Eco Investor Update

A Weekly News Update for Environmental Investors

1 November 2010 - No 7

ASX 100

DUET's sale of its 29 per cent interest in Duquesne to the Government of Singapore Investment Corporation should be completed by the end of March 2011, following a decision by DUET's consortium partners not to exercise their right of first offer. However, the sale is still subject to regulatory and bank approvals.

The sale will make DUET an Australian and much more gas focused business.

DUET subsidiary United Energy has had the final close of its US$435 million private placement bond issue extended to 15 December. The funds will be used to refinance $363 million of bonds maturing next April, and the extension of time will lower the carrying costs until then, said DUET. (ASX: DUE)

Origin Energy
Origin Energy says an analysis of its Australia Pacific LNG exploration wells shows they have not had any impact on the water bores of landholders.

A chemical analysis was undertaken of samples from water bores on properties where exploration wells had recently been hydraulically fracture stimulated in the Surat Basin in Queensland after traces of the toxic chemicals BTEX were found in the exploration wells.

The analysis of these samples did not identify unsafe levels of any of these chemicals, said Origin.

"Due to the physical separation between the water bores and the fracture stimulated well, Australia Pacific LNG is confident the fracture stimulation operations undertaken on its exploration wells have not had any impact on landholder water bores," said Australia Pacific LNG, which has received independent verification of this view.

The Qld Government regulator, the Department of Environment and Resource Management, has reviewed the analysis and has not raised any issues with the conclusion.

Origin said its Exploration and Production business delivered record production and sales revenue in the September quarter.

Executive director, Finance and Strategy, Karen Moses, said "The Exploration and Production business achieved quarterly production of 37 PJe, a 45 per cent increase on the same period last year. Sales revenues of $230 million represented an increase of 52 per cent compared with the corresponding period in 2009.

"Australia Pacific LNG's production of coal seam gas increased 25 per cent compared with the previous quarter (June 2010) and achieved peak daily production rates in excess of 300 terajoules per day (TJ/d). Driving increased demand was the commencement of supply to Rio Tinto Alumina and commercial operations of Origin's Darling Downs Power Station.

"The strong result is a reflection of the deployment of substantial capital and resources during the past couple of years, specifically in the Kupe field in New Zealand, our increased equity interest in the Otway Gas Project, and the continuing growth in production from the coal seam gas fields.

"All projects, except the Perth Basin, produced at or above levels recorded in the previous quarter. High seasonal demand resulted in the Kupe and Otway Gas Projects increasing their production 31 per cent and 26 per cent respectively, compared with the previous quarter," said Ms Moses. (ASX: ORG)

Sims Metal Management
Sims Metal Management subsidiary Sims Group Australia Holdings Ltd is to purchase the assets of Commercial Metal Recycling Services (CMRS), a metal recycler with eight yards across Queensland. Three are in Brisbane, and five in Townsville, Cairns, Toowoomba, Gladstone and the Sunshine Coast.

CMRS collects 75,000 tonnes of ferrous scrap and seven thousand tonnes of non-ferrous scrap each year.

Darron McGree, managing director of SimsMM Australia, said "CMRS is a good strategic fit for our Queensland metal recycling business due to its diverse geographic footprint and strong local capability."

The acquisition is subject to clearance from the Australian Competition & Consumer Commission. The financial terms of the transaction are not material to Sims. (ASX: SGM)

ASX 200

Eastern Star Gas
Eastern Star Gas has appointed a project manager responsible for planning and coordinating development of infrastructure at its Narrabri Coal Seam Gas Project, including gas gathering, processing and compression, water treatment and transmission pipelines, and interface with downstream customers.

Alan Fanton has over 40 years experience in all aspects of large scale project management from concept stage through to completion and handover, said ESG. Most recently he was project manager and upstream FEED study manager for the Gladstone LNG Project.

In addition to his experience in Australia and New Zealand, he has overseen projects in Asia, South America, North America, Africa and the Middle East.

Eastern Star's managing director, David Casey, said Mr Fanton's skills, knowledge and insight will be invaluable as ESG progress to full-scale commercialisation of the Narrabri CSG Project and work towards implementing the LNG Newcastle option. (ASX: ESG)

Envestra has acquired the gas networks business of Country Energy from the NSW Government, substantially increasing its presence in NSW.

