CBD: CBD ENERGY NOW 19 PCT OWNED BY SOLON AG OF GERMANY HAS A...

CBD: CBD ENERGY NOW 19 PCT OWNED BY SOLON AG OF GERMANY HAS A RANGE OF ALTERNATIVE POWER TECHNOLOGIES ON A STRONG GROWTH PATH

By Jenny Prabhu and Gerald Stanley


CBD Energy Ltd listed in 2002 with a focus on energy saving, using technology developed by its Hong Kong based subsidiary Ventronics.

But while in 2002, theoretically, alternative energy sources were already much in favor, and projects were being funded by government as well as companies in hydro, wind and solar power, only a few companies, such as Energy Developments, were consistently profitable.


CBD Energy's history of profits through 2003/04 was somewhat patchy and dependent on technologies since sold, but its focus has remained steadfastly on facilitating and smoothing the delivery of electrical energy with an emphasison alternative sources.

Today, when global warming is no longer a theory but with all too visible effects - the melting icebergs, more violent weather - already giving the world a taste of the dire consequences if it is not addressed - companies like CBD Energy have come into their own.


German solar power company SOLON AG has earlier this month taken a 19 pct stake in CBD Energy (subject to shareholder approval) for a capital injection of Euro 3 million, and CBD Energy has been appointed the exclusive Australasian distributor of SOLON's solar power products.

CBD is also involved in facilitating the supply of King Island's alternative energy sources that currently include wind, storage, solar and diesel power generated turbines - – in a joint venture with Hydro Tasmania, King Island's energy utility.


CBD's directors are dedicated, long serving and prestigious. In 2003 they took the almost unique step of deciding to take no wages until the company was substantially in profits. Although CBD did make profits in 2004, they to date have taken no emoluments (they have been issued with shares and are substantial shareholders in the company and also have been issued with options, now in the money - although at the time they made this decision and until recently CBD's future was far from secure).

A recent acquisition, a sub license to graphite storage technology for energy for $0.5 million was funded through a convertible loan facility entered into with Souls Private Equity Ltd. Souls Private Equity became a substantial shareholder in CBD earlier this month after agreeing to convert their note into equity and buying a further 7,500,000 shares.


CBD Energy is expected to seek funds for expansion in the near future, which could provide an opportunity.


CBD ENERGY LTD - A SNAPSHOT


CBD Energy listed in 2002 via a name change from CBD Online, which before that was Asia Pacific Infrastructure.

Its main focus at the time was on wholly owned Hong Kong based subsidiary Ventronics, a developer of energy saving equipment for lighting.


CBD Energy in September 2003 acquired Capacitor Technologies, a Melbourne based business that provides buildings with better electrical utilisation and efficiencies. Services provided are power factor correction, auditing, power systems integration and consultancy.

In December that year, CBD acquired Parmac Airconditioning and Mechanical Services Pty Ltd, also based in Melbourne, a mechanical services and air conditioning contractor that builds, services and maintains high quality systems for the commercial and industrial sector.

CBD also acquired distribution rights to the PowerBoss range of products.

Op Industries was acquired in May 2004, with CBD also completing a 50 for 1 share consolidation.

Both Ventronics and Op Industries were later sold, with the company's three divisions now being Capacitor Technologies, Parmac Airconditioning, both acquired in 2003 and graphite block energy storage technology, acquired as a sub license last December from Lloyds Energy Systems Ltd (LES) earlier this year.

CBD is entitled to use LES's graphite block energy storage technology in Australia, NZ, Indonesia, Pacific Island nations, India and China.

The storage of electrical energy in graphite has a number of other applications for energy management both for renewable energy systems and mainstream power generation installations, increasing energy management and efficiency.


The LES transaction was funded through a convertible loan facility of up to $1.5 million entered into between CBD and Souls Private Equity Ltd.

CBD in August 2006 incorporated a new wholly owned subsidiary, Remote Area Power Systems Pty Ltd which holds the Lloyds sub licence (100 pct) and 50 pct each of the graphite storage and wind energy systems, both in joint venture with Hydro Tasmania. The Hydro Tasmania j/v was established to primarily develop a renewable energy storage solution for King Island Tasmania.


Profit history

In 2003/04 CBD Energy made profits, with at the end of 2004 a 50 for 1 share consolidation being undertaken, taken CBD Energy from trading under 5c to trading at around 50c, before losses in the following two years (largely relating to problems with the Op Group, later divested) returning CBD to trading at around 5c.

CBD was profitable in the March quarter 2007 and is currently trading at around 18c.


SOLON AG takes a 19 pct stake in CBD, who becomes its exclusive distributor in Australia

The agreement with Solon AG, a German solar panel maker, involved SOLON investing Euro 3 million in CBD at 14c a share and owning about 19 pct of CBD, subject to shareholder approval.

CBD and Hydro Tasmania, Australia's largest renewable energy business, have also initiated a project to add 100 kW solar power with SOLON's Mover system on King Island. Other projects are under discussion.

SOLON has a range of domestic solar and solar thermal technology and CBD along with SOLON could significantly benefit from the latest Budget announcements on grants for the installation of solar energy in schools, community centers and for residences.

CBD is looking at several locations for solar farms throughout Australia.


About SOLON AG

SOLON AG, founded in 1997 was the first solar enterprise in Germany to be quoted on the stock exchange in 1998. SOLON had year on year sales growth of 72 pct in 2006 over 2005 to Euro 380 million while EBIT rose to Euro 25 million from Euro 14.5 million and EPS rose 62 pct to Euro 1.54 per share.

