Synthesis Energy Systems (SES), a global energy and gasification technology company that provides products and solutions to the energy and chemicals industries, has signed an agreement with China Energy Industry Holding Group, for a cash investment of approximately $83.8 million to support the company's business strategy in China, including project development and investment. China Energy, a Hong Kong based limited liability corporation, has been formed by Zhongjixuan Investment Management (ZJX) of Beijing for the purpose of investing in SES.
This agreement significantly strengthens the SES balance sheet and provides additional financial flexibility for SES to execute on its business plan in China and around the world.
ZJX, with extensive relationships throughout China, will assist SES in the development of 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. 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 the company's efforts with its current partners and projects.
"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," commented Robert Rigdon, President and CEO of SES.
"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. This makes it an ideal solution to address the country's growing demand for clean, affordable and secure energy supplies," said Feng Feng, managing chairman of ZJX. "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. 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."
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 $3.0 billion for either synthetic natural gas, transportation fuels, power or fertilizers combined with the market value of SES' common stock reaching $8.00 per share or above on average for 20 consecutive trading days provided that the measurement period occurs six months after the closing. In addition, SES will increase 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' CEO, and be responsible for leading the SES business in China.