Eco Investor Update

A Weekly News Update for Environmental Investors

23 July 2012 - No 90

____ Core Securities ____

ASX 100

APA Group
APA Group has welcomed the Australian Competition and Consumer Commission's (ACCC) decision not to oppose its proposed takeover of Hastings Diversified Utilities Fund if it divests the Moomba to Adelaide gas pipeline.

Managing director Mick McCormack said the decision enables APA to consider its options for the takeover offer. APA will waive the ACCC condition and extend the offer period.

Hastings Diversified Utilities Fund said APA's cash and scrip offer valued it at $2.08 per unit at market close on 19 July. Hastings has recommended a rival cash offer by Pipeline Partners Australia of $2.325 per unit.

Meanwhile Hastings Diversified Utilities Fund's units have hit a new three year high of $2.52, probably on expectation of a bidding duel.

Hastings Diversified Utilities has received an inquiry from unit holder Australian Foundation Investment Company Limited (AFIC) saying that investors are entitled to a full evaluation of internalization of management before deciding whether to sell. It also says the Takeover Deed between Hastings Funds and Pipeline Partners is precluded from portraying internalization of management favourably.

Hastings Funds Management responded that its coming Target's Statement "will contain all the information that HDF security holders and their professional advisers would reasonably require, and reasonably expect to find, to make an informed assessment of whether to accept the offer made by Pipeline Partners Australia". (ASX: APA and HDF)

ASX 200

GWA Group
GWA Group and Q Technology Group Ltd have terminated their scheme implementation agreement (SIA) under which GWA would acquire all of the shares in QTG through a scheme of arrangement. This is due to one of the conditions in the SIA being unable to be satisfied.

GWA said it remains interested in the QTG business, API Locksmiths, and the parties have entered into an indicative non-binding heads of agreement for the sale of that business for $14 million on a debt free basis. (ASX: GWA)

Hastings Diversified Utilities Fund
See story for APA Group.

ASX 300

Tassal Group
In a Strategy Briefing, Tassal said export markets are oversupplied and extremely volatile and have been producing unacceptable returns over the past year, so it will now focus its growth strategy on the domestic market where per capita salmon consumption is low.

Demand stimulation in the retail market in collaboration with retailers is the most effective avenue for sustainable domestic growth, it said.

Marketing will change and a national TV campaign will focus on increasing awareness of salmon, communicating the versatility of salmon, salmon as an everyday protein choice, and driving a preference for Tassal salmon.

Tassal will also commence diversifying sales into other sustainable sea foods. New products include salmon croquettes, salmon sausages, and salmon pies.

However, stockbroker Ord Minnett believes that volatile pricing in the export salmon markets and warm water temperatures over summer will impact Tassal's 2011-12 earnings and has forecast it will miss guidance. It also believes plans to increase domestic demand through an aggressive marketing campaign and reducing participation in supermarket discounting may be difficult and it expect margins to remain under pressure.

Ord Minnett has changed its recommendation from hold to lighten. (ASX: TGR)

Emerging Companies

Gale Pacific
Shares in Gale Pacific hit a new three year high of 30 cents when the company said it expects to announce a record profit of around $8.5 million for 2011-12, a 19 per cent increase on the previous year.

This would give earnings per share of 2.87 cents., also a 19 per cent increase.

Sales for the year were $110.5 million, up 16 per cent. Strong cash generation has resulted in net debt at 30 June of $4.1 million, down $1.6 million, said managing director, Peter McDonald. (ASX: GAP)

Gerard Lighting
Shares in Gerard Lighting surged to an all time high of $1.03 on news that it has recommended a takeover over by CHAMP Private Equity at $1.05 per share.

Deputy chairman, and independent director, Rick Allert said the independent directors believe the proposal is an excellent opportunity for shareholders to realize value and secure an attractive premium. Other directors and the major shareholders associated with the Gerard family also support the proposal.

The $1.05 offer is a 52 per cent premium to Gerard Lighting's average 69 cent price leading up the proposal. However, the Australian Financial Review has reported that the share price surge is to be investigated.

The proposal vales Gerard Lighting at $186 million. The scheme booklet should be sent in early September.

CHAMP managing director, John Haddock, said "The Gerard Lighting Group is a market leader with strong growth prospects, led by a committed executive group and as such is the type of company in which CHAMP likes to invest."

