TIDMGSF
RNS Number : 1317G
Gore Street Energy Storage Fund PLC
17 July 2023
17 July 2023
Gore Street Energy Storage Fund plc
(the "Company" or "GSF")
Full Year Results
Internationally diversified portfolio supports strong growth in
NAV, EBITDA and best-in-class revenue generation
Gore Street Energy Storage Fund plc, the internationally
diversified energy storage fund, is pleased to announce its Audited
Full Year results for the year ended 31 March 2023.
Performance highlights for the year ended 31 March 2023:
-- NAV increased 47.8% to GBP556.3m (FY 2022: GBP376.5m).
-- NAV per share increased 5.9% to 115.6 pence (FY 2022: 109.1 pence).
-- Total NAV return of 12.3% and 48% since 31 March 2022 and
IPO, respectively (FY22: 13.1% and 34.2%).
-- GBP39.3m in revenue was generated during the reporting period
(FY 2022 GBP29.3m), averaging GBP135,000 per MW/yr. Over the 2022
calendar year, the Company achieved a consistently high average
revenue of GBP157,000 per MW/yr.
-- EBITDA of the operational portfolio increased 19% to GBP27.8
million (FY 2022: GBP23.3 million), with 63.5% secured outside
Great Britain.
-- Dividends paid during the 12-month period of 7 pence per
share, with an operational dividend cover of 0.90x. This was
achieved with c.25% of the Company's portfolio operational at the
period end.
-- Dividends declared for the period of 7.5 pence per share.
-- Weighted average discount rate increased to 10.1% (FY 2022: 8.3%).
-- Portfolio revenue curves increased during the period, largely
driven by the Company's geographically diverse portfolio.
Deployment and fundraising
-- The Company raised GBP150m in an oversubscribed issuance in April 2022.
-- As of 31 March 2023, the Company had drawn down GBPnil from its Debt Facility.
-- The Company remains fully funded to meet all contractual
obligations and EPC payments over the next 18 months, utilising
equity and its existing debt facility.
-- Operational assets producing income increased to a total
capacity of 291.6MW (FY 22: 231.7MW).
-- Portfolio expansion continued with sizeable new projects
acquired in attractive new markets, offering unique diversification
and differentiation:
-- 144.65 MW across 8 assets in Texas, US
-- 200 MW construction asset in GB
-- 200 MW construction-ready asset in California, US
-- The Company's geographical split is now: 42% in GB, 27% in
Ireland, 12% in Texas, 17% in California and 2% in Germany.
Post Period-end Highlights:
-- The energisation of the Stony asset, with a capacity of 79.9
MW, has been scheduled with National Grid ESO for July-end
2023.
-- Post reporting period, the Company increased its existing
Debt facility from GBP15m to GBP50m, with an accordion option of up
to 30% of Gross Asset Value ("GAV").
CEO of Gore Street Capital, the investment manager to the
Company, Alex O'Cinneide, commented:
"I am pleased to announce that the Company has maintained its
upward trajectory, achieving significant milestones by adding
landmark assets to our portfolio. Additionally, we have generated
industry-leading revenues from four uncorrelated markets, further
bolstering our success.
As we have consistently communicated, the discussion around
system duration in GB has now shifted towards recognising
international diversification as the key determinant of sustained
profitability. The Company's ability to thrive amidst challenging
market dynamics in GB showcases the strength of the Company's
unique approach.
Looking ahead to 2023 and 2024, we look forward to bringing over
half a GW of operational capacity online across five diverse
markets. We are confident this strategic expansion will have a
positive impact on dividend cover, leading to increased shareholder
value whilst supporting continued incremental growth in NAV. We
look forward to updating the market regularly on the progress of
this expanding international operational capacity.
We remain committed to driving efficiency and have witnessed a
consistent growth in revenue and EBITDA year on year. This trend is
expected to be further supported as we bring online increased
operational capacity in rapidly evolving markets that offer
significantly higher revenue potential and promising
forward-looking revenue forecasts.
In line with our focus on driving efficiencies, we have made
strategic decisions to prioritise larger assets for energisation.
This approach leverages economies of scale and ongoing efforts to
increase the capacity of some of the smaller sites within our
construction portfolio. More details on this can be found within
the Annual Report.
We are optimistic about the next year as we strategically expand
our capacity in multiple jurisdictions. This approach ensures
sustainable returns across a well-diversified portfolio, mitigating
risks associated with a single market. We look forward to updating
our valued shareholders on our progress throughout the upcoming
reporting period."
Results presentation today
There will be a presentation for sell-side analysts at 9.00 a.m.
today, 17 July 2023. Please contact Buchanan for details on
gorestreet@buchanancomms.co.uk
Annual Report:
The Company's annual report and accounts for the year ended 31
March 2023 are also being published in hard copy format and an
electronic copy will shortly be available to download from the
Company's webpages https://www.gsenergystoragefund.com/. Please
click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/1317G_1-2023-7-14.pdf
The Company will be submitting its Annual Report and Accounts to
the National Storage Mechanism, which will shortly be available for
inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism .
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 / Iain Sexton (Corporate Advisory) Tel: +44 (0) 20 7408 4090
Fiona Conroy (Corporate Broking)
J.P. Morgan Cazenove (Joint Corporate Broker)
William Simmonds / Jérémie Birnbaum (Corporate Finance) Tel: +44
(0) 20 3493 8000
Buchanan (Media Enquiries)
Charles Ryland / Henry Wilson / George Beale Tel: +44 (0) 20
7466 5000
Email: gorestreet@buchanan.uk.com
Notes to Editors
About Gore Street Energy Storage Fund plc
Gore Street is London's first listed and internationally
diversified energy storage fund dedicated to the low carbon
transition. It seeks to provide Shareholders with sustainable
returns from their investment in a diversified portfolio of
utility-scale energy storage projects. In addition to growth
through increasing operational capacity and a considerable
pipeline, the Company aims to deliver consistent and robust
dividend yield as income distributions to its Shareholders.
https://www.gsenergystoragefund.com
Gore Street Energy Storage Fund plc Annual report for the year
ended 31 March 2023
Key Metrics
For the year ending 31 March 2023
NAV PER SHARE
115.6p
(2022: 109.1p)
OPERATIONAL EBITDA
GBP27.8m
(2022: GBP23.3m)
DIVID YIELD
6.9%
(2022: 6.2%)
NAV TOTAL RETURN
for the year ended 31 March 2023
12.3%
(2022: 13.1%)
OPERATIONAL CAPACITY
291.6MW
(2022: 231.7MW)
TOTAL CAPACITY
1.17GW
(2022: 628.5MW)
Key Metrics
As at 31 March As at 31 March
2023 2022 % Change
---------------------------------------------- -------------- -------------- --------
Net Asset Value (NAV) GBP556.3m GBP376.5m 47.8%
---------------------------------------------- -------------- -------------- --------
Number of issued Ordinary shares 481.4m 345.0m 39.5%
---------------------------------------------- -------------- -------------- --------
NAV per share 115.6p 109.1p 5.9%
---------------------------------------------- -------------- -------------- --------
NAV Total Return for the year* 12.3% 13.1%
---------------------------------------------- -------------- -------------- --------
NAV Total Return since IPO* 48.0% 34.2%
---------------------------------------------- -------------- -------------- --------
NAV Total Return for the year including
dividend reinvestment* 12.6% 13.4%
---------------------------------------------- -------------- -------------- --------
NAV Total Return since IPO including dividend
reinvestment* 52.4% 36.8%
---------------------------------------------- -------------- -------------- --------
Share price based on closing price at
indicated date 100.8p 113.0p -10.8%
---------------------------------------------- -------------- -------------- --------
Market capitalisation based on closing
price at indicated date GBP485.3m GBP389.9m 24.5%
---------------------------------------------- -------------- -------------- --------
Share Price Total return for the year* -4.6% 11.1%
---------------------------------------------- -------------- -------------- --------
Share price total return since IPO* 31.8% 37.0%
---------------------------------------------- -------------- -------------- --------
(Discount)/Premium to NAV* -12.8% 3.6%
---------------------------------------------- -------------- -------------- --------
Portfolio's total capacity 1.17 GW 628.5 MW 86.2%
---------------------------------------------- -------------- -------------- --------
Portfolio's operational capacity 291.6 MW 231.7 MW 25.9%
---------------------------------------------- -------------- -------------- --------
Total Comprehensive Income for the Company GBP63.4m GBP42.5m 49.1%
---------------------------------------------- -------------- -------------- --------
Operational EBITDA GBP27.8m GBP23.3m 19.0%
---------------------------------------------- -------------- -------------- --------
Total Fund EBITDA GBP16.8m GBP15.2m 10.8%
---------------------------------------------- -------------- -------------- --------
Dividends per Ordinary Share paid during
the year 7p 7p**
---------------------------------------------- -------------- -------------- --------
Operational Dividend cover* 0.90x 1.29x**
---------------------------------------------- -------------- -------------- --------
Dividend Yield* 6.9% 6.2%
---------------------------------------------- -------------- -------------- --------
Ongoing Charges Figure* 1.37% 1.45%
---------------------------------------------- -------------- -------------- --------
* Some of the financial measures above are classified as
Alternative Performance Measures, as defined by the European
Securities and Markets Authority and are indicated with an asterisk
(*). Definitions of these performance measures, and other terms
used in this report, are given on page 103 together with supporting
calculations where appropriate.
** Dividends of 5p per Ordinary Share were paid in the year
ended March 2022, as a result of two dividends payments being made
in the quarter ended March 2021, with the December 2020 quarter
dividend paid at the end of March 2021. Due to this timing of
payments, only 5p was paid for the prior year. To ensure
comparability and to reflect a more meaningful and accurate
dividend cover for the comparable period, dividends paid of 7p is
reflected, being the 5p paid between 1 April 2021 and March 2022
plus the December 2020 quarter dividend paid at the end of March
2021, which due to timing of payment was not reflected as paid in
the year ended 31 March 2022.
Chair's Statement
I am pleased to present the Company's Annual Results for the
year ending 31 March 2023
Overview and Performance
This has been a successful period of growth and diversification,
with the Company entering two new grids and holding a uniquely
diversified portfolio of 1.17 GW across five uncorrelated markets.
These assets achieved strong growth and an attractive dividend
yield for our investors, with a NAV total return of 12.3% and 7.5p
in dividends declared for the period. The dividend for the year,
based on the 31 March closing share price of 100.8p, was equivalent
to a 6.9% yield. Over the five years since our IPO, the Company has
delivered a NAV total return of 48%, including 29p of dividends
paid to Shareholders. With 291.6 MW of operational capacity in the
portfolio thus far, the last financial year laid the foundations
for a sustained period of growth and opportunity for our portfolio.
Over 500 MW of capacity is scheduled to come online by the end of
2024 across the Company's portfolio, including in California, where
the 200 MW Big Rock asset will establish us in a new market, the
CAISO grid. During the reporting period, the Company generated an
average revenue of GBP135,000 per MW/ yr, resulting in total
revenue of GBP39.3 million. Post-reporting period, the Company
successfully expanded the existing GBP 15 million revolving debt
facility with Santander to GBP 50 million together with an
accordion option.
In 2018, we identified the vulnerability of relying on a single
market and the volatility it introduced to our revenues and overall
profitability. We made our first international acquisition in 2019
on the all-Irish Grid, where we now have a fleet of assets
totalling 310 MW, of which 130 MW is operational.
During the reporting period, the contributions from our Irish
assets have been significant, generating the largest proportion of
revenue for the Company. Our Irish assets boast a duration of
sub-30 minutes (and therefore the lowest capital expenditure within
our portfolio and significantly below the market average), which is
optimally sized to capitalise on the available contracts on this
grid. Moreover, these assets have consistently over delivered and
now surpass the level of revenue we see in the GB market.
Expanding our operations into new geographies required extensive
efforts to navigate the regulatory landscapes, establish networks,
and understand the contracts available with each grid operator.
While pursuing a GB-only strategy could have expedited deployment
and led to a larger operational asset base today, 2023 has shown us
that this would not have been the correct approach. By pursuing an
internationally diversified strategy, the Company hasn't been
wholly exposed to a grid with currently declining revenues, as
opposed to the diversified fleet of assets we currently possess,
which continues to deliver industry-leading returns for our
investors.
The Company remains well-capitalised to meet all contractual
obligations over the next 12 months without further debt. The
Company maintains a gearing level of less than 5% of NAV. This
aspect is significant, differentiating the Company and insulating
it from increased debt servicing costs.
Over the next period, we aim to introduce a conservative level
of debt. Accounting for the construction funding requirements for
the 522 MW of capacity targeting energisation by end of December
2024 and milestone payments for assets targeting energisation after
this period, net debt is expected to stay below GBP150m or 21% of
GAV over the 18 months from the date of publication. Considering
the prevailing cost of debt and the recent interest rate hikes, I
believe this is the appropriate approach.
During the period, the Company continued to execute on its
growth strategy, both in terms of capacity and geographical
diversification. This first led to the successful acquisition of
three operational assets and four pre-construction assets in the
ERCOT market of Texas in April 2022, with a combined capacity of
69.65 MW, which was later followed in January 2023 with the
acquisition of the 75 MW Dog Fish asset in the State. The Company
continued this momentum in February 2023 by entering a fifth grid
market with the completion of the acquisition of Big Rock, a 200
MW/400 MWh asset located in California.
The Company made one of its largest investments to date with the
200 MW Middleton project, which will be built in the north of
England. Together these project additions have taken the Company's
portfolio to a capacity of 1.17 GW spread across five distinct
energy systems, with access to more uncorrelated revenue streams
than ever before.
Macroeconomic Environment
There have been considerable macroeconomic shifts in the
reporting period - ranging from rising short-term inflation and
interest rates to increasing construction costs - due, in part, to
the unprecedented financial market conditions that have developed
over the financial year. Our Investment Manager has demonstrated
sound risk management and resilience within this context, adopting
effective measures to mitigate their impact on the portfolio.
Through its dedicated construction team, we have secured
competitively priced engineering, procurement, and construction
(EPC) contracts, leveraging pre-established relationships and
economies of scale, given the size of the Company's construction
portfolio. The Company has also benefitted from minimal debt
exposure, insulating it from increased debt servicing costs, while
our unique diversification has proven valuable in creating natural
hedges against FX volatility and pricing movements experienced in
the GB market.
Despite these conditions, the fundamental growth drivers for
energy storage remain strong, driven by the worldwide transition to
low-carbon energy generation and further reinforced by the global
concern over energy security. We remain confident in the Company's
ability to deliver sustainable dividends and attractive capital
growth for our investors over the long term.
Dividends
The Board has approved a fourth interim dividend of 1.5 pence
per share, bringing the total dividend announced for the period
ending 31 March 2023, to 7.5 pence per share, in line with the
Company's progressive Dividend Policy. The dividend paid for the
year based on the 31 March 2023 closing share price of 100.8p was
equivalent to a 6.9% yield.
NAV Performance
NAV has continued to progress in line with the Company's target
returns increasing from 109.1p per share in March 2022 to 115.6p
per share as of 31 March 2023, reflecting a NAV Total Return of
12.3% for the reporting period. With a significant portion of the
portfolio under construction (c. 75% on a MW basis), we maintain a
positive outlook on our ability to continue to deliver long-term
value to our shareholders as we deploy operational capacity over
the next period and beyond.
As we progress with the build-out of our construction portfolio,
we expect further positive impacts on revenue generation, dividend
coverage, and enhanced shareholder value as projects are de-risked
and revalued from stages of construction to becoming
operational.
Discount Management
In the interest of discount management, at the Board's
discretion, the Company is able to repurchase its shares at a price
lower than Net Asset Value (NAV). However, as the Company's funds
are fully committed to the build-out of the portfolio assets, and
the healthy returns available, we do not believe this to be the
optimal course of action. The Board will diligently monitor the
performance of the share price and retains the ability to employ
appropriate discount control mechanisms if deemed necessary.
Strategy and Operational Performance
Our strategy in FY 2022/23 continued to be led by participation
in various ancillary services, which remain the most profitable
source of income available to energy storage assets. The portfolio
engaged in some wholesale trading opportunities when appropriate
but achieved 93% of total revenue from ancillary services,
emphasising the significance of these services in the revenue stack
and highlighting the effectiveness of our system duration in the GB
market.
The GB portfolio performed well in the first half of the
reporting period, driven by our success in FFR services and the
introduction of Dynamic Services. High revenues from DS3 ancillary
services in Ireland, resulting from increased renewable generation
in winter months, helped offset the impact of declining prices
witnessed in GB during the second half of the financial year. This
seasonal volatility underscores the value of our portfolio
operating across multiple grids and geographies, reducing our
exposure to revenue fluctuations in any single market.
Similar patterns of seasonal performance were seen in Germany,
where our newly acquired asset was called on to help tackle the
sustained volatility experienced over the summer months as gas
prices peaked. August provided the highest monthly revenue from the
ancillary services market, with prices remaining stable throughout
winter.
The summer also proved beneficial for the Company's operational
assets in Texas, where several extreme weather events, including a
heat wave in July 2022, caused ancillary services prices to spike
above $2,000 (GBP1,590)/MW/hr as demand increased. A similar impact
was seen in December 2022, resulting from a winter storm, which
drove prices even higher.
This volatility in summer and winter, separated by subdued
pricing in the transitional seasons of spring and autumn, can be
seen broadly across the portfolio and illustrates the value of
having assets located across multiple grids to capitalise on
extreme swings in supply and demand.
Sustainability
Over the past 12 months, we have continued to build on our
commitments around how we record and report the Company's impact.
The Company's first ESG & Sustainability report, published in
August 2022 for the previous reporting period, delivered voluntary
disclosures for our GB and Ireland assets covering emissions,
social metrics and efforts to understand the human rights exposure
of our supply chain. We have ramped up these efforts during the
reporting period and expanded our reporting to cover Germany, Texas
and California, where we added assets in early 2022.
An SFDR Article 8 periodic report covering Principle Adverse
Impacts (PAIs) is disclosed in this report. This will be followed
in August 2023 by the Company's second ESG & Sustainability
Report, which will include reporting under the Sustainable Finance
Disclosure Regulation (SFDR) and the Task Force for Climate-related
Financial Disclosures (TCFD) disclosures.
Debt
Post-reporting period, the Company successfully expanded the
existing GBP15 million GBP revolving debt facility with Santander
to GBP50 million. The facility includes an accordion option to
increase beyond GBP50m to up to 30% of Gross Asset Value. Pricing
for the GBP50m facility remains unchanged at 300 basis points over
SONIA. Throughout the calendar year, we will remain focused on
optimising the Company's capital structure and are actively
exploring debt options in both GBP and USD.
The recent acquisition of the Big Rock project in California
presents an opportunity for project level financing by leveraging
its unique revenue profile under the Resource Adequacy mechanism.
This programme has similarities to GB's Capacity Market in that it
aims to ensure safe and reliable operation of the grid through
security of supply but can offer up to 40% of revenue under a
long-term contract. This level of secured revenue allows us to
consider asset-level debt financing in a new way, further
supporting the Company's decision to diversify its portfolio.
