ANNUAL REPORT
2012 – 2013
POWER FROM
THE EARTH
ABOUT
GEODYNAMICS
OUR VISION
We are working to make Geodynamics a
world-class geothermal energy company
that supplies competitive zero-carbon
energy and base-load power.
(Left) Savo Island, Solomon Islands
(Right) Drilling Habanero 4
CONTEN T S
Our Vision
Inside cover
About Geodynamics
2013 Highlights
Review by the Chairman and
Managing Director
Operations Review
Exploration Projects
Our Community Performance
Our Health and Safety Performance
Our Environmental Performance
Financial Report
Directors’ Report
Auditor Independence Declaration
Corporate Governance Statement
Statement of Comprehensive Income
Statement of Financial Position
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
Members of Geodynamics Limited
Off-take Agreements
Shareholder Information
Useful Terms
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Corporate Directory
Inside back cover
2013 Annual Report GEODYNAMICS LIMITED 1
ABOUT
GEODYNAMICS
Geodynamics Limited is a public company
limited by shares, incorporated and domiciled
in Australia. It listed on the Australian Securities
Exchange in September 2002.
Geodynamics is also actively pursuing
conventional volcanic-hosted geothermal
projects that have the potential to provide
shorter term returns utilising existing
technology in growth markets, while
maintaining a long term focus on the EGS
project development at Habanero.
We are Australia’s most advanced geothermal
exploration and development company and a world
leader in the emerging field of Enhanced Geothermal
Systems (EGS), achieving a major milestone this year with
the successful demonstration of the 1 MWe Habanero
Pilot Plant near Innamincka, South Australia – one of only
three operating EGS plants globally.
In November 2012, the Company entered into
a two stage earn-in agreement with Kentor
Energy to acquire up to 70% interest in the
Savo Island Geothermal Power Project in
the Solomon Islands. This joint venture project presents
a compelling new opportunity that with successful
development could replace expensive diesel generated
power to the city of Honiara and Gold Ridge Mine. Early
exploration drilling is targeted for the dry season 2014.
2 GEODYNAMICS LIMITED 2013 Annual Report
2013 Annual Report GEODYNAMICS LIMITED 3
Geodynamics has further
exploration interests in the
Northern Territory, Queensland
and New South Wales.
2013 HIGHLIGHTS
Excellent safety record
during a period of
intense field activity
including the drilling,
testing and stimulation
program for Habanero 4
and throughout the
commissioning and
operation of the 1 MWe
Habanero Pilot Plant.
Generation of Australia’s first EGS derived
power, through the commissioning and
operation of the 1 MWe Habanero Pilot
Plant, achieving higher than predicted
modelled plant performance results.
The successful pilot plant demonstration
followed the safe drilling and completion
of Geodynamics’ sixth EGS geothermal
well, Habanero 4, one of the most
technically challenging wells to be drilled
in Australia.
Habanero 4 and Habanero 1 operated
in closed-loop mode to power the 1 MWe
Habanero Pilot Plant, with Habanero 4
as the producer and
Habanero 1 as the injector.
Closed loop flow rates
of up to 19 kilograms
per second at 215°C
achieved, with flows and
temperatures continuing
to trend upwards.
Successful productivity
and injectivity testing
of the Habanero 4 well.
Geodynamics recorded
one of the highest
reservoir productivity
results globally for
an EGS well with a
flow rate of 39 kilograms
per second.
Acquisition of Savo
Island Geothermal
Power Project in the
Solomon Islands through
a two stage earn-in
agreement with Kentor
Energy to acquire up to
70% interest in the Project.
Completed
initial
exploration
activities
at Savo Island including
maiden inferred resource
assessment, indicating
potential capacity to
generate in excess of
30 MWe.
Completed stage one of the earn-in joint venture with
Kentor Energy to take 25% interest and operatorship of
the Savo Island Geothermal Power Project.
Strengthened balance
sheet through sale of
Rig 200 for a total cash
consideration of
$21 million (GDY interest:
70%) and securing R&D
tax incentive refund of
$22.2 million leaving the
company securely funded
with $41.4 million in cash
at 30 June 2013.
4 GEODYNAMICS LIMITED 2013 Annual Report
2013 Annual Report GEODYNAMICS LIMITED 5
REVIEW BY ThE ChAIRMAN
AND MANAGING DIRECTOR
Keith Spence, Chairman (left)
and Geoff Ward, Managing Director
and CEO (right)
2013 MILeSToneS
2013 has been an important year for Geodynamics with two
major achievements that mark significant milestones in the
Company’s development.
The first milestone was the successful completion of the
Habanero 4 well and commissioning of the 1 MWe Habanero
Pilot Plant in April 2013. Realising this long held goal is a
significant achievement and an important demonstration of EGS
technology. As one of only three EGS plants operating globally
and the first new EGS plant to be commissioned for a significant
period of time, there has been a great deal of interest in our
results around the world, particularly in the unique reservoir
behaviour of the Innamincka granite resource. Having pushed
the boundaries of conventional drilling and engineering, we are
pleased to have achieved this difficult milestone with an excellent
safety and environmental record.
Further details of the technical milestones achieved at Habanero
are set out in the operations review following this section. Our
sincere thanks to all our shareholders who have supported the
Company to achieve this result.
The second milestone was the acquisition of our first
international project with the agreement to acquire up to
70% of the Savo Island Geothermal Power Project in the
Solomon Islands announced in November 2012. Savo Island is a
high quality conventional geothermal project well positioned to
supply the growing demand for power in the city of Honiara. The
initial feasibility study and inferred resource statement released
in April 2013 showed the potential to develop a 10 - 20 MW
project based on a high quality shallow geothermal resource
delivering power to customers by the end of 2017. Our progress
at Savo Island since the acquisition has been encouraging and
we believe it offers Geodynamics a clear path to making the
transition to become a geothermal producer earning positive
returns for shareholders.
STrATeGIc cHAnGe
The acquisition of the Savo Island Geothermal Power Project
marks a significant broadening of Geodynamics’ project portfolio
and is an important strategic development for our Company.
Over the last two years the Board and management have closely
tracked trends in the Australian energy markets that make the
development of new large scale renewable power projects in
Australia very challenging. The reduction in electricity demand
caused by structural changes in the Australian economy,
increased focus on energy efficiency, changed customer
behaviour in response to significant price increases and the rapid
6 GEODYNAMICS LIMITED 2013 Annual Report
2013 has been an important year for Geodynamics with two major
achievements that mark significant milestones in the Company’s
development, through the commissioning of the 1 MWe Habanero
Pilot Plant and the acquisition of our first international project.
and substantial deployment of distributed generation via solar
PV systems has fundamentally changed the Australian electricity
market. Data and analysis released by the Australian Energy
Market Operator (AEMO) in 2013 indicated a fourth consecutive
year in which aggregate electricity demand has decreased in
Australia after over 50 years of annual consecutive increases.
This major disruption is challenging the business models of
incumbent utilities and raises questions regarding how Australia’s
energy system will evolve. AGL Energy, Australia’s largest utility,
estimates that Australia now has 9,000 MW of excess generation
capacity which would continue to depress wholesale electricity pool
prices in the National Electricity Market (NEM) and will have to be
removed from the system before new projects could be justified.
The major electricity retailers share a consistent view that Australia
will not require additional new baseload generation capacity until
at least after 2022. This is in stark contrast to estimates by AEMO
that Australia would require between 3,000 – 5,000 MW of new
generation capacity by 2017 made only 4 years ago. While we are
confident that we have a world class EGS resource in the Cooper
Basin, this surplus baseload capacity and depressed wholesale
electricity price outlook means that the window of opportunity for
the introduction into the NEM of EGS generated baseload power
moves further into the future.
In response to these material changes the Board has adopted the
following key strategic positions:
Strategic Theme 1 - For our flagship Cooper Basin development,
we will complete the planned 1 MWe Habanero Pilot Plant trial to
demonstrate the capability of the Innamincka Granite resource
and then focus on securing local customers (who are not
connected to the NEM and who burn gas, not coal, to generate
electricity) capable of supporting initial small scale commercial
development. This strategy maximises the future value of the
assets by securing the intellectual property and know-how
developed over the past ten years while maintaining the option
for our Innamincka granite resources to be a major supplier to
the NEM should market conditions change in the future.
Strategic Theme 2 - Diversify our portfolio through the
acquisition of high quality, small to medium sized geothermal
projects that can be quickly and profitably developed using the
strong geothermal skills and capabilities developed through our
work at Habanero. This will provide a clear path to generating
positive returns to shareholders while still maintaining the
knowledge and skills necessary to develop our Cooper Basin
project in the future.
Strategic Theme 3 - Make the Company as financially strong
and self-sufficient as possible to ensure that we are not reliant
on repeated capital raisings to meet our commitments. With the
successful completion of the sale of Rig 200, the receipt of
$22.2 million through the Research & Development Tax Rebate
and through an ongoing focus on cost reduction, Geodynamics
is well positioned financially with $41.4 million of cash reserves
as at 30 June 2013 and with the major spending commitments
related to deep drilling in the Cooper Basin completed.
In growing our portfolio, we have sought opportunities to use
the skills and capabilities developed through our program at
Habanero and deliver profitable geothermal projects in markets
where geothermal has a natural advantage as the potential
lowest cost supplier. Through evaluation of prospective projects,
we have identified that using geothermal power to replace
expensive imported liquid fuels, particularly in markets with a
growing demand for power, offers the opportunity for attractive
commercial returns while still meeting the needs of energy
utilities, customers and national governments.
Growing economies in the Pacific Islands which are still
primarily using diesel fired power but have an excellent
natural endowment of high quality, high temperature, shallow
geothermal resources are an excellent fit with this strategy. With
the acquisition of the Savo Island Geothermal Power Project and
proposed acquisition of KUTh Energy Limited, announced in
September, adding the Takara Geothermal Project in Vanuatu as
well as exploration permit applications in PNG and Fiji, we have
created a strong pipeline of opportunities that offer excellent
revenue and profit growth potential over the short to medium
term that can be progressed within our financial capability.
2013 cHALLenGeS
2013 has been a very challenging year for renewable energy
companies in Australia. The continued uncertainty with regard to
the future of carbon pricing and other aspects of energy policy
has materially affected investor sentiment and the availability
of financing to support development of emerging technologies.
The high likelihood of a change in government (now realised in
the election of September 7) has exacerbated this fear of policy
change thereby deterring investment. As we head into 2014 there
remains enormous uncertainty about the future of the Australian
Renewable Energy Agency (ARENA), our key funding partner,
and the Clean Energy Finance Corporation, a potential future
funder, which the incoming Coalition government has promised
to close. This uncertainty is likely to be prolonged as the changes
to the Senate necessary to pass parts of this legislative agenda
will not occur until June 2014.
2013 Annual Report GEODYNAMICS LIMITED 7
REVIEW BY ThE ChAIRMAN
AND MANAGING DIRECTOR
(CONTINuED )
On 30 March 2013, Origin Energy announced that it would
withdraw from the Innamincka Deeps Joint Venture as of 30
June 2013. This decision was driven by Origin’s need to focus all
available resources on the completion of their APLNG Project
and Origin’s changed view on the likely timing of further
investments in the Australian generation fleet. We understand
their decision and would like to thank them for their support
over the past six years; in particular noting their support was
instrumental in allowing us to drill the Habanero 4 well.
In our FY2013 financial report the Board took the decision to
write down the carrying value of our Cooper Basin assets by
$88.8 million. It is regrettable that this decision had to be taken
but having completed our current investment program at
Habanero, combined with the material market changes identified
above, the write-down was necessary to comply with Australian
Accounting Standards.
The write-down is an accounting charge only and does not
reflect any change to our cash position, nor does it change our
view that Cooper Basin EGS geothermal resource will play a
material role in Australia’s long term energy economy.
FuTure DeveLoPMenTS
Despite these challenges, Geodynamics has an exciting program
and clear goals in 2014.
In the Cooper Basin the enormous growth in exploration for
unconventional (shale) gas has greatly improved the outlook
for local energy demand. Driven by the expansion of gas
facilities we see a very real prospect for commercial demand
for both electricity and heat to eventuate in the area around our
operations at Innamincka. Through 2014 we will put forward
proposals to key customers to supply both power and heat
to the operators of gas and oil ventures in the basin to secure
the customer contracts necessary to allow us to continue the
development of the Habanero resource. Based on the successful
results of the Habanero trial we believe we can put forward a
strong technical proposal for the supply of 5 - 10 MW of electrical
power or 30 – 50 MW of geothermal heat.
Downloading data at Geodynamics’
seismic monitoring station
8 GEODYNAMICS LIMITED 2013 Annual Report
We have created a strong pipeline of opportunities that offer
excellent revenue and profit growth potential over the short to
medium term that can be progressed within our financial capability.
In our conventional geothermal portfolio we anticipate
progressing the Savo Island Geothermal Power Project
through the completion of an environmental and social impact
assessment, securing the next stage of land access agreements
and agreeing a power purchase agreement with the Solomon
Islands Electrical Authority (SIEA). Achieving these milestones
would position us to commence exploration drilling in mid
2014. Additionally should we be successful with our proposal
to acquire KUTh Energy Limited, we would seek to accelerate
exploration drilling at the Takara Project and combine it with
our program on Savo Island. This would create cost efficiencies
through the sharing of equipment, knowledge and human
resources between the two campaigns.
coMPAny ouTLook
As we enter 2014 Geodynamics is well funded with an exciting
portfolio of near term opportunities both in the Pacific Islands
and Cooper Basin and a strong team of committed staff with
world leading skills. The Company has weathered significant
uncertainty and adverse market conditions to deliver excellent
operational results, acquire new opportunities and define a clear
path to positive returns for shareholders.
We would like to thank all the Geodynamics team for the
immense efforts they have made to deliver this excellent
outcome in very challenging circumstances. With the outlook
for world energy markets and policy action on climate change
remaining very uncertain we will continue to face many
challenges but we are well equipped to address them and believe
this period of unprecedented change in technology and markets
will also deliver many opportunities for Geodynamics.
Yours sincerely,
keith Spence
Non-Executive Chairman
Geoff Ward
Managing Director and CEO
2013 Annual Report GEODYNAMICS LIMITED 9
Genecati quodis es dolorep erehenda cus reptatur? Odit laut aut vollabo rioritat re ra nihit laut eos aboribusant vero es OpERATIONS REVIEW
Loading casing at the V-door
at Habanero 4
oPerATIonAL AcHIeveMenT AT HAbAnero
Over the past twelve months Geodynamics has successfully
executed its field program at Habanero delivering key operational
milestones. The program culminated in the commissioning
and operation of the 1 MWe Habanero Pilot Plant with the first
demonstration of EGS power in Australia in May 2013.
The safe and successful completion of the Habanero 4 well, the
improved drilling performance in key sections of the well, the
excellent open flow and closed loop test results and the high
system reliability demonstrated in the pilot plant trial support
Geodynamics’ vision that EGS sourced geothermal power can
play a material role in Australia’s long term energy economy.
DrILLInG HAbAnero 4
In the period under review, Geodynamics successfully completed
Habanero 4, one of the most technically challenging wells to
be drilled in Australia. Located approximately 120 m east of
the Habanero 3 well, Habanero 4 was designed as a production
well to intersect the main fracture zone identified and stimulated
by earlier Habanero wells.
The well was spudded on 9 March 2012 and took 179 days to
drill to a total depth of 4,024 m, achieving some notable drilling
firsts in Australia for both the geothermal sector and broader oil
and gas industry. The well included the first reverse cementing
procedure undertaken in Australasia. Improvements were also
made in our time to drill each section through improved drill
bit selection and through better operating procedures and
management of the drilling fluids used to circulate the well.
MAjor ProjecT MILeSToneS:
2 0 1 2
March
aPrIL
MaY
JUNE
JULY
aUgUst
sEPtEMbEr
OctObEr
NOvEMbEr
Spudding of
Habanero 4
10 GEODYNAMICS LIMITED 2013 Annual Report
Habanero 4 well
completed
Successfully
undertook
Australian first
reverse cementing
operation at
Habanero 4
First open flow test
achieved 34 kg/s
prior to stimulation
Highest recorded
flow rate of
39 kg/s post local
stimulation
The commissioning of the 1 MWe Habanero Pilot Plant was a
significant event for base-load renewable energy generation in
Australia, and holds importance on a global scale as it is one of
only three EGS plants in operation worldwide.
1 MWe Habanero
Pilot Plant
Throughout the drilling campaign there were no reportable
incidents. This is an outstanding health and safety achievement
particularly given the difficult high-pressure high-temperature
conditions in the well at depth.
TeSTInG HAbAnero 4
Following the drilling and completion of Habanero 4, a rigorous
testing program was undertaken to establish key reservoir
performance parameters and to secure static and dynamic
reservoir data necessary for long-term production modelling.
Results from the test program have established Habanero 4 is
one of the most productive EGS wells in the world.
Key operational activities in the test program included:
First open-flow test: An initial open-flow test was conducted
prior to stimulation of the reservoir achieving a maximum brine
flow rate of 34 kg/s (kilograms per second) - better than the
result achieved at Habanero 3 which recorded a maximum
stabilised flow rate of 27 kg/s.
enhancing well performance: A local (or small) stimulation
was then conducted to improve the connection between the
Habanero 4 well and the reservoir. The stimulation caused
shearing of the fractures in the granite and produced ~1,900
micro-seismic events which were recorded on surface with
Geodynamics’ network of seismometers.
DEcEMbEr
JaNUarY
FEbrUarY
March
aPrIL
Major
stimulation
program of
the reservoir
Refurbishment
of Habanero 1 and
recommissioning as
an injection well
Hot commissioning
of the closed loop
(Habanero 4 and 1)
and brine system
2 0 1 3
MaY
1 MWe Habanero
Pilot Plant
commissioning and
production of first
EGS derived power
JUNE
JULY
aUgUst
sEPtEMbEr
Extended
production testing
and plant trial
2013 Annual Report GEODYNAMICS LIMITED 11
OpERATIONS REVIEW
(CONTINuED )
Reservoir Development Manager,
Robert Hogarth, at open-flow test
at Habanero 4
Second open-flow test: Open loop testing post stimulation
produced equally pleasing results with Habanero 4 recording a
maximum flow rate of 39 kg/s. This represents the highest flow
rate achieved at Habanero and is testament to the preparation
and care taken during drilling to achieve a high quality well.
extending the Habanero reservoir: The major stimulation of the
Habanero reservoir progressed without incident. The objectives
of this stimulation were to assess the extent to which the area of
the enhanced fracture zone could be increased from the current
~3.6 km2 and to look for indications of multiple fracture zones
as the fracture zone was extended. By the end of the extended
stimulation, the area of the previously enhanced fracture zone
had been increased to ~4.0 km2, with the extension being mostly
to the north. The seismic data from this stimulation and earlier
stimulations at Habanero 1 and Habanero 3 indicates that all
shearing is occurring in one fracture zone, which dips to the west
at ~10° from horizontal.
The open flow tests demonstrate a higher productivity
from the Habanero frature system than had been previously
measured. This positive result provides important data to allow
Geodynamics to optimise the heat recovery scheme at Habanero
and so improve future projected energy generation performance.
TecHnoLoGy AT Work DurInG
HAbAnero TeST ProGrAM
During the open flow testing program,
brine samples were captured in the
well using a new down-hole fluid
sampler tool constructed
from a
specially selected Titanium alloy highly
resistant to H2S (hydrogen sulphide
gas). This tool enabled capture of
uncontaminated brine samples from
close to the fracture zone so that
these could be analysed to determine
their chemistry, particularly
their
H2S content. The samples obtained
have confirmed that the H2S content
of Habanero brine is low This is an
important technical finding adding to our understanding of
the unique process conditions of the Habanero reservoir and
will allow Geodynamics to continue to optimise well design
and materials selection for the completion of future wells.
12 GEODYNAMICS LIMITED 2013 Annual Report
Geodynamics recorded one of the highest reservoir productivity
results globally for an EGS well with a maximum flow rate of
39 kilograms per second.
(Left) Geoff Ward, Managing
Director and CEO, inspects drill bit
(Right) Tri-cone drill bit
DrILLInG IMProveMenTS
AT HAbAnero 4
cASe STuDy
Drilling deep, high-pressure,
high-temperature EGS wells is
a challenging exercise,
particularly in the Cooper Basin
where the unique process conditions of ~240°C and
~700 bar in the reservoir are at the technical limits of
conventional drilling technologies.
Geodynamics made significant progress towards
solving these challenges during the latest campaign
at Habanero by successfully implementing a number
of Australian first processes and techniques such
as the reverse cementing procedure to secure the
well and the use of high-pressure, high-temperature
“fingerprinting” to optimise management of the
main fracture zone.
In drilling Habanero 4, Geodynamics made
operational improvements in bit selection and
bottom hole assembly design increasing penetration
rates and bit longevity. Research and development
in drilling mud composition also led to improved
drilling performance by preventing temperature-
induced breakdown of fluids, increasing well bore
stability and contributing to increased penetration
rates and decreased downtime.
These operational improvements will allow
Geodynamics to further enhance well designs and
deliver cost efficiencies in future drilling campaigns.
2013 Annual Report GEODYNAMICS LIMITED 13
OpERATIONS REVIEW
(CONTINuED )
1 MWe Habanero Pilot Plant
turbine and generator
HAbAnero 1 re-AcceSSeD For cLoSeD LooP
ProDucTIon TeSTInG
To undertake closed loop production testing, the existing
Habanero 1 well was successfully prepared for re-use as an
injection well. This well would form one half of a “doublet pair”
with Habanero 4 as the production well. To recommission the well
for service the “Christmas Tree” valve assembly was replaced and
the temporary plug, which had been installed in the tubing as a
safety mechanism while the well was suspended, was removed.
With Habanero 4 and 1 connected, closed loop flow rates of up
to 19 kg/s at 215°C had been achieved at the time of writing, with
flows and temperatures both continuing to trend upwards.
1 MWe HAbAnero PILoT PLAnT oPerATIonS
Commissioning activities on the 1 MWe Habanero Pilot Plant
commenced in March 2013, following completion of the plant
refurbishment and modifications to the high pressure brine line
from Habanero 4 to the plant.
Key activities for the commissioning period, involved:
• Spinning the turbine shaft using open flows from Habanero 4
(late March)
• Start-up of the brine circulation loop between the two wells
(Habanero 4 and Habanero 1) using diesel power (mid April)
• Synchronisation of the 1 MWe turbine to produce net electrical
power without diesel support (late April)
Throughout commissioning, the distributed control system,
which plays a key role in the control and protection of the brine
circulation loop, was closely monitored and refined.
Geodynamics announced it had successfully commissioned
the 1 MWe Habanero Pilot Plant and produced Australia’s
first EGS-generated power on 2 May 2013. Following this, the
Company commenced a demonstration trial and testing program
over a period of approximately five months to evaluate plant
performance, assess brine loop reliability and performance, carry
out extensive materials and chemistry testing, and prove key
technologies for future plants.
14 GEODYNAMICS LIMITED 2013 Annual Report
A significant milestone was achieved during the operating test phase
in June 2013, when the pilot plant was operated in stand-alone mode,
generating net power without assistance for the diesel generator,
and without needing to release open flow of brine.
cASe STuDy
(Image) Geodynamics’ seismic stations ready
for deployment to monitor seismic activity.
MAjor STIMuLATIon AT HAbAnero 4 enHAnceS
reServoIr unDerSTAnDInG
In November 2012, a major hydraulic stimulation was carried
out in the Habanero field. The intent of the stimulation was
to expand the existing EGS geothermal reservoir and to gain
a better understanding of the geothermal system, through
the seismic response caused by the stimulation.
During stimulation, seven seismic stations were used to
transfer data in real time to the central processing office
with an additional 17 stations recording in an offline mode
and incorporated into the workflow in post-processing. In
this three week stimulation period, over 27,000 events were
recorded, of which over 20,700 events could be triangulated
to determine the hypocenter (origin). Event magnitudes
were also calibrated using the permanent network of
Geoscience Australia which recorded comparable events
with magnitudes (ML) in the range of ML -1.6 and 3.
The progression and nature of events observed as the seismic
cloud grew was consistent with the previous stimulations
performed at the Habanero 1 well in 2003 and 2005 and has
revealed important information about the size and orientation
of the reservoir, as well as the stimulation process.
(Left) Hypocenter locations of the induced seismicity from the
2012 stimulation in Habanero 4. Each seismic event is displayed
by a globe scaled to the event magnitude. Colour encoding
denotes occurrence time according to legend. Previous seismic
activity is indicated by grey dots.
(Above) Hypocenter locations in side-view
looking from east south east.
2013 Annual Report GEODYNAMICS LIMITED 15
OpERATIONS REVIEW
(CONTINuED )
(Left) Sunrise on the process deck of the 1 MWe
Habanero Pilot Plant
(Right) Mechanical Engineer, Ben Humphreys,
inspecting brine samples for chemical cleaning test
• Testing of chemical cleaning Systems for removal of Stibnite:
The Habanero system is unusual but not unique in that along
with normal geothermal minerals it also contains antimony, which
precipitates as crystalline antimony sulphide, more commonly
known as “stibnite”. The deposits of stibnite in heat exchangers
and brine coolers will decrease plant efficiency over time if not
appropriately controlled. A dedicated cleaning system was
designed to manage the stibnite deposits consisting of periodic
hot flushing, using a caustic soda solution to dissolve the stibnite
build-up. The performance of this system has been very good
demonstrating the ability to manage this operational risk.
• reservoir productivity and performance testing:
During the extended pilot plant trial a number of different
tests were performed to analyse reservoir performance and
behaviour including;
- A tracer test was initiated in June 2013 to assess reservoir
size and analyse the mixing between re-injected geothermal
brine and “fresh” reservoir fluid. This test involves measuring
the time taken for trace elements to travel from injection to
production well via the reservoir before returning to surface.
- Step rate performance testing involving the operation of the
plant at different flow rates was undertaken to provide data on
the characteristics of the system’s performance at varying rates
and pressures to allow the compilation of performance curves.
Key operational trial aspects have included:
• brine reinjection loop reliability and performance testing:
Overall the closed loop system has performed above modelled
expectations, with injectivity in our Habanero 1 well improving
during the duration of the trial, increasing the overall efficiency
of the Habanero 1-4 well doublet. The reliability of the brine
reinjection pump and seal system has improved relative to the
previous closed loop performance test in 2009 with the brine
loop having operated for ~2,200 hours at the time of writing.
There remain some ongoing challenges associated with the
integrity and performance of the pump seal but the overall
reliability of the steam plant has exceeded expectations.
16 GEODYNAMICS LIMITED 2013 Annual Report
Our focus for the year ahead is demonstrating the feasibility of a viable
small scale commercial plant to supply customers in the Cooper Basin.
Aerial view of
Habanero site
Overall, there has been very strong and stable production from
Habanero 4 with well head temperatures increasing in line with
our models and estimates, which at the time of reporting was
at 215°C and on trend to achieve our long-range temperature
estimate of approximately 220°C flowing well head temperature
at projected operational rates.
A significant milestone was achieved during the operating test
phase in June 2013, when the pilot plant was operated in stand-
alone mode, generating net power without assistance from the
diesel generator, and without needing to release open flows of
brine. The turbine output continued to improve throughout the
trial and has allowed all available electrical load at the Habanero
site and camp to be EGS-powered and the pilot trial to be
operated without diesel support.
The pilot plant trial was originally scheduled for completion in
August. However given the excellent quality of the reservoir data
being obtained, and the lower than projected costs of operating
the trial as a result of lower than expected diesel consumption,
the trial was extended. This has provided the opportunity to
complete further testing. A comprehensive analysis of the testing
data and performance results has commenced and will be
completed as part of finalising the trial.
yeAr AHeAD For THe cooPer bASIn DeveLoPMenT
Our focus for the year ahead is demonstrating the feasibility of
a viable small scale commercial plant to supply customers in the
Cooper Basin.
The first key objectives are the completion of a field development
plan for a 5 – 10 MWe commercial scale plant, based on a six
well scheme exploiting the high permeability reservoir created
at Habanero. The feasibility of supplying process heat as an
alternative to supplying power will also be investigated as part
of this study.
With the continued exploration for unconventional gas and oil in
the Cooper Basin by companies such as Santos, Beach Energy,
Chevron and Senex, the potential market for energy, both power
and industrial heat, in the Cooper Basin has substantial potential
for growth and the Habanero resource is well positioned to
supply this market as these projects are developed. In particular
geothermal heat may become a material supply opportunity to
these customers either in combination with the supply of power
or as a standalone opportunity.
Geodynamics has initiated discussions with identified
cornerstone customers and funders and is targeting securing
a power purchase agreement in financial year 2014 to support
further development.
2013 Annual Report GEODYNAMICS LIMITED 17
ExpLORATION pR O jECT S
Field trip to review surface
manifestations at Savo Island
convenTIonAL GeoTHerMAL ProjecTS – ISLAnD MArkeTS
Through the course of the year, Geodynamics has made good
progress with its strategy to diversify its project portfolio
through acquiring high quality small-medium scale conventional
geothermal projects. These projects will allow Geodynamics
to use the technical capability developed and demonstrated in
the Cooper Basin in markets with a growing demand for power
where geothermal is a proven lowest cost supplier. This provides
the Company with a short term path to revenue and profitability.
