Gresham House Energy Sto... Share Discussion Threads

[marktime1231] 08/10/2024 16:38

How frustrating. NESO, which recently admitted it will not be able to call on battery storage properly until 2027 because it lacks a system to do so, is claiming in The Guardian that our risk of winter blackouts is reduced because of expanding battery storage ...



The real reason is also given in the article. We now have so much interconnector capacity to call on and Europe has an abundance of gas storage, we won't even miss the closure of our last coal power station.

We prefer to buy energy from our neighbours rather than generate and store our own. Somehow that has fooled us in to a sense of security.

Doesn't it make you proud.

[nickrl] 07/10/2024 16:03

I thought they had said some of them have the potential for expansion so were worth more than par.

[cc2014] 07/10/2024 13:03

I don't trust them. I think this it's likely we haven't been given all the relevant information. It's interesting they do not tell us which batteries they had the offers on.

FWIW their is no sensible reason to turn down such an offer unless it's for assets which you have built in the last few months where selling them at below book value is going to raise questions as to why you are still building out the portfolio.

[marktime1231] 07/10/2024 12:32

For anyone wondering "jakku" is an internal codename given by GRID to unidentified assets which were under offer, presumably a group of operational 1hr battery farms capable of increased duration but not yet in the funded augmentation pipeline.

jakku is I think a Star Wars reference, an imaginary wilderness, feels about right!

Given the discounted state of GRID it seems extraordinary not to take an offer at par value, but we will never know how "close to" the offer was. Everyone seems puzzled by the no-deal, which would have been a board decision rather than just by Guest.

Gresham House has already been taken over this year, by Searchlight Partners. I imagine the new owners, and GRIDs main investor Blackrock, will be very concerned about the tumbling performance. Our bigger concern as small investors is that the current management did not see what was coming, they certainly didn't want to tell us and were in denial when we spotted the problems and raised doubts. Execution of plans has been a shambles. How do we trust them to be doing the right thing now, and do you believe we are getting an honest picture of the situation and prospects?

[cc2014] 07/10/2024 08:49

Ben Guest, head of new energy at Gresham House, said in half-year results this week that the £630m trading company had received an offer for 135-megawatt of assets close to their current valuation.

However, he had decided to retain the Jakku sub-portfolio saying there was ‘considerable potential revenue upside’ thanks to the fall in battery prices and their increased energy density. This meant a greater number of one-hour installations could be upgraded to more profitable two-hour durations.


This seems a very very questionable decision to me. I think if I were a large institution I would be thinking about removing Gresham House as fund manager.
At the current share price GRID will never raise more capital and the only way it can fund upgrades to more batteries beyond the planned upgrades would seem to be by binning the dividend forever (I'm not even sure that works if we get another winter like the last one in terms of revenues, the lenders are going to want the RCF to keep reducing if that happens)

From where I'm sitting GH seem more interested in extracting as much fees as possible rather than looking after the long term future of shareholders.

[pj84] 04/10/2024 19:58

GRID rejects offer for battery assets claiming upgrades offer upside

[marktime1231] 03/10/2024 12:18

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 12:05

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 08:00

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

[marktime1231] 30/9/2024 17:42

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 15:03

@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 11:44

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 08:55

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 08:44

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

[nickrl] 25/9/2024 16:55

@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 10:07

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 08:40

@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 06:53

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 09:44

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 20:18

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 20:48

@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 09:06

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