TIDMGSF
RNS Number : 7100W
Gore Street Energy Storage Fund PLC
14 December 2023
14 December 2023
Gore Street Energy Storage Fund plc
(the "Company" or "GSF")
Half Year Results for the 6-months ending 30 September 2023
Strong performance and positive revenue trends continue
Operational highlights:
-- The portfolio generated GBP19.3m of revenue during the
period, amounting to GBP12.2m in operational EBITDA.
-- During the September-end quarter, the Company generated
operational EBITDA of GBP8.3m, resulting in an operational dividend
cover of 1.15x.
-- For the six month period, total portfolio revenue per MW per
hour was GBP15.10, with non-GB assets achieving 2.6x more revenue
than the GB portfolio, underscoring the benefits of the
diversification strategy:
-- GB revenue: GBP7.54/MW/hr
-- Non-GB revenue: GBP19.66/MW/hr
-- The 79.9 MW Stony asset was energised during the reporting period.
-- Energisation and commencement of commissioning for the 49.9
MW Ferrymuir asset is awaiting completion of grid connection
works.
-- The Company's cash balance as of 30 September was GBP75.0m
with a further GBP13.9m held across its subsidiaries, sufficient to
meet all outstanding contractual commitments.
-- As at 30 September, Fund level gearing remained at 0%.
-- Additional project-level debt funding of $60m secured
post-period through a First Citizens loan to support the build-out
of the Company's 200MW / 400MWh Big Rock asset in California.
Between the Santander and First Citizens facilities, GSF has
available debt financing of c.GBP99.0m. If fully drawn, total debt
would represent c. 15% of GAV.
Net Asset Value (NAV):
The Company continued to demonstrate strong operational
performance. However, adjustments to short-term inflation and
discount rates (+25bps) reflecting the macroeconomic landscape
drove a decrease in NAV:
-- NAV as of 30 September 2023 was GBP543.3m or 112.9 pence per
share, bringing NAV total return since IPO to 48.8%.
-- Despite the NAV per ordinary share decrease of 2.3% to 112.9p
(115.6p as at 31 March 2023), NAV total return for the period,
including the 3.5p in dividend payments, remained positive at
0.7%.
-- Portfolio valuation increased by 8%.
Movement in NAV since Changes in NAV per
March 2023 share in pence
============================= ==================
NAV March 2023 115.6
============================= ==================
Fund + Subsidiary Holding
Companies Operating Expense (0.8)
============================= ==================
Dividends (3.5)
============================= ==================
Cash Generation 2.9
============================= ==================
Discount Rate Increases (2.8)
============================= ==================
Inflation (1.2)
============================= ==================
Opex Savings 1.6
============================= ==================
De-risking of Assets 1.2
============================= ==================
Revenue Curves (0.9)
============================= ==================
Other DCF Changes and
Rollover 0.8
============================= ==================
NAV 30 September 2023 112.9
============================= ==================
Dividend Declaration
The Company's Board of Directors has approved a dividend of 2.0
pence per share for the September end quarter. The ex-dividend date
will be 28 December 2023, and the record date of 29 December 2023.
The dividend will be paid on or around 12 January 2024.
Any such dividend payment to Shareholders may take the form of
either dividend income or "qualifying interest income", which may
be designated as an interest distribution for UK tax purposes and,
therefore, subject to the interest streaming regime applicable to
investment trusts. Of this dividend declared of 2.0 pence per
share, 1.15 pence is treated as qualifying interest income.
Alex O'Cinneide, CEO of Gore Street Capital, the Investment
Manager of the Company, commented :
"I am pleased to report that the Company's strategy, enabled by
the active role of the Investment Manager, despite difficult stock
market conditions, has allowed the business to continue to meet its
objectives. Since inception, the operational portfolio has
generated an average of 20% per annum cash yield over invested
capital, and during the September-end quarter, the Company
delivered an operational dividend cover of 1.15x. This positive
trajectory is reflected in portfolio performance, which maintained
the highest revenue on both a per MW and absolute basis among our
listed peers during the period whilst being the cost leader on
capital cost per MW/MWh fully installed. This was achieved through
diversification, with assets in Ireland, Texas and Germany
overachieving against base case. With a NAV Total Return of 48.8%
since IPO, an excellent balance sheet given our minimum level of
debt, and a strong cash position, the Company remains in a
compelling and sustainable position."
The interim report will shortly be available to download from
the Company's website www.gsfenergystoragefund.com . Please click
on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/7100W_1-2023-12-13.pdf
The Company has also submitted its interim report to the
National Storage Mechanism and it 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) Tel: +44 203 493
8000
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
Half Year Report Gore Street Energy Storage Fund Plc
For the six months ended 30 September 2023
Highlights and Key Metrics
Key Metrics
For the period ending 30 September 2023
NAV PER SHARE
112.9p
(March 2023: 115.6p)
OPERATIONAL CAPACITY
291.6 MW**
(March 2023: 291.6 MW)
DIVID YIELD
8.9%
(March 2023: 6.9%)
NAV TOTAL RETURN
for the 6 month period
0.7%
(September 2022: 4.6%)
OPERATIONAL EBITDA
for the 6 month period
GBP12.2m
(September 2022: GBP14.8m)
DIVIDS PAID DURING THE PERIOD
3.5p
(September 2022: 3.0p)
As at As at
30 September 31 March
Table 1: Key Metrics 2023 2023
---------------------------------------------------------- ------------- -------------
Net Asset Value (NAV) GBP543.3m GBP556.3m
---------------------------------------------------------- ------------- -------------
NAV per share 112.9p 115.6p
---------------------------------------------------------- ------------- -------------
NAV Total Return since IPO * 48.8% 48.0%
---------------------------------------------------------- ------------- -------------
Share price based on closing price at indicated date 78.8p 100.8p
---------------------------------------------------------- ------------- -------------
Market capitalisation based on closing price GBP379.3m GBP485.3m
---------------------------------------------------------- ------------- -------------
Share price total return since IPO * 13.3% 31.8%
---------------------------------------------------------- ------------- -------------
(Discount)/Premium to NAV * -30.2% -12.8%
---------------------------------------------------------- ------------- -------------
Portfolio's total capacity 1.17 GW 1.17 GW
---------------------------------------------------------- ------------- -------------
Portfolio's operational capacity 291.6 MW** 291.6 MW
---------------------------------------------------------- ------------- -------------
Operational dividend cover for the period * 0.72x 0.90x
---------------------------------------------------------- ------------- -------------
Operational dividend cover for quarter ended 30 September
* 1.15x 1.30x
---------------------------------------------------------- ------------- -------------
Dividend Yield * 8.9% 6.9%
---------------------------------------------------------- ------------- -------------
Ongoing charges Figure * 1.39% 1.37%
---------------------------------------------------------- ------------- -------------
Fund level gearing 0.00% 0.00%
---------------------------------------------------------- ------------- -------------
As at As at
30 September 30 September
Key Metrics for the period (1 April - 30 September) 2023 2022
---------------------------------------------------------- ------------- -------------
NAV Total Return for the six month period * 0.7% 4.6%
---------------------------------------------------------- ------------- -------------
Share Price Total return for the six month period
* -18.4% 0.0%
---------------------------------------------------------- ------------- -------------
Operational EBITDA for the six month period * GBP12.2m GBP14.8m
---------------------------------------------------------- ------------- -------------
Total Fund EBITDA for the six month period * GBP8.5m GBP10.4m
---------------------------------------------------------- ------------- -------------
Dividends per Ordinary Share paid during the period 3.5p 3.0p
---------------------------------------------------------- ------------- -------------
* 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 37 of the Interim Report for
the period ending 30 September 2023 together with supporting
calculations where appropriate.
** The 79.9 MW Stony asset was energised during the reporting period.
Chair's Statement
On behalf of the Board, it is my pleasure to present the
Company's Interim report covering the six months ending 30
September 2023.
Overview and Performance
Following advice from the Company's independent valuers and
reflecting the financial conditions as at the end of the period, we
have adjusted our inflation assumptions and raised discount rates
across the board by 0.25%, leading to a new weighted average of
10.3%. The Net Asset Value (NAV) per share, as of 30 September, was
112.9p, representing a reduction of 2.7p per share over the period.
These adjustments have been made in light of the macroeconomic
conditions experienced over the reporting period, while the
operational performance of the Company and its assets remains
strong. Overall growth is evidenced by NAV total returns of 48.8%
since IPO in May 2018 and an 8.9% dividend yield to shareholders,
based on the 30 September share price.
Despite challenging market conditions - especially in Great
Britain - over the six months to 30 September, the Company's
internationally diversified portfolio has performed well. Revenue
for the reporting period was GBP19.3m, representing an average of
GBP15.10/MW/hr, with the Company's international assets delivering
2.6x more revenue on a MW basis than those in Great Britain.
The strength of this revenue generation during the period was
supported by exceptional performance in August , which delivered
the highest revenues reached in a single month across the Company's
five-year history. This record-breaking achievement was led by the
Company's Texas assets following their pre-qualification to deliver
a newly launched grid service, ERCOT Contingency Reserve Service
(ECRS), illustrating the success of the Company's international
diversification, which underpins the potential and sustained
profitability of our asset class.
We are, therefore, committed to building out our construction
portfolio to ensure greater access to revenue-generating activities
across multiple markets in future, some of which have progressed
well in the reporting period. The 80 MW Stony asset - our largest
operational asset to date - was energised in September, a key
milestone in achieving our stated target of an energised portfolio
of over 800 MW by the end of 2024.
By remaining focused on the key metrics of cost per MW fully
installed and revenue generation per MW, the Company anticipates
that deployment across multiple international markets will have a
positive impact on the current operational dividend cover of 0.72x
while lowering exposure to the GB market as a percentage of its
total operational portfolio.
I look forward to updating shareholders as additional
revenue-generating capacity is added to the operational portfolio
in the coming months.
The Company continuously evaluates how best to optimise the c.
1.2 GW portfolio it holds across five energy grids. This includes
the potential sale of assets to enhance shareholder returns when it
would prove accretive to reinvest capital in other opportunities.
This would also prove to be a valuable exercise in NAV discovery,
given the uncertainty over a wide range of asset valuations seen
elsewhere within the sector.
Share Price
The extreme volatility seen across the stock market over the
last six months, has been reflected in the share prices of the
entire asset class, and is not reflective of the Company's
sustained performance in operations and revenue generation. As
market conditions improve, we expect our industry-leading portfolio
to continue delivering sustainable returns to investors.
The Company continues to demonstrate best-in-class operational
performance, notwithstanding challenging market dynamics, and
offers healthy returns to long-term stockholders who recognise
energy storage's fundamental value within the energy
transition.
Dividends
We remain committed to the dividend target of 7% of NAV, which
has been met consistently. The Company paid a dividend of 2.0 pence
for the June end quarter in line with this target, with an
additional dividend of 2.0 pence for the September end quarter to
be paid on or around 12 January 2024.
Outlook
Despite challenges, the Company remains resilient and focused on
outperforming revenue benchmarks, increasing EBITDA margin, and
building its portfolio. It has energised 80 MW during the period,
with 50 MW expected to follow through Ferrymuir in Q4 FY23/24 and
57 MW at Enderby in Q1 FY24/25. In total we are targeting the
energisation of 442 MW by the end of 2024, including expanding
assets in Ireland and the United States.
This will support the Company's uniquely diversified approach
across international markets, which has allowed us to tap into
diverse revenue streams and positions it well for continued success
in the years to come.
Since the quarter end we have already seen inflation rates come
down, a fall in the yield on government bonds and markets have
started to expect falls in interest rates rather than further
increases. This has led to a strong rally in our share price and,
though it remains well short of our NAV, we are hopeful this is the
start of a trend that may go significantly further in 2024.
Patrick Cox
Chair
13 December 2023
Investment Manager's Interim Report
Dr Alex O'Cinneide
CEO of Gore Street Capital, the Investment Manager
"I am pleased to report that the Company's strategy, enabled by
the active role of the Investment Manager, has ensured the business
continued to overachieve during a challenging period. Since
inception, the operational portfolio has generated an average 20%
per annum cash yield over invested capital, and during the
September-end quarter, the Company delivered an operational
dividend cover of 1.15x. This positive trajectory is reflected in
portfolio performance, which maintained the highest revenue on both
a per MW and absolute basis among our listed peers during the
period. This was achieved through diversification, with assets in
Ireland, Texas and Germany overachieving against base case. The
slight decrease in NAV is wholly due to changes in discount rate
and inflation assumptions, with high-interest rates expected to
continue, and does not reflect the exemplary performance of the
Company's commercial operations. With a NAV Total Return of 48.8%
since IPO, an excellent balance sheet given our minimum level of
debt, and a strong cash position, the Company remains in a
compelling and sustainable position."
