Gresham House Energy Storage secures revenues for half its portfolio

Gresham House Energy Storage (GRID) has announced that 14 of its projects, representing 568MW/920MWh, have secured fixed price contracts with a subsidiary of Octopus Energy, the UK’s largest electricity provider. This will provide two-year fixed-price contracts for approximately half of the company’s 1,072MW target portfolio starting in a phased manner from 1 July 2024.

Octopus will pay a fixed fee per MW on these projects in return for the use of each project’s batteries. The fixed fee rate is determined by the duration of the asset (expressed in hours) and excludes capacity market payments which the projects will continue to receive separately.

Including these capacity market revenues across its full portfolio, the majority of which are for 15 years index-linked to CPI, the GRID expects to have annual contracted revenues of c.£43m during the tolling arrangement. GRID believes that this contract underpins its revenues and provides a greater degree of certainty over its cash flows. For the portion of the portfolio contracted with Octopus, GIRD has secured a competitive, higher price than recent weak performance at the start of the year.

Following this agreement, GRID’s portfolio is expected to be c.50% hedged by the end of 2024: 568MW/920MWh of the target portfolio will be contracted under the agreement while 504MW/776MWh will continue to operate under existing optimisation agreements. These fixed price contracts will provide GRID with greater confidence in restarting a dividend at the appropriate stage in 2025.

John Leggate CBE, GRID’s chair, commented:

“The Board and Manager firmly believe that the rebalanced mix of contractual and merchant revenues offers shareholders a superior risk adjusted target return and material risk mitigation, particularly in a revenue environment that remains uncertain in the near term, by reducing direct exposure to the Electricity System Operator (ESO) as the principal counterparty in Great Britain.”