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Nathaniel Energy Corporation (NECX)

The Wall Street Analyst Forum

August 15, 2007 2:00 pm ET

Executives

Tim Peach - CFO

Presentation

Moderator

Good afternoon, I would like to introduce the next company in this afternoon's program, Nathaniel Energy, whose stock trades under the ticker symbol NECX. They are a waste-to-energy company. I will let them give the real details about the company.

Suffice to say, if I get my history correct, this is only the second time they presented at an analyst conference, and the first time it was with us 18 months ago. Since that time and particularly in very recent history, and I will let the management to speak to it, there has been a number of changes both in management, the financial structure and some changes in technology that I will let them update you with.

And suffice to say, the whole principle or the concept of waste-to-energy taking all the multiple categories of wastes around the world, being able to convert that and taking whether it's a landfill or the dozens of categories of waste and convert that efficiently and cleanly to energy, provides almost an unlimited -- think of all the wastes that the branch creates on a per day basis.

Well, it's true, right? You can take one [barrel] of New York and how much waste do they create in a day and how much money do they spend. It's an incredible amount of money per ton to transport it and then to bury it, and then to seal it, and do all, all other EPA thinks you need to do.

So, the market is pretty unlimited and I think Wall Street tends to have again spend a lot of time of on soil and a lot of time on biofuels. And I think they will be awakened in this space. And they have made more investment banking dollars, so they probably wouldn't spend more time on it. But that doesn't mean that's not a great investment. It just means that they have their products in interest at stake and maybe those will change.

In any case, so without any further introduction, I will introduce Nathaniel, and they have just committed in the last week, so they weren't on the schedule originally. But we are going to step up and have them present today and tomorrow after a couple of the big New York Stock Exchange Utilities that are presenting tomorrow. So, they will be here both today and they will be here again tomorrow afternoon. So, we are glad to have them back.

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Tim Peach

Thank you, Gerry. It's a pleasure being here this afternoon. You can see from the first slide, we are looking at a company called Vista International and my name is Tim Peach, I am Chief Financial Officer for Nathaniel Energy, which is a publicly traded company, whereas Vista International is a private company. And I will try to explain how the two intermix and intermingle and hear fairly shortly why both are fairly important. And I will give you an overview of what we are attempting to do and where we are headed with both Nathaniel and Vista International.

There have been some recent changes at Nathaniel and I have been in office, if you will, for about two weeks. We received an invitation through Vista and their involvement in Nathaniel to come present, as Gerry mentioned. So, we have been moving fairly quickly to put together the presentation. We are very pleased to be here to do this. But I have got to be very cautious about what I say and do at this point.

So, I would like to start with a quick introduction of Vista. And Vista, as I said, is a private company. It's a technology holding company. It devotes itself to creation of markets for innovative products and technologies working with, primarily, inventors of technologies to bring them into commercialization. Vista essentially is an acronym for Vision, Integrity, Science, Technology and Alternative Fuels and Energy. Its focus is green technologies. Vista's view of the world is probably very similar to what everybody else's view of the world is and what we all probably already know.

We have got natural resources that are becoming very scare and costly. We have got a number of technologies that are currently being deployed. I think Gerry mentioned, landfills, which are essentially outdated, and inefficient, obsolete, but they are still in use. There is really nothing that has been replacing them very quickly over the last number of years.

We are experiencing serious air, water problems and power issues, which really requires some cutting-edge technologies. One of the places that we have seen and one of the areas that Vista has looked at is China. And as you know, at the Beijing, Olympics are coming up and there are some news reports just recently talking about postponing some of the events because of the air quality in Beijing. And the Chinese are very concerned about this and they are making investment in technologies to improve their quality along with water quality. I am sure you are well aware of those concerns.

Lot of attention today is being placed on alternative power generators such as wind, geothermal, solar and nuclear. But one of the things that we were looking out and addressing is the growing problem of waste and latent energy in that waste stream, that can be turned to productive use. So overall, it's really time to try to create a healthier and cleaner and greener world for all of us.

