TIDMGSF
RNS Number : 6854T
Gore Street Energy Storage Fund PLC
26 July 2022
26 July 2022
Gore Street Energy Storage Fund Plc
('Gore Street' or the 'Company')
Full Year Results
Strong asset performance drives 13% NAV Total Return over the
period.
Asset performance and capacity growth positions the portfolio to
continue to capture market opportunities.
Gore Street Energy Storage Fund plc (ticker: GSF), London's
first listed energy storage fund supporting the transition to low
carbon power, is pleased to announce its Audited Full Year results
for the year ended 31 March 2022.
Financial Highlights for the year ended 31 March 2022
-- NAV increased 154% to GBP369.6 million [1] (31 March 2021: GBP145.1 million)
-- NAV per share increased 6% to 107.1 pence [2] (31 March 2021:
100.9 pence), NAV Total Return of 13%
-- Total share returns of 11% since 31 March 2021 and 37% since inception
-- Net income increased 191% to GBP42.5 million (31 March 2021: GBP14.6 million)
-- EBITDA of operational portfolio increased 704% to GBP23.3
million (31 March 2021: GBP2.9 million)
-- Dividend declared for the March-end quarter of 1.0 pence per
share. Total dividend declared for the year of 7.0 pence per share,
as targeted, with operational dividend cover of 1.09x [3]
-- The Company raised a total of GBP208.6 million in two
oversubscribed issuances: GBP135 million in April 2021, and a
further GBP73.6 million in October 2021. Issued Share Capital (ISC)
increased to 345.0 million shares (31 March 2021: 143.9 million
shares)
-- Earnings per share (basic and diluted) of 14.15 pence (31 March 2021: 16.1 pence)
Operational Highlights for the year ended 31 March 2022
-- Portfolio increased substantially to 628.5 [4] MW as at 31 March 2022 (31 March 2021: 380 MW)
o 37% of the portfolio operational and 63% under
construction/pre-construction (31 March 2021: 55% operational and
45% under construction/pre-construction)
o Operational assets producing income increased to 12 projects,
with a total capacity of 231.7 MW (31 March 2021: 11 projects with
209.7 MW capacity)
o 5 Construction/pre-construction portfolio assets with a total capacity of 396.8 MW
o Operational assets performed at or above expectations during the period:
o All operational GB assets showed strong performance for the
period: The average revenue per MW for the fiscal year was over 68
per cent higher than the 2021 fiscal year average and 18.3 per
cent. higher than internally forecasted for the period
o The Company's two assets in Northern Ireland, driven high
payments under DS3 uncapped contract
o The newly acquired operational asset in Germany, driven by ancillary services high rates
o Portfolio expansion continued across attractive markets:
o First acquisition in Mainland Europe, a 22MW operational asset in Germany
o Acquisition of two assets in Great Britain: Stony (79.9 MW) and Enderby (57MW)
o The Company secured rights to expand one of its assets in the
Republic of Ireland ("ROI"), Kilmannock by an additional 90MW,
which, following the 60MW expansion grant for Porterstown, will
increase the Company's total portfolio size in the ROI from 60MW on
acquisition to 210.0 MW upon completion
Post Period-end Highlights
-- Gross proceeds of GBP150 million raised in April 2022 through
an oversubscribed institutional placing and retail offer at 110.0
pence per Ordinary Share, with the resultant total ISC increasing
to 481.4 million.
-- Portfolio increased to 21 projects with a total capacity of
668.3 MW of which 291.6 MW is operational
-- The Company completed the acquisition of energy storage
projects in the ERCOT market in the United States. 29.9MW of the
newly acquired U.S. assets (Synder, Westover and Sweetwater) are
operational and are of two-hour duration. The fourth asset (Mineral
Wells) is pre-construction with operation targeted by the end of
2023.
-- The Company is actively reviewing opportunities in GB,
Ireland, Western Europe, North America and Australia, in accordance
with the Company's investment policy. The total pipeline stands at
c. 1.7 GW or 3.6 GWh with transactions in exclusivity or advanced
negotiations amounting to c. 495 MW or 980 MWh as of the date of
publication
Net Asset Value
As at 31 March 2022, the audited estimated NAV per Ordinary
Share increased to 107.1 pence, compared with 100.9 pence per
Ordinary Share at 31 March 2021, representing a total return
including dividends over the period of 13%. The weighted average
discount rate is 8.3%.
Dividend Payment
The 1.0 pence per share declared dividend will be paid on or
around 26 August 2022 to shareholders on the register on 05 August
2022. The ex-dividend date will be 04 August 2022.
Environmental, Social, and Governance
As a pure-play energy storage fund, the Company takes pride in
its contribution to supporting clean energy ambitions for increased
integration of renewable energy into global power systems.
The Board of Directors of the Company is responsible for
defining the Company's environmental strategy and has committed to
measuring and reporting the Company's environmental sustainability
in accordance with the SFDR framework. The Investment Manager is
responsible for the day-to-day implementation of that environmental
strategy, including the evaluation and possible amendment of the
Company's construction and asset management processes as necessary
to embody or improve environmental measurements under the SFDR
framework. The Board of Directors of the Company is responsible for
defining the Company's social impact strategy and has committed for
the Company to measure and report the social impact of its
investments in accordance with the SFDR framework.
A summary of the Company's performance under SFDR and under the
United Nation's Sustainable Development Goals (SDG) will be
available on the Company's website in August 2022, as part of the
Company's first ESG Pillars Report.
The Company is also a signatory to the United Nations Principles
of Responsible Investment (UN PRI) and will participate in the next
mandatory submission period, in 2024. Additionally, the Company has
committed to comply with the 'Task Force on Climate-Related
Financial Disclosures' (TCFD) framework by the end of 2022.
CEO of Gore Street Capital, the investment adviser to the
Company, Alex O'Cinneide commented:
"I am pleased to report that the Company continues to enjoy a
sustained period of rapid growth, responding to the pressing and
global increasing need to enable the energy transition to a low
carbon society through energy storage solutions and in the process,
further diversifying our portfolio for shareholders. We have
achieved this through a mixture of financial and operational
success, raising additional capital via highly successful,
oversubscribed fundraises, from both institutional and retail
investors; as well as delivering on our strategy, first laid out in
our IPO of 2018 when we defined this category of investing, of
building the industry-leading international portfolio of energy
storage assets, now totalling 628.5 MW.
Our active asset management approach continues to optimise Capex
of the portfolio's assets, which increases both performance and
profitability, providing greater returns for shareholders.
Additionally, the Company has had great success to date with
keeping construction on time and within budget, even in this period
of supply chain challenges; as well as carefully designing each
asset to be optimised for maximum efficiency once operational.
The 291.6 MW operational portfolio ([5]) continues to deliver
significant cash flow for the Company and has ensured we have
maintained our robust dividend of 7 pence per share. The end of the
period saw the GB and Northern Irish assets perform extremely well,
outperforming revenue expectations considerably.
We have also successfully raised, through oversubscribed
fundraises, GBP135.0 million in April 2021 and a further GBP73.6
million in October 2021, with an additional GBP150.0 million raised
post-period end. The substantial increase of investible capital has
given the Company additional headroom to continue our strategy of
expanding into other geographies, with our first acquisition in
Germany, during the period, and in the United States post-reporting
period, which add a layer of geographical and revenue diversity to
our already highly diverse portfolio of energy storage assets,
de-risking Gore Street further for our shareholders.
We look ahead to the next year with optimism and look forward to
updating shareholders on our progress during regular intervals
throughout 2022 and beyond."
Annual Report
A copy of the annual report has been submitted to the National
Storage Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . The annual
report and presentation for analysts will also be available on the
Company's website at https://www.gsenergystoragefund.com/ where
further information on Gore Street can be found. Further, the
annual report can be found on the Company's website under Reports
and Accounts:
https://www.gsenergystoragefund.com/content/investors/shareholder-literature
There will be a virtual presentation for analysts at 9:30am
followed by a live Q&A today. The webinar will be hosted by
Gore Street Capital, the Company's investment adviser. To register
for the event please contact gorestreet@buchanan.uk.com
A recording of the presentation will be posted on the Company's
website at https://www.gsenergystoragefund.com/
The Legal Entity Identifier of the Company is
213800GPUNVGG81G4O21.
The person responsible for releasing this announcement is Susan
Fadil.
For further information:
Gore Street Capital Limited
Alex O'Cinneide / Paula Travesso Tel: +44 (0) 20 3826 0290
Shore Capital (Joint Corporate Broker)
Anita Ghanekar / Rose Ramsden / Tel: +44 (0) 20 7408 4090
Iain Sexton (Corporate Advisory)
Fiona Conroy (Corporate Broking)
J.P. Morgan Cazenove (Joint Corporate
Broker)
William Simmonds / Jérémie Tel: +44 (0) 20 7742 4000
Birnbaum (Corporate Finance)
Buchanan (Media Enquiries)
Charles Ryland / Henry Wilson / Tel: +44 (0) 20 7466 5000
George Beale
Email: t g orestreet@buchanan.uk.com
JTC (UK) Limited, Company Secretary Tel: +44 (0) 20 7409 0181
Notes to Editors
About Gore Street Energy Storage Fund plc
Gore Street is London's first listed energy storage fund and
seeks to provide Shareholders with a significant opportunity to
invest in a diversified portfolio of utility scale energy storage
projects. In addition to growth through exploiting its considerable
pipeline, the Company aims to deliver consistent and robust
dividend yield as income distributions to its Shareholders.
The Company targets an annual dividend of 7.0% of NAV per
Ordinary Share in each financial year, with a minimum annual target
of 7.0 pence per Ordinary Share, payable quarterly. Dividends are
discretionary.
Gore Street Energy Storage Fund plc is listed on the LSE's
Premium Segment of the main market and is LSE Green Economy Mark
accredited.
https://www.gsenergystoragefund.com
OVERVIEW & HIGHLIGHTS
About Us
Launched in 2018, Gore Street Energy Storage Fund plc ("GSF" or
"the Company") is London's first listed energy storage fund. As of
the date of publication, the Company is the only UK-listed Energy
Storage fund with a diversified operational portfolio located
across four different national grids.
The Company is one of the principal owners and operators of
battery storage facilities in Great Britain and Ireland, and as of
the date of publication, owns and operates facilities in Western
Mainland Europe and the US. It is listed on the Premium Segment of
the London Stock Exchange and included in the FTSE All-Share
Index.
Energy storage technologies can enhance power system stability
and flexibility and are key tools for balancing out variability in
renewable energy generation, which allows the integration of more
renewable energy supply into power grids. In this way, energy
storage is critical to the renewable and low-carbon energy
transition.
GSES 1 Limited is a wholly owned subsidiary of the Company, and
it is the entity that holds the Company's Assets (referred to as
the 'Company's portfolio' or 'GSF's portfolio'). As of the date of
publication, GSF's portfolio consists of 668 ([6]) megawatts (MW)
of utility-scale energy storage assets across the UK, the Republic
of Ireland, Germany, and the United States, of which 291 MW are
operational and 377 MW are at varying stages of construction. The
Company also counts on an additional 1.57 gigawatts (GW) of
pipeline projects across the Company's key markets.
The Company has been awarded the London Stock Exchange's Green
Economy mark, which recognises leading companies and funds that
derive more than 50 per cent of revenues from products and services
that contribute to environmental objectives.
GSF is an Investment Trust managed by Gore Street Capital
Limited (the "Investment Manager") [7] , which is a full-scope
Alternative Investment Fund Manager ("AIFM"), authorised and
regulated by the UK's Financial Conduct Authority ("FCA"). The
Company has an independent board of non-executive directors that
engages constructively with the Investment Manager on an ongoing
basis.
The Investment Manager was formed in 2015 as a platform to
acquire, develop and manage global renewable energy assets. The
Investment Manager's investment, technical and operating team has a
wealth of combined experience in sourcing, structuring the
acquisition of, and managing the construction and operation of
energy assets worldwide.
The Investment Manager oversees the acquisition, development,
and management of the Company's operations and has been responsible
for the Company's portfolio development and growth since the
Company's inception. Through its subsidiary, Gore Street
Operational Management Limited (the "Operations Manager" or
"GSOM"), [8] the Investment Manager has oversight of the efficient
and cost-effective buildout of energy storage assets from
acquisition through to commissioning. The Operations Manager is
also responsible for the supervision of asset management, fault
correction, and revenue optimisation strategies across the
portfolio. [9]
The Company is authorised to invest up to 60 per cent. of Gross
Asset Value into opportunities outside of the UK and the Republic
of Ireland, into target developed markets in North America, Western
Europe, Australia, Japan, and South Korea. [10] The Company's
recent expansion into the United States and Germany is indicative
of the Investment Manager's appetite for capitalising on available
and attractive opportunities for targeted growth.
Corporate Purpose
The Company aims to provide investors with a sustainable and
attractive dividend, generated from long-term investment in a
diversified portfolio of utility-scale energy storage assets. The
Company targets a dividend payment to shareholders at an annual
rate of 7 per cent. of Net Asset Value per Ordinary Share, with a
minimum target of 7 pence per Ordinary Share ([11]) . In addition,
the Company seeks to provide investors with capital growth through
the re-investment of net cash generated in excess of the target
dividend, in accordance with the Company's investment policy.
The Company has committed to disclose its Environmental, Social
and Governance ("ESG") principles through its voluntary compliance
with Article 8 of the EU 'Sustainable Finance Disclosure
Regulation' (SFDR). GSF will disclose relevant environmental and
social data assessing the Company's alignment with the SFDR
requirements, as part of its first ESG Pillars Report, in August
2022. The ESG Pillars Report will be published annually thereafter,
in order to provide investors with visibility of the Company's
plans for continued integration of target ESG principles into the
Company's business activities, from acquisition to construction and
through the period of an asset's operations.
Why Energy Storage?
National grids face challenges in matching the demand for
electricity with fluctuating power system supply. This challenge is
exacerbated by the intermittent nature of some renewables. Much of
the renewable power supply is weather dependent: the sun does not
always shine, the wind does not always blow at the same speed, and
this makes renewable energy sources, such as solar and wind, less
predictable as sources of power, over a longer period, than fossil
fuels. On the other hand, electricity demand follows a predictable
pattern, rising during the day, summer, and winter months, and
falling at night.
Energy storage can be used to solve the problem of intermittency
of supply against predictable demand patterns in the short term
through a battery's ability to store power, including energy
generated by wind or solar and then sell (or "trade") such stored
power (including sustainably generated power) for use at times of
excess demand. Energy storage is also used to reduce the risk of
brownouts and blackouts resulting from the increased integration of
wind, solar and other intermittent sources of power into the global
power infrastructure. The introduction of larger volumes of
intermittent forms of energy into electricity networks affects the
quality of available power and therefore the stability of the grid.
Battery storage has proven itself a well-suited tool to provide the
system stability necessary to avoid blackouts (typically caused by
voltage surges) and to manage other power quality issues .
Driven by renewable deployment, the global energy storage market
has exceeded installations of 11 GW / 24 GWh per annum and is
predicted to grow to 26 GW / 60 GWh per annum by 2025. ([12])
THE INVESTMENT PROPOSITION
Investment Objective and Target Yield
The Company seeks to provide investors with a sustainable and
attractive dividend over the long term by investing in a
diversified portfolio of utility-scale energy storage projects. The
Company will target dividends in each financial year based on the
average Net Asset Value per Ordinary Share during that financial
year, subject to a minimum target of 7 pence per Ordinary Share in
each financial year. The target dividend will increase by 0.5 pence
per Ordinary Share for each 7.0 pence increase in average Net Asset
Value per Ordinary Share in any financial year above 100 pence. In
addition, the Company seeks to provide investors with an element of
capital growth through the re-investment of net cash generated in
excess of the target dividend in accordance with the Company's
investment policy.
Diversified Portfolio and Revenue Stream
The Company holds [13] and operates a diversified portfolio of
lithium-ion energy storage assets in four markets [14] , including
291.6 MW of operational assets (earning revenues) and 376.8 MW
projects under construction. Lithium-ion batteries deliver multiple
grid balancing and power quality services to power grids and
present power trading opportunities. Consequently, batteries
generate multiple revenue streams. It is the Company's intention
that no single project or interest in any project will have an
acquisition value of greater than 20 per cent. of Gross Asset Value
of the Group as a whole (calculated at the time of acquisition).
Geographical and revenue contracting risks will be diversified
between GB, Ireland, the United States, Germany, and other target
markets.
Proven Technology & Capability
Energy storage systems are utilised by power grid systems to aid
in regulating power security, ensuring power quality and in
balancing electricity demand. The Company is committed to
maintaining best-in-class practices in the design and management of
its systems, and to ensuring adequate health and safety standards
are kept. Its operational discipline is not only relevant from an
environmental perspective but also ensures that its fleet of assets
are dependable generators of revenue. The Company represents a
substantial 13 per cent. market share of the Dynamic Containment
("DC") market in Great Britain, and, in Ireland, it accounts for 55
per cent. of the 'Delivering a Secure Sustainable Electricity
System' ("DS3") capped contracts, and 13 per cent. of DS3 uncapped
agreements, inclusive of the provision of reactive power services.
GSF's market share of large-scale battery storage services
delivering grid balancing services not only demonstrates the
Company's scale but also confirms its operational and technological
reliability. [15]
Market Leadership
The Investment Manager was one of the first movers to deploy
privately owned grid-scale battery projects in GB. It was also one
of the first to successfully enter and deliver services in the
energy storage market in Ireland, where the Company continues to
hold a substantial market share. As of the date of publication, the
Company has also entered energy markets in the United States and
Germany.
The Investment Manager is comprised of industry experts, thought
leaders, and financial professionals, who leverage their collective
expertise and work collaboratively alongside industry leaders on
system design, procurement, and asset construction.
Environmental Sustainability, Social Impact and Governance
Energy storage is a critical piece of the infrastructure used to
solve the challenge of intermittency of supply from
weather-dependent, variable renewable energy sources, against
predictable demand patterns. As a sole-play energy storage fund,
the Company takes pride in its contribution to supporting clean
energy ambitions for increased integration of renewable energy into
global power systems.
The Board of Directors of the Company is responsible for
defining the Company's environmental strategy and has committed to
measuring and reporting the Company's environmental sustainability
in accordance with the SFDR framework, which will be available on
the Company's website in August 2022. This will provide investors
greater assurance and transparency around the Company's
environmental strategy. The Investment Manager is responsible for
the day-to-day implementation of that environmental strategy,
including the evaluation and possible amendment of the Company's
construction and asset management processes as necessary to embody
or improve environmental measurements under the SFDR framework.
The Board of Directors of the Company is responsible for
defining the Company's social impact strategy and has committed for
the Company to measure and report the social impact of its
investments in accordance with the SFDR framework.
A summary of the Company's performance under SFDR and under the
United Nation's Sustainable Development Goals (SDG) is provided in
the Company's first ESG Pillars Report which will be available on
the Company website in August 2022.
The Company is also a signatory to the United Nations Principles
of Responsible Investment (UN PRI). The UN PRI requires the Company
to participate in the next mandatory submission period, which will
be in 2024. Additionally, the Company has committed to comply with
the 'Task Force on Climate-Related Financial Disclosures' (TCFD)
framework by the end of 2022.
INVESTMENT HIGHLIGHTS
Fundraise
During the fiscal year, the Company closed a Placing Programme
in which it issued all available shares, raising a total of
GBP208.6 million (GBP135 million in April 2021, and a further
GBP73.6 million in October 2021). Both capital raises were
oversubscribed. [16]
In March 2022, the Company opened a new issuance programme of up
to 750 million Ordinary and C Shares. In April 2022, the Company
was again significantly oversubscribed and raised gross proceeds of
GBP150.0 million in its issuance [17] of 136,363,636 new Ordinary
Shares. The Company's issued share capital comprises as of the date
of publication amounts to 481,399,478 Ordinary Shares.
Deployment of Capital
The Company grew by 66 per cent (in MWs) during the fiscal
year.
During the period, the Company acquired 158.9 MW of energy
storage projects across England and Germany of which 22.0 MW are
currently operational. Both construction assets (Stony 79.9 MW and
Enderby 57.0 MW) have target commission dates in 2023. The Company
also secured the right to expand its Kilmannock ("KBSL") project in
the Republic of Ireland ("ROI"), resulting in a total 248.9 MW
increase in its total portfolio capacity as of 31 March 2022.
Enderby 57.0 MW represents the Company's first asset connected
to National Grid's main transmission network. This means that
Enderby will operate without an intermediary distribution network
operator, potentially reducing capital and operating expenditure.
The acquisition of the 22.0 MW operational projects in Cremzow,
Germany, represents the Company's first acquisition in Mainland
Europe.
The expansion of the KBSL site by 90.0 MW follows the 60.0 MW
expansion grant for Porterstown ("PBSL") and increases the
Company's portfolio capacity in the ROI from 60.0 MW (on
acquisition in July 2019) to 210.0 MW. The initial 30.0 MW phase of
development at PBSL ('PBSL Phase 1') became fully energised as of
the date of publication [18] . The PBSL expansion project ('PBSL
Phase 2') is expected to be operational by 2024. Given challenges
amidst global supply chain issues, the Company expects delays in
the timeline for KBSL and its expansion site ('Phase 1' and 'Phase
2', respectively) and will inform the markets of the updated
timeline in due course.
As of the date of publication, GSF has acquired 39.8 MW of
energy storage projects in the ERCOT (the 'Electric Reliability
Council of Texas') market in Texas, United States with rights to
acquire an additional 40 MW upon satisfaction of the terms of its
purchase agreement. 29.9 MW of the ERCOT assets (Synder, Westover
and Sweetwater) are operational (2-hour duration). The remaining
9.9 MW (Mineral Wells) is in its pre-construction phase with
operation targeted by the end of 2023.
Figure 1 : Timeline and milestones of the Company since IPO:
market capitalisation, portfolio total capacity and operational
portfolio capacity; as well as contracted 'Engineering Procurement
and Construction' (EPC) contracted capacity
Pipeline
The Investment Manager intends to further diversify its
investment pipeline with acquisitions in Western Europe and North
America, GB, and Australia. Its investment pipeline currently
stands at 1.57 GW of energy storage assets with the capacity to
deliver 3.24 GWh. [19] As of the date of publication, the
Investment Manager has actively engaged in exclusive negotiations
for projects totalling 495.0 MW with the capacity to deliver 980.0
MW of power per hour.
Key Metrics
As of Fiscal Year, Ending March 2022 [20] :
Table 1 : Key Metrics
Adjusted NAV is calculated as the NAV per the Statement of
Financial Position adjusted for the interim dividend relating to
the December 2021 quarter of GBP6.9m or 2.0 pence per share, which
was declared in March 2022 but paid post period end on 1 April
2022. This metric provides consistency and a more meaningful
comparison against the NAV on 31 March 2021, which already included
the 2.0 pence per share dividend relating to the December 2020
quarter, which was paid in March 2021, prior to the period end.
The Company's market capitalisation increased by 151 per cent.
since the end of the last fiscal year. Further capital was raised
post year-end, in April 2022, which together constitutes a total
increase of 258 per cent in the Company's market capitalisation
since the end the of the last fiscal year [21] .
The Company declared a total of 7.0 pence dividend per share for
the financial year, with the final instalment of 1.0 pence to be
paid post the date of publication.
The increase in Total Adjusted NAV during the fiscal year is
illustrated in the bridge, shown in Figure 1. The key drivers of
the increase in NAV from GBP 145.1 million (March 2021) to GBP
369.6 million (March 2022 Adjusted NAV) were: (i) Two fundraises
totalling GBP208.6m; (ii) Both NI assets were operational
throughout the year; (iii) Acquisition of operational asset,
Cremzow; (iv) Successful de-risking of projects as they progress
through their construction stage; (iv) Revenue forecasts; and (v)
Strong operational performance of the assets due to efficient
optimising of the revenue stacks.
On a NAV per share basis, the Company experienced an increase of
6.2 pence per share since the last fiscal period. Since IPO (to the
end of the fiscal year), the Company has delivered a Net Asset
Total return of 34.2 per cent (inclusive of dividends) to
shareholders. [22]
Figure 2 : NAV Bridge March 2022 in GBPm
The Net DCF changes have been broken out in the below graph:
Figure 3 : Net DCF changes bridge for the fiscal year GBP(m)
Portfolio Composition
The Company has a portfolio of 296.6 MW in GB and 310.0 MW of
energy storage assets across the island of Ireland ([23]) . During
the fiscal year, it successfully completed its first acquisition in
Mainland Europe, a 22.0 MW operational portfolio in Germany. As of
the date of publication, the Company has completed its first US
acquisitions, consisting of four energy storage assets totalling
39.8 MW in the ERCOT market in Texas. ([24])
A breakdown of the total portfolio is present below,
differentiated by: i) Geography; ii) Asset status; and iii) Storage
System suppliers [25] , on a per MW basis, as of March-end
2022:
As of the publication date, the updated breakdown is disclosed
below:
Sources of Revenue
As of the publication date, the Company's operational assets
deliver services to the following Transmission System Operators
(TSOs): The 'National Grid Electricity System Operator' (NGESO or
"National Grid") in GB; EirGrid and SONI [26] in Ireland; the
'Electric Reliability Council of Texas' (ERCOT), in Texas, US and,
indirectly through participating in the German ancillary services
market [27] to eleven further TSOs, across eight countries in
Mainland Europe ("European Grids").
These services generate attractive income streams and diversify
exposure to different markets and sources of revenue. Revenue
diversification is achieved by selling services to different
counterparties (including selected TSOs) and through the ability to
"stack" several income streams across various contract lengths
within individual assets.
Whilst ancillary services are currently the predominant revenue
stream in the portfolio, the Company also derives revenues from
Capacity Market ("CM") contracts, Triads, and participation in
energy arbitrage ("Trading"). Ancillary Services include Dynamic
Containment ("DC") and Firm Frequency Response ("FFR") in GB; the
'Delivering a Secure Sustainable Electricity System' ("DS3")
contracts in the Irish Network; Frequency Containment Reserves
("FCR") in Europe, and Response Reserve Services ("RRS"), in Texas,
US.
The figure below illustrates the breakdown of total portfolio
revenue per TSO and revenue stream at the end of the financial
year. [28]
Figure 4 : Geographical exposure and revenue services breakdown
during the 2021/22 fiscal year. [29]
As of 31 March 2022, the National Grid constitutes the Company's
primary counterparty, from which 49 per cent. of the Company's
revenues are generated. A further 41 per cent. of operating
revenues are generated in Northern Ireland with EirGrid/SONI as the
counterparty.
As of the date of publication, the Investment Manager has
further diversified its revenue stack as a result of its
participation in the ERCOT and German markets and by the
commencement of delivery of DS3 capped contract services in the
Republic of Ireland in July 2022.
Figure 5 : Expected geographical exposure based on expected
revenue for the next fiscal year (2022 /2023). [30]
Market Overview
The market backdrop wherein the company operates, shows a
growing shift toward low carbon energy generation, which represents
strong fundamental drivers for energy storage deployment. The UK
([31]) and Irish ([32]) Governments are committed to achieving
carbon neutrality by 2050, as well as the US ([33]) . Germany has
set on a path of accelerated clean-energy expansion, bringing
forward its goal of 100 per cent. renewable power to 2035 [34] .
This provides a tailwind for the deployment of battery energy
storage systems and has led to rapid growth within the sector.
The Company provides a number of critical services across these
markets and benefits from multiple revenue streams, of varying
contract lengths, which can be stacked. Furthermore, due to the
flexible nature of the Company's assets, it is able to take
advantage of a variety of contracts depending on prevailing market
conditions.
The table below shows the relevant characteristics for each
market relevant to the Company, as well as the diverse mix of
revenue streams available to the Company's assets in each of these
markets.
Market Market Structure Revenue Streams Characteristics
GB National Grid Capacity o CM : Procurement of future
Market (CM) energy capacity to ensure
Firm sufficient generation on the
Frequency system
Response o FFR : Balancing supply and
(FFR) demand of electricity to
Dynamic ensure that frequency remains
Containment around 50Hz
(DC) o DC : Fast-acting post-fault
Dynamic service to contain frequency
Moderation outside of acceptable limits
(DM) o DM : Balancing supply and
Wholesale demand of electricity to
Trading ensure that frequency remains
Triads around 50Hz
o Wholesale Trading : The trade
of energy between generators
and suppliers
o Triads : Top three half-hour
peaks of national energy
demand across the grid
------------------------ --------------------------------------- ---------------------------------------
Ireland EirGrid/SONI Capacity o Volume uncapped :
Market Procurement that does
DS3 not limit
Programme the volume of the
Volume service being
uncapped procured and to which
Volume regulated tariffs
capped apply
o Volume capped :
Procurement where an
upper limit is
applied to the volume
of relevant DS3
services being
procured and for
which prospective
providers will offer
a competitive price
as part of their
tender
o CM : Procurement of
future energy
capacity to ensure
sufficient generation
on the system
------------------------ --------------------------------------- ---------------------------------------
Germany TSOs across 8 countries Frequency o FCR : Primary
Containment ancillary service in
Reserve Germany and serves
(FCR) to stabile frequency
deviations in the
system
o Wholesale Trading:
(from January 2023)
------------------------ --------------------------------------- ---------------------------------------
Texas, US ERCOT Responsive o RRS : Used to
Reserve restore the frequency
Services of the system
(RRS) within the first few
minutes of an event
that causes
a significant
deviation from the
standard frequency
------------------------ --------------------------------------- ---------------------------------------
Market Share
During the fiscal year, the Company's delivery of FFR services
accounted for 9 per cent of the FFR market in GB. In the same
period, GSF's services accounted for c. 13 per cent. of the DC
market in the GB energy market ([35]) .
The Company's Northern Irish assets represent an ongoing 100.0
MW commitment to delivering DS3 services to the Irish network. The
Company's operational assets represent a 13 per cent market share
of DS3 services for uncapped agreements in NI ([36]) including the
provision of reactive power services.
The Company also holds contracts for 60.0 MW of capped DS3
agreements for its two assets in ROI, representing a 55 per cent
market share of the Irish DS3 capped contracts' storage projects
under development. In terms of uncapped contracts, the Company
represents 5 per cent of the market share. [37]
Ireland [38]
GB
New Markets: Germany and the US [39]
Portfolio Revenue Performance
The portfolio's growth, as represented below by the 23.2x
increase in the Fund's installed capacity from 10.0 MW in June 2018
to 231.7 MW in March 2022, is largely attributable to the Company's
strategic expansion into new markets.
The revenue growth, comprising a compound annual growth rate
("CAGR") of 181.5 per cent. since the Fund's inception, has been
mostly driven by the increase in the operational installed capacity
of the portfolio companies, both through the acquisition of
operational sites and the commissioning of sites in construction,
during the financial year. Additionally, EBITDA for the portfolio
has experienced a CAGR of 191.2 per cent. largely due to the
Investment Manager's in-house technical capabilities that allow the
Company to minimise Opex, whilst optimising a revenue stacking
strategy across its assets.
The Company's growth and its delivery against projected revenue
streams are reflected in its Net Revenue and EBITDA performance,
illustrated in the figure below.
Figure 6 : Representation of Total Net Revenue and EBITDA of
operational portfolio Companies (GBP) since IPO, alongside
installed capacity progression (historical and forecast). Data is
presented per quarter. ([40])
Figure 7 : Total Revenue per MW represented per each of the four
grids: National Grid, EirGrid/SONI, European TSOs ('European
Grid'), and ERCOT, Texas, since IPO [41]
Regarding the Company's Capex per MW, the Investment Manager is
focused on capital discipline as a way of maximising returns to
investors. The Investment Manager has an in-house procurement team
that manages all EPC negotiations, including the assurance of
warranties and technical specificities in accordance with revenue
strategies. This considers optimal system duration strategy,
degradation profile and Capex pricing expectation.
Notwithstanding material supply chain disruptions in the market
during the fiscal year, the Company sought to minimise price hikes,
utilising economies of scale. Through its existing EPC framework
arrangements, the Group also sought to maintain timely access to
equipment despite market shortages.
Portfolio Overview [42]
GSF is currently the only listed energy storage fund in the UK
that possesses international exposure, providing services to four
different markets and their respective grids, in GB, Ireland,
Western Mainland Europe (during the fiscal year) and Texas, US
(post year-end). As of March-end, the Company has [43] 26 assets
across GB, Ireland, and Germany, and, as of the publication date,
it has increased its portfolio to 30 assets including 4 assets in
the US.
Figure 8 : Company's portfolio assets as of the date of
publication.
Portfolio in GB and Ireland*
Asset name Capacity Ownership Asset Name Capacity Ownership
----------------- ---------- --------------- ---------------- ----------
6.0 MW/6.0
1. Boulby MWh 99.90% 9. Ferrymuir 49.9 MW 100.00%
----------------- ---------- --------------- ---------------- ----------
4.0 MW/4.8 20.0 MW/20.0
2. Cenin MWh 49.00% 10. Hulley MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
3. Port of 9.0 MW/4.5 20.0 MW/20.0
Tilbury MWh 100.00% 11. Lascar MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
10.0 MW/5.0 10.0 MW/10.0
4. Lower Road MWh 100.00% 12. Breach MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
50.0 MW/21.3 19.5 MW/19.5
5. Mulavilly MWh 51.00% 13. Larport MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
50.0 MW/21.3 11.2 MW/11.2
6. Drumkee MWh 51.00% 14. Ancala MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
30.0 MW/30.0
7. Porterstown MWh 51.00% 15. Stony 79.9 MW 100.00%
----------------- ---------- --------------- ---------------- ----------
Porterstown
Phase 2 60.0 MW 51.00% 16. Enderby 57 MW 100.00%
----------------- ---------- --------------- ---------------- ----------
8. Kilmannock 30.0 MW 51.00%
----------------- ---------- --------------- ---------------- ----------
Kilmannock
Phase 2 90.0 MW 51.00%
----------------- ---------- --------------- ---------------- ----------
International Portfolio in US [44] and Germany*
Asset name Capacity Ownership Asset Name Capacity Ownership
----------------- ---------- --------------- ---------------- ----------
22.0 MW/29.0
17. Cremzow MWh 90.00% 20. Sweetwater 9.95 MW/19.9MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
9.95 MW/19.9 21. Mineral
18. Synder MWh 100.00% Wells 9.95 MW 100.00%
----------------- ---------- --------------- ---------------- ----------
19. Westover 9.95 MW/19.9MWh 100.00%
----------------- ---------- --------------- ---------------- ----------
*MWh included for operational
sites
---------- --------------- ---------------- ----------
Net Asset Value
There was a NAV increase of 6.2 pence per share, which together
with dividends declared for the fiscal year [45] , represents a net
asset total return of 13.1 per cent. during the fiscal year. From
IPO to 31 March 2022, the Company has delivered a net asset total
return of 34.2 per cent. inclusive of dividends.
Table 2 : Net Asset Value of GSF: quarterly progress
Quarter End Pence per share
Mar-21 100.9
---------------
Jun-21 101.0
---------------
Sep-21 103.3
---------------
Dec-21 103.9
---------------
Mar-22 [46] 107.1
---------------
Dividend History
Since IPO, the Company has targeted dividends at a minimum of 7
pence per Ordinary Share in each financial year [47] . The Company
is pleased to announce that as of the publication date, the Company
has declared total dividends of 7.0 pence with respect to the
period ending 31 March 2022, as targeted.
Ordinary Shares
Quarter Dividends
---------
30 June 2021 2.0p
---------
30 September 2021 2.0p
---------
31 December 2021 2.0p
---------
31 March 2022 1.0p
---------
CHAIR'S STATEMENT
On behalf of the Board, I am pleased to present the fourth
audited Report and Accounts of the Gore Street Energy Storage Fund
for the year ended 31 March 2022 and to report that GSF has
achieved strong financial results with average net revenues per MW
in Great Britain 68 per cent ahead of last year's, and 18.3 per
cent higher than internal forecasts. NAV increased 154% to GBP369.6
million and NAV ([48]) per share (post-dividends) increased by 6.1
per cent. Net income increased 191 per cent. to GBP42.5 million.
