Renta 4 | Grenergy has announced the award of capacity contracts for four storage projects in the UK, with an aggregate nominal power of 190 MW and a total capacity of 760 MWh, in the latest auction organised by NESO (National Energy System Operator), the UK’s electricity system operator.
The contracts will begin to provide stability to the grid from October 2029 and will run for 15 years, with remuneration at a fixed price indexed to inflation of GBP 27.10/kW, implying a minimum financial allocation of over €40 million over the contract period.
Capacity revenues will form part of the projects’ revenue stack, which will be supplemented by revenues from the sale of electricity and participation in various electricity markets, including ancillary services.
Additionally, Grenergy has secured a solar contract for difference (CfD) for one of these projects, Fibden (53 MWp + 160 MWh), also awarded via auction. The contract will run for 20 years, commencing in March 2028, and will guarantee minimum revenues of approximately £55 million over the contract period.
Assessment: Positive news from both an operational and strategic perspective. The award strengthens Grenergy’s position in the development of storage projects in European electricity markets and marks the company’s entry into the UK market, one of the most developed in Europe in terms of batteries, in line with the storage growth strategy it has been implementing in recent years.
From a business model perspective, the revenue structure (combining long-term capacity payments indexed to inflation with additional revenue from electricity markets and ancillary services) provides long-term visibility and stability, reducing exposure to spot price volatility and improving the risk-return profile of the projects.
However, in terms of valuation, and despite the news confirming the successful execution of the investment plan, we believe that the current share price already largely reflects the expected growth. Following the sharp re-rating of the share in recent quarters, current levels still appear demanding to us, and we therefore reiterate a cautious stance pending new catalysts or more attractive entry points. Consequently, we reiterate our Hold recommendation, with a Target Price of €70.55 per share.
