REG - Gresham House Energy - Improved trading driven by industry developments

Gresham House Energy Storage FundAnnouncement

06/01/2025 07:00

For best results when printing this announcement, please click on link below:
https://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20250106:nRSF1406Sa&default-theme=true

RNS Number : 1406S  Gresham House Energy Storage Fund  06 January 2025

6 January 2025

 

Gresham House Energy Storage Fund PLC

("GRID" or the "Company")

 

Improved trading backdrop driven by positive industry developments

 

 

Gresham House Energy Storage Fund plc (LSE: GRID), the UK's largest fund
investing in utility-scale battery energy storage systems (BESS), is pleased
to provide an update on current trading and recent industry developments.

 

Current trading and portfolio performance

 

The Company is expecting full year operational portfolio revenues of c.£42mn
and operational portfolio EBITDA in the region of £29mn for the financial
year ending 31 December 2024 (2023: £25.8mn), representing year-over-year
EBITDA growth of c.12% and an EBITDA margin of c.69% for 2024 (2023: 67%).

 

In its interim results, announced on 30 September 2024, GRID indicated that
annualised operational portfolio EBITDA could reach c.£45mn based on £45,000
per MW per annum in merchant revenues from its uncontracted assets once all
projects under construction are commissioned 1  (#_ftn1) . By comparison,
better trading conditions have resulted in annualised operational portfolio
revenues per MW on uncontracted assets (504MW) exceeding £60,000 per MW in
the second half of 2024.

 

Improved operational portfolio revenues and EBITDA have been underpinned by a
recovery in the wholesale market backdrop and as trading in the Balancing
Mechanism (BM) begins to see better dispatch rates of batteries, with December
being the strongest month of 2024. If this is sustained, GRID should be well
placed to meet or exceed the £45mn EBITDA level.

 

Project upgrade progress and asset management improvements

 

New projects are coming online, with Elland (50MW), energised on 1 November
2024 at a 2-hour duration, now commissioned. The commissioning of Melksham
(100MW) was rescheduled as the planned outage was on the same day as Storm
Bert landing. The site is fully ready to energise, and the team is working to
shorten the commissioning phase once energisation has taken place, which is
now expected later this month. The team is using this time productively by
progressing augmentation works from the current 1-hour to the 2-hour target
duration at Melksham. Shilton Lane (40MW), a 2-hour duration project, is also
fully built and is in the final stages of the National Energy System
Operator's (NESO) compliance process (a requirement for projects greater than
30MW in Scotland). This is expected to complete in February 2025.

 

As well as maintaining a high and increasing level of project availability
across the portfolio, the asset management team has been driving additional
asset level efficiencies. Disposals of non-essential equipment, such as diesel
engines and loadbanks installed in the original fleet, and other one-off
savings from construction, raised c.£1.1mn in December. The team is also
identifying recurring savings, such as the lower insurance costs reflected in
the last quarterly NAV, and further efficiencies are expected.

 

Improving dispatch rates of batteries in the NESO control room

 

The National Energy System Operator (NESO) has delivered several improvements
in its control room, leading to in-merit dispatch rates 2  (#_ftn2) of
batteries rising from 10% in September to 14% in November 3  (#_ftn3) 2024
which has benefitted trading income in recent months.

 

Since September, NESO has:

1.   Upgraded its existing systems to improve decision-making by changing
how information is presented to traders (known as Balancing Engineers in the
control room).

2.   Introduced a Dispatch Efficiency Monitor to provide in-merit dispatch
rate feedback to the control room in close to real time.

3.   Recruited personnel to permanently staff the Open Balancing Platform
(OBP) desk (through which BESS are dispatched) to ensure the OBP receives more
in-merit dispatches. In due course, the OBP will undertake all control room
dispatching (i.e., all technologies will be included in, and dispatched via,
the OBP). NESO has targeted 2027 to reach this final stage at which time the
Balancing Mechanism is expected to be automated and in-merit dispatch rates
optimised.

4.   On 3 December, NESO launched Quick Reserve, a reserve service designed
for BESS, with demand of 500MW. This has resulted in a further improvement in
BESS utilisation and better trading revenues. Details of Quick Reserve are
available on the NESO website here
(https://www.neso.energy/industry-information/balancing-services/reserve-services/quick-reserve)
.

