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CALGARY, Nov. 10 /CNW/ - (TSXV - NRG; OTCQX - ANRGF) - Alter NRG Corp., ("Alter NRG" or the "Company") is pleased to report on its corporate activities and financial results for the three and nine month periods ended September 30, 2008. The following are the highlights for the third quarter of 2008 and the period up to November 6, 2008:
Q3 HIGHLIGHTS
- Repositioned Alter NRG's strategic focus to technology sales with
large waste services and energy companies able to advance plasma
gasification projects. To further our focus on technology sales, we
initiated a partner selection process to find credible companies
seeking commercially-proven alternative energy solutions through
gasification.
- Advanced Project Lighthouse, Coskata Inc.'s (Coskata) cellulosic
ethanol commercial demonstration project located at our pilot
facility in Madison, Pennsylvania. The demonstration project is
expected to begin operations in the spring of 2009. Upon completion,
the project will allow Alter NRG to tour customers through our
operational pilot facility, which has converted more than 100
different feedstocks into high-quality synthesis gas (syngas).
- Advanced commissioning of the Pune and Nagpur waste-to-energy (WTE)
facilities in India, which will double the commercial application of
Alter NRG plasma gasification technology in WTE from two to four
facilities. SMS Infrastructures Limited (SMSIL), Central India's
largest civil engineering and infrastructure development company, is
initiating commissioning of the Pune 68 tonne-per-day hazardous WTE
plant in November 2008.
- Named as a recipient of the 2008 Deloitte Technology Green 15 Award,
which recognizes 15 Canadian companies that offer solutions to global
environmental challenges by creating intellectual property and
technology that reduce society's environmental impact.
- Filed a Public Disclosure Document with the Government of Alberta
outlining further project details on the proposed development of
Alter NRG's coal reserves in the Fox Creek Area of Alberta - Canada's
first coal-to-liquids (CTL) project with carbon capture and storage
(CCS). The project will gasify Alter NRG's coal reserve, which
contains enough coal to produce 40,000 bbls/d of liquid fuels, such
as diesel and naphtha, for over 50 years.
- Strengthened our Alter NRG executive team with the addition of Alex
Damnjanovic as Vice President, Strategic Alliances. Mr. Damnjanovic
brings more than 20 years of experience in sales, marketing and
business development spanning across the construction, power and
petroleum industries.
- Continued to develop plasma gasification opportunities with our
strategic partner, NRG Energy. The environmental permit has been
received for the Somerset power plant retrofit using Alter NRG's
plasma gasification, and Alter NRG and NRG Energy are assessing the
optimal project details to advance the project's development. NRG
Energy also submitted its statement of qualifications to the City of
Taunton in Massachusetts, which is soliciting proposals for a
waste treatment facility. NRG Energy is proposing to use Alter NRG's
plasma gasification technology.
- Closed the previously announced acquisition of a project site in
Bruderheim, Alberta. The Company plans to use the site to develop
Canada's first integrated gasification combined cycle (IGCC) facility
with CCS. When fully developed, the project will produce
approximately 120 megawatts (MW) of electric power.
- Secured a listing on the U.S.-based OTCQX, which will provide Alter
NRG with a credible and accessible gateway to access U.S.-based
investors.
For more information on the Company's activities please visit www.alternrg.ca or www.sedar.com to view Alter NRG's 2008 Third Quarter Report.
In response to the slowdown in the global economy, Alter NRG is being proactive in our plan to manage this new economic landscape. There is no question that challenges associated with the capital markets will impact business decisions; but despite the tough market, capital does still exist and interest in Alter NRG's gasification technology remains strong. Overall, the alternative energy space - even in a global slowdown - continues to be an exciting and growing market.
Given this new economic landscape, Alter NRG's corporate focus has shifted from project development to technology sales in order to preserve our strong balance sheet. This involves focusing on cash inflows through technology sales and reducing the capital expenditures on projects through smaller working interests and slowing project timelines.
