Renova Energy plc - Company Update

RNS Number:2027L
Renova Energy plc
07 January 2008

For immediate release 7 January 2008

Renova Energy plc ("the Company" or "Renova")

Project costs and funding update

At 12.30 p.m. today, the suspension of trading on AIM in Renova Energy plc's
(RVA:AIM) ordinary shares will be lifted.

Renova, the ethanol production, distribution and marketing company, today
provides an update on the Heyburn project and the Group's financial position.

Over the course of 15/16 December 2007, Renova identified cost overruns in
relation to the construction of its combined ethanol and power plant at Heyburn,
Idaho, and a resultant funding shortfall to achieve completion of this project.
The Company's shares were suspended from trading on AIM on 17 December 2007
pending further investigation and clarification of the issue.

A preliminary investigation by Renova has revealed cost overruns of
approximately US$11 - 13 million which would take total project costs to US$57 -
59 million if the project were to proceed on the current schedule to start-up in
March 2008. However, Renova does not have sufficient funds available under
existing bank facilities and from operating cashflow to maintain this schedule.
As a result of this funding shortfall Renova has suspended work on the Heyburn
facility and, as a consequence, it is now in breach of its banking covenants
which were structured around the original project start-up date. Renova has
outstanding term loans under these facilities amounting to US$28 million on
which repayment was scheduled to commence on 30 June 2008 but, as a result of
the breach in banking covenants, this is now repayable on demand. Renova is in
discussions with its bankers regarding a rescheduling of this debt and the
possible provision of additional facilities as part of a refinancing package,
which is also likely to include new equity capital, to complete the Heyburn
plant.

A further detailed review of the Heyburn project is now underway to identify
project specification changes and other cost savings that could be achieved over
a revised project schedule. The Company has appointed independent consultants to
assist in conducting this review.

New Renewable Fuel Standard

On 19 December 2007, the Energy Independence and Security Act 2007 was passed
into law in the US. This new legislation includes a revised Renewable Fuel
Standard ("RFS") increasing the mandated usage of renewable fuels in the US to
36 Bgal by 2022. In the near term, the RFS now requires 9 Bgal of renewable fuel
usage in 2008, increasing to 11.1 Bgal in 2009, compared to 4.7 Bgal in 2007.
This legislation significantly increases the demand for ethanol and redresses
the ethanol supply and demand balance. Ethanol prices have strengthened as a
result of this new legislation.

Current trading

Renova's underlying production and marketing business remains sound. Renova's
operating plant at Torrington, Wyoming, continues to generate positive cashflow.
As previously reported, for the six month period to 30 September 2007, the plant
produced 3.4 MMgal. The programme to increase production capacity at the
Torrington plant to in excess of 10 MMgal/yr is still ongoing and is scheduled
for completion in March 2008.

The distribution business continues to successfully grow with 6.0 MMgal being
distributed through its 14 terminals during the same six month period to 30
September 2007 with an average realised ethanol price of US$2.37 per gallon.
Overall, the US operations generated US$1.9 million in cash during this period.
Sales for the three months ended 31 December 2007 amounted to 3.5 MMgal of
ethanol at an average realised price of $2.10/gal compared to 3.1 MMgal at $1.94
/gal for the same period last year. After a decline in ethanol prices in the
last quarter of 2007, prices have strengthened recently with Renova's posted
terminal prices now in the range of $2.25 - $2.45/gal.

For further information please contact

Renova Energy
Chris Thomas, Chairman +44 207 299 4444
Fanton Chuck, Chief Executive Officer +44 207 299 4444
Raf Alam, Finance Director +44 207 299 4444

Brewin Dolphin
Ken Fleming/Jamie Cumming +44 141 221 7733

Buchanan Communications
Ben Willey +44 207 466 5000

or visit www.renovaenergy.com

Glossary: Bgal - billion gallons; MMgal - million gallons

This information is provided by RNS
The company news service from the London Stock Exchange

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