 -1- ADA Environmental Solutions Capstone Investments Small-Cap Conference July 17, 2007 NASDAQ:ADES A Leader in Clean Coal Technology Exhibit 99.1 |
| -1- ADA Environmental Solutions Capstone Investments Small-Cap Conference July 17, 2007 NASDAQ:ADES A Leader in Clean Coal Technology Exhibit 99.1 |
 -2- This presentation contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, which provide a "safe harbor" for such statements in
certain circumstances. These statements include the Company’s
expectations regarding future revenues or other financial measures, the
number and timing of anticipated projects and new contracts, anticipated size of and growth in our target markets, expected shortage in activated carbon supply, costs of building an activated carbon manufacturing facility
and similar items. Such statements involve significant
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 changing economic conditions and
market demand for ADA-ES’ products and services, changes in technology, failure to satisfy performance guarantees, reductions in federal funding, changes in federal and state laws or regulations, results of demonstrations of the Company’s and licensed technologies, inability to obtain funding and other risks related to the
development of an activated carbon manufacturing facility, operational
difficulties, availability of skilled personnel, and other factors discussed
in the Company's filings with the U.S. Securities and Exchange Commission.
The forward looking statements contained in this presentation are presented
as of the date hereof, and we disclaim any duty to update such statements
unless required by law to do so. |
 -3- Overview ADA Environmental Solutions develops environmental solutions for the coal-fired power plant market Recognized emission control industry experts Senior staff has over 200 years experience developing emission control technology Baltimore, MD Allentown, PA Birmingham, AL Marshall, TX ADA-ES office Littleton, CO Napa, CA (Headquarters) |
 -4- Coal: a Key Energy Resource Coal powers 50%+ of electricity generated in the U.S. 1,100+ coal-fueled boilers Lowest cost energy source Secure energy source – 250-year U.S. reserve but Cleaning coal burning process critical to long- term viability and future acceptance |
 -5- Investment Highlights Profitable and cash flowing since ‘03 spinout Strong balance sheet Three significant growth opportunities: 1. Mercury control from power plants • ADA is the industry research leader • Currently the leading provider of engineering services and equipment • Undertaking large capital projects ($260mm to $1.5B) to vertically integrate
business in production of Activated Carbon (AC) • Well positioned for potential $1-3B/yr market of pending Federal regulation
2. Developing Refined Coal (Section 45) product for older plants • ADA technology meets criteria for tax credits of approximately $6 Million per
plant per year 3. Developing technology to address greenhouse gas CO 2 |
 -6- Opportunity Development Research & Development / Engineering Services DOE and industry sponsorship 3 to 5 year cycle Develop affordable capital equipment Typical emission equipment: $25 - $100mm ADA equipment: ~ $1mm 5 to 10 year cycle Create continuous chemical revenue stream $100mm to $1B annual markets Razors and Razor Blades |
 -7- External Technology Development Funding 1985-1996: Awarded 50+ R&D contracts exceeding $40 million 2000: Won $1.7 million DOE flue gas conditioning program 2001: Won $6.8 million DOE mercury control program 2002: Won $2.4 million DOE follow-on mercury control program 2003: Won $8.8 million DOE full-scale mercury control program 2004: Won $9 million contract with We Energies under $53 million mercury control program (50% funded by the DOE) 2004: Won approx. $5 million contract for 4 additional sites 2006: Won $7.5 million DOE mercury control project for 2 plants 2006: NexGen JV may provide up to $5 million over next three years 2006: DOE award for development of ADESORB ™ , a proprietary process to produce activated carbon 2006: $4 million DOE subcontract for sorbent-based CO 2 control |
