Member Info for alibaba42

April fact sheet has less information than is deposited on toilet paper from one stochastic wipe.

The UK is not regulating their energy grid, they are leaving it to fend for itself. that measn potentially prices could end up being volatile since at some point compqanies will stop investing in UK BESS, in fact its already starting now - if the low prices continue then there is no incentive and it squeezes supply. maybe in 4 years they will regret it but maybe uk will just abandon the green transition (even so they would still need more storage). all in all it seems likely that this is a cyclical market currently at a low but the UK may be more volatile than others since it has no regulation/contracts or guaranteed payments etc for the BESS operators

Its not about the age but number of cycles. batteries in storage last around 5000 cycles and probably have a warranty for that. i see that they have been using maybe 1.5 cycles per day on some of the cells from gore street so maybe 10 years for uk batteries. i think other batteries like the ones in ireland and usa may be using less cycles.

uk is a terrible place for doing storage at the moment as its many cycles and not much profit - you need a very good trader/operator to maximise the battery profits but gore street doesnt seem to have the good operator or the right long duration cells for this so im not sure if they can ever ahcieve good profits in uk.

their success really lies in ireland and usa

I dont think thats the issue. the issue is uncertainty in the revenue generation past 10 years or so.

the revenue curves and future revenue predicted by GSF is very easy to find and calculate from the reports - so you can easily make your ownn calculations and if you followed their curves you would find a NPV similar to their NAV. the issue is in believing that battery energy storage is going to be in the same format, capturing similar revenues for 20 years or more.

some of the risks are car batteries acting as grid stabilisation (would need some grid reform but i guess it spossible especially since car batteries actually store a lot of energy). sodium cells which maybe gore street could capitalise on later and maybe things like hydrogen or other chemical storage - though these have low efficiencies.

i dont really see other big risks - can the grid saturate to very low prices? yes but not for long since this reduces future investment. can lithium prices stay low for a long time? maybe another year or 2. can rates stay this high for a long time? it doesnt seem so based on job numbers and mounting risks.

I would also add that any changes to the environment and also any big artificial intelligence deployments would be potentially big positive catalysts for revenue - https://www.computing.co.uk/news/4190203/power-demand-uk-datacentres-set-surge-fold-decade#:~:text=John%20Pettigrew%2C%20the%20chief%20executive,and%20advancement%20in%20quantum%20computing.

i think its very likely to occur in the next 5 years onwards

My understanding is the revenue rate is given as a normalised rate as if they were running continously, for example lets have a look here:

https://www.bessanalytics.com/operations?asset_name=Pillswood%202&datestr=2024-03-26

you can see that the calculated rate is shown above the graph as £10/MW Hr

this unit generated £11,801 for the day - it is a 49MW rated battery.

now lets say we were going to calculate the revenue 'per hour' you can see at the bottom there the number of half hour periods as 48 therefore 24 hours. so we can say 11801/24 = £491 per hour. however we also need per MW so lets divide by 49 = £10 /MW Hr

ok but this BESS did not generate revenue for the whole time? inded but the calculation is obviously spreading the revenue over total hours not the actual hours of operation (because its just easier to calculate - imagine having to first find number of operating hours and what counts as an operating hour? if the unit is doing very little does it still count).

you can also verify that they spread this over the whole time by saying:

unit generated 11801 in one day, so in 365 days it will generate: 4.31 million - divide this by 8770 hours and then by 49MW we get the same value - £10 /MW Hr

in other words, all revenue is calculated as if it is equally spread throughout the year and not per hour of operation of the asset (its impossible to say per hour of operation since the revenue varies so much depending on what mode the asset is operating in)

so the maximum capsacity ireland calc is then

385*7.5*8770 = 25 million - because any revenue rate (like 7.5 above) is the revenue per hour of existence (or number of hours in year) not per hour of operation.

The baseline is a longer term rate that is sustainable beyond 2025 etc. the rates for all regions are generally going down as more BESS is installed. the current £15 is largely driven by ireland which is seeing some very high rates of maybe £30 at the moment due to high windspeeds, a totally unsaturated and ncapped market and also slower build out of BESS (so supply constrained). eventually after a few more years, most regions will fall somewhere between fully saturated and unsaturated (closer to saturated) thus the rates will decrease to some average.

every BESS operator will see a different avergae baseline, because of the location and size of gore streets assets - we can start to calculate some global avergae steady state or baseline rate for the next 10 years or so

my esitmate is £7.5

Interesting, although if thats right it implies that the share contribution was basically for 0 vlue to shareholders. Also your other point about Europe is something else Gore Street should consider - Germany seems to be having trading opportunities, are these longer lived than chasing ancilliary services accross the globe? it seems at the very least Gore Street need to have excellent management of their assets and maximise trading while also looking for trading opportunities. i know its probably not as easy as that and building a small 10MW batterry in a few EU countreis to evaluate trading may also not be feasible. Thus i think Gore street is doing the next best thing in diversifying accross grids, regions, regulations and energy system approaches.

