Gresham House, the UK’s largest utility-scale battery energy storage fund, remains optimistic about its future prospects despite a significant downturn in earnings revealed in its audited annual results for the year ended December 31, 2023.
According to the figures released, the fund’s EBITDA for the underlying portfolio plummeted to £25.8 million in 2023 from £48.8 million in the previous year, marking a 47% year-over-year decrease. This decline reflects the challenging revenue environment encountered by battery operators throughout 2023.
Furthermore, the Net Asset Value (NAV) per share dropped to 129.07p, down 17% from the previous year’s 155.5p. The fund attributed this fall to significant reductions in revenue forecasts for the years 2024 to 2026, as it anticipates a gradual improvement in the revenue environment.
While Gresham House announced a dividend of 5.51p per share for 2023, it stated that no dividend would be paid in 2024. However, the company aims to resume dividend payments from 2025 onwards, aiming to deliver an attractive dividend from distributable cash-flow after debt covenant testing.
Despite the challenging start to 2024, Gresham House reported improved trading conditions in January and February, with revenue rates increasing by 33% and 97% for the operational portfolio since February for March and the first half of April, respectively. This improvement is attributed to enhanced utilization of Battery Energy Storage Systems (BESS) by the GB Electricity System Operator (ESO) and improving wholesale market spreads as renewable penetration rises.
However, the company acknowledges the inherent volatility of merchant revenues and anticipates further revenue recovery as ESO progresses through its Balancing Programme in 2024 and 2025.
Looking ahead, Gresham House plans to expand its operational portfolio to 1072MW 1696MWh through the completion of remaining projects, including new schemes and extensions. This expansion aligns with the company’s goal of reaching 1GW of operational capacity in 2024.
Despite the recent challenges, John Leggate, Chair of Gresham House Energy Storage Fund plc, remains optimistic about the long-term prospects of the BESS sector, emphasizing its resilience and the growing demand driven by rapid deployment of renewable generation.
Ben Guest, Fund Manager of Gresham House Energy Storage Fund and Managing Director of Gresham House New Energy, echoed this sentiment, highlighting the fundamental strength of the business case and the role of BESS in balancing the increasingly volatile electricity supply.
In conclusion, despite short-term setbacks, Gresham House remains committed to its growth trajectory, leveraging its construction program and scale to increase earnings potential and resume dividend payments in the future, supported by the continued expansion of renewable energy penetration.