The Company raised a total of GBP208.6 million in two issuances:
GBP135 million in April 2021, and a further GBP73.6 million in
October 2021. Both capital raises were oversubscribed. Since IPO,
the Company has targeted and delivered dividends of 7 pence per
Ordinary Share in each financial year, and it shall do so again in
this fiscal year.
Our report issues against the backdrop of the most significant
geopolitical event of the 21(st) century, Russia's invasion of
Ukraine. This has altered the strategic energy landscape,
heightened the focus on energy security, and led to renewed pledges
to hasten the energy transition towards renewables-led
decarbonisation. Both in terms of energy security and the energy
transition grid-scale battery storage has a vital contribution to
make. The wider macroeconomic and potential supply chain
consequences of the war are being kept under active review by the
Board and our Investment Manager.
As the first UK-listed energy storage fund, we are proud to be
the only such fund to expand services into both Western Europe and
North America. The Board agreed to increase the scope of services
delivered by the Investment Manager [49] whose deepening talent
pool and operational expertise will permit Gore Street to deliver
its ambitious expansion plans and to maintain a position of
leadership in the rapidly growing market for battery energy
storage.
Strategy and Performance
As of the date of publication, GSF's portfolio consists of 668
([50]) megawatts (MW) of utility-scale energy storage assets across
the UK, the Republic of Ireland, Germany, and the United States, of
which 291 MW are operational and 377 MW are at varying stages of
construction.
In the past year, the Company focused on operational growth
through global diversification, acquiring three projects in England
and Germany during the fiscal year and, an additional 4 sites in
the United States (in Texas) as of the date of publication. It is a
personal pleasure to note that our first asset in the Republic of
Ireland, PBSL, became fully energised as of the date of
publication, increasing the operational portfolio by a total of 81
MW, a 38 per cent. Increase since our last Annual Report.
([51])
While the operational portfolio increased by 10 per cent. from
March-end 2021 to March-end 2022, revenues were nearly four times
higher for the same period. The rise in revenue from almost GBP3
million in the quarter ending March 2021 to over GBP10 million in
the quarter ending March 2022 can be attributed both to the growth
of the operational portfolio in the previous fiscal year and to
increases in market demand for ancillary and trading services.
Moreover, the Investment Manager's team has improved its revenue
stacking capability and has entered stronger revenue optimisation
partnerships.
Our NAV growth also results from our efforts at maintaining
financial discipline in construction and asset management. The
Manager strongly believes in capital efficiency and strives to
achieve amongst the lowest Capex and/or Capex/MW in the industry
through leveraging its in-house technical know-how.
This, together with our strategic partners and the exploitation
of economies of scale, has ensured the timely development of
construction projects despite heavy supply chain instability within
the industry related to the current social and geopolitical
climate.
New and Evolving Markets
There is a clear global shift towards low carbon energy
generation. In all key regions in which the Company provides grid
balancing and market services, there is a political commitment to
achieve carbon neutrality by 2050, with Germany now committed to
100 per cent renewable power by 2035 in the light of Russia's
invasion of Ukraine. ([52]) , ([53]) , ([54]) , [55] These
political ambitions should encourage a strong economic tailwind for
continued and rapid growth within the battery storage sector.
Notwithstanding an increase in participants in the energy
storage market, the Company still maintains a material share of the
grid balancing services of large-scale battery storage systems. We
accredit our market share to not just our size and scale, but also
to our operational and technological reliability. [56] In the
fiscal year, the Company maintained operational performance at an
average availability of 97 per cent. [57] Operational HSE
performance has been very reassuring, as the Manager works closely
with EPC contractors and O&M providers to ensure Health and
Safety of the Company's sites during the construction and operation
stages. The Company aims to always operate in a manner that
safeguards public health, property and the environment and I am
therefore proud to note that the GSF has had no health or safety
incidents or community complaints in the fiscal year.
DC and FFR are two primary ancillary services delivered by
large-scale batteries to the UK National Grid. The Company
represents13 per cent. of the DC market and 8 per cent of the FFR
market. In Ireland, where ancillary services are delivered under
the DS3 program, Gore Street accounts for 55 per cent. of DSC
capped (fixed price) contracts, and 13 per cent. of DS3 uncapped
(floating price) agreements.
The Company began to deliver Frequency Containment Reserves
("FCR") in Germany during the fiscal year and now accounts for 4
per cent of grid-scale battery ancillary services market in
Germany. As of the date of publication, GSF's services account for
3 per cent. of the grid-scale battery ancillary services market in
Texas's ERCOT market. ([58])
The Company's strong performance further justifies the Manager's
extensive pipeline of energy storage assets spanning multiple
continents, which, in turn, enables the Manager to enhance the
diversification of the Company's portfolio whilst expanding into
new markets. As of the publication date, we have secured exclusive
rights to negotiate contracts for 495.0 MW of new projects, of
which 295.0 MW are outside of the UK and the Republic of
Ireland.
Environmental Impact and Social Sustainability
Gore Street's purpose is to deliver long-term capital growth to
its investors through the construction, operation, and optimisation
of a geographically diverse portfolio of utility-scale battery
storage systems. Since IPO, the Company has maintained that energy
storage is a crucial component in accelerating the transition of
national grids to cleaner energy and that our products and services
are intrinsically entwined with these environmental objectives.
In the fiscal year, we have commenced compliance with SFDR
(including the TCFD climate change disclosures) and committed to
track and report environmental and social performance utilising
specific EU metrices that apply to global and European investors.
Similar metrices and performance targets are now underway in the
United Kingdom. ([59]) By signing up to SFDR, the Company has
committed to provide investors with visibility of the Company's
score card for select environmental principles and to continuously
evaluate and integrate those principles into the Company's business
activities, from acquisition to construction and through the
operating and decommissioning periods of an asset's life cycle.
SFDR compliance means that the Company will evaluate its
progression towards social and governance performance targets ahead
of adoption and codification by the Financial Conducts Authority in
the UK. ([60]) Specifically, we are tasked as market leaders to
encourage industry-wide evaluation of our sources of raw materials
used in cell and battery production and of the way decommissioning
will occur as batteries approach end of life. We intend to add to
Board membership in the coming year, having regard to the
appropriate skills and diversity essential to ensuring the Fund's
future prosperity.
The Company will publish its first ESG Pillars Report on its
website in August 2022 (including its environmental data) and
thereafter will release an update of its progress on an annual
basis.
COVID-19, and Other Principal Risks and Uncertainties
Since IPO, the United Kingdom's economy has been impacted by
Brexit and the coronavirus (Covid-19) although the Company's
operational and construction activities have remained largely on
target. The Company established supply and procurement framework
arrangements which allowed the Group to benefit from economies of
scale over the past few years and to maintain timely and preferred
access to equipment notwithstanding market shortages. However,
there is a risk that continued market disruption will begin to
materially impact construction and supply chain activities.
Whilst the UK is not materially reliant on Russian gas [61] ,
the Russian-Ukrainian conflict does increase global instability and
may arguably have accelerated the business case for increased
reliance on renewable power in Ireland, Germany, and other parts of
Europe. We discuss the potential impact of geopolitical conditions
and other risks alongside our mitigation strategies on page 80.
Use of Funds, Dividends and AGM
We returned to investors twice during the fiscal year to raise
funds and were oversubscribed when we completed a modest 2021/2022
issuance programme for 250 million shares, raising GBP208 million
during the fiscal year. The Fund market cap exceeded GBP400 million
during the fiscal year, growing to the point of inclusion in the
FTSE All-share index.
With funds raised and allocated across the existing construction
and acquisition pipelines, the Company elected, after the fiscal
year, to issue a 2022/2023 issuance programme of 750 million shares
but limited its initial raise to 160 million shares (which was
again oversubscribed). As of the date of publication, Gore Street's
market cap is GBP0.58 billion. The Company's share price has
consistently traded at a premium to NAV throughout the reporting
period.
The Board declared dividends for the reporting period amounting
to 7p per Ordinary Share, in keeping with its dividend policy. This
represents the fourth consecutive year of dividend allocation. The
Board will propose for the final 1p payment to be scheduled for
distribution to shareholders around the time of publication of this
report.
The Company plans to host its 2022 AGM as a hybrid meeting on
the 20(th) of September 2022. With the recent increase in incidents
of COVID 19, shareholders are encouraged to attend virtually.
Further details, including the location, video and/or audio link,
and questions and answers procedure, will be provided in the Notice
of AGM.
Dividend Ratification
The Board was concerned to learn a technical issue has arisen in
respect of the Company's procedure for the payment of the interim
dividend of 2.0 pence per Ordinary Share for the period from 1 July
2021 to 30 September 2021 paid on 7 January 2022 and the interim
dividend of 2.0 pence per Ordinary Share for the period from 1
October 2021 to 31 December 2021 paid on 1 April 2022 (the "Interim
Dividends"). The aggregate amount of the Interim Dividends was
approximately GBP13.8 million.
This issue arises from an inadvertent failure to file interim
accounts with Companies House showing that sufficient distributable
reserves were available when the dividends were paid.
A special resolution will be proposed at the Company's
forthcoming AGM to resolve this technical issue.
The Board has been working closely with the Manager to ensure
that lessons are learned and that processes have been enhanced to
avoid a recurrence.
More detail is set out in the Financial Notes 21 pages
157-158.
Directors' Responsibilities Pursuant to Section 172
The Directors are responsible for acting in good faith and
towards the success of the Company for the benefit of its members.
In doing so, Directors must have regard for the needs of
stakeholders amongst other matters set out in section 172 when
performing their duties as discussed in the corporate governance
report, on pages 100-114.
Viability and Going Concern
The Directors have assessed the prospects of the Company over a
period of five years and confirm our reasonable expectation of
viability and continuance over that term. The Board deemed this
period appropriate due to the early stage of development of both
the Company and its investment portfolio after 40 months of
trading, and the nature of the business in which the Company is
involved. The Directors' assessment of Gore Street's viability and
going concern are discussed in the corporate governance report, on
pages 100-114.
Closing Remarks
The year ending March 2022 marks the year of strong performance
at the Company. The Investment Manager has added to its talent pool
thus enhancing our capacity to meet ambitious targets, contain
costs, maximise revenues, and grow both financially and
responsibly, while entering new markets. On behalf of the Board, I
wish to thank the Investment Manager, its CEO, Alex O' Cinneide,
and the staff together with our suppliers and service providers for
their individual and collective contributions to our success.
The Company is now part of the critical infrastructure necessary
for incorporating greater amounts of renewable energy into national
and regional power grid systems in the United Kingdom, Ireland,
Germany, and the United States. With the support of our
shareholders, I am confident of Gore Street's capacity to deliver
our ambitious growth plans and look forward to continued
success.
STRATEGIC REPORT
1. Business Model
Asset identification and assessment
The Investment Manager has assessed hundreds of projects since
the Fund's IPO to select opportunities that meet the Company's
investment policy. As part of its assessment of investment
opportunities, the Investment Manager routinely runs market
analyses on each grid network within its geographical mandate. The
Investment Manager's team also works with local advisors to
evaluate the regulatory environment applicable to each grid
operator. The Company has established a strong network of project
developers that possess a deep understanding of early-stage project
development to ensure that projects identified for investments meet
or will meet land, planning and grid energisation requirements by
the time of acquisition. The Investment Manager has designed the
Company's portfolio to be geographically diverse with flexibility
in mind so that the Company can withstand regulatory and
technological changes in the evolving energy policy climates of the
various markets in which it has a mandate to operate.
Acquisition execution and onboarding of new assets/projects
The Investment Manager's team is comprised of professionals with
experience in finance, legal, asset construction, engineering, and
operations. The Investment Manager manages the acquisition process
from bid to close. It relies on third parties to ensure due
diligence and remove biases in assessing opportunities. It aims to
design transactions in a manner that allocates project risks in
accordance with the Company's investment policy. The investment
team is also responsible for monitoring and integrating the
Company's health, safety, environmental, social and investment
objectives into the Company's acquisition model.
Procurement and Construction
The Operations Manager has an in-house procurement team, with
both the legal and technical expertise to negotiate all key
contracts for project engineering and construction and obtain
warranties for continued battery performance. The construction and
development team are responsible for monitoring project
construction and holding relevant stakeholders accountable for cost
and quality control and timeline management. The team is also
responsible for monitoring and integrating the Company's health,
safety, environmental, social and investment objectives into the
Company's construction model.
Performance Optimisation, Responsible management, and
monitoring
The Operations Manager dictates the parameters for revenue
stacking and optimisation for the portfolio. It forms its bidding
strategies by taking into consideration energy market dynamics,
regulatory limitations, and existing contract commitments and then
works with optimisation and trading professionals to maximise
revenue streams. The Operations Manager also monitors asset
performance in order to ensure asset availability for revenue
contracts. The asset performance team is responsible for managing
relationships with stakeholders, monitoring technical performance
and maximising asset availability. The team is also responsible for
monitoring and integrating the Company's health, safety,
environmental, social and investment objectives into the Company's
operations model.
2. Investment Summary
Investment Objective
The investment objective of the Company is to seek to provide
investors with a sustainable and attractive dividend over the long
term by investing in a diversified portfolio of utility-scale
energy storage projects [62] . In addition, the Company seeks to
provide investors with an element of capital growth through the
re-investment of net cash generated in excess of the target
dividend in accordance with the Company's investment policy.
Asset Diversification and Revenue Stacking
Assets are diversified across different stages (operation, under
construction and pre-construction), and through the ability to
participate in different services, with most of the sites expected
to generate revenue from more than one contract. Furthermore, the
portfolio is spread across four different geographical grids.
Revenue diversification is also achieved through the potential to
"stack" several different income streams in one battery, allowing
the Company to spread risks across different counterparties,
contract lengths and maintain varying return profiles. The Company
aims to maintain similar diversification across third-party service
providers and works with a variety of developers, EPC contractors,
O&M contractors, battery manufacturers, asset managers and
route-to-market providers.
Geographical Concentration and Diversification
The Company may invest in projects in the UK, the Republic of
Ireland, North America, Western Europe, Australia, Japan, and South
Korea, although it does not intend that the aggregate value of
investments outside the UK and the Republic of Ireland will be more
than 60 per cent. of Gross Asset Value (calculated at the time of
investment).
It is the Company's intention that no single project will have
an acquisition price greater than 20 per cent. of Gross Asset Value
of the Group as a whole (calculated at the time of acquisition).
However, to retain flexibility, the Company will be permitted to
invest in any single project (or interest in any project) that has
an acquisition price of up to a maximum of 25 per cent. of the
Company's Gross Asset Value (calculated at the time of
acquisition).
Currency Exposure Management
The Company enters into hedging arrangements as appropriate to
manage its exposure to foreign currency, ensure repayment of
capital expenditure, protect against interest rate hikes, and
efficiently manage operating cash flow to ensure repayment of
intra-Group debts. The Company will not enter into derivative
transactions for speculative purposes. During the fiscal year, the
Company hedged between 50-80 per cent. of near-term forecast
cashflows in the Republic of Ireland in order to manage its
exposure against deviations in the euro-pound exchange rate and
ensure appropriate protection of the Company's interests in Ireland
and Northern Ireland.
Gearing
The Board and the Investment Manager periodically review the
Company's gearing policy to ensure that it is accretive to
Shareholders and in line with the financing needs of the Group's
expanding portfolio.
During the fiscal year, the Company determined in light of the
energy storage market's maturity, to increase its ability to
utilise debt where appropriate (subject to the prior approval of
the Board) to expand the size and scale of operations, support the
development of an expanding portfolio, and to seek to enhance
profitability. The Directors intend for the Company to maintain a
conservative level of borrowings but have increased the maximum cap
from 15 per cent. to 50 per cent. of Gross Asset Value (calculated
at the time of drawdown of the relevant borrowings). [63]
Notwithstanding the increased cap, the Directors have instructed
the Investment Manager to apply a firm borrowing limit of no more
than 30 per cent. of gross assets at any time and the Directors
commit to inform Shareholders prior to any amendment of its views
and guidelines on gearing.
The Company is a guarantor under a GBP15 million facility held
by the Company's subsidiary, GSES 1 Limited. The facility may be
used to fund acquisitions, for construction of assets, and for
general working capital requirements.
INVESTMENT MANAGER'S REPORT
CEO of Gore Street Capital, the Investment Adviser to the
Company, Alex O'Cinneide commented:
"I am pleased to report that the Company continues to enjoy a
sustained period of rapid growth, responding to the pressing and
global increasing need to enable the energy transition to a low
carbon society through energy storage solutions and in the process,
further diversifying our portfolio for shareholders. We have
achieved this through a mixture of financial and operational
success, raising additional capital via highly successful,
oversubscribed fundraises, from both institutional and retail
investors; as well as delivering on our strategy, first laid out in
our IPO of 2018 when we defined this category of investing, of
building the industry-leading international portfolio of energy
storage assets, now totalling 628.5 MW.
Our growing team of technology and engineering resources are
proactively managing both the operational and in-construction
assets to ensure that costs and construction risks continue to
maintain our market-leading position. This active asset management
approach continues to optimise Capex of the portfolio of assets
which increases both performance and profitability, providing
greater returns for shareholders.
Additionally, our onsite teams assess how best to keep
construction on time and within budget, something that the Company
has had great success with to date, even in this period of supply
chain challenges; as well as carefully designing each asset to be
optimised for maximum efficiency once operational.
The 291.6 MW operational portfolio [64] continues to deliver
significant cash flow for the Company and has ensured we have
maintained our robust dividend of 7 pence per share. The end of the
period saw the GB and Northern Irish assets perform extremely well;
outperforming revenue expectations considerably.
During the 2021 financial year, we successfully raised GBP135.0
million in April 2021 and a further GBP73.6 million in October 2021
via a Placing and PrimaryBid offer, with an additional GBP150.0
million raised post-period end. Both fundraisers were
oversubscribed, resulting in a scaling back exercise. The strong
demand came from new and existing investors, further broadening our
capital base. The substantial increase of investible capital has
given the Company additional headroom to continue our strategy of
expanding into other geographies, with our first acquisition in
Germany, during the period, and in the United States post-reporting
period, both of which add a layer of geographical and revenue
diversity to our already highly diverse portfolio of energy storage
assets, de-risking Gore Street further for our shareholders.
The global transition to clean and renewable energy generation
continues to be a dominant priority for governments both
domestically and internationally, and our assets play an important
role in supporting energy security and the transition to a
low-carbon society, as well as creating substantial value for
shareholders.
We look ahead to the next year with optimism and look forward to
updating shareholders on our progress during regular intervals
throughout 2022 and beyond."
Portfolio Overview
As of March 2022, the Company has an interest in 26 assets held
within 16 portfolio companies [65] .
Summary of Recent Portfolio Developments
As of March 2022, the Company has increased its total portfolio
to 628.5 MW, comprised of 231.7 MW of operational assets and 396.8
MW of construction and pre-construction projects. The latter
includes the grant secured in November 2021 from EirGrid to
increase KBSL grid capacity in the ROI by a further 90.0 MW, and
the 60.0 MW expansion of PBSL in the ROI secured last year.
The Company's portfolio as of March 2022 represents an increase
of 134 per cent. in portfolio development capacity (MW) since March
2021, and an 11 per cent. increase in the operational capacity.
The Stony (79.9 MW) and Enderby (57.0 MW) assets acquired in
April and September, respectively, are expected to become
commercially operational in Q2 and Q4 2023 calendar year,
respectively.
The Company successfully marked its second stage of expansion
outside the GB market in March 2022 (having expanded into Ireland
in July 2019), with the acquisition of the Cremzow (22.0 MW) assets
in Germany. The Cremzow site has been operating to specification
and delivering revenues to the Group since January 2022 [66] . This
milestone is further evidence of the successful application of the
Company's investment methodology to new markets.
The Company also signed contracts for its first US acquisition
in March 2022, comprising an 79.6 MW portfolio of three operational
sites and five pre-construction sites in Texas. The Company has
since completed acquisition of three 9.95 MW operational assets and
one 9.95 MW projects in pre-construction stage [67] , post the
reporting period. The three operational sites began to generate
merchant revenues for the Group, as of April 2022 [68] , through
delivery of ancillary services in the ERCOT market. The fourth
asset is scheduled to be operational in the second half of
2023.
The Company also reached a milestone in the ROI after the
reporting period, with its Porterstown asset coming energised as of
the date of publication. PBSL will be delivering services to
EirGrid [69]
In total, the Company's operating portfolio as of the date of
publication is 291.6 MW and the total portfolio capacity is now
668.3 MW.
The portfolio buildout provided below illustrates the Company's
acquisitions since IPO, highlighting the relevant milestones as of
March-end and as of the publication date.
Figure 9 : Portfolio by Stage. Note: colours indicate the status
of assets, as of March-end. LR and PT stand for the Company's
assets, Lower Road, and Port of Tilbury, respectively.
Investment commitments made during the year and for projects
closed post-year end are listed in the table below.
Table 3 : Capital Commitment and expected Commercial Operational
Dates (COD) for projects acquired during the fiscal year as well as
projects signed during the fiscal year but closed post year-end.
The percentage committed is calculated based on the deals closed in
the period up to publication and does not include deals that were
signed but not closed.
Completion Project Location COD [70] % Owned Status Capital % of cash
Date by the Commitment* on balance
Company [71] sheet as
at 31 March
2022
committed
to project
May 2021 Stony England Q2 2023 100% Pre-construction GBP30.8m 14.1%
September
2021 Enderby England Q4 2023 100% Pre-construction GBP29.7m 13.6%
March 2022 Cremzow Germany Q2 2019 90% Operational GBP0.0m 0.0%
------------ -------------- ----------- ---------- ------------ ----------------- ------------- -------------
Assets signed within the reported period, but completed post-reported period:
-----------------------------------------------------------------------------------------------------
March 2022 Snyder Texas, US Q4 2021 100% Operational GBP7.5m 3.4%
March 2022 Sweetwater Texas, US Q4 2021 100% Operational GBP7.5m 3.4%
March 2022 Westover Texas, US Q4 2021 100% Operational GBP7.5m 3.4%
March 2022 Mineral Wells Texas, US H2 2023 100% Pre-construction GBP6.9m 3.1%
As of March 2022, the Company has outstanding commitments of
GBP210.8m, broken down below.
2022 2023 2024 2025 Total
Outstanding commitments
(% of Cash on Balance
Sheet as of 31 March
2022) 53.3% 16.6% 24.9% 1.6% 96.4%
------ ------ ------ ----- ------
Committed amounts (GBP
mil) 116.6 36.3 54.4 3.5 210.8
------ ------ ------ ----- ------
Table 4 : Outstanding commitments as of 31 March 2022 [72]
Portfolio Summary
The Company's 628.5 MW portfolio of energy storage assets is
made up of operational assets, assets under construction
("construction assets") and assets undergoing design and
contracting ("pre-construction assets").
A summary of the Company's operational assets is provided in
table 7 below and a summary of its construction projects and
pre-construction projects is available in table 8 below:
Table 5 : Summary, as of 31 March 2022, of all sites in
construction, including the location of assets, capacity (MW),
construction status and the expected Commercial Operational Date
(COD), expressed as calendar year.
Fiscal Year GB Location Nameplate Construction Expected COD Revenue
power Status (Calendar year) Streams
capacity
(MW)
Ferrymuir Fife, Scotland 50.0 Pre- Q1 2023 Frequency
Construction Capacity
Market
Energy
Trading
Enderby Leicestershire, 57.0 Pre-construction Q4 2023 Frequency
England Capacity
Market
Energy
Trading
Stony Buckinghamshire, 79.9 Pre-construction Q2 2023 Frequency
England Capacity
Market
Energy
Trading
Ireland Location Nameplate Construction Expected COD Revenue
power Status Streams
capacity
(MW)
Porterstown Co. Dublin 30.0 Under Q3 2022 DS3 Capped
Phase 1 Construction Capacity
Market
Porterstown Co. Dublin 60.0 Pre-construction H1 2024 DS3 Uncapped
Phase 2 Capacity
Market
Kilmannock Co. Wexford 30.0 Pre-construction Q4 2023* DS3 Capped
Phase 1 Capacity
Market
Kilmannock Co. Wexford 90.0 Pre-construction Q4 2023* DS3 Uncapped
Phase 2 Capacity
Market
Post year-end US Location Nameplate Construction Expected COD Revenue
acquisitions power Status Streams
capacity
(MW)
Mineral Wells Texas 9.95 Pre-construction H2 2023 Ancillary
Services
Energy
Trading
*Expected timeline as of 31 March 2022. As of the publication
date, the Investment Manager anticipates delays in the timeline.
Commissioning dates to be confirmed by the Investment Manager
Table 6 : Summary, as of 31 March 2022, of operational sites
including the location of assets, nameplate capacity (MW and MWh),
availability for the year and services that can be performed.
Fiscal GB Location Name Plate Name Plate Availability Services that
Year Power Capacity Energy for the year can be
Capacity performed
MW MWh
DC, FFR,
Capacity
Cenin Wales 4.0 4.8 94.9% Market
FFR, Capacity
Market,
Boulby Yorkshire 6.0 6.0 93.4% Triads
DC, FFR,
Capacity
Ancala Mixed* 11.2 11.2 96.7% Market
DC, FFR,
Energy
Trading,
Capacity
Lower Road Essex 10.0 5.0 87.4% Market
DC, FFR,
Capacity
Market,
Port of Tilbury Essex 9.0 4.5 92.3% Triads
DC, FFR,
Energy
Trading,
Capacity
Larport Hereford 19.5 19.5 99.6% Market
DC, FFR,
Energy
Trading,
Capacity
Lascar Bury 20.0 20.0 99.0% Market
DC, FFR,
Energy
Trading,
Capacity
Hulley Macclesfield 20.0 20.0 98.7% Market
DC, FFR,
Energy
Trading,
Capacity
Breach Farm Derbyshire 10.0 10.0 99.2% Market
Ireland Location Name Plate Name Plate Availability Services that
Power Capacity Energy for the year can be
Capacity performed
MW MWh
Drumkee Co. Tyrone 50.0 21.3 97.4% DS3 Uncapped
Mullavilly Co. Armagh 50.0 21.3 97.1% DS3 Uncapped
Germany Location Name Plate Name Plate Availability Services that
Power Capacity Energy - since can be
Capacity acquisition performed
MW MWh
FCR, Energy
Cremzow Cremzow 22.0 29.0 100% Trading
TOTAL 231.7 172.6
Post US Location Name Plate Name Plate Availability Services that
year-end Power Capacity Energy since can be
acquisitions Capacity acquisition performed
MW MWh
Scurry County, RRS, Energy
Snyder Texas 9.95 19.9 N/A Trading
Nolan County, RRS, Energy
Sweetwater Texas 9.95 19.9 N/A Trading
Ector County, RRS, Energy
Westover Texas 9.95 19.9 N/A Trading
TOTAL 29.9 59.7
*The Ancala asset comprises 10 smaller sites of 1.0 MW - 1.2 MW
across the UK. Availability for the year for US assets Snyder,
Sweetwater and Westover is not applicable, as these are post
year-end acquisitions.
Portfolio Installed Capacity: Expected Completion Date
The Manager [73] expects all sites currently under construction
or pre-construction to begin commercial operations by the end of
the second quarter of the 2025 calendar year.
Figure 10 : Expected Completion Date of sites under construction
and Installed Capacity expectations for the portfolio by 2025.
[74]
Capex Optimisation
The Manager strongly believes in capital efficiency, and through
financial discipline and leveraging the technical know-how of its
in-house team and strives to achieve amongst the lowest Capex
and/or Capex/MW in the industry.
The table below shows the declining trend in Capex expenditure
across the Company's assets, on a MW basis. Although Engineering
and Procurement Contract ("EPC") prices have increased
significantly in the fiscal year, the Manager leveraged the support
of its strategic partners to ensure responsible and timely
development of construction projects. The Operations Manager then
closely monitored construction progress with the aim of minimising
unnecessary expenditure.
GBP,000s/MW
Figure 11 : Total Capex of the Company's greenfield projects,
expressed as GBP'000 per MW, for both 30min and 1h-duration
systems. Capex figures include (not restricted to): Development
Fee, Grid connection Capex, EPC capex.
Asset Performance
Figure 12 : Assets Availability by region for the 2021/2022
fiscal year, including German revenues received for Q1 2022 upon
acquisition in March 2022 [75] .
During the fiscal year, the Company's portfolio of assets
achieved an average availability across all regions of 97 per cent
[76] :
GB: In April 2021, availability was affected by the performance
of one of the Company's assets (Lower Road) which was taken offline
for 13 days to allow for cable replacements. The site returned to
full operational capacity in May 2021.
Ireland: Asset availability in Ireland lowered periodically
between April and July 2021. In April, one of the projects in NI
underwent switchgear maintenance. In June, the assets were taken
offline for three days to improve inverter stability and in July,
the assets experienced inverter dropouts. Inverter stability has
now been secured in both sites.
Germany: The Cremzow asset was acquired in March 2022 with a
commercial transfer date of Jan 1, 2022 . The assets are assumed to
have achieved availability of 100 per cent. across Q4 of the
reporting year.
US : The Texan assets were acquired after the reported period,
with a commercial transfer date of 1 March 2022. The three
operational assets are assumed to have achieved availability of 100
per cent. during the fourth quarter of the reporting period.
Health & Safety (HSE)
The Manager monitors and collaborates with best-in-class EPC
contractors during the construction period. The EPC [77] contractor
takes on the role of principal contractor and HSE manager until
commercial operation. Following commercial operations, the Manager
works with third-party asset managers and O&M service providers
to ensure the Health and Safety of the Company's sites. GSF's
service providers are chosen based on their performance records and
are required to deliver services in accordance with good industry
practice.
The Company aims to always operate in a manner that safeguards
public health, property and the environment and is proud to note
that it has had no health or safety incidents or community
complaints in the fiscal year.
Revenue Stacking During the 2021/2022 Fiscal Year
The diverse ancillary and trading opportunities available to
energy storage assets create opportunities for diversification of
revenues with the goal of maximising the Company's return on
capital. A breakdown of sources of revenue across the different
regions is detailed below.
Table 7 : Revenue breakdown for the Company's revenue
breakdown.
Revenue Stream (GBPmillion) % Within % Of Revenue Revenue MW MWh
the Grid overall / MW / MWh
portfolio (GBP000's) (GBP000's)
-----------
Fiscal GB
Year
-------------------- ------
Firm Frequency
Response (FFR) GBP4.83 29.4% GBP44.0 GBP47.8 110.0 101.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Dynamic Containment
(DC) GBP9.78 59.6% GBP89.1 GBP96.8 110.0 101.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Capacity Market
(CM) GBP0.97 5.9% GBP8.8 GBP9.6 110.0 101.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Wholesale Trading GBP0.65 3.9% GBP5.8 GBP6.4 110.0 101.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
GBP12.6
Triad GBP0.19 1.1% [78] GBP18.0 15.0 10.5
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
GB - Total GBP16.42 55.48% GBP149.3 GBP162.6 110.0 101.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Ireland
-------------------- -------------- ---------- ----------- ------------ ------------ ------ ------
DS3 GBP12.23 100.0% GBP122.2 GBP287.0 100.0 42.6
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Ireland - Total GBP12.23 41.35% GBP122.2 GBP287.0 100.0 42.6
--------------------------
Germany - 3 months
-------------------- -------------- ---------- ----------- ------------ ------------ ------ ------
Frequency
Containment
Reserve (FCR) GBP0.63 100.0% GBP28.8 GBP22.6 22.0 28.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Germany - Total GBP0.63 2.14% GBP28.8 GBP22.6 22.0 28.0
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Operating Revenues GBP29.28 98.97%
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Post US - 1 month [79]
Year-End
-------------------- -------------- ---------- ----------- ------------ ------------ ------ ------
Responsive Reserve
Services (RRS) GBP0.31 100.0% GBP10.2 GBP5.1 29.9 59.7
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
US - Total [80] GBP0.31 1.03% GBP10.2 GBP5.1 29.9 59.7
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Operating Revenues GBP29.59 100.0%
-------------------- -------------------------- ---------- ----------- ------------ ------------ ------ ------
Great Britain (Revenue Stack)
Figure 13 : Overview of time allocated in the fiscal year for
the Company's operational assets in GB [81] .
Operating GB assets showed strong performance for the period:
the average revenue per MW for the fiscal year was more than 68 per
cent. higher than the previous fiscal year's average.
89 per cent. of GB asset delivery time was spent performing
ancillary services (DC and FFR) which generated 90.1 per cent. of
revenues for the Company's GB assets. The remaining time was spent
in power trading, which generated 4 per cent. of revenues. The
remaining 6 per cent. of revenues were generated from the Capacity
Market ("CM") services which is a stackable service for which
revenue is earned in parallel with delivery of other services to
the power grid. All GB assets have capacity agreements with a
duration of between one to fifteen years. Capacity contracts are
designed to deliver power to the grid, at times of peak demand.
Ancillary service prices remained at high levels of
GBP17.5/MW/hour during the fiscal year. Between 1 January and 31
March 2022, prices averaged GBP23.1/MW/hour, with February 2022
being the strongest month, when DC achieved c. GBP48.0/MW/hour. In
April 2022, ancillary service prices reached a record-high of c.
GBP104.0/MW/hour. Revenue per MWh in Q1 2022 calendar year was 65
per cent. higher when compared to Q1 2021 and 22 per cent. higher
than 2021 quarterly average. The Investment Manager anticipates
that this trend will continue into summer 2022 as National Grid
procures increased volumes of DC (around 1.0-1.1GW of capacity).
[82]
Figure 14 : FFR and DC average price levels secured by GSF
Portfolio companies since DC introduction [83]
When appropriate, the Manager participates in wholesale trading
to exploit spikes in power pricing as a result of market
volatility. Although power trading can offer higher payments than
ancillary services, there are also higher costs associated with
faster degradation of the battery if it is used for arbitrage.
During the fiscal year, the National Grid changed its
procurement method for DC from a 24-hour procurement period to
four-hour EFA blocks, providing the assets with greater flexibility
to participate in both grid balancing and wholesale trading
services. Beginning in September 2021, volatility increased in GB's
wholesale energy markets, improving the opportunity for energy
trading. The opportunities for combined delivery of energy trading
and frequency response service resulted in an additional 4.3 per
cent. uplift over the forecasted ancillary services baseline.
Figure 15 : Wholesale Market trading price in GB during FY
2021/2022 (GBP/MWh) (Aurora EOS platform, 2022)
According to a third-party market researcher [84] , some of the
Company's assets attained the highest market revenues on a per MW
and MWh basis at least twice during the fiscal year. The batteries
in question were of 30 min and 1-hour duration with lower Capex
when compared to longer duration. The Figure below showcases the
increasing Capex for longer-duration batteries, as per market
data.
Although the ideal duration (MWh/MW) for delivery of market
services will vary by geographic region, ancillary services can
appropriately be delivered using short-duration systems (such as
30-minute or one-hour systems). Whilst ancillary services remain
the major source of revenue, there is little incentive to increase
the average battery duration.
The Figure below showcases the increasing Capex for
longer-duration batteries, as per market data.
Figure 16 : Market data for Capex increase for 1h, 2h and 4h
systems. Note: Balance of System (BoS), a structural component of
batteries. Source: Aurora Energy Research Ltd, 2021.
Battery duration is obtained by increasing the number of cells
behind each MW of power capacity. The longer the duration, the more
expensive the battery. The Capex margin between short and
long-duration battery systems is expected to increase in the
near-term raw material prices (lithium as well as aluminium,
graphite, and copper) increase [85] . Lithium alone has increased
c. 400 per cent over the last year.
The Investment Manager believes that it is premature to invest
in a 2-hour battery for the GB market given the current Capex.
