SIDOTI INVESTOR PRESENTATION - Advanced Emissions Solutions, Inc. Advancing Cleaner Energy
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Advanced Emissions Solutions, Inc.
Advancing Cleaner Energy
SIDOTI INVESTOR
PRESENTATION
© 2017 Advanced Emissions Solutions, Inc. All rights reserved.SIDOTI INVESTOR PRESENTATION
This presentation includes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which provides a "safe harbor" for such
statements in certain circumstances. The forward-looking statements include statements or expectations regarding future growth, amount and timing of production and sale
of Refined Coal (“RC”), Tinuum Group, LLC and Tinuum Services, LLC cash flow and ability to make distributions and Tinuum Group’s ability to lease or sell remaining RC
facilities; future revenues, expenses, cash flow, liquidity, and other financial and accounting measures; our ability to commercialize EC products and intellectual property;
expectations about the timing and amount of future dividend payments; returning value to stockholders; and related matters. These statements are based on current
expectations, estimates, projections, beliefs and assumptions of our management. Such statements involve significant risks and uncertainties. Actual events or results
could differ materially from those discussed in the forward-looking statements as a result of various factors, including but not limited to, changes and timing in laws,
regulations, IRS interpretations or guidance, accounting rules and any pending court decisions, legal challenges to or repeal of them; changes in prices, economic
conditions and market demand; the ability of the RC facilities to produce and sell coal that qualifies for tax credits; the timing, terms and changes in contracts for RC
facilities, or failure to lease or sell RC facilities; impact of competition; availability, cost of and demand for alternative tax credit vehicles and other technologies; technical,
start-up and operational difficulties; availability of raw materials; loss of key personnel; the value of our products, technologies and intellectual property to customers and
strategic investors; intellectual property infringement claims from third parties; the outcome of pending litigation; seasonality and other factors discussed in greater detail in
our filings with the SEC. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties that may
apply to our business and the ownership of our securities. Our forward-looking statements are presented as of the date made, and we disclaim any duty to update such
statements unless required by law to do so.
2
-2-INNOVATING A CLEANER TOMORROW
REFINED COAL (RC) EMISSIONS CONTROL (EC)
FOCUS: Leader in coal-
TICKER:
fired power emissions NASDAQ: ADES
Equity: control for 25+ years
Chemicals for Coal Emissions
Tinuum Group 42.5% owned
Equity: TRANSFORMATION:
Equipment for Coal Emissions Completed significant
Tinuum Services, 50% owned MARKET-CAP:
(1)
redirection in ~$210M
the business
Royalty: 35 U.S. Patents, 16 Pending,
M-45™ Licenses 10 Int’l filed or pending
(1) Market capitalization based on proximity to 3/27/17 closing price
3INVESTMENT SUMMARY
SOLID AND STABLE CASH FLOWS
Current business projected to deliver at least $50M to $60M annually through 2021
INCREMENTAL CASH FLOWS
Potential to more than double current cash flows over next few years through 2021
NICHE INDUSTRY LEADER
Highly leverageable position as trusted partner to America’s top energy producers focused on clean coal technology
COMPLETED TRANSFORMATION
No debt, strong balance sheet, streamlined organization, rebuilt governance and proven management team
STRONG EMISSION CONTROL INTELLECTUAL PROPERTY
Chemicals technology commercialized into a growing recurring revenue business
RETURN TO SHAREHOLDERS
Starting $0.25 per share dividend in Q2; potential to expand capital return program through further dividends and/or and
share repurchases
4
-4-HISTORICAL EVENTS & NEW BEGINNING
2011 2012 2013 - 2014 2014 2015 - 2016 2017
Launch of Equipment Systems Speculative R&D Identification of Transformation Lean Model and
Refined Coal and Manufacturing Investments Financial Statement Restructure Focused on
Started Matters Re-position Recurring Cash
Poor Margin Flow
Equipment Bubble Cash Burn
NEW MANAGEMENT ACCOMPLISHMENTS
TRANSFORMATION RESTRUCTURE RE-POSITION
Simplified business model and shed poor performing assets Reduced costs by over 70% Re-listed on NASDAQ with improved investor relations
Built diverse new team Improved balance sheet; no debt Solidified market reputation in Power Market
Commercialized patents Supported new team & approach at Tinuum
5COAL USE: A REALITY MOVING FORWARD
U.S. NET ELECTRICITY GENERATION
(BILLION KILOWATTHOURS)
Source: U.S. Energy Information Administration, Annual Energy Outlook(AEO), 2017, www.eia.gov.
