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Pure speculation of course, but EDF are going to have to pay to decommission these...
https://www.bbc.co.uk/news/uk-england-nottinghamshire-56487432
https://www.thetimes.co.uk/article/britain-down-to-its-last-coal-power-station-rkvxftjg6
Sue Ferns, from the Prospect union, said: “The priority has to be enabling a just transition for dedicated workers into new jobs. We cannot allow the skills we have built up to go to waste, and we mustn’t abandon those communities where power stations have been big employers.”
Thanks for the links OT. How did you come across that webinar?
Kwasi Kwarteng wasn't much use (for anyone who's going to watch it I'd recommend skipping the first 45 minutes) but it was interesting to see the presentations. It was particularly exciting to hear Sean talk about the 2000+ coal power stations throughout the world that will be available for SAE to convert. Of course, there are no guarantees, but over a 10 year timeline there's the potential for SAE to grow to a multi-billion pound valuation with Subcoal conversions alone.
Well the deadline has been and gone and we still don't have an update on the NRW page re: questions 7 and 14. In general, NRW seem to post correspondence on the same day that it's sent/received, though I don't know what the criteria are for posting to the public register. Presumably the answers have been sent and we just haven't seen them yet.
Unlike the planning permission, the environmental permitting is a legal process - if SAE can demonstrate they can meet the legal requirements for an EP then NRW are obliged to grant it regardless of local or political opposition. I'm pretty confident the EP will be granted. Of course, if the PP isn't granted then the whole thing is meaningless, but I think we should expect to see good news regarding the EP in a few weeks time.
https://naturalresources.wales/about-us/news-and-events/statements/uskmouth-power-station-application-to-change-environmental-permit/?lang=en
NRW:
https://publicregister.naturalresources.wales/Search/Results?SearchTerm=PAN-008534&sortBy=Date&filters%5BLocation%5D=&filters%5BLocalAuthority%5D=&SortRelated=Date
NCC:
https://documents.newport.gov.uk/PublicAccess_LIVE/SearchResult/RunThirdPartySearch?FileSystemId=PL&FOLDER1_REF=20/0748
WG:
https://gov.wales/planning-decisions-being-considered-welsh-ministers-called
as noisyboy says, the WG one only seems to be updated on Fridays at about midday.
second tranche in! Bit of a relief that came in before any further bad news about GFG - I was a little concerned they might collapse and leave the SP under 5p.
We should also be expecting a further update on the NRW page today, tomorrow, or maybe Monday - SAE have two more questions to answer and the deadline is tomorrow.
That's a much more helpful response than I received when I contacted them. Doesn't sound like it should be too long. Thanks for posting Strangy.
Which email address did you contact to get that response?
I suspect it's more the tweet from SAE than the tweet from Myles, but he's right that the choice of the word "independent" seems very deliberate. It seems to be a subtle/tactful way of distancing themselves from GFG and the financial mess they're in.
"SAE, an independent sustainable energy developer..."
By the way, if anyone knows what kind of bid SAE should be able to put in, that would be incredibly helpful.
I know SAE are planning to build about 80MW of turbines for £420 million
https://simecatlantis.com/projects/meygen/
but I haven't got round to converting that into a strike price according to government methodology yet. (https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/765690/Admin_Strike_Prices_Methodology_AR3.pdf )
As and when I get time to do so, I'll post my best guess on here.
Chasable:
Yeah, I listened to that committee meeting. After further reading, my worry is not about the administrative strike price (ASP) being too low for SAE to be able to put in a bid, but for there to be too many lower bids from other technologies for SAE to be awarded a contract.
If you look at the ASPs of all the other technologies in Pot 2, Tidal is second highest by a long way (with only wave being a more expensive tech). Now, we know that SAE are at the top of the tidal game, so let's be generous and assume that Atlantis can put in a bid at £140/MWh, undercutting the (AR3) ASP by a third, and beating the potential for 100MW of £150/MWh estimated here:
https://www.marineenergywales.co.uk/wp-content/uploads/2018/05/ORE-Catapult-Tidal-Stream-and-Wave-Energy-Cost-Reduction-and-Ind-Benefit-FINAL-v03.02.pdf
The question is, how competitive would a bid of £140/MWh be? That's basically impossible to answer confidently without knowing what the budget will be, but it's obvious that the bigger the budget is, the more chance we have. My doubt comes from the fact that every single tech other than wave had an ASP lower than £140/MWh in AR3:
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/765690/Admin_Strike_Prices_Methodology_AR3.pdf
Since the ASP methodology states that each ASP is set so as to target 25% of the supply curve, we know that (if the govt's modelling is approximately correct) the only way that SAE can win a contract, is if the 25% of the total supply curve summed across all of the other technologies doesn't exceed the monetary or energy budget imposed by the government. This is because as soon as one of the budgets is exceeded, an auction is triggered and the bids are eliminated in descending order. By definition of the ASP, all the bids from ACT, AD, Dedicated Biomass with CHP, Geothermal, Floating OW and Remote Island Wind will be lower than £140/MWh.
