What Global Green Investors Have Been Waiting For

What Global Green Investors Have Been Waiting For post image

Global Green Solutions (GGRN – $0.085) released a photo update of the construction of its Greensteam demonstration unit at Aera Energy’s Belridge oilfield. After meticulously planning and organizing, construction has begun, and now everybody can see the progress being made. Management plans to do similar updates every 4-6 weeks.

You can take a look at the photo update here (pdf) or you can look at the online slideshow here.

The Demonstration Unit

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.

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. We believe Greensteam will easily pass the emissions tests because in prototype testing, Greensteam demonstrated NOx emission of 0.040 lbs per MMBTU*, while other biomass combustors in the region have been permitted at levels as high as 0.075 – 0.100 lbs per MMBTU.

After Global Green receives its emission 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).

* 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.

Potential Revenue

Producing a lot of steam is nice, but at the end of the day we buy shares of a Company to make some money right? Well, Global Green will do exactly that.

The off-take agreement with Aera stipulates that Global Green 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 $4.17/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 $5.49/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:

$5.49 per MMBTU x 80 MMBTU per hour = $10,540.8 per day

$10,540.8 per day x 10 units x 330 days up time per year = $34,784,640 revenues per year. (Excluding sales of CO2 credits)

This is 8.6 times Global Green’s current market cap!

These photos show the excellent work being done by the Greensteam people and contractors. By speaking with several (potential) shareholders, we know this visual progress is what they’ve been waiting for.

Looking at today’s stock price, compared with Global Green’s revenue potential at Aera, we can only conclude the stock is severely undervalued.

For important disclosures, please read our disclaimer.

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