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Eco Investor Update

A Weekly News Update for Environmental Investors

16 April 2012 - No 76
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____ Core Securities ____

ASX 200

GWA Group
GWA Group’s shares fell below $2 after a trading update based on market conditions in the March quarter, which were more difficult than expected when GWA provided market guidance in February.

The company said this was due to adverse weather on the east coast during March, a further slow down in demand following the 14 per cent decline in dwelling commencements in the December 2011 quarter, and lower sales of Dux environmental water heaters since the Government’s 28 February decision to immediately cease rebates.

Sales are now more likely to be down by 11 per cent on a like for like basis and full year trading earnings (EBIT) to decline by between 20 to 25 per cent. This compares to the February guidance of a 9 per cent decline in sales and a 16 per cent decline in EBIT.

Trading results for the second half will include one-off costs associated with the ramp up of the new Dux hot water tank facility at Moss Vale and the phase down of the Gainsborough door hardware factory at Blackburn prior to closing in May.

On the plus side, restructuring is expected to have a positive impact of $7 million to $8 million due to gains on property sales, which will offset the restructuring costs in the December 2011 half year.

Managing director, Peter Crowley said “We are particularly disappointed in the performance of the NSW market. There were a number of issues with flooding and poor weather restricting access to homes to complete construction projects but there is no doubt underlying demand is weaker than expected.

“Restructuring activities are progressing to plan, we have conditional sale agreements for surplus properties and we have a number of product and market development initiatives in various stages of implementation. The business is being positioned to perform when the market improves but this appears to be some time off.”

GWA confirmed that the 2011-12 dividend will be maintained at 18 cents. A fully franked interim dividend of 9.5 cents was paid on 4 April. (ASX: GWA)


____ Satellite Securities____

ASX 200

Energy World Corporation
The ASX has queried a fall in Energy World Corporation’s share price, but the company said it is unaware of any possible reason apart from media reports which it considers “contain inaccurate, false or misleading information in relation to the company’s LNG equipment purchases. The company is seeking legal advice regarding the articles and the content.”

In the past three weeks the shares have fallen from a year high of 86 cents to 59.5 cents. (ASX: EWC)

Transpacific Industries Group
A conditional settlement has been reached between Transpacific Industries and a legal claim funded by IMF (Australia) Ltd on behalf of investors who acquired TPI shares between 29 August 2007 and 16 February 2009.

The settlement depends on a percentage of group members providing a release to TPI from their claims.

The parties have reached an agreement to settle the proposed class action for an amount of up to $35 million or about $24.5 million after tax and subject to certain conditions. $25 million is payable in June 2012 and up to $10 million deferred until 30 June 2014. The settlement has been reached on a commercial basis and there is no admission of liability by TPI.

Chairman Gene Tilbrook said “We took the decision to participate in a structured mediation process having regard to the likely costs involved, and the uncertainties and risks that are inevitably associated with claims of this nature.

“The negotiated settlement with members of the proposed securities class action will resolve this action, which grew out of events that occurred several years ago under a previous management regime. The focus of the current Board and senior management continues to be firmly on building TPI into a world class waste management company.”

The final settlement amount will be included as a significant item in TPI’s FY12 results. (ASX: TPI)

Emerging Companies

CBD Energy
CBD Energy says the price gap between solar power and more expensive coal fired power looks set to keep widening with the Independent Pricing and Regulatory Tribunal confirming an average 16 per cent price rise for NSW electricity from 1 July.

Within the average, EnergyAustralia customers, the greatest in number in NSW, will experience a 19.2 per cent price increase, says CBD Energy.

Half the price rise will come from transmission costs, the other half from higher wholesale costs and the carbon tax, all of which can be avoided with solar energy.

NSW households currently pay between 20 and 30 cents a kilowatt hour and 43 cents at peak. In contrast, solar energy costs between 5 and 7 cents a kilowatt hour to produce, with this level applicable over the lifetime of a solar system of around 25 years, says Jeff Bye, who runs the solar arm of CBD Energy.

Unlike the increasing cost of building new coal fired power stations, the cost of solar panels has been falling, mainly due the lower cost of silicon which has fallen from $450/kg in 2008 to around $25/kg today.

