Investor Presentation-Baird Conference November 2013 www.advancedemissionssolutions.com © 2012-2013 Advanced Emissions Solutions, Inc. Exhibit 99.1 |
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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. © 2012-2013 Advanced Emissions Solutions, Inc. -3- SAFE HARBOR |
Advanced Emissions Solutions, Inc. Developing proprietary solid sorbent capture technology to capture CO 2 from flue gas Pilot program underway, co-funded by the Department of Energy BUSINESS © 2012-2013 Advanced Emissions Solutions, Inc. -4- Provides Activated Carbon Injection (“ACI”) and Dry Sorbent Injection (“DSI”) Systems Low capex alternative for compliance with Mercury Air Toxic Standards (“MATS”) Proprietary M-Prove technology for mercury control Deploys technologies for conditioning flue gas Operates through Clean Coal Solutions (“CCS”), a joint venture 42.5% owned by ADES Owns 28 RC facilities that qualify for tax credits under Section 45 of the Internal Revenue Code Reduces mercury emissions by 40+% and NO x by 20+% at coal-fired power plants Refined Coal (“RC”) Emission Control CO Capture 2 TM OVERVIEW |
Advanced Emissions Solutions, Inc. (“ADES” or the “Company”) is a family of companies that has been providing emission control solutions to the power industry for more than 30 years WHO WE ARE © 2012-2013 Advanced Emissions Solutions, Inc. -5- 1. Subsidiaries include ADA-ES, Inc., BCSI, LLC and Clean Coal Solutions, LLC (42.5% ownership). Headquartered in Highlands Ranch, CO Business founded in 1996 Operations across Coal Treatment, Emission Control and CO 2 Capture 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 1 |
-6- Refined Coal- $0 cost to utility M-Prove 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. Boiler ACI System DSI System Coal Pile ACI System for Mercury Control ™ PORTFOLIO OF EMISSIONS CONTROL SOLUTIONS |
Near-term growth opportunities Refined Coal Creates $1B equipment market ADA leading provider of equipment to meet MATS 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 to coal 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 RC facilities qualify for Section 45 Tax Credits of $6.59/ton (escalating) through 2021 8 RC facilities generating more than $85M in annual 42.5%) Remaining RC facilities expected to be in full-time operation by YE2014 Expect ~$300M in annual CCS revenues at +90% margin by 2015 MATS rule took effect in 2012, compliance by 2015-2016 -7- Activated Carbon Injection Systems Dry Sorbent Injection Systems $33.2M at 2Q13 $25.3M at 4Q12 and $4.5M at 2Q12 payments to CCS (ADA |
TM © 2012-2013 Advanced Emissions Solutions, Inc. EXPECTED REVENUE MIX TRAJECTORY -8- |
-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 GOLDMAN SACHS 15% NEXGEN 42.5% ADA 42.5% REFINED C OAL CLEAN COAL SOLUTIONS, LLC (CCS) |
© 2012-2013 Advanced Emissions Solutions, Inc. 3 party investor 3 party investor leases RC facility and receives ~$8.00/ton in tax credits (assuming a 35% tax rate) Pays ~$2.00/ton for operating expenses CCS receives $3.00 to $4.00/ton in rental income Utility gets emission reductions Pays ~$1.00 /ton to utility CCS Leasing Model ADES owns 42.5% of CCS (~$1.40/ton) rd rd -10- REFINED COAL: BENEFITS FOR ALL PARTIES |
REFINED COAL: OPERATING IMPACT © 2012-2013 Advanced Emissions Solutions, Inc. -11- CCS incurs no operating costs for the RC facility CCS receives ~$3-$4/ton in rental income from RC investor CCS spends ~$3 ton to operate the RC facility CCS generates ~$7.50 in tax credits for its members CCS incurs no operating costs for the RC facility CCS generates no value RC facility leased/sold to RC investor RC facility operated by CCS RC facility not in full-time operation CCS will likely operate an RC facility prior to finalizing contracts with an RC investor • Faster way to initiate full-time operations with the host power plant • Provides operating assurance to potential 3 party RC investors • Attractive long-term returns to CCS. ~$3/ton in operating costs generates ~$7.50/ton in tax benefits rd |
© 2012-2013 Advanced Emissions Solutions, Inc. -12- Example of a typical RC facility located at a plant that typically burns 4 MT per year (CCS) Assumptions: Retained operating costs of ~$3/ton Lease payments of $~3.50/ton $ millions Quarterly Annually Cash Spent $0.0 $0.0 RC facility not in full-time operations Cash Received $0.0 $0.0 Tax Benefits Generated $0.0 $0.0 Quarterly Annually Cash Spent $3.0 $12.0 RC facility Operated by CCS Cash Received $0.0 $0.0 Tax Benefits Generated* ~$7.50 ~$30.0 Quarterly Annually Cash Spent $0.0 $0.0 RC facility leased to RC Investor Cash Received $3.5 $14.0 Tax Benefits Generated $0.0 $0.0 $ millions $ millions * 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 R EFINED C OAL : FINANCIAL IMPACT OF GAAP REPORTING |