Operational Highlights:
-- The portfolio generated GBP19.3m of revenue during the
period, amounting to GBP12.2m in operational EBITDA;
- Total portfolio revenue per MW per hour was GBP15.10, with
non-GB assets achieving 2.6x more revenue than the GB portfolio,
showcasing the benefits of the diversification strategy;
- GB revenue: GBP7.54/MW/hr
- Non-GB revenue: GBP19.66/MW/hr
- During the September-end quarter, the Company generated
operational EBITDA of GBP8.3m, resulting in an operational dividend
cover of 1.15x .
- The Company achieved an operational dividend cover of 0.72x
for the reporting period and a fund-level dividend cover of
0.50x.
-- The 79.9 MW Stony asset was energised during the reporting period.
-- Energisation and commencement of commissioning for 49.9 MW
Ferrymuir asset are awaiting completion of grid connection
works.
-- The Company's cash balance as of 30 September was GBP75.0m
with a further GBP13.9m across its subsidiaries, sufficient to meet
all outstanding contractual commitments.
-- As at 30 September, Fund level gearing remained at 0%.
-- Additional project level debt funding of $60.0m secured
post-period through a First Citizens loan to support the build out
of the Company's 200.0MW/400.0MWh Big Rock asset in California.
Between the Santander and First Citizens facilities, the Company
has available debt financing of c.GBP99.0m. If fully drawn, total
debt would represent c.15% of GAV.
Net Asset Value (NAV):
-- NAV as of 30 September 2023 was GBP543.3m or 112.9 pence per
share, bringing NAV total return since IPO to 48.8%.
-- NAV per ordinary share decreased by 2.3% to 112.9p (115.6p as at 31 March 2023).
-- Portfolio valuation increased by 8%.
While the Company continued to demonstrate strong operational
performance, adjustments to short-term inflation and discount rates
(+ 25bps) were needed in response to the macroeconomic landscape
and were the primary drivers of the decrease in Net Asset Value
(NAV).
Table 2
Changes in
NAV per share
Movement in NAV since March 2023 in pence
------------------------------------------------------ --------------
NAV March 2023 115.6
------------------------------------------------------ --------------
Fund + Subsidiary Holding Companies Operating Expense (0.8)
------------------------------------------------------ --------------
Dividends (3.5)
------------------------------------------------------ --------------
Cash Generation 2.9
------------------------------------------------------ --------------
Discount Rate Increases (2.8)
------------------------------------------------------ --------------
Inflation (1.2)
------------------------------------------------------ --------------
Opex Savings 1.6
------------------------------------------------------ --------------
De-risking of Assets 1.2
------------------------------------------------------ --------------
Revenue Curves (0.9)
------------------------------------------------------ --------------
Other DCF Changes and Rollover 0.8
------------------------------------------------------ --------------
NAV 30 September 2023 112.9
------------------------------------------------------ --------------
Revenue Generation and Portfolio Performance
As energy grids around the world continue to move toward a
cleaner, more secure energy mix, the requirement for flexible
technologies able to provide stability to this transition is
increasing. This system need is stemming from not just from the
deployment of renewable generators, like wind turbines and solar
panels, but also from the increased volatility caused by climate
change and global conflicts.
Extreme weather events in recent years have become more frequent
and exposed the vulnerabilities of traditional energy
infrastructure, while shortages in fossil fuels have caused energy
prices to spike as demand outstripped supply.
The Company is one of the only energy storage providers to be
delivering crucial grid services across multiple jurisdictions,
bringing the benefits of the asset class to five different energy
systems (Great Britain, Ireland, Germany, Texas and California).
The international spread of the Company's portfolio allows it to
access a wide range of revenue streams, requiring active management
to ensure optimal performance.
The Company's commercial performance across the period improved
through adjustments in strategy, driven by transfers to new route-
to-market (RTM) providers in various markets, enabling access to
additional value from ancillary services and wholesale trading
markets.
The Company switched RTMs for its German (March '23) and Texan
(June '23) assets for the first time. The processes associated with
the selection of these new service partners differed significantly
from equivalent actions taken by the Company previously in GB and
involved engagement with new contractors, as well as enrolling into
new services the Company had not yet delivered.
The successful transition to new partners resulted in almost
immediate upsides as the Company's assets were able to capture
revenue previously unavailable to them. The US fleet provided
additional ancillary services beyond Response Reserve Service
(RRS), with ERCOT's Contingency Reserve Service (ECRS) being a
particular highlight across periods of higher load experienced
during, hotter temperatures in summer. Early prequalification of
the Company's Texan assets in late July through a new RTM partner
contributed to a +53% increase in revenue for the remainder of the
period, when benchmarked against a passive strategy focused on
pre-existing ancillary services.
The US, German and Irish assets also saw additional value in the
wholesale market as trading opportunities became more frequent,
with new and existing RTMs incorporating new opportunities into the
assets' revenue stacks. Whilst the Company maintains the view that,
over the short-term, ancillary services will continue to drive
revenues across all grids with currently operational assets,
exposure to a variety of trading strategies is integral to
sustaining revenue. The Company's German asset has demonstrated
this with the successful transition to a new data driven RTM
provider, which yielded a +38% increase through increased wholesale
trading activity against a passive strategy focused on the market's
Frequency Containment Reserve (FCR) service. The Company also
utilised its exposure to this kind of strategy in the Irish market
at times when opportunities from DS3 (Delivering a Secure,
Sustainable Electricity System) ancillary services, which provide
the bulk of revenue, were low, due to variations in renewable
energy.
Wind generation volumes will continue to drive these variations
as the single Irish electricity market progresses towards net-zero
targets. During the period, information was released on the Future
Arrangements market reform, starting in 2025, which will ultimately
transform the current DS3 market for providers of flexibility
whilst ensuring sustainability and security for consumers. The
Company is prepared to embrace these changes in network operations
as it has done in GB, which continues to present an ever-changing
volume of capacity procurement.
The Company's extensive experience with battery energy storage
system operations positions it well to maintain optionality between
RTMs whilst reducing the risk of unforeseen delays or issues when
switching contractors. This will facilitate the Company's ongoing
ability to capture new revenue opportunities and begin operations
in new markets.
Great Britain (GB) market
Table 3
TSO National Grid
--------------------------------- -----------------------
GB Portfolio (operational) 109.7 MW / 101.0 MWh
--------------------------------- -----------------------
Share of the market 3.5%(1)
--------------------------------- -----------------------
Revenue during the period (GBP) 3.6m
--------------------------------- -----------------------
Revenue per MW (GBP) 33,100 (GBP7.54/MW/hr)
--------------------------------- -----------------------
Revenue per MWh (GBP) 36,000 (GBP8.19/MWh/hr)
--------------------------------- -----------------------
EBITDA GB grid % of Total EBITDA 8.8%
--------------------------------- -----------------------
(1) Modo Energy Q3 battery build out report
While ancillary services continue to dominate the GB market, the
current level of saturation has resulted in a downward pressure on
prices. During the summer months, these reached their lowest levels
to date in stark contrast to the record highs observed during the
same period in 2022, particularly in Dynamic Containment (DC)
markets.
Despite a notable increase in the procurement volume of all
dynamic services, battery supply outpaced demand and, towards the
period-end, market participants sought additional value outside
ancillary markets. June saw a brief respite as National Grid ESO
reacted to increasing volatility in network frequency by increasing
levels of DC procurement. This event underscores energy storage's
ability to quickly and efficiently alleviate grid issues, which are
readily caused by increasing renewables penetration on the grid. As
this continues to rise the grid operator will require more
flexibility to manage system operators, creating higher demand for
energy storage.
Summer months in GB markets have historically seen lower
marginal prices in wholesale markets due to lower demand and
increased gas availability (with 2022 being an exception). High
renewables penetration occasionally drove prices negative during
the reporting period, creating arbitrage opportunities, though
these were short-lived. Consequently, asset owners/operators
primarily reverted to single-sided trading stacked alongside
ancillary services. Over the period, the Company participated in
pure arbitrage less than 1% of the time due to the limited
available margins.
The Company actively engaged in consultations related to the
Balancing Mechanism (BM), the near real-time market permitting
National Grid ESO to take final energy and system actions to
balance supply and demand and manage constraints. Despite
dispatching an average of 3 GW of power continuously, energy
storage systems faced under-utilisation due to the ESO's selection
of out-of-merit assets, despite not offering the best available
pricing.
It remains unclear why energy storage assets are skipped in
favour of larger, higher carbon assets, however, it is widely
considered to be linked to human error and technological
limitations in the National Grid ESO control room on the volume of
dispatch decisions. Energy storage market participants continue to
face these barriers and are, therefore, unable to properly factor
opportunities within the BM into their commercial strategy.
Anticipated reforms to the BM, including the introduction of a Bulk
Dispatch Operator in December 2023, aim to materially improve the
utilisation of energy storage systems active in the BM.
The Company acknowledges the complexity of the ESO's
decision-making process when assessing value for the consumer,
which is rightly a priority. Given the uncertainty around the
upside in value from forthcoming reforms, the Company maintains a
prudent approach, refraining from becoming reliant on potential
improvements to the BM for revenue growth.
Irish market
Table 4
TSO SONI (Northern Ireland), EirGrid (Republic
of Ireland)
------------------------------------ ------------------------------------------
Irish portfolio (operational) 130.0 MW / 72.6 MWh
------------------------------------ ------------------------------------------
Share of the market 50% in NI, 6% in RoI(2)
------------------------------------ ------------------------------------------
Revenue during the period (GBP) 9.7m
------------------------------------ ------------------------------------------
Revenue per MW (GBP) 74,800 (GBP17.04/MW/hr)
------------------------------------ ------------------------------------------
Revenue per MWh (GBP) 134,000 (GBP30.51/MWh/hr)
------------------------------------ ------------------------------------------
EBITDA Irish grid % of Total EBITDA 59.5%
------------------------------------ ------------------------------------------
(2) Energy Storage Ireland
While DS3 has continued to represent the dominant revenue stream
available to assets connected to the Irish grid, this value has
historically exhibited seasonal variations caused by changes in
wind volumes. These variations result in lower revenue under DS3
uncapped contracts during summer months, as the contractual tariffs
are directly proportional to the volume of renewable generation
(mostly wind) on the grid at any given time.
The reporting period defied these expectations due to regular
episodes of high wind penetration from May to August. This
significantly improved revenue, surpassing projections and
generating 57% of the FY2023 revenue within the six-month reporting
period, a notable increase compared to 36% in the same period the
previous FY. Towards the end of the reporting period, the Company's
Northern Irish fleet actively engaged in wholesale trading to
enhance baseline revenue from uncapped DS3 payments, which vary
throughout the day. The Company utilised advanced forecasting to
estimate when these variations would occur and diverted capacity
towards more lucrative opportunities in the wholesale market
compared to a passive DS3 strategy. The combination of increased
trading activity and uncapped DS3 revenues, which exceeded
forecasts for both the Mullavilly and Drumkee assets during the
period, presents a promising opportunity for long-term increased
revenue.
Mullavilly began trading at 5 MW to test the frequency of
dispatches and opportunities for higher revenues. September
experienced almost a full month under this strategy before an
increase to 10 MW on 29 September. The initial findings represent a
potential 46% increase in revenue on a MW basis when compared to
the availability- adjusted DS3 only strategy utilising 5 MW in
isolation, equivalent to GBP1,100/MW upside in revenue from
exploiting low DS3 events and aligning them with wholesale value.
Post-period, the Company has scaled up its volumes accessing
wholesale markets as well as deploying the strategy to other assets
across the Irish portfolio.
Wind volumes will continue to play a key role as the single
Irish electricity market progresses towards net-zero targets.
During the period, information was released on the future
arrangements market reform starting in 2025, which will ultimately
transform the current DS3 market whilst ensuring sustainability and
security for consumers. The Company remains well positioned to deal
with changes in procurement mechanisms due to its experience in GB,
which has offered varying levels of procurement since the Company's
inception.
