MagneGas (NASDAQ:MNGA) has an aggressive plan to expand the sales of its promising hydrogen-based fuel, which is looking to make waves in the industry as a greener natural gas alternative that has lower emissions than any fossil fuel currently on the market.
The company has invented a process to convert liquid waste into its hydrogen-based fuel, known as MagneGas, which involves the flow of carbon-rich liquid feedstock through a 10,000 degree Fahrenheit electric arc between two carbon electrodes.
The patented process sterilizes the liquid waste, which can include anything from manure or sludge to medical waste, and produces the hydrogen-based fuel, which also contains carbon and trace gases.
The Florida-based company’s path to growth is clear, with CFO Luisa Ingargiola outlining a three-pronged strategy which aims to bring the company to exit 2015 at a break-even run rate.
The first part involves the expansion of fuel sales through key partnerships with domestic gas distributors in Alabama, Michigan, Pennsylvania and Florida. It has already signed on about a dozen distributors in the US and just recently acquired Equipment Sales and Service Inc (ESSI), a small distribution company in Clearwater, Florida, giving MagneGas a tangible platform to increase its market penetration at an even faster rate. The local Florida gas distributor is also expected to generate $2 million in revenues in 2014.
“In the past, we’ve been selling one bottle at a time, versus now, with [ESSI’s] existing customers, we have a platform to enter the market significantly,” says Ingargiola in a recent interview with Proactive Investors.
“Our goal is to bring this [gas sales] division to break even in 2015 as a result of the acquisition.”
The company’s target market is the $5 billion metal cutting industry, where MagneGas is seeking to replace acetylene, claiming its home-grown, US patented hydrogen-based gas is cheaper, uses less oxygen and also cuts faster and better. MagneGas costs between $20 and $35 per cylinder, compared to about $50 per cylinder for acetylene, which is sourced from calcium carbide from China. It also uses less oxygen than acetylene, meaning customers save money on oxygen cylinders.
The high temperature of MagneGas is a strong selling point too, with the company’s product independently verified by the City College of New York to have a temperature of 10,500 degrees F, compared to some 6,000 degrees for acetylene. With MagneGas, the company says the heat is concentrated to the precise point of the metal cut, creating a faster and higher quality cut. It also emits 12.5% oxygen and has lower toxicity than acetylene, with less harmful emissions or soot.
MagneGas dissipates into the air unlike acetylene, which pools on the ground and creates a major risk for an explosion. This is why the product is deemed safer by the company and has piqued the interest of even fire departments, which currently use acetylene. The New York Fire Department has been testing MagneGas to replace acetylene for the past 18 months, with final results expected shortly.
The clean burning fuel has a myriad of industrial uses though, including cooking, heating, and powering natural gas bi-fuel automobiles, leaving a wide market for the company to penetrate.
Its revenue stream does not stop there, with the company also able to sell equipment to remediate liquid waste to create products like irrigation water or fertilizer. The company’s technology to sterilize the liquid waste using heat from the plasma arc system is already patented, and has received approvals and verification from the US and Europe.
For now, the company is focused on water-based waste like sewage or manure, which traditionally is disposed of using anaerobic digestion, a process by which “good bacteria” is added to eat away the “bad bacteria” to break down the material, using huge leaching ponds.
“The reason our technology is better is that we are sterilizing the liquid instantly. Imagine manure being hit against a 10,000 degree lightning bolt. It’s fully sterilized,” affirms the chief financial officer.
MagneGas recently tested swine manure to confirm the sterilization process, with the results confirming the resulting manure is suitable for Class A treatment, meaning it can be field spread immediately, as opposed to other disposal methods which can take hours or months.
In order to sell its equipment to this market, the company will set up live demonstration centers, and to this end, it has already partnered with a farmer in Indiana from which to launch its platform. It is also pursuing sewage sterilization opportunities and other potential applications through negotiations with companies in Brazil, Costa Rica, Italy and other international countries, Ingargiola says.
Medical waste is another application for its sterilization technology, with the company setting up a similar strategic relationship in this industry with Pioneer Recycling, the goal of which is to find solutions for Pioneer’s different waste streams.
“It’s for anything that requires a liquid that needs to be sterilized. Our goal is to set up strategic relationships with stakeholders in the specific industries we are targeting, and then put a machine there to demonstrate, proceeding to launch the technology to market.”