BOE may ahve to lower rates soon, Will this be sufficient to allow Gore street to make further investments? ideally they would find more value opportunities now in preparation for low rates, while Lithium is cheap.

there is the possibility of holding on to cash also and evaluating the prospect for installing Sodium ion batteries in future projects e.. from 2027 or 2028 - China has already been deploying large scale sodium cells so if they really are cheaper and they can secure supply and some guarantees it should be looked at earlier and Gore street could run some pilots on small site extensions with Sodium

ultimately the destruction in value for gore street and others has been primarily the result of chasing overpriced energy markets that were in a temporary phase of instability and also supply chain issues leading to spiked in lithium prices (they overpaid for the right to develop them and then overpaid for the lithium). the trajectory back to the NAV or anything similar will simply require hard work and a lot of very careful capital management.

for BESS as an industry to thrive we really need increasing buildout of renewables, higher lithium prices and high variance in grid demands, otherwise there is nothing to prevent grids from saturating for a time (although maybe its the new cyclical - grids saturate reducing bess build and so on) - some markets are slightly different like texas bess revenues rely almost entirely on freak weeather events happening (which they seem to) -Texas rvenues are basically almost all coming from 10-11 days of very volatile weather.

california is more dependable but we need to know what the contractual rates agreed by gore street are (and i dont know the average rates per MW there ayway).

in light of this ireland makes sense but again how much is it going to cost to develop these and what are the expected payouts.

from report, the revenue curve for ireland shows it stabilising at above £10/Mw/Hr and the USA drops slowly towards £8 or so (which i think will happen faster unless lithium prices go up). the UK being stuck at £5 i think that once again reaffirms that £7.5/MW/Hr is a global baseline - 56 mil or 72 mil revenue for 850MW and 1100MW

Everything does indeed depend on the price paid and i guss the share price at NAV is a bit disingenous since the discount would be paid for in cash, at least partially. Regarding people worried about Carbon selling, i dont think they will be selling any time soon at these prices and they are probably happy to take the dividend.

Ireland is a good and logical expansion step and it does indeed generate good revenues. i dont think it would ever drop below £7.5/MW /Hr because of the things mentioned in the report:

"Whilst there were always questions about the longevity of the volume uncapped market including the amount being spent on the service, we note that the timeline has regularly been extended as the number of batteries been deployed for grid balancing services still remains relatively low. Although new proposals are being considered to reform the Irish ancillary services market, including the existing DS3 contracts, EirGrid remains focused on ensuring that it delivers a stable system with the minimum possible hydrocarbon usage and therefore whatever the reforms, Ireland will continue to require some form of ancillary services and hence we believe the probability that we have a decline in revenues to levels significantly below what GSF has estimated remains low, particularly so given the slower buildout of energy storage projects"

this makes sense albeit no one can say what the price will be if it is above 7.5.

still at the above revenue rate, and now with 385MW capacity it could theoretically generate on average 25 million per year.

dont forget that lithium prices will be going up from 2025 onwards (unless the whole energy transition is completely scrapped)

Indeed, although at £16/ MW /hr (which is the latest earnings rate) the dividend is actually more or less covered.

given the uk revenues have recovered recently i would say an average of £7.5 per MW per Hr seems like the more reasonableaverage (lower estimate) revenue for BESS for next few years.

given gore street intends to have 850Mw by EOY:

7.5*850*8770 = around 55 million minus 20 million in costs (10 for admin and 10 for debt)

so they should be ok but they would need rates to drop in order ot invest more for future growth

Companies are fleeing LSE because it has low liquidity and investor appetite. but then again LSE also has a terrible level of management who seem to think that investor money is free somehow - or they have 0 growth prospects - one or the other. this is after looking at aroun 400 compnaies on AIM.

Its actually not even the price (although that sounds ridiculous). the board simply refuse to publish the right information (i guess they either feel that we dont deserve it or they would rather not publish this information for whatever reason). this lack of information just makes the stock hard to value, the info is:

-what is the true expected revenue curve for GB post 2025/2026 and why - is there any real justification thought etc for this, if there is no good estimate fo rhtis (and Gore st are using revenue curves to cover themselves) then i would apply a margin of safety and derate UK revenues

- what is the total amount of debt and cash position of gore street after the end of 2024 assuming the projects are delivered on time (remaining ireland, uk, usa projects).

- what is the rate that was agreed with california grid for the cali projects, what is the expected revenue from this fixed component per year

- is it realistic to assume the existing texas and cali curves for future revenues? do they need to be revisited in light of uk market and expected grid saturation in texas imminently.

