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Friday Briefing: Investment and ownership in a rapidly maturing energy storage industry


This Friday Briefing discusses energy storage companies getting new ownership, and how the right owners or investors bring a ‘synergy advantage’.

Back in 2021, US-based battery storage developer Key Capture Energy (KCE) was acquired by SK E&S, an affiliate of major South Korean conglomerate SK Group which has interests in life sciences, advanced mobility and semiconductors, to of course, energy.

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At the time, KCE told this site that its new owner anticipated putting a billion dollars into growing and operating the developer. KCE owns and operates its projects in an independent power producer (IPP) model, with a portfolio of around 600MW of operating assets in Texas and New York and a development pipeline of 9,000MW spanning various US states, ISO and RTO markets.

You may have already read our exclusive ESN Premium interview with Brian Hayes, the new CEO of Key Capture Energy, which was published this week.

While it didn’t make the final edit of that feature-length interview, we also asked Hayes a few questions about KCE’s relationship with its owner and what it means for the developer.

“The relationship with SK has been very good so far. I’ve been here for three months; I speak with the SK counterparts, at least on a weekly, if not daily, basis, so we’re very much aligned,” Hayes said of the day-to-day running side.

SK Group has, Hayes noted, a “big focus” on energy transition industries, particularly in the US and the CEO claimed Key Capture is one of the new owner’s “best investments in the energy transition, and one they like a lot”.

“So, the involvement with SK is high and they have big expectations for us as we go forward. We’re doing everything we can to meet and exceed those expectations.”

As Hayes took over his role just three months ago in January, Kyungyeol Song, Chief Operating Officer of SK E&S subsidiary Passkey, Inc, said that since taking over KCE, Passkey has been “focused on becoming the most innovative battery energy storage company in the United States”.

Asked for his interpretation of that brief, the KCE CEO said that – as mentioned in the full interview – the developer’s building up of its in-house capabilities to access market opportunities via smart software was an aspect of the sort of smart technology innovation he believed SK was interested in.

“As far as linking the market opportunities and how we optimise everything, that is very much something that they had an interest in when they bought the company, and it’s something that we’ve pushed forward,” Hayes said.

“At the same time, what we’re trying to do here at Key Capture is [that] we want to be the reference in the industry. We want to do things the right way with our stakeholders, and whenever Key Capture says we’re going to deliver a project, we want everybody to know that we’re going to deliver the project on time. Then, we want to be the best operator with the highest safety.”

Hayes said that being a reference for the industry, by extension, includes being innovative and looking at the right technologies and business models, whether that be in terms of software, hardware, contracting structures, and so on.

SK having interests in a multitude of industries, including some directly relevant to Key Capture’s own suite of offerings was much preferable to what has happened with some of the developer’s rivals, the CEO said.

“We’re very fortunate to have SK as our parent because… compared to some others… a lot of others are owned by their backers, or financial institutions or funds.”

That said, when asked if KCE would be leveraging potential synergies with what SK does in its other group companies, Hayes said there are no plans to go in that direction.

To give an example from another Korean conglomerate, LG Energy Solution has got LG Energy Solution Vertech, an energy storage system integrator, under its wing, and that obviously has some interesting aspects to it. Obviously Vertech is an integrator and not a developer, but there’s a comparison that could be drawn to some extent.

“We don’t have any plans to get into building storage systems and doing all that and sourcing them from SK and all those types of things,” Hayes said.

“We’re very much focused on the traditional players within the energy storage space, the providers, and kind of working through that because they’re the ones that are doing the volume, and they’re proving to be the leaders.”

Ultimately, KCE’s success will benefit SK E&S’ bottom line, and while the parent company offers advice and thoughts, SK wants the developer to be independent, Hayes said.

‘Synergy advantage’ likely to influence Wärtsilä’s considered options

On a related theme of M&A activity, alongside our recent interview with Florian Mayr, partner at clean energy advisory Apricum, we asked the strategist about his thoughts on Wärtsilä’s ongoing strategic review of its energy storage and optimisation (ES&O) business.

Mayr, whose firm advises on everything from market entry to due diligence for M&A deals, agreed with the view of Danske Bank analyst Panu Laitinmäki, who said back in February that it was likely parent Wartsila Group didn’t want to see its margins diluted by carrying the energy storage business, even though Wartsila ES&O is now profitable and continues to grow.

“Wärtsilä, they are traditionally in the genset business, and then they bought Greensmith (the US integrator which became ES&O) years ago (in 2017),” Mayr said.

“I think what they’re seeing right now is despite the storage market booming, the margins you can achieve as an ESS integrator or whatever they would call themselves – I would see Wärtsilä ES&O as an integrator – they are lower than what they have in their other businesses.”

The advisor said it was probably similar to the case of NHOA, the Italy-headquartered system integrator which was bought out by Taiwan Cement Corporation (TCC) from ENGIE and rebranded to its new name from ENGIE EPS.

To bring that full circle back to the question we posed to Brian Hayes, one interesting aspect of TCC’s acquisition of NHOA was that TCC owns a battery cell manufacturing business in Taiwan. The deal to acquire the BESS integrator was touted at the time as bringing together the downstream smarts of the European company with the upstream technology capabilities of the Asian parent.

To be clear, Wärtsilä may not even sell off its energy storage arm yet, with company leadership stating that “all options” are being considered. That could include selling, bringing in new investment and retaining a stake, or perhaps some other kind of change.

Nonetheless, we put Mayr on the spot and asked what sort of new owner might be a suitable fit for a company like that.

“Anyone who can bring in already a synergy advantage and I think that’s obvious,” he said.

However, what may be less obvious is that synergy could be about cost – access to cheap components, whether cells, modules, power conversion system (PCS) or other parts – but also access to customers and presence in certain strategically important geographies.

According to the advisor, a deal like Wärtsilä-Greensmith may not even happen in today’s market because it appears to have been a case of wanting to get in early on an emerging market opportunity ahead of rivals.

Mayr noted that in Germany, Europe’s largest residential energy storage market, nearly all of the bigger providers that began life as independents that are now owned by entities including utilities and electronic component manufacturers, all of which offer that all-important “synergy”.

German market leader sonnen’s parent on the other hand, Shell, has put the storage company up for sale recently, which plays into the oil and gas company’s divesting of many of its B2C businesses, according to Florian Mayr.

So, some really interesting perspectives from Brian Hayes and Florian Mayr there on the changing face of the energy storage industry, as it becomes an ever-more mainstream value proposition.

Happy Friday!  

This week on ESN Premium

Key to success as an energy storage IPP is being a first mover, says new Key Capture Energy CEO

Read the full interview with Hayes here, in which he discusses his appointment, the company’s development pipeline, its business model, financing, variation in revenue streams across markets and strategic priorities.

‘Duke-CATL case won’t be unique’: BESS land grab to continue as curbs on China imports loom

Read our latest coverage of the ongoing ramp-up in global competition from China-based BESS providers and the – inextricably linked – drops in average market prices for the technology. Sources at the Energy Storage Summit USA last month discussed how this might tie into the potential of future additional controls on importing product from China.

Europe bets big on recycling in efforts to onshore battery supply chain

From another event, Benchmark Mineral Intelligence’s Giga Europe conference in Sweden, we caught up with companies in the battery recycling space. Investing in end-of-life and recycling solutions is a key part of the continent’s strategy to build up a local battery supply chain.

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