Eco Investor Update

A Weekly News Update for Environmental Investors

29 November 2010 - No 11

ASX 100

The chief executive of DUET Group, Peter Barry will retire from the position and full time employment next February. The new CEO is chief operating officer, David Bartholomew. Mr Bartholomew has been COO since 2006.

Also in February, John Roberts, executive chairman of Macquarie Funds Management, will replace Philip Garling as chairman of DUET. He will remain on the board.

DUET's final distribution for the six months to 30 June is maintained at 10 cents per stapled security.

The Group's growth strategy is through organic growth of its assets - the contribution of the Stage 5B expansion of the Dampier Bunbury Pipeline, the Smart Meter roll-out and 2011-2015 regulatory growth capital expenditure program for United Energy, gas marketing to Multinet's South Gippsland residents, and connection and network expansion of WA Gas Networks.

It will also look at opportunities to expand its regulated asset bases.

United Energy is appealing the Australian Energy Regulators' final Electricity Distribution Price Review, which could affect its cost of capital, operational expenditure, S-factor penalty and asset based indexation. (ASX: DUE)

ASX 300

Ceramic Fuel Cells
Ceramic Fuel Cells will begin assembling BlueGen units at its new manufacturing facility in Heinsberg, Germany from January 2011. The plant already produces fuel cell stacks.

Chairman, Jeff Harding, said the German plant is now operational, but there are challenges with commissioning the large furnaces to increase output.

In the meantime it is making fuel cell stacks using smaller furnaces at the site, as well as at its Melbourne plant.

To scale up the new plant to meet the expected German demand, the company has hired additional staff, with numbers going from six to 14.

The company is working to reduce the number and complexity of components in the BlueGen unit. (ASX: CFU)

Geodynamics has appointed Geoff Ward as its new chief executive officer and managing director, starting 31 January 2011.

He takes over from Dr Jack Hamilton, who has been in the position on an interim basis and resumes his role as a non-executive director.

Mr Ward was most recently a director and partner of Azure Capital, a Perth independent corporate advisor for the resources and engineering industries. He has 15 years experience in the oil and gas industry in senior roles covering business development, mergers and acquisitions, operations, oil and product trading, strategic and organizational development, planning and economics, investor relations and new project development.

Mr Ward has an honours degree in Chemical Engineering and a Master of Business Administration.

At an operational level, the Innamincka ‘Shallows' Joint Venture is to commence exploring for a hot sedimentary aquifer, with drilling to start in mid December. The initial drilling is for two wells about 2 kilometres deep. These will test for temperature, porosity and permeability, with results due in the first half of 2011. The expected temperatures are 130–145°C at depths of around 2,000 metres. The target geothermal potential is 300+ Mwe.

Geodynamics said the ‘Shallows' project diversifies its geothermal portfolio and has the potential to deliver geothermal electricity production earlier than its Deeps project.

The company has also released its four year forward work program for its Queensland acreage. Its aims to complete research and gravity surveys, run a seismic survey, determine the temperature gradients and heat flows, drill to granite and carry out fracture and temperature logging, and prepare a feasibility study for commercial development.

In March 2010 Geodynamics won a grant under the Queensland Government Drilling Initiative to cover 50 per cent of the drilling cost of four temperature gradient wells in EPG 006. The wells will be 500 metres deep and 50 mm in diameter. (ASX: GDY)

Tassal Group
Orbis Investment Management continues to edge up the Tassal share register, increasing its holding from 15.6 to 16. 6 per cent since mid October.

Tassal's share price has come off its recent four year low of $1.36 and is trading at around $1.50. (ASX: TGR)

Tox Free Solutions
Tox Free Solutions faces a possible $1.2 million hit to its net profit after tax with one of its customers going into liquidation. The work was for a one-off emergency and not a recurring revenue stream, it said. Last year's net proft after tax was $9.2 million. (ASX: TOX)

Emerging Companies

CBD Energy
CBD Energy is to establish a solar manufacturing business in Australia in partnership with Chinese electricity group, Tianwei, a Fortune 500 company.

The new business will give CBD's subsidiary, eco-Kinetics, the right to manufacture solar PV modules using Tianwei's technology and branding.

Tianwei will initially own 5 per cent of the joint venture, and increase this to 51 per cent when it has gains Australian and Chinese government approval, possibly in March 2011.

CBD expects the new business to achieve annual production of 50 MW, representing approximately $100 million in revenue.

