Gresham House Energy Sto... Share Discussion Threads

[jonwig] 01/10/2021 11:30

Thanks hpcg. There are quite a few med/long duration storage projects. This article mentions five;



Crtainly Li-ion won't solve prolonged gas shortage or windless spells of months.

[hpcg] 01/10/2021 11:11

I thought this might be of general interest to investors here. Medium term energy storage is a worthy goal - there are plenty of times that wind power produces more than out needs and so is feathered off. Capture that in a large scale and there is a new base load source when wind speeds are low.

[pavey ark] 20/9/2021 21:17

I was just about to ask the company when they were intending to gear their business as this was certainly in their original plan.

I have a reasonably large holding here from the IPO.
My reason for investing was largely down to the quality of the management and I have not had any reason to find fault with them.

This loan of £180m comes at a time when they have the business up and running and have shown the cash generative and sustainable nature of their business.

The company now intend to build rather than buy new units (suppliers/contractors like to know you have the cash to pay them) and have said that they expect to get better value/returns especially with the economics of scale found in larger and larger capacity plant.

Not difficult to see this new approach producing savings that match (exceed?) any interest payments on their loan.

This gearing is modest:"It allows us to significantly reduce both cash drag and our weighted average cost of capital, even at a relatively low leverage ratio of 25-30% once fully drawn. It will also allow us to improve dividend cover for a given revenue level, which is a key goal for the Manager."

With this new installed capacity there is little doubt that this company will have c. 30% gearing for the foreseeable future with any number of lenders and potential lenders willing to put up the cash.

It is highly unlikely that GRID (or any similar company)would pay down a loan like this and indeed it is even more likely that the facility would be enlarged as the company expands and has a larger and larger asset base to support this modest gearing.

Very happy to hold.

PS: the company has taken a very prudent approach to writing down battery performance and has bought from internationally reputable suppliers.
If I remember correctly the write down period is matched by manufacturers guarantee period...little risk.
There is a possible and potentially significant upside here if the battery life turns out to be greater than expected....something similar occurred when the life expectancy of wind turbines turned out to be greater than thought.
I wonder if they give any value to their old Lithium batteries....I'm not up to date with the technology but any progress on an extraction process would give old batteries value....just a thought.

An additional point is that battery cost only accounts for 25% of the cost of each installation.

[marktime1231] 20/9/2021 12:03

In which case GRID needs to double its ebitda from the current £44M pa run-rate in order to service the loan and progress the dividend. The fully funded plans have already signed up to doubling capacity, aiming for 1.3GW of operational capacity by Q1 2023 should allow dividend progression then if not before. We might be pegged to 7p next year though, unless the current energy price bubble causes a surplus. (Wow ... with half-hour-ahead prices up to £4,000 / MWh why not).

Don't get the reporting focus on asset values and discount rates. GRID still behaving like an asset manager rather than an income trust.

[marktime1231] 20/9/2021 11:37

How interesting, GRID have decided to fund future expansion with debt while GSF have just gone for another share issue. Lot of detail to read, but could it be argued that GRID was under-geared, not leveraging its advantage, and now it has the assets to do so?

Nevertheless a bold move by GRID to sign to a base + 3% floating rate deal on £180M with a + £200M accordian. At a time when economic sages are saying watch out for inflation.

Is this GRID saying it is confident that interest rates will remain historically low for longer? Or saying its income potential and price elasticity are such that it can absorb base + 3% and still yield 6%, and that is better than the cost or dilution from issuing shares?

Or is this a defensive move, using the capacity to borrow before a predator spots that opportunity and moves in with a bid? No, they say it was just to get some leverage as always intended.

So over a 5 year term we have to find £30M per year to repay the loan, plus interest on the balance, and still pay the dividends of ...

When it says it has repaid the last £8M of the Power Bond, was that the last of the £30M loan mentioned above?

