Windflow Update: NZ Windfarms continues

NZAX Statement: November 2nd 2009
Windflow Update: NZ Windfarms continues

Windflow Technology Ltd (WTL) has completed the construction program for the 65 turbines on site at the Te Rere Hau (TRH) wind farm and is completing commissioning of the last two of these turbines. The turbines at TRH are performing well. WTL is now focusing on completing the build of the remaining 32 turbines which were ordered unconditionally by its customer NZ Windfarms Limited (NWF) in September 2008.

NWF has delayed the installation of these 32 turbines and has requested a variation to the contract to allow them to do so. This is to allow NWF to gain a resource consent for an extension to the TRH wind farm and place the turbines ordered on the extension area. To date an agreement has not been reached on this matter.

In mid-August NWF began withholding payments from WTL asserting a right of ‘set off’ resulting from differences between the turbines supplied for TRH and the final design submitted for IEC Certification.

WTL strongly denies that NWF has either any such right of set off or a right to IEC Certified turbines under the Sale and Purchase Agreement (SPA) between the parties. WTL has made efforts to reach a commercial resolution with NWF including commissioning an independent expert re view of the TRH turbine design differences compared to the final design submitted for IEC certification. This review has now been completed. WTL is satisfied that it does not disclose any major issues and has offered the report to NWF.

Despite the efforts made to reach a commercial resolution, NWF has continued to withhold payments due to WTL, and as a result the amount owed is now in excess of $3.5 million. If NWF continues to withhold payment then WTL will need to take steps to conserve its remaining cash until NWF resumes payment. WTL has initiated a legal process to recover amounts owing to it by NWF and this will shortly result in a High Court hearing unless NWF makes the required payment.

WTL has today sought a waiver from NZX from Listing Rule 10.5.1, which requires that its Annual Report be delivered to NZX and sent to shareholders by today. WTL has delayed its Annual Meeting date until 16 December, and accordingly is seeking to delay delivering its Annual Report until 16 November (20 working days beforehand) because it expects further developments on this matter before then.

ENDS

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