Carnegie’s Perth Project Remains in Focus in Q2, CETO 6 Progresses

During the quarter Carnegie Wave Energy Limited focused primarily on its Perth Wave Energy Project (the Perth Project) with the CETO unit assembly and test phase, delivery of the desalination plant to the Garden Island onshore site and the construction of the onshore power plant and grid connection. Carnegie also progressed its CETO 6 Project including being awarded a new grant of $11m from the Australian Renewable Energy Agency (ARENA) and announcing that the first CETO 6 Project would be located at Garden Island, Western Australia.

Perth Wave Energy Project

CETO Unit Assembly and Test Phase

During the quarter, Carnegie has continued to progress through the CETO unit assembly and test phase for the Perth Wave Energy Project. The assembly and testing to date has been focused on the buoyant actuators, pumps, energy relief system, tethers, connectors and hydraulic pods, as well as the installation and testing of instrumentation equipment across all components of the plant.

Testing is progressing well and includes: system pressure, flow and leakage; pump connector fit and articulation, buoyant actuator deployment system, ballasting and deballasting; process control and instrumentation communications, data acquisition and system integration; desalination plant operation; and CETO unit installation testing.

Carnegie decided to extend the period of pre-deployment testing through the winter months to allow detailed testing in advance of planned system commissioning in the optimum post-winter weather period. The extension of the assembly and pre-installation testing phase will allow CETO unit installation and any initial fault finding to occur outside of the larger winter swells which are currently being experienced off the west coast of Garden Island. These reduce significantly through September and October, thereby increasing the opportunity and lowering the risk associated with any required intervention after installation. This still allows the first project operational results to be available before the end of 2014.

Buoyant Actuators Unveiled by Federal Energy Minister

In April, the three CETO 5 Buoyant Actuators for the Perth Project were unveiled by the Hon Ian Macfarlane MP, Federal Energy Minister and Ivor Frischknecht, CEO of ARENA, the Federal Government’s Renewable Energy funding agency. The buoys were delivered to BAE Systems, the Project’s pre-deployment location, where the CETO units are now undergoing assembly and the pre-installation testing phase.

Desalination Pilot Plant Progress

During this quarter, the CETO desalination pilot plant was delivered to Garden Island and installed onsite, following completion of manufacturing and Factory Acceptance Testing by MAK Industrial Water Solutions. The desalination pilot plant has been connected to the seawater intake bore and storage tanks and the water delivery pipe has been installed, connecting the desalination plant to the Australian Government Department of Defence (Defence) water supply system. The ocean outfall pipeline has also now been installed.

Commissioning of the desalination plant off electricity supply has now commenced and the first freshwater (permeate) has been produced. Commissioning will complete shortly and will include meeting Department of Water potable water guidelines.

Perth Project plays key part in new ARENA funded CSIRO Project

Carnegie Wave Energy Limited will be part of a $1.3m national study undertaken by Australia’s premier science agency, the CSIRO, to develop a wave energy atlas and improve the assessment of wave energy extraction on the marine environment.

The Australian Government’s independent funding agency for emerging renewable technologies, the Australian Renewable Energy Agency (ARENA) awarded $1.3 million of funding support for the Commonwealth Scientific and Industrial Research Organisation (CSIRO) to undertake the innovative wave resource mapping and modelling project.

Carnegie’s Perth Wave Energy Project, off Garden Island in Western Australia, will be monitored using in-water oceanographic sensors, and the impacts of energy extraction assessed using computation modelling, allowing CSIRO to establish best practice guidelines for assessing the potential impact of wave energy plants.

CETO 6 Development

During this quarter, Carnegie announced further details of the CETO 6 Project development, including the award of $11m in new grant funding from the Australian Renewable Energy Agency for a CETO 6 Project on Garden Island, Western Australia as well as the award of a CETO 6 commercial site at WaveHub, a pre-consented, grid-connected wave energy demonstration facility in the UK. Carnegie also progressed the CETO 6 technology design and development including commencing a $1.8m project with University of Adelaide to research and develop control systems for the CETO technology.

CETO 6 Project Funding Awarded

In June, the Australian Federal Government’s Australian Renewable Energy Agency (ARENA) awarded Carnegie $11m in funding to support the first CETO 6 Project which will be located at Garden Island, Western Australia. This is matched by the $20m five year loan facility from the Clean Energy Finance Corporation previously announced in March this year.

