Preliminary results for year ended 31 March 2014

Infinis Energy plc (Symbol: INFI)

PRELIMINARY RESULTS FOR THE YEAR ENDED 31 MARCH 2014

Delivering on our IPO commitments

Infinis Energy plc (Infinis or the Group), the UK's leading independent generator of renewable power, is pleased to announce its preliminary financial results for the year ended 31 March 2014.

Summary financial performance

Eric Machiels, Chief Executive Officer of Infinis, commented:

"Today's results are evidence of Infinis delivering the operating and financial performance we promised at the time of the IPO. We have performed strongly in both our landfill gas and wind businesses, exporting 2.6TWh of renewable power, which has translated into financial results ahead of our expectations.

Our balanced portfolio of landfill gas and onshore wind assets leaves us well placed to fulfil our dividend commitments and execute our growth plans. We continue to make progress on our wind development pipeline and are on target to deliver incremental capacity of 130-150 MW by 2017 as set out in our IPO.

With a strengthened balance sheet and strong cash generation, we are pleased with the performance of the Group during its first months since listing and look forward to further delivery against our targets in the current year."

Financial and operating highlights

· Revenue increased by 7.3% to £242.5 million largely due to higher exported power from wind and increases in average selling price (ASP)

· EBITDA before operating exceptional items¹ increased by 18.3% to £148.4 million driven by strong revenue growth and cost control

· Balance sheet position strengthened with leverage significantly lower at 3.7 times from 4.4 times in 2013

· Final dividend proposed of 6.63 pence per share for the period from the date of Admission to the London Stock Exchange to the end of the financial year, and in line with our stated dividend policy under which we intend to declare a dividend of £55 million for the first full financial year ending 31 March 2015 and increasing from that point at least in line with inflation

Corporate highlights

· Initial public offering on the London Stock Exchange and inclusion in the FTSE 250 index

· The refinancing and consolidation of ten separate operational wind project finance facilities of £255 million into a single £296 million syndicated loan at a lower portfolio interest rate

· Growth plan on track to deliver 130 MW to 150 MW of new wind capacity by 2017

Outlook

· Operationally our landfill gas business has performed well and will benefit from eight NFFO terminations which will make a full or part year contribution in this financial year. In our wind business, wind speeds have trended below average in the first quarter;

· While mild weather and lower gas prices has led to softer wholesale power markets in the near-term, we believe that the longer term fundamentals for our industry remain strong, with anticipated tightening reserve margins supportive of power prices;

· Infinis remains well insulated from external factors with around 50% of expected revenues increasing by inflation each year. Furthermore we have already contracted approximately 60% of our expected power output at fixed prices for the current year;

· The strong cash generative nature of the Group provides management with confidence that our stated dividend policy will be delivered without compromising our growth plans.

Forward-looking statements

Certain statements made in this announcement are forward-looking. These represent expectations for the Group's business, and involve risks and uncertainties. The Group has based these forward-looking statements on current expectations and projections about future events. The Group believes that expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which in some cases are beyond the Group's control, actual results or performance may differ materially from those expressed or implied by such forward-looking statements.

Investor Relations

Analyst presentation and conference call

Management will host a presentation for analysts at 9.15am (London BST) today at Brunswick Group LLP, 16 Lincoln's Inn Fields, London, WC2A 3ED.

The meeting can also be accessed via a conference call. After the meeting, a recording of the call will be available. Access details are set out below.

A copy of the presentation will be made available from 8.45am (London BST) on 19 June 2014.

Details for the call are provided below:

UK Number: +44 (0) 1452 561394

Pass code: 24547084

Upcoming investor timetable:

For further information, please contact:

Investors and analysts: Will Cooper, Head of Investor Relations

Infinis Energy plc

Telephone: 01604 742338

Email: [email protected]

Media: Brunswick LLP

Justine McIlroy / David Litterick

Telephone: +44 20 7404 5959

Email: [email protected]

Chairman's Introduction

I am delighted to introduce the first annual results of Infinis Energy plc as a listed company and to welcome so many new shareholders. I was approached to act as Chairman of Infinis in the early summer of 2013 and was truly impressed with what I found. The consistent and meaningful development of the business over the last ten years is impressive. Infinis has grown from being an unloved division of a waste company to the largest independent generator of renewable electricity in the United Kingdom operating a broad portfolio of landfill gas, onshore wind and hydro power plants.

Whilst that history is a good foundation, what struck me more was the clear and ongoing commitment from everyone at Infinis to operational excellence. Everyone works as part of the team and is always looking for the extra value in any situation. This is reflected in the Infinis culture of 'going the extra mile.'

This was best illustrated by the team delivering a record set of results during a year in which the Company floated on the London Stock Exchange, a major event in any company's life. The flotation was achieved despite regulatory pressures and a difficult political backdrop. The political landscape around UK energy policy continues to be challenging but I believe that by focusing on affordable, reliable and clean electricity production, Infinis is well positioned for the coming years.

One of the key tasks that needed to be done before flotation was assembling a Board. At flotation the Board comprised two Executive Directors, two representatives of Terra Firma, and four independent Non-executive Directors. We also committed to bring on a fifth Non-executive director by the end of the financial year, which we have now done with the appointment of Baroness Sally Morgan. This Board of nine has a combination of a long and deep understanding of the Infinis business along with sufficient independence from a group of individuals with experience in utilities, engineering, finance and policy. It is a good mix and will, I believe, serve shareholders' interests well. I am grateful to my colleagues for their support over the last few months.

As well as preparing for, and delivering, a successful IPO, the Infinis team also refinanced ten separate wind farm bank facilities into one portfolio facility. This has significantly reduced complexity, increased flexibility and, most importantly, reduced interest costs. This transaction won the prestigious European Onshore Wind Deal of the Year from Project Finance magazine.

