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ThermoEnergy
(TMEN-OTC: BB)
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The Acquisition Of CASTion Has Transformed
ThermoEnergy Into A Full Service Water Resources Management Company Capable
Of Playing A Key Role In Addressing Clean Water Issues By Providing
Cost-Effective, Environmentally Responsible Solutions For
Water Conversation, Water Reuse And Water Reclamation Technologies For Its
Municipal And Industrial Clients
Industrial Goods
Waste Management
(TMEN-OTC: BB)
www.thermoenergy.com
124 West Capitol Avenue, Suite 880
Little Rock, AR 72201
Phone: 501-376-6477
Dennis C. Cossey
Chairman and CEO
Interview conducted by:
Lynn Fosse, Senior Editor
CEOCFOinterviews.com
Published – April 18, 2008
BIO:
Dennis C. Cossey
Chairman and CEO
Mr. Cossey has served as CEO and a Director since the Company's inception in
1988; being elected Chairman in 1990. He is also CEO of ThermoEnergy Power
Systems, LLC, a subsidiary of ThermoEnergy Corporation. Mr. Cossey majored
in Philosophy at the University of Arkansas, and minored in economics. Mr.
Cossey's professional background includes various management positions
within the investment banking, data processing, and engineering/construction
industries; including such companies as American Fuel and Power, Peter
Kiewit, and IBM Corporation. As CEO, Mr. Cossey oversees the implementation
of the Company’s overall corporate strategy. He is especially active in the
areas of corporate finance, joint venture partnerships, technology
acquisition, overall marketing strategy, and government relations. Mr.
Cossey is active in local community affairs and maintains membership in a
number of business and professional organizations including, the New York
Academy of Science, Association of Energy Engineers, the US Naval Institute,
the American Society of Naval Engineers, the American Chemical Society, and
the National Safety Council. In addition, Mr. Cossey is one of the founding
members of the Asia Pacific Water Council.
Company Profile:
Founded in 1988, ThermoEnergy is a diversified technologies company
engaged in the worldwide commercialization of patented and/or proprietary
municipal and industrial wastewater treatment and power generation
technologies. The wastewater treatment technologies are consolidated in our
subsidiary, CASTion Corporation ("CASTion"), a fast growing developer and
manufacturer and supplier of innovative wastewater treatment and recovery
systems to industrial and municipal clients. The systems are unique because
they meet environmental regulations while providing a rapid return on
investment by recovering and reusing expensive feedstocks, reducing
contaminated wastewater discharge and reusing wastewater from process
operations. CASTion's wastewater treatment systems have application in
aerospace, food processing, metal finishing, refineries, manufacturing and
municipal wastewater. We assemble and ship our waste water treatment
products from our 20,000 square foot manufacturing facility in Worcester,
Massachusetts. The power generation technologies are consolidated in our
majority owned subsidiary, ThermoEnergy Power Systems, LLC ("TEPS"). The
economic and environmental matrix of the Company's technologies represents a
paradigm shift in these key infrastructure industries. The Company currently
has offices in Little Rock, AR, Worcester, MA, Hudson, MA, Jacksonville, FL,
Baton Rouge, LA and New York, NY. Additional information on the Company and
its technologies can be found on its website at www.thermoenergy.com, or
www.castion.com for wastewater treatment specific information.
CEOCFO: Mr. Cossey, what was your vision
twenty years ago when the ThermoEnergy was founded, and where are you today?
Mr. Cossey: “Like any typical start-up
our focus was on one particular market we planned to go after with one
particular technology. That initial technology was called Sludge To Oil
Reactor System, which converted municipal sewage waste into a high-energy
fuel. That technology has since been superceded by our Thermo-Fuel Process.
