Powering the renewable

energy transition

Gresham House Energy Storage Fund plc (GRID)

Accounts as at 31 December 2021

2021

31 December

Gresham House Energy Storage Fund

plc (GRID, the Fund or Company) invests

in a portfolio of utility-scale operational

Battery Energy Storage Systems (BESS) in

Great Britain.

Real time energy storage

to address supply-demand

imbalances on the

National Grid.

Annual Report

02 Highlights

03 Chair's Statement

07 Investment Manager's Report

17 Sustainability Report

29 Strategic Report

39 Board and Investment Team

41 Director's Report

45 Director's Remuneration Report

49 Corporate Governance Report

53 Audit Committee Report

56 Remuneration Committee Report

57 Nomination Committee Report

59 Management Engagement Committee Report

61 Independent Auditor’s Report to the Members

of Gresham House Energy Storage Fund plc

Financial Statements

67 Statement of Comprehensive Income

68 Statement of Financial Position

69 Statement of Changes in Equity

70 Statement of Cash Flows

71 Notes to the Financial Statements

Additional Information

89 Alternative Performance Measures

92 Company Information

93 Glossary

For more information visit

www.greshamhouse.com/gresham-house-energy-storage-fund-plc

Gresham House Energy Storage Fund plc (GRID)

NAV per share (pence)

(as at 31 December 2021)

Company profit & total comprehensive

income profit (£mn)

(for the year ended 31 December 2021)

Company Financial Highlights Performance Highlights

 Net Asset Value (NAV) as at 31 December 2021

rose to £511.7mn or 116.86p per share (HY 2021:

109.89p / FY 2020: 102.96p).

 Fully Operationally Covered Dividend of 7.0p

for the year, equivalent to a 5.4% dividend yield

based on the closing share price of 130.5p on 31

December 2021.

 The Board reaffirms a target dividend of 7.0p

for 2022 and expects full Operational Dividend

Cover from underlying earnings in the portfolio

again in 2022. The Company will balance

future targeted dividends with increases in

Operational Dividend Cover.

 £100mn equity raised in July 2021 taking total

share issuance under the Prospectus published

in November 2020 to £220mn gross proceeds.

Deployment of the equity is progressing well

with 415MW of Battery Energy Storage Systems

(BESS) under construction as at 31 December

2021.

 Debt process successfully completed in

September 2021 unlocking a £180mn total debt

facility made up of £150mn capex facility and

an additional £30mn working capital facility

significantly improving the Company’s future

cost of capital when drawn down.

116.86p

£80.4mn

Total gross equity funds raised (£mn)

(for the year ended 31 December 2021)

£100.0mn

Operational Highlights

 The underlying investment portfolio generated

revenues of £51.4mn (2020: £16.1mn) and

EBITDA of £42.5mn, an increase of 172% over

2020 (2020: £15.6mn).

 With 425MW of operational capacity and a

market share of 30% as of 31 December 2021,

GRID remains the UK’s largest operational

battery energy storage portfolio. Share

Purchase Agreements (SPAs) relating to a

further 425MW were signed during the year,

of which 375MW were under construction as

at 31 December 2021. The total in construction

is 415MW. This includes the Stairfoot project

which is not yet subject to a signed SPA. Total

operational portfolio, assets in construction

and future pipeline together currently stand at

1,557MW.

1. Alternative Performance Measures are defined and calculated

on pages 89 to 91 of the Annual Report

2. 415MW in construction includes Stairfoot (40MW). This site is

under construction by Gresham House DevCo Limited but the

Share Purchase Agreement with the Company / MidCo has not

yet been signed

3. Debt facility raised through the Company’s wholly owned

subsidiary Gresham House Energy Storage Holdings plc (MidCo)

4. Financial performance of the underlying investment portfolio

contributes to the valuation of investments through growth in

working capital balances. Earnings greater than forecasted in

prior valuations will increase valuations and hence NAV

Dividend per Ordinary Share (pence)

(for the year ended 31 December 2021)

7.0p

Ordinary Share price total return since IPO

(for the period from IPO to 31 December 2021)

51.5%

Alternative Performance Measures4

NAV per Ordinary Share total return

(unlevered)

(total return for the year to 31 December 2021)

20.3%

116.86p

102.96p

Dec 21

Dec 20

7.0p

Dec 21

Dec 20

51.5%

23.1%

Dec 21

Dec 20

20.3%

8.4%

Dec 21

Dec 20

£100.0mn

£151.2mn

Dec 21

Dec 20

£80.4mn

£18.7mn

Dec 21

Dec 20

Chair's

Statement

On behalf of the Board, I am delighted to present the

audited Report and Accounts of the Gresham House

Energy Storage Fund plc (GRID, the Fund or the

Company) for the year ended 31 December 2021.

Invasion of Ukraine

Firstly, the Board and the Investment Manager

are closely following the global response to

Russia’s invasion of Ukraine and considering

the potential impact on energy markets and

the Company’s business. For the moment,

the indications are pointing to an increased

penetration of renewable energy globally with

an associated growing demand for energy

storage projects.

The Board and Investment Manager are closely

following the global response to Russia’s

military intervention in Ukraine, and the ensuing

humanitarian crisis, as well as considering the

potential impact on financial markets, energy

security considerations, power price volatility

and the Company’s business model. In terms of

impact on the Company’s longer-term outlook,

for the moment, the indications are pointing

towards a much faster rollout of renewable

energy globally with an associated increasing

demand for energy storage projects.

Performance update

2021, our third full calendar year since IPO in

November 2018, has seen GRID delivering key

milestones and gain significant momentum.

Financially, the Investment Portfolio has

performed well, with Operational Dividend

Cover

improving to 1.32x (2020: 0.77x) as

EBITDA from the underlying investment

portfolio reached £42.5mn on revenues of

5 “Operational Dividend Cover” is one of the Alternative Performance Measures, which are defined and calculated on pages 89 to 91 of the Annual

Report

6 The Company considers the operational performance and future opportunities of the underlying investment portfolio to be of importance to

understanding the performance of the Company in the year, as underlying performance supports the flow of cash earnings to pay dividends to

investors and provides evidence of the investment portfolio business model and valuation of the Company’s investments

7 Total in construction is 415MW including Stairfoot (which is not yet subject to an SPA)

£51.4mn, driving an EBITDA margin of 83%.

Throughout 2021, the NAV rose steadily (an

increase of 13.5% for the accounting period),

driven mostly by gains from the revaluation of

projects as they become part of the operational

fleet of investments, reflecting the attractive

cost of the projects the Manager has sourced

compared with the weighted average discount

rate.

Investor demand has rewarded the Company’s

achievements with a further gain in the

Share Price Total Return since IPO which has

reached 51.5% through to 31 December 2021,

which in turn equates to an annual compound

return of 14.2%. The Company’s share price

continues to trade at a premium to NAV and still

demonstrates good value, particularly given

the growth in value anticipated through 2023,

from the increase in operational MWs and the

benefit expected from additional Capacity

Market contracts awarded in February. These

were announced on 28 February 2022 and

are therefore not included in the NAV as at 31

December 2021.

Complementing this revenue growth, the

Investment Portfolio maintained strong growth

momentum, with operational capacity

of the

portfolio rising by 110MW to 425MW during 2021

and signing SPAs relating to a further 425MW, of

which 375MW

were under construction by the

end of the year.

The total UK BESS market has grown to c.1.4GW

and is expected to grow substantially in the next

three to five years.

John Leggate CBE, FREng

Non-Executive Chair,

Gresham House Energy Storage

Fund plc Board

Read more about the highlights of the Fund

See page 02

KPIs

 2021 Dividend per share: 7.0p

 Profit: £80.4 million

 Number of projects: 24

 Connection capacity: 425MW

Connection capacity (incl. pipeline):

1,557MW

Gresham House Energy Storage Fund plc (GRID)

It is the Board’s ambition to maintain a

leadership role in the sector. While deployment

of the existing pipeline is key to delivering the

Company’s ambitions over the next 18 months,

the Board expects to utilise the debt capital

secured in 2021 as well as the potential further

accordion facility during 2022, in order to

acquire the additional pipeline necessary to

establish a further significant growth path in

2023 and beyond.

Securing debt of £180mn

, attractively priced

at 300bps over SONIA, with an uncommitted

accordion finance facility of up to £200mn

in September was a significant milestone,

demonstrating how the industry has matured

since IPO. It reinforces GRID’s place as a leader

in this market, being the first battery energy

storage fund to unlock a significant term-debt

facility. These funds are allowing the Company

to bring down its cost of capital as they are

drawn down.

The Irish and other international markets

are also burgeoning and another first for the

Company has been to secure a 180MW pipeline

in the Republic of Ireland, which is expected to

commission in 2024.

Portfolio, transactions, and pipeline

As reported in the 2021 Interim Results, the

Company added 110MW of operational capacity

to its investment portfolio in the first half of

2021, concluding transactions initiated in 2020.

Throughout the year, the Investment Manager

has also focused on completing due diligence

on projects in its exclusive pipeline, signing

SPAs on 425MW in order to launch its next

phase of growth. Of these 425MW, 375MW

were

already under construction at the end of 2021.

Additional projects will be put into construction

during 2022.

As indicated in the Company’s Trading Update

released on 6 January 2022, the Company

intends to invest in portfolio projects with at

least a 2-hour battery life. In recent weeks, the

Board has agreed to upgrade all existing EFR

projects (which see their contracts expire in HY1

2022 and currently have sub-1-hour duration

systems) to 2 hours as well as building much of

the pipeline out to 2 hours. The transition to 2

hours reflects that the investment portfolio ‘s

revenue mix is shifting to trading (as opposed to

Frequency Response), justifying projects with

longer durations in general.

8 Debt facility raised through the Company’s wholly owned subsidiary Gresham House Energy Storage Holdings plc (MidCo)

9 Total in construction is 415MW including Stairfoot (which is not yet subject to an SPA)

More specifically, increased EBITDA from

2-hour projects should result in an improved

return on capital employed. Given the

substantial slate of investment projects in

construction as well as additional pipeline,

the Investment Manager’s focus during 2022

is on deployment and pipeline execution.

This is particularly important as supply chain

challenges reported across the economy are

impacting the Company in various ways. All

challenges so far have proved surmountable

and within budget, but occasionally causing an

incremental delay. Most of these delays were

reflected in the updated pipeline table in the

January 2022 trading statement; however, the

Company has encountered further potential

delays on a subset of projects. The updated

commissioning timetables are reflected in the

portfolio and pipeline summary tables in the

Investment Manager’s report on page 9.

In addition, to continue to drive growth, the

Investment Manager will press on with its

pipeline for deployment in 2023 and beyond.

Fundraising and investment pipeline

During the period, the Company raised

£100mn equity from share issuance under the

Prospectus published in November 2020. The

equity issue was significantly oversubscribed.

However, the Company stuck to its £100mn

target to ensure the Company maintains capital

discipline and minimises cash drag: put simply,

it raises the amount needed when it is needed.

In the second half of 2021, the Company’s

wholly owned intermediate holding company,

Gresham House Energy Storage Holdings plc,

agreed a five-year debt facility for £180mn with

a syndicate of banks including Commonwealth

Bank of Australia, Lloyds Bank, NatWest, and

Santander. By obtaining this facility for the

Group, the Company is taking a measured

approach to leverage and optimising the future

capital structure on attractive terms.

The debt facility secures finance for the pipeline

investments currently under construction and

for a portion of the future investment pipeline.

The Company also has an uncommitted

accordion facility for up to £200mn which

will be explored in order to execute on the full

pipeline tabled in the Investment Manager’s

Report and any additional pipeline secured.

Investment performance

The Company performed strongly during the

year. The investment portfolio generated

EBITDA from the underlying assets of £42.5mn,

from net operating revenues of £51.4mn, both

ahead of the valuation model assumptions,

supporting the payment of dividends by the

Company and valuation of investments.

In the period, the investment portfolio

underlying revenues were generated mostly

from Frequency Response (FR) contracts

(82.2%), while the remainder came from trading

(11.5%), Capacity Market (CM) contracts (5.8%)

and a small contribution from TRIAD income

(0.5%).

It is worth highlighting how the investment

portfolio revenue mix in the investment

portfolio changed in Q4 2021, when FR

represented 71.7%, trading 22.1% and CM 6.2%.

This change was anticipated in the Company’s

interim report, as the Investment Manager had

expected, for some time, that the FR market

would become saturated.

As the market shifted, the Investment Manager

was able to combine trading and FR services

to earn higher returns than from either alone.

It is pleasing to see the Company being a first

mover once again, adapting and transitioning to

new opportunities as they appear (as was also

shown when Dynamic Containment was first

launched back in October 2020).

The commoditisation of the FR market has

revealed the underlying attractiveness of

trading, where the revenue potential, as

expected, is not significantly lower than

what has been achievable from FR (and DC in

particular). Nonetheless, revenues from trading

are expected to be lower than DC in 2022. As

such, the Company’s financial forecasting has

embedded a like for like decline in forecasted

revenues per MW in 2022, as it transitions to a

trading-centric business model.

Offsetting this potential for lower revenues

per MW, is the commissioning of investment

projects under construction, which have been

developed for a lower cost per MW than the

pre-existing portfolio. Combined with the

lower cost of capital supporting the future

pipeline, due to a significant proportion of

lower-cost debt in the future capital mix, this

is reducing the revenue hurdle per MW which

the Company needs to generate to cover the

7.0p annual targeted dividend. The Investment

Manager expects that this will be reflected

in improvements in Operational Dividend

Cover over the medium term. The Company

will balance future targeted dividends with

increases in Operational Dividend Cover.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Net Asset Value and results

During the period, the NAV per Ordinary Share

rose from 102.96p on 31 December 2020 to

116.86p on 31 December 2021. This increase was

primarily driven by cash generation in excess

of dividends, upward revaluation of projects

(acquired and owned for at least 60 days) and

by projects acquired pre-construction and

expected to commission within nine months

(see further explanation below). Improving

trading forecasts and a reduction in the

discount rate for merchant income from 11.1%

to 10.85% also contributed to the increase.

These upward drivers more than offset a

negative impact of c.1.5p from changes to

the corporation tax regime (whereby taxes on

UK companies will increase from 19% to 25%

from FY 2023) prior to modelling of additional

tax efficiencies, which was reported in the

Company’s Interim results in 2020.

The Board, in conjunction with the Company’s

appointed independent valuer, Grant Thornton,

reviewed the discount rates used to calculate

the weighted average discount rate ahead of

the Q3 NAV announcement in October. While

the 5% discount rate remains unchanged for

CM revenues, the Board determined that the

discount rate for all other revenue streams

could be reduced from 11.1% to 10.85%. A

further change was also agreed: to revalue

acquired assets under construction sooner,

provided they are within nine months of

commissioning. To reflect the increased risk

profile, a higher discount rate, of 5.5% and

11.35% respectively, is used to calculate the

NPV of these projects.

10 Alternative Performance Measures are defined and calculated on pages 89 to 91 of the Annual Report

The Board and Investment Manager are

comfortable that the discount rates used are

both conservative and appropriate for the risk

profile of BESS and will continue to monitor

performance against forecasts before making

any further changes to discount rates.

These changes have reduced the weighted

average discount rate on operational sites to

10.57% at the end of 2021 (2020: 10.80%) and

on in-construction assets to 11.35% (2020: n/a).

The weighted average discount rate for the

overall investment portfolio for the year ended

31 December 2021 was 10.77% (2020: 10.80%).

Dividends

Operational Dividend Cover

in 2021 was 1.32x.

It is gratifying that the existing operational

portfolio achieved Operational Dividend Cover

despite uninvested cash on the balance

sheet. Thus, we expect the commissioning of

additional projects to see Operational Dividend

Cover, on the current shares outstanding, to

improve further in the medium term. The Board

intends that full Operational Dividend Cover

is maintained across any calendar year, with

sufficient operating cash reserves set aside in

the event of excess Operational Dividend Cover.

As noted above, the deployment of the equity

capital raised in 2021 and the secured debt

facility, will take place during 2022. This is

expected to lower the revenue per MW from

the underlying investment portfolio which is

required for the Company to meet its target

dividend of 7.0p per share.

Accordingly, the Board remains confident

that the current level of dividend is well

supported and will continue to monitor dividend

commitments in line with commissioning of

projects and resulting growth of earnings from

the Company’s underlying investments.

Climate change

The Company has considered climate change

risks and our response. These are outlined

on page 26. The Company is in an excellent

position to underpin the transition to Net Zero.

Investment policy and growth ambitions

A supportive UK market backdrop and

continued deployment of capital into a large and

attractively-priced pipeline using a lower cost

of capital bodes well for improving Operational

Dividend Cover and NAV growth.

After a hiatus of sorts in 2020, when

installations of renewables rose by c.900MW

in 2020, 2021 was expected to add at least

1.5GW and further strong growth is expected

as offshore wind projects from 2017 and 2019

contract for difference (CfD) auction rounds are

commissioned. The potential easing of planning

restrictions for renewables projects in response

to reducing reliance on Russian gas would

further drive the rollout of renewables. Beyond

these business-as-usual elements, there are

two sources of value that the Company would

like to pursue which would require amendments

to the Company’s Investment Policy, for which

shareholder approval will be sought.

Chair's Statement continued

Gresham House Energy Storage Fund plc (GRID)

These amendments are laid out below and will

be communicated formally, including details of

other, less material, proposed changes, via a

circular which is to be published shortly.

The first of these proposals is that the Company

be authorised to take development risk (i.e.

acquire investments in the pre-construction

stage) up to 10% of GAV

. This proposal would

extend only to ready-to-build projects and not

to riskier, greenfield project development. To

date, project rights have been acquired on

behalf of the Company by Gresham House

DevCo Limited (Gresham House DevCo), an

affiliate of the Investment Manager, with

the developed project being subsequently

acquired by the Company. The Board believes

that moving past this arrangement would offer

the Company some key benefits, including

an approximately 5-7% lower total cost of

acquisition going forward and the potential to

generate stronger growth.

The second of the proposals relates to

international expansion. The Board intends

to propose an amendment to the Company’s

investment policy to extend the current

permission to make investments in Ireland to

enable the Company to invest internationally

in similar markets up to an exposure of

30% of GAV. As part of this amendment,

certain attractive international investment

opportunities may be designed to include some

solar generation equipment, either to make

them possible, or to optimise the design.

11 GAV is defined in Alternative Performance Measures: it includes debt within MidCo as well as Gross Assets in the Company

It may therefore be proposed that up to 20%

of the international investment allocation (i.e.

6% of total GAV) could be allocated to solar

photovoltaic (PV) equipment. There is no

intention to invest in what could be thought of

as solar projects with collocated batteries; solar

PV equipment would always be the minority

element.

The Board and Investment Manager are

acutely aware of how quickly renewable energy

penetration is increasing abroad as countries

all over the world aim for Net Zero. This

naturally unlocks a need for BESS expansion

in those markets and represents a significant

opportunity for the Company to leverage

its demonstrated capabilities. While the UK

remains a market with plenty of opportunity,

the Board believes that geographic diversity

is also a potential benefit for shareholders.

Since GRID’s IPO, the Investment Manager has

demonstrated both its expertise in managing

and commercialisation of BESS and the

opportunity for further growth in this area,

and both the Board and Investment Manager

believe that now is the time to build on this early

success and to enter new geographic markets,

which are most attractive in the early stages.

The intention is to pursue a disciplined focus,

limiting the range of new markets to those with

comparable market dynamics in the United

States, Canada, the European Union, and

Australia.

The scale of the opportunity in these markets

is large. While the UK only currently represents

about 1% of global electricity consumption; by

comparison, the United States and European

Union markets are among the world’s largest

electricity markets, each being at least ten

times the size of the UK electricity market.

Finally, on a more administrative note, the

current split of equipment and construction

loans into separate limits within the Investment

Policy is to be combined into a single limit to

ensure alignment with the pipeline.

Over the last three years, the Company has

developed a positive track record and has

established its credentials, therefore the

Board now supports these proposed strategic

changes, appreciating the advantage of being

able to invest in project rights directly and

international expansion reflects a unique

opportunity for the Company to leverage its

know-how to compete effectively in specific

overseas markets. These changes will drive

significant scale, diversify risks, and propel the

growth momentum of the Company over the

years to come.

John Leggate CBE, FREng

Chair

Date: 5 April 2022

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Portfolio and pipeline overview

The Company grew its operational investment

portfolio significantly in 2021, ending the year

with 17 operational projects totalling 425MW.

During the year, the Company acquired five

operational projects adding 110MW to the

portfolio. These projects are items 13 to 17 in

Table 1 on page 9. Of these, 70MW (Tynemouth,

Nevendon and Port of Tyne) were acquired

with Enhanced Frequency Response (EFR)

contracts, adding to the Glassenbury and

Cleator EFR projects (together 50MW) acquired

in 2019. The remaining additions were a 10MW

extension to the Glassenbury project and the

30MW Byers Brae project near Livingston in

Scotland.

The Company also signed SPAs representing

a further 425MW across seven ready to

build projects, of which 375MW were under

construction by the end of 2021. In addition,

Stairfoot (40MW), for which an SPA has not

been signed, but is exclusive to the Company,

is under construction, taking the total figure

for MW under construction to 415MW as at 31

December 2021.

As at 31 December 2021, the valuation of the

portfolio was £389mn (FY 2020: £249mn)

representing a 56% increase. The valuation

primarily reflects the 425MW in operational

projects (FY 2020: 315MW), 150MW of the

375MW of in construction projects (which are

revalued as they were expected to commission

within nine months of the year end) and cash in

hand.

The total portfolio size is set to increase to

850MW once projects subject to signed SPAs

have been commissioned.

The pipeline consists of a further 707MW

across eight projects which would take total

portfolio capacity to 1,557MW once acquired

and commissioned.

The Company has significantly increased the

average size of projects over the last 12 months,

with the average pipeline project currently at

88MW. Acquisition of larger projects is more

cost effective and an efficient way to drive

scale. This also typically reduces costs once

projects are operational.

Investment

Manager's Report

Ben Guest

Managing Director,

New Energy

Gresham House Asset Management Limited (GHAM) is wholly

owned by Gresham House plc (Gresham House), an AIM-quoted

specialist alternative asset manager with a market capitalisation of

c.£340mn as at 31 December 2021. Gresham House provides funds,

direct investments, and tailored 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.

Gresham House Energy Storage Fund plc (GRID)

The portfolio is also increasing its average

duration, with pipeline projects of an average

target duration of over 1.6 hours.

As shown in the chart to the right, the Company

owns the largest BESS portfolio in the UK with a

c.30% market share.

We aim to have all acquired projects and

Stairfoot connected and generating income

in 2022, with pipeline projects expected to be

connected during 2023 and 2024.

The £220mn in equity raised since November

2020, alongside the £180mn debt facility

secured in September 2021, will provide the

capital for the acquired pipeline and some of

the additional pipeline. Additional debt or equity

fund raising will be sought as appropriate.

It is expected that the acquisition cost per MW/

MWh of projects under construction and of the

pipeline (on a like for like duration basis) will be

materially lower on average than for projects

acquired and built prior to the granting of the

change in Investment Policy in November 2020,

which granted the Company permission to take

construction risk with capital equivalent to 10%

of the Company’s Gross Asset Value (GAV)

We are pleased to see this policy change has

delivered value for shareholders as anticipated.

As reflected in the Chair’s Statement above,

we are also confident of adding value if the

Investment Policy were to be amended, with

shareholder approval, to allow the direct

acquisition of ‘shovel-ready’ projects up to 10%

of GAV. In terms of pipeline for later in 2023 and

beyond, we remain confident of our ability to

add pipeline to underpin the continued growth

of the Company, such that it maintains its

market share in the UK and Ireland. We are also

confident of our ability to execute successfully

in international markets, should shareholder

approval be granted to target carefully chosen

international markets.

12 GAV is defined in Alternative Performance Measures: it includes debt within MidCo as well as Gross Assets in the Company

GB Rated Operational Capacity

GRID 30%

Gore Street

Capital 8%

Pivot Power

Huaneng Group

Statera 7%

Zenobe 5%

Sembcorp

Energy UK 4%

Centrica 4%

EIG 4%

Conrad Energy

Harmony

Energy/FRV

Other Owners

with <40MW

18%

GB Rated Operational Capacity

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Table 2: Pipeline summary

Map

ref.

Asset name Location Capacity

(MW)

Battery size

(MWh)

Duration

(hours)

Site type Commissioning/

Completion status

25 Stairfoot North Yorkshire 40 40.0 1.00 Battery, symmetrical Target COD: Q2 2022

26 Project York York 50 50.0 1.00 Battery, symmetrical Target COD: Q4 2022

27 Project Bradford West West Yorkshire 87 174.0 2.00 Battery, symmetrical Target COD: Q1 2023

28 Project Elland West Yorkshire 150 300.0 2.00 Battery, symmetrical Target COD: Q1 2023

29 Monet’s Garden North Yorkshire 50 100 2.00 Battery, symmetrical Target COD: Q2 2023

30 Lister Drive Merseyside 50 100 2.00 Battery, symmetrical Target COD: Q2 2023

31 Project Bradford West 2 West Yorkshire 100 200 2.00 Battery, symmetrical Target COD: H2 2023

32 Project Monvalet Rep. of Ireland 180 180 1.00 Battery, symmetrical Target COD: 2024

Total Pipeline: 707 1,144 1.62

Total Portfolio: 1,557 2,142 1.38

Table 1: Company portfolio

Map

ref.

Existing assets Location Capacity

(MW)

Battery

size

(MWh)

Battery

duration

(hours)

Site type Operational status

1 Staunch Staffordshire 20 2.9 0.20 Battery and generators, 0.5MW import Operational

2 Rufford Nottinghamshire 7 9.5 1.35 Battery and generators, symmetrical Operational

3 Lockleaze Bristol 15 22.1 1.45 Battery, symmetrical Operational

4 Littlebrook Kent 8 6.3 0.80 Battery, symmetrical Operational

5 Roundponds Wiltshire 20 25.8 1.30 Battery and generators, 16MW import Operational

6 Wolves West Midlands 5 7.8 1.55 Battery, symmetrical Operational

7 Glassenbury Kent 40 28.2 0.70 Battery, symmetrical Operational

8 Cleator Cumbria 10 7.1 0.70 Battery, symmetrical Operational

9 Red Scar Lancashire 49 74.3 1.50 Battery, symmetrical Operational

10 Bloxwich West Midlands 41 46.6 1.15 Battery, symmetrical Operational

11 Thurcroft South Yorkshire 50 75.0 1.50 Battery, symmetrical Operational

12 Wickham Suffolk 50 74.0 1.50 Battery, 40MW import Operational

13 Tynemouth Tyne and Wear 25 17.4 0.70 Battery, symmetrical Operational

Glassenbury

Extension

Kent 10 10.1 1.00 Battery, symmetrical Operational

15 Nevendon Basildon 10 7.1 0.70 Battery, symmetrical Operational

16 Port of Tyne Tyne and Wear 35 28.0 0.80 Battery, symmetrical Operational

17 Byers Brae West Lothian 30 30.5 1.00 Battery, symmetrical Operational

18 Enderby Leicester 50 50.0 1.00 Battery, symmetrical Target COD: Q2 2022

19 West Didsbury Manchester 50 50.0 1.00 Battery, symmetrical Target COD: Q3 2022

20 Melksham Wiltshire 100 100.0 1.00 Battery, symmetrical Target COD: Q4 2022

21 Couper Angus Scotland 40 40.0 1.00 Battery, symmetrical Target COD: Q2 2022

22 Arbroath Scotland 35 35.0 1.00 Battery, symmetrical Target COD: Q2 2022

23 Penwortham Preston 50 50.0 1.00 Battery, symmetrical Target COD: Q3 2022

24 Grendon Northampton 100 200.0 2.00 Battery, symmetrical Target COD: Q1 2023

Total acquired portfolio 850 997.7 1.17

Investment Manager's Report continued

Gresham House Energy Storage Fund plc (GRID)

Operational

Pipeline

Acquired Pipeline

7 & 14

27 & 29

Portfolio

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Fund and portfolio performance

2021 was an exceptional year for the Company’s

investments as projects benefited from a

prolonged period (starting in October 2020) of

high pricing of Frequency Response services

due to the undersupply of MW capacity available

to deliver Dynamic Containment (DC) and Firm

Frequency Response (FFR) services at the

level required by National Grid for most of the

year. In addition, rule changes which allowed

the Company’s portfolio to trade while running

batteries in DC meant the portfolio could

both demonstrate its trading capabilities and

confirm that revenues from trading were also at

very attractive levels.

As such, the Company’s underlying investment

portfolio generated EBITDA of £42.5mn for the

period, resulting in net earnings for Operational

Dividend Cover

of £36.3mn and Operational

Dividend Cover of 1.32x for the 7.0p dividend

paid in relation to the period. Operational

Dividend Cover at this level was achieved in

spite of a large amount of uninvested cash

being held for investment into pre-operational

projects laid out in Tables 1 and 2 on page 9.

The Ongoing Charges Figure (OCF)

for the

Fund for the period to 31 December 2021 was

1.23% based on the weighted average Net Asset

Value (NAV) for 2021 (2020: 1.26%), which, we

believe, is among the lowest of the comparable

listed funds in the market. The OCF is expected

to decline marginally over time, mainly driven

by a rising NAV which then drives a drop in

incremental management fees. As the NAV has

now reached over £500mn, any incremental

growth in the NAV will attract fees at the

reduced rate of 0.8%, down from 0.9% above

£250mn and 1% for the first £250mn.

As a result of NAV growth and a consistent

dividend policy in the year, the Company

13 Alternative Performance Measures are defined and calculated on pages 89 to 91 of the Annual Report.

extended its track record of strong NAV

Total Return¹³ performance achieving an NAV

Total Return of 20.3% in 2021 and takes the

annualised NAV Total Return since IPO to 11.0%,

demonstrating consistent returns in excess of

the target of 8.0% set at IPO.

As noted above, the Company’s underlying

assets generated EBITDA of £42.5mn, an

increase of more than 172% from £15.6mn in

2020. This growth is underpinned by a 220%

increase in revenues in the period from £16.1mn

in 2020 to £51.4mn in 2021.

This was driven by like for like growth as well

as acquisitions, with average revenue per

weighted average MW increasing by 64% to

£126.7k per MW.

FR was again the largest revenue source

making up 82.2% of the revenue generated

by the underlying investment portfolio for the

whole of 2021. This has been largely dominated

by DC, a service launched in October 2020, in

which the Company’s underlying assets were

the only participants in at launch. Through to

October 2021 DC prices were buoyed by the

undersupply referred to above which allowed

for the pricing to be consistently set at National

Grid’s price cap of £17 per MWh.

During this period, the investment portfolio

maintained a strong market position, holding on

average 37% of the contracted capacity in the

service, whilst also enhancing returns through

trading. From 1 November 2021, National Grid

updated its DC volume requirements, with

volume no longer procured on a daily basis

but in four-hourly blocks, allowing for lower

demand and therefore prices in certain blocks

and in general, sharply decreasing average daily

requirements.

This has also led to the already limited FR

market becoming saturated towards the end of

the year. We, alongside our asset optimisers,

were ready for these changes having predicted

this development since our IPO in November

2018 and had been prepared to stack trading

with any FR service to maintain optimal

performance of the portfolio.

Since these changes, we have seen an

increasingly volatile DC price which has on

occasion presented opportunities for the

portfolio. Despite a brief increase in FFR prices

over the winter for those asset owners alive

to the changes in DC, with the overall battery

capacity in Great Britain growing significantly,

it is clear that FR pricing (across all FFR, DC etc)

is likely to now reset permanently at a lower

level, which increases our focus on trading

performance and effective stacking of other

services.

With a greater focus on trading in Q4, this area

accounted for 11.5% of underlying investment

portfolio revenue in 2021, up from 9.9% in

2020 helped by an increase in Q4 when trading

represented 22.1%. In full, the fourth quarter

saw revenues from FR at 71.7%, Trading at

22.1% and CM at 6.2%.

The trading opportunity was not just limited

to the final quarter of the year. Since the start

of the year assets have been able to use Day

Ahead prices to inform decisions between

Trading and DC ahead of submitting volume

into DC. This led to a number of days in January

2021 when projects stepped out of DC to trade

for high Day Ahead and imbalance prices and

deliver higher returns than possible from FR.

Since the change in the DC procurement rules

in September to 4-hour blocks (previously the

service was for 24-hour blocks), the opportunity

Investment Manager's Report continued

Gresham House Energy Storage Fund plc (GRID)

to step out of DC to trade has increased

significantly with evening peaks presenting

several opportunities to earn more than the DC

price cap of £17 per MWh.

We are pleased with the pace at which our

Operations Team is adapting to changing

market conditions and that the Company’s

assets are consistently the first movers in

markets and optimisation innovators when

it comes to stacking of revenue streams. We

are confident that this track record bodes well

for ongoing returns from the portfolio as the

market begins transitioning to a more trading

focused revenue make up.

As shown in Table 3, CM revenues also grew

in 2021, with the portfolio earning 262% more

CM revenue in 2021 (£2.97mn) than in 2020

(£0.82mn) as 60MW of T-4 contracts came into

force in October 2020, 35MW of T-4 contracts

from acquired assets enjoyed a full year in 2021

and 52MW of T-4 contracts came into force

in October 2021 supporting the final quarter

contribution. Due to the exceptional revenues

earned through other sources in 2021, CM

revenues represented only 5.8% of underlying

investment portfolio revenues for the year, a

modest uplift from 5.1% in 2020. We expect the

CM share of revenues to continue increasing

over time as additional contracts, beginning

in October each year, come into force and as

revenues on a per MW basis begin to fall from

the record levels seen from DC in 2021.

