28th Apr 2008 07:00
Renewable Energy Holdings plc28 April 2008 28 April 2008 Renewable Energy Holdings plc ("REH" or "the Company") Unaudited preliminary results for the year ended 31 December 2007 Renewable Energy Holdings plc (AIM: REH), the AIM quoted investor and operatorof proven and innovative renewable energy technologies, is pleased to announceits unaudited preliminary results for the year ended 31 December 2007. Financial Highlights • Revenue increased to £4.6 million (six months to 31 Dec 2006: £1.5 million) • Net loss for the year was £1.5 million, significantly better than the £2.3 million loss expected • Placing and Warrant exercise raised £8.35 million (before expenses) • Project finance facility secured with Standard Chartered Bank (SCB) for €135 million to finance expansion of wind portfolio: €37 million already drawn down for Kesfeld and Kirf wind farm projects • Share subscription post year end of £3 million by EDF Energies Nouvelles Operational Highlights • CETO collaborations de-risk route to market: • EDF Energies Nouvelles (EDF EN): roll-out in Northern Hemisphere and Reunion Island, currently identifying viable sites • Carnegie Corporation: exclusive rights to develop commercial installations of CETO in Southern Hemisphere (excluding Reunion Island) for £4.75 million (£750,000 recognised in current reporting period), plus a licence fee of 2% of total investment for each project and an Annual Royalty of 2.5% of net earnings • REH maintains 100% ownership of CETO intellectual property • 12.6MW expansion of wind assets in Germany, bringing capacity to 42.5MW • Diversification of wind portfolio in progress, with new sites in Poland and Wales: on track to achieve 150MW wind capacity by 2010 • New Power Purchase Agreement negotiated for Welsh landfill gas project doubling revenue • Strong pipeline of potential investments • Appointment of Wayne Keast of Consensus to the Board of REH as a Non-executive Director Commenting on the results, Mike Proffitt, Chief Executive of REH, said: "I consider this year to have been a milestone year in the establishment of theGroup's financial stability, project pipeline and a model for the commercialdevelopment of our unique wave energy device, CETO. "With our portfolio of renewable energy assets including wind, biogas and waveenergy, I feel the time has now come to build on the work of the last threeyears and deliver a company that will be both a sound investment and a marketleader in the renewable energy sector." For further information please contact: Mike Proffitt, Chief ExecutiveRenewable Energy Holdings plc Tel: 01624 641199 Katherine RoePanmure Gordon - Broker to REH Tel: 020 7459 3600 Richard SwindellsNabarro Wells - Nominated Adviser to REH Tel: 020 7710 7400 Emma Kane / Samantha Robbins / Paul DulieuRedleaf Communications Tel: 020 7822 0200 Chairman's Statement 2007 has been a significant and encouraging year in the development of theCompany. With the 12.6MW expansion of our wind assets in Germany addingmaterially to our German revenues, we have made good progress in the operationof our wind farms. Projects for new wind farms in Poland and Wales areprogressing well. Technical and commercial performance of our small methanegas project in Wales has been dramatically improved. There has also beensubstantial technical progress with the development of the pre-commercialversion of our proprietary wave energy technology (CETO), including putting inplace commercial arrangements to roll out the technology in both Northern andSouthern hemispheres. Work has started on site on our 30MW wind project in Poland and the Boardexpects the wind regime there to support a load factor of over 30%. Ournegotiations for the acquisition of a 69MW wind farm in Wales are at an advancedstage, adding confidence to our early predictions of 150MW of wind capacity onthe Company's balance sheet within five years from our start up in 2005. Whilst still under development, the Company's unique wave energy technology(CETO) started on its route to market with