BlackRock Energy and Resources Income (BERI) has published its annual results for the year ended 30 November 2025, during which it provided NAV and share price total returns of 15.3% and 14.0% respectively, both significantly ahead of the internal benchmark that BERI uses to evaluate its performance (performance is measured against a blended comparator index which comprised three indices – the MSCI ACWI Select Metals & Mining Producers Ex Gold and Silver IM (Mining), the MSCI World Energy Index (Traditional Energy) and S&P Global Clean Energy Index (Energy Transition) with a 40:30:30 mix of the 3 indices). Over the period the comparator index showed a return of 0.5% with the representative indices returning for Mining 0.6%, Traditional Energy 10.7% and Energy Transition -11.7% (all in sterling terms).

Within the mining portfolio, mergers and acquisitions activity was a driver of performance, with the acquisition of Filo Corp (by BHP and Lundin Mining), and of the Canadian steel company, Stelco (by its peer, Cleveland-Cliffs) both contributing significantly to returns. In the energy transition portfolio, the most significant contributions to performance came from industrial holdings, manufacturing energy efficiency products and electricity grid infrastructure equipment suppliers (key to support the growing demand for electricity generation).

Revenue income and dividend

BERI’s revenue earnings were 3.63p per share, a 17.3% decrease compared to the prior year (2023: 4.39p) as a result of lower dividend payments from a number of key mining companies, combined with an increased portfolio exposure to energy transition companies, which tend to have a lower yield. The board’s dividend target for 2024 was to declare quarterly dividends of at least 1.125 pence per share in the year to 30 November 2024, making a total of at least 4.50 pence per share for the year as a whole. The shortfall of 0.87 pence between earnings per share and the annual dividend target will be funded out of BERI’s revenue reserves (c£5m or 4.29 pence per share as at 30 November 2024). This target represents a yield of 3.7% based on the share price of 121.00 pence at 30 November 2024, and 3.8% based on the share price at the close of business on 28 January 2025.

BERI’s board has decided to maintain the annual dividend target of at least 4.50p per share for the year to 30 November 2025, which will be met through a mix of dividend income from the portfolio and revenue reserves, although this may be supported by the distribution of other distributable reserves if required.

Gearing

The maximum gearing used during the period was 14.8%, and the level of gearing at 30 November 2024 was 13.4%. Average gearing over the year to 30 November 2024 was 9.5%.

Discount management

Discounts across the closed end funds sector remained wide during the year, driven by ongoing uncertainty around interest rates, cost inflation and global economic growth, and heightened by an accelerated stream of retail selling in the run-up to the UK Budget (and expectations of higher capital gains taxes). Against this challenging backdrop, BERI’s shares started the year under review trading at a discount of 10.7% and ended the year at 12.1%, which compared to a closed end fund sector average (excluding 3i) of 15.5% and an average for the AIC Commodities and Natural resources peer group of 13.1% at 30 November 2024.

BERI’s board bought back 9,833,697 shares in the year at a cost of £11,288,000 and at an average discount of 10.8%. This discount management activity has continued since the year end, and up to 28 January 2025, the company repurchased 1,708,000 ordinary shares for a net consideration of £2,046,000 at an average discount of 10.3%. As at 28 January 2025 the company’s shares were trading at a discount of 8.3%. The board says that, despite consistent and targeted action in support of the share rating, it was disappointing to see the discount remain wide during the period.

Ongoing charges

As announced on 1 December 2024, BERI’s board agreed a reduced level of cap on its ongoing charges. Previously, BERI’s ongoing charges had been capped at 1.25% per annum of average daily net assets; with effect from 1 December 2024 this reduced to 1.15% per annum of average daily net assets.

Investment manager’s comments on portfolio performance and investment activity

“While the Company produced a positive NAV Total Return (with dividends reinvested) over the year, the second half of the Company’s year started in a challenging way as continued weak economic data from China was a headwind to the commodity complex and this was eventually reflected in lower share prices across the Mining sector. As the charts contained within the Annual Report and Financial Statements show, we reduced our exposure to mining companies early in the second half of the year compared to the first half, which cushioned the impact and we shifted the mix of exposure within the Mining sector, reducing industrial metals exposure, including copper, and adding to uranium and precious metals in the second half of the year.

