Frontier Energy Reports Capacity Credit Assignment and Updated Revenue Forecasts for Waroona Project

• Stage One assigned 88.06 MW of capacity credits at a Reserve Capacity Price of $360,700 per MW for the 2027-2028 capacity year, representing approximately $32 million in annual revenue.
• Independent price forecasts by Aurora show average annual revenue of $72.5 million and average annual EBITDA of $61.4 million over the first five years of operations.
• Capacity revenue forecast at approximately $160 million over the first five years, based on the fixed price facility structure.
• $11.5 million share placement completed at $0.25 per share, with proceeds for debt financing process and Reserve Capacity Mechanism security deposit.
• Independent Technical Engineer appointed and major equipment tender processes advanced.

Frontier Energy Limited (ASX: FHE; OTCQB: FRHYF) is an Australian-based renewable energy company developing the Waroona Renewable Energy Project in Western Australia. Stage One of the project comprises a 120 MW solar facility with integrated battery storage, targeting commercial operations by October 2027. The project is located approximately 120 kilometres south of Perth.

Assignment of 88.06 MW Reserve Capacity Credits

The Australian Energy Market Operator (AEMO) assigned Stage One 88.06 megawatts of peak capacity credits for the 2027-2028 Reserve Capacity Cycle in October 2025. The Reserve Capacity Price was confirmed at $360,700 per MW, representing a 67% increase compared to the previous year's price of $216,000 per MW.

Based on the assignment of 88.06 MW and the Reserve Capacity Price of $360,700 per MW, Stage One expects to receive annual revenue from capacity credits of approximately $32 million. As Stage One is structured as a fixed price facility for the first five years of operation (October 2027 to September 2032), total reserve capacity revenue is forecast at approximately $160 million over that period, subject to the company meeting its reserve capacity obligations.

Revenue from capacity credits is received in addition to revenue from energy sales and other market opportunities. Capacity credits are reported to represent approximately 45% of forecast revenue for Stage One, with the remainder from energy sales, Large-scale Generation Certificates, and other market opportunities including FCESS (Frequency Co-optimised Essential System Services).

The Western Australian electricity market's South West Interconnected System (SWIS) remains dependent on carbon emissions generation, which accounted for approximately 57% of electricity supply in 2025 (coal 28%, gas 29%). The WA Government is committed to closure of State-owned coal and gas generation facilities by 2029. AEMO forecasts that plant closures combined with demand growth will require approximately 7.1 terawatt-hours of additional generation by 2031.

Updated Independent Revenue Forecasts

Aurora, a global energy market expert, was engaged to provide independent price forecasts for each revenue stream over the life of Stage One as part of the debt financing process. Aurora previously completed independent price forecasts for the February 2024 and December 2024 definitive feasibility studies (DFS), which included a Base Case and a Debt Case scenario.

The updated Aurora forecasts show average annual revenue of $72.5 million per annum and average annual EBITDA of $61.4 million per annum over the first five years of operations. This compares to the 2024 DFS Base Case of $65.1 million revenue and the 2024 DFS Debt Case of $57.0 million revenue. The updated forecast comprises energy sales of $39.3 million, reserve capacity of $31.0 million, and other revenue sources of $2.2 million.

Average electricity prices on the WEM reached $88 per megawatt-hour in 2025, an 11% increase on 2024 and a 33% increase on 2022. Electricity prices during peak periods (4pm to 10pm) averaged $120 per megawatt-hour in 2025, compared to $152 per megawatt-hour in 2024. The decrease in peak prices was attributed to an increase in standalone battery storage facilities on the network. The number of negative price periods decreased to 5.5% in 2025 compared to 21.8% in 2024.

Share Placement and Debt Financing Process

The company completed a placement of 46 million new fully paid ordinary shares at $0.25 per share in October 2025, raising $11.5 million. The placement included approximately 23 million attaching options (one option for every two shares issued), exercisable at $0.40 and expiring two years from the date of issue. Proceeds are being used to complete the debt financing process and pay the security deposit required under the Reserve Capacity Mechanism.

An Independent Technical Engineer (ITE) has been appointed as part of the debt financing process. The company is finalising negotiations for major equipment and EPC (Engineering, Procurement and Construction) contracts. The tender for the main substation transformer has been issued with support from Mott Macdonald. Early works undertaken by Monford Group are approximately 90% complete, with the majority of design deliverables finalised.

As at 31 December 2025, the company reported a cash balance of $5.6 million. An additional $8 million cash-backed security deposit is held with AEMO as required under the Reserve Capacity Mechanism. The company expects this security deposit to be replaced by a bank guarantee as part of a senior project debt facility, which would result in the cash deposit being returned. A short-term $6 million loan from an entity associated with director Grant Davey was drawn and repaid during the quarter.

Outlook and Next Steps

The company has received assignment of 88.06 MW of reserve capacity credits for the 2027-2028 capacity year and completed updated independent revenue forecasts showing average annual revenue of $72.5 million over the first five years of operations. The debt financing process continues, with the Independent Technical Engineer appointed and EPC contract negotiations under way. Stage One is targeting commercial operations by October 2027. Work associated with procurement of long-lead items for the substation is continuing, and an independent review confirmed that all environmental and planning approvals required to proceed to development remain valid.

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