This excerpt taken from the ADES 8-K filed Aug 22, 2007.
Award of Purchase Orders for Engineering Release on Activated Carbon Injection Systems
On August 15, 2007, we received three (3) separate purchase orders to supply engineering, design and initial fabrication work for six (6) activated carbon injection (ACI) systems for mercury control at three (3) separate power plants. These purchase orders resulted from our submission of a formal bid for the supply of ACI systems in response to a fleet-wide RFQ from a major electric utility generator for as many as thirteen (13) mercury control systems on March 23, 2007. For all thirteen of these systems, our bid was approximately $11.7 million, plus freight costs, and we were awarded these purchase orders following completion of a competitive bid and formal negotiation process. The aggregate amount receivable by us under these initial purchase orders is approximately $600,000.
These purchase orders cover services and materials for 10% of the full contract price for these six ACI systems, and set forth the terms and conditions under which we will continue design and fabrication work on the six ACI systems, pending completion of the conformed specifications for the complete systems, which are being prepared by the utilitys engineering firm. This contracting process is used by the utility to meet an aggressive delivery schedule imposed on these initial systems, which will require delivery of system components to begin in the second quarter of 2008, with final delivery in December of that year. We expect to receive purchase orders for the full value of the contracts as a revision to the current purchase orders upon completion of the conformed specifications, which we expect will occur in the next 3-4 weeks. The total contract price for the six complete ACI systems for which we have received these initial purchase orders would be approximately $6.1 million plus freight and applicable taxes, assuming we are awarded the expected purchase orders for the complete systems.
Decisions on the balance of the additional seven (7) ACI systems, which are not covered under these purchase orders, are expected to occur in two phases. Exercise of priced options on the first four (4) units are expected to occur in late fall of 2007, with a decision on the final three (3) systems expected in the first quarter of 2008. If awarded these outstanding options, delivery on these additional systems would likely start in late 2008 and be completed by the second quarter of 2009.
While we expect to receive additional purchase orders for the six complete ACI systems, there is no guarantee that the utility will issue those purchase orders to us, or for any additional ACI systems. The utility retains the right to cancel the current purchase orders at any time upon written notice. Unless cancellation is for cause under the contracts, the utility would be responsible for paying us all costs incurred in performing the work to the date of termination, plus a reasonable allocation of our overhead and general and administrative costs apportionable to the contracts, plus a reasonable profit that we would have earned to the date of termination, but in no event more than the contract price.