![]() ADA
Environmental Solutions FBR Capital Markets
Investor Conference November 27, 2007 NASDAQ:ADES A Leader in Clean Coal Technology Exhibit 99.1 |
![]() -2- This presentation, including the materials that follow, contain 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. These statements are based on current expectations, estimates, forecasts, and projections about the industries in which we operate and the beliefs and assumptions of our management. Actual results may vary materially from such expectations. These statements are prefaced by words or phrases such as believe, "will," "hope," "expect," anticipate, "intend," "plan," potential and propose, the negative expressions of such words, or words of similar meaning. Such forward-looking statements include, but are not limited to, statements or expectations regarding future revenues or other financial measures, anticipated projects and new contracts, anticipated growth in the markets we serve and related items, including our position in those markets. 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 changing economic conditions, market demand for ADA-ES products and services, changes in technology, failure to satisfy performance guarantees, availability of federal funding, availability of private financing which will be needed to implement our expansion plans, changes in laws or regulations, results of demonstrations of our own, and others licensed technologies, operational difficulties, availability of skilled personnel, and other factors which we discuss in detail in our filings with the U.S. Securities and Exchange Commission. You are cautioned not to place undue reliance on the forward-looking statements made in this presentation, and to consult filings we make with the U.S. Securities and Exchange Commission for additional information concerning risks and uncertainties that may apply to our business and the ownership of our securities. The forward-looking statements contained in this release and the conference call are made and based on information as of the date of this release. We assume no obligation to update any of these statements based on information after the date of this report, unless required by law to do so. |
![]() -3- Overview ADA Environmental Solutions develops environmental technology and specialty chemicals for the coal-fired power plant market Recognized emission control industry experts Senior staff collectively has over 200 years experience developing emission control technology |
![]() Financial Highlights Cash flow positive & profitable on an annual basis since 2003 spin-off 5.8 million diluted shares outstanding 50%+ held by institutions ~15% held by insiders and employees Balance sheet highlights (at 9/30/07): Cash and investments of $19.2 million Working capital of $16.0 million No long-term debt Shareholders equity of $28.3 million Market cap $63 million (10/31/07) -4- |
![]() -5- Investment Highlights Three significant growth opportunities: 1. Mercury control from power plants Leading provider of engineering services and equipment Well positioned for potential $1-3B/yr Activated Carbon (AC) market from pending Federal regulation (existing rules create $200-400mm market for AC) Undertaking large capital projects ($260mm to $1.5B) to vertically integrate in production of AC 2. Marketing Refined Coal (IRC Section 45) product for older plants Technology meets technical criteria for federal tax credits of approximately $6 million per plant per year 3. Developing control technology for greenhouse gas CO 2 |
![]() -6- New Emission Control Markets Generate Three Sequential Revenue Opportunities 1. R&D/Engineering Services DOE and industry sponsorship 2. Low-cost capital equipment Typical emission control equipment for NO x and So x control: $25 - $100mm ADA equipment for mercury control: ~ $1mm 3. Continuous revenue streams from AC and Refined Coal $100mm to $1B total annual markets A Razor and Razor Blades Business Model |
![]() -7- Past Actual and Estimated Future Revenue by Product Segments (1) Based on a Single AC Production Line (1) See Assumptions on Slide 37 0 100 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Other Engineering Consulting Equipment Chemicals |
![]() GROWTH AREA #1 -8- |
![]() -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- R&D Funding for Technology Development 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 |
