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Red Sky feasibility demonstrates viability of solar power project in NSW

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Red Sky Energy (ASX:ROG) has demonstrated the viability of constructing a 2.5 megawatt photovoltaic solar power project in Dubbo following a feasibility study that showed project internal rate of return between 15% to 23%.

The returns on the SOLEIR project are against a capital cost of $4.4 million with operating costs estimated at $37,000 per year rising to $67,000 per year in year 10.

A project life of 35 years was assumed in the Feasibility Study.

The expected returns are in line with development risks and the project is likely to be competitive with large-scale wind projects.

The Dubbo Solar One Project will use proven technology, comprising polycrystalline PV panels of approximately 15% efficiency. The project configuration is “fixed tilt”, whereby the rows of PV panels run east-west across the site and are permanently fixed in place to tilt north.

The capital cost estimate of $4.4 million comprises 85% supply items such as PV panels, inverters, support structure, transformers, switchgear, cabling and 15% installation costs.

The project revenue is a combination of the sale of electricity and sale of Large scale Generation Certificates (LGCs) as per the federal government's target of requiring renewables to provide 20% of electricity supply by the year 2020.

The Dubbo Solar One Project requires only five hectares, which is a significantly small portion of the total 24.9 hectares under lease. The site could ultimately accommodate an expanded project, of up to 12 MW.

The funding structure also provides for a unitised ownership to allow individuals to invest in the project.

The feasibility assumed 65% of the project is sold upon completion of construction to individual sophisticated investors, providing them with a relatively steady income over the project life with no development risk.

The funding structure is going through a regulatory approval process while grid studies are expected to be completed shortly.

It is proposed to have the first module of the Dubbo Solar One Project installed by mid year, with the remainder completed over the following nine months.

Red Sky acquired solar energy company, SOLEIR last November to broaden its energy business into the development of utility scale solar projects.

SOLEIR is a developer of utility scale PV solar power projects, and its first project is in the major regional city of Dubbo in central NSW.

Red Sky had a cash balance of $1.11 million at the end of last quarter.



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