Board Composition and Succession Planning
In the 2022 half-year report, I updated shareholders on our
progress with the recruitment of a new Director. We are delighted
to welcome Lisa Scenna to the Board, effective 1 May 2023. Lisa's
skills and experience are detailed on page 49 and she will be
standing for election at the AGM with the rest of the Board.
The remuneration and nomination committee also recommended that
the Board seek to appoint a new Director in 2024/25 and every two
or three years thereafter, such that Directors' retirement dates
are staggered as part of orderly succession planning.
AGM and Continuation Vote
This year marks an important milestone for the Company, as it
passed its five-year anniversary. When the Company's shares started
trading on 25 May 2018, it was the first listed company offering
access to energy storage.
Five years later, the Company has built an internationally
diversified portfolio of 1.17 GW and delivered a NAV total return
of 48% including 29p of dividends paid to Shareholders.
The Company's continued progress with geographic, grid and
revenue diversification is detailed in this report, as are the
Company's plans for future growth as its pre-construction assets
become operational, accessing and stacking additional revenue
sources, driving returns and adding to dividend cover.
In accordance with the Company's articles of association, the
Board is required to put forward a proposal for the continuation of
the Company to shareholders at five-yearly intervals. The Board
believes the Company is delivering what it set out to do at IPO,
that its long-term investment objectives remain appropriate and
that the Investment Manager is well placed to continue to deliver
those objectives. The Board encourages shareholders to vote in
favour of the continuation resolution at the AGM.
The AGM will be held at the offices of Stephenson Harwood, 1
Finsbury Circus, London EC2M 7SH on Thursday 21 September 2023 at
9.30 am. Further details are included in the Notice of AGM on page
90 of the annual report. I look forward to welcoming shareholders
attending in person. If you are not able to attend in person, or
prefer to vote by proxy, but have questions for the Board, please
contact the Company Secretary at cosec@gorestreetcap.com .
Outlook
We begin the next reporting period cautiously optimistic,
recognising the opportunities that our diversified strategy
presents. The current pricing landscape in GB necessitates an
international approach granting access to a wide range of revenue
streams across uncorrelated markets, 2023 and beyond will
illustrate this as we bring more international capacity online.
The appropriate assumptions employed by the Company, coupled
with the continued growth of our fund and diligent work by the
Investment Manager, provide reassurance amidst the recent pricing
volatility experienced within the energy storage industry and
prepares us for future market developments.
The regulatory landscape continues to shift in GB as we head
towards the uncertainty of a General Election, which is already
delaying decisions by regulators and obscuring the broader future
direction of the market. New revenue opportunities in Germany and
the US, such as through the Resource Adequacy programme in
California or the yet--to--be--implemented ECRS service in Texas,
help to provide a focus for activity in the coming months while
maintaining our high levels of availability across the fleet.
We find ourselves at a pivotal juncture for the Company's
growing presence across five geographically diverse grids, which I
am delighted to say is contributing to the Company's continued
growth in the face of declining revenue in the GB market.
Patrick Cox
Chair
Investment Manager's Report
Dr Alex O'Cinneide
CEO of Gore Street Capital, the Investment Manager
"I'm delighted to report that the Company continued to deliver
for shareholders through a dedicated focus on building a robust and
diversified portfolio during a historic year for the energy sector.
The Company's asset value continues its trajectory of strong and
sustained growth, exceeding target returns and continues to meet
the dividend target laid out to shareholders. The Company has
achieved a NAV Total Return of 48% since IPO."
The Company's NAV increased by 47.8% from the end of the last
fiscal year (31 March 2022). The key drivers of the increase from
GBP376.5m (1st April 2022) to GBP556.3m (31 March 2023) were: (i) a
fundraise of GBP147.3m in net proceeds in April 2022, (ii)
acquisitions of operational and construction projects in Great
Britain (GB), Texas and California, totalling 544.7 MW. The
acquisitions included the 200 MW Big Rock acquisition in
California, the 200 MW Middleton acquisition in GB, the 75 MW
Dogfish asset, and a 69.65 MW portfolio of assets in Texas, and
(iii) changes in key forecasts across the portfolio.
Table 1
Changes in
Movement in NAV NAV per share
since March 2022 in pence
--------------------------------------------------------- --------------
NAV March 2022 109.1
--------------------------------------------------------- --------------
Offering Proceeds 0.3
--------------------------------------------------------- --------------
Offering + Fund + Subsidiary Holding Companies Operating
Expense -3.6
--------------------------------------------------------- --------------
Dividends -6.4
--------------------------------------------------------- --------------
Cash Generation 6.5
--------------------------------------------------------- --------------
Revenue Curves 4.7
--------------------------------------------------------- --------------
Inflation 2.7
--------------------------------------------------------- --------------
Discount Rates -2.2
--------------------------------------------------------- --------------
CM Contracts Awarded 2.9
--------------------------------------------------------- --------------
Asset Depreciation and Other DCF Changes -4.7
--------------------------------------------------------- --------------
New Investments to FV 6.3
--------------------------------------------------------- --------------
NAV March 2023 115.6
--------------------------------------------------------- --------------
The Investment Manager's Report provides readers with an
explanation of the backdrop in each of the markets the Company
operates in. It details the revenues generated, how the assets
performed, and the specific drivers of the portfolio's NAV. It also
includes a Q&A with the Investment Manager's CIO and CFO, Sumi
Arima, where he talks about the Company's strategy and his thoughts
on the markets in which the Company operates. The Investment
Manager's CEO, Dr Alex O' Cinneide, then gives his views on the
Company's performance, and outlook of the future.
A glossary of industry terms can be found on page 106 of the
annual report.
Portfolio
1.17 GW
Total portfolio (GW)
1.54 GWh
Total portfolio (GWh)+
291.6 MW
Operational
881.6 MW
Pre-construction and construction phase projects
Portfolio in GB & Northern Ireland (GBP)
Asset name Capacity Ownership
-------------- ------------------------ ---------
1 Boulby 6.0 MW | 6.0 MWh 99.9%
---------- ------------------------ ---------
2 Cenin 4.0 MW | 4.8 MWh 49.0%
---------- ------------------------ ---------
3 POTL 9.0 MW | 4.5 MWh 100.0%
---------- ------------------------ ---------
4 Lower Road 10.0 MW | 5.0 MWh 100.0%
---------- ------------------------ ---------
5 Mullavilly 50.0 MW | 21.3 MWh 51.0%
---------- ------------------------ ---------
6 Drumkee 50.0 MW | 21.3 MWh 51.0%
---------- ------------------------ ---------
7 Hulley 20.0 MW | 20.0 MWh 100.0%
---------- ------------------------ ---------
8 Lascar 20.0 MW | 20.0 MWh 100.0%
---------- ------------------------ ---------
9 Larport 19.5 MW | 19.5 MWh 100.0%
---------- ------------------------ ---------
10 Ancala 11.2 MW | 11.2 MWh 100.0%
---------- ------------------------ ---------
11 Breach 10.0 MW | 10.0 MWh 100.0%
---------- ------------------------ ---------
12 Stony Energisation | July 2023 100.0%
---------- ------------------------ ---------
13 Ferrymuir Energisation | Sep 2023 100.0%
---------- ------------------------ ---------
14 Enderby Energisation | June 2024 100.0%
---------- ------------------------ ---------
15 Middleton Energisation | Dec 2026 100.0%
---------- ------------------------ ---------
Republic of Ireland & Germany (EUR)
Asset name Capacity Ownership
--------------------------- ------------------------ ---------
16 Cremzow 22.0 MW | 29.0 MWh 90.0%
---- --------------------- ------------------------ ---------
17 Porterstown 30.0 MW | 30.0 MWh 51.0%
---- --------------------- ------------------------ ---------
17.1 Porterstown Expansion Energisation | June 2024 51.0%
---- --------------------- ------------------------ ---------
18 Kilmannock Energisation | H2 2025 51.0%
---- --------------------- ------------------------ ---------
18.1 Kilmannock Expansion Energisation | H2 2026 51.0%
---- --------------------- ------------------------ ---------
North America (USD)
Asset name Capacity Ownership
----------------- ------------------------ ---------
19 Snyder 9.95 MW | 19.9 MWh 100.0%
------------- ------------------------ ---------
20 Westover 9.95 MW | 19.9 MWh 100.0%
------------- ------------------------ ---------
21 Sweetwater 9.95 MW | 19.9 MWh 100.0%
------------- ------------------------ ---------
22 Big Rock Energisation | Dec 2024 100.0%
------------- ------------------------ ---------
23 Dogfish Energisation | Dec 2024 100.0%
------------- ------------------------ ---------
24 Wichita Falls Energisation | June 2025 100.0%
------------- ------------------------ ---------
25 Mesquite Energisation | June 2025 100.0%
------------- ------------------------ ---------
26 Mineral Wells Energisation | June 2025 100.0%
------------- ------------------------ ---------
27 Cedar Hill Energisation | June 2025 100.0%
------------- ------------------------ ---------
-- Operational Assets
-- Assets under construction / pre-construction
* MWh included for operational sites
+ Based on expected system duration and may be subject to change
Market Overview
Summary
The world is experiencing unparalleled transition to a cleaner,
more secure energy system through the widespread adoption of
renewable energy sources. Generation from wind turbines, solar
panels and other distributed renewable energy resources is rapidly
decarbonising global power grids with inherently intermittent
output, leading to higher volatility on energy grids. The ability
to effectively capture, store and discharge energy when it is most
needed has become a critical tool in successfully integrating clean
power generation, improving the efficiency of energy systems and
reducing the world's reliance on polluting fossil fuels.
New urgency has emerged within the low carbon energy transition
following Russia's ongoing invasion of Ukraine, which has exposed
several markets' overreliance on fossil fuels. Shortages of oil and
gas, combined with increased episodes of extreme weather, have
caused energy prices to spike as demand outstripped supply.
Energy storage owners are well placed to provide grid operators
with the flexibility they need to reduce these imbalances between
energy demand and supply by supporting them to reduce system
volatility. This improves energy security to maintain the
electricity grid system at the correct frequency and keep the
lights on while ensuring the global move towards decarbonisation
can continue at pace. The faster these flexible renewable energy
solutions can be deployed, the faster society can move to a more
sustainable world.
As a global owner of large-scale energy storage assets working
in five grids (Great Britain, Ireland, Germany, ERCOT in Texas and
CAISO in California), the Company is delivering these benefits in
multiple jurisdictions. This internationally diversified approach
means the Company's operational assets - online in four
uncorrelated markets to date - can utilise the dynamic and flexible
capabilities of energy storage technology to stack revenue streams
across contracted and merchant opportunities.
The majority (72%) of the Company's 291.6 MW operational
portfolio benefit from Capacity Market (CM) contracts, which allow
merchant revenues to be stacked around secure income. The remaining
capacity (28%) operates on a purely merchant basis, adding further
diversity to our revenues. This allows the entirety of the
portfolio to counteract any quarterly downturns or volatility
experienced in specific markets throughout the year and maintain
healthy returns for the Company and its shareholders.
Further details are below in high-level summaries of each market
the Company is active in:
Great Britain (GB) market
Table 2
TSO National Grid
--------------------------------- -------------------------------
GB Portfolio (operational) 109.7 MW/101 MWh
--------------------------------- -------------------------------
Share of the market(2) 4.4%
--------------------------------- -------------------------------
Annual revenue GBP15.2m
--------------------------------- -------------------------------
Revenue per MW GBP138,400/MW (GBP15.80/MW/hr)
--------------------------------- -------------------------------
Revenue per MWh GBP150,400/MWh (GBP17.17/MW/hr)
--------------------------------- -------------------------------
EBITDA GB grid % of Total EBITDA 36%
--------------------------------- -------------------------------
Ancillary services continued to represent the majority of
revenues for all energy storage assets in fiscal year (FY) 2022/23,
which saw National Grid ESO unveil a full suite of new frequency
response services. Dynamic Regulation (DR) was launched in April
2022, after a testing phase in Q4 2021, followed by Dynamic
Moderation (DM) in May 2022. They were introduced with the aim of
retiring services such as Firm Frequency Response (FFR), in which
energy storage had widely participated in previous years. FFR was
intended to be phased out within FY 2022/23 but has continued
largely due to uncertainty and the extension of the trial period
for new services (DM and DR). With a view to duration across the
period, the majority of uncontracted revenue came from FFR or
Dynamic Containment (DC) which both can be provided by sub one- and
one-hour systems. Whilst DR was the most profitable in the period,
it was capped at 100 MW, creating a small opportunity for systems
over 1.5 hours.
National Grid ESO began to procure higher volumes of the
previously introduced DC over the summer in 2022 and increased the
price cap for the DC product alongside the gradual introduction of
DR. Removal of the initial GBP17/MW/h price cap, combined with DR
and procurement volumes required by National Grid ESO exceeding the
supply-side capacity of energy storage in GB, allowed participants
to push DC clearing prices upwards to the benefit of the entire
market.
H2 of the reporting period was marked by a fall in D-suite (DC,
DM, DR) prices caused by market saturation, particularly towards
the end of the period when additional capacity in the GB market
came online.
As FFR and D-suite services are mutually exclusive for a given
period, this downward price trend - which continued into March 2023
- made FFR one of the most lucrative services for energy storage in
the Autumn and Winter of 2022/23 as market participants priced in
the opportunity cost of D-suite and wholesale trading into their
FFR bids, which National Grid accepted.
The opportunity cost for FFR bid prices is calculated to
encompass the estimated monthly revenue from the alternative
revenue stack. As a result, D-suite revenues are more sensitive to
the daily market grid and market dynamics such as National Grid ESO
buy curves, demand, electricity prices, and renewable penetration.
D-suite clearing prices remain uncertain and, therefore, more
volatile.
Procurement volumes of FFR were reduced towards the end of FY
2022/23 as part of the electricity transmission system operator's
phase-out of FFR, driving increased competition as the market
sought guaranteed monthly revenue rather than risk exposure to
daily volatility in D-suite procurement auctions. The low perceived
opportunity in DC and decreasing procurement volumes dragged FFR
prices down.
DR volume caps, meanwhile, were raised from 100 MW to 200 MW as
of March 2023 to accommodate more consistent use of this service by
National Grid. DR has a lower frequency deviation trigger,
requiring more battery cycling than DC and assets below two-hours
duration to de-rate their capacity to participate in the market.
The additional strain led to fewer participants entering DR in the
initial period, creating lucrative opportunities for participants
qualified to enter this market. While DR has not been immune to the
downturn in revenues seen with DC, as more energy storage has
qualified for delivery, it continues to clear on average higher
than DC, reflecting the additional opportunity cost.
DM volumes have remained capped at 100 MW, as National Grid ESO
does not systematically acquire DM volumes.
Irish market
Table 3
SONI (Northern Ireland), EirGrid (Republic
TSO of Ireland)
------------------------------------ ------------------------------------------
Irish portfolio (operational) 130 MW / 72.6 MWh
------------------------------------ ------------------------------------------
Share of the market(3) 50% (NI), 6% (RoI)
------------------------------------ ------------------------------------------
Annual revenue GBP17.0m
------------------------------------ ------------------------------------------
Revenue per MW GBP130,800/MW (GBP14.93/MW/hr)
------------------------------------ ------------------------------------------
Revenue per MWh GBP234,200/MWh (GBP26.73/MWh/hr)
------------------------------------ ------------------------------------------
EBITDA Irish grid % of Total EBITDA 50%
------------------------------------ ------------------------------------------
Non-synchronous generation in the Irish market, led by wind
power, has been a key resource in efforts to achieve a 100%
renewable energy system and has created a market for ancillary
services through the DS3 (Delivering a Secure Sustainable
Electricity System) programme. Energy storage investment has been
encouraged via procurement through uncapped (annually procured) and
capped (up to six-year contracts auctioned in 2019) schemes.
Uncapped contracts unit price is based on System Non-
Synchronous Penetration (SNSP), which refers to the real-time
measure of intermittent renewable generation on the system and net
interconnector flows within the single electricity market. Revenue
is calculated based on annual fixed tariffs multiplied by various
scalars including availability and SNSP, the principal factor
driving volatility in DS3 revenues. This is predominantly set by
wind penetration levels, which represent the largest deployed
renewable generation resource in both Irish grids. There is a
direct correlation between SNSP levels and DS3 uncapped revenue,
which fluctuates with seasonal variation to provide higher
financial returns during the peak winter months. In contrast,
summer revenues have not reached the same levels as these months
typically experience fewer windy days and are not pushed higher by
the amount of solar generation in the market.
In contrast, capped contracts are fixed at the contracted price.
SNSP scalars, which provide a multiplier for the uncapped tariff
(common across the Irish DS3 uncapped market), experience seasonal
variations.
Energy storage assets can also participate in the Capacity
Market (CM), which functions similarly to the GB equivalent.
Eirgrid and SONI have begun testing trading capabilities and the
process of dispatching assets in the Balancing Mechanism (BM).
1
https://www.cleanenergywire.org/factsheets/what-german-households-pay-electricity#::text=The%20increase%20was%20mostly%20caused,
160%20percent%20compared%20with%202021.
2
https://energeia-binary-external-prod.imgix.net/4hCe-bWGRjCXayeF55Yi6NFpKM8.pdf?dl=Annual+Market+Update+2021.pdf
3 Source: Energy Storage Ireland: As of March 2023 there was 470
MW in Republic of Ireland, 200 MW in Northern Ireland.
German market
Table 4
50Hertz, Amperion, Tennet, Transnet
TSO BW
------------------------------------- -----------------------------------
German portfolio (operational) 22 MW / 29 MWh
------------------------------------- -----------------------------------
Share of the market (MaStR)(4) (50
Hertz)(5) 2.16% (Germany), 4.2% (50 Hertz)
------------------------------------- -----------------------------------
Annual revenue GBP3.3m
------------------------------------- -----------------------------------
Revenue per MW GBP149,800/MW (GBP17.10/MW/h)
------------------------------------- -----------------------------------
Revenue per MWh GBP113,600/MWh (GBP12.97/MWh/h)
------------------------------------- -----------------------------------
EBITDA German grid % of Total EBITDA 9%
------------------------------------- -----------------------------------
Germany comprises four transmission system operators (TSO) in a
single grid, each controlling an area of the country. The Company
currently interacts with the TSO 50Hertz by providing Frequency
(Primary) Control Reserve (FCR). This cross-border service operates
across eleven transmission system operators in eight European
countries, with 50Hertz and other German TSO able to pass on excess
flexibility to the wider European grid. FCR in Germany has
typically been delivered through gas as the biggest provider of
generation, meaning power prices generally mirror seasonal
variation in the wholesale gas market. This usually results in
lower prices during summer and higher in winter when demand for gas
and electricity is higher.
As illustrated in figure 4 of the annual report, power prices
increased sharply towards the end of 2021 to accommodate rising
demand across the EU as countries recovered from the economic
impact of the Covid-19 pandemic.
