Synthesis Energy Systems' CEO Discusses F2Q2013 Results - Earnings Call Transcript

| About: Synthesis Energy (SES)
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Synthesis Energy Systems, Inc. (SYMX) F2Q2013 Results Earnings Call February 6, 2013 8:30 AM ET


Matthew Haines - Managing Director, MBS Value Partners

Robert Rigdon - President and CEO

Kevin Kelly - Chief Accounting Officer


Robert Smith - Center for Performance Investing


Good morning and welcome to the Synthesis Energy Systems' Second Quarter 2013 Earnings Conference Call. All participants will be in a listen-only mode. (Operator Instructions)

Please note this event is being recorded. I would like to turn the conference over to Mr. Matthew Haines, Managing Director of MBS Value Partners. Please go ahead.

Matthew Haines

Thank you, Denise. Good morning everyone, and thank you for joining Synthesis Energy Systems earnings conference call. Today management will discuss financial results for the company's second quarter of fiscal 2013 ended December 31, 2012 and will provide an update on corporate developments. Following management's prepared remarks, we will open up the lines for your 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 the Company believes that in making such forward-looking statements its expectations are based upon reasonable assumption. Such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected. There can be no assurances that the assumptions upon which these statements are based will prove to have been correct.

Please note that in connection with the proposed ZJX China Energy transaction, SES has filed a preliminary proxy statement and intends to file a definitive proxy statement with the SEC and intends to mail the definitive proxy statement to the stockholders of SES. SES and its directors and officers may be deemed to be participants in the solicitation of proxies from the stockholders of SES in connection with this transaction. You may obtain the preliminary proxy statement and when available, the definitive proxy statement for free by visiting EDGAR on the SEC website at Investors should read the definitive proxy statement carefully before making any voting or investment decisions because that document will contain important information.

Please refer to the Company's Annual Report on Form 10-K for the year ended June 30, 2012 for a further discussion on risk factors. SES's 10-K and other SEC filings are available on the Securities and Exchange Commission's website at or on the Company's website at

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

Robert Rigdon

Thanks Matt. Good morning and welcome to our second quarter fiscal 2013 earnings call. With me on the call today is Kevin Kelly, our Chief Accounting Officer. I am pleased to report today that the Company is progressing well. We are keenly focused on delivering key objectives for the Company that are intimate to grow its revenue, earnings and operating cash flows in 2013, and will have a meaningful impact to our business.

We are currently completing a major significant milestone for the Company with our Yima Joint Venture Plant now in the early stages of producing methanol. Separately we have recently signed two important technology engineering agreement; one, to apply our technology into large scale steel production and another to apply our technology in the production of methanol from municipal waste such as refuse to right fields.

Also over the past quarter we have been evaluating small scale power applications to validate the potential market and seek initial customers for power plants using our technology in combination with small scale gas turbine engines.

Lastly, we have entered into a new agreement to renew and expand our relationship with Crystal Vision Energy, which is expected to delivery to SES China significant new levels of funding and financing and near term earnings in conjunction with strategic M&A opportunities currently being pursued.

In a moment I will provide a more in-depth overview of our progress and answer questions, but now I would like to turn the call over to Kevin Kelly to review our second quarter financials. Kevin?

Kevin Kelly

Thank you, Robert. Revenue for the quarter ended December 31, 2012 was $13,000 versus $183,000 for the quarter ended December 31, 2011, due to fewer technology services performed during the period. We continue to keep the ZZ plant idle while we work diligently to negotiate new commercial arrangements with Xuecheng Energy or XE an affiliate of Shandong Weijiao Group.

Through December of 2012, XEO the ZZ joint ventures $6.8 million in pass due capacity fees which we are working to recover in a new commercial arrangement. Discussions regarding the nonpayment and restructuring are ongoing. In the event we are not successful reaching agreement with XE, we may seek to recover the outstanding capacity fees to binding arbitration.

Technology licensing and latest services revenues in the quarter were $13,000 versus $164,000 for the prior year's comparable quarter. However, the Company has recently received orders from customers totaling $850,000 for technology services that are expected to be recognized as revenue for the quarters ending March and June 2013.

