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australian geothermal index™

The Australian Geothermal Index (AGI™) is the benchmark composite index of the 9 solely geothermal focused companies listed on the Australian Securities Exchange (ASX). The AGI™ was based at 100 using Laspeyre’s PI methodology (as was the XAO) on the 1st of July 2008 to provide an indication of the relative performance of the AGI against the XAO.

Activated Logic also publishes a broader sub-index of the AGI™ which covers ASX-listed companies with equity interests and also the significant private segment of the industry with geothermal projects in Australia.

The relatively small size of the Australian geothermal industry combined with less than 20% of licence holders
being publicly listed companies, is responsible for the limited availability of public domain data for many projects.
Most projects are still at the early stages of development, and limited corporate activity in the sector has made
determining the economic prospectivity of projects and valuations of these specific projects very difficult.

Traditional valuation methodologies used across a range of industries, including standard valuation metrics based on net present value (NPV) or internal rate of return (IRR) approaches, are not applicable to the geothermal industry at the current stage of development. Initial calculations based on enterprise value to energy reserves ratios (EV/Reserve) have been abandoned due to the uncertainty in the magnitude and the timing of commercialising reserves.

Australian Geothermal Index Performance

Following sharp falls in global equity markets during late-2008, the value of the Australian Geothermal Index™ collapsed to the extent that the AGI was trading at under 50 during November 2008. Less than the AGI’s value only 6-months prior.

The Australian geothermal sector has not been immune from the downturn in investment, with Activated Logic’s benchmark index, the Australian Geothermal Index™ (AGI) closing at a 12-month low on the 21st of November last year. The AGI, made up of the 9 ASX-listed geothermal companies, valued the sector at $331 million, less than half the sectors $700 million valuation back in July 2008.

Despite the challenging investment environment at the beginning of the year, investors remain interested in the sector and are specifically monitoring the advanced projects which are approaching key milestones. With confidence returning to global equity markets in recent months and the Senate having passed the Federal Government’s renewable energy target (RET) legislation in August, the AGI is hovering at around $450 million, up 36% from its recent lows.

In recent months the performance of the AGI has closely followed the positive lead by both the Australian market and global equity markets, by posting improvements in the order of 30% since recent lows.

Many of the private geothermal exploration companies which have aspirations for a public listing are watching equity markets closely. The private geothermal companies aim to develop extensive project portfolios and capture sufficient value by identifying attractive geothermal resources, before participating in corporate activity or opting for a primary listing on the Australian Securities Exchange.

With market sentiments improving, successful first round Geothermal Drilling Program (GDP) grant recipients, Petratherm (ASX: PTR) and Panax Geothermal Ltd (ASX: PAX) led the capital raising efforts earlier in the year by bolstering their balance sheets by $7 million and $9.3 million respectively. More recently Green Rock Energy (ASX: GRK) also managed to successfully place $1.43 million through a private placement.

With more than 50 private geothermal companies active in Australia and appetite for risk returning to financial markets, a string of initial public offerings are expected in the next 3-9 months, with Sydney based Granite Power likely to be the first to hit the market with an expected $50 million IPO later this year or possibly early next year.

Combined Market Capitalisation of Australian Securities Exchange listed Geothermal Companies

The volatility in the performance of the Australian listed geothermal exploration and development companies as demonstrated by the Australian Geothermal Index™ is due to the combined impact of factors internal to the industry such as the performance of individual geothermal companies and factors external to the sector. Major external factors include the relative performance of global equity markets, specifically the Australian equities market and also the political environment and how supportive it is towards the wide-scale adoption of renewable energy technologies, specifically geothermal.

Company Updates

A number of Australian geothermal exploration companies have already identified significant thermal energy resources in place - of which a proportion is expected to be economically viable to recover in the medium term. Specifically, Geodynamics, Petratherm and Panax Geothermal have delineated very significant thermal resources. An increasing proportion of Australian geothermal companies are partnering into international projects in an effort to leverage their geothermal experience and technologies and potentially participate in more advanced projects.

Due to the inherent technical, geological and commercial risks associated with geothermal exploration and commercialisation, Activated Logic believes a number of key ingredients are necessary to maximise chances of commercial success:

• strong balance sheet or financial backing
• technically able JV-partner
• capable board experienced in resource or energy commercialisation
• independently documented geothermal resource

For these reasons, Activated Logic believes the larger Australian geothermal companies with more advanced projects present a more compelling case for investment.

Geoscience Australia estimates indicate that even if 1% of Australia’s geothermal resources were capable of being exploited, this would represent Australia’s total energy needs for thousands of years. Figure 10 highlights that Australia’s geothermal energy resources potentially far exceed all other forms of Australian energy reserves combined.

Click on the following link to download the full 16 page Industry Analysis report Activated Logic has prepared with the AGEG and industry participants:
Geothermal Energy - Industry Analysis Report

Company Podcasts

Activated Logic Managing Director Bahay Ozcakmak recently discussed the AGI on Boardroom Radio, a unique investor relations portal designed to help Australian listed companies communicate with the spectrum of current and potential investors. Click on the following link to listen to the interview in full: http://www.brr.com.au/event/58000

Launched in 2005, Boardroom Radio is a unique investor relations portal designed to help Australian listed companies communicate with the spectrum of current and potential investors. Through a comprehensive online information and delivery platform, Boardroom Radio uses the latest technology to communicate company information clearly, simply and cost effectively. Boardroom Radio broadcasts deliver a company’s message to a potential audience of more than 500,000 investors through a range of distribution partners including financial information portals, broker websites, share trading chat rooms, industry bodies and other relevant financial entities.

Subscribe to current and future audio events for Activated Logic on Boardroom Radio

 

How can Activated Logic Help?

  • Assistance with geothermal project investment through a network of experienced strategic partners, attendance at geothermal and renewable energy events, and the coordination of priority investor briefings including the preparation of company roadshow style events.

  • Geothermal project evaluation through comprehensive due-diligence, in-depth feasibility analysis including use of Activated Logic’s Sequential Investments Assessment Matrix (al-SIAM) to determine the attractiveness of geothermal project investment or  other forms of corporate transactions including M&A.

  • Manage geothermal grant applications under the Australian Geothermal Drilling Program (GDP) and the Renewable Energy Demonstration Program (REDP). Activated Logic also can provide assistance with international grant schemes including those available through the International Finance Corporation (IFC) division of the World Bank Group.

  • Preparation and presentation of technical communications including investment proposals and information memorandums with the objective of raising capital or forming alliances with industry participants to develop geothermal projects.

  • Geothermal project development & management - from early stage project initiation through to pre-feasibility, resource definition, FEED, project sanction and all commercial development stages.

  • Develop integrated and effective strategies (including geothermal  power plant technology selection) to accelerate the commercialisation of attractive geothermal projects and maximise likelihood of sustained success of geothermal projects.

  • Government policy – Activated Logic provides research, interpretation and advisory services in relation to the actual and expected implications of current and future government policies in relation to geothermal exploration and development.

  • Effective project and company communications for internal and external stakeholders demonstrating key-benefits. Full suite of graphic services provided to ensure technical communications including seismic-sections, gravity surveys and other geological data is presented professionally.

For more information on how Activated Logic can assist your organisation create and extract value from your geothermal portfolio, please contact us.


Other geothermal Sectors:

 

Industry Membership

Activated Logic Pty Limited is a Member of the Australian Geothermal Energy Group. As a member of the AGEG, Activated Logic has a common interest in sharing information to commercialise Australia’s geothermal resources at maximum pace and minimum cost in Australia’s competitive energy markets.

 

 

 

 



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