J-POWER sign MOU on GNX's K2 150MW Wind Farm for 50% equity, page-13

Hey Ratos.

Always good to put up ideas for discussion.

Why this play? Genex must satisfy Powerlink/QLD Gov't that it is committed to building out its portfolio. Can you imagine the uproar if the Qld Govt were to give us $132mn upfront and $3mn a year in line sharing (for 80 years) and we just build K2H and move on? That is not value for money for Queensland ratepayers. We had long stated that a 50% selldown on K2S was required when it was planned as the next venture post-K2H close. As wind is far more attractive in Queensland right now, it makes sense to complete the selldown with K2W. All parties will be well aware we couldn't fund it alone.

Who does it give confidence to? Well, Japan's largest power company are that chuffed to be working with us on the SSP, they've committed long-term at the project level. This is as important a moment in the GNX-J-POWER relationship as I've seen. It gives confidence to me, as a shareholder, that what I see is seen by Asia's largest energy players.

I would have assumed the powerlink line construction and ongoing maintenance cost would be the same irrespective of what stage is built first or second ie K2H or K2W or both.

You're correct. Although, this is more about whether any additional projects can take the attributable line rental fee. Imagine that K2H is all that's built. K2H would then, as a project, be funding 50% of the line rental (50% to Powerlink). This is a significant amount of money and could impact just how profitable the project is. However, if other projects are confirmed, or likely, there's less concerns from a equity/debt perspective.

finding a JV to put up 150m for W is definitely easier than a JV at 300 for H.

The 300mn for K2H is off possibly one of the cheapest loans possible, with a 30 year PPA, and has far more pathways to revenue than a wind project. Make no mistake, it was a competitive JV process.

im going out on a lim, and pls shoot down the idea if you believe I’m way out of line. Could they be finding it difficult to lock a JV in for the H and plan to use W as a sales pitch for H JV in the future...meaning a possible further delay to H?? Hope that doesn’t read as a negative.

All good, it's just my position as well. There's always been a reasonable chance we are delayed to CY21. However, most of those variables seem to have been overcome (election, etc). We can not build K2W without K2H - K2W requires the K2H transmission line. If J-POWER are signing MOU's on K2W you'd think they're rather confident on K2H's prospects. Whether that happens in December or January probably isn't too important, from a K2W commercial perspective.

Regards,
Jeremy