In a stock exchange notice today (16 February), the £798m trust said its 31 December NAV stood at 117.6p, reflecting a 1.8% fall over the quarter, and a flat NAV total return (-0.2%).
Key valuation movements included downward revisions to near-term power prices (-2.3p), although these were partially offset by the subsequent Electricity Generator Levy movement and favourable price fixes secured in the period (+0.8p).
Moreover, reductions in the gross margin forecasts for battery storage assets, prompted by independent consultants reappraising the available revenue opportunities, led to a -0.6p reduction to NAV per share.
Gresham House Energy Storage scraps Q4 dividend and outlines share buyback plans
Actual inflation being below forecast (-0.7p), other movements including actual performance (+2.6p), and dividends paid (-1.9p) also impacted portfolio valuation during the period.
From the all-time-highs of June and July 2022, the UK’s battery energy storage sector is undergoing a period of diminishing revenues, resulting from declines in Ancillary Service revenues that have not been offset by a pick-up in trading revenues.
The main hold-up is that the National Grid’s Energy System Operator (ESO) arm has not yet implemented the system changes needed to use batteries to absorb fluctuations in power supply and demand.
The National Grid’s ESO launched the Open Balancing Platform (OBP) in December to improve the utilisation of BESS on the GB network. However, the full plan will take until at least summer 2024 to roll out, with the pressure on revenues expected to persist until at least the end of the year.
As a result, the shares of the London-listed energy storage trusts Gresham House Energy Storage (GRID), Harmony Energy Income (HEIT) and Gore Street Energy Storage (GSF) have experienced severe volatility so far this year, with GRID and HEIT forced to cancel their Q4 dividends.
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“NAV weakness from softer power prices and inflation is in common with other renewable generation strategies to have reported 4Q23 NAVs,” said Markuz Jaffe, analyst at Peel Hunt.
“However, we highlight the revised battery storage forecasts from the independent consultants and the resulting impact (c.£4m) this has had on JLEN’s portfolio, which likely represents a meaningful percentage impact on the valuation of those assets given the relatively low weighting to battery storage in JLEN’s portfolio.”
As of 30 September 2023, JLEN’s portfolio includes one operational and three 50 megawatt Battery Energy Storage Systems (BESS) at varying stages of construction.
According to Numis, JLEN has previously paused development of its project rights in relation to two further battery storage assets, with analyst Andrew Rees noting the broker “would not expect these to be progressed until there is greater certainty over the revenue profile”.
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