Synthesis Energy Systems, Inc. (SES) (NASDAQ:SYMX), the global
leader in low cost, high performance clean energy gasification
technology, today reported financial and operating results for its
fiscal 2016 year and fourth quarter, ended June 30, 2016.
“During our 2016 fiscal year we more than
doubled our installed base of gasification systems in China, and we
embarked on our bold strategy to expand SES’s growth and increase
our share of the profits realized from our low cost, high
performance clean energy technology. We are excited to have
launched our first project investment platform, and subsequently
established a stronghold in two of three designated industrial
parks in the Dongying Port Economic Development Zone in Shandong
Province, China. We believe that Dongying City will become a major
hydrogen and industrial gas supply hub for China, and are pleased
to have entered into agreements to develop and build our initial
two pipeline hydrogen projects for refining cleaner transportation
fuels from our clean syngas. We are in active discussions with the
targeted offtakers for hydrogen gas sales and we intend to move
quickly into the related agreements,” said DeLome Fair, SES
President and CEO.
“The Dongying projects represent the first of
several projects and investment platforms worldwide we anticipate
for our new business growth model during the 2017 fiscal year. Each
platform is designed to bring in projects, attract investment
capital, secure equity positions for SES, and pull through
technology and equipment orders from SES Technologies, LLC and
Tianwo-SES,” continued Ms. Fair. “Our technology’s superior level
of performance using locally supplied and plentiful low-grade coal,
coal wastes, biomass, and municipal solid wastes not only generates
clean energy in an environmentally friendly manner, it also
provides superior economics as compared to the higher cost natural
gas alternative. The global market for our technology is large,
with significant quantities of our sweet spot feedstocks in
developing and newly industrializing regions of our world that have
historically had to rely on expensive imported natural gas.
“All of us at SES are very proud to have crossed
the threshold from commercialization – with an installed base of 12
systems – to globalization during this past fiscal year. Our 2017
fiscal year is primed for strong growth for us to realize our
vision for a worldwide, large-scale, clean energy value creation
model. In China and beyond, we are singularly focused on creating a
diverse global business operation with growth and income its
driving force, by bringing vitally needed, high value energy
products – that are at once sustainable, economic and clean – to
the growing regions of our world,” concluded Ms. Fair.
Recent Corporate Highlights
Equity Platforms and
Projects:
China Clean Energy Platform: Dongying Port
Economic Development Zone Hydrogen Projects: SES has ventured into
two new equity platform projects with local governments to serve
refinery upgraders in Dongying City, in Shandong Province, China:
Lijin Binhai New District industrial park, and Hekou Blue Economy
Industrial Park. These initial pipeline projects will use SGT’s
clean syngas to produce lower-cost, high purity pipeline hydrogen,
as well as syngas and other industrial gases, for refining cleaner
transportation fuels from the Company’s clean syngas. Dongying
houses the largest concentration of non-state-owned refineries in
China, and is a city developed via the Shengli Oil Field. SES is
now focused on the configuration of the plants, and is in the
process of completing the Feasibility Study Reports (FSR) for both
projects. The FSRs are a critical step in the government approval
process in China. Additionally, SES is in active discussions with
the targeted offtakers for hydrogen gas sales and the Company
intends to move quickly into the related agreements. The projects
are intended to be funded by equity from a combination of funding
vehicles along with debt financing.
SES Assets:
Yima Joint Ventures Methanol Plant (Yima): Yima
has achieved multiple milestones during 2016, including technical
acceptance, the physical completion of construction and, most
recently, a business license in July. This license represented the
final milestone required for the Yima JV to be able to produce and
sell high value chemical grade methanol into the market. The JV has
a few milestones still to be reached to formally finalize the
construction of the plant, per Chinese regulations. This
includes obtaining the final safety and environmental
permits. As part of this process and at the request of the
local environmental bureau, the facility was shut down in June. The
outage was complicated by a maintenance related accident, but we
believe the JV is taking all required actions and will have the
plant up and running during the upcoming next quarter. One key step
in the process to finalize permits is to modify and consolidate the
existing 3-JV structure, which together comprise the entire
facility, this process is now in progress by the JV management
team. SES anticipates that the new JV entity will complete this
process and will receive its required final safety and
environmental permits before the end of this calendar year. As a
result of the temporary shutdown and resultant increased financial
debt for the project, the Company determined that the asset was
partially impaired.
