Eco Investor Update

A Weekly News Update for Environmental Investors

4 October 2010 - No 3


ASX 100

AGL Energy
AGL Energy is predicting its future energy mix will be 51 per cent renewables, 38 per cent gas and 11 per cent coal.
Currently it is 41 per cent renewables, 43 per cent gas and 18 per cent coal.

The data was given by managing director Michael Fraser to the 2010 JP Morgan NY Conference, but he gave no time line for the transition.

The growth in renewables is backed by AGL's shortfall in Renewable Energy Certificates (RECs). It currently has obligations for about 3.5 million RECs and supply from wind farms of about 1 million RECs. By 2015 it expects to have obligations of 5 million RECs and supply of 3 million RECs.
By 2020 its obligations should be over 8 million RECs.

AGL satisfies its obligations through a combination of buying RECs, building wind farms, and power purchase agreements with other parties. It has contracted enough RECs to 2014.

AGL has also released updated 2P and 3P gas reserves. From December last year to June this year 2P reserves rose from 1,308 petajoules to 1,578 PJ, and 3P reserves from 3,143 to 3,372 PJ. There was a 58 per cent increase in 2P reserves at Gloucester. The initial reserves assessment for the Hunter region is expected in the first half of 2011. (ASX: AGK)

DUET Group is to sell its 29 per cent interest in the US based electricity distributor Duquesne to the Singapore Investment Corporation for US$360 million, or about $381 million.

The sale is subject to a right of first offer and regulatory and bank approvals, but should be completed by March 2011.

DUET chief executive officer, Peter Barry, said "The transaction will result in a simplified asset portfolio and allow DUET to pursue growth opportunities in Australia."

The sale is good news for environmental investors as it increases the gas component of DUET's portfolio and means the Dampier to Bunbury Pipeline will represent 49.9 per cent of its assets. Together with Multinet and WA Gas Works, gas will comprise 63.5 per cent of assets.

The sale proceeds will be used to pay down DUET's corporate debt facility from $514 million to $138 million. Net debt to net assets will fall slightly to 65.3 per cent. (ASX: DUE)

ASX 200

Energy World Corporation
Energy World Corporation is part of a consortium planning to build a 2 million tonne per annum LNG plant in Papua New Guinea.

The first train will process 1.5 trillion cubic feet of natural gas over 15 years. Production is targeted for late 2013, and early stage capital expenditure is estimated at US$455 per tonne of LNG production.

Energy World will contribute all equity and debt for the development and construction of the First Train.,and will receive 14.5 per cent of the sale proceeds for the first 15 years.

Other parties will pay for upstream facilities such as gas fields, pipeline and jetty.

The other consortium members are InterOil Corporation and Pacific LNG. (ASX: EWC)

ASX 300

Ceramic Fuel Cells
The directors of Ceramic Fuel Cells have shown their faith in the company's prospects by participating in the company's recent equity raising.

Four non-executive directors increased their holdings through both the rights issue and overseas offer.

Jeff Harding acquired another 1.25 million shares, John Dempsey another 250,000 shares, Bob Kennett added 30,000 shares, and Roy Rose 16,666 shares. Mr Dempsey also indirectly acquired another 30,000 on market. (ASX: CFU)

Tox Free Solutions
Following its strong performance in 2009-10, Tox Free Solutions is expecting the good times to continue. "The revenue from recently awarded contracts will positively impact earnings in financial year 2011 and beyond," it says in its annual report.

Recent contracts include Toll Energy, Rio Tinto, Murrin Murrin Nickel Refinery, Boral Cement and Woodside.

It also expects contributions from the recent acquisition of Envirochem, further improvement in operational performance of industrial services, further contracts presently being tendered, and organic growth in all divisions.

In recent weeks fund manager IOOF Holdings has increased its substantial holding in Tox Free Solutions from 8.4 per cent to 10.5 per cent. (ASX: TOX)

Transfield Services Infrastructure Fund
Transfield Services Infrastructure Fund (TSI) has appointed a new chief executive officer, Steve Loxton, who joined the Fund as chief financial officer in May 2009.

Steve MacDonald has stepped down as chief executive officer, and been appointed a non-executive director. He replaces Matthew Irwin, who is resigning as a nominee director of parent company Transfield Services Ltd.

TSI's chairman, Peter Young said Mr Loxton has demonstrated the strategic capabilities and financial experience to be a skillful leader of the Fund. "He has made an impressive contribution since joining TSI Fund, including playing a key role in the successful completion of the Capital Structure Review, which has significantly strengthened TSI Fund's financial position."

