Eco Investor Update
A Weekly News Update for Environmental Investors
October 2011 - No 55
In regard to the now controversial issue of coal seam gas mining, Mr Maycock said AGL has contracted gas supplies until around 2016, when some of the contracts end. The company aims to find gas that can be extracted commercially so "as far as possible, we can replace contracted gas with gas that we produce for ourselves".
With large numbers of residential and commercial customers in Sydney and Newcastle, it is working hard in these areas. "This year it was pleasing to be able to book our first reserves in the Hunter Valley. That brought to more than 1,000 petajoules the total volume of 2P gas reserves we have now booked from permit interests in NSW.
AGL's strategy is self reliance. "We seek to achieve this by developing our own reserves of gas and our own electricity generation assets," said Mr Maycock.
"In the Hunter Valley in NSW, many local residents have expressed concerns about the effects that exploring for coal seam gas might have on the already established agricultural, viticultural and tourism industries that are an important part of the regional identity. In western Victoria, some local residents have written to us with their concerns about whether wind turbines might cause adverse health effects.
"This year, some of our shareholders have also asked questions about how AGL makes sure that its development projects do not threaten the health and wellbeing of local communities.
"The Board takes a number of steps to satisfy itself that AGL's projects are operated in a way that safeguards the health and wellbeing of members of local communities, protects local environments, and meets all our legal and regulatory obligations," said Mr Maycock.
The directors receive copies of letters sent to AGL from local residents or community groups, and also see copies of some of the responses.
Another method is employing experienced project managers, and making sure that all major contractors have a track record of protecting local environs. The board also visits project sites to see first hand that construction and development activities are sensitive to the local communities.
The board is also mindful" of scientific and medical studies and government enquiries. An example is the report of the Energy and Climate Change Committee of the House of Commons in relation to shale gas activities in the UK.
"Although it did not specifically relate to coal seam gas activities, that report concluded that hydraulic fracturing processes posed no direct risk to underground water aquifers. Any risks of contamination of water through a failure in the integrity of the well were found to be no different from those encountered when drilling for oil and gas from conventional gas reservoirs," he said.
"AGL has a strong track record in developing major energy infrastructure projects in regional Australia. The Bogong power station, which was completed in 2009, was built in a national park in the Victorian alps. The Hallett wind farms in South Australia have provided substantial economic benefits to the mid-north region of South Australia. All of these projects were developed in full co-operation with local communities and are projects that those communities have been proud to be associated with. Our objective is that AGL's future projects be held in the same regard," said Mr Maycock.
An important part of AGL's strategy is its focus on renewable energy assets, he said. The 132 MW Hallett 4 wind farm was commissioned in May. Construction of a fourth wind farm at Hallett is well advanced. AGL also has two wind farm projects under development in western Victoria - the Oaklands Hill wind farm should be commissioned early next year, and construction has commenced on the 420 MW Macarthur wind farm, which will be Australia's largest
Mr Maycock noted the recent Senate Committee Inquiry into the social and economic impacts of rural wind farms, which found "there is currently no published scientific evidence to positively link wind turbines with adverse health effects".
Recently, AGL announced commitment to construct two new gas fired electricity generators. (ASX: AGK)
The funds will refinance a $253 million of bank debt maturing in June 2012; and the remaining $99 million of bank debt maturing in June 2014. DBP recently repaid $128 million of this facility and $32 million of the remaining subordinated debt (SOLA) balance from the proceeds of DUET's $160 million upfront contribution to the $200 million equity recapitalisation.
The remaining balance of the new facility will partially repay DBP's credit wrapped floating rate notes when they mature in April 2012.
DUET's chief executive, David Bartholomew, said "DBP's successful refinancing transaction demonstrates the benefits of the recent equity recapitalization undertaken by Alcoa and DUET, with DBP now well placed for both this and future debt refinancings." (ASX: DUE)
Sims Metal Management
There are two key components to the package, a new $1.5 billion replacement facility and a $309 million entitlement offer to shareholders.
The $1,525 million facility will replace the existing $1,435 million facility and extend average debt maturity from 1.9 years to 4.1 years. The bigger facility will give Transpacific the flexibility to buy back its $309 million convertible notes and its 5 and 10 year US Private Placement securities (USPPs) borrowings early.
