ADA-ES, Inc.

(NASDAQ:ADES)
ADES - Maintain Mkt Perform; Waiting For Success on M45
MARKET PERFORM COMPANY UPDATE

Emission Control Technologies

Daniel J. Mannes, CFA, Director Brian Shore, Senior Associate
Price ($) 52 Wk Range ($) Price Target ($) Market Cap ($mil) Enterprise Value ($mil) Avg. Daily Vol. (000s) Price / Book Cash Per Share ($) Net Debt / Cap. Shares Out (mil) Div($)/Yield(%) 15.00 4.54-24.92 14.00 144.0 138 16 3.0x 4.40 0% 9.6 /0.0%

November 10, 2011

dmannes@avondalepartnersllc.com bshore@avondalepartnersllc.com
FYE - Dec 1Q 2Q 3Q 4Q FY EPS ($) y/y % chg FY EPS (Old) FY EBITDA ($mil) CY EPS ($) CY P/E 2010E (0.39)A (0.50)A (0.79)A (0.42)A (2.13)A 64% (2.13)A (32.7)A (2.13)A NM

610-727-3878 615-467-3453
2011E (3.62)A (0.30)A (0.50)A (0.32) (6.76) NA (6.73) (11.8) (6.76) NM 2012E NE NE NE NE 0.43 NA 0.23 12.2 0.43 NM

Action
We maintain our Mkt Perform rating and $14 PT on ADES following its Q3 results/call. While recognizing the potential upside from M45, we find it premature to include in our model given limited tests to date and a tight window to qualify facilities. Our estimates assume successful deployment of Cyclean, but not yet for M-45 and we remain on the sidelines with ADES shares until we have more clarity on M-45 execution and economics.

Key Details and Summary Perspectives

Q3 Results - EPS of $0.50 fell short of our 32 cent loss estimate as incremental arbitration costs weighed on results. Looking forward, those costs should diminish and SG&A has begun to improve with lower legal expenses. Admittedly, quarterly results are not terribly meaningful as they do not reflect the potential earnings from refined coal and M-45. ADES ended the q with $9.5 mm in cash and subsequent to quarter end, raised ~$30 mm in cash through an equity raise. Cyclean Progress Continues - During Q3, ADES started up 8 incremental Cyclean units with 4 more started in Q4. That leaves 8 more by year end to meet the stretch goal of 20. In total, ADES expects these units to add 30 mm tons of refined coal annually. We conservatively model for 25 mm tons (in addition to the legacy 7 mm tons). Each incremental mm tons beyond our estimate would add $1 mm pre-tax income and 6 cents of incremental after tax earnings to ADES. M-45 Represents Upside Potential - Similar to Cyclean, M-45 qualifies for a $6.33 per ton tax credit as it reduces NOx/Hg emissions by 20/40%. ADES plans to fabricate 6 of these units that could treat 10-20 mm tons of coal. To date, this product has only been tested on 1 plant so its broad applicability is as yet unknown. ADES is also somewhat unsure on its margin profile which could range between $1-2 per ton of operating income to ADES. We conservatively assume none of these units are qualified by year end, given the tight time frame. This represents the primary upside to our assumptions and at 10 mm tons in service, ADES could garner an incremental $10-$20 mm of operating income annually ($0.60 - $1.20 in EPS). Norit Arbitration In the Past, Indemnification Still To Be Decided - ADES has now settled with Norit and paid the majority of its fees. However, ADES still owns 21% of the activated carbon plant and owes $30+ mm to its partner ECP under the indemnification. It is unclear if ADES will also have to reimburse ECP for the running royalty to Norit. We expect ADES to turn over its stake in the AC plant to ECP to meet its indemnification obligations, but additional cash payments may be needed as well. We retain our Market Perform Rating and $14 Price Target following quarterly resutls. ADES has seen improvements in costs as legal expenses have dwindled and is beginning to execute on its plan to further commercialize Cyclean and M-45. Our $14 Price Target assumes successful deployment of 32 mm tons of Cyclean. With tight time frames and technology uncertainty on M-45, we are unwilling to take a more aggressive view. However we do recognize the potential upside if ADES is successful.
Important Disclosures on Page 6

ADA-ES, Inc. - November 10, 2011

Avondale Partners, LLC

Details
Q3 Results Actual Estimate 13,232 8,966 3,095 3,147 9,160 5,250 977 569 -6,078 -1,955 -3,487 -636 7,154 1,140
37%