German market
Table 5
TSO 50 Hertz, Amperion, Tennet, Transnet
BW
--------------------------------------- ------------------------------------
German portfolio (operational) 22.0 MW / 29.0 MWh
--------------------------------------- ------------------------------------
Share of the market (MaStR) (50 Hertz) <1% (Germany), <5% (50 Hertz(3) )
--------------------------------------- ------------------------------------
Revenue during the period (GBP) 0.8m
--------------------------------------- ------------------------------------
Revenue per MW (GBP) 38,600 (GBP8.79/MW/hr)
--------------------------------------- ------------------------------------
Revenue per MWh (GBP) 29,300 (GBP6.67/MWh/hr)
--------------------------------------- ------------------------------------
EBITDA German grid % of Total EBITDA 3.5%
--------------------------------------- ------------------------------------
(3) MaStR database
Following spikes in FCR prices experienced over the previous FY
caused by shortages in gas supplies, the Company prepared for
normalisation of the gas market and a subsequent fall in FCR prices
by opening its German strategy to increased trading activity.
Over the period, the Cremzow asset was, therefore, optimised
using a blend of FCR and wholesale trading. This was particularly
effective across June to August, when FCR accounted for a lower
percentage of the revenue stack (c.25%), meaning wholesale markets
offered more flexibility and higher revenues.
Working with the newly-selected RTM provider in Germany has
exposed the Company to new methods of algorithmic wholesale
trading, allowing for higher frequency trading with the optionality
for positions to be deployed physically. This is demonstrated in
just under 50 GWh of energy capacity being traded during the
period, with only a fraction of that being charged/discharged from
the grid.
The asset was also prequalified for the "secondary reserve
service" aFRR towards the end of the period. This product has two
elements focused on energy (akin to FCR) and power, procured in
15-minute blocks. The additional revenue stream will be secured in
conjunction with wholesale trading and FCR upon delivery, which
will begin this fiscal year.
ERCOT market (Texas, US)
Table 6
TSO ERCOT
------------------------------------ ------------------------
ERCOT portfolio (operational) 29.85 MW / 59.7 MWh
------------------------------------ ------------------------
Share of the market (ERCOT) <1%(4)
------------------------------------ ------------------------
Revenue during the period (GBP) 5.1m
------------------------------------ ------------------------
Revenue per MW (GBP) 171,600 (GBP39.08/MW/hr)
------------------------------------ ------------------------
Revenue per MWh (GBP) 85,800 (GBP19.54/MWh/hr)
------------------------------------ ------------------------
EBITDA ERCOT grid % of Total EBITDA 28.2%
------------------------------------ ------------------------
(4) ERCOT September GIS report
The Texas assets also transitioned to a new RTM provider towards
the end of June 2023, a month that experienced the first heatwave
of the summer period. This resulted in RRS prices spiking to just
under $2,500/MW across the peak hours of multiple days in a row,
contributing to $800k generated in revenue over the full month of
June.
The selection of a new RTM allowed assets to provide a wider
suite of services and trading activity in the wholesale market.
This included the newly introduced ECRS, which requires two hours
of delivery and constituted a pivotal factor in the overall
performance of this period. Without transitioning to the new RTM,
it is unlikely the Company would have been exposed to this service
and would, therefore, have captured lower revenue.
As June heatwaves cooled into July, prices across ancillary
services returned to baseline levels as requirements were easily
satisfied. In August, however, temperatures increased to over
40degC (105degF) for sustained periods, with peak demand of over 85
GW reached due to increased use of air-conditioning, in particular.
With thermal generation (gas and coal) typically used to meet high
demand on annual maintenance or unable to come online due to
temperatures, the TSO went to the market for reserves (RRS, ECRS)
in the absence of interconnections with surrounding regions. As the
situation progressed throughout the month, ECRS clearing prices
moved from over $2,500/MW, given the low volume of providers
pre-qualified for the service, to reach a maximum of over
$4,000/MW.
The RTM adjusted the strategy to a blend of ECRS, RRS and
wholesale trading as calls for the new two-hour service grew,
ensuring the maximum value for delivering energy was achieved for a
given day. This allowed the Company's Texas assets to generate
$3.5m in August from just ECRS.
One final temperature spike early in September saw prices
achieve $2,000/MW before dropping away towards the end of the
period. The assets were able to deliver GBP5.1m in the first six
months of FY23/24 compared to GBP3.8m across the entire previous
the full financial year, equating to an 85% increase in revenue
compared to the same period in 2022.
The Company expects these market conditions to continue until
2025 on the basis that the availability of flexible capacity (15
GW) will remain consistent with the levels seen during the period
(14 GW in 2023)(5) . The Company has evaluated the expected load
profile over the coming two years and concluded that should the
necessary generation not come online to meet the increased demand
on the system from consumers, as the latest forecasts suggest,
ERCOT will experience frequent scarcity events. As seen during the
period, these scarcity events enable high battery revenues through
reserve services and wholesale volatility.
(5) Calculated based on Aurora Energy Research October 2023
ERCOT Flexible Energy Market Forecast Data
Table 7
1 April -
30 September
2023 % within
GBP(000s) grid % of portfolio
--------------------------------------- ------------- ---------- ----------------
GB - 109.7 MW / 101.0 MWh
--------------------------------------- ------------- ---------- ----------------
Ancillary Services 2,590 71%
--------------------------------------- ------------- ---------- ----------------
Capacity Market 618 17%
--------------------------------------- ------------- ---------- ----------------
Wholesale Trading 426 12%
--------------------------------------- ------------- ---------- ----------------
GB Total(6) 3,634 19%
--------------------------------------- ------------- ---------- ----------------
Ireland - 130.0 MW / 72.6 MWh
--------------------------------------- ------------- ---------- ----------------
DS3 Capped/Uncapped 9,480 97%
--------------------------------------- ------------- ---------- ----------------
Capacity Market 216 2.2%
--------------------------------------- ------------- ---------- ----------------
Wholesale Trading 32 0.3%
--------------------------------------- ------------- ---------- ----------------
Ireland total 9,728 50%
--------------------------------------- ------------- ---------- ----------------
Germany - 22.0 MW / 29.0 MWh
--------------------------------------- ------------- ---------- ----------------
Ancillary Services 303 36%
--------------------------------------- ------------- ---------- ----------------
Wholesale Trading 547 64%
--------------------------------------- ------------- ---------- ----------------
Germany Total(7) 849 4%
--------------------------------------- ------------- ---------- ----------------
ERCOT - 29.9 MW/59.7 MWh
--------------------------------------- ------------- ---------- ----------------
Ancillary Services 4,633 90%
--------------------------------------- ------------- ---------- ----------------
Wholesale Trading 490 10%
--------------------------------------- ------------- ---------- ----------------
ERCOT Total 5,123 27%
--------------------------------------- ------------- ---------- ----------------
Portfolio Total - 291.6 MW / 262.3 MWh 19,334
--------------------------------------- ------------- ---------- ----------------
Market Revenue GBP(000s) GBP/MW/hr GBP/MWh/hr
---------------- ----------------- --------- ----------
GB 3,634 7.54 8.19
---------------- ----------------- --------- ----------
Irish 9,728 17.04 30.51
---------------- ----------------- --------- ----------
German 849 8.79 6.67
---------------- ----------------- --------- ----------
ERCOT 5,123 39.08 19.54
---------------- ----------------- --------- ----------
Weight averages 15.10 16.78
---------------- ----------------- --------- ----------
September
June - end -
Total Revenue GBP(000s) quarter end quarter
------------------------ ---------- ------------
GB 1,859 1,775
------------------------ ---------- ------------
NI 3,552 5,413
------------------------ ---------- ------------
RoI 378 384
------------------------ ---------- ------------
Germany 340 509
------------------------ ---------- ------------
ERCOT 798 4,325
------------------------ ---------- ------------
TOTAL 6,929 12,406
------------------------ ---------- ------------
(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
Asset Performance
The portfolio performed well with average availability
incorporating all commercial operations downtime, including planned
preventive maintenance, exceeding 95% across the reporting
period.
Great Britain:
Cenin, Lower Road, and Port of Tilbury achieved availability
above 99%, with Breach, Hulley, Larport and Lascar following
closely with over 97% availability on average. Ancala faced
challenges, with efforts underway to resolve issues at Heywood
Grange and Brook Hall. Boulby achieved lower availability during
the period, with ongoing initiatives for improvement.
Ireland (Northern Ireland and the Republic of Ireland):
In Ireland, all three operational assets-Mullavilly, Drumkee,
and Porterstown-consistently demonstrated high availability and
reliable performance during the reporting period. Mullavilly and
Drumkee in Northern Ireland achieved over 99% availability, with no
major risks identified. Porterstown maintained near-faultless
performance, achieving 100% availability.
Germany:
The Cremzow project, developed in two phases, encountered
availability issues primarily due to extended lead times for spare
parts related to the 2.0 MW pilot project. As necessary spares are
being procured and issues addressed, an increase in availability is
anticipated in the next reporting period.
Texas:
The projects in Texas-Snyder, Sweetwater, and Westover-exhibited
impressive resilience, achieving 94% availability despite high
temperatures. Inverter failures in September affected Snyder,
however, ongoing resolutions with suppliers are expected to rectify
the issue. Sweetwater maintained strong performance, achieving over
95% availability during the period, while a failed network switch
affected Westover's availability for a short time before additional
spares were procured to minimise future impacts.
Project progress overview
Great Britain (GB):
Stony was energised in September 2023.
Energisation and commencement of commissioning for Ferrymuir are
awaiting completion of the last remaining non--contestable work
packages carried out by Scottish Power Energy Networks, including
telecommunication and SCADA works. All other material
non-contestable works, including the Point of Connection circuit
breaker modification, have been completed. The slight delay to the
grid connection works program has been driven by resourcing
problems at the distribution network operator and the insolvency of
the main sub-contractor undertaking contestable works on behalf of
the Project.
Procurement, manufacturing, and delivery of key battery
components for Enderby are complete, with works progressing well on
site. The project is on track to meet its energisation target of
May 2024.
California:
The Big Rock asset in California is progressing well and, as of
the date of publication, is in construction. Contractors have been
mobilised, with the construction of civil engineering works
underway, and batteries have been delivered, with the first
enclosures shipped. Key high- voltage equipment for the substation
has been procured, manufactured and stored in project controlled
warehouses. The Investment Manager remains confident of the asset's
energisation date.
Texas:
Initial contracts have been signed, and design, as well as
procurement, has been kicked off for the advanced engineering and
delivery of a high-voltage grid connection customer substation for
Dogfish. Contracting for the battery system is nearing completion.
The project is progressing in accordance with the planned timeline,
aligning with the energisation target.
Ireland:
Transformer and civil engineering works for Porterstown Phase II
are complete, with detailed engineering and procurement for the
battery system underway. Despite a minor delay, energisation is
targeted for October 2024.
Kilmannock, designed to accommodate Phase I and II, has
finalised layout and earthworks designs. Consent updates are in
progress, and both phases remain on schedule.
Pre-Construction development (Middleton and Dallas &
Surrounds portfolio)
Pre-construction efforts at Middleton and the broader Dallas
& Surrounds portfolio (Mineral Wells, Mesquite, Wichita Falls,
and Cedar Hill) are progressing in accordance with grid
availability. The projects are on track to meet their respective
energisation targets.
There is an active exploration of site expansion across the
Company's existing portfolio, with an initial focus on capacity
(MW) expansions as this represents greater additional value in most
markets. The Investment Manager is also exploring and progressing
with opportunities for augmentation of assets with additional
duration (MWh) in specific locations where market signals support
the investment case.
Table 8
Project Target Energisation Capacity
----------------- ------------------- --------
Stony Energised 79.9 MW
----------------- ------------------- --------
Ferrymuir Jan - end 2024 49.9 MW
----------------- ------------------- --------
Enderby May - end 2024 57.0 MW
----------------- ------------------- --------
Porterstown Ph II Oct - end 2024 60.0 MW
----------------- ------------------- --------
Big Rock Dec - end 2024 200.0 MW
----------------- ------------------- --------
Dogfish 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 H2 2025 30.0 MW
----------------- ------------------- --------
Kilmannock Ph II H2 2026 90.0 MW
----------------- ------------------- --------
Middleton H2 2026 200.0 MW
----------------- ------------------- --------
Q&A with Sumi Arima
Sumi Arima
CIO and CFO of Gore Street Capital, the Investment Manager
Q: What new revenue streams has the Company pursued during the
reporting period?