Managing director Gerry McGowan the arrangement will make CBD Australia's first integrated solar company - a manufacturer of solar modules, inverters and racking as well as an installer, servicer and wholesaler.

CapTech is now making inverters but needs about $2 million to expand production.

Mr McGowan said the company is also negotiating to buy some substantial wind farm developments in NSW and Victoria with total project size of 1,250 MW.

However CBD will not proceed with the wind development at Shannons Flat as it is not economic. (ASX: CBD)

Clean TeQ Holdings
Market demand for environmental services has weakened, says Clean TeQ, which now expects lower sales and a loss for the current financial year.

Th reduced demand is due to lower government spending after a high spend in 2009-10, price competition from Asian companies and the high Australian dollar, and low business confidence leading to deferred capital programs in the environmental area, said chief executive, Peter Voigt.

The company is responding by diversifying its customer base to achieve a balanced mix across the municipal, industrial, mining and energy sectors. It also wants to extend its geographic reach and product range, reduce manufacturing costs, and make acquisitions to gain size and market position. (ASX: CLQ)

Environmental Group
Environmental Group says that over the past 12 months it has made a substantial contribution the environment, having helped to remove 7 million tonnes of dust and 100,000 tonnes of air pollutants including nitrous oxide, sulphur dioxide, hydrogen sulphide and volatile organic compounds.

It also treated 12 gigalitres of liquid effluent or about 5,000 olympic swimming pools worth, and removed half a million tonnes of biosolids as well as quantities of ammonia, phosphorus and manganese. (ASX: EGL)

Micro Cap Companies

Advanced Engine Components
With cash of $244,000 at the end of the September quarter, Advanced Engine Components received a query from the ASX about its ongoing viability.

The company responded that R&D rebates plus a letter of credit should assist with funding an increasing supply of components to India, France and Thailand.

The company has also arranged a $600,000 working capital facility through its two largest shareholders. The interest rate is 8 per cent and the facility is repayable by 31 December 2011. Together with the rebates/ grants it should have at least $1.1 million of working capital.

The working capital facility is to fund the delivery of 100 natural gas vehicle systems (NGVS) to China, 14 engines with NGVS to Thailand, 3,500 electronic control units to India, and 2,500 injectors to France.

Sales are increasing, it said, and by 23 November were 50 per cent ahead of the September quarter. (ASX: ACE)

Aeris Environmental
Aeris Environmental has provided Lonza Inc., a subsidiary of global life science company Lonza Group, with a non-commercial R&D license to support an initial collaborative development to evaluate technical and commercial opportunities around some of Aeris' microbial control technologies.

Lonza produces a range of biocides and a leading world supplier to the pharmaceutical, healthcare and life science industries. This includes chemical and biotech ingredients to the nutrition, hygiene, preservation, agro and personal care markets.

Lonza is headquartered in Basel, Switzerland and listed on the SIX Swiss Exchange.

Aeris chief executive Huw Jones says the global demand for microbial control across a broad range of sectors and markets is growing exponentially due to increasing awareness of the impact of microbial contamination on occupational health and safety, productivity, system efficiency and energy consumption. (ASX: AEI)

AnaeCo is to raise up to $2 million via a placement for short term working capital.

The company received a query from the ASX about its low cash position, and replied that along with the placement it also expects to have lower expenditure going forward.

However, the company will now not receive an early milestone payment for engineering services to the Perth waste facility. Payments for engineering services have been restructured to be dependent on achieving project cost outcomes relative to budgeted cost.

Directors Ian Campbell and Les Capelli have agreed to extend the repayment date for loans they have made to the company.

AnaeCo has released a new video of its DiCOM system in Perth. The video aims to increase understanding of the system's technology and capability, and how it can divert significant waste going to landfill and produce by-products including biogas and compost. The video is on AnaeCo's web site. ASX: ANQ)

Apollo Gas & Dart Energy
Dart Energy has received acceptances for 91.7 per cent of the shares in Apollo Gas. It has extended the takeover offer to 2 December.

Apollo shareholders receive three Dart shares for every four Apollo shares and three comparable Dart options for every four Apollo options. Apollo floated in December 2009 at 20 cents per share.

At Dart's current share price of around $1.225, four Apollo shares bought at the IPO for 80 cents are worth $4.90. (ASX: AZO and DTE)

Clean Sea Tuna
Clean Seas Tuna's efforts to breed southern bluefin tuna are now more important than ever with southern bluefin tuna listed as a conservation dependent species under environment law by Federal environment minister Tony Burke.

