Renewable Energy Generation Ltd
19 February 2008
Press Release
19 February 2008
Renewable Energy Generation Limited
("REG" or the "Group")
Interim Results for the six months to 31 December 2007
A period of robust growth in strongly expanding markets
Renewable Energy Generation Limited (AIM: RWE), the international renewable
energy group, today announces its interim results for the six months ended 31
December 2007.
Operational Highlights
Strong revenue growth from UK wind energy assets; five operating UK
sites generated 12,800MWh
New power purchase agreement with Smartest Energy Ltd to March 2009
for UK wind portfolio
Construction of 40MW in Canada nearing completion; on track for
commissioning during the first quarter of 2008
Turbines secured for Whittlesey and Ramsey wind projects in the UK
New Bentwaters used cooking oil project nearing commissioning
Recycled capital through the sale of Polish Tymien wind projects for
£10 million
£30 million credit facility secured with HBOS
Purchase of REG's management company for £1.6 million
Appointment of David Crockford as Finance Director
Financial Highlights
Group revenue of £1.25 million (H1 2007: £0.5 million)
Net loss narrowed to £0.5 million (H1 2007: £1.2 million)
Capital expenditure of £30.0 million (H1 2007: £19.5 million)
Proposed dividend of 1p per Ordinary Share (H1 2007: 1p)
Andrew Whalley, Chief Executive Officer of REG, commented:
"The first half of the year has been one of strong growth both in operating
assets and in projects under construction. Continuing the trend that started in
the second half of the previous financial period, we have demonstrated a track
record of delivery by building one new wind project on average every six weeks
over the last year. We estimate we will have over 60 megawatts of operational
generation and over 4,000 megawatts of projects in our pipeline by the end of
the current financial year. We look forward to a further productive period in
the second half."
A presentation to analysts will be held today at 9:30am at the offices of Numis
Securities, The London Stock Exchange Building, 10 Paternoster Square, London
EC4M 7LT. If you would like to attend, please contact Poppy Wonnacott at Hogarth
on 020 7357 9477.
Contacts:
Renewable Energy Generation Tel: 01483 400 444
Andrew Whalley, Chief Executive Officer
David Crockford, Finance Director
Numis (Nomad for REG) Tel: 020 7260 1000
Charles Farquhar / Anthony Richardson
Hogarth Partnership (PR for REG) Tel: 020 7357 9477
Sarah MacLeod
Julian Walker
Vicky Watkins
Notes to Editors
Renewable Energy Generation Ltd (REG) is a world-leading renewable energy group.
The Group's main business is the development, ownership and operation of wind
farms in the UK and Canada. It also generates power from refined used cooking
oil in the UK.
The Cornwall Light & Power Co. Ltd: based in Cornwall, UK, it currently
operates five wind projects in Cornwall, County Durham, Cumbria and Gwynedd,
with a total capacity of 17.7MW and has a development pipeline of around 200MW.
AIM PowerGen Corporation: based in Toronto, Canada, AIM PowerGen
Corporation is one of Canada's largest independent wind developers and has a
pipeline of over 4,000MW of potential wind projects across seven provinces.
REG Bio-Power UK Ltd: based in Norfolk, UK, it operates electricity
generation plant fuelled by refined used cooking oil.
Headquartered in Guernsey, REG was admitted to trading on the Alternative
Investment Market ("AIM"), a market operated by the London Stock Exchange in
May 2005 (AIM: RWE).
www.renewableenergygeneration.co.uk
Renewable Energy Generation Limited
("REG" or the "Group")
Interim Results for the six months to 31 December 2007
Introduction
REG is principally a developer, owner and operator of wind energy projects. In
the six months to 31 December 2007, the Group made good progress in the UK and
Canada - its two principal countries of operation and prime markets for
renewable energy generation. Together, the two markets provide the
complementary characteristics of strong profitability in the UK from sites with
good wind exposure and favourable incentive schemes and in Canada, a more
sympathetic planning system and access to long-term Power Purchase Agreements ("
PPAs"), which are well suited to long-term debt financing. By focusing on the
entire value chain from the acquisition of sites through to the development and
operation of assets (as opposed to acquiring assets already in operation), REG
believes that it can generate superior returns for shareholders.
In the UK, REG develops small projects of up to 10MW in size, and has five
operating wind farms totalling 17.7MW of capacity. It also owns a portfolio
totalling over 200MW at various stages of development. In Canada, REG is one of
the largest wind developers with 70MW of wind projects under construction and a
development portfolio of around 4,000MW.
