Plutus Powergen Share Discussion Threads

[codydotcom] 09/2/2018 10:13

Had a quick look through the results this morning, comparing to the pre-auction register.....

Bio Fuel Sites
Ipswich Equivalence Energy 15yr contract
Marchwood A Reliance Generation No contract
Marchwood B Portman Power No contract
Selby Plot 15 SelectGen No contract

Gas Sites
Letchworth A LF Flexgen No record (i can't find this in the results)
Letchworth B NRS Power No record
Medway KI Power Rejected at pre-qualification stage
Witney FC Powergen No contract

[2pablo] 09/2/2018 09:00

1renard - yes we did pull out apparently except for one built site as it was going down to £8. Maybe savvy will update you later.

[1renard] 09/2/2018 08:24

Looking through the CM auction results seems like UK power Reserve pulled out of 15 year auction as did Plutus. Lots of Nuclear and Drax !

[marvin9] 08/2/2018 20:49

Looks like the auctions didn't go well, awsum info from codi, many thanks.

[1renard] 08/2/2018 16:23

Looks to me like T-1s and T -4s are now converging. Reading some Twitter conversations feeling is that all existing T-1 winners were willing to put in bids at same price which is why people didn't withdraw. Possibly means market realised it overpaid for previous 15 year contracts. Interesting side note though is that it again pulls the rug from battery provision. I think it's why Plutus are being coy with stating intentions on battery. It's definitely got a big future but a business has to make money and it's not clear yet how robust income is from battery. Much better to focus on getting the gas up and running with merchant sales .

[1savvyinvestor] 08/2/2018 13:53

Suprised at today's auction . Good news is we already have six sites at a much higher rate : three at £18 and three at £22. Gas sites main revenue will be merchant sales. I suppose it reflects that previous auctions have largely given enough capacity so this years round is a top up.

[codydotcom] 08/2/2018 12:22

Thanks Pablo
-------------------------

Ooosh! That's not good.

Into round 13, where the price drops from £15 to £10

And there is still 5GW of excess capacity

Not sure whether a contract at those levels = winning, or losing

[2pablo] 08/2/2018 11:24

cody, you're a gentleman and a mine of information

[codydotcom] 08/2/2018 11:23

I've been wondering about that for a while Rhug. Ownership / funding differences may dictate the strategy. As you mention though, the capital cost of gas sites are likely to be higher, but then the cost of running will be lower, and the opportunities to stack revenues are greater with gas.

It will be interesting (in a geeky way) to see what stays in / drops out at this level

[rhug1966] 08/2/2018 11:18

We are likely to stay in the auction until the end for the FlexGen sites as the plan is to sell eventually. Not so sure about the gas sites though as they are around £12.5m a pop to build.

[codydotcom] 08/2/2018 11:13

Picking up on a point discussed yesterday, about the assets being more attractive for sale if they have CM contracts.....

Almost all new build projects will have 15yr CM contracts, otherwise they wouldn't get built (there are some notable exceptions, but its a general rule). So having a CM contract isn't necessarily an advantage in itself.

However, the price of those contracts will be a differentiator when comparing assets. The 3 assets which won contracts a year ago @ £22.50/kW will be seen as more valuable than the 2 which won contracts at £18 the prior year.

They will also be more valuable than assets which get contracts this year (already below £20). So the dilemna when bidding becomes; do we stay in and commit the project to revenues which aren't great, but cover the costs OR do we drop out, and take our chances again next year. If we drop out, do we progress with the project, and then enter into the T-1 auctions, or do we pause for a year?

I suspect there will be a lot of those questions being asked right now

[codydotcom] 08/2/2018 10:59

Lots of project economics will be in £15-20 range, so that 7GW will drop out in this current round imho

[codydotcom] 08/2/2018 10:57

from earlier.... I'm guessing we'll see another 3-4GW drop out in this current round, taking maybe 7GW excess into round 12. That would (in my total guesswork world) give a cleared price somewhere down near £15.

4GW did drop out in that round, so we go into round 12 with 7GW excess capacity, 50GW required, 57GW offered.

[codydotcom] 08/2/2018 10:48

Also, as the price drops, the volume that EMR are willing to buy gradually increases. So initially they were willing to buy 47,988MW (or 48GW) at £75, but in round 11 that is now up to 50,087MW at £20.

[codydotcom] 08/2/2018 10:36

Once the auction clears, all assets which are still in will receive the clearing price * their derated capacity, each year, for the duration of their contract.

Contracts for new build projects are generally 15 years. Existing sites generally get 1 year contracts. Some refurbishment projects can get 3-5 year contracts iirc

[codydotcom] 08/2/2018 10:33

It's a descending clock or Dutch auction, similar to that used to auction tulip bulbs many years ago.

The EMR delivery body intend to purchase 48-50GW of capacity, but there were approx 75GW of actual or potential assets offered to provide it. So there is an excess capacity.

The process is to drop the price gradually, which will make some more expensive projects drop out of the auction (because the expected revenue will no longer cover their project economics). This continues until the capacity offered is equal to that required.

HTH

[2pablo] 08/2/2018 10:20

cody - would you mind explaining the concept of the T-4 auction, please.

I basically know we've entered 8 sites as candidates to win long-term contracts. These would start in 2021/2022 and run for 4 years???

How does the auction actually work? You say the price is dropping now to £20 per kW? So a 20MW site would earn 20,000 X £20 which is £400k per year for being available?

What does it mean the GW gradually dropping out of the auction?

[codydotcom] 08/2/2018 09:53

OK, we're getting toward the interesting part of the auction now.

Into round 11, where the price will drop from £25 to £20. At the beginning of the round, there is still 11GW of excess capacity. 3GW dropped out in round 9 (£35-£30), but nothing dropped out in round 10.

I'm guessing we'll see another 3-4GW drop out in this current round, taking maybe 7GW excess into round 12. That would (in my total guesswork world) give a cleared price somewhere down near £15.


It's just soooooooo slooooooooooow. I don't know why they can't make each round last 30m, and complete the process in one day

[2pablo] 07/2/2018 21:52

Thanks rhug - it will be great to get the summary after these auctions are complete.

Perhaps tomorrow

[rhug1966] 07/2/2018 20:00

This is an extract from the year end report -

Capacity Market: This year the Company is applying for eight 15-year contracts (four FlexGen and four Gas) and six one-year contracts.

[2pablo] 07/2/2018 16:14

This was the state of our T-4 contracts before this year's auctions :

"Worth reminding our investors that our 15 year capacity mechanism contracts start in 2019 with £360K per site annually and then 3 more with £450k per year from 2020"

Not sure how many start in 2019 @ £360k per site.

Maybe after this year's T-4 auction, all 9 Rockpool and our 2 gas-sites qualify ?

[2pablo] 07/2/2018 15:02

rhug - that's definitely the thing. If they've got a 4-year contract they are very valuable.

cody : looking forward to you giving us the results, though PPG will probably Tweet them. They've done a couple of tweets on STOR today, what it is and what it means to us.

[rhug1966] 07/2/2018 14:41

I guess if 15 year CM contracts have been won for the SPVs we want to sell then this will make them more attractive to buy.

[codydotcom] 07/2/2018 13:15

Into round 8 of the T-4, now at £40. Excess capacity is still 16GW

About 5GW has dropped out over the past 2 rounds. Those will likely have been new CCGT projects

[rhug1966] 07/2/2018 11:52

What's a 20MW diesel site likely to sell at ? Sounds like they are being built to just sell off. Let's hope at a profit.