"I have taken the advice of the independent Threatened Species Scientific Committee and listed southern bluefin tuna under the category it was nominated for—conservation dependent," he said.

"The species has declined in the past, and while ongoing improvements in management measures are helping to stabilize the population, the breeding population is still considered to be less than eight per cent of unfished levels.

"This listing will not prevent or restrict fishing or create additional regulatory burden on the industry. Fishing can continue under existing arrangements but it will now be a legal requirement that the species remain under a plan of management that includes actions to stop its decline and support its long-term recovery.

"Australia's tuna fishers are already working towards sustainable management, such a plan is already in place."

Mr Burke said that Australia is also involved with the Commission for the Conservation of Southern Bluefin Tuna—the group of countries that sets global southern bluefin tuna catch levels and oversees the global management of the species.

"Because of its highly migratory nature, a global management strategy is the only way to help the recovery of southern bluefin tuna. A ban on southern bluefin tuna fishing in Australia would not necessarily result in a reduction of global catch, as the global catch limit may not change."

Mr Burke said Australia supports recent measures the Commission has put in place to develop a strategy to rebuild the population and to reduce the global catch by 20 per cent over the 2010 and 2011 seasons.

"At the 2010 Commission meeting in October, member countries re-affirmed their commitment to adopt and implement a strategy to rebuild the southern bluefin tuna spawning stock in 2011, which will be used to set future global total allowable catch for 2012 and beyond," said Mr Burke. (ASX: CSS)

Dyesol and the National Institute for Materials Science (NIMS) Japan are to collaborate in a three year program to deliver what they say is the next generation of highly efficient dye solar cell (DSC) materials and technology. This will feed into Dyesol's commercial partner projects, including two key partners, Tata Steel Europe and Pilkington North America.

The work will be undertaken at the NIMS research facility in Tsukuba near Tokyo. It will be directed by Dr Liyuan Han of NIMS, a leader in DSC research worldwide, and Dyesol's Dr Gavin Tulloch. Dr Han was principle researcher of the Advanced Energy Laboratories, Sharp Corporation, Japan, from 1993 to 2008 and holds the world record for DSC efficiency of 11.1 per cent.

Dr Tulloch, Dyesol's director of Technology, said "This project seeks to extend the boundaries beyond the efficiency levels achievable with thin film PV devices based on CIGS (copper indium gallium diselenide) or CdTe (cadmium telluride).

"In contrast to these technologies, DSC does not rely on significant quantities of toxic materials (such as cadmium) or rare materials (such as indium, gallium, tellurium) and offers the shortest energy payback rates because DSC uses significantly less energy in manufacture, can operate in any light conditions and because DSC emulates photosynthesis, so it works all day every day". (ASX: DYE)

European Gas
European Gas is to restructure its balance sheet and has appointed the Paris office of Alvarez and Marsal to advise and develop proposals.

The company is also looking at options to repay or refinance the convertible notes held by Transcor Astra Group. (ASX: EPG)

Utilities management services provider, Intermoco has signed an agreement with R Corporation to supply an embedded network to a 211 unit development in Melbourne.

The five year contract, with option for another five years, is for the provision of electricity, telephone and internet to the Clara Apartments in South Yarra. Intermoco expects the contract to generate up to $2.5 million over the first five years with upfront capital costs of about $150,000.

R Corporation is a Melbourne based property development company with a large portfolio of residential, commercial and mixed use developments. Intermoco said the agreement is the initial contract in a strategic partnership that will provide it with additional Embedded Network contract opportunities.

Intermoco says that four of its previously announced Embedded Networks will start to generate revenues in the next quarter.

The agreement with Ravida will provide $200,000 over the five year contract, with initial revenue to be generated early January.

Revenue from the $1.2 million five year contract with Lynch Street Apartments and the $580,00 contract with Vivida will begin to be received in mid-January.

Revenue from the $2.7 million contract for the Bell Street Preston development is expected in February 2011.

Intermoco chairman Andrew Plympton said the establishment of a strategic partnership with R Corporation adds to the company's stable of strategic property development partners.
"Our access to project flow will be significantly enhanced, and we expect to be booking initial revenues from the Clara Apartments contract in January 2011.

"Intermoco is currently in advanced negotiations with a range of property development companies for Embedded Network contracts and will be updating the market shortly. Demand for our Embedded Network Service remains extremely buoyant, and we expect our pipeline of contract opportunities to continue growing in 2011." (ASX: INT),

KUTh Energy
KUTh Energy's managing director, David McDonald, has been elected chairman of the Australian Geothermal Energy Association (AGEA).

