Attached files
| file | filename |
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| 8-K - FORM 8-K - ADA-ES INC | d430335d8k.htm |
| EX-99.2 - PRESS RELEASE, ADA-ES, INC. PROVIDES OPERATING UPDATE - ADA-ES INC | d430335dex992.htm |
 NASDAQ:
ADES www.adaes.com
Reducing Emissions From Coal-Fired Power Plants
November 2012
Exhibit 99.1 |
 SAFE
HARBOR
-2-
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; 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 laws and
regulations and legal challenges to or repeal of them; interpretations of Section 45
tax credit regulations by the IRS adverse to our RC business; 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;
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. |
 A leader in
control technologies to reduce mercury emissions from coal-fired electric power generators
Three distinct business segments provide a portfolio of proprietary, low CAPEX
technologies (equipment and chemicals) that allow utilities to meet stringent
U.S. Government pollution control mandates Refined Coal
Emissions Control
CO
2
Capture
technology development business partnering with U.S. DOE, Electric Power Research
Institute (EPRI) and Southern Company
Enhanced Coal offers long-term revenue potential
Recent acquisition of the assets of Bulk Conveyor Systems, Inc. adds dry sorbent injection
(DSI) experience and security to supply chain for equipment business
Expect substantial improvements and growth in revenue, income and cash flows
Adequate cash position, modest debt profile
-3-
business meeting demand created by Mercury and Air Toxics Standard (MATS)
regulation (April 2012)
business
driven
by
Section
45
Tax
Credits
of
$6.47
/
ton
(2012
rate)
of
coal
burned
for
10 years, ending 2021 |
 -4-
Up to 28 RC facilities
operational / monetized
by 2014
MATS response by
utilities
ADA maintaining 35%
market share
DOE Contracts
CO
Capture
Pilot
Plant
MATS and License with
Arch Coal
ACI/DSI
(1)
1) RC 2014 and 2018 amounts exclude RC coal sales revenues
$40.3
$10
$1.3
$3.1
$200
$100
$10
$4
$216
$35
$50
$25
$0
$100
$200
$300
Refined Coal
Emissions Control
Equipment
Enhanced Coal
2011 (A)
2014 (E)
2018 (E)
CO
Capture
2
SEGMENT REVENUES
(2011) + OUTLOOK
(ANNUAL
REVENUE
$
IN
MM)
2 |
 COAL
ENERGY
The United States has enough coal to last 200
years, based on current production levels
1,200 existing coal-fired power plants
generate the majority of the nation’s
electricity, and consume ~ 900 MM tons of
coal each year
Coal expected to provide ~ 40% of America’s
electricity in 2035
11 new coal-fired power projects currently
have permits and are expected to begin
construction in the next year
In order to maintain its leadership position,
coal
must
burn
cleaner
EPRI
estimates that the coal-fired power
industry will invest $275 billion in retrofits
through 2035
Source: U.S. EIA, March 2012
SOURCES
OF
U.S.
ELECTRICITY,
2011
-5-
1%
Coal
Natural Gas
Nuclear
Renewables
Petroleum
The energy in America’s recoverable coal reserves
is equivalent to 1 trillion barrels of oil –
about equal to the world’s known reserves
|
 Wet Scrubber
$100 MM+
ADA’s ACI = $1.0 MM
ADA’s DSI = $3.0 MM
Refined Coal
$0 cost to utility
Enhanced Coal
No capital equipment
$2.0 -
$4.0 MM / year in higher
producer fuel cost
Benefits of $1.0 -
$4.0 / ton of
Western Coal burned
-6-
Emissions Control Equipment
(NO
x
, SO2, Particulate)
ACI System for
mercury
ADA’s offerings do not require 10-20 years of extended plant life to justify
purchase Trades variable operating expenses for fixed capital costs
Allows continued operation of plants that may otherwise be considered for closure
|
 PORTFOLIO OF
EMISSIONS
CONTROL
SOLUTIONS
-7-
Enhanced Coal
Refined Coal
Flue Gas
Conditioning
Activated Carbon
Injection (ACI)
Dry Sorbent
Injection (DSI)
Scrubber
Additive
Filter or ESP
SCR
DeNOx
Air
Preheater
Steam
Generator
Flue Gas Desulfurization
(FGD) Scrubber
Coal
Bunker |
 REFINED COAL
IS
PROVIDED
THROUGH
JV
CLEAN
COAL
SOLUTIONS, LLC
-8-
REFINED
COAL |
 -9-
REFINED
COAL: INTRODUCTION
&
OVERVIEW
The
American
Jobs
Creation
Act
of
2004,
