Gresham House has just announced the signing of fixed-price contracts with Octopus Energy, the UK’s leading electricity supplier. These contracts cover a total capacity of 568MW, representing around half of GRID’s target portfolio of 1,072MW. This initiative is designed to stabilize GRID’s revenues while providing a degree of cash flow predictability.
Income stabilization and financial security
These agreements allow Octopus Energy to pay a fixed fee per MW in exchange for the use of GRID’s batteries. The royalty is based on the life of the assets and excludes Capacity Market payments, which the projects will continue to receive separately. With the inclusion of Capacity Market revenues across the portfolio, GRID expects annual contract revenues of around £43 million over the life of these arrangements. These contracts provide GRID with greater financial security, enabling better cash flow management and reducing the risks associated with energy market fluctuations. The finalization of these agreements coincides with the completion of projects to build and/or increase certain assets, ensuring a smooth transition to integration with Octopus Energy.
Strategic and market implications
The partnership with Octopus Energy marks an important step in GRID’s strategy to diversify its revenue sources. John Leggate CBE, Chairman of Gresham House Energy Storage Fund plc, says this balanced mix of contract and merchant revenues offers shareholders a superior risk-adjusted target return while reducing direct exposure to electricity market fluctuations. Meanwhile, Ben Guest, Fund Manager at Gresham House Energy Storage Fund plc, points out that these fixed-price contracts guarantee revenues at levels currently higher than those obtained on the national wholesale and balancing markets. This diversification of income through alternative and innovative opportunities has long been a key objective of GRID’s Board of Directors.
Future prospects and developments
This agreement enables GRID to contract around 50% of its portfolio with Octopus Energy, thus ensuring a reliable level of income. The remainder of the portfolio will continue to be exposed to market prices, offering upside potential in an improving income environment. Collaboration with major energy suppliers like Octopus could become a model for other players in the sector.
GRID anticipates that this strategy will enable it to better meet investor expectations while consolidating its market position. The ability to secure stable revenues is essential to maintain investor confidence and guarantee the long-term viability of energy storage projects.
