Eco Investor Update

A Weekly News Update for Environmental Investors

14 March 2011 - No 24

ASX 100

AGL Energy
AGL Energy is to construct Australia's largest industrial co-generation plant in a decade, for Qenos Pty Ltd at its Altona plant in Victoria.

The facility will secure Qenos' energy supply and assist its preparation for the introduction of a price on carbon emissions. The facility is expected to reduce greenhouse gas emissions from the production of polyethylene by 100,000 tonnes CO2-e per annum. AGL said this is equivalent to 24,390 cars off the road.

The facility will cost approximately $45 million, and have a nominal capacity of 21 MW. When coupled with a heat recovery steam generator, it will produce up to 88 tonnes of steam per hour.

AGL will build the co-generation plant for Qenos and the parties have entered into an Operating and Maintenance Agreement for the next 15 years, with options to extend to 25 years.

AGL will also become the sole supplier of natural gas to the site to operate the gas turbine and balance of plant. The co-generation plant and balance of plant is estimated to consume approximately 4.5 petajoules of natural gas per annum.

Construction is expected to commence in September 2011 and the plant to be operational by late 2012.

Qenos is Australia's sole manufacturer and leading supplier of world class polyethylene and polymers. Its products are used in the manufacture of household items such as milk bottles, and packaging as well as water infrastructure such as pipes and water tanks. Qenos also has a plant in Botany, NSW. It is a wholly owned subsidiary of China National Bluestar (Group) Co. Ltd, a joint venture between China National Chemical Corporation and The Blackstone Group.

AGL also owns and operates three other co-generation plants - 4.4 MW at Coopers Brewery in South Australia, 10 MW at Melbourne Water and 4.4 MW at Symex Holdings in Victoria. (ASX: AGK)

ASX 200

Dart Energy
The Bank of America Corporation has reduced its substantial stake in Dart Energy from 8.56 pert cent to 6.43 per cent.

The sales coincide with a fall in Dart Energy's share price to 91 cents, its lowest level since last September. (ASX: DTE)

Eastern Star Gas
Shares in Eastern Star Gas have fallen back to around their 12 month low of 62 cents.

The fall continued despite Eastern Star Gas announcing the first independent assessment of the coal seam gas resources in three licences in northern NSW adjacent to its other coal seam gas licences.

PELs 6, 427 and 438 together have total Recoverable Contingent Resources of 1,011.2 petajoules and Recoverable Prospective Resources of 4,637.2 petajoules.

Eastern Star Gas holds 77.5 per cent of PEL 6, 50 per cent of PEL 427, and 40 per cent of PEL 428.

The company said the resources estimate follows nearly three years of exploration activity.

"In particular, we are excited to note the interpretation that the Black Jack Formation and Maules Creek Formation resources identified by the Edgeroi-1 and -2 coreholes in PEL 238 continue into southern PEL 427," it said. PEL 238 contains the Eastern Star Gas' Narrabri Gas Project and Wilga Park Power Station.

Appraisal and development field efforts will focus on the Narrabri Gas Project in PEL238 while a program to convert these new resources to reserves is designed.

Managing director David Casey said "The resource estimates released today are testament not only to the success of our recent exploration program, but also to the significant upside that exists for continued gas reserves growth for ESG in addition to the Narrabri Gas Project in PEL238 which already has 3P+3C of 9,012 petajoules." (ASX: ESG)

Hastings Diversified Utilities Fund
Hastings Diversified Utilities Fund security holders have approved the manager, Hastings Funds Management, taking its base fee and any performance fees in stapled securities rather than cash. The approval applies to the period to 31 December 2013.

Hastings will receive its performance fee as 8,740,254 HDF stapled securities rather than cash of $22.375 million. The issue price of the units will be $2.56 if the 15 day volume weighted average price of HDF's stapled securities before the issue does not exceed $2.56.

The payment in securities will reduce the economic value of the performance fee from $22.375 million to $14.771 million (excluding GST), based on the 31 December 2010 security closing price of $1.69. (ASX: HDF)

Lynas Corporation
Rare earths developer Lynas Corporation has completed the purchase of the Kangankunde Carbonatite Complex (KGK) in Malawi, Africa. The purchase price was US$4 million.

