TSX - NRG OTCQX - ANRGF
CALGARY, March 12 /CNW/ - (TSX - NRG; OTCQX - ANRGF) - Alter NRG Corp., ("Alter NRG" "the "Corporation", "us or "we") is pleased to report on its corporate activities and financial results for the year ended December 31, 2009.
The following are the annual highlights for the 2009 fiscal year and the period up to March 10, 2010:
2009 HIGHLIGHTS
Alter NRG has expanded its activity base in North America, China, the United Kingdom and elsewhere in the European Union during 2009 (up to March 10, 2010) with further strategic partnerships and numerous plasma gasification facilities being planned in each region. The Westinghouse plasma technology has been independently ranked as the leading plasma gasification solution providing renewable and sustainable energy solutions. The Westinghouse Plasma Technology is being utilized in a total of 44 proposed projects being advanced worldwide, of which 18 projects are in the engineering stage.
Technology Sales
- In North America the overall demand for sustainable energy solutions continues to grow with programs, stimulus and legislation that promote both waste and biomass solutions. This includes multiple projects being advanced by one of the largest independent power producers in the United States. In North America, a total of 11 projects are in the engineering stage which represent potential sales of approximately $300 million. - Announced the advancement into the engineering phase of the first commercial scale biomass to ethanol facility being developed by Coskata Inc. ("Coskata"). This commercial scale facility represents an approximate $50 million sale of gasification equipment. Coskata intends to use the Westinghouse plasma system to provide syngas that is used by their proprietary process to create ethanol. - Alter NRG is advancing strategic discussions with 6 different companies in China that are expected to result in construction of numerous facilities with construction dates as early as 2010. The Chinese government has aggressive plans regarding waste management and energy recovery from household waste, biomass, sewage sludge and hazardous and industrial waste. There is currently one project that is seeking government approval. This project has moved through the feasibility phase and will be submitted for technical review and consideration of the government later this year. Once approved this project will move into full project phase. - In July, announced an alliance agreement with UHDE Engineering Consulting (Shanghai) Co. Ltd. to provide engineering and marketing services and to jointly pursue business opportunities in the Asia Pacific Region. This provides local presence by a leading engineering firm in the Asian market as well as fabrication and procurement expertise to lower the cost structure of the gasification systems. - Began active marketing in the United Kingdom and elsewhere in the European Union in early 2009 and the market had quick acceptance of the Westinghouse plasma technology. In this jurisdiction there are stringent waste reduction and renewable energy mandates and plasma gasification qualifies for significant credit and incentives that currently exist. - Announced a joint development agreement with Air Products and Chemicals Inc. ("Air Products") for development of renewable energy projects in the UK, continental Europe and the US. Air Products, which will be the owner/operator of projects, has advanced two projects into the engineering phase of project development which would represent $30 and $60 million sales to Alter NRG. Air Products is a Fortune 500 company and owns and operates industrial facilities in 40 countries. Customer Projects - Commissioned the biomass to ethanol semi-commercial facility at the Westinghouse plasma facility in Pennsylvania. The Westinghouse plasma centre, which has been converted from a pilot plant to a commercial demonstration facility that now can operate on a more continuous basis and produces clean syngas. The clean syngas is then provided to Coskata's semiscale ethanol facility located on the same site to produce ethanol through their proprietary cellulosic process. This technology combination is expected to provide ethanol at a much lower operating cost than conventional ethanol production and uses non-food feedstocks like straw, woodchips, or corn husks. Coskata was named one of the 50 most innovative companies in the world by MIT Tech Review. - Commissioned the worlds largest hazardous waste plasma gasification facility in Pune, India. This facility is operated by SMS Infrastructures Ltd. central India's largest engineering company and has met all environmental standards. A second facility is currently under construction to be commissioned in 2010. - Advanced further engineering and project development on the Somerset Massachusetts coal retrofit project. This project has regulatory approval and represents a plasma gasification equipment order of approximately $90 million based on current expected scope. This project is currently undergoing an environmental appeal but is expected to begin construction as early as Q3 of 2010. Alter NRG Project Development - Announced selection as the technology provider and initial developer of an energy recovery facility that will process 75 tonnes per day of household waste and convert it into approximately two megawatts of electricity in the County of Dufferin, Ontario. - Selected KBR engineering to advance project work on Alter NRG's 468 million tonnes of coal reserves in Fox Creek, Alberta which has resulted in additional options for the coal reserve for a mine mouth gasification project. Alter NRG is currently seeking strategic alternatives for partnering, royalty agreements on the coal or outright sales of the asset. Corporate - On October 2, 2009, Alter NRG expanded its renewable energy platform through the acquisition of Clean Energy Developments Corp. ("CleanEnergy"), a private company providing turnkey geoexchange solutions. Alter NRG, through CleanEnergy, intends to offer a turnkey geoexchange solution to the market which includes engineering, equipment and installation. Geoexchange systems have lower energy consumption compared to conventional equipment, and adoption of this technology has experienced rapid market growth worldwide in recent years. Alter NRG intends to provide market leadership in the highly fragmented geoexchange market in Canada to increase market share significantly.
