Eco Investor Update

A Weekly News Update for Environmental Investors

11 October 2010 - No 4

ASX 100

AGL Energy
AGL Energy shares have continued their three year high, reaching $16.87 on 8 October.
Mosaic shareholders have approved a takeover by AGL Energy. Mosaic shareholders will receive 15 cents for each share or 1.01 AGL share per 100 Mosaic shares. (ASX: AGK)

Origin Energy
Origin Energy's managing director, Grant King, has sold 200,000 shares held indirectly. The shares were sold at $15.86 per share for a total of $3.17 million. He retains 1,069,326 shares indirectly, 41,085 directly plus 997,000 options and 358,000 performance rights shares.

Origin's shares have traded above $16 for the first time in five months. (ASX: ORG)

ASX 200

Hastings Diversified Utilities Fund
Jim McDonald, director of Hastings Funds Management Ltd, which manages Hastings Diversified Utilities Fund, has acquired 20,000 securities in the Fund. The average cost was $1.38.

HDF's security price has been trending upwards since April 2009 when it hit a low of 26 cents in March 2009. The are now at around $1.40. (ASX: HDF)

Emerging Companies

Forest Enterprises Australia
Forest Enterprises Australia (FEA) had revenue of $77.1 million and total income of $83.5 million for the seven months to 28 February 2010, compared to $152.7 million for the year to 30 June 2009, says the administrator, BRI Ferrier.

The net loss for the seven months was $51.9 million. This includes a $37.8 million charge for impairment of non-current assets, although this is not explained.

At 28 February the company had total assets of $576.3 million, total liabilities of $296.7 million, and net assets of $279.5 million.

At 14 April, the company owed $223.9 million under a secured debenture and $3 million for employee entitlements. At book values this left an estimated $219.4 million for unsecured creditors, although the realizable value is unknown.

Unsecured creditors are owed $22.4 million, there is a 2008 Scheme Fraud Claim of $1.7 million, and contingent liabilities (property lease liabilities and unearned revenue) of $108.5 million, plus the cost of the administration.

BRI Ferrier says the company became insolvent between September 2009 to March 2010. Ending the administration and returning the company to its directors is unrealistic as it would still be insolvent. Although there is no acceptable deed of company arrangement (DOCA) proposal at present there is time for one to be formulated.

A liquidation scenario would allow for a more thorough review of the business but an immediate liquidation could "severely limit and possibly prevent any reconstruction of the Company and MISs".

"Within the time constraints imposed by the Act, we have not identified any material recoveries likely to be made in a liquidation. Further investigation by a Liquidator may reveal additional recoverable assets – nothing identified to date," it says.

The administrator says it is working on forestry Scheme reconstruction proposals for the growers. Four potential purchasers have been identified, of which two are advanced and one has been put to the banks.

The latter proposal provides for the forestry Schemes from 1994 to 1998 to be fast track harvested, and the Schemes from 1999 to 2009 to be pooled. It would need a significant equity contribution. The result would be a new and simplified management structure, a reorganised corporate structure, and it could resolve litigation now afoot.

The proposal would "maximize returns to all stakeholders by a Going Concern realisation as opposed to Liquidation".

The next meeting of creditors for Forest Enterprises Australia will be on or before 23 November.

Micro Cap Companies

Australian Renewable Fuels
Australian Renewable Fuels is to raise $4.97 million in an underwritten rights offer to shareholders at 1 cent per share. The two for three non-renounceable offer comes with one free option exercisable at 1 cent by December 2011.

The funds are to repay debt and for working capital.

The company has biodiesel plants in WA and SA and says it can benefit from recent substantive positive changes in the sector including Government support for the industry since the Federal election and more support a State level.

The company said it also has more options for feedstocks, having tested a variety including imported non-food grade commodities.

It is also in discussion with an international group that could become a supplier of feedstock, a customer for biodiesel and an equity or debt investor for up to $3 million in the company. (ASX: ARF)

BioProspect has had an interim court injunction it brought against shareholder Solagran dismissed by the Federal Court. "Solagran is confident of success when the balance of BioProspect's claim comes to trial," said BioProspect. The company claims it was misled into entering a Development Agreement with Solagran. (ASX: BPO)

Carbon Conscious
Carbon Conscious has acquired a third major corporate client with a deal to offset Wesfarmers Insurance's 2010 carbon emissions.

Carbon Conscious did not say how much the deal is worth, but it involves planting 26,000 mallee eucalypts on marginal WA farm land that will also assist with salinity and erosion.

Carbon Conscious said it has also retired Voluntary Carbon Standard units from regional renewable energy projects on behalf of Wesfarmers Insurance, which said retirement of the VCUs means it is National Carbon Offset Standard compliant. (ASX: CCF)

Carnegie Wave Energy
Carnegie Wave Energy has secured the vessel to deploy its commercial scale CETO 3 wave energy unit off Garden Island near Perth.