The new facility is conditional on completion of the entitlement offer. The renounceable entitlement offer is for up to about $309 million. The proceeds will reduce debt, and lead to interest savings of between $21.8 million and $24.8 million in 2011-12 and between $31.3 million and $34.3 million in later years.
Transpacific shareholders will be able to subscribe for 9 new shares for every 14 shares at 50 cents each.
Transpacific's largest shareholder, Warburg Pincus, has committed up to $207 million to take up its entitlement in full of $105 million and to sub-underwrite a portion of the institutional component up to $102 million. Transpacific's directors also intend to take up their entitlements.
The offer consists of an underwritten institutional component to raise $260 million and a retail component, which is not underwritten, to raise $49 million.
"This re-financing package will reduce borrowings, extend our debt profile and decrease interest expense significantly in turn, allowing us to maximize profitability," said Mr Gene Tilbrook, chairman of Transpacific.
"As a result of this total re-financing package Transpacific will have less debt and that debt will be simpler, cheaper and longer term."
However, the company will continue to focus on reducing debt through increased operational cash flow, reductions in working capital and possible divestment of surplus properties and non-core assets.
Mr Tilbrook said that "Based on current economic trends and conditions for the sector in Australia and New Zealand, the outlook for our company remains positive. We are forecasting EBITDA of $452 million and profit before tax and significant items of $119 million for the year ending 30 June 2012, compared with EBITDA of $425 million and profit before tax and significant items of $73 million for FY 2011," he said. (ASX: TPI)
Ceramic Fuel Cells
There are currently 90 systems operating in nine countries.
September quarter receipts from customers at $1.24 million were up 130 per cent on the September 2010 quarter, and similar to the June 2011 quarter of $1.2 million.
Working capital requirements are increasing to meet sales demand, it said. Net operating cash outflow for the September quarter was 5.5 million, reflecting an ongoing increase in the working capital requirements with inventory increasing by $1.8 million. The increase in inventory is being used to meet orders and expected future orders.
The increasing inventory purchases are part of the strategy to achieve economies of scale in purchasing as production increases, resulting in significant reductions in the unit price for the majority of components, it said.
Ceramic Fuel Cells director Dr Roman Dudenhausen has indirectly acquired 500,000 shares for $65,000, an average price of 12.4 cents. (ASX: CFU)
The shipment of 242 tonnes had an average grade of 3.3 per cent tantalum pentoxide, representing 17,610 pounds of tantalum pentoxide.
About half of the world's tantalum is used in the electronics industry to manufacture capacitors and circuit board connectors for mobile phones, personal computers, digital cameras and electronic systems for vehicles.
Tantalum is also used as an alloy additive in nickel-based superalloys in the manufacture of turbine blades for the aerospace industry and land based gas turbines. Other uses include sputtering targets, mill products, cutting tools, surgical implants and specialty chemicals and coatings.
While Galaxy's primary focus at Mt Cattlin is production of spodumene, tantalum occurs as a by-product and is recovered with additional processing.
Galaxy managing director Iggy Tan said the global tantalum market is tight. "Supply from our Mt Cattlin mine, though small, is an important source for the industry. The tantalum supply market has been historically around seven million pounds of tantalum pentoxide, with a significant amount coming from the conflict region of Democratic Republic of Congo."
Galaxy said it is preparing a third spodumene consignment of around 31,000 tonnes for shipment to China in December 2011. (ASX: GXY)
Director, Jill Monk, resigned the day before the annual general meeting, which saw more than half of the votes cast against her re-election - 47.1 million for and 58.7 million against. Ms Monk had been a director for eight years.
Chairman Allan McCallum told the AGM that "In terms of environmental and fish welfare standards, Tassal understands the increasing importance of ethical farming. We are anticipating this awareness amongst consumers and are continuing to work, in partnership with the major retailers, on meaningful and operationally acceptable standards of farming salmon. Tassal is a global leader in sustainable salmon farming." (ASX: TGR)
New customer enquiries are at record levels, and in September alone, the business secured $4.6 million worth of new contracts, said the company.
