The project is currently under construction and is expected to be operational in the first half of 2023; the battery containers have already been delivered. Following the acquisition of the 21.9% stake in clearvise, the acquisition represents the second step in the strategic development announced in July 2022.
The enterprise value of the battery storage project has been set at GBP 5.0 million. The expected return on equity is just above 8% and can be further optimized through the targeted use of debt capital.
Tion's operation of the battery storage project opens up the possibility of combining several available revenue streams. The most important revenue streams are wholesale trading, i.e. trading electricity on the spot market, and grid services, such as control reserve. Wholesale trading generates revenue by charging the battery during periods of low market prices and discharging it when prices are again high. Grid operators tender control reserve or other grid services to maintain the balance between power generation and power consumption. Taking into account BESS' cycle strategy, which combines multiple revenue streams, the company expects to average two full charge cycles per day.
Purchase price partly financed by a vendor loan
In addition, battery storage projects in the UK are not affected by the taxation of windfall profits ("Electricity Generator Levy"), which takes effect on January 1 next year, and therefore do not have to fear a loss of revenue. However, companies or plants that generate renewable energy, nuclear energy or energy from biomass in an annual volume of at least 100 GWh and are connected to the power grid will be affected differently.
The battery storage project is currently being completed and is expected to be operational in the first half of 2023. In line with the Company's acquisition strategy, the project was acquired free of development risks. The purchase price is partly financed by a vendor loan, which is structured in such a way that possible risks during the construction phase as well as possible operational risks beyond the development phase partly remain with the seller.
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Christoph Strasser, Co-CEO/CIO of Tion Renewables: "For our market entry into the battery storage market we decided to acquire a rather smaller project. The project represents an ideal opportunity to enter the battery storage market, which is still quite new for us, and to be able to grow further without raising fresh capital. We as a company want to develop step by step in order to make the best possible use of the potential of our large battery pipeline. This is how we have successfully handled it in the past in the renewable energy sector."
Battery storage pipeline of 1.5 GWh
Mark Hogan, founder and CEO of Boom, said, "The Boom team has delivered 50 MWh of battery storage projects in the past. We are very pleased to have worked with Tion on their first battery storage project and look forward to implementing many more projects together. Our battery storage pipeline, to which Tion has priority access, has now grown to more than 1.5 GWh and continues to provide many opportunities for ongoing collaboration."
Dr. Martin Siddiqui, Co-CEO/CFO of Tion Renewables, said, "Green scalable technologies are at the core of our strategic evolution announced in July of this year and we are pleased to have successfully navigated the next milestone of our strategic initiatives with the acquisition of the battery storage project. Battery storage is a logical complement to our wind and solar portfolio and our investment in clearvise, as battery storage benefits from the increasing volatility in electricity markets as renewables expand, whereas renewables cannibalize. Most importantly, they play a crucial role in the success of the energy transition by helping to stabilize power grids. (hcn)
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