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Windfarms moves into 'clean-up' mode

Wednesday 7th April 2010

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New Zealand Windfarms is moving to mop up a range of outstanding issues with the landowners at its Te Rere Hau windfarm site in the Manawatu and the supplier of its wind turbines, Windflow Technology

The moves come as Windfarms becomes more confident that it will come through a period of severe financial strain which will be alleviated by a $34.1 million eight-for-three cash issue, a crucial piece of which was approved by shareholders at a special meeting yesterday.

In statements issued to the NZX, Windfarms and Windflow disclosed that they have reached agreement the potential cost of repairs to early versions of Windflow's pioneering two-bladed Windflow 500 machines, while Windfarms is also offering to buy out the Te Rere Hau landowners for $3.55 million in an offer that stands open at that price between June and December this year.

The Windflow agreement says the turbine maker will indemnify its turbines for repairs up to a value of $966,200 within the next five years, if required, on turbines which were installed at Te Rere Hau prior to design modifications made during the international certification process. Windfarms will hold that sum for the five year period, with any residual payable at the end of the period to Windflow.

The International Electrification Certification process determined that certain aspects of the earlier turbine design could not be guaranteed to last 20 years. The affected components will remain under warranty for the full 20 years unless an independent expert certifies them not to need repair.

Meanwhile, Windfarms is also offering $3.55 million to the shareholders in Aeolian Properties Ltd., the company formed by Windflow founder and chief executive Geoff Henderson in 1992 to own the Te Rere Hau windfarm site.

Among shareholders of Aeolian are former Green Party leader Jeanette Fitzsimons and long-time energy issues campaigner Molly Melhuish.

There is currently a royalty agreement in place with Aeolian, which would produce income over the life of the windfarm. The cash offer from Windfarms, made possible as long as the current round of capital-raising succeeds, seeks to crystallise that value, giving shareholders the option not to be exposed to Te Rere Hau's performance over its commercial life. It also clears the way for construction of turbines on Te Rere Hau's so-called "extension site" - a better wind resource not owned by Aeolian and recently resource-consented - rather than completing the development on Aeolian's property.

Neither NZX-listed Windfarms nor NZAX-listed Windflow had traded by late afternoon today, with the two shares sitting at 92 cents and 37 cents respectively.

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