Gresham House Energy Sto... Share Discussion Threads

[cc2014] 06/6/2024 10:40

Too much to paste but some snippets:

Christopher Brown, an analyst at JP Morgan Cazenove, estimated the deal with Octopus could lift GRID’s annual revenues to about £70m and see it reinstate a covered dividend of 4.7p per share, more than expected though well below the 7.35p it originally aimed to pay last year.

‘Overall this is an interesting transaction that locks in an acceptable level of revenue at a time of uncertainty, and while the portfolio is being ramped up,’ he said.

[igoe104] 06/6/2024 07:45

I wouldn't be surprised if octopus take over GRID within the 2 years, does make sense for a business point of view..

[cc2014] 06/6/2024 07:42

Also I don't think the deal with Octopus will turn out that great for GRID, but it does open a new market and that's important.

[cc2014] 06/6/2024 07:40

There was one question in the presentation which I think worth repeating. I'm long so perhaps I'm looking for things that aren't there.

The question was broadly something along the lines of "if ORIT are contracting for half GRID's output"... "why wouldn't they seek to acquire that output themselves"

Which GRID couldn't answer of course as it was not for them to answer. But they did say Octopus needed 1500 capacity vs the 1000ish they have taken from GRID.


As a shareholder I'm left wondering why Octopus don't just offer 90p for GRID? Conjecture I know, but maybe this is a good way for Octopus to take a "look, see" first.


it will be interesting to see where the share price goes as the market settles down and has had time to digest this. I suspect a bit higher yet.


(Also I note we are back to negative pricing last night as we had some wind)

[cc2014] 06/6/2024 07:30

With regard to the NAV they said in the meeting they are still working it through.

Also that the Octopus deal is at a higher price than the existing revenue assumptions.


That must mean this deal enhances the NAV. (but I expect the effect is marginal)

[marktime1231] 05/6/2024 22:37

I am happy to be corrected and thanks for that clarification, in a webinar rather than rns, which I have not heard/seen. In which case this restores GRID to better than breakeven next year and does indeed raise the prospect of paying a dividend again.

If GRID can secure £40M pa revenue by effectively contracting half the portfolio to a private buyer, why not do the same with the rest? On short term or upward indexing contracts.

Was there any consideration of what this means to NAV ... presumably not much change since the 130p valuation assumes market prices recover after flat years covered by the Octopus agreement.

[nickrl] 05/6/2024 21:32

MODO done an overview of tolling deal they reckon its work 56k/MW which is well above what bessanalytics reckon GRID are making from their BM registered batteries.

hxxps://modoenergy.com/research/battery-tolling-announced-gresham-house-octopus-energy-june-2024

[nickrl] 05/6/2024 19:52

Unfortunately the webinar not uploaded despite the promise in the RNS

[llef] 05/6/2024 19:02

Thanks mepfish.

Marktime1231, the webinar clarified that the 43m in 2025 referred to (guaranteed) contracted revenues, which comprised
a) the capacity market revenue for GRID's entire portfolio
b) the tolling revenue from that part of GRID's portfolio allocated to Octopus.

Which leaves the unknown non-octopus portfolio revenues from wholesale markets and the BM, (which must be estimated at 27m, given they said they were targeting total revenues of 70m in 2025).

They did not break down the split of the 43m between a) and b), as they said that that was commercially sensitive information, but they said that given previous information re CM payments, investors/analysts could make a decent estimate re the split.

[igoe104] 05/6/2024 18:39

The deal is for half of GRID long-term portfolio.



Fund manager Gresham House announced the two-year fixed price contract with Octopus today (5 June), which covers 568MW/920MWh of its UK battery energy storage system (BESS) assets, half of its long-term target portfolio of 1,072MW.

[marktime1231] 05/6/2024 18:31

Where is the clarification that the £43M pa revenue is just for that half of the portfolio participating in the Octopus tolling agreement? The rns does not say that, it says the whole of the portfolio:

"Including the Company's Capacity Market revenues across its full portfolio, the majority of which are for 15 years index-linked to CPI, the Company expects to have annual contracted revenues of c.£43mn during the tolling arrangement."

[pj84] 05/6/2024 18:03

"Christopher Brown, an analyst at JP Morgan Cazenove, estimated the deal with Octopus could lift GRID’s annual revenues to about £70m and see it reinstate a covered dividend of 4.7p per share, more than expected though well below the 7.35p it originally aimed to pay last year.