A key part of operational excellence is delivering on your promises and that has been the focus of Infinis since the flotation. I think it is worth setting out what we have achieved. We have:

· reported an 18.3% increase in EBITDA1 to £148.4 million, ahead of our expectations at the time of the flotation;

· maximised output from our three different technologies with total exported electricity up 5.7% to 2.6 TWh;

· continued to reduce leverage with the key net debt to EBITDA1 ratio declining to 3.7 times;

· progressed our wind development portfolio enabling an investment decision to be made on the first project in 2014;

· achieved full compliance with governance rules with the appointment of the final independent non-executive Director; and

· proposed our first ever dividend as a publicly listed company of 6.63 pence per share.

This last point is particularly significant. Utilities are classic income growth stocks and Infinis is no exception. We are committed to paying a full year dividend of £55 million (18.33p per share) for the coming year and our dividend policy to increase at least in line with inflation is unchanged.

So that is the Infinis story: a foundation of operational excellence; a focus on clean, affordable electricity production; and a commitment to a progressive dividend policy.

Ian Marchant

Chairman

Infinis Energy plc

Chief Executive's statement

Overview

Infinis delivered another strong performance during 2013/14 with a record EBITDA1 of £148.4 million and strong operational results across landfill gas and onshore wind. Although we recorded our best health and safety record ever, we continue to strive for further improvements. We also achieved a major milestone in the Company's history when Infinis listed on the London Stock Exchange in November 2013 and subsequently joined the FTSE 250 index. Our growth strategy remains on track as we move to the final pre-construction stages of two new wind farms to be built in Scotland and continue to progress the development of other sites to meet our target of adding an additional 130 to 150 MW of new wind capacity over the next three years.

Earnings

Our earnings for the year benefitted from a solid performance from our landfill gas (LFG) business, a full year's contribution from wind assets added at the end of the previous financial year, additional capacity added to our wind portfolio in the year, high wind speeds and a continued focus on cost control. After adjusting for one-off exceptional items relating to the IPO and refinancing of our operational wind portfolio, EBITDA1 was £148.4 million, representing an increase of 18.3% compared with the previous year.

Operations

During the year we exported 2.6 TWh of electricity, equivalent to 5.7%4 of total generation from renewable sources in the UK. Both our LFG and wind businesses performed well and, in the latter part of the year, there was some improvement in the performance of our smaller hydro business.

Although LFG accounted for around 50% of installed capacity, it generated more than 70% of our power exports in the year due to a solid operating performance and its base-load characteristics. The proportion of electricity sold under the RO regime increased as the migration from the NFFO to the RO regimes continued as planned; 77% of the year's LFG production was sold under the RO regime compared with 72% the year before. The natural decline in landfill gas was broadly in line with our expectations. With the natural decline in landfill gas, and our objective of maintaining a constant operating cost per MW hour, we continued to 'right size' engine capacity, resulting in the withdrawal of 11 MW of installed capacity.

With the commissioning of Tedder Hill wind farm in September 2013 our operational wind portfolio now stands at 274 MW. All our wind assets performed well, with the portfolio achieving an average availability of over 96%. The wind business benefited from good wind speeds, particularly in the last quarter of the financial year. Our strategy to in-source the non-OEM operations and maintenance (O&M) management of our wind farms has now been fully implemented and a dedicated team of experienced wind professionals is now in place. Only turbine O&M activities remain outsourced.

Our much smaller hydro business experienced low rainfall and water levels in the first half and lower than expected availability throughout the year at four of our smaller sites. We have made selective investments to improve performance on a durable basis which resulted in higher availability during the final quarter.

Health and safety

The health and safety of our employees and all who may be affected by our activities is a top priority for us. Recognising that health and safety is very much a team effort, we work with our employees, contractors, landlords and other relevant stakeholders to improve safety for anyone who may be affected by our operations. Our Reporting of Injuries, Diseases and Dangerous Occurrence Regulations (RIDDOR) accident frequency rate dropped from 0.4 to 0.35. We recognise that health and safety can only be maintained through continued focus and attention and so we have rigorous processes in place to maintain a culture of review and improvement. This dedication has been recognised externally through a Gold Award for Health and Safety from the Royal Society for the Prevention of Accidents and an International Safety Award from the British Safety Council. We have now been awarded a Gold Award for each of the last six years.

Future developments

Growth plans: focus on onshore wind

We continue to progress our organic wind development portfolio with a view to build out an incremental 130 to 150 MW by 2017. Two projects, accounting for 98 MW of that target, which are fully consented, have scheduled grid energisation dates and are in the final stages of pre-construction procurement. We have appointed lenders to project finance one of the projects. Our wind development pipeline is at various stages in the planning cycle. In addition to the 98 MW which are in the final stages of pre-construction, we have an additional 17 MW consented, 188 MW awaiting planning approval, and 152 MW at pre-planning development phase.

Regulatory outlook

The Energy Act received Royal Assent in December 2013 and constitutes a major step in the Government's plans to reform the electricity market whilst delivering on its three stated objectives of decarbonising energy generation, ensuring security of supply and providing affordable power to consumers. The new Contract-for-Difference (CfD) regime will not affect Infinis' existing installed capacity which is fully grandfathered under the RO. Although the RO scheme remains open for new accreditations until March 2017, DECC announced in December 2013 that it planned to introduce CfD auctions for established technologies such as onshore wind by the end of 2014. We expect the government to provide more clarity on the transition arrangements between the RO and the CfD schemes and how it plans to structure the CfD allocation process in the coming months. We continue to work with the government through industry associations, participating in consultations and providing direct feedback, to ensure that the revised regulatory framework continues to support onshore wind development, the most affordable renewable power source after LFG.

We believe that we are well positioned to continue to contribute to the UK's renewable energy targets under both the RO and CfD schemes due to our proven track record of building plants to budget and our procurement, commercial, operational and financing expertise.

The outcome of the Scottish referendum in September 2014 will remove some of the uncertainty affecting future renewable capacity investment in Scotland. The ambitious renewable targets set by the Scottish Government work well within a wider single UK market for power where the remainder of the UK relies on the contribution of Scottish renewable power to meet binding EU renewable targets by 2020. Scotland and the rest of the UK are natural partners to secure optimal synergies from investment in renewable capacity and we expect there to be mutually beneficial long-term arrangements in place to support renewable energy regardless of the outcome of the referendum.

