Eco Investor Update
A Weekly News Update for Environmental Investors
July 2012 - No 88
Eco Investor is suspending coverage Mission NewEnergy until the direction of the company becomes clearer.
The environmental attraction of the biodiesel producer was its transition from palm oil to jatropha as its main feedstock. However, earlier this year the company reported significantly lower yield than expected on its early jatropha plantations, and attributed this to the planting of wild seed varieties that have large yield variability in their early years before the trees mature.
Jatropha trees mature in their seventh year and the company's acreage is less than three years old. The company said that based on this it is re-evaluating its productive acreage and yield expectations. "The Company expects that both productive acreage and yield estimates will be materially down-graded and awaits the completion of the 2012 harvest season in December 2012 to provide further clarity," it said. Until then, the company is not undertaking further planting.
This also prompted the company to make structural changes, and it said it intends to invest in an Indonesian palm oil joint venture. If it proceeds this will process palm oil into other products as well as biodiesel.
Mission NewEnergy has a good record in raising the sustainability standards of palm oil. However land use and food issues remain around palm oil in general for which jatropha promised solutions. Mission's aim to commercialize jatropha is a worthy one, and it is unfortunate that it has run into difficulty and is now prepared to upgrade its involvement with palm oil.
A fee is earned if the DUET accumulation index outperforms the S&P/ASX 200 Industrials Accumulation Index after making up for any performance fee deficit carried forward. The deficit carried forward was $65.3 million.
Over the period the DUET accumulation index outperformed the benchmark by 7.4 per cent, increasing by 11.8 per cent compared to 4.4 per cent.
The average performance fee surplus, calculated over the last 20 trading days of June 2012, was $81.2 million. The performance fee payable is 20 per cent of this or $16.2 million. (ASX: DUE)
The US dollar debt was swapped to Australian dollars to remove foreign currency risk. The bonds mature in 10 and 15 years, and the average duration of Envestra's debt has increased to 11 years.
The company has available bank facilities of $400 million, which will be used to refinance the $83 million of Capital Indexed Bonds that mature in August.
After that, Envestra's next term-debt refinancing is due in 2015-16 when $241 million of bonds and bank facilities mature. (ASX: ENV)
In all, 8,250,000 shares were issued to senior executives, currently worth $1.98 million. (ASX: GAP)
In an investor newsletter, managing director Simon Gerard says "Australia, as a nation, is becoming "greener" and will continue down that path." Although the new carbon tax will add an "edge" to rising consumer costs, "reduced energy consumption by households and businesses, in my opinion, is a trend that will continue regardless of the introduction of specific carbon reduction' policies."
"From the Gerard Lighting Group's point of view this "greening" of the country is important because it pushes consumers whether residential, commercial or industrial towards products and technology that deliver the required or enhanced output but with reduced energy consumption.
"It is these realities that have underpinned the Group's establishment of and belief in the intelligent Lighting Products (iLP) Division. iLP provides end-to-end' expertise, products and technical support for every commercial, industrial, infrastructure or residential lighting challenge. "It also equips our customers with the knowledge and practical understanding they need for effective installation of new technology and new products.
"Frankly, it hardly matters if you're a committed climate change sceptic. No one really argues the wisdom of using less of a finite resource. Conservation, increasingly, is now to the fore in addressing the waste of electrical energy." (ASX: GLG)
Unlisted Share Funds
Climate Advocacy Fund
The agreements run to 30 March 2017, and where applicable supersede the existing original equipment manufacturers warranty agreements for those turbines.
Mitsubishi is responsible for all turbine maintenance costs including labour and component replacement for a fixed cost per turbine, subject to agreed caps; and is providing turbine availability guarantees backed by liquidated damages provisions.
Mitsubishi is entitled to performance payments if turbine availability exceeds agreed levels.
On an equity interest basis, the agreements cover 39 per cent of Infigen's US installed capacity. They will assist to contain post warranty costs, and reduce post warranty working capital needs.
