Gresham House Energy Sto... Share Discussion Threads

[cousinit] 24/5/2024 11:18

CC2014 - you were very clear on DGI9 when you exited.

I guess my challenge here was (as I appreciate that investing can be a bit of an insular activity!) was the comment about 50% upside.

To my mind, there are much better 50% upside options where revenue is clearer/contracted, financial flexibility is greater and there are actual dividends and buybacks ongoing.

Portfolio/diversification is required, so I'm not putting all my eggs in the CORD basket, but happy to some of the air leasing funds, infrastructure, contracted renewables and some PE as decent quality with broadly a 50% return expectation.

[cc2014] 24/5/2024 08:45

That's a bit harsh CousinIT although a fair challenge.

I have made lots of posts about DGI9 but I'm not sure I ever fell in love with DGI9.

I sold all mine for about a half point loss as I posted at the time at 40p IIRC on the day DGI9 issued the outcome of the DGI9 tender.

With DGI9 I knew I was playing with fire and it was the riskiest thing in my portfolio. There were lots of red and amber flags over DGI9


I have reflected on your challenge and I don't see red flags here. There are some amber ones. Is the NAV over-egged. Probably. Is GH's fee reasonable given the NAV. No. The paying of unfunded dividend was another one.

However, what I do have is real time data on the revenue streams and visibility on ESO objectives.

My risk here is not what other posters keep bashing on about but some new technology which produces a step change in battery prices (Sodium based batteries?)
or potentially Lithium halving in price (although that does not look likely) or possibly at the margin lower takeup of electric cars or heat pumps.

Or looking at it another way. If there's no money to be made in batteries why is the worldwide buildout so strong? For sure buildout costs are lower than they were but GRID are doubling their MWh now at those low build out costs. In fact GRID's buildout costs are going to be even lower than competitors as they don't need to pay for a new grid connection for much of it. For sure older installations cost more and we should take the average but anyone buying now is paying only 57p a share. As Stiefel says that's significant less than new buildout costs.

It is my guess that the share price will stick down here for a while. I would expect a pickup as confidence arises as the new Mwh comes on stream and as volumes continue to pickup in the BM as skips slowly fall.

[cousinit] 24/5/2024 08:17

CC2014 - are you sure you're not falling in love with this one like you did with DGI9 at one point?

[cc2014] 24/5/2024 07:30

I guess the question is if NAV is not 130p what is it?

There are two major factors in the the NAV. The price curve and the discount rate.

Let's deal with the discount rate first. It's 10.8% so that's higher than nearly every IT I look at (actually I can only think of DGI9 which is higher and that's a basket case). I think that assumption prudent.

Then we have the price curve, where long term prices are above today's (but not recent previous years). For the sake of discussion let's say they are too high by quite a bit.

Let's call the NAV 90p instead. That's still a discount to NAV of 36%.

That's a decent enough chance the share price could go up 50% from here. The share price does not expensive to me. Cheap even.



Or I'll try another way. The NAV is based on the sum of discounted future cash flows.
So, if the revenue forecasts are so optimistic why did the NAV go up by 0.51p from winning new Capacity Market contracts in the last quarter. The answer is of course that the revenue in these new contracts is higher than whatever was being assumed in the previous NAV model. This for contracts won recently at uninspiring prices.


From where I'm sitting it's pretty simple. The share price has fallen and overshot to the downside as is often the case as people bail as they can take the pain no longer. The recovery always takes a while and goes in phases.


(Also take a look at the price of UK Natural Gas which as the marginal fuel sets the price of electricity in the UK. The higher it goes the better for GRID as it works the price spread. It's up over 50% since February. It's not just a UK thing either. It's global. US gas is up around 75% over the same period)

[marktime1231] 23/5/2024 20:25

Except that the NAV assessed at 130p feels like a fantasy, not based on forseeable earnings is it? If it was genuine and the discount is credible yes it would be a reason to invest, then resolve to wind up and extract value.

[boystown] 23/5/2024 17:58

I agree with your comments marktime1231, but there is the sheer simplicity of the 57% discount as a reason for buying today.

[marktime1231] 23/5/2024 14:06

Not sure there is much of an investment case for a 60p stock which might or might not be able to cover a 2p dividend next year. Especially not one founded at 100p on the promise of 7% yield.

A quick check of the AGM notice it is very surprising to me there is no discontinuation vote, a disgruntled investor would have to table a special resolution for winding up at a GM. How come there is no automatic resolution to wind up triggered when the discount breaches x%? I guess it would all need to start with Schroders if they feel it is time to test appetite, but having invested much higher they will want to wait out in the hope of a long term recovery. No one likes to admit their mistake and take their punishment do they?

And no opportunity to vote out the mis-manager either, not even a vote on their remuneration.

You can only vote to not re-elect the chairman and board, and reject their remuneration, but is it their fault?

