Eco Investor Update

A Weekly News Update for Environmental Investors

15 August 2011 - No 44

ASX 100

AGL Energy
The NSW Office of Environment and Heritage (OEH) has put AGL on notice by sending the company an official warning about an incident that happened at one of its coal seam gas (CSG) sites in Western Sydney in May.

An investigation into the incident at a property in Camden has shown that AGL was remiss in its management of the CSG bore well but that no significant environmental impacts had been recorded, said deputy chief executive, Environment Protection and Regulation for OEH, Greg Sullivan.

"OEH has been coordinating the multi-agency investigation into the incident that occurred on the 17th May this year and involved foam and water emissions discharging from the well site. The investigation found that whilst the incident was concerning no significant environmental harm was recorded.

"As a result we have issued them with an official warning that will be recorded on their compliance history to be considered by the Office if there are any further environmental incidents.

"AGL have given OEH assurances that it has put a number of corrective actions in place to ensure that an incident of this nature won't happen again. Their performance will continue to be monitored into the future," said Mr Sullivan.

The timing of the warning was not good for AGL, which two days earlier had responded to general community concerns about coal seam gas and water tables.

"We have heard these concerns about possible impacts on the water resource raised in many communities. No-one, especially AGL, wants to create additional concern or cause damage to agricultural lands," said AGL's group general manager of Upstream Gas, Mike Moraza.

"We acknowledge that the integrity of our operations is important to our communities and that is why AGL: has multiple levels of protection in place at our gas wells – in fact there are three layers of steel casing (each one is 6 mm thick) and three layers of specialized cement between each layer of steel casing in our wells which prevent communication with aquifers used for agriculture," he said.

"The fact is that properly managed coal seam gas extraction processes will have no impact on shallow beneficial use aquifers.

"Although NSW needs this resource, AGL understands that its development can only occur against a backdrop of a robust regulatory framework and improved community engagement. We believe that well-regulated, best practice industry operators can enable a CSG industry to meet the needs of NSW's gas consumers whilst co-existing alongside other land uses.

"AGL intends to continue to work with communities to give them the opportunity to monitor our development activities. AGL welcomes this scrutiny, and looks forward to ongoing discussions with local communities so that they can develop confidence in the integrity of our operations", said Mr Moraza. (ASX: AGL)

DUET Group
DUET Group has received the final regulatory approval from the Pennsylvania Public Utility Commission (PaPUC) for the sale of its 29 per cent interest in Duquesne Light Holdings to GIC.

The PaPUC approval is subject to a 30 day notice period. Financial close of the transaction is expected to occur immediately following in mid September.

The net hedged sale proceeds of $345 million will be used to repay DUET's corporate bridge debt facility.

Chief executive David Bartholomew said "The finalization of the Duquesne sale is another key step in the simplification of DUET's portfolio and the strengthening of its capital structure, and will allow the Group to now focus on its three majority-owned Australian regulated utility businesses."

DUET said the institutional component of its current Entitlement Offer raised $174 million and was oversubscribed.

Sumitomo Mitsui Trust is now a substantial shareholder in DUET with 6.7 per cent. (ASX: DUE)

ASX 200

Lynas Corporation
Lynas director, Zygmunt Switkowski has acquired 300,000 shares in Lynas at $2.08 each. He now holds 700,828 shares indirectly.

Mitsubishi UFJ Financial Group has reduced its interest from 10 per cent to 8.9 per cent. (ASX: LYC)

ASX 300

Galaxy Resources
Galaxy Resources said ramp-up of its Mt Cattlin mine continues to progress solidly, with spodumene concentrate production in July of 8,916 wet metric tonnes, a 25 per cent increase on June.

Plant utilization was 16 per cent higher at 79 per cent.

The company expects to ship a third consignment of about 20,000 tonnes of spodumene concentrate to China in September. (ASX: GXY)

Emerging Companies

Qube Logistics
KFM, which manages Qube Logistics, said an independent valuation of Qube's unlisted logistics investments has resulted in a pre-tax revaluation gain of $152.1 million for the six months to 30 June, and a full year pre-tax revaluation gain of $205 million.

During this period, Qube increased its ownership of POTA Holdings from 47.2 per cent to 94.7 per cent. POTA is Qube's Landside Logistics division. The valuation of the Landside Logistics Division was $123.3 million at 30 June 2010. Qube made a $125 million investment bringing the total to $248.3 million and the pre tax valuation was $402.9 million, an increase of $154.6 million or 62.3 per cent.

