GOLD DUST

The “Air Pollution Management” Newsletter

 

June 2019

No. 494

 

 

 

OVERVIEW

 

Factors Shaping the Air Pollution Control Market

 

The Market is Internationalizing Faster

Regional Markets and Opportunities in Each Industry are Changing

The Chinese Government is a Positive Force with New Rules

 

 

PLAYER ANALYSIS

 

Boqi Has Made the Transition to BOO

 

Concession Operation Business

Capturing the Market Opportunities brought by the Government’s “Ultra-low Emission” Policy

Expanding the Business Scope of the Group with Core Competitive Strengths

Continuing to Invest in Research and Development and Strengthening the Conversion of Policy Research Results and Technological Achievements

 

JET has Influential Executives who are Promoting Coal to Ammonium Sulfate Technology

 

IAC Out Performs the Field

 

Donaldson Announces Fiscal 2021 Financial Targets

 

Babcock and Wilcox Announces New Financing Agreement

 

BIOREM Reports Eight Percent Increase in Revenue

 

CECO Reports Improved First Quarter

 

 _________________________________________________________________

 

 

OVERVIEW

 

 

Factors Shaping the Air Pollution Control Market

 

There are significant changes underway in the air pollution control  industry. They are triggered by the following:

 

  • The market is internationalizing faster
  • Regional markets and opportunities in each industry are changing
  • The profit opportunities are in high performance rather than general performance products
  • The purchases will be based on lowest total cost of ownership
  • The Chinese government is a positive force with new rules
  • The large international purchasers will shape the market rather than countries or regions
  • Individual companies need to develop organic and acquisition growth strategies taking into account these factors.

 

The Market is Internationalizing Faster

 

Air pollution control system and product suppliers have to deal with the reality that Asia is where the game will be won or lost. 1n 1946 the U.S. generated most of the coal-fired power. It produced most of the steel, chemicals, and pharmaceuticals. Today China produces more than half the world’s coal fired power, cement and steel. Asian countries are rapidly building generic drug plants. Taiwan, South Korea, China and Japan dominate semiconductor wafer fabrication.

 

European suppliers of some components in air pollution control systems have long coped with the reality of small domestic markets. Metso, GE, Andritz and others have become  true international suppliers with substantial Asian market share. U.S. companies have not fared so well. GE, Babcock & Wilcox, and a number of the U.S based APC companies  have failed to become Asian leaders.

 

There are exceptions. Thermo Fisher has set up its world air pollution research center in China. Let’s consider the intellectual property implications. The company is affirming that they have loyal employees who will guard intellectual property regardless of where they are located. In fact, international business is based on trust.

 

In the coal-fired power air pollution control business MHPS based in Japan and Doosan based in South Korea have built relationships with partners around the world and have succeeded whereas Combustion Engineering, Foster Wheeler and Babcock & Wilcox who once dominated coal fired power are now part of other companies or have a reduced role. The Chinese APC system suppliers are playing a large role not only within China but in the rest of Asia.

 

The U.S. has one big advantage. It is producing low-cost oil and gas thanks to hydraulic fracturing. However, U.S. air pollution  suppliers will look over their shoulder to see Sinopec in pursuit. Sinopec is supplying complete fracking truck systems in the U.S. using Chinese made pumps and valves. Sinopec has just purchased some stock of Boqi which is one of the three largest air pollution companies in China.

 

Regional Markets and Opportunities In Each Industry are Changing

 

Hydraulic fracturing decisions are being made by companies such as ExxonMobil and Chevron.  These  two oil and gas companies are altering their investment plants to focus on oil from shale. They believe that the U.S. will be producing 25 million bbl/day of oil in eight years. This contrasts to IEA and OPEC who are forecasting U.S.  Production of only 14 bbl/day in 2027.

 

The Chain Effect of Expanded Oil and Gas Production on the Air Pollution Control Industry

 

 

If ExxonMobil and Chevron are right and the U.S is producing liquids at costs below $30/bbl in quantities approaching 25 million bbl/day the downstream impact on the slurry pump market will be significant. Companies such as Shell are investing huge sums of money to build feedstock processing plants taking advantage of the ethane in the gas being extracted in the Marcellus region. Others are investing in LNG liquefaction facilities. The refining industry is expanding  and so is the petrochemical industry who will be making more intermediates resulting in more end products such as polyethylene. These lower cost end products will boost construction of  plants which use them in their process equipment .  These same plants will benefit from lower energy costs.  So prospects are bright for the broader market

