Attached files
| file | filename |
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| 8-K - 8-K - Advanced Emissions Solutions, Inc. | d596488d8k.htm |
| EX-99.2 - EX-99.2 - Advanced Emissions Solutions, Inc. | d596488dex992.htm |
| EX-99.3 - EX-99.3 - Advanced Emissions Solutions, Inc. | d596488dex993.htm |
 Investor Presentation
September 2013
www.advancedemissionssolutions.com
©
2012-2013 Advanced Emissions Solutions, Inc.
Exhibit 99.1 |
 This page intentionally left blank
©
2012-2013 Advanced Emissions Solutions, Inc.
-2- |
 This
presentation includes 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 statements or
expectations regarding future contracts, projects, demonstrations and technologies; amount and
timing of production of RC, revenues, earnings, cash flows and other financial
measures; future operations; our ability to capitalize on and expand our
business to meet opportunities in our target markets and profit from our proprietary
technologies; scope, timing and impact of current and anticipated regulations and
legislation; future supply and demand; the ability of our technologies to assist
our customers in complying with government regulations 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,
regulations and IRS interpretations or guidance, government funding, accounting rules,
prices, economic conditions and market demand; timing of laws, regulations and
any legal challenges to or repeal of them; failure of the RC facilities to
produce coal that qualifies for tax credits; termination of or amendments to the
contracts for RC facilities; decreases in the production of RC; failure to lease
or sell the remaining RC facilities on a timely basis; our inability to ramp up
operations to effectively address expected growth in our target markets; inability to
commercialize our technologies on favorable terms; impact of competition;
availability, cost of and demand for alternative tax credit vehicles and other
technologies; technical, start-up and operational difficulties; availability of raw
materials and equipment; loss of key personnel; intellectual property
infringement claims from third parties; seasonality 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. We refer to certain non-GAAP financial measures in this
presentation. Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures can be found within this
presentation. SAFE HARBOR
©
2012-2013 Advanced Emissions Solutions, Inc.
-3- |
 ADA-ES, Inc.
100% owned ADES
BCSI, LLC
100% owned ADES
Clean Coal Solutions, LLC
42.5% owned ADA-ES, Inc.
Operating Companies
CORPORATE
STRUCTURE
(EFFECTIVE JULY 1, 2013)
©
2012-2013 Advanced Emissions Solutions, Inc.
-4- |
 A
family of companies that has been providing emission control solutions to the
power industry for more than 30 years ADVANCED EMISSION SOLUTIONS
©
2012-2013 Advanced Emissions Solutions, Inc.
-5-
Portfolio of proprietary, low CAPEX technologies to meet pollution control
mandates. 19 patents issued or allowed
Customers include most of the leading electric power companies
Strong
and
growing
cash
flows
from
Refined
Coal
business
through
2021
(CCS)
Emission Control at early stage of compliance ramp. Near-term equipment
market, longer-term consumables supply market (ADA and BCSI)
10M shares outstanding, no significant LT debt, $12.3M in cash at 2Q13 which
does
not
include
more
than
$14M
in
lease
prepayments
received
by
CCS
joint
venture in late July |
 Near-term growth opportunities
Refined Coal
Creates $1B equipment
market
ADA leading provider of
equipment to meet MATS
Activated Carbon Injection
Systems
Dry Sorbent Injection
Systems
Equipment backlog buildup
MATS to create annual
market of $1-$2B for
consumables to control
mercury (e.g. AC,
chemical enhancements)
ADA offers proprietary
chemical technology
applied prior to
combustion that reduces
AC requirements
Addressable market of
~600M tons of western
coal per year
Equipment
Consumables
©
2012-2013 Advanced Emissions Solutions, Inc.
