Windlab (ASX:WND) FY18 results & outlook


by Jessica Amir

Windlab (ASX:WND) Executive Chairman, Roger Price talks about its FY18 results, local and international development portfolio and the falling cost of renewable energy.

Jessica Amir: Hello I’m Jessica Amir for the Finance News Network. Joining me today from Windlab Limited (ASX:WND) is Executive Chairman, Roger Price. Hi Roger and welcome back.

Roger Price: Hi Jess, it’s good to be here.

Jessica Amir: For those who don’t know, you develop and operate wind farms here in Australia and around the world. Just tell us where the business is at today?

Roger Price: As you know Jess, Windlab owns a suite of atmospheric modelling and wind energy prediction tools called, WindScape, which we use to identify the best wind resources anywhere around the world, from our office in Canberra. We’ve done that to build a large diversified portfolio spanning the US, Australia and Southern Africa. We’ve completed over 1,000 megawatts of capacity, but we’ve got a further 7,500 megawatts, some 50 plus projects in the development portfolio.

We listed the company last year in August on the ASX, principally to raise money to fund the construction of Kennedy Energy Park, an industry first, wind solar and battery storage hybrid. That project is now nearing construction completion and will commence operating next month. We, however, haven’t rested on our laurels, during the year we’ve continued to work hard on building and maturing our portfolio. We’ve added some 700 megawatts of additional capacity, both in Australia and South Africa. And we’ve also matured our pipeline, gaining development approvals on a further 500 megawatts of capacity, including the first ever wind farm developed in Tanzania.

Jessica Amir: The business operates on a calendar year basis and you’ve just handed down your full financial year results. Just take us through some of the highlights?

Roger Price: I think the key highlight for the year was our growth in recurring revenue. Our revenues that are sourced from our share of profits from operating wind farms, royalties and asset management, grew some 65 per cent compared to 2017. This is an important metric for our business. It’s strategically important, because we’re seeking to rebalance revenues that we make from recurring revenue, versus development profits. Now the latter are large and exciting, but they’re often quite difficult to predict in terms of timing. So by building our sources of recurring revenue, we make the business more robust and earnings more predictable.

Jessica Amir: And Windlab of course, operates in Southern Africa and just recently you announced a significant partnership. Can you tell us about that?

Roger Price: Windlab’s been operating Sub-Saharan Africa now for a number of years and we’ve built a development portfolio, spanning some eight countries that go all the way from Zambia to Ethiopia. These are interesting countries and some of them are not without risk. But what most people don’t know is that they have some of the highest GDP growth rates, in the world. Six, eight, even 10 per cent. However, these countries suffer a chronic shortage of electricity. There’s over a billion people in Sub-Saharan Africa, yet less than a third have access to permanent electricity. So this creates an enormous market opportunity. A little like India was 10 years ago, or even China twenty.

So, we’ve signed a deal with Eurus Energy of Japan, one of the world’s largest renewable energy only, independent power producers. They operate in some 13 countries, including some interesting places like Uruguay and Egypt. And they’re investing US$10 million into our eastern African portfolio, to help accelerate the development of that portfolio, and to help with financing in to construction.

Jessica Amir: Over the past six months, we’ve seen a significant rise in contracts being awarded to renewables in Australia. What impact has this had on the business?

Roger Price: You’re right Jess, we’ve seen a huge uptick in the amount of renewable energy investment in Australia. In fact, 2018 was a record year, some $12 billion was invested in renewables in Australia. But the price equation is an interesting one. It’s not actually the amount of new renewables that’s having a downward impact on the price. It’s actually the renewables are now becoming so cheap that it’s creating a market dynamic, where investment in this technology happens regardless of the fact, that we do not have long-term sensible stable energy policy from the Federal Government.

And the market is saying that we want renewables. Not just because they’re clean, but because they’re the cheapest way of generating electricity. We’re seeing this dynamic happen all around the world and what it means for Windlab, it’s an enormous growing market.

Jessica Amir: Changing pace now to finances and your share price. Just give us an update Roger on your financial position?

Roger Price: We finished the year with revenues of about $6.25 million, $5.5 of them coming from recurring revenues, as I mentioned before. Our balance sheet is healthy, we finished the year with just under $5 million in the bank. So the business is well placed to meet its medium term strategic objectives. And as Kennedy Energy Park starts to operate later in this year, the business will move to a position where it’s effectively cash flow neutral, exclusive of the development profits we expect.

Jessica Amir: What can you tell us about your share price?

Roger Price: That’s always an interesting topic. Our view is that the company remains undervalued. And I think there’s a number of reasons why that’s a justified statement. But perhaps a contemporary one is the investment that Eurus Energy is making in our African portfolio. So that’s a relatively smaller part of the business. But they’ve valued that portfolio at over $40 million, which is greater than half of our overall market cap.

Jessica Amir: Just lastly Roger. What’s your outlook for the first half of this year?

Roger Price: We’ll continue to stick to our knitting and we’ll continue to seek to extract value, from our large development pipeline. So we feel like we’ve started the year very well, by closing the transaction with Eurus Energy to allow us to accelerate development, in our east African projects. But we’ll also work in Australia to complete Lakeland Wind Farm. Kennedy Energy Park, we’ll see that enter operations towards the middle of the year. We’ll reach financial close on a project called Greenwich in the United States, and receive a pretty significant success fee. And of course, we’ll continue to work on financing projects right across our portfolio, including Australia and Africa.

Jessica Amir: Roger Price, thank you so much for the update and thanks for your time.

Roger Price: Thanks Jess, my pleasure.


Jessica Amir

Finance News Network
Jessica joined FNN in January 2017 after having worked in financial advising for seven years and in TV journalism for seven years, specialising in finance, equities and analysis. She has interviewed former Prime Ministers of Australia, Tony Abbott, Julia Gillard and Kevin Rudd and ex Treasurer Jo Hockey. Jessica has worked as a journalist with Sky News Business, ABC 1, ABC's The Business, ABC24 and has also been a regional Channel 7 and 9 TV reporter with Prime7 and Win News.