Renewable Energy Generation
REG Financial Results Year ended 30 June 2013
Andrew Whalley David Crockford Matt Partridge
Chief Executive Finance Director Development Director
Highlights Financial ■
Revenue of £13.4 million (2012: £12.1 million)
■
Adjusted EBITDA £12.3million (2012: £2.7million)
■
Profit after tax of £6.5 million (2012: loss of £1.8 million)
■
Sale of 16MW of wind farms for net profit of £9.1m
■
Total cash of £24.3 million (2012: £18.1 million)
■
Proposal to pay final dividend of 1.5p per Ordinary Share (2012: 1.5p)
■
Total dividend for the year maintained at 2.0p (2012: 2.0p)
Operational ■
Construction of South Sharpley (6MW), Orchard End (4MW) and Burnthouse Farm (6MW) wind farms
■
Planning permission granted for St Breock (10MW), Ramsey II (8MW) and Burnthouse Farm (6MW) wind farms
■
66MW of new planning applications made, with 140MW now awaiting determination
■
Long term strategic partnership established with a fund managed by BlackRock
Post year end events ■
Sale of the Goonhilly wind farm (12MW) for an enterprise value of £25.1m
2
REG and BlackRock ■
■
Sale of three wind farms to BlackRock
South Sharpley
6MW
Sancton Hill
10MW
Goonhilly Downs 12MW – post year end
Generated cash of c£24m
Increasing REG’s net asset value by 30%
■
Reduces Group gearing to 15%
■
Asset Investment Agreement ("AIA") providing a framework for future co-operation between REG and BlackRock
■
Provides access to long term low cost of capital partner
■
Creates a new, high quality income stream from Asset Management
■
Sancton Hill, 10MW managed by REG
Expected to grow as future projects (20MW+ p.a.) sold under the AIA
Released equity for reinvestment and facilitates the build out of our near term pipeline
Larger projects sold to BlackRock with REG retaining smaller projects to build recurring revenue
3
Delivering shareholder returns Wind
Biopower
Central Costs
Year to 30/06/13
6 months to 31/12/12
Year to 30/06/12
45.15
8.55
-
53.7
59.7
59.7
122,000
3,000
-
125,000
64,000
108,000
£m
£m
£m
£m
£m
£m
Revenue
12.3
1.1
-
13.4
6.5
12.1
Cost of Sales
(3.2)
(0.9)
-
(4.1)
(2.2)
(3.7)
9.1
0.2
-
9.3
4.3
8.4
Administration
(3.5)
(0.6)
(1.6)
(5.7)
(2.5)
(4.7)
Development - external
(0.4)
-
-
(0.4)
(0.5)
(1.0)
9.1
-
-
9.1
-
-
14.4
(0.4)
(1.6)
12.3
0.9
2.7
3.6
-
-
3.6
-
-
(11.0)
-
-
(11.0)
(4.5)
(24.9)
Capitalised development
(6.3)
-
-
(6.3)
(1.9)
(3.7)
Debt movements
11.0
-
-
11.0
7.2
22.4
Other cash movements
(0.1)
-
(1.5)
(1.6)
(1.0)
(1.8)
CASH FLOW
11.5
(0.4)
(3.1)
7.9
0.7
(5.3)
MW MWh
Gross Profit
Profit on sale of wind farms EBITDA Adj. to proceeds on sale Construction costs
Sale of 16MW of sites to BlackRock, £12.7m of net Development capitalised and cash generated contributed to 140MW in the planning system and the PBSE, Goonhilly, 12MW delivered £10.7m beginnings of 100MW coming in of net cash FY2014
Bio Power holding steady, advances expected with more STOR in coming years
Growth in admin driven by the wind business and increased focus on pipeline delivery
External spend capitalised as development portfolio matures
Profits crystallised in the year illustrate potential value of pipeline and underline the strategy of developing renewables