Qube's ownership interest in its other logistics assets remained unchanged in the period. The valuation of the Auto, Bulk and General Stevedoring Division rose by $50.8 million or 20.9 per cent, while that of the Strategic Development Assets fell division by $0.9 million.

Qube said the increase in the Landside Logistics division reflects a strong revenue and earnings outlook through organic growth and recent acquisitions, as well as the attractive purchase price negotiated with DP World for its shareholding in POTA during the period.

The increase in the Automotive, Bulk and General Stevedoring division was due to strong automotive and bulk volumes, as well as increasing contributions from new development projects and acquisitions.

"It should be noted that Qube's financial statements for the year ending 30 June 2011 will not fully reflect these gains and valuations due to Qube's having to consolidate rather than fair valuing investments where it has control such as in the case of POTA in its Landside Logistics division," said Qube.

Based on Qube's preliminary accounts including the independent valuations, KFM will be entitled to a performance fee for the twelve months to 30 June 2011 of $17.4 million excluding GST.

KFM will apply up to 50 per cent of the performance fee to subscribe for shares in New Qube, if the planned corporatization is approved. (ASX: QUB)

Micro Cap Companies

BluGlass director George Venardos has indirectly acquired 100,000 shares at 10 cents each, bringing total shares held to 500,118. (ASX: BLG)

Dyesol has appointed former Geodynamics managing director Gerry Grove-White as a director. Mr Grove-White has 45 years experience in power generation internationally in the gas, oil, coal, nuclear, wind, hydro and geothermal sectors. His experience includes project management, and financing and operational engineering.

Prior to Geodynamics, he held a number of senior management roles around the world, including managing director of Eraring Energy and chief operating officer of Tata Power, India's largest private generator. Mr Grove-White a member of the Institution of Mechanical Engineers.

Meanwhile, US subsidiary Dyesol Inc has completed installing equipment for DyeTec Solar's dye-sensitized solar cell based building integrated photovoltaic's (BIPV) program in Toledo. The shipment is Dyesol's Inc's first key deliverable for DyeTec Solar's product development program, which is funded by the Ohio Third Frontier Fund.

Key management and technical resources from Dyesol Inc's California office were relocated to DyeTec's office in May and have completed the first phase of the program, enabling DyeTec to begin building prototype panels. The larger size panels are said to be a significant advance on earlier DSC products and will help open up opportunities in the built environment, said Dyesol.

DyeTec's Solar's technology utilizes dye solar cell (DSC) materials and Transparent Conductive Oxide (TCO) glass manufactured by DyeTec's shareholders. It enables downstream suppliers in the glazing and facade market to mass produce high performing DSC–TCO glass products for use in BIPV, BAPV (Building Applied Photovoltaics) and AIPV (Automotive Integrated Photovoltaics).

The BIPV and BAPV marketplace represents the largest opportunity for DSC technology, and initial efforts will result in the development of prototype DSC based BIPV glass products and equipment, and lay the foundation for future high volume manufacturing capability.

Dyesol's executive chairman Richard Caldwell said "Bringing together Dyesol's leading DSC expertise, with our partners' 150 plus years of glass processing technology and resources provides DyeTec with a significant head start in its development of DSC based BIPV products." (ASX: DYE)

European Gas
In early September European Gas will commence another stage of coal bed methane production testing at the Folschviller 2 well in Lorraine, France.

Initially scheduled for three months, the test may be extended to evaluate and demonstrate well and reservoir characteristics in the longer term.

The contingent resource is 2.7 trillion cubic feet. A key objective of the drilling is confirmation of gas content, flow capacity and coal seam geometry from which a pilot project can be designed.

The company anticipates the well results will enable the design and implementation of a CBM pilot project in 2013 leading to early commercial scale development drilling. "The pilot project is a critical step to the Company's overall development program for the large CBM resources which are known to be present in Lorraine," it said. (ASX: EPG)

Green Rock Energy
Green Rock Energy and the Federal Government have mutually agreed that the funding agreement for Green Rock's Perth Metropolitan area Project be terminated. The company will return the unspent balance of $250,000 out of the $350,000 first tranche received in September 2010. The final amount of this balance to be returned after eligible expenditure on project activities is yet to be finally agreed

The funding was terminated because Green Rock could not securing matching funding to drill two geothermal wells, nor securing a suitable drilling rig.