Alter NRG's strategic approach to technology is focused on large waste services and energy companies able to secure limited debt and equity financing for smaller-scale plasma gasification projects - generally from $50 million to $300 million in total capital. These companies also have existing cash flow from their operations to invest in renewable energy projects using the Alter NRG gasification solution. We expect licensing agreements and future equipment orders from discussions with these waste and energy companies will begin to materialize in 2009.
I was recently in Europe meeting with potential strategic partners capable of advancing technology sales. Europe is a market where waste-to-energy is ahead of North America in its regulatory and economic environment, and there is strong interest in Alter NRG's technology for integration with various waste disposal and recycling programs, as well as using syngas as an alternate to natural gas fuel requirements. We will continue to pursue opportunities and strategic partnerships in the European market for technology sales.
In the first half of 2008 we also completed a number of independent assessments of our plasma gasification technology. These independent assessments confirm the emissions, capital costs, and overall commercial viability of the Alter NRG gasification product offering. Alter NRG commissioned a number of industry-leading engineering and consulting firms - including ENSR/AECOM, Golder Associates and RW Beck - to review the Company's technology and provide independent assessments. The completed studies have armed us with credible and valuable information on our technology to share with large waste services and energy companies seeking alternative energy solutions.
In North America the social and regulatory push for clean energy projects continues to gain momentum. Regulatory incentives exist for clean fossil fuel and renewable energy projects. These include loan guarantees in the United States for clean coal and renewable energy projects, grant money for projects which involve CO2 sequestration plus various government programs at the provincial, state, and federal government levels for gasification in Canada and the United States. As well, Alter NRG has lenders which have been actively performing due diligence over the past six months and have expressed formal interest in providing project-level debt. Several of these lenders have access to capital and continue to deploy capital in these difficult market conditions.
Although credit is a key issue for all project developers in this turbulent market, Alter NRG's technology solutions have unique advantages to access the limited capital which includes government incentives, smaller project scopes and strong relationships with the capital community.
As a means to reduce Alter NRG's capital requirements we have adopted a more stepwise approach with our projects. Being prudent with how we move forward in our projects at Fox Creek, Bruderheim and Somerset will allow us to tighten our focus. Currently, we are evaluating partners for both the Bruderheim and Fox Creek projects that will minimize our capital outlay while still moving the projects forward and adding value for our shareholders.
In our continued effort to expand our shareholder base, Alter NRG secured a listing on the OTCQX, which will provide the Company with a credible and accessible gateway to access U.S.-based investors. The United States is a world leader in clean energy investing and we look forward to sharing our company story with this large investor base.
While no business is immune to risk, the door remains open for Alter NRG to be a leader in the emerging alternative energy industry. Two plasma gasification facilities are being commissioned in India over the coming months, which further add to our market leader position in waste-to-energy.
Our strategy remains solid - focus on technology sales in order to provide the cash requirements for project development. We are enthusiastic about the interest we've received from our current and potential new strategic partners, as well as the opportunities this can provide for technology licenses and sales. The global market has changed and growth planning is complex - and through these turbulent times, the Alter NRG team will continue to post positive results. We are excited about moving forward with a focus on technology sales and are confident in our ability to be flexible and creative in adapting to a changing economic environment.
I would personally like to thank our loyal shareholders that have kept their holdings in our Company through difficult times. Through our industry leading technology and strong portfolio of opportunities, I believe significant value creation is on the horizon.
FINANCIAL
RESULTS ($) September 30, December 31,
2008 2007
-------------------------------------------------------------------------
Total Assets $ 119,648,688 $ 78,506,274
Total Liabilities 23,660,928 21,289,213
Total Equity $ 95,987,760 $ 57,217,061
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Three months Three months
ended ended
September 30, September 30,
2008 2007
-------------------------------------------------------------------------
Revenue, interest and other income $ 780,348 $ 1,156,115
Loss (4,414,367) (3,642,098)
Loss per share - basic and diluted $ (0.08) $ (0.09)
-------------------------------------------------------------------------
Nine months Nine months
ended ended
September 30, September 30,
2008 2007
-------------------------------------------------------------------------
Revenue, interest and other income $ 3,986,072 $ 1,813,307
Loss (8,677,808) (7,556,720)
Loss per unit/share - basic and diluted $ (0.17) $ (0.25)
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For the complete financial statements please visit www.alternrg.ca or
www.sedar.com to view Alter NRG's 2008 Third Quarter Report.
