Mast Energy Developments Announces Operational Update

Source: 7/5/2022, Location: Europe

Mast Energy Developments Plc, the UK-based multi-asset owner and operator in the rapidly growing Reserve Power market is pleased to announce an update with regards to its current flagship producing asset, the 9 MW Pyebridge Synchronous Gas-powered Standby Generation Facility (the "Site" or "Pyebridge") that was acquired in August 2021 (see RNS dated 12 August 2021).

Since the Site commenced with steady state production it has provided MED with an opportunity to assess, identify and address further areas where operational efficiencies could be achieved. The additional operational improvements also provided the opportunity to enhance key metrics of the Power Purchase Agreement ("PPA") Pyebridge has with Statkraft, that resulted in a further enhancement of the Pyebridge economics and profitability.

An overview of the key highlights with regards to the Site's actual performance both operationally and economically is provided below.

Trading Update

The Pyebridge Site generated the following actual performance figures for the 3-month period March to May 2022:

- Power Sales Revenue Turnover - c. £130,000

- Total Electricity Generation Output - c. 371 MWh

- Average Power Sales Price achieved per MWh sold - c. £354

The average power sales price per MWh achieved during the 3-month period March to May 2022 of c. £354 is around 5x higher than the average power sales price at the time of MED's IPO in April 2021 (i.e. around £66). Although the associated generation gas cost also increased during this time, there is a positive net variance that will add to the Site's profitability.

The above actual performance figures pre-date the finalisation of the operational and PPA enhancements and optimisations referred to below. MED expects that the actual performance of the Site for the period post finalisation of such optimisation will result in a net operational profit margin of c. 30%, which is currently being independently confirmed by EnAppSys as part of their financial remodelling of Pyebridge referred to below.

Operational Optimisation

The following operational efficiencies were identified and addressed:

- The Pyebridge site's gas connection license class was upgraded from a Class 1 AQ to a Class 2 AQ (the best and most cost effective available) following the requisite gas usage proof period to allow the class change appeal application, which results in a significant increase in the site's operational profit margin, due to a significant decrease in gas usage costs associated to the new gas AQ license;

- Each of the Site's three engines' bursting discs were replaced with re-settable bursting discs, which results in a significant decrease in engine availability downtime and increase in revenue generation potential;

- Reduction of ongoing costs associated with the inherent own electricity consumption and heating of the engines;

- Optimisation of the Operations & Maintenance ("O&M") contract terms with a focus on performance and reducing the variable O&M cost per MW; and

· Limitation of the number of engine starts, by refining and enhancing the Warranted Operational Parameters in the PPA with the off-taker, Statkraft (see details in the section below), which contributes to the engines achieving higher net generation output efficiencies and running more profitable.

Enhancing Commercial Aspects of the PPA

The initial period of steady state operations, allowed MED to enhance the following Warranted Operational Parameters in the PPA with the off-taker:

- Increased electricity generation output efficiencies of the engines;

- Increased minimum profit trade starts threshold;

- Increased number of available hours to run per annum to 4,000 hours (up from 2,500 hours); and

- Reduction of the variable O&M cost per MW in line with the revised O&M contract.

Impact of Optimisation on Economics

MED is in the process of updating the Pyebridge Financial Model with its leading independent UK energy market data provider, EnAppSys in order to confirm the positive impact of the various operational and PPA enhancements. It is expected that the site operational and PPA enhancements will have a significant positive impact on the Site's economics.

Pieter Krügel, MED CEO, commented: " We are pleased to report Pyebridge's maiden operational trading results. The past few months have been used fruitfully and provided the MED management and operational teams the opportunity to further optimise and enhance the Site's performance. We are looking forward to providing investors with a further update on Pyebridge in due course.

Rapidly rising costs of living in the UK driven by energy inflation have increased the need for locally produced energy at competitive rates. The recent Winter 22/23 contracts entered into by UK Government with coal fuelled electricity generating counterparties have further underlined the strategic and economic challenges currently dominating GB power markets. There is an increasingly strategic and valuable need to provide dependable back-up distributed generation to help support the large-scale renewable energy projects coming on stream and mitigate any resultant market volatility of intermittency in low carbon generation.

In such an uncertain geopolitical and macroeconomic environment, the management of MED continues to believe that flexible capacity will play a key role in delivering the necessary Net Zero transition in GB markets over the coming years, while keeping prices as low as possible. Consequently, management continues to explore new potential flexible power sites and assets in the current market. Management will closely evaluate any such opportunities to build a selective pipeline of operating & development assets that could provide the greatest potential for value creation for its shareholders."

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