Moreover, as trading only offers a marginal uplift to ancillary
services revenues (ignoring degradation concerns) it does not
justify the greater Capex. When appropriate, the Company has the
options of both retrofitting existing assets with additional MWh
capacity and increasing its pipeline for larger duration batteries.
A retrofit can be completed within 6-8 months and will be
appropriate if Capex reduces to below GBP300k/MWh or if trading
revenue strategies change to justify the increase in Capex.
Ireland (Revenue stack)
Figure 17 : Overview of time allocated in the fiscal year for
the Company's operational assets in Ireland [86] .
The Company's assets in NI and the ROI participate in the DS3
programme and the Integrated Single Energy Market ("I-SEM")
providing revenue streams which are substantively similar to the GB
markets. The Company's NI assets delivered DS3 services for c. 94
per cent of the time in the fiscal year.
The Investment Manager currently provides uncapped DS3 services
in NI with an aggregate capacity of 100.0 MW. In NI, the Company
uses sub-30-minute duration batteries to deliver six ancillary
services under its DS3 uncapped contracts. Prices averaged c.
GBP14/MW/hour during the fiscal year. In Q1 2022, NI revenues
exceeded forecast, and in February achieved an average price of c.
GBP31/MW/hour and c.GBP2m of the GBP4.9m net revenues generated in
Q1 2022.
The uplifts against forecasted DS3 revenues were aided by
improvements in asset performance and availability but are
materially based on the structure of DS3 revenue contracts.
Under DS3, EirGrid and SONI impose trigger and trajectory
scalars that determine when batteries should kick in, and how
steeply they should ramp up their response. Under the System
Non-Synchronous Penetration (SNSP) scalar, battery assets are
rewarded for adequately forecasting their availability to provide
frequency (and other ancillary services) and for actual delivery of
services following a performance incident ([87]) . The rationale
behind this scalar is to incentivise flexible assets, such as
batteries, to be available when the electricity network is
vulnerable to intermittency and the grid operators are under
stress: The more reliable the generator, the greater the revenues.
This creates a very lucrative scheme for batteries during months
when renewable generation is high, as was the case during the
recent winter of 2022, when wind penetration in the island was
relatively high.
The DS3 scalar component in pricing also means that revenues
will fluctuate based on wind penetration but will generally be
lower in the summer months and higher in winter months. In February
2022, as a result of volatility due to high wind penetration, DS3
uncapped revenues were more than double the annualised average.
Uncapped DS3 contracts will continue to be awarded by EirGrid
and SONI until 30 April 2024 although regulatory authorities have
the option to extend contracts up to 2026.
The Group's assets in the ROI (Porterstown and Kilmannock)
successfully won 60.0 MW out of the 110.0 MW awarded through a
competitive tender for capped (fixed tariff) DS3 services in 2019
([88]) . The volume capped contracts are offered for a maximum of a
six-year term, which begins in June 2022 for Porterstown (30.0 MW)
and is expected to commence in Q4 2023 for Kilmannock (30.0 MW).
[89] DS3 capped contracts pay a fixed tariff and are not subject to
the SNSP scalar.
The DS3 framework also includes CM services, and the Company
possesses CM contracts for both of its assets in NI for delivery
years beginning 2022, 2024 and 2025 (and will seek 2023 contracts
in upcoming auctions).
New Markets
The Company's Cremzow asset in Germany further diversifies
portfolio revenues. Frequency Containment Reserve (FCR), accounts
for 100 per cent. of the services provided between 1 January to 31
March 2022 by the asset ([90]) .
The commercial transfer date for Cremzow was 1 January 2022.
There has been an uplift in projected FCR prices from the
acquisition base case, spurred on by increased volatility in the
European energy market, ([91]) (.) FFR prices have averaged
EUR21.1/MW/hour across Q1 2022
Figure 18 : Overview of time allocated between 1 January to 31
March 2022 for the Company's operational asset in Germany [92]
The three operational assets acquired post-reporting period in
the US were subject to commercial transfer date of March 2022, and
profits accrued by the Company for the month of March 2022 [93] .
In March 2022, the three operational assets in Texas delivered
Response Reserve Service (RRS), at an average market price of
$18.7/MW/h in 2022, with peak market prices of $183.5/MW/h.
Since April 2022 (post period-end), average RRS prices have been
15 per cent. higher than the previous year, with peaks as high as
$2,000/MW/h during periods of sustained high temperatures [94] , as
pricing closely follows Texas temperature patterns, with high
temperatures leading to high grid demand.
Figure 19 : Overview of time allocated in the month of March
2022 for the Company's operational assets in the US, Texas [95]
.
Cash generation for the Fund
During the period from 31 March 2021 to 31 March 2022, the
operational portfolio generated an EBITDA of c. GBP23 million.
Inclusive of fund expenses, the Company generated c. GBP16 million
in EBITDA.
For the period between 31 March 2021 to 31 March 2022, dividends
were fully covered by the EBITDA of the operational portfolio.
Dividend coverage [96] for the period between 31 March 2021 to 31
March 2022 was 1.09x for the operational portfolio and 0.7x for the
Company during the reporting period.
Figure 20 : Historical dividend coverage and shares in issue by
the Company.
Profitability Drivers
o Lower Capex and Opex
The Manager aims to maintain financial discipline in its
procurement, construction, and ongoing management of the Company's
energy storage portfolio.
o Return on Capital
The Company's revenue strategy revolves around ancillary
services better suited to shorter duration batteries, as the asset
is required to correct small, but frequent, deviations in the
grid's frequency. Given lucrative opportunities in ancillary
services in GB and Ireland, the Investment Manager has optimised
the Company's capital allocation by sizing the assets in GSF's
energy storage portfolio to the targeted revenue strategy. This has
resulted in some of the Company's GB assets periodically achieving
the highest revenue per MWh and MW, as reported by Modo Energy
([97]) and achieving similar returns in Ireland.
Commitments / deployments
Figure 21 : Cash bridge since the end of the 2020/2021 financial
year, reflecting the Capex spent during the period. until March-end
2022.
The above figure illustrates the movement of cash over the
fiscal year, including the two successful fundraises totalling
GBP204 million (net of fees) in April and December 2021. The
Company spent GBP49 million in Capex and acquisitions of its
portfolio and paid a further GBP15 million in dividends. The 'Fund
Opex' is GBP6.4 million for the period. This implied a cash
generation of GBP20 million by portfolio companies over the
period.
The figure below shows the budgeted investment Capex for the
existing portfolio projects, broken down by quarter for the next
three years. The 'contracted Capex' comprises any pre-determined,
contractual Capex, such as signed EPC contracts, deferred
development fee payments and grid payments. The 'uncontracted
Capex' refers to anticipated Capex that the Company does not yet
have any contractual obligation to spend, such as EPC contracts
under negotiation or tender. The 'expansion Capex' and 'duration
Capex' reflect the expected expenditure for the second phases of
the assets in the ROI (PBSL and KBSL), and expenditure for an
increase in duration to 1-hour systems for the sites currently
operating below a 1-hour duration. The running cash balance shows
decreasing cash on the balance sheet, as the Company incurs its
expected Capex over the next three years.
Figure 22 : Planned Capital Deployments and net cash position
(running cash balance) for the Company over the next 3 years.
[98]
The figure below illustrates the expected timing for the use of
the Company's cash on the balance sheet (cumulative) in percentage
terms, on a quarterly basis.
Figure 23 : Capital commitments or future capital deployments,
as a percentage of Captial until 2025. [99]
Pipeline
To diversify revenues and market exposure, the Investment
Manager's current pipeline focuses heavily on international
markets, particularly mainland Western Europe and the United
States. These markets generally rely on similar grid balancing,
capacity market and trading services that characterise the GB and
Irish markets. Nonetheless, revenues are not necessarily correlated
given different regulatory frameworks, barriers to entry, levels of
renewable penetration and weather conditions.
In addition to opportunities in the UK, the Republic of Ireland,
the United States and Western Europe, the Investment Team may
invest in projects in Australia, Japan, and South Korea , in
accordance with the Company's investment policy. The Company does
not intend that the aggregate value of investments outside the UK
and the Republic of Ireland will be more than 60 per cent. of Gross
Asset Value (calculated at the time of investment).
The Investment Manager will leverage on its experience to secure
new assets in accordance with the Company's Investment Policy, so
that the Company does not assume early-stage development risks
associated with obtaining land, planning permission and grid
connection rights.
As of the date of publication, the Investment Manager is
actively reviewing opportunities in GB, Ireland, Western Europe,
and the United States. The total pipeline stands at 1.57 GW or 3.24
GWh with transactions in exclusivity amounting to a total of 495 MW
or 980 MWh as of the date of publication.
Table 8 : Pipeline as of the date of publication.
Project Location Total project Total project size
size MW h
MW
Project A GB 200.0 400.0
--------- ------------- ------------------
Project B GB 99.8 199.6
--------- ------------- ------------------
Project C EUR 43.5 43.5
--------- ------------- ------------------
Project D US 200.0 400.0
--------- ------------- ------------------
Project E US 50.0 100.0
--------- ------------- ------------------
Project F US 95.0 180.0
--------- ------------- ------------------
Project G US 19.0 76.0
--------- ------------- ------------------
Project H US 200.0 400.0
--------- ------------- ------------------
Project J US 200.0 400.0
--------- ------------- ------------------
Project K US 200.0 400.0
--------- ------------- ------------------
Project L US 200.0 400.0
--------- ------------- ------------------
Project M US 60.0 240.0
--------- ------------- ------------------
Total 1,567.3 3,239.1
------------- ------------------
Valuation of the Portfolio
Net Asset Value
The NAV for the Company in March-end 2022 amounted to GBP376.5
million and with an NAV per share of 109.1 pence. In March-end
2022, the Adjusted NAV for the Company amounted to GBP369.6
million, with an Adjusted NAV per share for the Company of 107.1
pence. Adjusted NAV is calculated as the NAV per the Statement of
Financial Position adjusted for the interim dividend relating to
the December 2021 quarter of GBP6.9 million or 2.0 pence per share,
which was declared in March 2022 but paid post period end on 1
April 2022.
The Adjusted NAV of March 2022 represents 6.1 per cent. increase
on the NAV per share achieved in March-end 2021 of 100.9 pence,
inclusive of costs. This metric provides consistency and a more
meaningful comparison against the NAV on 31 March 2021, which
already included the 2.0 pence per share dividend relating to the
December 2020 quarter, which was paid in March 2021, before
period-end.
Figure 24 : Net Asset Value (NAV) bridge for the fiscal year in
GBP m
The Net DCF changes have been broken out in the below graph:
Figure 25 : Net DCF changes bridge for the fiscal year
GBP(m).
Table 9 : Portfolio NAV
Total NAV (GBPm)
NAV per geography
Great Britain 89.4
Ireland 74.7
Germany 12.6
-------------------------- -------
Total NAV 176.7
-------------------------- -------
NAV per MW 0.37
-------------------------- -------
As shown above, the portfolio NAV is diversified across GB,
Ireland, and German markets, as of 31 March 2022. Furthermore, with
the recent acquisitions in Texas, US, the Investment Manager
expects the Fund to successfully mitigate the risk associated with
concentrated exposure to a particular grid and achieve
diversification of revenue streams over the course of 2022 and
2023.
Key NAV Drivers
The Investment Manager reflected general NAV drivers such as
inflation, across the portfolio, as well as making
asset/jurisdiction-specific NAV updates. The major updates were as
follows:
Inflation
All macroeconomic assumptions were independently determined by
respective research companies. The Investment Manager updated the
long-term CPI assumption from 2.5 per cent. to 3.0 per cent. across
the portfolio, given the current macro-outlook.
Grid Specific Drivers - Great Britain:
Revenues
In GB, updated price forecasts have been applied to all GB asset
valuations for ancillary services, trading, Capacity Market
revenue, and other revenue sources (such as voltage revenue and
TNUoS benefit). The price forecasts for ancillary services and
trading are illustrated in the blended curve shown below.
Blended Curve of Ancillary Service and Trading
(GBP/MW/h) Dec-22 Dec-23 Dec-24 Dec-25 Dec-30 Dec-35 Dec-40
------- ------- ------- ------- ------- ------- -------
GB (Real in
2021) 13.8 10.5 8.8 8.0 7.1 7.3 7.7
------- ------- ------- ------- ------- ------- -------
Assets which received T-4 Capacity Market contracts (Ferrymuir,
Stony and Enderby) and T-1 contracts (Ancala, Larport, Lascar,
Hulley and Port of Tilbury) in the 2022 Capacity Market auction
have been updated and reflected. ([100])
Expenses
Higher assumptions on insurance have been applied across the
portfolio to reflect the increased premiums being seen in the
market.
Capex: Battery cell cost forecasts have also been updated,
capturing the higher global prices seen currently in the market.
Final EPC contracts that were secured in the fiscal year, for two
of the Company's assets, Ferrymuir and Stony, have also been
reflected.
Grid Specific Drivers - Ireland:
Revenue
In NI, updated price forecasts have also been applied to asset
valuations for Uncapped DS3, Trading and Capacity Market revenue.
The forecast prices for NI up until 2025 are driven by uncapped DS3
services. The average of the central forecasts from multiple
third-party research houses are shown below:
Blended Revenue stack including DS3 and trading
(EUR/MW/h) Dec-22 Dec-23 Dec-24 Dec-25 Dec-30 Dec-35
------- ------- ------- ------- ------- -------
North Ireland (Real
in 2020) 11.6 13.1 13.9 9.8 4.6 4.3
------- ------- ------- ------- ------- -------
Republic of Ireland
(Real in 2020) 5.7 5.0 4.4 4.0 4.6 3.9
------- ------- ------- ------- ------- -------
The two NI assets were awarded Capacity Market contracts in 2019
for delivery commencing in October 2022.
Expenses
Higher assumptions on insurance have been applied across the
portfolio to reflect the increase in premiums being seen in the
market.
Capex: Battery cell cost forecasts have also been updated, which
capture the higher global prices currently seen in the current
market.
Grid Specific Drivers - Germany:
The Company's asset in Germany, Cremzow, was acquired on 10th
March 2022. GSF is the majority stakeholder in the asset (which
operates as a partnership structure), owning 90 per cent. stake.
The valuation of the asset saw the following key updates since the
time of its acquisition:
Revenue
Since the time of acquisition, the Investment Manager has
updated the revenue forecasts for delivery of FCR using central
revenue scenarios.
Expenses
Higher assumptions on insurance have been applied to the Cremzow
asset to reflect the increase in premiums seen in the market.
Key Sensitivities
The NAV sensitivities are shown in the table above and cover the
major macro-economic factors and valuation assumptions that the
portfolio is subject to. Increased Inflation, a lower discount rate
along with a stronger Euro will lead to an increase in the value of
the portfolio. Changes in EPC prices will have a material impact on
the NAV of the portfolio particularly in Great Britain, given a
number of assets in the pre-construction and construction stage,
which has been depicted in the table above.
Inflation rate: +/- 1.0%
FX volatility +/- 3.0%
Discount Rate: +/- 1.0%
EPC Capex: +/- 10.0%
Table 10 : NAV Sensitivity Chart
Region NAV in NAV Sensitivity Chart
Base Case
(With DCF)
Inflation Inflation FX FX Discount Discount
+1.0% -1.0% +3.0% (GBP -3.0% (GBP Rate Rate EPC Capex EPC Capex
stronger) weaker) +1.0% -1.0% +10.0% -10.0%
--------- --------- ----------- ----------- -------- --------- ----------- -----------
Northern GBP57.1m GBP61.2m GBP53.5m GBP56.2m GBP58.0m GBP53.9m GBP60.8m n/a n/a
Ireland
--------- --------- ----------- ----------- -------- --------- ----------- -----------
Republic GBP17.7m GBP19.8m GBP15.4m GBP17.4m GBP18.1m GBP14.5m GBP21.5m GBP17.3m GBP18.2m
of Ireland
----------- --------- --------- ----------- ----------- -------- --------- ----------- -----------
Great GBP89.4m GBP105.3m GBP75.4m n/a n/a GBP77.0m GBP103.7m GBP84.20m GBP94.4m
Britain
----------- --------- --------- ----------- ----------- -------- --------- ----------- -----------
Germany GBP12.6m GBP13.4m GBP11.9m GBP12.3m GBP12.9m GBP11.9m GBP13.4m n/a n/a
----------- --------- --------- ----------- ----------- -------- --------- ----------- -----------
NAV scenarios
The NAV scenarios demonstrate the change in the value of the
portfolio when considering alternate scenarios, such as utilising
High/Low revenue forecasts or applying different discount rates for
projects in construction. We have taken forecasts from multiple
independent research houses in order to derive a blended revenue
curve for both High and Low Cases. The below table also shows the
potential increase in value of the portfolio
construction/pre-construction assets when a lower operational
discount rate is applied. This scenario illustrates the stage that
the assets will progress to as they transition from the
construction stage to the operational stage, in line with the
valuation matrix.
In addition, the valuation achieved from the capacity expansions
of the assets in the ROI has been considered, as they will be
accretive to NAV once included. This has not been currently
modelled in our base case, although will represent an increase in
value to investors in future periods.
Revenue Scenarios: NAV based on third-party high & low
cases; these scenarios exhibit a deviation of c. 15 to 25 per cent.
from the central case
Discount rate: Applying an operational discount rate of 7.5 per
cent. to sites in construction.
ROI Expansion projects: NAV if including the 90.0 MW and 60.0 MW
expansions of KBSL & PBSL, respectively.
Based on third-party market analysis, the market average
duration is 63 minutes, which exceeds the Company's portfolio
duration average of 50 minutes [101]
Key Scenarios
Table 11 : NAV Scenarios
Region NAV in Base Case NAV Scenarios Chart
(With DCF)
Revenue Revenue Discount Rate ROI Expansion
(High case) (Low case) (Operational (NAV of 150.0
rate applied MW ROI capacity
to construction expansions)
assets)
------------ ----------- ---------------- ----------------
Northern Ireland GBP57.1m GBP67.1m GBP47.1m n/a n/a
------------ ----------- ---------------- ----------------
Republic of GBP17.7m GBP22.1m GBP12.8m GBP23.5m GBP35.3m
Ireland
---------------- ------------ ----------- ---------------- ----------------
Great Britain GBP89.4m GBP136.0m GBP61.0m GBP110.8m n/a
---------------- ------------ ----------- ---------------- ----------------
Germany GBP12.6m GBP16.3m GBP8.1m n/a n/a
---------------- ------------ ----------- ---------------- ----------------
Valuation methodology
The Investment Manager is responsible for providing a fair
market valuation of the Company's underlying assets. Its valuation
results are presented to the Company's Board of Directors
("Directors") for review and approval prior to reporting.
Valuations are calculated quarterly and a sample which meets our
NAV materiality threshold is reviewed by an independent third
party, before the publication of the half-year and year-end
reports.
All the assets in the Company's portfolio are valued using the
Discounted Cash Flow (DCF) approach that adheres to the principles
of IFRS13 and the International Valuation Standards Council ("IVSC
guidelines").
Asset Life
The valuation assumes the assets have a useful life of up to 30
years, with the Investment Manager assuming no residual value
(despite possessing active grid connections) at the end of life of
the assets.
Movements in Valuation Discount Rates
The Investment Manager primarily applied a discount rate between
7.5 per cent. and 10 per cent. except for contracted revenues
within GB and Ireland, which are discounted at 6 per cent. to each
asset in the Company's portfolio, given that large portions of the
revenue were procured in response to near real-time demands of the
energy system. The 6.0 per cent discount rate is only applied to
cash flow from contracted revenues which an asset has actually
secured for the relevant contract period, reflecting the lower risk
associated with the contract. The weighted average discount rate is
8.31%.
The standard discount rates matrix used by the Investment
Manager are set out below:
Table 12 : Discount Rate Matrix
Discount rate Matrix Pre-Construction Pre-Construction Construction Operational
Phase Phase (Post Phase * Phase**
EPC)
Contracted income
[102] 10.0% 9.5% 6.5%-9.5% 6.0%-7.0%
----------------- ----------------- ------------ ------------
Uncontracted income
[103] 10.0% 9.5% 7.5%-9.5% 7.0%-8.5%
----------------- ----------------- ------------ ------------
MW 180 136.9 80 231.7
----------------- ----------------- ------------ ------------
* Construction discount rates vary based on programme status and
lead time.
** Uncontracted revenue rates vary in accordance with market
maturity. Contracted revenue rates vary by counterparty
Revenue
For contracted revenue, the Investment Manager used the prices
of the contracts actually secured by the assets to project future
revenue cashflows . Regarding uncontracted revenue, the Investment
Manager estimates uncontracted revenue based on the unit price
forecasts of independent third-party research house(s) and the
advice of independent third-party consultants.
To ensure objective and unbiased calculation of the Fund's Net
Asset Value, the Investment Manager has obtained high, central, and
low cases from multiple research companies and used the average of
their central scenarios for the purpose of the NAV calculation.
These uncontracted revenues were not influenced by the Investment
Manager's view; no macro-economic assumptions other than
site-specific ones.
Operating Expenses
Where not already contracted and priced, operating expenditure
(i.e. equipment maintenance and lease costs) is based on the most
recent contracted expenditure and price quotes, with inflation
adjustments. Energy costs are estimated based on each system's
efficiency (as determined under EPC technical specifications),
published transmission and distribution network tariffs, and
third-party electricity price forecasts.
Capital Expenses
The Investment Manager uses third-party curves for determining
the benchmark EPC prices and also tracks market changes within the
commodities market for determining pricing for its projects. In
addition, there is an assumption of (i) replacement of Inverters
based on estimated Capex halfway into the life of projects; (ii)
augmentation of the assets based on markets where assets operate;
and (iii) degradation profile over time.
Fiscal Net Asset Value
Table 13 : Fiscal Net Asset Value
Pence
NAV at 31 March 2021 100.9
------
Less 31 March 2021 declared
dividend 1.0
------
NAV at 31 March 2021 (ex-dividend) 99.9
------
NAV at 31 March 2022 109.1
------
Less 31 December 2021 declared
dividend 2.0
------
Adjusted NAV at 31 March 2022 107.1
------
Less 31 March 2022 declared
dividend 1.0
------
NAV at 31 March 2022 (ex-dividend) 106.1
------
Movements in NAV (ex-dividend) 6.2
------
NAV Increase% 6.2
------
Share Price performance
Gore Street Energy Storage Fund has consistently traded at a
premium to NAV over the last fiscal year. Share price as at 31
March 2022 was 113 pence per share [104] , representing a 5.5% per
cent premium to Adjusted NAV. The chart below shows the share price
over the year, compared to Adjusted NAV per share .
The Fund was also included in FTSE All-shares during the
2021/2022 fiscal period.
Figure 26 : Historical NAV per share and Closing Share Price for
the Company
The Adjusted NAV per share as at 31 March 2022 was 107.1 pence.
The chart below shows the historical Net Asset Value per share.
Figure 27 : Historical Net Asset Value per share [105]
Dividends
The Company declared a total dividend of 7.0 pence per share
relating to the fiscal year, with the final instalment of 1.0 pence
to be paid post the date of publication [106] .
Gearing
As at 31 March 2022, the Company acts as guarantor under a GBP15
million facility agreement held by the Company's subsidiary, GSES 1
Limited. The facility shall be used to fund the acquisition and/or
development of assets. There has been no significant drawdown as of
the date of publication.
Sustainability
The Company's purpose is to deliver long-term capital growth to
its investors by the development of a geographically diverse
portfolio of utility-scale battery storage systems that are a
critical component in accelerating the transition to greener
national grids. Whilst GSF's core products and services are
designed to support the environmental sustainability of global grid
systems, the Board of Directors and its Investment Manager
understand that the Company has a broader responsibility to go
beyond its environmental contributions and to evaluate how best to
imbed and improve the environmental, social and governance
frameworks of its investments and operations.
The Company has chosen to align with Article 8 of the
Sustainable Finance Disclosure Regulation (SFDR), and this is the
first year that the Company has tracked the metrics that are
outlined in this regulation. These metrics will be disclosed on the
Company's website, as part of its 'ESG Pillars Report', in August
2022. The Company has engaged the services of third-party experts
to ensure adequate oversight of its assessment regarding its
alignment with TCFD requirements. Neither regulatory framework is
mandatory for the Company currently. Nevertheless, the Board and
Investment Manager believe that the early monitoring of its
sustainability against third-party frameworks is an important step
in improving accountability and in providing shareholders with
transparency on its progress in integrating ESG considerations into
its business framework.
The first edition of the Company's ESG Pillars Report, which
will be available on the Company's website in August 2022, will
detail the environmental, social and governance impact of the
Company's actions, including its assessment under the SFDR and the
United Nations Sustainability Development Goals (SDGs)
frameworks.
Environmental Sustainability
The Company contributes to the path to net zero by investing,
building, and operating battery storage systems that enable
national power grids to rely on more heavily intermittent sources
of renewable power. Energy storage technologies also "make low
carbon electricity systems more cost-effective". [107]
The political drive for a greener grid stems from "unambiguous
risks of climate change". [108] In addition, social and political
support for a greener energy policy has increased since the fiscal
year as a result of COVID-19, rising natural gas prices and
geopolitical instability in Europe. For instance, Germany has
increased its targets for electricity consumption from renewables
from 80 per cent by 2030, to 100 per cent. by 2035. [109] These
targets will see Germany alone install 22 GW of solar and 10 GW of
onshore wind per year. The UK will look to similarly decarbonise
its power systems by the same date [110] .
Energy consumption is also increasing. Between 2015 and 2019,
global energy consumption grew by 6.6 per cent. [111] In order to
accommodate a greater share of renewables in energy systems and
support increased energy consumption, it will be necessary to
invest in a portfolio of technological solutions, including energy
storage, smart grids, as well as demand-side management, enabling
the transition to a greener power grid. [112]
Case Study: GSF delivers frequency response services that enable
higher renewable penetration into energy systems
The ultimate goal of grid system operators is to keep the lights
on. National transmission networks require electricity generators
to spin at fifty rotations per second (50Hz) for the power systems
to run smoothly; too much supply and the grid electricity frequency
will rise, potentially short-circuiting. On the other hand, too
much demand will lower frequency and equally cause system
failure.
Energy storage is part of the infrastructure used by the Irish
grid to maintain system frequency in ROI and NI. System balancing
is increasingly challenging in Ireland because it is one of the
world's leaders in developing an environmentally sustainable grid:
EirGrid had increased the cap on the amount of variable renewable
generation on the grid at a given time to 75 per cent. following a
successful trial. [113] Without balancing infrastructure, the
EirGrid and SONI network operators must resort to brown and
blackouts to maintain their system within normal operating limits
of 49.9Hz to 50.1Hz.
The Company's energy storage systems in NI were activated to
prevent system imbalance on Monday, 22 November 2021 after the grid
system measured a drop below the trigger threshold of 49.8Hz.
Figure 28 : Immediate response at Drumkee project in the first
15 seconds following detection of the frequency event.
On 22 November 2021, two conventional generators within the
Irish grid tripped offline in quick succession, prompting two drops
in frequency. By inversing the frequency graph and scaling
correctly, Drumkee was able to respond to the changes in grid
system electricity and output up to 50 MW of power until the grid
system returned to its normal operating thresholds.
Figure 29 : Measured power's (nearly exact) tracking of
frequency.
Without the intervention of Drumkee and other balancing systems,
the Irish grid may well have had to resort to a brown or black out
to remain balanced.
Drumkee and Mullavilly can increase their combined grid power
output by up to 100MW in less than half a second and, as the Irish
grid moves towards net zero, it will increasingly rely on the
support of these and other battery storage technologies for system
balancing. In anticipation of increased demand, the Company will
increase its battery system capacity in Ireland by 30 MW as of the
date of publication and has an additional 180MW of generation under
development in Ireland.
Sustainability in Governance
The Company has invested heavily in the fiscal year to document
its environmental sustainability and to identify areas for
improvement in its social sustainability and governance processes.
The Company is committed to disclosing any shortfalls in its
environmental, social and governance metrices to investors. It will
rigorously evaluate its ESG performance, and when deemed
appropriate, shall integrate necessary changes to its investment,
operations, and leadership frameworks in an orderly and responsible
manner.
A delegated team of engineers, compliance, reporting and legal
professionals at the Investment Manager (through its subsidiary,
the Operating Manager) have worked closely with third-party
advisors during the fiscal year to begin data collection and
operational assessments as required to commence SFDR reporting.
Over the next two years, the Investment Manager will continue
its ESG performance assessment process to incorporate other
applicable regulatory frameworks and initiatives, including as
regulated by the Financial Conducts Authority. Simultaneously with
this assessment, the Investment Manager will recommend to the Board
that it evaluate and integrate improvements into every aspect of
the business as appropriate to meet the Company's stated
environmental, social and governance goals.
Sustainability Regulations and Awards
Sustainable Finance Disclosure Regulation (SFDR)
The Company, a sole-play investor in battery energy storage
systems, confirms that it constitutes a "financial product"
that "promotes environmental or social characteristics" under
the SFDR. [114]
During the fiscal year, the Company engaged reputable third-party
environmental consultants to assess and track the Company's
environmental and social performance against 14 main metrics
under Article 8 SFDR and six additional environmental and
social impact indicators, which are relevant to the Company's
business processes. In order to provide transparency, the
Company has engaged the services of a third-party organisation
with expertise in ESG and renewable energy, to track and monitor
the metrics under SFDR. The first ESG Pillars Report detailing
this assessment will be available on the Company's website
in August 2022.
TCFD Disclosures
The Company has engaged the services of third-party experts
to ensure adequate oversight of its assessment of its alignment
with TCFD requirements.
The Company aims to complete a formal climate risk assessment
and make necessary disclosures in accordance with TCDF requirements
by the end of 2022 calendar year.
United Nations Sustainability Development Goals (SDGs)
The 2022 ESG Pillars Report (which will be available on the
Company's website in August ) will also include the Company's
ESG assessment against the UN's Sustainability Development
Goals (SDGs).
United Nations Principles for Responsible Investing (UN PRI)
The Company is a signatory of the UN PRI. The UN PRI requires
the Company to participate in the next mandatory submission
period, which will be in 2024.
The Investment Manager is currently reviewing what steps need
to be taken in order for the Company to have greater alignment
with the UN PRI. [115]
Green Economy Mark
The Company's role in energy storage has been recognised by
the Exchange Green Economy Mark, awarded by the London Stock
Exchange's Green Economy Mark. The award recognises companies
that derive 50 per cent or more of their revenues from environmental
solutions.
Global Impact Investing Network
The Company is a member of the Global Impact Investing Network
(GIIN) and is aligned with GIIN's mission of reducing barriers
to impact investment and supporting the allocation of capital
to fund solutions to the world's most intractable challenges
Equality, Diversity, and Inclusion at GSF
The Company is an Investment Trust and has no employees nor any
senior management.
The Listing Rule 9.8.6R(10) requires the Company to specify
Board diversity as broken down by gender identity or sex, and
ethnic background. The Board is currently composed of four
individuals (one female and three males) who identify themselves as
'White British or other White (including minority-white groups)'.
It is the Company's intent to both grow the Board and to plan for
the succession of its members beginning in the 2023 fiscal year.
The Company supports the global investor community's efforts to
improve diversity in senior management and Board leadership. GSF is
working with reputable third-party advisors to evaluate the Board's
composition in a manner consistent with such efforts.
The Listing Rule 9.8.6R(10) requires the Company to specify
Board diversity as broken down by gender identity or sex, and
ethnic background.
Table 14 : Table for reporting on gender identity or sex.
Number of Percentage Number of Number of Percentage
board members of the board* senior positions executive of executive
on the board management management
(CEO, CFO,
SID and
Chair)
Men 3 75% 1 n/a n/a
--------------- --------------- ------------------ ------------ --------------
Women 1 25% 0 n/a n/a
--------------- --------------- ------------------ ------------ --------------
Other categories 0 0 0 n/a n/a
--------------- --------------- ------------------ ------------ --------------
Not specified/
prefer not
to say 0 0 0 n/a n/a
--------------- --------------- ------------------ ------------ --------------
* Note: the investment trust does not have any executive
management
Table 15 : Table for reporting on ethnic background.
Number of Percentage Number of Number of Percentage
board members of the board senior positions executive of executive
on the board management management
(CEO, CFO,
SID and
Chair)
White British
or other
White (including
minority-white
groups) 4 100% 100% n/a n/a
--------------- -------------- ------------------ ------------ --------------
Mixed/ Multiple
Ethnic Groups 0 0% 0% n/a n/a
--------------- -------------- ------------------ ------------ --------------
Asian/ Asian
British 0 0% 0% n/a n/a
--------------- -------------- ------------------ ------------ --------------
Black/ African/
Caribbean/
Black British 0 0% 0% n/a n/a
--------------- -------------- ------------------ ------------ --------------
Other ethnic
group, including
Arab 0 0% 0% n/a n/a
--------------- -------------- ------------------ ------------ --------------
Not specified/
prefer not
to say 0 0% 0% n/a n/a
--------------- -------------- ------------------ ------------ --------------
Principal Risks and Uncertainties
COVID 19 and Geopolitical Factors
The impacts of Covid-19, Brexit, and the Russo-Ukrainian war
continue to evolve at a rapid pace. The Board and Investment
Manager are continuously assessing how these social, economic, and
geo-political events impact the Group's principal risks.
Impact of Supply Chain Disruptions on EPC Strategy and Costs
The changes in cross-border trade between Britain and the EU on
the one hand, and the government ordered shutdowns and lockdowns in
response to COVID -19, including in China, on the other hand,
continue to disrupt global supply chains. Manufacturing and
shipping delays may materially increase key equipment costs. There
is a risk that supply chain disruption will materially increase the
cost of construction delay bringing new projects online, negatively
impact the Group's overall financial returns.
Whilst the cost and supply of materials continues to fluctuate,
the Investment Manager has, to a substantial degree, mitigated the
impact of such fluctuations through its existing EPC framework
arrangements. These arrangements, implemented prior to the onset of
supply chain disruptions, have allowed the Group to benefit in the
short term from fixed pricing for key equipment, limit adjustments
where pricing is variable and have also ensured that the Group has
timely and preferred access to equipment notwithstanding market
shortages. Nonetheless, there remains a risk that further or
persistent supply chain disruptions will materially increase the
average cost of construction and negatively impact the Group's
construction operations in the short term and its longer-term
returns.
Impact on Operations
COVID-19 related illnesses and lockdowns may also restrict the
ability of engineers to access sites, negatively impacting the
Company's ability to meet deadlines for commencement of services or
implement its asset maintenance programs.
To date, the Company's construction activities constitute key
infrastructure activities that have not been subject to lockdown
restrictions and none of its EPC providers have suffered material
delays in construction as a result of the COVID pandemic. The
Company continues to work closely with its suppliers and service
providers to seek to adjust project timelines to anticipate and
allow for delays and illnesses resulting from COVID. Nonetheless,
there remains a risk that severe or persistent staff shortages will
negatively impact the Group's construction activities in the short
term.
The Investment Manager operates a hybrid work environment to
allow staff the maximum amount of flexibility to manage COVID-19
related disruptions. Nonetheless, there remains a risk of
short-term or persistent disruption to business activities as a
result of COVID-19 related illnesses.
THE GSF RISK CONTROL FRAMEWORK
The Company's Board has general oversight and responsibility for
maintaining and reviewing the effectiveness of the Company's risk
management activities and does so on a quarterly basis. In
addition, risks are managed by the AIFM through its Risk Committee
and Internal Controls. The Risk Committee meets on a monthly basis
to review risks and controls, including those relating to
information security, regulatory compliance, and business
continuity. Their findings are shared with the Board on a quarterly
basis.
