Synthesis Energy Systems, Inc. Reports Fiscal 2015 Third Quarter Financial Results and Provides Business Update
"During this past quarter we have gained good traction in
"Looking ahead, our priorities to accelerate growth of the Company are twofold. First, we are pursuing our strategic
Recent Corporate Highlights
China Joint Venture: SES's
Replacement Gas" Syngas: Aluminum Corporation of China: Tianwo-SES has order commitments related to the Aluminum Corporation of China Limited projects with Innovative Coal Chemical Design Institute (Shanghai) Co. Ltd.(ICCDI), a subsidiary of STT. The $23 millionin orders is for technology, proprietary equipment plus additional equipment from Tianwo-SES to ICCDI for the three previously announced industrial syngas supply plants for Aluminum Corporation of China, China'slargest alumina and primary aluminum producer. ICCDI serves as the general contractor providing all engineering and construction of the three projects which will utilize SES Gasification Technology for seven total gasification systems. Construction on these three new syngas plants, alongside existing aluminum manufacturing plants in Shandong, Shanxiand Henanprovinces, is underway. The gasification plants are being fast-tracked and built in a staged progression based on the capacity of ICCDI and Tianwo-SES. The Shandongproject in ZiboCity is the most advanced and is expected by Tianwo-SES to start early commissioning in June 2015.
Direct Reduced Iron (DRI) Steel: Tianwo-SES secured the joint venture's first DRI steel vertical market contract for an initial feasibility study on an integrated coal gasification DRI steel plant using SES Gasification Technology and
MIDREX® Direct Reduction Process. Named The Mongolian New Comprehensive Steel Plant Project, it would be located in Darkhan City, and would be designed to utilize syngas from the SES Gasification Technology using local low quality coals to convert iron ore to Direct Reduced Iron products for steel making. Joining Tianwo-SES and SES's global DRI technology partner, Midrex Technologies, a wholly owned subsidiary of Kobe Steel, in this $200,000prefeasibility study agreement are project owner, Nanometals, LLC, and two other engineering and equipment suppliers.
Global Initiative - Distributed Power Business:
Dengfeng Power Group(DFPG): The initial feasibility study on the Dengfeng Power Groupproject by SES and Tianwo-SES teams is nearing completion. Following completion and final consensus with Dengfeng, the process to secure local Henan Provincegovernment endorsement of the initial 160 MW distributed power plant will commence. When and if approved, a larger scope, full Feasibility Study Report will be initiated by DFPG, with those results being then used to obtain the required second-level government approvals to proceed and build the plant. All of this work is anticipated to be completed during the next 12 months. Upon successful completion, construction and breaking ground on the first project in Dengfeng would begin shortly thereafter. The Dengfeng distributed power plant, which is intended to serve as the model for the Dengfeng Power Groupproject, would be designed to utilize two state-of-the-art SES XL3000 gasification systems and four GE model LM2500+G4 advanced aero-derivative gas turbines in combined cycle mode. Up to 600 MW total is anticipated in the city of Dengfeng, with more plants forecasted by Dengfeng Power Groupelsewhere in Henan Provinceand in other regions of China.
K-Electric: The K-Electric,
Pakistanproject, a collaboration with co-marketing partner, GE Packaged Power, and regional partners, IEG and Tuten, is being delayed while K-Electric focuses on an immediate need to reallocate new LNG gas to stranded power generating assets and assets burning fuel oil. The parties will continue to work to secure the approval and power purchase agreement from K-Electric and minimize the delay time as much as possible. Other distributed power product proposals and business development is underway with prospective customers in Japan, Australia, Brazil, and western and southern Africa.
Regional Initiative -
SES and Simon India Limited(SIL), an EPC company, announced the extension of the regional partners' exclusive marketing and engineering agreement, to market SES' advanced technology for coal and biomass gasification projects in India. SES technology, due to its unique ability to gasify multiple feedstocks including India'sabundant high-ash, low-grade coal, is competitively advantaged for converting coal to syngas in India. To facilitate order procurement for advanced active prospects ranging from an ammonia-to-fertilizer project to a DRI steel facility, SES is working to bring in Chinese implementation capability to strengthen its position. SIL is now offering to build gasification islands using SES technology on a fixed price turnkey basis which brings an additional cost advantage to customers, versus expensive gas and imported LNG options for energy and chemical products.
Synthesis Energy Systems(Zao Zhuang) New Gas Company Joint Venture (ZZ) - With priority focus on re-purposing and maximizing the value of the ZZ JV asset, SES signed a preliminary, non-binding term sheet in late April for selling a portion of the Company's ZZ asset to a local Shandong Provincecompany who desires to re-purpose ZZ by further investing and expanding the plant beyond methanol into production into the higher value and more profitable chemicals of Acetic and Propionic Acid. Successful negotiation and completion of the definitive agreements remain to be completed before the proposed transaction can be closed. Until that time, the Company continues to pursue all options for maximizing the value in the ZZ JV asset, which sold 10,584 tonnes of methanol produced from coke oven gas and generated approximately $2.8 millionin revenues this past fiscal third quarter.
