Gresham House Energy Storage Fund has announced a proposed placing of shares to institutional investors and a separate offer of shares on the REX platform (the “Retail Offer”) available to existing UK-based retail shareholders of the company. Targeted gross proceeds are approximately £80m, of which the maximum size of the Retail Offer will be capped at the sterling equivalent of €8m [a hangover from EU prospectus rules that we had hoped would have been upsized by now]. The company is relying on an available exemption from the need to publish a prospectus approved by the Financial Conduct Authority in connection with the Retail Offer. The total number of shares issued is expected to represent up to 10% of the company’s existing issued ordinary share capital.
The issue price is fixed at 155.5p per share. The NAV at 31 March 2023 (net of the Q1 dividend of 1.8375p which goes ex-dividend today) is 153.77p. The last closing share price (on a cum-dividend basis) prior to announcement was 158.60p. Investors in the placing and retail offer will be entitled to the dividend for the quarter-ending 30 June 2023 (1.8375p expected).
The placing is expected to close at 3.00pm on 24 May 2023.
The accompanying statement notes that from IPO in November 2018 to 31 March 2023, Gresham House Energy Storage (GRID) delivered a NAV total return of 95.1%. It says that this has been driven in large part by the scaling of the business, from 70MW at IPO, by integrating well-priced project acquisitions, the largest driver of NAV per share growth.
GRID currently owns 590MW of operational projects and had EBITDA of £48.8m in 2022. In addition, GRID has 437MW of fully funded projects under construction in Great Britain targeting commissioning by the end of 2023, which will take operational capacity to over 1GW (1027MW; up c.80% year-on-year). This will drive EBITDA-earning capacity significantly. These projects contributed meaningfully to NAV per share growth in 2022 and will do so further as they are commissioned.
New pipeline
GRID has identified a further 390MW of pipeline expected to commission in 2024 which it is now seeking to prioritise. This pipeline drives the continued scale-up of the business and is expected to create significant incremental shareholder value.
The 390MW pipeline comprises:
- 230MW of projects in Great Britain designed to a 2-hour duration which can be built using existing funds; and
- 160MW of solar with co-located 4-hour BESS projects in California, USA (“Project Iliad”) requiring a total equity consideration through to commissioning of £135m.
Project Iliad has been progressed over the last six months, is subject to final documentation and confirmatory due diligence and is expected to generate significant NAV per share gains once fully commissioned and revalued on a discounted cashflow basis. It represents a broad relationship with a California-based developer comprising the initial purchase of rights to two projects (100MW and 60MW) in Southern California. Each project comprises solar PV co-located with a 4-hour BESS. Key benefits include:
- about one third of revenues expected to be contracted for 20 years, and could be re-contracted thereafter
- about one third of solar revenues which are capable of being contracted via fixed price power purchase agreements [exposure to non-battery related revenues would be a first for GRID]
- about one third in merchant BESS revenues made up primarily of trading
- early connection scheduled for late 2024
- US investment tax credits covering at least 30% of the total construction cost
[It will be interesting to see if this issue succeeds. GRID is the only fund in the renewable energy sector that is still trading at a premium. If shareholders do back it, and the new exposure to US solar, perhaps investors will finally see the attraction of the two dedicated US solar funds – US Solar and Ecofin US Renewables, which currently trade on some of the widest discounts in the sector. The main attraction is, as GRID has highlighted, the significant government subsidy available to get these projects built. There ought to be more UK-based money taking advantage of this.]
GRID : Gresham House Energy Storage targets £80m fundraise