SES Wants to Build Plant in China Instead
By ANNIE DIMMICK
POSTED: October 24, 2008
theintelligencer.net
BENWOOD - Resources that had been expected to fund a coal liquefaction plant in Marshall County now apparently will be sent to the other side of the globe.
On the same day Synthesis Energy Systems Inc. officials announced the company is pulling out of the Marshall County project, they also announced plans to build a similar plant in Henan Province, China.
With a credit crisis under way in the United States, a joint venture agreement between SES and YIMA Coal Group guarantees debt financing for the plant in China from domestic Chinese banking sources.
"The execution of the joint venture agreement with YIMA underscores our current focus on projects in China, where traditional bank financing remains accessible. We are fortunate to have a partner like YIMA that has the ability to provide a guarantee for the financing, which we believe will allow SES and YIMA to advance this project despite these turbulent financial times," said Tim Vail, president and chief executive officer of SES. "From an operational perspective, the ability to conduct coal testing in our Hai Hua commercial facility as opposed to a pilot plant will be invaluable to the design process."
Much like the Marshall County plant, the Henan Province plant will utilize SES' licensed U-Gas technology to convert coal into synthetic gas, according to SES officials. However, the Asian plant will use lower quality coal and will be converting the resource into transportation fuels and chemicals; the Benwood facility would have converted coal to synthetic gas to produce methanol for use as a feedstock for the chemical industry and 87-octane gasoline.
"YIMA is very pleased to have signed the joint venture contract with SES," said YIMA Chairman Wu Luyu in a news release. "Despite the downturn in the international financial markets, Chinese banks have recently decreased interest rates and the central government has reduced reserve ratios for banks, enhancing the ability of Chinese banks to lend to projects. We are committed to ensuring the financing for this project, as this is an encouraged industry in China with excellent government support. We believe this is an opportunistic time to be building new capacity, and we expect this project to be just the first step in a series of projects with SES."
Preliminary estimate state the total required capital for the joint venture will be about $350 million. SES will own a 49 percent interest in the joint venture, while YIMA will own a 51 percent interest.
In announcing its decision not to proceed in Benwood, SES officials said the company was re-evaluating its capital investments because of the unstable credit market in the U.S.
On Sept. 15, SES reported revenue of $288,226 for fiscal 2008, crediting most of that money to synthetic gas sales from the Hai Hua plant in Zaozhuang City, Shandong Province, China. That plant, which was the first of its kind in China, employs more than 150 and is currently being expanded.
"Clearly the most significant event for SES was the initial syngas sales from our first U-Gas plant in China. We are very proud of this achievement, as it signals our ability to build, own and operate coal gasification plants utilizing low-rank coal," Vail said.
However, the company's net loss for fiscal 2008 was $27.4 million, or 80 cents per share, compared to a net loss of $13.1 million, or 47 cents per share, during fiscal 2007.
The Houston-based company's stock was trading Thursday afternoon at $1.71 a share. The stock's 52-week high was $15.92, set in January; it hit a 52-week low of 73 cents a share on Oct. 10.
Still, the company is moving forward with two coal-to-liquids plants in this country.
"The U.S. market remains a core opportunity for U-Gas expansion, and we will continue to monitor the situation in order to make the best decisions on behalf of our shareholders," said Vail. "We continue to work with our partner North American Coal in the evaluation of U-Gas project sites in North Dakota and Mississippi." |
