Final Results

17 October 2011

Renewable Energy Generation Limited

("REG", "the Company" or "the Group")

Preliminary Results for the year ended 30 June 2011

Renewable Energy Generation Limited (AIM: WIND), the renewable energy group, today announces its preliminary results for the year ended 30 June 2011.

¹ Earnings before interest, taxation, depreciation and amortisation ("EBITDA") is equal to the Group's continuing operating loss before exceptional items, interest, taxation, depreciation and amortisation.

REG Chief Executive Officer Andrew Whalley said:

"Over the course of the year we have constructed three new wind farms, more than doubling our clean energy output.

"Our development portfolio has also substantially increased with a significant number of planning applications to follow this year. We are now poised to expand our generating fleet rapidly."

A presentation to analysts will be held today at 9.00am at the offices of City Profile, Augustine House, 6A Austin Friars, London, EC2N 2HA. Please contact Sheena Khan if you would like to attend.

ENDS

Enquiries:

Notes to Editors

Renewable Energy Generation Ltd (REG) is a UK orientated renewable energy group. The Group's main business is the development, construction and operation of wind farms in the UK and generating power from refined used cooking oil in the UK.

Headquartered in Jersey, REG was admitted to trading on AIM, a market operated by the London Stock Exchange, in May 2005 (AIM: WIND).

www.renewableenergygeneration.co.uk

Chairman's Statement

Last year brought much greater traction as we accelerated towards our stated three-year target to commit £100m to UK renewable energy projects by end 2012. Well-funded following the successful sale of our Canadian business in 2009, we built three new wind projects which almost doubled REG's operational assets and clean energy production; we secured planning consents for a further five new wind projects which will soon add 25MW to our fleet, and we advanced the preparation of a further 100MW of projects which will be submitted for Planning Consents during the next financial year.

The new coalition government has indicated that it remains strongly supportive of renewable technologies. It has added that onshore wind is integral to government ambitions for radically reshaping the UK energy industry over the next ten years.

Encouraged by Global Activity

As reported by the United Nations Environment Programme, global investment in renewable energy grew by 32% in 2010, to a record $211bn. It was boosted inparticular by wind farm development in China andsmall-scale solar PV installations in Europe. Wind was the dominant sector in terms of new financialinvestment with a rise of 30% to almost $100bn, other technologies lagged far behind.

With six major wind turbine manufacturers from the US, Europe and China all competing for market share in the wake of substantial new production capacity, wind power developers have benefitted from an average18% fall in wind turbine prices per MW in the last two years. Further improvements in the levelised cost of energy for solar, wind and other technologies lie ahead. In particular, the rapidly growing offshore wind market is spurring great progress in the development of wind turbines two-to-three times more powerful than existing machines. These technological and economic innovations will also benefit the onshore market. The down-side of this otherwise favourable trend was investors' blanket concerns about over-capacity in the manufacturing sector of the wind industry and the risk of cut-backs in government subsidies such as has been seen in the solar energy sector. These sentiments weighed heavily on the renewables sector, resulting in its under performance against wider stock market indices by more than 20%. A further challenge for renewables came from outside scepticism. This manifested itself both in the stock markets, and in international politics, where the mood post-Copenhagen and post-"Climategate" was cooler than in previous years. In fact, more progress towards emission reduction was achieved than expected at the December 2010 meeting in Cancun and the consensus among climate scientists about man-made global warming actually strengthened during last year. However neither has yet catapulted clean energy back to the top of government agendas.

Responding to UK Opportunities

The UK's new coalition government has taken early, assertive action to address the chronically neglected energy policy issues which it inherited. In particular it has confronted the twin threats to the economy, of insufficient electricity generating capacity in the next five to ten years arising from forced retirement of that one-third of the nation's power plant which is obsolete and environmentally inoperable; and the probability that the UK will fail to meet its binding obligation under EC Directives to meet at least 15% of its energy requirements from renewable sources by 2020 - which implies at least 35% of electricity to be met from renewable sources compared with just 6.6% as of 2009.

