Gresham House Regulatory News (GRID)

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION

9 November 2022

GRESHAM HOUSE ENERGY STORAGE FUND PLC

("GRID", "the Fund" or the "Company")

Net Asset Value

Gresham House Energy Storage Fund plc (LSE: GRID) (the "Fund") announces its NAV as at 30 September 2022 was £818mn and NAV per share rose to 151.18p per ordinary share (30 June 2022: 145.11p).

Financial highlights

NAV has increased to £818mn, or 151.18p per share, up 6.07p per share. No dividends were paid in the quarter as the dividend in respect of the quarter ended 30 June 2022 was paid in October 2022. After deducting the Q2 dividend, the adjusted ex-dividend NAV is 149.43p per share representing a like-for-like increase of 2.98% compared to the Q2 2022 NAV.

§ From the IPO in November 2018 to the end of September 2022, GRID has delivered a share price total return of 100.54% compared with 11.83% for the FTSE All Share and an NAV total return of 84.12%

§ Exceptional first half performance continued through Q3 2022 with revenue and EBITDA significantly ahead of budget. The backdrop for BESS remains positive, underpinned by structural shifts as more renewables come online and challenges in the French nuclear fleet turned Great Britain into a net exporter of power to France for the first time in at least a decade.

§ Dividends were more than 1.3x covered[1] in Q3 2022 and expected to be fully covered in 2022

§ 550MW of operational assets as at 30 September 2022

§ During the quarter, the most significant changes to NAV per share included:

- +4.63p from higher third-party revenue forecasts

- +2.56p from cash flow generation of underlying assets

- +1.99p from increasing the RPI inflation assumption for 2022 to 9.0%

- -0.89p from roll forward of NPV from operational projects

- -1.78p due to a combination of cost increases primarily caused by a weaker sterling and slightly later projections for COD[2] on a couple of new projects and operational projects whose batteries are being augmented

§ In Q3 2022, there have been no changes to NAV from:

- new projects being valued on a Discounted Cash Flow (DCF) basis (having been previously valued at cost). Arbroath will be revalued at year end and other projects are expected to follow in Q1 2023

- changes to inflation assumptions beyond 2022 which remain at 4.5%, 3.5% and 2.5% for 2023, 2024 and 2025 & thereafter, respectively. Assumptions remain lower than implied by UK gilt yield curves

- changes in underlying discount rate assumptions. As such the blended weighted average discount rate was 10.8% based on the mix of operational and construction-stage projects

§ The Manager and Board are actively reviewing inflation and discount rate assumptions and any changes will be incorporated in the end-of-year valuations

Portfolio activity and market outlook

Portfolio activity has been positive in Q3 2022. Arbroath and Stairfoot are now operational, while Enderby and Coupar Angus are in the process of becoming fully operational and several other projects will follow, as previously announced.

As we mentioned in our Interim Results, the timing of connections remains challenging. Other issues have been largely resolved, such as Covid-era supply-chain bottlenecks and shipping costs, which have declined sharply, while the time to connect new projects to local and national grid networks has increased. 

The Manager remains positive about the potential for growth. GRID's publicly announced pipeline remains unchanged this quarter: however, new opportunities are being progressed that are expected to increase pipeline in the future.

There is currently much discussion of possible regulatory or tax changes for the renewables sector. We note that BEIS expressly stated in their recent REMA consultation that it is essential for 'low-carbon flexibility' to be prioritised and we are convinced, on both technical and financial grounds, that batteries are the most credible storage technology compared with less proven, more costly, and less efficient alternatives such as hydrogen or "CO2-abated" gas-fired generation.

The factsheet for the period ended 30 September 2022 is available here.

For further information, please contact:

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, Northern Ireland, and the Republic of Ireland. 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 (i) an unlevered Net Asset Value total return of 8 per cent. per annum; and (ii) a levered Net Asset Value total return of 15 per cent. per annum Gresham House Asset Management Limited is the FCA authorised operating business of Gresham House plc, a London Stock Exchange quoted specialist alternative asset manager. Gresham House is committed to operating responsibly and sustainably, taking the long view in delivering sustainable investment solutions. 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. BESS also provide Frequency Response services to National Grid whereby batteries import and export power with the aim to keep real-time supply and demand in near-perfect balance while also protecting against unexpected outages of major power plants.