TIDMGRID
RNS Number : 7236R
Gresham House Energy Storage Fund
09 November 2021
9 November 2021
Gresham House Energy Storage Fund plc
(the "GRID" or the "Fund")
Quarterly NAV and Factsheet Publication
Gresham House Energy Storage Fund plc (LSE: GRID) (the "Fund")
announces its NAV as at 30 September 2021 was GBP490.0m or 111.91p
per ordinary share.
Financial Highlights
- NAV has increased to GBP490.0m, or 111.91p per share, up 2.02p per share in the quarter.
- From the IPO in November 2018 to the end of September 2021,
the Fund has delivered a share price total return of 42.7% compared
with 16.5% for the FTSE All Share and a NAV Total Return of
31.2%.
- Dividend cover remained healthy at 1.2x notwithstanding the
increased cash balance following GBP100m equity fundraising in
July.
- The portfolio achieved record EBITDA performance during the
quarter with Dynamic Containment generating over 50% of revenues.
Increased power price volatility during September led to a record
monthly EBITDA, driven by trading.
- Volatility, which is remaining high in Q4 2021, is driving
continued record revenue levels, therefore trading is expected to
achieve a larger share of revenues going forward.
- Review of weighted average discount rates: as highlighted in
the Interim Results, the Fund has completed a review of the
discount rates used for valuation purposes. The Board and Manager,
in consultation with its Independent Valuer, have agreed that a
0.25% reduction in discount rate applied to merchant cashflows from
11.10% to 10.85% is appropriate. There is no change to the discount
rate applied to contracted cashflows. Accordingly, the weighted
average discount rate (WADR) for operational assets as at 30
September has therefore dropped to 10.5% from 10.7% at the end of
June.
- Review of valuation methodology for in-construction assets:
following the Investment Policy change in November 20202, the Fund
has acquired several projects at the pre-construction stage from
its target pipeline and is currently putting these projects into
construction. The Board and the Manager have determined that the
appropriate approach is to revalue projects in construction using a
discount rate of WADR+0.5% so long as they are projected to
commission within 9 months. Post-commissioning, the WADR is
applied. This approach will ensure that the revaluation of projects
takes place gradually as they are de-risked and major milestones
are achieved.
- As at 30 September, the blended WADR across all operational
assets (425MW) and in-construction assets (100MW) combined is
10.7%.
Commentary on changes to the NAV
During the quarter, the most significant changes to NAV per
share included:
-- +3.39p due to revaluation of 100MW of projects under
construction (Enderby and West Didsbury)
-- +2.25p from cash generated by the portfolio
-- +1.32p from the reduction in the discount rate on merchant cashflows of 0.25%
-- +0.41p from raising GBP100m in July 2021 at 112p, a premium to the prevailing NAV
-- -1.75p from the payment of dividends
-- -1.93p due to lower revenue forecasts. The Fund's third-party
consultants revised down Dynamic Containment pricing forecasts
following National Grid moving to contracting in four-hourly blocks
in mid-September and announcing reduced demand during certain
blocks, impacting rest-of-2021 and 2022 price and volume forecasts.
Higher trading revenue assumptions offset some of the reduction
although overall revenue forecasts remain below currently
achievable levels.
Portfolio activity & market outlook
- The Fund has seen a lot of activity in the third quarter of
2021 both in terms of transactions and market backdrop.
- The Fund successfully raised equity of GBP100m before expenses
at 112p in early July 2021. This was in addition to the GBP120m
raised in November 2020.
- In September, the Fund signed a GBP180m debt facility which
consists of a GBP150m capex facility and a GBP30m RCF. The facility
carries a cost of 300bps over SONIA on amounts drawn and has a term
of five years allowing the Fund financial flexibility through the
prudent utilisation of this facility.
- The Fund put four projects into construction: Coupar Angus,
Arbroath, Enderby and West Didsbury, totalling 175MW. A further
190MW are expected to follow in Q4 and over 200MW in Q1 2022.
- The Fund continues to develop its pipeline which currently
stands at 852MW. The team is focused on scaling up through adding
new pipeline opportunities to the current batch of projects.
- The market environment has been developing as expected in
terms of rising volatility due to the increasing penetration of
renewables; in the Manager's opinion, this feature of the market is
here to stay and is expected to continue to evolve as more
renewables are deployed, resulting in more supply side
intermittency.
