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CALGARY, May 13 /CNW/ - (TSX - NRG; OTCQX - ANRGF) - Alter NRG Corp., ("Alter NRG" or the "Company") is pleased to report on its corporate activities and financial results for the three month period ended March 31, 2009. The following are the highlights for the first quarter of 2009 and the period up to May 11, 2009:
Q1 HIGHLIGHTS
- Announced strategic alliance with Air Products for the development of
renewable energy facilities in North America and Europe. Air Products
is a recognized global leader in industrial gases and a Fortune 500
company.
- Advanced construction of Project Lighthouse, a commercial
demonstration facility developed by Coskata Inc. (Coskata) that uses
the WPC gasification solution to turn biomass into ethanol. Coskata,
a leading second generation ethanol company, was recently named one
of the "50 Hottest Companies in Bioenergy".
- Advanced discussions in Europe with companies progressing with waste
and renewable energy projects. The response was very positive and
resulted in commercial discussions with several different companies.
This includes two developers entering proposals for waste projects,
providing a commercial proposal for a waste-to-energy facility in
Turkey, entering final round technology discussions for a project in
Spain, as well as other commercial discussions.
- Management travelled to China for the first time and received very
positive interest and is currently advancing commercial discussions
with strategic partners advancing waste and biomass clean energy
projects including the signing of a memorandum of understanding. The
Chinese have current plans to focus on cleaner energy and waste to
energy solutions for which the Westinghouse brand is well recognized.
- Operations underway at the first of two commercial hazardous waste to
energy facilities in India being operated by SMS Infrastructures, one
of India's leading engineering companies. The facility is operational
and is expected to be running at capacity during the third quarter of
this year.
- Increased plasma technology sales and service revenue for the quarter
to $1.1 million from $0.7 million in the first quarter of 2008, a 57%
increase. The current sales are primarily for engineering services to
advance commercial projects with technology equipment sale generally
ranging from $10 to $50 million upon successful development.
- The Company continued to advance 12 projects to the engineering
stage. Nine opportunities are located in the United States, one in
Europe and two in Southeast Asia.
For more information on the Company's activities please visit www.alternrg.com or www.sedar.com to view Alter NRG's 2009 First Quarter Report.
The development of renewable and alternative energy projects will continue to move forward despite the current economic challenges as governments from around the world have committed more than $200 billion toward technologies that cut the dependence on fossil fuels.
We are seeing utilities look to not only reduce their emissions but increase their use of renewables. With the United States, Europe and Asia having developed more than 250 policies since July 2008 that support alternative energy, the strongest governments in the world are creating an ideal landscape for our commercially proven, clean energy solutions. There will be an end to this current financial down turn and those of us coming out of the other side will be better and more resilient than before.
A significant opportunity for Alter NRG is underway at our Waltz Mill, PA site as Coskata moves forward with their first commercial demonstration scale cellulosic ethanol plant. The project is projected to initiate operations this summer. Syngas converted from biomass in our gasifier provides a key component to Coskata's ethanol conversion process. The success of this project is expected to create significant visibility and lead the way to numerous commercial installations across North America.
We are strategically expanding our efforts in Europe, an area that considers our technology to be advanced. Europe offers a very favourable environment as it focuses, through incentives, on the removal of market barriers, changing behavior, creating a more favorable business environment for increasing energy efficiency and renewable energy technologies markets. There are numerous developers active in the United Kingdom, Italy and Spain with submissions and projects advancing.
Strategic partnership development progressed with our recent management trip to China, which had a waste-to-energy (WTE) focus. The Westinghouse brand is well recognized and has opened the door to some very promising leads which leaves us optimistic and focused on this fast-moving market.
Despite providing a more difficult regulatory regime to navigate, projects also continue to progress in North America with NRG Energy, along with numerous other developers, advancing both coal retrofit and WTE projects.
Throughout 2009 we will remain focused on creating revenue from technology sales and licenses, as well as furthering our strategic partnerships and international opportunities.