As at 31 December 2021, the Portfolio had

166MW of active T-4 CM contracts and this is

set to increase to 207MW in October 2022. In

addition, as announced on 28 February 2022,

325MW of T-1 CM contracts and 463MW of

T-4 CM contracts have been awarded for the

portfolio in the 2022 auctions in February 2022

and are expected to deliver over £108mn of

additional revenue over the life of the contracts.

Both auctions cleared at record prices of

£75,000 per MW for T-1 and £30,590 per MW for

the T-4 auction.

As such, the portfolio is expected to enjoy an

additional £8.4mn in revenues in the year from

October 2021 on the T-1 contracts and over

£100mn in the 15 years from October 2025,

assuming CPI at 2%, on the T-4 contracts. As

the auctions were not formally completed at the

year end, this is not factored into valuations as

at 31 December 2021.

TRIADs are no longer a significant part of the

revenue mix for the portfolio assets (0.5% for

2021) and we expect this to remain low. Most

TRIAD income now is earned as an additional

benefit on top of trading peak demand periods

as opposed to TRIAD specific export runs as

done just a couple of years ago.

2021 Portfolio revenue split

Table 3: Underlying investment portfolio revenue breakdown for 2021 and 2020

Investment portfolio revenue 2021 revenue (£mn) Share of 2021

revenue

2020 revenue (£mn) Share of 2020

revenue

Firm Frequency Response FFR 2.00 3.9% 3.20 19.9%

Enhanced Frequency Response EFR 9.63 18.7% 3.59 22.3%

Dynamic Containment DC 30.64 59.6% 5.35 33.3%

Frequency Response Total 42.27 82.2% 12.14 75.5%

Trading 5.91 11.5% 1.59 9.9%

Capacity Market CM 2.97 5.8% 0.82 5.1%

TRIADs 0.28 0.5% 1.52 9.5%

Operating revenues from assets owned 51.43 100.0% 16.07* 100.0%

* 2020 revenue also included £2.97mn of liquidated damages: these have been excluded in the table above

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Investment portfolio operational performance

Average availability of assets in contracted

services was 99.2% for the year (2020: 98.8%),

demonstrating ongoing strong delivery from the

Company’s portfolio.

During the year, all assets except EFR

contracted assets were offering DC for a large

percentage of time. This involves significantly

lower cycling of batteries (approximately 0.3

cycles per day for a 1-hour battery) versus

our base case for valuation modelling (of over

two cycles per day). As a consequence, the

degradation of batteries in the portfolio has

been very light with average State of Health

(SOH) falling to only 97.5% (2020: 97.7%). The

move to longer duration assets, on average,

should also result in less degradation.

There are two incidents to note across the

portfolio. The first involved vandalism at the

DNO connection for Rufford in May, which left

the site offline for six months. The incident

was reported to the police and all damaged

equipment has since been replaced. The site

has been online and performing at full capacity

since the DNO connection was reinstated in

November. The lost earnings for this outage

plus equipment costs to rectify the connection

are being claimed under an existing insurance

policy. We currently expect full reimbursement

and this is factored into the valuations.

The second incident involved trespassing and

theft of materials at another site in September.

Due to the nature of the materials taken and

the damage to the perimeter fencing, manned

guarding was installed around the perimeter of

the site until remedial works were carried out

and the site could be deemed safe: safety for

workers and the general public are paramount

for the Investment Manager. We are grateful

for the collaborative effort from all concerned

to ensure a swift and safe resolution. Despite

being offline for half of the month, the asset

was still able to deliver returns higher than

achievable in DC for the full month, thanks to

effective trading of the September energy price

volatility before the incident. No insurance

claim was made for this incident.

These two incidents tested and proved the

effectiveness of the team’s Health, Safety

and Security procedures, while also offering

learning opportunities. As such, the Investment

Manager will look to implement new ideas

across the portfolio to further enhance site

security and safety.

In terms of project delivery, we have previously

reported some slippage to timescales and

unfortunately a few more have developed since

10 January 2022, the date of the Company’s

Trading Update announcement. Almost all

issues relate to unexpected procurement

challenges. Examples include: a high voltage

cable being in short supply in one project;

concrete being in short supply at another;

delays to the delivery of key components due

to shipping delays; or component shortages

at suppliers affecting other projects, to

name a few. These challenges are being

addressed with a wholehearted effort from our

construction management team. All problems

are being resolved without any material impact

on cost, but they are affecting commissioning

dates. The team will attempt to compress

commissioning timeframes to counter some of

the delays during construction.

Market update

The market backdrop for BESS projects in

the UK and Ireland has improved significantly

during 2021 as long-expected high power price

volatility has continued, having first emerged

in late 2020. This volatility has emerged as

renewable penetration has risen to levels at

which existing sources of flexibility, and in

particular gas-fired generation, have reached

their limits in terms of dealing with the rising

intermittency of renewables. And indeed, as

renewables gain market share, baseload gas

is losing share and will probably be gradually

decommissioned, reducing a source of

flexibility – further reinforcing the need for

batteries. Recent sharp price increases in

global energy prices have further supported

the investment and energy security cases

for a global acceleration of renewable energy

development, and thus continuing to favour the

global rollout of battery storage.

Past CfD auctions offering a guaranteed offtake

for offshore wind projects (in 2015: 2.2GW, 2017:

3.3GW and 2019: 5.5GW) and the most recent

auction for offshore and onshore wind and solar

(expected to catalyse a further 12GW of capacity

according to the Department for Business,

Energy and Industrial Strategy (BEIS)) provide

near term visibility for the energy storage

business model. With only 1.4GW of energy

storage commissioned in the UK to date, albeit

with further significant rollout expected in the

next few years, energy storage still lags the

pace of renewable project installations, which

are running at over 2GW per annum and rising.

There are three key factors we believe will drive

the investment portfolio and performance in the

BESS market over the short to medium term:

i) FR market

The FR services market currently consists of

DC and FFR. As of November 2021, saturation

of these markets began and with continuing

growth of BESS assets in the market, further

pressure on pricing is anticipated.

In addition to DC and FFR, Dynamic Modulation

(DM) and Dynamic Regulation (DR) are set to

launch in 2022, currently expected by the end of

the summer. However, we do not expect a long-

term increase in the overall volume as National

Grid plans to phase out FFR once these two

products are launched.

The ability to stack trading revenues on to these

services and the reduced 4-hourly contract

periods increases our confidence that value will

continue to be extracted from FR despite its

reduced attractiveness on its own.

Investment Manager's Report continued

Portfolio revenue split by month

2,500,000

5,000,000

CM EFR DC FFR Trading TRIAD

Gresham House Energy Storage Fund plc (GRID)

100

200

300

400

500

600

Jan-18

Feb-18

Mar-18

Apr-18

May-18

Jun-18

Jul-18

Aug-18

Sep-18

Oct-18

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

Jan-22

Feb-22

Number of days in month with significant System price

spreads

Average daily spread of system price for the month (£/MWh)

Value of average daily spreads by month and frequency of signficant spread opportunities in

the system price (£/MWh)

Avg Daily Spread (LHS) Daily Spread >£200 (RHS)

Value of average daily spreads by month and frequency of significant spread opportunities in the system price (£/MWh)

Furthermore, while the FR markets are

becoming saturated, the volume requirement

from National Grid ESO on a seasonal basis is

expected to rise as we head into summer, as

additional capacity is required when renewable

(solar) generation is higher. This may provide

a short-term reprieve to the downward trend

in prices but is noteworthy, nonetheless. The

higher summer and lower winter requirement

for FR services should manifest in the

Company’s revenue split going forward.

ii) Reserve from Storage

Aside from FR services and increasing volume

requirements, National Grid have long promised

more demand for storage as a source of reserve

capacity. We expect more news on this in

2022 after a lengthy design phase following

the successful Reserve from Storage trial in

September 2020, which demonstrated the

value of BESS assets versus CCGTs used in

Balancing Mechanism (BM) Reserve.

iii) Electricity prices and Trading

2021 saw further increases in Trading

opportunities for the portfolio, with increasing

volatility over previous years and more frequent

pricing events. Some of this opportunity

remained uncaptured by batteries as DC pricing

remained significantly above average daily

returns from Trading. As prices for FR services

have fallen, and electricity price volatility

continues to increase, Trading is becoming key

to profit maximisation.

As shown in the chart below, the daily average

system price trebled in 2021 from £81/MWh in

2020 to £242/MWh in 2021. There were also

136 days with an average system price of at

least £200/MWh versus just 11 days in 2020

(2018: 4, 2019: 1). We have also seen record

numbers of extremely high prices with 36 half

hours at prices of £1,000/MWh and above in

2021 (2020: 2). Prior to this year, the previous

system price high in recent years was in March

2020 at £2,242/MWh. From the start of 2021

through to January 2022, there have been 28

instances of prices higher than this, with seven

instances of prices being at least £4,000/MWh.

The Company’s assets have been capturing

this upside in the intraday market as well as

in the Day ahead markets which has offered

significant spread opportunities more valuable

than DC.

This volatility is expected to remain as more

renewables are commissioned.

These exceptional prices are occurring more

frequently, but in addition to this, we are also

seeing more occurrences of consecutive

settlement periods at extreme prices. Since the

start of January 2021, we have seen seven days

with prices above £1,000/MWh for at least three

consecutive settlement periods (1.5 hours).

To illustrate the potential for building larger

batteries to capture this, on 9 September 2021,

a 1-hour asset could have earned the equivalent

of 8.8 days’ worth of DC revenue at the £17/

MWh cap whereas a 3.5-hour asset could have

achieved a full month of DC revenue from a

single cycle of the battery.

We are therefore committed to steadily

expanding duration towards 2-hours. The

current EFR assets, which come to the end of

their contracts in 2022, will be the first to be

expanded to 2-hour durations with some of the

pipeline assets being commissioned as 2-hour

sites as well.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Russian invasion of Ukraine

The Russian invasion of Ukraine, which

occurred after the year end, has had significant

geopolitical ramifications for the UK energy

markets in which the Company’s investments

operate. The Investment Manager strongly

opposes the invasion and we believe there is no

place in the modern world for actions such as

those undertaken by Russia in Ukraine. Whilst

the Company has no investments in Russia and

is not engaged with any sanctioned entities, we

understand our obligations to our stakeholders

to assess the potential impacts on the

Company. We are closely following the global

response to the Russian invasion and its impact

on energy markets. We will continue to review

our counterparties and to reduce any exposure

to potential future sanctions.

To date, there has been no impact on

development projects in terms of either delays

or costs as Russian entities are currently

neither counterparties to the Company nor its

investments. The increasing and volatile gas

prices at the start of March 2022, however,

have had an impact on energy prices in the UK.

This has led to an increase in volatility in the

electricity markets. If energy prices remain high

for longer periods, we may start to see cost

of construction for pipeline assets increase if

parts and material costs increase.

Across Europe, we are starting to see a

push to reduce reliance on Russian gas with

an increased focus on driving growth in

renewables. At the time of this report, the

UK Government is considering plans to ease

planning restrictions for on-shore wind to

reduce the lead time for new projects. The likely

increase in renewable generation is expected to

further increase the demand for BESS.

Valuations and NAV

NAV per share has risen from 102.96p per

Ordinary Share at 31 December 2020 to 116.86p

per Ordinary Share at 31 December 2021. This

equates to a NAV Total Return

of 20.3% for the

period.

Most of the increase in the NAV per share is

driven by the revaluation of projects previously

held at cost (£38.0mn), including assets

under construction at the year end. A net

improvement in forecasts, driven by a recovery

in revenue assumptions following a drop in

2020 (+£5.8mn), as well as significant cash

generation from underlying asset performance

in excess of value losses on model roll forwards

(+£31.2mn), also contributed positively.

14 Alternate performance measures are defined and calculated on pages 89 to 91 of the Annual Report

The discount rate for CM revenues remains

at 5% whilst the discount rate for all other

revenues has decreased marginally from 11.1%

to 10.85%. The reduction to the discount rate

reflects a longer track record of delivery and

increased confidence in returns from BESS

projects, which is echoed by the confidence in

the Company’s forecasts, and ability to deliver

against them. Confidence in delivering against

forecasts is perhaps best demonstrated by

the willingness of well-established, blue-chip

institutions to provide debt finance for the

growth of BESS, as shown by the debt facility

agreed in the period.

Following a revision to the Company’s Valuation

Policy, a further 0.5% is added to discount rates

for construction assets revalued in the period,

to reflect additional risk mainly on timing of

cash flows and full commissioning of assets.

It is worth noting that the impact of revaluing

three construction assets, totalling 150MW, in

the period was 4.72p.

A lower capex per MW on projects in

construction (compared with previously

acquired operational projects) has presented

opportunities for larger positive revaluations

upon acquisition into the Fund.

Investment Manager's Report continued

NAV (p/Share) bridge from 31 Dec 20 to 31 Dec 21

102.96

116.86

0.41

8.53

2.49

9.69

1.32

(7.00)

(0.54)

(0.44)

(0.56)

100

102

104

106

108

110

112

114

116

118

NAV @ 31Dec20

Net of Shares Issued

Net Fund and SPV working

Capital

Dividends

Transaction fees

Debt Costs

Change in NPV due to

rollforward, third party revenue

forecasts and other assumptions

Change in NPV due to new

project revaluations

Change in NPV due to inflation

rate

Change in NPV due to discount

rate

NAV @ 31Dec21

p/Share

NAV (p/Share) bridge from 31 Dec 20 to 31 Dec 21

NAV/Share Increase Decrease

Daily Day Ahead Auction Max/Min Spread (£/MWh)

100

150

200

250

300

350

400

450

500

31/12/2017

31/03/2018

30/06/2018

30/09/2018

31/12/2018

31/03/2019

30/06/2019

30/09/2019

31/12/2019

31/03/2020

30/06/2020

30/09/2020

31/12/2020

31/03/2021

30/06/2021

30/09/2021

31/12/2021

Day Ahead price spread (£/MWh)

Spread DA (£/MWh) 28 per. Mov. Avg. (Spread DA (£/MWh))

Gresham House Energy Storage Fund plc (GRID)

As the Company continues to acquire the

outlined pipeline and begins to revalue these

in line with the revised Valuation Policy, which

allows for certain construction projects to be

revalued with an additional premium of 0.5%,

we expect to see further growth in valuations

and NAV similar to those seen in HY2 2021.

The removal of the extra 0.5% to discount

rates on the construction assets as they

become operational will further have a positive

impact in future quarters as these assets are

commissioned.

While the Investment Manager develops its

own views on the market, revenue forecasts

for the Company’s projects are provided by

an independent consultant. These revenue

forecasts are driven from the independent

consultant’s view on the future volatility in

the market. These revenue forecasts can

have a meaningful impact on the valuations

of the Company’s investments and NAV. More

conservative assumptions have the impact of

reducing the overall valuation of investments

due to reducing future cash generation

expectations of the investments. Further

information on the valuation process and

sensitivities can be found in Note 18 on pages

80 to 83.

Outlook

We remain very confident that opportunities in

the UK and Irish markets will remain healthy for

many years as the deployment of renewables

continues apace and electricity demand

starts to rise in the UK, particularly driven by

an increase in electric vehicle uptake and the

beginning of an electric heat pump rollout

(replacing natural gas-fired domestic and

commercial boilers). We intend to increase

scale to take advantage of our leading position,

to drive down operational costs as well as the

cost of capital across the industry. As such,

efforts will continue in sourcing additional

pipeline for later in 2023 and beyond.

As we look ahead to 2022, we anticipate

Operational Dividend Cover to increase

progressively in line with projects

commissioning through the year and expect

full Operational Dividend Cover for the year. In

addition, we anticipate achieving NAV growth

towards the upper end of the target range of

8% to 15% and continuing to be the leading

owner of operational BESS in the UK. We do not

anticipate the Russian invasion of Ukraine to

detract from these aims for the year, however

we will continue to monitor and assess the

potential impact for our portfolio and work with

our supply chains and counterparties to reduce

exposure to any potential future sanctions.

Expected shareholder proposals to change

the Investment Policy, outlined in the Chair’s

Statement relating to development risk (into

shovel-ready projects), will lower acquisition

costs (all else being equal) and potentially

help in facilitating a migration to the premium

segment of the London Stock Exchange in

due course (hopefully driving down the cash

cost of equity), while improving liquidity in

the Company’s shares. Similarly, while the

UK opportunity remains strong, our plans for

international expansion, subject to shareholder

approval, are timely and could further

accelerate the Company’s growth while creating

diversification. We continue to ensure that

the team’s size and experience appropriately

matches the opportunity ahead.

Change in investment value from December 2020 to December 2021 (£mn)

£249.0

£389.3

£55.3

£38.0

£5.8

£11.1

£5.8

£1.3

£0.2

£37.7

(£6.5)

(£2.8)

(£2.0)

(£3.5)

£220

£240

£260

£280

£300

£320

£340

£360

£380

£400

£420

Valuation at 31/12/2020

Additional investment at cost

New transactions to FV

Roll forward

Revenue forecasts

Cost assumptions

Site upgrades and commissioning

changes

Change in Inflation rates

Change in Discount Rate

Change in Tax assumptions

Other

Change in SPV Working Capital

Change in GHESH Working Capital

Valuation at 31/12/2021

Valuation Increase Decrease

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Sustainability

Report

Environmental, Social and Governance

The Investment Manager’s sustainable

investment approach

Battery energy storage systems (BESS) play

an essential role supporting the shift from a

world powered by hydrocarbon resources to

a new energy world powered by intermittent

renewables in what is a rapidly changing energy

landscape.

The Investment Manager is committed to

increasing BESS capacity to support the

decarbonisation and electrification of the

UK’s energy system. The Fund, in this way,

contributes positively to climate change

mitigation and the UK’s Net Zero Strategy,

which explicitly recognises and supports the

need to improve and increase the supply of

storage to the National Grid to decarbonise the

UK power system by 2035

The Investment Manager also recognises

the importance of environmental, social

and governance (ESG) considerations and

incorporating them into the investment process

to deliver long-term, sustainable growth, and

consistent positive outcomes across local and

national communities.

Positive contributions

The Investment Manager has identified two

material positive contributions of GRID:

15 BEIS, Net Zero Strategy, October 2021

16 Transitioning to a Net Zero Energy System: Smart Systems and Flexibility Plan, BEIS, July 2021

17 The Just Transition reflects the idea that seeks to ensure that no-one is unfairly disadvantaged by the transition to a low carbon economy

Environment: Climate change and pollution

1. BESS plays a key role in the UK’s pathway

to net zero emissions

BESS plays a key role in decarbonising the UK’s

electricity grid by enabling further deployment

and production of renewable energy. This will in

turn reduce reliance on carbon intensive energy

generation, such as coal and gas, as renewables

form a greater proportion of the UK’s energy

mix due to the availability of battery storage

capacity, supporting reductions in carbon

emissions. Therefore, to support the UK’s net

zero ambitions and renewable energy targets,

battery storage capacity across the grid must

increase.

Social: Marketplace responsibility

2. BESS helps stabilise the energy network

reducing consumer energy costs

BESS supports the production of renewable

energy on a large scale by balancing and

stabilising the electricity grid. The imbalances

in supply and demand of electricity are currently

expensive for National Grid to manage. For

example, National Grid has to pay to generate

more electricity from gas fired power stations

when renewable supply falls short and must

also pay owners of wind and solar farms to

stop generating when supply is greater than

anticipated. Additional costs are then passed

on to consumers, increasing energy bills, and in

some cases contributing to the problem of fuel

poverty.

The use of BESS in the electricity grid may help

reduce consumer energy costs over time in two

ways, to:

1. Avoid National Grid having to ‘turn on’

expensive gas fired power generators and

instead requesting the energy stored in

the batteries to be released; and to

2. Prevent National Grid from paying

renewable energy generators from

curtailing generation and instead

requesting batteries store the additional

energy produced until it is needed.

The UK Government estimates that the

cumulative value (from 2020-2050) from

reduced costs driven by increased system

flexibility could be between £30-70bn

meaning BESS is an important solution to help

reduce National Grid’s costs and therefore

consumer costs

Gresham House Energy Storage Fund plc (GRID)

Key 2021 statistics

425MW total battery energy storage operational capacity provided to the UK National Grid

- An increase in operational capacity of 110MW from 2020

415MW of battery energy storage capacity under construction

2nd year of GRID being awarded the LSE Green Economy Mark

18 Cumulative capacity of BESS fleet (MW) using end of year (31 December 2021) data

BESS plays a key role in the UK’s pathway to

Net Zero emissions

The introduction of BESS into the UK’s

electricity grid is fundamental to the UK’s

ambition of achieving net zero carbon by 2050

and combating climate change.

Whilst the falling costs of renewable power

generation have led to rapid deployment over

the past few years, the chart below shows that

we still rely heavily on carbon intensive gas-

fired generation:

Electricity generation mix in the UK

To achieve the UK’s net zero ambitions,

electricity and renewables in particular, will

need to become a much larger part of the UK

energy mix as more industries move towards

electrification (e.g. transportation and heating).

Source: BEIS

GB Electricity generation by technology

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Q1 2011

Q2 2011

Q3 2011

Q4 2011

Q1 2012

Q2 2012

Q3 2012

Q4 2012

Q1 2013

Q2 2013

Q3 2013

Q4 2013

Q1 2014

Q2 2014

Q3 2014

Q4 2014

Q1 2015

Q2 2015

Q3 2015

Q4 2015

Q1 2016

Q2 2016

Q3 2016

Q4 2016

Q1 2017

Q2 2017

Q3 2017

Q4 2017

Q1 2018

Q2 2018

Q3 2018

Q4 2018

Q1 2019

Q2 2019

Q3 2019

Q4 2019

Q1 2020

Q2 2020

Q3 2020

Q4 2020

Q1 2021

Q2 2021

Q3 2021

GB Electricity generation by technology

Coal Gas Nuclear

Hydro (natural flow) Wind and Solar Bioenergy

Pumped storage (net supply) Net imports (Interconnectors)

Renewable electricity

penetration rose from 9.6%

in 2011 and is expected

to rise to c.53% in 2023

(Source: BEIS)

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Considerations of renewable energy generation

Generating energy from solar and wind relies

on solar irradiation and the wind blowing.

This means renewable energy generation

is intermittent, varying continuously. This

inflexible generation is the opposite of what is

required by National Grid who need to balance

electricity supply and demand all the time, and

in near real time, without exception.

Introducing BESS into the electricity grid can

support the use of renewable energy generation

and help balance the intermittent electricity

supply from renewable sources. They can store

energy at times of oversupply and release

it back to the grid when there is increased

demand, stabilising the network and enabling

further renewable deployment.

The tables across summarise the actions that

National Grid take to meet energy supply and

demand with and without BESS.

The chart below outlines the electricity capacity

flexibility requirements (gigawatts) and the

technologies needed to achieve this in the

government’s “High flexibility, High demand”

2050 Scenario

. “Other Storage” refers to short-

term storage and includes existing battery

projects and other new deployments including

new pumped hydro projects. “Flexible demand”

refers to mechanisms that reduce demand

for energy such as smart charging of electric

vehicles and heat pumps with combined heat

storage. Finally, “Interconnection” refers to the

use of electricity or gas from suppliers outside

of the UK to support flexibility requirements.

As such, BESS has a central role to play in

decarbonising the UK’s energy system and its

achievement of its net zero strategy and GRID is

already contributing materially.

BESS helps stabilise the energy network

reducing consumer energy costs

BESS supports the production of renewable

energy on a large scale by stabilising and

balancing the electricity grid. The services

provided by BESS systems include;

§ Supporting National Grid’s ability to

balance the electricity grid and meet

electricity supply and demand.

§ Helping to regulate supply and demand

through “merchant” activities whereby

power is drawn and stored when there is a

surplus in the system with the purpose of

discharging it into the electricity grid when

there is a shortage.

19 High flexibility, High demand 2050 Scenario, Transitioning to a Net Zero Energy System: Smart Systems and Flexibility Plan, BEIS, July 2021

Sustainability Report continued

Without BESS

Energy

balance

National Grid action Outcome

Renewables

produce too

much energy

Over supply Pay renewable energy

power plant owners to

‘switch-off’ generation

(known as curtailment)

Renewable energy that could

have replaced other carbon

intensive energy sources is lost

and additional costs passed to

consumers

Renewables

produce too

little energy

Shortfall ‘Switch-on’ gas

turbines to increase

supply

Increased emissions as the

electricity grid needs to use a

carbon intensive energy source.

Need to build backup gas capacity

with low load factors

With BESS

Energy

balance

National Grid action Outcome

Renewables

produce too

much energy

Over supply Request BESS

providers store the

excess energy available

in the electricity grid

for use at another time

Renewable energy producers do

not need to ‘switch off’ their wind

or solar farms and the renewable

energy can then be used later,

avoiding carbon intensive energy

generation

Renewables

produce too

little energy

Shortfall Call on BESS providers

to discharge energy

they have stored

No need to ‘switch on’ carbon

intensive energy generation,

therefore directly avoiding

emissions

Technology deployment for a flexible electricity system by 2050

2020 2030 2040 2050

Interconnection

Demand Side

Response

Other Storage

Existing Pumped

Hydro

Capacity (GW)

Source: BEIS, July 2021

Gresham House Energy Storage Fund plc (GRID)

UK wind energy generation was curtailed on 275

days in 2020, losing energy which could have

powered over a million homes for a whole year

The 2021 figure was expected to be lower due

to the less windy conditions throughout the

year. National Grid must pay renewable energy

generators to ‘switch-off’ their generation.

Without the increasing use of BESS, increasing

deployment of wind power will likely result in a

higher bill for curtailment.

The use of BESS in the electricity grid therefore

may help reduce consumer energy costs, an

important aspect to be considered as part of a

Just Transition.

The UK Government estimates that the

cumulative value (from 2020-2050) from

reduced costs driven by increased system

flexibility could be between £30-70bn

20 LCP, energy sector consultants

21 Transitioning to a Net Zero Energy System: Smart Systems and Flexibility Plan, BEIS, July 2021

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Sustainable investment process

The Investment Manager has developed

and published an overarching Sustainable

Investing Policy along with a New Energy

Sustainable Investment Policy which is specific

to the Fund’s asset division. These policies

describe the Investment Manager’s approach

to sustainable investment and highlight

the Investment Manager’s commitments to

investing sustainably while meeting its overall

investment objectives. The Investment

Manager has also integrated sustainability

across all asset divisions, including that of the

Fund, which starts with the completion of its

proprietary ESG Decision Tools.

The Investment Manager’s Sustainable

Investment Framework (SIF) consists of ten

core themes and is used to structure analysis,

monitor, and report on a broad range of ESG

risks which may materially impact proposed

transactions, as well as directing focus towards

more sustainable outcomes.

The ESG Decision Tool (the Tool), first applied by

the Investment Manager in 2020, supports the

identification of potential, material ESG risks

that need to be managed and mitigated and

which helps shape the due diligence process

prior to investment into a new battery site. The

Tool aims to provide a rational and replicable

assessment of key ESG risks prior to an

investment decision being made.

The Tool is based on the ten themes in the

SIF and several sub-factors are considered

under each broader theme. It is used across

the various stages of the investment and

management process: pre-acquisition, pre-

construction, construction, and operation.

The Investment Manager has identified six

ESG factors across the SIF that are most

material to the Company’s operations and

investments. These are carbon emissions and

pollution, natural capital, waste management,

employment, health, safety and well-being,

supply chain management, and governance and

ethics. The specifics of each of these factors

are addressed in more detail as part of the

sustainability objectives discussed in the tables

below.

Wider sustainability considerations

While BESS support the decarbonisation and

stability of the electricity grid, the Investment

Manager recognises that the production,

transportation, use, and end of life treatment

of batteries have environmental and social

implications.

The Investment Manager applies a robust

sustainable investment process to fully

incorporate all ESG considerations, positive

and negative, into the investment process.

The integration of ESG factors ensures the

Investment Manager both assesses risks and

opportunities to investments, and delivers

long-term, sustainable growth, and positive

outcomes for key stakeholders.

The Investment Manager has also set

sustainability objectives for the Fund which

aim to enhance the positive sustainability

contributions of BESS and to address ESG risks

and minimise or avoid negative externalities.

Sustainability objectives

The tables below provide an update on progress

made against the sustainability objectives set

for 2021 and ambitions for the period 2022-

2025.

Sustainability-related objectives set at the

time of the 2021 Annual Report were either met

during the year or key milestones to achieving

them were passed.

Since 2020, the Investment Team have updated

the objective categories to be aligned with

the Investment Manager’s recently published

Corporate Sustainability Strategy (CSS) and

priority topics.

The CSS was developed in 2021 to supports the

Investment Manager’s 2025 strategic objective

‘“to become a recognised leader in sustainable

investment, including ESG". More information

on the CSS can be found in the Investment

Manager’s Sustainable Investment Report 2021.

Sustainability Report continued

Sustainable Investment Framework and ESG Decision Tool

Gresham House Energy Storage Fund plc (GRID)

G: Commitment to sustainability (previously Strategic Contribution)

2021 Objective Progress in 2021 Future objective

Continue to increase capacity under

management to increase GRID’s

contribution to the decarbonisation of the

UK electricity network.

Increased operational capacity by 110MW, to 425MW

as of 31 December 2021, through the acquisition of

five new BESS projects.

Acquired and put into construction eight new

projects with a total capacity of 375MW.*

*Total in construction is 415MW including Stairfoot (which is not

yet subject to an SPA).

Continue to increase capacity under

management to increase GRID’s contribution

to the decarbonisation of the UK’s electricity

network and a reliable, low-cost energy system.

S: Supply Chain Management (previously Supply Chain)

2021 Objective Progress Future objectives

Complete a review of key contractors and

suppliers to assess their ESG practices

and alignment to their ESG policy

commitments in order to identify gaps in

application and highlight key risks.

The team engaged with consulting and audit firms

specialising in supply chains to establish how they

could help GRID and the Investment Manager with

auditing and continuous monitoring of the supply

chain for batteries.

The Investment Manager devised the scope for

supply chain audit and regular monitoring.

The Investment Manager conducted a competitive

process to identify two firms best positioned to

carry out this project, with the final selection

between the two underway at the time of writing.

The Fund switched from NMC to LFP battery

chemistry for all projects entered into construction

from 2021, reducing potential human rights related

risks linked to the sourcing of Cobalt.

Update the Supply Chain Policy to fully

reflect best practice in the market and the

commitments of the Investment Manager.

Carry out, where possible and appropriate,

third-party, external assessments of our

battery supply chain to identify material

risks and mitigation actions that could be

incorporated into our investment process.

Have a comprehensive supply chain monitoring

and management process in place to assess

ESG risks in the supply chain and to ensure the

compliance of suppliers with the Supply Chain

Policy.

Include sustainability criteria into supplier

contract renewal and supplier selection

decisions.

Increase active engagement with

suppliers to positively influence

sustainability practices and policies.

Increased levels of engagement with key battery

suppliers in relation to their environmental and

social practices and standards.

Have engaged with key suppliers to enhance

their sustainability processes and reduce the

Fund’s ESG risk exposure.

G: Marketplace Responsibility: Processes, Policies and Education (previously GHESF Asset Review)

2021 Objective Progress Future objectives

Assess current operating assets against

our SIF and establish plans to rectify

any material risks or create value for

shareholders.

The Sustainable Investment Framework and ESG

Decision Tool was applied to the screening and

acquisition process of all new projects in 2021

(seven projects).

Assess all assets against our SIF using the ESG

Decision Tool and establish plans to rectify any

material risks to create and protect value for

shareholders.

Ensure the ESG Decision Tool remains up

to date to reflect any enhancements to

the sustainable investment processes and

sustainability-related policies.

Finalise ESG KPIs to monitor and measure

sustainability performance of the Fund and

report these regularly to stakeholders.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Sustainability Report continued

E: Climate Change and Pollution (previously GHESF Asset Review)

2021 Objective Progress Future objectives

Review the carbon footprint of current

operations and set an action plan to reduce

emissions

Carbon footprinting of GRID assets, as of

December 2021, is being carried out at the time

of writing of this report with the support of an

expert carbon consultancy group. Results will

be reported in the 2022 Annual Report.

Control and monitoring software was installed

and configured at certain sites, reducing the

need for human involvement and travel to and

from sites. This offers the potential to reduce

carbon emissions associated with travel and

enables the identification of opportunities to

improve energy efficiency on site.

Report annual carbon footprint to

stakeholders, across all three emissions

scopes.

Set targets and actions to reduce operational

carbon emissions in line with science.

Engage suppliers and contractors to reduce

Scope 3 emissions.

Apply full TCFD guidance and report in line with

recommendations.

G: Governance & Ethics: Engaged and active ownership (previously Engagement)

2021 Objective Progress Future objectives

Continue engagement with key counterparties

such as National Grid, Ofgem, the Department

for Business, Energy and Industrial Strategy

and others, communicating how the

deployment of BESS is needed to achieve

decarbonisation goals.

Continued engagement with National Grid

to establish BESS as a key contributor to the

stability of the UK’s electricity system.

Continue engagement with key counterparties

to increase BESS capacity and the contribution

of BESS to a low carbon economy.

Identify and work with key industry bodies

to drive positive industry outcomes linked to

sustainability topics.

Track and report on engagement activities and

key outcomes.

Increase community engagement, where

applicable, continuing to educate the public on

the role of BESS in the UK’s decarbonisation

ambitions.

Increased levels of engagement with local

communities in relation to landscaping and

biodiversity.

Increase community engagement, where

applicable, continuing to educate the public on

the role of BESS in the UK’s decarbonisation

ambitions.

Solicit, where practical, feedback from

key stakeholders who are in a position to

contribute.

Continued dialogue with key investors and

brokers in this area to understand their

sustainability requirements.

Solicit, where practical, feedback from

key stakeholders who are in a position to

contribute.

E: Natural Capital

2021 Objective Progress Future objectives

N/A Recruitment of an experienced Project

Manager to manage Safety, Health, and

Environment for each new project.

