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Eco Investor Update

A Weekly News Update for Environmental Investors

10 October 2011 - No 52
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ASX 100

AGL Energy & APA Group
APA Group and AGL Energy are to jointly develop a 242 MW gas-fired power station at Mount Isa in Queensland as part of an electricity supply agreement Xstrata Mount Isa Mines, a subsidiary of Xstrata. The agreement commences 2013 and runs to 2030.

The Diamantina Power Station will be constructed on a 50:50 basis between APA and AGL, and will comprise two Siemens 121 MW combined cycle gas-turbine units with scope for future expansion. It will be underpinned by contracts with other major energy users, and supply mines and communities in the region.

For the first 10 years AGL expects to supply around 138 PJ and has contracted transport capacity in APA's Carpentaria Gas Pipeline for this period. Xstrata Mount Isa Mines will then be responsible for sourcing gas for the remaining seven years under a tolling arrangement with the Diamantina Power Station.

An additional electricity supply agreement has been agreed with Ergon Energy, the State government owned regional electricity supplier.

APA managing director Mick McCormack said the Diamantina Power Station will be a modern, low emission, efficient power station, delivering competitive and reliable energy supply to the region. It will not need government subsidies or cross subsidies.

APA and AGL have finalized agreements for the construction of the power station with Perth based contractor CTEC under a fixed price turnkey contract. CTEC is supported by Siemens, which is responsible for the design, supply of power generation equipment and maintenance.

The first 121 MW unit is expected to be operational in late 2013 and the second unit operational in early 2014.

APA and AGL are jointly seeking limited-recourse project financing facilities. The total development cost before financing costs is expected to be around $500 million. Once project financing is in place and construction of the power station is completed, APA's investment in the power station is expected to be approximately $100 million to be funded from existing unutilised facilities. AGL will fund its $100 million equity contribution from cash reserves. (ASX: AGK and APA)

AGL Energy
AGL Energy has increased its total proved plus probable (2P) gas reserves as at 30 June 2011 to 2,089 petajoules (PJ), an increase of 511 PJ or 32 per cent over the past 12 months. The increase is net of production over the period.

The increase is based on rights to 441 PJ at ATP 1103, a 142 PJ increase in the Hunter Valley and a 65 PJ increase at Silver Springs minus 124 PJ from Morandah.

Separately, AGL and 50:50 partner Galilee Energy have announced their first gas discovery at the Galilee Gas Project in central Qld.

Glenaras 6, part of the Glenaras close-spaced five-spot production pilot, started to flow at a steady rate of 54 Mscf per day for a period of four days before the well was temporarily shut down for maintenance, they said.

This is the first measurement of a stabilized gas flow from a coal seam gas pilot in the Galilee Basin.

AGL managing director Michael Fraser has sold 70,000 shares at $14 each, (ASX: AGK)

DUET Group
The WA Government has commenced planning for a Bunbury to Albany Gas Pipeline corridor, with GHD Pty Ltd to determine route alignment options.

Regional Development and Lands Minister Brendon Grylls said the awarding of the tender brought the South-West and Great Southern regions a step closer to a secure gas supply which would unlock future growth potential for communities along the route.

GHD will assess existing and potential energy demands in the regions and determine route alignment options for the corridor. These options will take into account social, economic, environmental and engineering considerations as well as opportunities to link the corridor with other State Government initiatives in the south of the State, such as the Regional Centres Development Plan (SuperTowns).

The corridor options are expected to be finalized in March 2012.

Any decision by the WA Government to proceed with a pipeline is a long way off, said DUET, which majority owns the Dampier to Bunbury gas pipeline and emphasized that the corridor project is a feasibility study only.

Should the new pipeline proceed, it would connect with the Dampier to Bunbury pipeline and increase its volume. DUET would see itself as the ‘natural owner' and would look to be involved in its construction and ownership.

