Delays in National Grid modernising its control room have hit Gresham House Energy Storage (GRID ) which has reported a 3.5% fall in net asset value and lower dividend cover as a result of a sharp decline in revenues.

In a half-year trading update, GRID said after budget-beating revenue generation in the past two years, income had fallen in the six months to 30 June. This was due to reduced consumer demand combined with an excess of suppply from the rapid rollout of renewables and a slowdown in the decommissioning legacy power stations. 

Exacerbating the situation, GRID said, was National Grid’s inability to make full use of battery energy storage systems (Bess) in its balancing mechanism (BM) after failing to complete the modernisation of its control room.

‘Instead, despite being cheaper and lower-carbon assets, batteries are consistently skipped over in favour of assets such as fossil fuel gas plants. As such, all GB Bess are earning less revenue than the sold from the BM at this time,’ it said.

Although GRID expects the fluctuations in supply and demand to normalise and remains ‘very positive’ about the fundamental outlook for its market, nevertheless, the decline in revenue forecasts had knocked 15.5p from its net asset value (NAV) per share in the second quarter. 

After payment of the quarterly dividend, overall NAV per share fell 9.95p from 156.61p to 146.66p in the three months to 30 June, with the impact from the revenue shortfall offset by construction projects becoming operational, higher inflation assumptions and new capacity market contracts.

Dividend cover for the 5.5% yielder fell to 0.6 times in the first half but is expected to rise significantly and reach parity once pipeline projects have been completed and switched on.

NG’s Electricity System Operator (ESO) had committed to resolving its problems with the launch of a new trading platform in December, GRID said. 

Chairman John Leggate said: ‘We are fully engaged with the Bess industry to ensure that National Grid ESO is taking every step possible to adhere to its promised timeline’. Meanwhile, the company’s US business, for which GRID raised £50m from investors, was making progress with construction expected to start early next year.

Gresham House fund manager Ben Guest said: ‘We therefore believe the company is set up for a powerful recovery.’

Peel Hunt analyst Markuz Jaffe said the slump in dividend cover was disappointing but it was good to see the manager’s confidence that it would be repaired this year. ‘We would welcome greater transparency around cash flow generating but note that we expect GRID to publish its interim results later this month which should hopefully provide greater detail.’ 

GRID shares fell 2% to 130.4p on a 16.7% discount to NAV.