[metis20] 20/9/2021 08:45

· EBITDA generated by the portfolio of £22.4m (H1 20: £4.5m) from operating revenues of £24.9m (H1 20: £5.2m)



Also £180m debt facility secured. Prior to this, the only other non-equity fund raising looks to have been those bonds for c£30m around this time last year.

To have raised £180M at c3.5% suggests the lenders have confidence in the way the company is developing?

"The Facility comprises a £150m capex term facility and a £30m revolving working capital facility. The interest rate is 300bps over SONIA (before hedging). The capex facility also provides for an uncommitted accordion which could increase the total amount borrowed up to £380m over time."

[igoe104] 20/9/2021 07:24

Good results and a solid looking Outlook. I'm happy to hold these for many years to come...

[hpcg] 17/9/2021 12:44

Yes, they should be making serious coin on the off-peak to peak delta at this time. Or as mentioned above short term frequency balancing services.

[hiddendepths] 16/9/2021 16:25

Bought some more, for better or worse!

[hiddendepths] 16/9/2021 15:28

I agree marktime. This must surely be a golden time for GRID. I've got plenty but don't think the power crisis, for that is what the country is experiencing, is discounted even a little bit in the share price.

I wish earnings were more transparent and we could be sure the company is benefitting from this situation!

[marktime1231] 16/9/2021 13:18

GRID must be a winner from the fire knocking out the IFA link from France and causing demand panic, the National Grid reporting "UK prices hit a record high of £540 per MWh on the wholesale energy market". Steel makers saying they have had to shut down because they can't afford to operate seems to be a harsh but effective control loop.

Well I thought there were a couple of freak incidents in the last two years, one where systems were tripped out and one where there was a failure in a wind forecast, hour-ahead energy prices spiked to around £2,500 / MWh. That may be for the emergency balancing response from batteries and other standby systems, as opposed to National Grid in the above referring to normal open market trading of base-load prices.

Either way GRID must be winning, because I think it models its business on prices in the £15-200 / MWh range depending on which service is being provided.

[aa29] 15/9/2021 09:10

Can't see interims/placing announcement anywhere now, were they withdrawn?

[jonwig] 10/9/2021 12:00

marktime - I agree with your description of the conflict of interest.

Of course the managers of GRID are the same folk that will have gone through the purchases here! Are they getting paid twice over? It has to fall to the Board to query the procedure, and insist on correct due diligence.

[marktime1231] 10/9/2021 11:51

From the results and fund raising announcements from Gresham House Plc today ...

"We continue to develop utility scale battery storage projects to support the growth of Gresham House Energy Storage Fund plc (GRID) and have £11 million invested in projects at the end of the period and also completed the sale of 30MW to GRID in H1, deploying balance sheet capital to support growth."

and

"The Group sold one of the battery storage development projects, Byers Brae, in the period to Gresham House Energy Storage Fund plc (GRID), realising a gain of £818,000. The development of these sites is also used to incentivise the team and as such a proportion of the gain is paid to the team as a variable incentive. Other costs associated with battery storage development projects were £219,000 in the period."

and

"The Company intends to raise gross proceeds of approximately £40 million through a placing ...

The intended net proceeds of the Placing will be used to fund the Acquisition as well as to fund development projects such as battery storage and solar projects, which are intended to be acquired by vehicles managed by Gresham House, thereby creating value for shareholders."

How nice that GRID provides a ready-made customer for the battery storage developments of its parent Gresham House, creating value for shareholders (of the parent). A net profit for the parent of £599K on the 30MW Byers Brae project and £219K bonus for "the team".

As a GRID shareholder I would prefer that GRID invested directly in projects at an earlier stage to get the benefit of creating value. I very much hope the stewardship of GRID includes transparent procedures to ensure assets are acquired at best price and are not influenced by bonus incentives for "the team". The opportunity for skewed insider dealing is obvious, and where people have an opportunity to make quick easy money they susually do.

We might be comforted that GRID is acquiring operational assets which enhance its value, and that value might be expected to continue to grow a little, but there is a nagging disquiet at the back of my mind that the parent and team are making a quick no-risk profit at GRID's expense.

