Alter NRG Reports 2011 Activities and Financial Results
Mar 22, 2012
OTC Disclosure News Service
Calgary, ALB, Canada –
CALGARY, March 22, 2012 – Alter NRG Corp., (“Alter NRG” or the “Corporation”) is pleased to report on its corporate activities and financial results for the fiscal year ended December 31, 2011.
Kevin Bolin, Executive Chairman states that “2011 has been a year of transition which has seen the Company sign its largest ever commercial contract, sell non-core assets and also manage a process to find a world class CEO to lead Alter NRG through the next phase of its commercialization. On March 8, 2012, we announced Walt Howard as the newly appointed CEO and I am excited as both the Chairman and as a shareholder of Alter NRG to have Mr. Howard on board. As part of the transition, my role will become that of a Non-Executive Chairman effective immediately. I look forward to working with Walt and creating shareholder value from our industry leading technology platform.”
Alter NRG provides and pursues alternative clean and renewable energy solutions through plasma gasification to meet the growing demand for clean energy in world markets. The Corporation markets and sells the Westinghouse Plasma technology through a wholly owned subsidiary:
Westinghouse Plasma Corp. (“Westinghouse Plasma”) – the industry leader for the treatment of all types of waste (industrial, household, commercial, hazardous, etc.) using plasma technology and converting it into useable energy such as electricity, syngas (replacement for natural gas), heat, steam, or liquid fuels such as diesel or ethanol.
The Corporation also has a wholly owned subsidiary called Clean Energy Developments Corp. (“CleanEnergy”) which provides heating and cooling geoexchange solutions for homes, commercial and industrial buildings using energy from the earth. During December 2011, as a result of the Corporation’s strategic review, the Corporation decided to exit the geoexchange business and entered into a sales agreement to dispose of all the assets and liabilities of CleanEnergy. Accordingly, the CleanEnergy results of operations and assets and liabilities are now shown as discontinued operations in the 2011 financial statements.
The Westinghouse Plasma business continues to grow. For the year ended December 31, 2011, the Corporation achieved sales growth and expenses declined significantly as the concerted efforts to control and reduce expenses across the Corporation were realized.
For the year ended December 31, 2011, total revenues of $6.7M were $298,000 or 5% higher than the year ended December 31, 2010. Gross profit for the year ended December 31, 2011 was 60% as compared to the year ended December 31, 2010 of 58%. In late December 2011, the Corporation received a purchase order for its large-scale plasma gasification unit for $22.4 million, which increases the revenue base for 2012 considerably.
The Corporation remains focused on decreasing expenses and has achieved success in 2011. General expenses, which include general and administration and selling and distribution, decreased 24% for the year ended December 31, 2011 to $8.9 million as compared to $11.7 million in the same period of 2010. The expenses have been decreased through focus and efficiencies and a reduction in the number of employees. Management believes they have built a strong team of people focused on further growing revenue in 2012.
The Plasma business accomplished a number of important strategic milestones that are illustrative of the larger sales pipeline that continues to mature.
· Sales of $6.7 million which is the largest annual plasma revenues in the Corporation’s history.
· Received a $22 million purchase order from Air Products, a US based Fortune 500 company for their Tees Valley project in Northern England which intends to take 950 tonnes per day of processed household waste and convert it into 49 MW of electricity, enough to power over 50,000 homes.
· Worked with SMS Infrastructures (“SMS”), who already has constructed two hazardous waste facilities in India using the Westinghouse Plasma technology, and is now pursuing two additional projects and a further portfolio of hazardous waste projects which continue to advance.
· Provided syngas to Coskata, Inc. (“Coskata”) at the Westinghouse Plasma Centre in Pennsylvania. Coskata has a proprietary syngas to ethanol conversion technology that is using the Westinghouse Plasma technology to create syngas from biomass and waste.
· The Coskata technology has been chosen for a waste to ethanol project in Australia that is being advanced and is expected to be a $50 million technology sale to Alter NRG, upon successful development. The consortium (called Flex Ethanol) performed a successful waste to ethanol test at the Westinghouse Plasma Centre.
· Executed upon a $1.9 million sale of plasma torches for use in an industrial application.
· Finalized the detailed engineering for the construction of a demonstration facility by Wuhan Kaidi (“Kaidi”) in the Wuhan province of China and constructed the plasma torches. Upon successful demonstration, Kaidi has up to 150 biomass-to-energy projects which they expect to develop in the Central China market over the next 15 years using the Westinghouse Plasma technology. The revenue to Westinghouse Plasma is expected to be US$3 to US$5 million per facility.
· Advanced the detailed engineering and construction of the plasma torches for a demonstration facility in Shanghai which will be integrated with an existing incinerator to take the incinerator ash as well as other difficult feedstocks. Upon successful demonstration, the revenue to Westinghouse Plasma is expected to be US$5 to US$10 million per additional facility and they have identified 13 current incinerators around Shanghai as targets.