The company says the deposit has an inferred resource of 107,000 tonnes of rare earths oxide (REO) at an average grade of 4.24 per cent using a 3.5 per cent REO cut-off grade. At a 3 per cent REO cut-off grade the resource increases to 180,000 tonnes REO and remains open at depth.

The deposit also contains strontianite and phosphate minerals which Lynas will examine to see if can be economical by-products.

"Importantly, the deposit has extremely low natural radiation levels for a rare earths deposit, with an average of 11 ppm thorium oxide per percentage of REO content," it said.

The deposit is suitable for a low cost gravity separation concentration process producing a 60 per cent REO concentrate.

The company said that over the next 12 months it will establish an office in Blantyre, Malawi, prepare the mine site for development work, and undertake a technical validation program. An engineering, construction and mining schedule can then be developed. (ASX: LYC)

Emerging Companies

CMA Corporation
CMA Corporation must use its best endeavours to raise not less than $25 million net of costs by 1 July as part of a restructure of its debt.

The company said it is currently in discussions with a party about a significant subscription of shares together with a sub-underwriting of a capital raising.

If any transaction proceeds it is likely to be put to shareholders for approval, and will provide a basis to comprehensively restructure CMA's debt facilities.

The company's Syndicated Facility Agreement with ANZ Bank has been amended to give it additional funds for draw down under the overdraft facility and a new bridge facility so it draw down further after certain conditions have been met.

The maturity date of the facilities has been extended from 1 July 2011 to 1 January 2012. There are now no longer any amortisation payments before the maturity date and the non-payment of past amortisation payments has been waived.

The application of the Financial Undertakings in the Facility Agreement have been suspended until 1 January 2012 unless CMA and ANZ agree to them applying earlier, and all past breaches of the undertakings together with any current events of default have been waived.

Although the news is positive for CMA, its shares remain in voluntary suspension. (ASX: CMV)

Qube Logistics
Shares in Qube Logistics have continued their rise to a new all time high of $1.68.

Following Foreign Investment Review Board approval for Carlyle Infrastructure Partners (CIP) to subscribe for a placement of 15 per cent of Qube's capital, a unit holder meeting to approve the deal will be held on 6 April.

The subscription price is $1.275 per unit, putting CIP well ahead already. (ASX: QUB)

Micro Cap Companies

Advanced Energy Systems
Advanced Energy Systems says it has had a "remarkable" response to its pre-sales campaign for the Fushan Project with 116 apartments with a total contract value of RMB 51.6 million having been sold so far. Deposits of RMB 10.7 million have been collected.

The Fushan Project is a large residential and commercial development in Fushan District, Yantai, a coastal city in Shandong Province, China.

The company said it will assess whether it will continue with the early stage pre-sales campaign. The formal sales campaign will start when the buildings are at half height, expected to be by June this year.

Advanced Energy Systems is commercializing sustainable energy technologies in residential and commercial property developments. Its current commercialization model involves entering into technology utilization agreements with joint venture partners and developing projects jointly.

The technology is said to enable the onsite production of a significant proportion of the energy requirements of complexes, reducing their reliance on external power production.

The company says this reduces the carbon footprint of the complexes and should provide it and its partners with competitive advantages in planning concessions, building approvals and bidding preferences, as well as the potential for residual income streams from the complexes.

The Fushan Project involves the construction of 1,986 apartments, 76 shops and 3,012 car bays across 17 buildings. Stage 1, Aocheng Gardens, comprises 718 apartments, 20 shops and 1,175 car bays. The company has projected a pre-tax profit of about $70 million from the Aocheng Gardens development.

Advanced Energy Systems is developing three other projects: Jusco in Fushan District and Yanfeng in Zhifu District, both in China, and Tangcheng in Adelaide.

The company said it is seeking to acquire further sustainable energy technologies, and that it reviews various technologies as it identifies suitable vendors. (ASX: AES)

AnaeCo has appointed Shaun Scott as a non-executive director. A chartered accountant, Mr Scott has spent six years in senior executive roles, including a final term as chief executive officer of Arrow Energy prior to its acquisition last year by Royal Dutch Shell and PetroChina. Prior to this he held a senior finance position with Energy Developments.

