How Battery Swaps Unlock Finance - Miranda Energy

I'm your host, Ed Porter. Welcome back to transmission. Over 200 megawatts of battery exposure across Europe, yet Miranda Energy doesn't own a single battery. Battery. What it owns is the volatility. This story starts with a problem. Chris owns solar farms that have been losing value as midday prices fall. Building a battery next to them would have taken years. Buying a battery's earnings through a contract was faster. Here, he's bringing exposure to battery returns and volatility. That sounds like a good solution, but the devil is in the detail. For the battery owner, what happens when the asset goes offline, but you still pay out the battery's returns? And will lenders finance against these contracts? What length of contract is sensible. Chris Kennedy is the founder of Miranda Energy. He's writing ten year swaps in markets the big trading houses haven't reached yet. He's also expecting that the market has underpriced volatility. If this episode gets you excited about the world of swaps and options, check out the recent SSC Stackcraft swap deal struck on the Moto Energy Index extra transmission episode to follow, or ask Ko, our AI energy analyst, how these swaps work in practice. Let's jump in. Hello, Chris, and welcome to transmission. Thanks for having me. Our pleasure. And as ever, we're gonna get straight into it. Yep. So what is one thing that people get wrong about their head swaps? Basis risk. Okay? And for the listeners who don't know exactly what basis risk is, it is the difference between what the actual battery produces and then what is owed under the day ahead swap. I think part of the problem with the problem... Part of the problem with the problem of the the basis risk is I think it's misunderstood in in two dimensions. One, and again, we're recording this now today in Berlin, energy storage summit. And about two hours ago, your colleague very graciously and and definitively explained why ancillary services are asymptotically approaching some terminal value and they will becoming less of an important element on the the on the full revenue stack. So I think the first point is the basis risk about the differential between the what the battery produces and what is owed under the day ahead swap will become mitigated simply by the fact that that that will be the revenue stack. And I think the second thing is really the day ahead swap is evolving over time. And in its simplest form, it's nothing other than one party pays fix, another party pays the top minus the bottom of the day ahead auction. And that's its simplest form. But another way to mitigate the basis risk between what the battery owes and what is... What the battery produces and what's owed under the swap is then to calibrate the swap with some kind of asset linked profile. And what we're doing now with with with with clients, and we've seen this really evolve over the past couple of months, is move away from just give me the top minus the bottom, but rather give me the top minus the bottom, but let's add in an RTE function. Okay? Or give me the top minus the bottom RTE plus some kind of degradation schedule. Yeah. And RTE being round to proficiency, so you're trying to account for the energy lost in the battery. Correct. And we can take that as a a formulaic way of of... It is a number and it's easy to to incorporate that into the swap formula. But here, I I think is really the real secret sauce or two things. And again, we were talking about an hour ago to to to a lender and that lender was saying, well, we don't finance against day ahead swaps because the owner of the battery has potential unlimited liability under the swap. And again, also for the listeners to make it simple, if I'm paying a fixed price and they're paying me the top minus the bottom, well, the top minus the bottom could theoretically be infinite. So, you know, that could lead to unlimited liability and banks don't like that. And it and it should work out nicely. Right? So the the idea of like selling away the floating should should should be nice because they should be they should be exposed to the floating because the battery should buy at the bottom and sell at the top. And so the battery should receive in the floating amount and then out to whoever wants to buy the floating, it should be able to pay that out. But then the the risk is that that you kind of sign this contract, right, and you're you're responsible for selling the floating and you you hope that you have an asset that's generating this floating element. But if your assets offline or the grid connection is out, then I think that's where sort of the finances get a bit nervous. Right? Yep. And here's another way. That was the second part of the secret sauce and you've addressed it nicely. Thank you very much. But that is to address the availability. So what happens exactly that? The grid is offline, force majeure, something like that. In the event that is caused by an exogenous occurrence, but that is not quite yet something that you would, know, use your insurance to cover. So you have at least the theoretical possibility or actually the real possibility that they're owing me something, a formulaic payout on something that they can't deliver because the the acid is offline. So what we do also is potentially modify the top minus the bottom with RTE and and degradation, but also additionally things like capping that payout, so the payout can't go infinite, and also mapping that also onto some kind of availability