Corporate overview
Alter NRG provides and pursues alternative energy solutions through gasification to meet the growing demand for clean energy in world markets. The Company's vision is to become a leader in the development of economically viable and environmentally sustainable gasification projects for the commercial production of energy. Alter NRG creates revenues by selling plasma gasification technology and through equity participation in gasification projects that fit its strategic growth plan. In the current difficult market conditions, the Company is focusing its primary efforts on technology sales and developing a portfolio of strategic customers that have the capability to advance projects from internally generated cashflow. Alter NRG's focus will be to increase near term cash inflows from technology licenses and sales and reduce expenditures on projects through smaller working interests and slowing project timelines.
Alter NRG endeavors to be a leader in innovative gasification technologies applied to produce profitable and clean alternative energy solutions. The Company invests in the skills of its people who will provide the creativity, determination and passion to generate growth in stakeholder value. The Company continues to strive to be transparent and fair in its activities and work to form positive relationships with the communities in which it operates and with all of its stakeholders.
Earlier in the year, Alter NRG made the decision to create a stand-alone entity focused solely on technology sales and licensing, however given the turbulent capital markets and global economic uncertainty, the Company has chosen to delay the timing of formalizing this change. The underlying reasons for a separate sales entity remain valid, but until such time that this restructuring can create value for our shareholders, Alter NRG will remain as one corporate entity.
In the second quarter of 2008 the Company began meeting with numerous large waste, power and energy companies that are focused on renewable and clean energy solutions. The interest from the strategic customers has been positive and discussions continue to advance with numerous parties. Alter NRG's customers continue to advance their project development opportunities and management believes they have the balance sheets and access to capital to continue to execute these projects. These projects include:
SMSIL - The two hazardous WTE facilities under construction in India are continuing to advance with the first expected to be operational in the fourth quarter of 2008, and the second in mid-2009. Both facilities will use Alter NRG plasma gasification technology to convert approximately 68 tonnes-per-day of hazardous waste into power. The facilities are owned and operated by SMSIL, Central India's largest civil engineering and infrastructure development company. These facilities will increase the number of commercial facilities processing waste using Alter NRG's technology from two to four and provide further commercial history for smaller-scale waste solutions that can be replicated for future projects.
Coskata's Project Lighthouse - The celluosic ethanol commercial demonstration project being developed by Coskata and its partner General Motors, is advancing on schedule and is expected to be completed in the spring of 2009. The commercial demonstration will be located at the Alter NRG pilot facility in Madison, Pennsylvania, and the existing plasma gasifier will provide the syngas which will then be converted to ethanol through Coskata's proprietary conversion process. This project is expected to result in $2.5 million in revenues in 2009 and 2010 for Alter NRG. This ethanol commercial demonstration is expected to bring potential key strategic customers focused on renewable energy to the Alter NRG pilot facility in 2009.
NRG Energy - The Somerset project operated by NRG Energy which will convert coal and biomass into 120 MW of power continues to advance. The project received regulatory approval from the Department of Environmental Protection of Massachusetts on January 25, 2008, however it has been subject to various regulatory appeals since that time. Alter NRG has an option to elect to take up 10% to 25% in the project, at its sole discretion, and will have to make the election once the project has final approval to proceed. Alter NRG believes the Somerset project will advance but will make its investment decision based on several factors including the Company's access to capital and the ability to obtain project debt. The Company is also supporting NRG Energy's project development efforts on other waste-to-energy projects and coal retrofit opportunities.
As a means to reduce Alter NRG's capital requirements the Company has adopted a staged approach for internally-led projects in development, including:
Bruderheim, Alberta - Based on a slowing economy that may affect the outlook for power development in Alberta, Alter NRG will be delaying the decision to proceed on phase one of the Bruderheim power facility until the spring of 2009. Development of the first phase of the project had already commenced with the intention of having the 120 MW natural gas combined cycle facility operational by early 2010.