FINANCIAL RESULTS ($)
March 31, 2009 March 31,2008
Total assets $ 120,665,217 $ 79,719,168
Total liabilities 26,738,385 22,902,072
Total equity $ 93,926,832 $ 56,817,096
Three months ended Three months ended
March 31, 2009 March 31, 2008
Revenue, interest and other income $ 1,250,464 $ 1,063,849
Loss (2,945,549) (1,809,133)
Loss per share - basic and diluted $ (0.05) $ (0.04)
For the complete consolidated financial statements please visit www.alternrg.com or www.sedar.com to view Alter NRG's 2009 First Quarter Report.
Corporate overview
Alter NRG provides and pursues alternative energy solutions through gasification to meet the growing demand for clean energy in world markets. The Company's vision is to become a leader in the development of economically viable and environmentally sustainable gasification projects for the commercial production of energy. Alter NRG creates revenues by selling plasma gasification technology and through participation in gasification projects that fit its strategic growth plan.
Alter NRG's mission is to participate in financially accretive projects in the emerging alternative energy market, through technology sales and project interests, to maximize returns for its investors. Alter NRG endeavors to be a leader in innovative gasification related technologies applied to produce profitable and clean alternative energy solutions. The Company invests in the skills of its people who will provide the creativity, determination and passion to generate growth in stakeholder value. The Company continues to strive to be transparent and fair in its activities and work to form positive relationships with the communities in which it operates and with all of its stakeholders.
Given the current unfavourable market conditions, the Company is focusing its efforts on technology sales and developing a strategic portfolio of customers that have the capability to advance projects from internally generated cash flow. The focus will be to increase near term cash inflows by generating operational revenues and reducing capital expenditures by limiting the working interest we hold in projects and slowing project timelines.
The Company owns Westinghouse Plasma Corporation (WPC). WPC has proprietary technology, which the Company believes is an industry leading technology and has the following broad advantages:
- Commercially proven - the technology has been commercially applied
for six years in facilities in Japan for gasification of waste. The
plasma torches, which are core to the overall technology, have been
commercially used for over 20 years.
- Environmentally responsible - the technology has the capability to
reduce emissions significantly as compared to other conventional
fossil fuel technologies.
- Flexible Technology - the technology can handle a wide range of
feedstocks, including many types of waste (municipal, commercial,
industrial and hazardous), biomass, and coal and petroleum coke. The
flexibility to accept a variety of feedstocks gives the technology a
range of uses and markets to which it can be applied.
- Scalable Technology - the technology is ideal for projects with total
capital between $50 million and $500 million. The technology is
larger scale than most other plasma gasification technologies and has
a longer commercial operating history.
The current economic and capital market conditions provide a challenging environment to navigate. To mitigate the challenges, Alter NRG is focusing on technology sales to parties that bring the capital, skill and expertise to develop energy projects. A core part of the corporate strategy is the use of strategic alliances and partnerships to commercialize the technology into different geographic regions and markets.
Technology sales
Alter NRG repositioned its strategic focus on technology sales to large waste and energy companies with the ability to advance plasma gasification projects in this challenging market environment. The Company is initially focusing on opportunities in North America, the European Union and Southeast Asia. Discussions have advanced with numerous companies with strong balance sheets and a focus on renewable energy solutions.
In the first quarter of 2009, the Company announced the signing of a Joint Development Agreement with Air Products to pursue renewable energy opportunities in North America and Europe. Air Products is a leading industrial gas provider and a Fortune 500 Company with annual revenues of over $10 billion, operations in more than 40 countries and 21,000 employees. The non-exclusive agreement allows Air Products to license and incorporate Alter NRG's proprietary Westinghouse Plasma Gasification technology in renewable energy projects. Air Products will initially focus on developing energy facilities using renewable feedstock to generate synthesis gas (syngas) - a mixture of hydrogen and carbon monoxide - for power, heat or steam generation.
Alter NRG continued to advance Project Lighthouse, a commercial demonstration facility developed by Coskata that uses the WPC gasification solution to turn biomass into ethanol. This breakthrough technology will use non-food biomass (waste biomass) to create ethanol at a market leading low cost, which is expected to be under $1.25 per gallon. Coskata, a leading second generation ethanol company, was recently named number one in the "50 Hottest Companies in Bioenergy".
