5 June 2024
Gresham House Energy Storage
Fund PLC
("GRID" or the
"Company")
Tolling agreement with
Octopus Energy
Delivering significant
contractual income for GRID and benefitting UK electricity bill
payers
Gresham House Energy Storage Fund
plc (LSE: GRID), the UK's largest fund investing in utility-scale
battery energy storage systems, is
delighted to announce that fourteen of its projects, representing
568MW/920MWh, have secured fixed price contracts with a subsidiary
of Octopus Energy ("Octopus"), the UK's largest
electricity provider, which provides attractively priced, 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.
For the term of these arrangements,
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 the Company's Capacity
Market revenues across its full portfolio, the majority of which
are for 15 years index-linked to CPI, the Company expects to have
annual contracted revenues of c.£43mn during the tolling
arrangement.
This contract underpins GRID's
revenues and provides a greater degree of certainty over the
Company's cash flows. For the portion of the portfolio contracted
with Octopus, the Company has secured a higher price than recent
weak performance at the start of the year, and at a competitive
price for underlying battery economics.
Following this agreement, which
allows time for assets to be onboarded by Octopus and allows GRID
to complete the construction and/or augmentation of certain
projects, the end-of-2024 portfolio is expected to be c.50% hedged:
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 greater confidence in restarting a dividend at the
appropriate stage in 2025.
Kieron Stopforth, Head of Flexibility at Octopus Energy,
said:
"Every year we're letting hundreds
of gigawatt-hours of clean energy go to waste because our system
isn't flexible enough - not only that, we also have to pay for this
senseless waste.
"Batteries play a key role in
unlocking the clean and cheap energy system, storing green energy
when it's plentiful and providing it to the grid when energy is
expensive.
"Through this landmark deal with
GRID we're not only increasing the size of our virtual power plant
to over 1.5GW, we're also unlocking the power of flexibility to
drive down costs for consumers across the country."
John Leggate CBE, Chair of Gresham House Energy Storage Fund
plc, said:
"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."
Ben
Guest, Fund Manager of Gresham House Energy Storage Fund plc &
Managing Director of Gresham House New Energy,
said:
"The fixed-price contracts with
Octopus secure revenues for GRID at levels which, for the time
being, are above those currently being achieved from the merchant
revenue stack available in the national wholesale and balancing
markets. They demonstrate the value batteries offer in balancing
the supply (power generation) and customer demand that are managed
by retail and wholesale market players, in addition to balancing
supply and demand at a national level.
"The remainder of GRID's portfolio
will continue to maintain exposure to merchant market pricing and
the potential upside from an improving revenue
environment.
"Diversifying revenues via
alternative and innovative opportunities has been on the Board's
agenda for some time so this transaction is a very important
milestone for GRID. By fully contracting circa 50% of GRID's
portfolio with Octopus, the Company secures a reliable level of
revenues while ESO concludes the rollout of its Balancing Programme
which is expected to improve BESS utilisation in Great Britain, in
due course.
"End consumers are increasingly
demanding electricity that is both renewable and affordable, as
well as reliable. Therefore, electricity suppliers increasingly
need to balance intermittent, renewable supply with customer
demand, for which batteries are well-suited.
"GRID's scale has made this
transaction possible with a counterparty as large as Octopus and
demonstrates the benefits of having a leading position in this
market.
"We share Octopus' passion for
innovation, which has helped it become Britain's largest
electricity supplier. As renewable generation continues to ramp up,
we expect batteries to earn revenues in new ways that deliver
cheaper, renewable and reliable power to homes and businesses
across the country. We believe working with the largest energy
suppliers in this way could become as important as the national
market."
Webinar
A webinar and Q&A session, to
discuss the new tolling arrangement, will be held at 11.30am on 5
June 2024. You can register for the webinar
here and a recording will be
available following the presentation.
For
further information, please contact:
Gresham House New Energy
Ben Guest
James Bustin
|
+44 (0)20 3837 6270
|
Jefferies International Limited
Stuart Klein
Gaudi Le Roux
Harry Randall
|
+44 (0)20 7029 8000
|
KL
Communications
Charles Gorman
Charlotte Francis
Effie Aye-Maung-Hider
|
gh@kl-communications.com
+44 (0)20 3882 6644
|
JTC
(UK) Limited as Company Secretary
Christopher Gibbons
|
GHEnergyStorageCoSec@jtcgroup.com
+44 (0)20 7409 0181
|
About the Company and the
Manager:
Gresham House Energy Storage Fund
plc seeks to provide investors with an attractive and sustainable
dividend over the long term by investing in a diversified portfolio
of utility-scale battery energy storage systems (known as BESS)
located in Great Britain and internationally. In addition, the
Company seeks to provide investors with the prospect of capital
growth through the re-investment of net cash generated in excess of
the target dividend in accordance with the Company's investment
policy.
The Company targets an unlevered Net
Asset Value total return of 8% per annum and a levered Net Asset
Value total return of 15% per annum, in each case calculated net of
the Company's costs and expenses.
Gresham House Asset Management is
the FCA authorised operating business of Gresham House Ltd, a
specialist alternative asset manager. Gresham House is committed to
operating responsibly and sustainably, taking the long view in
delivering sustainable investment solutions.
http://www.greshamhouse.com/
Definition of utility-scale battery energy storage systems
(BESS)
Utility-scale battery energy storage
systems (BESS) are the enabling infrastructure that will support
the continued growth of renewable energy sources such as wind and
solar, essential to the UK's stated target to reduce carbon
emissions. They store excess energy generated by renewable energy
sources and then release that stored energy back into the grid
during peak hours when there is increased demand.
LEI number:
213800MSJXKH25C23D82