Electricity prices continued to increase in line with gas in
April 2022 following the Russian invasion of Ukraine, which
impacted energy supplies and gas storage in continental Europe, as
shown in figures 4 and 5 of the annual report. The resulting
shortage in supply across Europe during the reporting period drove
gas prices and the marginal cost of power production from gas-fired
power plants up in the summer. Over 2022 Germany paid more than
double for its natural gas imports compared to the previous year,
according to the Federal Office for Economic Affairs and Export
Control, BAFA1, which, in turn, caused FCR prices to surge.
The trend of increasing prices reached a record high of
EUR469/MWh in August 2022 when extreme summer temperatures impacted
hydropower generation due to low water levels. It even contributed
to low nuclear capacity in France due to low reservoir levels
reducing water available for cooling reactors(3).
As the EU entered the Autumn period, wholesale prices started to
decrease due to milder weather, which led to lower demand, and
higher gas storage availability after the EU implemented a
regulation requiring all storage facilities on the continent to be
filled to 80%, on average, before the winter of 2022/2023. This was
achieved in late August using LNG imports from the US(4) and caused
FCR prices to fall faster than seen in previous years.
1
https://www.reuters.com/business/energy/germanys-gas-bill-surged-109-last-year-despite-slashed-buying-2023-03-01/
3
https://gmk.center/en/news/electricity-prices-in-the-eu-fell-significantly-in-october-2022/
4 https://www.consilium.europa.eu/en/infographics/gas-storage-capacity/
4 Source: Mastr database, as of March 2023 there is around 1,019
MW of total capacity in Germany. 50 Hertz 521MW
(https://www.marktstammdatenregister.de/
MaStR/Einheit/Einheiten/OeffentlicheEinheitenuebersicht)
The factors of: Covid-19 recovery, worldwide gas volatility
caused by war in Europe, and extreme temperatures experienced
across the mainland created an abnormal seasonal variation during
the period, where FCR was higher in the summer and lower in the
winter. Prices stayed higher than the previous year, however, with
the average natural gas import price in December - equivalent to
EUR9.38/kWh - remaining 74% above a year earlier, following a
period of divestment from Russian supplies.
Additional revenue for short-duration flexibility is now
available through automatic Frequency Restoration Reserve (aFRR),
also known as Secondary Control Reserve, following a reduction in
delivery duration from four hours to 15 minutes. This service is
designed to support FCR should it fail to deliver the flexibility
needed to maintain the grid by maintaining a reserve in the power
grid that helps to keep the grid frequency stable. This provides
revenue for availability in case of activation and for actively
balancing energy when called on.
This reporting period also provided opportunities in wholesale
trading across the FCR market, with liquidity available from the
demand for balancing from renewable generators seeking to settle
their supply imbalances before facing high system charges.
ERCOT market (Texas, US)
Table 5
TSO ERCOT
------------------------------------ -----------------------------
ERCOT portfolio (operational) 29.85 MW / 59.7 MWh
------------------------------------ -----------------------------
Share of the market (ERCOT)(5) 1.4%
------------------------------------ -----------------------------
Annual revenue GBP3.8m
------------------------------------ -----------------------------
Revenue per MW GBP127,800/MW (GBP14.59/MW/h)
------------------------------------ -----------------------------
Revenue per MWh GBP63,900/MWh (GBP7.30/MWh/h)
------------------------------------ -----------------------------
EBITDA ERCOT grid % of Total EBITDA 5%
------------------------------------ -----------------------------
US President Joe Biden signed the Inflation Reduction Act into
law on 16 August 2022. The legislation provides $369bn over ten
years to tackle climate change and invest in the renewable energy
sector to reduce carbon emissions by 40% by 2030, compared with
2005 levels.
Two-thirds of this funding will be used to extend or introduce
support for emission-free electricity generation and storage
technologies.
Standalone utility-energy storage projects with a minimum name
plate capacity of 5 kWh can now access investment tax credits
(ITCs) worth at least 30% of capital expenditure for the first time
provided construction is underway by the end of 2024. Projects
beginning construction in 2025 through to 2032 will be able to
receive ITC support however specific facilities will be done on a
technology neutral basis. Per the 2022 unemployment data published
by the Bureau of Labour and Statistics (BLS), the Company's assets:
Dogfish, Wichita Falls, and Mineral Wells (combined 95MW) all
qualify for 40% ITC, provided that unemployment rates in these
regions remain equal to or higher than the national average.
This is expected to help grow the US battery storage market from
around 10 GW in 2022 to over 85 GW by 2035, with 29 GW (ERCOT) and
25 GW (CAISO) more in construction or planned(5) .
5 Source: S&P Global: Market Intelligence, as of March 2023
there is 2.2 GW of operational capacity;
https://www.spglobal.com/marketintelligence/en/news-insights/research/battery-stampede-spurs-sunny-storage-economics-in-ercot
;
https://www.50hertz.com/en/Transparency/GridData/Installedcapacity
Ancillary services are the main revenue driver in ERCOT, except
when extreme weather events create opportunities in wholesale
markets as real-time prices spike due to swings in supply and
demand. These weather events also impact ancillary services and can
produce price spikes and supply scarcity, driving demand for
Responsive Reserve Service (RRS).
The Company expanded the number of services offered after the
reporting period to include existing (e.g. Regulation Up/Down) and
new (e.g. ECRS - Contingency Reserve Service) revenue streams. The
wholesale market opportunity was and continues to be bearish,
mainly due to falling natural gas prices. This trend is expected to
reverse throughout 2023 and into 2024 in line with commodity prices
and demand increases.
CAISO market (California, US)
Table 6
TSO CAISO
------------------------------ ------------------------------------------
CAISO portfolio (construction) 200 MW / 400 MWh
------------------------------ ------------------------------------------
Advanced pre-construction phase (pre-NTP):
Current Status Batteries procured and in warehouse
------------------------------ ------------------------------------------
Target energisation Dec-end 2024
------------------------------ ------------------------------------------
The outlook for ancillary services in California's CAISO market
is well supported by three main fundamentals: grid flexibility,
high penetration of non-dispatchable renewable generation and
decommissioning of existing conventional generation. Deployment of
battery storage is integral to increasing penetration of renewable
energy as existing conventional energy resources are unable to meet
sub-second response requirements. This need for flexible capacity
has seen a rapid deployment of battery energy storage systems
motivated by the retirement of fossil fuel generation. CAISO
experiences a similar frequency of extreme weather events as ERCOT
despite its location on the opposite coastline - these events
create short-term spikes in wholesale and ancillary markets.
In addition to ERCOT, the Inflation Reduction Act applies in
CAISO and will give access to an ITC worth at least 30% of capital
expenditure, which can be extended to some Tax Credit Adders for
projects in low-moderate income communities, tribal lands, or
repurposed fossil fuel power plants to between 2% and 20% extra per
individual possible adder.
Revenue opportunities under the Resource Adequacy (RA)
mechanism, which acts as a tool for CAISO and the Local Regulatory
Authorities to ensure enough generation capacity is secured ahead
of time to deliver security of supply, are also drivers. RA can be
compared to the Capacity Market in GB in that it offers secure
revenue on which the prevailing ancillary/wholesale merchant
strategy can be stacked. They differ, however, in that RA contracts
are expected to represent up to 40% of the revenue of a battery
energy storage system, a materially higher proportion than GBs CM
contracts account for.
Revenue Generation and Portfolio Performance
The Company exercised a diverse strategy throughout the
reporting period, participating in a mixture of ancillary and
trading opportunities across the markets in which it is active.
Revenue was generated from a growing suite of services launched in
2022 (e.g. the expanded D-suite in GB), while the Company also
implemented steps to prepare for additional streams in 2023 (e.g.
wholesale trading in Germany) and post-period (e.g. ECRS in
ERCOT).
Great Britain (GB) market
Ancillary services played a key role in GB revenue generation,
accounting for 85.7% of annual revenue, or GBP13m. The strategy for
bidding into varying ancillary services was evaluated in advance as
FFR is bid into one month before delivery to secure
calendar-month-long agreements. D-suite services, meanwhile, are
bid into on a day-ahead basis and provided an alternative
strategy.
While all the assets were entered into FFR for all EFA blocks at
various points throughout the financial year, a higher bid strategy
was adopted for those more suited to delivering for the DC market.
This meant they were available to pick up FFR contracts if prices
reach a higher bid level but, in most months, meant they could
ensure an even split between FFR committed capacity and DC
committed capacity was achieved. This diversified services strategy
acted as a hedge against the volatile conditions experienced
earlier in the year.
Revenue in Q1 2022 was the highest of all reported quarters
since April 2021 and was 40% above the previous year's Q1 revenue.
This was largely due to the uplift in DC prices across this period,
with DC representing 51% of all revenues achieved (Capacity Market
included). The continued uplift in D-suite revenues also led to Q2
2022 being 18% ahead of the previous year, with D-suite
representing 73% of all revenues.
Lower prices were bid into FFR in H2 of the reporting period due
to fewer alternative opportunities in the D-suite market caused by
market saturation. H2's performance was 35.5% below the previous
year, in stark contrast to the excellent market conditions in
H1.
Whilst FFR prices cleared higher than DC and DM, on average,
decreased procurement volumes ahead of retiring the service
(contributing to increased competition) led to fewer batteries in
the portfolio receiving contracts. FFR represented only 31% of
revenue in H2, although the portfolio saw an increase in trading,
which accounted for 11% of revenues during the same period.
FY 2022/23 included the second half of the 2021/22 Capacity
Market delivery year and the first half of the 2022/23 delivery
year. Capacity Market revenue in H2 was 31% above H1, driven in
large part by the GBP75/kW clearing price of the 2022/23 T-1
Auction; the Port of Tilbury (POTL) asset secured a contract at
7.061 MW de-rated capacity. Capacity Market revenues represented
8.9% of the GB portfolio revenues during the financial year.
Irish market
Northern Ireland
Ancillary services, monetised through DS3 uncapped contracts,
generated 98% of revenues for the Northern Irish fleet, totalling
GBP15.5m across the financial year - an uplift of 27% of total
revenue compared with the previous financial year. DS3 uncapped
tariffs for each of the five contracted ancillary services are
subject to yearly variations by the Regulatory Authority in Ireland
and could inevitably lead to lower revenues being secured. Despite
a 10% reduction in DS3 tariffs in January 2022, the NI portfolio
still generated 24% more revenue from DS3 this financial year,
driven mainly by increased SNSP levels in the December-end
quarter.
Monthly DS3 uncapped revenues peaked in FY 2022/23 at
GBP29.24/MW/h, just short of the all-time high of c. GBP33.87/MW/h
in February 2022.
The remaining 2% of the revenue stack comprised two revenue
streams: Capacity Market and wholesale trading. The contracted
Capacity Market revenue generated around GBP36,000 per month in
total from both assets, starting from October 2022 and continuing
post-period until the contracts end in September 2023. The NI
portfolio also secured yearly Capacity Market contracts until
September 2027.
Trading remains in its infancy in the grid with limited
accessibility to the wholesale market. To date, bids from the NI
assets have been accepted to dispatch volume generating c.
GBP118,000.
Republic of Ireland
Porterstown Phase I operates under a six-year DS3 capped
contract (starting September 2021) with a fixed tariff rate of
EUR6.79/MW/h The asset was declared available to provide services
on 24 January 2023 and has since generated EUR326,000 throughout
the remainder of the March-end quarter. Prior to the DS3 capped
contract, the asset generated additional revenue from liquidated
damages caused by delays experienced by the engineering,
procurement, and construction (EPC) contractor in delivering the
project.
The NI & ROI portfolio generated an overall average weighted
price of GBP14.90/MW/h, with the bulk of the revenue generated from
DS3 uncapped revenue.
German market
The Company acquired the Cremzow project at the end of the
previous fiscal year with a view to targeting ancillary services in
a new market that presented similar conditions to GB. The asset
enabled the Company to capitalise on uncharacteristic price rises
in gas, power and ancillary markets during the summer of 2022.
Delivery of ancillary services resulted in revenues totalling
EUR3.7m through provision of FCR for 98.0% of the year, with
monthly revenue accrued directly from FCR peaking at EUR32.22/MW/h
in August to achieve a total of EUR488,000 - the highest monthly
revenue in FY 2022/23, marginally ahead of October 2022.
FCR prices remained stable during the winter months, once again
moving against expected seasonal variation where previously prices
would increase towards the end of the calendar year. The stability
at lower levels pushed the Company towards expansion into new
revenue streams, mainly the wholesale market.
The Company expanded its capabilities in Germany to include
wholesale trading through work with a new optimiser and, in March
2023, generated revenue of EUR73,400 solely from wholesale trading
following delays transitioning to a new FCR provider and pending
approval from 50 Hertz. Post-period, the Company's revenues will be
a blend of both streams with the expected addition of aFRR
following submittal of tests for post-period evaluation to join the
service.
Texas (ERCOT market)
Due to the significant renewable energy development in this
region and unique characteristics surrounding interconnections,
there is exposure to wholesale price volatility due to the inherent
intermittency of renewable generation. This isolation of the ERCOT
grid means there is an increasing need for flexibility. The
Company's activity this period, however, was focused on performing
RRS, which is also affected by swings in renewable supplies.
Several extreme weather events during FY 2022/23, such as a heat
wave in July 2022, caused RRS prices to spike above $2,000/ MW/h
for a short period. This occurrence was not isolated, with a
similar scenario in December 2022 resulting from a winter storm and
cold snap driving prices up to $3,000/MW/h. These short-term events
resulted in monthly revenue of $57.26/MW/h in July and $36.12/MW/h
in December.
Such events related to weather conditions are more likely to
occur during winter and summer, leaving spring and autumn as
transition seasons, typically referred to as shoulder months. In
ERCOT, steady wind and thermal generation led to lower prices in
RRS during the March-end quarter; consequently, the Company's
revenue dipped to $4.51/MW/h. The seasonal price volatility
captured by the ERCOT assets during extreme weather events versus
shoulder months are an expected market condition of operating in
ERCOT and offset the fall in revenue experienced during transition
periods of the year.
Overall portfolio performance
Overall, the portfolio generated GBP39.3m in revenues (2022
Fiscal Year GBP29.3m), with weighted annualised revenue of c.
GBP135,000/ MW (GBP15.40/MW/hr). This was achieved through
geographical diversification and the Company's unique ability to
generate revenues even when some markets were hindered by seasonal
variation or saturation.
Table 7
GBP(000s) FY 2022/23 % within grid % of portfolio
--------------------------------------- --------------------- ------------- --------------
GB - 109.7 MW / 101 MWh
--------------------------------------- --------------------- ------------- --------------
Ancillary services GBP13,012 85.7%
--------------------------------------- --------------------- ------------- --------------
Capacity Market GBP1,354 8.9%
--------------------------------------- --------------------- ------------- --------------
Wholesale Trading GBP822 5.4%
--------------------------------------- --------------------- ------------- --------------
GB total(6) GBP15,188 100.0% 38.6%
--------------------------------------- --------------------- ------------- --------------
Ireland - 130 MW / 72.6 MWh
--------------------------------------- --------------------- ------------- --------------
DS3 Capped/Uncapped GBP16,666 98.0%
--------------------------------------- --------------------- ------------- --------------
Capacity Market GBP216 1.3%
--------------------------------------- --------------------- ------------- --------------
Wholesale Trading GBP118 0.7%
--------------------------------------- --------------------- ------------- --------------
Ireland total GBP17,000 100.0% 43.3%
--------------------------------------- --------------------- ------------- --------------
Germany - 22 MW / 29 MWh
--------------------------------------- --------------------- ------------- --------------
Ancillary services GBP3,231 98.0%
--------------------------------------- --------------------- ------------- --------------
Wholesale Trading GBP65 2.0%
--------------------------------------- --------------------- ------------- --------------
Germany total(7) GBP3,296 100.0% 8.4%
--------------------------------------- --------------------- ------------- --------------
ERCOT - 29.9 MW / 59.7 MWh
--------------------------------------- --------------------- ------------- --------------
Ancillary services GBP3,711 97.3%
--------------------------------------- --------------------- ------------- --------------
Wholesale Trading GBP104 2.7%
--------------------------------------- --------------------- ------------- --------------
ERCOT total GBP3,815 100.0% 9.7%
--------------------------------------- --------------------- ------------- --------------
Portfolio total - 291.6 MW / 262.3 MWh GBP39,299 100.0% 100.0%
--------------------------------------- --------------------- ------------- --------------
Market Revenue GBP(000s) GBP(000s)/MW/yr GBP/MW/hr GBP(000s)/MWh/yr GBP/MWh/hr
----------------- ----------------- --------------- --------- ---------------- ----------
GB GBP15,188 GBP138 GBP15.80 GBP150 GBP17.17
----------------- ----------------- --------------- --------- ---------------- ----------
Irish GBP17,000 GBP131 GBP14.93 GBP234 GBP26.73
----------------- ----------------- --------------- --------- ---------------- ----------
Germany GBP3,296 GBP150 GBP17.10 GBP114 GBP12.97
----------------- ----------------- --------------- --------- ---------------- ----------
ERCOT GBP3,815 GBP128 GBP14.59 GBP64 GBP7.30
----------------- ----------------- --------------- --------- ---------------- ----------
Weighted averages GBP135 GBP15.39 GBP150 GBP17.10
----------------- ----------------- --------------- --------- ---------------- ----------
Total Revenue
(GBP000s) Jun-end Sep-end Dec-end Mar-end
------------- --------- -------- --------- --------
GB GBP4,844 GBP4,675 GBP3,657 GBP2,012
------------- --------- -------- --------- --------
NI GBP3,264 GBP1,963 GBP4,969 GBP5,313
------------- --------- -------- --------- --------
ROI GBP395 GBP403 GBP406 GBP287
------------- --------- -------- --------- --------
Germany GBP807 GBP1,076 GBP918 GBP494
------------- --------- -------- --------- --------
ERCOT GBP1,238 GBP1,529 GBP813 GBP235
------------- --------- -------- --------- --------
TOTAL GBP10,548 GBP9,646 GBP10,763 GBP8,341
------------- --------- -------- --------- --------
6 The Company holds a 49 % ownership interest in Cenin (4.0 MW)
and retains 49% of the generated revenue.
7 The Company holds a 90% ownership interest in Cremzow (22 MW)
and retains 90% of the generated revenue, while Enertrag maintains
a minority stake in the asset.
The charts on page 20 of the annual report highlight the
seasonal variation in each market and how the Company's diverse
portfolio results in exposure to lucrative opportunities when one
market is experiencing a downturn. As detailed above, saturation in
the GB ancillary market drove clearing prices down at the same time
as a pickup in the Irish market. While the overall result was lower
year-on-year fleet revenue in the March-end quarter, the impact
would have been more significant if the portfolio had been solely
exposed to the price decline in GB.
Operational
The operational assets (weighted by asset capacity in MW)
achieved over 95% availability during the year. This excellent
performance was supported by the increased availability of the GB
portfolio and a successful operational takeover of the Porterstown
asset in Ireland.
Great Britain: The overall availability for the GB fleet was
positive, highlighting successful interventions by the Commercial
Manager and management of O&M contracts over the year. The
latter half of the year showed a c. 5% increase in weighted average
availability to 94% (from 89% in H1 2022), driven predominantly by
improvements at Boulby, Port of Tilbury and Larport. The only asset
with material reductions in availability in the latter half of the
year was Ancala due to various project issues requiring repairs
that are now resolved and where downtime is subject to liquidated
damages under availability guarantees.