 

A further improvement (known as GC0166) is expected in Q2 2025 and will allow
the control room to see a battery's state of charge. The rules in the BM mean
that all technologies need to be able to run at full power for 89 minutes if
dispatched. This is the reason for the 30-minute rule (which limits the amount
of time that BESS can be dispatched for, to 30 minutes), as many BESS cannot
run for 89 minutes today due to their limited duration. When the control room
is able to see the state of charge of a BESS, it could be dispatched for 89
minutes at a lower power level or up to full power for shorter periods, thus
eliminating the need for the 30-minute rule. This change should help level the
playing field further for BESS compared to other technologies in the BM.

 

NESO has also permitted publication of a report it commissioned from LCP
Delta, a leading technical consultancy focused on the energy sector, on 1
December 2024. The report includes analysis of historical skip rates and a
revised skip rate methodology which has been used to provide skip rate data on
a daily basis since 16 December 4  (#_ftn4) .

 

Government announcements

 

As part of its aim for clean power in 2030, the UK Department for Energy
Security and Net Zero (DESNZ), is now prioritising technologies that are
deliverable within this timeframe, rather than other technologies which, at
best, may be delivered operationally later in the 2030s and beyond. In
particular, DESNZ's detailed Action Plan published on 13 December 2024 states
that 29-35GW of batteries will be required by 2030, compared to less than 5GW
installed today. This reinforces the Company's long-held belief that
significant growth, and therefore investment, in the sector is required to
ensure net zero targets can be met. The report is on the DENZ website
(https://www.gov.uk/government/publications/clean-power-2030-action-plan) .

 

 

Other strategic initiatives

As announced at the Company's recent Capital Markets Day, numerous internal
initiatives are underway to further drive earnings, refinance debt and resume
the payment of dividends during 2025. Further details will be announced in due
course.

 

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

"We are pleased to see solid progress in the Company's performance, as well as
improvements in NESO's control room, and commitment to further change, that
should see BESS increasingly well utilised.

 

"We thank our shareholders for their patience as the battery storage industry
gets back on track with the most environmentally appropriate and economically
competitive energy storage technology (Li-ion) being properly prioritised.
Alongside NESO's backing of BESS, it is encouraging to see the government's
endorsement of a level playing field for battery storage - the only proven,
commercially viable technology that can dynamically manage renewable
intermittency at national scale."

 

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

"We have worked hard to highlight the industry's issues; we are relieved to
see NESO's acceptance of these issues and appreciate the NESO team's
significant efforts to address them. There is more work to be done, and we
look forward to seeing further progress.

 

"We are now working hard on our refinancing to drive growth in the business
and re-instate dividend payments. Our three-year plan involves project
augmentations, new pipeline and accessing the new revenue streams which are
becoming available as the industry matures. We look forward to sharing
progress on this in the near future."

 

 

 

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

 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

 

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/

 

 

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  (#_ftnref1) As referenced most recently in the 29 November 2024
announcement, revenues will be two-thirds contracted once all tolling
agreements are in place and assuming a merchant revenue rate on 504MW of
uncontracted assets of £45k/MW/yr

 2  (#_ftnref2) The in-merit dispatch rate = (1 - the skip rate) and is the
percentage of the time that batteries across the industry are used (to import
or export) when they are most competitively priced. The skip rate definition
and other information, including LCP's latest report are available here
(https://www.neso.energy/industry-information/balancing-services/skip-rates#Analysis-on-skip-rates)
.

 3  (#_ftnref3) Modo Energy,
https://modoenergy.com/research/battery-energy-storage-revenues-gb-benchmark-november-2024-balancing-mechanism
(https://modoenergy.com/research/battery-energy-storage-revenues-gb-benchmark-november-2024-balancing-mechanism)
.

 4  (#_ftnref4)
https://www.neso.energy/industry-information/balancing-services/skip-rates#How-is-a-skip-measured
(https://www.neso.energy/industry-information/balancing-services/skip-rates#How-is-a-skip-measured)

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
 or visit
www.rns.com (http://www.rns.com/)
.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
.   END  MSCEAXFDEEASEFA