Global Green Demonstration Unit Full Steam Ahead

Global Green Demonstration Unit Full Steam Ahead post image

A month after the first update, Global Green Solutions (GGRN – $0.13) released a second series of photos on the progress of the construction of its Greensteam demonstration unit. The photos show that the construction is proceeding rapidly. Once finished, the Greensteam system will produce high quality renewable steam using waste agricultural biomass as fuel. Shortly after, Global Green’s first revenues will be generated.

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.

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 the 10 full scale production units staged over a 30-month period.

Why Do They Need To Build A Demonstration Unit?

Before commencing construction of the 10 full scale units however, a ¼ scale demonstration unit had to be build 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).

How Much Revenue Will Those 10 Full Scale Units Generate?

The off-take agreement with Aera stipulates that Greensteam can sell its produced steam at a price which is tied to the price of natural gas. Today, the benchmark Henry Hub spot price is trading around $3.97/MMBTU, while natural gas futures prices for delivery in September 2011, when the first commercial unit is scheduled to come on line, is trading at $5.327/MMBTU. Longer range forecasts are between $6.00 and $7.50/MMBTU

So if we do a little math, we reach the following revenue projection:

$5.327 per MMBTU x 80 MMBTU per hour = $10,227.8 per day

$10,227.8 per day x 10 units x 330 days up time per year = $33,751,740 revenues per year (Excluding sales of CO2 credits)

This is 5.5 times Global Green’s current market cap!

Conclusion

Currently, GGRN’s stock price fluctuates between 10 and 12 cents. We give shares of Global Green Solutions a Buy Recommendation, because we believe that in the next few months, as the demonstration unit nears completion and construction on the 10 full scale production units commences, we’ll see multiples of current valuations.


For important disclosures, please read our disclaimer.

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