· Completed the second phase of engineering on a project in Minnesota being developed by the Koochiching Development Authority. The proposed project which is to be located in Koochiching County in Northern Minnesota is called the Renewable Energy Clean Air Project. This project could result in an approximate US$12 million technology sale.
· Received the first milestone payment on a license agreement in Australia and New Zealand with Phoenix Energy (formerly Moltoni Energy) for $5.75 million payable in increments over 5 years. Phoenix Energy is a private development company with experience in both waste and large power facilities and they have a dozen planned energy-from-waste projects in the region.
· Continued the regulatory process and stakeholder relations efforts for the Dufferin County energy-from-waste project in Ontario, Canada, an approximate 6.5 MW facility. This would be an approximate $12 million sale of Westinghouse Plasma equipment.
· In addition to the above highlights, Alter NRG tours potential new customers to the facilities in Japan, India and the Westinghouse Plasma Centre operated by us Madison Pennsylvania on a regular basis. In the last 6 months, we have had numerous Fortune 500 and equivalent companies perform further due diligence on the Westinghouse Plasma Solution and are negotiating various license agreements. We expect to be adding new strategic, and industry leading customers in 2012.
· Announced the sale of CleanEnergy, the Corporation’s geoexchange division, for $5 million to focus its efforts entirely on plasma gasification. This transaction is expected to close in April 2012.
· Sold a non-core coal asset for cash proceeds of US$5.0 million and executed an agreement for the sale of a steam turbine for $1.75 million which improved the Corporation’s working capital position.
· Appointed Kevin Bolin as interim Executive Chairman, who has an extensive background in the energy-from-waste industry.
· Completed the necessary filings for a $20 million Committed Equity Facility provided by Haverstock Master Fund. The 24-month agreement enables the Corporation to receive in aggregate $20 million through individual drawdowns of up to $500,000. Timing of any drawdown is at Alter NRG’s sole discretion and the Corporation is also able to set a minimum price for each drawdown.
Alter NRG continues to actively pursue exclusive licensees for its proprietary Westinghouse Plasma Gasification solutions. Currently, Alter NRG has active negotiations in Asia and Europe with most companies having signed a memorandum of understanding or the definitive agreement itself which may include conditions precedent or be awaiting regulatory approvals or final funding. License payments under the agreements vary by market, however, all agreements include a substantive upfront payment, performance metrics, and the requirement that gasification equipment be purchased from Alter NRG. Terms will be released once each agreement is finalized and the first payment is made.
EXECUTIVE CHAIRMAN’S MESSAGE
2011 was an important year for Alter NRG. We needed to evolve our Company to ready ourselves for the next stage of value creation.
This included garnering the right focus and shedding what was not core to our franchise.
Accomplishments this year include:
· developing a strategy to monetize the value of the Company and put us in a position for growing positive cash flows in 2012 and beyond;
· directing our corporate resources on project and key milestone delivery; and
· adjusting our leadership so that we can execute and create value for years to come.
By accomplishing these things we are now moving forward quickly. We are now poised to create long-term value. To me, it is a very exciting time at Alter NRG.
I would be remiss if I didn’t directly address the performance of our share price to our shareholders in this message. It would be easy to excuse our recent market performance on the current overall conditions, widespread investor fatigue and fears of global slowdown – it would also be wrong. Our investors need to see execution and revenue growth. Growth can only come with focus and execution.
Early in the year we explored strategic alternatives for the Company in order to achieve the best value for shareholders. The process resulted in the return of our focus to our Westinghouse Plasma business in addition to the sale of non-core assets, which helped to strengthen the balance sheet. With focus 100% on plasma, it was determined that our shareholders would be best served by a modification to our strategy, management and Board.
The evolution of our Company has been a journey with some detours, but looking back we can confidently say that we have done an excellent job in creating potential value through advancing our technology development and commercial readiness. Since acquiring Westinghouse Plasma in April of 2007, the Company significantly improved the core plasma gasification technology by enhancing performance, reliability, and the overall economics. This began with leveraging our existing demonstration and commercial facilities, and then expanding our product offering to a full gasification solution, which can be integrated with other conventional equipment to create renewable energy from waste or biomass. Numerous leading engineering companies have provided technical input into our Westinghouse Plasma gasification technology, allowing us to further evolve and extend our technical and commercial lead over competitors.
Our technology is commercially deployed. We have operating plants and customers utilizing our plasma gasification offering as substantiated by the $22.4M sale announced in December to Air Products and Chemicals, Inc. The scope of this order includes engineering, fabrication and construction of a plasma gasifier for installation at their proposed Tees Valley Renewable Energy Facility in Northeast England. Our technology is commercially ready for demanding applications substantially up the value chain.
Realizing that the Air Products success was a platform for growth coupled with the need to create shareholder value, a change of leadership was important for the next chapter of our Company. We have welcomed our new CEO, Walter Howard, who has experience in both the capital markets and international sales of large infrastructure technology. He comes to us as a leader in the renewable energy field.
