Eco Investor Update

A Weekly News Update for Environmental Investors

18 February 2013 - No 117

____ Core Securities ____

ASX 100

DUET Group
DUET Group recorded a loss after tax of $45.9 million for the half year to 31 December, which it said was mostly due to expenses of $98.1 million for internalizing its management.

Consolidated revenue was up 9 per cent and earnings (EBITDA) up 7 per cent.

Chief Executive Officer David Bartholomew said “Coupled with the recent internalization of DUET’s management team, this performance provides a platform for continued strong total securityholder returns.”

Earnings per stapled security were 9.3 cents and the interim distribution 8.25 cents. The full year distribution guidance remains at 16.5 cents.

DUET Group issued 11,098,092 securities under its Distribution and Dividend Reinvestment Plan for the interim distribution. The number of securities was capped at a participation rate of 25 per cent. Investors had applied for a participation rate of 35.9 per cent.

Three directors, Michael Bessell, Eric Goodwin and Michael Lee reinvested their distributions. (DUET)

Sims Metal Management
A Sims Metal Management special committee investigating inventory valuation issues in the UK business said a write down of inventory of $78 million is needed although the preliminary assessment was around $60 million.

$16 million of the write down will impact the December half results. The balance will be reflected in a restatement of prior period results.

There is also more clarity around a previously announced upcoming impairment of goodwill totaling $354 million. $291 million relates to North America Metals and will be recorded in the 2012-13 result. $63 million relates to UK Metals and UK Sims Recycling Solutions and will be reflected in a restatement of results for earlier periods.

The company will restate its results for fiscal 2012, 2011, and 2010. (ASX: SGM)

ASX 200

Envestra’s shares hit a new five year high of $1.01 on 11 February.

Ellerston Capital has increased its stake from 5.6 to 7 per cent. (ASX: ENV)

GWA Group
GWA Group’s shares hit a new one year high of $2.61 on 12 February. (ASX: GWA)

Emerging Companies

Reece Australia
Reece Australia’s shares hit a new one year high of $22.99 on 12 February. (ASX: REH)

Tag Pacific
Tag Pacific subsidiary MPower has won two power systems contracts with a combined value of $9.5 million, lifting to $29.5 million the total value of major new projects during the past six months.

The new deals are for BHP Billiton’s iron ore mines in the Pilbara and Chevron’s Gorgon LNG gas project on the North West Shelf.

The first contract is for the design, construction and supply of a black start and emergency power system for the Yarnima power station, which is being developed by the Forge Group for BHP Billiton. MPower’s system will be delivered over this calendar year.

The second contract for Chevron involves the design, manufacture and testing of two 2.5 MW generators with a 25 year design life for the Gorgon administration buildings. The generators will be delivered in late 2013 and are designed to operate in adverse conditions including category 5 cyclones.

“The two projects are further confirmation of MPower’s success in the provision of sophisticated power solutions for the resources sector,” said Tag’s chief executive, Nathan Wise. “MPower has a healthy project order book and has emerged as a leading tier one power systems supplier to the resource sector.

“The financial benefits of this project work will begin to have a positive impact on the company in the second half of the current financial year.”

Tag said two contracts signed by MPower in September and October last year for the Inpex Ichthys LNG project in WA are well advanced. The contracts are for the emergency power systems for the offshore facilities and are each worth up to $10 million.

MPower dispatched a 20 MW temporary power station for Chevron’s Gorgon project under an earlier contract, and site commissioning is expected to commence later this year. (ASX: TAG)

Tassal Group
Tassal Group had a good December half with net profit rising 22 per cent on the December 2011 half to $15.8 million. Revenue was up 5 per cent to $134.9 million. Gearing (net debt/ equity) fell to 23.7 per cent.

The interim dividend is 4.5 cents per share, up 0.5 cent or 12.5 per cent. It is unfranked.

