"A necessity": Why WA's Cannaponics is going off the grid

As Cannaponics founder Rod Zakostelsky steers the Perth-based medicinal cannabis company into an initial public offering (IPO), he's also doubling down on its  renewable energy strategy moving the company off the grid at a new facility in Collie, where construction is currently underway.

It's expensive, labour-intensive, and a little unorthodox. So will investors see green?

When Zakostelsky founded Cannaponics back in 2016, he wasted little time in shoring up supplies with renewable energy.

Operated through subsidiary CannaEnergy, he explains a self-reliant power system has been a major driver of the company's succes to date. Now, he's expanding on that vision with a new build - a 160-acre site in Collie, 200 clicks south of Perth.

Cannaponics has been carbon-neutral almost from the get-go but, with the latest move, Zakostelsky will achieve his dream of shifting off the grid entirely. Electricity will be provided by a 25,000-square-metre solar and hydrogen gas turbine plant, complete with advanced rainwater harvesting technology.

"This movement is more than just a phenomenon, it is a necessity," he tells Business News Australia.

Even as Cannaponics sails into a $15 million pre-IPO, Zakostelsky is adamant this green business model won't be scrapped once the company answers to investors.

"The company's core values are people, planet, and profit. But importantly, this sustainable strategy also brings down our COGS (cost of goods sold) and let us release better-quality products. It's all about the shareholders too."

Plans to sell the surplus onwards through subsidiary CannaEnergy, Zakostelsky said, should quell any doubts the renewable model paves the way forward for the company. 

"We already have offtake agreements for that energy for example, we have an MoU (Memorandum of Understanding) with a company called DC Two, an AI data storage company," he said.

The strategy has the added benefit of leaving Cannaponics free from reliance on the nearby Collie Power Station, which has at times lapsed into blackouts due to bushfires, causing friction at the state political level.

"We'll be bringing in a hydroplane which will power our hydro-powered turbines, and it'll also provide backup power we need to run the facility during blackouts."

"In terms of water there's plenty of it in Collie, but it's filled with salt after the mines decimated the water table," he said.

"Even in terms of the desalination plant, for every litre of water processed 30 per cent has to be pumped back in the ocean. So instead, we're planning to harvest rainwater. While we'll only need 11 million litres of water in stage one, for plant growth, our technology allows for as much as 32 million."

The challenge, Zakostelsky said, was to lower profits without compromising on quality.

"We need to be able to compete, price-wise, with Colombia and some African countries. Yet, at the same time, we're building an EU GMP (good manufacturing practices) compliant manufacturing facility, which allows us to export into into Europe and other parts of the world," he said.

Aside from the drive towards renewables, Zakostelsky plans to meet those challenges head-on through upscaling. The Collie site is set to include a 3,600 square metre greenhouse, due to be finished by the end of the year, as well as a 2,000-square-metre manufacturing hub set to be completed in mid-2022.

An on-site tourism centre might also help reinvigorate the once booming South West town. With the local coal plant set to shutter at some point in the next five to ten years, he estimates around 1,200 jobs will be lost in Collie - a town of just 7,000.

"There'll be a lot of jobs that are going to be obsolete in the next five to 10 years," he said.

"But stage one, that's construction alone, will create fifty jobs, plus twenty-four permanent jobs moving beyond that."

This spurred investment from State government backers, who sunk $2 million into the project after Zakostelsky last year approached Minister for Regional Development Alannah MacTiernan for a smaller grant.

While the idea for the Collie site came to Zakostelsky alone, he said his team had been instrumental in making this light bulb moment a reality.

"It's crucial to have a very strong board in this space, since there's so much compliance work to do," he said.

"Chief operating officer Damian Wood, for example, has worked for 20 years as an industrial pharmacist in the past, he's built manufacturing facilities and had a close relation to all the regulatory assets that we needed to get this project off the ground."

The earthworks contract has been awarded to local Collie business T & R Contracting, partnering with Donnybrook Civil Earthmoving Contractors, while the deal for the build has been closed by Perth-based Ballpoint Construction Group.