SAvo ISLAnD GeoTHerMAL PoWer ProjecT
The 2013 financial year saw Geodynamics acquire its first
international project. The Company announced that it had
entered into a two stage earn-in agreement with Kentor Energy
Ltd, a wholly owned subsidiary of KGL Resources (previously
Kentor Gold Limited), to acquire up to 70% interest in a
conventional geothermal power project in the Solomon Islands.
Located on the island of Savo, 14 km off the north coast of
Guadalcanal the project will investigate an identified volcanic
geothermal resource that could host a substantial geothermal
reservoir at temperatures in excess of 260°C and at shallow
depths of 500 - 1,500 m.
18 GEODYNAMICS LIMITED 2013 Annual Report
The project is an exciting development for Geodynamics that
offers a near term, smaller scale development opportunity with a
strong business case for rapid commercialisation. Honiara, capital
city of the Solomon Islands, is currently a high cost diesel market
with generated power costing around ~A$0.90 per kWh1. With
an average demand of ~8.5 MW that is rapidly growing, there is
strong local support in Honiara from the government, electricity
authority and consumers for development of alternative energy
supply to replace imported diesel fuel. Further customer demand
for the geothermal project is possible through supply to the Gold
Ridge Mine operation located 25 km south east of Honiara that
uses an additional ~12 MW of power, also currently diesel supplied.
Field progress at Savo has advanced well since the joint venture
agreement was first signed, with Geodynamics fulfilling its
commitments under stage one of the agreement in March
2013, to earn a 25% interest in and operatorship of the project.
The Company has the right to earn an additional 45% interest
through exploration drilling and the completion of a feasibility
study for the project (stage two).
Geodynamics is actively engaging with customary landowners,
progressing discussions with the relevant government ministries
to secure further exploration approvals and consulting with
the Solomon Islands Electricity Authority on electricity supply
and power purchase agreements, ahead of targeting an initial
exploration drilling campaign during the 2014 dry season.
1. Solomon Islands Electricity Authority Tariff, 2nd Quarter 2013
(converted to AUD as at September 2013)
Through the course of the year, Geodynamics has made good
progress with its strategy to diversify its project portfolio
through acquiring high quality small-medium scale conventional
geothermal projects.
WHAT IS A MAGneToTeLLurIc Survey?
(Above) The conceptual model based
on the MT survey data and surface
manifestations has identified potential
low resistivity clay caps overlying a
higher resistivity geothermal system.
(Below) The resistivity model
illustrated below together with the
surface manifestations, discovered
during field work undertaken at
Savo Island, gives a strong indication
of the presence of a high quality
geothermal resource.
A magnetotelluric (MT) survey refers to an electromagnetic
geophysical exploration technique that images the earth’s
subsurface by measuring variations in the electrical and
magnetic fields at the earth’s surface. By measuring and
recording the natural variations of the earth electrical and
magnetic fields, a three dimensional resistivity model of the
sub-surface rock volume can be created.
2013 Annual Report GEODYNAMICS LIMITED 19
ExpLORATION pR O jECT S
(CONTINuED )
InITIAL exPLorATIon STuDIeS AnD reSource ASSeSSMenT
Initial exploration activities at Savo Island have entailed
completion of geological mapping and geophysical surveying.
A 3D MT (magnetotelluric) survey covering 76 sites on the island
was completed.
The results of this work, together with an evaluation of the
location and nature of surface thermal features and geochemical
and isotopic analysis of thermal fluids, were used to build a
comprehensive geothermal conceptual model as the basis
for the initial geothermal resource assessment and to identify
exploration drilling targets.
In April 2013, Geodynamics reported an initial inferred geothermal
resource estimate and assessment for Savo which indicated the
presence of a high quality geothermal exploration prospect with
the potential capacity to generate in excess of 30 MWe, or 100% of
Honiara and the Gold Ridge Mine’s power requirement.
ScoPInG STuDy
In addition to completing the initial inferred geothermal resource
assessment, a scoping study was undertaken to assess the
viability of potential development schemes for the delivery of
power to Honiara. The scoping study examined key parameters
including power plant design, infrastructure requirements, drill
site access and power transmission options.
The study assessed the potential for the development of
a 20 MWe power plant, and has identified a commercially
viable project scheme that offers significant financial and
environmental benefits to consumers, including:
• Displacement of ~40 million litres of imported diesel per year,
costing ~SBD$360 million (US$50 million)
• Production of ~150,000 MWh electricity per year
• Reduction of end user electricity price
• Reduction of CO2 emissions of ~100,000 tonnes CO2e
nexT STePS AT SAvo
The joint venture is planning to commence an initial exploration
drilling campaign of four slim hole wells in the dry season of 2014
and, with successful results, will undertake further production drilling
in 2015 with a target of achieving first power generation in 2017.
Key activities for the Savo Island Geothermal Power Project in
the 2014 financial year are:
• Completing an independent Environmental and Social
Impact Assessment
• Securing a customer offtake agreement with the Solomon
Islands Electricity Authority to supply Honiara
• Community consultation and negotiation of land accesses
agreements, including development of a community benefits
package in preparation for the transition from exploration to
mining lease
• Drilling of four slim hole exploration wells of 97 mm (3.8”)
diameter to approximately ~1,200 m depth using a track
mounted drilling rig
Gove PenInSuLA DIrecT HeAT GeoTHerMAL ProjecT
In September 2012, Geodynamics signed a Heads of Agreement
with Gulkula Mining Company to form a 50 / 50 joint venture,
with Geodynamics as operator, to investigate the potential for a
direct heat geothermal project within Geothermal Exploration
Permit (GEP) 28310 on the Gove Peninsula, Northern Territory.
The ongoing uncertainty surrounding the future of the Pacific
Aluminium alumina refinery, the single potential customer for this
project, has meant that the joint venture has taken the decision
to defer preliminary exploration works and does not envisage
undertaking any capital expenditure until the long term future of
the refinery is confirmed.
Geodynamics together with Gulkula Mining will continue to
engage with Pacific Aluminium as commercial arrangements for
gas delivery to the refinery progress.
conTInuInG exPLorATIon In SouTH AuSTrALIA,
QueenSLAnD AnD neW SouTH WALeS
In South Australia, exploration licence GEL 268, located between
Innamincka and the South Australian-Queensland border, was
renewed for a period of five years. The renewed licence area is
approximately 313 km2 after relinquishment (in accordance with
regulations) of approximately one third of the original licence.
There has been no further exploration activity in Queensland and
New South Wales, though Geodynamics continues to monitor
petroleum exploration activities in overlapping and neighbouring
permits and will seek to obtain data from any relevant drilling.
key ProjecT STAGeS
coMPLeTe
Ground
Exploration
Dry SeASon
2014
coMPLeTe
eArLy 2015
Exploration
Drilling
Engineering and
Financing
coMMence
2015
Production
Drilling
and Plant
Construction
MID 2017
Operation
Progression to subsequent activity phases is dependent on success in earlier stages.
20 GEODYNAMICS LIMITED 2013 Annual Report
Speaking about the 1 MWe Habanero Pilot Plant, Minister Gary Gray,
said, “This particular development is impressive because of its technical
excellence; it’s impressive because of its remote location; it’s impressive
because it’s allowed the exploitation of a deep, hot resource that
otherwise would simply have been unknown and unremarkable.”
A year of recognition
Geodynamics receives clean energy council award
for innovation
Geodynamics’ work at Habanero was recognised at the 2013
Clean Energy Week with the Company receiving the Clean
Energy Council Innovation Award.
The award recognised the pioneering role played by
Geodynamics in the development of EGS technology over
a number of years leading to the successful commissioning
of the 1 MWe Habanero Pilot Plant and generation of first
Australian EGS power this year.
2013 Geothermal resources council Special Achievement Award
Founding member of Geodynamics and former Chief
Scientist Dr Doone Wyborn (pictured below) was awarded
the Geothermal Resource Council Special Achievement
Award, recognising outstanding achievement in the area
of geothermal energy development and related areas. Dr
Wyborn has been championing the development potential of
EGS geothermal energy for over 15 years and is recognised as
a leading Australian expert authority.
The Company congratulates Dr Wyborn on the receipt of the
award, and thanks him for the important industry contribution
he has made to the development and promotion of renewable
energy in particular EGS technology in Australia.
1 MWe Habanero Pilot Plant Ministerial visit
On 22 July 2013, Geodynamics hosted The Honourable Gary
Gray AO MP, Federal Minister for Resources and Energy at
site to tour the 1 MWe Habanero Pilot Plant in full operation.
Operation of the pilot plant represents the culmination of
over ten years of field-based research and development in
the Cooper Basin and has attracted significant interest in
Australia and overseas. Further guests on the day included,
representatives from Commonwealth authorities; the
Australian Renewable Energy Agency (ARENA); Clean Energy
Finance Corporation (CEFC); the Department of Resources
Energy and Tourism (DRET), and the South Australian
Department for Manufacturing, Innovation, Trade, Resources
and Energy (DMITRE).
Speaking about the 1 MWe Habanero Pilot Plant, Minister Gary
Gray, said, “This particular development is impressive because
of its technical excellence; it’s impressive because of its remote
location; it’s impressive because it’s allowed the exploitation of
a deep, hot resource that otherwise would simply have been
unknown and unremarkable.”
Also in attendance were representatives from companies
exploring unconventional oil and gas in the Cooper Basin.
Geodynamics is in preliminary discussions with these
companies around the possibility of supplying heat and/or
power to their operations, as exploration and production of oil
and gas in the Cooper Basin gains momentum.
2013 Annual Report GEODYNAMICS LIMITED 21
OUR C OMMUNITY pERf ORMANCE
Sesepi Village,
Savo Island
enGAGInG WITH THe coMMunITy
Geodynamics understands that our licence to operate
comes from our performance in working together within the
communities in which we operate. As we progress our projects,
we aim to ensure our communities remain informed and are
consulted about our ongoing activities.
Following the commissioning of the 1 MWe Habanero Pilot Plant,
Geodynamics was pleased to host a local community event at
Habanero for residents to tour the site and view the plant in full
operation. The event also provided an opportunity for CEO, Geoff
Ward, to thank community members in person for their ongoing
support and engagement in this project.
We recognise the importance of involving the local community
in the decisions that affect them. Listening to the feedback and
recommendations of community members as well as providing
opportunities to raise questions and voice any concerns, will help
us develop a project that brings benefits to all.
coMMunITy conSuLTATIon AT InnAMInckA
Geodynamics’ community consultation and stakeholder
management plan has continued to provide the overarching
framework of objectives and principles for our community
engagement initiatives at Innamincka.
During a year of intense field activity in the Cooper Basin,
Geodynamics engaged regularly with the local community
to report on operational progress in line with key project
deliverables. This included both formal and informal consultation.
An information session held for community members in July 2012
to explain the main fracture stimulation stage of the Habanero
project. In addition to briefing the community, Innamincka
residents were also invited to subscribe to a daily email report
from Geodynamics for updates on the results of the micro-
seismic activity captured throughout the stimulation program.
22 GEODYNAMICS LIMITED 2013 Annual Report
SAvo ISLAnD STAkeHoLDer enGAGeMenT
Local support for our new exploration project at Savo is encouraging
and we look forward to continued positive engagement as the
project progresses. A number of stakeholder engagement activities
were undertaken during financial year 2013, including:
community consultation
Five community consultation sessions were held on Savo
Island and in Honiara in April. The meetings, which were well
attended by over 800 residents, were aimed at providing an
initial introduction and overview of the proposed Savo Island
Geothermal Power Project. The sessions also provided an
opportunity to address questions and concerns from the local
community and for the Company to gain a better understanding
of local values and priorities.
Through the course of the 2013 financial year, Geodynamics
has worked in close cooperation with the Solomon Island
Department of Mines, Department of Lands and with the Savo
House of Chiefs to ensure our community engagement approach
addresses community concerns.
We recognize that the long-term success of our projects will depend
on our ability to build mutually beneficial relationships and to work
collaboratively and transparently with our key stakeholders.
employment
Through the course of the MT survey undertaken in October
2012, Kentor Energy and Geodynamics sought to maximise the
use of local skills and labour in carrying out the survey. Over 100
members of the local community were engaged to support the
survey teams in taking field measurements, providing guiding,
security and logistics support. A key initiative was the use of
local womens’ groups to provide catering support to the teams
in difficult to access field locations. Geodynamics would like
to acknowledge the work of Dr Graeme Wheller in putting this
program in place for the initial exploration survey.
environmental and Social Impact Study
A key undertaking by Geodynamics in the current financial year
is the development of a comprehensive Environmental and Social
Impact Study to address the potential impacts of our operations on
the community. Topics that will be addressed in the study include:
• Household surveys
• Community health
• Baseline flora and fauna studies
• Soil and water studies
• Acoustic modelling
• Existing land use mapping
• Solomon Islands economic benefits of the project.
Throughout this process, stakeholder engagement will form an
integral component in the development of this impact study and
we will continue to meet regularly with the community and the
House of Chiefs.
THe yeAr AHeAD
We recognize that the long-term success of our projects will depend
on our ability to build mutually beneficial relationships and to
work collaboratively and transparently with our key stakeholders.
We will continue to strengthen our community performance
during the coming year by:
• Maintaining effective community consultation across our
projects to provide a forum for ongoing feedback and to
ensure local stakeholders are informed of key developments
• Completing an Environmental and Social Impact Study for the
Savo Island Geothermal Power Project
• Undertaking consultation and negotiations of land accesses
agreements, in preparation for the transition from exploration
to mining lease
• Expanding on the existing community projects program
as part of the land access agreement as the Savo Island
Geothermal Power Project transitions to exploration drilling
2013 Annual Report GEODYNAMICS LIMITED 23
community development
Through the Surface Access Agreement in place with customary
land owners the joint venture has committed to fund thirty
community projects on the island (ten per year for the duration
of the three year prospecting licence). These projects, proposed
by members of the community to the Savo House of Chiefs,
are designed to support local infrastructure improvements
particularly the upgrade of health and education facilities. The
projects are identified, scoped and carried out by the local
community using funds provided by the joint venture to secure
materials and equipment.
The first ten projects for Year 1 of the prospecting licence have
been successfully completed. Of the Year 2 projects, four were
underway at the time of writing with three additional projects
being in the planning stage. The community projects program
is coordinated through the representative of the Department
of Mines, Energy and Rural Electrification and we gratefully
acknowledge the support of Thomas Toba in ensuring the
successful completion of these projects.
Genecati quodis es dolorep erehenda cus reptatur? Odit laut aut vollabo rioritat re ra nihit laut eos aboribusant vero es
OUR hEALTh AND
S AfETY pERf ORMANCE
Inspection
of wellhead
injection valve
APProAcH To HeALTH AnD SAFeTy
Health and safety is central to our corporate value system and
we strive to maintain an incident-free workplace. Geodynamics
recognises that this goal is best achieved by developing a risk
aware workforce and building a strong safety culture across the
business through regular training, the implementation of strong
governance measures, and careful monitoring of our health and
safety performance.
SAFeTy PerForMAnce revIeW
The Total Recordable Injury Frequency Rate (TRIFR) is the
primary industry standard measure for safety performance,
representing the number of medical, restricted work and lost
time injuries recorded for every million hours worked.
The Company achieved an enviable TRIFR of 0.0 for financial
year 2012 during a period of intense operational activity at
Habanero. Three recordable injuries during 2013 compromised
our excellent safety record.
Each incident was fully investigated and the business has since
put in place barriers to prevent reoccurrence. The knowledge
from these incident investigations together with our ingrained
safety management system has enabled the Company to again
target zero incidents in financial year 2014.
The Company maintained key targets put in place to improve
the completion of actions arising from audits and incident
investigations. An improved tracking and auditing system
significantly reduced the numbers of open and overdue
corrective actions during the reporting period.
A FrAMeWork For SAFe oPerATIonS
Following the full implementation of our health and safety
management system in 2012, work was undertaken in 2013 to
tailor Safety Management Plans for key operational activities,
and the Habanero operational site plan was revised to meet
health and safety requirements during the 1 MWe Habanero
Pilot Plant trial period. The new plans form a vital component
of the health and safety management system which delivers
an essential framework of safety processes, systems and
governance measures to manage and record company-wide
performance and alignment with operational activities.
24 GEODYNAMICS LIMITED 2013 Annual Report
Geodynamics operates on the basis that
“nothing is so important, it cannot be done safely”.
FocuS on TrAInInG
Training continues to receive high priority within Geodynamics.
Training modules are designed to provide employees with the
information, leadership, self-management skills and competency
levels needed to carry out their work safely. Field personnel
receive targeted training and are regularly required to perform
operational exercises that train and test systems, individuals and
the team’s overall safety performance.
Competency levels are tracked and maintained using a training
matrix and a variety of training delivery processes and mechanisms.
The Geodynamics Emergency Response Team has continued to
conduct regular training exercises that have concentrated on first
aid, casualty evacuation, industrial rescue and fire fighting. This
program has allowed the field operations team to maintain a high
state of readiness while running the 1 MWe Habanero Pilot Plant trial.
(Above) Safety gear issued to
visitors during the 1 MWe Habanero
Pilot Plant site tour
(Left) Habanero paramedics
conducting training with SA
ambulance service
yeAr AHeAD
Our overall objective is to ensure the health and safety of our
staff and contractors comes first. Our strategies for the year
ahead are to:
• Target zero incidents in the workplace
• Detail project specific Safety Management Plans for new and
emerging projects
• Ensure competence levels of employees and contractors are
maintained and enhanced in their occupation area promoting
safe work behaviours
• Continue to improve our health and safety culture through
targeted initiatives
2013 Annual Report GEODYNAMICS LIMITED 25
OUR ENVIR ONMENTAL
pERf ORMANCE
Creek flowing
at Savo Island
our envIronMenTAL APProAcH
Geodynamics is committed to the effective environmental
management of all its exploration, development and operating
activities to minimise the impact on local communities, the
natural landscape, waterways, flora and fauna.
To support this goal, Geodynamics has implemented an
Environmental Management System (EMS) that sets out clear
policies, procedures and processes to reduce and mitigate the
impact of our activities in the Cooper Basin. Our EMS reflects our
commitment to raising environmental awareness and ensuring all
Geodynamics’ employees and contractors operate to a high level
of environmental performance through regular training.
26 GEODYNAMICS LIMITED 2013 Annual Report
envIronMenTAL PrIncIPLeS
Geodynamics adheres to the following principles and standards:
• Maintain and continually improve our EMS.
• Comply with all relevant laws, regulations and standards and
aspire to delivering higher standards.
• Ensure that all employees and contractors receive appropriate
training to fulfil their individual environmental responsibilities.
• Ensure that we have the necessary resources and skills to
achieve our environmental commitments.
• Develop and implement strategies to minimise pollution,
manage waste effectively; use water and energy efficiently while
addressing all relevant cultural heritage and biodiversity issues.
• Formally monitor and report annually on our environmental
performance against defined objectives.
• Require that companies providing contract services to
Geodynamics manage their environmental performance in line
with our Environment Policy.
• Work towards the achievement of a high level of external
recognition for the quality of our on-site environmental
management.
Sustainable development is at the heart of what we do and
its principles guide our actions and activities. Our projects are
located within sensitive environments making environmental
management and performance an essential component of our
overall work programs.
eMS AuDIT
During the year, environmental compliance audits of our
operations were undertaken both internally and externally to
ensure the active implementation of the EMS across the business.
Following an independent surveillance audit by SAI Global in
July 2013, Geodynamics’ EMS was re-certified in October 2012 as
compliant with the requirements of the International Standard
for Environmental Management Systems ISO14001:2004.
InTernAL ProGreSS
cooper basin operations
Over the past twelve months, progressive rehabilitation of
identified Cooper Basin sites that are no longer being actively
used for geothermal exploration and development has been
undertaken, to ensure each location is restored to a level that
meets or exceeds relevant legislative requirements. Work has
included cordoning off site locations to encourage natural
regrowth and implementing erosion controls.
Site monitoring conducted post the reporting period has
indicated that rehabilitation is progressing well with the
condition of the Savina 1 site exceeding legislative requirements,
Celsius 1 meeting the requirements and Jolokia 1 steadily
progressing towards meeting the requirements. The legislative
requirements do not formally apply until each site has been
plugged and abandoned, yet to occur. An upcoming area of
focus is the rehabilitation of the areas surrounding the Habanero
2 and 3 wells. The Company also plans to commence a plug and
abandon program for Celsius 1, Habanero 2 and 3 wells.
Geodynamics also renewed the Statement of Environmental
Objectives (SEO) for the 1 MWe Habanero Pilot Plant. As part of
the review process a new Environmental Impact Report (EIR)
was prepared to include environmental mitigation measures and
procedures relevant to the pilot plant and associated infrastructure
that has been developed over the last five years. The revised SEO
and EIR were submitted to the Department for Manufacturing,
Innovation, Trade, Resources and Energy (DMITRE), the South
Australian regulator, for approval in July 2013.
A further development impacting the environmental
management of our Cooper Basin operations has been the
introduction of new drinking water regulations in South Australia.
The legislation requires remote camps which provide their own
potable water supplies, such as Geodynamics’ Cooper Basin
operations, to develop a Drinking Water Risk Management plan
by 1 March 2014. In preparation, Geodynamics has developed a
plan for implementation when the new regulations take effect.
Dingo crossing Dillon’s Highway,
Cooper Basin
2013 Annual Report GEODYNAMICS LIMITED 27
OUR ENVIR ONMENTAL
pERf ORMANCE (C ONT INuED )
Savo Island Geothermal Power Project
Post the reporting period, the Company engaged Sinclair Knight
Merz to conduct an Environmental and Social Impact Study for
the recently acquired Savo Island project. Topics that will be
addressed in the study include:
• Baseline flora and fauna studies
• Soil and water studies
• Acoustic modelling
• Household surveys
• Community health
• Existing land use mapping
• Solomon Islands economic benefits of the project
The results of the study and an Environmental Management
Plan are expected early 2014 at which point Geodynamics will
review its EMS to ensure it sufficiently covers environmental
management for the project.
rAISInG envIronMenTAL AWAreneSS
The Company recognises that training staff is integral to
achieving ongoing improvements in our environmental
performance. Environmental awareness programs are provided
to all Geodynamics’ employees and contractors, with specific
training provided to those working within the field. Training is
undertaken at regular intervals to maintain awareness of the
Company’s overall environmental responsibilities to issues across
the organisation.
Third party contractors must also ensure that all employees and
contractors working under their supervision are provided with an
induction to Geodynamics’ EMS, including thorough familiarisation
with our Environmental Policy and Management Plan.
envIronMenTAL IncIDenTS
The transparent reporting of all incidents is encouraged by the
Company to reinforce a risk-aware culture and ensure all issues
are investigated and appropriately addressed.
Geodynamics is pleased to report the Company experienced no
‘serious’ environmental incidents as defined in the Petroleum and
Geothermal Energy Act 2000 (SA). Three minor environmental
incidents were recorded during the past year which were
addressed and closed out with negligible environmental impact.
28 GEODYNAMICS LIMITED 2013 Annual Report
Fig tree,
Savo Island
yeAr AHeAD
Geodynamics will continue to focus on improved environmental
performance as we work hard to achieve our strategic goal of
recording zero environmental incidents.
Our targets for the year ahead are to:
• Further develop and refine the EMS, including:
− addressing the findings made in the recent surveillance audit
by SAI Global such as refining our objectives and targets to
incorporate the usage of alternative/renewable energy within
the Cooper Basin operations where reasonable and feasible
− reviewing the EMS for its potential application to the
Solomon Islands Geothermal Power Project
− ensuring our site wastewater treatment procedures comply
with the new SA Health guidelines for such systems
• Developing a rehabilitation benchmarking process to provide
objective evidence of progress by comparison of sites being
rehabilitated against comparable undisturbed sites
• Implementing a Drinking Water Risk Management Plan to
be in compliance with South Australia’s Drinking Water Risk
Management guidelines by 1 March 2014
• Remediation of several Cooper Basin sites following
the successful plug and abandon program for identified
geothermal well locations
2 01 3 fI NA NCI AL rEp Or T
GEODYNAMICS LIMITED ABN 55 095 006 090
contents
Directors’ Report
Auditor Independence Declaration
Corporate Governance Statement
Statement of Comprehensive Income
Statement of Financial Position
Cash Flow Statement
Statement of Changes in Equity
Notes to the Financial Statements
Directors’ Declaration
Independent Auditor’s Report to the
Members of Geodynamics Limited
30
44
45
52
53
54
55
56
79
80
2013 Annual Report GEODYNAMICS LIMITED 29
DIrECTOr S’ rEp Or T
director profiLes
Your Directors submit their report for the period ended 30 June 2013. The names and details of the Directors of Geodynamics Limited
in office during the financial year and until the date of this report are as follows. Directors were in office for this entire period unless
otherwise stated.
Keith spence
B.Sc. (Hons), FAIM
non-executive chairman
Geoff Ward
B.E (Chem) (Hons) MBA
Managing director & ceo
andreW stocK
B.Eng. (Chem) (Hons), FIE Aust
non-executive director
robert davies
CMA (Canada)
non-executive director
Mr Spence is an experienced
leader in the oil, gas, and
energy sectors. Originally
trained as a geophysicist,
Mr Spence has over 30
years experience in senior
executive roles with Shell
both in Australia and
internationally, and with
Woodside Energy Limited,
including acting as Interim
CEO and Chief Operating
Officer. Mr Spence has a long
record of successfully leading
exploration and development
organisations, building skilled
and technologically advanced
workforces and representing
the company and sector with
government and the public.
Mr Spence is the Chairman
of Clough Limited and a
non-executive director of
Oil Search Limited, Verve
Energy and Synergy. Keith
also serves on a number of
government bodies, including
being the current Chair of
NOPSEMA, the National
Offshore Petroleum Safety
and Environment Management
Authority, and as a Director of
Skills Australia.
Mr Ward is Managing Director
and Chief Executive Officer
of Geodynamics. Prior to his
appointment in January 2011,
he held the role of Director at
Azure Capital, a Perth-based
independent advisory firm,
offering corporate advisory
services to leading firms in
the resources and engineering
industries where he had
worked since 2007.
Mr Ward has over 20 years
experience in the energy and
finance industries in senior
roles covering business
development, mergers and
acquisitions, operations,
oil and product trading,
strategic and organisational
development, planning and
economics, investor relations
and new project development.
Mr Ward holds an honours
degree in Chemical
Engineering from the
University of Melbourne
and a Masters of Business
Administration from the
University of Western Australia
Business School, receiving
the Director’s Letter of
Commendation.
Mr Robert Davies is a Certified
Management Accountant
(Canada) and has extensive
senior finance experience with
global mining and resource
companies. He was formerly
the Chief Executive Officer
and a Director of Australian
Energy Company Limited,
an unlisted public company.
Prior to that he was Executive
Vice President and Chief
Financial Officer for Inco Ltd,
the western world’s largest
nickel producer. Prior to
that, he was Chief Financial
Officer for Alumina Ltd., and
General Manager Treasury
Tax and Investor Relations for
WMC Ltd. He has previously
held senior finance positions
with BHP in Canada, the US,
Chile and Australia, acquiring
significant operational and
corporate finance experience.
He was also previously a
director of PT Inco and Alcoa
of Australia.
Mr Andrew Stock was
formerly Director, Executive
Projects for Origin Energy
and in previous roles, he
was responsible for Origin’s
major capital investments in
upstream petroleum, power
generation, and low emissions
technology businesses.
With over 35 years of
experience, he previously
held senior management
positions in energy industries
in Australia and overseas.
He is a Non-executive Director
of the listed Company Horizon
Oil Limited (since February
2011) and Silex Systems
Limited (since August 2013),
a Board Member of the Clean
Energy Finance Corporation,
a member of the Advisory
Board of the Faculty of
Engineering, Computer and
Mathematical Sciences,
Institute for Mineral and
Energy Resources and Centre
for Energy Technology at the
University of Adelaide, and
Melbourne University’s
Energy Institute. He has a
Chemical Engineering degree
(Honours) from the
University of Adelaide, is
a Fellow of the Institution
of Engineers Australia, and
a Graduate member of
the Australian Institute of
Company Directors.
30 GEODYNAMICS LIMITED 2013 Annual Report
JacK haMiLton
B.Eng. (Chem), Ph.D, FAICD
non-executive director
Dr Jack Hamilton was formerly
CEO of Exergen Pty Ltd, a
low emission coal resource
development Company
and prior Director of NWS
Ventures with Woodside
Energy. Dr. Hamilton is also
a non-executive director of
Southern Cross Electrical
Engineering Ltd and Calix
Ltd. Dr Hamilton graduated
from Melbourne University
with a Bachelor of Chemical
Engineering and Doctorate
of Philosophy in 1981. He has
over 28 years’ experience both
locally and internationally
in operations management,
in refining, petrochemicals
and gas production,
marketing, strategy and
LNG project management.
