Synthesis Energy Systems CEO Discusses F2Q2011 Results - Earnings Call Transcript

| About: Synthesis Energy (SYMX)

Synthesis Energy Systems, Inc. (NASDAQ:SYMX)

F2Q2011 Earnings Conference Call

February 8, 2011 4:30 PM ET


Matthew Haines – Managing Director of MBF, Investor Relations

Robert Rigdon – President and CEO

Kevin Kelly – Chief Accounting Officer, Controller and Secretary

Donald Bunnell – President and CEO, Asia-Pacific


James Sheehan – Deutsche Bank

Robert Smith – Center for Performance Investing


Good afternoon and welcome to the Synthesis Energy Systems Second Quarter 2011 Earnings Conference Call. All participants will be in listen-only mode. (Operator Instructions) After today’s presentation, there will be an opportunity to ask questions. (Operator Instructions) Please note this event is being recorded.

I would now like to turn the conference over to Matt Haines. Please go ahead.

Matthew Haines

Thank you. Good afternoon. And thank you for joining Synthesis Energy Systems’ conference call. My name is Matt Haines and I’m the Managing Director at MBF’s Value Partner, SES’s Investor Relations firm. Today, management will discuss financial results for the fiscal 2011 second quarter ended December 31, 2010, and will provide an update on corporate developments. Following the prepared remarks, we will open the line for questions.

Before we begin, I would like to remind you that during this call, management will be making 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.

Although we believe 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. We cannot assure you that the assumptions upon which these statements are based will prove to have been correct.

Please refer to the company’s annual report on Form 10-K for the year ended June 30, 2010 for a further discussion on risk factors. A copy of our filings can be found on the Securities and Exchange Commission’s website at, or on our website at

And now I would like to turn the call over to Mr. Robert Rigdon, President and CEO. Robert?

Robert Rigdon

Thank you, Matt. Welcome to our conference call for the second quarter for the fiscal 2011 which ended in December 31 of last year. Joining us on the call today is Kevin Kelly, our Chief Accounting Officer who is here with me in Houston and Don Bunnell, President and CEO of Asia Pacific who is on the line from Sydney, Australia.

As we just announced this afternoon, Bill Preston is joining the company as Senior Vice President covering global business development and licensing replacing Don who is leaving his operating role with the company to pursue longstanding personal interest outside of the industry. Don will continue to contribute to the company’s progress and future success in his role as an SES board member and as a consultant to the company following his departure at the end of February. He will also remain a significant shareholder. Over these past three years, it has been my pleasure to work together with Don to grow this business. He has certainly earned my respect as a business leader and as a friend.

On behalf with everyone at SES, I’d like to thank him for all his mini contributions. We wish him well and his new endeavors and look forward to our continuing relationship.

I am very pleased to have Bill Preston joining the team. For almost 30 years Bill has been highly effective business leader. He has exceptional management and communication skills and a proven track record of success developing and profitably commercializing innovated gasification solutions with the energy and chemical industries.

Bill has held senior positions at leading companies including Great Port Energy, The Energy Capital Group, GE Energy, Chevron Texaco, and Texaco Inc. Early in his carrier, Bill worked on the design and startup teams and then had extended operating assignments at the cool water gasification project in California, and then the coal gasification unit at the Eastman Chemical Plan at Kingsport, Tennessee. Also while at Texaco Bill led the development of power project, which is a 250 megawatt operating IGCC plant in Florida.

All three of these projects were successful and are quite famous actually as landmark projects in the gasification industry. His experience at these early coal gasification facilities gave him a foundation in gasification technology that is extra ordinary in this industry.

Subsequently, Bill’s career continue to grow at Texaco where he became a business leader in the licensing of gasification technologies and the development of large scale equity gasification projects for Texaco and Chevron Texaco. In fact, Bill rose to President of Chevron Texaco Gasification Technology business, just prior to GE acquiring that business.

Yeah, I’ve known Bill for many years and I am confident he will make many important contributions to the futures success of the company. We continue to tailor our team by bringing in the deep domain experience necessarily not only at the executive level, but also at the operations level. At the same time, we are reducing other costs by appropriately outsourcing or eliminating other functions where possible.