Carnegie awarded the vessel charter contract to local firm Total AMS Pty Ltd, an experienced offshore equipment, mooring and diving service provider. The installation barge will be fitted out with a 50 tonne crawler crane, air compressor, generator and dive operation support equipment, and provide a working platform for the CETO 3 installation equipment and system components.

Managing director, Dr Michael Ottaviano, said Carnegie and TAMS have an established working relationship with TAMS having been involved in deployment and retrieval activities at Carnegie's Fremantle Wave Energy Facility as well as the CETO 3 foundation installation. The offshore deployment and testing will be carried this year to demonstrate the functional performance of the commercial scale CETO 3 design. (ASX: CWE)

Eco nappy company EcoQuest has opened its share purchase plan to investors, who can subscribe for up to $15,000 worth of shares. The price is 8 cents per share, the same as for placement sn August and September.

The company will issue no more than 27.7 million shares or 30 per cent of its pre-offer issued capital. (ASX: ECQ)

Eden Energy
Eden Energy raised $1.29 million through its share purchase plan, and has issued 25.9 million new shares.

Two directors have also shown their faith in the shares. Executive chairman Greg Solomon has directly and indirectly acquired 600,000 shares at 5 cents per share for a total of $30,000. Director Douglas Solomon indirectly acquired 300,000 shares at 5 cents each for a total of $15,000.

Substantial shareholder Noble Energy acquired $15,000 worth of shares in the share purchase plan but has seen it interest fall from 21.4 to 16.6 per cent. (ASX: EDE)

Enerji has raised $250,000 in a placement to sophisticated investors at 2 cents per share. The capital is to continue commercializing its Opcon Powerbox technology and for working capital. (ASX: ERJ)

European Gas
European Gas has a new substantial shareholder with Ocean Dome Technology taking a 10.5 per cent stake.

European Gas is to have its coal seam gas and shale gas assets in France reviewed by MHA, which will provide an independent estimate of its resources, an update on reserves status, and recommendations for exploration and testing. (ASX: EPG)

Green Rock Energy
Under its recent rights issue, Green Rock Energy hoped to $1.65 million, but received application for 55.1 million of the 110.5 million shares on offer. The underwriter will take up the balance. (ASX: GRK)

Hot Rock
Hot Rock says it could expand its Chilean geothermal portfolio to 13 tenements by year the end of the year, as its Chilean subsidiary Hot Rock Chile S.A. is set to be granted two tenements and another eight are close.

The new tenements, Calerias and Tuyatjo 4, will give HRL five tenements covering 2,500 square kilometres of what it says is highly prospective ground.

Chairman Dr Mark Elliott said "We are excited to be progressively growing our exploration base in a country that is rich in untapped geothermal energy resources, a government which supports renewable energy, politically very stable, with an established mining sector, and with a real need for domestic energy supply."

"We are planning an extensive exploration program for all five of our tenements, with field studies already underway, to be followed by sampling thermal springs and undertaking extensive MT geophysical surveys. We have a local office and exploration team in place, and envisage a busy year ahead that could culminate in drilling by the end of 2011."

The Calerias concession is immediately south east of HRL's Galo concession near Santiago. The geochemistry is neutral chloride surface hot springs in the Calerias and Galo concessions with discharge temperatures ranging up to 65oC.

The Tuyatjo 4 concession is in the Antofagasta region in northern Chile and covers 400 square kilometres. The area has high chloride surface hot springs with high surface discharge rates of up to 60 litres per second.

HRL said the other eight concessions awaiting grant could be processed before year-end. (ASX: HRL)

KUTh Energy
The first Inferred geothermal resource identified for Vanuatu estimates that KUTh Energy has a resource of 100,000 megawatt years of thermal energy or 3290 petajoules relative to an assumed 80°C brine re-injection temperature.

KUTh said it is pleased with the results of the independent assessment of the northern part of its tenements on the island of Efate, Vanuatu. The report was by Sinclair Knight Merz of Auckland.

KUTh said it is an important step in developing its strategy of replacing high cost diesel power generation with indigenous geothermal resources in the Pacific region.

Meanwhile four KUTh directors have taken shares in lieu of directors fees, and chairman Bruce McKay has taken 1 million options as remuneration. (ASX: KEN)

Orbital Corporation
Orbital Corporation, through its LPG business Orbital Autogas Systems, has entered a long term supply agreement with Motonic Corporation of Korea to source its LPG components for the Australian and New Zealand LPG Autogas markets.

The Motonic components will be part of the Liquid LPG systems that Orbital will supply to Ford Australia and other customers.
Motonic is the world's largest supplier of LPG Autogas components, and a supplier to Hyundai/ Kia Group, the world's largest producer of LPG vehicles.