Green Rock said it still believes that direct-use commercial geothermal projects in the Perth metropolitan area may become attractive in time, but current economic conditions and the lack of a suitable drilling rig and of Renewable Energy Certificates for geothermal directuse projects mean it will give them a low priority for at least the next 12 months.

Green Rock's managing director Richard Beresford said the company will now focus on securing government funding for its Mid West geothermal power project in the northern
Perth Basin.

It hopes this will be a contender for the Government's new Emerging Renewables program. (ASX: GRK)

Greenearth Energy
Greenearth Energy and the Government have agreed to terminate the company's grant under the Geothermal Drilling Program (GDP).

Current economic conditions over the past year combined with the agreed construct of the GDP grant have limited Greenearth Energy's ability to attract project funding for its Geelong Geothermal Power Project and fulfil the requirements of the grant.

Greenearth Energy said it is committed to developing its Victorian geothermal assets, and hopes to qualify under the Government's new $126 million Emerging Renewables program, which has more flexible funding arrangements. Geothermal companies are thought to be well placed to win at least one third of the $126 million.

Managing director of Greenearth Energy, Mark Miller said "Our plans for the Geelong Geothermal Power Project and Latrobe Valley region remain unchanged. We look forward to the State Government's continued support in concluding our current ETIS grant funding negotiations. Our Victorian permits and project areas remain amongst the countries most strategically attractive to develop.

"With twenty two percent of our nation's greenhouse gases emitted in the Latrobe Valley alone, our proposition to develop base-load, zero-emissions renewable energy in that part of our State remains at the core of our company's long term strategic objectives".

Meanwhile, subsidiary Greenearth Energy Efficiency Pty Ltd has undertaken a Metrolight High Intensity Discharge (HID) lighting equipment upgrade and optimization trial at Ambulance Victoria's depot in Melbourne's western suburbs.

As a converted factory, the Ambulance Victoria depot had a simple garage lighting system that was inefficient, inflexible and costly to run, said Greenearth.

The Greenearth Energy Efficiency solution combined efficient lights with a simple smart control system "that delivers light in the right amount, in the right areas and at the right times".

The lighting system's electricity savings are estimated to be 65 per cent.

Mr Miller said "With literally thousands of similar sites nationally we believe our technology solution has enormous potential." (ASX: GER)

Hot Rock
Hot Rock and the Australian Government have terminated the company's funding under the Government's Geothermal Drilling Program (GDP) due to the company's inability to meet the conditions of the grant.

Hot Rock said it will aim to win funding under the Government's new Emerging Renewables program, which is more flexible in its funding and is thought to better suit geothermal projects.

The company said its Koroit geothermal project in Victoria "is one of the best lower risk geothermal projects in the nation, given its similarities to commercially operating Hot Sedimentary Aquifer type projects overseas, proximity to existing transmission lines and a large energy market. Currently, the project has identified sufficient indicated and inferred resources to supply 1,000 MW of clean base-load 24/7 power to over a 1,000,000 homes. A geothermal plant could be operational within two years following a successful drilling and testing program."

Koroit is ready to drill with the test site selected, steel casing and wellheads procured for the first well and the second well's preparation is very advanced.

Executive chairman Dr Mark Elliott said "We are committed to developing the Koroit Geothermal Project in Victoria and welcome the opportunity to apply for the Australian Government's new Emerging Renewable Program." (ASX: HRL)

MediVac says it has finalised more accessible long-term funding for the rollout of its new MetaMizer 240 SSS clinical waste remediation devices and its SunnyWipes professional hand sanitising gels and surface wipes.

The funding agreement, with US-based La Jolla Cove Investors Inc., is for up to four convertible notes, each with a purchase price of $2 million, and drawn down in guaranteed monthly sums of $200,000, or higher sums at the discretion of La Jolla.

The unsecured funding has a coupon rate of 4.75 per cent. The issue of the third and fourth Note is at the discretion of MediVac. In certain circumstances, MediVac can elect to force conversion of any outstanding principal into shares in the company.