Mr. Howard will be focused on our new strategy which includes increasing our recurring revenue base through licensing activities and incremental project participation, enhancing our strategic partner base to generate greater sales volumes, and focusing on markets which are ready to act now. He will continue our technology leadership position, capitalize on our brand, and leverage our existing installed base to accelerate technology improvements and intellectual property. Technology improvements will focus on enhancing addressable markets and increasing margins. Finally, Mr. Howard will focus on improving our balance sheet and creating a cash flow positive business.
We have a great technology, a great brand, a leading position, and a team that has the ability to capitalize on these. We listen to our Shareholders and we are committed to creating value for you. We are confident that our recent changes and focused direction will provide the results that matter to you. We are fortunate to have some long term supporters and want to take the opportunity to thank you for patiently supporting our evolution. We have achieved important progress during a time of significant change. One of the primary truths about fundamental change is that it can be easy to overestimate the speed with which it will unfold – and just as easy to underestimate the impact that it will ultimately have. From that outlook, we are optimistic about the future. It is reasonable to expect a company in our position to have many exciting announcements in the near term and for years to come.
SELECT FINANCIAL RESULTS ($)
The consolidated financial statements have been prepared on a going concern basis. The going concern basis assumes that the Corporation will continue in operation for the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of business.
As at and for the years ended December 31, 2011, the Corporation had losses of $21,146,419, negative cash flows from operations of $8,507,926 and had an accumulated a deficit of $91,938,688 (year ended December 31, 2010 – $22,352,313, $16,046,061 and $70,792,269 respectively). Management is developing new sustainable energy solutions which is a long-term process and recognizes that the Corporation must generate positive cash flows or secure additional financial resources in order to meet its liabilities as they come due and to enable the Corporation to continue operations.
On February 11, 2011, the Corporation entered into a binding agreement to secure access to funds on an as-needed basis for up to $20 million through a Committed Equity Facility provided by Haverstock Master Fund (“Haverstock”). The ability to access the cash through the facility is subject to regulatory approval, which was obtained May 30, 2011, and the filing of a base shelf prospectus with the Canadian Securities Administrators, which was completed on June 28, 2011 and filing of the prospectus supplement which was completed on August 26, 2011. The Company has not yet drawn on these funds.
Whether and when the Corporation can achieve profitability or secure additional financial resources through Haverstock or other sources is uncertain. While the Corporation has been successful in obtaining its required funding in the past, there is no assurance that financing will be available to the Corporation in the future. These uncertainties may cast significant doubt about the Corporation’s ability to continue as a going concern.
The financial statements have been prepared on the basis that Alter NRG Corp. will continue to operate as a going concern, which means we expect to realize our assets and settle liabilities and commitments in the normal course of business. The statements do not reflect adjustments in the carrying values of assets and liabilities reported, revenue or expenses, and the classification used on the consolidated statement of financial position that would be necessary if the going concern assumption was not appropriate. Such adjustments would be material.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
Advisory Respecting Forward-Looking Statements
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words “expect”, “anticipate”, “continue”, “estimate”, “objective”, “ongoing”, “may”, “will”, “project”, “should”, “believe”, “plans”, “intends”, “confident”, “might” and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: availability and cost of key materials and labour and availability of funds with respect to the amount of capital expenditures and scheduled commencement of operations; timing of regulatory approval including various permits from the applicable government authorities; the assessment of capital markets including the availability of debt and equity in current market conditions; commodity prices for electricity, natural gas, coal and other resources that impact the Corporation’s operations directly and indirectly; extent of investment by government authorities in infrastructure projects; the financial and operational health of key partners in various projects; the continued development of the Corporation’s technology and its use in various applications and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements reflect management’s current beliefs and assumptions, based on information currently available to management. A number of factors could cause actual results to differ materially from the results discussed in the forward-looking statements, many of which are beyond the control of the Corporation. Among the material factors that could cause actual results to differ materially from those indicated by such forward-looking statements are: that the information is of a preliminary nature and may be subject to further adjustment; unforeseen environmental effects; the completion of strategic partner’s projects; arrangements with key suppliers; potential product liability and other claims; other business risks outlined in this news release, including risks associated with the proprietary technology; the possible unavailability of financing at competitive rates and the related effect on development activities; the effect of energy price fluctuations; changes in government regulation, including changes to environmental regulations; the effects of competition; the dependence on senior management and key personnel, and fluctuations in currency exchange rates and interest rates, as well as those factors discussed in or referred to under the heading “Risk Factors” in the Corporation’s Annual Information Form dated March 29, 2011 available at www.sedar.com. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements.
The Corporation cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information and statements contained in this news release speak only as of the date of this news release, and the Corporation assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.
For further information:
Walter Howard, Chief Executive Officer
Daniel Hay, Chief Financial Officer
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