Eco Investor Update

A Weekly News Update for Environmental Investors

14 February 2011 - No 20

ASX 100

AGL Energy
Recent extreme weather events in Queensland, NSW, Victoria and South Australia are expected to reduce AGL Energy's forecast 2011 underlying net profit after tax (NPAT) by $30 million to $35 million, said the company. The previous forecast has been revised down from the range of $450 million to $480 million to between $415 million and $440 million.

Weather events that have affected the national electricity market include very high temperatures in SA, Victoria and NSW, a record heat wave in Sydney, Cyclone Yasi and
major flooding in Qld.

The result has been several days of record electricity demand in NSW, the highest recorded electricity demand in SA, extended periods of high and volatile electricity prices, and the shutdown of the Yabulu power station and the Oakey power station over which AGL has dispatch rights.

The increased electricity demand exposed AGL to higher underlying pool prices of up to $12,500 per MW hour compared with recent wholesale prices of below $40 per MW hour, it said.

The interim dividend is anticipated to be similar to the previous year's interim dividend of 29 cents per share, and will be unfranked. (ASX: AGK)

DUET Group
DUET Group is to reduce its debt under a deal with partner Singapore Power to recapitalize their subsidiary United Energy with a pro rata $150 million equity injection by 30 July.

DUET expects to fund its $99 million share through its corporate debt facility.

United will use the capital and its cash reserves to pay down $184 million of debt owned by DUET, which will in turn pay down its corporate debt facility.

The arrangement will assist United to fund growth of its network and support its credit rating, said DUET chief executive, Peter Barry.

The injection is dependent on Singapore Power obtaining foreign investment approval and DUET obtaining bank consent. (ASX: DUE)

Sims Metal Management
The release of a positive update on its expected half year results has not stopped Sims Metal Management's shares continuing their decline to the low $18 mark after their recent strong rise to over $22.

The company said it expects to see sales revenue up 17 per cent on the previous corresponding half year to $3.9 billion, and net profit after tax up 24 per cent to $49.3 million. Basic earnings per share should rise 13 per cent to 24.1 cents.

Scrap intake and shipments were 6.6 million tonnes and 6.5 million tonnes respectively, with scrap intake and shipments in the three months to 31 December at 3.2 million tonnes and 3.6 million tonnes respectively.

Group chief executive, Daniel W. Dienst said "Scrap shipments in our second quarter were strong and allowed us to balance our cumulative intake and shipments for the six months ended 31 December 2010. Consistent with strong shipments in our second quarter, EBITDA was $97.7 million, sequentially higher by 91 per cent, against $51.2 million of EBITDA in our first quarter of fiscal 2011."

"Performance in the second fiscal quarter remained attractive in Australasia and for Sims Recycling Solutions. Our UK Metals business also performed well during the second quarter despite sequentially lower intake and shipments. North America Metals continued to encounter margin pressures during our second quarter and for the half year," he said. (ASX: SGM)

ASX 200

Infigen Energy
Infigen Energy's production and revenue for the six months to 31 December 2010 were within its guidance. Actual production was 2,282 GWh and revenue was $137.8 million.

The Australian revenue includes retained Renewable Energy Certificates at market value in the month they were generated, and US revenue includes the Bluarc asset management business.

Revenue is up $2.5 million on the 2009-10 first half. (ASX: IFN)

ASX 300

Galaxy Resources
Emerging lithium producer, Galaxy Resources has appointed a new non executive director,
Michael Spratt, and put back its Hong Kong listing by one month.

Mr Spratt's appointment means Galaxy now has three independent directors as required ahead of its listing on the Stock Exchange of Hong Kong.

Galaxy said Mr Spratt has 48 years of experience in the base metals, mining, processing, smelting and construction sectors. He was previously the managing director of Thailand's Thaisarco Ltd, one of the world's largest tin smelters, and is currently chairman of ASX listed Kasbah Resources.

Other past positions include chief operating officer of Minproc and executive vice president and operations director of Kaiser Engineers Pty Ltd.

As a metallurgist with extensive experience managing a range of operations in a variety of environments and geographies including Australia, Asia, and Africa, he will significantly strengthen the Galaxy's knowledge of upstream and downstream mining processes," said the company.

Galaxy's listing on the Stock Exchange of Hong Kong was originally scheduled for late this quarter. (ASX: GXY)

Emerging Companies

CBD Energy
CBD Energy has changed non executive directors with the resignation of Dr David Iverach and the appointment of Todd Barlow.