Gas Networks has 1,160 kilometres of gas distribution pipelines and 65 kilometers of transmission pipelines in southern NSW between Wagga Wagga and Cooma. It delivers 3 petajoules of gas to 26,000 customers each year.
It is a mature business with attractive growth potential, and is earnings and cashflow accretive, said Envestra. The purchase price is $107 million.

APA will operate the business on behalf of Envestra. It should deliver revenue of $14 million and earnings (EBITDA) of $10-11 million in 2011-12. (ASX: ENV)

GWA Group
GWA International has changed its name to GWA Group and its ASX code to GWA. The change reflects its focus on Australian building fixtures and fittings.

The first quarter results were strong except for the expected reduction in environmental hot water products following the wind back in government rebates. This has been offset by higher sales from construction activity around the Government's social housing and Building the Education Revolution programs.

The company has forecast earnings for 2010-11 of around $105-108 million.

GWA has appointed two new non-executive directors. John Mulcahy is a non executive director of Mirvac and Coffey International and a former managing director of Suncorp Metway. Peter Birtles is a chartered accountant and the managing director and chief executive of Super Cheap Auto Group. (ASX: GWA)

Hastings Diversified Utilities Fund
Hastings Diversified Utilities Fund's gas transmission business Epic Energy has signed a 15 year conditional long term Gas Transmission Agreement (GTA) with Santos to transport 147 TJ's per day at current market rates.

The GTA provides Santos with firm gas transport on the South West Queensland Pipeline (SWQP) from Moomba east to Wallumbilla, and an option for Santos to increase its capacity on the SWQP through non-firm transportation.
The GTA is subject to conditions around a final investment decision on GLNG train two, scheduled to be decided in 2011, and subject to Epic's financiers.

The capital cost to convert the SWQP into a bi-directional pipeline will be funded from HDF's cash reserves and recovered from Santos via a separate capital surcharge.

HDF chief operating officer Colin Atkin said "This development is illustrative of the high value opportunities that Hastings expects will continue to be made available to HDF through its investment in the gas transmission network in Australia."

Announced in December 2009, HDF has committed to the Stage 3 expansion of the SWQP. Construction is underway and due for completion by January 2012.

The SWQP's daily capacity is being increased from 168 TJs to 380 TJs. The expansion is fully underpinned for the firm transport of gas in a westerly direction from Wallumbilla to Moomba. (ASX: HDF)

ASX 300

Tox Free Solutions
Tox Free Solutions director Michael Humphris has sold 50,000 at an average price of $2.39 and a total value of $119,589. He retains 2.15 million shares. (ASX: TOX)

Emerging Companies

Clean TeQ Holdings
Slower than expected sales delivered Clean TeQ a loss for the September quarter. Receipts were $2.8 million, giving it an operating cash loss of $0.9 million.

The company said it is managing the situation through attention to costs, diversifying revenue, increasing its sales capability, and getting bigger through acquisitions.

It expects its trading results to slowly improve during this "period of re-alignment". At the end of September it had cash of $2.3 million. (ASX: CLQ)

CO2 Group and Carbon Conscious
In a move that should benefit both CO2 Group and Carbon Conscious, the Federal Government has announced an expert panel to assess proposed methods for developing and selling carbon credits. This is the first step in the Government's Carbon Farming Initiative (CFI).

"The Domestic Offsets Integrity Committee will assess the specific methods for measuring carbon credits," said the minister for Climate Change and Energy Efficiency, Greg Combet. "The Carbon Farming Initiative (CFI) will set out what farmers, foresters and landholders need to do to generate carbon credits and it will establish an independent regulator to verify carbon credit claims."

The National Carbon Offsets Standard introduced in July established the rules for companies to become carbon neutral or to sell carbon neutral products. These include reforestation, capturing emissions from existing landfill, and better management of livestock manure.

"Once the credits are verified, they can be traded on Australia's voluntary carbon market and on overseas markets, generating revenue while reducing carbon pollution," Mr Combet said.

The six experts form an independent panel called the Domestic Offsets Integrity Committee that will advise the minister on methodologies that can be approved in advance of the CFI legislation that is planned to be brought to Parliament in the first half of 2011. (ASX COZ and CCF)

Energy Developments
Energy Developments has sold its half interest in French landfill gas business Gastec to its joint venture partner SITA for 18.7 million after tax, about $26.5 million.