Our wind fleet REG operates, has under construction or has consented 105MW of onshore wind capacity, including 28MW operated on behalf of BlackRock Site
Location
Status
MW
Braich Ddu
Gwynedd
Operating
3.9
High Haswell
County Durham
Operating
4.0
High Pow
Cumbria
Operating
3.9
High Sharpley
County Durham
Operating
2.6
Loscar
Yorkshire
Operating
4.5
Ramsey
Cambridgeshire
Operating
1.8
Roskrow Barton
Cornwall
Operating
1.7
St. Breock
Cornwall
Operating
5.0
Whittlesey
Cambridgeshire
Operating
1.8
Orchard End
Lancashire
Operating
4.0
Burnthouse Farm
Cambridgeshire
Operating
Total REG owned projects High Down
Construction Consented Operated under asset management agreements
6.0 39.2
Cornwall
Construction
Ramsey II
Cambridgeshire
Consented
8.0
St Breock Repower
Cornwall
Consented
10.0
Total Construction
0.5
18.5
Cheverton Down
Isle of Wight
Denzell Downs
Cornwall
Draperstown French Farm
Consented
1.2
Consented (legal challenge)
10.0
Co. Londonderry
Consented
4.0
Cambridgeshire
Consented
4.0
Total Consented Sancton Hill
Operational
19.2 Yorkshire
AMA
South Sharpley
County Durham
AMA
6.0
Goonhilly Downs
Cornwall
AMA
12.0
Operated on behalf of Third Party
10.0
Year ended
30 June 2013
Availability
97.21%
MWh output
122,000
Overall capacity factor
29.2%
Note South Sharpley, Burnthouse Farm and Orchard End not operational for full year
28.0
5
Wind 2013/14 construction High Down
Ramsey 2
St Breock
Location
Cornwall
Location
Cambridgeshire
Location
Cornwall
MW
10
MW
8
MW
0.5
P50 output
30GWh
P50 output
27GWh
P50 output
1.8GWh
Cost
£12m
Cost
£10m
Cost
£1.5m
6
Wind development REG currently has around 140MW of projects in planning, around 100MW due into planning in FY2014 and an early-stage pipeline of around 700MW In appeal
Site
Location
Status
MW
Barlborough 1
Derbyshire
In appeal
0.5
Hallburn
Cumbria
In appeal
12.0
Pentre Tump
Powys
In appeal
Total awaiting appeal decision
Awaiting determination
6.0 18.5
Bank House Farm
Lincolnshire
In planning
12.0
French Farm II
Cambridgeshire
In planning
8.0
High Pow II
Cumbria
In planning
16.0
Langthwaite
Cumbria
In planning
12.0
M48/M4
Gloucestershire
In planning
3.6
Mendennick
Cornwall
In planning
2.6
Mynydd Brombil
Neath Port Talbot
In planning
10.0
Mynydd Portref
Rhondda Cynon Taf
In planning
12.0
Outh Muir
Fife
In planning
11.5
Pen Bryn Oer
Caerphilly
In planning
6.0
Ventongimps
Cornwall
In planning
2.6
Abergorki
Rhondda Cynon Taf
In planning
9.0
Chapman's Howe
Dumfries & Galloway
In planning
6.9
Highfield
Cambridgeshire
In planning
10.0
Total awaiting LPA decision
122.2
Total awaiting a planning decision
140.7
Total due into planning FY 2014
100.0
7
Upcoming planning decisions REG has around 140MW of projects in the planning system, with an average project size of over 8MW. All but 19MW are being considered by a Local Planning Authority (LPA). The scenario below demonstrates the potential outturn from the 122MW of LPA applications currently in the planning system. In addition to the estimated 85MW of consents in the period to 31 December 2015, there are the consents that would be anticipated in that period (and later) from the additional 100MW entering the planning system in the period to 30 June 2014 and from the 19MW of projects currently in planning, outside the LPA planning system.