Mr Barlow is the managing director of Pitt Capital Partners, an independent corporate advisory firm. He is a lawyer and has extensive experience in corporate finance including advice on, and implementation of, mergers and acquisitions, financial structuring, capital raising and stock exchange listings.

Mr Barlow will continue to act as a corporate advisor to CBD Energy in his role with Pitt Capital Partners.

Hunter Hall has increased its holding to 15.1 per cent through the conversion of convertible notes, whole Souls Private Equity has reduced its holding in CBD from 6.3 per cent to 5.09 per cent. (ASX: CBD)

Dolomatrix International
Weston Aluminium, a substantial shareholder in Dolomatrix International, has increased its holding from 12.5 to 18.7 per cent. The shares were purchased on market. Dolomatrix is known to already have a tightly held share register, so depending on the seller this could have made it tighter. (ASX: DMX)

Environmental Group
Environmental Group will have a new chief executive following the resignation of Philippe Cussinet, which is effective 7 March.

Chief financial officer Johannes Van der Walt, has been appointed chief operating officer with immediate responsibility for day to day management and operations.

The company confirmed that it will report a half year loss to 31 December, its first since 2006. Its shares are also at a 12 month low of just under 1 cent. (ASX: EGL)

Quantum Energy
Quantum Energy said it expects to make a loss of between $3 million to $6 million after tax for the half year to 31 December 2010. The result is primarily due to two factors, said managing director, Phillip Sidney.

The company has substantial amounts of investment held as renewable energy certificates (REC) from its renewable energy business and because of REC prices these had not been liquidated by 31 December.

The RECs must be valued to market at period end "and this accounting treatment is expected to give rise to a book loss in respect of certain of the RECs", he said. Although REC prices have "increased significantly since 31 December", the company's half year result will reflect the price at 31 December.

Also, the company incurred losses on its roll-out of renewable energy and solar solutions products, including the introduction of the sale and installation of Quantum Solar photovoltaic units.

"However with those products now being more established, sales are increasing significantly and the Company expects these products to be a major contributor to future revenues and profitability for the Company and that the Company will return to positive profits in its full year results," said Mr Sidney. (ASX: QTM)

Qube Logistics
Qube Logistics' share price has shot up since September to an all time high of $1.35. Its low was 43.9 cents in February 2009.

Following a recommendation by Kaplan Funds Management, Qube's responsible entity, The Trust Company, has made an in-principle decision to support two previously announced structural changes to Qube - proceeding with the internalisation of Qube's management and changing Qube's corporate structure from a trust to a company.

Deloitte Corporate Finance will prepare an independent expert's report on both proposals. Subject to the outcome, a meeting to vote on each will be held in May.

The internalisation will be conditional on the corporatisation being approved, but the corporatisation will not be conditional on the internalisation being approved.

The internalisation will involve paying KFM $40 million to terminate the management contract. KFM will accept at least 80 per cent of this payment in Qube securities.

Qube said KFM will work with The Trust Company to put in place a suitably experienced management team and board to operate Qube should the internalisation and corporatisation be approved. The new management team is expected to include some of KFM's core team presently involved in Qube. (ASX: QUB)

Solco non-executive chairman David Richardson has become executive chairman following the temporary absence of managing director and chief executive Mark Norman due to
health concerns.

Mr Norman is expected to be absent for about three months for rest and recuperation.

Mr Richardson was appointed Solco's chairman in November 2009 and has been a company director for more than five years. He is Solco's largest shareholder and was formerly the company's chief executive and managing director.

The company said that over the past five years Mr Richardson has been integral in shaping and developing Solco into a strong and profitable wholesale supply company.

"Solco achieved three years of consecutive profit and revenue growth and remains comfortably on-track to continue this trend into the future," it said.

Steve Missen, currently executive manager of Solco's core wholesale Products Division, has
been additionally appointed acting chief financial officer for the group. (ASX: SOO)

Micro Cap Companies

AAQ Holdings
Shares in aquaculture turnaround AAQ Holdings relisted on 9 February at 2.2 cents and over the first two days fell to 1.5 cents before recovering slightly to 1.8 cents.

Acorn Capital and Contango Asset Management have ceased to be substantial shareholders due to dilution. (ASX: AAQ)

Advanced Engine Components
Advanced Engine Components' shares have hit a 12 month low of 2 cents. The shares have had a steady decline from their 5 cent peak last March. (ASX: ACE)

Carnegie Wave Energy
The hydraulic energy module for Carnegie Wave Energy's commercial scale demonstration unit has been delivered to Carnegie¡|s Fremantle Wave Energy facility. The hydraulic module will sit on the sea floor next to the CETO pump and imitate a wave energy plant. Its key functions are to regulate the inlet and outlet pressures of the pump and to dissipate the generated energy by way of a heat exchanger.

