Alter NRG Reports Second Quarter 2011 Activities and Financial Results
Aug 12, 2011
OTC Disclosure News Service
Calgary, ALB, Canada –
CALGARY, Aug. 12, 2011 /CNW/ – (TSX – NRG); (OTCQX – ANRGF) – Alter NRG Corp., (“Alter NRG” or the “Corporation”) is pleased to report on its corporate activities and financial results for the three month period and six months ended June 30, 2011.
Alter NRG provides clean and renewable energy solutions that are economically viable and environmentally sustainable. Alter NRG has seen significant growth in revenues and continues to build its industry leadership position. The Corporation’s vision is to commercialize growth technologies through developing economically viable and environmentally sustainable alternative energy projects. Our mission is to be the supplier of choice for clean energy solutions in markets with the greatest opportunities. We market and sell our technology through two wholly owned subsidiaries, Westinghouse Plasma Corp. (“Westinghouse Plasma”) and Clean Energy Developments Corp. (“CleanEnergy”).
Westinghouse Plasma – the industry leading plasma gasification technology that provides clean and renewable energy solutions by converting all types of waste and biomass into high value energy – like electricity, ethanol or syngas for industrial use. With plasma systems in operation for 20 years and converting waste into energy since 2002, this technology is commercially proven and has lower emissions than conventional energy technologies.
Clean Energy – the Canadian industry leading geoexchange company that provides heating and cooling for homes and commercial buildings using energy from the earth. This is a solution that is used extensively in Europe as it reduces the use of fossil fuels for heating and cooling by up to 80%. In a highly fragmented Canadian market, CleanEnergy provides complete design and build solutions for commercial projects and also equipment sales through its dealer network across Canada.
Fox Creek Coal Assets (“Fox Creek”) – Alter NRG has acquired one of the largest contiguous deposits of surface mineable coal, available in Western Canada (847 million tonnes). With existing infrastructure and access to rail and ports, the Fox Creek Coal can help fulfill the increasing demand for coal in Asia.
Alter NRG is pleased to be presenting highlights for its second quarter of 2011 as revenues have increased and operating expenses have decreased. The quarter ended June 30, 2011 was very successful with revenue growth of 92% or $1.6 million over the same three month period and growth of 66% or $2.3 million over the same six month period ending June 30, 2010. Combined profit margins remain above 30% for both the three and six month periods ended June 30, 2011 and operating expenses have declined, as compared to June 30, 2010, by $1.1 million or 22% for the three months ended and $1.8 million or 17% for the six months ended June 30, 2011. The Plasma business contributed $1.5 million of the revenue growth and CleanEnergy contributed $0.8 million of the revenue growth for the six months ended June 30, 2011.
The Westinghouse Plasma business continues to grow as the second quarter revenues were engineering and testing revenues that occur in advance of the larger equipment sales. The Plasma business accomplished a number of important strategic milestones that are illustrative of the larger sales pipeline that continues to mature.
· Revenue for the three months ended June 30, 2011 were $1.2 million which is an increase of 215% over the June 30, 2010 quarter.
· Continued to support over 22 projects located worldwide which are in the engineering stage of project development with a total sales value of over $500 million upon successful development. The Westinghouse Plasma technology has been selected in a total of over 60 proposed projects being advanced worldwide that are in active project development by numerous industry leading companies.
· Air Products, a US based Fortune 500 company, received the regulatory approval for their Tees Valley project in Northern England which will take 950 tonnes per day of processed household waste and convert it into 49 MW of electricity, enough to power over 50,000 homes. The project is expected to begin construction in late 2011 and represents approximately a US$25 million sale depending upon final scope.
· Continued to provide 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 upon successful development.
· Announced a $1.9 million sale of plasma torches for use in an industrial application. The torches began manufacturing and are expected to be delivered in Q4 of 2011. This is one of several potential plasma torch orders, which represents shorter sales cycles, the Company is actively pursuing.
· Finalized the detailed engineering for the construction of a demonstration facility by Wuhan Kaidi (“Kaidi”) in the Wuhanprovince of China. 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 10 years using the Westinghouse Plasma technology. The revenue to Westinghouse Plasma is expected to be US$3 to US$10 million per facility.