 

 

(U.S. annual revenue impact of cheaper U.S. oil and gas 2025 $Millions)

 

Subject

 

Fabric filters

300

Scrubbers

400

Precipitators

50

Thermal oxidizers

200

Scrubber wastewater treatment

80

CEMS and process gas

measurement

70

Nozzles, valves, pumps, hose, couplings,

packing,  chemicals

400

 

 

 

 

The Profit Opportunities are in High Performance rather than General Performance Products

 

For high performance products, International suppliers will justify greater R&D based on the expanded sales potential. This will lead to better products and higher margins. Local suppliers of general performance products will reduce the international opportunities in this segment. The higher performance product can be a solution rather than a superior individual product. A smart pump which reduces energy cost not by lower inherent efficiency but through data analytics which optimize its operation will be a higher performance product.

 

The Purchases will be based on Lowest Total Cost of Ownership

 

Higher performance products are purchased based on life cycle costs. Purchasers are increasingly relying on data analytics and remote monitoring to enable them to accurately determine the TCO.

 

As an example, let’s assume that  JET is successful in securing BO0 contracts from Illinois power plants. The price will be based on quantity of sulfur captured.  If a scrubber nozzle costs twice as much but lasts longer JET will be a receptive purchaser.  The total cost of ownership will be the primary consideration of any company with a BOO contract based on results.

 

The Chinese Government Is a Positive Force with New Rules

 

China is now a manufacturer of high-performance products. Longking is the world’s largest supplier of dry FGD systems. It is also a leading supplier of hybrid fabric filter/precipitators. China is now operating far more ultra-super critical coal fired boilers than the rest of the world combined. The air pollution systems are subject to the tightest standards worldwide.

 

In possibly the most important initiative China is encouraging ultra-low emissions by supporting third party operation of air pollution control systems. This is allowing system suppliers such as Boqi to transform their business model from build to build, maintain and even own. Contracts are let based on meeting emission limits for a fixed fee. This creates a big opportunity for international suppliers with better pumps, valves, nozzles, filter bags, or fans to participate in the Chinese market. The BOO operators become major CFT product purchasers.

 

The Large International Purchasers will shape the Market rather than Governments

 

End users such as BASF and Arcelor Mittal are making air pollution control decisions  for plants scattered throughout the world. Hamon received a large order from Arcelor Mittal in Belgium for fabric filters to be installed in multiple steel plants located in Europe and South America. More than half the air pollution control related  purchases will be made by just 7000 companies. Suez and Veolia are major worldwide APC product  purchasers because of their third part operation initiatives. NAES operates a number of coal-fired as well as gas turbine power plants for U.S. utilities. It is a subsidiary of ITOCHU of Japan. So, it is a significant air pollution control decision maker for the world power industry.  Now a whole new wave of Chinese companies will also be in this category. This includes not only purchases within China but all along the new Silk Road with the Chinese Belt and Road Initiative (BRI).

 

Individual Companies need to develop Organic and Acquisition Growth Strategies taking into account these Factors

 

Success is not going to be predicted from the extension of past financial results. Companies such as B&W, Eastman Kodak, IBM, U.S. Steel and many others have learned this the hard way. When one air pollution control  company is considering acquisitions a major question should be “how will this impact market share in Asia.” An air pollution  company will not be able to dominate regions representing 40 percent of the world while allowing competitors to dominate the other 60 percent.

 

Chinese companies have to be viewed in the longer-term perspective. Developing countries can be risky places to do business because of lack of intellectual property protection and other initiatives to insure a level playing field.  However, when a country develops and has intellectual property it wants protected as it pursues world markets, its attitude toward IP protection changes.  Recent studies show that for foreign companies doing business in China protection of IP has fallen from one of the top concerns to #5 on the list. There  are new IP protection laws. 100 percent of the suits filed by foreign companies under this new law have been settled in favor of the plaintiff.

 

Subsidizing of domestic suppliers  has risen to the top. But this is also a temporary situation and will shrink in importance as Chinese technology improves and world-wide supply accelerates. The fact that China is dedicated to enforcing air pollution emission limits equal to or better than any other country is important. Companies with innovative products and lowest total cost of ownership will have the opportunity to pursue  the Chinese market and international markets where China is also playing. 

 

Decisions on growth, through organic means or through acquisition, need to consider that the future world market will be integrated on a world-wide basis. The opportunity for a specific technology will be larger due to the world wide potential.  The purchasers will be looking for lower cost solutions and not lower cost products.  These solutions are likely to involve multiple products supplied by a number of companies. One route to providing solutions is to acquire companies with complimentary products.

