The ASX stock quietly charging up

Many investors like the idea of clean energy but are unsure where the investment return comes from. A solar farm may be good for the environment, but does that automatically make it a good investment? Of course not. What counts is whether the business can build its project, sell something customers need and earn enough money to reward shareholders. That is why Frontier Energy (ASX: FHE) stands out to us. Its Waroona project in Western Australia is no longer simply a proposal. Work has started, major construction contracts are signed, and a new announcement has lifted expected yearly payments for keeping electricity available. At recent share prices, we think the opportunity is compelling enough to call Frontier a buy.

What does Frontier actually do?

Frontier is building a large solar farm and battery near Waroona, about 120 kilometres south of Perth. The solar panels will make electricity when the sun shines. The battery can store electricity and send it into the power grid later, including during busy evening hours when households and businesses need it most.

The first stage includes a 132-megawatt solar farm and a battery capable of delivering up to 81.5 megawatts for around 6.9 hours. A megawatt describes how quickly power can be supplied. You do not need to be an electricity expert to see the attraction: power that can be delivered when people need it is more valuable than power that can only be produced at midday. It is also a practical way to help a grid use more renewable energy.

Why we favour the investment

The biggest difference between Frontier and many early-stage clean-energy companies is that Waroona is moving towards becoming an operating business. Frontier raised $110 million from investors, arranged credit-approved underwriting for debt facilities of up to $280 million, and signed fixed-price contracts for the major construction and equipment work. Site teams arrived in September and the company expects the first electricity to be produced in 2028.

Waroona is also close to an existing high-voltage electricity connection. That may sound like a small detail, but building and connecting major energy projects can be slow and expensive. Frontier has already secured unconditional connection arrangements for the first stage. These are meaningful advantages. The debt facilities still need final documentation and conditions to be satisfied, so it would be wrong to treat every funding milestone as complete.

The $36 million reason to pay attention

Frontier will earn money in two main ways. First, it expects to sell electricity. Second, Western Australia has a system that pays approved power projects to be ready to supply electricity when the grid needs it. Think of the second payment as being paid for having dependable power available, not just for the electricity actually sold.

On 21 October, Frontier announced that the amount of capacity recognised by the market operator had increased. The result was an upgrade to expected annual capacity payments from around $32 million to $36 million. The agreed price for those capacity payments is fixed until September 2032, provided the project is built and meets its obligations. This is a major reason we like the business: Frontier is not relying only on guessing future electricity prices. A separate federal scheme also offers some limited protection against low battery revenue, subject to conditions.

Management now forecasts around $76 million of annual sales, $66 million of annual earnings before financing and tax, and $38 million in annual cash flow after modelled loan payments and tax. These are average forecasts from the planned start of generation in 2028 to September 2032, not profits Frontier is earning today. 

Source: FHE ASX Announcement - Revenue upgrade following reserve capacity uplift 21 October 2026

Why the timing looks attractive

There is a sizeable gap between what Frontier earns today and what its first power project could earn once completed. That gap creates risk, but it is also where investors can find opportunity. At the last share-price close 17.5 cents on 26 October 2026, Frontier was valued by the market at roughly $200 million. Compare that with the company’s forecast of $38 million a year in project cash flow once operating. The figures are not directly interchangeable, because the cash flow comes later and company-level costs and future spending still count. They nevertheless illustrate why we believe the potential upside deserves serious attention.

Investors are being asked to take construction risk today in exchange for the possibility of owning a long-life power business with substantial recurring income later. We think that trade-off is attractive, especially after several major development hurdles have already been passed.

Good for the grid and the environment

Environmental investing need not mean accepting lower returns. In our view, the strongest opportunities are businesses where a useful environmental result and a commercial need reinforce each other. Frontier is a good example. Western Australia needs power that can meet demand as older coal-fired plants retire. A solar farm adds electricity without burning fossil fuels while operating, and a long-duration battery helps make that electricity more useful during the evening.

This environmental benefit should become measurable. Once Waroona is operating, investors can track how much electricity it produces, how the battery performs and how much higher-emissions generation it may displace. We should not claim that emissions have already been avoided on a verified basis: the plant is still being built, and equipment manufacture and construction also have environmental impacts.

Source: FHE Investor presentation 02 September 2026. Underlying source: AEMO data.

There could be more after Stage One

Frontier owns around 830 hectares of land near its grid connection, with only part needed for the first development. It is planning a second solar-and-battery project of similar size. On 15 October, the electricity network operator allowed Stage Two to move into the next stage of its connection assessment. Importantly, a later stage may be able to share some of the costly infrastructure already planned for Stage One.

That offers an additional reason to own the shares, but we are not counting the second project as a certainty. It still needs further approvals, commercial arrangements and funding.

Further to the above, electricity demand from data centres is forecast to almost triple between 2023 and 2030. This creates a potential growth opportunity for electricity generators, including renewable energy developers such as Frontier.

Source: Frontier Energy Investor Presentation, 02 September 2026 (citing IEA and S&P Global).

The risks are real, but so is the opportunity

Frontier has not yet become an operating power producer. Delays, unexpected building costs, equipment problems, lower electricity prices or changes to future capacity payments could reduce returns. Its existing capacity payment price becomes variable after September 2032, and the company must keep meeting performance conditions. There is no guarantee management’s forecasts will be achieved.

These are the reasons to treat FHE as a speculative investment, not a defensive income stock. But they are also why investors have an opportunity to buy before the power plant begins generating cash.

Our call: Buy

We believe Frontier Energy is one of the more compelling listed opportunities to invest directly in new renewable electricity infrastructure. It offers a tangible solar-and-battery project, meaningful government-backed revenue protection, construction underway and an expansion opportunity beyond the first site. Just as importantly, its environmental benefit comes from what the business is being built to do, not from a marketing label.

For investors comfortable with construction risk and a multi-year horizon, our view is clear: FHE is a buy at the recent price around 18 cents. We would rather assess this opportunity while the asset is being built than wait until all its potential cash flow is obvious to the market. Financial close, construction progress and the first electricity sales in 2028 remain the milestones that will test our conviction.

Disclosure of interests

The EnviroInvest Investment Fund currently holds shares in Frontier Energy Limited (ASX: FHE).