(EnergyAsia, May 12 2011, Thursday) — Synthesis Energy Systems Inc (SES), a Nasdaq-listed global energy and gasification technology company serving the energy and chemicals industries, said it has secured an agreement for a US$83.8 million cash investment from China Energy Industry Holding Group Co Limited (China Energy).
SES said the investment will be used to support its business strategy in China, including project development and investment, while “significantly” strengthening its balance sheet and providing financial flexibility for its business plan in China and around the world.
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, with extensive relationships throughout China, will assist SES develop new joint venture businesses to meet the needs of China’s growing demand for clean energy based on lower cost, lower grade coals such as lignite.
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 establishing a coal gasification joint venture with funding of approximately US$3 billion for either synthetic natural gas, transportation fuels, power or fertilisers combined with the market value of SES’ common stock reaching US$8 per share or more.
SES will also expand the size of its board from seven to 11 directors with four individuals to be appointed by China Energy. ZJX will appoint a managing director, who will report to SES’s CEO, and be responsible for leading the SES business in China.
Robert Rigdon, SES President and CEO, said:
“This is a major step forward for SES and accelerates our business plan and objectives, especially for China, while enhancing our global, three-pronged growth strategy. This strategy is designed to provide our proprietary technology and equipment to third parties through technology and equipment sales; make investments in projects that we develop, design, build and operate; and exploit unique opportunities to gain access to coal feedstock resources through implementation of our technology.
“In addition to opening new doors for future coal gasification projects, we will now have the opportunity to accelerate the development of our existing and future projects in China.”
Feng Feng, ZJX chairman, said:
“We believe that SES’s 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. This makes it an ideal solution to address the country’s growing demand for clean, affordable and secure energy supplies.
“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 fertilisers 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. We look forward to working together with our colleagues at SES to establish important business ventures to meet this need in China while also helping China’s energy independence and strengthening SES to grow globally.”