Windlab set to change hands, flags write-down on Kennedy solar-wind-battery park

Following months of connection delays, renewables developer Windlab has confirmed a $29.4 million write-down on its landmark Kennedy Energy Park project, Australia’s first project on a major grid to combine wind, solar and battery technologies. With no certainty over when the project may start operation, it is now difficult to estimate the project value. 

“Management has identified significant uncertainty around the valuation of Windlab’s investment in Kennedy, resulting from uncertainty over the project’s completion date and ongoing dispute with the contractor,” Windlab said in its results statement. “The current carrying value is considered to be a conservative estimate, with potential for the impairments to be written back in the future if further delays are minimised and the dispute settled favourably”.

The write-down was announced after the legal dispute with contractors Danish Vestas Wind Systems and U.S. Quanta Services was paused until mid-March, with parties agreeing to try to resolve the claims outside of the courtroom. The standstill was announced following an adjudication that ruled Windlab would be the sole party to bear the costs of delays at the Kennedy hub.

Construction of the Kennedy hub – combining 43 MW of wind, 15 MW of solar and a 2MW/4MWh Tesla battery – was completed in December 2018. The project located east of Hughenden in Queensland was energized in August last year but its commercial operation has been delayed due to complications in the connection process. Today, the project is behind schedule for around 18 months.

The Kennedy Energy Park is jointly developed and owned by Windlab and Japan-based Eurus Energy. This means Windlab’s share of the write-down totaled $14.7 million and was a major contributor to the company’s increased loss in the first half of the financial year until December 31. The total loss amounted to $12.8 million up from $4.3 million in the respective period the year before. 

Acquisition confirmed

Following the release of the preliminary results on Friday, trading in Windlab shares was suspended pending the outcome of negotiations on the company’s proposed acquisition. On Wednesday, the developer confirmed that it had signed a binding ‘Scheme of Implementation Agreement’ with a consortium consisting of private equity investor Federation Asset Management and Squadron Wind Energy Development, owned by Andrew Forrest’s Minderoo Group, to purchase all outstanding shares in the company.

Already a major Windlab shareholder with an 18.4% stake, Federation previously offered to pay Windlab $1 per share, valuing the company at around $70 million. On Wednesday, Windlab confirmed that shareholders would be paid $1 per share, which is a nearly 40% premium on the share price prior to the announcement of the takeover offer, which stood at around $0.72 per share. The Windlab board of directors have unanimously recommended that shareholders approve the offer, but it remains subject to both shareholder and court approval under the Corporations Act.

As part of the takeover proposal, Federation and Squadron have agreed to provide a loan of up to $20 million to Windlab for a period of three years and voiced their confidence in Windlab’s potential. “The unique technical capabilities of the team and the strong portfolio of project opportunities give Windlab a leading position in wind generation in Australia,” Forrest said. “Alongside our recent investments in solar projects, the investment also underscores Squadron Energy’s vision for a sustainable energy future.”

Previously, Squadron Energy stepped in to finance the completion of the 128 MW Cunderdin solar farm in Western Australia, which had been plagued by financing problems and connection difficulties since first being proposed in 2016. Alongside Mike Cannon-Brookes, Forrest has also invested in the ambitious Sun Cable project, which aims to export solar energy from the Outback to power Singapore.