Western Wind Energy Corp. - The Final Phase (Three) of Fair Market Valuation Completed
Toronto Stock Exchange (Venture) Symbol: "WND"
Issued and Outstanding: 59,856,524
VANCOUVER, Aug. 8, 2011 /PRNewswire/ - Western Wind Energy Corp. (TSXV: WND)
("Western Wind") is pleased to announce that the third phase of the
valuation process pursuant to the Substantial Issuer Bid process is
completed. Western Wind, under recommendation from one of its lenders,
engaged DAI Management Consultants, Inc., ("DAI") to perform a
three-part valuation process of all of the Company's assets, both
financial and physical. The first two phases were comprehensive
valuations of the 120 MW Windstar Project (now 80% complete), the
10.5-megawatt Kingman Project (now 95% complete), the existing
30-megawatt producing Mesa Project, and the 30-megawatt Yabucoa Solar
Project, which is expected to be under construction later this year.
Discounted to present values as of August 1, 2011, the valuation of
these 4 assets produced a net equity value on behalf of Western Wind of
US $345 million.
The third phase covers three projects and certain other net corporate
liabilities and assets: First is the 50 MW repower and expansion of
Mesa (net of the value of the existing assets, which were valued as
part of Phase II). The second and third are two early stage development
projects: the 30 MW Windswept wind project in Tehachapi, California,
and the 196 MW Snowflake project in central Arizona. The other net
corporate liabilities and assets include: cash, accounts receivable,
refundable tax credits, prepaid expenses and deposits, deferred income
tax assets, accounts payable and accrued liabilities, a crane financing
contract, interest rate swap-related liabilities, an asset retirement
obligation, and certain corporate bridge financing.
The DAI estimate of Western Wind's net equity position in the phase
three assets is US$38 million as of August 1, 2011. The DAI estimate of
Western Wind's net equity position of all of its assets and liabilities
is US $383 million or C$364 million as of August 1, 2011.
The Western Wind Board of Directors, management team and staff are
prohibited from participating and selling into any prospective share
buy-back program, which, in turn, is contingent on the company's
ability to raise funds through the sale of tax equity or a corporate
debt offering and not anticipated to occur until Windstar is fully
operational.
Summary of Appraised Values
| (in millions US$) | Windstar | Kingman I | Mesa† | Yabucoa |
Mesa Repower (net of existing) |
Snowflake | Windswept |
Other corporate assets and liabilities |
| Valuation Date | 12/31/2011 | 12/31/2011 | 8/1/2011 | 6/1/2012 | 8/1/2011 | 8/1/2011 | 8/1/2011 | 8/1/2011 |
| Fair Market Value ("FMV") | $358 | $32 | $25 | $206 | $134 | $14 | $2 | - |
| Cash grant | $99 | $8 | $- | $58 | $- | $- | $- | - |
| Other assets | $25 | $1 | $- | $4 | $12 | $- | $- | $12 |
| Total assets | $482 | $41 | $25 | $268 | $146 | $14 | $2 | $12 |
| Liabilities | ||||||||
| Senior debt | ($205) | ($16) | ($-) | ($90) | ($85) | ($-) | ($-) | ($-) |
| Cash grant bridge | ($55) | ($4) | ($-) | ($45) | ($-) | ($-) | ($-) | ($-) |
| Other bridge | ($15) | ($4) | ($-) | ($17) | ($36) | ($-) | ($-) | ($14) |
| Other liabilities | ($-) | ($-) | ($-) | ($-) | ($-) | ($-) | ($-) | ($1) |
| Total liabilities | ($275) | ($24) | ($-) | ($152) | ($121) | ($-) | ($-) | ($15) |
| Net Value to Equity | $207 | $17 | $25 | $116 | $25 | $14 | $2 | ($3) |
† Mesa was valued as of July 1, 2011 in DAI's previous appraisal report. However, for purposes of the valuation summary, DAI used the same valuation model for Mesa to estimate the value of Western Wind's equity position in Mesa as of August 1, 2011.
