Gambling Greenie  February 22, 2019


Making a tough decision

CONCRETE IS ONE OF THE LEAST environmentally friendly products on the planet.  Making the stuff is responsible for an estimated 7 per cent of mankind's global CO2 emissions, according to Wikipedia.  So why would any greenie invest in a company which gets most of its money from concrete?

The company, Eden Innovations  (EDE), makes most of its money manufacturing a reinforcing additive for concrete, using carbon nanotubes.  The company says its EdenCrete makes the concrete stronger and last longer. Presumably that means that in the long run, less concrete will be needed.  That's a pale green tick.

You have been warned

THE GAMBLING GREENIE  is licensed by the South Australian government to drive a moter vehicle. He is not an adviser and has no links to the financial services industry. If he finds a guaranteed way of making serious money on the stock market, he won’t tell anyone.

He may at times own shares mentioned in the column, but does not trade in any such shares for at least two working days after publication.

The carbon nanotubes are a byproduct of turning methane into hydrogen, using a pyrolysis technique developed at the University of Queensland, but now wholly owned by Eden.

Eden's other business is Optiblend, a duel-fuel system that uses natural gas, or Eden's Hythane, a hydrogen-enriched natural gas blend, to reduce emissions from large diesel and natural gas engines.  That's a brighter green tick, especially if it is widely adopted by bus fleets in India's megacities.

The increasing interest in hydrogen as a clean fuel source has also resulted in Eden being approached recently by a couple of companies interested in its proprietary  pyrolysis process.  That's potentially a third tick.

Companies in the Eden stable have been working on hydrogen blends since the 1990s.  In 2007 its declared objective was "to be the world's leading hydrogen technology company".

At that time it also had interests in coal seam gas in Wales,cyrogenics, natural gas exploration in South Australia, and was so confident of hitting hot rocks under Renmark and the Cooper Basin that it was hoping to be able to float its own geothermal energy company on the stock market in 2008.

Those activities have all been sold or abandoned.   Hythane was the great white hope, especially in India.  In March 2007 Eden signed a five-year Hythane marketing agreement with Gujarat State Petroleum.  It was delighted when later that year the Indian government decreed that 20 per cent of all vehicles should be running on a blend of hydrogen and natural gas by 2020.  It had been shown that buses running on natural gas could halve their nox emissions by using Hythane.

In 2014, the diesel engine giant Cummins approved Eden's OptiBlend dual fuel system which uses natural gas to replace up to 70 per cent of the diesel used by its generators on drilling rigs.  The Confederation of Indian Industry granted GreenPro certification for OptiBlend for diesel generator sets.

Yet that business has gone nowhere very fast. Over the past six years, sales have totalled more than $US 5 mln.  But in the year to June 2018, Optiblend global sales were only $600,000, 2 per cent down on the year before.

EdenCrete, however, seems to be gong gangbusters.  It is significantly cheaper, and easier to use, than other additives such as fly ash or steel.

In the US, it has been approved for use by the Federal Highway Administration and the departments of transportation in 11 states, and is already being used, particularly Georgia and Colorado.  It is being tested in South Korea and the first sales in Australia and New Zealand are expected later this year.

Sales, which began in 2015/16, have soared from around $US 550,000 in the year ended last June to more than $US 700,000 in the latest six months.  The business is expected to be generating positive cash flow in 2019/20.

Photo:  Eden Innovations

EDEN HAS ALSO been working, with the University of Queensland, on using its carbon to improve plastics and polymers. The packaging, automotive and aerospace industries are likely to be target markets for eventual commercialisation.

However, the hydrogen may be the sleeper in the story.  In terms of mass, Eden's pyrolysis turns 25 per cent of the natural gas into hydrogen and 75 per cent into solid carbon.

If it used renewable energy such as surplus wind or solar to provide the heat needed for the pyrolysis, it would be a zero-emissions process.

Eden has recently bought a 65.5 acre industrial site in Georgia to step up its production of EdenCrete from 2.4 mln gallons a year to 12.5 mln g.p.a. as demand grows. 

That's a lot of hydrogen.

The company believes that "the hydrogen generated by Eden's pyrolysis process is likely to be both commercially competitive and environmentally acceptable with other renewable hydrogen production processes.

"These factors have been the drivers for preliminary enquires that Eden has received during the past year in relation to its various hydrogen-related technologies."

(However, Eden does have a new hydrogen pyrolysis rival in its home town of Perth, in Western Australia. The Hazer Group (ASX code HZR), which has worked with the University of Western Australia, is aiming to commercialise a process which produces hydrogen and solid carbon in the form of graphite.)

Eden is now trying to find almost $10 mln to fund its expanding businesses.  It has already raised $1.34 mln in a private placement. Existing shareholders are being invited to kick in almost $8.1 million by buying new shares at 5.4c each.  The sweetner is that investors who take up the offer will also get a free option for every two shares they buy. The options carry the right to buy more shares at 8c each any time in the next two years.

The closing date is March 4, unless extended in the meantime.  The offer is only partially underwritten, so Eden may not get all the money it wants.

At the time of writing, Eden shares can be bought on the stock exchange for 5.4c and sold for 5.3c, so any investor taking up their rights to new shares will show an immediate loss.  The sweetner is the only real carrot.  In early 2017, Eden shares peaked at a heady 35c, and they suddenly — briefly — rushed up to 12c last October, so maybe an 8c option will be a winner.

The reality is that Eden has never made a profit, has a number of failed ventures behind it, and will almost certainly need to raise more cash in the next couple of years.  It has had to raise money so often that if this latest fundraiser is successful, it will have issued 1.6 billion  shares and 131.5  million options.  It is one of those stock market tiddlers that has no debt because no one will lend it any money.

In the year ended last June, Eden burned through more than $9 mln and made a net loss of $10.8 mln – which admittedly was better than the $11.3 mln it lost the year before.

It’s a tough decision, but the GG, a hardened gambler, has bought 35,000 shares anyway. Not having Eden in his portfolio already, he has picked them up in the market for $1,900.

air logo