The Project Manager sits on a Biodiversity Sub-

Committee of the Investment Manager. The

Sub-Committee aims to enhance biodiversity-

related processes and outcomes for all New

Energy assets, including those in the Fund.

Environmental Plans and ecological surveys for

all new projects completed or underway.

Measure and report on key natural capital

impacts and dependencies.

Enhance policies and processes to reduce,

restore and enhance biodiversity and other key

ecosystem services at asset sites.

Gresham House Energy Storage Fund plc (GRID)

E: Waste Management

2021 Objective Progress Future objectives

N/A N/A Work with contractors to incorporate full

lifecycle analysis into BESS design to maximise

asset life, reduce the overall carbon footprint

of constructing and operating projects, and

consider end-of-life use to reduce negative

environmental and social impacts of battery

production and the battery components

including raw materials.

Engage with contractors/suppliers on

their end-of-life process development and

technology.

Further updates on sustainability initiatives

in 2021

S: Supply Chain Management

Supply chain sustainability was one of the big

themes in 2021, both in terms of availability and

pricing, but also in terms of ESG considerations.

The demand for batteries from the electric

vehicle and energy storage industries increased

throughout the year, and this coincided with the

ongoing tightening of supply chains affecting

raw material pricing and transportation costs.

The increased leverage suppliers therefore

gained at the expense of purchasers, including

GRID and its contractors, this did not divert

the Investment Manager from the focus of

managing ESG risk in the supply chain.

Supply Chain Policy Implementation

The Investment Manager published its first

Supply Chain Policy in 2020. The Supply Chain

Policy covers material ESG topics and places

obligations on suppliers (including contractors)

to ensure their own compliance, as well as the

compliance of their subcontractors, with the

Policy. It also requires suppliers to monitor and

report any non-compliance to the Investment

Manager.

The Supply Chain Policy was covered in detail

in the 2020 Annual Report. It has now been in

place for a year and the Investment Manager

will be updating the Policy requirements with

guidance from the appointed supply chain audit

consultant and in line with new information

from our own understanding of our key supply

chains.

GRID obtained the approval of its investors in

November 2020 to take a limited amount of

construction risk.

This provided it with more flexibility to engage

directly with equipment suppliers and sub-

contractors. Five of the projects sourced

in 2021 were put into construction after

negotiating individual contracts with key

equipment suppliers and subcontractors. This

meant that the Supply Chain Policy was applied

across to all five new contracts.

Supply Chain Risk Assessment

While BESS support the decarbonisation of

the electricity grid using battery-based storage

systems, the Investment Manager recognises

that the production, transportation, use, and

end of life treatment of batteries may have

environmental and social implications.

The Investment Manager is aware of the need

to carefully monitor suppliers of Lithium-

Ion batteries due to the long and complex

supply chains and manufacturing processes

associated with their production. The supply

chains for the batteries have a global footprint

and include resources that are sourced

from parts of the world with heightened

sustainability-related risks, particularly in

relation to labour practices, environmental

impact, and business conduct.

Therefore, one of the focus areas for the

Investment Manager’s sustainability work over

the next few years is on Stakeholder and Supply

Chain Engagement.

The Investment Manager is committed to

demonstrating best practice regarding

sustainability in the deployment and operation

of BESS projects. A key step in this process was

the commissioning of an audit of the supply

chain for batteries in 2021. This project will be

continued in 2022.

E: Natural Capital

Natural capital relates to the natural assets

which exist on BESS sites such as geology, soil,

water and living things. In the period, where

eight new projects were put into construction,

the Investment Manager stepped up its efforts

in the management of project environmental

impact, and engagement with local

communities in this context to protect natural

capital on BESS sites.

Biodiversity Sub-Committee

An experienced Project Manager was recruited

to manage Safety, Health, and Environment for

each new project. The Project Manager sits on

the Investment Manager’s internal Biodiversity

Sub-Committee for the New Energy division to

enhance the Fund’s processes and biodiversity

outcomes for all projects.

Biodiversity Sub-Committee Objectives

§ Educate the team and key stakeholders

(contractors, landowners, and investors)

on the role that New Energy can play in

enhancing biodiversity

§ Develop a clear framework on how to

implement biodiversity considerations into

the full investment lifecycle

§ Clearly define core expectations for

biodiversity for all New Energy projects,

including expectations for suppliers

(contractors included)

§ Create a process to measure and

assess baseline biodiversity, monitor

progress over time, and work to enhance

biodiversity where possible

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Environmental plans

The process for the granting of new planning

permissions in the UK incorporates stringent

screening and assessment of the environmental

impact of projects. It imposes conditions, pre

and post construction phase, for eliminating

and mitigating environmental impact be that

visual, pollution related (including noise), or

more general impact on local communities.

The Investment Manager has ambitions to go

beyond these requirements, and where feasible,

do more to assist local communities and bring

biodiversity benefits.

Each of the new projects going into

construction has an Environmental Plan to

ensure there are Risk Assessments and Method

Statements in place to reduce risk of negative

environmental impact.

Examples of actions taken to reduce risk of

negative environmental impact

§ Spill kit available at each site. These

are used if there is spillage of fuel from

equipment to build and commission the

project and allow contractors a quick

means of limiting pollution

§ Traffic Management Plan ensuring

contractors and suppliers know the

shortest and most efficient routes to site,

highways they are not to use, and off-site

holding areas to regulate large deliveries

§ Noise monitoring

Every project is subject to an ecological survey

to ensure the Investment Manager manages

the existing flora and fauna, appropriately

deals with Sites of Special Scientific Interest,

existing water courses, and other habitat areas

such as woodlands with Tree Preservation

Orders. Fenced-off battery storage plants

may sometimes provide safe refuge for birds,

reptiles and small mammals protecting them

from larger predators.

The Investment Manager attends one on

one, online and in person consultations with

residents, planning officers and local politicians

to ensure our projects are sympathetic to the

local communities wishes.

Examples of actions to protect or enhance

biodiversity on site

§ Attenuation ponds designed into site plans

§ Actions to enhance the local flora and

fauna are investigated

§ Upgraded planting schedules to include

mature trees that quickly hide the project

from the local community

§ Expansion of local beehives onto project

sites

§ Implementation of nesting bird boxes and

bat boxes

E: Waste Management

The recycling of Lithium-Ion batteries is

another key consideration battery purchasers

and owners need to account for from a

sustainability perspective.

Despite the rapid growth in the electrical

vehicle and grid-connected battery markets,

battery suppliers and waste management/

recycling companies are still developing large

scale alternatives for battery recycling at the

end of its useful life.

The oldest batteries in GRID’s fleet were

purchased in late 2016 but have been used

in applications that cause little degradation.

Considering a useful life of at least eight years

based on the way batteries have been operated,

there is still time for end-of-life use options to

emerge for GRID’s assets.

The Investment Manager has, in the vast

majority of cases, deliberately passed on the

recycling obligations to the EPC contractors

who have built the sites. The likely port of call

for EPC contractors will be the manufacturers

themselves who will face demand for recycling

from several other purchasers.

The Investment Manager is of the opinion that

multiple alternatives will emerge for end-of-

life use going forward as recycling becomes

profitable due to the high metal and mineral

content of the batteries. Specialist metal

and electronics recycling firms are likely to

compete.

Prior to recycling, it is anticipated that there

will be a market giving batteries a “second life”

as batteries used in BESS systems are planned

to be replaced once cumulative degradation

exceeds 40% of the initial capacity.

The Investment Manager is closely monitoring

developments in the recycling area so that

it is up-to-date on which technologies and

processes have the best potential for limiting

negative sustainability-related externalities

associated with the disposal of batteries. It is

also investigating options for offloading any

commercial risk associated with these recycling

obligations.

The Investment Manager has set an objective

to identify end-of-life opportunities that reduce

and minimise negative impacts and support

circular economies.

Sustainability Report continued

Gresham House Energy Storage Fund plc (GRID)

Climate change

The Company’s investment portfolio is front and

centre of the race to Net Zero: the roll-out of

utility scale BESS is seen as crucial to enable

development of intermittent renewable energy

generation and displace fossil fuels from the

UK energy grid. This creates both risk and

opportunity:

Task Force on Climate-related Financial

Disclosure (TFCD)

The recommendations of the Task Force on

Climate-Related Financial Disclosures are

supported by the Company. This will establish

a framework for consistent, comparable, and

clear reporting on a company’s approach to

climate change and assessing its potential

impact on the Company.

The Company is working towards a full

disclosure in relation to these areas in 2023

onwards: a preliminary assessment against

all eleven of the TCFD recommendations is

undertaken below on a voluntary basis:

Issue Opportunity Risks

UK Government policy to achieve Net Zero and

European government policies to decarbonise.

§ Continuing rollout of renewable generation

at scale which require battery energy

storage to balance the system.

§ Co-located batteries on sites reduce the

need for “centralised” battery storage.

§ Utilisation of ageing fossil plant as an

alternative form of system balancing:

whilst not viable in the long term such

plant can operate at incremental cost as

investment costs are sunk.

§ European governments remain committed

to decarbonise and reduce reliance on

imported gas: this creates additional

opportunities for battery energy storage.

§ Risks from flooding or increasing AC

requirements.

§ The production of hydrogen (both green

and blue) by use of renewable generation

is likely to be a long-term solution:

however, the time-scales and investment

required to achieve this are very long.

Electric vehicle rollout § This may create opportunities for the

Company to become an “aggregator” of

batteries and trade them in future.

§ Decentralised batteries being used,

particularly overnight, may reduce income

earning opportunities for utility scale

centralised battery energy storage.

Governance

Recommendation Disclosure

1. Describe the Board’s

oversight of climate-

related risks and

opportunities.

The Board has overall responsibility for the Company’s sustainability risks and opportunities, including climate

change. The Gresham House Sustainability Policy is on the website: https://greshamhouse.com/wp-content/

uploads/2020/09/Sustainable-Investment-Policy-final-update-190920.pdf

The Board and Investment Manager meet on a quarterly basis and as part of this meeting cycle, review the risks

facing the Company. In future this will include risks and opportunities related to climate change. The Company’s

investment strategy is embedded within the race to Net Zero. The impact of the physical consequences of climate

change features in these meetings and in the Company’s Risk Management Framework.

The Board’s Management Engagement Committee reviews the Investment Manager’s performance annually,

including their adherence to the Company’s Sustainability Policy. The Board’s Audit Committee considers the

Company’s climate-related disclosures.

2. Describe management’s

role in assessing and

managing climate-related

risks and opportunities.

The Gresham House Sustainability Policy, including climate change considerations, applies when making new

investments and running of the Company’s existing investments by its Investment Manager.

The Investment Manager monitors climate-related government policy, to inform the application of the Company’s

strategy and assessment of the risks faced by the Company. The Investment Manager also ensures that climate

change related risks are considered for individual investment projects.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Sustainability Report continued

Strategy

Recommendation Disclosure

3. Describe the climate-related risks

and opportunities the organisation

has identified over the short,

medium, and long term.

The Company’s investments are specifically designed to take advantage of the investment opportunities

arising from the decarbonisation of energy usage: the pace of decarbonisation is driving the size of the

investment opportunities for the Company.

The Climate Change risks section on page 26 details these risks further.

4. Describe the impact of climate-

related risks and opportunities

on the organisation’s businesses,

strategy, and financial planning.

The Climate Change risks section on page 26 details these risks further. The Investment Manager ensures

that all investments are reviewed under the Gresham House Sustainable Investment Policy: this will also

include local planning for the impact of climate change on flood risks and cooling requirements for the

battery storage assets.

5. Describe the resilience of the

organisation’s strategy, taking

into consideration different future

climate scenarios, including a 2°C or

lower scenario.

The Board and Investment Manager have identified three major risks in this area:

§ Confidence of renewable generation to be built based on power price forecasts: power price forecasts

for a 2°C or lower scenario are variable: energy demand is expected to increase as transport and

heating move away from fossil fuels but, as gas prices have less impact on setting the prevailing

market price, power prices might reduce, although higher carbon pricing is expected to offset this – in

this scenario it is expected that renewable generation remains an attractive investment and therefore

demand for battery energy storage remains robust.

§ Alternative technologies replace battery energy storage: over time a move to a hydrogen-based

energy system is likely to be required to achieve Net Zero: most likely this will utilise renewable energy

generation to create “green” hydrogen. This transition requires a complete refresh of the UK’s national

gas grid and huge investment which will take time. In this scenario, battery energy storage systems

are still required to secure electricity supplies for the production of hydrogen.

§ Increased infrastructure costs: the increase in temperature will require additional cooling capital

expenditure and operating costs: this is not anticipated to be material.

6.Describe the organisation’s

processes for identifying and

assessing climate-related risk.

The Company’s business model is specifically designed to take advantage of the investment opportunities

arising from the decarbonisation of the energy system. However, climate change risks remain and

are assessed as part of the Sustainable Investment Framework review process and ongoing asset

management activities.

7. Describe the organisation’s

processes for managing climate-

related risks.

The Company’s risk register includes climate-related risks. They are identified at several stages:

§ During the acquisition process such risks are managed via the business plan and appropriate costs for

mitigation measures.

§ Risks identified as part of the running of the Company’s investments are managed through

mitigating action proposed by the Investment Manager. Management activities are discussed by the

Management Engagement Committee.

8. Describe how processes

for identifying, assessing, and

managing climate-related risks are

integrated into the organisation’s

overall risk management.

Climate-related risks are integrated into the Company’s risk management framework through the

investment process and reported quarterly to the Board. The Board considers the risks recognised and the

proposed mitigations.

Gresham House Energy Storage Fund plc (GRID)

Metrics

Recommendation Disclosure

9. Disclose the metrics used by the

organisation to assess climate-

related risks and opportunities.

The Company’s investments mitigate against climate related risks by allowing for the balancing of the

UK electricity grid and the reduction of renewable energy being “spilled” from the system, and potentially

benefiting the energy curb of the end users.

The Company estimates the CO reducing impact of this by calculating the net energy exported and

assuming that this energy removes an equivalent amount of gas generation from the system.

In addition, the Company also monitors the energy efficiency of the battery cells and their degradation/

impact on useful life based on the services being operated by the batteries.

10. Disclose Scope 1, Scope 2, and

if appropriate, Scope 3 greenhouse

gas emissions, and the related

risks.

Scope 1 and Scope 2 emissions are disclosed on page 43.

11. Describe the targets used by the

organisation to manage climate

related risks and opportunities and

performance against targets.

The Company monitors its investments via a monthly dashboard which shows the level of utilisation of

each energy storage asset and the income achieved from each of the main services offered. The level of

utilisation and the optimisation of the battery assets (i.e. moving to a 2-hour battery model) will improve the

level of CO abated.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

The Directors present their Strategic Report for

the period ended 31 December 2021. Details of

the Directors who held office during the period

and as at the date of this report are given on

page 39 of the Annual Report and Financial

Statements. This Strategic Report has been

prepared in accordance with the requirements

of Section 414 of the Companies Act 2006

and best practice. Its purpose is to inform the

members of the Company and help them to

assess how the Directors have performed their

duty to promote the success of the Company, in

accordance with Section 172 of the Companies

Act 2006.

The Board has 25% female representation. The

Board has also adopted a formal diversity policy

and considers diversity on the Company’s Board

as an important supplement to the Board’s

existing skills, experience, and knowledge.

Business review and future outlook

A detailed discussion of individual asset

performance and a review of the business in the

period together with future outlook are covered

in the Investment Manager’s Report on pages

7 to 16.

The Directors are of the view that the

investment strategy, incorporating both

additional acquisitions and the existing

portfolio is performing well. The Company has

a strong portfolio of investments which are

well positioned to take advantage of a growing

opportunity. The equity fundraising at the end

of 2021 demonstrates strong investor support

for the Company’s growth strategy and the

resilience of the Company’s income. One of

the Board’s key objectives for 2022 is to ensure

an effective and efficient deployment of the

capital raised at the end of 2021, augmented by

a drawdown of the debt facility, into a portfolio

of accretive assets that are in line with the

Company’s Investment Policy. The Board is also

reviewing the current Investment Policy and

is expected to recommend, to shareholders,

proposals for amending the policy as described

in more detail in the Chair’s Statement.

Key performance indicators

The Board believes that the key performance

indicators detailed in the Highlights section on

page 2 and the Investment Manager’s Report,

which include profit, project revenues, dividend,

NAV, total return, project capacities and battery

sizes, provide shareholders with balanced

information to assess how the Company is

performing against its investment objectives.

The Board monitors these key metrics on an

ongoing basis and is pleased by performance

in the year: the capacity of the batteries

has increased; the pipeline of new batteries

is substantial; and the revenue earning

opportunities for these batteries are continually

developing in line with expectations. Further

discussion of the KPIs and results are included

in the Chair’s Statement on page 3 and in the

Investment Manager’s Report.

The Company has generated £80.4mn of profit

in the year ended 31 December 2021, including

interest receivable from subsidiaries. Total

dividends in respect of 2021 were £27.5mn

(including the dividend paid on 25 March 2022).

The Board maintains a focus on operating

profit and Operational Dividend Cover to

ensure underlying profits from the Company’s

investments are available to cover dividends.

As the capital raised is fully deployed and

underlying assets upgraded, the Board will

continue to ensure this is monitored closely.

Grid connection capacity (in MW) and the

capacity of the batteries (in MWh) are also

crucial to ensure the underlying investments

are able to operate at full capacity: the

Investment Manager has ensured grid

capacities (both import and export) are

optimised and symmetrical wherever possible.

Finally, as the Company has undertaken several

fundraisings following IPO, the Board monitors

the project pipeline to ensure quality projects

are available to meet investor demand to ensure

funds raised are deployed in a reasonable

timeframe.

Investment Policy: diversification of assets

and revenues

The Company invests in BESS projects using

Lithium-Ion batteries as such technology is

considered by the Company to offer the best

risk/return profile. However, the Company is

agnostic as to which specific battery energy

storage technology is used by the projects

over the longer term and will monitor projects

and may invest in projects with alternative

battery technologies and will consider such

investments (including combinations thereof),

where they meet the Company’s investment

objective and policy.

The Directors present their Strategic Report for the period ended 31

December 2021. Details of the Directors who held office during the

period and as at the date of this report are given on page 39 of the

Annual Report and Financial Statements. This Strategic Report has

been prepared in accordance with the requirements of Section 414 of

the Companies Act 2006 and best practice. Its purpose is to inform the

members of the Company and help them to assess how the Directors

have performed their duty to promote the success of the Company, in

accordance with Section 172 of the Companies Act 2006.

Strategic Report

Gresham House Energy Storage Fund plc (GRID)

The Company intends to invest with a view

to holding assets until the end of their useful

life. BESS projects may also be disposed of,

or otherwise realised, where the Investment

Manager determines in its discretion that

such realisation is in the interests of the

Company. Such circumstances may include

(without limitation) disposals for the purposes

of realising or preserving value, portfolio

management or of realising cash resources for

reinvestment or otherwise.

The Company intends that the BESS projects in

which it invests will primarily generate revenue

from in-front-of meter services but may also

provide behind-the-meter (BTM) services.

BESS projects will be selected with a view to

achieving appropriate diversification in respect

of the portfolio.

First, diversification will be sought by

geographical location of the BESS projects

in which the Company invests across Great

Britain, the Republic of Ireland and Northern

Ireland, provided that no more than 10% of

Gross Asset Value (calculated at the time of

investment) may be invested in the Republic of

Ireland and Northern Ireland.

Second, it is the Company’s intention that at

the point at which any new investment is made,

no single project (or interest in any project) will

have an acquisition price (or, if an additional

interest in an existing investment is being

acquired, the combined value of the Company’s

existing investment and the additional interest

acquired shall not be) greater than 20% of

Gross Asset Value (calculated at the time of

investment).

However, in order to retain flexibility, the

Company will be permitted to invest in a single

project (or interest in a project) that has an

acquisition price of up to a maximum of 30%

of Gross Asset Value (calculated at the time of

acquisition). The Company targets a diversified

exposure with the aim of holding interests in not

less than five separate projects at any one time.

Third, the Company intends to achieve

diversification by securing multiple and varied

revenue sources throughout the portfolio by

investing in BESS projects which benefit from

a number of different income streams with

different contract lengths and return profiles

through individual BESS projects, as well as

by enabling the BESS projects in which the

Company invests to take advantage of a number

of different revenue sources. It is intended that

the main revenue sources will be:

In Great Britain:

§ Firm Frequency Response (FFR) – the

Company invests in BESS projects

that generate FFR revenues including

from FFR contracts through which the

Company and/or its subsidiaries will

provide, on a firm basis, dynamic or non-

dynamic response services to changes

in frequency, to help balance the grid and

avoid power outages. Third parties provide

electricity trading services to project

companies on a commercial basis for an

arm’s-length fee.

§ Asset optimisation – the Company

invests in BESS projects that generate

revenues from importing and exporting

or generating and exporting in the case of

BESS projects including generators, power

in the wholesale market and the National

Grid-administered BM.

§ CM – the Company invests in BESS

projects that generate revenues by access

to the benefit of contracts, or through

entering into new contracts, to provide

back-up capacity power to the Electricity

Market Reform delivery body via 1-year and

15-year CM contracts.

§ TRIADS and other National Grid related

income – the Company invests in BESS

projects that generate revenues from the

three half-hour periods of highest system

demand on Great Britain’s electricity

transmission system between November

and February each year, separated by at

least ten clear days and other National

Grid related income including Generator

Distribution Use of System, through which

benefits are paid by DNOs to suppliers,

which are passed through to electricity

generators in their power purchase

agreements and the National Grid’s

Balancing Use of System (BSUoS), which

recovers costs through charges levied on

electricity generators and suppliers. In

addition, the balancing system produces

small half-hourly residual cash flows that

are generally negative (a disbenefit to

distributed generators) but can be positive

(a benefit) and are allocated to suppliers in

the same way as BSUoS charges.

In the Republic of Ireland and Northern

Ireland, the key source of revenue for storage

is through DS3 System Services contracts,

both volume uncapped, and volume capped.

If successful in a procurement exercise for a

volume uncapped contract, a service provider is

paid a regulated tariff approved by the relevant

regulatory authorities. Some fast-responding

battery energy storage projects were awarded

volume capped contracts (with a fixed term

of six years) in the 2019 auction. Revenue

may also be possible through the Capacity

Payment Mechanism (which involves an auction

for capacity revenues) or wholesale trading

revenues.

BESS projects in which the Company invests

may diversify their revenue sources further

by collaborating with renewable generators

or large users of power in close proximity to a

BESS project or providing availability-based

services to restore electric power stations or

parts of electric grids to operation.

In such circumstances, the proportion of

revenues coming from electricity sales may

materially increase from that indicated above.

BESS projects in which the Company may

invest in Great Britain may also be able to enter

into FFR contracts with Distribution System

Operators (DSO) and provide reactive power

services to National Grid, the timing of which is

according to the current evolving DSO model.

Fourth, the Company aims to achieve

diversification within the portfolio through the

use of a range of third-party providers, in so

far as appropriate, in respect of each battery

energy storage project such as developers,

EPC contractors, battery manufacturers and

landlords.

Finally, each BESS project internally mitigates

operational risk because each project will

contain a battery system with a number of

battery modules in each stack, each of which

is independent and can be replaced separately,

thereby reducing the impact on the project, as

a whole, of the failure of one or more battery

modules. This includes appropriate systems to

suppress fire risk and other operational risks.

Other investment restrictions

The Company will generally acquire BESS

projects within SPVs, where construction

is substantially complete and where BESS

projects are capable of commercial operations

(Operational Projects). Operational Projects

will need to have in place a completed lease on

satisfactory terms in relation to the land where

that BESS project is situated, an executed

grid connection agreement and completion of

relevant commissioning tests (in Great Britain,

a G99 Certificate confirming commissioning

completion). Once an Operational Project

is acquired, the Company may invest in

upgrades by providing loan or equity financing

to the SPV. The SPV may enter into new

lease arrangements to increase the size of

the site, new planning permissions enabling

construction of an increased capacity BESS

project on that land, a new and/or amended

grid connection agreement which provides for

increased capacity, and/or an EPC contract or

EPCm contract suite to undertake construction

of the relevant upgrades.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

The Company may also acquire BESS projects

or rights to acquire BESS projects which are

ready to build that as a minimum have in place

a completed lease, lease option, or agreement

for lease, on satisfactory terms in relation to the

land where that BESS project is situated, full

planning permission enabling the construction

of a suitable BESS project on that land, a grid

connection offer, and an agreed form EPC

contract or EPCm contract suite (Ready to

Build Projects). The Company may acquire such

Ready to Build Projects for a nominal upfront

consideration provided that (i) any remaining

consideration is paid by the Company only

where construction is substantially complete

and where such BESS projects are capable of

commercial operations and (ii) the Company has

an option to transfer back the Ready to Build

Project to the seller in certain circumstances.

The Company may provide loan finance to BESS

project companies so that the BESS project

companies can acquire equipment prior to

construction, provided that no more than 15%

of Gross Asset Value (calculated at the time that

finance is provided based on the latest available

valuations) may be exposed in aggregate to any

such loans. The Company may also provide loan

finance to Ready to Build Projects for payments

under the EPC contract or EPCm contract

suite which cannot be classed as being for

equipment, provided that no more than 10% of

Gross Asset Value (calculated at the time that

finance is provided based on the latest available

valuations) may be exposed in aggregate to any

such loans.

The Company does not intend to invest in

listed closed-ended investment funds or in any

other investment fund (other than, potentially,

in money market funds as cash equivalents)

and in any event shall not invest any more than

15% of its total assets in listed closed-ended

investment funds or in any other investment

fund.

Investment in developers

The Company may invest in one or more

developers of BESS projects through equity

issued by the relevant developer, provided that

investment in developers (calculated at the

time of investment) shall be capped at £1mn in

aggregate.

Cash management

Uninvested cash or surplus capital may be

invested on a temporary basis in:

§ cash or cash equivalents, money market

22 This is a target only and is based on current market conditions as at the date of this document and is not a profit forecast. There can be no

assurance that this target will be met or that the Company will make any distributions at all. This target should not be taken as an indication of

the Company’s expected or actual current or future results. The Company’s actual return will depend upon a number of factors, including the

Company’s net income and the Company’s ongoing charges figure. Accordingly, investors should not place any reliance on these targets in deciding

whether to invest or assume that the Company will make any distributions at all.

instruments, money market funds,

bonds, commercial paper or other

debt obligations with banks or other

counterparties having a “single A” or

higher credit rating as determined by any

internationally recognised rating agency

selected by the Board which, may or may

not be registered in the EU; and

§ any UK ‘‘government and public securities’’

as defined for the purposes of the

Financial Conduct Authority (FCA) rules.

Leverage and derivatives

The Company (via MidCo) has raised a debt

facility in September 2021 comprising a £150mn

capex term facility and a £30mn revolving credit

facility. There is also an uncommitted accordion

of £200mn which brings total available debt to

£380mn. The interest rate is 300bps over SONIA

(before hedging). This debt is expected to start

to be drawn down in Q2 2022.

The Directors will restrict borrowing to an

amount not exceeding 50% of the Company’s

NAV at the time of drawdown. There will be

no cross collateralisation between the BESS

projects.

Derivatives may be used for currency, interest

rate or hedging purposes as set out below and

for efficient portfolio management. However,

the Directors do not anticipate that extensive

use of derivatives will be necessary.

Efficient portfolio management techniques

may be employed by the Company, and this may

include (as relevant) currency hedging, interest

rate hedging and power price hedging.

Bribery and Corruption policy

The Investment Manager has an Anti-Bribery

and Corruption Policy and the Company is

working on its own Anti-Bribery and Corruption

Policy.

Dividend policy

The Board expects that dividends will

constitute the principal element of the return

to the holders of Ordinary Shares. On the basis

of current market conditions, the Company will

target dividend payments of 7.0p per Ordinary

Share in the financial year ending 31 December

2022 and in financial periods thereafter

It is intended that dividends on the shares will

be payable quarterly for the quarters ending

in March, June, September, and December, all

in the form of interim dividends (the Company

does not intend to pay any final dividends). The

Board reserves the right to retain, within a

revenue reserve, a proportion of the Company’s

net income in any financial year, such reserve

then being available at the Board’s absolute

discretion for subsequent distribution to

shareholders, subject to the requirements of

the Investment Trust Regulations.

The dividend policy will be subject to an annual

vote at each Annual General Meeting (AGM). The

Company may, at the discretion of the Board,

and to the extent possible, pay all or part of any

future dividend out of capital.

Share buybacks

The Company may purchase Ordinary Shares in

the market at prices which represent a discount

to the prevailing NAV per Ordinary Share of that

class so as to enhance the NAV per Ordinary

Share for the remaining holders of Ordinary

Shares of the same class.

The Company is authorised to make market

purchases of up to 35,117,170 Ordinary Shares.

The Board intends to seek shareholder

approval to renew its authority to make market

purchases of its own issued Ordinary Shares

once its existing authority has expired or at

subsequent AGMs.

Purchases of shares will be made within

guidelines established from time to time by the

Board and only in accordance with the Statutes

and the Disclosure Guidance and Transparency

Rules. Any purchase of shares may be satisfied

by the available cash or cash equivalent

resources of the Company, from borrowings,

the realisation of the Company’s assets or any

combination of these sources of liquidity, at the

Directors’ discretion.

Ordinary Shares bought back by the Company

may be held in treasury or cancelled. Such

shares may (subject to there being in force a

resolution of shareholders to disapply the rights

of pre-emption that would otherwise apply) be

resold by the Company. C Shares bought back

by the Company will be cancelled.

At the date of this Annual Report, the Company

does not hold any shares in treasury and has

no intention to buy back shares at the present

time.

Continuation votes

Shareholders will have the opportunity to vote

on an ordinary resolution on the continuation

Strategic Report continued

Gresham House Energy Storage Fund plc (GRID)

of the Company at the AGM of the Company

to be held in 2023, and every fifth AGM

thereafter. If any such ordinary resolution is not

passed, the Directors shall draw up proposals

for the voluntary liquidation, unitisation,

reorganisation, or reconstruction of the

Company for consideration by the shareholders

at a general meeting to be convened by the

Directors for a date not more than six months

after the date of the meeting at which such

ordinary resolution was not passed.

Going concern and viability

The Strategic Report describes the Company’s

business activities, together with factors

likely to affect its future performance and

development and an assessment of the

principal risks and uncertainties facing the

Company.

The key risks facing the Company include, but

are not limited to, the risks mentioned on pages

33 to 36. The Board notes that it is difficult

to foresee the viability of any business over

the long term given the inherent uncertainty

involved and that the risks associated with

investments within the infrastructure sector

could result in a material adverse effect on the

Company’s performance.

Going concern

As at 31 December 2021, the Company had

net current assets and net cash balances

of £122mn (excluding cash balances within

investee companies) and no debt. The Company

is a guarantor to the £180mn debt facility

(£150mn capex facility and £30mn revolving

credit facility) entered into by the MidCo in

September 2021 which was undrawn at the year

end. It is anticipated that the capex facility will

be utilised during 2022 to purchase equipment

for pipeline projects as previously announced.

In January 2022, the Company provided letters

of credit to a supplier for an amount of £30mn

in respect of the purchase of batteries that are

being used in projects under construction in the

Company portfolio and which are expected to

commission during 2022.

As set-out in the Chair’s Statement, the

Company has also decided to build certain

projects to a 2-hour duration and to upgrade

all existing EFR projects to 2-hours. The cost

of the 2-hour projects and upgrades is likely

to require additional funding and the Directors

note that the existing debt facility includes

provision for an incremental facility of up to

£200mn. Alternatively, the Directors could take

the decision to seek an additional placement of

shares, pause certain projects and/or dispose

of surplus batteries.

As described in the viability statement, financial

models have been prepared on a conservative

base case and on a severe but plausible

downside case, which show that sufficient cash

is expected to be available to the Company to

meet current obligations and commitments

as they fall due and that the debt covenants of

MidCo’s debt facility are expected to be met.

The Directors confirm they have a reasonable

expectation that the Company has adequate

resources to continue its operations for at

least 12 months from the date of signing these

financial statements. As such, the Directors

have adopted the going concern basis in

preparing the Annual Report and Financial

Statements.

Viability statement

The Directors have assessed the prospects

of the Company for the period to March 2025.

Although the Company maintains cash flow

models which extend well beyond this period,

there is less certainty over the later cash flows

as the profitability of the underlying investment

portfolio (and therefore available dividends to

the Fund) is driven by future pricing volatility

in the electricity market. We therefore limit

the review to three and a half years to reduce

this uncertainty in forecasting and which

also reflects the current investment strategy

and cash deployment. The Company’s MidCo

includes a financing facility which expires

in September 2026, the viability statement

assumes this is refinanced by March 2025.

An uncertainty in the Company’s viability is the

continuation vote which will be held in 2023 in

line with the Company’s Articles of Association.

We believe the Company will continue on the

basis of the growth seen since IPO and the

continued development to drive valuation

growth.

Financial models have been prepared for

the viability period which consider liquidity

at the start of the period and key financial

assumptions at the Company level as well as at

the operational project level. These financial

assumptions include expected cash, generated

and distributed by the portfolio companies

available to be distributed to the Company, this

includes inflows and outflows in relation to the

external debt and interest payments expected

within the MidCo, the availability of new external

debt facilities, committed expenditure for

investments and expected dividends as well

as the ongoing administrative costs of the

Company. It is also assumed that there is no

vote to terminate the Company in 2023. The

Directors have applied two scenarios to their

viability assessment:

1. A base case assessment to consider the

Company’s ability to continue in operation

under the current planned strategy to

fund and acquire the currently committed

Exclusivity Pipeline; and

2. A severe but plausible downside case

scenario which assumes a reduction in

underlying portfolio EBITDA of 25% to the

base case. The downside case also takes

account of the availability of mitigating

actions available to the Directors, such as

reducing discretionary spend and pausing

the roll-out of projects.

