TIDMSTAR
RNS Number : 5332K
Star Energy Group PLC
29 August 2023
29 August 2023
Star Energy Group plc ("Star Energy" or "the Company" or "the
Group")
Acquisition of Croatian Geothermal Development Company
Star Energy is pleased to announce that it has today acquired
51% of the issued share capital of A14 Energy Limited ("A14
Energy"). A14 Energy owns, via its Croatian subsidiary, IGeoPen
d.o.o. ("IGeoPen"), the Ernestinovo geothermal waters exploration
licence in the highly prospective Pannonian Basin in Croatia. The
IGeoPen team has deep knowledge and experience of the Croatian
energy sector.
This transaction further develops the Company's strategy to
transition into a geothermal developer, owner and operator,
diversifying regulatory risk and providing an entry into the
electricity generation sector.
The geothermal sector is a fundamental component of the energy
transition, with the ability to provide long term baseload
electricity and heat generation. Star Energy, has decades of
experience of sub-surface analysis, onshore drilling, well
management and environmental control from its portfolio of oil and
gas operations in the UK. These skills and experience, coupled with
those of the IGeoPen team, mean that Star Energy is well positioned
to deliver geothermal energy in Croatia, a member of the European
Union (EU), with a liberalised, well established and attractive
energy market.
Transaction Details
The interest in A14 Energy has been acquired by the Company's
subsidiary, GT Energy Croatia Limited ("GTEC"), from Peninsula
International Pte Ltd ("Peninsula") for a total cash consideration
of EUR1.3 million. Additionally, Star Energy will pay EUR0.1
million, relating to the provision of cash backed guarantees to the
Croatian Hydrocarbon Agency, plus EUR0.2 million in back costs
relating to the ongoing appraisal of the Ernestinovo licence.
In addition, GTEC has entered into a shareholders' agreement
with Peninsula in order to jointly develop and submit bids, and
thereafter to own, construct and operate geothermal projects in
Croatia.
GTEC and Peninsula, through IGeoPen, have jointly submitted
three bids for geothermal licences to the Croatian Hydrocarbon
Agency as part of the current licencing round and expect the
results of the bids by December 2023. A further aggregate amount of
up to EUR 1.5 million is payable upon the successful award of these
licences.
The re-entry of an existing well on the Ernestinovo exploration
licence and the drilling of any new appraisal wells, on the
successful award of licences bid for in the current licencing
round, will be financed by GTEC and Peninsula through shareholder
loans and externally sourced finance. GTEC has agreed to carry
Peninsula for up to EUR 13.2 million over the five-year exploration
licence period. The GTEC carry is repayable from free cash flow
generated from the licences.
Key highlights
-- The vast Croatian geothermal resource is well understood,
with extensive data available from over 4,000 exploration and
appraisal wells drilled during a period of hydrocarbon exploration
in Croatia. In addition, 2D and 3D seismic surveys that cover
c.20,000km(2) , including the Ernestinovo licence and the three
licence areas that the parties have applied for in the current
licensing round. All data is available to the licence holder.
-- Characteristics are well suited for electricity generation
with a geothermal gradient proven to be 60% higher than the
European average and electricity can be sold bi-laterally
throughout the EU.
-- Nearby electricity transmission infrastructure provides
immediate access to pan-European power markets.
-- The Croatian Government is highly supportive and is actively
promoting the sector internationally. The Croatian electricity
market is liberalised and well established and it offers an
attractive market premium (CfD) for a 12 year period.
-- The acquisition brings a small team of highly regarded
geothermal and geological experts with a recognised track record in
the Croatian energy sector, with key personnel having led the
development of Croatia's first geothermal power plant (Velika
1).
-- The Ernestinovo licence already has existing wells in situ,
one of which will require re-entry and a well test to validate the
resource, after which a 20-year development licence will be
awarded.
-- Bids have been submitted, through IGeoPen, for three further
highly prospective licence areas.
Croatia Geothermal Development
Whilst still in its infancy, interest in geothermal exploration
and the development of geothermal projects is growing fast, driven
by government support and promotion of the sizable resource
potential.
There is currently a single operating geothermal plant, Velika
Ciglena, with an installed capacity of 17.5MWe. The Croatian
Hydrocarbon Agency estimates that the geothermal potential in
Croatia is in excess of 1GW.
There are good in-country grid connections. The Croatian
Transmission System Operator (HOPS) owns and operates the entire
Croatian transmission network (400kV, 220kV,110kV) and is
independent and non-discriminatory towards all transmission system
users.
