Member Info for clissold345

@shamusj911. Total fund earnings in the Interims were £6.1M. Four 1p dividends (total dividend for the year = 4p) would cost £20.2M. Without the tax credits GSF certainly won't be paying a 4p Q4 dividend.

@shamusj911. Yes sorry I used alibaba42's term "stream" but I called it "revenue stream". He's taken off £20m in operating expenses so the £35M is an estimate of net income.

@alibaba42. Thanks for sharing your calculations. I think viewing GSF as a £35M a year revenue stream is not unreasonable. I'd say GSF is a poor quality business, with so little fixed revenue. (Roughly speaking, GB rates crashed two years ago and ERCOT rates crashed last year. It's investors who take the risk of more rate crashes.) The revenue stream is very unlikely to be less than £35M in the next few years (and hopefully it will be considerably more).

@simonm. Thanks for the link. Presumably the Bid Optimizer needs to be installed and tested and fine tuned? So that partly accounts for the delay between energisation and commercial operation?

And there will be a "transaction fee" (0.5%) on disposals of assets and new incremental debt financings (see quote below). The managers give up part of their fee and then introduce new fees? And the Board thinks that's fine!

"In addition, to improve the alignment of the Managers further in achieving positive outcomes for shareholders, a fee ("Transaction Fee") will be payable in respect of certain future transactions including sales of investments and the raising of new debt financing. No fee will apply to transactions in progress, which are expected to raise about £300 million of proceeds in aggregate. Thereafter, qualifying transactions will be subject to prior Board approval. Fees on such disposals of assets and new incremental debt financings will be 0.5% of the relevant transaction value. The combination of the Management Fee and Transaction Fees in any one calendar year shall not exceed the quantum of the Management Fee that would have been charged under the present arrangements."

@Pip56. Thanks for the link. Here's one quote: "Credits are typically sold at a discount to their face value, indicated as cents on the dollar (e.g., a $0.93 TTC price indicates a 7% discount to the face value of the tax credit)." And there are transaction costs, typically paid by the seller. So it makes sense that GSF give a range of values for what they'll get for the ITCs.

@Temple_of_Doom. Thanks for trying to check about claiming an ITC. Regarding how ITCs work, I found this quote: "A five-year period is vested upon qualifying ITC projects. In the event that a project is sold within the five-year period, recapture shall be made upon the unvested portion of the ITC." So if GSF get the ITCs, it would appear there are "penalties" if the assets are sold within five years.

@StarBright yes the managers do deserve some credit. Eg they mention in the January factsheet that GSET continued to boost GB revenue in January.

From the January factsheet: "All assets are scheduled to be revenue-generating in FYQ1 (by June-end) of the upcoming Financial Year (FY25/26)". Do they mean at least one of the three new assets won't generate any revenue until June? If so, that's very disappointing!

I hope the Board is putting pressure on the managers to reduce their fees (eg fees based on NAV and market cap would be an improvement).

Regarding BBGI, the offer is at a small premium to estimated NAV (see quote below). I'd be very happy if GSF got an offer at a small premium to NAV!

"Further, the Offer values BBGI at a premium of 3.4 per cent. to BBGI's estimated net asset value per BBGI Share of 142.7 pence as at 31 December 2024 (the "Estimated 31 December 2024 Net Asset Value")."

GRID have announced that the management fee will now be based on NAV and market cap (instead of just on NAV). See quote below. It would be good if GSF did something similar.

"From 1 February 2025, the Company and Gresham House Asset Management Limited ("the Manager") have agreed that these percentage rates, rather than being applied to NAV alone, will be applied to an equal weighting of (i) the average of the closing daily market capitalisation during each quarter and (ii) the NAV at the beginning of each quarter. "

@alibaba42. A baseline rate of £100 per MWh per day = £4.17/MWh/hr. In countries where gas is cheap (eg the States) lower rates are possible? I see that the Texas rate in the interims was £3.48/MWh/hr.

@alibaba42. Thanks for your input. I'll have to have a think about what you've written about "baseline" revenue. I checked the interims. When Big Rock, Enderby and Dogfish are operational the total capacity will be 753 MW / 924 MWh. (I've ignored fractions.)

@Therosy1. Yes the RNS does have value. I'm pleased that they've gone public with forecasts. You must admit there appears to be a big unexplained gap between current performance and the forecast for FY 25/26. £72M revenue with capacity at 753MW is £95.6K/MW/yr.

@Therosy1. The revenue forecast of £72M for FY25/26 may be too high. Eg the GB rate in the last interims (annualised) was only £60.1K/MW/year. Yes if revenue in FY25/26 is £72M they'll be able to pay 7p (though they have to pay interest on their debt. $100M at 8%? and they'll need money for upgrades?). They're forecasting the average rate to fall medium term. Not much of their revenue is contracted. So if they can afford 7p in FY25/26 it may be only for one year. My guess is that they'll be able to pay 4p or more for at least five years.

@Pip56. "The big question is whether the 750MW capacity will be sufficient to sustain the 7p dividend." Yes I agree.

@Pip56. The Interims weren't inspiring (capacity up a bit, average rates down, total fund earnings down). I wouldn't be surprised if the results for the full year 25/26 were disappointing (capacity greatly increased of course - but average rates disappointing and total fund earnings disappointing). GSF can plug NAV and EBITDA as much as they like but I think the key figure is total fund earnings. GSF will stop borrowing to pay the dividend and pay what they can afford. That's good.

@Pip56. I think you've given a good summary of much of the current situation. I'm not that bothered about the current financial year ( but yes it would be nice to have a 4p final dividend!). In future financial years if GB rates continue to improve a bit and CAISO rates stay a bit above GB rates (who knows what will happen to ERCOT rates!) then I'd expect GSF to be able to pay at least 4p a year for five years or more. Rates in the different grids seem unpredictable and on average seem to be trending ever downward.

Regarding GB: Enderby due to be energised in Jan (supposedly). GB revenue was £7.2M. Assume a 50/50 split. So that's £14.4M for the full year. Capacity is 239.5MW so that's £60.1K/MW/year. In the last financial year it was £77.3K/MW/year.

Lower management fees is good news. The quote is from a Citywire article published today.

"While the thresholds for the fee remain unchanged – at 1.2% up to £500m, 1% between £500m and £1bn, 0.8% between £1bn and £3bn, and 0.7% above £3bn – taking them off the company’s depressed market value rather than asset value yields a 19% cut in fees, equal to £5.5m a year, said Deutsche Numis analyst Colette Ord."

I fear there won't be much good news in the Interims. Is Big Rock energised yet? Is Enderby energised yet? Is Dogfish still on schedule? Are GSF still expecting the tax credits? ERCOT revenue will be much reduced from the last H1. If ERCOT revenues don't recover, Dogfish will be a major disappointment. More contracted revenue at good rates would be good news.