QUEBEC CITY, May 28, 2019 /CNW Telbec/ - CO2
Solutions Inc. (the "Corporation" or "CO2
Solutions") (TSXV: CST) today announced its financial results for
the three-month period ended March 31,
2019. The Corporation's detailed condensed interim
consolidated financial statements and management's discussion and
analysis ("MD&A") will be filed and available on
www.sedar.com.
Three-month Period ended March 31,
2019 and Subsequent Operational Highlights
Update on the Saint-Félicien Project –
Commissioning complete and the unit now in operation
On March 14, 2019, the Corporation announced that the start
of the commissioning of the CO2 capture unit had
officially begun. This start-up was preceded by the successful
pre-operation verifications of each of the capture unit's systems,
after which the unit was put into operation and the first tonnes of
CO2 were captured. The Corporation also announced
that it would then ramp up the overall capture rate to validate the
unit's nominal capacity of 30 tonnes of CO2 per
day. This is the Corporation's first commercial project with Fibrek
General Partnership, a subsidiary of Resolute Forest Products Inc.
(TSX: RFP) (NYSE: RFP), and Serres Toundra Inc. The project
involves the deployment of a 30-tonne per day (tpd)
CO2 capture unit and ancillary equipment at
Resolute's pulp mill in Saint-Félicien, Quebec and the commercial reuse of the
captured CO2 by the adjacent Serres Toundra
Greenhouse complex.
The construction of the
Saint-Félicien CO2 capture unit was partly
financed with investments from Sustainable Development Technology
Canada (SDTC) and the Technoclimat program of the Quebec government as well as a loan from
Canada Economic Development (CED).
On April 29, 2019, the Corporation
announced that the successful completion of the commissioning of
the CO2 capture unit located at the Resolute Forest
Products Inc. pulp mill in Saint-Félicien, Québec, a
significant milestone and development in the objective of
monetizing the Corporation's proprietary CO2 capture
technology. Given the late delivery of certain components and the
difficult weather conditions experienced during equipment
installation over the fall and winter months, the project's capture
unit was completed later than originally planned and, because of
these delays, unforeseen additional equipment costs, and variations
in the U.S. to Canadian exchange rate, the Corporation estimates
that the total cost of the completed CO2 capture unit
and ancillary equipment could reach $11.1M, approximately $2.6M higher than the original estimate provided
by the Corporation's consulting engineers in October 2017. Under the circumstances, given the
Corporation's current cash situation, aggravated by this cost
overrun, CO2 Solutions is currently evaluating
alternative financing options (see "special committee" announcement
below). It should be noted that even at this higher level of
capital expenditure ("capex"), the Saint-Félicien capture unit is
expected to be profitable and its operating cost profile is
expected to confirm the competitive operating and capex estimates
of the Corporation's enzymatic technology at large scale.
CO2 Solutions' completed unit is now only the second
commercial carbon capture unit in Canada and the first such project using
second-generation technology. The Corporation's management is
confident that this successful completion of the unit will be a
major stepping stone for future projects at the same and greater
scales.
As part of the commissioning phase,
CO2 Solutions contracted Tetra Tech, an independent
consulting engineering services firm, to review the Unit's
operational efficiency and deliver a performance audit report (the
"Audit"). Specifically, the Corporation sought to validate the
Unit's nominal capacity of 30 tonnes-CO2 per day
and the ability of the pulp mill to provide all of the Unit's
thermal requirements with only residual low-grade energy (i.e. hot
water).
The Audit confirmed the following:
- The Unit and its components are accurately sized to produce at
least 30 tonnes-CO2 per day under normal operating
conditions.
- The quantity of thermal energy required by the reboiler of the
Unit is only 2.4 GJ/tonne-CO2.
- The required thermal energy is entirely provided by the pulp
mill through residual, low-grade energy (i.e. hot water) that has
nil value and no parasitic impact on the mill's energy
balance.
- The quantity of electrical energy required to operate the Unit
translates into a cost of only C$7.35/tonne-CO2 (or less than US
$5.00/tonne-CO2).
Along with these excellent results confirmed by the Audit, the
Corporation recorded two additional significant operating outcomes
during this commissioning period; the first is related to enzyme
half-life (i.e. durability), and the second is related to the
quality of the CO2 produced for delivery to the
greenhouse.
Regarding enzyme half-life, the configuration of the Unit
enabled a doubling of the enzyme's half-life relative to what had
been observed in earlier large-scale demonstrations of the
Corporation's technology. This gain is the result of modifications
to the process following the 2015 Valleyfield demonstration and
clearly demonstrates the cost reduction potential of the
Corporation's enzymatic technology.
With respect to CO2 quality, an analysis of the
samples drawn from the Unit confirmed its high degree of purity
which was well within the stringent guidelines required by
greenhouse operators. This purity level was obtained even though
the Unit draws raw and unpolished flue gas from the pulp
mill's lime kiln, which mimics conditions similar to those found in
cement plants and other industrial applications.
