Gresham House Energy Sto... Share Discussion Threads

[pj84] 04/10/2024 20:58

GRID rejects offer for battery assets claiming upgrades offer upside

[marktime1231] 03/10/2024 13:18

Give it a rest Edison!

... rising revenues, improvement in the revenue outlook ...

Good grief

Actually they hit the nail on the head. If you believe in the confidence of the (con-artist) manager then be a fool.

[pj84] 03/10/2024 13:05

The update concludes: -

Very wide discount may be an attractive investment opportunity

Until a year ago, GRID’s shares usually traded at a premium to cum-income NAV (see chart at the start of this note), but a sharp share price decline over the past year has seen the share price enter discount territory. The company initiated a programme of share buybacks in February 2024, repurchasing a total of 4.4m shares before buybacks ceased in April 2024, to focus capital allocation to the construction of new projects and augmentations. The discount exceeded 60% at this point but has since narrowed to closer to 50%. This is likely to be due at least in part to the improvement in GRID’s revenue outlook over recent months, especially since the agreement of the tolling arrangement with Octopus Energy.

In addition, investors may be beginning to see value in the shares. Alternative valuation estimates released by GRID for the first time in its H124 results show that at current merchant revenue levels and based on current operational capacity and the tolling arrangement discussed above, the company is valued at 9x EV/EBITDA, with a P/E ratio of 5.7x, on a forward basis. However, capacity is set to rise by end 2024, and medium- to long-term revenues are forecast to increase significantly based on third-party revenue curves, so both the EV/EBITDA and P/E ratios are likely to fall over time. This suggests the company’s shares offer potential value at their current level.

The current wide and arguably unjustified discount may represent an opportunity for those investors who share the confidence of GRID’s manager and board in the long-term viability of the battery storage industry and in the company’s prospects. It will take more time for conditions in the sector to improve, and for GRID’s revenues to fully reflect recent developments, but as and when they do, the company’s share price discount has significant scope to narrow back towards its historical levels.

[nickrl] 02/10/2024 09:00

@value hound thx for that reinforces our own assessments. share price too high.

[marktime1231] 30/9/2024 18:42

A quick scan of the interim report and progress is rather asymmetric. Only 100MW / 243MWh has been added in 9 months, leaving 282MW / 670MWh scheduled to complete in the remaining three months. Unless Guest has a magic wand I suspect some projects will slip in to next year, and it will be touch and go whether the revised and much reduced 1GW target will be achieved in 2024.

If trading and income stream were improved I would have expected more detail, saying there are random days when things are better than previous does not help. Nor does pinning hopes on NESO pulling themselves together.

It will be a struggle to hit the £43M ebitda target then, in my opinion. Agree with the pessimistic prognosis for dividends. 40p for me, and only if the end of year trading update proves my suspicion about slippage wrong.

[nickrl] 30/9/2024 16:03

@erstwhile/marktime certainly needs to <45p for me to take any based on current forecast income stream. Summer months are going to present best opportunity in all revenue streams (grid is awash with solar) so c45k/MWh looks most likely annual rev stream. They wont have full year of complete portfolio till end 25 so doubt any divis will be paid till then. Of coutde BoFs and inv mgr aren't bothered.

[marktime1231] 30/9/2024 12:44

Thanks nickrl. The share price responding like the outlook is more stable, but it still feels to me this should be a 40-50p share rather than 50-60p.

I wonder if Octopus (ORIT) are the interested party given their tolling agreement, in some of the choice assets rather than the whole. Octopus the energy supplier is ahead of the pack in the way it trades the daily cycle of energy prices, and has the nouse to exploit storage in contrast to ESO. Which NAV do you think the bid might be close to, the previous unbelievable or the current unbelievable? It would be surprising if GRID were not prepared to trade something on par terms given the wide alleged discount, if only to demonstrate that its NAV figures are not complete fantasy.

So there might be a net FY result of £20-25M? I don't share your enthusiasm that GRIDs first priority is to distribute some income to shareholders, not until it knows what is sustainable anyway. Sometime late next year?

Did you get a sense how confident GRID are of delivering the revised asset schedule, are they hitting dates now?

[nickrl] 30/9/2024 09:55

HY report doesn't tell us much more than we already know. There are a few interesting charts in it (i)shows that we need to be cautious about the data on bessanalytics (it only covers assets in the BM [4 of 25] as the rest aren't visible) be a guide to revenues as they are reporting better monthly numbers over the whole portfolio. (ii) wholesale pricing delta between max/min continues to fall which isn't healthy for that revenue stream but and now averages 50/MWh down from 150/MWh two years back and thats despite them telling us instances of negative pricing have increased significantly this year.

Seems they had an interested party for some assets close to NAV but have decided not to sell as they can be augmented easily and the the longer the duration the more income you can receive.

All assets should be fully operational by year end so they use this as a forecast for various scenarios and using the mid point £45/MWh they suggest rev of £65m giving 45m EBITDA. Debt costs of c13m off this but not sure what else needs to be offset as this suggests something left for a modest divi of maybe 2-3p range. If thats correct share price is about right for me. Of course the other possibility is someone buys the lot but not sure thats going to happen although Octopus must be a possibility as they are ramping wind and solar assets currently.