The technologies that Vista has been involved with and has developed over the years, involve High Octane Alcohol process from Synthesis Gas. Some Energy Saving and Full Spectrum Lights, which provide the very high efficiency. And the color rendering index on the lighting, which is essentially equivalent to sunlight, it's about 93% of sunlight. So, the combination of the reduction in electricity and the brightness give a combined efficiency effect.

They have also worked with Low Wind Speed Generation devices, that are small units, that operate in a 4 mile per hour wind, up to approximately 150 miles per hour that have been tested out with installations throughout the world.

There is also some Energy Efficient Power Generating Equipment that the company has been involved with. That looks at hydro turbine type technology utilizing flywheels. And recently, Vista made an equity ownership interest in Nathaniel Energy, acquiring a controlling interest.

What is Nathaniel Energy and what are they doing? Gerry mentioned that Nathaniel Energy is a small cap publicly traded company and its primary technology is the gasification technology that has been developed and commercially tested over a 15-year period. In addition, the company owns a state license tire fuel processing facility in Texas that produces tire-derived fuel for use in cement kilns.

Broadly stated, the vision for Nathaniel Energy is commercialized, patented gasification technology on a global basis. And that process and vision will be supported by a new management team.

The company, about two weeks ago brought in a gentlemen by the name of Barry Kemble, as the Chief Executive Officer of the company. Barry is a Chemical Engineer, has over 25 years of experience in operations and management with international business experience. He has been with startups and involved with turnaround operations. And we are very pleased to have him on the staff. Especially me, since I am the Chief Financial Officer, and he invited me into take that role after his appointment as Chief Executive Officer, otherwise I wouldn't be here.

I have approximately 25 years of experience in finance and administration, as a CPA and MBA. And I have been involved with public companies, very hands-on experience in restructurings and building companies.

In addition, we have brought on a partner through Vista International, to really focus on the project and business development side. They have significant experience in raising capital and developing new technologies in the international and domestic markets. They also have a significant potential sales pipeline, which is in the billions of dollars for the technologies that they have been involved with.

The other area that they bring expertise and there are some significant contacts with Federal and International Governments relationships in Mexico, China, and in the United States.

What the expectation is for Nathaniel Energy at this time is really a complete [about phase] and a name change will show the new direction of where the company is intended to go. So, we expect at some point in time in the near future to change the name of the company to Vista International Technologies Inc.

As I mentioned, the new controlling management really has a specialized interest in renewable and energy serving technologies. And their focus is to provide one solution to the customer, a one stop shopping to the customer.

The focus in the future is really on building infrastructures to solve global energy and waste problems. The other focus will be to work with US firms for manufacture and the fabrication, so we could promote exports and job growth in the United States.

To give you a little idea of what the technology under Nathaniel looks like. This Thermal Gasifier, is a model that was a commercial structure built and delivered to a customer in Italy. It essentially converts any hydro-carbon based waste into a thermal energy or synthesis gas stream. And it can utilize a number of fuel sources, any hydro-carbon based waste, so you could look at tires, you could look at municipal solid waste, you could look at agricultural waste, anything that has a hydro-carbon based component. So it could be utilized as a fuel stock.

The testing on the unit resorted in meeting EPA and EU Emission Standards. It has a modular application so that it can be scaled. And it really is cost competitive. The markets we are looking at and being involved with are not the huge markets that are captured by the large corporations. We are looking at smaller to midsize markets to deploy the Thermal Gasifier and utilize those waste streams to produce energy for our customers.

The company has patented technology. And as I said, it's a multistage gasification system, creating economical clean electricity and thermal energy. And at this point in time, there are engineering efforts going on to further scale the model, provide multiple sizes, and a portable unit.

This gives you an idea of the size of the commercial operation in Italy. It was about 100 to 125 tons of municipal solid waste per day, with the expected production of about 6 megawatts. This facility was constructed and completed in about 2005-2006.