Ireland: Portfolio performance in Ireland (and Northern Ireland)
remains a highlight, with weighted availability (by MW capacity) of
99% over the reporting period between the three Irish projects. The
Company saw its first asset in the Republic of Ireland,
Porterstown, enter operations in January 2023. To date, there have
been no availability reductions with the asset. The Northern Irish
assets-Drumkee and Mullavilly-continue to meet performance
expectations and achieved 97% and 99% availability over the year,
respectively. Availability was impacted by quickly resolved
inverter failures. The O&M provider is providing additional
training with the supplier to further improve repair times in
future.
DS3 services provide most of the revenue for all three
operational Irish projects. In the reporting period, all DS3
events-instances where grid frequency drops below 49.8Hz and asset
response is assessed by the system operator- recorded on the Irish
network were successfully delivered and each project was monetised
successfully. The Commercial Manager's improvements to the
technical response of the assets addressed issues seen during the
previous financial year, highlighting the benefit of the Commercial
Manager's experienced technical team managing the assets.
Germany: The Cremzow project is generally performing well. In
July 2022, an inverter issue with the 2 MW proportion of the
project impacted availability but was resolved in a timely manner.
Availability impacts were infrequent and isolated over the year,
limiting the impact through timely successful maintenance
activities and active engagement by the Commercial Manager. The
asset recorded 96% availability over the reporting period and there
are no ongoing concerns, with availability expected to remain
high.
US - Texas: The three operational assets-Snyder, Sweetwater and
Westover-performed well during the period. Technical performance
was good across the 9.95 MW projects, and their total availability
averaged over 95%. The most notable availability impact was a
commercial restriction at Westover due to miscommunication between
the optimiser and the Texas system operator ERCOT, resulting in
lower availability in October 2022 (no ongoing concern). System
inverter issues were observed with limited availability impacts on
each occurrence, and the Investment Manager opted to make
preventative improvements to all inverters, which drove
availability reductions in H2 2022 but are expected to improve
availability over the longer term.
Table 8
H1 22/23
Region Availability
------------------ -------------
GB 88.8%
IRE 97.7%
GER 94.7%
ERCOT 96.7%
Weighted average: 93.6%
------------------ -------------
H2 22/23
Region Availability
------------------ -------------
GB 94.2%
------------------ -------------
IRE 99.0%
------------------ -------------
GER 96.7%
------------------ -------------
ERCOT 93.8%
------------------ -------------
Weighted average: 96.5%
------------------ -------------
FY-22/23 Availability
Region (% YTD)
------------------ ---------------------
GB 91.5%
------------------ ---------------------
IRE 98.6%
------------------ ---------------------
GER 95.7%
------------------ ---------------------
ERCOT 95.2%
------------------ ---------------------
Weighted average: 95.4%
------------------ ---------------------
Asset management developments
It was an exciting year for energy storage, particularly for
operations of the Company's portfolio. The Investment Manager
successfully onboarded assets on two new transmission networks: in
Germany and Texas. The over 95% availability on each of these grids
demonstrated the team's ability to quickly build and manage
relationships with new contractors despite the expansion into new
territories.
The Investment Manager's in-house technical team grew
substantially over the period and drove important initiatives for
the Company's operational assets and pipeline. The first retrofit
of an electrolyte vapour detection system-used to prevent the
operation of batteries in scenarios which may lead to thermal
runaway-was completed for the Cremzow project in Germany. Security
enhancements have been made to reduce the risk of thefts, enhance
safety performance (through monitoring and visibility) and gave the
team better engagement with on-site activities. Trials have begun
with industry-leading analytics partners to further improve
performance through state of charge and state of health prediction
improvements whilst materially improving safety through 'risk
reduction by prevention' measures. The continuation of this
workstream is set to be a key focus in 2023.
The Company continues to build key relationships whilst
developing contractual partnerships suited to the portfolio's
increasing capacity. The Investment Manager's increasing technical
capability is delivering important initiatives (such as those
referenced above) whilst improving the delivery of the team's most
core requirements. This is evidenced by the materially improved
availability figures reported over the entire reporting period
relative to the H1 2022 period reported in the Company's most
recent Interim Report.
Portfolio
Construction/pre-construction
514.8 MW of construction or pre-construction phase assets were
acquired during the reporting period, bringing the total
pre-operational capacity to 881.6 MW.
Given the macro environment and future capital expenditure
projections, the Investment Manager has made a decision to optimise
asset build out based on targeted energisation date and capacity.
The Investment Manager strategically decided to prioritise the
following assets: Stony, Ferrymuir, and Enderby in GB; Big Rock in
California; Porterstown II expansion in Ireland; and Dogfish in
Texas (a total of 521.8 MW). In the near term, the Investment
Manager will prioritise larger assets over the 9.95 MW sites in
Texas. The Investment Manager is exploring opportunities to
increase their capacity, similar to the expansion projects
announced for the Company's Irish assets.
In Great Britain, commissioning of Stony (79.9 MW) has commenced
and the energisation process will begin at the end of July, while
Ferrymuir (49.9 MW) is at the final stages of mechanical
completion, with the majority of contestable works completed. The
asset is waiting for energisation of the grid connection by the
distribution network operator, expected in summer 2023. Works at
Enderby (57 MW) are underway but have been impacted by National
Grid ESO's outage availability resulting in a consequent delay to
energisation. National Grid ESO has advised that April 2024 is the
next available outage window during which their works can be
completed, and subsequently, the asset can be energised.
In Ireland, Porterstown Phase II (60MW) consents have been
acquired, with design and procurement underway. Modifications to
the connection agreement have been negotiated with EirGrid to
enable the connection of the extension, and energisation and
commissioning are expected in June-end 2024.
In California, the Big Rock (200 MW) project acquired in
February 2023 is progressing well, with batteries and grid
transformers delivered and in storage. The procurement of the key
balance of plant contracts is near completion, with mobilisation
planned for August 2023. Permitting and grid consenting are
underway. Enclosures arrive in Spring 2024, and energisation is
scheduled for December-end 2024.
In Texas, Dogfish (75 MW) procurement is underway, with orders
of long lead HV plant in advanced stage of negotiations. The grid
connection agreement with the transmission operator (Texas New
Mexico Power) has been signed, with grid design works underway.
At Kilmannock, the property purchase option has been exercised.
Preliminary engineering and demonstrating planning condition
compliance is underway for Phase I (30MW), while Kilmannock Phase
II (90MW) has received and accepted its connection offer.
Optimisation of the design and configuration of the grid connection
plant for phase I and II is underway, however, the delivery of the
project has been deprioritised to optimise capital deployment.
Table 9: Sites in construction/pre-construction
Project Expected Energisation Capacity
----------------- --------------------- --------
Stony July - end 2023 79.9 MW
----------------- --------------------- --------
Ferrymuir Sep - end 2023 49.9 MW
----------------- --------------------- --------
Enderby Jun - end 2024 57.0 MW
----------------- --------------------- --------
Porterstown Ph II Jun - end 2024 60.0 MW
----------------- --------------------- --------
Big Rock Dec - end 2024 200.0 MW
----------------- --------------------- --------
Dog Fish Dec - end 2024 75.0 MW
----------------- --------------------- --------
Mineral Wells Jun - end 2025 9.95 MW
----------------- --------------------- --------
Mesquite Jun - end 2025 9.95 MW
----------------- --------------------- --------
Cedar Hill Jun - end 2025 9.95 MW
----------------- --------------------- --------
Wichita Falls Jun - end 2025 9.95 MW
----------------- --------------------- --------
Kilmannock Ph I Dec - end 2025 30.0 MW
----------------- --------------------- --------
Kilmannock Ph II Dec - end 2026 90.0 MW
----------------- --------------------- --------
Middleton Dec - end 2026 200.0 MW
----------------- --------------------- --------
Q&A with Sumi Arima
Sumi Arima
CIO and CFO of Gore Street Capital, the Investment Manager
Q: Why did the Company invest in Germany, Texas and California
during FY2022/23?
Most available revenue contracts for energy storage projects are
short-term in nature, meaning quarterly revenue figures tend to be
volatile. Project diversification within a grid does not
necessarily offer revenue diversification, as available contracts
tend to be identical regardless of the location of an asset within
a single grid. This can leave an energy storage asset owner exposed
to downward revenue trends if they are not internationally
diversified.
The Company has a mandate to invest at least 40% in GB and
Ireland, and up to 60% in other selected countries. This allocation
is intended to offer a diversified portfolio for the Company's
shareholders, as evidenced by the performance of the 40% of the
Company's portfolio in GB and Ireland. With three operational Irish
projects, the Investment Manager was able to partly mitigate the
reduced revenue available to GB projects in the second half of the
year.
For the remaining 60% of the portfolio, the Manager has been
working to further diversify outside of GB and Ireland. The GB and
Ireland grids are, relatively speaking, smaller than other markets,
such as those in the US and continental European markets, and are
prone to saturation. This has driven our recent investment
activities in larger geographic regions.
Continental Europe offers attractive revenue opportunities
through frequency control reserve (FCR) and wholesale trading. Many
large European grids are interconnected and offer similar revenue
streams with less concern over market saturation. The Manager
decided to enter the mainland European market via an operational
German project to quickly accumulate experience by operating an
asset without the lead time of construction.
In the US, ERCOT in Texas and CAISO in California had the most
compelling business cases driven by significant pricing volatility,
increased penetration of renewables and pre-existing market
conditions to remunerate storage. Acquisitions of operational
assets in ERCOT earlier this fiscal year helped us accumulate
knowledge of the market and evaluate and design new project
opportunities in ERCOT.
The passage of the US Inflation Reduction Act in August 2022
introduced investment tax credits for standalone storage, further
strengthening the business case for the asset class. The Company
capitalised on these new and material tailwinds through its
acquisition of Big Rock in California and its construction
portfolio in Texas.
Our operational portfolio is now benefiting from 19 revenue
streams across four markets with limited correlations, while
further revenue opportunities are expected to follow in California
once Big Rock becomes operational. We are also poised to take
advantage of the introduction of new services, such as the
long-expected ECRS in Texas, which will allow our energy storage
assets to deliver additional value during the ramp down of solar in
the evening.
Q: How does the Company decide the optimal duration for its
assets across five energy markets?
We have no preference towards a particular system duration. We
view optimal duration decisions purely as a financial one; a
function of capex costs and revenues available for the different
duration profiles. We apply the same logic across multiple
jurisdictions by choosing system durations appropriate to the
volatility of the markets we operate, from 25 minutes up to two
hours.
In GB, we identified c. one-hour systems as the optimal duration
due to ancillary services remaining the dominant revenue streams to
date. Since our first operational asset, we correctly minimised
capex by deploying up to an hour system and still managed to
capture the same revenues available to all energy storage
operators. Without the additional capex required for the additional
duration, we improved the financial return of portfolio companies
by focusing on maximising profitability (not just revenues).
This reality is also true of Ireland - where our sub-30-minute
assets are more than sufficient to deliver under the DS3 ancillary
services market, which values response time and doesn't provide
additional payments for longer durations. System duration in
Ireland has been particularly successful, as evidenced during the
reported period when the Company's Irish assets accounted for the
largest portion of the revenue of any geography the Company is
active in, with assets that required the lowest build-out cost
within the portfolio. Our c.90-minute system in Germany
sufficiently captures current volatility in the FCR and wholesale
markets. Unlike in GB, wholesale market volatility in Germany is
driven by the lack of an imbalance mechanism, which exposes
participants to high imbalance prices if they do not settle their
positions within the relevant period.
We are building a two-hour system in California to access the
spread in peak prices found in the California grid. The asset has
also been designed specifically to be operated at 100 MW
deliverability to access a de-rated Resource Adequacy (RA) contract
requiring four-hour discharge, adding a secure revenue to the stack
that can be obtained by the asset. This will join the two-hour
operational batteries we have in Texas' ERCOT market, which capture
the volatility often caused by extreme weather events.
We will continue to evaluate new revenue streams arising in
Texas and every other market that might shift the duration of the
batteries needed and will deploy capex accordingly for the projects
we have yet to build.
Q: How do the opportunities for energy storage differ in each of
the grids the Company is now engaged with?
The electricity grids the Company operates in all have different
market design and requirements and, therefore, offer different
opportunities. Ancillary services still dominate GB and Ireland,
but they differ in that our Irish assets are tied directly to the
successful integration of wind power, with higher generation
contributing to higher revenue levels for the Company's assets. In
Germany, the Cremzow asset provides a critical suite of balancing
and frequency services to up to 11 transmission system operators
across eight European countries through an interconnected grid
system. It also participates in wholesale and intra-day arbitrage,
presenting additional revenue stacking opportunities.
The starkest difference can be seen in Texas, where our
operational assets support a grid prone to extreme volatility. As a
result, in July and December 2022, our assets generated the
equivalent of five months of revenue in just four days. Our newest
asset in California will carry out a similar role, once
constructed, in a more regulated market, benefiting from long-term
capacity contracts worth up to 40% of project revenue. This is
considerably higher than an equivalent GB Capacity Market contract
and allows us to consider raising project-level debt financing.
The ERCOT electricity market includes locational energy prices,
as opposed to GB, Ireland and some mainland European markets, where
single wholesale electricity prices apply across an entire grid.
Locational energy prices offer diversification opportunities within
a grid and interesting trading opportunities. The UK government
included plans for GB locational energy prices in its July 2022
review of electricity market arrangements (REMA) consultation but,
given the regulatory and physical barriers that will need to be
overcome, an implementation timeline has yet to be established. Our
experience of various monetisation strategies gathered in the US
market is expected to help formulate a more advanced trading
strategy in GB.
Q: How did the Investment Manager overcome challenges when
entering new grids?
The ability to deploy in multiple grids is challenging and
requires resources dedicated to managing regulatory and
transactional challenges involved with cross-jurisdictional
interfaces. The Investment Manager has built specialised
relationships to help navigate the specific regional conditions in
each of the five grids the Company is currently invested in and has
engaged with appropriate legal, technical and financial advisers to
maximise value for shareholders through diversification across
multiple jurisdictions. In addition, the incumbent developer / DNO
maintains a minority stake in the Cremzow asset, and Avantus, the
developer of Big Rock, is working alongside the Investment Manager
to assist with the deliverables of the project. The Investment
Manager also has US-based employees overseeing the construction of
the Company's US projects.
The Investment Manager prioritises acquisitions of operational
assets when entering a new market, if such projects are available.
That is evidenced by the acquisition of Cremzow in Germany and the
Snyder/Westover/Sweetwater assets in ERCOT. That helps us to learn
the objective business case quickly and helps evaluate greenfield
project pipelines and procure suitable energy storage systems more
strategically.
Q: What is the Investment Manager's view on utilising leverage
for energy storage?
The utility-scale energy storage market has evolved rapidly in
the last five to six years around a merchant revenue stack, which
meant there was limited appetite for lenders to provide leverage to
investments on attractive terms. As the market has matured and
lenders have become more familiar with the energy storage business
model, they have become more comfortable lending against certain
conservative revenue assumptions, underpinned by fundamental grid
demands.
Despite this progress, however, we don't intend to take on
excess leverage to build-out our portfolio (with a limit of 30% of
GAV, or c. GBP230m, as set out within the Company's investment
policy on page 38 of the annual report). Minimal debt is currently
held across the portfolio given the high interest rate environment,
which means that the Company is not servicing highly priced debt.
Resilience of the Company's balance sheet is important, especially
when we are seeing revenue drop in some of the grids the Company
operates in. The Company expects to be able to build out its
portfolio with a maximum debt below the 30% thresholds and is
continually working with lenders to ensure appropriately sized
facilities are in place to be utilised when prevailing funding
conditions are attractive to make use of such leverage. We
successfully increased our revolving credit facility post period
end from GBP15 million to GBP50 million, with a four-year term, to
support the construction of our next phase of projects to be
brought online in the coming months.
Q: What is your near-term focus?
Following a successful period of acquisitions (544.7 MW during
the reported period), our focus now is on the build-out of our
construction assets across multiple grids and optimising the
Company's capital structure to finance this capex through a
combination of cash on balance sheet and external debt.
Over 520 MW of Capacity is scheduled to come online by the end
of 2024 across GB, Ireland, Texas, and California, which will
successfully establish our presence across five grid systems. The
Investment Manager's growing in-house technical teams will allow us
to deliver and optimally manage these projects at competitive capex
costs. We believe 2023 will serve as a prime example of the
benefits of diversification for investors.
Whilst progressing construction, based on the prevailing
interest rate environment, we continue to carefully evaluate the
business case of each pre-operational assets within the portfolio.
The reviews are based on the most recent revenue trends, funding
costs, and updated capital expenditures towards commercial
operations and timing of binding capital commitments.
Q: How do you see dividend cover evolving over the next two
years?
The Company generated cash flow(7) of 6p per share which
translates into 4.8% cash yield per NAV or 5.5% cash yield per
share price as at 31 March 2023. The Company's dividend yield was
6.9% based on the 31 March 2023 closing share price.
The Company is following a strategy of acquiring assets at the
project rights stage and constructing them utilising in-house
technical expertise. This enables energy storage system procurement
at competitive costs and flexible battery system design to
accommodate future market uncertainty. In addition, rather than
taking a simple approach of replicating similar assets in the same
grid over and over, the Company entered new geographies to deliver
a diversified portfolio with less exposure to single revenue
drivers. While this approach requires longer lead times, the
superiority of the strategy is evidenced by the cashflow of the
operational portfolio, which only accounts for 30% of total NAV and
provided 90%(8) operational dividend cover, based on dividends paid
in the period. On a consolidated fund level, these operational
assets provided 0.54x dividend cover for the fund. Given the over
20-year life of energy storage projects, management believes a
careful approach to investment and construction is prudent for
energy storage.
7 Operational portfolio EBITDA minus holding company operating
expenses plus external net interest income
8 This figure is based on portfolio EBITDA only and does not include HoldCo or PLC expenses
The Company raised GBP150 million in April 2022. While this
reduced dividend coverage by 26.3%, raising equity capital upfront
enabled the Company to gain further financial security without
excessive reliance on external debt. It also supported large
strategic acquisitions at an attractive price (over 500MW acquired
during the reported period).
The Company's ability to cover its dividends through the
generation of revenues from its operational asset portfolio
undergoes significant change over the Company's lifecycle. Since
inception of the fund, we have delivered on our promise to pay a 7%
dividend to investors each year, despite our early-stage
investments into pre-construction assets which generate cashflows
only when operational. Whilst our project-rights acquisition
strategy has allowed for industry-leading levels of capex per MW,
exceptional capital discipline and a robust foundation for
high-performing operational assets, it is a longer-term approach
that prioritises growth over dividend cover in the short term. Our
strong belief in diversification as a key strategy for success in
the storage market meant we focused on entering new geographies.
This may have prolonged the timeline for the buildout of our
operational portfolio, but we believe the revenues generated across
five grids or more will be the necessary basis to manage the
merchant volatility and ensure a stable dividend cover.