New Government policy initiatives towards renewable energy are broadly encouraging. Proposals in the National Planning Policy Framework presume in favour of sustainable development especially where it supports the transition to a low carbon economy. The contribution of onshore wind power as an established, cost-effective means of achieving the UK's energy imperatives is further reinforced in the National Policy Statement for Renewable Energy Infrastructure, as well as in the Localism Bill. Government proposals for Electricity Market Reforms, aim to attract the £200bn investment required in the next decade to meet energy security and environmental needs. Its proposals for new Feed-in-Tariffs with Contracts for Difference offer opportunities for REG as our flexible approach allows us to consider schemes beneath the radar of the larger utilities.

Power prices increased markedly over the year, from around £41/MWh to £55/MWh, triggered by the catastrophic events in Japan. With the scene set for further price rises due to capacity tensions, REG should be protected from any devaluation of the ROC onshore wind support mechanism which may arise in the forthcoming Renewable Obligation banding review.

In the UK as elsewhere, consensus is emerging that electricity generated from renewable sources, more than any other form of energy, provides the only sustainable solution to an energy gap, with gas as a premium fuel best used in standby power generating capacity to accommodate the intermittency of renewable energy used for bulk energy production. The UK power market has already begun to incentivise investment in dedicated standby capacity.

Having won its tender into National Grid's STOR scheme and enjoying optimum capacity utilization, REG Bio-Power is nearing cash flow break even. With capacity reward likely to become a structural feature of electricity market reform in the UK and in recognition of its strategic value as a hedge against wind energy variability, REG Bio-Power has begun a modest expansion of its small fleet of power plants fuelled by our patented proprietary bioliquid recovered from Waste Cooking Oil (WCO), with the addition of a third project, commissioned at year-end in Leeds. Plans for two more projects in 2012 also reflect the capability of its WCO collection network to fuel a fleet of up to 50MW.

Driving Results

Having sold its cash-constrained Canadian wind power business in the wake of the 2009 financial crisis and with a healthy Balance Sheet and increased confidence in prospects in the UK, your Board set a target of £100M of new investment in onshore operating wind assets, to be committed during the three years to end 2012. Addressing the obstacle of a historically challenging planning environment, it also strengthened the capability of the company's development team through the targeted recruitment of accomplished industry professionals. Now fully established, this team has justified this investment, and having secured six Planning Consents during the past 15 months, it remains on target to meet the £100m goal. More than 100MW of new planning applications are due to be submitted in the next financial year.

Building Resilience

A "one-in fifteen years" meteorological event which caused low winds in the Northern hemisphere, reduced the wind resource to 20% below the 10-year mean. The resulting loss of close to £2m from revenues led to a Group normalised EBITDA at about break-even. With our human resource now sufficient to deliver at least the next 200MW of operating assets, our overhead cost base is sufficiently capped such that the anticipated income from additional generating capacity coming on stream in the next 18 months will flow largely as free cash after interest.

In January, your Board received a takeover bid for the company, which, after consultation with shareholders, was rejected. We believe that the strategy developed and pursued by the management team is now about to bear fruit, justifying that decision and rewarding the faith shown by our investors.

Your Board is acutely alert to the balance of shareholder benefit between reinvesting and distributing earnings. In view of the strength of asset-building opportunities available to the Directors, they propose to pay a final dividend of 1.5p per ordinary share (2010: 1.5p) in respect of the past year. As REG continues to leverage its balance sheet equity to accelerate the addition of new operational capacity, it is expected that cash returns to equity holders will quickly rise. Accordingly, your Board has begun a review of options for value distribution to ensure that shareholders receive a return reflecting the company's success. 

Chief Executive's Statement

Strategic Overview and Review of the Year

In line with the business plan outlined in the Chairman's statement, our primary focus remains on developing and operating home-grown renewable energy projects, managing each stage of the process through our in-house team.

During the course of the year, we successfully constructed and commissioned three new wind projects, totalling 20.5MW. This has more than doubled REG's P50 output of green electricity to 106,000Mh per annum. In addition we were successful with five new planning applications totalling 25.3MW of new onshore wind when constructed.

REG's Windpower's development portfolio also grew strongly, increasing from around 500MW of new projects to over 1,000MW. Importantly, late stage projects, for which REG has already carried out most of the work required to submit a planning application, increased to over 200MW.