Market outlook

With around 50% of our revenues increasing by inflation each year and our contracting strategy of progressively selling forward expected output, the impact of lower power prices in the short-term is limited. We have continued our balanced power contracting strategy of locking in power output on short-term contracts (6-24 months) with licensed offtakers, enabling us to secure good pricing visibility over the next two power trading seasons whilst preserving exposure to expected future price increases in the wholesale power markets linked to the tightening of the reserve margin.

Short-term power prices have softened in recent months due to a combination of lower power demand and lower gas prices following a mild winter. The table below shows our contracted power position for the Group as at 2 June 2014, assuming a normal wind year.

Power sold at fixed prices under the RO scheme has been contracted at £47.60/MWh for Summer 14 and £51.83/MWh for Winter 14/15. Summer 14 and Winter 14/15 correspond to our financial year ending 31 March 2015. Under the RO scheme, in addition to revenues from the sale of power, we also earn revenues from the sale of ROCs, LECs and receive embedded benefits.

Over the medium-term, current forecasts for wholesale power prices in the UK anticipate price rises due to a tightening reserve margin. This tightening is expected to arise from the regulatory driven mandatory decommissioning of old fossil fuel plants, political uncertainty in the run-up to the general election and the referral of the 'Big Six' to the Competition and Markets Authority, all of which may result in much needed additional capacity not being built until the uncertainties are removed.

Going the extra mile

In FY14, we delivered our best financial performance ever, with an EBITDA of £148.4 million, and with the commissioning of the Tedder Hill wind farm we completed, on budget, a significant wind farm construction programme. We also streamlined our capital structure by refinancing ten separate wind project finance facilities into a single debt facility shortly before listing Infinis Energy plc on the London Stock Exchange. We owe these achievements to the superb dedication and commitment of all of our employees who once again went the extra mile during a particularly busy year, for which I offer my sincerest thanks. We remain fully committed to delivering an attractive dividend to our investors based on our existing operating assets and delivering future growth as we build out our onshore wind pipeline. We look forward to paying our first post-IPO dividend in the coming months and are confident we will continue to contribute to the UK's efforts to meet its 2020 renewable targets.

Eric Machiels

Chief Executive

Infinis Energy plc

Operating and financial performance

Introduction

Infinis delivered another strong performance during the financial year ended 31 March 2014 with a record EBITDA before operating exceptional items of £148.4 million, an increase of 18.3% on the prior year.

The financial result was underpinned by a strong operating performance in landfill gas and onshore wind and a significant reduction in overheads.

Adjusted net income increased by £14.1 million to £41.0 million and net debt to EBITDA before operating exceptional items at 31 March 2014 reduced to 3.7 times from 4.4 times at 31 March 2013.

During the financial year ended 31 March 2014 the Group completed the construction of Tedder Hill wind farm, concluding the construction, on budget, of five wind farms from Infinis' organic pipeline.

At the time of the IPO, we refinanced ten project finance facilities with one senior secured loan of £296 million together with ancillary facilities of £33 million and additionally arranged a £50 million revolving credit facility, which was undrawn at 31 March 2014.

At the forthcoming Annual General Meeting the Board will recommend a final dividend of 6.63 pence per share for the period from the date of admission to trading on the LSE to the end of the financial year ended 31 March 2014, consistent with the Group's dividend policy.

Operating performance

Operating performance indicators

We measure our operational success through a combination of operating key performance indicators (KPIs) affecting the level of electricity available for sale. The KPIs for each technology differ. In our LFG business we monitor the reliability of our engine fleet. In our wind and hydro businesses we monitor availability to generate. We define availability as being the time that an asset is available to generate, taking account of the need to service and maintain the asset.

Our LFG portfolio experienced a small reduction in reliability from 95.9% in the year ended 31 March 2013 to 95.1% in the year ended 31 March 2014. Supporting our measure of reliability are two KPIs. Mean time between breakdowns measures how long our engines run between unscheduled outages which improved from 146 hours to 149 hours due to our focus on improving the effectiveness of scheduled maintenance. Mean time to repair measures the time it takes us to repair our engines following an unscheduled outage which increased by 1.8 hours to 10.5 hours in the year ended 31 March 2014.

Availability in wind was similar to the previous year at 96% and hydro availability increased from 76% to 89%, reflecting an increased level of investment in capital expenditure and a more preventative maintenance regime being implemented.

Exported electricity

A strong performance in our wind division and a full year's contribution from wind farms constructed during the previous financial year contributed to a 5.7% increase in total exported power to 2,639 GWh (2013: 2,497 GWh). This is a record performance for Infinis and is equivalent to 5.7%4 of total generation from renewable sources in the UK. Electricity from LFG remains our largest business contributing 1,871 GWh or 71% of total exported output (2013: 1,956 GWh and 78% respectively). Onshore wind grew by 46% to 727 GWh, representing 28% of total exported power (2013: 499 GWh and 20%, respectively). The excellent performance in our wind division resulted from a full year contribution from several new wind farms and favourable wind speeds captured across our operational wind fleet. Our hydro business contributed the balance with output of 41 GWh, remaining broadly similar year-on-year. We manage a combined portfolio of 610 MW of renewable generation capacity6.

Group financial summary

The financial year to 31 March 2014 has been one of significant change for Infinis, with two major events strongly impacting the results of the business.

The first major event, the refinancing of our operational wind portfolio in October 2013, followed on from the refinancing of our LFG portfolio in the previous financial year. The refinancing consolidated ten separate operational wind project facilities into a single £296 million syndicated amortising loan, with ancillary facilities of £33 million. This allowed us to reduce the interest rate on borrowings relating to our operational wind portfolio from around 6% to around 4% and simplify the administration of our debt facilities. The refinancing was awarded Project Finance magazine's European Onshore Wind Deal of the Year and was completed five weeks before Infinis' second major event of the year, the IPO on the London Stock Exchange in November 2013.

EBITDA before operating exceptional items removes the impact of £39.4 million administrative expenses associated with these items and adjusted net income removes a further £19.8 million of costs relating to the refinancing of the operational wind portfolio, and adjusts for the tax impact on the total cost of £59.2 million. The overall pre-tax charge of £59.2 million to deliver these items is considered by the Board to be exceptional in nature and the Group has therefore presented adjusted metrics in the annual report and financial statements, which reflect the non-recurring nature and materiality of these items.