The principal risks are as set out on pages

33 to 36 and management have considered

the mitigation to those risks when setting

the downside case scenario, which, given

the revenue opportunities available to the

portfolio companies, the critical nature of the

services provided by the portfolio companies

to the National Grid and the continued volatility

of power prices, is considered unlikely. The

Directors have considered the impact of the

Russian invasion of Ukraine and believe that

there is no significant impact.

The financial models show that the debt

covenants in relation to the debt entered into by

the MidCo are expected to be met throughout

the period and the viability assessment

considers the MidCo is able to refinance any

external debt when it becomes due.

As set out in the going concern statement, the

Company has provided letters of credit and

parental guarantees to suppliers in respect

of advance orders of batteries for which

additional funding is likely to be required. The

Directors are confident the additional funds

will be available to the Company, either through

an incremental facility to the capex facility

or an additional placement of shares. Other

alternative measures could include the decision

to pause the projects and/or dispose of surplus

batteries.

The Directors believe that the Company is

well placed to manage its business risks

successfully over both the short and medium

term and accordingly, the Board has a

reasonable expectation that the Company will

be able to continue in operation and to meet its

liabilities as they fall due for a period of at least

three years.

Based on the assessment of the Company’s

financial position, after assessing the risks

and significant assumptions together with the

existing high level of cash held by the Company

and the forecasts of the Company’s future

performance under the various scenarios,

the Board has a reasonable expectation that

the Company is well positioned to continue to

operate and meet its liabilities as they fall due

over the period to March 2025.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Principal risks and uncertainties

Risk management approach

The Company continues to recognise that

effective risk management is critical to

enable it to meet its strategic objectives. The

Company has a clear framework for identifying

and managing risk, at both an operational

and strategic level. Its risk identification and

mitigation processes have been designed to

respond to the changing environment in which

it operates.

The impact of emerging risks on the Company’s

business model are also considered and used

to make informed decisions, including as to

the delivery and evolution of the Company’s

strategy. The table below captures those risks

that would have the most significant adverse

impact on the Company (and the underlying

investments), based on their impact and/or

likelihood. In addition, climate change risks are

considered separately on page 26.

Strategic Report continued

Existing risks

Risk area Gross impact Mitigation Net impact

Emerging business model and

impact on revenue streams.

Residual risk: high

(2020: high)

Adverse changes by National Grid

in relation to services contracted

by them may reduce the size/scope

of income earning opportunities

to the Company’s investments and

potential impact on valuation.

The Company’s investments

enjoy several different income

streams ranging from BM, Capacity

Payments, FFR, TRIADs, and DC

as contracted services to National

Grid; the Company’s investments

are able to change which income

streams are contracted and

ascertain the most advantageous

on any given time period: this

is continuously monitored by

the Investment Manager and

optimisation partners.

Due to the progressive

decommissioning of other carbon

intensive options available to

National Grid for managing these

services, and the need to support

the security of this critical national

infrastructure, BESS is expected to

form an integral part of transforming

the electricity sector in the UK.

Battery energy storage is a versatile

asset, and it can perform a variety of

roles to manage risk.

There is also the potential to

“revenue stack” and gain multiple

revenue streams from different

services.

The income stream opportunities

and usage of battery energy storage

systems is expected to evolve over

time.

Gresham House Energy Storage Fund plc (GRID)

Risk area Gross impact Mitigation Net impact

Environmental, Social and

Governance: production and

recycling of batteries creates

risk.

Residual risk: medium

(2020: medium)

BESS are manufactured, installed

and operated with the intention

of driving the transformation to a

low carbon energy supply in the

UK. However, the lifecycle ESG

impact of the batteries needs to be

considered and minimised.

The supply for battery manufacture

relies on high quality global partners

who ensure their supply chain does

not involve the use of illegally or

unethically sourced “rare earth”

materials or inadequate labour

standards. This could be mitigated

by undertaking reviews of the supply

chain.

The recycling of the BESS systems

is subject to constant development

and research; the importer of

these batteries (not the Company

or SPV companies) is responsible

for their disposal, but the Company

will facilitate this to ensure low

environmental impact.

Some aspects of this are still

evolving over time, especially the

end use/recycling of BESS.

The ability of the BESS market to

drive a low carbon electricity system

needs to be considered versus the

other, mainly fossil fuelled, options

when considering the overall ESG

impact of BESS. Work will continue

to minimise this over time.

Valuation risk.

Residual risk: medium

(2020: medium)

The Company’s investments are

valued using discounted cash flows

and assessment of future income

streams: these valuations may be

materially incorrect or not held at

fair value.

The Company’s investments are

impaired if income streams are not

as profitable as expected or costs

are higher than expected.

Risk adjusted discount rates drive

valuation along with the external

pricing curves.

The Company utilises a modelling

methodology which ensures

income streams are discounted

using appropriate discount rates

dependent on the perceived risks.

The weighted average discount

rates are reviewed regularly and the

Company believes the valuations are

conservative.

A third-party valuer reviews

valuations and confirms

appropriateness.

Operational and performance

risk in the underlying

investments leading to loss of

value.

Residual risk: low

(2020: medium)

The BESS investments do not

perform in the manner expected

(i.e. degradation in performance)

or are not optimised in the best

commercial manner to capture

revenue streams leading to

reduction in valuations.

Performance within the SPVs

may not meet planning or safety

requirements and result in

curtailment of operations and loss

of investment value.

The portfolio will rely on contracts

with suppliers to maintain certain

key equipment: these suppliers may

fail to provide adequate support.

The Company underwent a

programme of upgrades to the seed

assets to optimise these assets and

has ensured that the new assets

being invested into are designed

in a flexible manner. The battery

duration for the new investments

is also considered to ensure fullest

flexibility for future operation.

Design and commissioning testing

takes place in each investment to

ensure all relevant planning and

HSE conditions are met. Fire risk,

in particular, is carefully assessed

and sites are designed and operated

to ensure this risk is as low as

practicable.

Cyber security risk is managed

via secure systems used by

optimisation partners.

The portfolio has a number of

alternative suppliers and optimisers

to manage risk.

The Investment Manager has

substantial experience managing

BESS assets and works with leading

asset optimisers to ensure assets

are designed and operated as

expected.

Health and safety performance is

rigorously tested and reviewed.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Strategic Report continued

Risk area Gross impact Mitigation Net impact

Investment in development

and construction projects.

Residual risk: low

(2020: low)

The Company invests in projects via

loans before and after the projects

are owned by the Company. There

is a risk that the project does not

complete, and the Company incurs

financial loss.

The Company invests in

construction projects as part of its

investment portfolio. There is a risk

of financial loss or delay of revenue

generation.

The Company does not invest in

speculative project development.

Any investments in projects are

carefully assessed and vetted by

the Investment Manager: they will

have secured certain minimum

requirements and are expected to

be ready to proceed to construction

in a relatively short timescale.

Late delivery of plant items may lead

to delay.

Limited exposure to the

Company due to careful vetting

and management of project

development activities and

commercial arrangements with the

Investment Manager to manage

construction risk.

The Company is usually investing in

the advance purchase of equipment

which has inherent value and can be

used on other projects if needed.

The Company is proposing that

these current development and

construction loans are combined

into a limit to ensure the pipeline of

projects can be balanced.

Reliance on the Investment

Manager.

Residual risk: low

(2020: low)

The Company relies on the

Investment Manager as a key

supplier.

The Company has long-term

contractual arrangements in place

with the Investment Manager

and the Investment Manager has

confirmed to the Company that

the growth of the Company is a

key focus area of the Investment

Manager.

The Investment Manager remains

incentivised to continue to grow the

Company and drive value.

Financing risk.

Residual risk: low

(2020: low)

Equity or debt financing is not

available and the Company is unable

to fund its pipeline of assets.

The Company does not enter

into unfunded commitments: all

committed pipeline can be funded

from existing equity finance or the

existing debt facility.

Limited overall impact on

deployment of pipeline.

When drawn the debt facility will

include appropriate hedging of

interest rates to manage this risk.

COVID-19 pandemic.

Residual risk: low

(2020: medium)

The pandemic can impact adversely

both on delivery of new battery

capacity projects in construction

through labour, travel restrictions,

or the inability to source key

materials/parts from overseas due

to shipping problems or production

shortages.

Energy was, and remains, a

key industry in the UK and the

construction of these assets

continues. Remote commissioning

with overseas technical experts

was utilised to ensure project

commissioning could continue.

Shipping costs and capacity to

deliver equipment for new projects

remain a concern, as many

components are sourced overseas,

and the Investment Manager works

closely with key providers to ensure

key components are ordered in

advance.

Limited overall impact expected in

the future: shipping costs remain

high but are a modest portion of

project costs.

The Company is managing access to

key plant and materials by arranging

long-term supply frameworks with

key suppliers.

Tax compliance.

Residual risk: low

(2020: low)

The Company is registered as an

Investment Trust and must comply

with certain tests.

The Investment Manager

undertakes the relevant tests each

quarter and the Company’s tax

advisers review this regularly.

None.

Gresham House Energy Storage Fund plc (GRID)

Emerging risks

Risk area Gross impact Mitigation Net impact

Emerging technology replaces

battery energy storage assets.

Residual risk: low

(2020: new risk)

The Company invests in battery

storage projects: a new or

disruptive technology might

adversely impact on the Company’s

investments.

The Company utilises proven

technologies with associated

Tier 1 supplier warranties and

performance guarantees.

Whilst the cost of these batteries

is expected to continue to fall

and incremental performance

improvements accrue in future,

it is currently viewed as unlikely

that a completely new reliable and

cost competitive technology will

appear during the lifetime of these

batteries and impact on the lifecycle

of these batteries.

The Company continues to review

available technologies.

Falling cost of batteries may

reduce future income streams if

new entrants have significantly

lower marginal costs. However,

the Company will also benefit from

lower costs and the valuation model

assumes continuing cost reductions

for replacement assets over time.

Potential equipment shortages

if China is subject to sanctions.

Residual risk: low

(2020: new risk)

If China invades Taiwan or takes

other hostile measures which

cause sanctions, the supply chain

of crucial equipment would be

disrupted.

The Company has relationships

with other non-Chinese suppliers,

but they are likely to source

components from China.

The Company ensures payments are

protected via Letters of Credit to

ensure no financial loss.

The Company ensures it is securing

key equipment orders in advance.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Stakeholder Engagement and Statement

under Section 172

The Board recognises that the Company should

be run for the benefit of shareholders, but

that the long term success of a business is

dependent on maintaining relationships with

stakeholders and considering the external

impact of the Company’s activities.

The Company has identified the following key

stakeholders:

§ The Company’s shareholders and lenders

§ The Company’s Investment Manager

§ The communities in which the Company’s

assets are located

§ The Company’s business partners and key

service providers

§ Investment trading partners

Engagement with shareholders and lenders

Who they are?

The Company will require further funding to

continue the requirements of the investment

strategy and obtain the additional pipeline

investments. As such, existing and prospective

equity investors and existing lenders are vitally

important stakeholders.

Why is it important to engage with this group of

stakeholders?

Through our engagement activities, we strive

to obtain investor buy-in into our strategic

objectives and how they are executed. Since

IPO the Company has issued a significant

number of shares to allow the Company to meet

the investment strategy of the Company.

How has the Company engaged with the equity

investors and lenders?

The Company engaged with the stakeholder

group in the period through the following:

§ Interim and full year accounts

§ Company’s corporate Brokers and

Investment Manager are in regular

communication with shareholders and

shareholder views are reported to the

Board on at least a quarterly basis

§ One-to-one meetings with the Investment

Manager

§ Regular news and quarterly NAV updates

§ A webinar and Q&A session with the Chair

and the Investment Manager

What came out of the engagement?

Through these engagement activities, the

Company has successfully carried out a

fundraising for an increased pipeline of

investments during 2021, whilst also managing

the shareholders’ expectation on the Company’s

growth. The Company will continue to engage

with shareholders in future as further expansion

becomes necessary.

In addition, the Company’s wholly owned

subsidiary secured a £180mn debt facility in

2021. This will enable the Company to manage

the debt and equity mix to improve cost of

capital and cash flows for dividends.

Engagement with the Investment Manager

Who they are?

The Investment Manager implements and

oversees the investment strategy of the

Company, including acquisition identification,

and manages the value enhancement in the

underlying SPVs. The Investment Manager

is crucial for the Company to meet dividend

expectations.

Why is it important to engage with the

Investment Manager?

Constructive engagement with the Investment

Manager is important in order to ensure that the

expectations of the shareholders are being met

and that the Board is aware of challenges being

faced by the Investment Manager.

How does the Company engage with the

Investment Manager?

The Company, supported by its Management

Engagement Committee, conducts both

ongoing reviews and an annual review of

the Investment Manager’s performance and

the terms of engagement of the Investment

Manager. The Board and the Investment

Manager maintain an ongoing open dialogue on

key issues facing the Company with a view to

ensuring that key decisions such as investment

decisions, trading partner performance in the

SPVs and the Company’s strategy are aligned

with achieving long-term shareholder value.

This open dialogue takes the form of a number

of ad hoc Board meetings, as discussed in

the Corporate Governance Report, and more

informal contact, as appropriate to the subject

matter.

What came out of the engagement?

The Company and Investment Manager have

aligned interests to ensure the future success

of the Company. The Investment Manager

sees the growth of the Company as both a key

element of its strategy and a Company which

fits well with the ESG strategy of the Investment

Manager.

Through this engagement the Company

has been able to carry out an additional

equity raise during the year for an increased

pipeline of investments. With the support of

the Investment Manager, the Board has also

reviewed the discount rate for its operational

assets and resolved to approve a 25bp discount

rate reduction.

The Board and the Investment Manager

also discussed and revisited governance

arrangements going forward as the Company

grows in size.

Engagement with communities

During construction of investment projects,

the Company ensures all relevant planning and

construction conditions are met. In addition,

the Company remains committed to proactively

engaging with the communities within which

the Company operates. The Investment

Manager is part of the Gresham House plc group

and is focused on a sustainability agenda.

Engagement with business partners and key

service providers

Who they are?

The Company has various key service providers

who provide management services.

Why is it important to engage with the key

service providers?

The intention of the Company is to maintain

long-term and high-quality business

partnerships to ensure stability while the

Company pursues its growth strategy.

How does the Company engage with the key

service providers?

The Company, supported by its Management

Engagement Committee, reviews all key service

providers to the Company and the terms of their

engagement. During the period, the Company

conducted a review of the terms of all service

provider engagements along with their fee

levels to ensure appropriate levels of support to

the Company during the period.

Strategic Report continued

Gresham House Energy Storage Fund plc (GRID)

The Company seeks two-way engagement

between the Board and key service providers

on service delivery expectations and feedback

on important issues experienced by service

providers during the period. The intention of

the Company is to maintain long-term and high-

quality business partnerships to ensure stability

while the Company pursues its growth strategy.

What came out of the engagement?

The Company has ensured that the interests

of key service providers are aligned with the

Company. The support of the Company’s key

service providers was also fundamental in the

successful completion of the Company’s equity

placing and debt raise.

Key strategic decisions during 2021

The Company continued its growth phase in the

period ended 31 December 2021.

Key strategic decisions included:

§ Investment in future asset pipeline

§ Fundraising decisions to align the

investment programme with available

funds (including securing a debt facility)

§ Continuing to upgrade the “bench

strength” of the Investment Manager’s

team to match the increasing scale of the

portfolio

§ Payment and level of dividends to meet

expectations

In relation to these key decisions, stakeholders,

such as key contractors, were involved to

ensure asset pipeline was available to the

Company on the timescales required. As noted

above, shareholder discussions were held

to ensure clear communication was made

in relation to progress and market interest

for expansion of the Company. Finally, the

Company worked with the Investment Manager

to ensure the Company’s dividend target of 7.0p

per Ordinary Share for 2021 was delivered.

This Strategic Report is approved on behalf of

the Board by

John Leggate CBE, FREng

Chair

Date: 5 April 2022

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Board

John Leggate, CBE FREng

Chair and Independent Non-

Executive Director

John is highly experienced as an

energy sector executive and is

a venture investor in the ''clean

tech'' and digital technologies.

John has significant board

experience and is currently on

the board of cyber security firm

Global Integrity in Washington

DC and is a senior advisor in the

energy sector to a “blue chip”

international consultant. John

was appointed to the Board on

24 August 2018

Significant interests: John

is a Director of Flamant

Technologies and Global

Integrity, Inc.

Catherine Pitt

Chair of the Nominations

Committee and Independent

Non-Executive Director

Cathy is a legal adviser

who has specialised in the

investment company and

asset management sectors for

over 20 years, specialising in

governance, regulation, capital

markets and mergers and

acquisitions.

Significant interests: Cathy is a

Consultant and former Partner

at CMS Cameron McKenna

Nabarro Olswang LLP, a

director of Baillie Gifford UK

Growth Trust plc and a member

of the Advisory Council of

Sex Matters, a not-for-profit

company limited by guarantee.

David Stevenson

Chair of the Remuneration

Committee and Independent

Non-Executive Director

David is a financial journalist

and commentator for a

number of leading publications

including The Financial Times

(the Adventurous Investor),

Citywire, and MoneyWeek. He

is also Executive Director of

the world's leading alternative

finance news and events

service www.altfi.com, which

focuses on covering major

trends in marketplace lending,

crowdfunding and working

capital provision for small to

medium sized enterprises as

well as www.ETFstream.com.

David was appointed to the

Board on 24 August 2018.

Significant interests: David is a

Director of Aurora Investment

Trust plc; 321 Publishing and

TV Limited; Altfi Limited;

Altfi Data Limited; Bramshaw

Holdings Limited; ETF Stream

Limited; Planet Sports Rights

Limited; Rocket Media LP;

The Secured Income Fund plc;

Stockmarkets Digest Limited;

and Windhorse Aerospace

Limited.

Duncan Neale

Audit Committee Chair and

Independent Non-Executive

Director

Duncan is a CFO and Finance

Director with over 20 years

of commercial experience

working for both publicly

listed and privately-owned

companies. Duncan is a Fellow

of the Institute of Chartered

Accountants and qualified with

Price Waterhouse in London.

Duncan was appointed to the

Board on 24 August 2018.

Significant interests: Duncan

is a trustee of the Cambodian

Children’s Fund UK and a

Director of DJN Consultancy

Limited.

Board and

Investment Team

Gresham House Energy Storage Fund plc (GRID)

The Company has a Board of four Independent

Non-Executive Directors. The Board has

25% female representation. The Board has

also adopted a formal diversity policy and

considers diversity on the Company’s Board

as an important supplement to the Boards

existing skills, experience and knowledge.

All appointments to the Board are, and will

continue to be, subject to a formal, rigorous

and transparent procedure as required by the

AIC Code.

The Board’s requirements for vacancies on

the Board are set with reference to objective

criteria and promote diversity of gender,

social and ethnic backgrounds, cognitive and

personal strengths.

Further, the Board reviews, at least annually,

its effectiveness and its combination of skills,

experience and knowledge. The Board will

conduct an externally facilitated effectiveness

evaluation every three years, its first such

evaluation took place during 2021.

The Board has been in situ since the

Company’s IPO in November 2018. While it is

too early to be considering formal succession

planning for existing Directors, the Board

will focus on this matter further as part of its

annual Board evaluation process from 2021

onwards.

All directors were re-appointed at the

Company’s AGM in 2021. As is the Company’s

policy, all of the Directors will all stand for re-

election at the Company’s AGM every year.

Ben Guest

Managing Director,

New Energy

Ben has over 20 years' of

investment experience,

Ben’s expertise

spans the investment

spectrum, across

infrastructure, public

equities and venture

capital.

Ben is responsible for

the origination and

execution of investment

opportunities at

Gresham House,

alongside ongoing

portfolio management.

Ben currently serves

as a Director of over 40

companies and until

recently was the Non-

Executive Chairman of

Oxis Energy, a UK-

advanced battery power

company.

Investment Team

Bozkurt Aydinoglu

Investment Director,

New Energy

Bozkurt dedicated the

early part of his career

to funding and advising

companies in the

telecommunications

and technology

industries, whilst in roles

at Nomura, Salomon

Brothers, Bowman

Capital and Deloitte &

Touche.

In 2002, Bozkurt co-

founded and built New

Energy Finance (NEF),

which became the

leading provider of data,

research and analysis to

investors in the global

cleantech industry.

NEF was acquired by

Bloomberg in December

2009.

Gareth Owen

Investment Director,

New Energy

Gareth was a Partner

at Hazel Capital (now

Gresham House New

Energy) and has over

18 years' experience

executing structured

transactions across a

variety of sectors.

Before Hazel Capital,

Gareth worked at

Barclays Natural

Resource Investments,

a captive private equity

fund investing in the

natural resource and

renewable energy

sectors.

Prior to this, Gareth

worked in the Structured

Capital Markets divisions

of Barclays Capital

and Deutsche Bank,

handling the acquisition

and disposal of various

asset-based companies.

Rupert Robinson

Managing Director,

Gresham House Asset

Management Limited

Rupert is the

Managing Director

of Gresham House

Asset Management

Limited and has 30

years' experience in

asset management and

wealth management,

focused on product

innovation, investment

management, business

development, banking

and wealth structuring.

Rupert was previously

CEO and CIO of

Schroders (UK) Private

Bank and head of private

clients at Rothschild

Asset Management

Limited.

Stephen Beck

Finance Director,

Real Assets

Stephen has 24 years'

of industry experience

and is a law graduate

and Barrister and was

called to the Bar in

1996. He is also a Fellow

of the Institute of

Charted Accountants of

England and Wales and

qualified with Price-

waterhouseCoopers.

He leads an inhouse

finance team

managing; New

Energy, Renewables,

Commercial Forestry

and Housing sectors.

Prior to this, Stephen

worked at E.ON from

2000, where he held

a variety of financial

and commercial roles,

ranging from leading

large finance teams,

developing power

station projects,

M&A transactions

and working with HM

Government delivering

low carbon solutions.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Company performance

The Directors have reviewed the performance

of the Company throughout the period. Details

of the performance of each investment owned

by the Company are included in the Investment

Manager’s Report on pages 7 to 16 and the

Chair’s Statement on pages 3 to 6.

Financial risk management

Details in relation to the Company’s use

of financial instruments, financial risk

management objectives and policies,

including policies for hedging each major type

of forecasted transaction for which hedge

accounting is used; the Company’s exposure to

price, credit, liquidity, or cash flow risk can be

found under Note 19 on pages 83 to 85.

Share capital

At the period end, the Company had in issue

437,842,078 Ordinary Shares. There are no

other share classes in issue and the Company

does not own any of its own shares.

All shares have voting rights; each Ordinary

Share has one vote.

Dividends

All Ordinary Shares are entitled to receive

dividends and interim dividends have been paid

by the Company as shown in the table below. No

final dividend has been or will be declared, but

the Company’s dividend policy of paying four

interim dividends will be tabled for approval at

each AGM.

Dividends are not recognised in the financial

statements of the Company until paid, and

therefore the dividend in respect of the final

period, from 1 October to 31 December 2021 is

not recognised in the period to 31 December

2021.

On 14 February 2022, the Company announced

its interim dividend for Q4 2021 of 1.75p per

Ordinary Share successfully meeting its

dividend target for the 2021 financial year of

7.0p per Ordinary Share (7p per Ordinary Share

was paid in 2020). Further, the Board confirmed

its commitment to targeting a 7.0p per Ordinary

Share dividend for 2022.

Substantial interests

As at 31 December 2021, and the date of this

report, the Company had been notified of the

following beneficial interests exceeding 3% of

the issued share capital, being 437,842,078 (see

table on page 42).

The Directors’ interests in the ordinary share

capital of the Company are disclosed in the

Directors’ Remuneration Report on pages 45

to 47.

Annual General Meeting (AGM)

The Company’s AGM was held on 21 June 2021.

All resolutions proposed to the Company’s

shareholders at this AGM were duly passed on a

poll vote.

The Company’s next AGM is expected to be held

in June 2022. The Notice of the AGM and Form

of Proxy will be circulated to all shareholders in

advance of this meeting.

Auditor

A resolution proposing the reappointment of

BDO LLP will be submitted at the AGM.

The Directors present the Annual Report and Financial Statements of

the Company for the period ended 31 December 2021.

The Company has no employees. The Directors during the period,

including their appointment dates, are set out in the Nomination

Committee Report on page 58.

The Corporate Governance Report on pages 49 to 52 forms part of

this report.

Directors' Report

John Leggate, CBE FREng

Non-Executive Chair

Period in relation to which

dividend was paid

Announcement date Ex-dividend date Payment date Amount per Ordinary

Total amount

1 January to 31 March 2021 28 April 2021 13 May 2021 4 June 2021 1.75p £6,099,736

1 April to 30 June 2021 1 July 2021 8 July 2021 30 July 2021 1.75p £6,099,736

1 July to 30 September 2021 15 November 2021 25 November 2021 17 December 2021 1.75p £7,662,236

1 October to 31 December 2021 14 February 2022 3 March 2022 25 March 2022 1.75p £7,662,236

Gresham House Energy Storage Fund plc (GRID)

Directors’ responsibilities

The Directors are responsible for preparing the

Annual Report and the Financial Statements in

accordance with applicable law and regulations.

Company law requires the Directors to prepare

financial statements for each financial year.

Under that law the Directors are required to

prepare the financial statements and have

elected to prepare the Company financial

statements in accordance with UK adopted

international accounting standards. Under

company law the Directors must not approve

the financial statements unless they are

satisfied that they give a true and fair view of

the state of affairs of the Company and of the

profit or loss for the Company for that period.

In preparing these financial statements, the

Directors are required to:

§ select suitable accounting policies and

then apply them consistently;

§ make judgements and accounting

estimates that are reasonable and

prudent;

§ state whether they have been prepared in

accordance with UK adopted international

accounting standards, subject to any

material departures disclosed and

explained in the financial statements;

§ prepare the financial statements on

the going concern basis unless it is

inappropriate to presume that the

Company will continue in business; and

§ prepare a Director’s Report, a Strategic

Report and Director’s Remuneration

Report which comply with the

requirements of the Companies Act 2006.

The Directors are responsible for keeping

adequate accounting records that are

sufficient to show and explain the Company’s

transactions and disclose with reasonable

accuracy, at any time, the financial position

of the Company and enable them to ensure

that the financial statements comply with the

Companies Act 2006. They are also responsible

for safeguarding the assets of the Company

and hence for taking reasonable steps for the

prevention and detection of fraud and other

irregularities. The Directors are responsible

for ensuring that the Annual Report and

Financial Statements, taken as a whole, are

fair, balanced, and understandable and provide

the information necessary for shareholders to

assess the Company's performance, business

model and strategy.

Website publication

The Directors are responsible for ensuring the

Annual Report and the Financial Statements

are made available on the Company’s website.

Financial statements are published on the

Company’s website in accordance with

legislation in the UK governing the preparation

and dissemination of financial statements,

which may vary from legislation in other

jurisdictions. The maintenance and integrity of

the Company's website is the responsibility of

the Directors. The Directors' responsibility also

extends to the ongoing integrity of the financial

statements contained therein.

Directors’ responsibilities pursuant to DTR4

The Directors confirm to the best of their

knowledge:

§ The financial statements have been

prepared in accordance with international

accounting standards in conformity with

the requirements of the Companies Act

2006 and in accordance with UK adopted

International accounting standards and

give a true and fair view of the assets,

liabilities, financial position and profit and

loss of the Company.

§ The Annual Report includes a fair review of

the development and performance of the

business and the financial position of the

Company, together with a description of

the principal risks and uncertainties that

they face.

Insurance cover

Directors’ and Officers’ liability insurance

cover is held by the Company in respect of the

Directors.

Corporate governance

The Company’s corporate governance

statement and compliance with the 2019 AIC

Code of Corporate Governance which has been

endorsed by the Financial Reporting Council

(www.frc.org.uk) is shown on pages 49 to 52.

Streamlined energy and carbon reporting:

quantification and reporting methodology

We have followed the 2013 UK Government

environmental reporting guidance: associated

greenhouse gases have been calculated using

the 2021 conversion factors published by the

Department for Business, Energy & Industrial

Strategy.

Boundaries

We have used the equity share approach.

The Company itself is not an emitter of

greenhouse gas. However, the underlying

investments within the Company’s portfolio

companies import and export electricity which

are sourced from either the grid or from gas

or diesel generators at each site. These have

been included in our emissions disclosures. The

energy used and produced by the companies is

fully metered and carefully monitored.

Shareholder

Number of

Ordinary

Shares as

at 31 Dec

2021

Percentage

of Issued

Capital as at

31 Dec 2021

Number of

Ordinary

as at 31

March

2021

Percentage

of Issued

Capital as

at 31 March

2021

Sarasin & Partners

42,976,903 9.82% 34,784,954 9.98%

Schroder Investment Management

28,483,743 6.51% 18,292,152 5.25%

Gresham House

26,509,422 6.05% 25,502,737 7.32%

Gravis Capital Management

23,857,210 5.45% 21,062,210 6.04%

CCLA Investment Management

22,356,233 5.11% 22,088,195 6.34%

Close Asset Management Limited

20,815,264 4.75% 18,535,490 5.32%

Newton Investment Management

20,334,378 4.64% 22,809,955 6.54%

East Riding Pension Fund

18,080,757 4.13% 17,253,614 4.95%

Ben Guest

14,383,826 3.29% 14,383,826 4.13%

JM Finn & Co

13,714,525 3.13% 7,958,750 2.28%

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

UK energy use covers the battery storage

activities across all the portfolio companies

owned directly or indirectly by the Company

from the date of ownership. It does not cover

energy use of assets under construction where

construction is being carried out by third

parties. All operations are in the UK.

Scope 3 emissions

We have identified the following as Scope 3

emissions which have not been quantified:

§ Carbon emissions from end-to-end

manufacturing, transport, and installation

at battery energy storage systems

§ Investment Manager emissions (i.e. office

buildings)

Intensity measurement

The chosen intensity measurement ratio

is gross emissions in metric tonnes COe

per weighted average MW capacity. This is

considered a more appropriate ratio than MWh

due to variability in operation of assets and

different service types.

Measures taken to improve energy efficiency

The usage of diesel generators within the

operational portfolio has been significantly

reduced. Diesel generators are in place to

meet CM contract requirements and TRIAD

operations on three of the sites but are also

available for trading activities. The Company

is not currently making new investments in

projects which require diesel generators.

Going concern

The going concern statement is detailed on

page 32 of this Annual Report.

Future developments

Future developments in the Company are

detailed in the Chair’s Statement, pages 3 to 6.

Engagement with stakeholders

Further information on the Directors’

engagement with the Company’s stakeholders

can be found on pages 37 to 38.

Post Balance Sheet Events

Post Balance Sheet events are disclosed in

Note 25 of the Accounts on page 88.

Statement as to disclosure of information to

the Auditor

The Directors in office at the date of the report

have confirmed, as far as they are aware, that

there is no relevant audit information of which

the Auditor is unaware. Each of the Directors

has confirmed that they have taken all the steps

that they ought to have taken as Directors in

order to make themselves aware of any relevant

audit information and to establish that it has

been communicated to the Auditor.

This Directors’ Report is approved on behalf of

the Board by

John Leggate CBE, FREng

Chair

Date: 5 April 2022

Directors' Report continued

Energy used: 2021 2020

Scope 1 emissions in metric tonnes COe

Gas consumption 1,596 2,541

Diesel consumption 64 73

Total Scope 1 1,660 2,614

Scope 2 emissions in metric tonnes COe

Consumption of electricity* 2,891 2,412

Total Scope 2 2,891 2,412

UK energy consumption used to calculate emissions (MWh) *

Gas 8,716 13,821

Diesel 233 266

Electricity* 12,509 9,525

Total UK energy consumption 21,458 23,612

Intensity ratio

CO emissions per weighted average battery capacity (tonnes per MW)

11.1 24.2

*The figures shown are the net import/(export) of electricity from the grid

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

The Annual Remuneration Statement

The Chair of the Remuneration Committee has

summarised the major decisions on Directors’

remuneration, including the discretion which

has been exercised in the award of Directors’

remuneration, the changes relating to Directors’

remuneration made during the year and the

context in which those changes occurred, and

decisions have been taken in the report from

the Remuneration Committee on page 56.

Remuneration Policy

The Company’s policy remains unchanged:

the remuneration of Non-Executive Directors

should be determined with due regard to

the experience of the Board as a whole, the

time commitment required and to be fair and

comparable to that of other Non-Executive

Directors of similar companies. The Company

may also periodically choose to benchmark

Directors’ fees with an independent review,

to ensure they remain competitive, fair, and

reasonable.

This policy has been effective from the date

of admission to trading and was approved at

the Company’s 2020 AGM and will be put to

shareholders for approval at least every three

years thereafter. There has been no change to

the policy.

The fees for the Directors are determined

within the limits set out in the Company’s

Articles of Association which states that the

Directors’ remuneration for their services in

the office of Director shall, in the aggregate not

exceed £500,000 per annum or such higher

figure as the Company, by ordinary resolution,

determines.

The Directors are entitled only to their annual

fee and to be reimbursed for any expenses

properly and reasonably incurred by them

respectively in and about the business of the

Company or in the discharge of his or her duties

as a Director.

Any Director who performs services which in

the opinion of the Directors are outside the

scope of the ordinary duties of a Director,

may be paid such reasonable additional

remuneration to be determined by the Directors

or any committee appointed by the Directors

and such additional remuneration shall be in

addition to any remuneration provided for by

way of their annual fee and their reasonable

expenses.

No element of the Directors’ remuneration is

performance related, nor does any Director

have any entitlement to pensions, share options

or any long-term incentive plans from the

Company.

The Directors hold their office in accordance

with the Articles and their appointment letters.