MicheL Marier
BBA (Int’l Mgt), M.Sc. (Finance), CFA, FRM
non-executive director
Mr Michel Marier joined The
Sentient Group in 2009 and
he is based at their office in
Sydney. Before joining the
Sentient Group, Mr Marier
worked 8 years at the Private
Equity division of la Caisse
de dépôt et placement du
Québec (CDPQ). While at
CDPQ, his responsibilities
ranged from currency
hedging, risk and return
analysis to investments. In
2006, he participated in the
establishment of a new sector
in the Private Equity division
– distressed debt. In less
than two years, the portfolio
grew to billions through
co-investments and private
equity funds. After this
accomplishment, Mr Marier
concentrated his efforts on
restoring the natural resources
sector within the Private
Equity division.
Michel Marier holds a Master’s
degree in finance from HEC
Montreal. He is a CFA charter
holder. He is a former Director
of Natural Resources USA
Corp, and a Director of Samco
Gold, a company listed on the
TSX.V exchange.
All of the above named Directors acted as Directors of the
Company for the whole of the year under review and up to the
date of this report except where indicated.
Minesh dave
non-executive director
(Retired 29 November 2012)
Mr Dave has over 29 years
professional experience
in the power sector
covering engineering,
fuels, environment,
project feasibility, project
development, project
construction, policy and
regulatory, strategy &
business development and
corporate functions. He has
a Bachelor of Engineering
(Mech.) and a Master of
Technology (Heat, Power &
Refrigeration).
He has been an employee of
The Tata Power Company Ltd
since 1983 and is currently
its Chief Representative –
Indonesia and Head Business
Development – APEC. His
key responsibilities for Tata
Power include managing the
development of geothermal
projects in Indonesia and
the development of Power
Projects in the Association
of South East Asian Nations
(ASEAN) and overseeing Tata
Power’s investments in the
region. He is a Non-executive
Director on the Boards of
several subsidiaries and
investments of Tata Power in
the region.
praMe chopra
B.Sc. (Hons), Ph.D, FAICD, MAGU,
MASEG, MIGA, MASC
alternate director
to Minesh dave
(Retired 29 November 2012)
Dr Prame Chopra was a Reader
in Geophysics at The Australian
National University (ANU) in
Canberra from 1996 - 2006.
He obtained his Ph.D in rock
physics at the ANU in 1980 and
has held research appointments
at ANU, Cornell University in
New York and at the Bureau of
Mineral Resources, Geology &
Geophysics and the Australian
Geological Survey Organisation.
He is an internationally
recognised researcher of more
than 21 years standing with
strong collaborative links with
key overseas Hot Fractured
Rocks (HFR) geothermal energy
research groups.
He was a Principal Investigator
of the Energy Research &
Development Corporation
funded project into HFR and
Tight Gas in the Cooper Basin,
SA and the ANU - Pacific Power
geothermal research project
in the Hunter Valley, NSW. In
2000, he was an invited guest
of the Japanese New Energy
Development Organisation and
lectured on HFR geothermal
resources in a number of
Japanese cities. He is a member
of the Australian Science
Communicators and was an ABC
Science Media Fellow in 2000.
2013 Annual Report GEODYNAMICS LIMITED 31
DIrECTOr S’ rEp Or T
CONTINUED
coMpanY secretarY
corporate strUctUre
Geodynamics Limited is a company limited by shares, incorporated and domiciled in Australia. It listed
on the Australian Securities Exchange on September 2002 under code GDY. Its registered office and
principal place of business is Level 3, 19 Lang Parade, Milton QLD 4064.
tiM pritchard
MCom, MIT, CPA, CSA (Cert)
Mr Tim Pritchard joined
Geodynamics in 2010 as
Financial Controller and
became Chief Financial
Officer in May 2011 responsible
for managing all financial
activities of the Company as
well as leading the information
technology team. He was
appointed Company Secretary
in March 2012.
Mr Pritchard has over 20 years
management experience in
finance, accounting, consulting,
project management and
information technology.
In addition to extensive
accounting experience, he has
led a number of successful
business transformation
and system implementation
assignments that have resulted
in significantly improved
financial processes and
business systems.
Before joining Geodynamics,
Mr Pritchard was most
recently engaged by leading
institutional investment
company, QIC as Head of
Management Information.
principaL activities
The principal activity of Geodynamics Limited during the financial year was to explore and develop
areas suitable for geothermal power production.
Geodynamics has established a leading capability in the exploration and development of Enhanced
Geothermal Systems (EGS). Through our Cooper Basin tenement position covering the Innamincka
Deep granite resource the Company has identified a substantial heat resource with the potential
to play a material role in Australia’s long term energy system as a reliable source of large scale
continuous and controllable energy. In exploring and demonstrating the capability of supplying
EGS derived power from the Innamincka Deeps granite, Geodynamics has capacity to manage sub-
surface investigation of geothermal resources, management of technically demanding and high risk
drilling activities, development of power conversion facilities and securing commercial and funding
agreements necessary to develop major geothermal power projects. The Company is pursuing the
further development of the identified Innamincka Deeps resources through a proposal to develop
an initial small scale commercial plant (estimated capacity 5–10 MWe) at the Habanero location,
approximately 10 km south of Innamincka, South Australia. The long term aspiration of Geodynamics
is to supply large scale utility power to Australian energy customers through the large scale
development of the Innamincka Deeps resource and securing a connection to the National Electricity
Market, (NEM).
In parallel with our activities in our Australian permits and utilising the skill base and experience
developed through our operation of the Habanero Project, Geodynamics is seeking to acquire and
develop smaller scale geothermal projects based on conventional hydrothermal (volcanic-hosted)
geothermal resources. The Company has identified that there is a good opportunity to utilise our
geothermal development capacity to supply power to isolated or island markets that have access to
good high temperature geothermal resources and are currently supplied though high cost imported
liquid fuels such as diesel or fuel oil. Projects of this type represent lower cost, lower risk opportunities
that can be developed in a shorter timeframe than the Company’s Australian assets and within
existing market conditions and costs. This provides a significant risk diversification for the Company
and an alternative path to generating sustainable revenues. The first project of this type is the Savo
Island Geothermal Power Project, located in the Solomon Islands, approximately 35 km from the
capital of Honiara. The Company acquired its interest in the Project in November 2012 and is targeting
initial exploration drilling to be undertaken in 2014 with a target of first power production in 2017. The
Company will seek to add further projects similar to the Savo Island Geothermal Power Project to its
project portfolio based on a strict selection criteria.
While principally focused on geothermal exploration and development, Geodynamics continues to
monitor developments in clean energy markets and technologies and will assess opportunities to
acquire interests in projects or technologies where it is able to utilise its skills and capacity to develop
further clean energy projects that provide an acceptable return for shareholders.
revieW and resULts of operations
The Company realised a loss before tax for the financial period as set out below:
Loss before income tax expense
Net loss attributable to members
of Geodynamics Limited
Earnings per Share
Basic and diluted loss per share
2013
$
2012
$
(105,092,252)
(11,771,616)
(105,092,252)
(11,771,616)
(cents)
(25.86)
(cents)
(3.06)
32 GEODYNAMICS LIMITED 2013 Annual Report
revieW and resULts of operations (continued)
In the 12 months to 30 June 2013, Geodynamics has made further
progress in its development of zero-emissions, renewable energy
generation. The key achievements and highlights for the 12
months to June 2013 were as follows:
• Habanero 4 was completed to a target depth of 4,204 m, one of
the most technically challenging wells to be drilled in Australia
this year. The completion of Habanero 4 also saw the first
reverse cementing operation in Australia, a technique adopted
to ensure the overall safety and integrity of the well.
• A major stimulation at Habanero 4 was completed. Over a period
of 14 days commencing 17 November 2012 over 24,000 micro
seismic events were detected by Geodynamics’ seismic network.
• The surface works construction for the Habanero 4 –
Habanero 1 closed loop and the 1 MWe Habanero Pilot Plant
refurbishments were completed. The 1 MWe Habanero Pilot
Plant was successfully commissioned on 30 April 2013 with first
EGS power being generated in Australia.
• The power plant trial operations progressed successfully including
turbine test runs, brine reinjection loop reliability, step rate tests
to assess reservoir performance parameters, and a tracer test
was initiated to measure reservoir size and characteristics. A
significant milestone was achieved on 24 June 2013 with the
power plant operating in stand-alone mode generating net
power without assistance from the site diesel generator.
• A two stage earn-in and joint operating agreement was
entered into with Kentor Energy Pty Ltd, a subsidiary of Kentor
Gold Ltd, to acquire up to a 70% interest in a conventional
geothermal project on the island of Savo in the Solomon
Islands. In April 2013 Geodynamics released an Inferred
Resource Assessment for Savo indicating the presence of a
high quality geothermal exploration prospect with the potential
capacity to generate in excess of 30MWe, or 100% of Honiara
and the Gold Ridge Mine’s power requirement.
• A Heads of Agreement for a new joint venture project
opportunity in Gove Peninsula, East Arnhem Land, Northern
Territory, was signed with Gulkula Mining Pty Ltd. The joint
venture plans to investigate the potential to deliver heat to the
Rio Tinto owned Pacific Aluminium alumina refinery, focusing
on Gumatj land that is adjacent to the refinery.
• The sale of Rig 200 was successfully completed for a total
cash consideration of $21 million to Pangaea Resources. Net
proceeds to Geodynamics for its 70% interest in the rig asset
totalled $14.7 million.
• Geodynamics received $22.2 million under the Federal
Government’s R&D Tax Incentive Scheme.
eMpLoYees
The Company had 30 equivalent full time employees as at
30 June 2013 (2012: 37 employees).
dividend
The Directors do not propose to recommend the payment of a
dividend in respect of the period ended 30 June 2013.
directors’ interests in the shares and options
of the coMpanY
As at the date of this report, the interests of the Directors in the
shares of Geodynamics Limited were:
Director
K. Spence
G. Ward
R. Davies
J. Hamilton
M. Marier
A. Stock
Fully paiD
orDinary shares
212,413
730,319
120,775
371,208
-
62,315
options over
orDinary shares
-
2,700,000
-
-
-
-
siGnificant chanGes in the state of affairs
Significant changes in the state of affairs of the Company during
the financial period were as follows:
• On 27 March Origin Energy provided Geodynamics with a
notice of withdrawal from both the Deeps and Shallows joint
ventures. The withdrawal from the joint ventures became
effective on 30 June 2013. Geodynamics is actively seeking
alternate partners to take a share in the Deeps joint venture.
• Deferred Exploration and Evaluation costs decreased from
$106.9 million to $1.2 million, a decrease of $105.7 million.
The movement was largely the result of an impairment of
Geodynamics’ deferred exploration and evaluation costs in
respect of the Deeps and Shallows joint ventures, partially
offset by government grants and R&D tax incentives received or
receivable, of $78.5 million.
• Property, Plant and Equipment reduced from $19.8 million to
$4.0 million primarily as a result of the impairment of the 1 MWe
Power Plant and the offset from government grants.
siGnificant events after the baLance date
As advised to the ASX on 28 March 2013, Origin Energy have
withdrawn from both the Deeps and Shallows joint ventures
effective 30 June 2013. Origin Energy continues to be liable for their
share of site rehabilitation costs for both joint ventures for a period
of five years from withdrawal. As at 1 July 2013 the company has a
100% interest in both the Deeps and Shallows joint ventures.
On 22 July 2013 the Company advised that the 1MWe Habanero Pilot
Plant, which was commissioned on 30 April 2013, had produced
Australia’s first Enhanced Geothermal Systems (EGS) generated
power and was a leading global demonstration of EGS technology.
On 25 July 2013 the Company was honoured to receive the
Clean Energy Council (CEC) Innovation Award at the CEC
Clean Energy Week Gala Event. The award recognised the
leading edge technology developed and deployed in producing
Australia’s first EGS power with the commissioning of the 1 MWe
Habanero Pilot Plant.
Other than the above, there has not arisen between 30 June 2013
and the date of this report any item, transaction or event of a relevant
and unusual nature likely, in the opinion of the Directors of the
Company, to affect significantly the operations of the Company, the
results of those operations, or the state of affairs of the Company.
2013 Annual Report GEODYNAMICS LIMITED 33
DIrECTOr S’ rEp Or T
CONTINUED
LiKeLY deveLopMents and eXpected resULts
The proposed 2013/14 financial year work program will continue
to progress activities at the Habanero site to complete the final
stages of the 1 MWe Habanero Pilot Plant demonstration trial and
develop a proposal for an initial small scale commercial plant utilising
the demonstrated Habanero resource. Additional field works to
undertake plug and abandonment and site remediation works
associated with the earlier Habanero 3, Habanero 2 and Celsius 1 well
sites will also be completed in line with our permit obligations.
The completion of the 1 MWe Habanero Pilot Plant demonstration
trial is the final activity in this phase of investigation and
assessment of the viability of development of the Innamincka
Deeps resource. This phase has focussed on the successful drilling
and testing of the Habanero 4 well, successful demonstration
of EGS derived power and the acquisition of reservoir and
plant performance data necessary to be able to develop the
engineering, performance and cost parameters of a commercial
scale development to demonstrate the viability of an EGS
geothermal development consistent with the objectives defined
under the terms of our Renewable Energy Demonstration
Program grant.
With the completion of the pilot plant demonstration trial,
Geodynamics will now confirm the key parameters (plant
capacity, plant scope, cost etc.) for the next development stage
and seek to secure customer off-take agreements and funding
to support this development. The Company has identified and
has commenced discussions with potential customers for energy,
both power and heat, located in the Cooper Basin area associated
with the development of conventional and unconventional oil and
gas resources. These customers vary from existing operations
with a current demand for power, to prospective future
operations reliant on the further development of unconventional
gas or oil resources in the area that may have a requirement for
both power and heat. Geodynamics will look to work with both
existing and potential new operations to identify a customer base
capable of supporting an initial commercial project.
With the continued exploration for unconventional gas and
oil in the Cooper Basin we believe there is strong potential for
the market for energy, both power and industrial heat, to grow
and which our Innamincka Deeps resource is well positioned
to supply. Securing such a customer capable of supporting
further capital expenditure will be a pre-requisite to any further
material spending at Habanero after the current trial activities
are completed. Geodynamics is targeting securing a customer
agreement in FY2014; however if further exploration and
development activities are required to allow potential customers
to enter into a contract this may be delayed.
The proposed 2013/14 financial year work program for the Savo
Island Geothermal Power Project is focussed on stakeholder
management, commercial negotiations and studies necessary
to progress key commercial milestones. Further to this plans
are being developed for initial exploration drilling to commence
towards the end of the financial year. The drilling program
will continue into FY14/15 culminating in Geodynamics having
completed stage 2 of the earn-in and being entitled to an
additional 45% interest. The results of the exploration drilling
will allow for the completion of a feasibility study for the project
allowing for the detailed design and planning, and project
financing stages to progress.
34 GEODYNAMICS LIMITED 2013 Annual Report
environMentaL reGULations and perforMance
Geodynamics Limited is strongly committed to the effective
environmental management of our exploration, development and
operating activities. Our Environmental Policy is the driver for
maintaining our Environment Management System (EMS). This in turn
provides the framework to support and guide activities, both in our
offices and on our sites, in relation to environmental performance.
Our EMS was re-certified in October 2012 by SAI Global Limited
as compliant with the requirements of the International Standard
for Environmental Management Systems ISO14001:2004 and
this indicates Geodynamics is meeting the global benchmark for
environmental practice.
A summary of the Company’s environmental performance over
the year is as follows:
• Generally, compliance has been achieved with environmental
regulatory requirements with the exception of the following
occurrences:
• A notice of non-compliance was issued to Geodynamics
by the South Australian Department for Manufacturing,
Innovation, Trade, Resources and Energy (DMITRE) in March
2013 in relation to a breach of the 1 MWe Geothermal Plant
SEO. The breach related to a weed being introduced at the
site in the form of a small landscaped area of couch grass
adjacent to the amenities area at the Habanero base camp.
Geodynamics responded by removing the landscaped area.
No impact on the surrounding environment occurred; and
• A non-compliance with the Stimulation and Evaluation SEO
was detected in an internal environmental compliance audit
(October 2012) relating to minor surficial salinisation of soil
on the Habanero 4 drill pad by geofluid condensate drift
(generated during the clean-up open flow). Geodynamics
responded by constructing a cover for the open flow outlet
to minimise condensate drift and recent sampling of soil
indicates a normal level of salt in the soil.
• No serious environmental incidents occurred and only one
reportable (to DMITRE) incident occurred. Three minor
environmental incidents occurred during the past year which were
addressed and closed out with negligible environmental impact.
• All scheduled environmental audits have been completed on
time, with the majority of the findings closed out or in progress.
• Consultation has been undertaken with all relevant stakeholders
prior to commencement of activities, including traditional
owners and pastoralists, with no complaints received.
• An environmental best practice reference guide (‘The Green
Book’) has been developed and is provided to site personnel
and contractors once inducted. It provides a best practice
reference guide specific to Geodynamics’ activities in the
Cooper Basin.
We continue to build on our environmental achievements by
seeking ways to reduce the day-to-day impact of our activities on
the environment, while at the same time maintaining a framework
for continued environmental performance focussing on mitigating
our environment impacts.
environMentaL reGULations
and perforMance (continued)
In particular, Geodynamics is focussing on rehabilitating those
areas that are no longer being actively used for geothermal
exploration and development. Monitoring and evaluation of
these areas indicates that Geodynamics’ rehabilitation work
at the Savina 1 and Celsius 1 & 2 well sites has resulted in good
vegetation cover that either meets or exceeds the revegetation
requirements for such well sites.
Even within active sites such as the main Habanero camp,
Geodynamics is minimising its footprint by cordoning off
areas not required for operations so that they can recover and
revegetate naturally.
indeMnification and insUrance of directors
and officers
During the financial year, the entity paid premiums in respect of
contracts insuring directors, secretaries, and executive officers
of the Group and related entities against liabilities incurred as
director, secretary or executive officer to the extent permitted
by the Corporations Act 2001, subject to the terms, conditions,
limitations and exclusions of the policy.
The total amount of insurance contract premiums paid was $35,500.
roUndinG
The amounts contained in this report and in the financial report
have been rounded to the nearest $1,000 (unless otherwise
stated) under the option available to the Company under ASIC
Class Order 98/0100. The Company is an entity to which the Class
Order applies.
share options
Unissued shares – employee options
As at the date of this report, there were 6,828,319 unissued
ordinary shares under employee options (2012 – 10,729,530).
Option holders do not have any right, by virtue of the option, to
participate in any share issue of the Company or any related body
corporate. The options are unlisted, issued for nil consideration
and have a term of three years. There were no employee options
granted during the financial year ended 30 June 2013 (2012 –
4,142,765). Refer to Note 16 of the financial statements for further
details of the options outstanding.
shares issued as a result of the exercise of employee options
There were no employee options exercised during the financial
year (2012 – Nil) or since the end of the financial year.
Unissued shares – shareholder options
As at the date of this report, there were no unissued ordinary
shares under shareholder options (2012 – Nil). Option holders do
not have any right, by virtue of the option, to participate in any
share issue of the Company or any related body corporate. There
were no shareholder options granted during the financial year
ended 30 June 2013 (2012 – Nil).
shares issued as a result of the exercise of shareholder options
There were no shareholder options exercised during the financial
year (2012 – Nil) or since the end of the financial year.
directors’ MeetinGs
During the period there were seven directors’ meetings held of which three were by telephone conference. The number of directors’
meetings and the number of meetings attended by each of the Directors of the Company during the financial period are as follows:
Directors’ Meetings
auDit & risk ManageMent
coMMittee Meetings
reMuneration
& noMinations
coMMittee Meetings
technical coMMittee
Meetings
health, saFety
& environMent
coMMittee Meetings
nuMber
helD whilst
in oFFice
nuMber
attenDeD
nuMber
helD whilst
in oFFice
nuMber
attenDeD
nuMber
helD whilst
in oFFice
nuMber
attenDeD
nuMber
helD whilst
in oFFice
nuMber
attenDeD
nuMber
helD whilst
in oFFice
nuMber
attenDeD
K. Spence
G. Ward
P. Chopra
B. Davies
J. Hamilton
M. Marier
A. Stock
M. Dave
7
7
3
7
7
7
7
3
7
7
3
7
7
5
7
0
-
-
-
3
1
3
-
-
-
-
-
3
1
2
-
-
2
-
-
2
-
-
2
-
2
-
-
2
-
-
2
-
2
-
1
-
2
-
1
-
2
-
1
-
2
-
1
-
1
-
-
-
1
-
1
-
1
-
-
-
1
-
1
-
2013 Annual Report GEODYNAMICS LIMITED 35
1. introduction
The remuneration report details the remuneration arrangements
for key management personnel (KMP) who are defined as those
persons having authority and responsibility for planning, directing
and controlling the major activities of the Company directly or
indirectly including any Director.
For the purposes of this report, the term ‘executive’ encompasses
the Managing Director and the executive management team of
the Company.
Non-executive Directors (NEDs)
K. Spence
Chairman
P. Chopra
Alternate Director – retired 29 November 2012
R. Davies
Director
J. Hamilton
Director
M. Marier
Director
A. Stock
Director
M. Dave
Director – retired 29 November 2012
Executive Directors
G. Ward
Managing Director and CEO
Other Executives
K. Coates
Operations Manager
R. Hogarth
Reservoir Engineering Manager
T. Pritchard
Chief Financial Officer & Company Secretary
A. Hodson
Well Engineering and Technology Manager
A. Mills
Project Engineering Team Leader
– appointed 5 September 2011
2. remuneration governance
remuneration committee
The Remuneration & Nominations Committee comprises three
Non-executive Directors. The Remuneration and Nominations
Committee has the primary objective of assisting the Board in
developing and assessing the remuneration policy and practices
of the Directors, Chief Executive Officer (CEO) and Senior
Executives who report directly to the CEO.
Specifically, the Board approves the remuneration arrangements
of the CEO, the aggregate annual fixed remuneration salary
review, the level of the short-term incentive (STI) pool and the
methodology for awards made under the long-term incentive
(LTI) plan, following recommendations from the Remuneration
& Nominations Committee. The Board also sets the aggregate
remuneration of NEDs, which is then subject to shareholder
approval, and NED fee levels.
Committee assessments incorporate the development of remuneration
policies and practices which will enable the Company to attract
and retain executives who will create value for shareholders.
DIrECTOr S’ rEp Or T
CONTINUED
directors’ MeetinGs (continued)
The Company had four committees during the year with the
following membership:
audit & risk Management committee – Membership comprises
three Non-executive Directors being Messrs Davies (Chair), Marier
and Hamilton.
remuneration & nominations committee – Membership
comprises three Non-executive Directors being Messrs Stock
(Chair), Spence and Davies.
technical committee – Membership comprises three Directors
being Messrs Hamilton (Chair), Spence and Chopra. The
Company’s Well Engineer and Technology Manager, Amy Hodson,
is an ex-officio member. A. Stock attended one of the Technical
Committee meetings as a proxy for P. Chopra. At a meeting
of Directors on 23 April 2013 the Board resolved to formally
dissolve the technical committee due to the original basis for the
formation of the committee no longer being applicable.
health, safety & environment (hse) committee – Membership
comprises four Non-executive Directors being Messrs Hamilton
(Chair), Spence, and Stock with G. Ward as an ex-officio member.
The Company’s Health and Safety Manager (K. Coates) is also an
ex-officio member of this Committee.
aUditor independence and non-aUdit services
The Directors received a declaration from the auditor of
Geodynamics Limited which is listed immediately after this report
and forms part of this Directors’ report.
During the 2013 financial year, no non-audit services were
provided by the entity’s auditor, Ernst & Young (2012: $nil). Other
assurance services provided by Ernst & Young represent audits of
government grants.
corporate Governance
The Directors recognise the need for the highest standards of
corporate behaviour and accountability and therefore support
and have adhered to the principles of Corporate Governance.
The Company’s Corporate Governance Statement is printed
immediately following this Directors’ Report.
reMUneration report (aUdited)
This remuneration report for the year ended 30 June 2013 outlines
the remuneration arrangements in place for Directors and Executives
of Geodynamics Limited in accordance with the requirements of the
Corporations Act 2001 and its Regulations. This information has been
audited as required by section 308(3C) of the Act.
The remuneration report is presented under the following sections:
1. Introduction
2. Remuneration governance
3. Executive remuneration arrangements
A. Remuneration principles and strategy
B. Approach to setting remuneration
C. Detail of Incentive Plans
4. Executive remuneration outcomes for 2012/13
(including link to performance)
5. Executive contracts
6. Non-executive Director remuneration
(including statutory remuneration disclosures)
7. Additional statutory disclosures
36 GEODYNAMICS LIMITED 2013 Annual Report
The Company aims to reward its executives with a level and
mix of remuneration commensurate with their position and
responsibilities within the Company and so as to:
• Reward executives for company, business division and
individual performance against targets set by reference to
appropriate benchmarks;
• Link reward with the strategic goals and performance of the
Company; and
• Ensure total remuneration is competitive by market standards.
3b. approach to setting remuneration
The Managing Director’s and key executives’ emoluments
are structured to retain and motivate executives by offering
a competitive base salary, a short term annual cash-based
performance related component together with longer term
performance incentives through periodic grants of shares and
share options which allow executives to align with the success of
Geodynamics Limited.
Remuneration consists of the following key elements:
• Fixed Remuneration – Base salary and superannuation;
• Variable Remuneration under the Geodynamics Short Term
Incentive Plan (STIP) – payable in cash at the end of the
financial year;
• Variable Remuneration under the Geodynamics Long Term
Incentive Plan (LTIP) – payable in Shares and Share Options.
Due to the Company’s low share price and the dilution involved
under the LTIP from issuing securities at such a share price, the
Board Resolved to suspend the LTIP with effect from 1 October
2011 and no issues have been made under the LTIP since that
date other than where there is a contractual obligation.
The level of fixed remuneration is set so as to provide a
base level of remuneration which is both appropriate to the
position and is competitive in the market. Fixed remuneration
of the Managing Director is reviewed annually by the
Remuneration and Nominations Committee and approved by
the Board. Factors considered include Company and individual
performance, relevant comparative remuneration in the market
and internal and, where appropriate, external advice. The
Remuneration and Nominations Committee has access to external
advice independent of management.
Senior executives receive their fixed (primary) remuneration in
cash. The fixed remuneration component of KMP is detailed in
Table 1 of this report.
reMUneration report (aUdited) (continued)
2. remuneration governance (continued)
Executives will be fairly and responsibly rewarded having regard to
the performance of the Company, the performance of the executive
and the general market environment. The Committee also assists
the Board in its own self evaluation by annually reviewing the
process for self evaluation. This considers attributes such as the
qualitative and quantitative nature of the review, and the mix
between total Board review and individual Director review.
The Remuneration & Nominations Committee meets regularly
through the year. The CEO attends remuneration committee
meetings by invitation, where management input is required.
The CEO is not present during any discussions related to his own
remuneration arrangements.
Further information on the Remuneration & Nomination
Committee’s role, responsibilities and membership can be found
on the Company’s web site at www.geodynamics.com.au.
Use of remuneration consultants
In keeping with the legislation relating to the appointment of
remuneration consultants for organisations, Hay Group was
appointed by the Chair of the Board of Directors to provide advice
on salary movements within the energy and resources sectors
of the market and in particular the Brisbane market for general
salaried employees and KMP.
During FY12/13 year, the Hay Group provided the Company
with reports on market movements and remuneration for senior
executives and selected other staff. These were used by the Board
in considering remuneration for the coming year.
The fees paid to the Hay Group for the remuneration
recommendations were $13,500.
The Company is satisfied the advice received from the Hay Group is
free from undue influence from the KMP to whom the remuneration
recommendations apply as the reports received from the Hay Group
were presented to the Remuneration and Nominations Committee
and were used in consideration of salary changes for FY13/14.
remuneration report approval at fY11/12 aGM
The FY11/12 remuneration report received positive shareholder
support at the FY11/12 AGM with a vote of 93.8% in favour.
3. executive remuneration arrangements
3a. remuneration principles and strategy
Geodynamics’ executive remuneration strategy is designed to
attract, motivate and retain highly skilled executives and align the
interests of executives and shareholders.
To this end, the company embodies the following principles in its
remuneration framework:
• Provide competitive salaries to attract high calibre executives;
• Link executive performance rewards to medium and longer term
shareholder value creation through the KPI linked Short Term
Incentive plan and periodic grants of shares and share options;
• Establish appropriate share price performance hurdles under its
long term incentive plan to align executive reward with shareholder
value creation, the achievement of which will depend on the
Company achieving key corporate milestones that are integral to
the Company’s successful completion of its business plan.
2013 Annual Report GEODYNAMICS LIMITED 37
The Geodynamics LTIP offers eligible employees and the
Managing Director of Geodynamics the opportunity to participate
in the growth of Geodynamics through participation in the:
• Geodynamics Limited Deferred Employee Share Plan (DESP); and
• Geodynamics Limited Employee Option Plan (EOP).