The Group's investment in utilising used cooking oil to fuel diesel generators,
as a means of diversifying the revenue stream and enhancing the earnings
profile, is progressing well and we anticipate significant expansion of our
activities in this sector going forward.
Review of Operations
UK
During the first half year, REG's UK business benefited from continued high
energy prices, good production from its established wind farms, the timely
commissioning of its most recent project and good progress with the development
of the next tranche of its sites.
The Group now operates 17.7MW of capacity at five wind farms - Goonhilly Downs
and Roskrow Barton in Cornwall, High Sharpley in County Durham, High Pow in
Cumbria and Braich Ddu in Gwynedd. Wind farms totalling a further 25MW of
production capacity are in late-stage development at several sites in County
Durham, Cambridgeshire, Yorkshire, Powys and Lincolnshire and the Group is
progressing a further pipeline of over 200MW.
The two 850kW turbines erected at Roskrow Barton, our second site in Cornwall,
are now operational. Construction of this wind farm was completed in just four
months, on budget and on schedule. With good exposure to wind and short (and
therefore, inexpensive) electrical connections, Roskrow Barton represents a
typical example of the 24 development projects acquired from nPower under the '
Wind Works' acquisition in September 2005.
During the first half year, REG submitted a number of planning applications for
site development. Among them was the proposed re-powering of the existing farm
at Goonhilly in Cornwall, the UK's most southerly wind farm. Application was
made after a successful consultation with the local community, and the intention
is to increase the current capacity from 5.6MW to 15MW - providing enough energy
to supply over 7,000 homes.
In Cambridgeshire, two 1.8MW Vestas V90 turbines have been ordered for projects
at Whittlesey and Ramsey. The machines are expected to be delivered to site in
Summer 2008 and are expected to be operational in Autumn 2008.
All of the Group's operational UK wind projects now operate under a new PPA with
Smartest Energy Ltd, part of the Marubeni Group of Japan. Extending to Spring
2009, the PPA reflects market expectations for continued high prices for
wholesale electricity. We expect our projects to earn a total of more than £100
per MWh, peaking in the high output winter months. In accordance with the
Group's demonstrably successful strategy, Renewable Obligation Certificates
generated will continue to be sold separately from physical power on an
opportunistic basis to take advantage of best pricing.
UK Cooking-Oil-to-Power
The Group's first 400kW used cooking oil power plant at Hockwold in Norfolk is
running continually, with impressive fuel efficiency. Development of the new
large 12 unit, 6MW facility at Bentwaters in Suffolk is progressing to plan,
with the first generators already installed. All commissioning and testing is
planned to be completed during March 2008. We are consolidating our early-mover
advantage in this sector, which enjoys strong Government policy support and
offers rapid investment pay-back.
A five-year initiative established with Norfolk County Council in December 2007
to site waste oil collection bins across the county is an example of the
diversity we are pursuing in our fuel supply arrangements.
Canada
REG's Canadian business has also made good progress during the half year,
developing existing projects and targeting future growth opportunities.
The Canadian Standard Offer Programme ("SOP") awards 20-year, partially
index-linked power purchase agreements with Ontario Hydro, the provincial
utility, to developers able to satisfy rigorous build and interconnect criteria.
This initiative is designed to stimulate the construction of small - 10MW or
under - wind energy projects connecting to the local distribution grid at low
voltage. Hence it is similar in nature to our UK projects which benefit from the
relative simplicity of connection to the local, rather than the national, grid.
Construction of the Group's first four SOP projects at Clear Creek, Cultus,
Frogmore and Mohawk, totalling 40MW of capacity, is nearly complete. These
projects are on track to commence operation in the first quarter of 2008. It is
our strategy to refinance our Canadian assets with long term debt once built.
Refinancing negotiations are taking place with leading commercial banks and this
process is expected to be concluded before the Group's year end in June 2008.
With interest rates currently favourable in Canada, equity returns are likely to
be at or above the Board's original expectations.
Construction of three further 10MW SOP projects is scheduled to start in the
third quarter of 2008, with subsequent commissioning scheduled for the first
half of 2009. Turbines have already been secured for these projects.
Provincial utilities generally procure power in Canada using the Request for
Proposals ("RFPs") mechanism. These RFPs are typically used for very large
projects of around 100MW in size, and the Group has been shortlisted on one such
project into the Manitoba RFP in an arrangement with The General Electric
Company. An announcement of the winning bids is expected in the first quarter
of 2008.
