5 February
2024
Gore
Street Energy Storage Fund plc
(the
"Company" or "GSF")
Further Portfolio and Trading
Update
Gore Street Energy Storage Fund plc
("the Company" or "GSF") notes the turbulence in the market and
reconfirms its strong liquidity and its commitment to the current
dividend policy. The Company also reconfirms its commitment to a
diversification strategy, which has insulated it from the current
dynamics of the GB market.
Overview:
Dividend
policy
· GSF
reaffirms its dividend target of 7% of NAV for the fiscal
year. It has met its dividend target since
listing.
· The
Company's dividend cover has been trending upward and was fully
covered in the last reported quarter (September-end
2023).
Revenue
generation
·
Further to the Company's update on 10 January
(link
here), the reported
portfolio average revenue across all assets for the fiscal
year-to-date stands at £15.1 per MW/hr (H1 & Q3), given its
effective diversification strategy.
Liquidity
· The
Company maintains a healthy balance sheet with low debt. As
previously disclosed, the Company had £66 million in cash or cash
equivalents as of 31 December 2023. Of the available $60 million in
the Big Rock Facility, approximately $15.8 million had been drawn
down as of 31 December 2023, and there were no draws on the
Company's £50 million RCF with Santander.
Portfolio
· The
Company's construction program is progressing per the schedule
outlined on page 11 of its Interim Report
(link
here).
· The
Company's operational fleet is on track to more than double by the
end of 2024.
·
Based on the build-out schedule, by the end of 2024, the
Company's US assets will account for 55% of total operational
capacity, while GB will account for less than 30% on a MWh
basis.
Background:
The Company has been at the forefront of the
energy storage sector since becoming the first energy storage fund
to list on the Premium Segment of the London Stock Exchange in May
2018.
From inception, the Company's strategy
prioritised diversification as a critical pillar of success. This
led the Company to expand its portfolio into the Irish market in
2019, followed by expansion into mainland Europe, Texas, and
California in the United States. This unique portfolio composition
across five uncorrelated markets significantly reduces reliance on
any single revenue stream, market dynamic, or regulatory regime,
positioning the Company to achieve its long-term investment
objective of sustainable growth and consistent dividend
payments.
The Company has maintained strict control over
capital expenditure to achieve a competitive build cost per MW.
Through a comprehensive understanding of each market, each system
is currently optimally sized for the market in which it operates.
Augmentation has also been built into the design assumptions,
allowing for upsizing when revenue signals (and capex pricing)
dictate an increase in duration. This efficient deployment,
including around duration, is a key variable in capex costs and
ultimately a determining factor in the IRR of an asset.
Storage investors have relied on
forward-looking revenue curves to make capital deployment decisions
and determine asset values. The revenue curves employed in valuing
GSF's assets have proven to be the closest to actuals amongst those
disclosed in the market, avoiding Net Asset Value
volatility.
Liquidity and
Dividends:
The Board seeks to reassure shareholders and
address any potential concerns on liquidity management and
dividends. While these are recognised as valid in light of recent
sector news, the Board wishes to provide comfort to investors. The
Company maintains a strong balance sheet, with sufficient cash to
meet its contractual obligations and undrawn lines of credit
totalling c.£83 million. In line with its prudent investment policy
on leverage, the Company has a low debt burden and, consequently, a
low refinancing risk. The Company also continues to generate a
healthy operational cash flow and fully covered its dividend during
the last reported quarter (September-end 2023).
The Company continues to follow its mandate to
deliver sustainable long-term returns for its investors. Based on
the current year's performance, GSF reaffirms its commitment to a
dividend target of 7% of NAV for the fiscal year.
Revenue
Generation:
The Board and Investment Manager of the
Company share the concerns expressed regarding the current
challenges posed by low revenue generation in the GB market.