If revenues were to remain at the current level across each
grid, further operational capacity will need to be online to fully
cover dividends at both a portfolio and PLC (consolidated) level.
Currently, we are at a crucial juncture as a substantial number of
assets are poised to become operational in the near future across
multiple grids, with 130 MW scheduled to come online in GB over the
next six months, and the landmark 200 MW Big Rock project coming
online in California 18 months after that. This strategic
diversification and the upcoming increase in operational capacity
will leave us well placed to cover dividends and drive sustainable
growth.
Q: What is the Company's exposure to each market in which its
assets operate?
The Company's operational portfolio is split across four grids,
with 38% in GB, 34% in NI, 10% in ROI, 10% in Texas, and 8% in
Germany.
The benefits of the Company's diversification strategy were seen
this year in Ireland and Germany, where more lucrative pricing in
the first quarter of 2023 offset the subdued pricing seen in GB,
keeping the Company's overall revenue stack relatively constant.
This is in line with the Company's strategy to be exposed to
multiple uncorrelated revenue streams, which is particularly
important for a largely merchant asset class.
Q: Were available revenues as you expected during the year?
As expected, seasonal variations played a significant role in
revenue generation for the financial year. GB and NI provided the
bulk of revenues in Q1, followed by a fall in NI in Q2 caused by
low SNSP at the same time as an uptick in Germany and the US.
Portfolio revenues began to dip in Q3 but were supported by a
resurgent NI portfolio thanks to higher SNSP caused by more wind.
The final quarter weighed heavily on the overall portfolio, with GB
revenues 55% lower than the average of the previous three quarters;
however, during this time, revenue was highest in NI.
These results highlight the importance of our geographically
diversified strategy, further endorsed by market saturation in GB
towards the end of 2022 and into 2023.
Q: Why delay the construction of assets in Texas, and how do you
expect this delay to impact returns?
As the Investment Manager is responsible for the sustainable
delivery of assets for the Company, we continually evaluate the
macroeconomic conditions that could impact future capital
expenditure. Following the macroeconomic events of the reporting
period that resulted in a high interest rate and inflationary
environment, the strategic decision was made to optimise the
construction schedule of our wider portfolio based on targeted
energisation dates and capacity. Prioritising larger assets in GB
(Stony, Ferrymuir, and Enderby in GB) and Ireland (Porterstown II
expansion), as well as Big Rock in California and Dogfish in Texas,
will allow us to bring (a total of 521.8 MW) online while exploring
opportunities to increase the capacity of the 9.95 MW sites in the
Perfect Power portfolio, as we have done for the Company's Irish
assets. We believe this updated construction schedule will reduce
overall capital expenditure - the largest cost associated with
energy storage assets - and have a positive impact on returns,
ultimately increasing value for shareholders.
NAV Overview and Drivers
Cash generation during the reporting period resulted in an
uplift of GBP31m in NAV. An additional GBP22m uplift was primarily
driven by updated forecasted revenue assumptions for the Company's
international assets during the reported period. In GB, although
the revenue curves saw an uplift in the September-end quarter, this
was largely offset by a decrease seen in March-end forecasts.
Revenue curves were revised in line with merchant revenue forecasts
received from third-party providers. New Capacity Market contracts
secured across the portfolio, in addition to merchant revenues,
resulted in an uplift of GBP14m in the reported period.
The Manager has adjusted inflation rates in response to the
current inflationary and high-interest-rate environment across the
portfolio regions. Changes in inflation rates impacted forecasted
revenues and operational expenses, creating a GBP13m uplift in NAV.
The Manager has updated assets' discount rates across the portfolio
according to their respective grid and operational status. Changes
in discount rates have resulted in a net reduction of GBP11m in NAV
for the reported period.
Other DCF changes and asset depreciation across the portfolio
have resulted in a reduction in NAV of GBP23m. These include
changes in opex and capex pricing, such as battery cell costs for
repowering, grid capex, business rates, and EPC pricing.
Acquisitions in the period that sufficiently progressed in their
lifecycles were brought to their respective fair values, which
resulted in a GBP30m uplift in NAV. Cumulatively, Net DCF changes
across the portfolio have resulted in a GBP47m uplift in NAV.
FV Breakdown by Grid (in GBPm) Construction Operation
------------------------------- ------------ ---------
Great Britain 133.8 47.0
------------------------------- ------------ ---------
Ireland 9.4 74.3
------------------------------- ------------ ---------
Germany - 16.7
------------------------------- ------------ ---------
ERCOT 6.6 23.0
------------------------------- ------------ ---------
CAISO 119.8 -
------------------------------- ------------ ---------
Revenue forecasts
The Company sources revenue forecasts for uncontracted revenue
from independent energy research houses and, where feasible, adopts
an average of multiple independent forecasts to present a more
comprehensive view. The Company also considers the advice of
independent consultants and route-to-market providers. This
approach has given shareholders visibility on value which has been
proven to be closest to actuals among listed peers.
Great Britain
GB assets' valuations are derived from ancillary services,
trading, Capacity Market contracts and other revenue sources (such
as TNUoS benefit). All forecasts have been updated using data
provided by third-party providers. The price forecasts for
ancillary services and trading are illustrated in the blended curve
shown in Figure 20 of the annual report.
During the reported period, the Manager also secured one year
T-4 Capacity Market contracts for Hulley, Lascar, Larport, and the
Ancala assets, one 15-year T-4 contract for the Middleton asset and
one year T-1 Capacity Market contracts for Port of Tilbury, Stony
and Ferrymuir.
Ireland
Northern Ireland asset valuations use third-party curve averages
for all revenue streams and third-party data for DS3 tariffs.
Revenues are derived from the DS3 uncapped regime until 2025 and,
from 2026 onwards, use a combination of ancillary services,
trading, and Capacity Market revenue forecasts. The Investment
Manager has secured Capacity Market contracts from 2023 to 2027;
therefore, those contracted prices are used to calculate the
revenue for those periods.
Republic of Ireland asset valuations use third-party curve
averages for ancillary services, trading, and Capacity Market
revenue forecasts. Secured Capacity Market contracts are integrated
into the model for the years applicable. DS3 Capped contracts are
used as inputs in the models for relevant assets.
Germany
German asset valuations are derived from FCR revenue assumptions
based on the central case of third-party forecasts.
ERCOT
ERCOT asset valuations are derived from the central case of a
third-party research house and include revenues from trading and
ancillary services.
CAISO
CAISO asset valuations are derived from the central case of a
third-party research house and include revenues from trading and
ancillary services.
Resource Adequacy revenues are based on expected future
contracts expected to be secured by the Investment Manager based on
bilateral discussions with load serving entities.
Figure 20 of the annual report showcases revenues across various
grids alongside the weighted average revenue for the Company's
ancillary services and trading. The forecast revenues shown are
weighted averages of various duration assets. The weighted average
revenue is calculated using the operational capacity of the
portfolio over the years across various grids. It gives a
comprehensive picture of the forecasted revenue of the operational
portfolio and the benefits of the diversified revenue streams.
Table 10: MW Capacity by Grid in Respective Years
Dec-23 Dec-24 Dec-25 Dec-26
Great Britain 239.5 296.5 296.5 496.5
--------------- ------- ------- ------- -------
United States 29.9 304.9 344.7 344.7
--------------- ------- ------- ------- -------
Germany 22.0 22.0 22.0 22.0
--------------- ------- ------- ------- -------
Northern
Ireland 100.0 100.0 100.0 100.0
--------------- ------- ------- ------- -------
Republic
of Ireland 30.0 90.0 120.0 210.0
--------------- ------- ------- ------- -------
Inflation
In response to the current inflationary environment, the
Investment Manager has revised the CPI assumptions across the
portfolio, which now reflect short-term and long-term rates for
each grid. These updated assumptions impact both the applicable
revenue contracts in place, anticipated inflationary hikes in
merchant revenue prices, and increases in operational expenses.
Table 11
CPI Assumptions 2023 2024 2025+
---------------- ---- ---- -----
GB 5.4% 3.0% 2.5%
---------------- ---- ---- -----
EUR 4.8% 3.0% 2.5%
---------------- ---- ---- -----
US 3.9% 3.0% 2.5%
---------------- ---- ---- -----
Discount rates
The weighted average discount rate across the portfolio
increased to 10.1% from 8.3% in 2022. The increase reflects the
rising interest rates and supply chain concerns.
Pre-construction and construction phase discount rates are
applied depending on construction progress prior to start of
commercial operations and operational phase discount rates are
applied once commercial operations have started. The discount rate
matrix used by the Investment Manager is set out below:
Table 12
Pre-Construction
Discount Rate Matrix Phase Construction Phase Operational Phase
--------------------- ---------------- ------------------ -----------------
Contracted Income 10.35-10.75% 9.0-10.0% 7.0-9.0%
--------------------- ---------------- ------------------ -----------------
Uncontracted Income 10.35-10.75% 9.0-10.0% 8.5-9.0%
--------------------- ---------------- ------------------ -----------------
MW 694.8 186.8 291.6
--------------------- ---------------- ------------------ -----------------
Operating expenditures
Notable increases in operating expenses include:
-- Business rates: Local councils in GB and NI had set fixed
rateable values for properties until revaluations that came into
effect in April 2023, post the reporting period. The increase in
business rates resulting from this revaluation was reflected in the
GB and NI portfolio valuations.
-- New prices associated with O&M and asset management contracts have been reflected.
Capital Expenditure
Capital-intensive items, such as grid and EPC contracts secured
at the project level, were reflected in valuations in line with
their contract prices. Forecasted capital expenditures relating to
inverter replacements and battery augmentation (determined by the
degradation profile of the asset) are underwritten using
third-party forecasts. Although these reflect higher cell and
equipment costs in the short term, valuations have not been
materially affected by these due to the timeframe of these capital
works, typically scheduled to occur between 7-15 years of
operation.
The Investment Manager has been assessing EPC contract options
for the pre-construction and construction portfolio, specifically
regarding EPC providers and the optimal duration of its
projects.
The NAV of the Company's construction and pre-construction
portfolio, which has been reflected at fair market value, is
GBP376k/MW, driven by progress in construction work and
acquisitions during the period. The construction portfolio refers
to Stony (energisation process scheduled to begin at the end of
July 2023), Ferrymuir, Enderby, Porterstown Expansion, Mineral
Wells, Mesquite, Cedar Hills, Wichita Falls, Kilmannock Phase 1,
Middleton and Big Rock. The Company is expecting to build out the
portfolio of 1.17 GW at a competitive cost of GBP617k/MW and
GBP510k/MWh.
As a leading global player in the energy storage market, the
Manager prioritises fire and general safety measures. During the
period, the Manager performed site security upgrades across four
sites within its GB and all the Irish operational assets.
Energisation and commissioning timelines
Given the macro environment and future capital expenditure
projections, the Manager has made a decision to optimise asset
build out based on targeted energisation date and capacity. The
Investment Manager strategically decided to prioritise the
following assets: Stony, Ferrymuir, and Enderby in GB; Big Rock in
California; Porterstown II expansion; and Dogfish in Texas (a total
of 521.8 MW). In the near term, the Investment Manager will
prioritise larger assets over the 9.95 MW sites in the Perfect
Power portfolio. The Investment Manager is exploring opportunities
to increase the capacity of the Perfect Power portfolio, similar to
the expansion projects announced for the Company's Irish
assets.
The Manager has worked to mitigate construction delays across
the portfolio stemming from supply chain issues and grid operator
bottlenecks, however, some of the construction portfolio is facing
delayed energisation. As of the date of publication, the
energisation process for Stony is due to commence on 31 July 2023
and Ferrymuir is now expected to be online in September-end 2023.
Enderby will follow in June 2024 and Kilmannock in December-end
2025 due to delayed grid connections. Middleton remains to be on
track for energisation in December-end 2026.
1. Key Sensitivities
The NAV sensitivities shown in the table cover the critical
macro-economic factors and valuation assumptions that affect the
NAV of the portfolio. The value of the portfolio broadly rises with
an increase in inflation, lowering of discount rate, weakening of
the pound and a decrease in EPC pricing secured for assets yet to
be built out.
a. Inflation rate: +/- 1.0%
b. FX volatility: +/- 3.0%
c. Discount rate: +/- 1.0%
d. EPC costs: +/-10.0%
NAV Sensitivities Chart
NAV in FX Discount
Base Case Inflation Inflation +3.0% FX -3.0% Rate Discount
Rate
Region (With DCF) +1.0% -1.0% (GBP stronger) (GBP weaker) +1.0% -1.0% EPC +10% EPC -10%
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
Northern
Ireland GBP55.0m GBP59.4m GBP51.3m GBP54.2m GBP56.0m GBP51.8m GBP58.8m GBP54.7m GBP55.4m
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
Republic of
Ireland GBP28.6m GBP33.2m GBP24.7m GBP28.5m GBP28.8m GBP22.7m GBP35.6m GBP26.9m GBP30.4m
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
Great
Britain GBP180.7m GBP211.6m GBP153.1m n/a n/a GBP155.6m GBP210.4m GBP170.6m GBP190.8m
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
Germany GBP16.7m GBP17.5m GBP16.0m GBP16.4m GBP17.1m GBP16.1m GBP17.4m n/a n/a
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
Texas GBP29.6m GBP32.7m GBP26.9m GBP28.8m GBP30.5m GBP27.3m GBP32.2m GBP28.5m GBP30.7m
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
California GBP119.8m GBP131.3m GBP109.8m GBP116.3m GBP123.5m GBP108.3m GBP133.0m GBP113.3m GBP126.2m
----------- ----------- --------- --------- -------------- ------------ --------- --------- --------- ---------
2. NAV Scenarios
The NAV scenarios demonstrate the change in the value of the
portfolio when considering alternate scenarios, such as utilising
high case and low case revenue forecasts, valuing the portfolio
using peer proxy funds' assumptions and applying operational
discount rates for projects in construction.
Forecasts from independent research houses have been used to
derive the valuation for both the high and low cases reported.
The peer revenue assumptions scenario is based on publicly
disclosed information from comparable funds. The scenario
represents the value of the Company's GB portfolio using future
revenue data points of peer funds within the GB market as at 31
March 2023.
The last scenario illustrates the portfolio value of assets as
they transition from construction stage to operational stage,
reflecting the reduction in risk in line with the valuation
matrix.
a. Revenue Scenarios: NAV based on third-party high & low cases;
b. Valuation of GB portfolio using peers' revenue assumptions:
c. Valuation of construction portfolio using operational discount rates.
NAV Scenarios
Chart Construction
GB NAV Using NAV Using
NAV in Revenue Revenue Peer Operational Discount
Region Base Case (High Case) (Low case) Revenue Assumptions Rates
------------------- ---------- ------------ ----------- -------------------- ---------------------
Northern Ireland GBP55.0m GBP60.3m GBP46.3m n/a n/a
------------------- ---------- ------------ ----------- -------------------- ---------------------
Republic of Ireland GBP28.6m GBP34.8m GBP14.5m n/a GBP36.6m
------------------- ---------- ------------ ----------- -------------------- ---------------------
Great Britain GBP180.7m GBP234.7m GBP112.8m GBP255.3m GBP231.7m
------------------- ---------- ------------ ----------- -------------------- ---------------------
Germany GBP16.7m GBP20.7m GBP10.9m n/a n/a
------------------- ---------- ------------ ----------- -------------------- ---------------------
Texas GBP29.6m GBP37.5m GBP23.2m n/a GBP31.8m
------------------- ---------- ------------ ----------- -------------------- ---------------------
California GBP119.8m GBP123.1m GBP116.6m n/a GBP140.4m
------------------- ---------- ------------ ----------- -------------------- ---------------------
Message from Alex O' Cinneide
Dr Alex O'Cinneide
CEO of Gore Street Capital, the Investment Manager
I'm delighted to report that the Company has continued to
deliver for shareholders through a focus on building a robust and
diversified portfolio during a historic year for the energy
market.
As the Company continued to pursue its strategy of delivering a
well-diversified market leading stream of income, built on the
lowest cost per MW/h installed and leading optimisation of revenue
opportunities, market developments around the world demonstrated
why our mandate to seek out investments across different
geographies is the correct approach.
The passing of the game-changing Inflation Reduction Act - the
most ambitious and important piece of climate legislation the world
has ever seen - validates the Company's acquisitions in the US over
the reporting period. The under-construction projects will benefit
from investment tax credits (ITCs) covering at least 30% of capital
expenditure under the policy package targeting $369bn towards
energy security and climate change initiatives.
The positivity around this legislation was offset by the
outbreak of war, with Russia's invasion of Ukraine upending the
European market as gas prices increased. As countries previously
reliant on Russian gas race to lower their exposure to fossil
fuels, the need for energy storage will continue to grow as higher
levels of renewable generation are brought onto European grid
systems.
We've already seen this reflected in a series of policy
recommendations made by the European Commission in March 2023,
which all centred on deploying energy storage to support the wider
adoption of renewables.
This recognition of energy storage as the crucial technology to
underpin decarbonised and secure energy systems worldwide shows
that policymakers have caught up to what we've seen in the
technology all along. Our internationally diverse portfolio is
already well positioned to act on the increased opportunities we
expect to emerge while protecting the Company from seasonal
variations in revenue experienced in individual markets.
The Company's GB portfolio, for example, performed well in the
first half of the reporting period thanks to our success across
ancillary services, which continued to play a dominant role in the
revenues available to energy storage systems. Strong revenues from
DS3 services in Ireland, meanwhile - mainly driven by increased
generation from renewables in winter months - meant the Company's
Irish assets produced the highest revenue over the year across the
portfolio, mitigating a sharp decline in revenue seen in GB in 2023
and insulating the Company on a portfolio level.
This meant falling GB revenue, broadly in line with forecasts,
had a less severe impact on our portfolio due to the effectiveness
of our diversification strategy. I am pleased to report the Company
once again produced industry-leading returns, generating an average
of GBP157,000/MW/yr during the 2022 calendar year.
We are, therefore, confident that our growing international
presence will continue to deliver strong returns for our investors.
We have made significant progress in expanding our portfolio, with
514.8 MW of construction and pre-construction phase assets acquired
during the period, bringing the total pre-operational capacity to
881.6 MW. The Company has reached a turning point at which the 25%
operational capacity is expected to become 70% by the end of 2024,
with assets scheduled to come online across the GB, ERCOT and CAISO
grids.
The expanding portfolio further maximises our exposure to a
range of revenue streams, allowing us to explore debt options
across the portfolio, both in USD and GBP, including portfolio-and
asset-level debt. Project-level debt for the Big Rock project is
particularly interesting, given its unique revenue profile. Assets
in California's CAISO market can generate up to 40% of revenue from
the Resource Adequacy mechanism, which delivers long-term,
inflation-linked revenues lasting up to 20 years.
Following a period of acquisitions, we are now focused on
building out the Company's construction portfolio. As previously
announced in February, the Company is well-funded for this,
utilising a combination of cash on balance sheet and the judicious
use of debt in line with the Company's gearing policy. Overall our
balance sheet is best in class with very strong ratios across the
board.