Managing director Miles George said Infigen will continue to refine and implement its response strategies to contain operating costs.
In April Infigen announced a post warranty services agreement with Vestas in Australia. (ASX: IFN)
Advances under the facilities are interest-free and at CMA's election can be settled either by delivery of processed scrap material at market value or in cash. Each contract continues to 1 July 2013 on a revolving basis.
CMA said the change means it can increase its volumes of scrap inventory and better utilize its processing capacity.
CMA has also renegotiated the application of some of the covenants under its debt finance facilities with Stemcor Trade Finance, GE Commercial Corporation and Bank of New Zealand.
Stemcor Finance has agreed to defer financial covenant testing until 1 January 2013, and extended the maturity date of the loan facility from 1 March 2013 to 1 September 2013.
GE Commercial has agreed to relax CMA's fixed charge cover ratio financial covenant until 31 December 2013. In addition CMA is required to repay GE up to $5,822,222 by 31 August 2012.
Bank of New Zealand has agreed to extend the expiry date of the revolving credit facility by 12 months to 30 September 2013, to extend the availability period of the working capital facility until 31 December 2012, and to waive the testing of financial covenants scheduled for 30 June 2012 and 30 September 2012.
This is if CMA pays BNZ NZ$4 million by 31 August 2012, and uses its best endeavours to deliver a proposal to BNZ by 30 October 2012 to fully repay the BNZ facilities by 31 December 2012.
CMA said it is considering the most appropriate funding structure to meet the revised commitments including the payments due on 31 August 2012 to GE Capital of up to $5.8 million and to BNZ of NZ$4 million.
Prior to the announcement, on 25 June shares in CMA Corporation fell to an all time low of 8.5 cents. (ASX: CMV)
Last year, inquiries about the CFI from landholders were up by 681 per cent and interest remained strong in the first half of 2012. In June interest was boosted by a series of workshops hosted by CO2 Australia and the Central West Catchment Management Authority to assist landholders to understand the CFI.
"Carbon farming has the potential to deliver a new income source for farmers and can also deliver broader environmental objectives. Landholders from across Australia are contacting us wanting to know more about the CFI and whether they are eligible to take part in this program," said CO2 Australia land acquisition manager Mark Ritchie.
"By partnering with CO2 Australia, landholders have the opportunity to improve their properties through the planting of carbon sinks and receive other benefits under the CFI legislation. The carbon credits generated by carbon sinks on their property are then on-sold to clients of CO2 Australia," he said.
CO2 Australia managing director Andrew Grant said carbon farming was an economically viable way for landholders to improve the value of their properties.
"There may be an area on the farm that landholders want to convert to trees; it might be shelter belts, non-productive paddocks, creek lines or degraded areas, rather than valuable agricultural land. If the project's big enough you can bring it to account under this scheme and generate revenue by creating carbon credits," he said.
The minimum landholding for environmental planting is 50 hectares (125 acres) and the life of the agreement is usually 100 years, which gives certainty to the amount of carbon that will be sequestered from the trees.
The CFI allows landholders to participate in carbon reduction projects covering environmental plantings, savannah burning, landfill gas management and manure management. There are also a number of carbon reduction methodologies under consideration for landholders. If landholders have a good idea to reduce emissions then the CFI is a mechanism for them to innovate and bring that idea to fruition, said the company. (ASX: COZ)
Mr Bleach has over 30 years of experience in accounting and finance. He was originally a Chartered Accountant for KPMG Peat Marwick in Sydney and Dallas, and moved into financial services in 1987 when he joined Bankers Trust Australia.
Mr Bleach has also worked for Macquarie Group where he was CEO of its US business. He was previously CEO of Intoll Group and is currently a non executive director of Industry Funds Management and Eraring Energy. (ASX: EAX)
ERM Power will earn minimum 50 per cent equity interests in petroleum exploration leases PEL 457 and 479, and 65 per cent in PEL 478. ERM expects to earn these interests in 2012 and has further options to move to 100 per cent in each permit.