The Group has started work on bid submissions into the Ontario RFP totalling
500MW and proposals are required to be submitted to the provincial utility
before 31 March 2008. As the most prominent wind developer in Ontario, REG is
likely to bid multiple projects into this RFP. Announcement of the winning bids
is likely in the third quarter of this year.
The Board
David Crockford was appointed to the Board as Finance Director with effect from
4 December 2007. David began his career as a Chartered Accountant with Deloitte
where he gained 10 years of experience in private and public sector business.
Following this, David moved overseas to work in the international petroleum
sector where he was based in the UK and South America. Prior to his appointment
at REG, David was Chief Financial Officer of Duchy Originals Limited, the
organic food company founded by HRH The Prince of Wales.
Other than the directorships disclosed above, the Group confirms there is no
further information required to be disclosed under Schedule 2(g) of the AIM
Rules for Companies.
Financial Results
Group revenue increased by 148% to £1.25 million (H1 2007: £0.5 million), with
the Group's five operational wind farms generating 12,800MWh in the six month
period.
Loss after tax narrowed to £0.5 million (H1 2007: £1.2 million) as more
development projects became operational.
Following the Group's acquisition of REG Power Management ("RPM"), its
management company, for £1.6 million in cash, announced on 4 December 2007, all
management arrangements between REG and RPM have now ceased with the Group's
financial investment management segment now reported as a discontinued
operation. The cessation of management and finders' fee payments to RPM should
result in material cash savings to REG by de-coupling administration costs from
the expected strong growth in installed power generating capacity.
A profit of £1.4 million was recognised from the sale of our investment in the
Polish Tymien wind project for a cash consideration of £10 million. REG no
longer has any activity or interests in Central Europe.
Investment in the Group's used cooking oil business was £1.8 million in the
period, through acquisitions and capital expenditure on our 6MW project at
Bentwaters.
Capital expenditure on wind projects in the period totalled £30 million, with
£26 million being spent on the first four Canadian SOP wind farms, and the
balance of £4 million being allocated for the continuing build-out of the UK
pipeline, including Roskrow Barton.
During October 2007, REG secured a £30 million revolving credit facility with
the Bank of Scotland allowing the Group to continue its strategy of on balance
sheet financing of its wind projects in the UK and Canada.
The Group moves into the second half of the financial year with a strong balance
sheet showing £98.8 million of net assets and a portfolio of cash generative
assets expected to exceed 60MW of generating capacity by the financial year end.
Dividend
In line with our existing dividend policy, the Directors propose the payment of
an interim dividend of 1p per Ordinary Share.
Outlook
To date the Group has placed turbine contracts for 13 projects and the majority
have been negotiated for delivery within 12 months from the contract being
awarded - a demonstration of the Group's continued operational flexibility and
strategic use of capital to accelerate growth, and a testament to management's
entrenched industry relationships.
In the past 12 months, REG has initiated construction on eight wind projects
with a total capacity of 51.7MW. Once the final Canadian SOP project has been
connected in the second quarter of 2008, the Board believes that REG will be
generating significant EBITDA and will have multiple opportunities to build
further capacity and refinance existing projects. Additionally, the new used
cooking oil business is anticipated to build further generating capability,
providing a cost effective solution to large corporates seeking to procure green
energy.
The current period has been one of strong growth both in operating MWs and in
projects under construction. The UK and Canadian wind markets are now expanding
rapidly and the Board believes that the Group is well positioned to take
advantage of the many opportunities it has for increasing shareholder value.