No Director has a service contract with the

Company, nor is any such contract proposed.

The Directors’ appointments can be terminated

in accordance with the Articles and without

compensation.

In order to avoid conflicts of interest, no

Director is involved in the setting of their

own remuneration and remuneration is set

by the Remuneration Committee in line with

the Remuneration Policy and aggregate

remuneration levels are limited under the

Company’s Articles of Association.

John Leggate and David Stevenson signed

letter of appointments with the Company dated

14 October 2018. Duncan Neale signed a letter

of appointment with the Company dated 15

October 2018. Catherine Pitt signed a letter

of appointment with the Company dated 28

February 2019. These agreements are available

for inspection at the Company’s registered

office and at the AGM. The agreements are

terminable on three months’ notice by either

side. The Directors are not entitled to any

variable consideration or any other taxable

benefits under these agreements.

The Annual Remuneration Report

The Remuneration Committee considers any

change in the Directors’ Remuneration Policy.

The report from the Remuneration Committee

is set out on page 56.

Directors’ remuneration and interests

(audited)

Directors’ remuneration (excluding National

Insurance Contributions) for the Company and

dividend received for the period under review is

shown in the tables on page 46.

The Directors of the Company had the following

beneficial interests in the issued Ordinary

Shares as at 31 December 2021 and at the date

of this report:

The Board presents the Directors’ Remuneration Report for the period to 31

December 2021 which has been prepared in accordance with the requirements

of the Large and Medium-sized Companies and Groups (Accounts and Reports)

Regulations 2008 (SI2008/410) and the Companies Act 2006.

Under the requirements of Section 497 of the Companies Act 2006, the

Company’s Auditor is required to audit certain disclosures contained within

the report. Where disclosures have been audited, they are indicated as such.

The Auditor’s opinion is included in their report on pages 61 to 66.

Directors'

Remuneration Report

John Leggate CBE, FREng

Non-Executive Chair,

Gresham House Energy Storage

Fund plc Board

Directors

As at the date

of this report

5 April 2022

As at

31 Dec

2021

John Leggate 46,875 46,875

Duncan Neale 13,425 13,425

Catherine Pitt 23,987 23,093

David Stevenson 18,330 18,330

Gresham House Energy Storage Fund plc (GRID)

The Company does not oblige the Directors

to hold shares in the Company, but this

is encouraged to ensure the appropriate

alignment of interests.

2020/21 remuneration

The remuneration levels for the forthcoming

year for the Directors are expected to be at

the current annual fee level, as shown in the

table above. The Board reviews Directors’

remuneration at least annually to ensure that it

is in line with market rates.

Consideration of shareholders’ views

An ordinary resolution to approve the

Remuneration Report will be put to

shareholders at the Company’s 2022 AGM

and shareholders will have the opportunity

to express their views and raise any queries

in respect of the Remuneration Policy at this

meeting.

Statement of voting at the 2021 AGM

The Directors’ Remuneration Report was

subject to an advisory vote at the 2021 AGM. The

voting outcome is shown in the table below:

No concerns were noted from the shareholders

as part of the AGM.

2021 Salary and fees

period from

01/01/21 to

31/12/21

Short term

variable pay

period from

01/01/20 to

31/12/20

Percentage

increase since

01/01/20 on short

term variable pay

Total fixed

remuneration

period from

01/01/21 to

31/12/21

Total variable

remuneration

period from

01/01/21 to

31/12/21

Total

remuneration

(fixed and

variable)

period from

01/01/21 to

31/12/21

John Leggate 80,000 - - 80,000 - 80,000

Duncan Neale 62,500 - - 62,500 - 62,500

Catherine Pitt 45,000 - - 45,000 - 45,000

David Stevenson 45,000 - - 45,000 - 45,000

Total fixed remuneration 232,500 - - 232,500 - 232,500

2020 Fixed salary and fees

period from 01/01/20 to

31/12/20

Short term variable pay

period from 01/01/20 to

31/12/20

Total fixed

remuneration period

from 01/01/20 to

31/12/20

Total variable

remuneration period

from 01/01/20 to

31/12/20

John Leggate 65,000 - 65,000 -

Duncan Neale* 45,000 7,000* 45,000 7,000*

Catherine Pitt 40,000 - 40,000 -

David Stevenson 40,000 - 40,000 -

Total fixed remuneration 190,000 7,000 190,000 7,000

* In view of the significant additional work undertaken, the Board agreed to pay an additional fee of £7,000 (2019 – £5,000) to Duncan Neale during 2020

Resolution to approve Directors’ Remuneration Report Votes %

Votes for* 164,826,784 89.28

Votes against 19,763,202 10.72

Total votes validly cast 184,589,986

Total votes cast as % of issued share capital 52.96

Votes withheld** 31,469

* Includes discretionary votes

** A vote withheld is not a vote in law and is not counted in the calculation of the votes for or against a resolution

2021

Percentage

increase

from 31

December

2019 to 31

December

2020 on

salary annual

fees

Percentage

increase

from 31

December

2020 to 31

December

2021 on

salary and

annual fees

John Leggate 0% 23%

Duncan Neale 0% 38.8%

Catherine Pitt 0% 12.5%

David

Stevenson

0% 12.5%

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Payments to past Directors or for loss of

office

There are no payments to disclose. Under the

terms of the Directors’ Remuneration Policy

there would be no compensation for loss of

office.

Performance graph

The graph across represents the Company’s

performance during the period since the

Company’s Ordinary Shares were first admitted

to trading on the London Stock Exchange on 13

November 2018 and shows Ordinary Share price

total return and NAV total return performance

on a dividends reinvested basis. Both series are

rebased to 13 November 2018, being the date

the Company’s Ordinary Shares were listed.

This graph has been chosen as a comparison as

it is a publicly available broad equity index which

focuses on smaller companies and is therefore

more relevant than most other publicly available

indices.

Relative importance of spend on pay

The difference in actual spend between 31

December 2020 and 31 December 2021 on

Directors’ remuneration in comparison to

distributions (dividends and share buybacks)

and other significant spending are set out in the

table across.

This Directors’ Remuneration Report is

approved on behalf of the Board by

David Stevenson

Chair of the Remuneration Committee

5 April 2022

Director's Remuneration Report continued

Payments made during

the year ended

31 December 2021

Payments made during

the year ended

31 December 2020

Remuneration to Directors 232,500 197,000

Dividends paid to shareholders 25,961,445 14,341,916

Buy-back of Ordinary Shares - -

Total 26,193,945 14,538,916

GRID vs FTSE All Share Total Return

100

110

120

130

140

150

160

Nov-18

Dec-18

Jan-19

Feb-19

Mar-19

Apr-19

May-19

Jun-19

Jul-19

Aug-19

Sep-19

Oct-19

Nov-19

Dec-19

Jan-20

Feb-20

Mar-20

Apr-20

May-20

Jun-20

Jul-20

Aug-20

Sep-20

Oct-20

Nov-20

Dec-20

Jan-21

Feb-21

Mar-21

Apr-21

May-21

Jun-21

Jul-21

Aug-21

Sep-21

Oct-21

Nov-21

Dec-21

GRID vs FTSE All Share Total Return

GRID - Share price total return GRID - NAV Total Return

FTSE All Share Total Return

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

The powers to issue the Company’s shares and

any amendments to the Company’s Articles of

Association require approval by shareholders.

The Board considers that reporting against

the Principles and Provisions of the AIC Code

provides relevant information to shareholders.

The Company has complied with the Principles

and Provisions of the AIC Code.

The AIC Code is available on the AIC website

(www.theaic.co.uk). It includes an explanation

of how the AIC Code adapts the Principles and

Provisions set out in the UK Code to make them

relevant for investment companies.

Capital structure and voting rights

Information about the Company’s capital

structure and voting rights are set out in Note 21

of the Financial Statements on pages 86 and 87.

Board leadership and purpose

The Board views its purpose as supporting

the Investment Manager, including providing

constructive challenge, to achieve the

Company’s intended acquisition of a portfolio

of BESS projects to take advantage of the

significant market opportunity for battery-

based energy storage systems. The Board is

also committed to delivering the Company’s

targeted dividends and NAV total return.

Further discussion of the Company's strategy

has been set out within the Strategic Report on

pages 29 to 38.

The Board seeks to establish a culture of

openness and engagement. The Board

considers this culture aligned with the strategic

purpose of the Company through its growth

phase.

The Board has met frequently with the

Investment Manager throughout the period in

an effort to sustain continuous dialogue on key

issues.

During the year ended 31 December 2021, the

Board supported the Investment Manager with

further deployment of the available funds and

in further fundraising by way of both debt and

equity.

As set out in the section on Stakeholder

Engagement and Statement under Section 172,

pages 37 to 38, the Board seeks to understand

the views of the Company’s key stakeholders

and to consider these views in Board

discussions and decision-making.

The Board assesses and monitors its own

culture, including its policies, practices, and

behaviour to ensure it is aligned with the

Company’s purpose, values, and strategy.

The Board remains committed to diversity

and further detail on the Company’s Diversity

Policy and approach to diversity is set out in the

Nomination Committee Report on pages 57 to

58.

Chair

The Chair, John Leggate, is responsible for

the leadership of the Board and ensuring its

effectiveness.

Senior Independent Director

As announced on 3 December 2021, David

Stevenson was appointed as the Senior

Independent Director of the Company with

effect from 18 November 2021. The Senior

Independent Director will be the alternative

contact for shareholders should they have

any concerns in relation to which the contact

with the Chair, the Investment Manager, or the

Company Secretary may be inappropriate.

Division of responsibilities

Matters reserved to the Board

Full Board meetings take place quarterly and

the Board meets or communicates more

regularly to address specific issues. The Board

has a formal schedule of matters specifically

reserved for its decision which includes, but

is not limited to, considering proposals from

the Investment Manager; making decisions

concerning the acquisition or disposal of

investments; and reviewing, annually, the

terms of engagement of all third-party advisers

(including the Investment Manager) and the

appointment and removal of the Company

Secretary.

The Board has also established procedures

whereby Directors wishing to do so in

the furtherance of their duties, may take

independent professional advice at the

Company’s expense.

All Directors have access to the advice and

services of the Company Secretary. The

Company Secretary provides the Board with

full information on the Company’s assets

and liabilities and other relevant information

requested by the Chair, in advance of each

Board meeting.

Corporate

Governance Report

The Board of Gresham House Energy Storage Fund plc has

considered the Principles and Provisions of the AIC Code of Corporate

Governance (AIC Code). The AIC Code addresses the Principles and

Provisions set out in the UK Corporate Governance Code (the UK

Code), as well as setting out additional Provisions on issues that are of

specific relevance to Gresham House Energy Storage Fund plc.

Gresham House Energy Storage Fund plc (GRID)

There is a clear division of responsibilities

between the Board and the Investment

Manager. Under the AIFM Agreement, the

Investment Manager acts as discretionary

investment manager and AIFM to the Company

within the strategic guidelines set out in

the Investment Policy and subject to the

overall supervision of the Board. The asset

management role encompasses the oversight

of all operational and financial management,

the placing and managing of all operational

contracts, management of all health and

safety operational risks, advising the Board

on the monthly and quarterly asset/portfolio

performance, management of power price/

market exposure, progress with the asset

pipeline and reporting to the Board.

The Company also has a business relationship

with Gresham House DevCo Limited, a related

party of the Investment Manager, which:

§ sources, due diligences and acquires

pipeline on a speculative basis exclusively

for the Company to ensure the Company’s

ability to grow in a burgeoning market with

few operational projects;

§ manages these projects through

construction;

§ sells projects to the Company; and

§ takes development risk on behalf of

the Company, where the Company’s

investment mandate prevents taking this

risk.

The Management Engagement Committee,

on an annual basis, reviews the Investment

Manager's performance during the year along

with its adherence to the terms of the AIFM

Agreement. Further details are contained in the

Management Engagement Committee Report

on pages 59 to 60.

The capital structure of the Company is

disclosed in the Financial Statements.

Board committees

The Board has four committees: the Audit

Committee, Remuneration Committee,

Nomination Committee, and the Management

Engagement Committee (MEC). During the

period under review, all the Directors of the

Company were Non-Executive Independent

Directors and served on all committees.

Board and committee meetings

The table above sets out the Directors’

attendance at the Board and committee

meetings during the period.

During the period the Board held a number of

additional ad hoc Board meetings outside of the

regular quarterly Board meetings. These Board

meetings were mainly to discuss the progress

of investments proposed by the Company and

completion of such investments and further

fundraising completed by the Company during

the period. Typically, there was attendance by

the full Board at these ad hoc meetings and

attendance was in line with the requirements of

the AIC Code.

The primary focus at regular Board meetings

is a review of investment performance, asset

allocation, marketing and investor relations,

peer group information and industry issues.

At the Company’s quarterly Board meetings,

the Board typically considers the following

business:

§ Update from the Investment Manager,

including:

- Investment portfolio commentary

- Health and safety commentary

- Trading data and investment

performance, by month

- Analysis of the Company’s financial

model, including and updates to key

assumptions

- Risk management and risk mitigation

- Review of any recommendations

made by the Investment Manager

§ Update from the Company’s Broker;

including;

- Market commentary

- Share price performance against the

Company’s peers

- Sales and trading commentary

§ Report from the Company’s Depositary

§ Report from the Administrator and

Company Secretary, including;

- Compliance monitoring

- Regulatory and governance updates

The Board has been focused on developing

ongoing and positive communication with the

Investment Manager and regular meetings are

one way the Board seeks to encourage open

and constructive engagement on key issues.

Relations with shareholders

Shareholders have the opportunity to meet

the Board at the AGM. The Board is also happy

to respond to any written queries made by

shareholders during the course of the period,

or to meet with major shareholders if so

requested. The Company’s second AGM in

2021 was unable to be held with shareholders

in attendance due to the restrictions imposed

by the Company in response to COVID-19.

The Company will, however, seek to secure

appropriate shareholder engagement as part of

its AGM in 2022.

The Board ensured that the Company regularly

kept shareholders informed of investment

activities and quarterly financial performance

through appropriate public announcements

and the publication of quarterly factsheets by

the Investment Manager that are available on

the Company’s website. There were no specific

actions arising from the Company's interactions

with shareholders in the period.

Quarterly

Board

meetings

Audit

Committee

MEC Nomination

Committee

Remuneration

Committee

(4 held) (3 held) (1 held) (1 held) (1 held)

John Leggate 4 3 1 1 1

Duncan Neale 4 3 1 1 1

Catherine Pitt 4 3 1 1 1

David

Stevenson

4 3 1 1 1

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

In addition to the formal business of the AGM,

representatives of the Investment Manager and

the Board are available to answer any questions

a shareholder may have. If shareholders are not

able to attend the AGM in person, shareholders

will be given the opportunity to ask questions

in advance of the AGM, with answers to any

questions received published on the Company’s

website.

Separate resolutions are proposed at the AGM

on each substantially separate issue. The

Registrar collates proxy votes and the results

(together with the proxy forms) are forwarded to

the Company Secretary immediately prior to the

AGM. Proxy votes are announced at the AGM,

following each vote on a show of hands, except

in the event of a poll being called. The notice of

the first AGM and proxy form will be circulated

with this Annual Report.

Remuneration

The Board is committed to implementing

remuneration policies and practices that are

designed to support strategy and promote long-

term sustainable success. This policy is set on

in the Remuneration Report on page 56.

This Corporate Governance Report is

approved on behalf of the Board by

John Leggate CBE, FREng

Chair

Date: 5 April 2022

Compliance with the 2019 AIC Code

Board leadership and company purpose

Principle A – A successful company is led by

an effective board, whose role is to promote

the long term sustainable success of the

company, generating value for shareholders and

contributing to wider society.

Strategic Report

Board Leadership and Company purpose

Principle B – The Board should establish the

Company’s purpose, values and strategy, and

satisfy itself that these and its culture are

aligned. All Directors must act with integrity,

lead by example, and promote the desired

culture.

Strategic Report

Board Leadership and Company purpose

Principle C – The Board should ensure that

the necessary resources are in place for the

Company to meet its objectives and measure

performance against them. The Board should

also establish a framework of prudent and

effective controls, which enable risk to be

assessed and managed.

Principal Risk and Uncertainties

Stakeholder Engagement and Statement Under

Section 172

Audit, Risk, and Internal Controls

Audit Committee Report

Principle D – In order for the Company to

meet its responsibilities to shareholders and

stakeholders, the Board should ensure effective

engagement with, and encourage participation

from, these parties.

Stakeholder Engagement and Statement Under

Section 172

Board Leadership and Company purpose

Division of responsibilities

Principle F – The Chair leads the Board and

is responsible for its overall effectiveness

in directing the Company. They should

demonstrate objective judgement throughout

their tenure and promote a culture of openness

and debate.

In addition, the Chair facilitates constructive

Board relations and the effective contribution

of all Non-Executive Directors, and ensures that

Directors receive accurate, timely and clear

information.

Chair’s Statement

Board Leadership and Company purpose

Division of responsibilities

Principle G – The Board should consist of an

appropriate combination of Directors (and,

in particular, independent Non-Executive

Directors) such that no one individual or small

group of individuals dominates the Board’s

decision making.

Division of responsibilities

Directors' Biographies

Principle H – Non-Executive Directors

should have sufficient time to meet their

Board responsibilities. They should provide

constructive challenge, strategic guidance,

offer specialist advice and hold third party

service providers to account.

Board Leadership and Company purpose

Division of responsibilities

Audit Committee Report

Management Engagement Committee Report

Corporate Governance Report continued

Gresham House Energy Storage Fund plc (GRID)

Principle I – The Board, supported by the

Company Secretary, should ensure that it has

the policies, processes, information, time

and resources it needs in order to function

effectively and efficiently.

Division of responsibilities

Composition, succession and evaluation

Principle J – Appointments to the Board should

be subject to a formal, rigorous and transparent

procedure, and an effective succession plan

should be maintained. Both appointments and

succession plans should be based on merit

and objective criteria and, within this context,

should promote diversity of gender, social and

ethnic backgrounds, cognitive and personal

strengths.

Directors’ Report

Principle K – The Board and its committees

should have a combination of skills, experience

and knowledge. Consideration should be given

to the length of service of the Board as a whole

and membership regularly refreshed.

Directors’ Biographies

Principle L – Annual evaluation of the Board

should consider its composition, diversity and

how effectively members work together to

achieve objectives. Individual evaluation should

demonstrate whether each Director continues

to contribute effectively.

Directors’ Report

Audit, risk, and internal control

Principle M – The Board should establish formal

and transparent policies and procedures to

ensure the independence and effectiveness of

external audit functions and satisfy itself on the

integrity of financial and narrative statements.

Audit, risk,and internal control

Audit Committee Report

Notes 2 and 3 to the Financial Statements

Principle N – The Board should present a fair,

balanced and understandable assessment of

the Company’s position and prospects.

Strategic Report

Audit, risk, and internal control

Audit Committee Report

Independent Auditor’s Report

Financial Statements

Principle O – The Board should establish

procedures to manage risk, oversee the internal

control framework, and determine the nature

and extent of the principal risks the Company is

willing to take in order to achieve its long term

strategic objectives.

Principal risks and uncertainties

Viability statement

Audit, risk, and internal control

Audit Committee Report

Directors’ Report

Remuneration

Principle P – Remuneration policies and

practices should be designed to support

strategy and promote long term sustainable

success.

Strategic Report

Board leadership and Company purpose

Remuneration Committee Report

Principle Q – A formal and transparent

procedure for developing policy on

remuneration should be established. No

Director should be involved in deciding their

own remuneration outcome.

Director’s Remuneration Report

Principle R – Directors should exercise

independent judgement and discretion

when authorising remuneration outcomes,

taking account of Company and individual

performance, and wider circumstances.

Director’s Remuneration Report

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Audit Committee Report

Introduction

During the year and since, the Committee

has played an integral role in reviewing and

challenging the Company’s financial modelling,

financial reporting, key financial controls, and

other risk management topics.

Building on its work during 2020, the Committee

continued to work with the Investment Manager

and key service providers in 2021 to ensure

that the Company can rely on robust internal

financial controls and clear risk management

procedures.

Audit Committee Composition

The Audit Committee is chaired by Duncan

Neale, who is a Chartered Accountant, CFO

and Finance Director and therefore has recent

and relevant financial experience. Duncan is

supported by the other three independent Non-

Executive Directors on this committee.

The Audit Committee meets at least twice a

year and operates within clearly defined terms

of reference. The Committee met three times

during the period. These meetings were also

attended by representatives of the Investment

Manager, the Company Secretary (JTC (UK)

Limited) and the Auditor (BDO LLP).

Given the size of the Board and the diverse

range of experience and skills possessed by

the Directors, the Board has considered it

appropriate to have all Directors serve on this

Committee. The Board has also considered it

appropriate for the Chair of the Board to serve

on the Committee due to the current size of the

Board.

Terms of reference

The Committee reviewed its terms of reference

to ensure that they remain in alignment with the

pro-forma terms of reference published by ICSA

and the latest version of the AIC Code.

Principal responsibilities

The principal responsibilities which the Board

has delegated to the Audit Committee are:

i. to monitor the integrity of the Financial

Statements of the Company and any

formal announcements relating to the

Company's financial performance;

ii. reviewing the Company’s internal financial

controls and internal control and risk

management systems, unless expressly

addressed by a separate Board risk

committee composed of independent

Non-Executive Directors, or by the Board

itself;

iii. conducting the tender process and making

recommendations to the Board, about the

appointment, reappointment, and removal

of the external Auditor, and approving the

remuneration and terms of engagement of

the external Auditor;

iv. reviewing the effectiveness of the external

audit process, taking into consideration

relevant UK professional and regulatory

requirements;

v. to review and monitor the Auditors'

independence and objectivity and the

effectiveness of the audit process; and

vi. (to develop and implement policy on the

engagement of the Auditors to supply non-

audit services and considering relevant

guidance regarding the provision of non-

audit services by the Auditors.

The Chair of the Audit Committee is required to

report formally to the Board on the Committee’s

findings after each meeting on all matters

within its duties and responsibilities.

Financial reporting

The Audit Committee is also responsible

for reviewing the financial reporting and in

providing advice to the Board on whether the

Annual Report and Financial Statements,

taken as a whole, is fair, balanced, and

understandable, as required under the AIC

Code, and provides the information necessary

for shareholders to assess the Company's

position and performance, business model and

strategy.

The Audit Committee considered the detailed

reviews undertaken at various stages of the

production process by the Investment Manager,

Administrator and Auditor, which are intended

to ensure consistency and overall balance.

The Committee also sought additional comfort

from the Investment Manager in relation to the

conclusion reached by the Board.

As a result of the work performed by the Audit

Committee, the Board is able to conclude that

the Annual Report and Financial Statements for

the period ended 31 December 2021, taken as

a whole, is fair, balanced, and understandable

and provides the information necessary

for shareholders to assess the Company’s

performance, business model and strategy.

The Committee also reviews the significant

financial reporting issues and judgements

made in connection with the preparation of the

Company's Financial Statements and considers

whether the accounting policies adopted are

appropriate.

Going concern and viability

The Committee considered the going concern

statement and viability statement on page 32.

The Committee was satisfied that the Company

remained a going concern and was expected to

remain well positioned to continue to operate

and meet its liabilities over the short term and

the outlook period.

Gresham House Energy Storage Fund plc (GRID)

Key accounting judgements and estimates

The key accounting judgement reviewed by the

Audit Committee is the high level of judgement

involved in determining the unquoted

investment valuations. The Investment

Manager’s fee is based on the value of the

net assets of the Company. The Investment

Manager is responsible for preparing the

valuation of investments which are reviewed

by the Audit Committee and approved by the

Board.

During the period, the valuation of the

Company’s investments has been a focus

point for the Audit Committee and the Board.

The Chair of the Audit Committee has worked

closely with the Investment Manager to

understand how the Company’s investment

valuations are calculated and this has been

reported to the Board.

The Board has also carefully considered the

discount rates used by the Investment Manager

and considers these rates to be appropriate

given the strategic objectives of the Company

and the commercial risks associated with the

Company’s Investment activities.

The Audit Committee has also taken additional

comfort from the opinion of an external

independent valuation assessment prepared

by Grant Thornton, which concluded that the

Investment Manager’s calculation of valuation is

fair and reasonable on a fair value basis.

Following the detailed and ongoing assessment

of investment valuations, the Audit Committee

and the Board are able to conclude that the

Company’s investments are valued fairly and

reasonably.

Auditor independence, objectivity and

effectiveness

BDO has formally confirmed its independence

as part of the annual reporting process, and

the Audit Committee considered and agreed

that BDO, the engagement team and other

partners and Directors conducting the audit had

complied with relevant ethical requirements

including the FRC’s Ethical Standard and were

considered independent of the Company.

The Audit Committee discussed the

effectiveness of BDO as Auditor and agreed that

the Auditor had adhered to high professional

and ethical principles and demonstrated the

appropriate skills and knowledge about the

business, industry and environment together

with the regulatory and legal frameworks

in which the Company operates. The Audit

Committee also agreed that the audit partner

demonstrates experience in the energy sector

and is well informed about current topical

issues with the FRC. The Audit Committee

concluded that it had no concerns with BDO’s

effectiveness.

Marc Reinecke has been BDO’s lead audit

partner for the Company since IPO in 2018.

This is Mr Reinecke’s third annual audit for

the Company. In line with best practice, the

Company would under normal circumstances

seek a rotation of the lead audit partner every

five years with an audit firm tender process

every ten years and a mandatory audit firm

rotation after 20 years.

The Audit Committee has recommended that

a resolution to reappoint BDO is proposed to

shareholders at the next AGM.

Internal controls and risk management

systems

The Audit Committee’s responsibilities

in respect of internal controls and risk

management are to:

i. review the reports on the internal controls

of the Company's service providers which

identify the risk management systems

in place for assessing, managing, and

monitoring risks applicable to such service

providers;

ii. establish a process for identifying,

assessing, managing, and monitoring the

risks which may have a financial impact on

the Company;

iii. review reports on the conclusions of any

testing carried out by the Auditors;

iv. carry out at least annually a robust

assessment of the emerging and principal

risks facing the Company; and

v. review and approve the statements

included in the Annual Report in relation

to internal control and the management

of risk.

The Audit Committee reviews the Company’s

internal controls on an annual basis with the

last review being conducted in November

2021. The Audit Committee obtains evidence

of the internal control frameworks of both

the Administrator and Investment Manager to

review. Further, the Company Secretary reports

to the Board quarterly on any potential internal

control failures.

The Audit Committee confirms that it has

completed its assessment of the Company’s

emerging and principal risks and the details of

this assessment are set out in emerging risks,

principal risks, and uncertainties assessment,

and going concern assessment on pages 33

to 36. The Audit Committee considers the

Company’s risk matrix on an annual basis

with regular risk reporting being presented to

the Board by the Investment Manager on an

ongoing basis.

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

The Audit Committee Chair has engaged with

the Investment Manager during the year to

improve the risk reporting to the Board on an

ongoing basis and this improved reporting is

expected to enhance the Board’s oversight

of principal risks. The Audit Committee was

satisfied with the Investment Manager’s overall

assessment of principal risks.

Although the Board is ultimately responsible

for safeguarding the assets of the Company,

the Board has delegated, through written

agreements, the day-to-day operation of the

Company (including the financial reporting

process) to Gresham House Asset Management

Limited as Investment Manager and JTC (UK)

Limited as Administrator.

Whistleblowing

The Audit Committee has arrangements by

which staff of the Investment Manager and

Administrator and other service providers as

the Committee sees fit may, in confidence,

raise concerns about possible improprieties

in matters of financial reporting or other

matters and satisfy itself that arrangements

are in place for the proportionate and

independent investigation of such matters

and for appropriate follow-up action. These

arrangements are embedded into the

Investment Manager and Administrator’s

internal policies and are being embedded into

a Company focused process at the time of

writing.

The Company focused process (currently

being reviewed) is to allow concerns to be

raised with the Audit Committee Chair on a

confidential basis. The Audit Committee Chair

is then empowered to conduct an independent

investigation, with the support of appropriate

service providers, including the Company’s

Auditor. The Audit Committee Chair, on

conclusion of the investigation, will then report

back to the Company’s Audit Committee, and

external authorities or regulators, if required,

and the Audit Committee will then make a

recommendation, including proposed remedial

action and agreed timetable, to the Board.

Any action taken by the Board or the Audit

Committee in this regard, will be reported to the

Company’s shareholders in the Annual Report.

There were no instances of whistleblowing

during the period.

External audit

The Audit Committee also makes

recommendations to the Board in relation to

the appointment of the external Auditors and

to ensure the independence of the external

Auditor. It also reviews and agrees the audit

strategy paper, presented by the Auditor in

advance of the audit, which sets out the key

risk areas to be covered during the audit and

confirms their status on independence.

The Audit Committee has reviewed the

engagement of the external Auditor on the

supply of non-audit services in order to

ensure that the independence of the external

Auditor is maintained, considering the relevant

regulations and ethical guidance in this regard.

The Company’s Auditor did not provide any non-

audit services during the period.

The Audit Committee, after taking into

consideration comments from the Investment

Manager and Administrator, regarding the

effectiveness of the audit process; immediately

before the conclusion of the annual audit,

will recommend to the Board either the re-

appointment or removal of the Auditors.

Internal audit

The Committee discussed the need for an

internal audit function. The debate included

input from the Investment Manager and

consideration of the assurance received from

third parties under the risk management

framework. In the light of this consideration,

the Audit Committee decided that there was no

current requirement for an internal audit as the

internal controls and risk management were

adequate and effective.

Financial reporting

The Directors’ responsibilities statement

for preparing the accounts is set out in the

Report of the Directors on pages 45 to 47 and a

statement by the Auditor about their reporting

responsibilities is set out in the Independent

Auditor’s Report on pages 61 to 66.

Statement on Investment Manager’s risk

management and internal controls

During the period the Audit Committee

has reviewed and has received appropriate

evidence of the Investment Manager’s risk

management and internal control systems

and the Audit Committee is satisfied that this

framework is fit for purpose and appropriately

designed to safeguard the shareholder’s

investment and the Company’s assets. The

Board and the Audit Committee will continue

to review the Investment Manager’s risk

management and internal control systems

regularly and at least annually.

Audit Committee evaluation

An external evaluation of the Audit Committee

was undertaken as part of the overall Board

evaluation in 2021. The evaluation concluded

that the Audit Committee was effectively run

by the Chair with a high degree of scrutiny. The

Audit Committee will continue to concentrate

on development and training of committee

members, as the regulatory focus on audit and

audit committees increases.

This Audit Committee Report is approved on

behalf of the Board by

Duncan Neale

Chair of the Audit Committee

5 April 2022

Audit Committee Report continued

Gresham House Energy Storage Fund plc (GRID)

Introduction

During the period, the Board was mindful of

the requirements under the AIC Code and

the Company’s objective of maintaining high

governance standards.

Remuneration Committee composition

The Remuneration Committee is chaired

by David Stevenson. David is supported by

the other three independent Non-Executive

Directors on this Committee.

The Remuneration Committee meets at

least once a year and operates within clearly

defined terms of reference. The Remuneration

Committee met once during the period. The

Remuneration Committee’s meeting was also

attended by representatives of the Company

Secretary (JTC (UK) Limited).

Given the size of the Board and the diverse

range of experience and skills possessed by

the Directors, the Board has considered it

appropriate to have all Directors serve on this

Remuneration Committee. The Chair of the

Board was independent on appointment to

the Board and remains independent and is

therefore eligible to serve on the Remuneration

Committee.

Terms of reference

The Remuneration Committee reviewed its

terms of reference to ensure that they were

in alignment with the pro-forma terms of

reference published by ICSA and the latest

version of the AIC Code.

Principal responsibilities

The main role and responsibilities of the

Remuneration Committee include:

§ in conjunction with the Chair, setting the

Directors’ remuneration levels; and

§ considering the need to appoint external

remuneration consultants.

Review of Directors’ remuneration

The Remuneration Committee considered that

the appointment of an external remuneration

consultant was not required for 2021. During the

year, the Remuneration Committee considered

the appropriate level of increases to the

Directors’ fees for 2022.

The Directors’ remuneration was set at launch

at a level that was considered to be appropriate

for a Company of its size and nature at the

time, and without knowledge of the level of

commitment that would be involved. Over the

past three years, that commitment has grown

as the Company itself has grown.

Following a review, the Remuneration

Committee decided to increase the Directors’

remuneration in line with Consumer Price

Inflation (CPI) each year to ensure that Directors

fees remain competitive and in line with

inflation.

Director 2021 Fee 2022 Fee

John Leggate £80,000 £84,080

Duncan Neale £62,500 £65,687

Catherine Pitt £45,000 £47,295

David Stevenson £45,000 £47,295

The Remuneration Committee considers the

increases in Directors’ fees to be in line with the

Company’s Remuneration Policy approved by

the Company’s shareholders at the Company’s

2020 AGM. The Remuneration Committee has

delegated authority to set the remuneration

of the Non-Executive Directors, including the

remuneration of the Chair of the Board, under

its terms of reference.

David Stevenson was appointed by the Board

as the Senior Independent Director (SID). David

will not receive an additional remuneration for

this role.

Remuneration Committee evaluation

An external evaluation of the Remuneration

Committee was undertaken as part of the

overall Board evaluation in 2021. The evaluation

concluded that there was a good balance

of skills between the four Directors on the

Remuneration Committee.

This Remuneration Committee Report is

approved on behalf of the Board by

David Stevenson

Chair of the Remuneration Committee

5 April 2022

Remuneration Committee

Report

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Nomination Committee

Report

Introduction

During the period, the Board, mindful of

the requirements of the AIC Code and the

Company’s objective of maintaining high

governance standards, constituted the

Nomination Committee during 2021.

