REG - Gore Street Energy - Annual Financial Report
26/07/2022 07:00
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RNS Number : 6854T Gore Street Energy Storage Fund PLC 26 July 2022
26 July 2022
Gore Street Energy Storage Fund Plc
('Gore Street' or the 'Company')
Full Year Results
Strong asset performance drives 13% NAV Total Return over the period.
Asset performance and capacity growth positions the portfolio to continue to
capture market opportunities.
Gore Street Energy Storage Fund plc (ticker: GSF), London's first listed
energy storage fund supporting the transition to low carbon power, is pleased
to announce its Audited Full Year results for the year ended 31 March 2022.
Financial Highlights for the year ended 31 March 2022
· NAV increased 154% to £369.6 million 1 (#_ftn1) (31 March 2021:
£145.1 million)
· NAV per share increased 6% to 107.1 pence 2 (#_ftn2) (31 March 2021:
100.9 pence), NAV Total Return of 13%
· Total share returns of 11% since 31 March 2021 and 37% since
inception
· Net income increased 191% to £42.5 million (31 March 2021: £14.6
million)
· EBITDA of operational portfolio increased 704% to £23.3 million (31
March 2021: £2.9 million)
· Dividend declared for the March-end quarter of 1.0 pence per share.
Total dividend declared for the year of 7.0 pence per share, as targeted, with
operational dividend cover of 1.09x 3 (#_ftn3)
· The Company raised a total of £208.6 million in two oversubscribed
issuances: £135 million in April 2021, and a further £73.6 million in
October 2021. Issued Share Capital (ISC) increased to 345.0 million shares (31
March 2021: 143.9 million shares)
· Earnings per share (basic and diluted) of 14.15 pence (31 March 2021:
16.1 pence)
Operational Highlights for the year ended 31 March 2022
· Portfolio increased substantially to 628.5 4 (#_ftn4) MW as at 31
March 2022 (31 March 2021: 380 MW)
o 37% of the portfolio operational and 63% under
construction/pre-construction (31 March 2021: 55% operational and 45% under
construction/pre-construction)
o Operational assets producing income increased to 12 projects, with a
total capacity of 231.7 MW (31 March 2021: 11 projects with 209.7 MW capacity)
o 5 Construction/pre-construction portfolio assets with a total
capacity of 396.8 MW
o Operational assets performed at or above expectations during the
period:
o All operational GB assets showed strong performance for the period:
The average revenue per MW for the fiscal year was over 68 per cent higher
than the 2021 fiscal year average and 18.3 per cent. higher than internally
forecasted for the period
o The Company's two assets in Northern Ireland, driven high payments
under DS3 uncapped contract
o The newly acquired operational asset in Germany, driven by ancillary
services high rates
o Portfolio expansion continued across attractive markets:
o First acquisition in Mainland Europe, a 22MW operational asset in
Germany
o Acquisition of two assets in Great Britain: Stony (79.9 MW) and
Enderby (57MW)
o The Company secured rights to expand one of its assets in the
Republic of Ireland ("ROI"), Kilmannock by an additional 90MW, which,
following the 60MW expansion grant for Porterstown, will increase the
Company's total portfolio size in the ROI from 60MW on acquisition to 210.0 MW
upon completion
Post Period-end Highlights
· Gross proceeds of £150 million raised in April 2022 through an
oversubscribed institutional placing and retail offer at 110.0 pence per
Ordinary Share, with the resultant total ISC increasing to 481.4 million.
· Portfolio increased to 21 projects with a total capacity of 668.3 MW
of which 291.6 MW is operational
· The Company completed the acquisition of energy storage projects in
the ERCOT market in the United States. 29.9MW of the newly acquired U.S.
assets (Synder, Westover and Sweetwater) are operational and are of two-hour
duration. The fourth asset (Mineral Wells) is pre-construction with operation
targeted by the end of 2023.
· The Company is actively reviewing opportunities in GB, Ireland,
Western Europe, North America and Australia, in accordance with the Company's
investment policy. The total pipeline stands at c. 1.7 GW or 3.6 GWh with
transactions in exclusivity or advanced negotiations amounting to c. 495 MW or
980 MWh as of the date of publication
Net Asset Value
As at 31 March 2022, the audited estimated NAV per Ordinary Share increased to
107.1 pence, compared with 100.9 pence per Ordinary Share at 31 March 2021,
representing a total return including dividends over the period of 13%. The
weighted average discount rate is 8.3%.
Dividend Payment
The 1.0 pence per share declared dividend will be paid on or around 26 August
2022 to shareholders on the register on 05 August 2022. The ex-dividend date
will be 04 August 2022.
Environmental, Social, and Governance
As a pure-play energy storage fund, the Company takes pride in its
contribution to supporting clean energy ambitions for increased integration of
renewable energy into global power systems.
The Board of Directors of the Company is responsible for defining the
Company's environmental strategy and has committed to measuring and reporting
the Company's environmental sustainability in accordance with the SFDR
framework. The Investment Manager is responsible for the day-to-day
implementation of that environmental strategy, including the evaluation and
possible amendment of the Company's construction and asset management
processes as necessary to embody or improve environmental measurements under
the SFDR framework. The Board of Directors of the Company is responsible for
defining the Company's social impact strategy and has committed for the
Company to measure and report the social impact of its investments in
accordance with the SFDR framework.
A summary of the Company's performance under SFDR and under the United
Nation's Sustainable Development Goals (SDG) will be available on the
Company's website in August 2022, as part of the Company's first ESG Pillars
Report.
The Company is also a signatory to the United Nations Principles of
Responsible Investment (UN PRI) and will participate in the next mandatory
submission period, in 2024. Additionally, the Company has committed to comply
with the 'Task Force on Climate-Related Financial Disclosures' (TCFD)
framework by the end of 2022.
