TIDMGRID
RNS Number : 2208M
Gresham House Energy Storage Fund
20 September 2021
20 September 2021
Gresham House Energy Storage Fund plc
(the "Company" or the "Fund")
Half-year results to 30 June 2021
Gresham House Energy Storage Fund plc, the UK's largest fund
investing in utility-scale battery energy storage systems (BESS),
announces its half-year results for the period ending 30 June
2021.
Financial and operational highlights
-- NAV rose to GBP383m as at 30 June 2021 (GBP359m as at 31 December 2020)
-- NAV per share up 6.7% to 109.9p per share (Q1 21: 106.7p) and
NAV total return of 10.0% during the period
-- Share price total return for the period of 10.7% (H1 20:
4.0%) and 36.3% since inception (H1 20: 15.6%)
-- EBITDA generated by the portfolio of GBP22.4m (H1 20:
GBP4.5m) from operating revenues of GBP24.9m (H1 20: GBP5.2m)
-- Dividend cover from underlying earnings of 1.38x
-- Dividends paid or declared of 3.5p for the period (H1 20:
3.5p) and, as targeted, 7.0p reaffirmed for 2021
-- Discount rates remained unchanged. Weighted average discount
rate marginally reduced from 10.8% to 10.7% due to revenue mix
-- Discount rates will be reviewed by independent advisors ahead of the release of Q3 NAV
-- GBP280m raised in the year to date; GBP100m in equity in July
and GBP180m, five-year, debt facility secured in September 2021
Deployment
-- 425MW of 100%-owned, operational projects as at 30 June 2021
-- The Company signed SPAs for the acquisition of 100% of a
further 425MW of shovel ready capacity across seven projects during
the period, which have, or shall, complete subject to certain
conditions being met
-- 275MW, or five of these projects, are now under construction
-- A further 187MW of shovel ready projects are in advanced stages of due diligence
-- Targeting c.1.3GW of operational capacity by H1 2023
Market Environment and Outlook
-- Half-hourly power price volatility has remained high as
renewables continue to take market share, increasing the
intermittency of electricity generation and so the need for energy
storage
-- Half hourly power prices peaked at GBP4,000/MWh during January and September
-- Supportive industry developments with National Grid:
o Set to demerge the Electricity System Operator (ESO)
o To procure Dynamic Containment service using 4-hourly
contracts from September 2021
o Increasing expectations for energy storage installed capacity
to up to 15GW by 2025
o Forecasting another volatile power price period this
winter
-- No material impact on operations or construction activities from COVID-19 at this time
Performance Highlights
-- NAV per share increase driven by revaluation of projects
previously held at cost, cash retained over and above shareholder
distributions, and improvements in third party forecasts
-- EBITDA largely driven by attractive frequency response
services (88.5% of total), with the remainder from the capacity
market, and from power trading opportunities taken advantage of as
they arise
-- Debt to significantly reduce weighted average cost of capital (WACC) once drawn
Commenting on the Fund's results, John Leggate CBE, Chair of
Gresham House Energy Storage Fund plc said:
"As we approach the third anniversary of GRID's IPO, we are
proud of the Company's and the Investment Manager's collective
achievements and ongoing ambitions. By 1Q 2023, our active
portfolio is on track to have increased over 18 times since IPO,
from 70MW to c1.3GW. In delivering this growth, the average project
size in the portfolio has grown fourfold, from 14MW at IPO to the
average 60MW projects we're building today.
"These market-leading achievements are the result of the team's
disciplined focus of delivering against our challenging targets,
the huge support of our longstanding investors, and a favourable
market backdrop. However, the scale of our ambitions and the
industry's growth, simply reflect the fundamental and urgent need
for continued rapid deployment of large-scale battery storage
systems."
Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc
& Managing Director of Gresham House New Energy said:
"It has been another busy and successful half-year, with more
new and favourable developments in the battery storage market
driven by Ofgem and National Grid. Our recent equity and debt
raises have continued to power our growth against this favourable
backdrop, as power price volatility, which drives our revenues,
continues to rise. The current spikes in power prices, with new
daily and monthly records continuing to be set this year, are the
result of higher fossil fuel prices, higher carbon prices and the
growth of renewables.
"Frequency response services have continued to drive our
revenues and provide strong dividend cover, even as we continue to
expect wholesale power trading opportunities to deliver greater
revenues than these contracted National Grid services over the long
term.
"We are continuing to construct a robust, and resilient
portfolio of energy storage infrastructure with large capacity
batteries.
"Given our track record and our growing team's depth of
expertise, we remain confident of our ability to deliver on our
plans to triple our current operational portfolio within the next 2
years, while also delivering on our target returns."
The Company's Interim Report and Initial Financial Statements
for the period ending 30 June 2021 are included in this
announcement
http://www.rns-pdf.londonstockexchange.com/rns/2208M_1-2021-9-18.pdf
, available on the Company's website at:
https://greshamhouse.com/real-assets/new-energy-sustainable-infrastructure/gresham-house-energy-storage-fund-plc/
and can be found at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
For further information, please contact:
Gresham House New Energy
Ben Guest
Rupert Robinson +44 (0)20 3837 6270
Jefferies International Limited
Stuart Klein
Gaudi Le Roux +44 (0)20 7029 8000
KL Communications
Charles Gorman
Will Sanderson
Millie Steyn +44 (0)20 3995 6673
JTC (UK) Limited as Company Secretary
Christopher Gibbons +44 (0)203 846 9774
About the Company and the Manager:
Gresham House Energy Storage Fund plc seeks to provide investors
with an attractive and sustainable dividend over the long term by
investing in a diversified portfolio of utility-scale battery
energy storage systems (known as BESS) located in Great Britain,
Northern Ireland and the Republic of Ireland. In addition, the
Company seeks to provide investors with the prospect of capital
growth through the re-investment of net cash generated in excess of
the target dividend in accordance with the Company's investment
policy.
The Company will target dividend payments of 7.0p per Ordinary
Share in the financial year ending 31 December 2021 and in
financial periods thereafter. The Company targets an unlevered Net
Asset Value total return of 8% per annum, calculated net of the
Company's costs and expenses. Once certain further asset management
activities are completed and leverage is introduced to the
Portfolio, the Company targets a levered Net Asset Value total
return of 15% per annum, calculated net of the Company's costs and
expenses. A debt facility has now been committed to at a modest
level compared with the Company's borrowing limit of 50% as a
percentage of Gross Asset Value.
The current portfolio has a total capacity of 425MW. The Company
is managed by Gresham House Asset Management Limited under the
leadership of Ben Guest. The Company was admitted to trading on the
London Stock Exchange (Specialist Fund Segment) on 13 November 2018
(the "IPO") having raised GBP100m of gross proceeds from investors.
Including IPO, the Company has raised a total of approximately
GBP458m of gross proceeds from investors.
Gresham House Asset Management is the FCA authorised operating
business of Gresham House plc, a London Stock Exchange quoted
specialist alternative asset manager. Gresham House is committed to
operating responsibly and sustainably, taking the long view in
delivering sustainable investment solutions.
www.greshamhouse.com
Definition of utility-scale battery energy storage systems
(BESS)
Utility-scale battery energy storage systems (BESS) are the
enabling infrastructure that will support the continued growth of
renewable energy sources such as wind and solar, essential to the
UK's stated target to reduce carbon emissions. They store excess
energy generated by renewable energy sources and then release that
stored energy back into the grid during peak hours when there is
increased demand.
1. HIGHLIGHTS
Performance highlights
-- Net Asset Value (NAV) of GBP383m or 109.89p per share (FY2020: 102.96p / H1 2020: 98.16p).
Increase in NAV in H1 2021 driven by revaluations of recently commissioned projects, cash
retained over and above distributions to shareholders and improvements in third party forecasts.
The weighted average cost of capital dropped from 10.8% to 10.7% due to a greater proportion
of revenues coming from Capacity Market contracts
-- NAV total return of 10.03% for the six-month period, driven by a 6.9p increase in NAV per
share and 3.5p in dividends paid in the six-month period
-- Ordinary Share price at 30 June 2021 was 120.75p implying a total return of 36.25% since inception,
and 10.66% for the six-month period ended June 2021
-- The Board reaffirms expectations of 7.0p dividends for 2021 and expects full dividend cover
from underlying earnings in the portfolio in 2021
-- GBP100m equity raised following the half-year period end. The Manager is now targeting an
additional 515MW in BESS projects by Q1 2022 from deployment of GBP220m in cash raised from
share issuance under the Prospectus published in November 2020. Deployment of this equity
is progressing well
-- A debt process successfully completed unlocking a GBP180m total debt facility made up of GBP150m
capex facility and GBP30m working capital facility, significantly improving the incremental
cost of capital for the Company.
Operational highlights
-- Daily operations continue to be dominated by frequency response services, Dynamic Containment
and Enhanced Frequency Response in particular, contributing 86% of revenues, while power trading
opportunities are taken advantage of as they arise
-- The Company had 425MW of operational projects at the end of June and has also signed conditional
SPAs for the acquisition of a further 425MW in the period. In addition, a further 187MW is
in advanced stages of due diligence. Average project size has increased to c.60MW significantly
accelerating operational scale-up
-- 2021 started with occasional periods of extreme volatility with short run power prices reaching
GBP4,000/MWh on 8 January 2021
-- Daily peak electricity prices are at historically high levels due to higher demand, higher
natural gas prices and elevated carbon prices demonstrated by record monthly average price
per MWh in August 2021[1]
-- Supportive industry developments with (i) National Grid demerging the Electricity System Operator,
(ii) significant changes in frequency response and reserve services procured by National Grid
and (iii) a significant pick up in deployment of storage projects
-- National Grid has significantly increased the prominence of Energy Storage, forecasting up
to 43GW of capacity being required in 2050 and confirming 15GW by 2025 under its recently
published Future Energy Scenarios compared with c.1.3GW operational today
2. CHAIR'S STATEMENT
Summary
On behalf of the Board, I am delighted to present the Interim
Report and Accounts of Gresham House Energy Storage Fund plc for
the six-month period ending 30 June 2021.
The Company and its Portfolio have performed well over the
period, with dividend cover from underlying operational earnings of
1.62x (1.38x excluding locked box income) for H1 2021 (H1 2020:
0.48x / FY 2020 0.78x). Total Share Price Return since IPO is
36.25% to H1 2021 (H1 2020: 15.60% / 2020 FY: 23.10%).
Complementing this strong performance, our future growth plans
are on track, with a significant number of acquisitions, further
equity fundraising and the commitment of equity funds raised into
projects both during and following the half-year end.
The completion of the debt fundraising process is also a
significant milestone for the Company, demonstrating how much the
industry has matured since IPO, and how the Company is
demonstrating sector leadership through scale and strong execution
in its operational activities.
Portfolio Description, Transactions and Pipeline
The Company's 17 projects make up 425MW of wholly owned
operational BESS projects located across England and Scotland,
averaging over one hour in duration.
The Manager has remained very active in terms of fundraising and
the building of a strong pipeline. In terms of fundraising, the
Company completed a successful equity fundraising shortly after the
half-year end and also completed a debt fundraising totalling
GBP180m in September 2021.
On deployment, since the start of 2021, the Company has
completed the acquisition of 110MW of operational projects and has
signed SPAs for the acquisition of a further 425MW which are
scheduled to become operational during 2022. A further 187MW are in
the advanced stages of due diligence. Having secured a debt
facility, the Company's aim now is to commit to the remainder of
the pipeline disclosed during the fundraising in July 2021, which
would take operational MWs to c.1.3GW during H1 2023.
The Company's overall pace of deployment is likely to result in
it maintaining market share of at least 25-30% as it has done since
its IPO in 2018.
The Manager continues to work hard on delivering our pipeline
and incrementally focusing on projects that will commission in 2023
and later. The Manager also continues to review opportunities in
Ireland, although the team has been able to execute more
effectively in Great Britain where the revenue outlook has improved
significantly since shareholders agreed to a change in Investment
Policy in 2020, to include investment in Ireland. The Manager has
visibility on a large exclusive pipeline in Ireland, which we
intend to announce once these projects are closer to being shovel
ready.
Examining upcoming deployment more closely, it is worth noting
that average project size has increased significantly to
approximately 60MW. Assuming this continues, it will only take 13
projects to triple the Company's operational capacity.
Of the projects acquired in the first half of 2021, 70MW (Port
of Tyne, Tynemouth and Nevendon) are contracted in EFR until the
first half of 2022. These projects were well-priced given the fully
contracted nature of their revenues from EFR and high value 15-year
Capacity Market contracts but also taking into account the
projects' limited battery duration and the need for the Manager to
carry out an upgrade programme once the EFR contracts expire.
These are the last of the already-operational projects that the
Company expects to acquire in the foreseeable future as it focuses
on its new-build project pipeline, although we are still open to
opportunistic acquisitions.
Referring to battery duration, the Manager is actively
considering the optimal duration for its latest projects. While all
new projects which are already funded, namely Coupar Angus (40MW),
Arbroath (35MW), Enderby (50MW), West Didsbury (50MW), Melksham
(100MW), Stairfoot (40MW), Penwortham (50MW), Grendon (up to 100MW)
and Project Y (50MW) are being built out to one hour durations,
pipeline projects are being evaluated on their ability to have
longer duration batteries and we have a preference to invest in
projects that can be built with at least a 90 minute duration: the
longer duration increases the potential revenue per MW.
Results and Outlook
The Company has performed strongly during the period. The
portfolio generated net earnings for dividend cover of GBP19.7m,
from operating revenues of GBP24.9m. Revenues came mostly from
frequency response services, with GBP16.2m from Dynamic
Containment, GBP5.2m from EFR services provided by our 120MW of EFR
contracted projects and GBP0.6m from FFR services. The remaining
12% of the Company's revenue is made up of trading ("Spread
Capture") and Capacity Market contracts.
The high proportion coming from frequency response services
reflects the continued shortfall, during the period, in available
battery capacity to deliver the service that National Grid has
demand for and has resulted in the high level of revenues this
year. This is expected to change in phases over the next year as
the number of operational batteries increases and as contracting
moves from twenty-four-hour periods to four-hourly periods (known
as EFA blocks), resulting in National Grid being able to procure
less capacity when less is required.
