Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
12/02/08
AESO daily
0.35
0.30
0.25
0.20
Tel: 1-866-788-1600 Email: ir@atlanticenergy.net Website: http://www.atlanticenergy.net MARKET DATA
Symbol Exchanges Current Price Price Target Rating Outstanding Shares Market Cap. Average 3M Volume
0.15 volume
Š BigCharts.com
1
0.5
Millions
Atlantic Energy Solutions Inc. 92 Congress St. Saratoga Springs, NY 12866
0
Oct
Nov
Dec
Company Introduction AESO OTCPK $0.25 $0.40 Speculative Buy 193.0 Million $48.2 Million 53,177
Source: Yahoo Finance, Analyst Estimates
Atlantic Energy Solutions Inc. (AESO) is a global company that develops and finances energy efficiency projects designed to improve the overall efficiency of energy, water usage and renewable resources, reducing the U.S. dependency on foreign oil and diminishing carbon footprint. AESO assesses energy demands and usage by municipal, corporate and industrial complexes, and assists them in conserving resources and bolstering savings at the consumer level. The Company incorporates the latest alternative technologies, including wind and solar energy generation, and renewable resources. Its services focus on energy and financial strategies to achieve comprehensive, innovative and cost beneficial improvements. AESO is a member of NAESCO (National Association of Energy Service Companies), a national trade association that has been promoting the widespread use of energy efficient technologies for more than 20 years. The Company has developed projects for Auburn City Schools, the Fonda-Fultonville Central School District, Sullivan County Community College, Lakeland Central School District, St. Peters Hospital, Schenectady Library, Moriah Central School District and the New Jersey public schools.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
1
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Investment Highlights Business model capitalizing on energy savings AESO is poised to capitalize on global energy savings and carbon emission reduction trends by providing energy efficient solutions for the municipal, households and corporate sectors, which promote energy conservation and generate savings at the consumer level. The Company has a proven track record for customer satisfaction and project performance. The Company’s projects help its customers generate additional revenues, gain long-term financial benefits and take advantage of energy tax credits. Robust industry outlook Over the last 20 years, a large market for energy-efficiency services has developed in the U.S. Promoting efficiency has become the first priority in creating a portfolio of economic and environmentally sustainable energy resources and customers and public officials are encouraged to think of energy efficiency first when making energy resource procurement or energy policy decisions. Industry revenues have been growing 24% annually over the last decade, and the market size is approaching $16 billion. Global demand for electricity is forecast to skyrocket over the next 20 years, fueled in large part by rapid economic growth in developing nations where per-capita energy use is still relatively low. In the face of looming shortages, demand for energy savings solutions and renewable energy will strengthen, creating significant opportunities for energy efficiency solutions providers. Partnership with STV Architects to develop energy saving projects AESO has partnered with STV Architects to serve public agency clients interested in energy savings and the use of alternative energy sources. For example, STV and AESO are collaborating on energy solution projects that will benefit the New York State Office of Mental Health and the environment, and also establish a new baseline for renewable energy and energy conservation. This partnership has already resulted in several projects that provide AESO with a measurable revenue stream. A growing portfolio of energy efficiency projects The Company has developed a portfolio of projects expected to generate cumulative revenues of nearly $30 million, including revenue in the range of $2.2 million for the first nine months of 2008. The Company has developed or is developing projects for Auburn City Schools, the Fonda-Fultonville Central School District, Sullivan County Community College, the Lakeland Central School District, St. Peters Hospital, Schenectady Library, the Moriah Central School District and New Jersey public schools. Atlantic Energy Solutions Inc. (OTCPK: AESO)
2
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Value creation for clients By upgrading or replacing old and inefficient building systems and equipment with state-of- the-art energy efficient equipment, clients reduce costs, experience fewer breakdowns and reduced maintenance. In addition, clients benefit from better lighting, air quality and comfortable room temperatures, which increase productivity and employee retention. Improved energy efficiency also lowers operating expenses; several projects have produced energy savings in the range of 15%-70%. Portfolio growth supports outlook for exponential revenue growth In the last two months, AESO has added an $18 million Energy Efficiency Partnership Project for Northern New Jersey Township and School District, and a $680,000 project