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Synthesis Energy Systems, Inc. Is An Emerging Technology Leader In The Gasification Of Low Rank Coal Into Value-Added Products That Address The Growing Demand For Clean, Affordable Energy And Related Products, Particularly In Emerging Markets Such As China And India - The Company’s U-GAS® Technology Has Been Proven To Unlock The Value Of Low Rank Coal Through Its Commercial Operations In China
Jr. Oil & Gas
Health & Wellness
Synthesis Energy Systems,
Inc. provides advanced technology products, including its U-GAS® fluidized
bed gasification technology and related services and equipment, to enable
the clean conversion of low cost, low rank coal and biomass feedstocks into
high value energy and chemical products, such as transportation fuel and
ammonia. U-GAS® technology, which the Company licenses from the Gas
Technology Institute, gasifies coal in a cost-effective manner, without many
of the harmful emissions normally associated with coal combustion plants.
The Company currently has offices in Houston, Texas, and Shanghai, China.
Interview conducted by: Bud Wayne, Editorial Executive, CEOCFOinterviews.com, Published – October 22, 2010
With respect to our strategy, Synthesis is a clean alternative energy technology company that creates value through applying our technology to convert ultra low cost coal feedstocks and biomass into high value products such as fuels, synthetic natural gas, chemicals and power. We do this primarily in three ways. We provide our proprietary technology and equipment to third parties through licensing; we make investments in projects which we develop, design, build and operate; and through unique opportunities to gain access to coal feedstock resources through implementation of our technology.
In terms of my vision for the Company, I believe we have the right technology at the right time to grow into a major industry player through using our technology to create value from the uplift in ultra low cost coals and biomass into high-value products.
CEOCFO: Why is gasification of low rank coal important?
Mr. Rigdon: Low rank, low quality coal has the potential to be a very significant source of clean, low-cost energy to help power the global economy. It is abundant, particularly in emerging countries such as China, India and many others. The problem, essentially, is that low rank coal can be difficult to gasify with current technologies in a clean, economical way, making it unappealing as a wide-scale feedstock. However, our technology now makes it possible to realize the enormous potential of these very low cost, low rank coals. The technology has already been demonstrated and commercialized in China and we are actively engaged in licensing discussions in many areas of the world.
CEOCFO: What are some of the Company’s key accomplishments over the last year or two?
Most importantly is that we were able to demonstrate the utility of our coal
gasification technology through our first commercial operating plant, in
Shangdong Province in China, which is called Zao Zhuang New Gas Company, or
just ZZ. This joint venture plant started up in early 2008 and went into
commercial operation in late 2008. With the ZZ plant, we have demonstrated
the technical capabilities of our U-GAS® technology as well as our ability
to implement our technology in a commercial setting. Since that time, in
September 2009, we completed the financial closing on our second project, in
Henan Province, China, which we call Yima. Yima is a much larger project,
about four times larger than ZZ. The Yima project is well into its
construction phase and is expected to come online in the middle of 2012.
Those are two key accomplishments for the Company. In addition to these,
based on the success that we had in China, we have made our U-GAS®
technology available to other parties through licensing, which we only began
to do less than a year ago. Through the licensing process, we have
established a very robust list of potential customers and we are in various
stages of discussions and negotiations on their utilization of our U-GAS®
technology. We are very excited about our licensing strategy because it will
enable a more rapid commercialization of our U-GAS® technology. In addition,
we expect that our licensing activities will generate near term revenues,
which are very important to a small company like Synthesis as we wait for
the longer-term revenue streams that should result from our larger projects
such as Yima.
CEOCFO: Please tell our readers a little bit about syngas and what it can do.
