Gresham House Energy Storage Fund has provided a trading update ahead of the publication of its audited annual results in April 2024.
The battery asset owner continues to be impacted by the weak revenue environment, due to a combination factors.
These include batteries still being under-utilised in National Grid ESO’s Balancing Mechanism (BM), the continued excessive use of legacy gas-fired electricity generation by ESO to provide the BM with flexible generation, in turn causing oversupply in the wholesale electricity market, reducing the revenue opportunity for BESS, and the slower than expected pace of commissioning of new projects to date, due to elongated grid connection times.
Notwithstanding challenges around the completion of connection works at certain projects, Gresham House Energy Storage Fund remains on target to reach 1072MW in total operational capacity (currently 740MW) and intends to complete a number of extensions to project durations in 2024, taking the average project duration to 1.6 hours from 1.2 hours, doubling the number of MWh installed over the course of the year.
In light of the uncertainties and challenges mentioned above, the board and manager’s aim is to put the company in the strongest possible position, to ensure it remains cash generative as it manages its way through the current low revenue backdrop and make certain that revenue accretive projects get commissioned during 2024.
In 2024, Gresham House Energy Storage Fund intends to solely focus on completion of its 2023 pipeline projects comprising of a further 332MW, all of which are constructed and awaiting completion of grid connection related works, together with the duration extensions already committed to, given the potential for this to meaningfully increase the earnings capacity of the portfolio.
A significant amount of this capex is expected to be financed by cash on hand, which stood at in excess of £40m as at 31 December 2023.
Given the recent difficult revenue environment, the Board has decided not to declare a dividend for Q4 2023.
In terms of the dividend for 2024, if the current revenue environment endures, it will be challenging to generate the cash required to cover the dividend this year and, as such, the board intends to recalibrate the Company’s dividend target for 2024, as well as the dividend policy on an ongoing basis to better reflect the predominantly merchant nature of the company’s revenues.
Noting the recent sharp decline in the company’s share price, the board confirms its intention to commence a share buyback programme.
The fund also intends to enter into discussions with its lenders to seek certain amendments to optimise its debt facility, which may include a reduction in the size of the facility.
In terms of recent construction progress, the 50MW/50MWh West Didsbury project has been commercially operational since December 2023.
In addition, the 50MW/76MWh York project was energised in mid-January 2024 and is expected to be revenue-generating in February 2024.