Triodos Renewables Half Year Report 2014

Triodos Renewables plc half-year report
30 June 2014
Directors’
report
The Directors present the interim
report including the unaudited
financial statements for the Group1
for the half year ended 30 June 2014.
Principal activities
Triodos Renewables’ principal activity is
the direct investment in small-to-medium
scale renewable energy projects with
planning consent and grid connection, such
as wind farms and hydro-electric schemes.
The Company offers a compelling way for
individuals and institutions to invest directly
in renewable energy opportunities. Our
portfolio includes eleven operating renewable
energy projects (53.4MW), with two further
wind farms under construction (7.2MW) and
the rights to part ownership of two other
consented wind farms at pre-financial close
stage (1.6MW). Although our principal focus (as
set out in the 2012 Investment Memorandum)
is onshore wind, we continue to review other
opportunities such as solar and hydro where
the renewable technology is proven and
investment risks are relatively low.
Road) in early 2014. The total equity deployed
in the last six years is over £24 million. Once
fully constructed Triodos Renewables will own
a portfolio of 61.5MW generating capacity
(growth of 162% from 23.5MW in 2008).
We are planning a new share issue in
October 2014 to raise further equity for
continued growth from a strong pipeline of
new sustainable energy projects. We are
grateful for the continued support from our
shareholders and are pleased that Triodos
Renewables now unites 5,0042 individuals,
charitable foundations and institutions in a
common goal of combating climate change
by the generation of clean, green electricity.
33,160
homes equivalent powered
from our portfolio in the
first 6 months of 2014
The £3.5 million raised at the last share issue
in 2012 was successfully deployed into the
construction of the 8.2MW wind farm in Bristol
(Avonmouth) which has been operational
since November 2013. Refinancing of
additional equity in the Bristol (Avonmouth)
project has also enabled us to acquire
two further projects now in construction,
Boardinghouse and March (Floods Ferry
Triodos Renewables seeks to allow as many
individuals as possible to contribute to
building more sustainable energy generating
capacity. For example, the equity required
to build an 8.2MW project such as Bristol
(Avonmouth) is equivalent to 375 of our
average shareholders’ investments (based
on average shareholding of 4,000 shares).
We are proud that Triodos Renewables
provides so many people the opportunity
to come together and do something
meaningful with their investment.
1 Triodos Renewables Plc Group of Companies
2 Figure correct at 13 August 2014
Share Issues
2
great achievement, but there remains work to be
done in delivering both the emission reduction
and renewable energy target.
Map showing Triodos Renewables
renewable energy project sites
Sigurd
Operational
In development
Auchtygills & Clayfords
Wind farm
Hydro scheme
Beochlich
6.5 homes
Average shareholding
equivalent energy production
Dunfermline
Haverigg II
Caton Moor
Wern Ddu
Ransonmoor
Boardinghouse
March
Eye
Ness Point
Kessingland
Avonmouth
Renewable industry outlook
In January 2014 the EU proposed a greenhouse
gas emission reduction target of 40% below 1990
levels by 2030. This represents a doubling of the
20% target set for 2020. The implementation of
additional renewable energy generation capacity
is essential for achieving the greenhouse gas
emission targets, as an estimated 27% of the
EU’s electricity will have to come from renewable
energy in order to meet these targets. In 2013
the UK renewable sector generated a record
breaking 15% of the UK’s electricity demand3, a
3 DECC, March 2014
4 Non Fossil Fuel Obligation, Renewables Obligation and Feed
in Tariffs.
Triodos Renewables’ portfolio currently benefits
from three support mechanisms4 which have
evolved over our 19 years of operations. The
UK energy sector is once again in a transitional
phase with the introduction of the Energy
Market Reform (EMR). The EMR’s objective is
to deliver a lower carbon energy sector in a
financially efficient manner. This has already
resulted in the reduction of the financial
support available to renewable energy projects
and we forecast that this will continue. This,
to the Company, is a logical consequence of
the increasing competitiveness of the proven
renewable technologies and is crucial to achieve
sustainability. We are confident that any changes
will not affect our existing operational portfolio
because the government has confirmed that all
existing accreditations will be grandfathered
(honoured) and new accreditations for existing
Renewables Obligation (RO) will be accepted up
to 20175. The new system will replace the RO for
projects built after March 2017. Under the new
system renewable energy projects over 5MW
in capacity will benefit from a Feed in Tariff
Contract for Difference (FiT CfD) where the
projects will receive the fixed price for electricity
generated, with compensation being received or
paid to balance market price volatility, therefore
delivering price stability for the project whilst
maintaining alignment with the underlying
market price. Within the EMR, projects with a
5 DECC November 2012, Electricity Market Reform Policy
Overview Report
3
capacity of 5MW and below will continue to be
eligible for the Feed in Tariff (FiT), a fixed price for
the first 20 years of operation. In an environment
of reduced financial support we will continue to
focus on well-sited projects employing proven
technologies. We consider that the continued
adjustments to the energy market policies are
part of the evolution of ‘alternative technologies’
to proven technology and sustainably integrating
them into the energy system.