Mercury Control (MATS)
Clean Coal Solutions (CCS)
42.5%
ADA
42.5% NexGen
15% Goldman-Sachs
28 facilities eligible for
Section 45 Tax Credits of
$6.59/ton (escalating)
through 2021
7 facilities generating more
than $75M in annual
payments to CCS (ADA
42.5%)
Remaining facilities
expected to be leased/sold
by YE2014
Expect ~$300M in annual
CCS revenues at +90%
margin by 2015
MATS rule took effect in 2012, compliance by 2015-2016
-6-
$33.2M
at
2Q13
$25.3M
at
4Q12
and
$4.5M
at
2Q12 |
 -7-
Refined Coal-
$0 cost to utility
M-Prove
TM
Technology ~$100k
capex, $1-$4/ton reduced
compliance cost
ACI/DSI-
$1-$3M in capex
Scrubber, SCR-
$100M+
in capex
Large E&C
firms
©
2012-2013 Advanced Emissions Solutions, Inc.
ACI System
DSI System
PORTFOLIO OF
EMISSIONS CONTROL SOLUTIONS |
 -8-
TM
©
2012-2013 Advanced Emissions Solutions, Inc.
EXPECTED
REVENUE MIX
TRAJECTORY |
 -9-
©
2012-2013 Advanced Emissions Solutions, Inc.
Owns 28 facilities eligible for Section 45 Tax Credits of $6.59/ton (escalating)
through 2021
To qualify for Section 45, the RC facility must reduce mercury by 40% and NOx by
20% and have been “placed in service”
on or prior to December 31, 2011
CLEAN COAL
SOLUTIONS, LLC (CCS) REFINED
COAL |
 -10-
CCS LEASES THE RC FACILITY TO A THIRD-PARTY INVESTOR
©
2012-2013 Advanced Emissions Solutions, Inc.
Pays
~$2-$2.50/ton
for
chemicals
and
labor
CCS receives ~$7.50/ton in tax
benefits
RC investor
RC Investor receives more than
$8.00/ton in tax benefits (assuming
a 35% tax rate)
Utility gets free
emission reductions
Pays
~$2-$2.50/ton
for
chemicals
and
labor
INITIAL START-UP: CCS OPERATES THE RC FACILITY AND RETAINS THE TAX CREDITS
CCS receives ~$3-$4/ton in rental income
Utility gets free
emission reductions
Pays ~$1/ton
to utility
REFINED
COAL:
MONETIZATION
DYNAMICS |
 CCS may
operate an RC facility prior to finalizing contracts with an RC investor
•
Faster way to initiate long-term operations with the host power plant
•
Provides
operating
assurance
to
potential
3
rd
party
RC
investors
•
Very attractive returns to CCS. ~$3/Ton in operating costs generates
~$7.50/ton in tax benefits
Note: ADA’s 42.5% share of tax credits included in net deferred tax
assets.
NDTA
are
offset
by
a
valuation
allowance
as
discussed
in
the
footnotes to the financial statements.
Retained RC Results (CCS)
©
2012-2013 Advanced Emissions Solutions, Inc.
-11- |
 UPDATE
ON 28 REFINED COAL FACILITIES ~22MT/yr
7
facilities
generating
$75M
+
in
annual
revenues
to
CCS
Operating
RC
Facilities
3
facilities
retained
by
CCS
~7MT/yr
~55MT/yr
3 facilities
using
CyClean
TM
technology
likely to
close in
2014
11 facilities
that will use
M-45-PC
TM
technology in
various
stages of
discussions
~5MT/yr
~9MT/yr
4 facilities
scheduled
to begin
operating
in 2H13
treating a
total of
16MT/yr
~14MT/yr
RC Facilities Waiting to Commence Long-term Operations
©
2012-2013 Advanced Emissions Solutions, Inc.
-12- |
 -13-
EMISSIONS CONTROL -
EQUIPMENT
Installed/installing ACI systems on over 60
boilers at coal-fired power plants
Sold through our BCSI subsidiary
©
2012-2013 Advanced Emissions Solutions, Inc.
ACTIVATED CARBON
INJECTION SYSTEMS
DRY SORBENT INJECTION
SYSTEMS |
 EMISSION CONTROL EQUIPMENT ($ IN MILLIONS)
MATS market developing as expected
$1-$2B market for consumables to control mercury starting in 2016
ADA is prepared for the equipment market
Supply agreements already in place, engineering capabilities expanded
Ample (and growing) cash balance
©
2012-2013 Advanced Emissions Solutions, Inc.
