Renewable Energy Generation Ltd. : Half Yearly Report

February 10, 2014 at 04:30 am EST

MarketScreener.com By The editorial team

Renewable Energy Generation Ltd

10 February 2014

Renewable Energy Generation Limited

("REG" or the "Group")

Interim Results for the six months to 31 December 2013

RENEWABLE ENERGY GENERATION REPORTS STRONG MOMENTUM IN WIND AND BIO-POWER BUSINESSES

Financial highlights

●	Group revenues of £5.7m (H1 2013: £6.5m)
●	Profit before tax of £6.5m (H1 2013: loss of £1.7m)
●	Sale of the 12MW Goonhilly Wind farm to BlackRock for an enterprise value of £25.1m and a profit of £9.4m to the Group
●	Adjusted EBITDA1 after disposals of £9.6m (H1 2013: £1.4m)
●	Unrestricted cash resources of £19.3m as at 31 December 2013 (H1 2013: £10.0m)
●	Proposed interim dividend increased by 10% to 0.55p per ordinary share (H1 2013: 0.5p)

Operational highlights

●	Wind output of 48.2GWh, ahead of expected levels for the period
●	Commencement of construction of the 4.5MW Goonhilly solar farm
●	Planning permission issued for Ramsey II wind farm
●	Conditional turbine supply agreements with Vestas Celtic Wind Technology for the 10MW St Breock and 8MW Ramsey II wind farms
●	Acquisition of 4MW Rodbaston College wind farm planning permission
●	Project financing completed for 4MW Orchard End wind farm
●	Circa 140MW of applications across 15 wind projects awaiting determination in the UK planning system

Post period end events

●	Construction contract signed for 18MW bio-power plant in Selby, Yorkshire
●	Planning permission for the extension of French Farm to 12MW

¹ Earnings before interest, taxation, depreciation and amortisation ("EBITDA") is equal to the Group's continuing operating profit before exceptional items, share based payments, interest, taxation, depreciation and amortization and including profit on disposal of subsidiaries.

Andrew Whalley, REG Chief Executive Officer said:

"The sale of Goonhilly Wind Farm to our strategic partner BlackRock further demonstrates the value of our well-managed wind farm portfolio.

"We have also progressed energetic projects at St Breock and Ramsey into construction during the period and our development team continues to deliver planning permissions.

"I am delighted to report our collaboration with Caterpillar and Finning to deliver our 18MW Whitemoor plant, which will be powered by our patented bioliquid. This represents a huge step forward for our biopower arm and will enable it to play a significant role in the growing STOR market."

A presentation to analysts will be held today at the offices of Broker Profile at 9.30 am. The address is Augustine House, 6A Austin Friars, London, EC2N 2HA.

ENDS

Enquiries:

Renewable Energy Generation Limited Andrew Whalley, Chief Executive Officer David Crockford, Finance Director Ian Lawrence, Communications Manager	+44 (0)1483 901 790
Smith & Williamson Corporate Finance Limited (Nominated Adviser) Martyn Fraser	+44 (0)117 376 2213
Cenkos (Corporate Broker) Bobbie Hilliam	+44 (0)20 7397 8900
Broker Profile Simon Courtenay / Tamsin Shephard	+44 (0)20 7448 3244

Notes to editors

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

REG Windpower: based in Truro, Bath and Guildford, UK, it currently operates 14 wind projects in Cambridgeshire, Cornwall, County Durham, Yorkshire, Lancashire, Cumbria and Gwynedd, with a total capacity of 67.15MW and has a development pipeline of over 1,000MW.

REG Bio-Power UK Ltd: based in Nottingham, UK: it operates electricity generation plant powered by fuel recovered from used cooking oil.

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

www.renewableenergygeneration.co.uk

Overview of the Period

REG's growth strategy remains to recycle value from selected disposals within its renewable asset portfolio to fund a sizeable investment in its operational wind, solar and bio-power projects.

Operational Progress

Following on from the sale of 16MW of wind farms last financial year under our framework agreement with BlackRock, the Group made a further disposal of its 12MW Goonhilly Downs operating project for a total enterprise value of £25.1m under the agreement. This resulted in upfront cash consideration of £10.7m and profits of £9.4m. The funds received will be reinvested in to the Group's asset development and construction pipeline. An asset management agreement has been agreed with BlackRock, allowing REG to continue to manage the site and benefit from a recurring asset management fee.

