Gresham House Energy Sto... Share Discussion Threads

[marktime1231] 16/4/2024 13:58

Thank you for that effort nickrl, very useful, your "quite unwieldy" comment had me chuckling. To summarise your summary you are saying CM adds £16K - £36K / MW / yr from a mix of T-1 and T-4 auctions on a subset of assets. Across the portfolio CM adds only around 10% on top of the FR/BM revenues averaging about £50K / MW / yr. Have I got that right?

As you say welcome additional revenue but not enough to save the dividend.

An amusing sideways look at the buyback cc. By the same token if NAV is genuinely around 140p still and we are trading at 40p we should vote to test that and put everything up for sale so we can sack the manager?

For sure the big winners of future services to ESO will be larger long duration BESS assets in prime locations, development of those was the winner in recent auctions. Fortunately demand is ramping up which is why there is quite a pipeline of them, but your view that GRIDs itty bitty short duration assets will be left out is rational. Coutinho championing gas for energy security does not help.

[george stobart] 16/4/2024 12:47

According to Modo updated data, GRID live NAV is 23.72p.

If we deduct tax receivables on BESS revenue, that recently the government decided to abolish the live NAV moves to 11.69p.

Does anyone know why this stock trades at such a high premium?

[nickrl] 16/4/2024 12:17

@igoe another commentator just recycling the Modo headlines without putting some cautionary comment on whether this will be sustained going forward. Reality is there has been improvement and changes in the ESO system are helping but my concern remains the tsunami of new BESS systems that are coming on line including some supersized systems which i reckon will become big players in balancing reserve as they can provide big chunks of energy to compete with the CCGTs so could eat some of the recent benefits.

Anyhow where are the results?

[nickrl] 16/4/2024 10:27

Capacity Market contracts are awarded for T-1 (1 year) and T-4 (15 years). The delivery year is 1st Oct to 30th Sept and a unit can only have a T-1 or a T-4 not both. For the current FY they potentially had 12 units with a T-1 which could be worth 6m (60/kw) (note you get paid on the derated capacity not the declared capacity of the unit). However, not all those units have been commissioned yet which means they both lose the revenue and risk having penalty charges levied. They also have a number of units with T-4 for this year which are all operational and worth 0.6m/pa for next 15 years. These are worth only 15.97/kw (on derated capacity) which was quite low and those units can't compete in any future auctions but at least its guaranteed income.

They failed to win any T-4 for 25/26 (and did for 26/27) which worked in their favour as they got 19 units awarded for T-1(25-26)which is worth 3.2m (36k/kw).

At the end of the day its a useful addition but its still sub 10% of even the reduced income stream from the batteries themselves. Can't see the divi being reinstated anytime soon but its quite unwieldy to analyse effectively and with less than half the units in the balancing mechanism you have to make a lot of assumptions. The real winner for BESS is pricing volatility and its been quite pronounced across first half of April but historically you wouldn't expect that to continue through the summer. Also still a huge backlog of units waiting to get connected so will we see pricing pressure spill over into balancing reserve and even the wholesale markets as the competition increases?

[cc2014] 16/4/2024 08:25

lol. Deep Thought would be proud

[williamcooper104] 16/4/2024 08:02

Indeed - 42 being the number

[cc2014] 16/4/2024 07:30

On a more serious note, if they really are buying back 147p of NAV for 40p, the dividend should be cut to zero. Unpopular with the institutions but the maths says it's the right thing to do.

I too think it not unlikely the next dividend will get binned if the share price is below 50p when the announcement occurs.

[cc2014] 16/4/2024 07:28

A bit of fun.

GRID are buying back shares to the value of not more than the cut dividend.

So, on say around 573.4m shares they started with before the buyback this is £42.15m a year to spend on buybacks.

This would buyback 100m shares at 102m shares a year at 41p a share.


Therefore by some Douglas Adams style of logic where I ignore that the buyback will force up the share price, if I do not sell my shares I will own 100% of GRID in about 5.5 years and collect the whole juicy dividend of £42m for myself

[cc2014] 15/4/2024 20:54

A couple of points.

The BESS index does not include capacity market contracts so that's additional revenue to add. I do not have time to go through them all but Thurcroft is an extra 7.1% revenue, Couper Angus an extra 20%, Port of Tyne is an extra 59%. All for the month to date. If you look at Port of Tyne for the last year it's an extra 70% on average.

At your starting point of 740 MW GRID had 837 MWh

By the end of 2024 GRID will have 1117 MW / 1817 MWh

Note the doubling broad doubling of MWh as GRID are upgrading many of their batteries to 2hr, which is quick to do as it doesn't require a grid connection and will in itself bring in more revenue than just the new battery as 2 hour batteries are more attractive to the ESO.

GRID say they can do this and more with no extra debt.. That kind of suggests nearly everything is built and relying on grid connections but whilst I take them at their word, I also take it with a pinch of salt.


You are right about slippage. That's on on-going problem

[marktime1231] 15/4/2024 19:51

Let's be careful reading too much in to figures in isolation. Thank you, but that linkedin chart from modo doesn't show earning rates before Q2 of 2023, at which stage operating income cover of the previous 1.75p quarterly dividend fell from x 0.97 to below x 0.5 I think. According to my looking at this back in February the dividend hasn't been covered since Q4 2022, when the average asset earning rate may well have been over £100k / MW / yr.