The Board of Directors
The Company's Board is responsible for maintaining and reviewing
the effectiveness of the Company's risk management activities, from
a strategic, financial, and operational perspective. The Board aims
to ensure that risks are accurately identified and managed but does
not seek to eliminate such risks. Additional risks and
uncertainties not currently known to the Board of Directors, or
that the Directors deem immaterial, may also have an adverse effect
on the performance of the Company.
The Risk Committee.
The AIFM's Risk Committee regularly monitors the principal risks
and uncertainties identified, along with the strategies developed
and the actions proposed to mitigate them. The risk identification,
assessment and reporting process are supported by the Investment
Manager's Executive Team, who continually review the effectiveness
of the AIFM's risk management systems and its internal
controls.
Internal Controls
Each member of the Investment Manager's Executive Team is
responsible for the management of the specific risks within their
own business unit. The Executive Team assesses current risks,
reviews, and monitors the controls that mitigate those risks; and
identifies potential new risks to the Board and Risk Committee.
They are also responsible for reviewing, monitoring, and agreeing
to the approach for mitigating specific risks faced by the
Company.
Internal and External Auditors
The Investment Manager's internal auditors review and assess the
Company's risk management and internal controls process and report
their findings and recommendations to the board of directors of the
Investment Manager and the Company, respectively.
OUR RISK PROFILE
Our risk assessment program assesses the potential impact of key
financial, reputational, and operational risks against the
probability of their occurrence.
Identification & Assessment of Risks
Icon Risk
C19 COVID 19
----------------------------
CMD Changes to Market
Design
----------------------------
INFL Inflation
----------------------------
BM Exposure to Lithium-Ion
Batteries and Battery
Manufacturers
----------------------------
KSR Key Skills Retention
----------------------------
OM Dependence on Long-Term
Operations and Maintenance
(O&M) Contracts
----------------------------
VUA Valuation of Unquoted
Assets
----------------------------
GDL Delays in Grid Energisation
or Commissioning
----------------------------
CFX Currency Exposure
----------------------------
CA Cyber-Attack and Loss
of Data
----------------------------
ISA Insurability of Assets
----------------------------
KEY RISKS AND UNCERTAINTIES
Key risks highlighted by the Board of Directors as impacting the
Company in the year ending March 2022 are highlighted below:
Risk Description Mitigant
Changes to Market The Company's assets The Company owns
Design generate revenue by and operates a diverse
delivering balancing portfolio of assets
CMD services to power across Great Britain,
grid operators in Ireland, Germany and
the United Kingdom, (post year-end) the
Ireland, Germany, ERCOT market within
and United States. the United States.
There is a risk in In addition, the
any of those markets Investment Manager
that unanticipated aims to stack revenue
changes to the design contracts in order
of power system services to vary the types
or any change in the of income streams
specifications and received from each
requirements for service system operator and
delivery (including within each market.
network charges or In these two ways,
changes to market the Company minimises
rules) could negatively its reliance on any
impact revenues or single market or any
constrain revenue specific market service
projections for assets and mitigates against
within the region changes in any single
in which a change market product.
occurs and thereby
reduce the net asset
value of the affected
assets.
------------------------------------ --------------------------------------------------
Inflation The Company's profit The Company ensures
projections are based that it generates
INFL in part on its budget revenues in the markets
for capital and operating in which it incurs
expenditure incurred operating costs from
in the construction, a diverse mix of short,
operation, and maintenance medium and long-term
of its portfolio of contracts that are
battery storage assets. subject to fixed or
These include the floating contract
cost of battery cells, prices. As revenues
inverters, the cost are pegged to operating
of power required expenditure, the Company
to charge the batteries shall aim to neutralise
and the labour costs inflationary increases
for operations. There (e.g. cost of power
is a risk that unanticipated to charge the batteries)
inflation will increase by rebalancing its
capital expenditure revenue services (e.g.
and operating costs changing the timing
materially beyond or bases for charging
budget with the consequence batteries to either
of reducing profitability reduce costs or increase
below the investment revenues) as appropriate
forecast and/or rendering to maintain its investment
projects less economic forecast.
or uneconomic.
There is also a risk
that continued or
severe inflation could
positively and/or
negatively change
the grid power market
design (see Changes
to Market Design above).
The Company has little
exposure to debt financing
but has access to
debt facilities. [116]
There is a risk that The Company has sufficient
increases in the inflationary access to equity capital
index rates could and shall only utilise
render the interest debt to the extent
rates applicable to considered accretive
these debt facilities to shareholders.
less economic or uneconomic.
------------------------------------ --------------------------------------------------
Exposure to Lithium-Ion Gore Street's portfolio The Company remains
Batteries and Battery currently consists technology agnostic
Manufacturers only of lithium-ion and continues to evaluate
batteries. The Group's other economically
battery energy storage viable energy storage
systems are designed opportunities in order
by a variety of EPC to minimise its exposure
providers but the to lithium-ion and
underlying lithium-ion further diversify
batteries are manufactured its portfolio mix.
primarily by BYD, The Company is not
CATL and LG Chem. under an exclusivity
While the Company agreement with any
considers lithium-ion individual battery
battery technology manufacturer and will
to be the most efficient manage its supply
and most competitive framework agreements
form of storage in in a manner that allows
today's market, there it to take advantage
is a risk that other of any improvements
technologies may enter or amendments to new
the market with the storage technologies
ability to provide as they become commercially
similar or more efficient viable.
services to power
markets at comparable
or lower costs, reducing
the portfolio's market
share of revenues
in the medium or long
term.
------------------------------------ --------------------------------------------------
Key Skills Retention The Company is an The AIFM Agreement
investment trust operated between the Company
under the supervision and the Investment
of a non-executive Manager provides for
board of directors; a twelve-month notice
it has no employees period before termination
and relies exclusively by either party in
on third parties to order to afford the
manage and operate Company sufficient
its assets and deliver time to arrange for
information to shareholders. alternative services.
In particular, the
Investment Manager
is responsible for
the development of
the Company's acquisition
pipeline and (through
its subsidiary) has
operational oversight
of the Company's procurement,
construction, asset
management, and revenue
generation functions.
The Investment Manager
engages and supervises
leading industry suppliers
and service providers
for operational performance
including for engineering,
procurement, construction,
asset management and
maintenance of battery
energy storage assets.
In addition, the Investment
Manager supports the
Company's Administrator
to ensure adequate
management of the
Company's accounting
functions. There is
a risk that the early
termination of the
AIFM and Operational
Management Agreements
would result in a
loss of key expertise
required for the strategic,
financial and operational
management of the
Company.
------------------------------------ --------------------------------------------------
Dependence on Long Each battery energy The Investment Management
Term Operations and storage system contains routinely seeks to
Maintenance (O&M) multiple battery stacks incorporate warranties
Contracts connected in parallel, and liquidated damage
with each stack containing clauses into the O&M
modules of battery service contracts
cells that are partially to ensure that service
independent and can providers are adequately
be replaced and repaired incentivised to maintain
separately, thereby systems in the manner
partially limiting contracted for. Although
the impact of failure these service contracts
of any module of cells. are long-term, there
The performance of are subject to early
each Group asset is termination for breach
nonetheless dependent of service terms.
on scheduled maintenance
and timely repair
of batteries by these
service providers
in order to ensure
the health and safety
of the communities
and systems concerned
and to ensure the
durability of the
battery system for
its anticipated life
span. There is a risk
that the asset and
O&M providers selected
to maintain and manage
the battery systems
fail to adequately
deliver services,
which could lead to
loss of revenue, health,
and safety risks and/or
untimely degradation
or destruction of
the battery systems.
------------------------------------ --------------------------------------------------
I nvestment in Unquoted The Company invests The Investment Manager
Assets predominantly in unquoted is regulated by the
assets whose value FCA and managed by
involves the exercise professionals who
of judgement by the have knowledge and
Investment Manager. expertise working
in a regulated environment.
There is a risk that The Investment Manager
the I nvestment Manager works under the supervision
may fail to fulfil of an Investment Committee
its investment objectives composed of investment
in making these investments professionals with
or may fail to appropriately decades of experience
implement its investment in clean energy investing.
strategy in selecting The Investment Committee
assets for investment reviews each of the
or may fail to comply Investment Manager's
with the Company's recommendations to
investment policy ensure that they comply
in implementing its with the Company's
investment strategy. investment policy
and are in line with
the Investment Manager's
investment strategy.
------------------------------------ --------------------------------------------------
Valuation of Unquoted The Company invests The Investment Manager
Assets predominantly in unquoted routinely works with
assets whose fair market experts to
value involves the assess the reasonableness
exercise of judgement of key data utilised
by the Investment in the asset valuation
Manager. There is process (such as energy
a risk that the Investment price forecasts) and
Manager's valuation to reassess its valuations
of the portfolio may on a quarterly basis.
be deemed by other In addition, in order
third parties to have to ensure the object
been overstated or reasonableness of
understated. the Company's NAV
materiality threshold
and the discount rates
applied, substantive
components of the
portfolio valuation,
(based on a NAV materiality
threshold) are reviewed
by an independent
third party, prior
to publication of
the half-year and
year-end reports.
------------------------------------ --------------------------------------------------
Delays in Grid Energisation The Company relies The Company works
or Commissioning on EPC contractors closely with EPC
for energy storage contractors
system construction, to ensure timely
and on the relevant performance
transmission systems of services and imposes
and distribution systems' liquidated damage
owners (TSO) for timely payments under the
energisation and connection EPC contracts for
of that battery storage certain delays in
asset to the transmission delivery.
and distribution networks The Company seeks
appropriately. There commitments from TSOs
is a risk that either to a target
the EPC contractor energisation
or relevant TSO could date as a condition
delay the target commercialisation to project acquisition
date of an asset under and provides maximum
construction and negatively visibility on project
impact projected revenues. development to TSOs
in order to encourage
collaboration towards
that target
energisation
date.
------------------------------------ --------------------------------------------------
Currency Exposure The Company is the The Company acts as
principal lender of guarantor under currency
funds to Group assets hedge arrangements
(via intercompany entered into by impacted
loan arrangements) subsidiaries to mitigate
for their investments its exposure to the
in projects, including Euro under EirGrid
projects outside of and SONI contracts.
the UK. This means The Company will also
that the Company may guarantee future hedging
indirectly invest arrangements as appropriate
in projects generating to seek to manage
revenue and expenditure its exposure to foreign
denominated in a currency currency risks. As
other than Sterling, of publication date,
including in US Dollars it is completing similar
and Euros. There is hedging arrangements
a risk that the value to mitigate its Euro
of such projects and and Dollar exposure
the revenues projected in light of recent
to be received from acquisitions in Germany
them will be diminished and Texas, US.
as a result of fluctuations
in currency exchange
rates. The diminishing
in value could impact
a subsidiary's ability
to pay back the Company
under the intercompany
loan arrangements.
------------------------------------ --------------------------------------------------
Cyber-Attack and Loss The Company is exposed Among other measures,
of Data (through the server, the Company ensures
software, and communications its contractors and
systems of its primary service providers
service providers incorporate firewalls
and suppliers) to and virtual private
the risk of cyber-attacks networks for any equipment
that may result in capable of remote
the loss of data, access or control.
violation of privacy Cybersecurity measures
and resulting reputational are incorporated for
damage. both external and
internal ('local')
access to equipment,
preventing exposure
to ransomware attacks
or unsolicited access
for any purpose. The
Company engages experts
to assess the adequacy
of its cybersecurity
measures and has implemented
a requirement for
annual testing to
confirm and certify
such adequacy for
representative samples
for the entire fleet.
------------------------------------ --------------------------------------------------
Insurability of Assets The Company protects The Company is taking
the value of its asset adequate procedures
from property damage, to protect its assets
theft, vandalism, from theft and vandalism
fire damage and other through upgrades to
physical risks through its security equipment
property insurance. and improvements in
Property insurance its remote monitoring.
is assessed and renewed The Company will continue
on an annual basis. to monitor and upgrade
Battery storage is its surveillance systems
in its nascent stage as appropriate to
from an insurance prevent theft or vandalism.
perspective and there
is a risk that this The Company continues
class of assets will to evaluate its fire
be deemed uninsurable prevention and control
or may become too measures to ensure
expensive to insure. the suitability of
each system's design
to sufficiently mitigate
the risk of fire and
manage the consequences
of such an event.
The mitigation solution
is design risk assessed
and tailored to the
environments in which
the assets are based,
taking into consideration
(among others) the
layout of the battery
system, its location
(rural or urban),
technology type and
water access. The
Investment Manager
is actively engaged
in dialogue with third-party
insurers, fire safety
professionals and
other industry experts
to reaffirm the adequacy
of its processes and
to discuss operational
safety in general
in the battery storage
context
------------------------------------ --------------------------------------------------
Emerging Risks
To ensure that the Company maintains a holistic view of risk
management, the AIFM and the Board will continue to monitor the
relevant emerging risks and assess their potential to adversely
impact operations on a quarterly basis. The risks identified this
year are: (i) regulatory and legal changes impacting strategy
(including as may ensue from compliance with TCFD's climate-related
reporting and metrics), (ii) other impacts of climate risks on
technologies and markets, (iii) potential changes to national and
cross-border energy policy; (iv) interest rate risks (not yet
relevant as the Company currently has no floating rate debt
facilities), and (v) changes to future investor accreditation
resulting from Brexit.
GOVERNANCE
Directors' Report
The Directors present their report together with the audited
financial statements for the period from 1 April 2021 to 31 March
2022. The Corporate Governance Statement on pages 100-114 forms
part of this report. The Directors' Report together with the
Strategic Report comprise the "management report" for the purposes
of Disclosure Guidance and Transparency Rule 4.1.5R.
Principal activity and status
The Company was incorporated in England and Wales on 19 January
2018 with company number 11160422 and registered as an investment
company limited by shares under Section 833 of the Companies Act
2006. On 25 May 2018, the Company's Ordinary Shares were admitted
as a Premium Listing and commenced dealings on the Main Market of
the London Stock Exchange ("LSE"). The Company has, subsequent to
its launch, entered the Investment Trust Company ("ITC") regime for
the purposes of UK taxation. The Company is a member of the
Association of Investment Companies ("AIC").
Business review
During the period the Company, through GSES 1 Limited,
successfully acquired three new facilities, including its first
investment in Germany and two additional investments in GB, of
which all facilities are majority owned by the Company. Post
year-end, the Company has completed its first acquisition in North
America, in Texas, US. The registered address of GSES 1 Limited is
The Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF. The
Chair's statement and Investment Manager's report expands on the
business activity and acquisitions in the period.
Results and dividends
The financial statements of the Company for the period appear
from pages 128-132. Total Comprehensive income for the year 31
March 2022 was GBP42,527,570 (31 March 2021 GBP14,594,694). The
Directors recommend a fourth interim dividend of 1.0 pence per
share be paid, bringing the total dividend in respect of the period
ended 31 March 2022 to 7 pence per share (7 pence per share 31
March 2021).
Dividend policy
Subject to market conditions and performance, financial
position, and financial outlook, it is the Directors' intention to
pay an attractive level of dividend income to Shareholders on a
quarterly basis.
On 22 March 2022, the Company announced that, for the quarter to
31 March 2022, and for subsequent financial years, the Company will
target dividends in respect of the Ordinary Shares in each
financial year based on a 7 per cent. yield on the average Net
Asset Value per Ordinary Share during that financial year, subject
to a minimum target of 7 pence per Ordinary Share in each financial
year. The annual target dividend will increase by 0.5 pence
increments per Ordinary Share based on a certain progression of the
average Net Asset Value per Ordinary Share in any financial year
above 100 pence (subject to rounding). For illustrative purposes
only: if the average Net Asset Value per Ordinary Share during a
financial year is 107 pence per Ordinary Share or greater (but less
than 114 pence) the target dividend for that financial year will be
7.5 pence per Ordinary Share; if the average Net Asset Value per
Ordinary Share during a financial year is 114 pence per Ordinary
Share or greater (but less than 121 pence) the target dividend for
that financial year will be 8.0 pence per Ordinary Share; and if
the average Net Asset Value per Ordinary Share during a financial
year is 121 pence per Ordinary Share or greater (but less than 128
pence) the target dividend for that financial year will be 8.5
pence per Ordinary Share.
Dividends are paid quarterly, and the Company will target a
dividend of 2.0 pence per Ordinary Share for the first three
interim dividends in each financial year and the amount of the
final dividend will depend on the overall annual dividend target
for that financial year. If any C Shares are issued, holders of C
Shares will be entitled to participate in any dividends which the
Directors may resolve to pay to holders of C Shares out of the
assets attributable to the C Shares. The target dividends set out
above shall not apply to any C Shares prior to their conversion
into Ordinary Shares. Investors should note that the payment of
dividends is at the discretion of the Board and the Directors may
resolve to pay dividends otherwise than in accordance with the
targets noted above in order to reflect the Company's expected
returns and future plans for the growth of the Company.
The targeted annual dividend to 31 March 2022 has been met.
Share capital
As at 31 March 2022, 345,035,842 Ordinary Shares were in issue
(31 March 2021: 276,224,622) and no other classes of shares were in
issue at the respective 2021 and 2022 year end.
Risk management and internal control
The Board is responsible for financial reporting and controls,
including the approval of the Annual Report and Accounts, the
dividend policy, any significant changes in accounting policies or
practices, going concern and treasury policies including the use of
derivative financial instruments. The Board takes comfort that it
has outsourced and received assurance from those service providers
regarding their internal controls and risk management processes.
During the period, the Board has carried out a robust assessment of
the principal risks and uncertainties facing the Company and how
they are being mitigated, as described on pages 79--89. Further
detail on how the board ensure effective internal controls is
provided on page 80.
The Board meets at least every quarter to review the Company's
performance against its strategic aims, objectives, business plans
and budgets and ensures that any corrective action considered
necessary is taken. Additional meetings are held as required to
deal with the business of the Company in a timely manner. Directors
are expected to attend all meetings of the Board and all meetings
of those committees on which they sit, as well as the Annual
General Meeting ("AGM"). Meetings called outside of the scheduled
quarterly Board meetings may need to be convened at relatively
short notice and therefore at times when not every director is
available. Every meeting during the period was convened with an
appropriate quorum and with the Directors acting independently of
the Investment Manager.
Insurance
The Company maintains GBP10 million of Directors' and Officers'
Liability Insurance cover for the benefit of the Directors, which
was in place throughout the period, and which continues in effect
at the date of this report.
Directors
All Directors are Non-Executive Directors. All the Directors
will seek re-election at the AGM in accordance with the
recommendation of the AIC Code. Full details of the processes by
which Directors can be appointed or replaced are set out in the
Articles of Association.
Significant shareholdings
As at 31 March 2022 the following shareholders have a
disclosable interest of 3 per cent or more in the Ordinary Shares
of the Company:
Shareholder Number of Percentage of issued
Ordinary Shares share capital
Rathbones 51,165,522 14.83%
----------------- ---------------------
Hargreaves Lansdown
Nominees Limited 22,048,703 6.39%
----------------- ---------------------
EFG Harris Allday 18,975,028 5.50%
----------------- ---------------------
Interactive Investor
Services Nominee Limited 16,528,086 4.79%
----------------- ---------------------
Charles Stanley 12,682,956 3.68%
----------------- ---------------------
Momentum Global Investment
Management 12,389,177 3.59%
----------------- ---------------------
National Treasury Management
Agency 11,730,910 3.40%
----------------- ---------------------
AJ Bell 11,677,367 3.38%
----------------- ---------------------
First Avenue Capital 11,658,249 3.38%
----------------- ---------------------
Redmayne Bentley 10,972,508 3.18%
----------------- ---------------------
Privium Fund Management 10,947,263 3.17%
----------------- ---------------------
Political contributions
The Company made no political contributions during the
period.
Greenhouse gas emissions reporting
The Board has considered the requirement to disclose the
Company's measured carbon emissions sources under The Companies Act
2006 (Strategic Report and Directors' Report) Regulations 2013. The
Company is a closed-ended investment company which has no employees
and so its own direct environmental impact is minimal.
Employees
The Company has no employees and therefore no employee share
scheme or policies for the employment of disabled persons or
employee engagement.
Restrictions on transfer of securities in the Company
There are no restrictions on the transfer of securities in the
Company, except as a result of:
The Financial Conduct Authority ("FCA") Listing Rules that
require certain individuals to have approval to deal in the
Company's shares: and,
The Company's Articles of Association that allow the Board to
decline to register a transfer of shares, or otherwise impose
restriction on shares.
The Company is not aware of any agreements between holders of
securities that may result in restrictions on transferring
securities in the Company.
Securities carrying special rights
No person holds securities in the Company carrying special
rights with regards to control of the Company.
Change of control
The Company is not aware of any person who, directly or
indirectly, owns or controls the Company. The Company is not aware
of any arrangements the operations of which may give rise to a
change in control of the Company.
Directors' share dealings
The Directors have adopted a code of Directors' dealing in
Ordinary Shares, which is in accordance with the Market Abuse
Regulation. The Board is responsible for taking all proper and
reasonable steps to ensure any dealings by Directors, or persons
closely associated with them, are in compliance with the Market
Abuse Regulation.
Articles of Association
These are available on the Company's website at
https://www.gsenergystoragefund.com/ or by application to the
Company Secretary. Any amendment to the Company's Articles of
Association (the "Articles") may only be made by passing a special
resolution of the Shareholders of the Company.
Branches outside the UK
The Company does not have any branches outside the UK.
Powers of the Directors
The Board are responsible for managing the business affairs of
the Company in accordance with the Articles, the Companies Act, any
direction given by the Shareholders by special resolution and the
investment policy and have overall responsibility for the Company's
activities including its strategy, investment activities and
reviewing the performance of the portfolio.
Powers in relation to the Company issuing its shares
Subject to company law and the Articles, the Directors are
authorised to issue shares of such number of tranches and on such
terms as they determine, provided that such terms are consistent
with the provision of the Articles.
Statutory information contained elsewhere in the annual
report
Information required to be part of this Directors' Report can be
found elsewhere in the annual report and is incorporated into this
report by reference, as indicated below:
Future developments, pages 38 and 89
Engagement with suppliers, customers, and others with business
relationships with the Company, pages 96-98
Corporate Governance statement, pages 100-114
Manager and service providers, pages 105-106
Directors' names and biographies, pages 108-110
Directors' interest in shares, page 122
Financial instruments, page 138-139
Share capital reserves, pages 155-157
Transactions with related parties, pages 158-160
Post balance sheet events, page 160-161
Other disclosures
Disclosures of financial risk management objectives and policies
and exposure to financial risks are included in the financial
statements.
Disclosures in relation to the Company's business model and
strategy have been included within the Investment Manager's Report
on pages 38-79. Disclosures in relation to the main industry trends
and factors that are likely to affect the future performance and
position of the business have also been included within the
Investment Manager's report.
Disclosure of information to Auditors
All of the Directors have taken all the steps that they ought to
have taken to make themselves aware of any information needed by
the auditors for the purposes of their audit, and to establish that
the auditors are aware of that information. The Directors are not
aware of any relevant audit information of which the auditors are
unaware.
Independent Auditors
Ernst & Young LLP were appointed as auditors by the
Directors during the period and have expressed their willingness to
continue as auditor for the financial year ending 31 March 2023. A
resolution to re-appoint Ernst & Young LLP as auditors to the
Company will be proposed at the AGM.
Going Concern and Viability
The Company's business activities, together with the factors
likely to affect its future development performance and position,
are set out in the Investment Manager's Report. The Company faces a
number of principal risks and uncertainties, as set out above,
including with respect to the economic impact of COVID-19,
government regulation and political instability and financial risks
such as counterparty risk, credit risk, concentration risk as
discussed in the financial statements.
The Company also continues to monitor and assess emerging risks
which may potentially impact operations, including the impact of
climate change. The Company will also undertake a formal climate
risk assessment, which will facilitate the Company's resilience in
a world where climate change is altering the environment.
Going Concern
Since the year end, there have been reduced restrictions on
travel and lockdown, but the full human and economic impact of the
COVID-19 pandemic still remains difficult to assess.
The Company's ability to generate revenue from its operational
assets continues and remains largely unaffected by the pandemic.
The Company and the Investment Manager have worked closely and
liaised with the operators to ensure that commercial activities
remain operational, and, in their view, power generation will
remain essential to the UK's infrastructure.
The completed going-concern analysis assumes continued annual
expenditure at the rate of current expenditure and continued
discretionary dividend payments to Shareholders at the target
annual rate of 7% of NAV, subject to a minimum target of 7 pence
per Ordinary Share in each financial year. With expenditure and
discretionary dividends assumed unchanged, the Company will
continue to be operational and will have excess cash after payment
of its liabilities over the period to 31 July 2023, being at least
12 months from the date of approval of the financial
statements.
The Company also continues to monitor and assess emerging risks
which may potentially impact operations, including the impact of
climate change. The Company will also undertake a formal climate
risk assessment, which will facilitate the Company's resilience in
a world where climate change is altering the environment.
The Directors have reviewed Company forecasts and projections
which cover a period of five years from 31 March 2022, and as part
of the going concern assessment have modelled downside scenarios
taking into account foreseeable changes in investment and trading
performance, which show that the Company has sufficient financial
resources.
The Directors consider the following scenarios:
The Company and the portfolio assets over at least 12 months to
31 July 2023. We have assumed the Company's rate of expenditure
over the period will remain unchanged, that there are no
contractual capital commitments at fund level but has included
potential commitments of the subsidiaries in the analysis. There
are no loan repayments received from operational companies over the
time frame.
A reverse stress test to determine the term over which the
Company can remain viable given its current resources before the
necessity for liquidation or protection from creditors. As the
Company has no financial responsibility for its operating
companies.
The Directors acknowledge their responsibilities in relation to
the financial statements for the year ended 31 March 2022 and the
preparation of the financial statement on a going concern basis
remains appropriate and the Company expects to meet its obligations
as and when they fall due for at least 12 months until 31 July
2023.
Long Term Viability
The Directors have assessed the prospects of the Company over a
period of five years.
As at 31 March 2022, the Company had net current assets of
GBP195.72million and had cash balances of GBP198.04 million
(excluding cash balances within investee companies), which are
sufficient to meet current obligations as they fall due. The major
cash outflows of the Company are the payment of dividends and costs
relating to the acquisition of new assets, both of which are
discretionary. The Company continues to commit to its investors
that its business purpose is to invest funds solely for returns
from capital appreciation, investment income, or both. The Company
is a guarantor to GSES1 Limited's GBP15m revolving credit facility
with Santander. The Company had no outstanding debt as at 31 March
2022.
The Directors have reviewed Company forecasts and projections
which cover a period of five years from 31 March 2022, and as part
of the going concern assessment have modelled downside scenarios
taking into account foreseeable changes in investment and trading
performance, which show that the Company has sufficient financial
resources.
The Directors further considered the following scenario:
An economic turmoil test to assess the impact of a continued
market slowdown during a five year term with no additional equity
raised and annual expenditures remaining the same over the defined
period.
After assessing the risks, which include emerging risks like
climate change and reviewing the Company's liquidity position,
together with the forecasts of performance under various scenarios,
the Directors confirm that the Company will be able to continue in
operation and meet its liabilities over the period of at least five
years.
SECTION 172 STATEMENT
The Role of the Board
The Directors are responsible for determining the Company's
investment policy and strategy and have overall responsibility for
the Company's activities including the review of investment
activity and performance and the control and supervision of the
Company's service providers. The Directors may delegate certain
functions to other parties such as the Investment Manager, the
Administrator and the Registrar.
The Directors have had regard for the matters set out in section
172(1)(a) and (c) to (f) of the Companies Act 2006 when performing
their duty under section 172. Subsection (b) is not applicable to
the Company as it has no employees. The Directors consider that
they have acted in good faith in the way that would be most likely
to promote the success of the Company for the benefit of its
members as a whole, while also considering the broad range of
stakeholders who interact with and are impacted by our business,
especially with regard to major decisions.
In doing the above, the Directors have taken into account the
following:
(a) the likely consequences of any decision in the
long-term.
(b) the need to foster the Company's business relationships with
suppliers, customers and others;
(c) the impact of the Company's operations on the community and
the environment.
(d) the desirability of the Company maintaining a reputation for
high standards of business conduct; and
(e) the need to act fairly as between members of the
Company.
The Company continuously interacts with a variety of
stakeholders important to its success and strives to strike the
right balance between engagement and communication. The Company has
identified the following key stakeholders:
The Company's shareholders
The Company's Investment Manager
The Company's business partners and key service providers
The Company's key contractors
Regulators/Government
Understanding our stakeholders' views has influenced our
investment strategy, including our focus on asset diversification
and introduction of a consolidated ESG policy.
Engagement with shareholders
Existing Shareholders and prospective investors are therefore
key to implementing our strategy. We strive through our engagement
activities to obtain shareholder and prospective investor buy in
into our strategic objectives and have developed relationships with
several cornerstone shareholders. We have engaged with Shareholders
and prospective investors through the following:
Interim and Annual Accounts.
General Meetings.
Company's corporate broker and Investment Manager are in regular
communication with shareholders and shareholder views are reported
to the Board.
One to one meetings with the Investment Manager.
Regular news and quarterly NAV updates.
The Company will continue to engage with shareholders in future
either directly or via the Company's corporate broker and
Investment Manager as further expansion becomes necessary. These
engagement activities have ensured that the Company's investment
pipeline and fundraising programme have been aligned, as the
Company will require further funding to continue with the
investment strategy and obtain additional pipeline investments.
Engagement with the Investment Manager
The Investment Manager is responsible for the development and
implementation of the investment strategy, including the
acquisition, origination, execution and management assisting the
Company in meeting the expectations of its Investment and Dividend
Policies. The Board engage constructively with the Investment
Manager in order to ensure that the expectations of the
Shareholders are being met and that the Board are aware of
challenges being faced. The Board and the Investment Manager
maintain an ongoing open dialogue on key issues facing the Company,
this open dialogue takes the form of ad hoc board meetings and more
informal contact, as appropriate. It ensures that the Company and
Investment Manager have aligned interests to ensure the future
success of the Company.
Engagement with business partners and other key service
providers
The Company has various key service providers who provide
management and administration services. The intention is to
maintain long-term and high-quality business partnerships to ensure
stability while the Company pursues its growth strategy. Through
its Management Engagement Committee, the Company reviews the
performance of all key service providers to the Company and the
terms of their engagement on an annual basis and seeks two-way
engagement between the Board and key service providers on service
delivery expectations and feedback on important issues experienced
by the service provider during the period. The Board has regular
contact with the three main service providers: the Investment
Manager, Administrator and Company Secretary through quarterly
board meetings with the Chair and Audit Chair meeting more
regularly.
Engagement with key contractors
The Company and its investments are reliant on the Investment
Manager selecting reputable suppliers and experienced O&M
service providers. The failure of any of the Group's suppliers
(including EPC contractors and O&M service providers) may
result in closure, seizure, enforced dismantling or other legal
action in respect of the Group's projects.
NEC ES has recently announced that it intends to wind down
operations by 2030. Since its announcement, NEC continues to meet
its outstanding obligations to the Company. Nonetheless, there is
the risk that NEC's internal restructuring efforts may adversely
affect its ability to meet its outstanding obligations to the
Company.
Engagement with communities
The Board recognises the importance of the communities in which
the Company operates. As we start to develop assets closer to
communities, we will look to ensure that our environmental and
social footprint takes account of the local communities and is
sympathetic to the locality, taking account of local views which
will be obtained via the planning process. The development of a
comprehensive ESG strategy is under active implementation.
Regulators / Government
The Board regularly considers how it meets regulatory and
statutory obligations and follows voluntary and best practice
guidance, including how any governance decisions it makes impact
its stakeholders both in the short and long term.
Key Board Decisions
The Board's principal decisions each year typically include
approving capital raises (equity and debt), payment and level of
dividends to meet expectations.
Where potential conflicts of interest arise, these would be
discussed at the Board and resolved in line with the formal
Conflicts of Interest policy. No conflicts of interest occurred
that prevented the Directors from carrying out their duties during
the year.
The nature of the Company's business means that the Directors
must consider the long-term impact of its decisions, given that the
Company assumes its operational assets will perform for 30 years.
The Investment Manager communicates regularly with the Board on
both the pipeline and the individual projects that the Investment
Manager is transacting on, before such a transaction is concluded.
The Board retains the right to request such additional information
as necessary to confirm compliance with the Company's investment
policy. The Investment Manager actively assesses the Group's
portfolio risk and performance and routinely reports to the Board
on the Deal Team's execution of revenue strategy, month to month
financials, operational performance, health and safety performance
and financial projections. At the project level, the Investment
Manager works closely with third parties to monitor revenue
contracts and cash flow level, and to review the financial model to
assess actual and projected project returns based on actual
performance.
The Board also agreed to create more distributable reserves, by
way of approval of the cancellation of GBP40 million from the share
premium account which was achieved through the issue of a special
resolution at the AGM; this request was approved by a minimum of
75% of shareholder votes and filing of a court order to legally
approve the cancellation. The Company strives to maintain a
reputation for high standards of business conduct, and this is
reflected in one of our core values, which is to always act openly
and transparently with all of our stakeholders. In relation to
these key decisions, stakeholders, such as key contractors, were
involved to ensure asset pipeline was available to the Company on
the timescales required. Shareholder discussions were held to
ensure clear communication was made in relation to progress and
market interest for expansion of the Company. To ensure dividend
expectations were deliverable the Company worked with the
Investment Manager.
Statement of Directors' Responsibilities in respect of the
preparation of the Annual
Financial Report
The Directors are responsible for preparing the Annual Report
and the financial statements in accordance with applicable law and
regulations.
Company law requires the Directors to prepare financial
statements for each financial period. Under that law the Directors
are required to prepare the Company financial statements, in
accordance with UK adopted international accounting standards.
Under company law, the Directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Company and of the profit or
loss for the Company for that period.
In preparing these financial statements, the Directors are
required to:
select suitable accounting policies and then apply them
consistently.
make judgements and accounting estimates that are reasonable and
prudent.
state whether they have been prepared in accordance with UK
adopted international accounting standards, subject to any material
departures disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the Company will
continue in business; and
prepare a Report of the Directors, a Strategic Report and
Directors' Remuneration Report which comply with the requirements
of the Companies Act 2006.
The Directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company's
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and enable them to ensure that
the financial statements comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities. The Directors are responsible
for ensuring that the Annual Report, taken as a whole, is fair,
balanced, and understandable and provides the information necessary
for Shareholders to assess the Company's performance, business
model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and
the financial statements are made available on a website. Financial
statements are published on the Company's website in accordance
with legislation in the UK governing the preparation and
dissemination of financial statements, which may vary from
legislation in other jurisdictions. The maintenance and integrity
of the Company's website ( https://www.gsenergystoragefund.com ) is
the responsibility of the Directors. The Directors'
responsibilities also extend to the ongoing integrity of the
financial statements contained therein.
Directors' Responsibilities pursuant to DTR4
The Directors confirm that to the best of their knowledge:
the Company's financial statements have been prepared in
accordance with UK adopted international accounting standards and
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the Company; and
the Annual Report includes a fair review of the development and
performance of the business and the financial position of the
Company, together with a description of the principal risks and
uncertainties that it faces.
Disclosure of information to the Auditor
The Directors who were members of the Board at the time of
approving the Directors' report have confirmed that:
-- so far as each director is aware, there is no relevant audit
information of which the Company's auditor is not aware; and
-- each director has taken all the steps that they ought to have
taken as a director in order to make themselves aware of any
relevant audit information and to establish that the Company's
auditor is aware of that information.
Signed on behalf of the Board of Directors
Patrick Cox
Chair
Date: 25 July 2022
Corporate Governance Report
This Corporate Governance Report forms part of the Report of the
Directors as further on pages 90-100. The Board operates under a
framework for corporate governance which is appropriate for an
investment company.
Gore Street Energy Storage Fund plc is an investment trust and
has been compliant with section 1158 of The Corporation Tax Act,
2010. The Ordinary Shares were admitted to trading on the Premium
Segment of the Official List of the London Stock Exchange on 25 May
2018.
