Eco Investor Update

A Weekly News Update for Environmental Investors

25 July 2011 - No 41

ASX 100

AGL Energy
AGL Energy has entered two financing transactions for $1.2 billion. The funds will be used to refinance $886 million of debt due in October and help fund capital expenditure including wind turbines.

The transactions lengthen AGL's debt maturity profile and diversify its funding sources.

A $1 billion Self-arranged Syndicated Loan Facility has a $600 million three term loan and a $400 million five year revolving tranche. It was supported by domestic and foreign lenders and was oversubscribed.

AGL also signed a $200 million loan with EKF, the Danish export credit agency. The loan amortizes over 18-years and matures in 2031. It will partially fund AGL's 50 per cent interest in the Macarthur Wind Farm, including the purchase of Vestas turbines. (ASX: AGK)

ASX 200

Dart Energy
Dart Energy has sold its first coal bed methane gas in the UK. The buyer is SSE Energy Supply, a FTSE 100 utility with over 9 million customers and a significant coal, gas and renewables generation business. It owns 50 per cent of Scotland Gas Networks, which owns and operates the gas grid infrastructure that passes across Dart Energy's PEDL 133 field in Scotland, from which the gas will be supplied.

The Gas Sales Agreement (GSA) is for five years and extendable by mutual agreement. It means Dart will be able to deliver all current PEDL 133 2P reserves during the term. The price is linked to the prevailing UK natural gas market prices.

An independent assessment of PEDL 133 identified 2P Reserves of 43 BCF, 3P Reserve of 81 BCF and a 2C contingent resource of 607 BCF.

Chief executive officer, Simon Potter, said he expect to see the first cash flows in early 2013.

Dart Energy estimates that up to 20 wells will be needed in the ramp-up to first gas sales, and then 10 to 12 additional wells each year to sustain production. (ASX: DTE)

Eastern Star Gas
The directors of Eastern Star Gas have accepted and recommend a takeover offer by major shareholder Santos.

Under the all scrip offer Santos is offering 0.6803 of its shares for every 10 Eastern Star Gas shares. Based on Santos' share price on 15 July, the offer is equivalent to 90 cents per Eastern Star Gas share and values the company at $924 million.

Eastern Star Gas said the takeover will immediately crystallize the long term value of its Narrabri Gas Project and address the commercialization and funding challenges associated with the project.

The deal means that another environmentally positive company will be delisted.

Despite the considerable gas activities of the company, Eco Investor will not follow Santos as it does not meet our environmentally positive screen, mainly due to its oil activities. (ASX: ESG)

Energy World Corporation
Shares in Energy World Corporation have hit a two year high of 66.5 cents. The recent sharp rise coincides with announcement of the carbon tax, the introduction of a new strategic substantial shareholder, and the takeover offer for Eastern Star Gas by Santos. (ASX: EWC)

ASX 300

Ceramic Fuel Cells
Ceramic Fuel Cells has signed a distributor for The Netherlands, while the German Government has approved funding for a previously announced order of up to 200 of Ceramic Fuel Cells' integrated power and heat generators from German energy service provider EWE.

The EWE order is the largest the company has received with total revenue of up to 4.9 million over two years. Part of the funding for the order is provided by the German government's national hydrogen and fuel cell technology innovation program.

Ceramic Fuel Cells is supplying its Gennex fuel cell module and components to its local manufacturing partner, Gebrüder Bruns Heiztechnik GmbH, which is integrating the module with a boiler into a power and heating product. EWE will install the units in homes in the Lower Saxony region in northern Germany.

EWE is Ceramic Fuel Cells longest standing utility customer and one of the largest utilities in Germany with 6,400 staff and revenues of 5.8 billion.

Ceramic Fuel Cells has signed a distribution agreement with Zestiq B.V. that will see Zestiq sell Ceramic Fuel Cells' BlueGen gas-to-electricity products in The Netherlands.

Zestiq is part of the consortium of companies that in March installed a BlueGen in a 17th century canal house "De Groene Bocht" in the centre of Amsterdam. Zestiq and its partners will market and sell BlueGen units to small commercial and residential customers. The units will be installed and maintained by consortium partner Eneco.

Matthijs Guichelaar from Zestiq said "Zestiq sees a huge market potential for BlueGen in the Netherlands. With its dense gas network, large gas reserves in the North and growing interest in distributed generation, we think the Netherlands and the BlueGen are a perfect match. We see great possibilities in carbon reduction and smartgrid applications. Together with Eneco we are looking forward to starting to make sales."