schedule that's linked to the asset. So I think those things go to mitigate really significantly the basis risk between what the asset creates and then what's owed under the the financial derivatives behind that. And I think we've we've kind of gone really into detail and I really like it because this is exactly kind of where we where we should get to. Right? But let's just do a quick quick recap. So when people talk about top bottom spreads, talked about the basis risk being a problem. So that's the the theory that the the top bottom spread doesn't accurately describe the money that the asset might make Yep. And so you have a difference between the two, that's basis risk. And then we've kind of gone on to say that if you have any of these sort of indices in place, then they don't perfectly describe the asset as well and so that's when you've started to talk about things like applying branch proficiency to it or adjustments for availability so that the the product that we're using allows better transfer of risk between parties. That's a fair summary? It is. And you're actually again addressing another keyword and that is some index. Okay. What we're talking about right now is just the day ahead slice. The day ahead slice of course is part of the battery stack, but not the complete element of it. And and as I said, I think it will become an integral part much more so going forward, and this is consistent also with your house view and and whatnot. But there are ways to evolve a day ahead swap into what's called a total revenue swap. Okay? Why do we have to make a formulaic payout on just the day ahead slice? Well, theoretically, you can do that on the intraday, but also ancillary services. And maybe a question back to to to you, Ed. I I noticed today that you guys just published your index linked swap for a project. I think that was with Stotkraft and and and and SSC. SSC. Exactly. So, you know, I like to think of not just our house, Miranda Energy. We are a a virtual battery platform. Our motto is monetize vol and enable flex. But I think to monetize the vol element, we want to look into beyond just the TB Of the day ahead slice and possible... Possibly joining kind of Stockhraft and and and others in in using broader indices that capture more of the revenue stack, again, which would then further go to to to mitigate that basis risk and allow a battery owner to separate the volatility that that asset produces from the physical itself. Yeah. This is... And and thank you for shoehorning that into the conversation. I I shall I shall buy you a coffee afterwards. So let's so let's just just take a step back for a second because getting into risk is this detail, think is is something that we've talked a bit a bit about on this podcast before, but I I wanna just set the scene. Right? So way back when, let's say, like late twenty tens Yep. You had people mostly sort of doing profit share. So the money comes into the battery and then it was split between the asset owner and the optimizer standard. And then you have optimizers looking to offer floors, so that's a little bit that's sort of fixed revenue for these for these assets, but only up to a certain level. So it's a guaranteed floor to their revenue. And then you've got tolls and that sort of instead of guaranteeing a a portion of it, you you guarantee all of the revenue and you've got things like partial tolls that start to come in. But what we've started to do here is we start to go beyond those structures which people might already know and we start to talk about other ways of solving this. So the TB spread, the top bottom spread is one way of doing it and that's a sort of starting point. But really, we're starting to get into this world where the concepts of sort of floating for fix is is starting to come in. So I as an asset owner, I sell floating, you sell fix to me and so I'm a happy asset owner because all of a sudden I've got fixed revenue, which is what I need to finance my asset at low cost. And so just with that sort of scene setting here, we're now starting to talk about a world where risk transfer becomes a really important part of like how we get these projects sort of going forward and being financed. Maybe maybe just to... Can we find an analogous industry? Can we talk about times when fixer floating has been useful in the past before and kind of where that's helped other industries scale up? Because I think that'd be a really useful comparison to draw. Yeah. No. I thank you. I mean, I think it it it is a... The most natural progression for us to incorporate a financially settled is the documented fixed for floating swap because that's our DNA. '25 And the ISDA, sorry. ISDA being the the standardized swap agreement that is... That takes a lot of the pain out of the hourly rates for lawyers and just make everything standard. It is a standard document that every... That the whole industry and the industry here being at least originally the fixed income industry. And back twenty two years ago, I set up my previous company and we were involved in creating trading strategies around fixed for floating interest rates. And the underlying documentation for that was exactly this thing called ISDA, and the way we monetize that was by using this thing called a swap. And exactly as you said, we would pay a fixed rate and receive in in exchange a floating rate. In that case, it was a floating rate based on on LIBOR or interest rates. But conceptually, it's actually the same thing that we're doing here. And so for