MEEC: Highlights of interview with CEO Richard MacPherson: overview & initiatives in core mercury removal business; comments on upcoming patent litigation trial; update on R&D progress of REE extraction effort
OTC:MEEC
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On September 7, 2023, ME2C Environmental’s (OTC:MEEC) CEO, Richard MacPherson, was interviewed by the Investor Relations company Adelaide Capital. Mr. MacPherson presented an overview of the company and discussed recent developments and potential catalysts, along with answering questions from the attendees. The 52-minute webinar is available on YouTube (https://www.youtube.com/watch?v=6HGqAXjOHCI). The major topics covered were:
• The company’s principal competency of chemisorption
• The attributes of the core business (mercury removal at coal-fired power plants)
• Expectations for second half of 2023
• The initiative to expand into international markets, particularly in SE Asia and Poland
• Patent litigation trial begins on November 13th
• R&D efforts for applying chemisorption in ancillary markets, namely
o extraction of Rare Earth Elements (REE)
o remediation of water in coal ash ponds
o remediation of wastewater contaminated with “forever chemicals” aka PFAS
ME2C Environmental has developed expertise in chemisorption through the study of and R&D in chemical reactions between compounds in industrial environments for the purpose of removing contaminants. The company’s core business targeted the removal of mercury in coal-fired electric utility plants. A series of different processes (based on patented technologies) was developed that not only increase the ability to extract mercury, but also reduce the consumption of sorbent material by approximately 50%, which lowers the cost. Due to a specialized skill set, the company is able to finetune the sorbents utilized and the processes employed to optimize the extraction of mercury.
Concerning the operational expectations for second half of 2023, management anticipates that this seasonally stronger period ought to generate higher revenues than the first half. Management plans to make announcements and update investors about the tenor of the core mercury extraction business in November after the third quarter results have been tabulated. Operationally, cash flow is positive with no need to raise capital.
ME2C Environmental plans to expand its mercury removal franchise internationally over the next few years. Over the last 6-to-8 months, management has approached state-owned utilities in SE Asia and met with coal-fired operators in Poland. The most advanced prospect is in Taiwan where a demonstration could potentially occur during the fall of 2023.
In November 2018, ME2C Environmental announced a patent strategy/licensing program in an effort to capture revenues from the unauthorized use of the company’s patented SEA Technology. Caldwell Cassady & Curry, P.C. (an Intellectual Property law firm based in Dallas, TX) was engaged to pursue the alleged patent infringement. The scheduled date for the trial by jury against 24 refined coal companies is November 13, 2023. The defendants appear to have benefitted from a 10-year refined coal program that generated approximately $10 billion.
A positive court outcome or a potential settlement prior to trial would validate the company’s IP and send a message to those coal-fired utilities infringing upon it. Any positive result is anticipated to trigger a great deal of activity (licensing agreements and/or sorbent supply contracts with ME2C) among the infringers. Management estimates that the annual revenues could be in the $30 million-to- $40 million range (which is 60% of the sorbent-based mercury-remediation coal-fired plant base). There is also possible there could be a payment of retribution from the refined coal companies. A positive outcome of the patent litigation initiative has the potential to make a significant change in the profile of ME2C Environmental.
It is worth noting that since the patent strategy/licensing program began, at least eight utilities have entered into licensing agreements and/or sorbent supply contracts with ME2C. Furthermore, management is openminded in how to settle the disputes and is amenable to take on new clients with long-term contracts without pursuing further litigation.
ME2C Environmental is pursuing several applications of chemisorption, including the extraction of REE from coal ash ponds and water remediation for potable water. The REE effort is the most advanced. For decades, coal-fired power plants disposed of coal ash in unlined ponds and landfills with over 1,100 coal ash ponds having been identified in U.S. Overtime, certain toxins have leaked into the water table, contaminating the groundwater with contaminant levels that exceed the EPA’s drinking water quality standards. In order to utilize sorbent technology, a certain concentration level of REE in solution must be achieved. The company’s latest R&D effort at the University of North Dakota has sufficiently concentrated REE in solution at a reasonable pH level. Though further testing is required, management is hopeful to move to field trial stage later this year. ME2C Environmental is also researching methods and developing specialized activated carbon to extract forever chemicals and to remediate contaminated water into potable water.
Valuation
Our indicated share price target is based on market-based comparative analysis that utilizes the valuation metric of Price/Sales. Utilizing a first quartile industry P/S ratio of 4.72 on TTM sales, our share price target is $1.08.
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