Wednesday, September 1, 2010

Will Growing Energy Needs in Asia, Increased Environmental Concerns Provide Financial Boon for Clean Coal Technologies

With the growing energy needs in Asia well documented and an emphasis on environmentally-friendly avenues in which to meet those demands now a standard a window of opportunity for companies specializing in clean energy technology has emerged. One such company, Clean Coal Technologies, Inc. (PINK: CCTC), has recently taken steps to satisfy these two developments by signing a strategic consulting agreement with MMB Global Advisors.

News of the agreement emerged earlier this month and Clean Coal Technologies is now hoping it will put them on target to introduce their patented technology that provides clean coal energy at low costs throughout Asia.

That technology, according to the company’s 10-Q/A filed on Aug. 10, 2010, has the ability “to utilize controlled heat to extract and capture pollutants and moisture from low-rank coal, transforming it into a clean-burning, more energy-efficient fuel, prior to combustion. Our proprietary coal cleaning process is designed to ensure that the carbon in coal maintains its structural integrity during the heating process while the volatile matter (polluting material) within the coal turns into a gaseous state and is removed from the coal.”

While the technology appears to be there, the organizational structure of Clean Coal Technologies remains a question as they will now rely on MMB Global Advisors to redefine their “global corporate structure” as well as re-align the company so as to attract key personnel while facilitating the development of strategic partnerships and alliances, according to their Aug. 17 press release. That release also noted MMB Global Advisors would assist in developing “new global client relationships predicated on the commercialization of CCTC’s products and technologies.”

Investors may be impressed with MMB as they have considerable influence in the emerging energy markets of Asia but the scope of the CCTC project may be cause for worry. The strategic consulting agreement is certainly a step in the right direction for CCTC as CEO and member of the Board of Directors Robin Eves pointed out “will help CCTC’s efforts in commercializing our technology within India, China, and other targeted countries,” but there is a lot of work to be done.

Despite owning a patented technology that, as their 10-Q/A filing points out, utilizes controlled heat to extract and capture pollutants and moisture from low-rank coal, transforming it into a clean-burning, more energy-efficient fuel, prior to combustion the company is yet to establish revenue since its inception and again, according to their quarterly report, have not installed their technology in an operating commercial facility.

To say the least that’s a bit discouraging, making it worse is the fact they don’t foresee the first operational plant to be constructed with the Sino-Mongolia International Railroad Systems, Co. Ltd. for a minimum of 12 to 18 months as they have yet to receive the Chinese government’s final approval. That leaves the company in a problematic state as they have estimated they would need approximately $5,000,000 to fund their operations for the next 12 months, and a similar additional amount to continue operations for the following twelve months, or until the initial plant is up and running. Based on their quarterly report ending June 30 those figures appear rather conservative as their operational costs during the three-month period was $2,574,866, and during the six-month period they reached $7,708,336.

CCTC has already acknowledged they anticipate increased losses during the next twelve months, citing “increased payroll expenses as we add necessary staff and increases in legal and accounting expenses associated with becoming a reporting company. We expect that we will continue to have net losses from operations for several years until revenues from operating facilities become sufficient to offset operating expenses, unless we are successful in the sale of licenses for our technology,” not exactly comforting to investors.

Making things even more difficult for Clean Coal Technologies is the fact it will need to come up with approximately $1,670,000 within 90 days of the Chinese government issuing their final approval for the project, this represents the first 20% of their partnership contribution with SMIRSC for the plant. The remaining portion of CCTC’s funding will be due within 24 months of final approval, leading the company to estimate a need of $10,500,000 for the balance of 2010, and $13,700,000 for 2011 just to meet funding commitments and operational costs.

Having generated no revenue since inception is bad enough but the company has been unable to generate any funding through any form of private or public offering, receiving cash for research and development activities and operating expenses solely through advances and/or loans from affiliates and stockholders. The company has said it intends to seek “sufficient debt or equity funding to meet both our capital contribution deadlines and funding sufficient for our operations” but based on their track record this could be difficult. CCTC has also said they have been “exploring joint venture arrangements and other strategic partnerships with various parties” so as to facilitate the deployment of their technology in the U.S. and abroad but no definitive agreements are in place.

If these weren’t enough red flags for an investor the stability of SMIRSC should be the most concerning as any problem with their finances would likely devastate the joint venture project with Clean Coal technologies. This is certainly something to be concerned about as the economic situation in China remains fragile and SMIRSC’s line of credit with the state-owned China Development Bank could disappear if the situation worsens.

Needless to say an opportunity exists for investors as most believe the stock has bottomed out after hitting its 52-week low of 0.044 earlier this month. While recent trading has it in the 0.053 range it’s still a far cry from last September when it hit its 52-week high of 2.50 and it could be some time before Clean Coal Technologies sees those days again.

CCTC’s 200 day moving average is 0.3467and its 50 day moving average is 0.0576, which can be seen in the chart at

Technical Chart for CCTC
CCTC is a penny stock traded on the Pink Sheets. Penny stocks are shares in public corporations that trade below $5 per share.