Corcel – deal signed to jointly fund and develop the UK energy storage and generation project pipeline. Buy.

April 28, 2022 | Posted by

By Dr. Michael Green

A short announcement yesterday morning looks destined to have a hugely positive impact going forward on Corcel, the natural resource exploration and development company with interests in battery metals and flexible energy generation and storage.

Investors have just learnt that the company has signed Heads of Terms with Altana Social Impact Partnership Partners (ASIP),  a large UK based fund which invests across a range of asset classes with a social and ethical agenda. The deal concerns not only the funding of Corcel’s current and future UK energy storage and generation projects, but also the award of an option for a direct investment in the company’s UK subsidiary which holds the portfolio of UK based energy generation and storage projects.

ASIP is seeking to jointly fund and develop Corcel’s UK energy storage and generation project pipeline, which currently includes a mix of battery energy storage and transitional energy generation projects at various stages of development. The partnership has sprung from the funding process for Corcel’s two 50MW gas peaker projects at Avonmouth and Tring Road. However, this partnership is envisioned to be far broader, and could potentially include multiple battery storage sites across the UK alongside other projects. 

Corcel’s board was quick to point out that discussions between the company, ASIP and the landlord at Avonmouth, regarding exclusivity rights. are continuing and due diligence is underway. However, the company did err on the side of caution in drawing attention to the fact that there was no certainty at present that Corcel’s rights to Avonmouth will be formally extended.

On top of this key funding relationship, in the agreement, ASIP has been awarded a 3-month option over 50% of Flexible Grid Solutions Limited (FGS) for £500,000. FGS is Corcel’s UK based subsidiary which owns the company’s portfolio of UK based energy generation and storage projects. This option is subject to detailed DD and approval from ASIP’s Investment Committee. On executing this option, ASIP will be granted the right to nominate a board representative to FSG as well as a right of first refusal to fund the first 250MW of FGS projects.

ASIP’s arrival on the scene looks to be a dream come true for Corcel in our view as the company had been a developer without access to the significant finance required for these sorts of projects. The option which allows ASIP to buy into Corcel’s development company FSG would most definitely turbo charge it.

What this announcement was not is the financial close on the two assets. But it is obvious that this proposed relationship has come out of those discussions and it looks as though ASIP is up to partnering Corcel on further projects. ASIP has a social impact angle and is not just involved in energy. However, solving the UK’s energy crisis and decarbonisation must be pretty high up their list of social concerns and they want exposure to these sorts of assets either on a 100% basis or by bringing partners in. It totally changes the dynamic for Corcel in our view as the company now has a potentially big funder in its back pocket and could then be taken a lot more seriously by the industry.

Corcel has a growing project pipeline which it has been working on for a while. No project names have been mentioned until they are pretty advanced as projects can fall down for a number of reasons, such as the grid being congested, planning falls over or the landlord gets greedy. ASIP want to be shown these types of projects and gain the first right of refusal. There are plenty of private developers but for a quality outfit like ASIP it must be a lot easier to partner with a developer like Corcel that is listed with fully audited accounts and which is highly transparent.

If ASIP exercised the option and took a 50% stake in FSG, we believe it would be advanced into being a serious development company. ASIP would make money as the developer and investors could realise that there would be funds to develop the project. With ASIP as a 50% shareholder in FSG it would reduce Corcel’s share of the costs and would more than likely lead to an expanded team to allow for a doubling down on the effort in the UK.

The message that is coming out is that ASIP not only wants exposure to the project pipeline but will also to help build out the pipeline. It might well be that as part of the development company they may be happy to develop projects to a certain stage and sell them (Corcel wouldn’t moan about that) and actually not always have to tap their own cash.

All these moves bring Corcel’s efforts in the flexible energy generation and storage space sharply into focus and make FGS a legitimate player. In the past the business never had access to a funder. Now they have ASIP partnering them, a well-respected institutional backer who believes in the vision. This agreement looks to be the first step, we look forward to learning more as the news flow looks set to jump a couple of gears higher from hereon in.

The more we see the more we like about Corcel, which looks to be rapidly coming good but as yet the market continues to still not reward this progress. By any yardstick, we believe this company is materially undervalued. As we set out in our full detailed note, it is apparent that there is frankly negative value for the company’s PNG assets which have world class nickel & cobalt reserves. News is due on the Mambare mining lease renewal, the all important JORC resource upgrade and, per recent RNS’s – progress on the potential farm in of a partner at Wowo Gap. Any one of these key value inflection catalysts would be transformative for equity holders. Below is a marker of news flow to be anticipated through 2022 into 2023 – it can be seen we are now entering a news rich period.

We initiated coverage on Corcel in July 2021 with a Conviction Buy stance when the shares were trading at 1.625p and have since upped our target price to 20.03p. At the current price of 1.45p, and as the largest shareholders in the company backing out our view with our own funds, we reiterate our Conviction Buy recommendation.

Read our full research report on Corcel HERE


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