MEEC: Midwest Energy Emissions update confirms installations continue as planned.
Zacks Small Cap Research 11 hrs ago
By Steven Ralston, CFA
OTC:MEEC
In a Business Update, Midwest Energy Emissions (MEEC) reported that revenues generated during August 2015 exceeded $1.5 million. The major driver was the installation and commissioning of the company’s sixth front end-injection system. Product sales during the month were approximately $900,000. For the month, the company achieved positive operating profit and earnings before interest, taxes, depreciation and amortization (EBITDA). In a prior update issued in August, the company announced that Canadian demonstrations had been completed successfully which included the introduction of a new line of sorbents. Previously, in May 2015, Midwest Energy Emissions announced that three injection systems had been installed in April. Management has estimated that product sales, equipment installations and consulting services will generate over $8 million in equipment sales during 2015, over $30 million in revenues in 2016 and over $110 million over the terms of existing contracts.
Though the enforcement of the implementation of the current form of MATS has come into question by the Supreme Court ruling, the Court’s decision requires further proceedings of the Michigan et al v. EPA case by the DC Circuit Court. However, the company’s business updates confirm installations are on track. Management is currently not observing any behavioral changes by customers under.
Midwest Energy Emissions continues to install the infrastructure required MATS compliance. The company has 15 electric generating units (EGUs) under contract, of which six have been installed and commissioned. Two EGUs have been operational since 2011. The remaining nine units under contract are scheduled to become operational in 2016. Management continues to estimate that product sales, equipment installations and consulting services will generate over $8 million in equipment sales during 2015, over $30 million in revenues in 2016 and over $110 million over the terms of existing contracts.
Midwest Energy is unique in that it 1) has a singular focus (the mercury emissions control market), 2) holds exclusive rights to patented processes, 3) has achieved market penetration through the commercialization of SEA Technology and 4) is positioned to take advantage of further growth opportunities afforded by the implementation of MATS in whatever form develops from the process initiated from the Supreme Court’s ruling. Midwest Energy Emissions should experience a dramatic increase in revenues over the next few years as the coal-fired plants, which have contract for Midwest Energy’s SEA Technology, ramp up their mercury emissions control efforts to become MATS-compliant.
Comparable pollution control and value-added specialty chemical companies trade in a P/S valuation range between 2.8 and 0.7. Also, as a reference, Cytec Industries is in the process of being acquired by Solvay SA at 2.6 times TTM revenues. Utilizing the top decile P/S ratio of 2.5 on projected 2016 sales of $17.98 million, our share price target is $1.00.
We are optimistic about Midwest Energy Emissions. The company should experience a dramatic increase in revenues over the next few years as the coal-fired plants, which have contract for Midwest Energy’s SEA Technology, ramp up their mercury emissions control efforts.