In the spring of 2009, Alter NRG will assess whether to combine the two phases of the Bruderheim IGCC project. When fully developed, the facility will convert petroleum coke and oilfield waste into approximately 120 MW of power, which includes design for CCS. Delaying the development of phase one of the Bruderheim project is expected to reduce the near-term capital requirements for 2008 and 2009 to under $2 million. The reduced budget will be used by Alter NRG to continue to advance project engineering, government grant applications and to select a strategic partner to move the Bruderheim IGCC project forward with an expected completion date of late 2011 for the IGCC facility.
Fox Creek, Alberta - Alter NRG is also reducing project development expenditures on the Fox Creek coal-to-liquids project which is expected to produce up to 40,000 barrels per day of diesel fuel and naphtha from Alter NRG's existing coal reserves. The Company expects to spend less than $3 million in 2008 and 2009. The Company will continue to advance engineering work to further define the project scope, advance government grant applications and continue to seek strategic partners. The delayed timeline will impact the final completion of the development until late 2015, subject to successful partner selection by the end of 2009.
St. Lucie County, Florida - Geoplasma LLC continues to advance the WTE project in St. Lucie, Florida. The WTE facility will use Alter NRG's plasma gasification technology and is to be located on an existing landfill site. The ground lease with St. Lucie County and an offtake agreement for the syngas, steam or power are currently being finalized. The operator of the project has been experiencing operational difficulties and Alter NRG has taken a more active role in the project. Alter NRG has an option to participate up to a 25% equity investment in this project. The project has an existing municipal bond allocation that is expected to provide a significant portion of the project capital.
Alter NRG's most significant achievements in the year to date include:
- A $2 million plasma torch system sale to Kiplasma Industries and
Trade Inc. which will be used in their waste facility in Turkey,
scheduled for completion in 2010;
- Regulatory approval and advancement of NRG Energy, Inc.'s Somerset,
Massachusetts coal powered retrofit project for which Alter NRG will
supply gasification systems and in which Alter NRG has the option to
participate from 10% to 25%;
- Selection of the Westinghouse Plasma Corporation (WPC) plasma
gasification pilot facility for a cellulosic ethanol commercial
demonstration project. The project will utilize Coskata's proprietary
synthesis gas-to-ethanol conversion technology. In the third quarter
of 2008, Coskata, in partnership with General Motors, plans to begin
construction of the commercial demonstration facility. The WPC pilot
plant is expected to generate approximately $2.5 million in revenues
in 2009 and 2010;
- Closing a bought deal financing for $46 million in gross proceeds,
including the over-allotment option, at a price of $4.40 per share;
- Execution of engineering services agreements for proposed projects in
Minnesota, Florida, Kentucky, Thailand, California and Louisiana;
- Initiated the regulatory process, a strategic partner selection
process and filed its public disclosure document for the Fox Creek
coal-to-liquids polygeneration project, which will utilize the
Company's 468 million tonne coal reserves. This is expected to be
Canada's first coal-to-liquids project;
- Continuing to make gasification design and engineering advancements
to our proprietary gasification systems, resulting in the Company
applying for two additional patents.
- Sale of our Hinton coal lease to a junior TSX Venture mining company
for $1 million cash and a 5% net profits royalty on future coal
sales. This represents a 466% cash return on investment in less than
two years and the potential for significant net profit royalties upon
successful development of the mine;
- Neared commissioning of SMSIL's WTE facilities in Pune and Nagpur,
India. SMSIL is initiating commissioning of the Pune 68 tonne-per-day
hazardous WTE plant in November 2008.
- Closed the previously announced acquisition of a project site in
Bruderheim, Alberta.
- Secured a listing on the U.S.-based OTCQX in an effort to provide us
with greater exposure to a larger investor base and access to global
investment capital.
