REG - Gresham House Energy - Net Asset Value(s)

Gresham House Energy Storage FundAnnouncement

12/05/2023 07:00

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RNS Number : 1698Z  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
(https://greshamhouse.com/real-assets/new-energy/gresham-house-energy-storage-fund-plc/)
/
(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
 
+44 (0) 20 3837 6270

Rupert Robinson

 

Jefferies International Limited

Stuart Klein
                                    +44 (0)
20 7029 8000

Gaudi Le Roux

Harry Randall

 

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

Charles Gorman
                        +44 (0) 20 3995 6673

Charlotte Francis

 

JTC (UK) Limited as Company Secretary    GHEnergyStorageCoSec@jtcgroup.com
(mailto:GHEnergyStorageCoSec@jtcgroup.com)
David Rice
                        +44 (0)203 846 9774

 

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.

 

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