-14- |
 Patented
technology
designed
to
enable
Western
and
lignite
coals
to
burn
with
lower
mercury
emissions
U.S.
burns
up
to
600M
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
treated
coal
sales
ADA
retains
rights
to
apply
technology
at
power
plants
Initial
market:
states
with
mercury
regulations
already
in
place
MATS
expected
to
create
market
starting
in
2016
Continued
demonstration
of
technology
to
customers
©
2012-2013 Advanced Emissions Solutions, Inc.
-15- |
 Developing proprietary solid sorbent capture
technology to capture CO
2
from flue gas in
conventional coal-fired boilers
DOE and industry funding:
Phase I -
$3.8 M, R&D at 1 KWe scale,
Completed in 2011
Phase II -
$20.5 M, 51-month contract to
validate technology at 1 MWe scale
Pilot Design: 2012, Construction: 2013, Testing: 2014
Located at Southern Company’s Plant Miller
Advantages over competing technologies:
For customer: lower cost and less parasitic
energy
For ADA: continuous revenues from sale of
proprietary chemical sorbents
Pilot under construction
©
2012-2013 Advanced Emissions Solutions, Inc.
-16- |
 RC
opportunities expected to provide substantial growth in revenues, profits and
cash flows in 2013, and consistent revenue streams through 2021
MATS compliance requirements are driving
significant near-term market for equipment
M-ProveTM technology and royalty opportunity
expected to produce additional growth beyond MATS
equipment market
Developing solid sorbent capture technology to
capture CO2 from flue gas in conventional coal-fired
boilers
KEY TAKEAWAYS
©
2012-2013 Advanced Emissions Solutions, Inc.
-17- |
 APPENDIX
©
2012-2013 Advanced Emissions Solutions, Inc.
-18- |
 Source:
U.S. EIA, March 2012 ©
2012-2013 Advanced Emissions Solutions, Inc.
Coal expected to provide ~ 40% of America’s
electricity in 2035 according to Department of
Energy
1,200 existing coal-fired power plants in the US
generate the majority of the nation’s
electricity, and consume ~ 900M to 1B tons of
coal each year
EPRI estimates that the coal-fired power
industry will invest $275 billion in retrofits
through 2035
Lower coal prices benefit our customers
11 new coal-fired power projects currently
have permits and are expected to begin
construction in the next year
The energy in America’s recoverable coal
reserves is equivalent to 1 trillion barrels of oil
–
about equal 2/3rds of the world’s known
reserves
In order to maintain its leadership position,
coal must burn cleaner
Coal Energy
-19- |
 COAL
AND US ELECTRICITY GENERATION Source: EIA
2012: lowest power demand since 1987, natural gas prices reach a
low of $1.91/MM/btu-
2012 average of $2.77/MMbtu
©
2012-2013 Advanced Emissions Solutions, Inc.
-20- |
 MERCURY
CONTROL- 15 YEARS IN THE MAKING
EPA
determines it
necessary to
regulate
mercury
2000
2009
2005
2008
EPA issues
Clean Air
Mercury Rule
D.C. Circuit Court
vacates the Clean Air
Mercury Rule
EPA proposes
new rule to
replace the
vacated CAMR
Mercury
Air
Toxic
Standards
(MATS)
EPA issues final
Mercury Air
Toxic Standards
(MATS)
Compliance
deadline
for
MATS.
Plants
can
apply
for
an
extension
2011
2012
2015/16
Technology
commercially
proven
©
2012-2013 Advanced Emissions Solutions, Inc.
-21-
EPA
issues
draft
of |
 $s in
Millions * Does not include the impact of more than $14 million in RC lease
prepayments received by CCS in late July 2013 **Included in working capital at 6/30/13 are current liabilities of $7.2
million in deposits and $23.4 million in deferred revenue
related to Clean Coal.
Included in working capital at 6/30/12 are current liabilities
of $21.2 million in deposits and $4.5 million in deferred revenue related
to Clean Coal
*** LT liabilities include deferred revenues related to Clean Coal of $11.2 million
and $0.9 million at 6/30/13 and 6/30/12 respectively ©
2012-2013 Advanced Emissions Solutions, Inc.