Capital discipline remains a top priority, with capital
expenditure representing the most significant expense for renewable
energy solutions like energy storage. Due to the Company's
construction portfolio size, we have strategically adjusted
construction schedules to capitalise on the expected decrease in
capital expenditure costs for the Company's construction assets in
Texas and Kilmannock in Ireland. This was an economic decision and
aims to impact returns positively.
The Company's ongoing expansion will continue to be supported by
the technical excellence cultivated within the Investment Manager,
as ensuring our systems under management are available as much as
possible will continue to be a key decider of success. We are proud
of our record over FY 2022/23 maintaining fleet availability above
95%, including the operational assets acquired in new grids,
further demonstrating our ability to operate assets successfully
across multiple jurisdictions.
We continue to invest in our in-house resources at the
Investment Manager, which now has dedicated construction, asset
management, and commercialisation teams, as well as providing the
Company Secretary function, ESG, legal and finance expertise.
Internalising these functions has resulted in higher efficiency and
optimal delivery against our mandate and will continue to support
the Company during this next phase of growth.
The Company's NAV continues to show strong and incremental
growth, increasing from 109.1p/share (31 March 2022) to 115.6p/
share (31 March, 2023), reflecting a 12.3% NAV Total Return for the
reporting period. The valuation approach has delivered a true
picture to our shareholders of the portfolio's worth whilst
minimising the large volatility experienced by peers and
maintaining the management fee at the correct level. In line with
the Company's progressive dividend target, declared dividends for
the period amount to 7.5p. With 75% of the portfolio under
construction, we remain positive about delivering long-term value
to shareholders as further operational capacity is brought
online.
Delivery against strategy
The reported period marked a milestone year for the Company.
Following a significantly oversubscribed fundraise, the Investment
Manager completed four new international projects totalling 544.7
MW, bringing the total portfolio capacity to over 1.17 GW -
cementing the Company as a globally diversified energy storage
player. The Company has delivered against its growth and
diversification strategy with entry into two new grids in the
US-ERCOT (Texas) and CAISO (California)-resulting in a portfolio
spanning five grids.
This US expansion began with its 69.7 MW acquisition in ERCOT-a
portfolio of three 9.95 MW operational sites and four 9.95 MW
construction sites followed by the acquisition of the Dogfish (75.0
MW) project, also in Texas, in January 2023. The scale of the
Company's US pre-construction portfolio warrants lower expected
construction capital expenditure on a per MW basis due to the
economies of scale that can be achieved. ERCOT is a high-growth
market that remains an area of interest for the Company.
In the GB market, the Company completed the 200.0 MW Middleton
acquisition, representing one of the largest standalone storage
acquisitions of its kind. The scale of this GB acquisition further
established the Company's commitment to invest in proven markets
where its existing operational portfolio has demonstrated success.
It is also reflective of the type of asset that our portfolio is
geared to, relevant to the energy system. Its size will help the
Company achieve best-in class cost, while being connected to the
transmission network will allow it to avail of cost savings and new
revenue streams. We shall make a decision over the next 12 months
on what duration this asset should be depending on factors such as
capex and revenue streams. To date our minimising of capex and
duration in the GB market has been proved correct again and
again.
The final acquisition completed during the reported period was
the landmark 200.0 MW / 400.0 MWh acquisition of Big Rock in CAISO
- the Company's first acquisition in this market, furthering the
geographical diversification of the portfolio. CAISO is an
attractive market featuring contracted revenues through Resource
Adequacy and merchant revenue opportunities through trading and
ancillary services. The project is on track to meet its target
energisation of December-end 2024.
Alongside the portfolio growth, the Manager has maintained a
focus on allocating capital for the buildout of the construction
and pre-construction portfolio. The successful commissioning of
Porterstown (30.0 MW/30.0 MWh) in January 2023 added the Republic
of Ireland to its EBITDA-generating jurisdiction. The asset will
benefit from contracted income for the first six years of its
operations under the DS3 Capped programme, further diversifying the
Company's revenue stack and risk profile.
The Company has made further progress on the construction of its
near-term 186.8 MW GB portfolio, including the Stony (79.9 MW/79.9
MWh), Ferrymuir (49.9 MW/49.9 MWh) and Enderby (57.0 MW/57.0 MWh)
projects.
The Company secured lucrative Capacity Market contracts for its
GB and Irish assets in the February 2023 auction. In addition to
the one-year T-4 contracts secured for GBP63/kW for five of its
operational GB assets, the Company also secured a 15-year T-4
contract for the Middleton asset and now has 15-year contracts for
the entire GB construction portfolio. The two 50.0 MW assets in NI
secured contracts from 2022 until 2027, and Porterstown in ROI
secured a CM contract for 2026-2027.
Outlook
Over the next twelve months, we are focused on our portfolio
along the following areas:
1) bringing projects to operation at the lowest cost per MW/ MWh fully installed.
2) generating the highest revenue per MW/MWh in each of the
markets in which we are competing in.
3) utilising our economics of scale to materially increase EBITDA margin.
4) creating increased capacity in our existing projects over the original project size.
The Investment Manager's focus has therefore transitioned
primarily to building out the Company's 881.6 MW of construction
assets located across four grids and optimising the capital
structure of the Company. With 521.8 MW scheduled to be
commissioned by the end of 2024, the Company seeks to optimise cash
generation and, in turn, dividend cover.
The Manager is assessing project finance and Company leverage
structures to fund the buildout of the construction portfolio.
Lenders have become more comfortable with the prospect of merchant
revenues in the energy storage market after observing a solid track
record of operational and revenue performance and an accelerated
growth rate of key industry players. Debt will enable more
flexibility in capital deployment and improved returns for
shareholders. As of the date of publication, the Company has
increased its existing facility with Santander from GBP15m to
GBP50m. The Investment Manager is also actively engaging other
project-level debt providers to optimise the capital structure of
suitable assets.
The conviction on the long-term success of energy storage
continues to be based on the fundamental market drivers of climate
action and energy security, supported by policies and legislation
of several governments around the world. The Manager will continue
engaging with grid operators to explore and capitalise on new
revenue opportunities, such as National Grid ESO's "black-start"
and ERCOT's "ECRS" programmes in GB and Texas, respectively. As
discussions regarding the future of the revenue stack remain
ongoing, the Manager will continue to assess the target duration of
construction assets in the procurement process. It is confident in
its ability to retrofit the three GB assets targeting energisation
during the next 12 months with additional duration should capex
prices and revenue opportunities align to create an advantageous
environment to do so. The large portfolio of construction assets to
be brought online in the near future will bolster the
industry-leading revenue generation already achieved by the
existing international fleet. The increased operational capacity
and resulting cash generation will support the progressive dividend
target and contribute to the Company's continued profitability and
support growth in Net Asset Value.
The reporting period has showcased the portfolio's value and
ability to deliver consistently across multiple uncorrelated energy
systems. The forthcoming increase in operational capacity will add
to this established success and, combined with the appropriate
valuation applied to the Company's revenue forecasts, create
significant value. These factors enable the Company to allocate
capital efficiently to meet the target IRR outlined within its
mandate while justifying appropriate asset valuations.
The creation of this shareholder value allows the Company to
continue to deliver energy storage as the critical asset class
needed to integrate renewable generation contribute towards global
decarbonisation and, ultimately, drive forward the fight against
climate change.
Strategic report
Risk Management and Internal Control
The Board is responsible for the Company's system of risk
management and internal control and for reviewing its
effectiveness. The Board has adopted a detailed matrix of principal
risks affecting the Company's business as an investment trust and
has established associated policies and processes designed to
manage and, where possible, mitigate those risks, which are
monitored by the audit committee on an ongoing basis. This system
assists the Board in determining the nature and extent of the risks
it is willing to take in achieving the Company's strategic
objectives. Both the principal risks and the monitoring system are
also subject to robust review at least annually. The last review
took place in July 2023.
Although the Board believes that it has a robust framework of
internal controls in place this can provide only reasonable, and
not absolute, assurance against material financial misstatement or
loss and is designed to manage, not eliminate, risk.
Actions taken by the Board and, where appropriate, its
committees, to manage and mitigate the Company's principal risks
and uncertainties are set out in the table below.
*The "Change" column on the right highlights at a glance the
Board's assessment of any increases or decreases in risk during the
year after mitigation and management. The arrows show the risks as
increased or decreased.
EMERGING RISKS AND UNCERTAINTIES
During the year, the Board also discussed and monitored risks
that could potentially impact the Company's ability to meet its
strategic objectives. These were political risk, and climate change
risk. Political risk includes regulatory and legal changes
impacting strategy, and potential changes to national and
cross-border energy policy. Climate change risk was reviewed during
the year and following its assessment, the audit and risk committee
recommended and the Board agreed that climate change risk should be
included in the principal risks.
The Board has determined they are not currently sufficiently
material for the Company to be categorised as independent principal
risks. The Board receives updates from the Manager, Company
Secretary and other service providers on other potential risks that
could affect the Company. The Board also considered the
uncertainties caused by the conflict in Ukraine, the threat of a
global recession and increasing energy prices although they are not
factors which explicitly impacted the Company's performance.
PRINCIPAL RISKS AND UNCERTAINTIES
Risk Description Mitigation and Management Change*
---------------------- ----------------------------------------- --------------------------------------- -------
Changes to The Company's assets generate The Company has assets in five ó
Market Design revenue by delivering balancing grids to mitigate the impact
services to power grid operators of one grid's changes.
in the United Kingdom, Ireland, In addition, the Manager aims
Germany, Texas and California. to stack revenue contracts
There is a risk in any of those to vary the types of income
markets that unanticipated streams received from each
changes to the design of power system operator and within
system services or any change each market.
in the specifications and requirements
for service delivery (including
network charges or changes
to market rules) could negatively
impact cash flow or constrain
revenue projections for assets
within the region in which
a change occurs and thereby
reduce the net asset value
of the affected assets.
---------------------- ----------------------------------------- --------------------------------------- -------
Inflation The Company's profit projections The Company ensures that it ó
are based in part on its budget generates revenues in the markets
for capital and operating expenditure in which it incurs operating
incurred in the construction, costs from a diverse mix of
operation, and maintenance short, medium and long-term
of its portfolio of battery contracts that are subject
storage assets. These include, to fixed or floating contract
amongst other things, the cost prices. As revenues are pegged
of battery cells, inverters, to operating expenditure, the
the cost of power required Company shall aim to neutralise
to charge the batteries and inflationary increases (e.g.,
the labour costs for operations. cost of power to charge the
There is a risk that unanticipated batteries) by rebalancing its
inflation will increase capital revenue services (e.g., changing
expenditure and operating costs the timing or bases for charging
materially beyond budget, without batteries to either reduce
a commensurate impact on revenues, costs or increase revenues)
with the consequence of reducing as appropriate to maintain
profitability below the investment its investment forecast. The
forecast and/or rendering projects long-term Capacity Market contracts
less economic or uneconomic. of up to 15 years are index
There is also a risk that continued linked.
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. There is
a risk that increases in the
inflationary index rates could
render the interest rates applicable
to these debt facilities less
economic or uneconomic.
---------------------- ----------------------------------------- --------------------------------------- -------
Exposure to The portfolio currently consists The Company remains technology ó
Lithium-Ion only of lithium-ion batteries. agnostic and continues to evaluate
Batteries, The Group's battery energy other economically viable energy
Battery Manufacturers storage systems are designed storage opportunities to reduce
and technology by a variety of EPC providers, its exposure to lithiumion
changes but the underlying lithium-ion and further diversify its portfolio
batteries are manufactured mix.
primarily by BYD, CATL and The Company is not under an
LG Chem. While the Company exclusivity agreement with
considers lithium-ion battery any individual battery manufacturer
technology to be the most efficient and will manage its supply
and most competitive form of framework agreements in a manner
storage in today's market, that allows it to take advantage
there is a risk that other of any improvements or amendments
technologies may enter the to new storage technologies
market with the ability to as they become commercially
provide similar or more efficient viable, as well as mitigating
services to power markets at any potential supply chain
comparable or lower costs, issues.
reducing the portfolio's market
share of revenues in the medium
or long term. There is also
a risk that batteries might
be unavailable due to delays
caused by supply chain issues.
---------------------- ----------------------------------------- --------------------------------------- -------
Service Provider The Company has no employees Service providers are appointed ó
and has delegated certain functions subject to due diligence processes
to several service providers, and with clearly documented
principally the Manager, Administrator, contractual arrangements detailing
depositary and registrar. Failure service expectations.
of controls, and poor performance Regular reports are provided
of any service provider, could by key service providers and
lead to disruption, reputational the quality of their services
damage or loss. is monitored. The Directors
also receive presentations
from the Manager, depositary
and custodian, and the registrar
on an annual basis.
Review of annual audited internal
controls reports from key service
providers, including confirmation
of business continuity arrangements
and IT controls, and follow
up of remedial actions as required.
---------------------- ----------------------------------------- --------------------------------------- -------
Valuation The Company invests predominantly The Investment Manager routinely ó
of Unquoted in unquoted assets whose fair works with market experts to
Assets value involves the exercise assess the reasonableness of
of judgement by the Investment key data used in the asset
Manager. There is a risk that valuation process (such as
the Investment Manager's valuation energy price forecasts) and
of the portfolio may be deemed to reassess its valuations
by other third parties to have on a quarterly basis. In addition,
been overstated or understated. to ensure the objective reasonableness
of the Company's NAV materiality
threshold and the discount
rates applied, a majority of
the components of the portfolio
valuation, (based on a NAV
materiality threshold) are
reviewed by an independent
third party, prior to publication
of the halfyear and year-end
reports.
---------------------- ----------------------------------------- --------------------------------------- -------
Delays in The Company relies on EPC contractors The Company works closely with ó
Grid Energisation for energy storage system construction, EPC contractors to ensure timely
or Commissioning and on the relevant transmission performance of services and
systems and distribution systems' imposes liquidated damage payments
owners (TSO) for timely energisation under the EPC contracts for
and connection of that battery certain delays in delivery.
storage asset to the transmission The Company seeks commitments
and distribution networks appropriately. from TSOs to a target energisation
There is a risk that either date as a condition to project
the EPC contractor or relevant acquisition and provides maximum
TSO could delay the target visibility on project development
commercialisation date of an to TSOs to encourage collaboration
asset under construction and towards that target energisation
negatively impact projected date.
revenues. The Manager factors in delays
by adjusting the valuation
on an ongoing basis.
---------------------- ----------------------------------------- --------------------------------------- -------
Currency Exposure The Company is the principal The Company acts as guarantor ó
lender of funds to Group assets under currency hedge arrangements
(via intercompany loan arrangements) entered into by impacted subsidiaries
for their investments in projects, to mitigate its exposure to
including projects outside Euros and US Dollars. The Company
of the UK. This means that will also guarantee future
the Company may indirectly hedging arrangements as appropriate
invest in projects generating to seek to manage its exposure
revenue and expenditure denominated to foreign currency risks.
in a currency other than Sterling,
including in US Dollars and
Euros. There is a risk that
the value of such projects
and the revenues projected
to be received from them will
be diminished 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 The Company is exposed (through Among other measures, the Company á
and Loss of the server, software, and communications ensures its contractors and
Data systems of its primary service service providers incorporate
providers and suppliers) to firewalls and virtual private
the risk of cyber-attacks that networks for any equipment
may result in the loss of data, capable of remote access or
violation of privacy and resulting control. Cybersecurity measures
reputational damage. are incorporated for 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.
---------------------- ----------------------------------------- --------------------------------------- -------
Physical and The Company's assets are located The Manager's due diligence New
transitional in several different countries, and site design processes factor
climate-related some of which experience extreme in climate change-related risks
risks weather, which could have a when selecting sites and assets
physical impact on the assets and designing systems to operate
and as a result affect shareholder within a range of temperatures.
returns. The Manager reports to the
Climate change may also affect Board on developments in these
the development of technologies, areas regularly, including
markets and regulations. recommendations for the Company
to acclimate to technological,
market or regulatory change,
including any driven by climate
change.
---------------------- ----------------------------------------- --------------------------------------- -------
RISK ASSESSMENT AND INTERNAL CONTROLS REVIEW BY THE BOARD
Risk assessment includes consideration of the scope and quality
of the systems of internal control operating within key service
providers, and ensures regular communication of the results of
monitoring by such providers to the audit and risk committee,
including the incidence of significant control failings or
weaknesses that have been identified at any time and the extent to
which they have resulted in unforeseen outcomes or contingencies
that may have a material impact on the Company's performance or
condition.
No significant control failings or weaknesses were identified
from the audit and risk committee's ongoing risk assessment which
has been in place throughout the financial year and up to the date
of this report. The Board is satisfied that it has undertaken a
detailed review of the risks facing the Company.
A full analysis of the financial risks facing the Company is set
out in note 18 to the Financial Statements on pages 82 to 84 of the
annual report.
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, and
financial risks such as counterparty risk, credit risk and
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. Whilst the Company's articles of association
require that a proposal for the continuation of the Company be put
forward at the Company's AGM, the Directors have no reason to
believe that such a resolution will not be passed by
shareholders.
GOING CONCERN
As at 31 March 2023, the Company had net current assets of
GBP121.5 million and had cash balances of GBP123.7 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, costs
relating to the acquisition of new assets and further investments
in existing portfolio Companies, all of which are discretionary.
The Company is a guarantor to GSES 1 Limited's revolving credit
facility with Santander. Subsequent to year end this facility was
increased from GBP15m to GBP50m, with an extended term of four
years to 2027. The Company had no outstanding debt as at 31 March
2023.
The completed going concern analysis considers liquidity at the
start of the period and cash flow forecasts at both the Company
level and project level. These forecasts take into consideration
expected operating expenditure of the Company, expected cash
generation by the project companies available for distribution to
the Company, additional funding from the Company to project
companies, under construction, 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. Financial assumptions also include expected inflows
and outflows in relation to external debt held of the Company or
its subsidiaries.
The Directors have reviewed Company forecasts and projections
which cover a period of 18 months from 31 March 2023, and as part
of the going concern assessment have modelled downside scenarios
considering foreseeable changes in investment and trading
performance, which show that the Company has sufficient financial
resources.
The Directors consider the following scenarios:
-- A base case scenario considering expected Company operating
expenditure and dividends, and cash inflows and outflows relating
to subsidiary companies under the current planned strategy to focus
on build-out of existing construction projects. This factors in
expectations of available external debt.
-- Although a simultaneous reduction in project companies'
revenue across the five grids they operate is not considered
likely, a plausible average reduction in base case revenue has been
considered as a downside scenario. This would result in a reduction
in cash flow available for distribution from subsidiaries to the
Company.
This analysis shows that, under both the base case and downside
scenarios, the Company is expected to have sufficient financial
resources available to meet current obligations and commitments as
they fall due for at least 12 months until 30 September 2024.
The Directors acknowledge their responsibilities in relation to
the financial statements for the year ended 31 March 2023 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 30 September
2024.
LONG TERM VIABILITY
In reviewing the Company's viability, the Directors have
assessed the prospects of the Company over a period of five years
to 31 March 2028. 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 have a reasonable expectation that the
Company will be able to continue in operation and meet its
liabilities over the period of five years.
