Renewable Energy Generation’s wind farm development programme is beginning to bear fruit with the company moving into profit and sitting on a pipeline of opportunities which could see it quadruple the size of its portfolio within the next three to four years. This, coupled with a decent dividend yield, suggests there is value in its shares.
The company broke even in the first half thanks to decent wind conditions which fed into its expanded portfolio of onshore wind farms. And this will grow further before the end of 2012 as two wind farms, totalling 16MW, are likely to start generation. Planning permission has been granted for a further 10MW facility and the company has 40MW of projects in the planning pipeline, and a further 80MW close to submission. According to analysts at Daniel Stewart, REG’s wind power portfolio should produce £15m of annual revenues once this year’s construction is complete.
REG’s second business stream is REG Bio-Power, which generates power from used cooking oil and currently has 8MW of capacity. The Bio-Power business has extended its Short Term Operating Reserve (STOR) contract with National Grid to 2014 and recently started up a further 2MW plant in Leeds. By the end of the first half the unit was operating at break even and expansion plans include a 5MW plant in Lakenheath and a 15MW plant in County Durham, which is subject to testing larger engine sizes.
RENEWABLE ENERGY GENERATION (WIND) | ||||
|---|---|---|---|---|
| ORD PRICE: | 50p | MARKET VALUE: | £51.6m | |
| TOUCH: | 49.75-50.5p | 12-MONTH HIGH: | 59.5p | LOW: 42.75p |
| DIVIDEND YIELD: | 4.0% | PE RATIO: | na | |
| NET ASSET VALUE: | 66p* | NET DEBT**: | 23% | |
| Half-year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2010 | 4.3 | -1.9 | -1.78 | 0.5 |
| 2011 | 6.3 | nil | 0.01 | 0.5 |
| % change | +46 | - | - | - |
Ex-div: 28 Mar Payment: 24 Apr *Includes intangible assets of £10.3m, or 10p a share **Excludes restricted cash | ||||
