TIDMGRID
RNS Number : 7397N
Gresham House Energy Storage Fund
27 September 2023
27 September 2023
Gresham House Energy Storage Fund plc
("GRID" the "Company" or the "Fund")
Half-year results to 30 June 2023
Targeting 2.5GWh by mid-2025: 300% capacity growth with no
further equity capital [1]
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
2023.
Performance highlights in H1 2023
-- Net Asset Value (NAV) of GBP841.0mn (31 Dec 2022: GBP841.7mn, 30 June 2022: GBP785.4mn)
-- NAV per share (pence): 146.66p (-5.7%) (31 Dec 2022: 155.51p, 30 June 2022: 145.11p)
o driven by lower third-party revenue forecasts resulting in
lowest forecasts since IPO
-- NAV Total Return: -3.5% in H1 2023: +90.0% since IPO in November 2018
-- Share price total return of -8.3% vs FTSE All Share Index total return of +2.6% in H1 23
-- Dividends of 3.675p per share paid in H1 2023 (30 June 2022: 3.5p)
o Committed to pay 7.35p per share for 2023 despite a drop in
Operational Dividend Cover to 0.63x in H1 2023, following
Operational Dividend Cover of 1.32x in 2021 and 1.28x in 2022.
o Run-rate dividend cover expected to be approximately 1x once
the 2023 Pipeline projects are commissioned.
-- Underlying Operational Portfolio Revenue fell 31.9% to
GBP20.5mn (H1 22: GBP30.1mn) and EBITDA stood at GBP13.8mn (H1 22:
GBP22.7mn) as long-expected saturation of ancillary services has
not been replaced by the anticipated level of trading revenues.
-- Recent weaker trading has been driven by:
o Low power price volatility; lower demand caused by higher
energy bills and increased supply from rising renewable energy
generation. Volatility is cyclical and is expected to
normalise.
o Most significantly, current low utilisation of Batteries by
National Grid ESO (ESO) in the Balancing Mechanism (BM). This is
affecting the entire GB BESS industry.
-- ESO is holding a key industry event on 16 October 2023 to
discuss their initiatives to improve their control room's
utilisation of Batteries in the BM. These include:
o Their previously announced new trading platform which ESO have
publicly committed to launch on 15 December 2023;
o Parametric changes which will allow Batteries to input the
actual capacity they have available to trade; currently Batteries
cannot display more than 15 minutes' capacity at a time, and;
o Changes to make Batteries contractable, e.g., 4 hours, in
advance. This is to address National Grid ESO's control room's
concerns that Batteries are currently not contractable ahead of
when they will be needed and so could, in theory, not be available
when needed.
-- GRID's projects are achieving operating uptime of greater
than 95% and generating revenues at a competitive level compared
with the rest of the sector, according to available market data [2]
.
-- Weighted average discount rate of 10.9% (31 December 2022:
10.9%) for assets valued on a DCF basis. GRID only values projects
on a DCF basis if they are fully funded and within nine months of
commissioning.
Deployment and Fundraising
-- 590MW across 21 operational projects as at 30 June 2023,
which has risen to 640MW across 22 operational projects as at 31
August 2023 (up from 425MW, 500MW at respective 2022 dates).
-- An additional 387MW across six projects have been built. Grid
connection works for these projects are expected to be completed
this year and into H1 2024 with delays attributed to ongoing
industry grid connection challenges [3] .
-- Further deployment results in a target portfolio of c.1.3GW /
2.5GWh, at an average duration of 2 hours, by mid-2025.
-- GBP50mn raised in equity placing in May 2023 for GRID's first
international project in California, Project Iliad, a 160MW/640MWh
solar plus BESS collocation project.
o Subject to final DD and negotiations the deal is expected to
sign in 2023, construction is expected to commence in early 2024
and commercial operations to commence from 2025.
-- Further GBP50mn drawn from existing debt facilities: total of
GBP110mn debt drawn as at 30 June 2023, out of total GBP335mn
available.
John Leggate CBE, Chair of Gresham House Energy Storage Fund
plc, said:
"While we currently face a more challenging electricity market,
the Manager's track record and our leading position in BESS in
Great Britain position us solidly to take advantage of the market's
recovery.
"In particular, strong dividend cover in 2021 and 2022 has
allowed us to maintain our committed dividend increase for 2023,
despite reduced revenues this year. As more projects come online
and installed capacity increases later in 2023 and into 2024, we
expect full run-rate dividend cover to return.
Looking to the longer term, we firmly believe that BESS are a
strategic cornerstone globally which uniquely will enable the
transformation of the energy sector towards carbon neutrality.
Renewables are the cheapest form of incremental energy generation
and batteries the cheapest and most efficient way of addressing
intermittency. These are the two fundamental pillars to delivering
a zero carbon future."
Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc
and Managing Director of Gresham House New Energy, said:
"We are proud of our track record and industry-leading position
as we continue to execute on our plans. The past five years since
GRID's IPO have seen some of the most extraordinary market
conditions condensed into a short timeframe. While some of those
periods have been very positive for GRID, the current weaker
trading environment has been challenging and lower revenue
forecasts in 2023 also arise from industry issues outside our
immediate control.
"We have carefully re-examined our strategy to maximise returns
in light of the tougher market environment which includes a focus
on extending MWh duration rather than creating new MW capacity.
These project extensions do not require new grid connections and
provide a quicker route to revenues. At the same time, we are
diversifying internationally with Project Iliad in California and
are excited about what these projects will unlock in terms of
further pipeline and growth. Finally, any potential disposals would
provide a secondary market valuation reference for our portfolio as
well as generating cash that may have multiple opportunistic uses
in the current environment.
"The inexorable rise of renewable energy is driven by both the
economic reality of cheaper energy, and international net zero
commitments. With National Grid system issues expected to be
addressed in the relatively near term, and new capacity coming into
operation, we have no doubt that, as we enter 2024, the long-term
return opportunities for GRID remain as strong as ever."
The Company's Interim Report and Financial Statements for the
period ending 30 June 2023 are available on the Company's website
www.greshamhouse.com/gresham-house-energy-storage-fund-plc and also
on the National Storage Mechanism
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
A webinar and Q&A session for investors, to discuss the
results, will be held at 11:00am (BST) today, 27 September 2023.
This will be an opportunity to hear fund manager, Ben Guest provide
an update on GRID's operational and financial performance and to
ask questions. Registration is at here or via the GRID website
www.greshamhouse.com/gresham-house-energy-storage-fund-plc .
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 gh@kl-communications.com
Charles Gorman +44 (0)20 3995 6673
Charlotte Francis
Effie Aye-Maung-Hider
JTC (UK) Limited as Company Secretary GHEnergyStorageCoSec@jtcgroup.com
Christopher Gibbons +44 (0)20 7409 0181
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 and
in Overseas Jurisdictions. 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 targets an unlevered Net Asset Value total return of
8% per annum and a levered Net Asset Value total return of 15% per
annum, in each case calculated net of the Company's costs and
expenses.
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.
http://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] This is exclusive of any potential disposals which would be
limited to <200MWh and also excludes any additional pipeline
being built from proceeds from any disposals.
[2] Not all revenue data is publicly available but revenues from
frequency response, Capacity Market and Balancing Mechanism are
available and are amalgamated by data providers such as Modo
Energy.
[3] At least two interconnection providers have gone into
administration in H1 2023 causing delays in connection works.
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END
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