Gresham House Energy Sto... Share Discussion Threads

[nickrl] 30/4/2024 18:54

@CC2014/Marktime two contrasting but equally fair views. The Jefferies analysis wasn't well researched and certainly forced the price down and the second leg down seemed to have no rationale to it so not surprised its come back a fair bit. Unfortunately i had been biased against GRID over HEIT so didn't take the plunge and can't see it retracing unless they come out again and pull the dividend in 25. Im not sure either extending the batteries duration was astute market evidence has been telling us long duration was the way to go for sometime. Anyhow its certainly sensible they've done it and will help revenue at whatever the run rate turns out to be.

[marktime1231] 30/4/2024 18:08

It would have been astute of GRID if a year or two ago they had prioritised extending durations of existing assets when already faced with connection delays and whatever on new assets, instead of fund raising for grand new schemes while still presenting a healthy income outlook. Astute is not the right word for doing something obvious and too late to prevent income drying up in the meantime.

Thanks for your feedback but I will wait for the hard facts of the q & a ... were they challenged on what is the breakeven or dividend cover threshold and when it might be met, are they really disposing of assets to deleverage, how is the delivery of the 1,072MW really going given we are still a long way off with just 8 months remaining, what is the strategy to deal with a > 60% discount assuming the latest NAV figure is realistic, how sensitive is that NAV assessment to the possibility that revenues stay stuck around the current level, are future management fees going to reflect the collapse in shareholder value ... rather than be swayed by feelings based on how assured the architect of our downfall came across. Maybe he wasn't needled hard enough. I would be particularly keen to hear how GRID are now going to keep us transparently informed of trading with detail on revenue and net income, something else which would have been astute when advised to do so yonks ago.

There is an asset trading case for remaining interested in GRID, for example if you anticipate positive movement in the share price as things become prospectively less awful, but the most simple (some would say only) rationale for any long term investment is that it rewards you with returns eg income. But as you say it is horses for courses.

[cc2014] 30/4/2024 13:09

To add what I saw more than anything is that GRID have been explaining the revenue stream in detail. The analysts should have got the measure of it by now.

[cc2014] 30/4/2024 13:07

I turned up late and listened to the Q&A

What I would say is there has been a fundamental change in the last 2-3 presentations compared with a year ago. My reading of Ben Guest's body language is that he's now reasonably relaxed and happy to answer any question. Gone is the man who was taking his time and being guarded in his responses or was just parroting off the answer that would place the fund in best light.

I won't go through the detail of the questions but I was left feeling assured. I'm more content to hold than I was before


(As an aside I think they've been very astute in increasing the duration of their assets rather than building new ones. The lead time seems to be around 2-3 months and doesn't require a grid connection and there are some economies of scale. Effectively they will have around doubled their capacity really quickly and the revenue should all be on stream by end of October).

[marktime1231] 30/4/2024 12:20

Sorry not I. They promised a recording of the results presentation and Q&A webinar from yesterday but not anywhere I can find on the Gresham House website as yet.

[nickrl] 29/4/2024 22:30

Read the AR but as ive always had with GRID difficult to draw any conclusion with the reported income vs what the individual opcos actual performance is. At least HEIT give an un-audited attempt at consolidating all the subsidiaries to give you a feel for the overall performance of income vs expenditure so you can at least assess what the various rates/MWh might be worth.

Also had hoped to watch the results but couldn't and can't find it on the website! Anyone watch it?

[cc2014] 29/4/2024 12:56

Well, I always struggle with the thought process around income investors as I really couldn't care whether I live off capital gains or dividends or interest. However, I acknowledge that there are very many investors who do.

Regarding whether the recent better revenue from wind is a con or not, I can see it's been presented in the best light possible, but the wind always tends to blow in March/April just as the sun tends to shine in the summer months.

Revenues have dropped now as we are in a lull with the weather. Cloudy days with low wind speed won't get a good spread to trade and will only allow one cycle.