 

Another option is to collaborate with other companies who have complimentary products and or complimentary geographic or industry strengths. These companies can share insights on technology and specific prospects and build bottoms up relationships with the decision making at the local  or product level.

 

PLAYER ANALYSIS

 

Boqi Has Made The Transition to BOO

 

China Boqi Environmental (Holding) Co., Ltd. for the year ended December 31, 2018. reported revenue of RMB 1,744,998,000 compared to RMB 1,329,078,000 a year ago. Profit for the year was RMB 392,819,000 or RMB 0.44 per basic share or RMB 0.27 per diluted share compared to loss of RMB 37,029,000 or RMB 0.08 per basic and diluted share a year ago.

 

Market-oriented operation and maintenance of desulfurization/denitrification projects is one of the major trends in recent years. Professional third-party treatment companies, observes Boqi, possess richer experience in operation, maintenance and more abundant technical expertise compared with power plants. The penetration rate of third-party treatment is expected to keep rising. Boqi quotes other sources which predict that by 2021, the penetration rate of cumulative installed capacity in operation of desulfurization and denitrification under the operation and maintenance model in China would reach 16.5 percent. Meanwhile, boosted by favorable government policies, the market has witnessed increasing recognition and effective promotion of the concession operation model in the industry of environmental protection for coal-fired power plants. The desulfurization and denitrification concession operations are expected to grow steadily with a penetration rate to reach 15.7 percent and 15.5 percent, respectively, by 2021.

 

The Group enters into project contracts with coal-fired power plants and other customers for the provision of services mainly based on three business models: the EPC, the O&M business and concession operations (which includes BOT and TOT). The Group uses different business models for different projects in its desulfurization, denitrification and other flue gas treatment businesses in an effort to comply with general market practices or to meet customer’s expectation or to take advantage of certain favorable government policies

 

As of December 31, 2017, the cumulative installed capacity contracted for newly built EPC projects (including desulfurization, denitrification and dust removal projects) of the Group reached 2,000 MW and the cumulative installed capacity contracted for upgrade EPC projects of the Group reached 3,235 MW. The total contract value of newly contracted EPC projects, including newly built and upgrade project, amounted to RMB712 million for the 2017 Financial Year. Among which, Boqi has made a breakthrough in EPC projects in non-electricity fields and have entered into contract for their first ultra-low emission project in the petrochemical industry, namely the Shanghai Petrochemical Boiler Ultra-low Emission Upgrade Project and the Group’s first flue gas desulfurization project in the electrolytic aluminum industry, namely the flue gas desulfurization system engineering of Aluminum Company I (鋁業一公司)and Aluminum Company VI (鋁業六公司) of Zouping Hongmao New Materials Technology Co., Ltd. (鄒平縣宏茂新材料科技有限公 ) of Shandong Province.

 

As at December 31, 2017, the Group had 14 EPC projects under construction. The following table sets forth the status of the EPC projects under construction as of December 31, 2017:

 

Environmental Protection Facility Engineering Projects under Construction

Type of Project

Newly built/upgraded

Date of Contract (Year/Month)

Aggregate Contract Value (RMB millions)

% of Construction Completed (1)

Shentou Electric Power Phase II Desulfurization System and WESP Project

Desulfurization and dust removal

Newly built

2014/12

354.41

8.74% (2)

Beihai Desulfurization Project

Desulfurization

Newly built

2015/11

149.57

0.00% (2)

Shouyang Green Island Project

Green Island

Newly built

2015/12

287.56

30.52% (2)

Binzhou Phase II Dust Removal Project

Dust removal

Upgraded

2016/4

29.68

99.05%

Shangqiu Desulfurization Project

Desulfurization

Newly built

2016/6

85.88

67.05%

Phase II Desulfurization EP Project in Serbia

Desulfurization

Newly built

2016/9

90.20

1.6%

Seawater Desulfurization System and Equipment Supply Project in Pakistan

Desulfurization

Newly built

2016/11

90.77

55.99%

Xinjiang New Energy #1-2 Unit Desulfurization Project

Desulfurization

Newly built

2016/12

71.80

2.04% (2)

Shanghai Petrochemical Boiler Ultra-low Emission Upgrade Project

Green Island

Upgraded

2017/3

224.63

75.57%

Gaoqiao Denitrification System Supplies Procurement Project

Denitrification

Upgraded

2017/4

16.99

56.15%

Nanyang Desulfurization Project

Desulfurization

Newly built

2017/3

167.77

4.81%

Sinopac Shanghai #3-4 Unit Desulfurization Project

Desulfurization

Upgraded

2017/9

91.12

0.00%

Flue-gas desulfurization system construction for Aluminum Company I of Zouping Hongmao New Material Technology Co., Ltd.