ADES Model Changes

Delta 4,266 -52 3,910 408 -3,694 -309 -3,225 -160 572 -361 686 248 1,284 -298 697 1,383 2,255 0 -1,385 -$0.18 New 36,852 9,787 24,194 2,871 -12,463 -5,966 -4,285 -2,212 24,389 3,822
39%

$ thousands Revenues MEC Cyclean FGC/Other COGS MEC Cyclean FGC/Other Gross Margin MEC
Margin%

2011 Estimates Old Delta 32,178 4,674 9,839 -52 20,284 3,910 2,055 816 -8,428 -5,656 -1,061 -1,711 23,750 4,183
43%

New 61,204 14,418 43,915 2,871 -15,162 -10,813 -2,196 -2,153 46,042 3,604
25%

2012 Old 60,388 14,418 43,915 2,055 -14,550 -10,813 -2,196 -1,541 45,838 3,604
25%

Delta 816 0 0 816 -612 0 0 -612 204 0 0 204 2,912 0 0 0 3,116 0 1,906 $0.20

New 96,359 24,252 69,236 2,871 -23,804 -18,189 -3,462 -2,153 72,555 6,063
25%

2013 Old 95,543 24,252 69,236 2,055 -23,192 -18,189 -3,462 -1,541 72,351 6,063
25%

Delta 816 0 0 816 -612 0 0 -612 204 0 0 204 3,229 0 0 0 3,433 0 2,066 $0.21

-2,384 -1,646 -263 -476 6,582 1,501

48%

-4,035 -309 -3,225 -501 639 -361 686 315 2,068 -596 697 1,383 2,808 0 -216 -$0.03

Cyclean FGC/Other
Margin% Margin%

5,673 341
35% 62%

4,988
95%

19,909 659
23% 82%

19,224 344
17% 95%

41,720 718
25% 95%

41,720 514
25% 95%

65,774 718
25% 95%

65,774 514
25% 95%

93

16%

Other Operating Costs Equity in Earnings - ACS MI/NexGen for Refined Coal Net Cyclean Contribution EBITDA
Margin %

-3,438 -2,050 -3,053 2,620 -1,387

-10%

-4,722 -1,752 -3,750 1,238 -3,642

-41%

-18,736 -7,811 -9,615 10,294 -11,773

-32%

-20,804 -7,215 -10,312 8,912 -14,581

-45%

-11,922 0 -26,458 15,262 12,162

20%

-14,834 0 -26,458 15,262 9,046

15%

-12,944 0 -39,118 26,656 24,993

26%

-16,173 0 -39,118 26,656 21,560

23%

One Time Items Net Income

0 -3,811

0 -2,426

0 -49,944 -$6.76

0 -49,727 -$6.73

0 4,168 $0.43

0 2,262 $0.23

0 11,716 $1.22

0 9,650 $1.00

EPS -$0.50 -$0.32 Source: Avondale Partners, Company Filings

Company Description
Headquartered in Littleton, CO, ADA-ES (ADES) is a leading provider of mercury emissions control technology and combustion optimization products to coal-fired power plants. Coal is the leading fuel source for energy in the US, and recent emissions legislation has required companies to address emissions during the coal-burning process. ADES offers solutions to limit mercury emissions as well as improve operating efficiency of coal boilers.

Investment Thesis
We remain cautious on ADES shares given the risk/reward around the Norit judgment and uncertainties about the business prospects. The company's refined coal joint venture (CyClean) represents a lucrative near-term opportunity, and ADES has shifted its focus to this business until a Federal mercury rule justifies an increase in AC supply. With the extension of the in-service through YE 2011, ADES has an opportunity to enlist additional customers and meaningfully drive earnings. ADES provides Mercury Emissions Control solutions to utilities with coal-fired boilers and is working to capitalize on the increasing amount of mercury regulations in the US. There are over 1,100 coal-fired boilers in the US, and less than 50% contain some form of mercury control. At this point, ADES' holds only a minority interest in the AC plant (24%) and profitability is unlikely until compliance with the Federal MACT rule draws closer (2014).

Price Target Justification

We reach our $14 Price Target based on an NPV analysis of ADES reaching 32 mm tons of refined coal sales annually (discounted at a 5% aftertax rate), net of the preferred interest and reduced by the value of the Norit arbitration and royalty. We assume the company's entire ownership position in the ADA-CS AC joint venture
2

ADA-ES, Inc. - November 10, 2011

Avondale Partners, LLC

is reduced to compensate the JV for legal expenses and that enhanced coal and emissions control sales serve to cover SG&A costs.

