Frontier Energy (ASX:FHE) - Financing Locked In, Waroona Build Begins

Adam Kiley (0:00)

I'm Adam Kiley, CEO of Frontier Energy. Frontier is an ASX listed company under the ticker FHE.

We're a fully funded company, which is developing the Waroona Renewable Energy Project in Western Australia, where construction is commenced and will be in operations over the next two years.

Matt (0:16)

Adam, good to see you. So we're back in April. I think back then you were kind of development financing, sorry, but you just used the key phrase, they're fully funded, fully contracted as well, I understand.

I'm ready to build. So what has still got to happen before shareholders can regard Stage 1 as irrevocably delivered?

Adam Kiley (0:35)

We got to finish building it over the next two years now. So in essence, since we last spoke, there's been a lot which has gone on, just very quickly to step through it again. So the project now is fully funded. So we raised $110 million and that effectively institutionalized the share register. We also got underwritten debt financing of $250 million from SMB in Natixis at the same time. So the funding now is completely in place for that project. The other thing we did was get revenue security. So that's guaranteed revenue for the project. If you don't have that, whether you're an energy project, mining project doesn't make a difference, you will not get debt financing. The way we structured that was through a state mechanism, as well as a federal government mechanism. So that gives us revenue security now until 2042 for the project, which is another big tip for the banks.

We've executed all contracts for the project, and they're all fixed price contracts as well, because obviously, again, with any project, well, are you sure it's not going to blow out? Well, we're pretty confident because these are fixed price contracts. They're like the simplified Meccano sets that you basically piece together on the way through, so that's all done.

As I mentioned, construction is underway. So there's boots on ground actually happened yesterday, and in the very beginning, in the next year, we'll have 200 people at site on a daily basis.

Matt (1:56)

Brilliant. Okay, so let's look at the construction, but then we'll come to the financing, because I think there's the two big key post-conversation we had back in April.

But you started work yesterday, so what exactly is happening? What is this first major construction milestone?

Adam Kiley (2:12)

Yes, so the mobilization to site, that's under way at the moment. So that's basically taking half a step back. We've got an EPC contractor, they're engaged to build the project overall. So them and our owners' team, and we've done a lot of work over the last few months, getting a very experienced owners' team together. Guys that have been there, done that, built these things before, they're all engaged out by the company, as well as the EPC supplier, Monford. So both of us and them, we landed at sites a couple of days ago. Effectively now over the next two months, we start doing the site preparation work. So that's clearing of the little land that needs to be cleared, putting the roads in place, getting everything to go for the project.

Come December, we start putting the pillars in the ground, which is obviously for the panels. Panels start getting delivered then in January. That's where we start hitting maximum employment for the project, about 200 people will be on site from there. And then over the next six months, it's effectively built out. Come the end of next year, start cold commissioning, and then through the final aspects from there. So yeah.

Matt (3:20)

Okay. And at least on fixed-price contracts? Or are you ensuring the price doesn't go up as you continue building out?

Adam Kiley (3:27)

Yeah, good question. So the way that we have put the contracts in together for this project, we effectively done what's called free issue. So that's us as a company going out and basically paying, signing the contracts with the equipment supplies, and we free issue that to the EPC supplier that builds it. So that's the solar panels, that's the battery, that's the inverters, that's the trackers. Now, all those contracts, so I'll give you an example. Solar panels, going back six months ago, the silver price went old, as you probably know.

Panel prices went up.

Silver price tomorrow, it could go through the moat. It wouldn't make a difference from out on a view. That is now a fixed price contract. Panel prices cannot change at all. It's the same with the battery. It's the same with the inverters. It's the same with the trackers. And it's effectively the same with the EPC contracts as well. That's a fixed price contract. Obviously, you've got the potential for variations, as with any EPC supplier, but I think what we've done internally, we've got a very good relationship with the EPC contractor and actually a number of our guys that are part of our owners' team used to work with them as well. So they know the way they work really very well, which is massively important. And the EPC contractor actually participated in the raising as well for $5 million. So we have made sure everyone is aligned to get this project up on time, on budget as quickly as possible.