Residential installations still have the benefit of qualifying for government sponsored small technology certificates (STCs) and their current three times multiplier. STCs can contribute around 35 to 40 per cent of the cost of a solar system, so that the average cost of installation can range from $2,000 to $12,000. (ASX: CBD)

CMA Corporation
CMA Corporation will issue of 25 million shares to Scholz Invest GmbH if shareholders agree at a general meeting on 11 May.

The shares will be issued at 40 cents, well below the current share price of 25 cents.

The shares will discharge and satisfy over $9 million in debts owed by CMA, with a balancing amount to be paid to CMA in cash, making a total consideration of $10 million or 40 cents per share.

The deal will lift Scholz’s stake in CMA by 6.08 per cent to 47.48 per cent.

The shares will satisfy a $4.5 million loan from January 2011 plus interest; an unsecured $2.7 million overdraft facility from December 2011 plus interest; $460,000 owed to Oliver Scholz, Parag-Johannes Bhatt and Mike Greulich for unpaid directors' fees; and $878,378 in reimbursement fees for services provided by Roland Berger, a business strategy consultancy. (ASX: CMV)

Energy Action
Energy Action director Bill Moss has sold 40,803 shares for $74,458, an average price of $1.825. (ASX: EAX)

Energy Developments
Energy Developments is seeking further information from the Australian and NSW Governments about the final arrangements for their respective green credits schemes so it can assess the short to medium term financial benefits.

Energy Developments says it welcomes the Federal Government’s Clean Energy Future Plan, including the carbon price commencing on 1 July, the Carbon Farming Initiative (CFI) under which landfill gas electricity generation and Greenhouse Gas (GHG) abatement projects are entitled to create and sell Australian Carbon Credit Units (ACCUs); and the transition of Energy Developments’ German Creek and Moranbah North waste coal mine gas fueled power generation into the Renewable Energy Target (RET) and their possible eligibility to create and sell RET certificates.

Energy Developments said that until the final regulations, accreditations and operating rules for the CFI and the RET schemes are issued, the financial impact cannot be determined with any certainty, but it expects them to be favourable.

Following the decision by the NSW Government on 5 April to close its Greenhouse Gas Reduction Scheme (GGAS) on 1 July, Energy Developments is awaiting further details on how unsold Scheme certificates (NGACs) will be treated at the scheme’s cessation.

The company is in discussion with the NSW and Federal Governments about transitional arrangements for unsold NGACs but there is no certainty that such arrangements will be forthcoming or deliver value, it said.

Under the CFI, landfill gas abatement projects (LFG projects) will be eligible to apply for CFI accreditation when the rules are finalized. Energy Developments expects its LFG projects will be eligible for accreditation and will earn revenue from the sale of ACCUs to third parties.

Entities with a carbon liability can purchase ACCUs for up to 5 per cent of their liability during the three year fixed price period of the carbon price from 1 July.

LFG projects will be eligible to retrospectively create ACCUs for abatement from 1 July 2010, subject to further regulations which are expected to be released in the next month. Energy Developments expects to complete the process of accrediting its LFG projects by 30 June.

The 32 MW German Creek and 45 MW Moranbah North power projects will be eligible to be accredited to create and sell Large-scale Generation Certificates under a capped addition to the RET from 1 July. The Office of Renewable Energy Regulator (ORER) is now assessing each project’s eligibility. (ASX: ENE)

ERM Power
An ERM Power subsidiary, ERM Gas Pty Ltd, has agreed terms with Empire Oil & Gas NL for the drilling of a petroleum exploration well, Black Arrow-1, in EP 432 in the North Perth Basin. The deal is subject to a formal Farmin Agreement between Empire Oil Company (WA) Ltd and ERM Gas.

From an environmental perspective, the arrangement is a disappointment, as ERM Power has a significant gas business and does not need to diversify into oil exploration. At this stage the drilling is a minor part of its activities, although it does denote a lack of commitment to being environmentally positive.

ERM Gas will earn an additional 35 per cent interest in Area A by funding 60 per cent of Empire’s share of an exploration well to be drilled to at least 1,000 metres to evaluate the oil potential of the Arranoo Sandstone at Black Arrow. On completion of the drilling ERM Gas will hold a 47.5 per cent interest.

Empire will operate the drilling program, which will commence on Approval to Drill by the Department of Mines and Petroleum.

ERM Gas has a 12.5 per cent interest in the remainder of the EP 432 Permit, Area B, where the joint venturers say they are keen to pursue the shale gas potential of EP 432.