Shares and Options issued under the DESP and EOP respectively are
allocated and issued to participants for no consideration. The issue
of options and allocations of shares within the LTIP is also subject
to the participants’ satisfactory performance as judged by their line
manager with final payments approved by the Managing Director.
To become entitled to the shares and options, participants
are required to satisfy certain performance requirements. On
satisfying the performance requirements for options, the options
can be converted into shares by payment of the exercise price.
performance measure to determine vesting
The service requirements for shares issued under the DESP
require that for each annual allocation of shares made to
participants under the DESP, the participant will be required to
remain employed by Geodynamics or a Related Body Corporate
for 36 months from the date of allocation of the shares for the
shares to vest.
The performance requirements for options issued under the EOP
requires that options will only vest should the compound growth
in the Geodynamics share price increase by 15% per annum and
the participant remains employed by Geodynamics or a Related
Body Corporate for:
• 12 months from the date of allocation for 30% vesting of the
total option grant; and
• 24 months from the date of allocation for 30% vesting of the
total option grant; and
• 35 months from the date of allocation for 40% vesting of the
total option grant.
The Company uses a Total Shareholder Return (TSR) measure
as the performance hurdle for the Geodynamics EOP as outlined
below. A TSR based hurdle ensures an alignment between
medium term shareholder return and reward for executives. The
Board considers at this development stage of the Company’s
growth, share price increase itself is an adequate measure of TSR.
hedging of shares and options risk
Currently no Director or officer uses hedging instruments to limit
their exposure to risk on either shares or options in the Company.
The Company’s policy is that the use of such hedging instruments
is prohibited.
DIrECTOr S’ rEp Or T
CONTINUED
reMUneration report (aUdited) (continued)
3. executive remuneration arrangements (continued)
3c. details of incentive plans
short term incentive plan (stip)
The objectives of the Geodynamics STIP are to:
• Reward employees for their contribution in ensuring that
Geodynamics achieves the corporate key deliverables;
• Encourage team work;
• Enhance Geodynamics attracting and retaining high calibre and
high performing employees; and
• Link remuneration directly to the achievement of key annual
organisational objectives.
The Company has in place an annual STIP that establishes a
pool of funds up to a maximum of 30% of annualised fixed
remuneration, adjusted in size according to the achievement of
key Company Business Plan milestones in a year.
The distribution of the pool is to be determined by team
achievement in delivering the team business plan milestones.
Specifically, base targets are outlined that if achieved would result
in an award of 20% of annualised fixed remuneration. First stretch
targets are outlined that if achieved would result in an award
of up to 25% of fixed annual remuneration and second stretch
targets are outlined that if achieved would result in an award of
up to the maximum of 30% of fixed annual remuneration.
To participate in the Plan, eligible staff must be employed for at
least six months for the financial year in question meaning that for
the FY12/13 year, eligible staff must have started by 1 January 2013.
On an annual basis, after consideration of performance against
KPIs, the Board, in line with their responsibilities, determine the
amount, if any, of the short-term incentive to be paid from the
pool of funds.
Long term incentive plan (Ltip)
The objective of the Geodynamics LTIP is to retain, motivate
and reward senior executives and staff in a manner which aligns
this element of remuneration with the creation of long term
shareholder value. Due to the Company’s low share price and the
dilution involved under the LTIP from issuing securities at such a
share price, the Board resolved to suspend the LTIP with effect
from 1 October 2011 and no issues have been made under the LTIP
since that date other than where there is a contractual obligation.
The LTIP comprises two components: Geodynamics Limited
shares, and options to purchase Geodynamics Limited shares
at the current price, at a time in the future. The LTIP is designed
to provide rewards over a three year term. An allocation of
Geodynamics shares representing a deemed value of 15% of
annualised fixed remuneration is made each 12 month period.
An allocation of Geodynamics options to purchase shares
representing a deemed value of 45% of annualised fixed
remuneration is made each 36 month period meaning that
the option incentive is also deemed to represent 15% of the
annualised fixed remuneration for each 12 month period.
38 GEODYNAMICS LIMITED 2013 Annual Report
reMUneration report (aUdited) (continued)
4. executive remuneration outcomes for fY12/13
company performance and its link to short-term incentives
The key business plan milestones driving STI payment outcomes for FY12/13 with relevant performance against targets are outlined in
the table below:
Milestone
Health Safety & Environment – delivering the business plan safely with low environmental impact
Fy12/13 perForMance versus targets
Three of five base targets and
first stretch target met
Delivery of operational results on schedule, quality and budget with a weighting of time 20%, cost
40% and quality 40%
Five of six base targets met
Management of Finances – the Company remains securely funded through management
of income and costs, and uses financial resources to develop new opportunities.
Two of three base targets first
stretch target met
For FY12/13, the Company’s performance against the above key
Business Plan milestones resulted in a payment under the STI Plan
of a maximum of 10% of annualised fixed remuneration or one
third of the maximum bonus pool. The aggregate of annual STI
payments available for staff was approved by the Remuneration
and Nominations Committee. The payments made are recognised
as remuneration in the year in which STI was earned and therefore
the STI payments for FY12/13 which were paid in August 2013 are
reflected in the remuneration tables for FY12/13.
The following table outlines the proportion of maximum STI that
was earned and forfeited in relation to FY2013
naMe
G. Ward
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
proportion oF MaxiMuM
sti earneD in Fy13
proportion oF MaxiMuM
sti ForFeiteD in Fy13
32%
26%
39%
32%
48%
68%
74%
61%
68%
52%
company performance and its link to long-term incentives
The graph below shows the performance of the Company as measured by its share price and therefore by definition its Total
Shareholder Return. The loss per share from continuing operations for the last five years was as follows: 2008/09 - $0.054, 2009/10 -
$0.051, 2010/11 - $0.43, 2011/12 - $0.031, 2012/13 - $0.26.
Geodynamics Limited share price 2008 – 2013
$2.00
$1.80
$1.60
$1.40
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
Jun 08
Oct 08
Feb 09
Jun 09
Oct 09
Feb 10
Jun 10
Oct 10
Feb 11
Jun 11
Oct 11
Feb 12
Jun 12
Oct 12
Feb 13
Jun 13
2013 Annual Report GEODYNAMICS LIMITED 39
DIrECTOr S’ rEp Or T
CONTINUED
reMUneration report (aUdited) (continued)
company performance and its link to long-term incentives (continued)
No options vested during the year under the Employee Option Plan as share price vesting performance hurdles were not met.
596,753 shares vested during the year for seventeen employees who met the vesting hurdle of three years of continuous service.
471,698 shares were issued to the Deferred Employee Share Plan on behalf of Geoff Ward. These shares were issued under the Long
Term Incentive provision of his contract and have a vesting period of 36 months.
table 1 – remuneration of KMp of the company for the year ended 30 June 2013
short-terM
post eMployMent
share baseD payMent
total
perForMance
relateD
cash bonus
– short terM
incentive
194,508
27,345
26,819
29,808
16,519
38,142
salary
475,000
288,546
366,992
244,220
257,562
264,962
superannuation
shares
(aMortiseD cost)
options
(aMortiseD cost)
42,992
21,760
22,441
24,737
16,071
24,712
39,286
29,573
36,960
19,086
28,880
12,500
104,265
2,297
3,418
9,327
2,671
34,190
856,051
369,521
456,630
327,178
321,703
374,506
39.49%
16.02%
14.72%
17.79%
14.94%
22.65%
1,897,282
333,141
152,713
166,285
156,168
2,705,589
G. Ward
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Totals
table 2 – remuneration of KMp of the company for the year ended 30 June 2012
short-terM
post eMployMent
share baseD payMent
total
perForMance
relateD
cash bonus
– short terM
incentive
-
64,100
56,000
58,200
74,100
42,400
salary
476,479
268,850
320,726
244,340
284,444
206,439
superannuation
shares
(aMortiseD cost)
options
(aMortiseD cost)
19,917
29,966
33,905
27,218
30,816
22,396
25,000
34,274
44,840
19,711
35,004
9,375
112,145
20,596
30,654
20,540
23,949
34,284
633,541
417,786
486,125
370,009
448,313
314,894
21.65%
28.48%
27.05%
26.61%
29.68%
27.33%
1,801,278
294,800
164,218
168,204
242,168
2,670,668
G. Ward
K. Coates
R. Hogarth
T. Pritchard
A. Hodson 1
A. Mills 2
Totals
1 Deemed to be a KMP from 1 July 2011, full annual remuneration included
2 Appointed 5 September 2011
5. summary of executive contractual arrangements
Remuneration arrangements for KMP are formalised in employment
agreements. Details of these contracts are provided below.
The contracts below include arrangements entered into prior
to the amendments to the Corporations Act 2001 regarding
termination payments which came into effect on 24 November
2009. No contracts of the Company however exceed the revised
limits on termination payments.
Managing director and chief executive officer
Mr Geoff Ward was appointed Managing Director on 31 January
2011. Mr Ward’s remuneration package is formalised in a four year
service agreement, the details of which were announced to the
ASX on 29 November 2010. The key terms of Mr Ward’s contract
are as follows:
• He receives a base remuneration including superannuation of
$500,000 per annum;
• Short Term Incentive – Up to $250,000 per annum which is only
payable on the achievement of certain performance milestones.
The members of the Remuneration and Nominations Committee
have assessed that Mr Ward is eligible for a payment under the
Short Term Incentive Scheme of 85% of the maximum payable
or $212,500 including superannuation, having achieved key
financial and operational milestones identified for FY2013..
The key performance milestones set for Mr Ward for FY12/13
were delivering results to achieve agreed strategy, including
achievement of planned milestones at the Habanero Project and
identification of and successful acquisition of the Savo Island
Geothermal Power Project, securing funding to deliver strategy,
strengthening alignment with key stakeholders and partners
necessary to support project development, building the right
organisational capacity to deliver projects while adapting to a high
level of environmental uncertainty and increasing Geodynamics’
influence as the energy market in Australia transforms.
40 GEODYNAMICS LIMITED 2013 Annual Report
reMUneration report (aUdited) (continued)
5. summary of executive contractual arrangements (continued)
• Long term incentive (Shares) – an annual grant equivalent
in the number of shares in value to 15% of annual base
remuneration as set out under the rules associated with the
Company’s Deferred Employee Share Plan. The first grant will
occur three months after the commencement of employment
and then annually on the anniversary of the commencement
of employment. The issue price will be the volume weighted
average share price for the five trading days prior to the date
of issue of the shares. Each grant of shares will have a vesting
period of 36 months but all shares will vest if the full term of 48
months is served under the employment agreement;
• Long term incentive (Options) – A grant of a total of 2,700,000
options subject to the rules of the Company’s Employee Option
Plan and exercisable in four tranches as follows:
• 400,000 options will vest on the commencement of
employment and will be exercisable from the first date that
the volume weighted average share price in a period of 20
consecutive trading days is 150% higher than the exercise
price of 48 cents;
• 500,000 options will vest 31 January 2012 and will be
exercisable from the first date that the volume weighted
average share price in a period of 20 consecutive trading
days is 200% higher than the exercise price of 48 cents;
• 900,000 options will vest 31 January 2013 and will be
exercisable from the first date that the volume weighted
average share price in a period of 20 consecutive trading
days is 250% higher than the exercise price of 48 cents;
• 900,000 options will vest 31 January 2014 and will be
exercisable from the first date that the volume weighted
average share price in a period of 20 consecutive trading
days is 250% higher than the exercise price of 48 cents.
• The last exercise date of all tranches of options is 31 January
2014. The exercise price applying is the 10 day volume
weighted average price of the Company’s shares traded on
the ASX leading up to the date of the appointment being 25
November 2010 which was 48 cents.
• The allotment of shares to Mr Ward during the 2013 financial
year was made pursuant to his contract of employment. The
allotment of shares and options included was set out in the
contract as approved by shareholders at the November 2011
Annual General Meeting.
The CEO’s termination provisions are as follows:
notice perioD
payMent in lieu oF notice*
treatMent oF sti on terMination
treatMent oF lti on terMination
Resignation
6 months
6 months
Unvested awards forfeited
Unvested awards forfeited
Termination for cause
14 days
None
Unvested awards forfeited
Unvested awards forfeited
Termination in cases
of long term illness,
disablement, or notice
without cause
6 months
6 months
Maybe prorated for time
and performance subject
to Board discretion
Maybe prorated for time
and performance subject to
Board discretion
Change of control
14 days
12 months
Prorated for time
and performance
Prorated for time and
performance
*If the time remaining under the 4 year contract is less than 6 months then that lesser amount.
other KMp
All other KMP have rolling contracts.
Other standard KMP provisions are as follows:
notice perioD
payMent in lieu oF notice
treatMent oF sti on terMination
treatMent oF lti on terMination
Resignation
3 months
3 months
Unvested awards forfeited
Unvested awards forfeited
Termination for cause
None
None
Unvested awards forfeited
Unvested awards forfeited
Termination in cases
of death, disablement,
or notice without cause
3 months
3 months
Change of control
1 month
1 month
Maybe prorated for time
and performance subject
to board discretion
Maybe prorated for time
and performance subject
to board discretion
Prorated for time
and performance
Prorated for time and
performance
2013 Annual Report GEODYNAMICS LIMITED 41
DIrECTOr S’ rEp Or T
CONTINUED
reMUneration report (aUdited) (continued)
structure
6. non-executive director remuneration arrangements
remuneration policy
The Board seeks to set aggregate remuneration at a level which
provides the Company with the ability to attract and retain
directors of the highest calibre, whilst incurring a cost which is
acceptable to shareholders.
The amount of aggregate remuneration sought to be approved by
shareholders and the manner in which it is apportioned amongst
Directors is reviewed annually. The Board considers advice from
external consultants as well as the fees paid to Non-executive
Directors of comparable companies when undertaking the annual
review process. The amounts are set at a level that compensates
the Directors for their significant time commitment in overseeing
the progression of the Company’s business plan.
The Constitution of Geodynamics and the ASX Listing Rules
specify that the aggregate remuneration of Non-executive
Directors shall be determined from time to time by a general
meeting. An amount not exceeding the amount determined
is then divided between the directors as agreed. The latest
determination was at the Annual General Meeting held on 28
November 2007 when shareholders approved an aggregate
remuneration of $700,000 per year.
The Board will not seek any increase for the NED pool at the 2013 AGM.
Each Non-executive Director receives a fee for being a Director of
the Company. The current fee structure is to pay Non-executive
Directors a base annual remuneration of $64,500 p.a. with the
Chairman paid $118,250 p.a. The Chairman of each committee
receives an additional fee of $16,125 p.a. These fee structures have
remained the same with no increase in the past four years. There
are no retirement benefits offered to Non-executive Directors
other than statutory superannuation which is in addition to
these amounts. In accordance with good corporate governance
practice, the Non-executive Directors do not participate in share
and share option based remuneration plans of the Company.
The Company notes that Origin Energy Limited and collectively
Sunsuper Pty Ltd & The Sentient Group, as major investors, each
have a right to appoint a Non-executive Director to the Company
and as such those Directors (where appointed) are not considered
by the ASX Corporate Governance Principles to be independent.
Origin Energy formally waived their right to appoint a nominee
director on 15 August 2012. As Mr A. Stock retired from Origin on
30 June 2012 he is now considered to be independent.
The remuneration of Non-executive Directors for the year
ending 30 June 2013 is detailed in Table 3 of this report and the
remuneration for the comparative year ending 30 June 2012 is
detailed in Table 4 of this report.
table 3 – non-executive directors’ remuneration for the year ended 30 June 2013
salary &
consulting Fees
Directors Fees
superannuation
other
K. Spence
P. Chopra 1
R. Davies
J. Hamilton
M. Marier
A. Stock
M. Dave 1
Totals
-
-
-
-
-
-
-
-
118,250
35,875
80,625
87,881
64,500
80,625
-
10,643
2,419
7,256
-
5,805
7,256
-
467,756
33,379
-
-
-
-
-
-
-
-
1 Retired 29 November 2012
table 4 – non-executive directors’ remuneration for the year ended 30 June 2012
salary &
consulting Fees
Directors Fees
superannuation
shares
(aMortiseD cost)
K. Spence
B. Agrawala 1
P. Chopra
R. Davies
J. Hamilton
M. Marier
A. Stock
M. Dave 2
Totals
-
-
-
-
-
-
-
-
-
118,250
-
56,250
80,625
87,881
64,500
80,625
-
488,131
10,642
-
5,063
7,256
-
-
7,256
-
30,217
-
-
-
-
-
-
-
-
-
total
128,893
38,294
87,881
87,881
70,305
87,881
-
501,135
total
128,892
-
61,313
87,881
87,881
64,500
87,881
-
518,348
1 Retired 24 November 2011
2 Appointed 23 February 2012. Fees are paid to the Alternate Director, Prame Chopra.
42 GEODYNAMICS LIMITED 2013 Annual Report
reMUneration report (aUdited) (continued)
7. additional statutory disclosures
table 5 – shares granted to executives as part of remuneration for the year ended 30 June 2013
During the financial year, no shares were granted or were proposed to be granted under the Long Term Incentive Plan other than those
granted on behalf of Geoff Ward in accordance with his contract.
grant Date
granteD
nuMber
value oF shares
granteD During
the year
% oF
reMuneration #
value oF shares
vesteD During
the year
value oF shares
ForFeiteD
During the year
value per share
at grant Date
R. Hogarth
K. Coates
A. Hodson
T. Pritchard
G. Ward
22/2/13
471,698
$75,000
15%
6,261
4,206
4,891
4,600
-
-
-
-
-
-
0.92
0.92
0.92
0.45
0.16
table 6 – options granted to executives as part of remuneration for the year ended 30 June 2013
During the financial year, no options were granted or were proposed to be granted under the Long Term Incentive Plan.
grant Date
granteD
nuMber
value oF
options granteD
During the year
% oF
reMuneration
value oF options
exerciseD During
the year
value oF
options lapseD
During the year
value per
option at
grant Date
weighteD
average
exercise price
R. Hogarth
K. Coates
A. Hodson
T. Pritchard
Signed in accordance with a resolution of the Directors.
36,060
24,228
28,172
26,494
0.48
0.48
0.48
0.23
0.92
0.92
0.92
0.45
K. spence
Chairman
Brisbane, 30 August 2013
2013 Annual Report GEODYNAMICS LIMITED 43
AuDITOr’S INDEpENDENCE
DECLAr ATION TO ThE DIrECTOr S
Of GEODYNAMICS LIMITED
aUditor’s independence d ecLaration to the directors of GeodYnaMics LiMited
In relation to our audit of the financial report of Geodynamics Limited for the financial year ended
30 June 2013, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
ernst & Young
andrew carrick
Partner
30 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
44 GEODYNAMICS LIMITED 2013 Annual Report
COrp Or ATE
GOVErNANCE STATEMENT
The Board of Directors of Geodynamics Limited is responsible for the
corporate governance of the Company and is committed to achieving
and demonstrating the highest standards of corporate governance.
For further information on corporate policies adopted by
Geodynamics Limited, please refer to “Governance” under the Our
Company Tab on our website located at www.geodynamics.com.au.
For 2013, the Company’s reporting against the Principles is as follows:
1. LaY soLid foUndations for ManaGeMent
and oversiGht
Companies should establish and disclose the respective roles and
responsibilities of Board and management.
The Board operates in accordance with the following principles
and guidelines.
• The Board does comprise a majority of Non-executive Directors.
• The Chairperson is an independent Director.
• The Board does comprise Directors with an appropriate range
of qualifications and expertise.
• The terms and conditions of the appointment of Non-
executive Directors are set out in a letter of appointment. The
appointment letter covers the following matters:
• the level of remuneration;
• the tenure of appointment;
• the expectation of the Board in relation to attendance and
preparation for all Board meetings;
• the Directors code of conduct;
• the procedures dealing with conflicts of interest; and
• the availability of independent advice - The Board has agreed a
procedure for Directors to take independent professional advice
at the expense of the Company. Prior approval of the Chairman
is required, but this will not be unreasonably withheld.
• The Board meets as often as required to attend to the affairs of
the Company and follow meeting guidelines set down to ensure
all Directors are made aware of, and have available to them
all necessary information enabling them to participate in an
informed discussion of all agenda items.
• The Chairman of the Board meets regularly with the
Managing Director.
The Geodynamics Limited Corporate Governance Statement is
structured with reference to the Australian Securities Exchange
Corporate Governance Council’s “Corporate Governance
Principles and Recommendations with 2010 Amendments” as
revised in June 2010 the Principles of which are as follows:
Principle 1. Lay solid foundations for management and oversight
Principle 2. Structure the Board to add value
Principle 3. Promote ethical and responsible decision making
Principle 4. Safeguard integrity in financial reporting
Principle 5. Make timely and balanced disclosure
Principle 6. Respect the rights of shareholders
Principle 7. Recognise and manage risk
Principle 8. Remunerate fairly and responsibly
This Corporate Governance Statement contains certain specific
information and discloses the extent to which the Company
has followed the guidelines during the period. Where a
recommendation has not been followed, that fact is disclosed,
together with the reasons for the departure.
Geodynamics Limited’s corporate governance practices were in place
throughout the year ended 30 June 2013 and were fully compliant
with the Council’s recommendations except for the following:
Recommendation 3.3 - Companies should disclose in each annual
report the measurable objectives for achieving gender diversity
set by the Board in accordance with the diversity policy and
progress towards achieving them. The Company has adopted a
Diversity Policy that encourages the participation and provision
of opportunity to all interested in working at Geodynamics. As the
Company has a relatively small work-force with many requiring
specific skills that may not be widely available , the Company
has not deemed it appropriate to set specific numeric targets
as these could be inappropriately skewed by the small sample
size. Geodynamics currently has participation from a diverse
workforce, with gender diversity being in advance of industry
averages for our sector.
Recommendation 3.4 - Companies should disclose in each
annual report the proportion of women employees in the whole
organisation, women in senior executive positions and women
on the Board. The Company has adopted a Diversity Policy that
encourages the participation and provision of opportunity to all
interested in working at Geodynamics. As the Company has a
relatively small work-force with many requiring specific skills that
may not be widely available, the Company has not deemed it
appropriate to publish specific employment numbers as Company
does not believe this information adds any meaningful value due
to its small workforce.
2013 Annual Report GEODYNAMICS LIMITED 45
COr p Or ATE GOVErNA NCE
STATEMENT CONTINU ED
1. LaY soLid foUndations for ManaGeMent
and oversiGht (continued)
The Board is responsible for the direction and supervision of the
Company’s business on behalf of the shareholders, by whom they are
elected and to whom they are accountable. This includes ensuring
that internal controls and reporting procedures are adequate and
effective. The Directors recognise the need to maintain the highest
standards of behaviour, ethics and accountability. The primary
functions of the Board include responsibility for:
• Approving objectives, goals and strategic direction for management;
• Monitoring financial performance including adopting annual
budgets and approving the Company’s financial statements;
• Ensuring that adequate systems of internal control exist and are
appropriately monitored for compliance;
• Selecting, appointing and reviewing the performance of the
Managing Director and Chief Executive Officer and reviewing
the performance of senior operational management;
• Ensuring significant business risks are identified and
appropriately managed; and
• Reporting to shareholders on performance.
The Company’s Managing Director’s performance and
remuneration is reviewed annually by the Non-executive
Directors. The performance criteria against which executives are
assessed is aligned with the financial and non-financial objectives
of Geodynamics Limited. Further details of the process for
evaluating performance are set out in the Remuneration Report.
The Board may determine from time to time to establish specific
purpose sub-committees to deal with specific issues. All matters
determined by committees are submitted to the full Board as
recommendations for Board decision. Minutes of committee
meetings are tabled at the immediate subsequent Board meeting.
2. strUctUre the board to add vaLUe
Companies should have a board of an effective composition, size and commitment to adequately discharge its responsibilities and duties.
sKiLLs, eXperience and eXpertise of directors
The Directors in office at the date of this statement are:
naMe
position
inDepenDent
terM in oFFice
expertise
Keith Spence
Non-executive Chairman
Geoff Ward
Managing Director
Robert Davies
Non-executive Director
Jack Hamilton
Non-executive Director
Michel Marier
Non-executive Director
Andrew Stock
Non-executive Director
Yes
No
Yes
Yes
No
Yes
5.1 years
2.6 years
4.8 years
6.9 years
2.5 years
9.8 years
Energy, Engineering and Management
Energy, Engineering, Corporate Finance
and Management
Finance, Governance and Management
Energy, Engineering and Management
Finance and Management
Energy, Engineering and Management
independent directors
Directors of Geodynamics Limited are considered to be independent
when they are independent of management and free from any
business or other relationship that could materially interfere with,
or could reasonably be perceived to materially interfere with the
exercise of their unfettered and independent judgement.
In the context of director independence, ‘materiality’ is considered
from both the Company and individual director perspective.
The determination of materiality requires consideration of
both quantitative and qualitative elements. Qualitative factors
considered include whether a relationship is strategically important,
the competitive landscape, the nature of the relationship and the
contractual or other arrangements governing it and other factors
which point to the actual ability of the Director in question to shape
the direction of the Company’s loyalty.
In accordance with the definition of independence above, and the
materiality thresholds set, the Directors as marked in the previous
table are considered to be independent. Therefore there are six
Non-executive Directors, four of whom are deemed independent,
and one Executive Director. One Non-executive Director who is
not deemed independent is an Officer of one of the Company’s
three largest shareholders which has a right to appoint a Director
to the Board under their Investment Deed. (The Sentient Group
and Sunsuper Pty Ltd are jointly treated as a cornerstone investor
in so far as they have a collective right to appoint a Director).
Further details of the members of the Board including their
experience and expertise are set out in the Directors’ Report.
46 GEODYNAMICS LIMITED 2013 Annual Report
2. strUctUre the board to add vaLUe (continued)
perforMance
non-eXecUtive directors
The six Non-executive Directors periodically meet for a period of
time, without the presence of management, to discuss the operation
of the Board and a range of other matters including those relating to
Remuneration and Directors’ Nominations. Relevant matters arising
from these meetings are shared with the full Board.
terM of office
The Company’s constitution specifies that all Directors (with the
exception of the Managing Director) must retire from office no
later than the third annual general meeting (AGM) following their
last election. Where eligible, a Director may stand for re-election.
noMinations
The Company has established a combined Remuneration and
Nominations Committee. Membership and composition of this
Committee is discussed at the end of this Corporate Governance
Statement. With regard to the Nominations charter of the
Committee, the main functions of the Committee are to:
• Devise criteria (necessary and desirable competencies) for
Board membership for approval by the full Board.
• Identify specific individuals for nomination.
• Make recommendations to the Board for new Directors and
membership of committees being always mindful that any
recommendation should ensure there is a complementary mix
of necessary skills.
• Annually, assist the Chairman of the Company in advising
Directors about their performance and tenure.
• Oversee management succession plans, including the Managing
Director and Chief Executive Officer and first line managers;
• Review of the Board succession plan.
• Critically examine the Committee’s performance and
recommend any changes to the responsibilities to the Board.
In devising criteria for Board membership, the Company uses a
Board skills matrix to identify any gaps in the skills and experience
of the Directors on the Board. In addition, the Company uses a
combination of professional intermediaries to identify and assess
candidates as well as the network of contacts within the Board itself.
In order to ensure that the Board continues to discharge its
responsibilities in an appropriate manner, the performance of all
Non-executive Directors is reviewed annually by the Chairman. In
addition during the year, all Directors completed a structured self
evaluation questionnaire that aimed to evaluate the performance
of the Board as a whole. These responses are collated and
subsequently discussed by the Board to improve the functional
operations of the Board. The Chairman meets privately with each
Director as appropriate to discuss their individual performance.
The Chairman’s performance is reviewed by the Board.
3. proMote ethicaL and responsibLe
decision-MaKinG
Companies should actively promote ethical and responsible
decision-making.
The Company supports and has adopted the Code of Conduct
published by The Australian Institute of Company Directors in
2005. This code recognises the need for Directors and employees
to observe the highest standards of behaviour and business ethics
and its commitment to ensuring compliance with the insider
trading laws.
The Company has established a policy regarding Diversity that is
underpinned by four key principles:
• Fairness: Every person will have the opportunity to work and
succeed at Geodynamics - regardless of their gender, nationality,
background, age, physical ability or sexual orientation.
• Support: The Company will support the varying needs of its
diverse workforce by providing flexible working conditions and
ensuring programs are in place to enable every Geodynamics
employee to reach their career potential.
• Respect: Every Geodynamics employee will be treated with
dignity and respect, recognising that success depends upon
the commitment, capabilities and diversity of the Company’s
employees.
• Leadership: The Board and senior leaders will be ultimately
responsible for instilling a culture that embraces and values
diversity amongst the workforce.
At least once every 12 months, the Remuneration and
Nominations Committee will review the Diversity Policy including
a review of the diversity objectives and initiatives to ensure they
remain current and appropriate and a review of progress on the
achievement of diversity objectives over the preceding year.
2013 Annual Report GEODYNAMICS LIMITED 47
COr p Or ATE GOVErNA NCE
STATEMENT CONTINU ED
4. safeGUard inteGritY of financiaL reportinG
Companies should have a structure to independently verify and
safeguard the integrity of their financial reporting.