Mr Loxton said "We are fortunate to own a high quality portfolio of thermal and renewable power and water assets with stable contractual earnings. We also have a strong balance sheet that will support long-term growth. With strict financial discipline, the TSI Fund team is committed to building on these foundations to deliver attractive and sustainable returns for our security holders."

The Fund is searching for a new chief financial officer. (ASX: TSI)

Emerging Companies

CBD Energy
Hunter hall Investment management has reduced its holding in CBD Energy to 5.3 per cent. In mid September it sold 766,175 shares at an average price of 14.1 cents. It retains 19.8 million shares.

At an operational level, CBD subsidiary eco-Kinetics has completed Australia's largest solar energy tracker which is located at the Desert Knowledge Centre at Alice Springs.

The solar tracker generates 27 kW and its effectiveness will be compared with other trackers at the site. It is 27 metres wide and 8.8 metres high and follows the sun's path by computer control. Its large size makes it utility scale and its design means other trackers can be installed nearby.

eco-Kinetics says it is now installing a solar energy system in Australia every 30 minutes, 24 hours a day, seven days a week.

David Enright, national general manager of eco-Kinetics, said the project showcases eco-Kinetics' ability to deliver a utility scale solar plant, which is the benchmark for utility grade systems in Europe. (ASX: CBD)

CMA Corporation
CMA Corporation has reported an underlying net loss after tax for 2009-10 of $72.4 million, compared with an underlying loss of $72.6 million in the previous year.

The legal proceedings brought by CMA against former managing director Doug Rowe have been settled, with Mr Rowe restrained from using the name SouthernRo and CMA's costs being paid on a party party basis by the respondents.

CMA's 2008-10 result was impacted by $50.2 million in impairments charged against the company's Meretec assets in the US and Australia. A further $5.1 million in losses came from the Contracting Division, which was sold in August.
The directors said the Meretec impairments were appropriate given that operational throughput was lower than expected and there is uncertainty about the level of future cash flows from the assets.

The metals recycling business had adjusted earnings before depreciation, interest and tax of $23.4 million compared to a loss of $35.5 million the previous year.

CMA said its strategy will be to focus mainly on this business, which is starting to show signs of improvement amid increasing demand in the global scrap market and strengthening commodity prices.

Meretec generated a loss before depreciation, interest and tax of $5.4 million compared to a loss of $4 million in the corresponding period. The Ecocycle business broke even on an adjusted basis before depreciation, interest and tax, compared to a previous loss of $0.2 million.

The directors said they are exploring ways to improve the earnings of both divisions.

CMA remains in voluntary suspension while it reviews its capital structure. (ASX: CMV)

Forest Enterprises Australia
Although there is no ASX announcement, the Australian Financial Review reports that a controversy is brewing over the administration of Forest Enterprises Australia where the administrator, BRI Ferrier, is to charge $3 million in fees for work done so far.

It appears that the major creditors, including the Commonwealth Bank, are "furious" and questioning what work has been done. It also appears that trees have died or are distressed.

As usual in such cases, no one seems to care about the interests of shareholders, including the ASX and ASIC and perhaps not even the shareholders, even though $3 million seems a lot of money for a company in financial trouble and was suspended from the ASX only seven months ago. (ASX: FEA)

Hydromet has requested a trading halt to its shares pending an announcement. The request is to 30 October but it expects to make the announcement before 29 October.

Meanwhile the company has revised down its 2009-10 profit from $3.03 million to $2.18 million, due to an error about production and stock. (ASX: HMC)

Viridis Clean Energy
The UK bankers to Viridis Clean Energy have extended the date on which Viridis must inject £4.1 million into the UK business to 29 October. Viridis said the waiver provides extra time to progress discussions about rescheduling the UK project debt.

However, the sale of Viridis' US landfill gas assets is not going well with the prospective purchaser requesting a lower price. This means the exclusivity period has lapsed and Viridis has recommenced discussions with other parties that submitted proposals, as well as continuing discussions with the prospective purchaser.

Substantial shareholder Kingston Capital has reduced its holding from 8.5 to 7.2 per cent. (ASX: VIR)

Micro Cap Companies

AnaeCo's Barwon waste processing project has received a set back with the Geelong City Council and AnaeCo agreeing not to proceed with the tender awarded in 2008. The parties said the terms and conditions no longer suit all of the stakeholders.

