Gresham House Energy Sto... Share Discussion Threads

[jonwig] 14/1/2022 07:37

Whilst the projected 15% pa NAV growth is impressive, raw material costs are rising fast, so new projects will be more expensive and repair/replace costs similarly. The 10/01 trading statement says nothing about this, and whether revenues can rise to keep pace.

From a recent FT article (11/01):

Lithium carbonate +400% over past year.
Cobalt +100%.
Nickel +15%.

The article is most concerned about EV autos, but the read across can't be ignored.

[marktime1231] 12/1/2022 13:56

I missed this snippet on first reading ...

"Gresham House expects to acquire its upcoming pipeline at the lowest levels achieved to date, with all-in costs expected to be on average under £450,000 per MW for one hour projects and under £625,000 per MW for two hour projects"

The upcoming pipeline represents an approximate doubling of assets within 2 years. All good provided it is resolving what it reported as supply chain problems causing some delays. In which case 10+% NAV growth is repeatable and the share price should continue to rise, even if the dividend takes a while to catch up.

[pavey ark] 11/1/2022 15:06

The future performance here is centred round leverage of the assets.

From the earliest days it has been the company's aim to raise cash, build up the asset base and then leverage these assets.

With initial spending of the recent loan GRID are now moving into this second phase.

Close reading of recent statement will show the current direction of the company.

It matters little to me if I get the 15% as dividend or increased assets but I don't think I have many shares where this sort of gain looks quite as locked in with the risks as low as here.

[marktime1231] 10/1/2022 14:34

£40M ebitda so eps of around 9p indicating net income covers a dividend of 7p with a little headroom, projecting to repeat that yield in 2022 similarly covered eg without any increase. As per expectation but a little disappointing noting the strong share price and NAV performance that there is little prospect of dividend progression. A modest increase would have grabbed attention.

The management may of course be targetting low in order to surprise us in due course, but let's not count our chickens by pencilling in a raise. Exceptional income opportunities in 2021 may not be repeated and they have warned that a change in the capacity auction format is likely to suppress prices in that market segement. Any tier-down in management fees likely to be offset by interest rate rises.

Focus is on execution of the development portfolio, ramping up gross assets and an impressive target of up to 15% growth of NAV per share which would take us to 125p+. But that is already priced in through 2022 with the share price averaging 130p.

Of course continuing demand for renewable power generation will sponsor additional demand for (battery) storage and GRID is really well placed to surf the wave. Adding value by participating in the development of projects from an earlier stage is the upside, while maintaining an attractive and confidently covered but flat dividend in the 5-5.5% yield range.

Outperformance would require GRID to start realising embedded value by trading, selling stakes in mature sites to provide the capital for further value-add development, a bit like SSE is doing with its wind projects. Still waiting to hear what GRID is going to do about long-duration storage.

Content that this is a worthy long term hold for income, fairly valued.

[pavey ark] 10/1/2022 09:18

Very good update.

I am expecting a dividend increase at the time of the results.

8p would give a 6% yield at these prices.

[jonwig] 10/1/2022 08:14

The numbers there are quite remarkable. I was beginning to wonder how they could justify their valuation, now it's plain.

[speedsgh] 10/1/2022 07:37

Trading Update -

Gresham House Energy Storage Fund PLC (LSE: GRID), the UK's largest fund investing in utility-scale battery energy storage systems, is pleased to provide shareholders with an update on trading for the full year to 31 December 2021 ahead of the publication of its audited annual results in April 2022.

2021 has been another transformational year for the Company. Key highlights include:

- Full year revenues of the asset portfolio comfortably ahead of modelled levels and EBITDA of the asset portfolio expected to be in excess of £40m, more than doubling FY2020 EBITDA (£15.6m[1]);
- Full dividend cover[2] for FY 2021 dividend target of 7.0 pence per share;
- 415MW of battery energy storage systems ("BESS") under construction as at Q4 2021 (Q32021: 175MW);
- 280MW added to the exclusive pipeline during Q4 2021 for connection in 2023 and 2024, increasing the target portfolio, once operational, to over 1.5GW;
- Further growth in the Company's capital base in 2021 with £100m raised in equity funds and £180m of debt secured at an interest rate of SONIA + 300bp before hedging costs.

