Dr. Durham: ADA - the "ES" stands for "environmental solutions" - we provide emission control technology to the coal-fired power industry. I've been working in this area for about 35 years with the group I have here. In 1997 we were sold to a public company called Earth Sciences, and then in 2003 we spun out as a separate public entity and started trading on Nasdaq in 2004.
TWST: What are you up to at the present time?
Dr. Durham: As you know, there is a lot of pressure on burning coal cleaner. Coal represents 50% of electrical power generation in the U.S., but there are mandates to burn it cleaner and cleaner. We are working on three areas that are related to new regulations. Mercury is being regulated for the first time ever from coal-fired power plants. We have been working in mercury control for over a decade and the market is coming in two phases, the first of which occurred in 2006 through 2010, resulting from mercury regulations in 19 states. In this initial phase, ADA was the market leader in providing mercury control technology for power plants. The technology that we provide is based around activated carbon injection, and what this represents is somewhat of a razor and razor-blade model. We sell a piece of hardware to a power plant that represents about a 1 million capital equipment sale to them. But once that equipment is in, it will require approximately 1 million to 2 million per year in activated carbon. We have started construction of a new activated carbon plant in Louisiana in 2008 that is in the process of starting up as we speak, that will produce about 150 million pounds per year of activated carbon. The next wave of activity is occurring as a result of a court-ordered mandate for EPA to create a federal mercury control regulation that will create a market on the equipment side about five times bigger - about 800 million - five times bigger than the current market for activated carbon equipment. But it will also generate markets for about close to a billion pounds of activated carbon starting in 2014. So we have permitted a number of new plants to produce activated carbon at as many as six total production lines that would be required for this market. That's the mercury control area.
Another area that's growing for us is our refined coal segment. Refined coal is basically a chemical treatment of coal that reduces mercury as well nitrogen oxides. This product qualifies for a Section 45 tax credit of about 6 per ton of coal. We were able to get two systems up and running by the December 31 IRS deadline. These two systems, which are about to start up now, meet all the requirements for the tax credit. They'll be generating about 6.5 million tons per year of coal, so that will generate about 40 million a year in tax credits for 10 years. We are finalizing an agreement with a monetizers, who will turn those tax credits into revenues for us. We'll announce the details of those contracts once they're finalized shortly.
The third area is the capture of carbon dioxide in response to potential climate change legislation. We have been developing carbon capture technology for the power industry, and currently we are working on a 3 million program from the Department of Energy that's co-founded by several large utilities, such as AEP, Southern Company, Luminant and Xcel. We are waiting to hear about a 14 million extension of funding that we submitted to the DOE, which we expect to hear on in the next couple of weeks. This funding will allow us to scale up our technology.
Tickers included in this excerpt: ADES
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.