NZ Windfarms Limited Analysis

Overview

Current:

The Te Rere Hau wind farm is situated on North Range Road in the Tararua Ranges approximately 11 kilometres from Palmerston North. The site operates 91 Windflow Technology WF500 turbines, with an output of 45.5 MW, capable of producing approximately 116.7 GWh's of renewable electricity per annum enough to power about 16,000 homes, or in excess of half the households in Palmerston North.

The wind farm provides economic benefit to the country through providing electricity generation close to where it is needed and an estimated $2m to the local community through the employment of local residents and purchase of other goods and services. TRH Services Ltd (100% owned and controlled by NZ Windfarms Ltd) is the entity responsible for the operation and maintenance of Te Rere Hau wind farm.

The electricity generated is fed into the national grid through a transmission line connected to the node at the adjacent Tararua wind farm.

Future:

The Company has secured resource consents paving the way for potentially repowering the Te Rere Hau wind farm with up to 30 new, larger, three-bladed wind turbines. Repowering the Te Rere Hau wind farm could position it as an onshore wind farm with an estimated capacity factor between 48% to 51% (compared to our current fleet capacity factor of ~25%). Average annual energy production could increase substantially from 100 to 120 GWh to between 530 GWh and 570 GWh. The Company is currently advancing confidential commercial negotiations for the repower.

Additionally, we have identified an opportunity for further expansion of the repowered wind farm with nine additional turbines through the Aokautere Extension project. This could add up to an additional 170 GWh to the production potential of the repowered wind farm. (i.e. up to 740 GWh in total). This project has been successfully referred to the fast-track consenting pathway, and we are currently progressing the resource consent application. Our intention is to submit the second fast-track consent application by the end of October 2023, with a consenting decision possible in Q1 2024. If successful, this will be incorporated into the repower.

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We have secured land rights to build an alternative higher capacity grid connection option. We are in advanced discussions with Transpower on the grid connection requirements.

Background:

Consent for the existing wind farm was granted from the Palmerston North City Council in 2005. Construction of the wind farm commenced the following year in 2006 and involved the commissioning of 65 turbines on 240 hectares of land owned by the Company.

In 2009 resource consent was sought from the Tararua District Council for an extension of the farm to install up to 56 turbines on the eastern side of the wind farm. Consent was granted in March 2010 and 32 turbines were commissioned progressively up to 1 July 2011.

The 500 kW turbines are 30 metres high and have a rotor diameter of 33 metres. The turbines were the only locally produced variants being operated in New Zealand and are designed for the strong winds and turbulent conditions prevailing in the region. See the Windflow 500 brochure for more information on the turbine.

97 turbines were constructed, however only 91 turbines are operated currently. The consent allows for a further 56 WF500 turbines to be constructed and operated, but there are no plans to do this at this time.

Performance

The following information was extracted from NZ Windfarms Limited's full year results, released on 29 August 2024:

Strong financial performance and further positive progress on Te Rere Hau Repower Project

Key highlights

• Shareholder approval for Te Rere Hau repower transactions and placement
• 50:50 joint venture established with Meridian Energy for Te Rere Hau repower
• Continue to make good progress on the repower project - completing preparations to raise NWFs share of equity for the joint venture
• Expert Panel Appointed by the Environmental Protection Authority to consider Aokautere Extension Project released a decision to approve this on 26 August 2024
• Investigating new renewable energy developments separate from Te Rere Hau - agreement in principle with development partner on two major opportunities - have lodged applications for both to be listed under Schedule 2A of the new fasttrack consenting bill
• Continued strong health, safety and wellbeing performance: nil recordable lost time injuries (2023: nil)
• Undertook a TOITU audit and certification around greenhouse gas emissions inventory and management

Key Company Metrics

• Net Electricity Revenue1 of $10.8m, up 12% (2023: $9.7m)
• Net Electricity Price GWAP of $102.67 MWh, up 4% (2023: $98.51 MWh)
• Generation of 105.6GWh, up 8% (2023: 98.2 GWh)
• Average wind speed of 9.3m/s, up 3% (2023: 9.0m/s)
• Availability of 96.9% (2023: 95.5%)
• EBITDAF2 of $5.4m (2023: $4.6m) and within guidance range
• Net Profit After Tax (NPAT3) to $0.15m (2023: - $5.3m)
• Operating Cash Flow4 of $3.1m, down 17% (2023: $3.7m)
• Net cash of $0.7m and $5.8m of term deposit investments
• $6.9m headroom available in the BNZ committed credit facility
• Dividends remain paused to fund strategic growth workstreams

Financial result

The Company achieved a solid result for the 2024 financial year. Net electricity revenue was $10.8m, an increase of 12% over the previous financial year supported by a strong generation of 105.6 GWh (2023: 98.2 GWh).

Generation was bolstered by an average wind speed of 9.3 m/s which was higher compared to the previous period (2023: 9.0m/s). We also achieved higher availability throughout the year at 96.9% (2023: 95.5%), which is above our OEM benchmark of 95.0%, but below the industry benchmark of 97.0%. This highlights the dedication and professionalism of our site operations and maintenance team who work hard to ensure our plant is ready and available to generate to its full potential when wind conditions permit.

Our Variable Volume Fixed Price Agreements (VVFPA) helped deliver a Net Electricity Price GWAP at $102.67 MWh (2023: $98.51 MWh).

EBITDAF was $5.4m up 17% on the prior year and was a strong performance for the company. Net profit after tax for the year was $0.15m, a 103% increase from the previous year.

Total bank debt at the end of FY24 was nil (2023: $7.6m) with $6.9m headroom available on its cash offset facility to draw down if required.