The UK's largest listed battery storage fund 2020 - Gresham House

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The UK's largest listed battery storage fund 2020 - Gresham House
30 June

                                                 2020
The UK’s largest listed
battery storage fund
Gresham House Energy Storage Fund plc (GRID)
Interim Report and Accounts as at 30 June 2020
The UK's largest listed battery storage fund 2020 - Gresham House
Interim Report
02 Highlights
03 Chair's Statement
07 Investment Manager's Report            Energy storage to
                                          address supply-demand
17 Environmental, Social and Governance
19 Board and Investment Team
21 Director's Report
25 Principal Risks and Uncertainties

Financial Statements
29 Condensed Statement of Comprehensive
    Income
                                          imbalances on the
                                          National Grid, in real time.
30 Condensed Statement of Financial
    Position
31 Condensed Statement of Changes in
    Equity
32 Condensed Statement of Cash Flow
33 Notes to the Financial Statements

Additional Information
51 Company Information
52 Glossary                               Gresham House Energy Storage Fund
                                          plc (GRID, the Fund or Company) invests
                                          in a portfolio of utility-scale operational
                                          Energy Storage Systems (ESS) primarily
                                          using batteries in Great Britain.

                                            For more information visit
                                            www.greshamhouse.com/gresham-house-energy-storage-fund-plc
The UK's largest listed battery storage fund 2020 - Gresham House
Interim            Financial           Additional
                                                                                  Report             Statements          Information

Financial Highlights                                                          Performance Highlights
                                                                              Æ    Net Asset Value (NAV) of £230.0m or 98.16 pence per
                                                                                   share. Reduction in the NAV per share of 2.6p due
                                                                                   downward revisions to forward curves in the wake

                                                                    100.79p
           NAV per Share (pence)                                                   of the COVID-19 pandemic and partially uncovered

                                                         98.16p
           (as at 30 June 2020)                                                    dividend due to cash weighting. Weighted average
                                                                                   cost of capital remains unchanged at 11.1%
  98.16p                                                                      Æ    Flat NAV total return of minus 0.02% for the six-month
                                                                                   period as NAV per share reduction of 2.6p offset by
                                                                                   dividends of 2.75p paid in the six-month period

                                                         Jun 20
                                                                    Dec 19
                                                                              Æ    Strong share price performance since inception:
                                                                                   Ordinary Share price total return was 15.6% to the end
                                                                                   June 2020, with shares consistently trading at a
                                                                                   premium to NAV reflecting strong investor demand:
           Profit/loss (£m)                                                        apart from initial volatility during the COVID period. The

                                                                    £4.4m
           (for the period to 30 June 2020)                                        Ordinary Share Price total return for the six-month
                                                                                   period ended June 2020 was 4.0%
 (£0.5m)

                                                           -£0.5m
                                                                              Æ    Announcement of 2020 dividend of 1.75 pence per
                                                                                   Ordinary Share for the period from 1 April 2020 to 30
                                                                                   June 2020, bringing total dividends of 3.5p for the six-
                                                         Jun 20
                                                                    Jun 19
                                                                                   month period. The Board reaffirms expectations of 7.0
                                                                                   pence dividends for 2020 and expects full dividend
                                                                                   cover in 2021
                                                                              Æ    £31 million raised in the six-month period with total
           Dividend per Ordinary Share (pence)                                     gross funds raised to date of £238 million. These funds
                                                         3.5p

           (for the period to 30 June 2020 - including                             will be deployed by the end of the year with 350MW of
           proposed dividend)
                                                                     2.5p

                                                                                   operational capacity. In addition, the GRID Power Bond
   3.5p                                                                            offering is underway
                                                                              Æ    Gresham House Asset Management, the Investment
                                                                                   Manager of the Company, has achieved the highest A+
                                                                                   score in relation to Principles for Responsible
                                                         Jun 20
                                                                    Jun 19

                                                                                   Investment demonstrating a strong commitment
                                                                                   to Environmental, Social and Governance matters:
                                                                                   reinforcing the Company’s ESG credentials
           Ordinary Share price return since IPO
           (for the period to 30 June 2020)

                                                                              Operational Highlights
                                                         1 5.60%

  15.6%
                                                                    11.15%

                                                                              Æ    COVID-19 impact on GRID’s operations remains low,
                                                                                   despite slowdown in connections by Distribution
                                                                                   Network Operators which partly impacted
                                                                                   commissioning dates of Wickham Market and
                                                         Jun 20
                                                                    Dec 19

                                                                                   Thurcroft
                                                                              Æ    The Company has 215MW of operational projects as at
           Total gross funds raised (£m)                                           the date of this report, including the acquisition of the
                                                         £238m

           (for the period post IPO to 30 June 2020)                               41MW Bloxwich project on 3 July 2020 from Arenko
                                                                    £207m

 £238m
                                                                                   Group
                                                                              Æ    Thurcroft and Wickham projects will commission in Q3
                                                                                   2020 / early Q4 2020 respectively adding another
                                                                                   100MW
                                                                              Æ    A further project of c.25MW (Project River), not
                                                                                   previously contemplated, is in advanced stages of due
                                                         Jun 20
                                                                    Dec 19

                                                                                   diligence and is expected to complete in September.
                                                                                   Including the 10MW Glassenbury extension, the
                                                                                   portfolio will total 350MW by the end of 2020
                                                                              Æ    On 4 March 2020 the system price spiked to £2,242/
                                                                                   MWh, the highest price in 19 years, catalysed by a wind
                                                                                   forecasting error, and each of our available sites were
                                                                                   able to capture significant value

                                                                                   Gresham House Energy Storage Fund plc (GRID)           2
The UK's largest listed battery storage fund 2020 - Gresham House
Chair's
Statement
It is a positive confirmation of our investment
thesis to see that grid-scale batteries are now
becoming an essential feature of the UK’s critical
                                                                                                          John Leggate
national infrastructure.                                                                                  Non-Executive Chair,
                                                                                                          Gresham House Energy Storage
                                                                                                          Fund plc Board

Summary                                               In addition, exclusivity has been secured for       Such assets demonstrate a diversification of
On behalf of the Board, I am delighted to             a c.40MW project in the Republic of Ireland         our deal sourcing strategy.
present the Interim Report and Accounts of            (Project Emerald) which will be our first outside
Gresham House Energy Storage Fund plc for the         of the UK. None of these deals contributed          The Byers Brae 30MW project near Edinburgh
period ending 30 June 2020.                           to the period ending 30 June 2020; we look          (which is in the Company’s exclusivity pipeline)
                                                      forward to their positive contribution in H2 2020   is likely to be commissioned in H1 2021, a little
Portfolio description, transactions and               and full contribution during 2021.                  later than previously expected, but remains
pipeline                                                                                                  exciting as our first Scottish deal and will
This has been an eventful period leading to           Project Emerald reflects our recognition of         take advantage of the opportunity to help
significant growth in our contracted portfolio of     the unique opportunity to generate better than      National Grid manage the growing output from
battery storage assets.                               average returns in the “volume-uncapped with        wind energy in Scotland, and in particular,
                                                      tariff” regulated Irish market for frequency        to minimise curtailment when generation is
The pace of new project acquisition and               response and related services over the next         strong.
integration continues to cement our industry          few years, and the identification of a specific
lead and allows us to leverage our scale and          project to take advantage of this. The Manager      In our Annual Report, we highlighted that 22%
sector “know how” in the market.                      sees the Irish market as providing excellent        of the portfolio’s capacity was still ramping up
                                                      investment opportunities for the Fund and           following an upgrade or experiencing some
We are pleased to note that the Company’s             provides the ability to secure operational cash     degree of technical challenges. I am pleased
pipeline continues to build strongly, as              flows to provide dividend cover and diversify       to say that this has now fallen to under 4% of
identified in the Portfolio Section of the            revenue streams. This deal was possible             the 215MW in operation today. Further, given all
Investment Manager’s report.                          following the amendment to the Company’s            the portfolio growth, it has been important for
                                                      Investment Policy, which now permits                the Investment Manager to add further highly
At end 2019 the portfolio was 174MW. On 3 July        investment of up to 10% of NAV in the Republic      experienced and well qualified operational
2020, the 41MW Bloxwich project was acquired.         of Ireland and Northern Ireland and was             resources.
In addition, a further 75MW is expected to be         overwhelmingly approved by Shareholders at
added to the portfolio by the end of September        the AGM on 30 June 2020.                            Last and by no means least, the Investment
2020 and another 50MW in early Q4. Including                                                              Manager has worked to make sure that potential
the Glassenbury extension of 10MW, this will          Of the deals the Manager has worked on in the       risks and opportunities resulting from the
double the portfolio to 350MW by the end of           year 2020 to date, two were already operational;    COVID-19 pandemic have been well understood
2020.                                                 Bloxwich, the energy storage system acquired        and, where possible, have been mitigated.
                                                      from Arenko Group and Project River – see
These projects include Project River (c.25MW),        further details in the Investment Manager’s
an operational project in advanced stages of          report.
due diligence and the Thurcroft (50MW) and
Wickham (50MW) projects.

