Eco Investor Update

A Weekly News Update for Environmental Investors

24 December 2012 - No 112

The next Eco Investor Update will be on Monday 21 January 2013. A Merry Christmas to all readers.

____ Core Securities ____

ASX 100

APA Group
APA Group and AGL Energy have completed limited-recourse project financing of the 242 MW Diamantina Power Station (DPS) and 60 MW back-up generation capacity at Mount Isa.

The DPS is being developed through the 50:50 jointly owned Diamantina Power Station Pty Ltd. The total capital expenditure including the back-up generation is expected to cost $570 million. APA's equity contribution should be about $100 million and will be funded from cash and committed facilities. The DPS is expected to become fully operational in the first half of 2014.

APA Group has changed the names of Hastings Diversified Utilities Fund to APA Sub Group. The trusts that comprise HDF have been renamed as follows: HDUF Finance Trust to APA Sub Trust No 1; HDUF Epic Trust to APA Sub Trust No 2; and HDUF Further Investments Trust to APA Sub Trust No 3. (ASX: APA)

DUET Group
DUET Group has canceled its undrawn $200 million revolving corporate debt facility due to mature in June 2014, saving it $2 million per year in commitment fees.

Subsidiary, Dampier Bunbury Natural Gas Pipeline has a new four year $170 million bank debt facility that will be used to repay DBP's remaining maturing term debt in 2013 and other debt facilities. DBP has raised $625 million in 2012 and has no further term debt maturities until October 2014. (ASX: DUE)

Sims Metal Management
Sims Metal Management now expects first half 2012-13 underlying earnings (EBITDA) to be in the range of $110 million to $120 million, about 20 per cent lower than the previous guidance.

The change is due to "continued challenging market conditions" that relate "primarily to SimsMM's assessment of recent intake volumes and its anticipated shipping program, particularly for deep sea ferrous products, forecasted for December 2012".

"Whilst recent positive economic signals in the US, including declining unemployment, positive consumer confidence data and increasing industrial production, are encouraging, the direct benefit to intake volumes and metal recycling margins typically follows at a lag which will not benefit SimsMM through the 31 December 2012 period," it said.

SimsMM expects to release its first half results on 15 February. (ASX: SGM)

ASX 200

Envestra's shares reached a new four year high of 97 cents on 19 December. (ASX: ENV)

GWA Group
GWA Group's shares continued to climb since it announced a cost cutting restructure on 12 December and have now spiked from $1.87 to $2.29. (ASX: GWA)

Emerging Companies

Energy Action
Energy Action's shares touched a new all time high of $3.47 on 17 December. (ASX: EAX)

ERM Power
Oceaneering Services Pty Ltd has won the contract to commission, operate and maintain the Red Gully Gas and Condensate Processing Facility near Gingin WA in which ERM Power is a joint venture partner. (ASX: EPW)

Tag Pacific
Tag Pacific now expects to report a loss for the December half.

The company said day-to-day sales of the core distribution products of its subsidiary MPower continue to be impacted by economic conditions including an industry-wide downturn in the residential rooftop solar market.

"The company is gearing up its human resource base to ensure delivery of the two recently awarded Inpex Ichthys contracts – worth up to approximately $20 million combined – and has also incurred one-off integration costs associated with MPower. It is likely that a loss will be reported in the company's first post-integration half-year result, scheduled to be released in late February 2013.

"However, the current trading environment is being offset by a number of positive factors which indicate that the outlook for the second half of the 2013 financial year is more positive."

These include cost savings and sales increases in the pipeline, including reduced operational expenditure and a reduction in staff numbers in some less productive areas which offset recruitments where prospects are more buoyant.

The financial benefits from the two Inpex Ichthys projects will start to be seen from the second half of 2013. "When combined with other pending, large-scale contracts – totaling approximately $10 million – and initiatives under negotiation, it is likely that the project order book will hit record levels by the end of the third quarter," it said.

MPower has formed an exclusive alliance with Pramac, a European generator manufacturer, for MPower to market Pramac's range of power systems in Australia, New Zealand, PNG and the Pacific Islands, and this will help expand MPower's standby and portable generator activities.