These one-off items are material to understanding the Group's performance in this and the previous financial year and are reflected in the financial review below.

Our results include an estimate of the recycled ROC price for the financial year. In view of the mild temperatures and strong wind yields registered throughout the winter 2013/14 season, we have taken a prudent view on the value of this recycled element.

Group revenue and revenue recognition

We sell our generation under two regulatory support mechanisms known as the Non-Fossil Fuel Obligation scheme (NFFO) and the Renewables Obligation scheme (RO). NFFO contracts were established as the original support mechanism to encourage renewable generation in the UK. These contracts are fixed price contracts increasing annually by inflation.

The RO regime was implemented to encourage further investment in the renewable industry, replacing the NFFO regime. The major revenue components under RO are (1) Power (2) Renewables Obligation Certificates (ROCs) and (3) Levy Exemption Certificates (LECs). The Group sells its RO generation to a number of the large scale suppliers of electricity in the UK through power purchase agreements (PPAs).

An element of ROC revenue, known as the recycled element, is received following the publication of the recycle price by Ofgem. We estimate the value of the recycled ROC during the financial year. When Ofgem subsequently announce the value of the recycled ROC, which normally occurs during the October immediately following the financial year, any difference between the amount announced and our estimate will give rise to an "out of period" variance.

In addition we receive other income relating to embedded benefits. These are benefits received from electricity suppliers that relate to being part of the distribution network. We also receive Triad income which is income derived from generating at certain specific points in winter when demand for electricity is at its highest.

A key driver of our performance is the average selling price (ASP) received from sales of electricity. To compare our ASPs on a like-for-like basis we have adjusted for out of period recycled ROC amounts (as explained previously) and revenues recognised in the year ended 31 March 2013 (which related to prior years) following the settlement of a legal dispute with Ofgem, to enable year on year comparison on an underlying basis. These items are explained in the divisional commentaries below. The following table bridges our ASP:

Operating portfolio: Landfill gas

In the UK, Infinis is the market leader in generating electricity from landfill gas. We account for around 40%4 of all electricity generated in the UK from LFG and the business generated a gross profit of £107.6 million in the year to 31 March 2014 (2013: £114.8 million). In this financial year we have exported 1,871 GWh of electricity from LFG sources (2013: 1,956 GWh), a 4.3% decline in output, broadly in line with management expectations.

The table below reconciles statutory revenue to underlying revenue adjusting for certain non-recurring items. Underlying revenue in 2013 has been adjusted by £7.8 million in respect of the settlement of a legal dispute with Ofgem, the current year netting of certain income and costs which were previously recognised on a gross basis and out of period recycled ROCs. In 2014 the impact on revenue from out of period recycled ROCs was £0.5m.

Our underlying revenue performance was broadly in line with the prior year with the exported volume decline in line with our expectations and offset by higher average selling prices. Our adjusted ASP per MWh exported was £85.29 in 2014 compared to £81.64 in 2013. The underlying improvement was due to higher realised pricing and an increase in the proportion of generation sold under the RO regime. The proportion of power sold under the RO regime increased from 72% to 77%. Under the RO regime we receive fixed elements of renewable support, recycled RO income and also the wholesale power price, whereas under the NFFO regime we receive a fixed price only. The all-in price achieved under the RO regime is significantly higher than under the NFFO regime.

We have continued our balanced power contracting strategy of locking in expected future generation by entering into short-term contracts (6-24 months) with licensed off-takers, enabling us to secure good pricing visibility over the next two power trading seasons whilst preserving exposure to expected future price increases in the wholesale power markets linked to the anticipated tightening of the reserve margin.

Operating expenses in 2013 included royalty costs on revenues recognised relating to the Ofgem settlement, balance sheet releases following reviews during the 2013 financial year and a change in recognition relating to netting of revenue and costs in 2014. Adjusting for these items underlying prior year costs would have been £61.7 million. The underlying increase of £2.8 million to £63.8 million in the current year was driven by a reallocation of overhead expenses to direct costs, increased operating costs resulting from the wet winter period and an increase in royalties due to the portfolio mix of sites.

On an underlying basis the gross profit margin for the year ended 31 March 2014 was 62.8% compared to 64.0% in the prior year.

We continue to drive operational performance within the LFG business through the standardisation of maintenance processes, the rationalisation of generating assets in line with gas yield at each site and a continued focus on efficiency. The combination of continued operational streamlining and use of technology, such as centralised monitoring and performance management from our 24/7 Logistics Centre, provide us with an LFG business well positioned for the future. Through our Lancaster Centre of Engine Overhaul Excellence, we overhaul our engines in-house and continue to provide best-in-class technical training capabilities for our engine technicians across the UK.

Operating portfolio: onshore wind

Infinis is one of the leading onshore wind operators in the UK, with 274 MW6 of installed capacity across 16 sites which exported 727 GWh in the year to 31 March 2014 (2013: 499 GWh). This increase was due to three factors: the full year contribution in this financial year of five new wind farms built and commissioned, and two operating wind farms acquired, in the course of the 2013 financial year; the commissioning of Tedder Hill in September 2013; and strong wind speeds across the UK throughout the winter period which benefited all our operating wind farms.

All our wind sites are accredited under the RO regime. We sell our power through long-term power purchase agreements (PPAs) with prices predominantly set by reference to the day ahead wholesale power price. The green power benefits (ROCs and LECs) are also sold under long-term PPAs either together with the wholesale power element or separately directly to a supplier.

Revenue has increased to £67.0 million from £43.3 million driven by an increase in both exported volume and price. Average selling prices per MWh increased by £1.58 to £90.21 from £88.63 per MWh in the previous year on an adjusted basis.

Our strategy to in-source all of our balance-of-plant operations and maintenance functions in-house was fully implemented during the year. We do not service and maintain the turbines as these remain contracted with the original turbine suppliers. We maintained our availability similar to the prior year at 96%.

