19th Feb 2008 07:00
Renewable Energy Generation Ltd19 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 renewableenergy group, today announces its interim results for the six months ended 31December 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 operatingassets and in projects under construction. Continuing the trend that started inthe second half of the previous financial period, we have demonstrated a trackrecord of delivery by building one new wind project on average every six weeksover the last year. We estimate we will have over 60 megawatts of operationalgeneration and over 4,000 megawatts of projects in our pipeline by the end ofthe current financial year. We look forward to a further productive period inthe second half." A presentation to analysts will be held today at 9:30am at the offices of NumisSecurities, The London Stock Exchange Building, 10 Paternoster Square, LondonEC4M 7LT. If you would like to attend, please contact Poppy Wonnacott at Hogarthon 020 7357 9477. Contacts: Renewable Energy Generation Tel: 01483 400 444Andrew Whalley, Chief Executive OfficerDavid Crockford, Finance Director Numis (Nomad for REG) Tel: 020 7260 1000Charles Farquhar / Anthony Richardson Hogarth Partnership (PR for REG) Tel: 020 7357 9477Sarah MacLeodJulian WalkerVicky 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 windfarms in the UK and Canada. It also generates power from refined used cookingoil in the UK. • The Cornwall Light & Power Co. Ltd: based in Cornwall, UK, it currentlyoperates 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 PowerGenCorporation is one of Canada's largest independent wind developers and has apipeline of over 4,000MW of potential wind projects across seven provinces. • REG Bio-Power UK Ltd: based in Norfolk, UK, it operates electricitygeneration plant fuelled by refined used cooking oil. Headquartered in Guernsey, REG was admitted to trading on the AlternativeInvestment Market ("AIM"), a market operated by the London Stock Exchange inMay 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. Inthe six months to 31 December 2007, the Group made good progress in the UK andCanada - its two principal countries of operation and prime markets forrenewable energy generation. Together, the two markets provide thecomplementary characteristics of strong profitability in the UK from sites withgood wind exposure and favourable incentive schemes and in Canada, a moresympathetic planning system and access to long-term Power Purchase Agreements ("PPAs"), which are well suited to long-term debt financing. By focusing on theentire value chain from the acquisition of sites through to the development andoperation of assets (as opposed to acquiring assets already in operation), REGbelieves that it can generate superior returns for shareholders. In the UK, REG develops small projects of up to 10MW in size, and has fiveoperating wind farms totalling 17.7MW of capacity. It also owns a portfoliototalling over 200MW at various stages of development. In Canada, REG is one ofthe largest wind developers with 70MW of wind projects under construction and adevelopment 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 earningsprofile, is progressing well and we anticipate significant expansion of ouractivities in this sector going forward. Review of Operations UK During the first half year, REG's UK business benefited from continued highenergy prices, good production from its established wind farms, the timelycommissioning of its most recent project and good progress with the developmentof the next tranche of its sites. The Group now operates 17.7MW of capacity at five wind farms - Goonhilly Downsand Roskrow Barton in Cornwall, High Sharpley in County Durham, High Pow inCumbria and Braich Ddu in Gwynedd. Wind farms totalling a further 25MW ofproduction capacity are in late-stage development at several sites in CountyDurham, Cambridgeshire, Yorkshire, Powys and Lincolnshire and the Group isprogressing 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 fourmonths, on budget and on schedule. With good exposure to wind and short (andtherefore, inexpensive) electrical connections, Roskrow Barton represents atypical 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 forsite development. Among them was the proposed re-powering of the existing farmat Goonhilly in Cornwall, the UK's most southerly wind farm. Application wasmade after a successful consultation with the local community, and the intentionis to increase the current capacity from 5.6MW to 15MW - providing enough energyto supply over 7,000 homes. In Cambridgeshire, two 1.8MW Vestas V90 turbines have been ordered for projectsat Whittlesey and Ramsey. The machines are expected to be delivered to site inSummer 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 withSmartest Energy Ltd, part of the Marubeni Group of Japan. Extending to Spring2009, the PPA reflects market expectations for continued high prices forwholesale electricity. We expect our projects to earn a total of more than £100per MWh, peaking in the high output winter months. In accordance with theGroup's demonstrably successful strategy, Renewable Obligation Certificatesgenerated will continue to be sold separately from physical power on anopportunistic 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 isrunning continually, with impressive fuel efficiency. Development