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Eco Investor Update

A Weekly News Update for Environmental Investors

30 May 2011 - No 34
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ASX 100

APA Group
APA Group is to expand the capacity of its underground Mondarra Gas Storage Facility near Dongara in WA by more than five times to 15 petajoules.

APA has a long term foundation contract with Verve Energy for a substantial part of the facility's increased capacity, and is in discussions with other potential customers. Over the next two years APA expects to spend up to $140 million under the Verve foundation contract, which provides Verve Energy with long term certainty in gas storage services, and APA with long term revenue certainty.

The facility is part of APA's gas infrastructure in the Perth Basin. It provides an interconnection with the Parmelia Gas Pipeline and the Dampier Bunbury Pipeline, and serves energy retailers, power generators, and industrial customers throughout the Midwest and Perth regions.

Managing director Mick McCormack said "Given the issues around gas supply in Western Australia in recent years, APA is taking the lead in developing a market driven outcome to enhance energy reliability and strengthen gas supply security for our customers. In addition, an expanded Mondarra gas storage facility will provide our customers with supply options and flexibility to better manage their gas supply and demand portfolios", he said.

Completion of the expanded capacity is scheduled for first quarter of calendar year 2013. (ASX: APA)

DUET Group
DUET Group has refinanced its $564 million of bank debt, which is drawn to $464 million. The new facility has two components. $200 million over three year is a general revolver. $345 million over 364 days is a bridge until receipt of the proceeds from the Duquesne sale and will be repaid when the sale closes. (ASX: DUE)

ASX 200

Dart Energy
Dart Energy's directors have significantly increased their holdings through participation in the recent entitlement issue at 75 cents per share.

Stephen Bizzell indirectly acquired 1,005,520 shares for a total of $754,140. Nicholas Davies acquired 1,108,981 shares for $831,735. Simon Poidevin acquired 22,728 shares for $17,046. Shaun Scott acquired 106,792 shares for $80,094. And David Williamson acquired 18,922 shares for $14,191. (ASX: DTE)

Infigen Energy
Infigen Energy said a report published by the equity research group of Credit Suisse Australia and refered to in the media about a potential future breach of its leverage ratio covenant is misinformed.

Infigen said it will satisfy the leverage ratio covenant test for 2010-11, and that based on its present business outlook it expects to meet its leverage ratio covenant in future periods.

If adverse business conditions were to place unexpected pressure on future covenant compliance, "Infigen is confident that it has available a range of mitigants and remedies sufficient to avoid or cure any potential failure to satisfy its leverage ratio covenant test in conformity with the terms of the facility". These could involve using some of its liquid assets outside the corporate facility borrower group.

In response to speculation that some banks in its corporate debt facility lender group may be looking to exit their positions, Infigen said 15 of the 17 lenders are European based banks, some of which may no longer see participation in the facility as consistent with their future strategy.

Two of its lenders recently traded their positions in the facility to other banks and financial institutions. In both cases the sales were part of wider loan portfolio sales which included loans to other borrowers and are therefore not specifically attributable to Infigen, it said. Further orderly trading may occur as facility lenders continue to restructure loan portfolios. (ASX: IFN)

ASX 300

Ceramic Fuel Cells
Ceramic Fuel Cells is to market, sell, install and service its BlueGen gas-to-electricity units in the UK through a non exclusive distribution agreement with RES On-Site Ltd.

RES On-Site will distribute BlueGen to the commercial microgeneration energy market. It is adding microCHP accreditation to its Microgeneration Certification Scheme installer accreditations for many other technologies, and will provide installation and after-sales service for BlueGen products. It will also support Ceramic Fuel Cells to developing the market.

RES On-Site sells and installs low emission power and heating products for commercial, industrial and public sector customers, including wind, biomass, solar PV and solar hot water. It is part of the RES Group, an international renewable energy company with operations in Europe, North America and Asia Pacific that has delivered more than 5 GW of renewable energy projects worldwide.

The UK average domestic power consumption is estimated at 3,300 kWh per annum. Surplus electricity can be sold to the grid or used in other applications such as charging an electric car, hot water and heating the home.

