Gore Street Energy Storage Share Discussion Threads

[george stobbart] 04/7/2024 06:39

Deutsche Bank Numis initiates coverage of Battery Storage Funds

Buy Sector Rating

July, 4 2024

Preferred Fund: Gore Street Energy Storage Fund

The significant share price volatility across battery storage investment companies in 2024 (average -31% ytd) reflects the impact of lower actual and forecast GB revenues on earnings, dividends and NAVs. Ultimately, we believe battery storage has a significant role to play in the energy transition and in our view the inherent variability of the current merchant-based revenue model is masking upside potential of the listed peer group. Although we reiterate our view that the variable revenue profile is less suited to the high fixed dividend targets that underpinned initial investment pitches, we note the composition of returns is evolving with the introduction of greater contracted revenue visibility and earnings-based dividend policies. We do not rule out the possibility of further near-term share price volatility, but in our view the significant increases in operational capacity, expected over the coming months as companies execute existing build out programmes, gives rise to attractive potential earnings. This will improve cash cover for existing dividends and enable a return to distributions from funds where dividends are currently suspended. This, combined with the potential for asset sales and corporate action, will underpin a positive share price trajectory in our view.

To download the full note (41 pages) please click here: Download battery storage note

Evolution of revenues: The weakness in revenues for GB batteries over the past 12 months has been driven by falling prices for ancillary services amid increased supply, coupled with limited opportunities in wholesale markets. The picture has improved more recently, aided by the first steps of a programme to evolve the grid balancing systems, but it is expected to be some time before the impact of this is fully felt. Gore Street Energy Storage’s international exposure has partially cushioned the impact of this weakness in the GB market on overall revenues, while Gresham House Energy Storage has responded to the challenging environment with the introduction contracted revenues through a tolling arrangement. This two-year contract will reduce the volatility of earnings, but we expect some investors will question the potential returns upside that has been sacrificed.

Do discounts offer value: Wide discounts are reflective of investor scepticism towards NAVs and portfolio valuations that are based on long-term, third-party revenue forecasts in a nascent market. As a result, we focus on nearer-term cash earnings and undertake a scenario analysis which assesses the likely run-rate earnings potential of each fund by the end of 2024 and underlines potentially attractive distributable returns going forward. We believe evidence of this translating into a more sustained period of improved returns will be required for share prices to see a significant further re-rating, but we note that there is also scope for value to be unlocked through M&A and asset sales, given significant capital is seeking access to the storage thematic.

Preferred exposure: Based on our analysis we believe Gore Street Energy Storage offers investors the most compelling exposure to the BESS sector. Its significant anticipated growth in operational capacity in H2 gives rise to attractive forward-looking earnings potential, which should be relatively stable based on the portfolio’s international diversification across five uncorrelated grids. In addition, we note that shares of Harmony Energy Income also benefit from potential nearer-term catalysts, with the prospect of asset sales and other corporate action.

[cocopah] 03/7/2024 07:42

Questions submitted for the Investor Meets year-end prentation … let’s see if they have the cahoonas to answer them … especially the one about the exorbitant fees! 🙄🤔

[george stobart] 02/7/2024 23:19

Jefferies turns bullish on Battery Storage funds


Equity Research
July 3, 2024

Battery Storage, Q2 State of Charge

During Q2 GB battery revenue improved for the first time since summer 2022, predominately driven by frequency response. We expect the volume required for dynamic response services to remain high in July and August, and we also see signs of the trading environment improving going into Q3. Elsewhere, we take a look at grid code change GC0166 in more detail.

Overview: Modo Energy's revenue benchmark (now including CM revenue) indicates that GB BESS revenue improved in Q2, achieving c.£10,700/MW for 1-hour batteries and c.£14,600/MW for 2-hour batteries, versus c.£8,400/MW and c.£12,200/MW in Q1, respectively, and versus c.£14,900/MW and c.£18,500/MW, respectively, in Q2 2023. The quarter-on-quarter improvement was largely driven by stronger seasonal demand in frequency response, and helped by a better trading performance. The balancing reserve, introduced in March, saw declining prices over Q2 and therefore remains a very limited part of the overall revenue stack.

Ancillary services: Higher volume required in dynamic responses has resulted in a price improvement, which in turn contributed positively to battery revenue in Q2. The dynamic containment volume required will likely remain seasonally high throughout July and August before softening in September. This should provide support to ancillary services revenue in Q3.

Trading: Day-ahead intraday spreads have increased in Q2 to a monthly average of £52/MW, from £44/MW in Q1, and £51/MW in Q2 2023. UK forward power prices have picked up over Q2 (here), which along with the heightened possibility of zero and negative wholesale prices during summer, should improve the trading environment for batteries in Q3. Elsewhere, we see some evidence of the 30-minute rule and balancing reserve helping to increase batteries' dispatched volume into the balancing mechanism since March.

Grid code change GC0166: Our recent expert call with Caroline Still from Aurora Energy Research (here) highlighted the importance of grid code change GC0166. Currently, National Grid relies on a workaround using the unit's grid connection metrics (Maximum Import Limit and Maximum Export Limit) and caps batteries' dispatches to 30 minutes. The proposed change will bring in new parameters designed for limited duration storage (including Maximum Delivery Bid, Maximum Delivery Offer, and Future State of Energy). As these parameters reflect the batteries' operational state and commitments at the selected point in time, they enhance the communication between battery operators and National Grid's control room, which in turn will enable longer dispatches into the balancing mechanism. The workgroup on GC0166 expects to finalise the solution in September, and the grid code's implementation date is provisionally set for the end of March 2025.