Zao Zhuang New Gas Company Joint Venture (ZZ):
In August, SES and its JV partner, Shandong Weijiao Group Xuecheng
Energy Co., Ltd. (Xuecheng Energy), entered into a Definitive
Agreement to restructure ZZ. Xuecheng Energy assumed all
outstanding financial liabilities of ZZ and SES retained about 9%
ownership in the joint venture. The JV is currently evaluating a
new and improved ZZ syngas facility at the Zouwu Industrial Park,
in a new industrial zone for the Xuecheng District of Zao Zhuang,
where Xuecheng Energy has built and is operating new and larger
coke ovens as well as an LNG manufacturing facility. Xuecheng
Energy is considering more valuable end products to make from ZZ
syngas, including LNG, refined hydrocarbons, fuels and acetic
anhydride. SES has the option to reinvest in the new ZZ project,
and SGT will continue to be used for syngas production at the new
site.
Technology Licensing and
Equipment:
China Joint Venture: Tianwo-SES Clean Energy
Technologies Co., Ltd. (Tianwo-SES), SES’s China Joint Venture with
Suzhou THVOW Technology Co., Ltd. (THVOW):
- Customer – Aluminum Corporation of China Limited (CHALCO):
Tianwo-SES licensed and provided the SGT technology design and
proprietary gasification equipment to three CHALCO industrial fuel
plants, and has recognized $18.4 million in revenue to date from
the order.
- CHALCO HENAN: This plant began commissioning of the gasifiers
in April 2016, but has temporarily suspended its commissioning due
to operating issues in the aluminum facility unrelated to the clean
syngas plant. The Company expects the commissioning to resume when
the aluminum facility is ready, but it is not known at this time
when this is expected to happen.
- CHALCO SHANXI: The plant in Xing County, Shanxi Province is in
operation.
- CHALCO SHANDONG: The first plant in this CHALCO order, in Zibo
City, Shandong Province is also in operation.
- Suzhou THVOW Technology Co., Ltd. continues to fail to complete
its required last payment of 46.2MM Yuan, or approximately $7MM, of
registered capital into the Tianwo-SES JV. SES is actively
examining all legal options to remedy the situation.
Fiscal Fourth Quarter 2016 Financial
Results (Unaudited)
The Company reported $0.5 million of revenue for
the three months ended June 30, 2016, versus $4.6 million for the
three months ended June 30, 2015. The decrease in both volume and
revenue was primarily due to the shutdown of the ZZ Joint Venture’s
plant in late October 2015.
The Company’s operating loss for the fourth
quarter of fiscal 2016 was increased to $11.2 million versus an
operating loss of $3.8 million for the fourth quarter of fiscal
2015. The increase in operating loss was primarily due to an $8.6
million impairment of the Yima Joint Ventures investment.
The net loss attributable to stockholders for
the fourth quarter of fiscal 2016 was $11.6 million, or $0.13 per
share, versus a loss of $3.8 million, or $0.05 per share, for the
prior year’s fourth quarter.
As of June 30, 2016, the Company had cash and
cash equivalents of $13.8 million and working capital of $2.4
million.
Fiscal 2016 Financial Results
(Unaudited)
Total revenue was $6.0 million for the Current
Year as compared to $15.5 million for the Prior Year.
Our ZZ Joint Venture sold 18,115 metric tons of
methanol and generated approximately $4.8 million of revenue during
the Current Year, compared with 49,706 metric tons of methanol sold
which generated approximately $15.1 million of revenue during the
Prior Year. The decrease in both volume and revenue was primarily
due to the shutdown of the ZZ Joint Venture’s plant in late October
2015.
Technology licensing and related services
revenue was $0.3 million for the current year, which resulted from
the technical consulting and engineering services provided to
during the Current Year. There was no technology licensing and
related services revenue to customers during the Prior Year.
Related party consulting revenue increased by
$0.5 million to $0.9 million during the Current Year as compared to
$0.4 million for the Prior Year, which primarily resulted from
technical consulting and engineering services provided to related
parties.
The operating loss for fiscal 2016 was $22.5
million compared to an operating loss of $38.3 million for fiscal
2015. The decrease was primarily the result of the $20.9 million
impairment of the ZZ Joint Venture plant during the prior year
partially offset by the $8.6 million impairment recorded for the
Yima Joint Ventures in the current year.
The net loss attributable to stockholders for
fiscal 2016 was $23.1 million or $(0.27) per share versus $37.9
million or $(0.50) per share for fiscal 2015.
Conference Call Information
SES President and CEO DeLome Fair and CFO Roger
L. Ondreko will report on quarterly financial results and provide a
business update beginning at 4:15 p.m. EDT on September 27.
To access the live conference call webcast,
please log on to the Investor Center of the corporate website,
www.synthesisenergy.com. Interested parties can pre-register for
the conference at: http://dpregister.com/10092174. Alternatively,
interested parties may participate in SES’s conference call by
phoning (877) 508-9602 (U.S) or (412) 317-5113 (Int’l). Callers
should request the “Synthesis Energy Systems, Inc. (SES) call.”