For more information on the Corporation's activities please visit www.alternrg.ca or www.sedar.com to view Alter NRG's 2009 Annual Report.
PRESIDENT'S MESSAGE
2009 was a year of challenges and change, and looking back we can confidently say that we have worked diligently to ensure high performance for our customers and stakeholders in the most efficient way. While much happened throughout the year, the underlying fundamentals remain the same - the world needs energy. Renewable, sustainable energy makes sense; but moreover it is responsible - environmentally responsible, socially responsible and economically responsible. Energy is central to sustainable development and a commitment to renewable and sustainable energy will play an increasingly important role in energy supply for both developed and developing countries in the future.
Our leading and commercially proven plasma gasification technology, originally developed by Westinghouse, which produces valuable and clean syngas from a multitude of cheap and abundant feedstocks, has continued to receive third-party validation. Despite the large, complex sales cycles that are inherent in this segment, along with the challenges of navigating regulatory barriers, we continued to make progress throughout 2009.
During 2009 we repositioned and re-focused our efforts. This included focusing on large, credible developers that have a track record of execution. Our list of credible and well established partners is long and continues to grow. As well, we expanded our marketing efforts into SouthEast Asia, in particular China, and also the European Union. With aggressive renewable energy mandates and meaningful waste issues in both jurisdictions, the Westinghouse Plasma Solution has gathered much attention and numerous projects are advancing using our technology solution. In 2010, we expect further project announcements and strategic partnerships stemming from the expansion efforts in 2009.
We have maintained a strong focus on strategic partnerships all utilizing the Westinghouse Plasma Gasification Technology. This includes the construction of a commercial demonstration facility developed by Coskata Inc. to turn biomass into ethanol. We successfully commissioned the world's largest hazardous waste to energy facility in Pune, India. This facility, developed by central India's largest engineering company, SMS Infrastructures, is operational and has received government environmental approvals. We have continued active development with NRG Energy of the Somerset Massachusetts 110 megawatt coal retrofit project using Westinghouse Plasma Gasification technology and through a Joint Development Agreement with Air Products we have continued to pursue renewable energy opportunities in North America and Europe.
This is substantial progress in a complex, tightly regulated segment. This is providing a strong foundation for future growth as each of our partners has aggressive plans to develop multiple facilities. Combine this with the hundreds of other facilities being advanced using the Westinghouse technology around the world and this creates significant growth potential.
In October we held true to our commitment of pursuing alternative energy solutions to meet the growing demand for environmentally responsible energy by expanding our alternative energy platform through the acquisition of Canadian geoexchange company, CleanEnergy(TM). Geoexchange is a technology that will make a material impact on the way in which energy is delivered to buildings in Canada. Through a turnkey geoexchange solution, which includes engineering, equipment and installation, we are uniquely positioned to be a market leader in this space.
Private and public-sector involvement in overcoming the obstacles to wider dissemination of renewable energy sources has intensified in recent years and we feel confident that the establishment of dedicated institutions and governmental incentives for renewable energy and energy efficiency finance will open new avenues. While 2010 will be a critical year for Alter NRG, we believe that by staying true to our strategic priorities, preserving financial strength and focusing on maintaining a high quality team, it will also be a breakout year.