Gerard Lighting has entered a scheme implementation agreement with Lighting Group Australia Pty Ltd (LGA), which is owned by funds managed or advised by CHAMP III Management Pty Ltd. LGA will on completion be owned by the CHAMP III Funds, comprising CHAMP Buyout III Pte Ltd, CHAMP Buyout III Trust, CHAMP Buyout III (SWF) Trust and CHAMP Buyout III (WW) Trust. (ASX: GLG)

____ Satellite Securities____

ASX 300

Infigen Energy
Infigen Energy is proceeding with the construction of the Capital East Solar Farm as part of its Capital Renewable Energy Precinct near Bungendore, NSW. The integrated solar photovoltaic (PV) and energy storage demonstration facility will be Infigen's first operational solar PV facility and the first of its kind in Australia.

Infigen has received Planning Approval from the Palerang Council for a facility up to 1 MW in capacity. The first stage is a 200 kW solar PV array and a complementary energy storage system.

Infigen will use the facility to trial construction techniques, storage technology, and the combined operation and dispatch of the solar PV array and energy storage to maximize economic return. The lessons will be applied to the design of utility scale PV plants and the integration of future large scale energy storage into the National Electricity Market (NEM).

David Griffin, general manager of Development at Infigen said "Whilst the first stage operating solar PV facility will supply enough renewable energy to power approximately 40 average homes, it is primarily being developed as a demonstration facility to support Infigen's entry into large scale solar PV generation and implementation of energy storage technologies."

"Infigen recognizes that energy storage will be a key enabling technology in the future of renewable energy in Australia. Distributed renewable energy facilities that are also capable of providing network support are expected to become increasingly competitive with traditional supply solutions requiring continuing large investments in outdated network infrastructure.

"We feel there is a reasonable prospect that energy storage costs will follow the price path of solar modules. If that happens we are going to be talking about a very different NEM," he said.

The energy storage system will be installed alongside the solar PV array and will be able to store over an hour of the solar PV array's generation. (ASX: IFN)

Emerging Companies

Environmental Group
Environmental Group has appointed recent director Louis Niederer as chairman. Long standing chairman John Reed will remain as a director. (ASX: EGL)

ERM Power
ERM Power has launched its first marketing campaign to promote electricity sales to business customers.

A recent independent Utility Market Intelligence survey revealed that ERM Power is not well known to most of its competitors' customers, indicating growth potential.

Managing director and chief executive, Philip St Baker, said the ERM Business Energy campaign has newspaper, magazine and online advertising, and direct mail and other initiatives.

"Our business accounts for 4 per cent of all retail electricity sold in Australia, having achieved this without any marketing. That is about to change with the launch of our first marketing campaign which will feature new branding and promote the quality of our service offering," he said. (ASX: EPW)

Unlisted Share Funds

Australian Ethical Smaller Companies Trust
Australian Ethical's Investment Smaller Companies Trust has divested its interest in Carnegie Wave "after it downgraded earnings guidance". (ASX: CWE)

____ Pre-Profit Securities ____

ASX 300

Ceramic Fuel Cells
Shares in Ceramic Fuel Cells touched a three year low of 6.9 cents on 12 July. (ASX: CFU)

Micro Cap Companies

Carbon Conscious
Carbon Conscious non executive director Andrew McBain has become an executive director. and the company has issued a convertible note facility to raise up to $2 million.

Mr McBain is one of the founders of the company and will be responsible for investor relations, capital markets and business development.

The convertible note facility can be drawn down through the issue of up to 20 $100,000 convertible notes to a sophisticated investor. It is subject to shareholder approval and will be used to facilitate funding and growth.

The facility commenced on 20 July and goes to 20 January 2013. The coupon rate is 10 per cent per annum paid quarterly on any drawn notes. A commitment fee of 5 per cent per annum is payable quarterly on undrawn notes.

The company can redeem the notes at any time during the funding term. Before the end of the funding term, the investor can extend the term, require the company to redeem the notes, or convert the notes to shares at the lower of 20 cents per share or a 10 per cent discount to the volume weighted average share price over the preceding five days.

In consideration for providing the facility, Carbon Conscious will give the noteholder 1 million unlisted options exercisable at 20 cents each by 31 July 2014, said chief executive, Peter Balsarini. (ASX: CCF)

In a market update, Intermoco said it now has 11 sites that have fully implemented embedded network utility management systems and are producing income. Another three sites are expected to commence billing in August.

However the company said that it has decided not to pursue another three sites previously announced. This leaves the total number of sites signed up at 29 including the 11 that are currently income producing.

The company said it remains very positive about the continued growth in its embedded networks business. Chief executive Ian Kiddle said "We are gaining exposure to a range of different sectors and seeing our model accepted across all of them. We're very happy with the outlook for the next couple of years."