Unaudited interim consolidated income statement
For the six months to 31 December 2007
Six months to Six months to
Continuing Dis-continued 31 December 31 December Year to
operations operations Acquisitions 2007 2006 30 June 2007
£ £ £ £ £ £
(un-audited) (un-audited) (audited)
Revenue 1,218,024 - 26,487 1,244,511 502,222 1,443,003
Cost of Sales (645,009) (344,278) (26,478) (1,015,765) (599,976) (1,669,967)
Gross profit/(loss) 573,015 (344,278) 9 228,746 (97,754) (226,964)
Administrative (1,880,857) - (15,585) (1,896,442) (1,125,440) (2,165,491)
expense
Development costs (1,150,780) - (81,134) (1,231,914) (399,149) (1,838,260)
Share of results of
associate - - (1,000) (1,000) - -
Group trading loss (2,458,622) (344,278) (97,710) (2,900,610) (1,622,343) (4,230,715)
Profit on sale of
investments - 1,444,319 - 1,444,319 - -
Other income 30,195 - - 30,195 (47,485) 881,510
Group operating
profit/(loss) (2,428,427) 1,100,041 (97,710) (1,426,096) (1,669,828) (3,349,205)
Finance revenue 740,653 - 965 741,618 492,018 1,629,229
Profit/(loss)
before tax (1,687,774) 1,100,041 (96,745) (684,478) (1,177,810) (1,719,976)
Tax 145,820 - - 145,820 45,439 394,228
Profit/(loss) after (1,541,954) 1,100,041 (96,745) (538,658) (1,132,371) (1,325,748)
tax
Attributable to:
Equity holders of the
Company (1,541,954) 1,100,041 (92,711) (534,624) (1,132,371) (1,325,748)
Minority Interest - - (4,034) (4,034) - -
(1,541,954) 1,100,041 (96,745) (538,658) (1,132,371) (1,325,748)
Earnings per share for profit attributable to the equity holders of the Company during the period
- basic (0.52p) (1.79p) (1.60p)
- diluted (0.52p) (1.78p) (1.58p)
Unaudited interim consolidated balance sheet
As at 31 December 2007
31 December 2007 31 December 2006 30 June 2007
£ £ £
(un-audited) (un-audited) (audited)
Non-current assets
Property, plant and equipment 64,723,790 22,584,707 31,752,469
Goodwill 3,009,914 16,796,815 3,009,914
Intangibles 23,576,802 - 20,703,800
Development assets 3,945,644 4,697,414 3,963,434
Interests in associate 273,480 - -
Investments at fair value through profit or loss - 8,358,253 8,555,681
95,529,630 52,437,189 67,985,298
Current Assets
Inventories - 11,782 -
Trade and other receivables 3,597,544 7,571,087 17,660,293
Intangibles 777,832 217,983 760,053
Cash and cash equivalents 12,286,709 43,819,359 20,751,234
16,662,085 51,620,211 39,171,580
Total assets 112,191,715 104,057,400 107,156,878
Current liabilities
Trade and other payables 7,513,784 6,293,371 2,543,210
Tax payable - 126,973 -
7,513,784 6,420,344 2,543,210
Net current assets 9,148,301 45,199,867 36,628,370
Non-current liabilities
Deferred tax liabilities 5,816,388 542,369 6,774,483
5,816,388 542,369 6,774,483
Total liabilities 13,330,172 6,962,713 9,317,693
Net Assets 98,861,543 97,094,687 97,839,185
EQUITY
Share capital 10,310,101 10,310,101 10,310,101
Share premium 79,645,688 79,479,412 79,645,688
Special reserve 10,000,000 10,000,000 10,000,000
Fair value and other reserves 5,880,264 (104,829) 1,479,662
Share based payment reserve 800,092 328,529 546,648
Retained earnings (7,770,568) (2,918,526) (4,142,914)
Equity attributable to the equity holders of the parent 98,865,577 97,094,687 97,839,185
Minority interests (4,034) - -
Total equity 98,861,543 97,094,687 97,839,185
Net asset value (NAV) per share
- basic 95.89p 94.17p 94.90p
- diluted 96.19p 92.23p 95.14p
Unaudited interim consolidated cash flow statement
For the six months to 31 December 2007
Six months to Six months to Year to
31 December 2007 31 December 2006 30 June 2007
£ £ £
(un-audited) (un-audited) (audited)
Cash flows from operating activities
Cash generated/(used) in operations 17,532,138 (2,295,112) (17,835,565)
Net cash generated/(used) in operations 17,532,138 (2,295,112) (17,835,565)
Cash flows from investing activities
Acquisition of subsidiaries, net of cash acquired (2,975,668) (9,545,790) (9,557,237)
Purchase of property, plant and equipment (30,793,861) (18,989,196) (28,547,782)
Development costs - (540,990) -
Proceeds from sale of investments 10,000,000 4,858,886 4,794,858
Interest received 741,618 492,018 1,629,229
Net cash used in investing activities (23,027,911) (23,725,072) (31,680,932)
Cash flows from financing activities
Proceeds from issue of shares - 45,788,952 45,788,952
Transaction costs from issue of shares - (2,705,596) (2,740,564)
