Gresham House Energy Sto... Share Discussion Threads

[cc2014] 29/7/2024 08:27

Morning Nick. I'm quite shocked to see the data for the weekend. Average of just over £20k/MW for one hour batteries and that includes the CM contracts. It appears there is almost nothing to arbitrage at all at the moment as the weather is too "flat"

Two hour batteries are doing little better at £23k/MW and considering they cost far more than 10% more to build that doesn't look too clever.

Just a couple of days data of course but the trouble is the number of days with low revenue seems to be going on and on.

[nickrl] 26/7/2024 12:48

@CC2014 they do have some assets with 15yr contracts but you can't have both a 1yr and a 15yr on the same asset. For 24/25 they have 21 asset worth 3.5m but there will certainly be alot more assets in play for 25/26. Its also debateable how much a CM contract ties your hand on trading as well as the likelihood of a capacity market notice being issued is very low risk. Thus their trading desk should be able to 2nd guess it on the odd occasion when the risk is prevalent to have the asset out of trading anyhow. Personally Id say you've hit the nail on the head with arbitrage being the most important dynamic here that will define whether GRID has a long term future.

[cruelladeville] 26/7/2024 07:55

Thank you. That's food for thought.

[cc2014] 26/7/2024 07:35

It's my view CDeV that it's currently hard to build a compelling case for GRID.

On a short term basis the price per unit generated is low and whilst it has not yet got as low as the January low's it's starting to get there. That will change when the wind starts blowing in autumn but what we are seeing are long periods of time when there is little to arbitrage. And if there is little to arbitrage in "trading" there's also little demand for the balancing mechanism when the weather is so stable.

On a longer term basis there are two issues. The price of lithium and potential improvements in technology means newer batteries can produce economic returns at lower power prices than GRID can. That imho will tend to drive revenues down for GRID (or at least mean revenues don't rise as technology improvements offset inflation)

Then finally we have the interconnectors. Britain is no longer an isolated island. The interconnectors with Europe are squashing the peaks and troughs in pricing. Further we are building more interconnectors between Scotland and the SE coast of the UK which will further squash arbitrage opportunities.


So, I end up with an investment model that instead requires 15 year tolling agreements and 15 year capacity market contracts. But the market does not currently offer 15 year tolling agreements and GRID chose not to take part in the 15 year CM contracts as it though there would be more revenue from trading.

GRID's next immediate problem is surely the expiry of it's 1 year CM contracts which it will have to rebid for. I would assume/guess/have a stab in the dark that given the current low revenues in the market for trading, the supply of bids will be high and prices for next year will be lower than this year.


On the other hand the share price is 63p... which perhaps reflects a great deal of uncertainty about future revenues...

[cruelladeville] 25/7/2024 15:38

Ah yes. See what comes out in the morning then.

[cc2014] 25/7/2024 15:24

Last time this happened Jefferies produced some scribbles with their red pen

[cruelladeville] 25/7/2024 15:16

Oops, what's gone wrong here today then to send the shares down?

[george stobart] 25/7/2024 09:05

Massive BESS tolling agreement announced yesterday by Europe's largest listed renewable company EDP Renováveis (EDPR).

EDP Renováveis (EDPR), has secured a 24-year capacity tolling agreement with Salt River Project for a 200 MW / 800 MWh battery energy storage system in Arizona, US.

The battery is expected to reach commercial operation in 2025. “The project will be the largest BESS project installation so far in North America by EDPR,” a statement said.

It added: “With this project, EDPR reinforces its commitment with innovation and the development of new technologies and underscores its belief in the critical role of storage in maximising renewable energy’s potential, fostering further the acceleration of the energy transition and the decarbonization of the economy.”

[cc2014] 24/7/2024 07:56

If we go back to the tolling agreement announcement and the presentation.

Ben Guest says they would have revenue of around £70m and EBITDA of £50m once fully built out based on £50MW/hr of which £43m was "contracted" which I assume to mean through the tolling agreement or CM contract but could be tolling only.

GRID is running at £40 for the last 30 days or £43 YTD or £47 for the last year. We accept the numbers are only a proxy as it's not all the batteries and also we don't know which ones are in the tolling agreement.


Either way let's call revenue £65m and EBITDA £45m. (I do understand they are not binning off a load of overheads with the tolling agreement but that's another matter)

Debt was to peak at £165m at a rate of between 6.5-7%. Call that £11m of interest

Gives £34m of cash generation available for dividends, paying off loans, share buybacks and capital investment


The financial model is quite sensitive to the revenue number and therein lies the difficulty in valuing the shares.