Now, I haven't been able to find useful data about the capacity of those technologies, so I can't estimate 25% of the supply curve for them. You can't infer much from results of previous rounds because the highest strike price was about £41, which is way too low to get a sense of the available supply. It's possible that these other technologies are small enough that the budget won't be used up by their bids. It's also possible that I'm vastly overestimating the cost for SAE to generate energy, and they'll be able to come in at a third or a quarter of the ASP set by the govt. I'll feel more confident to make a prediction when I see the budget note for AR4. For now, I'm assuming that SAE won't win a CFD in AR4.
A game changer would be a pot within a pot of course, but I wouldn't like to bet my shares on that coming through.
I guess "dump Gupta" in the sense of SIMEC selling their stake in SAE and SAE not being influenced by him/SIMEC.
All this being said, I'm far more concerned by the planning permission for Uskmouth than by what's going on with GFG. I plan to hold for several years and don't see GFG's troubles keeping the share price low for that long. I think the coal-to-subcoal conversion will be a much easier sell if SAE can point to a working Uskmouth though.
I've also been reading a lot of the CfD documentation over the last few days. I'm keenly awaiting news of the budget for AR4 - I'm still skeptical that SAE have a decent shot of a CfD without a "pot within a pot" structure being announced - but if the pot 2 budget is generous enough, it's not impossible. TC seemed to feel like separating offshore wind would make a big difference.
Thanks for bringing us back on topic casapinos. I don't know how closely you still follow SAE if you're not a shareholder anymore, but I'd appreciate some more context for your doubts about Uskmouth will ever bear fruit. Is it that you have doubts about the planning permission being granted, do you not think the project is financially viable, or is it something else? I only came across SAE about 12 months ago so I don't have the same experience with them as you do.
Re: free speech, there's a certain irony to making successive posts in which you accuse someone of libel and then decry the loss of freedom of expression. If you accept the legitimacy of accusations of libel then you subscribe to the view that certain restrictions on freedom of expression are both fair and legitimate - for example, restrictions on the ability to knowingly lie and mislead at cost to others. If that's the case, you can't then turn around and complain that people have had posts or accounts removed for the exact same thing.
There's also the pesky problem that this isn't a public space (insofar as the domain lse.co.uk is privately owned). LSE have the right in UK law to prevent you from expressing opinions that would be protected in a truly public space like your local high street.
There's a decent post here about it for anyone interested:
https://www.law.ox.ac.uk/research-and-subject-groups/property-law/blog/2020/03/privately-owned-public-spaces-comparative
There's also going to be a select committee meeting tomorrow about freedom of expression online:
https://www.parliamentlive.tv/Event/Index/0507a4c0-f7f2-407f-a411-b9bb1009734c
The situation with GFG does seem bad, and the more news that comes out of it, the worse it seems. But I'm still struggling to pin down why exactly it's bad for SAE - beyond the the short term effect that dumping 43% of shares would have on the share price. SAE don't have any debt tied up with Greensill as far as I can tell. SAE don't rely on SIMEC for anything in their supply chains that couldn't be sourced elsewhere. SAE also took over the JV with N+P so that SIMEC aren't involved in that anymore. For example, if SIMEC found a private buyer(s) for their shares so that they weren't sold on the open market, what difference would GFG's troubles actually make to SAE? I don't see why the tidal division or Uskmouth would be at significant risk.
For short term holders the current drop in share price might present a problem, but if you're holding long term I can't see why GFG being out of the picture would make a huge difference. Please correct me if I'm wrong though.
The worst case scenario would seem to be if SIMEC sold their shares just before the third tranche of investment is due and the sp dropped to below 12p again. Seems like a lot of ifs though. (I'm assuming, of course, that the EP decision comes before then and is favourable - if NRW decline the permit then that would spell bigger problems for SAE than GFG's troubles imo)
Thanks Mehmet, that's really helpful
@Mehmet
Case in point re: people with greater knowledge and understanding of these things.
Do you have any recommended readings or viewings to get a better grasp of it all? What I find hardest is knowing where to start.
Your comment seems to imply that even within the UK, what counts as a competitive strike price varies by location: do you know where I can find out more about any of that?