REG Bio-Power, our bio-fuels business, won a contract with the National Grid to provide Short Term Operating Reserve (STOR). This has the potential to change the economics of our bio-liquid business.

Wind - Operational Overview of Year

The repowering of our flagship project at Goonhilly Downs in Cornwall has almost quadrupled average annual output from the site from 9,000MWh to 35,000MWh. Two smaller projects were also completed at High Haswell in County Durham (4MW) and Loscar in Yorkshire (4.5MW). Together these have increased average annual output from our wind portfolio by over 100% to around 106,000MWh.

Last year we successfully brought the turbine operations and maintenance function in-house to provide us with more data on each of our sites. As a result, we have achieved turbine availability of 97% over the year, compared to our target of 95%.

Project Development

The engine of growth for REG is our ability to secure planning consent and build new projects. We have substantially increased the size and geographic diversity of our project development portfolio, with 15 schemes comprising around 100MW due to enter the planning system in the coming financial year. This represents a significant escalation from last year's figure.

During the year under review, we added five new planning consents with a cumulative capacity of 25.3MW. Major successes were a 10MW scheme at Sancton Hill in the East Riding of Yorkshire, the 6MW South Sharpley project adjacent to our existing operational site at High Sharpley in Durham and the 4MW Orchard End project in Lancashire.

During the last 12 months we invested around £4m of internal and external costs into our development pipeline. The majority of this investment, some £3m, comprised external spend on environmental impact assessment required by planning authorities and carried out by experts in various fields, economic assessments including anemometry work and legal fees. These are all essential elements in ensuring viable consented projects enter construction. In line with our accounting policies, £1.4m of these external costs were capitalised on the balance sheet in the year.

We anticipate that our spending on new projects will continue at this level, with an increasing amount capitalised to reflect the value of our high-quality pipeline of projects and consents. In the round we are targeting a long-term all-in development cost of £125,000 per MW, a figure we believe is considerably better than our peers. Furthermore as REG's development team increases the pace of planning submissions and a typical project in our portfolio approaches 10MW rather than the current operating average of 4MW, we fully expect excellent value for money from our investment in the pipeline.

Bio-Power - Operational Overview of the Year

One of the most pleasing aspects of the last year has been the development of REG Bio-Power, which operates renewable energy plant powered by a patented bioliquid recovered from waste cooking oil. The trebling of the waste cooking oil price from 2006 to 2010 resulted in a pre tax operating loss of £1,254,000 and forced us to seek a new direction for the business, reducing reliance on expensive commercially sourced oil in favour of maximising the value of oil collected from civil amenity sites across the UK.

REG Bio-Power successfully won a contract from the National Grid to provide 8MW of Short Term Operating Reserve (STOR). Under STOR, REG Bio-Power earns a capacity payment for standing by to generate and a utilisation fee when plant is called on to operate at times of unscheduled power demand. While the plant is only likely to operate sporadically under STOR it is free to run opportunistically outside STOR hours.

Taken together with its other operational plant at Hockwold and Port of Dover this should mean that REG Bio-Power nears cash break even on a going forward basis. The outlook for REG Bio-Power is further enhanced by recycling demand for our patented recycling technology from outside the electricity industry in the form of tolling agreements to turn waste oil into a useable commodity.

Given the sound returns that REG Bio-Power has demonstrated it can achieve we are evaluating the opportunity to construct two more STOR plants during the course of 2012, funded through debt and the release of equity in the existing plant. This is anticipated to add 11MW of further capacity increasing overall operational STOR plant to 20MW.

Financial Highlights

As flagged in our interim results, wind speeds during the year were unusually low. This resulted in a reduction in Group revenue of close to £2m compared to a year with average wind levels. Group revenue was £9.8m (2010: £6.2m) with EBITDA before exceptional costs of nil (2010: loss of £0.9m). Pre-tax losses after exceptional costs were £3.0m (2010: £3.5m).

By the close of this year, REG operated 10 wind farms totalling 41.15MW (2010: 26.25MW) with a total output of 76.3GWh (2010: 39.3GWh). This is around 20% below normalised P50 wind levels, resulting in a pre tax loss of £165,000 for the Wind segment.