122MW in planning 49MW of LPA consents )in period to December 2014*)
£60m required to construct
73MW of refusals (planning appeals)
* 40% LPA planning consent rate assumed ** 50% planning appeal consent rate assumed
36MW of appeal consents (in period to December 2015**) 8
£45m required to construct
Financing our growth ■
Our primary objective remains to build, own and operate a sizeable pool of renewable energy assets benefitting from the UK’s stable incentives and strengthening power prices.
■
The route to funding that objective has begun already, the sale of Canada in 2009 gave REG the opportunity to focus on the UK, and we have already explored 3 routes to accessing capital;
■
Using REG’s equity to build on balance sheet
Traditional project finance to leverage that equity
Sale of assets to crystallise value and recycle cash
We are now considering to add to our arsenal of funding routes;
Community funded projects – Most probably through retail debt at a project level – Gets community support and “ownership” at an early stage, helping the development process – Satisfies Government’s desire to involve communities
Corporate bond – Allows more flexible funding of larger projects – May be more suitable for the CfD FIT regime
Using our suppliers’ balance sheets – Delays REG’s equity investment – Diversifies our lender base 9
REG Bio-Power Year ended
30 June 2013
30 June 2012
Litres of oil processed
1.85m
1.4m
MWh of operation
3304
3209
■
Oil volumes up 32% year on year
■
Annualised volumes now running at over 3,000 tonnes per annum
■
Bio-Power awarded the East Anglia franchise 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
■
Own collection volumes will be doubled leveraging existing infrastructure, providing sufficient fuel for around 36MW of new generation
■
8MW STOR contract with National Grid extended to April expected increase hours of generation and hence return
■
Generation facilities pass 80,000 operational hours without major mechanical incident on our Environment Agency approved fuel; LF100.
10
Bio-Power 2013/14 construction - Whitemoor Currently finalising contracts to construct an 18MW peaking and STOR plant at a total capital cost of around £6.3m, financed partly by debt, based near Selby, Yorkshire. Allows REG to participate further in the expected electricity market volatility and diversifies our generation portfolio
Location
Yorkshire
MW
18
Mode of operation
STOR and peaking
Fuel
LF100
Cost to build
£6.3m
11
Leveraging and diversifying our capabilities ■
UK Government now committed to solar PV as a “key technology” (thousands of MW of potential)
■
REG has several existing sites with grid where new solar PV is possible
■
Additionally may install solar on existing wind sites leveraging existing grid capacity
To maximise existing grid, ratio of solar to wind is around 1:4
■
REG currently in process of constructing a 4.51MW solar scheme at Goonhilly using “surplus” grid capacity
■
Project aimed to be complete by March 2014
■
We have identified further wind sites that may offer reasonable returns
Easier and quicker planning than wind
Although returns much lower than wind capital can be recycled quickly
This provides acceptable ROE
■
At least 30MW of solar potential within operating wind sites
■
Solar will leverage existing REG planning expertise and relationships
■
But we must be conscious not to use prime land
REG’s Burnthouse Farm wind project alongside solar project owned by Lightsource – shared substation 12
Summary ■
REG now focussed on delivering shareholder returns after period of investment post Canada sale
■
We delivered circa £9m of value from two asset sales this year
■
Goonhilly has delivered around £11m of cash in the current year with Orchard End to come
■
The programmes of construction on St Breock and Ramsey 2 are well advanced
■
Focus now is on advancing our portfolio of development assets where significant capital has already been deployed
recycling our 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 and well placed as UK generating margins fall
■
Solar leverages REG’s existing development and planning capability
■
Deliverable from a strong balance sheet
A strong project portfolio, a robust balance sheet and a new capital partner allows REG to continue to enhance shareholder value
13
Appendix 1 - Electricity Market Reform (“EMR”) ■
The closure of the older coal plants is on track
■
The trouble is the new capacity is late – 3 years?
