White Coal Pilot Plant Operating Above Expectations; Pushing For- ward in Indonesia and Entering African Markets; Reiterate Buy

Analyst Details
Company: Merriman Curhan Ford
Analyst: Brion D. Tanous
URL: http://www.mcfco.com/

Summary

White Energy Company is focused on the commercialization of coal upgrading technologies. By leveraging its coal upgrading process, the company can take advantage of the price differential between lower quality (brown an sub-bituminous) coals and higher quality (bituminous) coals, ultimately yielding a high margin business which simultaneously improves plant emissions. Moving forward with con- struction of its Indonesian plant, and quickly penetrating new markets, we believe the company is well positioned for profitable growth.

Indonesia plant quickly coming together. White Energy’s 51% owned subsidiary, PT Kaltim Supacoal, is constructing a 1M tonne per annum binderless coal briquetting plant in Indonesia. Today the plant stands at approximately 80% complete, and the company is on track for plant commissioning in C1Q09. This will be the first commercial scale plant White Energy commissions, however we be- lieve this to be only the beginning of a global rollout plan.

Process performance exceeding expectations. Parallel to the plant construction, White Energy has been testing a variety of coals at its pilot plant in Australia. The plant has exceeded expectations is its ability to process particularly low grade coal. Where initially in- tended for the processing of roughly 30% moisture sub-bituminous coal, the plant has processed even higher moisture brown coal into export-grade coal. With this added functionality, the technology can be more versatile in its deployment, and potentially give the com- pany an opportunity to take advantage of bigger pricing spreads.

Solid first step in Africa. The company recently announced the signing of a joint venture agreement with Black River Asset Manage- ment LLC for the deployment and commercialization of White En- ergy’s technology throughout Africa. Not only is it good to see White Energy enter a new market, but the JV comes with favorable terms and a significant capital commitment (US$70M) from Black River. Where White Energy has 51% ownership, they will only be responsi- ble for 34% of the equity contributions to any future build-out.