The Group invested £16m (2010: £29m) of cash in new projects during the year, successfully drew down on the first element of deferred consideration from the Canadian sale, releasing £3.6m and completed our first UK asset financing totalling £12m. The year closed with a healthy cash balance of £14.9m (2010: £17.2m)

Financing Growth

The sale of our Canadian business in October 2009 raised net proceeds of around £52m. This allowed us to accelerate the build of Goonhilly Downs, Loscar and High Haswell as well as order turbines for our new project at Sancton Hill. However, in order to fund the future growth in REG's operational portfolio we are gradually introducing non-recourse project financing for both our operational wind farms and for new projects. As well as freeing up further capital for development of new projects the project finance will materially enhance the return on equity for our projects and will enhance returns for REG's shareholders. We are well aware, that while debt should increase returns for REG's shareholders it also increases risk. We are therefore careful to maintain sound cover ratios in the event that, as we have seen during the last year, the wind fails to blow as expected.

Our first project financing is a £12m facility from The Cooperative Bank covering our operational projects at High Sharpley, Braich Ddu, Ramsey, High Pow and Roskrow Barton. The overall gearing ratio for these projects is 85%. A second financing for Goonhilly, Loscar and High Haswell is currently underway and expected to result in similar gearing levels with an equity release of between £20m and £25m. This will be sufficient for REG to finance at least 150MW of new capacity. At that point we expect the resulting cashflows will be sufficient to finance at least 30MW of new projects per annum on a similar model to the first two financings.

In the near term, the successful operation of South Sharpley and Sancton Hill in the next 12 months will provide more than adequate cashflow to pay for all finance and corporate overheads. Much depends on electricity prices and wind conditions but even after all corporate and finance costs management expect REG to be generating surplus cash. This means that the Company is in a sound position to increase returns to its shareholders.

Health and Safety

In undertaking all our activities we aim to do so in a responsible and environmentally friendly manner. We place the health and safety of our stakeholders at the forefront of all our activities.

Staff

Our staff work tirelessly to fulfil the goals and objectives of the Company and I am indebted to them for their hard work over the year.

Post Year End Activity

Notable achievements since the end of the financial year include the acquisition of a two-thirds majority share in a 6MW wind scheme with planning permission at Brackagh Quarry near Draperstown in Northern Ireland. This not only marks REG's entry into a region with a high wind resource, but also the establishment of a joint venture with Creagh Concrete to develop further projects in Ulster.

In September we were delighted to receive planning permission for our 10MW wind project at Denzell Downs in Cornwall.

Also, REG Bio-Power's 2MW Leeds North plant came online on schedule this autumn, and will operate under our STOR contract.

Outlook

The project financing of our first five wind farms has provided REG with a sound platform for growth. The coalition government in the UK recognises the importance of onshore wind in offering a clean and relatively inexpensive route to help address the impending energy gap. REG has invested a significant amount of money and effort in its development and operational teams and the last six months has seen a significant step up in the pace of projects entering the planning system and also in the construction of new projects with planning approval.

REG is one of the few remaining developers in the UK in the 5-20MW segment of the UK onshore wind market and has emerged with both a strong balance sheet and the skill set to succeed in this increasingly vibrant sector. While many smaller private equity players have deserted the onshore wind market place, perhaps daunted by the patience and tenacity required to obtain consent and then build wind farms, REG has persisted in its efforts and is now poised to expand its generating portfolio rapidly.

Consolidated Statement of Comprehensive Income

For the year ended 30 June 2011

Consolidated Balance Sheet

As at 30 June 2011

Consolidated Cash Flow statement

For the year ended 30 June 2011

Consolidated Statement of Changes in Equity

For the year ended 30 June 2011

1. Basis of preparation

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards as issued by the IASB as they apply to the financial statements of the Group for the year ended 30 June 2011.

The Group financial statements are presented in Sterling and all values are rounded to the nearest thousand pounds (£) except when otherwise indicated.

In accordance with the Article 105 (11) of the Companies (Jersey) Law 1991, the parent company is no longer required to present separate parent company financial statements as consolidated financial statements have been presented.

2. Going Concern

A review of business activity, the financial position of the Group, its cash flows, liquidity position, borrowing facilities and future prospects of the Group are covered in the Chairman's and Chief Executive Officer's statement. Detailed information regarding the Group's current facility levels, liquidity risk and maturity dates are provided in the full Report & Accounts.

