Infinis Energy results yield increased LFG revenue, gross profit

By Katie Fletcher | June 01, 2015

On May 28, Infinis Energy plc released its preliminary results for the 12 months ending March 31, reporting its landfill gas (LFG) business exported 1,842 gigawatt hours (GWh) of electricity and high levels of engine fleet reliability at 95 percent.

In the U.K., Infinis accounts for around 40 percent of all electricity generated from LFG. This line of business within Infinis generated a gross profit of £113.5 million ($124.67 million) in the year to March 31, an increase from £107.6 million in the prior year period.

Eric Machiels, CEO of Infinis, said that the company’s LFG business had its best results ever. He added that the positive results are welcomed due to the weakened wholesale power price environment that went through last year in the U.K. “I think the results demonstrate, yet again, how robust the business model of Infinis is,” Machiels said.

The company highlighted key LFG performance factors in its report. The LFG line of business exported power 1.9 percent above budget, and LFG power export from renewable obligation (RO) contracts increased from 77 percent to 90 percent. Also noted was that the normal weather conditions in the U.K. kept the landfill caps in good condition throughout the year.

Infinis reported company-wide revenue of £236 million, down 1 percent from the prior year. In its LFG division, the company reported £180 million, or a 5 percent increase from £171.4 million in the comparable period in the prior year. There was an increase in operating expenses to £66.6 million compared to £63.8 million in the prior year due to royalties payable on higher revenues plus an increase in the number of engine decarbonization and servicing requirements. The adjusted selling price (ASP) for LFG exported power increased by £6.5 MWh to £91.41 MWh for fiscal year (FY) 2015 in comparison to FY 2014. The increase is attributable to the greater proportion of RO generation in the total revenue mix.

The company reported it has a significant increase in capex planned in FY 2016. In total, the company reported a capex of £43.6 million for FY2015 up from £31.9 million in the prior year period. Specifically for LFG, £19.2 million was reported down slightly from £19.4 million in FY 2014.

An earnings before interest, taxes, depreciation and amortization (EBITDA) before operating exceptionals of £142.8 million was reported, or a 3.8 percent decrease from the prior year period. The company reported final dividends per share of 12.2 pence (19 cents) per share, bringing the total to 18.3 pence per share for the year. This compares to 6.6 pence per share in FY 2014.

During the preliminary results ending March 31, Machiels said that although natural gas and wholesale power prices have declined over the past year, they have held up relatively well in comparison to the decline in oil prices. “The doubling of the carbon price floor to £18 per metric ton of CO2 on April 1, 2015 and ongoing tightness of the reserve margin during the winter season are supporting wholesale power price levels available in the day ahead and season ahead market for spring and winter 2015,” he said.

In February, the company released its quarter three trading statement, announcing that Infinis’ LFG business has continued to make good progress on normalized funds from operations (NFFO) to renewable obligation (RO) conversions. The company reported in its recent financial results that power sold at fixed prices under the RO scheme, in respect of expected LFG output, has been contracted at an average selling price of £46.76 per MWh for summer 2015, £50.65 per MWh for winter 2015 and £47.42 per MWh for summer 2016. The amounts in summer 2015 and winter 2015 correspond to the FY ending March 31, 2016.

A proportion of Infinis’ LFG output is sold at fixed prices under the NFFO regime. All of these contracts will expire by 2019 and, as they expire, output will be sold under the RO regime. According to the company, a significant proportion of revenues derived from RO sales is dependent on wholesale power prices. “Due to the volatility of wholesale power prices, our revenues are likely to be more volatile than has been the case historically,” Machiels said.

Besides LFG, Infinis Energy generates renewable power from onshore wind and hydro power plants. Discussed in the results was the company’s onshore wind capacity growth plan. Machiels said the plan is on track with their 43 MW A’Chruach project in full construction, pre-construction work underway at the 66 MW Galawhistle site and financial close expected shortly, and the 8 MW Sisters venture is at advanced stages of contract negotiation. These project’s help the company work towards its initial public offering (IPO) commitment to increase operational wind capacity by 130 MW to 150 MW by March 2017.