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| 8-K - 8-K - Advanced Emissions Solutions, Inc. | d583056d8k.htm |
| EX-99.2 - EX-99.2 - Advanced Emissions Solutions, Inc. | d583056dex992.htm |
 Investor Presentation
August 2013
www.advancedemissionssolutions.com
©
2013 Advanced Emissions Solutions, Inc.
Exhibit 99.1 |
 -2-
This page intentionally left blank
©
2013 Advanced Emissions Solutions, Inc. |
 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
-3-
©
2013 Advanced Emissions Solutions, Inc. |
 ADA-ES, Inc.
100% owned ADES
BCSI, LLC
100% owned ADES
Clean Coal Solutions, LLC
42.5% owned ADA-ES, Inc.
Operating Companies
-4-
©
2013 Advanced Emissions Solutions, Inc. |
 A
family of companies that have been providing emission control solutions to the
power industry for more than 30 years
ADVANCED EMISSION SOLUTIONS
-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
(Clean Coal Solutions)
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
©
2013 Advanced Emissions Solutions, Inc. |
 Near-term
growth
opportunities
Refined Coal
28 facilities eligible for
Section 45 Tax Credits of
$6.59/ton (escalating)
through 2021
7 facilities leased/sold to
investors generating more
than $75M in annual
payments
Remaining facilities
expected to be
leased/sold by YE2014
Expect $200M in annual
segment revenues at +90%
margin by 2015
Clean Coal Solutions JV:
42.5%
ADA
42.5% NexGen
15% Goldman-Sachs
MATS rule took effect in 2012,
compliance by 2015-2016
Rule creates $1B market for
equipment
ADA leading provider of
equipment to meet MATS
Activated Carbon
Injection Systems
Dry Sorbent Injection
Systems
Equipment backlog of $33.2M
at 2Q13, up from $25.3M at
4Q12 and $4.5M at 2Q12
MATS to create annual
market of $1-$2B for
consumables to control
mercury
ADA offers proprietary
chemical technology
applied prior to
combustion as alternative
to the use of activated
carbon
Addressable market of
~600M tons of western
coal per year
Emissions Control
Equipment
Mercury Control
Consumables
-6-
©
2013 Advanced Emissions Solutions, Inc. |
 -7-
PORTFOLIO OF
EMISSIONS
CONTROL
SOLUTIONS
Refined Coal-
$0 cost to utility
M-Prove
TM
Technology
$0
capex,
$1-$4/ton
reduced
compliance
cost
ACI/DSI-
$1-$3M in capex
Scrubber, SCR-
$100M+
in capex
Large E&C
firms
©
2013 Advanced Emissions Solutions, Inc. |
 -8-
EXPECTED
REVENUE
MIX
TRAJECTORY
TM
©
2013 Advanced Emissions Solutions, Inc. |
 -9-
REFINED COAL
©
2013 Advanced Emissions Solutions, Inc. |
 -10-
REFINED
COAL:
MONETIZATION
DYNAMICS
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, RC
investor and power companies
3 RC investors currently
engaged
Working with additional RC
investors for remaining RC
facilities
Utility
Receives:
value
of
$1.00 -
$4.00 / ton for
emissions reduction
Payment of ~$1/ton from
RC investor
RC Investor
Receives:
(a)$6.59/ton tax credit
through RC production, and (b)
tax deductions for rental,
utility and operating expenses
Pays:
~$1/ton to utility, ~$2/ton for
operating expenses and
~$3+/ton to CCS
CCS Receives:
~$3+/ton in consolidated
payments, net $1.50-$2/ton to
ADA of pre-tax income after
payments to ADA’s JV partners
Each RC facility can be leased or sold to
generate revenue, or operated by CCS for
tax credit benefits to offset future tax
obligations
©
2013 Advanced Emissions Solutions, Inc. |
 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
©
2013 Advanced Emissions Solutions, Inc.
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.
-11-
Retained RC Results |
 UPDATE
ON 28 REFINED COAL FACILITIES 7 facilities
generating
$75M + in
annual
revenues
Operating
2 facilities
retained
by CCS
CyClean
1 facility
likely to
close in
2014
9 facilities in various
stages of
discussions and
negotiations
1 facility
currently
retained (since
early June),
expected to be
leased in 2H13
-12-
4 facilities in
negotiations.