The completion of the transaction to secure non recourse debt against 5 operating sites introduced substantial cash to the group. As a result, the immediate cash flow needs of the Group are covered by its current cash balances. Given that the debt is secured against operating sites, with a known history of operating costs, the key assumption in satisfying covenants is wind volumes. Covenant compliance is maintained if actual wind volumes are statistically in the lowest 10% of long term averages (P90). Over the 12 year term of this debt this is considered remote, and the Group has the ability to inject equity into the projects if wind volumes are below covenant levels.

Going forward, the preference will be to finance future construction with non recourse debt, further reducing the cash needs of the group as it expands.

The Board has reviewed the Group's forecasts and budgets over the next 36 months and are satisfied that current cash balances in combination with cash generation from operating activities will provide sufficient liquidity for the Group. Accordingly the accounts have been prepared on the going concern basis.

3. Exceptional items

1 During the year the Board committed to repowering the generation facilities at Goonhilly, which successfully trebled output. As part of this arrangement, the existing Property, plant and equipment was sold, and a loss on disposal of £275,000 was recognised. The transaction completed in January 2011 and there was no further change to the carrying value.

2 As announced on 28 January 2011, an indicative offer was received to acquire the Group. Costs amounting to £95,000 associated with considering and dealing with the offer were incurred during the year.

3 During the year the Group was approached with an opportunity to acquire an operation with both operating wind farms and consented wind farms. The return on the assets was above our internal hurdle rates but the offer was not successful. Due diligence costs of £120,000 were incurred in relation to the offer.

4. Dividends per share

A final dividend of 1.5p per ordinary share, amounting to £1,549,000 was proposed by the directors at their meeting on 14 October 2011. The proposed dividend has not been recognised as a liability as at 30 June 2011.

5. Business combinations subsequent to the balance sheet date

On 28 July 2011 the Group acquired a controlling stake in the ordinary share capital of REG Creagh JV Company Limited for initial consideration of £450,000.

REG Creagh JV Company Limited is a strategic partnership with Creagh Concrete to develop wind farms in Northern Ireland. At the time of acquisition the primary asset of the company was a conditional consent to build a 6MW wind farm.

Following clearance of the remaining planning conditions, a further £550,000 of cash and REG shares to the value of £100,000 will be paid bringing the maximum consideration to £1,100,000.

The preliminary assessment of the assets acquired and goodwill are as follows:

6. Discontinued operations

On 22 October 2009 the Group entered into a sale agreement to dispose of AIM Powergen corporation, which carried out all of the Group's Canadian operations. The sale resulted in a profit on disposal of £5,440,000 being recognised in the prior year. This included an amount that was receivable contingent on a performance evaluation of operating windfarms sold. In the current year, based on information available and the conclusion of the performance evaluation an impairment of £373,000 was recognised, reducing the value of the receivable under the sale agreement to £2,329,000

7. Report & Accounts

The financial information in this announcement which was approved by the Board of Directors does not constitute the Group's statutory accounts for the years ended 30 June 2010 or 2011 but is derived from those accounts. Statutory accounts for the year ended 30 June 2011 are available from the Company's website www.renewableenergygeneration.co.uk.

The auditors have reported on the 2011 accounts and their report was unqualified and did not draw attention to any matters by way of emphasis. 

This preliminary announcement is based on the Report & Accounts which are prepared in accordance with IFRS. However, this announcement does not, in itself, contain enough information to comply with IFRS'.

This statement is not being posted to shareholders. The Report & Accounts for the year ended 30 June 2011, together with notice the Notice of Meeting will be posted to shareholders in due course. Further copies will be available on request from, The Company Secretary, Renewable Energy Generation Limited, Elizabeth House, 9 Castle Street, St Helier, Jersey, JE4 2QP, or on-line from www.renewableenergygeneration.co.uk

This document contains forward-looking statements. The forward-looking statements reflect the knowledge and information available to the Group during the preparation and up to the publication of this document. By their very nature, these statements depend on circumstances and relate to events that may occur in the future thereby giving a degree of uncertainty. Therefore nothing in this document should be construed as a profit forecast by the Group.