Eco Investor Update

A Weekly News Update for Environmental Investors

15 November 2010 - No 9

ASX 100

AGL Energy
Arrow Energy has detected minute traces of benzene in three of 60 fluid samples taken in the northern Bowen Basin in Central Queensland. The preliminary results relate to two coal seam gas wells in Arrow's Moranbah Gas Project (MGP) and one well in the adjoining exploration tenement ATP364. AGL Energy is a joint venture partner with Arrow in the Moranbah Gas Project.

Arrow said water from the wells is managed in accordance with regulations for coal seam water and is contained in lined, fenced ponds for treatment or removal. There are no registered water bores within five kilometres of the wells, and coal seam water is not used for feedstock. As a precaution, Arrow will test water from bores closest to the area.

Arrow said it has not used chemicals containing benzene (or other members of the BTEX group of chemicals) in its fraccing fluids.

Independent testing will be undertaken to verify the results, while separate research will be conducted to determine if the benzene is naturally occurring or introduced by another means. BTEX chemicals can be present in oil based lubricants, diesel and petrol.

Arrow has briefed the Department of Environment and Resource Management (DERM), Department of Employment Economic Development and Innovation (DEEDI) and the Isaac Regional Council. (ASX: AGK)

APA Group
APA Group is to acquire another 16.7 per cent of the SEA Gas Pipeline from International Power for $46.3 million.

APA has exercised its pre-emptive right over part of International Power's interest, and the acquisition will increase APA's interest to 50 per cent. APA provides field operations and maintenance services to the pipeline. Financial close is expected before the end of 2010.

In June 2007 APA acquired a one third interest in the SEA Gas Pipeline from Origin Energy.
The 680 kilometre SEA Gas Pipeline was commissioned in 2004 and provides a key gas transmission link between Victoria and South Australia. (ASX: APA)

Origin Energy
The Queensland Coordinator-General has approved Australia Pacific LNG Pty Ltd's coal seam gas (CSG) to liquefied natural gas (LNG) project. Australia Pacific LNG is a 50:50 joint venture between Origin Energy and ConocoPhillips.

Subject to what are said to be strict conditions, the approval is for the progressive development of the gas field over a 30-year period, along with a 450 kilometre transmission pipeline and an LNG facility on Curtis Island.

Australia Pacific LNG Project director, Page Maxson, said the approval is a significant milestone for the project.

"The stringent conditions contained in the Coordinator-General's report, including detailed on-going monitoring and reporting requirements, should give the community confidence that the project will meet the high standards required during construction and operation," he said.

Compliance with the Coordinator-General's conditions will be independently audited, with Australia Pacific LNG also required to provide an annual environmental report.

The Environmental Impact Statement included an assessment of the cumulative impacts of all existing projects proposed for the region including other CSG to LNG projects and an undertaking to develop and implement a comprehensive biodiversity protection strategy.

Origin said Australia Pacific LNG met with more than 6,000 stakeholders including landowners and non-government organisations during an 18 month period.

The Coordinator-General's report will be provided to the Commonwealth Government for further consideration and approval under the Environment Protection and Biodiversity Conservation Act (EPBC Act).

Qld premier Anna Bligh said "The momentum of our new liquefied natural gas industry is growing and this is the latest announcement that promises thousands of jobs in our state. Construction of the project, including the first two LNG trains, could commence in 2011, with first exports scheduled for 2014." (ASX: ORG)

ASX 200

Infigen Energy
A power play at Infigen Energy has seen chairman, Graham Kelly, resign as chairman and director of Infigen Energy, and Tony Battle, chairman of the board's Nomination and Remuneration Committee, give notice that he will retire by rotation at the upcoming annual general meeting.

The new chairman is Mike Hutchinson.

Infigen said that its largest investor, The Children's Investment Master Fund (TCI), which holds 22 per cent of Infigen, wishes to appoint a nominee director. Infigen said it is willing to accommodate the request provided certain governance arrangements are established to ensure the company is managed in the best interests of all security holders. Discussions are continuing.

