Interim Results presentation March 2009
Interim Results presentation March 2009
1
Operational highlights
• Total revenues £4.7m (2007 £1.2m) • Gross profit £3.2m (2007 £0.7m) • Loss before tax • Interim dividend of 0.5p per share • Proposals to allow 25% buy back authority • Redomiciliation to Jersey and adoption of shareholder friendly Articles including preemption rights • 39.6MW fully operational in Canada • 21.3MW fully operational in UK • 4.2MW Bentwaters UCO plant operational • Goonhilly and Loscar ready to build • Good progress with EA regarding end of waste
Goonhilly Braich Ddu
2
Review of Operations - UK
3
UK - Wind Projects with planning: Loscar 4.0MW Goonhilly up to 15.0MW
Operational Under Construction
Projects in late stage development:
In Development
South Sharpley 7.5MW Cheverton Down 9.0MW Orchard End 4.0MW Pentre Tump 3.9MW French Farm 4.0MW Bears Down 4.0 - 8.0MW
Goonhilly
4
UK – Pricing • UK portfolio potential to produce around 51GWh per annum • New PPA starting 1 April for 2 years • Power sold at £80/MWh on a time weighted basis – current market pricing around £40/MWh • ROC pricing around £50/MWh
Braich Ddu
5
UK – REG Bio-Power • Operational projects: • Bentwaters commissioned – 4.2MW • End of waste • Negotiations with Environment Agency progressing well • Commercial quantities of LF 100 possible late 2009 • Used cooking oil prices have collapsed, benefiting REG Bio-Power • Pricing around 15-20p per litre at present • Economics • Each ton of oil produces approx 4.1MWh • UCO qualifies for 1.5 ROCs as conventional plant and 2 ROCs as high grade CHP
Bentwaters
6
UK – REG Bio-Power • Next Steps • Operate Bentwaters on non food grade oil • Expected by end of April • Enabling profitability • Then build production facility for LF 100 • Cost will be around £500,000 • Target completion by end of September 2009 • Capable of processing up to 20,000 tons per annum • Enough for 3 Bentwaters
7
Review of Operations - Canada
8
Canada - 2008 Standard Offer Programme
• Four SOP projects complete: • • • •
Cultus Frogmore Mohawk Clear Creek
9.9MW 9.9MW 9.9MW 9.9MW
• Total capital investment of Cdn$100 million • Refinanced with Fortis Bank at 6.3% fixed • 15 year term, 20 year amortisation • Leveraged equity returns around 15% using 75% debt • Equity released from projects totals Cdn$75 million
Cultus Goonhilly
9
Canada – Ontario Green Energy Act
• Proposed streamlined regulatory and approvals process • eliminating municipal approval bottlenecks and • reducing NIMBY opposition • Grants priority to renewable energy projects to connect to the grid • Replaces the RESOP and RFP programmes with a Feed-in-Tariff for distribution and transmission connected projects • Guaranteed pricing structure for 20 year contracts • Prices vary based upon project size and type of renewable energy technology • No capacity restrictions for wind projects
10
Canada – Ontario Feed-in-Tariffs
• Proposed new feed in tariffs for Renewable Energy Projects in Ontario are: •
Onshore wind projects 13.5¢/kWh
•
Offshore wind projects 19.0¢/kWh
•
Community-based or Aboriginal Wind Projects ≤10MW
14.4¢/kWh
• New tariffs anticipated to be introduced in June 2009 • Issue for REG is mechanism for novation of existing RESOP contracts • Potential to add significant value to Canadian business
11
Canada - the “asset light” model • Scale of Canadian opportunity vs. cost • Options being investigated to reduce capital employed in Canada • Potential to create significant liquidity for REG to redeploy to the UK • Assessment of building further projects against share buy backs
Roskrow Barton Mohawk Point
12
Financial Review
13
Profit and Loss £’000
UK Wind
UK UCO
Canada Wind
Central Costs
31 December 2008
31 December 2007
30 June 2008
Revenue
2,187
504
1,959
-
4,650
1,244
3,564
Cost of Sales
(408)
(567)
(481)
-
(1,456)
(555)
(690)
Gross Profit
1,779
(63)
1,478
-
3,194
689
2,847
Administration
(653)
(240)
(527)
(516)
(1,936)
(1,473)
(5,355)
Development
(652)
(248)
(964)
-
(1,864)
(1,232)
(2,150)
Other Income
12
1
-
-
13
1,444
1,555
486
(550)
(13)
(516)
(593)
(572)
(3,076)
(525)
(55)
(945)
-
(1,525)
(629)
(1,092)
Warrant Costs
-
-
-
(13)
(13)
(253)
(448)
Forex
-
-
-
1,929
1,929
-
-
Exceptional item
-
-
(2,867)
-
(2,867)
-
(48)
Financing
2
(2)
(4,903)
68
(4,835)
770
205
PBT
(37)
(607)
(8,728)
1,468
(7,904)
(684)
(4,459)
Tax
17
-
(25)
-
(8)
145
375
PAT
(20)
(607)
(8,753)
1,468
