Interview with Adam Kiley, CEO of Frontier Energy Ltd.
Recording date: 27th June 2024
Frontier Energy (ASX:FHE) is positioning itself as a key player in Western Australia's renewable energy transition with its Waroona Renewable Energy Project. Located 100km south of Perth, the project's first stage comprises 120MW of solar power coupled with an 80MW/4-hour battery energy storage system, strategically positioned to capitalize on the state's shifting energy landscape.
The project benefits from several unique advantages:
Reserve Capacity Mechanism: This Western Australia-specific policy provides stable revenue streams, with Frontier expecting approximately $27 million annually from these payments alone, covering operating costs and debt service.
Grid Connection: Frontier has secured grid connections for up to 1GW of capacity, a crucial advantage in a market where grid access is increasingly scarce.
Market Dynamics: Western Australia has seen an 80% increase in energy prices over the past two years, coupled with plans to retire coal-fired power stations by 2029. Energy demand is forecast to increase by 55% over the next decade.
CEO Adam Kiley emphasizes the project's timing: "We're hitting the market at the absolute perfect ideal time. That's the key difference that we have, and looking to expand the project really quickly thereafter as well."
Financially, Frontier is in advanced discussions for a debt facility of around $225 million, with terms typical for renewable projects: 20-year tenure, 2-3% interest rates for the first five years, potentially dropping to around 2% thereafter. The company is also running a strategic process to sell down part of the project, aiming to minimize the equity gap and bring in a long-term partner for future expansion.
Based on the Definitive Feasibility Study, the project is expected to generate approximately $74 million in annual revenue in its first year of operations, with operating costs estimated at only $6 million per year, offering attractive margins.
Frontier's growth potential is significant, with grid connections for up to 1GW allowing for substantial future expansion. The company's approach also allows for adaptation to changing market conditions, potentially incorporating larger batteries or different energy mixes in future stages.
Frontier Energy is progressing towards financial close and Final Investment Decision (FID) in the coming months, offering investors the opportunity to participate in a project that could play a significant role in Western Australia's energy future. With its scalable approach and potential for future expansion, Frontier Energy presents both near-term catalysts and long-term growth potential in the rapidly evolving renewable energy sector.
As the company moves from development to construction and operation, investors should monitor progress towards FID (expected in Q3 2024), watch for announcements on future expansion plans, and keep an eye on Western Australian energy market dynamics, particularly any changes to the Reserve Capacity Mechanism.
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An insight into junior mining and opportunities to invest.
Company Interviews, a Crux Investor show, exists to cut through the jargon, bias and bluster.
Matthew Gordon, and guest host Merlin Marr-Johnson hone in on the important factors that indicate a company's strong footing for growth and success.