REG Interim Results Six months ending 31 December th February 2014

Transcription

1 REG Interim Results Six months ending 31 December th February 2014 Andrew Whalley David Crockford Chief Executive Finance Director

2 Introduction to REG REG is primarily a developer, owner and operator of small to medium-sized onshore wind projects in the UK REG also owns a business that recycles Used Cooking Oil into a patented and accredited bioliquid used for generating clean power Main focus on converting substantial pipeline of development assets into consented and then operational wind projects Smaller assets generally under 8MW retained to build up portfolio of operating sites Larger projects sold to fund organic growth strategic partnership with BlackRock REG owns 11 wind farms (39.2MW), operates 3 for BlackRock (28MW), has 3 under construction (18.5MW), planning consent for 5 (31.5MW), 15 projects (circa 140MW) in planning system awaiting determination and around 85 (900-1,000MW) in development Appetite for onshore projects remains strong Neither stock market nor M&A recognises value of development pipeline so conversion to consented/operating sites key to maximising value REG Bio operates 8MW of generation plant, primarily to service National Grid Short Term Operating Reserve contracts Contracts signed for new 18MW site, also to be used in the expanding Short Term Operating Reserve (STOR) market 2

3 Onshore wind in the UK UK has binding legal target to achieve 15% of energy requirement from renewable sources by 2020 Onshore wind recognised by Government as a key technology Well proven operationally Provides the cheapest renewable energy DECC s Renewable Energy Roadmap identifies potential increase in installed capacity from 4GW to 13GW by 2020 Electricity Market Reform is designed to ensure low carbon options viable to achieve 2020 targets and beyond Existing Renewables Obligation support mechanism to be replaced in 2017 by CfD feed in tariff Energy has become an increasingly party political issue over recent years But fundamentally Government policy remains supportive 3

4 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 Adjusted Group EBITDA 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) Goonhilly Wind Farm, Cornwall 4

5 Operational Highlights Wind output of 48.2GWh ahead of expected levels for the 6 months 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 Commencement of construction of the 4.5MW Goonhilly Solar Farm for completion in March 2014 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 5

6 Post Year End Events Construction contract signed for 18MW bio-power plant in Selby, Yorkshire Planning permission granted to extend French Farm to 12MW Turbine tower delivery at High Down 6

7 Delivering shareholder returns Wind Biopower Central Costs 6 months to 31/12/13 6 months to 31/12/12 Year to 30/06/13 MW MWh 48,293 2,373-50,666 64, ,000 m m m m m m Revenue Cost of Sales (1.4) (0.9) - (2.2) (2.2) (4.1) Gross Profit 3.5 (0.1) Administration (1.8) (0.3) (0.9) (3.1) (2.5) (5.7) Development - external (0.2) - - (0.2) (0.5) (0.4) Profit on sale of wind farms EBITDA 10.9 (0.4) (0.9) Adj. to proceeds on sale (0.3) - - (0.3) Construction costs (5.1) - - (5.1) (4.5) (11.0) Capitalised development (1.7) (0.3) - (2.0) (1.9) (6.3) Debt movements Other cash movements (1.2) (0.2) (1.6) (3.0) (1.0) (1.6) CASH FLOW 5.1 (0.9) (2.5) MW Goonhilly disposal delivered profits in H1 Development capitalised and contributing towards 100MW of applications this year Bio Power holding steady, advances expected with more STOR in coming years Drop in revenue due to less capacity on line after asset sales 4m financing of Orchard End with The Co-operative Bank gives positive debt movement Further profits crystallised in the period release value of pipeline and underline the strategy of developing renewables 7

8 Our wind fleet REG operates, has under construction or has consented 117MW of onshore wind capacity, including 28MW operated on behalf of BlackRock. We have around 140MW of projects currently awaiting a planning determination Operational Construction Consented Site Location Status MW Total REG owned projects 39.2 High Down Cornwall Construction 0.5 Ramsey II Cambridgeshire Consented 8.0 St Breock Repower Cornwall Consented 10.0 Total Construction 18.5 Cheverton Down Isle of Wight Consented 1.2 Denzell Downs Cornwall Consented (legal challenge) 10.0 Draperstown Co. Londonderry Consented 4.0 French Farm Cambridgeshire Consented 12.0 Rodbaston College Staffordshire Consented 4.0 Total Consented 31.2 Sancton Hill Yorkshire AMA 10.0 South Sharpley County Durham AMA 6.0 Goonhilly Downs Cornwall AMA 12.0 Operated on behalf of Third Party 28.0 Operated under asset management agreements Half year ended 31 Dec 2013 Availability 97 % MWh output 48Gwh 8

9 Wind 2014 construction High Down St Breock Ramsey II Location Cornwall Location Cornwall Location Cambridgeshire MW 0.5 MW 10 MW 8 P50 output 1.9GWh P50 output 30GWh P50 output 27GWh Cost 1.7m Cost 12m Cost 10m Status Commissioning Status Access tracks in Status Turbine procurement 9

10 REG will continue to recycle assets to fund project build Capital cost ( m) Mar-14 Mar-15 Mar-16 Mar Cumulative capital cost ( m) Mar-14 Sep-14 Apr-15 Oct-15 May-16 Nov-16 Jun

