SES anticipates transitioning soon from a development stage company to an operating stage company. Its technology to cleanly and economically unlock value and low quality coals and biomass is unmatched and is under consideration by more projects in more regions of the world than ever before. It believes it is at the point where it can start to generate meaningful cash flow.
SES believes China offers significant opportunities for the company. China is expected to be a coal-based economy for decades. It has large quantities of low quality coal resources, which can be transformed into energy and chemical products using SES's technology. SES has formed SES China, a business platform to accelerate and realize the company's potential in China through the attraction of Chinese partners who wish to invest in clean energy. Recently, SES engaged Colin Tam at Crystal Vision Energy to strengthen its team in China. It is already seeing positive results from its China efforts, including a $15.5 million investment from Hongye International Investment Group, one of the top 100 private enterprises in Mongolia that operates businesses in energy and natural resources, and Shangai Zhongmo Investment Management Company.
The Yima project in China is in the commissioning stage and the company expects methanol production sales by the end of the year. It has started testing portions of the gasification system. Once the current phase of the Yima project is operating smoothly, there will be 2 more phases that should quadruple the total capacity for the facility. The first phase has the capacity of 300,000 tons a year of methanol equivalent capacity. A second phase would add another 300,000 tons, while a third phase would add 600,000 tons. SES anticipates more follow-on business flowing from the Yima project once it is consistently operating and expects the Yima project to make a meaningful contribution to its bottom line in China.
SES continues to idle the Zao Zhaung (ZZ) plant due to Hai Hua' non-payment of capacity fees. SES is optimistic that a timely solution will be reached because the controlling interest of Hai Hua was recently acquired by the Shandong, Weijiao Group, which is one of the 500 largest privately owned enterprises in China. Weijao is willing to work with the ZZ joint venture to reach a solution and the parties are discussing entering into a definitive agreement that will combine the ZZ operation with a Hai Hua methanol plant.
SES had previously announced a $84 million strategic equity investment from ZJX China Energy and those discussions are still active and ongoing. ZJX is working with potential partners to obtain the necessary funds to complete the transaction.
Outside of China, SES has had opportunities to develop licensing and equipment sales and opportunities for potential partnerships primarily in India, where the market for coal gasification plants is now forming, and the United States, which is showing an interest in SES's technology to cleanly convert coal mining waste into energy, such as transportation fuels. SES is also working with U.S. chemical companies on green renewable chemicals.
SES formed a coal resource joint venture with Midas in June 2011, the goal of which is to acquire low quality coal resources around the world and convert them into proven resources through SES's technology. It has validated the suitability of its coal reserves in Mozambique for its technology.
Financials.
Revenue in Q4 was $284,000 versus $2.5 million a year ago. Hai Hua has not paid the capacity fees owed to ZZ joint venture under terms of the syngas purchase and sale agreement since April of 2011 and the ZZ joint venture idled the syngas production in September 2011. As a result, there has been no product sales from the ZZ joint venture versus $2.3 million a year ago. The amount of unpaid capacity fees is now $4.7 million and SES continues to try to collect the fees.
Technology, licensing and related services revenues for Q4 were $284,000 versus $231,000 a year ago. Those revenues were primarily from coal testing reporting provided to customers to develop new projects and new license and build plans using SES's technology.
Total revenues for fiscal year 2012 were $3.1 million versus $10.2 million a year ago, with the reduction in revenue due to the unpaid capacity fees from the ZZ joint venture. Technology licensing and related services revenues for fiscal year 2012 was $.9 million versus $1.2 million.
Operating loss for Q4 was $4.2 million versus $4.7 million a year ago. The reduction in net loss was due to a reduction in the loss on the ZZ joint venture and stock based compensation expense. Operating loss for fiscal year 2012 was $18.3 mllion versus $15.7 million a year ago.
Net loss for fiscal year 2012 was $.39/share versus $.32/share loss a year ago.
At the end of Q4, SES had cash and cash equivalence of $18 billion and working capital of $9.9 million. It has an agreement with Hongye and Zhongmo to sell 10.4 million shares at $1.50 per share for total proceeds of $15.5 million. It just closed the sale of 5.8 million of those shares for $8.7 million.
The transcript of the earnings conference call can be found on Seeking Alpha at the following link:
http://seekingalpha.com/article/888041-synthesis-energy-systems-ceo-discusses-f4q2012-results-earnings-call-transcript
Copyright 2012 Jaygo's Earnings Conference Call Summaries
This work is licensed under a Creative Commons Attribution-NoDerivs 3.0 Unported License.
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