Windflow Technology outlines hand-to-mouth survival plan

Tuesday 13th September 2011

Embattled wind turbine pioneer Windflow Technology is down to $400,000 in the kitty and needs to raise $2.4 million from existing shareholders and other sources to keep going until next January.

Declaring a loss of $7.03 million for the year to June 30, Christchurch-based Windflow says it can then hang on for another six months to June 2012 because it is due $2.82 million for the last 32 turbines at its only commercial installation, the 97-turbine Te Rere Hau windfarm in the Manawatu.

In that time, it hopes to stabilise the company by licence sales of its innovative gearbox technology, which allows its two-bladed Windflow 500 machine to operate in high winds when other windfarms stop generating electricity.

It says that there is already one Fortune 500 company “at the advanced evaluation stage of the intellectual property with the objective of entering into a licence and engineering support agreement.”

Among Fortune 500 companies involved in wind generation are General Electric and Duke Energy, both based in the U.S., where Windflow secured rights but was unable to fund the construction of two demonstration turbines at a southern California project which also uses two-bladed turbines.

More generally, the company’s preliminary annual review, released to the NZX today, says it already has “significant interest from potential purchasers of licences for its intellectual property, even prior to a formal sale process being entered into.”

Since balance date, it also sold some $900,000 worth of spare parts to New Zealand Windfarms, operator of the Te Rere Hau development, with some further revenue as more spares arrive from suppliers.

“This tight cash position underlines the need for an immediate capital raising,” said managing director Geoff Henderson.

Accordingly, directors will from tomorrow offer the company’s existing shareholders one-off parcels of 30,000 shares at 50 cents each, up to 30% of the issued capital of the company.

“The capital raising … could provide $2.35 million should 160 shareholders take up their full $15,000 entitlement,” the Windflow documents say – some 17% of the shareholder base, compared to the 38% who participated in the last capital raising in late 2010.

The loss for the year was in part because of higher than previously anticipated costs for maintenance on the Te Rere Hau machines, which cost $3.54 million, although recent experience suggests costs associated with the prototype project have now peaked and are “over the hump”, although the accounts still include future warranty provisioning of $5.39 million.

Comparisons with the maintenance and warranty costs experienced at Meridian’s new West Wind project near Wellington suggests the Windflow 500 is “as good as or better than the latest offerings from Europe installed in New Zealand.”

In addition, hopes of sales in the U.K. from uptake of a government-subsidised Feed-In Tariff scheme did not materialise when a review of the scheme was announced. Windflow remains optimistic there will still be a “modest” number of turbines once the review is completed, later this year.

However, if the company does not succeed in generating new revenue from the three planned sources – capital-raising, licence sales, and U.K. sales – it is signalling it may not be able to continue to operate.

(BusinessDesk)

BusinessDesk.co.nz

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