Investor News

Victoria Coldry Project - Fact Sheet & FAQ

The Project

Victoria Coldry Pty Ltd (VCPL) will design, fund, build, and operate a Coldry plant with an initial production capacity of 2 million metric tonnes per year, operating on the proposed Loy Yang site in the Latrobe Valley. The project is targeted to expand progressively over the first decade of operations to 20 million tonnes per year, subject to rail and port infrastructure development. The target market is for the export of the finished product—Coldry BCE (Black Coal Equivalent) pellets - to the Asian market, predominantly Vietnam.

The Company

The project partners, Thang Long Joint Investment Stock Company (TinCom) of Vietnam and ASX-listed technology development company Environmental Clean Technologies (ECT) own VCPL. At inception, the shareholding is 50/50, and this will continue through the project development phase until commercial close (i.e., when the construction commitments and full funding arrangements are finalised before breaking ground). At this time, ECT's shareholding will revert to 10%, and TinCom's will grow to 90%. ECT's 10% holding will remain static for the project's life.

ECT will contribute the Coldry technology, and all equity and debt financing for the project will be the responsibility of TinCom. For phase 1, the capital requirements are expected to be of the order of $US400 million; this figure will be refined and confirmed during the detailed design process to be performed by Arup. TinCom will cover this through equity of approximately $100 million and the balance through debt sourcing.

The License

The License to use the Coldry technology is granted to VCPL by ECT. This was signed into force on 25th June, 2010.

For ECT, the licensing royalties are $A5 per tonne of Coldry product, escalating by CPI for the life of the License (50 years of plant operation).

The License provides for export exclusivity from Victoria for the full License period and a Victorian domestic sales exclusivity for five years, able to be extended if certain performance conditions are met. The License also grants VCPL the right to build up to 100 million tonnes of capacity in Australia and Indonesia and the exclusive right to build Coldry plants in Vietnam.

Benefits for ECT

Following commissioning, ECT will receive licensing royalties of $A10 million per year, escalating by CPI. The royalties will rise in line with sales as the plant expands, reaching an anticipated $A100 million per year at full capacity (increased by CPI).

ECT will also have a 10% equity stake in VCPL on its balance sheet. Based on current estimates, this would equate to approximately a $40 million asset following the completion of phase 1 construction.

Benefits for Victoria

For coal of similar quality to the Coldry BCE pellets, current Newcastle benchmark pricing is around $US100 per tonne, delivered to port of loading. At this pricing level, the export value of phase 1 operations is about $200 million per year, growing to 10 times that level as the plant is expanded.

Frequently Asked Questions

Q: Will the Victoria Coldry project export brown coal?

A: No. The project will produce and export dewatered lignite, fundamentally transformed on a physical and chemical basis to produce a lower CO2 emitting product. It is no longer brown coal but a dry, dense, hard black coal equivalent (BCE).

The Coldry process achieves this transformation by initiating an exothermic chemical reaction resulting in phenolic polymerisation, leading to the collapse of the porous structure and the expulsion of chemically trapped moisture.

For every 2 tonnes of 60% moisture, 8Gj/t brown coal that goes into the Coldry plant, 1 tonne of 12% moisture, 24Gj/t Coldry is produced along with 1,000 litres of 'Class A' water.

Q: What is the value of exports from the Victoria Coldry project?

A: Phase one of the project will produce 2 million metric tonnes of coldry annually, starting in late 2013 or early 2014. The current Newcastle price of $98 a tonne translates to almost $200 million a year worth of exports.

  • Phase 2 will increase production to 5 million metric tonnes annually, worth around $490 million.
  • Phase 3 will increase production to 10 million tonnes, worth about $890 million at today's prices.
  • Phase 4 is targeted to produce 20 million metric tonnes a year, or roughly $2 billion worth of exports.

Q: If the government is serious about emissions reduction, how can it allow the project to proceed?

A: If the project does not proceed, TinCom and Vietnam will source high moisture coals from elsewhere. That will mean higher CO2 emissions compared to using Coldry BCE pellets. If the Victoria Coldry project does not proceed, emissions will be greater. Therefore, by investing in the Coldry technology, TinCom is mitigating CO2 by around 30% compared to the alternative.

Australians wouldn't expect or demand other Nations to keep their people in poverty or at a lower standard of living than we enjoy.

Q: Doesn't the project create a massively polluting export industry?

A: No, thermal coal export is not a new industry.

Thermal coal exports have been around for decades. Victorian lignite, when dewatered, has lower ash, sulphur, SOx and NOx than many black coals currently used in Australia and exported worldwide.

