Opium Power is building a new class of energy investment opportunity that is revolutionary in a number of ways making significant returns for its investors.
Alongside its investors, Opium Power, identifies designs and delivers new energy projects that are directly connected to the National Grid, supplying electricity and other essential services that help maintain a balanced energy system in the UK.
We create exceptional value for investors, both in terms of capital appreciation and income with investment plans that can be open ended and provide numerous exit opportunities.
Energy Funds Background
There are various energy and renewable energy funds in the market. Some are also described as Green Funds. The general consensus is that these types of fund offer lower returns, because they are significantly less dynamic and only provide longer term rewards. This is due to the timing and nature of their investment strategy.
The majority of these funds only invest in proven technology and purchase assets that are already operating. These acquisitions are likely to be made at a higher buy-in point as their valuation reflects the asset’s income potential. Even funds that target the renewable sector usually only invest at a point that is behind the curve, or in assets that are well established and have a proven track record.
The Opium Power approach and why it is better
We have a different approach to running an energy investment opportunity:
- Early Investor engagement
- Continued Investor involvement
- Investment into new emerging and dynamic technology
- Security through strong national demand for the product
- Taking advantage of opportunities before they become popular
- Design, Build & Operate
- Multiple sites spreading risk
- Investor engagement and involvement
- Higher capital growth as well as income
- Genuine profit share
- Hold or exit options including debt finance
Investment into new technology can often be considered risky for a variety of reasons. However, with careful planning, modelling and research, it is possible to make very sound investments in new technology well ahead of the market curve. Understandably, new technology can be expensive, although it can often generate higher capital returns and profit for investors.
Security Through Demand
An overall understanding of the UK’s future power demands and the National Grid’s current ability to supply that demand allows one to understand that there is a huge requirement for advanced energy technology services to be installed and commissioned over the next 10-15 years. To take one obvious example, it is expected that from 2030, no new petrol or diesel vehicles can be sold into the UK market, and this market sector will be replaced by the Electric Vehicle (EV).
The National Grid’s existing antiquated infrastructure is a long way from being able to replace the power demands of the UK’s current fossil fuel driven transport system.
This is emerging technology, but the National Grid’s requirement for frequency services (FFR or new/emerging services such as fast-acting frequency response) is going to dramatically increase, not decrease, in the medium to long term future. This is evident on both the demand and the generation side. Demand on the Grid is due to the increase not only in the capacity required, but also in terms of the increased fluctuation in demand levels. The reason for this increased fluctuation forecast is that an ever-larger proportion of total energy demand will be for electricity provided by alternative electrically powered applications as they become available with fossil fuels being phased out. The most obvious of these applications is of course Electric Vehicles (EV’s), which are due to put a huge strain on the grid during peak hours. As developing battery technology allows for increased cell density, more and more applications will become suitable for battery power, and less will be powered by fossil fuels.
The future of our core energy power supply will move significantly towards renewables, primarily solar and wind, moving away from conventional power generation by fossil fuel driven turbines, which will require a reduction in the “inertia” of the UK’s power delivery. As a result, the level of power generation will in the future be more susceptible to fluctuations as renewable power supply is rapidly and unpredictably influenced by changes to weather conditions. National Grid must match this intermittent generation with an appropriate (increasing) volume of grid stabilisation services, such as FFR, to maintain a balanced grid within acceptable frequency tolerances. Battery Energy Storage Systems (BESS’s) are the obvious solution to this issue, supplying additional power when demand exceeds supply, in cloudy and nighttime conditions, and the frequency drops too low. Then storing excess power when supply exceeds demand, in windy and sunny conditions, and frequency rises too high.
Future Services and Revenue Streams
The National Grid is in the process of developing and preparing to launch a number of new services in the emerging markets created by the System Needs and Product Strategy consultation that are more precisely targeted at Grid-Scale Battery. These services will require almost instant response times and will therefore not be achievable by other generating sources such as diesel and gas powered gen-sets that currently compete with battery in the marketplace. You can access all of the published information here.
Design, Build & Operate
Very rarely do energy funds engage in the construction of a project, unless it is a completely proven technology where the risk of construction is completely mitigated. However, Opium Power’s experience, knowledge and understanding is that if the fund finances the build, it will create increased value and therefore capital profit that would ordinarily be delivered to the developer.
Opium Power’s strategy is to design, plan, construct and operate energy projects and to involve its investment partners in the process. This way, our investment partners fully understand their investment opportunity and growth potential.
Our knowledge of the market and the relationships we have with suppliers, contractors and agencies enable Opium to deliver fully operating and highly successful state of the art energy systems at a significantly lower cost than the market average.
We remove risk and uncertainty by working with industry leaders and specialist contractors who have in-depth market knowledge and fully certificated credentials to ensure a successful, on target and on budget project.
Multiple Sites Spreading Risk
Opium Power is building multiple battery energy storage sites across the UK. This will enable the fund to derive security via the diversity of the portfolio.
Investor Engagement and Involvement
The energy sector is a fundamental requirement to any modern-day national economy. Governments are collaborating at a global level to direct energy generation towards cleaner more efficient solutions, creating new and exciting investment opportunities within the sector.
Opium Power wants to involve, engage and work with investors to not only understand and embrace new technological opportunities in the power generation sector but also identify the opportunities available in terms of business and revenues.
Higher Capital Growth as well as Income
Opium Power structures the projects to enable each scheme to maximise annual returns and provide superior capital growth.
Opium Power has a low-cost base and has already delivered the UK’s best value grid scale BESS, a 30MW scheme in Taunton, Somerset. The additional buying power that will be provided by the fund will enable additional efficiencies to be achieved. Capital growth is maximised by funds entering the sector at an early stage.
Capital expenditure to secure, design, deliver and energise a 30MW battery system will be in the order of £14m.
Once operational, the current valuation of a site of this size is in the region of £20m. This represents an exceptional increase in asset value on delivery.
Once a site is operational, this value creates a number of opportunities for investors: The decision can either be made to sell, or to hold and operate.
Genuine Profit Share or Capital Repayment while Retaining Equity
Revenues generated from the portfolio of schemes will enable investors to have the option of capital to be returned to them whilst at the same time retaining their equity stake within the projects.
Hold or Exit Options Including Debt Finance
To offer investors a reasonable level of liquidity the investment opportunity will be structured to retain a degree of flexibility.
There will be options available to release equity from completed projects using debt funding. Once a project is completed, operational and energised, the increase in security for funders and market sale value allows for favourable structuring of new finance, which is being offered by an increasing number of funders. 60/40 LTV debt funding is currently available for operational and revenue earning schemes. In addition, there will be an opportunity to IPO.