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Gresham House Energy Storage returns boosted by government inaction

230406 GRID

Gresham House Energy Storage has announced its audited annual results for the year ended 31 December 2022.

2022 performance highlights

  • NAV total return (TR) of 39.1%, mostly driven by revaluation of new projects and increases in third-party revenue forecasts
  • [Share price total return not disclosed in the report but we think it was 29.1%]
  • EBITDA of the underlying portfolio of £48.8mn, a like-for-like increase of 23.2%
  • 7p per share dividend to be paid in respect of 2022, covered 1.28x
  • Weighted average discount rate up slightly to 10.9% (2021: 10.8%)

During 2022:

  • Total target portfolio grew to 2GW
  • Total gross equity funds raised of £150mn (2021: £100mn)
  • Incremental debt of £155mn secured, taking total debt facilities to £335mn

As of 31 December 2022:

  • Operational capacity increased 29.4% to 550MW (FY21: 425MW)
  • Eight projects in construction, totalling a further 477MW, expected to commission in 2023
  • Up to 670MW expected to go into construction during 2023
  • £60mn of debt drawn down

As of 31 March 2023:

  • 40MW Coupar Angus project has become fully operational
  • 50MW West Didsbury and 50MW Penwortham projects are now close to commissioning having experienced delays
  • £110mn of debt drawn down

 Operational performance and construction     

  • GRID remains GB market leader with a market share of around 30%
  • Revenue generation and EBITDA were significantly above budget in 2022
  • Longer average battery duration is targeted across the portfolio as trading opportunities increase
  • Four new members were added to the investment manager’s operations team with further recruitment expected in preparation for a significantly larger portfolio
  • Some delays to construction timelines were due to supply chain and grid connection issues

2023 outlook

Q1 NAV per share expected to be driven by +3.3p from incremental project revaluations and +2.2p from newly awarded Capacity Market contracts. Other factors, including any changes to revenue curves or discount rates are still to be determined. 

Operational capacity is expected to reach 1GW in 2023 and c.1.5GW in 2024; growth of 80% and 170% respectively vs year-end 2022 which is expected to drive NAV per share and EBITDA growth.

In light of growth in EBITDA from increased operational capacity in 2022 and expected in 2023, the board intends to pay a dividend of 7.35p per share for 2023, a 5% increase over 2022. The board will periodically review the dividend policy to maintain a competitive dividend yield while also ensuring that dividend cover is strong.

The manager is trialling a new trading revenue opportunity on a small number of MW which has the potential to add a new income line to GRID’s revenue stack if the trial is successful.

The chairman notes that in 2022, the greatest headwinds were experienced in relation to construction activities within the investment portfolio, specifically in terms of delays caused by longer lead times and issues relating to connecting projects to the grid, as well as some supply chain cost increases linked to, for example, the weakening of sterling versus the US dollar. These issues have affected the entire Battery Energy Storage System (BESS) sector. Conversely, and more positively, delays in the growth of the Great Britain energy storage fleet have given the existing BESS, portfolio a boost in terms of performance in 2022 as a result of undersupply of BESS capacity in key services.

[This issue of the difficulty of securing grid connections for projects is something that we hear time and again. Here the chairman acknowledges that this is driving up costs for consumers. This is something that the government needs to tackle as a matter of urgency. However, as Alex O’Cinneide of Gore Street Energy Storage said on Friday’s show, the issue wasn’t even mentioned in the government’s latest plans.]

GRID : Gresham House Energy Storage returns boosted by government inaction

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