re: intersuisse report todayus dept of energy con Don't hold am...

re: intersuisse report todayus dept of energy con Don't hold am watching Intersuisse report today for those interested


Eden Energy (EDE)
Indian agreement to trial Hythane® hydrogen technology
Speculative buy for L/T upside
$0.41

Event

Alternative energy company, Eden Energy (EDE) has achieved a 10-year engine conversion and marketing agreement with a leading bus manufacturer in India to have EDE's more environmentally friendly hydrogen-enriched natural gas fuel blend, Hythane®, tested for introduction into the Indian company's natural gas powered buses. The Indian agreement is between EDE and the Chenai-based Ashok Leyland provides a major opportunity for Hythane®, the patented hydrogen and natural gas fuel blend, to be introduced across tens of thousands of public transport vehicles in India and it follows the recent awarding of a grant to another wholly owned subsidiary of EDE by the US Department of Energy for Hythane® to be used in the USA's first long-term test of engines fuelled by ultra-clean hydrogen-blend fuel. Ashok Leyland is the principal Indian business of the large, London-based trans-national Hinduja Group (which employs over 30,000 people with offices in many of the key cities of the world and in all the major cities of India).

Hythane® is a low cost transition technology with principal application in the energy sector as it has been shown to be a low cost and effective agent in the reduction of greenhouse gas emissions, especially nitrous oxides and CO. Hythane® involves a mixture of natural gas and hydrogen (in which hydrogen is a relatively small component at 5% to 7% by energy equivalent). The intellectual property of Hythane® includes production and dispensing equipment that can readily use existing natural gas infrastructure. Hythane® has been extensively tested and proven over 15 years. Because Hythane® is not a pure hydrogen product, it does not require high purity hydrogen but is able to use hydrogen from waste streams (such as from chlor-alkali plants which generally vent it as waste).

The first Ashok Leyland engines have arrived at the Colorado, USA test facilities of EDE's wholly owned subsidiary, Brehon Energy PLC, (Brehon), where they will be recalibrated for testing and demonstration trials. The engines will then be installed for testing and demonstration purposes throughout 2007 in the Indian cities of Delhi, Mumbai, Ahmedabad and Kanpur where natural gas is available. EDE hopes to widen the base test program as the Indian government recently announced an immediate five-year program to expand the natural gas pipeline network to cover up to 60% of all vehicles in India and to increase the available annual natural gas availability from 5Mt to 25Mt. The numbers of natural gas powered public busses in India is expected to match this growth and EDE is targeting to have a high percentage of these operating on Hythane as natural gas in India currently sells for less than half the cost of diesel. The Indian Government has provided significant financial assistance for the testing of various hydrogen fuels, including Hythane®.

Ashok Leyland currently manufactures over 80,000 vehicles per year, including 11,000 to 14,000 buses per year and provides the majority of all metropolitan state transport buses in India carrying over 60 million passengers per day. Ashok Leyland is also a major manufacturer of trucks and defence equipment so that the commercialisation of its Hythane® technology has the potential to expand into truck, generator, locomotive, car, taxi fleet and three-wheeled auto rickshaw markets.

Brehon has a world class technical team including the inventors of the Hythane® technology and several world leading scientists with over 30 years of experience in hydrogen research, much of which was gained from extensive periods with NASA and a long development experience with the Hythane® technology operating on truck engines that have undergone extensive testing over 15 years and more recently a pilot bus engine conversion in California and an engine conversion test in China. Through Brehon, EDE holds numerous patents and trademarks already and has further patents under development as Hythane® has a number of other applications related to cryogenics (the storage, piping and handling of hydrogen) that could ultimately lead to EDE generating multiple earnings streams.

EDE has a market capitalisation of about $70M, having a total of 122.3M shares and 87.8M options (most of which are exercisable at 20 cents by 30/9/09). EDE has other alternative energy interests including coal bed methane in Wales and natural gas and geothermal exploration in South Australia. In addition to the ongoing advanced testing programs in the USA and India described above, EDE is progressing with marketing arrangements for Hythane® in China and Europe.

Impact

The advances made by EDE with its Hythane® technology are a reflection of the growing interest in and requirement for energy solutions that offer low emissions on an economical basis in a relatively short time frame. While there has been much interest in hydrogen as a potentially ultra clean fuel source, the issues of the handling and storage of what is potentially a very explosive material along with the potential need to undertake major engineering to use it in new applications have severely hampered its development. We believe Hythane® potentially offers an elegant, low cost solution, which may only be an interim one, while the above issues with hydrogen are ultimately resolved or other suitable ultra clean energy solutions are developed.

We see the commercialisation of Hythane® as a medium to longer term investment opportunity, with some potentially nearer term outcomes as the process evolves. This timeframe is likely to result in the share price of EDE being volatile and having some downside in the near term as the Indian test work gets underway following the market reaction to the winning of the contract with Ashok Leyland. We see EDE as having a significant "first mover" advantage with the growing acceptance of its Hythane® technology as it is apparently able to be adopted on a relatively low cost basis without the need for extensive re-engineering of engines or infrastructure and it makes a relatively low cost and clean energy source that is already in wide use in natural gas a potentially more valuable product.

We recommend EDE as a speculative buy for investors with the appropriate risk profile seeking exposure to a potentially attractive alternative energy situation with potentially significant longer term upside.