Potential Catalysts
Onset of Mercury Emissions Regulations - ADES, as a market leader in mercury controls, would be a prime beneficiary of timely implementation mercury emissions regulations, such as the Federal Utility MACT. Sale of CyClean Solution - ADES' prime opportunity is its joint venture to produce and market a refined coal product (CyClean) specifically designed for cyclone boilers. It has qualified CyClean for the Section 45 tax credits, and if it can line up more buyers, it appears to be a lucrative project for ADES. Incremental Pollution Control Solutions, Particularly CO2 - With its CyClean joint venture, ADES is entering the realm of control solutions for other pollutants, and the growing market for emissions control devices presents incremental opportunities for other pollutants. CO2 in particular is receiving significant attention, and a comprehensive national regulation would provide an opportunity for ADES.

Risks
Availability of Capital - While ADES is pursuing an entry into activated carbon production, it will need significant capital to construct a manufacturing facility. The company currently has limited float and an inability to procure capital could slow these efforts. Competition - ADES is seen as a market leader in ACI mercury controls, but other options are available, some at lower costs. Additionally, solutions aimed at curbing other emissions can also reduce mercury, which adds another layer of competition Norit Arbitration - ADES received a negative judgment in its legal case with Norit for patent infringement on AC production and will owe Norit nearly $41 mm in awards plus additional royalties on future AC sales from the plant. Unresolved is the question about indemnification to the JV for legal costs and royalty responsibility.

ADA-ES, Inc. - November 10, 2011

Avondale Partners, LLC

ADA-ES Inc. Consolidated Financial Statements

($ thousands) Full Year 2008 Full Year 2009 Mar 2010 - Quarter Ending June Sept Dec Full Year 2010 Mar

Avondale Partners LLC Dan Mannes, CFA 2011 - Quarter Ending - Projections Projected June Sept Dec 2011 Projected 2012 Projected 2013

Income Statement
Mercury Emission Control Revenues Cyclean Revenues (includes M-45) FGC, CO2, and Other Revenues Total Revenue Mercury Emission Control Operating Costs Cyclean Costs FGC, CO2 and Other Operating Costs Total Cost of Sales Mercury Emission Control Gross Margin Cyclean Gross Margins FGC, CO2, and Other Gross Margin Total Gross Margin G&A R&D Total Operating Costs Equity in Income - Carbon Solutions NexGen Payment to ADES Minority Interest- NexGen Minority Interest - GS EBITDA Depreciation and Amortization Interest Expense Interest Income Royalty to Norit Earnings Before Taxes Provision for Taxes Unrealized Gains (Losses)/Other items - Royalties Net Income Weighted Basic Shares Weighted Fully Diluted Shares Diluted EPS Source: Company Reports and Avondale Partners -3,522 1,506 -$2,970 -$4,986 6,741 6,048 -$0.65 -14,318 5,546 0 -$8,772 6,741 6,881 -$1.30 -$2,820 7,194 7,194 -$0.39 -$3,710 7,412 7,412 -$0.50 -$5,823 7,455 7,455 -$0.78 -4,433 1,613 -5,797 2,087 -9,312 3,489 -10,564 1,375 6,072 -$3,117 7,393 7,393 -$0.42 -30,370 8,564 $6,072 -$15,734 7,364 7,364 -$2.14 -2,296 14,256 -39,502 -$27,542 7,608 7,608 -$3.62 -$2,251 7,608 7,632 -$0.30 -4,564 2,313 -$3,467 -494 0 439 $15,750 433 $16,183 -$10,461 -443 -$10,904 $5,289 -10 $5,279 -7,962 -784 -8,746 $16,470 2,300 1,187 $19,957 -$9,971 -2,800 -1,108 -$13,879 $6,499 -500 79 $6,078 -17,850 -721 -18,571 -2,629 1,343 $3,064 0 803 $3,867 -1,822 -426 -264 -$2,512 1,242 -426 539 $1,355 -4,579 -184 -4,763 -1,181 0 346 $1,600 0 337 $1,937 -1,199 -586 -144 -$1,929 401 -586 193 $8 -6,176 -197 -6,373 -1,568 0 675 $2,551 4,491 467 $7,509 -1,334 -158 -191 -$1,683 1,217 4,333 276 $5,826 -10,470 -258 -10,728 -2,389 0 -1,921 $2,610 5,892 466 $8,968 -1,752 -270 -467 -$2,489 858 5,622 -1 $6,479 -11,565 -272 -11,837 -2,899 0 -2,713 $9,825 10,383 2,073 $22,281 -$6,107 -1,440 -1,066 -$8,613 $3,718 8,943 1,007 $13,668 -32,790 -911 -33,701 -8,037 0 -4,634 $2,033 6,086 348 $8,467 -836 -175 -283 -$1,294 1,197 5,911 65 $7,173 -4,817 -321 -5,138 -1,959 0 -2,779 $1,709 4,748 569 $7,026 -962 -413 -476 -$1,851 747 4,335 93 $5,175 -6,847 -375 -7,222 -1,752 1,498 -2,056 $3,095 9,160 977 $13,232 -1,955 -3,487 -636 -$6,078 1,140 5,673 341 $7,154 -2,932 -506 -3,438 -2,050 0 -3,053 0 -$1,387 -216 -889 71 -2,182 -4,603 792 0 -$3,811 7,661 7,661 -$0.50 $2,950 4,200 977 $8,127 -2,213 -210 -817 -$3,240 738 3,990 160 $4,887 -2,432 -506 -2,938 -2,050 0 -2,100 -1,125 -$3,326 -80 -90 22 -840 -4,313 1,509 0 -$2,803 8,632 8,632 -$0.32 $9,787 24,194 2,871 $36,852 -$5,966 -4,285 -2,212 -$8,178 $3,822 19,909 659 $24,389 -17,028 -1,708 -18,736 -7,811 1,498 -9,988 -1,125 -$11,773 -688 -979 397 -3,022 -16,064 5,622 -$39,502 -$49,944 7,393 7,393 -$6.76 $14,418 43,915 2,871 $61,204 -$10,813 -2,196 -2,153 -$12,966 $3,604 41,720 718 $46,042 -10,214 -1,708 -11,922 0 0 -21,958 -4,500 $12,162 -701 -408 464 -5,103 6,412 -2,244 $0 $4,168 9,632 9,632 $0.43 $24,252 69,236 2,871 $96,359 -$18,189 -3,462 -2,153 -$20,342 $6,063 65,774 718 $72,555 -11,236 -1,708 -12,944 0 0 -34,618 -4,500 $24,993 -715 -204 755 -6,804 18,024 -6,309 $0 $11,716 9,632 9,632 $1.22

