Mast Energy says Bordesley project is now ready for construction

Mast Energy Developments (LON:MAST), the UK-based power company, confirmed on Friday that its Bordesley project has reached “construction-ready” status following a thorough work programme since it was listed in London in April.

The Mast Energy board set out on a work programme to review and evaluate its available pipeline of sites in an effort to ensure its business strategy is delivered. The company provided an update on its latest progress.

Target 1: Bordesley 5 Mw base case with upward optimisation potential of up to 19.12 Mw

Now that Mast Energy has sufficient funding, it has intensified its development programme on the Bordesley site. This is despite being denied access due to coronavirus related lockdown measures. Mast has now MED has now obtained an updated EPC Scope of Works (SoW) proposal from Clarke Energy, commensurate with updated and amended site specifications, as detailed below:

• Reconfiguration of the gas reciprocating engine combination reduced the combined power pack to two engines from the original three. The two generators will provide a total installed generation capacity of 5,352kW and will deliver a minimum net export capacity of 5.2MW.

• The optimised number of units provide clear benefits with regards to capital cost of equipment, site installation time/cost and operations & maintenance costs. This will also leave sufficient redundant surface area to create an opportunity for future installation of a third generator, thereby increasing the electricity export capacity from the current 5 Mw to a potential 7.5 Mw with commensurate increase in revenue, due to higher electricity sales, of c. GBP12, 500 p/m.

• The delivery lead time for the selected generation equipment has been optimised to 22 weeks from the original 26.

• Clarke Energy:

– Clarke Energy will assume the roles of Principal Contractor and Principal Designer under the CDM Regulations and will include the necessary site facilities during the construction and installation works.

– As part of the EPC Scope, Clarke Energy shall be responsible for the connection of natural gas supply downstream from the new gas metering kiosk through to each engine, provision of the civil engineering works and compound construction.

• Finance

– The “all in” EPC SoW fee proposal is £ c. 2,900,000 vs the previously reported £ 2,800,000 and is due to the inclusion of an exhaust stack, civil engineering works, compound construction and the connection of the natural gas supply to the engines. These items were previously costed in the “Balance of Plant” budget, but now included in the EPC SoW.

– Debt financing at 65% of project capex currently being negotiated with a blue-chip financier at very competitive commercial terms.

• Construction

– MED and Clarke are currently in the process of executing the EPC-agreement and it is expected that construction will commence during June 2021. This timeline is consistent with the indicative timelines stated in the Prospectus.

Target 2: Site capacity 9 Mw

Target 2 – two of the engines are currently being tested and operated at varying load conditions, with the 3^rd engine to follow suit. The finalisation of the SPA for Target 2 remains well on track and it is expected that the parties involved will be able to finalize the SPA imminently.

Louis Coetzee, non-executive chairman, commented on Mast’s progress: “We are delighted with the progress we have made since announcing the successful IPO of MED. The operations teams have rapidly gained traction with development of the planned work and we can see the benefit of optimisation of technical work, feeding into commercial and business plans. We are particularly pleased with the significant gains we have already made in terms of savings and improved generation capacity as well as earlier than expected first production timeline.”

Clear Capital Markets gave a fresh near-term target price for the stock of 26p recently.