Desulfurization

Upgraded

2017/11

1,976

0.00%

Flue-gas desulfurization system construction for Aluminum Company VI of Zouping Hongzheng New Material Technology Co.,Ltd.

Desulfurization

Upgraded

2017/11

2.191

o.00%

 

Notes:

 

(1)     Represents the percentage of completion as measured by the preparation that construction costs incurred for work performed to date relative to the estimated total construction costs.

 

(2)     The construction of the project is temporarily on hold, subject to further adjustments of construction plans, pursuant to the instruction by the relevant government authorities.

 

O&M

 

The O&M services mainly include operation service and regular maintenance service for desulfurization and denitrification facilities owned by the customers. The Group acts as a contractor providing desulfurization, denitrification and dust removal operation services and the work scope involves the full operation, repair, upgrade and maintenance of flue gas treatment system/facilities owned by power plants. Under the O&M projects, the customers are either charged a service fee for the O&M services calculated based on the total amount of on-grid electricity generated during the service period, or a price pre-determined at the commencement of the project based on the scope of work performed. Revenues from the O&M business can generate recurring revenue stream and stable cash flow for the Group.

 

During the 2017 Financial Year, the Group acted as a contractor under the O&M projects providing desulfurization, denitrification and dust removal operating services, and the scope of business included full-process operation, upgrading and maintenance of flue gas treatment system/facilities of coal-fired power plants. Regular maintenance services included provision of technical support, regular maintenance, facilities testing, maintenance services and spare parts services for flue gas facilities. The Group renewed 89 percent of the O&M contracts that expired in the 2017 Financial Year. As of 31 December 2017, the Group had 14 O&M projects under operation with an aggregate installed capacity of 19,680 MW. The following table sets forth the installed capacity and status of the O&M projects of the Group under operation as of December 31, 2017:

 

Project Name

Type of Project

Starting date of service (Year/Month)

Expiring date of service contract (1) (Year/Month)

Installed capacity

Anshun Flue Gas Desulfurization O&M Project

Desulfurization

2007/11

2018/12

2*300 MW

Yangcheng #1-6 Unit Flue Gas Desulfurization O&M Project

Desulfurization

2008/7

2018/8

6*350 MW

Yangcheng #7-8 Units Flue Gas Desulfurization O&M Project

Desulfurization

2008/6

2018/8

2*600 MW

Yangcheng #7-8 Unit Slag Removal O&M Project

Slag removal

2009/6

2018/8

2*600 MW

Kuche Flue Gas Desulfurization O&M Project

Desulfurization

2012/12

2020/12

2*330 MW

Bulian Flue Gas Desulfurization O&M Project

Desulfurization

2013/4

2018/3

2*660 MW

Qinzhou Desulfurization O&M Project

Desulfurization

2015/7

2018/6

2*630 MW+

Guotal Flue Gas Desulfurization, Denitrification and Slag Removal O&M Project

Denitrification, desulfurization and slag removal

2015/11

2018/6

2*350 MW

Jingjiang Flue Gas Desulfurization and Dust Removal O&M Project

Desulfurization and dust removal

2016/3

2018/3

2*660 MW

Tianjin SDIC Jinneng Power Plant Desulfurization, WESP and Water Intake System Operation and Cleaning Project

Desulfurization

2016/8

2020/12

4*1000 MW+

Serbian Flue Gas Desulfurization O&M Project

Desulfurization

2017/5

2018/5

2*350 MW

Yangxi Fuel Gas Desulfurization and Denitrification O&M Project

Desulfurization and denitrification

2017/1

2025/12

2*350 MW+

Chengde Desulfurization O&M Project

Desulfurization

2017/5

2018/5

2*350 MW

Anshun #1-2 Units Maintenance and Repair Service Project

Desulfurization

2017/9

2018/8

2*300 MW

 

(1)     The Group may further renew the service contract with customers upon expiration of the service contract based on its regulation with respective customers.

