The Anonymous Widower

Centrica Invests In Renewable Energy Storage Capabilities To Boost UK’s Energy Security And Accelerate Transition To Net Zero

The title of this post, is the same as that of this press release from Centrica.

These two paragraphs are effectively headings.

Centrica plc announces a strategic partnership and £70 million investment in Highview Power and its first clean energy storage project in Carrington, Manchester.

Centrica’s investment will be a key part of a £300 million funding package to develop the first commercial-scale Liquid Air Energy Storage plant in the UK, which will boost the UK’s energy security and accelerate the transition to net zero.

These four paragraphs give more details on the deal.

The investment, which forms part of our plans to invest between £600m – £800m a year until 2028, will be structured as £25m of convertible debt at Highview Enterprises Limited, being the Highview Power holding company and £45m of debt funding at the Carrington Liquid Air Energy Storage project, phased over the project construction. The investment delivers several benefits to Centrica:

Robust standalone returns aligned with Centrica’s capital allocation framework and returns thresholds
Aligned to our green-focused investment programme targeting assets which complement our existing capabilities, provide balance to the portfolio, and align to the needs of the energy transition
Includes rights to equity participation and energy optimisation from future projects in Highview’s £9 billion project pipeline.

At a first look, it appears to give Centrica robust returns  and some security for their £70 million investment.

But it is the last paragraph that I like. Does it mean that Centrica can cherry-pick, the projects that it likes and fit its own objectives and expertise from Highview’s £9 billion project pipeline and take-up some equity?

Whatever it means, It looks like it will be good for Centrica.

Do the other partners have similar rights to equity?

Suppose Goldman Sachs have a long-term client in the Mid-West of the United States, who are an electricity generator, with perhaps half-a-dozen coal-fired power stations.

As the client needs to decarbonise and it is believed that Highview’s long duration batteries can replace small coal-fired power stations, it is likely that a Highview solution will at least be examined.

If the client goes down the Highview route, Goldman Sachs might like to continue their long-term relationship, by taking a share in the equity.

June 24, 2024 - Posted by AnonW | Energy, Energy Storage | Carrington LDES, Centrica, Goldman Sachs, Highview Power