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ADA-ES SIGNS TERM SHEET FOR EXCLUSIVE LICENSE OF M45 REFINED COAL

    11/9/2011 2:08:00 PM    ReadCount:617

ADA-ES,   Inc.  announced   that   it   has  signed   a  non-binding term   sheet for an   exclusive  license of   its  new M45 Refined Coal technology to Clean Coal Solutions, LLC (“Clean Coal”),  its joint venture with   an   affiliate   of   NexGen   Resources   Corporation   and   an   affiliate   of   The   Goldman   Sachs Group, Inc.    With this license, Clean Coal can now provide customers with both the patent- pending M45 technology and ADA’s patented CyClean technology to produce Refined Coal (“RC”), which reduces emissions of NOx and mercury, and qualifies for the  IRS Section 45 tax credits of over $6.33 per ton of RC. The   expected     license,   which   is   subject   to   due   diligence   and negotiation   and   closing   of definitive   agreements, would  provide ADA   with   a   royalty  based   on   a   percent   of   operating income from future production of RC produced with the M45 technology and prepaid royalties that include an initial refundable payment of $2 million paid to ADA upon signing of the term sheet    with   additional  refundable     payments      of   up  to  $8  million    upon   meeting     certain milestones.     In addition, ADA would also receive its 42.5% of distributions from M45 paid to the equity owners of Clean Coal.  The prepaid royalty payments would  be refundable via  a withholding from 50% of future distributions or payments to ADA from Clean Coal if certain conditions are not satisfied, including the completion of satisfactory due diligence by Clean Coal.   ADA expects  Clean Coal to finance the fabrication and installation of up to six M45 facilities   with   a   goal   of   getting   these  “placed-in-service”  by  the  2011  year-end   deadline. These systems would then be available for full-time operation in 2012 and qualify for the tax credit for a ten-year period.      These facilities would have the potential of  producing a total of as much as $20 million in net operating income annually for ADA from the M45 activities for the period of the tax credits. In addition, Clean Coal has installed and operated 10 CyClean systems at utility sites and is working to install and operate up to an additional ten RC systems by year-end, for a total of 20 systems installed in 2011.  After initial operation, it takes an average of approximately six months to obtain permits for full-time operation and to complete all necessary contracts.                 If all planned 20 CyClean systems become fully operational, they could generate pre-tax income of approximately $30 million annually for ADA after payments to minority partners for the 10- year life of the tax credits.
Clean Coal is financing the construction and installation of the new RC facilities with a $15 million line of credit with a commercial bank, internal cash flows, and $8 million received to date in deposits to secure participation in the facilities. Dr. Michael Durham, President and CEO, stated, “We believe that licensing this technology to Clean Coal will enable us to optimize the opportunity to fabricate, install and place-in-service as many systems as possible by year-end.