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March 21, 2011 12:55 pm
Renewable Energy Generation, the renewable energy developer and operator, has blamed “abnormally low wind speeds across the UK” for widening pre-tax losses.
REG, which runs 10 onshore windpower projects in locations including Cornwall, Yorkshire, Cumbria and Cambridgeshire with a total capacity of 41.15MW, said the lack of wind knocked £1m from its interim earnings.
Andrew Whalley, REG chief executive, on Monday told the Financial Times that “December was the worst month in 10 years for wind in the UK, and January was pretty awful as well ... but it goes in cycles.”
“We’re not seeing a long-term reduction in wind speed, it’s just that the past 12 months have been a really bad period for wind.”
Aim-quoted REG has a goal of investing £100m in the sector by the end of 2012, which Mr Whalley said the group was on target to achieve.
“We’ve got lots of projects, lots of cash, and we’re ready to invest it in UK wind,” Mr Whalley said.
REG this month signed a power purchase agreement with Norwegian group Statkraft, covering eight wind sites to lock in energy prices for the next three years.
“Power prices in the UK have been creeping up over the past six months and it provides greater visibility to our accounts. However, the main reason is that it helps us to finance these projects and release a lot of cash back to the group,” Mr Whalley said.
For the six months to December 31, the group revenues rose by almost a quarter to £4.3m, but the pre-tax loss widened from £292,000 to £1.9m.
In spite of the loss per share increasing from 0.27p to 1.78p, the company maintained its interim dividend of 0.5p per share.
Simon Miller, analyst at Northland Capital Partners, held his “outperform” rating on the shares, and said: “The hit to revenues and earnings should not come as a surprise; December was almost windless.
“The wind speed has been abnormally low for the past two winters. While the increased loss is a slight setback we believe REG remains undervalued.”
REG, which was admitted to Aim in May 2005, also has a biopower division that operates an electricity generation plant fuelled by waste vegetable oil.
REG’s Bio-Power division “was adversely affected by the high price of waste cooking oil in the UK for commercially purchased oil to supplement the amount collected from municipal sites”, the group said, resulting in a loss of £600,000.
Mr Whalley said the company also hoped to benefit from the uncertainty affecting the UK’s solar power sector following government proposals to cut subsidies to larger schemes.
“It’s an opportunity for us,” he said. “We’ve got a number of opportunities to leverage some of our existing sites and expertise into the smaller end of the market to get planning permissions to small wind sites that would ideally fit into the feed-in tariff area.”
In January shares in Jersey-based REG rose almost 30 per cent in a day after the group rejected a takeover bid.
REG did not identify which company made the cash-and-shares indicative offer, and only confirmed that it came from a UK-listed company. The approach valued REG’s equity at almost £70m ($111m), and the 67.7p-per-share offer was a 54 per cent premium to group share price at the time.
REG shares rose 0.31p, or 0.55 per cent, to 56.81p on Monday.
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