Gresham House Energy Sto... Share Discussion Threads

[igoe104] 08/2/2024 07:56

National Grid is hosting an investor event in London today focusing on accelerating connections across its UK Electricity Transmission and Distribution businesses.

Might be worth listening to...


 



 

[spectoacc] 08/2/2024 06:52

If Muddy Waters are on it, GRID are worth 10p at best.

[robertspc1] 07/2/2024 22:39

Listened to Ben Guest on many occasions. Comes across as pretty arrogant I know best. Is he now doing mea culpa or same old stuff

[mr george stobbart] 07/2/2024 22:36

Muddy Waters is Short GRID and are going to publish a detailed report tomorrow?

Are the rumours correct?

[nickrl] 07/2/2024 21:46

@genista71 as a NED he probably shouldn't be commenting either way?

[genista71] 07/2/2024 20:07

David Stevenson is embarrassing..he talked these up at issue and when the stock prices were sky high, basically the mouthpiece of the management to raise money..the revenue environment has been poor for 8 months and fallen off a cliff over the last three months and he doesn't say a word..he has no insight. and the so called analysts are much the same, a waste of space.

[marktime1231] 07/2/2024 18:05

Amused to note NED David Stevenson, in his regular "adventurous investor" column in FT Money, mentioned a couple of examples (often ones where he is invested or about to be) in the renewables sector where the wide discount makes for an attractive opportunity. On this occasion he was not able to bring himself to tip GRID.

[nickrl] 07/2/2024 17:41

@CC2014 re#668 capacity market is a fixed fee/MW/Yr at the derated capacity. Biggest income stream is from T-1 as the derating factor is even larger on T-15. When you refer to spot i presume you mean trading in the wholesale market where the units registered with the ESO are visible to bessanalytics/modo (and us if you want to download and manipulate huge quantities of datapoints!!). These represent c50% of capacity the other 50% are potentially signed up with an energy trader who uses them to balance their books but at what rate only GRID can reveal. The likes of UKW provide much more visibility about each of their assets income stream and whether its fixed or linked to an index or the system price GRID should be more transparent as well then broker notes wouldn't be second guessing their forecasts.

[marktime1231] 07/2/2024 12:54

Really interesting discussion guys. My guess is FY23 revenues halved to about £25M too, but I can't get a handle on future income or NAV except that things must be considerably down. The managers must be under huge pressure from Searchlight to deliver fees.

As I recall the last fund raise in May 2023, at 155.5p, was chiefly to finance the new venture in California. They were shooting for £80M but only raised £50M, circa 32 million shares representing a 6% dilution. I wonder how those who reluctantly participated feel now, their funds being used to run a buyback at 50p instead.

[cc2014] 07/2/2024 12:15

@nickrl Many thanks for your latest post. It created a lightbulb moment for me.

This is what I came up with.

Based on the BESS data GRID has got 34k/MW/yr inc. the CM contracts for the last 30 days. The BESS data does not contain all the GRID batteries as far as I can see but I've got to start somewhere.

So,

Revenue based on 740MW currently installed £25m
Interest at 8% on debt of £110m £9m
Running costs inc. fund manager fee at 1.25% £10m
Profit £6m
equals EPS of 1p vs dividend before axe of 7.35p


If I re-run based on 45k/MW/yr (which seems optimistic given how much is coming on stream) and 2024 ramped to 1072MW and assume it all came on stream on Jan 1st which is obviously hasn't and add £20m of debt for the build out and drop the NAV to 100p I get an EPS of 5.35p vs the revised dividend of 5.51p


Not only is the spot price hurting GRID but it's strategy of going spot rather than fixed price capacity market contracts is also hurting it. Only 29% of GRID's revenue is CM, the lowest of the major 3. GSF's is 42% as it has made a far greater effort to match it's long term revenue with long term cost of build.

[nickrl] 06/2/2024 21:18

@CC2014 id say the run rate excluding CM payments is no more than 30k/MW/yr based on latest MODO data. So based on the 740MW they have this generates c22m revenue through the opcos. Current year they have some asset with T-1/4 Capacity Mkt agreement worth another 6m so say 36m. How much of this is then lost through operational costs is difficult to work out but looking at a couple of opco subsidiary accounts it could be in range of 10-15k/MW so that eats into the revenue say 9m so nett 27m.

Onto financing majority of opcos have loans from the midco but they aren't commercial loans and can be parked without comeback ie its the shareholders cash which was charged at 8% to fund the 42m pa divi.

So the main external liability is the loan drawn by the MidCo and according to last weeks trading update its still 110m which is surprising but guess they have plenty of cash for the dead Californian adventure to finance the current upgrades. Its quoted as SONIA+300bps so could be 8% currently but they refer to hedging but can't find that detail anywhere. Last MidCo accounts are over 12mths old. So say 9m + 1mm for commitment fee for unused portion of loan. Then there are fund costs run rate was 10m at HY23 report. So that leaves the 7m or so to fund the buyback currently.

Can't see how this even support a sub 100p NAV personally but then they won't take my/your analysis as they decide for themselves what the NAV is especially as that what determines their income stream.

[cc2014] 06/2/2024 10:55

I have been trying to unravel what GRID is actually worth this morning and it's difficult because all the batteries are held in subsidiary companies so you can't actually even the most basic information in the P&L such as revenue.

I did manage to get some form of grip on the NAV though. The model uses as one of its parameters the revenue input per year in £/MW/yr. For 2023 this was 100,000, for 2024 it is 120,000 and then it tails off to a long term value of 100,000

We also know that the current average for all providers for the last year is around 40,000 and that right now it's lower than that. We also know GRID's value is very likely to be below the average due to it having more 1 hour batteries than average. I also suspect the average is even lower as Ben Guest said in a webinar a couple of years ago he preferred not to compete in capacity market tenders as that just meant the winner was the biggest loser as they bid the lowest price.

