REG - Gresham House Energy - Half-year results to 30 June 2024

Gresham House Energy Storage FundAnnouncement

30/09/2024 07:00

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RNS Number : 1112G  Gresham House Energy Storage Fund  30 September 2024

GRESHAM HOUSE ENERGY STORAGE FUND PLC

("GRID" or the "Company")

 

Half-year results to 30 June 2024

 

 

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 2024.

 

H1 2024 highlights

§ As previously reported, NAV per share declined to 109.16p, down 19.91p
since 31 December 2023 with third-party revenue forecasts contributing to
19.47p of this decline, principally due to the introduction of a new, more
conservative curve provider.

§ Operational capacity in MW rose 34% year over year to 790MW (590MW as of 30
June 2023 and 690MW as of 31 December 2023).

§ Operational capacity in MWh increased 46% year over year to 931MWh and
increased further to reach the 1GWh (1000MWh) milestone shortly after the
period end.

§ Operational portfolio revenues decreased 12.8% year over year to £17.9mn
(HY 2023: £20.5mn), and EBITDA declined 23.9% to £10.4mn (HY 2023: £13.8mn)
due to especially difficult market conditions in Q1 2024.

§ GRID closed a landmark tolling arrangement with Octopus Energy contracting
568MW / 920MWh for two years starting in H2 2024.

§ Debt facilities were amended and restated to set covenants at levels
reflecting the low revenue environment in Q1 2024. £110mn of the facilities
were cancelled, reducing the overall debt capacity from £335mn to £225mn.
This preserved access to the capital required to complete the current
construction programme.

§ Net debt is expected to peak at less than £165mn following completion of
all current pipeline projects.

 

 

Portfolio update since 30 June 2024

§ Net revenues in July and August averaged at the highest levels of the year
so far and were c.25% higher than average net revenues in H1 2024.

§ Penwortham's augmentation (additional 50MWh), Shilton Lane (40MW / 80MWh),
Elland (50MW / 100MWh), Nevendon (additional 5MW/26MWh) and Melksham (100MW /
150MWh) will go through energisation and commissioning in October and November
2024.

§ Melksham augmentation has commenced and will start operations in October at
150MWh before reaching 200MWh during December.

§ 170MW of assets have so far been onboarded by Octopus under the tolling
arrangement, with the remaining projects expected to transfer by the end of
2024.

§ GRID cancelled a further £30mn of its debt facility, reducing the total
size of the facility to £195mn.

 

 

Outlook

§ All projects contracted under the tolling agreement are expected to have
been onboarded by Octopus Energy by the end of 2024.

§ Including Capacity Market contracts, GRID expects to have c.£43mn of
annualised contracted revenues during the tolling arrangement.

§ The portion of the portfolio that remains merchant, is expected to benefit
from the launch of Quick Reserve by National Energy System Operator (NESO) in
Q4 2024.

§ Increased volatility of supply from deeper renewable penetration and higher
consumer winter demand may point to further improved trading revenues over the
next six months.

§ The second half of 2024 is expected to see the conclusion of the current
construction programme, taking the operational portfolio to over 1GW for the
first time with an average duration of 1.6 hours.

§ On 8 October, the Manager will host site visits for institutional and
retail investors, as previously communicated.

§ At its upcoming Capital Markets Day in November, the Company intends to
announce a three-year plan seeking to maximise portfolio capacity, revenues
and cashflow from 2025 to 2027 while reducing the volatility of earnings.
Event details will be announced in due course.

 

 

Gresham House will host a webinar for investors at 14:00 BST today. To access
the live webinar, please register here
(https://greshamhouse.zoom.us/webinar/register/WN_LCRcp3okTMO9IOuEsMUC6g#/registration)
.

The Company's Interim Report and Financial Statements for the period ending 30
June 2024 are available on the Company's website
www.greshamhouse.com/gresham-house-energy-storage-fund-plc
(http://www.greshamhouse.com/gresham-house-energy-storage-fund-plc) and will
shortly be available on the FCA's National Storage Mechanism
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) .

 

John Leggate CBE, Chair of Gresham House Energy Storage Fund plc, commented:

"The first half of this year has undoubtedly been one of uncertainty for
shareholders with the deterioration of the BESS revenue environment and with
the Board taking the incredibly difficult decision to temporarily suspend
dividends. We thank our shareholders for their loyalty and patience during
this time. Throughout the period the Board and Manager have taken the
necessary decisions to position the Company to thrive as the market improves.

"GRID has made significant progress on executing areas of its strategic plan.
This is fundamental to driving continued growth and providing a supportive
backdrop for the recommencement of dividend distributions. We look forward to
welcoming investors to our sites in October and announcing further progress on
2024 milestones and our plans for 2025 and beyond at the upcoming Capital
Markets Day in November."

 

Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc &
Managing Director of Gresham House New Energy, added:

 

"The tolling agreement and conclusion of the construction programme have
stabilised the business and provided the visibility required for the Board and
Manager, with our shareholders, to be able to look forward to renewed growth.

"While it is clear the revenue environment has been weak there have been
several important positive industry developments. Renewable generation has
risen as expected and will continue to do so, increasing power price
volatility and the revenue potential of longer duration batteries in
particular. This, combined with record low prices, and hugely improved energy
density of new batteries and the Manager's now proven expertise in
cost-effective project augmentation, means that the Manager sees considerable
potential revenue upside from increasing the duration of the remainder of the
portfolio to at least two hours during 2025 for modest amounts of capital,
subject to availability.

"Even using recent forecast levels, cheaper batteries also mean that new
pipeline projects, whether fully contracted on tolling arrangements or
merchant revenues, are capable of achieving attractive returns. The Manager is
working on the project level equity and debt financing for a new pipeline
which is to be announced at the Capital Markets Day.

"In the meantime, in the second half of the year we will see a meaningful
change to the revenue mix as the tolling agreement comes into force. Increased
volatility of supply from a higher renewables grid and rising electricity
demand increases the need for BESS in the UK electricity system and this
indicates improved merchant revenues to come.

"It is good to be looking forward to new growth in 2025 and beyond with a
large portfolio and a more stable earnings outlook, as our starting point."

 

ENDS

 

For further information, please contact:

 

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

 Ben Guest

 James Bustin

 Jefferies International Limited         +44 (0)20 7029 8000

 Stuart Klein

 Gaudi Le Roux

 Harry Randall

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

 Charles Gorman                          +44 (0)20 3882 6644

 Charlotte Francis

 Effie Aye-Maung-Hider

                                         GHEnergyStorageCoSec@jtcgroup.com (mailto:GHEnergyStorageCoSec@jtcgroup.com)

                                       +44 (0)20 7409 0181
 JTC (UK) Limited as Company Secretary

 Christopher Gibbons

 

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.

 

http://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.

 

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