The Need
China's commitment to cleantech and renewable energy is a result of their National Development and Reform Commission's strict policies to lower carbon emissions. According to China's National Energy Administration, China doubled the pace of adding renewable energy capacity in the first ten months of 2013. By 2035, the International Energy Agency estimates they will produce more energy from renewable sources than the US, Europe and Japan, combined.
The Source
China will increasingly rely on solar, wind, nuclear and hydro-electric power, as they turn away from carbon emitting fossil-fuels. But there is another source of energy that they are also employing, methanol, produced from an abundance of low quality coal.
According to the Institute for the Analysis of Global Security, China's methanol annual production capacity has grown from 2 billion gallons in 2003 to 15 billion gallons. That is roughly the size of America's ethanol industry. Among other uses, they state that there has been over 100 million refuelings of methanol converted vehicles.
Synthesis Energy Systems, Inc. (NASDAQ: SYMX), is one company that has a proven method for transforming low quality coal into environmentally compatible power generation. In this case, methanol. According to their website, they hold an exclusive license for the U-Gas technology from the Gas Technology Institute. U-Gas is a commercially successful, cost effective coal and biomass conversion technology.
2013 Developments
SYMX is currently involved in two joint ventures in China. They announced on December 18 that their Zao Zhuang joint venture plant in Shandong Province has begun production of syngas. Company President & CEO, Robert Rigdon, said the possibility exists for annual sales of $30 - $40 million of methanol sales in 2014. The second joint venture plant in Yima (Henan Province) could have the capacity to produce three times as much methanol. It is currently producing methanol at 80% capacity.
The Future
SYMX has announced that they are currently developing business projects in Inner Mongolia, China, with several companies. SYMX currently has a joint marketing agreement with General Electric Company (NYSE: GE) as well. It involves SYMX's gasification technology and GE's gas turbine power technology. Together they can target opportunities in emerging areas. SYMX U-Gas technology can also be used in connection with 'green' chemicals, transportation and industrial fuels, steel production, and substitute natural gas.
Companies such as Siemens (NYSE: SI) and Renewable Energy Group,Inc (NASDAQ: REGI) are players in the biomass gasification sector. Syntroleum Corporation (NASDAQ: SYNM) agreed to an asset purchase agreement by Renewable Energy Group on December 17, 2013. With SYMX's joint venture plants on the cusp of profitability, could they be on their purchase radar in the not too distant future?After all, SYMX's website touts up to 40% lower core technology costs than other gasification technologies. That is an attractive number in any business.
Conclusion
SYMX is a company that has laid the foundation for promising growth in 2014 and beyond. They have done so by testing & proving their technology. It is all the more sweeter to be able to help China meet it's environmental goals and provide it's own stockholders with a company they can be proud to be a part of. They are also working on projects involving clean technologies in their hometown, Houston, TX. SYMX has employed the time honored tradition of developing business relationships with respected industry leaders like General Electric. They have earned respect in China and India, where established business partnerships are in place.
I believe SYMX will enter the profitability realm in 2014. They have never been in business for the fast buck. The company deserves credit for due diligence. I feel patient investors will ultimately be rewarded for their knowledgeable insights into this company. SYMX is a heavy speculative play, and if you're looking for guarantees, they don't exist in the stock market. But if your investing philosophy includes placing speculative plays alongside established hard earners in your portfolio, you could do much worse than SYMX.
Disclosure: I am long SYMX, GE.