REG - Gresham House Energy - Full-Year Results to 31 December 2024

Gresham House Energy Storage FundAnnouncement

23/04/2025 07:00

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RNS Number : 7566F  Gresham House Energy Storage Fund  23 April 2025

 

23 April 2025

 

Gresham House Energy Storage Fund plc

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

 

Full-Year Results to 31 December 2024

 

Strong recovery during 2024 leading to 20% revenue growth, to £46.5mn.

Operational capacity grew sharply again in 2024.

Further significant growth in Operational capacity expected from further
augmentations and construction of new projects as the Three-year Plan
progresses.

 

 

Gresham House Energy Storage Fund plc (LSE: GRID), the UK's largest
utility-scale battery energy storage fund, announces its audited annual
results for the year ended 31 December 2024.

Performance highlights as of 31 December 2024

·      109.35p NAV per share dropped 15.3% over the year driven by lower
third-party forecast revenue curves (31 December 2023: 129.07p)

·      GRID remains GB market leader with a market share of c.17%

·      Operational grid capacity stood at 845MW and battery capacity of
1,207MWh increasing 22% (+155MW) and 53% (+419MWh) respectively during 2024

·      Duration 1  of the Operational portfolio rose 25.1% to an average
of 1.43h, up from 1.14h

·      Operational portfolio revenues rose 20.1% to £46.5mn (2023:
£38.7mn) as revenues in the second half rose 58.1% year-on-year to £28.6mn
(H2 2023: £18.1mn) more than offsetting the decline in the first half

·      Operational portfolio EBITDA rose 12.7% to £29.1mn (31 December
2023: £25.8mn) resulting in an EBITDA margin of 62.5%

·      Debt drawn was £150mn (31 December 2023: £110mn) while cash on
hand was £39.5mn (31 December 2023: £43.7mn) resulting in net debt of
£110.5mn.

·      Net debt to GAV stood at 14% and net debt to NAV at 18%, well
below the investment policy limit of 50% of NAV

 

Highlights since 31 December 2024 and outlook

·      Operational capacity has increased further to 945MW / 1,447MWh
today, up 12% and 20% respectively post year end. Year to date growth
reflects:

o  Melksham (100MW / 100MWh) commissioning at a one-hour capacity in January
2025;

o  Coupar Angus augmentation (+40MWh) to a 2-hour duration in April 2025; and

o  Melksham augmentation (+100MWh) to a 2-hour duration in April 2025

·      Shilton Lane (40MW / 80MWh) and West Bradford (87MW / 174MWh) are
both expected to become operational in Q2 2025 to take total operational
capacity to 1,072MW / 1,701MWh

·      Investment Manager's fee has reduced, with annual savings of
£1.6mn (28%) 2  ( )following agreement to change its basis from a percentage
of NAV to the average of NAV and market cap

·      Progressing a transaction to validate NAV and to improve
liquidity remains an active focus. A deal with initial terms agreed is in the
late stages of due diligence with an announcement expected soon

·      Update on refinancing:

o  Refinancing of existing debt arrangements and financing for new projects
is progressing positively and is expected to conclude in Q2 2025

o  It is expected to result in a lower interest rate and a longer-term debt
facility

o  All debt is to be underpinned by longer term contracted revenues, the
details of which will be announced once contracts have been signed which is
expected ahead of the debt closing in Q2 2025

·      Update on the Three-year Plan:

o  Once the refinancing is completed and funding is secured, the Three-year
Plan will launch in earnest. Augmentations and new projects are anticipated to
get underway in 2025, as previously outlined at the Capital Markets Day, a new
pipeline of up to 694MW and further augmentations of up to 1.5GWh have been
identified subject to funding. The final list of funded projects will be
announced at the time of the refinancing.

·      Update on capital allocation:

o  Upon refinancing of the existing debt, the Company expects to reinitiate
distributions to shareholders. The Board will provide further information
about dividends and other uses of capital allocation such as buybacks at that
time.

 

Valuation

NAV per share for 31 December 2024 was 109.35p, reflecting a 15.3% reduction
compared with 31 December 2023 (129.07p). This values the Operational
portfolio at £684k/MW. Discounted cashflows represented £670k/MW while
working capital represented the remainder.

 

The primary driver for the reduction in NAV per share was lower independent
third-party revenue forecasts, which were revised down in the context of the
weakening of merchant revenues at the start of 2024. Performance in Q1 2025
has continued at similar levels to Q4 2024.

 

Discount rates were unchanged except for the inclusion of an 8.5% discount
rate for tolling revenues during each two-year tolling contract reflecting the
contracted nature of the earnings. This, combined with more assets moving from
being under construction to operational, led to a small reduction in weighted
average discount rate to 10.73% (31 December 2023: 10.87%).

 

 

Portfolio performance and market update

GRID and the GB BESS sector experienced very weak revenues at the start of
2024 dropping significantly from 2023 levels. Following a turbulent first
quarter, revenues improved over the remainder of 2024, culminating in a record
revenue month for the portfolio in December 2024, which reflected peak
operational capacity and the highest revenue per MW run rate since January
2023.

 

Q1 2025 revenues remained similar to Q4 2024 levels, and the portfolio
continued to outperform its peer group having consistently done so in 2024.

 

The Company responded to the uncertain environment in Q1 2024 by agreeing to
toll 568MW, a little over half the portfolio, to Octopus Energy in a deal
signed in June 2024. This two-year arrangement provides greater revenue
certainty for the business. As of 31 December 2024, 310MW of the 568MW had
started to be tolled and the remainder is expected to begin to be tolled in Q2
2025.