The Board has adopted an Audit & Risk Committee Charter to
ensure the truthful and factual presentation of the Company’s
financial position and to review and advise on the company’s risk
management processes. Audit & Risk Committee meetings will
be held periodically throughout the year. It is the policy of the
Board that the members of the committee shall be a minimum of
three Non-executive Directors. The Audit & Risk Committee will
be chaired by a Non-executive Director other than the Chairman
of the Board.
The Chief Executive Officer and Chief Financial Officer may attend
the committee meetings by invitation.
The main functions of the committee will be to:
• Assess the appropriateness of accounting policies, practices
and disclosures and whether the quality of financial reporting
is adequate;
• Review the scope and results of internal, external and
compliance audits;
• Maintain open lines of communication between the Board and
external auditors and the Company’s compliance officers;
• Review and report to the Board on the annual report, the
half-year financial report and all other financial information
published by the Company or released to the market;
• Assess the adequacy of the Company’s internal controls and
make informed decisions regarding compliance policies,
practices and disclosures;
• Ensure effective deployment of risk management processes;
• Nominate the external auditors and review the terms of their
engagement, the scope and quality of the audit and the
auditor’s independence;
• Review the level of non-audit services provided by the external
auditors and ensure that it does not adversely impact on
auditor independence.
The Chairman of the Audit & Risk Management Committee
reviews the performance of the Committee with members and
reports annually to the Board.
The members of the Audit & Risk Committee during the year were:
Robert Davies (Chairman)
Michel Marier
Prame Chopra
Jack Hamilton.
Qualifications of audit & risk committee members
Robert Davies CMA has extensive senior finance experience with
global mining and resource companies. He has held a number
of senior management responsibilities including Executive Vice
President and Chief Financial Officer for Inco Ltd, Chief Financial
Officer for Alumina Ltd and General Manager Treasury Tax and
Investor Relations for WMC Ltd. He has previously held senior
finance positions with BHP in Canada, the US, Chile and Australia,
acquiring significant operational and corporate finance experience.
Prame Chopra B.Sc. (Hons), Ph.D, FAICD, MAGU, MASEG, MIGA,
MASC was a Reader in Geophysics at The Australian National
University in Canberra from 1996 - 2006. He obtained his
Ph.D in rock physics at the ANU in 1980 and has held research
appointments at ANU, Cornell University in New York and at the
Bureau of Mineral Resources, Geology & Geophysics and the
Australian Geological Survey Organisation. Mr Chopra retired from
the Board on 29 November 2012.
Michel Marier joined The Sentient Group in 2009. Before joining
the Sentient Group, Mr Marier worked 8 years at the Private
Equity division of la Caisse de dépôt et placement du Québec
(CDPQ). While at CDPQ, his responsibilities ranged from currency
hedging, risk and return analysis to investments. In 2006, he
participated in the establishment of a new sector in the Private
Equity division – distressed debt. Michel Marier holds a Master’s
degree in finance from HEC Montreal. He is a CFA charter holder.
He is a former director of Natural Resources USA Corp.
Dr Jack Hamilton was formerly CEO of Exergen Pty Ltd, a low
emission coal resource development Company and prior Director
of NWS Ventures with Woodside Energy. Dr. Hamilton is also a
non-executive director of Southern Cross Electrical Engineering
Ltd and Calix Ltd. Dr Hamilton graduated from Melbourne
University with a Bachelor of Chemical Engineering and Doctorate
of Philosophy in 1981. He has over 28 years’ experience both
locally and internationally in operations management, in refining,
petrochemicals and gas production, marketing, strategy and LNG
project management.
For details on the number of meetings of the Audit Committee
held during the year and the attendees at those meetings, refer to
the Directors’ Report.
48 GEODYNAMICS LIMITED 2013 Annual Report
5. MaKe tiMeLY and baLanced discLosUre
Companies should promote timely and balanced disclosure of all
material matters concerning the company.
7. recoGnise and ManaGe risK
Companies should establish a sound system of risk oversight,
management and internal control.
The Board has adopted a Listing Rule 3.1 Compliance Policy, which
has been designed to ensure compliance with the ASX Listing
Rule disclosure requirements and to ensure accountability at a
senior management level for that compliance.
The Company is committed to having a culture of risk
management and has established a risk management system
that supports a pro-active approach to managing risk and to
exploiting opportunity at all levels.
The Company Secretary has been nominated as the person
responsible for communications with the Australian Securities
Exchange (ASX). This role includes responsibility for ensuring
compliance with the continuous disclosure requirements in the
ASX listing rules and overseeing and co-ordinating information
disclosure to the ASX, analysts, brokers, shareholders, the media
and the public.
The Company rigorously polices its continuous disclosure
responsibilities to ensure a fully informed market at all times.
The Company’s Continuous Disclosure Policy is available on the
Company’s website.
6. respect the riGhts of sharehoLders
Companies should respect the rights of shareholders and facilitate
the effective exercise of those rights.
The Board of Directors aims to ensure that the shareholders,
on behalf of whom they act, are provided with all information
necessary to assess the performance of the Company. Information
is communicated to the shareholders through:
• The Annual Report, which will be distributed to all shareholders
(unless shareholders specifically indicate otherwise);
• Quarterly Reports to all shareholders;
• The Annual General Meeting, and other meetings called to
obtain approval for Board action as appropriate; and
• The Company’s Corporate Internet site at www.geodynamics.
com.au. This web site is actively maintained and includes
all market announcements, research reports from analysts,
briefings to shareholders, full texts of notices of meeting and
explanatory material and compliance reports such as the
quarterly cash flow report and annual report.
Shareholders are actively encouraged to become ‘online
shareholders’ by registering electronically with the Company to
receive an email notification of announcements as they are made.
The Company endeavours to respond to all shareholder queries
on a prompt and courteous basis.
All information disclosed to the ASX is posted on the Company’s
website as soon as it is disclosed to the ASX.
A series of extensive workshop reviews have been held for each
component phase of the Company’s business plan and these
will continue to be held for subsequent stages to highlight
major risk areas and plan the treatment to manage those risks.
In addition, a formal risk management plan is included as part
of every major capital acquisition or procurement decision and
key risk/opportunity areas and their drivers are included in
the Management/Board reporting system. The Board has also
established a Health Safety and Environment Committee which
operates under a charter approved by the Board.
Management, through the Managing Director and Chief
Executive Officer, is responsible for designing, implementing and
reporting on the adequacy of the Company’s risk management
and internal control system. Management reports to the Audit
and Risk Committee on the Company’s key risks and the extent to
which it believes these risks are being managed. This is performed
on a six monthly basis or more frequently as required by the
Board or Committee.
The Board is responsible for satisfying itself annually, or more
frequently as required, that management has developed and
implemented a sound system of risk management and internal
control. It reviews strategic, operational and technical risks in
conjunction with, and as a key input to an annual corporate
strategy workshop attended by the Board and senior management.
This workshop reviews the Company’s strategic direction in detail
and includes specific focus on the identification of business risks
which could prevent the Company from achieving its objectives.
Management are required to ensure that appropriate controls and
mitigation strategies are in place to effectively manage those risks.
Compliance and reporting risks are reviewed on an ongoing basis
and independently audited from time to time. The Audit and Risk
Committee oversees the adequacy and comprehensiveness of risk
reporting from management.
2013 Annual Report GEODYNAMICS LIMITED 49
COr p Or ATE GOVErNA NCE
STATEMENT CONTINU ED
7. recoGnise and ManaGe risK (continued)
The Board receives a written assurance from the Chief Executive
Officer and the Chief Financial Officer that to the best of their
knowledge and belief, the declaration provided by them in
accordance with section 295A of the Corporations Act is founded
on a sound system of risk management and internal control and
that the system is operating effectively in relation to financial
reporting risks. The Board notes that due to its nature, internal
control assurance from the Chief Executive Officer and Chief
Financial Officer can only be reasonable rather than absolute.
This is due to such factors as the need for judgement, the use
of testing on a sample basis, the inherent limitations in internal
control and because much of the evidence available is persuasive
rather than conclusive and therefore is not and cannot be
designed to detect all weaknesses in control procedures.
technicaL coMMittee
Technical Committee meetings are held on an as required basis
but generally there will be at least two meetings throughout the
year. The Committee is comprised of a Chair drawn from the
Non-Executive Directors of the Geodynamics Board, the Well
Engineering and Technology Manager and Chief Scientific Officer
are ex-officio members. The Technical Committee has been given
the following Terms of Reference:
• Advise the Board on issues related to the technical risks,
mitigations and opportunities associated with the key
technical domain areas the Company related to the Company’s
development plans;
• Provide guidance and challenge to management on
technical issues;
• Review and advise the Audit and Risk Committee of the Board
on the Technical Risks and their potential impact on the broader
Company objectives;
• Each member shall have the responsibility to initiate issues that
should be brought to the attention of the committee or Board.
The members of the Technical Committee during the year were:
Jack Hamilton (Chairman)
Keith Spence
Prame Chopra
At a meeting of Directors on 23 April 2013 the Board resolved to
formally dissolve the technical committee due to the original basis
for the formation of the committee no longer being applicable.
heaLth, safetY & environMent coMMittee
Health, Safety & Environment (HSE) meetings are held on an as
required basis. The Committee is comprised of a Chair drawn
from the Non-executives of the Geodynamics Board. It is the
policy of the Board that the members of the committee shall be a
minimum of three Non-executive Directors. The HSE Committee
has been given the following Terms of Reference:
• Its primary objective is to assist the Board of Directors in its
responsibilities relating to establishing and maintaining the highest
standards of HSE performance by Geodynamics, and compliance
with all relevant legislation. In addition the Committee will ensure
that Management reports to the Board on:-
• Compliance with statutory requirements, codes, standards,
and guidelines;
• Establishment of measurable objectives and targets aimed
at elimination of work related incidents or environmental
impacts from Geodynamics’ activities;
• The defining of roles, responsibilities and levels of
accountability for HSE within Geodynamics.
• Act as an independent and objective party to review the
safety and environmental performance reports presented by
management for the use of all stakeholders.
• Review HSE risk assessment processes and monitor their
effectiveness.
• Review all significant Geodynamics incident reports along
with the results of the subsequent investigations and the
implementation of the identified corrective actions.
• Oversee and appraise the quality of the health & safety and the
environmental audits conducted by the HSE auditors.
• Ensure through regular meetings that open lines of communication
exist among the Board, Management and HSE Auditors.
The members of the HSE Committee during the year were:
Jack Hamilton (Chairman)
Keith Spence
Prame Chopra
Andrew Stock
50 GEODYNAMICS LIMITED 2013 Annual Report
With regard to the Remuneration charter of the Committee, the
main functions of the Committee are to:
• Set the terms and conditions of employment for the Chief
Executive Officer.
• Set policies for Senior executive remuneration including the
Chief Executive Officer and other Executive Directors (if any)
and review from time to time as appropriate.
• Set policies for Non-executive Director remuneration and review
and recommend the level of remuneration with the assistance
of external consultants as appropriate.
• Make recommendations to the Board on remuneration for the
Chief Executive Officer and Executive Director(s).
• Review and approve the recommendations of the Chief
Executive Officer on the remuneration of Senior executives.
• Review all equity based plans and make recommendations to
the Board for approval.
• Review and approve the design of executive Incentive Plans
ensuring appropriate performance hurdles are in place.
• Review transactions between the group and the Directors,
or any interest associated with the Directors, to ensure the
structure and the terms of the transaction are in compliance
with the Corporations Act 2001 and are appropriately disclosed.
• Review and approve the annual Remuneration Report
contained within the Directors’ Report.
The members of the Remuneration and Nominations Committee
during the year were:
Andrew Stock (Chairman)
Keith Spence
Robert Davies
For details on the number of meetings of the Remuneration and
Nominations Committee held during the year and the attendees
at those meetings, refer to the Directors’ Report.
8. reMUnerate fairLY and responsibLY
Companies should ensure that the level and composition of
remuneration is sufficient and reasonable and that its relationship
to performance is clear.
reMUneration
It is the Company’s objective to provide maximum stakeholder
benefit from the retention of a high quality Board and executive
team by remunerating Directors and key executives fairly and
appropriately with reference to relevant employment market
conditions. The Managing Director’s and key executives’
emoluments are structured to retain and motivate executives by
offering a competitive base salary together with short and long
term performance incentives through cash, shares and options
which allow executives to share in the success of Geodynamics
Limited. The Board will assess the appropriateness of the nature
and amount of emoluments of such officers on a periodic basis
by reference to relevant employment market conditions with the
overall objective of ensuring maximum stakeholder benefit.
The Company currently has five Non-executive Directors and a
Managing Director. The Company’s Managing Director does not
receive Directors’ fees and his remuneration package is formalised
in a service agreement. The Non-executive Directors’ maximum
aggregate remuneration as approved by shareholders is currently
$700,000 and is set at a level that compensates the directors for
their significant time commitment in overseeing the progression
of the Company’s business plan.
There are no retirement benefits offered to Non-executive
Directors other than statutory superannuation. For a full
discussion of the Company’s remuneration philosophy and
framework and the remuneration received by Directors and
Executives in the current period, please refer to the Remuneration
Report which is contained within the Directors’ Report.
reMUneration and noMinations coMMittee
The Remuneration and Nominations Committee operates under
a charter approved by the Board. Remuneration and Nomination
Committee meetings are held at least semi-annually and otherwise
as required throughout the year. It is the policy of the Board that
the members of the Committee shall be a minimum of three Non-
executive Directors and a majority of independent directors. The
Remuneration and Nominations Committee will be chaired by a
Non-executive Director other than the Chairman of the Board.
2013 Annual Report GEODYNAMICS LIMITED 51
CONSOLIDATED STATE MEN T
Of COMprEhE NSIV E INCOM E
FINANCIAL YEAR ENDED 30 JUNE 2013
Continuing Operations
Interest Income
Total Revenue
Impairment of Property, Plant & Equipment
Impairment of Deferred Exploration & Evaluation Costs
General & Administrative Expenses
Corporate Expenses Recovered
Total Expenses
Income/(Loss) before Income Tax Expense
Income Tax Benefit
Income/(Loss) after Income Tax Expense
Other Comprehensive Income
Items that may be subsequently reclassified to profit or loss
Net Gain/(Loss) On Cashflow Hedge Taken To Equity
Other Comprehensive Income for the period
Total Comprehensive Income/(Loss) for the period
attributable to the Owners
Basic and Diluted Earnings/(Loss) per share (cents per share)
Basic and Diluted Earnings/(Loss) per share attributable to the equity
holders of the entity (cents per share)
note
2013
$’000
1,166
1,166
(10,300)
(78,510)
(17,817)
369
(106,258)
(105,092)
-
7
8
3
4
2012
$’000
1,418
1,418
(728)
-
(15,860)
3,398
(13,190)
(11,772)
-
(105,092)
(11,772)
-
-
65
65
(105,092)
(11,707)
17
17
(25.86)
(25.86)
(3.06)
(3.06)
The above statement of comprehensive income should be read in conjunction with the accompanying notes.
52 GEODYNAMICS LIMITED 2013 Annual Report
CO NSOLIDATED STATEMENT
Of fIN ANCIAL p OSITION
AS AT 30 JUNE 2013
Current Assets
Cash Assets
Inventories – Rig Parts and Well Materials
Receivables
Non-Current Assets Held for Sale
Total Current Assets
Non Current Assets
Property, Plant and Equipment
Deferred Exploration, Evaluation & Development phase costs
Total Non Current Assets
Total Assets
Current Liabilities
Payables
Provisions
Deferred Income
Derivative Liability
Total Current Liabilities
Non Current Liabilities
Provisions
Total Non Current Liabilities
Total Liabilities
Net Assets
Equity
Contributed Equity
Other Reserves
Accumulated Losses
Total Equity
note
22(A)
5
6
7
8
9
10
11
12
10
13
14
2013
$’000
41,390
188
14,239
-
55,817
3,962
1,177
5,139
60,956
4,301
2,201
-
-
6,502
4,003
4,003
10,505
50,451
346,083
10,456
2012
$’000
35,146
189
3,126
14,700
53,161
19,771
106,923
126,694
179,855
13,773
660
5,700
-
20,133
5,299
5,299
25,432
154,423
346,083
9,336
(306,088)
(200,996)
50,451
154,423
The above statement of financial position should be read in conjunction with the accompanying notes.
2013 Annual Report GEODYNAMICS LIMITED 53
CONSOLIDATED
CASh fLOW STATE MEN T
FINANCIAL YEAR ENDED
30 JUNE 2013
Cash Flows from/(used in) Operating Activities
Net Goods and Services Tax received
Payments to suppliers and employees
Net Interest Received
note
Net cash flows from/(used in) Operating Activities
22(B)
Cash Flows from/(used in) Investing Activities
Proceeds from Government Grants
Proceeds from R&D Tax Incentive
Purchase of Property, Plant & Equipment
2013
$’000
2,096
(10,020)
1,082
(6,842)
14,000
22,115
(3)
2012
$’000
463
(10,513)
1,317
(8,733)
8,050
-
(276)
Payments for Exploration and Evaluation expenditure
(38,657)
(32,830)
Proceeds from Farmin Cash Calls
Proceeds from Insurance claim
Proceeds from sale of property, plant & equipment
Net cash flow used in investing activities
Cash Flows from Financing Activities
Proceeds from issue of shares
Net cash flow provided by financing activities
Net increase / (decrease) in cash held
Add: Opening cash carried forward
Closing cash carried forward
1,551
-
14,080
13,086
-
-
6,244
35,146
41,390
10,406
8,215
11,478
5,043
9,658
9,658
5,968
29,178
35,146
22(A)
The above Cash Flow Statement should be read in conjunction with the accompanying notes.
54 GEODYNAMICS LIMITED 2013 Annual Report
CO NSOLIDATED STATEMENT
Of ChANGES I N EQuITY
FINANCIAL YEAR ENDED
30 JUNE 2013
issueD capital
$’000
eMployee equity
beneFits reserve
$’000
Foreign exchange
heDge reserve
$’000
At 1 July 2012
346,083
9,336
Recognition of foreign exchange
hedge reserve
Total expense for period
recognised directly in equity
Loss for the period
Total loss for the period
Equity Transactions:
Share based payment on
Employee Share Plan
Cost of share-based payment -
recognition of share option expense
-
-
-
-
-
-
-
-
-
-
582
538
At 30 June 2013
346,083
10,456
FINANCIAL YEAR ENDED
30 JUNE 2012
At 1 July 2011
336,405
7,502
Recognition of foreign exchange
hedge reserve
Total expense for period
recognised directly in equity
Loss for the period
Total loss for the period
Equity Transactions:
Issue of Share Capital
in consideration of services
Refund for overpayment
of option exercise
Issue of Share Capital pursuant
to capital placement
Share Capital raising expenses
Issue of Share Capital via Share
Purchase Plan
Transaction costs of
Share Purchase Plan
Ordinary shares issued for the
deferred employee share plan
Cost of share-based payment -
recognition of share option expense
-
-
-
-
19
(6)
3,823
(142)
6,201
(217)
-
-
At 30 June 2012
346,083
-
-
-
-
-
-
-
-
657
1,177
9,336
-
-
-
-
-
-
-
(65)
65
65
-
65
-
-
-
-
-
-
-
accuMulateD losses
$’000
total equity
$’000
(200,996)
154,423
-
-
-
(105,092)
(105,092)
(105,092)
(105,092)
-
-
582
538
(306,088)
50,451
(189,224)
154,618
-
-
65
65
(11,772)
(11,772)
(11,772)
(11,707)
-
-
-
-
-
-
19
(6)
3,823
(142)
6,201
(217)
657
1,177
(200,996)
154,423
2013 Annual Report GEODYNAMICS LIMITED 55
NOTES TO ThE
fINANCIAL STAT EME NT S
note 1 – corporate inforMation
The financial report of Geodynamics Limited (the Company) for
the year ended 30 June 2013 was authorised in accordance with a
resolution of the Directors on 29 August 2013.
Geodynamics Limited is a Company limited by shares,
incorporated and domiciled in Australia whose shares are publicly
traded on the Australian Securities Exchange. The nature of the
operations and principal activities of the Company are described
in the Directors’ Report.
note 2 – sUMMarY of siGnificant accoUntinG poLicies
(a) basis of preparation
The financial report is a general purpose financial
report which has been prepared in accordance with
the requirements of the Corporations Act 2001,
Australian Accounting Standards and other authoritative
pronouncements of the Australian Accounting Standards
Board. The financial report has also been prepared on a
historical cost basis except for the valuation of available
for sale financial assets which are carried at fair value. The
financial report is presented in Australian dollars and all
values are rounded to the nearest thousand dollars ($000)
unless otherwise stated. The Directors have adopted the
going concern assumption in preparing the financial report.
(b) compliance with ifrs
The financial report complies with Australian Accounting
Standards and International Financial Reporting
Standards (IFRS) as issued by the International
Accounting Standards Board.
(c) new accounting standards and interpretations
Certain Australian Accounting Standards and interpretations
have recently been issued or amended but are not yet
effective and have not been adopted by the Company for the
annual reporting period ended 30 June 2013. The Directors
have assessed the impact of all new or amended standards
(to the extent relevant to the Company) and have concluded
that these Standards and interpretations will not have any
financial impact on the amounts recognised in the financial
statements.
The Company has adopted the following new and amended
Australian Accounting Standards and AASB Interpretations as
at 1 January 2013:
- AASB 2011-09 Amendments to Australian Accounting
Standards arising from AASB 9 (December 2009) (AASB
1, 3, 4, 5, 7, 101, 102, 108, 112, 118, 121, 127, 128, 131, 132, 136, 139,
1023 & 1038 and Interpretations 10 & 12).
The following standards were assessed.
- AASB 119 – Employee Benefits (effective 1 July 2013).
- AASB 2011-4 – Amendments to Australian Accounting
Standards to Remove Individual Key Management Personnel
Disclosure Requirements (AASB 124) (effective 1 July 2013).
- AASB 1053 Application of Tiers of Australian Accounting
Standards and AASB 2010-2 Amendments to Australian
Accounting Standards arising from reduced disclosure
requirements (effective 1 July 2013).
(d) basis of consolidation
The financial statements comprise the financial statements of
Geodynamics Limited and its subsidiaries.
The Company has three wholly owned subsidiaries.
Geodynamics Share Plans Pty Ltd has an issued capital of
$1.00 and its purpose is to act as trustee for the Geodynamics
Deferred Employee Share Plan which holds shares on trust for
employees. Consolidation was not considered material for the
purposes of this subsidiary.
Geodynamics Savo Island Pty Ltd has an issued capital of
$1.00 and its purpose is to act as the controlling entity for the
Savo Island Geothermal Project Joint Venture.
Geodynamics NT Pty Ltd has an issued capital of $1.00 and its
purpose is to act as the controlling entity for the Gove Direct
Heat Geothermal Project Joint Venture.
Subsidiaries are all those entities (including special purpose
entities) over which the Group has the power to govern
the financial and operating policies so as to obtain benefits
from their activities. The existence and effect of potential
voting rights that are currently exercisable or convertible
are considered when assessing whether a group controls
another entity. Subsidiaries are fully consolidated from the
date on which control is obtained by the Group and cease to
be consolidated from the date on which control is transferred
out of the Group.
(e) significant accounting Judgements, estimates
and assumptions
The carrying amounts of certain assets and liabilities are often
determined based on judgement, estimates and assumptions
of future events. The key estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of certain assets and liabilities within the
next annual reporting period are:
Share-based payment transactions
The Company measures the cost of equity-settled
transactions with employees by reference to the fair value of
the equity instruments at the date at which they are granted.
The fair value is determined using a Black Scholes model.
- AASB 9 –Financial Instruments (effective 1 July 2013).
Provision for site rehabilitation
- AASB 10 – Consolidated Financial Statements
(effective 1 July 2013).
- AASB 11 – Joint Arrangements (effective 1 July 2013).
- AASB 12 – Disclosure if Interests in Other Entities
(effective 1 July 2013).
- AASB 13 – Fair Value Measurement (effective 1 July 2013).
The Company reviews rehabilitation requirements for its
geothermal exploration tenements on a six-monthly basis
by undertaking an in-house analysis of the costs to
rehabilitate the sites including the plugging and abandoning
of wells as appropriate.
56 GEODYNAMICS LIMITED 2013 Annual Report
note 2 – sUMMarY of siGnificant accoUntinG poLicies
(continued)
(e) significant accounting Judgements, estimates
and assumptions (continued)
Capitalisation of Deferred Exploration and Evaluation
Expenditure & Impairment
The Company determines whether Deferred Exploration and
Evaluation Costs are impaired as described by AASB 6 at least
on an annual basis. The Company considers whether an area
of interest will be subject to further activity in the foreseeable
future. Where substantive expenditure on further exploration
and evaluation is neither budgeted or planned consideration is
given as to whether an impairment cost should be recognised
relating specifically to that area of interest.
Classification and valuation of investments
The Company classifies investments in listed and unlisted
securities as ‘available for sale’ investments and movements
in fair value are recognised directly in equity unless
impairment has occurred in which case impairment is
expensed. The fair value of unlisted securities not traded in an
active market is determined by the pricing of those securities
when share allotments of those securities are made on or
around balance date to independent third parties.
(f) foreign currency translation
Both the functional and presentation currency of
Geodynamics is Australian dollars ($A). Transactions in
foreign currencies are initially recorded in the functional
currency at the exchange rates ruling at the date of the
transaction. Monetary assets and liabilities denominated in
foreign currencies are retranslated at the rate of exchange
ruling at the balance date.
All exchange differences in the financial report are taken to
net income. Non-monetary items that are measured in terms
of historical cost in a foreign currency are translated using the
exchange rate as at the date of the initial transaction. Non-
monetary items measured at fair value in a foreign currency
are translated using the exchange rates at the date when the
fair value was determined.
(G) property, plant & equipment
Property, plant and equipment is stated at cost less
accumulated depreciation and any impairment in value.
The costs include obligations relating to reclamation, plant
closure and other costs associated with the restoration of
the site. Depreciation is provided on a straight line basis on
all property, plant and equipment. All classes are depreciated
over periods ranging from 3 to 15 years (comparable to prior
year). The assets’ residual values, useful lives and amortisation
methods are reviewed, and adjusted if appropriate, at each
financial year end.
Impairment
The carrying values of property, plant and equipment are
reviewed for impairment at each reporting date, with the
recoverable amount being estimated when events or changes
in circumstances indicate the carrying value may be impaired.
For an asset that does not generate largely independent cash
inflows, the recoverable amount is determined for the cash-
generating unit to which the asset belongs. An impairment
exists when the carrying value exceeds its estimated
recoverable amount. The asset or cash-generating unit is then
written down to its recoverable amount.
The recoverable amount of plant and equipment is the
greater of fair value less costs to sell and value in use. In
assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Impairment
losses are recognised in the statement of comprehensive
income in the year the loss is recognised.
Derecognition and disposal
An item of property, plant and equipment is derecognised
upon disposal or when no further future economic benefits
are expected from its use or disposal. Any gain or loss arising
on derecognition of the asset (calculated as the difference
between the net disposal proceeds and the carrying amount
of the asset) is included in profit or loss in the year the asset
is derecognised.
(h) exploration, evaluation, development
and restoration costs
Costs carried forward
Costs arising from exploration and evaluation activities
are carried forward provided such costs are expected to
be recouped through successful development, or by sale,
or where exploration and evaluation activities have not,
at balance date, reached a stage to allow a reasonable
assessment regarding the existence of economically
recoverable reserves.
Grants and subsidies are treated as revenue and an equivalent
amount of eligible exploration and evaluation expenditure
is written off to offset this revenue. Costs carried forward in
respect of an area of interest that is abandoned are written
off in the year in which the decision to abandon is made.
Impairment
The carrying values of exploration, evaluation, development
and restoration costs are reviewed for impairment in
accordance with AASB 6 Exploration and Evaluation of
Mineral Resources when facts and circumstances suggest
that the carrying amount of such an asset may exceed
its recoverable amount. Any impairment loss identified is
recognised as an expense in accordance with AASB 136
Impairment of Assets.
Amortisation
Costs on productive areas will be amortised over the life
of the area of interest to which such costs relate on the
production output basis.
2013 Annual Report GEODYNAMICS LIMITED 57
note 2 – sUMMarY of siGnificant accoUntinG poLicies
(continued)
(h) exploration, evaluation, development
and restoration costs (continued)
Restoration costs
Restoration costs that are expected to be incurred are
provided for as part of the cost of the exploration, evaluation,
development, construction or production phases that give
rise to the need for restoration. Accordingly, these costs
will be recognised gradually over the life of the facility as
these phases occur. The costs include obligations relating to
reclamation, plant closure and other costs associated with the
restoration of the site.
(i) intangibles
The useful lives of intangible assets are assessed to be either
finite or indefinite. Intangible assets with finite lives are
amortised over the useful life and assessed for impairment
whenever there is an indication that the intangible asset may
be impaired. The amortisation period and the amortisation
method for an intangible asset with a finite useful life is
reviewed at least at each financial year-end. Changes in the
expected useful life or the expected pattern of consumption
of future economic benefits embodied in the asset are
accounted for by changing the amortisation period or
method, as appropriate, which is a change in accounting
estimate. The amortisation expense on intangible assets
with finite lives is recognised in profit or loss in the expense
category consistent with the function of the intangible asset.
