Global Green Demonstration Unit Almost Finished

Global Green Demonstration Unit Almost Finished post image

Global Green Solutions (GGRN – $0.11) released a third series of photos on the progress of the construction of its Greensteam demonstration unit at Aera Energy’s Belridge oilfield. The Company announced that construction will be completed within the next 4 weeks, after which hot testing, meaning combusting fuel, will start.

The demonstration unit is scheduled for completion (construction, testing and permitting) by late summer 2010. On acceptance of the unit, Greensteam will commence construction of 10 full scale production units staged over a 30-month period.

In our previous update we showed that the Aera contract is very lucrative for Greensteam as annual revenues can easily exceed $30 million. You can take a look at the photo update here (pdf) or you can look at the online slideshow here.

A Recap

In March 2008, Global Green Solutions signed an off-take agreement with Aera Energy, a Shell and ExxonMobil joint venture and one of California’s largest oil and gas producers, to replace 10 of Aera’s natural gas fired steam generators with Greensteam waste biomass fired steam generators.

At present, Aera Energy operates approximately 150 natural-gas fired steam generators in their enhanced oil recovery (EOR) process. EOR is used when heavy crude oil needs to pumped up. The main technique used by Aera Energy to accomplish this, is to inject steam into reservoirs to heat and make the oil more fluid, in this way easing its flow.

Why Do They Need To Build A Demonstration Unit?

Before commencing construction of the 10 full scale units however, a ¼ scale demonstration unit has to be built to test the performance of the Greensteam process and to measure the emissions in order to secure air quality permits.

Will They Pass The Emissions Tests?

We believe Greensteam will pass the emissions tests because in prototype testing, Greensteam demonstrated NOx emission of 0.040 lbs per MMBTU*, while other biomass combustors in the San Joaquin Valley region, where the demonstration unit is being built, have been permitted at levels as high as 0.075 – 0.100 lbs per MMBTU.

* MMBTU represents one million BTU (British thermal unit). It’s approximately the amount of energy needed to heat one pound of water one degree Fahrenheit. One BTU is equal to about 1.06 kilojoules. The 80 MMBTU produced by a single unit every hour is enough to heat an average U.S. home for a whole year.

What Will Happen Next?

After Global Green receives the emissions permit from the San Joaquin Valley Air Pollution Control District and U.S.Environmental Protection Agency (EPA), it can construct the 10 full scale units. These units will each consume up to 50,000 bone dry tons (BDT) of biomass per year and transfer 80 MMBTU per hour in normal state operations (23.4 MW thermal).

Has Greensteam Secured Enough Feedstock For The Project?

Greensteam signed an agreement with several feedstock suppliers which agreed to a pricing mechanism that links the price of the feedstock to the steam off-take price that Greensteam receives. So, if the steam price declines, the cost of feedstock also declines.

The feedstock requirement is easily met by available resources as Aera Energy is located in California’s Central Valley, one of the most productive agricultural areas in the US. For instance, half of the country’s fruits and nuts are grown in the Central Valley. And farmers have little alternative than to contract biomass removal to local chipper and grinder companies, because recent legislation prohibits open-burning of agricultural waste.

Conclusion

All of this is exactly why we like Global Green Solutions. The Company signed a long-term off-take contract with a first class customer. Critical elements were tested in prototypes. The demonstration unit was meticulously planned, so that the actual construction progresses smoothly. And the necessary groundwork has also been laid for the 10 full scale units.

We believe that investors who buy at these prices will be amply rewarded.


For important disclosures, please read our disclaimer.

2 comments… add one
  • Jerome Parker May 27, 2010, 5:13 pm

    I am new to investing and truly believe that Alternative Energy sources are the future. I have been following GGRN for over a year now and have slowly begun buying shares. This article has been very helpful. It is hard to find updates on their progress. My question to you is, as a new, young investor, is it likely to benefit me down the road by snatching up shares now? And if you have an idea of when I might see a positive return, when do you expect that to happen? Just really excited about GGRN and the opportunity. Thank you for your time.

  • admin May 27, 2010, 7:42 pm

    Hi Jerome,

    I agree with you that alternative energy is, and will be, one of the best performing industries the coming years. But, as always, picking the right companies is essential, even in a growing industry.

    I personally believe Global Green’s shares will perform really well over the next few quarters, mainly because the stock price is currently at a ridiculous low.

    It’s trading as if the company is going out of business, which is absolutely not the case. It’s demonstration unit at Aera is as good as finished, after which the performance and emissions will be tested. As I wrote in the article I think they will pass those tests with flying colors.

    Your most difficult question is when you will see a positive return. I think (and hope) that once the demonstration unit is finished and tested, more investors will start to recognize the potential of the company, which will inevitably lead to higher valuations.

    If you have any additional questions or remarks, just let me know.

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