Carbon Banc provides an access point to state and federal-based emission trading schemes for customers with an environmental obligation. Thee markets are typically illiquid and Carbon Banc helps to provide liquidity by attracting new trading customers.
Carbon Banc has been most active in the Small-scale Renewable Energy Scheme and the Large-scale Renewable Energy Target where many new entrants have sought competitive pricing in exchange for certificates.
Other markets where Carbon Banc trades are the NSW Greenhouse Gas Reduction Scheme & Energy Saving Scheme, the Large Renewable Energy Scheme and the Victorian Energy Efficiency Scheme.
In six months, Carbon Banc has partnered with over 80 customers and established trading relationships with some major banks, large and medium sized enterprises, and energy retailers and generators.
The introduction of the Carbon Farming Initiative should assist Carbon Banc to expand as it will allow Carbon Banc to trade CO2 Group's credits in international carbon markets.
CO2 Group's chief executive Andrew Grant said the company has a clear strategy to diversify its business into a broader environmental services company.
"Irrespective of government legislation, carbon trading activities are a growing market and we are well placed to take advantage of this growth in Australia, as well as in international markets where we see significant upside. Our marketing efforts to date have focused on the Australian market however we are now actively exploring new international opportunities with a number of large blue chip organisations.," he said.
Mr Grant said CO2 Group is progressing other new business initiatives in forestry mapping and management, mine site rehabilitation, new carbon sink plantings, carbon accounting and inventory management activities.
Meanwhile, CO2 has raised $0.18 million through the exercise of 1.5 million options at 12 cents each. (ASX: COZ)
Energy Developments has completed the $20.4 million institutional component of its 1 for 15 accelerated non-renounceable entitlement offer to raise $26 million at $2.45 per share.
Pacific Equity Partners through Greenspark Power Holdings Ltd took up its full entitlement under the institutional offer.
The retail component of the offer closes 15 November. (ASX: ENE)
Under the GSA, the joint venture will sell 15,000 terajoules of gas to Alcoa, commencing in late 2012.
The first tranche consists of the Forward Gas Sales component where Alcoa has agreed to pay $25 million. As the GSA is now unconditional the joint venture will receive the first $5 million pre-payment from Alcoa. (ASX: EPW)
Micro Cap Companies
The offer aim to raise $2.5 million and follows the recent placement of $2.5 million of shares with sophisticated and professional investors.
Director Ian Campbell has another 33.66 million shares directly and indirectly through the conversion of a loan to the company to equity. (ASX: ANQ)
However, La Jolla can only sell the shares at a rate of up to $10,000 worth per week over the next six week period.
The consideration for the shares was $100,000, an average price of 3.3 cents each..
Credit Suisse World Water
The net asset value for the fund at 27th October was $1.0232 per unit. (ASX: CSW)
Poseidon is the developer of the largest high grade nickel sulphide deposits in Australia.
Following a successful feasibility study and site conditions being met, Enerji and Poseidon will enter into negotiations for a power purchase agreement. Construction of the powerhouse and the waste heat recovery system would commence in the second half of 2012.
An Opcon Powerbox would provide up to 700 kW of fuel and emissions free power to Poseidon's Windarra powerhouse to assist in meeting the additional power requirements for its recently announced plans to double mine throughput as well as reduce fuel consumption and green house gas emissions.
"Enerji is very pleased
to be assisting Poseidon with the clean energy aspects of its substantial
Poseidon's chief executive, David Singleton said "Poseidon is committed to applying innovative practices to developing the Windarra project. We believe that the Enerji solution to waste heat recovery will deliver real benefits to our shareholders and help to minimize our environmental footprint." (ASX: ERJ)
Hydrotech chairman Philip Gray told the company's annual general meeting that over the past five years there has been a growing trend for tunnel engineers to replace existing preformed membranes with spray applied linings. However, the spray applied cement based systems used have serious issues when used in deep tunnel excavations such as those in major cities such as Hong Kong and London. Cement based systems do not work well in damp conditions and need several overlays, he said.
The use of Polyurea overcomes the issues and allows for continuous application even in locations with running water.
