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LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018.
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CONSIDERED TO BE IN THE PUBLIC DOMAIN.
29 November 2024
Gresham House Energy Storage
Fund plc
(GRID or the
Company)
Trading progress update &
three-year strategic plan
Gresham House Energy Storage Fund
plc (LSE: GRID), the UK's largest fund investing in utility-scale
battery energy storage systems (BESS), is announcing an update on
current trading progress and the highlights of its three-year plan
presented at the Company's Capital Markets Day on 27 November 2024.
The Company encourages Investors and
Analysts to view the replay of the event which will shortly be
available on the
Company's website. The key points covered are as follows:
Trading progress
update
Improving financial position
·
Capital allocation policy in 2024 has focused on
cash preservation which has allowed GRID to manage through the
recent challenging operational backdrop.
·
A focus on prudent capital deployment is expected
to result in installed MWh capacity[1]
growing 116% since 31 December 2023 through to Q1 2025 with a 13%
increase in total capital[2]
·
c.£45mn of EBITDA in 2025, two thirds
contracted[3], creating revenue visibility,
as highlighted in the H1 2024 Interim report and
accounts
·
Focus on disposals to reduce debt continues while
current debt arrangements remain in place
·
Compliance with debt terms, with net debt expected
to peak at 20% of Gross Asset Value[4]
·
Commenced process to refinance existing debt
facilities with new sustainable amortising debt to align with
launch of GRID's new 3-year plan envisioning the transition of its
portfolio away from a primarily merchant asset base and sizing debt
off contracted revenues
Aiming to set a valuation benchmark proving GRID's
NAV
·
Equity investment into 50MW Glassenbury project,
under exclusivity
·
Targeting a pre-money valuation at the project's
current valuations which is reflected in the Company's
NAV
·
The prospective investment provides funding for an
accretive augmentation to a 4-hour duration
·
Deal is expected to close in Q1 2025
Reinstating GRID's Dividend Policy
·
GRID expects to reinstate its Dividend Policy in
2025 once the current debt has been refinanced
·
The future Dividend Policy will be focused on
providing:
o sustainable, fully covered dividends (after costs)
o three smaller quarterly distributions with a final larger
payment linked to performance
·
If EBITDA reaches £45-55mn in 2025,
cashflow[5] per share to be
4.5-6.2p
·
Capital allocation: balance between income and
growth to reflect the stabilised earnings of the business and its
growth potential
Clean Power 2030: a strong commitment to BESS in Great
Britain
·
Clean Power 2030 requires[6] 22GW of BESS and up to 81GW / 99GWh of Long
Duration Energy Storage (LDES)
Sector fundamentals providing tailwinds
including
·
The National Energy System Operator's (NESO) Open
Balancing Platform (OBP) rollout
·
Wind & solar capacity is growing
rapidly
·
Demand growth: electric vehicles are just 4% of
cars on UK roads
·
Slower UK BESS growth in 2024 is expected to
result in less competition in the near term
·
Baseload capacity is decreasing with coal fired
generation now offline and the gas and nuclear fleets set to
shrink
·
Long duration storage cap and floor opportunity
adds a new dimension to the BESS industry
Three-year
plan
£150mn EBITDA target[7]
Subject to a successful refinancing,
indicated level of £45mn during tolling period is targeted to
increase as follows:
·
2025-2027: 1.5GWh augmentation of existing
portfolio targeting incremental EBITDA of £33mn
·
2026-2027: 680MW targeting incremental EBITDA of
£47mn
·
2025-2027: Increased revenue stack: agreement in
principle reached; targeting EBITDA of £25mn
·
No improvement in the trading backdrop is assumed,
which is based on £45,000 per MW per year for uncontracted
projects, which in turn reflects the revenue backdrop at the time
that Interim results were presented in September 2024
Backdrop to refinancing: Moving with the
times
·
Experience means only low leverage is appropriate
on merchant revenues
·
Long-term revenue contracts emerging
·
Blended approach route to market looking forward
means debt can be sized off long term contracted revenues while
maintaining an uncontracted asset base to capture upside
potential
Benefits of blended contracting approach
·
Project financing with contracted revenues
significantly reduces risk of unexpected drops in revenues and
provides a more stable platform for optimizing GRID's capital
structure and payment of future dividends
·
Potential returns remain strong thanks to project
financing offering a lower cost of capital and unlocks growth
through augmentations and the new pipeline indicated above in the
three-year plan.
John Leggate CBE, Chair of Gresham House Energy Storage Fund
plc, says
"Following a review of the Company's
performance over recent years and a considered view of the outlook
for the coming three-year period, the Board and Manager are able to
offer a positive view that the BESS sector in the UK is turning a
corner and is on a path to improving performance. The underlying
rationale is based on:
·
The UK's Net Zero policy and regulatory regime
becoming progressively more favourable to BESS
·
NESO's operating practices, as the Operational
Balancing Platform rollout progresses, more opportunities are
created for BESS
·
The Company has significantly reduced counterparty
risk with NESO by reducing merchant revenue exposure by
c.50%
·
The recently launched process to refinance should
move from debt servicing based on merchant revenues to one where
the debt is sized off contracted revenues and amortised over a
longer term
Therefore, taking these factors into
consideration, the Board and the Manager are feeling more confident
of delivering growth for the Company and re-instating the ability
of the Company to pay covered dividends during 2025."
