UPDATED: Windflow threatens Windfarms with court action

Tuesday 3rd November 2009

Windflow Technology, the Christchurch-based wind turbine developer, is threatening legal action over $3.5 million of payments withheld by its sole customer, New Zealand Windfarms.

NZAX-listed Windflow says in a statement that "if Windfarms continues to withhold payments then Windflow will need to take steps to preserve its remaining cash until Windfarms resumes payment".

That could include slowing down and potentially stopping production at the company's Christchurch manufacturing plant, where a further $20 million to $30 million of turbines are on order from Windfarms, Windflow's chief executive Geoff Henderson told BusinessWire.

"We are making a world-beating effort here," he said. "To have it jeopardised like this is a huge learning experience for me as an engineer.”

Shares of Windfarms, tumbled 7.8% to 47 cents on the NZX today. Windflow, which is 19.9% owned by Mighty River Power was unchanged at $1.30.

"Windflow has initiated a legal process to recover amounts owing to it by Windfarms and this will shortly result in a High Court hearing unless Windfarms makes the required payment," Henderson said. A hearing was expected within a month.

Windfarms began withholding payments for the two-bladed turbines in August, claiming that it had been a condition of sale that the turbines would have International Electricification Commission certification. The Windflow turbines have undergone design modifications as they were developed, meaning that the turbines currently being supplied to Windfarms' Te Rere Hau development in the Manawatu differ from earlier versions.

Windflow had "made efforts to reach a commercial resolution with Windfarms, including commissioning an independent expert review of the Te Rere Hau turbine design differences compared to the final design submission for IEC certification".

The results of that review had found "no new negative information" and had eliminated around half the dozen or so issues at stake. "The new information has been very positive in that it's diminished the imporance of the issues that were highlighted in the first instance."

Windflow has offered the report to Windfarms.

The issues are also holding up Windflow's reporting to the NZAX. The company has requested a waiver on today's annual report filing deadline to November 16, to synchronise with its delayed annual meeting, now to be held on December 16 "because it expects further developments on this matter before then".

Windflow says it has now almost completed installation of the 65 turbines on site at Te Rere Hau, which it says are "performing well".

"Windflow is now focusing on completing the build of the remaining 32 turbines which were ordered unconditionally by its customer, Windfarms, in September 2008."

Windfarms chief executive Steve Cross told BusinessWire the company was "still working to try to get through all this" and would be issuing a statement later today.

Businesswire.co.nz

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