Orbital Autogas Systems managing director, Tony Fitzgerald, said "The combination of Orbital's local assembly and engineering expertise, combined with Motonic's proven quality and high volume manufacturing track record sets a new standard for LPG system supply in Australia."

"Our relationship with Motonic has matured nicely. We are now jointly prospecting for new LPG & CNG system supply opportunities in Asia." (ASX: OEC)

Panax Geothermal
Panax Geothermal says it is optimistic that its Salamander-1 well in SA can still be developed into a production well. The view follows the final well test report for the Salamander-1 well completed by SKM (New Zealand).

The results of the tests are not different from those already reported previously. "However, it now appears likely that the test results reflect the status of the well itself, rather than the quality of the intersected target reservoir rocks," it said.
"By adopting appropriate well completion techniques/ methods, we are optimistic that the Salamander-1 well can still be developed into a production well."

The 4,025 metre Salamander-1 well has a most likely transmissivity (capacity to flow, also known as Darcy meters or Dm or as kh) value of 6.7 Dm and this would meet the requirements for a Demonstration Plant that could meet all the power requirements for the town of Penola.

The interpreted petrophysical logs have also indicated that the transmissivity could be as high as 13.5 Dm, 30 per cent higher than originally targeted for Salamander-1, it said. The bottom hole geothermal temperature was measured at 171.4°C, exceeding the projected target temperature by more than 10°C.

Panax said the issues it encountered at the Salamander-1 well "are not dissimilar to the problems experienced by the coal bed methane industry in the 1980s and 1990s. Many of the original pioneers in this field used standard petroleum drilling methods, but did not succeed in producing economic flows. After spending hundreds of millions of dollars, many of these pioneering companies gave up. History shows that these "well completion problems" were resolved by adopting new well completion techniques," it said.

Panax has now engaged experienced reservoir engineers who were instrumental in resolving the CBM well completion problems in Queensland and who played a major role in making the CBM industry a multi-billion industry.

The focus will now be on a detailed examination of the Salamander-1 drilling records, including drill mud logs and the reservoir tests, as a basis for developing an optimised well completion program.

Discussions are continuing with a number of parties who have expressed interest in partnering with Panax on the Penola Project, said managing director, Bertus de Graaf. (ASX: PAX)

Papyrus Australia
Papyrus Australia has appointed Colin Dunsford as a director. During a more than 40-year professional career, Mr Dunsford has had experience with a wide range of corporate, government and incorporated clients in Australia and the US.

He retired from his most recent position as a partner and Division Head of the Adelaide Assurance and Business Advisory Division of Ernst & Young in July 2010, but remains chairman of Ernst & Young South Australia. He is also chair of the Bedford Group, Independent Gaming Corporation and Leaders Institute of South Australia.

"The Papyrus technology has outstanding opportunities worldwide and I'm looking forward to helping the company in its international commercialisation strategy," he said.

The commercialisation strategy is to license the technology to suitable entities worldwide that will establish banana veneer and banana fibre production factories in locations where banana is grown. (ASX: PPY)

Solverdi Worldwide
The Deed of Company Arrangement (DOCS) has been executed for Solverdi Worldwide, the former Australian Biodiesel Group.

Under the DOCA, creditors will receive about 5 cents in the dollar, and rights to a Creditors Trust. All other assets will be returned to the company, a recapitalization proposal put to shareholders, and new directors appointed. (ASX: SWW)

Unlisted Funds

Cruelty Free Super
Investors concerned about animal welfare as well as environmental issues now have a choice with a new superannuation fund that says it will not fund the exploitation of animals.

Cruelty Free Super has been launched by Melbourne based Ethical Money. Director Lee Coates said there are hundreds of thousands of Australians who would be horrified if they knew that their retirement savings were being invested in companies involved in animal testing, live animal trade and intensive farming.

"No other superfund exists to truly cater for people who want to avoid investing in companies whose activities exploit animals. Now they have a choice," he said.

The main thrust of the Fund is to avoid animal exploitation, but the ‘cruelty free; principles also apply to people and the planet.

"This Fund will not invest in companies which are involved in animal testing, intensive farming, polluting, armaments, deforestation, climate change, live exports, tobacco, human rights abuse, gambling or genetic modification," said Mr Coates.

In Australia that includes Cochlear (animal testing), BHP and Rio Tinto (human rights evidence), and Woolworths (sale of meat and dairy products and links to environmentally damaging paper pulp suppliers), among others.

Animal protection groups such as Animals Australia and Stop Live Exports have welcomed the creation of the fund.
Cruelty Free Super is based on nearly 20 years of animal friendly investment in the UK, where Lee Coates is recognised as a leading expert in this area.

Credit Suisse has been selected to manage the Fund's investments. Cruelty Free Super will invest in listed shares and interest bearing securities, other investment funds, cash and property, all of which must pass through the cruelty free filter.

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