-$11,150 -596 0 57

-$4,243 -209 0 19

-$7,258 -330 0 1,791

-$9,212 -300 0 200

-$10,970 -78 0 484

-$32,704 -160 0 2,494

-$2,703 -185 0 592

-$4,357 -207 0 0

ADA-ES, Inc. - November 10, 2011

Avondale Partners, LLC

ADA-ES Inc. Consolidated Financial Statements

($ thousands) Full Year 2008 Full Year 2009 Mar 2010 - Quarter Ending June Sept Dec Full Year 2010 Mar

Avondale Partners LLC Dan Mannes, CFA 2011 - Quarter Ending - Projections Projected June Sept Dec 2011 Projected 2012 Projected 2013

Summary Margin Data Mercury Emission Control Revenues Flue Gas Conditioning and Other Revenues Mercury Emission Control Gross Margin Flue Gas Conditioning and Other Gross Margin Total GM G&A Margin EBITDA Margin Pretax Margin Effective Tax Net Margin Summary Growth Rates (Y/Y) Mercury Emission Control Revenues Flue Gas Conditioning and Other Revenues Total Revenue Total Gross Margin Cost of Sales EBITDA Net Income EPS (excluding Special Items) Summary Growth Rates (Sequential) Mercury Emission Control Revenues Flue Gas Conditioning and Other Revenues Total Revenue Cost of Sales EBITDA Net Income Source: Company Reports and Avondale Partners

97% 3% 34% -2% 33% 49% -21% -22% -43% -31% -12% -67% -16% -15% -16% 1194% -2128% -1631%

97% 6% 39% -2% 30% 89% -56% -72% -39% -44% 5% 174% 23% 15% 27% 222% 76% 99%

79% 21% 41% 67% 35% 118% -110% -115% 36% -73% -36% 943% -21% -34% -11% 477% 418% 395% -23% 153% -41% -9% 79% 120%

83% 17% 25% 57% 0% 319% -375% -299% 36% -192% -67% 338% -60% -100% -35% 887% 582% 113% -48% -58% -50% -23% 71% 32%

34% 6% 48% 59% 78% 139% -123% -124% 37% -78% -42% 19% 58% 223% -34% 274% 257% 3% 59% 39% 288% -13% 27% 57%

29% 5% 33% 0% 72% 129% -122% -118% 35% -35% -22% 17% 140% 440% -10% 34% -41% 131% 2% 0% 19% 48% 19% -46%