· Advanced the detailed engineering and construction of a second demonstration facility in Shanghai which will be integrated with an existing incinerator to take the incinerator ash as well as other harder to handle 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 targeted 13 current incinerators around Shanghai as targets.
· Advanced 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 KoochichingCounty in Northern Minnesota is called the Renewable Energy Clean Air Project. This results in an approximate US$12 million dollar technology sale which is expected in 2012 as well as site licenses and engineering revenues in late 2011.
· Signed a license agreement in Australia and New Zealand with Moltoni Energy for $5.75 million payable in increments over 5 years. Moltoni Energy is a private development company with experience in both waste and large power facilities and have a dozen planned energy from waste projects in the region. Testing is expected to start in August 2011.
· Began the regulatory process for the DufferinCounty energy from waste project in Ontario, Canada, an approximate 6.5 MW facility.
CleanEnergy continues to complete a number of large projects including municipal, commercial and residential projects and focus on building brand and reputation through strategic partnerships and the dealer network. During the three months ended June 30, 2011, CleanEnergy achieved the following:
· Sales of $2.2 million for the quarter which is an increase in sales of 57% over the first quarter of 2010. CleanEnergy has executed on larger scale projects in the second quarter of 2011 and successfully positioned itself to be the industry leading commercial geoexchange company focused on larger jobs from $0.5 million to $4.5 million and growing. Our strengthening reputation has expanded the backlog of sales to over $7.0 million with a strong pipeline of opportunities.
· Announced that CleanEnergy was awarded the CalgaryAirport geoexchange installation contract for a total of $4.5 million in revenue which will begin in Q4 of 2011. The Calgary Airport Authority has begun a major development project at YYC, including building a new runway and doubling the size of the AirTerminalBuilding with the addition of a new concourse, which will be the new home for International and U.S. flights. YYC has chosen to incorporate geoexchange as part of its sustainable design principles that are expected to reduce the carbon footprint by 4,900 tonnes per year, which is equivalent to taking 1,200 cars off the road permanently.
· Continued construction on a geoexchange installation in Truro, Nova Scotia for $2.05 million to complete the Central Nova Scotia Civic Centre for all geoexchange aspects of the building including, making ice for the rink, heating the pool and heating and cooling the buildings. This facility will feature a NHL-sized ice surface with seating for 3,200 spectators. It will also be home to an indoor aquatic centre, an exercise track, a fitness centre and space for events like concerts, tradeshows and community gatherings.
· Continued construction on a state of the art mental hospital in Ontario for $1.5 million. Mental Health Centre Penetanguishene aims to achieve Leadership in Energy and Environmental Design (LEED®) Gold certification for the design and construction of the new facility. CleanEnergy’s geoexchange system will help the Health Centre achieve the necessary points to reach a LEED® Gold certification.
· Secured a $450,000 purchase order to provide geoexchange heating and cooling solutions for a 72 unit senior’s affordable living complex in London, Ontario. This work will be initiated in mid 2012.
· Completed $825,000 of the installation of a geoexchange solution which provides the complete heating, cooling and ice making for a hockey rink and sports complex in Fredericton, New Brunswick.
· Added a tier one Canadian bank as a partner to provide financing for the complete geoexchange system for commercial and municipal customers.
· Expanded our dealer network across Canada to 115 dealers to which CleanEnergy distributes the WaterFurnace manufactured GeoStar branded heat pumps exclusively in Western and Central Canada. The dealer network sells geoexchange solutions to the residential market.
· Announced the heating content of the Fox Creek coal would be 4,944 kcal/kg (8,900 Btu/lb) on a washed basis, which is similar quality to the NorthAmericanPowderRiver Basin coal. The Fox Creek coal asset is 847 million tonnes of measured and indicated coal resource located near Fox Creek, Alberta. This is one of the largest exportable thermal coal resources in the developed world. Recently, thermal coal demand internationally, particularly in Asia, has increased, which has resulted in higher thermal coal prices. The Fox Creek Coal has access to rail lines and a port that are expected to have capacity to take the coal to export markets.