NRG Energy, another strategic partner, continues work on multiple projects using plasma gasification. The Somerset project operated by NRG Energy will convert coal and biomass into 120 MW of power. This project received regulatory approval from the Department of Environmental Protection of Massachusetts on January 25, 2008, but was subject to various regulatory appeals including a subsequent appeal filed in the first quarter of 2009. Management understands that NRG Energy anticipates to commence construction during 2010. The Company also supports NRG Energy's project development efforts on other WTE projects and coal retrofit opportunities.
During the quarter, management travelled to Europe and China for discussions with companies advancing renewable energy projects. The response was very positive and resulted in commercial discussions with several different companies. This includes two developers entering proposals for a waste project, providing a commercial proposal for a WTE facility in Turkey, entering final round technology discussions for a project in Spain and signing an initial MOU with a company in China. Further details will be available when binding contracts are executed.
The Company continued to advance 12 projects to the engineering stage. Nine opportunities are located in the United States, one in Europe and two in Southeast Asia. An average plasma gasification equipment sale would result in approximately $10 to $50 million of revenues upon successful development.
Customer projects under construction
Continuing projects that align with Alter NRG's strategic focus include the following:
Project Lighthouse is a 40,000 gallon per year ethanol commercial demonstration project developed by Coskata. Coskata expects to complete the project, located at the Alter NRG pilot facility in Madison, Pennsylvania, on schedule in the summer of 2009. The existing plasma gasifier provides the syngas that will then be converted to ethanol through the Coskata's proprietary conversion process. The Company expects this ethanol commercial demonstration project to result in $2.5 million in total revenues in 2009 and 2010. Further, the Company expects a successful demonstration will attract key customers with a focus on renewable energy to the Alter NRG pilot facility in 2009.
SMS Infrastructure Limited (SMSIL) consists of two hazardous WTE facilities under construction in India. The first facility in Pune has undergone initial commissioning and is resolving several integration challenges. The first facility is anticipated to be operational in the second quarter of 2009 and the second facility in 2010. Both facilities will use Alter NRG plasma gasification technology to convert approximately 68 tonnes per day of hazardous waste into power. The facilities are owned and operated by SMSIL, Central India's largest civil engineering and infrastructure development company. These facilities will increase the number of commercial facilities processing waste, using Alter NRG's technology, from two to four and provide commercial experience for smaller scale industrial waste solutions that can be replicated.
Alter NRG project development
As a means to reduce Alter NRG's capital requirements the Company has adopted a staged approach for internally led projects under development as described below:
Fox Creek, Alberta is a coal-to-liquids project expected to produce up to 40,000 barrels per day of diesel fuel and naphtha from Alter NRG's existing coal reserves. Alter NRG is reducing project development expenditures to less than $0.8 million in 2009 on work defining the project scope. The delayed timeline will postpone completion of the development until late 2015, subject to successful partner selection by the end of 2009.
Plasma technology sales and services
Three months ended Three months ended
March 31, 2009 March 31, 2008
Sales revenue
Engineering and testing services $ 1,043,518 $ 604,332
Parts and other sales 70,624 107,255
1,114,142 711,587
Direct cost of sales
Engineering and testing services 400,961 366,724
Parts and other sales 62,414 78,174
463,375 444,898
Gross margin $ 650,767 $ 266,689
Plasma technology sales and service revenues are from engineering services provided for reactor design and process engineering, replacement parts for existing gasification customers and plasma gasification testing services provided at the Company's testing centre pilot facility located in the United States (US).
Direct costs of sales relate to direct materials and expenditures for products and services and reflect standard rates. Margins in 2009 are higher than 2008 due to the reduced amount of direct labour spent on engineering products and as a result of the favourable US dollar foreign exchange rate.
Sales increased by 57% in the first quarter of 2009 compared to the first quarter of 2008 as the Company has added new customers and customer projects continue to advance.
Alter NRG's key revenue stream going forward is expected to be from equipment sales in the form of either a plasma torch sale or the sale of a plasma gasification island. Plasma torches are one component of the plasma gasification island. The sale of the plasma torches used in a small scale gasification facility generates approximately $1.5 to $3.0 million in revenue. The Company plans to sell a full scope gasification solution - the plasma gasification island - to third party project developers. The sale of a single plasma gasification island would generate revenues from $10 to $50 million. The Company has spent much of its efforts to date expanding the product offering and completing the engineering studies and product design enhancements required to construct the plasma gasification island.