We sought out new RTM partners during the period to secure
additional opportunities and ultimately increase revenue generation
from the global portfolio.
Following the selection of a new RTM in Texas, the Company was
able to secure prequalification for ECRS, a daily procured
ancillary service introduced in June 2023. The first of the
Company's assets began providing ECRS on 29 July, and in the months
since, the Texas sites have been delivering portfolio- leading
revenue, including an average of GBP156/MW/hr in August alone -
totaling GBP3.5m for the month.
We have also entered day-ahead and real-time energy trading
markets in Texas as part of a more diverse strategy. The Company
has always had some capability in the real-time market, but this
has now been more fully enabled to create a more effective trading
strategy.
We were also able to select a data-driven RTM provider in
Germany and achieved prequalification to start delivering aFRR
post-period, in addition to continuing to provide FCR. Germany also
has the deepest wholesale market opportunity from the grids we are
active in by a significant margin and, therefore, is providing the
Company with unique insight into high-frequency trading. We have
been able to apply this knowledge to the strategies we are enacting
across the portfolio, which has been optimised across four energy
grids to maximise profitability while delivering a valuable
contribution to grid stability.
In Ireland, for example, there are periods where ancillary
services revenue is lower. We are, therefore, ensuring the
Company's assets are able to take advantage of wholesale trading as
a higher-value alternative revenue stream when appropriate.
Should the depth and additional liquidity come to the GB market,
as is expected in the coming years as more renewables are deployed,
we will be well placed to deploy this kind of strategy.
Q: How are the Company's operational assets in Texas delivering
value from the volatile market?
We've seen in recent years how volatility caused by weather
events in Texas has created massive demand for energy storage. The
Company's near 30 MW/60 MWh operational portfolio plays a
significant role in responding to these periods, which often
experience spikes in pricing up to $4,000 in ancillary services and
over $5,000 in real-time markets. Scarcity has the potential to
last for longer periods, as we saw this summer when the fleet
generated $1.7m across 24-27 August due to high temperatures
creating the same conditions on each day. Maintaining fleet
availability during these spikes has been a crucial means of
success for the Company's Texas assets, allowing material revenues
to be captured in a short period. From the beginning of June
through to the end of August, the Manager's in-house asset
performance team kept the three Texas assets at an average
availability rate of 94%, ensuring they could respond to the
increased volatility experienced on the ERCOT grid during heatwaves
experienced over this summer period.
These assets began delivering the ECRS service, which responds
to both losses of load on the ERCOT grid and ramping of load or
demand, often caused by changes in renewable generation. In summer
months, the change from daytime solar generation to evening
capacity is stark (often referred to as a duck curve due to the
shape of the evening net demand curve), and our assets are adding
resilience to the Texas grid by helping manage this transition.
While this ramping is not as prominent in winter due to reduced
daylight hours, we expect to see some revenue generation from the
changes in output from the state's fleet of wind turbines. These
months, however, have different requirements from the ERCOT energy
system, as cold snaps can result in failures across traditional
infrastructure. This increases volatility as the assets available
on the grid can attract higher prices for their deliverability,
creating opportunities for energy storage.
Q: How are the varying system durations across the portfolio
suited to the markets in which they operate?
GSF is unique in being the only listed vehicle with four
different durations within its portfolio: sub-30 minutes in
Northern Ireland, both 30 minutes and one hour in both the Republic
of Ireland and Great Britain, 90 minutes in Germany and two hours
in Texas, with a two-hour system to follow in California. For those
assets built on behalf of the Company, minimising capex has always
been a focus, and we have, therefore, sized their technical
capabilities to suit the revenues available in each market.
The Northern Ireland portfolio has illustrated the success of
this approach during the reporting period, earning
industry--leading revenues from the uncapped DS3 suite of ancillary
services from less than half an hour of energy delivery achieving
5.8x of the GB revenue in the period on a MWh basis.
The capabilities of the Company's two-hour operational Texas
assets have also proved advantageous following the introduction of
ECRS in June. This service requires providers to have two hours of
capacity reserved for delivery at all times, and while this could
be served by a one-hour system delivering half its capacity across
the period in which it is triggered, we have been able to utilise
the full pre-qualified capacity of 9 MW of the operational Texas
assets since they first entered the service on 29 July to secure
high revenues as an early pre-qualified asset.
The 200 MW/400 MWh size of the Big Rock asset in California is
strategically designed to enable the asset to qualify for the
Resource Adequacy (RA) mechanism, which requires four hours of
delivery. The asset has 100 MW of RA deliverability and will also
operate within ancillary services and wholesale trading markets
within California with 200 MW capacity.
To date, the Company has deployed optimal duration for the
markets in which it operates to avoid overspending on energy
storage systems with underutilised excess duration. In certain
markets, like GB, it is still not evident when the commercial
opportunity to utilise larger MWh capacity will materialise. Today
the opportunities aren't there to allow a trading strategy that
would justify the added expense of building longer duration
systems. The only other market to reward such systems in GB -
Dynamic Regulation - is significantly oversubscribed, reducing the
value than can be accrued to justify higher capex for larger
capacity. The Manager has ensured the Company is prepared for any
changes to these realities and maintains the flexibility to upgrade
assets if and when the market signals provide an incentive to do
so.
Q: You've spoken about diversification, but does it work?
For a largely merchant asset-class like energy storage,
diversification is a fundamental necessity to reduce revenue
volatility. Within Great Britain, opportunities to diversify are
limited due to uniform revenue streams and consistent wholesale
electricity prices across all regions. This uniformity results in
significant fluctuations in revenue year on year. Seasonal
variation also creates large fluctuations in quarterly revenue,
with Spring and Summer historically yielding higher revenues
compared to the Fall and Winter seasons.
The Company has always factored these revenue variations into
its decision making, which is why international diversification has
been a key strategic objective. Today, it is unique in holding
assets across five distinct and uncorrelated energy systems. This
enables the Company to navigate the challenges posed by individual
market fluctuations by accruing more stable and reliable revenue
generation throughout the year from multiple markets. This can be
seen in the Company's revenue over this reporting period, when
revenue from its GB fleet was GBP7.54 per MW/hr, compared with
GBP15.10 per MW/hr on a consolidated portfolio basis, representing
c.2x vs a GB-only portfolio.
Figure 3 in the 2023 Interim Report shows the standard deviation
in revenue generated per quarter since IPO by GSF's GB fleet, which
amounts to c.GBP 4.95 per MW/h. When analysing the consolidated
fleet, however, which also includes assets in Ireland, Germany and
Texas, this quarterly figure drops to GBP2.68 per MW/h. The
reduction of approximately 50% (post-FX) showcases the tangible
impact of diversification on revenue stability and, thus, the
Company's ability to sustainably pay dividends to its investors. As
the Company continues to build out new capacity outside of GB,
volatility in revenues is expected to reduce further.
Q: How is the Company's acquisition strategy delivering better
value for shareholders than alternatives?
The Company made a choice early on to acquire ready-to- build
projects - those with land rights, planning permission and a grid
connection all secured - where possible in order to manage the
buildout process leveraging the Investment Manager's in- house
technical teams. This ultimately leads to higher returns compared
to an operational asset purchase strategy due to the successful
management of the higher risk profile of construction projects,
which can be built at cost without a markup included in the
purchase price. In addition, the Company's strategy ensures the
best quality operational assets due to the tight controls in place
from start to finish while continually bolstering the knowledge and
expertise kept in the Investment Manager to be applied to future
projects.
As the Company's presence continues to grow in scale, it is able
to leverage its experience as an international owner to select
favourable markets and projects whilst also evaluating any
potentially advantageous capital recycling programs. The
composition of the international portfolio is, therefore,
continuously evaluated to ensure all capacity remains wedded to the
Company's goals.
Q: To what extent is the market saturation experienced in GB
emerging in other markets?
As a first mover, the Company factors in declining revenue
streams in all the markets it operates in as we understand new
entrants will follow and place downward pressure on prices. This
has been seen in GB every two to three years since 2017, generally
driven by new project lead times, and leaves the market's 3 GW
operational fleet competing over reducing revenues. The reductions
seen in ancillary services prices over the reporting period are a
strong indication this saturation is tightening.
The Company has been deploying capacity in other markets to
increase access to a wider range of revenue streams. The early
moves into these markets allowed the Company to establish itself
ahead of others, who are likely to face high barriers of entry and
lack the experience operating in such markets that the Manager has
built up over the past two years.
In the single integrated Irish grid, for example, which remains
a nascent market, connection delays and limitations on grid needs
for new capacity means for those already operating assets,
saturation is not an immediate concern. The potential for more
frequent procurement of ancillary services following the retirement
of the DS3 program bodes well for the Company, which will be able
to leverage its experience in other markets with competitive
auctions and shorter-term contracts.
Concerns over the potential for market saturation in the ERCOT
market in Texas, given the rapid deployment of energy storage in
recent years, fail to consider the scale of renewables capacity
planned for the coming years, alongside the retirement of
traditional thermal generation.
Wind and solar generation, which is already being curtailed in
the state, could more than double from 50 GW at the end of 2022 to
104 GW(8) by 2035, ensuring an ongoing need for energy storage
through services like ECRS. It is not a correct comparison to judge
energy storage growth in ERCOT against today's ancillary service
needs, which will only grow as the system continues to
decarbonise.
The continued cycle of extreme weather events witnessed in Texas
in recent years adds to this need. Price spikes continue to
increase as each heatwave causes increasing demand for supply
resources to serve both the ancillary services and energy
markets.
As with ECRS, more opportunities will always emerge for energy
storage, including in GB, where the full suite of ancillary
services has yet to be deployed. Procurement levels for the 2024
introduction of quick and slow reserve have yet to be revealed, but
these new services could help reduce the current market saturation.
Additional reforms planned for the Balancing Mechanism and a
subsequent shift in merchant trading opportunities may also help
alleviate the revenue issues seen in GB. These upcoming market
drivers could reduce downward pressure on prices as more
opportunities for market participants emerge, increasing demand for
energy storage.
We would expect to see this cycle of tightening market
saturation restricting new entrants, followed by more opportunities
for existing market players, in every market.
(8) Aurora EOS:
https://eos.auroraer.com/dragonfly/insights/region/erc/home/content/2102
Q: How is the Company managing its cash flow and future
deployments?
The scale of the Company's international portfolio and
assessment of potential pipeline opportunities requires a prudent
approach to capital deployment. Despite the diversified assets
generating cashflows, the Company must strategically prioritise
asset buildouts, taking into account capital requirements, contract
structures and expected returns to contribute to dividend cover
once operational.
As at period-end, the Company and its subsidiaries had GBP89m of
cash and cash equivalents and a GBP50m Revolving Credit Facility
("RCF") with Santander, which are sufficient to cover its
contractual obligations of c. GBP64m. The RCF also features an
accordion option to increase beyond GBP50m to up to 30% of Gross
Asset Value ("GAV").
Post-period, the Company secured a $60m loan facility from First
Citizens Bank. The Investment Manager intends to draw down from
this loan to optimise returns through the construction of the 200
MW Big Rock asset in CAISO, which is expected to be backed by up to
40% of contracted revenues.
The Company is continuously monitoring the use of debt given its
prevailing costs and intends to make drawdowns only when it is
advantageous to do so. As at 30 September, gearing stood at 0% of
GAV. The Investment Manager has been incrementally making use of
the competitively priced First Citizens loan since the period
end.
NAV Overview & Drivers
Cash generation during the reporting period was GBP14m.
Net Asset Value (NAV) movements during the period reflected the
macroeconomic context in which the Company is operating.
Adjustments in inflation assumptions and an increase to discount
rates (+25bps across the portfolio), required to ensure the
Company's valuation assumptions remained aligned with the
prevailing macroeconomic environment, resulted in a GBP19m
reduction in NAV. Revenue forecasts were updated to reflect the
current pricing trends in GB, resulting in an additional GBP4m
reduction in NAV.
Positive drivers of NAV during the period included the Company
achieving key milestones for portfolio assets under construction.
As the assets are de-risked through stages of construction,
discount rates are naturally unwound to reflect the updated risk
profile. During the period this resulted in an NAV uplift of GBP6m.