In March 2011, the Corporation announced its intent to pursue strategic alternatives to maximize shareholder value going forward, which may include the sale on non-core assets, technology or the Corporation as a whole. The Corporation has engaged strategic advisors to assist with this process and management announced on June 27, 2011 that it had received expressions of interest, which are preliminary and non-binding, for all of the Corporation’s major assets, as well as the Corporation as a whole. Management will continue to identify accretive transactions and negotiate these to definitive agreements over the coming quarter.
The Corporation has not set a definitive timetable for final completion of its exploration of strategic alternatives, and may not make further public announcements with respect to the same other than as required by applicable securities laws.
The Corporation remains focused on decreasing expenses and has achieved some success this far in 2011. Expenses for the three months ended June 30, 2011 decreased by 22% to $4.0 million as compared to $5.1 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 attaining revenue and cost reduction goals for 2011 and 2012.
During the quarter the following were achieved:
· Sold non-core assets for cash proceeds of $2.1 million.
· Filed regulatory documents related to a $20 million Committed Equity Facility provided by Haverstock Master Fund. The 24-month agreement enables the Company to receive in aggregate $20 million through an initial $1,000,000 drawdown and up to $500,000 per drawdown subsequently. Timing of any drawdown is at Alter NRG’s sole discretion and the Company is also able to set a minimum price for each drawdown.
· Announced the option to invest in up to 25% of Air Products Tees Valley Renewable Energy Facility. Due to timing, this option is no longer being pursued by Alter NRG although Alter NRG retains its rights to invest in all future projects.
Much of this quarter has been spent focused on the strategic process that began back in March of this year. Throughout the quarter we’ve had the opportunity to review the preliminary, non-binding proposals that have been submitted for our individual assets as well as the company as a whole and are pleased to see that this process will provide shareholders with meaningful options. That said, a lot of work remains before a transaction is complete and in times like this it can be easy to lose sight of the forest for the trees.
Consensus on the best path forward can be hard to achieve and in the energy sector it seems we are particularly prone to long debate dominated by complicated technical, financial and regulatory issues. Despite this, while we have been looking at strategic alternatives for the company we have been presented with a repeated theme – our Westinghouse Plasma technology is being recognized as the world leader in waste to energy and our geoexchange company (operated as CleanEnergy) is the Canadian leader in the commercial geoexchange market. This recognition is a good reminder to all of us to consider the broader perspective.
We have made noteworthy advancements in our plasma technology and in building our pipeline. Large customers have invested significant money in projects with lengthy sales cycles further validating the Westinghouse Plasma technology and demonstrating faith in the Company. With Air Products’ TeesValley project moving quickly ahead, we are optimistic that we will see a gasifier sale in Q4 – a significant milestone following the detailed engineering completed in 2010 for the project which will take household waste and convert it into 49 megawatts of electricity. A strong balance sheet is essential in order for the Company to maintain its leadership position and to further the adoption of our technology, making this strategic process we are engaged in crucial to our success.
Our repositioning of the geoexchange business to focus on commercial building markets has resulted in the migration of our dealings to much larger jobs. To reach our strategic goal, we are actively bidding on $20 million of additional projects. We have remained committed to the priority we set for CleanEnergy in 2011. Delivering sustainable, predictable performance improvement both operationally and financially has allowed the Company to secure the single largest contract in its history – a $4.5 million geoexchange installation at the CalgaryInternationalAirport. The installation is expected to begin in the Q4 2011 and is expected to finish in Q1 2013. We are confident that our results will continue to improve.
Despite the recent success in CleanEnergy in both sales and execution, management recognized that it has taken longer than expected to realize the value of the business and has taken an impairment of the goodwill this quarter of $7.25 million. Management remains committed and resolved to continue building our leadership position and maximizing value in this exciting growth business.
As a company, we strive to do the right thing – always. Our stakeholders expect this of us, and we know that nothing is more important to our success. In a changing landscape we will continue to meet our responsibility to evolve this company and owe thanks to our Board of Directors for their guidance and to our shareholders for their patience. Einstein said that “when a man sits with a pretty girl for an hour, it seems like a minute. But let him sit on a hot stove for a minute – and it’s longer than any hour. That’s relativity.” Sometimes the process of doing the right thing feels like sitting on a hot stove, so we encourage you to remember the broader perspective, while we work towards a common vision and continue working to overcome the short-term obstacles because we really have only one choice for the future, and that is to continue moving forward.
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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 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.
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