The other component of Nathaniel's revenue is the tire recycling facility in Texas, and as I mentioned earlier that it takes in waste tires and receives a tipping fee for doing that and it converts those waste tires into feedstock for cement kilns. It's really the only licensed facility in the Dallas/Fort Worth area that can take in waste tires and actually store both waste tires and fuel that's produced.

In the following fiscal year, the expectation is to place an affordable gasification system on this facility in Texas to utilize some of the tire feedstock, more of the Tire-Derived-Fuel to produce energy and other fuels. And really it will, be a test and a model for that area for sales and marketing efforts.

One of the focuses of the partnership between Vista and Nathaniel is really to incorporate a synthesis gas back in for the gasification process and that essentially would take the synthesis gas and convert it into a high-grade alcohol. That would be a process that would have to be engineered and provide an alcohol backend revenue source or revenue stream, which is of higher value than, production of steam or electricity or other thermal energy. That alcohol at this point in time, can be mixed or blended with any existing petroleum feedstock, could be used as a straight fuel for an automotive application and it has received EPA approval.

In the near future, Vista expects to invest approximately $2 million into Nathaniel, that's for engineering and marketing and development of the technology that goes in the business. They are also contributing business development work they have done over the past couple of years, which involves waste energy facility, marketing that's occurred in China, Mexico, Europe, West Indies and some in the United States.

One of the items that Vista also brings to the table is the potential or expected use of the Nathaniel Energy gasification technology in a project in Li Xian in China, which is south east of Shanghai. That project at this point is expected in April to process about 450 tons of waste straw a year and about 250 tons of municipal solid waste per day.

The waste straw problem in China is a significant problem. They, in the past, have burned the straw in the fields and that has caused major issues. As you could imagine, that burning has essentially been curtailed. I can't say it has been completely curtailed. But it's run upon, and they are looking for solutions to utilize that straw in other ways. And gasifying of a hydro-carbon based straw is a very efficient use of waste material, and it eliminates the major problem for the Chinese.

Vista has also developed and will bring to the party, with Nathaniel, some business relationships, one with Wilcox/Devere, who we expect to be our EPC contractor. They have over 1,000 employees, been in the business for over 40 years. They have international project expertise, and they have experience in building ethanol plants and water treatment plants. And the ethanol plants are very similar to our gasification plant technology that we expect to deploy here in the near future.

In addition, Vista has become a consulting member of the Asia and Pacific partnership. It's a conglomerate or it's an association, if you will, of six countries, United States, China, Korea, Japan, Australia, and India. And the partners include a number of major corporations in the United States.

The purpose of the partnership is really to develop sustainable economies within the countries China, Korea and India with the assistance of United States, Japan and Australia. And the focus is really on alternative technologies and green energy.

In closing, I want to thank you for your attention. Again, this is a fairly quick presentation. I want to give you an overview of what's going on with Nathaniel and it's involvement with Vista International. We expect to be a force in the economic growth in our country and really one of the visions we have is to provide a greener, cleaner legacy for our children and their children. Thank you. Yes, sir.

Question-and-Answer Session

Unidentified Audience Member

Two questions. One, do you also collect the garbage? And number two, do you buy garbage from other people?

Tim Peach

The first question is, do we actually collect garbage, and the answer to that is no. Usually, the waste streams are brought to a facility. And do we buy the waste stream, typically not. Because in most areas, there are fees associated with disposal. And one way we would make money on a gasification project is to charge for handling that waste stream, taking it off somebody else's hands.

Unidentified Audience Member

(Question Inaudible)).

Tim Peach

Yes. Now in certain parts of the world, the fees for collecting and processing trash significantly differ. If you go to Europe, the fees for disposal of municipal solid waste are hundreds of dollars a ton. I mean, if you go into Mexico or China, they are much lower and in the United States, they are somewhere in between. So, the economics are dependent on what those tipping fees might be that you can receive from accepting that waste. Yes.

