The Gresham House Energy Storage Fund (GRID) has entered into long-term floor pricing agreements with counterparties Statkraft and Markel Bermuda, totalling 789MW.
The deals cover 412MW of battery energy storage system (BESS) capacity with Statkraft Markets GmbH starting in 2025 and 2027, and 377MW of capacity with Markel Bermuda, part of insurance firm Markel Group, which kicks in once a debt refinancing is completed ‘shortly’, GRID said.
That totals 789MW, around 74% of GRID’s 1072MW BESS portfolio, some of which still needs to enter commercial operation during the period. The firm is one of the largest owners of BESS in the UK.
Floor agreements will replace Octopus toll
The agreements will fully kick in once GRID’s two-year 568MW tolling deal with Octopus Energy, which started in June 2024, ends, though will partially kick in before that.
Once the toll expires, the floors will provide GRID with minimum annual contracted revenues of £35 million while still allowing GRID to capture additional revenues above that level. The firm said this improves its risk-adjusted return characteristics.
Though not specified by GRID, revenues above the minimum floor are typically shared by owner and offtaker. That is different to a toll, where a fee is paid by the offtaker for some or all of a project’s capacity and financial performance, with no revenue or profit-sharing.
Those floor revenues do not include Capacity Market (CM) revenues for the projects, which will amount to £11 million in 2026, GRID added, meaning a total of £46 million in minimum revenues.
The toll with Octopus meanwhile provided £43 million in annual revenues across 568MW, including CM revenues, so the two deals are hard to compare.
Executives from both Octopus Energy and GRID discussed the toll deal with our sister site Energy-Storage.news at the time, in separate articles available for ESN Premium subscribers.
Floors to help unlock refinancing
GRID said the floors are key to unlocking advantageous terms for its previously announced new debt facility, which is due to refinance existing debt facilities shortly, with the aim that future debt servicing will be fully covered from cash flow derived from contracted revenues. GRID expects to sign additional contracts on operational projects with a further investment-grade counterparty ahead of concluding the refinancing.
The refinancing will allow for augmentation of existing projects, a revised dividend policy and new pipeline construction.
GRID manager Gresham House Asset Management estimates that once the Octopus toll ends and the floors kick in, around 50% of the portfolio’s revenue will be contracted. The disparity between that and the portion of the portfolio (74%) reflects it being a floor, but also that merchant revenues are expected to increase in the next 12 months.
John Leggate CBE, Chair of Gresham House Energy Storage Fund, commented: “Being able to demonstrate to lenders that GRID has de-risked revenue streams is key to unlocking more favourable and longer-term financing terms with less onerous covenants. Along with a third agreement, which we expect to conclude soon with a separate counterparty, this revenue floor model will deliver contracted minimum revenues on the majority of our assets, meeting our needs to cover debt servicing obligations whilst retaining opportunities to access upside revenues.”
Nephila
The 377MW deal is with Markel Bermuda subsidiary Nephila, an investment management firm which Markel acquired in 2018. It is structured as an International Swaps and Derivatives Association (ISDA) agreement.
It will come into force upon the completion of GRID’s refinancing, at which time a premium will be paid to guarantee a floor of £52,000 per MW per annum for over seven years, subject to the performance of the assets.
Three agreements will come into force once that premium has been paid: two for the 100MW Melksham project and one for the 50MW Elland project.
One agreement, for the 50MW York project, will start once it has been augmented.
Three agreements covering the 40MW Shilton Lane BESS and two for the 87MW West Bradford system are aligned to the expiry of their current counterparty agreements.
Finally, an agreement with Thurcroft (50MW) is aligned to the expiry of its current counterparty agreement and following augmentation to a 2-hour-plus duration.
Statkraft
The agreement with power generation and trading firm Statkraft comes into force between 2025 and 2027 following an augmentation of the assets to at least 2-hours.
Two agreement start immediately: Nevendon (15MW) and Cleator (10MW). Meanwhile agreements for Arbroath (35MW), Bloxwich (41MW), Byers Brae (30MW), Coupar Angus (40MW), Grendon (50MW), Red Scar (49MW), Roundponds (20MW), Rufford (7MW), Stairfoot (40MW), Tynemouth (25MW) and Wickham (50MW) come into force either from the end of their current counterparty agreement and/or from completion of an augmentation.