Managing director and chief executive, Mark Ryan, said the results are a clear indication that the company’s infrastructure investment and focus on growing domestic market per capita consumption are the right strategies to deliver sustainable growth and increasing shareholder returns.
“As a result of the company’s successful marketing campaign, Tassal has been able to strongly grow domestic volumes through increasing per capita consumption. Importantly, the growth in domestic volumes has allowed us to strategically exit the lower margin export and contract growing markets.”

The company has generated a greater overall profit and greater profit per kilogram from selling less fish than the previous corresponding half, he said. The company’s growth over the past six months continues the trend over the past three first half results with earnings and cashflows growing strongly and sustainably and reducing debt.

“We are looking to implement further sustainability and environmental initiatives and are moving ever closer to achieving global best practice with respect to fish growing costs and processing costs and yields and recoveries,” said Mr Ryan.

Tassal Group’s share price has continued its recent rise and reached $1.82 on 14 February. (ASX: TGR)

____ Satellite Securities____

ASX 200

Transpacific Industries Group
Transpacific Industries Group’s chairman Gene Tilbrook and non executive director Bruce Brown are retiring from the board. Current deputy chairman, Martin Hudson, is the new chairman, while Mike Harding and Mark Chellew are new non executive directors. The changes are effective from 1 March.

Mr Harding is chairman of Downer EDI, a non executive director of Santos and Roc Oil Company and a former non executive director of Clough. He has held management positions with British Petroleum including president and general manager of BP Exploration Australia.

Mr Chellew is managing director and chief executive of Adelaide Brighton. He has over 30 years of experience in the building materials and related industries in Australia and the UK.

Mr Tilbrook said “Since I joined the board of Transpacific in 2009 we have progressed the transformation of the company, in particular the strengthening of its financial position and the establishment of an effective management team focused on the required operational and strategic directions for our businesses. I am confident that the Board, led by Martin with the addition of the significant operational experience of Mike and Mark, will be well positioned to continue its focus on strategies for the delivery of shareholder value.” (ASX: TPI)

Emerging Companies

Carbon Conscious
Shares in Carbon Conscious fell to a new all time low of 4.2 cents on 14 February. (ASX: CCF)

CBD Energy
CBD Energy Limited has issued 9,313,797 shares at 2.6 cents each, a total value of $246,264, to professional advisors and service providers as consideration for services provided to the company.

It has also amended the agreement with secured convertible note holders to remove some financial covenants in the original agreement. As part of this, it will issue up to 46,181,818 additional warrants at 2.75 cents and re price 50,016,604 warrants held by note holders to this level.

The Warrants can convert to ordinary shares. (ASX: CBD)

CO2 Group
CO2 Group has revealed its strategic vision for its new aquaculture subsidiary, WA Resources.

Its Project Sea Dragon is a land based aquatic production system that will produce 100,000 metric tonnes of prawns such as high value black tiger prawns for export. Development will be staged with a stand alone production unit in northern Australia starting at 3,000 hectares and growing to 10,000 to 15,000 hectares.

Expected project expenditure to the end of this year is around $6 million, and for stage 1 reaching around $400 million with annual expected revenue at full production of around $400 million per annum.

The company is in discussions with several potential partners and with CSIRO over long term research collaboration.

The aim is to develop a new and sustainable large scale aquaculture enterprise and industrialize what it says are Australia’s currently small and artisanal aquaculture operating models. It wants to scale up efficient production systems to deliver reliable, long term supplies of sustainable, high volume, quality seafood. (ASX: COZ)

Ecosave Holdings
Newly listed Ecosave made a net loss after tax of $949,700 for the December half, but said it remains well positioned to meet its prospectus forecast for 2012-13 of operating net profit after tax of $3 million.

Half year revenue was up 84 per cent on the previous corresponding half to $2.4 million. It has cash of $5.929 million. The loss included non recurring listing costs of $311,100.

