Release Date: April 23, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gresham House Energy Storage Fund PLC (LSE:GRID, Financial) experienced a significant recovery in revenues and earnings in the second half of 2024, continuing into the first quarter of 2025.
- The company has successfully contracted approximately half of its revenues for a couple of years, reducing downside risk.
- Operational capacity has grown strongly, reaching 1.5 gigawatt hours, with plans to further increase capacity.
- The refinancing of existing facilities is expected to close at a lower interest rate, allowing for new project financing and augmentations.
- The company plans to reinstate dividends and potentially initiate share buybacks following the completion of refinancing.
Negative Points
- The NAV per share declined by about 15% due to lower revenue forecasts and a change to a more conservative forecast provider.
- The company faced a challenging first half of 2024 with weak revenues, leading to the suspension of dividends.
- There have been delays in closing out certain projects, such as Shelton Lane, due to administrative issues.
- The company remains at a significant discount to NAV, impacting management fees and shareholder value.
- The market environment remains uncertain, with potential impacts from zonal pricing and queue reform on future operations.
Q & A Highlights
Q: Can you explain the impact of the Harmony Energy Income Trust acquisition on Gresham House Energy Storage Fund's valuation?
A: Ben Guest, Managing Director - New Energy, explained that the acquisition of Harmony Energy Income Trust at NAV suggests a positive read across for Gresham House Energy Storage Fund. The transaction indicates that NAV is a relevant metric, and the deal was conducted at NAV, which is significantly higher than Gresham House's current share price.
Q: What are the plans for capital allocation, particularly regarding dividends and share buybacks?
A: Ben Guest stated that paying dividends is imperative, and they aim to reinstate them following the refinancing. Share buybacks are considered accretive, especially at current share price levels, but they increase leverage and do not enhance scale, which is strategically important.
Q: How does the company plan to finance the 694 megawatt project pipeline?
A: The financing will primarily come from senior debt, which is project finance not cross-collateralized with the existing portfolio. Additional funds will come from ongoing cash flow generation and potentially equity at the project level.
Q: What is the expected impact of zonal pricing and queue reform on the portfolio?
A: Zonal pricing is expected to create local market signals that will drive investment decisions, potentially leading to lower power prices in renewable-rich areas. Queue reform aims to accelerate projects that are funded and ready, benefiting Gresham House's well-positioned portfolio.
Q: Can you provide details on the Octopus tolling revenues and other contracted revenues?
A: The Octopus tolling agreements are staggered, with some concluding in 2026 and others in 2027. New contracts are being secured to extend beyond these dates. Floor contracts offer higher revenue levels but are shorter-term, providing a balance between securing financing and capturing upside potential.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