us to, if you will, appropriate a standard operating procedure that is accepted by industry participants in one market, fixed income, and then apply it to here. Well, that's simply a much easier jump than than than creating a whole new energy specific derivative. And the way we got into it was originally after we had that interest rates business. We sold that off about ten years ago. And with part of the liquidity, we invested in in in a pool of solar farms. And this was back ten years ago in 2016 when we were getting, you know, feed in tariffs, you know, $10.11 cents per kilowatt hour. So very, very good. Pretty good returns. It was a great return. It was... The motivation was then we had negative yielding German interest rates. Okay. So the German the German government was actually... People were paying the German government to to to buy their debt. So completely negative prices. What the hell? And that's... And that's so useful for renewable assets. Right? So so if you think about the cost of renewable assets, the the capital cost is a massive part of this. And so if somebody gives you negative interest rates, you get this boom in renewable projects. Yep. And that's why as an industry, it's just as a short aside, like, it's why when we see interest rates hitting five or 6%, like, this this is part of the reason why a lot of renewable projects have become more expensive Yep. Because the cost of capital goes... It is a cost of capital is an integral part of kind of the whole financing package, but to continue a little bit of of kind of our our development over time when we set up the company ten years ago, originally to monetize the the... I call it the sovereign arbitrage because the German government was essentially paying me 900 basis points to actually own these solar farms with German government default risk. What the hell? Let's do this. So we did that and that's all fine up until about two or three years ago when the duck curve really was taking its toll and there's this paragraph 51 or whatever it is. I don't know the EEG. I don't read beyond paragraphs three. So all of sudden, wow, we're hit with it. That means that the feed in tariffs are suspended under certain circumstances of protracted negative rates. Again, the issue of negative pricing coming in, but here in the context of of of power. So like we did ten years ago, we turned that in from a problem into a an opportunity, and we said, okay. We have a solar farm that has a certain production and for the the viewers you can see I'm making this kind of curve throughout the day for the for the listeners, and that is exactly the opposite. Our production curve is exactly the opposite of the duck curve. Again, there's a causality there. But the way to immunize our solar farm against adverse duck curve developments would be to co locate a battery of course, but you can import that profile using a financial derivative called a swap Where we pay somebody a fixed rate and they pay us the top minus the bottom. Spread and I like to think that we were one of the first ones back in early twenty twenty five to put this top bottom spread on on our on our... On the books. Yep. Now what we did, and just to finish that up, and I'll shut up, is you have the production profile from the the solar farm. And then you have the financial profile, the revenue profile of a battery essentially through this TB swap. And then when you kind of put everything together at a portfolio level, you actually raise the capture rate from 50 to 75% or something. So it works wonders as a hedge for a solar portfolio. And the last thing is, and that's why we're pivoting a little bit from being a a pure solar IPP to being a virtual battery platform, is we see that this volatility that is monetized by paying, fixed, and receiving float is has a legitimacy on a standalone basis. Yeah. So that's what really what we're doing now. So I'll come back to that in a second and kind of ask you like what does Miranda Energy want to do? Because I think it's described in there, but also like it'd be nice to get a bit of the strategy. But but just to just to put one comment on what you said, right, which is a lot of solar projects out there that are being built and a lot of those are starting to find they have clauses around things like negative pricing and the natural reaction as you say is, well, you can kind of like, you could try and pass that risk off to someone else, but generally, kind of know what the assets were, so they won't pay you more for it. But the thing that people are now starting to is, okay, I wanna put a battery on my site and building a battery can take you quite a long time. And so I think the thing you're you're sort of articulating well is you don't need to physically have a battery, right? You might just be able to financially have a battery, so have an exposure to it. And going back to sort of the SSE and Stackcraft example, there are there are ways that people can now allocate this risk between them. You don't have to do it on a specific project basis. Yep. And I'm quite excited about where that could go. Right? So imagine imagine that you sort of bring in lots of these floating positions of batteries. I can imagine a world where there's a wind independent power producer or someone with a large retail book or a trader who's got no batteries thus far but would want some exposure to some. He might come to you and say, hey Chris, like Miranda Energy, are you selling any of that? Because I kinda want that exposure, right? I I feel