11 Community Schemes The Government is strongly in favour of supporting more community-based energy projects In Jan-14 they published their vision for community energy with the Community Energy Strategy, in summary: Various initiatives are proposed, including a new Community Energy Unit in DECC, a Community Benefits Register, a One Stop Shop information portal, a national Communities & Local Government Conference and new working group to tackle barriers to communities developing energy projects There is an expectation for developers to substantially increase projects with shared ownership by 2015 It is proposed that the Feed-in Tariff (FIT) maximum capacity ceiling is raised from 5MW to 10MW for community projects, subject to consultation in spring 2014 Opportunities REG can continue to build smaller wind projects (sub-10mw) post-2017 outside of the EMR Many of our competitors have much larger schemes and will find it difficult to participate in this space REG has already started the process of community funding REG will launch community based debenture for direct investment in 0.5MW High Down wind farm. The debenture, with Abundance Generation, will allow 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 We consider the area of community involvement and ownership a key driver in the continued growth of the onshore wind sector 11

12 Wind development portfolio matures By the end of 2014 REG will have approx 250MW in planning of which 15m is currently capitalised on the balance sheet REG plan to increase value from the portfolio via obtaining planning consents As consents emerge focus will turn to building and operating portfolio New projects going into planning may include Community based schemes under the UK FiT regime Rate of new planning submissions will slow, whilst revenues begin to rise from construction projects financed by recycling capital via further asset sales of larger projects to BlackRock Rodbaston College Draperstown (Creagh Concrete) Whitemoor Allowing enhanced returns to shareholders 12

13 REG Bio-Power STOR market update Projected GB de-rated peak capacity margins are forecast to fall from around 14.3% in 2013 to around 7% by 2016 Driven by closure of ageing coal plant under the Large Combustion Plant Directive Peak reserve margins will need to increase as more variable forms of generation come on-line Contracted STOR plant in 2013 alone is insufficient to meet the minimum reserve requirement and could only meet 40% of the peak reserve requirement The remaining gap is mainly filled by balancing mechanism plant such as part loaded combined cycle gas turbines National Grid will continue to procure STOR to cover the current proportion of the peak reserve requirement On this basis demand for STOR should increase by 1,400MW over the period 2013 to 2020 STOR demand predicted to reach 4,500MW by 2020 Replacement STOR plant will be required quickly as Open Cycle Gas Turbines move out of STOR into the Balancing Market as coal plant closes The market offers REG compelling returns Our fuel is cheaper than diesel whilst engine efficiency is very high circa 40% We are also eligible for Renewables Obligation Certificate (ROCs) which diesel and gas plant cannot receive Results: REG Bio-Power has the lowest short run marginal cost plant in the STOR programme 13

14 Whitemoor Bio-Power Plant Utilises ten well proven Caterpillar 3516B-HD engines each of 2MW Have been subjected to exhaustive testing by REG and Finning under STOR conditions Additionally REG s existing 8MW peaking plant already has over 70,000 operational hours using LF100 The Plant will operate at 18MW - the thermal limit under the Environmental Permitting Regulations Will be eligible for ROCs Will be built under an Engineering, Procurement and Construction ( EPC ) contract by Finning UK REG s initial equity investment will be 15% of the total plant cost of 6.3m at around 1m When complete in October 2014 plant will be refinanced by Caterpillar under a seven year financing with REG investing the balance of its 30% equity commitment Existing 2MW Bio-Plant at Leeds North Returns will compare very favourably with wind on a risk adjusted basis 14

15 Living Fuels Fuel collection and processing Oil volumes up 32% year on year Annualised volumes now running at over 3,500 tonnes per annum Bio-Power awarded the East Anglia, East Midlands and West Midlands franchises of the Arrow Group s national waste oil collection business Provides access to around 30,000 tonnes per annum of waste oil New collection and processing facility opened in Nottingham Living Fuels anticipates increasing overall oil collection to 7,000 tons by end of ,500 tonnes from white van or commercial collection 2,000 tonnes from industrial 500 tonnes from public sector As our fuel demand grows the balance will be made up from within Arrow Group Insulates Living Fuels from on market purchases Overall price for fuel will remain competitive with Diesel 15

16 Solar Power Projects 4.51MW Goonhilly solar scheme well advanced All piles now fixed Cables laid in trenches All modules on site Foundations for invertors in place Substation (thankfully) watertight Energisation second week in March in time to capture current ROC support REG has signed exclusivity on up to 300MW of solar on brownfield sites Currently exploring economics If favourable, will develop as fast as possible under current support mechanism Relatively cheap to develop Offer faster route through planning system, especially brownfield sites Solar projects will be sold to low cost of capital buyers Risk adjusted returns acceptable 16

17 Summary REG now focused on delivering shareholder returns after period of investment post Canada sale Sale of Goonhilly Downs has realised profit of 9m Further asset sales will recycle capital to finance company owned portfolio build out Construction programmes on St Breock and Ramsey II are well advanced Looking Ahead Focus on advancing our portfolio of development assets where significant capital has already been deployed Recycling larger investments Submitting 100MW into the planning system this year Building on the strong asset base, team and relationships we have created in the last year EMR offers significant support for UK onshore wind despite political noise beyond 2017 Bio-Power now poised for rapid delivery of technology as lowest cost UK STOR provider Solar leverages REG s existing development and planning capability On course to deliver growth targets based on our strong balance sheet 17