Offshore opportunities beckon for listed Windflow Technology
- which is looking to raise $5.1 million capital - as it eyes
expanding markets in the United Kingdom and United States.
Windflow manufactures dual-bladed 500kW wind turbines (Class
I) and supplied 97 turbines to the Te Rere Hau wind farm
project, near Palmerston North, but there remain few
opportunities in the oversupplied New Zealand generation
Windflow is entering a new era, following its overly public
spat with former partner, separately listed WindFarms, over a
payment of more than $3.5 million outstanding on an order for
Court action, which could have threatened both companies'
viability, was averted after WindFarms paid $1.8 million. The
issue is still under negotiation.
Windflow Technology chief executive Geoff Henderson was in
Dunedin last week and will be in Christchurch this week, for
presentations on the capital raising.
Just weeks ago the UK Government bought in a ''feed-in
tariff'' for wind turbines, essentially subsidising any
generator for the next 20 years, while in the US, Windflow
has gone into partnership with multibillion-dollar General
Dynamics SatCom, designing a new, slightly smaller, Class II
turbine, which operates in lower wind conditions.
Mr Henderson said Windflow's present focus was the UK and US
markets and the UK feed-in tariff was ''the catalyst'' for
the capital raising. Windflow, backed by a $4 million loan
last year from a major shareholder and New York broker, has
plans for three different types of turbine in Scotland. Each
is an example of a separate business model the company could
The first turbine, installed on the Orkney Islands, is in the
final stages of commissioning and is being sold to the local
The second turbine will be built and operated by Windflow,
but then ''likely'' sold to the landowner, while the third
will be Windflow owner-operated, possibly for sale some time
in the future, Mr Henderson said.
''With the [UK] tariff, Windflow could become a generator
[business],'' Mr Henderson said of the incentive subsidy,
which is ideally suited to Windflow's 500kW turbines.
If the full $5.1 million is raised, $2.1 million will go
towards pre-ordering components for seven turbines to speed
UK deliveries, $2 million for five turbines to be delivered
and operated in the UK, with the balance spread over spare
parts and sales staff.
Mr Henderson had considered a stock exchange float in the UK
and did not rule out a similar, second capital raising later
in the year.
Craigs Investment Partners broker, Charles Abraham, said
while the renounceable issue was open to shareholders and the
public, the non-voting rights preferential shares were
offering a 10% annual dividend. Ordinary shareholders get no
Mr Abraham said the share model would raise cash for
Windflow, could be treated as equity instead of debt, and as
separate preferential shares, would not dilute the value
ofthe ordinary shares.
''On the basis of the Orkney turbines, if they can sell one
turbine a month, Windflow can pay that [10%] dividend,'' he
Mr Henderson said preference shares were being offered,
partly to stop share dilution of the 20.5 million ordinary
shares on issue, given $30 million had been invested in the
company during the past decade. It listed on the alternative
exchange in December 2003.
The share price, at a year-low of 15c in November, had
rebounded to 24c but since slumped to around 17c last week.
The Class I turbines are worth about $2 million each, in a
one-off sale, but efficiencies of scale when building a large
wind farm can halve that cost. The Te Rere Hau per-unit cost
was just over $1 million apiece.
Mr Henderson declined to put a figure on the Class II cost,
but he hoped it would be ''not much more'' than a Class I.
On the General Dynamics partnership, Mr Henderson noted
General Dynamics, with its $US30 billion annual turnover,
already supplied communications to US military bases around
He believed Windflow had scored another coup from the
partnership, at present in a memorandum of understanding
form, that General Dynamics would supply insurance for
crucial five to 10-year warranties on Windflow turbines in
''There are also some benefits in GD's global supply chain
which could offer more efficiencies,'' Mr Henderson said.
While General Dynamics held Class II licensing for the US and
Africa, Windflow had the ''rest of the world'', but
principally the UK market.
Mr Henderson said Windflow's gain to the General Dynamics
partnership lay in the intellectual property rights and
future royalty payments, as General Dynamics would
manufacture the Class II turbines in the US.