Quarterly NAV and Factsheet publication

Gresham House Energy Storage Fund

22 November 2023

 

22 November 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 30 September 2023 was £837.7mn and NAV per share was 146.08p per ordinary share (30 June 2023: 146.66p).

Highlights

·    NAV at £837.7mn and NAV per share at 146.08p per share declined by 0.40% over the quarter

·    A 1.84p dividend in respect of the quarter ended 30 June 2023 was paid on 29 September 2023

·    NAV total return of 91.6% since IPO

·    Operational portfolio reached 640MW vs 590MW on 30 June and 550MW on 31 December 2022

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

o  +1.95p from project revaluations:

-  Shilton Lane was valued on a DCF basis for the first time, being within nine months of commissioning, at a 75bp premium to operational discount rates

-  Grendon was commissioned and was valued as a project in commissioning at a 50bp premium to operational discount rates

o  -1.84p from the payment of the Q2 dividend

o  +1.36p due to higher third-party revenue forecasts, reversing some of the reduction seen up to the first half of 2023 (-9.38p at HY 2023), reflecting improvement in longer term revenue forecasts for longer duration projects

o  -1.24p from delays on construction projects

o  +0.83p from portfolio cashflow generation

o  +0.58p from projected cost savings, mostly reflecting the reduced insurance premiums achieved

o  -0.47p for fund costs including transaction fees

o  -0.46p for debt costs

o  -1.29p for other items including movement in fair value of interest rate swaps

·    No changes to inflation assumptions or underlying discount rates during the period. The weighted average discount rate (WADR) for the portfolio in Q3 2023 was 10.9%, and was 10.6% for operational assets

·    Operational assets valued at £833k/MW. Adjusting for working capital, i.e., taking just the NPV of future cashflows, the valuation stood at £736k/MW. Working capital included cash and batteries and other equipment held for upgrades

Portfolio activity

Grendon (50MW/100MWh), our largest battery to date, was commissioned and began commercial operations in the period. The site has demonstrated encouraging performance, highlighting the advantages of longer duration BESS in today's market environment.

From a construction perspective, the three sites which were exposed to an Independent Connections Provider (ICP) that went into administration were quickly transferred to a new ICP several months ago. West Didsbury has now been energised, while Penwortham and Melksham are on track for completion at the start of 2024.

More broadly, we continue to make good progress on the remainder of the '2023 pipeline', as announced with the Fund's Interim Results 2023. York remains on track to be energised in November. Elland and Bradford West are on track to follow later in H1 2024. We look forward to providing further updates in due course.

Market outlook

In Q3 2023, Frequency Response prices generally remained low but we have seen some short-term improvements in prices such as in July 2023 when volume requirements increased during a period of high wind power generation. This period further demonstrated the high levels of curtailment which ESO currently needs to implement, cutting renewables output to increase fossil fuel thermal generation to manage system needs - the consequence of insufficient BESS and low utilisation of available BESS on the system.

As previously announced, steps are being taken to resolve this. On 16 October 2023, ESO hosted an event called 'Enhancing Energy Storage in the BM' to provide clarity on the system improvement plans in the BM to better utilise BESS flexibility. A detailed timeline showed the steps being taken to improve systems and the revenue opportunity for BESS. The next key step is the launch of the Open Balancing Platform (OBP), a new system alongside a new dispatch algorithm (called the Bulk Dispatch Optimiser, or BDO), which is expected to drive significant increases in the volume of actions for BESS in the BM. ESO remain committed to their 12 December 2023 launch date. We look forward to seeing the improvements these bring for BESS and their wider impact on higher volatility in wholesale markets, driving greater trading returns.

The fundamentals for BESS remain strong, with rising renewable penetration placing increasing challenges on the system today. The decommissioning of nuclear power, remaining coal and older gas-fired power stations over the next few years will further drive reliance on renewable generation, driving increased supply, and power price volatility.

Portfolio outlook

Regardless of any improvement in revenue backdrop, the portfolio remains well positioned to return to dividend cover (without interest income on construction capital deployed to SPVs) in 2024 as operational, revenue-generating capacity increases as pipeline is commissioned, as highlighted in the Manager's five-point plan in the Company's Interim Report and Accounts 2023.

Q3 2023 Factsheet

The factsheet for the period ended 30 September 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/

For further information, please contact:

Gresham House New Energy

Ben Guest                                                       [phone]
James Bustin 

Jefferies International Limited

Stuart Klein                                                      [phone]
Gaudi Le Roux
Harry Randall 

KL Communications                                                [e-mail]
Charles Gorman                                             [phone]
Charlotte Francis
Effie Aye-Maung-Hider

JTC (UK) Limited as Company Secretary             [e-mail]
Christopher Gibbons                                                   [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 and internationally. 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.

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.

 

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