Eco Investor Update
A Weekly News Update for Environmental Investors
January 2011 - No 18
There were no announcements at the time, but on 24 January Envestra said the floods in Queensland and Victoria have had only a minor impact on its gas distribution networks. The impact on Envestra's future revenues, due to businesses not being able to operate, and homes that will not be re-occupied for some time, is not expected to be material, said managing director, Ian Little.
"Considering the extent of damage across the regions, Envestra's gas assets have performed remarkably well. Supply was maintained to the vast majority of consumers throughout these devastating events," he said.
"Some water entered the low pressure sections of the network, particularly in Ipswich, causing supply interruptions to a limited number of consumers in this area. This water has since been removed and gas supply restored to those consumers."
"The company has inspected over 4,000 properties connected to natural gas that have been affected by the floods in Queensland, and 500 in Rochester, Victoria, with only 90 meters and 150 regulators having to be replaced."
"While additional costs have been incurred in dealing with the emergencies, they are not expected to be material, and are unlikely to reach the level at which the Company's insurance policy would respond ($0.5 million)." (ASX: ENV)
A reduction in government rebates saw sales of environmental water heating products down substantially in the half, but this was offset by higher sales associated with the Government's stimulus measures in public housing and the Building Education Revolution program.
Earnings (EBIT) for the half year is on track to meet with the company's previous annual earnings (EBIT) guidance of $105108 million excluding the imminent Gliderol acquisition.
The company's operations have not been adversely affected by the east coast floods but the events are expected to lead to lower sales during the first quarter of 2011, it said.
"However the company expects to benefit as reconstruction and replacement programs gather pace. We will be in a better position to provide a view on the short and medium term impact of the floods on the business when we announce the half year result on 15th February," said GWA.
The acquisition of Gliderol is expect to be completed at the end of January. Discussions are continuing with a potential buyer for the Sebel commercial seating business, with a decision on whether to sell expected to be made this half. (ASX: GWA)
Mr Campbell has been Transpacific's chief financial officer and was formerly Global Director and chief financial officer of Visy Industries.
"Since he joined Transpacific in 2010, Kevin has been an outstanding contributor and has developed strong and constructive relationships with those with whom he has dealt. He has demonstrated leadership across a range of functional areas," said Transpacific chairman, Gene Tilbrook.
"He comes to the role with a strong track record of driving profitability, growth and the efficient use of capital whilst maintaining strong and consistent control of trading and manufacturing in large and complex corporate environments."
A search is now underway for a new CFO. Mr Tilbrook said the board renewal process announced in November is progressing.
Transpacific's share price has moved in the right direction, hitting a one year high of $1.50 on 17 January. (ASX: TPI)
Ceramic Fuel Cells
Famous for its Hills Hoist, one of Australia's best ever solar products, Hills is listed on the ASX and a leading manufacturer, distributor and installer of home products including solar hot water products. Annual revenue is $1.1 billion. Its three major business categories are home, hardware and eco products; electronic security and entertainment; and building and industrial products.
Brendan Dow, Ceramic Fuel Cells' managing director, said "Hills designs, develops and makes its own appliances and solar products, so there are also longer term strategic opportunities for us to collaborate on the BlueGen manufacturing and supply-chain side."
Ceramic Fuel Cells estimates the Australian market for BlueGens at several hundred thousand units, while the number of households connected to natural gas is more than three million.
The agreement with Hills is part of Ceramic Fuel Cells' strategy to sell BlueGen in Australia through distributors and to outsource the installation and servicing. Ceramic Fuel Cells has similar distribution agreements with Melbourne based retailer Neco, and Harvey Norman's Commercial Division, in NSW and ACT.
In December after two years of testing, German utility EWE placed an order worth up to $6.6 million for up to 200 integrated micro CHP products made using Ceramic Fuel Cells' technology. (ASX: CFU)
The indicative value ranges are above the initial approach from Pacific Equity Partners at $1.80-$1.90 per share, it said. However, it would not disclose the value ranges or terms as the indicative proposals are incomplete, confidential and conditional.
Tassal said it remains in discussions with certain parties, but that there is no assurance that a formal proposal will eventuate. (ASX: TGR)
Clean TeQ Holdings
The decline appears due to the company's deteriorating trading conditions, which will result in a loss for the first half year.