■
That means that, absent older plant being kept online, reserve margins falling
■
The margin looks okay at the moment but 2015/16 looks a bit tight
■
REG believes that volatility may increase although chances of “lights going out” are very slim
■
The two critical legs of EMR are beginning to take shape although “devil remains in the detail”
■
Contracts for difference ● These will stimulate investment in low-carbon technologies (including renewables, nuclear and carbon capture and storage by providing predictable revenue streams that will encourage investment by reducing risks to investors and by making it easier and cheaper to secure finance
■
Capacity market ● This will help secure the UK’s energy supply by giving capacity providers financial incentives to provide reliable capacity – making sure the lights stay on at times of peak demand
■
The CfD FiT is £100 for onshore wind degrading to £95 in 2017
■
This is commensurate with existing RO although contract is 15 years vs 20 years for RO
■
REG is examining ways to minimise CfD FiT discount
14
Appendix 2 - Onshore wind in the UK ■
UK has binding legal target to generate 15% of energy (electricity, heat and transport) from renewable sources by 2020
■
4.1% achieved in 2012 (see chart); electricity sector makes biggest contribution and has seen fastest growth
■
Onshore wind recognised as a key technology
Well-proven operationally
Provides the cheapest renewable energy
■
DECC’s Renewable Energy Roadmap identifies potential onshore wind increase in installed capacity from 6.4GW today to 13GW by 2020 16.0%
■
Electricity Market Reform is designed to ensure low carbon options viable to achieve 2020 targets and beyond
14.0% 12.0% 10.0%
■
Interim ROC support (up to 2017) fixed at 0.9ROC/MWh
■
RO to be replaced in 2017 by CfD feed in tariff; strike prices adequate and confirm onshore wind as lowest cost renewable source
■
8.0% 6.0%
So the overall government policy is supportive
4.0% 2.0% 0.0% 2008
2009
2010
2011
2012
2013 Target
15
2014
2015 Actual
2016
2017
2018
2019
2020
Appendix 3 - Cost of onshore wind versus other technologies ■
Onshore wind is the cheapest and most proven/mature renewable technology
■
On best sites is only marginally more expensive than CCGT gas
■
And is significantly cheaper than offshore wind
■
Recent uncertainty over nuclear costs increase attractiveness of onshore wind
■
Price of onshore wind is and be remain competitive – against conventional and other renewable sources
16
Andrew Whalley David Crockford Matt Partridge
Chief Executive Finance Director Development Director
Highlights Financial ■
Revenue of £13.4 million (2012: £12.1 million)
■
Adjusted EBITDA £12.3million (2012: £2.7million)
■
Profit after tax of £6.5 million (2012: loss of £1.8 million)
■
Sale of 16MW of wind farms for net profit of £9.1m
■
Total cash of £24.3 million (2012: £18.1 million)
■
Proposal to pay final dividend of 1.5p per Ordinary Share (2012: 1.5p)
■
Total dividend for the year maintained at 2.0p (2012: 2.0p)
Operational ■
Construction of South Sharpley (6MW), Orchard End (4MW) and Burnthouse Farm (6MW) wind farms
■
Planning permission granted for St Breock (10MW), Ramsey II (8MW) and Burnthouse Farm (6MW) wind farms
■
66MW of new planning applications made, with 140MW now awaiting determination
■
Long term strategic partnership established with a fund managed by BlackRock
Post year end events ■
Sale of the Goonhilly wind farm (12MW) for an enterprise value of £25.1m
2
REG and BlackRock ■
■
Sale of three wind farms to BlackRock
South Sharpley
6MW
Sancton Hill
10MW
Goonhilly Downs 12MW – post year end
Generated cash of c£24m