They are also keen to drill for oil at the EP 454 Permit, where ERM Gas has a 16.67 per cent interest.

Meanwhile, the WA Department of Mines and Petroleum has issued the EP 389 Joint Venture an offer to grant the Pipeline Licence applied for on 19 October 2011. The applicants are Empire Oil Company (WA), ERM Gas which has a 21.25 per cent interest, and Wharf Resources Plc.

The pipeline will be located from the gas feed inlet of the Red Gully Gas and Condensate Processing Plant to the tie-in to the Dampier to Bunbury Pipeline.

The offer is conditional on Empire Oil Company providing evidence of access to the area of the pipeline. Access is currently before the Magistrates Court with the hearing to be heard on 31 May and 1 June to determine the compensation to be paid to the landowner.

The timetable for commissioning the Processing Plant is on track with commissioning planned for November this year.

The Department of Mines and Petroleum has also offered the renewal of Exploration Permit EP 389 for another five years. The Permit covers 1,680 square kilometres. The joint venture is developing the Red Gully Gas and Condensate Plant from the two discovery wells, Gingin West-1 and Red Gully-1, and plans to drill three additional wells. (ASX: EPW)


____ Pre-Profit Securities ____

Micro Cap Companies

Nanosonics
Director Richard England has indirectly purchased 25,000 shares for $13,750, an average price of 55 cents.

132,500 Options under the Nanosonics Employee Share Option Plan and the Nanosonics General Option Share Option Plan have been exercised, raising $43,462.50. (ASX: NAN)

Pacific Environment
Pacific Environment has appointed Peter White as chief executive officer. He has previously been a non-executive director and chair of the company’s Audit and Risk Management Committee between October 2007 and June 2009.

Mr White replaces David Cassidy who had been CEO since April 2010. The company said Mr Cassidy has provided steady leadership through a period which saw the company's balance sheet strengthened and asset impairments curtailed.

“The Company is nearing on-going profitability and cash flow, while still tight at times, is not the major issue that it was in 2009 and early 2010. The Company is very appreciative of the value that Mr Cassidy has added during the last two years and wishes him well with his future endeavors,” it said.

Mr White has spent 25 years specializing in developing services and solutions companies across many industries. His roles have included executive general manager, country manager, director of services and sales director. His skills include strategic business and sales planning, leadership, team building, people development and change management, financial management and risk management.

Mr White has a Bachelor of Mathematics with a major in computer science and has completed the Advanced Business Management course at the Australian Graduate School of Management.

Mr White’s remuneration is structured heavily to incentivize him to focus on revenue growth and earnings (EBIT), said chairman, Dr Merv Jones. (ASX: PEH)

RedFlow
Shares in RedFlow fell to a post IPO low of 48 cents on 12 April, just before it announced a trading halt. The company is to announce a restructure. (ASX: RFX)

Vmoto
Vmoto’s rights issue announced on 5 April is to raise up to $3,812,032. The non-renounceable rights is one share plus one free option for two every two shares held on 26 April. The issue price is 1.2 cents per share. The options will have an exercise price of 4 cents and an expiry date of 31 December 2014. (ASX: VMT)

WestSide Corporation
WestSide Corporation’s entitlement offer closed well oversubscribed, perhaps not surprisingly as shareholders wait to see if LNG will proceed with its mooted takeover.

The entitlement offer was fully-underwritten at 25 cents per share and raised $25.4 million.

The company’s Australian and New Zealand-based shareholders took-up on average 93 per cent of their entitlements. Through the top up facility, the offer was 19 per cent oversubscribed.

Major shareholders Energy Infrastructure Trust and New Hope Corporation and all non-executive directors subscribed for their full entitlements. Executive chairman Angus Karoll took-up 96 per cent of his entitlement.

Mr Karoll said “We value the very solid support received from both our retail and institutional shareholders to enable WestSide to pursue near-term growth aspirations across the Company’s various operations in Queensland.”

Work during the year will be directed at maintaining and increasing gas production at Meridian SeamGas to supply existing and future customers and advancing joint venture exploration programs within WestSide’s other Bowen Basin and Galilee Basin tenements, he said. (ASX: WCL)


____ Pre-Revenue Securities ____

ASX 100

Lynas Corporation
Lynas Corporation’s shares jumped over 10 per cent on news that the High Court of Malaya has denied an application by protesters to apply for a judicial review of the decision of the Malaysian Atomic Energy Licensing Board to approve a Temporary Operating Licence to the Lynas Advanced Materials Plant (LAMP) in Malaysia.

