Renewable Energy Generation
REG Interim Results Six months ending 31 December 2014 9 February 2015
Andrew Whalley David Crockford
Chief Executive Finance Director
REG strategy ■
To develop, build and operate a portfolio of renewable energy assets in the UK
■
Generating a significant operating free cash flow which is allocated:
■
■
As dividends to shareholders, and
As reinvestment back into the business funding future growth
Three main business areas:
REG Windpower
Development and ownership of distributed generation wind projects
REG Bio-Power
Development and ownership of plant powered by recycled used cooking oil
REG Asset Management
Management of renewable energy projects
REG is also active in developing large scale PV solar projects on brownfield sites
2
Overview of period Record development performance ■
Resolution to grant planning for Hallburn Wind Farm
■
Resolution to grant planning for Mynydd Portref Wind Farm
■
Resolution to grant planning at Knockshinnoch Wind Farm – post period end
■
Solar planning gained for 60MW on Veolia sites
Operational and financial highlights ■
Whitemoor Bio-Power (18MW) plant now fully commissioned
■
St Breock (10MW) and Ramsey II (8MW) Wind Farms financed and under construction
■
Sale of St Breock and Ramsey II Wind Farms to BlackRock
Enterprise value of £36m
Profit before tax of £4.5m recognised in the six months
■
REG adjusted EBITDA (after disposals) of £4.2m
■
Unrestricted cash of £14.6m
Tower erection at Ramsey II Jan 2015
3
Project consents Demonstrating the benefits of a diversified portfolio, 53MW across 8 projects ■
■
24.9 MW of wind farm projects now in procurement during FY15
Denzell Downs (10MW)
French Farm, Draperstown and Rodbaston (14MW)
Barlborough (0.9MW)
Hallburn (12MW) approved by Carlisle City Council
■
■
■
2016 build into the RO
Mynydd Portref (12MW) resolution to grant at planning committee
Section 106 being agreed
Moving to procurement and to construction 2016 into RO
Knockshinnoch (4MW) resolution to grant at planning committee
Grid available 2017
May be possible to build into the RO
Projects approved at planning committee are considerably cheaper than the appeal process
also harder for DCLG to overturn in England
4
Projects awaiting planning determination Projects at appeal – 46MW ■
French Farm II(8MW)
■
Lincolnshire (7.65MW)
■
Total of 124MW of projects in UK planning system representing a £14m investment by REG
Decision post election
Mynydd Brombil (10MW)
■
Decision post election
Pen Bryn Oer (6MW)
■
Decision post election
Decision post election
Northern Ireland (14MW)
Decision post election
Awaiting committee decision – 78MW ■
9 projects in total
3 decisions totalling 18MW possible pre-election
5
Future UK development strategy ■
Scottish and Welsh projects being progressed
Devolved planning
Devo max makes imposition of Westminster politics more problematic
DCLG has no authority in Wales or Scotland
■
34MW of Scottish projects now well advanced towards planning submission
■
20MW under active development in Wales
■
English projects being maintained awaiting results of the May election
■
REG will take a view depending on outcome of May general election
Also exploring opportunities to leverage development and construction capabilities
Working on several projects which have an existing planning consent in conjunction with third parties
Looking to further our footprint in Northern Ireland with our JV partner
6
Wind construction 14MW under construction ■
■
■
St Breock (10MW) Cornwall
Five Vestas V80 turbines
100m to tip
Expected annualised output of 28GWh
Expected operation end Q2 2015
Ramsey II (8MW) Cambridgeshire
4 Vestas V90 turbines
125m to tip
Expected annualised output of 22GWh
Expected operation by end Q2 2015
Both projects have been pre sold to BlackRock Fund
EV of £36m
Initial proceeds to REG of £13.8m recognised to date
Profit of £4.5m – St Breock was purchased by REG in 2009
7
Blades and tower lift at St Breock Jan 2015
Projects in procurement 24.9MW for 2015 construction start ■
■
■
■
■
Denzell Downs (10MW)
Five 2MW turbines, 100m to tip
Expected annual output 32GWh
Draperstown (6MW) Northern Ireland
Three 2MW turbines, 100m to tip
Expected annual output of 15GWh
Rodbaston College (4MW)
Two 2MW turbines, 127m to tip
Expected annual output of 9GWh
French Farm (4MW) initial phase
Two 2MW turbines, 100m to tip
Expected annual output of 10GWh
Barlborough (0.9MW) South Yorks
One 0.9MW turbine, 86m to tip
Expected annual output 2GWh
V80 turbine blade arriving at St Breock Jan 2015