 

Concession Operation Business

 

Under the concession operation business model, the Group is responsible for the financing, investment, construction and upgrade of a project according to the concession contract with the customer. In general, the concession projects are funded by the Group’s own capital or borrowings from local banks. After the completion of constructions, the Group also owns the project assets and operates the project for a period pre-defined in the concession agreement, which is typically 15 to 20 years, and the Group is entitled to collect revenues generated from the project during the term of the contract. Revenues generated by the concession operation business during the operation phase of the relevant projects are calculated based on the on-grid power generation of the customer using the unit price specified in the concession contract during the operation phase, which is generally settled with the customers on a monthly basis. The Group also generates revenues from the sales of by-products during the operation of the environmental protection facilities. The fees the Group receives for the provision of concession services under the concession contracts typically include a service fee based on a guaranteed minimum flue gas treatment volume and such fees are contingent subject to adjustment of certain variable cost the Group incurred. Such tariff subsidy for the power consumption pre-determined at the time the concession agreement has been entered into with the client.

 

In 2017, the Group continued to carry out its concession operation business, including desulfurization, denitrification and Green Island (which is an integrated flue gas treatment system synergic treatment of flue gas pollutants produced by the boilers of coal-fired power plants, including denitrification, desulfurization, dust removal, induced-drafted fan system, reheating system.). As at December 31, 2017, the Group cumulatively undertook six concession operation projects with one under construction and five in operation. Among which, the acquisition of Xinjiang Shenhuo BOT Project has further optimized the business structure of the Group and enhanced the profitability of the company, which demonstrated the significance of the Group’s development in regional markets such as Xinjiang.

 

Project name

Installed capacity

Type of project

Newly built/upgraded

Total investment RMB millions

Date of signing contract (Year/Month)

Ending date of concession period (Year/Month)

Jiangxi Jinggangshan BOT Project

2*300 MW+ 2*660 MW

Desulfurization

Newly built

223.74

2008/1 (for Phase I) 2008/8 (for Phase II)

2030/7 (for Phase I) 2030/12 (for Phase II)

Shanxi Hejin BOT Project

2*350 MW

Denitrification

Newly built

89.93

2012/6

2033/9 (for Unit #1) 2033/5 (for Unit #2)

Shanxi Puzhou Phase I BOT Project

2*300 MW

Denitrification

Newly built

84.40

2012/6

2034/1 (for Unit #1) 2033/5 (for Unit #2)

Shanxi Puzhou Phase II BOT Project

2*350 MW

Desulfurization

Newly built

111.88

2014/5

End of 2037

Shanxi Yuguang BOT Project

2*300 MW

Green Island

Upgraded

82.36

2015/5

2036/2 (for Unit #1) 2935/5 (for Unit #2)

Xinjang Shenhuo BOT Project (1)

4*350 MW

Gren Island

Upgraded

490.07

2017/6

End of 2032

 

(1) For Xinjiang Shenhuo BOT Project, the Group acquired certain flue gas desulfurization, denitrification and dust removal facilities, which in turn upgrade at the Group’s own expenses. The Group expects to recover its investments in the acquisition and upgrading of the relevant facilities through the service fees it charges during the subsequent concession operation period.

 

 

 

Capturing the Market Opportunities Brought by the Government’s “Ultra-low Emission” Policy 

 

The Group seeks to capture the market opportunities arising from China’s national “ultra-low emission” policy. Leveraging the extensive customer base and abundant business experience of the Group, the Group seeks to further cover the whole industrial chain of flue gas treatment. The Group would closely focus on the development of the third-party treatment market, endeavor to tap into the market potential of the desulfurization and denitrification concession operation and O&M business and improve the proportion of third-party treatment business within our major businesses, so as to achieve the sustainable development of their business. The PRC government has promulgated a series of environmental treatment polities, which brought significant impetus to the development of the relevant industries. In light of the favorable national policies, looking forward, the Group would put more focus on the expansion of flue gas third party treatment markets, while it would strengthen the market overall planning, modify marketing strategies, increase their resource allocations, building up their professional image and brand, attach great importance to the maintenance of major customers, continuously offer training to marketing personnel in respect of technology knowledge, market analysis and sales techniques and improve the quality of tenders won.