The onshore wind business' gross profit increased from £33.2 million to £54.1 million and gross profit margins increased by 4.0% to 80.7%. The current year has benefited from, and the previous year was adversely impacted by, one-off items of £1.3 million and £0.8 million respectively. Adjusting for these items gross profit margins remained broadly flat at approximately 79%.

Our wind farm portfolio is of a substantial scale and is relatively young, with a weighted average age of less than five years. We have a dedicated team of experienced wind professionals in place and are well placed for future growth.

Operating portfolio: hydro

We have a small portfolio of ten hydro sites mainly located in Wales and England. Total capacity is 17 MW and comprises reservoir and run-of-river power plants. Our total exported output to the grid was 41 GWh, similar to the 42 GWh in the previous year. The average availability of our hydro power plants was 89%, up from 76% in the previous year. The improvement in availability was due to an increased level of investment in capital expenditure in the hydro business and a more preventative maintenance regime being implemented.

Underlying average selling price per MWh was £91.02 in the current financial year, compared to £81.70 in the previous year. The improvement in ASP was due to two factors, the switch of NFFO revenue to RO revenue and a renegotiation of the PPA that the power is sold under. All our hydro sites are now accredited under the RO regime. Gross profit has remained broadly in line with the previous year but margins have fallen. The fall in divisional gross profit of £0.4 million to £2.2 million is mainly due to a royalty adjustment falling into this financial year.

Administrative expenses

Administrative expenses of £15.6 million were £9.6 million lower than the previous year, and in line with expectations at the IPO. The reduction was mainly attributable to three factors: (1) we actively reduced the cost base which resulted in a year on year saving of £4.2 million; (2) we reclassified £1.5 million from administrative expenses to operating expenses to reflect the way we manage the business; and (3) in both years there have been non-recurring items which contributed to a £4.2 million reduction, most notably the collection of accrued income and bad debt provisions previously made as a result of an increased focus on working capital management.

Operating exceptional items

The Group's £39.4 million operating exceptional items comprised £37.1 million of costs incurred in relation to the IPO and £2.3 million relating to the refinancing of the wind portfolio. In the previous financial year the £2.2 million charge comprised the costs of restructuring to enable the Group to issue a new bond, and to cancel and prepay a banking facility.

IPO costs

The £37.1 million of costs relating to the IPO comprised £15.6 million of advisors' and professional services firms' fees and £21.5 million relating to the Group's cash and share-based incentive arrangements. Advisor and professional fees were in line with our original estimate of £16.0 million disclosed at the half year. On 1 November 2013 the Board approved the restructuring of the Group's cash and share-based incentive arrangements, conditional on admission of the shares of Infinis Energy plc to the London Stock Exchange. Based on Infinis Energy plc's opening share price at listing of £2.60 per share, this resulted in a charge to the statement of comprehensive income of £22.6 million (of which £1.1 million had been expensed in previous periods) resulting in a current year charge of £21.5 million.

The Group also entered into an agreement with Monterey Capital II S.a r.l.18, a company controlled by Terra Firma, whereby Monterey Capital II S.a r.l. agreed to fund the Group's obligations in respect of the restructured cash and share-based incentive arrangements through subscription of capital, which resulted in an increase in share capital by £0.01, and an increase in share premium of £22.6 million.

Refinancing of the operational wind portfolio costs

The £2.3 million administrative costs incurred in connection with refinancing the operational wind portfolio mainly comprised legal fees.

Depreciation, amortisation and impairment

The depreciation charge of £54.1 million increased by £4.1 million (2013: £50.0 million) mainly due to the full year impact of depreciating four wind farms which became operational in the last quarter of 2012/13, and the part year depreciation of Tedder Hill wind farm which was commissioned in September 2013. The amortisation charge of £23.5 million was broadly consistent with the previous year (2013: £23.4 million).

There has been no impairment of non-current assets during the year (2013: £nil).

Net finance costs

Net finance costs were £59.2 million including exceptional refinancing costs of £19.8 million (2013: £46.9 million and £5.6 million, respectively). On an underlying basis net finance costs excluding exceptional finance costs were £39.4 million (2013: £41.3 million) reflecting a reduction in the Group's average interest rate as a result of current and prior year refinancing activities.

The exceptional finance costs for the current financial year related to the settlement of interest rate swaps with £12.8 million recycled from the hedging reserve resulting from swap breakage costs incurred of £21.5 million (2013: income of £2.9 million resulting from £10.5 million recycled from the hedging reserve resulting from swap breakage costs incurred of £7.5 million) and the write-off of unamortised loan costs of £7.0 million (2013: £4.7 million) resulting from refinancing of debt facilities. Additionally in the previous year there was a £3.8 million exceptional finance cost relating to the redemption of the £275 million 9.125% bond.

Taxation

For the year ended 31 March 2014 the Group has a total tax credit of £16.0 million (2013: £6.0 million) comprising a corporation tax charge of £10.5 million (2013: £7.0 million) and a deferred tax credit of £26.5 million (2013: £13.0 million credit). 

The current year corporation tax charge of £10.5 million included £6.3 million relating to current year corporation tax, a charge of £3.7 million due to changes in the Group structure pre-listing, relating to previously untaxed inter-company interest income becoming taxable, and prior year adjustments of £0.5 million.

The deferred tax credit of £26.5 million comprises three elements (1) £12.3 million credit due to timing differences mostly relating to tax losses within our operational wind business which cannot be surrendered to other Group companies at the current time (2013: timing differences gave rise to a credit of £8.5 million); (2) £11.5m credit due to corporation tax rate changes (2013: £4.1 million); and (3) a £3.7 million reduction due to the taxing of inter-company interest income.

The underlying tax position of the Group, excluding the effects of exceptional operating and exceptional finance costs, are a £15.0 million corporation tax charge and a £6.7 million deferred tax credit.

The underlying effective tax rate of 26% is higher than the rate of corporation tax (23%) because not all of the Group's income and capital expenditure qualifies for tax relief. Looking ahead, as the operational wind portfolio matures the effective tax rate should decrease to a rate slightly higher than the standard UK corporation tax rate.