Lazard Asset Management Pacific Co has reduced its substantial holding in DUET from 10.67 per cent to 9.44 per cent. (ASX: DUE)

Sims Metal Management
With its shares having hit a two year low of $11.54, Sims Metal Management has announced a share buyback to buy up to 10 per cent of its capital or 20,603,871 shares over the next 12 months, commencing 24 October.

The day before the announcement Sims' shares bounced about $1 to $13.

Sims said the buyback is part of its capital management strategy in this time of "share market turmoil and share price volatility".

Group CEO Daniel Dienst said the company remains committed to its strategy of organic and external growth and this is not mutually exclusive with the repurchase of shares.

"We have maintained discipline with respect to our balance sheet so as to be positioned to opportunistically pursue accretive deployment of our shareholders' precious capital. The current share price, impacted by global macroeconomic concerns, provides one such opportunity."

"In the last 12 months the company completed a number of strategically important acquisitions including S3 Interactive Ltd, Dunn Brothers, Device and ergoTrade, Metrade and Commercial Metal Recycling Services. These acquisitions were accomplished via free cash flow. As at 30 June 2011, the company had net debt of 4 per cent of total capital, providing significant balance sheet flexibility to fund growth initiatives, internal investment and in buying back shares under this capital management initiative," he said (ASX: SGM)

ASX 200

Dart Energy
Dart Energy said it continuing with its significant exploration and appraisal program and has 13 rigs active around the world.

Dart expects to complete the drilling of 40 to 50 wells in 2011 or 40 to 50 per cent of its total planned program). 27 wells have been drilled or are being drilled.

22 rigs will be used in 2011 - 11 in China, 4 in Indonesia, 2 in India, 2 in Australia and 2 in Europe. (ASX: DTE)

Energy World Corporation
Energy World Corporation has entered a memorandum of understanding with the provincial government of East Java to develop and construct an LNG Import Receiving Terminal. This would have a capacity of up to 3 million tonnes per annum.

East Java is said to have an annual as deficit of 3 million tonnes and 332 companies cannot meet their gas needs.

Due to the low number of shareholders, Energy World Corporation is to delist from the New Zealand Stock Exchange.

The Capital Group Companies, Inc have become a substantial shareholder with 5.05 per cent of Energy World's capital. (ASX: EWC)

ASX 300

Ceramic Fuel Cells
Ceramic Fuel Cells continues to work for a feed-in tariff for its domestic BlueGen fuel cell system, while a research paper by Nomura in London says it is hugely undervalued compared to Bloom Energy which has similar but not as efficient technology.

Ceramic Fuel Cells has made a submission to the Australian Energy Market Commission's review into the National Electricity Market that is looking at ways to give consumers options in the way they use electricity.

Central to its submission is that one BlueGen unit installed in a home can reduce the home's carbon footprint by 14 tonnes a year – or four times the carbon saving of a typical solar PV system.

Ceramic Fuel Cells argues that if the government is serious about reducing emissions, then low-emission technology – in addition to no-emission technology – should be supported by a feed-in tariff.

Homeowners and businesses will buy BlueGen units if they can generate a commercial payback, provided the energy retailers pay them a reasonable rate for the low-emission electricity they export to the grid. This should be equal to the standard retail rate, currently about 20 cents per kilowatt hour, it says.

Other countries such as Germany, UK and Netherlands already pay feed-in tariffs for low-emission electricity fed into the grid.

Eco Investor believes the slow pace of government decision making on this issue is another example of Australia's failure to think ahead and support local innovation.

Given that the Ceramic Fuel Cell's world leading technology was developed in Australia, our bureaucracy should have been alert enough to have had all research and approvals in place to allow the technology to "plug in" when it was ready,

The fact that other countries have already provided a feed-in tariff for the BlueGens shows that our Federal and State governments are slow rather than ahead of the game.

Meanwhile, Nomura has done a research paper comparing Ceramic Fuel Cells and Bloom Energy in the US which shows that Ceramic Fuel Cells' technology is "hugely undervalued".