Since those early days, our intellectual property portfolio has
significantly expanded. Its breadth and depth relevant to the municipal and
industrial water resources management market is significant for a company
our size. A recent milestone that really altered the entire dynamic here at
ThermoEnergy was the acquisition of CASTion Corporation. CASTion is a
25-year old, award winning company, based in Worcester, MA, that
manufactures custom-designed, turnkey water treatment, technologies with
approximately 150 industrial systems operating in the US, Canada, Mexico
and Japan. With the acquisition, ThermoEnergy has gone from a virtual
company with ten employees and three technologies to approximately forty
people and, forty clean water process systems. We are also developing an
advance power plant design that improves plant efficiency and includes
carbon capture. The company has changed almost 180% since we started;
however, our original vision is still there for cost-effective and
environmentally responsible solutions for wastewater treatment. It is just
that our market has developed into many markets now.”
CEOCFO: You
mentioned you have forty technologies; please explain why you have so many
technologies to offer.
Mr. Cossey: “There are probably only
four key technologies; the remaining technologies support the four key
technologies depending on the client’s particular application or need. One
of these key technologies is our Zero Liquid Discharge system, which returns
virtually 100% of the water back to the client at the end of the day.
Another is our Ion Exchange system that is very good at removing a variety
of regulated pollutants for such key industrial applications as oil
refining, chemical processing, pulp & paper, food processing, and heavy
manufacturing. Our ARP process, which removes and recovers nitrogen in the
form of ammonia from industrial and municipal wastewater treatment plant’s
which would otherwise lead to dead zones in local waterways including such
notable bodies of water as the Chesapeake Bay, Long Island Sound, Puget
Sound, and Jamaica Bay. Regulators associated with these as well as other
protected water resource areas in the US are looking to solve this serious
and growing problem. The wastewater treatment industry, whether it is
municipal or industrial is driven by two principles: regulations and the
cost to meet those regulations. If you have a technology that can meet the
regulations at the lowest possible cost then you are the winner. Since all
of our patents are process patents, we can use a variety of off-the-shelf
components from manufacturers around the world which makes our systems both
reliable and cost competitive.”
CEOCFO:
When you initiate the process, do you then run the service or does your
customer handle that aspect?
Mr. Cossey: “We do both. On the
industrial side, our clients are mainly Fortune-200 companies, such as GE,
Valaro, Tyco, United Technologies, and Honeywell for example. All of these
companies are experts in their particular business and have specialty
engineers on staff to operate these systems successfully. In that case, we
simply sell the technologies to the client and provide a site-specific
license for that particular operation. The municipal market is slightly
different in that they do not typically have chemical engineers on staff.
What we offer the municipal client is a “package solution” concept based on
the design/build/own/operate concept for the removal of ammonia and
phosphate, as well as converting their solids into a high-energy fuel. For
decades, the municipal wastewater treatment industry has relied on
biological treatment methods to resolve both their process and regulatory
issues. Biological solutions have been very effective up to a point. Over
the last ten years, there has been a spate of new clean water regulations
mandated by local, state, and federal governments. Many pollutants that were
once exempted have now been included under the new regulations. At
ThermoEnergy we use physical chemical process technologies that have been
utilized in industrial applications for decades to provide more
cost-effective solutions for a client that has never really for municipal
clients that have not used these type system before. As such we have
received a significant amount of interest in having ThermoEnergy design,
build and operate these systems for them so they can take advantage of the
cost-savings as well as meet the regulations. Some of the wastewater
authorities may want to operate their own, so we are flexible in this
respect, but clearly build, own and operate is one of our primary business
models.”
CEOCFO:
Please tell us about the project you are doing for New York City?
Mr. Cossey: “New York City is one of the
regions of the country that has come under more stringent state and federal
regulation governing the amount of ammonia that can be discharged into local
waterways. The ammonia present in the plant comes from two sources, urea
present in the incoming waste stream and from biological digestion. Ammonia
is water-soluble, so when plant operators dewater the digested solids to
reduce the volume of solid waste it must haul off-site they put it through a
centrifuge, similar to your home washing machine spin cycle. Being water
soluble, the ammonia stays with the water coming off the centrifuge; this
ammonia laden stream is called centrate. Historically, this centrate stream
is sent back to the front of the plant where it is discharged into the local
waterways. In many parts of the country, including New York, they can no
longer do this. The Centrate stream contains between 800 and 2000 parts per
million of ammonia; anything over 100ppm is lethal to fish and other aquatic
life.
