Gresham House Energy Storage Fund plc

A Product Of New Energy

Gresham House Energy Storage Fund plc (the ‘Fund’) will invest in a portfolio of utility-scale operational Energy Storage Systems (known as ESS) located in Great Britain and is targeting a NAV total return of 8.0% per annum (net of all Fund expenses and before leverage) with a minimum dividend payment of 7.0p (4.5p in first financial year).* Once the net proceeds raised on IPO have been invested, and certain further asset management activities are completed in respect of Energy Storage investments, the Fund expects to introduce leverage to its portfolio of assets, up to a maximum of 50% of NAV. Gearing combined with asset management and revenue improvements such as extending leases and adding grid capacity may increase the targeted return to 15.0% per annum (net of all Fund expenses).*

The Gresham House New Energy team has a proven track record in developing and operating energy storage and other renewable assets sector having developed 70MW of Energy Storage Systems and approximately 290MW of predominantly ground-mounted solar projects. The Fund will be managed by Gresham House Asset Management Limited under the leadership of Ben Guest. The Fund is listed on the London Stock Exchange (Specialist Fund Segment) and shares commenced trading on 13 November 2018.

* This is a target only and not a profit forecast. There can be no assurance that this target will be met or that the Fund will make any distributions at all. This target return should not be taken as an indication of the Fund’s expected or actual current or future results. The Fund’s actual return will depend upon a number of factors, including but not limited to the size of the Fund’s portfolio of assets, the Fund’s net income and the Fund’s ongoing charges figure. Potential investors should decide for themselves whether or not the return is reasonable and achievable in deciding whether to invest in the Fund.

Investment objective

The Fund seeks to provide investors with an attractive and sustainable dividend over the long term by investing in a diversified portfolio of utility-scale operational energy storage systems, which utilise batteries and may also utilise engines, located in Great Britain.

Key Fund highlights include:

  • Target minimum dividend distribution of 7.0p (4.5p in the first year)*
  • Target NAV total return of 8.0% per annum (net of all fund expenses) before leverage*
  • Target NAV levered total return of 15.0% per annum (net of all fund expenses) assuming 50% leverage combined with expected asset management and revenue improvements*
  • Each Energy Storage System project can generate multiple revenue streams
  • Returns are not correlated to the absolute level of wholesale power prices and are not dependent on renewable subsidies
  • Target gross IPO proceeds of up to £200 million expected to be fully deployed within 12 months in a seed portfolio of 70MW and an exclusive pipeline of 182MW
  • Management team are making a substantial investment in the Fund, ensuring strong alignment of interest
* This is a target only and not a profit forecast. There can be no assurance that this target will be met or that the Fund will make any distributions at all. This target return should not be taken as an indication of the Fund’s expected or actual current or future results. The Fund’s actual return will depend upon a number of factors, including but not limited to the size of the Fund’s portfolio of assets, the Fund’s net income and the Fund’s ongoing charges figure. Potential investors should decide for themselves whether or not the return is reasonable and achievable in deciding whether to invest in the Fund.

Market and investment opportunity

Energy generation in the UK is undergoing fundamental change – older coal-fired stations are being decommissioned and renewable energy is increasing its share of the energy mix. The intermittency of renewables puts pressure on the National Grid network to match supply and demand in real-time; cost-effective battery-storage plants have emerged as a solution to address the challenge of this renewable intermittency.

The backdrop to the opportunity for the Fund is:

  • Carbon reduction targets set in UK law combined with a stated objective to withdraw all coal-fired generation by 2025
  • Renewables are increasingly dominant, with a declining need for subsidies (see chart below) – management of the National Grid increasingly requires Energy Storage Systems
  • Rapid decarbonisation of the economy through electrification of transportation and water heating further drives the need for an extremely reliable electricity supply based on renewable energy
  • The challenge of intermittency is best addressed through Energy Storage Systems and other flexibility solutions, as Energy Storage Systems can both absorb and release energy in near real time using reliable and cost-effective battery solutions

UK Electricity Generation Mix


Source: BEIS Reference Scenario

Energy Storage Systems


The image shows Rufford site (7MW), commissioned in July 2017 – based on the date that the G59 certificate was issued

Revenue Opportunity – each Energy Storage System project can generate multiple revenue streams:

The initial business model focuses on Firm Frequency Response (FFR). However, we expect Asset Optimisation to become the largest contributor to revenues over the medium term. Key elements of the revenue stack are described below:

FFR

The firm provision to the National Grid of a dynamic (i.e. proportionate) response based on changes in the UK grid’s electrical frequency, by either rapidly importing or exporting power to help maintain a steady 50Hz frequency.

ASSET OPTIMISATION

Projects are ‘optimised’ to maximise income from the wholesale (half-hourly) market and the balancing mechanism, through which National Grid balances supply and demand within each half hour, i.e. buying power at times of excess supply and selling power during periods of high demand.

CAPACITY MARKET (CM)

Introduced as part of the UK Government’s Electricity Market Reform (EMR) in 2014. It pays generators a fixed fee for every hour they are available to deliver power when called to do so.