Results from plasma technology sales and services
Three month period ended Three month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Sales revenue $ 318,274 $ 807,807
Direct cost of sales (212,654) (380,638)
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Gross margin $ 105,620 $ 427,169
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Period from WPC
Nine month period ended acquisition on April 17
September 30, 2008 to September 30, 2007
-------------------------------------------------------------------------
Sales revenue $ 1,883,166 $ 1,256,627
Direct cost of sales (1,047,906) (532,873)
-------------------------------------------------------------------------
Gross margin $ 835,260 $ 723,754
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Plasma technology sales and service revenues during the three and nine month periods ended September 30, 2008 are from engineering services provided for reactor design and process engineering, replacement parts for existing gasification customers and plasma gasification testing services at the Company's U.S. testing centre pilot facility.
Revenues for the nine month period ended September 30, 2008 were 50% or $626,539 higher than the period from April 17, 2007 to September 30, 2007. Revenues for the nine month period ended September 30, 2008 include $280,018 in plasma torch parts sales and $1,603,148 for engineering and testing services. Revenues for the nine month period ended September 30, 2007 include sales from the date the Company acquired its commercially operating U.S. subsidiary on April 17, 2007 to September 30, 2007 and therefore revenues for the nine month period ended September 30, 2007 are not comparative to the current year period.
Revenues for the three month period ended September 30, 2008 were 61% or $489,533 lower than the prior year period as the Company completed a major torch sale in the prior period. The torch sale was the sole revenue stream during the September 30, 2007 three month period. For the three month period ended September 30, 2008, revenues consisted of $85,684 in plasma torch parts sales and $232,590 in engineering and testing services.
Going forward, management expects revenues to increase as we focus on increased sales, marketing and business development as the plasma gasification market grows. The Company has a portfolio of customers that have projects in various stages of development of which the timeframe extends over several years. During 2008, the Company expects to continue to advance pilot plant testing, engineering services, and has the potential for licensing income.
The sale of a single plasma gasification island would generate approximately $30 to $35 million in revenues or the Company; however, the majority of revenues are not realized until the point in time the sale of equipment occurs after regulatory approval of the project and project financing has been received. As such, plasma gasification island sales have a long lead time. The Company has consistently increased its customers under contract over the last year from five, when it purchased WPC in April 2007, to more than 15 today. The Company also works with other project developers worldwide that are in the early stages of developing plasma gasification projects.
Direct cost of sales relate to direct materials and expenditures for products and services and reflect standard rates. Costs for the three and nine month periods ended September 30, 2008 were $167,984 lower and $515,033 higher versus costs incurred during the three month period ended September 30, 2007 and period from April 17 to September 30, 2007, respectively. Cost of sales for the nine month period ended September 30, 2008 includes $185,335 for plasma torch parts and $862,571 for engineering and testing services. Margins in 2008 are lower than 2007 as the engineering and testing services provided in 2008 were at a lower margin than the torch sales, the major revenue stream in 2007.
General and administrative expenses
Three month period ended Three month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
General & administrative
expenses ("G&A") $ 3,610,946 $ 2,058,840
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Nine month period ended Nine month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
General & administrative
expenses $ 8,479,195 $ 4,105,921
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Consolidated G&A increased by $1,552,106 and $4,373,274, respectively, for the three and nine month periods ended September 30, 2008 versus the prior three and nine month periods ended September 30, 2007. The increase in G&A reflects the growth of Alter NRG, which included WPC as of April 17, 2007. The major components of G&A include additions to the Alter NRG team for salaries and wages from increased staffing as part of Alter NRG's corporate growth strategy; increased rent for the new head office space (lease acquired August 2007) to accommodate growth; management investment in its U.S. business operations; and consulting fees related to recruitment and business development activities. At September 30, 2008, the Alter NRG team included 42 full time employees, 25 in the Calgary office and 17 at the Company's facility in the United States, as compared to 22 employees at September 30, 2007.