8
Percentage of UK Generation from Renewable Sources
Growth of renewables in the UK to 2020
16% Renewable Heat and Transport Fuel
14%
Renewable Energy
12% 10% 8% 6% 4% 2% 0% 2008
2009
2010
2011
2012
2013
2020
Source: DECC Data from Digest of UK Energy Statistics (DUKES) July 2014 9
UK unlikely to achieve 2020 targets without onshore wind ■
The 5GW of new capacity earmarked to come from onshore wind is the most affordable and deliverable within the growth mix
Incremental renewable energy capacity (GW)
Incremental UK Renewable Generation Capacity 2013-2020 (GW) 45 9.6GW
0.9GW
41.0GW
40 35
5.0GW
30
6.5GW
25 19.5GW
20 15 10 5 0 2013
Offshore Wind
Onshore Wind
Source: National Grid EMR Analytical Report (Dec 2013) 10
Small scale FiT
Other
2020 Target
Cost of onshore wind versus other technologies Onshore wind is by far the cheapest, deployable renewable technology
Levelised Cost per €MWh 2012 values
250
200
150
100
50
0 CCGT
Coal
Nuclear
Hydro
Wind onshore
Source EDPR analysis (wind at 25% load factor) 11
Biomass
Solar PV
Wind offshore
Solar CSP
REG Bio-Power Whitemoor successfully commissioned ■
First plant of its type in the world
■
Comprises ten Caterpillar B-HD Gensets each of 1.8MW
■
Commissioned on time and on budget
■
Total capital cost of £6.3m
£4.3m of debt from Caterpillar Finance, 5.5% over 7 years
£2m of REG equity
■
Built by Finning UK
■
Operated by Finning UK under a 7 year O&M agreement
■
Bulk of revenue from National Grid Short Term Operating Reserve service
■
Availability payments
Utilisation payments
Scope for opportunistic operation outside STOR hours
Whitemoor Jan 2015
12
Bio-Power growth GB Peak Reserve Requirement
UK grid likely to become more volatile due to increase in intermittent generation
25
■
Bio-Power plant highly competitive because it earns ROCs per MWh generated
20
■
Access to fuel is primary limiting factor
■
REG believes there is scope for three to four more “Whitemoors” taking our installed capacity up to 100MW Sites already in planning with grid connections
■
Will be built, financed and operated identically to Whitemoor
■
A further equity investment for REG of up to £10m
15 GB future reserve requirement
■
Capacity (GW)
■
10
5 0% wind load factor
0
Source: DUKES, Poyry, National Grid, Baringa, REG analysis
13
Fuel collection and processing – Living Fuels ■
Oil volumes up 60% year on year
■
■
■
■
annualised volumes now running at over 4,000 tonnes per annum
Living Fuels awarded the East Anglia, East Midlands and West Midlands franchises of the Arrow Group’s national collection business
Allows Living Fuels access to national contracts
Allows Arrow Group members access to a new market for their collections – REG Bio-Power
Allows Arrow group customers access to new CSR opportunities
Used cooking oil prices down 23% over last twelve months
Reflecting large global production of virgin oils
Bio-diesel manufacturers have switched to virgin oils
Living Fuels on track to deliver an annualised volume of 7,000 tons by end of 2015
4,500 tonnes from “white van” or commercial collection
2,000 tonnes from industrial
500 tonnes from public sector
120l barrel containing used cooking oil at Hockwold
REG Bio-Power has leased oil storage to take advantage of current low prices
Living fuels becoming the “go to” Company in the UK for used cooking oil collection 14
Asset Management To leverage our existing systems and expertise into a fragmented market in the UK ■
There is a good opportunity to leverage our existing systems and personnel
■
Renewables asset management market in the UK is fragmented
■
REG covers all three areas of Asset Management
Operations and Maintenance – mechanical reporting
Financial reporting
Commercial – e.g. PPAs
■
Existing service rated as “best in class” by BlackRock
■
REG is targeting funds that have bought operational assets
■
Return on capital is attractive as the only additions REG will make is “people” as the business grows
■
Monitoring of REG Bio plant will also be assigned to Asset Management team
■
REG is targeting 300MW + of managed capacity by the end of 2017
■
Significant proportion of this will be from the BlackRock relationship
15
REG Solar Agreement with Veolia
Opportunities for Larger Roof Mounted
■
Veolia is the World’s largest waste management Company
■
Examining the scope and returns for larger rooftop mounted schemes
■
Operates twenty landfill sites across the UK
■
Also examining other solar opportunities
■
REG has signed an exclusivity agreement on eleven landfill sites to deploy renewables