 GROWTH AREA #1 MERCURY CONTROL |
 -9- ADA-ES Technology is Low Cost and Simple to Implement Scrubber Removes SO 2 Particle Capture AC Injected Here AC Storage and Feeder AC with Mercury Collected Here Activated Carbon (AC) Injection for Mercury Control |
 -10- Engineering Services Help utility clients develop cost-effective emission control Mercury, NO X /SO 2 CO 2 , Particulate Build relationships with utility customers On leading edge of new regulations and new approaches to existing regulations Continuous Mercury Monitor |
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 -12- Proven Technology PRB/Bit Blend ESP PRB ESP PRB Fabric Filter 0 10 20 30 40 50 60 70 80 90 100 0 0.5 1 1.5 2 2.5 3 3.5 4 Sorbent Costs (mills/kWh) Eastern Bituminous Bettered EPA cost goals by 80% Established as “Best Available” and “Maximum Achievable” control technology for mercury |
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 -14- Prospects for New Federal Legislation Expected to Create $1 Billion Market for AC EPA sued by multiple states and environmental groups re: CAMR Ruling from the DC District Court expected this year Two multi-pollutant (SO 2 , NO x , Hg, CO 2 ) bills introduced to the Senate in April Bipartisan support Tighter Hg, NO x and SO 2 controls are not controversial with focus on CO 2 |
 -15- Activated Carbon Injection (ACI) Equipment for Mercury Control |
 -16- ACI Equipment Sales: Status Since summer ‘05 commercialization: Won contracts covering 19 ACI systems Contract options on 6 more Key supplier of mercury control technology to major air pollution control companies Babcock and Wilcox, Alstom Power, Hamon Research Cottrell, and Hitachi, among others Working closely with largest utilities in the U.S. and Canada Expect to bid on 100 systems in 2008-2009 Recently doubled the size of our engineering design group
|
 -17- Activated Carbon (AC): Current and Near-Term Supply Capacity Current AC market in US is approximately 450 million pounds per year Primarily used for drinking water treatment 90% provided by Calgon, Norit and Mead Westvaco • Operating near production capacity 40-60 million pounds of Chinese carbons had been dumped on the market at below cost • 70% tariffs on Chinese carbons passed in April ‘07 New mercury control market could require additional 400 million pounds by 2010 and up to 1 billion pounds by 2012 to 2015 Existing AC producers have been slow to respond New AC production plants could take 4 to 6 years |
 -18- New Market for Activated Carbon Created for Mercury Control 0 500 1,000 1,500 2,000 Activated Carbon (millions of lbs / yr) Current H20 AC Market Developing Market for Hg Control Total AC Market 2006 2010E 2015E ANNUAL U.S. MARKET Significant production gap identified New Market based on existing regulations New Market based on Federal regulation |
 -19- Recent Activated Carbon Market Activity AC pricing in water treatment has risen 80% compared to last year Four utilities have issued RFPs for AC in past 4 months 200 million pounds per year requested 3, 5, and 10 year terms requested All requests for Treated Carbon (TAC) for Western coals TAC quoted by AC suppliers at $1.00/lb and above • Current spot $0.85 • ADA project modeled at 50% PAC / TAC – PAC at Q1 spot pricing – TAC at Q1 spot pricing |
 -20- Near-Term Supply of Activated Carbon In March ’07 ADA-ES signed an MOU with Calgon Carbon for three supply phases: 1. ADA-ES and Calgon will have a commission- based marketing agreement 2. Negotiating potential investment with Calgon to restart a currently idled line which could include joint marketing / profit sharing 3. Discussions underway with Calgon to be potential operating partner and equity participant in new carbon production plant |