Intermoco is not currently being provided with funding under its agreement with La Jolla Cove Investors. The company's share price is at the minimum 0.1 cent and there is no liquidity. (ASX: INT)

Nanosonics has issued 718,196 shares to raise $380,644 under the share purchase plan that was announced on 16 May and closed on 16 July. The issue price was 53 cents each.

In addition 14,166 options under the Nanosonics Employee Share Option Plan have lapsed. There are now 3,744,103 unlisted Options on issue. (ASX: NAN)

Pacific Energy
Pacific Energy has won a contract to build, own and maintain an 8 MW power station at the Meekatharra Gold Project in WA.

The contract, with Reed Resources Ltd subsidiary GMK Exploration Pty Ltd, has a term of 19 months commencing from December and can be extended.

"This contract is a significant milestone for Pacific Energy, marking the achievement of our 250 MW by 2012 growth strategy approximately six months earlier than our self-imposed deadline, a testament to the exceptional quality and capability of our KPS personnel," said managing director, Adam Boyd.

"Pacific Energy now has contracted capacity of 250 MW at 20 mine site power stations and two hydro-electric power stations across Australia. New electricity supply and broader opportunity negotiations are continuing. We expect the KPS business to continue securing new and expanded electricity supply arrangements over the remainder of 2012," he said. (ASX: PEA)

Po Valley Energy
Po Valley Energy has been awarded its first offshore exploration permit by the Italian Ministry for Economic Development. The exploration permit, named AR94PY and previously named AR168PY, is in the shallow waters of the Adriatic Sea and contains two connected gas discoveries, Carola and Irma, both drilled and tested by the former operator, ENI.

Resource evaluations give the combined gas fields a low estimate Contingent Resources (1C) of 22 billion cubic feet (bcf) and best estimate Contingent Resources (2C) of 24.8 bcf, said the company. Final recovery estimates will be formalized with the development plan.

Po Valley will purchase the recorded 3D seismic data on the Carola and Irma structures and start working on the field development program. The projects are close to the offshore production facility at the adjacent ENI Pandora gas field. (ASX: PVE)

Refresh Group
Refresh Group breached an ASX listing rule when it issued shares to directors without seeking shareholder approval.

The company said Mr Richard Tan wanted his new investment of $300,000 to be used to grow the business instead of paying off outstanding loans and debts. To help secure the investment, non-executive directors agreed to accept payment of their overdue directors' fees in Refresh shares at a market price of 3.5 cents in lieu of the fees. This totals 2,282,859 shares, saving the company $79,900.

The ASX requires Refresh to seek shareholder approval for the issue of the securities at the next general meeting, apply a holding lock to the securities, and if shareholders do not approve the issue to sell the shares.

Refresh will comply, said executive chairman, Henry Heng. (ASX: RGP)

WestSide Corporation
Although there has been no further word on the possible takeover over of WestSide Corporation by LNG Ltd, WestSide has released a new corporate presentation that says the initial indicative proposal of 65 cents per share would be equivalent to 53 cents per share on a diluted basis since the recent rights issue.

That valuation was before the recent reserves upgrade.

WestSide said it is working cooperatively with LNG Ltd to progress the proposal and that the board is committed to maximizing shareholder value and working with advisers to explore all available options. (ASX: WCL)

____ Pre-Revenue Securities ____

Micro Cap Companies

Carnegie Wave Energy
Carnegie Wave Energy and the Australian Department of Defence have signed power supply and grid connection agreements for the Perth Wave Energy Project at Garden Island near Perth.

The agreement is for the exclusive purchase of all the electricity generated from the project and the connection of the project into the electrical infrastructure of the adjacent HMAS Stirling naval base.

The deal, which saw Carnegie's share price jump 32 per cent, was unveiled by the prime minister, Julia Gillard, at Carnegie's Wave Energy Research facility at Fremantle.

Managing director and chief executive officer, Dr Michael Ottaviano, said "It is significant, in light of current efforts by international navies such as the US Navy to increase their renewable energy mix, for the Australian Department of Defence and Royal Australian Navy to be supporting the development of emerging clean technologies like Carnegie's CETO through the purchase of electricity."

Carnegie has been working with Defence since the signing of a Memorandum of Understanding in December 2008. Carnegie is now focused on progressing detailed design of the project with construction and first power to the grid targeted for the end of 2013.

The project will provide HMAS Stirling with renewable green power, and contribute to Defence and Commonwealth greenhouse gas reduction targets. (ASX: CWE)

Earth Heat Resources
Earth Heat Resources says the abridged geoscientific field survey shows its Copahue geothermal energy project in Argentina could support an approximate 15 MWe power station.

