NZ Windfarms chair Rodger Kerr-Newell wants the next government to have another look at the structure of the electricity market, which he says is stacked against the expansion of wind generation.
Speaking at today's annual meeting in Auckland, Kerr-Newell told shareholders it was becoming harder to turn a profit in the wind sector in a market where the large generator-retailers were facing a smaller decline in wholesale prices than wind farms while also enjoying higher retail prices.
"This idiosyncratic market behaviour puts all merchant generators at risk and suppresses the build-out of existing wind farm consents pushing away the day that NZ can depend fully on sustainably generated energy," Kerr-Newell said in speech notes published on the NZX. "I encourage the incoming government to critically review the current market structure to address this market anomaly."
NZ Windfarms is in the process of turning the business around, and recently announced plans to buy the distribution and transmission assets of its 97-turbine Te Rere Hau wind farm near Palmerston North from Powerco in a move that would end a requirement to hold $6.5 million of cash as a guarantee. Shareholders voted in favour of the deal today, which would see it take a $12.3m facility with Bank of New Zealand to fund the deal.
The Palmerston North-based company has also cut a fifth of its workforce to cut costs and has overcome equipment failure and maintenance issues with the two-bladed turbines built by Windflow Technology and used at the Te Rere Hau wind farm.
"The board has driven a philosophic change in the company from a wind farm business run by engineers almost in total isolation of the wholesale market and the regulated environment - to the new ethos where we run the business in such a way that we only spend your dollars when there is a clear payoff," Kerr-Newell said. "We are actively working with the regulator (the Electricity Authority) and the grid owner and operator to improve the operating environment and financial sustainability of merchant wind generators."
The company has generated $1.6m of revenue in July and August and kept costs within budget, and wants to lift annual sales to $8.2m in the current financial year from $6.2m in the June 2017 year.
"We, the board and all the staff are making this company sustainably profitable - not easy within the NZ electricity market structure, but we're way ahead of where the company has been before and it will give me much pleasure to confirm a distribution in coming weeks," Kerr-Newell said.
NZ Windfarms plans to branch out into more alternative generation and build a retail customer base, and Kerr-Newell said he expects to execute one of those strategies before the next annual meeting.
Kerr-Newell also said the company will end its long-running litigation over the noise conditions of its resource consents, which have cost about $2m.
"This board will end the foolishness because it's cost-effective, it's the fair thing to do for our neighbours and we have much more exciting things that will drive shareholder value to be getting on with rather than being distracted by this pointless litigation," he said.
The shares rose 2.9 per cent to 10.8 cents, and have gained 24 per cent so far this year.