Nomination Committee composition

The Nomination Committee is chaired by Cathy

Pitt. Cathy is supported by the other three

independent Non-Executive Directors on this

Nomination Committee.

The Nomination Committee meets at least

once a year and operates within clearly defined

terms of reference. The Nomination Committee

met once during the period. The Nomination

Committee’s meeting was also attended by

representatives of the Company Secretary, (JTC

(UK) Limited).

Given the size of the Board and the diverse

range of experience and skills possessed by

the Directors, the Board has considered it

appropriate to have all Directors serve on this

Nomination Committee.

Terms of reference

The Nomination Committee reviewed its

terms of reference to ensure that they were

in alignment with the pro-forma terms of

reference published by ICSA and the latest

version of the AIC Code.

Principal responsibilities

The Nomination Committee’s principal

responsibilities are:

§ leading the process for appointments;

§ ensuring plans are in place for orderly

succession to the Board; and

§ overseeing the development of a diverse

pipeline for succession to the Board.

The Nomination Committee is also responsible

for supporting the Chair of the Board in an

annual review of the effectiveness of the Board,

its Committee and each of its Directors.

Composition, succession and evaluation

Composition

The Company has a Board comprising four Non-

Executive Directors, with the Chair being John

Leggate. All of the Directors are independent

from the Investment Manager as defined in

the AIC Code and no circumstances have been

identified that are likely to impair, or could

appear to impair, a Non-Executive Director’s

independence. Further, all Directors’ significant

interests, as set out in the Board of Directors

summary on page 39, have been reviewed and

no conflicts of interest with the interests of

the Company have been identified. The Board

does not consider these interests to have any

significant impact on the Directors’ ability to

discharge their duties to the Company.

Biographical details of all Board members

(including significant other commitments) are

shown on page 39.

When making new appointments, the Board

will consider other demands on Directors’ time.

Prior to appointment, significant commitments

will be disclosed with an indication of the time

involved. Additional external appointments

should not be undertaken without prior approval

of the Nomination Committee and Board,

with the reasons for permitting significant

appointments explained in the Annual Report.

The Nomination Committee reviewed the size

and composition of the Board having regard to

the skills of each Director and the commitment

involved in service on the Board. The Board

particularly considered whether the time was

right to appoint a Senior Independent Director

and/or a fifth Director to the Board. The

Nomination Committee agreed to appoint David

Stevenson as the Senior Independent Director

and to proceed with the recruitment of a fifth

Director to the Board. The recruitment process

for a fifth Director would take place during the

course of 2022.

The Nomination Committee also considered the

opportunity for scholarship initiatives and Board

apprenticeship programmes. The Nomination

Committee considered that access to

experience would be valuable for disadvantaged

individuals and for the Nomination Committee

to support the wider community. The

Nomination Committee resolved to pursue

initiatives to support scholarship initiatives

and Board apprenticeship programmes during

2022.

Gresham House Energy Storage Fund plc (GRID)

Board evaluation

During the period, the Board undertook its

first externally facilitated Board evaluation

conducted by an experienced independent

external consultant, BoardAlpha Limited.

Three proposals from different independent

external consultants were considered by the

Board in February 2021. Following a detailed

review by the Board, BoardAlpha Limited was

selected to undertake the Board evaluation for

2021. BoardAlpha Limited were deemed to be

sufficiently experienced given their experience

in evaluating Boards of investment companies,

and therefore have the technical expertise to

conduct the evaluation. BoardAlpha Limited had

not provided any other services to the Company

in the past.

The focus of the review was to conduct a

comprehensive assessment of the following

areas:

§ overall strategy of the Company;

§ supervision of investment activities;

§ risk management;

§ shareholder accountability;

§ Board composition and process;

§ committee structure, composition, and

effectiveness;

§ corporate governance and regulatory

compliance;

§ support and relationship with suppliers;

and

§ performance of the Chair.

The Company Secretary assisted in providing

BoardAlpha Limited access to the key

individuals involved in the evaluation process.

The evaluation process was conducted over a

five-month period and it involved one-to-one

interviews with each of the four Directors,

including the Chair. A number of discussions

and interviews took place with the Investment

Manager’s key personnel, the Company

Secretary (JTC), the Company’s legal advisers at

Eversheds Sutherland, the independent valuers

Grant Thornton, the independent Board adviser

Charles Conner, and the Company’s PR agency

Kaso Legg Communications. BoardAlpha

Limited also spoke to one of the Company’s

shareholders during the process.

BoardAlpha Limited also observed one Board

meeting and a shareholder Q&A held during

the year. Furthermore, BoardAlpha Limited

reviewed the Board and committees’ meeting

packs from all meetings over the year.

The evaluation process concluded that the

Board was highly engaged in the strategy

of the Company, and that the Investment

Manager provided the Board with good and

timely information on the Company’s portfolio.

The Board’s independent adviser has also

played a key role in achieving this. The Board

also received good information with respect

of regulatory compliance from the Company

Secretary, its external Auditor BDO, and its legal

advisors Eversheds Sutherland.

Areas for ongoing development included

the increase of the Board’s engagement

with shareholders, and the appointment of

a Senior Independent Director to act as a

secondary point of contact for shareholders.

On 18 November 2021, David Stevenson was

appointed as Senior Independent Director to

address this.

Whilst there is a good balance of skills on the

Board, the appointment of a fifth Director

would also help to ensure a smooth succession

planning. The recruitment process is underway

to facilitate the appointment of a fifth Director.

It is anticipated that a fifth Director will be

appointed during 2022.

The Company’s policy is to have an externally

facilitated Board evaluation at least every three

years.

During 2022, the Company will monitor its

progress against the recommendations arising

from the externally facilitated Board evaluation.

Re-election and succession

John Leggate, David Stevenson and Duncan

Neale were appointed to the Board on 24

August 2018 and re-elected by the shareholders

at the 2020 AGM. Catherine Pitt was appointed

to the Board on 1 March 2019 and duly elected by

the shareholders at the 2020 AGM.

In accordance with the AIC Code, all Directors

are required to retire at the forthcoming AGM,

and being eligible, offer themselves for re-

election.

Further, in relation to the tenure of the Chair,

the Board considers it appropriate to have no

fixed term for the tenure of the Chair and deems

this appropriate given the long term nature

of the Company’s investments. However, the

Nomination Committee will review this policy on

an annual basis.

Diversity

The Company recognises the benefits of having

a diverse Board and sees increasing diversity

at Board level as an essential element in

maintaining an effective Board. The Company

has adopted a formal Diversity Policy, which

sets out the Company’s approach to and

commitment to diversity. The policy was

reviewed by the Nomination Committee during

2021.

The Company’s policy is to ensure that there is

broad experience and diversity on the Board.

Diversity includes, and makes good use of,

differences in knowledge and understanding

of relevant diverse geographies, peoples and

their backgrounds including race or ethnic

origin, sexual orientation, sex, age, disability,

and religion. Appointments to the Board

should be made on merit, in the context of

complimenting and expanding the skills,

knowledge and experience of the Board as a

whole (and in accordance with the Equality Act

2010). Accordingly, in view of the recruitment

of a fifth Director, the Board will liaise with

external independent recruitment consultants

to ensure a wide pool of candidates from a

diverse background are being considered for

the position.

The Nomination Committee will be responsible

for the implementation of the Company’s

Diversity Policy and for monitoring progress

towards the achievement of its objectives.

This Nomination Committee Report is

approved on behalf of the Board by

Cathy Pitt

Chair of the Nomination Committee

5 April 2022

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Management Engagement

Committee Report

Introduction

During the year, the Management Engagement

Committee played an integral role in:

§ reviewing the contractual relationship and

performance of the Investment Manager;

and

§ evaluating key service providers, including

the Company Secretary, Depositary,

Registrar, and Broker.

Building on its work during 2021, the

Management Engagement Committee

continued to work with the Investment Manager

and key service providers to ensure that the

Company had a robust system of internal

financial controls and a clear risk management

procedure.

Management Engagement Committee

composition

The Management Engagement Committee is

chaired by Cathy Pitt. Cathy is supported by

the other three independent Non-Executive

Directors on the Committee.

During 2021, the Board agreed to appoint Cathy

Pitt as chair of the Management Engagement

Committee to replace John Leggate. This

decision was intended to provide John with

additional time and capacity to focus on leading

the Board.

The Management Engagement Committee

meets at least once a year and operates

within clearly defined terms of reference. The

Management Engagement Committee met

once during the period. This meeting was also

attended by representatives of the Investment

Manager and the Company Secretary, (JTC (UK)

Limited).

Given the size of the Board and the diverse

range of experience and skills possessed by

the Directors, the Board has considered it

appropriate to have all Directors serve on the

Committee.

Terms of reference

The Management Engagement Committee

reviewed its terms of reference to ensure that

they remain in alignment with the pro-forma

terms of reference published by ICSA and the

latest version of the AIC Code.

Principal responsibilities

The Management Engagement Committee’s

principal responsibilities include:

§ monitoring and evaluating the Investment

Manager’s investment performance

and, if necessary, providing appropriate

guidance;

§ putting in place procedures by which the

Board regularly reviews the continued

retention of the Investment Manager’s

services;

§ considering the merit of obtaining, on a

regular basis, an independent appraisal of

the Investment Manager’s services;

§ reviewing the level and method of

remuneration, the basis of performance

fees (if any) and the notice period; and

§ putting in place processes to review

the Company’s risk management and

internal control systems designed to

safeguard shareholders’ investment and

the Company’s assets. A review of the

effectiveness of these systems should be

made annually by the Board and reported

to shareholders in the Annual Report.

The Management Engagement Committee

also reviews the performance of other

service providers to the Company and makes

recommendation to the Board, including by:

§ reviewing and considering the

appointment and remuneration of service

providers to the Company; and

§ considering any points of conflict which

may arise between the providers of

services to the Company.

Performance of the Investment Manager

The Management Engagement Committee

reviewed the performance of the Investment

Manager and the Management Engagement

Committee was generally satisfied that the

Investment Manager had performed well during

Gresham House Energy Storage Fund plc (GRID)

the period with the Company completing a

number of acquisitions during the period,

driving the performance of the operating

assets, successfully deploying the capital

raised during 2020 and conducting a further

successful fundraising during 2021.

The Management Engagement Committee

noted that information flow to the Board

had improved during 2021. The Management

Engagement Committee continues to

collaborate with the Investment Manager to

improve reporting and information flow to the

Board and its committees.

The Management Engagement Committee

reviewed the size of the Investment Manager’s

workload, key-person policies and resources

to handle the anticipated workload. The

Management Engagement Committee also

noted the additional resources added to the

Investment Manager’s team, in particular the

additional capacity to support the Company’s

financial modelling.

The Management Engagement Committee

reviewed the remuneration of the Investment

Manager and found these fees to be in line with

market rates for the services delivered to the

Company during the period.

The Management Engagement Committee

is satisfied that the Investment Manager has

performed well under the terms of the AIFM

Agreement and is of the view that the continued

engagement of the Investment Manager is in

the best interests of the Company and would

support the Company’s long-term sustainable

success.

Performance of key service providers

The Management Engagement Committee

undertook at review of all key service providers

to the Company and there were no issues to

report.

The Management Engagement Committee

specifically discussed the performance

of JTC (UK) Limited appointed by the

Company both as Administrator and as

Company Secretary and concluded that

the performance as Administrator and

Company Secretary remained satisfactory.

JTC (UK) Limited continue to work with the

Investment Manager and Board on a process

of continuous improvement around financial

information, internal controls, and corporate

governance. The Company are responsible for

the appointment or removal of the Company

Secretary.

Committee evaluation

An externally facilitated evaluation of the

Management Engagement Committee was

undertaken as part of the overall Board

evaluation. The Management Engagement

Committee was found to be working well and

the skills and experience of the members

was found to be appropriate for their roles.

The evaluation report recommended that

the Management Engagement Committee be

chaired by a different Director and Cathy Pitt

took over as the Management Engagement

Committee’s Chair.

This Management Engagement Committee

Report is approved on behalf of the Board by

Cathy Pitt

Chair of the Management Engagement

Committee

5 April 2022

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

Independent Auditor’s Report to

the Members of Gresham House

Energy Storage Fund plc

Opinion on the financial statements

In our opinion the financial statements:

§ give a true and fair view of the state of the

Company’s affairs as at 31 December 2021

and of its profit for the year then ended;

§ have been properly prepared in

accordance with UK adopted international

accounting standards; and

§ have been prepared in accordance with

the requirements of the Companies Act

2006.

We have audited the financial statements of

Gresham House Energy Storage Fund plc (the

‘Company’) for the year ended 31 December

2021, which comprise the statement of

comprehensive income, the statement of

financial position, the statement of changes in

equity, the statement of cash flows and notes to

the financial statements, including a summary

of significant accounting policies. The financial

reporting framework that has been applied

in their preparation is applicable law and UK

adopted international accounting standards.

Basis for opinion

We conducted our audit in accordance with

International Standards on Auditing (UK) (ISAs

(UK)) and applicable law. Our responsibilities

under those standards are further described

in the Auditor’s responsibilities for the audit

of the financial statements section of our

report. We believe that the audit evidence we

have obtained is sufficient and appropriate to

provide a basis for our opinion. Our audit opinion

is consistent with the additional report to the

audit committee.

Independence

Following the recommendation of the Audit

Committee, we were appointed by the Board

of Directors in December 2019 to audit the

financial statements for the year ending 31

December 2019 and subsequent financial

periods. The period of total uninterrupted

engagement including retenders and

reappointments is three years, covering the

years ending 31 December 2019 to 31 December

2021. We remain independent of the Company

in accordance with the ethical requirements

that are relevant to our audit of the financial

statements in the UK, including the FRC’s

Ethical Standard as applied to listed public

interest entities, and we have fulfilled our other

ethical responsibilities in accordance with

these requirements. The non-audit services

prohibited by that standard were not provided

to the Company.

Conclusions relating to going concern

In auditing the financial statements, we have

concluded that the Directors’ use of the going

concern basis of accounting in the preparation

of the financial statements is appropriate. Our

evaluation of the Directors’ assessment of the

Company’s ability to continue to adopt the going

concern basis of accounting included:

§ assessing the reasonableness of

the Company’s cash flow forecast by

comparing the expected cash flows to

contractual obligations and that these are

covered by the available cash reserves for

the period of 12 months from the date of

approval of the financial statements;

§ considering the appropriateness of the

approach and model used by the Directors;

§ assessing the reasonableness of the

stress test performed by the Directors

which assumed that there would be a

25% reduction in inflows and no further

dividends are paid in the period and all

existing funding obligations towards the

investments would still be met over the

next 12 months;

§ evaluating the appropriateness of the

Directors consideration of the impact of

the current Russia/Ukraine crisis on going

concern based on our knowledge of the

entity; and

§ reviewing the adequacy and consistency

of the disclosure in line with the Directors'

assessment.

Gresham House Energy Storage Fund plc (GRID)

Based on the work we have performed, we

have not identified any material uncertainties

relating to events or conditions that, individually

or collectively, may cast significant doubt on

the Company’s ability to continue as a going

concern for a period of at least 12 months from

when the financial statements are authorised

for issue.

Our responsibilities and the responsibilities of

the Directors with respect to going concern

are described in the relevant sections of this

report.

An overview of the scope of our audit

Our audit was scoped by obtaining an

understanding of the Company and its

environment, including the Company’s system

of internal control, and assessing the risks

of material misstatement in the financial

statements. We also addressed the risk of

management override of internal controls,

including assessing whether there was

evidence of bias by the Directors that may have

represented a risk of material misstatement.

Key audit matters

Key audit matters are those matters that, in

our professional judgement, were of most

significance in our audit of the financial

statements of the current period and include

the most significant assessed risks of material

misstatement (whether or not due to fraud) that

we identified, including those which had the

greatest effect on: the overall audit strategy;

the allocation of resources in the audit; and

directing the efforts of the engagement team.

This matter was addressed in the context of our

audit of the financial statements as a whole,

and in forming our opinion thereon, and we do

not provide a separate opinion on this matter.

2021 2020

Key audit

matters

Valuation of unquoted

investments



Valuation of unquoted

investments



Materiality Financial statements as a whole

£7.6mn (2020:£5.3mn) based on 1.5% of net assets

Specific materiality

£870k (2020:£500k based on 3% of profit before tax) based on 5% of profit before tax less fair value gains

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

Independent Auditor’s Report to the Members of Gresham

House Energy Storage Fund plc continued

Key audit matter How the scope of our audit addressed the key audit matter

Valuation of unquoted

investments

Refer to Note 3 and 5

on pages 71 and 73 and

Note 12 on page 77 of the

financial statements

As detailed in Note 12, the Company owns an

investment portfolio of unquoted equity and

loan investments which, as described in the

accounting policies in Note 5, are held at fair value

in the financial statements.

The valuations of the investments make use

of judgemental assumptions where there is an

inherent risk of management override arising

from investment valuations being prepared by the

Investment Manager, who is remunerated based

on the NAV of the Company.

The Company has engaged an independent

external valuer to help mitigate the risk.

The fair value was determined through the use

of a discounted cash flow model. The valuation

involved significant judgements and estimates

from management including, but not limited to

discount rates, changes in net revenue yield and

changes in energy production. Changes to the

estimates and/or judgements can result, either

on an individual or aggregate basis, in a material

change to the valuation of unquoted investments.

Our procedures in relation to management’s valuation of

unquoted investments include:

§ We assessed the competency, qualification, independence

and objectivity of the independent external valuer

engaged by the Company and reviewed the terms of their

engagement for any unusual arrangements or limitation on

the scope of their work.

§ We discussed the key assumptions with the independent

external valuer and with the assistance of our internal

valuation experts, we challenged the appropriateness

of the selection and application of key estimates in the

discounted cash flow model including discount rate, net

revenue yield, annual generation, inflation rate, underlying

costs and asset life by benchmarking these to available

industry data and actual results in the year.

§ Agreed net revenue yield and annual generation used in the

discounted cash flow model to net revenue yield provided

by management's independent third-party expert. We

held discussions with them to understand the model

assumptions and how the models are produced.

§ For new investments, we obtained and reviewed the sale

and purchase agreements and loan contracts and checked

if they were accurately reflected in the valuation model.

§ For investments where the battery asset is under

construction, we have challenged the policy applied

to fair value these investments through obtaining an

understanding of the status of each project and the

risks of the projects. For the construction risk premium

applied, we benchmarked this against other companies

and considered the risks in the projects. We discussed the

premium with management's independent external valuer

and involved our internal valuations experts in assessing

the appropriateness of the premium.

§ Agreed period end working capital adjustments in

determining the fair value of the portfolio companies to the

working capital recognised in the management accounts

of the portfolio companies as well as bank statements,

invoices and VAT returns.

§ Agreed the movements in loans provided to the portfolio

companies including interest rates to underlying

loan agreements, vouched cash movements to bank

statements and re-performed the calculation of interest.

Key observation

Based on the audit procedures performed, we found the

assumptions made by the management in relation to the

valuation of the unquoted investments to be appropriate.

Gresham House Energy Storage Fund plc (GRID)

Company financial statements

2021 2020

Materiality £7,600,000 £5,300,000

Basis for determining materiality 1.5% net assets

Rationale for the benchmark applied We considered that net assets is the most relevant performance measure for users of the

financial statements.

Performance materiality £5,110,000 £3,445,000

Basis for determining performance

materiality

70% of materiality based on consideration of

factors including the level of historical errors

and nature of activities, which resulted in

an increase in the performance materiality

benchmark.

65% of materiality based on consideration of

factors including the level of historical errors

and nature of activities.

Our application of materiality

We apply the concept of materiality both in

planning and performing our audit, and in

evaluating the effect of misstatements. We

consider materiality to be the magnitude by

which misstatements, including omissions,

could influence the economic decisions of

reasonable users that are taken on the basis of

the financial statements.

In order to reduce to an appropriately low

level the probability that any misstatements

exceed materiality, we use a lower materiality

level, performance materiality, to determine

the extent of testing needed. Importantly,

misstatements below these levels will not

necessarily be evaluated as immaterial

as we also take account of the nature of

identified misstatements, and the particular

circumstances of their occurrence, when

evaluating their effect on the financial

statements as a whole.

Based on our professional judgement, we

determined materiality for the financial

statements as a whole and performance

materiality as follows.

Specific materiality

We also determined that for transactions and

balances that impact on the Company’s realised

return other than the valuation of the unlisted

investment portfolio, a misstatement of less

than materiality for the financial statements as

a whole, specific materiality, could influence

the economic decisions of users. As a result, we

determined materiality for these items based

to be £0.87mn (2020:£0.5mn) based on 5% of

profit before tax less fair value gains. We further

applied a performance materiality level of 70%

of specific materiality to ensure that the risk

of errors exceeding specific materiality was

appropriately mitigated.

Reporting threshold

We agreed with the Audit Committee that

we would report to them, all individual audit

differences in excess £43,500 (2020: £25,000).

We also agreed to report differences below this

threshold that, in our view, warranted reporting

on qualitative grounds.

Other information

The Directors are responsible for the

other information. The other information

comprises the information included in the

Annual Report and Financial Statements

other than the financial statements and our

Auditor’s Report thereon. Our opinion on the

financial statements does not cover the other

information and, except to the extent otherwise

explicitly stated in our report, we do not express

any form of assurance conclusion thereon.

Our responsibility is to read the other

information and, in doing so, consider whether

the other information is materially inconsistent

with the financial statements, or our knowledge

obtained in the course of the audit, or

otherwise appears to be materially misstated.

If we identify such material inconsistencies

or apparent material misstatements, we are

required to determine whether this gives rise

to a material misstatement in the financial

statements themselves. If, based on the

work we have performed, we conclude that

there is a material misstatement of this other

information, we are required to report that fact.

We have nothing to report in this regard.

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Other Companies Act 2006 reporting

Based on the responsibilities described below

and our work performed during the course of

the audit, we are required by the Companies Act

2006 and ISAs (UK) to report on certain opinions

and matters as described below.

Responsibilities of Directors

As explained more fully in the Directors’

responsibilities statement, the Directors

are responsible for the preparation of the

financial statements and for being satisfied

that they give a true and fair view, and for such

internal control as the Directors determine

is necessary to enable the preparation of

financial statements that are free from material

misstatement, whether due to fraud or error.

In preparing the financial statements, the

Directors are responsible for assessing the

Company’s ability to continue as a going

concern, disclosing, as applicable, matters

related to going concern and using the going

concern basis of accounting unless the

Directors either intend to liquidate the Company

or to cease operations, or have no realistic

alternative but to do so.

Auditor’s responsibilities for the audit of the

financial statements

Our objectives are to obtain reasonable

assurance about whether the financial

statements, as a whole, are free from material

misstatement, whether due to fraud or error,

and to issue an Auditor’s Report that includes

our opinion. Reasonable assurance is a high

level of assurance, but is not a guarantee that

an audit conducted in accordance with ISAs

(UK) will always detect a material misstatement

when it exists. Misstatements can arise from

fraud or error and are considered material if,

individually or in the aggregate, they could

reasonably be expected to influence the

economic decisions of users taken on the basis

of these financial statements.

Extent to which the audit was capable of

detecting irregularities, including fraud

Irregularities, including fraud, are instances

of non-compliance with laws and regulations.

We design procedures in line with our

responsibilities, outlined above, to detect

material misstatements in respect of

irregularities, including fraud. The extent to

which our procedures are capable of detecting

irregularities, including fraud is detailed below:

§ We obtained an understanding of the

legal and regulatory framework that is

applicable to the Company and determined

that the relevant laws and regulations

related to the elements of the Company

Act 2006 and tax legislation, and the

financial reporting framework.

§ Our considerations of the other laws and

regulations that may have a significant

effect on the financial statements included

the supervisory requirements of LSE

Listing and Disclosure Rules, Financial

Conduct Rule ‘FCA’ Listing rules applicable

to the Company, and the Association of

Investment Companies ‘AIC’ SORP.

§ We understood how the Company is

complying with these laws and regulations

by making enquiries of the Investment

Manager, the management service

provider, the Board of Directors and those

responsible for legal and compliance

matters. We reviewed correspondence

between the Company and regulated

bodies and reviewed minutes of the Board

of Directors and committee meetings,

gaining an understanding of the Company’s

approach to governance.

§ We assessed the susceptibility of

the financial statements to material

misstatement, including fraud and made

enquiries of the Investment Manager,

the management service provider and

the Board of Directors of any known or

suspected instances of fraud. The key

area for fraud and manipulation is around

the unquoted investment valuation (see

related key audit matter) and management

override of controls.

§ We challenged the assumptions made by

the Investment Manager in their significant

accounting estimates, in particular,

in relation to valuation of unquoted

investments (see related key audit matter).

§ In response to the risk of management

override of controls, we identified and

tested journal entries, in particular any

journal entries posted with unusual

account combinations and low value

recurring items, journals posted by the

Investment Manager and journals posted

and reviewed by the same individual by

agreeing to supporting documentation.

§ We communicated relevant identified

laws and regulations and potential fraud

risks to all engagement team members

and remained alert to any indications of

fraud or non-compliance with laws and

regulations throughout the audit.

Independent Auditor’s Report to the Members of Gresham

House Energy Storage Fund plc continued

Strategic Report and

Directors’ Report

In our opinion, based on the work undertaken in the course of the

audit:

§ the information given in the Strategic Report and the Directors’

Report for the financial year for which the financial statements

are prepared is consistent with the financial statements; and

§ the Strategic Report and the Directors’ Report have been

prepared in accordance with applicable legal requirements.

In the light of the knowledge and understanding of the Company and its

environment obtained in the course of the audit, we have not identified

material misstatements in the Strategic Report or the Directors’

Report.

Directors’

remuneration

In our opinion, the part of the Directors’ Remuneration Report to be

audited has been properly prepared in accordance with the Companies

Act 2006.

Matters on which we

are required to report

by exception

We have nothing to report in respect of the following matters in

relation to which the Companies Act 2006 requires us to report to you

if, in our opinion:

§ adequate accounting records have not been kept, or returns

adequate for our audit have not been received from branches not

visited by us; or

§ the financial statements and the part of the Directors’

Remuneration Report to be audited are not in agreement with the

accounting records and returns; or

§ certain disclosures of Directors’ remuneration specified by law

are not made; or

§ we have not received all the information and explanations we

require for our audit.

Gresham House Energy Storage Fund plc (GRID)

The engagement partner has assessed that

the engagement team collectively had the

appropriate competence and capabilities to

identify or recognise non-compliance with laws

and regulations.

Our audit procedures were designed to respond

to risks of material misstatement in the

financial statements, recognising that the risk

of not detecting a material misstatement due

to fraud is higher than the risk of not detecting

one resulting from error, as fraud may involve

deliberate concealment by, for example, forgery,

misrepresentations or through collusion. There

are inherent limitations in the audit procedures

performed and the further removed non-

compliance with laws and regulations is from

the events and transactions reflected in the

financial statements, the less likely we are to

become aware of it.

A further description of our responsibilities

is available on the Financial Reporting

Council’s website at: www.frc.org.uk/

auditorsresponsibilities. This description forms

part of our Auditor’s Report.

Use of our report

This report is made solely to the Company’s

members, as a body, in accordance with

Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we

might state to the Company’s members those

matters we are required to state to them in an

Auditor’s Report and for no other purpose. To

the fullest extent permitted by law, we do not

accept or assume responsibility to anyone other

than the Company and the Company’s members

as a body, for our audit work, for this report, or

for the opinions we have formed.

Marc Reinecke (Senior Statutory Auditor)

For and on behalf of BDO LLP,

Statutory Auditor

London

United Kingdom

5 April 2022

BDO LLP is a limited liability partnership

registered in England and Wales (with

registered number OC305127)

Gresham House Energy Storage Fund plc (GRID)

Annual

Report

Additional

Information

Financial

Statements

Statement of

Comprehensive Income

For the year ended 31 December 2021

Company number 11535957

For the year ended 31 December 2021 Notes Revenue

(£)

Capital

(£)

Total

(£)

Net gain on investments at fair value through profit and loss 7 22,470,837 63,058,528 85,529,365

Other income 298,500 - 298,500

Total income 22,769,337 63,058,528 85,827,865

Administrative and other expenses:

Transaction fees - 56,539 56,539

Legal and professional fees - (560,589) (560,589)

Other administrative expenses 9 (4,932,056) - (4,932,056)

Total administrative and other expenses (4,932,056) (504,050) (5,436,106)

Profit before tax 17,837,281 62,554,478 80,391,759

Taxation 10 - - -

Profit and total comprehensive income for the year 17,837,281 62,554,478 80,391,759

Earnings per share (basic and diluted) - pence 11 4.57 16.02 20.59

The total column of this statement is the Statement of Comprehensive Income of the Company prepared in accordance with International Financial

Reporting Standards (IFRS). The supplementary revenue return and capital columns have been prepared in accordance with the Association of

Investment Companies Statement of Recommended Practice (AIC SORP).

All results are derived from continuing operations. The Notes on pages 71 to 88 form an integral part of these Financial Statements.

For the year ended 31 December 2020 Notes Revenue

(£)

Capital

(£)

Total

(£)

Net gain on investments at fair value through profit and loss 7 12,346,913 10,055,692 22,402,605

Interest on loans to affiliated entities of the Investment Manager 8 761,169 - 761,169

Other income 188,236 - 188,236

Total income 13,296,318 10,055,692 23,352,010

Administrative and other expenses:

Transaction fees - (309,778) (309,778)

Legal and professional fees - (1,002,983) (1,002,983)

Other administrative expenses 9 (3,329,721) - (3,329,721)

Total administrative and other expenses (3,329,721) (1,312,761) (4,642,482)

Profit before tax 9,966,597 8,742,931 18,709,528

Taxation 10 (20,570) - (20,570)

Profit and total comprehensive income for the year 9,946,027 8,742,931 18,688,958

Earnings per share (basic and diluted) - pence 11 4.15 3.64 7.79

Gresham House Energy Storage Fund plc (GRID)

PLACE TEXT HERE

82%

Statement of

Financial Position

Notes 31 December 2021

(£)

31 December 2020

(£)

Non-current assets

Investments in subsidiaries at fair value through profit or loss 12 389,346,748 248,964,175

389,346,748 248,964,175

Current assets

Cash and cash equivalents 14 122,175,081 110,967,025

Trade and other receivables 15 359,467 274,427

122,534,548 111,241,452

Total assets 511,881,296 360,205,627

Current liabilities

Trade and other payables 16 (210,255) (1,315,217)

(210,255) (1,315,217)

Total net assets 511,671,041 358,890,410

Shareholders' equity

Share capital 21

4,378,421 3,485,564

Share premium 21

349,058,720 251,601,260

Merger relief reserve 21

13,299,017 13,299,017

Capital reduction reserve 21

38,162,172 64,123,617

Capital reserves

75,421,840 12,867,362

Revenue reserves

31,350,871 13,513,590

Total shareholders' equity 511,671,041 358,890,410

Net Asset Value per Ordinary Share (pence) 20 116.86 102.96

The Financial Statements were approved and authorised for issue by the Board of Directors and were signed on its behalf by:

John Leggate CBE, FREng

Chair

Date: 5 April 2022

The Notes on pages 71 to 88 form an integral part of these Financial Statements.

For the year ended 31 December 2021

Company number 11535957

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

Statement of

Changes in Equity

For the year ended 31 December 2021

The Notes on pages 71 to 88 form an integral part of these Financial Statements.

Note Share capital

(£)

premium

reserve

(£)

Merger relief

reserve

(£)

Capital

reduction

reserve

(£)

Capital

reserves

(£)

Revenue

reserves

(£)

Total

shareholders'

equity

(£)

Shareholders’ equity at

1 January 2021

3,485,564 251,601,260 13,299,017 64,123,617 12,867,362 13,513,590 358,890,410

Profit for the year - - - - 62,554,478 17,837,281 80,391,759

Total comprehensive

income for the year

- - - - 62,554,478 17,837,281 80,391,759

Transactions with owners:

Ordinary Shares issued at a

premium during the year 21 892,857 99,107,143 - - - - 100,000,000

Share issue costs 21 - (1,649,683) - - - - (1,649,683)

Dividends paid 21 - - - (25,961,445) - - (25,961,445)

Shareholders’ equity at 31

December 2021

4,378,421 349,058,720 13,299,017 38,162,172 75,421,840 31,350,871 511,671,041

Note Share capital

(£)

premium

reserve

(£)

Merger relief

reserve

(£)

Capital

reduction

reserve

(£)

Capital

reserves

(£)

Revenue

reserves

(£)

Total

shareholders'

equity

(£)

Shareholders’ equity at

1 January 2020

2,042,707 104,380,109 13,299,017 78,465,533 4,124,431 3,567,563 205,879,360

Profit for the period - - - - 8,742,931 9,946,027 18,688,958

Total comprehensive

income for the year

- - - - 8,742,931 9,946,027 18,688,958

Transactions with owners:

Ordinary Shares issued at a

premium during the year 21 1,442,857 149,757,143 - - - - 151,200,000

Share issue costs 21 - (2,535,992) - - - - (2,535,992)

Dividends paid 21 - - - (14,341,916) - - (14,341,916)

Shareholders’ equity at 31

December 2020

3,485,564 251,601,260 13,299,017 64,123,617 12,867,362 13,513,590 358,890,410

The total distributable reserves available at 31 December 2021 are £69,513,043 (2020: £77,637,207). Distributable reserves are made up of the capital

reduction reserve and revenue reserve.

Gresham House Energy Storage Fund plc (GRID)

TEXT HERE

82%

Statement of

Cash Flows

For the year ended 31 December 2021

The Notes on pages 71 to 88 form an integral part of these Financial Statements.

