Government Backing Reshapes Future for WA Renewables Pioneer

• Frontier Energy is developing the Waroona Renewable Energy Project in Western Australia and was recently selected as one of four successful applicants for the federal government's $67 billion Capacity Investment Scheme (CIS).
• The CIS provides a 15-year revenue floor guarantee, underwritten by the federal government, which helps secure debt financing by ensuring minimum revenue levels even if energy prices fall significantly.
• The company is currently in the process of selecting a strategic partner from several shortlisted candidates to help cover the equity gap, secure favorable debt terms, and align on future expansion beyond the initial project.
• The initial project (Stage 1) consists of a 120-megawatt solar project with an 80-megawatt/4.75-hour battery storage system, expected to begin production in late 2027, with significant expansion potential (Stage 2) on their 820 hectares of land.
• The timing aligns with Western Australia's energy transition as coal (currently 30% of the grid) is being phased out by 2029, creating an energy supply gap that Frontier's hybrid renewable project is positioned to help fill.

Frontier Energy, an Australian Stock Exchange listed company, is developing the Waroona Renewable Energy Project in Western Australia. After experiencing some challenges in late 2024, the company has been working to establish a solid foundation for growth in 2025. In a recent interview, CEO Adam Kiley shared significant updates on the company's progress, particularly highlighting their selection as one of four successful applicants for the federal government's Capacity Investment Scheme (CIS) and their ongoing strategic partner selection process.

Federal Government's Capacity Investment Scheme

The Capacity Investment Scheme (CIS) is a $67 billion federal government initiative aimed at accelerating Australia's renewable energy transition. The scheme provides successful applicants with an essential revenue floor guarantee through a 15-year contract with the government.

"What CIS does overall for projects such as ours, it's in essence an underwriting by the federal government for a contract of up to 15 years which now provides a revenue floor for the project moving forward. When you're trying to get debt financing for a project or any investor generally overall, they want a guaranteed revenue that you're not going to fall below that. That is what CIS in essence actually does."

This revenue guarantee works as a synthetic power purchase agreement (PPA) where the government doesn't physically purchase the energy but ensures that if revenue falls below an agreed threshold, they will provide a top-up payment. The scheme also includes a profit-sharing mechanism where if energy prices exceed a certain ceiling, Frontier Energy would share 50% of those profits with the government.

Strategic Partner Selection Process

Following the completion of their Definitive Feasibility Study (DFS), Frontier Energy initiated a comprehensive process to identify a strategic partner to help finance the project. The company has received multiple non-binding indicative offers and has now shortlisted potential partners.

"We identified bringing on the right strategic partner will help shape the company not just for now but into the future as well. The toughest part with any financing is obviously filling that equity gap. We identified that if we fill that equity gap... getting the debt there afterwards, it's never simple but it is a little bit more simplistic if you bring through the right partner who has those relationships."

The company is seeking partners that align with their long-term vision, not just for the initial project but for future expansions as well. Kiley emphasized that they are looking for a true partnership rather than a takeover: 

"It will be a partnership on the way through. It's not going to be a big brother coming through taking majority ownership in the project and little Frontier going in the corner."

Project Details and Operating Strategy

Frontier Energy's Stage 1 project consists of a 120-megawatt solar facility combined with an 80-megawatt battery capable of storing energy for 4.75 hours. This hybrid approach is designed to maximize revenue by fully charging the battery each day and then discharging during peak demand periods when prices are highest.

The project is sized to account for seasonal variations, ensuring the battery can be fully charged even during winter months when solar generation is at its lowest. This strategy allows Frontier to mitigate curtailment risk and optimize revenue by selling energy during the highest price points of the day.

"Our strategy is in essence every day to make sure that battery is fully charged. Once the battery is fully charged, you in essence can always ensure that you can sell at the highest price point of the day."

Interview with Frontier Energy CEO, Adam Kiley

Expansion Potential & Long-term Vision

While Stage 1 is significant, Frontier Energy has substantial expansion potential with their 820-hectare land holding. Stage 1 utilizes only about 300 hectares, leaving approximately 500 hectares available for future development.

The company has already completed the necessary environmental spring surveys for the additional land and is working to determine the optimal size for Stage 2. Based on land availability, Kiley indicated that Stage 2 could be at least twice the size of Stage 1.

"We're working now in the background to identify how big that project can be, but if you do just do rough maths overall, you're probably looking as a bare minimum twice the size of a stage one in that expansion stage thereafter."

The timing of this expansion aligns strategically with Western Australia's energy transition. With coal currently providing 30% of the state's energy and scheduled to be phased out by 2029, Frontier Energy sees an opportunity to fill this supply gap with renewable energy backed by battery storage.