Tom Rudas, managing director of AnaeCo, said the Barwon group of Councils have decided to review its waste management strategy and reconsider its options while stage 2 of AnaeCo's Perth project is developed. If Barwon again calls for tenders, AnaeCo will consider submitting a proposal.

AnaeCo said it is poised to proceed with stage 2 of its Perth project within weeks. (ASX: ANQ)

Carnegie Wave Energy
Carnegie Wave Energy is to look at developing a Wave Energy Project at the Belmullet Wave Energy Test Site and an Ocean Energy Project at other locations in Ireland following a three year Collaboration Agreement with the Ocean Energy Development Unit (OEDU) of the Sustainable Energy Authority Ireland (SEAI).

Carnegie's new and Ireland-based executive director, Kieran O'Brien, said Carnegie is the developer of the Ocean Energy Project, and will work with SEAI and the project partners to plan, install and commission the commercial test site as the first step for commercial roll out of CETO in Ireland.

Carnegie's managing director and chief executive officer, Dr Michael Ottaviano, said the Irish Government is providing dedicated grant funding to support research, development and deployment of ocean energy and has established a feed-in tariff of 220 per megawatt hour for ocean energy.

Ireland has also set a National target to produce 33 per cent of its energy from renewable sources by 2020 including specific ocean energy targets of 75 MW by 2012 and 500 MW by 2020. (ASX: CWE)

Dart Energy and Apollo Gas
Dart Energy is to takeover Apollo Gas in an all scrip offer agreed by Apollo's independent directors and major shareholders holding 54 per cent of Apollo.

The offer comprises three Dart shares for every four Apollo shares; and three comparable Dart options for every four Apollo options.

The implied consideration is $0.791 per Apollo share. Before the announcement, Apollo's shares were trading at $0.61.
Dart already held 21 per cent of Apollo, and is exercising farm-in rights for two Apollo tenements.

Dart will issue 118 million shares, and if all goes well Apollo shareholders will hold about y 22 per cent of the combined group.

Dart's managing director, Simon Potter, said the takeover would create significant value for both Dart and Apollo shareholders. "The acquisition of Apollo is a logical move for Dart and is consistent with our Australian strategy laid out at the time of the demerger of Dart from Arrow Energy - to grow big, grow fast," he said.

"We see in Apollo a differentiated NSW focused strategy, with extensive gas resources capable of near term commercialisation, with access to an ever increasing gas market advantaged in terms of its greener credentials, pricing and infrastructure.

"Importantly, Apollo's resource may benefit from gas-to-LNG projects, but is not dependent on them. A combination of Dart's ambition, technical and operational expertise with Apollo's assets will drive further upside from within this portfolio."

Apollo listed in December 2009 at 20 cents per share. Dart's shares have leapt to a new high of $1.35. (ASX: DTE and AZO)

EcoQuest, which is also listed on the Berlin Stock Exchange, is undertaking a roadshow in Germany to present to various investor groups including some large trade fairs. German investors are well known for their interest in environmental stocks, and EcoQuest says it has starting to see German investors on its share register. The company has launched a German language website. (ASX: ECQ)

Electrometals Technologies
Electrometals director Robert Mills has increased his shareholding, acquiring 1.98 million shares at an average price of 1.4 cents each. He now has 2.48 million shares. (ASX: EMM)

Green Invest
Green Invest is to sell 51 per cent of its energy and environmental broker Next Generation Energy Solutions business to Envex Services. It will take a 49 per cent interest in Envex and be on the board. Green Invest will receive $2 million for its 51 per cent interest in NextGen, which will be operated by Envex.

Green Invest will use the funds to remove debt and for working capital. The deal includes provision for the sale of the remaining 49 per cent interest.

Green Invest said the joint venture will combine Envex's market experience and corporate associations with NextGen's broking expertise and network of companies and associations active in energy and carbon markets.

A legal dispute over Green Invest's acquisition of NextGen has been partially settled.

Green Invest's Green Plumbers business has won a contract with Scouts Australia NSW under their Sustainable Scouts Sites program. Scouts Australia NSW has received $1.1 million for the installation of water and energy efficient products at various sites in NSW. (ASX: GRI)

Green Rock Energy
Green Rock Energy has been offered funding of $5.4 million by the WA Government for its geothermal drilling project at The University of Western Australia's Crawley Campus in Perth.

The funding is under the third round of the LEED (Low Emissions Energy Development) Fund, and subject to the achievement of milestones.

The funding complements the $7 million awarded a week earlier by the Federal Government for the same project.