I therefore conclude the published NAV is way higher than it should be in my mind. Ben says he's got third party long term numbers broadly in line with the existing numbers. That may be, but they look punchy to me and the market has reached the same conclusion.

[genista71] 06/2/2024 09:34

James Carthew is a cheerleader for the industry he has nothing objective to say

[nickrl] 05/2/2024 17:56

James Carthew on a moan that current share price fall is down to the ESO

hxxps://citywire.com/investment-trust-insider/news/james-carthew-blame-imbalanced-national-grid-for-battery-funds-woes/a2435535

Not sure the blame game against the ESO will help the situation both BESS and the ESO are now dependant on each other. Remember its only 12mths ago that GRID said Balancing Mechanism was a small part of the revenue stack yet now it along with wholesale trading are the key revenue drivers. The ESO recognised that BESS would be a key part of grid management as its generation mix evolves towards renewables and have a roadmap that will gradually favour BESS over CCGTs through 2024. So the ESO aren't trying to drive BESS off the system but their first priority is to keep the grid stable and for decades they've done this through big fossil fuelled power stations so we are in a period of evolution. This could be a good entry price but im holding back until there is more visibility that revenue is improving.

[bsdjj] 05/2/2024 14:04

Also I think Edison is paid research so one could surmise that any forecasts within would probably have been guided by the company.

[bsdjj] 05/2/2024 14:02

I know. I posted without seeing how short it was. Hopefully the more comprehensive note will have some financial forecasts but not holding my breath.

[nickrl] 05/2/2024 13:49

@bsdjj that report tells us nothing new although they do refer to a more comprehensive note coming out. If this note is to worth anything its needs to address revenue generation going forward and show how GRID are going to turnaround the current low income they are getting through the various new sources they say the ESO is going to tap into. In short term they may get something extra out of balancing reserve when it starts in March but that will soon be swamped with the mega sized batteries that are in build now which have far more chance of providing an alternative to CCGTs at scale.

[bsdjj] 05/2/2024 11:28

hxxps://www.edisongroup.com/research/responding-to-challenging-times/33212/?j=163876&sfmc_sub=13224327&l=715_HTML&u=4839004&mid=536001663&jb=5

[marktime1231] 05/2/2024 10:31

A pointed rns from GSF to reiterate they are relatively OK, with less exposure to the troubled market in the UK. GSF are still somewhat exposed but their dividend can be maintained they say, in stark contrast to GRID and HEIT. On a 30% discount after today's bounce, compared to 60% here. Hardly a case for investing in either.

Wonder how much of the buying here today is with shareholder funds.

[mr george stobbart] 05/2/2024 08:48

GSF reaffirmed dividend policy.

Given the strength of the BESS market, evidenced by the comments of the world's largest BESS investor US listed NextEra Energy in Jan-24 earnings call, it is fair to assume an aggressive growth in dividends for GSF going forward.

The UK market is worse than dead on the other hand and a toxic market lacking a stable regulatory framework.

Investing in UK-focused BESS trusts is a suicide mission

[nickrl] 04/2/2024 23:09

Not sure how they work out divi cover as asset income alone wouldn't have covered the 42m let alone the finance costs and inv mgt fees. This has been relying upon illusory capital growth which is now wiped out and unlikely to return anytime soon. The key here is whether Greshams insistence that there are future revenue streams to had out of the ESO although we've heard that before.

As i see it the only winner here is Gresham House who will keep collecting their fees leaving nought for shareholders. Of course im sure at these depressed levels we will see a dcb but until there is some positive news that revenue generation is improving can't see it holding. Maybe a bidder will come along but in a saturated market it aint going to be at the current NAV thats for sure.

[podgyted] 04/2/2024 19:36

Jefferies stated that they thought dividend cover slipped to 0.1 in Q4.

If that is the new norm, rather than just a blip, then a 0.1 cover of a £42m annual dividend gives a net profit of @ £4m.

Its MV at the current low is £274m - you've got to be sure that this is just a blip. I think waiting for some further information in the year-end accounts could be a prudent move.

BWDIK

[marktime1231] 04/2/2024 11:51

Not sure we can rely on Ben Guest for anything.

I would be shocked if they continue to forecast future revenues and prices without revising their assumptions. No-one believes NAV is mid 140's and I'm not sure the market would believe it if they only shave it. But as newbold observes the compulsion to print a sustained number to preserve their fees means they will try it on.

The sp, and any recovery prospect, is therefore more likely to be cued by what they decide for the revised dividend policy, to be announced on or before 5 April. If earnings have halved, and even if they consider the lull to be transient, the reset might be to 1p a quarter. GSF (early Mar) and HEIT (tba / late Feb) presumably have similar decisions to make and they will be watching each other. A relatively confident report from GSF on 10 Jan was in contrast to the warnings from GRID and HEIT. Their share price has also tumbled but not nearly as bad, thanks to market diversity perhaps.

OK I think I'm reaching a conclusion subject to that dividend decision a GRID rebuy possibly worth a gamble in the low 40s, more likely in the 30s.

[cc2014] 04/2/2024 09:37

With regard to the NAV, Ben Guest has already given us a broad clue from the webinar last week in that he stated that the valuations they've had through already on the future power price curve are not significant different from those being used already.

He also pointed to the discount rate which is above 10%.

If those are maintained and no changes are made then the NAV is going to be around 125p.

I'm not saying this is going to happen. In my mind this is likely to be revisited before the NAV is published