K - ADA-ES INC | d393240d8k.htm |
| EX-99.2 - PRESS RELEASE - ADA-ES INC | d393240dex992.htm |
 Creating a
Future with Creating a Future with
Cleaner Coal
Cleaner Coal
Investor Presentation
August 8, 2012
NASDAQ:ADES
www.adaes.com
Exhibit 99.1 |
 Please note
that this presentation contains forward-looking statements within the meaning of Section 21E of the
Securities Exchange Act of 1934, which provides a "safe harbor" for such statements in
certain circumstances. The forward-looking statements include, but will not
necessarily be limited to, statements or expectations regarding future contracts,
projects, demonstrations, operations and technologies; the impact of a restatement; amount and timing of RC
production, revenues, earnings, cash flows and other financial measures; impact of
regulations; future supply and demand; the ability of our technologies to assist our
customers in complying with government regulations; expected growth in and potential
size of our target markets and related matters. These statements are based on current
expectations,
estimates,
projections,
beliefs
and
assumptions
of
our
management.
Such
statements
involve
significant
risks and uncertainties. Actual events or results could differ materially from those discussed
in the forward-looking statements as a result of various factors, including but not
limited to, changes in laws and regulations, government funding, accounting rules,
prices, economic conditions and market demand; timing of regulations and legal challenges to
them; impact of competition; availability, cost of and demand for alternative energy sources
and other technologies; technical, start-up and operational difficulties; inability
to commercialize our technologies on favorable terms; our inability to ramp up
operations to effectively address expected growth in our target markets; failure of the RC facilities to
continue
to
produce
coal
which
qualifies
for
IRS
Section
45
tax
credits;
termination
of
the
contracts
for
such
facilities;
decreases in the production of RC; seasonality; failure to monetize the new CyClean and
M-45 facilities; availability of raw materials and equipment; failure to consummate
the acquisition of the assets of Bulk Conveyor Specialist Inc. and Bulk Conveyor
Services, Inc. (BCSI); difficulties in the integration of BCSI’s operations; loss of key personnel; intellectual
property infringement claims from third parties; and other factors discussed in greater detail
in our filings with the Securities and Exchange Commission (SEC). You are cautioned not
to place undue reliance on such statements and to consult our SEC filings for
additional risks and uncertainties that may apply to our business and the ownership of our
securities. Our forward-looking statements are presented as of the date made, and we
disclaim any duty to update such statements unless required by law to do so.
Disclaimer
-2- |
 Founded in
1997 by Dr. Michael D. Durham; became stand alone public company in 2003 Portfolio of
proprietary, low cap-ex environmental technologies and specialty chemicals that
reduce emissions from coal-fired power plants
Market leader in mercury control technologies
7 of 28 Refined Coal (“RC”) facilities operational, treating an annual aggregate 20
mm tons of coal Additional RC facilities expected to go online in 2012; target 30 mm
tons of coal by year end 2012 Recent Government mandate is a catalyst for future ACI
& DSI Systems growth Company Overview
-3-
Refined Coal
CyClean and M-45 technologies reduce
mercury and NOx emissions and qualify
for Section 45 Tax Credits of $6.47 per
ton for next 10 years
Each facility can be leased or sold to
generate revenue or operated by Clean
Coal for tax credit benefit
42.5% stake in Clean Coal Solutions JV
with NexGen & Goldman Sachs
MATS expected to create $1 BN market for
low cap-ex technologies
-
Activated Carbon Injection: control mercury
-
Dry Sorbent injection: control acid gases
Enhanced coal treatment technology to reduce
mercury emissions; licensed to Arch Coal
Developing technology to capture CO2
from flue gas in coal-fired boilers
Ongoing partnership with Department
of Energy and Southern Company
Emissions Control Systems
CO
2
Capture
1H 2012 Segment Revenues |
 EPA’s
Mercury and Air Toxics Standard (MATS) became final on April 16, 2012
–
