Newsletter: October 2010

Since our last newsletter in early June, we’ve delivered the next step in our Victoria Coldry project; the signing of the binding licence agreement with TinCom on 25 June.

The complexities and nuances of advancing the commercialisation of a disruptive, high capex, long-lead time, first-of-a-kind technology such as Coldry with a foreign partner mean the process has taken longer than expected. Having said that we are on track per previous announcements and various activities are advancing. More on TinCom and the Victoria Coldry project below.

We’ve been busy strengthening our team with the recent appointment of two new members:

  • Dan Panchal – Financial Accountant
  • Dougal Gillman – Sales Support Coordinator

The addition of Dan provides increased resource to our financial management and reporting efforts, while reducing outsourced Accountancy costs. Dougal’s appointment provides the bandwidth to manage inbound sales queries in addition to driving sales and route-to-market campaigns.

Topics

In this newsletter we cover a few topics (click on the topics to expand/collapse):

[slider title=”Funding Agreement: We explain the recent capital raising with La Jolla Cove Investors”]

We announced this week a funding arrangement with La Jolla (pronounced ‘La Hoya’) Cove Investors providing A$2.5M.

Click on the below links to read more:

Link – Proposed Issue of Convertible Notes

Link – Funding Agreement Signed

Those with their finger on the pulse of the finance markets will know placement terms, including discounts of 15 to 25% plus 5-7% brokerage to microcaps in this market are now typical.

The capital raising committee (Stephen Carter, Larry Hanley and Kos Galtos) considered the very low ESI share price, coupled with our confidence in the business per previous announcements (such as TinCom and other opportunities) and determined that shareholder interests were best served by not immediately actualising an upfront dilution that a placement would cause.

Accordingly, a convertible note (c-note) was negotiated with an investor – La Jolla Cove Investors (LJCI) – that has been in regular communication with us for over 18 months on what we believe are more positive terms, that may allow conversions at higher share price levels in the future, and with shareholders not having to fund brokerage costs.

Additionally, LJCI offers other benefits to ECT, such as providing US introductions to target prospects and investors.

Whilst we acknowledge that a few investors that have previously benefited from the opportunity to take a heavily discounted placement have voiced their displeasure, the board agreed this form of funding was the most appropriate and in the interests of all ECT holders at this time.

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[slider title=”JC Steele Strategic Alliance: A win-win partnership with a world-class equipment company”]

We announced on 19 October (click here for the full release) the signing of a Co-operation Agreement with JC Steele (JCS).

JC Steele manufactures, supplies and services equipment for the clay, brick and tile making industries, including mixers and extruders. In our opinion, they are market leaders.

Extruders are required for the second stage of the Coldry process, known as ‘Attrition and Extrude’. The stage where we initiate the exothermic chemical reaction that allows us to achieve a dewatered, densified pellet.

Coldry represents a new market for JCS and an opportunity to significantly increase their sales. In exchange ECT gets world-class knowhow and practical in-kind support.

The mixer-extruder being installed at our pilot plant is a ’25 Model’. It’s a baby version of the ’90 Model’ planned for the commercial scale Coldry plant.

As part of the ‘Localisation Study’ for the Victoria Coldry Project, this ’25 Model’ will allow fine tuning of the specs and operational parameters of the ’90 Model’.

Beyond that, it provides greater throughput and operational flexibility at out Pilot Plant, enabling larger runs of test coals from around the world at lower cost, which is great for ongoing sales efforts.

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[slider title=”Coldry Intellectual Property: Recent developments and what they mean to the business”]

On 21 October we updated the market on the granting of an Innovation Patent for Coldry and our view of the ‘opposition’ to the Coldry Patent in Australia.

Click here to read more.

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[slider title=”TinCom Update: Latest News and coming events”]

Following on from a formal engagement here in Melbourne with Vietnam’s Ambassador in September TinCom Chairman Thang Van Luong and Project Director Lihn Vu Dac will be in Melbourne over coming weeks to progress the Victoria Coldry Project.

Accompanying TinCom is a senior delegation of Chinese power station representatives who will be touring the Coldry Pilot Plant and Loy Yang power station on Friday 5th November.

Per previous announcements to the market, the next stage in the Victoria Coldry Project involves the Localisation study, detailed engineering and design, scheduled to start before the end of the year.

