ASX Announcement
July 29, 2016
Report to Shareholders for the Quarter Ended June 30, 2016
Dear Shareholder,
Its been another quarter of strong progress in the commercialisation of both our CETO 6 wave power technology and our island renewable microgrid business, including the completion of our Investment and Alliance Agreement with microgrid developer Energy Made Clean (EMC) and significant progress being made on island projects, in particular Mauritius and locally on Garden Island. Your company remains in a strong financial position with $13m cash at bank and access to $13m in undrawn Government grants and a $21m debt facility.
The completion of the Agreement between Carnegie and EMC means that work has now begun to deliver microgrid initiatives, the first of which is Carnegie's Mauritius Wave and Microgrid Design Project, where Carnegie will be paid $800,000 from a partnership between the Australian and Mauritian Governments to deliver study and design activities, focused on high penetration renewable energy microgrids. As part of this Project, Carnegie was delighted to host two representatives from the Central Electricity Board of Mauritius in Perth, which included visits to Carnegie and EMC's offices, along with several knowledge sharing presentations with various project partners including State Government owned utility Western Power.
The rapid progress of our microgrid business is a testament to the innovative and hard-working Carnegie team. In a little over 12 months, rapid progress has been made in broadening Carnegie's product offering and diversifying our business into an adjacent renewables segment that offers rapid growth without technology risk and obvious synergies with our core business. We would expect this progress to continue this quarter with the planned Garden Island Microgrid project expected to reach financial close and to start construction.
In parallel, strong progress has been made in Carnegie's development of CETO 6, with the team advancing the design development phase for our Garden Island CETO 6 project with detailed design expected to be completed later this year ahead of manufacturing and construction. Carnegie also gathered valuable data while carrying out wave tank testing at the UK's University of Plymouth's unique Coastal, Ocean and Sediment (COAST) facility.
Carnegie has continued to execute its strategy of collaborating with world class research organizations and industry partners on CETO and, where possible, leverage third party funding. During the quarter, we extended our relationship with the University of Western Australia with a $1 million wave energy research project supported by the Australian Renewable Energy Agency (ARENA), focused on reducing the cost of wave energy.
We were pleased to welcome global infrastructure investment company UIL Limited (formerly Utilico Limited) onto the shareholder register via their 100% acquisition of Renewable Energy Holdings PLC. UIL Limited's objective is to maximise shareholder returns by identifying and investing in investments worldwide where the underlying value is not reflected in the market price. UIL has the flexibility to invest in markets worldwide, although most commonly invests in the utilities and infrastructure sectors.
We also witnessed the British referendum to leave the European Union (EU) this quarter. As we've previously noted, the EU has allocated 100's of millions of capital and revenue for the ocean energy sector in Europe, including for projects in in the UK. Stage 1 of Carnegie's Wave Hub project - a single 1MW CETO 6 unit - is currently being assessed for European funding. Discussions with the European Commission in Brussels and commentary from Ocean Energy Europe, the industry group of which Carnegie is a board member, both indicate that it is business as usual for the time being. We'd expect to have an outcome on the success or otherwise of this process during Quarter 3.
With our CETO 6 project and our new partnership with EMC combined with advancing both our Garden Island Microgrid and Wave Hub projects, our team is working hard to create significant value, the benefits of which we should see in the second half of 2016.
Dr Michael Ottaviano CEO & MD
Highlights from the quarter include:
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Financial snapshot
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Perth Project (CETO 5)
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CETO 6
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Design activities progressing well including deep engagement with CETO 6 supply chain.
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Wave Tank Testing completed at University of Plymouth's COAST facility
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Received $200k concept design milestone payment from ARENA.
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Carnegie formed a partnership with the University of Western Australia on a $1 million wave energy research project.
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Project Pipeline
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Wave Measuring Buoy deployed off Mauritius as part of Carnegie's Mauritius Wave and Microgrid Design Project.
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Excellent progress made on local and international project opportunities including advancing Garden Microgrid project.
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Corporate
1. CETO 6 Development
During the quarter, Carnegie continued to advance the design and development of the CETO 6 commercial product platform ahead of the completion of detailed design later this year. Major design work packages are progressing well including with Bosch Rexroth for the Power Take Off and Pump as well design of all main project subsystems including the buoyant actuator, foundation connector and umbilical and export cables. Due to this progress, Carnegie was able to complete the CETO 6 concept design milestone, resulting in a $200,000 CETO 6 milestone payment from ARENA.
During the quarter, Carnegie also secured the offshore permits and approvals required for the Garden Island CETO 6 project.
CETO 6 Design Drawings
Carnegie also continued to advance the development of its UK CETO 6 Project at Wave Hub in Cornwall in the South West of England. The Project is currently planned as a two stage development with Stage 1 consisting of a single CETO 6 unit, followed by an expansion to a 10-15MW stage. The Wave Hub facility is a pre-consented, pre-developed site with sub-sea cable and grid connection already in place. As we've previously noted, the EU has allocated 100's of millions of capital and revenue for the ocean energy sector in Europe, including for projects in the UK. Stage 1 of Carnegie's Wave Hub project is currently being assessed for European funding and discussions with the European Commission in Brussels and commentary from Ocean Energy Europe, the industry group of which Carnegie is a board member, both indicate that it is business as usual for the time being. We'd expect to have an outcome on the success or otherwise of this process during Quarter 3.
Early in the quarter, Carnegie undertook a comprehensive wave tank testing programme of its CETO 6 technology design at the University of Plymouth's unique Coastal, Ocean and Sediment (COAST) facility to test the performance of the CETO 6 design across a range of sea states.
Over 340 separate tests were completed throughout the programme with specific outcomes including the measurement of CETO 6 performance across a range of operational and extreme sea states, optimisation of Carnegie's preferred Power Take Off (PTO) system operation and control, validation of Carnegie's in-house modelling suite and detailed and validated load case for CETO system design.
CETO 6 model undergoing testing at the University of Plymouth's COAST Lab
The commencement of this testing coincided with discussions with leading academic and industry experts aimed at exploring opportunities to support CETO wave development in the UK. Carnegie also used this opportunity to hold a seminar hosted by the University of Plymouth and attended by members of the Partnership for Research in Marine Renewable Energy (PRIMaRE).
(from left to right) Professor Deborah Greaves, CWE UK's CEO Mr Tim Sawyer, Commercial Director for Wave Hub Stuart Herbert, Associate Professor (Reader) in Coastal Dynamics Modelling (Wave Hub) Dr Daniel Conley.