Arq, Inc. · NASDAQ:ARQ
Arq — Advanced Emissions Solutions — Baird Conference 2013
32 slides from Arq's conference presentation, Nov 4, 2013
Slide 1: Investor Presentation - Baird Conference
Exhibit 99.1 Investor Presentation-Baird Conference November 2013 www.advancedemissionssolutions.com © 2012-2013 Advanced Emissions Solutions, Inc.
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Slide 3: Safe Harbor
SAFE HARBOR This presentation includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a "safe harbor" for such statements in certain circumstances. The forward-looking statements include statements or expectations regarding future
Slide 4: Business Overview
BUSINESSOVERVIEW Advanced Emissions Solutions, Inc. Refined Coal (“RC”) Emission Control CO 2 Capture Operates through Clean Provides Activated Developing proprietary Coal Solutions (“CCS”), Carbon Injection (“ACI”) solid sorbent capture a joint venture 42.5% and Dry Sorbent Injection technology to
Slide 5: Who We Are
WHO WE ARE Advanced Emissions Solutions, Inc. (“ADES” or the “Company”) is a family of companies1 that has been providing emission control solutions to the power industry for more than 30 years Headquartered in Highlands Ranch, CO Business founded in 1996 Operations across Coal Treatment, Emission C
Slide 6: Portfolio of Emissions Control Solutions
PORTFOLIOOF EMISSIONS CONTROL SOLUTIONS ACI System ACI System for Mercury Control Boiler DSI System Coal Pile Refined Coal- $0 cost to utility ACI/DSI- $1-$3M in capex M-Prove™ Technology ~$100k Large E&C Scrubber, SCR- $100M+ capex, $1-$4/ton reduced firms in capex compliance cost © 2012-2013 Advan
Slide 7: Near-term growth opportunities
Near-term growth opportunities Mercury Control (MATS) Refined Coal MATS rule took effect in 2012, compliance by 2015-2016 Clean Coal Solutions (CCS) 42.5% ADA 42.5% NexGen Equipment Consumables 15% Goldman Sachs 28 RC facilities qualify for Creates $1B equipment MATS to create annual Section 45 Tax
Slide 8: Expected Revenue Mix Trajectory
EXPECTED REVENUE MIX TRAJECTORY TM © 2012-2013 Advanced Emissions Solutions, Inc. -8-
Slide 9: Refined Coal: Clean Coal Solutions, LLC (CCS)
REFINED COAL CLEAN COAL SOLUTIONS, LLC (CCS) GOLDMAN SACHS 15% ADA 42.5% NEXGEN 42.5% Owns 28 facilities eligible for Section 45 Tax Credits of $6.59/ton (escalating) through 2021 To qualify for Section 45, the RC facility must reduce mercury by 40% and NOx by 20%and have been “placed in service” on
Slide 10: Refined Coal: Benefits for All Parties
REFINEDCOAL:BENEFITSFORALL PARTIES CCS Leasing Model ADES owns 42.5% of CCS (~$1.40/ton) CCS receives $3.00 to $4.00/ton in rental income Pays ~$1.00 /ton to utility Pays ~$2.00/ton for 3 rd party operating expenses investor Utility gets emission 3 rd party investor leases RC facility reductions and
Slide 11: Refined Coal: Operating Impact
REFINED COAL: OPERATING IMPACT CCS will likely operate an RC facility prior to finalizing contracts with an RC investor • Faster way to initiate full-time operations with the host power plant • Provides operating assurance to potential 3rd party RC investors • Attractive long-term returns to CCS. ~$
Slide 12: Refined Coal: Financial Impact of GAAP Reporting
REFINEDCOAL: F INANCIAL IMPACT OF GAAP REPORTING Example of a typical RC facility located at a plant that typically burns 4 MT per year (CCS) Assumptions: Retained operating costs of ~$3/ton Lease payments of $~3.50/ton $ millions Quarterly Annually Cash Spent $0.0 $0.0 RC facility not in full-time
Slide 13: Update on 28 Refined Coal Facilities
UPDATE ON 28 REFINED COAL FACILITIES All RC 28 facilities are expected to be in full-time operations by year end 2014 CCS expects to retain and operate some RC facilities to generate tax credits sufficient to offset expected tax liability Full-Time Operations Roadmap 28 facilities in full-time Addit
Slide 14: Emissions Control Equipment
EMISSIONS CONTROL EQUIPMENT - ACTIVATED CARBON INJECTION SYSTEMS DRY SORBENT INJECTION SYSTEMS Installed/installing ACI systems on over 80 Sold through our BCSI subsidiary boilers at coal-fired power plants © 2012-2013 Advanced Emissions Solutions, Inc. -14-
Slide 15: Emission Control Equipment ($ in Millions)
EMISSION CONTROL EQUIPMENT ($ IN MILLIONS) MATS market developing as expected $1-$2B market for consumables to control mercury starting in 2016 ADA is prepared for the equipment market Supply agreements already in place, engineering capabilities expanded © 2012-2013 Advanced Emissions Solutions, Inc
Slide 16: Mercury Control Consumables: M-Prove Technology