-22-
BALANCE SHEET
HIGHLIGHTS |
  $(000)
2013
2012
Revenues
$58,930
$52,511
$68,314
*Revenues excluding coal sales
$27,161
$14,772
$23,354
Gross Margin Before Depreciation and Amortization
$10,594
$7,434
$9,388
General and administrative
8,109
4,040
7,313
Research and development
577
618
347
Depreciation and amortization
1,347
1,181
1,422
Operating Income
$561
$1,595
$306
Income from unconsolidated entities
274
132
323
Interest and other income, net
(83)
(389)
(313)
Other expense
(735)
(469)
(673)
Income (Loss) from Continuing Operations Before
Income Taxes and Non-controlling interests
$17
$869
($357)
Income Tax Benefit (Expense)
-
-
-
Non-controlling interests
(3,195)
(2,167)
(1,812)
Net Income (Loss) Attributable to ADA
(3,178)
$
(1,298)
$
(2,169)
$
Net Income (Loss) Per Basic Common
Share Attributable to ADA
(0.32)
$
(0.13)
$
(0.22)
$
Weighted Average Basic Common Shares
10,076
10,002
10,050
*See page 32 for explanation of non-GAAP measure
2013
June 30,
For the Three Months Ended
For the Three Months Ended
March 31,
©
2012-2013 Advanced Emissions Solutions, Inc.
-23-
FINANCIAL RESULTS
|
 REFINED
COAL RESULTS ©
2012-2013 Advanced Emissions Solutions, Inc.
-24-
The operation of these units included $32M in pass-through coal
purchases/sales In 2Q13 the four RC facilities operated by Clean Coal incurred
operating expenses of $4.4M but generated $7.7M in tax credits
For the Three Months Ended
March 31,
$(000)
2013
2012
2013
Rental income
11,642
$
10,590
$
12,213
$
Coal
sales 31,769
37,739
44,960
Other income
777
22
950
Total RC Revenues
44,188
$
48,351
$
58,123
$
Cost of
Revenues 36,167
$
41,908
$
51,469
$
Gross
Profit 8,021
$
6,443
$
6,654
$
Gross Profit Margin Percentage
18%
13%
11%
Adjusted Gross Profit*
12,393
$
10,927
$
13,144
$
Adjusted
Gross Profit Margin Percentage* 99%
99%
99%
* Adjusted gross profit and adjusted gross profit margin percentage excludes coal sales and
raw coal purchases and retained tonnage operating expenses. See page 32 for explanation
of non-GAAP measures. Operating Statistics (millions)
Tons for leased facilities
2.6
2.6
3.2
Tons retained
1.2
1.2
1.9
Total tons treated
3.8
3.8
5.1
Tax Credits generated by JV
7.7
$
7.6
$
12.6
$
Tax Credits to ADA (42.5%)
3.3
$
3.2
$
5.4
$
For the Three Months Ended
June 30,
Clean
Coal
operated
9
facilities
in
2Q13,
5
of
which
were
leased
or
sold
to
RC
investors |
  MATS
rule finalized in March 2012- compliance by 2015/2016
2Q13 Revenues up 200% year-over-year, driven by MATS demand for ACI
and DSI systems
Backlog at 6/30/13 stands at $33.2M
Currently working on bids or discussing potential projects for ACI and DSI
systems in excess of $150 million
For the Three Months Ended
March 31,
2013
2012
2013
$(000)
Systems and equipment
9,915
$
2,745
$
7,525
$
Consulting and
development 2,020
1,058
1,004
Chemicals
79
162
240
Total EC Revenues
$12,014
$3,965
$8,769
Cost of Revenues
9,711
$
3,087
$
6,253
$
Gross Profit
2,303
$
878
$
2,516
$
Gross Profit Margin
Percentage 19%
22%
29%
EC segment Backlog
33,200
$
4,500
$
32,700
$
For the Three Months Ended
June 30,
©
2012-2013 Advanced Emissions Solutions, Inc.
-25-
EMISSION CONTROL
|
 ADA
STANDARD ACI SYSTEM -26- |
 ACI
MARKET SHARE Boilers treated by ACI systems
Source: ICAC
ADA
Norit
Clyde
Bergemann-
EEC
©
2012-2013 Advanced Emissions Solutions, Inc.
