[ACCESSWIRE]
HIGHLANDS RANCH, CO / ACCESSWIRE / August 20, 2015 / Advanced Emissions Solutions, Inc. (OTC: ADES) (the "Company" or "ADES") today provided an operations update on its businesses.
Refined Coal Update ("RC")
The Company produces Refined Coal through Clean Coal Solutions, LLC ("CCS"), a joint venture among our subsidiary ADA-ES, Inc. (42.5%), an affiliate of NexGen Resources Corporation (42.5%), and an affiliate of The Goldman Sachs Group, Inc. (15%).
CCS currently has 17 Refined Coal facilities in full-time operations located at coal fired plants that collectively burned more than 58 million tons of coal in the past 12 months [1]. Twelve of these RC facilities have been leased or purchased by multiple RC investors. CCS is in discussions with both new and existing RC investors for some of the RC facilities that are currently producing RC tax credits for the benefit of the members of CCS.
Permanent installation work is underway for an additional five RC facilities.
The last six RC facilities have installation locations identified at coal plants owned by multiple utilities. The timing on these RC facilities is dependent upon progress on contract negotiations and permitting, and in some cases permanent installation work may not begin until 2016.
During the second quarter of 2015, CCS produced a total of 11.4 million tons of RC, of which 2.9 million tons were produced at RC facilities that generated tax credits for the benefit of the members of CCS. This compares to a total of 6.9 million tons of RC produced in the second quarter of 2014, of which 1.1 million tons were produced at RC facilities that generated tax credits for the benefit of the members of CCS.
L. Heath Sampson, President and CEO of Advanced Emissions Solutions said, "The management team and owners of CCS continue to focus on securing investors for the
remaining RC facilities. Now that CCS has a meaningful number of RC facilities in full-time operation and being installed at utilities, the pipeline of RC investors is solidifying."
Emissions Control ("EC")
The Company is continuing its push to broaden its Emission Control product offerings as the market shifts towards compliance solutions including those designed to meet the federal Mercury Air Toxics Standard ("MATS"). The June 29th Supreme Court ruling is not currently impacting the marketplace, and the Company has won new contracts and begun work on MATS related product demonstrations since the ruling. We are moving forward as a Company while we await information from the DC Court about next steps around MATS. ADES looks forward to continuing to help our customers meet both existing and new regulations for a variety of pollutants.
Cash Position
As of June 30, 2015, the Company had cash in excess of $23 million, which includes more than $13 million in restricted cash[2]. As previously disclosed, as of December 31, 2014, the Company had more than $36 million in cash, which included more than $11 million in restricted cash[3].
The restricted cash includes approximately $8 million of cash that is used to collateralize Letters of Credit which secure the Company's delivery and performance for certain Activated Carbon Injection ("ACI") and Dry Sorbent Injection ("DSI") equipment contracts. Upon completion of these contracts, the Letters of Credit are released and the cash used for collateral will no longer be restricted. The Company expects the majority of the Letters of Credit to be released by mid-year 2016 as it completes its ACI and DSI equipment contracts.
Restricted cash also includes approximately $5 million of cash that is used to collateralize Letters of Credit which secure the Company's obligation to pay certain previously disclosed royalties. These Letters of Credit will expire in 2018 and 2019 and the cash which collateralizes these Letters of Credit will no longer be restricted. Once its financial statements are current, the Company will seek alternatives to its existing Letter of Credit arrangements with the objective of substantially reducing its restricted cash balances.
In the first six months of 2015, the Company incurred the following cash expenses:
- Approximately $4 million for various professional services related to the restatement and re-audit efforts.
- Approximately $3 million related to strategic initiatives, other organizational changes and legacy incentive payments.
- Approximately $4 million related to the acquisition of or access to various emerging technologies.
- Approximately $2 million in contributions for the Company's 24.95% stake in an RC facility.
- Approximately $3 million in interest expense payments related to IRS section 453A ("453A") in connection the Company's share of CCS equity method earnings for RC facility leases which CCS has treated as installment sales for tax purposes.
Certain of these cash outflows cited above are expected to be non-recurring. Future contributions for investment in the RC facility and required 453A tax payments will be recurring, however, the Company has begun efforts to divest its stake in the RC facility. The elevated spending on accounting and re-audit work is expected to subside in the later part of this year and return to normal levels in 2016. In addition, the Company expects a significant decline in the amount of working capital invested in its ACI and DSI equipment business as more projects are completed in late 2015 and 2016.
Separately, as part of the ongoing review of its businesses, the Company has decided to wind down the operations of its subsidiary, ADA Analytics, LLC. This will result in a non-cash impairment charge of approximately $2 million and is expected to reduce the Company's annual operating costs by $0.8 million.