[willywonka12] 29/4/2024 12:41

Could start seeing directors bus now all the news is out .unless there some takeover rumours about .not swaping for core not at 2 p divi

[marktime1231] 29/4/2024 12:14

An interesting throw away line in the results rns today

"Active disposal process for a subset of the portfolio is ongoing to demonstrate value and contribute towards deleveraging"

Well it would be an interesting test of valuation agreed. But I don't believe GRID are actively pursuing significant disposals because they are still pushing for that 1,072MW year end target. Given the current trading environment it would be self harm to sell off one or two of the best performing assets simply to demonstrate value. GRID needs every MWh to close the income gap.

As has been observed a rebound from focusing attention on better trading in early April, driven by transient wind conditions, feels like a con. Or is it the rather optimistic but now audited NAV assessment drawing speculators in? If people are invested for income from renewables it would be sensible to look elsewhere for better prospects in the medium term.

The NAV reset acknowledges that revenues will be significantly reduced compared to previous forecasts for at least the 2024-2026 period and only gradually improve. The carrot of restoring a dividend in 2025 has been dangled but with the sense that it will unlikely be coming back at the 7p level.

[cruelladeville] 29/4/2024 10:10

Thanks. I'm wondering about swapping Gresham House Energy for Gore Street Energy as I like the industry. But I don't want to add any new money. Gore Street Energy is still paying dividends and is way more diversified. If it's cost neutral, I'm struggling to see downside in the swap. Opinions welcomed.

[dickiehh] 29/4/2024 09:56

Not sure about selling GRID as it seems to have some good momentum right now, but have just bought some GSF

[cruelladeville] 29/4/2024 09:29

Hmmm, the share price gap between GRID and GSF has almost gone. Anyone else here wondering about selling GRID to buy Gore Street Energy?

[cc2014] 26/4/2024 14:13

Agreed the CM revenue is not in the BM index.

And also GRID are saying they have about half their assets not in the BESS index as they get more revenue elsewhere.

What puzzles me most is that Jefferies is GRID's house broker. Jeez....

When your house broker writes such stuff it's going to compound the share movement. (even if someone is going to argue there was a crystal wall or whatever it's called between departments at Jefferies)

[nickrl] 26/4/2024 13:48

@CC2014 I believe BESS index may only include assets registered in the BM although it could also include other non BM assets that provide frequency response but including that without the trading income would distort the index so i suspect not. What it doesn't include is the capacity market payments i believe which not every unit has and some only have a T-1 some have T-4's but its worth a fair bit extra. HEIT have tabulated it in their last report would be helpful if GRID did the same.

Separately stocks/trusts in this sector are quite unusual in having an almost real time visibility of what is happening on the revenue stream which you just don't get with any other trust. So analysts should be able to make very informed opinions and although Jefferies analysis was flawed they did force the companies to come clean about what was happening.

[cc2014] 26/4/2024 13:07

I think it's pretty simple. Jefferies issued a note which stated the dividend cover (and therefore an implied profit) was about 0.1x

Jefferies analysis appeared to be issued at very lowest point in the cycle for BESS revenues (wonder why) when revenues were around £15k per year and appeared to suggest that value should be used for the whole year. On top of that the analysis also if my understanding is correct did not appreciate that BM revenues are on top of the BESS index so all that revenue got ignored. HEIT fared no better as I understand the analysis assumed HEIT's fee is based on NAV when it's based on market cap. (And my apologies if it wasn't Jefferies but someone else but time has moved on)

What we discovered is that many believe this stuff. Further when GRID binned the dividend again many must not have read the full RNS.


GRID have provided considerable information to the market in a closed period which has put things right but actually 99% of it was already in the public domain, such as the BESS revenue streams and the construction program.

It seems analysts don't do any independent work any longer. Just a bunch of notes from brokers which they don't fact check.