It has also executed what it says is a growth focused $45 million debt facility with major shareholder Greenspark Power Holdings. The sale and one year facility are part of its "strategy to rebalance its global landfill gas, waste coal mine methane, remote area and LNG/ CNG power generation assets towards a higher growth profile".

The Gastec joint venture generated 30 megawatts and contributed $0.48 million to after tax profit for Energy Developments in 2009-10. There is a non cash accounting loss of $9 million on the sale, due mainly to exchange rate movements, but Energy Developments said it was an attractive opportunity to exit a low growth asset and redeploy the capital. (ASX: ENE)

Forest Enterprises Australia
Gunns is to acquire Forest Enterprises Australia's Bell Bay sawmill in north east Tasmania. The mill is new, having been commissioned in 2008. However the price is believed to be well below the cost with the Australian Financial Review Suggesting it could be up to $30 million less.

Interestingly, Gunns is continuing with its new push to be sustainable and has become a party to the Tasmanian Forest Statement of Principles agreement. This will see it restrict its woodchip export business to plantation woodchips as soon as possible, review all of its Tasmanian operations involved in processing timber from native forests and, "as a priority", exit the processing of timber from high conservation value forests.

Even more interesting, Gunns has said it wishes to be seen as an "environmentally positive" business by the community.
Time will tell.

Gale Pacific
Gale Pacific is undertaking a ‘shareholder value realization review" and has appointed the investment banking division of Investec as financial adviser. The review was prompted by approaches from a number of parties about its strategic options, and will explore a wide range of options, said the company.

Gale said its new Xceltex waterproof outdoor product was successfully trialed in a range of umbrellas and quickly sold out. An expanded range of products is being marketed in Australia, New Zealand, US and Europe.

Another new product is Coolaroo synthetic grass.

The company expects to achieve modest sales and profit growth in 2010-11. (ASX: GAP)

Micro Cap Companies

Aeris Environmental
Aeris Environmental is hopeful it will receive the first order for its new AerisGuard OEM Anti-microbial Coating this calendar year.

The coating is applied to heat exchange coils at manufacture and protects against bacteria and mould for more than three years. The global HVAC industry is estimated to produce about 100 million systems per year.

Aeris is also targeting automotive, transport and refrigeration applications.

The company said it is also in commercial discussions with the leading global manufacturers of microbial control and polymer technologies. The discussions are about Aeris' suite of smart surface products including the AerisGuard Biocidal Polymer, AerisGuard Biocidal Coating and AerisGuard Anti-Microbial Treatments.

In addition, one of Australia's largest beer makers has requested a trial of the new AerisGuard Multi Enzyme Brewery Solution that was launched in March.
Meanwhile September quarter sales were a modest $120,000. (ASX: AEI)

Apollo Gas
An independent assessment has given Apollo Gas a 3C contingent resource estimate for PEL 456 in the Hunter Valley of NSW of 939 billion cubic feet (BCF) of coal seam gas. Apollo's 85 per cent share of this is 799 BCF and 50 per cent share 470 BCF after phases 2B and 2C of the project have been completed.

The other 15 per cent is held by Santos, which could move to 50 per cent. The farm-in is for coal seam gas only, not natural gas.

The estimate is for an area of 218 square kilometres within the 5,953 square kilometre licence area. (ASX: AZO)

BioProspect and Solagran have ended their legal dispute with BioProspect withdrawing its court case and Solagran withdrawing its cross claim following mediation.

The parties have also ended their 2007 Development Agreement and will pursue separate business strategies.
BioProspect said it plans to continue seeking approval for its GI-GUARD by the APVMA. This will no longer be based on Solagran's Bioeffective A product and instead will use a different raw material called Coniferous Chlorophyll-Carotene Paste (CC-CP).

The company has also lodged a prospectus for a pro rata non-renounceable rights issue of shares and options in BPO expected to raise $1.9 million and $1.65 million after costs. (Eco Investor Update 25 Oct 2010). (ASX: BPO)

Carbon Conscious
Carbon Conscious has been awarded the 2010/11 carbon off-set tree planting tender for the City of Perth. The tender is for the planting and maintaining of 85,000 trees, which when mature are required to entrap an estimated 15,600 tonnes of carbon dioxide and equivalent.

The City of Perth's interest in planting trees is to offset greenhouse emissions associated with parking activities, said Carbon Conscious chief executive, Peter Balsarini.
"The 2011 planting of mallee eucalypt trees will be established on land acquired by Carbon Conscious and designated specifically as the ‘City of Perth 2011 Plantation'."