The Company's operating loss for the quarter was $3.9 million versus $4.8 million reported for the second quarter of fiscal 2012. The decrease in the operating loss was due primarily to lower costs at the ZZ joint venture plant while holding the plant idle.

The net loss attributable to stockholders for the quarter was $4.4 million or $0.07 per share compared to a loss of $5 million or $0.10 per share for the second quarter of fiscal 2012. Our weighted average common shares outstanding increased approximately 22% for the quarter ended December 31, 2012 compared to the quarter ended December 31, 2011, due primarily to the sales of stock to Hongye and Zhongmo in September and October of 2012.

Our SRS joint venture incurred expenses of $272,000 for the last quarter. We expect these expenses to decrease significantly over the next couple of quarters. We believe the markets today are not conducive to raising new business development funds for coal resources and therefore we have chosen to temporarily suspend the expenses of SRS until the markets improve.

In October we closed on the sale of additional $6.8 million of common stock to Hongye and Zhongmo, which completed the transactions totaling $15.5 million of stock sales. As of December 31, 2012 the company had $23.3 million in cash and working capital of $15.6 million.

Now I'll turn the call back over to Robert.

Robert Rigdon

Okay. Thanks, Kevin. We are focused on securing new important partners and strategic collaborations in China that will help us fund and accelerate the growth of our business there. As well as forming new partnerships with strategic and well capitalized industrial companies to build market segment business verticals with a potential to pull through a meaningful volume of SES equipment, technology and services into the markets where the partners have their business.

I'll start with the update on China. First and foremost we are very excited that our Yima Joint Venture Plant, which we consider to be a key element to the Company's success had its first methanol production at the end of December. Accomplishing this milestone with significant to meeting the project goals and objectives for the joint venture and this also moves us towards accomplishing full production rates of the plant.

Additionally we announced yesterday that we have achieved new operating milestones including a 23 day run of one gasifier and the simultaneous operation of two gasifiers, which is how the plant will run when it's at full capacity.

The joint venture is planning to be producing and selling refined methanol from local Yima coal at full capacity rates by early summer this year. Its design capacity is 300,000 tons of refined methanol per year, and for this year the joint venture is targeting a total annualized production of about 210,000 or about 70% of the full production rate for the plant.

With methanol prices currently averaging about RMB2,600 to RMB2,800 per ton the JV plant would generate about $90 million in gross revenues of this year based on current exchange rates. At an annual rate of full production the plant would generate between $130 million and $150 million in revenues at today's methanol prices.

As you may recall the Yima coal company controls 75% of the JV and SES has 25% ownership. When the JV was put together in 2009, we arranged for favorable commercial terms for the coal supply from Yima. Based on favorable coal pricing and good management by the Yima joint venture team we believe that the plant has a capability of delivering attractive operating margins.

SES is currently supporting this joint venture by supplying management personal such as two assistant general managers and a large team for the start up of the gasification systems inside the joint venture. The long-term plans for this project site continues to be building out additional methanol equivalent capacity on the order of about 900,000 tons per year, once this first phase is fully operational. This would bring the total capacity to about 1.2 million tons per year of refined methanol. In fact significant portions of the utility infrastructure and personal support buildings were installed during this first phase.

Based on the recent accomplishments at Yima and the interest we have received from potential customers and partners visiting the plant has increased significantly. In particular we have a number of clients in our technology opportunity pipeline who have been waiting to see a reasonable level of commercial demonstrations from the Yima plant before making key decisions about their projects moving forward with our technology.

Although SES today is not a very large company, we believe that the potential that we have to participate in the global energy market is enormous based on our demonstrated low-cost, feedstock flexible technology which can utilize most of the world's coal waste and renewable feedstock. The startup of our Yima plant is already showing signs of magnifying the interest to include our technology in large-scale energy projects globally.

Our objectives in China remain steady to quickly establish earnings and operating cash flows from new and existing China investments and increasing amounts over the next 12 to 18 months.

To facilitate the continued growth of our business in China, we were pleased to announce in December that we extended our engagement with Crystal Vision Energy for another 24 months, based on how pleased we have been with the early results generated by their teams working together with us.

