Frontier Energy delivers robust DFS for Waroona solar and battery project
Headline numbers include EBITDA of $68m per annum over the first five years and post-tax IRR of 26.1%
Payback time is less than six years, representing 19% of the total 30-year project life
Financial advisers secured, with a final investment decision pegged for the mid-2024
Special Report: A definitive feasibility study (DFS) for developing the Waroona solar and battery project looks to propel Frontier Energy into becoming a significant renewable energy provider in WA, with a Stage 1 goal of producing 258GWh of solar energy.
Frontier Energy (ASX:FHE) says the study confirms Waroona as a long-life, low operating cost and highly profitable renewable energy outfit, comprised of a 120MWdc (megawatts of direct current) solar facility with an integrated four-hour 80MW battery.
The company recently appointed Leeuwin Capital Partners as debt advisors, noting the group’s esteemed track record of creating secure revenue streams for businesses in the West Australian energy sector – a key milestone on the way to a final investment decision for the Waroona project.
The Waroona renewable energy project footprint. Pic: Supplied (FHE)
Demand to outpace supply
FHE chief executive Adam Kiley says the Stage 1 DFS delivers an excellent result and highlights the company’s “fantastic and unique” opportunity to become a near-term major renewable energy producer in WA.
“This comes at a time when energy demand continues to outpace supply in WA, resulting in electricity prices reaching record highs,” he says.
“Just last week, record peak demand on the South West Interconnected System (SWIS) was surpassed once again, with the top six operational demand peaks ever recorded in the State’s main grid all happening between January 31 and Feb 19 this year.
“Unfortunately, the majority of the energy to meet this record demand peak came from carbon-emitting sources, with 58% being gas and 32% being coal-generated.
“This highlights the urgent requirement for renewable energy storage solutions, such as our 100% renewable energy Waroona solar/battery project, to quickly come online.”
DFS highlights
The key numbers are as follows:
EBITDA of $68 million over first five years
$304 million total initial capital cost
5.8 years post-tax payback
Post-tax IRR of 21.6%
First-year solar generation of 258GWh with 119GWh discharged/sold into WA market
The study’s metrics include an average energy price forecast over the life of the operation at $143/MWh4 (peak periods) and $80MWh4 (solar price), in line with 2023’s actual prices on WA’s Wholesale Energy Market (WEM).
“Highlights of the study include exceptionally strong financial returns under all key metrics, including forecast EBITDA averaging $68m per annum over the first five years of production,” Kiley says.
“These strong returns drive a rapid post tax payback of 5.8 years, or 19% of the project life of 30 years.
“A major contributor to this is the Reserve Capacity Payment, a feature unique to WA, which is forecast to provide revenue of about $28m per annum during the first five years of production.”
FHE aims to move rapidly towards FID by the middle of this year.
Barrenjoey has been appointed to assess strategic development partnerships with a range of firms which have expressed interest in the project.
This article was developed in collaboration with Frontier Energy, a Stockhead advertiser at the time of publishing.
This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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