He has over 25 years of experience in upstream and downstream projects, mergers and acquisitions and finance in the resources and energy sector in Australia, Asia, and the US.

Chairman Michael Dureau said "Shaun's experience with the rapid growth, commercialization and highly successful development of Arrow Energy coupled with his knowledge of the waste treatment sector gained at EDL mean he is ideally suited to assist AnaeCo with its future development and commercialization growth strategies." (ASX: ANQ)

Blue Energy
Blue Energy has seen a significant increase in its coal seam gas reserves.

An independent assessment of technical data from the Sapphire and Central Blocks of ATP814P has resulted in a 60 per cent increase in the overall Contingent Resource in ATP814P. The assessment brings the 3C Contingent Resource in ATP814P to 2,063PJ of recoverable gas. The total discovered gas in place volume in ATP814P now stands at 7,018 petajoules.

The resource estimates for the Central and Sapphire Blocks are in addition to the previously reported Monslatt Block Contingent Resource (3C) estimates of 1,295 petajoules recoverable gas. Both assessments were conducted by Netherland, Sewell and Associates.

"In addition to the 3C Contingent Resources, 1,922 petajoules of gas in place has been allocated to the Fort Cooper Coal Measures in the Central Block. Accordingly, a total of 192 petajoules of recoverable Prospective Resource (un-risked) has been assigned to these coals in the Central Block. This addition brings the total ATP814P gross unrisked Prospective Resource to 1,100 petajoules recoverable," said Blue Energy.

Chief executive John Phillips said the increase in Blue Energy's 100 per cent owned ATP814P 3C Contingent Resource "is very significant as it now provides a much larger volume of gas for Blue Energy to market".

"The location of the permit is close to existing CSG production infrastructure at Moranbah and strategically, it is in an intensive export coal mining province, with existing and new export coal mining operations requiring reliable energy supplies. These energy requirements will provide opportunities to commercialize this significant gas resource.

"In addition the CSG acreage surrounding ATP814P is held by companies with either fully sanctioned or proposed LNG export facilities in Gladstone. Should these facilities require additional feed gas, Blue Energy's ATP814P is ideally located to add to the required gas supply."

Blue Energy is working to convert the contingent resources to reserves. (ASX: BUL)

Carnegie Wave Energy
Indonesia has been identified by Carnegie Wave Energy as a possible future market.

Last week the company hosted an official visit by His Excellency Professor Doctor Boediono, the Vice President of the Republic of Indonesia, at its Fremantle facility in Western Australia.

Vice president Boediono and his advisors toured the research facility where he inspected the CETO commercial scale unit and viewed the onshore test program in progress. Discussions were held with Doctor Boediono and senior government officials on the Indonesian power and water market and the potential for CETO throughout Indonesia.

Carnegie's chairman, Grant Mooney, said "With more than 17,000 islands and a decentralized electricity network Indonesia is an example of one of the key future markets for CETO to supply clean power and water to island nations and reduce their reliance on shipped diesel. With 10 times the population of Australia but only half the installed power capacity, the Indonesian market will see strong growth as the country urbanizes. its wave resource, fragmented geography and the absence of a nationwide grid, make CETO particularly suited to the Indonesian market."

Meanwhile, Carnegie director Gregory Bourne has indirectly acquired 501,000 shares in the company at an average price of 9.9 cents each. (ASX: CWE)

Clean Seas Tuna
One of the world's largest private investors in the global aquaculture industry has moved to a 17 per cent shareholding in Clean Seas Tuna as part of a $6.9 million share placement.

Clean Seas Tuna placed 62.7 million shares at 11 cents each with Frode Teigen of Norway. The new shares represent 15 per cent of Clean Seas Tuna's issued shares and take Mr Teigen's shareholding 17 per cent.

The company says Mr Teigen is one of the world's largest private investors in the global aquaculture industry, including significant shareholdings in several major international fishing and finfish aquaculture companies, such as Codfarmers, Atlantic Cod Farms, Grieg Seafood, Aker Seafoods, Austevoil, Cermaq and Norway Palagic. He is also the largest single shareholder in Akva Group, said to be the world's most recognized brand of recirculation aquaculture technology.