As such, revenues earned per MW from frequency response are
expected to decline over the next 12 months, uncovering the
underlying attractiveness of trading, a market which is much more
sustainable, due to its large and growing size as renewables
continue to be deployed at pace. It is this market opportunity,
which is driving the interest in the potential of longer duration
batteries, mentioned in the section above, as these longer duration
batteries can capture more revenues from the intraday volatility in
power prices. The financial model projections, which drive the
Company's NAV, already reflect less revenue from frequency response
and a migration to income from trading activities from later this
year and as such, revenues, on a per MW basis, are expected at
levels closer to those anticipated at the time of the IPO from 2022
onwards.
Offsetting the potential for lower per MW revenues is the
possibility of another period of higher volatility this winter, as
forecast in National Grid's recently published Winter Outlook 2021
- Early View document, which combined with the commissioning of a
large number of new BESS projects within the Company, many of them
in Q1 2022, offers the Company a potentially healthy dividend cover
going into 2022.
Perhaps the most exciting development in the Company is the
closing of the recently announced debt facility. This facility
enables the Company to achieve a significantly lower weighted
average cost of capital. While this supports the growth in NAV, it
also supports the Manager's core efforts to reduce the hurdle level
of revenues which it needs to earn from merchant sources to cover
the dividend to levels that reflect rarely seen low levels of
intraday power price volatility, de-risking as much as possible the
downside risks for investors. We look forward to providing more
information on the implications of the debt raise in coming
quarters.
Fundraising
During the period, the Company did not raise any equity
funds.
However, just after the end of the period the Company repaid
GBP7m of the Power Bond to an institutional investor and raised
GBP100m in equity through the issue of 89.3m new shares at a price
of 112p, a premium of 5% to the prevailing NAV at the time. The
equity issue was significantly oversubscribed and a scaling back
exercise was undertaken to ensure the Company maintains capital
discipline and minimises cash drag.
Net Asset Value ("NAV")
In the first half of 2021, the NAV increased 6.93p from 102.96p
to 109.89p. This is the result of a combination of factors, most
significantly the revaluation of a significant number of recently
commissioned projects (five projects totalling 150MW). Another
positive driver is a 3.6p improvement from higher cashflow
forecasts, driven by higher trading revenue expectations.
This more than offsets a negative impact of c.1.5p from changes
to the corporation tax regime (whereby taxes on UK companies will
increase from 19% to 25% from FY 2023) prior to modelling of
additional tax efficiencies.
The underlying discount rates used to calculate the weighted
average discount rate of 5% for Capacity Market revenues and 11.1%
for all other revenues, remain unchanged with the weighted average
dropping slightly to 10.73%. This reflects the greater proportion
of revenues coming from Capacity Market contracts.
The Board, in conjunction with our independent valuer, will
review the discount rates used to calculate the NAV, particularly
in light of the comparatively low cost of debt secured. This
highlights a significant spread between the cost of debt and equity
available to the Company, as well as the falling hurdle rate of
revenues at which the company covers its dividend, which suggests
lower risk from its merchant operations. This review will be
undertaken during 2021.
COVID-19
We commented on COVID-19 in the Interim Report and Accounts in
2020. It is pleasing to be able to paint a very different picture
12 months later.
First, demand for power has recovered and may even be showing
signs of growth as we migrate to electric vehicles and use more
computing power as a nation. This, combined with higher commodity
prices (natural gas and carbon in particular) and a rising
percentage of renewables, is starting to unlock the
much-anticipated positive strategic backdrop for energy
storage.
The ending of lockdowns has also meant that site and
construction operations are back to normal.
There have been negative impacts, however, that we are
monitoring. The most significant are rising costs in areas like
shipping, supply chain impacts and insurance. We do not expect
these to persist indefinitely however, and there has been no
material impact to date.
Dividend
Dividend cover in H1 2021 was 1.62x with 0.24x of this being
derived from locked box income from acquisitions completed in Q1
2021. Our cash generating operational portfolio allows us to
demonstrate a more sustainable dividend paying ability versus
comparable funds in the same market and we are pleased to say that
we expect full coverage of dividends in 2021.
This is despite the additional dividend burden for H2 2021
created from the recent equity fundraising. We were careful to
demonstrate some restraint for this reason and kept our target at
GBP100m despite seeing much larger demand for shares.
As mentioned above, the deployment of the remainder of the
recent equity capital raised, as well as of the recently secured
debt funding, will take place during 2022 and early 2023. This
should drive down the revenue per MW level at which we can meet our
target dividend of 7p per share to significantly lower levels
compared with prior periods. The Board accordingly remains
confident that the current level of dividend is well supported.
With the issue of the Intergovernmental Panel for Climate Change
(IPCC) Report in August 2021 and the early responses from the UK
Government, it is clear that there is the appetite to accelerate
the deployment of renewables in the UK - especially offshore wind
which is continuing to increase substantially. The growing role for
batteries in providing grid balancing for this additional
intermittent generation supports our investment thesis of rising
future demand for power storage infrastructure.
John Leggate CBE, Chair
Date: 17 September 2021
3. INVESTMENT MANAGER'S REPORT
1. Information about the Manager
Gresham House Asset Management Limited (GHAM) is wholly owned by
Gresham House plc (GH), an AIM-quoted specialist alternative asset
manager. GH provides funds, direct investments and tailored
investment solutions, including co-investment across a range of
highly differentiated alternative strategies. GHAM's expertise
includes strategic public equity, private equity, forestry, new
energy, housing and other infrastructure.
Investment Portfolio
Map Ref. Existing Location Capacity Battery Site type* Commissioning Ownership
assets (MW) size (MWh) status status
======== =============== ================= =========== =========== ============= ============== =============
Battery and
generators,
0.5MW
1 Staunch Staffordshire 20 2.9 import Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery and
generators,
2 Rufford Nottinghamshire 7 9.5 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
3 Lockleaze Bristol 15 22.1 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
4 Littlebrook Kent 8 6.3 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery and
generators,
5 Roundponds Wiltshire 20 25.8 16MW import Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
6 Wolverhampton West Midlands 5 7.8 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
7 Glassenbury Kent 40 28.2 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
8 Cleator Cumbria 10 7.1 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
9 Red Scar Lancashire 49 74.3 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
10 Bloxwich West Midlands 41 46.6 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
11 Thurcroft South Yorkshire 50 75.0 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
12 Wickham Suffolk 50 74.0 40MW import Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
13 Tynemouth Tyne and Wear 25 12.5 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Glassenbury Battery,
14 Extension Kent 10 10.1 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
15 Nevendon Basildon 10 5.7 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
16 Port of Tyne Tyne and Wear 35 22.6 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery,
17 Byers Brae West Lothian 30 30 symmetrical Operational 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery, Target COD:
18 Enderby Leicestershire 50 50 symmetrical Q1 2022 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
Battery, Target COD:
19 West Didsbury Manchester 50 50 symmetrical Q1 2022 100% owned
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
20 Melksham Wiltshire 100 100 Battery, Target COD: 100% acquired
symmetrical H1 2022** subject to
satisfaction
of conditions
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
21 Coupar Angus Scotland 40 40 Battery, Target COD: 100% acquired
symmetrical Q1 2022 subject to
satisfaction
of conditions
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
22 Arbroath Scotland 35 35 Battery, Target COD: 100% acquired
symmetrical Q1 2022 subject to
satisfaction
of conditions
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
23 Penwortham Preston 50 50 Battery, Target COD: 100% acquired
symmetrical H2 2022 subject to
satisfaction
of conditions
--------------- ----------------- ----------- ----------- ------------- -------------- -------------
24 Grendon Northamptonshire 100 100 Battery, Target COD: H2 100% acquired
symmetrical 2022 subject to
satisfaction of
conditions
Total 850 885.5
-------------------------------- ----- ------ ------------------- -------------------- -------------------
*Note: a symmetrical battery system has equal import and export
capability to the grid; this increases the level of services the
site is able to operate.
**While the Melksham project is expected to have been completed
in Q1 2022, it is becoming likely that National Grid will not be in
a position to connect this project until Q2 2022, hence the change
from Q1 to H1 compared with previous reports. All other projects
scheduled to complete in Q1 2022 remain on track.
During H1 2021, five operational projects were added,
contributing a further 110MW in operational assets. These projects
are listed as 13 to 17 in the investment portfolio table.
Tynemouth, Nevendon and Port of Tyne added 70MW to what was
previously a 50MW portfolio of EFR contracted projects, added
through the acquisitions of Glassenbury and Cleator in 2019.
The two remaining additions included the 10MW extension to the
Glassenbury project in Kent, known as Glassenbury B, and Byers
Brae, a 30MW project, and our first in Scotland, located near
Livingston.
Pipeline Summary (as at 30 June 2021)
Map Ref. Pipeline Location Capacity (MW) Battery size Site type Commissioning
Projects (MWh) status
======== ================= ================= ============== ================ ================ ================
25 Monet's Garden North Yorkshire c.50 c.50 Battery, Target COD: H2
symmetrical 2022
----------------- ----------------- -------------- ---------------- ---------------- ----------------
26 Lister Drive Merseyside c.50 c.50 Battery, Target COD: H2
symmetrical 2022
----------------- ----------------- -------------- ---------------- ---------------- ----------------
Battery, Target COD: H2
27 Project E2 West Yorkshire 150 150 symmetrical 2022
----------------- ----------------- -------------- ---------------- ---------------- ----------------
Battery, Target COD: Q1
28 Stairfoot North Yorkshire 40 40 symmetrical 2022
----------------- ----------------- -------------- ---------------- ---------------- ----------------
Battery, Target COD: H2
29 Project B West Yorkshire 87 87 symmetrical 2022
----------------- ----------------- -------------- ---------------- ---------------- ----------------
Battery, Target COD: H2
30 Project Y York 50 50 symmetrical 2022
----------------- ----------------- -------------- ---------------- ---------------- ----------------
Total c.427 c.427
----------------- ----------------- -------------- ---------------- ---------------- ----------------
It remains the ambition of the Manager to connect all the
projects in the tables above during 2022, or in Q1 2023 using a
combination of the GBP220m in equity raised since last November
2020 and the GBP180m debt facility just secured.
It is anticipated that the total cost of acquisition and
commissioning projects will fall meaningfully, as previously
disclosed, compared with projects acquired prior to the granting of
the change in Investment Policy in November 2020 which allows the
Company to take construction risk with capital equivalent to 10% of
the Company's Gross Asset Value (GAV).
As previously reported, planning laws have changed in Great
Britain, allowing projects of greater than 50MW and the Manager is
pleased to report that it is taking advantage of this change, with,
currently, three projects which are greater than 50MW in size .
The Manager is now considering its pipeline for 2023 and beyond
as the current suite of projects head into construction with
completion expected in 2022. The Investment Manager remains
confident of its ability to grow its pipeline and to maintain the
growth of the Company. This is despite some evidence in the market
of increasing developer premiums as new participants enter the
market.
2. Fund and portfolio performance
The Portfolio has performed well in the first half of 2021,
generating net earnings for dividend cover of GBP19.7m resulting in
dividend cover in the Company of 1.38x, excluding lockbox income.
Dividend cover at this level is gratifying, given that much of
capital raised in November 2020 is still being deployed (see
further below).
The Company therefore remains on track to distribute 7.0p per
Ordinary Share in 2021 and anticipates that dividends will be fully
covered in 2021. The latter is in spite of the further GBP100m in
equity raised in July, committed to projects already that are
scheduled to commission during 2022. The Company paid, on 30 July
(declared ex-dividend before the close of the last fundraising)
1.75p per share for the period from 1 April to 30 June 2021,
resulting in total dividends for the half year of 3.5p per
share.
The Ongoing Charges Figure (OCF) for the Fund for the year to 31
December 2020 was 1.26%, which we believe is lower than comparable
listed funds in the market. For the six-month period ended 30 June
2021 the Ongoing Charges Figure was 1.27%. Over time the OCF is
expected to decline, driven by the rising Net Asset Value of the
Company which then drives a drop in incremental management fees to
the Manager to 0.9% (from 1.0%) above GBP250m and then to 0.8%
above GBP500m.
Frequency response continued to dominate the revenue mix, as
expected given the shortage of BESS capacity to meet the National
Grid's demand for this service.
Trading income generated 5.5% of revenues in the period, and
this was driven mostly by opportunities early in the year when, as
reported in the Annual Report and Accounts for 2020, volatility
reached extreme levels.
H1 2021 portfolio asset revenue Revenue Share of total
(GBPm) operating revenue
(%)
Firm Frequency Response FFR 0.62 2.5%
======== ===================
Enhanced Frequency Response
EFR 5.25 21.0%
======== ===================
Dynamic Containment DC 16.18 65.0%
======== ===================
Frequency Response Total 22.04 88.5%
======== ===================
Trading 1.36 5.5%
======== ===================
Capacity Market 1.53 6.0%
======== ===================
Operating revenues from assets
owned 24.93
========
The operational uptime of our asset portfolio at 99.4% has been
strong with most sites achieving close to their potential.
Degradation of the batteries remains modest as a result of their
application in Dynamic Containment. However, the financial
projections have not been altered in terms of when upgrades need to
take place in order to provide some margin of safety, which the
Manager deems appropriate as the use of batteries is still so
nascent and other factors may yet influence degradation less
favourably.
In terms of construction operations, the sites that have been
committed to for Q1 2022 (or H1 2022 in the case of Melksham) have
been de-risked as much as possible in terms of long lead items.
Meanwhile, in terms of construction programmes, work is set to
start in earnest at all sites in September 2021. For completeness,
this applies to the 275MW announced which committed the GBP120m
raised in November 2020 (Enderby, West Didsbury, Melksham, Coupar
Angus and Arbroath) and 40MW (Stairfoot) of the further 240MW
announced during the recent fundraising in July 2021 in order to
commission the sites in Q1 2022. As mentioned earlier in this
section, while the Melksham project's construction is scheduled to
complete in Q1 2022, National Grid has indicated that it will not
be possible to secure a winter (defined as the period between
winter clock changes) outage and so this project may not be
commissioned until Q2 2022.
All other sites not included above, including those already
acquired but not operational or in the pipeline, are in the design
and construction evaluation phase, with the aim of finalising
pre-construction arrangements during the remainder of this
year.
3. Market update
Compared with the situation in mid 2020, the backdrop is much
improved as the importance of BESS' role in providing flexibility
has become increasingly clear. This is reflected in the analysis
below.
