In a stock exchange notice today (2 February), the trust said it had decided not to declare the 2p dividend for three months to 31 January 2024, given the persistent weakness in the revenue environment for batteries in the UK.
“Battery energy storage system revenues for the year ended 31 October 2023 were markedly lower than revenue generated in the same period in 2022,” the board said.
“While a reduction from the remarkable highs of 2022 was expected and built into third-party revenue forecasts, the scale and the speed of the reduction has exceeded market expectations.”
Gresham House Energy Storage scraps Q4 dividend and outlines share buyback plans
The directors said the trust’s ambition to pay an annual 8p dividend remains, however, in the immediate term, the board is implementing steps including “one or more asset sales” and a restructuring of its debt facility to stabilise the position of trust.
Any cash proceeds from asset sales will be used to reduce gearing and then to fund future dividend distributions for FY24 and FY25, the board added, noting that any funds available after the payment of dividends could be used to repurchase shares.
The suspension of the quarterly dividend follows a similar move from Gresham House Energy Storage on Thursday (1 February), which also cited the continued weak revenue environment for GB battery storage assets, as did Gore Street Energy Storage.
Jefferies equity analysts Fiona Huang and Matthew Hose argued that the challenging revenue conditions for GB batteries throughout 2023 has led to all three battery storage trusts being unable to cover their dividends, with the strain on revenues expected to persist until the end of 2024.
According to the Association of Investment Companies, HEIT is currently trading at a 66.3% discount to net asset value.
Its share price has slumped over 47% in the past month, and it is down 18% so far today, AIC data also shows.
Other investment trusts in the sector, such as GRID and Gore Street Energy Storage are also running at steep double-digit discounts. GRID is trading at a 64.9% discount, while Gore Street’s discount stands at 39.6%.
Gresham House Energy Storage commences share buyback programme
HEIT noted that its operational free cash flow should increase over the course of 2024, as the fund’s remaining three projects complete construction and begin operations, increasing the portfolio’s operational capacity by 30%.
Despite the recent weak revenue environment during 2023, the board noted that discount rates applied to its “operating” and “under construction” assets remained stable.
“The investment adviser continues to opine, based upon its own enquiries and intelligence gathered from other industry stakeholders, that there remains a high level of appetite amongst private investors for BESS assets,” the board added.
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