Now I’d like to ask Kevin to discuss our second quarter financial results. Kevin?

Kevin Kelly

Thank you, Robert. Our operating results for the second quarter of fiscal 2011 reflect an improved trend driven by higher operating margin at our ZZ joint venture plant and lower overall costs. Total revenues increased to $2.9 million from 2.6 million in the prior quarter. Product sales from our ZZ joint venture plant were 2.6 million for the second quarter of fiscal 2011 compared to 2.5 million for the second quarter of fiscal 2010.

The plant operated for 73% of the quarter compared to 83% in the prior quarter. The plant’s availability for production was 97% for both periods.

Technology licensing and related services revenues for the quarter were 0.3 million which reflected the value of the coal contributed by Ambre Energies and exchanged for testing of the coal at our ZZ plant.

Cost of sales and plant operating expenses were 2.6 million for both the second quarter of 2010 and 2011. The decrease in Q2 2011 coal consumption volume at the ZZ plant due to less operating time was offset by higher coal prices compared to the prior year period. The improved gross margin for the second quarter of fiscal 2011 resulted mainly from operating efficiencies of the plants. And higher capacity fee and energy fee revenues.

G&A expenses were 3.1 million for the second quarter of fiscal 2011 compared to 2.9 million for the second quarter of fiscal 2010. This increase was primarily due to increased business development activities, offset in part via decrease in corporate personnel costs. Project and technical development expenses decreased by 0.5 million due to feasibility costs for the ZZ plant incurred during the prior fiscal year. And stock-based compensation expense decreased 0.3 million due to stock optioned four features.

The company reduced its operating loss to $3.5 million for the second quarter of fiscal 2011, compared to an operating loss of 11.1 million for the second quarter of fiscal 2010. $7.6 million improvement in the operating loss was primarily due to the $6.6 million asset impairment loss related to our Golden Concord project reported in the second quarter of fiscal 2010.

In addition, there was an improved operating margin at the ZZ joint venture plant and lower project and technical development and stock-based compensation expenses. Overall, we are pleased with the improving financial trend and a continuing progress and margin improvements that have been achieved at the ZZ plant.

We are continuing to closely monitor and control our operating and overhead costs, domestic company’s goals and objectives.

As of December 31, 2010, we had cash and cash equivalents of 34.1 million and working capital of 31.1 million.

Lastly, on January 5, we were pleased to announce that we had regained compliance with ABDEC with NASDAQ’s continued listing rules. Robert?

Robert Rigdon

Okay. Thanks Kevin. Now I’d like to give you an update on our Zao Zhuang and Yima joint ventures. As it was mentioned in the earnings release, we had a very successful coal test at Zao Zhuang in December, when we were in, the Ambre Energy coal from Australia.

Also we’ve continued operated improved margins and we’ll be working to further improve this over the next several months. Actually two coincidental things were happening. First, Hai Hua is indicating they may be able to increase to a higher gasifier utilization rate, if we can all to our syngas composition to fit changes they are making in their process. And we are working with Hai Hua today to make this happen.

The second item, we are working on at Zao Zhuang is a long-term coal test contemplated by a large multinational chemical company and this company is interested in the low-cost fuel advantages of our U-GAS for their upcoming projects. So we’d like to see a long-term test run on their target coals. We’re in the early stages of developing the commercial deal and planning for this test arrangement.

In December at the Zao Zhuang plant, we successfully implanted a new SES developed technology improvement, which we call our fines management system or FMS. This technology relates to recovering energy remaining in the fines resulting from the gasification process. With FMS we can maximize the utilization of lower-rank coal in our U-GAS based gasifier.

The heart of this new technology is in how we manage the fine particles of coal ash created in the gasification process, in such a way that we extend the exposure to gasifier conditions for near complete conversion.

The successful implementation of this advancement has increased the coal utilization rate at Zao Zhuang to 98% an above, which is reducing the coal consumption on the order of about 10%. This is a significant achievement with this – with our U-GAS platform.

The FMS is actually the product of a 12 month undertaking by the SES team in China to increase gasification efficiency in order to improve the cost advantages drive from using the technology. On a plant as sized as Yima processing 2,400 tons of coal per day for example, this improved efficiency could translate into roughly $10 million a year of coal savings.