The alliance will commence in January and is expected to add to profitability after an initial lead-in period. (ASX: TAG)

Unlisted Property Funds

Aspen Parks Property Fund
In November Aspen Parks Property Fund sold its Wymah Valley Holiday Park in NSW for $2.5 million, an 11 per cent increase on its book value of $2.25 million. The property was purchased in 2006 and was the smallest in the Fund's portfolio. The manager said its sale reflects the Fund's strategy of diversification and maximization of returns. The proceeds will be used to reduce the Fund's debt.

In September Aspen Parks released a new Offer Document for investors.

____ Satellite Securities____

ASX 300

Infigen Energy
Infigen Energy has welcomed the recommendations of the Climate Change Authority's (CCA) final report on the Renewable Energy Target, endorsing the key recommendations and in particular a continued fixed GWh target for large scale projects. This is essential for the scheme to meet its objectives to grow renewable energy investment at least cost, it said.

The recommendations increase regulatory predictability critical for the renewable energy industry in Australia, said Infigen.

The CCA said the scheme is delivering the worthwhile benefits intended, while its independent modeling confirms that the total cost of the RET scheme to electricity consumers is very modest at $12-$64 per annum, depending upon assumptions used. (ASX: IFN)

Emerging Companies

CBD Energy
CBD Energy has sold its first large scale solar project in Italy to a UK institution for $15.3 million. This will enable CBD to retire $10.8 million of short term construction finance debt from its balance sheet and reduce current liabilities, as well as further reduce bank debt in the Group.

The same institution has also signed a binding Framework Agreement for a further 25 MW of solar projects in Europe. The institution will pre-commit on a project by project basis after each due diligence process. CBD expects to commence constructing the next 5 MW project under this arrangement in early 2013.

Separately, CBD has signed documents for a 4 MW extension to the 8 MW solar project it built in Thailand 18 months ago. The extension is due to commence in early 2013 and be completed within 2012-13, enabling it to contribute to full year earnings.

Managing director, Gerry McGowan, said the international progress underlines the value of CBD diversifying across renewable energy projects and geographical locations. "These projects also provide valuable reference sites that demonstrate the considerable delivery capability we have built over the past two years. Both these projects will positively contribute to this year’s results," he said. (ASX: CBD)

Unlisted Investment Companies

August Investments
August Investments said it sees "no light at the end of the tunnel for would-be geothermal explorer Petrotherm" and has sold out of the stock.

____ Pre-Profit Securities ____

Micro Cap Companies

Australian Renewable Fuels
Australian Renewable Fuels has released its Bidder's Statement for its off market takeover of Wentworth Holdings Ltd and Wentworth has released its Target Statement. Wentworth's independent expert, Leadenhall, says the offer is fair and reasonable. The Wentworth board unanimously recommends shareholders accept the offer. (ASX: ARW)

Cardia Bioplastics
Biodegradable plastics maker Cardia Bioplastics closed its share purchase plan on 20 December but will not announce the results until 27 December.

The company has also placed 200 million shares at 0.2 cents each to raise $400,000. The placement was to sophisticated investor Richard Tegoni, who has become a substantial shareholder and will hold direct and indirect equity interests of 12.49 per cent before allotment of the share purchase plan shares.

Mr Tegoni has also been appointed a non–executive director. He has a Masters of Business Administration, Diploma in Mortgage Broking, and a Diploma in Financial Markets. His background is in finance, banking and sales and marketing.

Cardia's shares are in a trading halt pending an announcement.

In other news, Cardia and partner University of Sydney have won Australian Research Council funding for research into a cost-effective biomimetic that has the potential to treat many bone diseases such as osteoporosis.

Cardia said the partnership will allow it to extend its environmentally-friendly PPC-starch blended resin into biomedical products and regenerative medicine such as tissue scaffolds and drug delivery agents.

Chairman, Pat Volpe, said "This opportunity provides a unique facility and platform to develop cutting edge research for the Australian industry. This research will allow us to design and develop a world-first clean technology for the synthesis and purification of a biohybrid and biodegradable polymer.

"The development of this breakthrough clean technology will transform Cardia's bioplastic starch blended products which are used in the plastics and packaging industry, into a multi-purpose and global "green friendly" product that can be used across many other applications and products.

"The research will create the potential to develop a world-first internationally accredited compostable PPC polymer."