GRID PAYMENTS AT TIMES OF PEAK DEMAND

“Triads” are paid by National Grid to generators during the three half hours of highest annual demand. Payments are decreasing through 2021 as regulations change, however, several locations will continue to earn attractive income from Triads. Other grid payments can also be earned for generating during daily peaks. Amounts are specific to each project.

Gresham House competitive advantage:

Gresham House Energy Storage Fund plc offers a compelling opportunity to invest in a fast-growing sector delivered by an experienced investment management team.

Gresham House Asset Management’s combined skillsets, deep industry knowledge of the power generation markets and proven ability to operate energy storage projects create a sustainable edge and drive barriers to entry.

The Gresham House New Energy Team (formerly Hazel Capital LLP) formed 10 years ago has developed or invested in 28 solar projects (290 MW) and 5 energy storage systems (70MW) to date.

The Fund will benefit from the Gresham House group’s strategic relationship with Noriker Power Limited, a specialist designer of control systems. Noriker Power provides oversight of energy storage systems projects and will be responsible for managing and enhancing control system software for the Fund’s investments. Gresham House plc is a 28% shareholder in Noriker Power Limited.

Board of Directors

The Directors, all of whom are non-executive and all of whom are independent of Gresham House Asset Management Limited, are responsible for the determination of the investment policy of the Company and the supervision of the implementation of such policy. The Board currently consists of:

John S. Leggate CBE, FREng, Chairman and Independent Non-executive Director

John is highly experienced as an oil and gas and energy sector executive and is a venture investor in the ‘‘clean tech’’ and digital technologies. In his early career, John worked in the power generation business (coal, oil, nuclear) and then at BP where his breadth of experience covered project management, construction, commissioning and field operations with a focus on the North Sea and Azerbaijan. The last ten years of John’s BP career were spent at corporate executive level in various roles including Group Chief Information Officer, leading significant integration and transformation programmes associated with the BP merging campaign with Amoco, Arco, etc. and the digital transformation of the Corporation; Group wide supply chain management, leading strategic relationship development, significant outsourcing and offshoring agendas to India, China and South Korea; Group wide physical and cyber security and global emergency response; Lead the development of corporate investment activity into the digital enablement of the corporation from trading systems, automated market places, and green energy companies.

Since leaving BP John has been active as a Senior Advisor to ‘‘blue chip’’ global consultants specialising in the areas of energy and digitisation. He is on the board of cyber security firm Global Integrity in Washington DC and advisor to the Board of ACWA International, the largest independent power producer in Saudi Arabia. John is also a Partner with donedeal (Monaco) a boutique financial advisory and M&A house covering strategic reviews, preparation for fund raising and running transactions process. Until recently, John was on the board of the ASX listed Carnegie Clean Energy (for over 6 years) and resigned in December 2017. John also serves on the Enterprise Committee of the Royal Academy of Engineering in London.

Duncan Neale, Audit Committee Chairman and Independent Non-executive Director

Duncan Neale is a CFO & Finance Director with over twenty years of commercial experience working for both publicly listed and privately-owned companies. Duncan is a Fellow of the Institute of Chartered Accountants and qualified with Price Waterhouse in London. Early in his career he was part of the senior management team that turned Corona Energy from a gas trading business into the largest independent supplier of gas to UK businesses. He has been involved in M&A in the power sector, as a CFO of a team bidding for thermal power stations. More recently he spent a couple of years as Finance Director of Belltown Power, an operator of renewable energy sites (covering hydro, solar & wind) which has a portfolio of 215 MW. He is a Trustee and Treasurer of Cambodian Children’s Fund UK.

David Stevenson, Independent Non-Executive Director

David Stevenson is a financial journalist and commentator for a number of leading publications including The Financial Times (the Adventurous Investor), Investment week (The contrarian), Money Week and the Investors Chronicle. He is also executive director of the world’s leading alternative finance news and events service www.altfi.com, which focuses on covering major trends in marketplace lending, crowdfunding and working capital provision for small to medium sized enterprises. David is the author of a number of books on investment including the bestselling book on ETFs and their use within portfolios in Europe for the FT. Before founding AltFi David was a director at successful corporate communications business The Rocket Science Group and before that a senior producer in business and science in BBC TV. He is also a non-executive director on the SQN Secured Income investment trust and the Aurora Investment Trust.

Portfolio and pipeline

  1. As at October 2018
  2. Projects owned by Gresham House Group or in which members of the Gresham House New Energy management team have an interest and held exclusively for the Fund
  3. Gresham House Group has exclusivity in place and is in advanced stage of negotiations to acquire this project. This site has a full suite of projects rights
  4. Additional pipeline includes one project of 50MW in which members of the Gresham House New Energy management team have an interest and which has a full suite of project rights as well as several other projects at various stages of development
  5. Commissioning based on the date that the G59 certificate was issued
  6. Expected commissioning dates are indicative only and based on conversations with various DNOs
  7. Pipeline projects do not have EPC contracts in place

Contact us

If you are a retail investor, please contact your financial adviser or stockbroker to invest in this Fund.

If you are a professional investor please contact:

Richard Harris,
Managing Director, Head of Investment Company Sales at Cantor Fitzgerald

T: 0207 894 8229
E: richard.harris@cantor.com