Chief executive, Marcelo Rouco said “The first half loss is in keeping with our traditional revenue profile, where we book the overwhelming majority of revenues and profits in the second half of the year.”

“We are very pleased with our start to the year and we are confident in our prospectus forecast. The market for our services is growing strongly and we are well positioned to service it. Ecosave continues to grow rapidly as more corporations and governments unlock the cost savings of energy efficiency.” (ASX: ECV)

Shares in Greencap fell to a one year low of 5.3 cents on 11 February. (ASX: GCG)

Pacific Energy
Pacific Energy expects to pay a maiden franked dividend for 2012-13 after reporting a 21 per cent increase in half year profit to $3.3 million compared to the December 2011 half. Earnings per share were 0.95 cents.

The adjusted profit was $6.5 million before non cash amortization charges, non cash employee share and option expenses, asset sale gains and the related tax effect.

Revenue was up 20 per cent to $18.6 million.

Managing director, Adam Boyd said “Pacific Energy continues to deliver exceptional organic earnings growth, resulting in another record result for the period. The result reflects the robust performance of the Kalgoorlie Power Systems business which has commissioned 45 MW of new power station capacity since 1 July 2012. This new generation capacity, together with the planned completion of the 44 MW Tropicana Gold Project power station before FY13 end is expected to deliver new record earnings for the remainder FY13 and FY14.”

The company will then have total installed capacity of over 245 MW.

“We continue to evaluate and test new equipment that will further enhance the KPS reputation as the benchmark contract power supply partner to the Australian resources sector,” he said. “We are also focusing on initiatives to expand our service and supply offering to provide our clients energy infrastructure alternatives that can reduce mine operating costs.”

During the period the company also worked on the roll out of its waste heat recovery technology across its existing power stations.

The company said its dividend policy is under consideration. It will recommence the payment of income tax in February 2013 providing for franked dividends. The board intends to pay a maiden dividend after the end of 2012-13. The amount and the long term dividend policy will be announced along with the 2012-13 results in August. (ASX: PEA)

____ Pre Profit Securities ____

Micro Cap Companies

Australian Renewable Fuels
Australian Renewable Fuels has completed the $4.27 million placement 0.7 cents per share to Thorney Holdings Pty Ltd, Lignol Energy Corporation, Wentworth Holdings Ltd and other institutions and entities.

Lignol Energy has increased its interest from 14.8 to 17.7 per cent, and Wentworth has become a substantial shareholder with 6.5 per cent. (ASX: ARW)

Carbon Polymers
In response to an ASX query last November, Carbon Polymers has now received a formal valuation for assets held with a director’s valuation. The company had adopted a carrying value for the plant and equipment of $2.393 million, but the formal valuation for this is $3.352 million, an increase of $959,000.

The company will not revise its 2012 accounts but use it for the 2013 accounts, said chief executive, Andrew Howard. (ASX: CBP)

Nanosonics made a net loss of $6.01 million for the December 2012 half year compared with $3.01 million in the prior half year.

Revenue for the half year rose to $4.4 million compared to $2.797 million in the December quarter 2011 but fell compared to the $5.08 million in the prior half year.

The company has cash of $25.8 million.

Sales of consumables increased 98 per cent, reflecting the increased installed base of Trophon EPR units.

Chief executive, Dr Ron Weinberger said customer sales in North America grew significantly each quarter over the past 12 months and include prestigious reference sites that are helping raise awareness and acceptance of the Trophon EPR throughout that market.

Nanosonics is now well positioned to drive growth of the Trophon EPR in its key North American markets and is investing in sales and marketing activities in Europe together with an active regulatory approval program in the Asia Pacific region, he said. (ASX: NAN)

Orbital Corporation
Orbital Corporation’s share price spiked to a year high of 40 cents on 12 February. The year low was 13 cents in late October.

No Orbital news accompanied the latest rise, but a press release by the national peak body for gaseous fuels, Gas Energy Australia, said businesses that rely heavily on their cars to deliver their products and services are saving between $350 and $500 per car each month by converting their fleets to Autogas. It exampled Orbital subsidiary, Sprint Gas.

