White Energy’s “White Coal:” The Right Technology at the Right Time

Analyst Details
Company: Mithra Research
Analyst: Gary M. Goldstein & Laurie D. Goldstein, C.F.A.
URL: http://www.mithraresearch.com

Summary

White Energy Company (WEC) owns the exclusive worldwide license to a patented coal upgrading technology developed by the Australian government. After expending approximately $100M in the acquisition and further development of the binderless coal briquetting (BCB) process, WEC is on the cusp of initial commercial production.

The ubiquity of low-grade coal combined with the rising demand for coal- fired power and depleting reserves of hard coals makes the proposition of enhancing the economic appeal of low-grade coals as a source of energy a very useful application.

Agreements for three key projects have been signed: one in the U.S. with NRG Energy (NYSE: NRG- NR - $40.42) and two with Indonesian-based coal producers, PT Bayan Resources and the Adaro Group. A fourth relationship with Datang in China is in advanced stages. The company’s strategic partnering is an integral platform in its initial global expansion plans, and ensures its economic participation in briquetting operations.

Global Market Opportunity: Coal is the fastest growing source of energy and is projected to supply nearly 50% of the world’s energy by the year 2100 from a current level of approximately 25%(a).
Technology Offers Tremendous Economics: White Energy’s BCB process can transform $5-$12/ton brown or sub-bituminous coal to have energy characteristics of $50-$80/ton bituminous coal.
At the Cusp of Commercialization: The first commercial plant is scheduled for completion in 2008. Initial JV partner Bayan Resources has agreed to buy $215 million worth of upgraded coal over the first five years of operation.
World-Class Support: Via a $35 million investment, BHP Billiton (NYSE: BHP – NR - $77.05) has become White Energy’s global marketing agent.
Keeping it Simple: The “White Coal” BCB process is wholly a mechanical one, requiring low energy intensity in the production of an upgraded binderless briquette: existing competing technologies are “chemical” and use a binding agent. Additionally, the commercial plants have modular designs and are highly scalable.
Energy & Environmental Benefits: Sub-bituminous coal is lower in sulphur, ash, and nitrogen vs. hard coals; more efficient burns can further enhance reduced emissions; dramatically lowering the moisture content of the coal significantly reduces transportation costs; the BCB process results in lower dust production during handling and transport AND a water-resistant briquette that prevents spontaneous combustion.
U.S. & Chinese Coal Markets Ideal Beneficiaries: The synergies White Energy’s BCB process can realize in the U.S. and China are particularly strong due to the huge deposits of sub-bituminous coal.