Managing director and CEO, Philip St Baker, said the deals were consistent with ERM Power's strategy of gaining a foothold in the Australian east coast gas market. "They provide ERM Power with direct exposure to existing gas reserves and a potential shallow conventional gas play, and the opportunity to consider local generation development," he said.
"Our diversified gas investment strategy, which includes direct investment in exploration and production, the procurement of gas, and investment in gas exploration and production companies, provides both greater options for our generation development activities and also business opportunities in their own right."
Independent certifier MHA Petroleum Consultants has certified that on a 100 per cent basis for PEL 457 and 479, 2P reserves are 17 petajoules (PJ), 3P reserves are 380 PJ and 2C resources are 629 PJ.
ERM Power will initially have a 30 per cent interest in PELs 457 and 479 and 35 per cent in PEL 478.
Total payments to the parties for these interests are up to $7.45 million and will be staged with key milestones.
ERM Power will drill a minimum of two wells and one optional well in each permit to increase its interests to 60 per cent in PEL 457 and 479 and 80 per cent in PEL 478. It will fund 80 per cent of each well in PELs 457 and 479 and 100 per cent of each well in PEL 478.
ERM Power will also subscribe for 150 million shares in Red Sky.
The transactions are subject to Red Sky and CMR shareholder approval. (ASX: EPW)
Unlisted Share Funds
Australian Ethical Smaller
Australian Ethical Investment, which manages the fund, is no longer charging contribution fees and switch fees for new investors and existing direct investors.
International Share Funds
Australian Ethical International
In another change. Australian Ethical Investment, which manages the Trust, is no longer charging contribution fees and switch fees for new investors and existing direct investors.
Micro Cap Companies
Chief executive, Peter Balsarini said the company had several new carbon sink agreements in the pipeline with large-scale carbon emitters seeking environmentally attractive offsets.
Carbon pricing affects the top 300 carbon emitters. By 2020 these companies will need to hold permits for 346 million tonnes of carbon dioxide emissions per annum, representing a 5 per cent reduce in emissions on 2000 levels.
"Formally introducing the Clean Energy Act signals a turning point for this country and our company as Australia endeavours to reduce carbon emissions and establish the clean energy economy of tomorrow. Australia has responded to the overwhelming scientific evidence on human induced climate change and joined 34 other nations in making our contribution to the international reduction effort," he said. (ASX: CCF)
Roger Johnston has been appointed as a non-executive director. Mr Johnston has 36 years of commercial, capital markets and directorial experience. He commenced his career as an insolvency specialist at Arthur Andersen & Co and has worked in financial, industrial and resource services including funds management and technology. (ASX: CBP)
Po Valley Energy
Vmoto will produce all of PowerEagle's electric vehicle models on an original equipment manufacture (OEM) basis, currently 40,000 units per year.
Initial orders for 6,000 units are expected this calendar year and orders are forecast to rise to 42,000 units in 2014, 72,000 units in 2014 and 150,000 units by 2015. This would represent a total sales value of about $86 million to the end of 2015.
Vmoto said significant benefits will include exposure to the largest electric scooter market in the world, and additional benefits will come through efficiencies, economies of scale and improved purchasing power.
Managing director, Charles Chen, said the agreement is a significant event in the company's history.
"China is by far the biggest two wheel transportation market in the world and this transaction marks the start of Vmoto's expansion into it. It also highlights how important and valuable our Chinese manufacturing licence is and we are hopeful that this agreement will expose us to similar 2 wheel electric businesses in China.'
PowerEagle will move production of all current products from its facilities in Qingpu District, Shanghai to Vmoto's Nanjing manufacturing facilities by September this year.
PowerEagle will then focus on growing its sales through additional retail outlets and distribution networks in China.