■
Three sites now have a planning permission totalling 60MW
Ockenden
37MW
Netley
12MW
Ling Hall
12MW
■
Netley has been bid into the forthcoming CfD
■
REG will seek to leverage the fall in panel prices to extract value
■
Goonhilly Solar Project 4.5MW
BlackRock is keen to add solar projects for its funds
Lower IRR than UK wind
16
Summary REG has established three core businesses, all in high growth UK markets;
■
Wind development pipeline is now maturing with a record period for planning consents
■
REG now has circa 50MW of wind projects to build
■
Representing an investment of around £60m
Need to move quickly to maximise value creation through the existing RO mechanism
Relationship with BlackRock working well
Gives REG the opportunity to effectively recycle capital into its own owned portfolio of renewables assets
■
Asset management business targeting growth from 50MW to 300MW+ by 2017
■
REG Bio-Power has opportunity to deliver significant growth in expanding National Grid balancing services
All three businesses increasing operating free cash flow to REG equity holders
17
Disclaimer This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology. These forwardlooking statements include matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or current expectations. Any forward-looking statements in this presentation reflect the Company’s current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. No representations or warranties are made as to the accuracy of such statements, estimates or projections. The Company undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances. This presentation does not constitute an invitation or inducement to any person to subscribe for or otherwise acquire securities in the Company.
18
Andrew Whalley David Crockford
Chief Executive Finance Director
REG strategy ■
To develop, build and operate a portfolio of renewable energy assets in the UK
■
Generating a significant operating free cash flow which is allocated:
■
■
As dividends to shareholders, and
As reinvestment back into the business funding future growth
Three main business areas:
REG Windpower
Development and ownership of distributed generation wind projects
REG Bio-Power
Development and ownership of plant powered by recycled used cooking oil
REG Asset Management
Management of renewable energy projects
REG is also active in developing large scale PV solar projects on brownfield sites
2
Overview of period Record development performance ■
Resolution to grant planning for Hallburn Wind Farm
■
Resolution to grant planning for Mynydd Portref Wind Farm
■
Resolution to grant planning at Knockshinnoch Wind Farm – post period end
■
Solar planning gained for 60MW on Veolia sites
Operational and financial highlights ■
Whitemoor Bio-Power (18MW) plant now fully commissioned
■
St Breock (10MW) and Ramsey II (8MW) Wind Farms financed and under construction
■
Sale of St Breock and Ramsey II Wind Farms to BlackRock
Enterprise value of £36m
Profit before tax of £4.5m recognised in the six months
■
REG adjusted EBITDA (after disposals) of £4.2m
■
Unrestricted cash of £14.6m
Tower erection at Ramsey II Jan 2015
3
Project consents Demonstrating the benefits of a diversified portfolio, 53MW across 8 projects ■
■
24.9 MW of wind farm projects now in procurement during FY15
Denzell Downs (10MW)
French Farm, Draperstown and Rodbaston (14MW)
Barlborough (0.9MW)
Hallburn (12MW) approved by Carlisle City Council
■
■
■
2016 build into the RO
Mynydd Portref (12MW) resolution to grant at planning committee
Section 106 being agreed
Moving to procurement and to construction 2016 into RO
Knockshinnoch (4MW) resolution to grant at planning committee
Grid available 2017
May be possible to build into the RO
Projects approved at planning committee are considerably cheaper than the appeal process
also harder for DCLG to overturn in England
4
Projects awaiting planning determination Projects at appeal – 46MW ■
French Farm II(8MW)
■
Lincolnshire (7.65MW)
■
Total of 124MW of projects in UK planning system representing a £14m investment by REG
Decision post election
Mynydd Brombil (10MW)
■
Decision post election
Pen Bryn Oer (6MW)
■
Decision post election
Decision post election
Northern Ireland (14MW)
Decision post election
Awaiting committee decision – 78MW ■
9 projects in total
3 decisions totalling 18MW possible pre-election
5
Future UK development strategy ■
Scottish and Welsh projects being progressed
Devolved planning
Devo max makes imposition of Westminster politics more problematic
