Frontier Energy's update on Waroona Renewable Energy Project

Frontier Energy Limited (ASX:FHE) has provided an update on its Waroona Renewable Energy Project, revealing that the Australian Energy Market Operator (AEMO) has made significant changes to the Capacity Credit allocations. Despite being assigned 87.2 MW of Certified Reserve Capacity in August 2024, the final allocation process resulted in AEMO assigning no Reserve Capacity Credits (RCCs) to the Project. This decision was influenced by a surplus in reserve capacity and the ranking system applied under the Wholesale Electricity Market (WEM) Rules, particularly impacting five-year fixed price facilities. The Company's debt financing strategy, based on AEMO's forecast of a reserve capacity deficit in 2026/2027, has been affected, leading to the mutual termination of the debt mandate with Infradebt Pty Ltd.

Executive Commentary on Funding Strategy and Project Development

Frontier CEO, Adam Kiley, expressed the Company's response to AEMO's allocations, stating, 'Whilst the outcome of AEMO's allocations is not ideal, energy prices remain at record highs, and are forecast to continue into the future, the underlying fundamentals for our Waroona Renewable Energy Project remain excellent.' Kiley highlighted the pursuit of alternative funding solutions, including bonds, equipment financing, and equipment supplier equity opportunities, to provide greater flexibility and potentially limit development delay. He also emphasized the ongoing work on an updated Definitive Feasibility Study (DFS) to identify significant capital cost savings and ensure minimal impact on the Project timetable.

Summary of AEMO's impact and Company's future plans

The final Capacity Credit allocations by AEMO have prompted Frontier Energy to adjust its funding strategy for the Waroona Renewable Energy Project. Despite the setback in RCC allocation, the Company remains optimistic about the Project's prospects, citing the current high energy prices and the potential for continued increases. Frontier Energy is actively exploring alternative funding avenues, such as bonds and equipment financing, to mitigate the impact of the RCC outcome and avoid significant development delays. Additionally, the Company is focused on delivering an updated DFS, which is expected to reveal capital cost savings. Looking ahead, Frontier Energy aims to navigate the evolving energy landscape and capitalize on the strong electricity price outlook, aligning its strategies with the transition to renewable electricity generation in Western Australia.