for the upstate New York Public School District. The Company has also expanded two of its previously contracted projects for Auburn City Schools and a State College located in Upstate NY which will provide it with long-term recurring revenues. Long-term plans include two projects to build multi mega-watt solar plants in New York’s Long Island and southern Florida. Proven management team The Company is led by seasoned managers and engineers with a strong track record of successful projects developed over the last 20 years. CEO Tim Brock has worked in the energy performance services sector for more than 13 years and has more than 21 years experience in the building controls segment. Tim Casabonne, the Company’s operations manager, has more than 14 years experience coordinating large construction projects. His experience with project management includes the $1.9 million Moriah performance project and an $8 million capital construction project. Bill Marzano, the director of engineering, prepares detailed energy audits for each project; he has more than 14 years experience with commercial and industrial energy auditing and the development of comprehensive energy performance contracts. Governmental support for energy efficient improvements About one-third of U.S. states have established energy savings targets and have addressed utility disincentives for energy efficiency. The U.S. spends about $2 billion per year on energy efficiency programs, which save utility customers nearly $6 billion annually. In October 2008, the Emergency Economic Stabilization Act of 2008 was enacted to extend tax credits for energy efficient home improvements such as insulation, replacement windows, non-solar water heaters and high efficiency heating and cooling equipment. In November 2008, DOE and the U.S. Environmental Protection Agency released an updated version of the National Action Plan Vision for 2025: a Framework for Change, which lays out a proposed energy efficiency action plan for state policy makers. If implemented by all states, the plan could lower energy demand across the country by 50%, achieve more than $500 billion in net savings over the next 20 years, and reduce annual greenhouse gas emissions equivalent to those from 90 million vehicles.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
3
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Business Model Atlantic Energy Solutions Inc. develops and finances innovative alternative energy efficiency solutions that create positive cash flows, reduce expenses, increase net operating incomes and protect natural resources. The Company provides technical and administrative expertise that assist healthcare, educational, corporate and municipal entities through energy efficiency solutions. AESO services focus on energy and financial strategies to achieve comprehensive, cost-beneficial improvements. The Company’s projects create value for its customers by: • Creating additional revenues; • Providing long-term financial benefits, and; • Generating Energy Tax Credits (RECs). AESO uses proven technologies, expertise and a streamlined approach to making facility improvements through a single contract. Clients are provided with a full range of services and continued service once the project is completed to ensure achievement of long-term energy goals. Alternative energy solutions proposed by AESO may incorporate: • Solar photovoltaic; • Wind turbines; and • Geothermal conduction. New systems and equipment typically reduce the client’s overall energy costs. Several projects have seen energy savings in the range of 15%-70%. Customers keep all of the savings once the equipment is paid off, as well as any excess savings during the contract period. By upgrading or replacing old and inefficient building systems with state-of- the-art energy efficient equipment, clients experience fewer breakdowns and reduced maintenance. Other major advantages of energy efficiency projects include: • Better lighting, air quality and comfortable room temperatures, which in turn increase productivity and employee retention; and • Competitive advantages resulting from reduced operating expenses. Financing may be available for energy performance projects even with no funds allocated for building improvements. AESO brings an all-encompassing approach to facility and energy improvement by providing low interest financing, assistance in securing government grants, engineering, installation, execution and warranties. Atlantic Energy Solutions Inc. (OTCPK: AESO)
4
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Project portfolio AESO has formed a strategic alliance with STV Architects to provide services to public agency clients interested in energy savings and the use of al¬ternative energy sources. STV and AESO have identified numer¬ous creative energy savings solutions for the New York State Office of Mental Health which benefit the environment and establish a new baseline for renewable energy and energy conservation. The following is a list of energy performance projects completed by AESO. Project size
Annual savings
Auburn City Schools
$4,661,082
$258,949
Atlantic Energy has work with Aurburn on three separate projects. Phase three included boilers, co-generation, motors, and weatherization.