The Company's portfolio diversification serves as the primary
driver of the Company's stable revenue and profit profile and has
allowed the Company's portfolio to generate a consistent revenue
profile on a consolidated basis. The Company's active management
strategy continually adapts to navigate the cyclical fluctuations
in the GB market while taking full advantage of the portfolio's
broad exposure to much higher growth markets that are able to
deliver increased profitability.
Pat Cox, Chair
of Gore Street Energy Storage Fund,
commented:
"In this challenging period for the GB energy
storage industry, it is crucial to acknowledge the resilience and
fundamentally differentiated strategy employed by our Company. The
GB market's cyclical nature has posed significant hurdles, yet we
remain well-positioned to navigate these challenges - largely
thanks to our investment policy and Investment Manager's foresight
and strategic understanding.
"Fundamentally, the importance of energy
storage as a critical asset in driving the energy transition and
ensuring the sustainability of the grid remains true. The current
headwinds the sector faces in GB highlight some of the more complex
aspects unique to this asset class, which require long-term
planning and experienced management. We have long recognised the
cyclical dynamics of the energy storage sector in GB, which is why
we took proactive measures beginning in 2019 to diversify our
portfolio across five grids to mitigate consolidated cash flow
volatility.
"Today, we can see that this differentiated
strategy has proven effective and contributed significant
resilience. Our unique portfolio structure allows us to access a
diverse selection of revenue streams, including highly contracted
ones, such as the Resource Adequacy Contract currently being
negotiated for our largest asset to date, which will provide
further consistency to portfolio income. Even during periods of low
revenue generation, such as the current downturn in the GB market,
our portfolio has demonstrated resilience thanks to the far-sighted
decisions made five years ago.
"Looking ahead to the coming quarters and
years, it is evident that effective capital allocation and our
unique diversification strategy have shielded us from the severe
impacts others in the industry face. The Company remains
well-positioned to weather the current challenges and continue to
lead the sector."
Alex
O'Cinneide, CEO of Gore Street Capital, the Investment Manager
of the Company, commented:
"Energy storage is and will remain a critical
asset for our transition to a low-carbon society and, I believe, an
essential part of every investor's portfolio. The asset class does,
however, require expert knowledge of multiple energy markets,
renewables construction and management experience, clear investment
execution around capital allocation, correct use of leverage, and,
essentially, revenue diversity across multiple geographies. Without
that skill set, experience and discipline, energy storage is a
challenging asset class.
"We have raised the correct amount of capital
when appropriate to do so at a fair price. The GSF portfolio has
been built up over multiple years, with the careful addition of new
markets and new revenue streams whilst keeping capital expenditure
low and leverage correctly managed. This has led to our growing
dividend coverage and increasing cash flow, and that consistency
will see us through valid concerns over the sector's
performance.
"We continue to be well positioned to
capitalise on this growing sector and will benefit as the market
leader."
For further
information:
Gore Street Capital
Limited
Alex O'Cinneide / Paula
Travesso
Tel: +44 (0) 20 3826 0290
Shore Capital (Joint Corporate
Broker)
Anita Ghanekar / Rose Ramsden / Iain
Sexton (Corporate Advisory)
Tel: +44 (0) 20 7408
4090
Fiona Conroy (Corporate
Broking)
J.P. Morgan Cazenove (Joint
Corporate Broker)
William Simmonds / Jérémie Birnbaum
(Corporate Finance)
Tel: +44 (0) 20 3493
8000
Buchanan (Media
Enquiries)
Charles Ryland / Henry Wilson /
George Beale
Tel: +44 (0) 20 7466
5000
Email: gorestreet@buchanan.uk.com
Notes to Editors
About Gore Street Energy Storage
Fund plc
Gore Street is London's first listed
and internationally diversified energy storage fund dedicated to
the low-carbon transition. It seeks to provide Shareholders with
sustainable returns from their investment in a diversified
portfolio of utility-scale energy storage projects. In addition to
growth through increasing operational capacity and a considerable
pipeline, the Company aims to deliver consistent and robust
dividend yield as income distributions to its
Shareholders.
https://www.gsenergystoragefund.com