Gresham House Energy Sto... Share Discussion Threads

[marktime1231] 09/11/2022 18:45

Welcome update, too late though already extended the debt facility having missed the chance of an issue at this price two months ago, a frustrating dividend delay all for nought.

Not immune to execution risk, 90MW which was supposed to be days away in September still held up, missing out on revenue and the cost overruns are eroding NAV. Let's hope the 400GW due to commission in the next 6 months will be delivered smoothly.

Still a great outlook, GRID are at scale ahead of the rest of the market, and I agree it would be an own-goal to punish battery storage companies with windfall taxes since this technology is key to managing Winter peak demand. GRID is part of the solution not the problem. On the other hand a 95% tax rebate on all the investment would be rather good news.

[cruelladeville] 09/11/2022 17:23

Terrific to see North of 170 again here. Especially in a very gloomy market.

[jonwig] 09/11/2022 07:53

NAV statement (see header link) and more detail.

NAV rises to 151.18p from 145.11p.
And this is relevant:

There is currently much discussion of possible regulatory or tax changes for the renewables sector. We note that BEIS expressly stated in their recent REMA consultation that it is essential for 'low-carbon flexibility' to be prioritised and we are convinced, on both technical and financial grounds, that batteries are the most credible storage technology compared with less proven, more costly, and less efficient alternatives such as hydrogen or "CO(2) -abated" gas-fired generation.

All good.

[cruelladeville] 08/11/2022 12:32

Hope you're right!

[jonwig] 08/11/2022 11:59

They aren't generators and they improve grid efficiency. I'd amazed if they were caught by this tax.

[cruelladeville] 08/11/2022 11:16

Looking quite perky here again of late. Aren't there still concerns over a tax grab on renewable energy companies that's likely to set back GRID and everybody else for years? Or am I worrying about nothing?

[jonwig] 29/10/2022 19:23

From The Times, 24/10 (pinched from the GSF thread, the poster thanked):

In a field in Leicestershire neat lines of identical green shipping containers stretch into the distance. Each container is stuffed full of black plastic boxes a bit like car batteries. A forest of electrical apparatus and switchgear sits close by in its own fenced compound. Workmen and engineers bustle by, putting the finishing touches to the project.

“From this one site we can boil one million kettles,” Ben Guest declared, gesturing around himself. Guest is the driving force behind a growing new industry, battery storage, that might just play a significant part in the battle to slow global warming while making attractive returns for investors.

This site in Enderby, just across the road from the Next head office, is the eighteenth of what Guest hopes will be a fleet of 28 battery sites scattered across the UK by the end of next year.

He is the manager of Gresham House Energy Storage (GHES), a listed company valued at more than £800 million. It is by far the biggest player in UK battery storage, claiming about 29 per cent of the market.

It is an industry (known as Bess: battery energy storage systems) that has sucked in hundreds of millions of pounds from investors intrigued by the modern-day alchemy of buying power from National Grid in the middle of the night when it is cheap, storing it for a few hours and selling it back at breakfast time for a profit.

The wholesale price of energy can oscillate between minus £100 per megawatt hour and £4,000 per megawatt hour in the space of a few hours. It is an arbitrageur’s dream. The minus price occurs when battery operators are paid to take excess power from the system in a process known as curtailment. Batteries help to solve the problem at the heart of renewable energy: its intermittency. Wind and solar farms could provide even more of the nation’s power but only if it could be cheaply and reliably stored.

Guest, an employee of the investment manager Gresham House, an engineer by education and hedge fund manager by background, has raised more than £620 million from investors, most recently tapping them for £150 million in May.

It was a bumpy start. At the launch of the company in 2018 he raised only half the £200 million he had hoped for in his first capital-raising. Investors were hesitant about the untested business model. Everything from planning consent (the sites are not beautiful and the batteries hum slightly) to doubts about battery life worried potential investors.

GHES has so far, however, largely done what it promised, opening sites from Byers Brae in West Lothian to Littlebrook in Kent and all the while paying a 7p dividend in a world where investors have been starved of yield. The shares, first priced at 100p, are now trading at 156p. Total return since flotation is a very respectable 87 per cent.

Enderby is a few months behind schedule and has not yet supplied a watt of electricity. Just getting the equipment has taken longer than expected because of supply chain interruptions. Then there are delays in connecting to the wider electricity system. Local grid companies can be “twitchy”; about this new source of power, Guest said. They are overstretched and not always very familiar with this new form of technology. Plumbing in the sites, which involves a huge safety-critical step-up in voltage, is a serious matter. Guest pointed across to the massive £1 million transformer at the heart of this process, which is needed to connect his batteries to the high-voltage pylons visible across the fields.