- Yima Joint Venture Methanol Plant (Yima) - Parent company, Henan Energy, recently completed a four-week planned shutdown for maintenance and to complete several more of the remaining commissioning and construction items. The project ran from October of last year until this shutdown period at approximately 50% capacity with little downtime for maintenance. The plan for the second half of this year is to increase production rates initially to 80% this summer and then ultimately to 100% operating rates later this year, assuming adequate methanol prices. At that time the plant is expected to move into its originally intended operating phase producing 300 kilo tons per year of chemical grade methanol. SES's focus remains to achieve formal Chinese commercial acceptance of the three SES gasification systems.
In March, Ms.
DeLome Fairwas appointed President of the Company's wholly owned subsidiary, SES Technologies, LLC, and took the lead of SES technical teams in Houstonand Shanghai, as well as global business development efforts. Ms. Fair's25-year gasification career spans leadership positions with GE Energy and Chevron/ Texaco. Prior to joining SES as Senior Vice President, Gasification in December 2014, Ms. Fairled GE Energy's global team of 135 engineers in the U.S., Indiaand China, as General Manager, Gasification & Process Systems Technology. In that post, she was responsible for engineering to GE's global gasification business, including business development support, execution of customer orders, new product development, services, and project management.
In April, SES raised
$12 millionin a registered direct offering with certain accredited investors. The net offering proceeds to the Company from the sale of the shares, after deducting the placement agent's fee and associated costs and expenses, is estimated to be $11.4 million.
Shanghaiand Tianwo-SES offices are now co-located with ICCDI, comprising three floors in a new office complex in Shanghai, provided by Chinajoint venture partner, STT.
Fiscal Third Quarter 2015 Financial Results (Unaudited)
The Company reported
The Company's operating loss for the third quarter of fiscal 2015 was
The net loss attributable to stockholders for the third quarter of fiscal 2015 was
Conference Call Information
SES's President and CEO,
To access the live webcast, please log on to www.synthesisenergy.com. Alternatively, interested parties may participate in the SES telephone conference call by phoning (866) 652-5200 (U.S.) or (412) 317-6060 (Int'l). Callers should request the "
An archived version of the SES conference call webcast will be available on the company's website through
SES Forward-Looking Statements
This press release includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical fact are forward-looking statements. Forward-looking statements are subject to certain risks, trends and uncertainties that could cause actual results to differ materially from those projected. Among those risks, trends and uncertainties are the ability of our ZZ joint venture to effectively operate XE's methanol plant and produce methanol; the ability of our project with Yima to produce earnings and pay dividends; our ability to develop and expand business of the Tianwo-SES joint venture in the joint venture territory; our ability to successfully partner our technology business; our ability to develop our power business unit and
marketing arrangement with GE and our other business verticals, including DRI steel, through our marketing arrangement with
|Consolidated Statements of Operations|
|(In thousands, except per share amounts)|
|Three Months Ended||Nine Months Ended|
|Product sales and other -related parties||$ 2,780||$ 4,600||$ 10,725||$ 10,514|
|Related party consulting and equipment sales||15||2,635||166||2,635|
|Costs and Expenses:|
|Costs of sales and plant operating expenses||3,874||7,806||14,916||11,933|
|General and administrative expenses||2,226||2,536||6,594||7,141|
|Stock-based compensation expense||381||336||1,615||1,855|
|Depreciation and amortization||229||596||1,373||1,727|
|Impairment of long-lived assets||—||—||20,914||—|
|Total costs and expenses||6,710||11,274||45,412||22,656|
|Non-operating (income) expense:|
|Equity in losses of joint ventures||—||1||—||2|
|Foreign currency (gains) losses, net||20||48||(6)||5|
|Less: net loss attributable to noncontrolling interests||(45)||(33)||(634)||(36)|
|Net loss attributable to stockholders||$ (3,933)||$ (4,150)||$ (34,042)||$ (9,748)|
|Net loss per share:|
|Basic and diluted||$ (0.05)||$ (0.06)||$ (0.47)||$ (0.15)|
|Weighted average common shares outstanding:|
|Basic and diluted||73,239||64,266||73,220||63,886|
|Consolidated Balance Sheets|
|(In thousands, except share and per share amounts)|
|Cash and cash equivalents||$ 11,573||$ 19,407|
|Certificate of deposit-restricted||1,628||—|
|Accounts receivable-related party, net||711||676|
|Prepaid expenses and other currents assets||673||873|
|Total current assets||15,097||21,821|
|Property, plant and equipment, net||10,371||31,499|
|Intangible assets, net||965||1,049|
|Investment in joint ventures||34,813||34,856|
|Other long-term assets||1,955||2,481|
|$ 63,201||$ 91,706|
|LIABILITIES AND EQUITY|
|Accrued expenses and accounts payable||$ 8,333||$ 7,167|
|Line of credit||3,256||—|
|Short-term bank loan||3,256||3,251|
|Total current liabilities|
|Commitment and contingencies|
|Additional paid-in capital||242,827||241,125|
|Accumulated other comprehensive income||6,101||6,062|
|Total stockholders' equity||49,635||81,934|
|Noncontrolling interests in subsidiaries||(1,279)||(646)|
|Total stockholder's equity|
|$ 66,201||$ 91,706|
|Total liabilities and stockholder's equity|
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