 

Expanding the Business Scope of the Group with Core Competitive Strengths

 

The Group will continue to expand its business scope with competitive strengths. Looking to the future, the Group plans to extend its flue gas treatment industrial chain to other aspects of heavy metal treatment, VOC treatment and CO2 capturing and collection in order to provide customers with integrated energy-saving and environmental protection solutions. Meanwhile, after Listing, leveraging strong capital strength, the Group entered the fields of municipal and industrial sewage treatment business and detoxification treatment of solid waste through various approaches, such as technology cooperation, investment, mergers and acquisitions, so as to build an integrated environmental industry group. In addition, supported with the resources of the shareholders in the industry, the Group would collaborate with research institutes on joint technology licensing so as to expand their “ultra-low emission” upgrade business in the fields of petroleum and petrochemicals, metallurgical, steel and coal chemicals. Leveraging the Implementation of the “One Belt One Road” National Strategy to Explore the Overseas Markets By leveraging the “One Belt One Road” strategy and the national “Green Finance” policy, the Group will explore overseas markets in countries alongside the “One Belt One Road”, such as Turkey, Serbia, India, Russia, Indonesia, Vietnam and Pakistan. The Group would continue to reinforce cooperation with overseas energy engineering companies and large-scale technology companies. The Group plans to explore overseas market based on current EPC and O&M model. In January 2018, the Group completed the structural adjustment of overseas business expansion. By establishing an international business department, the Group would strengthen our overseas team building in terms of marketing, designing, purchasing and project executions, and accelerate its overseas talent base through talent introduction and internal cultivation, so as to satisfy their needs for overseas market development and enlarge their space for development in overseas market.

 

Continuing to Invest in Research and Development and Strengthening the Conversion of Policy Research Results and Technological Achievements

 

The Group will continue to invest in technology research and development and technology innovation by promoting the infrastructure of technology research and improving postdoctoral research station and technology center, to strengthen the cultivation and utilization of skilled talents, so as to make full use of the skills of the talents. By conducting multilevel, multi-channel cooperation and communication with external institutions in technology, the Group will closely monitor the latest development of the industry, establish the platform to acquire and monitor technology in different phases and different depth. The Group seeks to establish a pool of various technologies to provide technical support for development. By further improving the postdoctoral research station, the experimental research base and technology the Group has established, the Group will strengthen the infrastructure of technology research, improve its innovation capabilities and fully utilize the Group’s strengths in technology as a high-tech enterprise. The Group will actively participate in the establishment of the national and industrial standards to strengthen its leading position in technology.

 

JET has Influential Executives who are Promoting Coal to Ammonium Sulfate Technology

 

Jiangnan Environment Technology Inc. (JET) has sold a number of systems in China to use high sulfur coals and make ammonium sulfate. Last week we devoted considerable space to the conclusions of an Illinois task force which recommended pursuit of this technology. We did not report the impressive group of individuals supporting the initiative.

 

JET has a U.S. office in Ridgefield Park, NJ. This year, the company hired several prominent American executives and diplomats, including Neil Bush, the fourth child of George H.W. Bush and brother to former President George W. Bush. Bush's hiring was announced the same day as JET executives met with Dept. of Energy officials.

 

Other members of JET's U.S. team include David Phillips, a former KeySpan Corp. CEO and chairman of the Bilateral U.S.-Arab Chamber of Commerce, and Richard Westerdale II, a former State Dept. adviser.

 

While at the State Dept., Westerdale spoke at a JET technology symposium at the St. Regis hotel in Washington, providing an overview of the Trump administration's energy policy. Less than a month later, he would leave the government to take a job with the company.

 

Other presenters at the conference included JET's founder and chairman and the chief operating officer of its U.S. subsidiary, a former Indianapolis Power & Light Co. executive.

 

Dynegy Inc. sent a team to China in mid-2017 to evaluate whether JET's technology made sense for the company's Zimmer power station in Ohio, according to the former managing director of the plant, who presented at the fall technology symposium.

 

Plus, JET did its own case study using the Kincaid coal-fired power plant in Illinois, concluding that the plant could save $44 million annually with its SO2-removal technology and a switch to Illinois coal.

 

McIlvaine has been reporting on ammonia scrubbing since 1974. It did one brief study, which showed that higher chlorine Illinois coals could be burned without corrosion. This could make cheaper high chlorine coals the most attractive fuel. Peabody Coal has expressed concern that mining low chlorine coals is more expensive than importing PRB.

 

McIlvaine has also recommended that the system include rare earths recovery. The cost to produce 30 percent hydrochloric acid, rare earths feedstock, ammonium sulfate, and high quality flyash is little more than a typical limestone scrubbing system. This insight is unique and the result of direct accidental experience at Philadelphia Electric Eddystone and Cromby.