Unidentified Audience Member

(Question Inaudible)).

Tim Peach

The question, if I can repeat it properly is, are we using different technologies for different feedstocks?

Unidentified Audience Member

(Question Inaudible)).

Tim Peach

I think, the way I can answer that is, the fuel has to be properly prepared in order to be accepted into our gasification process. That means, if it's a tire you chip it to size. So, you can shred it and chip it. Or, if its municipal solid waste, you would essentially compact it, and make a pellet out of it. You are dealing with wood waste, then you can also use that same compaction technique, little change, a little different there. Coal could be ground to form, but I think that might be a little more difficult, to generate a conformity, in that feedstock, but it's doable.

Unidentified Audience Member

Is that your technology or you are using somebody else's technology?

Tim Peach

No. The primary [feed] handling technology is elsewhere.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Yes. A lot of that depends on what type of fuel you are handling. The question was what's the cost of the plan? And it really depends on the feedstock, and the feedstock preparation costs, and let's say you want to produce off the backend. You can produce electricity, you can produce steam or you can produce an alcohol.

If you are producing electricity, the capital costs are a little higher than in producing steam, in which you have as much power generation equipment that needs to be added to the capital structure. The alcohol process is probably a little cheaper than the electricity process. So, I mean it varies by feedstock and what your (inaudible).

I would say, I am probably safe in saying that a typical plant might run in the $30 million range for about 100 to 150 tons of municipal solid waste process [bringing] on a daily basis. That's a rough estimate. Yes sir.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

The question is where do we see our plants being built? I think, Vista has done a tremendous amount of business development work in a couple of different places. One is in China and I see there is a big opportunity, huger opportunity for the deployment of facilities over in China.

I think the other area that we could focus on is Mexico. They are very interested and they've got a huge problem with waste and they also have a huge problem with waste tires. And that's a huge target market that Vista has been involved with. There are some locations in the United States that have been targeted and there are special situations at this point. Yes sir.

Unidentified Audience Member

Does the calorific content of waste vary greatly or hardly among countries? In other words, the Chinese…

Tim Peach

That's a very good question.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Okay. So, the question is, does the calorific value of the waste vary from country to country? And most assuredly, it does.

Unidentified Audience Member

Or region to region?

Tim Peach

And region for region. What you want in the gasification process, is depending on what you want to produce. You want to produce electricity, you want high BTU content. So, you are looking at plastics and tires and things that have high BTU contents that produce tremendous amount of thermal energy. If you are looking at producing an alcohol, you don't need that high BTU contents. You can go with something lesser like, MSW has a lesser value.

But if you are going from country to country, United States has a tremendous amount of plastic, and fairly high BTU plastics, and high BTU content waste material. In China, they have less plastic certainly, they have more water content in the waste. It's more organic. So, that every country, every region, has different variation and that has to be taken into account in terms of the project, (inaudible). Yes sir.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Well, the question is what is the sales cycle and certainly there are two sort of overlapping questions here that I'm focusing on in my mind. One is what is the sales cycle itself, and that is from introduction to signing a contract, and that certainly varies. And essentially this is done with some of that business development work. So, the sales cycle for a number of projects, we expect not to be as long as, "hey you are starting from scratch at this point." Typically, you are looking at probably anywhere between three months to a year sales cycle, might be my guess.

But in terms of a project deployment cycle, you are looking at anywhere between a year to 18 months roughly. And a lot of that is depending on two things, one is the time for permitting, but that could be run in parallel with a number of other operations. The long lead times are probably on the equipment side. We are looking at special, it's depending on what you are building, if you require special boilers, dirty gas boilers and things of that nature, the lead times in those are sometimes 6 to 12 months, sometimes longer.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

They do, yes. Yes. In the economics and in terms of what we have done with looking at our profitability on the projects, we have not taken any of that into consideration at this time. But we know those credits are there, and it depends on state to state. It depends on whether they are in Federal, US.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