[george stobart] 30/9/2024 09:44

We are left holding the biggest bag of odorous excrement ever assembled in the history of capitalism.

[nickrl] 25/9/2024 17:55

@cc2014 there will certainly be many more BESS participants but they are still modest volume when you take into account the derating factor so the big generators will still control the cut off price I suspect. T-4 will also be of interest to see how the mkt is going to evolve now with potentially insufficient incentive to bring anymore new gas online.

[cc2014] 25/9/2024 11:07

Right now I'd be more concerned as to what this years T1 Capacity Market contracts are going to be. From memory this is due in about October and given current revenues I can only see them being lower than last year.

[nickrl] 25/9/2024 09:40

@jparta MODO speek with fork tongue as the amount of BESS participating in the BM has gone up considerably and will keep increasing so the engineers have a multitude of choices. The blunt reality is electricity has to be managed by the second and a control engineer faced with a multi MW shortfall or excess can tweak that amount with one instruction to a 300MW gas turbine but would take dozens or more to BESS operators. The ESO have come up with mods to the current system that were temporarily removed early in 24 but came back online after a glitch was resolved to increase BESS participation which has increased dramatically over last 12mths. However, the real problem for GRID is the price keeps going down. Don't be deluded by the reasonable run in July/August on revenue generation as high wind output on sunny days is the elixir for BESS. Things will now drop away as solar falls off and demand goes up to absorb wind and thus wholesale prices will remain positive. So that tolling agreement with Octopus at least brings a degree of certainty to income now but im unsure it will be enough to restore a divi next year.

Ignoring the current economics it certainly makes sense to have BESS on a renewables system and id say its highly likely given Labour emphasis on achieving NZ by 2030 that some new incentive will be created that may give us a leg up here or a buyer to emerge.

[jpatara3] 25/9/2024 07:53

Another FT articleSome of the article below Some think engineers simply prefer trusty gas power plants to newfangled green tech batteries. The electricity system operator denies this, but it has confirmed that oldfangled computer systems are a problem.It says the IT system its engineers use to calculate whether batteries are cheaper than gas was built in the 1990s and doesn't allow control room engineers to quickly calculate when to use batteries or fossil fuels.A newer system had to be retired earlier this year, leaving engineers to use the older one until an even newer upgrade is fully operational in 2027.The operator says the upgrade has already significantly increased average use of batteries this year and skip rates should reach low single digits early next year. However, the data provider Modo Energy says skip rates have only declined from 92 per cent in December to 76 per cent in August.The system operator does not calculate skip rates itself and it has delayed publication of a consultants' report it commissioned last year on the best way to measure rates.Things may change after Tuesday next week. That's when the electricity system operator, previously a legally ringfenced business in National Grid, becomes a separate, publicly owned body that may be better resourced.

[george stobart] 17/9/2024 10:44

Well now that Sir Kier has nationalised the ESO Grid can start buying them new computers instead of using donor money to buy his wife £3k dresses and himself £8k sunglasses

[jpatara3] 15/9/2024 21:18

Battery storage sees exponential growthBattery storage reached 200GW 202390GW installed in 2023Expected to top 1TW by end of decadeExceed 5TW by 2050Potential to expand from $15bn in 2023 to upto $700bn by 2030 and $3trn by 2040Source: IEA and Bain Consultancy ...in a growth market management would need to be utterly incompetent to mess up!!

[nickrl] 13/9/2024 21:48

@george the eso had to be paid for anyway so there will be no real change. There also rammed full on net zero evangelists now but as long as the control engineers continue to run the system we will have measured expansion that doesn’t jeopardise security of supply.

[george stobart] 13/9/2024 10:06

The National Grid ESO is getting taken under public ownership by the HM Government as per announcement this morning

The RAB of the ESO was £425 million at 31st March 2024, highlighting a strong premium on the sale of the asset at ~48% for National Grid.

Now Starmer et al will plant a left wing/pro-renewables CEO to push for more green policies.

- Very positive for Renewables & BESS investors

- Very negative for UK taxpayers, as the ESO is now a state owned business and someone will have to pay to run it

[george stobart] 10/9/2024 17:30

Sir Kier Starmer will bring massive green investments to the UK BESS.

Rumour says Sir Kier is scooping up GRID cheap shares as we speak through his offshore Isle of Man account.

Gains in this stock are not promised; they are guaranteed

[topvest] 10/9/2024 17:00

What a dog this has been. The fact that they were using highly optimistic forward curves about sums this up. Ben Guest should be fired in my view. I'm not sure you can believe anything he says.

[cc2014] 10/9/2024 14:14

I've with you on that. I'm thinking the price will be very keen too, lower than this years.

[nickrl] 10/9/2024 13:43

@CC2014 only assets without an existing CM contract can prequalify though although im not sure many BESS if any got a T-4 for delivery year 25/6 so could be a lot of batts in play. Also they eased back on derating factors so won't need as many. My guess is pricing will be keen.

[cc2014] 10/9/2024 12:14

The ESO has set capacity for next year’s T-1 auction at 6.5 GW, 1.2 GW below the previous auction. The target capacity for the T-4 auction is 44 GW, the same as the final target capacity for the previous auction