98% 9% 38% 49% 61% 147% -147% -136% 30% -71% -40% 75% 12% 125% -38% 193% 79% 64%

24% 4% 59% 19% 85% 57% -32% -27% 621% -325% -34% -57% 119% 429% -48% -36% 877% 824% -22% -25% -6% -48% -75% 784%

24% 8% 44% 16% 74% 97% -62% -65% 51% -32% -44% -29% 82% 282% -4% 3% -20% -41% -16% 64% -17% 43% 61% -92%

23% 7% 37% 16% 54% 22% -10% -35% 17% -29% 93% 190% 583% 89325% 261% -81% 3% -36% 81% 72% 88% 228% -68% 69%

36% 12% 25% 16% 60% 30% -41% -53% 35% -34% 16% 109% 8% -16% 30% -64% -52% -23% -5% 0% -39% -47% 140% -26%

27% 8% 39% 23% 66% 46% -32% -44% 35% -136% 0% 38% 65% 78% -5% -64% 217% 216%

24% 5% 25% 25% 75% 17% 20% 10% 35% 7% 47% 0% 66% 89% 59% -203% -108% -106%

25% 3% 25% 25% 75% 12% 26% 19% 35% 12% 68% 0% 57% 58% 57% 106% 181% 181%

ADA-ES, Inc. - November 10, 2011

Avondale Partners, LLC

Important Disclosures
Avondale Partners, LLC makes a market in the securities and/or ADRs of ADA-ES, Inc. (ADES). Avondale Partners, LLC and/or its affiliates, their individual officers, directors, members or employees (excluding the analyst primarily responsible for this report) and/or members of their families, may make purchases and/or sales as principal or agent in the subject securities. The analysts responsible for the preparation of this report may receive compensation which is derived, in part, from the overall investment banking revenues received by Avondale Partners. Such analysts are not permitted to receive compensation directly from investment banking fees paid by the subject company. Each Avondale Partners research analyst named on the front page of this research report, hereby certifies that (i) the recommendations and opinions expressed herein accurately reflect the analyst's personal views about the company and the securities that are the subject of this report and (ii) no part of the analyst's compensation was, or will be, directly or indirectly, related to the specific recommendations or view expressed by the analyst in this report. Price Target Valuation Method and Risk Factors: The 12 month price target is based on the analyst's assessment of future earnings and cash flow, comparable company valuations, and growth prospects. Risks to the target include broader market and macroeconomic fluctuations, as well as unforeseen changes in the company's fundamentals, business trends, competition, and/or unexpected management changes. Additional disclosures are available by calling 866-699-3531. Rating Definitions MO: Expected price gains of at least 5-10% greater than the market over the next 6-18 mos. MP: Expected price gains similar to the market over the next 6-18 mos. MU: Expected price gains of at least 5% less than the market over the next 6-18 mos.

InvestmentBankingServ./Past12Mos.
Rating Count Percent Count Percent

BUY[MO] HOLD[MP] SELL[MU]

116 52 2

68.20 30.60 1.20

4 0 0

3.45 0.00 0.00

Other Disclosures
The material herein is based on sources that we consider reliable, but it is not guaranteed to be accurate or complete. It is published for informational purposes only and should not be construed as an offer, or the solicitation of an offer to buy or sell any security. Prices and opinions expressed herein are subject to change without notice, and Avondale Partners is under no obligation to update or keep the information current. The securities described herein may not be eligible for sale in all jurisdictions or to certain categories of investors.

ADA-ES, Inc. - November 10, 2011

Avondale Partners, LLC

BANKING 866.699.3530 *** SALES 866.386.7474 *** TRADING 866.386.7475 *** RESEARCH 866.699.3531 615.467.3500 3102 West End Avenue, Ste 1100, Nashville, TN 37203 Nashville Main 866.699.3530 3102 West End Avenue, Ste 750, Nashville, TN 37203 Investment Banking 866.401.5741 601 East Pratt St., Ste 321, Baltimore, MD 21202 Baltimore 866.326.9365 184 High St, Suite 702, Boston, MA 02110 Boston 866.386.7474 180 N. LaSalle Street, Suite 3700, Chicago, IL 60601 Chicago 866.699.3531 8014 State Line Road, Suite 202, Prairie Village, KS 66208 Kansas City 866.699.3531 2 Sheppard Road, Voorhees, NJ 08043 New Jersey 610.727.3878 1055 Westlakes Dr., Suite 300, Berwyn, PA 19312 Philadelphia 866.699.3531 3 City Place Drive, Suite 1060, Creve Coeur, MO 63141 St. Louis