For
further information, please contact:
Gresham House New Energy
Ben Guest
James Bustin
Harry Hutchinson
|
+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.
DISCLAIMERS
This announcement has been prepared
for information purposes only. This announcement does not
constitute a prospectus relating to the Company and does not
constitute, or form part of, any offer or invitation to sell or
issue, or any solicitation of any offer to subscribe for, any
shares in the Company in any jurisdiction nor shall it, or any part
of it, or the fact of its distribution, form the basis of, or be
relied on in connection with or act as any inducement to enter
into, any contract therefor. The merits or suitability of any
securities must be independently determined by the recipient on the
basis of its own investigation and evaluation of the Company. Any
such determination should involve, among other things, an
assessment of the legal, tax, accounting, regulatory, financial,
credit and other related aspects of the securities.
This announcement may not be used in
making any investment decision in isolation. This announcement on
its own does not contain sufficient information to support an
investment decision and investors should ensure that they obtain
all available relevant information before making any investment.
This announcement does not constitute or form part of and may not
be construed as an offer to sell, or an invitation to purchase or
otherwise acquire, investments of any description, nor as a
recommendation regarding the possible offering or the provision of
investment advice by any party. No information in this announcement
should be construed as providing financial, investment or other
professional advice and each prospective investor should consult
its own legal, business, tax and other advisers in evaluating the
investment opportunity. No reliance may be placed for any purposes
whatsoever on this announcement or its completeness.
The information and opinions
contained in this announcement are provided as at the date of the
announcement and are subject to change without notice and no
representation or warranty, express or implied, is or will be made
in relation to the accuracy or completeness of the information
contained herein and no responsibility, obligation or liability or
duty (whether direct or indirect, in contract, tort or otherwise)
is or will be accepted by the Company, Gresham House Asset
Management Limited, Jefferies International Limited or any of their
affiliates or by any of their respective officers, employees or
agents to update or revise publicly any of the statements contained
herein. No reliance may be placed for any purpose whatsoever on the
information or opinions contained in this announcement or on its
completeness, accuracy or fairness. The document has not been
approved by any competent regulatory or supervisory
authority.
Any investment in the Company is
speculative, involves a high degree of risk, and could result in
the loss of all or substantially all of the investment. Results can
be positively or negatively affected by market conditions beyond
the control of the Company or any other person. Any data on past
performance contained herein is no indication as to future
performance and there can be no assurance that any targeted or
projected earnings or returns will be achieved or that the Company
will be able to implement its investment strategy, including
without limitation, the refinancing, or achieve its investment
objectives. Any target earnings or returns published by the Company
are targets only. There is no guarantee that any such earnings or
returns can be achieved or can be continued if achieved, nor that
the Company will make any distributions whatsoever. There may be
other additional risks, uncertainties and factors that could cause
the earnings and returns generated by the Company to be materially
lower than the target earnings and returns of the
Company.
The information in this announcement
may include forward-looking statements, which are based on the
current expectations, intentions and projections about future
events and trends or other matters that are not historical facts
and in certain cases can be identified by the use of terms such as
"may", "will", "should", "expect", "anticipate", "project",
"estimate", "intend", "continue", "target", "believe" (or the
negatives thereof) or other variations thereof or comparable
terminology. These forward-looking statements, as well as those
included in any related materials, are not guarantees of future
performance and are subject to known and unknown risks,
uncertainties, assumptions about the Company and other factors,
including, among other things, the development of its business,
trends in its operating industry, and future capital expenditures
and acquisitions. In light of these risks, uncertainties and
assumptions, the events in the forward-looking statements may not
occur and actual results may differ materially from those expressed
or implied by such forward looking statements. Given these risks
and uncertainties, prospective investors are cautioned not to place
undue reliance on forward-looking statements. In particular
(i) any disposal is subject to various factors including, without
limitation, completion of satisfactory sale and purchase
agreements; and (ii) any investment is subject to completion of
satisfactory legal, technical and financial due diligence and
documentation, which may include, without limitation, entering into
and completion of investment documentation. There can be no
guarantee that the Company will dispose of, or invest in any BESS
project.
Jefferies International Limited,
which is authorised and regulated by the Financial Conduct
Authority in the United Kingdom, is acting only for the Company in
connection with the matters described in this announcement and is
not acting for or advising any other person, or treating any other
person as its client, in relation thereto and will not be
responsible for providing the regulatory protection afforded to
clients of Jefferies or advice to any other person in relation to
the matters contained herein. Neither Jefferies nor any of its
directors, officers, employees, advisers or agents accept any
responsibility or liability whatsoever for this announcement, its
contents or otherwise in connection with it or any other
information relating to the Company, whether written, oral or in a
visual or electronic format. Each of the Company, the Manager,
Jefferies and their affiliates and their respective officers,
employees and agents expressly disclaim any and all liability which
may be based on this announcement and any errors therein or
omissions therefrom.
No representation or warranty is
given to the achievement or reasonableness of future projections,
management targets, estimates, prospects, earnings or returns, if
any. Any views contained herein are based on financial, economic,
market and other conditions prevailing as at the date of this
announcement. The information contained in this announcement will
not be updated.