BlueGen customers in The Netherlands are eligible to receive a feed in tariff for up to 5,000 kilowatt hours of electricity exported to the grid. (ASX: CFU)

Tassal Group
Fund manager Maple Brown Abbott has increased its interest in Tassal Group from 5.4 to 6.8 per cent. It became a substantial shareholder in May. (ASX: TGR)

Emerging Companies

Energy Developments
Energy Developments is to acquire WA based remote area energy provider Energy Generation Pty Ltd (enGen) from Wesfarmers for $101 million.

enGen owns or operates 98 megawatts of generation capacity at mine sites and remote communities. Of the 20 remote area energy projects it operates, 19 are in regional WA.

For the six months to 31 December 2010, enGen's unaudited earnings (EBITDA) werer $11 million and EBIT was $5 million. The acquisition is on a debt free basis.

Energy Developments said the remote area energy (RAE) power generation sector is forecast to double in the near term and almost triple in the coming decade, as mine and ancillary operations are developed without the support of established power grids."

The acquisition gives the company excellent diversification in the prime mining boom market, said managing director, Greg Pritchard. "Energy Developments will now be the largest independent remote power producer in Australia operating in the 1 to 100 MW market, with 32 projects and an installed capacity of 275 MW."

"The acquisition of enGen will add to the substantial embedded value in the Company's existing RAE portfolio and signals a substantial new stage of growth for the Company," he said.

The sale is subject to conditions which are expected to be satisfied in coming weeks, and the sale includes a working capital adjustment. ENE will fund the acquisition from cash and debt facilities that were recently refinanced. (ASX: ENE)

Qube Logistics
Taverner's Group has reduced its holding in Qube Logistics from 14.2 to 12.9 per cent.

Qube's shares have been slowly but steadily declining since they peaked at $1.855 in April. (ASX: QUB)

Micro Cap Companies

AnaeCo has appointed Patrick Kedemos as chief executive officer, commencing 29 August. It describes Mr Kedemos as a commercialization specialist.

Mr Kedemos has held senior leadership positions in commercial, financial, marketing and strategic disciplines. He spent years with Air Liquide group, internationally and in Australia, and since 2007 held the role of general manager of Air Liquide Western Australia (ALWA), the partnership company between Wesfarmers Limited and Air Liquide Australia.

He holds a Master of Science in Management from the Reims Management School and is fluent in five languages.

Mr Kedemos said "The DiCOM System is a stand out technology in a global market that is searching for alternative waste management solutions which are both economically and environmentally compelling. I am very excited to be tasked with the commercialization responsibility of introducing DiCOM to markets around the world." (ASX: ANQ)

Blue Energy
Data sharing between Blue Energy, Netherland, Sewell and Associates (NSAI) and several other coal seam has operators in Queensland has resulted in NSAI revising upwards its assessment of Blue Energy's Sapphire Block in ATP814P.

NSAI has identified 39 Petajoules (PJ) of 3P reserves within the Fort Cooper and Rangal Coal Measures in the Sapphire Block. While the 3P reserve classification includes Proved, Probable and Possible reserve categories, this recent assessment of 3P reserves in the Sapphire Block is composed of Possible reserves only, it said.

The initial reserve numbers are modest, but the assessment gives a focus for the location of initial pilot production wells in the block, which will provide a mechanism for the start of the conversion process of current Contingent Resources into Reserves.

The company is targeting a potential 6 to 10 PJ per annum gas supply. (ASX: BUL)

Carbon Conscious
Carbon Conscious non-executive chairman Stephen Lowe is now executive chairman.

Chief executive Peter Balsarini, said "Stephen is a consummate deal maker and has a strong background in the Australian energy trading and equity markets. His abilities greatly strengthen our management team and will free me up to focus on executing major commercial agreements and driving our key client relationships in the energy and emission markets."

Carbon Conscious says it is on the verge of a sustained period of growth, thanks to the Government's Carbon Price legislation which it expects to trigger enormous demand for carbon off-set credits. (ASX: CCF)

EcoQuest has appointed Keith Herbert as global managing director.

Mr Herbert worked for PZ Cussons for 20 years where he held a range of senior leadership roles, the last of which was as a PZ Cussons PLC director in charge of the Group's commercial operations in Europe, Americas, India, China and Australasia.

Since retiring from PZ Cussons, Mr Herbert has consulted widely to companies in the toiletry, household and tissue/wipes markets.

