Repair costs falling for NZ Windfarms, no early dividends

See also: Windfarms shareholders defy board on dividend

New Zealand Windfarms [NZX: NWF] says it is getting on top of the range of failures that have hampered operation of the Tararua Ranges windfarm near Palmerston North, which listed on the NZX four years ago and has reached a conditional settlement with its turbine supplier.

At the company's annual meeting, chairman Derek Walker told shareholders that its supplier, Christchurch-based Windflow Technology, had reached an agreement in principle to provide NZWF with $1 million in cash and convertible notes that could be used to take a 9.9% shareholding in Windflow, as well as "access to the necessary licence and know-how to ensure we can independently operate, maintain and improve our future fleet."

NZWF has struggled since its inception because of issues with the two-bladed New Zealand-made turbines developed by Windflow, which has struggled for sales and commercial viability as a listed company.

"Due to the challenges that have faced our supplier, Windflow Technology, the level of effort that we as a customer have had to put into these solutions has been much higher than would be the case if the turbines had been supplied by a more established and better resourced supplier," Mr Walker said. The settlement is conditional on Windflow shareholders accepting the terms at their annual meeting on November 30.

Also, during the year, the company won an Environment Court action brought by Palmerston North City Council, which claimed the turbines were exceeding noise limits under the windfarm's resource consents.

"It is disappointing to us that the PNCC have not engaged with us in a more proactive way to resolve the noise issue and have been intent on a court process," Mr Walker said.

Repairs to bearings, gearboxes, generators and other equipment totalled $1.4 million in the last financial year, and considerable work was done to try to improve output from the Windflow 500 machines, which have not performed to specification.

The company was still capital-constrained and while no further asset impairments were considered necessary, the company considered it prudent to hold available cash on the balance sheet for working capital.

While there had been "a very preliminary expression of interest" in purchasing the company during the last year, which had evaporated when the share price began rising and before any engagement commenced. NZWF shares traded slightly lower at 11c, having traded close to 4c apiece in the last year.

Some $6.5 million being held on deposit with the BNZ as security against leased electricity infrastructure at the windfarm would come free if the company succeeded in refinancing lease arrangements that had previously not been able to be unwound, but those funds might be better applied to reducing debt and ongoing financing costs, he said.

To support a one cent per share dividend, the company would need to be producing cash annually of $2.9 million, compared with losses of $159,000 and $1.2 million in the 2015 and 2014 financial years respectively.

However, with turbine problems now better understood, warranty claims against Windflow had dropped, said Walker. Part of the issue may be siting of some turbines and investigations are under way to re-site some.

Two long-standing directors, Michael Stiassny and Vicky Buck, resigned at the meeting after two shareholders sought nomination for the board. The result of shareholder voting has yet to be announced.

(BusinessDesk)