Ann: HALFYR: NWF: Interim Report for the six months ended 31 December 2014

• Release Date: 24/02/15 11:48
• Summary: HALFYR: NWF: Interim Report for the six months ended 31 December 2014
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					NWF
24/02/2015 11:48
HALFYR
PRICE SENSITIVE
REL: 1148 HRS NZ Windfarms Limited

HALFYR: NWF: Interim Report for the six months ended 31 December 2014

NZ WINDFARMS LIMITED
CHAIRMAN'S REVIEW

For the six months ended 31 December 2014

OVERVIEW

There have been a number of positives for NZ Windfarms in the first six
months of the 2015 financial year.  Good levels of wind resource and
wholesale prices have resulted in the Company making a small profit for the
period which is an improvement of $1.26 million over the same period last
year. Electricity generated for the period was on budget for the six months.
It was below the expected long term average for the first quarter but above
the expected long term average for the second quarter including a monthly
record output of 16,347 MWh in November.  This illustrates the variability in
output due to wind conditions.

The programs put in place by our technical team to address gearbox issues and
adjustment of our operating protocols has resulted in an improvement in
turbine availability to 96.3%.

After the period end, the Court of Appeal ruled in NZ Windfarms' favour in
relation to the appeal by the Palmerston North City Council of an earlier
High Court decision. The High Court had ruled that the company was not in
breach of Condition One of the original consent granted by the Council for
the Te Rere Hau wind farm.  Following the Court of Appeal decision that
ruling stands and no further action is expected in this matter.  We still
await the Environment Court decision in relation to other declarations sought
by the Council in relation to compliance with the noise conditions of the
consent.

FINANCIAL PERFORMANCE

The key drivers of the revenue from the wind farm are the wind received at
the site and the wholesale electricity price. Compared to the previous
corresponding period, the volume of electricity generated and the average
price increased significantly. Volume increased due to higher average wind
speeds and improved turbine availability. In the latter part of the period
wholesale prices increased due to a combination of factors including lower
than average hydro inflows and scheduled maintenance outages at key thermal
stations.

Half-year electricity sales were $4,190,000. To achieve this, the turbines
generated 68,674 MWh at an average price of $61.01 per MWh. The comparatives
for the six months to 31 December 2013 were revenues of $2,729,000 from
63,531 MWh and an average price of $42.95 per MWh.

Profit before depreciation, amortisation, interest and tax was $1,545,000 for
the half-year (December 2013 half-year - profit of $187,000). When
depreciation, amortisation, interest and tax are taken into account, there
was a net profit after tax of $40,000 (December 2013 half-year - loss of
$1,225,000).

Warranty recoveries have fallen in comparison with the corresponding period
last year due to the reducing number of turbines covered under the warranty
and a reduction in the number of major components requiring repair. High
legal costs were incurred due to the Court of Appeal and continuing
Environment Court actions instigated by the Council relating to Consents, and
the commencement of arbitration and litigation actions against Windflow
Technology Limited in relation to on-going technical issues with the fleet of
WF500 turbines.

Interest income earned during the period was $224,000 (December 2013
half-year - $181,000). Interest expense during the period was $484,000
(December 2013 half-year - $486,000).

As at June 30 2014, to be conservative, we maintained a provision for the
outstanding warranty debt from Windflow Technology Limited of $857,000
including GST. During the first six months of the current financial year we
received payment for part of this outstanding debt but invoiced further
warranty claims. As at 31 December 2014 we maintained a provision for all
outstanding warranty debt of $968,000 including GST.

OPERATIONAL PERFORMANCE

The 68,674 MWh generated in the six months to 31 December 2014 is an 8.1 per
cent increase on the 63,531 MWh generated in the corresponding period of the
previous financial year. Output of 16,347 MWh in November set a new monthly
record, 14 per cent higher than the previous best of 14,329 MWh in October
2012.

The program put in place to address premature gearbox failures has allowed
availability to be recovered to 96.3 per cent for the first half of the
financial year. This is a 2.5 percentage point improvement from the previous
corresponding period. We continue to gain knowledge about the operations of
the fleet of WF500 turbines and are iteratively developing our operating
protocols to capture improvements identified.

Our operations and maintenance team has completed a further six months period
without a serious Health and Safety incident, which is a credit to the
professionalism of the team.

RESOURCE CONSENTS

As noted above, the company successfully defended an appeal by the Palmerston
North City Council of an earlier High Court decision in regard to compliance
with the original consent for the Te Rere Hau wind farm. The Appeal Court
judgement affirmed the High Court decision that the company was not in breach
of Condition One of the consent.  The Palmerston North City Council did not
appeal the Appeal Court decision.

A further hearing in the Environment Court was held in October to determine
declarations sought earlier by the Council as to whether the company was
compliant with the specific sound level conditions in the original consent.
The result of this hearing is expected in early 2015.

OUTLOOK

Long-term financial performance is dependent upon three key variables of
which two are outside the Company's control - the wind at the site and the
wholesale electricity market prices. In the period under review wholesale
electricity prices increased significantly over those prevailing in previous
years, particularly in the second quarter of the year.
The third key variable within the Company's control is operational
performance which improved significantly over the six months with turbine
availability increasing and major repairs decreasing. The Company is
continually learning how to optimise the installed turbine fleet's
performance and exploring options for engineering efficiencies to streamline
operating costs, whilst remaining focused on operating the farm generally as
economically and prudently as possible.

Derek Walker
Chairman
17 February 2015
End CA:00261054 For:NWF    Type:HALFYR     Time:2015-02-24 11:48:14