Alterra secures long term income stream in Alinta deal
Listed agricultural asset developer, Alterra, has signed a property rights agreement for its high quality Dambadgee Springs agricultural land in Western Australia that could see $2.5 million flow into the company’s coffers over the next 25 years.
The agreement, which is essentially an agreement between neighbouring landholders, will allow Yandin WF, a joint venture between WA power utility, Alinta Energy and the RATCH Group, to construct and operate wind turbines at their $400 million Yandin wind farm on neighbouring land in the shire of Dandaragan.
With its fifty one 4.2 megawatt turbines that are scheduled to be completed by mid 2020, Yandin will become WA’s largest wind farm.
Under the terms of the agreement, Alterra will start receiving payments this month, which should significantly add to its market value – particularly given the length of the agreement.
Alterra is currently considering selling its Dambadgee Springs property and is expected to make a decision regarding the possible sale in the first quarter of 2020.
The Perth based ASX listed company originally bought the 1,600 hectare Dambadgee Springs property in March 2017 for $4.2 million with a view to doing some due diligence on its suitability for a new style of dairy known as a system 5 dairy.
Whilst due diligence suggested the project could work, the risks, including unfavourable milk market conditions and the WA processors’ reluctance to commit to long term take-off agreements meant that the company has now pivoted its business model towards a co-investor and management model of developing land for produce like avocados.
During December 2018, Alterra demerged its existing carbon business and with new Managing Director, Oliver Barnes, focussing since then on working with landowners to turn under-used agricultural land and water assets into investment-grade agricultural assets suitable for institutional ownership.
In addition to its historic use for dryland cropping and grazing, the Dambadgee Springs property has characteristics that could support a number of other developments according to Alterra management including horticulture, permanent tree crops, intensive livestock enterprises and carbon farming.
Under the terms of the agreement no wind turbines will be located on Alterra’s ground which is curious given the $2.5m, 25 year income stream its management team has just secured from one of Western Australia’s toughest negotiators, Alinta Energy.
The property is currently leased for dryland cropping and grazing for $210,000 per annum, generating a passive yield of 5%, excluding the additional income to be generated by the latest agreement.
Alterra Managing director Oliver Barnes said: “We are pleased to have reached an agreement that addresses the commercial imperatives for both the Yandin wind farm and Alterra, and in doing so will deliver value to both parties and the wider community.”
"This agreement concludes Alterra’s initial phase of property improvements. The company will, in light of its new business model, consider the asset’s strategic fit moving forward, which includes potentially selling the asset in order to redeploy capital into near term growth opportunities.”
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