Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from Burt Chao - Simmons & Company
Burt Chao - Simmons & Company
You just mentioned licensing in India and perhaps some other markets. Do you have any idea at this point what the economics on that would look like to Synthesis, or is that something that’s too early to tell at this point?
Robert Rigdon
It’s a good question; I think I would say it’s too early for us to tell at this point. We’re still evaluating this. The licensing business is a business that is a low resource, low equity intensity business that has the potential to generate some nice margins, we believe. I think it’s too early to get more specific then that at this point.
Burt Chao - Simmons & Company
You mentioned the difference, obviously it wouldn’t be as capital intensive, you now have an operational facility in Hai Hua and Yima will likely be up pretty soon as well. Does the business model going forward, is that something where you might see a greater shift towards the licensing model or is it something that you probably plan on being an operator first and then licensing opportunistically going forward?
Robert Rigdon
We see both in our future. We see selective investments in good solid projects that fit our strategy, in addition to licensing. One of the things that I think is differentiating us is our operating experience. We take a lot of that from Hai Hua, we’ll continue to get more operating experience from Yima as we will have SES involvement in the Yima project. This is going to be easily translated into the licensing business. I think its going to be all of the above to answer your question.
Burt Chao - Simmons & Company
On Yima, the financing, I know you’ve paid the money out this quarter and you talked about effectively the Chinese bank debt and the guarantee by Yima. Is there an update as to how far that’s progressed? Do you think Yima is going to have to put the money up themselves or do you believe that its imminent that we get the bank debt there?
Kevin Kelly
The bank financing is moving ahead. We have to recognize that the debt markets work a little bit differently in China then they do in the West. The Chinese banks, almost every deal I’ve ever seen, require that you have all your equity in the project before they lend. Now that we put all our equity in there has been acceleration with the banks on processing the loans. The end of the day the CFO belongs to Yima and this project and they have the obligation. We’re really focused on executing that because there’s so much money in the project. There’s nothing holding us back and Yima is very credit worthy. We’re going to get the loan regardless and we’re fairly indifferent if it comes from a Chinese bank or from Yima. We do believe that it will come from a Chinese bank because they have shown real interest in the project.
- To read the full transcript on Seeking Alpha, click here »