Since the capture unit has now successfully reached its nominal
capacity, as provided in the contract, a six-month demonstration
period has begun, after which the Corporation expects to generate
revenues from the sale of the captured CO2 to the Serres
Toundra greenhouse. This unit in Saint-Félicien is the
Corporation's second operating CO2 capture unit and its
first commercial unit. The completed Saint-Félicien unit
will provide several benefits to its stakeholders, from
generating revenues for CO2 Solutions, to reducing the
CO2 emissions of Resolute pulp mill and enhancing the
growth of Serres Toundra's greenhouse production. As a result of
the successful completion of this Unit, CO2 Solutions
continues to attract strong interest from corporations worldwide
seeking a cost-effective and environmentally friendly
CO2 capture technology.
Update on the VCQ Project
The VCQ project, lead by the Corporation, is the most
comprehensive CO2 capture and utilization demonstration
project. Launched in February 2017,
the objectives of this project are to develop and demonstrate
commercially viable end-to-end solutions to capture and utilize
CO2 in various applications while reducing greenhouse
gas ("GHG") emissions.
Due to the Corporation's current cash situation noted above, the
VCQ project has currently been paused pending the raising of
additional financing.
CO2 Solutions announces the creation of a
special committee by the Board of Directors to review Strategic
Options
On April 1, 2019, the Corporation announced that its
Board of Directors had appointed a special committee (the "Special
Committee") to review all strategic alternatives that may be open
to the Corporation. The Special Committee is composed of
independent members of the Corporation's Board of Directors, namely
Kimberley Okell, Jocelyn Proteau and Glenn Kelly, the latter acting as Chairman of
the Special Committee. In connection with this review process, the
Corporation retained the services of Langlois Lawyers and Ernst
& Young to act as its advisors.
In order to provide adequate leeway for the Special Committee's
review, the Corporation immediately curtailed its operating
activities until its financial situation allows for their
resumption. At this time, the Special Committee has initiated a
process allowing it to evaluate various strategic alternatives,
with the support of its financial and legal advisors.
Financial Update
Revenues
The Corporation recorded no revenues for the three-month period
ended March 31, 2019 and $0.01 million for the same period in
2018. For the nine-month periods ended March 31, 2019, and 2018, the corporation
recorded $0 and $0.03 million respectively. Funds received from
subsidy or grant agreements signed with federal or provincial
government agencies are not treated as revenue. Rather, these
amounts are accounted for as a deduction from research and
development expenses in the period the contribution is claimed and
accrued (see Research and development expenses below).
Research and Development Expenses
Research and development expenses, before tax credits and
government assistance, increased by $0.35 million to $2.60 million for the three-month period
ended March 31, 2019, compared to
$2.25 million for the same
period in 2018. Increases in the three-month period from that of
the prior year reflect the variation in activity in the VCQ project
and the completion of the Saint-Félicien project. These expenses
will vary based upon the development phase and activity levels of
ongoing projects undertaken by the Corporation.
For the nine-month period ended March 31,
2019, research and development expenditures, before tax
credits and government assistance, increased by $6.00 million to $13.84 million from $7.84 million for the same period last year.
As was the case above, this increase reflects the higher volume of
research and development activities associated with the VCQ and
Saint-Félicien projects.
Quebec provincial research and
development tax credits accrued during the quarter were
$0,21 million and $0,44 million for the nine-month period
ended March 31, 2019.
General and Administrative Expenses
General and administrative expenses totalled $0.65 million for the three-month
period ended March 31, 2019, compared to $0.51 million for the same period in 2018,
representing an increase of $0.14 million. This net increase is
predominantly related to an increase of $0.19 million in travel, entertainment and
advertising and other general office expenses offset by a decrease
in patents amortization of $0.05 million.
General and administrative expenses totalled $2.05 million for the nine-month period
ended March 31, 2019, compared to
$1.69 million for the same
period in 2018. This net increase of $0.36 million is predominantly related to a
net increase in travel, entertainment and advertising and other
general administrative expenses.
Loss and Comprehensive Loss for the Quarter
The Corporation recorded a loss of $2.45
million, or $0.02 per share,
for the three-month period ended March 31,
2019, an increase of $1.97
million from the loss of $0.49
million or $0.00 per share,
for the same period in 2018. For the nine-month period ended
March 31, 2019, the Corporation
recorded a loss of $7.79 million or
$0.05 per share, an increase of
$5.46 million from the loss of
$2.33, or $0.02 per share, for the same period in 2018. No
significant factors, other than those described above, contributed
to the change in the loss for the three-month or the nine-month
periods.
Liquidity and Financial Position
As at March 31, 2019, the
Corporation had an aggregate balance of cash and cash equivalents
of $1.45 million and negative
working capital (current assets less current liabilities) of
$10.40 million.
