IMCO Leapfrogs Into Utility Scale Battery Business

 Paula Sambo of Bloomberg reports Ontario pension buys UK-based power generator Green Frog:

Investment Management Corp. of Ontario, a money manager for pension funds in the Canadian province, bought U.K.-based power generator Green Frog Power Ltd. to seize on the growing market for renewable energy.

The pension fund said it will invest up to C$500 million ($400 million) to buy the business and execute on its pipeline of battery projects. Green Frog produces power stations that utilize batteries, which are key to the production of solar- and wind-based electricity.

“Utility scale batteries are in some sense the missing link in transitioning the energy distribution and generation markets, because the sun doesn’t always shine and the wind doesn’t always blow when you need power,” IMCO CEO Bert Clark said in an interview. “The only way to level that out is to introduce batteries.”

The pension manager expects the business to grow across various geographies, depending on opportunities, according to its global head of infrastructure, Tim Formuziewich.

“Green Frog gives us access to a flexible generation platform and a substantial development pipeline in the early stages of a trillion-dollar sector,” Formuziewich said.

IMCO was created less than five years ago to consolidate several public-sector funds under one manager. It’s the first time it has acquired a company outright.

The pension manager for government workers in the Canadian province manages C$73.3 billion in assets. It posted an overall gain of 5.4% for 2020.

IMCo put out a press release on this deal:

TORONTO, August 5, 2021 – The Investment Management Corporation of Ontario (“IMCO”) announced today it has signed an agreement to acquire 100% of Green Frog Power Ltd. (“Green Frog”) and will invest up to $500 million (£288 million) over the next several years, to transform Green Frog into an owner and operator of utility scale batteries and execute on its pipeline of battery projects under development. The transaction will enable IMCO and Green Frog to establish a global, utility-scale platform focused on battery storage assets.

“IMCO is actively seeking new and innovative ways to participate in the global transition towards a low-carbon future while accessing compelling returns for our clients,” said Bert Clark, President and CEO of IMCO. “This acquisition is an excellent example of this strategy in action and is tightly aligned with our ESG and sustainable investing objectives.”

This transaction is the first time IMCO has acquired 100% of a company and it is a marquee addition to IMCO’s infrastructure portfolio. Green Frog was founded in 2009 and is a leading developer, owner, and operator of flexible generation projects in the UK. It has developed a substantial pipeline of near-term development projects and the Green Frog team is highly regarded with extensive expertise in design, development, construction, and operations of flexible generation assets.

“Over the past 12 years we have built Green Frog into a national leader in flexible generation,” said Jeremy Taylor, Founding Director at Green Frog Power. “We are excited to be working together to build a best-in-class scalable battery storage platform. IMCO’s acquisition enables us to continue to offer the UK market enhanced grid stability services.”

Renewable energy that is generated intermittently, like solar or wind, can cause system instability and price volatility when it is introduced into a power grid. The UK is expected to be a global leader in the adoption of intermittent renewable energy over the coming decades and battery storage is uniquely positioned to help system operators navigate this challenge.

“Utility scale batteries play a critical role in greening electricity by providing grid operators with frequency stability solutions, which enable further renewable penetration growth,” said Tim Formuziewich, Managing Director of Global Infrastructure at IMCO. “The acquisition of Green Frog gives us access to a leading flexible generation platform and a substantial development pipeline in what we believe is the early stages of a trillion-dollar utility scale battery sector.”

Completion of the transaction is subject to customary closing conditions and approvals.

ABOUT IMCO

The Investment Management Corporation of Ontario (IMCO) manages $73.3 billion of assets on behalf of its clients. IMCO’s mandate is to provide broader public sector institutions with investment management services, including portfolio construction advice, better access to a diverse range of asset classes and sophisticated risk management capabilities. IMCO is an independent organization, operating at arm’s length from government and guided by a highly experienced and professional Board of Directors. Follow us on LinkedIn and Twitter @imcoinvest.

This deal caught my attention earlier today and I want to look into it.

First, a little background on UK-based Green Frog Power:

Green Frog Power builds and operates power stations. We deliver power into the UK’s network when it is most needed.

GFP’s plant delivers almost immediate electrical power to the grid. Our industry-leading proprietary software allows us to ramp up whenever our power is needed.

We operate and maintain our power stations to the strictest safety standards and work closely with environmental authorities to make sure our standards exceed mandated requirements.

We use the Best Available Technology for the market in which we operate, which is to provide reliable power to National Grid when others falter.

Our engineers continuously monitor our systems, resulting in our plant having audited class-leading availability to generate.

We have been at the forefront of the UK’s power generation sector for ten years.

Our new projects include 280MW of battery storage and further construction of gas-fuelled peaking plant.

We are at the forefront of the programme to bring hydrogen to the UK’s gas networks.

We have an R&D programme with Durham University’s world-class engineering faculty to develop a ground-breaking new turbine of our design.

We are always interested in hearing from people with new energy technologies and ideas.

Moreover, the company handles big power generation projects:

Our team can handle every aspect of power generation from planning applications to plant design and from groundworks to grid connections. We build within time and under budget. 

The group has built more than 1,000MW of plant in the UK, of which 500MW has been operated in-house.  

We have sites located from Newcastle-upon-Tyne in the north of England through to Plymouth in the south.  From mobilisation to commissioning we can build a complete 20MW power plant in 16 weeks.

