The Group operates a project development model in the electricity generation area. EQTEC identifies suitable project sites and then advances projects through the planning and environmental permitting process as well as specifying the appropriate power technology.
The Group then sources the appropriate project finance through a mix of Senior Debt and Equity partners to facilitate the build out and commissioning of the project. EQTEC’s typical target is to retain an equity stake in each project post development and commissioning. The Group targets individual project internal rate of returns in excess of 15%.
The project development model enables EQTEC to make substantial returns on its initial investment in the early stage development costs and planning and permitting costs in projects.
The Group’s target is to generate a return in excess of 3 times its original investment in any individual project. The typical investment horizon from concept to construction ready/finance ready is 3 years.
The Directors believe that long term Power Purchase Agreements (“PPA”) with Blue Chip counterparties plus qualification for either Renewable Obligation Certificates (“ROC’s”) or Contract for Difference ("CFD") add significant value to the Electricity Generation Business Model.
The Renewables Obligation (RO) is the primary support scheme for renewable electricity generation in the UK, and places an obligation on electricity suppliers to source an increasing proportion of their electricity from renewable sources. The Renewable Obligation Certificate (ROC) is a Certificate issued under the Renewables Obligation to an accredited electricity generator for eligible renewable electricity generated within the UK. The Renewables Obligation is underwritten by the UK Government.
Contract for Difference (CFD)
A Contract for Difference (CFD) is a private law contract between a low carbon electricity generator and the Low Carbon Contracts Company (LCCC), a government-owned company. A generator party to a CFD is paid the difference between the ‘strike price’ – a price for electricity reflecting the cost of investing in a particular low carbon technology – and the ‘reference price’– a measure of the average market price for electricity in the GB market. It gives greater certainty and stability of revenues to electricity generators by reducing their exposure to volatile wholesale prices, whilst protecting consumers from paying for higher support costs when electricity prices are high. The UK Government published, in November 2016, a draft of the Budget Notice ahead of the CfD allocation round opening in April 2017. This set an overall budget for total support payments for projects delivered in the two years from the middle of 2021 to 2023 and also set out strike prices for the various less well established technologies including advance conversion technologies, such as advanced gasification.