Operational expenditure savings achieved during the period also
provided a material GBP8m uplift to NAV.
A further increase of GBP4m was due to other Discounted Cash
Flow (DCF) changes, including updated repowering assumptions and,
due to the proportion of construction assets, the rollover across
the portfolio added to the net positive effect on NAV.
Table 9
Construction
and
FV Breakdown by Grid (in GBPm) pre-construction Operation
------------------------------- ----------------- ---------
GB 151.9 43.6
------------------------------- ----------------- ---------
Ireland 13.9 74.6
------------------------------- ----------------- ---------
Germany n/a 14.0
------------------------------- ----------------- ---------
ERCOT 12.5 20.7
------------------------------- ----------------- ---------
CAISO 140.6 n/a
------------------------------- ----------------- ---------
Revenue Forecasts
GB:
GB's updated third-party revenue forecasts have been reflected
with a central blend of forecasts and have seen a decrease in
forecasted prices driven by the current drop in market prices. The
prior application of prudent valuation assumptions has largely
mitigated the effect of lower third-party curves.
IRE:
Updated third-party revenue forecasts reflecting a central blend
of forecasts were used. The net effect of the updated curves on the
Irish portfolio was an uplift compared to the previous financial
year-end.
The Porterstown asset in the Republic of Ireland has secured a
Capacity Market contract for the period from September 2023 to
October 2024, which was reflected in the valuations.
GER:
Updated central case scenario third-party revenue forecasts were
used in the model, creating an uplift in the German asset's
valuation. The application of a hybrid business model curve
(ancillary services & trading) supported this uplift. The
adoption of this hybrid curve followed the German asset's material
participation in the trading market during the reporting
period.
ERCOT:
Updated third-party central case scenario forecasts have been
applied to the models and did not cause material changes in price
levels.
CAISO:
Third-party base case scenario merchant revenue forecasts have
been updated and, similar to ERCOT, did not have material changes
in price levels.
Table 10: MW Capacity by Grid in Respective
Years
2023 2024 2025 2026
-------------------------------------------- ---- ---- ---- ----
GB 190 297 297 497
-------------------------------------------- ---- ---- ---- ----
ERCOT 30 105 145 145
-------------------------------------------- ---- ---- ---- ----
CAISO 0 200 200 200
-------------------------------------------- ---- ---- ---- ----
GER 22 22 22 22
-------------------------------------------- ---- ---- ---- ----
NI 100 100 100 100
-------------------------------------------- ---- ---- ---- ----
RoI 30 90 120 210
-------------------------------------------- ---- ---- ---- ----
Inflation
The inflation assumptions have been updated to reflect a
decrease in inflation throughout 2023 and 2024 compared to the
assumptions at the previous financial year end. The long-term
inflation assumption remains consistent with those disclosed
previously.
Table 11
CPI Assumptions 2023 2024 2025+
---------------- ----- ----- -----
GB 4.63% 2.75% 2.50%
---------------- ----- ----- -----
EUR 3.11% 2.75% 2.50%
---------------- ----- ----- -----
US 3.31% 2.75% 2.50%
---------------- ----- ----- -----
Discount rates
The weighted average discount rate across the portfolio was
10.3% (10.1% in FY23 end) as at 30 September. A 25 bps increase was
applied to discount rates across the portfolio, reflecting the
increased risk-free rate. For relevant assets, construction premia
have been reduced in line with major construction milestones
completed.
Table 12
Pre-construction Construction Energised
Discount Rate Matrix phase phase phase
--------------------- ---------------- ------------ ----------
Contracted Income 10.40-11.00% 9.25-10.25% 7.25-9.25%
--------------------- ---------------- ------------ ----------
Uncontracted Income 10.40-11.00% 9.25-10.25% 8.75-9.25%
--------------------- ---------------- ------------ ----------
MW 694.8 106.9 371.5
--------------------- ---------------- ------------ ----------
Opex
The Investment Manager's experienced in-house asset management
team enables the portfolio assets to benefit from lower costs and
increased technical supervision.
Material operating expenditure savings were achieved during the
period by taking several third-party services in-house, including
asset management and certain O&M workstreams for operational
Irish assets; asset management for Cenin, Stony, Enderby, and
Ferrymuir in GB; and RTM fee reductions for the Texas operational
portfolio.
Newly executed contracts with opex impacts have been reflected
in the US assets' models, such as insurance and substation
facilities expenses.
Capex
Repowering curve assumptions have been updated, reflecting a
slight increase in the long-term forecast of battery prices.
However, the Company's assets have a significant portion of their
useful life left before they are scheduled to be repowered.
For relevant construction assets, the upfront capex schedules
have been revised based on developing discussions with
contractors.
Sensitivities
NAV sensitivities were applied to analyse the impact of changes
in macroeconomic factors and key valuation assumptions on the NAV
of the portfolio. The following sensitivities were applied:
a. Inflation rate: +/- 1.0%
b. FX volatility: +/- 3.0%
c. Discount rate: +/- 1.0%
d. EPC costs +/- 10.0%
Outlook Message from Alex O' Cinneide
Dr Alex O'Cinneide
CEO of Gore Street Capital, the Investment Manager
CEO Statement
I am pleased to report that the Company's strategy, enabled by
the active role of the Investment Manager, despite difficult stock
market conditions, has allowed the business to continue to
overachieve during a challenging period. Since inception, it has
generated a 20% per annum cash yield over invested capital, and
during the September end quarter, the Company delivered an
operational dividend cover of 1.15x. This positive trajectory is
reflected in portfolio performance, which maintained the highest
revenue on both a per MW and absolute basis among our listed peers
during the period. This was achieved through diversification, with
assets in Ireland, Texas and Germany overachieving against base
case. The slight decrease in NAV is wholly due to changes in the
discount rate and inflation assumptions, with high-interest rates
expected to continue, and does not reflect the exemplary
performance of the Company's commercial operations. With a NAV
Total Return of 48.8% since IPO, an excellent balance sheet given
our minimal level of debt, and a strong cash position, the Company
remains in a compelling and sustainable position.
While we expect energy storage to continue to play a crucial
role in the decarbonisation of GB, the growth of the market in just
a short number of years has resulted in new entrants exceeding
demand for their services. The expected market saturation we are
currently experiencing caused reduced prices during the reporting
period, particularly in the summer months.
Due to the international spread of the Company's operational
assets, these market dynamics did little to impact the industry-
leading revenues that were achieved during the period, in part, by
tackling volatility caused by the climate crisis.
Heatwaves have become a predictable feature of summer months in
Texas, as seen by the record-breaking temperatures experienced
across the latest reporting period. As power demand achieved new
heights across the state, the Company's operational portfolio in
the ERCOT market was able to capture value from price spikes as
high as $4,000/MW/hr while supporting the constrained grid system
to deliver capacity when needed most. Early prequalification for
the new ECRS service allowed the Company to reach average monthly
revenues of GBP156/MW/h in Texas in August, with its three
operational assets generating GBP3.46m in August alone.
This first mover mentality continues to pay off in the single
integrated Irish electricity market, where the Company was among
the first to establish itself with the DS3 program.
While DS3 services have proven effective in responding to the
needs of an increasingly decarbonised grid, the structure of future
delivery of ancillary services is uncertain after the Irish
transmission system operators and regulator set out proposals to
reform the suite of ancillary services in the reporting period. The
Investment Manager is already engaging in the development of this
process to safeguard future revenue streams for the Company's
assets.
In addition to these ancillary service activities across the
portfolio, the assets have also derived additional value from the
wholesale market as trading opportunities became more frequent.
While the Company has always taken a realistic view of the
emergence of trading as a dominant revenue stream for energy
storage, the reporting period has shown we are ready to act on any
opportunity as it arises. With the support of new and existing
partners, we have been able to optimise trading across the US,
Germany and the Irish grid.
The expertise we are continuing to build will pay dividends in
future reporting periods when more of the Company's assets enter
commercial activity. The 80 MW Stony project was energised in
September while the 50 MW Ferrymuir project is ready and awaiting
final works by the network operator. The Company's biggest project
to date - the 200 MW/400 MWh Big Rock asset in California - has
also been advancing at speed through the efforts of the Investment
Manager. A $60m loan agreement with First Citizens Bank was secured
post-period to introduce project-level debt into the portfolio for
the first time. It will be used to fund the remaining capital costs
of the Big Rock project, which, to date, has been funded with GSF
equity.
While we have remained mindful of the changing macroeconomic
challenges, updating the Company's NAV accordingly, the exciting
advancements made by the Company during the reporting period along
with continued industry- leading revenues ensure we are
well-positioned for sustainable growth.
Delivery against strategy
The Company has continued to deliver industry-leading revenue
during the reporting period thanks to the new RTM partnerships and
refined strategies introduced across its uniquely diversified
revenue streams. Improvements in revenues were delivered through
new RTM partnerships and refined strategies, including
participation in trading markets in Germany, Texas and Ireland.
Optimisation of asset management functions has further complimented
the profitability of the Company during the period, resulting in
material and ongoing cost savings.
During the period, the Company's operational fleet grew further
with the energisation of the Stony asset. Significant progress has
been made in the buildout of Big Rock and Enderby in line with
project schedules.
As indicated to investors, the Company has continued to put a
suitably mature capital structure in place. This began with the
upsizing of the existing debt facility from GBP15m to GBP50m
through a revolving credit facility, with an accordion facility
option to increase beyond GBP50m to up to 30% of Gross Asset Value
("GAV"), secured at the fund level from Santander and was followed
by project-level debt secured for its California asset, the 200
MW/400 MWh Big Rock project. Post-period, the Company successfully
secured a $60m First Citizens loan for a period of three years at a
competitive cost compared to GBP debt. The progress made on
Resource Adequacy contracting for the Big Rock asset further
supports the improved capital structure.
The increased debt availability adds to the funding sources
providing sufficient headroom for the Company to continue meeting
its working capital, capex, dividend and other financial
commitments without the need for additional equity raise in the
short-term. These include: GBP75m in Company cash reserve and a
further GBP13.9m across its subsidiaries as at 30 September 2023.
The Company maintains its prudent approach to leverage with
drawdowns made only when it is advantageous compared to the
resulting costs, while the facilities are kept available to support
growth during improving market conditions.
In response to increasing costs in the debt markets, the
Investment Manager continuously assesses various strategies to
optimise the use of available funds. One such strategy is the
prioritisation of construction-ready projects based on buildout
schedules and sizes. As part of this strategy, the Investment
Manager has decided to prioritise the construction of Dogfish and
progressed with its procurement.
The Company continues to maintain a strong balance sheet with a
total available liquidity of GBP135m as at 30 September 2023.
With the additional CIT loan facility secured post-period and
future cash generation capability, the Company is well--positioned
to manage liquidity in the coming years.
Outlook
Equity markets, particularly for renewables infrastructure, are
navigating challenging terrain amidst the ongoing pressure from
central banks' persistent "higher for longer" rate signals. Despite
its leading global dividend yields, the UK is trading at a historic
discount compared to other regions. While the market is likely to
be close to or already at the peak of interest rates, the Bank of
England is expected to reduce the base rate gradually, given the
persistent nature of inflation in the UK, with some forecasts not
predicting a decline in the base rate until mid-2024.
The Company has demonstrated resilience during these challenging
market conditions and continues to execute against the strategy
outlined to investors in the investment policy. As highlighted in
the previous Annual Report, the Company is focused on the following
areas: outperforming revenue benchmarks, increased EBITDA margin,
and the buildout of the Company's portfolio.
Buildout of the Portfolio
Following the successful energisation of 79.9 MW, the Company is
now focused on the construction of Ferrymuir and Enderby in GB,
scheduled for energisation in January and May 2024, as well as
other prioritised assets. The Company has targeted the energisation
of an additional 442 MW before the end of 2024, including the
expansion of the Porterstown asset in Ireland and the Big Rock and
Dogfish assets in California and Texas.
As a real asset investor, the increased operational capacity
directly impacts cash generation and dividend cover. These assets
not only provide yields but also offer capital appreciation as they
progress from the construction to the operational stage.
RA and ITC Processes
The Investment Manager is in advanced stages of contracting
under the Resource Adequacy (RA) mechanism, a service available to
energy storage operators in the CAISO market (California). The RA
market is currently observing favourable prices for batteries with
commercial operation dates (CODs) before the end of 2025, driven by
a high demand for RA providers in the near term. Big Rock benefits
from this market trend through its Dec-24 target COD with the
ability to secure 10-15-year bilateral contracts, which it intends
to confirm in early 2024 at the currently attractive pricing
levels.