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[slider title=”Victorian Market: With an election in our home State of Victoria on 27 November, we take a look at the local power generation industry in the context of the Government’s new Climate Change policy and talk about what it means to ECT and Coldry”]

The following article appeared in a recent edition of The Mining Chronicle:

We at innovation company Environmental Clean Technologies might hold the domain name ‘cleancoal.com.au’, but we’re the first to admit there really is no such thing.

What we are in the business of is cleaner coal, and our revolutionary brown coal drying technology known as Coldry, is not only less CO2 intensive than brown coal, but game changing in the context of brown coal resource value and energy security.

We have an economically viable, immediately deployable brown coal drying solution capable of producing a black coal equivalent (BCE) fuel suitable for export to the lucrative thermal coal market.

The export market has been our focus to date due to lack of clear domestic policy around carbon emissions. We recently signed a multi-million dollar license agreement with Vietnamese company TinCom to create a business which will process and export two million tonnes a year of Coldry from Victoria to Vietnam from early 2014, expanding up to 20 million tonnes a year in its first decade of operations.

However, we believe Coldry is a perfect solution for any Government committed to aggressively pursuing emissions reduction while still recognising coal will still be a major part of the energy mix for decades to come.

The Victorian Government has recently taken the lead in this country, with the release of its Climate Change Policy committing to 20% emissions reduction by 2020 compared to 2000 levels – the equivalent of a 40% cut per person (factoring in population growth).

It also includes shutting down the Hazelwood Power Station in the Latrobe Valley – considered Australia’s ‘dirtiest’ power plant – in order to make way for better technologies.

It’s an ambitious target that calls for radical action and new technologies.

Their action plan is broad and importantly seeks to achieve reductions via an open book, least-cost approach. This is great news for ECT as we’ve done our numbers and are confident Coldry will be the most cost effective drying solution on the market.

This is important when you consider Government policy now requires any new coal fired power station to emit no more than 0.8t CO2 per MWh, compared with the 1.3 to 1.5 tonnes currently emitted.

This means the time is right for ECT to position Coldry as a powerful player in a carbon constrained energy future, not only in Australia, but also around the world.

Coldry is a ‘gateway’ technology for cutting carbon emissions by 30 to 50 per cent when coupled with new state-of-the-art power stations in brown coal-based electricity markets like Victoria.

A Coldry enabled solution

Coldry, as a front-end drying solution to proven, state-of-the-art black coal (not brown coal) power station technologies like PC/USC or IGCC could replace Hazelwood’s 1600MW baseload capacity, reducing CO2 emissions by more than 7 million tonnes a year. This is equivalent to:

  • A reduction of over 40% on existing emissions from Hazelwood
  • Accounts for more than 10% reduction on emissions from all brown coal-based electricity in Victoria
  • Represents a 4% reduction on Australia’s total emissions of 207 million tonnes a year from electricity generation

Coldry’s efficiency lies in the natural exothermic chemical reaction, which actively expels physically and chemically trapped moisture and the use of low-grade waste heat from a co-located power station to achieve cost-effective evaporative removal of the expelled moisture.

It also helps to ‘drought proof’ the co-located power station, because water captured via the process is usable without costly treatment.

Our figures based on replacing Hazelwood indicate we can recover up to 4 billion litres of water, while simultaneously reducing evaporative loss from the cooling towers of the power station itself.

The Coldry plant can therefore reduce the need for the power station to take water from the local rivers.

Moreover, it’s estimated there are 500 years worth of brown coal in Victoria waiting to be mined.

Until Coldry, these reserves were black coal’s ‘poor cousin’ – too waterlogged and prone to spontaneous combustion making it uneconomic to export and dangerous to store.

It’s not a solution that’s been developed in a hurry to meet the current Government challenge.

Coldry technology has been years in development and has been subject to rigorous scientific, engineering and environmental investigation.

With all this in mind, we welcome the latest moves by the Victorian Labor Government to aggressively pursue emissions reduction, which improves certainty and lays the foundation for potential deployment of cost-effective domestic CO2 reduction initiatives.

We look forward to working openly with the Government to make Coldry a priority consideration, especially with news Hazelwood Power Station is to be phased out.

There’s no turning back: the world needs new energy sources to meet surging demand.

Using ECT’s revolutionary Coldry technology, we have an affordable, incremental solution.

As long as the world is burning coal, lets burn it better.

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Importantly, our AGM is booked in for Friday 26th November (details here). I look forward to presenting, along with the Board, the years results and our plans moving forward.

Kos Galtos
Chief Executive


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