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Background

Founded in 2004 and floated on AIM in February 2005, Renewable Energy Holdings (REH.L) is one of the most experienced renewable energy generation companies on the junior market. Initially created to acquire the intellectual property rights of CETO, a unique wave energy extraction and desalination device, REH have used the proceeds of its stock market floatation to develop the project and diversify into wind energy and landfill gas generation projects.

The company’s strategy is to develop a diverse renewable energy company covering wind, wave, solar and run of river hydro in the growth markets of Europe and North America. Shareholder value will be driven by a combination of developing and selling projects in addition to that from its growth operating portfolio.

The company’s strategy is to develop a diverse renewable energy company

CETO

Named after the mythical goddess of the sea, CETO is REH’s patented wave energy technology that converts the energy of the ocean waves into zero-emission electricity and zero-emission freshwater.

Unlike other wave energy systems currently under development around the world, the CETO wave power converter is the first unit to be fully-submerged and to produce high pressure seawater for delivery onshore. 

By delivering high pressure water ashore, the technology allows zero-emission electricity to be produced using standard hydro electrical power generation technology. 

By generating power onshore, there is no need for expensive undersea cables and no need for the national grid to be extended out to projects. This gives REH more control in its marketing of the technology for full scale projects.  

Tests show that the pressure of the water is also sufficient to produce zero-emission fresh water, utilising standard reverse osmosis desalination technology as an application (see graphic below).

REH has made significant progress in commercialising CETO. The first and second versions of the technology passed with flying colours and the company expects the deployment and testing of its latest unit (CETO 3) to take place in late 2009.

In order to assist the company with the testing and commercial roll-out of the CETO technology, REH have a Joint Venture agreement with EDF, the major European utility (for Northern hemisphere territories), and a license agreement with Australian listed Carnegie Corporation Limited (for Southern hemisphere territories).

Under the terms of the agreements, the company will: 

• Earn license fees for the use of CETO technology in the Southern and Northern hemispheres.
• Retain ‘free-carry’ rights in any of Carnegie’s CETO developments.
• Retain the right to take an equity stake in any of EDF’s CETO projects.

REH and EDF have signed a Memorandum of Understanding ('MOU')  for an initial 2MW test wave farm in Bermuda, with the intention of developing it into a 20MW development once proven. The REH/Carnegie collaboration has signed an MOU with the Australian Government's Department of Defence (DoD), permitting Carnegie and the DoD to investigate the feasibility of a wave energy facility at Garden Island, Western Australia, home of the Royal Australian Navy's largest fleet base.

Other testing and (possible) deployment opportunities have also been identified off the coast of Canada and Victoria, Western Australia.

REH has made

significant progress

in commercialising

CETO

Wind and Land Fill Gas

In addition to its interest in CETO, REH now owns a growing portfolio of renewable energy projects, including:

During 2008 approximately 89% of its portfolio’s revenue came from the German wind projects with the remaining 11% from the land-fill gas.

Since then the company has secured options over a 70MW Welsh wind farm and a 30MW Polish wind farm, consolidating their plan to have 150MW of wind power by 2010.

Financials

Whilst CETO provides investors with a highly attractive medium to long-term investment opportunity in marine renewables, the company’s established wind portfolio is providing the company with significant working capital and giving strong support to REH’s current share price.

Preliminary results for the twelve months ended 31 December 2008 showed revenues of £5.3 million (of which £2.79m was exceptional revenue from the Carnegie deal), and a loss before tax of £1.99m.

Preliminary results for the twelve months ended 31 December 2008 showed a cash balance of £6.5 million. REH has a €183 million credit facility with Standard Chartered Bank which is sufficient for the company’s immediate pipeline of wind projects. REH is actively broadening its banking relationships given the current lack of liquidity in the credit markets

Looking to the future, REH is forecast to move into profit in 2010. The Analyst forecasts for 2011 anticipates a profit of just over £10 million and earnings per share of 5.6 pence.

Conclusion

REH has the benefit of a highly experienced management team which has been further strengthened with the recent appointment of Paris Mouratoglou, Chairman of EDF Energies Nouvelles SA as a Non-executive director. The company’s strategic alliances with EDF and Carnegie Corp are ensuring that the commercialisation of CETO progresses as planned and its wind farm assets provide the company with that all-important revenue stream.

With the financing facility from Standard Chartered bank available for the progression of all its projects, it looks likely that REH will graduate from AIM minnow to renewables heavy-weight,

Alex's wind energy blog can be found at  http://www.depthchargewind.blogspot.com/

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Written by Alex Race

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RETURN TO AIMZINE NEWSLETTER HOME | May 2009