By Jason Simpkins
A subsidiary of ADA-ES Inc. (NASDAQ:ADES), a leader in environmental technology, is out to slash air pollution – and in a big way.
So big, in fact, that the company is planning to build the world’s biggest plant for producing activated carbon, a substance that allows coal-fired power plants to operate more cleanly. ADA subsidiary Red River Environmental Products LLC has filed an air permit application with the Louisiana Department of Environmental Quality. Construction will start once approval is granted.
Activated carbon – or AC, as it’s referred to in industrial parlance – is used to absorb mercury from industrial plant discharges. The new AC plant, planned for Red River Parish, La., should be able to produce 350 million pounds of activated carbon a year. The plant will be located next to an active lignite coalmine, which will provide the primary raw material for the manufacturing process for the next 20 years, the company said in its announcement.
ADA also disclosed on Friday that it plans to file permits to build similar facilities in North Dakota through other wholly owned subsidiaries. It is uncertain which projects will get under way first, but ADA says its first production line is projected to make enough activated carbon each year to reduce mercury emissions at approximately 10% of the coal-fired power plants currently operating inside the United States.
The demand for this material is projected to skyrocket. The need for activated carbon beyond what’s already being supplied in this country will reach an additional 400 million pounds per year by 2010, and up to a billion additional pounds per year by 2012 to 2015, ADA said Friday. Recent contract awards to ADA-ES and other suppliers of the machinery that injects the material into the mercury-control areas of the power plants repeatedly validated these market estimates, ADA said Friday.
By obtaining the operating permits and securing financing in the first quarter of 2008, ADA-ES said it would be able to begin construction at that time, enabling AC production to meet anticipated demand by 2010. The permit time lines and overall business environment will dictate whether the Louisiana facility, or one of the plants in North Dakota, will be the first to be built.
ADA-ES is based in Littleton, CO, and specializes in environmental technology systems and chemicals that reduce emissions of coal-burning power plants. In 2006, the company reported sales of roughly $15.7 million, and a profit of about $400,000. It is set to release its second quarter earnings statement Wednesday. ADA-ES shares closed Friday at $11.50, down $1.11, or 8.8%, each. In the last 52 weeks, the stock has been as high as $23.20 and as low as $10.95 .
The company said it is currently negotiating with financing sources to secure the capital needed for the project. It expects to raise a combination of both debt and equity equaling $260 million for a single production line. It has also filed a shelf registration with the Securities and Exchange Commission, seeking approval to sell up to 3 million shares of ADA-ES stock. With these projects, the company says that it is aiming to cement its position as the current industry leader.