Greenfern Industries has entered into an exclusive Heads of Agreement with Rotorua-based Vortex Group to negotiate a development agreement that could see the two companies jointly develop a renewable energy hydropower generation plant at Normanby, Taranaki for their mutual benefit.
The in-principle terms of the agreement to be negotiated are that:
• Greenfern would transfer ownership of the power station equipment to a New Company (NewCo), jointly owned by Greenfern (51%) and Vortex (49%). Greenfern would retain ownership of the land on which the power station sits and would lease that land to NewCo.
• In exchange for their interest in NewCo, Vortex would complete an upgrade of the power station at their cost. The arrangements are subject to ongoing investigation and evaluation by both parties and the final details of the arrangement may vary in the process of negotiation.
The Heads of Agreement is conditional on approval of both the Greenfern and Vortex boards. Greenfern bought the power station in December 2020 after a crowdfunding campaign and then set about investing in works to get the power station operational again. Taranaki Regional Council gave the go-ahead in April for the power station to again start generating power after passing the final inspection of items that were historically in breach of resource consent conditions held by the station's previous owner.
Greenfern’s rationale for purchasing the power station was that it sits alongside the company’s research facility, indoor growing operation, and processing facility and to be able to access cost-price power – the highest overhead cost in a medicinal cannabis indoor growing operation – would be a competitive advantage. The renewable energy aspect also fits with Greenfern’s strong sustainability ethos.
The Heads of Agreement requires Greenfern and Vortex to negotiate and sign the full development agreement with Vortex by the end of January 2022 with work planned to commence in 2022.
If agreed, the work would involve replacing the current turbine, which can generate 250kW of power and adding an additional, secondary turbine to maximise operational output allowable under the current water take consents. Any new consents or council requirements will be investigated during the due diligence period prior to finalising the contract.
Once the upgrade is complete the power station is expected to generate 950kW and the book value of the power station will increase significantly.
“That will have a marked, positive impact on our balance sheet,” Greenfern managing director Dan Casey said.