Renewable Energy Generation Limited (“REG”) (AIM: WIND), the UK renewable energy group, announces that it has entered a long term strategic partnership with a fund managed by BlackRock (“BlackRock”) (the “Transaction”).
The Transaction comprises three key components:
1) The immediate sale of two of REG’s newly built wind farms at Sancton Hill (10MW) and South Sharpley (6MW) for a total enterprise value of £32.1m which results in upfront cash consideration of £16.15m, contingent deferred consideration of £0.65m and BlackRock assuming project net debt of £15.3m. REG anticipates selling a further 4MW wind farm to BlackRock in spring 2013.
2) A long term Asset Management Agreement (“AMA”), on normal commercial terms, under which REG will manage certain wind farms for BlackRock in return for an asset management fee. Under the AMA, REG will manage the operations of Sancton Hill and South Sharpley with immediate effect. The AMA will apply to any other wind farms sold by REG to BlackRock and may also include other wind farms owned by BlackRock but not developed by REG.
3) An Asset Investment Agreement (“AIA”) which provides a framework for future co-operation between REG and BlackRock, under which, inter alia,BlackRock may acquire wind farms which REG may elect to sell in the future.
Strategic Rationale
REG’s core business is the development, construction and operation of wind farms. It has established an experienced team that creates value for its shareholders by identifying sites to progress through planning and construction into operation. REG currently operates twelve wind projects across the UK with a total capacity of 57.15MW, has two further projects under construction totalling 10MW and six consented schemes comprising a further 30MW. The Company’s development pipeline amounts to around 1,000MW, with 82MW of projects awaiting a planning decision and a further 70MW of planning submissions anticipated in the current year to the end of June 2013.
REG’s strategy of investing in its development team is now delivering significant growth of new projects. The strategic partnership with BlackRock gives REG the opportunity and flexibility to realise the significant value which has been created through developing well-structured wind farms and to recycle capital through future asset sales in order to accelerate its delivery of operational sites. As such, it is consistent with the route to shareholder returns set out in REG’s 2012 results presentation.
REG intends to use part of the sale proceeds of the Transaction to fund immediate project build, including Denzell Downs, St. Breock and High Down wind farms in Cornwall which together total 21MW. In addition the Board today announces it will be monitoring opportunities to make use of the authority conferred on it to make on-market purchases of the Company’s ordinary shares at valuation levels the Board considers appropriate. Any such purchases will be effected within the Company’s general buyback authority of 10% of its issued share capital as approved by shareholders at the recent AGM and the AIM Rules for Companies (“AIM Rules”). The maximum price which may be paid for each ordinary share will be no more than 105% of the average middle market closing price of a REG share for the five business days preceding the date of acquisition. The timing and quantum of any purchases will be determined in consultation with its broker with regard to the prevailing market price of the Company’s shares, prevailing market conditions and any other relevant considerations. Any purchases will be funded out of the Company’s cash balances. Any shares acquired pursuant to the buyback programme will be cancelled or held in treasury and the acquisition will be notified to a Regulatory Information Service in accordance with the AIM Rules.
The Company will announce its interim results for the six months to 31 December 2012 on Monday 4 February. There will be a presentation to analysts in the offices of City Profile on the day of the results, starting at 9.30am. The address for City Profile is Augustine House, 6A Austin Friars, London, EC2N 2HA.
Andrew Whalley, Chief Executive Officer of REG, said:
“We are delighted to enter a long term relationship with BlackRock. REG has invested heavily in its development pipeline and is now seeing the benefits of this expenditure in terms of new planning applications and consents. A strategic partnership with BlackRock allows us to continue to recycle capital to fund future growth and enhance returns to shareholders. The Transaction demonstrates the inherent value of the REG business, whilst the AMA allows REG to continue to manage the projects on a day to day basis.
The proceeds from the disposal will be reinvested both into delivering new operational projects and into buying back our shares, which have been trading at a substantial discount to REG’s intrinsic value.”
Jim Barry, Managing Director at BlackRock, commented:
“Our partnership with REG creates an exciting investment opportunity for BlackRock’s clients. We look forward to working together with such a high quality developer in the UK onshore wind sector.”
Renewable Energy Generation Ltd (REG) is a UK renewable energy group. Its main business is the development, construction and operation of wind farms and generating power from refined used cooking oil.
REG Windpower: based in Truro and Bath, UK, it currently operates 12 wind projects in Cambridgeshire, Cornwall, County Durham, Yorkshire, Cumbria and Gwynedd, with a total capacity of 57.15MW with a further 10MW under construction and around 1000MW of projects in development.
REG Bio-Power UK Ltd: based in Nottingham, UK: it operates electricity generation plant powered by fuel recovered from used cooking oil.
Headquartered in Jersey, REG was admitted to trading on AIM, a market operated by the London Stock Exchange, in May 2005 (AIM: WIND).
www.renewableenergygeneration.co.uk
BlackRock is a leader in investment management, risk management and advisory services for institutional and retail clients worldwide. At December 31, 2012, BlackRock had assets under management of $3.792 trillion. BlackRock offers products that span the risk spectrum to meet clients’ needs, including active, enhanced and index strategies across markets and asset classes. Products are offered in a variety of structures including separate accounts, mutual funds, iShares® (exchange traded funds), and other pooled investment vehicles. BlackRock also offers risk management, advisory and enterprise investment system services to a broad base of institutional investors through BlackRock Solutions®. Headquartered in New York City, as of December 31, 2012, the firm has approximately 10,500 employees in 30 countries and a major presence in key global markets, including North and South America, Europe, Asia, Australia and the Middle East and Africa. For additional information, please visit the Company’s website at www.blackrock.com.