The development aims to reduce the level of heavy metals, in particular zinc glutarate used in sustainable resin PPC polymers, to meet international compostability accreditation

"Importantly, this aims to manufacture purified polymer products with less petroleum and put CO2 to good use, rather than emitting it into the atmosphere or storing it underground. Converting carbon dioxide and carbon monoxide from pollution into valuable materials has the potential to transform the plastics and materials landscape on a global scale," he said.

The company has commenced discussions with petrochemical companies that are looking at ways to turn their CO2 emission into a business prospect. PPC resins use less virgin oil and have a lower carbon footprint, and Cardia now has the potential to develop PPC resins with low impurities. (ASX: CNN)

Clean Seas Tuna
Clean Seas Tuna is to suspend its Southern Bluefin Tuna propagation program until it can afford to recommence it.

The company said spawnings commenced in October but the volume and quantity of fertilized eggs compared to prior seasons has been disappointing and it does not expect to be able to transfer fingerlings to sea cages for experimental grow out early enough in the season to achieve its goal of juvenile winter survival.

Given its limited financial resources and need to preserve liquidity, the company anticipates suspending its Tuna Propagation Program for at least the 2013-14 summer, and to direct its resources to its Yellowtail Kingfish operations.

"Whilst the company continues to believe in the commercialization potential of the successful closure of the SBT lifecycle, investment beyond the company's current financial resources will be required for this goal to be achieved," said chief executive officer, Craig Foster.

"Directors believe it prudent to write down the significant investment in this project as at 31 December 2012 to an estimated net realizable value, in case the funding is not available in the future to re-activate this program. The net impact on 1H 2013 results is likely to be in the order of $30 million, a non-cash outgoing."

The company has been unable to secure a strategic partner willing to make a significant investment in Clean Seas given the present investment climate, the previous ongoing funding requirement of the SBT propagation program and the significant prior losses arising from excess mortalities in the Yellowtail Kingfish division.

The board and management are now directing their attention to the company's survival.

It is planning to either continue with a further scaled down Yellowtail Kingfish division in its own right, or in joint venture with a domestic partner. The contract with the company's external financial advisors concludes on 31 December and discussions will then be held with a shortlist of identified potential domestic aquaculture partners.

Some good news is that since the addition of Taurine to all Kingfish feed there has been a dramatic and sustained recovery in fish health.

The company has cash of $3.9 million, and is largely debt free.

"With the Kingfish growth season now commencing in earnest, cash limitations will necessitate either Kingfish volumes being further reduced or the company will need to be successful in securing a domestic Yellowtail Kingfish joint venture partner," said Mr Foster.

No rights issue is planned at present, but the board is considering other capital and debt raising options including the possibility of a share purchase plan early in the new year, he said. (ASX: CSS)

Po Valley Energy
Po Valley Energy deputy chairman Michael Masterman has indirectly acquired 150,000 shares at 11 cents each. (ASX: PVE)

____ Pre-Revenue Securities ____

ASX 100

Lynas Corporation
Shares in Lynas Corporation fell to a two year low of 55 cents on 17 December. Two days later on 19 December Lynas and the Malaysian government successfully defended another challenge by the Save Malaysia Stop Lynas (SMSL) group to Lynas' Temporary Operating Licence (TOL).

The Malaysian Court of Appeal dismissed the appeal with costs in favour of Lynas pending a judicial review hearing in 2013.

The judicial review application is scheduled to be heard by the Kuantan High Court on 5 February 2013. The Malaysian government and Lynas intend to strongly defend the process undertaken by the minister of Science, Technology and Innovation in dismissing the appeal under the Atomic Energy Licensing Act.

There is no injunction or stay preventing Lynas from carrying out its operations at its Malaysian plant.

Lynas raised $25 million under its share purchase plan at 56 cents per share.

Lynas director Kathleen Conlon has indirectly acquired 111,361 shares at 56 and 59 cents each. (ASX: LYC)

ASX 300

Dart Energy
Maria's Farm Veggies Pty Ltd (MFV), which is 20 per cent owned by Dart Energy and 80 per cent by Horticulture & Energy Investment Company Australia (HEICA), has secured Development Approval to construct its $65 million horticultural glasshouse at Fullerton Cove.