(J) impairment of assets
At each reporting date, the Company assesses whether there is
any indication that an asset may be impaired. Where an indicator
of impairment exists, the Company makes a formal estimate of
recoverable amount. Where the carrying amount of an asset
exceeds its recoverable amount the asset is considered impaired
and is written down to its recoverable amount.
Recoverable amount is the greater of fair value less costs to
sell and value in use. It is determined for an individual asset.
In assessing value in use, the estimated future cash flows are
discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time
value of money and the risks specific to the asset.
(K) cash and cash equivalents
Cash assets on the statement of financial position comprise
cash at bank and on hand and short-term deposits with an
original maturity of three months or less that are readily
convertible to known amounts of cash and which are subject
to an insignificant risk of change in value.
For the purposes of the Cash Flow Statement, cash includes
cash on hand and in banks and short term deposits with an
original maturity of three months or less, net of outstanding
bank overdrafts.
(L) trade and other receivables
Trade receivables, which generally have 30 day terms,
are recognised and carried at original invoice amount. An
allowance for doubtful debts is made when there is objective
evidence that the Company will not be able to collect the
debts. Bad debts are written off when identified.
(M) inventories
Inventories include spare parts and consumable items used in
drilling operations and are valued at the lower of cost and net
realisable value.
(n) contributed equity
Ordinary shares are classified as equity. Any transaction costs
arising on the issue of ordinary shares are recognised directly
in equity as a reduction of the share proceeds received.
(o) trade and other payables
Trade payables and other payables are carried at cost and
represent liabilities for goods and services provided to the
Company prior to the end of the financial year that are unpaid
and arise when the Company becomes obliged to make future
payments in respect of the purchase of these goods and services.
(p) provisions
Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event, it
is probable that an outflow of resources embodying economic
benefits will be required to settle the obligation and a reliable
estimate can be made of the amount of the obligation.
If the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at a
pre-tax rate that reflects current market assessments of the time
value of money and, where appropriate, the risks specific to the
liability. Where discounting is used, the increase in the provision
due to the passage of time is recognised as a finance cost.
(Q) employee benefits
Wages, salaries, annual leave and sick leave
Liabilities for wages and salaries, including non-monetary
benefits and annual leave expected to be settled within
12 months of the reporting date are recognised in other
payables in respect of employees’ services up to the reporting
date. They are measured at the amounts expected to be paid
when the liabilities are settled. Liabilities for sick leave are
recognised when the leave is taken and are measured at the
rates paid or payable.
Long service leave
The liability for long service leave is recognised in the provision
for employee benefits and measured as the present value of
expected future payments to be made in respect of services
provided by employees up to the reporting date using
the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of
employee departures, and periods of service. Expected future
payments are discounted using market yields at the reporting
date on national government bonds with terms to maturity
and currencies that match, as closely as possible, the estimated
future cash outflows.
58 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 2 – sUMMarY of siGnificant accoUntinG poLicies
(continued)
(r) share-based payment transactions
relevant asset. The amount of the grant is then released to
net income over the expected useful life (by way of reduced
depreciation or amortisation) of the relevant asset.
The Company provides benefits to employees (including
executive directors) in the form of share-based payment
transactions, whereby employees render services in exchange
for rights over shares (‘equity-settled transactions’). The
current plans in place to provide these benefits are the
Geodynamics Employee Option Plan and the Geodynamics
Deferred Employee Share Plan, which both provide benefits
to executive directors and employees. The cost of these
equity-settled transactions with employees is measured
by reference to the fair value at the date at which they
are granted. The fair value is determined by the use of a
Black-Scholes model which is prepared by the Company
and independently reviewed. In valuing equity-settled
transactions, no account is taken of any performance
conditions, other than conditions linked to the price of the
shares of Geodynamics Limited (‘market conditions’). The
cost of equity-settled transactions is recognised, together
with a corresponding increase in equity, over the period in
which the performance conditions are fulfilled, ending on the
date on which the relevant employees become fully entitled
to the award (‘vesting date’).
The cumulative expense recognised for equity-settled
transactions at each reporting date until vesting date reflects
(i) the extent to which the vesting period has expired and (ii)
the number of awards that, in the opinion of the Directors of
the Company, will ultimately vest and (iii) the expired portion
of the vesting period. This opinion is formed based on the
best available information at balance date. No adjustment is
made for the likelihood of market performance conditions
being met as the effect of these conditions is included in
the determination of fair value at grant date. No expense is
recognised for awards that do not ultimately vest, except for
awards where vesting is conditional upon a market condition.
The dilutive effect, if any, of outstanding options is reflected
as additional share dilution in the computation of earnings
per share.
(s) revenue recognition
Revenue is recognised to the extent that it is probable that
the economic benefits will flow to the entity and the revenue
can be reliably measured. In the case of interest, revenue is
recognised as the interest accrues (using the effective interest
method, which is the rate that exactly discounts estimated
future cash receipts through the expected life of the financial
instrument) to the net carrying amount of the financial asset.
(t) Government Grants
Government grants are recognised at their fair value where
there is reasonable assurance that the grant will be received
and all attaching conditions will be complied with. When
the grant relates to an expense item, it is recognised as
income over the periods necessary to match the grant
on a systematic basis to the costs that it is intended to
compensate. Where the grant relates to an asset, the fair
value is credited to a deferred income account until such
time as all conditions associated with the grant are met. Once
these conditions are achieved the credit is allocated to the
(U) earnings per share
Basic earnings per share is determined by dividing the profit/
(loss) after tax by the weighted average number of ordinary
shares outstanding during the financial period. Diluted earnings
per share is determined by dividing the profit/(loss) after tax
adjusted for the effect of earnings on potential ordinary shares,
by the weighted average number of ordinary shares (both issued
and potentially dilutive) outstanding during the financial period.
(v) income tax
Deferred income tax is provided on all temporary differences at
the balance date between the tax bases of assets and liabilities
and their carrying amounts for financial reporting purposes.
Deferred income tax liabilities are recognised for all taxable
temporary differences:
• except where the deferred income tax liability arises from
the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction affects neither the accounting profit nor taxable
profit or loss; and
• in respect of taxable temporary differences associated with
investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the
temporary differences can be controlled and it is probable
that the temporary differences will not reverse in the
foreseeable future.
Deferred income tax assets are recognised for all deductible
temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable
profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and
unused tax losses can be utilised. The carrying amount of
deferred income tax assets is reviewed at each balance date
and reduced to the extent that it is no longer probable that
sufficient taxable profit will be available to allow all or part of
the deferred income tax asset to be utilised.
For Geodynamics Limited, no deferred income tax asset
is being recognised in the accounts as the benefit is not
considered to be probable of being realised at this stage of the
Company’s development. Unrecognised deferred income tax
assets are reassessed at each balance date and are recognised
to the extent that it has become probable that future taxable
profit will allow the deferred income tax asset to be recovered.
Deferred income tax assets and liabilities are measured at the
tax rates that are expected to apply to the year when the asset
is realised or the liability is settled, based on tax rates (and tax
laws) that have been enacted or substantively enacted at the
balance date. Income taxes relating to items recognised directly
in equity are recognised in equity and not in net income.
Deferred income tax assets and deferred tax liabilities are
offset only if a legally enforceable right exists to set off
current tax assets against current tax liabilities and the
deferred income tax assets and liabilities relate to the same
taxable entity and the same taxation authority.
2013 Annual Report GEODYNAMICS LIMITED 59
note 2 – sUMMarY of siGnificant accoUntinG poLicies
(continued)
(W) other taxes
Revenues, expenses and assets are recognised net of the
amount of GST except:
• where the GST incurred on a purchase of goods and
services is not recoverable from the taxation authority, in
which case the GST is recognised as part of the cost of
acquisition of the asset or as part of the expense item as
applicable; and
• receivables and payables are stated with the amount of
GST included.
The net amount of GST recoverable from, or payable to,
the taxation authority is included as part of receivables or
payables in the statement of financial position. Cash flows
are included in the Cash Flow Statement on a net basis and
the GST component arising from investing and financing
activities, which is recoverable from, or payable to, the taxation
authority are classified as operating cash flows. Commitments
and contingencies are disclosed net of the amount of GST
recoverable from, or payable to, the taxation authority.
(X) segment reporting
A business segment is a distinguishable component of the
entity that is engaged in providing products or services that are
subject to risks and returns that are different to those of other
business segments. A geographical segment is a distinguishable
component of that entity that is engaged in providing products
or services within a particular economic environment and is
subject to risks and returns that are different than those of
segments operating in other economic environments.
(Y) available for sale securities
Available for sale investments are those non-derivative
financial assets, principally equity securities that are
designated as available for sale. After initial recognition
available for sale securities are measured at fair value with
gains or losses being recognised as a separate component
of equity until the investment is derecognised or until the
investment is determined to be impaired, at which time
the cumulative gain or loss previously reported in equity is
recognised in profit or loss.
The fair values of investments that are actively traded in
organised financial markets are determined by reference
to quoted market bid prices at the close of business on
the balance date. For investments with no active market,
fair values are determined using valuation techniques.
Such techniques include: using recent arm’s length market
transactions; reference to the current market value of another
instrument that is substantially the same; discounted cash
flow analysis and option pricing models making as much use
of available and supportable market data as possible and
keeping judgemental inputs to a minimum.
(Z) Joint venture arrangement
The Company is a party to two joint venture arrangements
with Origin Energy Geothermal Pty Ltd (Origin). The joint
venture assets comprise the South Australian geothermal
tenements and all property plant and equipment for use in
the Cooper Basin. The two joint ventures are respectively
named the Innamincka ‘Deeps’ Joint Venture and the
Innamincka ‘Shallows’ Joint Venture.
Participants in the Innamincka ‘Deeps’ Joint Venture which
focuses on higher temperature Enhanced Geothermal
Systems (EGS) greater than 3,500 m depth are:
Geodynamics (Operator) – 70%
Origin Energy Geothermal Pty Ltd* – 30%
Participants in the Innamincka ‘Shallows’ Joint Venture which
focuses on exploration of shallow Hot Sedimentary Aquifers
(HSA) above approximately 3,500 m depth are:
Origin Energy Geothermal Pty Ltd* (Operator) – 50%
Geodynamics Limited – 50%
* A wholly owned subsidiary of Origin Energy Limited (ASX:ORG)
Refer to Note 21 for a status of the payments made to date
under this Joint Venture arrangement.
As advised to the ASX on 28 March 2013, Origin Energy have
withdrawn from both of the above joint ventures effective 30
June 2013. As at 1 July 2013 the Company has a 100% interest
in both the Deeps and Shallows joint ventures.
The Company is also a party to a joint venture arrangements
with Kentor Energy Pty Ltd (Kentor). The joint venture assets
comprise the Savo Island prospecting license and all property
plant and equipment for use on Savo Island. The joint venture
is named the Savo Island Geothermal Joint Venture.
Under the terms of the agreement, Geodynamics (Savo Island)
Pty Ltd is entitled to earn an initial 25% interest in the Savo Island
Geothermal Power Project following the completion of initial
geophysical studies to determine target locations for a drilling
program. The Company has the right to earn an additional 45%
interest through exploration drilling and the completion of a
feasibility study for the Project. At 30 June Geodynamics had
met all requirements for the initial 25% interest.
(aa) Going concern
As the Company’s assets are in the exploration and
development phase, Geodynamics is currently non-
revenue generating. As such a major focus of the Board
and management is on ongoing cash flow forecasting and
management of cash flows to ensure that the Company
always has sufficient funds to cover its planned activities
and any ongoing obligations. Management has identified
a number of sources of cash inflows which are expected
to progressively be achieved throughout the year that will
provide sufficient coverage to fund the proposed work
program. Should the timing of these cash inflows not occur
within expected timeframes, alternative funding options
including equity funding options continue to be maintained
such that operations can be continued. In addition to the close
management of cash inflows, the Company has significant
ability to slow or defer spending on its major activities to
ensure that it is always able to meet its obligations when
they fall due, including deferring expenditure on our drilling
program as the company’s permit expenditures are well in
advance of the minimum permit conditions.
60 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
note 3 – eXpenses and Losses/(Gains)
Loss before income tax has been determined after charging/(crediting)
the following specific items:
Depreciation of plant and equipment and Amortisation of leasehold improvements
Share Plan Expense
Share Option Expense
Employee Expenses
Interest expense
Operating lease rentals paid
Foreign exchange loss/(gain)
(Profit)/loss on disposal of property, plant & equipment
note 4 - incoMe taX
Income tax expense
2013
$’000
2012
$’000
7,431
582
538
5,987
32
856
(27)
(79)
1,320
657
1,177
7,327
6
816
130
877
The prima facie tax benefit on loss of 30% (2011 - 30%) differs from the income tax
provided in the financial statements as follows:
Prima facie tax on loss
(31,528)
(3,531)
Tax effect of amounts which are not deductible (taxable) in calculating taxable income:
Grant Income
Impairment of Property, Plant & Equipment
Other income/(expenses)
Income tax benefit attributable to current year losses
Deferred tax asset not brought to account as realisation of the asset is not regarded as probable
Income tax benefit attributable to operating loss
deferred income tax
Deferred income tax at 30 June relates to the following:
4,200
-
340
(26,988)
26,988
-
2,415
218
(3,215)
(4,113)
4,113
-
Deferred tax liabilities
Deferred exploration phase expenditure
Deferred evaluation phase expenditure
Other deferred tax liability
Deferred tax assets
Losses available for offset against future taxable income
Other deferred tax asset
Net deferred tax assets
Deferred tax asset for tax losses not recognised
Gross deferred income tax assets
Deferred tax income/(expense)
stateMent oF Financial position
stateMent oF coMprehensive incoMe
2013
$’000
(10)
(343)
(1,064)
90,375
253
89,211
(89,211)
-
-
2012
$’000
(762)
(21,561)
(1,857)
87,852
6,184
69,856
(69,856)
-
-
2013
$’000
2012
$’000
-
-
-
-
-
-
-
-
-
-
-
-
The deferred tax asset arising from estimated tax losses is only brought to account to the extent that it offsets the Company’s deferred
tax liabilities arising from temporary differences. To the extent surplus tax losses are available, the deferred tax asset associated with
these tax losses is not brought to account at balance date as the benefit is not yet regarded as probable.
The deferred tax asset will only be obtained if:
(a) future assessable income is derived of a nature and of an amount sufficient to enable the benefit to be realised;
(b) the conditions for deductibility imposed by tax legislation continue to be complied with; and
(c) no changes in tax legislation adversely affect the Company in realising the benefit.
2013 Annual Report GEODYNAMICS LIMITED 61
2013 Annual Report GEODYNAMICS LIMITED 61
note 5 – receivabLes (cUrrent)
Accounts Receivable
GST Receivable
Interest Receivable
Other Receivables
2013
$’000
-
109
315
13,815
14,239
2012
$’000
1,602
688
264
572
3,126
Accounts receivable, GST receivable, interest receivable and sundry receivables are non-interest bearing.
The other receivables balance represents an amount receivable in relation to a claim made under the REDP grant deed as well as an
estimate of the amount due under the R&D Tax Incentive Scheme relating to expenditure incurred during the year ended 30 June 2013.
allowance for impairment loss
No allowance has been made for impairment loss. A provision for impairment loss is only recognised when there is objective evidence
that an individual receivable is impaired. None of the balances within receivables and prepayments contain impaired assets.
note 6 – non-cUrrent assets heLd for saLe
Non-Current Assets Held for Sale
Total Non-Current Assets Held for Sale
Reconciliation of Non-Current Assets Held For Sale
Carrying amount at beginning
Additions
Impairment
Disposals
Carrying amount at the end
2013
$’000
-
-
14,700
-
-
(14,700)
-
2012
$’000
14,700
14,700
-
26,821
(728)
(11,393)
14,700
Rig 200 was reclassified as non-current assets held for sale as at 30 June 2012 as the Rig was being actively marketed. The sale was
successfully completed in September 2012.
note 7 - propertY, pLant & eQUipMent
Plant and Equipment at cost
Less: accumulated depreciation and impairment
Total Property, Plant and Equipment
Reconciliation of Plant & Equipment
Carrying amount at beginning
Additions
Disposals
Impairment *
Reclassification to Assets Held for Sale
Reclassification from Deferred Exploration and Evaluation Costs
Less: Proceeds of Government Grants
Depreciation/Amortisation Expense
Carrying amount at the end
2013
$’000
25,467
(21,505)
3,962
2012
$’000
23,577
(3,806)
19,771
19,771
49,153
127
(156)
(10,300)
208
(916)
-
-
(26,821)
9,919
(8,000)
(7,399)
3,962
-
-
(1,853)
19,771
The reclassification from Deferred Exploration and Evaluation costs relates to the transfer of carrying costs for the 1 MWe Habanero Pilot
Plant and reclassification as a depreciable asset as at the time of commissioning.
* Impairment of Property Plant & Equipment
While the technical appraisal of the resource and trial of the 1 MWe Habanero Pilot Plant has been successful and provides proof
of concept, the development of EGS geothermal resources in Australia remains a long term challenge requiring significant capital
investment and extension of infrastructure.
The 1 MWe Habanero Pilot Plant was designed to provide a platform for proof of concept but is not commercially viable as a long term
source of power production. The Board has therefore impaired the carrying amount of the 1 MWe Habanero Pilot Plant to its residual
value being an estimate of the fair value less costs to sell at 30 June 2013.
62 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 8 – deferred eXpLoration and evaLUation costs
Exploration Phase
Evaluation Phase
Total
Reconciliation of Deferred Exploration & Evaluation costs
Carrying amount at beginning
Add: Exploration Expenditure for period
Add: Evaluation & Development expenditure for period
Less: Insurance proceeds received
Less: Proceeds of Government Grants
Less: Proceeds from R&D Tax Incentive
Reclassification to Property Plant and Equipment
Less: Impairment of Evaluation & Development expenditure
Carrying amount at the end
2013
$’000
32
1,145
1,177
106,923
57
28,741
-
(14,000)
(32,115)
(9,919)
(78,510)
1,177
2012
$’000
2,539
104,384
106,923
85,300
50
35,769
(5,122)
(9,074)
-
-
-
106,923
The ultimate recoupment of costs carried forward for exploration and evaluation phases is dependent on the successful development
and commercial exploitation or sale of the respective geothermal exploration tenements. The Company completed Stage One of its
business plan in March 2009 being ‘Proof of Concept’. The Proof of Concept Phase is the demonstration of economic heat extraction
from a two well circulation test via a developed underground heat exchanger.
As mentioned under Note 7, while the technical appraisal of the resource has been successful and provides proof of concept, the
development of EGS geothermal resources in Australia remains a long term challenge requiring significant capital investment and
extension of infrastructure.
In the absence of a small scale commercial project or other plan to commercialise the project in the medium term, the Board has
impaired the carrying amount of the Geodynamics deferred exploration, evaluation and development cost in respect of its Cooper Basin
project to $nil. This represents the company’s best estimate of the fair value less cost to sell of these assets at 30 June 2013.
The decision to impair does not change Geodynamic’s view that EGS geothermal resource will play a material role in Australia’s long
term energy economy as a reliable supplier of large scale, continuous, predictable and controllable energy.
note 9 - accoUnts paYabLe
Current
Trade Creditors
Accrued Liabilities
Trade creditors and accruals
terms and conditions
2013
$’000
801
3,500
4,301
2012
$’000
3,881
9,892
13,773
Accounts payable and accrued liabilities are non-interest bearing. Liabilities are recognised for amounts to be paid in the future for
goods and services received, whether or not billed to the Company. All amounts are normally settled within 30 days, and discounts for
early payment are normally taken where it is considered advantageous for the Company to do so. Due to the short term nature of these
payables, their carrying value is assumed to approximate their fair value.
2013 Annual Report GEODYNAMICS LIMITED 63
note 10 – provisions
At 1 July 2012
Arising during the year
Utilised
At 30 June 2013
Current 2013
Non current 2013
Current 2012
Non current 2012
At 30 June 2012
eMployee
entitleMents
$’000
restoration
provision
$’000
Make gooD
provision
$’000
total provisions
$’000
713
652
(731)
634
504
130
634
650
63
713
5,015
313
-
5,328
1,697
3,631
5,328
10
5,005
5,015
231
11
-
242
-
242
242
-
231
231
5,959
976
(731)
6,204
2,201
4,003
6,204
660
5,299
5,959
The restoration provision relates to the ultimate restoration of the Habanero 1, Habanero 2, Habanero 3, Habanero 4, Jolokia 1, Savina 1
and Celsius 1 sites including the wells themselves (permanent plugs), the monitoring wells and water supply pipeline routes.
Bank guarantees totalling $150,000 and $80,000 are held respectively by the South Australian and NSW governments to secure
tenement rehabilitation obligations.
The make good provision relates to the lease agreement on the Company’s corporate office premises in Brisbane. Under this agreement,
Geodynamics is required to restore the leased premises to its original condition at the end of the lease. A bank guarantee totalling
$465,820 is held by the landlord of these leased premises.
note 11 – deferred incoMe
Current
Government Grant - REDI
Government Grant – RDIF
Government Grant - REDP
Non-refundable Deposit
2013
$’000
-
-
-
-
-
2012
$’000
5,000
-
-
700
5,700
terms and conditions - renewable energy development initiative
The Company announced on 5 December 2005, that it had been awarded a $5 million grant under the then Federal Government’s
Renewable Energy Development Initiative (REDI) Program. The grant was for the demonstration 1 MWe Habanero Pilot Plant to be
constructed near Innamincka in the Cooper Basin, South Australia.
The REDI grant was formally executed in late 2007 and at 30 June 2010 the grant had been paid in full. It had been classified as deferred
income on the basis that the grant relates to an asset. As at 30 June 2013 the conditions of the grant had been achieved and therefore
the deferred income was transferred to the associated asset (being the 1 MWe Habanero Pilot Plant). The 1 MWe Habanero Pilot Plant
was subsequently impaired to its residual value (refer Note 7).
terms and conditions - regional development infrastructure fund
The Company announced on 16 April 2009 that it had been successful in its application for a $560,000 grant in relation to the construction
of the power line, from the Regional Development Infrastructure Fund (RDIF), an initiative of the South Australian government. The grant
funded 50% of the cost of the transmission line between the 1 MWe Habanero Pilot Plant and the Innamincka township. At 30 June 2012
this grant has been transferred to deferred exploration and evaluation costs as no further activity is required under the terms of the deed.
terms and conditions - renewable energy demonstration program
The Company announced on 14 July 2010 that it had executed a $90 million funding deed with the Federal Government under the
Renewable Energy Demonstration Program (REDP) to establish the Cooper Basin Geothermal Demonstration Plant. At 30 June 2011
the first milestone payment had been made relating to the procurement of long lead items for the drilling of the Habanero 4 well. At
30 June 2012 the proceeds of the grant have been transferred to deferred exploration and evaluation costs as the proceeds relate to
recoupment of historic expenditure.
non-refundable deposit
Non-refundable deposit at 30 June 2012 represents the initial payment, received on 19 June 2012, under the terms of the conditional sale
agreement for Rig 200. The sale was successfully completed in September 2012.
64 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 12 – derivative financiaL instrUMents
Current Liabilities
Forward currency contracts – cash flow hedges
forward currency contracts – cash flow hedges
2013
$’000
-
-
2012
$’000
-
-
In order to protect against exchange rate movements, the Company enters into forward exchange contracts to hedge certain foreign
currency asset purchase commitments. These contracts are timed to mature when payments are scheduled to be made. At balance
date, the details of outstanding contracts are:
Buy US$ / sell Australian $
Buy GBP£ / sell Australian $
2013
$’000
-
-
2012
$’000
-
-
2013
exchange rate
2012
exchange rate
-
-
-
-
The forward currency contracts are considered to be highly effective hedges as they are matched against committed purchase
schedules and any gain or loss on the contracts attributable to the hedged risk is taken directly to equity. When the related fixed asset is
delivered the amount recognised in equity is adjusted to the fixed asset account in the statement of financial position.
Movement in forward currency cash flow hedge reserve
Opening balance
Transferred to PPE and Exploration and Evaluation
Charged to other comprehensive income
Closing balance
note 13 – contribUted eQUitY
Issued and Fully Paid Capital
2013
$’000
-
-
-
2013
$’000
2012
$’000
65
(65)
-
-
2012
$’000
406,452,608 (2012 – 406,452,608) fully paid ordinary shares
346,083
346,083
MoveMent in orDinary share capital:
30/06/11
Balance end of financial year
Jul 2011
Jul 2011
Sep 2011
Oct 2011
Nov 2011
Dec 2011
Dec 2011
Ordinary shares issued in consideration of services rendered
Ordinary shares issued for the deferred employee share plan
Refund for overpayment of option exercise
Ordinary shares issued for the deferred employee share plan
Performance Incentive for the Managing Director as
approved by shareholders
Ordinary shares issued pursuant to a share placement
25,489,782
nuMber oF shares
336,892,832
60,000
131,342
-
858,050
258,621
-
42,761,981
-
406,452,608
Share Placement expenses
Jan 2012
Share Purchase Plan
Jan 2012
Share Purchase Plan Costs
30/06/12
Balance end of financial year
NIL Movement
issue price
$ per share
0.32
0.31
-
0.20
0.29
0.15
-
0.145
-
$’000
336,405
19
-
(6)
-
-
3,823
(142)
6,201
(217)
346,083
30/06/13
Balance end of financial year
406,452,608
346,083
2013 Annual Report GEODYNAMICS LIMITED 65
note 13 – contribUted eQUitY (continued)
terms and conditions of contributed equity
Ordinary Shares entitle their holder to one vote, either in person or by proxy, at a meeting of the Company. Effective 1 July 1998, the
Corporations legislation abolished the concepts of authorised capital and par value shares. Accordingly the Company does not have
authorised capital nor par value in respect of its issued capital.
capital Management
When managing capital, management’s objective is to ensure the entity continues as a going concern and to maintain a structure that
ensures the lowest cost of capital available to the entity. As the entity is not in position to be debt funded until it advances its Cooper
Basin project to a completed feasibility phase which has the support of financiers, it must rely totally on shareholders and government
grants for its funding requirements.
Unissued shares – shareholder options
At 30 June 2013, there were no unissued ordinary shares under shareholder options (2012 – Nil). Option holders do not have any right,
by virtue of the option, to participate in any share issue of the Company or any related body corporate. There were no shareholder
options granted during the financial year ended 30 June 2013 (2012 – Nil).
note 14 – reserves
Deferred Employee Share Plan Reserve
Employee Share Option Reserve
Reconciliation of Reserves
Carrying amount at beginning
Recognition of Share Plan Expense – Transfer from Contributed Equity
Recognition of Share Plan Expense
Recognition of Share Option Expense
Recognition of Foreign Exchange Hedge Reserve
nature and purpose of reserves
employee share plan reserve
2013
$’000
3,125
7,331
10,456
9,336
-
582
538
-
10,456
2012
$’000
2,543
6,793
9,336
7,437
-
657
1,177
65
9,336
The employee share plan reserve is used to record the value of fully paid ordinary shares granted to employees, including key
management personnel, as part of their remuneration. Refer to Note 16 for further details.
employee share option reserve
The employee share option reserve is used to record the value of share options granted to employees, including key management
personnel, as part of their remuneration. Refer to Note 16 for further details.
cash flow hedge reserve
This reserve records the portion of the gain or loss on a hedging instrument in a cash flow hedge that is determined to be an effective hedge.
66 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 15 – eXpenditUre coMMitMents
enhanced Geothermal systems (eGs) tenement commitments
In order to maintain current rights of its EGS tenements, the Company is required to outlay annual rentals and to meet certain expenditure
requirements of the New South Wales, South Australian and Queensland Mines Departments. These obligations are subject to renegotiation
upon expiry of the EGS tenements. The obligations are not provided for in the financial report and are payable as follows:
Payable not later than one year
Operating Leases (non-cancellable)
Payable not later than one year
Later than one year but not later than five years
2013
$’000
164
1,071
1,109
2,180
2012
$’000
238
929
1,739
2,668
Other Commitments (Open Purchase Orders)
3,204
8,925
Included in the other commitments are open purchase orders in relation to the Deeps Joint Venture – refer to Note 27 for details.
The Company has no capital commitments at 30 June 2013.
note 16 - eMpLoYee benefits and sUperannUation coMMitMents
Employee Benefits
The aggregate employee benefit liability is comprised of:
Provision for Annual Leave (current)
Provision for Long Service Leave (current)
Provision for Long Service Leave (non-current)
2013
$’000
440
-
130
570
2012
$’000
548
52
63
663
superannuation commitments
The Company contributes to external accumulation funds for its employees which provide benefits for employees and their dependants
on retirement, disability or death. These funds provide benefits on a defined contribution basis. Contributions are enforceable to the
extent of the contribution required by the Superannuation Guarantee Levy.