[nickrl] 26/4/2024 12:55

@erstwhile wind is very low today so generation dominated by CCGTs thus price spread much reduced along with need for frequency management. Mind you short term forecast isn't showing high wind for a few days either so income will slip back but April will still be a reasonable month but how representative it is of the future remains to be seen. So id say your assessment is fair and GRID clearly don't anticipate that much of an improvement this year but given the mess they got themselves in they will no doubt throw caution to the wind. I also reckon if income outperforms expectations they will pay off debt first now before restoring the dividend. Personally as @marktime says they've exploited the April improvement well to at least put a floor under the share price but they've also been transparent about the dividend situation.

Im just watching with interest here no position (yet).

[marktime1231] 26/4/2024 12:39

Except on the basis of what they put out which was awful and should have ducked the share price even deeper it has recovered 20%. Go figure.

[erstwhile2] 26/4/2024 12:29

Second half of April is already back to Q1 type performace, looking at dayahead spreads and the ancillary pages






Its surprising how they cherry pick a couple of weeks to make their case and set themselves up for another fall.

If they earn 50k/MW overall, and operating costs are 20-25k/MW, then there's 25-30k/MW of cashflow. Harmony break out operating costs and say it is 24k/MW, maybe a bit less for Gresham as smaller batteries. Gresham have 1GW when complete, so say £27.5m cashflow. They will have 175m of debt by the time they have finished building out at say 6.5%, and about £9m at fund level expenses and manager fees. Also the debt will have an amortisation schedule, but lets ignore that for now. That 20.5m of interest and fees, leaving £7m or so distributable cashflow, or 1.2p/share.

Bank covenants are preventing this being paid anyway rght now, and the 175m of debt repayment at some point swamps it even if averaged over 15 years.

If they got to 70k/MW, thats another £20m which is another 3.5p/share. So think its more like 80-90k to cover a 7p dividend, and more if you have to reserve something for repaying debt and replacing the batteries at the end of their 15y or so useful lifes. Some of the batteries are 5 years old already.

So basically they are at standstill. Manager believes revenues will improve (double), market isnt so sure, and we are in wait and see mode.

[marktime1231] 26/4/2024 12:09

nickrl I know you have been following this closely.

I noticed that the late detail on trading gave figures as revenue recovering from £40/MW/yr to £70/MW/yr. When asked about dividend cover it was reported that Ben Guest said it needed £70/MW/yr to cover 7p ... but did he say revenue, operating income, net income or what? The difference is crucial. When I looked at this a couple of weeks ago the difference between revenue and distributable profit was about x 2.

As you say the communication, the lack of transparency, has been awful. It makes you not want to trust them. Is it possible GRID are now presenting figures which give the illusion of a return to par trading when in reality things are only half way there? It might explain why the dividend was pulled for the whole year.

[cc2014] 25/4/2024 13:23

All a disappointing that GRID isn't up 10% yet today

[dickiehh] 24/4/2024 10:21

Thanks Nickrl - the communications seems a bit of a shambles though - which is also why the share price is so volatile. After last week's vague update, the share price goes down by 10 percent on Thursday (at one point) before recovering a little. Now it's up 20 percent this week, based on the same information except this time they bothered to put it in an RNS. As you say, a monthly update is needed with full transparency on what's going on

[cc2014] 24/4/2024 10:07

I heard that too Nick but I'm not sure it will wash with the major institutions. It certainly doesn't hold any sway with me.

I think what he said was something like the directors of Gresham House, Gresham House and Gresham House clients own 10% of GRID. What, like what have Gresham clients got to do with it?

Anyways I think Gresham House would be wise to throw us shareholders something. It's the right thing to do.

[nickrl] 24/4/2024 09:42

@CC2014 re above i did ask that very question last week but Rupert xxx MD of Gresham House told me "Ben and quite a few of us have skin in the game so are feeling the effects as well" but he did intimate that BoD always have it under consideration.

[cc2014] 24/4/2024 08:45

Nice. Now all they need to do is for Gresham House to cut their fee to the average of the share price and the NAV like they have already done on the property fund they are running which I can't quite remember the name of. (might be RESI?)