RC revenues rose to $70.2 million for the 2012 third quarter from $9.2 million for the same period last year. The rise was attributable to rental income of $11.1 million from the four leased RC facilities compared to $6.2 million in last year’s third quarter, and RC sales of $59.0 million for the facilities operated by Clean Coal during the quarter for its own account. RC sales for Clean Coal’s own account in the third quarter of 2011 amounted to only $2.6 million.
Cost of revenues for the RC segment increased to $67.3 million from $3.5 million in the third quarter of 2011, due primarily to the cost of raw coal and operations at the RC facilities Clean Coal operated for its own account. The cost of the raw coal approximates the revenues realized on its sale; however, these activities provide Clean Coal’s members with tax credits and benefits that can be used to lower and offset federal tax obligations. The $16.1 million of tax credits generated by Clean Coal during the third quarter from the operation of RC facilities for its own account are allocated among its owners and ADA can use its share to offset future tax obligations.
Dr. Durham stated, “As previously announced, we experienced delays in Q2 and Q3 in closing several deals for our RC facilities with power companies and tax equity partners for various reasons, including: permitting, regulatory approval, corporate financial restructuring of related third parties, change in plant ownership, changes in and retirements of personnel involved in the negotiations, involvement of additional parties in the transactions, and uncertainties in the tax credit community. After evaluating the causes of the recent closing delays, which were all due to factors outside our control, we do not believe that any of these events will have a material impact on the expected size of our market, availability of a sufficient appetite for the tax credits, or the future long term economics for our RC business segment. Therefore, we maintain our guidance that once all new and existing RC facilities are leased or sold to others and become fully operational, we would be producing at least 60 tons of refined coal per year which would produce approximately $100 million in segment income to ADA after payments to joint venture partners, including an estimated $30 million in tax credits apportioned to ADA to be generated by RC facilities operated by Clean Coal.”
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