Current two-wheel electric vehicle sales in China are estimated at 40 million per annum, and forecast to grow.
Following this initial transaction, Vmoto will launch its own model to target the Chinese domestic market, and then look to expand its market share with new products.
Vmoto says that PowerEagle's brand name is well known in China and it has a good reputation for product development and quality control, and a wide and established sales and distribution network. Currently it distributes 40,000 electric vehicles in China annually and expects to increase this to 150,000 units per annum by the end of 2015.
The agreement does not include PowerEagle's range of products that are currently exported.
Vmoto said that due to recent Government policy changes, further consolidation is expected in the Chinese electric two-wheel vehicle sector, and it is well placed to participate.
Vmoto is also considering a dual listing on the Alternative Investment Market in London. (ASX: VMT)
A second new well is flowing at 1 million standard cubic feet per day (scf/d). Five new wells are now each flowing at greater than 675,000 scf/d.
Chief executive, Dr Julie Beeby, said the upward trend is expected to continue with the on-going refurbishment of under-performing existing wells and increasing production from Meridian's seven new dual-lateral wells and three new up-dip laterals.
WestSide has a 51 per cent operating interest in Meridian SeamGas. (ASX: WCL)
Galaxy's assets are:
Galaxy's partners include the top three lithium battery producing countries in the world, China, Japan and Korea, and its partners include the top 13 cathode producers in China; Mitsubishi Corporation in Japan; and Korean Resources Corporation, LG International and GS Caltex in Korea. (ASX: GXY)
Micro Cap Companies
The WMRC DiCOM Expansion Project is increasing the capacity of the facility from 20,000 to 55,000 tonnes per annum. When completed it will be the first full scale operating application of the DiCOM System.
The project is being delivered for Palisade Regional Infrastructure Fund under a fixed price contract. AnaeCo said that as it is the first of its kind, there have been some additional development costs that were not recoverable in the contract. AnaeCo, as the owner and licensor of the technology, bears most of these and the issue of shares to Monadelphous is a co-investment in these development costs.
The Project is scheduled to reach construction completion before the end of September, with AnaeCo and Monadelphous targeting early commissioning of the Materials Recovery Facility from late August. The plant should be fully operational before the end of 2012.
Managing director and chief executive, Patrick Kedemos said he welcomed Monadelphous' significant contribution to the WMRC project, both from a construction standpoint and in becoming a cornerstone investor in AnaeCo.
"We are already partners through the design and construct JV, and this equity position binds the relationship as we work to finish the project as well as collaborate towards tackling future projects together," he said.
Monadelphous managing director, Rob Velletri said "The WMRC DiCOM Expansion Project has been a significant project for our Infrastructure division for the past 18 months. We are proud to be part of delivering this pioneering solid waste management facility. We believe our relationship with AnaeCo and its DiCOM technology has the potential to open a substantial pipeline of future infrastructure work for Monadelphous, both in Australia and overseas." (ASX: ANQ)
A few days after the low Blue Energy said that KOGAS intends to exercise its farm-in option for the ATP814P block. This will initiate discussions between on a non-exclusive basis on potential farm-in terms for ATP814P. Blue Energy said it cannot say with any certainty that an agreement on terms will be reached.
The farm-in option was granted to KOGAS as part of a share placement between Blue Energy and KOGAS in June 2009, and the option period has been extended several times.
"The company remains committed
to considering all available options to maximize value for shareholders
while remaining focused on increasing certified reserves," said John
Among other data is shows strong growth in the concentrated photovoltaic (CPV) market, which has risen from 2 MW of installed capacity in 2007 to 275 MW in 2012. It is forecast to rise to 1,500 MW in 2015. (ASX: BLG)
Carnegie Wave Energy
In August last year the Water Corporation said the SSDP would purchase renewable energy from the Greenough River Solar Farm and the Mumbida wind farm. These supply arrangements include a provision to accommodate electricity from Carnegie.
