Plu­tus is ad­dress­ing the UK en­ergy deficit through flex­i­ble gen­er­a­tion

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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.

FI­NAN­CIALS

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.

STRONG TEAM

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.

OUT­LOOK

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.

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