DCLG has no authority in Wales or Scotland
■
34MW of Scottish projects now well advanced towards planning submission
■
20MW under active development in Wales
■
English projects being maintained awaiting results of the May election
■
REG will take a view depending on outcome of May general election
Also exploring opportunities to leverage development and construction capabilities
Working on several projects which have an existing planning consent in conjunction with third parties
Looking to further our footprint in Northern Ireland with our JV partner
6
Wind construction 14MW under construction ■
■
■
St Breock (10MW) Cornwall
Five Vestas V80 turbines
100m to tip
Expected annualised output of 28GWh
Expected operation end Q2 2015
Ramsey II (8MW) Cambridgeshire
4 Vestas V90 turbines
125m to tip
Expected annualised output of 22GWh
Expected operation by end Q2 2015
Both projects have been pre sold to BlackRock Fund
EV of £36m
Initial proceeds to REG of £13.8m recognised to date
Profit of £4.5m – St Breock was purchased by REG in 2009
7
Blades and tower lift at St Breock Jan 2015
Projects in procurement 24.9MW for 2015 construction start ■
■
■
■
■
Denzell Downs (10MW)
Five 2MW turbines, 100m to tip
Expected annual output 32GWh
Draperstown (6MW) Northern Ireland
Three 2MW turbines, 100m to tip
Expected annual output of 15GWh
Rodbaston College (4MW)
Two 2MW turbines, 127m to tip
Expected annual output of 9GWh
French Farm (4MW) initial phase
Two 2MW turbines, 100m to tip
Expected annual output of 10GWh
Barlborough (0.9MW) South Yorks
One 0.9MW turbine, 86m to tip
Expected annual output 2GWh
V80 turbine blade arriving at St Breock Jan 2015
8
Percentage of UK Generation from Renewable Sources
Growth of renewables in the UK to 2020
16% Renewable Heat and Transport Fuel
14%
Renewable Energy
12% 10% 8% 6% 4% 2% 0% 2008
2009
2010
2011
2012
2013
2020
Source: DECC Data from Digest of UK Energy Statistics (DUKES) July 2014 9
UK unlikely to achieve 2020 targets without onshore wind ■
The 5GW of new capacity earmarked to come from onshore wind is the most affordable and deliverable within the growth mix
Incremental renewable energy capacity (GW)
Incremental UK Renewable Generation Capacity 2013-2020 (GW) 45 9.6GW
0.9GW
41.0GW
40 35
5.0GW
30
6.5GW
25 19.5GW
20 15 10 5 0 2013
Offshore Wind
Onshore Wind
Source: National Grid EMR Analytical Report (Dec 2013) 10
Small scale FiT
Other
2020 Target
Cost of onshore wind versus other technologies Onshore wind is by far the cheapest, deployable renewable technology
Levelised Cost per €MWh 2012 values
250
200
150
100
50
0 CCGT
Coal
Nuclear
Hydro
Wind onshore
Source EDPR analysis (wind at 25% load factor) 11
Biomass
Solar PV
Wind offshore
Solar CSP
REG Bio-Power Whitemoor successfully commissioned ■
First plant of its type in the world
■
Comprises ten Caterpillar B-HD Gensets each of 1.8MW
■
Commissioned on time and on budget
■
Total capital cost of £6.3m
£4.3m of debt from Caterpillar Finance, 5.5% over 7 years
£2m of REG equity
■
Built by Finning UK
■
Operated by Finning UK under a 7 year O&M agreement
■
Bulk of revenue from National Grid Short Term Operating Reserve service
■
Availability payments
Utilisation payments
Scope for opportunistic operation outside STOR hours
Whitemoor Jan 2015
12
Bio-Power growth GB Peak Reserve Requirement
UK grid likely to become more volatile due to increase in intermittent generation
25
■
Bio-Power plant highly competitive because it earns ROCs per MWh generated
20
■
Access to fuel is primary limiting factor
■
REG believes there is scope for three to four more “Whitemoors” taking our installed capacity up to 100MW Sites already in planning with grid connections
■
Will be built, financed and operated identically to Whitemoor
■
A further equity investment for REG of up to £10m
15 GB future reserve requirement
■
Capacity (GW)
■
10
5 0% wind load factor
0
Source: DUKES, Poyry, National Grid, Baringa, REG analysis
13
Fuel collection and processing – Living Fuels ■
Oil volumes up 60% year on year
■
■
■
■
annualised volumes now running at over 4,000 tonnes per annum
Living Fuels awarded the East Anglia, East Midlands and West Midlands franchises of the Arrow Group’s national collection business
Allows Living Fuels access to national contracts
Allows Arrow Group members access to a new market for their collections – REG Bio-Power
Allows Arrow group customers access to new CSR opportunities
Used cooking oil prices down 23% over last twelve months
Reflecting large global production of virgin oils