“The biggest change in the portfolio over the course of 2024 though was the increased weight to the Energy Transition sector. A confluence of factors, including the anticipation of Trump winning the US election and his subsequent victory, caused some high-quality companies in this sector to become oversold and, in our view, attractively valued for the first time in several years. Also, the tough stance on China taken by both Parties in the US gave us conviction that the surge in US manufacturing investment spending was likely to continue and with that backdrop, we found a number of interesting Energy Transition investments related to greater electricity grid spend and data centre build outs.

“The Company’s NAV total return was 15.3% for the year to 30 November 2024, which was a strong outcome compared to the performance of the three main sectors that the Company invests in as shown in the chart contained within the Annual Report and Financial Statements.

“The key driver of the portfolio’s performance was stock selection, notably in the Mining and Energy Transition parts of the portfolio. On the Mining side, some of that positive stock selection came from two companies that were acquired for very different reasons, Filo Corp and Stelco. Filo Corp was acquired by BHP and Lundin Mining who wanted to secure exposure to the world class copper discovery that had been made in the Vicuña district of Argentina. Stelco was a Canadian steel company that for a number of years traded at a substantial discount to peers despite paying consistently strong and high dividends – whilst the market might not have recognised the value in the company, their peer Cleveland-Cliffs did recognise this when they acquired it in an all-cash deal at a substantial premium.

“On the Energy Transition side, it was our industrial holdings with exciting energy efficiency products that were strong contributors to returns along with companies such as Schneider Electric that produce the transformers that will be critical in building out the electricity grid infrastructure required to enable the growing capacity of electrical generation.

“Reflecting on some of the investment decisions that were detractors to performance during the year, a couple of items stood out. The first was a tough year for European utilities, with positions in RWE and EDP Renováveis both seeing meaningful declines in their share prices. The second challenging area was exposure to battery and battery materials companies. Whilst we have very limited exposure to electric vehicle (EV) manufacturers, the modest holdings we had in battery manufacturer Samsung SDI and lithium producer, Albemarle, both detracted from performance during the year.”

Income

“This year was a tougher year for income for the Company, primarily driven by lower dividend payments from a number of key Mining companies and the decisions during the year to increase the exposure to Energy Transition companies, which are usually lower dividend payers as they are often using a greater proportion of their earnings to reinvest back into growth projects.

“The Traditional Energy companies in the UK, such as Shell, continued to have a more fixed dividend policy, although the increase they announced this year was more modest than in the previous two years. However, with valuations where they are, we would expect a greater emphasis on capital allocation to buybacks from Conventional Energy and Mining companies in the year ahead.

“Option income remained at under 20% of total income generated by the Company during the year and at levels comparable to that in 2023. Also similar to 2023, there was a balance of call and put options written given the lack of overall market direction in our sectors and our preference to focus on stock specific opportunities. We reduced option writing in the last month or so of the year going into the US elections given it was a potentially binary event where investment outcomes were harder to predict.”

Mining

“This year followed a similar pattern to 2023 with the mined commodities experiencing a wide variety of returns with gold on one hand up over 30% and coking coal on the other down a little less than 30%.

“The commodity prices that came under the most pressure were the steel inputs of iron ore and coking coal as weaker Chinese demand and a lack of supply disruptions, that had been a feature of recent years, caused these markets to be soft. Looking forward in these markets, the outlook is improving. For iron ore, when the price touched around US$90 per tonne in August 2024, we started to see some higher cost supply curtailed, suggesting that this could be a reasonable longer-term price for the industry. On the coking coal side, the recent sale of some key producing assets led to a more consolidated industry which will, hopefully, bring supply discipline and a more robust pricing environment.