3             Gresham House Energy Storage Fund plc (GRID)
The UK's largest listed battery storage fund 2020 - Gresham House
Interim             Financial           Additional
                                                                                                 Report              Statements          Information

Results and outlook                                 Arenko (from whom the Company acquired                 The Board have decided to review discount
During the first half, the Company has been in      the Bloxwich asset) proposed a trial using             rates and will consider the outcome in future
a transition towards full deployment of funds       processes currently used to make gas turbine           NAV updates.
raised to date and expects to be fully invested     generators available for system balancing
before the year end.                                by providing payments for availability. This           COVID-19
                                                    concept of payment-for-availability which              The impact of COVID-19 on our business was
In terms of revenue sources and mix, the            Arenko has proposed is an ideal way to make            outlined in our 2019 Annual Report in April 2020.
Manager has skewed battery operations               batteries available via contract several hours in
to frequency response, in particular since          advance.                                               We have been pleased and relieved that,
lockdown, as this has offered higher revenues                                                              as expected, day to day operations and
than trading in the wholesale market or the         There have been two trials so far and a third          maintenance have not been affected thanks
Balancing Mechanism.                                is planned for September. We are therefore             to the diligence of our O&M contractors and
                                                    hopeful that National Grid will introduce this         sub-contractors. However, as noted in the
Meanwhile, in terms of wholesale trading, lower     as a revenue generating service in coming              Market Update Section, the portfolio has
national electricity demand has consequently        months. In our view, this could transform the          experienced some flattening of volatility curves
led to lower available trading revenues during      use of batteries, and put them on the path to          which have impacted on income opportunities
the lockdown period of the second quarter.          mainstream adoption.                                   available; the flexibility of the portfolio has been
However, it is noteworthy that there has been                                                              utilised to minimise the impact of this on asset
some recovery of demand since the lows of           Fundraising                                            optimisation income.
May and June, and that has helped wholesale         During the period, the Company raised a further
market trading returns recover. In normal           £31 million in equity, immediately prior to the        The impact of the lockdown on deployment has
market environments there would be very             commencement of the UK lockdown period.                impacted the timings of the commissioning of
limited correlation to power prices, however                                                               new projects. Specifically, the Wickham and
when electricity demand collapses as it did         The Company launched, through its 100%                 Thurcroft commissioning dates were pushed
during the initial COVID-19 impact period,          owned subsidiary Gresham House Energy                  back by a few months due in part to a pause in
the Manager has, in hindsight, observed that        Storage Holdings plc, a bond raise (GRID Power         connections by Distribution Network Operators
temporary excess generation plays a part in         Bonds) on 7 July 2020 seeking up to £40 million        during the lockdown as well as certain
dampening trading spreads.                          of funding over a 12-month period. The first           contractors employing specialist staff who had
                                                    series targeting up to £15 million will be closing     a need to self-isolate. Fortunately, there has
Similar dynamics apply in the Balancing             in the coming weeks. This funding is allocated         been no financial impact as the lost income due
Mechanism (or “BM”, the mechanism by which          to fund projects within the current pipeline.          to late commissioning will be mitigated through
National Grid uses generation assets, at prices                                                            agreed compensation from the sellers and
offered by their operators, to balance supply       Net Asset Value (NAV)                                  EPC contractors at a level that will fully replace
and demand on a rolling half-hourly basis) and      Through the period, the NAV has fallen from            operating cash flows.
this remains one of our most important areas        100.79p to 98.16p This has come mainly from
of revenues. However, having started the year       a more cautious set of volatility and revenue          In our view, COVID-19 has had the effect of
in a very promising way, the BM became less         stream forecasts from our new third-party              highlighting the importance of the ESG agenda
profitable than the wholesale market during         industry consultants (we are no longer using           and the extent to which integrating additional
the lockdown as National Grid needed to take        Cornwall Insight). In addition, 0.7p of the            battery storage deeper into the UK power grid
decisions to protect the stability of the system.   reduction is from a cash shortfall from the            can play a more valuable role in emergency
This had an adverse impact on intraday pricing,     dividend not being fully covered in the first half     situations.
as well as on the utilisation of batteries.         of the year.
                                                                                                           The high percentage of demand being met
National Grid are only too aware of their under-    Industry consultants have reacted to recent            by renewables in Q2 2020, caused by the
use of batteries, given their promise to be able    events by making fairly significant reductions         lockdown-induced drop in demand, has
to operate a zero-carbon grid by 2025. In this      to their forecast curves of average daily power        offered a glimpse of a future where there is not
context, from September National Grid will start    prices, linked to a lower demand outlook, a            sufficient battery capacity installed. The UK
to publish the times they do not use batteries      growing amount of near-zero marginal cost              renewables fleet, combined with low amounts
when they could have done (known as “skip           renewables and much lower natural gas prices.          of battery storage requires the use of more gas
rates”). These skip rates will be monitored by      The net impact of these changes has resulted in        fired generation to balance the system. Indeed,
Ofgem under the upcoming RIIO2 framework,           lower power pricing forecasts. We have adopted         balancing costs to the UK power grid reached
which is designed to improve value for              this new and more conservative regime.                 £718 million for the period March to July 2020
customers, and should lead to further demand                                                               according to Ofgem, a 41% increase on 2019.
for battery services from National Grid.            While we have reflected these forecasts in the
                                                    NAV, we are cautiously optimistic about the
Separately, earlier in 2020, National Grid made     future prospects of the portfolio because of its
a request to industry stakeholders asking           scale and its capability to operationally flex our
for ways they might be able to better utilise       assets.
batteries.

                                                                                                  Gresham House Energy Storage Fund plc (GRID)             4
The UK's largest listed battery storage fund 2020 - Gresham House
Chair's Statement continued

Thus, installing batteries in the right quantities
achieved two things at once; lower CO2
emissions by using less gas, and avoiding
unnecessary curtailment of renewable power
thereby lowering balancing costs to the UK
power grid which are reaching unacceptable
levels.

The National Grid has just added more
recognition to the importance of battery
storage by launching Dynamic Containment, a
new frequency response service which will add
significantly to procurement of such services
from battery projects. The service is being
launched on 1 October 2020 to include 500MW
of demand. This approximately doubles the
total demand for Frequency Response services;
a further sign that battery storage is becoming
increasingly integral to the UK power grid.

Finally, before I discuss dividends, I am
pleased to announce that Gresham House
Asset Management Limited, the Investment
Manager of the Company, has achieved
an A+ score in relation to Principles for
Responsible Investment demonstrating
a strong commitment to Environmental,
Social and Governance matters in relation to
infrastructure investment. The Board pass
on their congratulations and look forward to
taking the “ESG” agenda further forward as the
Company grows.

Dividend
Although dividends were not yet fully covered in
this period, the Company continues to target a
dividend policy totalling 7.0p per Ordinary Share
in the 2020 calendar year.