The Board of Gore Street Energy Storage Fund plc has considered
the Principles and Provisions of the Association of Investment
Companies Code of Corporate Governance (the "AIC Code"). The AIC
Code addresses the Principles and Provisions set out in the UK
Corporate Governance Code (the "UK Code"), as well as setting out
additional Provisions on issues that are of specific relevance to
the Company.
The Board considers that reporting against the Principles and
Provisions of the AIC Code, which has been endorsed by the
Financial Reporting Council, provides more relevant information to
Shareholders.
The Board recognises the importance of good governance and
considers that the Company has, throughout the year under review,
complied with the Principles and Provisions of the AIC Code. The
AIC Code is available on the AIC website. It includes an
explanation of how the AIC Code adopts the Principles and
Provisions set out in the UK Code to make them relevant for
investment companies. The Company is a member of the AIC.
Compliance with the AIC Code
The below table sets out the Company's compliance with the AIC
Code:
Section 5: Board Leadership and Purpose
Principles Details of how the Company
complies
A. A successful Company is led by Strategic report, pages 35-37
an effective board, whose role is to Chair's Statement, pages 30-35
promote the long-term sustainable success Corporate Governance Report,
of the Company, generating value for pages 100-114
shareholders and contributing to wider
society.
B. The Board should establish the Strategic report, pages 35-37
Company's purpose, values, and strategy, Chair's Statement, pages 30-35
and satisfy itself that these and its Corporate Governance Report,
culture are aligned. All Directors pages 100-114
must act with integrity, lead by example,
and promote the desired culture.
C. The Board should ensure that the Environmental, social and governance
necessary resources are in place for report, pages 73-79
the Company to meet its objectives Principal risks and uncertainties,
and measure performance against them. pages 79-89
The Board should also establish a framework Audit Committee report, pages
of prudent and effective controls, 114-119
which enable risk to be assessed and
managed.
D. In order for the Company to meet Stakeholders, pages 96-98
its responsibilities to shareholders Section 172 statement, page
and stakeholders, the Board should 96-98
ensure effective engagement with, and Corporate Governance Report,
encourage participation from, these page 100-114
parties.
E. Intentionally left blank Per the
AIC Code
-------------------------------------
Section 6: Division of Responsibilities
Principles
F. The chair leads the Board Chair's Statement, page 30-35
and is responsible for its overall Corporate Governance Report
effectiveness in directing the section, page 100-114
Company. They should demonstrate
objective judgement throughout
their tenure and promote a culture
of openness and debate. In addition,
the chair facilitates constructive
board relations and the effective
contribution of all non-executive
directors, and ensures that Directors
receive accurate, timely and clear
information.
G. The Board should consist of Corporate Governance Report,
an appropriate combination of page 100-114
Directors (and, in particular, Biographies, pages 108-110
independent non-executive directors) Remuneration and Nomination
such that no one individual or Committee, pages 120-125
small group of individuals dominates
the Board's decision making.
H. Non-executive directors should Corporate Governance Report,
have sufficient time to meet their page 100-114
board responsibilities. They should Remuneration and Nomination
provide constructive challenge, Committee report, page 120-125
strategic guidance, offer specialist Audit Committee report, page
advice and hold third party service 114-119
providers to account. Management Engagement Committee,
page 125-127
I. The Board, supported by the Corporate Governance Report,
Company Secretary, should ensure page 100-114
that it has the policies, processes, Audit Committee report, page
information, time and resources 114-119
it needs in order to function
effectively and efficiently.
----------------------------------
Section 7: Composition, Succession
and Evaluation
------------------------------------------- -----------------------------------
Principles
-----------------------------------
J. Appointments to the Board Remuneration and Nomination
should be subject to a formal, Committee report, page 120-125
rigorous and transparent procedure,
and an effective succession plan
should be maintained. Both appointments
and succession plans should be
based on merit and objective criteria
and, within this context, should
promote diversity of gender, social
and ethnic backgrounds, cognitive
and personal strengths.
-----------------------------------
K. The Board and its committees Biographies, pages 108-111
should have a combination of skills,
experience and knowledge. Consideration
should be given to the length
of service of the Board as a whole
and membership regularly refreshed.
L. Annual evaluation of the Board Remuneration and Nomination
should consider its composition, Committee report, page 120-125
diversity and how effectively
members work together to achieve
objectives. Individual evaluation
should demonstrate whether each
director continues to contribute
effectively.
Section 8: Audit, Risk and Internal
Control
------------------------------------------- -----------------------------------
Principles
-----------------------------------
M. The Board should establish Audit Committee report, page
formal and transparent policies 114-119
and procedures to ensure the independence Notes 2 and 3 to the financial
and effectiveness of external statements section, page 133
audit functions and satisfy itself -135
on the integrity of financial
and narrative statements.
N. The Board should present a Strategic report, page 35-37
fair, balanced and understandable Audit Committee report, page
assessment of the Company's position 114-119
and prospects. Financial statements, pages
128-132
O. The Board should establish Principal risks and uncertainties,
procedures to manage risk, oversee page 79-89
the internal control framework, Viability Statement, page 94-96
and determine the nature and extent Audit Committee report, page
of the principal risks the Company 114-119
is willing to take in order to Management Engagement Committee
achieve its long-term strategic report, page 125-127
objectives.
-----------------------------------
Section 9: Remuneration
------------------------------------------- -----------------------------------
Principles
-----------------------------------
P. Remuneration policies and Corporate Governance Report,
practices should be designed to page 100-114
support strategy and promote long-term Remuneration and Nomination
sustainable success. Committee report, page 120-125
Q. A formal and transparent procedure Remuneration and Nomination
for developing policy on remuneration Committee report, page 120-125
should be established. No director
should be involved in deciding
their own remuneration outcome.
R. Directors should exercise Remuneration and Nomination
independent judgement and discretion Committee report, page 120-125
when authorising remuneration
outcomes, taking account of Company
and individual performance, and
wider circumstances.
-----------------------------------
The Board
The Board consists of four non-executive directors all of whom
are deemed to be independent of the Investment Manager. The Board
represent a range of public service, investment, financial and
business skills, and has a depth of experience across these
categories. The Chair of the Board is Patrick Cox. In considering
the independence of the Chair, the Board took note of the
provisions of the UK Code relating to independence and has
determined that Mr Cox is an independent Director. The Senior
Independent Director is Mr Thomas Murley. The Company has no
employees and consequently there is no requirement for a chief
executive.
In accordance with the AIC Code, all the Directors will retire
at the forthcoming AGM. Patrick Cox, Caroline Banszky, Thomas
Murley and Malcolm King, being eligible, will offer themselves for
re-election.
Biographical details of all Board members (including significant
other commitments) are shown on page 108-110.
Full Board meetings take place quarterly and the Board meets or
communicates more regularly to address specific issues. The Board
has a formal schedule of matters reserved for its decision which
includes, but is not limited to, considering recommendations of the
Investment Manager, ensuring the Company is delivering on its
strategy and monitoring performance against the Company's strategic
objectives.
The Board has also established procedures whereby the Directors
wishing to do so in the furtherance of their duties may take
independent professional advice at the Company's expense.
All Directors have access to the advice and services of the
Company Secretary. The Company Secretary provides the Board with
full information on the Company's assets and liabilities and other
relevant information requested by the Chair, in advance of each
Board meeting.
In keeping with the provisions of the AIC Code, the Company's
policy is that every three years an external consultant, who has no
connection with the Company, carries out a formal review of the
Board's performance. The first such review took place in 2021 and
details can be found in the Remuneration and Nomination Committee
Report. In the intervening years, an internal board evaluation will
be carried out with the assistance of the Company Secretary.
Board Responsibilities
The Directors are responsible for managing the business affairs
of the Company in accordance with the Articles and the investment
policy and have overall responsibility for the Company's activities
including its strategy, investment activities and reviewing the
performance of the portfolio.
The Board has a clearly articulated set of matters which are
specifically reserved to it and this is reviewed annually. These
include:
-- The strategic direction of the overall business, objectives,
budgets and forecasts, levels of authority to approve expenditure,
and any material changes to them.
-- The commencement, material expansion, diversification, or
cessation of any of the Company's activities.
-- The Company's regulatory, financial, and material operational policies.
-- Changes relating to the Company's capital, corporate, management or control structures.
-- Material capital or operating expenditures, outside
predetermined tolerances or beyond the delegated authorities.
-- Any material contract or joint venture and material
arrangements with customers or suppliers.
-- Ensuring the maintenance of a sound system of internal
control and risk management and review the effectiveness of the
Company's overall internal control arrangements and processes.
The Board may delegate certain functions to other parties such
as the Board committees, the Investment Manager, the Administrator,
the Company Secretary and the Registrar. In particular, the Board
has delegated responsibility for day-to-day management of the
investments comprised in the Company's portfolio to the Investment
Manager. The Directors have responsibility for exercising
supervision of the Investment Manager.
Culture & Purpose
As a young company, our purpose and values are clear and fresh,
and we believe that the culture required to support these is
straightforward and apparent - respectful, pragmatic and to provide
constructive challenge. The Board keeps under review the culture
and how this aligns with the Company's purpose and strategy. Our
culture is driven by our purpose and core values.
Our purpose is to deliver seven per cent income yield per annum
and long-term capital growth to its investors from its portfolio of
utility-scale energy storage assets located in the UK and the rest
of the OECD. This forms the foundation of our strategic
framework.
Our core values are:
-- To focus on the long-term sustainability of our business.
-- To act openly and transparently with all our stakeholders.
-- To combine entrepreneurial nimbleness with the strength of a listed company.
Board Committees
The Board has delegated a number of areas of responsibility to
its three committees, the Audit Committee, the Management
Engagement Committee and the Remuneration and Nomination Committee.
Each committee has defined terms of reference and duties.
All the independent Directors serve on the Committees of the
Board, so the links and overlaps between the responsibilities of
the committees are fully recognised and each committee has full
knowledge of the business and deliberations of the other
committees.
In addition, the Investment Manager, as Alternative Investment
Fund Manager ("AIFM"), has a Risk Committee, comprised of members
of its own staff for the purposes of monitoring the risk management
framework of the Company.
Alternative Investment Fund Manager Directive ("AIFMD")
The Company is an Alternative Investment Fund for the purposes
of the AIFMD and related regimes in EEA member states.
Service and Support
The Company has no employees and is externally managed by the
Investment Manager as the mandatory AIFM, supported by the
Administrator.
The Management Engagement Committee formally reviews the
performance of the Investment Manager, the Administrator and other
service providers each year and makes recommendations to the Board
as it considers appropriate. Further details of these reviews, and
the relationships with the Investment Manager and Administrator are
given in the Management Engagement Committee Report on pages
125-127.
The Investment Manager
Gore Street Capital Limited ("GSC") act as the AIFM, to provide
investment advice to the Company in respect of the assets of the
Company and to provide the day-to-day management of those
investments.
GSC receive a further GBP75,000 in addition to its fee outlined
in the Advisory and Services Agreement. This is to cover the
incremental cost of providing additional services as AIFM.
Under the terms of the Management Agreement, the Investment
Manager is entitled to receive from the Company an advisory fee
payable quarterly in arrears calculated at the rate of a quarter of
one per cent of Adjusted Net Asset Value minus "Uncommitted Cash",
where uncommitted Cash means cash that has not been allocated for
repayment of a liability on the balance sheet of any member of the
Group. Adjusted Net Asset Value means Net Asset Value, minus cash
on the Company balance sheet.
The Investment Manager is also entitled to a performance fee
calculated by reference to the movements in the Net Asset Value
(before subtracting any accrued performance fee) which is linked to
gross proceeds raised on the Company's IPO plus a 7% hurdle, and is
set out in the Prospectus dated 29 March 2022.
During the year, the Management Agreement was amended to:
- change the term of adjusted NAV to mean net asset value minus
uncommitted cash. Uncommitted cash means all cash on the Company's
balance sheet other than committed cash. Committed cash means cash
that has been allocated for repayment of a liability on the balance
sheet of any member of the group.
an additional fixed fee payable quarterly in advance with effect
from 1 October 2020 to the Investment Manager of GBP50,000 per
annum to support the administrative and accounting function, plus
an additional per asset fee of GBP6,000 per annum in respect of
each energy storage project held by the group beginning with (and
including) the tenth energy storage project, calculated and payable
quarterly in arrear with effect from 1 October 2020 and based on
the number of energy storage assets held by the Group at each
quarter end.
a fixed fee of GBP10,382.97 per month payable monthly in arrear
with effect from 1 October 2020 to Investment Manager for the
provision of corporate services. Corporate services are defined in
the side letter and is in relation to supporting the execution of
investment transactions and managing third party advisors, a
short-term fee for development and management of assets through to
completion of construction, for a maximum term of one and one-half
years.
In addition, the following changes to the management agreement
were implemented with fees being payable to the Investment Manager
by each respective subsidiary:
During the period, the Investment Manager and Company entered
into a Commercial Management Agreement for the provision of the
Construction Services and the Operational Services. The Investment
Manager shall be entitled to receive a fixed fee of GBP110,750 per
Development Project per annum (the "Construction Services Fee"),
for a maximum term of 1.5 years in respect of each Development
Project and in respect of the Operational Services to be provided
by the Commercial Manager pursuant to this Agreement, the
Commercial Manager shall be entitled to receive a fixed fee of
GBP20,000 per Operational Asset per annum, save for the Ancala
Assets in respect of which the fixed fee shall be GBP6,000 per
annum.
The Depositary
Indos Financial Limited are the Depositary to the Company.
The Administrator
Sanne Group Administration Services (UK) Limited ("Sanne") is
Administrator to the Company.
During the year ended 31 March 2022, as Administrator, Sanne on
behalf of the Directors, was responsible for the maintenance of the
books and records, the management and financial accounts, the
management of all cash movements of the Company and the
calculation, in conjunction with the Investment Manager, of the Net
Asset Value of the Company.
The Company Secretary
JTC (UK) Limited ("JTC") are Company Secretary to the Company.
As Company Secretary, JTC is responsible for regulatory compliance
and providing support to the Board's corporate governance process
and its continuing obligations. In addition, JTC is responsible for
liaising with the Company, the Investment Manager, and the
Registrar in relation to the payment of any dividends, as well as
general secretarial functions required by the Companies Act.
Member Board Audit Committee Management Engagement Remuneration
Committee and Nomination
Committee
Patrick Cox 4/4 2/2 1/1 1/1
====== ================ ====================== ================
Caroline Banszky 4/4 2/2 1/1 1/1
====== ================ ====================== ================
Malcolm King 4/4 2/2 1/1 1/1
====== ================ ====================== ================
Thomas Murley 4/4 2/2 1/1 1/1
====== ================ ====================== ================
Meetings and attendance
The Board meets formally on a quarterly basis. The table above
gives the names of all of the Directors who served during the year
and shows each individual Director's attendance at the scheduled
board and committee meetings for which they were eligible to attend
during the year.
We also had 14 ad hoc meetings which are generally called to
approve special announcements, transactions or share issues that
have taken place throughout the year. JTC attend all our meetings
as Secretary to the Board. In addition, we invite representatives
of the Investment Manager, our Independent Auditor, and other
advisors to attend as required.
The Board Agenda
At our quarterly meetings, the Board follows a formal agenda.
This agenda generally includes, amongst other things:
The Investment Manager's report for the period, including
strategic performance and acquisitions, a review of the performance
of the investments, operator performance and market conditions.
The AIFM report for the period, including discussion of
risk.
Reviewing the risk register and considering internal
controls.
The Depositary Report for the period.
Financial results against budget and cash flow forecasts,
including dividends declared and forecast.
Reports and updates on shareholder and investor
communications.
The Corporate Governance and Secretary's Report, with a review
of policies and procedures, a compliance report, and an update on
legislative/regulatory obligations as appropriate.
Recommendations and updates from the Board committees as
appropriate.
Key Activities of the Board during 2021/2022
The primary focus at regular Board meetings has been on
delivering the strategy and monitoring performance against our
strategic objectives (see the Strategic Report on pages 35-37 for
more details). This included:
-- Considering capital structure.
-- Raising additional equity.
-- Discussing and approving portfolio acquisitions.
-- Reviewing conflicts of interest register and significant shareholdings.
-- Reviewing the Risk Register.
-- Reviewing and approval of the quarterly NAV and dividend.
-- Approval of the interim report.
-- Monitoring performance of investments, risks, and market conditions.
-- Review of financial results against budget and cash flow
forecasts including dividends declared and forecast.
-- Monitoring the situation with regards to COVID-19.
-- Monitoring the impact of the Russia/Ukraine conflict.
The Board of Directors
Patrick Cox (Chair)
Mr Cox has significant board experience
and is currently, a member of the Appointment
Advisory Committee for the European Investment
Bank, Chair of Ecocem Ltd., a non-executive
director of Supernode Ltd and of Gresham
House Ireland Asset Management Ltd. He also
sits on the Boards of various think tanks
and not-for- profit organisations, including
as a Senior Fellow and Board Member of the
Institute for International and European
Affairs, Ireland, a Board Member of the
Third Age Foundation Ireland. He was formerly
the Chair of the Public Interest Committee
for KPMG Ireland until December 2020. Mr
Cox was President of the European Parliament
from 2002 to 2004 and leader of its Liberal
Democrat Group from 1998 to 2002 and served
as a Member of the European Parliament for
Munster, Ireland, from 1989 to 2004. He
is the European Coordinator for the Scandinavian-
Mediterranean TEN-T Core Network Corridor,
appointed by the European Commission, and
leader of a parliamentary reform programme
with Ukraine, appointed by the European
Parliament. He has been bestowed with National
Honours by Presidents of Austria, Bulgaria,
Estonia, Italy, Latvia, Lithuania, Poland,
and Romania, and is a Commander of the Legion
of Honour, France. He is a graduate of Trinity
College, Dublin and holds Honorary Doctorates
from Trinity College Dublin, the National
University of Ireland, the University of
Limerick, the Open University, and the American
College Dublin.
Mr Cox was appointed on 22 February 2018
and has been a director for 4 years and
1 month. He sits on the Remuneration & Nomination
Committee, the Audit Committee, and the
Management Engagement Committee.
Ms Caroline Banszky
Ms Banszky is currently a non-executive
director of 3i Group plc, where she is the
Chairman of the Audit and Compliance Committee
and a member of the Remuneration Committee,
and a non-executive director of IntegraFin
Holdings plc where she is Chairman of the
Audit and Risk Committee. In addition, she
is a director of the Benefact Trust Limited
and a member of their Finance & Investment
Committee, a director of the UK Stem Cell
Foundation S and a member of the Investment
Sub-Committee of The Open University. Formerly
the Chief Executive of The Law Debenture
Corporation plc., from 2002 to 2016, she
was also Chief Operating Officer of SVB
Holdings plc (now Novae Group plc), then
a Lloyd's listed integrated vehicle, from
1997 to 2002 and Finance Director of N.M.
Rothschild & Sons Limited from 1995 to 1997,
having joined the bank in 1981. She originally
trained at what is now KPMG. Ms Banszky
was appointed on 22nd February 2018 and
has been a director for 4 years and 1 month.
She is the Chair of the Audit Committee
sits on the Remuneration & Nomination Committee,
and the Management Engagement Committee.
Malcolm King
Mr King has had a varied career in financial
services, including over 30 years in investment
management. For 10 years Mr King was the
investment manager at Finsbury Asset Management
where he was responsible for the investments
of seven investment trusts. Subsequently
he moved to J O Hambro Capital Management
where he was director and investment manager
of two investment trusts and a number of
other portfolios. From 2004 until 2016,
Mr King worked at Investec Asset Management
where he was the co-manager of various multi-asset
funds invested in internal and external
funds, including closed-ended funds. A Chartered
Accountant, having trained at Peat, Marwick
& Mitchell (now KPMG), he is currently a
non-executive director of Ecofin Global
Utilities & Infrastructure Trust plc and
a former non-executive director of Henderson
Opportunities Trust. He writes regularly
for MoneyWeek as well as having a number
of unpaid commitments.
Mr King is an economics graduate of Trinity
College, Cambridge.
Mr King was appointed on 22 February 2018
and has been a director for 4 years and
1 month. He sits on the Remuneration & Nomination
Committee, the Audit Committee, and the
Management Engagement Committee.
Thomas Murley
Mr Murley has been involved in investing
in renewable energy projects for over 25
years in both Europe and the United States.
From 2004 to 2016 Mr Murley was a director
at HgCapital, a London-based private equity
firm, where he established its renewable
energy investment fund business which raised
and invested over US$1 billion in equity
in over 70 EU wind, solar, biomass and hydroelectric
projects. From 2016 to 2018 Mr Murley continued
to act as Chairman and Senior Advisor to
the HgCapital Renewable Energy team, which
spun out of HgCapital in December 2017 and
is now trading as Asper Investment Management,
serving on investment and portfolio committees.
In 2012 Mr Murley was appointed as a non-executive
director to the inaugural board of the UK
Green Investment Bank, where he also served
on the investment committee. Mr Murley remained
on the Board until the privatisation of
the Green Investment Bank in August 2017.
In October 2016 he was appointed as an independent
non-executive director of Ameresco Inc.,
a renewable energy and energy efficiency
company listed on the New York Stock Exchange.
Mr Murley also serves as an independent
investment committee member for two private
renewable energy investment funds, one based
in New York and the other in Amman, Jordan.
From 1993-2003 Mr Murley was a lawyer and
later Managing Director of EIF Group in
Boston Massachusetts, one of the first energy
infrastructure funds, where he was responsible
for equity investments and renewable and
conventional power projects. Mr Murley has
a degree in History from Northwestern University
in Evanston, Illinois, and a Law Degree,
with honours, from Fordham University in
New York.
Mr Murley was appointed on 22 February 2018
and has been a Director for 4 years and
1 month. He sits on the Remuneration & Nomination
Committee, the Audit Committee and the Management
Engagement Committee.
The Investment Committee
Frank Wouters is a director of the Investment
Manager. He is Senior Vice President New Energy
at Reliance Industries and heads the EU Clean
Energy Technology Network from Abu Dhabi.
Mr Wouters was recently the Deputy Director
General of the International Renewable Energy
Agency ("IRENA"). IRENA is an intergovernmental
organisation that supports governments in
their transition to a sustainable energy future.
Prior to IRENA, Mr. Wouters was the Director
of the Clean Energy Unit at Masdar, a subsidiary
of Mubadala, one of Abu Dhabi's sovereign
wealth funds. During his tenure as Director
of the Masdar Clean Energy Unit, Mr Wouters
led the development and construction of renewable
energy projects worth more than US$3 billion,
including a solar plant in Abu Dhabi, three
in Spain and the London Array, the largest
offshore wind park in the world. He received
his MSc in Mechanical Engineering from Delft
University of Technology.
Suminori Arima, the Chief Investment Office
(CIO) at the Investment Manager, is a former
Managing Director of RHJ International in
Japan and London, and of Kleinwort Benson
in London. RHJ International was a parent
company of Kleinwort Benson and was a publicly
listed private equity business spun off from
Ripplewood Holdings. Since Suminori joined
Ripplewood in 2002, he has gained over 20
years' experience in private equity, including
various large investments and divestments.
He was also a board member of various public
and private companies. Prior to joining Gore
Street Capital, Suminori had been engaged
in various investment activities in solar
and wind (on-shore and off-shore) in Europe.
He has a Masters in Finance from Princeton
University and a BA in Economics from the
University of Tokyo.
Alex O'Cinneide is CEO and Chair of the Investment
Committee of Gore Street Capital, a business
he founded in 2015. Prior to this he was Managing
Director and Head of Europe for Paladin Capital,
a Senior Advisor to Kleinwort Benson Bank,
and served on the Investment Committee of
IndoChina Capital; and from 2006 to 2013 was
Head of Investments for Masdar, Abu Dhabi's
USD15 billion sovereign wealth fund. From
2006 to 2012, Masdar invested in the largest
off-shore wind farm in the world, owning 20
per cent. Of the 1GWp London Array project
in a joint venture with E>ON UK and Dong;
China's largest non-SOE wind developer (over
a GWp of active projects); a range of PV and
CSP plans in both Europe and the US, including
40 per cent. of a EUR1.76 billion investment
in Torresol Energy devoted to the construction
of three CSP plants in Spain; Acciona Solargenix
CSP plants (over 60MW) in the US; and waste-to-
energy plants in both the US and Europe, as
well as a range of growth equity positions
in new technology companies located globally.
Alongside those commercial activities he is
a trustee of the London Irish Centre, a UNICEF
Advisor, is an Associate Researcher to the
Energy Policy Group in Cambridge University,
a Fellow of the Royal Geographical Society
and an Honorary Research Fellow of Imperial
College London. Alex O'Cinneide holds a MA
from Trinity College Dublin, a MSc from the
London School of Economics, a MSc from the
London Business School and a PhD from Trinity
College Dublin on Energy Policy.
Information on the Investment Manager
The Company has appointed Gore Street Capital Limited as the
Company's investment manager, which is authorised and regulated by
the UK's Financial Conduct Authority as a full scope Alternative
Investment Fund Manager (the "Investment Manager").
The Investment Manager was formed in 2015 as a platform to
acquire, develop and manage global renewable energy assets. It is
headquartered in the UK and comprises a strong team of investment
professionals with significant experience in sourcing, structuring,
and managing large renewable energy projects globally. The
Investment Manager was the first to deploy privately-owned
large-scale battery projects in Great Britain.
The Investment Manager is responsible for deal origination,
execution, and asset management of the portfolio in accordance with
the Company's investment objectives and policy. The Board has
delegated authority to the AIFM to acquire or dispose of assets
without seeking further approval from the Board provided that the
Board is given the opportunity to consider each acquisition or
disposal before it is concluded.
Once a potential project which falls within the Company's
investment policy has been identified, and the Investment Manager
wishes to proceed with the acquisition of such project, its
Investment Committee approval is required to confirm that
financial, legal, and technical diligence suggests that the
proposed transaction is consistent with the Company's investment
policy.
Approach to risk management and internal control
The Directors acknowledge their responsibility for maintaining
the Company's system of internal control and risk management, in
order to safeguard the Company's assets. The Board review the
reports on the internal controls of the Company's key service
advisers which identify the risk management systems in place for
assessing, managing, and monitoring risks applicable to such
service advisers. This system is designed to identify, manage, and
mitigate the financial, operational and compliance risks that are
inherent to the Company, and to manage rather than eliminate the
risk of failure to achieve business objectives. As such, it can
only provide reasonable, but not absolute, assurance against
material misstatement or loss.
As part of each quarterly Board meeting during the period, the
Directors reviewed the financial position of the Company and
assessed any risks in relation to the Company's business model and
the Company's future performance, liquidity, and solvency. To
facilitate this process the Investment Manager produced financial
reports, which included the latest management accounts, a review
and report on the Company's financial model, substantiation of any
dividend payments and a general update on the financial health of
the Company.
The Board considered whether the Company should employ an
internal audit function during the period and concluded that, due
to the Company's structure, the nature of its activities, and
taking into account the controls already in place and, more
particularly, the external service already provided by the
Administrator and the Manager, an internal audit function was not
necessary.
As part of the internal risk review, we identified that whilst
the Administrator has its own internal audit performed on an annual
basis, from which the Company reviews any findings and takes
particular comfort, the Company should also independently assess
whether these controls are sufficient and if they operate
effectively.
Internal Control
Although the Board is ultimately responsible for safeguarding
the assets of the Company, the Board has delegated, through written
agreements, the day-to-day operation of the Company (including the
Financial Reporting Process to the following key service
advisers):
Investment Manager: Gore Street Capital Limited
Administrator: Sanne Group (UK) Limited
Company Secretary: JTC (UK) Limited
The Board keeps under review the effectiveness of the systems of
internal control and risk management, ensuring that the procedures
to be followed by the advisers and themselves are in place to
ensure that the controls remain relevant and were in operation
throughout the year.
The Company's principal risks and uncertainties are detailed on
pages 79-89 of this report. As further explained in the Audit
Committee Report, the risks of the Company are outlined in a risk
matrix which was reviewed and updated during the period. The Board
continually reviews its policy setting and updates the risk matrix
at least annually to ensure that procedures are in place with the
intention of identifying, mitigating, and minimising the impact of
risks should they crystallise. The Board relies on reports
periodically provided by the Investment Manager regarding risks
that the Company faces.
As part of its regular risk assessment procedures, the Board
reviews reports on the conclusions of any testing carried out by
the auditors, and takes account of environmental, social and
governance matters related to the business of the Company. The
Board has identified and assessed the ESG risks to the Company's
short and long-term value, as well as the opportunities to enhance
value that may arise from an appropriate response. Further
information on the Company's approach to ESG can be found on pages
73-79.
When required, experts, including tax and legal advisors, are
employed to gather information and advise the Board. The Board also
regularly monitors the investment environment and the management of
the Company's portfolio, and applies the principles detailed in the
internal control guidance issued by the Financial Reporting Council
("FRC"). The principal features of the internal control systems
which the Investment Manager and the Administrator have in place in
respect of the Company's financial reporting include:
-- Internal reviews of all financial reports.
-- Review by the Board of financial information prior to its
publication.
-- Authorisation limits over expenditure incurred by the
Company.
-- Review of valuations.
-- Authorisation of investments.
Whistleblowing Policy
The Board has considered the UK Code recommendations in respect
of arrangements by which staff of the Investment Manager, Company
Secretary or Administrator may, in confidence, raise concerns
within their respective organisations about possible improprieties
in matters of financial reporting or other matters. It has
concluded that adequate arrangements are in place for the
proportionate and independent investigation of such matters and,
where necessary, for appropriate follow up action to be taken
within their organisation.
Relations with Shareholders
The Company places great importance on communication with its
Shareholders and welcomes the views of Shareholders. The Investment
Manager is available at all reasonable times to meet with principal
Shareholders and key sector analysts. The Chair, the Senior
Independent Director and other Directors are also available to meet
with Shareholders if requested or required. All Shareholders have
the opportunity to put questions to the Company at the registered
address.
The Company's AGM is scheduled to be held on 20 September 2022
and notice of the meeting is published accompanying the Annual
Report and Accounts. The Company will notify shareholders of any
changes to the proposed format for the AGM as soon as possible via
a RIS and its website ( www.gsenergystoragefund.com )
The Board receives comprehensive Shareholder reports from the
Company's Registrar and regularly monitors the views of
Shareholders and the Shareholder profile of the Company. The Board
is also kept fully informed of all relevant market commentary on
the Company by the Investment Manager.
Shareholders may also find Company information or contact the
Company through its website:
www.gsenergystoragefund.com
The terms of reference of the Committees and the conditions of
appointment of non-executive directors are available to
Shareholders on request.
Patrick Cox
Director
Date: 25 July 2022
Audit Committee's Report
The Audit Committee (the Committee) is chaired by Caroline
Banszky and comprises all the Directors. The Committee operates
within clearly defined terms of reference and includes all matters
indicated by Rule 7.1 of the UK FCA's DTRs and the AIC Code. The
terms of reference were reviewed during the year under review and
were updated to enhance the Committee's scope to consider key risks
facing the Company. The Board is satisfied that the Committee is
properly constituted with at least one member of the Committee who
is a chartered accountant with recent and relevant financial
experience.
The Committee plays an important role in the governance of the
Company, with its principal activities focused on the integrity of
financial reporting, quality and effectiveness of external audit,
risk management and the system of internal control.
The Committee meets a minimum of twice a year, and at such other
times as the Committee shall require. The Administrator and
representatives of the Investment Manager may be invited to attend
meetings as and when deemed appropriate.
Meetings
We met two times during the financial year ended 31 March 2022.
These meetings were attended by the committee members, as well as
representatives of the Investment Manager, Gore Street Capital
Limited, the Company Secretary, JTC (UK) Limited, the Independent
Auditor, Ernst & Young LLP, and the independent valuer BDO
LLP.
The Audit Committee operates within clearly defined terms of
reference which are reviewed on an annual basis and approved by the
Board. The terms of reference include all matters indicated by
Disclosure Guidance and Transparency Rule 7.1 and the AIC Code.
Third parties are invited to attend meetings as and when deemed
appropriate.
Summary of the Role and Work of the Audit Committee
The function of the Committee is to ensure that the Company
maintains the highest standards of integrity, financial reporting,
internal and risk management systems, and corporate governance. The
main duties of the Audit Committee are:
1. Monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the Company's
financial performance and reviewing significant financial reporting
judgements contained in them.
2. Reporting to the Board on the appropriateness of the Board's
accounting policies and practices including critical judgement
areas and going concern and the viability statements.
3. Reviewing the valuation of the Company's investments prepared
by the Investment Manager and their underlying assumption, we
review the work of the independent valuer BDO LLP bi-annually prior
to making a recommendation to the Board on the valuation of the
Company's investments.
4. Meeting regularly with the Auditor to review their proposed
audit plan and the subsequent audit report and assess the
effectiveness of the audit process and the levels of fees paid in
respect of both audit and non-audit work.
5. Making recommendations to the Board in relation to the
appointment, re-appointment, or removal of the Auditor, and
approving their remuneration and the terms of their engagement.
6. Monitoring and reviewing annually the Auditor's independence,
objectivity, expertise, resources, qualification, and non-audit
work.
7. Reviewing the effectiveness of the accounting and internal
control systems of the Company and considering annually whether
there is a need for the Company to have its own internal audit
function.
8. Reviewing and considering the UK Code, the AIC Code, the FRC
Guidance on Audit Committees and the Company's institutional
investors' commitment to the UK Stewardship code; and
9. Reviewing the risks facing the Company and monitoring the risk matrix.
The Audit Committee is required to report formally to the Board
on its findings after each meeting on all matters within its duties
and responsibilities.
Overview
During the year, the Audit Committee has had regular contact and
meetings with the Investment Manager, the Administrator, and the
Independent Auditor. These meetings and discussions focused on, but
were not limited to:
A detailed analysis of the Company's half year and interim
NAVs.
Reviewing the risk matrix of the Company.
Reviewing the Company's corporate governance framework.
Reviewing the internal controls framework for the Company, and
those of the Administrator and the Investment Manager with respect
to the Company.
Considering the ongoing assessment of the Company as a going
concern.
Considering the principal risks which took into consideration
the effects of the Covid-19 pandemic and period of assessment for
the longer-term viability of the Company.
Reviewing the detailed stress tests for the viability of the
Company to ensure that going concern basis is appropriate.
Monitoring compliance with AIFMD, the AIC code and other
regulatory and governance frameworks.
Reviewing and approving the audit plan in relation to the audit
of the Company's Annual Report and financial statements.
Considering the impact of the Russian invasion of Ukraine.
Financial Reporting
The primary role of the Committee in relation to financial
reporting is to review with the Investment Manager and the
Administrator the appropriateness of the half-year report and
Annual Report and financial statements, concentrating on, amongst
other matters:
-- The quality and acceptability of accounting policies and practices.
-- The clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements. The Committee reviewed the disclosures related to the
technical infringement of the Company's Act 2006 and proposed
remedial actions, as described on page 34-35 of the Chair Statement
and notes 21 and 24 of the financial statements.
-- Amendments to legislation and corporate governance reporting
requirements and accounting treatment of new transactions in the
year.
-- The impact of new and amended accounting standards on the Company's financial statements.
-- Whether the Audit Committee believes that proper and
appropriate processes and procedures have been followed in the
preparation of the half year report and Annual Report and financial
statements.
-- Whether the Annual Report and financial statements, taken as
a whole, are fair, balanced, and understandable and provides the
information necessary for Shareholders to assess the Company's
performance, going concern, viability, business model and
strategy.
-- Material areas in which significant judgements and estimates
have been applied or there has been discussion with the Auditor;
and
-- Any correspondence from regulators in relation to the Company's financial reporting.