Dividends paid to Company's shareholders (3,093,030) (1,759,392) (2,790,403)
Net cash (used)/generated from financing activities (3,093,030) 41,323,964 40,257,985
Net (decrease)/increase in cash and cash equivalents (8,588,803) 15,303,780 (9,258,512)
Cash at beginning of period 20,751,234 28,611,764 28,611,764
Exchange gains/(losses) 124,278 (96,185) 1,397,982
Cash at end of period 12,286,709 43,819,359 20,751,234
Unaudited interim consolidated statement of changes in equity
For the six months to 31 December 2007
Share based
Share Fair value and payments
Share premium Special other reserves reserve Retained
capital account reserve earnings Total equity
£ £ £ £ £ £ £
Balance at
1 July 2007 10,310,101 79,645,688 10,000,000 1,479,662 546,648 (4,142,914) 97,839,185
Share based
payments - - - - 253,444 - 253,444
Foreign
currency
translation - - - 4,400,602 - - 4,400,602
Net income /
(expense)
recognised
directly
in equity 10,310,101 79,645,688 10,000,000 5,880,264 800,092 (4,142,914) 102,493,231
Loss for the
period - - - - - (538,658) (538,658)
Dividend - - - - - (3,093,030) (3,093,030)
Balance at
31 December
2007 10,310,101 79,645,688 10,000,000 5,880,264 800,092 (7,774,602) 98,861,543
Attributable to
Equity holders
of the parent 10,310,101 79,645,688 10,000,000 5,880,264 800,092 (7,770,568) 98,865,577
Minority
Interests - - - - - (4,034) (4,034)
10,310,101 79,645,688 10,000,000 5,880,264 800,092 (7,774,602) 98,861,543
Notes to the un-audited consolidated financial statements
1. Statement of compliance
These un-audited interim consolidated financial statements of the Group are for
the six months ended 31 December 2007. They are prepared in accordance with
International Accounting Standard 34, Interim Financial Reporting and applicable
Guernsey law.
These un-audited interim consolidated financial statements should be read in
conjunction with the Annual Report and Accounts for the period ended 30 June
2007 which contain an unqualified audit report. The accounting policies have
been applied on a consistent basis with those applied in 2007.
2. Segment information
a) Primary reporting format - business segments
At 31 December 2007, the Directors consider that the Group's primary business
segment is that of energy generation. Following the disposal of the Tymien Wind
Project and the purchase of the Group's management company, REG Power Management
Limited, the Director's consider that the segment of Financial Investment
Management is a discontinued activity.
Continuing Discontinued
operations operations
Financial
Energy Generation investment
management Total Group
£ £ £
Revenue 1,244,511 - 1,244,511
Operating loss (2,556,332) (344,278) (2,900,610)
Profit/(loss) for the period after tax (1,850,963) 1,100,041 (750,922)
Energy generation revenue is broken down as follows:
Electricity sales 528,751
ROC sales 666,808
LEC sales 48,952
1,244,511
Assets and liabilities:
Segment assets 112,191,715 - 112,191,715
Segment liabilities (13,330,172) - (13,330,172)
Total net assets 98,861,543 - 98,861,543
Other segmental information:
Capital expenditure on tangible fixed 30,793,861 - 30,793,861
assets
Depreciation 441,965 - 441,965
Amortisation 17,790 - 17,790
b) Secondary reporting format - geographical segments
The Company is domiciled in Guernsey.
The following table represents revenue, expenditure and certain asset
information regarding the Group's geographical segments for the six months to 31
December 2007:
UK Canada Total
£ £ £
Revenue 1,244,511 - 1,244,511
Total assets 39,484,195 72,707,520 112,191,715
Total liabilities (4,650,826) (8,679,346) (13,330,172)
Net Assets 34,833,369 64,028,174 98,861,543
Capital Expenditure on Tangible Fixed Assets 4,714,555 26,079,306 30,793,861
3. Dividends
Six months to Six months to Year to
31 December 2007 31 December 2006 30 June 2007
£ £ £
(un-audited) (un-audited) (audited)
Declared and paid during the period
Equity dividends on ordinary shares:
Second interim dividend declared and paid - 3 p 3,093,030 1,759,372 1,759,372
First interim dividend declared and paid - 1 p - - 1,031,031
3,093,030 1,759,372 2,790,403
Proposed but not recognised as a liability at 31 December 2007
Equity dividends on ordinary shares:
First interim dividend declared and paid - 1 p 1,031,010
This information is provided by RNS
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