The 10MW St Breock repowering and 8MW Ramsey II projects commenced construction with the signing of conditional turbine supply agreements with Vestas. The projects are expected to become operational towards the end of the calendar year, with a combined output of 55.4GWh per annum.

The construction of the 4.5MW Goonhilly Solar PV project commenced in the period, with commercial operation targeted for Spring 2014. The project represents REG's first interest in the solar sector, and is expected to lead to further sites and opportunities in the coming years.

Acquisition

In October, REG acquired a consented wind project located at the Rodbaston campus, near Penkridge, Staffordshire. The project will comprise two 2MW turbines and is expected to deliver 11GWh of clean electricity per annum. Under the terms of the agreement, REG will support the College's educational programme by providing access to the turbine and will make annual lease payments to the College for the duration of the project.

Bio-Power

Following the period end, we announced our collaboration with Finning and Caterpillar Financial over the 18MW Whitemoor bio-power plant to be constructed in Selby, Yorkshire. We are delighted to be procuring engines from the world's largest diesel engine manufacturer to build the Whitemoor project with Caterpillar Financial providing long-term debt finance.

We believe the standby generation market will grow strongly, a result of the closure of older electricity generation plant leading to greater variability on the UK grid. REG is in a strong position to participate in this growth, utilising its proven, clean renewable energy technology.

Wind Portfolio Development

On 5 February, we announced that Peterborough City Council's planning committee resolved to grant planning permission for an extension to our French Farm wind farm project. Construction of four new turbines in addition to the existing two turbine planning permission at French Farm will deliver a 12MW wind farm with an anticipated annual energy output of 28.5GWh, making it one of REG's most productive wind farms. Formal planning permission is expected to follow shortly and subject to the expiry of the six week legal challenge period, the project is expected to enter construction later this year.

Community Debenture Funding

We announce for the first time a new financing opportunity for the Group with the launch of a community based debenture for direct investment in to our High Down wind farm. The debenture, to be launched with Abundance Generation, allows the general public to invest directly in a 20 year debenture product that shares in the operating surpluses generated by this feed-in-tariff wind turbine.

The Group considers the area of community involvement and ownership a key driver in the continued growth of the onshore wind sector, and as such expects to encourage further direct investment from communities in future REG wind projects.

Dividend

Reflective of the Board's confidence in the positive outlook for the Group, it has resolved to increase the interim dividend by 10% to 0.55p per share. The dividend will be paid on 11 April 2014 to shareholders on the register as at 21 March 2014.

Unaudited interim consolidated income statement

For the six months to 31 December 2013

	Six months to 31 December 2013	Six months to 31 December 2012	Year to 30 June 2013
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)

Revenue	5,660	6,466	13,406
Cost of Sales	(3,723)	(3,714)	(7,675)
Gross profit	1,937	2,752	5,731
Central administrative expenses	(870)	(1,077)	(1,661)
Bio-power administrative expenses	(297)	(281)	(613)
Wind administrative expenses	(1,812)	(1,340)	(3,524)
Development costs	(658)	(411)	(1,350)
Corporate finance costs	(180)	(501)	-
Other operating income	-	20	-
Group operating loss from continuing activities	(1,880)	(838)	(1,417)
Profit on disposal of subsidiaries (note 5)	9,375	-	9,116
Net finance cost	(1,040)	(866)	(1,870)
Profit / (loss) on continuing operations before tax	6,455	(1,704)	5,829
Tax	-	200	685
Profit / (loss) on continuing operations after tax	6,455	(1,504)	6,514

Attributable to
Equity holders of the parent	6,455	(1,504)	6,514
Non controlling interest	-	-	-
Total	6,455	(1,504)	6,514

(Loss) / earnings per share attributable to the equity holders of the Company during the period

