Macquarie reaches financial close on MGT’s Tees Renewable Energy Plant

Macquarie Capital and Macquarie Commodities and Financial Markets (together ‘Macquarie’) have reached financial close on £900 million of total funding for the Tees Renewable Energy Plant (Tees REP), a 299MWe biomass combined heat and power plant. Developed by MGT Power and located in North-East England, Tees REP will be the world’s largest new-build biomass plant.

Macquarie, partnering with MGT, has successfully commercialised, structured and financed the project through development to financial close. Construction is due to start imminently and be completed by 2020.

Macquarie will own 50 per cent of the equity in the Project, with Macquarie Capital introducing Danish pension fund PKA as an equity co-investor and partner who will own the remaining 50 per cent stake.

Macquarie Capital also acted as financial advisor raising more than £650 million of senior debt and, drawing on the expertise of Macquarie’s Commodities and Financial Markets team, developed the commercial and fuel supply arrangements for the plant. Macquarie’s Commodities and Financial Markets is also providing a long term route to market based power purchase agreement.

Mark Dooley, Head of Infrastructure, Utilities and Renewables, Macquarie Capital Europe commented: "We are delighted that our partnership with MGT Power will enable the delivery of this important project for the economy of North-East England. This project demonstrates the commitment and flexibility of Macquarie in delivering capital and advice to clients at all stages of their business or project evolution. Macquarie Capital has invested more than €1.2 billion in European renewables projects valued at over €4.7 billion over the past three years demonstrating our ongoing commitment to the sector."

Matt Booth, Managing Director, Macquarie Commodities and Financial Markets, commented: "Macquarie has a long track record of providing development and later stage capital to the energy and commodities sectors. We work with our clients to help them grow and develop their businesses and are pleased to have been able to contribute to the success of this important project."

Ben Elsworth, CEO of MGT Teesside added: "The Tees REP project had to overcome many hurdles and Macquarie’s involvement was critical to this successful outcome, as was the support of MGT’s committed shareholding group including majority shareholder Capeview Capital. This has been a huge team effort from many different parties over a long period, and we are proud to be delivering a project which is not only low carbon but which will meaningfully add to the UK’s energy security at an important time."

This is the culmination of Macquarie and MGT working together for more than 18 months with Macquarie having provided a development loan in mid-2015 to support MGT through the Project’s later stage development.

The Tees REP will be delivered by a world class team of contractors who have been engaged by Macquarie and MGT, including:

• A fully turn-key contract for engineering, procurement and construction via a joint venture of Samsung C&T and Tecnicas Reunidas
• An operations and maintenance agreement with Fortum
• A fuel supply agreement with Enviva Wilmington Holdings, LLC, a joint venture between an affiliate of Enviva Holdings, LP and affiliates of John Hancock Life Insurance Company
• PD Ports will provide a dedicated berth for fuel deliveries as well as stevedoring services

About the Tees Renewable Energy Plant

The Tees Renewable Energy Plant (Tees REP) is a 299 MWe biomass combined heat and power project owned by MGT Teesside Limited and developed by MGT Power Limited. The project is located on a brown-field site adjacent to the Tees Dock near Middlesbrough.

The total construction cost is approximately £650 million, with a further £250m raised for working capital and operating costs, representing a major investment for the Teesside region. It is estimated that the project will create at least 600 jobs during construction and sustain about 100 full time jobs on site once operational plus several hundred more in the supply chain – many in the local region.

Biomass is a reliable source of large-scale, baseload renewable energy, which is needed to supplement intermittent renewable generation (such as wind and solar) and to help the UK meet its legislated renewable energy targets. As a result, the Project received a UK Government-supported Contract for Difference (‘CfD’) in 2014. The Project will be fuelled by wood pellets and chips from certified sustainable forestry sources, with regular audits to ensure compliance with strict sustainability criteria mandated by the Project’s CfD. When constructed, the Project will have a significantly smaller carbon footprint than fossil fuel alternatives. All necessary consents for construction and operation have been secured.

The Tees REP will produce enough to electricity to power approximately 600,000 homes as well heat for use on the site and for nearby users.

About MGT Power Limited

MGT Power is a UK independent power station developer focused on large-scale sustainable biomass projects. Its management team has experience in UK and overseas power generation projects totalling c.15 GWe. The team has a long history in biomass supply and sustainable sourcing. MGT Power’s investors include Capeview Capital and Ecofrontier of South Korea.

About PKA

PKA is one of the largest pension funds in Denmark with 275,000 members and assets of more than £28 billion. PKA has invested around £2 billion in climate-related projects, including wind farms, green bonds and the Danish Climate Investment Fund. The aim is that climate-related projects will be 10 per cent of total investments in 2020.