Our progress and commitment to responsible energy resonates in everything we do and in everything we are planning. It is rewarding personally to work in marketplaces that promise to have meaningful impact on society and we understand that, be it in business or the environment, decisions made today will leave a permanent mark on tomorrow. We can't claim to have all the answers and there is no silver bullet for the world's energy problems but we can lead the way in showing others the environmental, social and economic benefits of embracing responsible energy and making it a common part of life.
SELECTED FINANCIAL RESULTS ($) December 31, December 31, As at 2009 2008 ------------------------------------------------------------------------- Total assets $ 106,789,330 $ 122,483,956 Total liabilities 21,870,839 26,862,685 Total equity 84,918,491 95,621,271 ------------------------------------------------------------------------- December 31, December 31, For the years ended 2009 2008 ------------------------------------------------------------------------- Revenue, interest and other income $ 3,644,249 $ 4,847,743 Loss (19,850,475) (12,924,286) Loss per share - basic and diluted (0.34) (0.24) -------------------------------------------------------------------------
This press release should be read in conjunction with the Corporation's consolidated financial statements for the year ended December 31, 2009, the notes thereto and the associated Management's Discussion and Analysis thereon. For the complete financial statements please visit www.alternrg.ca or www.sedar.com to view Alter NRG's 2009 Annual Report.
MANAGEMENT'S DISCUSSION AND ANALYSIS EXCERPTS
CORPORATE OVERVIEW
Alter NRG provides and pursues alternative energy solutions through plasma gasification and geoexchange to meet the growing demand for clean energy in world markets. The Corporation's vision is to commercialize growth technologies through developing environmentally sustainable and economically viable alternative energy projects. Alter NRG has two main operating divisions both of which are wholly owned subsidiaries:
- Westinghouse Plasma Corporation ("WPC") - Plasma gasification can take renewable feedstocks such as household, commercial or industrial waste, biomass, or combinations of feedstocks and turn them into syngas. The syngas can be used as a replacement to natural gas as fuel or converted into ethanol, diesel fuel or electricity. This provides clean energy that has a lower carbon footprint and lower emissions of other harmful pollutants and provides affordable domestic energy sources. - CleanEnergy Developments Corp. ("CleanEnergy") - CleanEnergy provides geoexchange solutions for buildings (residential homes, apartments, schools, etc) that use energy from the earth for heating and cooling. This reduces the use of fossil fuels by 60% to 80% in most applications which means a smaller carbon footprint and reduced energy costs.
Alter NRG creates revenues by selling plasma gasification technology and geoexchange services and through participation in projects that fit its strategic growth plan.
Alter NRG's mission is to maximize returns for its investors by participating in financially accretive projects in the emerging alternative energy market, through technology sales and project interests. Alter NRG endeavors to be a leader in innovative gasification related technologies applied to produce profitable and clean alternative energy solutions. The Corporation invests in the skills of its people who will provide the creativity, determination and passion to generate growth in stakeholder value. The Corporation strives to be transparent and fair in its activities and works to form positive relationships with the communities where it operates and with all of its stakeholders.
Initially, the Corporation is focusing its efforts on technology sales and developing a strategic portfolio of customers with the capability to advance projects from internally generated cash flow. The focus will be to increase near term cash inflows by generating operational revenues and reducing capital expenditures.
Plasma Gasification Solutions -----------------------------
The Corporation owns Westinghouse Plasma Corporation (WPC). WPC has proprietary technology that the Corporation believes is an industry leading technology with the following broad advantages:
- Commercially proven - the technology has been commercially applied, for six years, in facilities in Japan for gasification of waste. The plasma torches, which are core to the overall technology, have been commercially used for over 20 years. - Environmentally responsible - the technology has the capability to reduce emissions significantly as compared to other conventional fossil fuel technologies. - Flexible technology - the technology can handle a wide range of feedstocks, including many types of waste (municipal, commercial, industrial, and hazardous), biomass, coal and petroleum coke. The flexibility to accept a variety of feedstocks gives the technology a range of uses and markets to which it can be applied. - Scalable technology - the technology is ideal for projects with total capital between $50 million and $500 million. The technology is larger scale than most other plasma gasification technologies, and has a longer commercial operating history.
Alter NRG is focusing on technology sales to parties that bring the capital, skill and expertise to develop energy projects. A core part of the corporate strategy is the use of strategic alliances and partnerships to commercialize the technology into different geographic regions and markets.