the establishment of two StrategicPartner Relationships - one with EDF Energies Nouvelles SA for the Northernhemisphere and one with the Carnegie Corporation for the Southern hemisphere.The Board is delighted with the quality of these Strategic Partners and believesthese partnerships offer prospect of significant value creation for shareholderswhilst minimising the financial and human resource requirements of the Company.The Intellectual Property relating to CETO remains 100% with the Group. We have seen turbulent times on AIM and, in particular, the challenge of lack ofliquidity in the stock of small cap companies, often leading to theirunder-valuation. The Board believes it is firmly on track in delivering thevision and goals of the Company outlined when it was floated in 2005, and thatit is well placed to add significant value in the months ahead. J W BakerChairman Chief Executive Officers Report I consider this year to have been a milestone year in the establishment of theGroup's financial stability, project pipeline and a model for the commercialdevelopment of our unique wave energy device, CETO. In the first part of the year we stabilised the 4.6MW expansion of Kesfeld windfarm in Germany and commissioned the 8.0MW Kirf wind farm on time in July,bringing German capacity to 42.5MW. We negotiated a new Power PurchaseAgreement on the Landfill Gas Plant in Wales, raising the earnings rate from thebelow market rate of £52.10 per megawatt hour to a weighted average of £104.61per megawatt hour between December 2007 and March 2009. Additionally, we sold rights to use CETO technology in the Southern hemisphere,discussed later in this report. The effects of these activities saw significant growth in the Company's revenueyear on year, from £1,456,035 in the six months to 31 December 2006 to£4,584,910 in the year to 31 December 2007 (including £750,000 for recognitionof the sale of CETO rights). During the same comparative periods, operational expenditure of £1,939,949 forthe six months to December 2006, was £3,502,864 for the year to 31 December2007. The net performance of the Company being a net loss for the year of £1.5million, significantly better than the £2.3 million loss expected. Our Proven Technology Assets The completion of this year sees a settling down of all engineering issues onthe commissioning of German wind farms. We have an appreciation of the windregime and we have studied this across the whole of Germany, securing theknowledge that our sites are performing on and slightly ahead of national windstatistics. Moving now into Poland and Wales removes our sensitivity to the wind performanceof only one region and will bring a healthy diversification to our portfolio. CETO Technology The PB Power Independent Report on CETO published at the end of 2006 gave usvalidation of our views as to the probability of commercial success, as a resultdevelopment costs in 2007 have been capitalised. Much of this success will come from the relatively low capital investmentnecessary for our technology which is derived from the simplicity of CETO'sfundamental design. CETO pumps high pressure sea water on-shore, allowing thegeneration of electricity to be undertaken on land and without the extra cost ofprotection and transmission engineering. We have determined the regions of the world most suitable for the commercialexploitation of CETO and with the results of this review determined theappropriate Strategic Partnerships to roll-out CETO globally. Carnegie Corporation Limited have agreed to purchase the rights to use the CETOtechnology in the Southern Hemisphere for £4,750,000 (only £750,000 of the salesprice has been recognised in the current reporting period), plus a licence feeof 2% of total investment for each project and an Annual Royalty of 2.5% of netearnings. From the receipts of the Sale-of-Rights funds, we are able to complete CETO'scommercial development work without deploying existing cash resources. In January 2008 EDF Energies Nouvelles SA invested £3,000,000 in the company andhas