Notice of Annual Meeting of Shareholders
Notice is hereby given that the annual meeting of the shareholders of
Windflow Technology Limited (the Company) will be held at The City View Room,
Quality Hotel Elms, 456 Papanui Rd, Christchurch on Wednesday 7 December 2016
at 7:30 pm. Please ensure you read the following notified motions together
with the Explanatory Notes attached to this Notice of Annual Meeting of
Shareholders (Explanatory Notes). Capitalised terms in this Notice that are
not otherwise defined in this Notice have the meaning given in the
Explanatory Notes unless the context requires otherwise.
BUSINESS
A. Welcome
B. Apologies and Proxies
C. Minutes of last Annual Meeting, held 30 November 2015
D. Annual Report
E. Notified Motions to consider and, if thought fit, pass as ordinary
resolutions of shareholders:
(i) Resolution 1 - Receipt of Financial Statements
That the financial statements for the year ended 30 June 2016 and the reports
of the directors and auditors (KPMG) be received.
(ii) Resolution 2 - Remuneration of Auditors
That the directors be authorised to determine and fix the fees and expenses
of the Company''s auditors for the forthcoming year.
(iii) Resolution 3 - Election of Ian McInnes as Director
That Ian McInnes, who has been co-opted as a director in accordance with
clause 21.8 of the Company''s Constitution, is retiring in accordance with
NZAX Listing Rule 3.2.3 and is available for re-election, be elected as a
director of the Company.
(iv) Resolution 4 - Variation of purpose of Loan Facility1
That in respect of the existing Loan Facility provided by David Walter Iles
for the purposes of building and owning eleven turbines in the United
Kingdom, for the purposes of NZAX Listing Rules 9.1.1 and 9.2.1, the
Company''s Constitution and for all other purposes, the shareholders approve,
and the Board be authorised to vary the purpose of the Loan Facility to be
expanded to apply to turbine projects in the Pacific (including New Zealand
and Australia) as well as in the United Kingdom, or any other purpose
determined by the Board.
F General Discussion about the Company''s Immediate Prospects and Plans
In this part of the meeting, which is somewhat related to Resolution 4 in
that the continued use of the Loan Facility for projects in the Pacific and
elsewhere will facilitate the Company''s entry into these new markets, the
Directors will outline the current position of the Company and invite
discussion in the following context:
Wind Power remains a large and growing industry:
o Onshore wind power continues to be the "workhorse" of the renewable energy
revolution, which itself continues its huge growth, amid popular and
political support in many countries.
o The huge growth in the last decade has involved a shift to China as the
global epicentre and has cemented large turbines (around 2 MW) as the
dominant size for onshore wind power.
The Windflow turbine has fundamental advantages, which suit licensing:
o The technology fundamentals of the Windflow turbine (light-weight, robust,
grid-friendly) are now well-proven and established.
o Windflow has had licensing discussions with potential Asian licensees. It
has also commenced sales and marketing work in Pacific islands. Progress on
both of these fronts has been slow but promising.
o The Windflow turbine''s weight advantage needs volume and low-cost
manufacturing to translate into a cost advantage.
o Midsize turbines (0.1 - 1 MW) remain a relatively niche market for
distributed projects and islanded networks. Projects of under about 50 MW
may prove to be a "sweet spot" for midsize turbines where they are
cost-competitive with large turbines, as was the case when Te Rere Hau was
built.
o The September blackout in South Australia provides an opportunity to
highlight the advantages of the synchronous generator that Windflow uniquely
offers to the wind industry.