Increasing REG’s net asset value by 30%
■
Reduces Group gearing to 15%
■
Asset Investment Agreement ("AIA") providing a framework for future co-operation between REG and BlackRock
■
Provides access to long term low cost of capital partner
■
Creates a new, high quality income stream from Asset Management
■
Sancton Hill, 10MW managed by REG
Expected to grow as future projects (20MW+ p.a.) sold under the AIA
Released equity for reinvestment and facilitates the build out of our near term pipeline
Larger projects sold to BlackRock with REG retaining smaller projects to build recurring revenue
3
Delivering shareholder returns Wind
Biopower
Central Costs
Year to 30/06/13
6 months to 31/12/12
Year to 30/06/12
45.15
8.55
-
53.7
59.7
59.7
122,000
3,000
-
125,000
64,000
108,000
£m
£m
£m
£m
£m
£m
Revenue
12.3
1.1
-
13.4
6.5
12.1
Cost of Sales
(3.2)
(0.9)
-
(4.1)
(2.2)
(3.7)
9.1
0.2
-
9.3
4.3
8.4
Administration
(3.5)
(0.6)
(1.6)
(5.7)
(2.5)
(4.7)
Development - external
(0.4)
-
-
(0.4)
(0.5)
(1.0)
9.1
-
-
9.1
-
-
14.4
(0.4)
(1.6)
12.3
0.9
2.7
3.6
-
-
3.6
-
-
(11.0)
-
-
(11.0)
(4.5)
(24.9)
Capitalised development
(6.3)
-
-
(6.3)
(1.9)
(3.7)
Debt movements
11.0
-
-
11.0
7.2
22.4
Other cash movements
(0.1)
-
(1.5)
(1.6)
(1.0)
(1.8)
CASH FLOW
11.5
(0.4)
(3.1)
7.9
0.7
(5.3)
MW MWh
Gross Profit
Profit on sale of wind farms EBITDA Adj. to proceeds on sale Construction costs
Sale of 16MW of sites to BlackRock, £12.7m of net Development capitalised and cash generated contributed to 140MW in the planning system and the PBSE, Goonhilly, 12MW delivered £10.7m beginnings of 100MW coming in of net cash FY2014
Bio Power holding steady, advances expected with more STOR in coming years
Growth in admin driven by the wind business and increased focus on pipeline delivery
External spend capitalised as development portfolio matures
Profits crystallised in the year illustrate potential value of pipeline and underline the strategy of developing renewables
Our wind fleet REG operates, has under construction or has consented 105MW of onshore wind capacity, including 28MW operated on behalf of BlackRock Site
Location
Status
MW
Braich Ddu
Gwynedd
Operating
3.9
High Haswell
County Durham
Operating
4.0
High Pow
Cumbria
Operating
3.9
High Sharpley
County Durham
Operating
2.6
Loscar
Yorkshire
Operating
4.5
Ramsey
Cambridgeshire
Operating
1.8
Roskrow Barton
Cornwall
Operating
1.7
St. Breock
Cornwall
Operating
5.0
Whittlesey
Cambridgeshire
Operating
1.8
Orchard End
Lancashire
Operating
4.0
Burnthouse Farm
Cambridgeshire
Operating
Total REG owned projects High Down
Construction Consented Operated under asset management agreements
6.0 39.2
Cornwall
Construction
Ramsey II
Cambridgeshire
Consented
8.0
St Breock Repower
Cornwall
Consented
10.0
Total Construction
0.5
18.5
Cheverton Down
Isle of Wight
Denzell Downs
Cornwall
Draperstown French Farm
Consented
1.2
Consented (legal challenge)
10.0
Co. Londonderry
Consented
4.0
Cambridgeshire
Consented
4.0
Total Consented Sancton Hill
Operational
19.2 Yorkshire
AMA
South Sharpley
County Durham
AMA
6.0
Goonhilly Downs
Cornwall
AMA
12.0
Operated on behalf of Third Party
10.0
Year ended
30 June 2013
Availability
97.21%
MWh output
122,000
Overall capacity factor
29.2%
Note South Sharpley, Burnthouse Farm and Orchard End not operational for full year
28.0
5
Wind 2013/14 construction High Down
Ramsey 2
St Breock
Location
Cornwall
Location
Cambridgeshire
Location
Cornwall
MW
10
MW
8
MW
0.5
P50 output
30GWh
P50 output
27GWh
P50 output
1.8GWh
Cost
£12m
Cost
£10m
Cost
£1.5m
6
Wind development REG currently has around 140MW of projects in planning, around 100MW due into planning in FY2014 and an early-stage pipeline of around 700MW In appeal