The largest G&A expenses in the nine month periods ended September 30, 2008 relate to salaries and accrued bonuses of $4,090,252; office costs of $948,553; consulting costs of $800,114 and professional fees of $514,264 primarily for corporate growth and business development efforts; and travel costs of $507,239 for business development and investor relations. Included in G&A was also $563,733 of costs related to finding strategic partners and $840,861 in bad debt expense. One of the Company's strategic partner's development projects is delayed due to an extended regulatory appeal process. Amounts owing to Alter NRG may be recovered from the customer once the project receives final notice to proceed, however, collection of the outstanding amounts owning are uncertain at this point and as such Alter NRG wrote off the receivable of $840,861 during the three month period ended September 30, 2008. The remaining G&A is for information technology costs, public reporting and the general costs of setting up and maintaining an office.
Interest and other income
Three month period ended Three month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Interest income $ 462,074 $ 210,388
Other income - 137,920
-------------------------------------------------------------------------
Total interest and
other income $ 462,074 $ 348,308
-------------------------------------------------------------------------
Nine month period ended Nine month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Interest income $ 1,250,041 $ 418,760
Other income 74,461 137,920
-------------------------------------------------------------------------
Total interest and
other income $ 1,324,502 $ 556,680
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Interest income relates to funds invested in short-term, interest-bearing investments with a major Canadian chartered bank. Interest income increased by 120% and 199% for the three and nine month periods ended September 30, 2008 versus the prior three and nine month periods ending September 30, 2007. The increase reflects interest earned on a significantly higher average cash balance in 2008 from equity issuances net proceeds in the second and fourth quarter of 2007 and the second quarter of 2008.
Other income relates to Jacoby Energy's contribution, equal to general and administrative costs, to the joint venture for the nine month period ended September 30, 2008. No income was incurred for the three month period ended September 30, 2008 as the Jacoby Energy joint venture license became non-exclusive and under the amended agreement Jacoby Energy is required to contribute a total of $1 million USD of general and administrative costs, which had been fulfilled by March 31, 2008. There was $137,920 recorded as other income for the prior period from August 2, 2007 to September 30, 2007. Alter NRG will retain its interest in any joint venture projects developed to date, including a 25% option in the WTE project in St. Lucie, Florida.
Gain on sale
The Company sold one of its non-core coal resource properties located in the Hinton area of Alberta for cash consideration of $1 million and a 5% royalty on any net profits earned from the property in the future. The carrying value of the property was $221,596 for a gain of $778,404 on the disposition. The consideration excluded the future 5% royalty as the amount and potential realization of this royalty is dependent on successful mine construction and will be recognized as revenue at the point in time it is received.
Depreciation and amortization
Three month period ended Three month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Depreciation $ 70,527 $ 15,654
Amortization 381,136 382,611
Amortization of deferred
compensation expense - 1,880,700
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Total depreciation and
amortization $ 451,663 $ 2,278,965
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Nine month period ended Nine month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Depreciation $ 176,175 $ 714,657
Amortization 1,118,796 34,338
Amortization of deferred
compensation expense - 3,512,850
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Total depreciation and
amortization $ 1,294,971 $ 4,261,845
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Depreciation for the three and nine month period ended September 30, 2008 relates to corporate assets, including computer equipment and furniture, and the U.S. facility upgrade completed in the first quarter of 2008. For the three and nine month period ended September 30, 2007, depreciation was for corporate assets only. Amortization is on the intangible assets acquired on purchase of the Company's U.S. subsidiary on April 17, 2007. The deferred compensation also stemmed from the acquisition and was fully amortized over an eight month period ending December 2007.