There are three key trends that we follow in the market
today:
i) Developments in the frequency response market, in terms of demand and innovation
ii) The trading backdrop through evaluation of demand and the generation mix
iii) Total installed capacity of BESS systems in the UK
Taking each of these in turn:
i) Frequency response market
This market has evolved very significantly, with overall demand
almost 1GW higher than it was this time last year, thanks to the
launch of Dynamic Containment in October 2020. The industry also
has Dynamic Modulation and Dynamic Regulation services to look
forward to which are expected to launch in H2 2021. It is also
important to note that Enhanced Frequency Response contracts will
expire and will not be replaced (200MW) and Firm Frequency Response
or FFR will be gradually phased out as new services bed in. Overall
demand is expected to increase although demand is also seasonal
with greater demand in the summer months.
Another important development in this marketplace is that
four-hourly contracting will begin in September this year. As such,
demand will not just be seasonal but also vary intraday, with
evening demand being lower. This is likely to lead to saturation of
the night-time frequency response market first. As we see this
happen, we will be on alert to favour trading activities for the
first time.
Despite the gradual saturation of the frequency response market
over the next 12 to 18 months, we are excited about the market
migrating to its long-term positioning by providing half hourly
energy supply and demand balancing through batteries being traded
in the Balancing Mechanism or the wholesale market.
ii) Trading outlook
It is worth reflecting on the importance of events in 2020 that
has led to the improved trading backdrop today.
In Q3 2020, in particular, trading conditions were challenging
with demand up to 20% below normal levels and gas prices at
multi-decade lows, depressing intraday peak power prices as demand
was being met by zero marginal cost renewables or very low-cost gas
fired generation (due to the low gas prices).
The biggest challenge however was the consistent use by National
Grid of gas-fired generation to balance supply and demand, rather
than batteries, which are a cheaper and more carbon-efficient
solution. The environment in 2020 highlighted the need for energy
storage as this use of gas fired generation in the Balancing
Mechanism (to balance supply and demand in each half hourly trading
period) proved very expensive to the end consumer and wasteful of
renewable energy, which was curtailed in record quantities.
This environment also catalysed the decommissioning of gas-fired
generation with the Calon Energy Ltd fleet going into
administration. Sutton Bridge, one of the three sites in the Calon
Energy fleet portfolio of three with 850MW of capacity, is being
decommissioned despite entering operations as recently as 1999.
This gradual decommissioning reduces the amount of gas-fired
generation able to behave flexibly, revealing the true underlying
volatility in supply and demand imbalances as renewables roll out
further. This is starting to be reflected in higher power prices
and is further supported by rising electricity demand for the first
time in over a decade.
iii) Total installed capacity of BESS
Total installed capacity of BESS has increased, but it is
proving a slow process as it takes time to develop these sites. As
such, installed capacity has increased from c.1.1GW at the start of
2021 to c.1.3GW today and is expected to increase to c.1.5GW by the
end of 2021. While this is a significant percentage increase, it is
from a low base and lags the deployment of renewables. As a result,
BESS installations are not keeping up with the needs of the system.
An indicator of this is the continued rise in the underlying trend
in the system balancing costs as batteries are still mostly used
for frequency response and more expensive options remain the norm
for National Grid in terms of what sort of generation they rely on
to provide reserve capacity and flexible generation.
4. Valuation
NAV per share has risen from 102.96p per Ordinary Share at 31
December 2020 to 109.89p per Ordinary Share at 30 June 2021. This
equates to a NAV Total Return (i.e. including dividends) of 10.03%
in the six-month period.
Most of the increase in the NAV per share is driven by the
revaluation of recently commissioned projects, while a net
improvement in forecasts, driven by a recovery in revenue
assumptions following a drop in 2020 also contributed positively,
despite the impact of higher tax rate assumptions following the
Government's last Budget.
The key changes in the valuation bridge above, over and above
the changes seen in the NAV per share bridge, are from the
acquisitions that have taken place this year. Modelling of further
tax efficiencies available to the portfolio offset the decrease in
value from higher tax rates. Inflation assumptions were reduced
slightly from 2030 with the largest impact being on revenue
expectations in outer years.
5. Principal Risks and Uncertainties
Risk management approach
The Company recognises that effective risk management is
critical to enable it to meet its strategic objectives. The Company
has a clear framework for identifying and managing risk, both at an
operational and strategic level. Its risk identification and
mitigation processes have been designed to respond to the changing
environment in which it operates. The impact of emerging risks on
the Company's business model are also considered and used to make
informed decisions, including as to the delivery and evolution of
the Company's strategy. The table below captures those risks that
would have the most significant adverse impact on the Company (and
the underlying investments), based on their impact and/or
likelihood.
Risk area Gross impact Mitigation Net impact
1. Environmental, BESS are manufactured, The supply for battery Some aspects of
Social and installed and operated manufacture relies on high this are still
Governance with the intention quality global partners evolving over
of driving the who ensure their supply time, especially
transformation chain does not involve the end use /
to a low carbon the use of illegally or recycling of BESS.
energy supply in unethically sourced "rare
the UK. However, earth" materials or poor However, the ability
the lifecycle ESG labour standards. of the BESS market
impact of the batteries to drive a low
needs to be considered The recycling of the BESS carbon electricity
and minimised. systems is subject to constant system needs to
development and research: be considered
the importer of these batteries versus the other,
(not the Company) is responsible mainly fossil
for their disposal, but fuelled, options
the Company will facilitate when considering
this to ensure low environmental the overall ESG
impact. impact of BESS.
------------------------------ ---------------------------------- -------------------------
2. Emerging Adverse changes The Company's investments Battery energy
business model by National Grid enjoy several different storage is a versatile
and impact in relation to income streams ranging asset, and it
on revenue services contracted from Balancing Mechanism, can perform a
streams by them may reduce Capacity Payments, Firm variety of roles
the size / scope Frequency Response, TRIADs to manage risk.
of income earning and Dynamic Containment
opportunities to (soft launched in October There is also
the Company's investments. 2020) as contracted services the potential
to National Grid: the Company's to "revenue stack"
investments are able to and gain multiple
change which income streams revenue streams
are contracted and ascertain from different
the most advantageous on services.
any given time period.
Due to the decommissioning
of other carbon intensive
options available to National
Grid for managing these
services, BESS is expected
to form an integral part
of transforming the electricity
sector in the UK.
------------------------------ ---------------------------------- -------------------------
3. Operational The BESS do not The Company underwent a The Company has
and performance perform in the programme of upgrades to substantial experience
risk manner expected the Seed Assets to optimise managing BESS
(i.e. degradation these assets and has ensured assets and works
in performance) that new assets are designed with leading asset
or are not optimised in a flexible manner. The optimisers to
in the best commercial battery duration is also ensure assets
manner to capture considered to ensure fullest are designed and
revenue streams. flexibility for future operated as expected.
operation.
Performance may Health and Safety
not meet planning Design and commissioning performance is
or safety requirements testing ensure all relevant rigorously tested
and result in curtailment planning and HSE conditions and reviewed.
of operations. are met. Fire risk, in
particular, is carefully
The Portfolio will assessed and sites are
rely on contracts designed and operated to
with suppliers ensure this risk is as
to maintain certain low as practicable.
key equipment:
these suppliers The portfolio has a number
may fail to provide of different suppliers
adequate support. to manage risk.
------------------------------ ---------------------------------- -------------------------
4. Investment The Company invests The Company does not invest Limited exposure
in development in projects via in speculative project to the Company
and construction loans before the development. Any investments due to careful
projects projects are owned in projects are carefully vetting and management
by the Company. assessed and vetted by of project development
There is a risk the Investment Manager: activities and
that the project they will have secured commercial arrangements
does not complete, certain minimum requirements with the Manager
and the Company and are expected to be to manage construction
incurs financial ready to proceed to construction risk.
loss. in a relatively short timescale.
The Company invests The Company is usually
in construction investing in the advance
projects. There purchase of equipment which
is a risk of financial has inherent value and
loss or delay can be used on other projects
if needed.
---------------------------- ---------------------------------- -------------------------
5. Emerging The Company invests The Company utilises proven Falling cost of
technology in battery storage technologies with associated batteries may
projects: a new Tier 1 supplier warranties reduce future
or disruptive and performance guarantees. income streams
technology might if new entrants
adversely impact Whilst the cost of these have significantly
on the Company's batteries is expected to lower marginal
investments. continue to fall and incremental costs. However,
performance improvements the Company will
accrue in future, it is also benefit from
unlikely that a completely lower costs and
new and reliable technology the valuation
will appear during the model assumes
lifetime of these batteries. continuing cost
reductions for
The Company continues to replacement assets
review available technologies. over time.
---------------------------- ---------------------------------- -------------------------
6. COVID-19 The pandemic can Energy was, and remains, Limited overall
pandemic impact adversely a key industry in the UK impact expected
both on delivery and the construction of in the future.
of new battery these assets continues.
capacity projects Remote commissioning with
in construction overseas technical experts
through labour was utilised to ensure
travel restrictions project commissioning could
or inability to continue.
source key materials
/ parts from overseas Shipping costs and capacity
due to shipping to deliver equipment for
problems or production new projects remains a
shortages. concern, many components
are sourced overseas and
the Investment Manager
works closely with key
providers to ensure key
components are ordered
in advance.
---------------------------- ---------------------------------- -------------------------
5. BOARD OF DIRECTORS AND INVESTMENT TEAM
The Board
The Company has a Board of four Independent Non-Executive
Directors.
John Leggate CBE, FREng (Chair and Independent Non-Executive
Director) - John is highly experienced as an energy sector
executive and is a venture investor in the "clean tech" and digital
technologies. John has significant board experience and is
currently on the board of cyber security rm Global Integrity in
Washington DC and is a senior advisor in the energy sector to a
"blue chip" international consultant. John was appointed to the
Board on 24 August 2018
Significant interests: John is a Director of Flamant
Technologies and Global Integrity, Inc.
Duncan Neale (Audit Committee Chair and Independent
Non-Executive Director) - Duncan is a CFO and Finance Director with
over 20 years of commercial experience working for both publicly
listed and privately-owned companies. Duncan is a Fellow of the
Institute of Chartered Accountants and quali ed with Price
Waterhouse in London. Duncan was appointed to the Board on 24
August 2018.
Significant interests: Duncan is a Trustee of the Cambodian
Children's Fund UK and a Director of DJN Consultancy Limited.
Catherine Pitt (Chair of the Nominations Committee and
Independent Non-Executive Director) - Cathy is a legal adviser who
has specialised in the investment company sector for over 20 years.
Cathy is currently a consultant partner at CMS, a top 10 global law
firm. Cathy was appointed to the Board on 1 March 2019.
Significant interests: Cathy is a Consultant and former Partner
at CMS Cameron McKenna Nabarro Olswang LLP and a Director of
Baillie Gifford UK Growth Trust PLC.
David Stevenson (Chair of the Remuneration Committee and
Independent Non-Executive Director) - David is a nancial journalist
and commentator for a number of leading publications including The
Financial Times (the Adventurous Investor), Citywire, and
MoneyWeek. He is also Executive Director of the world's leading
alternative nance news and events service www.alt .com, which
focuses on covering major trends in marketplace lending,
crowdfunding and working capital provision for small to medium
sized enterprises as well as www.ETFstream.com . David was
appointed to the Board on 24 August 2018.
Significant interests: David is a Director of Aurora Investment
Trust plc; 321 Publishing and TV Limited; Altfi Limited; Altfi Data
Limited; Bramshaw Holdings Limited; ETF Stream Limited; Planet
Sports Rights Limited; Rocket Media LP; The Secured Income Fund
plc; Stockmarkets Digest Limited; and Windhorse Aerospace
Limited.
The Board has 25% female representation. The Board has also
adopted a formal diversity policy and considers diversity on the
Company's Board as an important supplement to the Board's existing
skills, experience and knowledge.
All appointments to the Board are, and will continue to be,
subject to a formal, rigorous and transparent procedure as required
by the AIC Code. The Board's requirements for vacancies on the
Board are set with reference to objective criteria and promote
diversity of gender, social and ethnic backgrounds, cognitive and
personal strengths.
Further, the Board reviews, at least annually, its effectiveness
and its combination of skills, experience and knowledge. The Board
conducts an externally facilitated effectiveness evaluation every
three years, with its first such evaluation taking place during
2021.
The Board has been in situ since the Company's IPO in November
2018. While it is too early to be considering formal succession
planning for existing Directors, the Board will focus on this
matter further as part of its annual Board Evaluation process from
2021 onwards.
The Investment Team
Ben Guest (Managing Director, New Energy)
Ben has 26 years of investment experience, Ben's expertise spans
the investment spectrum, across infrastructure, public equities and
venture capital.
Ben is responsible for the origination and execution of
investment opportunities at Gresham House, alongside ongoing
portfolio management.
Ben currently serves as a Director of over 40 companies and
until recently was the Non-Executive Chairman of Oxis Energy, a UK
advanced battery power company.
Bozkurt Aydinoglu (Investment Director, New Energy)
Bozkurt dedicated the early part of his career to funding and
advising companies in the telecommunications and technology
industries, whilst in roles at Nomura, Salomon Brothers, Bowman
Capital and Deloitte & Touche.
In 2002, Bozkurt cofounded and built New Energy Finance (NEF),
which became the leading provider of data, research and analysis to
investors in the global cleantech industry. NEF was acquired by
Bloomberg in December 2009.
Gareth Owen (Investment Director, New Energy)
Gareth was a Partner at Hazel Capital (now Gresham House New
Energy) and has over 18 years' experience executing structured
transactions across a variety of sectors.
Before Hazel Capital, Gareth worked at Barclays Natural Resource
Investments, a captive private equity fund investing in the natural
resource and renewable energy sectors.
Prior to this, Gareth worked in the Structured Capital Markets
divisions of Barclays Capital and Deutsche Bank, handling the
acquisition and disposal of various asset-based companies.
Rupert Robinson (Managing Director, Gresham House Asset
Management Limited)
Rupert is the Managing Director of Gresham House Asset
Management Limited and has 30 years' experience in asset management
and wealth management, focused on product innovation, investment
management, business development, banking and wealth
structuring.
Rupert was previously CEO and CIO of Schroders (UK) Private Bank
and head of private clients at Rothschild Asset Management
Limited.
Stephen Beck (Finance Director, Real Assets)
Stephen has 25 years of industry experience and is a law
graduate and Barrister and was called to the Bar in 1996. He is
also a Fellow of the Institute of Chartered Accountants of England
and Wales and qualified with PricewaterhouseCoopers.
He joined FIM Services Limited in 2013 which was then acquired
by Gresham House in 2018. Within Gresham House, he leads an
in-house finance team managing the New Energy, Renewables,
Commercial Forestry and Housing strategies.