The plantation can be cost effectively managed over 40 years in conjunction with other nearby plantations established for other CCF clients, he said.

The rights to the carbon sequestered by the mallees will be vested in the City of Perth and lodged on the title of the land where the plantation is to be established. (ASX: CCF)

Carnegie Wave Energy
Carnegie Wave Energy has unveiled the buoyant actuator (BA), a key component of its commercial scale CETO 3 wave energy unit, which when deployed near Perth will be the first commercial wave energy unit operating in Australia.

The buoyant actuator will begin its onshore and offshore test program in coming weeks, said managing director, Dr Michael Ottaviano.

The buoyant actuator is the technology's energy collection system. The first step in the three test program is individual component testing to ensure each component has met its design specification. This is followed by component assembly and system integration tests onshore, and then offshore deployment and operational testing off Garden Island.

Successful testing will allow Carnegie to proceed with its first grid-connected commercial wave power project and deliver its first revenues from power sales.
This will be followed by the roll out of CETO projects at the most prospective sites internationally and in Australia.
"We are confident that CETO 3 will perform as expected," said Dr Ottaviano.

The spherical buoyant actuator is 7 metres in diameter and 5 metres high, is made primarily from steel and rubber, weighs 25 tonnes, and typically sits two metres below the surface. It contains a proprietary system to reduce energy when wave energy is very high.

Carnegie received a query from the ASX after its shares rose from 9.8 to 13 cents on high volume, but could offer no explanation. (ASX: CWE)

Clean Seas Tuna
In its annual report, Clean Seas Tuna's auditor, Grant Thornton, says there are indications of "material uncertainty which may cast significant doubt about the consolidated entity's ability to continue as a going concern".

The company itself says it "recognises that it is still in the research and development phase for SBT [southern bluefin tuna] and whilst rapid advancement towards commercialisation is being made, it is premature to predict exactly when full commercialisation will occur.

"To this end, a significant amount of funding (with Seafood CRC and FRDC support) is being invested in the SBT program and a full research team, with their own recirculation research systems, will be based on site in Arno Bay for the coming SBT season. This will enable a greater level of research as well as an easier integration of research findings into commercial production" said chairman, John Ellice Flint.

"FY2010 has been a disappointing year for Clean Seas, however, the transformational program that began in 2009 has continued and I believe that it will have a positive long term impact. We achieved a great deal in some areas but underachieved in others. The lessons learnt should stand us in good stead for the year ahead."

The company is focusing on its kingfish operations to become cashflow positive. At 30 September it had cash of $5.1 million. (ASX: CSS)

Dyesol has appointed its former Managing Director – Global, Dr Gavin Tulloch, to the board. In recent times Dr Tulloch has spent his time focusing on key technical projects, including the Tata Steel (Corus) Dyesol PV Accelerator in the UK. His new title is Director of Technology.

Executive chairman, Richard Caldwell, said "It has become abundantly clear that we require Dr Tulloch's board presence, especially in relation to direction on the Tata project which is now bearing the fruit of the intense R&D that has been jointly undertaken over the past three years. He will also provide valuable guidance in newer projects, such as DyeTec Solar Inc. which is poised to advance significantly during 2011."

Gavin Tulloch holds a PhD in solid state materials science, is a Companion of the Institute of Engineers and a Fellow of the Australian Institute of Company Directors. He jointly founded Dyesol and its predecessors STA and STI, and has led the industrialisation of DSC for the past 16 years. (ASX: DYE)

Eco Quest
Eco Quest has added more retail outlets for its biodegradable nappies through a distribution deal with what it describes as "one of the world's leading toy retail store chains". Eco Quest did not give the retailer's name but said it is "virtually a household name throughout the world". The nappies will be stocked in all its Australian mainland stores.

Chairman Sylvia Tulloch said the deal could be a company maker as it reinforces the international scope of the product. It should also speed up the company's progress to being cashflow positive. The December half revenue figures should be interesting to indicate initial sales.

Together with other recent distribution deals, the nappies are now on sale in over 200 stores around Australia. (ASX: ECQ)

Eden Energy and Origin Energy
Eden Energy is to sell its remaining 30 per cent interest in Cooper Basin Geothermal Licence No. 185 (GEL 185) to Origin Energy for $700,000 cash.

