Advanced Emissions Solutions, Inc. (ADES)

Not sure if others caught this but the below is a great sign for pricing in APT segment for ADES and margins given ADES is vertically integrated

Cabot Norit Activated Carbon to Increase Prices for Activated Carbon Globally
BOSTON – June 24, 2021 – Effective for all shipments made on or after August 1, 2021, or as customer contracts allow, Cabot Norit Activated Carbon will increase prices globally for all activated carbon products. Price increases will range from 10 percent to 20 percent, depending on the specific activated carbon product and region.
The price increase is necessary to address escalating raw material, transportation and other operating costs. The price increase will enable Cabot Norit to continue to support investments in product and application development. Furthermore, it will ensure that Cabot Norit remains a reliable, long-term supplier of high-quality activated carbon products and services to its customers

Cash by EOY? A fellow SH has been discussing this with me & I'd appreciate others' thoughts. Q1's +$16mm was somewhat anomalous given tax code Tx of the RC winddown costs vs distribution Tx. Let's go back to Q3 to Q4 '20. Cash increase was $10.9mm. That # netted out the $3mm in mine reclamation costs that ADA will have each Q throughout the 1st 18mos of the CBT agreement(Q2/Q3 2022). Presently, ADA is reducing overhead given RCs winddown, has increased APT pricing , coal burn has increased, improving APT volumes(CBT),no debt=no interest expense or repayment drawdown... Is it reasonable to assume that those dynamics would allow $12-$15mm cash build per Q? If so, we'll be right @ $90-$100mm EOY. $5-$5.50/sh just in cash.

Some of us on the HPK message board chat about other stocks. Here is an interesting post relating to ADES:

Found this interesting by goAnyWhereGuy on VIC

"Thanks - long time lurker, first time poster.

The RC cash flows are essentially volume-based royalties, so yeah, visibility is good (obviously with some volatility depending on thermal coal burn of contracted facilities).

If you're spending time on the name, perhaps most important thing to read is their supply agreement with Cabot: https://www.advancedemissionssolutions.com/ADES-Investors/Financials/SEC-Filings/SEC-Filings-details/default.aspx?FilingId=14419033. It was a really smart, win-win deal I.M.O. and market hasn't digested its implications fully:
- Cabot has long had the IP and customer relationships on granular activated carbon ("GAC"), which is what's used to purify water; their primary problem is that their manufacturing plant in Marshall, TX was outdated and cost inefficient and they risked having their lunch cut by Calgon;
- ADES has the best, lowest marginal cost AC plant in the US, but they'd always been almost entirely powder activated carbon ("PAC"), which is what's used to treat mercury from coal generation. They'd been trying to get into water and reduce reliance on coal for a couple years since acquiring APT, but with limited success.
- The 9-30-20 supply agreement essentially lets Cabot employ its GAC IP inside ADES' manufacturing, they split the capital costs of doing so, ADES sells to Cabot at the same price it sells for its own third party sales (i.e. a wholesale margin), and Cabot keeps the retail/distribution margin.
- Cabot can now aggressively compete with Calgon in water because Cabot has access to ADES' low cost manufacturing (and Cabot's finally rid of its millstone Texas operations which were bleeding for years), and ADES gets fat contribution margins from supplying Cabot (they quoted 30-40% revenue growth and $10-$15M EBITDA; given APT pre-transaction revenue base was ~$50M, ADES is getting north of a 50% contribution margin on the Cabot contract).
- And of course, ADES is now much more saleable with a long-term contract to supply to growing end markets via Cabot, than it was withering as a supplier of PAC."

Are there any EPS estimates for $ADES?
2021 EPS probably 4 x .75 or 3.00 based on RC coal business.
2022 EPS depends almost entirely on APT and its activated carbon contract with Cabot.

Bottom line: what is $ADES worth? (don't tell me today's price).

I see that in the company’s May CC management anticipated an additional take in of cash between $50-60M from the RC cash flows by year end. That brought the estimate of cash on the companies books to around $4.50 to $5.00 by year end by my estimate. Given that recent recent coal usage boost from the switch of NG to coal at utilities, does anyone believe that there is actually a possibility ADES pushes past $5 a share in YE cash? According to the filings most of Tinuum’s agreements seem fixed but they do have upside from volume? Trying to figure out what if any upside ADES will get from the current environment because the Tinuum operation is juggling a balancing act between seemingly unexpected AC demand and preparing for a YE wind down of its operation. We also have ADES doing planned maintenance for Q2 which they are just coming off of. Hard to gauge what if any upside there is short term.

Given the homework others have put in on this board from the recent Cabot agreements and Calgon Carbon line on costs, the gap in valuation is rather striking and probably one of the best risk/rewards I’m seeing in the market right now.

Thanks for any reply.

Good news and bad news on Tinuum wind down:

From investor relations: “No cash flows from facilities after expiration. The facilities don’t have value without the tax credits.
 
Contracts are comped on a fixed $6.90 in production tax credits per ton of RC burned. So obviously greater burn, better cash flows”

Coal burn is much higher than the beginning of the year so I presume we may be sitting on the higher end of that $70-90mil projection that mgmt made at beginning of year. But no value in the assets without the tax benefit so no cash flow upon wind down.

Vanessa Dezem, Jesper Starn and Isis Almeida: Tue, June 15, 2021, 2:00 AM
(Bloomberg) --

Europe is so short of natural gas that the continent -- usually seen as the poster child for the global fight against emissions -- is turning to coal to meet electricity demand that is now back to pre-pandemic levels.

Coal usage in the continent jumped 10% to 15% this year after a colder- and longer-than-usual winter left gas storage sites depleted, said Andy Sommer, team leader of fundamental analysis and modeling at Swiss trader Axpo Solutions AG. As economies reopen and people go back to the office, countries like Germany, the Netherlands and Poland turned to coal to keep the lights on.

Europe has long been at the forefront of the battle to reduce global warming. The continent has the world’s largest carbon market, charging the likes of utilities, steel producers and cement makers for polluting the environment. But even with record carbon prices this year, low gas reserves mean burning coal -- the dirties of fossil fuels -- has become more widespread again.