Geoexchange Solutions ---------------------
The Corporation owns CleanEnergy, a leading company providing geoexchange services in the Canadian commercial, industrial and residential markets. "Geothermal" is the commonly used term for sourcing heat from the ground. "Geoexchange" is a geothermal application that uses heat from the sun stored in the earth to provide heating, cooling and hot water for buildings of all types. Geoexchange systems have lower energy consumption compared to conventional equipment, and adoption of this technology has experienced rapid market growth worldwide in recent years. Alter NRG, through CleanEnergy, intends to offer a turnkey geoexchange solution to the market which includes engineering, equipment installation, and financing. Geoexchange has the following benefits:
- For every unit of electricity used in the process, 3 to 5 units of 'free' energy are recovered from the earth - For an average home, installing a Geoexchange system has an environmental benefit equivalent to planting 750 trees (one acre of trees) or removing 2 cars from the road permanently - Has payback for a consumer generally in 5 - 6 years for larger installations - In addition to economic & environmental drivers - Reliable - equipment with a greater than 20 year life - Quiet - no outdoor units - Safe - no combustion, no CO fumes - Comfort - improves internal air quality
The Corporation acquired CleanEnergy on October 2, 2009 and the results from operations are included in the financial statements as of the acquisition date.
SELECTED FINANCIAL INFORMATION FOR THE YEARS ENDED DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Total revenues, interest and other income $ 3,644,249 $ 4,847,743 Expenses 25,783,609 17,999,478 Loss (19,850,475) (12,924,286) Comprehensive loss (23,253,180) (7,724,539) Loss per share - basic and diluted (0.34) (0.24) Cash used in operations (11,595,441) (7,919,419) ------------------------------------------------------------------------- ------------------------------------------------------------------------- AS AT DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Total assets 106,789,330 122,483,956 Total liabilities 21,870,839 26,862,685 Shareholders' equity 84,918,491 95,621,271 ------------------------------------------------------------------------- ------------------------------------------------------------------------- SALES AND SERVICES REVENUE PLASMA GEOEXCHANGE FOR THE YEAR OCTOBER 2 - ENDED DECEMBER 31 DECEMBER 31 2009 2008 2009 2008 ------------------------------------------------------------------------- Sales revenue Engineering and services $ 1,657,714 $ 1,920,397 $ 350,684 $ - Equipment sales - - 490,134 - Parts and other sales 285,749 467,800 - - ------------------------------------------------------------------------- 1,943,463 2,388,197 840,818 - ------------------------------------------------------------------------- Direct cost of sales Engineering and services 633,057 1,299,748 325,016 - Equipment sales - - 376,524 - Parts and other sales 123,755 105,773 - - ------------------------------------------------------------------------- 756,812 1,405,521 701,540 - ------------------------------------------------------------------------- Gross margin $ 1,186,651 $ 982,676 $ 139,278 $ - ------------------------------------------------------------------------- -------------------------------------------------------------------------
Plasma Sales and Services
For the year ended December 31, 2009 revenues of $1.9 million were earned from engineering services provided for plasma reactor design and process engineering, replacement parts for existing gasification customers and plasma gasification testing services provided at the Corporation's testing centre pilot facility located in the United States.
Direct costs of sales of $0.7 million relate to direct materials and expenditures for products and services sold and reflect standard rates. Margins in 2009 are 20% higher than in 2008 due to the reduced amount of direct labour spent on engineering products and services.
Plasma related revenues decreased in 2009 by $0.4 million or 20% as the pilot plant testing facility was closed, as modifications were being made in preparation for testing services to be provided for Coskata's Project Lighthouse. The Corporation has been contracted by Coskata to carry out 52 pilot tests, which are expected to be completed in 2010, generating expected revenues of $3 million.
Alter NRG anticipates a key revenue stream from equipment sales of a plasma torch or a plasma gasification island. Plasma torches are one component of the plasma gasification island and the sale of torches used in a small scale gasification facility generates approximately $1.5 to $3 million in revenue. The Corporation plans to sell a full scope gasification solution, the plasma gasification island, to third party project developers, which would generate revenues of approximately $25 to $100 million per project. Alter NRG has devoted significant efforts expanding its product offering through completing engineering studies and product design enhancements required to construct the plasma gasification island.