Section
45:
contains
provisions
to
incentivize
the
production
of
pollution
mitigating
Refined
Coal
(RC)
via
escalating
tax
credits
per
ton
of
coal
burned
CyClean™
and M-45™
technologies:
ADA
provides
on-site,
proprietary
pre-treatment
to
Powder
River
Basin
(PRB)
and
Lignite
coals
that
reduces
mercury
by
40%+
and
NOx
emissions
by
20%+
when
that
coal
is
burned
M-45
technology
for
use
in
circulating
fluid
bed
boilers;
CyClean
technology
for
cyclone
boilers
June
2010:
Clean
Coal
Solutions
(“CCS”)
commences
operations
at
first
two
RC
facilities
December
2010:
Congress
extends
“
placed-in-service”
deadline
for
new
RC
facilities
to
12/31/11
January
-
December
2011:
CCS
fabricates,
installs
and
“places-in-service”
26
additional
RC
units
able
to qualify
for
Section
45
tax
credits
2012
-
2014:
CCS
focused
on
capturing
the
value
of
Section
45
tax
credits
opportunity |
 -10-
REFINED
COAL:
MONETIZING
SECTION
45
TAX
CREDITS
Tax equity structure with partners
monetizes Section 45 tax credits
Clean Coal Solutions JV:
Created in 2006
Goldman Sachs affiliate acquired 15%
interest in May 2011 for $60 MM.
Investment recorded as “Temporary
Equity”
on ADA’s balance sheet.
Each RC facility can be monetized
(leased or sold) to generate ongoing
revenue, or operated by CCS for tax
credit benefit to offset future tax
obligations
NEXGEN
42.5%
ADA
42.5%
GOLDMAN
SACHS
15%
CLEAN
OWNERSHIP
STRUCTURE
COAL
SOLUTIONS
JV |
 -11-
Requirements to commence
operations:
Operating permits obtained
from each relevant state
Approval from Public Utilities
Commissions (PUC) in
regulated states
Approval from coal and
transportation companies
Approval from plant owners
Contracts negotiated and
signed among CCS, financial
institutions and power
companies
3 monetizers currently
engaged
Working with additional
monetizers for new RC
facilities
Utility
Receives:
value of
$1.00 -
$4.00 / ton for
emissions reduction
Cash of $1/ton from monetizer
Monetizer
Receives:
(a)$6.47 tax credit through RC
Pays:
$1/ton to utility, ~$2/ton for
operating expenses and
$3+/ton to CCS
Receives:
$3+/ton in consolidated rental
revenue, net $1.50-$2/ton to ADA of
pre-tax income after payments to
ADA’s JV partners
REFINED
COAL: MONETIZATION
DYNAMICS
production, and (b) tax deductions for
rental, utility and operating expenses |
 CCS will often
operate an RC facility, retaining the tax credits, prior to monetizing that facility
with a third party $7.50 /Ton
$40 /Ton
($3)
/Ton
-12-
Value of Tax Credits and Benefits
Current Period
Retaining Tons and Tax Credits
Operating Cost
-$40
-$30
-$20
-$10
$0
$10
$20
$30
$40
Tax Benefit Per Ton of Coal Sales
Per Ton Coal Cost
Per Ton Coal Sales
($40)
/Ton REFINED COAL:
FINANCIAL RESULTS OF RETAINING
TONS AND TAX CREDITS |
 REFINED COAL:
STATUS UPDATE
Goal 2014
Proportion of Refined Coal Produced that is Monetized
28 Total
RC Units
Operating YTD 2012
-13-
Operating by 2014
2012
2014
20
21
60
8
28
0
20
40
60
Run Rate Tons
of RC Produced
YE 2012
2014
70%
30%
20%
80%
Retained
Monetized |
 -14-
$20.1
$20.2
$106.5
$27.1
$150
$40
$300
$200
$7.0
$1.5
$3.0
$10.7
$16
$6
$30
$70
2011
2014-2021
(E)
YTD
9/30
2012
(E)
$500
$8.5
$40.3
$190
$22
$100
$13.6
2011
2014-2021
(E)
YTD
9/30
2012
(E)
Coal Sales
Rental Revenue
$133.6
Segment Income
Tax Credits
Equivalent Annualized Tons
2011
YTD 9/30
2012
2014-2021
7
20
21
60
Includes consolidated revenues from CCS Joint Venture
Data and projections for ADA-ES only (excludes non-controlling interests)
R
EFINED
C
OAL
P
ROGRESS
($
IN
MM) |
 Progress
being
made
on
several
fronts
that
have
the
potential
to
expand
ADA’s market:
Two M-45 systems currently in operation on Gulf Coast Lignite
One
CyClean
system
currently
in
operation
on
North
Dakota
Lignite
Progress in modifying technology for bituminous coal that could expand
market for both M-45 systems and CyClean systems
Testing underway on development of a new RC technology for Pulverized Coal
Boilers
Validation would allow ADA’s existing RC facilities to be used on a class of boiler that
burns significantly more coal than circulating fluid bed and cyclone boilers.