CVE was instrumental in assisting us and completing the strategic cooperation with Hongye and Zhongmo last year. With CVE, we have laid out a strategy for SES China business. This consists of generating operating cash flows from our Yima project, recouping our lost capacity fees from ZZ amounting to about $6.8 million and repurposing our ZZ plant. In addition, we intend to raise funds and finance the acquisition strategically, relevant operating assets in China, some of which we have access to through Hongye and CVE.

We are reviewing assets such as methanol fuel-blending facilities, compressed natural gas, fuel operations and operating coal mines and locations that would give SES unique advantage in using our technology for using low-cost coals and coal waste to produce methanol substitute natural gas for pipelines and other chemicals and transportation fuels.

It's our goal that the earnings generated by our operations and these potential acquisitions would fully cover our China operating expenses and enable us to further grow our business there, with the goal of eventually becoming a significant part of the new clean energy landscape in China.

Moving on to the ZZ joint venture, our ZZ joint venture is one of the key challenges to overcome during this current quarter. As you may recall, Hai Hua stopped paying the capacity fees owe to the ZZ joint venture. As a result, ZZ has been idling the joint venture since late 2011, and we have undertaken measures over several months to find the solution and reach agreement.

In the middle of last year, the Hai Hua facility was bought by a larger and financially stronger Chinese company, called Weijiao. With Weijiao's involvement, Hai Hua was renamed Xuecheng Energy and we have grown more optimistic that we can reach the financially acceptable solution for our parties.

Over the recent months, Xuecheng has shown some degree of goodwill by paying an advance of approximately $800,000 to the ZZ joint venture. We have greatly intensified our efforts over the last quarter to achieve agreement that would recoup our outstanding capacity fees and restructure the joint venture to get the project running again profitably. Recently, we engaged a senior leader from CVE to assist in this effort, and we believe we are getting closer to a resolution with Xuecheng and Weijiao.

It's too early for me to describe any details of a possible solution because things can change before final agreement is achieved. However, as long as we see progress and believe we can resolve this amicably with Xuecheng and Weijiao and we plan to stay on this course and avoid taking the path towards arbitration. That said, we have not ruled out binding arbitration for other further legal steps to recoup the outstanding capacity fees and the future capacity fees due under the original 20-year contract.

Finally, for China discussions regarding the potential strategic investment of ZJX/China Energy into SES do remain active as ZJX continues to structure their funding for China Energy with possible investors.

Now outside China, we've made significant progress since our last call. As I mentioned, our focus is on establishing the valuable business verticals in partnership with other industrial companies that now operate in markets where our technology can bring significant new value through opening up new business lines or dramatically improved economics on existing business lines. These types of partnerships are not capital intensive and have the ability to pull through SES equipment technology and services. We are currently advancing business vertical opportunities for waste and renewable feedstock for fuels and chemicals.

We are also advancing separate power and fuel market verticals. In December, we announced an important agreement with the global leader in iron ore processing and steel production. This agreement funds our study of the integration of our advanced gasification technology with the steel production technology.

We believe that the study will validate that this technology integration will be synergistic and will result in a highly feedstock flexible means of producing steel in developing parts of the world with attractive economics and environmental characteristics. Positive results from this study could lead to a joint venture business that would be a first of its kind in this industry.

We have targeted this market segment as a key business vertical platform for our technology. Additionally, in January, we announced a second similar agreement with the confidential customer to study the optimal use of renewable feedstock combinations for the production of green chemicals. And these feedstocks may include auto shredder residue, refuse-derived fuel, and other waste materials that can be efficiently and cost effectively used to produce valuable chemicals. The plants being contemplated are expected to have attractive environmental footprints as they would process these waste streams with exceptionally low emissions profile.

In addition, these plants have the potential to include carbon capture capability. This green chemicals business has potential to lead to a joint venture business partnership and would be a business vertical that would be attractive in the U.S., Europe, and Japan as well as China, India and other fast developing countries. The production of green chemicals could include ammonia for fertilizer, methanol, and derivatives of methanol such as gasoline, propylene, acetic acid and many other basic chemicals.