Construction stage
Fonda-Fultonville Central School District
$3,928,143
$363,325
This unique project took some out of the box thinking to design. An off grid co-generation plant was installed producing 100% of the schools electricity.
Detailed energy audit
Sullivan County Community College
$4,316,577
$415,755
This project included a wide scope of work lighting, weatherization, heat pumps, and a 1MW wind turbine.
Design and construction
Fortitech Inc.
$165,000
$57,792
Fortiitech is an international company that has recognized the need to go green. The small upgrade performed at their headquarters has led to projects at many other facilities.
Final stages of completion
Lakeland Central School District
$7,052,184
$391,788
This project included a large scope of work. The measures implemented were 11 co-gen units, VFD’s, boilers, and lighting upgrades.
The project started in 2008
Mechanicville City Schools
$1,272,438
$70,691
This project included the replacement on several windows, a co-generation system, boilers, and lighting.
The project began in the Spring of 2006
Fonda-Fultonville Central School District
$3,928,143
$301,459
The project at Fonda-Fultonville Central School District included lighting retrofits, HVAC upgrades, and a cogeneration plant with full back up power.
Completed
Chumung County Nursing Home
$225,000
$38,696
This project involved upgrading existing lighting systems for more energy and cost efficient lighting, resulting in a significant amount of electricity saved. In addition, the water fixtures were replaced with units that utilize less water per use, thereby saving water purchased by the nursing home.
Completed
Project name
Project description
Project status
Source: AESO web site
Atlantic Energy Solutions Inc. (OTCPK: AESO)
5
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
In addition, the Company has completed projects for St. Peters Hospital, Schenectady Library, the Moriah Central School District and New Jersey public schools. Project benefits AESO uses proven technologies, expertise and a streamlined approach to making facility improvements than generate significant savings for customers. The stages of project development usually include: • • • • •
Feasibility study; Communicating findings to clients; Preparing a detailed energy audit; Analysis of different financial schemes; and Developing a financing strategy.
The most important benefits derived from alternative energy efficiency solutions are: Better buildings. By upgrading or replacing old and inefficient building systems or equipment with state-ofthe-art energy efficient equipment, clients experience fewer breakdowns and reduced maintenance. Workers benefitting from improved lighting, better air quality and more comfortable room temperatures are likely to be more productive. Smart investing. Energy performance projects enable clients to divert funds that would have been spent on energy bills into investments in energy efficient systems. Limited budgets can stretch further and positive cash flows can be created. Improvement without sacrifice. Energy performance projects can be financed even if no funds are allocated for building improvements. Cost savings. New systems and equipment can lower energy costs. Many owners see energy savings of 15% - 70 % and greatly reduced long-term maintenance costs. Proven technologies and expertise. AESO uses industry-standard practices and proven energy-saving technologies; the Company has an excellent track record for customer satisfaction and project performance. AESO has financial incentives that ensure savings are achieved as represented. One-stop shopping. The Company offers a streamlined approach for making facility improvements through a single contract. AESO provides a full range of services and continues working with the client after the project is completed to ensure that long-term energy goals are achieved.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
6
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Recent Developments The Company has expanded its portfolio with several promising projects that are expected to increase revenues beginning in 2009. $18 million energy efficiency partnership project awarded to Atlantic Energy Solutions In October 2008, AESO announced a contract with an energy corporation to provide a Northern New Jersey Township and School District with energy efficiency services valued at more than $18 million. The project includes a partnership to develop and maintain a 1-megawatt co-generation plant, as well as to put into operation a 700-watt solar plant that will produce electricity for eight large municipal buildings. This project is expected to be one of the largest revenue generating projects to date for AESO. Upstate