(7,912)
(539)
(4,084)
EBITDA Depreciation
UK wind revenues up 180% on the prior year
Commercial generation at Bentwaters now underway
Write off of GE turbine deposit offset by Forex gain on cash back to REG
Development programmes accelerated
Includes £4.5m Non-cash Fair Value adjustment on Canadian SWAP
Continued growth of gross profit, exceeding FY June 2008
14
Balance sheet 31 December 2008
30 June 2008
£’000
£’000
32,549
29,662
110,750
80,659
143,299
110,281
Trade and other receivables
10,428
4,730
Cash and cash equivalents
5,216
16,453
15,644
21,183
(4,709)
(6,244)
(14,518)
(9,899)
(19,227)
(16,143)
(45,632)
(16,915)
(6,442)
(5,798)
(52,074)
(22,713)
87,642
92,608
NON-CURRENT ASSETS Intangibles Property, plant and equipment
Continued investment in projects, including the Harrow I,II & III projects in Ontario
CURRENT ASSETS Includes £6.0m of cash held in Escrow
CURRENT LIABILITIES Trade and other payables Borrowings
Short term borrowings under group credit facility, which is due for renewal in June 2010
NON-CURRENT LIABILITIES Borrowings Deferred Tax
NET ASSETS
Fully draw facility from Fortis Bank of CAD$75m
15
Current market trends UK •
Turbine pricing in UK significantly higher than 6 months ago •
Circa £1.5m per MW to build
•
Illustrative unlevered IRRs of around 12-15% depending on wind
•
Over 25% IRRs possible with modest debt
•
Debt costs in UK are 350bp over LIBOR so 6.5% all in
•
Turbine pricing expected to fall over next 6 months
•
Delivery times are much shorter – 6 months compared with at least 18 months previously
Canada •
Canadian turbine prices already falling
•
BOP costs are consistent with 2008 pricing
•
Circa $3m/MW to install at present
16
Summary and outlook
• End of 2008 was difficult period for REG • New UK Wind PPA commences April 2009 for 2 years • Further UK planning consents likely in Q2 2009 • REG Bio-Power business is gaining significant traction with end of waste • Canadian business value expected to be materially enhanced by new feed in tariffs • Asset light model in Canada has the potential to create significant liquidity for REG • REG reviewing other ways to maximise shareholder value outwith building projects
SOLID DEVELOPMENT PROVIDING CONFIDENCE FOR THE FULL YEAR 17
1
Operational highlights
• Total revenues £4.7m (2007 £1.2m) • Gross profit £3.2m (2007 £0.7m) • Loss before tax • Interim dividend of 0.5p per share • Proposals to allow 25% buy back authority • Redomiciliation to Jersey and adoption of shareholder friendly Articles including preemption rights • 39.6MW fully operational in Canada • 21.3MW fully operational in UK • 4.2MW Bentwaters UCO plant operational • Goonhilly and Loscar ready to build • Good progress with EA regarding end of waste
Goonhilly Braich Ddu
2
Review of Operations - UK
3
UK - Wind Projects with planning: Loscar 4.0MW Goonhilly up to 15.0MW
Operational Under Construction
Projects in late stage development:
In Development
South Sharpley 7.5MW Cheverton Down 9.0MW Orchard End 4.0MW Pentre Tump 3.9MW French Farm 4.0MW Bears Down 4.0 - 8.0MW
Goonhilly
4
UK – Pricing • UK portfolio potential to produce around 51GWh per annum • New PPA starting 1 April for 2 years • Power sold at £80/MWh on a time weighted basis – current market pricing around £40/MWh • ROC pricing around £50/MWh
Braich Ddu
5
UK – REG Bio-Power • Operational projects: • Bentwaters commissioned – 4.2MW • End of waste • Negotiations with Environment Agency progressing well • Commercial quantities of LF 100 possible late 2009 • Used cooking oil prices have collapsed, benefiting REG Bio-Power • Pricing around 15-20p per litre at present • Economics • Each ton of oil produces approx 4.1MWh • UCO qualifies for 1.5 ROCs as conventional plant and 2 ROCs as high grade CHP
Bentwaters
6
UK – REG Bio-Power • Next Steps • Operate Bentwaters on non food grade oil • Expected by end of April • Enabling profitability • Then build production facility for LF 100 • Cost will be around £500,000 • Target completion by end of September 2009 • Capable of processing up to 20,000 tons per annum • Enough for 3 Bentwaters
7
Review of Operations - Canada
8
Canada - 2008 Standard Offer Programme
• Four SOP projects complete: • • • •
Cultus Frogmore Mohawk Clear Creek
9.9MW 9.9MW 9.9MW 9.9MW
• Total capital investment of Cdn$100 million • Refinanced with Fortis Bank at 6.3% fixed • 15 year term, 20 year amortisation • Leveraged equity returns around 15% using 75% debt • Equity released from projects totals Cdn$75 million