Ceramic Fuel Cells managing director Brendan Dow said "To be working with the RES Group, one of the world's leading renewable energy development companies, is exciting news for CFCL and is yet another endorsement of BlueGen. The reputation, expertise and market penetration that the RES Group offers means that we are now even better placed to capitalize on the significant market opportunities that the UK offers."

Mike Atkinson, managing director of RES On-Site, said "The UK Government's tariff structures supporting the deployment of exciting new products such as BlueGen makes the UK a hugely dynamic developing market for renewable technologies and RES On-site is committed to being at the forefront of that market." (ASX: CFU)

Galaxy Resources
Shares in Galaxy Resources fell to a 12 month low of 84 cents on 27 May.

A day earlier Galaxy announced it had acquired an initial 20 per cent interest in the James Bay lithium project in Canada after the C$3 million initial payment was made. Galaxy can increase its equity interest to 70 per cent through the completion of a definitive feasibility study within a 24 month period.

The James Bay Project is an extensive high-grade spodumene pegmatite, near-surface deposit, with a NI 43-101 compliant resource and close proximity to key infrastructure, said Galaxy.

The M&G investment group has become a substantial shareholder with a 7 per cent interest. Fengli Group (Hong Kong) has reduced its interest from 8.8 to 6.7 per cent. Creat Resources Holdings has reduced its stake from 15.5 to 11.8 per cent. (ASX: GXY)

Tassal Group
Fund manager Maple-Brown Abbott has become a substantial shareholder in Tassal Group with an interest of 5.4 per cent. (ASX: TGR)

Emerging Companies

CO2 Group
CO2 Group says it is poised for growth after a record net profit after tax of $1.5 million for the half year to 31 March. The result was up 306 per cent on the previous corresponding half year loss of $745,000, and was underpinned by record revenue of $15 million, up 120 per cent.

Basic earnings per share were 0.55 cents.

The company says it is well funded with $14 million in cash and no debt.

The revenue was supported by the growing base of annuity income generated from the company's 30 to 50 year contracts. "Importantly, as revenue continues to grow, corporate costs remain largely fixed at around $6.5 million per annum," it said.

CO2 now manages 17,900 hectares of carbon plantings for its clients, and is preparing to establish another 4,400 hectares in the 2011 planting season to take total plantings to 22,300 hectares.

The company emphasized that the record results was achieved despite the absence of a carbon policy. "The strong financial performance was achieved in an environment of continued uncertainty around the federal government's policy on carbon. This highlights that the Australian carbon market is not just a function of Federal regulation, with many industries investing heavily in carbon offset strategies due to environmental approvals, corporate policy and brand development," it said.

CO2's chief executive officer Andrew Grant said the half year marks a key turning point in the company's development. "We have invested heavily in our business to date and the results are now starting to materialize into meaningful returns."

The company is well placed for growth and will shortly launch a major new business initiative to facilitate the trading of renewable energy certificates and carbon credits, and other initiatives such as consulting and site rehabilitation services are progressing.

Government legislation likely to impact around 1,000 large carbon emitters in Australia, and is currently partnered with 10 companies locally, so it is still in its early stages of growth, he said.

In New Zealand, CO2 has been busy with mapping and forestry management inventory consulting projects. Mine site rehabilitation, environmental plantings, carbon accounting and inventory management are new services now being marketed. (ASX: COZ)

Greencap
Greencap has restructured its consulting businesses into an integrated business model and away from the federated model that comprised nine separate brands.

The new structure is regional with geographically focused management led by leaders in each state and Asia. Each region has specialists focused in Occupational Health and Safety, Property Risk and Environmental Risk delivering an integrated service with a national capability, it said.

Group managing director Andrew Meerman has appointed Earl Eddings, previously the chief executive officer of the NAA Group, to the new position of chief executive officer of the combined Greencap consulting business. Mr Eddings will lead the consolidation of management and support functions from the Melbourne headquarters.

Mr Eddings said "Our clients expect an integrated risk management solution. The integration of our consulting businesses allows the company to meet these client needs with unparalleled strength across Australia and the Asia Pacific region. This approach is already providing new opportunities and securing broader based risk management work with existing clients and building a strong foundation for sustainable growth."

