Net Asset Value(s)

Gresham House Energy Storage Fund

12 May 2023

 

12 May 2023

GRESHAM HOUSE ENERGY STORAGE FUND PLC

("GRID", "the Fund" or the "Company")

Quarterly NAV and Factsheet publication

Gresham House Energy Storage Fund plc (LSE: GRID) (the "Fund") announces its NAV as at 31 March 2023 was £842.3mn and NAV per share rose to 155.61p per ordinary share (31 December 2022: 155.51p).

Financial highlights

NAV has increased to £842.3mn, or 155.61p per share, up 0.1p per share. The dividend in respect of the quarter ended 31 December 2022 of 1.75p per share was paid on 27 March 2023.

§ From the IPO in November 2018 to the end of March 2023, GRID has delivered an NAV total return of 95.1%

§ The portfolio has grown to 590MW of operational assets as of 31 March 2023 (550MW as of 31 December 2022)

§ During the quarter, the most significant changes to NAV per share included

-      -6.09p due to lower third-party revenue forecasts reversing a large portion of the increase in 2022 (+11.23p), reflecting the swings in power and gas price levels experienced in recent quarters

-      +3.40p uplift from Coupar Angus (40MW), Stairfoot (40MW) and Enderby (50MW) sites which are now valued as fully operational assets

-      +1.76p from increasing the long-term RPI inflation assumption beyond 2027 to 2.5%. Our long-term CPI inflation assumption, primarily applied to CM contracts, remains at 2%

-      -1.75p from the payment of the Q4 dividend

-      +1.70p from portfolio cash flow generation

-      +1.65p uplift from recently awarded Capacity Market contracts

§ There have been no changes to NAV from changes to underlying discount rate assumptions

Portfolio activity and market outlook

The market backdrop for energy storage in GB has reached a watershed moment. As long-expected, frequency response services have now commoditised, and prices have reached low levels. As we have anticipated for some time, GRID will focus more meaningfully on trading as well as earning a lower proportion of revenues from Frequency Response and continuing to earn contracted Capacity Market revenues.

Lower third-party revenue assumptions in Q1 2023 stated above (-6.09p) have reversed a large portion of the positive contribution to NAV per share observed during 2022 (11.23p). The significant swings in revenue forecasts can be explained by the swings in gas prices and power prices over the last two years resulting in the largest moves in revenue assumptions being seen in near term (i.e. up to and including 2025)¹. 

While the Fund is not heavily dependent on high commodity prices to generate power price volatility and trading revenues, it's worth noting their influence on near-term forecasts, particularly during periods of significant fluctuations.

What does fundamentally drive volatility is the intermittency of renewables, which is rising rapidly as renewables continue to commission at pace (renewable generation was 44.4% of total generation in Q4 2022, the most recently available data) in a right-sized market; one where supply is sized to match demand. High gas prices in 2022 have led to much higher electricity prices for consumers driving electricity demand down and it is this, in our view, that has driven lower volatility in electricity prices in recent months.  

We strongly believe fundamentals for the energy storage market remain robust and any lower power price volatility in the short term will self-correct as power prices work their way back down and as demand recovers. 

At a Portfolio level, there have been positive developments in Q1 2023 on our journey to the gigawatt level highlighted in our latest results. Coupar Angus is now operational, and West Didsbury, Penwortham, Grendon and York all expected to commission within the next two or three months. The Manager also continues to work on and grow an attractively priced pipeline with further information to follow.

We are pleased to report that the trial being conducted on a small number of MWs to explore additional trading revenue potential (first disclosed in the Annual Results RNS) is going as planned. Subject to the trial continuing to go well, we look forward to expanding it in due course.

The factsheet for the period ended 31 March 2023 is available within the key documents section of the website at https://greshamhouse.com/real-assets/new-energy/gresham-house-energy-storage-fund-plc/.

1. Operational projects as well as projects within 9 months of commissioning are valued on a discounted cashflow (DCF) based on our disclosed discount rates. The most important assumption in GRID's DCF valuation model is the revenue assumption which is provided by an independent third-party consultancy. The consultancy generates forecasts by first generating a half hourly power price projection over the following 20 or more years, called a Power Curve. Batteries revenue forecasts are then determined by calculating how much the batteries might earn from the trading of the volatility in the Power Curve, combined with an estimate of Frequency Response revenues.

For further information, please contact:

Gresham House New Energy

Ben Guest                                                       [phone]
Rupert Robinson        

Jefferies International Limited

Stuart Klein                                                      [phone]
Gaudi Le Roux
Harry Randall 

KL Communications                                      [e-mail]
Charles Gorman                                             [phone]
Charlotte Francis

JTC (UK) Limited as Company Secretary    [e-mail]
David Rice                                                      [phone]

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 targets (i) an unlevered Net Asset Value total return of 8 per cent. per annum; and (ii) a levered Net Asset Value total return of 15 per cent. per annum Gresham House Asset Management Limited 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. BESS also provide Frequency Response services to National Grid whereby batteries import and export power with the aim to keep real-time supply and demand in near-perfect balance while also protecting against unexpected outages of major power plants.

 

END