Loss and cash flow used in operations
Three month period ended Three month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Loss $ (4,414,367) $ (3,642,098)
-------------------------------------------------------------------------
Cash flow used in
operations $ (2,268,009) $ (546,690)
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Nine month period ended Nine month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Loss $ (8,677,808) $ (7,556,720)
-------------------------------------------------------------------------
Cash flow used in
operations $ (5,791,088) $ (2,686,359)
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The consolidated loss for the three month period ended September 30, 2008 was higher by $772,269 in the three month period ended September 30, 2007 and $1,121,088 for the nine month period ended September 30, 2008 versus the same period ended September 30, 2007. The increased loss for the three month period ended September 30, 2008 versus the same period ended September 30, 2007 is due to increases in G&A and non-cash stock-based compensation, lower sales margins and future income tax expense from the write down of the Company's future income tax assets. These amounts were offset by the gain on sale of the Company's Hinton property, the increase in interest, and the decrease in noncash depreciation and amortization as deferred compensation from the WPC acquisition was fully amortized in 2007. The increase in the loss for the nine month period ended September 30, 2008 versus the same period ended September 30, 2007 is due to the overall increase in G&A expenditures and stock-based compensation from corporate growth since the acquisition of its U.S. subsidiary and write down of the future income tax assets. Over a nine month period these amounts offset the gain on sale, increase interest and lower depreciation and amortization as compared to the nine month period ended September 30, 2007. The gross sales margin was consistent for the nine month periods ended September 30, 2008 and September 30, 2007. The nine month period ended September 30, 2007 only includes the acquired U.S. subsidiaries operations from April 17, 2007 to September 30, 2007.
Consolidated cash flow used in operations for the three and nine month periods ended September 30, 2008 was $2,268,009 and $5,791,088, respectively. This represents an increase of $1,721,319 and $3,104,729 in the cash flow used for the three and nine month period ended September 30, 2008 versus September 30, 2007. The increase is due to increased cash expenditures on G&A which offset cash received from the Hinton property sale and net sales revenues and interest income. Refer to the respective sections for G&A, plasma technology sales and services (revenue and cost of sales), interest and other income and gain on sale.
Capital expenditures
A breakdown of the capital additions for the three and nine month periods
ended September 30, 2008 and September 30, 2007 is as follows:
Three month period ended Three month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Internally generated
intangible assets $ 412,575 $ 41,133
Resource properties 431,824 133,586
Property, plant and equipment 4,605,966 288,459
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Total capital expenditures $ 5,450,365 $ 463,178
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Nine month period ended Nine month period ended
September 30, 2008 September 30, 2007
-------------------------------------------------------------------------
Internally generated
intangible assets $ 1,017,268 $ 626,820
Resource property assessment 1,140,356 337,527
Property, plant and equipment 11,156,280 414,057
-------------------------------------------------------------------------
Total capital expenditures $ 13,313,904 $ 1,378,404
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Internally generated intangible assets consist of internal project development work on plasma gasification systems and will be amortized at the point in time a project is in commercial operation.
Resource property expenditures for the nine month period ended September 30, 2008 were higher than costs incurred for the same period ended September 30, 2007 due to the Fox Creek core hole program completed in the first quarter of 2008 and environmental assessment, regulatory and public disclosure costs incurred in the second quarter of 2008. These costs have been incurred to advance the coal reserves owned by the Company in Fox Creek, Alberta.
For the three and nine month periods ended September 30, 2008, property, plant and equipment spending consisted of plant and facility costs of $4,466,851 and $10,854,996 (September 30, 2007 - $120,470 and $120,470) and corporate asset spending of $139,115 and $301,284 (September 30, 2007 - $167,989 and $293,587). Plant and facility costs related primarily to an upgrade on the Company's U.S. facility upgrade completed in February 2008, the acquisition of the Bruderhiem, Alberta site and a steam turbine for the Bruderheim IGCC project. Corporate asset costs, including office and computer equipment, have increased in line with the increase in personnel at the Company's U.S. facility and the head office in Calgary.
Deferred costs
A break down of deferred costs incurred for the nine month period ended September 30, 2008 is as follows:
Balance as at Nine month period Balance as at
December 31, ended September 30, September 30,
2007 2008 2008
-------------------------------------------------------------------------
Deferred project
development costs $ 99,323 $ (99,323) $ -
-------------------------------------------------------------------------
Deferred project development costs incurred in the nine month period ended September 30, 2008 relate to professional fees incurred for potential site acquisitions. The majority of costs relate to due diligence, site holding costs and preliminary engineering for Bruderheim and costs incurred for a potential WTE site in Ontario. During the three month period ended September 30, 2008, $1,047,949 in deferred costs was reclassified to property, plant and equipment.