In order to determine the appraised equity values as of the Effective
Date, DAI discounted the above value conclusions according to each
project's cost of equity. The US dollar equity valuations as of August
1, 2011, were translated to Canadian dollars using an exchange rate of
US$1=C$.9491.
| Asset | Effective Date | Cost of Equity |
Value of Western Wind's Equity Position (in millions of USD) |
Value of Western Wind's Equity Position (in millions of CAD) |
| Windstar | August 1, 2011 | 11.48% | $ 198 | $ 188 |
| Kingman I | August 1, 2011 | 11.51% | $ 16 | $ 15 |
| Mesa | August 1, 2011 | 10.52% | $ 25 | $ 24 |
| Yabucoa | August 1, 2011 | 10.96% | $ 106 | $ 101 |
| Mesa Repowering (net of Mesa) | August 1, 2011 | 17.37% | $ 25 | $ 24 |
| Snowflake | August 1, 2011 | N/A | $ 14 | $ 14 |
| Windswept | August 1, 2011 | N/A | $ 2 | $ 2 |
| Certain Other Corporate Assets | August 1, 2011 | N/A | $ (3) | $ (3) |
| Total Value of Western Wind's Equity Position† | $ 383 | $ 364 | ||
† Numbers do not add due to rounding.
Valuation methodology used by DAI Management Consultants, Inc. ("DAI") for the Final Phase of the Fair Market Valuation.
-
The Fair Market Value (FMV) for Mesa Repowering was determined from a
blend of the value determinations using the enterprise valuation income
approach, also known as the free cash flows-to-equity approach, and the
replacement cost.
-
The total Value of Equity was determined by adding the total project
values to project-level balance sheet assets such as debt service
reserves and working capital and subtracting senior debt and
construction bridge loans.
-
The valuation of Mesa Repowering is based on completion and assumes the
project will be completed as planned.
-
Western Wind was granted a right-of-way extension for Mesa Repowering
through September 22, 2037. It is expected that these land rights will
be transferred to the relevant project company. As a result, DAI
assumes that Mesa Repowering land rights will not permit operation of
the project beyond September 22, 2037.
-
Based on the development plans and expected in-service date for Mesa
Repowering and the early stage development projects, DAI assumes that
Mesa Repowering, Snowflake, and Windswept will not be entitled to
receive a Section 1603 federal cash grant based on the current
eligibility requirements of the program.
-
The FMV determinations for Snowflake and Windswept are based on the
sales comparison approach utilizing recent transactions involving
similar early-stage development projects.
- No material changes to the state of Western Wind's assets and liabilities at the corporate level are assumed to have occurred since its most recent financial statement (March 31, 2011 Interim Report).
Risks
-
Market conditions may change or the owner may not locate markets at the
appraised values.
-
This appraisal is not a guarantee of a sale price.
-
DAI has not investigated as to the existence of any liens or
encumbrances.
-
DAI did not inspect the sites or the proposed equipment as a part of the
valuation engagement and has relied upon the representations of the
Independent Engineer as to the condition and operation of the Kingman
and Windstar projects.
- This appraisal does not recognize or consider any improper use, effect, or disposal of any hazardous substance.
Key assumptions, hypothesis and contingencies
General
-
The projects are assumed to be built, placed into service, and operated
as described by the project independent engineer or otherwise assumed
by Western Wind.
-
Proper maintenance practices to occur as described by the project
independent engineer and required by the projects' operation and
maintenance agreements.
- No restrictions are assumed to be placed on the projects' operations because of changes in environmental regulations or local government requirements beyond those considered explicitly in the valuation reports.
Project specific - Phase Three
| Mesa Repower | Snowflake | Windswept | |
| Project type and size | 50MW wind | 196MW wind | 30 MW wind |
| Commercial operation date | January 1, 2014 | June 1, 2014 | June 1, 2015 |
| Remaining asset life | 24 years | na | na |
| Power Purchase Agreement (PPA) |
Not modeled in the FMV analysis. However, proposals were submitted in June 2011 to 3 California utilities energy calls |
TBD | TBD |
| Land | Right of way through 2037 | Leased |
Leased with some parcels owned |
| Tax incentives | None | None | None |
| Valuation approach | Income | Sales comparison | Sales comparison |
| Source of key assumptions | Management | Management | Management |
| Debt -to-capital ratio | 63% | na | na |
| Term of debt | 20 years | na | na |
| Cost of debt | 6.0% | na | na |
| Discount rate on equity returns | 17.37% | na | na |
| Construction cost contingencies | na | na |
na |
Project status
Windstar
- Financing fully committed.
