Windlab (ASX:WND) 1H18 results


by Rachael Jones

Windlab Limited (ASX:WND) Executive Chairman and CEO, Roger Price talks about the company's 1H18 results, strategy and outlook.

Rachael Jones: Hello, I'm Rachael Jones for the Finance News Network. Joining me today from Windlab Limited (ASX:WND) is Executive Chairman and CEO Roger Price. Roger, welcome back to FNN.

Roger Price: Hi, Rachael. It's great to be here.

Rachael Jones: Now, Windlab Limited (ASX:WND) is a wind farm developer and operator with projects in Australia and internationally. Can you tell us more?

Roger Price: So Windlab Limited (ASX:WND) uses world-leading atmospheric modeling and wind energy prediction tools to identify wind resources around the world. We've done that now successfully in parts of North America, Australia and Southern Africa to build a big development pipeline of over 50 projects, 7,500 megawatts of potential capacity. Importantly, about 1,500 megawatts of that already has development approval and, once financed, is ready to build. About half of it is in Australia, and that includes exciting projects like Kennedy Energy Park, an industry first wind, solar and battery storage hybrid nearing completion in Far North Queensland, Australia.

Rachael Jones: Roger, now before we get to your results, your industry always seems to be in the news and at the front of political discourse. What can you tell me about that?

Roger Price: Well, that is a very interesting topic. It seems that successive federal governments have been unable to reach any sort of bipartisan agreement and implement long-term stable energy policy. With the lack of that policy, it does impact investor sentiment and confidence. We find that that leads to delayed investment decisions, tighter supply, and ultimately higher prices. Now that's not good for energy users, and no one thinks it is. It most probably means some short-term perturbations for the renewal energy industry in Australia. But importantly, over the medium term, we actually don't think it'll make that much difference, and that's simply because of market dynamics.

Wind and solar are now the cheapest forms of generating technology you can build. In Australia, over the course of the next 10 years or so, we will turn off about a third of our coal fire generators, some 9 gigawatts of capacity because they are simply too old. They'll be over 50 years of age. They are inefficient. They're expensive to operate. They are dirty. That capacity will be replaced by wind and solar, and we'll see that occur purely because of market dynamics.

Rachael Jones: Thanks, Roger. Now to your first half 2018 results, what were the highlights?

Roger Price: Well, I think, in a nutshell, things have gone as planned. We operate on a calendar year-end, so June, 2018 was our half-year results. The revenue for the first half was modest, but that is as planned, where most of our revenue this year will come from the financing of a large project called Lakeland in Far North Queensland, Australia, a 100 megawatt wind farm. That is scheduled for the second half of the year, and with that, we'll see most of the revenue delivered in the second half of the year. But even in the first half, there are some good financial highlights. Perhaps the most important one is we have seen a 40 per cent year-on-year growth in recurring revenue between asset management fees and distributions from operating wind farms.

Rachael Jones: Excellent. Now to strategy and share price. What can you tell me about the company's strategy?

Roger Price: Well, that's pretty easy really. We are just looking to do more of the same. We have used our technology to identify the best wind resources in the markets that we operate. We have built out over the last few years a capability in the organisation to do everything from greenfield identification, development approval, financing, construction and now asset management. We have completed projects by the Coonooer Bridge Wind Farm in Kiata in Victoria, Australia, which are now the best performing wind farms in Australia by capacity factor. We've got 50 more projects to do in our pipeline. So really, all we are seeking to do is do more of the same, one or two projects a year. By doing that, we will grow value for the company and for shareholders.

Rachael Jones: Could you provide a comment for us on the share price over the last 12 months?

Roger Price: We're a little bit frustrated by the share price. We don't think it reflects the true value of the company nor the performance of the company since we IPO'ed the business in August last year. I think there's most probably three reasons for that. I mentioned before the political discourse, the uncertainty of the political level playing on investor sentiment. So I think that that's got to have some impact on our share price. We had a number of long-term shareholders in the business who supported the company when it was a private company investing 10, even 15 years ago, and with the IPO, some of them have sought to sell their position, which has put some downward pressure on the share price.

I also think it's fair to say that with very, very few comparables on the ASX, the market is still coming to grips with both the sector and Windlab Limited's (ASX:WND) business model. All of that said though, the business is delivering. We're meeting the milestones we said we'd deliver. We're focused on operating the business, and we feel if we continue to deliver, the share price will take care of itself.

Rachael Jones: To the last question now, Roger. What is the outlook for the company and why should investors consider adding Windlab Limited (ASX:WND) to their portfolios?

Roger Price: Well, what I think investors should look for over the course of the next couple of months is the Lakeland Wind Farm, Queensland, Australia reaching financial close. That will deliver a significant revenue event for the company and should top off a successful year for the business. At a larger scale though, renewable energy is now an enormous global business, over $400 billion a year invested internationally, and Windlab Limited (ASX:WND) has a number of great opportunities. Yet Australian investors have very limited exposure to this sector. There are very, very few established, profitable businesses on the ASX that investors can invest in. Windlab Limited (ASX:WND) provides one of those rare opportunities. We have a successful track record of both growth and profitability, and I think it's fair to say at our current share price, we most probably represent great value.

Rachael Jones: Roger Price, thanks for the update.

Roger Price: Thanks, Rachael.


Rachael Jones

Finance News Network
Rachael comes to FNN after working for Fairfax Media covering international breaking news, including the global economy and politics. She joined FNN in February 2018. She has reported on Australia’s finance news for various organisations since 2000 and has also interviewed a number of key business players, including Bill Gates. Rachael has also worked across a number of countries, including the UK and the US.