A strategic review of the company has also determined that Greencap's testing business is non-core and will be sold. Based on market evidence, Greencap believes proceeds of over $15 million could be realized.

Scott Bird has resigned as executive director of Greencap to focus on his role as Western Australia Regional Director of the Greencap consulting business.

The new structure should realize revenue growth of over 10 per cent next financial year.

Meanwhile, based on third quarter performance, and current and anticipated work to 30 June 2011, the company expects to close the year with revenues around $67 million against planned revenue of $70 million and last year's performance of $63 million.

The current year earnings should be closer to last year's figure of $4.3 million against planned earnings of $5 million, due to the impact of the natural disasters in Queensland and Western Australia in January and February, which have been felt across all service lines of the business, it said.

"The impact of these disasters has been deeper and longer than originally anticipated with revenue levels depressed throughout the entire third quarter and only recently returning to more normal levels. These events have compounded the influence of the relatively depressed state of the West Australian property market and increased the pace at which we are realigning our West Australian environmental business from the property sector to the resources sector."

The company plans to strengthen its Singapore operations with expansion of occupational health and safety consulting services.

Although the company had previously indicated it intended to pay a dividend in this quarter, the impact of the natural disasters means this will now not happen.

Greencap says its consulting business is the largest independent, Australian owned risk management consulting business in Australasia with over 400 professional, technical and engineering staff in 16 offices. It services over 5,000 public, private and government entities in the education, property, resources, industrial, manufacturing, retail and services sectors. (ASX: GCG)

Novarise Renewable Resources International
Plastics recycler Novarise Renewable Resources International is continually developing new products and expects to launch new products this year that will become additional revenue streams, chairman, Qingyue Su, told shareholders at the annual general meeting.

"With the continued recovery in the global economy and growing market demand for green products, Novarise will continue to be presented with great opportunities for development," he said.

Novarise is currently operating at full capacity, with the Nan'an facility expected to be operational in the third quarter of 2011. Production capacity will be 75,000 tonnes per year, which is currently 45,000 tonnes, and profit margins should be maintained. Revenue is expected to grow 15 per cent in 2011.

The company is also strengthening its risk management and operating strategies by improving corporate governance and better communication with shareholders, he said. (ASX: NOE)

Qube Logistics
Perpetual has become a substantial shareholder in Qube Logistics with an interest of 5.28 per cent. The holdings are held through several Perpetual managed funds. (ASX: QUB)

Micro Cap Companies

Advanced Engine Components
Advanced Engine Components received a ‘please explain' from the ASX over its low cash position at the end of the March quarter.

The company replied that it has been reviewing strategic steps and changes to fund the development and commercialization of its technology and products, and is continuing discussions with potential investors and joint venture partners, particularly for China.

"The success or otherwise of these negotiations are likely to have a significant impact on ACE's capital structure, corporate structure and/or trading operations," it said.

Meanwhile, operations have been restricted to cash flow positive or neutral trading operations to service its existing contracts in China, India, France and Australia. All research and development activities have been suspended.

Future cash flows also depend on sales in India, China, Thailand and other markets. (ASX: ACE)

Blue Energy
Blue Energy has signed a Memorandum of Understanding (MOU) with what it says is an experienced and respected international electricity generator for the supply of 6 to 10 petajoules (PJ) of gas per year over a 15 to 20 year period.

The gas will likely be supplied from Blue Energy's ATP814P permit near Moranbah in central Queensland and will be used for power generation.

Although the MOU is currently non-binding, it reflects the initial development of a potentially strategic relationship, it said.

ATP814P currently has 2,063 PJ of recoverable 3C contingent resource, independently identified by Netherland, Sewell and Associates (NSAI)), plus a shale gas prospective resource of 3,630 PJ, also identified by NSAI. The resource is close to significant coal mine infrastructure with large energy consumption potential in and around Moranbah.

Blue Energy said "Execution of this MOU signifies a significant milestone in the path toward commercialization of the gas resource in ATP814P. The MOU will also provide the economic framework with which reserves (under the SPE/PRMS definitions) can be attributed to ATP 814P." (ASX: BUL)

Carbon Polymers
As foreshadowed, Carbon Polymers has acquired the assets and operations of Reclaim Industries.