However, in a joint statement with Mr Battle, Mr Kelly said that he was not prepared to serve either as chairman or as a director with a nominee of TCI on the IFN boards. He said TCI had said it is prepared to call an extraordinary general meeting to force its way onto the boards, including the removal of Mr Kelly, if he and the boards were not prepared to accede to its views.

Messrs Kelly and Battle said TCI had also indicated it may vote against the re-election of Mr Battle as a director at the AGM without providing a substantive or justifiable reason for doing so.

Mr Kelly said that he does not believe that it is in the interests of security holders for TCI to take these steps. Nor did he wish to serve as chairman of potentially divided boards. TCI has made it plain it wishes Infigen to re-commence the security buy-back program even though the Group needs capital to pursue its program of renewable energy development in Australia, said Mr Kelly.

Infigen having a bright, though challenging, future as Australia's leading specialist renewable energy business, said Mr Kelly, and he regrets that effective control is now likely to be assumed by a foreign hedge fund, and like minded interests, with little concern for the longer term viability of the business, nor its continuation as a major contributor to Australia's clean energy needs.

Mr Battle has been a director since the IPO of the Group, and said it is disappointing that a hedge fund appears to be seeking to impose its own short term interests contrary to Infigen's longer term prospects as Australia's leading renewable energy business.

Mr Battle said a major factor in his decision to leave the Infigen boards was his support for the outgoing chairman who led Infigen through the difficult separation from Babcock & Brown's management and was at the forefront of its transformation from a managed fund to an independent business.

Mr Battle said he believed TCI had been reluctant to commit to what he regarded as proper processes for board review, selection and appointment.

Should be an interesting AGM. (ASX: IFN)

Transpacific Industries Group
Transpacific Industries has withdrawn as a possible bidder for the NSW Government's sale of WSN Environmental Solutions. The company said the acquisition was not in line with its strategic growth direction. (ASX: TPI)

ASX 300

Funding arrangements for a $7 million grant to Geodynamics under Round 2 of the Federal Government's Geothermal Drilling Program (GDP) have been finalized.

Initially awarded in late 2009, the funding is for the development of Geodynamics' Hunter Valley geothermal project. It will be used to drill two deep wells on its Hunter Valley tenements to demonstrate proof of concept.

The funding will be staged over the duration of the planned exploration activity with the final amount payable following on the successful announcement of proof of concept.

Geodynamics said it has commenced planning to commission a seismic risk assessment. This will be complete before the end of the financial year and will inform future exploration activity. (ASX: GDY)

Tox Free Solutions
Tox Free Solutions director Michael Humphris has sold another 50,00 shares at an average price of $2.46 each. He retains 2.1 million shares.

In October Mr Humphris sold 50,000 shares at $2.39 each. (ASX: TOX)

Emerging Companies

CBD Energy
Ethical funds manager Hunter Hall has ceased to be a substantial shareholder in CBD Energy, selling down to 4.9 per cent.

In a two week period between September 22 and October 3 it sold 459,652 shares, but gave no indication of the sale price. At the time CBD shares were on a high of around 15 cents. (ASX: CBD)

Environmental Group
Environmental Group chairman John Read appears to have a strong belief in the company. This calendar year he has regularly bought shares on market, indirectly acquiring 1.52 million shares at an average price of 3.1 cents each. He now holds 8.8 million shares indirectly and 0.4 million executive share options. (ASX: EGL)

Micro Cap Companies

Infrastructure fund manager Palisade Investment Partners has obtained investment approval to fund Stage 2 of joint venture partner AnaeCo's DiCOM facility for the Western Metropolitan Regional Council in Perth.

Commencement of construction is subject only to finalisation of contracts, which is expected to occur over the next week or so.