Credit facility
The Company has a line of credit agreement with a major bank in the United States for $500,000 USD. The line of credit is due on demand and secured by the assets of its U.S. subsidiary, WPC. The credit facility bears interest at the lender's rate. No amounts have been drawn on the credit facility as at September 30, 2008.
Liquidity and capital resources
At September 30, 2008, the Company had $55,593,605 in cash and cash equivalents which is an increase in cash and cash equivalents of $25,501,122 from December 31, 2007 and no debt. The increase in cash and cash equivalents is attributed to a private placement common share financing on April 3, 2008 in which the Company received net proceeds of $43.6 million offsetting this increase is cash spending on capital, G&A and direct cost of sales, net of revenues received, and deferred revenues for future projects. The net working capital surplus of $53,074,469 is primarily attributable to the cash and cash equivalents balances. In light of the current market conditions the Company is focusing on generating near term cash flows from technology licenses and sales and reducing capital expenditures to conserve its working capital balance through this turbulent period.
Equity
As at September 30, 2008 and November 6, 2008, the Company had 56,185,551 shares and 4,417,767 options outstanding.
The Company entered into an agreement with a syndicate of underwriters for a $40 million financing, which included an over-allotment for an additional $6 million exercisable within 30 days after closing. On April 3, 2008, the deal was closed, including the over-allotment, for 10,454,545 common shares at $4.40 per common share and gross proceeds of approximately $46 million.
At September 30, 2008 the Company had 4,417,767 stock options outstanding, of which 883,500 were granted, 188,000 forfeited and 130,333 exercised at a weighted average exercise price of $5.53, $2.74 and $2.15 per share, respectively, in the three and nine month periods ended September 30, 2008.
The authorized share capital of the Company consists of an unlimited number of Common Shares.
The Company intends to grant 402,500 stock options to officers, directors, employees and consultants on November 13, 2008. The pricing will be based upon the five day weighted average trading price after grant. No options will be granted to officers or directors.
For the complete management's discussion and analysis please visit www.alternrg.ca or www.sedar.com to view Alter NRG's 2008 Third Quarter Report.
The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this release.
Advisory Respecting Forward-Looking Statements:
This news release contains certain forward-looking information and statements within the meaning of applicable securities laws. The use of any of the words "expect", "anticipate", "continue", "estimate", "objective", "ongoing", "may", "will", "project", "should", "believe", "plans", "intends", "confident", "might" and similar expressions are intended to identify forward-looking information or statements. In particular, but without limiting the foregoing, this news release contains forward-looking information and statements pertaining to the following: currency exchange rate fluctuations; environmental risks; unanticipated reclamation expenses; ability to finance; risk of obtaining regulatory approvals; ability to find joint venture partners; engineering and design risk; fluctuation in commodity prices and other expectations, beliefs, plans, goals, objectives, assumptions, information and statements about possible future events, conditions, results of operations or performance. Various assumptions were used in drawing the conclusions or making the projections contained in the forward-looking statements throughout this news release.
The forward-looking information and statements included in this news release are not guarantees of future performance and should not be unduly relied upon. Forward-looking statements are based on current expectations, estimates and projections that involve a number of risks and uncertainties including but not limited to:, unexpected events during construction, and start-up; variations in feedstock grade,; delay or failure to receive board or government approvals; timing and availability of external financing on acceptable terms; conclusions of economic evaluations; changes in project parameters as plans continue to be refined; future prices of commodities; failure of plant, equipment or processes to operate as anticipated; delays in the completion of development or construction activities, as well as those factors discussed in or referred to under the heading "Risk Factors" in the Company's Annual Information Form dated July 8, 2008 available at www.sedar.com which could cause actual results to differ materially from those anticipated and described in the forward-looking statements. Such information and statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking information or statements.
The Company cautions that the foregoing list of assumptions, risks and uncertainties is not exhaustive. The forward-looking information and statements contained in this news release speak only as of the date of this news release, and the Company assumes no obligation to publicly update or revise them to reflect new events or circumstances, except as may be required pursuant to applicable securities laws.