Whilst COVID-19 has temporarily impacted
revenues at the margin, the positive medium
and long term outlook combined with the
strategic imperative and vital role which
batteries will play in the energy transition,
supported by a growing range of new monetary
opportunities to leverage the flexibility of
battery storage, gives the Board confidence
that the current level of dividend is sustainable.

John Leggate CBE
Chair
Date: 28 August 2020

5              Gresham House Energy Storage Fund plc (GRID)
The UK's largest listed battery storage fund 2020 - Gresham House
Interim            Financial           Additional
Report             Statements          Information

 Gresham House Energy Storage Fund plc (GRID)        6
The UK's largest listed battery storage fund 2020 - Gresham House
Investment Manager's Report

Investment
Manager's Report
Gresham House Asset Management Limited (GHAM) is wholly owned
by Gresham House plc (GH), an AIM-quoted specialist alternative
asset manager with a market capitalisation of £267 million as at 24                                                              Ben Guest
                                                                                                                                 Managing Director,
August 2020. GH provides funds, direct investments and tailored                                                                  New Energy
investment solutions, including co-investment across a range
of highly differentiated alternative strategies. GHAM’s expertise
includes strategic public equity, private equity, forestry, housing,
new energy & infrastructure.

Investment portfolio

 Existing assets           Location                 Capacity         Battery             Battery          Site type*                                              Acquisition date
                                                     (MW)          size (MWh)           duration
                                                                                        (c.hours)
 a.Staunch                 Staffordshire                20              4.0                0.25           Battery and generators, 0.5MW import                    14 November 2018
 b. Rufford                Nottinghamshire               7              9.5                1.40           Battery and generators, symmetrical                     14 November 2018
 c. Lockleaze              Bristol                       15             22.1               1.50           Battery, symmetrical                                    14 November 2018
 d. Littlebrook            Kent                          8               7.5               0.90           Battery, symmetrical                                    14 November 2018
 e. Roundponds             Wiltshire                    20              27.8               1.30           Battery and generators, 10MW import                     14 November 2018
 f. Wolverhampton West Midlands                          5               7.7               1.55           Battery, symmetrical                                    1 August 2019
 g. Glassenbury            Kent                         40              22.1               0.55           Battery, symmetrical                                    13 December 2019
 h. Cleator                Cumbria                       10             5.9                0.60           Battery, symmetrical                                    13 December 2019
 i. Red Scar               Lancashire                   49              73.0               1.50           Battery, symmetrical                                    31 December 2019
 Total                                                  174            179.6
 * Note: a symmetrical battery system has equal import and expect capability to the grid; this allows quicker discharge and recharge cycles and increases the level of services the site is
 able to operate.

Following the acquisition of 99MW across                        A further project of 25MW, codenamed Project                     In addition to the projects mentioned above,
three projects in December 2019, there were                     River, and not previously contemplated, is                       there are two new 50MW pipeline projects
no new additions to the operational portfolio                   in advanced stages of due diligence and is                       (Monet’s Garden and Lister Drive) acquired for
in H1 2020. However, the Company completed                      expected to complete in September 2020.                          construction and commissioning in the second
the acquisition of the 41MW Bloxwich project,                   Altogether, combined with the extension of                       half of 2021. These will be the Company’s first
just after the period end, on 3 July 2020 from                  Glassenbury, these projects add 176MW to the                     transmission-connected projects.
Arenko Group.                                                   portfolio, almost doubling operational capacity
                                                                to 350MW. We estimate that this gives the                        Also, in this table, is a project based in the
The Company is expecting to complete the                        Company a c.25% market share in the UK.                          Republic of Ireland, codenamed Project
acquisitions of Thurcroft (50MW) and Wickham                                                                                     Emerald. This is the Company’s first Irish
Market (50MW) by the end of September/early                     The pipeline as at 30 June 2020 is set out                       project since it received Shareholder approval
Q4 2020 respectively as these projects are                      below. This reflects the projects discussed                      to invest in Ireland at the AGM in June 2020. The
very close to commissioning. The transactions                   above which had not yet been acquired by 30                      details of the project are currently confidential,
complete upon issuance of a Provisional                         June 2020.                                                       and the project’s capacity is shown rounded to
Acceptance Certificate (PAC) to the EPC                                                                                          the nearest 10MW.
contractor.

7                   Gresham House Energy Storage Fund plc (GRID)
The UK's largest listed battery storage fund 2020 - Gresham House
Interim                       Financial            Additional
                                                                                                                  Report                        Statements           Information

 Portfolio and pipeline summary
 Pipeline projects                                        Location                     Capacity      Battery size        Site type                            Commissioning status1
                                                                                        (MW)           (MWh)
 j. Bloxwich                                              West Midlands                     41              41           Battery, symmetrical                 July 2020 (completed)
 k. Project River                                         North                            25              c.13          Battery, symmetrical                 Q3 2020
 l. Wickham Market                                        Suffolk                         c.50              75           Battery, 40MW import                 Q3 2020
 m. Thurcroft                                             South Yorkshire                 c.50              75           Battery, symmetrical                 Q3 2020
 n. Glassenbury Extension2                                Kent                             10               15           Battery, symmetrical                 Q3 2020
 o. Byers Brae3                                           Scotland                         30              45            Battery, symmetrical                 Q1 2021
 p. Monet's Garden                                        North Yorkshire                 c.50            c.50           Battery, symmetrical                 Q4 2021
 q. Lister Drive                                          Merseyside                      c.50            c.50           Battery, symmetrical                 Q4 2021
 r. Project Emerald                                       Republic of Ireland             c.40            c.25           Battery, symmetrical                 Q4 2021
 Other project in due diligence with GHAM for North of England                            c.190           c.190          Battery, symmetrical                 2021
 addition to exclusivity pipeline
 Total                                                                                   c.536            c.579
 In addition to the above, the Manager has identified over 300MW of additional pipeline
1. Expected commissioning dates are indicative and based on most recent conversations with relevant Distribution Network Operators (DNOs)
2. Remains subject to planning consent
3. Formerly known as Exclusivity Pipeline Project 2

The Company’s Investment Policy states that it                We expect to take advantage of new planning                        This may reduce the barriers to development of
cannot take construction or development risks                 legislation which allows projects larger than                      larger storage facilities (>50MW) which would
and so is only able, at this time, to acquire                 50MW to have planning permissions granted                          enhance our ability to maximise operational
operational projects. As this is an emerging                  and determined by local planning authorities.                      efficiencies.
sector there are few operational projects                     Before this change, which was announced
available to acquire outside the Exclusivity                  by BEIS in July 2020, projects larger than                         The Investment Manager is confident of its
Projects communicated in the IPO Prospectus.                  50MW had to be approved by the Planning                            ability to grow its pipeline and to maintain the
However, the Company is pleased to have                       Inspectorate, the agency responsible for                           growth of the Company as the requirement for
identified and completed the acquisition                      approving Nationally Significant Infrastructure                    batteries burgeons.
of Bloxwich, Glassenbury and Cleator and                      Projects (NSIPs).
it expects to be able to acquire other such
projects over time.
                                                                                                                                                             Existing projects
Including Bloxwich, which completed on 3 July                                                                        o.
2020, the Company has 215MW of operational
                                                                                                                                                                     Pipeline projects
projects. Following the integration of                                                                     h.
Wickham and Thurcroft and the other near-                                                                                              p.
term transactions the Company will have                           r.
350MW in operational projects by the end of
2020. The Company does not anticipate
completing any other transactions in 2020 but                                                                       i.
                                                                                                                                        k.
it will be working on the pipeline for 2021,
including having Byers Brae under                                                                                  q.
construction. This project, which had been in
                                                                                                                                                m.
the pipeline for Q4 2020 is now expected in Q1                                                                           a.
2021.
                                                                                                                                                   b.
While some existing storage facilities use gas                                                                              f.
engines or other generation technologies,
all current pipeline projects are intentionally
designed as large-scale symmetrical, battery-
only projects which do not use generation                                                                                                                                      l.
technologies. This approach is designed to                                                                                                 j.
maximise efficiency and minimise the impact
on carbon emissions and the environment.                                                                                         c.
                                                                                                                                      e.                      d.
                                                                                                                                                                         n.
                                                                                                                                                                   g.