6
-6-2017 PRIORITIES
OBTAIN NEW TAX EQUITY INVESTORS FOR REFINED COAL:
Nurture current & add additional sales channels
Dedicate additional resources
Leverage improving political and refined coal tax equity market
GROW EMISSIONS CONTROL & CONTINUE TRANSFORMATION:
Sell recently commercialized chemicals
Further monetize valuable intellectual property
Explore targeted M&A
RETURN CAPITAL TO SHAREHOLDERS:
Declare dividend of $0.25 in Q2
Evaluate and be prepared for potential additional dividends (one-time and/or incremental recurring)
Evaluate and be prepared for potential stock buy-backs
7
-7-REFINED COAL
8TINUUM GROUP: VALUABLE JOINT VENTURE
Denver area company founded in 2006
TINUUM GROUP OWNERSHIP STRUCTURE
Leading developer and operator of
Refined Coal production facilities
NEXGEN REFINED
ADES GOLDMAN SACHS
Federal tax policy incented the COAL, LLC
development of Refined Coal that reduces 42.5% 42.5% 15.0%
mercury and NOx emissions
Refined coal production enables investors
to receive tax incentives and Tinuum
receives income from those investors
Income expected through 2021
9REFINED COAL FACILITIES TODAY AND TOMORROW
FULL-TIME OPERATIONS ROADMAP
Not Operating and Not Invested
7 RC facilities – installed
and waiting for investor
7 RC facilities – yet POTENTIAL
Operating and Invested
to be installed
28 RC facilities
(~100 MT/year)
14 RC facilities
leased/sold
(40-50 MT/year)
RC Facility information as of March 23, 2017 2017 - 2021
11Projected Future RC Rent Payments
Projected Future RC Cash Flows to ADES
PROJECTED RC CASH FLOWS TO ADES AS OF TODAY
(in millions)
$70
• Based on 14 invested facilities as of March 23, 2017 $60
• Results in projected cash flows of $275M to $300M $50
to ADES in total through 2021 $40
$30 Total: $275 – $300 million
• Each additional refined coal facility could add
$20
between $5 -7 million annually
$10
• Closed an additional RC facility in March 2017 $0
2017 2018 2019 2020 2021
12
-11-REFINED COAL ENVIRONMENT
Proven Refined Coal Business Model
RC Tax Equity Examples: Goldman Sachs, Waste Management, DTE Energy,
Arthur Gallagher, Fidelity Investments and many others
There are benefits IF hurdles can be overcome
HURDLES BENEFITS
Coal Reputation and Uncertain Federal Net Income and EPS Uniquely strong
Political Stigma Tax Reform Improvement cash returns
Provide Cleaner
IRS Complexity
Energy
13
-12-EMISSIONS CONTROL
14EMISSIONS CONTROL: CURRENT OPPORTUNITY
CURRENT FOCUS MERCURY CONTROL COMPETITIVE DIFFERENTIATORS
Mercury control regulation since 2015/2016; with large capital investments complete Cost effective and simple alternative
Recurring consumables needed to control mercury Less equipment corrosion
Turn-key with world-renowned experts
$300M - $500M
MARKET COMPETITIVE ADVANTAGES
$100M Consumable market is $400M - $600M annually Patented technology
$100M annual target market and we are just Low operating cost mode
getting started (1)
Recurring revenue model
(1) Target Market estimated annual revenues based on the Company's internal estimates from current products for the mercury control consumables market
15
-14-EMISSIONS CONTROL: OTHER 2017 ACTIONS
Assess commercialization Complete commitments Standardize, simplify and Evaluate accretive
of remaining IP within on equipment rationalize to ensure M&A alternatives
mercury control and installations and warranty repeatability at lowest cost within dynamic market
emerging waste water
treatment within coal-fired
power market
16
-15-FINANCIALS
17FINANCIAL REVIEW
ANNUAL REVENUES EQUITY METHOD EARNINGS
$63M
& ROYALTIES $52M
$49M
$51M
$20M
$17M
2014 2015 2016 2014 2015 2016
OTHER OPERATING EXPENSES NET INCOME (LOSS)
$57M
$98M
$47M
$27M
$1M -$30M
2014 2015 2016
2014 2015 2016
18
-17-CURRENT CASH FLOWS VS. STOCK PRICE
$25.0
$?
Stock $15.0 $13.0
(2) Potential Value
Price (1) Undiscounted
$9.5
Under Value
$5.0
Current Base Incremental
Cash Flows Cash Flows
Undiscounted Under Value: Potential Value:
Current stock price may be undervalued based on current Ability to add up to 14 more Refined Coal facilities; each
business cash flows of $275M to $300M through 2021 new refined coal facility would add between $5M-7M
annually; 1 new facility added in 2017 would add
approximately $30M of cash or $1 to $2 per share
Ability to generate cash from untapped IP within
Emissions Control business
(1) Stock price based on proximity to 3/27/17 closing price
(2) Stock price calculated based on cash flow from current business of $275M to $300M
19
-18-THANK YOU
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