By Dr. Michael Green

Corcel’s Flexible Grid Solutions project portfolio is going from strength to strength. This morning’s announcement brings tremendous news that the company has gained the exclusive rights to acquire a 100% interest in the shovel ready Avonmouth 50MW gas peaking project outside of Bristol from FPC Electric Land Limited (Electric Land) plus an additional 15MW of potential grid capacity. This takes Corcel’s pipeline of projects up to 185MW.

Under the agreement, the company has acquired six months of exclusivity over a 100% interest in the 50 MW Avonmouth gas peaker project from Electric Land. Consideration for the acquisition is £72,000, payable immediately, and a further £72,000 payable at financial close. Corcel will also be entering into a formal agreement with Electric Land on a 30-year project land lease over the project site.  The company plans to take Avonmouth through to financial close, alongside Burwell and Tring Road, during 2021.

Not just that, but this latest deal near Bristol gets better and better as in addition, Corcel has also acquired the rights over an additional 15MW of potential grid connection capacity and associated land at the Avonmouth complex.  All of this means that the company has the rights to take on the connection for use in a potential generation or battery project on similar terms. 

At the time, Chief Executive Officer, Scott Kaintz commented that: “Following closely behind our recent acquisition of the Tring Road gas peaking complex, we have now added a further 50MW of flexible energy generation at Avonmouth.  Avonmouth is already “shovel ready”.  Our expanding partnership with Electric Land brings with it a dovetailing of capabilities and interests; ours in the underlying energy projects themselves and theirs in the land ownership and ongoing land lease revenue.  Our present intention is to seek to push Avonmouth to financial close during the course of 2021 leveraging the existing efforts already underway for Tring Road and Burwell, marketing the project portfolio jointly.”

There is no doubt that the rapid speed of developments at Corcel’s flexible grid solutions division seems to be unabated in the creation of what now looks like a really serious business. The latest move comes on top of the recently announced acquisition of a 40% interest in the shovel ready Tring Road 50MW gas peaking project outside of Aylesbury from Arlington Energy Limited (AE).  Not just that, but further to that deal, Corcel has plans to co-develop and fund additional flexible energy assets with AE – which is expected to cover energy storage, gas peaking and solar projects in the UK.

Today, Corcel offers investors a really compelling combination of battery metals interests together with flexible grid solutions. It has to be said that there is big value to be found in these battery metals interests which include the vast Papua New Guinea nickel laterite project Mambare which alone was once valued at £40 million. Currently, that project is being recrafted into a DSO nickel supplier to the large Chinese market for stainless steel.  Also, there is the prospect of the group’s nickel resources in PNG doubling. It is fast looking more likely that Corcel will also get its mitts on the Wowo Gap Nickel Cobalt Project, just 250km away from Mambare. Such a move should well and truly spark a material stock increase.

However, all eyes currently seem to be on the dramatic shift from fossil fuel plants to a lower carbon generation model which is creating huge opportunities for the supply of continuous uninterrupted supply of base load electricity which Corcel is addressing. Last month saw the arrival of a comparable stock on the market with the IPO of Mast Energy Developments (LON:MAST). At that time we looked at how Corcel compared and revisited our target price for this stock.

MAST has a portfolio of small-scale power generation assets. At the IPO, MAST had c.9MW immediate production capacity and c.20MW in production capacity within the first six months from listing. In addition, MAST also had another c.20MW in production capacity over the then next six months; plus, various other shovel ready sites have already been identified in the UK.

At that time, our comparative analysis was based on the pre-new money valuation of MAST, which was £18 million on listing. Well, it looked as though Corcel’s 100%-owned Burwell Project which is a 100MW (50MW of energy storage and 50MW of solar) very neatly trumped MAST’s portfolio. At IPO, MAST appeared to have between 9MW and 20MW of projects in its portfolio which are really advanced.

Valuation per MW for MAST. Source: Align Research

Our analysis at that time suggested that the valuations per MW for MAST range from £3.6 million to £0.9 million. Even taking the lowest figure and discounting it by 50%, to remain conservative, points towards a valuation of £45 million for the 100MW Burwell project. On that basis, plus adding highly conservative valuations for the battery metals interests, we determined an updated target price of 12.91p for Corcel.

Now there is a lot more to throw into the mix. Firstly, the acquisition of a 40% stake in the 50MW Tring Road Project, which gives Corcel an additional attributable 20MW. Secondly, this latest deal of the shovel ready Avonmouth 50 MW gas peaker project plus the rights acquire to an additional 15MW of potential grid connection capacity. All of this continues to show a huge and growing disconnect between the valuation awarded to Corcel and that for MAST.

Currently, we are working on an updated research report on Corcel, with a new valuation and target price, to take into account all the recent developments. Truth is that by any yardstick, we believe Corcel is highly undervalued. Ahead of that update, with the shares sitting at 1.75p, our stance on Corcel remains a Conviction Buy with a target price of 12.91p.

RISK WARNING & DISCLAIMER

Corcel is a research client of Align Research. Align Research holds an interest in the shares of CRCL. Full details of our Company & Personal Account Dealing Policy can be found on our website http://www.alignresearch.co.uk/legal/ 

This is a marketing communication and cannot be considered independent research nor is it subject to any prohibition on dealing ahead of its dissemination. Nothing in this report should be construed as advice, an offer, or the solicitation of an offer to buy or sell securities by us. As we have no knowledge of your individual situation and circumstances the investment(s) covered may not be suitable for you. You should not make any investment decision without consulting a fully qualified financial advisor.

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