The synergies between the two tyre recycling operations are expected to save $3-5 million in costs per year, as well as generate organic sales growth for both businesses. Key operations for improvement in Reclaim have already been identified. Full integration should take about six months.

Reclaim was a tyre recycling company listed on the ASX and was known for its soft fall playground products installed in playgrounds in McDonalds and Hungry Jacks outlets around Australia. It had operations nationally with processing and recycling plants in WA, SA and NSW, and sales offices in Qld and Vic.

Revenue was $16 million for the past 12 months and it had a forward order book of $7 million.

Carbon Polymers said that although Reclaim's processing capacity was only 600 tonnes per month, it was very effective at maximizing the value of its products.

"The national footprint of Reclaim will assist CBP's ability to enter into national collection agreements with tyre retailers. The operations in Western Australia and South Australia will
also be launching pads for increasing business with the vastly untapped mining sector," it said.

Carbon Polymer's spare plant capacity in Sydney will immediately fill the product supply shortfall Reclaim had experienced and instantly relieve the additional costs it faced in supplementing its shortfalls.

The purchase price was $925,000. After allowance for inventory, the net acquisition cost will be $525,000 for the three processing and recycling plants. This is against an estimated rollout cost for Reclaim of between $8-9 million, said the company.

"This acquisition will add very substantial value for CBP shareholders," said managing director, Andrew Howard. "This is highly synergistic and moves us much closer and more quickly to shareholder positive earnings and capital gains."

The acquisition means Carbon Polymers will revise its plant rollout strategy. "We will also lower our need to potentially raise funds for plant expansion and the capital expenditure required, due to the nature and the cost of the assets being acquired and the strong acquisition cost benefit versus expenditure on new plant and equipment," said the company. (ASX: CBP)

Carnegie Wave Energy
Two directors of Carnegie Wave Energy, Bruce McLeod and Clive Callister, have resigned. Carenie said their resignations follow the appointments of former ESB executive Kieran O'Brien and former BP and WWF executive Greg Bourne in the last 12 months. Carnegie said it acknowledges the efforts of both directors, particularly Mr McLeod who was a director for 14 years. (ASX: CWE)

Datamotion Asia Pacific
Rare earth explorer Datamotion Asia Pacific and its partner Oroya Mining have commenced drilling the first hole on the M12 Rare Earth Target at their Mt Barrett joint venture.

The drill program is two holes for a total combined depth of 900 metres, and should take two to three weeks. (ASX: DMN)

Dyesol
Dyesol Japan will undertake a major expansion of its R&D following its success in being one of five companies from around the world to be awarded a subsidy from the Ministry of Economy Trade and Industry (METI) to establish a major R&D facility in Japan.

Dyesol was the only solar energy company offered support.

Dyesol intends to establish a materials integration centre in what it says is the centre for materials R&D in Asia. "For Dyesol this is a strategic and tactical success that will establish one of the major pillars to enable its on-going leadership in the field of Dye Solar Cells. The project is expected to commence in July 2011 and facilities will be fully operational by late 2012." it said.

The new Dyesol Japan R&D centre will give access to IP generation capability and working relationships with centres of research in Japan. Dr Gavin Tulloch, Dyesol's Director of Technology, said "The IP that will be generated by the new R&D centre in Japan will expedite and add considerable value to our partner projects around the world."

The project also provides Dyesol with the government imprimatur that will assist in entering collaborative industrialization projects with key Japanese corporations, especially in consumer electronics, it said.

METI said "Projects were judged based on their uniqueness, added value and potential ripple effects on the Japanese economy, as well as on their overseas locational competitiveness.

"The Subsidy Program for Promoting Asian Site Location in Japan is intended to sustain and strengthen high-value-added business sites in Japan and to achieve sustainable growth of the Japanese economy by supporting the establishment of new high-value-added sites in Japan, which have been proven to have a significant impact on the Japanese economy and by attracting and concentrating high-value-added business operations that match the strength of the Japanese economy." (ASX: DYE)

EcoQuest
EcoQuest has added the online store Total Nappy Supplies and the retail store Nappy Palace to its growing list of retailers selling the Little Takas biodegradable nappy and bamboo baby wipes.

