Shareholder discontent is rising at Gore Street Energy Storage (GSF) after the battery fund cut its dividend and was requisitioned by one of its long-term shareholders, RM Funds, to call a general meeting and overhaul its board with a view to seeking a merger.

Shares in the £323m investment company tumbled 7% to 59p after the battery fund reset its dividend to 3p a year, or 0.75p a quarter, for the next two years with a review to determine the payout beyond that point.

This is down from the 1p a quarter the company paid in 2024/25 4p, putting the shares on a 9.5% yield, with the prospect of a 3p special dividend in the second half of this year taking the total to 7p.

The dividend cut came as the company’s annual results for the 12 months to 31 March showed operating revenue fell to £35.3m from £41.4m, although capacity increased to 408.9 MW from 311.5 MW in the previous year.

Analysts said the decline in earnings to £21m from £28.4m left the dividend only covered by a quarter, making a cut in distribution inevitable.

There was further disappointment at the news that the company would hold back £18m-£22m of proceeds from the sale of investment tax credits from its “Big Rock” asset in California to upgrade three of its UK battery projects from one hour to two hour duration, a more profitable configuration.

“The board believes this is a compelling example of how the company can continue to extract value from its existing portfolio while maintaining capital discipline,” the chair, Patrick Cox, said.

The decision follows an independent review of the company’s strategic options by Alexa Capital.

The review, which the company said was broad, exploring M&A, debt repayment and growth options, was continuing, disappointing Stifel analyst Will Crighton who said, “we were hoping full clarification on strategy would have been provided in these accounts”.

RM wants more rapid review

In this sense the requisition filed by RM Funds, an Edinburgh-based real asset and debt investor, is well timed. It wants to appoint two directors to the battery fund’s board, including a new chair, to oversee the disposal of non-core assets from its international portfolio and seek a merger.

RM Funds, which holds a stake in GSF through three mandates, including the VT RM Alternative Income and SVS RM Defensive Capital funds, said it had engaged privately with the GSF board for more than six months over its concerns about sustained underperformance, a prolonged share price discount, governance and strategic direction.

After a proposal to “refresh” the board’s non-executive directors was rejected, RM Funds decided it should go public. 

It is calling a general meeting so shareholders can replace Cox and non-exec Caroline Banszky with Brett Miller, a restructuring specialist who is currently overseeing the wind-down of Ecofin US Renewables (RNEW), and Ian Marcus Dixon, a management consultant.

RM Funds, which also runs the RM Infrastructure Income (RMII) investment company, itself in wind-down, said: “Over the past three years, GSF’s share price has declined by more than 47% and continues to trade at a discount of approximately 37% to net asset value (NAV). RM Funds believes this persistent discount reflects the subscale nature of the company, the complexity and fragmentation of its geographically diverse portfolio, and illiquidity in its shares.”

In a statement released after the market closed yesterday, it said there was now a “compelling opportunity to divest non-core assets, return surplus capital to shareholders, and pursue a merger with a peer or a sale of the company. 

“These actions could create a scaled, liquid platform more attractive to investors. The backdrop is favourable, with over 25 UK battery storage (BESS) transactions completed in the first half of 2025, underlining strong market appetite and the potential for significant value realisation.”

Shake-up needed

QuotedData senior analyst Matthew Read said GSF had not been as proactive as Gresham House Energy Storage (GRID), its sole UK-focused rival following the acquisition of Harmony Energy Income by Foresight funds this year.

“Prior to this morning’s results announcement, we would have argued that RM Funds needed to set out a stronger case as to why restructuring the board will help at this stage. However, with the dividend cut announced in the results this morning, the gap between GSF and its peers appears to be growing. We think that beleaguered shareholders will be more open to a shake up after the latest news.”

In response the board of GSF said it was verifying the validity of the requisition and carefully evaluating its contents. “The board firmly believes in the strength of the company and its governance and will continue to focus on delivering positive total shareholder returns for all its investors. Shareholders are advised to take no action at this stage and a further announcement will be made in due course.”

The challenge from RM Funds threatens to disrupt the turnaround GSF has attempted since its sector was hit by a damaging slump in UK revenues over a year ago. Launched in 2018, the fund is run by Alex O’Cinneide and Suminori Arima at Gore Street Capital. Unlike GRID, it has an international portfolio with operations in Ireland, Germany and the US as well as the UK.

Since launch the company said it had achieved a total return on net assets of 48%. The shares, while well off their high three years ago, had rallied 32% this year before today.