The current plan is for the first well to be drilled on the Crawley Campus in the first half of 2011. (ASX: GRK)

Greenearth Energy
Geothermal energy developer Greenearth Energy is diversifying its business with a 100 per cent subsidiary, Greenearth Energy Efficiency Pty Ltd, that it has created to deliver energy efficiency solutions to the commercial, industrial, manufacturing and street lighting sectors in Australia and the Pacific Rim.

The first energy efficiency solution will be the introduction of industrial and commercial lighting efficiency systems. The subsidiary will offer a complete solutions including project management, installation and lighting efficiency measures. Greenearth Energy Efficiency says it id able to achieve energy savings of up 65 per cent as well as cost savings.

Greenearth Energy Efficiency has established a partnership with Israeli based Metrolight Ltd. The two companies have a binding Memorandum of Understanding for Greenearth Energy Efficiency to be an authorised distributor of Metrolight's lighting efficiency products in Australia, New Zealand, Indonesia, and selected countries in Asia and the Pacific Rim.

Later, the companies may enter an exclusive distribution agreement.

Metrolight is said to be a leading manufacturer of smart electronic ballasts that power high intensity discharge (HID) energy efficient lighting systems. Established in 1996, it has over 500,000 systems installed around the world. It operates in 15 countries, has over 50 business partners worldwide and six patents in 25 countries. (ASX: GER)

Hot Rock
Hot Rock (ASX: HRL) has applied for grants totaling up to $9 million with the Victorian Government to expedite its flagship Koroit Geothermal Project in south west Victoria, which it says has the potential to be Australia's first commercial geothermal power generator.

Under the government's Energy Technology Innovation Strategy (ETIS), the company has applied for a $4 million grant for the Sustainable Energy Research and Development (SERD2) Program. If awarded, the grant will fund the testing and evaluation component of the Koroit Proof of Concept drilling program, set to commence in early 2011.

In addition, HRL has lodged an Expression of Interest for a $5 million grant under the Victorian government's Sustainable Energy Pilot Demonstration (SEPD) Program to assist in the development of a pilot scale demonstration plant at the Koroit Project. Short-listed applicants will be invited to submit a comprehensive application for assessment.

The applications would complement the Federal Government's Geothermal Drilling Program grant of $7 million awarded in August this year, said Hot Rock. (ASX: HRL)

KUTh Energy
KUTh Energy says exploration results from its recently acquired 2010 magnetotelluric (MT) survey confirm the MT results previously reported on 9 November 2009. Combined with data from existing heat flow and aeromagnetic surveys, they support the interpretation of a Naturally Fractured Hot Rock (NFHR) geothermal play beneath the Lemont Inferred Geothermal Resource in the Midlands area of Tasmania.

The company says NFHR is a concept unique to KUTh Energy, in which geothermal development targets hot natural fluids hosted by deep, permeable fracture systems. NFHR unites the strengths of existing play concepts such as Hot Dry Rock (HDR) and Hot Sedimentary Aquifer (HSA) through a combination of in situ permeability, potential for high
fluid flow rates and likelihood of high temperatures derived from a local high-heat-producing granitic source.

Managing director David McDonald said "KUTh has now collated a considerable amount of data towards location of its drilling target with projects like the MT survey continuing to form a critical component of the company's risk mitigation strategy. Our Lemont Inferred Resource target is now "drill ready"." (ASX: KEN)

Metgasco and LNG
Metgasco and LNG Ltd are to evaluate the feasibility of gas supply, transportation, liquefaction and sale of LNG from Metgasco's coal seam gas reserves and conventional resources in the Clarence Moreton Basin in NSW to LNG's Gladstone LNG Project, at Fisherman's Landing, Queensland.

Over the next few months Metgasco and LNG will assess whether the supply of gas from the Clarence Moreton Basin to Fisherman's Landing is viable, and the option to supply gas to a potential LNG project at the Port of Brisbane.

The arrangement is part of a Metgasco feasibility study into the delivery of gas to liquefied natural gas export markets. The company will evaluate the commercial, environmental and technical feasibility of a number of export LNG options.
If this review determines that this commercialization option has merit and is feasible Metgasco expects to be able to select a preferred LNG project option in 2011.

LNG Ltd recently became a substantial shareholder in Metgasco.

Metgasco says it is well advanced in developing the Lions Way gas pipeline which will deliver gas from its gas fields in northern NSW to south east Queensland. There are likely to be benefits in extending the pipeline to supply gas to Gladstone or Brisbane.

