Next Fuel, Inc. (NXFI.PK - News) (NXFI.PK - News) ("the Company"), which develops and commercializes clean energy and environmental technologies and solutions, today announced that the Company has entered into a License Agreement (the "Agreement") with its Strategic Partner (the "Licensee"), Future Fuel Ltd., in anticipation of the commercialization of biogenic coal-to-gas ("CTG" or "BCTG") activities in the People's Republic of China (China) and the Republic of Mongolia (Mongolia). Next Fuel and its Licensee have successfully conducted a multi-well CTG pilot project in Inner Mongolia, China during the past several months. Future Fuel Ltd., which is affiliated with Mr. Guangwei Guo, a member of the Company's Board of Directors and a major shareholder of the Company, is a privately-owned company that primarily operates in China and Mongolia.
Next Fuel's patent-pending CTG technology converts low-grade coal (such as lignite) into clean-burning natural gas through the introduction of nutrients, via a low-pressure pumping system, to the wide range of microorganisms that naturally exist in coal deposits. The proprietary nutrients stimulate the microorganisms, which in turn consume certain carbon-containing compounds in the coal and "exhale" biogenic natural gas as a byproduct.
Dr. Song Jin, President and Chief Technology Officer of Next Fuel, Inc., described the Agreement as "one of the most significant technical and business milestones achieved since the formation of the Company. Most importantly, this contract illustrates the continued cooperation and support provided by our friends and licensees at Future Fuel. With the signing of this contract, we expect to commence full-scale commercial operations in China in May 2012."
"This Agreement is key to the Company's commercialization of its CTG Technology on a large scale," said Robert Craig, Chief Executive Officer of Next Fuel, Inc. "We believe the activities covered under this Agreement will significantly strengthen Next Fuel's leadership position as the first company in the world to achieve full-scale commercial production of biogenic natural gas from coal seams with no prior gas-producing history."
The License Agreement was entered into following completion of a pilot test on coal fields in Inner Mongolia, China, that showed positive results from use of the Company's CTG technology. Within six weeks after the field test began, all four (4) wells included in the field test produced new biogenic methane gas at a measurable rate from a lignite deposit that had no prior gas production or known reserves.
The Licensee has a contractual commitment to develop at least fifty (50) new Gas Generating Units (GGUs) in China during the first year of the Agreement, which would result in a minimum of $1,500,000 in license fees payable to the Company. Except for this commitment and a requirement to pay recurring annual license fees on gas-producing GGUs, the Licensee's only obligation in later years is to use reasonable efforts to commercialize the technology.
The License has a one-year guaranteed term, which ends March 31, 2013. To extend the term of the license each year after that date, the Licensee must develop fifty (50) new GGUs (each encompassing an area of approximately 40,000 square meters) in China and twenty-five (25) new GGUs in Mongolia.
If the Licensee achieves its goal in China, but not in Mongolia, the license for Mongolia will terminate and the license for China will continue. Likewise, if the Licensee achieves its goal in Mongolia, but not in China, the license for China will terminate and the license for Mongolia will continue.
When the Licensee achieves, on a cumulative basis since inception of the agreement, one thousand (1,000) GGUs in China or five hundred (500) GGUs in Mongolia, the license for that geographic territory becomes perpetual, unless the Licensee fails to use reasonable efforts to commercialize the technology or otherwise breaches the Agreement. These cumulative GGU completions could generate in excess of $30 million in revenue to the Company if the life of a GGU is only one year. For GGUs that remain capable of producing gas for more than one year, the Company would earn additional revenue over the life of the GGU.
The Licensee bears all costs and expenses of producing natural gas, except that Next Fuel agrees to provide amendments (nutrients) valued at up to $10,000 for each new GGU without additional charge to the Licensee. Consequently, the Company expects minimum first-year net revenue for each GGU in the amount of Twenty Thousand US Dollars ($20,000). Additional nutrient expense will be paid by the Licensee.
One half (50%) of the first payment is due within (20) days after the first production or injection well is drilled on a GGU and one half (50%) is due upon the presence of biogenic methane gas from that GGU. Thereafter, minimum annual Thirty Thousand US Dollar ($30,000) payments are due for the gas-producing life of each GGU. Next Fuel will cease to earn payments for a GGU when gas production from that GGU ceases.
This annual fee for each GGU is fixed for the life of the agreement, which may be perpetual if the Licensee meets certain minimum performance criteria described below or otherwise complies with the Agreement. The Agreement contains no inflation, currency or other adjustment provisions, and the minimum annual fee remains at US $30,000 for each GGU.
A typical GGU is expected to support one to five CTG wells, and there will be multiple GGUs in each CTG project covered by the Agreement.
The Company will accrue additional revenue from the one-time payment of a Technology Licensing Fee by the Licensee in the amount of $500,000. The Technology Licensing Fee will consist of $100,000 in cash and $400,000 of in-kind contribution that will be credited against prior investments by the Licensee and its Principals in field pilot testing. Additionally, beginning April 1, 2013, the Licensee will pay a $50,000 fee for each new CTG project as compensation for technical support provided by the Company.
The Company expects to commence generating revenue from the Agreement by the fourth quarter of 2012.
About Next Fuel, Inc.
Next Fuel, Inc. develops and commercializes innovative technologies associated with clean and renewable energy, including unconventional natural gas production from lower-grade coal, lignite, oil shale and other carbonaceous deposits. The Company is currently in the process of commercializing its Coal-to-Gas (CTG) technology with strategic international licensees.
Although the Company's CTG technology is the only product with near-term revenue potential, the Company has also acquired, or is beginning to develop, advanced technologies associated with (1) environmental challenges associated with the treatment of energy-related waste water, (2) processes for carbon dioxide conversion and carbon loop closure, and (3) biological fuel cells. In collaboration with leading research institutes, Next Fuel, Inc. is focused upon the identification, development and/or acquisition of a portfolio of growth opportunities with compelling market potential that are consistent with clean energy and environmental stewardship.
This announcement contains forward-looking statements, including statements regarding the timing and amount of future revenue, future products, future contracts and future business to be conducted by the Company, all of which involve risks and uncertainties. Actual results could differ materially from those discussed. Factors that could cause or contribute to such differences include, but are not limited to, the price of natural gas, the ability of the Company and its collaborating licensees to successfully develop and commercialize new technologies, the results of CTG field tests, receptiveness of the market to the Company's technologies and services, negotiations between the Company and its Chinese licensees, and the ability of its Chinese licensees to enter into and implement agreements with owners of coal, lignite and similar deposits and other factors discussed in the Company's filings with the Securities and Exchange Commission. All forward-looking statements are based on information available to the Company as of the date of this news release, and the Company assumes no obligation to update such statements.
Image Available: http://www2.marketwire.com/mw/frame_mw?attachid=1969544