The Bloom Energy technology is similar to that of Ceramic Fuel Cells but with larger fuel cells. The valuation of Bloom is US$2.7 billion, while the valuation of Ceramic Fuel Cells is £105 million or about $160 million.

Yet the report says Ceramic Fuel Cells' technology is less expensive per kilowatt hour of electricity produced, is less expensive per unit, is more efficient, captures more by-product heat to increase efficiency, and has a longer life-cycle.

The research says "In our view, Ceramic Fuel Cells remains more advanced with its product: it is achieving dramatically higher energy efficiency despite a much smaller size fuel cell (one gets economies of scale with much larger fuel cells which would normally help with increased electrical efficiency and reduced cost per Watt).

"Additionally Ceramic Fuel Cells has developed a fully integrated co-generation unit where the recapturing of co-generated heat significantly increases the overall efficiency of the fuel cell, and hence the value provided by the product."

The report says the EU market for m-CHP units such as Ceramic Fuel Cells' has the potential to develop far more rapidly than the demand for 100 kW standalone immovable generators such as Bloom's, helped by feed-in tariff incentives in a number of European countries and an existing multi million unit boiler replacement market.

Bloom Energy recently raised another $150 million at a pre-money valuation of US$2.7 billion in a ‘pre-IPO' round. Bloom has previously raised about US$450 million in venture capital funding from funds including Kleiner Perkins, Advanced Equities, Goldman Sachs, New Enterprise Associates and SunBridge Partners. (ASX: CFU)

Emerging Companies

CBD Energy
CBD Energy is to buy Victorian-based energy retailer, Neighbourhood Energy, from Alinta Energy, giving it a retail outlet as Neighbourhood Energy has 65,000 customers, mostly in Victoria.

The company said the move makes it a vertically integrated retailer and generator of renewable energy and positions it to challenge major energy market players.

The acquisition is subject to finalization of funding. The cost is $24.9 million, which CBD will fund with a combination of debt and cash flow, which it says has been boosted by the commencement of wholesale solar projects in Italy..

Another advantage of adding an electricity retailer to the group is that it is a potential purchaser of Renewable Energy Certificates (RECs), a potential issuer of Power Purchase Agreements (PPAs) for renewable energy projects, and it provides a platform for retail distribution of CBD's renewable energy products.

Managing director, Gerry McGowan said "This acquisition, along with CBD's alliance with two of China's largest renewable energy companies, will put CBD in a position to begin to challenge the larger participants in Australia's energy markets. This is the birth of a new age integrated energy company totally focused on delivering renewable green energy combined with energy saving products."

This initiative will show our customers that clean energy is affordable and competitive with traditional fossil fuel based energy, he said.

In other news, CBD said it has negotiated in principle power purchase agreements for AusChina's Taralga wind farm, achieved a positive outcome to litigation defending ownership of its energy storage patents, and expanded its management team by appointing a chief operating officer, chief financial officer, and a special projects manager. (ASX: CBD)

Clean TeQ Holdings
Wasabi Energy and its subsidiary Aqua Guardian have increased their holding in Clean TeQ from 19 per cent to 26 per cent through participation in and Wasabi's underwriting of Clean TeQ's recent rights issue.

Chief executive Peter Voigt and his associated company Thierville Pty Ltd also participated in the rights issue but has been diluted from 34.9 to 20.6 per cent.

Chairman Greg Toll also participated but has directly and indirectly been diluted from 13.79 per cent to 10.06 per cent. (ASX: CLQ)

ERM Power
ERM Power has signed a gas supply agreement with Alcoa of Australia Ltd for supply of gas from the Gingin West 1 and Red Gully 1 gas fields located in Western Australia's on-shore
Perth basin.

In a joint venture with Empire Oil Company (WA) with 68.75 per cent and Wharf Resources Plc 10 per cent, ERM Power's gas business, ERM Gas, has entered into a Gas Supply Agreement (GSA) to sell 15,000 terajoules of gas to Alcoa from 12 November 2012.

ERM Power managing director Philip St Baker said the agreement was a substantial milestone for ERM Gas, laying a solid foundation for the transition of the business from exploration to production in the next financial year.