entered into a Collaboration Agreement with the Company which gives themrights to Joint Venture the commercial roll-out of CETO in the Northernhemisphere. Each Joint Venture will pay a 3% Licence Fee to the company. In these agreements we feel that we have secured a commercial developmentstructure which builds your Group's income producing capacity worldwide, withoutrisking an over stretch of our resources, while at the same time maintains 100%ownership of CETO Intellectual Property. In parallel with the completion of development work, we are busy identifyingsites in the Northern hemisphere. These sites include regions of Europe where the tariff structure offers CETOprojects high returns on investment, regions such as North West Canada and theUSA where financial incentives are focused more on capital grants and taxcredits, and regions such as islands, where high returns are available fromreplacing high cost imported fossil fuels and for providing low cost, carbonfree desalination. With our portfolio of renewable energy assets including wind, biogas and waveenergy, I feel the time has now come to build on the work of the last threeyears and deliver a company that will be both a sound investment and a marketleader in the renewable energy sector. Michael J ProffittChief Executive Officer 25 April 2008 Unaudited consolidated income statement for the year ended 31 December 2007 Unaudited Audited Year ended Six months ended 31 December 31 December 2007 2006 Note £ £ Revenue & gross profit 4,584,910 1,456,035 Other operating income 296,040 -CETO development expenses - (555,310)Administrative expenses (5,288,439) (2,013,114) ________ ________ Loss from operations (407,489) (1,112,389) Finance costs 9 (1,148,699) (411,988) Finance income 177,458 70,926 _________ _________ Loss before tax (1,378,730) (1,453,451) Tax expense 3 (72,732) (85,516) ________ ________ Loss after tax attributable to the (1,451,462) (1,538,967)equity holders of the parent _________ _________ Basic and diluted loss per share 4 (2.82p) (3.40p) __________ __________ Consolidated statement of changes in equity for the year ended 31 December 2007 Share Share Premium Foreign Share Based Merger Retained Total Equity Capital Reserve Exchange Payment Reserve Earnings Reserve Reserve £ £ £ £ £ £ £Balance at 31 452,666 16,583,898 (82,169) 984,715 4,410,000 (5,038,097) 17,311,013December 2006 ______ ________ ________ ________ ________ ________ ________Changes in Equity1 January 07 - 31December 07 Exchange - - 851,847 - - - 851,847difference arisingon translation offoreign operations ______ ________ ________ ________ ________ ________ ________ Net income - - 851,847 - - - 851,847recogniseddirectly in equity Loss for the year - - - - - (1,451,462) (1,451,462) ______ ________ ________ ________ ________ ________ ________ Total recognised - - 851,847 - - (1,451,462) (599,615)income and expensefor the year Issue of Share 166,920 7,677,513 - - - - 7,844,433Capital Equity share - - - 24,404 - - 24,404options issued ______ ________ ________ ________ ________ ________ ________ Balance as at 31December 2007 619,586 24,261,411 769,678 1,009,119 4,410,000 (6,489,559) 24,580,235 ______ _________ ________ ________ ________ _________ _________ Consolidated statement of changes in equity for the six months ended 31 December2006 Share Share Premium Foreign Share Based Merger Retained Total Equity Capital Reserve Exchange Payment Reserve Earnings Reserve Reserve £ £ £ £ £ £ £Balance at 30 June 452,666 16,583,898 (10,296) 956,571 4,410,000 (3,499,130) 18,893,7092006 ______ ________ ________ ________ ________ ________ ________Changes in Equity1 July 06 - 31December 06 Exchange - - (71,873) - - - (71,873)difference arisingon translation offoreign operations ______ ________ ________ ________ ________ ________ ________ Net income - - (71,873) - - - (71,873)recogniseddirectly in equity Loss for the year - - - - - (1,538,967) (1,538,967) ______ ________ ________ ________ ________ ________ ________ Total recognised - - (71,873) - - (1,538,967) (1,610,840)income