                                                                                                                   Gresham House Energy Storage Fund plc (GRID)                      8
The UK's largest listed battery storage fund 2020 - Gresham House
Investment Manager's Report continued

Staunch                                               This project is located near the site of the old    The nearest residential premises are
                                                      Littlebrook power station near the Dartford river   approximately 1.3 kilometres south of the site.
                                                      crossing on the south side of the Thames on
                                                      less than 0.5 acres of land. It is located within   The Rufford project was commissioned in July
                                                      the existing Littlebrook Industrial Estate. The     2017.
                                                      site was formerly an isolated patch of scrub
                                                      vegetation.                                         The battery capacity was increased significantly
                                                                                                          during upgrade work in Q4 2019 taking battery
                                                      This project was commissioned in December           size from 3.25MWh to 9.5MWh better equipping
                                                      2017.                                               the site for adoption of the Asset Optimisation
                                                                                                          business model described in the IPO
                                                      Lockleaze                                           Prospectus. As a result of this, the generators
Staunch, which is situated in Newcastle-                                                                  are no longer expected to be used for the vast
Under-Lyme, Staffordshire, was commissioned                                                               majority of the time but are necessary to meet
in March 2017 and has an asymmetric grid                                                                  the requirements of the site’s CM contract and
connection capacity of 20MW export, 0.5MW                                                                 will therefore remain installed.
import.
                                                                                                          Roundponds
This project is located within a secure
compound on the Holditch House Industrial
Estate, a brownfield site previously used for
waste collection and sorting. The industrial
activity in the surrounding area is of a
significant size; the neighbouring foundry
has 24-hour operation. The site itself is             The Lockleaze project is a 15MW import and
approximately 200 metres from the nearest             export battery-only project located in the
residential area which is well screened by            Lockleaze area of Bristol beside a railway line
industrial buildings and the acoustic fence           and a substantial Western Power Distribution
surrounding the compound.                             (WPD) substation, on approximately 0.5 acres of
                                                      land leased from WPD. The site battery capacity
Staunch following its upgrade in Q4 2019              was increased from 11.4MWh to 22.1MWh in 2019       The Roundponds Project, which is situated
consists of utility-scale batteries plus                                                                  in Melksham, Wiltshire, has an asymmetric
generators with a capacity currently split as         The Lockleaze project was commissioned in           grid-connection capacity of 20MW export,
follows: 16MW gas reciprocating generators and        July 2017.                                          16MW import. The import grid connection
4MW of diesel engine capacity and a battery                                                               was increased in Q1 2020 from 10MW to
system which comprises 4MW (3MWh) of                  Rufford                                             16MW making the site more symmetrical and
lithium-ion batteries and 16MW (3MWh) of VRLA                                                             increasing revenue opportunities. The site is
(lead acid) batteries. The diesel engines are                                                             made up of batteries and generators although
typically not used but remain installed to meet                                                           commercially only the batteries are used today.
the requirements of the CM contract belonging
to this site.                                                                                             The project is on approximately 0.5 acres of
                                                                                                          land located by farm buildings at Roundponds
Littlebrook                                                                                               Farm, which is off the Bath Road, 1.3 kilometres
                                                                                                          north west of Melksham. The site borders open
                                                                                                          countryside on its far side and is approximately
                                                                                                          150 metres from the nearest residential
                                                                                                          building.
                                                      The Rufford project is a 7MW import and
                                                      export battery (and reciprocating generator)        The project was commissioned and started
                                                      project located on land previously used for coal    commercial operations in April 2018. During
                                                      stocking within the former Rufford Colliery in      the upgrade work in 2019 the battery size was
                                                      Nottinghamshire.                                    increased from 12.7MWh to 27.8MWh. The
                                                                                                          10MW of generators remain in place to meet
                                                      The former colliery site is currently undergoing    the requirements of one of the two 10MW CM
                                                      remediation. The project sits adjacent to an        contracts belonging to this project.
The Littlebrook project is an 8MW import and          existing electrical substation and is positioned
export battery-only project.                          within its own secure compound built on
                                                      approximately 0.5 acres of land.

9             Gresham House Energy Storage Fund plc (GRID)
Interim              Financial         Additional
                                                                                                Report               Statements        Information

Wolverhampton                                      This project was constructed by NEC Energy             The project is located near Preston on an area
                                                   Solutions and commissioned in September                of waste land located to the south of the Red
                                                   2017.                                                  Scar Industrial Estate which accommodates
                                                                                                          a variety of industrial and commercial
                                                   This project is to undergo an initial upgrade to       enterprises. The wider site was formerly a large
                                                   take advantage of an excess of 10MW of grid            manufacturing facility and included an on-site
                                                   connection capacity using battery capacity             own power station (now demolished).
                                                   initially designated for the Littlebrook project.
                                                                                                          The Red Scar project was constructed by
                                                   In 2022, the project may be further upgraded for       Metka-EGN Limited and was commissioned in
                                                   the adoption of the Asset Optimisation business        December 2019.
                                                   model, which includes the trading of electricity.
                                                                                                          Bloxwich
Wolverhampton was the first project acquired       Cleator
following the Fund’s IPO. The project has a
symmetrical 5MW grid connection and 7.7MWh
of battery capacity. It was acquired by the Fund
in August 2019. The site is situated in an urban
environment c.1 kilometre from the centre of
Wolverhampton. The site is surrounded by a mix
of major roads, commercial, industrial activity,
and several residential dwellings to the north
west.

The Wolverhampton project was commissioned
in April 2019.                                                                                            Bloxwich is a 41MW/41MWh battery project
                                                   Cleator is a symmetrical 10MW battery-only             constructed indoors. The project also
Glassenbury                                        project acquired by the Fund in December 2019.         has a 52MW (summer) and 60MW (winter)
                                                   The site is situated in a greenfield location along    symmetrical, accepted connection offer which
                                                   the river Ehen near to Cleator Moor in Cumbria.        may be used to augment the project’s frequency
                                                   This project also benefits from a long term EFR        response capability, in due course.
                                                   contract running until January 2022.                   The project is near Walsall in the West Midlands
                                                                                                          in one of a row of large warehouses.
                                                   This project was constructed by NEC Energy
                                                   Solutions and commissioned in October 2017.            The Bloxwich project was constructed by GE
                                                                                                          and was commissioned in February 2019. It was
                                                   This project is also expected to undergo a             acquired by the Company in July 2020.
                                                   battery capacity increase prior to the EFR             This project is operated by Arenko Group
                                                   contract terminating in readiness for Asset            (Arenko). Arenko has been leading the initiative
                                                   Optimisation.                                          with National Grid to trial BM reserve services.
Glassenbury is a symmetrical 40MW battery-
                                                   Red Scar
only project (with a 50MW grid connection,
i.e. 10MW is currently unutilised) and was
acquired by the Fund along with Cleator in
December 2019.The Glassenbury site is in a
greenfield location near Cranbrook in Kent. This
project benefits from a long term EFR (Energy
Frequency Response) contract running until
January 2022 at an enhanced rate compared
to standard month ahead frequency response
contracts. EFR is a service under which storage
assets are able to provide frequency response
within one second. Glassenbury and Cleator
combined represent a quarter of the National
Grid’s EFR capacity. EFR and FFR, which is more    Red Scar is a symmetric 49MW project with
common, are similar services provided to the       a 73MWh battery and is the largest capacity
National Grid.                                     project in the portfolio to date.

