Trustpower cuts the value of its Snowtown wind farm

See also: Trustpower shares fell more than 3% after it slashed Snowtown 2's value

Trustpower [NZX: TPW] downgraded its assessment of the potential production from the second stage of its Snowtown wind farm in South Australia by 9.4%, reducing operating earnings by around $A8.5 million a year, cutting its valuation by as much as $A70 million.

The Tauranga-based electricity producer, which is controlled by Infratil [NZX: IFT], says "the revision is due to a number of factors associated with energy yield prediction", including "the limitations with industry modelling tools when applied to a site of this complexity and scale, using modern large rotor turbines."

Trustpower's shares fell 1.9% to a four-week low of $7.60. Infratil stock declined 0.6% to $3.15.

Snowtown is the second-largest wind generation facility in Australia with total installed capacity of 370 megawatts, according to the Trustpower website.

It was built in two phases, 2008 and 2013, at a total cost of about $A660 million.

The output reassessment relates to the stage two development, which had been revalued upwards by $A315 million in the latest company accounts. The reassessment reduces expected annual generation from 985GWh per year from the stage two development to 892GWh.

"Trustpower expects that wind production at Snowtown stage 2 will reduce 2017 financial year earnings before interest, tax, depreciation, amortisation and movements in the value of financial instruments by approximately $A8.5 million in a year of average wind," chief executive Vince Hawksworth says.

"Trustpower also expects a reduction in the valuation of the Snowtown stage 2 generation assets of between $A60 million to $A70 million", applied against the group's revaluation reserves.

"Energy yield modelling techniques are continuing to evolve to improve the accuracy of prediction, informed by research and analysis by wind industry participants and experts,” Mr Hawksworth says.

“Trustpower has undertaken a comprehensive analysis in conjunction with independent engineering advisers to better understand the factors contributing to this revision and will apply these learnings, along with advances in modelling techniques, to future developments."

He says Trustpower remains pleased with its investment in Snowtown stage 2 and the value created for shareholders from this project.

Trustpower had noted in its 2015 annual report earlier this year that "poor wind generation" in the second half of the last financial year at its Snowtown and Tararua wind farms had affected financial performance.

(BusinessDesk)