and expensefor the year Issue of Share - - - - - - -Capital Equity share - - - 28,144 - - 28,144options issued ______ ________ ________ ________ ________ ________ ________ Balance as at 31December 2006 452,666 16,583,898 (82,169) 984,715 4,410,000 (5,038,097) 17,311,013 ______ _________ ________ ________ ________ _________ _________ Unaudited consolidated balance sheet at 31 December 2007 Unaudited At Audited At 31 December 2007 31 December 2006 Note £ £ Non-current assetsProperty, plant & equipment 5 35,321,316 26,677,929Intangible assets 6 8,538,143 7,596,806 Current assetsTrade and other receivables 1,936,153 1,271,266Cash and cash equivalents 7,115,053 2,698,789 ________ ________ Total current assets 9,051,206 3,970,055 ________ ________ Total assets 52,910,665 38,244,790 ________ ________ Current liabilitiesTrade and other payables 1,057,222 4,442,834Tax liability 80,442 88,384Other financial liabilities 7 1,938,338 1,356,277 ________ ________ Total current liabilities 3,076,002 5,887,495 Non current liabilitiesFinancial liabilities 7 25,160,931 14,952,785Deferred tax liability 93,497 93,497Other creditors - - ________ ________ Total non current liabilities 25,254,428 15,046,282 ________ ________ Total liabilities 28,330,430 20,933,777 ________ ________ TOTAL NET ASSETS 24,580,235 17,311,013 _________ _________ Capital and reserves attributable to equity holders of the company Share capital 619,586 452,666Share premium reserve 24,261,411 16,583,898Foreign exchange reserve 769,678 (82,169)Share based payment reserve 1,009,119 984,715Merger reserve 4,410,000 4,410,000Retained earnings (6,489,559) (5,038,097) ________ ________ TOTAL EQUITY 24,580,235 17,311,013 _________ _________ Unaudited consolidated cash flow statement for the year ended 31 December 2007 Unaudited Audited Year ended Six months ended 31 December 2007 31 December 2006 Note £ £ Operating ActivitiesLoss before tax (1,378,730) (1,453,451)Adjustments for :Depreciation 1,721,008 621,867Amortisation 105,358 52,679Foreign exchange (gains)/losses (1,438,204) 542,426Finance income (177,458) (70,926)Finance expense 1,148,699 411,988Equity settled share based payment 24,404 28,144 _________ _________ Operating profit before changes in working capital and 5,077 132,727provisionsIncrease in trade and other receivables (664,887) (505,608)(Increase)/decrease in trade and other payables (3,385,611) 3,583,656 ____________ ______________Cash (absorbed by)/generated from operations (4,045,421) 3,210,775 ____________ ______________Income taxes paid (80,675) (13,166) ____________ ______________ Cash flows from operating activities (4,126,096) 3,197,609 Cash flows from operating activities (brought forward) (4,126,096) 3,197,609 Investing activitiesAcquisition of property, plant & equipment (8,074,344) (4,620,489)Increase in tangible assets (1,046,695) -Finance income received 177,458 70,926 ________ ________ (8,943,581) (4,549,563)Financing activitiesIssue of ordinary shares 8,346,000 -Issue costs (501,567) -Proceeds from bank borrowing 11,442,177 -Issue costs for bank borrowing (224,332) -Repayment of bank borrowing (651,970) (1,277,068)Finance costs paid (924,367) (351,029) ________ ________ 17,485,941 (1,628,097) ________ ________ Increase/ (decrease) in cash and cash equivalents 8 4,416,264 (2,980,051) ________ ________ Cash at 31 December 2007 7,115,053 2,698,789 Cash at 1 January 2007 2,698,789 5,678,840 Notes forming part of the preliminary results for the year ended 31 December2007 1 Basis of preparation The unaudited financial information set out in this preliminary announcementdoes not constitute the company's statutory accounts for the year ended 31December 2007 and the period ended 31 December 2006. The financial informationfor the period ended 31 December 2006 is derived from the statutory accounts forthat period which have been delivered to the Registrar of Companies. Theauditors have reported on those accounts; their report was unqualified and didnot contain a statement under section 15 (4) or 15 (6) of the Isle of ManCompanies Act 1982. The statutory accounts for the year ended 31 December 2007will be finalised on the basis of the financial information presented by thedirectors in this preliminary announcement and will be delivered to theRegistrar of Companies following the company's annual general meeting. 