Total Nappy Supplies services the Brisbane, Sunshine Coast, Gold Coast, Toowoomba and northern NSW region. The Nappy Palace retail store is in the Gold Coast.

Denise Touliatos, owner and director of Total Nappy Supplies and the Nappy Palace, said "We are delighted to start selling the Little Takas nappies in our stores as increasingly environmentally-conscious new mums are looking for more alternatives to conventional nappies to reduce their environmental impact and in a way that still provides the best in comfort and performance for their babies." (ASX: ECQ)

Eden Energy
Eden Energy shares have been suspended from trading pending the release of an independent report on its UK coal seam gas and shale gas assets, expected to be lodged on 31 May.

Meanwhile, following a parliamentary inquiry, the UK government has given its support to shale gas drilling in the country. The report, available at www.parliament.uk/eccpublications, found no evidence that the hydraulic fracturing process known as "fracking" poses a direct threat to underground water aquifers provided the drilling well is constructed properly.

"The committee concluded that, on balance, a moratorium in the UK is not justified or necessary at present," said Eden. However, MPs recommended the Department of Energy and Climate Change monitor drilling activity extremely closely in its early stages in order to assess its impact on air and water quality.

The inquiry said shale gas could reduce the UK's dependence on imported gas, but is unlikely to have dramatic effect on domestic gas prices.

It also noted that while greenhouse gas emissions from gas are lower than from coal they are still higher than many low-carbon technologies, and that gas would not be sufficient to meet long-term emissions reduction targets and avoid the worst effects of global climate change.

Eden holds up to a 50 per cent interest in coal bed methane and natural gas targets, and a 50 per cent interest in the prospective shale gas on 17 Petroleum Exploration and Development licences in South Wales, Bristol/ Somerset and Kent covering almost 1,800 square kilometres.

Eden is having two independent experts' reports prepared on the potential size and prospectivity of its UK coal bed methane and shale gas portfolios "with a view to deciding over the next few months on the best way to develop and exploit this potentially very significant asset".

Eden received acceptances under tits rights issue for 9.67 million shares and the same number of options, representing 44 per cent of the total number of shares offered. The offer was underwritten. (ASX: EDE)

Enerji
Emerging green energy utility Enerji has commitments of about $1 million for a share placement to sophisticated and private investors. The capital is to fund the installation of its first Opcon Powerbox, at Horizon Power's Carnarvon Power Station.

The issue price for the shares is 1.8 cents each. The placement shares have an attaching one for two option exercisable at 3 cents by 30 June 2015.

An upcoming one for three rights issue of options to all shareholders to raise about $460,000 before costs will commence before the end of August. The options will have an issue price of 0.2 cents each, will be exercisable at 3 cents, and will expire on 30 June 2015.

The rights issue will be underwritten by SA Capital Pty Ltd. (ASX: ERJ)

ERM Power
ERM Power has signed electricity sales contracts worth more than $300 million over four years with the Australian Government.

Starting 1 July, the contracts cover 82 government departments and agencies, including the Department of Defence, at 406 sites in the ACT and another 83 Department of Defence sites in NSW.

The ACT sites include Parliament House, Government House, Australian War Memorial, National Gallery of Australia, National Museum of Australia and Defence offices. The NSW Defence sites include bases and depots such as RAAF Williamtown and RAAF Richmond, Holsworthy Barracks, HMAS Albatross and Blamey Barracks Kapooka.

Managing director and chief executive officer Philip St Baker said the winning of the contracts demonstrates ERM Power's growth and ability to penetrate new markets and gain high quality large customers.

ERM Power is now one of the largest electricity providers by volume to the business customer market in Queensland and is growing its presence in NSW, Vic, SA, Tas, WA and the ACT, he said.