Significant Issues
The Audit Committee discussed the planning, conduct and
conclusions of the external audit as it proceeded. At the Audit
Committee meeting in advance of the year end, the Audit Committee
discussed and approved the Independent Auditor's audit plan. The
Audit Committee considered:
-- the more bespoke disclosure regarding the assessment of going
concern and long-term viability for the required statements by the
Board which took into consideration the effects of Covid-19
pandemic and having completed the assessment do not consider it to
be a key area of risk for the Company; and
-- identified the carrying value of investments as a key area of
risk of misstatement in the Company's financial statements.
Assessment of the Carrying Value of Investments
The Company's accounting policy is to designate investments at
fair value. As a consequence, the Committee reviewed valuation
policies processes and application. The most influential area of
judgement within the Accounts relates to the valuation of these
investments. The key estimates and assumptions include the useful
life of the assets, revenue estimates, the discount factors
utilised, the rate of inflation, and the price at which the power
and associated benefits can be sold. In particular, the Audit
Committee challenged the appropriateness of the discount rate used
and carefully considered the impact of the macro-economic and
industry related factors on Income recognition and associated
assumptions in relation to the valuation of the assets that have
been included in the 31 March 2022 valuation. At the year end, the
Company engaged BDO as independent valuation experts/advisors to
help the committee form a view as to the reasonableness as to the
valuations.
The uncertainty involved in determining the fair value of
investment valuations represents a significant risk in the
Company's financial statements. An inherent risk of management
override is present as the Investment Manager's fee is calculated
based on NAV (as disclosed in the financial statements). The
Investment Manager is responsible for calculating the NAV with the
assistance of the Administrator, prior to approval by the
Board.
On a quarterly basis, the Investment Manager provides a detailed
analysis of the NAV. This analysis highlights any movements and
assumption alterations to the NAV of the previous quarter. NAV
movements and the principles behind changes in assumptions are
considered and challenged by the Chair of the Audit Committee and
subsequently approved by the Board. The Audit Committee is
satisfied that the key estimates and assumptions used within the
valuation model are appropriate and that the investments have been
fairly valued.
Internal Control
The Audit Committee has established a set of ongoing processes
with a view to satisfying particular needs of the Company with
respect to managing the risks to which it is exposed. The process
is one whereby the Investment Manager has identified the key risks
to which the Company is exposed and recorded them on a risk matrix
together with the controls employed to mitigate these risks. The
Audit Committee is responsible for reviewing the risk matrix and
associated controls before recommending to the Board for
consideration and approval. The Audit Committee is also responsible
for challenging the Investment Manager's assumptions to ensure a
robust internal risk management process. By their nature, these
procedures provide a reasonable, but not absolute, assurance
against material misstatement or loss. Regular reports are provided
to the Audit Committee highlighting material changes to risk
ratings.
The Audit Committee discussed and reviewed the internal controls
in place at the Investment Manager and the Administrator.
Discussions were centered around assurances at operational level;
internal oversight; and independent objective assurance.
The Audit Committee concluded that these frameworks were
appropriate for the identification, assessment, management, and
monitoring of financial, regulatory and other risks, with
particular regard to the protection of the interests of the
Company's Shareholders.
Internal Audit
The Audit Committee considers at least once a year whether or
not there is a need for an internal audit function. Currently it
does not consider there to be a need for an internal audit
function, given that there are no employees in the Company and all
outsourced functions are with parties who have their own internal
controls and procedures. In light of the growing portfolio of
assets under management the requirement for an internal audit
function is under active discussion and review with the Investment
Manager.
External Auditor
Effectiveness of the Audit Process
The Audit Committee assessed the effectiveness of the audit
process by considering Ernst & Young LLP's fulfilment of the
agreed audit plan. This assessment included the review of reporting
presented to the Audit Committee by Ernst & Young LLP and the
discussions at the Audit Committee meeting, highlighting such
issues that arose during the course of the audit. In addition, the
Audit Committee also sought feedback from the Investment Manager
and the Administrator on the effectiveness of the audit process.
For this financial period, the Audit Committee was satisfied that
there had been appropriate focus and challenge on the primary areas
of audit risk and assessed the quality of the audit process to be
good.
Non-Audit Services
The Audit Committee seeks to ensure that any non-audit services
provided by the Independent Auditor do not conflict with their
statutory and regulatory responsibilities, as well as their
independence, before giving written approval prior to their
engagement.
The Audit Committee has a policy regarding the provision of
non-audit services by the external Auditor which precludes the
Independent Auditor from providing any of the prohibited non-audit
services as specified in the FRC Revised Ethical Standard 2019. The
Audit Committee monitors the Company's expenditure on non-audit
services provided by the Independent Auditor, who should be engaged
for non-audit services in circumstances where they are deemed to be
the most commercially viable supplier, and prior approval of the
Audit Committee has been sought. During the year, the only
non-audit service provided by EY was their review of the half year
accounts/financial statements. The Audit Committee was satisfied
that the provision of these Non-Audit Services did not provide
threats to the Independent Auditors' independence.
Independence
The Audit Committee is required to consider the independence of
the external Auditor. In fulfilling this requirement, in addition
to its own internal assessment, the Audit Committee has considered
a report from Ernst & Young LLP describing its arrangements to
identify, report and manage any conflict of interest and the extent
of non-audit services provided by them. The Audit Committee has
concluded that it considers Ernst & Young LLP to be independent
of the Company.
Auditor's Tenure
The Auditor is required to rotate the audit partner every five
years. The current partner is in her fourth year of tenure. There
are no contractual obligations restricting the choice of external
auditor and the Company will consider putting the audit services
contract out to tender at least every ten years. In line with the
FRC's recommendations on audit tendering, this will be considered
further when the audit partner rotates every five years. Under the
Companies Act, the reappointment of the external Auditor is subject
to shareholder approval at the AGM.
Having carried out the review described above and having
satisfied itself that the Auditor remains independent and
effective, the Audit Committee has recommended to the Board that
Ernst & Young LLP be reappointed as Auditor for the year ended
31 March 2023.
Annual General Meeting
The Chair of the Committee will be present at the Company's AGM
to answer questions on the Audit Committee's activity and matters
within the scope of the Audit Committee's responsibilities.
Fair, Balanced and Understandable Statements
The production and audit of the Company's Annual report and
accounts is a comprehensive process, requiring input from a number
of contributors. To reach a conclusion on whether the Company's
annual report and accounts, taken as a whole, are fair, balanced,
and understandable, as required under the AIC Code, the Board
requested that the Audit Committee advise on whether we considered
that the Annual Report fulfilled these requirements.
In outlining our advice, we considered the detailed reviews
undertaken at various stages of the production process by the
Investment Manager, third party independent valuer, BDO LLP,
Administrator and the Audit Committee, which are intended to ensure
consistency and overall balance. We then discussed with the
Investment Manager and Administrator the process of how this was
put together and received a series of drafts of the Company's
Annual report and accounts. These were scrutinised and discussed
thoroughly at an Audit Committee meeting. Additional comfort was
also sought from the Investment Manager and Administrator in
relation to the conclusion reached by the Board.
As a result of the work performed, we have concluded and
reported to the Board that the Annual Report and accounts for the
period ended 31 March 2022, taken as a whole, are fair, balanced,
and understandable and provides the information necessary for
Shareholders to assess the Company's performance, business model
and strategy.
Effectiveness of the committee
A detailed and rigorous evaluation of the Committee was
undertaken as part of the overall evaluation of the Board and its
committees. The skills and experience of the members was found to
appropriate, including recent and relevant financial experience.
The Committee will be concentrating on personal development and
training as the regulatory focus on audit and Audit Committees
increases. The Committee was found to be functioning
effectively.
Caroline Banszky
Chair of the Audit Committee
Date: 25 July 2022
Remuneration & Nomination Committee Report
The Board has prepared this report in line with the AIC Code as
well as the requirements of the Large and Medium-sized Companies
and Groups (Accounts and Reports) Regulations 2008 (SI2008/410) and
the Companies Act 2006.
Under the requirements of Section 497 of the Companies Act 2006,
the Company's Auditor is required to audit certain disclosures
contained within the report. These disclosures have been
highlighted and the audit opinion thereon is contained within the
Auditor's Report on pages 114-119.
Annual Statement from the Chair of the Remuneration &
Nomination Committee
The Committee comprises of the full Gore Street Energy Storage
Fund Plc Board with Pat Cox as Chair and consists solely of
non-executive directors. The Committee has responsibility for
reviewing the remuneration of the Directors, specifically
reflecting the time commitment and responsibilities of the role and
meets at least annually. The Committee also undertakes external
comparisons and reviews to ensure that the levels of remuneration
paid are broadly in line with industry standards and members have
access to independent advice where they consider it
appropriate.
We concluded that there is no need to change the remuneration
policy this year, the policy being approved in 2019 and will be put
a shareholder vote at the 2022 AGM as part of the regulatory three
yearly approval process.
In accordance with the Articles and the AIC Code, we considered
the current levels of remuneration and whether they reflect the
time commitment and responsibilities the Company calls for. During
the year neither the Board nor the Committee has been provided with
external advice of services by any person but has received industry
comparison information from the Company Secretary in respect of
Directors' remuneration. The remuneration policy set by the Board
is described below. Individual remuneration packages are determined
by the Remuneration and Nomination Committee within the framework
of the remuneration policy. The Directors are not involved in
deciding their own individual remuneration with each Director
abstaining from voting on their own remuneration.
At the end of the preceding year the Committee undertook a
benchmarking exercise of directors' remuneration across the
Company's peer group and considered the current level of
remuneration for each individual board member. It was agreed that
directors' remuneration should increase in line with the increased
capitalisation of the Company up to a maximum capitalisation of
GBP100m to bring the directors remuneration in line with market
rates and the remuneration set out in the Prospectus at IPO from
which the directors had taken a temporary reduction to reflect the
reduced market capitalisation of the Company. The Committee decided
in March 2021 that as directors had received increases during the
year to match the reflected growth of the Company, any further
additional increase was not appropriate at this time and that no
additional uplift would be made until such time as further growth
of substance had been achieved.
Remuneration Policy
Below is the Company's remuneration policy. This policy was
adopted on 14 August 2019 and will next be put to a Shareholder
vote at the 2022 AGM as part of the regulatory three yearly
approval process.
Policy
The Company's policy is to determine the level of Directors'
fees with due regard to the experience of the Board as a whole, the
time commitment required, and to be fair and comparable to
non-executive directors of similar companies. The Company may also
periodically choose to benchmark Directors' fees with an
independent review to ensure they remain fair and reasonable.
Directors' fees will be adjusted from time to time and will be
subject to Shareholder approval in the subsequent AGM. The
Directors may elect to apply the cash amount equal to their annual
fee to subscribe for, or to purchase, Ordinary Shares. The
Directors are entitled only to their annual fee and their
reasonable expenses. No element of the Directors' remuneration is
performance related, nor does any Director have any entitlement to
pensions, share options or any long-term incentive plans from the
Company.
The Directors hold their office in accordance with the Articles
of Association and their appointment letters. No Director has a
service contract with the Company, nor are any such contracts
proposed. The Directors' appointments can be terminated in
accordance with the Articles of Association and without
compensation. Under the Company's Articles of Association, all
Directors are entitled to remuneration determined from time to time
by the Board and approved by the Shareholders.
DIRECTORS' REMUNERATION REPORT
Details of Directors' Remuneration (Audited)
The emoluments in respect of qualifying services of each person
who served as a Director during the period are shown below. All the
Directors are paid a basic annual fee of GBP40,000 quarterly in
arrears for their services. In addition to this fee, Pat Cox is
paid an additional GBP17,500 per annum for his role as Chair of the
Board. Caroline Banszky is paid an additional GBP5,000 per annum
for serving as Chair of the Audit committee. No Director has waived
or agreed to waive any emoluments from the Company in the current
year. No other remuneration was paid or payable by the Company
during the current period, nor were any expenses claimed by or paid
to them other than for expenses incurred wholly, necessarily and
exclusively in furtherance of their duties as Directors of the
Company.
The remuneration levels for the Directors were set at the time
of IPO in May 2018 at a reduced level to reflect the GBP30million
of equity raise. As the market capitalisation of the Company has
grown during the year the Directors' remuneration was reviewed and
increased to reflect the current market capitalisation (capped at
GBP100million) to realign the Directors' remuneration in a stepped
process to reflect the original intended level of remuneration
pre-IPO. Whilst this has resulted in stepped increases of
substantial change the directors' do not propose to apply any
further remuneration increases until such time as further Company
growth of substance has been achieved.
Director Year ended 31 Year ended 31 Year ended 31 March
March 2023*** March 2022 2021
(GBP) (GBP)
Pat Cox* 70,625 57,500 43,387
=============== ============== ====================
Caroline Banszky** 52,500 45,000 31,051
=============== ============== ====================
Malcolm King 43,750 40,000 26,734
=============== ============== ====================
Tom Murley 43,750 40,000 26,734
=============== ============== ====================
Total 210,625 182,500 127,906
=============== ============== ====================
*This includes GBP17,500 per annum in respect of serving as
Chair of the Board. **This includes GBP5,000 per annum in respect
of serving as Chair of the Audit committee.
*** uplift effective from 1 July 2022, amount shows remuneration
on 3/12 and 9/12 split
2022 Percentage increase Percentage increase
from 31 March 2020 from 31 March 2021
to 31 March 2021 on to 31 March 2022 on
salary annual fees salary annual fees
Pat Cox 31.48% 32.53%
===================== =====================
Caroline Banszky 47.86% 49.92%
===================== =====================
Malcolm King 48.52% 49.62%
===================== =====================
Tom Murley 48.52% 49.62%
===================== =====================
2022/2023 Remuneration
The remuneration levels for the forthcoming year 2022/2023 for
the Directors are shown in the above table.
In accordance with FCA Listing Rules 9.8.6(R)(1), Directors'
interest in the shares of the Company (in respect of which
transactions are notifiable to the Company under FCA Disclosure and
Transparency Rule 3.1.2(R)) as at 31 March 2022 were as
follows:
(Audited)
Director Number of Ordinary Per centage of Issued
Shares share Capital
Pat Cox 49,996 0.01%
=================== ======================
Caroline Banszky 50,000 0.01%
=================== ======================
Malcolm King 50,000 0.01%
=================== ======================
Tom Murley 0 0.00%
=================== ======================
Total 149,996 0.03%
=================== ======================
All the Directors' share interests shown above were held
beneficially.
Tom Murley as a US resident has limited options for owning
shares. The platform through which he owned shares closed and he
was forced to sell. He is looking for a new platform through which
to purchase shares.
Relative Importance of Spend on Pay
The difference in actual spend between 31 March 2022 and 31
March 2021 on Directors' remuneration in comparison to
distributions (dividends and share buybacks) and other significant
spending are set out in the table below:
Payments made during Payments made during
the year ended 31 March the year ended 31 March
2022 2021
Directors' total remuneration 182,500 127,906
------------------------- -------------------------
Dividends paid 24,139,922 10,090,673
------------------------- -------------------------
Buy back of Ordinary - -
Shares
------------------------- -------------------------
Company-wide considerations
There are no executive directors, nor are there any employees of
the Company, so there are no statements to make on any
consultations, comparisons, or pay and employment conditions within
the Company.
Statement of consideration of shareholder views
The levels of remuneration were set out in the Prospectus and
did not receive any negative comment from the investment community
before or after the IPO. The AGM will give the opportunity for
opinions to be aired and demonstrated formally through the voting
process and will provide the basis for future discussions and
developments.
Payments to past directors or for loss of office
There are no payments to disclose. Under the terms of the
Directors' Remuneration Policy there would be no compensation for
loss of office.
Statement of voting at general meeting
The Directors Remuneration Policy was put to a binding vote at
the AGM on 14 August 2019 and is due for renewal at the AGM in
2022. The Directors Remuneration Report was subject to an advisory
vote at the AGM on 6 September 2021.
The voting outcome is set out in the table below:
Resolution Resolution
to to
approve approve
directors' remuneration
remuneration policy
report 2020
2021
Votes for* 111,448,581 30,512,395
-------------- --------------
% 99.86% 99.88%
-------------- --------------
Votes against 158,158 36,300
-------------- --------------
% 0.14% 0.12%
-------------- --------------
Total votes validly
cast 111,606,739 30,548,695
-------------- --------------
Total votes cast as
a per-centage of issued
share capital 40.40% 39.58%
-------------- --------------
Votes withheld+ 96,000 15,750
-------------- --------------
*includes discretionary vote.
+A vote withheld is not a vote in law and is not counted in the
calculation of votes for or against a resolution.
Approval of the Remuneration Report
An ordinary resolution for the approval of this Directors'
Remuneration Report will be put to Shareholders at the Company's
2022 AGM and shareholders will have the opportunity to express
their views and raise any queries in respect of the Remuneration
Policy at this meeting.
(2) Nomination
The Committee's responsibilities are reviewing annually the
structure, size, and composition (including the skills, knowledge,
and experience) required of the Board and making recommendations to
the Board with regard to any necessary changes.
Considering the succession planning and replenishment of
Directors as the Board and Company progresses, identifying and
nominating candidates to fill Board vacancies as and when they
arise and taking into account the challenges and opportunities
facing the Company, and what skills and expertise are needed on the
Board for the future.
Reviewing annually the time required from the Directors and
using performance evaluation to assess whether the Directors are
spending enough time on their duties.
Diversity
The Board recognises the benefits that diversity brings. Our
approach is to appoint the best possible candidate, considered on
merit against objective criteria and in accordance with the
Equality Act 2010, rather than to set quotas for a particular
aspect that may deflect from achieving this fundamental target
every time. At the date of this report, 25% of the Board was
female.
In light of the ongoing development in governance best practice,
the Committee decided that the Company should have a formal
diversity policy, which the Board adopted on 19 September 2018.
Diversity includes and makes good use of differences in knowledge,
and understanding of relevant diverse geographies, peoples, and
their backgrounds including race or ethnic origin, sexual
orientation, gender, age, disability or religion. Appointments to
the Board will be made on merit and objective criteria, in the
context of complimenting and expanding the skills, knowledge and
experience of the Board as a whole.
Board Evaluation
A formal and rigorous external board evaluation is currently
ongoing. The Board have appointed Heidrick & Struggles to
conduct and manage the process and report to the Board accordingly
on the outcomes.
The external evaluation consisted of a questionnaire covering a
range of board level topics, with accompanying reviews of each
Committee, which addresses issues specific to that Committee, as
well as self-assessments by the Directors and 1-2-1 interviews by
the external evaluator of each non-executive director. The final
results will be reviewed and discussed by the Remuneration and
Nomination Committee and then the Board.
In addition to the ongoing external evaluation during the year,
the Committee discussed the size, composition, skill set and
structure of the Board and its Committees and considered that all
of the Directors are independent from the Investment Manager as
defined in the AIC Code and no circumstances have been identified
that are likely to impair, or could appear impair, a Non-Executive
Director's independence. Further that the Board had the appropriate
combination of skills, experience and knowledge and that the
current size of the Board was appropriate for a Company of its
market capitalisation. However, this may change following the
finalisation of the external board evaluation report by Heidrick
and Struggles. During 2022, the Company will monitor its progress
against the recommendations arising from the externally facilitated
Board evaluation.
Members of the Board work effectively together to achieve the
Company's objectives and that each director has the time and
continues to contribute effectively.
Succession Planning
The Nomination Committee considered succession planning during
the year and noted that currently all four Directors' tenure of
nine years expires on the same date and that therefore there was a
need to refresh the board over the next five years.
This Directors' Remuneration Report was approved by the Board on
25 July 2022 and is signed on its behalf by Patrick Cox (Director
and Chair of the Remuneration and Nomination Committee)
Patrick Cox
Chair of the Remuneration and Nomination Committee
Date: 25 July 2022
Management Engagement Committee Report
Introduction
The Management Engagement Committee is comprised of all the
independent directors of the Company: Caroline Banszky, Malcolm
King, Thomas Murley and me, Patrick Cox (Chair). The Committee's
two principal functions are:
To review annually the compliance by the Investment Manager with
the Company's investment policy as established by the Board and
with the Advisory and Services Agreement entered into between the
Company and the Investment Manager from time to time (the
"Management Agreement"); and
To review annually the performance of any other key service
providers to the Company
The Committee is required to report formally to the Board on its
findings after each meeting on all matters within its duties and
responsibilities.
The Committee will meet as and when required, but formally at
least once a year.
JTC (UK) Limited attend our meetings as Secretary to the
Committee. In addition, we invite representatives of the Investment
Manager to attend as required.
The Committee met once in the period under review and all
members were present. During this meeting, Committees terms of
reference were reviewed and no alterations were made.
Investment Manager Review
When reviewing the Investment Manager's performance, the
Committee considers its compliance with the terms of the Management
Agreement as well as its overall performance against the Company's
objectives.
The Committee also reviews the relationship with the Investment
Manager including (but not limited to):
Making recommendations on the Investment Manager's
remuneration;
Approving the terms of engagement of the Investment Manager and
the terms of the Management Agreement;
Assessing annually the Investment Manager's independence and
objectivity taking into account relevant regulatory
requirements;
Assessing annually the qualifications, expertise and resources
of the Investment Manager; and
Meeting regularly with the Investment Manager and at least twice
a year, to discuss the Investment Manager's remits, the performance
of the Company's investments and any issues arising from the
management of the Company's investments.
The Committee also reviews the level and method of remuneration
of the Investment Manager pursuant to the terms of the Management
Agreement, including the methodology of calculation of the relevant
annual fee. The review of these fee arrangements seeks to ensure
that the methodology does not encourage excessive risk and that it
rewards demonstrably superior performance by the Investment Manager
in managing or advising on the portfolio against the stated
investment objective when compared to a suitable benchmark or peer
group.
The remuneration payable to the Investment Manager under the
terms of the AIFM Agreement, are set out on page 121.
Commercial Management Agreement
Pursuant to the Commercial Management Agreement, a subsidiary of
the Investment Manager, Gore Street Operational Management Limited
("GSOML") provides certain operational and administrative services
to the Company. These include services in respect of the
Development Projects (the "Construction Services") and services in
respect of the Operational Assets (the "Operational Services").
The Construction Services include, inter alia, managing
development related matters that arise in relation to the project
until the project has been commissioned, overseeing the exercise of
lease options and negotiation of lease terms and overseeing the
construction phase of the project.
The Operational Services include, inter alia, facilitating the
timely response to issues on site, including dispatch of
engineering resources and technicians, assessing daily performance
of energy storage assets and identifying and monitoring project
operations risks and issues and interfacing with and holding
accountable the asset manager and operation and maintenance
provider.
Pursuant to the Commercial Management Agreement, GSOML also
provides administrative services to the Group, including in
relation to financial reporting, supporting transactions and in
relation to the development and implementation of ESG policies. As
the Group's portfolio continues to grow, including with the
acquisition of assets in new jurisdictions, the scope of the
services to be provided by GSOML pursuant to the Commercial
Management Agreement will increase.
GSOML is entitled to receive a quarterly fee equal to the lower
of: (i) its costs associated with the provision of all services by
it to the Group pursuant to the Commercial Management Agreement
during the relevant quarter plus a 15 per cent. mark-up; and (ii)
one-fourth of one per cent. of Net Asset Value
The Committee reviewed the fee arrangements, compared them with
comparable Investment Trusts and concluded that they were
reasonable. The Committee agreed to undertake a full review of the
Investment Manager's remuneration and terms and conditions in
2022.
Following its review, the Committee have determined that the
Investment Manager was generally performing satisfactorily and had
complied with the terms of its engagement and had met its
obligations to the Company. The Committee and Investment Manager
discuss opportunities for improvements in communications on an
ongoing basis. The committee recommended the Investment Manager's
continued appointment to the Board.
Other service providers
The Committee also review the performance of the Company's other
service providers and in particular:
Monitors compliance by providers of other services to the
Company with the terms of their respective agreement from to
time;
Reviews and considers the appointment and remuneration of
providers of services to the Company; and
Considers any points of conflict which may arise between the
providers of services to the Company.
The Committee also carried out a full performance review of all
its service providers at its last meeting during which all terms of
engagement and fees were carefully considered by the Committee.
Administrator
Sanne Group Administration Services (UK) Limited ("Sanne")
served as Administrator during the period.
Under the terms of the Administration Agreement, Sanne is
entitled to:
(a) an annual fee in respect of the accounting and
administration services it will provide of GBP50,000.
(b) an annual value fee of:
0.05% of NAV to the extent that NAV is between GBP30m and
GBP75m.
0.025% of NAV to the extent that NAV is between GBP75m and
GBP150m; and,
0.02% of NAV to the extent that such NAV exceeds GBP150m.
The Committee found the Company's service providers were all
performing satisfactorily and concluded that the relevant
appointments should continue.
Committee evaluation
An evaluation of the Committee was undertaken as part of the
overall evaluation of the Board and its committees. The Committee
was found to be functioning effectively.
Patrick Cox
Committee Chair
Date: 25 July 2022
FINANCIAL STATEMENTS
Statement of Comprehensive Income
For the Year Ended 31 March 2022
Notes Year Ended 31 March 2022 Year Ended 31 March 2021
------------------------- ------ --------------------------------------- ---------------------------------------
Revenue Capital Total Revenue Capital Total
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Net gain on investments
at fair value through
profit and loss 7 - 43,531,405 43,531,405 - 16,205,729 16,205,729
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Investment income 8 5,489,529 - 5,489,529 1,233,000 - 1,233,000
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Administrative
and other expenses 9 (6,493,364) - (6,493,364) (2,844,035) - (2,844,035)
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Profit before tax (1,003,835) 43,531,405 42,527,570 (1,611,035) 16,205,729 14,594,694
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Taxation 10 - - - - - -
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Profit after tax
and profit for
the year (1,003,835) 43,531,405 42,527,570 (1,611,035) 16,205,729 14,594,694
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Total comprehensive
income for the
year (1,003,835) 43,531,405 42,527,570 (1,611,035) 16,205,729 14,594,694
------------------------- ------ ------------ ----------- ------------ ------------ ----------- ------------
Profit per share
(basic and diluted)
- pence per share 11 14.15 16.06
All Revenue and Capital items in the above statement are derived
from continuing operations.
The Total column of this statement represents Company's Income
Statement prepared in accordance with IFRS. The return on ordinary
activities after taxation is the total comprehensive income and
therefore no additional statement of other comprehensive income is
presented.
The supplementary revenue and capital columns are presented for
information purposes in accordance with the Statement of
Recommended Practice issue by the Association of Investment
Companies.
The notes on pages 132-162 form an integral part of these
financial statements.
Statement of Financial Position
As at 31 March 2022
Company Number 11160422
Notes 31 March 2022 31 March 2021
(GBP) (GBP)
----------------------------------- ------ --- -------------- --- --------------
Non - Current Assets
Investments at fair value through
profit or loss 12 180,762,419 80,694,275
----------------------------------- ------ --- -------------- --- --------------
180,762,419 80,694,275
Current assets
Cash and cash equivalents 13 198,047,440 60,152,317
Trade and other receivables 14 46,476 5,364,168
----------------------------------- ------ --- -------------- --- --------------
198,093,916 65,516,485
Total assets 378,856,335 146,210,760
----------------------------------- ------ --- -------------- --- --------------
Current liabilities
Trade and other payables 15 2,375,241 1,075,819
----------------------------------- ------ --- -------------- --- --------------
2,375,241 1,075,819
Total net assets 376,481,094 145,134,941
----------------------------------- ------ --- -------------- --- --------------
Shareholders equity
Share capital 20 3,450,358 1,438,717
Share premium 20 269,708,123 107,713,725
Special reserve 20 186,656 186,656
Capital reduction reserve 20 42,258,892 17,446,348
Capital reserve 20 64,757,592 21,226,187
Revenue reserve 20 (3,880,527) (2,876,692)
----------------------------------- ------ --- -------------- --- --------------
Total shareholders equity 376,481,094 145,134,941
Net asset value per share 19 1.09 1.01
Statement of Financial Position (continued)
As at 31 March 2022
Company Number 11160422
The annual financial statements were approved and authorised for
issue by the Board of directors and are signed on its behalf
by;
Patrick Cox
Chair
Date: 25 July 2022
The notes on pages 132-162 form an integral part of these
financial statements.
Statement of Changes in Equity
For the Year Ended 31 March 2022
Share capital Share premium Special Capital Capital Revenue Total
reserve reserve reduction reserve reserve shareholders
(GBP) (GBP) reserve equity
(GBP) (GBP) (GBP) (GBP) (GBP)
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
As at 1 April
2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Profit for the
year - - - - 43,531,405 (1,003,835) 42,527,570
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Total
comprehensive
profit for the
year - - - - 43,531,405 (1,003,835) 42,527,570
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Transactions with owners
-------------------------------- -------------- --------- ------------- ----------- ------------ ---------------
Ordinary Shares
issued at a
premium during
the year 2,011,641 206,616,364 - - - - 208,628,005
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Share issue
costs - (4,621,966) - - - - (4,621,966)
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Transfer to
capital
reduction
reserve - (40,000,000) - 40,000,000 - - -
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Dividends paid - - - (15,187,456) - - (15,187,456)
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
As at 31 March
2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
---------------- -------------- -------------- --------- ------------- ----------- ------------ ---------------
Capital reduction reserve and revenue reserves are available to
the Company for distributions to Shareholders as determined by the
Directors.
The notes on pages 132-162 form an integral part of these
financial statements.
Statement of Changes in Equity (continued)
For the Year Ended 31 March 2021
Share Share premium Special Capital Capital Revenue Total
capital reserve reserve reduction reserve reserve shareholders
(GBP) reserve equity
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
As at 1 April
2020 525,488 19,707,058 186,656 25,516,500 5,020,458 (1,265,657) 49,690,503
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
Profit for the
year - - - - 16,205,729 (1,611,035) 14,594,694
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
Total
comprehensive
profit for the
year - - - - 16,205,729 (1,611,035) 14,594,694
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
Transactions with owners
------------------------------ -------------- --------- ------------ ----------- ------------ ------------------
Ordinary shares
issued at a
premium during
the year 913,229 89,850,900 - - - - 90,764,129
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
Share issue
costs - (1,844,233) - - - - (1,844,233)
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
Dividends paid - - - (8,070,152) - - (8,070,152)
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
As at 31 March
2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
------------------ ---------- -------------- --------- ------------ ----------- ------------ ------------------
The notes on pages 132-162 form an integral part of these
financial statements.
Statement of Cash Flows
For the Year Ended 31 March 2022
Year Ended Year Ended
31 March 31 March
Notes 2022 2021
(GBP) (GBP)
---------------------------------------- -------- ------------- --- -------------
Cash flows used in operating
activities
Profit for the year 42,527,570 14,594,694
Net profit on investments at
fair value through profit and
loss (43,531,405) (16,205,729)
Decrease / (Increase) in trade
and other receivables 5,317,692 (400,641)
Increase in trade and other
payables 1,299,422 362,160
Net cash used in operating activities 5,613,279 (1,649,516)
Cash flows used in investing
activities
Purchase of investments (56,536,739) (34,076,053)
Net cash used in investing activities (56,536,739) (34,076,053)
Cash flows used in financing
activities
Proceeds from issue of Ordinary
Shares at a premium 208,628,005 90,764,129
Share issue costs (4,621,966) (1,844,233)
Dividends paid (15,187,456) (8,070,152)
Net cash inflow from financing
activities 188,818,583 80,849,744
Net increase / (decrease) in
cash and cash equivalents for
the year 137,895,123 45,124,175
---------------------------------------- -------- ------------- --- -------------
Cash and cash equivalents at
the beginning of the year 60,152,317 15,028,142
---------------------------------------- -------- ------------- --- -------------
Cash and cash equivalents at
the end of the year 198,047,440 60,152,317
---------------------------------------- -------- ------------- --- -------------
During the year, interest received by the Company totaled GBP5,489,530
(2021: GBP1,098,000).
The notes on pages 132-162 form an integral part of these
financial statements.
Notes to the Financial Statements
For the Year Ended 31 March 2022
1. General information
Gore Street Energy Storage Fund plc (the "Company"), a public
limited company limited by shares was incorporated and registered
in England and Wales on 19 January 2018 with registered number
11160422. The registered office of the Company is 18th Floor,
The Scalpel, 52 Lime Street, London, EC3M 7AF.
Its share capital is denominated in Pound Sterling (GBP) and currently
consists of Ordinary Shares. The Company's principal activity
is to invest in a diversified portfolio of utility-scale energy
storage projects primarily located in the UK and the Republic
of Ireland, although the Company has recently acquired a project
in Germany and is also considering projects in North America.
2. Basis of preparation
Statement of compliance
The annual financial statements have been prepared in accordance
with UK adopted international accounting standards. The Company
has also adopted the Statement of Recommended Practice issued
by the Association of Investment Companies which provides guidance
on the presentation of supplementary information.
The financial statements have been prepared on a historical cost
basis except for financial assets and liabilities at fair value
through the profit or loss.
The Company is an investment entity in accordance with IFRS 10
which holds all its subsidiaries at fair value and therefore prepares
separate accounts only.
Functional and presentation currency
The currency of the primary economic environment in which the
Company operates (the functional currency) is Pound Sterling ("GBP
or GBP") which is also the presentation currency.
Going Concern
In assessing the going concern basis of accounting the Directors
have had regard to the guidance issued by the Financial Reporting
Council. After making enquiries and bearing in mind the nature
of the Company's business and assets, the Directors consider the
Company to have adequate resources to continue in operational
existence over the period to 31 July 2023, being at least 12 months
from the date of approval of the financial statements. As such,
they have adopted the going concern basis in preparing the annual
report and financial statements.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
2. Basis of preparation (continued)
In our going concern assessment, we have taken into account the
impact of Covid-19 and the Company's ability to generate revenue
from its operational assets continues and remains largely unaffected
by the pandemic. The Company and the Investment Manager have
worked closely and liaised with the operators to ensure that
commercial activities remain operational and, in their view,
power generation will remain essential to the UK's infrastructure.
The going-concern analysis assumes continued annual expenditure
at the rate of current expenditure and continued discretionary
dividend payments to shareholders at the annual target rate of
7% of NAV, subject to a minimum target of 7 pence per Ordinary
Share in each financial year. With expenditure and discretionary
dividends assumed unchanged, the Company will continue to be operational
and will have excess cash after payment of its liabilities for
at least the next 12 months to 31 July 2023.
As at 31 March 2022, the Company had net current assets of GBP195.72
million and had cash balances of GBP198.04 million (excluding
cash balances within investee companies), which are sufficient
to meet current obligations as they fall due. The major cash
outflows of the Company are the payment of dividends and costs
relating to the acquisition of new assets, both of which are
discretionary. The Company continues to commit to its investors
that its business purpose is to invest funds solely for returns
from capital appreciation, investment income, or both. The Company
is a guarantor to GSES1 Limited's GBP15m revolving credit facility
with Santander. The Company had no outstanding debt as at 31
March 2022.
The Directors acknowledge their responsibilities in relation
to the financial statements for the year ended 31 March 2022
and the preparation of the financial statement on a going concern
basis remains appropriate and the Company expects to meet its
obligations as and when they fall due for at least the next twelve
months to 31 July 2023.
The board has considered the impact of climate change on the investments
included in Company's financial statements and have assessed that
it does not materially impact the estimates and assumptions used
in determining the fair value of the investments.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of
assets, liabilities, income and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to the
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
During the period the Directors considered the following significant
judgements, estimates and assumptions:
Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless they
provided investment related services to the Company. To determine
that the Company continues to meet the definition of an investment
entity, the Company is required to satisfy the following three
criteria:
a) the Company obtains funds from one or
more investors for
the purpose of providing those
investors with investment
management services;
b) the Company commits to its investors
that its business
purpose is to invest funds solely for
returns from capital
appreciation, investment income, or
both; and
c) the Company measures and evaluates the
performance of substantially
all of its investments on a fair value
basis.
