Description

IGC is in the most unusual situation I have encountered in over 40 years on Wall St. as CEO of a stock brokerage firm, a major player in the mutual fund industry, and a partner in many commercial real estate ventures.

With a tiny capitalization of two million shares and virtually no debt except specific real estate loans incurred in the normal course of business, IGC has prime real estate net assets greater than its entire stock market capitalization (2,100,000 shares x $10.75 per share = $22.6 million). Indeed, one piece of real estate alone is priced for sale at $25 million.

The Wilson family, who also runs the company, owns more than 50% of the stock. CEO Jim Wilson is a developer; primarily in real estate on a large scale both domestically and in Central and South America and the Caribbean. The family is bilingual and the largest developer in San Juan, Puerto Rico. (San Juan’s population is 3.5 million.) Wilson built the spectacularly successful new town of St. Charles (population 35,000) from the ground up. St. Charles is in Waldorf, MD, just south of Washington, DC and one of America’s fastest growing small cities.

Eight years ago, Jim Wilson changed the course of IGC to pursue another vision: addressing the world’s problem of waste disposal. He set up an additional office in Malvern, Pennsylvania, with three experienced senior engineers as part of a staff of eight. Two years ago, Wilson negotiated with a Swiss-German waste-to-energy technology group exclusive rights to contract, build, own, and operate their unique Thermoselect waste conversion processing plants in North America and the Caribbean, plus non-exclusive rights worldwide.

The Thermoselect technology has been proven to be absolute state of the art in Europe and Asia. Unlike conventional incinerators, this process is a closed loop system, which gasifies all waste to produce electric power. The prestigious British Juniper report produced by the U.K.’s top engineers ranks Thermoselect far ahead of the competition. Other European engineering appraisals concur.

Also, in a real coup, Wilson brought Mark Augenblick on board as IGC president. Augenblick was a partner in a very prominent Washington, D.C. law firm, which has built, according to the Washington Post, the premier staff of high tech lawyers in the country. Augenblick has spent the past decade on very large infrastructure projects in Asia and South America.

After five years of germination, IGC’s business plan is running full throttle. In Puerto Rico, IGC has a substantial commitment to build a huge $600 million plant to handle waste from San Juan and its suburbs and anticipates beginning construction this year.

The Virgin Islands recently selected IGC to build, own, and operate one or more facilities. Another major Caribbean island approached IGC for the same purpose. IGC also is in various stages of negotiations with municipalities in Puerto Rico (as previously mentioned), St. Maarten, Chile, Colombia, Singapore, Hong Kong, the Philippines, and a number of Chinese cities including Shanghai. (Preliminary agreements already have been translated into Chinese.)

Microcap IGC has assembled a supporting cast worthy of a major international.

DIRECTORS include:

Dr. John H. Gibbons, recently Science and Technology Policy Advisor to the Clinton White House. This position is equivalent to a cabinet post. Former head of Congress’ prestigious Office of Technology Assessment. Gibbons has an unrivaled biography – member to the Domestic Policy Council, the National Economic Council, and the National Security Council. He represented the U.S. government in major bilateral and multilateral meetings in such countries as Russia, Japan, China and the G7 Nations.

Earnst Ringle, previously President and CEO of Preussag/Noel (a German company), one of the largest construction firms in the world.

James Treptow, formerly a major real estate developer (developing projects of nine million square feet) out of Houston. He has financed over $600 million of synthetic fuel facilities.

IGC’s strategic alliance in its Thermoselect projects:

Accounting: Arthur Andersen.

Attorneys: Covington and Burling – and old line prestigious Washington, D.C. firm with a huge international cachet. IGC’s personal attorney is Alfred H. Moses, former ambassador to Romania and presently heading an international tribunal to resolve the enduring political crisis in Cyprus.

Contractor: Fluor/Daniel, (NYSE FLR) the largest U.S. international construction firm.

Performance Guarantor: ABN AMRO Bank of The Netherlands, (NYSE ABN) world’s sixth largest bank.

Plant Management and Procurement: Vivendi (NYSE V) (formerly Compagnie Generale Des Eaux), one of the world’s largest utilities and number one in waste and water treatment internationally.

IGC’s stock sold at $2.65 in 1997, $5.00 in 1998, $8.00 in 1999 and in 2000 closed at $11.00. Despite the growth in price over the past few years, the present valuation makes it still an opportunity, largely due to lack of public understanding of the company. Progress in the past two years warrants a much higher valuation. The market should be discounting at least part of future revenues to a valuation of $16 now and $24 next year.

I think we have here a direct analog to AES (NYSE - $57.00). AES builds and owns power plants abroad. It went public in 1981 and now has a market cap $26 billion. If IGC were to achieve the same result, each current share of IGC would be worth $13,000. Sounds farfetched, but it happened.

The ongoing need for waste-to-energy plants is comparable with power plants. What are IGC’s chances of doing as well as AES? I’ve always thought the chances were very good. Compared to the original AES, IGC is a much stronger entity in a number of ways: assets; proven successful managers; and strategic international business alliances.

Each waste conversion plant is like an annuity. Worldwide waste will increase. It’s a growth industry. Revenues should grow at every plant.

IGC’s real estate is in great demand. Final negotiations are underway for the sale of 240 lots to a national builder at Brandywine, MD, where IGC is the 50% managing partner along with Simon DeBartolo, one of the world’s largest mall developers and J.C. Penney.

Waldorf, MD continues as one of the leading boom areas of the country. IGC has four contracts in its shopping center land: Safeway, K-Mart and two local merchants who want to relocate. The county commissioners just approved IGC’s subdivision plan and all that remains before closing is certain land remediation work that is ahead of schedule. The shopping center land is listed for sale at $25 million ($12.00+ per share). (The book value is only $5 million- or $2.50 per share.

IGC has been working very hard to complete or sell its real estate projects so that it can focus entirely on the waste conversion business. The last couple of years have persuaded management that the business is not only hugely profitable but also there for the taking.

Over the years my most successful investments have always combined great assets, great managers, and a feasible business plan. Have a great year.

Catalyst

With IGC’s tiny equity base, one Puerto Rico plant alone would have a giant impact: A projected yearly cash flow of $10 – 12 million ($5 – 6 per share) plus a one-time developer fee of $20-25 million ($10-12 per share) and a recoupment of all expenses. (Note: by charter, IGC must pay out to its shareholders 55% of all taxable income.)