-27- |
 REFINED
COAL: INTRODUCTION & OVERVIEW ©
2012-2013 Advanced Emissions Solutions, Inc.
-28-
The
CyClean
TM
,
M-45
TM
and
M-45-PC
TM
technologies
provide
on-site,
proprietary
pre-treatment
to
Powder
River
Basin
(PRB)
and
Lignite
coals
for
use
in
cyclone
boilers,
circulating
fluid
bed
boilers
and
pulverized
coal
boilers.
Key Dates
June
2010:
Clean
Coal
Solutions
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
June
2011:
an
affiliate
of
Goldman
Sachs
purchases
a
15%
stake
in
CCS
for
$60M
2012
-
2014:
CCS
focused
on
capturing
the
value
of
Section
45
tax
credits
The
American
Jobs
Creation
Act
of
2004,
Section
45
of
the
IRC:
contains
provisions
to
incentivize
the
production
of
pollution
mitigating
Refined
Coal
(RC)
via
annually
escalating
tax
credits
per
ton
of
coal
burned.
RC
reduces
mercury
by
40%+
and
NOx
emissions
by
20%+
when
that
coal
is
burned.
Clean Coal Solutions (“CCS”) JV offers three technologies that produce
Section 45 Refined Coal |
 REFINED
COAL PHOTOGRAPHS ©
2012-2013 Advanced Emissions Solutions, Inc.
-29- |
             FINANCIAL
IMPACT OF RC OPERATIONS Facilities
Status
1Q13A
2Q13A
Annual run rate through 2021
RC Facilities # 1-7
5 facilities leased/sold at 1Q13,
2 retained by CCS
$10.1
$11.5
$50.0
RC Facility #8
Operated by CCS until late July,
then leased to RC investor
($2.0)
($1.4)
$14.0
RC Facility #9
Leased to RC investor in late July
$0.0
$0.0
$10.0
RC Facility #10
Commenced operations by CCS in
June, expect to be leased in 2H13
$0.0
($0.3)
$9.0
$8.1
$9.8
$83.0
Note:
ADA owns 42.5% of Clean Coal Solutions
Gross Margin from these RC facilities
©
2012-2013 Advanced Emissions Solutions, Inc.
-30- |
 REFINED
COAL: CCS Self Monetization
3
rd
Party RC Investor
CCS Consolidated financial example for a 3 MT/yr facility
©
2012-2013 Advanced Emissions Solutions, Inc.
-31-
FINANCIAL IMPACT OF CONVERTING AN
RC FACILITY FROM CCS OPERATION
TO 3
PARTY RC INVESTOR
RD |
 For the
For the
For the
Three Months Ended
Three Months Ended
Three Months Ended
$(000)
June 30, 2013
June 30, 2012
March 31, 2013
Coal sales
31,769
$
37,739
$
44,960
$
Cost of coal sales
31,769
$
37,739
$
44,960
$
Operating costs of retained
tonnage 4,372
$
4,484
$
6,490
$
Revenues
excluding coal sales, adjusted gross profit and adjusted gross profit percentage are non-GAAP financial measures which are
used to provide investors with greater transparency with respect to the effect on revenues,
gross margin and gross margin percentage from Clean Coal’s operation of certain RC
facilities for its own account. Adjusted gross profit and adjusted gross margin percentage
excludes coal sales and raw coal purchases and retained tonnage operating expenses. We believe
these non-GAAP financial measures provide meaningful supplemental information for
investors regarding the performance of our business and the effect on revenues, gross
margin and gross margin percentage of the operation of these RC facilities by Clean Coal for its own account.
©
2012-2013 Advanced Emissions Solutions, Inc.
-32-
NON-GAAP
FINANCIAL
MEASURES
|
 Graham
Mattison Vice President, Investor Relations
(646)-319-1417
graham.mattison@adaes.com
Michael D. Durham, Ph.D., MBA
President & CEO
Mark H. McKinnies
SVP & CFO
©
2012-2013 Advanced Emissions Solutions, Inc.
-33-
CONTACTS
|