Wednesday, 6 April 2022

Gresham House Energy Storage - FY Results

Since its launch in December 2018, Gresham House Energy Storage (GRID) has developed the largest energy storage portfolio in the country. It operates 16 utility-scale energy storage sytems with a total combined capacity of 425MW.

As we transition from fossil fuel generation to renewables such as wind and solar, we will increasingly need energy storage solutions due to the intermittent nature of renewable energy - the wind doesn't always blow and there's not much solar in the Winter months.

Currently we use gas fired generation to fill the gap but we have legislated for net zero carbon emissions by 2050 so the ability to store excess energy from an ever increasing capacity from renewables will be essential. As renewable capacity expands, gas-fired power stations will be required less frequently and so they become less profitable to run. This means that renewables are forcing fossil fuels off the grid.

As recently as 2014, coal was our main source of electricity generation. It is still used in the winter months but currently accounts for just 2% of  generation and is due to be completely retired by 2024.

GRID has several streams of revenue which include the wholesale market and National Grid balancing mechanism, Firm Frequency Response based on small-scale changes to the grid's electrical frequency, fixed fees for being on call to deliver power at times of extreme need and Triad payments from National Grid when there is peak demand.

Results

The company have today released results for the full year to end December 2021 (link via Investegate). Net Assets have increased by 13.5% per share over the year on a total return basis to 116.8p (last year 102.9p) and share price return is up 23.0% compared to FTSE All Share Index of 18.3%.

Operational revenues increased by 170% to £51.4m compared to £19m for the previous year. The company is forecasting growth of at least 15% in the coming year.

Over the year, the company has acquired three more storage projects with a total capacity of 141MW. This additional capacity has boosted annual revenues from £10m in 2019 to 19m. Over the past year, revenues have increased due to the introduction of National Grid's Dynamic Containment (DC) service in 2020. This aims to provide more resilience to the grid supply and reduce volatility to provide a better balancing mechanism.

Operational capacity increased from 315MW to 425MW by the end of the year with a further 375MW under construction. The total UK energy storage capacity has increased to 1.4GW and is expected to grow substantially over the coming 3 to 5 years. GRID continue to be the market leader with around a 30% share.

Looking forward, the management are looking to expand overseas and will seek authorisation to invest up to 30% of assets internationally.

Chair John Leggate "The Board and Investment Manager are closely following the global response to Russia's military intervention in Ukraine, and the ensuing humanitarian crisis, as well as considering the potential impact on financial markets, energy security considerations, power price volatility and the Company's business model. In terms of impact on the Company's longer-term outlook, for the moment, the indications are pointing towards a much faster rollout of renewable energy globally with an associated increasing demand for energy storage projects." 

GRID 3 yr share price/NAV

The company has paid a total dividend of 7.0p over the past year as promised and has maintained this target for 2022. This gives a forward yield of 4.9%.

I added this trust to my green portfolio in December 2019 at the price of 105p...its currently 143p and continues to trade at a 10% premium to net assets. The shares account for around 5% of my green portfolio with a further 4% invested in Gore St Energy Storage.

The focus so far has been batteries but they are now looking at the potential from solar PV and I am wondering whether they have considered other energy storage solutions such as flow batteries or green hydrogen as these also has lots of potential.

The reality is that fossil fuel generation will gradually be replaced by renewables as we move towards our net zero target by 2050. This means increasing intermittency which will require ways to store energy to bridge the gaps and provide a constant supply.

So, one to put back in the bottom drawer pending further developments.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

2 comments:

  1. Thanks for posting.

    I bought some myself and I am happy to participate in Battery investments.
    Do you participate in any equity raising that goes on?
    I have for my Greencoat Wind holdings but all of these trusts are raising capital and I would rather invest that way - however AJ Bell said for one fund that's raising cash, I'd have to pay £100 for the privilege - institutional investors only it seems.

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    1. It depends GFF mainly on whether I have funds available and the offer price. As you say, they are sometimes just for institutional investors. This is a fast-growing sector so expect to see lots more fund raising for expansion of wind, solar, storage etc. as we ween ourselves off the addiction to fossil fuels.

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