like I'm front running your answer, but and I apologize for that. I shouldn't do it. But where where do you tactically or strategically see Miranda energy going? Yeah. Well, you're front running the answer in the in the wrong direction. Okay. If I may. Okay. Good. I think... Well, at least I got it wrong. Thank you for the question. You're wrong. The way the way we really see it is is I think for TB swap, there are fundamentally three use cases. Okay. First is the one that got us into this game in the first place. We're sitting there with a solar portfolio. We're getting killed by the duck curve. How do we do this in a timely capital efficient manner that doesn't have a lot of headache? TB swaps. Picobello. Okay. So that's the first use case in in which your question was asking, well, why don't we just make a business kind of farming off some of that float onto onto those, which we certainly could do. The second use case, and I think this is more the angle that we're applying to, and so how... Where do we see this going is we see it going... Volatility is the asset I would argue. And these derivatives allow us to separate that volatility from the physical asset. At the end of ten years, you have a bunch of chemistry that is depreciated. But, you know, by using this swap, you can separate the physical from... The physical asset from the the other asset that it produces, and that is the volatility. And I think what we're trying to do more there rather than farm this off to other other IPPs is make it more into a... Yeah. A unique source of alpha generation for global macro approach. Now what we've seen a lot, and again, that was a bit of a kind of financial mumbo jumbo, but what it really means is that this is allowing us exposure to a new asset class, a new... A novel risk premia. And I think it has a validity not just for the immediate... Solving the immediate pain of perhaps a standalone solar portfolio. But perhaps more interestingly and importantly, at more broadly for, you know, a broader investment community who say, hey. Wow. I mean, you know, there are other kinds of, you know, stocks and bonds and alts and under alts you have commodities, under commodities you have energy and on energy you have this power volatility. So it up... It it sits in a rarefied corner of if you will the investment spectrum, But it does have a legitimacy, I think, on on... Really on that on that approach. And that's why at Marana Energy, our motto has has has two sides. Monetize vol For that use case. And the second one importantly, enable flex. Our fixed rates that we pay into a BESS owner allows them to go and get better banking conditions and and and find... Enables the BESS in the sense that we are a long term credit enhanced fixed rate off taker on that. And that's that's a nice tie in to the point earlier. Right? So around if you want to get renewable projects to be built at low cost, you have to give them conditions that allow them to bring debt in at low cost. And if you're if you're being sort of altruistic about this, which that's not something you said you were gonna do, but but if you were, then like... And this is kind of a role that governments play. Right? If if if governments were to step in and and provide like stability, then that allows people to raise debt at low cost and that means that the overall project is cheaper. That's So this is you can definitely see one outcome being cheaper renewable assets. But but maybe the thing that I really wanted to ask is sort of is is why you? Like why why should why should Miranda Energy hold this? Because if I think about sort of the groups that hold big risk portfolios, like my my mindset goes to your sort of classic trading houses Yep. Who have like the the... You know, this is their this is their bread and butter. Yep. Surely, you know. They they wake up and they think about Alpha. Yeah. Which I think, yeah, I enjoyed your description as financial mumbo jumbo. So, yeah, they they think about this all the time. So so how do you how do you kind of compare yourselves to those groups and and why you? Well, okay. I think this is an evolving market. It's gone a lot. I covered a lot of distance in the past six months. We'll continue to do so. And we just got back from London. We were talking to some of the the houses that that that that might pop to mind when you when you mentioned that. A lot of people kind of sniffing around in the corners, but there haven't been a lot of people to pull the the plug. And I like to think that because we have easier decision making processes and and and and whatnot, you know, it is a small prop shop essentially. And, know, I make the calls myself. So it's it's kind of... And I have a bit of a, you know, willing to take a punt or so on this. So I think the first thing is it will get there. It's just not there yet. I will... E e x is coming out with a a TB futures next week and we'll see how that goes and who's part of that and blah blah blah. But I think that the the, you know, one of the other elements that we're doing is... Again, back, Ed. Our original idea, our original plan a which we didn't... Which we binned was to co locate a battery next to our solar. And our solar has a twenty... It's a thirty year life. We started in 2016, twenty year remaining life. So our view is let's find a solution for the next two decades, not the next eighteen months. So when we do some of these fix for floating, and I think this might separate us a little bit for other houses, is we have a wonderful risk appetite