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Coro Energy tidying up and positioned as energy transition opportunity

Coro Energy PLC (LON:CORO) has this week cleaned up its portfolio, reaffirming its focus and commitment to an ambitious strategy that aims to position it as an attractive energy transition investment opportunity.

The AIM-quoted small-cap energy firm is to balance renewable energy, comprising solar and wind, along with natural gas in South East Asia.

Presently, work is underway to progress flagship wind and solar projects, with each project pencilled in for around 100 megawatts of generation capacity.

The target is to have these key projects in a ‘build-ready’ state by mid-2022, allowing the first revenues to follow around twelve months later.

In the meantime, the company is expected to deliver commercial progress for the Duyung gas project – where upcoming value-adding milestones include the completion of development plans, engineering design and the sealing of a gas sales agreement.

“This is an exciting time for Coro Energy as it looks to build on its recent acquisition and the resulting opportunities in SE Asia’s rapidly growing renewable energy sector,” chief executive Mark Hood said recently.

Coro Energy is proud to be supporting the transition from fossil fuels to clean energy in South East Asia and we have a large number of important commercial and operational milestones approaching over the next 6-12 months.

“I am confident that we will rapidly develop our platform of operated assets, with a view to creating a variety of revenue streams that will add material value to the business.”

Dispatching legacy assets in Italy was another important item on Coro’s to-do list, and, the wait for a deal now appears to have ended.

The company this week announced the signing of a deal to sell the Italian assets, with an immediate effective date, which means that Coro has severed the trading liabilities of the operations straight away even though the transaction still needs to go through a rubber-stamping process by the Italian authorities.

Renewables to create value

In the near-term Coro is expected to focus on value-creating pre-development milestones in its renewable energy business.

Coro’s foothold in SE Asia renewables comes via the March 2021 acquisition of Global Energy Partnership Limited, a developer and operator with expertise in wind turbine generated power and solar PV technologies.

It takes a well established and proven approach, capturing value milestones throughout. It aims to originate, develop, build and operate utility scale generation assets, tied to energy grids.

The business unit came with a ready-made pipeline of projects with 21 project split across wind and solar, 10 and 11 projects respectively, albeit the wind-power capacities are presently more defined, at around 2.3 gigawatts of potential capacity identified to date.

Its first two projects are a ground-mounted solar farm and an onshore wind project, both in the Philippines and both with a targeted initial capacity of 100 MW.

Significantly, the full cycle approach to the project not only create regular value catalysts it also progressively opens up opportunities to monetise, as its not uncommon in the industry for ‘build-ready’ projects to attract buying interest from either domestic or multinational utilities – especially in the current social and cultural climate where large scale power companies are more inclined to pay green premiums as they prioritise ESG-friendly project acquisitions.

Coro’s plan is not all about exits however as the company is open to also generate revenues for operating power assets and/or deal-making further down the road as project’s mature into predictable and profitable operations.

Why the Philippines?

Put simply, there is a substantial structural and demographic opportunity in the country.

The company is seen to have a fast growing, young demographic with increasing financial resources.

Industry estimates highlighted by Coro see the Philippines’ annual electricity demand rising some 65 gigawatts over the next twenty years.

The company sees strong long-term pricing policies which are designed to support renewable energy, along with legislative support for the industry.

The Philippines treats renewable power as strategically important particularly as it seeks to gain energy independence and reduce reliance on important fossil fuels.

The company also notes the company’s large deficit of renewable power production vs government targets, resulting from barriers to entry such as limitations on foreign ownership in independent power producers.

Project timelines

In April, the company detailed its ongoing activities which have included talks over energy service contracts (ESCs), local landlord engagement, environmental impact assessment, grid impact assessment and the negotiation of power purchase agreements.

A comprehensive data gathering campaign began for the onshore wind project. The wind data gathering programme will last for twelve months and is due to commence in mid-June.

The ESC contracts define the scale, technology and location of the projects and significantly will provide the company with approval to act as developer and as such will be a key milestone for Coro which are anticipated by the end of the current quarter.

The company also anticipates it will finalise landlord agreements by the end of the quarter.

It aims to have secured power purchase agreements for the projects by the end of November 2021, and, the full environmental impact assessment for both projects is planned by mid-July. Grid assessment is slated by August.

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