Looking ahead to 2022, as projects progressively commission through the year, GRID anticipates achieving the following ambitions:

- Full dividend cover for FY 2022 target of 7.0 pence per share, with cover continuing to improve progressively as new projects commission during the year;
- Net Asset Value ("NAV") growth towards the upper end of the target range of 8% to 15%[3];
- Continuing to be the leading owner of operational BESS in the UK and Ireland with a market share of c.25% to 30%.

These targets are underpinned by the deployment of existing cash and, incrementally, drawing of low cost debt into pipeline projects with Internal Rates of Return (IRRs) which are significantly above the Company's weighted average discount rate.

John Leggate CBE, Chair of Gresham House Energy Storage Fund PLC commented:
"The outlook remains very exciting for energy storage sector investments, particularly due to the recent Contract for Difference (CfD) auction launch announcement for renewable generation projects. The UK government's Department for Energy and Industrial Strategy (BEIS) expects this will result in a further 12GW in contracts, primarily for offshore wind, far in excess of the 5.5GW achieved in the 2019 round. This substantial growth in renewables will lead to increased generation intermittency and therefore drive the need for significant additional energy storage capacity. GRID remains committed to taking the lead in providing this storage capability in the UK and Ireland."

Ben Guest Lead Fund Manager and Managing Director of Gresham House New Energy, added:
"We continue to work towards the commissioning of our extensive pipeline, as well as continuing to grow it. We are excited about the impact that achieving these milestones will have on the prospects for earnings growth and NAV progression in 2022."

[continues]

[marktime1231] 22/12/2021 20:59

Good to know that thank you, and I have just proposed something steeper to the senior independent director. After all 0.75% is the new standard when up to scale except for adventurous funds.

[jonwig] 22/12/2021 18:50

They do taper the fees -

1% on first £250m, 0.9% up to £500m, 0.8*above £500m. No performance fee. (Prospectus p168.) That's not too bad. (I don't know what GSF's are.)

[marktime1231] 22/12/2021 18:14

Since presumably both GSF and GRID management earn their 1% of AUM management fees irrespective of income performance, they have been very excited to tell us about total asset growth.

GRID have done much better recently in terms of telling us what shareholders want to know about income prospects and dividend coverage. But since net assets have more than doubled from around £250M to around £500M in just one year, and are set to double again, there is a case for the rate at which management charge fees to taper.

Or for the formula to change. Never understood why fees are based on total asset under management, rather than what we pay the manager to do eg improve returns and in the case of GRID specifically to progress the dividend covered with income per share.

[marktime1231] 20/12/2021 14:09

Perhaps not then, not much interest shown in GSFs statement, and it wasn't very interesting or easy to read. Lots about how they are expanding and developing new assets, very little about income which I think at about 4.2p per half year only just covered the 4p paid in dividends. They were certainly not raving about prices and demand for services, the opposite it is almost impossible to understand income performance. Modest steady NAV progress. Hard for the GSF share price to respond too much when it is already at 10-15% premium.

In which circumstances I am happier being invested in GRID. Grateful if anyone spotted any read across, I didn't but I am suspicious that a lack of GSF raving about super income means GRID will not have any out-performance to shout about either.

By the way has anyone studied the form of Harmony Energy which listed as HEIT in November raising around £200M. Looks like a collection of mostly small onshore wind and a little solar and now increasingly utility scale battery storage projects, investing in early stage developments of the Tesla type. I have not studied the prospectus and they are not chattering much about projects or ambitions or income / dividend prospects. I think they sold a development to SSE recently, does that mean they are more interested in value creation than operating for income?

If any well backed developer (inc Schroders) can get in this market and see themselves appreciate to a 10-15% premium then HEIT trading at par may be worth a punt?

[marktime1231] 19/12/2021 16:09

On Monday Gore Street Energy due to report interim trading and financials to Sep 21, which will give us insight in to how GRID has been doing in its own Q3 since June. Presumably given the soaring cost of energy the market for battery storage and peak response services has been strong, but I noted the warning from GRID last time about changes which NatGrid made to capacity market auctions likely to depress future income from that sector.