![]() -11- Technology Demonstrations Provide Basis for Bidding and Guaranteeing Hg Control Tested ACI using western coal Tested ACI using eastern coal |
![]() -12- Market Drivers: Regulations for Hg Control Existing Rules Create $200-400 Million AC Market State with proposed legis/regs more strict than CAMR (13) State with firm legis/regs more strict than CAMR (13) Planned plant that has ordered mercury control system Plant with consent decree limiting mercury emissions State currently accepting CAMR (24) P Total Existing Coal-Fired Capacity MW 24,000 12,000 2,400 |
![]() -13- Prospects for New Federal Legislation Expected to Create $1 Billion AC Market EPA sued by multiple states and environmental groups re: CAMR DC District Court scheduled to hear oral arguments in December Bills requiring 90% mercury control for all power plants recently introduced in both the Senate and the House Bipartisan support |
![]() -14- Activated Carbon Injection (ACI) Equipment for Mercury Control |
![]() -15- ACI Equipment Sales: Status Approximately 70 contracts for ACI systems have been awarded by power companies for mercury control to date ADA maintains a ~50% market share The rest are split between 7-8 other companies Expect to bid on 50-100 systems in 2008-2009 Working closely with largest utilities in the U.S. and Canada Key supplier of mercury control technology to major air pollution control companies Babcock and Wilcox, Alstom Power, Hamon Research Cottrell, and Hitachi, among others |
![]() -16- In 2007 ADA More than Doubled Its ACI Systems Engineering Team Improved Designs Have Reduced Costs by 20% |
![]() -17- 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 anticipated Federal regulation |
![]() -18- Activated Carbon (AC): Current and Near-Term Supply Capacity Current AC market in US: approx. 450 million pounds per year Primarily used for drinking water treatment 90% provided by Calgon, Norit and Mead Westvaco 400 million additional pounds per year will be needed by 2010 for initial mercury control market Potential 1 Billion pound per year by 2012-2015 New AC production plants are necessary for new mercury control market Can take 4 to 6 years to develop ADA is implementing plans to build new production plants to meet expected AC demand by customers Plan to have one plant operational by Q1 2010 |
![]() -19- Recent Activated Carbon Market Activity AC pricing in water treatment has risen 80% compared to last year Last Spring, four utilities issued RFPs for AC since Q2 2007 Up to 200 million pounds per year requested 3, 5, and 10-year terms requested All requests for higher-priced Treated Carbon (TAC) for Western coals TAC quoted by AC suppliers at $1.00/lb and above |
![]() -20- ADA-ES New Activated Carbon Production Largest AC plant(s) in North America Capital cost: > $260mm per production line Annual production approx. 125 to 175 Million pounds of AC IRR expected to be greater than 25% 4-6 year process: Test products Secure lignite feedstock Design plant Select site Permits filed and pending Equipment procurement Permits issued/Construction Permitting multiple sites: goal of AC production by Q1 2010 ADAs current stage |
![]() -21- Permitting AC Plants at Three Lignite Mine-Mouth Sites (Two Lines per Site) 1. Adjacent to Red River Mine in NW Louisiana 2. Adjacent to Falkirk Mine near Bismarck, ND 3. Alternate ND site to be announced |
![]() -22- 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: Owners engineer TBD: Owners 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 Investment Bank: Credit Suisse 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, OQuin & 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) |
![]() -23- Anticipated Greenfield Funding 60% debt project financing Long-term off-take contracts expected to provide backing 40% equity including: ADA-ES balance sheet and equity issuance Current shelf registration of 3 Million shares expected to be brought to market prior to financial close in 2008 Anticipated equity from strategic partner(s) for a 49% partner with smart money who can provide additional expertise / capabilities: Plant operations EPC oversight Transportation Sales and marketing Contracting Financial assurance capacity |
![]() -24- Estimated Greenfield AC Plant Economics (1) Based on Annual revenue ~ $100 million -TAC 68% -PAC 29% -Power 3% (1) See Assumptions on Slide
37 EBITDA 70% Consumables Interest Depreciation Taxes Net Income 12% Labor-GA-Maint. 11% 16 % 28 % 14% 19% |