 

The uncertain revenue environment in 2024 was a function of very low
utilisation of BESS in NESO's Balancing Mechanism as reflected in very high
skip rates(( 3 )). NESO has committed to improving BESS utilisation in the
BM(( 4 )), admitting that BM skip rates are too high(( 5 )).

 

Given the renewed efforts by NESO and the important role BESS plays in
achieving the Government's Clean Power 2030 (CP30) ambitions detailed here
(https://www.gov.uk/government/publications/clean-power-2030-action-plan) , we
are hopeful that the operating environment for GB BESS will remain positive.
It is, however, imperative that the modernisation of NESO's control room is
successfully completed and that skip rates are eliminated for the backdrop to
remain positive over the long term.

 

 

Commenting on GRID's results, John Leggate CBE, Chair of Gresham House Energy
Storage Fund plc, said:

 

"The continued share price discount to NAV has been particularly difficult for
investors. We are therefore very thankful for our shareholders' continued
support. Despite the challenges during 2024, we benefitted from an improving
trend from the second quarter and ended the year on a more positive note,
posting over 50% growth in operational battery capacity (MWh).

 

"We are confident the revenue backdrop will continue to improve over the
medium term given Government's support for BESS in the context of rapidly
rising renewable generation and significant efforts from NESO to reduce skip
rates. The combination of a greater operational portfolio base coupled with an
improving merchant picture, a portion of which will be contracted over the
longer term to protect against downside scenarios will drive a growing and
more resilient business going forward.

 

"Following completion of our planned refinancing, we expect to have growing
levels of free cashflow to allocate to dividends and an improved and more
robust capital allocation framework as the Three-year Plan unfolds. The Board
looks forward to announcing details once the refinancing is completed."

 

 

Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc and Managing
Director of Gresham House Energy Transition, said:

 

"Our immediate focus is on delivering our Three-year Plan unlocked by the
contracting of revenues and a refinancing and new financing that provides the
capital for further growth in capacity and free cashflow. These processes are
expected to conclude in Q2 2025.

 

"We were pleased to see the recent market transaction indicate support for our
valuation approach. Meanwhile, the transaction we are working on, once
completed, will provide further support for the current valuation.

 

"We are excited by the next phase of growth. Once the funding is secured, we
will start work on new construction and the Company will be in a position to
start valuing the anticipated augmentations and new projects. We expect this
will drive a significant increase in both NAV and cash flow underpinning our
total return strategy."

 

 

Annual Report and webinar

 

An online webinar and Q&A session to discuss the results will be held at
10:30am BST on 23 April 2024. Ben Guest will provide an update on GRID's
operational and financial performance and answer questions. Registration is
available here
(https://greshamhouse.zoom.us/webinar/register/WN_cJzQ2WcmShuntjUklpElDA#/registration)
and a recording will be available following the presentation.
 

A copy of the 2024 Annual Report and Financial Statements (the "Annual
Report") is also available on the Company's website at
www.greshamhouse.com/grid (https://greshamhouse.com/grid) where further
information on the Company can also be found. The Annual Report has also been
submitted to the National Storage Mechanism and will shortly be available
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .

 

Further, the Annual Report can also be found here: GRID Annual Report 31
December 2024
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fgreshamhouse.com%2Fwp-content%2Fuploads%2F2025%2F04%2FGRID-Annual-Report-31-December-2024.pdf&data=05%7C02%7CL.Darbourne%40greshamhouse.com%7Ce3e86c7683c84d4c1f3508dd81dbe211%7C7a74c7b448444bcaa292c2f67edf7466%7C0%7C0%7C638809503611084843%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=WB8cTBjvU%2B2SkO7T7ZR6ynPJiEVYhtX4WsgI1mn9%2BEI%3D&reserved=0)

 

 

For further information, please contact:

 

 Gresham House New Energy                                                                                                 +44 (0) 20 3837 6270

 Ben Guest

James Bustin

 Harry Hutchinson

 Jefferies International Limited                                                                                          +44 (0) 20 7029 8000

 Stuart
 Klein

Gaudi Le Roux

Harry Randall

 Peel Hunt LLP                                                                                                            +44 (0)20 7418 8900

 Luke Simpson

 Huw Jeremy

 KL Communications                                                                                                        gh@kl-communications.com (mailto:gh@kl-communications.com)

Charles Gorman

                                                                                                                          +44 (0) 20 3882 6644

 Charlotte Francis

Effie Aye-Maung-Hider

 JTC (UK) Limited as Company Secretary Christopher Gibbons                                                                GHEnergyStorageCoSec@jtcgroup.com (mailto:GHEnergyStorageCoSec@jtcgroup.com)
                                                                                                                          +44 (0)20 7409 0181

 

The person responsible for the release of this announcement is JTC (UK)
Limited

 

LEI: 213800MSJXKH25C23D82

 

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 Ltd, a 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 (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  Duration is defined as battery storage capacity (MWh) divided by grid
connection capacity (MW)

 2  Assuming the closing share price on 31 January 2025 of 41.05p and current
NAV per share of 109.35p

 3  The skip rate is calculated as (1 - utilisation rate)

 4 
https://www.neso.energy/news/our-commitment-improve-battery-dispatch-rates-balancing-mechanism
(https://www.neso.energy/news/our-commitment-improve-battery-dispatch-rates-balancing-mechanism)

 5  https://www.neso.energy/document/348241/download
(https://www.neso.energy/document/348241/download)

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