L. Heath Sampson stated, "We are confident that CCS will secure investors for its RC facilities in the coming months and that ADES will successfully execute on its projects and initiatives. However, the Company is negotiating a bridge loan for up to $15 million to ensure that it has ample liquidity while it wraps up its restatement and re-audit efforts, completes its existing ACI and DSI contracts and other corporate and organizational initiatives."
Sampson added that, "since I became CEO in April, we have taken a number of steps to align our operating cost structure with market conditions, transition away from the use of outside professional consultants and experts, and position the Company for future markets. The Board of Directors and the new management team remain committed to completing our accounting review as soon as possible, getting current with SEC reporting obligations and relisted on NASDAQ and then taking actions to provide value to the Company's stockholders."
[1] Per US Energy Information Administration - 12 month period ending May 31, 2015.
[2] As used in this release, "cash" is a non-GAAP financial figure. As of June 30, 2015, cash and cash equivalents and restricted cash were approximately $10 million and $13 million, respectively.
[3] As of December 31, 2014, cash and cash equivalents and restricted cash were approximately $25 million and $11 million, respectively.
About Advanced Emissions Solutions, Inc.
Advanced Emissions Solutions, Inc. serves as the holding entity for a family of companies that provide emissions solutions to customers in the power generation and other industries.
ADA-ES, Inc. ("ADA") supplies Activated Carbon Injection ("ACI") systems for mercury control, Dry Sorbent Injection ("DSI") systems for acid gases, and technology services and other offerings in support of our customers' emissions compliance strategies. ADA's M-Prove(TM) technology, which reduces emissions of mercury and other metals from PRB coal, is applied directly to coal at power plants, or offered through a licensing agreement with Arch Coal for application at their mines. In addition, we are developing technologies to advance cleaner energy, including CO2 emissions control technologies through projects funded by the U.S. Department of Energy ("DOE") and industry participants.
Clean Coal Solutions, LLC ("CCS") is a 42.5% owned joint venture by ADA that provides ADA's patented Refined Coal ("RC") CyClean(TM) technology to enhance combustion of and reduce emissions of NOx and mercury from coals in cyclone boilers and ADA's patent pending M-45(TM) and M-45-PC(TM) technologies for Circulating Fluidized boilers and Pulverized Coal boilers respectively.
Advanced Clean Energy Solutions, LLC ("ACES") is a wholly owned subsidiary of ADES that is focused on supporting and improving the Company's existing products and identifying, developing and commercializing new solutions to advance cleaner energy and to help our customers meet existing and future regulatory and business challenges. Building off the success of M-45(TM) and M-45-PC(TM) Technologies for Refined Coal, ACES is currently working to develop and commercialize new technologies to reduce a range of emissions associated with power generation and oil & gas production. ACES has assembled a strong team and follows a rigorous process focused on development and maximizing the return on investment.
BCSI, LLC is a custom designer and fabricator of engineered emissions control technologies, bulk material handling equipment, bulk storage systems, water/waste water treatment equipment, and custom components. BCSI supplies Dry Sorbent Injection ("DSI") systems for acid gas control using its technologically advanced cool, dry conditioned conveying air systems. BCSI's technical solutions serve a wide range of industrial clients including; coal fired utilities, water treatment, wastewater, cement kilns, food processing and industrial boilers. BCSI employs engineers and trade professionals at a 190,000+sq. ft. fabrication and office facility located in McKeesport, PA.
This press release 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 statements or expectations regarding the impact of the U.S. Supreme Court's ruling on our Refined Coal and other businesses including delays and timing, our ability to help customers meet new and existing regulations and related matters. These statements are based on current expectations, estimates, projections, beliefs and assumptions of the Company's 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 economic conditions or market demand; timing of or changes in laws, regulations, IRS interpretations or guidance and any pending court decisions, legal challenges to or repeal of them; technical and operational difficulties; availability of raw materials and equipment; loss of key personnel; intellectual property infringement claims from third parties; impact of the weather and other factors discussed in greater detail in the Company's filings with the Securities and Exchange Commission ("SEC"). You are cautioned not to place undue reliance on such statements and to consult the Company's SEC filings for additional risks and uncertainties that may apply to the Company's business and the ownership of its securities. The Company's forward-looking statements are presented as of the date made, and the Company disclaims any duty to update such statements unless required by law to do so.
Graham Mattison
Vice President, Strategic Initiatives and Investor Relations
(720) 889-6206
[email protected]
SOURCE: Advanced Emissions Solutions, Inc.