Employer contributions paid or payable to the plans
695
825
Long term incentive plan (Ltip)
In October 2008, the Board resolved to approve a new Long Term Incentive Plan (LTIP) with the key objective being to retain, motivate and
reward senior executives and staff in a manner which aligns this element of remuneration with the creation of long term shareholder value.
The LTIP is provided in two components being Geodynamics Limited shares as traded on the ASX and options to purchase Geodynamics
Limited shares at the current price, sometime in the future. The LTIP is designed to provide rewards over a three year term.
The Geodynamics LTIP offers eligible employees and Executive Directors of Geodynamics the opportunity to participate in the growth of
Geodynamics through participation in:
• the Geodynamics Limited Deferred Employee Share Plan (DESP); and
• the Geodynamics Limited Employee Option Plan (EOP).
Shares and Options issued under the DESP and EOP respectively are allocated and issued to participants for no consideration. The issue of
options and allocations of shares within the LTIP is also subject to the participants satisfactory performance as judged by their line manager.
To become entitled to the shares and options, participants are required to satisfy certain performance requirements. On satisfying the
performance requirements for options, the options can be converted into shares by payment of the exercise price.
The service requirements for shares issued under the DESP require that for each annual allocation of shares made to participants under
the DESP, the participant will be required to remain employed by Geodynamics or a Related Body Corporate for 36 months from the
date of allocation of the shares for the shares to vest.
2013 Annual Report GEODYNAMICS LIMITED 67
note 16 - eMpLoYee benefits and sUperannUation coMMitMents (continued)
The performance requirements for options issued under the EOP requires that options will only vest should the compound growth in the
Geodynamics share price increase by 15% per annum and the participant remains employed by Geodynamics or a Related Body Corporate for:
• 12 months from the date of allocation for 30% vesting of the total option number; and
• 24 months from the date of allocation for 30% vesting of the total option number; and
• 35 months from the date of allocation for 40% vesting of the total option number.
employee option plan (eop)
The options are issued for a term of three years. The options are valued using the Black-Scholes formula which is a function of the
relationship between a number of variables that principally comprise the share price, option exercise price, risk free interest rate and the
volatility of the Company’s underlying share price. Accordingly, the formula requires a number of inputs, some of which must be assumed.
The LTIP was suspended in October 2011 and remains suspended at 30 June 2013. As such there were no options issued during the
2012/13 financial year.
471,698 shares were issued to the Deferred Employee Share Plan on behalf of Geoff Ward. These shares were issued under the Long
Term Incentive provision of his contract and have a vesting period of 36 months.
Information with respect to the number of options granted under the EOP is as follows:
2013
2012
nuMber oF options
weighteD average
exercise price
nuMber oF options
weighteD average
exercise price
Balance at beginning of year
10,729,530
$0.44
10,376,634
Granted during the year
- lapsed or forfeited
Balance at end of year
Options that vested during the period
Vested & Exercisable at end of year
options exercised
-
(3,901,211)
6,828,319
-
-
$0.55
$0.39
-
-
4,142,765
(3,789,869)
10,729,530
-
-
$0.57
$0.38
$0.73
$0.44
-
-
There were no options exercised by employees during the year ended 30 June 2013.
total options held at the end of the reporting period
The following table summarises information about options held by employees as at 30 June 2013:
grant Date
31/12/10
31/03/11
30/06/11
30/09/11
25/11/11
TOTAL
nuMber options
type
expiry Date
exercise price
1,256,501
1,630,962
160,942
1,079,914
2,700,000
6,828,319
Employee Option Plan
Employee Option Plan
Employee Option Plan
Employee Option Plan
Employee Option Plan
31/12/13
31/03/14
30/06/14
30/09/14
31/01/15
$0.50
$0.31
$0.31
$0.20
$0.48
$0.39
68 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 16 - eMpLoYee benefits and sUperannUation coMMitMents (continued)
deferred employee share plan (desp)
The shares are issued for a term of three years. The shares are valued using fair value at the date of grant which is deemed to be the five
day volume weighted average share price at the date of grant.
Information with respect to the number of shares granted under the DESP is as follows:
Balance at beginning of year
- granted
- transferred to employees or forfeited
Balance at end of year
Vested & Exercisable at end of year
2013
2012
nuMber oF shares
weighteD average
issue price
nuMber oF shares
weighteD average
issue price
4,512,489
471,698
(1,864,506)
3,119,681
-
$0.41
$0.16
$0.54
$0.30
-
4,506,178
1,153,034
(1,146,723)
4,512,489
-
$0.51
$0.22
$0.61
$0.41
-
total shares held at the end of the reporting period
The following table summarises information about shares held by employees under the DESP as at 30 June 2013:
nuMber shares
type
vesting Date
issue price
grant Date
30/09/10
31/12/10
31/03/11
30/06/11
30/09/11
25/11/11
22/02/13
TOTAL
246,188
414,957
520,416
376,388
831,413
258,621
471,698
3,119,681
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
Deferred Employee Share Plan
30/09/13
31/12/13
31/03/14
30/06/14
30/09/14
30/04/14
31/01/15
2013
(25.86)
$0.52
$0.50
$0.31
$0.31
$0.20
$0.29
$0.16
$0.30
2012
(3.06)
note 17 - earninGs per share
Basic and diluted earnings/(loss) per share attributable to the equity holders (cents per share)
The following reflects the income and share data used in the calculations of basic
and diluted earnings per share:
Net loss attributable to equity shareholders ($’000)
(105,092)
(11,772)
Weighted average number of ordinary shares used in calculation of basic earnings per share
406,452,608
384,280,944
The share options of 6,828,319 (2012: 10,729,530) are not dilutive and therefore have not been included in the calculation of diluted
earnings per share.
note 18 - seGMent inforMation
The Company operates in one segment, being the geothermal energy exploration & development. The Company’s areas of operation are
currently located in Australia and the Solomon Islands.
EGS geothermal energy development is the Company’s primary focus and business activity and it remains committed to commercialising
its “Deeps” geothermal project in the Cooper Basin of South Australia. Geodynamics aims to become the largest renewable energy
producer in Australia by developing emission-free, baseload electricity generation from known EGS geothermal resources.
The Company’s business plan is based on the development of the known EGS geothermal resource in the Cooper Basin. The Company’s
activities are currently concentrated on its Habanero location along with the development of appropriate drilling and completion
techniques to allow the effective extraction of the geothermal power contained within the Innamincka deep granite resource.
Operating segments are identified on the basis of internal reports that are regularly reviewed and used by the Board of Directors (chief
operating decision maker) in order to allocate resources to the segment and assess its performance. The financial information presented
in the Statements of Comprehensive Income and Financial Position is the same as that presented to the chief operating decision maker.
Unless otherwise stated, all amounts reported to the Board of Directors as the chief operating decision maker are in accordance with the
entity’s accounting policies.
2013 Annual Report GEODYNAMICS LIMITED 69
note 19 – reMUneration of aUditors
Amounts received or due and receivable by Ernst & Young Australia for:
An audit or review of the financial report of the entity
Other assurance services
note 20 – KeY ManaGeMent personneL
Details of Key Management Personnel
Directors
K. Spence
Chairman (non-executive)
G. Ward
P. Chopra
R. Davies
Managing Director & CEO
Director (alternate for M. Dave) (retired 29 November 2012)
Director (non-executive)
J. Hamilton
Director (non-executive)
M. Marier
Director (non-executive)
A. Stock
M. Dave
executives
K. Coates
Director (non-executive)
Director (non-executive) (retired 29 November 2012)
Operations Manager
R. Hogarth
Reservoir Engineering Manager
T. Pritchard
Chief Financial Officer
A. Hodson
Well Engineering & Technology Manager
A. Mills
Project Engineering Team Leader
compensation of Key Management personnel
Short-term employee benefits
Post Employment benefits
Share based payment
2013
$
92,500
5,000
97,500
2012
$
123,500
5,000
128,500
2013
$
2012
$
2,698,179
2,584,209
186,092
322,453
194,435
410,372
3,206,724
3,189,016
Further information on remuneration of Key Management Personnel is shown in the Remuneration Report contained within the
Directors’ Report.
70 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 20 – KeY ManaGeMent personneL (continued)
employee share plan option holdings of Key Management personnel
FY2013
Directors
G. Ward
J. Hamilton
P. Chopra
M. Dave
R. Davies
M. Marier
K. Spence
A. Stock
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
balance at
beginning
oF perioD
01/07/12
2,700,000
-
-
-
-
-
-
-
201,897
300,498
287,977
234,764
1,079,914
4,805,050
granteD as
reMuneration/
becaMe key
ManageMent
personnel
options lapseD/
no longer key
ManageMent
personnel
balance at
enD oF perioD
30/06/13
total vesteD
& exercisable
30/06/13
options exerciseD
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(201,897)
(300,498)
(287,977)
(234,764)
-
1,025,136
2,700,000
-
-
-
-
-
-
-
-
-
-
-
1,079,914
3,779,914
-
-
-
-
-
-
-
-
-
-
-
-
-
-
employee share plan option holdings of Key Management personnel
balance at
beginning
oF perioD
01/07/11
2,700,000
-
-
-
-
-
-
-
201,897
300,498
287,977
-
-
3,490,372
granteD as
reMuneration/
becaMe key
ManageMent
personnel
options lapseD/
no longer key
ManageMent
personnel
balance at
enD oF perioD
30/06/12
total vesteD
& exercisable
30/06/12
options exerciseD
-
-
-
-
-
-
-
-
-
-
-
234,764
1,079,914
1,314,678
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,700,000
-
-
-
-
-
-
-
201,897
300,498
287,977
234,764
1,079,914
4,805,050
-
-
-
-
-
-
-
-
-
-
-
-
-
-
FY2012
Directors
G. Ward
J. Hamilton
P. Chopra
M. Dave
R. Davies
M. Marier
K. Spence
A. Stock
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
2013 Annual Report GEODYNAMICS LIMITED 71
note 20 – KeY ManaGeMent personneL (continued)
Listed option holdings of Key Management personnel (quoted options expiring 31 March 2012 and exercisable at $0.55 per share)
there are no listed options held by KMp at 30 June 2013
FY2012
Directors
K. Spence
G. Ward
B. Agrawala
P. Chopra
M. Dave
R. Davies
J. Hamilton
M. Marier
A. Stock
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
balance at
beginning oF perioD
01/07/11
options lapseD
balance at
enD oF perioD
30/06/12
37,500
(37,500)
-
-
37,500
-
37,500
75,000
-
25,000
-
-
-
-
-
-
-
(37,500)
-
(37,500)
(75,000)
-
(25,000)
-
-
-
-
-
212,500
(212,500)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
shareholdings of Key Management personnel
balance at
beginning oF perioD
01/07/12
appointMents/
becaMe key
ManageMent
personnel
258,621
955,914
-
120,775
481,708
-
212,413
62,315
314,245
394,451
168,171
309,394
187,500
3,465,507
-
-
-
-
-
-
-
-
-
-
-
-
-
-
purchaseD on
Market, share
purchase plan
resignations,
DisposeD oF/
other/no longer
key ManageMent
personnel
balance at
enD oF perioD
30/06/13
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(35,054)
-
(50,000)
-
-
730,319
955,914
-
120,775
481,708
212,413
62,315
279,191
394,451
118,171
309,394
187,500
(85,054)
3,852,151
granteD as
reMuneration*
471,698
-
-
-
-
-
-
-
-
-
-
-
-
471,698
FY2013
Directors
G. Ward
P. Chopra
M. Dave
R. Davies
J. Hamilton
M. Marier
K. Spence
A. Stock
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
* Shares granted as remuneration were issued under the Geodynamics Deferred Employee Share Plan and are held in escrow on behalf of the Executive.
The Executive is required to remain employed by Geodynamics for 36 months from the date of allocation for the shares to vest.
72 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 20 – KeY ManaGeMent personneL (continued)
shareholdings of Key Management personnel
balance at
beginning oF perioD
01/07/11
appointMents/
becaMe key
ManageMent
personnel
granteD as
reMuneration*
purchaseD on
Market, share
purchase plan
resignations,
DisposeD oF/
other/no longer
key ManageMent
personnel
balance at
enD oF perioD
30/06/12
258,621
-
955,914
-
57,500
386,795
-
117,500
43,333
112,607
147,251
168,171
-
-
-
-
-
-
-
-
-
-
-
-
-
-
114,319
-
2,029,247
114,319
-
-
-
-
-
-
-
-
-
201,638
247,200
-
195,075
187,500
831,413
-
-
-
-
63,275
94,913
-
94,913
18,982
-
-
-
-
-
272,083
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
258,621
-
955,914
-
120,775
481,708
-
212,413
62,315
314,245
394,451
168,171
309,394
187,500
3,465,507
FY2012
Directors
G. Ward
B. Agrawala
P. Chopra
M. Dave
R. Davies
J. Hamilton
M. Marier
K. Spence
A. Stock
Executives
K. Coates
R. Hogarth
T. Pritchard
A. Hodson
A. Mills
Total
* Shares granted as remuneration were issued under the Geodynamics Deferred Employee Share Plan and are held in escrow on behalf of the Executive.
The Executive is required to remain employed by Geodynamics for 36 months from the date of allocation for the shares to vest.
2013 Annual Report GEODYNAMICS LIMITED 73
note 21 - reLated partY discLosUres
services rendered during the year
During the year electricity was provided to the Company by
Origin Energy under normal commercial terms and conditions.
the Metasource (Woodside) environmental credits off take rights
In 2002 Metasource committed by an Agreement to subscribe
for 10,443,392 fully paid ordinary shares as a pre-IPO investor
in the Company’s August 2002 Prospectus. Under the terms of
that Agreement Metasource has the right to participate pro rata
to its then current shareholding in any further issue of equity in
Geodynamics at the price payable by other parties at the time
and Metasource has a right to nominate a person to be appointed
as a director of Geodynamics.
On 31 March 2004 the Company announced that it had executed
an Environmental Credits Off take Deed with Metasource
which formalises Metasource’s rights to Environmental Credits.
Metasource or its nominee has the right to procure all of the
environmental credits which arise from 50% (capped at 1,300
GWh/year) of the power generated by Geodynamics’ power
plant(s). 37.5% of the Environmental Credits can be sold to
Metasource at full market price with the balance of 12.5% of the
Environmental Credits assigned to Metasource without separate
consideration. The term for the purchase of Environmental Credits
commenced on 8 April 2004 and ends on the earlier of:
a)
b)
10 years after the commissioning of the first commercial
power plant with capacity exceeding 250 megawatts;
20 years after the Company achieves commissioning of
EGS plants with a combined sales capacity exceeding 250
megawatts; or
c)
80 years after the date of the contract.
the origin energy environmental credits and power off take rights
On 5 August 2003, Geodynamics executed an Investment Deed
with Origin Energy Limited wherein the parties agreed to enter
into a strategic alliance under which Origin would subscribe
for 10,000,000 shares in Geodynamics. Under the terms of the
Investment Deed, Origin Energy has a right of participation in
future share issues pro rata to its then percentage shareholding in
Geodynamics and Origin has a right to nominate a person to be
appointed as a director of Geodynamics.
On 29 April 2005, Geodynamics executed a Heads of Agreement
(HOA) with Origin Energy Electricity Limited (Origin) under
which, at the time final contracts are entered into, the parties will
enter into a power purchase agreement (PPA) and Renewable
Energy Certificate purchase agreement (RPA). Under the terms of
the PPA, Origin will have the right to purchase 50% of the power
generated by Geodynamics (capped at 1300 GWh/year) from
any power plant that is connected to a transmission system at
a discount of 5% to the then market price. The term of the PPA
will commence on the first generation of power by Geodynamics
from any power plant that is connected to a transmission system
and end 10 years after the commissioning of Geodynamics first
large commercial power plant (being a power plant which has a
nominal rated capacity of 200 MW or more);
Under the terms of the RPA, Origin will have the right to purchase
any Renewable Energy Certificates (RECs) and/or environmental
credits (ECs) arising from 47.5% of all power generated by
Geodynamics at market price (up to a maximum of the number
of RECs and ECs arising from the generation of 1300 GWh of
power which qualify for the issue of RECs or ECs in each year). In
addition a further 2.5% of the RECs and/or ECs will be assigned
to Origin without separate consideration. The RPA will start on
the first generation of power by Geodynamics and will end 10
years after the commissioning date of Geodynamics first large
commercial power plant.
the origin energy Joint ventures
In December 2007, shareholders approved a farmin with Origin
Energy (Origin) on the Innamincka ”Deeps” EGS geothermal
resource. In the subsequent 24 month period, Origin contributed
$105.6m to project costs in addition to its own 30% share of project
expenditure to satisfy the terms of the farmin. The resulting Joint
Venture is known as the Innamincka “Deeps” Joint Venture and sees
Geodynamics as Operator with a 70% project interest and Origin
with a 30% project interest. The Joint Venture assets comprise the
South Australian geothermal tenements and all property plant and
equipment in the Cooper Basin including the drilling rigs.
In February 2010, Geodynamics announced that it had agreed to
enter into a second joint venture with Origin to explore for shallow
geothermal resources on existing Joint Venture licence areas in
the Eromanga Basin in South Australia.
74 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 21 - reLated partY discLosUres (continued)
the origin energy Joint ventures (continued)
The Innamincka “Shallows” Joint Venture focuses on the
exploration of shallow hot sedimentary aquifers (HSA) down
to approximately 3,000 m depth, as distinct from the existing
”Deeps” Joint Venture with Origin, which focuses on higher
temperature enhanced geothermal systems (EGS) in the deeper
granites generally below 4,000 m. The participating interests in
the “Shallows” Joint Venture are Origin as Operator with a 50%
interest and Geodynamics with a 50% interest. At 30 June 2013,
Origin Energy Limited, held 15,454,119 fully paid ordinary shares in
Geodynamics representing 3.8% of its issued capital.
As advised to the ASX on 28 March 2013, Origin Energy have
withdrawn from both of the above joint ventures effective 30
June 2013. The result being Geodynamics hold a 100% interest in
the Deeps and Shallows joint ventures as at 1 July 2013.
the Kentor energy Joint venutre
In November 2012, Geodynamics Limited entered into a two stage
earn-in and joint operating agreement with Kentor Energy Pty Ltd
(“Kentor”), a subsidiary of Kentor Gold Ltd (ASX: KGL), to acquire
up to 70% interest in a conventional geothermal power supply
project in the Solomon Islands.
Under the terms of the agreement, Geodynamics is entitled to earn
an initial 25% interest in the Savo Island Geothermal Power Project
(“Project”) following the completion of initial geophysical studies
to determine target locations for a drilling program. The Company
has the right to earn an additional 45% interest through exploration
drilling and the completion of a feasibility study for the Project.
In April 2013 Geodynamics fulfilled its commitments under Stage
One of the Earn-In by releasing a Savo Island Inferred Geothermal
Resource Assessment and became entitled to the initial 25% in
the Savo Island Geothermal Power Project.
the sentient/sunsuper investment
On 10 April 2008, Geodynamics announced that The Sentient Group
(Sentient) and Sunsuper Pty Ltd (Sunsuper) had agreed to become
joint cornerstone investors in Geodynamics. It had been agreed that
Sentient and Sunsuper would collectively subscribe for 11.8% of the
Company’s then current issued share capital or 25 million fully paid
ordinary shares in Geodynamics at an issue price of $1.50 per share.
In addition, one attaching unquoted placement option exercisable at
$2.00 per share for every two Shares issued (i.e. 12.5 million options)
and expiring 28 February 2009 would be issued. An extraordinary
general meeting of shareholders was convened on 29 May 2008 and
unanimously approved the placement.
As part of the investment, Sentient and Sunsuper have the right
to collectively appoint a Non-executive Director to the Board of
Geodynamics. Sentient and Sunsuper are collectively required
to maintain a 10% shareholding in Geodynamics to maintain
this Board representation. Mr Pieter Britz was appointed to the
Board on 25 June 2008 as the director representative under this
condition. He resigned as a Director on 24 February 2011 and Mr
Michel Marier was appointed as his replacement on the same date
under that condition.
In March 2010, Sentient and Sunsuper purchased a combined
total 14,974,385 fully paid ordinary shares in Geodynamics
representing 5.2% of its issued capital. This occurred in an off
market transaction thereby increasing their respective holdings
by 7,784,592 and 7,189,793 shares. The substantial shareholder
notices lodged at the time by both Sentient and Sunsuper
showed that Sentient held 20,284,592 fully paid ordinary shares in
Geodynamics representing 7.0% of its issued capital and Sunsuper
held 19,689,793 fully paid ordinary shares in Geodynamics
representing 6.8% of its issued capital.
the tata power investment
On 4 September 2008, Geodynamics announced that The Tata
Power Company Limited (Tata Power) had agreed to become
a cornerstone investor in the Company. It had been agreed that
Tata Power would subscribe for 11.4% of the Company’s then
current issued share capital or 29.4 million fully paid ordinary
shares in Geodynamics at an issue price of $1.50 per share. In
addition, one attaching unquoted placement option exercisable
at $2.25 per share for every two Shares issued (i.e. 14.7 million
options) and expiring 28 February 2009 would be issued. At the
Annual General Meeting held on 20 November 2008 shareholders
approved the placement and attaching options issue.
As part of the investment, Tata Power has the right to appoint
a Non-executive Director to the Board of Geodynamics. Tata
Power is required to maintain a 10% shareholding in Geodynamics
to maintain this Board representation. Mr Minesh Dave was
appointed to the Board on 23 February 2012 as the director
representative under this condition. At 30 June 2013, Tata Power
through its subsidiary Trust Energy Resources, held 29,400,000
fully paid ordinary shares in Geodynamics representing 7.2% of
its issued capital. Mr Minesh Dave retired from the Board on 29
November 2012 and, due to the Tata shareholding being below
the required level of 10%, was not replaced.
2013 Annual Report GEODYNAMICS LIMITED 75
note 22 - notes to the cash fLoW stateMent
(a) Reconciliation of Cash
Cash is defined in Note 2 to this financial report. Cash balance comprises:
Cash on Hand
Cash at Bank
Bank Bills and Term Deposits
Total Cash
(b) Reconciliation of the operating loss after tax with the net cash flows used in operations
Loss after income tax
Depreciation and amortisation
Net (profit)/loss on disposal of property, plant & equipment
Share Option Valuation Expense
Shares issued in lieu of services
Shares issued under Deferred Employee Share Plan
Shares issued for the Acquisition of Assets
Impairment of Property Plant & Equipment
Impairment of Exploration & Evaluation Costs
Changes in Assets & Liabilities
(Increase)/decrease in receivables and prepayments
Increase/(decrease) in other creditors and accruals
(Increase)/decrease in inventories
Increase/(decrease) in general provisions
Increase/(decrease) in provision for employee benefits
Net Cash Flow used in Operating Activities
2013
$’000
2012
$’000
-
10,590
30,800
41,390
-
8,346
26,800
35,146
(105,092)
(11,772)
7,431
(90)
538
-
582
-
10,300
78,510
(90)
823
-
325
(79)
(6,842)
1,320
877
1,176
19
657
-
728
-
(5,180)
283
694
2,510
(45)
(8,733)
(C)
Non-Cash Financing and Investing Activities. During the year nil (2012 – 60,000) fully paid ordinary shares were issued in
consideration of professional services rendered by external consultants to the Company in the ordinary course of business.
note 23 – avaiLabLe for saLe financiaL assets
Geysir Green Energy (GGE) is an unlisted public company headquartered in Iceland with an extensive portfolio of assets in the
geothermal sector. The Company’s investment in GGE is classified as an investment in an Available for sale Financial Asset. The fair
value of the unlisted available for sale investment has been estimated using the valuation techniques based on assumptions, which
are outlined in Note 2. For the valuation of GGE at 30 June 2013, the Company has kept the investment at nil value based on advice
received from GGE that it requires the support of its banks in order to pay its debts as and when they fall due. Management believes this
determination is reasonable and the most appropriate at the balance date. The 3% interest held does not allow Geodynamics to exercise
significant influence.
Unlisted Available for sale
Shares in Geysir Green Energy – an Icelandic unlisted public company
2013
$’000
-
2012
$’000
-
note 24 - continGent LiabiLities
Geodynamics Limited has been advised that the South Australian Geothermal Exploration Licences No. 211 (GEL) and Geothermal
Retention Licences (GRL) No. 3 through to 12 and 20 to 24 have been granted by the Department of Primary Industries and Resources
South Australia on the basis that the grant of a GEL or GRL is not an act which creates a ‘right to mine’ and therefore ‘the right to
negotiate’ process in the relevant native title legislation does not apply and the grant of the GELs and GRLs are valid for native title
purposes. The Company’s legal advice is that this is a sustainable position although it would be open to a Court to reach a different
conclusion. Any substantiated claim may have a financial ramification for the Company.
76 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED note 24 - continGent LiabiLities (continued)
The Company has also been advised that none of the New South
Wales tenements are invalid for native title purposes or attract
the relevant right to negotiate provisions in the applicable native
title legislation.
Bank guarantees totalling $150,000 and $80,000 are held
respectively by the South Australian and New South Wales
governments to secure tenement rehabilitation obligations. A
bank guarantee totalling $465,820 is held by the landlord for the
lease of the Brisbane office premises.
note 25 - sUbseQUent events
As advised to the ASX on 28 March 2013, Origin Energy have
withdrawn from both the Deeps and Shallows joint ventures
effective 30 June 2013. Origin Energy continues to be liable for their
share of site rehabilitation costs for both joint ventures for a period
of five years from withdrawal. As at 1 July 2013 the company has a
100% interest in both the Deeps and Shallows joint ventures.
On 22 July 2013 the Company advised that the 1MWe Habanero
Pilot Plant, which was commissioned on 30 April 2013, had
produced Australia’s first EGS generated power and was a leading
global demonstration of EGS technology.
On 25 July 2013 the Company was honoured to receive the
Clean Energy Council (CEC) Innovation Award at the CEC
Clean Energy Week Gala Event. The award recognised the
leading edge technology developed and deployed in producing
Australia’s first EGS power with the commissioning of the 1 MWe
Habanero Pilot Plant.
Other than the above, there has not arisen between 30 June 2013
and the date of this report any item, transaction or event of a relevant
and unusual nature likely, in the opinion of the Directors of the
Company, to affect significantly the operations of the Company, the
results of those operations, or the state of affairs of the Company.
note 26 - financiaL risK ManaGeMent obJectives
and poLicies
The Company’s principal financial instruments comprise cash
and short-term deposits. The main purpose of these financial
instruments is to manage the finances for the Company’s
operations. The Company has various other financial assets and
liabilities such as trade receivables and trade payables, which
arise directly from its operations. It is, and has been throughout
the period under review, the Company’s policy that no trading in
financial instruments shall be undertaken. The main risks arising
from the Company’s financial instruments are cash flow interest
rate risk and foreign currency risk.
Details of the significant accounting policies and methods
adopted, including the criteria for recognition, the basis of
measurement and the basis on which income and expenses are
recognised, in respect of each class of financial asset, financial
liability and equity instrument are disclosed in Note 2 to the
financial statements.
Primary responsibility for identification and control of financial
risks rests with the board of directors, however the day-to-day
management of these risks is under the control of the Managing
Director and Chief Financial Officer. The Board agrees the strategy
for managing future cash flow requirements and projections.
(a) interest rate risk
The Company’s exposure to interest rate risks primarily
relates to the Company’s funds held on term deposit. The
Company has no debt obligations. At balance date, the
Company had the following mix of financial assets and
liabilities exposed to interest rate risk:
Cash and cash
equivalents
2013
$’000
41,390
2012
$’000
35,146
The Company’s policy is to place funds in interest-bearing
deposits that are surplus to immediate requirements. The
Company’s interest rate exposure is reviewed near the
maturity date of term deposits to assess whether more
attractive interest rates are available without increasing risk.
At 30 June 2013, if interest rates had moved, as illustrated in
the table below, with all other variables held constant, the
post tax loss and equity would have been affected as follows:
post tax proFit
higher/(lower)
equity
higher/(lower)
2013
$’000
414
2012
$’000
351
2013
$’000
414
2012
$’000
351
(207)
(176)
(207)
(176)
+1%
-0.5%
The movements in the loss and equity are due to higher/
(lower) interest income from cash balances.
(b) credit risk
The Company’s maximum exposures to credit risk at balance
date in relation to financial assets, is the carrying amount
of those assets as recognised on the statement of financial
position. There are no derivative financial instruments currently
being used by the Company to offset its credit exposure.
The Company trades only with recognised, creditworthy third
parties, and as such collateral is not requested nor is it the
Company’s policy to securitise its trade and other receivables.
It is noted that the company’s significant receivable balances
at 30 June 2013 are in respect of the REDP grant and R&D
tax incentive scheme. As such they are receivable from the
Federal Government of Australia.
(c) foreign currency risk
During the course of its business activities, the Company has
had some transactional currency exposures, principally to the
US dollar. Such exposure arises from purchases in currencies
other than the Company’s functional currency. The Company has
entered into forward currency contracts to hedge some of these
exposures due to the length and size of the currency exposure.