Adjusted net income

In order to provide an appropriate measure of its profitability the Group reports adjusted net income which is defined as net income after adding back amortisation and exceptional items both net of tax. Adjusted net income for the year ended 31 March 2014 was £41.0 million (2013: £26.9 million). The loss from continuing operations (2013: profit) was adjusted for operating exceptional items of £39.4 million (2013: £2.2 million), exceptional finance costs of £19.8 million (2013: £5.6 million), amortisation of £23.5 million (2013: £23.4 million) net of tax on all of the above of £29.9 million (2013: £13.1 million).

Cash position and finance facilities

Cash and cash equivalents was £81.1 million at 31 March 2014 compared to £47.1 million at 31 March 2013. An analysis of cash flows is set out below:

Net cash flow from operating activities

The Group generated a net cash inflow from operating activities of £65.3 million in the year to 31 March 2014 compared to £74.8 million in the prior year. This performance was after the cash impact of exceptional items of £37.3 million for the current year (2013: £2.2 million). The net cash inflow from operating activities would have been £102.6 million (2013: £77.0 million) if net cash flow had excluded exceptional items.

Interest paid

Interest paid was £39.1 million compared to £48.6 million in the prior year. The reduction in interest paid mainly relates to the prior financial year where the Group paid the cash equivalent of 14 months' interest on the £275 million bond resulting from the refinancing of this bond compared to the 12 months' interest in the current financial year. Additionally, borrowing costs have reduced following the refinancing of the bond and the operational wind portfolio.

Working capital

The working capital outflow of £2.6 million (2013: £0.6 million) is due to the timing of payments. We have continued to focus on billing and cash collection processes throughout the year.

Capital expenditure

Commentary on capital additions is provided in the commentary on the summary balance sheet below. Cash capital expenditure in the year was £38.7 million (2013: £73 million), higher than capital additions of £32.2 million (2013: £81.8 million), reflecting settlement of amounts incurred in the previous year primarily relating to wind construction.

Cash flows from other investing activities

In the previous year the Group acquired three wind farms (including one wind farm under construction) for a total consideration of £16.1 million (net of cash) and paid deferred consideration of £1.9 million in respect of a wind development acquisition that achieved planning consent.

Financing activities

The net cash inflow from financing activities was £7.2 million (2013: £57.9 million outflow). In October 2013 we paid a dividend of £44.3 million to our then sole shareholder, Monterey Capital II S.a. r.l. (2013: £60.6 million).

In October 2013 the business refinanced its operational wind portfolio. We consolidated ten separate operational wind project facilities with drawn debt totalling £254.8 million into a single seven year £296 million syndicated loan (with ancillary facilities of £33.3 million), closed out interest rate swap instruments at a cost of £21.5 million and incurred fees of approximately £10 million. During the previous year the business refinanced almost £340 million of facilities (including the £275 million 9.125% bond maturing in 2014) with the issue of a new £350 million 7% bond maturing in 2019.

Net debt

Net debt at 31 March 2014 was £547.3 million (2013: £555.6 million). Net debt to EBITDA (before operating exceptional items) as at 31 March 2014 was 3.7 times (2013: 4.4 times). The reduction reflects the increase in EBITDA before operating exceptional items and the reduction in net debt.

Tax

The Group paid £2.0 million of corporation tax during the year, compared to a net repayment of £0.8 million received in 2013. In 2013 we benefited from the repayments of overpaid tax for financial years 2010 and 2011. In 2014 the Group continued to benefit from these repayments but we would expect our cash tax position to normalise in 2015.

Non-current assets were £926.8 million as at 31 March 2014 a decrease of £45.6m on the prior year. The decrease reflects the depreciation and amortisation charges in the year of £77.6 million which exceeded capital additions of £32.2 million.

Capital additions in the current year were £32.2 million, compared to £81.8 million in the year ended 31 March 2013. The year on year reduction was predominantly due to the lower levels of wind construction capital expenditure.

LFG capital additions were £19.4 million compared to £18.2 million in the prior year, and included £2.4 million for redeployment of engines to match engine size to available gas, and £0.5 million relating to the installation of additional gas isolation valves to allow repair and maintenance work to proceed on individual engines without disrupting generation from other engines on the same site.

Wind capital additions comprised £7.2 million construction spend, primarily relating to the completion of Tedder Hill wind farm and £5.2 million additional investment in our wind pipeline. Hydro capital additions were £0.3 million higher than the prior year, with investment made to improve availability.

The Group's corporation tax liability recognised in the balance sheet as at 31 March 2014 was £10.2 million, compared to £1.6 million last year as a result of an increase in the Group's current tax expense and timing of cash tax payments.

The Group's net deferred tax liability as at 31 March 2014 of £75.8 million comprises a deferred tax asset of £16.3 million relating to tax losses that cannot be accessed at the current time and deferred tax liabilities of £92.6 million. Deferred tax liabilities relate to property, plant and equipment (£28.4 million) arising as the cumulative tax relief claimed by the Group on capital allowances is higher than the depreciation charged and intangible assets (£64.1 million) where we amortise intangible assets though the profit and loss account but we do not obtain tax relief.

Capital resources

As at the balance sheet date net debt3 was £547.3 million, a decrease of 1.5% against the prior year. We have benefited from having full year EBITDA contributions from the wind farms that were under construction in 2013.

The Group has three primary funding facilities. The LFG business has a £350 million bond secured on the LFG assets maturing in February 2019. The operating wind business has total facilities secured on the wind assets of approximately £325 million, comprising an amortising term loan (of which £291.6 million was outstanding as at 31 March 2014), and £33.3 million of ancillary facilities. This facility matures in October 2020. The Group has a £50 million revolving credit facility (RCF) which matures in September 2017. The RCF was undrawn at the year end.

Proposed dividend

The Directors propose a dividend from the date of Admission to trading on the LSE to our financial year end of £19.9 million (6.63 pence per share). The dividend will be payable to shareholders on 28 August 2014 following approval at the Company's Annual General Meeting. The dividend is in line on a pro rata basis with the dividend policy outlined at the time of the IPO of £55 million for the first full financial year ending 31 March 2015 and increasing from that point at least in line with inflation.

