General Update

RNS Number : 6048H

Mast Energy Developments PLC

07 April 2022

 

Mast Energy Developments PLC

(Incorporated in England and Wales)

(Registration Number: 12886458)

Share code on the LSE: MAST

ISIN: GB00BMBSCV12

("MED" or "the Company")

07 April 2022

Mast Energy Developments Plc ("MED" or "the Company")

 Potential Acquisition of 7MW Production Ready Gas Site

Purchase of gas turbines and equipment

and

Re-purposing of Rochdale project

Mast Energy Developments Plc, the UK-based multi-asset operator in the rapidly growing Reserve Power market is pleased to announce a general update to align MED's site roll-out strategy with the unprecedented growth in electricity prices in the UK-energy sector.

Potential Acquisition of 7MW Production Ready Gas Site

MED is pleased to announce that it is in the process of finalising a proposed acquisition of a 7MW construction-ready synchronous gas reciprocating site ("the Proposed Acquisition") which will bolster MEDs portfolio of sites. The Proposed Acquisition will enable MED to immediately access existing infrastructure and repurpose it as a gas Peaker site. The Board have decided to prioritise and fast track the Proposed Acquisition. The rationale for doing so is set out below:

1.  it is an already developed site with a clear path to steady state production within a very short timeframe from the date of acquisition;

2.  it will allow the repurposing of at least one of the existing sites currently part of the Company's development portfolio into a battery site;

3.  it will accelerate the overall timeline towards getting additional production capacity into production with an expected 4 to 6 months timeframe;

4.  it will add an additional 7 MW production capacity to the current development portfolio; and

5.  the total cost is estimated at around £365,000 per MW which is significantly below the industry standard of c. £500,000 to £ 650,000 per MW installed, based on site complexity and gas and grid connection fees which vary from site to site.

The foregoing, once complete, will increase the Company's production capacity to 25.4 MW in the UK which is more than 50% of the Company's immediate production capacity goal of 50 MW faster and cheaper, and ultimately improve MED's investment case and return on investment.

Acquisition of gas turbines and equipment

Concurrent with this acquisition, MED is in the process of finalising an Equipment Purchase Agreement ("EPA") to purchase operational market recognised synchronous gas reciprocating engines and associated equipment with 10.5 MW electricity generating capacity to fast-track electricity production at the site of the Proposed Acquisition, mentioned above, as well as other sites that are currently part of the Company's development portfolio.

The acquisition of the equipment referred to above is done at a very competitive price and also forms part of the Company's strategy to mitigate long lead times on long-lead items, due to severe global supply chain constraints.

Re-purposing of Rochdale project

Entering the rapid growing Energy Storage arena is of strategic importance to MED to diversify its project portfolio and the Board is of the opinion that Rochdale presents a potentially ideal opportunity in this regard.  

The Rochdale site was originally acquired as a 4.4 MW Gas Peaker Plant site, as announced by the Company on 6 August 2021 and 7 October 2021 respectively.

As a result of recently announced Electricity System Operator ("ESO") trading products, MED decided to focus its attention on investigating the feasibility to convert Rochdale into a battery-only site with a view to take advantage of the opportunities the ESO markets present, such as Frequency response, Reserve Power, Reactive Power, Restoration and Stability. This could optimize maximum returns from this site's ability to sell its stored capacity via a long-term Power Purchase Agreement ("PPA") with Statkraft, its preferred Route to Market ("RTM") provider.

The preliminary results from a fast-tracked technical and financial evaluation on Rochdale in this regard concluded that a supercapacitor battery installation will provide the most profitable solution for the Rochdale 4.4MW connection point. Key highlights from these preliminary findings are the following:

· projected earnings are competitive and comparable vis a vis earnings from gas peaker projects of equivalent capacity;

· all-in capex estimates are competitively priced at circa £ 500,000 per installed megawatt, resulting in very attractive project economics; and

· aggressive equipment delivery and construction lead-times accelerates overall project critical path execution by 3 months if compared to gas peaker cradle to grave commissioning times of typically 12 months.

