Fundamental uncertainty now removed but some delay

Fundamental uncertainty now removed but has delayed production

Wind turbine manufacturer Windflow Technology Limited (WTL) is pleased to advise that the agreement it reached in early April with its customer NZ Windfarms (NWF) is now unconditional after the successful completion of the NWF capital raising last week. The agreement settles the dispute between the companies, and the successful capital raising enables NWF and WTL to concentrate now on completing the Te Rere Hau (TRH) wind farm together.

This is a very welcome development because it removes the fundamental uncertainty that was announced by NWF in August 2009 and affected both companies until resolved. A result of this fundamental uncertainty has been that WTL had to delay ordering some of the more costly components, some of which also have long lead times, until WTL was certain that it would receive payment for the final TRH turbine assemblies for which the components are needed.

Consequently, production levels have been behind original expectations, and although ordering from suppliers has now resumed, the delay will lead to a likely 8 – 10 week gap in nacelle production. The final 16 turbines will complete production in WTL’s next financial period rather than, as intended, in the financial year ending 30th June 2010. It is not anticipated that this production delay will lead to any delay to the development of the TRH wind farm as the turbines will be placed on the recently consented extension site and the likely construction date for this site is late 2010.

However, due to the production gap occurring immediately prior to the company’s financial year end, there will be an impact on the 2009/10 financial result with a portion of revenue deferred into the 2010/11 period. This will result in a loss in 2009/10 higher than anticipated which is now expected to be in the $5 - $6 million range.

Commenting on the loss, CEO Geoff Henderson said, “naturally we find this disappointing. It has arisen out of the delays to the TRH project, and the dispute with NZ Windfarms. Consequently instead of the planned forward momentum, we must now work hard to rebuild. We have yet to confirm the critical next turbine sale after TRH and continue in our efforts to achieve this. WTL is also turning its marketing efforts towards building its pipeline of wind farm opportunities both in New Zealand and in other countries. The company is receiving regular expressions of interest in the Windflow 500 turbine, 65 of which have been operating at above 95% availability for the last five months now at TRH and are establishing a very good track record on the windy and turbulent ridge-tops of that site.”

ENDS

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