Envirogen

Envirogen owns and operates four waste coal mine methane power stations located at Oaky Creek in Queensland and Glennies Creek, Tahmoor, and Teralba in NSW. Envirogen currently abates a significant amount of fugitive coal mine emissions which is the equivalent of removing approximately 315,000 cars from Australian roads.

Performance highlights 2011

In financial year 2011, Envirogen's revenue increased 7.4 percent to $21.8 million and EBITDA increased by 38.0 percent to a total of $9.8 million primarily driven by lower pipeline expenses and improved operating cost efficiencies.

Total generation was marginally above the previous corresponding period and broadly in line with expectations, driven by strong gas quality at Glennies Creek power station due to a deferred longwall changeover (a mine maintenance operation, where gas volume is typically constrained). However, Tahmoor and Teralba power stations generated less than expected due to gas quality issues caused by disruptions in mine operation. The Oaky Creek station performed in line with expectations for the financial year with generation up 4.1 percent from the prior year despite wet weather and the impact of the Queensland floods which hampered mining.

Envirogen continues to focus on initiatives to increase gas flow to its generation facilities and to improve operating efficiency. After negotiations with the plant operator, key spare engine parts, including alternators, are now stored on-site to minimise downtime caused by unscheduled maintenance. Better planning of pipeline connections will allow Envirogen to quarantine certain older gas wells for use during the longwall changeover, a process which otherwise constrains gas availability. With a further year of experience and a continued strong focus on operational issues, the refreshed management team has delivered a solid performance for FY2011.

Performance Outlook

Envirogen is focused on increasing gas flow and creating a closer alignment between its cost base and operational performance. The company is strategically positioning its resources to maximise generation at the most gas abundant sites with the highest contracted price. Envirogen is also examining various business development opportunities to provide stand alone generation to network constrained mining regions in Central Queensland.

Political and regulatory uncertainty remains a key risk to Envirogen's performance over the long term. On 10 July 2011 the Prime Minister announced details of the Federal Carbon Tax, which is proposed to come into effect on 1 July 2012 with a fixed carbon price for three years before transitioning into a market based emission trading scheme in 2015. Whilst the full impact of the carbon tax is still unclear, efforts are underway to secure an accelerated start date for Envirogen's entry into the Renewable Energy Target (RET) Scheme which will ensure future certainty in respect of the Company's entitlement to 'green' income. This follows the enactment of the expanded RET Scheme legislation during the previous year which recognises waste coal mine gas as an eligible energy source. Concurrently, Envirogen will focus its lobbying efforts on the recognition of the beneficial use of waste coal mine gas under the Carbon Tax Scheme consistent with the State based Greenhouse Gas Abatement Scheme under which Envirogen currently operates.

ENVIROGEN
Financial and operational performance

* CAGR: Compound Annual Growth Rate.
(1 MWh: Megawatt hours.