Clean Seas Tuna's managing director, Clifford Ashby, said the emergence of Mr Teigen as another cornerstone investor, along with the Stehr family's 20 per cent holding, is a significant vote of confidence in the future of the company and its world-leading initiatives for spawning and growing Southern Bluefin Tuna.

"Significantly, it provides Clean Seas Tuna with increased confidence as it moves forward with its capital raising plans to take the company forward in 2011 and beyond. While the level of capital available to the company through such share placements is vital to fund our ongoing Southern Bluefin Tuna program, the Clean Seas Tuna Board will ensure that the company's current shareholders are provided with the opportunity to participate in future capital raisings."

Clean Seas Tuna will also benefit from Mr Teigen's experience and knowledge within the aquaculture industry. "The company has already utilized the expertise of his Akva Group, which played a central role in the recent establishment of Clean Seas Tuna's state-of-the-art Southern Bluefin Tuna facility at Arno Bay in South Australia," he said.

"Along with existing cash reserves, funds raised from the share placement and any further capital raisings will provide working capital for the company's expanding operations, and particularly for the ongoing pioneering research into spawning and larval rearing of Southern Bluefin Tuna."

Mr Teigen said "Our significant investments in the global aquaculture industry include a focus on sector pioneers and ongoing initiatives. Clean Seas Tuna fits with that strategy."

"We are passionate about Clean Seas Tuna's current Southern Bluefin Tuna breeding program and, while we appreciate that the company is still very much in the research and development stage, we are in for the long haul," he said.

"Importantly, our investment is also made on the basis of our understanding that additional funds will be needed to achieve success with such world-first initiatives, especially to support the growing biomass when commercial quantities of Southern Bluefin Tuna fingerlings are transferred to sea." (ASX: CSS)

Dyesol chief executive officer, Clemens Betzel, has stepped down from the role effective immediately. Apart from thanking Mr Betzel and wishing him well, the company released no further details.

Dyesol has appointed Nicola Young as a director. Ms Young has a background in law, finance on Wall Street, and entrepreneurship.

She is chairman of Hohlenberg Young, a venture capital and advisory company. She is a member of the Investment Committee and a consultant to the Carnegie Innovation Fund.

Previously, she was the founding chief financial officer of a US based high technology Silicon Valley backed company. There she was pivotal in raising more than $200 million in financing, implementing joint ventures with Fortune 50 corporate partners, commercializing the company's platform technology and guiding it to a market capitalization high of over $850 million.

Nicola was previously director, Investment Banking, Merrill Lynch, New York, specializing in high tech M&A, and was also vice president, Mergers & Acquisitions, Lazard Frères, New York.

She commenced her legal career in M&A at Mallesons Stephen Jaques and is currently a consultant in M&A to Minter Ellison Lawyers.

Nicola holds a Bachelor of Science in Pure Mathematics and an LLB with Honours from the University of Sydney, in addition to an MBA with honours from Harvard Business School.

Meanwhile, Dyesol's shares have hit a two year low of 61 cents. (ASX: DYE)

Eden Energy
Eden Energy's shares have hit a one year high of 19 cents, after jumping from 9 to 19 cents on 9 March when it announced what it claims is a breakthrough in nano-carbon products.

Eden's US subsidiary, Hythane Company, has developed what it says is a time and cost breakthrough in the production of catalyst used for the manufacture of super-strong, super-light nano-carbon products.

The company is also claiming significant potential weight, cost and environmental savings when its carbon products are mixed with concrete for concrete construction and products.

Eden said the new catalysts are produced in a simple, one-step reactor, and the production process has been reduced from six steps to two.

Previously, catalyst production batches were a two-day process with about 10 hours of labor involved. The new process equipment is semi-continuous and can produce 15 times more catalyst in the same two days, with only two to three hours of actual labor involved, saving 15 to 20 per cent of the production costs.

The current equipment can produce enough catalyst for 20 tons per year of multi-wall carbon nanotube product, or enough catalyst for over 120 tons per year of carbon nanofibres, according to Hythane Company estimates.

Eden's executive chairman, Greg Solomon, said "The new process works for a variety of catalyst compositions, reduces the quantity of chemicals needed, is easily scalable for higher production and eliminates the majority of the time and labor needed for previous catalyst production methods.