The hydraulic module is only required for the stand-alone CETO 3 unit and allows an autonomous CETO unit to operate offshore without the installation of piping to shore and onshore generators.

The delivery of the hydraulic module and its connection to the CETO pump means the onshore test program should be completed in coming weeks.

Carnegie said the test will reduce risk and uncertainty prior to the subsequent installation and operation at Carnegie's test site off Garden Island.

The test program involves stroking the pump under various loads and velocities using sinusoidal profiles that simulate wave conditions. Instrumentation mounted on the pump and hydraulic module will record the system performance during both onshore and offshore testing.

The pump to mooring attachment has also been delivered from French manufacturer Techlam. Instrumentation required for load measurement has been fitted locally and tested and calibrated. The attachment is now ready for offshore testing. (ASX: CWE)

Dart Energy
Dart Energy has completed the acquisition of Apollo Gas. Chief executive and managing director, Simon Potter, said "We are already well advanced in terms of initiating work on the Apollo assets, and fully integrating Apollo in to the broader Dart business and team. Our 2011 drilling campaign in Australia will see work across the Apollo portfolio, and the first well has already been spudded on PEL 459".

Dart also has a new non executive director, Peter Clarke, a former investment banker and a resident of Hong Kong.

Mr Clarke has worked for over 30 years in Sydney, Hong Kong, London, New York and Tokyo and has lived in Hong Kong for the past 20 years. Dart said most of his career was spent at Salomon Brothers and at Merrill Lynch where he was chairman of the Asia Pacific region for nearly a decade.

New Hope has reduced its stake in Dart from 17 to 14.8 per cent. (ASX: DTE)

Enerji could receive its first revenue generated directly from an Opcon Powerbox installation early in the second half of 2011.
The company said it has reached a major milestone by completing a Power Purchase Agreement (PPA) with Horizon Power for the installation of an Opcon Powerbox at the
Carnarvon Power Station in the Gascoyne region of WA.

The PPA is the first such agreement to be signed between Enerji and a customer and follows the Memorandum of Understanding the two companies signed in October 2010.

The PPA sets out the commercial and legal terms and conditions for the installation of the
Opcon Powerbox, including the energy off-take framework, service and maintenance.

Following installation, revenue will be generated through electricity created by the Opcon
Powerbox and sold back to Horizon Power. The Powerbox has the capacity to increase the power station's energy output by up to 700 kW without burning additional fuel or creating emissions.

Enerji's managing director, Greg Pennefather, said the PPA heralds growing industry confidence in the Opcon Powerboxes' significant economic and environmental benefits. "We are in advanced negotiations with a number of companies regarding further Opcon Powerbox installations," he said. (ASX ERJ)

EnviroMission has begun to take expressions of interest for the development of the Australian Solar Tower power station concept in India.

EnviroMission said it has received a number of expressions of interest seeking the right to develop the power station concept in India, and the competitive market process will enable the company to more fully explore capitalization opportunities.

EnviroMission proposes to adopt a similar market development model to that applied in China, where EnviroMission owns the Australian Solar Tower development rights and is party to a 20 per cent non-diluting, free carried interest to develop Solar Towers in China with Shanghai based EnviroMission investor and shareholder, Guo Xiang Ma.

"Given India's appetite for sustainable renewable energy development and the number of enquiries already coming out of India, it is highly appropriate to push a competitive market process forward at this time," said Roger Davey, EnviroMission's chief executive.

"EnviroMission's progress in Arizona is proving to be a factor behind the growing number of enquiries seeking to develop the Australian Solar Tower concept, particularly in India and the Middle East. Development enquiries have continually flowed out of India and whilst EnviroMission has engaged in a variety of development discussions on a proposal by proposal basis there is a now a strong argument to proceed with a model where EnviroMission will share in the commercial development rights to achieve immediate and ongoing economic value for EnviroMission's shareholders," he said.

The competitive market process should take several months. (ASX: EVM)

European Gas
European Gas will fully repay Transcor Astra Luxembourg the principal and interest on 36.375 million of notes.

This will be done through transfering ownership of the Gazonor gas project in northern France to r, and issuing Transco 22 million shares and a 12 month option for it to subscribe for 20 million shares at 50 cents each, among other arrangements.

Chief executive and managing director. Peter Cockcroft, said "Discharging the notes completely restores the company's balance sheet and allows it to refocus on its core exploration expertise."

Gazonor had gas sales for the December quarter of 83,272 MWh (299,783 GJ). (ASX: EPG)

Hot Rock
Hot Rock has been granted seven more geothermal exploration tenements in Chile covering conventional volcanic targets.