Prior to this, Stephen worked at E.ON, where he held a variety
of financial and commercial roles, ranging from leading large
finance teams, developing power station projects, M&A
transactions and working with HM Government delivering low carbon
solutions.
6. DIRECTORS' REPORT
The Directors present the Interim Report and Accounts of the
Company for the period ended 30 June 2021.
The Directors during the period, including their appointment
dates, are set out in the Board of Directors summary on page
12.
Company Performance
The Directors have reviewed the performance of the Company
throughout the period. Details of the performance of each
investment owned by the Company are included the Investment
Manager's Report on page 5.
The Directors and Investment Manager have developed several
tools to review ongoing performance. These include ongoing monthly
and quarterly dashboards detailing the performance of each
investment in relation to the individual income streams expected of
each investment and performance against costs. As the Company
deploys capital raised the Directors have a focus on the underlying
investment model for each new investment to ensure it meets the
Investment Objectives of the Company.
The Directors are satisfied that underlying performance is being
developed in line with expectations: the rollout programme of new
investments and upgrades and extensions of investments acquired at
IPO is continuing to progress well and has ensured an increasing
level of operational performance throughout 2021 so far, which is
summarised within the Chair's Statement on page 3.
Financial Risk Management
The Board believes that the main financial risks of the Company
relate to the requirement to ensure the capital commitments of the
Company are commensurate with the capital available and the ability
of the underlying investments to generate income to the Company to
ensure the targeted dividend payments can be paid to investors. The
Board constantly monitors these financial risks.
At the present time, the Company and its underlying investments
are subject only to GBP8m bonds as financial leverage. Following
the successful debt raised these bonds will be redeemed. The
Company has the ability to assume up to 50% of gearing. The current
facility is anticipated to result in 25-30% gearing once fully
drawn.
Share capital
At the period end, the Company had in issue 348,556,364 Ordinary
Shares. There are no other share classes in issue. All shares have
voting rights; each Ordinary Share has one vote.
All Ordinary Shares entitled to receive dividends and interim
dividends have been paid by the Company, as shown in the table
below. No final dividend has been or will be declared, but the
Company's dividend policy of paying four interim dividends will be
tabled for approval at each annual general meeting.
Period in relation Announcement Ex-dividend Payment Amount per Total amount
to which dividend date date date Ordinary
was paid Share
1 October to 31 19 February 4 March 2021 26 March 1.75p GBP6,099,736.37
December 2020 2021 2021
------------- ------------- ------------- ----------- ----------------
1 January to 31 28 April 13 May 2021 4 June 2021 1.75p GBP6,099,736.37
March 2021 2021
------------- ------------- ------------- ----------- ----------------
1 April to 30 June 1 July 2021 8 July 2021 30 July 2021 1.75p GBP6,099,736.37
2021
------------- ------------- ------------- ----------- ----------------
Dividends are not recognised in the financial statements of the
Company until paid.
The results of the Company are disclosed in the Investment
Manager's Report on page 5 of this Interim Report and Accounts
.
Substantial interests
As at the date of this Interim Report and Accounts , the Company
had been notified of the following beneficial interests exceeding
3% of the issued share capital, being 437,842,078 Ordinary
Shares.
Shareholder Number of Percentage
Ordinary of issued
Shares to share capital
date to date
Sarasin & Partners LLP 34,852,576 7.96%
----------- ---------------
Gresham House plc 25,857,647 5.91%
----------- ---------------
CCLA Investment Management
Limited 21,814,131 4.98%
----------- ---------------
Newton Investment Management
Limited 21,757,672 4.97%
----------- ---------------
Gravis Capital Management 21,062,210 4.81%
----------- ---------------
Close Asset Management
Limited 20,440,570 4.67%
----------- ---------------
Schroders plc 20,200,797 4.61%
----------- ---------------
East Riding Pension Fund 13,936,616 3.18%
----------- ---------------
Benjamin Guest (and family) 14,383,826 3.29%
----------- ---------------
Annual General Meeting
The Company's second Annual General Meeting (AGM) was held on 21
June 2021. All resolutions proposed to the Company's shareholders
at this AGM were duly passed on a poll vote.
Directors Remuneration and Interests
Details of the gross fees paid to Directors in the period are
set out below.
Fixed salary Short term Total fixed Total variable
and fees for variable pay remuneration remuneration
period from period from period from period from
1 Jan 2021 1 Jan 2021 1 Jan 2021 1 Jan 2021
to 30 June to 30 June to 30 June to 30 June
2021 2021 2021 GBP 2021 GBP
GBP GBP
Catherine Pitt 22,500 - 22,500 -
-------------- -------------- -------------- ---------------
David Stevenson 22,500 - 22,500 -
-------------- -------------- -------------- ---------------
Duncan Neale 31,250 - 31,250 -
-------------- -------------- -------------- ---------------
John Leggate 40,000 - 40,000 -
-------------- -------------- -------------- ---------------
Total fixed remuneration 116,250 - 116,250 -
-------------- -------------- -------------- ---------------
In accordance with FCA Listing Rules 9.8.6(R)(1), Directors'
interest in the shares of the Company (in respect of which
transactions are notifiable to the Company under FCA Disclosure and
Transparency Rule 3.1.2(R)) as at the date of this Interim Report
and Accounts are shown below:
Director No. of Ordinary Percentage of
Shares total issued
share capital
Catherine Pitt 23,093 0.0053%
---------------- ---------------
David Stevenson 18,330 0.0042%
---------------- ---------------
Duncan Neale 13,425 0.0031%
---------------- ---------------
John Leggate 46,875 0.0107%
---------------- ---------------
Total Shares 101,723
---------------- ---------------
Directors' responsibilities
The Directors are responsible for preparing the Interim Report
and Accounts in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
are required to prepare the financial statements and have elected
to prepare the company financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006. Under company law the
Directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Company
for that period.
In preparing these financial statements, the Directors are
required to:
-- select suitable accounting policies and then apply them consistently;
-- make judgements and accounting estimates that are reasonable and prudent;
-- state whether they have been prepared in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 subject to any material
departures disclosed and explained in the financial statements;
and
-- prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities. The Directors are responsible
for ensuring that the Interim Report and Accounts, taken as a
whole, are fair, balanced, and understandable and provide the
information necessary for shareholders to assess the Company's
performance, business model and strategy.
Website publication
The Directors are responsible for ensuring the Interim Report
and Accounts are made available on the Company's website. Financial
statements are published on the Company's website in accordance
with legislation in the United Kingdom governing the preparation
and dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website is the responsibility of the Directors.
The Directors' responsibility also extends to the ongoing integrity
of the financial statements contained therein.
Directors' responsibilities
The Directors confirm to the best of their knowledge:
-- the Interim Report and Accounts have been prepared in
accordance with International Accounting Standard 34 "Interim
Financial Reporting" and give a true and fair view of the assets,
liabilities, financial position and profit or loss of the
Company;
-- the Chair's Statement and Interim Investment Manager's Report
include a fair review of the development, performance and position
of the Company and a description of the principal risks and
uncertainties, that it faces for the next six months as required by
DTR 4.2.7.R of the Disclosure Guidance and Transparency Rules;
and
-- the Investment Manager's Interim Report and Note 21 to the
Condensed Financial Statements include a fair review of related
party transactions and changes therein, as required by DTR 4.2.8.R
of the Disclosure Guidance and Transparency Rules.
Insurance cover
Directors' and Officers' liability insurance cover is held by
the Company in respect of the Directors.
Corporate governance
The Board of Gresham House Energy Storage Fund plc (the Company)
has considered the Principles and Provisions of the 2019 AIC Code
of Corporate Governance (the "AIC Code"). The AIC Code addresses
the Principles and Provisions set out in the UK Corporate
Governance Code (the UK Code), as well as setting out additional
Provisions on issues that are of specific relevance to the
Company.
The Board considers that reporting against the Principles of the
AIC Code, which has been endorsed by the Financial Reporting
Council, provides more relevant information to shareholders.
The Company has complied with the Principles and Provisions of
the AIC Code save in respect of the appointment of a Senior
Independent Director. The Company has not appointed a Senior
Independent Director as the Board considered this to be unnecessary
as the function of a Senior Independent Director is performed by
all of the Directors in their support for the Chair and their
availability to engage with shareholders on key issues. The Board
will review this requirement during the 2021 board effectiveness
assessment.
The AIC Code is available on the AIC website
(https://www.theaic.co.uk/aic-code-of-corporate-governance). It
includes an explanation of how the AIC Code adapts the Principles
and Provisions set out in the UK Code to make them relevant for
investment companies.
Going Concern
The Directors have adopted the going concern basis in preparing
this Interim Report and Accounts . The Going Concern Statement is
detailed on page 23 of this Interim Report and Accounts .
Future Developments
Future developments in the Company are detailed in the Chair's
Statement on page 3 and the Investment Manager's Report on page
5.
Post Balance Sheet Events
Post Balance Sheets are disclosed in Note 23 of the Accounts on
page 36.
This Directors' Report is approved on behalf of the Board by
John Leggate CBE, FREng
Chair
17 September 2021
7. UNAUDITED CONDENSED FINANCIAL STATEMENTS
7.1. Unaudited Condensed Statement of Comprehensive Income
For the period from 1 January 2021 to 30 June 2021
Company number 11535957
1 January 2021 to 30 June 2021 Notes Revenue Capital Total
unaudited unaudited unaudited
(GBP) (GBP) (GBP)
------------------------------------------ ------ ------------ ------------ ------------
Net gain on investments at fair
value through the profit and loss 5 10,670,174 27,891,255 38,561,429
Other income 90,000 - 90,000
------------------------------------------ ------ ------------ ------------ ------------
Total income 10,760,174 27,891,255 38,651,429
Transaction fees - 57,355 57,355
Legal and professional fees - (229,901) (229,901)
Other administrative expenses 7 (2,153,981) - (2,153,981)
------------------------------------------ ------ ------------ ------------ ------------
Total administrative and other expenses (2,153,981) (172,546) (2,326,527)
Profit before tax 8,606,193 27,718,709 36,324,902
Taxation 8 - - -
------------------------------------------ ------ ------------ ------------ ------------
Profit after tax and total comprehensive
income for the period 8,606,193 27,718,709 36,324,902
------------------------------------------ ------ ------------ ------------ ------------
Profit per share (basic and diluted)
- pence per share 9 2.47 7.95 10.42
1 January 2020 to 30 June 2020 Notes Revenue Capital Total
unaudited unaudited unaudited
(GBP) (GBP) (GBP)
------------------------------------------ ------ ------------ ------------ ------------
Net gain/(loss) on investments at
fair value through the profit and
loss 5 4,631,312 (4,162,440) 468,872
Interest on loans to related parties 6 781,088 - 781,088
Bank interest 23,037 - 23,037
Other income 75,295 - 75,295
Total income/(loss) 5,510,732 (4,162,440) 1,348,292
Administrative and other expenses
Transaction fees - (83,376) (83,376)
Legal and professional fees - (306,771) (306,771)
Other administrative expenses 7 (1,413,551) - (1,413,551)
------------------------------------------ ------ ------------ ------------ ------------
Total administrative and other expenses (1,413,551) (390,147) (1,803,698)
------------------------------------------ ------ ------------ ------------ ------------
Profit/(loss) before tax 4,097,181 (4,552,587) (455,406)
------------------------------------------ ------ ------------ ------------ ------------
Taxation 8 - - -
------------------------------------------ ------ ------------ ------------ ------------
Profit/(loss) after tax and total
comprehensive income for the period 4,097,181 (4,552,587) (455,406)
Profit(loss) per share (basic and
diluted) - pence per share 9 1.83 (2.03) (0.20)
All items dealt with in arriving at the result for the period
relate to continuing operations.
The notes on pages 23 to 36 form an integral part of these
Condensed Financial Statements.
7.2. Unaudited Condensed Statement of Financial Position
As at 30 June 2021
Company number 11535957
Notes 30 June 2021 31 December 2020
unaudited audited
(GBP) (GBP)
Non-current assets
Investment in subsidiaries
at fair value through
profit or loss 10 322,270,287 248,964,175
Other equity investments 10 238,095 -
322,508,382 248,964,175
Current assets
Cash and cash equivalents 12 61,154,974 110,967,025
Trade and other receivables 13 420,727 274,427
Loans receivable 11 - -
61,575,701 111,241,452
Total assets 384,084,083 360,205,627
----------------------------- ------ ------------- -----------------
Current liabilities
Trade and other payables 14 (1,068,243) (1,315,217)
----------------------------- ------ ------------- -----------------
(1,068,243) (1,315,217)
Total net assets 383,015,840 358,890,410
----------------------------- ------ ------------- -----------------
Shareholders' equity
Share capital 19 3,485,564 3,485,564
Share premium 19 251,601,260 251,601,260
Merger relief reserve 20 13,299,017 13,299,017
Capital reduction
reserve 20 51,924,145 64,123,617
Capital reserves 20 40,586,071 12,867,362
Revenue reserves 20 22,119,783 13,513,590
----------------------------- ------ ------------- -----------------
Total shareholders'
equity 383,015,840 358,890,410
----------------------------- ------ ------------- -----------------
Net asset value per
share (pence) 18 109.89 102.96
The Interim Report and Accounts were approved and authorised for
issue by the Board of Directors and are signed on its behalf
by:
________________________
John Leggate CBE, FREng
Chair
Date: 17 September 2021
The notes on pages 23 to 36 form an integral part of these
Condensed Financial Statements.
