Green Energy Solution Industries, Inc. (PINKSHEETS: GESI), a project developer for renewable energy projects in Canada, put together an impressive performance on Tuesday with shares climbing as high as 0.052 before closing the day at 0.050 with trading volume topping the 5.3 million mark. That positive activity carried over into Wednesday as shares quickly raced to a 52-week high of 0.060 but have since cooled, settling around the 0.044 level while volume has already exceeded the 10.7 million mark.
Triggering yesterday’s excitement was GESI’s press release entitled “GESI Announces Anticipated Entry Into Power Purchase Agreement — Could Earn $5.8-$8.1 Million Daily in Alberta Market.” Three hours after that release was distributed GESI distributed a corrected version of that press release with the headline reading “GESI Announces Anticipated Entry Into Power Purchase Agreement — Could Earn $5.8-$8.1 Million Annually in Alberta Market.”
While it would stand to reason most investors should have figured the initial release’s headline to be an error the thought of a company potentially earning $5.8-$8.1 million a day might have prompted a few investors to become shareholders. The error aside, the potential earnings annually is impressive in its own right given the fact that GESI is a new player in this industry and hasn’t generated any meaningful revenue through their efforts thus far.
GESI is basing their potential on their planned facility’s target to convert 200 tons of rail ties (feedstock) per day using gasification which would then result in their power production ability to net a 10 Megawatt power supply. Based on the current electrical grid rates this power supply would result in the earnings noted earlier. As pointed out by CEO Gordon MacKay, “The increased demand for electricity in Canada, as well as the increase in electrical prices, means that the revenue for GESI is highly likely to not decline in the foreseeable future. Annual electrical pooling prices have increased 100% over the last ten years in Alberta.”
Of course financing will be needed for GESI to actually meet their goal of being “profitable to a degree beginning in the second quarter of the year 2012,” that stated in their most recent quarterly report. To that end GESI announced on Wednesday that “that based upon preliminary examination of GESI’s waste-to-energy project InREFCo believes GESI’s Alberta Energy Project will qualify for a number of financing options.” GESI recently announced their partnership with InREFCo and through this partnership GESI hopes to secure the funding they need.
What GESI is apparently targeting is a Power Purchase Agreement (PPA) loan which they state “based upon its expected energy output capacity, such financing seems promising for the waste rail ties to electricity project in Alberta.” GESI sees their relationship with InREFCo positioning them “for not only a PPA and other revenue sources, but for a number of financing scenarios that are not intended to impact the equities of the Company.”
While GESI is obviously optimistic about their future there is reason for investors to remain cautious simply because the company has no real track record. Much of their potential is based on best-case scenarios and no roadblocks, something that often doesn’t occur in the real world.
One potential hurdle GESI might face is actually securing enough rail ties to convert to energy. Last week the company announced they were “planning a meeting with Canadian Pacific (CP) Railroads with hopes of securing more feedstock and expanding estimated production. These discussions will possibly expand existing contracts with On-Track Railway and build on the existing relationships GESI holds in the railway industry. Another key aspect of the meeting is to make introductions to CP’s new management team for rail-tie disposal.”
As noted by GESI they will need to “secure more feedstock to meet necessary quotas for expansion of both facilities and production.” That being said, the potential earnings that GESI has mentioned appears to be contingent upon securing these rail ties along with operating a facility capable of converting the waste rail ties into energy. Needless to say GESI has a lot to prove and they are not the only player in the game.