‘Overall this is an interesting transaction that locks in an acceptable level of revenue at a time of uncertainty, and while the portfolio is being ramped up,’ he said."

Even a reduced dividend of around 4.7p would give a dividend yield of almost 8% at the current share price.

[mepfish] 05/6/2024 16:57

yes its £43m for the part of the portfolio in the tolling agreement with Octopus, 54% roughly of total portfolio. said target (not forecast) rev for FY25 is £70m with £50m ebitda. man fee & interest could be around another £10m each . talked about dividend for Fy25 but also hinted at buybacks. I guess because of the wide discount to NAV (being recalculated following deal but not expected to move much +/-).

[llef] 05/6/2024 13:48

They also said they were hoping for 50m EBITDA in 2025...

[llef] 05/6/2024 13:47

I watched the webinar, and pretty sure I remember them saying they were hoping for 70m revenue for 2025.
Of that 70m, 43m being the total contracted (ie guaranteed) revenue from Octopus tolling deal and CM payments, the extra 27m coming from wholesale and balancing market for the non-octopus capacity.

Perhaps someone else who watched the webinar could confirm those impressions?

[marktime1231] 05/6/2024 13:46

Well that is not how I read it.

[cc2014] 05/6/2024 13:41

The £43m pa is for the Octopus part of the portfolio only.

[marktime1231] 05/6/2024 13:33

Total whole portfolio (eg once complete c. year end) revenue run rate £43M pa for the duration of the Octopus tolling agreement.

Adopting your figures nickrl if that equates to £40K/MW/yr then this has locked in sub-performance, kind of hedging against things getting any worse. By my previous estimate it needs £55K/MW/yr to breakeven and £120K/MW/yr to restore a 7p dividend - Ben Guest himself said restoration required £70K/MW/yr at a presentation but I think he meant net income. Let's not assume this restores the dividend then.

We were told the frothy first half of April delivered £41.5K/MW/yr, so this is backwarding.

I imagine good for Octopus though. If they are so switched on to using battery storage to arbitrage the electricity market why not just buy out GRID at this discount level. Are Octopus Infrastructure investing in their own storage projects ... maybe waiting for longer duration technologies to arrive.

[nickrl] 05/6/2024 08:28

Interesting move and locks in certainty but they could have traded the assets themselves in the wholesale mkt. Also they've previously indicated that assets trading outside of the ESO income streams (ancillary services, balancing mechanism, balancing reserve) were producing better revenue levels from trading so be interesting to know whether they are pulling assets out of the ESO mkts or not.

Edit: Is the 43m quoted the income from the Octopus deal or the whole portfolio? The former equates to around £80k/MW/yr good but nearer £40k/MW/yr on whole portfolio and that includes CM payments which is better than their BM assets are achieving currently. Unfortunately cant attend the webinar later to seek clarity but hopefully they will upload it.

[igoe104] 05/6/2024 07:52

Also looks like the dividend will be returning 2025..

[igoe104] 05/6/2024 07:29

Good move, the less reliant on NG the better, hopefully more deals like this are in the pipeline with other operators, with the rest of the portfolio..

[cc2014] 05/6/2024 07:26

That's an RNS and a half

[cc2014] 31/5/2024 10:57

My sense of this based on the trades going through at 54.6p is that someone is trying to collect stock without disturbing the price.

The challenge for me as someone who has enough stock and wants the share price to go up is that are succeeding.

Until either the flow of sellers around 53.8p stops or the careful buyer has to start competing with a second buyer the share price is going nowhere.

I'm trying to stay optimistic. The careful buyer isn't exactly getting much stock with this strategy, some yes, but in the scheme of usual daily turnover and GRID's market cap not much at all.

[boystown] 28/5/2024 09:25

A bit generalist I know, but presumably the inevitable Labour majority government (judging by the bookies' odds anyway) will be a good thing for energy storage infrastructure?

[llef] 28/5/2024 09:15

Gas peaking power plants still being installed in the UK.
Small scale at 48MW, but it's the sort of thing I would have thought that BESS would be replacing by now.

hxxps://wartsila.prod.sitefinity.fi/media/news/28-05-2024-wartsila-power-plant-will-provide-critical-grid-balancing-as-uk-expands-its-renewable-energy-supply-3453414