The Corporation works with project developers worldwide in the early stages of planning and developing plasma gasification projects. Engineering services are required in the preliminary planning phase and equipment is ordered only after a project has received regulatory approval and project financing, thus these sales have a long lead-time.
Since the Corporation purchased WPC it has increased its number of customers. Key customers advancing commercial projects include Air Products, Coskata, Dufferin County, NRG Energy and SMSIL (see the Highlights section).
Geoexchange Sales and Services
Alter NRG acquired 100% of the outstanding shares of CleanEnergy on October 2, 2009 and the following financial results are from that date through to December 31, 2009:
Total revenues were $0.8 million, however the fourth quarter is historically a slow quarter of activity due to winter freezing and the holiday season. In the fourth quarter, the Corporation spent significant efforts on reorganization and changes to internal processes to ensure that projects are scaleable and efficient going forward. Revenues are earned on services provided for the design and engineering of geoexchange projects, the sale of geoexchange equipment and the installation of geoexchange systems.
Direct cost of sales of $0.7 million are for the direct labour and expenditures for services provided, as well as equipment costs, including direct labour and materials for geoexchange projects. Cost of sales was higher than anticipated during the quarter due to less than optimal utilization of the direct labour as both people and processes were being altered to become more scalable.
The Corporation believes that through its acquisition of CleanEnergy it can successfully offer a turnkey geoexchange solution across Canada to increase market share. Currently, the geoexchange industry is fragmented, with many small suppliers offering only partial services. The Corporation believes offering a complete solution that is supported by a stronger public entity will provide a competitive advantage in the market.
The Corporation believes it will be able to gain market share and associated revenues over the next 3 years and improve overall profitability as revenue increases and economies of scale are achieved.
INTEREST AND OTHER INCOME FOR THE YEARS ENDED DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Interest income $ 222,492 $ 1,598,805 Gain on short-term investments 591,750 - Other income - 82,336 Gain on sale 45,726 778,405 ------------------------------------------------------------------------- Total interest and other income $ 859,968 $ 2,459,546 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Interest income relates to funds invested in interest bearing accounts with a Canadian chartered bank and decreased by 86% or $1.4 million for the year ended December 31, 2009 versus the year ended December 31, 2008. The decrease reflects a combination of lower average interest rates earned on cash balances and a significantly lower cash balance held in these accounts. An annualized average interest rate of approximately 0.5% was earned for the current year versus the average of 3.0% earned in 2008.
In July of 2009, the Corporation invested the majority of its cash resources in short-term investments including a government backed mortgage fund in pursuit of a better rate of return without significantly increasing the Corporation's investment risk. The total gain on this investment for the year ended December 31, 2009 was $0.6 million or a 3.4% annualized return.
During 2009, the Corporation divested its 49% interest in a joint venture, to which it had contributed proprietary technology. The other income of $79,044 for the year ended December 31, 2008 was related to this joint venture and did not recur in 2009.
The gain on sale in the year ended December 31, 2009 resulted from the sale of minor equipment and office furniture. The gain on sale in the year ended December 31, 2008 resulted from the sale of one of the Corporation's non-core coal resource properties.
GENERAL AND ADMINISTRATIVE EXPENSES CORPORATE and PLASMA GEOEXCHANGE FOR THE YEAR OCTOBER 2 - ENDED DECEMBER 31 DECEMBER 31 ------------------------------------------------------------------------- 2009 2008 2009 2008 ------------------------------------------------------------------------- Employee costs, net of recoveries $ 5,993,857 $ 4,831,861 $ 618,515 $ - Professional and consulting fees 2,498,662 1,666,173 127,409 - Office costs 1,848,854 1,306,798 169,759 - Travel costs 842,542 598,853 52,917 - Business development costs 690,641 813,775 - - Bad debt 140,179 798,729 142,396 - Other costs 735,120 805,327 29,828 - ------------------------------------------------------------------------- General and administrative expenses $12,749,855 $10,821,516 $ 1,140,824 $ - ------------------------------------------------------------------------- -------------------------------------------------------------------------
Employee costs increased due to the acquisition of CleanEnergy in October 2009, as well as an increased number of staff required to enact the Corporation's corporate growth strategy. At December 31, 2009, the team included 71 full time employees, 23 of which were employees of CleanEnergy, compared to 42 employees at December 31, 2008 as follows:
AS AT DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Engineering and operations 35 17 Sales and marketing 12 8 Corporate development 4 3 Finance, HR, IT and administration 20 14 ------------------------------------------------------------------------- Total number of employees 71 42 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Professional and consulting fees include legal, audit, accounting, external recruiting and engineering consulting fees. For the year ended December 31, 2009 these fees, related to corporate activity and the plasma business, which increased by $0.8 million or 50%. This is a result of increased fees incurred as the Corporation developed new strategic partnerships, related to project development efforts, including the NRG Energy Somerset and Coskata Lighthouse projects. CleanEnergy incurred $0.1 million in expenditures for legal and audit fees, the majority of which were related to the acquisition.
