Gore Street Energy Storage (GSF) shares fell today after the investment trust’s new board unveiled a larger than expected fall in the battery portfolio after updating revenue forecasts.

Net asset value (NAV) slid 14.8%, or 13p, to 74.9p per share in the fourth quarter of the company’s financial year, taking the total decline for the 12 months to 31 March to just over 27%.

Annual results showed that reductions in the independent revenue forecasts it takes were responsible “materially lower” expectations, accounting for 19p, or over two thirds of the 27.9p NAV per share slide over the year which knocked £95.8m off the valuation.

Another 6.1p per share, or £30.9m, hit came from revenues for the year falling below previous forecasts driven by competition and “oversaturation” of battery energy storage systems (BESS) in its UK, California and Texas markets.

Angus Lennox, who took over as chair this year, said this had been a “challenging period” but that the board had taken “decisive action”, revising strategy in March, reviewing service providers and conducting “benchmarking exercises” across the business to assess performance.

“We are now firmly focused on overseeing the disciplined execution of the company’s revised strategy to improve value for all shareholders,” said Lennox, who was appointed after pressure from activist shareholders RM Funds and Saba Capital.

GSF shares fell 5.5%, or 2.7p, to 46.6p as investors assessed the impact on the quarterly dividends the company said in March would rise to 1.75p per share with asset sales beefing up cashflow. This leaves the shares on a 37.5% discount, having fallen 16% this year.

Investec analyst Ben Newell said: “While the board expects a further update later this summer, it has acknowledged that failure to complete an asset sale before the next quarterly dividend declaration (expected in mid-September) would likely result in the 1.75p/share distribution target being missed and the continuation vote being brought forward. In our view, the revised strategy leaves little room for error.”

Including dividends, shareholders have lost 34% over five years. This is despite the growing importance of battery storage for the rollout of renewable energy as the world addresses climate change caused by the burning of fossil fuels.

Our view

Matthew Read, senior analyst at QuotedData, said: “Shareholders will be disappointed with these results, especially after the review in March set out a more positive picture. While the fall in NAV instantly grabs your attention, however, that is the end result of forecasted cashflows in a market that has many moving parts and has been quite hard to predict. More concrete is the fall in revenue per MWh in Great Britain and Ireland, which are GSF’s highest revenue markets, and continued very low revenues from its Texan assets.

“GSF’s revenue per MWh is a lot lower than at Gresham House Energy Storage (GRID), but that reflects GSF’s bias to one-hour duration assets in GB; its augmentation projects that are underway are designed to address that.

“Revenue figures reflect the balance of storage to variable generation from renewable assets. In Great Britain, a lot of new storage capacity is coming onstream, which could be worrying, but there is a lot of new solar and wind planned too, so this may just be a short-term problem, although the long-term picture is hard to discern.”

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