In making this statement, the Directors have reviewed cash
forecasts over this period, taking into consideration base case
expectations and potential downside scenarios. The Directors have
also considered the current unlevered nature of the Company and its
subsidiaries and its capacity and ability to raise further debt up
to 30% of Gross Asset Value per internal policy.
The diversified nature of the portfolio, across 5 different
grids, has been taken into account when assessing concentration of
any prolonged downturns to the portfolio. In addition, mitigating
actions under severe downside scenarios have been considered, such
as the discretionary nature of dividends and ability to delay
uncontracted capital expenditure on build out of construction phase
projects in the portfolio. This assessment has not considered the
potential for further fundraising through equity markets.
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 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 (www.gsenergystoragefund.com) is the
responsibility of the Directors. The Directors' responsibilities
also extend to the ongoing integrity of the financial statements
contained therein.
The Directors confirm that to the best of their knowledge:
-- 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;
-- 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 net return 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 and emerging
risks and uncertainties that it faces.
Statement of Comprehensive Income
For the Year Ended 31 March 2023
Year Ended 31 March 2023 Year Ended 31 March 2022
------------------------------------ ------------------------------------
Revenue Capital Total Revenue Capital Total
Notes (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
------------------------ ----- ----------- ---------- ----------- ----------- ---------- -----------
Net gain on investments
at fair value through
profit and loss 7 - 60,826,822 60,826,822 - 43,531,405 43,531,405
Investment income 8 12,466,909 - 12,466,909 5,489,529 - 5,489,529
Administrative and
other expenses 9 (9,881,436) - (9,881,436) (6,493,364) - (6,493,364)
------------------------ ----- ----------- ---------- ----------- ----------- ---------- -----------
Profit/(loss) before
tax 2,585,473 60,826,822 63,412,295 (1,003,835) 43,531,405 42,527,570
Taxation 10 - - - - - -
------------------------ ----- ----------- ---------- ----------- ----------- ---------- -----------
Profit/(loss) after
tax and profit for
the year 2,585,473 60,826,822 63,412,295 (1,003,835) 43,531,405 42,527,570
------------------------ ----- ----------- ---------- ----------- ----------- ---------- -----------
Total comprehensive
income/(loss) for the
year 2,585,473 60,826,822 63,412,295 (1,003,835) 43,531,405 42,527,570
------------------------ ----- ----------- ---------- ----------- ----------- ---------- -----------
Profit per share (basic
and diluted) - pence
per share 11 0.55 12.76 13.31 (0.33) 14.48 14.15
------------------------ ----- ----------- ---------- ----------- ----------- ---------- -----------
All Revenue and Capital items in the above statement are derived
from continuing operations.
The Total column of this statement represents the Company's
Income Statement prepared in accordance with UK adopted IAS. The
profit/(loss) after tax and profit/(loss) for the year 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.
Statement of Financial Position
As at 31 March 2023
Company Number 11160422
31 March 2023 31 March 2022
Notes (GBP) (GBP)
----------------------------------------- ------ -------------- --------------
Non - Current Assets
Investments at fair value through profit
or loss 12 434,762,146 180,762,419
----------------------------------------- ------ -------------- --------------
434,762,146 180,762,419
Current assets
Cash and cash equivalents 13 123,705,727 198,047,440
Trade and other receivables 14 843,825 46,476
----------------------------------------- ------ -------------- --------------
124,549,552 198,093,916
----------------------------------------- ------ -------------- --------------
Total assets 559,311,698 378,856,335
----------------------------------------- ------ -------------- --------------
Current liabilities
Trade and other payables 15 3,046,853 2,375,241
----------------------------------------- ------ -------------- --------------
3,046,853 2,375,241
----------------------------------------- ------ -------------- --------------
Total net assets 556,264,845 376,481,094
----------------------------------------- ------ -------------- --------------
Shareholders equity
Share capital 20 4,813,995 3,450,358
Share premium 20 315,686,634 269,708,123
Special reserve 20 349,856 186,656
Capital reduction reserve 20 111,125,000 42,258,892
Capital reserve 20 125,584,414 64,757,592
Revenue reserve 20 (1,295,054) (3,880,527)
----------------------------------------- ------ -------------- --------------
Total shareholders equity 556,264,845 376,481,094
----------------------------------------- ------ -------------- --------------
Net asset value per share 19 1.16 1.09
----------------------------------------- ------ -------------- --------------
Statement of Changes in Equity
For the Year Ended 31 March 2023
Share Capital Total
Share premium Special reduction Capital Revenue shareholders
capital reserve reserve reserve reserve reserve equity
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
--------------------- --------- ------------- -------- ------------ ----------- ----------- -------------
As at 1 April 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Profit for the year - - - - 60,826,822 2,585,473 63,412,295
--------------------- --------- ------------- -------- ------------ ----------- ----------- -------------
Total comprehensive
profit for the year - - - - 60,826,822 2,585,473 63,412,295
--------------------- --------- ------------- -------- ------------ ----------- ----------- -------------
Transactions with
owners
--------------------- --------- ------------- -------- ------------ ----------- ----------- -------------
Ordinary Shares
issued at a premium
during the year 1,363,637 148,636,363 - - - - 150,000,000
Share issue costs - (2,657,852) - - - - (2,657,852)
Transfer to capital
reduction reserve - (100,000,000) - 100,000,000 - - -
Movement in special
reserve - - 163,200 (163,200) - - -
Dividends paid - - - (30,970,692) - - (30,970,692)
--------------------- --------- ------------- -------- ------------ ----------- ----------- -------------
As at 31 March
2023 4,813,995 315,686,634 349,856 111,125,000 125,584,414 (1,295,054) 556,264,845
--------------------- --------- ------------- -------- ------------ ----------- ----------- -------------
Capital reduction reserve and revenue reserves are available to
the Company for distributions to Shareholders as determined by the
Directors.
For the Year Ended 31 March 2022
Share Capital Total
Share premium Special reduction Capital Revenue shareholders
capital reserve reserve reserve reserve reserve equity
(GBP) (GBP) (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) - - (15,187,455)
--------------------- --------- ------------ -------- ------------ ---------- ----------- -------------
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.
Statement of Cash Flows
For the Year Ended 31 March 2023
Year Ended Year Ended
31 March 31 March
2023 2022
Notes (GBP) (GBP)
------------------------------------------------------- ------------- ------------
Cash flows generated from operating activities
Profit for the year 63,412,295 42,527,570
Net profit on investments at fair value through profit
and loss (60,826,822) (43,531,405)
(Increase) / decrease in trade and other receivables (797,348) 5,317,691
Increase in trade and other payables 671,610 1,299,422
------------------------------------------------------- ------------- ------------
Net cash generated from operating activities 2,459,735 5,613,279
Cash flows used in investing activities
Purchase of investments (225,765,788) (56,536,739)
Repayment from investments 32,592,883 -
------------------------------------------------------- ------------- ------------
Net cash used in investing activities (193,172,905) (56,536,739)
Cash flows used in financing activities
Proceeds from issue of Ordinary Shares at a premium 150,000,000 208,628,005
Share issue costs (2,657,852) (4,621,966)
Dividends paid (30,970,691) (15,187,456)
------------------------------------------------------- ------------- ------------
Net cash inflow from financing activities 116,371,457 188,818,583
------------------------------------------------------- ------------- ------------
Net (decrease)/increase in cash and cash equivalents
for the year (74,341,713) 137,895,123
------------------------------------------------------- ------------- ------------
Cash and cash equivalents at the beginning of the
year 198,047,440 60,152,317
------------------------------------------------------- ------------- ------------
Cash and cash equivalents at the end of the year 123,705,727 198,047,440
------------------------------------------------------- ------------- ------------
During the year, interest received by the Company totalled
GBP12,466,909 (2022: GBP5,489,530).
Notes to the Financial Statements
For the Year Ended 31 March 2023
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 16-17 Little
Portland Street, First Floor, London, W1W 8BP.
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 currently located in the UK, the Republic
of Ireland, North America and Germany.
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 30 September 2024, 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.
The going-concern analysis takes into account expected increases
to Investment Adviser's fee in line with the Company's NAV and
expected increases in operating costs, as well as 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. Consideration has been
given to the current macro-economic environment and volatility in
the markets. Based on the analysis performed, 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 30 September
2024.
As at 31 March 2023, the Company had net current assets of
GBP121.5 million and had cash balances of GBP123.7 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, costs
relating to the acquisition of new assets and further investments
in existing portfolio Companies, all of which, are discretionary.
The Company is a guarantor to GSES1 Limited's revolving credit
facility with Santander. Subsequent to year end this facility was
upsized from GBP15m to GBP50m, with an extended term of four years
to 2027. The Company had no outstanding debt as at 31 March
2023.
Shareholders will have the opportunity to vote on an ordinary
resolution on the continuation of the Company at the AGM of the
Company to be held in 2023. The Directors have considered this when
evaluating the Going concern assessment for the Company and have no
reason to believe that such resolution will not be passed by
shareholders.
The Directors acknowledge their responsibilities in relation to
the financial statements for the year ended 31 March 2023 and have
prepared the financial statement on a going concern basis. The
Company expects to meet its obligations as and when they fall due
for at least the next twelve months to 30 September 2024.
The Board has considered the impact of climate change on the
investments included in Company's financial statements and has
assessed that it does not materially impact the estimates and
assumptions used in determining the fair value of the
investments.
OPERATING SEGMENTS
Under IFRS 8, particular classes of entities are required to
disclose information about any of their individual operating
segments. Having considered that the Company's entire portfolio is
held through the Company's direct subsidiary, GSES 1 Limited, the
Directors are of the opinion that there is only one segment and
therefore no operating segment information is given.
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. As such, the
Directors are required to make a judgement as to whether the
Company continues to meet the definition of an investment
entity.
To determine this, 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.
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 2023.
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.
In May 2021, the IASB issued amendments to IAS 12: Income Taxes
regarding deferred tax relating to Assets and Liabilities arising
from a Single Transaction. The amendments introduce an exception to
the 'initial recognition exemption' for an entity, whereby deferred
tax previously did not need to be recognised when, in a transaction
that is not a business combination, an entity purchased an asset
that would not be deductible for tax purposes (even though there is
a difference between the asset's carrying amount and its tax base).
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.
There have been no new standards, amendments to current
standards, or new interpretations which the Directors feel have a
material impact on these financial statements.
NEW AND REVISED IFRS IN ISSUE BUT NOT YET EFFECTIVE
In January 2020, the International Accounting Standards Board
issued amendments to IAS 1: Presentation of Financial Statements to
clarify how an entity classifies debt and other financial
liabilities as current or non-current. The amendments specify that
covenants to be complied with after the reporting date do not
affect the classification of debt as current or non-current at the
reporting date. Instead, the amendments require a company to
disclose information about these covenants in the notes to the
financial statements. The amendments are effective for annual
reporting periods beginning on or after 1 January 2024 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.
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 value 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%,
which is the rate applicable at year end. From 1 April 2023 the
main UK corporation tax rate increased to 25%. Current Tax and
movements in deferred tax asset and liability are recognised in the
Statement of Comprehensive Income except to the extent that they
relate to the items recognised as direct movements in equity, in
which case they are 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. Any closing deferred tax
balances have been calculated at 25% as this is the rate expected
to apply in future periods.
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 investment entities and 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
deposits held with the bank with original maturities of three
months or less.
RESTRICTED CASH
Restricted cash comprises cash held as collateral for future
contractual payment obligations and deferred payments payable from
indirect subsidiaries to third parties of the Company in relation
to the Big Rock project. Restricted cash is recognised 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 (refer to note 13 for further
information).
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.
DIVIDS
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.
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 cash equivalents,
restricted 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).
d) It is classified as an equity instrument.
The Company includes in this category equity instruments and
loans to investments.
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, 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.
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 up until 14 September 2022. JTC (UK) Limited was 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 GBP47,271 with GBP31,680 being
outstanding and payable at the year end.
On 14 September 2022, Gore Street Operational Management Limited
replaced JTC (UK) Limited as secretary for the Company.
During the year, expenses incurred with Gore Street Operational
Management Limited for secretarial services amounted to GBPnil with
GBPnil being outstanding and payable at the year end.
Apex Group Fiduciary Services (UK) Limited ("Apex") had been
appointed as administrator. Through an Administration agreement,
Apex 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 Apex for accounting and
administrative services amounted to GBP144,233, with GBP41,829
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 GBP74,793, there were no
outstanding fees payable at the year end.
At the year end, an amount of GBP18,854 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 2023 to 30 June
2023.
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
2023 2022
(GBP) (GBP)
-------------------------------------------------------------- ---------- ----------
Net gain on investments at fair value through profit and loss 60,826,822 43,531,405
-------------------------------------------------------------- ---------- ----------
60,826,822 43,531,405
-------------------------------------------------------------- ---------- ----------
8. Investment Income
31 March 31 March
2023 2022
(GBP) (GBP)
------------------------------------------------ ---------- ---------
Bank interest income 3,631,520 58,977
Loan interest income received from subsidiaries 8,835,389 5,430,552
------------------------------------------------ ---------- ---------
12,466,909 5,489,529
------------------------------------------------ ---------- ---------
9. Administrative and other expenses
31 March 31 March
2023 2022
(GBP) (GBP)
---------------------------------------- --------- ---------
Accounting and Company Secretarial fees 191,504 161,812
Auditors' Remuneration (see below) 303,500 226,000
Bank interest and charges 7,813 8,464
Directors' remuneration and expenses 242,313 204,009
Directors & Officers insurance 39,336 18,617
Foreign exchange loss 34 13,604
Investment advisory fees 4,914,324 3,090,737
Legal and professional fees 1,218,993 772,617
AIFM fees 74,793 75,207
Marketing fees 94,630 69,652
Performance fees 2,457,164 1,545,369
Sundry expenses 337,032 223,342
Write back of NEC interest receivable - 83,934
---------------------------------------- --------- ---------
9,881,436 6,493,364
---------------------------------------- --------- ---------
During the year, the Company received the following services
from its auditor, Ernst & Young LLP.
31 March 31 March
2023 2022
(GBP) (GBP)
----------------------------------------------- -------- --------
Audit services
Statutory audit Annual accounts - current year 285,900 210,000
Non-audit services
Other assurance services - Interim accounts 17,600 16,000
----------------------------------------------- -------- --------
Total audit and non-audit services 303,500 226,000
----------------------------------------------- -------- --------
The statutory auditor is remunerated GBP171,350 (2022:
GBP145,900), in relation to audits of the subsidiaries. This amount
is not included in the above.
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%. From 1 April 2023 the main UK
corporation tax rate increased to 25%.
31 March 31 March
2023 2022
(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 63,412,295 42,527,570
Tax at UK standard rate of 19% 12,048,336 8,080,238
Effects of:
Unrealised gain on fair value investments (11,557,096) (8,270,966)
Expenses not deductible for tax purposes 12,064 995
Utilisation of brought forward tax losses not previously
recognised as deferred tax (503,304) 189,733
---------------------------------------------------------- ------------ -----------
Tax charge for the year - -
---------------------------------------------------------- ------------ -----------
Estimated losses not to be recognised due to insufficient
evidence of future taxable profits 7,334,364 3,147,853
Estimated deferred tax thereon 25% (2022: 25%) 1,833,591 786,963
---------------------------------------------------------- ------------ -----------
There is no corporate tax charge for the year (2022: GBPnil).
The Company may utilise available tax losses from within the UK tax
group to relieve future taxable profits in the Company and may also
claim deductions on future distributions or parts thereof
designated as interest distributions. Therefore, a deferred tax
asset, measured at the prospective corporate rate of 25% (2022:
25%) of GBP1,833,591 (2022: GBP786,963) has not been recognised in
respect of carried forward tax losses. These carried forward tax
losses include a GBP7,220,992 tax deduction resulting from the
dividend for the quarter ending 31 March 2023 being designated in
full as an interest distribution.
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
2023 2022
-------------------------------------------------------- -------------- --------------
Net gain attributable to ordinary shareholders GBP 63,412,295 GBP 42,527,570
Weighted average number of Ordinary Shares for the year 476,542,691 300,542,518
-------------------------------------------------------- -------------- --------------
Profit per share - Basic and diluted (pence) 13.31 14.15
-------------------------------------------------------- -------------- --------------
12. Investments
31 March 31 March
Place of business Percentage ownership 2023 2022
------------------------------------------- -------------------- ----------- -----------
GSES1 Limited ("GSES1") England & Wales 100% 434,762,146 180,762,419
------------------------ ------------------ -------------------- ----------- -----------
31 March 31 March
2023 2022
Reconciliation (GBP) (GBP)
----------------------------------------------- ------------ -----------
Opening balance 180,762,419 80,694,272
Loan drawdowns during the year 225,765,788 56,536,742
Loan repayments during the year (32,592,883) -
Loan interest received (8,835,389) (5,430,553)
Loan interest receivable from GSES 1 Limited 8,714,157 4,180,723
Total fair value movement on equity investment 60,948,054 44,781,235
----------------------------------------------- ------------ -----------
434,762,146 180,762,419
----------------------------------------------- ------------ -----------
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, except as guarantor to the debt
facility entered into by its direct subsidiary GSES 1 Limited, 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 of the investment in
GSES1 is funded through equity. The amount drawn on the facility at
31 March 2023 was GBP309,182,178 (2022: GBP116,009,272). 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 repayments of loan
interest and principal. GSES1 controls GSF Albion, GSF England, GSF
IRE and GSF Atlantic as listed below which in turn hold an interest
in project companies. GSF Atlantic also controls GSF Americas,
which itself invests in its own project companies.
Percentage
Immediate
Parent Place of business Ownership Investment
------------------------------- ------------- ------------------ ---------- --------------------------------
GSF Albion Limited ("GSF
Albion") GSES1 England & Wales 100%
NK Boulby Energy Storage GSF Albion England & Wales 99.998% Boulby
Limited
Kiwi Power ES B GSF Albion England & Wales 49% Cenin
GSF England Limited ("GSF
England") GSES1 England & Wales 100%
OSSPV001 Limited GSC LRPOT England & Wales 100% Lower Road Port of
Tilbury
GSF IRE Limited GSES1 England & 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% Porterstown
Limited Ireland
Kilmannock Battery Storage GSF IRE Republic of 51% Kilmannock
Limited Ireland
Ferrymuir Energy Storage GSF Albion England & Wales 100% Ferrymuir
Limited
Ancala Energy Storage Limited GSF England England & Wales 100% Beeches, Blue House
Farm, Brookhall, Fell
View, Grimsargh, Hermitage,
Heywood Grange, High
Meadow, Hungerford,
Low Burntoft
------------------------------- ------------- ------------------ ---------- --------------------------------
Breach Farm Energy Storage GSF England England & Wales 100% Breach Farm
Limited
Hulley Road Energy Storage GSF England England & Wales 100% Hulley Road
Limited
Larport Energy Storage Limited GSF England England & Wales 100% Larport
Lascar Battery Storage Limited GSF England England & Wales 100% Lascar
Stony Energy Storage Limited GSF England England & Wales 100% Stony
Enderby Battery Storage GSF England England & Wales 100% Enderby
Limited
Middleton Energy Storage GSF England England & Wales 100% Middleton
Limited(3)
GSF Atlantic Limited GSES1 England & Wales 100%
GSF Americas Inc.(1) GSF Atlantic Delaware 100%
GSF Cremzow GmbH & Co KG GSF Atlantic Germany 90% Cremzow LP
GSF Cremzow Verwaltungs GSF Atlantic Germany 90% Cremzow GP
GmbH
Snyder ESS Assets, LLC(1) GSF Americas Delaware 100% Snyder
Sweetwater ESS Assets, LLC(1) GSF Americas Delaware 100% Sweetwater
Westover ESS Assets, LLC(1) GSF Americas Delaware 100% Westover
Cedar Hill ESS Assets, LLC(2) GSF Americas Delaware 100% Cedar Hill
Mineral Wells ESS Assets, GSF Americas Delaware 100% Mineral Wells
LLC(1)
Wichita Falls ESS Assets, GSF Americas Delaware 100% Wichita Falls
LLC(2)
Mesquite ESS Assets, LLC(2) GSF Americas Delaware 100% Mesquite
Dogfish ESS Assets, LLC(4) GSF Americas Delaware 100% Dogfish
Big Rock ESS Assets, LLC(5) GSF Americas Delaware 100% Big Rock
------------------------------- ------------- ------------------ ---------- --------------------------------
(1) The acquisition of Snyder ESS Assets, LLC, Sweetwater ESS
Assets, LLC, Westover ESS Assets, LLC and Mineral Wells ESS Assets,
LLC was completed on 22 April 2022.