7.3. Unaudited Condensed Statement of Changes in Equity
For the period from 1 January 2021 to 30 June 2021
1 January 2021 to 30 June 2021
Notes Share Share Merger Capital Capital Revenue Total
capital premium relief reduction reserves reserves shareholders'
reserve reserve reserve equity
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
--------------- ------ ---------- ------------ ----------- ------------- ----------- ----------- --------------
As at 1
January
2021 3,485,564 251,601,260 13,299,017 64,123,617 12,867,362 13,513,590 358,890,410
Comprehensive
income for
the period - - - - - - -
Profit for
the period - - - - 27,718,709 8,606,193 36,324,902
--------------- ------ ---------- ------------ ----------- ------------- ----------- ----------- --------------
Total
comprehensive
income for
the period - - - - 27,718,709 8,606,193 36,324,902
Transactions with
owners
Dividends
paid 19 - - - (12,199,472) - - (12,199,472)
As at 30 June
2021 19 3,485,564 251,601,260 13,299,017 51,924,145 40,586,071 22,119,783 383,015,840
--------------- ------ ---------- ------------ ----------- ------------- ----------- ----------- --------------
1 January 2020 to 30 June 2020
Notes Share Share Merger Capital Capital Revenue Total
capital premium relief reduction reserves reserves shareholders'
reserve reserve reserve equity
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
-------------------- ---------- ------------ ------------- -------------- ------------ ---------- --------------
As at 1 January
2020 2,042,707 104,380,109 13,299,017 78,465,533 4,124,431 3,567,563 205,879,360
Comprehensive
income for
the period - - - - - - -
(Loss)/profit
for the period - - - - (4,552,587) 4,097,181 (455,406)
---------------- --- ---------- ------------ ------------- -------------- ------------ ---------- --------------
Total
comprehensive
income for
the period - - - - (4,552,587) 4,097,181 (455,406)
Transactions
with owners
Ordinary Shares
issued at
a premium
during the
period 19 300,000 30,900,000 - - - - 31,200,000
Share issue
costs 19 - (509,930) - - - - (509,930)
Dividends
paid 19 - - - (6,142,442) - - (6,142,442)
As at 30 June
2020 19 2,342,707 134,770,179 13,299,017 72,323,091 (428,156) 7,664,744 229,971,582
---------------- --- ---------- ------------ ------------- -------------- ------------ ---------- --------------
The notes on pages 23 to 36 form an integral part of these
Condensed Financial Statements
7.4. Unaudited Condensed Statement of Cash Flows
For the period from 1 January 2021 to 30 June 2021
Note 1 January 1 January
2021 2020
to 30 June to 30 June
2021 2020
Unaudited Unaudited
GBP GBP
--------------------------------------- ----- ------------- -------------
Cash flows used in operating
activities
Profit/(loss) for the period 36,324,902 (455,406)
Net gain on investments at fair
value through profit and loss 5 (27,891,255) (468,872)
Interest income 5 (10,670,174) (804,125)
(Increase)/decrease in trade
and other receivables (146,300) 156,021
(Decrease)/increase in trade
and other payables (246,973) (1,310,279)
--------------------------------------- ----- ------------- -------------
Net cash used in operating activities (2,629,800) (2,882,661)
Cash flows used in investing
activities
Loans made to subsidiaries 10 (34,744,684) (12,319,675)
Loans receivable 11 - (20,165,028)
Equity investments (238,095) -
Inflow from restricted cash - 10,843,595
Bank interest received - 23,037
Net cash used in investing activities (34,982,779) (21,618,071)
Cash flows (used in) / generated
from financing activities
Proceeds from issue of Ordinary
Shares at a premium 19 - 31,200,000
Share issue costs 19 - (509,929)
Issue of redeemable preference - -
shares
Redemption of redeemable preference - -
shares
Dividends paid (12,199,472) (6,142,442)
Net cash (outflow)/inflow from
financing activities (12,199,472) 24,547,629
Net (decrease)/increase in cash
and cash equivalents for the
period (49,812,051) 46,897
--------------------------------------- ----- ------------- -------------
Cash and cash equivalents at
the beginning of the period 110,967,025 52,905,852
--------------------------------------- ----- ------------- -------------
Cash and cash equivalents at
the end of the period 61,154,974 52,952,749
--------------------------------------- ----- ------------- -------------
The notes on pages 23 to 36 form an integral part of these
Condensed Financial Statements
7.5. Notes to the Unaudited Condensed Financial Statements
For the period from 1 January 2021 to 30 June 2021
1. General information
Gresham House Energy Storage Fund plc (the Company) was
incorporated in England and Wales on 24 August 2018 with company
number 11535957 as a closed-ended investment company. The Company's
business is as an investment trust within the meaning of Chapter 4
of Part 24 of the Corporation Tax Act 2010. The registered office
of the Company is The Scalpel, 18th Floor, 52 Lime Street, London,
EC3M 7AF. Its share capital is denominated in Pounds Sterling (GBP
or GBP) and currently consists of Ordinary Shares. The Company's
principal activity is to invest in a diversified portfolio of
operating utility-scale Energy Storage Systems (BESS), which
utilise batteries and may also utilise generators. The BESS
projects comprising the portfolio are located in diverse locations
across Great Britain. These interim Financial Statements cover the
period from 1 January 2021 to 30 June 2021, with a comparative
period from 1 January 2020 to 30 June 2020.
2. Basis of preparation
Statement of compliance
The Interim Report and Accounts have been prepared in accordance
with International Accounting Standard 34 'Interim Financial
Reporting' as adopted by the European Union. The Condensed
Financial Statements have been prepared on a historical cost basis
except for financial assets and liabilities at fair value through
the profit or loss. The accounts have been prepared on a basis that
is consistent with accounting policies applied in the preparation
of the Company's Annual Financial Statements for 31 December
2020.
Where presentational guidance set out in the Statement of
Recommended Practice (SORP) 'Financial Statements of Investment
Trust Companies and Venture Capital Trusts', issued by the
Association of Investment Companies (AIC) is consistent with the
requirements of IFRS, the Directors have prepared the Interim
Condensed Financial Statements on a basis compliant with the
recommendations of SORP. The supplementary information which
analyses the Statement of Comprehensive Income between items of
revenue and a capital nature is presented in accordance with the
SORP.
These Condensed Financial Statements do not include all
information and disclosures required in the Annual Financial
Statements and should be read in conjunction with the Company's
audited financial statements for the year ended 31 December 2020,
which were prepared under full IFRS requirements as adopted by the
EU and the DTRs of the UK FCA. The comparative period is for the
period from 1 January 2020 to 30 June 2020.
Functional and presentation currency
The currency of the primary economic environment in which the
Company operates (the functional currency) is Pounds Sterling (GBP
or GBP) which is also the presentation currency.
Going concern
The Directors have considered the impact which COVID-19, could
have on the ability of the Company to continue as a going concern.
A key risk facing the Company is that investments may not be able
to make distributions or pay interest if they are not able to
continue to operate the assets or dysfunctional markets affect
trading operations.
The Company and the Investment Manager have so far been able to
ensure the operational integrity of the projects is maintained
particularly in terms of Operations & Maintenance and in terms
of all planned commercial activities, including Asset Optimisation
and in their view, power generation will remain essential to the
UK's infrastructure.
As at 30 June 2021, the Company had net current assets of GBP62m
and had cash balances of GBP61m (excluding cash balances within
investee companies), which are sufficient to meet current
obligations as they fall due. The major cash outflows of the
Company are the costs relating to the acquisition of new assets and
payment of dividends, both of which are discretionary. The Company
had no outstanding debt owing as at 30 June 2021. The Company has
no financial guarantees to support the Bonds held by its
subsidiary, Gresham House Energy Storage Holdings (the Midco).
As such, the directors have adopted the going concern basis in
preparing the Interim Report and Accounts .
3. Significant accounting judgements, estimates and assumptions
The preparation of the Condensed Financial Statements requires
management to make judgements, estimates and assumptions that
affect the application of accounting policies and the reported
amount of assets, liabilities, income and expenses. Estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to the accounting estimates are recognised in the period in which
the estimates are revised and in any future periods affected.
During the period the Directors considered the following
significant judgements and assumptions:
Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless they
provided investment related services to the Company and are not
themselves investment entities. To determine that the Company
continues to meet the definition of an investment entity, the
Company is required to satisfy the following three criteria:
a. the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
b. the Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
c. the Company measures and evaluates the performance of its investments on a fair value basis.
The Company meets the criteria as follows:
-- the stated strategy of the Company is to deliver stable
returns to shareholders through a mix of energy storage
investments;
-- the Company provides investment management services and has
several investors who pool their funds to gain access to
infrastructure related investment opportunities that they might not
have had access to individually;
-- the Company has elected to measure and evaluate the
performance of all of its investments on a fair-value basis. The
fair-value method is used to represent the Company's performance in
its communication to the market, including investor presentations.
In addition, the Company reports fair value information internally
to Directors, who use fair value as the primary measurement
attribute to evaluate performance;
-- A key indicator of whether a Company is an investment entity
is the existence of a formal exit strategy. Although there is
currently no documented exit strategy, the assets have a limited
life and are not expected to be held indefinitely and the
investments including the equity is held at fair value. The
Directors consider that there is a clear exit strategy from these
investments: and
-- A further indicator of whether a Company is an investment
entity is the expectation they hold more than one asset. The
Company holds two investments directly but many investments
indirectly, as there is a portfolio of investments within the
Midco.
The Directors believe the Company meets the business purpose
criteria to invest for capital appreciation and/or income
generation and note that the Company is not required to hold its
investments indefinitely.
The Directors are of the opinion that the Company has all the
typical characteristics of an investment entity and continues to
meet the definition in the standard. This conclusion will be
reassessed on an annual basis.
Assessment of the Midco as an investment entity
The Midco is not consolidated as the Midco is considered to be
an investment entity. The Board of the Midco have considered the
requirements of IFRS 10 as per above and confirm the Midco meets
this criterion. If the Midco was not considered to meet the
definition of an investment entity, then the Company would be
required to consolidate the entity. Within Note 10 the net assets
of the Midco have been set out. The impact of consolidating the
Midco would be to increase the investment value to GBP328,837,777
(2020: GBP264,393,793) and recognise the Bond loan of GBP15,119,930
(2020: GBP15,088,825) and additional net working capital of
GBP8,552,440 (2020: GBP340,794).
Investment Manager not a related party
The AIFM is not disclosed as key management personal in the
financial statements. To meet the key management personal
definition the AIFM would need to have authority and responsibility
for planning, directing and controlling the activities of the
entity. The Directors are of the opinion that the AIFM does not
meet these criteria as the Board has to approve key decisions.
Valuation of investments in subsidiaries
Significant estimates in the Company's Condensed Financial
Statements include the amounts recorded for the fair value of the
instruments. By their nature, these estimates and assumptions are
subject to measurement uncertainty and the effect on the Company's
Condensed Financial Statements of changes in estimates in future
periods could be significant. See Note 16 for further details.
4. Fees and expenses
Accounting, secretarial and directors
JTC (UK) Limited acts as secretary and administrator for the
Company through the Administration and Company Secretarial
Agreement. JTC (UK) Limited is entitled to a GBP60,000 annual fee
for the provision of Company Secretarial services and a GBP55,000
annual fee for the provision of fund accounting and administration
services, based on a Company Net Asset Value of up to GBP200m. An
ad valorem fee based on total assets of the Company which exceed
GBP200m will be applied as follows:
-- 0.04% on the Net Asset Value of the Company in excess of
GBP200m.
During the period, expenses incurred with JTC (UK) Limited for
administrative and secretarial services amounted to GBP88,312
(2020: GBP61,855) with GBP29,210 (2020: GBP28,750) being
outstanding and payable at the period end.
AIFM
The AIFM, Gresham House Asset Management Limited (the Investment
Manager), is entitled to receive from the Company, in respect of
its services provided under the AIFM agreement, a fee as
follows:
-- 1% on the first GBP250m of the Net Asset Value of the
Company
-- 0.9% on the Net Asset Value of the Company in excess of
GBP250m and up to and including GBP500m
-- 0.8% on the Net Asset Value of the Company in excess of
GBP500m
During the period, Investment Manager fees recognised in these
Condensed Financial Statements amounted to GBP1,754,677 (2020:
GBP1,126,012) with GBP896,591 (2020: GBPnil) being outstanding and
payable at the period end.
5. Net gain on investments at fair value through the profit and loss
1 January 1 January
2021 to 2020 to
30 June 30 June
2021 2020
(GBP) (GBP)
--------------------------------------- ---- ----------- ------------
Unrealised gain/(loss) on investments
at fair value through the profit and
loss 27,891,255 (4,162,440)
Interest on loans to subsidiaries 10,670,174 4,631,312
38,561,429 468,872
-------------------------------------------- ----------- ------------
6. Interest on loans to related parties
1 January 1 January
2021 to 2020 to
30 June 30 June
2021 2020
(GBP) (GBP)
-------------------------------------- ---- ----------- ----------
Interest on loans to related parties - 781,088
- 781,088
------------------------------------------------------- ----------
7. Administrative and other expenses
1 January 1 January
2021 to 2020 to
30 June 30 June
2021 2020
(GBP) (GBP)
------------------------- ---- ---------- ------------
Administration fees 88,312 61,855
Audit fees paid 76,250 48,141
Depositary fees 22,369 16,596
Directors' remuneration 125,858 105,970
Management fees 1,754,677 1,126,012
Sundry expenses 86,515 54,977
2,153,981 1,413,551
------------------------------ ---------- ------------
8. Taxation
The Company is recognised as an Investment Trust Company (ITC)
for the accounting period and is taxed at the main rate of 19%.
The Company may utilise group relief or make interest
distributions to reduce taxable profits for the period to 30 June
2021, therefore, no corporation tax charge has been recognised for
the Company for the period.
1 January 1 January
2021 to 2020 to
30 June 30 June
2021 2020
(GBP) (GBP)
-------------------------------------- ---- ------------ ----------
(a) Tax charge in profit or loss
UK corporation tax - -
------------ ----------
(b) Reconciliation of the tax charge
for the period
Profit/(loss) before tax 36,324,902 (455,406)
------------ ----------
Tax at UK main rate of 19% 6,901,731 (86,527)
Tax effect of:
Net gain/(loss) on investments
at fair value through the profit
and loss (5,299,338) 790,863
Non-deductible expenses (54,579) 74,128
Subject to group relief/designated
as interest distributions (1,547,814) (778,464)
------------ ----------
Tax charge for the period - -
-------------------------------------------- ------------ ----------
9. Earnings per Ordinary Share
Earnings per Ordinary Share (EPS) amounts are calculated by
dividing the profit or loss for the period attributable to ordinary
equity holders of the Company by the weighted average number of
Ordinary Shares in issue during the period. As there are no
dilutive instruments outstanding, basic and diluted Earnings per
Ordinary Share are identical.
