Gresham House Energy Storage Fund publish Quarterly NAV, Dividend and Factsheet

Gresham (LON:GRID)

Q1 2021 NAV

Gresham House Energy Storage Fund Plc (LON:GRID) has today announced its NAV as of the 31st March 2021 was £371.8m or 106.66p per ordinary share.

Dividend Declaration

The Board is pleased to announce a dividend of 1.75p per Ordinary Share for the period from 1 January 2021 to 31 March 2021. The dividend will be paid on 4 June 2021 to Shareholders on the register as at the close of business on 14 May 2021. The ex-dividend date is 13 May 2021.

Any such dividend payment to Shareholders may take the form of either dividend income or “qualifying interest income” which may be designated as an interest distribution for UK tax purposes and therefore subject to the interest streaming regime applicable to investment trusts. Of this dividend declared of 1.75 pence per Ordinary Share, 0.75 pence is declared as dividend income with 1.00 pence treated as qualifying interest income.

Q1 2021 Factsheet

The factsheet for the period ended 31 March 2021 is available at:

http://newenergy.greshamhouse.com/esfplc/

Extracted text of the commentary is set out below:

Financial highlights

From IPO to the end of March 2021, the Fund has delivered a share price total return of 27.3%, compared with a 7.9% total return from the FTSE All Share. The attribution of returns since inception is 14.5% to capital and 12.8% to income.

For the quarter ended 31 March 2021, the Fund’s NAV was £371.8m or 106.66p per share, an increase of 3.70p per share in the quarter.

There was a 4.36p uplift from the revaluation of projects recently acquired (previously held at cost) while income in excess of dividend distributions in the quarter accounted for a 0.72p benefit. Partially offsetting this by 1.22p were a more cautious set of assumptions which included taking into account the impact of the corporation tax rate rising to 25% from 2023, as announced in the recent Budget.

Dividend coverage in Q1 2021 was c.1.3x despite a significant cash balance and, as such, the Fund remains committed to its dividend policy of 7.0p per share paid in equal quarterly instalments.

Finally, the Fund is exploring a debt facility which is expected to drive down its cost of capital which, in turn, is expected to be significantly accretive to GRID’s overall return on capital, once any debt facility is fully deployed. The Fund will provide a further update in due course.

Portfolio activity & market outlook

The Investment Manager has had an active quarter, completing the acquisition of 80MW across four projects (Glassenbury Extension (10MW), Port of Tyne (35MW), Tynemouth (25MW) and Nevendon (10MW)) and a further 30MW since the quarter end in the form of Byers Brae near Livingston in Scotland.

The Investment Manager is also preparing to commence construction, subject to final due diligence, on a further 275MW across five projects (one is 100MW, two are 50MW and the other two are 40MW and 35MW respectively). The construction of these projects will fully commit all the funds raised in the November 2020 equity issue.

The Fund has a significant additional exclusive pipeline of 527MW across eight projects which will be built subject further debt and/or equity fundraising.

The market environment remains favourable as evidenced by the Fund’s dividend coverage over Q1 2021. National Grid continues to procure more in the way of frequency response than there are projects in the market, with the suggestion that this will continue for several more months. Over the next two years, the level of procurement is expected to increase steadily.

In addition and long anticipated, the volatility in power markets has increased significantly, as a result of several instances of insufficient power driving power prices very high this winter. This was caused by low wind generation (which has come out much lower year-over-year due to low wind resource) and various other factors, including forecasting errors (of supply and demand, and outages of either generation capacity or inter-connectors at different times).

Portflio & Pipeline

Current portfolio
ProjectLocationMWStatus
1.     StaunchStaffordshire20Operational – 2018
2.     RuffordNottinghamshire7Operational – 2018
3.     LockleazeBristol15Operational – 2018
4.     LittlebrookKent8Operational – 2018
5.     RoundpondsWiltshire20Operational – 2018
6.     WolverhamptonWest Midlands5Operational – Q3 2019
7.     GlassenburyKent40Operational – Q4 20191
8.     CleatorCumbria10Operational – Q4 20191
9.     Red ScarLancashire49Operational – Q4 20191
10.   BloxwichWest Midlands41Operational – Q3 2020
11.   Wickham MarketSuffolk502Operational – Q4 2020
12.   ThurcroftSouth Yorkshire50Operational – Q4 2020
13.   TynemouthNorth Tyneside25Operational – Q1 20211
14.   Port of TyneTyneside35Operational – Q1 20211
15.   NevendonEssex10Operational – Q1 20211
16.   Glassenbury ExtensionKent10Operational – Q1 20211
17.   Byers BraeWest Lothian30Operational – Q2 20211
Total Portfolio425
1. Operational assets acquired from the market, showing when the project was acquired by the Fund and not the date of commissioning.2. Asymmetric projects with lower Import Capacity versus its Export, all other projects have a symmetrical Export/Import Capacity. 
ProjectLocationMWCommissioning
Committed Pipeline
18.   Project MSwindon100Q1 2022e
19.   Project ELeicester50Q1 2022e
20.   Project DManchester50Q1 2022e
21.   Coupar AngusCo. Perth40Q1 2022e
22.   ArbroathCo. Angus35Q1 2022e
Subsequent Pipeline
23.   Project EmeraldRepublic of Irelandc.402022
24.   Monet’s GardenNorth Yorkshire502022
25.   Lister DriveMerseyside502022
26.   Project GNorthampton502022
27.   Project PPreston502022
28.   Project E2West Yorkshire100+502022
29.   Project BWest Yorkshire872022
30.   Project YYork, N. Yorks502022
Total Pipelinec.802