The operator of the Croatian electricity market (HROTE) runs
tenders that award a CfD for electricity generation from renewable
sources. The market premium contract is awarded for a 12-year
period. Alternatively, electricity can be sold bi-laterally
throughout the EU.
Croatian Geology
There was intense oil and gas exploration and production in the
northern part of Croatia (the Pannonian Basin) in the second half
of the 20th century which yielded a substantial amount of deep
geological, geophysical and hydrodynamic information, including 2D
and 3D seismic acquisition covering an area of c.20,000km(2) . Some
4,000 deep wells have been drilled and a large number of geothermal
reservoirs were discovered giving well test data that demonstrates
excellent temperature and permeability which are considered to be
critical elements to a successful geothermal project. Due to the
very large data set, the geological risk is assessed as low.
Ernestinovo Licence
The exploration licence covers 76.7km(2) with a commitment to
re-enter an existing well, due 8 April 2024. GTEC's carry is a
maximum of EUR1.47 million for the well re-entry. A conceptual
programme for the Ernestinovo-3 workover well has been submitted
and the work programme is on schedule to be completed as planned,
satisfying the licence commitment. The licence has excellent data
from three deep exploration wells drilled in the 1990s.
Based on preliminary heat reserves and well productivity
estimates, the Company's internal assessment forecasts the
potential for a first phase development of a 10MW electricity
generation plant utilising five to six wells producing and
re-injecting geothermal brine.
The proposed plant would connect into the Ernestinovo HOPS
substation - a major substation with 400kV transmission lines to
Zagreb, Hungary, Serbia and Bosnia, and local distribution lines at
110 kV and 85kV - and sell electricity on either a market premium
arrangement (CfD) or bilaterally.
There is upside potential for plant extension (an additional 5
to 10 MW) upon permit area extension (subject to tender) and
potential for heat for green-houses and milk processing plants as
the area is predominantly agricultural.
Geothermal Licence Bids
Licencing is through the Croatian Hydrocarbon Agency. An initial
five-year exploration licence is granted, followed by the
development licence (subject to fulfilling licence obligations
during the exploration phase).
A new licencing round, with six licences available, was
announced on 28 December 2022. The parties have participated in the
licencing round, submitting three bids in the Drava depression g
eological region (located in the southwestern area of the Pannonian
basin), the same region in which the Ernestinovo licence is
located.
The Croatian Hydrocarbon Agency has communicated that it has
received 16 offers from a total of 11 companies (including our
bids) and the results of the round are expected by the end of
2023.
Star Energy Chief Executive Officer, Chris Hopkinson
commented:
"We are very pleased to announce our first overseas investment
in geothermal as we look to build momentum in this part of our
business.
Whilst the business has, and continues to build, a material
pipeline of business opportunities in the UK, we identified a
significant opportunity in Croatia which will allow faster
development and diversification of Star Energy's geothermal
interests.
The Croatian government is actively promoting the sector with a
focus on electricity production which should allow accelerated
development.
The acquisition brings with it a small, but highly respected
team with years of experience in Croatia including developing the
Velika 1 power plant and we look forward to working with them
bringing complementary skills from our existing business.
This is an important next step in our strategy to transition
over time into a significant player in the geothermal market and to
deliver future value for our shareholders ."
Dragutin Domitrovic, Director of A14 Energy, added:
"We are excited to be working with the team at Star Energy. The
combination of our understanding
of Croatia's geology and Star Energy's successful track record
of operating projects onshore will be
mutually beneficial to both companies. This represents a
significant opportunity to accelerate the
development of geothermal projects in Croatia."
A short presentation can be found at:
https://www.starenergygroupplc.com/investors/reports-publications-presentations
For further information please contact:
Star Energy Group plc Tel: +44 (0)20 7993 9899
Chris Hopkinson, Chief Executive Officer
Ann-marie Wilkinson, Chief Communications Officer
Investec Bank plc (NOMAD and Joint Corporate Broker) Tel: +44
(0)20 7597 5970
Virginia Bull/Chris Sim
Canaccord Genuity (Joint Corporate Broker) Tel: +44 (0)20 7523
8000
Henry Fitzgerald-O'Connor/James Asensio
Vigo Consulting Tel: +44 (0)20 7390 0230
Patrick d'Ancona/Finlay Thomson/Kendall Hill
About IGeoPen and A14 Energy
IGeoPen is a newly incorporated entity which was formed to
acquire the Ernestinovo licence and is the operator of the
project.
IGeoPen comprises a small team with extensive knowledge and
experience of the Croatian energy sector.
A14 Energy is a newly incorporated holding company and holds
100% of the issued share capital of IGeoPen.
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