Requires 1,200 power plants to reduce emissions of mercury and acid gases by 2015
–
EPA predicts this will create a >$9 billion per year market for emissions
control Commencing vertical integration process with pending acquisition
of BCSI
10 million shares outstanding
Investment Highlights
-4-
2011
First two RC facilities
generate $20 mm in
revenue and $7+ mm
in segment
income for ADA
26 additional RC units
are placed-in-service
by ADA
2012
Seven RC units currently
operating
Negotiations ongoing to
monetize several
additional facilities
Expect segment income
run rate of ~ $50 mm
by year end
2013
Expect remaining RC
units to be monetized
Opportunity to produce
up to $100 million in
annual segment income
(2014 –
2021)
Significant revenue growth expected in 2012 and 2013 from Refined Coal (RC)
|
 ADA’s
Emissions Solutions for the Existing Fleet
-5-
Supply emissions control technologies based upon minimal capital
cost for new equipment – Doesn’t require 10-20 years of extended plant life
needed to justify large equipment costs Low CAPEX alternatives trade variable operating expenses for fixed
capital costs
–
Allows continued operation of the plants that may otherwise be considered
for closure
Examples for a 250 MW Plant: – High CAPEX: Wet Scrubber $100+ mm – ADA Low CAPEX alternatives – ACI: $1 mm – DSI: $3 mm – RC: Controls mercury at no cost to utility – Enhanced Coal: No capital equipment; $2-$4 mm per year
in increased fuel costs to the power producer with benefits of $1-$4 per ton of
Western Coal burned
|
 -6-
ACI System
for Mercury
ADA’s Low CAPEX Approach to Emissions
Control Technology
Emissions Control Equipment
(NO
x
, SO
2
, Particulate) |
 Emissions
Control Solutions Enhanced Coal
Refined Coal
Flue Gas
Conditioning
Dry Sorbent
Injection (DSI)
Activated Carbon
Injection (ACI)
CEMS
-7- |
 Refined Coal is
Provided through JV Clean Coal Solutions, LLC |
 Clean Coal
Solutions (CCS) Clean Coal Solutions (CCS) : ADA JV with NexGen Refined Coal
LLC –
Goldman Sachs affiliate bought 15% interest in May 2011 for $60 mm. Their
investment is recorded as Temporary Equity on the balance sheet.
CCS markets two coal pre-combustion technologies developed by ADA that qualify for
IRS Section 45 RC tax credits of $6.47 per ton of RC until 2021
–
Reduces mercury emissions by >40% and NOx emissions by >20%
Third parties lease or buy RC facilities from CCS converting tax
credits to revenues
In 2011, first two RC facilities generated $20 mm in revenues and $7 mm in segment
income for ADA
-9- |
 -10-
Tax
benefits
42.5%
42.5%
15.0%
Unprocessed
coal
Refined
coal
$1/ton
produced
CCS, LLC
CCSS
(50%NG/50% ADA)
not consolidated
Terms:
•
Monetization Rate: $/$ of TC
•
Pre-Paid Rent: $/ton
CCS Project Monetization
Overview
$6.47/ton tax credit plus
accelerated depreciation
Tax Financing
Party
Utility
Plant
Operator
Nex
Gen(NG)
ADA
Goldman
Sachs |
 In December
2010 Congress extended deadline to install new RC facilities until
year-end 2011
CCS installed and operated 26 new RC facilities ahead of the year-end deadline
New facilities are expected to begin operating full-time in 2012 and 2013 after:
–
Operating permits obtained from each relevant state
–
Contracts negotiated and signed among CCS, financial institutions and power companies
Working with multiple monetizers for new systems
By the end of 2012, new and existing facilities leased or sold to others are expected to
begin to:
–
Create >$100 mm in revenue per year for ADA through 2021
–
Produce up to $50 mm in segment income per year for ADA through 2021
Some facilities will be operated by CCS to reduce tax burden from RC profits
Remaining facilities expected to be put into operation in 2013 that will have the
potential to double RC generated revenues and cash flows from the end of 2012
projections stated above
-11-
2011 Refined Coal Facilities |
 Currently 7
facilities are in full-time operation, treating coal for 14 boilers that
cumulatively average over 20 million tons per year
–
4 facilities that treat an average of 11 million tons per year are fully permitted and
monetized (3 with our initial monetizer and 1 with a new monetizer)
–
2 facilities treating 8 million tons per year are currently being operated by Clean
Coal, generating tax credits for its own use. In the next few weeks to months,