New Leadership & Industry Expertise

Frontier Energy recently appointed Guy Chalkley as Chairman, bringing valuable energy sector experience to the board. Chalkley previously served as CEO of Western Power, the utility responsible for power distribution in Western Australia, and is currently CEO of Endeavor Energy, a large distributor in Sydney.

"When we commenced the search, we wanted someone with energy experience, but not just energy experience, specifically West Australian energy experience. Given his experience across Western Australia and then the broader Australian energy industry experience overall, we were really delighted to get Guy on board."

This appointment strengthens Frontier Energy's leadership team at a critical time as they advance their strategic investor discussions and project development plans.

Market Dynamics & Timing Advantages

Frontier Energy believes they are entering the market at an optimal time. Western Australia faces unique energy transition challenges compared to Australia's east coast. Unlike the eastern states with abundant coal resources, Western Australia has limited coal reserves, with approximately 75-80% of the state's coal power owned by the government and scheduled to be decommissioned between now and 2029.

This creates an energy supply gap that Frontier Energy is positioned to help fill. Additionally, grid limitations restrict how quickly new renewable energy projects can be developed in the region, giving Frontier an advantage with their already approved connection points on major transmission lines.

"We're hitting that market at the absolute sweet spot. It's just delivery on a stage one and then a move through to a stage two thereafter.”

Project Timeline & Next Steps

Frontier Energy is maintaining its timeline to begin production by October 2027. The immediate focus is on finalizing their strategic partnership, which will then facilitate debt financing arrangements. The company aims to move quickly from Stage 1 to Stage 2 development, potentially within 12 months of reaching Final Investment Decision (FID) on Stage 1.

"The key for us overall is going to be getting this financing completely done, locked up, having a strategic partner come through. Obviously, that will be the big, big rerating event for this company because then it's not the theory of this potential... it will be ‘this is going to happen now’." 

The company sees 2025 as a pivotal year where they transition from planning to execution, with attention quickly shifting to the larger Stage 2 expansion once Stage 1 financing is secured.

The Investment Thesis for Frontier Energy

• Government-Backed Revenue Floor: The 15-year Capacity Investment Scheme (CIS) contract provides a guaranteed revenue floor, reducing downside risk for investors and making debt financing more accessible.
• Strategic Partner Value-Add: The incoming strategic partner will likely bring advantages beyond capital, including preferential equipment pricing, better financing terms, and operational expertise.
• Perfectly Timed Market Entry: Frontier's production timeline (late 2027) aligns with Western Australia's coal phase-out (2029), positioning the company to help fill a significant energy supply gap.
• Expansion Already Secured: With 820 hectares of land (only 300 used for Stage 1), environmental surveys completed, and grid connection points secured, Frontier has a clear path to at least double the project size.
• Limited Competition Due to Grid Constraints: Western Australia's grid limitations restrict new project development, giving Frontier an advantage with their already approved connection points.
• Hybrid Energy Strategy Maximizes Revenue: The combined solar-battery approach allows the company to charge batteries during low-price periods and sell during peak demand, optimizing revenue potential.
• Strong New Leadership: The appointment of Guy Chalkley as Chairman brings valuable West Australian and broader energy sector expertise at a critical time in the company's development.
• Significant Rerating Potential: Securing a strategic partner and finalizing project financing would transform Frontier from a speculative renewable developer to a funded project with clear path to revenue.

Macro Thematic Analysis:

Western Australia faces a distinctive energy transition challenge compared to the rest of the country. While Australia's east coast operates on the National Electricity Market (NEM), Western Australia has its own isolated grid called the Western Australian Wholesale Electricity Market (WEM). This isolation creates both challenges and opportunities for renewable energy developers like Frontier Energy.

Currently, coal powers approximately 30% of Western Australia's electricity. Unlike the eastern states, Western Australia has limited coal resources, with 75-80% of coal power generation owned by the state government. This coal capacity is scheduled to be decommissioned between 2025 and 2029, creating a substantial energy supply gap that must be filled.

Simultaneously, the Australian Market Operator (AMO) forecasts a 53% increase in electricity demand over the next decade, further widening the supply-demand imbalance. Grid limitations present another critical factor, as the existing infrastructure cannot accommodate unlimited new renewable projects without significant upgrades.

These converging factors create what CEO Adam Kiley describes as "the absolute sweet spot" for Frontier Energy's market entry timing. With their hybrid solar-battery project scheduled to come online just as coal generation is being phased out, and with grid connection points already secured, Frontier is positioned to capitalize on higher energy prices during this transition period.

As Kiley explains:

"We know within this state there are limitations for large projects like ourselves to come through in the very near term... There's going to be an energy gap. This is what's been identified by these groups. This is why these groups are very interested in what it is, the potential that we have at the moment."