The carbon dioxide captured from these projects would be safely stored and would supply ore produces with the ability to recover untapped reserves. Unlike others interested in such a business SES can supply this industry with a commercially proven gasification technology at economical scale.

To help demonstrate and define the potential for these two business platforms, we are being assisted by Fluor for both of these paid studies which total to $850,000 in revenues for the company with the potential to add more customers shortly. Today Fluor has shown significant confidence in our technology capability through its recent engagement with global customers evaluating the implementation of coal gasification technology in the projects. And they bring decades of expertise around implementing gasification technology into energy projects around the world.

Now, we'd like to discuss a third business vertical under development. For the last several years, we've been aware of interest in using our technology for small scale power generations in regions where conventional fuels are scarce or expensive. We are learning that small scale power plants are needed in locations where electricity supply and infrastructure is immature or the location is too remote and where a large demand is incurred such as at mining operations, petrochemical plants, and for communities and facilities which do not have access to grid supply power or inexpensive fuel. This is a very common occurrence in developing regions such as Eastern Europe, Southeast Asia, Africa and South America.

According to the U.S. Energy Information Administration the power generation growth in these regions over the next four years from syngas alone is predicted to be almost 8 gigawatts. The potential business that can be built from this framework could be very substantial for SES. Our ability to use local, low-cost feedstocks including lignite coal waste and refuse enables these growing economies to build electricity generation using our technology paired with small scale, well commercialized aeroderivative gas turbine engines.

Plants such as this will be supplied as an engineered package designed in module sets, which could be fabricated inexpensively in regions like China and shipped to projects all over the world. We are advancing discussions with the engine suppliers and potential customers and we are excited about the possibilities of this endeavor and I look forward to providing more updates as this develops.

Over in India, we've been working hard to achieve our first licensing order for our technology and to close on a collaboration agreement with an Indian manufacturing company for jointly marketing our technology in the country. As we strive to finalize our first order in India, we have been adapting our commercial approach to meet the customers' requirements for expanding our scope of work. In order to meet these needs, we are now jointly working with a leading global engineering, procurement and construction company to meet the customers' requirements and hopefully we will win this first project in India very soon.

This first licensing project, which would include equipment and technical services supplied by SES, is very large steel producer in India, who is expanding their steel production based on coal gasification to supply syngas to the steel making processes. We believe that a first gas fire in India would be a significant launching pad for us to implement additional projects owning more rapid schedule and we are excited to be making good progress towards closing this deal.

The most important and key element that SES brings to all of these potential business protocols is our unmatched, extremely wide, low-cost feedstock capability and our low-cost approach to doing the business. As I've said many times, our ability to efficiently and cost effectively convert the world's cheapest and most abundant feedstocks into valuable clean energy and chemical products is our most attractive value proposition. And now, we are working with some large industrial companies operating in these energy and chemical businesses to take advantage of our technology's ability to open up entirely new product lines in existing markets and lower the cost of production in others.

So you can see we are dealing with our challenges and we are making good progress on our ongoing projects. We are advancing towards building several new valuable and potentially large business vertical ventures, which should have a very positive impact on our company. We are excited about these long-term prospects but also remain focused on the near-term goals of delivering revenues and earnings from our China and technology businesses.

Such that, we turned the corner during calendar 2013 towards profitability. And we believe that we're well-positioned to do so with our Yima project now progressing well through its startup, and with the financing and M&A work in progress now in China, along with the potential to form new business vertical partnerships this year. I look forward to reporting on all of these developments on our next call if not before.

And with that, I'll open up the call for questions.



(Operator Instructions) Our first question will come from Robert Smith of Center for Performance Investing. Please go ahead.

Robert Smith - Center for Performance Investing

Good morning, Robert.

Robert Rigdon

Good morning.