- basic EPS/(LPS)	6.23p	(1.46p)	6.30p
- diluted EPS/(LPS)	6.10p	(1.46p)	6.20p

Unaudited interim consolidated balance sheet

As at 31 December 2013

	31 December 2013	31 December 2012	30 June 2013
	£'000	£'000	£'000

ASSETS	(unaudited)	(unaudited)	(audited)
Non-current assets
Goodwill (note 3)	7,390	7,390	7,390
Development assets (note 3)	14,308	9,476	13,907
Property, plant and equipment (note 4)	44,496	53,758	41,576
Deferred tax asset	1,664	1,278	1,664
	67,858	71,902	64,537
Current Assets
Assets classified as held for sale	8,108	19,978	22,808
Inventories	628	271	419
Trade and other receivables	3,212	2,891	4,359
Intangibles	2,087	2,208	2,238
Restricted cash	3,619	6,107	8,229
Cash and cash equivalents	19,262	9,924	16,059
Derivative financial instruments	-	-	47
	36,916	41,379	54,159
Total assets	104,774	113,281	118,696

LIABILITIES
Current liabilities
Trade and other payables	4,061	4,196	10,913
Liabilities directly associated with assets classified as held for sale	4,246	9,482	15,981
Borrowings	997	1,760	860
	9,304	15,438	27,754
Non-current liabilities
Borrowings	17,087	32,082	17,849
Derivative financial instruments	620	3,233	1,196
Deferred tax liabilities	319	-	124
	18,026	35,315	19,169
Total liabilities	27,330	50,753	46,923

EQUITY
Share capital	10,366	10,330	10,345
Share premium	79,912	79,707	79,792
Own shares	(197)	-	(60)
Share based payment reserve	438	1,465	338
Hedging reserve	(466)	(2,867)	(1,130)
Retained earnings	(13,159)	(26,657)	(18,062)
Equity attributable to the equity holders of the parent	76,894	61,978	71,223
Non controlling interest	550	550	550
Total equity and liabilities	104,774	113,281	118,696

Unaudited interim consolidated cash flow statement

For the six months to 31 December 2013

	Six months to 31 December 2013	Six months to 31 December 2012	Year to 30 June 2013
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Cash flows from operating activities
Net cash generated/(used) in operations	(1,148)	1,509	3,665

Cash flows from investing activities
Purchase of property, plant and equipment	(8,788)	(6,252)	(10,370)
Capitalised development costs	(2,022)	(1,991)	(6,080)
Business combinations	-	-	(229)
Net proceeds from sale of subsidiary	9,080	-	12,729
Interest received	-	-	125
Movement in restricted cash accounts	3,686	1,739	(665)
Net cash generated/(used) in investing activities	1,956	(6,504)	(4,490)

Cash flows from financing activities
New borrowings net of issue costs	3,795	8,809	14,724
Interest paid	(759)	(948)	(2,272)
Repayment of borrowings	(462)	(680)	(1,535)
Purchase of own shares	(137)	-	(60)
Issue of shares	36	-	-
Dividends paid to Company's shareholders	(1,552)	(1,549)	(2,065)
Net cash generated from financing activities	921	5,632	8,792

Net increase in cash and cash equivalents	1,729	637	7,967
Cash at beginning of period	17,533	9,566	9,566
Cash at end of period	19,262	10,203	17,533

Unaudited statement of comprehensive income

For the six months to 31 December 2013

	Six months ended 31 December 2013	Six months ended 31 December 2012	Year ended 30 June 2013
	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Profit / (loss) for the period	6,455	(1,504)	6,514

Unaudited interim consolidated statement of changes in equity

For the six months to 31 December 2013

	Share capital	Share premium account	Own shares	Share based payments reserve	Hedging reserve	Retained earnings	Non controlling interest	Total equity
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000

At 1 July 2013	10,345	79,792	(60)	338	(1,130)	(18,062)	550	71,773
Total comprehensive income	-	-	-	-	664	6,455	-	7,119
Share based payments	-	-	-	100	-	-	-	100
Dividend (note 2)	-	-	-	-	-	(1,552)	-	(1,552)
Issue of new equity	21	120	-	-	-	-	-	141
Purchase of own shares	-	-	(137)	-	-	-	-	(137)
At 31 December 2013	10,366	79,912	(197)	438	(466)	(13,159)	550	77,444

Notes to the unaudited interim consolidated financial statements

1. Statement of compliance

While the financial information included in this unaudited interim financial statement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs), this announcement does not itself contain sufficient information to comply with IFRS.