                                                                                                 Gresham House Energy Storage Fund plc (GRID)        10
Investment Manager's Report continued

Fund and portfolio performance                         The trading capability continues to expand           three occurring in 2019. The portfolio achieved
The Fund has performed well in the first half of       among our traders. Most traded in either             its targets of hitting at least two of the three
2020 and remains on track to distribute 7.0p           the wholesale market or in the Balancing             TRIADs.
per Ordinary Share in 2020 and anticipates that        Mechanism until recently. However, via one of a      In May, the planned import increase at
this dividend level is fully covered in 2021. As       couple of mechanisms offered by National Grid,       Roundponds to 16MW was completed ahead
stated in the 2019 Annual Report, there was a          projects are now able to trade in the Balancing      of schedule. This increased import allows the
substantial amount of cash left to deploy at the       Mechanism as well as trade in the wholesale          site to compete for larger capacity Frequency
start of 2020 and this will be deployed in the         market in a complementary fashion. We                Response contracts as well as improving
coming weeks.                                          expect this to have a positive impact on trading     cycling opportunity when trading.
                                                       performance going forward.
The Company is pleased to announce a dividend                                                               Finally, the Manager has experienced delays
of 1.75p for the period from 1 April 2020 to 30        We were encouraged by the evidence to date           to construction as a result of COVID-19 with
June 2020 to be paid on 25 September 2020.             in the portfolio’s ability to capture value during   Thurcroft and Wickham commissioning being
Combined with the 1.75p dividend paid on 12            system pricing events. On 4 March 2020 the           delayed to the end of Q3 2020/early Q4 2020
June 2020, the Fund will pay dividends of 3.5p         system price spiked to £2,242/MWh, the highest       respectively. Fortunately, the delays are coming
in relation to H1 2020 in line with the 2020           price in 19 years, catalysed by a wind forecasting   to an end with both projects due to be energised
dividend target stated above.                          error. Each of our available sites was able to       shortly. The Sale and Purchase Agreements
                                                       export into and capture significant value with       signed for the projects protect the Fund from
The Ongoing Charges Figure (OCF) for the               this event representing our best single day of       being adversely impacted as a result of the
Fund for the period to 31 December 2019 was            trading performance to date.                         delays in commissioning, thereby protecting
1.43%. For the six month period ended 30 June                                                               the forecasted portfolio earnings and resulting
2020 the OCF reduced to an annualised rate of          The Manager believes such pricing events will        dividend cover.
around 1.3% representing economies of scale            become more frequent with the increase in
as the Fund has expanded.                              renewables generation. Over the short term,          Market update
                                                       peak prices have also fallen, offsetting the         2020 so far has been an extraordinary period for
Upgraded sites returned to full operations in H1       benefitting of lower intraday lows. The Manager      electricity markets, and as discussed further
2020 with some sites taking longer than others         views these lower peaks as a function of             in the Outlook Section below, is likely to be a
but all are operational now and with under 4% of       overcapacity in generating capacity, particularly    catalyst for major changes which we expect to
the 215MW in operation today (measured in MW)          in the form of gas-fired power stations (CCGTs)      favour energy storage going forward.
having a degree of technical downtime issues at        which, due to low demand, have tended to be
the time of writing. This compares with 22% at         the marginal supplier of power and have found        The market has been impacted by several
the time that the Annual Report was published.         themselves setting the price at a time when gas      factors as detailed below.
The Manager expects to further reduce                  prices were also significantly down.
technical unavailability by the year end.                                                                   i) Lower electricity demand and lower levels of
                                                       This backdrop is not sustainable, and it is likely   peak demand.
Operational capability broadened to full asset         that very low load factors in the gas-fired power
optimisation from the end of 2019. This allowed        plant fleet will lead to capacity dropping off the   The year started with a continuation of the
projects to trade in the wholesale market as           system. We have, in June, seen the insolvency        trend which started during the 2008 recession
well as offering frequency response services,          of Calon Energy which owns a portfolio of            of gradually falling demand and of lower
following the upgrades to both battery capacity        CCGTs totalling 2.3GW (out of a fleet of c.30GW      absolute annual peak levels of demand.
and grid connections. Application Programming          in the UK). The Manager expects to see many
Interface (API) software upgrades now allow            further examples of this, with the end result        ii) Large increase in instances of negative pricing
the sites to be remotely controlled by the asset       being that the market will experience lower lows     and huge Balancing Services Use of System
optimisers (traders) appointed to trade the            and higher highs as more renewable capacity          (BSUoS) costs.
sites.                                                 is added to the system. Such an outlook on
                                                       volatility would reaffirm the Fund’s investment      The latter, combined with mild weather
Trading was anticipated to be the main activity        thesis and its plans to focus future efforts         translated, this year, in the unusual result of
from the start of 2020, but, due to favourable         towards trading, over time.                          there being no TRIADs crystallising during
pricing available in ancillary services, the sites                                                          January or February which are the last two
have benefited from winning contracts in the           Elsewhere, the 2019/20 TRIADs have been              months of the TRIAD season (November to
monthly and weekly Firm Frequency Response             confirmed during this financial period with all      February).
(FFR) auctions.

11             Gresham House Energy Storage Fund plc (GRID)
Interim                              Financial                           Additional
                                                                                                                                     Report                               Statements                          Information

After a brief uptick in demand at the start
                                                                                                 National Demand (MW, monthly averages)
of March as cold weather created stronger
demand, at the start of lockdown, the decline
                                                    40,000
accelerated into a collapse of up to 20% year
on year. This equates to a multi-decade low in      38,000
electricity demand.
                                                    36,000
In August, so far, demand has recovered to          34,000
being down c.3% year on year.
                                                    32,000
The exceptionally low demand levels seen since
                                                    30,000
March have resulted in regular negative pricing
as National Grid paid renewable generation          28,000
to curtail output. This was only exacerbated
by the extraordinarily sunny weather we have        26,000
seen since April, injecting even more renewable
                                                    24,000
power into the system.
                                                    22,000
The chart above shows the total half-hourly
negative price events by quarter over the last      20,000

                                                                                                                                      Jun-17
                                                             Jun-15

                                                                                                 Jun-16

                                                                                                                                                                          Jun-18

                                                                                                                                                                                                              Jun-19

                                                                                                                                                                                                                                                  Jun-20
                                                                      Sep-15

                                                                                                          Sep-16

                                                                                                                                               Sep-17

                                                                                                                                                                                   Sep-18

                                                                                                                                                                                                                       Sep-19
                                                                                                                                                        Dec-17
                                                                               Dec-15
                                                                                        Mar-16

                                                                                                                   Dec-16
                                                                                                                            Mar-17

                                                                                                                                                                 Mar-18

                                                                                                                                                                                            Dec-18
                                                                                                                                                                                                     Mar-19

                                                                                                                                                                                                                                Dec-19
                                                                                                                                                                                                                                         Mar-20
three years.

Low electricity demand and strong renewable
energy generation created a headache for             Source: Aurora EOS
National Grid as it reduced, sharply, the amount
of generation from large rotating turbines
(such as gas-fired turbines) which inherently                              Number of half hours periods of negative pricing per month
provide stability to the system as a result
of their “spinning inertia”. Thus, during this      80
extraordinary period, National Grid needed to
curtail more renewable generation than just         70
the amount over-provided by this technology,        60
purely to increase the inertia on the system, to
keep the lights on.                                 50

The need to balance a more unstable system is       40
expected to lead to a national bill for balancing
                                                    30
the system during the lockdown of £1 billion.
This is far in excess of what we have seen in the   20
past and will show up in electricity bills.
                                                    10

                                                    0
                                                          Jul-18

                                                          Jul-19

                                                          Jul-20
                                                         Jan-18

                                                         Jan-19

                                                         Jan-20
                                                         Feb-18

                                                         Feb-19
                                                         Jun-18

                                                         Jun-19

                                                         Feb-20
                                                         Aug-17

                                                         Aug-18

                                                         Aug-19
                                                         Sep-17

                                                         Jun-20
                                                         Sep-18

                                                         Sep-19
                                                         Dec-17

                                                          Mar-18

                                                         Dec-18

                                                          Mar-19

                                                         Dec-19

                                                         Aug-20
                                                         May-18

                                                         May-19
                                                          Oct-17

                                                          Apr-18

                                                          Apr-19
                                                          Oct-18

                                                          Oct-19

                                                         Mar-20

                                                         May-20
                                                         Nov-17

                                                         Nov-18

                                                         Nov-19

                                                         Apr-20

                                                     Source: Aurora EOS

                                                                                                                                      Gresham House Energy Storage Fund plc (GRID)                                                          12
Investment Manager's Report continued

iii) Weak Gas prices, Combined Cycle Gas Turbine
(CCGT) overcapacity and the impact on Spreads.
                                                                                                                              BSUoS (£/MWh, monthly averages)
Gas prices have fallen sharply in 2020.                   7
Combined with lower demand during the
lockdown and the fact there is too much CCGT
                                                          6
capacity on the system (which operated at load
factors of under 20% at one stage), this has
resulted in peak daily power prices not reaching          5
the levels we have become accustomed to.
Therefore, despite the lower lows driven by               4
increased curtailment, the net effect was lower
intraday volatility in power prices and reduced           3
revenues in trading in the short term. This is
a temporary effect and we are already seeing              2
both higher demand and higher gas prices and
thus higher returns from trading compared with            1
the lows.
                                                          0
Gas prices are famously volatile and having
                                                              Jul-15

