The Tees Renewable Energy Plant, situated in Teesside and financially supported by Macquarie, has successfully secured urgent funding amounting to £80 million (€92 million) to prevent an impending financial crisis. The plant, valued at £1 billion (€1.1 million), has encountered setbacks and delays that prompted the need for additional resources.
Distinguished as one of the world’s largest biomass facilities, this power plant boasts the capacity to generate electricity to sustain 600,000 households. Recently surfaced documents obtained by The Times highlight the plant’s alarming financial trajectory, signaling an anticipated breach of the £15 million (€17.4 million) liquidity requirement in July. Furthermore, it faces the risk of plunging into negative cashflow territory by late September.
The root causes behind this distressing scenario stem from construction delays and conflicts with contractors, effectively pushing back the project by over two years. Although operational since July of the prior year, the management discovered design flaws early this year, culminating in further postponements. While the management team is actively embarking on modification endeavors, the plant has yet to commence full operation.
The plant’s ultimate revenue source is a government contract that mandates the provision of electricity at a fixed rate until December 2035. To date, the biomass plant has received additional loans from shareholders amounting to around £140 million (€162.5 million), originating from the period when it was slated for activation in January 2020. The latest funding acquisition has been executed through an insolvency procedure, representing the plant’s proactive approach to sustain its operations.
In the quest to stabilize the situation, Cantor Fitzgerald, entrusted with the task in October of the preceding year, sought potential buyers or third-party investments. While two promising bidders emerged, their conditions required a debt write-off that was untenable for existing creditors. Presently, the plant’s shareholders have collectively agreed to contribute up to £53 million in fresh capital.
Documented records accessed by The Times reveal the creditors’ cautious stance on extending new loans. However, an accord has been reached, leading to a commitment of approximately £27 million. Intriguingly, a thorough analysis by Alvarez & Marsal, experts in the field, demonstrated that creditors could potentially lose up to 29% of their initial investment if the plant were to undergo complete insolvency.
In essence, the Tees Renewable Energy Plant’s concerted efforts to secure emergency funding have temporarily averted the immediate financial turmoil it faced. This endeavor, driven by a dedicated management team and collaborative shareholders, seeks to rectify the delays and defects that have impeded the project’s progress, ensuring the eventual realization of its energy-generating potential.