This interim financial statement has been prepared on the basis of accounting policies adopted by the Group and set out in the annual report and accounts for the year ended 30 June 2013. The Group does not anticipate any change in these accounting policies for the year ended 30 June 2014. As permitted, this interim report has been prepared in accordance with the AIM rules and not in accordance with IAS 34 "Interim financial reporting".

2. Dividends

	Six months to 31 December 2013	Six months to 31 December 2012	Year to 30 June 2013
Declared and paid during the period on ordinary equity shares	£'000	£'000	£'000
	(unaudited)	(unaudited)	(audited)
Final dividend declared and paid	1,552	1,549	1,549
Interim dividend declared and paid	-	-	516
		1,549	2,065
Proposed but not recognised as a liability at 31 December 2013
Equity dividends on ordinary shares:
Interim dividend declared and paid - 0.55p (2012 - 0.5p)	570	516	-

The dividend will be paid on 11 April 2014 to members on the register on 21 March 2014. Shares will be marked ex-dividend on 19 March 2014.

3. Intangible assets

(unaudited)	Development costs	Goodwill	Total
	£'000	£'000	£'000
Cost
At 1 January 2013	10,264	7,390	17,654
Additions	5,396	-	5,396
At 30 June 2013	15,660	7,390	23,050
Additions	2,136	-	2,136
Transfers to property, plant and equipment	(1,244)	-	(1,244)
At 31 December 2013	16,552	7,390	23,942

Amortisation and impairment
At 1 January 2013	788	-	788
Impairment charge	965	-	965
At 30 June 2013	1,753	-	1,753
Impairment charge	491	-	491
At 31 December 2013	2,244	-	2,244
Net book value
At 31 December 2013	14,308	7,390	21,698
At 30 June 2013	13,907	7,390	21,297
At 1 January 2013	9,476	7,390	16,866

Included within additions to development costs are internal development costs of £250,000 (2013: £200,000).

4. Property, plant and equipment

(unaudited)	Operating wind sites	Other generation plant	Assets in the course of construction	Freehold land	Fixtures, fittings and equipment	Total
	£000	£000	£000	£000	£000	£000
Cost
At 1 January 2013	50,024	5,629	5,318	1,252	1,994	64,217
Additions	643	119	7,969	-	280	9,011
Movements	13,287	-	(13,287)	-	-	-
Assets classified as held for sale	(1,342)	-	-	-	-	(1,342)
Disposals	(19,998)	-	-	-	-	(19,998)
At 30 June 2013	42,614	5,748	-	1,252	2,274	51,888
Additions	(240)	50	3,506	-	209	3,525
Transfers from Development costs	-	-	1,244	-	-	1,244
Assets classified as held for sale	(375)	-	-	-	-	(375)
At 31 December 2013	41,999	5,798	4,750	1,252	2,483	56,282

Depreciation
At 1 January 2013	9,108	669	-	-	682	10,459
Depreciation charge	1,269	230	-	-	134	1,633
Assets classified as held for sale	(1,607)	-	-	-	-	(1,607)
Disposals	(173)	-	-	-	-	(173)
At 30 June 2013	8,597	899	-	-	816	10,312
Depreciation charge	1,173	138	-	-	163	1,474
At 31 December 2013	9,770	1,037	-	-	979	11,786

Net book value
At 31 December 2013	32,229	4,761	4,750	1,252	1,504	44,496
At 30 June 2013	34,017	4,849	-	1,252	1,458	41,576
At 1 January 2013	40,916	4,960	5,318	1,252	1,312	53,758

During the period an amount of £45,000 (2012 - £414,000) of borrowing costs were capitalised into assets in the course of construction. Capitalisation of borrowing costs has increased as a result of new additions being funded from debt.

5. Disposal of subsidiary

	2013
	£'000
	(unaudited)
Proceeds*	25,165
Assignment of project debt	(14,488)
Unrestricted cash included in disposal group	(1,893)
Fees	(154)
Net proceeds	8,630
Net liabilities of disposal group	745
Profit on disposals	9,375