“Although the future growth in demand for many mined commodities is likely to be driven by energy transition across developed and developing countries, we cannot forget that the Chinese economy probably still remains the key driver for the Mining sector. The concerns around the health of China’s economy surged again during the summer with the China Purchasing Managers’ Index falling below 50% in May and staying below 50% through the summer. Towards the end of the third quarter there was a series of stimulus announcements from the Chinese authorities that initially caused a remarkable risk-on rally with the Chinese stock market (Shanghai Composite Index) rising almost 30% during the three weeks from the middle of September. Despite the policy support and stock market reaction, the real economy has been slower to respond, and this can be seen in the continued growth of steel exports from China with higher exports implying weaker domestic demand for steel.

“One of the brighter spots in the industrial commodities was aluminium, where the price rose almost 20% over the course of the year. The demand story for aluminium for many years has been an attractive one – it is widely used in high voltage cables and thanks to better research and development, has been able to be substituted for more expensive copper in air conditioning units and even some wiring applications. Its lightweight properties have also driven demand growth from the automobile industry where it has been substituted for steel. However historically there has been more than adequate supply of aluminium to meet demand as China grew production in an almost unconstrained manner, placing new refineries and smelters close to coal fields to benefit from cheap energy. With China’s growing focus on the environment and a desire to keep the energy onshore (aluminium exports can be seen as energy exports given how energy intensive the production process is), the authorities have placed a capacity ceiling of 45 million tonnes per year on the industry. This has slowed the production growth as seen on the chart contained within the Annual Report and Financial Statements and we expect this restraint to continue. In addition to improving margins for producers in China, the restraint should limit aluminium export growth and tighten the supply-demand balance in the ex-China market, which would benefit the aluminium holdings in the portfolio such as Hydro.

“The mergers and acquisition (M&A) environment continued to remain active for the Mining sector during 2024 with the headline-grabbing attempt by BHP to acquire Anglo American, which ultimately ended in no deal being consummated. This was another example of companies recognising the benefits of “buying versus building” as both the capital intensity of building new assets continue to rise and the rising risk associated with getting assets permitted and built also grinds higher. We would expect this desire by companies to consolidate the industry to continue into 2025, but it will require boards and management teams to take a long-term view. At current commodity prices and cost structures, the prices being demanded by sellers of assets look expensive, so a belief in tighter markets to come and ultimately higher commodity prices is necessary to justify most potential M&A transactions or greenfield investments.”

Energy transition

“Over the past twelve months, the Energy Transition sector has continued to power ahead, with global solar panel installations expected to increase to 600GW, a rise of 35% on 2024, according to Bloomberg New Energy Finance. This compares to solar installations of 252GW in 2022, which was in itself a record year. In recent years, factors impacting on the energy transition have shifted from a focus on decarbonisation to prioritisation of energy security, reshoring of critical supply chains and we are now seeing an additional driver in the form of increasing electricity demand expectations.

“The US policy in the form of the US CHIPS Act and the Inflation Reduction Act (IRA) has supported a rapid increase in corporate investment in US manufacturing of key technologies including EV battery production, leading-edge semiconductor fabrication plants, solar panel and wind turbine manufacturing. Companies supplying the necessary equipment for these facilities have benefited from increased demand and Trane Technologies, (energy efficient commercial heating, ventilation and air conditioning) and Ingersoll-Rand (energy efficient pumps and compressors) were among the top contributors to performance.

“Large scale investment in the hardware required for generative artificial intelligence (AI) model training and subsequent querying has created increased demand for a number of related industries. In addition to microchips, AI data centres require specialist design and power management. Data centre and critical infrastructure design group, Vertiv Holdings and power management specialists, Schneider Electric, saw strong share price performance over the year. Supplies to electricity grid connections and power transformers including GE Vernova reported quarterly results consistently ahead of market expectations with increased orderbooks and performed strongly during the year.