Going concern

Having made enquiries, the Directors consider that the Company and its subsidiaries have adequate resources to continue in operation for the foreseeable future, and that it is therefore appropriate to adopt the going concern basis in preparing the consolidated and individual financial statements of the Company. The Directors consider that a robust going concern assessment process was undertaken and the results were discussed and challenged by the Audit Committee.

Liquidity risk, the risk that the Group will have insufficient funds to meet its liabilities, is managed by the Group's Treasury function. The Group can have significant movements in its liquidity position due to movements in price, working capital requirements and phasing of the future wind development and construction projects. Treasury is responsible for managing the banking and liquidity requirements of the Group, risk management relating to interest rate risk, and managing the credit risk relating to the banking counterparties with which it transacts including ensuring compliance with any banking covenants. Short-term liquidity is reviewed daily by Treasury, while the longer term liquidity position is reviewed on a regular basis by the Board.

In relation to the Group's liquidity risk, the Group's policy is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Company's reputation. The Group finances activities with a combination of external bank loans and cash from operating activities. During the year ended 31 March 2013 the Group issued a £350 million bond maturing in February 2019 and during the year ended 31 March 2014 the Group entered into a new finance facility comprising a seven year amortising term loan facility of £296 million (of which £291.6 million was outstanding at 31 March 2014) and ancillary facilities of £33.3 million, and renegotiated a new Revolving Credit facility of £50 million. Based on management forecasts, the Group has adequate headroom and will continue to meet liabilities as they fall due.

Principal risks and uncertainties

Landfill gas availability

Gas may decline faster than anticipated due to inaccurate estimates and/or changes in waste volume or mix, resulting in lower revenues.

Mitigation/comments:

Estimates and methodology for gas availability and forecasting were independently reviewed prior to the IPO in November 2013. The results of the independent review were consistent with management's estimates.

Management's estimates are regularly updated to reflect latest waste volumes/mix and tipping plans provided by landfill operators.

We have a good track record of forecasting available gas. Over the last five years output from landfill gas has varied between plus and minus 2% compared with budget.

Change: No change to risk profile

Failure to extend leases/early termination

We do not own any of our operating sites and are dependent on lease arrangements. Failure to renew expiring leases could result in a reduction in revenues.

Failure to comply with existing lease terms could result in early termination resulting in a reduction in revenues.

Mitigation/comments:

We have recently agreed terms for extending circa 10 MW of expiring leases reducing the amount of future revenues at risk from failure to extend leases. This maintains our 100% success rate for lease renewals. Infinis has a dedicated compliance function to monitor compliance with our environmental obligations (e.g. maintaining permits). We recently launched an improvement programme designed to streamline our royalties payment process and to improve the level of service provided to counterparties.

Change: Decrease in risk profile

Increasing proportion of revenues dependent on wholesale power prices

A proportion of our LFG output is sold at fixed prices under the NFFO regime. All of these contracts will expire by 2019 and, as they expire, output will be sold under the RO regime. A significant proportion of revenues derived from RO sales is dependent on wholesale power prices. Due to the volatility of wholesale power prices, our revenues are likely to be more volatile than has been the case historically. The proportion of Group revenue derived from wind generation is expected to increase as we deliver on our growth agenda. We have historically sold wind under long-term sales agreements where the price is referenced to day-ahead wholesale power prices. Due to the volatility of wholesale power prices (and intermittency of wind), our revenues are likely to be more volatile than has been the case historically.

Mitigation/comments:

Although year-on-year revenues may be more volatile as a result of the migration of LFG output from the NFFO to RO regime, all-in prices achieved from RO sales are significantly higher. Around 50% of revenue obtained from RO sales is fixed and increases annually by RPI. We mitigate short- to medium-term wholesale power price volatility by selling ahead a proportion of our expected LFG output at fixed prices. All of our existing wind generation has been accredited under the RO regime, with around 50% of expected revenue fixed and increasing annually by RPI. Exposure to the wholesale power price element is mitigated by a £30/MWh floor price included in a number of long-term sales agreements. New wind farms will either be accredited under the RO regime or under the CfD regime currently being introduced (which offers fixed prices).

Change: Increase in risk profile

Counterparty risk

We sell our generation output and related products to a small number of UK counterparties under a variety of contractual relationships. Failure of a counterparty to honour a contract may result in loss of revenue for power already delivered or, for power not yet delivered, a loss of future revenue where we are unable to enter into a replacement contract with another counterparty.

Mitigation/comments:

We enter into contracts with creditworthy counterparties and have recently added additional counterparties to reduce concentration risk. We are also exploring alternative routes to market.

We have made significant improvements in working capital management and we will seek to maintain these improvements to ensure any potential loss for power already delivered is minimised.

Change: No change to risk profile

Commodity price risk

Electricity prices are determined by a number of factors including electricity demand and the price of certain commodities (oil, gas, coal and carbon). Commodity prices have a direct impact on the cost of generation and therefore electricity prices. As we are a price taker and do not set the price of electricity our revenues will be affected by changes in commodity prices.

Mitigation/Comments:

A significant proportion of our revenue is fixed and increases annually in line with inflation. We reduce short- to medium-term revenue volatility by selling power forward at fixed prices in accordance with our trading strategy. Our largest single cost item is royalties which are directly correlated with revenues and is therefore naturally hedged.

Change: Increase to our risk profile

Funding risk

Although we have sufficient liquidity to meet our current needs, our plan to build 130 MW to 150 MW of new wind capacity over the next three years is dependent on being able to raise new debt. If we are unable to so then our ability to grow the business may be threatened.

Mitigation/comments:

We have experience of raising project finance and are well known to lenders. Until we refinanced our operational wind portfolio in October 2013 with a single facility (winner of 'European Onshore Wind Deal of the Year') we operated ten separate project finance facilities provided by nine lenders. It is notable that throughout the recession wind farm developers (including Infinis) were able to raise project finance. We have recently appointed lenders to provide finance in respect of a 43 MW consented site.

Change: No change to risk profile

Changes in government support for renewables

The Group is dependent on regulatory support for its existing generating capacity, through the NFFO and RO regimes, for a significant proportion of its revenues. Changes to this support could have a material impact on our revenues.