Robert Smith - Center for Performance Investing

There is a lot of iron and steel and fires so to speak. My first question is, I think, so much is dependent on this methanol unit really getting up and running toward full capacity to induce others to move on this. So yeah, when I got involved with the company, I guess the excitement was the potential arrangement with the ZJX and the possible garnering of a share price toward the $8 level. Now with so many kind of possibilities in the wings, although the capital gain from about a $1 a share, it was -- is kind of enormous in and of itself, the possible potential of the enterprise in a way might [draw] something like that in the future. So my first question is, in talks proceeding to try and put that initial event should have been, are you at all having second thoughts about the possible terms and essentially surrendering the control to another entity?

Robert Rigdon

Robert, first that's a very good question. I agree with you in that when we initiated the work that we were doing with ZJX which was still ongoing in terms of ZJX securing funds for their investment from China Energy. We were about one year into the construction of engineering you know and construction of our Yima project and it's taken ZJX much longer than we had anticipated to complete their funding efforts. Now when you look at what we’ve done over those remaining probably 20 to 24 months, now with the Yima project coming on, we’ve been as you know very, very active in key regions of the world like China and India and now with the new interest in the U.S. And with Yima, starting to operating clearly on track now for hitting its targets, then it’s actually in the interest because of the opportunity pipeline that we’ve built up. I agree with you that the possible enterprise value here with business vertical partnerships with the industrial companies has potential to be very, very large.

So we are part of what we’re doing frankly with the work in China that I just discussed in financing our China business is our initial step with Crystal Vision’s help to get all alternatives on the table in terms of financing. And we are not exclusive to ZJX in this agreement. So we are out now engaged with a number of parties that are showing significant interest in SES, because of what we’ve accomplished over last couple of years. So we’re going to make the right decision for the shareholders, the one that we believe is going to drive them most value. And at this time I think we just got to get everything on the table in front of us and we’re doing that very quickly right now.

Robert Smith - Center for Performance Investing

So in a way if tomorrow ZJX suddenly said -- appeared and said well we’ve got overdone and we’re ready to move forward, you would well wait a minute let’s get everything on the table and examine this as far as the shareholder value to Synthesis Energy.

Robert Rigdon

We are getting everything on the table right now Robert. And ZJX is unlikely going to walk in…

Robert Smith - Center for Performance Investing

I can understand that, sure.

Robert Rigdon

So I think that the reality of what’s happening is we’re putting everything on the table right now simultaneously and so that’s sort of what if case. ZJX can create a lot –through China Energy and the way we structured that agreement can create a lot of value for the Company. They walk in with the money right now, we’re going to sit down and say okay is this what’s in the best interest right now for shareholders to continue…

Robert Smith - Center for Performance Investing

I don’t expect that to happen either Robert, but I was just thinking of that hypothetic on…

Robert Rigdon

But your point is really good Robert, the thing that may sort of be lost on people is just how much work we have done over the last two years. And Yima project it just brings it altogether. I have been saying there is lot of pent up interest in our Company and waiting for this project to get going and now that interest is starting to mobilize and we are seeing and people sort of these projects that people are looking at building based on technology they are large investments. So they like – they want to see the comfort of a large scale project like Yima operating and that’s a big catalyst for us.

Robert Smith - Center for Performance Investing

How has the Chinese winter been impacting what you're doing?

Robert Rigdon

Yeah we’ve been actually managing okay. There’s been some cold snaps over there, but surprisingly well I have been a little bit concerned because these winters particularly in Hunan where this project is built could be, can get pretty cold. But they managed well. We haven’t had a lot of winter related issues in this project. So that’s telling me we’ve probably done a pretty good job initially on the engineering design for the local weather conditions.

Robert Smith - Center for Performance Investing

How about the recent publicity again about the pollution in Beijing, and how does that play into with the question of (Inaudible) coal -- eliminating (Inaudible) coal and moving to renewable and your expertise in sort of using clean technology?

Robert Rigdon

Well that’s right square in the center of value we bring. We do, because you’re right. Beijing has had some of the worst air pollution which is typical at this time of the year actually but it has been particularly bad this year because of the old style coal technologies that are running all over the China. What we bring to the table is very, very clean and efficient conversion of coal, but not just coal its cheap low cost coal that makes our projects not only clean and environmentally friendly but also attractive in economics.

