Interview: S&P Global Platts
25 February 2019
The potential to stack revenues, improve operational performance and cooperate with Chinese co-partners on
technology supported Sev.en Energy’s decision to buy into InterGen, Executive Director Alan Svoboda told S&P
Global Platts in an interview February 14.
On February 1 the Czech lignite miner/generator announced it was
buying Ontario Teachers’ 50% stake in InterGen, which owns three
combined cycle gas plants in the UK and has stakes in two coal plants
in Australia, for a combined capacity of 4 GW.
“The UK offers multiple sources of revenue, be it for the electricity,
system services, capacity markets or redispatch given constraints in
the grid,” Svoboda said.
“Positioning the plants and their market deployment to benefit
from all four revenue streams is where we think we can help support
the business,” he said.
InterGen is also building a 300 MW open cycle gas turbine at its
Spalding site in Lincolnshire, England.
The £100 million project secured a 15-year Capacity Market
agreement in the December 2016 auction. The unit is expected to be
completed this year, Svoboda said.
“We believe that conventional energy will remain a significant pillar
in the energy mix of these markets, and we see great potential for
further development of InterGen’s production base in Europe and
globally,” he said.
Division of skills
The other half of InterGen is owned by China Huaneng Group and
Guangdong Yudean Group of China, huge state generators with a
combined 170 GW installed, mostly coal-fired.
“We recognize our partners’ technical skills and bring to them
further expertise in trading and operational asset management driven
by market opportunities,” Svoboda said.
“First, are the assets as reliable and efficient as they could be?
Second, let’s look at how they are deployed on the different markets.”
UK gas assets had been a key target for Se.ven, Svoboda said.
“Gas is here to stay as a key enabler of increasing the share of
renewables. The more wind you put in the mix the more you need gas
plants to complement and act as back-up,” he said.
While InterGen’s CCGTs were between 14 and 21 years old, “if you do
proper maintenance this is not a short-term asset – we take a 35-40-
year operational lifetime outlook,” he said.
Intergen: uk gas capacity dominates portfolio
UK CCGT plans
Beyond the Spalding OCGT, InterGen has two consented UK CCGT
projects awaiting final investment decisions at Spalding Energy
Expansion (620 MW) and Gateway Energy Centre (1,250 MW).
“These were prepared in light of a functioning capacity market, so
now we have to wait until it is back in place,” Svoboda said, in
reference to the current suspension of the CM.
When and if restored, the projects would be revisited.
“I’m not saying we should invest immediately, we need the right
moment and the right price in the auctions. But with phase-out of coal
and some nuclear, and a likely shortage of new nuclear development,
we’re anticipating a shortage of capacity in the UK. The supply/demand
balance is going to get tighter,” Svoboda said.
Over time Sev.en is keen to look at innovation that feeds off
conventional generation’s market presence and physical site
That could mean co-locating batteries on existing sites “or
something different – batteries have only limited capacity and
discharge time, the volumes can only last for a few hours, certainly not
days or weeks,” Svoboda said.
For longer-term storage, “you need transformation from power to
something, then back to power, be it a chemical reaction, or using
pressure, or other thermo-chemical or physical transformations –
making hydrogen via electrolysis being an obvious example,” he said.
Further afield – and with an eye to possible coal plant acquisitions –
Sev.en is interested to learn from its new InterGen co-owners about
“We’ve visited the Chinese who are pioneering IGCC [integrated
gasification combined cycle] technology – conversion from coal to gas,
and from gas to power or hydrogen in a very clean way with carbon
capture and storage,” Svoboda said.
“This is something we definitely want to explore: whether
gasification could be the future not just for us, but for the overall
objectives of countries in central/eastern Europe that depend heavily
on coal,” he said.
The industry was rich in ideas and concepts, with the jury out on
which technologies would achieve viability.
“I say R&D into sustainable conventional technologies is equally
important to supporting the currently main-stream concepts such as
green power combined with storage. In countries heavily dependent on
coal, it makes sense to combine approaches and not just walk away
from conventional power,” Svoboda said.
German coal opportunity retreats
Sev.en had been looking at thermal assets in Germany, but
following the recent phase-out proposal from the government appointed coal commission, the operators would now likely hang
on to their plants in expectation of generous compensation,
The ex-CEZ manager said a German coal phase out would lead
to higher power prices for consumers throughout Central and
“We’re taking a big chunk of capacity out of the market. It proves
Germany is willing to throw a lot of money at the transformation – not
just for premature closures and regional redevelopment, but also at
the negative side effects requiring further investments, like OCGTs in
the south of Germany, and rising redispatch costs. Germany seems
ready and willing to fund all the systemic corrections needed to make
the transformation happen,” Svoboda said.
Unloved mining assets
This still left Sev.en with more acquisition opportunities than it could
ever take on, Svoboda noting further generation deals were already in
“And we’ve realized that our corporate profile is also compatible
with the mining industry – thermal coal or base metals,” Svoboda said.
Mining has to some degree similar features to conventional
generation, unloved assets with an asymmetry between investors
“These businesses are considered to have insufficiently
positive PR for investors, even though they are robust and
established,” he said.
“We can select carefully the right deals and not overpay.”