CSG fears not showing up on ASX
WHILE public debate rages over the future of coal seam gas extraction, investor confidence shows no sign of recoiling from the controversial industry.
Last week ERM Power acquired a six per cent interest in gas company Metgasco Limited, at an estimated price of close to $7 million. This which follows a $21 million haul from its share purchase plan offered to existing shareholders in June and July.
Metgasco chief executive Peter Henderson said the capital wasn't to fund the current shift into its production phase on the Northern Rivers, though he was buoyed by the confidence the market is showing.
"ERM are about $200 million market capital at the moment so yes, it is a reasonable amount of money and it shows (ERM) has obviously got faith in the business," he said yesterday.
"It's a good vote of confidence to have the money coming in.
"We went to the market in June and July and got $6 million, and we've (since) got another $15 million." (These raisings were through a share purchase plan.)
"We're very pleased because it was very tough times when we raised the money (and) the market was very uncertain.
ERM managing director and chief executive, Philip St Baker, said it was a modest investment that provided "exposure to anticipated rising gas prices on the east coast of Australia" and that the company was "comfortable with a shareholding at this level".
"ERM Power has a diversified gas investment strategy on the east and west coasts of Australia which includes direct investment in oil and gas exploration and production, direct gas procurement and direct (shareholding) investments in gas exploration and production companies," Mr St Baker said.
"The diversified approach to gas investment provides greater options to the company for its own generation development activities whilst also providing business opportunities in their own right.
"This strategy is consistent with the broader ERM Power strategy of vertical integration."
Meanwhile, Mr Henderson believes the future is bright for the new generation gas extraction industry despite public fears and controversy.
"You only have to look at the fact that Arrow Energy in Queensland has taken over Bow Energy - it is investing more so it thinks it is all okay, and Santos has just put more than $700 million into buying ESG NSW so it is not unduly concerned either," Mr Henderson said.
"When you look at what Arrow's paid for Bow, which is about 15c per gigajoule, applied to us, our shares should be about $1.50 each rather than the 38c it was on Friday - so there's plenty of opportunity on the upside of our shares.
"On the other issue, there are a small number in the community who just don't like fossil fuels, and no amount of persuasion it seems will turn them around.
"I think there are a lot of other people out there who would be quite happy with the industry, but they've heard so much rubbish being thrown around they are worried and are looking to us to communicate and show we have a safe business.
"So I'm confident over the next few months as we communicate, more and more people will understand a lot of things being said simply aren't true.
"We don't intend or want to be on the front page of the papers for evermore - we think this is a silly situation and we hope we can turn it around soon."
Metgasco shares closed 6 cents higher at 43.5.