for writing ten year TB swaps. We did it. Our Polish deal, I can't say the counterparty yet, but it is a ten year TB swap. And with all due respect to the other big boys and girls out there, I'm not too sure that they're going that far out. And the second thing that we're doing and that is a real interesting element to how we approach this, is when we have an SPV, a best SPV as a counterparty, we will credit enhance our fixed offtake cause they need to take that to the bank for the reasons that you just mentioned. But we don't always require a credit enhancement in reverse. Okay. And what that means is that, again, from the perspective of an SPV owner, they're not trading against some kind of a big French utility who says, you know Sign up your, you know, your life in terms of credit enhancing vis a vis me. That allows them a bit more flexibility. And I don't wanna go down the rabbit hole of of of of why we take that view, but it is a strategic decision that we made to say, let's make the SPV's life easier. Yes. Let's make it credit light for him or her. Let's go out in a duration that's commensurate with the term struck with the the funding that they might have in place. So, you know, yeah, competition, please bring it on. I think I don't... I welcome the competition in the sense it gives more transparency to price discovery. It allows legitimacy to the whole thing, it mitigates the basis risk that we that we spoke about this at the top of the call. But, you know, it's a question of time before other people will get there. I just like to think maybe we're early early to the game. Yeah. I I I think you are. And I think just on on that point, right, people make these special purpose vehicles with the intention of keeping them capital light. So Yeah. As long as you can stop them having to put in lots of sort of capital to support these projects, then that allows them to run them the way they would like to. Yeah. So I can see I can see lots of value in that. Maybe sort of one sort of forward looking question. Right? Are we being are we being like a bit early? Are we we being a bit boring on this? Right? So we're sort of just talking about like fix the floating swaps and I know that you're one of the first people to do it and I know that it's only very recently become a thing. But if we look at other markets, like the world of options is is is, I'm gonna say, exotic, like, know, and there's loads of places this could go. So so do you think we could, like, let's say we sat down in three or five years time, you'd say, god, Ed, like, what are we doing? Like, why didn't we talk about, you know, some some more sort of exotic ways of dealing with this? It was funny. I was talking to to to one of my partners the other day and we're talking about Volga. Volga for the option Greeks and geeks out there is the volatility of volatility. And if you think about what is the day ahead spread, it is volatility. And how that day ahead spread then the TB spread evolves over time is the volatility of volatility. And so we're, you know, at least in our internal discussions, we're already articulating some of the... We're appropriating some of the options language on on on doing so and seeing how, you know, the the the the the vol surface. If you look at our website, it's basically we monetize vol and we show a a vol surface that is is is right out of of option theory. Yeah. I mean, you know, why not is what I'm saying. You know, they have again harking back not just to the fixed income world that I grew up in, but also into the other asset classes, you know, even some of the energy commodities have a very very deep, you know, options market. And I certainly see a situation where we're writing the floor that you mentioned ten minutes ago, not in the sense of actually in in in the execution of that is not so much a asymmetrical swap like you alluded to, but some kind of a a put call structure that is again taken straight out of traditional financial modus operandi and just applied here. So, yeah, we'll see how it goes. I mean, you know, one step at a time. Let's get people comfortable with the idea of Of doing this. Of... Then this being derivatives and this being the separation of the physical asset from what I call the volatility asset, which is in my mind the asset to own. It's a it's a fascinating space. And if this... I think people will love this episode, particularly if you're familiar with the with the with the Greeks. But I also know that some people will be feeling like this is an... This is like the first time of watching the film Inception or something and they're thinking, what what the hell is going on? And so let let's let's turn it a little bit back to to some regions and and and I think things that people might more understand physically. So so where do you... What... Where where excites you in Europe? Like, would you would you... I think you mentioned Poland as a region you looked at. Are you just looking at, say, Poland, Germany or it's like, is anywhere in Europe on the on the table? I would I would again address throw this back to you. And I was listening to the... In in the in the Uber ride to the airport yesterday. Your podcast with redefining energy. Okay. Very kind. And it was basic under the title of who is making money invest. But the correct title I think should have been is what geographies are making money in in BEST. And with a little bit of a of a of an inspiration behind kind of the analysis that went behind the the the... That podcast. We took a similar