Now China is taking steps towards cleaning up they are really trying to do it, it’s just a big massive undertaking. And so what we see in China is moving towards technologies like ours not just that are clean but that are clean in the economic. And we are seeing now very definitive moves in China and increasing interest in renewables, starting to get those renewable plants built.

And you know where we're seeing that is the most I guess telling in the sweet of potential financing and sources of strategic partners that we're in discussions within China, just a numbers of those whose charter or a significant part of what they want in their portfolio is focused on green clean energy because these folks that we're talking to see a huge business opportunity in this area in China and they are just are not large scale, of large scale commercial technology options for renewables and this is another very sweet spot for us yes because of our, we can do renewables at - large scale for renewables, large scale for renewables by the way Bob is smaller scale for coal and so it's a very easy part for us.

Robert Smith - Center for Performance Investing

And going further, in the past you have mentioned projects that working in the continent of Africa and Australia and I was just wondering where those are at the moment?

Robert Rigdon

Yeah, so what's really happening here is that those potential projects such in Africa which are generally more centered around either small scale power or producing chemicals like ammonia for agricultural purposes. And projects in Australia, as well as projects in India, what they've done and to our opportunity pipeline is that they are aggregating, these are aggregated into market segments like the ones I was mentioning such as steel for example which is a big growth area in India such as small scale power and the renewables platforms.

And these are allowing because of sort of naturally evolves into talking to large industrial companies that we can partner with our technology and they are already operating in these businesses significantly, so that we can then come in and pull through our technology and equipment. And that's why we're now moving to leverage what we did over the last two years into forming these types of strong technology partnerships to pull through our technology into those areas. And that's what really happening to those projects so they're there, and we want to roll those into our business vertical opportunities.

Robert Smith - Center for Performance Investing

Okay and then your comment about how you see 2013 unfolding, is this fair to say that if what you expect to happen happens and you would not have to have a need for additional cash in 2013?

Robert Rigdon

Yeah, so what we're after--

Robert Smith - Center for Performance Investing

I know if you're to get financing I mean--

Robert Rigdon

Right, so what we're doing is very aggressively financing the business in China, Bob, and once we have completed that and moved on some of these M&A activities that are actually progressing pretty fast right now, we then and those are in place in all that financing is being completed and those are in place, then that is our goal is to move the company on into profitability and work-off of our operations.

But you know we're going to -- it's going to take us, we've got to have another step to get there at least another step here with our financing in china.

Robert Smith - Center for Performance Investing

Okay. Thank you and in the prospects again appear very exciting and although the there has been much to be shown top or bottom line yet the potential certainly is very apparent to me. Good luck.

Robert Rigdon

Thank you.


(Operator Instructions) And we have a question from [Steven Beglighter] of -- a private investor. Please go ahead.

Unidentified Analyst

Hi Bob, how you're doing?

Robert Rigdon

Hi, Steven.

Unidentified Analyst

Hi. So if I - I appreciate all the insight. I almost spent a ton time of following all the SYMX news. It Just seems to, following up on last question about capital raise, it just seems to me that every time I focus on it, the day when Yima is up and running and producing revenues seems to get pushed back six months and maybe a misstatement but that's just how it seems. And again, we probably remember I sort of have a I'm like a battered child from doing thing, trying to do ventures in China.

And so I wondering if you could comment on the what - one has the timeline got extended, what's the risk of it getting extended again and how much extension risk would require additional capital. Because I agree, if Yima gets started and it's -- Yima gets started and is effective, I'm sure you've got a whole host of things that really have a much higher probability of being valuable for the company. I'm just really sensitive to things going to China just sort of the step by a thousand (Inaudible) new approvals, new partners, that exchange job that they fresh (Inaudible) things whatever. And you know the end of this year which I was sort of expecting fourth quarter of last year to be somehow that would head with the date, or was it my head that that's when things would start to generating revenue and now it looks like it's, from your press release you know some time along the 2013, like the end of the year and like we get pushed back another year for reasons not under your control, like what's the plan? Could that happen, and what's the plan?