"With the move into commercialization and gas and condensate sales, ERM Gas has evolved from a small, complementary and developing business into an emerging business with the potential to deliver profits in its own right," he said.

ERM Gas has joint venture equity interests in more than 10,000 km2 of gas exploration acreage in the Perth basin.

"The business has achieved two consecutive discoveries in the past two years and is on track to grow into a significant gas supplier in Western Australia, where the gas market greatly needs additional supply," said Mr St Baker.

The Alcoa agreement includes a staged $25 million prepayment to the joint venture secured by providing Alcoa a fixed charge over the project assets. This will release capital ERM Power would otherwise have required for the commercialization of the gas fields.

The GSA is conditional upon approval from parent company Alcoa Inc by 31 December 2011. (ASX: EPW)

Solco
Solar products wholesaler Solco says its has experienced substantial reductions in earnings over the last quarter following changes to Government legislation, and has downgraded its revenue guidance for 2011-12.

Provided there is no further deterioration in the market, the company now expects revenue will be in the region of $41 million, compared to $53.7 million in 2010-11.

"This is largely due to significantly reduced sales during the first two months of the year. Solco has subsequently seen a recovery in sales orders through September and expects this to be maintained for the remainder of the year," said executive chairman, David Richardson.

The company has taken prompt remedial action throughout the September quarter to review cost structures, align them with reduced income levels and assess the likely impact on the full year results, he said.

Mr Richardson remains positive about the outlook for the renewable energy industry and believes the company is in a good position to capitalize on the market downturn and leverage future benefits from better trading conditions.

"The record profit made by the company last financial year has put us in a stable financial position, which I am confident will see us through the downturn," he said.

The Pumping division is continuing to grow sales and market penetration with an expanded national customer base developed by the National Sales Team.

Solco is continuing to increase its market share of power generation projects with a number of small-medium projects across Australia. New projects include a 30 KW power generation project at the Brookton Health and Aged Care Centre to be opened at the end of October.

"The company has experienced an encouraging increase in trading results for September and we believe this trend should continue. We are using this time to reposition Solco and ensure we have the correct internal processes and procedures to take the company forward as market conditions improve," said Mr Richardson. (ASX: SOO)

Micro Cap Companies

Blue Energy
Blue Energy says the Monslatt 9 coal seam gas well has confirmed coals with gas contents in the southern portion of the Monslatt Block, where little data existed. The well results reported high gas content of up to 25 m3/tonne, and thick coal seams of up to 4 metres.

The company said that interpretation of the preliminary data suggests that the well will add to the current gas in place and contingent resources for the block by extending the southern limit. Pilot production testing is still required to convert this resource into reserves.

"These results further reinforce the potential of the Monslatt Block as a significant gas resource and one which will play an integral part in Blue Energy's vision to have 3,000 PJ of 3P gas reserves by year end 2014," said the company. Blue Energy plans to expand from 3 to 6 Monslatt pilot production test wells by year end 2011.

The Monslatt 9 well has been cased and suspended, and is pending completion as a pilot test well. A major advantage of Monslatt 9 is that it is close to a sealed main road. (ASX: BUL)

BluGlass
Stock broker EL & C Baillieu has commenced coverage of BluGlass with a report that rates the shares as a short term buy and a long term hold.

Baillieu's probability-adjusted free cash flow valuation of the company's shares resulted in a valuation range of between US$0.12 and US$0.47 and a most probable value of US$0.29 per share.

"The shares are valued after explicitly allowing for the development risk associated with the RPCVD platform. However, as each milestone is achieved and the probability of success increases, so too will the value attributed to the shares," it said.

Baillieu has said it has acted as a corporate advisor to BluGlass during the last 12 months but did not receive a fee.

The report is at http://www.bluglass.com.au/images/stories/pdfs/blg_research_report_sep.pdf. (ASX: BLG)

Dyesol
Dyesol expects to have a commercial glass product with built-in dye solar cell photovoltaics available in 2014-15, and a commercial roofing product with built-in photovoltaics ready by 2015-16.