So far Guest and GHES’s third-party contractors have built and opened 429 megawatts of installed capacity. Confusingly the industry measures capacity in terms of power (megawatts), not energy (megawatt hours), because power determines the speed of charging and discharging the batteries, which is the most important factor in operational success.

Indeed, this nimbleness has proved to be such a competitive advantage that it has for now entirely changed the business model: GHES has increasingly switched from trading its power to selling a service called “frequency response” to National Grid. To avoid blackouts the Grid needs to keep its power frequency stable and to do that it needs batteries, which can feed in with a notice period of less than one tenth of a second. Coal-fired stations, which used to do the job, are mostly shut down. About 80 per cent of GHES’s revenues come from frequency response.

The industry is growing quickly, Guest said, but not quickly enough. “Why? Because the rate of deployment of renewables is far in excess of the rate of deployment of batteries.” Existing renewables capacity plus projects in the pipeline amount to 51 gigawatts in the UK, he said. Batteries, by contrast, are for now a tiny 1.5 gigawatts. This is an industry that needs to grow at least tenfold, he said.

He is relatively relaxed about the recent turmoil in the prices of raw materials: lithium carbonate has gone up fivefold in the past 12 months, pushing up the price of batteries. “It’s going to be deeply cyclical,” Guest said, confident that at these prices more lithium mining capacity will be opened up. He competes with the car industry for the batteries, which come from China.

Another common concern is how long the batteries will last. They tend to degrade relatively slowly and then suddenly fail completely. Manufacturers provide ten-year warranties but the speed of degradation very much depends on how aggressively they are used. Guest is confident that his batteries will last 15 to 20 years. “What I can say anecdotally is that the degradation of our batteries has been far less than the warrantied case.”

GHES’s scale gives it an advantage here, he added. The company is building a huge database that helps it to run its batteries in the most efficient way while designing new projects as optimally as possible. This is partly about the business of coaxing the longest life out of his batteries.

Another potential threat is the recent widening of the energy windfall tax. So far the assumption has been that this will only be imposed on renewable energy generators, not batteries, but with the coming post-Truss administration desperate for tax revenues, no one can be sure that it might not be extended.

Meanwhile, rising interest rates are posing a risk because of the way battery sites are valued by calculating all future cash streams discounted back to the present day. Guest uses a discount rate of 10.8 per cent, which he describes as conservative compared with the competition. If that had to be raised it would hit the company’s net asset value, which is 145p per share.

There is undeniable nervousness in the industry. Earlier this month a rival battery operator, Harmony Energy, received only £15 million in a fundraising in which it had hoped to raise up to £130 million. It called it “a very challenging market backdrop”.

As a hedge fund manager at Lazard 25 years ago Guest rode both the dotcom technology boom and subsequent bust, profiting on the way up and on the way down because he was able to short-sell. He does not have that same two-way flexibility with this new technology. He is confident, though, that he has the scale, the head start on competitors and the expertise to flourish further even if the headwinds intensify. And, he pointed out, he is well aligned with stockholders: £22 million of his own fortune is invested in GHES shares.

[cruelladeville] 26/10/2022 08:04

DividendMax says 1.75p pay out 28th October.

[willywonka12] 25/10/2022 15:57

Divi payout tomorrow .could be M and M know that most reinvest or maybe a announcement tomorrow.
I managed to top up just 500 quids worth

[cruelladeville] 25/10/2022 15:44

A decent day today. Anyone know why?

[cruelladeville] 24/10/2022 10:11

Poor quality article in today's Times. But good to get the company name out there all the same.

[cruelladeville] 07/10/2022 12:39

Only a matter of time before super heavyweights like Equinor bid for established battery storage portfolios? I can well imagine one of the huge energy companies buying into the sector. It's small change to any of them.

[marktime1231] 07/10/2022 12:21

Another "new" entrant in the UK battery storage market, a small start for Equinor but they have enormous resources. Ahead of the market requirement to handle intermittent generation from things like the 3.6GW Dogger Bank wind farm which it is co-developing and will lead operate.

[willywonka12] 06/10/2022 22:26

Ex divi today

[cruelladeville] 05/10/2022 12:33

We desperately need Coire Glas to go ahead. I guess with Dogger Bank etc.... SSE are in too deep to take on Coire Glas presently?

[marktime1231] 05/10/2022 10:19

Interesting comment at the end of this piece announcing another entrant in to the UK battery storage market ...