Our project managers and civil engineers handle every aspect of the design, build and installation of our plant, from planning permission to final commissioning. They’re on site throughout the process to ensure delivery on time and on budget without compromise.

The company prides itself on delivering reliable energy:


Interestingly, I read an older (2015) article explaining why Green Frog Power secured £49.5m Lloyds backing to better understand this company:

Green Frog Power Ltd already builds and operates power stations across the UK, providing standby power capacity to National Grid for times of excess demand.

Now, as part of its national strategy focused on developing new, flexible capacity, the organisation is building nine new gas-fuelled power stations across the country.

The bank has provided corporate asset finance and a VAT facility for the construction of the new gas-fired power stations, and work is now complete at the first site at Bridgwater.

Green Frog director, Jeremy Taylor, said: "When there is a tightness of supply because another station has failed or the wind is still, we step in to meet demand.

"It was encouraging to hear Amber Rudd, secretary of state for energy and climate change, this week back the development of flexible gas-powered stations such as ours to deliver energy for the UK when it needs it most.

"The funding from Lloyds Bank has been instrumental in the construction of these new, gas-fired stations."

Coleshill-based Green Frog has 60 employees, whilst the subcontractors it employs across the UK expand its workforce to around 300.

It has a pipeline of 500MW of new gas-fired power stations in development, in parallel with the current 178MW in construction.

Three years ago, Green Frog raised another £100m to build 11 new gas peaking plant:

The company said the new engines would take its total portfolio to 44 stations outputting some 750MW.

It targets 2GW over the next five years and the new funding – from Lloyds, HSBC and NIBC Bank – contains a facility to spend a further £50m on new plant, which Green Frog said would equate to another 110MW.

Director Jeremy Taylor and fellow founder Mark Jones have built the company’s annual turnover to £250m over the last nine years, during which period the country’s generation mix has changed significantly.

Taylor said the firm was “delighted” to have closed another deal with its banking partners, “who have again shown a sophisticated understanding of a complicated but fruitful market”.

“The new plant will allow us to continue to solve the ever-increasing problems caused by intermittent renewable energy,” he added.

In essence, Green Frog ensures there are little to no power disruptions when supply is tight.

The company has a long history:

Green Frog Power was the first company in the UK for about 100 years to build significant power capacity using reciprocating engines, which is now widely copied by others seeking to help balance the system when intermittent renewable energy falters. We will remain at the forefront of the UK’s power industry with the new green technologies that we are developing in-house and with our partners.

And  you can learn more about the Green Frog Group here:

  • Green Frog Utilities undertakes all gas connection and metering activities for the group and third parties, from gas-network design to on-site installation and metering.
  • Green Frog Connect is accredited by Lloyds Register to design high-voltage grid-connection processes and to undertake physical connections to the grid. They have project managed more than a gigawatt of new power generation.
  • Genovate Power Solutions handles project management and O&M for the Green Frog group and numerous third parties, exceeding 800MW of plant under management.

 Fascinating company and now IMCO has acquired it to help it grow. 

This is a mutually beneficial relationship as Green Frog gets a strong partner will a long investment horizon and deep pockets and IMCO is literally investing in the future of renewable energy, now owning 100% of this company. 

And it's a meaningful investment, IMCO now owns the company and will invest up to C$500 million (US$400 million) over the next several years.

Bert Clark, IMCO's CEO is spot on: “Utility scale batteries are in some sense the missing link in transitioning the energy distribution and generation markets, because the sun doesn’t always shine and the wind doesn’t always blow when you need power. The only way to level that out is to introduce batteries.”

Wind and solar are not reliable sources of energy and that poses all sorts of challenges to utilities trying to meet demand for power. Sometimes renewable power generates a lot and at other times none or very little, it all depends on weather conditions.

That's why you need these utility scale batteries to store energy when renewables are producing more to kick in whenever they are producing less. 

Moreover, this acquisition fits nicely into IMCO's sustainable investing objectives.

As Bert Clark stated: “IMCO is actively seeking new and innovative ways to participate in the global transition towards a low-carbon future while accessing compelling returns for our clients. This acquisition is an excellent example of this strategy in action and is tightly aligned with our ESG and sustainable investing objectives.”

Recall, IMCO recently joined OTPP, PSP Investments and Temasek to invest in the Brookfield Global Transition Fund.

Clearly, all these large Canadian pensions are investing, not divesting, to meet their goal to decarbonize and achieve net-zero.

Anyway, I really like this investment in Green Frog, it's a different way to play the secular renewable energy theme.

I also agree with Tim Formuziewich, Managing Director of Global Infrastructure at IMCO: “Utility scale batteries play a critical role in greening electricity by providing grid operators with frequency stability solutions, which enable further renewable penetration growth. The acquisition of Green Frog gives us access to a leading flexible generation platform and a substantial development pipeline in what we believe is the early stages of a trillion-dollar utility scale battery sector.”

 If you're betting on a secular theme, get in early, acquire companies that are today and tomorrow's disruptors. Great investment for IMCO and its members, one that I look forward to seeing its evolution over the next decade(s).

Below, a (2019) webinar from the Clean Energy Solutions Center on greening the grid. It introduces key concepts for understanding the value of battery energy storage systems; reviews the services they can provide to the grid; and explores when, where, why and how they can be deployed economically.

I also embedded an interesting clip on the challenges and opportunities for policy and technology on grid batteries for large-scale energy storage.

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