approach. We basically said, alright. Fine. We look at the... Well, the base case for any flex owner and batteries, and again, we're here in Berlin at the EES, and everybody who's here, I think subscribes to the the the view that volatility will increase because we need to need more flex in the system. If you look at it quantifiably, we've seen all of an overhang of renewable and specific PV rollout In an absolute number that completely squashes any kind of flex deployment. So the first thing that we look at are kind of the macro environment. Where do we think this volatility will increase? Okay. And that's why Poland has a significantly underdeveloped best market. It's coming. It's... Everybody's talking about Poland now. But one of the things we did, we looked at at at Hungary where we basically said, what country do we think because of interconnections and and and relative ratio of of solar and blah blah blah to flex and five or six other very simple metrics. We said Hungary is actually gonna be a very interesting place to be. And so we sought out and proactively looked for a counterparty who could sell us that volatility. So, yeah, it's still a bit early days for us right now. As I said, we have a 245 megawatts of financially settled fix off takes in Germany, Poland, Hungary, and and soon to be Italy. You know, Romania, Bulgaria, Greece, the kind of the more insular, the better. Yep. The more underdeveloped, the better. And again, coming back to your question about why aren't the big boys and girls of of of these established trading houses going well. Maybe going to a place that's a bit exotic and, know, a little bit on the fringe so that we don't have a whole lot of price competition Okay. There and and say, listen, we will step up to the plate in Poland by saying we will pay you fixed for the next ten years for this innovative thing called a TB swap and, you know, we had a taker. Some really interesting, like, some really interesting dynamics. Poland in particular, like the the interplay between say the the coal the solar deployment creates some really nice spreads. Italy as well is is a market that's slow to deploy, so it's slow to see sort of the the cannibalization come through but but it does mean there are some really nice spreads. I think if I was to point at the market that was probably the most on fire from a solar perspective, I'd say Spain Yeah. Today. I'm surprised you didn't mention Spain because I feel like the the sort of the first pillar of your approach was like our solar assets are not getting what they should and I feel like Spain that feels like a really nice product for it. It could be, you know, I think that that the proof is in the pudding in in the sense that you really do need to look at the spreads. Spain has a an an absolute number of negative hours, a very high number. Yep. But the magnitude of those of those negative hours isn't quite what it is in other places because Right. Spain has hydro, has other things that are... That, you know, that that I can kind of develop at flex. But it is insular in the sense that it's it's it's it it it has a lot of the, you know, headline things that we're looking to do. And, you know, we're in a capital raise capital formation exercise right now and and once we get kind of a larger balance sheet, it will certainly be on the on the map simply by way of diversification. And and again, what am I doing here? I am trying to build a diversified portfolio of power volatility using capital light instruments that is is, you know, efficiently managed. So if the pricing is right, you know, know, what what the heck? Let's do that. Yeah. Yeah. And Spain is kind of like for a while sort of hidden under the radar in terms of negative prices. And then this year, it's kind of broken out Yeah. And it's been far and away like the the leader in negative prices. But you're absolutely right. They're often quite small. So between zero and zero and minus 10. Well, and it has the other advantage. It has two other advantages that haven't spoken about. One is as wonderful golf. That's a good advantage. Yeah. And and fantastic flamenco guitar. So I mean, I think those are other reasons why we need to do a due diligence trip in in this game. I did I did promise you that I wasn't gonna raise you can play classical guitar on the podcast, but you did bring it up, so I'm I'm... It's nice to get that in there as well. Right. Two final questions. Yeah. First one is, somebody walks through the door, they are the perfect client of yours. Yep. What what would they be? They'd have to know what an ISDA is. That's a a starting point. Yes. I would say that they... Okay. I would like to say... I mean, we've done some publicly announced deals with some kind of the big energy houses. I'd like to say we we go to the source. Okay. And the source is that physical asset that can store at midday and discharge in the evening. And so the perfect counterparty in that sense is really going to be a, you know, an SPV, a best... A special purpose vehicle, sorry, special purpose vehicle for the best asset in an exotic location that is part of a portfolio from maybe a infra fund backed company that has a little bit of comfort with things like ISDAs in in these kind of offtakes. So that would be, you know, the ideal Yeah. Player. And then we would just... The way we would approach price discovery is just to to to sit with that person on the table and say to him or her, okay, you're backed by this infra fund. You... That infra fund wants a mid teens