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Algae.Tec signs Two MOU Posted by Sumukhi on Fri August 27 2010 04:53:55 AM 12

Algae.tec Limited, which has secured the exclusive global rights to a pioneering highly-efficient algae growth and harvesting system (the McConchie-Stroud System) that produces algal products (such as algal oil and biomass) that can be used to generate sustainable bio-fuels, today announced two MOU's for non-binding commitments to deploy the technology in China and Australia.

Algae.Tec is currently undertaking an Initial Public Offering by way of a prospectus dated 16 July 2010 with the intention to list on the ASX by the end of September 2010. The Company?s ASX code will be AEB.

What sets Algae Tec's technology apart is that it exploits a patented system of algae growth not within ponds but within converted shipping containers. Scalability thus becomes modular, and land requirement is reduced by the ability to stack those modules. The closed modules are not exposed to the same problems as open ponds. And, most importantly, the modules are readily transportable.

In the pond system, the CO2 must come to the pond. To improve yields and accelerate algal growth, captured CO2 can be introduced but (a) it must be transported to the site from an emitter and (b) a lot of the introduced CO2 will simply bubble out of the pond again. In Algae.Tec?s system, the ?pond? comes to the CO2.

Closed modules can be stacked adjacent to an emitter (eg a power station) and everybody wins. The emitter has a direct and measurable carbon offset and the introduced CO2 exponentially accelerates algae biomass production for conversion into commercial products which are themselves a source of renewable alternative energy (which in theory can also be used as an energy source by said emitter).

Partnership with Shoalhaven Starches Pty Ltd.
Algae.Tec has now signed a memorandum of understanding with Shoalhaven Starches Pty Ltd, a subsidiary of the Manildra Group. Manildra is primarily a producer of wheat flour and secondarily a producer of differentiated by-products such as gluten, glucose and starch. Nowra-based Shoalhaven Starches converts starch into ethanol, making the Manildra Group Australia?s largest ethanol producer.

Manildra's ethanol production plant operates using a CO2-emitting power plant. Therein lies a potential source of CO2 for exploitation by Algae.Tec technology, but CO2 is actually also emitted from the conversion of starch into ethanol. For Algae.Tec, its a double-whammy.

Algae.Tec has thus found the site for its demonstration plant. At the time its IPO prospectus was published, it had not. This means a supplementary prospectus has now been published and the close of application date for the IPO has been extended to September 17. Algae.Tec hopes to have the demonstration plant in operation by the June quarter, 2011.

The demonstration plant will consist of two or three container modules but if it proves successful the MOU extends to the construction of Algae.Tec's first commercial plant at the site consisting of some 200-300 containers. Requisite council and environmental applications for such a plant will be filed immediately rather than waiting until after the demonstration proves viable.

The Nowra-based plant would then be the world's first commercial algae operation. At this point, Algae.Tec is not yet planning to produce its own ethanol from the resultant biomass given there are a number of options to be explored, including directing the algae to the production of nutrient-rich stock feed for sale in the region.

Another MOU
Algae.Tec has also signed another new MOU which becomes part of the supplementary prospectus. The MOU involves Algae.Tec in a partnership with Bioenergy Investment Ltd ? an alternative energy investment vehicle incorporated in Hong Kong. Bioenergy Investment is itself a joint venture between Hong Kong company Pacific Minerals and Australian company RKD International.

The purpose of the joint venture is to first seek intellectual property protection for Algae.Tec?s technology in China.

Clearly Algae.Tecs two new MOUs, to add to existing the MOU with logistics and plant construction and management specialist Leighton Holdings, are of a material nature. Hence the supplementary prospectus and extended closing date for the $7.5m IPO.

Prospective investors must take note that while all of the above sounds very promising, algae technology is yet to be proven on a commercial scale anywhere in the world. While demonstration plants are intended to provide proof, there are no guarantees. This is a speculative investment. There will be no cashflow ahead of commercialisation. And the commerialisation phase will require the issuing of significantly more capital.