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Strong
cash flow and new products generating excitement for Headwaters Incorporated
Energy
Coal
(HDWR - NASD)
Headwaters Incorporated
Kirk A. Benson
Chairman and
Chief Executive Officer
Interview conducted by:
Walter Banks
Co-Publisher
CEOCFOinterviews.com
June 2003
Headwaters Incorporated is a world leader in
providing technology and services that maximize the value of fossil fuels. The Company is
focused on providing services to energy companies, conversion of fossil fuels into
alternative energy products, and generally adding value to energy. Headwaters generates
revenue from managing coal combustion products (CCPs) and from licensing its innovative
chemical technology to produce an alternative fuel. Through its CCP business and its solid
alternative fuels business, the Company earns a growing revenue stream that provides the
capital needed to acquire and expand synergistic new business opportunities. Kirk A. Benson, Chairman and CEO of Headwaters Incorporated tell
us, “There are three new products that we are in the process of
commercializing; one is a building product that we call FlexCrete it is made from 70% fly
ash, which is one of the coal combustion product. It is a building material developed
internally and we have applied for patents to protect our intellectual property. This
building product weighs about 25% of concrete materials, yet it is actually stronger and
more durable. It is fireproof and soundproof. It is something that we believe could be
compatible with wood materials for construction. We got another product that upgrades
heavy oils, it is a catalyst product and we think that the market for that product is
quite significant; we are in the process of starting the commercialization of that
product. Finally, we have developed another technology that we are in the process of
selling to utilities right now that is part of the clean-coal initiatives; it is related
to the control of nitrogen oxide, so it blocks emission from coal power plants.”
With regards to what investors should realize about Headwaters Mr.
Benson states, “We have two very strong cash flow
generating businesses, and we are very excited about the new products, particularly the
nanocatalyst that we are developing and the potential for continued growth and continued
positive cash flows in the future.”
“In our ISG business, which is the post-combustion business, we
are the largest company in that business managing the coal combustion products that are
produced when coal is burned. In the pre-combustion business, we are the largest company
as well. We have significant market positions in both of these strategic business units.”
Continuing his thoughts on the Company’s ISG business and their competitive advantage
Mr. Benson says, “In the ISG
business, we have three competitive advantages one is that we have long-term exclusive
contracts for the supply of the coal combustion products. We have contracts that are 20-25
years in length and they are exclusive, which gives us access to the supply of these
materials that other companies do not have. Secondly, we are the only company with a
national distribution system for these coal combustion products. We have over thirty
terminals that are strategically located throughout the United States that allows us to
distribute the materials directly to our customers. Thirdly, we have a proprietary
chemical reagent that improves the quality of the fly ash that we distribute. In our other
business, we have intellectual property that covers a unique chemical reagent that is used
to treat coal before it is burned and over 50% of the people in this business, use our
chemical reagent, and it provides us with a unique and exclusive technology that we apply
to coal before it is consumed at the electric utilities.”
ISG Resources subsidiary:
The Company’s ISG Resources subsidiary is the nation’s largest marketer and
manager of coal combustion products and services for the coal-fired electric utility
industry. ISG’s primary revenue source is the sale of high quality fly ash, produced
from the combustion of coal in the generation of electricity. ISG Resources is the leader
in supplying fly ash to the concrete industry. Derived from burning coal, fly ash is a
valuable additive that makes concrete stronger, more durable and easier to work with. ISG
manages nearly 19 million tons of coal combustion products each year for electric
utilities and industrial facilities. Careful management of coal combustion products helps
utilities achieve goals of reducing emissions. And use of the products in concrete helps
reduce creation of greenhouse gases by displacing the manufacturing of Portland cement.
Fly Ash Based Technologies:
The company is currently commercializing a new technology that promises dramatic
improvements for builders and manufacturers in a variety of industries. FlexCrete cellular
concrete is a low cost, easy to use building material suitable for a variety of
construction applications around the world.
Covol Fuels is a division:
Covol Fuels is solely responsible for all Company activities associated with the Section
29, coal-based synthetic fuel industry, including the commercialization of its proprietary
chemical reagent. This reagent is utilized by numerous facilities to transform coal, coal
fines, coal refuse and other coal derivatives into a “qualified fuel” within the
meaning of Section 29 of the Internal Revenue Code. Covol Fuels is the only full-service,
synthetic fuels industry reagent supplier to provide not only competitively priced, safe,
odorless and easy to handle reagent products, but also full technical support, R&D,
operations management and IRS Section 29 expertise. Covol can tailor the reagents to
maintain chemical change across the full FTIR spectrum while enhancing chemical change on
specific absorption peaks on high rank coals.
HTI:
Headwaters Technology Innovation Group, (HTI) is a technology-based company focused on
developing and commercializing catalysts and catalytic processes for producing chemicals
and converting low-value fossil fuels into high-value alternative fuels while improving
energy efficiency and reducing environmental risks. HTI's licensed proprietary Controlled
Cavitation Technology (CCT) utilizes the intense power created during hydrodynamic
cavitation to induce the mixing, heating, and reacting of difficult fluids.
"Cavitation" describes the generation and collapsing of bubbles within a liquid,
and when these bubbles collapse, they release energy and create extreme, momentary,
conditions - e.g., temperatures up to 6,000°K and pressures up to 2,000 atmospheres. By
harnessing this power, CCT enhances the processing of liquid-liquid, gas-liquid or
solid-liquid mixtures through: Intense micro-mixing of dissimilar fluids, Thorough
dispersion of gases or solids in liquids, Uniform heating of liquids - without scale
buildup, Accelerated reaction rates normally limited by mass transfer.
NANOTECHNOLOGY:
The term "nanocatalyst" is derived from "nanometer", meaning
one-billionth of a meter, and is used by industry to describe catalysts, which are
engineered at nanometer-scale precision. Headwaters’ NanoKinetix Inc. (HKI) works at
an even smaller scale, actually at the atomic level, to control the exact geometry of a
catalyst's structure. Instead of the more common practice of allowing catalyst atoms to
naturally form random geometric patterns on a support material, the HKI method guides
these individual atoms (often expensive, precious metals such as platinum or palladium)
into orderly/predictable arrangements and anchors them to the support material so that
they stay in place. The result is significantly enhanced catalyst performance and longer
catalyst life with less precious metal required - in other words, more catalytic activity
with less catalyst material. HKI's catalysts can also be engineered to perform multiple
reaction steps, which can be another source of significant cost-savings.
Instant Access:
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Headwaters
Incorporated (HDWR)
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