Mr. Rigdon: Syngas is made up primarily of carbon monoxide and hydrogen. Through our technology process the coal or biomass feedstocks are converted into carbon monoxide and hydrogen. Once syngas is produced in a clean and efficient manner it can then be converted into a multitude of products. Think of syngas as a basic building block needed to make these products. When we combine our technology with the right downstream technologies our syngas can be converted into fuels like gasoline through methanol-to-gasoline processes or diesel through Fischer-Tropsch processes. We can also convert our syngas into chemicals like methanol, which is a building block chemical for olefins and glycol or ammonia and urea, which is used in the fertilizer industry. Our syngas can also be used as a fuel gas for power generation, which is normally referred to as IGCC or integrated combined cycle gasification. When we gasifiy biomass feedstocks we make the same syngas that can be converted to the same type of products but in the case of biomass it can be considered renewable energy technology. I have only mentioned a few of the different types of products that can be made from syngas; there are many others in addition to what I have described. One last point that I would like to make, because it is important to our current business in China, is that we can also convert our syngas, taking low-rank coal and making it into synthetic natural gas, which in our industry referred to as SNG. And these types of projects are certainly important to many regions in China today due to rapidly growing demand for gas in China. So there are a multitude of different market segments that we can address because we can convert low-rank coal to this basic building block gas called syngas.
Let’s talk a bit about your activities in China. Is your current Zaozhuang
plant a test plant or is this an actual revenue generator?
That is true in the U.S. and other parts of the world as well.
acquisitions a part of your growth strategy or are you looking at purely
CEOCFO: Development is expensive; what is the financial picture like for Synthesis Energy Systems today?
Mr. Rigdon: We believe we have sufficient financial resources to execute our business strategy and grow the Company. You made the comment that “development is expensive” and you are absolutely right. Our technology was developed over the past 30+ years and requires no fundamental development any longer. We make incremental improvements from what we learn from our projects. Also, we have significantly scaled back the project development activities related to our own equity projects because of the amount of expense involved. We believe we will accelerate the adoption of our technology faster by making it available to third parties who are developing their own projects. In fact, we see potential opportunities for us to participate in some of those projects and in certain cases we have been invited to participate. We can keep our development costs very low this way because we are actually not doing the development; we are the technology provider and in some cases, we could be carried into the projects. On that point I would like to say that when we are looking at these low quality coals and the projects that are being developed by our customers, in many cases these coals have not been mined because there has not a gasification technology available to unlock the value. When we come into the picture, that changes the value proposition, so we can open up these low cost coal resources to projects utilizing our technology. In this way we have the potential to create more value than technology licensing fees and equipment sales alone. We believe we can participate in the value associated with the coal resources themselves, which can be realized through equity carries into the resources and the project or other similar means. So these are very exciting opportunities for us and it is our technology that allows us to have the ability to do that.
CEOCFO: In closing, what are you doing to attract investors to your Company and why should investors consider your stock?
Mr. Rigdon: Effective communications with the investment community as well as our shareholders is a key goal for the Company and it is something that I am involved in personally. We are taking steps now to ramp up that whole process. We have recently engaged an investor relations firm, MBS Value Partners, as part of the overall strategy to communicate with our shareholders and potential investors. To answer the first part of your question, the steps that our Company must take and what our shareholders want to see is the solid execution of our business plan and continuing to meet the milestones that we have identified. So we will continue to deliver the business, continue to grow our revenues as we have been, manage our costs, and demonstrate that we are on the path to being a cash-positive and profitable company. The second part is communicating that this potentially can be a very large business. We are active in very big, very deep markets where we can convert low rank coal and biomass feedstocks into value-added chemicals and energy projects. So the potential just from regions of the world that are growing, like China and India, for example, and some of the surrounding areas in Asia, could be extremely large.
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The gasification technologies that have been employed around the world over the last several decades operate on much more expensive coals. However, our technology is the most advanced commercially proven technology that can gasify much lower quality, lower cost coals in a clean and efficient manner. These coals are abundant in many places where other sources of energy, such as oil or natural gas, are not available or not practical. So our U-GAS® technology allows us and our partners to have a very low cost of operation. When you combine that with the fact that our capital costs to build our technology tend to run lower anyway, it is a very compelling economic case for our customers. - Robert W. Rigdon
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