They generally relate to the purchase of capital assets or major
material purchases. Conversely, the purchase of foreign currency
operational supplies and services are generally not hedged due to
the short time frame associated with the currency exposure and
the relatively modest overall exposure at any one point in time.
2013 Annual Report GEODYNAMICS LIMITED 77
note 26 - financiaL risK ManaGeMent obJectives
and poLicies (continued)
(c) foreign currency risk (continued)
Approved foreign exchange derivatives are limited to foreign
exchange forward contracts and foreign exchange swaps (i.e.
simultaneous purchase and forward sale) with tenors of less
than 12 months except for long lead time capital items where
the tenor shall be as specified under the contract.
Contractually agreed or committed (i.e. Board approval
received) foreign currency exposures in excess of the
equivalent of AUD 500,000 payable within 12 months are to
be fully covered. In addition, contracted capital items with a
foreign currency exposure in excess of the equivalent of AUD
500,000 payable beyond 12 months are to be fully covered.
Exposures of less than the equivalent of AUD 500,000 will
not normally be covered, as the business risk of not covering
these is considered negligible (due to the short time between
supply and payment).
It is the Company’s policy not to enter into forward contracts
until a firm commitment is in place and to negotiate the terms
of the hedge derivatives to exactly match the terms of the
hedged item to maximise hedge effectiveness.
At 30 June 2013, the Company had the following exposures to
foreign currency that is not designated in cash flow hedges:
Financial Assets
Available for sale
financial asset
Financial Liabilities
Trade and other
payables
Derivatives
2013
$’000
-
41
-
2012
$’000
-
398
-
At 30 June 2013, had the Australian Dollar moved, as illustrated
in the table below, with all other variables held constant, the
post tax loss and equity would have been affected as follows:
post tax proFit
higher/(lower)
equity
higher/(lower)
2013
$’000
4
(2)
2012
$’000
36
(20)
2013
$’000
4
(2)
2012
$’000
36
(20)
+10%
-5%
The movements in profit and equity in 2013 are less sensitive
than in 2012 due to the lower value of the financial liabilities.
Significant assumptions used in the foreign currency
exposure sensitivity analysis include:
• Reasonably possible movements in foreign exchange
rates were determined based on a review of the last years
historical movements.
• The reasonably possible movement of 10% was calculated
by taking the relevant foreign currency spot rates as at
balance date, moving those spot rates by 10% and then re-
converting back into AUD with the “new spot-rate”.
• This methodology reflects the translation methodology
undertaken by the Company.
(d) Liquidity risk
The Company’s objective is to maintain sufficient funds to finance
its current operations with additional funds to ensure its long-term
survival in the event of a business downturn. The Company’s
policy is that it is dependent on shareholder funds until such time
as it commences generating revenue from operations. It has no
finance facilities in place and no borrowings. The contractual
maturity of the Company’s financial liabilities are:
6 months or less
2013
$’000
4,301
2012
$’000
13,773
note 27 – interest in Joint ventUre
As advised in Note 21, Geodynamics is party to a joint venture with
Origin Energy (Origin) on the EGS geothermal resource in the
Cooper Basin. The Joint Venture is known as the Innamincka “Deeps”
Joint Venture and sees Geodynamics as Operator with a 70% project
interest and Origin with a 30% project interest. The Joint Venture
assets comprise the South Australian geothermal tenements and all
property plant and equipment in the Cooper Basin.
(a) commitments relating to the Joint venture
Share of capital
commitments
(b) interests in Joint venture
Current Assets
Long Term Assets
Current Liabilities
Long Term Liabilities
Other Commitments
(Open Purchase
Orders)
Income
Expenses
2013
$’000
-
2,696
3,675
2,395
-
3,003
40
5,963
2012
$’000
-
7,438
95,597
11,618
-
8,615
1,135
7,929
(c) Method used to recognise interest in Joint venture
The Company accounts for its interest in the Innamincka
‘Deeps’ Joint Venture as a jointly controlled asset. As such
it records its legal and beneficial share in the joint venture’s
assets, liabilities, revenues and expenses.
As advised in Note 21, Geodynamics is also party to a Joint
Venture with Origin Energy to explore for shallow geothermal
resources in the Eromanga Basin in South Australia. The
Joint Venture is known as the Innamincka ‘Shallows’ with
Geodynamics with 50% project interest and Origin, as the
operator, also with a 50% interest.
78 GEODYNAMICS LIMITED 2013 Annual Report
NOTES TO THE FINANCIAL STATEMENTS CONTINUED directors’ decLaration
In accordance with a resolution of the Directors of Geodynamics
Limited, I state that:
1)
In the opinion of the Directors:
(a) the financial statements, notes and additional disclosures
included in the Directors’ Report designated as audited
of the Company are in accordance with the Corporations
Act 2001, including:
(i) giving a true and fair view of the Company’s financial
position as at 30 June 2012 and of their performance
for the period ended on that date; and
(ii) complying with Accounting Standards and
Corporations Regulations 2001; and
(b) the financial statements and notes also comply with
International Financial Reporting Standards as disclosed
in note 2; and
(c) there are reasonable grounds to believe that the
Company will be able to pay its debts as and when they
become due and payable.
2)
This declaration has been made after receiving the
declarations required to be made to the directors in
accordance with section 295A of the Corporations Act 2001
for the financial period ending 30 June 2012.
On behalf of the Board.
K. spence
Chairman
Brisbane, 30 August 2013
note 27 – interest in Joint ventUre (continued)
(a) interests in Joint venture
Investment
in Shallows
2013
$’000
10,376
2012
$’000
10,376
This interest represents the cash contributions made to the
joint venture up to 30 June 2013.
As advised to the ASX on 28 March 2013, Origin Energy have
withdrawn from both of the above joint ventures effective 30
June 2013. Origin Energy continues to be liable for their share
of site rehabilitation costs for both joint ventures for a period of
five years from withdrawal. As at 1 July 2013 the company has a
100% interest in both the Deeps and Shallows joint ventures.
As advised in Note 21, Geodynamics is also a party to a Joint
Venture with Kentor Energy Pty Ltd (Kentor) to explore for
geothermal resources on Savo Island in the Solomon Islands.
The joint venture assets comprise the Savo Island prospecting
license and all property plant and equipment for use on Savo
Island. The joint venture is named the Savo Island Geothermal
Joint Venture.
(a) interests in Joint venture
Investment in
Savo Joint Venture
Expenses
2013
$’000
1,137
47
2012
$’000
-
-
This interest represents capitalised exploration costs to
30 June 2013.
note 28 – inforMation reLatinG to GeodYnaMics
LiMited (the parent)
Current Assets
Total Assets
Current Liabilities
Total Liabilities
2013
$’000
55,817
60,956
6,502
10,505
Contributed Equity
346,083
2012
$’000
53,161
179,855
20,133
25,432
346,083
Accummulated Losses
(306,088)
(200,996)
Other Reserves
Profit or loss of the
Parent entity
Total comprehensive
income of the Parent entity
10,456
50,451
(105,092)
9,336
154,423
(11,707)
(105,092)
(11,707)
The Parent has not issued guarantees in relation to the debts of
its subsidiaries.
The Parent has no contingent liabilities nor any contractual
obligations on behalf of its subsidiaries at 30 June 2013.
2013 Annual Report GEODYNAMICS LIMITED 79
INDEpENDENT A uDITOr ’S
rEp Or T TO ThE MEMbEr S
Of GEODYNAMI CS LIM IT ED
independent aUditor’s report to the MeMbers of GeodYnaMics LiMited
report on the financiaL report
We have audited the accompanying financial report of
Geodynamics Limited, which comprises the consolidated
statement of financial position as at 30 June 2013, the
consolidated statement of comprehensive income, the
consolidated statement of changes in equity and the
consolidated cash flow statement for the year then ended,
notes comprising a summary of significant accounting
policies and other explanatory information, and the
directors’ declaration of the consolidated entity comprising
the company and the entities it controlled at the year’s end
or from time to time during the financial year.
directors’ responsibility for the financial report
The directors of the company Geodynamics Limited are
responsible for the preparation of the financial report that
gives a true and fair view in accordance with Australian
Accounting Standards and the Corporations Act 2001 and
for such internal controls as the directors determine are
necessary to enable the preparation of the financial report
that is free from material misstatement, whether due to fraud
or error. In Note 2B, the directors also state, in accordance
with Accounting Standard AASB 101 Presentation of Financial
Statements, that the financial statements comply with
International Financial Reporting Standards.
auditor’s responsibility
Our responsibility is to express an opinion on the financial
report based on our audit. We conducted our audit in
accordance with Australian Auditing Standards. Those
standards require that we comply with relevant ethical
requirements relating to audit engagements and plan and
perform the audit to obtain reasonable assurance about
whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial
report. The procedures selected depend on the auditor’s
judgement, including the assessment of the risks of material
misstatement of the financial report, whether due to fraud
or error. In making those risk assessments, the auditor
considers internal controls relevant to the entity’s preparation
of the financial report that gives a true and fair view in
order to design audit procedures that are appropriate in
the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the entity’s internal controls.
An audit also includes evaluating the appropriateness
of accounting policies used and the reasonableness of
accounting estimates made by the directors, as well as
evaluating the overall presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our audit opinion.
independence
In conducting our audit we have complied with the
independence requirements of the Corporations Act 2001.
We have given to the directors of the company a written
Auditor’s Independence Declaration, a copy of which is
included in the directors’ report.
opinion
In our opinion:
a. the financial report of Geodynamics Limited is in
accordance with the Corporations Act 2001, including:
i
giving a true and fair view of the consolidated entity’s
financial position as at 30 June 2013 and of its
performance for the year ended on that date; and
ii complying with Australian Accounting Standards and
the Corporations Regulations 2001; and
b. the financial report also complies with International
Financial Reporting Standards as disclosed in Note 2B.
report on the remuneration report
We have audited the Remuneration Report included in
the directors’ report for the year ended 30 June 2013.
The directors of the company are responsible for the
preparation and presentation of the Remuneration Report
in accordance with section 300A of the Corporations Act
2001. Our responsibility is to express an opinion on the
Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
opinion
In our opinion, the Remuneration Report of Geodynamics
Limited for the year ended 30 June 2013 complies with
section 300A of the Corporations Act 2001.
Ernst & Young
Andrew Carrick
Partner
Brisbane
30 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
80 GEODYNAMICS LIMITED 2013 Annual Report
OffTAKE AGrEEMENT S
the MetasoUrce aGreeMent (2002)
Metasource Pty Ltd (a wholly owned subsidiary of Woodside Energy
Limited) was at the time of listing in 2002 the Company’s largest
shareholder. Metasource committed by an Agreement to subscribe
for 10,443,392 fully paid ordinary shares as a pre-IPO investor in the
Company’s August 2002 Prospectus and was therefore a substantial
shareholder at the time the Company was admitted to the official list
of the Australian Stock Exchange (ASX) on 11 September 2002. At
that time, Metasource’s shareholding represented 31.6% of the issued
share capital of the Company. Metasource subsequently subscribed
for a further 1,111,111 fully paid ordinary shares at an issue price of 90¢
per share on 31 March 2004 to support the Company’s working
capital requirement for the Cooper Basin Stage One project. In 2008,
Metasource sold all of its shares in Geodynamics.
The Metasource Agreement of 2002 contains the following
material conditions which remain current:
• Metasource or its nominee has the right to purchase Environmental
Credits from Geodynamics and the parties agreed to negotiate
and enter into a formal purchase contract. Environmental Credits
is defined broadly and includes renewable energy certificates,
carbon credits and any other legal, commercial or other benefit
(whether present or future) from any use of renewable energy
arising directly or indirectly from the use of thermal energy
or the generation of power from power plants developed by
Geodynamics. On 31 March 2004 the Company announced that
in conjunction with Metasource’s subscription for a further 1,111,111
fully paid ordinary shares at 90 cents, that it had executed an
Environmental Credits Off-take Deed with Metasource which
formalises Metasource’s rights to Environmental Credits.
• Metasource or its nominee has the right to buy all of the
environmental credits which arise from 50% (capped at 1,300
GWh/year) of the power generated by Geodynamics’ power
plant(s). Metasource is, however, not entitled to purchase
Environmental Credits in the form of renewable energy certificates,
unless either renewable energy certificates become an instrument
which is used for purposes other than those currently prescribed
in the Renewable Energy (Electricity) Act 2000 or Geodynamics
does not claim the benefit of the environmental credits which
Metasource is entitled to buy under the purchase contract other
than by reason of there being no legal framework within which
such benefits can reasonably be claimed.
• The price of environmental credits will be the lower of 75% of
the then market price in Australia or the then market price minus
$5/tonne. The purchase price of environmental credits cannot
be less than zero. Subsequently, this condition has been varied
following execution of an Environmental Credits Off-take Deed with
Metasource on 31 March 2004 such that 12.5% of the Environmental
Credits will be assigned to Metasource without separate
consideration and the balance of 37.5% of credits can be sold to
Metasource at full market value (therefore the weighted average
effective discount for the credits remains unchanged at 25%).
ASX agreed to grant a waiver from ASX listing rule 10.1 to
the extent necessary to permit the Company to enter into an
agreement for the purchase of Environmental Credits which arise
from 50% of the power generated by power plants developed
by the Company for a period commencing on the date of
commissioning the first power station developed by the Company
and terminating 10 years after the commissioning of the first
commercial power plant with capacity exceeding 250 megawatts.
Subsequently, following execution of an Environmental Credits
Off-take Deed with Metasource on 31 March 2004, the Company
agreed that the term for the purchase of Environmental Credits
shall commence on 8 April 2004 and end on the earlier of:
a)
b)
10 years after the commissioning of the first commercial
power plant with capacity exceeding 250 megawatts;
20 years after the Company achieves commissioning of
HDR plants with a combined sales capacity exceeding 250
megawatts; or
c)
80 years after the date of the contract.
The waiver from ASX listing rule 10.1 was granted on the following
conditions:
• The Company makes full disclosure of the Environmental Credit
purchase agreement to any person who may subscribe for
the Company’s securities under a prospectus issued by the
Company during the life of the Environmental Credit purchase
agreement;
• The Company includes the following information in each annual
report during the life of the Environmental Credit purchase
agreement:
• A statement that Metasource was a substantial holder of the
Company at the time that the Company was admitted to the
official list of ASX together with details as to Metasource’s
relevant interest in the total votes attaching to the voting
securities of the Company at the time that the Company was
admitted to the official list.
• An explanation of the circumstances under which Metasource
first became a substantial holder of the Company.
• A summary of the terms of the Environmental Credit
purchase agreement.
• The terms of the waiver.
the oriGin aGreeMent (2003)
Origin Energy Limited (Origin) is the Company’s third largest
shareholder and currently holds 18,388,688 fully paid ordinary
shares representing 4.5% of the issued capital of the Company.
Geodynamics executed an Investment Deed with Origin on 5
August 2003 wherein the parties agreed to enter into a strategic
alliance under which Origin would subscribe for 10,000,000
shares in Geodynamics for a subscription price of $0.50 cents
per share and also provide technical assistance and Geodynamics
would sell to Origin power generated from any power plant that
is or could be connected to a transmission system and renewable
energy certificates arising from the generation of any power
generated by Geodynamics.
Under the terms of the Investment Deed and following
shareholder approval, 10,000,000 fully paid ordinary shares were
issued and allotted to Origin on 30 September 2003.
Geodynamics was required to apply the subscription monies
towards the development of a two well HDR program in the
Cooper Basin to produce 20 MWt of thermal energy and for the
conduct a full bankable economic feasibility study in relation to
the generation of power using HDR geothermal energy from
Geodynamics Cooper Basin HDR resource.
2013 Annual Report GEODYNAMICS LIMITED 81
Off -TAKE AGrEEMENT S
CONTINUED
The Origin Investment Deed also contains the following
material conditions:
• Origin will have the right to appoint a non-executive director to
the Board of Geodynamics;
• The parties will proceed to negotiate in good faith a heads of
agreement (subject to final contracts) under which as long as
Origin holds not less than 10,000,000 shares at the time the final
contracts are entered into, the parties will enter into a power
purchase agreement (PPA) and Renewable Energy Certificate (REC)
purchase agreement. Subsequently, on 4 May 2005, Geodynamics
announced that it had executed a Heads of Agreement with Origin;
• Under the terms of the PPA, Origin will have the right to purchase
50% of the power generated by Geodynamics up to a maximum
of 1300 GWh per annum from any power plant that is or could
be connected to a transmission system at a discount of 5% to
the then market price. The term of the PPA will commence on
the first generation of power by Geodynamics from any power
plant that is or could be connected to a transmission system
and end 10 years after the commissioning of Geodynamics’ first
large commercial power plant (being a power plant which has a
nominal rated capacity of 200 MW or more);
• Under the terms of the REC purchase agreement, Origin will
have the right to purchase any RECs and/or environmental
credits arising from 50% of all power generated by
Geodynamics (up to a maximum of the number of RECs and
environmental credits arising from the generation of 1300 GWh
of power which qualifies for the issue of RECs or environmental
credits in each year) at a discount of 5% to the then market
price. The REC purchase agreement will start on the first
generation of power by Geodynamics and will end 10 years after
the commissioning date of Geodynamics’ first large commercial
power plant. Subsequently as part of the Heads of Agreement
executed on 3 May 2005, the Company has agreed to vary
this condition such that 2.5% of the environmental credits will
be assigned to Origin without separate consideration and the
balance of 47.5% of credits can be sold to Origin at full market
value (therefore the weighted average effective discount for the
credits remains unchanged at 5%);
• Geodynamics can terminate either or both agreements if
at any time during those agreements Origin holds less than
10,000,000 shares in Geodynamics;
• Origin has a right of participation in future share issues pro rata
to its then percentage shareholding in Geodynamics;
• Origin can be involved in the exploration, development, use or
generation of HDR geothermal energy without the consent of
Geodynamics.
Under the terms of a waiver granted by the ASX on 25 August
2003, ASX agreed to grant a waiver from listing rule 6.18 to the
extent necessary to permit the Company to enter into the above
Investment Deed which would enable Origin to maintain its
shareholding in the event of further equity issues by the Company
(the ‘Top-Up Right’). The waiver was granted by ASX on the
following conditions:
• The Top-Up right lapses if the strategic relationship between
the Company and Origin ceases;
• The Top-Up Right may only be transferred to a wholly owned
subsidiary of Origin;
• Any securities issued under the Top-Up Right are issued on the
same terms and conditions as are offered to third parties; and
• The Company discloses in each annual report a summary of the
terms of the agreement with Origin.
sUMMarY of the MetasoUrce and oriGin off-taKe riGhts
party
Metasource
Metasource
Origin
Origin
electricity oFF-take rights
renewable energy certiFicates (recs)
anD environMental creDits (ec’s) oFF-take rights
-
-
-
50% of export electricity produced
to a maximum amount of 1300GWh
per calendar year - 95% of forward
electricity contract market price
12.5% free to a maximum of those RECs or ECs arising
from 325GWh per year.
37.5% market price – right but not obligation to a maximum
of those RECs or ECs arising from 975GWh per year.
2.5% free to a maximum of those RECs or ECs arising from
65GWh per year.
17.5% market price – right but not the obligation to a maximum
of those RECs or ECs arising from 455GWh per year.
Total off-take obligations
of Geodynamics based on
a generated capacity of
2,600 GWh per calendar year
80%
100%
Origin
-
For subsequent plants (defined as any other plant other than the
first plant), Origin has a right but not the obligation to purchase
up to 70% of the REC volume generated from those plants but
such quantity cannot exceed more than 30% of the equivalents
REC’s or EC’s capable of being generated at the first plant.
Tenure*
10 years after commissioning
of first plant
10 years after commissioning of first plant.
* refer to specific detail in the agreements outlined above.
82 GEODYNAMICS LIMITED 2013 Annual Report
ShArEhOLDEr INf OrMAT ION
The shareholder information set out below was applicable as at 30 September 2013.
distribUtion of fULLY paid ordinarY shares
Analysis of numbers of equity security holders by size of holding:
range
100,001 and Over
50,001 to 100,000
10,001 to 50,000
5,001 to 10,000
1,001 to 5,000
1 to 1,000
Total
Unmarketable Parcels
tWentY LarGest hoLders - ordinarY fULLY paid shares
The names of the twenty largest holders of fully paid ordinary shares are listed below:
1
2
3
4
5
6
7
8
9
HSBC Custody Nominees (Australia) Limited
Sentient Executive
Trust Energy Resources Pte Limited
Origin Energy Limited
J P Morgan Nominees Australia Limited (Cash Income A/C)
Citicorp Nominees Pty Limited
Geodynamics Share Plans Pty Ltd
Invia Custodian Pty Limited (Franmart Super Fund A/C)
Mr Paul Armand Darrouzet
10 J P Morgan Nominees Australia Limited
11 Mr Edward Joseph Gettingby & Mrs Margaret Mary Gettingby
12 Mr Gary Alan Chalmers & Mrs Leanne Chalmers
13 Mr Richard Norman Gibson & Mrs Ingrid Margareta Gibson (Wattle Hill Super Fund A/C)
14 Mr Charles Douglas Sheardown
15 Dr Kuen Seng Chan
16 Mrs Elizabeth Aprieska (Tap Money Family A/C)
17 Mrs Kiara Dione Woods
18
19
Zero Nominees Pty Ltd
Sandhurst Trustees Ltd (DMP Asset Management A/C)
20 Dr Andrea Maria Thom
TOTAL
securities
241,581,646
45,612,865
84,418,540
19,313,045
14,007,570
1,518,942
406,452,608
12,922,755
no oF holDers
483
636
3,732
2,527
4,890
2,496
14,764
31,841,395
30,284,592
29,400,000
15,454,119
9,282,456
4,512,349
3,350,176
2,950,000
2,723,500
1,881,245
1,675,373
1,360,313
1,300,000
1,168,421
1,100,000
1,099,913
1,016,132
975,746
974,518
972,966
7.83%
7.45%
7.23%
3.80%
2.28%
1.11%
0.82%
0.73%
0.67%
0.46%
0.41%
0.33%
0.32%
0.29%
0.27%
0.27%
0.25%
0.24%
0.24%
0.24%
143,323,214
35.26%
sUbstantiaL sharehoLders
The names of substantial shareholders who have notified the Company in accordance with section 671B of the Corporations Act 2001 are:
1
2
3
The Tata Power Company
Sentient Executive
Sunsuper Pty Ltd
* represents holding percentage at the time of notification
distribUtion of share options
Analysis of numbers of equity security holders by size of holding:
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 And over
orDinary shares
nuMbers helD
29,400,000
30,284,592
29,999,999
percentage oF
issueD shares*
7.23%
7.45%
7.38%
listeD options
unlisteD options*
nuMber oF
option holDers
nuMber oF options
nuMber oF
options holDers
nuMber oF options
-
-
-
-
-
-
-
-
-
-
-
-
-
1
9
-
-
-
39,948
6,788,371
6,828,319
* Unquoted Options issued under the 2008 Geodynamics Employees Option Plan to take up ordinary shares
2013 Annual Report GEODYNAMICS LIMITED 83
uSEfuL TErMS
DeFinition
terM
DeFinition
Hot Commissioning Hot commissioning is the final stage of
commissioning and involves flowing hot
brine through the plant in a series of test
runs to demonstrate that the plant meets
its operational specifications including the
operation of all plant protective systems
and devices.
HSA systems are typically developed in
naturally occurring porous sandstones
containing water that is heated by either
crustal heat flow or proximate hot rocks.
Fracturing techniques may still be used to
enhance water flow between wells and HSA
systems have been successfully operating in
Australia and internationally for decades.
In the sense of EGS development, a treatment
involving the action of fluid pressure on
existing natural fractures to enhance fluid
pathways in the granite. It is achieved by
pumping water down a well at high pressure.
Special chemicals are not used.
An electromagnetic geophysical method
of imaging the earth’s subsurface by
measuring natural variations of electrical
and magnetic fields at the Earth’s surface.
Providing information about the earth’s
interior composition and structure since
naturally occurring rocks and minerals
exhibit a broad range of electrical resistivity.
A measured resource for which commercial
production can be forecast with some
confidence with existing technology and
prevailing market conditions.
Quantifies how strongly a given material
opposes the flow of electric current. A low
resistivity indicates a material that readily
allows the movement of electric charge.
An area/volume of rock that has
demonstrated character or dimensions
to indicate that a body of thermal
energy can be extracted. Commerciality
not yet established.
A drill hole of the smallest practicable size
having a diameter of 5 inches
(12.7 centimetres) or less.
The surface termination of a well bore that
incorporates facilities for installing casing
hangers during the well construction phase.
terM
Annulus
Bit
Brine
Casing
Casing shoe
Christmas tree
Completion
Conventional
Geothermal
Drilling mud
Enhanced
Geothermal
Systems (EGS)
Fingerprinting
In a borehole, the space between the drill
pipe and the borehole, between tubing and
casing, or between casing and formation.
The end piece of the drill string that cuts
and penetrates the earth.
Water containing dissolved inorganic
salts, mainly sodium chloride. Brine
from Innamincka granite has salinity
approximately two thirds that of sea water.
Large-diameter steel pipe with threaded
connections lowered into an open hole and
cemented in place.
A bull nose shaped device, known as a
guide shoe or casing shoe, that is attached
to the bottom of the casing string,
including the cement around it.
A set of valves, spools and fittings
connected to the top of the well to direct
and control the flow of fluids from the well.
The assembly of down hole tubular and
equipment required to enable safe and
efficient production from, or injection into,
a geothermal well.
Conventional geothermal resources are
hydrothermal systems that are associated
with active volcanic systems.
Provides lubrication and cooling at the drill
bit and carries the cuttings back to surface.
Its high density holds back overpressures
in fractures during drilling.
A geothermal source which needs
stimulation measures to become
economically viable by improving
energy output.
Plotting the flow back of the well at each
connection to understand the ‘breathing’
of the well. It also requires checking
this behaviour with a variety of surface
equipment turned on/off to understand the
impact of these actions on the well.
Hot Sedimentary
Aquifers (HSA)
Hydraulic
stimulation
Magnetotelluric
Reserve
Resistivity
Resource
Geotechnical drilling It involves drilling small holes to shallow
depths, to remove rock and soil samples
for soil stability evaluation, to determine a
site’s suitability for exploration drilling, and
construction of a drill pad and site.
Heat exchanger
The piece of equipment built for efficient
heat transfer from one medium to another –
geothermal brine to de-mineralised water.
Slim hole drilling
Wellhead
84 GEODYNAMICS LIMITED 2013 Annual Report
COMPETENT PERSONS STATEMENT
The information in this report that relates to Exploration Results,
Geothermal Resources or Geothermal Reserves is based on
information compiled by Dr Graeme Wheller and Robert Hogarth,
who appear on the Register of Practicing Geothermal Professionals
maintained by the Australian Geothermal Energy Group
Incorporated at the time of the publication of this announcement.
Dr Graeme Wheller is employed by Volcanex International. Robert
Hogarth is a is a full-time employee of the Company.
Dr Graeme Wheller and Robert Hogarth have sufficient experience
which is relevant to the style and type of geothermal play under
consideration and to the activity which they are undertaking to
qualify as a Competent Person as defined in the Second Edition
(2010) of the ‘Australian Code for Reporting Exploration Results,
Geothermal Resources and Geothermal Reserves’. Dr Graeme
Wheller and Robert Hogarth have consented in writing to the
inclusion in the report of the matters based on their information in
the form and context in which it appears.
CO RP O RATE DIRECTORY
BOARD OF DIRECTORS
Mr Keith Spence (Non-executive Chairman)
Mr Geoff Ward (Managing Director and CEO)
Mr Bob Davies (Non-executive Director)
Dr Jack Hamilton (Non-executive Director)
Mr Michel Marier (Non-executive Director)
Mr Andrew Stock (Non-executive Director)
COMPANY SECRETARIES
Mr Tim Pritchard CPA CSA (CERT)
PRINCIPAL AND REGISTERED OFFICE
Level 3, 19 Lang Parade, MILTON QLD 4064
Telephone: +61 7 3721 7500
Facsimile: +61 7 3721 7599
POSTAL ADDRESS
PO Box 2046, MILTON QLD 4064
INTERNET
www.geodynamics.com.au
EMAIL
info@geodynamics.com.au
ABN
55 095 006 090
BANKER
Westpac Banking Corporation
AUDITOR
Ernst & Young
SOLICITOR
Thomsons Lawyers
SHARE REGISTRY
Link Market Services Limited
Phone: +61 1300 554 474
Fax: 02 9287 0303
Postal address: Locked Bag A14, Sydney South NSW 1235
Website: www.linkmarketservices.com.au
Email: registrars@linkmarketservices.com.au
SECURITIES EXCHANGE LISTING
Geodynamics Limited shares are listed on the Australian
Securities Exchange. Ticker: GDY
PRINCIPAL and REGISTERED OFFICE Level 3, 19 Lang Parade, MILTON QLD 4064 Telephone: +61 7 3721 7500 Facsimile: +61 7 3721 7599
POSTAL ADDRESS PO Box 2046, MILTON QLD 4064 Internet www.geodynamics.com.au Email info@geodynamics.com.au