Costs for the Corporate and plasma offices for the year ended December 31, 2009 increased by $0.5 million or 41% from the year ended December 31, 2008. The amount of leased office space and associated expenditures increased to accommodate the growth in the number of employees. Also contributing to the increase was $0.3 million of expenditures for repairs and maintenance on the pilot plant facility, to ensure success of the testing for Project Lighthouse. CleanEnergy has offices in both Mississauga and Calgary and expenditures related to these offices were $0.2 million.
Travel costs for the year ended December 31, 2009 increased by $0.2 million or 41% due mostly to expenditures related to trips to the European Union and China to meet with potential strategic partners for the plasma business. CleanEnergy employees travelled between the offices in Calgary and Mississauga to facilitate the transition after the acquisition resulting in $0.05 million of expenditures.
Business development costs for the year ended December 31, 2009 decreased by $0.1 million or 15% compared with the year ended December 31, 2008. This is attributable to decreased spending related to the Fox Creek coal-to-liquids project.
Bad debt expense, related to the plasma business, decreased by $0.7 million or 82% for the year ended December 31, 2009 compared with the prior year. $0.1 million of bad debt expense was recognized for amounts due to CleanEnergy. The Corporation has completed a review of all outstanding accounts receivable and it believes all amounts in excess of the allowance for doubtful accounts are recoverable.
Other costs include public reporting costs, IT-related costs, advertising and promotion costs and banking charges. IT-related costs have increased in line with the growth in personnel and the remaining other costs are consistent with the year ended December 31, 2008.
Budgeted general and administrative costs for 2010 reflect the Corporation's growth strategy and the associated costs to support the planned activity levels. Should prolonged negative market conditions persist or customer activity decline in a significant way, general and administrative costs will be evaluated and reduced.
FOREIGN EXCHANGE LOSS
The unrealized foreign exchange loss of $1.3 million recognized for the year ended December 31, 2009 is the result of the strengthening of the Canadian dollar during the year and relates mostly to the intercompany advances. US dollar denominated intercompany advances made to the US subsidiary, which are eliminated at consolidation, are revalued at the exchange rate as of the balance sheet date.
DEPRECIATION AND AMORTIZATION FOR THE YEARS ENDED DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Depreciation $ 364,896 $ 271,618 Amortization 1,913,058 1,561,451 ------------------------------------------------------------------------- Total depreciation and amortization $ 2,277,954 $ 1,833,069 -------------------------------------------------------------------------
The increase in depreciation of $0.1 million or 34% for the year ended December 31, 2009 over the same period in 2008 reflects a full year of depreciation on the US facility upgrade, completed at the end of the first quarter of 2008. No depreciation was recognized on this asset in the first quarter of 2008. Also included in the increase is the depreciation recognized on the assets acquired as part of the acquisition of CleanEnergy.
Amortization relates to the intangible assets acquired through the purchase of the US subsidiary in 2007, the intangible assets acquired through the purchase of CleanEnergy on October 2, 2009 and on the completed internally generated intangible assets. The acquired intangible assets are being amortized on a straight-line basis over their estimated useful lives and accounts for $1.8 million of the amortization expense for the year ended December 31, 2009, of which $0.2 million is attributable to the intangible assets acquired through the acquisition of CleanEnergy. During 2009 specific internally generated intangible assets were completed and amortization commenced, resulting in $0.1 million of amortization expense. These completed internally generated intangible assets are being amortized on a straight-line basis over an estimated useful life of ten years.