The Company is also looking to monetise the Investment Tax
Credit (ITC) available under the US Inflation Reduction Act for its
US assets, which qualify for at least 30% of ITC. The market will
be updated in due course once negotiations for the correct long-
term partner for both streams have been suitably progressed.
Positive Policy Developments
The US Inflation Reduction Act has significantly benefited the
deployment of energy storage assets and, provides the Company with
substantial capital expenditure reimbursements post- energisation.
The strong incentives also accelerate renewable penetration acting
as the fundamental driver for increased need for energy storage and
subsequent revenues.
The $368bn policy package has also prompted action from the
European Commission, which released a series of recommendations for
accelerating the integration of renewable and low-carbon
technologies, including energy storage, that are now being
discussed at the European Council level. This marks a significant
and direct intention to support energy storage in European policy,
aligning with the industry's long-held beliefs regarding the
technology's pivotal role in achieving a decarbonised and secure EU
energy system.
Additionally, the Net Zero Industry Act, which aims to ensure
that at least 40% of the EU's annual deployment needs for strategic
net-zero technologies are met by 2030, now includes electricity
storage technologies. Coupled with recent changes to state aid
rules, this inclusion is expected to accelerate investments in the
manufacturing and deployment of energy storage, facilitating
Europe's journey to supply chain independence.
As an asset owner with operational capacity in the EU and an
active pipeline across the continent, the Company is
well--positioned to capitalise on the upcoming changes to the
policy landscape.
Policymakers in GB are proving slow to share their response, and
given recent policy announcements delaying the country's climate
targets and proximity to a general election, the Investment Manager
does not expect an improved policy agenda until after the general
election.
Next Steps
We approach 2024 with tempered optimism, recognising the
inherent opportunities of the Company's diversified approach. Given
the current pricing landscape in GB, continuing to build on the
Company's international presence will ensure it continues to tap
into a diverse mix of revenue streams across multiple uncorrelated
markets. This international emphasis will become increasingly
evident in 2024 and beyond as the Company brings more international
capacity online.
Directors' Interim Report
Principal Risks and Uncertainties
The principal risks and uncertainties with the Company's
business fall into the following categories: Changes to Market
Design; Inflation; Exposure to Lithium-Ion Batteries, Battery
Manufacturers, and technology changes; Service Provider; Valuation
of Unquoted Assets; Delays in Grid Energisation or Commissioning;
Currency Exposure; Cyber-Attack and Loss of Data; and Physical and
transitional climate-related risks. A detailed explanation of the
risks and uncertainties in each of these categories can be found on
pages 43 to 45 of the Company's published annual report for the
year ended 31 March 2023.
These risks and uncertainties have not materially changed during
the six months ended 30 September 2023. However, the Board has
noted that geopolitical factors continued to create uncertainties,
including relating to energy policy, supply chains and interest
rates.
Going Concern
Having assessed the principal risks and uncertainties, and the
other matters discussed in connection with the viability statement
as set out on page 46 of the published annual report for the year
ended 31 March 2023, the Directors consider it appropriate to adopt
the going concern basis in preparing the accounts.
Related Party Transactions
There have been no transactions with related parties that have
materially affected the financial position or the performance of
the Company during the six months ended 30 September 2023.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, this
set of condensed financial statements has been prepared in
accordance with UK adopted IAS 34 Interim Financial Reporting and
with the Statement of Recommended Practice, "Financial Statements
of Investment Companies and Venture Capital Trusts" issued in July
2022, and that this half year report includes a fair review of the
information required by 4.2.7R and 4.2.8R of the FCA's Disclosure
Guidance and Transparency Rules.
Patrick Cox
Chair
Independent Auditor's Review Report
to Gore Street Energy Storage Fund Plc
Conclusion
We have been engaged by the Company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 September 2023 which comprises the Interim
Condensed Statement of Comprehensive Income, the Interim Condensed
Statement of Financial Position, the Interim Condensed Statement of
Changes in Equity, the Interim Condensed Statement of Cash Flows
and the related explanatory notes. We have read the other
information contained in the half yearly financial report and
considered whether it contains any apparent misstatements or
material inconsistencies with the information in the condensed set
of financial statements.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
September 2023 is not prepared, in all material respects, in
accordance with UK adopted International Accounting Standard 34 and
the Disclosure Guidance and Transparency Rules of the United
Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International
Standard on Review Engagements 2410 (UK) "Review of Interim
Financial Information Performed by the Independent Auditor of the
Entity" (ISRE) issued by the Financial Reporting Council. A review
of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting
matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
As disclosed in note 2, the annual financial statements of the
Company are prepared in accordance with UK adopted international
accounting standards. The condensed set of financial statements
included in this half-yearly financial report has been prepared in
accordance with UK adopted International Accounting Standard 34,
"Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than
those performed in an audit as described in the Basis of Conclusion
section of this report, nothing has come to our attention to
suggest that management have inappropriately adopted the going
concern basis of accounting or that management have identified
material uncertainties relating to going concern that are not
appropriately disclosed.
This conclusion is based on the review procedures performed in
accordance with this ISRE, however future events or conditions may
cause the entity to cease to continue as a going concern.
Responsibilities of the Directors
The directors are responsible for preparing the half-yearly
financial report in accordance with the Disclosure Guidance and
Transparency Rules of the United Kingdom's Financial Conduct
Authority.
In preparing the half-yearly financial report, the directors are
responsible for assessing the company's ability to continue as a
going concern, disclosing, as applicable, matters related to going
concern and using the going concern basis of accounting unless the
directors either intend to liquidate the company or to cease
operations, or have no realistic alternative but to do so.
Auditor's Responsibilities for the review of the financial
information
In reviewing the half-yearly report, we are responsible for
expressing to the Company a conclusion on the condensed set of
financial statements in the half-yearly financial report. Our
conclusion, including our Conclusions Relating to Going Concern,
are based on procedures that are less extensive than audit
procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with
guidance contained in International Standard on Review Engagements
2410 (UK) "Review of Interim Financial Information Performed by the
Independent Auditor of the Entity" issued by the Financial
Reporting Council. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other than the
company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
London
13 December 2023
Interim Condensed Financial Statements
Interim Condensed Statement of Comprehensive Income
For the Period Ended 30 September 2023
1 April 2023 to 30 September 1 April 2022 to 30 September
2023 2022
----- ------------------------------------- ------------------------------------
Revenue Capital Total Revenue Capital Total
Notes (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
------------------------ ----- ----------- ----------- ----------- ----------- ---------- -----------
Net (loss)/gain on
investments at fair
value through profit
and loss - (4,742,507) (4,742,507) - 23,905,375 23,905,375
Investment income 12,442,482 - 12,442,482 2,575,055 - 2,575,055
Administrative and
other expenses (3,834,334) - (3,834,334) (3,795,540) - (3,795,540)
------------------------ ----- ----------- ----------- ----------- ----------- ---------- -----------
Profit before tax 8,608,148 (4,742,507) 3,865,641 (1,220,485) 23,905,375 22,684,890
Taxation 4 - - - - - -
------------------------ ----- ----------- ----------- ----------- ----------- ---------- -----------
Profit after tax and
profit for the period 8,608,148 (4,742,507) 3,865,641 (1,220,485) 23,905,375 22,684,890
------------------------ ----- ----------- ----------- ----------- ----------- ---------- -----------
Total comprehensive
income for the period 8,608,148 (4,742,507) 3,865,641 (1,220,485) 23,905,375 22,684,890
------------------------ ----- ----------- ----------- ----------- ----------- ---------- -----------
Profit per share (basic
and diluted) - pence
per share 5 0.80 4.81
------------------------ ----- ----------- ----------- ----------- ----------- ---------- -----------
All Revenue and Capital items in the above statement are derived
from continuing operations.
The Total column of this statement represents Company's Income
Statement prepared in accordance with UK adopted International
Accounting Standards. The total profit after tax for the period is
the total comprehensive income and therefore no additional
statement of other comprehensive income is presented.
The supplementary revenue and capital columns are presented for
information purposes in accordance with the Statement of
Recommended Practice issue by the Association of Investment
Companies.
The notes on pages 29 to 36 of the Interim Report for the period
ended 30 September 2023 form an integral part of these financial
statements.
Interim Condensed Statement of Financial Position
As at 30 September 2023
Company Number 11160422
30 September 31 March
2023 2023
Notes (GBP) (GBP)
-------------------------------------------- ------ ------------- -----------
Non - Current Assets
Investments at fair value through profit or
loss 6 469,342,485 434,762,146
-------------------------------------------- ------ ------------- -----------
469,342,485 434,762,146
Current assets
Cash and cash equivalents 8 74,989,816 123,705,727
Trade and other receivables 789,383 843,825
-------------------------------------------- ------ ------------- -----------
75,779,199 124,549,552
-------------------------------------------- ------ ------------- -----------
Total assets 545,121,684 559,311,698
-------------------------------------------- ------ ------------- -----------
Current liabilities
Trade and other payables 1,840,180 3,046,853
-------------------------------------------- ------ ------------- -----------
1,840,180 3,046,853
-------------------------------------------- ------ ------------- -----------
Total net assets 543,281,504 556,264,845
-------------------------------------------- ------ ------------- -----------
Shareholders equity
Share capital 10 4,813,995 4,813,995
Share premium 10 315,686,634 315,686,634
Special reserve 10 31,680 349,856
Capital reduction reserve 10 94,594,194 111,125,000
Capital reserve 10 120,841,907 125,584,414
Revenue reserve 10 7,313,094 (1,295,054)
-------------------------------------------- ------ ------------- -----------
Total shareholders equity 543,281,504 556,264,845
-------------------------------------------- ------ ------------- -----------
Net asset value per share 9 1.13 1.16
-------------------------------------------- ------ ------------- -----------
The interim financial statements were approved and authorised
for issue by the Board of directors and are signed on its behalf
by:
Patrick Cox
Chair
Date: 13 December 2023
The notes on pages 29 to 36 of the Interim Report for the period
ended 30 September 2023 form an integral part of these financial
statements.
Interim Condensed Statement of Changes in Equity
For the Period Ended 30 September 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 2023 4,813,995 315,686,634 349,856 111,125,000 125,584,414 (1,295,054) 556,264,845
Profit/(loss) for
the period - - - - (4,742,507) 8,608,148 3,865,641
----------------------- --------- ----------- --------- ------------ ----------- ----------- -------------
Total comprehensive
income for the period - - - - (4,742,507) 8,608,148 3,865,641
----------------------- --------- ----------- --------- ------------ ----------- ----------- -------------
Transactions with
owners
----------------------- --------- ----------- --------- ------------ ----------- ----------- -------------
Movement in special
reserve - - (318,176) 318,176 - - -
Dividends paid - - - (16,848,982) - - (16,848,982)
----------------------- --------- ----------- --------- ------------ ----------- ----------- -------------
As at 30 September
2023 4,813,995 315,686,634 31,680 94,594,194 120,841,907 7,313,094 543,281,504
----------------------- --------- ----------- --------- ------------ ----------- ----------- -------------
For the Period Ended 30 September 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 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Profit/(loss) for
the period - - - - 23,905,375 (1,220,485) 22,684,890
---------------------- ----------- ------------- -------- ------------ ------------ ------------- -------------
Total comprehensive
income/(loss) for
the period - - - - 23,905,375 (1,220,485) 22,684,890
---------------------- ----------- ------------- -------- ------------ ------------ ------------- -------------
Transactions with
owners
---------------------- ----------- ------------- -------- ------------ ------------ ------------- -------------
Ordinary shares issued
at a premium during
the period 1,363,637 148,636,363 - - - - 150,000,000
Share issue costs - (2,657,854) - - - - (2,657,854)
Dividends paid - - - (11,714,711) - - (11,714,711)
---------------------- ----------- ------------- -------- ------------ ------------ ------------- -------------
As at 30 September
2022 4,813,995 415,686,632 186,656 30,544,181 88,662,967 (5,101,012) 534,793,419
---------------------- ----------- ------------- -------- ------------ ------------ ------------- -------------
Capital reduction reserve and revenue reserves are available to
the Company for distributions to Shareholders as determined by the
Directors.