[nickrl] 24/7/2024 07:37

@CC2014 umm a scribbler may but we know that this is less than half the story here and the other half has more certainty with the Octopus deal to get a better overall picture here. So a small divi reinstatement is still probable come 25 but im not sure it will be more than 2p so sub 50p would be my target but will probably have some support given Labours policy actions on green energy.

[cc2014] 24/7/2024 07:24

Hi Nick,

I've been looking at Bessanalytics and I'm really struggling to see anything other than permanently reduced revenues compared with this time last year and on a rolling 12 month basis revenues are still falling.

I'm wondering how long before one of the analysts notes this and writes another difficult article for GRID

[george stobbart] 23/7/2024 22:27

Rumor says GRID accountant stole £143.3mn and ran away

[nickrl] 23/7/2024 21:49

bessanalytics has reached a 30 day low on £/MW/yr although still above the early year low rates and with GRID we know its not the whole story as over half the portfolio isn't visible but doesn't bode well on a divi coming back at a level that justifies the current share price

[cc2014] 23/7/2024 13:57

So, now it appears that whilst this was 75p just a few days ago, someone is selling into an iceberg buyer at 66.6p and I'm suspicious that is there to hold the price up as I can buy in the market at 66.61p

I dunno. I'm glad to not be in this one right now.

[boystown] 19/7/2024 12:20

It is a weird market CC2014. I have to confess, I really don't know what to do. I bought at 76p in January (when it had already fallen a long way) for the yield - but thankfully bought again at 50p, 46p, then as low as 41p in early April.

I think I'll stick with it, though, due to the still pretty gaping discount (>46%) and the fact that the Octopus agreement increases the likelihood of dividends resuming next year - or 2026.

[nickrl] 19/7/2024 10:56

@CC2014 well timed and certainly feel its at full value now given the uncertainty that still lies ahead although the octopus tolling agreement did improve the risk profile here.

[cc2014] 19/7/2024 10:07

And now the big buyer has stopped, the price has pulled back 5% already.

I am very grateful to whoever the large buyer was that allowed me to offload my entire holding at 75p.

I made 74% in just a few months, which for a stock with this market cap is just crazy. If you caught it perfect 100% was on offer.

Which shows just how great the difference of opinion with regard to the economics of battery storage

[cc2014] 16/7/2024 08:21

A quick post to thank you Nick for all your posts on this and the other BESS threads.

It really helped my understand better what I'd bought and how to work out what GRID is really worth.


Whilst I write BESS income has been looking poor for weeks now as the weather has been consistently static.

BESS analytics suggests £57k/MW year for 2 hours and £44k for one hour.

With the weather BM revenue is getting close to zero for 2 hour batteries

[cc2014] 15/7/2024 10:55

I'm out.

The huge buyer is still going and still absorbing everything but I decided to use the liquidity to close my position.

Apart from the huge buyer, there appears to be no others buyers out there of any size

[willywonka12] 14/7/2024 05:20

I still.in hear need to get to 115 to break evan .but glad it going in right direction

[cc2014] 11/7/2024 13:05

I guess Blackrock got their stock from Sarassin

[jimjamthe2nd] 04/7/2024 17:34

Tolling agreements and the wider market impacts with Ben GuesthTTps://youtu.be/ZQ_t8kZfWUQ?feature=shared

[igoe104] 04/7/2024 14:42

Investment week article.

[pj84] 04/7/2024 14:24

"Gresham House Energy Storage extends duration of two batteries, enabling it to capture a partial recovery in trading revenues and raising hopes of a resumption in dividends."

...

"Peel Hunt analyst Markuz Jaffe said it was a positive development and built on the tolling agreement with Octopus Energy last month in which GRID will sell around half its storage capacity at a fixed price for the next two years.

He said the rollout of two-hour duration ‘should contribute towards improved cash generation and increase the probability of the company being able to resume dividend payments during 2025’."

[boystown] 04/7/2024 11:24

Many thanks Value Hound and CC2014. I've watched the video and much of it kind of made me feel like I was back in a physics or maths lesson in the early 70s with a vacant expression on my face thinking about football or something.

But I get the gist and understand I need to be thinking about this over at least a couple of years in what will hopefully be a slightly easier interest rate environment.