Note 31 December 2021

(£)

31 December 2020

(£)

Cash flows used in operating activities

Profit for the year 80,391,759 18,688,958

Net gain on investments at fair value through profit and loss 7 (85,529,365) (22,402,605)

Interest income - (784,206)

Taxation - 20,570

Increase in trade and other receivables (85,040) (7,425)

Decrease in trade and other payables (74,431) (1,155,801)

Net cash used in operating activities (5,297,077) (5,640,509)

Cash flows used in investing activities

Acquisition of equity in subsidiaries - (238,095)

Deferred consideration paid (1,030,530) -

Disposal of investments 458,331 -

Loans made to subsidiaries (55,730,831) (76,155,352)

Loans repaid by investments 419,291 5,750,000

Bank interest received - 23,037

Net cash used in investing activities (55,883,739) (70,620,410)

Cash flows used in financing activities

Proceeds from issue of Ordinary Shares at a premium 21 100,000,000 151,200,000

Share issue costs 21 (1,649,683) (2,535,992)

Dividends paid 21 (25,961,445) (14,341,916)

Net cash inflow from financing activities 72,388,872 134,322,092

Net increase in cash and cash equivalents for the year 11,208,056 58,061,173

Cash and cash equivalents at the beginning of the year 110,967,025 52,905,852

Cash and cash equivalents at the end of the year 122,175,081 110,967,025

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

1. General information

Gresham House Energy Storage Fund plc (the Company) was incorporated in England and Wales on 24 August 2018 with Company number 11535957

as a closed-ended investment company. The Company’s business is as an investment trust within the meaning of Chapter 4 of Part 24 of the

Corporation Tax Act 2010. The registered office of the Company is The Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF. Its share capital is

denominated in Pounds Sterling (GBP or £) and currently consists of Ordinary Shares. Through its subsidiaries, the Company’s principal activity is to

invest in SPVs which operate a diversified portfolio of operating utility-scale Battery Energy Storage Systems (BESS), which utilise batteries and may

also utilise generators. The BESS projects comprising the investment portfolio are located in diverse locations across Great Britain.

These Annual Financial Statements cover the year ended 31 December 2021 with comparatives for the year ended 31 December 2020 and comprise

only the results of the Company as all its subsidiaries are measured at fair value.

2. Basis of preparation

Statement of compliance

The Annual Report and Financial Statements have been prepared in accordance with UK adopted international accounting standards. The accounts

have been prepared on a historical cost basis except for financial assets at fair value through profit or loss. All accounting policies have been applied

consistently in these financial statements.

Where presentational guidance set out in the Statement of Recommended Practice (the SORP) ‘Financial Statements of Investment Trust Companies

and Venture Capital Trusts’, issued by the Association of Investment Companies (AIC) is consistent with the requirements of IFRS, the Directors

have prepared the annual Financial Statements on a basis compliant with the recommendations of the SORP. The supplementary information which

analyses the Statement of Comprehensive Income between items of revenue and a capital nature is presented in accordance with the SORP.

Functional and presentation currency

The currency of the primary economic environment in which the Company operates (the functional currency) is Pound Sterling (GBP or £) which is

also the presentation currency.

Going concern

As noted in the Strategic Report, as at 31 December 2021, the Company had net current assets of £122mn including cash balances of £122mn

(excluding cash balances within investee companies), which are sufficient to meet current obligations as they fall due. The major cash outflows of

the Company are the costs relating to the acquisition of new assets and payment of dividends, both of which are discretionary (other than committed

transactions). All committed acquisitions at the end of the year and subsequent to year end are sufficiently covered through current cash reserves.

The Company had no outstanding debt owing as at 31 December 2021. The Company is an obligor to the debt facility entered into by the MidCo in 2021,

but which was undrawn as at 31 December 2021.

As such, the Directors have adopted the going concern basis in preparing the Annual Report and Financial Statements.

3. Significant accounting judgements, estimates and assumptions

The preparation of the Financial Statements requires management to make judgements, estimates and assumptions that affect the application of

accounting policies and the reported amount of assets, liabilities, income, and expenses. Estimates and underlying assumptions are reviewed on

an ongoing basis. Revisions to the accounting estimates are recognised in the period in which the estimates are revised and in any future periods

affected.

During the year the Directors considered the following significant judgements and assumptions:

Assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10 are required to measure their subsidiaries at fair value through profit or loss

rather than consolidate them unless they provided investment related services to the Company and are not themselves investment entities. To

determine that the Company continues to meet the definition of an investment entity, the Company is required to satisfy the following three criteria:

a) the Company obtains funds from one or more investors for the purpose of providing those investors with investment management services;

b) the Company commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment

income, or both; and

Notes to the Financial

Statements

For the year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

c) the Company measures and evaluates the performance of its investments on a fair value basis.

The Company meets the criteria as follows:

§ the stated strategy of the Company is to deliver stable returns to shareholders through a mix of battery energy storage investments;

§ the Company provides investment management services and has several investors who pool their funds to gain access to infrastructure related

investment opportunities that they might not have had access to individually; and

§ the Company has elected to measure and evaluate the performance of all of its investments on a fair value basis. The fair value method is used

to represent the Company’s performance in its communication to the market, including investor presentations. In addition, the Company reports

fair value information internally to Directors, who use fair value as the primary measurement attribute to evaluate performance.

An indicator of whether a Company is an investment entity is the existence of a formal exit strategy. Although there is currently no documented exit

strategy the assets have a limited life and are not expected to be held indefinitely.

A further indicator of whether a Company is an investment entity is the expectation they hold more than one asset. Following the re-organisation

in 2020 and the sale of Noriker Power in the year, the Company holds one investment directly but several indirectly, as there is a portfolio of assets

within the MidCo.

The Directors believe the Company meets the business purpose criteria to invest for capital appreciation and/or income generation and note that the

Company is not required to hold its investments indefinitely.

The Directors are of the opinion that the Company meets the characteristics of an investment entity and will reassess this conclusion on an annual

basis.

Assessment of the MidCo as an investment entity

The MidCo (see Note 12) is not consolidated as the MidCo is also considered to be an investment entity. The Board of the MidCo have considered

the requirements of IFRS 10 as per above and confirm the MidCo meets these criteria. If the MidCo was not considered to meet the definition of

an investment entity, then the Company would be required to consolidate the entity. The net assets of the MidCo have been set out in Note 12. The

impact of consolidating the MidCo would be to increase the investment value to £401,115,427 (2020: £264,393,793) and recognise the Bond loan of nil

(2020: £15,088,825) and additional net working capital of £11,768,679 (2020: £340,794).

Note 12 includes an overview of the balances within the MidCo and what would be included in the accounts of the Company if the Company was

required to consolidate the entity.

Investment Manager not a related party:

The AIFM is not disclosed as key management personal in the financial statements. To meet the key management personal definition the AIFM would

need to have authority and responsibility for planning, directing, and controlling the activities of the entity. The Directors are of the opinion that the

AIFM does not meet these criteria as the Board has to approve key decisions.

Valuation of investments in subsidiaries

Significant estimates in the Company’s Financial Statements include the amounts recorded for the fair value of the investments. By their nature,

these estimates and assumptions are subject to measurement uncertainty and the effect on the Company’s Financial Statements of changes in

estimates in future periods could be significant. See Note 18 for further details.

Interest revenue

The interest revenue generated by the Company on the loan paid to the MidCo. The interest is capitalised annually and is charged at the rate of 8% per

annum.

4. New and revised standards and interpretations

There are no new standards, amendments or interpretations at the reporting date which have been issued but are not yet effective, which could

impact the Financial Statements of the Company and which are deemed to be material for the Company.

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

5. Summary of significant accounting policies

The principal accounting policies applied in the preparation of these Financial Statements are set out below:

Segmental information

The Board is of the opinion that the Company is engaged in a single segment business, being the investment in the United Kingdom in battery energy

storage assets.

Income and expenses (excluding investments)

Income and expenses are accounted for on an accruals basis. The Company’s income and expenses are charged to the Statement of Comprehensive

Income. Costs directly relating to the issue of Ordinary Shares are charged to share premium.

Net gain or loss on investments at fair value through profit and loss

The Company recognises movements in the fair value of investments in subsidiaries through profit and loss.

Other income

Other income consists of bank interest and management fee income which are accounted for on an accruals basis.

Taxation

The Company is approved as an Investment Trust Company (ITC) under sections 1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter

1 Statutory Instrument 2011/2999 for accounting periods commencing on or after 25 May 2018. The approval is subject to the Company continuing

to meet the eligibility conditions of the Corporations Tax Act 2010 and the Statutory Instrument 2011/2999. The Company intends to ensure that it

complies with the ITC regulations on an ongoing basis and regularly monitors the conditions required to maintain ITC status.

From 1 April 2015 there is a single corporation tax rate of 19%. Tax is recognised in the profit and loss except to the extent that it relates to the items

recognised as direct movements in equity, in which case it is similarly recognised as a direct movement in equity. Current tax is the expected tax

payable on any taxable income for the period, using tax rates enacted or substantively enacted at the end of the relevant period. The Company may

use taxable losses from within the Group to relieve taxable profits in the Company.

Investment in subsidiaries

Investments in subsidiaries are held at fair value through profit and loss.

Subsidiaries are entities controlled by the Company. Control exists when the Company is exposed, or has rights, to variable returns from its

involvement with the subsidiary entity and has the ability to affect those returns through its power over the subsidiary entity. In accordance with the

exemption under IFRS 10 Consolidated Financial Statements, the Company is an investment entity.

The Company does not have any subsidiaries that provide investment management services and which are not themselves investment entities. As a

result, the Company does not consolidate any of its subsidiaries.

Financial Instruments

In accordance with IFRS 9, the Company classifies its financial assets and financial liabilities at initial recognition into the categories of amortised

cost or fair value through profit or loss.

Financial assets

The Company classifies its financial assets at amortised cost or fair value through profit or loss on the basis of both:

§ the entity’s business model for managing the financial assets; and

§ the contractual cash flow characteristics of the financial asset.

Financial assets measured at amortised cost

A financial asset is measured at amortised cost if it is held within a business model whose objective is to hold financial assets in order to collect

contractual cash flows and its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the

principal amount outstanding. The Company includes in this category loans receivable and short-term non-financing receivables which include cash

and trade and other receivables.

Loans receivable to affiliated entities of the Investment Manager

Loans receivable to affiliated entities of the Investment Manager are recognised initially at fair value and subsequently stated at amortised cost less

impairment. These are held at amortised cost due to the short-term nature of the loans: these loans are to project companies owned by Gresham

House plc which are included in the exclusivity portfolio. Once these are acquired these will be held at fair value.

Impairment provisions for receivables from affiliated entities of the Investment Manager are recognised based on a forward-looking expected credit

loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk

since initial recognition of the financial asset. For those where the credit risk has not increased significantly since initial recognition of the financial

asset, 12 month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly,

lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime

expected credit losses along with interest income on a net basis are recognised.

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

Cash and cash equivalents

Cash and cash equivalents comprise cash at bank and Treasury fixed term deposits held with the bank with maturities of up to three months which

can be readily converted to cash.

Trade and other receivables

Trade and other receivables are recognised initially at fair value and subsequently stated at amortised cost which is calculated using the provision

matrix of the expected credit loss model.

Financial liabilities measured at amortised cost

This category includes all financial liabilities, other than those measured at fair value through profit or loss, including short-term payables.

Trade and other payables

Trade and other payables are recognised initially at fair value and subsequently stated at amortised cost.

Deferred consideration

Deferred consideration relates to consideration payable in terms of the purchase price stated in the Share Purchase Agreement (SPA) and are

recognised initially at fair value and subsequently stated at amortised cost.

Financial asset measured at fair value through profit or loss (FVPL)

A financial asset is measured at fair value through profit or loss if:

a) its contractual terms do not give rise to cash flows on specified dates that are solely payments of principal and interest (SPPI) on the principal

amount outstanding; or

b) it is not held within a business model whose objective is either to collect contractual cash flows, or to both collect contractual cash flows and

sell; or

c) it is classified as held for trading (derivative contracts in an asset position).

The Company’s investment in subsidiaries (which comprises both debt and equity) is held at fair value through profit or loss under IFRS 9 as the

equity portion of the investment does not meet the SPPI test nor will the Company elect to designate the investments at fair value through other

comprehensive income. The debt investment forms part of a group of assets that are managed, and the performance evaluated on a fair value basis.

The Company includes in this category equity instruments including investments in subsidiaries (which comprises both debt and equity). There are no

consolidated subsidiaries.

Recognition and derecognition

Financial assets are derecognised on the date on which the Company commits to purchase or sell an asset. A financial asset is derecognised where

the rights to receive cash flows from the asset have expired, or the Company has transferred its rights to receive cash flows from the asset. The

Company derecognises a financial liability when the obligation under the liability is discharged, cancelled, or expired.

Impairment of other financial assets

While cash and cash equivalents are also subject to the impairment requirements of IFRS 9, there has been no impairment loss identified.

Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.

Dividends

Dividends are recognised as a reduction in equity when they become legally payable. In the case of interim dividends this is when they are paid. Final

equity dividends will be recognised when approved by the shareholders.

Equity

Equity instruments issued by the Company are recorded at the amount of the proceeds received, net of directly attributable issue costs. Costs not

directly attributable to the issue are immediately expensed in the Statement of Comprehensive Income.

Fair value measurement and hierarchy

Fair value is the price that would be received on the sale of an asset, or paid to transfer a liability, in an orderly transaction between market

participants at the measurement date. The fair value measurement is based on the presumption that the transaction takes place either in the

principal market for the asset or liability, or in the absence of a principal market, in the most advantageous market. It is based on the assumptions

that market participants would use when pricing the asset or liability, assuming they act in their economic best interest. A fair value measurement of

a non-financial asset considers the best and highest value use for that asset.

The fair value hierarchy to be applied under IFRS 13 is as follows:

Level 1: Quoted (unadjusted) market prices in active markets for identical assets or liabilities.

Level 2: Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.

Level 3: Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

For assets and liabilities that are carried at fair value and which will be recorded in the financial information on a recurring basis, the Company will

determine whether transfers have occurred between levels in the hierarchy by reassessing categorisation at the end of each reporting period.

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

6. Fees and expenses

Accounting, secretarial and Directors

JTC (UK) Limited has been appointed to act as secretary and Administrator for the Company through the Administration and Company Secretarial

Agreement. JTC (UK) Limited is entitled to a £60,000 annual fee for the provision of Company Secretarial services and a £55,000 annual fee for the

provision of fund accounting and administration services, based on a Company Net Asset Value of up to £200mn. An ad valorem fee based on total

assets of the Company which exceed £200mn will be applied as follows:

§ 0.04% on the Net Asset Value of the Company in excess of £200mn

During the year, expenses incurred with JTC (UK) Limited for administrative and secretarial services amounted to £235,934 (2020: £126,356) with

£29,210 (2020: £57,500) being outstanding and payable at the year end.

AIFM

The AIFM, Gresham House Asset Management Limited (the Investment Manager), is entitled to receive from the Company, in respect of its services

provided under the AIFM agreement, a fee as follows:

§ 1% on the first £250mn of the NAV of the Company

§ 0.9% on the NAV of the Company in excess of £250mn and up to and including £500mn

§ 0.8% on the NAV of the Company in excess of £500mn

During the year Investment Manager fees amounted to £4,052,956 (2020: £2,400,485) with no outstanding payables at the year-end (2020: nil).

The Investment Manager is a wholly owned subsidiary of Gresham House plc, a significant shareholder in the Company (6.05% (2020: 12.23%) of total

issued Ordinary Shares). Ben Guest (a Director of the Investment Manager), Bozkurt Aydinoglu (0.28% (2020: 0.57%) of total issued Ordinary Shares)

and Gareth Owen (0.05% of total issued Ordinary Shares) are also significant shareholders in the Company. Ben Guest also holds, via a wholly owned

vehicle Lux Energy Limited, a significant financial interest in the Company (Ben’s total holdings are 3.29% (2020: 5.74%) of total issued Ordinary

Shares, including direct and indirect holdings).

8. Interest on loans to affiliated entities of the Investment Manager 31 December 2021

(£)

31 December 2020

(£)

Interest on loans to affiliated entity of the Investment Manager - 761,169

- 761,169

7. Net gain on investments at fair value through the profit and loss 31 December 2021

(£)

31 December 2020

(£)

Unrealised gain on investments at fair value through the profit and loss 62,838,290 10,055,692

Realised gain on investments at fair value through the profit and loss 220,238 -

Interest on loans to subsidiaries 22,470,837 12,346,913

85,529,365 22,402,605

During the year the Company disposed of its interest in Noriker Power Limited, realising a net gain of £220,238.

Notes to the Financial Statements - year ended 31 December 2021

9. Administrative and other expenses 31 December 2021

(£)

31 December 2020

(£)

Administration and secretarial fees 235,934 126,356

Remuneration received by the Company’s Auditor for the audit of these financial statements 144,400 106,000

Remuneration received by the Company’s Auditor for the audit of the prior year financial

statements

34,400 18,911

Remuneration received by the Company’s Auditor for the audit of the subsidiary accounts 15,600 *15,000

Depositary fees 54,949 36,081

Directors’ remuneration salary 232,500 197,000

Directors’ remuneration social security contributions and similar taxes 23,209 19,073

Investment Manager fees 4,052,956 2,400,486

Sundry expenses 138,108 410,814

4,932,056 3,329,721

There were no non audit fees payable to the Company's Auditor in the year.

*In the prior year this fee was included within the total audit fees which amounted to £121,000

Gresham House Energy Storage Fund plc (GRID)

10. Taxation

The Company is recognised as an Investment Trust Company (ITC) and is taxed at the main rate of 19%.

For the year ended 31 December 2021 the Company may utilise group relief or make interest distributions to reduce taxable profits to nil. There is no

corporation tax charge for the year (2020: £20,570).

11. Earnings per Ordinary Share

Earnings per Ordinary Share (EPS) amounts are calculated by dividing the profit or loss for the period attributable to ordinary equity holders of the

Company by the weighted average number of Ordinary Shares in issue during the period. As there are no dilutive instruments outstanding, basic and

diluted EPS are identical.

31 December 2021

(£)

31 December 2020

(£)

(a) Tax charge in profit or loss

Current tax on profits for the year - -

Adjustments for current tax of prior periods - 20,570

- 20,570

(b) Reconciliation of the tax charge for the year

Profit before tax 80,391,759 18,709,528

Tax at UK main rate of 19% 19.00% 15,274,434 3,554,810

Tax effect of:

Non-taxable income (11,981,120) (1,914,490)

Non-deductible expenses 31,350 249,425

Subject to group relief/designated as interest distributions (3,324,664) (1,889,745)

Adjustments for current tax of prior periods - 20,570

Tax charge for the year - 20,570

Revenue Capital 31 December 2021

Total

Net profit attributable to ordinary shareholders (£) 17,837,281 62,554,478 80,391,759

Weighted average number of Ordinary Shares for the year 390,386,109 390,386,109 390,386,109

Profit per share (basic and diluted) - pence 4.57 16.02 20.59

Revenue Capital 31 December 2020

Total

Net profit attributable to ordinary shareholders (£) 9,946,027 8,742,931 18,688,958

Weighted average number of Ordinary Shares for the period 239,953,710 239,953,710 239,953,710

Profit per share (basic and diluted) - pence 4.15 3.64 7.79

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

12. Investment in subsidiaries

The Company meets the definition of an investment entity. Therefore, it does not consolidate its subsidiaries but, rather, recognises them as

investments at fair value through profit or loss. The Company is not contractually obligated to provide financial support to the subsidiaries, except as

a guarantor to the debt facility entered into by the MidCo, and there are no restrictions in place in passing monies up the structure.

Refer to Note 18 for valuation disclosures relating to the investments in subsidiaries. In the year, the Company disposed of its interest in Noriker

Power Limited.

The Directors evaluate the performance of the portfolio of energy storage investments through its subsidiary companies on a fair value basis. The

income approach is used to value investments as it indicates value based on the sum of the economic income that a project, or group of projects, is

anticipated to earn in the future. Where projects are acquired within the quarter to the valuation date, the cost approach is used to determine the fair

value.

The Company engaged with Grant Thornton as independent and qualified valuers to assess the fair value of the Company’s investments and have

provided their opinion on the reasonableness of the valuation of the Company’s investment portfolio.

Therefore, the investments in subsidiaries are measured at FVTPL under IFRS 9, as these financial assets are managed and their performance

evaluated on a fair value basis.

The loan attracts an interest rate of 8% per annum from the date of advance. Interest compounds on 31 December of each period and the loan is

unsecured.

Unless otherwise agreed, the loan principal and any interest accrued shall be repayable on the earlier of (i) written demand from the Company, or (ii) 31

December 2030.

Further analysis

The Company owns 100% of the Ordinary Shares in Gresham House Energy Storage Holdings plc (the MidCo) which itself holds a number of 100%

owned subsidiaries. The investment in the MidCo of £389,346,748 (2020: £248,964,175) comprises underlying investments as follows:

Equity

(£)

Loans

(£)

Total equity and

loans

(£)

As at 31 December 2021 69,124,138 320,222,610 389,346,748

As at 31 December 2020 6,285,848 242,678,327 248,964,175

Immediate parent Projects Place of business Registered office Percentage

ownership

Ownership

Gresham House

Energy Storage

Holdings plc

The Company “MidCo” The Scalpel, 18

Floor,

52 Lime Street, London,

EC3M 7AF

Gresham House Asset

Management Limited,

5 New Street Square,

London, England,

EC4A 3TW

100% Wholly owned

Reconciliation 31 December 2021

(£)

31 December 2020

(£)

Opening balance 248,964,175 138,203,407

Add: purchases during the year - 238,095

Less: disposals during the year (238,095) -

Add: loans advanced 55,730,831 76,155,352

Less: Loan repayments (419,290) (5,750,000)

Add: Loans to affiliated entities of the Investment Manager converted to investment - 6,871,121

Add: Escrow release to investment (non-cash) - 10,843,595

Add: accrued interest on loans 22,470,837 12,346,913

Total fair value movement through the profit or loss 62,838,290 10,055,692

Closing balance 389,346,748 248,964,175

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

An example of what the Company would look like if the MidCo was consolidated is included in Note 3.

The place of business for all the investments is 5 New Street Square, London, England, EC4A 3TW.

Percentage ownership Total Investment

31 December 2021 31 December 2020 31 December 2021

(£)

31 December 2020

(£)

Noriker Staunch Ltd 100% 100% 17,342,193 15,758,538

HC ESS2 Ltd 100% 100% 23,881,200 24,156,127

HC ESS3 Ltd 100% 100% 20,066,324 19,262,407

West Midlands Grid Storage Two Ltd 100% 100% 3,961,609 3,746,322

Cleator Battery Storage Ltd 100% 100% 7,612,741 7,448,425

Glassenbury Battery Storage Ltd 100% 100% 38,507,279 36,471,706

HC ESS4 Ltd 100% 100% 46,118,825 45,615,597

Bloxwich Energy Storage Ltd 100% 100% 25,088,436 22,397,138

HC ESS6 Ltd 100% 100% 44,737,484 38,238,323

HC ESS7 Ltd 100% 100% 46,055,369 47,058,902

Tynemouth Energy Storage Ltd 100% - 15,956,108 -

Gridreserve Ltd 100% - 19,569,973 -

Nevendon Energy Storage Ltd 100% - 5,028,954 -

Port of Tyne Energy Storage Ltd 100% - 17,551,881 -

Enderby Storage Ltd 100% - 19,189,475 -

West Didsbury Storage Ltd 100% - 14,917,971 -

Penwortham Storage Ltd 100% - 15,073,790 -

Grendon Storage Ltd 100% - 2,943,599 -

Melksham East Storage Ltd 100% - 8,110,637 -

Melksham West Storage Ltd 100% - 1,955,602 -

Investments in subsidiaries - subtotal 393,669,450 260,153,485

Noriker Power Ltd - 4% - 238,095

Biggerbrook Ltd - - - 1,951,194

Gridreserve Ltd (prior to acquisition) - - - 2,051,020

Coupar Ltd - - 3,519,729 -

Arbroath Ltd - - 3,926,248 -

Total investments 401,115,427 264,393,794

Bonds issued by MidCo - (15,088,825)

Working capital in MidCo (11,768,679) (340,794)

Total investment in MidCo 389,346,748 248,964,175

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

13. Loans receivable

The only loans receivable at 31 December 2021 are loans to the MidCo, which are accounted for as investments in subsidiaries – see Note 12.

14. Cash and cash equivalents

15. Trade and other receivables

16. Trade and other payables

17. Categories of financial instruments

As at 31 December 2021, the Company had an outstanding charge with Santander UK plc in respect of its position as guarantor to the debt facility,

held against all the assets and undertakings of the Company. Since the year end the Company has also provided letters of credit in respect of

equipment purchases for the benefit of certain subsidiaries for which a charge is held by Barclays Bank plc over a bank account belonging to the

Company.

At the balance sheet date, all financial assets and liabilities were measured at amortised cost except for the investment in subsidiaries which are

measured at fair value.

31 December 2021

(£)

31 December 2020

(£)

Cash at bank 122,175,081 110,967,025

122,175,081 110,967,025

31 December 2021

(£)

31 December 2020

(£)

Prepayments 88,666 13,995

Accrued income 41,397 89,902

VAT receivable 229,404 170,530

359,467 274,427

31 December 2021

(£)

31 December 2020

(£)

Administration and secretarial fees 29,210 57,500

Audit fee accrual 95,804 121,000

Other accruals 85,241 85,617

Deferred consideration for HC ESS4 Ltd (Red Scar) * - 1,030,530

Taxation payable - 20,570

210,255 1,315,217

* This related to the outstanding portion payable for the acquisition of the subsidiary based on meeting certain performance targets, the amount

was subsequently paid in 2021. These performance targets are not disclosed as they are commercially sensitive.

31 December 2021

(£)

31 December 2020

(£)

Financial assets

Financial assets at amortised cost:

Cash and cash equivalents 122,175,081 110,967,025

Trade and other receivables 130,063 103,897

Fair value through profit or loss:

Investment in subsidiaries 389,346,748 248,964,175

Total financial assets 511,651,892 360,035,097

Financial liabilities

Financial liabilities at amortised cost:

Trade and other payables (210,255) (1,315,217)

Net financial assets 511,441,637 358,719,880

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

18. Fair value measurement

Valuation approach and methodology

The Company, via the MidCo, used the income approach to value its underlying investments. The income approach indicates value based on the sum

of the economic income that an asset, or group of assets, is anticipated to produce in the future. Therefore, the income approach is typically applied

to an asset that is expected to generate future economic income, such as a business that is considered a going concern. Free cash flow to total

invested capital is typically the appropriate measure of economic income. The income approach is the DCF approach and the method discounts free

cash flows using an estimated discount rate.

Valuation process

The Company, via the MidCo, held a portfolio of energy storage investments with a capacity of 425 Megawatt (MW) operational and 375MW in

construction (together the investments). The investments comprise 24 projects held in 22 special project vehicles.

All of the investments are based in the UK. The Directors review and approve the valuations of these assets following appropriate challenge and

examination. The current portfolio consists of non-market traded investments, and valuations are analysed using forecasted cash flows of the assets

and use the discounted cash flow approach for valuation purposes. The Company engages external, independent, and qualified valuers to determine

the fair value of the Company’s investments or valuations are produced by the Investment Manager. As at 31 December 2021, the fair value of the

portfolio of investments has been determined by the Investment Manager and reviewed by Grant Thornton UK LLP.

The valuations have been determined using discounted cash flow methodology, whereby the estimated future cash flows relating to the Company’s

equity investment in each project have been discounted to 31 December 2021, using discount rates reflecting the risks associated with each

investment project and the time value of money. The valuations are based on the expected future cash flows, using reasonable assumptions and

forecasts for revenues, operating costs, macro-level factors and an appropriate discount rate.

New operational projects acquired are initially held at cost, which is deemed to be fair value, and are revalued once the performance of the assets

has been verified. The valuation of these assets, after the initial period, is performed on the same basis as the remainder of the portfolio. Assets in

the course of construction are also held initially at cost, but are revalued, with a construction risk premium of 0.5%, once certain criteria are met

including the timescale to expected commercial operations and the signing of certain contracts.

The determination of the discount rate applicable to each individual investment project considers various factors, including, but not limited to, the

stage reached by each project, the period of operation, the historical track record, the terms of the project agreements and the market conditions in

which the project operates.

The Investment Manager exercises its judgement in assessing the expected future cash flows from each investment. The Investment Manager

produces detailed financial models for each underlying project. The Investment Manager makes amendments where appropriate to:

a) discount rates (i) implied in the price at which comparable transactions have been announced or completed in the UK energy storage sector (if

available); (ii) publicly disclosed by the Company’s peers in the UK energy storage sector (if available); and (iii) discount rates applicable for other

comparable infrastructure asset classes and regulated energy sectors;

b) changes in power market forecasts from leading market forecasters;

c) changes in the economic, legal, taxation or regulatory environment, including changes in retail price index expectations;

d) technical performance based on evidence derived from project performance to date;

e) the terms of any power purchase agreement arrangements;

f) accounting policies;

g) the terms of any debt financing at project level;

h) claims or other disputes or contractual uncertainties; and

i) changes to revenue, cost, or other key assumptions (may include an assessment of future cost trends, as appropriate).

Valuation assumptions include consideration of climate related matters such as expected levels of renewable energy entering the grid system,

demand patterns and current regulatory policy. These are factored into the pricing assumptions which are prepared by an independent consultancy.

The Board reviews the operating and financial assumptions, including the discount rates, used in the valuation of the Company’s underlying portfolio

and approves them based on the recommendation of the Investment Manager.

23. Total in construction is 415MW including Stairfoot (which is not yet subject to an SPA).

31 December 2021 31 December 2020

Key valuation input Range Weighted average Range Weighted average

WACC/WADR 9.9 - 11.4% 10.8% 10.3 - 11.1% 10.8%

RPI 2.8 – 2.9% 2.8% 3% 3%

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

Another key assumption in the valuation models is the volatility of power prices. Due to the Asset Optimisation strategy, the investments are able to

benefit from a range of revenue streams including arbitrage on power price volatility or FFR and other similar income streams. Due to the nature of

the assets owned by the investments, should one revenue stream be impacted the asset is able to switch to alternative sources of revenue to seek to

maintain total revenue targets.

Sensitivity analysis

The below table reflects the range of sensitivities in respect of the fair value movements of the Company’s investments, via the MidCo.

The sensitivity analysis does not include an assessment of the fall in the power price as underlying power information is provided on a net revenue

basis as the investment portfolio generates value through maximising on the volatility in the market, therefore adjusting revenue as a total is a more

relevant measure. Therefore, we have therefore provided a sensitivity based on percentage changes in revenue overall.

Investment Project Valuation

technique

Significant inputs

description

Sensitivity Estimated effect

on fair value

31 December 2021

(£)

Estimated effect

on fair value

31 December 2020

(£)

Noriker

Staunch Ltd

Staunch DCF Discount rate +1%

-1%

(1,188,112)

1,346,462

(1,224,113)

1,401,859

Revenue +10%

-10%

1,307,467

(1,321,450)

1,157,930

(1,176,750)

HC ESS2 Ltd Rufford, Lockleaze,

Littlebrook

DCF Discount rate +1%

-1%

(1,622,287)

1,844,065

(1,666,859)

1,906,534

Revenue +10%

-10%

1,594,147

(1,947,003)

1,233,342

(1,455,996)

HC ESS3 Ltd Roundponds DCF Discount rate +1%

-1%

(1,504,951)

1,744,638

(1,494,752)

1,751,979

Revenue +10%

-10%

1,475,139

(1,505,125)

1,163,309

(1,125,303)

West Midlands

Grid Storage

Two Ltd

Wolverhampton DCF Discount rate +1%

-1%

(271,807)

308,750

(263,187)

300,777

Revenue +10%

-10%

399,734

(435,547)

361,590

(340,677)

Cleator

Battery

Storage Ltd

Cleator DCF Discount rate +1%

-1%

(743,633)

851,165

(648,290)

750,802

Revenue +10%

-10%

883,206

(886,715)

524,510

(529,040)

Glassenbury

Battery

Storage Ltd

Glassenbury DCF N/A N/A N/A N/A

Glassenbury B DCF Discount rate +1%

-1%

(3,576,483)

4,092,515

(3,302,809)

3,819,262

Revenue +10%

-10%

4,201,276

(4,216,089)

2,608,817

(2,606,621)

HC ESS4 Ltd Red Scar DCF Discount rate +1%

-1%

(3,751,022)

4,416,962

(3,840,242)

4,546,579

Revenue +10%

-10%

4,393,203

(4,420,195)

3,019,526

(3,819,002)

Bloxwich

Energy

Storage Ltd

Bloxwich DCF Discount rate +1%

-1%

(1,822,905)

2,074,137

(1,629,444)

1,861,700

Revenue +10%

-10%

2,690,591

(2,719,548)

2,138,010

(2,017,161)

HC ESS7 Ltd Thurcroft DCF Discount rate +1%

-1%

(3,605,403)

4,203,128

(3,530,887)

4,123,953

Revenue +10%

-10%

4,234,266

(4,284,189)

2,945,498

(3,666,454)

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

The Coupar, Arbroath, Melksham and Grendon projects are held at cost.