[nickrl] 22/5/2024 12:19

@CC2014 some energy companies are building big BEDS for their own energy mgt trading accounts and wont be participating in the ancillary mkt. GRID have about half exposed to wholesale only unlike HEIT which have committed everything to the BM. They have benefited from having 2hr units but with GRID and others catching up i suspect the pricing there will be commoditised later in the year. Also even with high wind the grid cant move the power South so its constrained off and thus less need for frequency response.
Agree with @CC2014 that short term this isn't going to improve and see little prospect of more than 2p dividend from next year so share price is in the right ball park.

[marktime1231] 22/5/2024 12:13

Gross portfolio cash generation Q1 2024 of 1.13p. (1.70p in Q1 2023)

That cash flow more than wiped out by costs. I think debt interest alone is about 0.46-0.47p per quarter to which add management fees, transaction costs, financing charges, swaps etc in total something like another 1p. Oh, and dividends of 1.75p per quarter ... ahem, NOT!

In the interests of performance transparency GRID told us on 24 April portfolio revenue in Q1 was averaging £41.5K/MW. Which links cash flow per share to the revenue rate. It puts breakeven at £55K/MW before any dividend, or a target £120K/MW if you want that 1.75p dividend back. Not likely.

So, in the interests of performance transparency, the first question at the AGM should be what has portfolio revenue averaged since March ... a blip up to £71.1K/MW in the first half of April until the wind died, but then how much?

[cc2014] 22/5/2024 11:18

That's a 4 hour battery they gone for. I guess they can build in small chunks and keep adding as demand appears.

I'm holding to my view of why would you build any battery storage in the UK with prices were they are. ESO are going to have to provide lots of capacity market contracts at decent prices to move the needle.

[cruelladeville] 22/5/2024 10:51

Teesside BESS announced. Will it get built? Doubt it. https://www.thenorthernecho.co.uk/news/24336523.battery-storage-plant-teesworks-part-1bn-project-site/

[boystown] 22/5/2024 07:44

Indeed; the share price v NAV performance graph is amusing; www.theaic.co.uk/companydata/gresham-house-energy-storage/performance

[cc2014] 22/5/2024 07:33

NAV up slightly. You have to laugh

[cc2014] 21/5/2024 12:47

One cannot blame GSF for taunting their rivals. GSF do seem either by luck or judgement to have built a portfolio generating an order of magnitude better revenue performance.

As for GRID, it's all going to come down in the end to how much of the huge competitor pipeline actually gets built. We know the schemes in place are just about enough to beat the "fall short scenario".

Personally I cannot see enough getting built based on current revenue streams compared with the cost of lithium and ultimately I see GRID sitting on assets which will be scarce.

However, the deeper question for me is that revenues are likely to get worse before they get better. Alot of capacity will come on stream by the end of the year. Will the market look past that or take fright? I have no idea. For sure we've found out many of the analysts don't know what they are doing.


Or put another way, does the crazy low pricing in the UK sort itself out due to supply and demand. GSF's revenue in Ireland was nearly 2.5x that of the UK per MW/yr and over 2.5x in Texas last year. Now the gap is even bigger. Surely the investment will just flow to where the returns are and that isn't the UK.

[marktime1231] 21/5/2024 12:10

GSF taunting rivals who do not have their diversity.

After a windy couple of weeks in early April conditions since have been dire. One day recently the entire installed UK wind power capacity of over 28GW was contributing less than 1GW. Most of May has been exceptionally calm. If surplus wind is what was driving income recovery in the storage market it must have slumped again.

UK energy demand has also been light, easily met from thermal gas, imports and other sources, so wholesale prices have not been especially volatile. Solar has been performing but not wind. What is the lesson ... co-locate extended storage with solar farms, making use of existing grid connections, so that some daily generation can be saved up to cover the evening peak demand.

Right. GRID have said they will not be updating the market at the AGM on 20 June but will field questions. Where to begin?

[spectoacc] 21/5/2024 07:16

GSF had this to say:


"Across the sector, it is increasingly apparent that the range of strategies employed by asset owners are yielding increasingly different financial outcomes, with Gore Street producing revenues c.3x of our peers and lowering the volatility of those revenues by 50%. In the GB market, participants largely act as price takers, resulting in similar revenue generation across asset owners. However, it is clear that the impact of capital allocation strategies, whether based on gearing levels, geography concentrations or capital expenditure, is a key component of a company's long-term viability. Within the sector, we have seen reports of a resurgence in GB revenue based on annualising a very limited data set of revenue over a 15-day period in April. It should be noted that GSF's estimated average revenue of £15.1 / MW / hr (or £133k / MW / year) for the past 12 months is almost double that of what peers considered as an annualised highlight based on 15 days of trading in GB in April (equating to c.£70k / MW / year)."

