15th Jul 2015 08:27
LONDON (Alliance News) - Renewable Energy Generation Ltd Wednesday said it has decided not to proceed with its plans to issue zero dividend preference shares and said it has extended its contracts with to supply a short term operating reserve through its bio-power plants in the UK.
The company said it wanted to raise GBP31 million by issuing the shares at 100 pence per share which indicated it was planning on issuing up to 31 million shares. The aim of the fundraising was to back the development of its UK wind portfolio.
The renewable energy company said that the funds would have backed its push to deliver projects under the UK government's Renewables Obligation and Feed-In Tariff back in June.
However, on Wednesday the company said it has decided not to proceed with the proposed issue of shares.
"Current sentiment in the debt markets, augmented by changes in the regulatory environment for onshore wind generating assets have, in the board's view, reduced the attractiveness of the zero dividend preference shares as a means to finance delivery of projects under the government's revised Renewables Obligation and Feed-in Tariff regimes," said the company.
The company has been hit by a string of changes in policy by the UK government over the last month.
UK Secretary of State for Climate Change Amber Rudd plans to scrap the Renewables Obligation, which is the primary of three subsidies for onshore wind farms, claiming the country has enough onshore wind in the pipeline.
Until April 2016, the government has allowed a grace period for companies which would continue to give access to support under the Renewables Obligation. On Monday, Renewable Energy Generation said its nine-megawatt Abergorki Wind Farm in Wales has been granted planning permission and said it was in talks with the DECC on the project's eligibility for the grace period.
The Renewables Obligation was introduced in 2002, and places an obligation on UK electricity suppliers to source an increasing proportion of the electricity they provide to businesses and households from renewable sources.
That was followed by UK Chancellor of the Exchequer George Osborne announcing he will remove the exemption that generators of renewable electricity have had from the climate change levy in his Summer Budget.
That resulted in Renewable Energy stating its Ebitda would fall by approximately GBP400,000 in the year ending June 30, 2016 and said it may lead to an impairment of around GBP600,000 as a result of the Renewable Obligation changes.
On Wednesday, the company said it believes it is now better to progress its portfolio using an "existing and proven funding strategy" which includes a combination of third party asset finance, the recycling of capital through selective asset sales, and the reinvestment of revenues from existing operations.
In a separate statement Wednesday, the company said it has successfully extended its contracts with National Grid PLC to provide short term operating reserve through its existing 26 megawatt bio-power plants in the UK.
The short term operating reserve allows the UK's National Grid to source reserve power in specified periods to meet demand when greater than forecast, or shortfalls in generation such as during unexpected plant downtime.
Renewable Energy has extended the contract for the 8 megawatt bio-power plants for a further 12 months untikl March 2017 and the contract for its 18 megawatt bio power plant at Whitemoor in the UK for a further six months until October 2016.
Renewable Energy Generation shares were down 0.1% to 48.70 pence per share on Wednesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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