Site
Location
Status
MW
Barlborough 1
Derbyshire
In appeal
0.5
Hallburn
Cumbria
In appeal
12.0
Pentre Tump
Powys
In appeal
Total awaiting appeal decision
Awaiting determination
6.0 18.5
Bank House Farm
Lincolnshire
In planning
12.0
French Farm II
Cambridgeshire
In planning
8.0
High Pow II
Cumbria
In planning
16.0
Langthwaite
Cumbria
In planning
12.0
M48/M4
Gloucestershire
In planning
3.6
Mendennick
Cornwall
In planning
2.6
Mynydd Brombil
Neath Port Talbot
In planning
10.0
Mynydd Portref
Rhondda Cynon Taf
In planning
12.0
Outh Muir
Fife
In planning
11.5
Pen Bryn Oer
Caerphilly
In planning
6.0
Ventongimps
Cornwall
In planning
2.6
Abergorki
Rhondda Cynon Taf
In planning
9.0
Chapman's Howe
Dumfries & Galloway
In planning
6.9
Highfield
Cambridgeshire
In planning
10.0
Total awaiting LPA decision
122.2
Total awaiting a planning decision
140.7
Total due into planning FY 2014
100.0
7
Upcoming planning decisions REG has around 140MW of projects in the planning system, with an average project size of over 8MW. All but 19MW are being considered by a Local Planning Authority (LPA). The scenario below demonstrates the potential outturn from the 122MW of LPA applications currently in the planning system. In addition to the estimated 85MW of consents in the period to 31 December 2015, there are the consents that would be anticipated in that period (and later) from the additional 100MW entering the planning system in the period to 30 June 2014 and from the 19MW of projects currently in planning, outside the LPA planning system.
122MW in planning 49MW of LPA consents )in period to December 2014*)
£60m required to construct
73MW of refusals (planning appeals)
* 40% LPA planning consent rate assumed ** 50% planning appeal consent rate assumed
36MW of appeal consents (in period to December 2015**) 8
£45m required to construct
Financing our growth ■
Our primary objective remains to build, own and operate a sizeable pool of renewable energy assets benefitting from the UK’s stable incentives and strengthening power prices.
■
The route to funding that objective has begun already, the sale of Canada in 2009 gave REG the opportunity to focus on the UK, and we have already explored 3 routes to accessing capital;
■
Using REG’s equity to build on balance sheet
Traditional project finance to leverage that equity
Sale of assets to crystallise value and recycle cash
We are now considering to add to our arsenal of funding routes;
Community funded projects – Most probably through retail debt at a project level – Gets community support and “ownership” at an early stage, helping the development process – Satisfies Government’s desire to involve communities
Corporate bond – Allows more flexible funding of larger projects – May be more suitable for the CfD FIT regime
Using our suppliers’ balance sheets – Delays REG’s equity investment – Diversifies our lender base 9
REG Bio-Power Year ended
30 June 2013
30 June 2012
Litres of oil processed
1.85m
1.4m
MWh of operation
3304
3209
■
Oil volumes up 32% year on year
■
Annualised volumes now running at over 3,000 tonnes per annum
■
Bio-Power awarded the East Anglia franchise 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
■
Own collection volumes will be doubled leveraging existing infrastructure, providing sufficient fuel for around 36MW of new generation
■
8MW STOR contract with National Grid extended to April expected increase hours of generation and hence return
■
Generation facilities pass 80,000 operational hours without major mechanical incident on our Environment Agency approved fuel; LF100.