[nickrl] 20/5/2024 21:52

@PJ84 the euphoria of increased revenue during March/April hasn't been repeated during May and income has fallen back again according to bessanalytics. Although to be fair they only have visibility of the BM registered assets, which is half their fleet, so maybe the other half have done better in the wholesale mkt. Anyhow lets see if GRID are true to their word about greater transparency and provide an update at the AGM.

[pj84] 20/5/2024 20:06

Conclusion from Edison's latest update.

"Discount may present an opportunity to invest at a low price

GRID’s shares usually trade at a premium to cum-income NAV (see chart at the start of the note), but the sharp share price drop over the past six months or so has seen the share price tumble deep into discount territory. The discount reached its widest reading of more than 60% in February 2023, at which point the company initiated a programme of share buybacks to support the share price. These continued until mid-April 2023, after which the company decided to redirect capital to the development of its project pipeline, as discussed above.

These buybacks, combined with the recent improvement in revenues, have, arguably, provided support for the share price. It is also likely that investors have begun to see value in the shares, which one analyst estimates are now trading below the replacement cost of GRID’s BESS assets. GRID’s discount narrowed to around 50% in recent weeks.

For those who share the confidence of GRID’s manager and board in the long-term viability of the battery storage industry and the company’s prospects, the sharp decline in the company’s share price may provide an opportunity to invest at an unusually low price. It may take some time for conditions in the sector to normalise, and for GRID’s revenues to fully recover from recent events, but as and when they do, the company’s share price discount has scope to narrow back towards its historical levels."

[cc2014] 14/5/2024 07:40

I'm taking a longer term view Nick.

The buildout in the UK from GRID, HEIT and GSF will be complete by the end of the year.

I appreciate they all have pipelines after that date but none of them are going to get built as none but GSF have any cash or ability to borrow apart from GSF and GSF has nothing else scheduled until Dec 26 anyway. GRID have already let 2 of the projects which they had exclusivity go. NESF and FSFL aren't building any more either and TENT won't be around to finance other parties such as Field. TRIG does have something in the pipeline but IIRC it's build date is 2027.

So, any buildout is dependent on other players. They will finish off their current builds too but who is going to invest when the returns in other territories are so much greater. The money will just flow elsewhere.


The maths of supply and demand says prices will remain low whilst more and more capacity comes on line but after December we will start to see the opposite as supply is largely fixed but demand is growing fast.

[nickrl] 13/5/2024 20:47

Income stream has softened over the last few weeks although still substantially above Jan/Feb lows but still too low to see much of dividend being reinstated.

[cc2014] 13/5/2024 14:38

The share price seemed to spend a while consolidating around 55.5p and has now moved upwards and away from that as the sellers have dried up.

We will see what happens next but my inclination is a move back to 62p with relative ease.

[nickrl] 30/4/2024 18:54

@CC2014/Marktime two contrasting but equally fair views. The Jefferies analysis wasn't well researched and certainly forced the price down and the second leg down seemed to have no rationale to it so not surprised its come back a fair bit. Unfortunately i had been biased against GRID over HEIT so didn't take the plunge and can't see it retracing unless they come out again and pull the dividend in 25. Im not sure either extending the batteries duration was astute market evidence has been telling us long duration was the way to go for sometime. Anyhow its certainly sensible they've done it and will help revenue at whatever the run rate turns out to be.

[marktime1231] 30/4/2024 18:08

It would have been astute of GRID if a year or two ago they had prioritised extending durations of existing assets when already faced with connection delays and whatever on new assets, instead of fund raising for grand new schemes while still presenting a healthy income outlook. Astute is not the right word for doing something obvious and too late to prevent income drying up in the meantime.

Thanks for your feedback but I will wait for the hard facts of the q & a ... were they challenged on what is the breakeven or dividend cover threshold and when it might be met, are they really disposing of assets to deleverage, how is the delivery of the 1,072MW really going given we are still a long way off with just 8 months remaining, what is the strategy to deal with a > 60% discount assuming the latest NAV figure is realistic, how sensitive is that NAV assessment to the possibility that revenues stay stuck around the current level, are future management fees going to reflect the collapse in shareholder value ... rather than be swayed by feelings based on how assured the architect of our downfall came across. Maybe he wasn't needled hard enough. I would be particularly keen to hear how GRID are now going to keep us transparently informed of trading with detail on revenue and net income, something else which would have been astute when advised to do so yonks ago.

There is an asset trading case for remaining interested in GRID, for example if you anticipate positive movement in the share price as things become prospectively less awful, but the most simple (some would say only) rationale for any long term investment is that it rewards you with returns eg income. But as you say it is horses for courses.

[cc2014] 30/4/2024 13:09

To add what I saw more than anything is that GRID have been explaining the revenue stream in detail. The analysts should have got the measure of it by now.