The DiCOM facility will process 55,000 tonnes per annum of municipal solid waste. It will be the first fully operational DiCOM System facility and will be one of the most advanced biological waste treatment plants in the world, said AnaeCo. (ASX: ANQ)

Australian Renewable Fuels
Australian Renewable Fuels received acceptances for 60 per cent of the shares in its fully underwritten rights offer. The issue raised $4.7 million to recapitalize the company and implement its new biodiesel strategy.

Substantial shareholder Wasabi Energy has seen its holding fall from 27.6 per cent to 23.3 per cent. (ASX: ARW)

BluGlass has received $2.68 million from cornerstone investor SPP Process Technology Systems (SPTS), following shareholder approval for the second tranche of a total investment of $5.2 million by SPTS.

BluGlass issued 24,431,780 shares at 11 cents each to SPTS, whose interest is now 19.9 per cent.

BluGlass chief executive, Giles Bourne, said the capital injection is "a major endorsement of our technology".

BluGlass now has cash of over $7 million. "Our cash resources along with the remaining $3.2 million of the Climate Ready grant will enable the completion of the research program that BluGlass, through the joint venture company, has committed to as outlined in the recently published roadmap. In addition the company is well positioned to complete the Climate Ready project," said Mr Bourne. (ASX: BLG)

Carnegie Wave Energy
Carnegie Wave Energy is to raise $5 million through share purchase plan that is underwritten by Blackswan Equities Ltd. Oversubscriptions for another $3 million will be accepted.

Shareholders will be able to buy from $5,000 up to $15,000 worth of shares at 10 cents each.

The price is a 20 per cent discount to the five day average share price and a 26 per cent discount to the 10 day volume weighted average price.

The funds will be used for site development opportunities, desalination technology development and working capital beyond the current commercial scale CETO unit deployment and testing. Results for the CETO tests are due in the first quarter of 2011.

Carnegie's managing director, Dr Michael Ottaviano, said "We are delighted to have secured the support of Blackswan Equities to underwrite this capital raising which provides our existing shareholders with the opportunity to purchase additional shares at a discount to the market price." (ASX: CWE)

EcoQuest has identified Toys R Us as the major international toy retailer whose Australian chain is stocking its Little Takas biodegradable nappies.

EcoQuest raised $980,000 under its recent share purchase plan. 12.2 million shares were applied for by 144 shareholders. (ASX: ECQ)

EnviroMission has received a query from the ASX on its low cash position after it had negative operating cashflows of $142,000 in the September quarter and cash at the end of the quarter of only $14,000.

The company replied that it has a term sheet for a hybrid debt equity facility and that the transaction is nearing completion. It also has a $250,000 loan facility of which $100,000 has been used.

Meanwhile, EnviroMission has appointed Arup to provide executive engineering services for its Solar Tower Concept project proposed for Arizona.

Arup principal, Building Services and Arup project spokesperson, Ken Stickland, said "Arup is internationally renowned for its experience in addressing complex engineering and environmental challenges of an order to some of those anticipated in Solar Tower design and construction.

"At the core of the Solar Tower concept is the unique engineering challenge where every material and dimension of the design has a function in the optimization of solar radiation being used effectively to heat air, to create a thermal updraft that will drive turbines to generate clean, sustainable, electricity.

"The iconic features of Solar Tower design will deliver new efficiencies in renewable energy that will be achieved without the use of water typically used yet seldom accounted for in the economics of electricity generation.

"Arup has completed key aspects of the methodology for site specific Solar Tower design and performance analysis under an existing Memorandum of Understanding."

EnviroMission's chief executive, Roger Davey, said once constructed, the project will generate electricity for the Southern California Public Power Authority (SCPPA) under the terms of a Power Purchase Agreement (PPA) approved by the SCPPA on October 21.

Due diligence for a capital raising negotiation now underway has been completed with legal documents expected to be finalized in the second quarter. This will provide EnviroMission with the working capital to progress through FEED and meet land acquisition related expenditures also anticipated in quarters two and three, said the company.