Both Lynas and the Malaysian Government opposed the application.

The Court said there is an appeal in process to the Minister of Innovation, Science and Technology, and it would not be appropriate for the Court to intervene in the matter. The appeal will be heard this month.

Executive chairman Nicholas Curtis said although the Court had ruled in Lynas’ favour, the present controversy is undermining both the LAMP and Malaysia’s international investment reputation.

“This concerted political campaign, which is based on misinformation, is sabotaging the science-based, regulatory process established in Malaysia and confidence in that process,” said Mr Curtis.

“Since the project was first approved in 2007 the LAMP has been subjected to the highest degree of scrutiny and public comment. It has been reviewed and received approval from both the International Atomic Energy Agency and the Malaysian Atomic Energy Licensing board and every safety box has been ticked. So it is disappointing that the highest safety standards integrated into the plant to protect human and environmental safety are ignored by a few people.”

“The LAMP is safe for everyone concerned and we look forward to the day when that will be recognized.” (ASX: LYC)

ASX 200

Dart Energy
Shares in Dart Energy fell to a new all time low of 27 cents on 11 April, a day the All Ordinaries fell nearly 1 per cent.

A day earlier the company’s international arm, Dart Energy International Pte Ltd, entered a mandate with HSBC Bank Plc to arrange a senior secured revolving borrowing facility for up to US$100 million to fund its near term revenue projects.

The Facility will comprise up to US$90 million in a borrowing base tranche and a US$10 million working capital tranche.

The first tranche will amortise over five years with first amortization after two years, while the working capital tranche will be repaid as a bullet at the end of the five year facility.

The initial base borrowing assets will be Dart International’s interest in PEDL 133 in Scotland, the Liulin PSC in China, and the Sangatta West PSC in Indonesia. The Mandate is subject to conditions including due diligence.

Dart International chief executive, John McGoldrick, said the debt facility, together with the proceeds of earlier fund raising activities, will position the business to become a leading global unconventional gas producer. (ASX: DTE)

ASX 300

Galaxy Resources
Galaxy Resources has produced the first lithium carbonate at its Jiangsu Lithium Carbonate Plant in China. This follows the completion of hot commissioning of the plant.

The company has also raised $30 million via a placement to institutional and sophisticated investors, and opened a $3 million share purchase plan. The placement, at 77 cents per share, will support Galaxy’s proposed merger with Lithium One Inc. The share purchase plan will be at the same price.

In addition, Galaxy has received final approval for two fixed asset/working capital loan facilities from two Chinese banks. The facilities total $36 million at 6.6 per cent interest, and will support the operation of the Jiangsu Plant.

Galaxy said the calcination kiln was fired to operating temperature of 1,080 degrees Celsius, and has been producing beta spodumene since mid March. The remainder of the Plant including the sodium sulphate plant, utilities, and leach area have been brought online.

The sulphuric acid addition was established at the end of March, with the sulphation kiln producing sulphated beta spodumene which, in turn, was fed through the plant. All process flows were then brought on line across the entire plant, culminating in successful production of lithium carbonate.

Managing director, Iggy Tan, said Galaxy has brought two projects into production in less than two years.

“Producing first lithium carbonate at the Jiangsu Lithium Carbonate Plant proves the success of the Plant’s design and processes. Galaxy’s focus now is maintaining plant stability, achieving continuous operation and product quality. The product will need to move continuously through the process plant before we can get the quality to the required level. We
expect a 12 month ramp-up of the Plant to meet its 17,000 tonne per annum design capacity.’

The $100 million Jiangsu Plant is the first fully-automated lithium carbonate plant in China and one of the most highly sophisticated plants of its kind in the world, he said. (ASX: GXY)

Micro Cap Companies

AnaeCo
AnaeCo and Sindicatum Sustainable Resources (SSR) are to work together to promote AnaeCo’s DiCOM municipal waste to energy system in a variety of geographies in and beyond Asia.

Last September the companies formed a joint-venture company to roll out DiCOM in the key markets of China, India, south east and north east Asia. The joint-venture company was granted four exclusive licenses, one for each of these four regional markets.