Presenting its December quarter results, Clean TeQ said "The first half of this financial year has been a difficult one with slower than expected sales in our traditional marketplaces due to the post-GFC period with a reduction in capital spends and the ending of government stimulus spending.
"In addition, Clean TeQ has experienced climate change initiatives being delayed for an extended period, all of which sees us in a loss position for the six months ending 31 December 2010."
Clean TeQ is reducing its underlying cost structures, diversifying revenue, increasing its sales capability, and identifying opportunities to realise value from its research and development investments.
"During this period of realignment we expect a steady improvement in our trading results," it said.
The company has cash of $1.9 million and no material debt. (ASX: CLQ)
Mr Lancken is deputy chairman and a non executive director, and has acted as interim managing director. He was managing director of Kennards Hire from 1994 to 2009. (ASX: CMV)
Novarise Renewable Resources
Novarise has been granted another Chinese patent, for a method of producing polypropylene from waste polypropylene products. (ASX: NOE)
Micro Cap Companies
Australian Renewable Fuels
The acquisition will be predominately a non-cash assumption of BPL's existing convertible note debt, which has a redemption value of $21 million, by the issue of ARF convertible notes on terms to be agreed. The payment and structure of the ARF notes will be linked to the performance of BPL's plant over a five year period.
ARF said it expects to complete the transaction without issuing any further shares at this stage.
The acquisition is subject to due diligence, legal documentation and ARF shareholder approval.
The BPL plant was built in 2008 and can produce 60 million litres per annum. It will give ARF a production capacity of over 150 million litres per year. ARF's two plants have 45 million litre capacity each and are located in WA and SA.
The BPL plant is well positioned for the east coast market, and is a major supplier to various oil companies and the regional market. The acquisition will give ARF coverage of the main industrial areas of Australia.
ARF said combining the ARF and BPL assets will provide a consistent and certified quality of product and benefit overall supply conditions for the major operating companies in Australia and.
It will also improve feed stock logistics, and optimize the use of low cost alternate feed stocks for all plants.
It will improve the cost base of the business, and provide strong accretive growth for ARF investors as the acquisition will be completed with "no new immediate equity issuance".
The acquisition of BPL is a major strategic progression for both companies,¨ said ARF managing director, Tom Engelsman.
Andrew White, managing director of BPL, said "The combination will allow the excellent results of BPL to be leveraged across the ARF facilities." (ASX: ARW)
Over the coming weeks the intake of tyres is expected to reach the equivalent of 20,000 passenger tyres per week. This will enable the company to life output of tyre derived products to over 700 tonnes per month.
Carbon Polymers said it expects to formalize sales agreements for this output in February.
At full capacity the plant can process 100,000 tyres per week and produce 3,500 tonnes of tyre derived products per month, said managing director, Andrew Howard. (ASX: CBP)
Cell Aquaculture said the funding will enable it to accelerate the development of its Thailand production facilities, and to progress development of new seafood retail products and international markets through its food processing subsidiary, Cell Aqua Foods Pty Ltd.
The funding will also be used to advance projects in Singapore, Malaysia and South Africa.
The US$6 million facility comprises three convertible notes of US$2 million each. Each note will have a repayment term of four years from the date of initial drawdown. Interest is payable quarterly in arrears at 4.75 per cent per annum on the unconverted principal amount.
Funding will be provided to Cell Aquaculture at US$150,000 per month.
The conversion price is for the first, second and third notes is the lesser of 30 cents, 60 cents and 90 cents respectively and 80 per cent of the average of the three lowest Volume Weighted Average Prices during the 21 trading days prior to conversion election.
La Jolla Cove cannot hold more than 19.99 per cent of Cell Aquaculture's share capital, and cannot short sell the shares whilst any note is outstanding.
Cell Aquaculture's executive chairman, Perry Leach, said "We have worked hard with the La Jolla Cove team to tailor this investment package which will allow us to achieve our corporate objectives, whilst having minimal dilution on the company and providing us control over the capital structure a real win-win for both parties. La Jolla Cove has not charged any fees for the implementation of the financing facility, or for any ongoing strategic advisory services, also making this deal attractive for CAQ."
La Jolla Cove's director, Malcolm Thompson, said "Having spent the last number of months understanding CAQ's technology, business model and expansion strategy, we find the growth prospects for the company highly compelling. The company has worked hard and spent many years developing its hatch to dispatch' offering and is now at a stage where well tailored financing and corporate advice will see CAQ maximize its potential from the company's current opportunities."