Metgasco is also assessing a floating LNG project. With its resources close to the coast, a floating LNG project is a commercial possibility, it said. To this end, it has entered a Memorandum of Understanding with Norwegian company FLEX LNG Ltd to evaluate the feasibility of an offshore export LNG project. (ASX: MEL and LNG)

Mission NewEnergy
Mission NewEnergy has appointed Peter Torre as a non-executive director. A chartered accountant, Mr Torre is experienced in the administration of listed companies, predominantly in the resource sector, being the company secretary of several ASX listed companies and companies listed on the Toronto Stock Exchange and London's AIM market.

He is also a director of Mineral Commodities Limited, Neo Resources Limited and a founding director of the Better Life Foundation WA.

Chairman Dario Amara said "Peter's presence on the Board will strengthen the skill and experience profile of the Board, as well as better prepare us for a listing on the Nasdaq, which we are in the process of applying for." (ASX: MBT)

Orbital Corporation
Orbital Corporation's LPG business Orbital Autogas Systems has commenced supplying liquid propane injection (LPi) systems to Holden Special vehicles, a maker of high performance cars.

HSV has launched a range of bi-fuel LPG vehicles in Australia and all but one model are available with an LPi system
LPi vehicles can reduce CO2 emissions by up to 15 per cent and give lower running costs.

Orbital says Australia is the second largest per capita LPG market in the world and has an extensive LPG distribution network. (ASX: OEC)

Phoslock Water Solutions
Phoslock has made distribution progress in the US and China. US based AquaTechnex will make its application of Phoslock this month in a number of lakes in southern California. AquaTechnex has a three year contract to maintain 15 lakes.

The core business of AquaTechnex is lake and water body remediation. If the applications are successful, AquaTechnex will expand the use of Phoslock to its established customers.

Another US lake remediation company is seeking approval to use Phoslock in Florida.

In China, Ningbo Tianyun Eco-control Co Ltd has purchased 20 tonnes of Phoslock and is to make its first commercial application to a number of small lakes and canals. (ASX: PHK)

Torrens Energy
Torrens Energy has increased its landholding with the granting of GEL 559 at Mulgaria in South Australia. The company said the 500 square kilometre acquisition brings its landholding to 13,846 square kilometres, the largest in South Australia.

The Mulgaria Project Area is the northern extension of the geology hosting the Parachilna Geothermal Play, which is the company's most advanced project and, it says, contains Australia's largest code compliant geothermal resource of 780,000 PJ.

Drilling at Parachilna since 2007 has established the highest recorded heat flows and modeled temperatures on the grid in Australia, and located close to the National Electricity Market.

International Companies

Ocean Power Technologies
Ocean Power Technologies has completed the first grid connection of a wave energy device in the US, at the Marine Corps Base Hawaii (MCBH). The company said the connection demonstrates the ability of its PowerBuoy systems to produce utility-grade, renewable energy that can be transmitted to the grid and in a way compliant with national and international standards.

The PB40 PowerBuoy is part of OPT's ongoing program with the US Navy to develop and test its PowerBuoy technology. Key program goals include demonstrating system reliability and survivability, and successful interconnection with the grid serving MCBH.

The PowerBuoy was deployed on December 14, 2009 approximately three-quarters of a mile off the coast of Oahu in water 100 feet deep. To date, the PowerBuoy has operated and produced power from over 3 million power take-off cycles and 4,400 hours of operation.

OPT has also won two new funding awards totaling US$4.8 million from the US Department of Energy (DoE).

OPT will use the first award, for US$2.4 million, to help construct and deploy one of its PB150 PowerBuoys at Reedsport, Oregon, as part of the first proposed commercial wave power project in the US. Deployment of the 150 kilowatt peak-rated PB150, which is currently under construction, is expected to occur in 2011.

This is the second award to OPT by the DoE for the Reedsport project. In 2008, it received US$2 million towards the construction of the PB150 PowerBuoy.

The second award, also for US$2.4 million, is for the design and development of OPT's next generation 500 kW PowerBuoy wave power system, the PB500. Development will focus on increasing the PB500's power extraction efficiency, implementing a "Design-for-Manufacture" approach and reducing maintenance costs, all of which aim to achieve lower installed capital and energy costs and make wave power more competitive with fossil fuels.

The award follows an initial US$1.5 million in April 2010, taking total DoE funding for the PB500 to US$3.9 million. (AIM: OPT, Nasdaq: OPTT)

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