Flexible energy generation-focussed power company Plutus PowerGen updated the market on its operations on Tuesday morning, saying its business model remained focussed on the construction of FlexGen projects across the country.
The AIM-traded firm said the energy environment in the UK was "tightening rapidly", and PPG was focussed on mitigating the current and forecast risk of an energy deficit through the development of a portfolio of 20MW power sites, which could be switched on at a moment's notice at times of peak demand.
PPG's inaugural 20MW FlexGen project, based in Plymouth, had traded above budget since it commenced operations in November 2016.
The board noted that on 17 May, power prices in the UK peaked above £1,500 per MW hour due to outage and generation imbalances, and recognised that volatility would be seen in the markets more regularly going forward.
PPG said its sites were "ideally positioned" to take advantage of that as they could be operational within 30 seconds.
A further eight 20MW projects were in various stages of development.
PPG and Rockpool Investments were arranging the finance for all nine projects with a combination of debt and equity, the board explained.
PPG had a 45% stake in each project and management contracts, which would total £150,000 per site per annum.
Around 100MW of the projects was under construction at present, and the board said it expected that they would be available to supply electricity during the winter of 2017-2018.
With regard to the current Ofgem regulatory review, which was initiated in March when the regulator published a 'minded-to' decision, the Plutus board said it was awaiting the conclusion of that review, which was likely to be published after the general election.
If implemented as published, that would reduce the TRIAD benefit received by small embedded generators - such as PPG's projects - to close to zero from the winter of 2020-2021.
It said it expected that Ofgem would announce a full review of the whole charging system and it was likely that TRIAD will either be frozen or reduced over the period of the review.
"On the surface, this has been perceived as damaging to the prospects of PPG," the company's board conceded.
"However, due to the sites having multiple revenue streams, including reactive power sales, STOR and FFR, the board [has] examined each of PPG's operational and financial models to exclude TRIAD from its renewable green diesel powered sites and proposed gas sites.
"While the gas sites are around 100% more expensive to construct than the renewable green diesel sites, the board believe[s] the financial returns, even excluding TRIAD if ultimately abolished, remain highly attractive and offer a potential IRR per project in excess of 20%."
With respect to the outcome of DEFRA's consultation on new lower emissions limits, the company said it understood that had also been delayed by the general election.
However, the board said it was "confident" that it will be able to comply with the proposed new rules, without any material impact on investor returns compared with the returns expected when Plutus Energy was first reversed into PPG.
"Overall, the structural changes in the business and the reduction in TRIAD have put negative pressure on PPG's share price performance," the board said.
"However, all parties, be it the board, Rockpool or financial advisors, believe the business case remains extremely compelling and that the future value of the business is attractive.
"Therefore, the company remains committed to executing its development strategy in tandem with its partners."
Going forward, the company said it had a pipeline of FlexGen gas projects totalling 150MW, which it will seek to retain an 80% plus interest in.
It was focused on constructing a minimum of four gas-powered projects per annum as they offered significant advantages, both environmental and financial, over renewable green diesel engines.
However, the company said it may consider other projects in certain circumstances, utilising strong relationships with key partners both in the finance and energy markets.
"Following a re-work of our modelling, and considering Ofgem's proposal, we believe we still have an extremely robust and attractive business model," said Plutus PowerGen chairman Charles Tatnall.
"The market for flexible energy generation is clear to see and we have the team and are in well-developed discussions regarding the financial backing to deliver our projects and therefore our stated strategy."
Tatnall said it was also important to emphasise that PPG continued to seek to fund the construction and development of its power generation sites through non-dilutive means.
"As such we continue to view the future with confidence."