Renewable Energy Generation

Shares in green energy specialist Renewable Energy Generation (WIND) have been oversold, not helped by the volatile stockmarket and low wind speeds.

In January of this year the AIM counter rejected a 67.7p bid on the grounds that it 'significantly undervalued the business' - so at the current price of 43.5, and with a 2p dividend (4.6% yield) to boot, now is the time to take a closer look a the company.

Renewable is the leading developer of small onshore wind farms in the UK, with 10 operating sites producing 41MW of electricity. It also has 28MW of consented sites that are fully financed and are currently entering the construction phase. To give an idea of the scope there are 100 projects in active development that total 1000MW - which would require a total investment of a mouthwatering £1.25bn.

To augment further expansion, Renewable recently signed a deal with local partner Creagh Concrete to enter the market in Northern Ireland. As part of the 50:50 agreement it will acquire the majority ownership of a consented 6MW wind project to be built in Draperstown, County Londonderry. Further projects are planned, predominantly on the East coast.

The recent acquisition of five 2MW Vesta turbines for its Sancton Hill site in Yorkshire will lead to their delivery in February, with the wind farm due to be operational in the first half of 2012. Renewable is also confident of the outlook for its REG Bio-Power division, which converts used cooking oil into a clean fuel.

Renewable covers its annual overhead with its existing projects so every additional MW added flows straight to the bottom line. The estimated sum-of-the-parts is nearer 90p a share, yet the current price is less than half this. Results for the year to June 2011 are expected to reveal a loss of £2.1 million, however in 2012 a swing to a pre-tax profit of £300,000 is anticipated. Buy.