"MTR are seen as a world leader in tunnel construction and we are very confident that with the successful installation of Polyurea on the WIL705 project that Hydrotech will have a very good introduction into this potentially lucrative market," said Mr Gray.
The company has further diversified its business by selling spray machinery and providing maintenance services, selling waterproofing materials, and selling MPS control units for luxury villa market use in China.
The effort means sales in the first quarter of the year are 45 per cent of the total sales in 2010- 11. Total income for the quarter was $674,000 compared to $214,000 over the same period in 2010. The gross margin on contract revenue was 23 per cent.
"A review of completed projects indicated that the major variable costs in these projects related to labour and as such the company has moved towards offering sub contracts to applicators. This not only ensures that we have a more precise estimation of true cost but also allows us to place the responsibility for workmanship firmly with the applicators which in turn increases their efficiency," he said.
The company has cash of about $300,00 and a capital raising is possible in the near future, said Mr Gray. (ASX: HTI)
Liquefied Natural Gas
The shares were sold for personal family reasons, said the company. The average price was 30 cents per share. The total value was $1.2 million.
Mr Brand retains 6 million shares in the company which are subject to reducing sale restrictions through to 30 June 2015. (ASX: LNG)
Shareholders have approved a share consolidation of 1 new share for every 20 shares on issue.
They also approved a capital reduction to offset accumulated losses and share capital balances. "This is essentially an accounting entry intended to reduce the Company's share capital by writing off capital lost in prior years. This does not involve cancelling any shares, nor returning capital to shareholders, but will result in a cleaner more relevant balance sheet and statement of company value," said the company.
Executive director Peter Steve did not seek re-election as a director due to health reasons and family commitments. Mr Steve is the founder of the SunnyWipes business and technology, and will continue with his management role as research & development director of subsidiary, SunnyWipes Pty Ltd.
During 2010-11 MediVac raised $2.638 million. (ASX: MDV)
Certification means that biofuels and biomass for biofuels are produced in compliance with EU legislation that requires all biofuels and biomass in Germany to be certified according to the EU-RED requirements. To qualify for certification companies must meet strict criteria for sustainable production and reduced emissions of greenhouse gases.
The pilot certification involved a selection of Mission's jatropha contract farmers in India undergoing audits to evaluate the sustainability of their farming practices and processes, and the traceability of product produced in the supply chain.
With this pilot certification Mission can continue to obtain certification for its entire contract farming operation.
"We believe that this certification, achieved with the assistance of our proprietary "Mission Agro Technology (MAT) platform, creates a benchmark for the jatropha industry to meet the highest standards of commitment to sound agricultural practices, detailed traceability and production processes," said Nathan Mahalingam, chief executive of Mission.
"The European biodiesel market represents a multi-billion dollar opportunity and we are honoured to be the first commercial scale provider of jatropha to receive this endorsement."
Mission said it is well positioned to petition regulators in the US for a similar approval. (ASX: MBT)
Chairman Ted Byrt said South America is the largest continent in banana production with several countries having a significant export industry. Bananas are packed in cardboard boxes made from imported wood based fibre, and transported on timber pallets made from imported and costly forest timber.
Recent trials by the timber industry to produce an alternate wood fibre pallet for the banana export industry have been unsuccessful because wood fibre pallets cannot resist moisture uptake and they are inherently brittleness.
"Yellow Pallet is also the name chosen for the proposed joint venture entity," said Mr Byrt. "The promoters of the JV are presently undertaking a feasibility study in Holland and Central and South America to utilize banana fibre in the production of banana fibre pallets."
Papyrus Australia will be an equity partner in the Yellow Pallet project and joint venture.
The partners envisages that Yellow Pallet will develop intellectual property as well as proprietary adhesives and specialist machinery necessary to manufacture the banana fibre pallets.
Mr Byrt said "Yellow Pallet will sell banana fibre producing factories which will comprise the patented Papyrus banana veneering and fibre producing machines to be manufactured by the Papyrus Australia wholly owned subsidiary The Australian Advanced Manufacturing Centre Pty Ltd (AAMC), together with the Yellow Pallet proprietary adhesives and specialist machines needed to manufacture banana fibre pallets."