"For the production of nano-carbon with specific structure and physical properties, the composition and atomic-level crystalline structure of the elements in the catalyst is critical. In addition, the catalyst particle size and surface area can have significant effects on the total nano-carbon production yields and the stability of carbon growth on the catalyst.

"With the new catalyst production process, Hythane Company has reduced the particle size range from approximately 100 micron down to about 1 micron. In addition, the bulk densities of the catalyst powders have been reduced by a factor of about five, an indication of the micro-porous structure and much higher surface area created by the new method.

"In tests to-date, catalysts made with the new process have increased both multi-wall carbon nanotube (MWCNT) production and carbon nanofibres (CNF) production yields by
about 20 per cent. Several published studies of MWCNT production show maximum yields of about 30 grams of carbon per gram of catalyst.

"Hythane's catalysts have demonstrated mass ratios approaching 40 grams of MWCNT product per gram of catalyst. With CNF production we can produce up to 225 grams of carbon CNF per gram of catalyst which is a higher ratio than we have found in any published literature.

"This new catalyst production method can also be used for a wide range of other catalyst compositions, not just nano-carbon production but many other chemical processes which use similar catalysts. Our new equipment will be used for research to further refine and optimize the best catalyst composition to make different, specific nano-carbon products, better yields, and faster carbon growth."

The carbon products may also reduce weight and costs for concrete in load-bearing applications, making it stronger, lighter, cheaper and more environmentally friendly.

Eden says trials combining cement with specific carbon products by its US-based operational arm have been successful.

While early days, the results point to major gains through a reduced volume of concrete needed in walls, pillars and support columns.

"The gains in compressive strength and reduction in volume are matched by reductions in weight, potentially making the carbon-cement pairing ideal for the popular "tilt up" style of wall construction on commercial buildings - while simultaneously reducing the load on footings," it said.

Another benefit is reduced carbon emissions as cement manufacture is a heavy producer of carbon dioxide.

"The initial trials – completed this month after a 28 day test period by Eden at its United States laboratories in Colorado - added miniscule amounts (just 0.1 per cent by weight) of the company's carbon nanofibres, to cement used in concrete production.

"The results include up to a 19 per cent gain in the concrete's compressive strength and similar percentage reduction in the weight, whilst suffering no loss in the concrete's flexural strength.

The company also wants to apply the same approach to plastics and rubber to try and achieve both strength and electrical and thermal conductivity gains, and, at the same time, reducing the amount of plastic and rubber that is consumed.

Executive chairman, Greg Solomon, said "With the significant advances that Eden has achieved with its catalyst production processes used in nanocarbon manufacture [announceed on 9 March] and which is the major cost component in the process, the company can produce on a very cost effective basis, up to 225 grams of carbon nanofibres from one gram of catalyst.

"With our existing catalyst production equipment, Eden is capable of producing up to 120 tonnes of CNF per year.

"The 2011 Colorado trial outcome would suggest that if this quantity of CNF were added to concrete for use as columns, pillars, walls and other similar load-bearing structures, it could potentially save approximately 1.6 tonnes of concrete for every 1 kilogram of CNF added. This equates to approximately 180,000 tonnes of concrete per year being saved if the whole 120 tonnes of CNF were used. At the same time, we would also produce approximately 40 tonnes of hydrogen."

"Clearly, these are only preliminary results and before we could expect to commercially market the CNF for this application, independent trials will have to be undertaken and regulatory certification of the product is also likely to be required to meet building and concrete codes and standards in our various target markets. (ASX: EDE)

ERM Power
Although it had $117 million in cash and cash equivalents at 31 December 2010, ERM Power says it is expecting $66 million from Arrow Energy on 30 June 2011. The cash is for the sale of its remaining interest in Braemar 2. The figure is included in ERM's trade receivables in its latest interim report.

The company said approximately $108 million in the market value of sales contracts is not shown in the interim balance sheet. (ASX: EPW)

GreenBox Group
The Australian Energy Market Operator (AEMO) has reinstated GreenBox Group subsidiary Jackgreen International as a market participant in the National Energy Market (NEM), paving the way for GreenBox to recommence its energy retailing operations.

The company said it will begin in Victoria where its electricity licence is active.