 

IAC Out Performs the Field

 

In the last few years IAC has outperformed the industry in terms of revenue increases. Its revenues have grown by more than 200 percent. A large portion of the increase has been the delivery of a number of complete frac sand manufacturing plants. These plants incorporate dryers and fabric filters. Orders for complete plants are often larger than $20 million. Because IAC is the leading provider of frac sand plants in the Texas region it is able to leverage this position to effectively pursue the aftermarket. It is also offering consulting services. One service involves a program to deal with the new silica dust limitations.

 

Donaldson Announces Fiscal 2021 Financial Targets

 

An in-depth review of Donaldson’s strategic priorities, including business segment performance, leadership through innovation, operational excellence and its capital allocation framework was provided. Additionally, the company is introducing long-range financial targets, including a framework for profitable growth through fiscal 2021.

 

“We continue to make excellent progress on our strategic priorities related to expanding our industry-leading technologies and solutions, extending our market access and executing strategic acquisitions,” said Tod Carpenter, Chairman, President and Chief Executive Officer. “We expect that benefits from strong execution of these priorities, supported by our technological innovations, deep customer relationships and global presence, will allow us to continue delivering profitable growth well into the future.”

 

Donaldson expects to achieve the following financial targets by the end of fiscal 2021:

 

  • Total fiscal 2021 sales between $3.0 billion and $3.3 billion, reflecting an average annual growth rate of 3 to 7 percent in fiscal years 2019 through 2021.
  • Operating margin between 15.0 and 15.8 percent, compared with 13.8 [1] percent in 2018.

·         The company also expects to maintain its disciplined approach to capital deployment, including investments in strategic growth priorities and returning cash to shareholders through dividends and share repurchase.

 

Babcock and Wilcox Announces New Financing Agreement

 

Babcock & Wilcox Enterprises, Inc. announced today it has taken strategic action to significantly strengthen its financial position and chart a path to profitability in 2019. The company has amended its credit agreement with its current lenders, whereby B. Riley FBR, Inc. has joined the facility and has arranged an additional $150 million in secured financing via a last out term loan and has agreed to provide an uncommitted incremental credit facility of up to another $15 million. This follows an additional $10.0 million in commitments from affiliates of B. Riley FBR under a last out term loan announced on March 19, 2019. 

 

Proceeds from the new financing have allowed B&W to settle and significantly limit future liabilities on its two remaining Vølund European loss projects and terminate its obligations on an additional European waste-to-energy EPC contract which has not yet reached the project phase. The new financing also provides the additional liquidity the company needs to release the value of its core business and strong market position to pivot towards profitability and positive cash flows.  

 

“With this financing, combined with the reduction of liabilities and risks from the Vølund loss contracts being vastly reduced through these settlements and recent plant turnovers, we believe the company is on a path to profitability in 2019,” said Kenneth Young, Chief Executive Officer, B&W. “We now can focus on unlocking the real value and strong position of our power business, along with value from the core technologies of Vølund and SPIG and improving the profitability of our company.”

 

BIOREM Reports Eight Percent Increase in Revenue

 

BIOREM Inc. announced its results for the three and twelve-month periods ended December 31, 2018.

 

For the twelve months ended December 31, 2018 revenue totaled $24.3 million compared to $22.6 million for the same twelve months in 2017. Net earnings for the year were $4.7 million compared to net earnings of $1.5 million in 2017. Earnings in 2018 were positively impacted by a $3.0 million recognition of previously unrecognized deferred tax assets. Earnings per share for the year were $0.12 basic and $0.12 fully diluted against $0.04 basic and $0.04 fully diluted per share reported in 2017.

 

Revenues of $24.3 million for the year represented an 8 percent increase over revenues reported the previous year. Gross profit was $6,378,000 for the year, a 2 percent increase from gross profit of $6,270,000 million recorded for the year-ended December 31, 2017.

 

Total operating expenses for the year were $4,662,000 compared to $4,742,000 for the year ended December 31, 2017.

 

On December 31, 2018 the company had cash on hand of $4.0 million and working capital of $9.7 million.  

 

The company has no long-term debt.

 

Total order bookings for the year were $25.5 million and the company's order backlog stood at $21.8 million on December 31, 2018.

 

CECO Reports Improved First Quarter

 

CECO Environmental revenue in the 1st quarter of 2019 was $86.0 million, up 16.0 percent from $74.1 million in the prior-year period. Excluding revenue of $6.5 million attributable to the businesses divested in 2018, organic revenues increased 27.2 percent.