I think the economics really dictate the location before the credits. What we are looking at, doesn't make economic sense and then the credits are really icing on the cake.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Well, we've partnered up with a low-cost carrier and they will be working with us as the EPC contractor. We have not, if you will, looked elsewhere at this point. Although we have talked to some other firms for international areas, that perhaps low-cost carriers are not interested in pursuing.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Well, we will be doing the project financing. We will be doing a debt-raise on the project to bring in some partners on the projects.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

It is very similar to any type of power generation facility. You line up your fuel source, and in our case, what we try to do is we try to make the profit on the fuel source. And you line that up with the long-term contract for delivery of your waste fuel, and then you develop. You have it in the Power Purchase Agreement in place for a period of time, whether it's 10 years or 15 years or as long as you can take it out of it.

We want to take it out and make the economics work. That's on the power side. If you are doing an alcohol, that's something, a little different, and you can get long-term contracts on production on the sale of the alcohol. I think, the opportunity for alcohol in terms of price improvements is probably greater than electricity in the long run. That's my personal opinion, that's not based on anything else. Yes sir.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Yeah the question is, are we operating a maintenance plant? And I think for these plants the key is to provide an operating contract, a maintenance contract. And in a lot of those plants we expect to own and operate. So what we have found is, you really need qualified training technical people running those facilities or they can get offline pretty quickly. So, our focus is certainly to be very vigilant about the running production that comes off those facilities.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

No. I would say, it's fairly similar to a power generation facility. Once you start an operation, it works efficiently until something causes a disruption. And so, therefore the idea is to cause as few disruptions as possible, and continue the operation 24/7 until something happens. And typically, where you run into problems or you have an issue, it would be essentially with the waste, if there is any residual scrap coming off or maybe that needs to be dealt with.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Year one. What we'd like to do is we would like to deploy our own teams initially to manage and operate. But I think, over the long haul, depending on the number of facilities we have up. We're going to have subcontracts on some of that, at some point in time. That's looking out into the future a little bit. Yes sir.

Unidentified Audience Member

Just can you elaborate a little bit? On China, will that be a joint venture with the government there?

Tim Peach

At this time, it will not, it's not expected to be a joint venture with the government.

Unidentified Audience Member

What is the capitalization of the company now?

Tim Peach

If you look at Nathaniel, it's a publicly traded company. The capitalization is relatively miniscule. What the value there, in Nathaniel, is really the value of the technology and the opportunity to be exploited. And what this is, interesting in the technology is, is they developed lot of business backlog, and interest in the technology to take it forward and exploit it. And Vista itself is a private company.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Nathaniel has, at this time; I am going to say in the area of, (inaudible) couple of weeks. There is about 17 to 20 people somewhere in that range, that are currently in Nathaniel.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

There are approximately 90 million shares outstanding, of which about 30 million are in the float.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

The authorization currently is 200 million shares of common stock. Yes sir.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

The question is when do we see the two companies coming together? And I expect that to be gradual over a period of time and, in certain instances, that may, for certain technologies that may not occur at all. So, I think that's a question I really can't definitively answer at this time.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Yeah. Those projects that deal with gasification and the alcohol process are all under Nathaniel Energy. Those are all Nathaniel Energy projects.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

That should be. The name change, yes. It will be called Vista International Technologies Inc.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

Vista International will still maintain itself as a private entity.

Unidentified Audience Member

(Question Inaudible).

Tim Peach

On the Vista Board or on the Nathaniel Board? On the Nathaniel Board, we have Johan Smith, who is the CEO of Vista International. And that's the gentlemen sitting right here in the front row. If you have any questions about Vista, he would be a good person to talk to. We have got Barry Kemble, who is the CEO of Nathaniel on the Board. We've got Michael Burdis, who is a Director of Nathaniel Energy and Karen Smythe, who is the fourth director.

Thank you very much. I appreciate your attendance.

TRANSCRIPT SPONSOR

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