New York public school district begins energy efficiency project The project scope, which has already been designed and sent for review to the State Education Department, calls for lighting upgrades, complete renovation of the mechanical room, including boiler replacements, providing for the first time high pressure utility gas service, upgrading digital controls and a complete weatherization package. The total project is valued at $680,000 and is expected to generate a minimum of $37,779 in annual energy savings. The project is expected to receive SED approval and begin construction in the early spring of 2009. Next phase at the State College from upstate New York project AESO has begun the next phase of a $4.4 million energy efficiency project with a state college located in upstate New York. The Company has already completed $3.5 million in renovations to the college campus. Among the renovations are campus-wide lighting system upgrades, improved water conservation technology, a building envelope and weatherization package, domestic hot water heater replacements, and a geothermal system conversion in their field house. Other project proposals The Company has two milestone project proposals under development: • 8 MW solar plant for Long Island Power Authorities, and • 15 MW solar plant in southern Florida
Atlantic Energy Solutions Inc. (OTCPK: AESO)
7
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Industry Outlook The construction and buildings sector consumes enormous amounts of energy, clean water and materials. Buildings use about one-third of the world’s energy — a proportion that will continue to increase as the population grows and becomes more urban and wealthier. If current trends continue, buildings worldwide will become the top energy consumers by 2025, and are likely to use as much energy as industry and transportation combined by 2050. In the United States, the buildings sector accounts for 40% of primary energy use, compared to 32% for the industrial sector and 28% for the transportation sector. The use of electric power and heat in the buildings sector also accounts for about 40% of U.S. greenhouse gas emissions1.
Energy Consumption in the United States
Source: 2007 DOE Buildings Energy Data Book
U.S. electricity demand Every year, energy consumption increases by 5% in the U.S. According to EIA, total electricity sales are expected to increase by 29%, from 3,659 billion kWh in 2006 to 4,705 billion in 2030, at an average rate of 1.1% per year.
1.http://ostp.gov/galleries/NSTC%20Reports/FederalRDAgendaforNetZeroEnergyHighPerformanceGreenBuildings.pdf
Atlantic Energy Solutions Inc. (OTCPK: AESO)
8
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
U.S. Retail Sales of Electricity to Ultimate Customers (million kWt)
Source: www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html
Electricity prices in 2007 made the largest one-year jump since 1981, according to the Energy Information Administration (EIA). Retail prices climbed to a nationwide average of 9.14 cents per kilowatt-hour, with homeowners in the east hit hardest by the price hikes. Average retail prices of electricity in August 2008 were 10.63 cents per kWh. Commercial retail prices were 11.07 cents per kWh, a 10.1% increase from the August 2007 commercial retail price of 10.05 cents per kWh. Industrial retail prices rose to 7.61 cents per kWh, an 11.3% increase over August 2007, and overall average costs of electricity increased to 10.63 cents per kWh from 9.68 cents per kWh in August 2007. Fuel costs remain high, and it is unlikely that electricity rates for most customers will fall significantly in the near term. According to EIA, U.S. residential electricity prices are expected to increase by about 6.5% in both 2008 and 2009. Average Retail Price of Electricity to Ultimate Customers (Cents per Kilowatt-hour)
Source: www.eia.doe.gov/cneaf/electricity/epm/epm_sum.html
Atlantic Energy Solutions Inc. (OTCPK: AESO)
9
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Energy services company (ESCO) industry In recent years, a large private sector energy-efficiency services industry has developed in North America. The U.S. Energy Services Company (ESCO) industry is often cited as the most successful model for the private sector delivery of energy-efficiency services. This industry has grown 24% annually over the last decade to a $16 billion market for the municipal, university, hospital and school sectors alone2. According to the National Association of Energy Service Companies (NAESCO), ESCO industry revenues from energy services were about $3.6 billion in 2006. Energy efficiency accounted for almost three quarters of industry revenues, or about $2.5 billion3. ESCO Industry Activity: 1990-2008
