Brian is the Finance Director here at FRE PLC. With more than 30 years of experience advising businesses across a broad range of sectors, we asked him why the wind industry, what the future holds and much more.
What attracted you to the wind industry?
Six/seven years ago, when the small-scale wind (< 50 kW) subsidies in the UK started, I worked with several clients and it became clear that with the subsidies and the export tariffs available, it was financially viable for individuals such as landowners, farmers etc to acquire small/medium sized turbines 15 kW, typically to operate on their farms. Small clusters of three or more sites also gave much needed revenue to rural Scotland where diversification of income opportunities was difficult. This snowballed into a very busy industry where I was involved as Finance Officer and we were selling up to 10 such small sites a month and carrying out installations throughout Scotland.
Can you tell us a bit about the process of acquiring a turbine site/portfolio of sites?
Opportunities come to us through many sources, I have forged many strong and long-standing relationships through my accountancy practice and we have agents in the marketplace constantly speaking to landowners. Our screening process filtrates opportunities based around cost of grid, wind speeds, planning, refinements of planning and calculating the best return from each site we screen. This would then ultimately either result in discarding an opportunity as not viable or promoting it to the next stage of development where we carry out land survey and project management surrounding the installation of a turbine.
For Phase 4, why was the decision made to acquire sites rather than build like in Phases 1-3? / what is the benefit of acquiring sites over building them?
Prior to the demise of the UK Feed-In Tariffs (FITs) and more recently Renewable Obligation Certificates (ROCs) in Northern Ireland, there were many opportunities where funding was not available which is when FRE plc decided to move into the acquisition and funding of sites. Primarily, with the shift in the market place, it became clear that many turbine site opportunities were underperforming or weren’t being serviced correctly to optimise output. We therefore approached the assessment of sites which were offered to us in a totally different fashion where we now look at a built-out site assessing the issues surrounding why they are under performing. Where small portfolios were available, we seek to acquire these sites and have found that there are opportunities that we can add substantial value too, potentially increasing production output up to 50%.
We are also looking at repowering opportunities, particularly in Northern Ireland, where good sites exist with excellent grid connections and wind speeds however the machines typically were supplied second hand or with poor performance outputs. We are looking at using existing grid connections, selling on an underperforming, poor quality turbines to a European market place and replacing them with higher specification turbines restricted to the limitation of planning (in most cases 250 kW) and maximising the returns. FRE plc will acquire these sites from landowners/farmers and build them into our portfolio. Future development opportunities will move our attention into the Republic of Ireland which has very recently announced a new Renewable Energy Support Scheme (RESS) for 2019 and beyond.
What do you see as the most significant challenges facing the industry?
The constant Government changes and the way in which they are introduced at such short notice. Much of the development time could be placed into looking at opportunities however a change in policy by the Government restricts this timeline. This was amplified by Amber Rudd MP whose decision it was to remove FITs going forward from the UK in September 2016. This makes us all aware of the fickle nature of the Government’s decision and policy making which is why we must incorporate the possibility of changes happening and planning in advance for projects.
Can you tell us briefly about the story behind Farm Energy Northern Ireland, Randolph Renewables and Realise Energy Services?
Randolph Renewables is the Head company that will own and currently owns a substantial shareholding in both Farm Energy Northern Ireland (FENI) and Realise Energy Services. The next key stage beyond developing sites for investment purposes is to ensure that they have a full wraparound service, particularly in Northern Ireland where FENI trades. This extends to trading ROCs in the open market and now power purchase agreements (PPAs) for each site that we own and the 100+ customers of FENI. They are operating wind turbine sites and then bringing the O&M services of the reputable servicing company to Northern Ireland in the form of Realise Energy Services. The existing poor standard of servicing providers in Northern Ireland opens many opportunities for a well respected operator to move into this market.
Natural evolution for us to control our own servicing and income streams for day to day management of both our own and other sites gives a large footprint both in NI and soon across the UK.
The long-term ambition is that the two companies will join under the Randolph banner and we will offer each site owner a dashboard service where they can monitor performance of their own sites, income generation, ROC trading returns, PPA returns and any market change updates. We plan to roll out this facility to customers in the coming months under a brand new bespoke software system.
What does the future of FRE plc look like?
Very exciting indeed! The natural evolution for FRE plc is to now move into what is commonly called big wind. These are sites where multiple megawatt turbines are in position or can be developed. These are most importantly still attractive in the subsidy free market and we are currently negotiating development of up to 45 megawatts of power through acquiring sites that are available for development. This will allow the expansion program of FRE plc and their sister companies in trading ROCs and PPAs as well as a full wrap around servicing through FENI and Realise Energy Services.