| Mission
To leverage our special technical, engineering and marketing expertise , our experience in the public utilities sector and with public company and venture development , in order to:
Develop profitable and desirable wind energy generation projects , by owning and controlling rare “wind” real estate , and operating nimbly and efficiently as a public company with access to capital markets.
Goal
To grow Western Wind Energy to a mid-size wind developer and operator with a market capitalization of between US $500 million and $1 billion
WIND DEVELOPMENT
What does it take? How do we do it?
The Company acquires and develops sites based on eight criteria:
Available physical transmission
Legal access to transmission (interconnection and wheeling)
Commercial wind resource: the average capacity factor of a new wind park in North America is between 25% - 40%
Zoning policy to allow wind park development
No cultural or environmental impediments
Jurisdictional regulatory support for renewable energy sources/generation
Local political support of development
Adequate incentives at the regional or federal level
Capacity factors are important to determining project economics and are derived from the frequency distribution of a given "mean" wind speed. The frequency distribution will vary according to specific meteorological conditions, which vary from site to site. A specific wind speed at one location does not generate the same energy at another site, because temperature and density both play roles in determining capacity factors. Other factors – including turbine array, layout, and air turbulence -- may also have an influence over how much energy is generated.
Meteorologist Rich Simon, analyzes the power curve of an appropriate wind turbine manufacturer and generates a resource assessment. There are only a handful of “bankable” meteorologists in the US who perform these assessments; Western Wind engages the top individual in the field. Since 1977, Rich Simon has sited over 7,000 turbines (over 3,000 MW), throughout the world. Approximately 10% of the world’s turbine capacity has been sited by Rich Simon who is working with Western Wind.
Pricing
Revenue sources for wind parks in the US come from three (3) sources:
Energy prices
Green credits
The Federal Production Tax Credit ("PTC")
The only fixed rate source is the PTC. Currently at 1.8 cents per kw/h, the PTC is adjusted for inflation. Prices for wind energy vary significantly throughout the country. Each resource site is just as unique in energy potential as is a specific region for energy prices and fuel variety for electrical production. Today, Hawaii, California, and the North Eastern US pay the highest energy rates for electrical consumption.
As wind resource areas vary, so does the cost of generation. A wind farm operating in a 15 mph yearly average wind speed may have total costs of 4.8 cents per kilowatt-hour. That same wind farm, operating in a 20 mph yearly average wind speed, may have total costs of only 2.9 cents per kilowatt-hour.
Wind farm revenues (including “green credits” and the “PTC”) can vary from some Midwest locations where the total revenue package equals 6 cents per kilowatt-hour to California where the total revenue package can equal over 9 cents per kilowatt hour.
Project Financing
The Company will raise capital through established institutional sources who are familiar with the economics of a wind energy project. Projects may be financed through combinations of equity or debt depending on terms and conditions at the time of negotiation; they may be financed entirely through debt.
Project and Contractual Obligations
Each operating subsidiary is impacted by local regulatory legislation concerning environmental, zoning and permitting regulations. The Company is currently in compliance with all applicable laws.
The contract with Arizona Public Service requires completion of the wind farm by March 31, 2006 with an extension to March 31, 2007.
The contract with New Brunswick Power requires completion by October 31, 2006.
Each subsidiary and its project areas have various forms of land tenure, some of which require performance obligations.
Back to top
MARKET POTENTIAL & GROWTH OPPORTUNITIES
Market Advantages
The market is significantly under-developed, while the market potential is huge.
Percentage wind generated vs. total energy production:
Denmark: 19%
Germany: 5.5%
United States: 0.4%
Total installed wind power capacity: 39,292 MW:
Germany: 14,609 MW
United States: 6,374 MW
Denmark: 3,110 MW
Canada: 312 MW
Critical success factors:
Five critical success factors are aligned, working in the company’s favor and providing competitive advantage:
Environmental
Wind provides a clean, pollution-free, renewable energy source.
No fuel costs in tapping wind energy.
Wind energy prices are stable.
Wind parks/wind turbines operate at extremely low operating and maintenance costs.
Wind provides independence from foreign oil and gas sources.
Economic
From Barron’s (May 31, 2004): “The surge of activity [in wind energy generation projects] is the result of simple economics. In the mid-1980s, it cost about 10 cents per kilowatt-hour to produce electricity from windmills. Today, thanks to technological advances, the cost has shriveled to about five cents, which is equal to the cost of producing electricity from a natural-gas-fired utility now that natural gas prices have surged above $6 per million British thermal units, or BTU.”
At a robust wind location, each one megawatt installed, or US $1 million capital invested, $166,000 is generated annually in revenues, plus $55,000 in “federal tax credits” (PTC) and $600,000 in first year write-offs.
Wind developers have three revenue sources:
Electrical sales: 3 – 7.5 cents per kw/h
Renewable Energy Credits: 1 – 3 cents per kw/h
Production tax credits: 1.8 cents per kw/h
Operations and maintenance costs are well defined, easily controlled, based on manufacturer’s warranties.
Natural gas fuel costs are US 5 cents kw/h compared to total cost of 1/2 – 1-cent kw/h for wind energy.
Political
Energy is moving up as a priority on political agendas and as an issue on people’s minds, in the wake of higher gasoline prices, eastern blackouts, and ongoing brownouts.
Surging oil and gas prices are creating a political environment friendly and supportive to wind power initiatives.
De-regulation and partial deregulation will allow for independent power producers and exempt wholesale generators.
California Governor Arnold Schwarzenegger supports the objectives of the CEC, CPUC, and CPA that 20% of the state’s electricity must come from renewables by 2010; his administration will offer tax incentives for renewable projects.
Barrons, May 31, 2004: “Fifteen states have mandated that at least some percentage of their energy be produced by renewable energy sources, and more states are expected to join the trend.”
Industry / Competition
The characteristics of the industry itself have created a unique opportunity for a company like Western Wind Energy, as a mid-sized developer with some special abilities.
The industry is highly fragmented. There are very few large companies involved in the industry and many small players, with few mid-sized players.
There is only one “play” available to individuals wanting to invest directly in wind energy initiatives (Western Wind Energy).
Few companies are vertically integrated.
Most developers do not own or control the real estate, operating primarily on leased or rented land.
Large companies that have access to capital tend to move slowly in acquiring resources and investing in an opportunity.
westernwindenergy.com |
|