Introducing a battery-only site will diversify the Company's product offering to the energy market and ensure that the Company stays on track with its planned production capacity targets. 

Update on Bordesley

The construction at Bordesley is progressing well, with many key development milestones completed, most notably the successful completion of the Ground and Soil Investigation ("GI") last year. These investigations not only confirmed the design of the concrete sub-bases where the containerised units will be positioned but also confirmed soil stability to avoid ground vibration. The completion of the GI triggered the formal start of the civil works which are well underway, with the construction of the concrete sub-bases already completed. Bordesley has also been repositioned to comply with recently revised environment friendly planning consent requirements as determined by the local council's latest directives. To achieve this, "Best Available Technology" (high efficiency engines) will be installed to provide and ensure reduced noise and emission levels.

Although the revised planning consent is aimed at an environmentally positive outcome, it did require a re-assessment of the required gas volume which has subsequently been approved, as well as a rerouting of the gas supply line. Global supply chain constraints have furthermore caused longer lead times for the delivery of long-lead items, which will impact on the timeline of construction and commissioning of Bordesley. The Company is however confident that it will be able to effectively counter this impact with the acquisition of alternative equipment as explained earlier in this announcement. These challenges have also had an effect on reaching financial closure with regard to the debt funding component for the construction of Bordesley, as announced on 20 October 2021.

Commissioning of Bordesley will however capture the lucrative and unprecedented Capacity Market auction prices, as announced by the Company on 24 February 2022.

Current Status of Energy Market in the UK

The management of MED remains of the opinion that the UK energy markets provide highly attractive economics for flexible power investments supported by unprecedented record high power prices and the current energy market structure. In February 2022 the price was £162 per MWh compared to site economics of £66 per MWh when MED listed. The recent capacity market auction clearing price underpinned the role that flexible capacity will have over the coming period to reduce market volatility and mitigate substantial end user price increases, while enabling the necessary transition of the UK energy mix to achieve the stated net zero goals. MED continues to explore potential new flexible power sites and assets in the market on a regular basis and will closely evaluate such opportunities to build a selective pipeline of operating & development assets that could provide the greatest potential for value creation for its shareholders.

Louis Coetzee, MED Non-Executive Chairman, said: "We are pleased to once again update the market on a new acquisition to our growing portfolio. The UK energy markets provide highly attractive economics for our portfolio, supported by record high power prices, which makes a compelling case for this acquisition.

The recent Capacity Market auction clearing price underpinned the role that flexible capacity will have over the coming period to reduce market volatility and mitigate substantial end user price increases, while enabling the necessary transition of the UK energy mix to achieve the stated net zero goals. We are proud to be strategically positioned to advance this."

Paul Venter, MED CEO, commented: " MED continues to explore potential new flexible power sites and assets in the market on a regular basis and will closely evaluate such opportunities to build a selective pipeline of operating & development assets that provide the greatest potential for value creation. We also look forward to the potential of transitioning the Rochdale site into a battery site, which will advance MED's contribution to the UK's power market."

Further information on the Company, including the prospectus published in conjunction with Admission, can be found on the Company's website: www.med.energy

This announcement contains inside information for the purposes of the UK version of the Market Abuse Regulation (EU No. 596/2014) as it forms part of United Kingdom domestic law by virtue of the European Union (Withdrawal) Act 2018 ("UK MAR"). Upon the publication of this announcement, this inside information is now considered to be in the public domain.

ENDS

For further information please visit www.med.energy or contact:

Louis Coetzee	info@med .energy	Mast Energy Developments Plc	Non-Executive Chairman
Jonathan Critchley & Keith Swann	[phone]	Clear Capital Markets	Joint Broker
Chris Hardie & Sarah Mather	[phone]	WH Ireland Limited	Joint Broker

 

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