of the newlarge 12 unit, 6MW facility at Bentwaters in Suffolk is progressing to plan,with the first generators already installed. All commissioning and testing isplanned to be completed during March 2008. We are consolidating our early-moveradvantage in this sector, which enjoys strong Government policy support andoffers rapid investment pay-back. A five-year initiative established with Norfolk County Council in December 2007to site waste oil collection bins across the county is an example of thediversity 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, partiallyindex-linked power purchase agreements with Ontario Hydro, the provincialutility, to developers able to satisfy rigorous build and interconnect criteria.This initiative is designed to stimulate the construction of small - 10MW orunder - wind energy projects connecting to the local distribution grid at lowvoltage. Hence it is similar in nature to our UK projects which benefit from therelative 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. Theseprojects are on track to commence operation in the first quarter of 2008. It isour strategy to refinance our Canadian assets with long term debt once built.Refinancing negotiations are taking place with leading commercial banks and thisprocess 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 tobe at or above the Board's original expectations. Construction of three further 10MW SOP projects is scheduled to start in thethird quarter of 2008, with subsequent commissioning scheduled for the firsthalf of 2009. Turbines have already been secured for these projects. Provincial utilities generally procure power in Canada using the Request forProposals ("RFPs") mechanism. These RFPs are typically used for very largeprojects of around 100MW in size, and the Group has been shortlisted on one suchproject into the Manitoba RFP in an arrangement with The General ElectricCompany. An announcement of the winning bids is expected in the first quarterof 2008. The Group has started work on bid submissions into the Ontario RFP totalling500MW and proposals are required to be submitted to the provincial utilitybefore 31 March 2008. As the most prominent wind developer in Ontario, REG islikely to bid multiple projects into this RFP. Announcement of the winning bidsis likely in the third quarter of this year. The Board David Crockford was appointed to the Board as Finance Director with effect from4 December 2007. David began his career as a Chartered Accountant with Deloittewhere he gained 10 years of experience in private and public sector business.Following this, David moved overseas to work in the international petroleumsector where he was based in the UK and South America. Prior to his appointmentat REG, David was Chief Financial Officer of Duchy Originals Limited, theorganic food company founded by HRH The Prince of Wales. Other than the directorships disclosed above, the Group confirms there is nofurther information required to be disclosed under Schedule 2(g) of the AIMRules for Companies. Financial Results Group revenue increased by 148% to £1.25 million (H1 2007: £0.5 million), withthe Group's five operational wind farms generating 12,800MWh in the six monthperiod. Loss after tax narrowed to £0.5 million (H1 2007: £1.2 million) as moredevelopment projects became operational. Following the Group's acquisition of REG Power Management ("RPM"), itsmanagement company, for £1.6 million in cash, announced on 4 December 2007, allmanagement arrangements between REG and RPM have now ceased with the Group'sfinancial investment management segment now reported as a discontinuedoperation. The cessation of management and finders' fee payments to RPM shouldresult in material cash savings to REG by de-coupling administration costs fromthe expected strong growth in installed power generating capacity. A profit of £1.4 million was recognised from the sale of our investment in thePolish Tymien wind project for a cash consideration of £10 million. REG nolonger has any activity or interests in Central Europe. Investment in the Group's used cooking oil business was £1.8 million in theperiod, through acquisitions and capital expenditure on our 6MW project atBentwaters. 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 thebalance of £4 million being allocated for the continuing build-out of the UKpipeline, including Roskrow Barton. During October 2007, REG secured a £30 million revolving credit facility withthe Bank of Scotland allowing the Group to continue its strategy of on balancesheet financing of its wind projects in the UK and Canada. The Group moves into the second half of the financial year with a strong balancesheet showing £98.8 million of net assets and a portfolio of cash generativeassets 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 ofan interim dividend of 1p per Ordinary Share. Outlook To date the Group has placed turbine contracts for 13 projects and the majorityhave been negotiated for delivery within 12 months from the contract beingawarded - a demonstration of the Group's continued operational flexibility andstrategic use of capital to accelerate growth, and a testament to management'sentrenched industry relationships. In the past 12 months, REG has initiated construction on eight wind projectswith a total capacity of 51.7MW. Once the final Canadian SOP project has beenconnected in the second quarter