Gas Energy Australia is encouraging more taxi drivers, couriers, trades persons and small business owners to make the switch, citing the savings, the ease of installation and gas access, more stable pricing and the environmental benefits.

Mike Carmody, chief executive of Gas Energy Australia, said businesses which deliver goods or rely on road transport are suffering inflated fuel costs which are having a direct impact on profits. “With petrol at around $1.50 a litre in most areas, every kilometre is delivering unnecessary costs. Gas prices are half that of unleaded petrol, vehicle conversion kits are widely available for nearly every type of car, and government rebates of up to $2,000 are on offer,” he said.

Taxi companies have started reaping the cost savings by converting their hybrid and petrol only fueled car fleets to Autogas.

Shane Smith, owner of Gold Coast based taxi operator First Class Taxi Management, conducted research in London and Singapore before undertaking an Australian first for his industry and converting his hybrid vehicles to Autogas. With the help of Sprint Gas, an Autogas vehicle fit out company, Mr Smith undertook the Autogas conversion of a hybrid vehicle with what are said to be impressive results.

“Sprint Gas have helped change our business for the better by instaling conversion kits in the cars and programing them to switch from fuel to gas within seconds,” Mr Smith said. “Businesses who own large fleets or rely on road transport would be crazy to not consider swapping to Autogas.

“So far 10 of our cars have been converted and we are still going. We are saving $350 to $500 per car per month, which even after the instalation costs, puts us well in front, especially as we convert more of the fleet,” said Mr Smith.

Sprint Gas also provided an Autogas kit that Sunshine Coast instalers, Revolution Automotive, fitted to a vehicle owned by local taxi identity Clark Chappel. Converting his hybrid car to use Autogas enabled the vehicle to be fueled by petrol until the motor reaches 30 degrees Celsius, after which it is fueled by gas or electrical power.

The conversion reduced Mr Chappel’s monthly petrol cost by $400, taking it from $1,600 per month to $1,200 over the same distance.

Andrew Lees from Sprint Gas said “The customer will realize even greater savings by converting a non hybrid petrol car and can therefore future proof themselves from rising petrol prices.”

Gas Energy Australia is the national peak body representing downstream Compressed Natural Gas (CNG), Liquefied Natural Gas (LNG), and Liquefied Petroleum Gas (LPG). The Association says its focus is to help Australia achieve energy security and economic prosperity in a lower carbon economy. (ASX: OEC)

Phoslock Water Solutions
Phoslock Water Solutions raised $1.1 million through its recent rights issue at 4.6 cents per share. Directors Laurence Freedman, Robert Schuitema and Pam Allan participated. (ASX: PHK)

Electric scooter maker Vmoto is targeting to break even by 31 December this year based solely on current contracts, said director Olly Cairns.

The majority of the company’s business is a large order from Chinese firm PowerEagle and this is in the early stages of ramping up production to significant volumes.

This year it will launch three new models including the E Milan into Australia. Mr Cairns said the 80L model for city commuting will retail for around 1,500 in Europe or about $2,000.

In addition, the company plans to enter significant new markets that could include Indonesia, India, Malaysia, Egypt, and South America.

It hopes that current large trials in Europe, North America and Australia will materialize into orders, and it is targeting new significant customers in China.

Vmoto’s new Chinese factory has significant room to expand capacity, he said. This could be up to between 150,000 to 300,000 scooters per annum depending on the model. (ASX: VMT)

WestSide Corporation
WestSide Corporation has substantially upgraded its gas reserves with total 2P reserves up 34.5 per cent to 347 petajoules (PJ). 1P reserves rose more than six fold from 6.5 PJ to 47 PJ. 3P reserves increased 22 per cent to 885 PJ.

The upgrade follows a review of Meridian SeamGas 2012 production results in Qld by independent reserve certifiers MHA Petroleum Consultants.