The Company meets the criteria as follows:
the stated strategy of the Company
is to deliver stable
returns to shareholders through a
mix of energy storage
investments;
the Company provides investment
management services and
has several investors who pool
their funds to gain access
to infrastructure related
investment opportunities that
they might not have had access to
individually; and
the Company has elected to measure
and evaluate the performance
of all of its investments on a
fair value basis. The fair
value method is used to represent
the Company's performance
in its communication to the
market, including investor
presentations. In addition, the
Company reports fair value
information internally to
Directors, who use fair value
as the primary measurement
attribute to evaluate performance.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
3. Significant accounting judgements, estimates and assumptions
(continued)
Having assessed the criteria above and in their judgement, the
Directors are of the opinion that the Company has all the typical
characteristics of an investment entity and continues to meet
the definition in the standard. This conclusion will be reassessed
on an annual basis.
Valuation of Investments
Significant estimates in the Company's financial statements include
the amounts recorded for the fair value of the investments. By
their nature, these estimates and assumptions are subject to measurement
uncertainty and the effect on the Company's financial statements
of changes in estimates in future periods could be significant.
These estimates are discussed in more detail in note 17.
4. New and revised standards and interpretations
New and revised standards and interpretations
The accounting policies used in the preparation of the financial
statements have been consistently applied during the year ended
31 March 2022.
There have been no new standards, amendments to current standards,
or new interpretations which the directors feel have an impact
on these financial statements.
New and revised IFRSs in issue but not yet effective
In February 2021, the International Accounting Standards Board
issued further amendments to IAS8: Accounting Policies, Changes
in Accounting Estimates and Errors. Those amendments clarify the
distinction between changes in accounting estimates, changes in
accounting policies and correction of errors. They further clarify
how entities use measurement techniques and inputs to develop
accounting estimates. These amendments are effective for periods
beginning on or after 1 January 2023 and having reviewed the amendments,
the Board is of the opinion that these amendments will not have
a material impact on the Company's financial statements.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below:
Investment Income
Interest income is recognised on an accrual basis in the Revenue
account of the Statement of Comprehensive Income.
Investment income arising from the portfolio assets is recognised
on an accruals basis in totality, with amounts received in cash
recognised in investment income and the unrealised portion disclosed
in net gain on investments at fair value through profit and loss.
Expenses
Expenses are accounted for on an accrual basis and charged to
the Statement of Comprehensive Income. Share issue costs are allocated
to equity. Expenses are charged through the Revenue account except
those which are capital in nature, these include those which are
incidental to the acquisition, disposal or enhancement of an investment,
which are accounted for through the Capital account.
Net gain or loss on investments at fair value through profit and
loss
Gains or losses arising from changes in the fair values of investments
are recognised in the Capital account of the Statement of Comprehensive
Income in the period in which they arise. The value of the investments
may be increased or reduced by the assessed fair value movement.
Taxation
The Company is approved as an Investment Trust Company ("ITC")
under sections 1158 and 1159 of the Corporation Taxes Act 2010
and Part 2 Chapter 1 Statutory Instrument 2011/29999 for accounting
periods commencing on or after 25 May 2018. The approval is subject
to the Company continuing to meet the eligibility conditions of
the Corporations Tax Act 2010 and the Statutory Instrument 2011/29999.
The Company intends to ensure that it complies with the ITC regulations
on an ongoing basis and regularly monitors the conditions required
to maintain ITC status.
From 1 April 2015 there is a single corporation tax rate of 19%.
Current Tax and movements in deferred tax asset and liability
is recognised in the Statement of Comprehensive Income except
to the extent that it relates to the items recognised as direct
movements in equity, in which case it is similarly recognised
as a direct movement in equity. Current tax is the expected tax
payable on any taxable income for the period, using tax rates
enacted or substantively enacted at the end of the relevant period.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Taxation (continued)
Deferred taxation is recognised in respect of all timing differences
that have originated but not reversed at the Statement of Financial
Position date where transactions or events that result in an obligation
to pay more tax or a right to pay less tax in the future have
occurred. Timing differences are differences between the Company's
taxable profits and its results as stated in the financial statements.
Deferred taxation assets are recognised where, in the opinion
of the Directors, it is more likely than not that these amounts
will be realised in future periods, at the tax rate expected to
be applicable at realisation.
Investment in subsidiaries
Subsidiaries are entities controlled by the Company. Control exists
when the Company is exposed, or has rights, to variable returns
from its involvement with the subsidiary entity and has the ability
to affect those returns through its power over the subsidiary
entity. In accordance with the exception under IFRS 10 Consolidated
financial statements, the Company is an investment entity and
therefore only consolidates subsidiaries if they provide investment
management services and are not themselves investment entities.
All subsidiaries are held at fair value in accordance with IFRS
9 and therefore not consolidated.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and call deposit
held with the bank on a 32 day notice which can be readily converted
to cash.
Trade and other receivables
Trade and other receivables are recognised initially at fair value
and subsequently stated at amortised cost less loss allowance
which is calculated using the provision matrix of the expected
credit loss model.
Trade and other payables
Trade and other payables are recognised initially at fair value
and subsequently stated at amortised cost.
Dividends
Dividends are recognised, as a reduction in equity in the financial
statements. Interim equity dividends are recognised when legally
payable. Final equity dividends will be recognised when approved
by the Shareholders.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Equity
Equity instruments issued by the Company are recorded at the amount
of the proceeds received, net of directly attributable issue costs.
Costs not directly attributable to the issue are immediately expensed
in the Statement of Comprehensive Income.
Financial Instruments
In accordance with IFRS 9, the Company classifies its financial
assets and financial liabilities at initial recognition into the
categories of amortised cost or fair value through profit or loss.
Financial assets
The Company classifies its financial assets at amortised cost
or fair value through profit or loss on the basis of both:
the entity's business model for managing the financial assets
the contractual cash flow characteristics of the financial asset
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held
within a business model whose objective is to hold financial assets
in order to collect contractual cash flows and its contractual
terms give rise on specified dates to cash flows that are solely
payments of principal and interest on the principal amount outstanding.
The Company includes in this category short-term non-financing
receivables including cash and trade and other receivables.
Financial asset measured at fair value through profit or loss
(FVPL)
A financial asset is measured at fair value through profit or
loss if:
a) its contractual terms do not give rise to cash flows on specified
dates that are solely payments of principal and interest (SPPI)
on the principal amount outstanding; or
b) it is not held within a business model whose objective is either
to collect contractual cash flows, or to both collect contractual
cash flows and sell; or
c) it is classified as held for trading (derivative contracts
in an asset position).
The Company includes in this category equity instruments and loans
to investments.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Financial Instruments (continued)
Financial liabilities
Financial liabilities measured at fair value through profit or
loss (FVPL)
A financial liability is measured at FVPL if it meets the definition
of held for trading of which the Company had none.
Financial liabilities measured at amortised cost
This category includes all financial liabilities, other than those
measured at fair value through profit or loss, including short-term
payables.
Recognition and derecognition
Financial assets and liabilities are recognised on trade date,
when the Company becomes party to the contractual provisions of
the instrument. A financial asset is derecognised where the rights
to receive cash flows from the asset have expired, or the Company
has transferred its rights to receive cash flows from the asset.
The Company derecognises a financial liability when the obligation
under the liability is discharged, cancelled or expired.
Impairment of financial assets
The Company holds trade receivables with no financing component
and which have maturities of less than 12 months at amortised
cost and, as such, has chosen to apply the simplified approach
for expected credit losses (ECL) under IFRS 9 to all its trade
receivables. Therefore, the Company does not track changes in
credit risk, but instead recognises a loss allowance based on
lifetime ECLs at each reporting date.
The Company's approach to ECLs reflects a probability-weighted
outcome, the time value of money and reasonable and supportable
information that is available without undue cost or effort at
the reporting date about past events, current conditions and forecasts
of future economic conditions.
The Company uses the provision matrix as a practical expedient
to measuring ECLs on trade receivables, based on days past due
for groupings of receivables with similar loss patterns. Receivables
are grouped based on their nature. The provision matrix based
on historical observed loss rates over the expected life of the
receivables and is adjusted for forward looking estimates.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Fair value measurement and hierarchy
Fair value is the price that would be received on the sale of
an asset, or paid to transfer a liability, in an orderly transaction
between market participants at the measurement date. The fair
value measurement is based on the presumption that the transaction
takes place either in the principal market for the asset or liability,
or in the absence of a principal market, in the most advantageous
market. It is based on the assumptions that market participants
would use when pricing the asset or liability, assuming they act
in their economic best interest.
The fair value hierarchy to be applied under IFRS 13 is as follows:
Level 1: Quoted (unadjusted) market prices in active markets for
identical assets or liabilities.
Level 2: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly
or indirectly observable.
Level 3: Valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable.
For assets and liabilities that are carried at fair value, and
which will be recorded in the financial information on a recurring
basis, the Company will determine whether transfers have occurred
between levels in the hierarchy by reassessing categorisation
at the end of each reporting period.
6. Fees and expenses
Accounting, Secretarial and Directors
JTC (UK) Limited had been appointed to act as secretary for the
Company through the Administration and Company Secretarial Agreement.
JTC (UK) Limited is entitled to a GBP70,000 annual fee for the
provision of Company Secretarial services.
During the year, expenses incurred with JTC (UK) Limited for secretarial
services amounted to GBP64,657 with GBP25,000 being outstanding
and payable at the year end.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
6. Fees and expenses (continued)
Accounting, Secretarial and Directors (continued)
Sanne Fiduciary Services (UK) Limited ("Sanne") had been appointed
as administrator. Through an Administration agreement, Sanne is
entitled to an annual fee of GBP50,000 for the provision of accounting
and administration services based on a Company Net Asset Value
of up to GBP30 million. An ad valorem fee based on total assets
of the Company which exceed GBP30 million will be applied as follows:
0.05% on a net asset value of GBP30 million to GBP75
million
0.025% on a net asset value of GBP75 million to GBP150
million
0.02% on a net asset value thereafter.
During the year, expenses incurred with Sanne for accounting and
administrative services amounted to GBP97,155, with GBP25,765
being outstanding and payable at the year end.
AIFM
The AIFM, Gore Street Capital Limited (the "AIFM"), was entitled
to receive from the Company, in respect of its services provided
under the AIFM agreement, a fee of GBP75,000 per annum for the
term of the AIFM agreement.
During the year, AIFM fees amounted to GBP75,207, there were no
outstanding fees payable at the year end.
At the year end, an amount of GBP18,647 paid in the year to Gore
Street Capital Limited in respect of these fees, is being disclosed
in prepayments as it relates to the period 1 April 2022 to 30
June 2022.
Investment Advisory
The fees relating to the Investment Advisor are disclosed within
note 22 Transactions with related parties.
7. Net gain on investments at fair value through profit and loss
31 March 31 March
2022 2021
(GBP) (GBP)
---------------------------------------------- ----------------------------- ------- --------------------------
Net gain on investments at fair value
through profit and loss 43,531,405 16,205,729
43,531,405 16,205,729
---------------------------------------------- ----------------------------- ------- --------------------------
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
8. Investment Income
31 March 31 March
2022 2021
(GBP) (GBP)
------------------------------------------------- ---------- --- ----------
Bank interest income 58,977 -
Investment income 5,430,552 1,098,000
Interest income (on advance to NEC) - 135,000
5,489,529 1,233,000
------------------------------------------------- ---------- --- ----------
9. Administrative and other expenses
31 March 31 March
2022 2021
(GBP) (GBP)
------------------------------------------------- ---------- --- ----------
Accounting and Company Secretarial fees 161,812 155,718
Audit fees (see below) 226,000 211,600
Bank interest and charges 8,464 6,810
Directors' remuneration and expenses 182,500 135,378
Directors & Officers insurance 18,617 13,431
Foreign exchange loss 13,604 1,050
Investment advisory fees 3,090,737 1,128,107
Irrecoverable VAT - (26,626)
Legal and professional fees * 772,617 483,724
AIFM fees 75,207 75,246
Marketing fees 69,652 80,144
Performance fees 1,545,369 496,461
Sundry expenses 244,851 82,994
Write back of NEC interest receivable 83,934 -
6,493,364 2,844,037
------------------------------------------------- ---------- --- ----------
* The Company incurred one-off expenses totalling GBP126,703 in
respect of transactional documentation relating to NEC (see note
14).
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
9. Administrative and other expenses (continued)
During the year, the Company received the following services from
its auditor, Ernst & Young LLP.
31 March 31 March
2022 2021
(GBP) (GBP)
---------------------------------------------------------- --------- ----------- --------------------------
Audit services
Statutory Annual accounts - current
audit year 210,000 191,100
Annual accounts - prior year
under accrual - 5,000
210,000 196,100
--------- ----------- --------------------------
Non-audit services
Other assurance services 16,000 15,500
Total audit and non-audit services 226,000 211,600
---------------------------------------------------------- --------- ----------- --------------------------
The statutory auditor is remunerated GBP145,900 (2021: GBP119,000),
in relation to SPV audits. This amount is not included in the
above.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
10. Taxation
The Company is recognised as an Investment Trust Company ("ITC")
for accounting periods beginning on or after 25 May 2018 and is
taxed at the main rate of 19%.
31 March 31 March
2022 2021
(GBP) (GBP)
(a) Tax charge in profit and loss account
UK Corporation tax - -
(b) Reconciliation of the tax charge
for the year
Profit before tax 42,527,570 14,594,694
Tax at UK standard rate of 19% 8,080,238 2,772,992
Effects of:
Unrealised gain on fair value investments (8,270,966) (3,079,089)
Expenses not deductible for tax purposes 995 20,600
Deferred tax not recognised 189,733 285,497
Tax charge for the year - -
------------ ------------
Estimated losses not to be recognised
due to insufficient evidence of future
profits 3,147,853 2,142,752
Estimated deferred tax thereon 25% (2021:
19%) 786,963 407,123
As at 31 March 2022, the Company has excess management expenses
that are available to offset future tax revenues. A deferred tax
asset, measured at the prospective corporate rate of 25% (2021:
19%) of GBP786,963 (2021: GBP407,123) has not been recognised
in respect of these expenses since they are recoverable only to
the extent that, it is considered more likely than not, the Company
has sufficient future taxable revenue.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
11. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing the
profit or loss for the period attributable to ordinary equity
holders of the Company by the weighted average number of Ordinary
Shares in issue during the period. As there are no dilutive instruments
outstanding, basic, and diluted earnings per share are identical.
31 March 31 March
2022 2021
------------------------------------------------------ --------------- ---------------
Net gain attributable to ordinary shareholders GBP 42,527,570 GBP 14,594,694
Weighted average number of Ordinary Shares
for the year 300,542,518 90,860,919
Profit per share - Basic and diluted (pence) 14.15 16.06
------------------------------------------------------ --------------- ---------------
12. Investments
Place of Percentage 31 March 31 March
business ownership 2022 2021
---------------------------- ----------- ----------- --------------- ---------------
England &
GSES1 Limited ("GSES1") Wales 100% 180,762,419 80,694,275
The Company meets the definition of an investment entity. Therefore,
it does not consolidate its subsidiaries or equity method account
for associates but, rather, recognises them as investments at
fair value through profit or loss. The Company is not contractually
obligated to provide financial support to the subsidiaries and
associate and there are no restrictions in place in passing monies
up the structure.
The investment in GSES1 is financed through equity and a loan
facility available to GSES1. The facility may be drawn upon, to
any amount agreed by the Company as lender, and is available for
a period of 20 years from 28 June 2018. The rest is funded through
equity. The amount drawn on the facility at 31 March 2022 was
GBP116,009,272 (2021: GBP59,472,534). The loan is interest bearing
and attracts interest at 5% per annum. Investments in the indirect
subsidiaries are also structured through loan and equity investments
and the ultimate investments are in energy storage facilities.
Realisation of increases in fair value in the indirect subsidiaries
will be passed up the structure as distributions on the equity
investment. GSES1 controls GSF Albion, GSF England, GSF IRE and
GSF Atlantic as listed below which in turn hold an interest in
project companies.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
12. Investments (continued)
Immediate Place of business Percentage Investment
Parent Ownership
--------------------------------- --------------- ------------------- ----------- --------------------
GSF Albion Limited England &
("GSF Albion") GSES1 Wales 100%
NK Boulby Energy Storage GSF Albion England & 99.998% Boulby
Limited Wales
Kiwi Power ES B GSF Albion England & 49% Cenin
Wales
GSF England Limited England &
("GSF England") GSES1 Wales 100%
OSSPV001 Limited GSC LRPOT England & 100% Lower Road
Wales Port of Tilbury
England &
GSF IRE Limited GSES1 Wales 100%
Mullavilly Energy Limited GSF IRE Northern Ireland 51% Mullavilly
Drumkee Energy Limited GSF IRE Northern Ireland 51% Drumkee
Porterstown Battery Storage GSF IRE Republic of 51% Kilteel
Limited Ireland
Kilmannock Battery Storage GSF IRE Republic of 51% Kilmannock
Limited Ireland
Ferrymuir Energy Storage GSF Albion England & 100% Ferrymuir
Limited Wales
Ancala Energy Storage GSF England England & 100% Beeches,
Limited Wales Blue House
Farm, Brookhall,
Fell View,
Grimsargh,
Hermitage,
Heywood Grange,
High Meadow,
Hungerford,
Low Burntoft
Breach Farm Energy Storage GSF England England & 100% Breach Farm
Limited Wales
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
12. Investments (continued)
Hulley Road Energy Storage GSF England England & 100% Hulley Road
Limited Wales
Larport Energy Storage GSF England England & 100 % Larport
Limited Wales
Lascar Battery Storage GSF England England & 100% Lascar
Limited Wales
Stony Energy Storage GSF England England & 100% Stony
Limited (1) Wales
Enderby Battery Storage GSF England England & 100% Enderby
Limited (2) Wales
GSF Atlantic Limited England &
(3) GSES1 Wales 100%
GSF Cremzow GmbH & Co GSF Atlantic Germany 90% Cremzow
KG (4)
GSF Cremzow Verwaltungs
GmbH (4) GSF Atlantic Germany 90%
(1) The acquisition of Stony Energy Storage Limited was completed
on the 12 May 2021.
(2) The acquisition of Enderby Battery Storage Limited was completed
on the 17 September 2021.
(3) GSF Atlantic Limited was incorporated on the 11 February 2022.
(4) The acquisition of GSF Cremzow GmbH & Co KG and its General
Partner, GSF Cremzow Verwaltungs GmbH was completed on the 10
March 2022.
All subsidiaries that have a place of business in England & Wales
are registered at 18 Floor, The Scapel, 52 Lime Street, London,
EC3M 7AF.
Porterstown Battery Storage Limited and Kilmanock Battery Storage
Limited are registered at Block C, 77 Sir John Rogerson's Quay,
Dublin, D02 VK60, Republic of Ireland.
GSF Cremzow GmbH & Co KG and GSF Cremzow Verwaltungs GmbH are
registered at Schenkenberg, Gut Dauerthal 3, 17291 Schenkenberg
13. Cash and cash equivalents
31 March 31 March
2022 2021
(GBP) (GBP)
--------------------------------------------------- ------------------------------- ---- --------------
Cash at bank 198,047,442 60,152,317
198,047,442 60,152,317
--------------------------------------------------- ------------------------------- ---- --------------
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
14. Trade and other receivables
31 March 31 March
2022 2021
(GBP) (GBP)
----------------------------------------------------- ---------------------- ------------ ----------
VAT recoverable - 359,954
Prepaid Director's and Officer's
insurance 4,920 6,239
Other Prepayments 39,027 37,384
Other Debtors 2,529 76,673
Advance to NEC ES - 4,500,000
Interest on advance to NEC
ES - 383,918
46,476 5,364,168
----------------------------------------------------- ---------------------- ------------ ----------
The Company advanced to NEC ES an advance of GBP4,500,000 on
the date at which it was admitted to the Premium segment of
the London Stock Exchange. The advance was agreed to be used
in conjunction with the Company's purchase of products, equipment
and / or services from NEC ES for the projects in which the
Company is to be invested. The Company's purchase of such products
and equipment from NEC ES was conditional upon NEC ES' ability
to meet the requirements of the Company's projects and subject
to the terms and pricing of the products, equipment and/or services
being provided on market standard terms (as defined by the Company).
During the year, the Company had offset the entire GBP4.5 million
advance against amounts due to NEC (UK) Limited, whilst it was
agreed that an amount of GBP299,984 would be settled as the
final interest charge, the balance of GBP83,934 was written
off (see note 9). The interest amount was received in full from
NEC ES on the 19 July 2021.
15. Trade and other payables
31 March 31 March
2022 2021
(GBP) (GBP)
----------------------------------------------------- ---------------- ---- ------------
Administration fees 50,765 25,826
Audit fees 226,000 127,400
Directors remuneration 6,668 6,669
Professional fees 1,897,707 529,549
Other creditors 5,002 13,003
VAT payable 189,099 370,372
2,375,241 1,075,819
----------------------------------------------------- ---------------- ---- ------------
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
16. Categories of financial
instruments
31 March 31 March
2022 2021
(GBP) (GBP)
----------------------------------------------------- ---------------- ---- ------------
Financial assets
Financial assets at amortised
cost
Cash and cash equivalents 198,047,440 60,152,317
Trade and other receivables 46,476 5,364,168
Fair value through profit
and loss account
Investment 180,762,419 80,694,275
Total financial assets 378,856,335 146,210,760
----------------------------------------------------- ---------------- ---- ------------
Financial liabilities
Financial liabilities at amortised
cost
Trade and other payables 2,375,241 1,075,819
Total financial liabilities 2,375,241 1,075,819
----------------------------------------------------- ---------------- ---- ------------
At the balance sheet date, all financial assets and liabilities
were measured at amortised cost except for the investment in
equity and loans to subsidiaries which are measured at fair
value. The amortised cost of all other assets approximates to
the cost value.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair Value measurement
Valuation approach and methodology
There are three traditional valuation approaches that are generally
accepted and typically used to establish the value of a business;
the income approach, the market approach, and the net assets (or
cost based) approach. Within these three approaches, several methods
are generally accepted and typically used to estimate the value
of a business.
The Company has chosen to utilise the income approach, which indicates
value based on the sum of the economic income that an asset, or
group of assets, is anticipated to produce in the future. Therefore,
the income approach is typically applied to an asset that is expected
to generate future economic income, such as a business that is
considered a going concern. Free cash flow to total invested capital
is typically the appropriate measure of economic income. The income
approach is the DCF approach and the method discounts free cash
flows using an estimated discount rate (WACC).
The International Valuation Standards Council ("IVSC") issued
guidance in March 2020 in response to the COVID-19 pandemic.
It notes that one of the main issues when dealing with valuation
is uncertainty and that valuation is not a fact, but an estimate
of the most probable of a range of possible outcomes based on
the assumptions made in the valuation process.
Valuation uncertainty can be caused by various factors, including
market disruption, input availability and the choice of method
or model of valuation.
The guidance issued by the IVSC was considered by the Investment
Advisor in the determination of the valuations disclosed at 31
March 2022.
Valuation process
In the year, the Company acquired Stony Energy Storage Limited
and Enderby Battery Storage Limited, with capacities of 79.9MW
and 57MW respectively. It also acquired its first mainland European
Asset, through GSF Cremzow GmbH & Co KG, a German limited partnership
and its German general partner, GSF Cremzow Verwaltungs GmbH,
the asset having a capacity of 22MW. These acquisitions bring
the Company's portfolio of lithium-ion energy storage investments
to a total capacity of 628.5 MW (2021: 440.0 MW). As at 31 March
2022, 231.7 MW of the Company's total portfolio was operational
and 396.8 MW pre-operational (the "Investments").
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair Value measurement (continued)
Valuation process (continued)
The Investments comprise twenty six projects, all based in the
UK, the Republic of Ireland or mainland Europe. The Directors
review and approve these valuations following appropriate challenge
and examination. The current portfolio consists of non-market
traded investments and valuations are analysed using forecasted
cash flows of the assets and used the discounted cash flow approach
as the primary approach for the purpose of the valuation. The
Company engages external, independent and qualified valuers to
determine the fair value of the Company's investments or are
produced by the office of the Investment Advisor.
Valuations are calculated quarterly by the Investment Advisor,
and a sample which meets our Net Asset Value materiality threshold
are reviewed by an independent third party, prior to presentation
and review by the Company's board of directors and publication
of the half year and year-end reports.
The below table summarises the significant unobservable inputs
to the valuation of investments.
Investment Portfolio Valuation Significant Inputs Fair Value
technique
Description (Range) 31 March 31 March
2022 2021
(GBP) (GBP)
--------------- --------- ------------ -----------
Great Britain DCF Discount Rate 6% - 8% 89,350,935 49,216,281
(excluding Northern Revenue / MWH GBP5.5
Ireland) - GBP40
Northern Ireland DCF Discount Rate 9.5% 57,076,847 23,968,276
Revenue / MWH GBP8 -
GBP21
Republic of
Ireland DCF Discount Rate 9.5% 17,595,232 6,015,352
EUR6 -
Revenue / MWH EUR15
Germany DCF Discount Rate 12,583,705 -
Revenue / MWH
Holding Companies NAV 4,155,700 1,494,366
Total Investments 180,762,419 80,694,275
--------------------------------------- -------------------------- ------------ -----------
The fair value of the holding companies represents the net assets
together with any cash held within those companies in order to
settle any operational costs.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair value measurement (continued)
Sensitivity Analysis
The below table reflects the range of sensitivities in respect of the
fair value movements of the Company's investments.
Investment Valuation Estimated effect on
Portfolio technique Significant Inputs Fair Value
---------------------------- ----------------
Description Sensitivity 31 March 31 March
2022 2021
(GBP) (GBP)
---------------- ---------- ---------------- -------------- --------------- ------------- ----------------
Great Britain DCF Revenue + 10 % 46,600,000 9,626,000
(excluding
Northern Ireland) - 10 % (28,312,000) (9,846,000)
Discount
rate +1 % (12,378,000) (4,278,000)
-1 % 14,357,000 4,919,000
Northern Ireland DCF Revenue + 10 % 9,984,000 4,210,000
- 10 % (10,034,000) (4,095,000)
Discount
rate +1 % (3,226,000) (2,407,000)
-1 % 3,675,000 2,787,000
Exchange
rate +3 % (839,000) (1,233,000)
-3 % 897,000 1,291,000
Republic of
Ireland DCF Revenue + 10 % 4,404,000 715,000
- 10 % (4,937,000) (1,392,000)
Discount
rate +1 % (3,242,000) (2,999,000)
-1 % 3,772,222 2,787,000
Exchange
rate +3 % (362,000) (192,000)
-3 % 382,000 208,000
Germany DCF Revenue +10 % 3,698,000 -
-10 % (4,465,000) -
Discount
rate +1 % (704,000) -
-1 % 804,000 -
Exchange
rate +3 % (285,000) -
-3 % 303,000 -
High case (+10%) and low case (-10%) revenue information used to determine
sensitivities are provided by third party pricing sources.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair value measurement (continued)
Valuation of financial instruments
The investments at fair value through profit or loss are Level
3 in the fair value hierarchy and the reconciliation in the movement
of this Level 3 investment is presented below. No transfers between
levels took place during the year.
Reconciliation 31 March 31 March
2022 2021
(GBP) (GBP)
-----------------------------------------------
Opening balance 80,694,275 30,412,493
Purchases during the year 56,536,739 34,076,053
Total fair value movement through the
profit and loss 43,531,405 16,205,729
180,762,419 80,694,275
-----------------------------------------------
A minority shareholder of Boulby has a right to receive a certain
share of Boulby distributions once NK Energy Solutions realises
excess return over an agreed hurdle return from its investment
into Boulby.
Based on free cash flow forecast used to compute the net asset
value of Boulby for this period, it is not expected to reach
the threshold return and thus no payment to the minority shareholder
is taken into account. However, if the actual cash flow significantly
exceeds the forecast cash flow used for current net asset value,
a part of the excess cash flow may be distributed to the minority
shareholder, impacting the ultimate fair value.
18. Financial risk management
The Company is exposed to certain risks through the ordinary
course of business and the Company's financial risk management
objective is to minimise the effect of these risks. The management
of risks is performed by the Directors of the Company and the
exposure to each financial risk is considered potentially material
to the Company, how it arises and the policy for managing it
is summarised below:
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Capital risk management
The capital structure of the Company at year end consists of equity
attributable to equity holders of the Company, comprising issued
capital, reserves and accumulated gains. The Company has no return
on capital benchmark, but the Board continues to monitor the balance
of the overall capital structure so as to maintain investor and
market confidence. The Company is not subject to any external
capital requirements.
Counterparty risk
The Company is exposed to third party credit risk in several instances,
including the possibility that counterparties with which the Company
and its subsidiaries, together the Group, contract with, may default
or fail to perform their obligations in the manner anticipated
by the Group. Such counterparties may include (but are not limited
to) manufacturers who have provided warranties in relation to
the supply of any equipment or plant, EPC contractors who have
constructed the Company's projects, who may then be engaged to
operate assets held by the Company, property owners or tenants
who are leasing ground space and/or grid connection to the Company
for the location of the assets, contractual counterparties who
acquire services from the Company underpinning revenue generated
by each project or the energy suppliers, or demand aggregators,
insurance companies who may provide coverage against various risks
applicable to the Company's assets (including the risk of terrorism
or natural disasters affecting the assets) and other third parties
who may owe sums to the Company. In the event that such credit
risk crystallises, in one or more instances, and the Company is,
for example, unable to recover sums owed to it, make claims in
relation to any contractual agreements or performance of obligations
(e.g. warranty claims) or require the Company to seek alternative
counterparties, this may materially adversely impact the investment
returns.
Further the projects in which the Company may invest will not
always benefit from a turnkey contract with a single contractor
and so will be reliant on the performance of several suppliers.
Therefore, the key risks during battery installation in connection
with such projects are the counterparty risk of the suppliers
and successful project integration. The Company accounts for its
exposure to counterparty risk through the fair value of its investments
by using appropriate discount rates which adequately reflects
its risk exposure.
The Company regularly assesses the creditworthiness of its counterparties
and enters into counterparty arrangements which are financially
sound and ensures, where necessary, the sourcing of alternative
arrangements in the event of changes in the creditworthiness of
its present counterparties.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Concentration risk
The Company's investment policy is limited to investment in energy
storage infrastructure, which will principally operate in the UK.
This means that the Company has a significant concentration risk
relating to the UK energy storage infrastructure sector. Significant
concentration of investments in any one sector may result in greater
volatility in the value of the Group's investments and consequently
the Net Asset Value and may materially and adversely affect the
performance of the Group and returns to Shareholders. During the
year, the Company has expanded its investment base to include Germany.
The Company intends to further limit its exposure to concentration
risk through further projects in Western Europe and is considering
projects in North America.
Credit risk
The Company regularly assesses its credit exposure and considers
the creditworthiness of its customers and counterparties. Cash
and bank deposits are held with Barclays plc and Santander UK plc,
both reputable financial institution with a Moody's credit ratings
of A and A1 respectively.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Currency risk
The majority of investments, together with the majority of all
transactions during the current period were denominated in Pounds
Sterling.
The Company holds two investments (Kilmannock and Kilteel) in the
Republic of Ireland, together with the newly acquired Cremzow in
Germany, acquisition costs were denominated in Euros, creating
an exposure to currency risk. These investments have been translated
into Pounds Sterling at year end and represent 16.69% (2021: 7.45%)
of the Company's fair valued investment portfolio. The contracted
revenue stream due from these investments has been agreed in Pounds
Sterling, thus limiting the exposure to fluctuations in exchange
rates.
Any expenditure denominated in Euros will be translated into Pounds
Sterling at the transaction date and any gain or loss resulting
from the foreign exchange exposure will be taken to the Statement
of Comprehensive Income. The Company does not hold any financial
instrument at period end which are not denominated in Pounds Sterling
and is therefore does not believe it is exposed to any significant
currency risk.
Interest rate risk
Interest rate risk arises from the possibility that changes in
interest rates will affect future cash flows or the fair values
of financial instruments. The Company is exposed to interest rate
risk on its cash balances held with counterparties, bank deposits,
advances to counterparties and through loans to related parties.
Bank deposits carry a fixed rate of interest for a definite period,
and loans to related parties carry a fixed rate of interest for
an initial period of 20 years. The Company is not exposed to changes
in variable market rates of interest and has therefore not considered
any sensitivity to interest rates.
Liquidity risk
The objective of liquidity management is to ensure that all commitments
which are required to be funded can be met out of readily available
and secure sources of funding. Although there is no present intention
to utilise borrowings, the Company may, where the Board deems it
appropriate, use short term leverage to acquire assets but with
the intention that such leverage be repaid with funds raised through
a new issue of equity or cash flow from the Company's portfolio.
Such leverage will not exceed 15 per cent. at the time of borrowing
of Gross Asset Value without Shareholder approval. The Company's
only financial liabilities are trade and other payables. The Company
has sufficient cash reserves to cover these in the short-medium
term. The Company's cash flow forecasts are monitored regularly
to ensure the Company is able to meet its obligations when they
fall due. The Company's investments are level 3 and thus illiquid
and this is taken into assessment of liquidity analysis.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Liquidity risk
The following table reflects the maturity analysis of financial
assets and liabilities.
31 March 2022 < 1 year 1 to 2 2 to 5 years > 5 years Total
years
Financial assets
Cash and cash
equivalents 198,047,440 - - - 198,047,440
Trade and other
receivables 46,476 - - - 46,476
Fair value through profit
and loss
Investments - - - 180,762,419 180,762,419
Total financial
assets 198,093,916 - - 180,762,419 378,856,335
Financial liabilities
Financial liabilities at
amortised cost
Trade and other
payables 2,375,241 - - - 2,375,241
Total financial
liabilities 2,375,241 - - - 2,375,241
31 March 2021 < 1 year 1 to 2 2 to > 5 years Total
years 5 years
Financial assets
Cash and cash equivalents 60,152,317 - - - 60,152,317
Trade and other receivables 5,364,168 - - - 5,364,168
Fair value through profit
and loss
Investments - - - 80,694,275 80,694,272
Total financial
assets 65,516,485 - - 80,694,275 146,210,760
Financial liabilities
Financial liabilities at amortised
cost
Trade and other payables 1,075,819 - - - 1,075,819
Total financial
liabilities 1,075,819 - - - 1,075,819
Investments include both equity and debt instruments. As the equity
instruments have no contractual maturity date, they have been
included with the >5-year category. Additionally, the debt instruments
have an original maturity of 20 years.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Market risk
Market risk is the risk that the fair value or cash flows of a
financial instrument will fluctuate due to changes in market prices.
Market risk reflects interest rate risk, currency risk and other
price risks. The objective is to minimise market risk through managing
and controlling these risks to acceptable parameters, while optimising
returns. The Company uses financial instruments in the ordinary
course of business, and also incurs financial liabilities, in order
to manage market risks.
Price risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. If the
market prices of the investments were to increase by 10%, there
will be a resulting increase in net assets attributable to ordinary
shareholders for the period of GBP18,025,549 (2021: GBP8,069,427).
Similarly, a decrease in the value of the investment would result
in an equal but opposite movement in the net assets attributable
to ordinary shareholders. The Company relies on the market knowledge
of the experienced Investment Advisor, the valuation expertise
of the third-party valuer BDO and the use of third-party market
forecast information to provide comfort with regard to fair market
values of investments reflected in the financial statements.
19. Net asset value per share
Basic NAV per share is calculated by dividing the Company's net
assets as shown in the Statement of Financial Position that are
attributable to the ordinary equity holders of the Company by the
number of Ordinary Shares outstanding at the end of the period.
As there are no dilutive instruments outstanding, basic, and diluted
NAV per share are identical.