Windflow is formulating a new business plan, following withdrawal from the UK
market:
o The market entry into the UK has not generated the hoped-for sales, and the
UK market is presently retrenching. The New Zealand market has been stagnant
for several years, though it may recover in the coming years due to an
expected combination of increasing electricity demand, increasing carbon
price due to the Paris Agreement and confirmation in 2017 that the aluminium
smelter will remain in business through to 2030 at least.
o Based on the above, Windflow''s business plan will, in 2017, see the Company
working in several directions simultaneously:
o Seeking licensee partners in the major continental markets (Asia, Europe
and North America) to monetise the Windflow turbine''s weight advantage
through volume manufacturing
o Developing a low-cost supply chain to ensure its products are competitive
o Sales and marketing efforts to generate revenue from its existing and
future products
o Continuing to improve its existing product line by working towards IEC
certification of the class 2 turbine, re-certification of the class 1
turbine, and eliminating residual issues of early component failure (torque
limiting pumps, pitch bearings). (Note that all wind turbines have such
issues, and in mainstream turbines these are predominantly gearboxes, in-hub
hydraulics and power electronics.)
o Working to develop a synchronous drive-train (TLG/LVS) offering for
installation in existing 3-bladed turbines at the midsize and large turbine
scale
o Working to expand its product line to include a large turbine like those
which currently dominate the industry, this last being a major multi-year
project, which will require a major capital injection before the Company can
commence work on it.
o Recognising its resource constraints, the need to prioritise among the
above strategic directions, and the immediate imperatives associated with the
transition in the UK market, the Company continues to work on a capital
raising plan and it expects to be able to make a further announcement in the
New Year. In preparation for the capital raising, it proposes to tidy up its
share register by getting shareholders with fewer than 1,000 equity
securities (the minimum holding under the Constitution and the Listing Rules)
either to sell their shares or increase their holding above the minimum.
Shareholders will be separately notified by the Company in relation to this.
G. Other Business
To transact such other business as may properly be brought before the meeting
in accordance with the Company''s Constitution.
NOTES:
All shareholders are entitled to attend and all ordinary shareholders are
entitled to vote (subject to voting restrictions set out in this Notice of
Meeting) at the annual meeting or to appoint a proxy (who need not be a
shareholder of the Company) or corporate representative (in the case of a
corporate shareholder) to attend the annual meeting and vote on their behalf.
If you wish, you may appoint "The Chairman of the Meeting" as your proxy or
as an alternative to your named proxy. A proxy form is enclosed with this
Notice. To appoint a proxy please complete, sign and return the enclosed
proxy form to Link Market Services Limited, PO Box 91976, Auckland 1142 or
Fax to 09 375 5990 in either case so that the Company receives the proxy form
by 5:00 pm on Monday 5 December, 2016. The Chairman of the Meeting intends to
vote any discretionary proxies in favour of the resolutions set out in this
Notice of Meeting.
An ordinary resolution is a resolution that is approved by a simple majority
of votes of those Shareholders entitled to vote and voting on the resolution.
Restrictions on voting
Pursuant to NZAX Listing Rule 9.3.1, none of David Walter Iles nor any of his
Associated Persons (as that term is defined in NZAX Listing Rule 1.7) shall
be entitled to vote on Resolution 4 for the purpose of NZAX Listing Rule
9.2.1 (Restricted Resolution). In respect of Resolution 4, Mr Iles is a
related party (as that term is defined in NZAX Listing Rule 9.2.3) of the
Company due to Mr Iles holding 42.10% of the voting rights in the Company and
a party to the proposed transactions that are the subject of those
resolutions.
Mr Iles and his Associated Persons are also precluded from acting as a
discretionary proxy of any other shareholder entitled to vote on a Restricted
Resolution, but may vote on a Restricted Resolution as a proxy if voting in
accordance with the appointing shareholder''s express instructions.
Yours faithfully,
for and on behalf of the Board of Directors
Geoff Henderson
Director/Chief Executive Officer
TABLE OF CONTENTS
FOR
EXPLANATORY NOTES
Resolution 1: Receipt of Financial Statements 5
Resolution 2: Remuneration of Auditors 5
Resolutions 3: Election of Director 5
Resolution 4: Variation of purpose of Loan Facility 6
Attachment A: Directors Certificate (NZAX Listing Rule 9.2.5(b)) 8
EXPLANATORY NOTES
1 These explanatory notes relate to the Resolutions set out in the Notice of
Annual Meeting.
Resolution 1 (to be passed as an ordinary resolution): Receipt of Financial
Statements
2 A copy of the Annual Report for the financial year ended 30 June 2016 can
be found at
www.windflow.co.nz/pdf-folder/Financial-Reporting/annual-report-june-2016# or
you can request a copy from the Company by calling the Link Market Services
helpline on +64 9 375 5998.
