Sun | Nov 29, 2020

Wigton to tap market for expansion cash, but timing undecided

Published:Sunday | October 25, 2020 | 12:12 AMNeville Graham - Business Reporter
Shaun Treasure, finance manager and company secretary, Wigton Windfarm Limited.
Shaun Treasure, finance manager and company secretary, Wigton Windfarm Limited.
Earl Barrett, managing director of Wigton Windfarm Limited.
Earl Barrett, managing director of Wigton Windfarm Limited.

Renewable energy company Wigton Windfarm Limited intends to tap the market for funds to finance an ambitious expansion and diversification programme, but is timing the trigger.

The wind farm is operating at near maximum levels in terms of equipment efficiency and production capacity, according to Managing Director Earl Barrett.

He told shareholders at the company’s annual general meeting on Wednesday that the 44 wind turbines with an installed capacity of 62.7 MW are operating at 97 per cent availability, the percentage of time the machines can work when there is enough wind to turn the blades. This effectively means, he said, that the company is maxed out as far as its ability to earn from its current resources.

“Wigton can’t remain at the size it is for much longer, therefore, the expansion and diversification must be job one,” Barrett told the Financial Gleaner after the meeting.

Wigton was divested by the Jamaican Government via the stock market last year. Barrett, who was the company’s general manager under state control, was promoted to managing director after its listing on the stock exchange.

The options under consideration to finance the wind farm’s expansion and diversification programme include a rights issue or an additional public offering, but are not confined to those only.

“It is part of our discussions as to how we will finance these multiple projects when they are at the green-light stage, policy-wise. It is a conversation we’re having with potential partners for any future development,” Barrett said.

Wigton is yet to determine when it will approach the market for financing.

“We can’t say yes or no on that,” Barrett said, when asked about potential movement by year end. “A lot depends on when the pandemic gives us a break. It makes no sense getting the money in and still have to wait on potential partners who are hamstrung by that little matter of timing,” he said

The wind farm, located at Spur Tree Hill in Manchester, produces electricity from wind, which is sold to Jamaica Public Service Company, operator of the national power grid. Wigton is averaging $2.4 billion in annual revenue, and last made a profit of $662 million at year ending March 2020, a strong improvement from $493 million the previous year.

Earnings dipped in the first quarter ending June. A nine per cent fall in revenue, occasioned by a 16 per cent decline in total power generated, according to the company’s first- quarter report, led to a near 18 per cent fall in profit, from $366 million to $300 million.

“Since wind is the major input into our business, spreading data over a three-year span, we are noticing that 2020 is proving itself as a relatively slower year for wind availability. The best we can do is to contain our costs and be ready for when wind is available,” Barrett said.

General administrative expenses ratcheted up more than16 per cent in the June quarter, which Finance Manager Shaun Treasure said included unavoidable depreciation costs for the ageing infrastructure.

Planned obsolescence is a key feature of companies heavily invested in machinery and technology. This takes into account replacing old capital-intensive equipment or technology with new ones or establishing a maintenance regime through upgrades or preventative maintenance that optimises the useful life of the equipment.

The 23 wind turbines established under Wigton Phase 1 in 2004 are edging close to their 20 to 25-year life span.

“It is something that we have looked at and we are having the discussions. We are reserving comment on that right now, except to say that at the relevant time there will be an update,” Treasure said.

In the meantime, Barrett said Wigton is working in tandem with the Caribbean Maritime University to build a drone and to purchase another to give the company the capability to examine its wind turbines as part of routine structural maintenance.