The notes on pages 29 to 36 of the Interim Report for the period
ended 30 September 2023 form an integral part of these financial
statements.
Interim Condensed Statement of Cash Flows
For the Period Ended 30 September 2023
1 April 2023 1 April 2022
to to
30 September 30 September
2023 2022
Notes (GBP) (GBP)
---------------------------------------------------- ------- -------------- --------------
Cash flows used in operating activities provided
by
Profit for the period 3,865,641 22,684,890
Net loss/(gain) on investments at fair value
through profit and loss 4,742,507 (23,905,375)
Decrease/(increase) in trade and other receivables 54,442 (1,091,983)
Decrease in trade and other payables (1,206,673) (1,520,858)
------------------------------------------------------------- -------------- --------------
Net cash generated from /(used in) operating
activities provided by 7,455,917 (3,833,326)
Cash flows used in investing activities
Purchase of investments (39,322,846) (26,900,159)
Purchase of short term investments - (140,000,000)
------------------------------------------------------------- -------------- --------------
Net cash used in investing activities (39,322,846) (166,900,159)
Cash flows used in financing activities provided
by
Proceeds from issue of ordinary shares at a premium - 150,000,000
Share issue costs - (2,657,854)
Dividends paid (16,848,982) (11,714,711)
------------------------------------------------------------- -------------- --------------
Net cash (outflow)/inflow from financing activities (16,848,982) 135,627,435
------------------------------------------------------------- -------------- --------------
Net decrease in cash and cash equivalents for
the period (48,715,911) (35,106,050)
------------------------------------------------------------- -------------- --------------
Cash and cash equivalents at the beginning of
the period 123,705,727 198,047,440
------------------------------------------------------------- -------------- --------------
Cash and cash equivalents at the end of the
period 74,989,816 162,941,390
------------------------------------------------------------- -------------- --------------
During the period, interest received by the Company totalled
GBP12,442,482 (2022: GBP2,575,055).
The notes on pages 29 to 36 of the Interim Report for the period
ended 30 September 2023 form an integral part of these financial
statements.
Notes to the Interim Condensed Financial Statements
For the Period Ended 30 September 2023
1. General information
Gore Street Energy Storage Fund plc (the "Company") was
incorporated in England and Wales on 19 January 2018 with
registered number 11160422. The registered office of the Company is
First Floor, 16-17 Little Portland Street, 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 primarily located in UK, the Republic of
Ireland, North America and Germany.
2. Basis of preparation
STATEMENT OF COMPLIANCE
The half yearly condensed financial statements for the period 1
April 2023 to 30 September 2023 have been prepared in accordance
with UK adopted IAS 34 Interim Financial Reporting, and the
Disclosure Guidance and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
The half yearly financial statements do not include all the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the Company's
annual financial statements as at 31 March 2023.
The same accounting policies, presentation and methods of
computation are followed in these condensed financial statements as
were applied in the preparation of the Company's annual financial
statements for the year ended 31 March 2023. These accounting
policies will be applied in the Company's financial statements for
the year ended 31 March 2024.
The financial statements have been prepared on a historical cost
basis except for the investments which are accounted for at fair
value through 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 and does not
prepare consolidated financial statements for the Company.
The financial information for the year ended 31 March 2023 has
been extracted from the latest published audited financial
statements which have been filed with the Registrar of Companies.
The Independent Auditor's Report on those accounts contained no
qualification or statement under Section 498 (2), (3) or (4) of the
Companies Act 2006.
The financial information contained in this Half Year Report
does not constitute statutory accounts as defined in Sections
434-436 of the Companies Act 2006. The financial information for
the six months ended 30 September 2023 and 30 September 2022 has
not been audited by the Company's external auditor.
The financial statements do not contain any operating segment
information on the basis that there is only one reportable
segment.
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
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 period. 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 31 December
2024.
As at 30 September 2023, the Company had net current assets of
GBP73.94 million, including cash balances of GBP74.99 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 had no outstanding debt as of 30 September 2023. The
Company is a guarantor to GSES 1 Limited's GBP50m revolving credit
facility with Santander, of which GBPnil was drawn at 30 September
2023.
The Directors acknowledge their responsibilities in relation to
the financial statements for the half year ended 30 September 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
31 December 2024.
3. Significant accounting judgements, estimates and
assumptions
The preparation of the financial statements requires management
to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amount of
assets, liabilities, income and expenses. Estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to the
accounting estimates are recognised in the period in which the
estimates are revised and in any future periods affected.
During the period the Directors considered the following
significant judgements, estimates and assumptions:
ASSESSMENT AS AN INVESTMENT ENTITY
Entities that meet the definition of an investment entity within
IFRS 10 are required to measure their subsidiaries at fair value
through profit or loss rather than consolidate them unless they
provided investment related services to the Company. To determine
that the Company continues to meet the definition of an investment
entity, the Company is required to satisfy the following three
criteria:
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management
services;
b) the Company commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income, or both; and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Company meets the criteria as follows:
-- the stated strategy of the Company is to deliver stable
returns to shareholders through a mix of energy storage
investments;
-- the Company provides investment management services and has
several investors who pool their funds to gain access to
infrastructure related investment opportunities that they might not
have had access to individually; and
-- the Company has elected to measure and evaluate the
performance of all of its investments on a fair value basis. The
fair value method is used to represent the Company's performance in
its communication to the market, including investor presentations.
In addition, the Company reports fair value information internally
to Directors, who use fair value as the primary measurement
attribute to evaluate performance.
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
7.
4. 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 25%.
30 September 30 September
2023 2022
(GBP) (GBP)
--------------------------------------------------------- ------------- -------------
(a) Tax charge in profit and loss account
UK Corporation tax - -
(b) Reconciliation of the tax charge for the period
Profit before tax 3,865,641 22,684,890
Tax at UK standard rate of 25% (2022: 19%) 966,410 4,310,129
Effects of:
Unrealised loss/(gain) on fair value investments
not taxable 1,185,627 (4,542,021)
Expenses not deductible for tax purposes 621 6,026
Utilisation of brought forward tax losses not previously
recognised as deferred tax 957,964 225,866
Interest distribution (3,110,621) -
--------------------------------------------------------- ------------- -------------
Tax charge for the period - -
--------------------------------------------------------- ------------- -------------
Estimated losses not recognised due to insufficient
evidence of future profits 11,166,219 3,338,021
--------------------------------------------------------- ------------- -------------
Estimated deferred tax thereon 25% (2022: 25%) 2,791,555 834,505
--------------------------------------------------------- ------------- -------------
There is no corporate tax charge for the period (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 GBP2,791,555 (2022: GBP834,505) has not been recognised in
respect of the carried forward losses.
5. 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.
30 September 30 September
2023 2022
--------------------------------------------------- ------------ -------------
Net gain attributable to ordinary shareholders GBP3,865,641 GBP22,684,890
Weighted average number of ordinary shares for the
period 481,399,478 471,712,444
--------------------------------------------------- ------------ -------------
Profit per share - Basic and diluted (pence) 0.80 4.81
--------------------------------------------------- ------------ -------------
6. Investments
Percentage 30 September 31 March
Place of business ownership 2023 2023
------------------------ ------------------ ---------- ------------ -----------
GSES1 Limited ("GSES1") England & Wales 100% 469,342,485 434,762,146
------------------------ ------------------ ---------- ------------ -----------
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 revolving
credit facility entered into by 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 is funded through
equity. The amount drawn on the facility at 30 September 2023 was
GBP352,104,170 (31 March 2023: GBP309,182,178). The loan is
interest bearing and attracts interest at 8.5% per annum effective
from 1 April 2023. Up until that date, the interest charge was 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.
The increase in interest rate is viewed as a substantial
modification to the terms of the loan facility and as a result is
derecognised and re-recognised from the effective date. As the loan
principal and accrued interest form part of the Company's
investments at fair value through profit or loss, the effect of
this change of interest rate is captured within the revaluation and
remeasurement of the total investment at period end. As a result
there is no accounting impact of the modification on the Statement
of Financial Position or Statement of Comprehensive Income.
Realisation of increases in fair value in the indirect
subsidiaries will be passed up the structure as repayments of loan
interest and principal. The Company holds a direct investment in
GSES 1, which in turn holds investments in various holding
companies and operating assets as detailed in Note 6 below.
Immediate Percentage
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
Ferrymuir Energy Storage GSF Albion England & Wales 100% Ferrymuir
Limited
GSF England Limited ("GSF
England") GSES1 England & Wales 100%
OSSPV001 Limited GSF England England & Wales 100% Lower Road
and Port of
Tilbury
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 Limited GSF England England & Wales 100% Enderby
Middleton Energy Storage GSF England England & Wales 100% Middleton
Limited
GSF IRE Limited ("GSF IRE") 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
GSF Atlantic Limited ("GSF
Atlantic") GSES1 England & Wales 100%
GSF Americas Inc. ("GSF Americas") GSF Atlantic North America 100%
GSF Green Power Cremzow Gmbh GSF Atlantic Germany 90% Cremzow
& Co KG
GSF Green Power Cremzow Verwaltungs GSF Atlantic Germany 90% Cremzow
GmbH
Snyder ESS Assets, LLC GSF Americas North America 100% Snyder
Sweetwater ESS Assets, LLC GSF Americas North America 100% Sweetwater
Westover ESS Assets, LLC GSF Americas North America 100% Westover
Mineral Wells ESS Assets, GSF Americas North America 100% Mineral Wells
LLC
Cedar Hill ESS Assets, LLC GSF Americas North America 100% Cedar Hill
Wichita Falls ESS Assets, GSF Americas North America 100% Wichita Falls
LLC
Mesquite ESS Assets, LLC GSF Americas North America 100% Mesquite
Dogfish ESS Assets, LLC GSF Americas North America 100% Dogfish
Big Rock ESS Assets, LLC GSF Americas North America 100% Big Rock
------------------------------------ ------------- ------------------ ---------- ----------------
GSES 1 is registered at First Floor, 16-17 Little Portland,
London, England, W1W 8BP.
GSF Albion, GSF England, GSF IRE and GSF Atlantic were
registered at 8th Floor, 100 Bishopsgate, London, EC2N 4AG up until
20 October 2023 when they all moved to First Floor, 16-17 Little
Portland Street, London, United Kingdom, W1W 8BP.
All other subsidiaries that have a place of business in England
& Wales and Northern Ireland are registered at 8th Floor, 100
Bishopsgate, London, EC2N 4AG.
All subsidiaries that have a place of business in Republic of
Ireland were registered at 4th Floor, 76 Lower Baggot Street,
Dublin 2 up until 6 June 2023 when they moved to Block 5, Irish
Life Centre, Abbey Street Lower, Dublin 1.
GSF Cremzow GmbH & Co KG and GSF Cremzow Verwaltungs GmbH
are registered at Schenkenberg, Gut Dauerthal 3, 17291.
All subsidiaries with a place of business in North America are
registered at 1209 Orange Street, Wilmington, Delaware 19801.
7. Fair Value measurement
VALUATION APPROACH AND METHODOLOGY
There are three traditional valuation approaches that are
generally accepted and typically used to establish the value of a
business; the income approach, the market approach and the net
assets (or cost based) approach. Within these three approaches,
several methods are generally accepted and typically used to
estimate the value of a business.
The Company has chosen to utilise the income approach, which
indicates value based on the sum of the economic income that an
asset, or group of assets, is anticipated to produce in the future.
Therefore, the income approach is typically applied to an asset
that is expected to generate future economic income, such as a
business that is considered a going concern. Free cash flow to
total invested capital is typically the appropriate measure of
economic income. The income approach is the DCF approach and the
method discounts free cash flows using an estimated discount rate
(WACC).
VALUATION PROCESS
The Company's portfolio of lithium-ion energy storage
investments has a total capacity of 1.17 GW (September 2022: 698.2
MW). As at 30 September 2023, 291.6 MW of the Company's total
portfolio was operational and 878.4 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 purpose of 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 30 September 2023, the fair value of all other investments
has been determined by the Investment Advisor and reviewed by BDO
UK LLP.
The below table summarises the significant unobservable inputs
to the valuation of investments.
