Statkraft’s sale of a stake in its Scottish pumped storage and hydro (PSH) project is on hold after it failed to qualify for government subsidies, three sources familiar with the situation said. 

Norwegian state-backed energy group Statkraft, which started seeking investors for an equity stake in the 500 MW Loch Na Cathrach PSH project earlier this year, received initial bids from various financial investors and recently shortlisted some including UK’s pension insurer Rothesay for a second phase, they said.

However, after the project failed to be selected for support from the UK’s cap-and-floor scheme, bidders cooled on the sale process, a source explained.

The developer was optimistic of the project qualifying for the scheme but is now working at other solutions, said another source, noting that Statkraft is unlikely to start construction without a cap-and-floor or an investment partner for the project.

KPMG is advising Statkraft on the sale process.

Statkraft took over the Loch Na Cathrach project from Intelligent Land Systems in December 2023. The planned development near Inverness will use the waters from Loch Ness.

At the time of receiving planning consent in 2021, the project was estimated to cost some GBP 550m and five years to build. Statkraft expects to make a final investment decision later this year, it said in an update recently.

The cap and floor scheme introduced last year by the UK government for PSH, and long duration energy storage (LDES) projects provides a guaranteed minimum income for developers as well as a cap on higher revenues.

Last week, the government shortlisted 16 of the 77 eligible projects for the LDES support scheme, including three PSH projects in Scotland – Statera Energy’s 660 MW Loch Kemp, SSE’s 1.44 GW Coire Glas, and Gilkes Energy’s 1.8 GW Earba projects. Other projects selected are in technologies such as batteries and compressed air energy storage.

Statera and Gilkes are both in the process of raising funds to develop their PSH projects.

Pumped hydro storage projects pump water up a reservoir when there is low demand for electricity or other renewable sources like solar are available to generate power. The water from the reservoir is then released through a turbine to produce electricity to meet increases in electricity demand.

Statkraft, which has built an installed capacity of 22.3 GW across technologies globally over the years, is active across Europe in clean energy segments such as hydro, wind, solar and gas-fired power, and also supplies district heating.

The company has been exiting various assets across the world after it announced in 2024 that it will prioritize investments in Norway, Europe, and South America and sell assets in various other markets such as Croatia, the Netherlands and India.

In the UK, Statkraft is in advanced stage discussions to sell around 1.3 GW onshore solar and wind portfolio in the UK and Ireland to iCON Infrastructure.

Statkraft declined to comment, while Rothesay did not respond to a query.