- 88% of foundations are complete.
- 85% of the turbines have been delivered
- 32% of the towers have been erected and.
- Substations are under constrution.
- Outstanding items are turbine commissioning and transmission line interconnection.
Kingman
- Financing fully committed.
- All foundations completed and all wind turbines have been erected.
- Substation is 80% complete.
- Solar panel installation is 50% complete
- Outstanding item is transmission line interconnection of which work has now begun.
Mesa
- Has been operating under Western Wind's ownership since 2006.
- Repower and expansion PPA's and transmission under negotiation.
- Has obtained full approval by the BLM for the repower and expansion.
Yabucoa
- PPA and land lease signed.
- Engineering contract signed with Lord Management, LLC
- Procurment and contruction contract under negotation.
- Updated financing mandate letter signed with Rabobank.
- Additional outstanding items include executing a solar panel supply agreement, obtaining government approval for the Puerto Rico investment tax credit and constructing the project.
Snowflake
- Leased sign for 16,000 acres.
- Biological studies underway.
Windswept
- Over 500 acres under lease.
- Biological studies underway.
Western Wind Energy has filed with the TSX Venture Exchange as confidential filings, the Independent Engineers Report for Windstar, The Lenders Final Financial Pro Forma for Windstar and full copies of the valuation reports for Windstar, Kingman,Yabucoa, Mesa and the phase three valuation report.
About DAI Management Consultants , Inc.
Founded in 1987, DAI is a consulting firm specializing in valuation and risk management services for the power and energy infrastructure sectors. DAI provides a comprehensive suite of analytical services addressing the technical, regulatory, and economic issues that directly affect power and energy projects. DAI has provided appraisal and valuation services for numerous power projects, including some of the largest existing and proposed renewable energy projects in the U.S. Clients of DAI have included the United States Internal Revenue Service, state and municipal government agencies, major public and private utilities, financial institutions and independent power producers.
DAI's appraisals of Western Wind's assets have been prepared under the direction of Steve Dean, ASA, P.E., DAI's Managing Principal, who is certified by the American Society of Appraisers as an Accredited Senior Appraiser in the Public Utilities (Machinery and Technical Specialties) area. Over the past three years, Mr. Dean has provided apprasials for almost 3,000 MW of wind projects throughout the U.S. Steve Dean's appraisal qualifications and experience can be found at: http://www.daimc.com/AppraisalQualificationsPackage.pdf.
About Western Wind
Western Wind is a vertically integrated renewable energy electrical production company that currently owns over 500 wind turbines with 165 MW of net rated capacity either in production or in construction in the States of California and Arizona. Western Wind further owns additional development assets for both solar and wind energy in California, Arizona, and Ontario, Canada; and in the Commonwealth of Puerto Rico.
Western Wind is in the business of owning and acquiring land sites and
technology for the production of electricity from wind and solar
energy. Management of Western Wind includes individuals involved in the
operations and ownership of utility scale wind energy facilities in
California since 1981.
| ON BEHALF OF THE BOARD OF DIRECTORS | ||||||||||
| "SIGNED" | ||||||||||
|
Jeffrey J. Ciachurski President & Chief Executive Officer |
Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
Certain statements in this press release constitute "forward-looking statements" under applicable securities laws, which involve known and unknown risks, uncertainties and other factors that may cause actual results to be materially different from any future results, performance or achievements expressed or implied by such statements. Words such as "expects", "anticipates", "intends", "projects", "plans", "will", "believes", "seeks", "estimates", "should", "may", "could", and variations of such words and similar expressions are intended to identify such forward-looking statements. Such statements in this news release include, but are not limited to, the Company's discussion concerning the Offer. These statements are based on management's current expectations and beliefs and actual events or results may differ materially. There are many factors that could cause such actual events or results expressed or implied by such forward-looking statements to differ materially from any future results expressed or implied by such statements. Such factors include, but are not limited to, the state of the Company's business activities and various factors discussed in the Company's annual report and annual information contained in the Company's 20F Annual Report filed with the United States Securities and Exchange Commission and securities regulators in Canada. Forward-looking statements are based on current expectations and the Company assumes no obligation to update such information to reflect later events or developments, except as required by law.
SOURCE Western Wind Energy
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