MediVac executive chairman, Paul McPherson said "This deal provides MediVac with guaranteed working capital to fund the expansion of our two key technologies in line with strongly anticipated market demand. The deal provides us with the necessary surety of accessible funds but also the flexibility, in the terms, to suit our needs at a given point in time."

However, La Jolla Cove Investors was behind funding deals with Intec and Clean TeQ Holdings that saw it convert and sell on market large quantities of shares, seriously affecting those companies' share prices.

The Funding Agreement imposes an ownership limit on La Jolla of 19.9 per cent. (ASX: MDV)

Metgasco's recent share purchase plan at 26 cents per share was well supported by three of the company's directors. Directly or indirectly, Leonard Gill, Steven Koroknay and Nicholas Heath each acquired another 115,386 shares. (ASX: MEL)

Mission NewEnergy
Mission NewEnergy has reported an unaudited increase in 2010-11 revenue of 3 per cent to $16.9 million, a net loss of $20.5 million which is a decrease of 79 per cent on the $97.8 million loss for 2009-10, and a cash loss of $12.5 million, down 16 per cent on 2009-10.

The company's cash position was $20.5 million. This included $15.8 million and refining trade receivables of $4.7 million which was received in July.

Revenue for the fourth quarter was $11.1 million compared to $2 million for the same period in 2010. The increase was primarily due to capacity utilization relating to strong sales into the European market.

"Mission's Jatropha operations continue to develop towards providing a captive supply of low cost material for biofuels production. Once the trees reach maturity, Mission will have an integrated business that produces biofuels that are forecast to be cost competitive with petroleum products at US$52 per barrel. While the trees are maturing, our integrated business model with established biodiesel refining capacity, has the ability to generate revenue and create value for the company," said chief executive, Nathan Mahalingam.

"We continue to see unprecedented demand for Jatropha oil in the aviation, transport fuel and power oil markets globally," he said. (ASX: MBT)

Orbital Corporation
Orbital Corporation's American Depository Receipts (ADRs) will begin trading on the NYSE Amex on 25 August under the symbol OBT.

Knight Capital Americas, L.P. will be Orbital's specialist on NYSE Amex.

Terry Stinson, Orbital's managing director and chief executive officer, said "The application of alternative fuels for automobiles and trucks and improved fuel economy are front and centre in the US. Investors who are monitoring these developments will be interested to understand what Orbital has to offer.

"Our United States based ADR holders represent approximately 20 per cent of our shareholder base and this move will provide improved stock liquidity and will enhance Orbital's profile in the US share market," he said. (ASX: OEC)

Orocobre has awarded the detailed engineering contract for the Salar de Olaroz lithium-potash project in Argentina to Sinclair Knight Merz (SKM). SKM has been involved in the Olaroz project for over a year. It recently completed the engineering and cost estimates for the definitive Feasibility Study for the production of 16,400 tonnes per annum of battery grade lithium carbonate.

SKM is said to be the only company that has designed and managed the construction of a complete lithium brine operation, one which was also in Argentina, at FMC's Salar de Hombre Muerto facility. It has also provided services to lithium projects in Chile. (ASX: ORE)

Panax Geothermal
Panax Geothermal is to receive $10 million in funding to develop its Indonesian projects under a deal with a Canadian geothermal company, Molten Power.

Molten will receive a 50 per cent interest in Panax's wholly-owned subsidiary, Panax Geothermal Singapore No.1, and will also subscribe for $1 million in equity in Panax.

Panax managing director Kerry Parker said the funds would be invested in existing projects, but the companies also plan to join forces to expand Panax's Indonesian interests, and both companies will be on the lookout for attractive projects.

"It's a significant portion of funding that can be applied directly to develop our projects in Indonesia, and provides funding certainty for Panax as we grow our international investments," he said.

"The value of this transaction has provided the first real market test of the value of Panax's Indonesian portfolio, which was twice the market capitalization of the entire portfolio of
projects held by Panax both in Australia and overseas."

Mr Parker said Molten and its people have significant experience in large-scale geothermal development activities across the world.

Panax has welcomed the Federal Government's new $126 million Emerging Renewables Energy Fund to support renewable energy technologies such as geothermal. At least one-third of the funding will be set aside to encourage further development of geothermal energy projects.

Panax's Penola hot sedimentary aquifer project is positioned directly under the national transmission grid in South Australia and is thought to be well-placed to apply for the Emerging Renewables funding.

