Updated definitive feasibility study sees major reduction in capital costs of Waroona renewable energy project

The update follows material changes to a number of key areas including capital costs and energy market forecasts.

Highlights from the Study include a significant reduction in capital costs of $21m (7%) to $283 million (USD 180 million), a rapid payback of 6.1 years and strong EBITDA generation averaging $57 million per annum over the first decade.

Highlights

• DFS confirms the project as a highly profitable renewable energy project with long life (30 years) and low operating costs
• Over the first decade of production, the project generates average annual revenue of
  $65 million and average annual EBITDA of $57 million, based on independent price forecasts
• Post-tax payback of 6.1 years based on initial $283 million total capital cost. The lower capital cost is due to a reduction in the cost of key equipment, namely solar panels and batteries, and a reduction in the cost of the switchyard which is sized for Stage One
• Post-tax IRR of 15.4% (pre-tax IRR is 18.7%)1 and project NPV 7% of $244 million
• All key financial outputs were in line with the February 2024 DFS
• Further upside to Stage One economics – DFS assumes nil value for Frequency Control Essential System Services (FCESS), highly conservative large-scale generation certificate (LGC) pricing and no account for recent positive changes to the Reserve Capacity structure, all of which are expected to positively impact financial returns
• A longer duration 80 MW 4.75-hour battery (380MWh) selected to allow for more energy to be sold into the peak market and extend the maximum Reserve Capacity payment to 8 years
• Annual solar energy generation is 258 GWh2, with 134 GWh discharged/sold through the battery in the daily peak period, and solar energy not required for charging the battery sold into the Wholesale Electricity Market (WEM)
• Stage One is development ready with all major approvals and an access contract
  executed with Western Power for connection onto the South West Interconnected System (SWIS), WA’s main electricity grid
• Major expansion potential as Stage One utilises only a third of Frontier’s 868 hectares landholding and is a fraction of total long-term potential energy production
• Project funding for Stage One to consist of both debt financing and equity solutions – the Company is considering multiple options to minimise shareholder dilution
• The Company had $14.5 million cash as at November 2024 (unaudited, nil debt)

Chief Executive Officer Adam Kiley commented: “Our updated DFS reconfirms strong economics for the Waroona Project and again highlights the unique opportunity Frontier presents for investors, as the only pureplay renewable energy developer on the ASX, with near-term exposure to the rapidly growing electricity market in Western Australia.”

“The Waroona Project remains one of the most advanced renewable energy projects in WA, with an approved connection onto the SWIS and other key development approvals and permits in place.”

“We updated the DFS to re-position the project prior to advancing funding discussions for its development. Pleasingly, we have benefited from cost reductions for key equipment,
decreasing capex by $21 million or 7% compared to the original DFS.”

“Importantly, our capital cost estimate was based on pricing received from vendors and contractors ready for construction, thereby providing a high degree of confidence in these estimates.”

“In addition, we enhanced the project with a larger 4.75-hour duration battery (4 hours
previously) to allow more energy to be sold in the peak energy market conditions, therefore providing greater flexibility and also ensuring the Company maintains maximum reserve capacity benefits for longer.”

“Whilst the study applied a conservative approach regarding revenue assumptions, the
Project continues to produce strong financial returns for a renewable energy project under all key metrics, including $65 million average annual revenue and $57 million average annual EBITDA over the first decade of production. ”

“This results in an attractive payback of six years, or 20% of the operational life, and strong IRR of more than 15%.”

“We are now focused firmly on project financing. The company will be running multiple
funding strategies in parallel, to ensure the optimal solution is available for development.”