Source: www.naesco.org/resources/industry/documents/2007-05.pdf
Historically, ESCOs have primarily pursued energy-efficiency improvements in existing buildings. Within this market, nearly all ESCOs have targeted performance-contracting offerings to larger customers due in part to the fact that costs related to developing and implementing performance contracts are relatively high. As a result, very few ESCOs work in the residential market; those that do mainly target larger multi-family and public housing facilities. In 2006, more than 80% of ESCO industry investment was among institutional customer facilities: 22% in the federal market, 58% in state/local government, universities, schools and hospitals markets, and 2% among public housing authorities. Private sector investment is split between commercial (9%), industrial (6%) and residential (3%) facilities. 2. www.peci.org/ncbc/proceedings/2005/11_Malek_NCBC2005.pdf 3. www.naesco.org/resources/industry/documents/2007-05.pdf
Atlantic Energy Solutions Inc. (OTCPK: AESO)
10
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
ESCO Industry Revenues by Market Segment
Source: www.naesco.org/resources/industry/documents/2007-05.pdf
In 2000, Goldman identified and then surveyed 63 companies with regional or national operations that offer performance contracting as a core part of their energy efficiency services business. The study revealed that 13 companies with annual revenues more than $30 million account for approximately 75% of total industry activity. In 2006, NAESCO’s report was based on data from 46 distinct, active ESCO companies. Eight of these companies had revenues exceeding $100 million in 2006, together accounting for 79% of industry activity. In addition, the 13 largest companies account for more than 90% of industry revenues. Energy efficiency solutions still comprise a major share of industry activity. At almost three-quarters of industry revenues, ESCO-deployed energy efficiency creates a $2.5 billion per year market. Median energy savings (electricity and other fuels) are 15 kBTU/ft2 for 29% of projects. Reductions in electricity consumption are critically important to project success, accounting on average for more than 80% of total energy savings (on a site energy basis)4. Energy efficiency initiatives in the U.S. In the U.S., states, utilities and other organizations are currently spending about $2 billion per year on energy efficiency programs which have saved energy customers nearly $6 billion annually. In terms of policy, about onethird of states have established energy savings targets and addressed utility disincentives for energy efficiency. The National Action Plan for Energy Efficiency initiative went into effect in 20055. In November 2008, DOE and the U.S. Environmental Protection Agency released an updated version of the National Action Plan Vision for 2025: A Framework for Change, which lays out a proposed energy efficiency action plan for state policy-makers. If implemented by all states, the plan could lower energy demand across the country by 50%, achieve more than $500 billion in net savings over the next 20 years, and reduce annual greenhouse gas emissions equivalent to those from 90 million vehicles.
4. www.osti.gov/bridge/servlets/purl/796107-9vxYdG/native/796107.pdf 5. www1.eere.energy.gov/buildings/building_america/printable_versions/news_detail.html?news_id=12109
Atlantic Energy Solutions Inc. (OTCPK: AESO)
11
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
In October 2008, the Emergency Economic Stabilization Act of 2008 was enacted. This bill extended tax credits for energy efficient home improvements, offering home improvement tax credits for insulation, replacement windows, non-solar water heaters and certain high efficiency heating and cooling equipment. Tax credits for residential products that had expired at the end of 2007 will now become available for improvements made during 2009. Tax credits for builders of new energy efficient homes and tax deductions for owners and designers of energy efficient commercial buildings were also extended6.
Financial Analysis Income statement During the first nine months of 2008, AESO reported revenues of $2,232,346, mainly from activities relating to upgrading or replacing building systems. Over the same period, AESO reported expenses of $2,077,115, consisting mainly of subcontractor and payroll costs. Operating results, $ First 9 months of 2008 Revenue Cost of goods Subcontractors Gross profit Operating expenses Payroll expenses Insurance Professional fees
2,232,346 1,1887,133 1,254,275 1,045,213 1,031,902 738,172 78,254 22,364
Other Income Net Income (Loss)
11,447 24,758
EPS, $
0.0001
Source: Pink Sheets Financial Reports; year ending December 31.