An archived version of the SES conference call
webcast will be available, beginning approximately one hour after
its completion, through December 22, 2016. Interested parties can
access the telephonic replay on the Investor Center of the
company’s website, or by phoning (877) 344-7529 (U.S.) or (412)
317-0088 (Int’l). The PIN access code for both the live call and
replay is: 10092174.
About Synthesis Energy Systems,
Inc.
Synthesis Energy Systems (SES) is a
Houston-based technology company focused on bringing clean
high-value energy to developing countries from low-cost and
low-grade coal, biomass and municipal solid waste through its
proprietary gasification technology based upon U-Gas®, licensed
from the Gas Technology Institute. The SES Gasification Technology
(SGT) can produce clean, low-cost syngas for power generation,
industrial fuels, chemicals, fertilizers, and transportation fuels,
replacing expensive natural gas based energy. SGT can also produce
high-purity hydrogen for cleaner transportation fuels. SGT enables
Growth With Blue Skies, and greater fuel flexibility for both
large-scale and efficient small- to medium-scale operations close
to fuel sources. Fuel sources include low-rank, low-cost high ash,
high moisture coals, which are significantly cheaper than higher
grade coals, many coal waste products, biomass, and municipal solid
waste feedstocks. For more information, please visit:
www.synthesisenergy.com.
Forward-Looking Statements This
press release includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933, as amended,
and Section 21E of the Securities Exchange Act of 1934, as amended.
All statements other than statements of historical fact are
forward-looking statements. Forward-looking statements are subject
to certain risks, trends and uncertainties that could cause actual
results to differ materially from those projected. Among those
risks, trends and uncertainties are the ability of our project with
Yima to produce earnings and pay dividends; our ability to develop
and expand business of the TSEC joint venture in the joint venture
territory; our ability to successfully partner our technology
business; our ability to develop our power business unit and
marketing arrangement with GE and our other business verticals,
including DRI steel, through our marketing arrangement with Midrex
Technologies, and renewables; our ability to successfully develop
the SES licensing business; the ability of the ZZ Joint Venture to
complete its planned restructuring, retire existing facilities and
equipment and build another SGT facility; the economic conditions
of countries where we are operating; events or circumstances which
result in an impairment of our assets; our ability to reduce
operating costs; our ability to make distributions and repatriate
earnings from our Chinese operations; our ability to successfully
commercialize our technology at a larger scale and higher
pressures; commodity prices, including in particular natural gas,
crude oil, methanol and power, the availability and terms of
financing; our ability to obtain the necessary approvals and
permits for future projects, our ability to raise additional
capital, if any, our ability to estimate the sufficiency of
existing capital resources; the sufficiency of internal controls
and procedures; and our results of operations in countries outside
of the U.S., where we are continuing to pursue and develop
projects. Although SES believes that in making such forward-looking
statements our expectations are based upon reasonable assumptions,
such statements may be influenced by factors that could cause
actual outcomes and results to be materially different from those
projected by us. SES cannot assure you that the assumptions upon
which these statements are based will prove to have been
correct.
Contact: MDC GroupInvestor
Relations:David CastanedaArsen
Mugurdumov414.351.9758IR@synthesisenergy.com
Media Relations:Susan
Roush805.624.7624PR@synthesisenergy.com
TABLES FOLLOW
SYNTHESIS ENERGY SYSTEMS, INC. |
|
Consolidated Statements of Operations |
|
(In thousands, except per share amounts) |
|
(Unaudited) |
|
|
|
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
|
June 30, |
|
June 30, |
|
|
|
|
2016 |
|
|
|
2015 |
|
|
|
2016 |
|
|
|
2015 |
|
|
Revenue: |
|
|
|
|
|
|
|
|
|
Product