                                                                                                           Jul-16

                                                                                                                                                        Jul-17

                                                                                                                                                                                                   Jul-18

                                                                                                                                                                                                                                                Jul-19

                                                                                                                                                                                                                                                                                            Jul-20
                                                                                    Jan-16

                                                                                                                                Jan-17

                                                                                                                                                                            Jan-18

                                                                                                                                                                                                                          Jan-19

                                                                                                                                                                                                                                                                       Jan-20
                                                                                              Apr-16

                                                                                                                                          Apr-17

                                                                                                                                                                                        Apr-18

                                                                                                                                                                                                                                     Apr-19
                                                                         Oct-15

                                                                                                                    Oct-16

                                                                                                                                                                  Oct-17

                                                                                                                                                                                                                Oct-18

                                                                                                                                                                                                                                                          Oct-19

                                                                                                                                                                                                                                                                                 Apr-20
fallen over 75% have now doubled from their
lows but are still at less than half their 5-year
average price level, and so are likely to bounce
                                                         Source: Aurora EOS
further; as gas producers are not making money
at these levels they are therefore holding back
production.
                                                                                                            Daily Wholesale Gas Price (NBP) (Pence/Therm)
COVID-19
The Manager responded quickly to the                     90
lockdown restrictions enforced in the UK
                                                         80
since March 2020 as a result of the COVID-19
pandemic and all employees were able to                  70
continue to work remotely from their homes in
a largely uninterrupted manner. The Manager              60
continues to support staff working remotely              50
and recognises the efforts of all staff during the
pandemic.                                                40

                                                         30
The Manager has experienced very few
operational disruptions since restrictions were          20
put in place and is pleased with the professional
response shown by both O&M contractors on                10
the ground and by optimisation partners. As               0
mentioned earlier in this Interim Report, there
                                                              Jul-18

                                                                                                                                                                           Jul-19

                                                                                                                                                                                                                                                                                          Jul-20
                                                                                                                    Jan-19

                                                                                                                                                                                                                                   Jan-20
                                                                                                                             Feb-19

                                                                                                                                                                  Jun-19

                                                                                                                                                                                                                                            Feb-20
                                                                       Aug-18

                                                                                                                                                                                     Aug-19

                                                                                                                                                                                                                                                                                Jun-20
                                                                                Sep-18

                                                                                                                                                                                              Sep-19
                                                                                                           Dec-18

                                                                                                                                      Mar-19

                                                                                                                                                                                                                          Dec-19
                                                                                                                                                         May-19
                                                                                                                                               Apr-19
                                                                                         Oct-18

                                                                                                                                                                                                       Oct-19

                                                                                                                                                                                                                                                     Mar-20

                                                                                                                                                                                                                                                                       May-20
                                                                                                  Nov-18

                                                                                                                                                                                                                 Nov-19

                                                                                                                                                                                                                                                              Apr-20

have been some commissioning delays to
certain projects; these projects are due to be
commissioned in Q3 2020.
                                                         Source: Aurora EOS

13             Gresham House Energy Storage Fund plc (GRID)
Interim            Financial           Additional
                                                                                                   Report             Statements          Information

Outlook                                                 Recognising this issue, National Grid have taken     Additionally, they emit no CO2 at the point of
Reinforcing our optimism on prospects for the           the decision to operate batteries even if they       use; as the recharging of batteries will be from
sector, there are three promising initiatives           lead to over procurement in the BM, taking           a grid dominated by renewable generation,
at National Grid to attempt to increase the             the long term view that doing this will lead to a    the CO2 impact will be substantially less
use, and therefore profitability, of batteries          lower cost system over time, as batteries are        than burning gas. The one issue, at the
in the Balancing Mechanism. At the core of              fundamentally more competitive.                      current time, is that there are not enough
these efforts is the recognition that batteries                                                              operational batteries yet for National Grid to
are fundamentally more environmentally                  The third initiative is Dynamic Containment, a       use the technology effectively in a scalable
friendly and more cost-effective than any other         new frequency response service which will add        manner. This will change as more batteries are
alternative.                                            significantly to procurement of such services        commissioned and become the overwhelmingly
                                                        from battery projects. The service is being          compelling option for system balancing.
First, there is a trial to use batteries in ‘Reserve’   launched on 1 October 2020 to include 500MW
services in the same way that CCGTs are used            of demand. This approximately doubles the
to run for hours to be able to be up or down            total demand for Frequency Response services.
‘regulated’ (i.e. their outputs varied) to balance
the market, for which they receive payments to          These initiatives are not factored into the
warm up, to be available and for their utilisation.     forecast or NPVs as at 30 June 2020 but
Naturally batteries don’t need ‘warming up’ and         fundamentally the batteries owned by the
they do not need to be exporting power to be            Company are able to target the revenue
available which therefore reduces curtailment           streams which offer the best returns for the
of renewables, they can just be utilised when           Fund, including the above schemes.
required. This trial is proving promising
as it is both technically and operationally             Taking the comments above together with
feasible, without new systems at National               those in the Market Update Section, we note
Grid, financially attractive to National Grid and       that, there is a very positive message which
environmentally positive as it reduces carbon           can be taken from the unprecedented recent
based emissions. For batteries, if it turns             events during lockdown; in particular the fact
into a permanent service, it is likely to lead to       that National Grid has had to use gas much
significantly higher revenues for the fleet.            more extensively and over curtail renewables
                                                        to achieve this (as the gas plant needs to run
The second, more established, but evolving,             to be available and provide system inertia).
initiative is to drive the use of batteries             This confirms the need for batteries which can
alongside, or instead of, more established              better balance the intermittent supply from
alternatives like pumped storage, peaking               renewables, given that they can do so without
plants and interconnectors which are simply             any curtailment of renewables due to their
instructed when needed. One challenge has               ability to meet demand immediately.
been too few batteries in the BM to date, even
adding all batteries together, to provide the           Crucially, batteries can offer their services
required power most of the time, leading to             at a dramatically lower cost than gas-fired
larger alternatives being favoured and batteries        generation and are therefore much cheaper for
being under used.                                       National Grid to utilise for system balancing.

                                                                                                    Gresham House Energy Storage Fund plc (GRID)        14
Investment Manager's Report continued

Valuation
NAV per share has fallen from 100.79p per                                                                 NAV per Share (p/share) Bridge 31 Dec 19 to 30 Jun 20
Ordinary Share at 31 December 2019 to 98.16p            104.0p
per Ordinary Share at 30 June 2020. This
equates to a NAV Total Return of (0.02%) in the

                                                                                                                                                                                                                                                                                          (2.41)
                                                                                                                                                                                                                                                  1.98
                                                        102.0p
six month period.