31 March 31 March
2022 2021
Net assets per Statement of Financial GBP 376,481,094 GBP
Position 145,134,941
Ordinary Shares in issue as at 31 March 345,035,842 143,871,681
NAV per share - Basic and diluted (pence) 109.11 100.88
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
20. Share capital and reserves
Share Share Special Capital Capital Revenue Total
capital premium reserve reduction reserve reserve
reserve reserve
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
At 1 April
2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
Issue of
ordinary
GBP0.01
shares:
27 April
2021 1,323,529 133,676,471 - - - - 135,000,000
Issue of
ordinary
GBP0.01
shares:
4 October
2021 688,112 72,939,893 - - - - 73,628,005
Transfer
to capital
reduction
reserve
(1) - (40,000,000) - 40,000,000 - - -
Share issue
costs - (4,621,966) - - - - (4,621,966)
Dividends
paid - - - (15,187,456) - - (15,187,456)
Profit for
the year - - - - 43,531,405 (1,003,835) 42,527,570
At 31 March
2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
(1) Following the approval at the Company's AGM on the 6
September 2021, the Company made an application to the High Court,
together with a lodgement of the Company's statement of capital
with the Registrar of Companies, the Company was permitted to
reduce the capital of the Company by an amount of GBP40,000,000.
This was affected on the 15 December 2021 by a transfer of that
amount from the share premium account to distributable
reserves.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
20. Share capital and reserves (continued)
Share Share Special Capital Capital Revenue Total
capital premium reserve reduction reserve reserve
reserve reserve
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
At 1 April 2020 525,488 19,707,058 186,656 25,516,500 5,020,458 (1,265,657) 49,690,503
Issue of ordinary
GBP0.01 shares:
30 June 2020 30,000 2,853,000 - - - - 2,883,000
Issue of ordinary
GBP0.01 shares:
8 July 2020 216,274 20,567,624 - - - - 20,783,898
Issue of ordinary
GBP0.01 shares:
30 October 2020 66,955 7,030,276 - - - - 7,097,231
Issue of ordinary
GBP0.01 shares:
16 December
2020 600,000 59,400,000 - - - - 60,000,000
Share issue
costs - (1,844,233) - - - - (1,844,233)
Dividends paid - - - (8,070,152) - - (8,070,152)
Profit for the
year - - - - 16,205,729 (1,611,035) 14,594,694
At 31 March
2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
20. Share capital and reserves (continued)
Share Issues
On 27 April 2021, the Company issued 132,352,941 ordinary Shares
at a price of 102.00 pence per share, raising net proceeds from
the Placing of GBP132,125,301. Admission subsequently took place
on 27 April 2021.
On 4 October 2021, the Company issued 68,811,220 ordinary Shares
at a price of 107.00 pence per share, raising net proceeds from
the Placing of GBP72,120,250. Admission subsequently took place
on 4 October 2021.
Following the approval at the Company's AGM on the 6 September
2021, the Company made an application to the High Court, together
with a lodgement of the Company's statement of capital with the
Registrar of Companies, the Company was permitted to reduce the
capital of the Company by an amount of GBP40,000,000. This was
affected on the 15 December 2021 by a transfer of that amount from
the share premium account to distributable reserves.
Ordinary shareholders are entitled to all dividends declared by
the Company and to all of the Company's assets after repayment
of its borrowings and ordinary creditors.
Ordinary shareholders have the right to vote at meetings of the
Company. All ordinary Shares carry equal voting rights.
The nature and purpose of each of the reserves included within
equity at 31 March 2022 are as follows:
Share premium reserve: represents the surplus of the gross proceeds
of share issues over the nominal value of the shares, net of the
direct costs of equity issues and net of conversion amount.
Special reserve: represents a distributable reserve totalling the
amount of outstanding creditors at the date of the Company's approved
reduction in capital.
Capital reduction reserve: represents a distributable reserve created
following a Court approved reduction in capital.
Capital reserve: represents a non-distributable reserve of unrealised
gains and losses from changes in the fair values of investments
as recognised in the Capital account of the Statement of Comprehensive
Income.
Revenue reserve: represents a distributable reserve of cumulative
gains and losses recognised in the Revenue account of the Statement
of Comprehensive Income.
The only movements in these reserves during the period are disclosed
in the Statement of Changes in Equity.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
21. Dividends
Dividend 31 March 31 March
per 2022 2021
share
(GBP) (GBP)
Dividends declared during the year
For the 3 month period ended
31 March 2020 1 pence - 771,761
For the 3 month period ended
30 June 2020 2 pence - 1,543,523
For the 3 month period ended
30 September 2020 2 pence - 2,877,434
For the 3 month period ended
31 December 2020 2 pence - 2,877,434
For the 3 month period ended 1 pence 2,762,246 -
31 March 2021
For the 3 month period ended 2 pence 5,524,492 -
30 June 2021
For the 3 month period ended 2 pence 6,900,718 -
30 September 2021
15,187,456 8,070,152
The table below sets out the proposed final dividend, together
with the interim dividends paid, in respect of the financial
year, which is the basis on which the requirements of Section
1158 of the Corporation Tax Act 2010 are considered.
31 March 31 March
2022 2021
(GBP) (GBP)
Interim dividends for 2021 - 4 pence
(2021: 6 pence) 12,425,210 7,298,391
Interim dividend - 2 pence 6,900,718 -
Proposed final dividend for 2022 -
1 pence (2021: 1 pence) 4,813,995 2,762,246
24,139,923 10,060,637
During the period, the Company declared and paid dividends
totalling GBP15.18m out of distributable reserves. The Companies
Act 2006 requires public companies where necessary to prepare and
file relevant accounts with the Registrar of Companies showing its
distributable profits position if the last filed accounts do not
show sufficient distributable profits. It has come to the attention
of the Directors that the Company did not fully comply with these
requirements resulting in a technical infringement of the Companies
Act in respect of the payment of the interim dividends for the
periods from 1 July 2021 to 30 September 2021 and 1 October 2021 to
31 December 2021. The matter does not have any impact on the
financial statements.
In order to address this situation a special resolution will be
proposed at the Company's forthcoming Annual General Meeting to
authorise the appropriation of distributable profits to the payment
of the relevant dividends and remove any right for the Company to
pursue shareholders or directors (the Director Release') for
repayment. The Director Release will constitute a smaller related
party transaction under the Listing Rules of the FCA. The overall
effect of the special resolution being passed will be to return all
parties to the position they would have been in, had the relevant
dividends been made in full compliance with the Acts.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
22. Transactions with related parties
Following admission of the Ordinary Shares (refer to note 20),
the Company and the Directors are not aware of any person who,
directly or indirectly, jointly, or severally, exercises or could
exercise control over the Company. The Company does not have an
ultimate controlling party.
Details of related parties are set out below:
Directors
During the year, it was agreed to increase each of the directors'
renumeration and as at 31 March 2021, Patrick Cox, Chair of the
Board of Directors of the Company, is paid a director's remuneration
of GBP57,500 per annum, (2021: GBP43,387), Caroline Banszky is
paid a director's remuneration of GBP45,000 per annum, (2021: GBP31,051)
per annum, with the remaining directors' renumeration of GBP40,000
per annum, (2021: GBP26,734).
Total director's remuneration of GBP182,500 and employment associated
costs and expenses of GBP21,509 were incurred in respect of the
period with GBP6,669 being outstanding and payable at the year
end.
Investment Advisor
The Investment Advisor, Gore Street Capital Limited (the "Investment
Advisor"), is entitled to advisory fees under the terms of the
Investment Advisory Agreement amounting to 1% of Adjusted Net Asset
Value. The advisory fee will be calculated as at each NAV calculation
date and payable quarterly in arrears.
For the avoidance of doubt, where there are C Shares in issue,
the advisory fee will be charged on the Net Asset Value attributable
to the Ordinary Shares and C Shares respectively.
For the purposes of the quarterly advisory fee, Adjusted Net Asset
Value means:
(i) for the four quarters from First Admission, Adjusted Net Asset
Value shall be equal to Net Asset Value;
(ii) for the next two quarters, Adjusted Net Asset Value shall be
equal to Net Asset Value minus Cash on the Company's Statement
of Financial Position, plus any committed Cash on the Company's
Statement of Financial Position;
(iii) thereafter, Adjusted Net Asset Value shall be equal to Net Asset
Value minus Cash on the Company's Statement of Financial Position.
During the year, the management agreement was amended to change
the term of adjusted NAV
to mean net asset value minus uncommitted cash. Uncommitted cash
means all cash on the Company's balance sheet other than committed
cash. Committed cash means cash that has been allocated for repayment
of a liability on the balance sheet of any member of the group.
Investment advisory fees of GBP3,090,737 (2021: GBP1,029,876) were
paid during the year, there were no outstanding fees as at 31 March
2022, (2021: GBPnil outstanding).
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
22. Transactions with related parties (continued)
Investment Advisor
In addition to the advisory fee, the Advisor is entitled to a performance
fee by reference to the movement in the Net Asset Value of Company
(before subtracting any accrued performance fee) over the Benchmark
from the date of admission on the London Stock Exchange.
The Benchmark is equal to (a) the gross proceeds of the Issue at
the date of admission increased by 7 per cent. per annum (annually
compounding), adjusted for: (i) any increases or decreases in the
Net Asset Value arising from issues or repurchases of Ordinary
Shares during the relevant calculation period; (ii) the amount
of any dividends or distributions (for which no adjustment has
already been made under (i)) made by the Company in respect of
the Ordinary Shares at any time from date of admission; and (b)
where a performance fee is subsequently paid, the Net Asset Value
(after subtracting performance fees arising from the calculation
period) at the end of the calculation period from which the latest
performance fee becomes payable increased by 7 per cent. per annum
(annually compounded).
The calculation period will be the 12-month period starting 1 April
and ending 31 March in each calendar year with the first year commencing
on the date of admission on the London Stock Exchange.
The performance fee payable to the Investment Advisor by the Company
will be a sum equal to 10 per cent. of such amount (if positive)
by which Net Asset Value (before subtracting any accrued performance
fee) at the end of a calculation period exceeds the Benchmark provided
always that in respect of any financial period of the Company (being
1 April to 31 March each year) the performance fee payable to the
Investment Advisor shall never exceed an amount equal to 50 per
cent of the Advisory Fee paid to the Investment Advisor in respect
of that period. Performance fees are payable within 30 days from
the end of the relevant calculation period. Performance fees of
GBP1,545,369, were accrued as at 31 March 2022, (2021: GBP496,461).
During the period the Investment Advisor provided operations management
services to SPV companies resulting in charges in the amount of
GBP781,600 (2021: GBP686,025) being paid by the SPV companies to
the Investment Advisor.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
23 Capital commitments
The Company together with its direct subsidiary, GSES1 Limited
entered into Facility and Security Agreements with Santander UK
PLC in May 2021 for GBP15 million. Under these agreements, the
Company acts as charger and guarantor to the amounts borrowed under
the Agreements by GSES1 Limited. As at 31 March 2022, no amounts
had been drawn on this facility.
The Company had no contingencies and significant capital commitments
as at the 31 March 2022.
24. Post balance sheet events
The Directors have evaluated the need for disclosures and / or
adjustments resulting from post balance sheet events through to
25 July 2022, the date the financial statements were available
to be issued.
The board approved on the 4 March 2022, the issuance of an interim
dividend of 2 pence per share. This dividend totalling GBP6,900,718
was paid to investors on the 1 April 2022. Post year-end, it has
come to the attention of the Directors that the Company did not
fully comply with The Companies Act 2006 requirements resulting
in a technical infringement in respect of the payment of the interim
dividends for the periods from 1 July 2021 to 30 September 2021
and 1 October 2021 to 31 December 2021. The matter does not have
any impact on the financial statements. In order to address this
situation a special resolution will be proposed at the Company's
forthcoming Annual General Meeting to authorise the appropriation
of distributable profits to the payment of the relevant dividends
and remove any right for the Company to pursue shareholders or
directors (the Director Release') for repayment. The Director Release
will constitute a smaller related party transaction under the Listing
Rules of the FCA.
In April 2022, the Company issued a further 136m shares, raising
gross proceeds of GBP150 million.
Post year end, the Company acquired 4 assets in the US for USD
32.03m, three operational projects and one in its construction
phase. These combined assets have a total capacity of 39.8MW with
30MW operational and are the Company's first investment in the
US.
There were no adjusting post balance sheet events and as such no
adjustments have been made to the valuation of assets and liabilities
as at 31 March 2022.
25. Notes to Financial Statements
The financial information set out above does not constitute Company's
statutory accounts for the years ended 31 March 2022 or 2021 but
is derived from those accounts. Statutory accounts for 2021 have
been delivered to the Registrar of Companies, and those for 2022
will be delivered in due course. The auditor has reported on those
accounts; their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention
by way of emphasis without qualifying their report and (iii) did
not contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Directors and Advisors
Directors Administrator Independent Valuer
Patrick Cox - Chair Sanne Fiduciary Services BDO LLP
Caroline Banszky (UK) Limited 55 Baker Street
Malcolm Robert King 6(th) Floor London
Thomas Scott Murley 125 London Wall W1U 7EU
Registered office London Ticker: GSF
The Scalpel, 18th EC2Y 5AS
Floor Company Secretary Independent Auditor
52 Lime Street JTC (UK) Limited Ernst & Young LLP
London The Scalpel, 18th 144 Morrison Street
EC3M 7AF Floor Edinburgh
AIFM 52 Lime Street EH3 8EX
Gore Street Capital London United Kingdom
Limited EC3M 7AF LEGAL ADVISOR
16-17 Little Portland Stephenson Harwood
Street Registrar and Receiving LLP
First Floor Agent 1 Finsbury Circus
London Computershare Investor London
W1W 8BP Services Plc EC2M 7SH
Investment Manager The Pavilions
Gore Street Capital Bridgewater Road
Limited Bristol
16-17 Little Portland BS13 8AE
Street Sponsor and Joint
First Floor Corporate Broker
London Shore Capital
W1W 8BP Cassini House
Joint Corporate Broker 57 St James Street
J.P. Morgan Cazenove London
Floor 29 SW1A 1LD
25, Bank Street
London
E14 5JP Depositary
INDOS Financial Limited
St Clements House
27-28 Clements Lane
London
EC4N 7AE
[1] For March-end 2022, based on Adjusted NAV. Adjusted NAV is
calculated as the NAV per the Statement of Financial Position
adjusted for the interim dividend relating to the December 2021
quarter of GBP6.9m or 2.0 pence per share, which was declared in
March 2022 but paid post period end on 1 April 2022.
[2] For March-end 2022, based on Adjusted NAV. Adjusted NAV is
calculated as the NAV per the Statement of Financial Position
adjusted for the interim dividend relating to the December 2021
quarter of GBP6.9m or 2.0 pence per share, which was declared in
March 2022 but paid post period end on 1 April 2022
[3] Dividend coverage means the number of times the Company
could pay dividends to its common shareholders using its net income
over the fiscal year. The Company's dividend coverage from the
EBITDA of its operational portfolio exceeds the coverage achieved
based on Company-level EBITDA because it excludes fund-level
expenses
[4] The 628.5 MW include the additional 60.0 MW of grid capacity
approved for Porterstown (announced March 2021) and a further 90.0
MW of capacity for Kilmannock (announced November 2021). It does
not account for the four US acquisitions completed in April 2022,
post year-end
[5] As of the publication date
[6] The 668 MW portfolio includes the four assets totalling 39.8
MW in Texas, US, acquired from Perfect Power Solutions in April
2022.
[7] Operational management services are provided to the Company
by Gore Street Operational Management Limited through its
subsidiary, Gore Street Operational Management Limited (the
"Operations Manager" or "GSOM"), a subsidiary of the Investment
Manager.
[8] Formerly Gore Street Technical Management Limited.
[9] The Investment Manager and Operations Manager are
collectively referred to as the "Manager".
[10] The increase in the percentage of non-UK and Irish
investments from 40 per cent. of Gross Asset Value, to 60 percent
of GAV (in each case calculated at the time of investment) was
approved by shareholders in the April 11, 2022, General Meeting
[11] Effective for the quarter to 31 March 2022, the annual
target dividend will increase by 0.5 pence increments per Ordinary
Share based on a certain progression of the average Net Asset Value
per Ordinary Share in any financial year above 100 pence (subject
to rounding). For illustrative purposes only: if the average Net
Asset Value per Ordinary Share during a financial year is 107 pence
per Ordinary Share or greater (but less than 114 pence) the target
dividend for that financial year will be 7.5 pence per Ordinary
Share; if the average Net Asset Value per Ordinary Share during a
financial year is 114 pence per Ordinary Share or greater (but less
than 121 pence) the target dividend for that financial year will be
8.0 pence per Ordinary Share; and if the average Net Asset Value
per Ordinary Share during a financial year is 121 pence per
Ordinary Share or greater (but less than 128 pence) the target
dividend for that financial year will be 8.5 pence per Ordinary
Share.
([12]) Bloomberg NEF, July 2021. '2H 2021 Energy Storage Market
Outlook. Leap Ahead'.
[13] GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to
as the 'Company's portfolio' or 'GSF's portfolio').
[14] as of the date of publication.
[15] Further details on the Company's market share are explained
in the 'Market Share' section below.
[16] The November 2020 Placing Programme was for 250 million
shares of which 60 million shares were issued in December 2020,
leaving 190 million shares available under the Programme during the
fiscal year.
[17] The Initial Issues consists of the Initial Placing, Initial
Offer for Subscription and Initial Intermediaries Offer.
[18] The site is fully energized and now waiting for
confirmation on contract commencement.
[19] Assuming seller specifications.
([20]) Note on Market Capitalisation: Closing Share Price of
113.0 pence as of 31 March 2022. The Market Capitalisation reported
does not account for the 136,363,636 new shares admitted
post-reported period on 14 April 2022.
Note on Annual Dividend: A total of 7.0 pence in dividends were
declared for the financial year: 4.0 pence in dividends were paid
in the financial year and 2.0 pence in dividends have been paid as
at the date of publication. The remaining 1.0 pence shall be paid
in August 2022.
Note on Total Share Returns since IPO: On a share price basis.
Calculated as the difference between the closing share price as at
31 March 2022 and share price at IPO, plus dividends paid or
declared since IPO divided by share price at IPO
(113p-100p+24p)/100p)*100. This is an alternative performance
measure.
Note on the Adjusted NAV: Adjusted NAV is calculated as the NAV
per the Statement of Financial Position adjusted for the interim
dividend relating to the December 2021 quarter of GBP6.9m or 2.0
pence per share, which was declared in March 2022 but paid post
period end on 1 April 2022.
Note on NAV per Share: Calculated as Total Adjusted NAV divided
by the total number of shares.
Note on NAV Total Increase since IPO: Calculated as the
difference between the closing Adjusted NAV per share as at 31
March 2022 and opening. NAV per share at IPO, plus dividends
declared since IPO divided by opening NAV at IPO
(107.1-97.7p+24p)/97.7p)*100. This is an alternative performance
measure.
([21]) Note on market capitalisation increase: calculated
between 31 March 2021 and 14 April 2022 (the admission date for
April 2022 fundraise).
[22] Net Asset Total Return is calculated as the change in the
Company's Net Asset value plus the dividend declared in the
period.
([23]) The 310 MW include the 90 MW capacity expansion for
Kilmannock secured with EirGrid in the fiscal year, as well as the
previously secured 60 MW expansion for Porterstown, in March
2021.
[24] Sales and Purchase Agreement (SPA) have been signed for
eight assets in Texas, US, as per the Company announcement on 10
March 2022. Nonetheless, the transfer of ownership was completed
for only four of the assets as of publication date and post
year-end, in April 2022. The Investment Manager expects to complete
the acquisition of the remaining four assets in the coming months
once the various condition precedents have been met.
[25] Note on Battery Integrators: companies involved in system
assembly, design, and commissioning of energy storage projects. The
system integrator often serves as the EPC contractor for the asset
and designs the battery storage system for the asset. Please note
that LG Chem includes former NEC ES.
[26] The System Operator for Northern Ireland (SONI) and
EirGrid, plc, the state-owned electric power transmission operator
in Ireland. The electricity market in Ireland is common between the
ROI and NI, under the Integrated Single Electricity Market
(I-SEM).
[27] The primary ancillary service in Germany (Frequency
Containment Reserve) is regionally procured between eight European
and eleven associated TSOs.
[28] The services the Company provides, their respective sources
of revenue, and further characteristics of the markets wherein the
Company operates, are further explained in the 'Market Background
and Sources of Revenue' section in this report.
[29] Cremzow acquisition was completed on 3 March 2022 but
cashflow transfer to the Company commenced as of 1 January 2022.
For the purpose of this illustration, the graph includes revenue
relative to January, February, and March. The ERCOT acquisitions
were completed post reported period but cashflow transfer to the
Company commenced as of 1 March 2022. For the purpose of this
illustration, the graph includes revenue relative to March.
[30] Projections are not indicative of future results.
Projections do not assume any new acquisitions have been made this
year.
[31]
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1033990/net-zero-strategy-beis.pdf
[32]
https://www.gov.ie/en/press-release/9336b-irelands-ambitious-climate-act-signed-into-law/
[33]
https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/#::text=Building%20on%20and%20benefiting%20from,
economy%20by%20no%20later%20than
[34]
https://www.bloomberg.com/news/articles/2022-02-28/germany-brings-forward-goal-of-100-renewable-energy-to-2035
[35] Note this market share is based on GSF awarded MW out of
the total awarded MW for DC and FFR in Great Britain for the
2021/2022 fiscal year.
[36] The DS3 system services are procured by EirGrid and SONI
under two separate procurement routes: (i) volume uncapped
procurement, also known as the regulated arrangements; and (ii)
volume capped procurement, also known as fixed contract
procurement. For uncapped agreements, market share considers NI
procured volumes only, as EirGrid procures volumes separately for
ROI and NI. This market share based on July 2021 data. No further
data is available from EirGrid/SONI. Provided there is more volume
procured, this per centage will change.
[37] Market share calculated based on DS3 uncapped contracts for
FFR, POR, SOR, TOR1, TOR2 and SSRP.
[38] Market share calculated based on DS3 capped contracts
awarded in 2019. The Asset providing services under the DS3 capped
contract started generating income after the reported period, in
July 2022
[39] Note on methodology: for Germany and US (Texas) market
share is expressed in terms of total installed capacity. German
battery energy storage systems' market capacity is estimated at 619
MW, considering batteries > 1 MWh, according to 'The development
of battery storage systems in Germany - a market review (status
2022)', Jan Figgener et al., RWTH Aachen University. For ERCOT,
battery energy storage systems' market capacity is estimated as
1,007 MW based on Ascend Analytics ERCOT Market Report.
([40]) Cremzow acquisition was completed on 3 March 2022, and it
had a locked box date as of 1 January, which translates into all
Assets' profits directed to the Company from locked box date. For
the purpose of this illustration, the graph includes revenue and
EBITDA relative to January, February, and March. US, Texas
acquisitions were completed post-reported period and had a locked
box date as of 1 March, which translates into all three operating
Assets' profits directed to the Company from locked box date. For
the purpose of this illustration, the graph includes revenue and
EBITDA relative to March. Projections are not indicative of future
results. Note on timeline: This timeline is based on events
occurred after 31 March 2022 and incudes estimates to the best of
the Investment Manager's knowledge.
[41] Cremzow acquisition was completed on 3 March 2022, and it
had a locked box date as of 1 January, which translates into all
Assets' profits directed to the Company from locked box date. For
the purpose of this illustration, the graph includes revenue
relative to the months of January, February, and March. The US
acquisitions in Texas were completed post-reported period and had a
locked box date as of 1 March 2022, which translates into all three
operating Assets' profits directed to the Company from this locked
box date. For the purpose of this illustration, the graph includes
revenue relating to March only for these US assets, hence its
reduced revenue/MW figures.
[42] Note on Ancala: The Ancala asset comprises 10 smaller sites
of 1.0 MW - 1.2 MW across the UK. The pin location represents Brook
Hall, one of the assets within Ancala.
Note on US assets: consist of three operational assets and one
pre-construction asset located in Texas, US.
Note on ROI Assets: Both projects in ROI have been granted
capacity expansions by EirGrid, resulting in an additional 60.0 MW
for Porterstown and an additional 90.0 MW Kilmannock, indicated as
'Phase 2' in each case above.
[43] GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to
as the 'Company's portfolio' or 'GSF's portfolio').
[44] Sales and Purchase Agreement (SPA) have been signed for
eight assets in Texas, US, as per the Company announcement on 10
March 2022. Nonetheless, the transfer of ownership was completed
for only four of the assets as of publication date and post
year-end, in April 2022. The Investment Manager expects to complete
the acquisition of the remaining four assets in the coming months
once the various condition precedents have been met.
[45] Note on 6.2 pence per share: based on Adjusted NAV.
Adjusted NAV is calculated as the NAV per the Statement of
Financial Position adjusted for the interim dividend relating to
the December 2021 quarter of GBP6.9m or 2.0 pence per share, which
was declared in March 2022 but paid post-period end on 1 April
2022. Note on Annual Dividend: A total of 7.0 pence in dividends
were declared for the financial year: 4.0 pence in dividends were
paid in the financial year and 2.0 pence in dividends have been
paid as of the date of publication. The remaining 1.0 pence shall
be paid in August 2022.
[46] Adjusted NAV: A djusted NAV is calculated as the NAV per
the Statement of Financial Position adjusted for the interim
dividend relating to the December 2021 quarter of GBP6.9m or 2.0
pence per share, which was declared in March 2022 but paid
post-period end on 1 April 2022.
[47] As per March 2022 Dividend policy, the Company will target
dividends in respect of the Ordinary Shares in each financial year
based on a 7 per cent. yield on the average Net Asset Value per
Ordinary Share during that financial year, subject to a minimum
target of 7 pence per Ordinary Share in each financial year. The
annual target dividend will increase by 0.5 pence increments per
Ordinary Share based on a certain progression of the average Net
Asset Value per Ordinary Share in any financial year above 100
pence (subject to rounding).
[48] Adjusted NAV of March 2022 compared to NAV 2021. Adjusted
NAV is calculated as the NAV per the Statement of Financial
Position adjusted for the interim dividend relating to the December
2021 quarter of GBP6.9m or 2.0 pence per share, which was declared
in March 2022 but paid post period end on 1 April 2022.
[49] Through its subsidiary, Gore Street Operational Management
Limited, the Investment Manager oversees the construction, and
management of the Company's operations post acquisition, and is
responsible for the supervision of asset construction, asset
management, fault correction, and revenue optimisation strategies
across the portfolio.
[50] The 668 MW portfolio includes the four assets totalling
39.8 MW in Texas, US, acquired from Perfect Power Solutions in
April 2022.
[51] The site is fully energized and now waiting for
confirmation on contract commencement.
[52]
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1033990/net-zero-strategy-beis.pdf
[53]
https://www.gov.ie/en/press-release/9336b-irelands-ambitious-climate-act-signed-into-law/
[54]
https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/#::text=Building%20on%20and%20benefiting%20from,
economy%20by%20no%20later%20than
[55] Panorama - Germany raises the bar on renewable energy with
new set of laws for 100 percent renewable power - Renewable Energy
Magazine, at the heart of clean energy journalism
[56] Further details on the Company's market share are explained
in the 'Market Share' section below.
[57] Availability expressed as the percentage of hours without
unexpected technical issues or maintenance preventing
operation.
[58] Note on methodology: for Germany and US (Texas) market
share is expressed in terms of total installed capacity. German
battery energy storage systems' market capacity is estimated at 619
MW, considering batteries > 1 MWh, according to 'The development
of battery storage systems in Germany - a market review (status
2022)', Jan Figgener et al., RWTH Aachen University . For ERCOT,
battery energy storage systems' market capacity is estimated as
1007 MW based on Ascend Analytics ERCOT Market Report.
[59] FCA (2021): "We are considering the European Commission's
Sustainable Finance Disclosure Regulation and proposed Regulatory
Technical Standards as we develop our policy design for the FCA's
implementation actions under the Government's proposed SDR". ('A
strategy for positive change: our ESG priorities'. Available at:
https://www.fca.org.uk/publications/corporate-documents/strategy-positive-change-our-esg-priorities#lf-chapter-id-executive-summary
[60] FCA (2021): "We are considering the European Commission's
Sustainable Finance Disclosure Regulation and proposed Regulatory
Technical Standards as we develop our policy design for the FCA's
implementation actions under the Government's proposed SDR". ('A
strategy for positive change: our ESG priorities'. Available at:
https://www.fca.org.uk/publications/corporate-documents/strategy-positive-change-our-esg-priorities#lf-chapter-id-executive-summary
[61] In 2021 imports from Russia made up only 4% of gas used in
the UK, 9% of oil and 27% of coal.
[62] GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to
as the 'Company's portfolio' or 'GSF's portfolio').
[63] As per the Circular published to shareholders on 22 March
2022
[64] As of the date of publication
[65] GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to
as the 'Company's portfolio' or 'GSF's portfolio'. The 26 assets
and 16 portfolio companies do not account for the four US
acquisitions (Snyder, Westover, Sweetwater, and Mineral Wells)
completed in April 2022, as this falls outside of the fiscal year.
Signature of Purchase agreement was announced on the 10(th) of
March 2022
[66] The Cremzow acquisition was completed on 3 March 2022,
however the revenues for the asset were held in a locked box since
1 January 2022 and are payable to the Company.
[67] The Company expects to complete the acquisition of the
remaining four assets in the coming months once the various
condition precedents have been met.
[68] Acquisition of the sites closed in April 22 with a locked
box date on 1 March 2022.
[69] The site fully energized and now waiting for confirmation
on contract commencement.
[70] Including grid connection date.
[71] Expected capex (including development fee, grid connections
costs and EPC) committed but yet to be deployed.
[72] Note on timeline: This timeline assumes events occurred
after 31 March 2022 and includes estimates to the best of the
Investment Manager's knowledge.
[73] Investment Manager and Operations Manager collectively
referred to as the Manager.
[74] Note on timeline: This timeline is based on events occurred
after 31 March 2022 and includes estimates to the best of the
Investment Manager's knowledge.
([75]) The Cremzow acquisition was completed on 3 March 2022
with commercial transfer effective as of 1 January 2022. The graph
assumes 100 per cent availability between January and March 2022
for illustrative purposes only. The Texas acquisitions were
completed post-reported period with commercial transfer effect as
of 1 March 2022. The graph assumes 100% availability for the Texan
assets in March.
[76] Availability expressed as the percentage of hours without
unexpected technical issues or maintenance preventing
operation.
[77] Third-party service provider for Engineering, Procurement
and Construction (EPC).
[78] Triad revenue is only available to the Company's
behind-the-meter sites, which are Boulby and Port of Tilbury, thus
only these two sites are included in the /MW and /MWh
calculations.
[79] The US acquisitions in Texas were completed post reported
period and had a locked box date as of 1 March 2022, which
translates into all three operating Assets' profits directed to the
Company from this locked box date. For the purpose of this
illustration, the table includes revenue relating to 1 March to 31
March 2022
[80] Assuming average rate of exchange as of April 2022.
[81] Project availability and service allocation is presented as
a percentage of total hours within the period. Note on Capacity
Market: revenue is not including the percentage allocation of
project delivery hours. Capacity Market revenue is stackable with
all other revenue streams as the Company is paid to be available to
deliver this service whilst delivering other revenue streams.
[82] Past performance is not indicative of future
performance.
[83] From November 2021 onwards, National Grid has split DC
between DC high and DC Low (DCH and DCL). For simplifications
purposes, we refer to DC prices throughout the year, with DC prices
being the average of the sum of DCH and DCL after November 2021.
Figure indicates price levels contracted by GSF.
[84] Modo Leadership Board, 2021
[85] Aurora Energy Research Ltd, 2021.
[86] Project availability and service allocation is presented as
a percentage of total hours within the period.
[87] There are two types of electricity generation: synchronous
generation and non-synchronous generation. Non-synchronous
generation produces a different amount of electricity depending on
the energy available. Most renewable forms of energy, such as wind
and solar, are types of non-synchronous generation.
[88]
https://www.gsenergystoragefund.com/content/news/archive/2019/041019
[89] Under the terms of the DS3 Capped Contract, in
circumstances where the date of energization is delayed by the TSO,
the contract term will be maintained, and contract commencement
delayed until the date of energization by the TSO.
[90] Operational site closed in March 22 with a locked box date
on 1 January 2022.
[91] Past performance is not indicative of future results.
[92] Project availability and service allocation is presented as
a percentage of total hours within the period. Note on Capacity
Market: revenue is not including the percentage allocation of
project delivery hours. Capacity Market revenue is stackable with
all other revenue streams as the Company is paid to be available to
deliver this service whilst delivering other revenue streams.
[93] US, Texas acquisitions were completed post-reported period
and had a locked box date as of 1 March 2022, which translates into
all three operating Assets' profits directed to the Company from
locked box date.
[94] Data is for the period of 1st April 2022 to 12th July
2022.
[95] Project availability and service allocation is presented as
a percentage of total hours within the period. Note on Capacity
Market: revenue is not including the percentage allocation of
project delivery hours. Capacity Market revenue is stackable with
all other revenue streams as the Company is paid to be available to
deliver this service whilst delivering other revenue streams.
[96] Dividend coverage means the number of times the Company
could pay dividends to its common shareholders using its net income
over the fiscal year. The Company's dividend coverage from the
EBITDA of its operational portfolio exceeds the coverage achieved
based on Company-level EBITDA because it excludes fund-level
expenses.
[97]
https://www.linkedin.com/posts/modo-energy_november-leaderboard-roundtable-activity-6874279809028038656-5p4h/
[98] Note on timeline: This timeline is based on events occurred
after 31 March 2022 and includes estimates to the best of the
Investment Manager's knowledge.
[99] Note on timeline: This timeline is based on events occurred
after 31 March 2022 and includes estimates to the best of the
Investment Manager's knowledge.
[100] T-1 auction occur a year ahead of the delivery year, T-4
auctions occur four years ahead of the delivery year.
[101] Source: Modo, 2021.
[102] Construction discount rates vary based on programme status
and lead time. Similar to *
[103] Uncontracted revenue rates vary in accordance with market
maturity. Contracted revenue rates vary by counterparty Similar to
**
[104] Share price at March 2022: post publication of Share
issuance programme circular, released on 29 March 2022.
[105] For the 31 March 2022, it was assumed the Adjusted NAV
[106] A total of 7.0 pence in dividends were declared for the
financial year: 4.0 pence in dividends were paid in the financial
year and 2.0 pence in dividends have been paid as the date of
publication. The remaining 1.0 pence shall be paid in August
2022.
[107] IPCC_AR6_WGIII_FinalDraft_FullReport.pdf pg 995
[108] IPCC_AR6_WGIII_FinalDraft_FullReport.pdf pg 80
[109] Panorama - Germany raises the bar on renewable energy with
new set of laws for 100 percent renewable power - Renewable Energy
Magazine, at the heart of clean energy journalism
[110] Department for Business, Energy & Industrial Strategy
and The Rt Hon Kwasi Kwarteng MP, 2021. 'Plans unveiled to
decarbonise UK power system by 2035'. Available at:
https://www.gov.uk/government/news/plans-unveiled-to-decarbonise-uk-power-system-by-2035
[111] IPCC_AR6_WGIII_FinalDraft_FullReport.pdf pg. 116
[112] IPCC_AR6_WGIII_FinalDraft_FullReport.pdf pg. 37
[113]
https://www.eirgridgroup.com/newsroom/electricity-grid-to-run-o/#::text=07%20April%202022,project%20by%20grid%20operator%20EirGrid
[114] Per Regulation (EU) 2019/2088 on sustainability-related
disclosures in the financial services sector. Please see the
Company's website for further information.
[115]
https://www.unpri.org/about-us/what-are-the-principles-for-responsible-investment
[116] The Company has circa GBP2m in debt drawn on a GBP15m
facility.
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