Origin Energy purchased a 70 per cent interest in GEL 185 in September 2009 for $1 million plus an obligation to fund the first $500,000 of expenditure.

Eden said that divestment of GEL 185 and recently securing a 12 month suspension on its financial commitments to its remaining geothermal licences gives Eden time to find a suitable partner or cornerstone investor to progress these licences. (ASX: EDE)

EnviroMission has secured a Power Purchase Agreement (PPA) with the Southern California Public Power Authority (SCPPA) for green power from its proposed EnviroMission Arizona Solar Tower power station, with SCPPA approving the PPA at its recent board meeting.

SCPPA executive director, Bill Carnahan, said "SCPPA is excited to support a large scale solar technology that when successfully deployed could change the renewable energy landscape. The pricing and load profile of the Solar Tower coupled with its zero water power production cycle makes it a compelling alternative".

Roger Davey, EnviroMission chief executive, said "Finalization of this PPA with the SCPPA is an important milestone that will allow finance to be secured and Front End Engineering and Design (FEED) that is required to break ground at the site earmarked in Arizona to commence". (ASX: EVM)

Green Rock Energy
An independent assessment of seven of Green Rock Energy's North Perth Basin permits says they contain very large geothermal stored heat resources of over 1 million PJt (petajoules thermal).

The Indicated Geothermal Resource based on temperature data recorded in existing wells within the target reservoir is 26,000 PJt, easily sufficient to support a target of 100 MW of power generation capacity, it said. "Data from five wells provided direct and reliable indications of temperatures greater than 125oC in the selected reservoir units."

"The Indicated Geothermal Resource of 26,000 PJt is equivalent to over 820,000 MWt.yrs. To put this into context, if only 5 per cent of the Indicated Geothermal Resource in these seven Green Rock Permits was produced, for an assumed project life of 25 years, a power conversion efficiency of 10 per cent and a parasitic load of 25 per cent, this would approximate 123 MWe of power generation capacity," said Green Rock Energy.

Green Rock is planning to define drilling targets in the first half of 2011.

The assessment was by Hot Dry Rocks Pty Ltd, a leading Australian geothermal consulting company. The seven North Perth Basin Permits are GEP23, 24, 25, 26, 27, 28 and GEP41, which cover 2,100 square kilometres.

The Permits are near the Dongara, Hovea, and Mt Horner oil and gas fields, 275 to 330 kilometres north of Perth and close to power infrastructure. (ASX: GRK)

Greenpower Energy
Greenpower Energy has given a US private equity group the right to farm-in to its conventional gas prospects at its 3,000 square kilometre EP 447 permit in the Perth Basin.

UIL LLC is a specialist in tight gas exploration and production technology and can earn an initial 50 per cent of the conventional and tight gas by carrying out a 3D seismic survey or drilling an exploratory in the next 12 months. It can earn another 25 per cent by drilling a second exploratory well.

Greenpower will receive a 10 per cent well head royalty for any gas produced.

The deal does not include coal seam gas. (ASX: GPP)

Hydrotech International
The Hydrotech International MPS water ingress management system at China's Guangzhou Metro Station will be commissioned on 1 November.

Hydrotech has also submitted a tender for Wuhan with a decision expected at the end of November.

Hydrotech said that following "very positive endorsement" from the Hong Kong Housing Authority and the "subsequent inundation of requests for presentations", it has adjusted its sales tactics to meet the interest shown.

Its main focus has been on meeting with property developers. A second segment is property management companies and architects.

The company said it is confident several discussions in Hong Kong will covert to instillations in the next three to six months.

"The outlook for HTI has improved quite dramatically in recent quarters although admittedly this has not been reflected in our share price," said chairman, Philip Gray.
The company may also have medium term cashflow issues, he said. (ASX: HTI)

Utilities management provider, Intermoco, has established a strategic partnership with the Retirement Village Association of Australia (RVA), the peak body for the retirement village industry with over 800 members including retirement village operators, managers, owners, developers, investors and industry specialists. The RVA has five offices in Brisbane, Sydney, Melbourne, Adelaide and Perth.

Under the agreement, the RVA will offer its membership base Intermoco Connect for the provision and management of electricity, voice and data services. The initial contract negotiations now being finalized could be worth around $4.2 million over five years. The services will also allow the RVA's members to benefit from annuity streams through a standard revenue sharing agreement.

