Plutus is addressing the UK energy deficit through flexible generation
As the energy environment in the UK is tightening, Plutus Powergen
(PPG:AIM) aims to help mitigate the current and forecast risk of an energy deficit by developing a portfolio of 20MW power sites, which can be switched on at a moment’s notice at times of peak demand.
Flexible energy is becoming increasingly necessary and prominent in the UK as its energy mix changes to include renewables, which by their very nature, provide power intermittently. Combined with this intermittency, larger carbon intensive sources of generation are being retired, meaning that the supply-demand margin is becoming increasingly constrained.
TEAM OF EXPERTS
Plutus’ team of industry and financial experts recognised the imbalance in energy supply and, from a standing start in 2015, rapidly grew the company; it already successfully operates 120MW comprising six 20MW projects across the UK.
These first six projects, which take circa 12 months to develop and hold capacity mechanism (CM) contracts for 15 years, were funded via EIS/Rockpool Investments with Plutus retaining ongoing 44.5% interests as well as earning management fees; a further gas site with the same partner is also being developed.
The group is now concentrating on developing higher-margin gas fuelled power generation in which it holds majority stakes. To this
INTRODUCING… PLUTUS POWERGEN a power company focused on the development, construction and operation of flexible energy generation (‘FlexGen’) projects in the UK.
end, it has a robust pipeline of gas operations totalling circa 300MW from its relationship with Reliance Energy; 40MW of plants are under site assembly in house and aims to enter planning in the next few months.
In line with this strategic shift to the development of highermargin gas operations, the company is looking to dispose of its six operating FlexGen sites and is in advanced discussion with potential buyers. It is hoped that the sale of these assets will be completed during 2019 to generate substantial cash resources, which can then support the rapid buildout of the company’s gas FlexGen sites.
Additionally, it is looking to widen its exposure and diversify its offering through the development of hybrid sites that incorporate energy storage technologies, thereby enabling Plutus to supply energy more efficiently and provide solutions to the low inertia and intermittent green energy upon which the UK is increasingly depending. Its agreement with land and property developer, London & Devonshire Trust Ltd, to identify and develop energy storage projects in the UK will play a key role in this regard.
The company’s current revenue model is based on multiple streams enabling it to optimise its performance and adapt to changing energy dynamics.
The project financials of a typical gas site are compelling. Each site, running for about 2,000 hours per annum, costs circa £12.5m to build and will generate an EBITDA of £3m per year when CM payments commence, giving a potential IRR of 20%.
Looking ahead, the company remains positive. The market in which it operates has gone through a period of significant change, with several UK-wide reviews across the industry undertaken. These are now complete, providing relative future certainty for all UK energy providers. In turn, as funders can also view the market with greater clarity, is it apparent that there is appetite for both equity and debt.
The team has a proven value creation track record and extensive sector experience. COO Paul Lazarevic previously held senior roles in the energy industry including a grid balancing technology company, RWEnpower and ExxonMobil. On the corporate side, both Chairman, Charles Tatnall, and Interim CEO/CFO, James Longley, have backgrounds in funding and building SMEs and have held several directorships with both private and listed companies in the US, Canada and the UK.
The company continues to make progress as it focuses on delivering near and longer term returns for shareholders. It has a good track record having brought six projects to fruition in a short timeframe and developed a meaningful pipeline of new gas sites. Plutus is an evolving story; its diversification into different power generation and energy storage types highlight its adaptability and focus on supplying energy more efficiently, whilst supporting its core values aimed at promoting sustainability.