SES (SYMX) Enters Agreement for Relocation and Expansion of ZZ

October 19, 2016 9:04 AM EDT

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Synthesis Energy Systems, Inc. (SES) (NASDAQ: SYMX) today announced that SES, Shandong Weijiao Xuecheng Energy Co. Ltd. (Xuecheng Energy), and the local government of Xuecheng District, ZaoZhuang City, Shandong Province signed a Moving Project Cooperative Agreement on October 18 to relocate the Zao Zhuang New Gas Company Joint Venture (ZZ) from inside the city proper to a new industrial zone for the Xuecheng District of ZaoZhuang. The project intends for ZZ to be expanded and repurposed to produce 283 million Nm3 of syngas per year using three SES Gasification Technology (SGT) systems. The facility’s clean syngas is intended to be used to generate hydrogen which will be used to convert tar to clean burning, ultra-low sulfur diesel fuel, using locally sourced coal in an environmentally responsible manner for energy that is at once clean, economic and sustainable.

The Zouwu Industrial Park was established in 2014 and Xuecheng Energy is operating modern coking coal ovens and a facility to convert coke oven gas to LNG in this park today. Xuecheng estimates the total capital cost for the complete project, including the syngas plant and the conversion of tar to diesel fuel, to be 700 to 800 million Yuan.

The local government of Xuecheng District, ZaoZhuang City, Shandong Province has expressed strong support for this project and has agreed to give coordination and support to permitting, land needs, and applications; tax preference to encourage expansion, upgrades, and re-construction; and financing preference, if the project continues to meet government requirements.

“The recent restructuring of ZZ has opened the pathway to develop this exciting project, and obtaining government support is a key next step in the development process. We are greatly encouraged with the tremendous support we have received from the local government. The completion of this agreement will allow us to move forward in confidence to continue to develop this project with our partner and evaluate the level of our participation as it moves forward,” said DeLome Fair, SES President and CEO. “Our Vice Chairman, Robert Rigdon, was on hand alongside Xuecheng Energy’s Chairman Liu to sign the three-party agreement with Xuecheng Government Secretary Jiang in a ceremony in ZaoZhuang City yesterday.”

The new and repurposed ZZ facility in the Zouwu Industrial Park will be the third industrial park planned to house SGT systems in Shandong Province. The other two, announced in Spring 2016, are Lijin County Binhai New District and Hekou Blue Economy Industrial Park Project, both in Dongying City.

In August 2016, SES and Xuecheng Energy entered into a Definitive Agreement to restructure ZZ, in accord with changing regulations at the location of the original ZZ facility. Xuecheng Energy assumed all outstanding financial liabilities of ZZ and SES retained about 9% ownership in the joint venture. The agreement will take effect formally when the registration with the government is completed, which is expected this quarter.

Shandong Province is a coastal province in the East China region. It is one of the biggest industrial producers and one of the top chemical manufacturing provinces in China.

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