-how much would it cost to upgrade all uk batteries to 2 hr duration, how much extra revenue might it bring

-what other opportunities exist outside of current regions, especially regarding smaller batteries that can take advantage of algo trading (e.g. germany)

taking all this together i did a rough calculation that if all grids saturate like the UK and all their cells produce a revenue of £5/MW/Hr (which i consider to be the minimum and it is where UK is now)

so if Gore st has 300MW UK, 150MW ERCOT, 200MW cali and 190MW ire by EOY 2024:

£5/MW/Hr * 840 MW * 8770 HR/Yr = £37 mil

debt service 10 mil (120 mil @ 8.5%)

admin costs 10 mil

17 mil a year profits in the worst case - say that the cells last 15 yrs - 255 million with no discount rate

thats the absolute floor with no trading, all grids saturated but also no discount rate. not expecting it to go there but that would probably be 'cheap' and a good margin of safety. this margin of safety is REQUIRED in the absence of the above information from mgmt

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)

Its not as simple as that, with regards to transferring energy from wind farms to where its needed - this bottleneck of BESS only exists in certain specific locations near scotland (could be maybe one or 2 projects from GSF). most BESS does not perform this duty and simply look for ways to balance the grid. however the simple Ancilliary balancing of the grid is saturated and no longer required. there are some schemes from the govt to slowly look at stabilising the grid etc but there are many BESS companies that will quickly fill any gaps with high profit margins. this leaves BESS in the UK as unlikely to be very profitable for the nextt few years because the UK does not want to electrify heating etc. and windfarm supply while increasing, alreay supplies a lot of tthe electricty needs so may not increase much further.

in the usa like cali and texas, we dont know how they will regulate the grid but its likely profit will stay higher there for longer. so there is that which is a positive for GSF - however you would have to assume they will deliver this all on time

They cant reassure investors about the dividend since the company cannot guarantee anything beyond a year - as you saw with the UK grids changing quickly.

lower rates wont help this much since the whole BESS industry is quite saturated and there just isnt the demand for this storage at the moment. they overbuilt and are waiting for demand to catch up but as you can see they continue to keep building!

Delays to usa projects (which seem very likely since they are not in tthe usa and they even delivered uk projectts latte) and grid saturation in the usa right after they deliver the bess there.

also at the moment they are earning 25% of expected revenue in the UK (expected by tthe rrevenue curves) - so how are they going to pay the dividend if anything similar happens in other grids.

battery storage using li-ion could be obselete in 10 years so no point trying to predict any revenue beyond 10 years from now.

BESS systems depreciate and so the depreciation is probably faster than they generate revenue (in the UK). the whole BESS industry is run by fools who couldnt pace their investments, they would have been better off leaving the raised money in a savings account

Because gore street is pretending it will be able to keep its dividend and that everything is fine (when they have serious risks they need to acknowledge). the market will humble them until they admit this

It's absolutely not personal. none the less everyone else here is not objective but rather subjective.

why are the directors not buying at this level if they believe the company is worth 112 pence a share

I have a small position here at around 68, but now after further research. i would buy more at much lower prices but it also depends on the mgmt responses and the grid outcomes so i would want to wait a year before buying more (to see the USA grid trends and ensure those projects are delivered more or less on time).

i think management need to pause a few things, do some analysis, and report accurate and concise/relevant data taking an objective view of decisions/capital allocation, performance and then start thinking about trends and how they will take advantage.

they may also want to double check that all the projects will give them a good ROI and if not then put some on ice until the grid rebalances. We are all working on the assunption that UK and other grids will electrify heating and more transport but that seems like its still a long way off - and who knows how regulations will impact those timelines.

they need to work with the grid as it is and be smart

I not talking about the business model, but cashflows. GSF have simply thrown some batteries into a GRID put in an operator and said ok thats done whats next - oh the uk grid is saturated (which they realised late) - lets do the same in the USA.

they are reactive and not actually lokking forward into the market and trying to anticipate trends and how their assets can benefit from it. the same will happen in the USA because ancilliary services get saturated quickly. after that things like balancing the grid etc arre harder to do for small batteries but the trading strategy also becomes much more important for returns.

they think they are smart because they lumped a bunch of batteries in the uk and usa - but they need to start lokoing into the data and trying to see how the grids will change and what oportunities they have for their assets. Grids and the world are changing fast and there are many companies capable of putting in some batteries and choosing an operator.

the rewards will go to companiies that cann annticipate and predict grid dynamics, take advantage, be nimble with capital and fast delivery to get the right assets in the rightt place/timme and a smart trader to trade this - dumb batteries will produce dumb low profitts