PPG.L Regulatory News (PPG)

Plutus PowerGen Plc / Ticker: PPG / Index: AIM

30 May 2017

PLUTUS POWERGEN PLC ("PPG" or the "Company")

Trading Update

Plutus Powergen Plc, the AIM listed power-company focussed on the development and operation of flexible energy generation ('FlexGen') projects in the UK, is pleased to provide a trading update on its operations.

The Company's business model remains focussed on the construction of FlexGen projects across the country. The energy environment in the UK is tightening rapidly and PPG is focussed on mitigating the current and forecast risk of an energy deficit through the development of a portfolio of 20MW power sites, which can be switched on at a moment's notice at times of peak demand.

PPG's inaugural 20MW FlexGen project, based in Plymouth, has traded above budget since it commenced operations in November 2016. The Board notes that on Wednesday 17 May 2017 power prices in the UK peaked above £1,500 per MW hour due to outage and generation imbalances, and recognise this volatility will be seen in the markets more regularly going forward. PPG 's sites are ideally positioned to take advantage of this as they can be operational within 30 seconds. A further eight 20MW projects are in various stages of development. PPG and Rockpool Investments LLP are arranging the finance for all nine projects with a combination of debt and equity. PPG has a 45% stake in each project and management contracts, which will total £150,000 per site per annum. Some 100MW's of these projects are in construction at present and it is expected that they will be available to supply electricity during the winter of 2017/2018.

With regards to the current OFGEM regulatory review, initiated in March 2017 when OFGEM published a "minded-to" decision, the Board await the conclusion of that review which is likely to be published after the general election. If implemented, as published, this would reduce the TRIAD benefit received by small embedded generators, such as PPG's projects, to close to zero from the winter of 2020/21. It is expected that OFGEM will announce a full review of the whole charging system and it is likely that TRIAD will either be frozen or reduced over the period of the review.

On the surface, this has been perceived as damaging to the prospects of PPG. However, due to the sites having multiple revenue streams, including reactive power sales, STOR and FFR, the Board have examined each of PPG's operational and financial models to exclude TRIAD from its renewable green diesel powered sites and proposed gas sites. While the gas sites are around 100% more expensive to construct than the renewable green diesel sites, the Board believe the financial returns, even excluding TRIAD if ultimately abolished, remain highly attractive and offer a potential IRR per project in excess of 20%.

With respect to the outcome of DEFRA's consultation on new lower emissions limits, the Company understands that this has also been delayed by the general election. However, PPG is confident that it will be able to comply with the proposed new rules, without any material impact on investor returns compared with the returns expected when Plutus Energy was first reversed into PPG.

Overall, the structural changes in the business and the reduction in TRIAD have put negative pressure on PPG's share price performance. However, all parties, be it the Board, Rockpool or financial advisors, believe the business case remains extremely compelling and that the future value of the business is attractive. Therefore, the Company remains committed to executing its development strategy in tandem with its partners.

Going forward, the Company has a pipeline of FlexGen gas projects totalling 150MW, which it will seek to retain an 80% plus interest in. The Company is focused on constructing a minimum of four gas powered projects per annum as they offer significant advantages, both environmental and financial, over renewable green diesel engines. However, the Company may consider other projects in certain circumstances, utilising strong relationships with key partners both in the finance and energy markets.

PPG Chairman Charles Tatnall said, "Following a re-work of our modelling, and considering OFGEM's proposal, we believe we still have an extremely robust and attractive business model. The market for flexible energy generation is clear to see and we have the team and are in well-developed discussions regarding the financial backing to deliver our projects and therefore our stated strategy. It is also important to emphasise that PPG continues to seek to fund the construction and development of its power generation sites through non-dilutive means.  As such we continue to view the future with confidence."

**ENDS**

For further information, please visit www.plutuspowergen.com, or contact:

Notes to Editors

Plutus PowerGen Plc is an AIM listed company focused on the development, construction and operation of flexible stand-by power generation sites in the UK. At present, the market dynamics for flexible power generation are positive due to the continued downward pressure on capacity available to National Grid to balance supply and demand, leading to their announcements about possible power shortages over the next few years.

Flexible power generators such as PPG offer a viable and timely solution to the power capacity shortfall in the UK. To this end, PPG is initially focusing on delivering 200MW of capacity by the end of 2017 and currently has a project pipeline of potential development sites with 700MW of power generation capacity.