Data for FMS operations indicating carbon conversions of greater than 98% and high overall gasification efficiency were also reported in a presentation our team made at the gasification technologies conference last year.

Our current partners, customers and licensees have taken note on this important technology investment and has had potential partners, customers and licensees. We believe that our technology improvement such as the FMS will enable us to continue to advance our strategy to leverage our U-GAS, coal and biomass gasification technology and to licenses and equipment sales opportunities, as well as additional projects and strategic partnerships in China and other emerging markets. Tom will have more to say about licensing in just a few moments.

Now the second major technology accomplishment during the same timeframe was the successful gasification of a low-rank high ash coal from Ambre Energy in Australia. The low rank coals in Australia are generally difficult for traditional gasification processes to handle. When we conducted a thorough review of their coals characteristics and after lab scale testing concluded that our coal gasification technology would be highly effective in gasifying this coal with competitive economics.

Ambre Energy subsequently shipped approximately 3,000 tons of their coal to our Zoa Zhuang plant for several days of gasification test, which a group of their employees observed. The test were an unqualified success, data from the test showed that coal, carbon conversions of over 98% were achieved. The test met all the plant targets for coal conversion, gas production and steady operation.

During the test, high quality syngas was produced and supplied to syngas offtaker Hai Hua Chemical without interruption. As a result, Ambre has agreed to move into the license negotiations stage for their plant coal-to-gasoline project in Australia, utilizing our U-GAS technology.

We will continue to work with Ambre regarding certain project development decisions that need to be made before a license is signed, but we are very encouraged by these recent developments.

Although we have focused a lot of our efforts at Zao Zhuang on the Ambre coal test and the FMS start up, we continued discussions to find a suitable partner for our Phase II expansion into glycol production. Much of this effort is making sure we find the right partner with aligned long-term interest not only for Zao Zhuang, but future projects as well.

In terms of operations at Zao Zhuang, the plant continue to operate very well this past quarter and was available for 97% at the time. With certain upgrades having being completed on time, plant operation has also been more stable during this cold weather season this year than it was last year.

Lastly, the carbon conversion rates during the four months, during which the FMS system has operated, have been consistently exceeding 98%. With respect to our Yima project, we have advanced the discussions with Yima to restructure the project to produce glycol instead of methanol.

We had expected to resolve this sooner but key Yima staff members have been tied up in preparing for their own IPO for which they recently received key government approvals. And this is very good news for ongoing relationship with Yima, as Yima plans to build on the success of this IPO to fund a major expansion of their coal-to-chemicals and energy business in-lined with China’s 12th, five-year plan.

The project team at Yima is now working on putting the offside utilities into place including a waterline from their coal mines, electricity from the local power grid and the rail yard from the Yaojin coal mine. Yima is also developing a plan to connect syngas and utilities between the Yima coal chemical west zone and east zone. And this could provide more demand for syngas through three other sources of demand including a gas line to the capital city and aluminum plant and another chemical plant nearby that needs lower cost feed stocks. And only our technology can provide this locally and in a timely way.

The equipment procurement is well underway. The gasifier fabricator was selected and work has started. We are working with Yima to get other major equipment purchase contracts out for bidding. The main piping and equipment installation contractors have already been selected and this work will begin in the second calendar quarter of this year, as we come out of this winter season.

Four floors of the gasification structure completed and the Boiler Steel Structure is underway. Under construction are also the ASU building, boiler building, compressor building, cooling towers, coal preparation areas and other utility units. Most of the major foundation work has all been now complete and boiler steel is going up today.

Now, turning to our licensing business and we continue to make substantial progress underpinned by these significant technology advancements I just mentioned.

I’d like to turn the call over to Don to discuss his departure and give us an overview of our technology licensing business and outlook. So, Don?

Donald Bunnell

Thanks Robert. As Robert said, after a lot of thought I have decided to leave SES so I can pursue other interests and new opportunities. Specifically I’m going back to school to study architecture which has been a life-long dream. This was a difficult decision for me personally as SES has been a very important part of my life for a long time. I’m comfortable with my decision because of the progress the company has made. And because they have the highest regard and confidence in Robert and the outstanding team that he has assembled. I look forward to continuing my role as a member of the board and as a consultant to the company.