Gresham House Energy Storage Fund plc also announced its second set of annual results since the IPO in November 2018. This covers the 12 months ended 31 December 2020 together with an update for the quarter ended 31 March 2021.

Performance highlights during the FY20 period

·       Net Asset Value (NAV) up 74% to £358.9m  (FY19: £205.9m)

·       NAV per share up 2.2% to 102.96p (FY19: 100.79p) and NAV total return of +8.4%

·       Share price total return of +10.8% versus FTSE All-Share Index total return of -9.8%

·       Underlying portfolio revenues up 89% to £19.0m (FY19: £10.1m), driven by Frequency Response services, Trading and Triads

·       Underlying portfolio EBITDA up 135% to £15.8m (FY19: £6.7m)

·       Total dividends of 7.0p per share paid for the year, as targeted and reaffirmed for 2021

·       Total equity funds of £151.2m raised and £14.9m of bonds issued

·       Portfolio weighted average discount rate of 10.8% (FY19: 11.2%)

Deployment

·       Total operational capacity increased to 315MW (FY19: 174MW)

·       £85.3m invested and 141MW of operational capacity added:

o  41MW Bloxwich (July 2020)

o  50MW Thurcroft (October 2020)

o  50MW Wickham Market (November 2020)

·       Cash position of £111m at year-end

Post-period end highlights, to 31 March 2021

·       NAV per share up 3.5% to 106.66p

·       Share price total return of +27.3% since IPO versus FTSE All-Share index total return of +7.9%

·       £49.0m invested into 110MW of operational capacity taking total to 425MW (including the 30MW Byers Brae acquisition announced on 22 April 2021)

·       Updated Pipeline of 802MW, of which 275MW due to start construction shortly

o  Investment into 275MW fully commits equity funds raised in November 2020, expected to take operational capacity to 700MW by Q1 2022

o  Additional exclusive pipeline of 527MW to be built subject to further debt and/or equity fundraising

Operational Performance

·       COVID-19 impact on operations was modest. Commissioning dates on two projects experienced delays during the year, for which compensation was received in the form of liquidated damages

·       GRID remains market leader, with market share around 30%, and largest operator by at least 2x

·       First and only operator to enter all new National Grid services in 2020

·       Operational uptime of 98.8% achieved for Firm Frequency Response

·       Battery duration is longer than most competitors, with over 1 hour average duration, reducing battery cycles and degradation

·       Investment and asset management teams expanded and well positioned to scale portfolio and deliver operational efficiencies

Environmental, Social and Governance

·       Battery Energy Storage Systems are playing a key role in pathway to net zero carbon

·       Supply chain policy developed for contractor evaluation

·       Batteries owned by GRID could discharge enough energy for over 47,000 homes in 2020

·       GRID awarded LSE Green Economy Mark and investment manager awarded Principles for Reponsible Investing A+ rating

Commenting on the Fund’s results, John Leggate CBE, Chair of Gresham House Energy Storage Fund plc said:

“2020 was a milestone year for GRID, with the need for battery storage highlighted by the sharp mismatch in power supply and demand during the first UK lockdown, and the Government accelerating decarbonisation targets.

“We have a substantial project pipeline and access to the necessary resources to deliver on our ambitious plans to maintain the growth momentum of our battery storage portfolio. This is fundamental to delivering a stable, cost effective, and carbon-free power generation infrastructure.”

Ben Guest, Fund Manager of Gresham House Energy Storage Fund plc & Managing Director of Gresham House New Energy said:

“The UK’s global leadership in renewable generation and in its setting of ambitious decarbonisation targets, continues to make it one of the world’s most attractive markets for deployment of utility-scale battery storage technology. We are encouraged by the system operator, National Grid, continuing to test and facilitate new ways for battery storage to contribute to system balancing.

“More renewable energy on the system will inevitably lead to more intraday power price volatility, driving the improved revenues and profit from trading which GRID is best positioned to capture. We are intent on driving shareholder value by maximising project returns through our portfolio scale as well as operational and cost leadership, while striving to reduce our cost of capital, including through a potential new debt facility.”

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