EnviroMission has filed a notice of intent with the Arizona Power Plant and Transmission Line Siting Committee for an application for a Certificate of Environmental Compatibility (CEC).

A CEC is a ‘critical and all-encompassing' permit for power station development and primary first step in the plant siting process, it said, as the Line Siting Committee considers all matters associated with the location of electric generation plants and transmission lines in Arizona and makes recommendations to the Arizona Corporation Commission to grant, deny or modify CEC permit applications. (ASX: EVM)

Green Invest
Green Invest's Green Plumbers business has been recognised by the US Green Building Council (USGBC) as the sole environmental and sustainability accreditation for plumbers in USA.

The USGBC is a not-for-profit organisation dedicated to cost-efficient and energy-saving green buildings. Just as USGBC offers sustainability and environmental assessors green building professionals' accreditation through its LEED Professional Credentials, Green Plumbers is now recognised as being the sole provider of professional accreditation by the USGBC for plumbers, said the company.

The USGBC has added Green Plumbers to its GreenHomeGuide.com directory of green residential professionals.

Green Invest said another US development that will assist it to expand its brand globally is the adoption of Green Plumbers training by United Association of Journeymen and
Apprentices of the Plumbing and Pipe Fitting Industry of the United States and Canada

The UA has 326,000 members in 300 local unions across North America, and is focused on their training and accreditation through 2,700 training centres it operates across North America.

Also favourable for Green Invest is the Defeat of Proposition 23 in California to freeze emission cuts. The defeat means California will push ahead with its plan for an emissions trading scheme, starting at modest reduction targets in 2012 and rising significantly after 2015.

Green Invest says the introduction of an emission trading scheme in California is crucial to the introduction of a proposed Western Climate Initiative which includes 10 western states and provinces of the US and Canada.

The Western Climate Initiative partner states and provinces will introduce legislative initiatives to work collaboratively to reduce greenhouse gases including the introduction of Emission Trading Schemes and renewable energy incentive schemes similar to those in Australia.

"These developments have provided a solid platform for Green Invest to rollout its commercialisation program within the USA and Canada," said the company, which has been
negotiating with a number of North American groups to provide funding and strategic support to initiate the program.

The funding model for international expansion is the establishment of a number of Sustainable Funds in various sectors in which Green Invest would be an investor as well as provide management services.

"These new developments in North America are significant to the future success of the Green Invest global model. It reinforces the board's decision early this year to acquire the worldwide rights to Green Plumbers," said Green Invest chairman, Peter McCoy.

"The foundations are now set for Green Invest to reap the rewards of some of the hard work done by the company over the past year and a half. We are now in a position to select our strategic partners from a number of high quality options." (ASX: GNV)

Mission NewEnergy
Mission NewEnergy has lodged a registration statement with the US Securities and Exchange Commission to be listed on the NASDAQ Global Market.

Mission's shareholders will be asked to approve a share consolidation to satisfy minimum trading price requirements on NASDAQ at a meeting to be held in due course.

Mission said there is no assurance that its shares will be listed on the NASDAQ or on the timing of any listing.

The company has had to audit its financial statements to accord with US audit standards and thus adjustments were made to its 2010 audited financial statements lodged with the ASX on 17 September. Mission made a further provision for certain receivables in the feedstock business unit and this increased the provision for doubtful debts by $4.3 million with a corresponding impact on profit and loss.

Mission describes itself as a vertically integrated biodiesel producer and one of the world's largest Jatropha plantation companies. (ASX: MBT)

Torrens Energy
Torrens Energy says it is delighted by Geoscience Australia's new OzTemp results which show that hot rocks exist around Port Augusta and close to Port Adelaide, further south in South Australia than previously thought and well within reach of the national grid.