With respect to business development, as we move into the second half of fiscal 2011, we continue to make very good progress in our technology licensing business. As Robert mentioned, this progress has been underpinned by two significant technology advancements. The first is our successful operations of the new FMS technology improvement at the Zao Zhuang Plant where we have increased the efficiency of our gasifier. And the second is the Ambre coal test that we completed last December.

This test was conducted by us at the request of Ambre Energy of Australia, which intends to build a Coal-to-Liquids Plant in Queensland with a capacity of 18,000 barrels per day, using our U-GAS technology platform to convert the coal to syngas which will then be converted to methanol and then gasoline using ExxonMobil’s proprietary MTG technology.

Although Zao Zhuang plant was designed for bituminous middlings waste coal the test results from Ambre’s high ash coal demonstrated once again the flexibility of the SES U-GAS process to efficiently handle a wide range of feedstocks including low rank and high ash content coals.

Ambre is moving ahead with the development of this project and we are working with Ambre to provide a license for the use of our technology on this project.

Over the past year, we have already seen significant interest in the SES U-GAS technology platform for many regions where natural gas is expensive and low-rank coals were inexpensive and abundant.

These two significant technology milestones that interest (ph) as only increased. One area, where we have seen significant uptick in the interest is in India, where we’re making progress on a possible joint venture for our Indian business with a large Indian converment (ph) that not only wants to work with us, just to develop the U-GAS market in India but can also deploy the U-GAS technology, the problem with operating plants and at new projects it has under development.

In addition, we’re also developing several project opportunities in India. One of the project opportunities involved the first phase gas of our island for an IGCC facility to be built by a large power company.

Through developing this opportunity we have been approached by major international engineering, procurement, construction and industrial equipment manufacturer. The group understands and appreciates the new gas advantage in India, and have expressed great interest in working with us to bid these projects. If successful this could be a very powerful business arrangement for us here. We look forward to providing additional information on this at the appropriate time.

In Australia, we are working with Ambre as noted earlier, as well as our partner Coalworks not only have the project in the South Wales and then potentially areas of cooperation.

In the US, we continue to see interest in biomass opportunities and working with several energy developers to explore ways we can work together. We are also developing advancing opportunities in Turkey, Thailand, Indonesia, Vietnam and Singapore.

With that I will turn the call back over to Robert.

Robert Rigdon

All right. Thanks Don and thanks for (inaudible) so early in the morning, there from Sydney, Australia. Building on what Don has discovered, I would add that apart from Zao Zhuang and Yima, we are pursuing multiple new business development opportunities including SNG projects with large partners. Highlights of our latest development efforts in China include an agreement we signed in late January with a Chinese company to provide the feasibility study report for medium scale, one million normal cubic meters per day.

SNG project, this project is planned to be implemented in two phases of 500,000 normal cubic meters per day each. Using new gas technology for coal gasification, this project should we go forward would supply SNG to the gas loop of the fairly large city which has a shortage in natural gas, which is also very common in China. Also in January we were engaged to prepare preliminary technical proposals for ammonia plant that is interested in using approximately 100,000 normal cubic meters per hour of our syngas to replace its existing fixed bed gasifiers in two equal phases. And we see many of these types of ammonia opportunities in China today. We are also actively pursuing other early stage opportunities in China including the projects in (inaudible) and Mongolia and in Mongolia that I mentioned on our last call.

We are working to close a definitive agreement, own a license for these projects, while project works force government approvals.

I would like to say few more words about China. China has recently issued it’s 12 five year plan under which China is expected to focus on making growth more balanced and sustainable as a main objective. Also China will accelerate urbanization in western regions and assuming China urbanization rate will reach the plan 65% by 2030. Besides of the urban population can grow 200 to 300 million in the next two decades, averaging 10 to 15 million per year providing stimulus for both consumption as well as investment.