Cultus Goonhilly
9
Canada – Ontario Green Energy Act
• Proposed streamlined regulatory and approvals process • eliminating municipal approval bottlenecks and • reducing NIMBY opposition • Grants priority to renewable energy projects to connect to the grid • Replaces the RESOP and RFP programmes with a Feed-in-Tariff for distribution and transmission connected projects • Guaranteed pricing structure for 20 year contracts • Prices vary based upon project size and type of renewable energy technology • No capacity restrictions for wind projects
10
Canada – Ontario Feed-in-Tariffs
• Proposed new feed in tariffs for Renewable Energy Projects in Ontario are: •
Onshore wind projects 13.5¢/kWh
•
Offshore wind projects 19.0¢/kWh
•
Community-based or Aboriginal Wind Projects ≤10MW
14.4¢/kWh
• New tariffs anticipated to be introduced in June 2009 • Issue for REG is mechanism for novation of existing RESOP contracts • Potential to add significant value to Canadian business
11
Canada - the “asset light” model • Scale of Canadian opportunity vs. cost • Options being investigated to reduce capital employed in Canada • Potential to create significant liquidity for REG to redeploy to the UK • Assessment of building further projects against share buy backs
Roskrow Barton Mohawk Point
12
Financial Review
13
Profit and Loss £’000
UK Wind
UK UCO
Canada Wind
Central Costs
31 December 2008
31 December 2007
30 June 2008
Revenue
2,187
504
1,959
-
4,650
1,244
3,564
Cost of Sales
(408)
(567)
(481)
-
(1,456)
(555)
(690)
Gross Profit
1,779
(63)
1,478
-
3,194
689
2,847
Administration
(653)
(240)
(527)
(516)
(1,936)
(1,473)
(5,355)
Development
(652)
(248)
(964)
-
(1,864)
(1,232)
(2,150)
Other Income
12
1
-
-
13
1,444
1,555
486
(550)
(13)
(516)
(593)
(572)
(3,076)
(525)
(55)
(945)
-
(1,525)
(629)
(1,092)
Warrant Costs
-
-
-
(13)
(13)
(253)
(448)
Forex
-
-
-
1,929
1,929
-
-
Exceptional item
-
-
(2,867)
-
(2,867)
-
(48)
Financing
2
(2)
(4,903)
68
(4,835)
770
205
PBT
(37)
(607)
(8,728)
1,468
(7,904)
(684)
(4,459)
Tax
17
-
(25)
-
(8)
145
375
PAT
(20)
(607)
(8,753)
1,468
(7,912)
(539)
(4,084)
EBITDA Depreciation
UK wind revenues up 180% on the prior year
Commercial generation at Bentwaters now underway
Write off of GE turbine deposit offset by Forex gain on cash back to REG
Development programmes accelerated
Includes £4.5m Non-cash Fair Value adjustment on Canadian SWAP
Continued growth of gross profit, exceeding FY June 2008
14
Balance sheet 31 December 2008
30 June 2008
£’000
£’000
32,549
29,662
110,750
80,659
143,299
110,281
Trade and other receivables
10,428
4,730
Cash and cash equivalents
5,216
16,453
15,644
21,183
(4,709)
(6,244)
(14,518)
(9,899)
(19,227)
(16,143)
(45,632)
(16,915)
(6,442)
(5,798)
(52,074)
(22,713)
87,642
92,608
NON-CURRENT ASSETS Intangibles Property, plant and equipment
Continued investment in projects, including the Harrow I,II & III projects in Ontario
CURRENT ASSETS Includes £6.0m of cash held in Escrow
CURRENT LIABILITIES Trade and other payables Borrowings
Short term borrowings under group credit facility, which is due for renewal in June 2010
NON-CURRENT LIABILITIES Borrowings Deferred Tax
NET ASSETS
Fully draw facility from Fortis Bank of CAD$75m
15
Current market trends UK •
Turbine pricing in UK significantly higher than 6 months ago •
Circa £1.5m per MW to build
•
Illustrative unlevered IRRs of around 12-15% depending on wind
•
Over 25% IRRs possible with modest debt
•
Debt costs in UK are 350bp over LIBOR so 6.5% all in
•
Turbine pricing expected to fall over next 6 months
•
Delivery times are much shorter – 6 months compared with at least 18 months previously
Canada •
Canadian turbine prices already falling
•
BOP costs are consistent with 2008 pricing
•
Circa $3m/MW to install at present
16
Summary and outlook
• End of 2008 was difficult period for REG • New UK Wind PPA commences April 2009 for 2 years • Further UK planning consents likely in Q2 2009 • REG Bio-Power business is gaining significant traction with end of waste • Canadian business value expected to be materially enhanced by new feed in tariffs • Asset light model in Canada has the potential to create significant liquidity for REG • REG reviewing other ways to maximise shareholder value outwith building projects
SOLID DEVELOPMENT PROVIDING CONFIDENCE FOR THE FULL YEAR 17
