Gresham House Energy (GRID) has reported an NAV of 101.5p, as at 31 March 2020. GRID said the NAV increased over the quarter, driven by the assets acquired in December being valued at fair market value, which was offset in part by a more conservative set of forecasts driven by lower inflation assumptions, as well as, reflecting more cautious figures given that the current third party forecasts used were published some time before the lockdown.
The NAV total return came in at +1.7%, while the share price return was (13.6%). Since 31 March, the shares have recovered strongly (101.5 as at 7 May), in line with the wider renewables energy infrastructure sector.
No material impact from covid-19 thus far
“GRID has not encountered any obvious impact on trading activities due to covid-19. However, as previously announced, we still foresee potential minor impacts on the commissioning dates of our next two 50MW projects, Thurcroft and Wickham. These are still scheduled for commissioning in H1 2020.
Having met the 2019 dividend target of 4.5 pence per share, a Q1 2020 dividend of 1.75 pence per share will be paid in June, as announced. The Board is also pleased to reaffirm the Fund’s dividend target of 7.0 pence per share.
The Fund successfully raised gross proceeds of £31.2m, just ahead of the substantial public equity market dislocation, from the issuance of ordinary shares at a price of 104.0 pence per share, to complete the c.50MW “Potential Acquisition”. This is an existing operational project and its acquisition is expected to close during Q2 2020, with further details to be announced.”
Portfolio activity – asset optimisation pushing revenues higher
“GRID had a busy start to 2020 completing both the integration of the projects acquired in December 2019 and the ramp up of the seed projects which we upgraded in H2 2019. This activity has more than doubled operational capacity to 174MW. Revenues have correspondingly stepped up, with an upward trend in revenues from asset optimisation.
This revenue increase will continue in line with portfolio growth expectations to around 364MW during 2020.”
Asset Optimisation revenues driven by volatility in power prices
“Despite headlines about falling energy demand and low power prices, we have not seen a discernible impact on revenues at this time. Asset optimisation revenues are driven by volatility in power prices rather than absolute power price levels.
We are encouraged by the trends for 2020 which include more renewables in the generation mix. In our view, these mark the beginning of the end for the excessively large, gas-fired power plant fleet. This fleet normally operates at a c.30% load factor in normal times but is currently operating at less than 20%. Both trends contribute to greater power price volatility.
In addition, there is a growing demand from National Grid for frequency and other services. This is allowing battery storage to compete effectively in wider areas of the market which either didn’t exist before or were previously the domain of large-scale fossil-fuelled generators.”
GRID: Gresham House Energy benefits from power price volatility