Midwest Energy Emissions Corp (OTCMKTS:MEEC) Has A Potentially Huge Opportunity Ahead

In April 2015, the US Environmental Protection Agency signed off on what’s called the Mercury and Air Toxics Standards (MATS) rule. It’s a rule that forces all power plants that produce more than 25 megawatts to reduce their mercury emissions by circa 90%. The plants in question have four years from sign off date (so, by April 2019) to comply, and those that don't will be subject to a zero compliance policy – harsh fines, penalties, etc.This created an opportunity for a company with a technology capable of reducing mercury output by this amount to approach these power plants and pitch their tech. That company is Midwest Energy Emissions Corp (OTCMKTS:MEEC). Midwest went public in October last year, and currently trades at a 183% premium to its list price. Since June alone, the company is up 144%.It’s a right time, right place type of play, and the upside is only limited by the number of plants currently required to meet MATS before 2019 (spoiler, it's 800-850).It's technology, what’s called SEA, captures mercury on emission by absorbing it through a process called chemisorption. It's a patented system, and outstrips nearly every other system of its type in the US from an amount-captured perspective.The company just announced preliminary Q2 numbers, and it's expecting revenues of $9.2 million for the quarter, and full year of $30 million or more. To put this in context, its current market cap is a little over $47 million. It's not often we see a company valued at around 1.5X annual revenues. Especially not when it's got a government mandated market to go at.A couple of key comments from yesterday's conference call:

We estimate with our technology that each of the units provide about $2 million to $3 million a year in revenue.We have multi-year contracts to date of approximately $110 million worth of business that we are now operating under.

So the company has 19 units up and running, and more than 800 more to go at, each of which it expects to bring in a minimum of $2 million a year revenues. It wont take too high a penetration before Midwest is bringing in hundreds of millions of dollars in recurring annual revenues.So what's the downside?Well, right now, the company has a little over $12 million of convertible debt outstanding, most of which converts at $0.50. That's a 50% discount to current prices, and could convert into 24 million common shares. Midwest only has 47.5 million common shares outstanding, so this conversion would be highly dilutive. Additionally, its paying interest on its loans through further share issue. Every time it issues shares to pay interest, the value of a current holding is diluted further.The upside is that this practice is expected to come to a halt by Q3, at which point Midwest will start paying off principal and interest in cash.All said, this one's an interesting play. The company is pretty much guaranteed to do well, as long as its sales team can push its SEA technology effectively. The potential clients need the product (it's either buy it or take a fine from the EPA) and so its sales team shouldn’t have too hard a job. Dilution is obviously an issue, but if management sticks to its word and stops firing out shares to meet its obligations, dilution should slow. There's the one off hit of the $0.50 convertibles, but there should be enough value creation between now and 2019 to offset any impact this might have near term.We're looking for confirmation on the latest guidance, and for the company's sales team to deliver on its targets. Subscribe to our updates using the field below and we'll let you know how the company performs on both these counts.Disclosure: We have no position in MEEC and have not been compensated for this article.