KEY POINTS:
Add some Kiwi-made engineering brains to the global push for renewable energy sources and within two years there's a $100 million utility company ready to list on the main board of the stock exchange.
Shareholders of NZ Windfarms are meeting in Christchurch tomorrow to approve a plan to transform their company from a small-scale wind farm developer to a big player on New Zealand's renewable power scene.
The growth story of NZ Windfarms is remarkable. It started life as a spin-off of Windflow Technology - the brain child of engineer Geoff Henderson - to develop and build a unique twin-bladed wind turbine.
Stage one of Windfarm's $80 million wind farm at Te Rere Hau - Maori for "fierce wind" - near Palmerston North was completed late last year. This month it raised $75 million of new capital, which will help pay for the next batch of its NZ-built turbines.
These machines are smaller and less obtrusive than some of the giant models favoured by other developers.
Company chief executive Chris Freear says using these smaller machines is an important part of its different take on wind power.
"Our approach to what wind generation should look like is certainly different to what some of the main players in the space have - particularly Trustpower and Meridian.
"Our whole business philosophy is one of building what's called 'distributed generation' - smaller scale generation that connects into the local networks and supplies power to the local communities," says Freear.
"It's a smaller-sized farm - we'll have more of them and they'll be peppered throughout the country.
"What that gives us is diversity in our portfolio in that if the wind's not blowing in one location, it's pretty sure to be blowing somewhere else, so we'll have a more consistent output across our portfolio of farms."
Using smaller machines also should mean the whole farm is much cheaper to build, with less need for new roads and power lines. Other wind farm builders - think here of state-owned Meridian's plans for turbines up to 125 metres high at its new Makara site - are taking a "power station" approach.
The rapid growth story of NZ Windfarms is attractive but when will shareholders actually start making some money?
Freear says the new capital now in the company removes some of the constraints on growth and Windfarms should soon be moving away from being a start-up, growth investment into something less exciting, but more stable. "We've been operating under effectively capital constrained, in a space where you actually need quite a lot of capital to do anything.
"From our point of view it removes the chocks that have been holding us back. It will allow us to move forward and get these projects developed.
"The story in the first few years is a growth story as the projects come online, then as the revenues from the sale of the power that's generated starts to come through, it becomes more of a utility - a stable, low return sort of beast. That's what we'll be eventually."
Vector's chief executive Mark Franklin says that the investment in Windfarms is not a sign that the network company will be expanding into greater power generation.
"If I looked at all the things we could get involved in - and I've said this lot of times - [then] we're not going to be a generator, there are enough generators around."
Vector has, over the past few years looked into a whole range of energy options, says Franklin, and these have included "micro-wind and small wind turbines".
"We've looked at smart metering, we've looked at the impact of solar on hot water heating, all of those things we look at demand-side response and whether customers would use them or wouldn't use them.
"This one [Windfarms] came up and it came up for a couple of different reasons that were interesting," says Franklin.
"One of them was that they were smaller and more flexible, likely more to be connected to distribution grids. They were technically more suited to be directly feeding into distribution grids, the way they were configured.
"I think that we're building something that is important to the future of New Zealand and this is one of the small steps along the way.
"This would be what we consider to be a very small strategic stake in an important company."
Windfarm's initial public offering in December 2005 raised more than NZ$4 million. With a current stock market capitalisation of $16 million, the $75 million of new equity is taking it firmly into the ranks of the larger listed companies.
Windfarms is leaving the AX, the Alternative Exchange, and moving on to the main board of the NZX.
As part of its deal with Windfarms, Vector will receive two places on the board and has conditionally agreed to invest $5 million in a future $25 million capital raising, if this happens before the end of 2009.
The $18 million investment is Vector's first under what it describes as its "environmental strategy".
"It is not Vector's role to participate in the science of the climate change debate," said Franklin last month when announcing the Wind- farms investment. "Our role is to take a responsible and sustainable view of the future of our company's contribution to New Zealand's energy market. We see NZ Windfarms delivering on that now and into the future.
"We see renewable distributed generation as delivering alternative solutions, which are both sustainable and offer customers greater choice. Vector will continue to look at a range of other renewable opportunities over the coming months."
As for Windfarms, and chief executive Chris Freear, he sees tomorrow's meeting as one of the young company's defining moments. "It's going to be a fairly big meeting. We are essentially moving from back street to main street. That's what it means for us. It's proof that good business can be good for the planet as well."