return on on on their equity slice. And we know interest rates, which you mentioned earlier, but the cost of of of the asset itself, and and we can plug and chug a lot of the other variables and back out a essentially a fixed rate that gives them a debt service coverage ratio that allows them to to go to the bank and take it. So I think that the, you know, the the... That is the ideal Okay. Yeah. I hear you. And then final question. So what is the contrarian view you hold about energy markets? Okay. The... I don't wanna say misplaced default to backwardation, but I would say the the the the the weight given to the backwardation in the TB forward curve. Now I'll Let's explain backwardation. Let's let's let's break that up a little bit. Backwardation is simply the the the temporal or the the fact that longer dated TVs are cheaper than than a shorter dated one. So you have if you will... If you think of the time as being kind of on the x axis, it is a downward sloping curve. That's why it's called backwardation. So backwardation for a TB spread is absolutely understandable. It has its roots in conventional financial theory. A ten year swap has much more risk than a five year one. Therefore, it should be... Actually have a higher yield and therefore be cheaper, and that's... You know, treasury yields are like that, and and we all understand kind of that. Also coming from the commodity space, there are storage costs and cost of capital that that that factor into... You plug and chug everything and then all of sudden you do get this backward dated curve. Importantly, if you look at the marginal price setter of power in Europe at least is is gas a great majority of the time, and that is steeply backwardated even more so now, but generally, yes. So... Yeah. Well, if TB is just a second order product of a baseload, well, should have a similar optical formation. So that's how the the market's being priced right now. We'll see it confirmed next week when EEX comes out with their their futures on, you know, the the TB spot. It's contrarian to our view. We view the TB spread as being directionally persistent. Okay? And hark back to our thesis. Our thesis is we've got a lot of solar. We have less flex, and the the the the the relative out deployment of solar to flex will exacerbate an already heightened volatility. So that volatility itself is seasonal. So what we have is not a forward backward dated curve. We have a extrapolated seasonal sinusoid. Okay? And a sinusoid is just this curvy, sinus curve, essentially, and that's driven by the by autocorrelation in in in in in statistics terms. But you see the TB spread reflecting kind of the seasonality better in the summer than in the winter, and that was good this year. It wasn't as good last year, and it wasn't as good the year before. So there is this if you will directional persistence to it. So our view is almost the opposite of the market in the sense that we think we wanna be the receiver of this volatility over time because we think over time it's not gonna decrease in value as would be consistent with the backwardation. But rather, we're willing to kind of do these ten year swaps because we think that the the the misprice is... There's more misprice to be monetized in in in that. Anyway... I suppose the... Yeah. I suppose the most like obvious thing to say would be the battery costs keep on coming down and sort of the natural reaction to high prices or high spreads would be like more batteries coming onto the system and Yeah. And like would that put a lid on element of that of that growth. But the the bit that I think you touched on really well, which is is that energy markets don't work fantastically. Okay. And sometimes you get these really like... So the wholesale price that sort of bounces around in the market. Yes. People do react to the wholesale price, but also there's sort of subsidies that get laid on and the domestic customer at home, do they see the wholesale price? No. They see the wholesale price plus a whole load of other Yeah. You know, stuff that's been bundled on. And so when they make a decision about whether they get home solar or not Yep. They're they're working off a different signal. And so Yeah. Sometimes you you feel like you've got a handle on like what the energy market or the electricity market should be doing, but actually, it just goes in a different direction. And so you may be thinking, yes, okay, this curve is gonna go down down over time, but so definitely contrary, but I I I feel like I'm with you in that sometimes you you feel like you've got a handle on the way these markets going develop and then they just do something a little bit different. Well, we're putting our money where our mouth is and, you know, we're we're as I say gladly bidding up all all along the curve and yeah, open for business in the sense, you know, we're looking for for as you say that ideal counterparty. So if the listener out there is there, please Get in touch. In the in the show notes. But also, yeah, you know, as I said, just as as using this as kind of a as a novel risk premia in in terms of its... I think it has legitimacy in in in kind of a more of a global macro view additionally. Super. Chris, well, you for coming on. Thank you for bringing the Greeks. Thank you for bringing backwardation and and and everything like the whole financial analysis to the battery space. We haven't had that before. I think people will be fascinated by it. You've been a wonderful guest. Thanks for coming on. Thanks for having me.