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Linc Energy taking stake in aboveground gasification company; potential CTL introduction in US

Australia’s Linc Energy, a developer of underground coal gasification and synthetic fuels projects, has signed an exclusive agreement with PowerHouse Energy Inc, a provider of onsite energy systems that uses fossil and renewable fuels to generate electricity and synthetic gas via the Pyromex ultra high temperature above-ground gasification (UHTG) process.

Linc says the Pyromex process produces good quality syngas with almost no CO2 gas emissions, and without the need for the consumption of high volumes of water or power. Additionally, the process does not utilize oxygen injection, which means there is no need for a large air separation unit (oxygen production facility). The Pyromex gasification process also has a small physical footprint ensuring very fast construction time-frames and lower construction costs than traditional above ground gasifiers.

PowerHouse had earlier completed an equity investment in and obtained exclusive licensing rights from the thermal reactor technology’s developer, Pyromex Holding AG of Switzerland. PowerHouse now offers integrated waste and biomass-to-energy systems on a turnkey basis.

Under the terms of the deal:

  • Linc Energy will invest US$6 million in cash into PowerHouse and grant certain rights to PowerHouse to use its FT gas to liquids technology for PowerHouse’s waste to energy applications.

  • Linc Energy will acquire a 10% interest in PowerHouse and will maintain that interest when PowerHouse lists on LSE-AIM (expected to occur within the next 90 days). Linc Energy is also granted US$1m worth of fully paid ordinary share options at US$0.30 per share, exercisable within 12 months of the LSE-AIM listing.

  • PowerHouse has granted Linc Energy a perpetual, exclusive, royalty-bearing licence to use, own, fabricate and operate Pyromex (UHTG) gasification systems for above-ground coal-to-syngas production of 1 MMcf per day and greater in all territories (with the exception of the China licence which will be non-exclusive and Italy which is excluded).

  • Linc Energy will pay a licence royalty of 5% of Linc Energy’s Pyromex-produced syngas net profits. This royalty does not include any downstream profit exposure, such as may be achieved from gas-to-liquids production.

  • Linc Energy is granted a further option exercisable within the next 2.5 years to invest a further US$6 million into PowerHouse stock at a 20% discount determined by reference to the market price at time of exercise.

  • PowerHouse has committed to the development of a larger Pyromex UHTG system within two calendar years of PowerHouse listing on the LSE-AIM, to provide Linc Energy with an enhanced ability to apply the technology in the exploitation of large, mineable coal deposits.

At the moment the cost of above ground gasification, combined with the huge greenhouse gas emissions issue means that any traditional above ground coal gasification development presents significant problems to overcome. But with Linc Energy holding the “ace” for underground coal gasification (UCG) and now developing the ability to roll-out a similar clean-coal model on above ground coal, the energy world is our oyster.

Linc Energy’s investment in Powerhouse is similar in many ways to the company’s previous investment in AFC [hydrogen fuel cell technology developer]. The PowerHouse agreement secures significant global technology rights for Linc Energy to the commercialization of the Pyromex above ground gasifier, whilst gaining a 10% exposure to the main business of the AIM listed company. This is just another example of how we at Linc Energy continue to build on our cleaner synthetic fuels capabilities and pursue opportunities wherever there is a potential to yield significant value and optionality for our shareholders.

—Peter Bond, Linc Energy CEO

The PowerHouse deal will allow Linc Energy to further open up a number of coal opportunities in the United States, including the state-line coal areas we own in Montana and North-Dakota. These coal areas were originally chosen by Tenneco as some of the better above ground gasification coal available in North America. This PowerHouse agreement allows Linc Energy to start to develop this billion tonne opportunity. When you consider our CEO is currently driving across the Australian continent using ultra clean diesel Linc Energy has already produced, the timing of this agreement, which provides the potential to turn billions of tonnes of coal into billions of barrels of diesel, is just perfect.

—Don Schofield, President of Linc Energy’s USA operations

Comments

HarveyD

Interesting development with great potential for Australia, China, India and USA. This could reduce worldwide GHG and other pollutants from current coal fired power plants.

JN2

Thanks Mike for all these articles. Keep them coming :)

John

SJC

There are under ground coal fields in the U.S. that have been burning for decades because they get enough oxygen to continue combustion. If they can make underground gasification work, that might mean fewer mountain tops blown off.

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