-15-
UPDATE
ON
REFINED
COAL
ACTIVITIES |
 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
Reduces mercury emissions by up to 90%
Work in progress at June 30, 2012 of $4.5MM
MATS is expected to generate new market of $500-600MM 2012-2015
-16- |
 New
environmental regulations creating demand for control of acid gases such as
HCI, SO
2 ,
and
SO
3
ADA provides 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-
CONTROL
OF
ACID
GASES
HCI,
SO
2
,
SO
3 |
 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
–
40% market share of DSI systems
–
Active bids on over $100 MM in DSI systems
Serves the electric and water/wastewater
utility sector
50 employees and 175,000 sq ft of
fabrication and office space
Will solidify ADA’s position in DSI market and
expand manufacturing capabilities for ACI
systems
-18-
ACQUISITION OF THE ASSETS OF BULK
SPECIALISTS (BCSI)
CONVEYOR |
 MATS is
projected to create $500+ MM market for both ACI & DSI Procurement activities have
commenced and ADA is responding to several fleet bids -19-
1) Total Expected Revenue from Estimated Equipment Sales 2012-2015
2) Includes Contracts Awarded But Not Yet Signed
(1)
(2)
$1.0 B
$350 M
$259 M
$30 M
$0
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
$1,100
Estimated Market Size
(2012
-
2015)
Expected Revenue
(~35% Market Share)
Bids Outstanding
Wins
ACI & DSI EQUIPMENT
MARKET
EMISSIONS
CONTROL: |
 Patented
technology designed to enable Western coals to burn with lower mercury emissions
–
U.S. burns up to 600 MM 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: states with mercury regulations already in place
MATS expected to expand market by 2015
-20-
MERCURY CONTROL: ENHANCED COAL |
 CO
2
-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
CAPTURE:
OVERVIEW |
 FINANCIAL RESULTS
OVERVIEW |
 -23-
3
rd
Quarter 2012 Financial Results To Be Released Nov. 7
th
Cash available at the end of Q2: $23.1 MM
No debt
Self monetization has a dominating impact on GAAP Income
Statement
~$59 MM of 3rd Quarter revenues are due to coal sales relating to
retained RC facilities, which drive revenue growth
~$8 MM of 3
Quarter operating expenses are due to ~2.5 million
retained tons
Financial benefit of tax credits generated will not show up until future
quarters
FINANCIAL
SUMMARY: YEAR
TO
DATE
2012
rd |
 BALANCE
SHEET HIGHLIGHTS
As of 6/30/12
As of 12/31/11
Cash & Cash Equivalents
$23.1 MM
$40.9 MM
Shares Outstanding
10.0 MM
10.0 MM
-24-
REDUCTION
IN
CASH
REFLECTS
BUILD
OUT
OF
RC
FACILITIES |
 KEY
TAKEAWAYS
RC opportunities expected to provide significant growth in
revenues, profits and cash flows in 2012 and 2013, and
consistent revenue streams through 2021
MATS compliance requirements are driving expected >$300
million total equipment revenues for ADA in next 3-4 years
Enhanced Coal technology and royalty opportunity expected
to produce 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 the resources to execute on future opportunities
-25- |
 Mark H.
McKinnies, CFO www.adaes.com
Michael D. Durham, Ph.D., MBA
President & CEO
Devin Sullivan
Senior Vice President
(212) 836-9608
dsullivan@equityny.com
Thomas Mei
Account Executive
(212) 836-9614
tmei@equityny.com
CONTACTS
-26-
(303) 734-1727 |