The company now holds 100 per cent of 12 Chilean exploration tenements covering 5,240 square kilometres in six project areas. These contain surface hot springs, sinter deposits and fumaroles, which are all indicative of the presence of active geothermal systems below surface.

Executive chairman, Dr Mark Elliott said HRL's tenements have been has built up within one of the most prospective geothermal regions in the world. "Given that we were able to identify and submit applications for tenements ahead of the recent influx of companies entering the Chilean renewable energy sector, HRL is now positioned as one of the largest holders of geothermal projects in Chile," he said.

Crews for the company's first major exploration program - detailed geochemical studies and magneto-telluric (MT) geophysical surveys - will commence field work at the Longavi and Calerias projects later this month. The surveys will define the size of the geothermal systems from which geothermal resource estimates of in-situ and recoverable energy can be made and expressed in terms of electricity generation potential in megaWatts (MWe) capacity.

It is anticipated that drill targets will be determined directly from the survey results and joint venture partners will be sought to fund future drilling and development programs. The company said it has already received unsolicited approaches from potential partners interested in its Chile projects and discussions with these will be progressed after assessment of the survey results. (ASX: HRL)

Hydrotech International
Hydrotech International's share price jumped to a year high of 1,5 cents on the day its subsidiary, Hydrotech Waterproofing Solutions, won a $0.5 million contract to supply the waterproofing systems to the Cathay Pacific Cargo Terminal at Chep Lap Kok International Airport in Hong Kong.

The company said the contract is the largest Polyurea project awarded in Hong Kong to-date and positions Hydrotech Waterproofing Solutions as the leading supplier of High Performance Polyurea systems in the region.

The contract requires 40,000 square metres of waterproofing and will comprise of 18,000 square metres of Hydrotech's Polyurea System products and the balance a self adhesive membrane that Hydrotech will obtain from an original equipment manufacturer supplier.

Previous contract sizes have averaged between $20,000 to $120,000.

Hydrotech said its Polyurea Systems have zero volatile organic compounds and their exceptional performance characteristics significantly reduce ongoing maintenance requirements and provide an extended life cycle for the areas they protect.

The exposure of Hydrotech Waterproofing Solutions to architects, engineers and contractors n the project will greatly assist marketing as the company focuses on Polyurea systems for major infrastructure projects that require waterproofing, said chairman, Philip Gray. (ASX: HTI)

Mission NewEnergy
Mission NewEnergy has established an Advisory Board and a US office in San Antonio.

James Garton, president of Mission NewEnergy USA, said the chairman of the Advisory Board is one of America's most respected military leaders - Major General Wilbert D. Pearson (USAF-Ret), who recently retired as vice president at Lockheed Martin where he guided the development of the F-35 Joint Strike Fighter.

"I believe that Mission NewEnergy's approach is particularly efficient and effective," said Mr Pearson. "Its product will not impact our food supply and its source provides the noblest of social reforms by employing those living in poverty. Finally, in these challenging economic times, the far lower cost per barrel produced without government subsidy is remarkable and will benefit all Americans."

Mr Garton said "The Jatropha solution to the global energy crisis is receiving world-wide support as the seeds are inedible and therefore do not affect food supplies or prices. Our Advisory Board, led by General Pearson, will bring together several high profile business leaders, scholars, consumer advocates, former public officials and celebrities who share a passionate commitment to a sustainable future fueled by responsible products." (ASX: MBT)

Pacific Environment
Pacific Environment has settled longstanding litigation over the acquisition of Commercial Energy Services (CES). Pacific Environment agreed to unreservedly withdraw the allegations of fraud and misleading and deceptive conduct made by it in the proceedings, and all parties have agreed to discontinue their claims.

The settlement means the current liability provision of $833,476 in Pacific Environment's balance sheet will be reversed, and the $350,000 previously paid by the company to the NSW Supreme Court as security for costs will be returned.

The overall effect is a reduction in current liabilities by $833,476 (the balance of consideration originally due to the CES vendors), a reduction in equity by $812,679 being the value of the shares originally issued by Pacific Environment to the CES vendors which are now to be returned and cancelled, and an increased cash balance of $350,000.

The company's Statement of Comprehensive Income will benefit from discontinued operations by $1,646,155 - the combined effect of the reversal of the liability and reduction in shares provided on purchase of CES.

Shareholders will need to vote on the cancellation of the 2,138,628 shares that will be returned to Pacific Environment by the CES vendors. (ASX: PEH)

Eco Investor Update






Search Eco Investor