Investment Project Valuation

technique

Significant inputs

description

Sensitivity Estimated effect

on fair value

31 December 2021

(£)

Estimated effect

on fair value

31 December 2020

(£)

HC ESS6 Ltd Wickham DCF Discount rate +1%

-1%

(3,207,419)

3,680,717

Revenue +10%

-10%

4,004,174

(4,060,406)

Tynemouth

Battery

Storage Ltd

Tynemouth DCF Discount rate +1%

-1%

(1,661,999)

1,956,686

Revenue +10%

-10%

2,037,818

(2,044,741)

Gridreserve

Ltd

Byers Brae DCF Discount rate +1%

-1%

(1,436,577)

1,638,084

Revenue +10%

-10%

2,013,383

(2,048,092)

Nevendon

Energy

Storage Ltd

Nevendon DCF Discount rate +1%

-1%

(646,090)

729,222

Revenue +10%

-10%

1,097,594

(1,104,807)

Port of Tyne

Energy

Storage Ltd

Port of Tyne DCF Discount rate +1%

-1%

(1,377,801)

1,510,192

Revenue +10%

-10%

2,248,320

(2,243,005)

Enderby

Storage Ltd

Enderby DCF Discount rate +1%

-1%

(2,598,696)

3,026,012

Revenue +10%

-10%

3,466,831

(3,516,511)

West Didsbury

Storage Ltd

West Didsbury DCF Discount rate +1%

-1%

(2,605,119)

3,035,333

Revenue +10%

-10%

3,426,385

(3,472,099)

Penwortham

Storage Ltd

Penwortham DCF Discount rate +1%

-1%

(2,640,548)

3,079,486

Revenue +10%

-10%

3,361,519

(3,402,072)

Portfolio Sensitivity of RPI Sensitivity Estimated effect

on fair value

31 December 2021

(£)

Estimated effect

on fair value

31 December 2020

(£)

Inflation +0.25%

-0.25%

9,733,718

(9,417,405)

4,828,487

(4,661,569)

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

The level in the fair value hierarchy within which the fair value measurement is categorised is determined on the basis of the lowest level input that is

significant to the fair value measurement in its entirety. For this purpose, significance of the inputs is assessed against the fair value measurement

in its entirety. Assessing the significance of a particular input to the fair value measurement in its entirety requires judgement, considering factors

specific to the asset or liability. If a fair value measurement uses observable inputs that require significant adjustment based on unobservable inputs

or any other significant unobservable inputs, that measurement is a Level 3 measurement.

The fair value hierarchy of financial instruments measured at fair value is provided below:

Valuation of financial instruments

The investment at fair value through profit or loss is a Level 3 in the fair value hierarchy and the reconciliation in the movement of this Level 3

investment is presented in Note 12. No transfers between levels took place during the period.

19. Financial risk management

The Company is exposed to certain risk through the ordinary course of business and the Company’s financial risk management objective is to

minimise the effect of these risks. The management of risks is performed by the Directors of the Company and the exposure to each financial risk

considered potentially material to the Company, how it arises and the policy for managing it is summarised below:

§ Counterparty risk

The Company is exposed to third party credit risk in several instances and the possibility that counterparties with which the Company and its

subsidiaries, together the Group, contracts may default by failing to pay for services received from the Company or its subsidiaries or fail to perform

their obligations in the manner anticipated by the Group. Such counterparties may include (but are not limited to) manufacturers who have provided

warranties in relation to the supply of any equipment or plant, EPC contractors who have constructed the Company’s plants, who may then be

engaged to operate assets held by the Company, property owners or tenants who are leasing ground space and/or grid connection to the Company for

the locating of the assets, contractual counterparties who acquire services from the Company underpinning revenue generated by each project or

the energy suppliers, demand aggregators, insurance companies who may provide coverage against various risks applicable to the Company’s assets

(including the risk of terrorism or natural disasters affecting the assets) and other third parties who may owe sums to the Company. In the event that

such credit risk crystallises, in one or more instances, and the Company is, for example, unable to recover sums owed to it, make claims in relation to

any contractual agreements or performance of obligations (e.g. warranty claims) or unable to identify alternative counterparties, this may materially

adversely impact the investment returns. Management has completed a high-level analysis which considers both historical and forward-looking

qualitative and quantitative information, to assess the credit risk of these loan receivables and has determined that the credit risk of these loans as at

31 December 2021 is low due to the financial position of the borrowers as a result of the value of these underlying project investments.

Further, the projects in which the Company may invest will not always benefit from a turnkey contract with a single contractor and so will be reliant on

the performance of several suppliers. Therefore, the key risks during battery installation in connection with such projects are the counterparty risk of

the suppliers and successful project integration.

The Investment Manager regularly assesses the creditworthiness of its counterparties and enters into counterparty arrangements which are

financially sound and ensures, where necessary, the sourcing of alternative arrangements in the event of changes in the creditworthiness of its

present counterparties.

§ Concentration risk

The Company’s investment policy is limited to investment (via its subsidiary) in battery energy storage infrastructure, which will principally operate in

the UK. This means that the Company has a significant concentration risk relating to the UK battery energy storage infrastructure sector. Significant

concentration of investments in any one sector may result in greater volatility in the value of the Company’s investments via its subsidiary, and

consequently the NAV and may materially and adversely affect the performance of the Company and returns to shareholders.

The Fund's BESS projects generate revenues primarily from Firm Frequency Response (FFR), Asset Optimisation, Capacity Market (CM) and other grid

connection-related charges, including TRIADs and Dynamic Containment. Revenues from the portfolio's seed BESS projects have historically been

skewed to FFR revenues, FFR being the provision to the National Grid of a dynamic response service to maintain the grid's electrical frequency at

50Hz. In 2021, operations were increasingly targeted towards Asset Optimisation, as this becomes the more profitable business activity. There are

several additional revenue opportunities emerging for the portfolio as a series of regulatory changes are implemented.

31 December 2020 Level 1

(£)

Level 2

(£)

Level 3

(£)

Investment in subsidiaries - - 248,964,175

- - 248,964,175

31 December 2021 Level 1

(£)

Level 2

(£)

Level 3

(£)

Investment in subsidiaries - - 389,346,748

- - 389,346,748

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

The Investment Manager is of the view that the UK's exposure to renewable energy generation has increased significantly over the last few years and

the pace has not lessened despite the removal of legacy subsidies to onshore wind and solar. This is largely because the development of offshore

wind installations has continued apace. As a result, generation from wind is having a growing impact on the grid, generating a volatile supply of energy

which underpins the opportunity for BESS.

§ Credit risk

Cash and other assets that are required to be held in custody will be held at bank. Cash and other assets may not be treated as segregated assets and

will therefore not be segregated from the bank’s own assets in the event of the insolvency of a custodian. Cash held with the bank will not be treated

as client money subject to the rules of the FCA and may be used by the bank in the ordinary course of its own business. The Company will therefore be

subject to the creditworthiness of the bank. In the event of the insolvency of the bank, the Company will rank as a general creditor in relation thereto

and may not be able to recover such cash in full, or at all.

The Investment Manager regularly assesses its credit exposure and considers the creditworthiness of its customers and counterparties. Cash and

bank deposits are held with Barclays Bank plc, a reputable financial institution with a Moody’s credit rating Baa2.

Investments held at fair value through profit or loss are not subject to IFRS 9 impairment requirements.

For interest receivables on cash balances and loans receivable, the Company uses a 12-month expected loss allowance.

The Company has completed some high-level analysis and forward looking qualitative and quantitative information to determine if the interest

and receivables are low credit risk. Based on this analysis the expected credit loss on interest and receivables are not material and therefore no

impairment adjustments were accounted for.

§ Liquidity risk

The objective of liquidity management is to ensure that all commitments made by the Company which are required to be funded can be met out of

readily available and secure sources of funding. As noted below, this includes debt funding.

BESS projects have limited liquidity and may not be readily realisable or may only be realisable at a value less than their book value. There may be

additional restrictions on divestment in the terms and conditions of any sale agreement in relation to a particular BESS Project.

The Company has assessed its ability to raise debt after sufficient assets were acquired and to the extent funding was available on acceptable terms.

Accordingly, the MidCo has entered into a debt facility during the year.

The Company is permitted to provide security to lenders in order to borrow money, which may be by way of mortgages, charges, or other security

interests or by way of outright transfer of title to the Company’s assets. The Directors will restrict borrowing to an amount not exceeding 50% of the

Company’s NAV at the time of drawdown.

The Company’s only financial liabilities are trade and other payables. The Company has sufficient cash reserves to cover these in the short to medium

term. The Company’s cash flow forecasts are monitored regularly to ensure the Company is able to meet its obligations when they fall due.

The following table reflects the maturity analysis of financial assets and liabilities.

As at 31 December 2021

< 1

year

(£)

1 to 2

years

(£)

2 to 5

years

(£)

>5 years

(£)

Total

(£)

Financial assets

Cash and cash equivalents (Note 14) 122,175,081 - - - 122,175,081

Trade and other receivables (Note 15)** 41,397 - - - 41,397

Fair value through profit or loss:

Investment in subsidiaries* - - - 389,346,748 389,346,748

Total financial assets 122,216,478 - -

389,346,748 511,563,226

Financial liabilities

Financial liabilities at amortised cost

Trade and other payables (Note 16) 210,255 - - - 210,255

Total financial liabilities 210,255 - - - 210,255

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

§ Market risk

Market risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. Market risk reflects

interest rate risk, currency risk and other price risks. The objective is to minimise market risk through managing and controlling these risks to

acceptable parameters, while optimising returns. The Company uses financial instruments in the ordinary course of business, and also incurs

financial liabilities, in order to manage market risks.

Price risk is the risk that the fair value or cash flows of a financial instrument will fluctuate due to changes in market prices. At 31 December 2021,

the valuation basis of the Company’s investments was valued at market value. This investment is driven by market factors and is therefore sensitive

to movements in the market. The Company relies on market knowledge of the Investment Manager, the valuation expertise of the third-party valuer

and the use of third-party market forecast information to provide comfort with regard to fair market values of investments reflected in the Financial

Statements. Refer to Note 18 for trading revenue sensitivities.

§ Interest rate risk

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The

Company is exposed to interest rate risk on its cash balances held with counterparties, bank deposits, loans receivable, advances to counterparties

and through loans to subsidiaries. Loans to subsidiaries carry a fixed rate of interest until repayment at the earlier of written demand from the lender

or 31 December 2030. The Company may be exposed to changes in variable market rates of interest as this could impact the discount rate and

therefore the valuation of the projects as well as the fair value of the loan receivables.

§ Currency risk

All transactions and investments during the current year were denominated in Pounds Sterling, thus no foreign exchange differences arose. The

Company does not hold any financial instruments at year end which are not denominated in Pounds Sterling and is therefore not exposed to any

significant currency risk. Subsidiary entities may, from time to time, incur expenditure in currencies other than Pounds Sterling.

§ Capital risk management

The capital structure of the Company at year end consists of equity attributable to equity holders of the Company, comprising issued capital and

reserves. The Board continues to monitor the balance of the overall capital structure so as to maintain investor and market confidence. The Company

is not subject to any external capital requirements.

20. Net Asset Value (NAV) per Ordinary Share

Basic NAV per Ordinary Share is calculated by dividing the Company’s net assets as shown in the statement of financial position that are attributable

to the ordinary equity holders of the Company by the number of Ordinary Shares outstanding at the end of the period. As there are no dilutive

instruments outstanding, basic, and diluted NAV per Ordinary Share are identical.

As at 31 December 2020

< 1

year

(£)

1 to 2

years

(£)

2 to 5

years

(£)

>5 years

(£)

Total

(£)

Financial assets

Cash and cash equivalents (Note 14) 110,967,025 - - - 110,967,025

Trade and other receivables (Note 15)** 89,902 - - - 89,902

Fair value through profit or loss:

Investment in subsidiaries* - - - 248,964,175 248,964,175

Total financial assets 111,056,927 - -

248,964,175 360,021,102

Financial liabilities

Financial liabilities at amortised cost

Trade and other payables (Note 16) 1,315,217 - - - 1,315,217

Total financial liabilities 1,315,217 - - - 1,315,217

*excludes the equity portion of the investment in subsidiaries (in 2020 equity investments were included due within one year, these are now

included in due more than five years as there is no set maturity)

**excludes prepayments and VAT

31 December 2021 31 December 2020

Net assets per statement of financial position (£) 511,671,041 358,890,410

Ordinary Shares in issue 437,842,078 348,556,364

NAV per Ordinary Share - Basic and diluted (pence) 116.86 102.96

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

21. Share capital

Share capital

The Company’s capital is represented by the Ordinary Shares, Share premium (until cancellation), Merger relief reserve, Capital reduction reserve,

Revenue reserves and Capital reserves.

Share premium

The surplus of net proceeds received from the issuance of new shares over their par value is credited to this account and the related issue costs are

deducted from this account. The reserve is non-distributable.

Merger relief reserve

The Merger reserve relates to shares issued for shares to acquire investments. This reserve is not distributable.

Revenue reserves

The Revenue net profit arising in the Statement of Comprehensive Income is added to or deducted from this reserve which is a distributable reserve.

Capital reserves

The Capital reserve comprises of increases and decreases in the fair value of investments held at the period end, gains, and losses on the disposal of

investments, transaction, and legal fees. The capital reserves are not distributable.

Capital reduction reserve

Following a successful application to the High Court and lodgement of the Company’s statement of capital with the Registrar of Companies in a prior

period the Company was permitted to cancel its Share premium account. This was completed on 13 February 2019 by a transfer of the balance of

£97,009,475 from the Share premium account to the Capital reduction reserve. The Capital reduction reserve is classed as a distributable reserve

and dividends to be paid by the Company may be offset against this reserve.

Ordinary

number

capital

(£)

premium

reserve

(£)

Merger

relief

reserve

(£)

Capital

reduction

reserve

(£)

Total

(£)

Allotted and issued share capital

As at 31 December 2020 348,556,364 3,485,564 251,601,260 13,299,017 64,123,617 332,509,458

Issue of Ordinary Shares of £0.01

and fully paid at £1.12 - 14 July 2021 89,285,714 892,857 99,107,143 - - 100,000,000

437,842,078 4,378,421 350,708,403 13,299,017 64,123,617 432,509,458

Share issue costs - - (1,649,683) - - (1,649,683)

Dividends paid - - - - (25,961,445) (25,961,445)

As at 31 December 2021 437,842,078 4,378,421 349,058,720 13,299,017 38,162,172 404,898,330

Ordinary

number

capital

(£)

premium

reserve

(£)

Merger

relief

reserve

(£)

Capital

reduction

reserve

(£)

Total

(£)

Allotted and issued share capital

As at 31 December 2019 (restated) 204,270,650 2,042,707 104,380,109 13,299,017 78,465,533 198,187,366

Issue of Ordinary Shares of £0.01

and fully paid at £1.04 – 5 March 2020 30,000,000 300,000 30,900,000 - - 31,200,000

Issue of Ordinary Shares of £0.01

and fully paid at £1.05 - 27 November 2020 114,285,714 1,142,857 118,857,143 - - 120,000,000

348,556,364 3,485,564 254,137,252 13,299,017 78,465,533 349,387,366

Share issue costs - - (2,535,992) - - (2,535,992)

Dividends paid - - - - (14,341,916) (14,341,916)

As at 31 December 2020 348,556,364 3,485,564 251,601,260 13,299,017 64,123,617 332,509,458

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

Share capital and Share premium account and Capital reduction reserve

On incorporation the Company issued 1 Ordinary Share of £0.01 which was fully paid up and 50,000 redeemable preference shares of £1 each which

were paid up to one quarter of their nominal value. These 50,000 redeemable preference shares were subsequently redeemed.

On 17 February 2020, the Board announced a non-pre-emptive placing of new Ordinary Shares at an issue price of 104.0p per Placing Share to fund

further pipeline acquisitions and provide increased general working capital. Further to that announcement, the Company announced on 3 March 2020,

the issue of 30mn Ordinary Shares raising gross proceeds of £31.2mn.

On 10 November 2020, the Company announced and published a prospectus in respect of, a share issuance programme for up to 250mn new Ordinary

Shares and on 25 November 2020 announced the successful raise of gross proceeds of £120mn through the issue of an initial tranche of 114,285,714

new Ordinary Shares at an issue price of 105p per share.

14 July 2021, the Company announced the successful raise of gross proceeds of £100mn through the issue of 89,285,714 new Ordinary Shares at an

issue price of 112 pence per Ordinary Share.

Dividends

Ordinary shareholders are entitled to all dividends declared by the Company and, in a winding up, to all of the Company’s assets after repayment of its

borrowings and ordinary creditors. Ordinary shareholders have the right to vote at meetings of the Company. All Ordinary Shares carry equal voting

rights.

22. Cash and non-cash flow items

The non-cash movements for the year ended 31 December 2021 relate to movement in the investments, these non-cash movements are reconciled

and discussed in Note 12.

23. Reserves

The Company and the Directors are not aware of any person who, directly or indirectly, jointly, or severally, exercises or could exercise control over the

Company. The Company does not have an ultimate controlling party.

Details of related parties are set out below:

All directors’ remuneration is short term salary.

The remuneration arrangements of Directors are disclosed in the Director’s Remuneration Report on pages 45 to 47.

Dividends paid by the Company to the Directors are disclosed in the Director’s Remuneration Report on pages 45 to 47.

No dividend amounts were payable as at 31 December 2021 (2020: none).

The aggregate fees of the Directors will not exceed £500,000 per annum. There are no performance conditions attaching to the remuneration of

the Directors as the Board does not believe that this is appropriate for Non-Executive Directors. The Directors are not eligible for bonuses, pension

benefits, share options, long-term incentive schemes or other benefits.

Period in relation to which dividend was

paid

Announcement

date

Ex-dividend date Payment

date

Amount per

Ordinary

Total amount

1 January to 31 March 2021 28 April 2021 13 May 2021 4 June 2021 1.75 pence £6,099,736

1 April to 30 June 2021 1 July 2021 8 July 2021 30 July 2021 1.75 pence £6,099,736

1 July to 30 September 2021 15 November 2021 25 November 2021 17 December 2021 1.75 pence £7,662,236

1 October to 31 December 2021 14 February 2022 3 March 2022 25 March 2022 1.75 pence £7,662,236

31 December 2021 31 December 2020

Directors’ remuneration 232,500 197,000

Employers NI 23,209 19,073

Total key management personnel 255,709 216,073

Notes to the Financial Statements - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

Loans to related parties

Loans receivable represent amounts due to the Company from its subsidiary and are disclosed in Note 12.

24. Capital commitments

As at 31 December 2021 the Company has no significant binding or conditional future capital commitments (2020: none).

25. Post balance sheet events

The Board of Directors announced the following:

§ On 14 February 2022, the Board approved the payment of an interim dividend in respect of Q4 2021 of 1.75 pence per Ordinary Share. It was

proposed that the Dividend would be paid on 25 March 2022 to the members whose names appeared on the Company’s register of members on

4 March 2022, with an ex-dividend date of 3 March 2022.

§ In January 2022, the Company issued a Letter of Credit to Sungrow Power UK Limited for an amount of £30,769,589 in relation to battery

purchases made by subsidiaries of MidCo.

§ On 24 February 2022, Russia began an unlawful invasion of Ukraine: this has caused significant volatility within the UK power market within

which the Company’s investments operate.

There were no further events after the reporting date which require disclosure.

Principal advanced

(£)

Interest accrued

(£)

Total loans

(£)

As at 31 December 2021 297,751,771 22,470,837 320,222,608

As at 31 December 2020 230,033,724 12,644,603 242,678,327

Notes to the Financial Statements - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

1) Dividend per Ordinary Share

Dividend per Ordinary Share is a measure to show the distributions made to shareholders during the year.

2) Ordinary Share price total return

Ordinary Share price total return is a measure of the return that could have been obtained by holding a share over the reporting period.

Alternative Performance

Measures

For the period from 1 January 2021 to 31 December 2021

Dividend period: 12 months to 31 December 2021 Dividend paid per share

(£)

Number of shares on

dividend payment date

Total dividend paid

(£)

Q1 2021 (declared 28 April 2021) 0.0175 348,556,364 6,099,736

Q2 2021 (declared 1 July 2021) 0.0175 348,556,364 6,099,736

Q3 2021 (declared 15 November 2021) 0.0175 437,842,078 7,662,236

Q4 2021 (declared 14 February 2022) 0.0175 437,842,078 7,662,236

0.0700 27,523,944

Dividend period: 12 months to 31 December 2020 Dividend paid per share

(£)

Number of shares on

dividend payment date

Total dividend paid

(£)

Q1 2020 (declared 11 May 2020) 0.0175 234,270,650 4,099,736

Q2 2020 (declared 1 September 2020) 0.0175 234,270,650 4,099,736

Q3 2020 (declared 27 October 2020) 0.0175 234,270,650 4,099,736

Q4 2020 (declared 19 February 2021) 0.0175 348,556,364 6,099,736

0.0700 18,398,944

12 months to

31 December 2021

(pence)

12 months to

31 December 2020

(pence)

Share price at end of the year 130.50 112.50

Dividends paid from inception to end of the year 16.75 9.75

Dividend reinvestment impact 4.26 0.88

Share price at initial public offering (100.00) (100.00)

Ordinary Share price total return since inception 51.51 23.13

Ordinary Share price total return since inception % 51.5% 23.1%

Gresham House Energy Storage Fund plc (GRID)

3) Net asset value (NAV) per Ordinary Share

4) NAV per Ordinary Share total return for the period

NAV per Ordinary Share total return is a measure of the success of the Investment Manager's strategy to grow the NAV, showing how the NAV has

changed over a period of time, considering both capital returns and dividends paid to shareholders.

5) Gross asset value (GAV)

GAV is a measure of the total value of the Company's assets.

12 months to

31 December 2021

12 months to 31

December 2020

NAV at end of the year £511,671,041 £358,890,410

Ordinary Shares in issue 437,842,078 348,556,364

NAV per share (pence) – Basic and diluted 116.86 102.96

12 months to

31 December 2021

(pence)

12 months to 31

December 2020

(pence)

NAV per Ordinary Share at end of the year 116.86 102.96

Dividends paid from inception to end of the year 16.75 9.75

Dividend reinvestment impact 2.51 0.42

NAV per Ordinary Share at end of the year including dividend reinvestment 136.12 113.13

NAV per Ordinary Share at beginning of the year including dividend reinvestment (113.13) (104.36)

NAV Total Return for the year 22.99 8.77

NAV per Ordinary Share total return for the year 20.3% 8.4%

12 months to

31 December 2021

(£'000)

Year ended

31 December 2020

(£'000)

Total assets reported in the Company at end of period 511,881 360,206

Debt held by intermediate holding company (A) - 14,935

GAV (B) 511,881 375,141

Gearing as defined by the Company (A / B) 0.0% 4.0%

Alternative Performance Measures - year ended 31 December 2021

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

6) Ongoing charges figure (OCF)

OCF measures the Company's recurring fund management costs incurred during the year expressed as a percentage of the average of the net assets

at the end of each quarter during the year.

7) Operational Dividend Cover

Operational Dividend Cover is a measure to demonstrate the Company's ability to pay dividends from the underlying operating cash earnings

of its investments after accounting for external interest costs and operational costs of the Company but excluding transaction costs and debt

arrangement fees.

8) Dividend yield

Dividend yield is a measure to show the dividend return received by shareholders for the year.

12 months to

31 December 2021

(£'000)

12 months to

31 December 2020

(£'000)

Fees to Investment Manager 4,053 2,400

Legal and professional fees 561 1,003

Other transaction fees (57) 310

Administration fees 312 237

Directors' remuneration 256 216

Audit fees 194 140

Other ongoing expenses 117 336

Total expenses 5,436 4,642

Non-recurring expenses not in OCF calculation (165) (1,608)

Total ongoing expenses 5,271 3,034

Average NAV for the year 429,192 240,820

Ongoing charges for the year 1.23% 1.26%

12 months to

31 December 2021

(£'000)

12 months to

31 December 2020

(£'000)

EBITDA of underlying group companies 42,522 15,615

Ongoing costs in the Company (5,271) (3,034)

External interest costs (1,405) (154)

Interest income 405 1,671

Net earnings for Operational Dividend Cover 36,251 14,098

Dividends declared by the Company for the year 27,524 18,399

Operational Dividend Cover 1.32x 0.77x

12 months to

31 December 2021

12 months to

31 December 2020

Dividend per share declared in respect of the period (pence) 7.00 7.00

Share price at end of period (pence) 130.50 112.50

Dividend yield for the period 5.4% 6.2%

Alternative Performance Measures - year ended 31 December 2021

Gresham House Energy Storage Fund plc (GRID)

Non-Executive Directors

John Leggate - Chair

Duncan Neale

Catherine Pitt

David Stevenson

Registered office

The Scalpel

18th Floor

52 Lime Street

London

EC3M 7AF

Investment Manager and AIFM

Gresham House Asset Management Limited

5 New Street Square

London

EC4A 3TW

Corporate Broker and Financial Advisor

Jefferies International Limited

100 Bishopsgate

London

EC2N 4JL

Company

Information

Tax Advisor

Blick Rothenberg Chartered Accountants

16 Great Queen Street

London

EC4V 6BW

Independent Auditor

BDO LLP

55 Baker Street

London

W1U 7EU

Administrator and Secretary

JTC (UK) Limited

The Scalpel

Floor

52 Lime Street

London

EC3M 7AF

Registrar and Receiving Agent

Computershare Investor Services plc

The Pavilions

Bridgewater Road

Bristol

BS13 8AE

Legal Adviser

Eversheds LLP

1 Wood Street

London

EC2V 7WS

Depositary

INDOS Financial Limited

54 Fenchurch Street

London

EC3M 3JY

Investment Valuer

Grant Thornton LLP

30 Finsbury Square

London

EC2A 1AG

Ticker: GRID

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)

Glossary

Asset Optimisation (Trading)

Asset Optimisation involves buying and selling

electricity in order to capture a spread between

the high and low electricity prices on any

given day. This can be done via one or more

market mechanisms, hence the expression

‘‘Asset Optimisation’’ and includes trading in the

wholesale market and offering the battery to

National Grid via the Balancing Mechanism.

Asymmetric

An asymmetrical grid connection is where the

import and export capacities are different.

AUM

Assets Under Management: the total net assets

of the Company.

Balancing Mechanism (BM)

A tool used by the ESO to balance the electricity

supply and demand close to real time. The BM

is used to balance supply and demand in each

half hour trading period of every day. Where the

ESO predicts that there will be a discrepancy

between the amount of electricity produced

and the level of demand during a certain

period, they may accept a 'bid' or 'offer' to either

increase or decrease generation (or even

increase consumption in the case of storage

assets). Sites must be registered in the BM to

receive such actions but once registered they

are able to set their own prices for being used.

Balancing services

National Grid procure services to balance

demand and supply and to ensure the security

and quality of electricity supply across Britain's

transmission system. These include:

§ Black Start

§ Demand side response

§ Dynamic Containment (DC)

§ Enhanced Frequency Response (EFR)

§ Firm Frequency Response (FFR)

§ Optional Downward Flexibility Management

(ODFM)

§ Short term operating reserve (STOR)

https://www.nationalgrideso.com/balancing-

services

Black start

A total or partial shutdown of the national

electricity transmission system (NETS) is an

unlikely event. However, if it happens, National

Grid are obliged to make sure there are

contingency arrangements in place to ensure

electricity supplies can be restored in a timely

and orderly way. Black start is a procedure to

recover from such a shutdown.

https://www.nationalgrideso.com/balancing-

services/system-security-services/black-start/

Capacity Market (CM)

The income received by generators to ensure

generation capacity is available to meet short

falls.

Combined Cycle Gas Turbine (CCGT)

Energy generation technology that combines

a gas-fired turbine with a steam turbine. The

design uses a gas turbine to create electricity

and then captures the resulting waste heat

to create steam, which in turn drives a steam

turbine.

Curtailment

Large wind farms are connected to the UK’s

high-voltage network and National Grid

balances electricity supply and demand. As

demand rises and falls during the day, electricity

supply mirrors these peaks and troughs.

National Grid accepts bids and offers from

electricity generators to increase or decrease

electricity generation as and when required.

As such it may mean that there are times when

generators are paid to curtail their output

(constraint payments).

https://www.nationalgrideso.com/news/

grounds-constraint

Operational Dividend Cover

Operational Dividend Cover for the purpose

of this report refers to a calculation for the

ratio between net earnings of the underlying

investment portfolio in the review period and

dividends paid in respect of the same review

period.

This measure aims to add clarity on the

Company's ability to pay dividends from the

earnings and cash generation of its underlying

investments after deducting Company costs.

This measure includes the EBITDA of underlying

group companies less Company and holding

company costs (excluding capital related

costs and debt arrangement fees but including

external interest expense).

Dividend Yield

The annual dividends expressed as a

percentage of the current share price.

EBITDA of underlying group companies

EBITDA includes earnings before interest, tax,

depreciation and amortisation and includes

liquidated damages earnt by SPVs. Earnings are

calculated on an accruals basis and therefore

only SPVs which were owned in the accounting

period have their earnings included here.

Transactions completing after the period will

have locked box income recognised once the

transaction is completed.

Electricity System Operator (ESO)

Refers to National Grid ESO. The ESO is

responsible for ensuring Great Britain has the

essential energy it needs so that supply meets

demand on the electricity system every second

of every day.

https://www.nationalgrideso.com/

Frequency Response (FR) services

A subset of Balancing Services which relate

to services performed by batteries to manage

the frequency on the electricity system. This

includes the following services:

§ Dynamic Containment (DC)

§ Enhanced Frequency Response (EFR)

§ Firm Frequency Response (FFR)

§ Optional Downward Flexibility Management

(ODFM)

https://www.nationalgrideso.com/balancing-

services

Gross Asset Value (GAV)

Gross Asset Value is the total value of the

investments and cash under the management

of the Company including debt held by the

MidCo.

Gresham House Energy Storage Fund plc (GRID)

International Financial Reporting Standards

(IFRS)

International Financial Reporting Standards

are accounting standards issued by the

International Accounting Standards Board

(IASB) and have been applied by the Company in

the preparation of the financial statements.

Liquidated Damages (LD)

Liquidated damages are presented in certain

legal contracts as an estimate of losses to one

of the parties. It is a provision that allows for

the payment of a specified sum should one of

the parties be in breach of contract. Liquidated

damages are meant as a fair representation of

losses in situations where actual damages are

difficult to ascertain.

Liquidated damages are often included

in specific contract clauses to cover

circumstances where a party faces a loss from

an asset. The Company typically uses these in

EPC arrangements to protect earnings from an

asset in the result of delays to construction but

are also common in other contracts such as for

O&M arrangements.

Load factors

The load factor is usually expressed as the

percentage of the actual output of a generator

compared to its theoretical maximum output in

a year.

Locked box income

On some acquisitions the Company agrees a

date at which the benefit of any subsequent

earnings then flow to the acquirer. This date

agreed is referred to as the Locked box date.

Earnings flowing to the acquirer are referred

to as the Locked box income. This mechanism

is often used by the Company and aims to

prevent the Company losing out on value as a

result of delays to transactions completing. The

period to which Locked box income is earnt

varies between transactions. Each of the new

acquisitions in January 2021 had a Locked box

date in 2020 meaning the Company achieved

benefits of earnings related to 2020 (through

higher working capital in the SPVs) once the

acquisitions completed in 2021.

Net Asset Value (NAV) per Ordinary Share

The total net assets in the Company divided by

the total number of Ordinary Shares in issue as

at 31 December 2021.

NAV Total Return

A measure showing how the NAV per share has

performed over a period of time, considering

both capital returns and dividends paid to

shareholders.

NAV Total Return is shown as a percentage

change from the start of the period. It assumes

that dividends paid to shareholders are

reinvested at NAV at the time the shares are

quoted ex-dividend.

NAV Total Return shows performance which is

not affected by movements in discounts and

premiums (share prices). It also considers the

fact that different investment companies pay

out different levels of dividends.

Ongoing Charges Figure (OCF)

The Ongoing Charges Figure includes all

charges and costs incurred by the Company

which relate to the ongoing operation of the

Company. This includes management fees,

administration fees, audit fees, Director’s

remuneration, depositary services costs and

other similar costs. It excludes capital costs

and costs of raising new capital. The Ongoing

Charges are then divided by the weighted

average NAV and annualised.

Ordinary Share

Share in the Company with a nominal value of

1p.

Ordinary Share price total return

A measure showing how the share price has

performed over a period of time, considering

both capital returns and dividends paid to

shareholders.

Share price total return is shown as a

percentage change from the start of the period.

It assumes that dividends paid to shareholders

are reinvested in the shares at the time the

shares are quoted ex dividend.

Share price total return shows performance

which is affected by movements in discounts

and premiums. It also considers the fact

that different investment companies pay out

different levels of dividends.

Seed Assets

The assets acquired at IPO known as

Staunch, Littlebrook, Lockleaze, Rufford and

Roundponds.

Site uptime

Calculation for the average level of availability

in the portfolio or for an asset in Frequency

Response Services. This is calculated by taking

the average MWs available in each period as a

percentage of total capacity contracted.

Symmetrical

A symmetrical grid connection is where the

import and export capacities are the same.

System inertia

Inertia works to keep the electricity system

running at the right frequency by using the

kinetic energy in spinning parts in power plant

generator turbines. When needed, the spinning

parts in generator turbines can rotate slightly

faster or slower to help balance out supply and

demand. The more turbines you have, the more

energy there is in the system and the greater

the system inertia, which helps to stabilise the

frequency.

https://www.nationalgrideso.com/information-

about-great-britains-energy-system-and-

electricity-system-operator-eso/technical-

terms-explained

TRIADs

TRIADs are defined as the three half-hours of

highest demand on the Great Britain electricity

transmission system between November

and February each year, the TRIADs are part

of a charge-setting process. This identifies

peak electricity demand at three points

during the winter in order to minimise energy

consumption.

However, TRIADs must be at least ten days

apart. This is to avoid all three potentially

falling in consecutive hours on the same day,

for example during a particularly cold spell of

weather.

https://www.nationalgrideso.com/news/triads-

why-three-magic-number

Underlying project revenues

The revenue earned by the operational SPVs

ultimately earned by the Company from

commercial operations from all sources. If

liquidated damages are payable to this SPV then

these are included.

VRLA

Valve-Regulated Lead-Acid

Annual

Report

Additional

Information

Financial

Statements

Gresham House Energy Storage Fund plc (GRID)