Mr McDonald said geothermal has a key role to play in the renewable energy space. However "This is a very difficult period for the geothermal industry and it will be of critical importance that we develop a pathway for future growth."

On the the importance of government initiatives in the sector and the effect of long term government policy on climate change, Mr McDonald said "Our industry is still a very young industry and in these early pioneering years there is a key role to be played by government. Clear signals to the investment community surrounding carbon pricing and support initiatives are crucial to an industry at our stage of development.

"Geothermal development is capital intensive in the exploration and demonstration phases but then has lower operating costs as projects move through commercialization and scale up. It is in this early stage of proving the enhanced geothermal concept in Australian conditions, that government support will be important."

He said the key to commercialization is to have the strong support of investors and a framework to work closely with government to bridge any investment market gaps at this stage of the technology's development. (ASX: KEN)

Marine Produce Australia
Marine Produce Australia has appointed Justin Clarke as managing director. Mpa said Mr Clarke is well known in the local government and business community of the Kimberley region of WA, is highly regarded by the board, and has experience in Cone Bay with Maxima Pearling Company in their pearling operations.

Mr Clarke a business degree and joined Kimberley Diamond Company in 1995 working in exploration and later qualifying as a mine manager. He became a director of Blina Diamonds NL, which was majority owned by Kimberley Diamond Company. He later joined Sandfire Resources as operations manager.

Dr Tor Theunissen has retired as a non-executive director of MPA, due to other increasing business commitments.

MPA's aquaculture operations are in the Kimberley. Its flagship brand is the Cone Bay Ocean Barramundi. It will produce 1 million kilograms in 2010-11 and is targeting 2 million in 2011-12. (ASX: MPA)

The issue price for MediVac's share purhase plan is 1.1 cents per share, the same as for the recent finance facility provided by Dutchess Capital. Shareholders can buy shares in lots of $2,000, $5,000, $10,000 or $15,000.

The funds raised will be used to complete development and testing of the new MetaMizer 240 SSS biohazrdous waste converter prototype, build sales inventory for domestic and export markets, and provide marketing support.

It will also build inventory for the rollout of SunnyWipes new antimicrobial gel through domestic professional healthcare channels and for export orders, fund further product development with SunnyWipes, and provide marketing support in domestic and export markets.

MediVac will also undertake capital management measures and loan repayments where appropriate. (ASX: MDV)

Mission NewEnergy
Mission NewEnergy is eyeing what it sees as the lucrative new market for crude jatropa oil (CJO) presented by the successful testing of biojet fuel in international airlines.

Managing director, Nathan Mahalingam, said the International Airline Transport Association (IATA) is encouraging the use of a 10 per cent blend of aviation biofuels from 2017 that could make annual market demand at least 150 million barrels. The IATA is expecting certification by 2011 at the latest, and he quoted the IATA as saying "Aviation biofuel is a US$100 billion plus business opportunity".

In addition, "The European Union has released a 94-page list of airlines that must reduce their emissions by 1 January 2012 or they will be banned from European airports. Airlines that must reduce their emissions include some commercial airline giants like United Airlines, US Airways, Lufthansa, KLM, Alitalia, and Emirates. The list also includes the US Navy and the Air Forces of Israel and Russia," he said.

"Many new technologies are rapidly being developed that will enable inedible oils such as Jatropha to be processed for new applications such as aviation biofuels. Without doubt, JCO will become a more versatile and valuable feedstock as new applications are developed. Mission as one of the largest Jatropha growing companies in the world is in a very strong position to enjoy the tremendous growth opportunities that these new applications will bring."

Meanwhile Mission will focus on several key areas in 2011.

It wants to start delivering into the Valero contract for the annual supply of up to 200,000 tonnes (60 million gallons) of biodiesel per year. This represents potential gross revenue of over US$3.5 billion based on prevailing market prices.

The introduction by the United States of the Renewable Fuels Standard 2, which mandates increased use of biodiesel, initially only allowed soy oil, used cooking oil and tallow as eligible feedstock for biodiesel.