The third vertical of the business is electric utilities and co-combustion, which involves the mixing of MagneGas with other hydrocarbon fuels to reduce emissions, without impacting the quality of the fuel. The company has the ability to inject MagneGas into any form of fossil fuel as a catalyst to improve combustion, as its high flame temperature burns existing fuels cleaner.
Specifically, MagneGas is focused on diesel and coal at the moment, with independent verification underway in each respective market. The company has tested its fuel in a co-combustion environment with coal, with results showing that carbon dioxide is reduced 30 to 40 percent with MagneGas, while heat is increased 50 to 100 percent. Nitrogen oxides and carbon monoxide were also dropped, according to the results.
MagneGas is estimating $4 million in annual revenues per coal-fired plant converted to its hydrogen-based fuel, with a total addressable market of some 547 coal-fired power plants in the US alone. The company has a partnership in place with a regional utility-associated research center in the southeast US, with the confidential partner testing MagneGas in its power plant for the reduction of coal emissions. Initial testing results from this venture are expected in the next few months.
Meanwhile, Georgia Tech has partnered with MagneGas to test the alternative fuel with diesel, with results also anticipated in the months ahead.
The green energy company is working with several tech partners worldwide to commercialize the co-combustion process, with partners in the US, Australia and Italy so far. Ingargiola says MagneGas is not expecting revenues from this unit until 2015.
Currently, the company generates revenue exclusively from the sale of gas and equipment, having just exited the start-up stage. But with the acquisition of the Florida-based gas distributor propelling expansion in the short-term, as well as upcoming test results and partnerships set to launch its technology to other markets, MagneGas is in store for some exciting growth. Its revenues for the first six months of the year increased 40 percent over the same period of 2013.
The company just completed another capital raise, with a total of three wrapped up in the past 12 months for some $14 million in proceeds. With a cash burn rate of $350,000 a month, Ingargiola says MagneGas has at least 12 to 16 months of cash left even after the latest acquisition and doesn’t anticipate any capital needs at this time.
“We’re fully capitalized, we have completed an acquisition, and we have lots of major catalysts and opportunities ahead,” assures MagneGas’ CFO.
Investors seem to be catching on.
The stock --- which trades a significant 730,000 shares a day given its market cap of just under $35 million --- has more than doubled in value in 2014, with the company recently attracting some institutional investors on the back of its fast revenue growth. Reported by Proactive Investors 13 hours ago.
The company has invented a process to convert liquid waste into its hydrogen-based fuel, known as MagneGas, which involves the flow of carbon-rich liquid feedstock through a 10,000 degree Fahrenheit electric arc between two carbon electrodes.
The patented process sterilizes the liquid waste, which can include anything from manure or sludge to medical waste, and produces the hydrogen-based fuel, which also contains carbon and trace gases.
The Florida-based company’s path to growth is clear, with CFO Luisa Ingargiola outlining a three-pronged strategy which aims to bring the company to exit 2015 at a break-even run rate.
The first part involves the expansion of fuel sales through key partnerships with domestic gas distributors in Alabama, Michigan, Pennsylvania and Florida. It has already signed on about a dozen distributors in the US and just recently acquired Equipment Sales and Service Inc (ESSI), a small distribution company in Clearwater, Florida, giving MagneGas a tangible platform to increase its market penetration at an even faster rate. The local Florida gas distributor is also expected to generate $2 million in revenues in 2014.
“In the past, we’ve been selling one bottle at a time, versus now, with [ESSI’s] existing customers, we have a platform to enter the market significantly,” says Ingargiola in a recent interview with Proactive Investors.
“Our goal is to bring this [gas sales] division to break even in 2015 as a result of the acquisition.”
The company’s target market is the $5 billion metal cutting industry, where MagneGas is seeking to replace acetylene, claiming its home-grown, US patented hydrogen-based gas is cheaper, uses less oxygen and also cuts faster and better. MagneGas costs between $20 and $35 per cylinder, compared to about $50 per cylinder for acetylene, which is sourced from calcium carbide from China. It also uses less oxygen than acetylene, meaning customers save money on oxygen cylinders.
The high temperature of MagneGas is a strong selling point too, with the company’s product independently verified by the City College of New York to have a temperature of 10,500 degrees F, compared to some 6,000 degrees for acetylene. With MagneGas, the company says the heat is concentrated to the precise point of the metal cut, creating a faster and higher quality cut. It also emits 12.5% oxygen and has lower toxicity than acetylene, with less harmful emissions or soot.
