Gresham House targets $129m storage fund deployment in six months

UK-based fund manager Gresham House is looking to fully invest its London-listed £100 million ($128.5 million; €114.2 million) energy storage fund in about six months, according to Ben Guest, head of the firm’s New Energy division.

The group concluded fundraising for the Gresham House Energy Storage Fund at the end of last week, reaching £100 million of commitments ahead of an initial £200 million target. Some £57.2 million will be spent immediately to acquire the seed assets for the fund, comprising 70MW across five operational sites.

Guest predicts the remainder will be spent within six months, but noted the fund manager has a 12-month window to deploy the fund if necessary. A pipeline of up to 300MW has already been identified, and Gresham House has exclusivity over 182MW of that total. The fund manager is likely to head back to the market in the second quarter of next year to raise further funds.

“I think the fundraising at this level puts us in the lead in the UK,” he told Infrastructure Investor. “I hope and expect to come back to the market to raise further funds. We’re looking for a total [NAV] return for investors of 8 percent unlevered, 15 percent levered. The market backdrop feels more and more positive because we have more and more renewable energy being commissioned.”

Asked why the £200 million target wasn’t reached, Guest said a combination of general market conditions and the relative immaturity of the energy storage market deterred some investors.

“The strategy has not raised significant amounts of money yet, so in some ways it is untested and unproven,” he explained. “I think the market is not that familiar with it yet, combined with the fact it is a merchant business opportunity, despite it being very profitable and with downside protection. I think people are more wedded to subsidised or contracted revenues.”

Gresham’s fund is the second energy storage vehicle to list in London this year and fall short of its aims. The Gore Street Energy Storage Fund was launched by Gore Street Capital in March and raised only £30 million from a £100 million target. Swiss firm SUSI Partners closed an unlisted storage fund on €252 million in May, although Guest believes the listed model has strategic advantages going forward.

“We didn’t have a massive preference of [listed] over [unlisted],” he said. “One of the attractions of doing a listed fund when it’s an early-stage fund is that you can target high returns for investors and the early investors have an opportunity to be rewarded for their confidence in the strategy. You will get yield compression that will drive the NAV and the share price,” Guest continued. “We will raise money at the higher share price which helps cement and compound that return, so it’s rewarding to the early investor.”