ADA-ES Inc. (NASDAQ:ADES), a maker of activated carbon for control of mercury emissions from coal-fired power plants, said March 16 that it will undergo a reorganization provided that shareholders approve it at the company’s June 6 annual shareholders meeting.
At the meeting, ADA shareholders will be asked, among other things, to consider and vote on a proposal to approve an agreement and plan of merger among a new holding company incorporated in Delaware named Advanced Emissions Solutions Inc. (ADES), ADA and a subsidiary of ADES whereby ADA will merge with the new subsidiary and become a wholly owned subsidiary of the new holding company.
In the merger, the current ADA shareholders will become stockholders of ADES on a one-for-one basis, holding the same number of shares and same ownership percentage after the reorganization as they held immediately prior to the reorganization. The reorganization generally will be tax-free for ADA shareholders.
Upon completion of the reorganization, ADES would replace the present company as the publicly-held corporation and it and its subsidiaries will conduct all of the operations ADA currently conducts. The officers of ADES would include the current President and CEO, Senior Vice President, CFO and Secretary, COO, Chief Technology Officer, and Vice President and Corporate Counsel of ADA. The directors of ADA prior to the reorganization would be the same as the directors of ADES following the reorganization. The company expects that the shares of ADES common stock will trade on the NASDAQ Capital Market under the ticker symbol ADES. If approved at the annual meeting, the reorganization would likely become effective on or about July 1.
Michael Durham, President and CEO of ADA, stated: “We believe the name Advanced Emissions Solutions more accurately reflects the scope of our current operations and our future direction. Since ADA spun out from Earth Sciences in 2003, we’ve become a prominent participant in the pollutant control industry including emission control technology, equipment and chemicals that reduce emissions mercury, CO2 and other pollutants from coal-fired power plants, industrial boilers and cement kilns. Implementing the holding company structure will provide us with strategic, operational and financing flexibility and, by incorporating ADES in Delaware, we will be in a better position to take advantage of the flexibility, predictability and responsiveness that Delaware corporate law provides. We are enthusiastic about the significant opportunities for the company from the release of the Mercury and Air Toxics Standards (‘MATS’) by the EPA in December 2011 and believe the reorganization and new name better positions the Company to capitalize on these opportunities.”
With respect to mercury emissions, ADA now: supplies activated carbon (AC) injection and dry sorbent injection (DSI) systems, mercury measurement instrumentation, and related services; under an exclusive development and licensing agreement with Arch Coal (NYSE:ACI), it is developing and commercializing an enhanced Powder River Basin (PRB) coal with reduced emissions of mercury and other metals; and through consolidated subsidiary Clean Coal Solutions LLC (CCS), it provides the patented Refined Coal (RC) CyClean technology to enhance combustion of and reduce emissions from burning PRB coals in cyclone boilers and the patent pending M45 technology for other types of coal and boilers.
ADA-ES said in a March 15 annual Form 10-K report that the reorganization effort actually began in March 2011. But ADA terminated that earlier reorganization agreement in April 2011 due to complexities arising out of an adverse ruling in arbitration with competing activated carbon producer Norit Americas.
ADA-ES works to deploy both ACI and DSI systems
As for its competitors in the activated carbon business, the Form 10-K said: “We believe companies such as Norit Americas, Inc. (‘Norit’), United Conveyor Corporation (‘UCC’), The Babcock & Wilcox Company and Clyde Bergemann, Inc. have responded to requests for commercial bids for [activated carbon injection] systems, and are some of our principal competitors in the ACI market. Competition for ACI systems is based primarily on price, quality, performance and the ability to meet the requested schedule. Based on the contracts we were awarded since 2005, we believe we are one of the market leaders and that we currently have approximately 35% of the existing ACI market. As the MATS driven EC market matures, we expect competition to continue to increase. In addition, we believe companies such as Nol-Tec Systems, Inc., UCC, Nalco Mobotec and SPE AMEREX have responded to requests for commercial bids for DSI systems, and are some of our principal competitors in the emerging DSI market. Similar to ACI systems, competition for DSI systems is based primarily on price, quality, performance and the ability to meet the requested schedule.”
To date, ADA-ES said it has obtained contracts for or is in the process of installing 50 ACI systems intended to control mercury emissions from 55 coal-fired electric power boilers. Some market demand continues in 19 states and six Canadian provinces that either have passed their own mercury control regulations or have entered agreements with power plants to reduce mercury emissions for new power plants. ACI system bid activity picked up in the second half of 2011 on individual and fleet-wide projects due to the anticipated release of the final MATS that occurred in December. ADA-ES said it anticipates the need for 400 to 600 ACI systems to be supplied between 2012 and 2015, which would require rapid scale-up of its production capabilities to maintain targets and the company’s present 35% market share. For an average size electric generating unit, the ACI equipment costs are between $600,000 and $1m.
ADA-ES said it also has developed and is offering commercial DSI systems to inject dry alkali sorbents for control of acid gases such as SO3 and HCl as well as for control of the criteria pollutant SO2. DSI systems, which cost $2m to $3m for an average size electric generating unit, provide a low CAPEX alternative to scrubbers for meeting certain provisions of the MATS and Cross-State Air Pollution Rule. ADA-ES conducted full-scale tests of the DSI equipment in 2010 and 2011 for the control of HCl, SO2 and SO3 on plants burning bituminous, PRB and lignite coals. “We believe several contracts for ACI and DSI systems will be awarded this year and that MATS will generate up to $300 million in sales of both ACI and DSI systems for the company,” said the Form 10-K.