Founder and director Sylvia Tulloch and president Dyesol North America Marc Thomas also told a retailinvestorconference that the markets for both products are huge.

The flat glass market is 6 billion square metres per annum and growing at 5 per cent, and the building component of this is 4.2 billion square metres. The addressable market for Dyesol's product is 1.7 billion square metres worth and around $25 billion per annum.

The coated steel roofing market is over 1 billion square metres per annum and growing at 7to 8 per cent. The potential for dye solar cell coated steel cladding is 20 per cent, an addressable market of 200 million square metres worth $30 billion. This would be equivalent to over 10 GW installed per annum.

For technical reasons the glass product is likely to have a higher efficiency than the roofing product.

Ms Tulloch said Dyesol has a burn rate of about $1 million per month. It has raised $70 million so far and raised another $30-40 million before its Dyesol incarnation. It has "not much debt" as it doesn't believe in debt.

Dyesol is listed on the ASX and Frankfurt Stock Exchange. About 30 per cent of its shareholders are German retail investors and another 30 per cent Australian retail investors. About 15 per cent is held by institutions, and the balance by founders and staff.

Dyesol has a "Capital-Light" business model where it owns the materials technology IP, licenses it to manufacturing partners, and leverages the partnerships to create massive demand for its materials, typically through exclusive materials supply agreements.

Its key strategic partnerships are with leading industrial companies Tata Steel, the world's number 10 steel manufacturer and Europe's number 1 coated roofing manufacturer; Pilkington, which is the world's leading glass/window manufacturer; and Merck, which is the world's number 1 manufacturer of specialty chemicals.

It is also looking at partnerships for the auto, indoor, and electronics sectors and possibly the military. (ASX: DYE)

Hot Rock
Shares in Hot Rock are in a trading halt pending an announcement by the company. The shares will remain so until the commencement of trading on Tuesday, 11 October or when the announcement is released. (ASX: HRL)

Intermoco
Intermoco is the latest company to obtain funding from La Jolla Cove Investors. The company has entered into a convertible note facility whereby La Jolla will provide up to $4.5 million in funding, with a further $1.5 million available at the option of Intermoco.

In recent times La Jolla has entered convertible note agreements with several Australian cleantech and other companies, and this has usually resulted in steep declines in these companies' share prices as La Jolla has converted huge numbers of shares and sold them on- market.

The Intermoco facility comprises three $1.5 million convertible notes, each with a duration of four years from the first drawdown.

The interest rate is 4.75 per cent payable monthly, but the notes can be converted into new Intermoco shares at La Jolla's election at the lesser of 3 cents per share or 85 per cent of the five day volume weighted average price at conversion.

The agreement has a floor price of 0.2 cents below which conversion cannot occur without Intermoco's approval. Intermoco's current share price is around 0.2 cents.

The conversion to shares will require the approval of shareholders if the conversion results in more than 15 per cent of the company's issued stock annually.

Intermoco can draw the between $100,000 and $200,000 per month dependent on the share price.

"This Facility provides Intermoco with additional working capital to support a number of new initiatives with our Intermoco Connect Model and will also allow us to consider potential acquisition opportunities if they arise," said Ian Kiddle, Intermoco's chief executive officer.

Intermoco is a provider of water, energy voice and data management solutions with a focus on providing embedded networks. It has eight embedded networks in operation and expects these to generate revenues of around $1.8 million in 2011-12. When fully tenanted these sites are expected to generate approximately $2.3 million per annum, it said. (ASX: INT)

Kimberley Rare Earths
Kimberley Rare Earths director Ian Macpherson has directly and indirectly acquired 200,000 shares for $25,275, an average price of 12.6 cents.

Liquefied Natural Gas
LNG has increased its holding in Metgasco from 5.16 per cent to 8.99 per cent. (ASX: LNG)

MediVac
MediVac subsidiary, SunnyWipes Pty Ltd, has secured distribution for its new professional range of natural based antimicrobial hand sanitisers and general virucidal and antimicrobial hard surface wipes through Bunzl Outsourcing Services Ltd.