A conservative approach shows it may be possible for the new wells to attain 290°C and 1090 psi (75bars) at the total planned depth of 1,500 metres.

"Critically for the program, supply of steam for a stage 1 plant could be satisfied by three wells, drilled directionally, with a fourth optional well which could be either used for condensate disposal or potentially as an additional production well," it said.

Managing director Torey Marshall said "The well design document is a massive step in the integration of the engineering proposal received and the geoscientific realities of the field.

"Most importantly for our shareholders, it confirms the potential to drill conventional standard diameter wells, which will produce at a rate needed to support a phase 1 power plant. It also allows us to be able to reach out to critical suppliers to properly integrate costing as well as their delivery times into the final feasibility study for the Copahue program." (ASX: EHR)

Enerji Limited says it has entered the final stages of installing its waste heat to power Opcon Powerbox system at Horizon Power's Carnarvon Power Station in WA.

Pre-commissioning by two engineers from Opcon's Sweden headquarters is complete, and the only remaining major tasks are the piping and electrical and control systems cabling.

Opcon will soon send out the commissioning team to ‘fire up' the Opcon Powerbox. This can happen when construction is complete and hot water from the heat recovery units can be piped to the Powerbox and all of the pumps and controls are operational.

On the sales front, the company said it continues in well advanced discussions with several interested parties.

"We have an increasing number of proposals under consideration and hope to progress to negotiations in the near term. Carnarvon is proving an invaluable reference site for a significant number of town sites in Queensland, Western Australia and the territories that have been identified as candidates for an Enerji waste heat to power system," it said.

The market discussions have led to the development of more diverse commercial models that allow more flexibility and commercial terms tailored to the potential customer. This approach broadens its market and should result in it being able to access some of the capital tied up in progress payments already made on Opcon Powerboxes. (ASX: ERJ)

European Gas
European Gas shareholders have overwhelmingly voted to support the company's share buy-back offer, disposal of its main undertaking, and the disposal of a substantial asset to substantial holders and associates. (ASX: EPG)

K2 Energy
K2 Energy has issued 3,675,750 shares under its share purchase plan, raising $110,272. The plan was at 3 cents per share and the funds for working capital. (ASX: KTE)

Kimberley Rare Earths
Kimberley Rare Earths said further soil geochemical assay results confirm that the Chigaio prospect in Mozambique has a substantial lithium-tantalum-tin occurrence that exhibits "many similarities to the world scale Greenbushes lithium mine in Western Australia".

The company began exploration in March 2012 and recently announced significant rare earth anomalism associated with the initial, Vundu prospect. The geological environment is highly prospective for many types of economic mineralization and the program has been designed to screen the tenements for all possibilities, it said.

The exploration team has identified two significant prospects in quick succession, said managing director, Tim Dobson.

1,847 soil samples have been collected from around the margins of the Malilongue granite, and define a major geochemical zone containing lithium, tantalum and tin. Small outcropping areas of the pegmatite are currently being exploited by artisanal miners for topaz, aqua marine and amazonite gemstones.

Follow up exploration will commence immediately, he said. (ASX: KRE)

Acorn Capital has become a substantial shareholder in Orocobre with a 5.36 per cent interest. (ASX ORE)

Strategic Elements
Strategic Elements director Matthew Howard has indirectly acquired 15,000 shares at about 3.5 cents each. (ASX: SOR)

Water Resources Group
Water Resources Group has appointed Patersons Securities as lead manager to place any shortfall shares not subscribed to by shareholders under the non-renounceable rights issue announced on 06 July.

Shareholders will receive two new shares for every three shares held at a price of 2.5 cents per share.

The rights issue is to raise up to $5.6 million for working capital for ongoing operations; equity investment for continued progress on commercial projects commencing with construction in Cape Verde, and further development of markets in resources, mining and aquaculture.

The company's new directors, Messrs Bylin and Richmond, have contributed a total of $470,000 in new funding to the company.

Chief executive Brian Harcourt said "The procurement of this working capital will allow WRG to commence construction of our first commercial project in Cape Verde later this year. This will generate a minimum of $10 million in construction revenue over the following 12 months and a further $95 million in water sales during the life of the 25 year contract for the delivery of water to the local municipality.

"WRG will earn 100 pr cent of the construction revenue and share the water sales with 51 per cent going to our Joint Venture partner and 49 per cent to WRG." (ASX: WRG)

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