WestSide’s chief executive, Dr Julie Beeby, said the report acknowledges the company’s achievements in bringing new wells into production at Meridian and extending the life and productivity of existing wells.

There remains significant upside to the current total reserve position, particularly to further increase 2P reserves through the conversion of 3P reserves from both upper seams and seams below 800 metres, she said.

The reserves increase confirms WestSide’s position as one of Australia’s leading listed junior coal seam gas companies with significant uncontracted 2P reserves just 160 kilometres west of Gladstone.

Dr Beeby also said that WestSide has made substantial headway progressing the Transitional Environmental Plan (TEP) work program to bring legacy dams and water management for PL94 into compliance with upgraded policy standards.

Works included the installation of a pilot water treatment plant that has the potential to treat water to a sufficient quality for beneficial use in the area. Discussions are underway with several potential water end users including nearby landholders.

Preliminary soil testing has been undertaken to determine the suitability for long term beneficial re use of the treated water.

The company has also completed the rehabilitation of the first decommissioned legacy evaporation dam and revegetation is well advanced.

Work commenced on Underground Water Impact Reports for other project areas. (ASX: WCL)

____ Pre Revenue Securities ____

Micro Cap Companies

Carnegie Wave Energy
Carnegie Wave Energy has revealed two new details of its wave to energy technology - that power output increases disproportionately and dramatically as the size of its buoyancy units increases, and that it is working on a design option to generate power offshore which would free the system from needing to be close to land and make it compatible with offshore wind farms.

Speaking at a shareholder information session to support its current share purchase plan, managing director, Michael Ottaviano, said the company’s CETO technology has great scalability. As the diameter of the buoyancy unit increases, it gives dramatic increases in power output due to the greater volumes of water that it can pump.

He said the early buoyant actuator of around 1.8 metres in diameter generated about 1.5 kW while the 10 metre CETO 4 unit to be deployed at Reunion Island will generate around 150 to 180 kW. The 11 metre CETO 5 unit at the Perth Wave Energy Project will generate between 200 to 240 kW.

A new public chart shows that dramatic increases in power output are possible as the units are scaled from 10 metres to 30 metres in diameter. The chart shows that seven fold increases in annual kilowatt hour production are possible at these sizes - much larger than the proportional increase in diameter. However, Carnegie has declined to give the actual power outputs as the diameter increases.

The chart suggests that the optimal diameter for most efficient output is around 30 to 40 metres. The different sizes would also give Carnegie options to design buoyant actuator models and wave farms to suit requirements.

Wave height and the period between waves also affect energy production, said chief operating officer, Greg Allen.

The idea of offshore power generation follows developments in offshore wind farms where an offshore transformer next to the turbines steps up the voltage. A similar offshore structure would allow Carnegie to generate power offshore rather than pipe water to land and back, and would only need a cable to land the electricity.

This means that the wave farm could be sited much further out to sea and also as part of an offshore wind farm. Again, it increases Carnegie design options.

Mr Ottaviano said the Perth Wind Farm would not be profitable, but declined to say how much revenue it would generate.

Again, in response to a question by Eco Investor, he said that The Lind Partners, which manages the Australian Special Opportunity Fund, has converted about $1.2 million of their equity facility into shares and he believes that they still hold this amount and have not dumped the shares on market. (ASX: CWE)

Greenearth Energy
Shares in Greenearth Energy fell to an all time low of 2.9 cents on 14 February. (ASX: GER)

MediVac and its subsidiaries have moved office to Level 31, 88 Phillip Street, Sydney, which it said will save it about $140,000 per year. (ASX: MDV)

Shares in Metgasco fell to an all time low of 13.5 cents on 12 February. (ASX: MEL)

Panax Geothermal
Shares in Panax Geothermal are in a trading halt pending an announcement about capital raising initiatives and other corporate matters. (ASX: PAX)

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