GreenBox executive director, Simon Barnes said "This approval is a landmark event. It is the first time that a company which was suspended from the NEM as a result of administration has been rescued, re-structured and re-admitted as a retailer."

However, GreenBox has had to extend the closing date on its current $5 million prospectus for a second time, to 15 March. (ASX: GNB)

MediVac haz raised $492,093 through the issue of 98,418,756 shares to sophisticated investors. The price was 0.5 cents per share.

The company said this follows a recent successful road show and presentations to stockbrokers in Sydney and Melbourne. The road show and funding were organised with the assistance of Alpha Securities, a boutique Financial Services Securities firm
Shareholder approval for the above placement will be sought at a general meeting. (ASX: MDV)

Mission NewEnergy
Mission NewEnergy said almost all of its existing note holders agreed to the Convertible Note Exchange Offer launched on 23 February.

Mission received acceptance from six of the seven Series One Convertible Note holders, representing 35,240,384 Series One Convertible Notes on a pre-consolidated basis or 75.33 per cent of all Series One Convertible Notes.

On completion of the Offer, Mission will have 11,538,466 Series One Convertible Notes on issue and 35,240,384 Series Two Convertible Notes. The numbers have not been adjusted for the 50-1 share consolidation that is subject to shareholder approval on 23 March 2011.

Completion of the Exchange Offer is subject to receiving shareholder approval on 23 March 2011 and the successful completion of a minimum US$20 million capital raising on the NASDAQ.

Mission has lodged an amendment registration statement with the US Securities and Exchange Commission to raise up to US$50 million. (ASX: MBT)

Phoslock Water Solutions
Phoslock Water Solutions has appointed new director Laurence Freedman AM as chairman.

The announcement follows the resignation of chairman Dr David Garman, who said "After some nine years as a director and five years as chairman, I'm proud to say that Phoslock has developed from an early stage concept company to one which is on the cusp of achieving significant global sales."

The board now comprise Mr Freedman AM, managing director Robert Schuitema, and the Hon. Pam Allan.

Mr Freedman said the company's focus is to convert its sales pipeline into large-scale, revenue generating applications.

"Our product is proven through trials and sales in 20 countries as the most effective means of improving water quality through reducing and eliminating algae-causing phosphorus in almost any water body. I am confident that this will be reflected in a shorter sales cycle to winning substantial contracts," he said. (ASX: PHK)

Style has boosted its balance sheet and prospects in China with its Chinese subsidiary Anji Yafeng Bamboo Products Ltd (AYF) signing a manufacturing joint venture agreement with Chinese company Zhejiang Tianzhen Bamboo & Wood Development Co. Ltd (TZ).

TZ is a leading Chinese engineered bamboo and wood flooring manufacturer. It employs around 450 people and has a factory capacity of three million square metres. The joint venture includes joint research and development into new products to be sold exclusively by Style.

The joint venture should provide immediate benefits as it expands Style's product portfolio and improves manufacturing efficiencies and capabilities in China.

Style has sold a portion of its fixed assets to the joint venture at book value, RMB 31.5 million ($4.8 million). This will provide Style with sufficient capital to repay all its outstanding bank debts and provide additional working capital for further business opportunities.

The transaction does not impact Style's net assets, and substantially improve its overall financial viability. It eliminates its overall bank debt, improving the net debt to equity ratio from 23.78 per cent to (35.84) per cent due to a reduction in Liabilities.

Chief executive officer Peter Torreele said "With this Joint Venture we complete the implementation of our Chinese manufacturing strategy commenced in 2009, which is to create a leading and efficient manufacturing base with a competitive cost structure, exceptional quality control and strong R&D capabilities.

"Importantly, the JV significantly increases our product portfolio across all segments of the green flooring market, and basically allows Style to become a ‘one-stop-shop' for our customers' needs."

The joint venture will provide Style with access to a wider market share through existing and future distribution networks, and a larger product portfolio at competitive prices. It will provide Style with the flexibility to expand its total production to a maximum capacity of about six million square metres per year.

Mr Torreele said the financial structure of the joint venture allows Style to become a substantially debt-free company and provide it with sufficient capital to finance growth in the foreseeable future. (ASX: SYP)

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