... the author has spotted that 40GW of the estimated UK requirement for 50GW of energy storage is in the pipeline. "Pipeline" includes previously unheard of market entrants with stated ambitions? It does suggest the (UK) opportunity for GRID is diminishing, turning international a good move then.

And news that at last there is committment to develop new UK pumped hydro, this time a 210MW scheme at a former opencast coalmine in Scotland. Which has had approval since 2016 ferchrissake. Unfortunately still no progress on SSEs GW-scale plans at Coire Glas. Well done the unlisted Foresight Energy Infrastructure fund in this case.

[willywonka12] 04/10/2022 13:49

Tories sleaze .have such a lead and lose it = in fighting

[willywonka12] 04/10/2022 13:48

It looks like another Labour government will get in next and there into battery storage.

[marktime1231] 30/9/2022 16:45

Phew.

Director buying, big add at 156p and a smaller one today at 167p, is a comfort. Imagine they have a better view of recent income performance, project commissioning and NAV progress than we do based on the interim report. And a good view of any major developments being considered.

So we can guess 156p was indeed below Q3 NAV and we can hope 167p might be exceeded before year end/the next big issue.

Not tempted to subscribe to Citywire based on that article but you know your stuff so thanks for the suggestion. I thought GRIDs gearing or lack of it was transparent, I thought it was GSF hiding its borrowing in project subsidiaries?

[jonwig] 29/9/2022 13:30

markt - it's a good article, and Citywire is well worth the free registration.

GRID the investment trust is debt free, but there will be project debt held within the subsidiaries. This is usually non-recourse, but not at all negligible.

We don't know the names of the subsidiaries, and most of their "names" don't come up on Companies House. I found one that does, Roundponds Energy Ltd, which oddly was dissolved on 31/05/22.GRID aren't helpful when it comes to looking into their projects. (They are no alone there!)

[speedsgh] 29/9/2022 13:22

Slightly misleading headline. It is the Stifel analyst (not GRID) who is suggesting that there may be scope for a special dividend IF revenues from the energy trading side of the business are strong over the winter.

... "Stifel analyst Sachin Saggar said the results were good with 89% of revenues coming from frequency response services, although he noted Guest’s comment that pricing here will fall as more supply comes on stream in the second half.

Nevertheless, he was optimistic that energy trading through the winter could provide a boost for dividends where GRID is on track to meet a 7p-per-share target for the year after paying 3.5p in the first half, 1.18 times covered by earnings.

‘Gresham House has the largest portfolio of operational batteries and is best placed to take advantage if we do see a marked shift to trading. If higher revenues are realised there is also scope for a special dividend in 2023,’ said Saggar."...

[marktime1231] 29/9/2022 12:37

Unfortunately I can't read that article. Or maybe it is just as well.

What rate fears and when? GRID is effectively debt free at present, agreements and terms in place for £30M of working credit, £150M of investment loan plus a £200M accordion, which is sufficient to see through its committed pipeline.

What hint about what special dividend? Due to the May share issue and project delays the regular dividend is only just covered by income, hardly awash with distributable cash until they complete the commissioning programme through Q1 2023, and then I would hope GRID are thinking of progression to the regular dividend not splashing cash on a special.

[speedsgh] 28/9/2022 22:04

GRID battles rate fears and hints at special dividend after powering through first half -

[nickrl] 28/9/2022 19:31

Interesting to see they are moving battery duration upto 1.5hrs and retrofitting some sites to increase duration to 2hrs must be fearing HEITs imminent commissioning of 2hr batteries! I was expecting more revenue from wholesale trading but frequency response services were dominant as they explained the ESO called for more capacity in frequency response forcing up prices but expect revenues to drop back as more assets come along and market becomes saturated. So need to be mindful that as more BESS's come online long run revenues will probably reduce to lower levels although they intend to be more dynamic in deciding whether to trade more wholesale than frequency response. Anyhow renewable levels only going in one direction so there services will remain in demand even if there are dips as more BESS's come online there will also be opportunities especially as the big offshore wind projects being commissioned in 24/25 onwards come on line driving system inertia down further.

[marktime1231] 28/9/2022 10:51

And has been well pointed out elsewhere, bond-proxy stocks paying a riskier 6-8% yield look suddenly less attractive when guaranteed UK 10-year gilts soar, they hit 4.5% this morning which is a level you can retire on. Even the FTSE100s dividend stalwart LGEN massively clobbered this morning pushing its "safe" yield to around 8.5%.

Everyone needs to calm down, the people in charge need to find something reassuring to say, and markets will rebound sharply like they always do.