Eco Investor February 2017
Carnegie Now A Different Company
Carnegie Clean Energy is a different company from what it was as Carnegie Wave Energy and the difference is now reflected in its share price which in late January hit an eight year high of 8.8 cents. Only three months earlier in mid September it was 2.4 cents.
It still has a long way to go to better its 10 year high just before the GFC of 48.5 cents, but in that time it has never looked as possible as it has recently of perhaps one day seeing its share price get back there.
The company has met a lot of technological milestones and capital raising hurdles to get to its current position as the world's best chance of commercializing wave energy. It has been a centuries old dream of sailors and inventors to turn wave energy into commercial electrical energy, and milestone by milestone Carnegie is now close to being the first in the world to commercialize wave energy.
To get there, it has not only had to develop a world leading wave energy technology - which has taken it over 20 years and more than $150 million of capital; it has also had to develop an original commercialization strategy that could work - and it looks like it has also done that.
The technology part is its CETO 6 1 megawatt underwater buoys that can be grouped to form a wave energy farm. These will be used in its first commercial wave farm at Garden Island near Perth and will be rolled out in other planned commercial wave farms and renewable energy based micro grid projects around the world.
Given Carnegie's longstanding and outstanding record in research and development and managing director and chief executive Michael Ottaviano's qualifications as an engineer, it is likely the CETO devices will keep getting better. Investors have trusted Carnegie to deliver ever-improving technology and there is every reason to believe they will keep doing so.
But turning technology into money - even when it works well - can be as hard or harder a proposition. Carnegie's recent share price rises are because it has a plan that looks like it could work.
That plan is to become a developer of diversified renewable energy projects that can supply clean energy - and also drinking water from sea water if needed - to off and on grid communities such as islands and remote settlements. Carnegie has done a lot of home work to show there are more than enough of these around the world to build and sustain a business.
The company's recent moves have shown how it is bringing this strategy to market and investors as well as potential future competitors seem impressed.
A key move was adding other renewable energies and technologies to its wave energy offering. It did this through the acquisition of WA based company Energy Made Clean, which has expertise in installing micro grids based on solar and wind energy systems and batteries for energy storage. Through Energy Made Clean, it can now also supply on and off grid inland communities with clean energy.
Together with wave energy for baseload power, island and remote coastal communities now have a lot of options for solving their energy requirements.
The other attraction of Energy Made Clean is that it generated $16 million in revenue in 2015-16. This means that Carnegie, which until now has always been a pre-revenue business, will soon be reclassified as a pre-profit company. Eco Investor will likely do this after either the half year or full year results come out.
The other recent development that seemed to move Carnegie's share price was a joint venture with Lendlease to deliver solar, battery and microgrid projects across Australia. No doubt the market was impressed with Lendlease's high profile and market cap as well as its position as a major international property developer.
The 50/50 Joint Venture Agreement (JVA) is with Lendlease Services Pty Ltd (LLS), which employs 3,000 people and has offices in every State and Territory.
The deal increases Energy Made Clean's capacity to bid for solar, battery storage and microgrid opportunities, and its access to the National Energy Market.
The partners will work together for an initial three years as they combine Energy Made Clean's design, construction and operation of microgrids, commercial scale solar projects and energy storage systems with Lendlease's construction and maintenance of power distribution and generation assets.
Dr Ottaviano said the partnership aims to reach a broad range of blue-chip clients including network providers, utilities, large-scale residential developments and defence. He quoted numbers that the Australian off-grid, fringe-of-grid, commercial and industrial market is worth $1.6 billion over the next 5 years and $5 billion over the next 10 years.
Carnegie is also getting into the vanadium battery market. Energy Made Clean recently signed a Strategic Memorandum of Understanding with Sumitomo Electric Industries and TNG Ltd to collaborate on the promotion and development of Australia's Vanadium Redox Flow Battery (VRF) market. EMC will identify commercial project site development opportunities and design and supply compatible plant to integrate with the VRF containerized system that will be supplied by Sumitomo. Its contribution will likely include a solar PV farm as part of a solar and battery demonstration project.
Carnegie's progress has long drawn Australian and international government support and its share price would not have been hurt by its UK subsidiary, CETO Wave Energy UK, receiving £9.5 million ($15.5 million) from the European Regional Development Fund to help with the first phase of a planned 15 megawatt commercial wave energy project at Wave Hub at Cornwall in the UK. Wave Hub is said to be the world's largest and most technologically advanced site for the testing and development of offshore renewable energy technology.
Carnegie has been different from many other early stage technology businesses
as in recent years it has had a very good cash position, and this has
now improved even more. At 31 December Carnegie had cash of $7.4 million
and $30 million in undrawn debt funding.
Over time Carnegie's sources of funding and willing investors has kept growing. For technology companies and entrepreneurs, Carnegie is a good example of how success breeds success. (ASX: CCE)
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