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Synthesis Energy Systems' CEO Discusses F2Q12 Results - Earnings Call Transcript

Robert Rigdon

Good morning and welcome to our second quarter fiscal year 2012 earnings call. With me on the call today is Kevin Kelly, our Chief Accounting Officer.

The second quarter was an extremely busy period as we continued to execute on our strategy to create value for our shareholders through our technology licensing and related engineering services and equipment sales, equity partnerships, and participation in low-cost coal resources. Before I provide the update on our recent progress, I’ll turn the call over to Kevin for the quarterly financial update. Kevin?

Kevin Kelly

Thank you, Robert. During the past quarter, we have kept the ZZ joint venture plant idle. For this reason, we did not incur most of the normal operating costs associated with the ZZ plant or have any meaningful revenue from the plant during the quarter. The ZZ plant has successfully demonstrated the capabilities of our U-GAS gasification technology. Our intention going forward is to make the plant a commercial success.

We have discussions ongoing with Hai Hua, our joint venture partner, and we remain optimistic that a mutually beneficial joint venture agreement will be reached that can improve this plant’s financial performance. We intend to restart the plant when an integration of the ZZ joint venture plant and Hai Hua’s methanol plant has been accomplished.

As a result, for the second quarter of fiscal 2012 ended December 31, 2011, total revenue was 183,000 versus 2.9 million for the second quarter of fiscal 2011 ended December 31, 2010. As we have reported previously, Hai Hua has not paid any of the capacity fees owed to the ZZ joint venture since April 2011, and we have not recognized any capacity fee revenue since then. We will recognize capacity fee revenues owed to us when collection of the capacity fees is assured. The amount of unrecognized capacity fees under the contract with Hai Hua totals approximately $2.6 million as of December 31, 2011, and we are working to recover the value of these fees within the new commercial structure under development with Hai Hua.

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