Small Caps | Jan 18 2012
By Greg Peel
Algae.Tec ((AEB)) is an advanced algae-to-biofuels company with proprietary high-yield enclosed algae growth and harvesting technology. (See An Opportunity To Enter The Biofuel Revolution At The Base Level; Independent Report A Positive For Algae.Tec; and other stories sourced via code AEB.)
Last November saw a milestone for the company as its first biofuel production module was put in place at the “Shoalhaven One” demonstration facility in Nowra, NSW, which will operate commercially at the ethanol plant operated by flour producer Manildra. However given interest in Algae.Tec's technology elsewhere in the world, a demonstration plant is rapidly seeming almost redundant.
In December AEB announced a deal with global building material company Holcim to establish a five-module facility at its operations in Sri Lanka, with the intention of upgrading to a much larger facility assuming success. Later in the month AEB announced a memorandum of understanding with Germany's Lufthansa airline to jointly evaluate the potential to use the company's proprietary technology for the production of sustainable aviation fuel.
Last week AEB announced the four-fold expansion of its Algae Development & Manufacturing Centre in Atlanta, Georgia, where used shipping containers are converted into biofuel production modules. The increased production line scale will be required for AEB's existing and upcoming commercial projects.
Today's news is the AEB has signed a binding memorandum of understanding for a equal equity joint venture in China with Shandong Kerui Group Holding Ltd. Kerui Group is primarily a manufacturer of oilfield and petroleum industry equipment and power generation and building facilities. Kerui is based in Shandong province, China's second largest oil province, and has eighteen offices located in countries outside China.
The first project under the joint venture will be to build a 250-module algae biofuels facility at Dongying in Shandong to produce approximately 33 million litres of transport fuel and 33,000 tonnes of biomass per annum at a value of over $40 million, capturing 137,000 tonnes of waste carbon dioxide in the process. AEB will provide the proprietary McConchie-Stroud production system and Kerui will provide knowledge and expertise to accelerate business development, identify further viable project sites, and deal with the relevant authorities and approval processes. The initial facility will be equally funded by both partners.
While a 250-module facility rather dwarfs those of the one and five-module test facilities in Nowra and Sri Lanka, the joint venture's intention is clearly that of opening all of China to algae technology. Following completion of the initial facility the joint venture will look to secure funding for new projects exceeding 1000 modules and to engage with Greater China's vast number of carbon dioxide emitters as well as local environmental administration authorities. Beijing has pledged to reduce the amount of carbon emitted in China per unit of GDP by 40% by 2020.
“Algae.Tec is well positioned for massive expansion in the fastest growing economy in the world and will be raising capital shortly to fund this expansion,” said AEB executive chairman Roger Stroud in an announcement this morning.
Shortly indeed. Mere hours after the Chinese joint venture announcement, Algae.Tec has announced a $5 million placement to sophisticated and professional investors via 12.5 million shares at 40c. The placement will be managed by Patersons Securities and is expected to take three days, over which time AEB will seek a trading halt.
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