Further deregulation and opening up of the state monopolized industry is expected and would encourage private capital to supplement public investment. In terms of energy, China is expected to speed up new energy development and promote cleaner and more efficient use of traditional energy such as clean coal energy base coal gasification. Due to the fast pace of growth in urbanization China is expected to be short on natural gas for many years. This will drive as many gas projects including large scale coal gasification base, synthetic natural gas called SNG. Cleaning up coal based energy provides significant growth opportunities for gasification and we are well positioned now in China to participate in this growth due to the strength of our technologies ability to gasify these more difficult but significantly cheaper coals.

Further to this point China plans to develop five main energy resource spaces in Shaanxi Province, Eastern and Mongolia, Argos, the South Western region of China and Zhen Zhaung (ph) autonomous region. With energy reserves accounting for 70% of the country’s total, most importantly much of this resource is located in area such Inner Mongolia, Argos and Zhen Zhaung that are rich in low rank coals.

In addition China is expected to emphasize renewable energy fuels over the next five years for which we are well positioned with our technical capability to convert a wide range of biomass feed stocks into energy products. In line with our strategy and over the last quarter, we are continuing discussions with a potential strategic Chinese partners aimed at growing our China business. We believe the right Chinese partner can strengthen our position for rapid growth particularly in the larger cold energy projects which are expected to make up much of China’s industrial growth over the next several years.

I would like to also add that we are in discussions with certain parties in Turkey and South Africa to develop small scale coal-to-power projects based on our mini integrated gasification combined cycle or mini IGCC concept.

We believe mini IGCC technology may host significant potential for us in many areas of the world. In the scenario where we believe a tremendous growth opportunity may exist.

For those of you who may not be familiar with our mini IGCC concept, this is a technology that is comprised of the gasification plant that produces syngas, coupled to a power plant that burns the syngas to produce between 50 and 100 megawatts of electricity.

We believed that utilizing lower cost U-GAS technology combined with this special aeroderivative gas turbine generators can cost much less than typical IGCC power plants to build and operate. This is particularly true, when lost cost fuel such as lignin or waste coals are available. Our mini IGCC concept can be well suited for certain emerging markets where these fuel sources are found in abundance and where smaller scale power generating stations are required due to the smaller, incremental load demand growth and lack of large scale power infrastructure.

Even in China, the mini IGCC concept can make a lot of sense due to the need for better load balancing at multiple points of the network. Also in India, with its even more limited power transmission infrastructure, the concept can be particularly uphold as it’s likely to be in South Africa.

The mini IGCC could be built on a faster schedule and due to its smaller size could be built and operated at remote locations or at mine melt sites and areas where large transmission lines does not exist, and where 50 to100 megawatts power is sufficient.

Multiple modular units can be coupled together to produce more power required. Late last year our mini IGCC concept was presented at a mini IGCC seminar in South Africa hosted and sponsored by General Electric. While this concept is still at the conceptual development stage, it’s being well received by potential licensees and partners and we’re actively pursuing multiple opportunities.

Now moving on, as I mentioned before our strategy is a three-pronged business strategy which includes sales of technology, equipment and engineering services, developing or participating in coal and biomass gasification projects and integrated U-GAS technology coal resource project investments.

And we plan to implement this through the formation of strong regional partnerships within which can grow more rapidly. To this point we are working jointly with Midas, a resource, investment and advisory partnership with Mike Oppenheimer and Dennis McShane as its principles. Mike Oppenheimer has been an adviser to our board, and as you may recall, has significant experience in the coal resource industry, much of which Dennis, from his past experience as present of BHP Billiton coal. The Midas principles are very enthused by the significant opportunity SES has to leverage U-GAS in select emerging economies to create value in coal resources, it otherwise would have little practical value in the market, into high value energy and chemical projects.

Midas is putting their own time into this effort and is currently working with our team to identify target sites and raised development funds for projects.

The initial focus is on coal resources for Eastern Europe and South Africa as well as Indonesia and Australia, where we believe we hold a distinct advantage in our ability to gasify these lower quality coals.

To summarize, we are pleased with the technology advancements we demonstrated last quarter which are being recognized by our current potential partners and customers. We continue to make progress through strengthening our financials, progressing multiple new opportunities, solid operations at Zaozhuang, advancing work at Yima and through our work in China, India and with Midas to progress strategic regional partnerships. We look forward to keeping you informed.