[scruff1] 01/7/2024 19:46

Doing a good job on me !

[george stobbart] 01/7/2024 18:03

Rathbones dumping those Sell orders with both fists?

Rathbones doesn’t care about price, they just want to destroy and humiliate current shareholders

[scruff1] 01/7/2024 17:44

The seller is back and the relentless fall continues. Lot to be said for ISAS and Gilts

[scruff1] 27/6/2024 12:21

Selling continues and divi wiped out - great

[zingaro] 27/6/2024 08:31

The ex-dividend date will be 27 June 2024, and the record date is 28 June 2024. The dividend will be paid on or around 15 July 2024.

[panshanger1] 27/6/2024 07:13

Ex div today

[rogerrail] 21/6/2024 17:22

From Euractive.com"Increasing battery storage is keyThe International Energy Agency (IEA) highlighted the urgent need for energy storage in an annual report."Developers who choose not to co-locate their wind and solar PV power parks alongside battery storage or other sources of flexibility may see a drop in potential revenues during peak generation – hampering profits and discouraging investment," the IEA wrote.The EU estimated that energy storage in the bloc will need to rise more than three-fold from 2022 to 2030, to match projections of a 69% share of renewable energy in its electricity system by then.Norwegian renewable energy producer Statkraft, which operates across Europe, has said it could divest some wind and solar projects, but would likely hold onto its battery assets."For batteries it will be positive to have greater volatility and also negative prices," CEO Birgitte Ringstad Vartdal said, as batteries can be charged when prices are low while output can be sold when prices are high."That is one of the reasons why flexible projects will be attractive," Ringstad Vartdal added.Besides storing energy in batteries to deal with periods of excess supply, other options like AI-powered smart grids and meters could also help consumers optimise their electricity use."

[george stobart] 21/6/2024 12:38

Given that operational cash dividend cover is that elevated at 1.6x for GSF and it has a very cost efficient structure at the trust level, Alex O'Cinneide is speaking at a position of superiority

Things like GRID and Harmony that suspended dividends and are failing to meet monthly debt interest payments will be forced to toll their assets for chump change

[cc2014] 21/6/2024 07:32

Gore Street says time not right for battery leasing
Manager Alex O'Cinneide says securing multi-year contracts at current battery revenue lows would not be beneficial, shortly after peer Gresham House Energy Storage announced its own landmark deal.

I tend to agree with him although the price GRID got for tolling is way above current pricing level.


GSF do not have the debt pressures GRID had and can take their time over any such agreement.

[rogerrail] 20/6/2024 13:04

Disagree. The company needs to use the money handed them by investors to increase the NAV by buying undervalued assets ( which should be available given the state of the BESS sector in the uk) thereby increasing the long term dividend returns to investors.

[george stobart] 20/6/2024 12:31

Given that operational cash dividend cover is that elevated 1.6x at the HoldCo level and 1.2x at the Fund level, it is outrageous and unprecedented that they do not increase the dividend aggressively but rather reserve excess cash to fund the remaining developments in 2024

[waterloo01] 20/6/2024 08:25

Reason for NAV drop seem prudent (ie realistic UK rev) and comment about long term contracts at current prices (a dig at ANO?).

Cash looks excellent and fully funded expansion this FY.

[stemis] 20/6/2024 08:24

Key statistics -

Dividend cost for year = £36m
Operational ebitda, before central costs (running at ~£10m), depreciation and tax = £28.4m

[cocopah] 20/6/2024 08:11

Well at least the dividend is 1.5p.

The mystical NAV calculation at £1.07 means that it is now a coin toss as to whether the dividend will be maintained at 7.5p for the year or whether it drops to 7p (especially if there is a further decline in NAV - remember it’s rolling 12 months at/above £1.07 that determines the divi policy).

Meanwhile the management company (and CEO - who is the substantial shareholder in it) continues to rake-in substantial fees at the expense of shareholder returns.

So many questions to be asked at the Investor Meets presentation in July, especially as the weak growth in income doesn’t look like improving any time soon.🫣ԅ31;

[cc2014] 20/6/2024 07:39

Dividend held as previously messaged to the market.

NAV drop a little disappointing but hardly surprising.

Average revenue of £133k/MW/yr excellent.

[george stobbart] 20/6/2024 07:04

Closes above 70p on positive outlook and possible increase in dividend given the significant coverage by underlying cash flows

It is urgent and vital that they increase the dividend given the strength in battery markets and prices globally

[rogerrail] 13/6/2024 12:11

No worries!

[scruff1] 13/6/2024 09:18

Roger - didnt get your 602 til I posted 603 - cheers

[scruff1] 13/6/2024 09:16

Yep. We know by now that the GSF management is a bit duff, lacks transparency and are unwilling or incapable of imparting info effectively to its investors.
However my point earlier was about Centricas development of liquid air storage which can be unfrozen and used as gas to drive turbines and generate electricity on demand. Sounds pretty effective to me and possibly a real threat to the future of battery storage but I dont know enough about it

[rogerrail] 13/6/2024 08:52

Not new. There are many ways to store energy including cryogenic, hydro, hydrogen, redox batteries , capacitors, even a flywheel is a way of storing energy. All are and will continue to be in the mix. The key question for GSF is which battery technology will become prominent.