30,100
tonnes of CO2 saved by green
energy from our portfolio
Operating performance
In the first half year to 30 June 2014, the Triodos
Renewables portfolio generated 79,689MWh,
48% higher than generation for the same period
in 2013.
The early part of 2014 was characterised by an
exceptionally high wind resource in the UK and
at the end of March the portfolio had performed
18% above target. April to June, however,
experienced lower than expected seasonal wind
resource, the net impact being that the portfolio
4
was 4% below target electricity generation for
the first half of 2014.
Cumulatively, the Company’s four newest
operational wind sites at Kessingland, Dunfermline,
Eye and Bristol (Avonmouth) continue to perform
ahead of annual generation target.
Operational turbine availability has seen a steady
improvement during the first half of the year with
an overall average availability over 97% across the
portfolio in June 2014 (2013: 91%). At our newest
sites we have negotiated long term availability
clauses into the supply contracts which offer
recompense at an agreed rate for any significant
mechanical failures. At the start of the year we
were unfortunate to experience the coincidental
failure of both generators at our hydro-electric
site, Beochlich, which resulted in no generation
from the site for two months. Whilst repairs were
carried out quickly and effectively we also took
the opportunity to undertake some proactive
maintenance and improvements to the remaining
plant to avoid further unnecessary downtime
from the site later in the year.
Once again, there have been no Health and
Safety incidents on our sites in the first half of
2014. Despite this record we have taken some
positive steps to improve our collection of “near
miss” events and standardised a number of
safety standards between sites in an effort to
identify and mitigate hazards.
Financial results
The first half-year results are as follows:
Consolidated profit and loss account
half-year ended 30 June 2014
Half-year
to 30 June
2014
£
Turnover
Cost of sales
Gross profit
Administrative expenses
Operating profit
Gain on investments
Share of associated operating profit
Interest receivable and similar income
Interest payable and similar charges
Half-year
to 30 June
2013
£
Year
to 31 Dec
2013
£
6,471,914
4,839,200
10,104,361
(3,052,689)
(2,292,707)
(4,706,732)
3,419,225
2,546,493
5,397,629
(1,135,987)
(900,845)
(1,829,839)
2,283,238
1,645,648
3,567,790
–
–
20,909
86,746
–
121,457
17,911
5,103
11,280
(1,434,290)
(906,484)
(1,989,180)
Profit/(loss) on ordinary activities before taxation
953,605
744,267
1,732,256
Tax credit/(charge) on profit on ordinary activities
(317,786)
(234,009)
(146,471)
Profit/(loss) on ordinary activities after taxation
635,820
510,258
1,585,785
6,794
2,717
7,878
642,614
512,975
1,593,663
Minority interests
Profit/(loss) for the financial year
5
The Group achieved a half year operating profit
of £2.28 million on turnover of £6.47 million
compared to an operating profit of £1.65 million
on turnover of £4.84 million in the first half of
2013. The improvement in performance is down
to increased capacity with Eye and Avonmouth
now fully operational and improved wind
resource relative to the same period in 2013.
After interest charges, the Group achieved a
pre-tax profit of £953,605 compared to a pretax profit of £744,267 in the same period in
2013. In 2013 the tax liability was reduced due
to losses brought forward; however in 2014
corporation tax and deferred tax provision are
estimated at 33% for the half year.
In August 2014 we paid a 4p per share
dividend to shareholders following our
performance in 2013 which we are hopeful
of maintaining or improving in 2015 as a
result of increased capacity. However, this
will be dependent on the wind yield and the
Company’s performance in the second half
of the year.
