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Gresham House Energy Storage – auction bakes in NAV uplift

Gresham House Energy Storage – auction bakes in NAV uplift

The National Grid’s recent T-1 and T-4 Capacity Market auctions took place on 15 and 22 February. These both cleared at record prices. These relate to contract start dates occurring one and four years respectively after the most recent 1st of October, in these instances referring to 1 October 2022 and 1 October 2025. Gresham House Energy Storage offered to make battery capacity available to help stabilise the grid. It entered both existing/operational and pipeline projects into both auctions and has been awarded several Capacity Market contracts which are expected to earn revenues of over £108m (assuming CPI at 2%) over the life of the contracts. These revenues are incremental to revenues currently used in the company’s existing valuation models and in producing the NAV.

Key highlights of the auction results include:

  • T-1 auction for 1-year contracts starting in October 2022, cleared at £75,000 per MW
  • T-4 auction for 15-year contracts starting October 2025, priced at £30,590 per MW
  • GRID was awarded contracts for:
    • 112.0MW of de-rated capacity** in the T-1 auction for 325MW of projects
    • 180.4MW of de-rated capacity** in the T-4 auction for 463MW of projects
  • Contracts were awarded to both operational and pipeline projects
    • T-1 contracts are expected to add £8.4m in revenues over one year
    • T-4 contracts are expected to add approximately £100m in revenues over the 15-year period, assuming CPI at 2%

GRID’s project valuation models assume no Capacity Market revenues until contracts are in place. These contract awards will directly contribute to the NAV and are expected to add approximately 15p per share to the NAV over time. The impact on the end March 2022 NAV is expected to be a positive uplift of approximately 5p. The remaining NAV uplift of approximately 10p is expected to come in subsequent quarters from assets which are under construction as they are revalued based on future cashflows.

The end December 2021 NAV will be published in April alongside the annual results. The uplift from these contracts will not be included in that number. The end March 2022 NAV is expected to be published in early May 2022.

GRID : Gresham House Energy Storage – auction bakes in NAV uplift

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