Bunzl is an international company headquartered in London and a leading supplier of a range of business-to-business consumable products in Australasia in the healthcare, industrial, hotel and catering, retail and safety markets.

MediVac executive chairman Paul McPherson said the distribution agreement is the most significant achievement to date in the commercialization of SunnyWipes. "With Bunzl as a distribution partner, we now have access to their wide distribution, marketing and logistical expertise," he said. "The arrangement with Bunzl is a major part of our marketing and distribution strategy."

Meanwhile, the first new model MetaMizer is ready for sale and shipping. It is expected that this will occur in the current quarter once a key customer has received local approvals for its new facility.

MediVac said it is progressing a significant number of other opportunities for the new MetaMizer – those previously announced and further new ones - in both domestic and export markets.

Although the timing of some of these deals is uncertain, especially where Governments are involved, Mr McPherson said he is confident that these are very much alive. Inventory building is underway for the next three machines.

MediVac will showcase its recently completed MetaMizer MM 240 SSS and SunnyWipes Professional ranges at Medica 2011 – the world's largest Medical Trade Fair – in Dusseldorf, Germany from November 16–19. (ASX: MDV)

Metgasco
Metgasco received an ASX query when its share price leapt from 33.5 cents on 28 September to 54.5 cents on high volume on 5 October.

Metgasco said it knew of no reason for the spike, but two days later LNG Ltd said it had increased its holding from 5.16 per cent to 8.99 per cent.

At the same time Metgasco director Glenda McLoughlin sold down 550,682 shares at 42 cents each. (ASX: MEL)

Petratherm
Flow testing at Petratherm's Paralana 2 Deep Geothermal Well has for the first time brought hot fluid to the surface at Paralana.

The operation has involved the gradual increasing of temperature and flow to manage the operation within equipment and test design parameters.

Petratherm said the Paralana 2 well has continued to flow.

The flow test will provide information on the nature of the geothermal reservoir and the extent to which connection has occurred with the natural fractures in the geological formation at depth. The flow test operation aims to measure flow deliverability potential of the over- pressured brine fluids at depth, fluid temperature, and brine fluid chemistry.

Petratherm said this is an important milestone on the path to the production of geothermal power by the end of next year. (ASX: PTR)

RedFlow
RedFlow said that on 5 October it completed the second tranche of the share placement announced on 17 August 2011, issuing 1,754,298 shares at $1 each to sophisticated and professional investors. (ASX: RFX)

Southern Crown Resources
Southern Crown Resources has suspended exploration on the Nkombwa Project in Zambia following information that the portion of its licence covering the Nkombwa Project may have been excised to another party without its knowledge or consent.

Through its acquisition of Rare Earth International (REI), Southern Corwn secured the rights to earn up to 75 per cent of the Nkombwa Rare Earths Project through a joint venture agreement with African Consolidated Resources plc (ACR).

The Nkombwa Project prospecting licence is held through a subsidiary of ACR. ACR has stated that it believes it has strong legal grounds for the excision to be cancelled and is seeking full rectification of its right with the assistance of the Zambian Mines Department.

Southern Crown has re-engaged the Zambian lawyer who was involved in the REI acquisition due diligence to provide independent legal advice. (ASX: SWR)

Initial Public Offerings

Energy Action
A rare environmental IPO is underway with Energy Action seeking to raise $3.8 million at $1 per share and list on the ASX around 13 October.

Energy Action is an energy auction and energy management and efficiency business. It established the Australian Energy Exchange, which it says is Australia's only online reverse energy auction platform, and holds online auctions where electricity retailers bid to fulfil client requirements.

Chairman, Ronald Watts, said the auctions are designed to get a business the best possible deal amongst all retail offers. "From the viewpoint of economic efficiency, it's pretty good, since it delivers a fairly frictionless price for a uniform product. Another way of expressing this is to say that the cost of sales is low. Since all retailers are treated equally, it also delivers the lowest price."