100+ MT/yr ~25 MT/yr 8 facilities leased/sold ~5 MT/yr © 2012-2013 Advanced Emissions Solutions, Inc. -13- 10/29/13 A 12/31/13 3/31/14 12/31/14 3 facilities CCS-operated Additional 2 facilities in full-time operation (using M- 45-PC technology) All RC 28 facilities are expected to be in full-time operations by year end 2014 Full-Time Operations Roadmap 2015 2021 Additional 4 facilities in full-time operation Additional 11 facilities in full-time operation 28 facilities in full-time operation UPDATE ON 28 REFINED COAL FACILITIES TM CCS expects to retain and operate some RC facilities to generate tax credits sufficient to offset expected tax liability |
Installed/installing ACI systems on over 80 boilers at coal-fired power plants Sold through our BCSI subsidiary © 2012-2013 Advanced Emissions Solutions, Inc. EMISSIONS CONTROL - EQUIPMENT -14- ACTIVATED CARBON INJECTION SYSTEMS DRY SORBENT INJECTION SYSTEMS |
MATS market developing as expected $1-$2B market for consumables to control mercury starting in 2016 ADA is prepared for the equipment market Supply agreements already in place, engineering capabilities expanded © 2012-2013 Advanced Emissions Solutions, Inc. -15- EMISSION CONTROL EQUIPMENT ($ IN MILLIONS) |
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 MATS expected to create market starting in 2016 Successfully used since 2010 as part of our Refined Coal offering. Continued demonstration of technology to customers outside of RC © 2012-2013 Advanced Emissions Solutions, Inc. -16- MERCURY CONTROL CONSUMABLES: M-PROVE TM TECHNOLOGY |
Pilot Design: 2012, Construction: 2013, Testing: 2014 Located at Southern Company’s Plant Miller Pilot plant being assembled at Plant Miller © 2012-2013 Advanced Emissions Solutions, Inc. -17- technology to capture CO 2 from flue gas in conventional coal-fired boilers DOE and industry funding: Developing proprietary solid sorbent capture 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 Advantages over competing technologies: For customer: lower cost and less parasitic energy For ADA: continuous revenues from sale of proprietary chemical sorbents CO 2 C APTURE : O VERVIEW |
RC opportunities expected to provide substantial revenues, profits and cash flows through 2021 MATS compliance requirements are driving significant near-term market for equipment M-Prove 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. -18- TM |
APPENDIX © 2012-2013 Advanced Emissions Solutions, Inc. -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- |
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 -21- 25% 19% 42% 13% 1% Coal Natural Gas Nuclear Renewables Petroleum |
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 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 an extension 2011 2012 2015/16 Technology commercially proven © 2012-2013 Advanced Emissions Solutions, Inc. -22- |
$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. -23- BALANCE SHEET HIGHLIGHTS Cash & Cash Equivalents Working Capital** Long-term Liabilities*** Shares Outstanding 6/30/13 $12.3* $(18.0) $14.3 10.1 12/31/12 $9.7 $(24.1) $6.5 10.0 |
FINANCIAL RESULTS © 2012-2013 Advanced Emissions Solutions, Inc. -24- $(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 31 for explanation of non-GAAP measure 2013 June 30, For the Three Months Ended For the Three Months Ended March 31, |
REFINED COAL RESULTS © 2012-2013 Advanced Emissions Solutions, Inc. -25- 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 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, |
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 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. -26- EMISSION CONTROL |
Bin Vent Filter Man-door with PRV Level Transmitters PAC Storage Module Process Equipment Module -27- ADA STANDARD ACI SYSTEM © 2012-2013 Advanced Emissions Solutions, Inc. |
Source: ICAC © 2012-2013 Advanced Emissions Solutions, Inc. -28- ACI MARKET SHARE |
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 , M-45 and M-45-PC 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 © 2012-2013 Advanced Emissions Solutions, Inc. -29- TM TM TM . |
REFINED COAL PHOTOGRAPHS © 2012-2013 Advanced Emissions Solutions, Inc. -30- |
© 2012-2013 Advanced Emissions Solutions, Inc. -31- 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. NON-GAAP FINANCIAL MEASURES |
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 © 2012-2013 Advanced Emissions Solutions, Inc. -32- |