- ZZ Joint Venture to Boost Profitability Through Repurposing and Expanding the Facility
- SES Sells 59.81% Interest in its Zao Zhuang Joint Venture Facility for $10 Million
- Funds for Transaction to be Received by SES Outside of China.
- Partner to Contribute $6.6 Million (40 Million Yuan) Equity Towards $16 Million Plant Expansion
- SES to Retain 24.52% Ownership Interest in Expanded Facility
A separate Operation and Management Agreement between the Transaction Partners and the ZZ plant has also been signed which establishes a new General Manager of ZZ and a project team to carry forward on both day to day plant operations as well as oversee the construction of the expansion project. Under the terms of the OM agreement the Transaction Partners will finance all operating costs of the ZZ Plant and have preferential profit distribution right for the first 36 months of operations from the expanded facility.The two existing SES gasification systems will be refurbished and prepared for full capacity operation and the syngas will be used for the production of 100,000 tons per year of acetic acid, as well as a secondary product of propionic acid (~10,000tpa). The agreed goal is to complete the expansion within 24 months. The parties will now work closely together to immediately amend the ZZ plant's existing facility's local government approvals to allow for production of the new products and begin equipment financing and engineering for the expansion. In addition, the ZZ plant will continue to generate methanol from Xuecheng Energy's coke oven gas (COG) under the terms of the existing Methanol Cooperation Agreement between ZZ and Shandong Weijiao Group Xuecheng EnergyCo., Ltd. "I am proud of our team to have found such an enthusiastic partner with a solid commitment to expand the ZZ plant. This expansion is expected to allow our two SES gasification systems to operate at 100% design capacity which will drive lower unit costs for the new enterprise plus the production of acetic acid and the related products is expected to provide higher profitability through improved operating margins which we believe will produce long-term financial results from the ZZ joint venture," said Robert W. Rigdon, President and CEO of SES. "This move accomplishes our strategic aim to both monetize a portion of the ZZ asset and repurpose the facility for growth and future earnings without additional equity or debt required from SES. A lot of hard work still remains to secure the additional financing and complete the expansion project and we will be working closely with our new partners to get it done successfully."
"Through friendly cooperation of all parties we will undertake a great project expansion effort to create value for our shareholders. Zao Zhuang is a preferable location to place this important acetic acid production facility and improve the overall conditions for the area," said Madame Li Bing, General Manager of Rui Feng. "We are utilizing an advanced downstream technology that has been commercially proven to generate acetic acid at favorable economics and we will now put all efforts to move quickly toward our goal of a big project success."About Synthesis Energy Systems, Inc. Synthesis Energy Systems (SES) is a Houston-based technology company focused on bringing clean high-value energy to developing countries from low-cost and low-grade coal and biomass through its proprietary gasification technology based upon U-Gas®, licensed from the Gas Technology Institute. The SES Gasification Technology enables Growth With Blue Skies, and greater fuel flexibility for both large-scale and efficient small- to medium-scale operations close to fuel sources. Fuel sources include low-rank, low-cost high ash, high moisture coals, which are significantly cheaper than higher grade coals, many coal waste products, and biomass feedstocks. For more information, please visit: www.synthesisenergy.com. SES Forward-Looking Statements This press release includes "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. Among those risks, trends and uncertainties are the ability of our ZZ joint venture to effectively operate XE's methanol plant and produce methanol; our ability to successfully expand the ZZ joint venture through our partnership with Saikong; the ability of our project with Yima to produce earnings and pay dividends; our ability to develop and expand business of the Tianwo-SES joint venture in the joint venture territory; our ability to successfully partner our technology business; our ability to develop our power business unit and marketing arrangement with GE and our other business verticals, including DRI steel, through our marketing arrangement with Midrex Technologies, and renewables; our ability to successfully develop the SES licensing business; events or circumstances which result in an impairment of assets, including, but not limited to, at our ZZ Joint Venture; our ability to reduce operating costs; our ability to make distributions and repatriate earnings from our Chinese operations; our limited history, and viability of our technology; commodity prices, including in particular methanol, and the availability and terms of financing; our ability to obtain the necessary approvals and permits for future projects; our ability to raise additional capital, if any, and our ability to estimate the sufficiency of existing capital resources; the sufficiency of internal controls and procedures; and our results of operations in countries outside of the U.S., where we are continuing to pursue and develop projects. Although SES believes that in making such forward-looking statements our expectations are based upon reasonable assumptions, such statements may be influenced by factors that could cause actual outcomes and results to be materially different from those projected by us. SES cannot assure you that the assumptions upon which these statements are based will prove to have been correct.