While selling energy is mostly environmentally neutral. Energy Action makes around 60 per cent of its revenue from energy management and efficiency services. It does this through its Activ8 energy management and contracting service and through its Activ8+ energy efficiency and sustainability partnering service.

Activ8 includes emissions as well as daily energy monitoring, efficiency reviews, alerts, detailed monthly reporting, and industry benchmarking.

Activ8+ is a fee based advisory service covering metering intelligence, sub-metering of individual parts of plant and equipment, carbon footprint measurement and advice, energy audits, feasibility studies for co-gen and tri-gen projects, and coordinating finance for large energy and efficiency projects.

Energy Action has been operating for 11 years and has low debt. Revenue is growing at 30 per cent per annum. It has been profitable since 2005-06 and pays a fully franked dividend.

If Energy Action is successful, Eco Investor would classify it as an emerging company.

The company is looking to grow through acquisitions and moving into auctioning gas as well as organically.

If the full amount is raised, Energy Acton would have 25.1 million shares on issue and cash of $4.3 million. The offer is not underwritten and the minimum it needs to raise to list is $2 million. This would still give it an initial capitalization of $23.3 million. The offer was scheduled to close on 30 September. (ASX: EAX)

Unlisted Funds

August Investments
Environmental fund August Investments made a small loss for 2010-11 of $31,870 or 7.7 per cent, comprised substantially of losses on the value of its investments. However, the Fund continued to pay dividends and at $10 per share or a yield of 4.76 per cent, this reduced the loss for the year to 2.95 per cent.

Managing director Damien Lynch said the Fund still has substantial profit reserves from previous years to continue paying a dividend at this level for some time yet.

"Again it was a poor year on markets for sustainable energy shares," he said. "These made up the largest part of our equity portfolio and we can only hope that the proposed Carbon Trading legislation will generate some interest in this sector."

The Fund has a policy to support potentially profitable ventures in the green and community sectors, but "With sustainable energy ventures, it is taking a long time to see any results from this support."

Mr Lynch is cautious on the market outlook. "Some investors have suggested that we increase our investments in these declining industries in the knowledge that when they rebound, we will be well positioned to take advantage of this rebound."

But Mr Lynch believes "the correct approach at the moment is to withhold making such investments until the regulatory and financial environment is correct, thus preserving our funds. We have ... substantial funds on deposit available to utilise once the investment environment improves."

During the year the Fund withdrew its support for the coal seam gas sector. "After some time supporting Coal Seam Gas as an intermediate technology towards a sustainable future, we totally reversed our assessment. Evidence emerged that the extraction of CSG has multiple negative social and environmental impacts. We removed all such investments from our portfolio. This included selling our long held investment in Origin Energy (completed in August, 2011)."

At 30 June the Fund had 27.9 per cent of its assets in term deposits and another 1.4 per cent at call. Two property trusts accounted for 8.6 per cent of assets, unlisted shares another 8.4 per cent, and forestry contracts 4.9 per cent.

Listed shares comprised 44.9 per cent of assets. Stocks, and their per cent of total assets, were:

Aust Ethical Investment 1.8 %
Bendigo & Adelaide Bank 4.8 %
Blackmores 5.1 %
Beach Energy 4.6 %
CBD Energy 5.1 %
Coretrack 1.4 %
Coretrack Options 0.4 %
Carnegie Wave Energy 1.3 %
Energy Developments 0.8 %
Geodynamics 2.7 %
Geodynamics Options 0.0 %
Green Earth Energy 0.7 %
Hot Rock 0.3 %
Infigen Energy 1.3 %
Kuth Energy 1.0 %
Lynas Corp 5.0 %
Mesoblast 1.5 %
Origin Energy 1.1 %
Pannax Geothermal 0.3 %
Panax Options 0.0 %
QUBE Logistics 0.5 %
Tassal Group 5.2 %.

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