- Natural gas and carbon prices have risen significantly with
the former having the greater impact on electricity prices. We do
not expect these very high prices to last more than a few months.
It is also not expected that a reversal in gas prices will
necessarily result in much lower power price volatility - for
example we witnessed similar volatility in December 2020 and
January 2021 of last winter despite much lower gas prices.
- As mentioned above, we are seeing lower Dynamic Containment
service procurement by National Grid. In moving to four hourly
contracting in mid-September, National Grid can now procure less
during those times of the day when they need less grid support
services. The result is to lower expected prices for Dynamic
Containment due to oversupply, in line with the Manager's prior
expectations.
The net result of the developments above is that higher
volatility is expected to underpin trading revenues while the
frequency response market is now in saturation much of the time. As
such, the Manager is expecting trading revenues to represent over
50% of revenues in 2022, with total revenues expected to remain
robust. The Manager remains confident, given its strong technical
capabilities and large scale operating portfolio, to be able to
capture significant revenues from this evolving market
environment.
Project Location MW Acquisition date
Staunch Staffordshire 20 November 2018
----------------- ---- ---------------------
Rufford Nottinghamshire 7 November 2018
----------------- ---- ---------------------
Lockleaze Bristol 15 November 2018
----------------- ---- ---------------------
Littlebrook Kent 8 November 2018
----------------- ---- ---------------------
Roundponds Wiltshire 20 November 2018
----------------- ---- ---------------------
Wolverhampton West Midlands 5 August 2019
----------------- ---- ---------------------
Glassenbury Kent 40 December 2019
----------------- ---- ---------------------
Cleator Cumbria 10 December 2019
----------------- ---- ---------------------
Red Scar Lancashire 49 December 2019
----------------- ---- ---------------------
Bloxwich West Midlands 41 Operational - Q3
2020
----------------- ---- ---------------------
Thurcroft South Yorkshire 50 Operational - Q4
2020
----------------- ---- ---------------------
Wickham Market Suffolk 50 Operational - Q4
2020
----------------- ---- ---------------------
Tynemouth North Tyneside 25 Operational - Q1
2021
----------------- ---- ---------------------
Glassenbury Extension Kent 10 Operational - Q1
2021
----------------- ---- ---------------------
Nevendon Essex 10 Operational - Q1
2021
----------------- ---- ---------------------
Port of Tyne Tyneside 35 Operational - Q1
2021
----------------- ---- ---------------------
Byers Brae West Lothian 30 Operational - Q2
2021
----------------- ---- ---------------------
Total Portfolio 425
---- ---------------------
Project Location MW Target Commissioning
----------------- ---- ---------------------
Enderby Leicester 50 Q1 2022
----------------- ---- ---------------------
West Didsbury Manchester 50 Q1 2022
----------------- ---- ---------------------
Melksham East Swindon 100 H1 2022
& West
----------------- ---- ---------------------
Coupar Angus Co. Perth 40 Q1 2022
----------------- ---- ---------------------
Arbroath Co. Angus 35 Q1 2022
----------------- ---- ---------------------
Penwortham Preston 50 H2 2022
----------------- ---- ---------------------
Grendon Northampton 100 H2 2022
----------------- ---- ---------------------
Monet's Garden North Yorkshire 50 Q1 2023
----------------- ---- ---------------------
Lister Drive Merseyside 50 Q1 2023
----------------- ---- ---------------------
Project E2 West Yorkshire 150 Q1 2023
----------------- ---- ---------------------
Stairfoot South Yorkshire 40 Q1 2022
----------------- ---- ---------------------
Project B West Yorkshire 87 H2 2022
----------------- ---- ---------------------
Project Y York, N. 50 H2 2022
Yorks.
----------------- ---- ---------------------
Total Pipeline 852
---- ---------------------
The factsheet for the period ended 30 September 2021 is
available here .
For further information, please contact:
Gresham House New Energy
Ben Guest +44 (0) 20 3837 6270
Jefferies International Limited
Stuart Klein
Gaudi Le Roux +44 (0) 20 7029 8000
KL Communications
Charles Gorman
Camilla Esmund
Alex Hogan +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.
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 Storage Systems
Utility-scale battery storage systems 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 for it.
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