"Mr Herbert's vast global experience in successfully marketing FMCG [fast moving consumer goods], particularly in toiletry and household items, will be particularly valuable as we take our environmentally sustainable products to the international market," said EcoQuest chairperson Sylvia Tulloch.

"We also look forward to benefitting from his experience as a director on the board of a company listed on the London Stock Exchange."

EcoQuest recently completed a redesign of its 90 per cent biodegradable nappy for lower production cost to allow for a competitive entry into European and North American markets and a more competitive retail price in Australia. (ASX: ECQ)

Enerji is expecting its first cashflow from its first power purchase agreement by the end of 2011. It also says the carbon tax announcement dramatically increases the appeal for its green power solution.

The Opcon Powerbox for its first waste heat-driven power station is scheduled for shipment from Sweden on 17 August. Site works will start in September at the Horizon Power Station in Carnarvon.

Enerji said its first invoice will be issued in a little over five month's time bringing the
company's first cashflow online after the commissioning of Enerji's Carnarvon power unit in late November.

The company says this first installation will demonstrate its waste heat recovery system's applicability to the mining industry and other sectors.

Chief executive, Greg Pennefather, said "With a $23 per tonne carbon tax, our clean utility service will save our customers up to an additional $120,000 each year in carbon tax payments per Powerbox by abatement of up to 5,500 tonnes of carbon dioxide gross per annum." (ASX: ERJ)

US firm Faithful+Gould has been appointed to assist EnviroMission with its 200 MW Arizona Solar Tower project.

Faithful+Gould is a North America construction consultant and program manager with well known projects such as the New York World Trade Center Redevelopment and Burj Al Arab in Dubai. It will provide EnviroMission with local project management and integrated commercial services.

Faithful+Gould technical director, Adrian Smith, said "The Solar Tower is a fabulous example of innovation driving sustainable solutions in the energy marketplace and is a perfect match with Faithful+Gould's deep routed passion for sustainability in design." (ASX: EVM)

Greenearth Energy
Greenearth Energy has released technical details of how emissions free energy is achieved using the technology of its subsidiary NewCO2Fuels Pty Ltd.

"A dedicated boiler using CO and O2 combustion is added to a coal-fired power generation plant," it says.

"The nearly pure CO2 emitted from the dedicated boiler is diverted to the solar dissociation plant and converted back to fuel (CO +O2), which is then fed back into the boiler.

"The added CO + O2 combustion energy replaces coal combustion, hence reducing overall CO2 emissions to the atmosphere.

"The larger the solar dissociation plant, the more coal it replaces by emissions free combustion, while producing the same amount of electricity."

To convert CO2 to transportation fuel "A dedicated boiler using coal and O2 oxy-fuel combustion is added to a coal-fired power generation plant. Water and the CO2 emitted from the dedicated boiler are diverted to the solar dissociation plant and converted to syngas (CO+H2) and O2. The syngas is stored and then converted to methanol or another transportation fuel, while the oxygen is stored and then returned to the dedicated boiler."

The leader of the team that created the NewCO2Fuels technology, Professor Jacob Karni of the Weizmann Institute of Science Israel, has visited Australia for a series of meetings and presentations. (ASX: GER)

Utilities management provider Intermoco has concluded a deal for its first site in Sydney and a new site in Melbourne.

The five year Sydney agreement is for Market Town at Wetherill Park, which covers 9,300 square metres of retail space plus common areas and consists of 32 retail stores, three restaurants and a 20 lane bowling alley.

Intermoco will provide embedded network services and generate approximately $1 million in revenue over the five years.

Chief executive, Ian Kiddle said Sydney is potentially the largest market for Intermoco. "This is a great step forward for Intermoco because it demonstrates the strength of our Intermoco Connect Model in both a retail environment but also in a brown field site."

Intermoco has also signed the first contract of a six stage development with the Maidstone Property Group. The development, called Willow Park. is in Maidstone, Melbourne and consists of a seven stage development comprising a total of 359 apartments.

The second stage for which a contract is now in place will start to generate revenue in August. The initial duration of the contract is five years with an option for another five years and is for the provision of electricity to the development.

Intermoco said contracts are being finalized for the remaining stages, with contracts for Stages 1 and 3 expected in the next two to three months. All seven contracts are expected to generate up to $1.1 million over the initial five years with upfront revenue for Intermoco of approximately $120,000. (ASX: INT)

Island Sky
Island Sky's efforts to find majority investors for its US operating subsidiary, Island Sky Inc, appear to be making progress with chairman David Lindh saying the company has received two expressions of interest about selling down its shareholding in Island Sky Inc and that more detailed discussions have commenced with one of the parties.