WRITE DOWN OF ASSETS HELD FOR SALE
During the year ended December 31, 2009, the Corporation determined that it would discontinue development of the Bruderheim property and began to actively market the property and equipment to potential buyers. The property consists of land, a building and a steam turbine.
During the year ended December 31, 2009, the Corporation recognized an impairment of $4,909,028, to write down the Bruderheim property to its estimated fair value less costs to sell the assets. The write down was based on an assessment of the latest market conditions for each of the assets held for sale.
The assets are actively being marketed for sale and the Bruderhiem site has a formal offer that is expected to close in the second quarter of 2010.
LOSS FOR THE YEARS ENDED DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Loss $ 19,850,475 $ 12,924,286
The increased loss for the year ended December 31, 2009 is a result of both lower revenues and increased costs. Interest income earned during the year decreased by $1.4 million however, this was partially offset by a gain in short-term investments of $0.6 million. The loss was compounded as the Corporation recognized an impairment of assets during the year of $4.9 million (December 31, 2008 - $1.9 million) and incurred general and administrative expenditures of $13.9 million for the year ended December 31, 2009, compared with $10.8 million for the year ended December 31, 2008. As well, the Corporation recognized a foreign exchange loss of $1.3 million versus a foreign exchange gain of $0.5 million in the year ended December 31, 2008.
The plasma gasification business consists of large dollar sales transactions that have a long, complicated sales cycle. There are many projects being advanced around the world using the Corporation's plasma solution that are proceeding into the construction phase. Profitability is expected to be achieved once equipment is ordered for the plasma facilities. Customers are expected to order equipment within the next 9 to 18 months on projects in the United States, Canada, Spain, the United Kingdom, India and China. Other potential sales are also possible around the world, however large scale energy facilities have inherent risks of delay or being cancelled (see the Business Conditions and Risks section).
The geoexchange business has current revenue streams through existing dealers. Alter NRG intends to increase revenues through solution sales for larger commercial, industrial, large residential home, and government building markets. Alter NRG expects this business to be cash flow neutral to slightly positive in 2010 based on increasing revenues to $12 million for the year.
QUARTERLY INFORMATION 2009 Q1 Q2 Q3 Q4 Total ------------------------------------------------------------------------- Capital expend- itures $ 1,398,152 $ 1,652,023 $ 1,104,424 $ 480,155 $ 4,634,754 Total revenues, interest and other income 1,250,464 357,085 887,524 1,149,176 3,644,249 Interest and other income 136,322 56,845 456,822 164,253 814,242 Gain on sale - 2,352 43,430 (56) 45,726 Write down of assets held for sale - 1,866,000 3,043,028 - 4,909,028 Loss (2,945,549) (6,087,592) (6,923,156) (3,894,178) (19,850,475) Loss per share - basic and diluted $ (0.05) $ (0.11) $ (0.12) $ (0.06) $ (0.34) ------------------------------------------------------------------------- 2008 Q1 Q2 Q3 Q4 Total ------------------------------------------------------------------------- Capital expend- itures $ 1,968,600 $ 5,894,939 $ 5,450,365 $ 1,472,406 $14,786,310 Total revenues, interest and other income 1,063,849 2,141,875 780,348 861,671 4,847,743 Interest and other income 352,262 510,166 462,074 356,639 1,681,141 Gain on sale - 778,405 - - 778,405 Loss (1,809,133) (2,454,308) (4,414,367) (4,246,478) (12,924,286) Loss per share - basic and diluted $ (0.04) $ (0.04) $ (0.08) $ (0.08) $ (0.24) -------------------------------------------------------------------------
Capital expenditures in the prior year were significantly higher due to spending on the Bruderheim and Fox Creek properties. In 2009 the majority of capital spending related to modifications to the pilot plant facility and spending on internally generated intangible assets. Included in the interest and other income is the gain on short term investments of $0.6 million. Total revenues have decreased from prior year as a result of less interest income and fewer testing revenues, offset by the $0.8 million of revenues of CleanEnergy in Q4 2009.
LIQUIDITY AND CAPITAL RESOURCES
The Corporation's working capital balance is approximately $25 million at December 31, 2009, a decrease of $24 million from the balance at the year ended December 31, 2008 of $49 million. Working capital provides funds for the Corporation to meet its operational and capital requirements. These funds are expected to allow the Corporation to focus on increasing its operational cash flows through sales revenues and prevail through the current economic downturn without relying on raising additional debt or equity financing in a volatile market.