Liquidity and capital resources As of September 30, 2008, the Company reported positive working capital of $637,908, as compared to a $2.6 million working capital deficit at June 30, 2008. The negative value of working capital in the second quarter of 2008 was mainly the result of a $1,912,861 intercompany loan due. In both periods, the Company had $3.1 million in accounts receivable.
6. www.energystar.gov/index.cfm?c=products.pr_tax_credits
Atlantic Energy Solutions Inc. (OTCPK: AESO)
12
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Balance sheet items, $ 30-Jun-08
31-Sep-08
Current Assets Net Working Capital Total Assets
977,391 (2,642,102) 984,629
3,462,645 637,908 3,499,930
Liabilities, including Debt Equity
3,648,717 998,540 (2,664,088)
2,824,737 995,492 676,362
Source: Pink Sheets Financial Reports; year ending December 31.
To date AESO has financed its operation mainly from debt instruments. However, the Company has begun generating operating cash flows, which will reduce its reliance on external financing. In October 2008, AESO announced that it has entered into a term sheet agreement with Trafalgar Capital Specialized Investment Fund, a Luxembourg-based company that works with small-cap companies to help them achieve their growth objectives. Trafalgar is committing up to $10 million over a two-year period, with initial funding of $2.5 million to AESO.
Outlook In the face of looming shortages, developing nations are embracing renewable energy. A recent alternative energy report from J.P. Morgan, citing data from the International Energy Agency, estimated that generating capacity by renewable energy across all categories - wind, solar, biomass and waste, geothermal, tide and wave, and hydro - would increase by 3.1% between 2004 and 2015. Increases in wind and solar capacity are forecasted to be especially strong at 12% and 16%, respectively. Companies that can utilize renewable resources to generate electricity have stronger growth potential than their competitors. AESO is poised to capitalize on energy efficiency trends through a business model that provides energy efficiency solutions to the municipal, household and corporate sectors. AESO uses industry-standard practices and proven energy-saving technologies and has an excellent track record for customer satisfaction and project performance. In addition, the Company has financial incentives that ensure savings are achieved as represented. The Company recently emerged as a publicly traded entity and has reported revenues of approximately $2.2 million for the first nine months of 2008. In addition, AESO has a robust pipeline of energy efficiency projects and proposals in New York and Florida, which positions the Company for exponential growth over the next five years. One of the benefits of its model is that AESO utilizes a renewable contract resulting in recurring revenues.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
13
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Revenue outlook, $ Mn
Source: Analyst estimates
Going forward, the Company plans to expand its operations nationally and tap various segments of the energy market, providing additional services to clients which create new revenue steams and support strong growth prospects.
Valuation We based our valuation on comparative analysis, selecting companies that provide engineering and project management services for the buildings, plants and power markets.
Company November 28, 2008 EMCOR Group Inc. Consolidated Edison Inc. Honeywell International Inc. ABB Ltd. AECOM Technology Corporation Jacobs Engineering Group Inc. Fluor Corporation Median
Ticker Price Market Symbol $ Cap. $ Mn EME ED HON ABB ACM JEC FLR
15.45 40.14 27.86 12.93 26.49 44.77 45.54
1010 10980 20230 25560 2710 5480 8260
2008 5.92 13.25 7.39 7.74 15.96 11.88 12.65 11.88
P/E
2009 6.11 12.70 7.65 7.84 13.52 11.31 11.44 11.31
2008 0.15 0.82 0.54 0.72 0.41 0.41 0.37 0.41
P/S
2009 0.14 0.79 0.55 0.69 0.39 0.38 0.33 0.39
Source: Yahoo Finance!
Atlantic Energy Solutions Inc. (OTCPK: AESO)
14
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
The peer group companies currently trade at 0.39 times forward Price/Sales multiples mainly due to tough market conditions and declining oil prices that make energy efficiency projects less effective. Over the long run, strong demand for energy and scarcity of fossil fuels will drive oil prices higher and spur demand for energy efficiency projects. We believe AESO should trade at a premium to the peer group range due to its growing portfolio of projects and exponential growth prospects. We are initiating coverage of AESO with a Speculative Buy Rating and a price target of $0.40, which represent a 1.5 times our estimate of 2011 revenue. However, we strongly advise prospective investors to consider the risk factors mentioned below since the Company faces many challenges in achieving its revenue growth goals.
