A Smokey Situation — Supply Contracts Needed To Keep Some Utilities Out Of Court?

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While much of the world is moving to more renewable forms of energy, coal-fired power plants dominate much of the landscape and likely will continue to do so for years to come.

The continued operation of coal-fired plants means that many emissions still need to be mitigated. One Texas-based company has fulfilled this need since the early 2000s and has gained a solid stronghold in the industry by helping utilities with mercury emissions capture to meet state and federal environmental regulations.

Corsicana, Texas-based Midwest Energy Emissions Corp. MEEC (ME2C Environmental) said it has recently signed multiple new and renewed product supply contracts with a number of utility companies.

Coal-fired power plants have historically been the largest industrial emitter of mercury, typically accounting for about 20% of all mercury emissions. When ingested or inhaled, mercury can cause chronic and acute poisoning and damage the brain, kidneys, and lungs as well as impact the environment and wildlife.

Signing on the Dotted Line

ME2C Environmental has a strong existing supply customer base of coal-fired utilities around the country; however, the company’s growth took a decline around 2017.  ME2C has maintained existing contracts, generally renewed every two to three years, with long-term supply customers. Recently, the company has regained some industry growth with new customer contracts, announced within the past two months.

At the end of November 2021, ME2C Environmental said it had signed a non-exclusive five-year deal with a midwest utility. The agreement includes a one-time lump sum to use the company's mercury emissions capture technology and the opportunity to compete for the utility’s product supply going forward.

In January this year, the company announced new supply business with two separate utilities, both current license holders, and a supply contract renewal with a major power producer.   

The existing customer, described by ME2C Environmental as “one of the largest power producers in the U.S.”, signed up for a two-year renewal with a contract value of approximately $2.5 million. One of the new customers, also similarly described by the company as “one of the largest coal-powered utilities in the U.S.,” has signed a one-year agreement with ME2C Environmental worth approximately $2 million. 

The most recent new supply business, announced last week, was gained from a utility under a license agreement, which was announced in late 2020.  The new supply business announced this year is the second plant owned by this large utility that is now under direct product supply with ME2C.  The company has stated that this new supply business “represents the second “win” toward our efforts in monetizing the value of our patents. This major utility was one of the first to enter into a license agreement in 2020 and the first to extend their agreement with one other plant announced as a supply customer in mid-2021.”  

And Avoiding Court?

ME2C has been and continues to be in litigation with several U.S. entities for what it sees as historically unlawful use of its patented technologies. Coming to license and/or supply contract agreements with infringing utilities avoids litigation and is a testament to what ME2C calls the success of its business-first approach. 

For example, the most recent contract win with the one-year, renewable supply agreement, points to that issue, the company said, “Through our business-first approach, this utility has gained a strategic business partner in ME2C,” said Richard MacPherson, CEO of ME2C Environmental. “We are excited to have gained a new supply partner as we enter into a strong 2022 with a new significant recurring revenue stream that will strengthen our bottom line.”

The ongoing lawsuit with the remaining defendants is due to be brought to court in September 2023 and focuses on entities who own and/or operate an IRS refined coal tax credit, which has generated more than $1 billion dollars annually for the past decade.

But is ME2C Environmental prepared for this new growth with recent and future product supply contracts?

After a historically banner year in 2016 with approximately $32 million in revenue reached, ME2C began constructing a state-of-the-art new chemical manufacturing batch plant at the company’s existing facility in Texarkana. Construction was completed on the new batch plant in 2019, which was fully engineered and paid for by the company, an investment of more than $4 million. With new supply business coming in and much more expected throughout 2022 and the next few years, ME2C is in process of commissioning this new batch plant to meet the ramp up in business supply. The new facility will support more than $100 million in product supply revenue, if needed.

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