Strong personal relationships and the combination of a purchase agreement from Merchant Power (PPA) and a contract for Difference (CFD) were important floating factors behind the successful financing of the UK’s Cleve Hill-Plus-Plus storage project.
This was a conclusion by speakers on a panel on the last day of Solar Media’s Renewables Procurement & Revenue Summit, held in London this week. Joseph Valvona, Infrastructure and Project Finance Origination at Lloyds Banking, one of the project financiers, said that working with an established industrial player such as Quinbrook Infrastructure Partners has contributed to minimizing the observed risk associated with a project of this scale and meaning.
‘We don’t like it alone [Quinbrook’s] Profile in the UK, but some things they have done in the US, including The Gemini project“Said Valvona.” That shows us that they have the capacity to expand this. “
This was an important consideration in view of the scale of the project-one 373 MW Zonneplus-Plus storage project that will be the largest in the UK as soon as its construction is completed and its status as the first project in the country that is a national important infrastructure project (NSIP). The project is something of an important proof-of-concept for large-scale renewable projects in the UK, and Valvona suggested that working with Tesco as an offtaker helped to bring the project closer to reality.
“They are investment quality, we know them well [and] That fame helps, “he said, suggesting that the market position of Tesco enabled it to function as a single, reliable buyer for a decrease in this type of decrease.
“Their position in the market is very strong. Historically we have looked at deals where you have a CFD or a PPA with a company or a utility, and that offers the diversity, so if one thing falls, the whole goes down.”
Minimizing project and financing risks
However, this does not mean that project development was not without a challenge, or not without the need to overcome risk.
“The largest is the actual volume -forming risk,” says Lyudmil Banev, director of project financing and infrastructure at Natwest, the other financier of the project. “There is a fixed volume obligation that has been set for example in a detailed commitment for half an hour.”
“Locational there were advantages and disadvantages,” Valnova added. “It was on the sea, so there is a certain sea wall that runs along the coast and we had to do a lot of work to be comfortable with the maintenance and projection of that marine wall, [ahead of] The transfer of the local government to Quinbrook.
“Much of the feedback that the consultants have given forward were taken over – [Quinbrook] Take the flood risk very serious and critical infrastructure is housed in what looks like a bomb-resistant structure.
The backers also tried to minimize the financial risk, as much as possible. Valnova suggested that his team is looking at the possible implications of Tesco that is in default on his payments – himself a very unlikely possibility – to see if the project would be financially viable without the input of Tesco. This has just demonstrated “how strong the project is” on his own merits.
“It is 100% contracted for 15 years … so that the dependence on the volatile price forecasts in the short term removed,” said Rosalind Smith-Maxwell, director at Quinbrook Infrastructure Partners. ‘[Tesco] Has very clear goals of decarbonsiation and a nature path, and we, as a sponsor, welcome a non-covered, pay-as-product inflation-linked purchase agreement with an FTSE100 company. “
