Eco Investor November 2015

Pre-Profit Securities

No Luck for Geodynamics in Pacific and Desert

All of Geodynamics' geothermal energy projects including the two key projects in the South Pacific and the Habanero Project in the Cooper Basin are on hold and unlikely to make further progress in the near term.

Writing in the company's annual report, chairman Keith Spence and managing director Geoff Ward say that the commercial conditions to progress the Pacific geothermal projects are weak. Slowing economic growth, low power demand growth, and strained government finances have prevented progress in securing power purchase agreements for the Savo Island Project in the Solomon Islands and the Takara Project in Vanuatu.

Both countries had cyclones in the last 18 months and the governments are focused on rebuilding housing, health, transport and infrastructure with reduced emphasis on improving power supply. The reduction in world oil prices has reduced the immediate need to transition away from diesel, and there is also competition from other renewable energy sources such as solar PV and hydro.

"At this stage we have no plans for further significant expenditure on the Pacific projects but will work with the national governments to explore potential Public Private Partnership structures that can better align project ownership with the long term benefits, and utilizing the strengths of the key stakeholders including access to low cost development finance," they say.

The outlook for the company's Cooper Basin project is no better. While the company has demonstrated that its 1 MWe Habanero geothermal energy pilot plant can be integrated into future natural gas processing facilities, its exclusivity agreement with Beach Energy expires this month.

The directors said "We continue to encourage Beach to enter our Cooper Basin permits, however this may not be possible given low oil prices and the decision by Beach's former joint venture partner, Chevron, to withdraw."

The long delay if not slow demise of Geodynamics' geothermal aspirations highlights that its immediate future is with its recent acquisition of Quantum Power and the roll-out of biogas plants at Australian agricultural facilities.

"Quantum is a market leader in the Australian biogas industry and has delivered more biogas projects in the food processing and intensive livestock industries than any other company in Australia," they said, adding that it is the only company in Australia to deliver projects across the rendering, abattoirs, pig production, layer chickens and dairy processing sectors.

Turning animal waste into biogas and distributed energy is environmentally useful work. Long patient investors need to see that the company can turn it into a profitable business. One upside for investors is that the biogas projects are much smaller and need far less time than geothermal energy projects so the picture should start to become clear in next 12 to 24 months. (ASX: GDY)





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