(2) The acquisition of Cedar Hill ESS Assets, LLC, Wichita Falls
ESS Assets, LLC and Mesquite ESS Assets, LLC was completed on 26
August 2022.
(3) The acquisition of Middleton Energy Storage Limited was completed on 28 October 2022.
(4) The acquisition of Dogfish BEES, LLC was completed on 24
January 2023. Post year end, on 17 April 2023, Dogfish BEES, LLC
changed its name to Dogfish ESS Assets, LLC.
(5) The acquisition of 92JT 8ME, LLC was completed on 16
February 2023. Post year end, on 17 April 2023, 92JT 8ME, LLC
changed its name to Big Rock ESS Assets, LLC.
13. Cash and cash equivalents
31 March 31 March
2023 2022
(GBP) (GBP)
---------------- ----------- -----------
Cash at bank 99,199,093 198,047,442
Restricted cash 24,506,634 -
---------------- ----------- -----------
123,705,727 198,047,442
---------------- ----------- -----------
Restricted cash comprises cash held as collateral for future
contractual payment obligations and deferred payments payable from
indirect subsidiaries to third parties of the Company in relation
to the Big Rock project. Collateral will be released to the Company
upon settlement of the contractual and deferred payments, to be
made in accordance with the applicable contracts. At the date of
publication GBP9,817,089 has been released, with the remaining
GBP14,689,545 to be released in H1 2024.
14. Trade and other receivables
31 March 31 March
2023 2022
(GBP) (GBP)
------------------------------------------- -------- --------
VAT recoverable 213,360 -
Prepaid Director's and Officer's insurance 4,085 4,920
Other Prepayments 36,746 39,027
Other Debtors 280,560 2,529
Bank interest receivable 309,074 -
------------------------------------------- -------- --------
843,825 46,476
------------------------------------------- -------- --------
15. Trade and other payables
31 March 31 March
2023 2022
(GBP) (GBP)
----------------------- --------- ---------
Administration fees 73,509 50,765
Audit fees 283,100 226,000
Directors remuneration 8,222 6,668
Professional fees 2,554,634 1,897,707
Other creditors 127,388 5,002
VAT payable - 189,099
----------------------- --------- ---------
3,046,853 2,375,241
----------------------- --------- ---------
16. Categories of financial instruments
31 March 31 March
2023 2022
(GBP) (GBP)
---------------------------------------- ----------- -----------
Financial assets
Financial assets at amortised cost
Cash and cash equivalents 123,705,727 198,047,440
Trade and other receivables 843,825 46,476
Fair value through profit and loss
Investment 434,762,146 180,762,419
---------------------------------------- ----------- -----------
Total financial assets 559,311,698 378,856,335
---------------------------------------- ----------- -----------
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 3,046,853 2,375,241
---------------------------------------- ----------- -----------
Total financial liabilities 3,046,853 2,375,241
---------------------------------------- ----------- -----------
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.
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 Discounted Cash Flow
("DCF") approach and the method discounts free cash flows using an
estimated discount rate (Weighted Average Cost of Capital
("WACC")).
VALUATION PROCESS
In the year, the Company, via its subsidiaries, acquired eight
projects totalling 144.65 MW connected to The Electric Reliability
Council of Texas, Inc. ("ERCOT") and a 200MW project in the scope
of the California Independent System Operator ("CAISO"). It also
acquired a 200MW project Middleton in England. These acquisitions
bring the Company's portfolio of lithium-ion energy storage
investments to a total capacity of 1.17GW (2022: 628.5 MW). As at
31 March 2023, 291.6 MW of the Company's total portfolio was
operational and 881.6 MW pre-operational (the "Investments").
The Investments comprise thirty-six projects, based in the UK,
the Republic of Ireland, mainland Europe or North America. 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 valuation. The
Company engages external, independent and qualified valuers to
determine the fair value of the Company's investments or valuations
are produced by the Investment Advisor.
As at 31 March 2023, the fair value of the portfolio of
investments has been determined by the Investment Manager and
reviewed by BDO UK LLP.
The below table summarises the significant unobservable inputs
to the valuation of investments.
Significant Inputs Fair Value
----------------------------- ------------------------
31 March 31 March
Valuation 2023 2022
Investment Portfolio technique Description (Range) (GBP) (GBP)
----------------------------- ---------- -------------- ------------- ----------- -----------
Great Britain DCF Discount Rate 7% - 10.75% 180,714,570 89,350,935
Revenue / MW
(excluding Northern Ireland) / hr GBP8 - GBP14
Northern Ireland DCF Discount Rate 9% - 9% 55,049,170 57,076,847
Revenue / MW
/ hr EUR11 - EUR24
Republic of Ireland DCF Discount Rate 8% - 10.5% 28,515,507 17,595,232
Revenue / MW
/ hr EUR7 - EUR25
Other OECD DCF Discount Rate 9% - 10.5% 171,008,958 12,583,705
Revenue / MW EUR5 - EUR26
/ hr /
$8 - $34
Holding Companies NAV (526,059) 4,155,700
----------------------------- -------------------------- ------------- ----------- -----------
Total Investments 434,762,146 180,762,419
--------------------------------------------------------- ------------- ----------- -----------
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.
-- Sensitivity Analysis
The below table reflects the range of sensitivities in respect
of the fair value movements of the Company's investments, via GSES
1.
Estimated effect on
Significant Inputs Fair Value
--------------------------- --------------------------
31 March 31 March
Valuation 2023 2022
Investment Portfolio technique Description Sensitivity (GBP) (GBP)
------------------------- ---------- -------------- ----------- ------------ ------------
Great Britain (excluding
Northern Ireland) DCF Revenue +10% 39,163,849 46,600,000
-10% (39,402,771) (28,312,000)
Discount rate +1% (25,103,594) (12,378,000)
-1% 29,658,404 14,357,000
Northern Ireland DCF Revenue +10% 5,360,179 9,984,000
-10% (5,357,401) (10,034,000)
Discount rate +1% (3,239,801) (3,226,000)
-1% 3,741,944 3,675,000
Exchange rate +3% (896,254) (839,000)
-3% 952,017 897,000
Republic of Ireland DCF Revenue +10% 5,631,626 4,404,000
-10% (6,434,752) (4,937,000)
Discount rate +1% (5,936,555) (3,242,000)
-1% 6,914,698 3,772,222
Exchange rate +3% (101,466) (362,000)
-3% 107,516 382,000
Other OECD DCF Revenue +10% 24,849,092 3,698,000
-10% (25,153,598) (4,465,000)
Discount rate +1% (14,401,398) (704,000)
-1% 16,472,024 804,000
Exchange rate +3% (4,689,659) (285,000)
-3% 4,981,974 303,000
--------------------------------------------------- ----------- ------------ ------------
High case (+10%) and low case (-10%) revenue information used to
determine sensitivities are provided by third party pricing
sources.
-- Valuation of financial instruments
The investments at fair value through profit or loss are Level 3
in the fair value hierarchy. No transfers between levels took place
during the year.
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:
-- 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 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.
-- Concentration risk
The Company's investment policy is limited to investment in
energy storage infrastructure in the UK, Republic of Ireland, North
America, Western Europe, Australia, Japan, and South Korea. The
value of investments outside of the UK is not intended to exceed
60% of Gross Asset Value of the Company. Significant concentration
of investments in any one sector and location 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. The Company
currently has investments located across 5 different grids in the
UK, Republic of Ireland, North America (ERCOT and CAISO), and
Germany. This diversification reduces exposure to any single grid.
The investment policy also limits the exposure to any single asset
within the portfolio to 25% of the Gross Asset Value of the
Company.
-- 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, Santander UK plc and
JPMorgan Chase and Co., all reputable financial institutions with
Moody's credit ratings of Baa2, A1 and Aa2 respectively.
-- 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. 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 30 per cent.
at the time of borrowing of Gross Asset Value without Shareholder
approval. The Company intends to prudently introduce a conservative
amount of debt throughout the portfolio. The Company's only
financial liabilities as at 31 Mach 2023 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.
The following table reflects the maturity analysis of financial
assets and liabilities.
31 March 2023 < 1 year 1 to 2 years 2 to 5 years > 5 years Total
---------------------------------------- ----------- ------------ ------------ ----------- -----------
Financial assets
Cash at bank 99,199,093 - - - 99,199,093
Restricted cash 19,610,119 4,896,515 - - 24,506,634
Trade and other receivables 843,825 - - - 843,825
Fair value through profit and loss
Investments - - - 434,762,146 434,762,146
---------------------------------------- ----------- ------------ ------------ ----------- -----------
Total financial assets 119,653,037 4,896,515 - 434,762,146 559,311,698
---------------------------------------- ----------- ------------ ------------ ----------- -----------
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 3,046,853 - - - 3,046,853
---------------------------------------- ----------- ------------ ------------ ----------- -----------
Total financial liabilities 3,046,853 - - - 3,046,853
---------------------------------------- ----------- ------------ ------------ ----------- -----------
31 March 2022 < 1 year 1 to 2 years 2 to 5 years > 5 years Total
---------------------------------------- ----------- ------------ ------------ ----------- -----------
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 9,275,958 - - - 9,275,958
---------------------------------------- ----------- ------------ ------------ ----------- -----------
Total financial liabilities 9,275,958 - - - 9,275,958
---------------------------------------- ----------- ------------ ------------ ----------- -----------
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.
-- 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 currency risk, interest rate 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.
i) Currency risk
The majority of investments, together with the majority of all
transactions during the current period were denominated in Pounds
Sterling.
The Company, via GSES 1 and its direct subsidiaries, holds two
investments (Kilmannock and Porterstown) in the Republic of
Ireland, an investment in Germany (Cremzow), and several
investments in North America, creating an exposure to currency
risk. These investments have been translated into Pounds Sterling
at year end and represent 36% (2022: 16.69%) of the Company's fair
valued investment portfolio. The Company regularly monitors its
exposure to foreign currency and executes appropriate hedging
arrangements in the form of forward contracts with reputable
financial institutions to reduce this risk. These derivatives are
held by the Company's subsidiaries.
ii) 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.
Loans to related parties carry a fixed rate of interest for an
initial period of 20 years. The Company may be exposed to changes
in variable market rates of interest and this could impact the
discount rate used in the investment valuations and therefore the
valuation of the projects as well as the fair value of the loan
receivables. Refer to Note 17 for the sensitivity of valuations to
changes in the discount rate. The Company currently has no external
debt. The Company continuously monitors its exposure to interest
rate risk and where necessary will assess and execute hedging
arrangements to mitigate interest rate risk.
iii) Price risk
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 GBP43,476,217 (2022:
GBP18,025,549). 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
2023 2022
----------------------------------------------- --------------- ---------------
Net assets per Statement of Financial Position GBP 556,264,845 GBP 376,481,094
Ordinary Shares in issue as at 31 March 481,399,478 345,035,842
----------------------------------------------- --------------- ---------------
NAV per share - Basic and diluted (pence) 115.55 109.11
----------------------------------------------- --------------- ---------------
20. Share capital and reserves
Share Capital
Share premium Special reduction Capital Revenue
capital reserve reserve reserve reserve reserve Total
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
-------------------- --------- ------------- ------- ------------ ----------- ----------- ------------
At 1 April 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Issue of ordinary
GBP0.01 shares:
14 April 2022 1,363,637 148,636,363 - - - - 150,000,000
Share issue costs - (2,657,852) - - - - (2,657,852)
Transfer to capital
reduction reserve - (100,000,000) - 100,000,000 - - -
Movement in special
reserve - - 163,200 (163,200) - - -
Dividends paid - - - (30,970,692) - - (30,970,692)
Profit for the
year - - - - 60,826,822 2,585,473 63,412,295
-------------------- --------- ------------- ------- ------------ ----------- ----------- ------------
At 31 March 2023 4,813,995 315,686,634 349,856 111,125,000 125,584,414 (1,295,054) 556,264,845
-------------------- --------- ------------- ------- ------------ ----------- ----------- ------------
Share Capital
Share premium Special reduction Capital Revenue
capital reserve reserve reserve reserve reserve Total
(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 - (40,000,000) - 40,000,000 - - -
Share issue costs - (4,621,966) - - - - (4,621,966)
Dividends paid - - - (15,187,456) - - (15,187,455)
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
-------------------- --------- ------------ ------- ------------ ---------- ----------- ------------
SHARE ISSUES
On 14 April 2022, the Company issued 136,363,636 ordinary shares
at a price of 110 pence per share, raising net proceeds from the
Placing of GBP150,000,000.
Following the approval at the Company's AGM on the 20 September
2022, 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 GBP100,000,000. This was
affected on the 29 November 2022 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 2023 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 non-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.
21. Dividends
31 March 31 March
Dividend 2023 2022
per share (GBP) (GBP)
----------------------------------------------- ---------- ---------- ----------
Dividends paid during the year
For the 3 month period ended 31 March 2021 1 pence - 2,762,246
For the 3 month period ended 30 June 2021 2 pence - 5,524,491
For the 3 month period ended 30 September 2021 2 pence - 6,900,718
For the 3 month period ended 31 December 2021 2 pence 6,900,718 -
For the 3 month period ended 31 March 2022 1 pence 4,813,995 -
For the 3 month period ended 30 June 2022 2 pence 9,627,990 -
For the 3 month period ended 30 September 2022 2 pence 9,627,990 -
----------------------------------------------- ---------- ---------- ----------
30,970,693 15,187,456
---------------------------------------------------------- ---------- ----------
The table below sets out the proposed final dividend, together
with the interim dividends declared, 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
Dividend 2023 2022
per share (GBP) (GBP)
------------------------------------------------------------------- ---------- ---------- ----------
Dividends declared for the year
For the 3 month period ended 30 June 2021 2 pence - 5,524,491
For the 3 month period ended 30 September 2021 2 pence - 6,900,718
For the 3 month period ended 31 December 2021 2 pence - 6,900,718
For the 3 month period ended 31 March 2022 1 pence - 4,813,995
For the 3 month period ended 30 June 2022 2 pence 9,627,990 -
For the 3 month period ended 30 September 2022 2 pence 9,627,990 -
For the 3 month period ended 31 December 2022 2 pence 9,627,990 -
For the 3 month period ended 31 March 2023 (declared in June 2023) 1.5 pence 7,220,992 -
------------------------------------------------------------------- ---------- ---------- ----------
36,104,962 24,139,922
------------------------------------------------------------------------------ ---------- ----------
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' remuneration and as at 31 March 2023, Patrick Cox, Chair
of the Board of Directors of the Company, is paid a Director's
remuneration of GBP70,625 per annum, (2022: GBP57,500), Caroline
Banszky is paid a Director's remuneration of GBP52,500 per annum,
(2022: GBP45,000), with the remaining Directors' remuneration of
GBP43,750 each per annum, (2022: GBP40,000).
Total Directors' remuneration, associated employment costs and
expenses of GBP242,313 were incurred in respect of the year with
GBP8,222 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 GBP4,914,324
(2022: GBP3,090,737) were paid during the year, there were no
outstanding fees as at 31 March 2023, (2022: GBPnil
outstanding).
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 GBP2,457,164, were accrued as at 31
March 2023, (2022: GBP1,545,369).
During the year, Gore Street Operational Management, a direct
subsidiary to the Investment Adviser, provided commercial
management services to the Company resulting in charges in the
amount of GBP855,692 being paid by the Company and the SPV
companies (2022: GBP781,600).
INVESTMENT
The Company holds 100% interest in GESE 1 through equity and a
loan facility. Transactions and balances held with GSES 1 for the
year are all detailed within note 12.
23. Guarantees and 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. The Facility was increased to GBP50
million in June 2023. Under these agreements, the Company acts as
charger and guarantor to the amounts borrowed under the Agreements
by GSES1 Limited. As at 31 March 2023, no amounts had been drawn on
this facility.
The Company had no contingencies and significant capital
commitments as at the 31 March 2023.
24. Post balance sheet events
The Directors have evaluated the need for disclosures and / or
adjustments resulting from post balance sheet events through to 14
July 2023, the date the financial statements were available to be
issued.
The Board approved on the 17 March 2023, the issuance of an
interim dividend of 2 pence per share. This dividend totalling
GBP9,627,990 was paid to investors on 11 April 2023.
The Board approved on the 14 June 2023, the issuance of a final
dividend of 1.5 pence per share. This dividend totalling
GBP7,220,992 will be paid to investors on 17 July 2023.
The size of the revolving credit facility, within which the
Company acts as chargor and guarantor to amounts borrowed by its
subsidiary GSES 1 Limited, has been increase in June 2023 from
GBP15 million to GBP50 million. The term of the facility has been
extended for four years to 2027.
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 2023.
2022 Financial Information
The figures and financial information for 2022 are extracted
from the published Annual Report and Accounts for the year ended 31
March 2022 and do not constitute the statutory accounts for that
year. The 2022 Annual Report and Accounts have been delivered to
the Registrar of Companies and included the Report of the
Independent Auditors which was unqualified and did not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006.
2023 Financial Information
The figures and financial information for 2023 are extracted
from the Annual Report and Accounts for the year ended 31 March
2023 and do not constitute the statutory accounts for the year. The
2023 Annual Report and Accounts include the Report of the
Independent Auditors which is unqualified and does not contain a
statement under either section 498(2) or section 498(3) of the
Companies Act 2006. The 2023 Annual Report and Accounts will be
delivered to the Registrar of Companies in due course.
Neither the contents of the Company's webpages nor the contents
of any website accessible from hyperlinks on the Company's webpages
(or any other website) is incorporated into, or forms part of, this
announcement.
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END
FR USRNROWUBAAR
(END) Dow Jones Newswires
July 17, 2023 02:00 ET (06:00 GMT)
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