New projects in construction
Boardinghouse
On 28 February 2014 Triodos Renewables
acquired a 55% stake in Boardinghouse wind
farm, a five-turbine site totalling 10.25MW.
Thanks to good local wind speeds it is expected
to generate 29,000MWh of electricity per year,
equivalent to the average annual electricity
demand of 6,900 homes. Our investment fills
the funding gap between the developers and
landowner’s funds and the debt funding. This
acquisition structure that we were able to
offer allows the developer and landowner to
continue to participate in the project alongside
Triodos Renewables. Through this investment
Triodos Renewables further diversifies its
banking relationship as the required debt
funding is being provided by Santander UK.
Following completion of the design phase,
construction on the site commenced in June.
The construction phase is expected to take
6
14 months with generation anticipated in
September 2015. The project is located on
farmland and the civil engineering is being
delivered by a local firm, R G Carter. At its
peak, 50 people will be employed on the site
using local sub-contractors.
March (Floods Ferry Road)
In November 2013 Triodos Renewables acquired
a new company with rights to develop and build
a 1.5MW wind turbine project.
All of the contracts were procured in the first
quarter of 2014. The project is funded with a
combination of equity from Triodos Renewables
and a senior loan from Santander UK.
The wind farm is located on an industrial site,
which belongs to Greenvale, the UK’s leading
supplier of potatoes. The turbine will provide
enough energy to power Greenvale’s potato
processing facility, providing them with lower
cost energy. The remaining energy, around
40% of the total output, will be supplied to
the local electricity network.
Construction work on the site has commenced
and is being project-managed by Wind Prospect.
The construction work is expected to employ
approximately 25 people.
Developments
Following the receipt of planning permission
for two 0.8MW single turbine wind farms in
Aberdeenshire, Triodos Mellinsus Projects
Limited (60% owned by Triodos Renewables
Plc) has now secured grid connection offers
for both sites. The projects will continue to be
developed through the procurement stage in
the coming months.
Pipeline
Thanks to the success of our previous Share
Issues, refinancing and strong relationships with
developers and suppliers, we are continuing to
actively progress a number of hydro, solar and
onshore wind farm projects. Further details on
these projects will be announced in due course.
The Team
After over a decade of involvement in various
roles for Triodos Renewables, James Vaccaro
resigned from the Board in June 2014 to
take up his position as Head of Corporate
Strategy for Triodos Bank NV. We would like
to take this opportunity to thank James for
his very significant contribution to Triodos
Renewables throughout this period.
Community relationships
Our Wern Ddu site continues to make a direct
contribution of £10k per annum into a local
community fund. The funds are spent on
projects that will directly benefit the local
community such as renovating the community
centre and providing workshops and sports
equipment for local children. We are also very
pleased that our wind farms at Caton Moor
and at Bristol (Avonmouth) continue to be a
popular destination for school field trips and
renewables industry seminars.
6% of the Company’s overall turnover is
distributed locally in the local economies
where our projects are located. In addition
at our Eye and Dunfermline sites we sell the
electricity directly to the local businesses,
providing them with green, cheaper
electricity. We also use local contractors on
site wherever possible.
In June 2014 we held an official open day at the
Bristol (Avonmouth) site with 150 very engaged
visitors who were keen to understand the
workings of the turbines. Children made up one
third of the visitors and we are pleased to have
been able to help these young people grow up
with greater awareness of renewable energy. This
site generates enough electricity for 4,900 homes
each year, almost enough for the population of
Avonmouth and is located on a sewage works.
Whilst the surrounding landscape is dominated
by industrial development, two of the turbines
stand within a nature reserve which supports
some important plant and animal species.
As part of the AGM in June 2014 shareholders
were invited to visit this project which has been
generating electricity since late 2013. Some of
these shareholders had also visited the site in
2013 when the project was under construction
and were amazed by the transformation on the
site and to see how their investment has been
put to work in a very tangible way.
We consider it important to engage with the
communities near our operational projects as
well as our shareholders. Please see the events
page on our website to find out more about
future events and how to get involved.
We could not do this without the continued
support of our shareholders and we thank you
for your involvement.
Registered address:
Triodos Renewables plc
Triodos Bank
Deanery Road
Bristol BS1 5AS
www.triodosrenewables.co.uk
[email protected]
0117 973 9339
Registered in England and Wales 2978651
TR/HYR/AUG14
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