"ERM Power is on track to double its market share during the prospectus period as forecast with more than 85 per cent of FY12 sales forecast already covered by existing contracts and more than 100 per cent in NSW/ACT and Tasmania respectively, versus 53 per cent as of 30 September 2010 as disclosed in the prospectus." (ASX: EPW)

Intermoco
Utilities management provider, Intermoco has entered a five year agreement to provide embedded network services to a commercial property development in Melbourne developed by MAB Corporation. Intermoco said the agreement is expected to provide $1.5 million over the term of the contract.

Intermoco will receive $70,000 in capital costs immediately with initial revenue to be generated this month.

MAB Corporation is a private property development group with over $2 billion in projects and generates $300 million in annual sales in the Melbourne metropolitan area.

Intermoco chief executive officer, Ian Kiddle, said "This brings the total contract value of signed contracts secured by Intermoco in the last eighteen months to approximately $26 million. Each of these contracts represents annuity revenues that will continue to grow as we secure new sites and all with long term contracts of five or more years."

"MAB's development pipeline provides Intermoco with potential access to a range of future opportunities to provide embedded network services within their projects.

"Demand remains extremely robust and we expect our order book to grow significantly in the current calendar year, adding to Intermoco's recurring revenue base." (ASX: INT)

Island Sky
Manufacturer of atmospheric water generators Island Sky Australia has received a cash deposit of US$50,000 from its Philippines distributor iMarketing Inc. for two container orders of Skywater 300 units on behalf of the Philippines government.

Island Sky president, Richard Groden said "The Skywater 300 machines will be placed around various municipalities throughout the Philippines. This represents the first steps in a broader clean water program which will include additional Skywater 300 purchase orders."

Island Sky quotes Manila Bulletin Publishing as saying "The [Philippines] government is exerting efforts to provide potable water to all. President Benigno S. Aquino III said that, "lack of water is a threat to national development. The shortfalls in the quantity and quality of infrastructure, including water supply and sanitation facilities, are constraints to our economic growth and poverty alleviation"."

The Skywater-14 for home and office can under optimal conditions produce up to 35 litres of water per day at low energy cost. The larger Skywater-300 can produce up to 1100 litres of water per day. (ASX Code: ISK)

Liquefied Natural Gas
Liquefied Natural Gas says two more conditions precedent have been met or waived in its share placement agreement of 3 May with China Huanqiu Contracting & Engineering Corporation (HQCEC).

HQCEC has obtained final approval from its parent company China National Petroleum Corporation (CNPC); and it has confirmed in writing the satisfaction or waiver of all conditions precedent relating to LNG's Fisherman's Landing LNG Project at Gladstone in Queensland.

The remaining conditions precedent are HQCEC obtaining approval from the Ministry of Commerce and the National Development and Reform Commission of China; and LNG obtaining approval at the shareholders' meeting on 7 June.

Pending completion of the share placement, HQCEC and LNG say they are working closely on HQCEC's update of the front end engineering and design, a detailed engineering, construction and procurement proposal and securing gas for the first two LNG trains. (ASX: LNG)

MediVac
Healthcare solutions company MediVac has raised $220,000 through the issue of 55 million shares to sophisticated investors. The issue price was 0.4 cents each. The funding was organised with the assistance of Alpha Securities. (ASX: MDV)

Orocobre
Orocobre says progress has been made on the approvals process for its lithium potash project, Salar de Olaroz, in Argentina. Representatives of the communities close to the project have given written support for the project to the provincial Minister of Production. "The document expresses the strong desire that the Olaroz Project receives all requisite approvals to allow commercial production to commence," said the company.

To its knowledge, no opposition to the Olaroz Project has been lodged with the provincial Minister of Production or the Committee of Experts, said Orocobre. (ASX: ORE)

Panax Geothermal
The securities of Panax Geothermal have been suspended from trading pending release of an announcement about a capital raising initiative. (ASX: PAX)

International Companies

Contact Energy
Contact Energy has received approval from the Board of Inquiry to develop its Hauauru ma raki wind farm in the Waikato region on the west coast of New Zealand's North Island.

The decision, the final decision due for the project, grants all resource consents for 168 wind turbines and designation for the transmission lines.

Contact's chief executive, Dennis Barnes, said Hauauru ma raki will generate up to 504 megawatts of power from 168 turbines, enough renewable energy to power around 170,000 average homes. (NZX: CEN)

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