 -21- ADA-ES New Activated Carbon Production Largest AC plant(s) in North America Capital cost: approx. $200mm per plant All-in financing: $250-270mm Would produce approx. $100mm in product per year IRR expected to be greater than 30% 4-6 year process: Test products Design plant Select site Permit Construction Locking up significant reserves of lignite for feedstock Permitting multiple sites: goal of AC production by 2010 May require up to four production lines by 2015 to maintain 50% market share Current stage |
 -22- Permitting AC Plants at Three Lignite Mine-Mouth Sites 1. Adjacent to Red River Mine in NW Louisiana 2. Adjacent to Falkirk Mine near Bismarck, ND 3. Alternate ND site to be announced |
 -23- Anticipated Greenfield Funding 60 - 80% debt project financing Long-term off-take contracts expected to provide backing 20 - 40% equity including: ADA-ES equity • Shelf registration for issuance of up to 3mm shares Anticipating equity from strategic partner(s) in energy industry |
 -24- Estimated Greenfield AC Plant Economics (2) •Based on Annual revenue ~ $100 million -TAC 60% -PAC 34% -Power 6% EBITDA 75% (2) See Assumptions on Slide 40 Consumables Interest Depreciation Taxes Net Income 11% Labor-GA-Maint. 10% 19 % 32 % 13% 15% |
 -25- Mercury Control – Estimated Revenue & EBITDA (1) Based on a single production train (6 permitted) for existing regulations (1) See Assumptions on Slide 40 0 100 200 2006 2007 2008 2009 2010 2011 2012 Rev Low Rev Mid Rev High EBITDA |
 -26- Upcoming Milestones for Greenfield Plant File for final permit in LA August 2007 Financing partner identified August 2007 EPC Contractor selected October 2007 File for final permit ND1 September 2007 File for final permit ND2 October 2007 Major equipment ordered December 2007 Construction permits granted April 2008 Financial close May 2008 Unit 1 operational Q1 2010 |
 -27- Project Team for Greenfield AC Plant MANAGEMENT, SITING, ENGINEERING, PROCUREMENT & CONSTRUCTION Emission Strategies Inc.: Project management Ramco Generating Two: Siting & project development support Highline Consultants, LLC: Engineering and environmental management Harris Group, Inc.: Engineering East Mountain Consultants, Inc.: Project Controls Andover Technology Partners: Market and alternatives analysis Misc: Engineering cross-checks, surveys & geotech TBD: EPC TBD: Owner’s engineer TBD: Owner’s construction management OPERATIONS & ENVIRONMENTAL Zephyr Environmental Corporation: Permitting Resource Catalysts: Environmental AOR, Inc.: Brand Development Steve Young (ADA-ES): Process development & Ops Ken Baldrey (ADA-ES): AC production R&D Hazen Laboratories: Pilot & product testing TBD: Plant operations contractor FINANCE & LEGAL 4M Corporation: Finance & market analysis manager Strategic Initiatives: Corporate finance advisor TBD: Investment bank TBD: Equity Manager / co-manager TBD: Strategic equity partner Schuchat, Herzog and Brenman: Corporate counsel Fox Rothschild: Lead counsel & legal team management Ayres Law Group: Environmental group outreach & legislation Hogan & Hartson: Contracts & environmental attorneys John Adams Associates: Public relations The Equity Group: Investor relations Blanchard, Walker, O’Quin & Roberts: LA counsel Kean Miller: LA environmental & transmission attorneys Kelsch Kelsch Ruff & Kranda: ND counsel SALES & MARKETING Jon Barr (ADA-ES) Rich Miller (ADA-ES) |
 GROWTH AREA #2 REFINED COAL |
 -29- Refined Coal: Cyclean American Jobs Creation Act of 2004 creates tax credit of $6/ton for “Refined Coal” (2009 – 2019) • “Refined” if 20% reduction in NO X and 20% reduction in SO 2 or Mercury • ADA-ES Refined Coal process: – Adds proprietary chemicals on Western Coal – For Cyclone boilers – Burns cleaner and more efficiently |
 -30- Status: Cyclean Refined Coal Simple process designed for rapid deployment Demonstrated at three full-scale plants achieving emission reduction levels that can qualify for the tax credit Patents on key components of technology; recently applied for new patents Marketing effort underway Clarification required on 50% market value issue |