                                                                                                                                                                                                                                                                                                                                         0.63

                                                                                                                                                                                                                                                                                                                                                                 (0.17)

                                                                                                                                                                                                                                                                                                                                                                                             (0.56)
                                                                                                                                                                                                       0.34
                                                        100.0p

                                                                                                                                                             (0.22)
                                                                                                            0.41
                                                                    100.79

                                                                                                                                                                                                                                                                                                                                                                                                                              (2.62)
Most of the reduction in NAV per share has
                                                         98.0p
come from a fall in the NPV of future project

                                                                                                                                                                                                                                                                                                                                                                                                                                                98.16
cash flows due to more conservative revenue              96.0p
forecasts from our third-party providers in the
wake of the reduced volatility curves during the         94.0p
COVID-19 pandemic. This can be seen in the
                                                         92.0p
valuations bridge below for H1 2020.
                                                         90.0p
The revenue forecasts used for valuations

                                                                                                                                                                                                                                                                                          Δ NPV of Future Cashflows

                                                                                                                                                                                                                                                                                                                                                                 Transaction fees
                                                                                                                                                                                                       Bank and Project Loan Interest
                                                                    NAV @ 31 Dec 19

                                                                                                                                                             Cost of Issue

                                                                                                                                                                                                                                                                                                                                         Δ W/C of portfolio

                                                                                                                                                                                                                                                                                                                                                                                                                              Dividends
                                                                                                                Shares Issued

                                                                                                                                                                                                                                                  Portfolio Interest

                                                                                                                                                                                                                                                                                                                                                                                                                                                 NAV @ 30 Jun 20
                                                                                                                                                                                                                                                                                                                                                                                             Fu nd Costs
reflect the pricing and volatility observed during
the low demand and low volatility environment
during the pandemic lockdown in the UK. The
Manager recommends valuing the portfolio
conservatively at this time but, as noted, in the
market update, there have been positive signs
of recovery since the easing of lockdown. This
suggests improvements are achievable versus
the forecasts.

The current forecasts used do not include
                                                                                                                                                                              Valuation                                                                        Increase                                                                  Decrease
any upside from the introduction of Dynamic
Containment or from the potential success of
the ongoing BM trial with National Grid. The
Manager is therefore confident that the current                                       Change in Valuations from December 2019 to June 2020
conservative valuations reflect a prudent
view of the value of the portfolio in the light of       £165.00m
COVID-19.
                                                         £160.00m
                                                                                                                                                                             £9.94m

                                                                                                                                                                                                                                   (£1.81m)

                                                         £155.00m
                                                                                                                                                                                                                                                                (£4.50m)

                                                                                                                                                                                                                                                                                                          (£5.96m)

                                                         £150.00m

                                                                                                                                                                                                                                                                                                                                                                                                                              £1.48m

                                                                                                                                                                                                                                                                                                                                                                                                                                                £150.99m
                                                                                                                                £12.29m

                                                                                                                                                                                                                                                                                                                                                                      (£0.74m)
                                                                                                                                                                                                                                                                                                                                                  £2.06m

                                                                                                                                                                                                                                                                                                                                                                                               £0.02m

                                                         £145.00m
                                                         £140.00m
                                                         £135.00m
                                                                                       £138.20m

                                                         £130.00m
                                                         £125.00m
                                                         £120.00m
                                                                                                                                                                                                                                                                Indexation assumptions
                                                                                                                                                                             New transaction to FV:
                                                                                Opening Valuation 31 December

                                                                                                                                                                                                                                                                                                                                                                                                                                                Closing Valuation 30 June 2020
                                                                                                                                                                                                                                   Roll Forward

                                                                                                                                                                                                                                                                                                                                                                      Site upgrade changes
                                                                                                                                                                                                                                                                                                                                                  Cost savings

                                                                                                                                                                                                                                                                                                                                                                                               Other NPV assumption changes

                                                                                                                                                                                                                                                                                                                                                                                                                              Working Capital
                                                                                                                                                                                                                                                                                                          Change in Revenu e forecasts
                                                                                                                                Additional Investment Cost
                                                                                            2019

                                                                                                                                                                                                      Valuations                                                                         Up                                      Down

15             Gresham House Energy Storage Fund plc (GRID)
Interim            Financial           Additional
Report             Statements          Information

 Gresham House Energy Storage Fund plc (GRID)        16
Environmental,
       Social and
       Governance
       Gresham House Energy Storage Fund’s projects fundamentally
       enable a cost-effective energy transition which we believe is both a
       social and environmental good as well as being cost-effective.

To date, the UK electricity system has been              It is also worth noting the positive influence     Supply chain
world-leading in terms of the reduction of               of the energy transition in terms of energy        Our project components are sourced from top
CO2 emissions it has achieved. However,                  security.                                          tier suppliers, such as LG Chem and Samsung
intermittent generation cannot continue to                                                                  SDI, both global leaders in lithium-ion battery
grow without a counter balancing stabilising             By decarbonising electricity and electrifying      manufacturing. These are highly reputable
influence, or the transition will become                 “everything”, the UK also reduces its              businesses each of which has their own publicly
increasingly challenging and costly; the risk of         dependence on imported fuel supplies.              available ESG reports which the Investment
costly curtailment or outages when renewables                                                               Manager has reviewed.
cannot provide will be significant.                      This means that from both an environmental
                                                         and people perspective, our ESS projects have      We are conscious of the fact that lithium,
Already an estimated 6% of all wind generation           a positive impact for the following reasons:       nickel and cobalt are all mined and have varying
is curtailed. This is due to generation being in                                                            reputations in terms of the labour sourced
excess of demand. Energy storage can make a              Æ      Supporting infrastructure that enables      and other issues. We intend to increasingly
material impact to reducing this curtailment if                 further investment into renewable energy    scrutinise our manufacturers so that they
present at the right scale. At the present time                                                             provide increasing transparency, particularly
there is insufficient energy storage capacity            Æ      Transition in power generation which took   as the use of these mined materials is likely to
to deal with this. Therefore, there is growth                   carbon emissions from 42.2MtCO2e in 1990    grow significantly due to continuing demand for
in demand for grid level battery storage. This                  to 106.0MtCO2e in 2017 and 98.3MtCO2e in    batteries over the coming years.
removes a loss of available renewable power,                    2018 (source BEIS)
removes a cost of both curtailment (generators                                                              Disposal of batteries
have to be paid to get off the system and                Æ      However, there is still a significant       It cannot be avoided that ESS projects still
thus for not generating) and the dialling up of                 challenge reducing emissions by over 90%    require substantial materials used in their
alternative generation. Today, Combined Cycle                   to meet the goal of 10g CO2/KWh by 2050     manufacture.
Gas Turbines (CCGTs) need to be used as the                     set by the Committee on Climate Change5
balancing force most of the time. A greater                                                                 To share the benefits first, a battery project
share of this balancing undertaken by battery            Æ      Increasing the security of energy supply    can import and export power many thousands
storage is more cost effective and boasts a                     where currently 36%⁶ of the UK’s energy     of times over many years before seeing a
lower level of emissions if the stored power is                 needs are imported in the form of oil and   meaningful reduction in performance. If this is
generated from renewable sources.                               natural gas for the most part               renewable power, then there is no meaningful
                                                                                                            incremental mineral extraction every time this
                                                         Æ      We estimate significant numbers of jobs     charging and discharging occurs.
                                                                will be created as c.30GW of ESS capacity
                                                                will be required, equivalent to c.1,000
                                                                projects in the next decade7
5. Source BEIS
6. Source House of Commons Library, 19 October 2018
7. Source Gresham House Research

17               Gresham House Energy Storage Fund plc (GRID)
Interim                Financial               Volutpat
                                                                                                                                                Additional
                                                                                                 Report                 Mauris
                                                                                                                        Statements
                                                                                                                               sit              odio
                                                                                                                                                Information
                                                                                                                                                     facilisis

                                                       Gresham House supports the UN’s Sustainable Development Goals and we believe our New
                                                                      Energy strategy contributes to the following four goals:

By comparison, fossil-fuel powered generation
plants only gets to use the fuel that has been
extracted, processed and transported once.
At their end of life, battery disposal is an
obligation of the EPC contractor who imports
a battery or the original manufacturer. Over
time, it is expected that recycling technologies
will be developed to ensure environmentally                                                           Community care
                                                                                                      and engagement
sustainable disposal and reuse of these raw
materials.                                                                    Marketplace
                                                                                                                                      Supply chain
                                                                              responsibility
                                                                                                                                     sustainability
Environmental standards at sites
All projects are developed with demanding
environmental standards in mind. Historically             Carbon, emissions                                                                        Employment, health,
some projects have included elements of diesel            and pollution                                                                           safety and well-being