MagneGas dissipates into the air unlike acetylene, which pools on the ground and creates a major risk for an explosion. This is why the product is deemed safer by the company and has piqued the interest of even fire departments, which currently use acetylene. The New York Fire Department has been testing MagneGas to replace acetylene for the past 18 months, with final results expected shortly.
The clean burning fuel has a myriad of industrial uses though, including cooking, heating, and powering natural gas bi-fuel automobiles, leaving a wide market for the company to penetrate.
Its revenue stream does not stop there, with the company also able to sell equipment to remediate liquid waste to create products like irrigation water or fertilizer. The company’s technology to sterilize the liquid waste using heat from the plasma arc system is already patented, and has received approvals and verification from the US and Europe.
For now, the company is focused on water-based waste like sewage or manure, which traditionally is disposed of using anaerobic digestion, a process by which “good bacteria” is added to eat away the “bad bacteria” to break down the material, using huge leaching ponds.
“The reason our technology is better is that we are sterilizing the liquid instantly. Imagine manure being hit against a 10,000 degree lightning bolt. It’s fully sterilized,” affirms the chief financial officer.
MagneGas recently tested swine manure to confirm the sterilization process, with the results confirming the resulting manure is suitable for Class A treatment, meaning it can be field spread immediately, as opposed to other disposal methods which can take hours or months.
In order to sell its equipment to this market, the company will set up live demonstration centers, and to this end, it has already partnered with a farmer in Indiana from which to launch its platform. It is also pursuing sewage sterilization opportunities and other potential applications through negotiations with companies in Brazil, Costa Rica, Italy and other international countries, Ingargiola says.
Medical waste is another application for its sterilization technology, with the company setting up a similar strategic relationship in this industry with Pioneer Recycling, the goal of which is to find solutions for Pioneer’s different waste streams.
“It’s for anything that requires a liquid that needs to be sterilized. Our goal is to set up strategic relationships with stakeholders in the specific industries we are targeting, and then put a machine there to demonstrate, proceeding to launch the technology to market.”
The third vertical of the business is electric utilities and co-combustion, which involves the mixing of MagneGas with other hydrocarbon fuels to reduce emissions, without impacting the quality of the fuel. The company has the ability to inject MagneGas into any form of fossil fuel as a catalyst to improve combustion, as its high flame temperature burns existing fuels cleaner.
Specifically, MagneGas is focused on diesel and coal at the moment, with independent verification underway in each respective market. The company has tested its fuel in a co-combustion environment with coal, with results showing that carbon dioxide is reduced 30 to 40 percent with MagneGas, while heat is increased 50 to 100 percent. Nitrogen oxides and carbon monoxide were also dropped, according to the results.
MagneGas is estimating $4 million in annual revenues per coal-fired plant converted to its hydrogen-based fuel, with a total addressable market of some 547 coal-fired power plants in the US alone. The company has a partnership in place with a regional utility-associated research center in the southeast US, with the confidential partner testing MagneGas in its power plant for the reduction of coal emissions. Initial testing results from this venture are expected in the next few months.
Meanwhile, Georgia Tech has partnered with MagneGas to test the alternative fuel with diesel, with results also anticipated in the months ahead.
The green energy company is working with several tech partners worldwide to commercialize the co-combustion process, with partners in the US, Australia and Italy so far. Ingargiola says MagneGas is not expecting revenues from this unit until 2015.
Currently, the company generates revenue exclusively from the sale of gas and equipment, having just exited the start-up stage. But with the acquisition of the Florida-based gas distributor propelling expansion in the short-term, as well as upcoming test results and partnerships set to launch its technology to other markets, MagneGas is in store for some exciting growth. Its revenues for the first six months of the year increased 40 percent over the same period of 2013.
The company just completed another capital raise, with a total of three wrapped up in the past 12 months for some $14 million in proceeds. With a cash burn rate of $350,000 a month, Ingargiola says MagneGas has at least 12 to 16 months of cash left even after the latest acquisition and doesn’t anticipate any capital needs at this time.
“We’re fully capitalized, we have completed an acquisition, and we have lots of major catalysts and opportunities ahead,” assures MagneGas’ CFO.
Investors seem to be catching on.
The stock --- which trades a significant 730,000 shares a day given its market cap of just under $35 million --- has more than doubled in value in 2014, with the company recently attracting some institutional investors on the back of its fast revenue growth. Reported by Proactive Investors 13 hours ago.