of 2008, the Board believes that REG will begenerating significant EBITDA and will have multiple opportunities to buildfurther capacity and refinance existing projects. Additionally, the new usedcooking oil business is anticipated to build further generating capability,providing a cost effective solution to large corporates seeking to procure greenenergy. The current period has been one of strong growth both in operating MWs and inprojects under construction. The UK and Canadian wind markets are now expandingrapidly and the Board believes that the Group is well positioned to takeadvantage of the many opportunities it has for increasing shareholder value. Unaudited interim consolidated income statementFor 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 1,443,003Cost 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)expenseDevelopment costs (1,150,780) - (81,134) (1,231,914) (399,149) (1,838,260)Share of results ofassociate - - (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 ofinvestments - 1,444,319 - 1,444,319 - -Other income 30,195 - - 30,195 (47,485) 881,510 Group operatingprofit/(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 theCompany (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 sheetAs at 31 December 2007 31 December 2007 31 December 2006 30 June 2007 £ £ £ (un-audited) (un-audited) (audited)Non-current assetsProperty, plant and equipment 64,723,790 22,584,707 31,752,469Goodwill 3,009,914 16,796,815 3,009,914Intangibles 23,576,802 - 20,703,800Development assets 3,945,644 4,697,414 3,963,434Interests in associate 273,480 - -Investments at fair value through profit or loss - 8,358,253 8,555,681 95,529,630 52,437,189 67,985,298Current AssetsInventories - 11,782 -Trade and other receivables 3,597,544 7,571,087 17,660,293Intangibles 777,832 217,983 760,053Cash 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 liabilitiesTrade and other payables 7,513,784 6,293,371 2,543,210Tax 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 EQUITYShare capital 10,310,101 10,310,101 10,310,101Share premium 79,645,688 79,479,412 79,645,688Special reserve 10,000,000 10,000,000 10,000,000Fair value and other reserves 5,880,264 (104,829) 1,479,662Share based payment reserve 800,092 328,529 546,648Retained 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 statementFor 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 activitiesCash 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 activitiesAcquisition 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 4,794,858Interest 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 activitiesProceeds from issue of shares - 45,788,952 45,788,952Transaction 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 28,611,764Exchange 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 equityFor 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 at1 July 2007 10,310,101 79,645,688 10,000,000 1,479,662 546,648 (4,142,914) 97,839,185Share basedpayments - - - - 253,444 - 253,444Foreigncurrencytranslation - - - 4,400,602 - - 4,400,602 Net income /(expense)recogniseddirectlyin equity 10,310,101 79,645,688 10,000,000 5,880,264 800,092 (4,142,914) 102,493,231Loss for theperiod - - - - - (538,658) (538,658)Dividend - - - - - (3,093,030) (3,093,030) Balance at31 December2007 10,310,101 79,645,688 10,000,000 5,880,264 800,092 (7,774,602) 98,861,543 Attributable toEquity holdersof the parent 10,310,101 79,645,688 10,000,000 5,880,264 800,092 (7,770,568) 98,865,577MinorityInterests - - - - - (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 forthe six months ended 31 December 2007. They are prepared in accordance withInternational Accounting Standard 34, Interim Financial Reporting and applicableGuernsey law. These un-audited interim consolidated financial statements should be read inconjunction with the Annual Report and Accounts for the period ended 30 June2007 which contain an unqualified audit report. The accounting policies havebeen 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 businesssegment is that of energy generation. Following the disposal of the Tymien WindProject and the purchase of the Group's management company, REG Power ManagementLimited, the Director's consider that the segment of Financial InvestmentManagement is a discontinued activity. Continuing Discontinued operations operations Financial Energy Generation investment management Total Group £ £ £ Revenue 1,244,511 - 1,244,511Operating 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 528,751ROC sales 666,808LEC sales 48,952 1,244,511 Assets and liabilities:Segment assets 112,191,715 - 112,191,715Segment 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 - 30,793,861assetsDepreciation 441,965 - 441,965Amortisation 17,790 - 17,790 b) Secondary reporting format - geographical segments The Company is domiciled in Guernsey. The following table represents revenue, expenditure and certain assetinformation regarding the Group's geographical segments for the six months to 31December 2007: UK Canada Total £ £ £ Revenue 1,244,511 - 1,244,511 Total assets 39,484,195 72,707,520 112,191,715Total 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 periodEquity 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 2007Equity dividends on ordinary shares: First interim dividend declared and paid - 1 p 1,031,010 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
WIND.L