2 Segment information The reporting segments presented are the same as those used in the Group'sinternal reporting structure: Head Office, CETO development, wind farm andLandfill gas. Year ended 31 December 2007 Head Office CETO Development Windfarm Landfill gas Total Isle of Man Australia Germany Wales £ £ £ £ £IncomeRevenue 6,027 37,301 3,513,491 278,091 3,834,910CETO licence fee income 750,000 - - - 750,000Finance income 97,315 7,539 72,604 - 177,458Other income - 296,040 - - 296,040 ExpensesOperational expenditure 2,299,740 - 956,897 205,435 3,462,072Finance costs 30 141 1,148,528 - 1,148,699Depreciation & amortisation - - 1,643,952 182,415 1,826,366 __________ ________ _______ _______ _________ Total profit/(loss) before (1,446,428) 340,739 (163,282) (109,759) (1,378,730)taxation __________ ________ _______ _______ _________ Balance SheetAssets - - - - -Property, plant & - - 35,115,121 206,195 35,321,316 equipmentIntangible assets - 6,606,574 - 1,931,569 8,538,143 Current assets 6,193,103 429,346 2,293,404 135,353 9,051,206 Liabilities (101,509) (185,903) (27,923,628) (119,389) (28,330,430) _________ ________ ________ ________ _________ Net assets 6,091,593 6,850,017 9,484,897 2,153,728 24,580,235 _________ _________ _________ _________ _________ _________ _________ _________ _________ _________ Capital expenditure - - 7,992,823 81,521 8,074,344Development expenditure - 1,046,695 - - 1,046,695 _________ _________ _________ _________ _________ Segment information (Continued) Six months ended 31 December 2006 Head Office CETO Development Windfarm Landfill gas Total Isle of Man Australia Germany Wales £ £ £ £ £IncomeRevenue - - 1,374,575 81,460 1,456,035Finance income 49,281 4,078 17,567 - 70,926 ExpensesOperational expenditure 998,317 507,310 280,774 153,548 1,939,949Finance costs - - 411,988 - 411,988Depreciation & amortisation - - 590,883 83,663 674,546Other non-cash charge 28,144 - - - 28,144Retranslation (74,215) - - - (74,215) ________ ________ _______ _______ _________ Total profit/(loss) before (902,965) (503,232) 108,497 (155,751) (1,453,451)taxation ________ ________ _______ _______ _________Balance SheetAssetsProperty, plant & - - 26,476,201 201,729 26,677,930 equipmentIntangible assets - 5,559,878 - 2,036,927 7,596,805Current assets 1,015,030 206,811 2,622,357 125,857 3,970,055 Liabilities (119,909) (110,582) (20,555,921) (147,365) (20,933,777) ________ ________ ________ ________ _________ Net assets 895,121 5,656,107 8,542,637 2,217,148 17,311,013 ________ ________ ________ ________ ________ Capital expenditure - - 4,620,489 - 4,620,489 _________ _________ _________ _________ _________ All intercompany balances and transactions are excluded from the above analysis. 3 Tax expense Year ended 31 Six months ended December 31 December 2007 2006 £ £Current tax expenseIncome tax on loss for the period 61,885 101,550Deferred tax expenseOrigination and reversal of temporary differences 10,847 (16,034) _______ _______ Total tax 72,732 85,516 _______ _______ The reasons for the difference between the actual tax charge for the period andthe standard rate of income tax in the Isle of Man applied to profits for theperiod are as follows: Year ended 31 Six months ended December 31 December 2007 2006 £ £Loss before tax 1,378,730 1,453,451 Expected tax charge based on the standard rate of income tax - -in the Isle of Man of 0% (31 December 2006: 0%)Unutilised tax losses 134,617 151,800Different tax rates applied in overseas jurisdictions (61,885) (66,284) _______ _______ 72,732 85,516 _______ _______ 4 Loss per share Year ended 31 Six months December 2007 ended 31 December 2006 £ £Numerator Loss used in basic and diluted EPS 1,451,462 1,538,967 ________ ________Denominator Weighted average number of shares used in basic and diluted EPS 51,540,532 45,266,669 ________ ________ The loss figure used in this calculation is the loss for the period. Year ended 31 Six months ended December 2007 31 December 2006 Total share options in issue 5,487,500 5,594,167 ________ ________ The effect of all the above share options granted is anti-dilutive, they havebeen omitted from the calculation of loss per share. 