BB the people who say the carbon tax will have next to no effect are correct in a very limited sense. They are talking about the % of Australia's contribution to carbon emissions compared to the rest of the world. Countries like China and the US totally eclipse Australia's emissions. However, Australians per head of population are the largest emitters world wide. Those commentators are the equivalent of downrampers, carefully chosen 'facts' taken out of context and made to look like something else. The carbon tax is far from ineffective.
Morally we have an obligation to deal with the effects of our emissions, and also deal with the broader issue as a matter of commonsense. Industry actually asked for the carbon tax because they want certainty so they can plan and make business decisions. This includes leaders like BHP. The purpose of the carbon tax is to stimulate alternative technologies, and to assist the transition to a carbon free future which is inevitable. Why not get ahead of the curve?.
It makes sound economic sense to factor in a carbon price so that industries can and will take seriously alternative carbon reducing technologies. It leads to a competitive advantage and if Australia develops new technologies, and then exports them. There is massive potential upside for the relevant companies. Germany is a world leader in alternate technologies and they have had regulation around 'polluter pays' issues since the 1970s. Ironically, Germany has the green party to thank for that world leader status. (If you want further research on this, there is an ABARE research paper which is well over 20 years old that says the countries that implement such policies will be able to leapfrog over other countries and become net exporters. How prophetic, and how sad that paper has gathered dust because of misinformation and vested interests.)
All this applies IF AEB's patents are bulletproof and we can manage to hold onto the intellectual property and resist commercial pressure to sell out, and resist takeovers. In relation to the first, you would think McConachie would know a thing or two about patents, having worked for Orica for a considerable time as an engineer. Patents to any of his inventions made in his capacity as an employee would be owned by Orica. Perhaps he grew weary of this situation. He would understand the need for good patent lawyers, particularly in the US and for thorough documentation of the development of the technology and proving it.
I may be wrong, but I would guess that the upscaling of the process in the full scale demonstration at Nowra will be part of proving the technology for patent purposes. The functionality of the algae product as fuel is 'already proven' viz jet propulsion etc, as Stroud has publicly said (see the videos on the company website), so how difficult will it be to upscale the production of it? This seems like the last link in the chain and possibly the simplest. Any challenges will surely be a question of making engineering adjustments, not fundamental to the working of the technology.
IMO AEB is well structured to resist takeovers, in part due to the large holdings of Stroud and McConachie through their holding companies. Also very few shares on issue. This latter situation may change, but as an experienced financier Stroud seems to know a thing or two about capital raising and the pitfalls involved.
Judging by this approach, I am guessing they would also be conservative in managing the intellectual property once the patents are granted. After all, IP will be the company's greatest asset. IMO a sound policy would be hold onto the patents and only issue licenses for use of the patents, not sell the patents outright for a quick buck. Again this depends on solid commercial base. These guys did not come down in the last shower, look at how long they have been associated with the industry. Over 10 years, plus their individual experience before that. DYOR.
AEB Price at posting:
41.0¢ Sentiment: LT Buy Disclosure: Held