These sales have a long lead-time as engineering services are required in the preliminary planning phase and equipment is ordered after a project has received regulatory approval and project financing. The Company works with project developers worldwide in the early stages of planning and developing plasma gasification projects.
Since the Company purchased WPC, its US subsidiary, the Company has tripled its number of customers. Key customers advancing commercial projects include SMSIL, Coskata, NRG Energy and Air Products. These companies have indicated they expect to order equipment in 2009 or 2010 to support their development activities. Alter NRG also has 12 engineering sales for customer projects in various stages of development.
Interest and other income
Three months ended Three months ended
March 31, 2009 March 31, 2008
Interest income $ 135,916 $ 277,801
Other income 406 74,461
Total interest and other income $ 136,322 $ 352,262
Interest income relates to funds invested in short-term, interest-bearing investments with a Canadian chartered bank. Interest income decreased by 51% for the quarter ended March 31, 2009 versus the quarter ending March 31, 2008. The decrease reflects the average interest earned on investments of approximately 1% for the current quarter versus the average of 4% earned on investments in the first quarter of 2008. Higher levels of investments on hand in the current quarter offset the decrease in interest rates.
General and administrative expenses
Three months ended Three months ended
March 31, 2009 March 31, 2008
Employee costs, net of recoveries $ 1,338,856 $ 904,599
Professional and consulting fees 549,420 453,241
Office costs 521,736 262,615
Public reporting costs 178,003 34,064
Travel costs 175,866 129,857
Other costs 161,228 124,517
Business development costs 92,674 46,672
Board of directors fees 20,000 -
Foreign exchange (159,107) (1,982)
General and administrative expenses $ 2,878,676 $ 1,953,583
Employee costs increased due to the increased number of staff required to enact the Company's corporate growth strategy. At March 31, 2009, the team included 44 full time employees - 27 in the Calgary office and 17 in the US - compared to 29 employees at March 31, 2008. The Company expects to keep its staff count relatively consistent for 2009 at this time.
Professional and consulting fees consist primarily of external recruiting fees and consulting and legal fees for business development. A majority of these fees are paid in US dollars, resulting in an increase in costs for the first quarter of 2009 due to the strengthened US dollar compared with the same quarter in 2008.
Office costs reflect the additional space acquired in the second quarter of 2008 to accommodate expected growth.
Public reporting costs reflect increased filing and registration fees incurred for the Company's move from the TSX-V to the TSX and listing on the OTCQX to allow potential US investors access to Alter NRG's capital market.
Business development costs reflect the Company's business development efforts, including costs of acquiring and developing strategic partnerships for project development efforts. Travel costs increased in the current year mainly due to an increased focus on business development and networking with potential customers.
Other costs include IT-related costs, advertising, promotion and banking charges and are consistent with the increase in personnel.
The large increase in the foreign exchange recovery reflects the effect of the drop of the Canadian dollar versus the US dollar over the period attributed to US dollar amounts loaned to the US subsidiary.
Total general and administrative costs for 2009 are expected to be approximately $12 million, which reflects projected staffing at current levels for a full year and associated costs to support the current activity levels. The Company has taken measures to reduce general and administrative costs which were offset by an approximate 25% increase in the US/Canadian exchange rate. Should prolonged negative market conditions persist or customer activity decline in a significant way, general and administrative costs will be evaluated and reduced.
Depreciation and amortization
Three months ended Three months ended
March 31, 2009 March 31, 2008
Depreciation $ 85,590 $ 31,843
Amortization 456,021 367,732
Total depreciation and amortization $ 541,611 $ 399,575
The increase in depreciation for the quarter ended March 31, 2009 reflects three months of depreciation on the US facility upgrade. This was completed at the end of the first quarter of 2008 and therefore no depreciation was recognized in the first quarter of 2008.
Amortization relates to the intangible assets acquired on the purchase of the US subsidiary on April 17, 2007.
