Shares in ‘bid target’ Gresham House Energy Storage (GRID ) have spiked after the battery fund revealed current revenues are running at double the level of January when a trading slump forced a scrapping of the dividend.

The shares rose nearly 9%, or 4.2p, to 51.2p yesterday and have edged to 51.5p today after the company rushed out an update, preferring not to wait until annual results expected on Monday after broker Stifel on Tuesday flagged the downtrodden stock as a potential bid target. 

The company, whose shares have halved this year but rallied 22% in the past month, said it had seen a 75% leap in operational revenues from £43,800 per megawatt per year in January to £77,900 MW per year in the first two weeks of April.

The reasons for the resurgence are threefold: the launch of the balancing reserve (BR), which allows battery systems to participate in the grid’s balancing market; the National Grid’s electricity system operator (ESO) replacing the ‘15-minute rule’ to 30 minutes for batteries, leading to a greater use of batteries in grid balancing; and improvements in wholesale market price spreads.

The summer tends to present better opportunities for wholesale trading as the rise of solar generation means negative prices in the middle of the day, as well as overnight, which creates two distinct trading cycles.

‘In summary, merchant revenues are inherently volatile, and the portfolio will experience periods of higher and lower revenues. [GRID] is pleased to see the recovery in trading opportunity since March 2024 and is encouraged by the progress being made by the ESO through its balancing programme to drive further utilisation of [battery] assets,’ the company said.

These revenues were driven from several streams, including the balancing mechanism, capacity market and wholesale trading, with the 49% of the portfolio not participating in the balancing market achieving higher revenues it said, although these are not public.

However, GRID noted that while recent improvements were promising, revenues remained below long-term forecasts. It anticipated further recovery as the ESO progresses through its balancing programme in 2024 and 2025.

The duration of GRID’s £240m operational portfolio is projected to increase from 1.2 hours to 1.6 hours by the end of 2024, which should help to net higher revenues, while the use of batteries in the BM will also become more common as ‘skip rates’ reduce.

On Tuesday Stifel analyst Sachin Saggar upgraded the fund from ‘neutral’ to ‘positive’ on the basis that it could become a bid target.

In response to the update he estimated annual pre-tax profits would total £26m before listed company expenses, based on the revenue data, which will improve as more development projects come online.

Deutsche Numis’ Andrew Rees said the shares’ 60% discount was close to 50% less than the cost of replacing the portfolio of batteries. ‘A more meaningful data point would be the pricing achieved on the possible sale of a portfolio of operational assets, which GRID has previously guided to exploring.