AnaeCo managing director, Patrick Kedemos, said “We have developed a close relationship with SSR over the last few months and believe that it is in the interest of both companies to be working together, on a nonexclusive basis, to promote DiCOM wherever the objectives of the two companies can be aligned, in a variety of geographies, in Asia and beyond.

“SSR have developed deep project development expertise over the years; AnaeCo welcomes the possibility of leveraging this experience wherever possible.”

Assaad Razzouk, chief executive officer of SSR, said “SSR’s strategic intent is to actively promote alternative, next generation, waste management technologies. I remain convinced that AnaeCo’s DiCOM technology can play an important role in delivering sustainable, efficient, waste management outcomes to our customers.” (ASX: ANQ)

Blue Energy
Blue Energy said its share purchase plan closed heavily oversubscribed. A total of $17.6 million was raised. However, listing Rule 7.1 required this figure to be scaled back to a maximum of $13.5 million, which represents 30 per cent of the company’s issued shares at the date the SPP was launched.

Chairman, Peter Cockcroft, said “The level of support for the SPP has been exceptional and demonstrates strong confidence by shareholders for the Company’s strategic direction and the recent injection of experience and acumen to the board and management teams with the election of Mr John Ellice-Flint as an executive director.”

“The combination of our recently-approved $10 million share placement, plus this stellar SPP result, places the Company in a strong financial position to undertake its exploration and appraisal activities for 2012 and beyond.” (ASX: BUL)

BluGlass
Shares in BluGlass fell to an all time low of 4.6 cents on 11 April. No news accompanied the dip. The shares have been drifting sideways or slowly downwards over the past year. (ASX: BLG)

Island Sky
Michael Paragon has resigned as an executive director of Island Sky. The board gave no reason but expressed its appreciation for his contribution. (ASX: ISK)

MediVac
Shares in MediVac fell to a new all time low of 0.7 cents on 5 April.

La Jolla Cove Investors continues to exercise its option and convert shares. Recent conversions saw 1,898,734 shares issued for $15,000, an average price of 0.79 cents, and 2,739,726 shares issued for $20,000, an average price of 0.73 cents. (ASX: MDV)

Panax Geothermal
Panax Geothermal says Indonesia is overtaking Australia in its green investment potential. The company expects to benefit from an Indonesian Government push to fast-track overseas investment in geothermal energy, with a new guarantee to protect projects during exploration and construction.

The guarantee is on top of the Indonesian Government’s guaranteed feed-in tariff for geothermal energy and, according to Panax managing director Kerry Parker, is the strongest signal yet that Australia will be left playing catch-up to Indonesia in renewable energy policy.

The government guarantee supports financier funding and independent power producer purchase agreements for power generation projects undertaken by Indonesia’s State Power Company, PT PLN (Persero). The government will guarantee the payment obligations of PT PLN, providing investment security to investors and lenders.

Mr Parker said the Australian Government needs to recognize the opportunities Indonesia is creating for Australian geothermal investors and take steps not to be left behind.

“New technologies like geothermal energy need real, practical support from the Australian Government to stimulate interest in investment and give certainty to investors,” said Mr Parker.

“The funds allocated to renewable projects under the new carbon scheme will feed through at far too slow a rate and there are currently no guidelines stipulating which technologies will get funding. As we understand it, the current scheme will only commit approximately $500 million per year to renewable technologies, starting in 2013.

“If the Australian Government was serious about investing in renewable technologies, the $9 billon clean energy funding would be allocated over a much shorter period to ensure rapid advancement in new technologies.”

Mr Parker says investment in Australian geothermal energy is waning and the Australian Government cannot afford to play catch-up on important renewable policies and to lose out on advancements in new technologies.

“We understand that a recent geothermal investment meeting in Sydney attracted extremely limited interest, with attending investors reporting that they were waiting for a project to be proven before backing further investment – and for a project to be proven the industry will require more government support.

“Without increased government support, geothermal development companies like Panax will only be able to test new technologies with the support of private investors.”

Since 2008, the Government of Indonesia has undertaken a fast track program to increase domestic capacity for power generation, as a prerequisite for economic growth. (ASX: PAX)

Petratherm
Shares in Petratherm fell to an all time low of 6.5 cents on 12 April. The shares have trended downwards for over two years. (ASX: PTR)

WAG
WAG’s latest quarterly accounts are not promising with the company having no receipts from customers, a cash burn of $97,000 and cash at hand of only $43,000. (ASX: WAG)

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