"The Company's gross margin was 30.9% in the quarter, versus 34.6% in the second quarter of last year, due to slightly lower margins realized on activated carbon injection ("ACI") systems as the market is developing and pricing pressures increased as a result of competition"
Who is the competition?
Also, they would have to issue a lot of shares (10 million at $10), plus take on a lot of debt ($160 million) to finance the activated carbon production facility. Not certain they are capable of those numbers. Any thoughts?
It seems the DOE is working on an alternative to activated carbon. Any comments? I'm interested in ADES, but still checking it out.
"Injecting activated carbon as a sorbent to capture flue gas mercury has shown the most promise as a near-term mercury control technology, but the process applied to coal-fired boilers is still in its early stages and its effectiveness under varied conditions (e.g., fuel properties, flue gas temperatures, and trace-gas constituents) is still being investigated. Moreover, without better technologies, significant costs could be added to the generation of the Nation's electric power. For a 90 percent control level, DOE estimated in the mid-1990s that annual costs could range between $2 and $6 billion per year (based primarily on tests using activated carbon as the standard process for removing mercury from the flue gas of coal combustion.) The DOE cost analysis became the basis for system-wide estimates of control costs ultimately used by EPA in the 1997 Mercury Study Report to Congress.
The Energy Department's Office of Fossil Energy has set two goals for developing improved mercury control technologies:
(the following is what bothers me.) A near-term goal to develop mercury controls that can achieve 50 to 70 percent mercury capture at 50 to 75 percent of the cost of current powdered activated carbon injection (current cost estimates for activated carbon technology are in the range $50,000 to $70,000 per pound of mercury removal). These technologies would be available for commercial demonstration by 2007.
A longer-term goal is to develop advanced mercury control technologies that can achieve 90 percent or greater capture at 50 to 75 percent of the cost of existing technologies and be available for commercial demonstration by 2010 The Office of Fossil Energy (FE) has been sponsoring studies on mercury emissions from coal based power generators to identify effective and economical control options for the past decade. These studies include mercury removal from flue gas by enhancing conventional pollution controls, identifying combustion modifications and developing advanced control methods. However, technology to cost-effectively reduce mercury emissions from coal-fired power plants is not yet commercially available.
pine52x, that is old, old information. PAC injection has got the price of mercury capture in many cases down to $5000 to $10,000 a pound and 90+% removal rates. I hear that bromide treated PAC is great for PRB coals, or something like that
I seriously doubt that given the many, many years of testing PAC for removing mercury from the flue gas of coal-fired power plants and its now very reasonably cost (and going lower) that some new, unknown technology that is cheaper and more effective will suddenly appear. The plain fact of the matter is that scientists have been seeking a solution to these mercury emissions for decades and PAC has been the only thing that works out in the real world.
Is this announcement in addition to the contracts mentioned in the SEC filing? Regardless, this should provide a psychological lift and help the stock price. I think there was an underlying concern that the AC contract failure with Calgon would leave ADA unable to compete for contracts. Now it seems they are showing that that was not the case.
The competition is current PAC suppliers and other air pollution control companies. However, having a 50% market share of the MEC equipment market is very healthy and I expect ADA-ES to get even more than that in supplying PAC in 2010 and beyond.
As to your other question, I think it is very clear that ADA-ES will go into a 50/50 joint venture with a very big partner for this greenfield PAC plant. That means that ADA-ES would have to sell 3 million shares at about $18.50 in order to raise the necessary $52 million. Even though the share price is currently about $10, I would expect the share price to rise to the $18.50 number either before or after the equity sale takes place.
This PAC plant will cost about $260 million. The new coal-fired plant that was mentioned in today's news release costs 10X that amount. We are talking about an industry that is heavily capitalized.