focusIR May 2024 Investor Webinar: Blue Whale, Kavango, Taseko Mines & CQS Natural Resources. Catch up with the webinar here.
To provide a sustainable and attractive long-term dividend by investing in a diversified portfolio of utility scale energy storage projects located in the UK, North America and Western Europe.
Find out MoreLondon South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
Ali,
You, obviously, are not invested in this.
what price would tempt you (after the mea culpa from the board) 10P?
jr
Its really not rocket science. Ancilliary services (balancing grid frequency) is a small but high yield part of the energy balancing market that BESS can store. other mechanisms (which are lower yield or less profitable) are energy arbitrage and or Balancing Mechanism. energy arbitrage is generally quite low profit at the moment and degrades batteries but some of the revenue is from this. the other eevenue is from balancing supply and demand (Balancing Mechanism, henceforth BM).
lets sum up:
-Ancilliary services - saturated and wont come back unless major grid issues occur or massive demand spikes
- energy arbitrage - not very profitable but can generate some profits for BESS - it uses up a single cycle for the cells
- Balancing Mechanistm - henceforth the likely driver for BESS profits in UK - balancing supply and demand between times and regions
- Capacity market - all storage and electricity generators get paid to be available in case of grid failures etc. the latest auction was very favourable in terms of prices but BESS is not the best system for guaranteeing supply since they are only available for short times (especially Gore's cells which are 1 hr or less). this means any capacity which is provided by BESS is 'handicapped' (term is derated). meaning that they only get a fraction of the effective power they can supply since its only for 1 hour or less. - Gore street have just told us that their cells in the UK got around £1 million revenue in the recent auctions and some of this is over more than 1 year, so its pretty insignificant.
so BM plus some arbitrage and CM - how is the grid balanced? NG makes auction slots for supply and demand every 30 mins or 15 mins, their system does not automatically allocate or accept bids/offers hence they find it diffcult to accept many small bids from BESS - its likely this wont be partially fixed until end of the year and fully fixed by end of 2025. this is expected to only increase revenues by maybe 20% once fixed though!!!!
so there really isnt that much additional revenue coming from the UK in the future. you can see the revenue from operators here: https://www.bessanalytics.com/performance
for example in the last month the most profitable operators achieved about £55 k /Mw/Yr this is including a capacity market payment. Gore street will achieve a lower revenue because their cells are lower duration.
for example lets take 55k /MW/Yr and lets say gore st has 300MW in uk which it will be EOY 2024:
55k *300MW = 16.5 million
you can verify by using the other units of
£6.24/MW/Hr * 300MW * 8770 (Hr/Yr) = 16.4 million £/Yr
thats the base case for the UK revenues for Gore street per year - it is likely to be lower (i see £40k/MW/yr on bess stats) becqause gore st batteries are less than 2 hr - something that they chose to do because they said it would allow them to be more flexible in their approach (actually if you think about it this is correct)
Agreed!
Perhaps the other area where some clarity would be helpful is on the usage of BESS facilities by the UK Grid. I haven’t been able to get a very clear answer on exactly what has stopped, why it has stopped and when/whether it will be resumed. GSF is content to make a positive about revenue diversification, but the truth is that this is making the best of a difficult situation that has been forced upon them (& other UK storage providers). I’d be happy to see UK sourced revenues recovering! If anyone has clearer insight into the what/why/when questions, I’d be really interested to hear it.
Below 70p I continue to view this as a highly attractive proposition in a diversified yield portfolio. Rathbones selling is usually the best of buy indicators btw..!
I’ve thought this had bottomed a few times so afraid it’s the wider picture (in particular the UK) that’s affecting the SP. But I’m happy with the diversity GSF has and will be watching to see the difference the packets due to come on make. There are times when you just enjoy the divi and wait…
Well cash generation is more interesting than the NAV, but unfortunately the company uses the NAV to set dividends. From the RNS 22/3/22: "if the average Net Asset Value per Ordinary Share during a financial year is 107 pence per Ordinary Share or greater (but less than 114 pence) the target dividend for that financial year will be 7.5 pence per Ordinary Share".
So, given the NAV has now dropped to 111p from 112.9p, it looks like we'll be staying on 7.5p for the foreseeable. That's still well over 11% yield though and, as you say, plenty more assets coming on stream in the current year.