Based in San Francisco, La Jolla Cove has done business with two other Australian emerging and micro cap environmental companies in recent months, including Clean TeQ Holdings and Intec, with Intec repaying its convertible note within six months.
Cell Aquaculture's share have reached a six month high of 13 cents. (ASX: CAQ)
Clean Seas Tuna
The company also said that the various initiatives over the past year should allow it to progress the production of juvenile aquaculture bred SBT. These include a new recirculation SBT hatchery which has been fully commissioned via a successful trial of yellowtail kingfish fingerling production.
Further, the company has completed its recruitment of a skilled SBT research and development team which is now in place at Arno Bay and providing support to the commercial hatchery team.
The company will provide investor updates on the SBT spawning and larval rearing season at critical times in the annual life cycle including commencement and cessation of SBT broodstock spawning, transfer of fingerlings for controlled growout trials to either sea cages or holding tanks, and significant progress and/ or failures with growout trials, e.g. the number of SBT juveniles living post 180 days hatch.
Clean Seas said it anticipates its financial result for the half year ended 31 December 2010 will see a reduction in the order of 25 to 35 per cent in the level of the after tax loss compared to the December 2009 half. This will be due to a range of factors but in particular inventory valuation requirements.
The sell down of inventory, price increases and cost saving initiatives have resulted in the kingfish business being cash flow positive for the latest half year, said managing director, Clifford Ashby. (ASX: CSS)
Mr Hiscox will take on full responsibility for the Sales and Marketing functions with help from an external consultant.
Eco Quest said Mr Hiscox has a strong commercial sales and marketing background from the fast moving consumer goods and pharmaceutical industries. He has a Degree in Marketing and an Advanced Diploma in Human Resources and Industrial Relations.
His new appointments recognize his successful driving of the launch of Eco Quest biodegradable nappy and wipes in Australia and for leadership in the business, said the company. He negotiated and finalised the commercial agreements with the Australian sales agents and distributors and negotiated with the IGA retail chains and the largest toy retailer in the world Toys-R-Us. (ASX: ECQ)
The project follows the recent announcement that Greenearth Solar Energy and Israel based ZenithSolar were joining forces to introduce into Australia the ZenithSolar Z20, a state-of-the art high concentration photovoltaic (HCPV)/ combined heat and power (CHP) solar technology.
The proposed Victorian ZenithSolar Z20 demonstration will be the first outside Israel. The demonstration site will allow potential investors, project developers and off take customers easy access to the technology.
Eight Z20 units on the site would produce a peak output of 88 kW thermal energy (hot water) and 36 kW of electrical energy.
Greenearth Solar Energy is now assessing electricity and hot water off take options including the potential to supply hot water to the Ambulance Victoria Port Melbourne Branch, which is directly opposite the proposed demonstration site. According to an initial assessment, the Port Melbourne Branch has similar hot water requirements to the output of the proposed eight unit Z20 CHP configuration.
A successful trial will result in Greenearth Solar Energy and ZenithSolar establishing an exclusive distribution agreement for the technology for Australia, New Zealand, Indonesia and a number of Pacific Island nations.
A single ZenithSolar Z20 CHP solar technology unit has two 11m2 collectors mounted on a dual axis tracker that concentrates incoming solar power onto a receiver. The Z20 receiver consists of a multi junction PV cell coupled to a heat exchanger that efficiently converts concentrated solar flux into DC electrical power and thermal energy.
DC electrical power is then converted to AC power and fed either direct to a customer or the grid.
Thermal energy, as heated water, is pumped through a closed loop system to proximate customer applications such as hospitals, aged care facilities, hotels, leisure centres, municipal offices, swimming pools, universities and industrial sites.
Managing director of Greenearth Energy Mark Miller said "In the last six months Greenearth Energy has embraced several Israeli technologies for introduction into the Australian market.
"Our investment in the energy efficiency space by way of our subsidiary Greenearth Energy Efficiency Pty Ltd is underpinned by our strategic alignment in the second half of 2010 with Metrolight Ltd, the leading manufacturer of Smart Electronic Ballasts that power High Intensity Discharge (HID) energy efficient lighting systems. With over 500,000 units installed in the US, Europe and around the world, Metrolight energy-efficient solutions have accumulated over 2 billion operating hours to date."