“Within Energy Transition, elevated interest rates, overcapacity in the solar and EV supply chains and uncertainty around the direction of US policy caused market sentiment to remain negative for parts of the renewable power sector, particularly for non-US companies, given a wide valuation differential between US and European stock markets. At a company level, given these market moves, wind turbine group, Vestas significantly underperformed during the year and detracted from returns, with the group experiencing higher costs, which prevented an awaited recovery in profit margins. European renewable utilities were sensitive to changes in interest rate expectations and underperformed following the US elections with RWE and EDP Renováveis detracting from returns. EV battery manufacturer Samsung SDI and EV semiconductor group ST Microelectronics fell during the year with EV demand growth in Europe lower than expected. EV sales globally are expected to rise c.20% in 2025, however this is skewed towards China with weaker automobile sales in Europe masking the continued increase in EV market share.

“Following the US elections, there was a pullback in valuations of renewables companies. In 2016, we saw similar initial negative share price reaction to renewables, yet the sector went on to outperform over the remaining presidential term and we see stronger demand drivers for these companies today.

“Whilst some policies or parts of the IRA may be changed, such as EV subsidies, lesser support at the federal level for offshore wind, or lower duration of tax credits for renewables, we do not see the core aim of reshoring of manufacturing to be reversed and we see opportunity in some of the market moves.”

Traditional energy

“Oil prices traded within a US$70-US$90/barrel range for most of the year, ending towards the lower band, but a level that enables the oil & gas industry to generate significant profits. Despite the significant ongoing investment into low-carbon alternatives, the world has yet to break the link between economic growth and oil demand and the 12-month period set a new record for oil demand at 102.6 million barrels per day (source: US Energy Information Administration December 2024). In contrast, North American natural gas markets saw a distinctly looser market throughout most of 2023 and 2024 as supply growth continued well ahead of the anticipated inflection in US LNG export (thereby driving up demand). Henry Hub prices spent most of the prior two years in contango with gas production companies having to curtail significant volumes to help rebalance the market.

“Oil prices were driven by several notable factors during the year. On the supply side, large new oil producing projects in Guyana and Norway, which have been under construction for several years, ramped production in 2024 and US shale oil producers led US production higher to 13.5 million barrels per day. On the demand side, global consumption has continued to increase. However, the main source of oil demand growth in recent years has been China, which saw significantly slower-than-expected growth due to lower levels of construction activity and continued substitution away from diesel and into natural gas within the heavy-duty truck sector. The International Energy Agency (IEA) revised downwards its estimate of 2024e oil demand growth expectations from China from 700,000 barrels per day to less than 200,000 barrels per day. With oil demand growth barely sufficient to absorb the new oil supply, global oil markets were well-supplied throughout the year, leading the Organisation of Petroleum Exporting Countries to delay adding back previously curtailed production to support oil prices. Despite the marked slowdown in Chinese growth the agency has been revising its expectations for 2025e demand upwards, notably in Asia ex-China.

“Commodities, including oil, have long been used by investors as a hedge against increased geo-political risk and this was again evident in 2024. Houthi militant attacks on international shipping in the Red Sea during the first quarter of the year resulted in disruption to global trade routes. A majority of ships therefore diverted to taking the longer route between East and West around the Cape of Good Hope, rather than the Suez Canal route. Oil prices rose during this period, and later moved higher with escalation of events in the Middle East between Iran and Israel in October, on the risk of disruption to energy infrastructure. As risk of further escalation subsided, the Brent oil price tracked lower towards US$70 into the year end.

“Energy holdings delivered a positive return in the period, modestly ahead of the benchmark. Midstream pipeline companies, including Targa Resources, which was the top contributor to returns over the year, having seen valuations increase. In our view, selected pipeline companies may benefit from the increased power demand in the US with reshoring of manufacturing trends and the build out of AI data centres. Increased demand for power in the US from hyperscalers, the large technology cloud service providers investing in AI data centres, has driven a resurgence in demand for nuclear power and a higher uranium price, which underpinned a positive contribution from Cameco. On the other hand, oil exploration and production company, Kosmos saw its shares fall on the range-bound oil price and lower than expected production from its Jubilee asset offshore Ghana.”