10
Bio-Power 2013/14 construction - Whitemoor Currently finalising contracts to construct an 18MW peaking and STOR plant at a total capital cost of around £6.3m, financed partly by debt, based near Selby, Yorkshire. Allows REG to participate further in the expected electricity market volatility and diversifies our generation portfolio
Location
Yorkshire
MW
18
Mode of operation
STOR and peaking
Fuel
LF100
Cost to build
£6.3m
11
Leveraging and diversifying our capabilities ■
UK Government now committed to solar PV as a “key technology” (thousands of MW of potential)
■
REG has several existing sites with grid where new solar PV is possible
■
Additionally may install solar on existing wind sites leveraging existing grid capacity
To maximise existing grid, ratio of solar to wind is around 1:4
■
REG currently in process of constructing a 4.51MW solar scheme at Goonhilly using “surplus” grid capacity
■
Project aimed to be complete by March 2014
■
We have identified further wind sites that may offer reasonable returns
Easier and quicker planning than wind
Although returns much lower than wind capital can be recycled quickly
This provides acceptable ROE
■
At least 30MW of solar potential within operating wind sites
■
Solar will leverage existing REG planning expertise and relationships
■
But we must be conscious not to use prime land
REG’s Burnthouse Farm wind project alongside solar project owned by Lightsource – shared substation 12
Summary ■
REG now focussed on delivering shareholder returns after period of investment post Canada sale
■
We delivered circa £9m of value from two asset sales this year
■
Goonhilly has delivered around £11m of cash in the current year with Orchard End to come
■
The programmes of construction on St Breock and Ramsey 2 are well advanced
■
Focus now is on advancing our portfolio of development assets where significant capital has already been deployed
recycling our 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 and well placed as UK generating margins fall
■
Solar leverages REG’s existing development and planning capability
■
Deliverable from a strong balance sheet
A strong project portfolio, a robust balance sheet and a new capital partner allows REG to continue to enhance shareholder value
13
Appendix 1 - Electricity Market Reform (“EMR”) ■
The closure of the older coal plants is on track
■
The trouble is the new capacity is late – 3 years?
■
That means that, absent older plant being kept online, reserve margins falling
■
The margin looks okay at the moment but 2015/16 looks a bit tight
■
REG believes that volatility may increase although chances of “lights going out” are very slim
■
The two critical legs of EMR are beginning to take shape although “devil remains in the detail”
■
Contracts for difference ● These will stimulate investment in low-carbon technologies (including renewables, nuclear and carbon capture and storage by providing predictable revenue streams that will encourage investment by reducing risks to investors and by making it easier and cheaper to secure finance
■
Capacity market ● This will help secure the UK’s energy supply by giving capacity providers financial incentives to provide reliable capacity – making sure the lights stay on at times of peak demand
■
The CfD FiT is £100 for onshore wind degrading to £95 in 2017
■
This is commensurate with existing RO although contract is 15 years vs 20 years for RO
■
REG is examining ways to minimise CfD FiT discount
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Appendix 2 - Onshore wind in the UK ■
UK has binding legal target to generate 15% of energy (electricity, heat and transport) from renewable sources by 2020
■
4.1% achieved in 2012 (see chart); electricity sector makes biggest contribution and has seen fastest growth
■
Onshore wind recognised as a key technology
Well-proven operationally
Provides the cheapest renewable energy
■
DECC’s Renewable Energy Roadmap identifies potential onshore wind increase in installed capacity from 6.4GW today to 13GW by 2020 16.0%
■
Electricity Market Reform is designed to ensure low carbon options viable to achieve 2020 targets and beyond
14.0% 12.0% 10.0%
■
Interim ROC support (up to 2017) fixed at 0.9ROC/MWh
■
RO to be replaced in 2017 by CfD feed in tariff; strike prices adequate and confirm onshore wind as lowest cost renewable source
■
8.0% 6.0%
So the overall government policy is supportive
4.0% 2.0% 0.0% 2008
2009
2010
2011
2012
2013 Target
15
2014
2015 Actual
2016
2017
2018
2019
2020
Appendix 3 - Cost of onshore wind versus other technologies ■
Onshore wind is the cheapest and most proven/mature renewable technology
■
On best sites is only marginally more expensive than CCGT gas
■
And is significantly cheaper than offshore wind
■
Recent uncertainty over nuclear costs increase attractiveness of onshore wind
■
Price of onshore wind is and be remain competitive – against conventional and other renewable sources
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