QUEENSLAND-based Linc Energy (LNC) has partnered with a Hong Kong-based suitor and secured a new pact to commercialise underground coal gasification (UCG) to gas to liquids (GTL) in mainland China.
ASX-listed Linc Energy’s joint venture with the Golden Concord-owned GCL Projects will oversee site selection and construction of four UCG gasifiers in China with potential to expand to six. Works will begin within six months after binding legal agreements are finalised.
LNC will have a 33 per cent stake in the JV while GCL will own 67 per cent.
“This relationship significantly revalues Linc Energy's key UCG to GTL technology base,” says CEO Peter Bond (pictured) in an ASX statement.
“This most recent deal with GCL in China is the first stepping-stone of many commercial opportunities. I believe you will see Linc Energy produce over the months ahead.”
Bond reveals China has always been a key market for LNC’s UCG and GTL operations.
“China’s insatiable appetite for liquid fuels and gas presents Linc Energy and GCL with a unique opportunity to capitalise on this world changing market,” he says.
“Linc Energy chose GCL as its partner in China for … its strong financial position, its proven ability to execute large projects in a fast and cost effective manner and its history of protecting its own world leading intellectual property.”
Solar energy developer GCL employs 17,000 people and is listed on the Hong Kong Stock Exchange. It has interests in power generation and coal production with an equivalent $4.1 billion market capitalisation.
LNC employs 464 staff and recorded $3.1 billion in revenue for the 2011 financial year, representing a 157.9 per cent jump on the previous fiscal period. Net profit after tax was $296.4 million – a turnaround from its FY10 loss of $16.2 million.
The agreement allows both companies to cooperate on LNC’s UCG to GTL process in Chinchilla, Queensland. GCL will take a $120 million private placement at $4.50 per unit in LNC in return for 5 per cent of issued share capital, while providing an equivalent $14.4 million in working capital to the JV for the first three years.
LNC will also grant an exclusive licence to the JV for using UCG and GTL intellectual property in China.
The deal is pending Foreign Investment Review Board approval in Australia and completion of legal documentation.
LNC shares weakened slightly today to $1.24 per unit.