The unaudited condensed interim consolidated financial
statements for the nine-month period ended March 31, 2019 and 2018, and related notes
included therein and the Management's Discussion and Analysis for
the period ended March 31, 2019, and
additional information regarding the Corporation, are available on
SEDAR at www.sedar.com.
Going Concern
To date, the Corporation has financed its operations mainly
through cash flow obtained from technology development
collaborations, the issuance of common shares or convertible
securities and government assistance.
As at March 31, 2019, the
Corporation had an accumulated deficit of $47,748,114 compared to $40,344,343 as at March
31, 2018. In addition to ongoing working capital
requirements, the Corporation must secure sufficient funding to
meet its capital and operational expense commitments related to its
research and development projects as well as its general and
administration expenses. As at March 31,
2019, the Corporation showed a working capital deficiency of
$10,402,657 compared to
$3,867,536 at the same time last
year. The working capital deficiency includes cash and cash
equivalents of $1,447,725
($8,124,284 in 2018) and deferred
grant of $5,880,325 ($9,188,973 in 2018). As at March 31, 2019 and currently, management
estimates that these current funds alone would not be sufficient to
allow the Corporation to continue its operations over the next
twelve (12) months especially given the cost increase related to
the Saint-Félicien project.
Through the creation of a Special Committee and through current
and ongoing discussions with potential funding partners and
provincial and federal government agencies, the Corporation's
management is actively seeking to raise the necessary capital to
meet its funding requirements. However, there can be no assurance
that management's plans or current negotiations will be successful.
Until such time as financing at terms acceptable to the Corporation
can be confirmed or negotiations with potential funding partners
are successfully concluded, the Corporation has commenced limiting
the ongoing project and development work and reducing its operating
costs.
Accordingly, these conditions have resulted in an uncertainty
that may cast significant doubt about the Corporation's ability to
continue as a going concern and accordingly, the appropriateness of
the use of IFRS applicable to a going concern as described in the
following paragraph. In the case that the Corporation is unable to
continue its operations, amounts realized for assets might be less
than amounts reflected in the Corporation's condensed interim
consolidated financial statements.
The Corporation's condensed interim consolidated financial
statements do not reflect the adjustment to the carrying values of
assets and liabilities, expenses and condensed interim consolidated
Statement of Financial Position classifications that would be
necessary were the going concern assumption inappropriate. These
adjustments could be material.
About CO2 Solutions Inc.
CO2 Solutions is an innovator in the field of
enzyme-enabled carbon capture and has been actively working to
develop and commercialize the technology for stationary sources of
carbon pollution. CO2 Solutions' technology lowers the
cost barrier to Carbon Capture, Utilization and Sequestration
(CCUS), positioning it as a viable CO2 mitigation tool,
as well as enabling industry to derive profitable new products from
these emissions. CO2 Solutions has built an extensive
patent portfolio covering the use of carbonic anhydrase, or
analogues thereof, for the efficient post-combustion capture of
carbon dioxide with low‐energy aqueous solvents. Further
information can be found at www.co2solutions.com.
CO2 Solutions Forward-looking Statements
Certain statements in this news release may be forward-looking.
These statements relate to future events such as (i) the
Corporation's projects, including their costs, progression and
benefits, (ii) the Corporation's expected activities, expenditures
and capital requirements, (iii) the Corporation's ability to
continue as a going concern, (iv) anticipated developments in the
Corporation's operations foreseeable future, (v) the adequacy of
the Corporation's financial resources and (vi) other events or
conditions that may occur in the future, and reflect the current
assumptions and expectations of management. Forward-looking
statements are frequently, but not always, identified by words such
as "expects", "anticipates", "believes", "intends", "estimates",
"predicts", "potential", "targeted", "plans", "possible" and
similar expressions, or statements that events, conditions or
results "will", "may", "could" or "should" occur or be
achieved.
Factors that could cause actual results to differ materially
from such forward-looking statements include, but are not limited
to, (i) availability of funding, (ii) general business and economic
uncertainties, (iii) third party events and adverse market
conditions, as well as those risks set out in the Corporation's
public documents filed on SEDAR and (iv) the adequacy of the
Corporation's available cash resources. The Corporation's
forward-looking statements are based on the beliefs, expectations
and opinions of management on the date the statements are made.
Consequently, all forward-looking statements made in this news
release involve known and unknown risks and uncertainties that
could cause actual results to differ materially from those
expressed or implied in these forward-looking statements.
Readers are cautioned not to place undue reliance on such
forward-looking statements. CO2 Solutions undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as may be required under applicable law.
Neither the TSX Venture Exchange nor its Regulation
Services Provider (as that term is defined in the policies of the
TSX Venture Exchange) accepts responsibility for the adequacy or
accuracy of this release.
SOURCE CO2 Solutions Inc.