Intermoco chief executive Ian Kiddle said "We see the retirement industry as a huge growth opportunity for Intermoco that is mutually beneficial for the retirees, the village operators and Intermoco. (ASX: INT)

Island Sky
Commenting on its September quarter, Island Sky said it is concerned with sales to date and while October sales have been optimistic they foresee "inconsistencies" from the results.

September quarter sales were $28,000 and net cash outflow $164,000. The company has cash of $184,000.

"Given that sales and cash receipts are inconsistent, the board is investigating various options to assist future operations," it said. (ASX: ISK)

KUTh Energy
KUTh Energy has commenced geological and geophysical appraisal of its two new geothermal tenements in North Queensland, EPG 7 and EPG 9 that were granted in January.

EPG 7 (Jackin Creek) is 40 kilometres south of Weipa on the Cape York Peninsula, an area that has had limited oil and gas exploration. It comprises flat-lying basement sediments over older metamorphic basement rocks, with the thickness of sedimentary cover as determined by deep boreholes and seismic survey data typically around 1 kilometre.

Recent work by KUTh reported in July indicated that significant heat flows may exist in this area. A detailed review of available legacy geophysical data is underway.

EPG 9 Georgetown is beneath the existing electricity grid, around 50 kilometres east of Georgetown in North Queensland. "The occurrence of a geothermal anomaly in this area is indicated by the presence of the Talaroo Hot Springs immediately to the north of the tenement. This unique mound-spring feature produces geothermal waters to surface at temperatures that have now been measured as around 60°C," said KUTh.

The results of geochemical spring sampling completed in July 2010 are currently being appraised before release.

KUTh said its approach to the Queensland tenements "is to carry out initial exploration to assess the prospectivity of the target and to make a decision on future activities based on early stage results.

"The company has always been keen to pursue "over the counter" applications for Queensland leases which will allow us to peg the ground that we believe has highest potential. When this process is introduced we will consider further areas that may be of interest.

"In the meantime if early stage exploration of existing tenements produces promising results we will look to early stage partnering options for the further development of these sites." (ASX: KEN)

Healthcare solutions company MediVac said that negotiations for a potential major export contract for its new MetaMizer have progressed further, with the project going before the foreign government's Cabinet for final approval in the immediate future. MediVac said it anticipates being able to make another announcement in a couple of weeks. (ASX: MDV)

Drilling of Metgasco's Thornbill E01 site has resulted in immediate gas production to the surface and with no water production and no CO2 detected. The average gas flow rate over a six hour production test was 100 million cubic feet per day (mcf/d).

Thornbill E01 at PEL 426 is about 50 kilometres south of Casino in northern NSW. It is a vertical well drilled to 846 metres to explore and evaluate the potential gas productivity of the Walloon Coal Measures in the area.

"This well provides further evidence of the presence of a "dry" coal seam gas play in the Clarence Moreton basin which flows little or no water at the time of drilling," said Metgasco.

"Thornbill E01 follows up similar results achieved from the Orara E01 well drilled by Metgasco, which was drilled 35 kilometers to the southwest of Thornbill E01 in January 2009 and the Wyan E01 well which was drilled by Metgasco in May 2009, 45 kilometres to the northwest of Thornbill E01. The Wyan E01 well produced gas on test at 175 mcf/d."

Metgasco said such "dry" coal seam gas plays are rare and that the best known example is the Horseshoe Canyon Coals (HSC) in Alberta, Canada, which is Canada's largest coal seam gas development.

In contrast the majority of coal seam gas developments in North America and Australia have been from coals containing water and gas and the wells must be dewatered before gas production.

"Horseshoe Canyon wells have proven to be highly profitable because production is immediate and there are no associated water handling costs," said Metgasco.

Metgasco's managing director David Johnson said "We first saw gas production without water production at the Orara E01 and Wyan E01 wells. This was a surprise as "dry" coal seam gas plays are rare. Since then, Metgasco's exploration team has compared the technical characteristics of the Clarence Moreton and the Horseshoe Canyon coals and found that they have some similarities. The Thornbill E01 well was designed to test this thesis and it is very exciting that the well has delivered immediate sustained gas production."

Thornbill E01 will be followed up by the drilling of Thornbill E02. (ASX: MEL)

Pacific Energy
Pacific Energy is to simply its capital structure. The company has agreed with its two largest shareholders for the early exchange of their $35 million in Exchangeable Bonds for Pacific Energy shares.