Expect one to be
operating in
2H13
4 facilities in
negotiations
M-45-PC
Not Currently Operating
~
15MY/yr
~6MT/yr
~18MT/YR
~45MT/yr
~3MT/yr
~2MT/yr
~22MT/yr
©
2013 Advanced Emissions Solutions, Inc. |
 -13-
EMISSIONS CONTROL -
EQUIPMENT
©
2013 Advanced Emissions Solutions, Inc .
Installed/installing ACI systems on over 60
boilers at coal-fired power plants
Sold through our BCSI subsidiary |
 EMISSION CONTROL EQUIPMENT ($ IN MILLIONS)
-14-
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
EC Revenues and Backlog
MATS Market
©
2013 Advanced Emissions Solutions, Inc. |
 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
-15-
©
2013 Advanced Emissions Solutions, Inc. |
 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
CO
2
CAPTURE:
OVERVIEW
©
2013 Advanced Emissions Solutions, Inc.
-16-
Pilot under construction |
 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-Prove
TM
technology and royalty opportunity
expected to produce additional growth beyond MATS
equipment market
Developing solid sorbent capture technology to
capture CO
2
from flue gas in conventional coal-fired
boilers
KEY TAKEAWAYS
©
2013 Advanced Emissions Solutions, Inc.
-17- |
 APPENDIX
©
2013 Advanced Emissions Solutions, Inc.
-18- |
 Source:
U.S. EIA, March 2012 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
©
2013 Advanced Emissions Solutions, Inc.
-19- |
 US
ELECTRICITY FROM COAL GENERATION ©
2013 Advanced Emissions Solutions, Inc.
-20-
Source: EIA |
 COAL
AND US ELECTRICITY GENERATION ©
2013 Advanced Emissions Solutions, Inc.
-21-
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 |
 MERCURY
CONTROL- 15 YEARS IN THE MAKING
-22-
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
EPA issues draft
of Mercury Air
Toxic Standards
(MATS)
EPA issues final
Mercury Air
Toxic Standards
(MATS)
Compliance
deadline for
MATS.
Plants can apply
for a extension
2011
2012
2015/16
Technology
commercially
proven
©
2013 Advanced Emissions Solutions, Inc. |
 $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 $11.2 million
and $0.9 million at 6/30/13 and 6/30/12 respectively -23-
©
2013 Advanced Emissions Solutions, Inc. |
 $(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 33
for explanation of non-GAAP measure
2013
June 30,
For the Three Months Ended
For the Three Months Ended
March 31,
FINANCIAL
RESULTS
-24-
©
2013 Advanced Emissions Solutions, Inc. |
 Clean
Coal
operated
9
facilities
in
2Q13,
5
of
which
were
leased
or
sold
to
RC
investors
In 2Q13 the four RC facilities operated by Clean Coal incurred operating expenses
of $4.4M but generated $7.7M in tax credits
The operation of these units included $32M in pass-through coal
purchases/sales REFINED COAL RESULTS
-25-
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. 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,
©
2013 Advanced Emissions Solutions, Inc. |
 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
EMISSION CONTROL
-26-
©
2013 Advanced Emissions Solutions, Inc.
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, |
 ADA
STANDARD ACI SYSTEM Feeder Room
Electrical Room
Blower Room
Fill Pipe
Bin Vent Filter
Man-door with PRV
Level Transmitters
PAC Storage
Module
Process Equipment
Module
©
2013 ADA-ES, Inc.
Confidential and Proprietary Information
-27- |
 ACI
MARKET SHARE Boilers treated by ACI systems
Source: ICAC
©
2013 Advanced Emissions Solutions, Inc.
-28-
ADA
Norit
CB-EEC |
 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
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
REFINED COAL: INTRODUCTION & OVERVIEW
©
2013 Advanced Emissions Solutions, Inc.
-29- |
 -30-
REFINED COAL PHOTOGRAPHS
©
2013 Advanced Emissions Solutions, Inc. |
 FINANCIAL IMPACT OF RC OPERATIONS
-31-
©
2013 Advanced Emissions Solutions, Inc.
Annual run rate through 2021
Facilities
Status
1Q13A
2Q13A
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 |
 REFINED
COAL: CCS Self Monetization
3
Party RC Investor
CCS Consolidated financial example for a 3 MT/yr facility
©
2013 Advanced Emissions Solutions, Inc.
-32-
rd |
 NON-GAAP FINANCIAL MEASURES
-33-
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.
©
2013 Advanced Emissions Solutions, Inc. |
 CONTACTS 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
-34-
©
2013 Advanced Emissions Solutions, Inc. |