Thanks!
I should point out though, that there has been a positive development in this round of contracts insofar as offshore wind has been taken out of Pot 2 and put into its own pot so that less-established technologies (like tidal) don't have to compete against it.
Pot 2 (less established technologies): advanced conversion technologies, anaerobic digestion (above 5MW), dedicated biomass with CHP, floating offshore wind, geothermal, remote island wind (above 5MW), tidal stream, wave
My understanding of the auctioning process for CfDs is very limited, but I think for SAE to win one they would need to be able to offer to generate some amount of electricity at a strike price that was lower than (or at least competitive with) the other technologies in Pot 2. I don't know all that much about those other technologies, so I can't comment on how competitive tidal stream is.
If anyone does know how competitive tidal stream is, I'd be very interested to hear.
Hi Operastar,
I won't claim to be any kind of expert, but my day job involves watching a lot of Parliamentary committee meetings so I end up knowing little bits through watching those. There are people on here who understand the tidal industry and CfD auctions far better than I do, but I'm happy to explain my understanding. CfD stands for Contracts for Difference:
https://www.gov.uk/government/publications/contracts-for-difference/contract-for-difference
First, think about a normal (non-CfD) powerplant because it will help with tidal and Uskmouth. A non-CfD power plant can either sell its energy to the grid, or find another buyer for it (a Power Purchase Agreement, or PPA). If it sells to the National Grid, it will be paid the prevailing wholesale price for electricity. You can see the recent history of wholesale electricity price here:
https://www.ofgem.gov.uk/data-portal/wholesale-market-indicators <-Just click wholesale price trends <- Electricity prices
So it has generally fluctuated between £40 and £50 per MWh - pandemic notwithstanding. To be profitable , your total costs associated with (buying and) running the power plant have to be less than the (wholesale price) * (electricity produced). So Uskmouth will eventually produce 220MW which means it would generate around £10,000 an hour if it were to sell to the grid.
If you have a CfD, you agree with the government in advance what you will be paid for the electricity you generate. This is known as the strike price. Essentially, whatever happens to the wholesale price of electricity, the government agrees to top that up to whatever amount you agreed on in the CfD auctions.
If you go here: https://committees.parliament.uk/committee/62/environmental-audit-committee/publications/oral-evidence/
and scroll down to January 27th there was a meeting about tidal. If you download that file and look at page 14 you'll see:
"Therefore, it is a ring fence or a provision within the CfD to allow tidal stream and other forms of new and emerging technologies to come forward at a higher strike price, an administrative strike price we advised through the BEIS marine evidence committee and through their call for evidence that that should be in excess of £200 per megawatt hour. We are talking about £250 per megawatt hour to bring this technology forward."
So a CfD with a £250 strike price would cost the government £200+ for each MWh you produce.
You can listen to the whole shebang here:
https://parliamentlive.tv/Event/Index/e7ef8ba0-418b-4b9d-9eff-9590f128135d
It's well worth a listen.
My impression from that meeting was that the ministers thought £200+ was too high, but listen for yourself and see what you think - they didn't say so explicitly.
I think the concentration on Uskmouth is more to do with its direct impact on the share price and profitability of SAE than forgetting about tidal.
Until we have a (profitable) route to market for tidal it's difficult to see progress in tidal positively affecting the share price. Hopefully there will be provisions for tidal in R4 of the CfD auctions, but from what I've heard in the environmental audit committee meetings, I'm not optimistic for the near term. Off the top of my head, I think we would need a strike price North of £200 to be competitive, and the sentiment in the meetings seemed to be that that was far too high. As I've mentioned before though, I have some speculative hope that the UK infrastructure bank announced at the budget might throw some money into tidal. That would be a great boost to SAE.
"In the case of Atlantis, it will have the right to elect to terminate the Agreement (and not to consummate the second, third and fourth tranches of investment) if the market price of the Company's Shares is less than a cancellation floor price of £0.20 per Share."
Why would that be in there? Under what circumstances would a SP below £0.20 lead SAE to want to terminate the agreement and reject the funding?
If the SP is still at <13p in in 3 months time then the EP would have to have been rejected, I would have thought. Even in the scenario where the WG call in the planning application, if the EP is (provisionally) granted then the SP should be above 13p...
The (extension to the) deadline is 19/03/21 and SAE have just sent answers to all but two of NRW's technical questions. They seem to be cutting it a bit fine.
https://publicregister.naturalresources.wales/Search/Results?SearchTerm=PAN-008534&sortBy=Date&filters%5BLocation%5D=&filters%5BLocalAuthority%5D=&SortRelated=Date