The total output of standard modules and SOLON Movers in 2006 amounted to 84 MGW vs 56 MGW the year before and is expected to increase to over 110 MGW this year.

SOLON forecast sales growth of over 50 pct for 2008.

SOLON also has a majority stake in a venture to set up a solar polysilicon production facility in France, and has major projects under way in Holland and Spain. Production, initially more than 3,000 tons is scheduled to commence at the end of 2008.



About King Island alternative power supply

King Island, a small island off the Australian coast near Tasmania, isn't connected to the mainland power grid and up until 2003 relied solely on diesel generators for its electricity.

In 1998 three 250kW Nordex wind turbines were installed by Hydro Tasmania, King Island's energy utility, supplementing diesel generation.

From that beginning, Hydro Tasmania began investigating ways to further increase the contribution of renewable energy to the island’s power requirements. The King Island Renewable Energy Expansion project involved the addition of two new 850kW Vestas turbines, a state-of-the-art 200kW Vanadium Redox Battery (supplied by Pinnacle VRB, now Cougar Energy Ltd) to store excess wind energy and release it back into the system in a controlled way, and an innovative control system which schedules the wind turbines, battery and diesel generation.

With assistance of grants from the Australian Greenhouse Office, the expanded King Island wind farm provides a total installed capacity of about 2.5 MW of wind generation, which is a significant contribution to the island’s current maximum demand of about 3 MW. This reduces annual diesel consumption on the island by more than a million litres, lowers greenhouse gas emissions by approximately 2800 tonnes and results in renewable energy contributing a about 50 percent of the island’s energy requirements.

While vanadium flow batteries have the advantage that their storage capacity can be expanded easily and cheaply by building larger tanks and adding more chemicals, one disadvantage is that it is difficult to prevent leaks, with electricity dribbling away.

The CBD sub license from Lloyds Energy Systems in j/v with Hydro Tasmania offers alternative storage in graphite rocks.

As well, SOLON's solar energy panels are expected to make additional electricity contributions while CBD's other technologies will be able to combine, monitor and ensure a smooth flow of energy from the various sources.


Major deals, 2004/06

*May 2007: CBD and Hydro Tasmania, Australia's largest renewable energy business, have initiated a project to add 100 kW solar power with Solon's Mover system on King Island.

The Solon technology, combined with CBD's graphite energy storage technology is seen as an alternative to the current use of diesel powered generators at King Island - which co-exist with hydro and wind power energy sources on the island.

*May 2006: CBD Energy's wholly owned subsidiary CapTech was awarded a $420,000 grant to subsidise power factor correction equipment in the Integral Energy network by the NSW Energy Savings Fund.

*April 2005: CBD Energy won a contract coordinated by Energy Services Department of Commerce NSW to install power factor correction equipment in an attempt to cut energy costs across many TAFE NSW Sydney Institute campuses.

The contract valued in the vicinity of $300,000 also requires a system to remotely monitor the electricity usage so as to set electricity targets and reduce greenhouse gas emissions.

The works include a turnkey project for the supply and installation of commissioning automatic Power Factor Improvement Equipment to several campuses covering 10 locations as well as installing 37 sub metering gadgets at 12 locations.

*December 2004: CBD Energy Ltd made the first delivery of their main energy efficiency product, the power factor correction system into Hong Kong.

An additional benefit is that China Light and Power, one of the two Hong Kong power generators was able to finalise their testing of the CapTech system.

*March 2004: CBD won a sub contract to Schiavello for significant refurbishment works at Coles Myer’s corporate headquarters in Melbourne for its Parmac subsidiary.

Also a contract valued at $1.5 million awarded by the Australian Property Network to supply engineering validation, delivery and commissioning of the air conditioning and mechanical services installations for two Melbourne projects, the Emmy Monash Nursing Home and Liverpool Street Apartments.

*February 2004: CBD won a contract in the face of stiff competition from internationally based competitors to supply low voltage (415 volt) power factor correction equipment for Capral Aluminium. The contract was to design, build and deliver an 11,000 volt solution via its Capacitor Technologies Pty Ltd (CapTech) subsidiary.


CBD Financials

Last Traded price 16.5 cents

Shares Issued 98.96 mln

Market Cap $16.3 mln

Year ended June 30, Values in Millions$

INCOME 2007 Int 2006 2005
Op Revenue 6.6 10.5 8.0
Op Profit (loss) 0.1 - (11.9)
Net profit (loss) 0.1 - (11.9)
(Loss) attributed to discont. Ops - - (10.3)
EPS (Cents) Continuing ops 0.16 0.05 (2.80)
Dividend (Cents)
PE Ratio (times)



BALANCE SHEET 2007 Int 2006 2005
Current Assets 4.0 3.2 18.0
Non Current Assets.. 2.7 2.0 1.9
Current Liabilities 2.9 2.8 16.1
Non Current Liabilities 1.8 1.2 2.7
Net Assets & Shareholders' Funds 2.0 1.2 1.1
Intangibles 1.8 1.5 1.5
Net Tangible Assets 0.2 (0.3) (0.4)
Gearing (Net of Cash) % 42.6 58.5 33.4
NTA per share (cents) 0.25 (0.5) (0.55)
Shares Issued (Millions) 86.05 70.55 70.55
Options Issued 11.5 4.0 4.0



Cash Flows: 2007 Int 2006 2005
Cash on hand (at open) (0.4) 2.6 2.7
Operating Activities 0.3 (0.5) (3.7)
Investing (0.7) (1.0) (1.0)
Financing Activates 1.7 (1.5) 4.6
Cash on hand at Year end 0.9 (0.4) 2.6