This concludes our announcement update for the fiscal second quarter of 2011. We would now like to give our callers a chance to ask questions, so operator could you please open up the lines.

Question-and-Answer Session


Thank you. (Operator Instructions) At this time we will pause momentarily to assemble our roster. Our first question comes from James Sheehan at Deutsche Bank.

Mr. Sheehan?

James Sheehan – Deutsche Bank

Hi. I am sorry. Can you hear me now?


Yes sir.

James Sheehan – Deutsche Bank

So my first question is on Yima, are you still on track for Phase one completion by 2012?

Donald Bunnell

What – we are on track for the completion of all gasifier island work by date, James and with the addition of the glycol project here, we are now looking with Yima at the overall schedule impact to see what that will be. However, the steps that I mentioned that we are taking with Yima here for the connection of the East, West chemical parts in Yima are expected to give us a syngas supply outlet for syngas as we start up should the glycol project not be ready as the syngas comes online.

James Sheehan – Deutsche Bank

Okay. And just on the technology development that you announced for the ZZ joint venture. You mentioned that the efficiency would increase so that utilization had gone up to above 98%. Could you just remind me what was the previous utilization before that development?

Robert Rigdon

Well, the utilization rate varies a lot depending on operations, but we’ve seen utilization rates in the low 90% at Zao Zhuang, we’ve also seen them at a high 80% range. That depends on how it’s been operated what coal were operating with. What’s really key and important about this technology development is that it is an industry leading change and the ability to efficiently convert all, almost all of the carbon in the coal into energy. These types of efficiencies that I am talking about here in terms of coal carbon in commercial plant is really unheard off, in the gasification world. It sometimes achievable in pilot unit, but has never really been demonstrated well in commercial plants. So, this is a very significant step forward for us.

James Sheehan – Deutsche Bank

Okay. And then, finally with some of the new developments in licensing deals that you talked about today. Are you prepared to revise your estimate of the fees that will be generated from licensing deals over the next 3 to 5 years or was that already incorporated into your previous comments on that?

Robert Rigdon

No, I think we are as – we see the potential on our licensing business only growing right now James, the activity, the amount of work we are doing dealing with customers is increasing. In the last call I mentioned the suite of prospects that we had and overall theoretical value of $100 million in terms of licensing. I see that the same is not even more aggressively, we have – this last test that we ran with the Ambre coal along with these technology developments is catching the attention of people who are interested in moving forward with gasification. And it’s just propelling us forward even faster.

James Sheehan – Deutsche Bank

Okay. One more quick one if I may, just on the Ambre deal or collaboration. Do you have any sense for timing of when that project might be implemented and any sense for what the revenue opportunity is for you?

Robert Rigdon

Well, right now that the – and our last turn to follow-on on this that you said had been following that directly, very closely, but this is envisioned at this stage of the project, unless we were to change our scope with Ambre to be a license in equipment supply opportunity and I can’t give direct guidance on what that fee structure will be obviously for a commercial lease sensitive reasons, but that’s the project our role, the scope in the project is licensing an equipment sales into that project. And Don, you may want to make a comment on Ambre’s progress in developing the project and how they see that moving forward.

Donald Bunnell

Sure, the next stage for the Ambre project is for them to move into a bankable feasibility study. And as far as that – a part of that process will want to ensure that they have access to the key technologies for the project. And I think for this project, the key technologies will, obviously The SES U-Gas technology, The Exxon Mobil Methanol-to-Gasoline technology and then the Methanol technology as well. So, we foresee that in this calendar year that they will likely execute agreements with all the technology suppliers as they move through the bankable feasibility study. I think that feasibility study process with my limited experience in Australia will probably take 12 to 18 months to be completed and they’re starting that process now.


Our next question comes from Robert J Smith at Center for Performance Investments.

Robert Smith – Center for Performance Investing

Hi guys, good evening.

Kevin Kelly


Robert Smith – Center for Performance Investing

Actually my question centered on Ambre as well. And I’m wondering whether you can generalization wise just give me a field for the profit model as far as what this might encompass in a multibillion dollar project, why Ambre is, I mean is there any way to get my arms around this, as far as typical season equipment sales something like that.

