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