MAGA ( Making Ancillary power from Gas Again )
Whilst renewables remain the poster child for the energy transition , high inflation and painful peak power prices for grids suffering from increased intermittency from renewables has seen the quiet return of gas-fired generation as a balancing power source .
In the UK , the energy security argument focused on more renewable power was given pause for thought when Russian naval vessels surveyed the UK ’ s network of OFTOs and the national grid struggled to meet demand as wind and sunlight were absent in parallel . Exacerbating the exposure to elevated natural gas prices as the marginal fuel in the merit order , the UK has looked to bring more new clean gas generation into the availability-based capacity market after several years of highly profitable merchant trading platforms including Bracewell ’ s instruction to act for lenders on VPI Generation ’ s £ 400 million merchant financing .
Whilst BESS projects continue to offer very short timeframe solutions to grid stability , gas-fired power has been making a comeback as a supplier of last resort for grid scale power when the wind doesn ’ t blow and the sun isn ’ t shining .
Bracewell acted for lenders on the greenfield project financing for Vitol Power ’ s two new gas-fired power plants backed by 15-year Capacity Market Agreements , located adjacent to its Immingham CHP to be connected into the Humber Zero CCUS project .
The stability of thermal power has also proved of interest to the huge power demand of data centres and other commercial and industrial users with Bracewell acting for CrossBoundary Energy ’ s 500 MW portfolio financing which includes thermal generation as well as , the uncapped holdco financing of Actis Energy ’ s 3 GW of thermal generation portfolio , Azura Power .
Recent Notable Matters
• Vitol VPI Vitol Power International — the lenders to VPI Power Flex in relation to its greenfield project financing for two new thermal power plants underpinned by the UK ’ s Capacity Market Agreements
• Taweelah C 2.6 GW IPP — advising JERA and Etihad WE with respect to its bid for this 2.6 GW conventional gas fired IPP
• CrossBoundary Energy — advising CBE , a portfolio company of ARCH Emerging Markets and Norfund , on its initial $ 300 million senior debt commitment from the Standard Bank Of South Africa and IFC ’ s Facility for Energy Inclusion to scale its renewable energy Commercial and Industrial portfolio across Africa , with a further permitted additional debt regime to allow for incremental facilities to be raised
• Pan African portfolio financing — acting for Mauritius Commercial Bank and ABSA Bank , Investec and Sanlam as lenders to a PE backed pan-African power developer , on its structurally subordinated holdco financing of its multi GW pan-African portfolio of thermal power generation , with an uncapped permitted additional debt regime to support the platforms ongoing growth and acquisitions
The Year Ahead
We predict continued transactions and associated financings around gas-fired assets with a focus on abatement for grid serving generation as well as increasing demand for gas-fired power from private wire to data centres . bracewell . com