It would be reassuring if, for example, GRID rejected a deal with its parent, or was able to secure cheaper battery storage assets from another developer just to demonstrate it was dealing fairly. But why not avoid that scenario all together by allowing GRID to invest directly in development projects at the earlier stage?

[marktime1231] 31/8/2021 14:15

Are we due an update from GRID, can't work out the financial calendar?

[speedsgh] 19/8/2021 17:57

Saw this in The Times today...Battery developers team up to solve electric car puzzle - https://www.thetimes.co.uk/article/battery-developers-team-up-to-solve-electric-car-puzzle-8q85tx05bThe leading names in Britain's development of electric car batteries, including Oxford University and Johnson Matthey, have formed a company to take the next generation of automotive energy storage out of the laboratory to produce power packs on an industrial scale.The development will result in fully charged electric vehicles with travel ranges to match those of combustion engines running on petrol or diesel.The nirvana of the electric vehicle battery is the solid-state battery, which is expected to overtake current lithium-ion batteries this decade.Such batteries could change the affordability of electric cars, which cost at least half as much again as petrol or diesel vehicles. In addition, they can be used on buses and lorries as ministers grapple with bringing to net zero the most polluting and carbon-emitting segments of the automotive industry...

[jonwig] 19/8/2021 17:11

marktime - thanks for the information there. There are other start-ups doing similar things, but size does matter, and GRID has an EV of around £420m. It also expects to have capacity of 1.2GW by end-2022.

This new company is raising capital in a sweet spot where it seems supply is unlimited, so good luck.

As for alternative battery technology, there's a lot of R&D going on, but at present Li-ion is just cheap.

[marktime1231] 19/8/2021 16:18

What does new entrant Field mean to GRID. (Courtesy of Energy Storage News). Sounds ambitious ...

"Battery storage startup Field has secured a pipeline of 160MW of battery storage sites in the UK, and begun construction of its first 20MW site in Oldham, England.

The company – originally called Virmati Energy – was launched at the beginning of 2021 by Amit Gudka, co-founder of independent renewable energy retailer Bulb, which has more than 1.7 million UK customers. In its first six months Field has raised £10 million (US$13.76 million) in pre-seed capital and Series A funding, and is set to run Series B in September.

It will finance, build and operate the sites within its pipeline itself, utilising an agile operation strategy that has lower overheads according to Field, as well as a much more comprehensive view of the energy market than traditional infrastructure businesses.

Oldham is due to go live in April 2022, with its next site – Field Gerrards Cross – to follow shortly after in August of next year. Field is planning to get its current 160MW pipeline in operation by Q1 2023, and expand this to 1.3GW by 2024. It is already in advanced discussions for a further 330MW of battery storage projects."

Actually that sounds way too ambitious, the idea it can self-build and commission 1.3GW in such short time without partners, and by direct financing? 300-500MW sounds more realistic through 2024. Mature better capitalised upscaled companies would raise eyebrows with a develop and build plan as fast as Field is projecting.

Does this mean opportunities for GRID are becoming rare and more expensive, or is Field going to be delivering the sort of turnkey storage operations which GRID likes to invest in? So actually Field is competing with the development part of Gresham House. Is the market demand for storage so huge there is room for everyone? Or does this explain what GRID meant when it said it expects better value acquisition opportunities ahead?

Can the need for batteries be met, or does energy storage need to look again at alternatives to Lithium Ion? Flow batteries or ...

[igoe104] 27/7/2021 16:55

IC Write-up

[cwa1] 27/7/2021 08:19

Well, so far, it hasn't had the punters charging at the barricades ;-)

[igoe104] 26/7/2021 21:12

Positive write- up in Ic printed after the market had closed today. Hopefully it will push this back over £1.20 tomorrow

[speedsgh] 13/7/2021 22:17

Received just over 50% of placing shares applied for.

[pdt] 12/7/2021 07:52

"significantly oversubscribed and a scaling back"

Perhaps a bit of buying in the market today then?