Gresham House Energy Storage Fund (GRID ) has scrapped its fourth quarter dividend, blaming grid connection delays and under-utilisation of battery balancing mechanism for falling UK revenues.

In a fourth quarter update, the company also said the ‘continued excessive use’ of legacy gas-fired power stations was responsible for the fund’s lack of cash generation to cover its payout to shareholders.

With the revenue outlook for 2024 ‘challenging’, the quarterly dividend will be reset with further details announced at the annual results in April.

In response to a sharp decline in the share price, which fell 47% in January leaving the stock on a 57% discount to net asset value (NAV) and 11% yield, the company will begin share buybacks. The value of these would not initially exceed the cut in the dividend, it added.

The company said it remained on target to increase its operating capacity from 740MW to 1,072MW this year and would focus on completing the 332MW 2023 pipeline, a ‘significant’ part of which could be funded by £40m of cash on its balance sheet.   

It is in talks with its lenders about lowering its £335m debt facility, on which it was £110m drawn in December, given the fund’s reduced need for borrowing and requirement to cut costs and conserve cash.

Chair John Leggate said the UK’s need for more energy storage was as clear as ever but greater use of balancing mechanisms like GRID’s was required. He said the decision to cut the dividend and reallocate capital had been ‘very carefully considered’ by the board, adding:

‘The current level of the share price represents the most compelling historic opportunity to invest capital in GRID’s shares, and to enhance net asset value per share. It is for these reasons that, in parallel with today’s dividend announcement, we aim to commence a share buyback.’

In early trading today the shares dropped 4.4p, or 7.5%, to 53.6p.

More to follow.