Island Sky Australia intends to retain an interest in the US business, but allow any party prepared to purchase the majority interest to have significant input into the management of the subsidiary, he said.

The funds to be raised under the current rights issue will be retained by Island Sky Australia "which intends to consider other avenues of investment in an effort to produce better value for shareholders," he said.

Managing director Richard Groden said the company has completed a working prototype and ha begun testing its first Skywater Marine Unit. The unit will produce over 500 litres of water in a 24 hour period. Preliminary production drawings have been completed and the company is working with several captains to arrange on-ship testing.

"We have also completed testing and production drawings for our alterative energy unit, Skywater 100," he said. "The Skywater alternative energy unit can be easily coupled with conventional solar, wind or biofuel-gasifier power to create the first completely self-sustaining air to water machine."

At the beginning of the year the company donated 60 Skywater 14 machines to Haiti's earthquake victims and now "stands poised to benefit from the sale of 8 Skywater 300 machines to the Haitian facility through an international fundraising drive for One Village Planet's Institute for Sustainability."

The company has also received payment from MBA Distribution in Saudi Arabia for their first container of Skywater 14s. "We see the Kingdom of Saudi Arabia as an excellent location for our products. Despite the desert environment there is a lot of humidity in most of the large cities and water is in extremely short supply. The company expects a container of Skywater 300 machines to be ordered soon."

The Skywater 14 machines have passed the water certification tests required by the Philippine government and the Philippine distributor is processing a government contract for 16 Skywater 300 units "which they tell us is the first of many orders".

The first project will supply all the water to several municipal buildings in Manila using Skywater 300s powered by large solar arrays.

Mr Groden said Island Sky has formed a joint venture with US company Featherlite Industries, which makes custom trailers and motor coaches, to design and build self-sustaining mobile water units that can be brought to any remote location and immediately begin producing drinking water. (ASX: ISK)

Liquefied Natural Gas
Copulos Group has reduced its interest in Liquefied Natural Gas from 12.7 to 10.1 per cent.

Dart Energy has reduced its interest from 7.5 to 5.4 per cent.

The company said it has adopted a conservative approach in its project financial modeling and does not expect the carbon tax to have any material impact on existing project return calculations. The carbon tax requires LNG projects to acquire carbon credits for only 50 per cent of their annual carbon emissions and includes fixed carbon credit prices over the first three years - 2012 to 2015.

"The Company believes the introduction of a carbon emissions tax will bring changes in future LNG plant designs in Australia towards adopting ‘Best Available Technology', such as the Company's OSMR LNG process, to reduce carbon emissions. The Company has positioned itself to be a low capital and operating cost LNG plant provider as well as to produce the lowest possible level of emissions on which the carbon tax is assessed." it said. (ASX: LNG)

Metgasco has welcomed the NSW Government's new coal seam gas (CSG) initiatives "as an important step in re-assuring the community of the safety and environmental sustainability of the CSG industry".

By creating more public confidence in the industry, the initiatives will support Metgasco's operations, it said.

The new rules strengthen the current regulatory framework. The NSW Government has introduced a ban on the use of BTEX chemicals in the CSG drilling process. Metgasco said it does not use BTEX as an additive in its CSG drilling fluids.

The NSW Government has also extended a moratorium on the use of hydraulic fracturing (or fraccing) in CSG drilling to 31 December 2011. This moratorium does not impact Metgasco as it does not use fraccing as a completion technique for its wells.

The Government also introduced a requirement for companies to hold a water access license for extraction of more than 3 ML per year. Metgasco said it does not access potable water aquifers.

Another measure is the phasing out of the use of evaporation ponds. "Evaporation ponds are a useful form of water handling but "beneficial" uses of the water are preferred. Metgasco, along with other CSG companies, is evaluating more effective methods of water handling and treatment," it said.

"The CSG in the area where Metgasco operates has "dry gas" properties, our wells produce low levels of water. Our CSG production wells typically produce less than 16 kl (0.016 ML/day or 100 Bbls/day) of water per day and some of our CSG wells do not produce any water at all. Metgasco considers that the low water production from our wells delivers a considerable operating cost advantage over CSG resource plays that produce large volumes of water."

The government also intends to produce new guidelines for transparency and accountability, and Metgasco said it will continue to work constructively with government and community.

