Introduction
SAE Renewables (LON:SAE), a prominent player in the UK’s renewable energy sector, is on an ambitious path to reshape the energy landscape. Analyst Daniel Slater of Zeus Capital provides a comprehensive overview of SAE’s prospects, highlighting the company’s strategic focus on Battery Energy Storage Systems (BESS) and tidal power. With significant government support and a robust project portfolio, SAE stands poised for substantial growth in the coming years.
Battery Energy Storage Systems (BESS)
SAE’s BESS portfolio is a cornerstone of its renewable energy strategy. The company has an impressive 1.3GW of BESS projects across sites in Wales and Scotland. Notably, a 230MW project has already been sold and is progressing, indicating the attractiveness and feasibility of these ventures.
Key Highlights of SAE’s BESS Portfolio
- Extensive Project Pipeline: SAE’s BESS portfolio includes 926MW of development projects at Uskmouth in Wales and Mey in Scotland. This portfolio is significant for a company of SAE’s size and is expected to drive substantial growth.
- Land and Grid Connections Secured: SAE’s projects are bolstered by secured land at its two sites, including the former Uskmouth power station, and grid connection offers that facilitate future BESS deployment. These elements provide a strong foundation for the company’s development plans.
- Initial Project Success: The sale of the initial 230MW BESS project at Uskmouth for £19.9 million underscores the project’s appeal, highlighting the potential for additional partners to invest in SAE’s upcoming projects. This could provide crucial funding for the company’s equity capital expenditures (CAPEX).
- Financial Projections: Modelling suggests SAE’s BESS portfolio could support an annual EBITDA of around £34 million by the early 2030s once all projects are operational.
Tidal Power: The MeyGen Project
SAE’s MeyGen tidal stream project in Scotland is another critical component of its renewable energy portfolio. With 6MW already operational and government Contracts for Difference (CFDs) covering an additional 50MW, the project represents a significant growth opportunity.
MeyGen’s Potential and Achievements
- Proof of Concept: The existing 6MW project has been a global leader in tidal stream power, generating over 63GWh of electricity and validating SAE’s technological approach.
- Future Expansion: With a total site capacity of 398MW, MeyGen offers substantial upside. The recent CFDs support further phases of development, providing a solid foundation for additional investment and growth.
Valuation and Outlook
Analyst Daniel Slater’s valuation of SAE includes both the BESS and tidal businesses. The BESS business alone is valued at 5.9p per share, with the tidal business adding another 1.4p per share, totalling 7.3p per share. This valuation reflects the potential growth from ongoing project developments and strategic partnerships.
Slater states, “We believe progress of the project portfolio, particularly the BESS projects, should drive the share price over the coming months and years. “
Final Thoughts
Strategically positioned to capitalise on the UK’s renewable energy targets. With a robust portfolio of BESS and tidal projects, substantial government support, and strategic partnerships, SAE has the potential to drive significant growth and value for shareholders. Investors should monitor the company’s progress in securing funding, advancing project developments, and achieving key milestones to fully realise SAE’s potential in the evolving energy market.