Actually you raise an interesting point ... why haven't BESS trusts been publishing these transparent income figures so we can judge performance and outlook directly? I have been asking GRID to include them in trading and audited reports for three years, deaf ears.

Actually it should be relatively straight forward to set an income breakeven benchmark.

4 x 1.8375p dividends over 569.55 million shares means GRID needs to earn £41.862M pa bottom line distributable profit. Ignore buybacks. Across 740MW of operational assets that requires £56.6K of distributable profit per MW per year to cover the current (former) dividend. So let's not cheer too loudly that gross revenues appear to have bounced back to around £50K according to modo.

DISTRIBUTABLE

Not revenue, not ebitda or operating income, not net income but distributable post tax profit. The margin ratios are severe ...

To illustrate the difference, in FY 2022 gross revenues were £62.7M, operating income or ebitda was £48.8M, reported net income presumably after debt interest was £32.8M and bottom line profit after a further £8M or so "admin expenses" was £25.3M. Credit drawn has risen from £50M to £110M. Management admin fees have risen in line with AUM.

There are too many variables to accurately calculate the revenues required to deliver £41.862M of distributable profit. For convenience lets assume x 2, which means each asset needs to earn revenues of £113.2K / MW / year to restore the dividend.

Over 740MW assets. Of course if GRID energise the revised reduced target of 1,027 MW by year end the revenue run rate target reduces to £81.6K / MW / yr.

Beware that GRID said in a previous trading update that should the revised reduced asset target of 1027MW be met the FY operating income would cover the dividend, not distributable profit. So £50K where revenues are now, actually not even £70K where revenues were this time last year, does not deliver.

It should be pretty obvious it is not just a fall in prices scuppering GRID, it is the high debt cost, the high admin fees, but most of all the massive shortfall caused by the failure to deliver the pipeline ... just a year ago when GRID reported on FY2022 they were still outlooking 1.5GW of operational capacity through 2024.

[genista71] 15/4/2024 19:45

I think the rolling 90 day performance chart at the bessanalytics homepage is the most informative in terms of trends.

Problem with modo is that as soon as things go well, they shout it from the rooftops, in fact this month breaking form and doing an intra month update, but when it turns down they are silent.

Th majority of their revenues come from the vested interests, not the investor side.

[igoe104] 15/4/2024 15:12

Its never been higher than 70 MW a month in 2023, where do you get this 100 mw figure from ?

[genista71] 15/4/2024 14:49

"£63k/MW/year so far in April"..the problem is it need in excess of 100k/MW/year to be sustainable and have a chance of seeing some sort of dividend

[igoe104] 15/4/2024 14:21

Big increase in April compared to March. 59% to far this month...

[marktime1231] 11/4/2024 23:27

Thanks very much for that link, nice to know what RBC see in GRID. A speculative risk, the target price 75p half of the share price just a year ago. Worth a gamble largely based on the notion there is better cashflow ahead but without really knowing how much. GSF a safer bet because of its diverse markets and already closer to their 85p target price which is more plausible.

Well I remain ready to speculate in the dark at the right price, or in the light of facts if and when they are made available. Not yet.

You would think the board would be remortgaging their houses to load up if there was the prospect of news on the way likely to send the share price back to the 70s.

[ghhghh] 11/4/2024 08:17

RBC initiate coverage with Outperform and 75p PT

[igoe104] 10/4/2024 11:28

UK: Battery storage could help reduce wind curtailment costs by 80%

[marktime1231] 09/4/2024 15:22

Thanks for that link, quite a complex report which I don't fully understand and therefore may not correctly conclude from it. Please correct my pessimism where you know better. However, what I did glean was that in isolation on one particular good day in early April battery assets participating in the Balancing Mechanism were able to earn their

"... highest daily figure since October 2023"

but only because there was a rare double round-trip scenario. So normal single round-trip trading is still only at about half of last October's rates. And at that stage in 2023 income coverage of the previous dividend was starting to plunge to x 0.1 according to Jefferies.

Which means that despite April prospectively being better than March which was reportedly better than February the current income run-rate only covers a 1.8375p quarterly dividend x 0.225, using the most optimistic sum eg half of Q3 2023 cover which was x 0.45.

In which case Q1 trading has been so poor there can be no justification for paying any 1st interim dividend at all. Unless they choose to pay an uncovered dividend, on the premise that income will be restored somehow in the near future.

All a speculative debate whether the immediate income outlook might be a quarter or a third or a half of previous levels. Optimistic long term outlooking might help prop up NAV, but to my mind it will not save the dividend pro-tem and nor should it be rescuing the share price

[willywonka12] 09/4/2024 15:18

Perhaps they talk the share down so they do cheap buy back .they seems plenty of inside dealing going on here .

[igoe104] 09/4/2024 14:11

Info from Modo energy.

[marktime1231] 09/4/2024 13:52

I would like to see the facts around the claim that BESS revenues rose 45% in March compared to February. Who says so, and from what to what? If that means run-rate income cover for a quarterly dividend of 1.8375p has only improved from x 0.1 to x 0.145 it is hardly cause for celebration, nor is it grounds for a 10% bounce in the share price

April saw the start of a new revenue stream I think. Again, I would like to see the facts about how things have improved though. It may explain why GRID has been slow to report and update shareholders, if it is waiting for something positive to say.

Your criticism is fair cc, some of us are assuming the worst rather than hoping for the best, it would be so much better if we had an honest transparent setting out of the facts to go on.