SAE Renewables Limited (LON:SAE) has announced its unaudited interim results for the six months ended 30 June 2024.
Key Highlights
· SAE received £7.0 million from the land sale contract with EL (Uskmouth) Ltd
· SAE acquired 100% ownership of the AW1 120MW/240MWh Battery Energy Storage System (“BESS”) project
· SAE submitted a planning application for Section 36 consent for the 300MW/1.2GWh “Mey BESS” project in the North of Scotland.
· The consolidated cash position of the Group as at 30 June 2024 was £7.7 million (as at 30 June 2023: £2.3 million)
· The Group reported revenues of £12.1 million for the six months ended 30 June 2024 compared to revenues of £12.4m for the same period in 2023
· The loss before tax of £6.0 million for the six-month period to 30 June 2024 (H1 2023: profit £4.5 million) was largely a result of the profit on the land sale contract with EL (Uskmouth) Ltd having been recognised in 2023 whilst the revenue from the sale was realised during 2024.
Chairman’s Statement
At the Annual General Meeting in July this year, SIMEC Atlantis Energy Limited launched its new strategy – Building a Sustainable Future to 2035. This strategy set out the Company’s plans for becoming a leading independent power producer, leveraging on our development, construction and operational teams’ experience as an IPP in tidal stream at MeyGen and operations and maintenance at Uskmouth Power Station, to develop, build, own and operate Battery Energy Storage System (BESS) projects and continue with the build out of the MeyGen project.
I’m very pleased to report that we have continued to make good progress in all these areas. During the past three years, we have been working with several organisations to help position SAE as one of the country’s leading BESS and tidal stream developers, owners and operators. This huge piece of work has seen us reimagine and reinvent the Uskmouth power station and MeyGen sites with a vision to deliver world leading integrated renewable energy generation and storage facilities.
I am also pleased to report a strong financial start to 2024. We continue to receive revenues from our first BESS project at Uskmouth and the MeyGen Phase 1 tidal array continues to break records with its predictable power generation. MeyGen has now generated 68GWh, 65% of global tidal stream generation and more than 80% of UK tidal stream generation, reinforcing MeyGen’s position as the world leader in this technology. We are on schedule to redeploy the fourth MeyGen turbine in Q4-24 bringing the array up to its full 6MW capacity.
Projects Updates
Battery Energy Storage
As a significant landowner at Uskmouth, SAE continues to benefit from the competitive advantages that its strategic location provides. The site benefits from the existing grid and logistical infrastructure located on the site, the continuing support that the local planning authorities are providing for the redevelopment of a brownfield site well established for energy facilities, and the expertise of the local operations and maintenance team we retained from the power station.
The first project, which we developed and divested, continues to deliver as the construction of a 230MW BESS project continues apace, with the receipt of £7.0 million in the first half of this year from the land sale contract with EL (Uskmouth) Ltd. As the construction of this project reaches its conclusion, SAE will be due the final £2.9 million of payments between now and the end of Q1-25. This project has an option to expand its capacity by a further 120MW which, if this option is exercised, would trigger a further development premium under the agreements with Uskmouth Energy Storage Limited, (the now owner of the project), and further land overage payments to SAE under agreements with EL (Uskmouth) Ltd.
Excellent progress is being made towards achieving financial close of the next BESS project at Uskmouth, a 120MW/240MWh BESS project known as Afon Wysg 1 (“AW1”) located on the site of the Uskmouth cooling towers. In January 2024, we announced a major milestone as AW1 was granted planning consent after which we immediately commissioned the demolition of cooling towers, clearing the site in preparation for construction. In August 2024, we announced taking full ownership of the project from the legacy developer alongside completion of the demolition works programme and provided an update on our procurement and financing programme. We are progressing well towards sourcing the project finance for construction of the project, estimated at £65.0 million, alongside finalising the equipment supply and construction agreements. The AW1 project’s target grid connection date is October 2026 and once fully operational is expected to generate annual revenues of £12.0 million.
The development of several additional BESS projects at Uskmouth and in Scotland is being progressed at pace this year. We believe that we are very well placed to take advantage of improved grid connection dates next year once National Grid completes the implementation of its connections reform process. This process changes the historic outdated queue system to a system which is in essence “first ready first connect”. Noting that SAE already has land rights for all of our projects, we have a significant competitive advantage in this new connections methodology which is accelerating projects with land rights and where planning applications have been submitted. Hence our focus is to progress all our projects to “Ready to Build” status, and I am very pleased to provide the following progress updates across the portfolio of our BESS development projects:
· In June 2024, SAE submitted its application for Section 36 consent for the 300MW/1.2GWh “Mey BESS” project in the North of Scotland. This year the project secured the necessary land rights and received an increased offer for grid capacity to 287MW alongside amending its grid connection to be suitable for BESS.
· SAE continues to progress a further 250MW project on the Uskmouth site and recently submitted a screening opinion request to Newport City Council. This project is known as “AW2”.
· In December 2023, we announced that SAE had secured an additional 349MW of grid capacity at our Uskmouth site. This project will be known as “AW3”. This project may receive an earlier grid connection date as the grid connections reform process reaches its conclusions.
· Several additional BESS opportunities have been identified by the management team. Whilst discussions are still at an early stage, they provide the opportunity for us to grow our portfolio further and we look forward to providing further details on these projects as they are progressed.
