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Research: Investment Companies
Gresham House Energy Storage Fund (GRID) is the largest UK fund investing in utility-scale battery energy storage systems in Great Britain and Ireland. Yesterday’s update on performance for the financial year ending 31 December 2022 and the outlook for 2023 includes news of an NAV increase in Q422, with further increases forecast in Q123 and beyond, a 5% increase in the 2023 dividend and plans to significantly expand GRID’s project pipeline across Great Britain, Ireland, the US, the European Union and Australia. These developments are all consistent with projections made in our recent update note (see link below) and suggest 2023 will be a year of both income and capital growth for GRID. They also bode positively for GRID’s efforts to capitalise on the global opportunities available in the battery energy storage sector over the longer term.
Gresham House Energy Storage Fund |
Amping up: Growth in capital and income ahead |
Trading update |
Investment trusts |
14 March 2023 |
Fund objective
Analyst
Gresham House Energy Storage Fund is a research client of Edison Investment Research Limited |
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Gresham House Energy Storage Fund (GRID) is the largest UK fund investing in utility-scale battery energy storage systems in Great Britain and Ireland. Yesterday’s update on performance for the financial year ending 31 December 2022 and the outlook for 2023 includes news of an NAV increase in Q422, with further increases forecast in Q123 and beyond, a 5% increase in the 2023 dividend and plans to significantly expand GRID’s project pipeline across Great Britain, Ireland, the US, the European Union and Australia. These developments are all consistent with projections made in our recent update note (see link below) and suggest 2023 will be a year of both income and capital growth for GRID. They also bode positively for GRID’s efforts to capitalise on the global opportunities available in the battery energy storage sector over the longer term.
Highlights
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GRID’s unaudited NAV at end December 2022 was 155.5p per share, a 2.9% increase on its September 2022 NAV of 151.18p per share and 33.1% higher than the December 2021 NAV of 116.86p per share.
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GRID’s manager expects incremental project valuations to add 3.3p to the Q123 NAV per share. Recent new contracts are expected to add a further 4.2p per share to GRID’s NAV over time.
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GRID’s unaudited total return in 2022 was 39.1%, and 93.2% since its IPO in November 2018, representing an annualised return of 17.2%.
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The main drivers of 2022’s NAV increase were the revaluations of new projects as they became operational, growth in third-party revenue forecasts, reflecting increased volatility, increased inflation assumptions and the addition of new capacity market contracts during the year.
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GRID’s weighted average discount rate was almost unchanged, at 10.9% compared to 10.8% in the previous year.
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Operational capacity rose to 550MW at end December 2022, a rise of 29% from the 425MW capacity at the end of the previous year. Capacity is set to reach 1GW in 2023 (a rise of 80% compared to end 2022) and around 1.5GW (+170%) in 2024. GRID’s manager expects this to drive further NAV and EBITDA growth.
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In addition to GRID’s investment portfolio of operational and pipeline projects detailed in our recent note, the fund has recently conditionally acquired the rights for two projects in Aberdeenshire (50MW) and Cambridgeshire (100MW). The manager is also arranging ‘a large pipeline’ of construction projects in Great Britain and Ireland between now and 2030, with similar plans in train in the US, European Union and Australia.
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GRID’s board intends to pay a dividend of 7.35p per share for 2023, a 5% increase on the 7.0p dividend paid in the three previous years. This represents a prospective yield of 4.6% based on the current share price.
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Investment Companies
Research: Industrials
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