Resolution 2 (to be passed as an ordinary resolution in accordance with
section 207S of the Companies Act 1993): Remuneration of Auditors
3 KPMG is the current auditor of the Company. A resolution to re-appoint the
auditor is no longer required given recent changes to the Companies Act.
Section 207T now provides that a company''s auditor is automatically
reappointed unless the shareholders resolve to appoint a replacement auditor,
or there is another reason for the auditor not to be reappointed.
4 Section 207S of the Companies Act 1993 provides that the auditor''s fees and
expenses must be fixed by the Company, or in the manner that the Company
determines at a shareholders'' meeting. Shareholders are being asked to
resolve that the directors be authorised to determine and fix the fees and
expenses of the auditor for the forthcoming year.
Resolution 3 (to be passed as an ordinary resolution in accordance with
clause 21.8 of the Company''s Constitution and NZAX Listing Rule 3.2.3):
Election of Director
5 As required by the Company''s Constitution and the NZAX Listing Rules, two
directors, Michael Chick and Angus Napier are retiring at the end of their
two-year terms. They have decided not to offer themselves for re-election.
Ian McInnes, having been co-opted since the last Annual Meeting, has offered
himself for election and his background is set out below.
Ian McInnes CMInstD, FNZIM: Mr McInnes has twenty five years of senior
management experience in the energy industry, the last four living and
working in China for the AES Corp, a US NYSE listed Energy Group. Prior to
that he worked for five years in Brisbane with Energy Developments Pty Ltd,
the leading renewable energy company listed on the ASX (ENE). He held a
number of General Management roles with Southpower Limited (Southpower was a
joint venture created in 1989 between Christchurch Municipal Electricity
Department, the Central Canterbury Electric Powerboard, Riccarton Electricity
and the Port Hills Energy Authority which was later renamed Orion New Zealand
Limited) & Orion New Zealand Limited for ten years in Christchurch before
moving to Australia in 2003. He brings to the table a background in Chinese
relationships that should assist WTL to progress its strategic plan. Mr
McInnes is a Chartered Member of the NZ Institute of Directors (CMInstD) and
a Fellow of NZ Institute of Management & Learning (FNZIM). He lives in
Christchurch.
Resolution 4 (to be passed as an ordinary resolution in accordance with NZAX
Listing Rules 9.1.1, NZAX Listing Rule 9.2.1, the Company''s Constitution and
for all other purposes): Variation of Loan Facility
6 The Company is seeking shareholder approval to vary the Loan Facility
previously approved by the Shareholders so that funds can be used for the
purpose of undertaking further wind turbine projects in the Pacific
(including New Zealand and Australia) or any other market where, as
determined by the Board, it is appropriate for the Company to invest in
turbine projects.
7 Based on previous shareholder approvals, the Company has built eight
turbines in Scotland funded by the Loan Facility. Of these it has sold two
to third parties, so that it currently owns six turbines in Scotland funded
by the Loan Facility. The Loan Facility was originally approved by
shareholders in July 2012 for up to ?2,830,000 for three turbines in the UK.
Since then the Shareholders have approved increases to ?10,880,000 for eleven
turbines in the UK. As at 23 November 2016, the current Loan Facility
balance is ?9,115,344.30. As the opportunity in the UK for single turbine
projects has now come to an end, the Directors recommend that the purpose of
the Loan Facility be broadened to include projects in the Pacific.
8 The Shareholders have previously approved the quantum of the Loan Facility
however the Company believes that the amendment to the loan arrangements in
relation to the purpose of the Loan Facility also constitutes a Material
Transaction with a Related Party (as those terms are defined in the NZAX
Listing Rules) for the purposes of NZAX Listing Rule 9.2.1 and, as such,
requires shareholder approval by ordinary resolution. The amendment to the
purpose for the use of the funds in new projects in the Pacific (including
New Zealand and Australia) is part of a related series of transactions with
the amendment to the loan arrangements, and therefore also constitutes a
Material Transaction with a Related Party for the purpose of NZAX Listing
Rule 9.2.1 and requires shareholder approval by ordinary resolution. This
also means these transactions must be approved on the basis that none of Mr
Iles nor any of his Associated Persons (as that term is defined in NZAX
Listing Rule 1.7) is entitled to vote on Resolution 4, as Mr Iles is a
related party (as that term is defined in NZAX Listing Rule 9.2.3) of the
Company and a party to the relevant transactions. The directors certificate
as required by NZAX Listing Rule 9.2.5(b) is enclosed at Attachment A.