[marktime1231] 17/12/2021 16:37

Welcome divi today what we are here for. Wonder how long before it gets increased, the share price at a 16% premium to NAV says lots of buyers are betting on strong progress.

Such a wide premium it must be tempting to go for another big fund raise.

[webby] 15/12/2021 16:21

I like this bit from the above report.
GRID saw its EBITDA soar to £22.4 million in the first half of 2021, jumping from £4.5 million in H1 2020. This was largely driven by frequency response services – accounting for 88.5% of its revenue – and highlights the opportunity for BESS projects in the UK market currently.

[marktime1231] 30/11/2021 14:21

Reporting on GRID borrowing for expansion ...



... even though this was news back in September, and was a 5-year £150M capex + £30 rcf plus an uncomitted £200M accordion, arranged with a consortium of lenders. Not a $500M loan with NatWest. But thanks to ESN for reminding us that GRID's ambitious expansion plans over the next two years are fully funded on base + 3% terms.

[marktime1231] 25/11/2021 12:33

Wow up on ex-div, the energy sector having a very good day.

[hiddendepths] 24/11/2021 20:54

xd tomorrow morning!

[speedsgh] 15/11/2021 11:01

Dividend Declaration -

Gresham House Energy Storage Fund PLC (LSE: GRID) is pleased to announce a dividend of 1.75p per Ordinary Share for the period from 1 July 2021 to 30 September 2021. The dividend will be paid on 17 December 2021 to Shareholders on the register as at the close of business on 26 November 2021. The ex-dividend date is 25 November 2021.

Any such dividend payment to Shareholders may take the form of either dividend income or "qualifying interest income" which may be designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts. Of this dividend declared of 1.75 pence per Ordinary Share, 0.75 pence is declared as dividend income with 1.00 pence treated as qualifying interest income.

[marktime1231] 10/11/2021 18:02

Nevertheless an interesting and meaningful update full of trading facts and sensible outlook. Pleasing to see the benefit to NAV of investing at an earlier stage, and that quarterly income of 2.25p covered the 1.75p dividend easily.

The pipeline investment is huge and already funded through a combination of recent fund raise and new capex facility at base + 3%. The lag before we see income from these investments means we can look forward to further significant NAV and dividend progress. Yes at 130p the share price premium got a bit too far ahead of NAV but it is only a matter of time ... 18-24 months maybe.

All good.

I would like to see them plan to invest in a GWh long duration flow battery installation, something which could be progressively scaled up and provide a strategic alternative to storing energy as gas or pumped hydro.

[nerja] 10/11/2021 17:40

I jump in a bit early for a top up at 125.45, but looking at the chart that 120p area looks like another top up area

[spangle93] 10/11/2021 17:18

Maybe the premium to NAV was getting a bit fruity#

March 31: NAV 106.7p, share price 114p, premium 7.3%

Sept 30: NAV 111.9p, share price 124p, premium 12.4%

Since when the share price during October has touched above 130p. Perhaps the figure released yesterday persuaded a few folks that it was getting ahead of itself.

[nerja] 10/11/2021 16:38

Taken a little bit of hit of late, maybe a seller about for some reason

[petersw1] 20/10/2021 15:35

I used to hold GSF as well as GRID but quite quickly lost trust in them. From memory, their projects always seemed to take longer to come online than they originally announced they would and the NAV increases were often linked to revaluing incomplete projects. The delays never seemed to be explained. Instead the RNSs seemed to twist things and try to make that all was going as planned. I also found it confusing that they seemed to be doing a lot more developing projects rather than running completed ones which did not really match what their literature said they'd do.The dividend payments felt like they were just giving shareholders their money back as they didn't have enough revenue from completed projects to cover it.I think their only real selling point over GRID is that you don't need to make any special declaration to be able to buy them. Seems odd that though, as they feel a riskier investment.

[jonwig] 20/10/2021 13:43

marktime - thanks for the point you made.

I've now read the TS and agree, it's the sort of thing they should put research companies into rather than own up to themselves. Are they making the big error of over-promising? I'd take issue with one statement in particular:

we took first mover advantage and moved our GB portfolio into Dynamic Containment contracts during Q3 2020.

From recollection, GRID were into this well before and didn't actually announce.