As well as Dutch businesses, the partners include Dutch agricultural researcher The Wageningen University & Research Centre. Its Plant Research Centre is headed by Dr Gert Kema, a world expert on banana production, banana plant genetics and banana plant disease. Dr Kema is working with all banana growing and exporting country governments in Central and South America to address banana plantation disease control and productivity improvement.
Other participants in the project work are large banana industry growers and exporters such as Dole and Chiquita, and community growing cooperatives throughout the region. A Dutch government funded venture capital entity PPM OOST is also involved. (ASX: PPY)
A full application was requested by the ASI after the project passed through the short-listed Expression of Interest stage.
Petratherm managing director Terry Kallis said "The work involves designing and developing an integrated solar, geothermal and combustion system to achieve high efficiency base load power generation. The key innovation is using an integrated boiler that exploits all of the energy sources in a way to reduce capital costs and achieve a critical breakthrough in cost and efficiency in solar thermal technology."
The project aims to reduce the capital cost of solar thermal technology by up to 50 per cent.
Heliotherm has an exclusive development agreement with the University of Adelaide, and the University was recently awarded a $750,000 Australian Research Centre linkage grant to assist with the development of the technology.
Five directors participated in Petratherm's recent share purchase plan - Lewis Owens, Derek Carter, Richard Bonython, Richard Hillis and Mr Kallis. Each invested the maximum $15,000. (ASX: PTR)
Phoslock Water Solutions
In a typical application the
R510 can supplying energy into the local low voltage network at peak evening
times after being recharged in off-peak times, and absorb electricity
The unit comprises one RedFlow ZBM in a lockable steel enclosure, along with a quality 5 kW inverter and RedFlow control systems. It can be fully remotely controlled and deliver and can store electricity from standard 240 volt networks. RedFlow says they are "sophisticated systems".
With its share price sagging, RedFlow said that the process of transitioning the manufacture of its core zinc bromine battery module (ZBM) to its large scale partner, Jabil Circuit, Inc, is on track for completion in mid-2012.
The transition is based around progressively increasing the supply of components and then sub-assemblies during the current quarter and quarter 1 in 2012. RedFlow production staff are working with their Jabil counterparts in Taiwan, Singapore and Malaysia, and taking input on product transfer from specialists in the US.
The components are mostly made from plastic and can be air freighted from Asian manufacturing plants for integration into RedFlow's own production operations. This will support a smooth transition in quarter 2 2012 while allowing ZBM production in Brisbane to grow in the near term, said the company.
The first component to be supplied is the core conductive plastic electrode. This is the heart of a ZBM, and one of the most exacting components in manufacturing precision.
RedFlow chief executive Phil Hutchings said the outsourcing transition has reached a significant milestone with the manufacture of the first ZBM by RedFlow using electrodes supplied by Jabil. (ASX: RFX)
Ocean Power Technologies
Under its "WavePort" project, the new wave prediction model will assess the characteristics of each incoming wave before it reaches the PowerBuoy wave power station, providing more time for the electronic tuning capability to react. It is expected this will significantly boost the power output of the PowerBuoy and reduce cost per megawatt hour of energy produced, said the company.
Ocean Power Technologies has a 2.2 million grant under the WavePort project from the European Union's Seventh Framework Program for research and innovation. (Nasdaq: OPTT)
Climate Advocacy Fund
The investors are asking ANZ to disclose its exposure to different parts of the energy sector, the greenhouse emissions that result from ANZ's investment in high greenhouse gas emitting assets, and any targets set by directors to manage the risk of exposure to particular greenhouse intensive sectors.
Australian Ethical said this extends the Climate Fund's activities as resolutions to date have focused on companies improving their emissions disclosure, their plans for reduction and their climate related assumptions in their capital budgeting.
The banking sector is a significant part of the investment markets and encouraging banks to improve the disclosure of the emissions of their loan book is critical for a better informed investment market, it said.
"In addition, the Fund is continuing to engage with the institutional investors in Woodside to strengthen the support for the resolution submitted last financial year. It is our plan to put forward the same resolution at the Woodside AGM in early 2012."
Several other companies are under review for resolutions.
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