Significant Inputs Fair Value
--------------------------------- --------------------------
30 September 31 March
2023 2023
Valuation (GBP) (GBP)
Investment Portfolio technique Description (Range)
------------------------- ----------- ----------------- -------------- ------------- -----------
Great Britain (excluding Discount Rate 7.25% - 11.00%
Northern Ireland) DCF Revenue/MW/hour GBP7 - GBP15 195,446,658 180,714,570
Discount Rate 8.00% - 9.25%
Northern Ireland DCF Revenue/MW/hour EUR9 - EUR29 53,436,187 55,049,170
Discount Rate 8.00% - 10.75%
Republic of Ireland DCF Revenue/MW/hour EUR8 - EUR19 35,009,444 28,515,507
Discount Rate 9.25% - 10.75%
Other OECD DCF Revenue/MW/hour EUR9 - EUR11 187,890,064 171,008,958
Holding Companies NAV $7 - $33 (2,439,868) (526,059)
------------------------- ------------------------------ -------------- ------------- -----------
Total Investments 469,342,485 434,762,146
--------------------------------------------------------- -------------- ------------- -----------
The fair value of the holding companies represents the net
current assets including 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.
Significant Inputs Estimated effect
on Fair Value
---------------------------- ---------------------------
30 September 31 March
2023 2023
Valuation (GBP) (GBP)
Investment Portfolio technique Description Sensitivity
------------------------- ----------- -------------- ------------ ------------- ------------
Great Britain (excluding
Northern Ireland) DCF Revenue + 10% 36,972,390 39,163,849
- 10% (37,624,009) (39,402,771)
Discount rate +1% (27,269,825) (25,103,594)
-1% 32,175,943 29,658,404
Northern Ireland DCF Revenue + 10% 5,429,474 5,360,179
- 10% (5,426,971) (5,357,401)
Discount rate +1% (3,056,981) (3,239,801)
-1% 3,517,592 3,741,944
Exchange rate +3% (1,397,842) (896,254)
-3% 1,483,991 952,017
Republic of Ireland DCF Revenue + 10% 5,270,918 5,631,626
- 10% (6,581,253) (6,434,752)
Discount rate +1% (5,917,836) (5,936,555)
-1% 6,865,968 6,914,698
Exchange rate +3% (1,037,385) (101,466)
-3% 1,101,553 107,516
Other OECD DCF Revenue + 10% 30,167,956 24,849,092
- 10% (30,614,718) (25,153,598)
Discount rate +1% (17,441,537) (14,401,398)
-1% 19,951,768 16,472,024
Exchange rate +3% (5,592,745) (4,689,659)
-3% 5,616,080 4,981,974
---------------------------------------------------- ------------ ------------- ------------
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 and the reconciliation in the movement
of this Level 3 investment is presented below. No transfers between
levels took place during the period.
30 September 31 March
2023 2023
Reconciliation (GBP) (GBP)
----------------------------------------------- ------------- ------------
Opening balance 434,762,146 180,762,419
Loan drawdowns during the period/year 39,322,846 225,765,788
Loan repayments during the period/year - (32,592,883)
Loan interest received (10,655,622) (8,835,389)
Loan interest receivable from GSES 1 Limited 14,254,272 8,714,157
Total fair value movement on equity investment (8,341,157) 60,948,054
----------------------------------------------- ------------- ------------
469,342,485 434,762,146
----------------------------------------------- ------------- ------------
8. Cash and cash equivalents
30 September 31 March
2023 2023
(GBP) (GBP)
---------------- ------------- -----------
Cash at bank 60,144,670 99,199,093
Restricted cash 14,845,146 24,506,634
---------------- ------------- -----------
74,989,816 123,705,727
---------------- ------------- -----------
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. The remaining
GBP14,845,146 is expected to be released in H1 2024.
9. 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.
30 September 31 March
2023 2023
----------------------------------------------------- --------------- ---------------
Net assets per Statement of Financial Position GBP 543,281,504 GBP 556,264,845
Ordinary shares in issue as at 30 September/31 March 481,399,478 481,399,478
----------------------------------------------------- --------------- ---------------
NAV per share - Basic and diluted (pence) 112.85 115.55
----------------------------------------------------- --------------- ---------------
10. Share capital and reserves
Share Capital
premium Special reduction Capital Revenue
Share capital reserve reserve reserve reserve reserve Total
(GBP) (GBP) (GBP) (GBP) (GBP) (GBP) (GBP)
-------------------- ------------- ----------- --------- ----------- ----------- ----------- -----------
At 1 April 2023 4,813,995 315,686,634 349,856 111,125,000 125,584,414 (1,295,054) 556,264,845
Dividends paid - - - 16,848,982 - - 16,848,982
Movement in special
reserve - - (318,176) 318,176 - - -
Profit/(loss) for
the period - - - - (4,742,507) 8,608,148 3,865,641
-------------------- ------------- ----------- --------- ----------- ----------- ----------- -----------
At 30 September
2023 4,813,995 315,686,634 31,680 94,594,194 120,841,907 7,313,094 543,281,504
-------------------- ------------- ----------- --------- ----------- ----------- ----------- -----------
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
Transfer to capital
reduction reserve - (100,000,000) - 100,000,000 - - -
Share issue costs - (2,657,852) - - - - (2,657,852)
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
-------------------- --------- ------------- -------- ------------ ----------- ----------- ------------
In the prior year, 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.
11. Dividends
30 September 30 September
Dividend 2023 2022
per share (GBP) (GBP)
------------------------------------------- ------------ ------------- -------------
Dividends paid during the period
For the 3 month period ended 31 December
2021 2 pence - 6,900,716
For the 3 month period ended 31 March 2022 1 pence - 4,813,995
For the 3 month period ended 31 December
2022 2 pence 9,627,990 -
For the 3 month period ended 31 March 2023 1.5 pence 7,220,992 -
------------------------------------------- ------------ ------------- -------------
16,848,982 11,714,711
-------------------------------------------------------- ------------- -------------
An interim dividend of 2 pence for the period 1 October 2022 to
31 December 2022 was proposed by the Directors, and subsequently
paid on the 11 April 2023.
An interim dividend of 1.5 pence for the period 1 January 2023
to 31 March 2023 was proposed by the Directors and subsequently
paid on 17 July 2023.
12. Transactions with related parties
Since the listing of the ordinary shares in 2018, 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
On 1 May 2023, Lisa Scenna was appointed as a director. Patrick
Cox, Chair of the Board of Directors of the Company, is paid a
director's remuneration of GBP77,000 per annum, (2022: GBP75,000),
Caroline Banszky is paid a director's remuneration of GBP57,000 per
annum, (2022: GBP55,000) with the remaining directors being paid
directors' remuneration of GBP47,000 per annum, (2022:
GBP45,000).
Total director's remuneration and associated employment costs of
GBP146,248 were incurred in respect of the period with GBPnil being
outstanding and payable at the period 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:
a. for the four quarters from First Admission, Adjusted Net
Asset Value shall be equal to Net Asset Value;
b. 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;
c. thereafter, Adjusted Net Asset Value shall be equal to Net
Asset Value minus Cash on the Company's Statement of Financial
Position.
During the prior 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 GBP1,411,253.62 (30 September 2022:
GBP2,160,498) were paid during the period, there were GBP1,412,656
(30 September 2022: GBPnil) outstanding fees as at 30 September
2023 (31 March 2023: 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 GBPnil were accrued for the period
ended 30 September 2023, (31 March 2023: GBP2,457,164).
During the period the Investment Advisor provided operations
management services to SPV companies resulting in charges to the
amount of GBP271,647 (31 March 2023: GBP855,692) being payable by
the SPV companies to the Investment Advisor.
13. 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
chargor and guarantor to the amounts borrowed under the Agreements
by GSES1 Limited. As at 30 September 2023, no amounts had been
drawn on this facility.
The Company had no contingencies and significant capital
commitments as at the 30 September 2023.
14. Post balance sheet events
The Directors have evaluated the need for disclosures and/or
adjustments resulting from post balance sheet events through to 13
December 2023, the date the financial statements were available to
be issued.
On 5 September 2023, the Board approved a dividend of 2 pence
per share for the period from 1 April 2023 to 30 June 2023. This
dividend totalling GBP9,627,990 was paid to investors on the 20
October 2023.
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 30 September 2023.
Alternative Performance Measures
For the Period Ended 30 September 2023
1. NAV Total return since IPO
A measure of NAV performance since IPO, considering both capital
returns and dividends paid to shareholders. This does not factor in
return on reinvestment of dividends.
30 September 31 March
2023 2023
-------------------------------------------- ------------ --------
NAV per Ordinary Share at year end 112.85p 115.55p
Dividends per ordinary share paid since IPO 32.50p 29.00p
NAV per Ordinary Share at IPO 97.67p 97.67p
NAV Total return 47.68p 46.88p
NAV Total Return since IPO 48.8% 48.0%
2. Share price total return since IPO
A measure of return to a shareholder holding a share since IPO.
Dividends per share reflect dividends declared during the period
with Ex - dividend date prior to year end. This does not factor in
return on assumed reinvestment of dividends.
30 September 31 March
2023 2023
------------------------------- ------------ --------
Share price at period end 78.80p 100.80p
Dividends per share since IPO 34.50p 31.00p
Share price at IPO 100.00p 100.00p
Share price return since IPO 13.30p 31.80p
% Share price return since IPO 13.3% 31.8%
3. Share premium/discount
30 September 31 March
2023 2023
----------------------------------- ------------ --------
Share price at year end 78.80p 100.80p
NAV per Ordinary Share at year end 112.85p 115.55p
Discount to NAV -34.05p -14.75p
Discount to NAV % -30.2% -12.8%
4. Operational dividend cover
A measure to demonstrate the Company's ability to pay dividends
to shareholders from the earnings generated by underlying
operational investments.
30 September 31 March
2023 2023
------------------------------------ ------------ ---------
Operational EBITDA GBP12.20m GBP27.77m
Dividend paid during the year (GBP) GBP16.85m GBP30.97m
Operational dividend cover 0.72x 0.90x
5. Operational dividend cover for quarter ended 30 September
A measure to demonstrate the Company's ability to pay dividends
to shareholders from the earnings generated by underlying
operational investments.
September September
quarter 2023 quarter 2022
--------------------------------------- ------------- -------------
Operational EBITDA GBP8.34m GBP6.24m
Dividend paid during the quarter (GBP) GBP7.22m GBP4.81m
Operational dividend cover 1.15x 1.30x
6. Dividend yield
30 September 31 March
2023 2023
---------------------------------------------------- ------------ --------
Dividends per Ordinary Share paid during the year -
Annualised 7.00p 7.00p
Share price at year end 78.80p 100.80p
Dividend yield 8.9% 6.9%
7. Ongoing charges figure
A measure, expressed as a percentage of average net assets, of
the regular, recurring annual costs of running the Company. This
has been calculated and disclosed in accordance with the AIC
methodology.
30 September 31 March
2023 2023
------------------------------------------- ------------ -----------
Total administrative and other expenses 3,834,334 9,881,402
Performance fee and non-recurring expenses - 2,501,163
Total ongoing expenses 3,834,334 7,380,240
Total ongoing expenses - Annualised 7,668,670 7,380,240
Average NAV for the year 550,785,491 540,090,679
Ongoing charges figure 1.39% 1.37%
8. NAV Total return for the 6 month period
A measure of NAV performance for the financial year, considering
both capital returns and dividends paid to shareholders within the
period. This does not factor in return on reinvestment of
dividends.
30 September 30 September
2023 2022
------------------------------------------------------ ------------ ------------
NAV per Ordinary Share at period end 112.85p 111.09p
Dividends per ordinary share paid during the period 3.50p 3.00p
NAV per Ordinary Share at the beginning of the period 115.55p 109.11p
NAV Total return 0.80p 4.98p
NAV Total Return for the period 0.7% 4.6%
9. Share price total return for the 6 month period
A measure of return to a shareholder holding a share for the
financial year. Dividends per share reflect dividends declared
during the period with Ex - dividend date prior to year end. This
does not factor in return on assumed reinvestment of dividends.
30 September 30 September
2023 2022
------------------------------------------- ------------ ------------
Share price at period end 78.80p 110.00p
Dividends per share during the period 3.50p 3.00p
Share price at the beginning of the period 100.80p 113.00p
Share price return for the period -18.50p 0.00p
% Share price return for the period -18.4% 0.0%
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END
IR FLFITFDLVLIV
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December 14, 2023 02:00 ET (07:00 GMT)
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