Loss
Three months ended Three months ended
March 31, 2009 March 31, 2008
Loss $ (2,945,549) $ (1,809,133)
The increased loss for the quarter ended March 31, 2009 related primarily to increases in depreciation and amortization, general and administrative costs and stock based compensation, plus a decrease in interest and other income. Profitability is a function of sales timing, type and margin as described in the "Plasma Technology Sales and Services" section and can be affected by various operating issues.
Credit facility
The Company's US subsidiary has a line of credit agreement with a major bank in the US for $500,000 USD (March 31, 2008 - $700,000 USD). The line of credit is due on demand and secured by the subsidiary's assets. The credit facility bears interest at a rate that is equal to the US prime rate. No amounts have been drawn on the credit facility as at March 31, 2009.
Liquidity and capital resources
The Company's working capital balance was approximately $45.8 million at March 31, 2009, a decrease of $3.6 million from the year ended December 31, 2008 ($49.4 million). Working capital provides funds for the Company to meet its operational and capital requirements. These funds will allow Alter NRG to focus on increasing its operational cash flows through sales revenues and prevail through the current economic downturn without relying on raising additional debt or equity financing in a volatile market.
Cash flow used in operations
Three months ended Three months ended
March 31, 2009 March 31, 2008
Cash used in operations $ 3,240,764 $ 1,196,284
The increase in cash used in operations reflects the increase in staff, related office operating expenses, costs for public reporting and business development activities. These costs are offset by increased sales revenue and foreign exchange gains.
Cash flow used in operations is expected to decrease as Alter NRG secures equipment sales contracts and license revenue. The timing of these cash flows is a function of sales timing, type and margin and can be affected by various operating issues.
Capital expenditures
Three months ended Three months ended
March 31, 2009 March 31, 2008
Deferred costs $ - $ 671,449
Resource properties 60,346 367,192
Property, plant and equipment 701,917 625,195
Internally generated intangible
assets 646,176 304,764
Total capital expenditures $ 1,408,439 $ 1,968,600
Internally generated intangible assets consist of internal project development work on the Company's plasma gasification island. These costs are not currently amortized, as the related projects have not reached commercial operation. These costs will be amortized when a project begins commercial construction, which management expects to be in 2009.
Resource property expenditures in the period ended March 31, 2008 include costs incurred for the Fox Creek core hole program. Resource property costs for the three month period ended March 31, 2009 are lower than the prior period ended 2008 as Fox Creek activity has been reduced to conserve cash and focus on technology sales. Property, plant and equipment costs relate primarily to the facility upgrades for the Coskata Lighthouse project ($0.7 million).
Alter NRG expects to continue to advance its overall product offering during 2009 and expects to incur costs in 2009 on the Fox Creek resource of approximately $0.7 million (reduced from $1.5 million at year end). The actual expenditures that will be incurred in 2009 may significantly vary from this estimate as the Company regularly reviews its spending in light of current market conditions, opportunities and the estimated timing and cost of development projects. In addition, new projects may arise during the year that will require capital expenditures.
Equity
As at March 31, 2009 and May 11, 2009, the Company had 56,185,551 common shares and 5,106,434 options outstanding.
At March 31, 2009 the Company had 5,106,434 stock options outstanding, of which 362,500 were granted at a weighted average exercise price of $0.91, in the three month period ended March 31, 2009.
The authorized share capital of the Company consists of an unlimited number of common shares.
For the complete management's discussion and analysis please visit www.alternrg.com or www.sedar.com to view Alter NRG's 2009 First Quarter Report.
The TSX 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: currency exchange rate fluctuations; environmental risks; unanticipated reclamation expenses; ability to finance; risk of obtaining regulatory approvals; ability to find joint venture partners; engineering and design risk; fluctuation in commodity prices 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 are based on current expectations, estimates and projections that involve a number of risks and uncertainties including but not limited to:, unexpected events during construction, and start-up; variations in feedstock grade,; delay or failure to receive board or government approvals; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of commodities; failure of plant, equipment or processes to operate as anticipated; delays in the completion of development or construction activities, as well as those factors discussed in or referred to under the heading "Risk Factors" in the Company's Annual Information Form dated July 8, 2008 available at www.sedar.com which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. 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 Company 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 Company 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.