Frontier Energy has secured 88.06 MW of peak capacity credits for its Waroona Project, guaranteeing around $32 million annually for five years, while raising $11.5 million to advance debt financing and project development.
- 88.06 MW capacity credits assigned for 2027-2028 Reserve Capacity Cycle
- Fixed reserve capacity revenue forecast at ~$160 million over first five years
- Updated forecasts raise average annual revenue to $72.5 million and EBITDA to $61.4 million
- Record high WA electricity prices in 2025 support project economics
- Successful $11.5 million capital raising to support financing and security deposits
Capacity Credits Secure Revenue Base
Frontier Energy Limited has taken a significant step forward in its Waroona Renewable Energy Project with the assignment of 88.06 MW of peak capacity credits for the 2027-2028 Reserve Capacity Cycle. At a Reserve Capacity Price of $360,700 per MW; a 67% increase from the previous year; this translates to approximately $32 million in fixed revenue annually for the first five years of operation, starting October 2027. This fixed revenue stream represents nearly half of the project's forecast income, providing a solid financial foundation amid market fluctuations.
Enhanced Revenue Forecasts Bolster Project Viability
Independent forecasts by Aurora, a global energy market expert, have updated the project's expected financial performance. The average annual revenue is now projected at $72.5 million, with EBITDA reaching $61.4 million over the initial five years. These figures surpass previous estimates and reflect a robust outlook supported by both capacity credits and energy sales, including Large-scale Generation Certificates and other market opportunities.
Market Conditions and Project Development Progress
The Western Australian electricity market experienced record high prices in 2025, with average wholesale energy prices climbing to $88 per megawatt-hour, a 10% increase over 2024. Peak period prices averaged $120 per megawatt-hour, aligning well with the Waroona Project's expected sales window. Early construction works are nearing completion, with design enhancements incorporating higher capacity solar panels to optimise output without affecting capacity credits. Environmental and planning approvals remain intact, clearing the way for continued development.
Capital Raising and Financial Position
To support ongoing debt financing and meet security deposit requirements under the Reserve Capacity Mechanism, Frontier successfully completed an $11.5 million capital raising at $0.25 per share. The company ended the quarter with $5.6 million in cash and an $8 million cash-backed security deposit, expected to be replaced by a bank guarantee upon securing senior project debt. Additionally, a short-term $6 million loan from a related party was repaid during the quarter, reflecting prudent financial management.
Outlook Amidst Energy Transition Challenges
With coal and gas-fired generation facilities in Western Australia scheduled for closure by 2029, the Waroona Project is well positioned to contribute to the region's renewable energy supply. However, the market faces a looming generation shortfall, with an estimated 7.1 terawatt-hours of additional capacity needed by 2031. Frontier's progress and secured revenue streams enhance its ability to attract debt financing and deliver on this critical energy transition.
Bottom Line?
Frontier Energy’s secured capacity credits and strengthened forecasts set the stage for critical financing milestones and project delivery in a tightening WA energy market.
Questions in the middle?
- How will Frontier manage risks related to fluctuating energy market prices beyond fixed capacity revenue?
- What are the timelines and contingencies for finalising major equipment and EPC contracts?
- How might increasing battery storage capacity in WA impact the Waroona Project’s energy sales revenue?