Let's try that again

Reason for Report: Company Update
Energy Developments (ENE) announced that its board has approved the construction of a new "Char Gasifier" for its Solid Waste and Energy Recycling Facility (SWERF) process.
The Char Gasifier is the last piece of the process that needs to be finalised for completion of the SWERF design. This sub-process has been highly problematic and resulted in the suspension of testing of nameplate capacity at the Whytes Gully (Wollongong) facility.
This new gasifier will replace the existing unit at Whytes Gully. The company feels the new unit utilises less complex technology, and hence should have lower capital costs than the unit it is replacing.
Modifications have also been made to other parts of the process on the Whytes Gully plant with the installation and commissioning of a dry char removal system. This reverses an earlier change to a wet char removal system. This change has "significantly reduced" the quantity of char produced and sees more energy captured in the primary gasifier. We believe this would have a positive effect on project economics as well as increasing the diversion from landfill.
While still not proven in a full scale operating environment, EDL stated that the new gasifier has undergone extensive testing from benchtop scale up to a 1-in-10 scale pilot. However, we caution that the existing unit also underwent similar testing but did not meet performance criteria when scaled up. More rigorous prototype testing and the less complex nature of the technology should limit the risks of a repeat of this outcome.
No timeframe has been provided for the commissioning of the new unit. Should it prove successful the next steps will be to recommence capacity and emissions testing. Final costing will also be crucial, although we understand that earlier estimates are still reasonable.
We view this as a very positive advance, while noting that it is by no means guaranteed that the new Char Gasifier will work in full scale development. We conservatively value EDL's core Energy Business at $3.93ps, so at current levels investors are paying little for SWERF, which could more than double this value. In our opinion the risk/reward profile is above average, but attractive.


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