1 January
2021 to
30 June
Revenue Capital 2021
Total
------------------------------------- ------------- -------------- --------------
Net profit attributable to ordinary
shareholders GBP8,606,193 GBP27,718,709 GBP36,324,902
Weighted average number of Ordinary
Shares for the period 348,556,364 348,556,364 348,556,364
------------- --------------
Profit per Ordinary Share (basic
and diluted) - pence per Ordinary
Share 2.47p 7.95p 10.42p
------------- -------------- --------------
1 January
2020 to
30 June
Revenue Capital 2020
Total
------------------------------------------- ------------- --------------- -------------
Net profit/(loss) attributable to
ordinary shareholders GBP4,097,181 (GBP4,552,587) (GBP455,406)
Weighted average number of Ordinary
Shares for the period 223,721,199 223,721,199 223,721,199
------------- ---------------
Profit/(loss) per Ordinary Share
(basic and diluted) - pence per Ordinary
Share 1.83p (2.03p) (0.20p)
------------- --------------- -------------
10. Investment in subsidiaries
As at 30 June 2021
Equity Loans Closing balance:
equity and loans
(GBP) (GBP) (GBP)
---------------------- ----------- ------------ ------------------
Gresham House Energy
Storage Holdings
plc 34,177,103 288,093,184 322,270,287
34,177,103 288,093,184 322,270,287
----------- ------------ ------------------
As at 31 December 2020
Equity Loans Closing balance:
equity and loans
(GBP) (GBP) (GBP)
---------------------- ---------- ------------ ------------------
Gresham House Energy
Storage Holdings
plc 6,285,848 242,678,327 248,964,175
6,285,848 242,678,327 248,964,175
---------- ------------ ------------------
Further analysis
The Company owns 100% of the ordinary shares in Gresham House
Energy Storage Holdings plc (the Midco) which holds the investments
in the underlying subsidiaries. The investment totalling
GBP322,270,287 (2020: GBP248,967,175) in the Midco comprises
underlying investments in the following companies:
As at 30 June 2021
Investment Place of Business Percentage Total investment
(GBP)
Noriker Staunch 5 New Street Square, London,
Limited (NSL) England, EC4A 3TW 100% 15,048,384
HC ESS2 Limited 5 New Street Square, London,
(HCESS2) England, EC4A 3TW 100% 25,283,787
HC ESS3 Limited 5 New Street Square, London,
(HCESS3) England, EC4A 3TW 100% 20,445,901
West Midlands
Grid Storage Two 5 New Street Square, London,
Limited (WMGS) England, EC4A 3TW 100% 3,938,736
Cleator Battery
Storage Limited 5 New Street Square, London,
(Cleator) England, EC4A 3TW 100% 7,513,269
Glassenbury Battery
Storage Limited 5 New Street Square, London,
(Glassenbury) England, EC4A 3TW 100% 37,989,489
HC ESS4 Limited 5 New Street Square, London,
(HCESS4) England, EC4A 3TW 100% 45,624,198
Bloxwich Energy
Storage Limited 5 New Street Square, London,
(Bloxwich) England, EC4A 3TW 100% 25,668,608
HC ESS6 Limited 5 New Street Square, London,
(HCESS6) England, EC4A 3TW 100% 44,553,926
HC ESS7 Limited 5 New Street Square, London,
(HCESS7) England, EC4A 3TW 100% 44,392,398
Nevendon Energy
Storage Limited 5 New Street Square, London,
(Nevendon) England, EC4A 3TW 100% 4,184,593
Port of Tyne Energy
Storage Limited 5 New Street Square, London,
(Port of Tyne) England, EC4A 3TW 100% 20,925,311
Tynemouth Battery
Storage Limited 5 New Street Square, London,
(Tynemouth) England, EC4A 3TW 100% 12,091,278
Gridreserve Limited 5 New Street Square, London,
(Byers Brae) England, EC4A 3TW 100% 15,764,520
Investments to SPV's- subtotal 323,424,398
5 New Street Square, London,
Coupar Limited England, EC4A 3TW 100% 2,824,372
5 New Street Square, London,
Arbroath Limited England, EC4A 3TW 100% 2,589,007
Bonds issued by
Midco (15,119,930)
Working capital
in Midco 8,552,440
-------------
Total investment
in Midco 322,270,287
-------------
As at 31 December 2020
Investment Place of Business Percentage Total investment
(GBP)
Noriker Staunch 5 New Street Square, London,
Limited (NSL) England, EC4A 3TW 100% 15,758,538
HC ESS2 Limited 5 New Street Square, London,
(HCESS2) England, EC4A 3TW 100% 24,156,127
HC ESS3 Limited 5 New Street Square, London,
(HCESS3) England, EC4A 3TW 100% 19,262,407
West Midlands
Grid Storage Two 5 New Street Square, London,
Limited (WMGS) England, EC4A 3TW 100% 3,746,322
Cleator Battery
Storage Limited 5 New Street Square, London,
(Cleator) England, EC4A 3TW 100% 7,448,425
Glassenbury Battery
Storage Limited 5 New Street Square, London,
(Glassenbury) England, EC4A 3TW 100% 36,471,706
HC ESS4 Limited 5 New Street Square, London,
(HCESS4) England, EC4A 3TW 100% 45,615,597
Bloxwich Energy
Storage Limited 5 New Street Square, London,
(Bloxwich) England, EC4A 3TW 100% 22,397,138
HC ESS6 Limited 5 New Street Square, London,
(HCESS6) England, EC4A 3TW 100% 38,238,323
HC ESS7 Limited 5 New Street Square, London,
(HCESS7) England, EC4A 3TW 100% 47,058,902
-----------------
Investments in SPV's- subtotal 260,153,485
Noriker Power Railway House, Bruton Way,
Limited Gloucester, England GL1 1DG 4% 238,095
5 New Street Square, London,
Biggerbrook Limited England, EC4A 3TW 1,951,194
5 New Street Square, London,
Gridreserve Limited England, EC4A 3TW 2,051,020
Bonds issued by
Midco (15,088,825)
Working capital
in Midco (340,794)
-----------------
Total investment
in Midco 248,964,175
-----------------
Unless otherwise agreed, the loan principal and any interest
accrued shall be repayable on the earlier of (i) written demand
from the Company, or (ii) 31 December 2030.
The Company meets the definition of an investment entity.
Therefore, it does not consolidate its subsidiaries but, rather,
recognises them as investments at fair value through profit or
loss. The Company is not contractually obligated to provide
financial support to the subsidiaries and there are no restrictions
in place in passing monies up the structure.
Immediate Place of Registered Office Percentage Ownership
Parent business ownership
---------------- ------------ ---------- ---------------------- ----------- ----------
Gresham The Company England Gresham House Asset 100% Wholly
Energy Storage & Wales Management Limited, owned
Holdings 5 New Street Square,
plc London, England,
EC4A 3TW
Refer to Note 16 for valuation disclosures relating to the
investments in subsidiaries.
11. Loans receivable
The only loans receivable at 30 June 2021 and 31 December 2020
are loans to the Midco, which is accounted for as an Investment
subsidiary.
12. Cash and cash equivalents
30 June 2021 31 December
2020
(GBP) (GBP)
-------------- ------------- ------------
Cash at bank 61,154,974 110,967,025
61,154,974 110,967,025
-------------- ------------- ------------
13. Trade and other receivables
30 June 31 December
2021 2020
(GBP) (GBP)
------------------ -------- ------------
Management fees 56,996 13,995
Prepaid expenses 179,903 89,902
VAT receivable 183,828 170,530
420,727 274,427
------------------ -------- ------------
14. Trade and other payables
30 June 2021 31 December
2020
(GBP) (GBP)
---------------------------------------- ------------- ------------
Administration fees 29,210 57,500
Audit fees 42,229 121,000
Other accruals 996,804 85,617
Deferred consideration for HCESS4 (Red
Scar) - 1,030,530
Taxation payable - 20,570
1,068,243 1,315,217
---------------------------------------- ------------- ------------
15. Categories of financial instruments
30 June 2021 31 December
2020
(GBP) (GBP)
----------------------------- ------------- ------------
Financial assets
Financial assets
at amortised cost:
Cash and cash equivalents 61,154,974 110,967,025
Trade and other receivables
(excluding VAT) 236,899 103,897
Fair value through
profit or loss:
Investment in subsidiaries 322,508,382 248,964,175
Total financial assets 383,900,255 360,035,097
----------------------------- ------------- ------------
Financial liabilities
Financial liabilities
at amortised cost:
Trade and other payables (1,068,243) (1,315,217)
Net financial assets 382,832,012 358,719,880
-------------------------- ------------ ------------
At the balance sheet date, all financial assets and liabilities
were measured at amortised cost except for the investment in
subsidiaries which are measured at fair value.
16. Fair value measurement
Valuation approach and methodology
The same valuation methodology and process is followed in these
Condensed Financial Statements as was applied in the preparation of
the Company's Annual Financial Statements for the year ended 31
December 2020. The Company used the income approach to value its
investments. The income approach indicates value based on the sum
of the economic income that an asset, or group of assets, is
anticipated to produce in the future. Therefore, the income
approach is typically applied to an asset that is expected to
generate future economic income, such as a business that is
considered a going concern. Free cash flow to total invested
capital is typically the appropriate measure of economic income.
The income approach is the DCF approach and the method discounts
free cash flows using an estimated discount rate (WACC).
Valuation process
The Company, via the Midco, held a portfolio of energy storage
investments with a capacity of 425 Megawatt (MW) operational (the
Investments). The Investments comprise 17 projects held in 14
special project vehicles.
All of these investments are based in the UK. The Directors
review and approve the valuations of these assets following
appropriate challenge and examination. The current portfolio
consists of non-market traded investments, and valuations are
analysed using forecasted cash flows of the assets and use the
discounted cash flow approach for valuation purposes. For
period-end and interim reports the Company engages external,
independent and qualified valuers to determine the fair value of
the Company's investments or are produced by the office of the
Investment Manager. The Company engages external, independent and
qualified valuers to determine the fair value of the Company's
investments or valuations are produced by the Investment Advisor.
As at 30 June 2021, the fair value of the portfolio of investments
has been determined by the Investment Advisor and reviewed by Grant
Thornton UK LLP.
The valuations have been determined using discounted cash flow
methodology, whereby the estimated future cash flows relating to
the Company's equity investment in each project have been
discounted to 30 June 2021, using discount rates reflecting the
risks associated with each investment project and the time value of
money. The valuations are based on the expected future cash flows,
using reasonable assumptions and forecasts for revenues, operating
costs, macro-level factors and an appropriate discount rate.
As at the period-end, the Company uses discount rates to value
the expected future cash flows of each investment project. The
determination of the discount rate applicable to each individual
investment project takes into account various factors, including,
but not limited to, the stage reached by each project, the period
of operation, the historical track record, the terms of the project
agreements and the market conditions in which the project
operates.
It is intended that this blended discount rate will also be
applied in respect of the expected future cash flows of projects
acquired by the Company in the future. The Investment Manager
exercises its judgement in assessing the expected future cash flows
from each investment. The Investment Manager produces, for each
underlying project, detailed financial models and the Investment
Manager takes into account, amongst other things, in its review of
such models, and make amendments where appropriate to:
a) discount rates (i) implied in the price at which comparable
transactions have been announced or completed in the UK energy
storage sector (if available); (ii) publicly disclosed by the
Company's peers in the UK energy storage sector (if available); and
(iii) discount rates applicable for other comparable infrastructure
asset classes and regulated energy sectors;
b) changes in power market forecasts from leading market forecasters;
c) changes in the economic, legal, taxation or regulatory
environment, including changes in retail
price index expectations;
d) technical performance based on evidence derived from project performance to date;
e) the terms of any power purchase agreement arrangements;
f) accounting policies;
g) the terms of any debt financing at project level;
h) claims or other disputes or contractual uncertainties; and
i) changes to revenue, cost or other key assumptions (may include an assessment of future
cost trends, as appropriate).
In arriving at the valuation assumptions this includes
consideration of climate related matters such as expected levels of
renewable energy entering the grid system, demand patterns and
current regulatory policy these are factored into the pricing
assumptions which are prepared by an independent consultancy.
The Board reviews the operating and financial assumptions,
including the discount rates, used in the valuation of the
Company's underlying portfolio and approves them based on the
recommendation of the Manager.
The Company used the income approach to value its investments.
The income approach indicates value based on the sum of the
economic income that an asset, or group of assets, is anticipated
to produce in the future. Therefore, the income approach is
typically applied to an asset that is expected to generate future
economic income, such as a business that is considered a going
concern. Free cash flow to total invested capital is typically the
appropriate measure of economic income. The income approach is the
DCF approach and the method discounts free cash flows using an
estimated discount rate (WACC).
Key valuation input Range Weighted
average
--------------------- --------------- ---------
WACC 9.56% - 11.1% 10.73%
Another key assumption in the valuation models is the volatility
of power prices. Due to the Asset Optimisation strategy, the
investments are able to benefit from a range of revenue streams,
either arbitrage on power price volatility or FFR and other similar
income streams. Due to the nature of the assets owned by the
investments, should one revenue stream be impacted the asset is
able to switch to alternative sources of revenue to seek to
maintain total revenue targets.
Valuation of financial instruments
The investment at fair value through profit or loss is a Level 3
in the fair-value hierarchy and the reconciliation in the movement
of this Level 3 investment is presented below. No transfers between
levels took place during the period.
Reconciliation 30 June 31 December
2021 2020
(GBP) (GBP)
---------------------------------------------- ------------ ------------
Opening balance 248,964,175 138,203,407
Add: purchases during the year 238,095 238,095
Add: loans advanced 34,744,684 76,155,352
Less: Loan repayments - (5,750,000)
Add: Loans to affiliated entities of the
investment manager converted to investment - 6,871,121
Add: Escrow release to investment (non-cash) - 10,843,595
Add: accrued interest on loans (Note 5) 10,670,174 12,346,913
Total fair value movement through the
profit or loss (Note 5) 27,891,254 10,055,692
Closing balance 322,508,382 248,964,175
---------------------------------------------- ------------ ------------
17. Financial risk management
As at 30 June 2021 there have been no changes to the financial
instruments risk identified in the Annual Financial Statements of
31 December 2020.
The Company is exposed to certain risks through the ordinary
course of business and the Company's financial risk management
objective is to minimise the effect of these risks. The management
of risks is performed by the Directors of the Company and the
exposure to each financial risk considered potentially material to
the Company, how it arises and the policy for managing it is
summarised below:
-- Counterparty risk
The Company is exposed to third-party credit risk in several
instances and the possibility that counterparties with which the
Company and its subsidiaries, together the Group, contracts may
default or fail to perform their obligations in the manner
anticipated by the Group. Such counterparties may include (but are
not limited to) manufacturers who have provided warranties in
relation to the supply of any equipment or plant, EPC contractors
who have constructed the Company's plants, who may then be engaged
to operate assets held by the Company, property owners or tenants
who are leasing ground space and/or grid connection to the Company
for the locating of the assets, contractual counterparties who
acquire services from the Company underpinning revenue generated by
each project or the energy suppliers, or demand aggregators,
insurance companies who may provide coverage against various risks
applicable to the Company's assets (including the risk of terrorism
or natural disasters affecting the assets) and other third parties
who may owe sums to the Company. In the event that such credit risk
crystallises, in one or more instances, and the Company is, for
example, unable to recover sums owed to it, make claims in relation
to any contractual agreements or performance of obligations (e.g.
warranty claims) or require the Company to seek alternative
counterparties, this may materially adversely impact the investment
returns. Further, the projects in which the Company may invest will
not always benefit from a turnkey contract with a single contractor
and so will be reliant on the performance of several suppliers.