All looks good to me, with the dividend confirmed at 2p as expected. Also good news that there is stronger commitment in language on additional energisation this calendar year, for both UK and California. If/when these projects are delivered, cash generation (which I find MUCH more interesting than the NAV) will be increased materially.
Update more or less as expected, and as provided early Feb. A great 12% yield atm
There we go.
Time to add a few more ... as this low valuation will not continue for long surely?
jr
Electricity prices easing but it won’t last. Much oversold
I'm guessing that this negative price action is because the march update is a bit later than recent years. However, we only had reassurance a month ago, and a healthy picture was painted.
So decided that this was a good place for a small top up.
Expect dividend announcement this week and a strong correction. We shall see.
GLA
Nala,
No, we don't know. It was 9th of March last year, so I assumed 8th or 11th being closest.
Could well be Thursday!
jr
Do we know its Monday? Wasnt it a Thursday last year?
I hope that when the next dividend is confirmed on monday hopefully , with an updated NAV, there may be an improvement on SP!
Unlucky. Must be time to sell and miss the recovery.
Im down 45% in 3 years.
Last year we had an rns on the 9th of March re quarterly divi.
Are likely to get one tomorrow or Monday?
jr
Thank you for this link. I don’t think it’s possible as investors to quantify the potential impact of changes like this. i wonder whether the company will offer any insight/guidance, or whether we’ll have to wait and see in results releases.
The BESS companies have some work to do in explaining what changes like this mean. I’m not sure they’ve yet taken on board that investors are increasingly focussed on cash-generation (because of dividend stability)rather than on NAV changes. The NAVs are obviously paramount for the management companies, simply because their fees are NAV-driven. But we have all had a good reminder of how NAVs can vary through no fault or effort of the management companies, just on changes in the risk-free rate or inflation for example. The first BESS company to come out and show how it has a dividend properly covered by sustainable cash generation will secure an advantage vs the peer group. It would be great to see GSF take this on.
Seems that the ESO is taking BESS seriously and is trying to resolve some of the recent issues. Good article from Timera.
https://timera-energy.com/our-latest-views-on-bess-value-capture-in-the-bm/
Https://www.energy-storage.news/rwe-completes-360mwh-of-us-bess-as-industry-bounces-back/
interesting read - suggests US market is emerging from issues of late.
There is little doubt this particular sector is being driven by sentiment with little application of individual context. People having been recently burned by the last recent fall are clearly nervous
I think the RNS was both wise and necessary but there doesn’t seem much more the company can do other than deliver as we run into another divi
Hi StarBright - yes I'm in BSIF. My portfolio consists of speculative growth shares (SAR where I've been lucky enough to accumulate a significant holding free running & PXS where I haven't) and then income shares to supplement my pension. So in that context, BSIF is one of around 40 dividend payers I hold as part of a diversified portfolio. It's at the lower-risk end and, as mentioned below, the dividend is almost 2x covered and yielding almost 9%. I hold a number of other renewables, including NESF & FSFL, all of which have suffered with the sector being out of favour but all still paying decent dividends and trading at a big discount to NAV. I would top up if I could but I've got other targets just now so will have to wait until more funds become available or things improve on the growth shares front.
Have you got any specific concerns about BSIF or have you not had chance to run the rule over it yet?
There are plenty of reasons to be cheerful regarding gsf here. Firstly, the recent largely unnecessary RNS released to try and shore up opinion. In this the chair commentated that:
Looking ahead to the coming quarters and years, it is evident that effective capital allocation and our unique diversification strategy have shielded us from the severe impacts others in the industry face.
In other words, other energy storage companies that have focussed on the Uk alone are suffering, but gsf is not. The management have nothing to gain and much credibility to lose by sticking their necks out so far if that RNS is not backed up with fact. We will of course see in time, but with 2024 likely seeing a doubling of the size of the portfolio and a 12% divi to keep us warm until then this appears to be an over reaction by Mr Market and a buying opportunity for those who wish to take it.
Obvious there are lots of bad things that could happen; delays, cost over runs etc but this is true of any company and something we must all factor in to our investment decision. As PIs we have no choice but to trust management at face value. If there were problems, then a sector wide issue and a series of divis being cancelled would provide the perfect cover.
@Krustysmegma - BSIF is on my list to investigate. Do you hold? Interested in your rationale / investment case if you are minded to share...
Yielding over 11% on 7p dividend now sidi, it won't stay like that forever...
BSIF is another, confirmed dividend target of 8.8p which is approximately twice covered and still near year-low sp @ just over £1...