MERCURY CONTROL CONSUMABLES: M-PROVE TM TECHNOLOGY Patented technology designed to enable Western and lignite coals to burn with lower mercury emissions U.S. burns up to 600M tons of Western Coal per year $1.00-$4.00/ton in benefits to customer Technology has been licensed to Arch Coal to apply to t
Slide 17: CO2 Capture: Overview
CO2 CAPTURE: OVERVIEW Developing proprietary solid sorbent capture technology to capture CO 2 from flue gas in conventional coal-fired boilers DOE and industry funding: Phase I - $3.8 M, R&D at 1 KWe scale, Completed in 2011 Phase II - $20.5 M, 51-month contract to validate technology at 1 MWe scale
Slide 18: Key Takeaways
KEY TAKEAWAYS RC opportunities expected to provide substantial revenues, profits and cash flows through 2021 MATS compliance requirements are driving significant near-term market for equipment M-Prove TM technology and royalty opportunity expected to produce additional growth beyond MATS equipment m
Slide 19: Appendix
APPENDIX © 2012-2013 Advanced Emissions Solutions, Inc. -19-
Slide 20: Coal and US Electricity Generation
COAL AND US ELECTRICITY GENERATION 2012: lowest power demand since 1987, natural gas prices reach a low of $1.91/MM/btu- 2012 average of $2.77/MMbtu Source: EIA © 2012-2013 Advanced Emissions Solutions, Inc. -20-
Slide 21: Coal Energy
Coal Energy Coal expected to provide ~ 40% of America’s electricity in 2035 according to Department of Energy 1% 1,200 existing coal-fired power plants in the US generate the majority of the nation’s 19% 13% electricity, and consume ~ 900M to 1B tons of coal each year 42% 25% EPRI estimates that the
Slide 22: Mercury Control - 15 Years in the Making
MERCURY CONTROL- 15 YEARS IN THE MAKING EPA issues final EPA Mercury Air determines it EPA proposes Toxic Standards necessary to new rule to (MATS) EPA issues regulate Clean Air replace the mercury Mercury Rule vacated CAMR 2000 2005 2008 2009 2011 2012 2015/16 EPA issues draft of Technology Mercury
Slide 23: Balance Sheet Highlights
BALANCE SHEET HIGHLIGHTS 6/30/13 12/31/12 $s in Millions Cash & Cash Equivalents $12.3* $9.7 Working Capital** $(18.0) $(24.1) Long-term Liabilities*** $14.3 $6.5 Shares Outstanding 10.1 10.0 * Does not include the impact of more than $14 million in RC lease prepayments received by CCS in late July
Slide 24: Financial Results
FINANCIALRESULTS For the Three Months Ended For the Three Months Ended June 30, March 31, $(000) 2013 2012 2013 Revenues $58,930 $52,511 $68,314 *Revenues excluding coal sales $27,161 $14,772 $23,354 Gross Margin Before Depreciation and Amortization$10,594 $7,434 $9,388 General and administrative 8,
Slide 25: Refined Coal Results
REFINED COAL RESULTS For the Three Months Ended For the Three Months Ended June 30, March 31, $(000) 2013 2012 2013 Rental income $ 11,642 $ 10,590 $ 12,213 Coal sales 31,769 37,739 44,960 Other income 777 22 950 Total RC Revenues $ 44,188 $ 48,351 $ 58,123 Cost of Revenues $ 36,167 $ 41,908 $ 51,46
Slide 26: Emission Control
EMISSION CONTROL For the Three Months Ended For the Three Months Ended June 30, March 31, 2013 2012 2013 $(000) Systems and equipment $ 9,915 $ 2,745 $ 7,525 Consulting and development 2,020 1,058 1,004 Chemicals 79 162 240 Total EC Revenues $12,014 $3,965 $8,769 Cost of Revenues $ 9,711 $ 3,087 $ 6
Slide 27: ADA Standard ACI System
ADA STANDARD ACI SYSTEM Bin Vent Filter Man-door with PRV Level Transmitters PAC Storage Module Process Equipment Module © 2012-2013 Advanced Emissions Solutions, Inc. -27-
Slide 28: ACI Market Share
ACI MARKET SHARE Source: ICAC © 2012-2013 Advanced Emissions Solutions, Inc. -28-
Slide 29: Refined Coal: Introduction & Overview
REFINED COAL: INTRODUCTION & OVERVIEW The American Jobs Creation Act of 2004, Section 45 of the IRC: contains provisions to incentivize the production of pollution mitigating Refined Coal (RC)via annually escalating tax credits per ton of coal burned. RC reduces mercury by 40%+ and NOx emissions by
Slide 30: Refined Coal Photographs
REFINED COAL PHOTOGRAPHS © 2012-2013 Advanced Emissions Solutions, Inc. -30-
Slide 31: Non-GAAP Financial Measures
NON-GAAP FINANCIAL MEASURES Revenues excluding coal sales, adjusted gross profit and adjusted gross profit percentage are non-GAAP financial measures which are used to provide investors with greater transparency with respect to the effect on revenues, gross margin and gross margin percentage from Cl
Slide 32: Contacts
CONTACTS Graham Mattison Vice President, Investor Relations (646)-319-1417 graham.mattison@adaes.com Michael D. Durham, Ph.D., MBA President & CEO Mark H. McKinnies SVP & CFO © 2012-2013 Advanced Emissions Solutions, Inc. -32-