"Other vegetable oils such as rape seed, palm oil and Jatropha oil had to meet certain environmental and green house gas requirements. At this point in time, the detailed analysis required to demonstrate that Palm and Jatropha will meet these requirements is in progress," he said. A determination on Palm is expected by the end of 2010 or early 2011
Mission also wants to become a supplier to Malaysian oil companies when the Malaysian biodiesel mandate starts in June 2011. This requires a B5 standard, and will require 500,000 tonnes of biodiesel per annum to be blended into mineral diesel.

Thirdly, Mission wants to become one of the select few compliant palm biodiesel suppliers to the EU market. In 2011, Germany and EU partner countries will implement the "Renewable Energy Directive", which requires biofuels to be produced only from feedstock supplies that meet minimum sustainability criteria.

"Mission is well ahead in its efforts to meet these standards,' said Mr Mahalingam. "In 2008, we became the first and only Palm biodiesel manufacturer to receive the German government sponsored International Sustainability & Carbon Certification (ISCC) attestation. Mission is expecting to receive its ISCC certification by year end after preliminary feedback from a successful audit of its facilities in October this year. The ISCC certification is approved and accepted by the German government as a guarantee of RED compliant biofuels."

Mission will also put more effort into its plantation activities in India to improve yields and lower costs. "Mission is currently further enhancing its agri technology system. This will greatly enhance the way we track and deliver assistance to our more than 126,000 farmers in India."

Mission will also need to access working capital. "The refining and selling of biodiesel requires a huge amount of working capital. For example, to produce and sell 10,000 tonnes of biodiesel per month requires working capital of approximately US$45 million."

The company is also working to finalize its listing on NASDAQ.

"En route to the listing, Mission is expected to consolidate its shares, warrants and notes on a 50:1 basis in order to meet NASDAQ minimum price requirements. Based on the current share price, Mission will have a theoretical share price of US$9.80 per share on the day it lists on NASDAQ."

Mr Mahalingam said Mission may enter several new partnerships with companies "who are doing some great work in this space". (ASX: MBT)

Panax Geothermal
Panax Geothermal founder and managing director Dr Bertus de Graaf, who turns 65 next year, is to resign, effective from 31 January, 2011. The company said this is part of his longstanding retirement plan. Dr de Graaf will remain as a non-executive director and has a services agreement agreement with Panax.

His successor is executive director Kerry Parker, who has been with Panax since its inception. The company said he has been involved in resource development projects throughout his career. "He has an intimate knowledge of all of the company's projects and in particular has worked closely with our Indonesian partners to progress our exciting new projects in Indonesia' said chairman, Greg Martyr. (ASX: PAX)

Phoslock Water Solutions
Based on reasonable projections, Phoslock Water Solutions is forecasting to be cash flow positive and profitable in 2011, said managing director, Robert Schuitema.

Meanwhile, the company has underperformed, with sales not achieving forecast levels. But the sales pipeline continues to grow, and several important trials have recently been completed and major sales decisions are due over the next 12 months, he said.

The sales process generally takes 12-36 months with trials required before larger sales.

Eight medium to large applications are scheduled for Europe and five medium to large applications are scheduled for Canada. Planning is underway for a large lake in China in
January, and if successful, up to 500 tons of Phoslock could be used for the whole lake in
May/June next year.

The company is looking to nationwide coverage of the US via a large distribution network.

The outlook for 2011 includes possible applications to South East Asia water bodies, and further developments of aquaculture basins. Some smaller sales have been made to aquaculture customers in recent months, and there are a number of other aquaculture companies in Australia and internationally looking at the suitability of Phoslock.

The company is also developing a second water treatment product in conjunction with the University of Queensland, and looking to expand through the acquisition of other water technologies. (ASX: PHK)

Style has launched what it says is the first strand woven timber floor to compete head on with traditional hardwood species. RESTYLE is based on Style's existing strand woven bamboo technology, and uses Chinese plantation grown Eucalyptus Grandis and an inexpensive process to produce a high density natural flooring material.

Style said RESTYLE was developed over two years of extensive research and development, and it has patented the process worldwide.

RESTYLE timber is harder than most old growth, tropical hardwoods, and has a high performance suitable for residential and commercial applications where resilience and durability are issues.

By utilising its manufacturing facilities in China and its global distribution network, Style hopes the product will an additional revenue stream from its core bamboo business.
It also wants it act as "proof of concept" for other timber species under its separate international manufacturing licensing model. (ASX: SYP)

Initial Public Offerings

Algae.Tec is now expected to listed on the ASX on 13 December. The company has an exclusive global licence to commercially exploit the McConchie Stroud algae production system for producing biodiesel. (ASX: AEB)

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