Continued regulatory support is required for our plans to build 130 MW to 150 MW of new wind capacity over the next three years. New wind farms commissioned after 2017 will receive support under new arrangements (the CfD regime), with a three-year transition period between 2014 and 2017. Details of how the new arrangements will work in practice are still emerging. It is unclear what impact the new regime will have on the prices we will achieve from new generation.

Energy policy uncertainty in the run-up to the 2015 general election is likely to increase. In addition there could be changes in support levels offered to new generation following the election which could affect our growth agenda.

Mitigation/comments:

Over the years the UK has made several changes to the support mechanisms for renewable power but has adopted a consistent 'grandfathering' approach throughout. There are no indications that this approach will change. The UK requires additional renewable generation to meet its binding 2020 targets. We will continue to lobby government, through industry trade bodies, of the advantages of continued on-shore wind investment as being the lowest cost source of renewable energy. The UK requires additional renewable generation to meet its binding 2020 targets.

Change: Increase in risk profile

Scottish referendum

The Scottish referendum will take place on 18 September 2014. In the event of a 'yes' vote it is unclear what regulatory support will be available for renewables. As a significant proportion of our existing wind capacity and wind farm pipeline is located in Scotland, revenues from operational wind farms located in Scotland, and our ability to execute our growth agenda, could be threatened, resulting in lower revenues.

Mitigation/comments:

Although it is unclear what impact Scottish independence would have on the support for existing renewable capacity and the economics for new wind farm development, the Scottish Government has indicated its strong support for renewable energy. 'RUK' would still have obligations to meet its 2020 EU targets for renewable energy with Scotland being an obvious source given its strong wind resource. This may result in regulatory support for existing renewable capacity and new wind developments continuing, albeit possibly in a different form.

Change: No change in risk profile

Weather

Weather impacts both demand for electricity and our ability to generate. Weather can have a small impact on LFG production but has a much greater impact on wind and hydro. As wind assumes an ever greater share of our generating capacity, output volatility is likely to increase resulting in greater revenue volatility.

Mitigation/comments:

Although wind is increasing as a proportion of total generating capacity, LFG remains significant due to a combination of higher installed capacity and its base load characteristics. We have sufficient liquidity to ensure to be able to continue to meet all of our commitments regardless of wind revenue volatility for the foreseeable future.

Change: an increase in risk profile

The balances on reserves as at 1 April 2012 have been presented under the principles of common control accounting.

Included in cash balances at 31 March 2014 is restricted cash of £3,600,000 (2013: £nil).

Infinis Energy plc

Notes forming part of the preliminary financial statements

Basis of preparation

The financial information presented within this document does not comprise the statutory accounts of Infinis Energy plc for the financial years ended 31 March 2014 and 31 March 2013 but represents extracts from them. These extracts do not provide as full an understanding of the financial performance and position, or financial and investing activities, of the company as the complete Annual Report.

The statutory accounts for the financial year ended 31 March 2014 have been reported on by the Company's auditor and will be delivered to the registrar of companies in due course. The reports of the auditor were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. The Annual Report, including the auditor's report, can be downloaded at www.infinis.com.

The financial information is presented under the principles of common control accounting, as if Infinis Energy plc had always owned the Infinis Holdings Group. Accordingly the comparative information represents the results for Infinis Holdings, which was formerly the holding company of the Infinis Group. Infinis Holdings was acquired by Infinis Energy plc on 22 October 2013 as a step to prepare the Group for admission to the London Stock Exchange.

Interest costs for the comparative period have been re-presented from the amounts previously disclosed as Infinis Holdings. A £10.5 million credit to interest has been recycled from the hedge reserve to the income statement in respect of cancellations of interest rate swaps. This amount is presented within exceptional net finance costs and does not affect adjusted net income. Other than the representation within reserves, there has been no adjustment to the consolidated balance sheet or cash flow statement.

(a) Significant accounting policies

The accounting policies applied in these financial statements are the same as those applied in the Group's consolidated financial statements as at and for the year ended 31 March 2014.

During the year the Group has adopted the following new standards and amendments to standards:

- Amendments to IAS 1: Presentation of Financial Statements

- IFRS 13: Fair value measurement

- Amendments to IFRSs: Financial Instruments: Disclosure of Transfers of Financial Assets

(b) Judgments and estimates

In preparing these financial statements, management necessarily makes judgments and estimates that have a significant effect on the values recognised in the financial statements. Changes in the assumptions underlying these judgments and estimates could result in a significant impact to the financial statements.

The significant judgments made by management in applying the Group's accounting policies and key sources of estimation uncertainty are the same as those applied to the consolidated financial statements as

at and for the year ended 31 March 2014.

1. Segment information

Segment information is prepared in conformity with the accounting policies of the entity as disclosed in note 4 of the annual report and IFRS accounting standard IFRS 8, Operating Segments.

Segment revenues, expenses and capital expenditure are those directly attributable to a segment and the relevant portion that can be allocated to the segment on a reasonable basis.

Description of segments

The Group is organised into the following segments, all of which operate in the UK and form the basis of reporting for management and the Board:

LFG

The LFG segment operates and maintains electricity generators, fuelled by the methane gas extracted from landfill sites across the UK.

Wind

The wind segment operates and maintains wind farms across sites in the UK, and a number of wind farm sites at various stages of development.

Hydro

The hydro segment operates hydroelectric generators at sites across the UK.

Unallocated

Unallocated costs relate to central overheads and other costs not directly attributable to the segments.

Information regarding the results of each segment is included below. Performance is measured based on segment profit before tax, as included in the internal management reports. Segment profit is used to measure performance as management believes that such information is the most relevant in evaluating the results of segments relative to other entities that operate within these industries.

Non-GAAP measure

EBITDA excluding operating exceptional items is a non-GAAP measure defined as earnings before interest, tax, depreciation, amortisation, impairment, and before operating exceptional items.

Adjusted net income is a non-GAAP measure defined as profit for the year before amortisation and impairment of intangible fixed assets, total exceptional items and the tax thereon.

1. Segment information (continued)