"In addition we are currently assessing a ground breaking Israeli technology that seeks to shift the current paradigm regarding CO2 emissions. Should our assessment and negotiations prove successful regarding this innovative technology then we anticipate a further announcement within the first half of 2011." (ASX: GER)
Liquefied Natural Gas
A Share Placement Term Sheet was signed in Beijing on 37 January.
Under the term sheet, HQCEC will subscribe for 53.25 million shares, equivalent to 19.9 per cent of LNG, at the lesser of 48 cents or 80 per cent of the volume weighted average market price over the last five days prior to the issuing of the placement shares.
The placement proceeds will help develop LNG's wholly owned 3 million tonne per annum Gladstone LNG project at Fisherman's Landing, Queensland.
HQCEC will nominate a non executive director, an executive director and a co chief executive officer to LNG. The co CEO will work with managing director and chief executive officer, Maurice Brand.
HQCEC, or one of its affiliates, will be the sole engineering, procurement, construction and commissioning contractor for the project, conditional on HQCEC providing a competitive proposal based on LNG's OSMR process technology.
The parties will also negotiate preferential terms for HQCEC, CNPC and their affiliates to use the OSMR technology.
HQCEC, CNPC, or an affiliate will consider purchasing the proposed initial 3 million tonne per annum LNG production capacity from the first two LNG trains.
The Term Sheet is conditional on LNG shareholder approval, among other approvals. The placement should be completed by the second quarter of 2011. (ASX: LNG)
Mr de Graf has spent 25 years as managing director/ chief executive of three ASX listed companies.
"My decision to retire is part of a plan to have time to pursue longstanding personal interests and coincides with my turning 65 during this quarter," he said. "I have greatly enjoyed my involvement in the resources sector and carry fond memories, especially of having been involved in the development of the geothermal sector in Australia." (ASX: PAX)
Phoslock Water Solutions
SePRO provides and supports a full line of aquatic plant and algae management products, to which Phoslock will be added.
The distribution agreement is for an initial five years and includes large annual purchase obligations by SePRO and a significant initial order.
Phoslock will be sold as a standalone product used in conjunction with SePRO products and also potentially formulated in other SePRO products.
A second distribution agreement with SePRO covering aquaculture and retail products for the US market is being finalised.
Phoslock Water Solutions' general manager for North America, Eddie Edmunds, said SePRO is a great fit for Phoslock. The SePRO Aquatics Team has 13 aquatics specialists, all trained in the science of aquatic plant and algae management.
The SePRO sales team supports over 160 accredited applicator companies spread throughout the US. The accredited applicators maintain strong local relationships with the lake management companies, lake associations, state and federal water body organisations and aquatic management companies, he said. (ASX: PHK)
The move is timely for Phoslock, which had December quarter sales of $177.000.
In Europe, Phoslock has completed the application of its treatment to 27 lakes over the last four years.
"Decisions are expected over the next nine months on 12 major projects (ranging in size from 20 to over 2,000 tons) in Germany, Italy, Poland, the UK, the Netherlands, Denmark and Finland with the majority of these applications likely to take place before the end of 2011," it said
"Sales revenue for the European region is projected to range between a low of approximately 1 million and a high of 5 million, depending on the decisions reached by customers during the course of the year. This is an approximate range of $1.4 million to $6.7 million at present exchange rates."
"A proposal to use Phoslock in a major North Italian lake will be finalized and submitted by the end of March 2011 while in lake trials in a 1,800 hectare Central American water supply reservoir are expected to commence within the first half of 2011."
The company said sales to the
aquaculture sector continued to increase in the December quarter. In Australia
eight aquaculture farming operations use Phoslock as part of their water
quality management. The enquiry rate from Australian and overseas aquaculture
companies remains high, it said.
Chief executive, Phil Hutchings, said: "The re-start of operations has been achieved earlier than we expected. Virtually all of our key production machinery is back in operation and we will progressively ramp up to full production rates. The financial impact is currently assessed at approximately $350,000 plus three weeks of lost production while operations are restored."
The medium and longer term impact on RedFlow's delivery and product development schedule is likely to be minimal, he said.
RedFlow installations of energy storage systems are ongoing in Victoria as the company continues to fulfil its $1 million contract with Energy Safe Victoria.
Additionally, the company shipped a zinc-bromine battery module for its inaugural participation at Mobile World Congress 2011 in Barcelona, February 14-17. (ASX: RFX)
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