9 The average market capitalisation for the Company as at 21 November 2016 is
$386,460.00.
Directors'' Recommendation
10 The Directors believe that varying the Loan Facility by amending the
purpose of the funds to undertake new projects in the Pacific (including New
Zealand and Australia) is fair and reasonable to shareholders and in the best
interests of the Company for the following reasons:
a) There is no change to the quantum of funds and turbine projects already
approved, which is ?10,880,000 and eleven turbine projects. While the
directors will reserve the right to vary the overall Loan Facility up or down
to a minor extent (for example by adopting a different currency such as US
dollars, or a Pacific island currency, instead of pounds sterling), there
will be no significant change in the magnitude of the funds at risk, nor the
general nature of the investment being made.
b) The UK market for single turbine projects is coming to a close because of
changes in UK government policy. The Company wishes to address opportunities
in the Pacific and elsewhere. Moving its focus to the Pacific market, closer
to its base in New Zealand, is a natural step, which will make some aspects
of doing business easier for the Company. These include reducing the cost of
travel for our commissioning engineers and the cost of procuring some
services. Also the role of NZ government departments such as NZ Trade &
Enterprise is very significant and proportionately more helpful for the
Company in the Pacific region.
c) The value of electricity in the Pacific Islands is driven by the cost of
diesel which is high because of transport costs. Thus the Company expects
there to be profitable opportunities for wind turbines.
11 The main risks associated with varying the Loan Facility and undertaking
further turbine projects in the Pacific are, in order of their significance:
a) A change in the political and market risk profile, associated with the
change of location. Political and market risk in some of these countries
introduces risks such as effective confiscation of a turbine if (for example)
a counter-party defaults on paying for the power produced and the turbine
cannot be re-exported. These risks will be mitigated by working closely
with NZ government agencies and local law firms to minimise contractual
exposure to such defaults. By contrast, operation in the UK has had its own
set of sovereign risks which NZ government agencies have had very limited
ability to assist the Company to address.
b) General commercial risk - the combination of wind speed and power price in
the Pacific may not be sufficient to ensure viability in all cases. The
Company will mitigate this risk by reviewing each project for viability with
the Lender, and making a go/no-go decision based on as complete a set of data
as possible. This review will take into account the normal benefit-cost
analysis of a wind turbine project, and in addition the prospects for
follow-on projects in each country.
c) Ensuring local maintenance teams are trained to maintain the Windflow
turbine. This risk will be mitigated by working closely with local power
companies who have staff trained to maintain diesel-generator sets (which
have similar skillset requirements).
d) Exchange rate risk - it may not be possible to obtain suitable power
purchase contracts denominated in a currency that matches the loan currency.
The Company intends to mitigate this risk by negotiating as far as possible
to obtain power purchase contracts denominated in major global currencies
such as US dollars.
12 The Directors recommend that shareholders approve Resolution 4. If
Resolution 4 is not approved, it will hamper the Company''s plans to address
new market opportunities in the Pacific and elsewhere, because it is always
useful to be able to offer to fund the first demonstration turbines in new
markets. In this event the Directors would need to consult with the Lender
as to whether the Loan Facility would persist but only for the UK market (and
if so what longer-term prospects for further small projects there are in the
UK), whether the Loan Facility might be terminated if it is deemed too
unlikely that small UK projects can be viable in future, or whether the
Company should attempt again to seek shareholder approval of Resolution 4 in
the same or similar form.
Attachment A
Directors Certificate (NZAX Listing Rule 9.2.5(b))
End CA:00293157 For:WTL Type:MEETING Time:2016-11-23 12:12:51