Novera had a successful year in 2008, with operational improvements implemented in the landfill gas generation business and significant progress achieved in our wind development pipeline, including the construction of the Lissett Airfield wind farm (30 megawatt (MW) which is scheduled to be fully operational in March 2009.

Novera has an established, diverse portfolio of renewable energy assets with a total capacity of 118MW in operation at the end of 2008: landfill gas (87MW); hydroelectric (16MW); and wind (15MW). Whilst the majority of our operational capacity is currently fuelled by landfill gas, over the next few years our strategy is to deliver a significant level of growth from onshore wind.

The company’s wind development portfolio currently comprises sites across the UK at various stages of development from early investigation through to construction, giving us confidence as we work towards our growth targets.

OPERATIONS

The Key Performance Indicators (KPIs) for our operations are based on power generation, revenue, costs and gross profit. The 2007 comparative figures are presented on a pro-forma basis as explained fully within the Financial Review.

The Group’s revenue increased by 3 %with higher contract prices more than compensating for a 2 %decline in production, further details of which are set out below.

These prices were achieved due to the higher one-year Power Purchase Agreement (‘PPA’) price, inflationary increase to the UK Government’s Non Fossil Fuel Obligation (‘NFFO’) contracts and a decrease in the proportion of less profitable energy generation sold under NFFO contracts. 87% of Novera’s 2008 power output was sold under long-term contracts (2007: 90%). As these contracts expire Novera can expect to achieve market prices, which are currently higher, compared to Novera’s 2008 average sales price of GBP60/MWh.

The main risks to our operations relate to asset performance, health & safety and environmental standards and the impact of weather. Operational performance is now monitored in real time with the establishment of a 24-hour control which assists us in identifying improvement opportunities and managing risk. Environmental and health & safety risks are key priorities for Novera and we have appointed dedicated resources to assess and manage these risks. The geographical spread of our portfolio and weather predictions included in our financial models facilitate our assessment of the impact of weather on our results.

Landfill Gas

Novera’s landfill gas portfolio generated 468GWh during 2008 (2007: 487GWh). During 2008, we experienced a series of operational issues, common to the industry, such as delays to capping and over-tipping carried out by the waste companies at certain sites in our portfolio. We are working with waste operators to overcome these issues. The company’s major partners in the waste industry are: WRG, Sita and Viridor, as well as with Clarke Energy, the main third party provider of external operations and maintenance services to the Group’s fleet of engines.

Further progress was made during the year with the Group’s operating improvements programme. In-house engine maintenance was increased to include an additional 16 engines, previously out-sourced, to improve quality control, cost management and engine availability.

Hydroelectric

The 16MW hydro portfolio performed well in 2008 generating 51GWh (2007: 49GWh). The increase was largely the result of higher levels of rainfall.

Wind

Generation from Mynydd Clogau (15MW) increased by 25% to 35GWh (2007: 28GWh) as a result of favourable wind conditions.

Industrial And Water Services

Novera is the UK’s largest independent operator of sludge drying and dewatering facilities. The Group manages the operations and maintenance of sludge drying and dewatering plants in Cardiff, Newport and Port Talbot for Kelda Water Services, a role we have fulfilled for the last ten years.

Novera also operates and maintains a sludge drying facility in Edinburgh for Veolia Water Services. Revenue from this activity was up 2 %to GBP2.4 million.

Wind Development

The KPIs for Novera’s development arm are based on megawatt targets established on an annual basis for each stage of the planning process: appraisal, pre-planning, sites into planning and consent. Progress against all of these measures is tracked on a monthly basis.

Construction

The construction of our 12-turbine, 30MW Lissett Airfield Wind Farm was underway throughout 2008 under a turnkey design and build contract with turbine supplier, Nordex, and project managed by Novera’s in-house construction team. Lissett started generating in February 2009, just over two and a half years after the planning application for the project was submitted. We are not aware of any other development of this size reaching first production in this timeframe. The project is expected to be completed under the budget of GBP38.5 million.

Consented Sites

During 2008, we were granted consents for two further wind farm applications: 11-turbine Glenkerie (22-27MW) in the Scottish Borders; and 20-turbine A’Chruach (40-46MW) in Argyll and Bute. Work is underway in respect of construction plans and financing for Glenkerie.

In Planning

The Group ended the year with eight wind farm sites in the planning system with a total capacity of about 80MW. One site, Fleeter Wood (10MW), has since been withdrawn while concerns regarding radar are addressed in liaison with National Air Traffic Services. Planning decisions on the remaining seven applications are anticipated during 2009. During 2008, Novera increased its wind development resources by six staff to include in-house expertise in the specialist areas of site selection, planning, grid, ecology, environmental impact assessment, construction and operations and maintenance.

The strengthening of the team has increased the Group’s efficiency of project management and decreased the dependency on external consultancies.

Consented Sites (62-73MW)

Glenkerie

The 11-turbine Glenkerie site lies between two tributaries of the River Tweed in the Scottish Borders. The planning application was submitted in December 2007 and was approved by both Scottish Borders Council and the Scottish Government in September 2008.

The wind farm site is well elevated, remote from residential properties and used for sheep-grazing. Glenkerie will have a capacity of 22-27MW, enough to power about 16,400 households. This is the equivalent of over 30 %of the population of Scottish Borders local authority area. Detailed design work on the connection to the grid has started and Novera is in discussions with several turbine suppliers to provide wind turbines for Glenkerie as well as for other sites in the Group’s portfolio

A’CHRUACH

A planning application for the 20-turbine A’Chruach Wind Farm in Argyll, Scotland, was submitted in December 2007, consented with no statutory objections five months later in May 2008 and the planning notice issued in September 2008.

The wind farm will be constructed on land owned by Forestry Commission Scotland (‘FCS’) which is secured under an option and lease agreement. National Grid and Scottish Hydro-Electric Transmission Ltd are concluding work to determine the timing of a connection. Depending on turbine selection, A’Chruach will have a capacity of 40-46MW and the renewable energy expected to be generated is equivalent to the average annual electricity demand of approximately 25,000 households, representing more than 64%of the population households of Argyll and Bute.