Kevin Kelly

Robert, I know it’s, I’m not in the position to give a head obviously what are licensees or where we’re going to be with Ambre and we haven’t closed on those agreements. But let me give you some guidance that I’ve given before in the past and that is for generally for projects in terms of licensing only and not counting the equipment sales which can be significantly additive to the licensing fees.

Licensing fees for projects can, on the small biomass projects can, and going up to the coal projects can range from in the $5 million range up to $30 plus million range on the larger projects.

Now, this project that we’re talking about in Australia is not a small project, this is a quite a large and it would probably be, as far as I know, it would probably be the largest coal liquids project if it’s moving forward that I’m aware of right now. So, this is on the large project side, but on top of that, there would be expected – that we would supplying several gas suppliers and associated equipment along with those gas suppliers for which I don’t have the direct guidance to give right now on what that, that sort of order would be, we’re going to complete those definitive agreements with Ambre before I can do that.

Robert Smith – Center for Performance Investing

And you suggested that this might be a 12 to 18 months process?

Kevin Kelly

Well, what Don is talking about in Australia is similar to the United States. They go through a phase to get to a bankable, EPC plan and cost estimate performance and all other things that are needed to actually green light the project and move forward and that process from the time they start that and that’s what we’re calling, what they’re calling the feasibility process is about a 12 to 18 months process, it’s also the same here in the U.S. it’s in about that range. A very comprehensive and they cannot complete that process Robert, without the technology license has been in place along with the technology transfer packages that we would have to provide along with Exxon being in place. So they’ve got to get all that put together to even be able to complete this process to be able to have essentially what this gives down is a preliminary design upon which then if they can go ahead and move forward.

Robert Smith – Center for Performance Investing

So subsequent to that, what is the timeline or an approximate timeline that before signing the lights (ph)?

Donald Bunnell

I’m not an expert in Australia but I would expect its 36 months which is probably pretty typical of what you would expect here. And I think that would probably be fairly safe to say to be in that same range there in Australia.

Robert Smith – Center for Performance Investing

As an owner or inclusive to the 12 as an –

Donald Bunnell

As an add-on, it typically takes about 36 months to build one. This is a very large project.

Robert Smith – Center for Performance Investing

You know I don’t mean to build them actually signing licensing over there.

Robert Rigdon

No, no, (inaudible).

Donald Bunnell

I was going to – I might be able to shed a little bit more light on this given my discussions with Ambre over the last couple of months. Yeah, I think this is tentative but I think they would like to execute technology licenses this year as part of the – it’s a lockup of various technologies for the project. The way that would typically work is with the down payment when you execute the license and then subsequent payment as they move through things like financial closing, construction milestones and things of that nature.

Robert Smith – Center for Performance Investing

In calendar ‘11?

Donald Bunnell


Robert Smith – Center for Performance Investing

All right, okay thanks very much. And can you give me an idea as to the many other numerous projects that you spoke about. What do you feel might be the earliest to come forward?

Robert Rigdon

Well, I would say that the leading prospects like both in China and India right now. And that I would expect that and I couldn’t tell which ones are going to forward first because both are moving very aggressively towards projects.

Robert Smith – Center for Performance Investing

Would you expect some announcement this calendar year on?

Robert Rigdon

I do, yeah, actually we do. And just as Don said, as he went through this, we are expecting to be able to do that this calendar year. We’ve been working as we launched this licensing business about a little over a year ago now. And it does take about 24 months or so to really work with all of these customers like we’ve been doing and we’re doing a great job of getting out there and aggressively doing that. And to get in line with their own decision process around their projects to get these license deals closed. So we do expect that.

Robert Smith – Center for Performance Investing

Okay. Thanks so much. Good luck to you.


(Operator Instructions) This concludes our question-and-answer session. I would like to turn the conference back over to Robert Rigdon for any closing remarks.

Robert Rigdon

Okay, all right. Well, ladies and gentlemen, this actually will conclude Synthesis Energy’s second quarter earning call. Thank you for your questions. And we appreciate your support and encourage you to call us if you have any additional questions after the call. Thank you. Operator, we can disconnect.


Thank you. The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.

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