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China Energy invests $83.8M in Synthesis Energy Systems; 43.5% ownership

Gasification company Synthesis Energy Systems, Inc. has signed an agreement with China Energy Industry Holding Group Co., Limited (China Energy), for a cash investment of approximately US$83.8 million to support SES’ business strategy in China, including project development and investment.

SES licenses its proprietary U-GAS fluidized bed gasification technology from the Gas Technology Institute.

China Energy, a Hong Kong-based limited liability corporation, has been formed by Zhongjixuan Investment Management Ltd. (ZJX) of Beijing for the purpose of investing in SES. ZJX will assist SES in the development of new joint venture businesses to deliver energy based on lower cost/lower grade coals such as lignite. Through these joint ventures, ZJX will assist in the development of new project investments, provide opportunities to acquire low cost coal resources, work to secure additional partnerships and financing, obtain government approvals, as well as support SES’ efforts with its current partners and projects.

We believe that SES’ proprietary U-GAS technology is strategically important to China and many other regions of the world due to its proven ability to cost effectively unlock the potential in challenging, low quality coals in an environmentally friendly manner...China has a very large and growing demand for clean energy such as synthetic natural gas for residential and industrial uses, transportation fuels, and electric power as well as for fertilizers for the agricultural industry. Importantly, all of these can be derived from China's abundant and low cost domestic coal via the technology of SES.

—Feng Feng, Managing Chairman of ZJX

Under terms of the agreement, China Energy will receive approximately 37.3 million shares of newly issued stock at closing, representing an approximate 43.5% ownership stake in SES. China Energy is entitled to receive additional shares of common stock bringing their total ownership position to 60% on a fully diluted basis contingent upon ZJX using best endeavors to establish a coal gasification joint venture with funding of approximately US$3.0 billion for either synthetic natural gas, transportation fuels, power or fertilizers combined with the market value of SES' common stock reaching US$8.00 per share or above on average for 20 consecutive trading days provided that the measurement period occurs six months after the closing.

Comments

HarveyD

This type of financial/ownership sharing arrangement is a much better idea than outright grants and/or tax credits. This way, governments/people get a return on their investments.

SJC

I read that the MIT people with the solar H2/O2 signed a deal with Tata in India. If China and India are willing to make the deals while the U.S. chases the highest returns on foreign T bills, be will be way behind the curve.

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