Risks Energy performance contracting risk AESO must identify and evaluate energy-saving opportunities and then recommend a package of improvements to be paid for through savings. The Company must guarantee that savings meet or exceed annual payments for project costs—usually over a contract term of seven to 10 years. The Company usually works under a performance guarantee that shifts risk to it. If savings do not materialize, the Company is obligated to pay the difference. Financial risk of accounts receivable Accounts receivable comprise a high-risk highly liquid asset of the Company. AESO has in excess of $3 million of outstanding accounts receivable. Reduced cash flow, the depreciating value of uncollected funds and losses incurred through bad debt write-offs are risks associated with large accounts receivable. Competition The energy performance contracting industry is highly competitive. According to the National Association of Energy Service Companies, 13 large companies now account for more than 90% of industry revenues. Most of these companies have strong financial resources and better access to funding than AESO. As a result, some competitors may be better positioned to gain market acceptance and compete for projects.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
15
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Management Team Tim Brock President/CEO
Mr. Brock has been in the energy performance services field for more than 13 years. Prior to that, he spent more than 21 years in the building controls industry. Mr. Brock’s experience includes ownership of The Conservation Group (TCG), a utility-based performance services company that had partnerships with Custom Energy (a subsidiary of Kansas City Power & Light) and Coneco Corporation (TCG/Coneco). Mr. Brock is also on the board of directors for NAESCO.
Tim Casbonne Operations Manager
Mr. Casabonne has more than 14 years experience coordinating large construction projects. Mr. Cassabone is responsible for all daily aspects of the projects, including at least weekly site visits. His experience with project management includes the $1.9 million Moriah performance project and $8 million capital construction project. Mr. Casabonne has also successfully managed numerous multi-technology energy projects for both private and public facilities across New York, Massachusetts and Michigan.
Bill Maarzano Director of Engineering P.E. C.E.M
Mr. Marzano has more than 14 years experience in commercial and industrial energy auditing and development of comprehensive energy performance contracts. Mr. Marzano is responsible for preparing the detailed energy audit for the projects and providing engineering support throughout the process. His specific expertise ranges from project capture through the design phase, including the development of technical aspects for proposals, scopes of work, operational intent documents, design intent documents, commissioning plans, measurement and verification plans, and investment grade audits. Mr. Marzano is a professional engineer, licensed in New York State; he also holds credentials as a Certified Energy Manager (CEM) and a Certified Measurement and Verification Professional (CMVP) through the Association of Energy Engineers.
Teri Rennie Administrative Director, PHR
Ms. Rennie has eight years of experience in human resources and payroll for a variety of industries. At Atlantic Energy, she has streamlined administrative processes. Prior to Atlantic Energy, Ms. Rennie was as a human resources consultant working with 40-50 small business clients. Ms. Rennie is well-versed in benefits, employee relations, training and payroll.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
16
Analyst: Victor Sula, Ph.D. Initial Report December 3rd, 2008
Disclaimer DO NOT BASE ANY INVESTMENT DECISION UPON ANY MATERIALS FOUND ON THIS REPORT. We are not registered as a securities broker-dealer or an investment adviser either with the U.S. Securities and Exchange Commission (the “SEC”) or with any state securities regulatory authority. We are neither licensed nor qualified to provide investment advice. The information contained in our report should be viewed as commercial advertisement and is not intended to be investment advice. The report is not provided to any particular individual with a view toward their individual circumstances. The information contained in our report is not an offer to buy or sell securities. We distribute opinions, comments and information free of charge exclusively to individuals who wish to receive them. Our newsletter and website have been prepared for informational purposes only and are not intended to be used as a complete source of information on any particular company. An individual should never invest in the securities of any of the companies profiled based solely on information contained in our report. Individuals should assume that all information contained in the report about profiled companies is not trustworthy unless verified by their own independent research. Any individual who chooses to invest in any securities should do so with caution. Investing in securities is speculative and carries a high degree of risk; you may lose some or all of the money that is invested. Always research your own investments and consult with a registered investment advisor or licensed stock broker before investing. The report is a service of BlueWave Advisors, LLC, a financial public relations firm that has been compensated by the companies profiled. All direct and third party compensation received has been disclosed within each individual profile in accordance with section 17(b) of the Securities Act of 1933. