Waroona Energy : News release

Announcement

02 August 2023 | TSX:WHE

Advancing the Waroona Solar Energy Project towards

a shovel ready position

Waroona Energy Inc. (TSXV: WHE) ("Waroona" or the "Company") is pleased to provide an update on the Company's flagship Waroona Solar Energy Project (the "Project") in Western Australia. The Projectis significantly advanced with all major permits and approvals in place.

The Company aims to finalise all outstanding aspects for the Project's development in the coming months, including a fixed price capital cost estimate, to put the Project in a "shovel ready" positionbefore the end of 2023.

HIGHLIGHTS

• The Company continues to advance the development of its Solar Project as it prepares for it to be in a "shovel ready" position before the end of 2023
  o All major permits, approvals and a connection to the WA electricity network (213MWac DSOC) are in place
• A preferred EPC contractor will be selected and tasked with finalising the design, size and technology for the Project. This will result in a fixed priced capital cost estimate for Project construction
• Modelling1 has indicated the average solar price the Project would have received in the past 12 months was approximately A$66/MWh (38% increase compared to the previous year). This price excludes revenue from Large Generation Certificates (LGC) and from reserve capacity payments
  o LGCs are essentially Australian carbon credits and currently trade at approximately A$55 each
  o Reserve capacity payments are payments made by the Market Operator (AEMO)_to electricity generators to ensure there is sufficient generation capacity available in the South West Interconnected System ("SWIS"). The benchmark reserve capacity price for 2025/26 onwards is currently A$193,400 per MW

Adam Kiley, President and CEO, said: While the Company continues to progress the Green Hydrogen Peaking Plant Study, the development of our Solar Project is by far the most critical asset in the Company. Without this, neither the potential for green hydrogen (which requires renewable energy)nor the Peaking Plant (requires hydrogen) are possible.

Importantly, all key permits, approvals and most importantly, a grid connection for the Solar Project are already in place, which have taken years to finalise. The design, size and technology selection for the Solar farm will be finalised over the coming months with a preferred EPC contractor. This will include a final capital cost estimate for the Project's development. This will mean all aspects for thedevelopment of the Project will be in place allowing for construction to commence in 2024.

1 - Dynamic modelling (10 years of historical solar data for the region * 12 month historical energy price for WA - Source - AMEO)

Level 20, 140 St Georges Terrace, Perth, WA, 6000

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Advancing the Solar Project towards a shovel ready

position

The Waroona Solar Project is located 120km south of Perth, and 7 km from the town of Waroona in Western Australia. The Solar Project is located on 300 hectares of freehold land, which is flat and predominantly cleared, meaning limited cost barriers for earthworks preparation will be requiredprior to construction.

Image 1: Northeast boundary of the Project with adjacent Landwehr power terminal

The Project is close to all essential major existing infrastructure (Image 2), most notably the Dampierto Bunbury Natural Gas Pipeline (DBNGP) and the Landwehr Terminal, the major connection point into the Western Australia electricity network (South West interconnected System - SWIS). Both are lessthan 500m from the Project boundary.

Connection to the WA Electricity Market

The Company holds both an executed Electricity Transfer Access Contract (ETAC) and Interconnection Works Contract (IWC) with Western Power. This means that once constructed, the Project will beconnected to the SWIS and electricity can be delivered into the Wholesale Energy Market (WEM).

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Image 2: Project location in relation to key infrastructure

All major permits and approvals in place

All major approvals to commence constructing and operating the Project are in place. These include:

• Development Approval in accordance with WA Planning and Development Act 2005;
• Referral of a Proposed Action (Not a controlled action) in accordance with Commonwealth Environmental Protection and Biodiversity Conservation Act 1999 (Commonwealth);
• Native Vegetation Clearing Permit in accordance with WA Environmental Protection Act 1986; and
• No Native Title as the property is freehold land. A desktop heritage assessment was undertaken during the Development Assessment approval process and no known Registered Aboriginal Heritage Sites were identified within the Project area.

Final preparation for a shovel ready project - Early Works

The Company is in the process of finalising an EPC contractor to complete the early works for the Project. This will put the Project in a shovel ready position prior to the end of this year. This work willinclude:

• Topographic survey;
• Geotechnical investigations (including Soil Thermal Resistivity Tests);
• Dynamic Penetration Test (PANDA);
• Hydrology Study;
• Corrosion Study;
• Pile Load Test;
• Conceptual Engineering; and

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• Draft Construction Program.

At the completion of this work, the EPC contractor would also provide a fixed price contract for the construction of the Project.

Previous studies estimated the Project would generate 241MWdc, utilising all of the current landholding (300 hectares). This however did not allow for the construction of a dual fuel green hydrogen peaking plant (Peaking Plant) nor a green hydrogen production facility (electrolyser). Both will ideally be located on existing landholding, due to its proximity to essential infrastructure. This update in the Project size will be incorporated into the early works program. A layout of the proposedsite is highlighted below.

Image 3: Proposed Waroona solar farm, peaking plant and hydrogen facility layout

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Electricity Market Update

Pricing Mechanisms and current market prices

The Wholesale Electricity Market (WEM) in Western Australia consists of two key components:

• Wholesale market - where market participants interact to supply and purchase electricity. The average electricity price on the WEM has increased significantly during the past 12 months (from an average price of A$57/MWh to A$85/MWh2, annualised basis).
  o Solar - Based on market data the average energy price received during the past 12 months for solar generation would have been A$66/MWh. This is a 38% increase compared to the previous 12 months (A$48/MWh).
  o Peaking Plant - Peak periods (4pm - 9pm) the Company aims to dispatch energy during high price periods through its proposed Peaking Plant. During peak periods the average price increased to A$122/MWh over the past year, a 48% increase compared to the previous 12 months (A$82/MWh).
• Reserve Capacity Credits3 - capacity payments are payments made by the Energy Market Operator to electricity generators to ensure there is sufficient generation capacity in the SWIS. The benchmark reserve capacity price for 2025/26 is currently A$193,400/MW4 and can be secured for five years, which can support prospective debt financing (fixed price and term). As solar energy is intermittent, it is probable a discount factor of around 25% would be applied to this amount. However, with availability of a peaking plant, no discount factor would be applied.

In addition, renewable energy producers in Australia with accredited power plants may create LGCs. This is effectively a government backed carbon credit. One LGC can be created per MWh of eligible electricity generated by a power station. The price of an LGC is currently around A$55 per unit and ranged between A$40 and A$68 over the past 12 months.

Figure 4 below compares the most recent quarter's electricity prices to previous June quarters (to remove seasonality effects), as well as the March 2023 quarter (to demonstrate the most recent trend).

1. http://data.wa.aemo.com.au/#balancing-summary
2. https://www.erawa.com.au/cproot/23061/2/Notice---Benchmark-Reserve-Capacity-Price-2025-26---Publication-of-Final-determination.pdf
3. https://www.erawa.com.au/cproot/23058/2/-BRCP.2023---2023-benchmark-reserve-cap_e-for-the-2025-26-capacity-year---Final-Determination---for-publication-clean-.PDF

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