CASH USED IN OPERATIONS FOR THE YEARS ENDED DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Cash used in operations $ 11,595,441 $ 7,919,419
Cash used in operations increased $4 million or 46% for the year ended December 31, 2009 compared with the prior year. This increase reflects the growth in the Corporation's operations through its expansion of sales and marketing efforts, engineering and administration personnel, the related office operating expenses, and the acquisition of CleanEnergy. Cash flow from operations is expected to increase as the Corporation secures plasma equipment sales contracts and license revenue, and increases geoexchange revenues. The timing of these cash flows is a function of sales timing, type and margin and can be affected by various operating issues as outlined further in the "Business Conditions and Risks" section.
CAPITAL EXPENDITURES FOR THE YEARS ENDED DECEMBER 31 2009 2008 ------------------------------------------------------------------------- Resource property $ 626,681 $ 1,406,917 Property, plant and equipment 1,983,182 11,846,161 Internally generated intangible assets 2,024,891 1,533,232 ------------------------------------------------------------------------- Total capital expenditures $ 4,634,754 $ 14,786,310 ------------------------------------------------------------------------- -------------------------------------------------------------------------
Resource property expenditures for the year ended December 31, 2009 decreased by $0.7 million or 55% and include costs incurred for the Fox Creek project which has 468 million tonnes of coal reserves (see the reserve report filed on SEDAR for further details). The Corporation is currently engaged in an active process marketing the Fox Creek coal reserves and acceptable outcomes would be partnership, royalty agreements, outright sale or a combination thereof.
Property, plant and equipment expenditures have decreased by $10 million from the prior year. $1.9 million of capital expenditures in the current year relate to costs incurred to transform our pilot facility into a commercial demonstration facility, which can operate on an extended continuous basis. This project has attracted international interest from leading energy companies and developers around the world. Currently this commercial demonstration facility is being used to provide syngas for Coskata's semi-scale ethanol facility located on the same site (see HIGHLIGHTS section). Internally generated intangible asset expenditures, consisting of internal project development work on the Corporation's plasma gasification island, increased by $0.5 million or 32%. The majority of costs in the current year relate to the detailed engineering, design and modelling of two different gasifiers that will be integrated with plant designs in the future. The majority of these costs are not currently being amortized, as the related projects have not reached completion. As individual projects are completed and commercial use or construction begins, the costs associated with that specific project begin to be amortized.
Going forward, the Corporation expects minimal capital expenditures as core technology sales do not require further research or development spending. Further advancements to the plasma technology are expected to be borne by customers, earned through engineering revenues as their projects continue to advance. The Corporation is currently considering further upgrades of its commercial demonstration facility in Madison, Pennsylvania but this is expected to be less than $1 million.
EQUITY
The number of common shares and options outstanding as of March 10, 2010 was 61,720,267 and 5,095,567, respectively. The authorized share capital of the Corporation consists of an unlimited number of common shares.
For more information on the Company's activities please visit www.alternrg.ca or www.sedar.com to view Alter NRG's 2009 Annual Report.
The Toronto Stock Exchange does not accept responsibility for the adequacy or accuracy of this release.
Advisory Respecting Forward-Looking Statements:
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "confident", "might" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: currency exchange rate fluctuations; environmental risks; unanticipated reclamation expenses; ability to finance; risk of obtaining regulatory approvals; ability to find joint venture partners; engineering and design risk; fluctuation in commodity prices and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties including but not limited to:, unexpected events during construction, and start-up; variations in feedstock grade,; delay or failure to receive board or government approvals; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of commodities; failure of plant, equipment or processes to operate as anticipated; delays in the completion of development or construction activities, as well as those factors discussed in or referred to under the heading "Risk Factors" in the Company's Annual Information Form dated March 31, 2010 available at www.sedar.com which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements.
The Company cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information and statements contained in this news release speak only as of the date of this news release, and the Company assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.
For further information: Mark Montemurro, President and Chief Executive Officer, (403) 806-3877, [email protected]; Daniel Hay, Chief Financial Officer, (403) 244-0111, [email protected]
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