The project creates a new industry around a technology designed to reduce CO2 emissions now in markets that would otherwise burn whatever high moisture coal they can get.

The Energy Information Administration (EIA) forecasts a 42% increase in coal-fired power generation by 2030. ECT, via the licensing of the Coldry technology, will help mitigate these emissions.

ECT is in the business of developing technologies capable of having a beneficial impact on emissions. Coldry is the first such technology. We plan to invest in the development and commercialisation of further advancements.

Q: Does the project mean a step backwards for renewables?

A: Coldry is not a silver bullet. A 30% reduction achieved by adopting a new technology will make serious inroads to mitigating CO2 emissions in emerging nations, now and in the future. It is a front-end solution for Nations that need base load power but can't afford wind and solar (or wave).

Even when renewables become affordable, baseload power will need to be duplicated in the form of coal, gas, geothermal or nuclear to cover times when the wind doesn't blow or the sun doesn't shine.

Coal is more CO2 intensive; therefore, Coldry mitigates this intensity and provides a transitional solution between maximum and near-zero emissions. It's an incremental improvement, much as the invention of the three-point car seat belt by Nihls Bohlin was an incremental improvement that greatly improved passenger injury and mortality rates for the car industry while still recognising the socio-economic benefits of affordable personal transport.

From an affordability point of view, it's very easy for Australians, sitting in electrified comfort, to demand renewable energy options are taken up by emerging nations in place of base-load coal power. As a Nation we could find a way to afford the extra $1,000 a year per household on our electricity bill. But take a look at the data below and judge for yourself if the Vietnamese people can afford to do the same, considering they already emit 93% less CO2 per capita than we do.


Q: How do CO2 emissions from Coldry compare to Natural Gas?

A: Natural Gas is less CO2 intensive than low-moisture coal, including black coal and Coldry. Indications vary, but Natural Gas can be as much as 70% less CO2 intensive than the wettest brown coal and up to 50% less than black coal and Coldry.

Because of the higher cost of Natural Gas, it is often used as peaking power, requiring a higher price per MW to cover capital investment.

Where a power generator has access to Natural Gas, can afford to use it and is certain it will last the power station's life, it is unlikely Coldry will be an option.

Where Natural Gas is limited or not an option, then Coldry becomes part of the decision mix.

Q: How do CO2 emissions from Coldry compare to solar (PV and thermal) and wind?

A: Coldry, in the case of converted Victorian lignite, will emit around the same CO2 as black coal - 0.8 to 0.9t per MWh - depending on the configuration of the power station it is fed into. If used in state-of-the-art Ultra Supercritical (USC) or Integrated Gasification Combined Cycle (IGCC) type power stations, emissions may be less than 0.8 tonnes per MWh.

Renewables present a techno-economic challenge that will be solved in time. Their affordability, reliability and efficiency will improve, and consumption efficiency advances will lower the per capita electricity demand, placing less pressure on supply.

In the meantime, emerging nations will continue to use coal. Increasing demand for black coal means these nations are looking to higher-moisture, lower-energy coals because of availability. If that's all they can get, and renewables aren't yet an affordable option or suitable for base load replacement, then Coldry provides the ideal transitional solution to help mitigate the inevitable emissions.

Q: Does ECT believe Coldry is of environmental benefit?

A: Yes. The Energy Information Administration (EIA) forecasts a growth in electricity consumption of 54% through 2030.

Coal power generation is expected to increase by 42% in the same time frame, while renewables are expected to increase by almost double that rate - 80%.

Right now, renewables account for around 10% of electricity generation. Even with the expected 80% increase by 2030, it will mean only a 3% increase in the energy mix globally.

Instead of talking and hoping, ECT is tackling this head-on by providing a transitional, incremental solution to the fact that the world will increasingly turn to high-moisture coals for decades.

Energy security is a fundamental component of National Security and geo-political stability.

Emerging nations will source high-moisture coal and use it to generate electricity to get and keep the lights on and power their industry to bring their people out of poverty.

By using Coldry technology to dewater high-moisture coals, emissions will be mitigated.

In developed nations with wet brown coal, Coldry can dewater their resource, again reducing emissions by between 5% and 30%, further mitigating the impact on the way to an energy future dominated by renewables.

Q: Does ECT accept that greenhouse gases are causing global warming?

A: ECT takes its guidance from the IPCC's assessment of the science and its conclusion that manmade emissions are the most likely cause behind the warming experienced over the past century.