"The result highlights Australia's vast geothermal potential and the uniqueness of Torrens Energy's on-grid land positioning north of Adelaide," said managing director, John Canaris. OzTemp is a measure of the current understanding of Australia's geothermal resources potential interpreted as national "temperature maps" of crustal temperatures at 5,000 metres depth.

OzTemp is derived from temperature data taken mostly from petroleum and minerals boreholes across Australia. Newly incorporated higher resolution company data has made possible a more accurate gridded image, he said.

"The new image shows anomalous values extending much further south than previously thought, fundamentally changing the prospectivity landscape for hot rock geothermal and placing higher than predicted temperatures within reach of the national power grid in South Australia. (ASX: TEY)

WestSide Corporation
The September quarter saw WestSide Corporation make its maiden coal seam gas sales with its share of sales revenue from the Meridian SeamGas CSG fields being $1,542,769, including revenues from processing.

Gas sales for the quarter were 992,071 GJ, of which WestSide's 51 per cent share was 505,960 GJ.

Since they took control of the Meridian SeamGas CSG fields on 1 July, WestSide and its joint venture partner Mitsui E&P Australia Pty Ltd have worked to increase production by drilling new production wells and working over existing wells.

The Pretty Plains #5 dual-lateral well has been drilled and is now being prepared for production, and they say this is the first of a series of dual-lateral well sets planned to lift field production. A second well-set, Pretty Plains #8, is also now well advanced.

WestSide is planning to engage additional rigs, and has started to upgrade roads and drill pads at Meridian to provide all-weather access.

Exploration expenditure for the quarter was $3.32 million and another $3.09 million was spent on development activities. (ASX: WCL)

Initial Public Offerings

The latest environmental float is RedFlow Ltd, an Australian electricity storage company with technology that stores conventional or solar electricity for release during periods of peak demand, thus helping to reduce distribution costs and pressure on retail electricity price rises. The technology allows solar electricity to be used at any time including at night.

RedFlow is offering 17.5 million shares at $1 each. The offer is fully underwritten by RBS Morgans.

The IPO proceeds will go towards expanding production and sales of RedFlow's energy storage systems, and ongoing product development.

The technology is based on RedFlow's proprietary zinc-bromine battery modules (ZBMs).

RedFlow chief executive, Phil Hutchings said the prospectus clearly demonstrates the company's growth plans, its range of business relationships with leading companies, and independent reports on RedFlow's ZBM and market opportunities.

"We are particularly pleased to highlight our recent agreement with Jabil Circuit, Inc. for much larger scale production of ZBMs and our associated power electronics. This will allow us to meet customer demand and assist in reducing our unit costs while maintaining high quality," he said.

"Since the business was founded in 2005, we've moved steadily forward with our products which are now of a commercial standard," he said. "Our electricity storage systems are currently in demonstration use with power utilities in Australia and New Zealand and will soon be in several other countries."

The company's foundation customers include EnergyAustralia, Ergon Energy and New Zealand's Powerco.

The global energy storage market for grid connected applications by electricity utilities and for off-grid rural applications is expected to grow rapidly over the next decade. Demand is growing due to increasing electricity distribution costs, aging electricity grids, and the previous unavailability of technology that can time-shift demand or supply locations close to consumers.

Founded in 2005, RedFlow says it is now acknowledged as one of the world leaders in high performance zinc-bromine flow batteries (ZBM) for grid-connected electricity storage. Its utility-scale energy storage systems help reduce electricity distribution costs and allow clean solar generated electricity to be used at any time including at night.

"RedFlow has kilowatt-scale energy storage systems available now to meet the needs of customers in these markets. The company is on track to provide commercial standard megawatt-scale storage systems by late 2011 which have been designed, among other things, to target the renewable energy storage market," said chairman, Peter Pursey. This is the RedFlow 200 product, which is now being prepared for its first demonstration.

Sales are expected to move from demonstration and trial units to full commercial sales in 2011. The company says it has low manufacturing costs at commercial scale.