these 2 facilities are expected to be leased and monetized, one by a new third
monetizer –
The 7
th
facility expected to be operated by Clean Coal for the long-term to generate tax
credits for its own use
An 8
th
facility treating 3 million tons per year has finalized monetization contracts and
permit has been granted; waiting for PLR and PUC approval before full-time
operation Negotiation on monetization of several other facilities in progress
Progress being made on several fronts that have the potential to
expand the market
–
2 M-45 systems currently in operation on Gulf Coast Lignite
–
1 CyClean system currently in operation on North Dakota Lignite
–
Progress in modifying technology for bituminous coal that could expand
market for both M-45 and CyClean
-12-
Update on RC Activities |
 During the
quarter, Refined Coal was produced at 7 facilities now running full time
Three facilities which are fully monetized produced ~ $10 million in rent
revenues
–
More than double the 2Q 2011 RC rent revenues
During the quarter, four facilities operated by Clean Coal generated:
–
~ $7.5 million in Tax Credits that can be used to offset future tax expenses
–
~ $38 million in revenues for coal sales (offset by $38 million in coal costs)
Progress on year-end goal of achieving a run rate of $50 million in RC
segment income
–
By the end of Q3, we expect to have 8 facilities operating, with
7 of them fully
monetized representing approximately 70% of our year-end goal
-13-
2Q 2012
RC Segment Financials |
 Emissions
Control Systems |
 ADA Commercial
ACI Systems > 20 GW Sold for Mercury Control
Installed/installing ACI systems on 55 boilers at coal-fired power plants
–
Over 35% market share of 159 boilers served for mercury control from power plants
Ability to reduce mercury emissions by up to 90%
ACI and DSI systems expected to generate more than $300 million
in
revenues for ADA (2012-2015)
-15- |
 Emissions
Control: Growth Expected in ACI Equipment
•
MATS is expected to create $500+ MM market for ACI
•
Procurement activities have commenced and ADA is
responding to several fleet bids
E
-16- |
 Control of Acid
Gases HCl, SO
2
, SO
3
New environmental regulations creating
demand for control of acid gases such
as HCI, SO
3
, and SO
2
ADA provides dry sorbent injection (DSI)
systems as a low-cost option to wet
scrubbers
Equipment costs $2-3 mm for average
size plants
EPA predicts over 200 systems will be
needed by 2015
ADA awarded first contract for DSI
in 2012
-17- |
 ADA Plans to
Acquire Bulk Conveyor Specialists (BCSI)
-18-
BCSI is a fabricator of bulk material
handling equipment and systems located in
McKeesport, PA
A leading provider of DSI systems to coal fired
power plants Serves the electric and water/wastewater
utility sector
Has 50 employees and 175,000 sq ft of
fabrication and office space Will solidify ADA’s position in DSI market space
and expand manufacturing capabilities for ACI
systems
|
 Mercury Control:
Enhanced Coal Designed to enable Western coals to burn with lower
emissions of mercury
–
U.S. burns up to 600 million tons of Western Coal per year
$1.00-4.00/ton in benefits to customer
Technology has been licensed to Arch Coal to apply to
their PRB coals at the mine
–
Royalty agreement –
payments to ADA of up to $1.00/ton
based on a portion of the premium paid on Enhanced Coal
sales
ADA retained rights to apply technology at power
plants
Initial market is in states with mercury regulations
already in place
Expanded market expected to develop by 2015 as a
result of the MATS
-19- |
 Technology |
 CO
2
Capture
-21-
Developing solid sorbent capture technology to
capture CO
2
from flue gas in conventional coal-fired
boilers
DOE and industry funding:
–
Phase I -
$3.8 mm R&D at 1 KW pilot plant
–
Phase II -
$20.5 mm, 51-month contract to scale-up
technology to 1 MW
–
Entered Fabrication and Construction phase of 1 MW plant
in June 2012, estimated completion in October 2013
Advantages over competing technologies:
–
For customer: lower cost and less parasitic energy
–
For ADA: continuous revenues from sale of proprietary
chemical sorbents |
 Financial |
 Summary of Q2
Financial Results 2
nd
Qtr. Ended
6/30/12
2
nd
Qtr. Ended
6/30/11
Year Ended
12/31/11
Year Ended
12/31/10
Total Revenues
$52.5 MM
$7.0 MM
$53.3 MM
$22.3 MM
Gross Margin
14%
74%
46%
61%
Gross Margin
Excluding Rev.