"Our Penola project has the largest of only three measured geothermal resources currently reported in Australia," said Mr Parker. (ASX: PAX)

Torrens Energy
Torrens Energy is one of four listed geothermal explorers that has terminated a grant agreement under the Government's Geothermal Drilling Program (GDP) because it could not meet the grant conditions. (ASX: TEY)

Initial Public Offerings

Strategic Elements
Rare earths explorer Strategic Elements (Eco Investor Jun 2011) listed on the ASX on 11 August. The company's IPO was oversubscribed and raised $2.4 million, giving it total funds of $4.9 million.

The pooled development fund has expanded its search for rare earths into Ireland with subsidiary Strategic Materials lodging applications for six licences covering 150 square kilometres. The licences cover rare earths, rare metals and gold.

But the company's immediate focus is on New Zealand. (ASX: SOR)

Unlisted Companies

BioPower Systems
Ocean energy company, BioPower Systems, has completed extensive tests of its full-scale O-Drive power conversion module, delivering stable power to the grid over extended periods with a high level of efficiency.

The O-Drive 250 kW module is designed to plug into wave and tidal energy systems such as the company's bioWAVE and bioSTREAM. Work commenced on the O-Drive in 2008 under a project partly funded by a Commonwealth Government REDI grant.

The O-Drive is driven in an oscillating fashion to convert the ocean energy harnessed by such systems into grid-ready AC power. The O-Drive combines a hydraulic circuit, an electric generator, and control algorithms to convert the characteristically large forces, and slow motions, inherent to ocean waves into a steady flow of electricity.

A test rig was built to reproduce ocean forces and apply these to the O-Drive.

Chief executive officer, Dr Timothy Finnigan, said "Ocean energy devices typically oscillate slowly in response to huge forces, and this presents a significant challenge in terms of harnessing the energy to produce electricity. The O-Drive solves this problem outright, as it not only gears up the motion, but also rectifies it and smooths it, so that we can produce grid-ready electricity using a standard electric generator."

"We are very pleased with the efficiency of this system, and with the quality of power that is produced."

The O-Drive is designed to be detached from a moored ocean energy system, which enables easy and cost-effective maintenance. It produces high-voltage power, which allows ocean energy systems to be installed even at substantial distances from shore, as the losses during transmission are minimal.

BioPower Systems will use the O-Drive module in a bioWAVE pilot demonstration off the coast of Victoria. The company also intends to produce a 1 MW commercial version of bioWAVE that will utilize four 250 kW O-Drive modules.

The company is planning to offer turnkey ocean energy solutions to project developers. Ocean energy equipment, services and support will be provided to companies that currently develop wind farms.

"We intend to adopt a similar business model to those used in the wind energy sector. It is well proven, and serves as a good precedent for ocean energy," said Dr Finnigan.

International Companies

Beacon Power Corporation
Beacon Power (Eco Investor Aug 2011) has more than doubled its second quarter revenue as its Stephentown project in New York has come to full capacity.

Beacon Power is commercializing a flywheel based energy storage product that supports a more stable, reliable and efficient electricity grid.

The company began to earn revenue in January 2011 from the first 8 MW of flywheel energy storage at the Stephentown plant. The full 20 MW capacity was reached in June. This increased revenue by 216 per cent from US$166,000 in the second quarter of 2010 to US$525,000 in the second quarter of 2011.

For the six months ending June 30, Beacon Power reported revenue US$970,000 compared to US$401,000 for the same period in 2010, an increase of 142 per cent. The net loss from operations was US$11.1 million compared to a net loss US$11 million in the same period of 2010.

Average gross margin on frequency regulation services during the June quarter was 56 per cent compared to 23 per cent during the same period in 2010. The improvement was primarily driven by higher margins in Stephentown compared to those earned in Tyngsboro.

Beacon Power has also been awarded a US$5 million State grant for a 20 MW flywheel plant in Pennsylvania.

"This is remarkable new technology that will help lower the cost of electricity in the long run," said US Representative Lou Barletta. "Storing energy and putting it back into the grid when it's needed could be a game-changer as we try to reduce the cost of energy.

"Additionally, projects like this will bring significant economic, environmental, and efficiency benefits to Pennsylvania's power grid." (NASDAQ: BCON)

Eco Investor Update






Search Eco Investor