They now have to figure out what to do with this ammonia stream. While it
only represents 1% of the total daily plant flow, it typically represents
80% of their regulatory headache. Our Ammonia Recovery Process system can
cost-effectively treat this Centrate stream, by removing virtually all of
the ammonia, then converting it into ammonium sulfate; a commercial grade
fertilizer used by agriculture around the world. Not only can we accomplish
this in a smaller space, we can do it at less capital and operating cost, we
lower the overall plants energy requirements and significantly reduce the
air emissions of greenhouse gases, including nitrous oxide which has 310
times greater warming potential than carbon dioxide. In the case of our
planned facility at New York City’s 26th Ward plant we will
prevent several thousand tons of greenhouse gases from entering the
atmosphere annually as well as 600 tons of ammonia from entering Jamaica Bay
- which fits in perfectly in with Mayor Bloomberg’s new sustainable program
that they have entitled ‘Plan NYC, promoting the reduction of energy use,
carbon emissions, as well as beneficial reuse. This is why New York City
selected our ARP technology as the technology of choice to deal with their
nitrogen ammonia problems.”
CEOCFO: Are
there many competing technologies?
Mr. Cossey: “In one sense, yes there
are. On the physical chemical process side there is steam stripping, air
stripping, membrane technology, and membrane filtration, all of which were
tested by New York City over a ten-year period, which included our ARP
process. Also, there are biological ways of treating ammonia which is
referred to as Biological Nitrogen Reduction, or BNR, of which there are
several different varieties from which to choose. Again, it comes down to
which process best meets the regulations at the lowest cost. ARP was the
first contract signed by New York City designed to deal specifically with
centrate ammonia removal. So, technically there are competitors, but in
reality there are not.”
CEOCFO: How
do you reach your potential customer?
Mr. Cossey: “Even though there are
approximately sixteen thousand publicly owned wastewater treatment plants in
the US, which doesn’t include the industrial side, it is still a small,
close knit, community. There are eight or nine big markets such as Chicago,
New York, Atlanta, Dallas, LA that drive the industry. Most of the smaller
plant operators follow their lead. New York City is the leading weather vane
for the industry because they have a sizeable R&D program. New York City
sends teams of engineers all over the world looking for new technologies
that they can adopt to achieve an economic or environmental goals. By
contrast, most municipal governments have trouble meeting their daily
critical services - much less being able to devote millions of dollars to
wastewater treatment research and development. The best way for us to reach
the municipal is through word of mouth as well as the dozens of trade
journals that write about successful projects – like the one we’re doing for
New York City. In addition we also have an in-house sales and marketing
group that calls on industrial and municipal clients. Although our current
sales and marketing staff is small, we are planning to double its size
during 2008. Currently we have sales offices in Jacksonville Florida and
Baton Rouge Louisiana. We plan to open another in Los Angeles during the
second quarter and one in Chicago during the fourth quarter during 2008.”
CEOCFO:
Will you tell us about your energy technology?
Mr. Cossey: “We have an interesting
energy component that we have been developing over the last seven years.