 

Operating Income was $4.9 million for the 1st quarter of 2019, compared with $12.2 million in the prior-year period. Non-GAAP operating income was $7.2 million for the 1st quarter of 2019 (8.4 percent margin), compared with $4.0 million in the prior-year period (5.4 percent margin).

 

Net income was $1.9 million for the 1st quarter of 2019, compared with $5.8 million in the prior-year period. Net income on a non-GAAP basis was $4.1 million for the 1st quarter of 2019, compared with $1.7 million in the prior-year period.

 

Total backlog at March 31, 2019 was $193.8 million as compared with $182.1 million as of both December 31, 2018 and March 31, 2018,  respectively. In the 1st quarter of 2018, $8.8 million of backlog was attributable to the divested businesses. Adjusted for divestitures, backlog increased $20.5 million from 1st quarter 2018 to first quarter 2019.

 

Bookings were $97.3 million for the f1st quarter of 2019, compared with $95.0 million in the prior-year period and $74.5 million in the 4th quarter of 2018. Excluding bookings of $4.7 million attributable to the businesses divested in 2018, 2019 organic bookings increased $7.0 million, or 7.7 percent.

 

Revenue in the 4th quarter of 2018 was $93.9 million, up 27.8 percent from $73.5 million in the prior-year period, and up 6.3 percent from $88.3 million in the 3rd quarter of 2018. Revenue in the 4th quarter of 2017 included $8.5 million attributable to divested businesses, Keystone, Strobic and Zhongli.

 

Operating Income was $5.7 million for the 4th quarter of 2018 (6.1 percent margin), compared with an $(8.2) million loss in the prior-year period. Non-GAAP operating income was $8.4 million for the fourth quarter of 2018 (9.0  percent margin), compared with $3.5 million in the prior-year period (4.8  percent margin).

 

Net income was $0.9 million for the 4th quarter of 2018, compared with a $(11.6) million net loss in the prior-year period. Net income on a non-GAAP basis was $3.0 million for the 4th quarter of 2018, compared with a $(1.7) million net loss in the prior-year period.

 

Revenue was $337.3 million for the twelve months in 2018, down 2.2 percent from $345.1 million in the prior-year period. Revenue in 2017 included $34.6 million attributable to our divested businesses, Keystone, Strobic, and Zhongli compared with $9.3 million for the year of 2018.

 

Operating income was $10.0 million in 2018 (3.0  percent margin), compared with $8.0 million in the prior-year period (2.3 percent margin). Operating income on a non-GAAP basis was $24.1 million in 2018 (7.1 percent margin), compared with $28.3 million in the prior-year period (8.2  percent margin).

 

Net loss was $(7.1) million for 2018, compared with a net loss of $(3.0) million in the prior-year period. Net income on a non-GAAP basis was $10.2 million for the year of 2018, compared with $9.5 million in the prior-year period.

 

CECO's Chief Executive Officer Dennis Sadlowski commented, "I am very pleased with our financial results for the 4th quarter and want to thank the entire CECO team for delivering big improvements in our performance. We achieved 44  percent year-over-year organic revenue growth, over 100  percent growth in EBITDA, and incredible free cash flow generation of $17 million. We view cash earnings as integral to generating top-tier returns for our shareholders and believe this to be a fundamental strength of CECO's asset light business model. 

 

Mr. Sadlowski added, "In 2018, we executed on our operating strategy, delivered growth with a 20 percent year-over-year increase in bookings and are well underway to transforming how we do business with a more customer focused and solutions-based mindset. Our 4th quarter bookings were below our expectations as capital markets volatility and U.S. political tensions created delays in customer decisions. We expect this to be more of a timing issue as our overall sales pipeline remains very strong and robust. We are headed into a new year with an impressive backlog of $182 million, which is up $32 million organically from the prior year. Our end markets are large and generally healthy going into 2019 which provide us confidence in our aggressive financial targets for 2021."

 

CECO sold its Zhongli business which serves the China coal-fired power generation market to Jiangsu Zhongli Environmental Technology company. This reflects an apparent strategy to focus on the domestic opportunity in oil and gas rather than the coal fired boiler business which is mostly international. The CECO 2019 projection in power generation is for no revenue growth whereas mid-stream oil and gas and industrial solutions predictions are for positive growth.

 


The term “Gold Dust” refers to profits from dust collection and was coined in the 1970s when the primary air pollution market was dust collection.  This newsletter is designed for management of air pollution control companies around the world.  This newsletter has been published each month for 40 years.  The issues for the last twenty years are searchable  on-line.