Therefore, the key risks during battery installation in connection
with such projects are the counterparty risk of the suppliers and
successful project integration.
The Investment Manager regularly assesses the creditworthiness
of its counterparties and enters into counterparty arrangements
which are financially sound and ensures, where necessary, the
sourcing of alternative arrangements in the event of changes in the
creditworthiness of its present counterparties.
-- Concentration risk
The Company's investment policy is limited to investment in
energy storage infrastructure, which will principally operate in
the UK. This means that the Company has a significant concentration
risk relating to the UK energy storage infrastructure sector.
Significant concentration of investments in any one sector may
result in greater volatility in the value of the Company's
investments and, consequently, the Net Asset Value and may
materially and adversely affect the performance of the Company and
returns to shareholders.
The Company's BESS projects generate revenues primarily from
Firm Frequency Response (FFR), Asset Optimisation (Trading),
Capacity Market (CM) and other grid connection-related charges,
including TRIADs and Dynamic Containment Revenues. The portfolio's
seed BESS projects are currently skewed to FFR revenues, FFR being
the provision to the National Grid of a dynamic response service to
maintain the grid's electrical frequency at 50Hz. In 2021,
operations are expected to be increasingly targeted towards Asset
Optimisation, as this becomes the more profitable business
activity. There are several additional revenue opportunities
emerging for the portfolio as a series of regulatory changes are
implemented.
The Investment Manager is of the view that the UK's exposure to
renewable energy generation has increased significantly over the
last few years and the pace has not lessened despite the removal of
legacy subsidies to onshore wind and solar. This is largely because
the development of offshore wind installations has continued apace.
As a result, generation from wind is having a growing impact on the
grid, generating a volatile supply of energy which underpins the
opportunity for BESS.
-- Credit risk
Cash and other assets that are required to be held in custody
will be held at bank. Cash and other assets may not be treated as
segregated assets and will therefore not be segregated from the
bank's own assets in the event of the insolvency of a custodian.
Cash held with the bank will not be treated as client money subject
to the rules of the FCA and may be used by the bank in the ordinary
course of its own business. The Company will therefore be subject
to the creditworthiness of the bank. In the event of the insolvency
of the bank, the Company will rank as a general creditor in
relation thereto and may not be able to recover such cash in full,
or at all.
The Investment Manager regularly assesses its credit exposure
and considers the creditworthiness of its customers and
counterparties. Cash and bank deposits are held with Barclays Bank
plc, a reputable financial institution with a Moody's credit rating
Baa2.
Investments held at fair value through profit or loss are not
subject to IFRS 9 impairment requirements.
For interest receivables on cash balances and loans receivable,
the Company uses a 12-month expected loss allowance.
The Company has completed some high-level analysis and forward
looking qualitative and quantitative information, to determine if
the interest and receivables are low credit risk. Based on this
analysis the expected credit loss on interest and receivables are
not material and therefore no impairment adjustments were accounted
for.
-- Liquidity risk
The objective of liquidity management is to ensure that all
commitments which are required to be funded can be met out of
readily available and secure sources of funding. As noted below,
this may include debt funding.
BESS projects have limited liquidity and may not be readily
realisable or may only be realisable at a value less than their
book value. There may be additional restrictions on divestment in
the terms and conditions of any sale agreement in relation to a
particular BESS project.
The Company has assessed its ability to raise debt after
sufficient assets were acquired and to the extent funding was
available on acceptable terms. Accordingly, it has introduced
leverage into its subsidiary (the Midco) as explained in Note
1.
In addition, the Company may from time to time use borrowing for
short term liquidity purposes which could be achieved through a
loan facility or other types of collateralised borrowing
instruments. The Company is permitted to provide security to
lenders in order to borrow money, which may be by way of mortgages,
charges or other security interests or by way of outright transfer
of title to the Company's assets. The Directors will restrict
borrowing to an amount not exceeding 50% of the Company's Net Asset
Value at the time of drawdown. There will be no cross
collateralisation between the projects.
The Company's only financial liabilities are trade and other
payables. The Company has sufficient cash reserves to cover these
in the short to medium term. The Company's cash flow forecasts are
monitored regularly to ensure the Company is able to meet its
obligations when they fall due.
The following table reflects the maturity analysis of financial
assets and liabilities.
< 1 year 1 to 2 to > 5 years Total
(GBP) 2 5 (GBP) (GBP)
As at 30 Years years
June 2021 (GBP) (GBP)
-------------- --------------------------------------------------------- ------ ------ -------------- ------------
Financial
assets
Cash and
cash
equivalents 61,154,974 - - - 61,154,974
Trade and
other
receivables
(Note 13)** 236,899** - - - 236,899
Investments - - - 34,415,198*** 34,415,198
Fair value
through
profit
or loss:
Investment
in
subsidiaries - - - 288,093,184* 288,093,184
Total
financial
assets 61,391,873 - - 322,508,382 383,900,255
-------------- --------------------------------------------------------- ------ ------ -------------- ------------
Financial
liabilities
Financial
liabilities
at amortised
cost
Trade and
other
payables
(Note 14) 1,068,243 - - - 1,068,243
Total
financial
liabilities 1,068,243 - - - 1,068,243
-------------- --------------------------------------------------------- ------ ------ -------------- ------------
The following table reflects the maturity analysis of financial
assets and liabilities.
< 1 1 to 2 to > 5 years Total
year 2 years 5 years
As at 31 December 2020 (GBP) (GBP) (GBP) (GBP) (GBP)
----------------------------- ------------- --------- --------- ------------- ------------
Financial assets
Cash and cash equivalents 110,967,025 - - - 110,967,025
Trade and other receivables
(Note 13) 103,897** - - - 103,897
Investment 6,285,848*** - - - 6,285,848
Fair value through profit
or loss:
Investment in subsidiaries - - - 242,678,327* 242,678,327
Total financial assets 117,567,770 - - 242,678,327 360,035,097
----------------------------- ------------- --------- --------- ------------- ------------
Financial liabilities
Financial liabilities at
amortised cost:
Trade and other payables
(Note 14) 1,315,217 - - - 1,315,217
Total financial liabilities 1,315,217 - - - 1,315,217
----------------------------- ------------- --------- --------- ------------- ------------
*excludes the equity portion of the investment in
subsidiaries
**excludes VAT
***calculated maturity amount
-- Market risk
Market risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market
prices. Market risk reflects interest rate risk, currency risk and
other price risks. The objective is to minimise market risk through
managing and controlling these risks to acceptable parameters,
while optimising returns. The Company uses financial instruments in
the ordinary course of business, and also incurs financial
liabilities, in order to manage market risks.
-- Price risk
Price risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market
prices. At 30 June 2021, the valuation basis of the Company's
investments was valued at market value. This investment is driven
by market factors and is therefore sensitive to movements in the
market.
-- Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows or the fair values of
financial instruments. The Company is exposed to interest rate risk
on its cash balances held with counterparties, bank deposits, loans
receivable, advances to counterparties and through loans to
subsidiaries. Bank deposits carry a fixed rate of interest for a
definite period and loans to subsidiaries carry a fixed rate of
interest until repayment at the earlier of written demand from the
lender or 31 December 2030. The Company may be exposed to changes
in variable market rates of interest as this could impact the
discount rate and therefore the valuation of the projects as well
as the fair value of the loans to subsidiaries.
-- Currency risk
All transactions and investments during the current period were
denominated in Pounds Sterling, thus no foreign exchange
differences arose. The Company does not hold any financial
instruments at period end which are not denominated in Pounds
Sterling and is therefore not exposed to any significant currency
risk. Subsidiary entities may, from time to time, incur expenditure
in currencies other than Pounds Sterling.
-- Capital risk management
The capital structure of the Company consists of equity
attributable to equity holders of the Company, comprising issued
capital and reserves. The Board continues to monitor the balance of
the overall capital structure so as to maintain investor and market
confidence. The Company is not subject to any external capital
requirements.
-- Other risks
The Company is exposed to other risks as set out in the
Prospectus dated 20 May 2021.
18. Net asset value per Ordinary Share
Basic NAV per Ordinary Share is calculated by dividing the
Company's net assets as shown in the statement of financial
position that are attributable to the ordinary equity holders of
the Company by the number of Ordinary Shares outstanding at the end
of the period. As there are no dilutive instruments outstanding,
basic and diluted NAV per Ordinary Share are identical.
30 June 31 December
2021 2020
-------------------------------------------- --------------- -----------------
Net assets per Statement of Financial
Position GBP383,015,840 GBP358,890,410
Ordinary Shares in issue 348,556,364 348,556,364
NAV per Ordinary Share - Basic and diluted
(pence) 109.89p 102.96p
-------------------------------------------- --------------- -----------------
19. Share capital
Ordinary Shares number Share capital
(GBP)
------------------------ ----------------------- --------------
Allotted and issued
share capital
As at 31 December 2020
and 30 June 2021 348,556,364 3,485,564
348,556,364 3,485,564
------------------------ ----------------------- --------------
Share capital and share premium account
On incorporation the Company issued 1 Ordinary Share of GBP0.01
which was fully paid up and 50,000 redeemable preference shares of
GBP1 each which were paid up to one quarter of their nominal value.
These 50,000 redeemable preference shares were subsequently
redeemed.
On 17 February 2020, the Board announced a non-pre-emptive
placing of new Ordinary Shares at an issue price of 104.0p per
Placing Share to fund further pipeline acquisitions and provide
increased general working capital. Further to that announcement, on
3 March 2020, the Company issued 30,000,000 Ordinary Shares raising
gross proceeds of GBP31.2m.
On 10 November 2020, the Company announced and published a
prospectus in respect of a share issuance programme for up to 250m
new Ordinary Shares and on 25 November 2020 announced the
successful raise of gross proceeds of GBP120m through the issue of
an initial tranche of 114,285,714 new Ordinary Shares at an issue
price of 105p per share.
On 12 July 2021, the Company announced the successful raise of
gross proceeds of GBP100m through the issue of 89,285,714 new
Ordinary Shares at an issue price of 112p per share.
Dividends
On 19 February 2021, a dividend of 1.75p per Ordinary Share for
the period from 1 October 2020 to 31 December 2020 was announced.
The dividend of GBP6,099,736 was paid on 26 March 2021 to
shareholders on the register as at the close of business on 5 March
2021. The ex-dividend date was 4 March 2021.
An interim dividend of 1.75p per Ordinary Share for the period
from 1 January 2021 to 31 March 2021 was announced on 28 April
2021. The dividend of GBP6,099,736 was paid on 4 June 2021 to
shareholders on the register as at the close of business on 14 May
2021. The ex-dividend date was 13 May 2021.
An interim dividend of 1.75p per Ordinary Share for the period
from 1 April 2021 to 30 June 2021 was announced on 1 July 2021. The
dividend of GBP6,099,736 was paid on 30 July 2021 to shareholders
on the register as at the close of business on 9 July 2021. The
ex-dividend date was 8 July 2021.
Ordinary shareholders are entitled to all dividends declared by
the Company and, in a winding up, to all of the Company's assets
after repayment of its borrowings and ordinary creditors. Ordinary
shareholders have the right to vote at meetings of the Company. All
Ordinary Share s carry equal voting rights.
20. Reserves
The nature and purpose of each of the reserves included within
equity at 30 June 2021 are as follows:
-- Merger relief reserve relates to the premium on shares which
were issued in exchange for shares as part of the IPO.
-- Capital reduction reserve represents a distributable reserve
created following a Court approved reduction in capital.
-- Revenue reserves represent cumulative revenue net profits
recognised in the Condensed Statement of Comprehensive Income.
-- Capital reserves represent cumulative net gains and losses on
investments and cumulative capital expenses recognised in the
interim Condensed Statement of Comprehensive Income.
The only movements in these reserves during the period are
disclosed in the Condensed Statement of Changes in Equity.
21. Transactions with related parties and other significant contracts
The Company and the Directors are not aware of any person who,
directly or indirectly, jointly or severally, exercises or could
exercise control over the Company. The Company does not have an
ultimate controlling party.
Details of related parties are set out below:
Directors
1 January 2021 to 1 January 2020 to
30 June 2021 30 June 2020
(GBP) (GBP)
Directors' remuneration 116,250 95,000
------------------ ------------------
Employers NI 13,608 10,934
------------------ ------------------
Total key management
personnel 129,858 105,934
------------------ ------------------
All directors' remuneration is short term salary.
No dividend amounts were payable as at 30 June 2021 (2020:
none).
The aggregate fees of the Directors will not exceed GBP500,000
per annum. There are no performance conditions attaching to the
remuneration of the Directors as the Board does not believe that
this is appropriate for Non-Executive Directors. The Directors are
not eligible for bonuses, pension benefits, share options,
long-term incentive schemes or other benefits.
Loans to related parties
Loans to subsidiaries represent amounts due to the Company from
its subsidiary.
Subsidiary Loans: principal 30 June 2021
advanced and Loans: interest Closing balance:
capitalised interest accrued loans
(GBP) (GBP) (GBP)
Gresham Energy
Storage Holdings
plc 277,423,010 10,670,174 288,093,184
288,093,184
==================
22. Capital commitments
As at 30 June 2021 the Company has no significant binding or
conditional future capital commitments.
23. Post balance sheet events
On 1 July 2021 the Company announced a dividend of 1.75p per
Ordinary Share for the period from 1 April 2021 to 30 June 2021.
The Dividend was be paid on 30 July 2021.
On 12 July 2021 the Company also announced the issuance of
89,285,714 Ordinary Shares of 1p each in the capital of the Company
with an issue price of 112p per share. The gross share proceeds
were GBP100m.
After the period end, the Company's subsidiary, Gresham House
Energy Storage Holdings plc, completed a debt facility totalling
GBP180m.
There were no other significant post balance sheet events that
need to be disclosed in the financial statements.