This effort was significantly expedited by three US government grants,
totaling approximately $2.5 million, in 2005; two with the Department of
Energy and one with US EPA. Two of those grants have been successfully
completed and we are working to finalize the third grant; a $1.5 million
effort sponsored by the Alaska Energy Authority in conjunction with the US
EPA. These grants were designed to fast-track the development of our new
zero air emission power plant design called the ThermoEnergy Integrated
Power System or ‘TIPS’. TIPS is based on atmospheric oxy-fuel chemistry
which has been around for decades. We added the novel aspect of pressurizing
the entire power plant cycle – which is the basis of our two TIPS US
patents. Once pressurized, a new thermodynamic pathway for combusting coal,
natural gas, heavy oil, and most biomass into energy has been created,
allowing zero air emissions of NOx, SOx, particulates and mercury. In
addition, we also capture CO2,
a potent greenhouse gas, in pressurized liquid form for either sequestration
or beneficial reuse. We have worked closely with the Canadian Energy
Laboratory (CANMET). CANMET produced an extensive 250-page scientific study
that says we can build a commercial TIPS plant for about the same cost of
building a conventional pulverized coal-fired power plants that doesn’t
offer carbon capture. Certainly we can build it much cheaper than
alternative technologies such as Internal Gasification Combined Cycle (IGCC),
a technology, which has been heavily promoted for over a decade by many in
the power industry as the next Clean Coal technology. The CANMET study
concludes that TIPS looks to be much more promising from both an economic
and environmental standpoint. TIPS represents a tremendous business
opportunity for the company going forward. In fact we are in the process of
negotiating a joint venture with a large, well-known company in the energy
industry that supplies key power plant components for coal-fired and power
plants to jointly pursue the commercialization of TIPS. So we are
understandably excited about the opportunities here. Although we are a few
months away from designing and building a large-scale multi-megawatt
prototype plant, we are still years ahead of other so-called carbon capture
technologies, many of which still remain in the planning phase.”
CEOCFO:
What is the financial picture like for the company?
Mr. Cossey: “A year and a half ago we
were seriously looking for additional capital. Fortunately, since that time
we have completed two rounds of private equity funding totaling $17.5
million. The last round was a $12 million commitment from a private Family
Trust brokered by the investment banking firm of Merriman Curhan & Ford,
based in San Francisco. This investment carries the possibility of bringing
in another $30 million behind that if the Company achieves certain
milestones. This investment allowed us to complete the CASTion acquisition,
as well as allow management to position the company to take the fullest
advantage of the technologies we have spent the last fifteen years
developing. All of our water technologies are commercially viable. We are
investing considerable money in building up our CASTion division and
increasing its production capability and thus its market share. I don’t want
to sound over confident, but our technologies are addressing a number of
critical needs in the water industry and as such we expect sales to ramp up
quickly. As one trader on AMEX told me recently “water is the new oil.” The
challenge is not so much selling the technologies as it is being able to
deliver what we sell. For the first time, ThermoEnergy can actually design,
manufacture, fabricate, deliver, install, and operate all of its patented
and proprietary process equipment. Only a year ago we would have had to
outsource each of these services.”
CEOCFO: In
closing, why should potential investors pick ThermoEnergy out of the crowd?
Mr. Cossey: “I think the core issue lies
in what separates us from the rest of the companies in our space. If you
look at the water industry from a global standpoint, there are eight to ten
companies that dominate the market. There are two French water companies,
two or three British waste-water companies along with Siemens and GE, and to
a lesser extent, US Filter. Below that level the market becomes somewhat
fractured. A large part of this market is populated by mostly small
companies which tend to offer only one or two technologies. In addition,
they tend to be very parochial, marketing to a small geographic area and
limited client base. Because of the breadth and depth of our technology
portfolio, we are attracting a great deal of interest from larger, well
known companies whose core business is in wastewater treatment. We are
attractive to them because we have proprietary technologies that meet
current regulatory needs at a lower cost. The other reason is because we
feel we are way undervalued at the moment. Even though we are a publicly
traded company we have never done an IPO, therefore, have no retail support
or analyst coverage. The only people that currently follow the company are
people that have already invested. We think that when our story gets picked
up by the mainstream media, and people start to see what we have to offer,
we feel we represent a bargain with lots of upside potential. Obviously a
year or two down the road that bargain is not going to be quite as good at
it is today.”
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