The securing of this combined funding now allows Carnegie to confirm Garden Island as the location of its first CETO 6 project. All the power generated from the project will be bought by the Australian Department of Defence under Carnegie’s existing power supply agreement for use at HMAS Stirling, Australia’s largest naval base which is located on Garden Island.

The CETO 6 Project will be up to 3MW in capacity and, based on the recent design work, is expected to have a total cost of $31m including design and contingency but excluding corporate payroll and overheads. Design work on the Project has been underway since 2013.

The CETO 6 unit in the Project has a target power capacity of 1MW (1000kW), some four times the current CETO 5 generation being used in the Perth Project. The increased capacity, combined with superior efficiency, delivers significantly reduced power costs and, when deployed at large commercial scale, aims to be cost competitive in a range of markets globally.

Commenced Control Systems Project with University of Adelaide

In July, Carnegie announced that it will partner with the University of Adelaide on a $1.8m project part funded by an Australian Research Council (ARC) Linkage Grant to research and develop control strategies for wave energy converters.

The three year project will specifically focus on understanding and developing novel control strategies tailored for submerged point absorber wave technologies, such as Carnegie’s CETO. Control strategies for wave energy generators focus on maximising power output by matching the wave energy converter characteristics to the oscillating forces of the waves. It represents a significant opportunity to considerably reduce the cost of energy by increasing power output with minimal additional capital expense. Carnegie engineers will work with University of Adelaide to develop control systems to improve the performance of the CETO technology, which could then be demonstrated as part of Carnegie’s CETO 6 Project.

CETO Wave Energy European Activities

CETO 6 WaveHub Project

During the last quarter, Carnegie was awarded a wave energy berth at the WaveHub purpose built wave energy demonstration facility in Hayle, Cornwall, south west England. This provides a pre-consented, constructed and grid connected berth at the dedicated wave energy demonstration site funded by the UK Government with existing infrastructure (subsea cables, onshore power substation, grid connection etc.) and incentives (wave energy feed-in tariff of approximately $500/MWh).

CWE UK signed a Commitment Agreement for the final berth at WaveHub to support an up to 10MW grid connected CETO 6 commercial demonstration project. Carnegie was awarded the final berth at the facility following successful completion of due diligence by DNV GL on Carnegie and the CETO technology.

Corporate Activities

Completed $9.35m Capital Raise

In April Carnegie completed an oversubscribed $9.35m capital raise via a Share Purchase Plan (SPP) and Private Placement. The funds from the capital raise will be used for the design and development of the CETO 6 Project and working capital purposes.

Carnegie selected as semi-finalist in the Australian Technologies Competition

Carnegie is one of only two ASX-listed companies to be selected as a semi-finalist among 228 entries. Carnegie was chosen as a semi-finalist as Carnegie’s proprietary CETO technology has been identified as an industry leader with innovative characteristics and with the capability to become a game-changer in the energy sector.

Government Grant Payments

Australian Federal Government ARENA Grant Payments

During this quarter, Carnegie received grant payments totalling $4,304,073 from the Australian Federal Government for the completion of milestones for the Perth Project.

Carnegie received payments of:

– $1,076,713 for the Foundation System;

– $89,208 for the Onshore Plant;

– $2,003,831 for the Pipeline;

– $1,134,320 for the CETO units.

Western Australian State LEED Grant Payments

During this quarter, Carnegie received grant payments totalling $1,258,737 from the Western Australian State Government for the completion of milestones for the Perth Project. Carnegie received payments of:

– $676,871 for the Pipeline

– $581,866 for the CETO Units

AusIndustry Desalination Grant Payment

In June, Carnegie received a quarterly grant payment of $143,436 as part of a $1.27m AusIndustry grant that supports the design, construction and operation of a CETO wave powered desalination pilot plant which will desalinate seawater to produce freshwater.

This is the fifth quarterly payment received and takes the total funds received to date to $949,096 which represents 100% of the construction portion of the grant funding.

Total Grant Funding for Perth Project to Date

The Perth Project has received $16.3m in cash grant payments as of 30 June 2014 from the Australian and Western Australian State Government under the ARENA, LEED and AusIndustry Grants.

Press Release, July 31, 2014