Frontier Energy Secures 88MW Reserve Capacity for Waroona Solar Project

• 88.06MW certified reserve capacity assigned to Stage One of Waroona Renewable Energy Project for 2027/28 capacity year
• $360,700 per MW benchmark price represents 57% increase from previous year due to regulatory methodology change
• 932MW capacity shortfall forecast by AEMO for 2027/28 before accounting for probable new facilities
• $8 million debt facility arranged with Rockford Equity to fund reserve capacity security requirements
• $2.75 million divestment of Pick Lake Zinc Project scheduled to complete by 15 October 2025

Frontier Energy Limited (ASX: FHE) develops renewable energy projects in Western Australia. The company's principal activities include the development of the Waroona Renewable Energy Project and the Bristol Springs development. Both projects are located in Western Australia, with the company focusing on large-scale renewable energy infrastructure.

The company is developing the Bristol Springs Green Hydrogen Project located 120km from Perth in Western Australia, positioning itself as an integrated clean energy developer with potential for green hydrogen production.

Reserve Capacity Certification and Revenue Stream

The Australian Energy Market Operator has assigned 88.06MW of Certified Reserve Capacity to Stage One of the Waroona Project for the 2027/28 capacity year. The Reserve Capacity Mechanism requires facilities to maintain availability during peak demand periods in exchange for annual capacity payments. This system was introduced in Western Australia in 2006 following electricity supply disruptions in 2004.

The benchmark reserve capacity price increased 57% to $360,700 per MW for 2027/28 due to the Economic Regulation Authority changing calculation methodology from gas turbine to four-hour lithium-ion battery technology. The final reserve capacity price will be announced on 20 November 2025, determined by market supply and demand conditions. Recent regulatory changes include a pricing floor at 50% of benchmark rates and a deadband mechanism where final pricing equals benchmark pricing if capacity surplus or deficit remains below 5%.

AEMO forecasts a 932MW capacity shortfall for 2027/28 in its Expected Scenario, primarily due to Collie Power Station closure and potential Bluewaters Power Station unavailability. The shortfall reduces to 425MW when including probable facilities such as the Waroona Project. Ongoing capacity deficits are projected through 2034-35 as coal-fired generation retires while electricity demand increases.

Debt Financing for Regulatory Requirements

Frontier entered into an $8 million debt facility with Rockford Equity Pty Ltd to fund reserve capacity security requirements. The facility carries a 90-day Bank Bill Swap Rate plus 11% margin with an initial 100-day term. Security includes company guarantees and first mortgage registration on freehold land owned by Frontier subsidiaries.

The financing addresses immediate regulatory compliance requirements as the company progresses through the capacity allocation process. Reserve capacity security payments are due by 8 September 2025, with final capacity credit allocations determined by 20 November 2025. Should the project not receive capacity credits, the security amount would be refunded and applied to debt facility repayment.

Facility terms include a 2.0% establishment fee and 0.25% ongoing line fee. The short-term structure aligns with the reserve capacity timeline, providing necessary capital without long-term financial commitments. Extension options remain available subject to negotiated terms between the parties.

Asset Divestment and Strategic Focus

The Pick Lake Zinc Project divestment proceeds according to schedule, with Panther Metals PLC holding an option to acquire the asset for $2.75 million by 15 October 2025. The London Stock Exchange-listed base metals exploration company has paid $100,000 upfront and continues monthly payments of $30,000 during the option period.

Panther has accelerated work programmes including historical drilling assays, technical studies, and permitting activities. The zinc project represents a non-core asset as Frontier concentrates on renewable energy development. Upon option exercise, Panther will pay the remaining purchase price balance and receive transfer of mining licences and related project information.

The transaction structure provides Frontier with immediate cash flow while maintaining certainty around closing timelines. Total option payments of $370,000 through the exercise period contribute to working capital requirements. The divestment supports the company's strategic focus on the Waroona renewable energy development.

Upcoming Milestones

Frontier must provide reserve capacity security by 8 September 2025 to maintain capacity allocation eligibility. AEMO will publish final capacity credit allocations and reserve capacity pricing on 20 November 2025. The Pick Lake Zinc Project sale completion remains scheduled for 15 October 2025, subject to Panther exercising its option.

The company must complete bilateral trade declarations and network access quantity processes, which may affect final capacity credit allocation. These regulatory steps will determine the project's revenue framework and support progression toward the 2027 operational timeline.

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