Wigton profits blow upwards
…but Phase II revenue to be cut in halfWednesday, February 17, 2021
BY DAVID ROSE
Following a drop in wind speed and production in the third quarter of 2019, Wigton Windfarm Limited managed to turn around its loss of $15.9 million into a profit of $135.9 million as plant availability and wind speed picked up for the period ending December 31, 2020.
The wind farm, which comprised three phases in Rose Hill, Manchester, saw its revenues strengthen by 59 per cent to $578.5 million that was attributed to the higher wind speed and average plant availability rate which stood at 94.3 per cent. This was evident in the production output which rose by 48 per cent to 35.1 million kilowatt hours (KWh), which was further compounded by the volatile foreign exchange rate that supported to higher revenue generation.
With a flat decline in cost of sales, gross profit increased by 137 per cent to $377.5 million along with the gross profit margin rising to 67 per cent. Even with an 81 per cent decline in other income to $22.4 million and higher administrative expenses, Wigton eked out an operating profit of $305.4 million which was 61 per cent higher. Due to the company repaying the $710 million of the series A bond on December 9, finance costs dropped by 40 per cent to $126.6 million. This higher out-turn left the company with an earnings per share of $0.012 for the quarter and higher support for a 13 per cent growth in the nine months net profit to $591.7 million.
PHASE II REVENUE TO CUT IN HALF
Wigton's fortunes for the upcoming financial year look bleak as an upcoming rate adjustment of the purchasing power agreement (PPA) related to Phase II is expected to translate to a 50 per cent reduction in revenue. Phase II began operations in December 2010 with an initial output of 14 MW (megawatts) for the first 11 months with the remaining tenure of the 20-year PPA agreement seeing the facility generate up to 18 MW for the electricity grid. Although Wigton doesn't provide segment reporting for its quarterly reports, the last audited financials revealed Phase II generating $757.8 million in revenue for the year with a segment result of $395.9 million. This would translate to Wigton earning about $378.9 million and see gross external revenue falling by 16 per cent based on the same 2020 financials. Phase II had $2.5 billion in segment assets with $2.7 billion in segment liabilities.
Even as the rate adjustment draws closer, Wigton believes that the Government of Jamaica will call for additional renewable energy in the 2021 calendar year with the company sufficiently positioned to respond and develop the utility scale projects.
“To keep abreast of the timelines within which calls will be made for additional renewable energy to the grid, Wigton has initiated discussions with the relevant agencies and placed itself in a position to readily respond to such calls. In addition, the company continues to actively seek projects, both locally and internationally, that would add value to the company and its shareholders,” stated the quarterly report signed by the Chairman Oliver Holmes and Managing Director Earl Barrett.
Phase I's initial PPA agreement is set to expire in April 2024 with the six-year extension subject to terms by both parties (JPS and Wigton) based on the company adhering to certain conditions such as minimum functional specifications in the agreement. This would be just months after Wigton pays down $1.95 billion on series B of its bond in December 2023. Wind turbines have a typical lifespan of 20 years with output said to decrease as time progresses. Wigton had stated that it would consider using the equity markets to facilitate part of its expansion locally or in the Caribbean. One of the major hurdles the company has faced is its ability to win a request for proposal in order to begin the process of setting up a new renewable energy project. Total assets stood three per cent higher at $10.6 billion with total liabilities down by four per cent to $6.6 billion.
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