GENERAL: NWF: Agreements Reached With Windflow And Aeolian Property

7 Apr 2010 1:54 pm

NWF 07/04/2010 GENERAL

REL: 1354 HRS NZ Windfarms Limited

GENERAL: NWF: Agreements Reached With Windflow And Aeolian Property

NZX Announcement

7 April 2010

For immediate release

AGREEMENTS REACHED WITH WINDFLOW TECHNOLOGY AND AEOLIAN PROPERTY COMPANY LTD

NZ Windfarms Ltd ("NWF") advises that it has entered into a settlement agreement with Windflow Technology Ltd ("WTL") which resolves matters that have been subject to dispute between the parties.

Specifically, NWF and WTL have reached agreement on a monitoring programme with respect to some components in the early turbines at Te Rere Hau which were subsequently modified as part of WTL's IEC Certification process because they did not meet IEC requirements for a 20 year life.

Agreement has been reached that, in respect of these components, NWF will retain a sum of $966,200 plus GST (being the total estimated remediation cost) which will be released to WTL if and when remediation works are undertaken during the five year warranty period or, if prior to the end of the current five year warranty period a report from an independent consultant provides an opinion that the affected components can be expected to achieve a 20 year life and accordingly do not need to be upgraded. In the absence of such a report, any components not upgraded will be subject to a warranty from WTL that extends to the end of the 20 year design life, provided WTL remains the operations and maintenance contractor. Any retention held at the end of the five year warranty period is repaid once the extended 20 year warranty is provided.

In addition to dealing with the IEC design issue the settlement agreement also deals with the holding of retentions for outstanding work; the consequences of delaying installation of Batch 4 turbines and other miscellaneous issues. As a result of this all outstanding claims between both companies have been settled. The settlement agreement is conditional on a successful capital raising being undertaken by NWF.

In a separate development, the wind rights agreement with Aeolian Property Company Limited ("APCL") has been renegotiated to allow preferential development of the proposed extension to the existing consented wind farm area ("Eastern Extension"), ahead of full development of the APCL Land. Under the wind rights agreement, the Company was prohibited from installing turbines within a 10 km radius of the Te Rere Hau site until the APCL Land was fully developed (97 turbines). APCL has agreed to remove this restriction in exchange for an adjustment to the royalty rate applicable to the APCL Land such that the royalty payable is equal to the royalty that would be expected if all 97 turbines had been installed on the APCL Land. Adjustments have also been made to minimum annual royalty thresholds as part of the amendments to the agreement with APCL. The amendments to the wind rights agreement remain conditional upon a successful capital raising being undertaken by NWF.

A put option agreement dated 22 December 2006 allows APCL to require NWF to purchase the APCL Land at a price calculated by reference to a formula which includes the value of the land as a grazing unit plus the net present value of the future royalty payments APCL will forego over the duration of the wind rights agreement and any renewals. As part of the recent agreement reached with APCL, NWF and APCL have agreed that, instead of the formula, a fixed price of $3.55 million (plus GST if applicable) shall apply if APCL exercises the put option any time between 30 June 2010 and 31 December 2010. Exercise of the put option would extinguish any requirement for NWF to pay royalties for turbines located on APCL Land and would give NWF ownership of the land on which the turbines are sited. There is no expiry date for the put option, but the purchase price for the land is subject to recalculation if it is not exercised during the defined price period (30 June 2010 to 31 December 2010). This recent agreement, which sets the purchase price under the put option at $3.55 million (plus GST if applicable) for that period, is also conditional upon a successful capital raising by NWF.

These agreements allow NWF to move ahead with completion of the Te Rere Hau Project in an optimal manner and allows the Company to focus on this task.

For any enquiries contact:

Steve Cross Chief Executive Officer (03) 943 5410 End CA:00193452 For:NWF Type:GENERAL Time:2010-04-07:13:54:25

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