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BlueWave Advisors, LLC, and/or its affiliated will hold, buy, and sell securities in the companies profiled. When compensated in shares, all readers should be aware that is our policy to liquidate all shares immediately. We reserve the right to buy or sell the shares of any the companies mentioned in any materials we produce at any time. This compensation constitutes a conflict of interest as to our ability to remain objective in our communication regarding the profiled companies. BeaconEquity.com is a Web site wholly-owned by BlueWave Advisors, LLC. BlueWave Advisors, LLC has been compensated twenty five thousand dollars from Wall St. Grand, a shareholder of AESO, as a marketing budget to manage a comprehensive investor awareness program including the creation and distribution of this report as well as other investor relations efforts. Information contained in our report will contain “forward looking statements” as defined under Section 27A of the Securities Act of 1933 and Section 21B of the Securities Exchange Act of 1934. Subscribers are cautioned not to place undue reliance upon these forward looking statements. These forward looking statements are subject to a number of known and unknown risks and uncertainties outside of our control that could cause actual operations or results to differ materially from those anticipated. Factors that could affect performance include, but are not limited to, those factors that are discussed in each profiled company’s most recent reports or registration statements filed with the SEC. You should consider these factors in evaluating the forward looking statements included in the report and not place undue reliance upon such statements. We are committed to providing factual information on the companies that are profiled. However, we do not provide any assurance as to the accuracy or completeness of the information provided, including information regarding a profiled company’s plans or ability to effect any planned or proposed actions. We have no first-hand knowledge of any profiled company’s operations and therefore cannot comment on their capabilities, intent, resources, nor experience and we make no attempt to do so. Statistical information, dollar amounts, and market size data was provided by the subject company and related sources which we believe to be reliable. To the fullest extent of the law, we will not be liable to any person or entity for the quality, accuracy, completeness, reliability, or timeliness of the information provided in the report, or for any direct, indirect, consequential, incidental, special or punitive damages that may arise out of the use of information we provide to any person or entity (including, but not limited to, lost profits, loss of opportunities, trading losses, and damages that may result from any inaccuracy or incompleteness of this information). We encourage you to invest carefully and read investment information available at the websites of the SEC at http://www.sec.gov and FINRA at http://www. finra.org. All decisions are made solely by the analyst and independent of outside parties or influence. I, Victor Sula, Ph.D, the author of this report, certify that the material and views presented herein represent my personal opinion regarding the content and securities included in this report. In no way has my opinion been influenced by outside parties, nor has my compensation been either directly or indirectly tied to the performance of any security listed. I certify that I do not currently own, nor will own and shares or securities in any of the companies featured in this report. Victor Sula, Ph.D. - Senior Analyst Victor Sula, Ph.D. has held the position of Senior Analyst with several independent investment research firms since 2004. Prior to 2004, Mr. Sula held Senior Financial Consultant positions within the World Bank sponsored Agency for Restructuring and Enterprise Assistance and TACIS sponsored Center for Productivity and Competitiveness of Moldova, where he was involved in corporate reorganization and liquidation. He is also employed as Associate Professor at the Academy of Economic Studies of Moldova. Mr. Sula earned his Ph.D. degree in 2001 and bachelor’s degree in Finance in 1997 from the Academy of Economic Studies of Moldova. Mr. Sula is currently a level III candidate in the CFA program.
Atlantic Energy Solutions Inc. (OTCPK: AESO)
17