Tidal Stream
MeyGen Phase 1
The MeyGen Phase 1 array continues to operate successfully, with three turbines in stable operations whilst the fourth is currently completing preventative maintenance and upgrade works and is expected to return to operation in Q4-24. The MeyGen operations team is doing an excellent job operating and maintaining the MeyGen Phase 1 turbines and has developed invaluable expertise and experience that is both enabling the ongoing successful operation of MeyGen Phase 1 and which is being applied to the development of MeyGen Phase 2.
MeyGen Phase 2
I was delighted by the result of the recent AR6 auction in which SAE was successful in securing an additional 9MW of UK Government Contract for Difference (“CFD”) at £172/MWh, bringing the total CFD’s won by the MeyGen Phase 2 project in AR4, 5 and 6 to 59MW. Along with generation from the existing array, MeyGen is best positioned to deliver this technology at scale to the UK.
We continue to develop the MeyGen Phase 2 project with our partners and are pleased to continue to receive support from all Scottish government departments. I would particularly like to thank the MeyGen funders, Scottish Enterprise and Crown Estate Scotland, for their continued unwavering support, as well as the junior lenders, Engie and Morgan Stanley
Summary of Results
The Group reported revenues of £12.1 million for the six months ended 30 June 2024 compared to revenues of £12.4m for the same period in 2023. Revenues available to the Group, which excludes ring-fenced revenue earned by the MeyGen tidal array, were £10.1 million compared to revenues of £10.3m for the comparative period in 2023.
In March 2024, the completion milestone in the land sale contract with EL (Uskmouth) Ltd was completed triggering the recognition of £9.9 million of revenue in the reporting period. The Group received £7.0 million of this total amount during the reporting period.
At the same time, the income statement reported a £9.9 million cost relating to the transfer of land inventory being the profit that was recognised on the land sale contract with EL (Uskmouth) Ltd in the 2023 Annual Report.
In the comparative period last year, the Group recognised revenues of £10.0 million from the sale of development rights to the 230MW Battery Energy Storage System to Uskmouth Energy Storage Ltd.
Revenues generated from the sale of electricity from the MeyGen Phase 1 tidal array remained steady at £1.9 million (H1 2023, £2.1 million).
Operating costs reduced to £4.5 million (H1 2023: £4.6 million). Costs associated with running the MeyGen array halved to £1.5 million (H1 2023: £3.0 million) in the latest six-month period following the completion of major turbine repair and maintenance in the first half of 2023 which have not been repeated to the same extent for the current period. Offsetting this reduction were higher employee costs of £1.9m (H1 2023: £1.0 million) reflecting the investment in all of SAE’s employees and reward for their delivering the strong financial performance of the Group during 2023 and to 30 June 2024. Higher operating expenses of £1.0 million (H1 2023: £0.5 million) due to increased development expenditure on specific BESS projects also contributed to the increase in operating costs.
Financing costs increased to £0.9 million (H1 2023: £0.6 million) primarily due to a higher discount rate applied to the Uskmouth decommissioning provision creating a non-cash adjustment of £0.3 million. Interest payable to bondholders during the six- month period remained unchanged at £0.6 million.
The loss before tax of £6.0 million for the six-month period to 30 June 2024 (H1 2023: profit £4.5 million) is largely a result of the profit on the land sale contract with EL (Uskmouth) Ltd having been recognised in 2023 despite the revenues from the sale being realised during 2024. The Group has improved its liquidity position as £7.0 million of revenue from the land sale contract with EL (Uskmouth) Ltd was received during the reporting period, in line with forecast.
Business Segment Reporting
The Group expanded its Business Segment Reporting in the 2023 Annual Report to include the Battery Storage segment. During the reporting period, the Battery Storage segment reported EBITDA of £9.2 million arising primarily from the completion of the land sale contract with EL (Uskmouth) Ltd.
The Tidal Stream segment, previously named Power Generation, reported EBITDA of £0.4 million following a significant reduction in turbine maintenance costs. The Tidal Stream segment’s financial results are materially impacted by the interest expense on the MeyGen project debt, which is predominantly non-recourse to the Company.
The Project Development segment represents development expenditures incurred on specific BESS projects.
The Corporate segment represents the costs associated with running an AIM listed and Singapore incorporated group and employee costs not allocable to another business segment and were in line with forecast.
| Business Segment Analysis | June 2024 | ||||
| Battery Storage | Tidal Stream | Project Dev’t | Corporate | Total | |
| £’ 000 | £’ 000 | £’ 000 | £’ 000 | £’ 000 | |
| Revenues | 10,167 | 1,882 | 0 | 43 | 12,092 |
| Operating costs | (963) | (1,445) | (682) | (1,357) | (4,447) |
| EBITDA | 9,204 | 437 | (682) | (1,314) | 7,645 |
| Depreciation and amortisation | 0 | (956) | 0 | (78) | (1,034) |
| Results from operating activities | 9,204 | (519) | (682) | (1,392) | 6,611 |
| Decommissioning Discount unwind | (218) | (34) | 0 | 0 | (252) |
| Interest expense | 0 | (1,632) | 0 | (795) | (2,427) |
| Exceptionals* | (9,900) | (9,900) | |||
| Reportable segment profit/(loss) before tax | (914) | (2,185) | (682) | (2,187) | (5,968) |
*Transfer of land inventory on recognition of sale
The unaudited consolidated cash position of SAE Renewables as at 30 June 2024 was £7.7 million (as at 30 June 2023: £2.3 million). Included in cash and cash equivalents in the statement of financial position are encumbered deposits of £0.7 million (as at 30 June 2023: £0.8 million).
Duncan Black
Chairman