Robert Rigdon

Okay, I think that's a very, I guess relevant question, Yima the project initially we had been plan to have that project running in the very early start-up stage, I guess in the middle of last year, so about six months ago.

In that project slipped as I've reported before because of the, I guess a couple of years, about a year or so after we kicked it off, Steven, you may recall there was -- because of what was going in the global financial markets and commodity prices with chemicals there was a sort of a several month review of maybe moving that project over to glycol production which we ultimately decided not to do. That really was the bottom line of what shifted things on us. And since then the JV has actually done a very good job of getting the project back up and running. So look where we are now in terms of what's the risk of further delays.

The project starting to run, so there were -- there's several items in here in terms of minor commissioning things that need to be done but the projects on the ground that's built, we're starting to operate it. It's a big large scale project so it takes like, I would saying it takes -- it's going to take a few months here, hopefully just two or three, but you know, we're allowing till the middle of the summer. And we're starting to see the unit coming up.

And while we've been making these runs, we've actually had methanol production. I'm not because it's been intermittent we're not really trying to report on how much methanol is being produced yet. But we're starting to see methanol production now. And so the almost all of the risk of this project is out of it now. Now where we are is getting this joint venture team that seems to be moving it forward pretty well at the moment, just to keep on track and get it up and going.

And it's just there should be a tremendous amount of comfort taken from the fact that the project is running and if it wasn't running, that would be a different story, but we've got all the pots and pans on the ground now and the project is running.

Unidentified Analyst

The project is running and I understand like you need to run it for various period of time and increase the pressure, heat capacity like, you don't want just sort of like turn it on and turn that like, treat it like the New Orleans super (Inaudible) or something like that.

End of the year it seems like a wrong time, like this is like we're a basically February 1, and something I want like can we get revenues in April?

Robert Rigdon

Well, we may. We very well may. The joint venture should, for sure. And the joint venture the distribution from the joint venture would be the next thing that we would be looking at. So very well may. And basically what I just went through was that the operations of the joint venture would get us up to full steady state that's the key, full steady state production of the Yima joint venture plant by early summer. That means by March or April we're -- that plant should be running often and producing methanol. And we're just -- there maybe tuning and debugging and things like that that you would normally expect in a project that are going on.

Unidentified Analyst

Sure. No I think it's going to take a year better time to figure out what the sweet spot is to analyze production.

Robert Rigdon


Unidentified Analyst

And I know you've disclosed this and so I don't want to answer the question you can, but when Yima is running at full capacity, the amount of methanol times 25% times to current market price of methanol or whatever else you're producing close for all is approximately what per share?

Robert Rigdon

On a per share basis I haven't done that and calculation will come ahead, but if you look in total, that revenue, 25%, that plant running at full rate to today's methanol prices throws off only order of about $150 million a year revenue for the joint venture. That's -- 25% of that revenue stream is represented by us, our ownership there. And I am not going to offer too much guidance on operating margins. We are looking at it to see where we are, but we do believe they are going to be attractive.

Unidentified Analyst

But would there be -- obviously you have your corporate level expenses, are there JV level expenses too against that 37.5?

Robert Rigdon

In terms of the JV -- this is all happening inside the JV, I am not sure I understood your questions, but I think this is all happening inside what you are asking, all of these have the [JV].

Unidentified Analyst

Would there be JV level of expenses against this revenue, that's what I am asking?

Kevin Kelly

The numbers, he was talking about, that's top line revenue from methanol sales, that's before any operating costs, JV.

Unidentified Analyst

Okay, I got it.

Robert Rigdon

You have both JV level of expenses whatever they are and then obviously you get the net of that and net of what has to be CapEx or whatever. And then you have whatever that amount was, that would have to go against your corporate expenses.

Unidentified Analyst

Yes, that's right.


Thank you. This will conclude our question-and-answer session. I would like to turn the conference back over to Robert Rigdon for his closing comments.

Robert Rigdon

Okay, well, look, thanks everybody for the questions and for your time with us on the call this morning. Since there are no further questions, we will go ahead and end the call.


Ladies and gentlemen, the conference has now concluded. We thank you for attending today's presentation. You may now disconnect your lines.

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