![]() -25- Upcoming Milestones for Greenfield Plant Milestone Date Status (11/27/07) File for air permit in LA August 2007 Filed Banking & Financial Advisor August 2007 Credit Suisse File for air permit ND1 September 2007 Filed EPC Contractor selected October 2007 In Negotiation File for air permit ND2 October 2007 Major equipment ordered December 2007 In Procurement Construction permits granted March 2008 Out Take Contracts February 2008 Marketing Strategic Partner February 2008 In Negotiation Financial close March 2008 Unit 1 operational Q1 2010 |
![]() -26- ADAs Interim Supply Plans Goal is to have sourcing in place to supply AC to utilities beginning in 2008 Sourcing Critical for interim period Beneficial addition to longer-term supply shortages Foreign and domestic supply Storage and Treatment Estimated capital costs for facility <$5m |
![]() GROWTH AREA #2 REFINED COAL ADA-ES opportunity through joint venture with an affiliate of NexGen Resources Corporation |
![]() -28- Refined Coal: CyClean American Jobs Creation Act of 2004 provides 10-year Refined Coal tax credit of approximately $6/ton Coal is deemed refined if: 20% reduction in NO x and 20% reduction in SO x or Mercury and 50% increase in market value ADA-ES Refined Coal process: For Cyclone boilers Adds proprietary chemicals on Western Coal Burns cleaner and more efficiently Reduces emissions Provides fuel flexibility |
![]() -29- CyClean Business Model 50/50 Joint Venture with NexGen Resources Clean Coal Solutions, LLC NexGen must pay $5mm upon tax credit qualification to maintain its 50% interest in the venture Expected Clean Coal Solutions revenue from: CyClean sales Monetized tax credit - shared with customers CyClean Target Market: Total 60mm tons of PRB coal per year burned in cyclones Near-term market: 20mm tons per year States with aggressive mercury regulations Older, stranded cyclones with fewer options |
![]() -30- 0 25 50 2006 2007 2008 2009 2010 2011 2012 Rev Low Rev Mid Rev High EBITDA Refined Coal Estimated Revenue & EBITDA (1) (1) See Assumptions on Slide 37 Based on 10 Million Tons of Refined Coal Per Year |
![]() -31- Status: CyClean Refined Coal Completed three full-scale plants exceeding tax credit emission reduction levels that can qualify for the tax credit Patents and patent-pending on key technology Marketing effort underway Seeking legislative clarification for 50% increase in market value requirement |
![]() GROWTH AREA #3 CONTROL OF GREENHOUSE EMISSIONS: CARBON DIOXIDE |
![]() -33- ADA-ES CO 2 Control Business Plan In pre-market period, use funding from electric power generators and DOE Awarded a subcontract on $4mm DOE program for sorbent-based CO 2 control Received initial utility funding to advance ADA technology Seeing a rapid growth in funding available to address the CO 2 issue Develop technology with a focus on the existing fleet of 1,100 boilers Focus on technology that will have a component that creates a continuing revenue stream Potentially largest new market opportunity |
![]() FINANCIAL OVERVIEW |
![]() 3 rd Quarter Summary -35- Quarter ended 9/30/07 vs. Q306 Revenues increased 26% to $5.6 million Gross margin rose 45% to $1.9 million or 33.4% of revenues versus $1.3 million or 29.0% of revenues for Q3 06 Backlog on ACI equipment doubled sequentially from $6 million in Q2 07 to $12 million in Q3 07 Operating income was $34,000, compared to an operating loss of $(63,000) in Q3 06 Net income was $215,000 or $0.04 per diluted share, versus $(128,000) or $(0.02) per diluted share in Q3 06 |
![]() -36- Past Actual and Estimated Future Revenue by Product Line (1) Based on a Single AC Production Line (1) See Assumptions on Slide 37 0 100 200 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 Other FGC Mercury Refined Coal CO2 |
![]() -37- Assumptions Actuals, 2007 Budget, 2008 2012 Projections 1. Revenue / EBITDA A. Mercury i. Achieve 50% of available ACI equipment market ii. Greenfield Activated Carbon Plant Project a) Single production line in place by end of Q1 2010 b) Current 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 |
![]() -38- Summary ADA-ES has been instrumental in creating a new mercury control market Existing rules: estimated 150 ACI systems, 400 mm lbs/yr AC Pending Federal Rule: estimated 600-700 ACI systems, 1 B lbs/yr AC Already a leading provider of engineering services and equipment for the mercury control market Building new AC plants 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 |