                                                                                                                       S
and natural gas generation capacity but with an                           
expectation that they would be used very rarely.
This remains the case. Many of the legacy diesel
                                                                                        ENVIRONMENT                    SOCIAL
installations have now been decommissioned
– and are now planned to be used in “force
majeure” situations only. Gas generation may be                                                                                                         Governance
                                                                                                                                                         and ethics
used more frequently.                                                   

                                                                                                      G
                                                     Natural resource
                                                     management
All new projects are being built with only battery
capacity. This is now possible as the cost of                                                     GOVERNANCE
                                                                                                   OVERNAN
batteries has fallen.                                                                                                                         Commitment to
                                                                                                                                                 sustainability
All our sites comply with all standards set either                      Waste
by the local councils or by DEFRA.                                      management

                                                                                                                    Risk and
                                                                                                                  compliance

                                                                                                  Gresham House Energy Storage Fund plc (GRID)                     18
Board and
 Investment Team

 Investment Team

Ben Guest                       Bozkurt Aydinoglu             Gareth Owen                 Rupert Robinson            Stephen Beck
Managing Director,              Investment Director,          Investment Director,        Managing Director,         Finance Director,
New Energy                      New Energy                    New Energy                  Gresham House Asset        Real Assets
                                                                                          Management Limited
Ben has over 20 years of        Bozkurt dedicated the         Gareth was a Partner                                   Stephen has 24 years
investment experience,          early part of his career      at Hazel Capital (now       Rupert is the              of industry experience
Ben’s expertise                 to funding and advising       Gresham House New           Managing Director          and is a law graduate
spans the investment            companies in the              Energy) and has over        of Gresham House           and Barrister and was
spectrum, across                telecommunications            18 years experience         Asset Management           called to the Bar in
infrastructure, public          and technology                executing structured        Limited and has 30         1996. He is also a Fellow
equities and venture            industries, whilst in roles   transactions across a       years experience in        of the Institute of
capital.                        at Nomura, Salomon            variety of sectors.         asset management and       Charted Accountants of
                                Brothers, Bowman                                          wealth management,         England and Wales and
Ben is responsible for          Capital and Deloitte &        Before Hazel Capital,       focused on product         qualified with Price-
the origination and             Touche.                       Gareth worked at            innovation, investment     waterhouseCoopers.
execution of investment                                       Barclays Natural            management, business
opportunities at                In 2002, Bozkurt co-          Resource Investments,       development, banking       He leads an inhouse
Gresham House,                  founded and built New         a captive private equity    and wealth structuring.    finance team
alongside ongoing               Energy Finance (NEF),         fund investing in the                                  managing; New
portfolio management.           which became the              natural resource and        Rupert was previously      Energy, Renewables,
                                leading provider of data,     renewable energy            CEO and CIO of             Commercial Forestry
Ben currently serves            research and analysis to      sectors.                    Schroders (UK) Private     and Housing sectors.
as a Director of over 40        investors in the global                                   Bank and head of private
companies and until             cleantech industry.           Prior to this, Gareth       clients at Rothschild      Prior to this, Stephen
recently was the Non-           NEF was acquired by           worked in the Structured    Asset Management           worked at E.ON from
Executive Chairman of           Bloomberg in December         Capital Markets divisions   Limited.                   2000, where he held
Oxis Energy, a UK-              2009.                         of Barclays Capital                                    a variety of financial
advanced battery power                                        and Deutsche Bank,                                     and commercial roles,
company.                                                      handling the acquisition                               ranging from leading
                                                              and disposal of various                                large finance teams,
                                                              asset-based companies.                                 developing power
                                                                                                                     station projects,
                                                                                                                     M&A transactions
                                                                                                                     and working with HM
                                                                                                                     Government delivering
                                                                                                                     low carbon solutions.

19          Gresham House Energy Storage Fund plc (GRID)
Interim             Financial           Additional
                                                                                                Report              Statements          Information

The Company has a Board of four Independent         The Board’s requirements for vacancies on             However, the Board is aware of the tenure limits
Non-Executive Directors. The Company has no         the Board are set with reference to objective         prescribed by the AIC Code and, supported by
Chief Executive.                                    criteria and promote diversity of gender, social      its Remuneration and Nomination Committee,
                                                    and ethnic backgrounds, cognitive and personal        the Board annually assesses the need for
The Board has 25% female representation. The        strengths.                                            long term succession planning to support the
Board has also adopted a formal diversity policy                                                          Company’s growth.
and considers diversity on the Company’s Board      Further, the Board reviews, at least annually,
as an important supplement to the Boards            its effectiveness and its combination of skills,
existing skills, experience and knowledge.          experience and knowledge.

All appointments to the Board are, and will         The Board has been in situ for approximately 16
continue to be, subject to a formal, rigorous and   months and considers succession planning for
transparent procedure as required by the AIC        existing Directors to be premature at this stage.
Code.

Board

John Leggate, CBE FREng                Catherine Pitt                           David Stevenson                           Duncan Neale
Chair and Independent Non-             Independent Non-Executive                Independent Non-Executive                 Audit Committee Chair and
Executive Director                     Director                                 Director                                  Independent Non-Executive
                                                                                                                          Director
John is highly experienced as an       Cathy is a legal adviser who has         David is a financial journalist
energy sector executive and is         specialised in the investment            and commentator for a                     Duncan is a CFO and Finance
a venture investor in the ''clean      company sector for over 20               number of leading publications            Director with over 20 years
tech'' and digital technologies.       years. Cathy is currently a              including The Financial Times             of commercial experience
                                       partner at CMS, a top ten global         (the Adventurous Investor),               working for both publicly
John has significant board             law firm. Prior to joining CMS,          Money Week and the Investors              listed and privately owned
experience and is currently on         Cathy worked in the Asset                Chronicle. He is also Executive           companies.
the Board of cyber security firm       Management Practice of                   Director of the world's leading
Global Integrity in Washington         another top ten global law firm          alternative finance news and              Duncan is a Fellow of the
DC and is a senior advisor to an       for almost 20 years, for eight           events service www.altfi.com,             Institute of Chartered
international strategic advisory       of which she was a partner.              which focuses on covering                 Accountants and qualified with
consultancy specialising in the        Cathy's work has encompassed             major trends in marketplace               Price Waterhouse in London.
energy sector.                         investment fund structuring              lending, crowdfunding and
                                       and fund raisings for domestic           working capital provision                 Duncan was appointed to the
John was appointed to the              and international investment             for small to medium sized                 Board on 24 August 2018.
Board on 24 August 2018.               funds. Since September 2018,             enterprises.
                                       Cathy has been a member of                                                         Significant interests:
Significant interests:                 the Law Society Company Law              David was appointed to the                Duncan is a trustee of the
John is a Director of Flamant          Committee. She also sits on              Board on 24 August 2018.                  Cambodian Children’s Fund
Technologies and Global                the Regulatory and Governance                                                      UK and a Director of DJN
Integrity Inc.                         Committees of Listed Private             Significant interests:                    Consultancy Limited.
                                       Capital (LPeC), the industry             David is a Director of Aurora
                                       association for listed private           Investment Trust plc; 321
                                       capital funds.                           Publishing and TV Limited;
                                                                                Altfi Limited; Altfi Data
                                       Cathy was appointed to the               Limited; Bramshaw Holdings
                                       Board on 1 March 2019.                   Limited; ETF Stream Limited;
                                                                                Planet Sports Rights Limited;
                                       Significant interests:                   Rocket Media LP; SQN
                                       Cathy is a former Partner                Secured Income Fund plc;
                                       at CMS Cameron McKenna                   Stockmarkets Digest Limited;
                                       Nabarro Olswang LLP.                     and Windhorse Aerospace
                                                                                Limited.

                                                                                                  Gresham House Energy Storage Fund plc (GRID)        20
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