Dart has a conditional Gas Sales Agreement (GSA) with MFV to supply gas from PEL 458 at Fullerton Cove. The 16.4 hectare glasshouse will employ over 125 people during construction and from early 2014 is expected to initially produce up to 8,000 tonnes of quality organic tomatoes and 1,500 tonnes of capsicums each year for sale to local markets.

MFV has acquired a 93.6 hectare property where the glasshouse will be located, and has provided notice to Dalsem Horticulture Projects to commence construction immediately.

MFV's gas fired boilers will produce enough heat to maintain optimal temperatures in the glasshouse and CO2 produced from the heating will be captured to feed the crops and significantly enhance production yields. Water produced from the coal seams during the initial phases of gas extraction will be treated and used to irrigate the crop. It is expected that the sequestering of carbon and the use of treated water will ensure the project has near zero emissions of CO2 and is virtually self-sufficient in water.

If the pilot project is successful and a production licence is granted, Dart will supply MFV with an initial 1 PJ of gas over 10 years which will be priced at $7.50/GJ and indexed to CPI. The GSA allows for an increase in supply of CSG up to 6 PJ if the MFV project is expanded to include an 8 MW combined heat and power plant.

Dart Energy Australia's chief executive, Robbert de Weijer said gaining the DA for MFV is a significant milestone towards the development of the project, which will be a great example of innovative commercialization, job creation, sustainability and co-existence between the gas and agricultural industries. (ASX: DTE)

Galaxy Resources
The M&G Investment Funds group has reduced its stake in Galaxy Resources from 19.4 to 18.6 per cent. (ASX: GXY)

Micro Cap Companies

Shares in Actinogen fell to a new all time low of 1.2 cents on 21 December. (ASX: ACW)

BluGlass has received total tax rebates of $2,335,957 for R&D activities in 2011-12. Chief executive, Giles Bourne, said "This is a significant cash injection for BluGlass and it will greatly assist the company in the commercialization of its ground breaking technology." (ASX: BLG)

EnviroMission said it has engaged law firm DLA Piper to prepare the Heads of Agreement to grant an exclusive Solar Tower power station development license for Texas to a Texas development entity. This should be executed by 31 January 2013.

The Agreement will include the terms and conditions set out in the MOU announced to the ASX on 10 December, and the rights and obligations of both parties.

EnviroMission is to receive a US$2 million development fee; the first tranche of US$200,000 to be received by 31 December and the balance in instalments by 30 June 2013.

EnviroMission will own 20 per cent of the ‘Texas Solar Tower' development company in the first instance. This holding will not be diluted to less than 10 per cent and will then be free carried and non-diluting, said executive chairman, Roger Davey.

EnviroMission will also receive an annual technology fee for each Solar Tower development delivered by the development company, although the fee is confidential.

"This is a landmark agreement that meets EnviroMission's objective for Solar Tower development in multiple US markets via joint venture and development license agreements and will provide vital operational revenue for EnviroMission's Arizona (La Paz) Solar Tower development through non-equity development capital," said Mr Davey. (ASX: EVM)

Liquefied Natural Gas
Liquefied Natural Gas said its subsidiary, Magnolia LNG LLC, has filed an application with the US Department of Energy, Office of Fossil Energy (US DOE/FE) to export up to 4 million tonnes per annum (mtpa) of LNG to countries that have Free Trade Agreements (FTA) with the US.

Magnolia LNG has executed an exclusive site access agreement with the Port of Lake Charles Harbour & Terminal District in Louisiana where it is proposed to develop a 4 mpta LNG production and export facility.

The site has direct access to underutilized gas pipelines which directly access the US gas market; and Magnolia LNG has commenced discussions with several potential partners on a draft Tolling Agreement. The company expects DOE/FE approval in February or March 2013. (ASX: LNG)

Former chairman Paul McPherson has resigned as a director of MediVac. (ASX: MDV)

Shares in Metgasco fell to an all time low of 15 cents on 17 December. (ASX: MEL)

Panax Geothermal
Panax Geothermal has issued 50 million shares at 0.1 cent each under its placement facility with Deer Valley Management LLC. Panax's shares are trading at their all time low of 0.2 cents and on record high volume. (ASX: PAX)

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