Managing director Peter Henderson said "CSG can play an important part in NSW's efforts to reduce greenhouse gases and ensure reliable, low cost energy supplies. As a community we must have a sensible conversation about how we manage competing needs for land use. This conversation should be based on fact and not untrue and poorly informed assertions. CSG operations can be managed in a manner that is safe and protects the environment. It can co-exist with other land uses.

"We welcome the NSW Government's initiatives to provide more certainty to the communities in which we operate."

Meanwhile Metgasco said it has extended the closing date for the share purchase plan to 26 July as "it has received numerous requests from shareholders to extend the current Share Purchase Plan Offer following a number of recent positive developments in the east coast gas sector."

All non-executive directors will take up their full entitlement to new shares and Mr Henderson has also purchased 300,000 shares on market at 30.5 cents each. (ASX: MEL)

Orocobre has completed the initial core drilling program at its Salinas Grandes Lithium-Potash Project in Argentina, with drilling confirming the presence of two brine bodies with significant exploration potential.

"Brine chemistry is attractive, with a low magnesium to lithium ratio, high potassium to lithium ratio and low sulphate and calcium levels," it said. "High recoveries of both potassium and lithium could be expected using a simple, low operating cost, process route."

"The key thing now is to complete the resource estimate and get some idea of the extractability of the brine, said managing director, Richard Seville. "We are awaiting the results of the porosity determinations from the British Geological Survey laboratories and from a shallow auger drilling program which will allow us to undertake a resource estimate. We have also started a program of pump testing to assess extractability from the shallow body."

The drilling results provide an encouraging outlook for the Salinas Grandes project, he said.

"Also, the close proximity to our flagship Olaroz Project could lead to potential operating synergies, including the option to process concentrated Salinas Grandes lithium brine at an expanded lithium carbonate plant at Olaroz after completing potash recovery at Salinas Grandes. (ASX: ORE)

Pacific Energy
Pacific Energy has won a contract to build, own and maintain a 20 MW power station at Sandfire Resources' Degrussa Copper Gold Project in WA. It is the largest new contract since Pacific Energy acquired Kalgoorlie Power Systems (KPS) in 2009.

The contract term is seven years commencing February 2012.

KPS' contracted capacity now exceeds 175 MW and has increased 80 per cent over 26 months. Pacific Energy said it is on track to deliver it "250 MW by 2012" growth strategy. (ASX: PEA)

Pacific Environment
Pacific Environment has reported unaudited revenue of $9.35 million for the year to 30 June, a 26 per cent increase.

Liabilities fell by over $4 million, cashflow management improved and, as planned, a platform is now in place for the company to establish consistent and increased profitability over the coming years, it said. (ASX: PEH)

Petratherm and its partners Beach Energy and TRUenergy say the fracture stimulation at their Paralana 2 well in South Australia was completed successfully.

The main aim of the fracture stimulation - to create fractures in the subsurface at least 500 metres from the Paralana 2 well, was achieved and preliminary analysis suggests the stimulated zone extends 900 metres to the east of the Paralana 2 well at a depth from 3,500 to 4,000 metres.

The success "represents another major milestone achievement in the company's and JV's development and a significant further derisking of the Paralana geothermal energy project," said Petratherm.
The well established temperatures of 176°C at 3,670 metres with expectations of 190°C at 4,000 metres. The next key stage of project de-risking is the creation of a subsurface geothermal reservoir by fracture stimulation from which the hot geothermal waters can be extracted for electricity generation.

"Over a five day period from 11 to 15 July 2011, a total of 3.1 million litres of water were pumped into the Paralana 2 well at pressures up to 9,000 psi and with sustained pump rates of up to 1600 litres per minute," said Petratherm.

This created the zone of subsurface micro-fracturing that extends 900 metres from the well.

The Australian Ethical Smaller Companies Fund has ceased to be a substantial shareholder in Petratherm. (ASX: PTR)

Southern Crown Resources
Southern Crown Resources has commenced resource definition drilling at its Xiluvo Rare Earth Project in Mozambique.

The company says historical results show that the soils contain up to 3.2 per cent total rare earth oxide (TREO) over an area of 400 metre by 300 metres to depths of up to 8 metres. The soils have significant concentrations of more valuable heavy rare earths, in particular europium, dysprosium and terbium.

Successful drilling results could provide Southern Crown with a JORC compliant resource next quarter, it said. (ASX: SWR)

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