and Cost related
to retained tons
81%
74%
73%
61%
Operating Income
(Loss)
$1.6MM
($2.3) MM
$3.0 MM
($21.0) MM
-23-
NOTE: We expect that the financial results shown above and on the following page will not be
impacted or changed as a result of any restatement regarding our tax deferred tax assets or the
reclassification of the equity held by the minority investor in Clean Coal.
|
 Balance Sheet
Highlights As of 6/30/12
As of 12/31/11
Cash & Cash Equivalents
$23.1 MM
$40.9 MM
Cash & Cash Equivalents
per Share
$2.31
$4.09
Shares Outstanding
10.0 MM
10.0 MM
-24- |
 1.
The investment by Goldman Sachs for a 15% equity ownership in Clean Coal Solutions in May 2011
will be reclassified to “Temporary Equity”
a)
Impact on our balance sheet will include new Temporary Equity line that is embedded between
Liabilities and Stockholders’
Equity.
2.
Company
has
been
in
discussions
with
the
Securities
and
Exchange
Commission’s
(SEC’s)
Division
of Corporation Finance and Office of Chief Accountant in regard to its net deferred tax assets
(DTAs). The SEC continues to assert that the Company should have taken a
valuation allowance at the end of 2010 and 2011 and in subsequent periods on its DTAs.
The Company is continuing to review and consider this issue internally to determine the
most appropriate course of action. If a conclusion is reached that full valuation
allowances for our DTAs should have been provided in 2010 and 2011:
a)
Impact on 2010 financials: Net loss for the year will increase from $15.5 million to
$31.1 million and assets will decrease $15.6 million.
b)
Impact
on
2011
financials:
Net
loss
for
the
year
will
increase
from
$19.9
million
to
$22.9
million
and
assets will decrease $3 million.
c)
The NOLs and tax credits that comprise the bulk of our DTAs would still be available
for the Company to use in the future. If in a subsequent fiscal period we reduce such
allowances, our net loss would decrease, or net income would increase, for such
periods to the extent of such reduction. 3.
Above will have no cash impact to the Company.
-25-
Restatements of 2010
and 2011 Financials |
 Summary
RC opportunities expected to provide significant growth in
revenues, profits and cash flows in 2012 and 2013
MATS compliance requirements are driving expected >$300
million total equipment revenues for ADA for next 3-4 years
Enhanced coal royalty opportunity expected to add additional
growth in 2013 to 2015 and beyond
Developing solid sorbent capture technology to capture CO
2
from flue gas in conventional coal-fired boilers
Available cash on balance sheet and expected cash flows from
RC provides us with the resources to execute on future
opportunities
-26- |
 A Leader in
Clean Coal Technology ©
Copyright 2012 ADA-ES, Inc. All rights reserved.
NASDAQ:ADES |