sales and other -related parties |
|
$ |
1 |
|
|
$ |
4,420 |
|
|
$ |
4,753 |
|
|
$ |
15,145 |
|
|
Technology licensing and related services |
|
|
— |
|
|
|
— |
|
|
|
300 |
|
|
|
— |
|
|
Related
party consulting services |
|
|
472 |
|
|
|
206 |
|
|
|
938 |
|
|
|
372 |
|
|
|
|
|
473 |
|
|
|
4,626 |
|
|
|
5,991 |
|
|
|
15,517 |
|
|
Costs and
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Costs of
sales and plant operating expenses |
|
|
399 |
|
|
|
4,797 |
|
|
|
7,213 |
|
|
|
19,713 |
|
|
General
and administrative expenses |
|
|
1,934 |
|
|
|
2,380 |
|
|
|
8,514 |
|
|
|
8,974 |
|
|
Stock-based expense |
|
|
500 |
|
|
|
971 |
|
|
|
3,317 |
|
|
|
2,586 |
|
|
Depreciation and amortization |
|
|
214 |
|
|
|
229 |
|
|
|
869 |
|
|
|
1,603 |
|
|
Impairments |
|
|
8,613 |
|
|
|
— |
|
|
|
8,613 |
|
|
|
20,914 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total costs and
expenses |
|
|
11,660 |
|
|
|
8,377 |
|
|
|
28,526 |
|
|
|
53,790 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating loss |
|
|
(11,187 |
) |
|
|
(3,751 |
) |
|
|
(22,535 |
) |
|
|
(38,273 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-operating income
(expense): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity in
losses of joint venture |
|
|
(244 |
) |
|
|
— |
|
|
|
(244 |
) |
|
|
— |
|
|
Foreign
currency gains (losses), net |
|
|
(116 |
) |
|
|
32 |
|
|
|
(430 |
) |
|
|
39 |
|
|
Interest
income |
|
|
5 |
|
|
|
17 |
|
|
|
60 |
|
|
|
70 |
|
|
Interest
expense |
|
|
(141 |
) |
|
|
(158 |
) |
|
|
(439 |
) |
|
|
(372 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
|
(11,683 |
) |
|
|
(3,860 |
) |
|
|
(23,588 |
) |
|
|
(38,536 |
) |
|
Less: net loss
attributable to noncontrolling interests |
|
|
(94 |
) |
|
|
(20 |
) |
|
|
(516 |
) |
|
|
(654 |
) |
|
Net loss attributable
to SES stockholders |
|
$ |
(11,589 |
) |
|
$ |
(3,840 |
) |
|
$ |
(23,072 |
) |
|
$ |
(37,882 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
$ |
(0.13 |
) |
|
$ |
(0.05 |
) |
|
$ |
(0.27 |
) |
|
$ |
(0.50 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted |
|
|
86,964 |
|
|
|
83,136 |
|
|
|
86,776 |
|
|
|
75,699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SYNTHESIS ENERGY SYSTEMS, INC. |
Consolidated Balance Sheets |
(In thousands, except share and per share amounts) |
(Unaudited) |
|
|
June 30,2016 |
|
June 30,2015 |
|
|
|
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
13,819 |
|
|
$ |
22,217 |
|
Certificate of deposit-restricted |
|
2,262 |
|
|
|
1,635 |
|
Accounts
receivable-related party, net |
|
27 |
|
|
|
705 |
|
Prepaid
expenses and other currents assets |
|
1,157 |
|
|
|
489 |
|
Inventory |
|
122 |
|
|
|
587 |
|
Total
current assets |
|
17,387 |
|
|
|
25,633 |
|
|
|
|
|
|
|
|
|
Property,
plant and equipment, net |
|
9,002 |
|
|
|
10,342 |
|
Intangible assets, net |
|
898 |
|
|
|
939 |
|
Investment in joint ventures |
|
26,201 |
|
|
|
34,815 |
|
Other
long-term assets |
|
1,693 |
|
|
|
2,022 |
|
|
|
|
|
|
|
|
|
Total
assets |
$ |
55,181 |
|
|
$ |
73,751 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
Accrued
expenses and accounts payable |
$ |
3,353 |
|
|
$ |
4,348 |
|
Accrued
expenses and accounts payable -related party |
|
4,853 |
|
|
|
4,088 |
|
Line of
credit |
|
3,770 |
|
|
|
3,271 |
|
Short-term bank loan |
|
3,016 |
|
|
|
3,271 |
|
|
|
|
|
|
|
|
|
Total
current liabilities |
|
14,992 |
|
|
|
14,978 |
|
|
|
|
|
|
|
|
|
Commitment and
contingencies |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholder’s
Equity: |
|
|
|
|
|
|
|
Preferred
stock, $0.01 par value: 200,000 shares authorized-no shares issued
and outstanding |
|
— |
|
|
|
— |
|
Common
stock, $0.01 par value: 200,000 shares authorized: 86,984 and
85,476 shares issued and outstanding, respectively |
|
870 |
|
|
|
855 |
|
Additional paid-in capital |
|
261,225 |
|
|
|
256,643 |
|
Accumulated deficit |
|
(226,938 |
) |
|
|
(203,866 |
) |
Accumulated other comprehensive income |
|
6,586 |
|
|
|
6,179 |
|
Total
stockholders’ equity |
|
41,743 |
|
|
|
59,811 |
|
Noncontrolling interests in subsidiaries |
|
(1,554 |
) |
|
|
(1,038 |
) |
|
|
|
|
|
|
|
|
Total
stockholders’ equity attributable to SES |
|
40,189 |
|
|
|
58,773 |
|
|
|
|
|
|
|
|
|
Total
liabilities and stockholders’ equity |
$ |
55,181 |
|
|
$ |
73,751 |
|
|
|
|
|
|
|
|
|
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