8. COMPANY INFORMATION
Non-Executive Directors: John Leggate - Chair
Duncan Neale
Catherine Pitt
David Stevenson
Registered Office The Scalpel
18th Floor
52 Lime Street
London
EC3M 7AF
---------------------------------
Manager and AIFM Gresham House Asset Management
Limited
5 New Street Square
London
EC4A 3TW
---------------------------------
Corporate Broker and Financial Jefferies International Limited
Adviser 100 Bishopsgate
London
EC2N 4JL
---------------------------------
Tax Advisor Blick Rothenberg Limited
16 Great Queen Street
Covent Garden
London
WC2B 5AH
---------------------------------
Independent Auditor BDO LLP
55 Baker Street
London
W1U 7EU
---------------------------------
Administrator and Secretary JTC (UK) Limited
The Scalpel
18th Floor
52 Lime Street
London
EC3M 7AF
---------------------------------
Registrar and Receiving Agent Computershare Investor Services
plc
The Pavilions
Bridgewater Road
Bristol
BS13 8AE
---------------------------------
Legal Adviser Eversheds LLP
1 Wood Street
London
EC2V 7WS
---------------------------------
Depositary Services INDOS Financial Limited
54 Fenchurch Street
London
EC3M 3JY
---------------------------------
Investment Valuer Grant Thornton LLP
30 Finsbury Square
London
EC2A 1AG
---------------------------------
9. Alternative performance measure table
For the period from 1 January 2021 to 30 June 2021
1) Dividend per Ordinary Share
Dividend per Ordinary Share is
a measure to show the distributions
made to shareholders during the
year.
Dividend period: 6 months to 30.6.2021 Dividend Number of Total dividend
paid per shares on paid (GBP)
share dividend
(GBP) payment
date
Q1 2021 (declared 28 April 2021) 0.0175 348,556,364 6,099,736
Q2 2021 (declared 1 July 2021) 0.0175 348,556,364 6,099,736
---------- -----------------------
0.0350 12,199,472
---------- -----------------------
Dividend period: 6 months to 30.6.2020 Dividend Number of Total dividend
paid per shares on paid (GBP)
share dividend
(GBP) payment
date
Q1 2020 (declared 11 May 2020) 0.0175 234,270,650 4,099,736
Q2 2020 (declared 1 September
2020) 0.0175 234,270,650 4,099,736
---------- -----------------------
0.0350 8,199,472
---------- -----------------------
2) Ordinary Share price total return
Ordinary Share price total return is
a measure of the return that could have
been obtained by holding a share over
the reporting period.
6 months 6 months
to 30.6.2021 to 30.6.2020
pence pence
Share price at end of period 120.75 109.00
Dividends paid from inception to end
of period 13.25 6.25
Dividend reinvestment impact 2.25 0.39
Share price at initial public offering (100.00) (100.00)
-------------- --------------
Ordinary Share price total return since
inception 36.25 15.64
-------------- --------------
Ordinary Share price total return since
inception % 36.3% 15.6%
-------------- --------------
3) Net asset value (NAV) per Ordinary Share
6 months 6 months
to 30.6.2021 to 30.6.2020
NAV at end of period GBP383,015,839 GBP229,971,582
Ordinary Shares in issue 348,556,364 234,270,650
------------------- --------------------
NAV per Ordinary Share (pence) - Basic and
diluted 109.89 98.16
------------------- --------------------
4) NAV per Ordinary Share total return for
the period
NAV per Ordinary Share total return is a
measure of the success of the Investment
Manager's strategy to grow the NAV, showing
how the NAV has changed over a period of
time, taking into account both capital returns
and dividends paid to shareholders.
6 months 6 months
to 30.06.2021 to 30.6.2020
pence pence
NAV per Ordinary Share at end of period 109.89 98.16
Dividends paid from inception to end of period 13.25 6.25
Dividend reinvestment impact 1.34 (0.07)
--------------- --------------
NAV per Ordinary Share at end of period including
dividend reinvestment 124.48 104.34
NAV per Ordinary Share at beginning of period
including dividend reinvestment (113.13) (104.36)
--------------- --------------
NAV total return for the period 11.35 (0.02)
--------------- --------------
NAV per Ordinary Share total return for the
period 10.0% 0.0%
--------------- --------------
5) Ongoing charges figure (OCF)
OCF measures the Company's recurring fund
management costs incurred during the year
expressed as a percentage of the average
of the net assets at the end of each quarter
during the period.
6 months 6 months
to 30.06.2021 to 30.6.2020
(GBP'000) (GBP'000)
Fees to Investment Manager 1,755 1,126
Legal and professional fees 230 307
Other transaction fees (57) 83
Administration fees 159 101
Directors' remuneration 126 106
Audit fees 76 48
Other ongoing expenses 38 33
--------------- --------------
Total expenses 2,327 1,804
Non-recurring expenses not in OCF calculation 9 (412)
--------------- --------------
Total ongoing expenses 2,336 1,392
--------------- --------------
Average NAV for the period 371,411 222,675
Ongoing charges for the period (annualised) 1.27% 1.25%
--------------- --------------
6) Dividend cover
Dividend cover is a measure to demonstrate
the Company's ability to pay dividends from
the earnings of its underlying investments.
6 months 6 months
to 30.06.2021 to 30.6.2020
(GBP'000) (GBP'000)
EBITDA generated by subsidiaries 22,438 4,545
Ongoing costs in the Company (2,336) (1,392)
Debt service costs in subsidiaries (451) -
Interest income 66 804
--------------- --------------
Net earnings for dividend cover 19,717 3,957
--------------- --------------
Dividends declared by the Company 12,199 8,199
--------------- --------------
Dividend cover 1.62x 0.48x
--------------- --------------
7) Dividend yield
Dividend yield is a measure to show the
dividend return received by shareholders
for the period .
6 months 6 months
to 30.6.2021 to 30.6.2020
Dividend per share declared in respect of
the period (pence) 3.50 3.50
Share price at end of period (pence) 120.75 109.00
Dividend yield for the period 2.9% 3.2%
-------------- --------------
10. GLOSSARY
Asset Optimisation (Trading)
Asset Optimisation involves buying and selling electricity in
order to capture a spread between the high and low electricity
prices on any given day. This can be done via one or more market
mechanisms, hence the expression "Asset Optimisation" and includes
trading in the wholesale market and offering the battery to
National Grid via the Balancing Mechanism.
Asymmetric
An asymmetrical grid connection is where the import and export
capacities are different.
AUM
Assets Under Management: the total net assets of the
Company.
Balancing services
National Grid procure services to balance demand and supply and
to ensure the security and quality of electricity supply across
Britain's transmission system. These include:
-- Black Start
-- Demand side response
-- Dynamic Containment (DC)
-- Enhanced Frequency Response (EFR)
-- Firm Frequency Response (FFR)
-- Optional Downward Flexibility Management (ODFM)
-- Short Term Operating Reserve (STOR)
https://www.nationalgrideso.com/balancing-services
Black Start
A total or partial shutdown of the national electricity
transmission system (NETS) is an unlikely event. However, if it
happens, National Grid are obliged to make sure there are
contingency arrangements in place to ensure electricity supplies
can be restored in a timely and orderly way. Black Start is a
procedure to recover from such a shutdown.
https://www.nationalgrideso.com/balancing-services/system-security-services/black-start/
Capacity Market (CM)
The income received by generators to ensure generation capacity
is available to meet shortfalls.
Combined Cycle Gas Turbine (CCGT)
Energy generation technology that combines a gas-fired turbine
with a steam turbine. The design uses a gas turbine to create
electricity and then captures the resulting waste heat to create
steam, which in turn drives a steam turbine.
Curtailment
Large wind farms are connected to the UK's high-voltage network
and National Grid balances electricity supply and demand. As demand
rises and falls during the day, electricity supply mirrors these
peaks and troughs.
National Grid accepts bids and offers from electricity
generators to increase or decrease electricity generation as and
when required. As such it may mean that there are times when
generators are paid to curtail their output (constraint
payments).
https://www.nationalgrideso.com/news/grounds-constraint
Dividend Cover
Dividend Cover for the purpose of this report refers to a
calculation for the ratio between net earnings of the investment
portfolio in the review period and dividends paid in respect of the
same review period.
Net earnings of the investment portfolio are calculated as the
total EBITDA from underlying projects which includes liquidated
damages earnt by SPVs (typically on delays in construction to
compensate for lost revenues) less Company and holding company
costs (excluding capital related costs but including interest
expense).
Earnings are calculated on an accruals basis and therefore only
SPVs which were acquired in the accounting period have their
earnings included here. Transactions completing after the period,
but which had locked box income related to the current period will
have this recognised once the transaction is completed. For the
transactions completed in January 2021 such income is therefore
recognised in the 2021 dividend cover calculation.
This measure aims to add clarity on the Company's ability to pay
dividends from the earnings and cash generation of its underlying
investments after deducting costs in the Company.
Dividend Yield
The annual dividends expressed as a percentage of the current
share price.
Electricity System Operator (ESO)
Refers to National Grid ESO. The ESO is responsible for ensuring
Great Britain has the essential energy it needs so that supply
meets demand on the electricity system every second of every
day.
https://www.nationalgrideso.com/
Frequency Response services
A subset of Balancing Services which relate to services
performed by batteries to manage the frequency on the electricity
system. This includes the following services:
-- Dynamic Containment (DC)
-- Enhanced Frequency Response (EFR)
-- Firm Frequency Response (FFR)
-- Optional Downward Flexibility Management (ODFM)
https://www.nationalgrideso.com/balancing-services
Gross Asset Value (GAV)
Gross Asset Value is the total value of the investments under
the management of the Company.
International Financial Reporting Standards (IFRS)
International Financial Reporting Standards are accounting
standards issued by the International Accounting Standards Board
(IASB) and have been applied by the Company in the preparation of
the financial statements.
Liquidated Damages (LD)
Liquidated damages are presented in certain legal contracts as
an estimate of losses to one of the parties. It is a provision that
allows for the payment of a specified sum should one of the parties
be in breach of contract. Liquidated damages are meant as a fair
representation of losses in situations where actual damages are
difficult to ascertain.
Liquidated damages are often included in specific contract
clauses to cover circumstances where a party faces a loss from an
asset. The Company typically uses these in EPC arrangements to
protect earnings from an asset in the result of delays to
construction but are also common in other contracts such as for
O&M arrangements.
Load factors
The load factor is usually expressed as the percentage of the
actual output of a generator compared to its theoretical maximum
output in a year.
Locked box income
On some acquisitions the Company agrees a date at which the
benefit of any subsequent earnings then flow to the acquirer. This
date agreed is referred to as the Locked box date. Earnings flowing
to the acquirer are referred to as the Locked box income. This
mechanism is often used by the Company and aims to prevent the
Company losing out on value as a result of delays to transactions
completing. The period to which Locked box income is earnt varies
between transactions. Each of the new acquisitions in January 2021
had a Locked box date in 2020 meaning the Company achieved benefits
of earnings related to 2020 (through higher working capital in the
SPVs) once the acquisitions completed in 2021.
NAV
Net Asset Value being the total Net Assets in the Company
divided by the total number of Ordinary Shares in issue as at 30
June 2021.
NAV total return
A measure showing how the net asset value (NAV) per share has
performed over a period of time, taking into account both capital
returns and dividends paid to shareholders.
NAV total return is shown as a percentage change from the start
of the period. It assumes that dividends paid to shareholders are
reinvested at NAV at the time the shares are quoted
ex-dividend.
NAV total return shows performance which is not affected by
movements in discounts and premiums (share prices). It also takes
into account the fact that different investment companies pay out
different levels of dividends.
Ongoing Charges Figure (OCF)
The Ongoing Charges Figure is seen as a useful indicator of the
overall cost burden for funds and similar investment vehicles. This
includes all charges and costs incurred by the Company which relate
to the ongoing operation of the Company. This includes management
fees, administration fees, audit fees, Director's remuneration,
depositary services costs and other similar costs. It excludes
capital costs and costs of raising new capital or making
acquisitions. The Ongoing Charges are then divided by the weighted
average NAV for the year or period over which it relates. Further
detail can be found here:
https://www.theaic.co.uk/sites/default/files/documents/AICOngoingChargescalculationOct20.pdf
Ordinary Share
Share in the Company with a nominal value of 1 penny.
Ordinary Share price total return
A measure showing how the share price has performed over a
period of time, taking into account both capital returns and
dividends paid to shareholders.
Share price total return is shown as a percentage change from
the start of the period. It assumes that dividends paid to
shareholders are reinvested in the shares at the time the shares
are quoted ex dividend.
Share price total return shows performance which is affected by
movements in discounts and premiums. It also takes into account the
fact that different investment companies pay out different levels
of dividends.
Further detail can be found here:
https://www.theaic.co.uk/glossary/share-price-total-return-performance
Site uptime
Calculation for the average level of availability in the
portfolio or for an asset in Frequency Response Services. This is
calculated by taking the average MWs available in each period as a
percentage of total capacity contracted.
Symmetrical
A symmetrical grid connection is where the import and export
capacities are the same.
Seed Assets
The assets acquired for GBP70m at IPO known as Staunch,
Littlebrook, Lockleaze, Rufford and Roundponds.
System inertia
Inertia works to keep the electricity system running at the
right frequency by using the kinetic energy in spinning parts in
power plant generator turbines. When needed, the spinning parts in
generator turbines can rotate slightly faster or slower to help
balance out supply and demand. The more turbines you have, the more
energy there is in the system and the greater the system inertia,
which helps to stabilise the frequency.
https://www.nationalgrideso.com/information-about-great-britains-energy-system-and-electricity-system-operator-eso/technical-terms-explained
TRIADs
Triads are defined as the three half-hours of highest demand on
the Great Britain electricity transmission system between November
and February each year, the Triads are part of a charge-setting
process. This identifies peak electricity demand at three points
during the winter in order to minimise energy consumption.
However, Triads must be at least 10 days apart. This is to avoid
all three potentially falling in consecutive hours on the same day,
for example during a particularly cold spell of weather.
https://www.nationalgrideso.com/news/triads-why-three-magic-number
UNDERLYING PROJECT REVENUES
The revenue earned by the operational SPVs ultimately earned by
the Company from commercial operations from all sources. If
liquidated damages are payable to this SPV then these are
included.
[1] source:
https://www.thetimes.co.uk/article/gas-lights-up-price-for-electricity-2h3j2gb2j
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IR SFEFIAEFSEFU
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