Transcription of Finance News Network Interview with Red Sky Energy Limited (ASX:ROG) Managing Director, Rohan GillespieClive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from Red Sky Energy
(ASX:ROG) is Managing Director, Rohan Gillespie. Rohan welcome to FNN.
Rohan Gillespie: Thank you, it’s a pleasure to be here.
Clive Tompkins: Can you start by introducing Red Sky Energy
(ASX:ROG). What’s the focus for the Company?
Rohan Gillespie: The focus of the Company over the last four years has been in gas exploration, primarily in Queensland and New South Wales. We’re now focusing on developing solar projects and really our showcase is going to be the Dubbo Solar One project.
Clive Tompkins: Thanks Rohan. So what’s your experience and how long have you been with the Company?
Rohan Gillespie: I’ve been with Red Sky for about four years now. Prior to that, I’ve had careers at BHP
(ASX:BHP), Commonwealth Bank
(ASX:CBA) and a couple of start-ups. One is Ceramic Fuel Cells
(ASX:CFU) which taught me a lot about start-ups, so it’s been a good experience for moving into Red Sky.
Clive Tompkins: Thanks Rohan and what’s the market cap for Red Sky Energy?
Rohan Gillespie: Market cap varies from day to day, but it varies from about three million to five million.
Clive Tompkins: Now Rohan, can you explain why your projects are viable without subsidies like the 20 per cent Renewable Energy Scheme?
Rohan Gillespie: Well we have a very low cost approach to how we are developing our projects. They’re small projects that sit within the distribution network. But a key thing is that nobody sold these projects on a spot basis into the electricity market. There are a time of day pricing when prices can go very high when periods of high demand, or when some of the coal plants drop off unexpectedly. And there are a lot of peaking plants out there in the market that get those high prices. Solar can share in that same market.
Clive Tompkins: Thanks Rohan, so clearly the focus is the Dubbo Solar One project. What is planned for stage one and how much electricity will it generate?
Rohan Gillespie: Yes we’re looking to build the first stage around about half a megawatt at Dubbo, which costs around about a million dollars. Its primary purpose is to give us credibility in the market; show that we can build a cost to time - right cost, right time. And operate the project on the spot basis that is the revenue model we think, is going to really generate the returns for the project.
Clive Tompkins: Great. So what’re the economics around the project and when is stage one expected to begin producing?
Rohan Gillespie: Well the returns on the first phase would be commensurate with returns of other electricity generation assets in the market. We’re talking in returns of around about the eight to nine per cent and we would expect it to start-up by June 2014, so June next year.
Clive Tompkins: So Rohan, why was Dubbo chosen as the location?
Rohan Gillespie: Well it’s got excellent sunlight intensity, it’s a growing area, the Council are very supportive, so we’ve got development consent from the Council. We’re actually putting the project on Council owned land for which we’ve leased for a 30 year period, so a number of factors which gravitated us to Dubbo.
Clive Tompkins: Now we’ve talked so far about stage one of the project. However, you have plans to add another 1.5 megawatts of capacity. Can you tell us more about this and how you intend financing stage two of the project?
Rohan Gillespie: Yes this is really a key plank for our developing the business. We’ve developed a unitised funding structure, which allows individuals to own the panels and inverters directly. So they have a stake in the project. And the funding structure we’re developing will allow some depreciation benefits for those investors. So we in fact, offer above market return to those investors and give them a long steady cash flow, for the life of the project.
Clive Tompkins: So Rohan, has this structure been approved by the regulator and if not, when do you expect this to occur?
Rohan Gillespie: Yes all the major elements have been agreed with the regulator. We have an AFSL in place and in terms of the structure of the scheme; all major elements have been agreed. So this has culminated in about 18 months’ work. We’d expect to have regulatory approval in place in the first quarter of next year.
Clive Tompkins: And Rohan, are you intending to roll this out beyond Dubbo?
Rohan Gillespie: Absolutely yes. We’ve been working with a number of the regional Councils around getting land, close to the zone substations and development consents. They’re very supportive of our projects. We’ve also developed a very strong relationship with a key stakeholder, which is Essential Energy which owns the gridding regional New South Wales, which allow access to sell our product - sell our electricity on the spot market.
Clive Tompkins: Now to your stock Rohan. What is the long term goal of the Board?
Rohan Gillespie: We would like to see a number of these projects rolled out over a period of years, so gradually building up to as much as 20 to 30 megawatts per year, on a sustained basis.
Clive Tompkins: And tell me, who has been backing the Company to this point?
Rohan Gillespie: Yeah one of our major shareholders is ERM Power
(ASX:EPW). They are a listed vertically integrated power company. We managed to have a transaction with them on our gas assets and they’re also supportive of us moving into the solar field.
Clive Tompkins: Last question Rohan. Where would you like to see Red Sky Energy in 12 months?
Rohan Gillespie: Well we would like to see the Dubbo project built and financed and that really is a stepping stone for building a major company.
Clive Tompkins: Rohan Gillespie thanks for the introduction.
Rohan Gillespie: Thank you for your time.
Ends
