Gresham House Energy Storage (GRID) has announced a third long-term floor pricing agreement with EDF Energy to underpin the battery fund’s revenues and secure refinancing for its three-year recovery plan.
The 10-year contract with EDF Energy is at the same floor level in £/MW terms as the deals announced with Statkraft Markets and Markel Bermuda at the start of July.
Once a two-year revenue-sharing agreement with Octopus Energy expires in a year’s time, the agreements mean 83% of GRID’s 1072MW operational energy storage schemes will benefit from a minimum revenue base of £40m. They will also have some exposure to merchant prices rising above the contracted floor price.
The addition of EDF has raised those figures respectively from 74% and £35m when the Statkraft and Markel agreements were published on 3 July.
Stifel analyst Will Crighton said: “This deal secures another £5m of contracted revenue through floor contracts on 100MW of capacity ie, at a floor of £50k/MW. Less detail has been provided versus the last announcement, so it is not clear whether this is structured as a swap like the Markel agreement, or a more traditional floor contract like the Statkraft agreement.”
As previously highlighted, GRID also stands to earn £11m in capacity market revenues when its industrial-scale batteries may be called upon in times of low wind or high demand.
GRID chair John Leggate said: “Being able to demonstrate to lenders that GRID has de-risked revenues is key to unlocking more favourable, longer-term financing terms with less onerous covenants.
“We look forward to concluding our refinancing shortly to unlock the next phase of our three-year plan and implementing a revised dividend policy.”
Gresham House fund manager Ben Guest said GRID’s 637MW of pipeline projects GRID would also benefit from similar floor agreements, further de-risking revenues after the painful slump at the start of last year forced the company to scrap its dividend.
GRID shares have bounced back strongly this year, up nearly 70% at 79.2p. However, they remain below their 100p launch price in 2018 and less than half their 179p peak in September 2022. They also stand around 28% below net asset value of 109.4p at 31 March.
Our view
James Carthew, head of investment company research at QuotedData, said: “GRID flagged this deal earlier in the month. Securing a guaranteed floor for revenues makes it easier for cautious lenders to stump up the cash to fund GRID’s expansion plans. The interesting thing about the EDF arrangement is that a large part of it relates to revenues from as yet unbuilt projects. The need for this extra battery storage capacity was outlined in Cherry Reynard’s recent article. Hopefully, this will help drive down UK electricity prices.”