The shareholders subscribed for the Exchangeable Bonds as part of the original funding for the acquisition of the Kalgoorlie Power Systems (KPS) business by Pacific Energy in May 2009.

The company said the early exchange of the bonds into shares will also reduce its debt levels and gearing ratios, which will enhance its ability to get long term credit and equity funding for future growth.

It will also increase the company's capitalisation to about $100 million.

Pacific Energy's managing director, Adam Boyd, said "The reduced balance sheet debt position and expanded equity capital base will significantly enhance the company's ability to finance its strategy to increase generation capacity to 250 MW by 2012 and attract an enlarged equity capital market shareholder base."

Pacific Energy will pay the shareholders a one-off early subscription fee of $2.4 million, which is equivalent to the 4 per cent per annum redemption premium coupon.
The deal needs shareholder approval. (ASX: PEA)

Phoslock Water Solutions
The well known businessman Laurence Freedman AM has joined water treatment company Phoslock as a director.

Phoslock chairman, Dr David Garman said Mr Freedman will considerably strengthen the company. "He is an experienced public company director with an extremely broad and in-depth knowledge of global corporate and commercial operations. Laurence brings comprehensive expertise to the board as Phoslock plans to expand its marketing operations and moves into the next phase of its development," he said.

The appointment comes as Phoslock transitions from a lengthy period of product trialing and small/ medium sized applications towards larger sales and profitability.

Mr Freedman said that he plans to hold his position until this phase of Phoslock's development has been completed and the company achieves sustainable and growing profitability.

"I am hopeful that the programs planned to achieve these objectives will be implemented in 12 to 18 months," he said.
Mr Freedman said that his focus will be on the commercialization of the company's unique product, which effectively removes phosphates from water bodies such as dams, lakes and reservoirs.

"Phoslock is a unique solution to solving many water supply and treatment problems. It can provide both clean water supply and safe ecosystems by protecting water bodies such as lakes, dams and reservoirs from the problems of excessive nutrient enrichment. These are increasing problems around the world and Phoslock provides the solution," he said.

"A further attraction for me in joining the board is the very high quality of the directors—Dr Garman is a world-renown water expert, the Hon. Pam Allan is a previous NSW Minister for the Environment and Robert Schuitema is a corporate and financial expert who has brought the company a long way since becoming managing director.

"In addition, Phoslock is debt-free with net assets of approximately $6 million," he said

Mr Freedman began his career with the Gold Fields Group as an analyst and rose to be director of Group companies. He later joined BT Australia as Manager, Investments.

In 1980 he founded Equitilink Limited, an investment management group which he grew to a global company with operations around the world and over $3 billion under management. He has held chairman and/or director positions in a number of public and private companies in Australia, US, UK, Canada, New Zealand and Taiwan.

He was a member of the syndicate which bought the Ten Network, taking it out of receivership and helping to make it the most profitable media network in Australia for some years.

In 2000 he sold the Equitilink Group and in 2004 sold out of the Ten Group.

He currently manages his private investment portfolio of international shares, property and fixed income securities, and is a mentor to a number of resource, biotech and technology companies.

He is chairman of The Freedman Foundation, a philanthropic foundation that assists and supports young Australians in many areas of endeavor and also finances a broad range of medical and scientific programs and organizations.

In 2001 he was awarded The Order of Australia for service to the community, to medical research, the arts, and to business and investment in Australia.

On the sales front, Phoslock's joint venture partner and licensee for Germany, Austria and Switzerland has won a contract worth around $450,000 for a lake in northern Germany.

The lake is a popular recreational lake which in recent years has been plagued with poor water quality caused by elevated phosphorus levels. Alum treatment, aeration and other measures have been attempted to improve the water quality but none has been successful and the lake has been closed to swimmers for the past four years due to high levels of blue green algae.

The application of Phoslock will take place over about five days towards the end of November and is expected to generate considerable publicity in northern Germany.

In addition to this treatment, two smaller treatments involving 13 tonnes of Phoslock are also confirmed for smaller lakes in eastern and northern Germany during November and December. The three applications will bring the value of contracts for Phoslock applications in Germany to nearly $2 million over the last three years.

Phoslock said its profile in Germany continues to grow with several additional applications in excess of $750,000 under consideration for 2011 and 2012. (ASX: PHK)

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