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Windfarms posts first-half loss

Tuesday 2nd March 2010

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New Zealand Windfarms posted a first-half loss after writing down the value of assets and said it has delayed plans to raise funds to expand its Te Rere Hau wind farm amid a dispute with its turbine supplier.

The net loss of $6.5 million in the six months ended December 31 included a $6.3 million write-down of its assets, the company said in a statement today. It earned $2.59 million a year earlier.

Windfarms continues to be in dispute with its turbine supplier Windflow Technology, which has slowed the company’s timing of its capital raising. Last August, Windflow Technologies advised that design changes would be required for its two-bladed WF500 turbine to be a recognised design standard under the International Electrotechnical Commission (IEC) Class 1A Type Certification. A fundamental refit of those turbines could cost up to $24 million.

Problems in six turbines have occurred where an incorrect heat treatment process with cast gears has made them prone to cracking, incorrect oil filters may allow manufacturing debris to enter the gearboxes and some overheating of generator assemblies has occurred during sustained periods at high output, Windfarms said in its statement today. Repairs for these faults have been carried out under warranty by Windflow Technologies, but have contributed to significant downtime for a number of turbines.

Windfarms obtained an independent consultant’s report on the IEC implications, and the significance of the design modifications that are required.

“Resolving this matter has not been easy,” said Windfarms chairman Derek Walker. “It has proven difficult to sort out and been time consuming. However, the company has made good progress on resolving this issue with Windflow Technology and continues to work with them to resolve outstanding issues.”

Windfarms said the recent completion of its 65 turbine Tararua Ranges site with an additional 32 turbines will demonstrate sufficient net cash surpluses to fund its ongoing operations.

The company made $1.59 million from the sale of electricity into the National Grid.

Windfarms has recently obtained resource consent to locate an additional 56 turbines on a Te Rere Hau Eastern extension, as the site has better winds than the lower slopes of the existing farm. The company is negotiating with the single appeal lodged in the Environmental Court on the decision, with the intention of reaching an agreement to have the appeal withdrawn.

“The last six months have been challenging, but your Board remains comfortable that the decision to delay the capital raising until the implications of not receiving IEC certified turbines were understood, and the decision on the resource consent application known, are in the best interest of the company and shareholders,” said Walker.

He said further information on the capital raising will be made shortly, but that the public should realise that a 32 megawatt wind farm is now successfully operating.

Windfarms earned over 30,000 carbon emission reduction units during the calendar year. These units will be recognised as an asset at fair value at the time the Crown issues the units and when fair value can be determined by reference to an active market. However, there is currently no active market for carbon credits in New Zealand and the Crown hasn’t issued any of them.

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