Carnegie has previously announced alternative power off-take options for its Perth Wave Energy Project including the Australian Department of Defence. Carnegie said it expects to make a decision shortly on the final power supply arrangements for its Perth Wave Energy Project.
Carnegie also said it enthusiastically supports the Australian government's actions towards securing a clean energy future and is pleased to see additional opportunities to access funding from CEFC and ARENA to develop future CETO wave power projects.
Meanwhile, on 29 June Carnegie issued 6,730,769 shares at 2,6 cents each to the Australian Special Opportunity Fund. (ASX: CWE)
The Federal Government has made a $2.3 million grant under the Emerging Renewables Program to assist BlueScope Steel's $5 million development of a prototype building-integrated photovoltaic (BIPV) system.
Bluescope is develop a new roofing profile that joins Australian steel roofing and inverter systems with international second-generation thin-film solar technologies. It provides for the simultaneous installation of roofing and solar technology and allows new buildings to adopt the design. The technology will be capable of generating energy for the grid.
The grant will allow the mass deployment of the technology across residential, commercial and industrial rooftops in Australia, said the minister for Resources and Energy, Martin Ferguson.
"The prototype will be easily scaled up to the operational stage ensuring future BIPV systems can be cost-effective without Government subsidies. This project will help make Australia a world leader in BIPV development, particularly for thermal roofing featuring flexible thin-film technology."
Australia's installed rooftop photovoltaic capacity increased from 23 to 1,450 megawatts between 2008 and 2012 and is expected to grow to more than 5,100 MW by 2020 and 12,000MW by 2031. (ASX: DYE)
Earth Heat Resources
Earth Heart has also agreed to acquire its joint venture partner, Geothermal One Inc, for CAD$6 million in cash or shares. EHR shares will be deemed to have a face value of 10 cents each if that option is chosen by any Geothermal One Inc shareholder. The acquisition is contingent on the capital raising.
CIFI will use its best endeavours to raise around US$30 million through the issue of non-voting preference shares in a special purpose project company. These shareholders will be entitled to a dividend payable in quarters from the date of commercial operation, subject to free-cash flow and approval by the company's board.
Preference shareholders will be also entitled to exchange their shares for shares in Earth Heat Resources at a fixed ratio of 10 shares in EHR for each preference share at any period up to 10 years from the date of issue.
The preference share offer will be open to sophisticated professional investors and the funds raised will be used exclusively for development costs at the Copahue project.
Managing director Torey Marshall said "These developments highlight the strong level of support that our Project has garnered from key multilateral organizations as well as professional investors from around the globe.
"Our acquisition of Geothermal One Inc unifies the ownership of the Copahue concession and also directly unifies our joint vision for the proper and appropriate development of Argentina's first Geothermal Power Plant." (ASX: EHR)
The new managing director is Samuel Marks.
In other changes, Robert King has resigned as a director, and Leslie Erdi OAM has joined the board. Mr Erdi is a Melbourne businessman and philanthropist and founder of Erdi Fuels Pty Ltd,
The Greenearth Energy board thanked Mr Miller for his "outstanding contribution to the company, driving its transition post IPO from a single focus geothermal exploration and development entity to a diversified renewable energy company with interests in domestic conventional geothermal projects as well as the introduction to the Australian market of several world leading aligned technology applications including Metrolight HID technology (Energy Efficiency) and NewCO2Fuels Ltd (CO2 to Fuel Conversion technology)."
The board also thanked Mr King for his work and specifically on the company's geothermal exploration activities in Australia and internationally. (ASX: GER)
Republica Capital has since become a substantial shareholder with a 13.04 per cent interest in MediVac.
Mr Johnston commenced his career as an insolvency specialist at Arthur Andersen & Co, and has 38 years of experience on public company boards in Australia and Asia. He recently resigned after 13 years as a non-executive director of Colombo based Peoples Merchant Bank Ltd. He is currently a director of ASX listed Imagine Un. (ASX: MDV)
Panax also said its planned Ngebel geothermal project will likely increase capacity to 220 MW in response to Indonesia's growing demand for secure, renewable energy. The Ngebel Project is a joint venture between Panax and Indonesian-owned company PT Bakrie Power.