Bio-diesel manufacturers have switched to virgin oils
Living Fuels on track to deliver an annualised volume of 7,000 tons by end of 2015
4,500 tonnes from “white van” or commercial collection
2,000 tonnes from industrial
500 tonnes from public sector
120l barrel containing used cooking oil at Hockwold
REG Bio-Power has leased oil storage to take advantage of current low prices
Living fuels becoming the “go to” Company in the UK for used cooking oil collection 14
Asset Management To leverage our existing systems and expertise into a fragmented market in the UK ■
There is a good opportunity to leverage our existing systems and personnel
■
Renewables asset management market in the UK is fragmented
■
REG covers all three areas of Asset Management
Operations and Maintenance – mechanical reporting
Financial reporting
Commercial – e.g. PPAs
■
Existing service rated as “best in class” by BlackRock
■
REG is targeting funds that have bought operational assets
■
Return on capital is attractive as the only additions REG will make is “people” as the business grows
■
Monitoring of REG Bio plant will also be assigned to Asset Management team
■
REG is targeting 300MW + of managed capacity by the end of 2017
■
Significant proportion of this will be from the BlackRock relationship
15
REG Solar Agreement with Veolia
Opportunities for Larger Roof Mounted
■
Veolia is the World’s largest waste management Company
■
Examining the scope and returns for larger rooftop mounted schemes
■
Operates twenty landfill sites across the UK
■
Also examining other solar opportunities
■
REG has signed an exclusivity agreement on eleven landfill sites to deploy renewables
■
Three sites now have a planning permission totalling 60MW
Ockenden
37MW
Netley
12MW
Ling Hall
12MW
■
Netley has been bid into the forthcoming CfD
■
REG will seek to leverage the fall in panel prices to extract value
■
Goonhilly Solar Project 4.5MW
BlackRock is keen to add solar projects for its funds
Lower IRR than UK wind
16
Summary REG has established three core businesses, all in high growth UK markets;
■
Wind development pipeline is now maturing with a record period for planning consents
■
REG now has circa 50MW of wind projects to build
■
Representing an investment of around £60m
Need to move quickly to maximise value creation through the existing RO mechanism
Relationship with BlackRock working well
Gives REG the opportunity to effectively recycle capital into its own owned portfolio of renewables assets
■
Asset management business targeting growth from 50MW to 300MW+ by 2017
■
REG Bio-Power has opportunity to deliver significant growth in expanding National Grid balancing services
All three businesses increasing operating free cash flow to REG equity holders
17
Disclaimer This presentation includes statements that are, or may be deemed to be, “forward-looking statements”. These forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believe”, “estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will”, or “should” or, in each case, their negative or other variations or comparable terminology. These forwardlooking statements include matters that are not historical facts and include statements regarding the Company’s intentions, beliefs or current expectations. Any forward-looking statements in this presentation reflect the Company’s current expectations and projections about future events. By their nature, forward-looking statements involve a number of risks, uncertainties and assumptions that could cause actual results or events to differ materially from those expressed or implied by the forward-looking statements. These risks, uncertainties and assumptions could adversely affect the outcome and financial effects of the plans and events described herein. Forward-looking statements contained in this presentation regarding past trends or activities should not be taken as a representation that such trends or activities will continue in the future. You should not place undue reliance on forward-looking statements, which speak only as of the date of this presentation. No representations or warranties are made as to the accuracy of such statements, estimates or projections. The Company undertakes no obligation to update or revise (publicly or otherwise) any forward-looking statement, whether as a result of new information, future events or other circumstances. This presentation does not constitute an invitation or inducement to any person to subscribe for or otherwise acquire securities in the Company.
18
