WorleyParsons goes green and black

That unsightly mess is an example of the landscape modification involved in tar sands mining in Alberta, Canada. We’ll come back to that.

But grabbing the news recently was the announcement that Australian engineering firm WorleyParsons was looking at constructing 34 solar power plants by 2020 worth $34 billion, with a company objective solar providing 40% of the electricity market. [That should read "40% of the renewable electricity market."]

This is, I think, unequivocally good news.

WorleyParsons is a significant listed company with a market capitalisation of about $7.6 billion employing 32,200 people in 38 countries (they are expanding so fast the site is out of date!) Their after tax profit, according to the Australian Financial Review, was $344 million, an increase of 53%. So after all the heartache of solar technology disappearing overseas we have the potential of an Australian company with global reach picking up the technology.

We shouldn’t get too excited yet because all we have now is a feasibility study for a single $1 billion plant with 250 megawatt capacity, albeit the biggest in the world. If they go ahead, however, the plant could be built by 2011.

I understand the technology involves direct sunlight heating oil with the heat then transferring to a steam turbine. Provision is being made to store heat via a vat of molten salt so that power can be supplied for a couple of hours after sundown.

Robert Merkel is planning a post that will take a closer look at the technology.

An interesting feature is that a consortium of companies is backing the project, including BHP Billiton, Rio, Woodside, Fortescue Metals and Wesfarmers, which apart from owning Coles also owns a few coal mines. It seems that these companies are taking the long view and hedging their bets.

The announcement seems proof that the investment climate has changed in Australia as far as renewable energy production in Australia is concerned, which augurs well.

Today on Bush Telegraph there was an item about plans to invest in wave power somewhere between Albany in WA to the Gold Coast. Again they are looking for a major stake in the Australian market.

I have a few shares in Geodynamics, the leading Australian company developing geothermal technology. This sector of the industry too aspires to supplying a major share of the Australian power generation industry, so you would need to have the wisdom of Job, and at least a bit of luck to pick the winner. There may be room for all.

I must confess to some concern when the share price of Geodynamics dipped recently. This should not be happening when the company is so close to declaring “proof of concept”. The reason may be contained in a company announcement of 5 August:

During operation of the circulation loop on 2 August 2008, the shaft mechanical seal on the inlet side of the pump failed and the loop was shut down. The cause of this failure is under investigation by the pump supplier of the mechanical seal. It is expected that this investigation and any resultant remedial works will take 2 to 3 weeks.

The company has a track record of seemingly minor stuff-ups that become major, so some market skittishness is understandable.

It illustrates, however, how speculative an investment such as Geodynamics is. It’s a smallish company with about $350 million market capitalisation and no profits. They are spending money rather than making it. Then it has to compete with all the other renewable energy wannabes, with only one shot in the barrel.

So if you want to participate in the renewable energy field you might be better off thinking about a company like WorleyParsons, but when you are doing your ethical scan just remember this. WorleyParsons has been quite acquisitive lately. They have the usual greenwash statement on their site but last year they bought Canadian oil-sands player Colt Companies for $1.1 billion.

UPDATE by Rob M: my technological take here.