5 Property, plant and equipment 2007 2006 Plant and Machinery Plant and Machinery £ £Cost1 January 27,884,326 23,894,662Additions 8,074,344 4,620,489Exchange differences 2,589,373 (630,825) _________ _________ 31 December 38,548,043 27,884,326 _________ _________ Accumulated Depreciation1 January (1,206,397) (601,056)Charge for the year/period (1,721,008) (621,867)Exchange differences (299,322) 16,526 _________ _________ 31 December (3,226,727) (1,206,397) _________ _________ Net Book Value _________ _________ 31 December 35,321,316 26,677,929 _________ _________ 1 January 26,677,929 23,293,606 _________ _________ 6 Intangible assets Landfill gas Goodwill Development costs 2007 2006 rights Total Total £ £ £ £ £Cost1 January/1 July 2,107,167 5,559,878 - 7,667,045 7,667,045Additions - - 1,046,695 1,046,695 - _________ _________ _________ _________ _________ 31 December 2,107,167 5,559,878 1,046,695 8,713,740 7,667,045 _________ _________ _________ _________ ________ Accumulated Amortisation1 January/1 July (70,239) - - (70,239) (17,560)Charge for the year/ (105,358) - - (105,358) (52,679period _________ _________ _________ _________ _________ 31 December (175,597) - - (175,597) (70,239) _________ _________ _________ _________ ________ Net Book Value _________ _________ _________ _________ _________ 31 December 1,931,570 5,559,878 1,046,878 8,538,143 7,596,806 _________ _________ _________ _________ _________ 1 January/1 July 2,036,928 5,559,878 - 7,596,806 7,649,485 _________ _________ _________ _________ ________ The cost of landfill gas rights are being amortised over the period to 30 April2026. Development costs are assessed for impairment on the basis of an estimate of theassets value in use. 7 Financial assets and liabilities-numerical information Maturity of borrowings The carrying amounts of borrowings, all of which are exposed to cash flow orfair value interest rate risk, are repayable as follows: 31 December 2007 31 December 2006 Group £ £In less than one year 1,938,338 1,356,277In more than one year but not more than two years 2,011,281 1,278,520In more than two years but not more than three years 2,020,048 1,293,053In more than three years but not more than four years 2,078,068 1,283,318In more than four years but not more than five years 1,926,578 1,185,464In more than five years 17,124,956 9,912,430 _________ _________ 27,099,269 16,309,062 _________ _________ There are undrawn loan facilities of £63,903,754 at 31 December 2007 (31December 2006: £3,351,053). 8 Notes supporting cash flow statement 31 December 31 December 2007 2006Group £ £Cash and cash equivalents comprises: Cash available on demand 4,820,301 741,620Short-term deposits 2,294,752 1,957,169 ________ ________ 7,115,053 2,698,789 ________ ________ Net increase/(decrease) in cash and cash equivalents 4,416,264 (2,980,051) ________ ________ Cash and cash equivalents at the beginning of the period 2,698,789 5,678,840 ________ ________ Cash and cash equivalents at end of period 7,115,053 2,698,789 ________ ________ £2,744,256 (31 December 2006: £1,588,223) of cash and cash equivalents held inGermany are restricted under the terms of the loan agreement covering borrowingsdisclosed in Note 8. 9 Finance Costs 2007 2006 £ £ Finance costs 745,196 411,988Refinancing costs 403,503 - ________ ________ 1,148,699 411,988 ________ ________ During the year the Group's loan facilities with Hypo- und Vereinsbank AG wererefinanced with Standard Chartered Bank, refinancing costs relate to the writeoff the original capitalised loan issue costs with Hypo- und Vereinsbank AG. 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