In Indonesia only 65 per cent of residents have access to reliable, grid-connected power a problem that the Indonesian Government is seeking to fix by incentivizing development of the country's abundant geothermal resources.
The Ngebel Project is also due to have its pricing increased in line with the proposed feed-in tariff increase soon to be offered by the Government.
Managing director Kerry Parker said the increase in planned capacity was a sign of Indonesia's demand for geothermal. "The Ngebel Project was originally expected to grow to up to 165 MW in stages, but we can now confirm we will be looking to increase its initial capacity to 220 MW," he said.
"In addition to this, and based on our recent discussions with state power company PLN in Indonesia, we are confident of being able to secure an increased electricity tariff for our Ngebel Project, which is centrally located in East Java, directly under the national transmission grid." (ASX: PAX)
Water Resources Group
The composition of the board is also changing, and a new US based CEO is expected to join the company in the near term to replaced interim CEO Brian Harcourt.
Andrew Kent has resigned form the board.
Two new non-executive directors are Robert Bylin and Malcolm Richmond.
Robert Bylin is a US based businessman. An engineer, he is a former process plant project manager for Chevron Corporation and a former project engineering and marketing manager for Raychem Corporation, which is now part of Tyco International. Mr Bylin is also an entrepreneur, having established two companies and sold one.
Malcolm Richmond is a metallurgical engineer with technological and international mining industry experience in operational and executive capacities. His experience covers major mining projects, business acquisitions and large scale project expansion. He is also a director of several listed companies, and the visiting professor and international technology expert from 2003 to 2011 at the Graduate School of Management and Faculty of Engineering in the MBA Program at the University of Western Australia.
Water Resources Group is streamlining its management structure to reduce overheads and prepare the company's NASDAQ listing.
The company said it is developing a new opportunity to supply a 40,000 cubic metre per day ASWRO system to a Government utility which urgently requires a reliable supply of quality drinking water. The expected equipment sales value is expected to be over US$75 million and a gross value of the water supply over the contract life than US$425 million.
The contract would include the largest ASWRO system to date.
Mr Harcourt said "The company is approaching a new level of commercialization and must now take advantage of its opportunities. With new directors, change in management structure and the near term appointment of a US based CEO, together with the upcoming NASDAQ listing, we expect that shareholders will benefit significantly by participating in this rights offering."
Water Resources provides advanced, low-cost chemical-free, community based water desalination systems. (ASX: WRG)
The conference focus this year was "Community Power Citizens Power". At the invitation of the World Wind Energy Association, Hepburn's Community Officer, Taryn Lane, presented a paper on the Hepburn Wind story.
The WWEA Board recognized Hepburn's work in introducing large scale community wind power to Australia, and that other Australian communities are now using the Hepburn Model' to develop their own community power projects.
Stefan Gsänger, secretary of the WWEA said: "The award is given to the initiators of the Hepburn wind farm for launching Australia's first and groundbreaking community initiative that led to a 4.1 MW community owned wind farm, an excellent answer in particular in order to increase social understanding and acceptance of wind power. Seen from outside of Australia, the project may appear small. However, the Hepburn wind farm stands for a social movement outside the strong fossil lobby in Australia.
"WWEA would like to express its willingness to work closely with the Australian wind and in particular the community wind sector and to extend its full support and cooperation in fostering the transformation of Australia towards 100 per cent renewable energy and a strengthened understanding of the importance of sustainability."
Hepburn Wind has previously won the Climate Alliance Innovator Award 2010, the Victorian Premier's Sustainability Award 2011, the Banksia Environment Award 2011 and the Ethical Investor Australian Sustainability Award 2011.
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