"RedFlow has orders on hand for energy storage systems containing more than 80 ZBMs for delivery by June 2011 and has identified distribution partners in New Zealand, Asia, the United Kingdom and France," says the prospectus.

Based in Brisbane, RedFlow has doubled its staff over the past 18 months and now has 49 employees including 15 engineers. It also has representation in the US.

RedFlow's Phase Two ZBM factory was opened on 10 August and recently moved to working two 10 hour daily shifts to meet ZBM demand.

"The proceeds from the IPO will allow us to commit to the much larger Phase Three ZBM factory for opening in mid-2011," said Mr Hutching. The Phase Three ZBM factory and product assembly plant will allow production capacity of up to 6,000 ZBMs per year, and to reduce unit costs. RedFlow also leases factory space for an expanded systems assembly facility.

The company had 51,104,672 shares prior to offer, so will be initially capitalized at $68.6 million. It will also have 6,238,896 options on issue.

RedFlow's 2009-10 revenue was only $691,123 and the annual loss $1.06 million. Net assets at 30 June were $3.1 million, and pro forma net assets after the IPO will be $23 million.

There remains some commercialization risk. RedFlow is a speculative early stage investment and will list as a micro cap.

The IPO closes on 29 November with listing expected on 14 December.

Unlisted Funds

Climate Advocacy Fund
The boards of two resource companies have rejected the Climate Advocacy Fund's first climate change shareholder resolutions for consideration, preventing shareholders from voting on the resolutions at the AGMs.

Paladin Energy and Aquila Resources believe that the climate change resolutions were management and not shareholder business and on that basis have refused the request to put the resolutions on their November AGMs' Notice of Meeting, said The Climate Institute and Australian Ethical Investment.

"It is disappointing and surprising that the Paladin and Aquila boards are censoring these proposed expressions of shareholder interests when the purpose of the resolutions is to help protect shareholder long-term returns," said Julian Poulter, The Climate Institute's Business director.

However, both companies have distributed the statements proposing the resolutions to all their shareholders.

The resolutions to four companies request disclosure of each company's carbon emissions, strategies to reduce emissions, capital investment assumptions around future carbon prices and their use in making long-term investment decisions.

Aquila Resources Board stated in a notice to shareholders that "The Board's view, is that the subject matter of the proposed resolution, both under the Company's Constitution and under the Corporations Act 2001 (Cwlth), is a matter for management rather than for shareholders."

Paladin Energy's board letter went further stating that the proposed resolution impinged on the board's authority to manage the company.

A resolution lodged with Oil Search has been accepted for its AGM in May 2011, while Woodside Petroleum is taking legal advice on the resolution it received and has committed to respond before its AGM in April 2011.

James Thier, Australian Ethical Investment director, said "Clearly there is some inconsistency here. Oil Search to its credit has acknowledged the issues within the resolution and presumably will come to the meeting with some information for shareholders. Oil Search's response, together with other regulatory developments all over the world put the Aquila and Paladin responses into context."

International Companies

Ocean Power Technologies
Ocean Power Technologies, Inc. has expanded its relationship with Mitsui Engineering & Shipbuilding Co. Ltd. (MES) with the signing of a new contract to develop OPT's PowerBuoy technology for Japanese sea conditions.

The two companies will work together to develop a new mooring system for OPT's PowerBuoy that is customized for wave power stations off the coast of Japan. The new system will undergo testing at MES's wave tank facilities to verify extensive computer modeling.

OPT and MES also intend to identify a project site for an in-ocean trial of the PowerBuoy system.

OPT expects to receive 18 million yen (about $220,000) for its development efforts. Work is expected to be performed over the next six months.

In October 2009, OPT and a consortium of MES, Idemitsu Kosan Co., and Japan Wind Development Co. signed a Memorandum of Understanding to develop wave energy in Japan. (Nasdaq: OPTT, AIM: OPT)

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