Keith McGrane, the co-founder and chief executive of renewable energy storage developer Corre Energy, couldn’t have timed the flotation of the company in September 2021 any better.
Global equity markets were on a tear at the time. Initial public offerings (IPO) were running at record levels globally. And few sectors were as in vogue as green transition stocks, amid concerns about climate change and power prices.
Still, McGrane — a geologist who had worked in renewables development (Airtricty and Gaelectric) and finance (KBC and Barclays) — had a firm view of the type of investors needed for Corre Energy’s IPO.
“You need risk-tolerant and patient capital that buys into the management team, and its ability and capability to deliver on the business plan,” he said at the time.
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The business is built around addressing one of the key issues with renewable energy: maintaining consistency of supply when the wind isn’t blowing or sun isn’t shining. The ability to store energy at scale for long periods is key to addressing the intermittent nature of renewables.
Corre’s most advanced development is its Zuidwending (ZW1) project in the province of Groningen in the Netherlands. The first large-scale compressed air energy storage (CAES) facility to be constructed in Europe in almost 50 years will allow surplus energy to be converted into compressed air, stored in underground salt caverns. ZW1 will be capable of supplying up to 320MW of electricity to the grid for a period of up to 3½ days. Still, it’s not due to come on stream until around the end of 2026.
Other key projects include Corre’s 320MW Green Hydrogen Hub (GHH1) project in Denmark, another facility in the Netherlands (ZW2) and a plan to develop three CAES plants in caverns secured last year in Germany. The German projects have the potential to generate a total of 500MW of electricity — equivalent to about 9 per cent of current peak demand in the Republic.
Corre also, more recently, targeted the US market, signing a deal in Texas last July, giving it an option to buy a 280MW CAES project.
The Dublin-listed shares of Corre, which is headquartered in the Netherlands, soared 300 per cent to €4 in their first 18 months on the market to become the Iseq darling, turbocharged as Russian president Vladamir Putin’s invasion of Ukraine pushed energy security to the top of the European political agenda.
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Corre has yet to find a way, however, to capture and hold on to shareholder value. The shares have slumped more than 80 per cent from their February 2023 peak. Patient capital, indeed.
Much of the sell-off is not of Corre’s making. The S&P Global Clean Energy Index, spanning renewable energy companies to wind turbine and solar panel makers, has slid by almost 25 per cent over the past 12 months, amid a decline in energy prices and the weight of higher interest rates on this capital-intensive sector. By contrast, the FTSE All-World Index has advanced nearly 25 per cent over the same period.
But much of the frustration is company-specific. Corre may have hit the big project development targets it has set itself to date. But it so far failed to spell out how much money it will make from its projects.
Take ZW1. Corre reached what is known as commercial close on this project in the first half of last year, having hit certain milestones, including signing up Dutch gas and electricity group Eneco to take energy produced from the facility for at least 15 years, guaranteeing at least a base level of income. This is known as an offtake agreement.
Corre has an agreement with investment firm Infracapital (part of M&G plc) to fund the project to financial close, when all the financing agreements are locked in. Infracapital will have a right to take a majority stake in the project at that stage. Beyond that, investors know precious little.
The company said last September it aimed to have funding arrangements in place for its main projects by the end of 2023. It said before Christmas that co-investment talks were being finalised on the ZW1, Danish GHH1, and first German projects, and that the specific terms would be spelt out “in early 2024″. Investors are still waiting.
It said in the same statement that it had struck an offtake deal on the Danish plant — leading to commercial close — but didn’t even give the name of the other party.
A company update in late January on the first German project said it has lined up Eneco to take energy from the facility and acquire a 50 per cent interest. However, strangely, it said that the financial terms had yet to be agreed.
Shares in Corre were hit further a month ago — falling below its €1 IPO price for the first time — when founding director and big shareholder, Darren Patrick Green, stepped down as an executive director after a Singaporean company ultimately owned by him was named by UK tax authorities concerning an alleged tax-avoidance scheme. Green told The Irish Times that he was “absolutely astonished” by the news and had not been a director of — or been involved in the running of — that company for years.
He insisted he remains committed to the 38 per cent stake he owns in Corre. But it is perceived by the market as an overhang.
Shares in Corre rallied as much as 37 per cent this week from an all-time low of 60 cent after the company revealed it had received “multiple indications of interest” from unnamed industrial, strategic and institutional companies looking to invest in it. Is an outright bid on the cards?
“While each discussion is at an early stage, the interest is not a surprise,” said Davy analyst Michael Mitchell. “Putting in place an appropriate funding solution, at both [at group] and project level, remains a critical part of the company’s long-term value creation approach.”
Chief suspects would include Eneco, Infracapital and Siemens, whose technology is being used for Corre’s projects.
But the stock rebound has still left the company with a market valuation of only €60 million. That’s a fraction of an estimated average €100 million analysts reckon Corre could raise from the sale of 50 per cent of one of its seven active projects.
The market is not putting much store just yet in a deal happening.
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