 -31- Cyclean Business Model Established a JV, Clean Coal Solutions LLC (CCS), with an affiliate of NexGen Resources Corporation NexGen paying ADA-ES $5mm for 50% of CCS Expect CCS to have chemical revenue of $3-4/ton The $6/ton tax credit to be monetized into $4.80/ton revenue (may share tax credit with customer) Target market: Cyclone boilers burning PRB coal 60 million tons per year total market 20 million tons per year currently require mercury control
|
 -32- Remaining Challenges for Refined Coal Recent PRB Coal Prices Rapid marketing of product Clarification of “50% Market Value” requirement 2006 Price spikes created unexpected volatility Congressional clarification required Bill currently in joint House/Senate committee - 5.00 10.00 15.00 20.00 25.00 2003 2004 2005 2006 2007 2008 2009 2010 2011 8800 Btu 8400 Btu |
 -33- 0 25 50 2006 2007 2008 2009 2010 2011 2012 Rev Low Rev Mid Rev High EBITDA Refined Coal – Estimated Revenue & EBITDA (1) Based on 10 Million Tons of Refined Coal Per Year (1) See Assumptions on Slide 40 |
 GROWTH AREA #3 CONTROL OF GREENHOUSE EMISSIONS: CARBON DIOXIDE |
 -35- CO 2 Control Business Plan In pre-market period, use funding from electric power generators and DOE Currently negotiating a subcontract on $4mm DOE program for sorbent-based CO 2 control Seeing a rapid growth in funding available to address the CO 2 issue. Develop technology with a focus on the existing fleet of 1100 boilers Focus on technology that will have a component that creates a continuing revenue stream Potentially largest new market opportunity |
 FINANCIAL OVERVIEW |
 -37- Financial Highlights Cash flowing & profitable since ‘03 spin-off 40% growth in revenue in 2006 Raised over $20 million in past two years to support growth Two private equity placements 5.9 million diluted shares outstanding 50%+ held by institutions ~15% held by insiders and employees |
 -38- 0 100 200 2002 2004 2006 2008 2010 2012 Other FGC Mercury Refined Coal CO2 Past Actual and Estimated Future Revenue by Channel (1) Based on Existing Mercury Regulations (1) See Assumptions on Slide 40 |
 -39- 0 100 200 2002 2004 2006 2008 2010 2012 Other Engineering Consulting Equipment Chemicals Past Actual and Estimated Future Revenue by Product Segments (1) Based on Existing Mercury Regulations (1) See Assumptions on Slide 40 |
 -40- Assumptions Actuals, 2007 Budget, 2008 – 2012 Projections 1. Revenue / EBITDA A. Mercury i. Achieve 50% of available ACI equipment market ii. Commissions per Calgon MOU iii. Greenfield Activated Carbon Plant Project a) Single production line b) Q1 2007 spot pricing for AC B. Refined Coal i. Sell 10 million tons Cyclean per year ii. $6/ ton tax credit, shared 50% with customer and monetized C. Declining FGC revenues, Increasing CO 2 consulting D. EBITDA based on mid-point estimates 2. Greenfield Activated Carbon Plant Economics A. Current price quotes for lignite, labor, and equipment B. Average of first ten years of production |
 -41- Strong Financial Position Balance sheet highlights (at 3/31/07): Cash and investments of $22.7 million Working capital of $17.3 million No long-term debt Shareholders’ equity of $27.7 million Market cap $115 million (7/13/07) |
 -42- Summary ADA-ES has been instrumental in creating a new mercury control market Existing rules: 150 ACI systems, 400 mm lbs/yr AC New Federal Rule: 600-700 ACI systems, 1 B lbs/yr AC ADA is already a leading provider of engineering services and equipment for the mercury control market Building new AC plant for this market Operating permits for 6 production lines expected Q1-2 2008 Well positioned to respond to AC demand by Federal rule Progress with Refined Coal; substantial market opportunity Developing control technology for Greenhouse gases The next big opportunity in Emission Control Strong financial position and growing revenue base |