Gresham House, the UK's largest utility-scale battery energy storage fund, is setting its sights on future growth prospects following a dip in earnings, as revealed in its audited annual results for the year ended December 31, 2023.
The figures unveiled a 47% year-over-year decrease in EBITDA for the underlying portfolio, totaling £25.8 million compared to £48.8 million in the previous year. This downturn reflects a challenging revenue environment for battery operators in 2023.
Despite the setback, Gresham House remains optimistic about its long-term prospects, with the Net Asset Value (NAV) per share standing at 129.07p, down 17% from the prior year's 155.5p. The fund attributes this decline to adjustments made to revenue forecasts for 2024 to 2026, anticipating gradual improvement in the revenue environment.
While the fund announced a dividend of 5.51p per share in 2023, it foresees no dividend payment for 2024, aiming to deliver attractive dividends from distributable cash-flow after debt covenant testing from 2025 onwards.
Chair of Gresham House Energy Storage Fund plc, John Leggate, acknowledged the disappointment stemming from the decision not to pay dividends in 2024 but emphasized the strategic importance of prioritizing the completion of ongoing projects to maximize shareholder value.
Looking ahead, Leggate expressed optimism about the potential for revenue recovery, citing recent improvements in market fundamentals and the rapid deployment of renewable generation, particularly offshore wind, which drives increased demand for battery energy storage.
Ben Guest, Fund Manager of Gresham House Energy Storage Fund and Managing Director of Gresham House New Energy, underscored the fund's commitment to capital deployment where it can generate maximum cash impact. He highlighted the completion of the construction program as pivotal in scaling up earnings potential, even in a reduced revenue environment, with a view towards reinstating dividend coverage as soon as feasible.
Guest emphasized the robust business case for battery energy storage systems (BESS) amid rising renewable penetration and increasing power price volatility. He reiterated BESS's efficiency in reserve and market balancing, positioning them as essential components in maximizing renewable energy utilization.
Gresham House anticipates reaching 1GW of operational capacity in 2024, leveraging an expanded grid capacity and portfolio duration to double its EBITDA generation potential. As market dynamics evolve, the fund remains committed to navigating challenges and capitalizing on opportunities for sustained growth in the energy storage sector.
