AGL Alliance

In 2008, Torrens Energy entered into a Geothermal Alliance Agreement (GAA) with AGL Energy Limited (AGL), to jointly commercialise geothermal sites within the Australian National Energy Market. AGL is Australia's largest integrated renewable energy company as well as the largest private owner, operator and developer of renewable generation.

Under the agreement, Torrens Energy, as the upstream explorer, will continue to initiate geothermal project generation through the systematic application of its 3D-TFM exploration methodology across its landholdings. Once Torrens Energy has advanced a project through to deep drilling status, AGL will have the first right to earn-in 50% by sole funding the completion of a confirmation well to target depth (approximately 4,000 – 5,000m). This is estimated to cost $15m at each site.

Regular Geothermal Alliance Committee meetings have been held and AGL has reiterated its commitment to the program. AGL have commenced ground access investigations and equipment selection and engaged an external principal advisor for advice in relation to the development of Parachilna and Port Augusta.

Torrens Energy has now compiled the geotechnical information required by the GAA and served AGL with a Confirmation Well Notice for proposed deep well Elendil 1. In January 2010 a Supplement to this Notice was presented to AGL after excellent heat flow results were returned from Melkor 1. AGL have now commenced their detailed assessment of the data.

Above: Drilling at Port Pirie north of Adelaide SA view enlargement

Grant Funding - Renewable Energy Development Initiative

In 2007 Torrens Energy successfully secured $3m matched funding from the Australian Government Renewable Energy Development Initiative (REDI). Since listing Torrens Energy has spent an estimated $6.6m on geothermal activities, of which $2.7m has been received from the REDI grant for work carried out in relation to the 3D Temperature Field Modeling.

The resulting net expenditure of $3.9m is well ahead of the budgeted expenditures set out in the initial prospectus, demonstrating that matched grant funding, when applied in-step with the Company's progression, can be a highly effective accelerant. Approximately $0.6m REDI ($1.2m matched) will be applied to the planned 2010 programs.

Grant Funding - Geothermal Drilling Program Round 2

In December 2009 Torrens Energy was successful in being awarded a $7m grant under Round 2 of the Geothermal Drilling Program of the Australian Government Department of Resources Energy and Tourism.

The Geothermal Drilling Program assists companies seeking to develop geothermal energy by supporting the cost of proof-of-concept projects. Proof-of-concept occurs by deep drilling and successfully testing an identified geothermal resource. 

The $7m matched funding will be directed toward achieving proof-of-concept at the outstanding Parachilna Geothermal Play in South Australia.

Mandatory Renewable Energy Target

Above: Heat Flow Drilling Operation at Port Augusta adjacent to the Davenport Substation view enlargement

In August 2009 the Federal Government passed Mandatory Renewable Energy Target (MRET) legislation, which aims at achieving a 20 per cent input from renewable energy in Australia's electricity mix by 2020.

The MRET Scheme is designed to encourage investment in renewable energy technologies including geothermal. This is done by creating a renewable energy certificate (REC) for each MWh of electricity that is generated from a renewable source, thereby allowing cost competitiveness with traditional energy generators. With the expanded legislative framework in place to support the development of renewable energy, driven by the REC trading scheme and Government grant funding and subsidies, renewed capital market participation will undoubtedly be stimulated across the renewable sector including geothermal.

Torrens Energy remains well positioned to benefit.