CEO of Gore Street Capital, the investment adviser to the Company, Alex
O'Cinneide commented:
"I am pleased to report that the Company continues to enjoy a sustained period
of rapid growth, responding to the pressing and global increasing need to
enable the energy transition to a low carbon society through energy storage
solutions and in the process, further diversifying our portfolio for
shareholders. We have achieved this through a mixture of financial and
operational success, raising additional capital via highly successful,
oversubscribed fundraises, from both institutional and retail investors; as
well as delivering on our strategy, first laid out in our IPO of 2018 when we
defined this category of investing, of building the industry-leading
international portfolio of energy storage assets, now totalling 628.5 MW.
Our active asset management approach continues to optimise Capex of the
portfolio's assets, which increases both performance and profitability,
providing greater returns for shareholders. Additionally, the Company has had
great success to date with keeping construction on time and within budget,
even in this period of supply chain challenges; as well as carefully designing
each asset to be optimised for maximum efficiency once operational.
The 291.6 MW operational portfolio(( 5 (#_ftn5) )) continues to deliver
significant cash flow for the Company and has ensured we have maintained our
robust dividend of 7 pence per share. The end of the period saw the GB and
Northern Irish assets perform extremely well, outperforming revenue
expectations considerably.
We have also successfully raised, through oversubscribed fundraises, £135.0
million in April 2021 and a further £73.6 million in October 2021, with an
additional £150.0 million raised post-period end. The substantial increase of
investible capital has given the Company additional headroom to continue our
strategy of expanding into other geographies, with our first acquisition in
Germany, during the period, and in the United States post-reporting period,
which add a layer of geographical and revenue diversity to our already highly
diverse portfolio of energy storage assets, de-risking Gore Street further for
our shareholders.
We look ahead to the next year with optimism and look forward to updating
shareholders on our progress during regular intervals throughout 2022 and
beyond."
Annual Report
A copy of the annual report has been submitted to the National Storage
Mechanism and will shortly be available at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . The annual report
and presentation for analysts will also be available on the Company's website
at https://www.gsenergystoragefund.com/ (https://www.gsenergystoragefund.com/)
where further information on Gore Street can be found. Further, the annual
report can be found on the Company's website under Reports and Accounts:
https://www.gsenergystoragefund.com/content/investors/shareholder-literature
(https://www.gsenergystoragefund.com/content/investors/shareholder-literature)
There will be a virtual presentation for analysts at 9:30am followed by a live
Q&A today. The webinar will be hosted by Gore Street Capital, the
Company's investment adviser. To register for the event please contact
gorestreet@buchanan.uk.com
A recording of the presentation will be posted on the Company's website at
https://www.gsenergystoragefund.com/ (https://www.gsenergystoragefund.com/)
The Legal Entity Identifier of the Company is 213800GPUNVGG81G4O21.
The person responsible for releasing this announcement is Susan Fadil.
For further information:
Gore Street Capital Limited
Alex O'Cinneide / Paula Travesso Tel: +44 (0) 20 3826 0290
Shore Capital (Joint Corporate Broker)
Anita Ghanekar / Rose Ramsden / 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 7742 4000
Buchanan (Media Enquiries)
Charles Ryland / Henry Wilson / George Beale Tel: +44 (0) 20 7466 5000
Email: tgorestreet@buchanan.uk.com
JTC (UK) Limited, Company Secretary Tel: +44 (0) 20 7409 0181
Notes to Editors
About Gore Street Energy Storage Fund plc
Gore Street is London's first listed energy storage fund and seeks to provide
Shareholders with a significant opportunity to invest in a diversified
portfolio of utility scale energy storage projects. In addition to growth
through exploiting its considerable pipeline, the Company aims to deliver
consistent and robust dividend yield as income distributions to its
Shareholders.
The Company targets an annual dividend of 7.0% of NAV per Ordinary Share in
each financial year, with a minimum annual target of 7.0 pence per Ordinary
Share, payable quarterly. Dividends are discretionary.
Gore Street Energy Storage Fund plc is listed on the LSE's Premium Segment of
the main market and is LSE Green Economy Mark accredited.
https://www.gsenergystoragefund.com (https://www.gsenergystoragefund.com/)
OVERVIEW & HIGHLIGHTS
About Us
Launched in 2018, Gore Street Energy Storage Fund plc ("GSF" or "the Company")
is London's first listed energy storage fund. As of the date of publication,
the Company is the only UK-listed Energy Storage fund with a diversified
operational portfolio located across four different national grids.
The Company is one of the principal owners and operators of battery storage
facilities in Great Britain and Ireland, and as of the date of publication,
owns and operates facilities in Western Mainland Europe and the US. It is
listed on the Premium Segment of the London Stock Exchange and included in the
FTSE All-Share Index.
Energy storage technologies can enhance power system stability and flexibility
and are key tools for balancing out variability in renewable energy
generation, which allows the integration of more renewable energy supply into
power grids. In this way, energy storage is critical to the renewable and
low-carbon energy transition.
GSES 1 Limited is a wholly owned subsidiary of the Company, and it is the
entity that holds the Company's Assets (referred to as the 'Company's
portfolio' or 'GSF's portfolio'). As of the date of publication, GSF's
portfolio consists of 668(( 6 (#_ftn6) )) megawatts (MW) of utility-scale
energy storage assets across the UK, the Republic of Ireland, Germany, and the
United States, of which 291 MW are operational and 377 MW are at varying
stages of construction. The Company also counts on an additional 1.57
gigawatts (GW) of pipeline projects across the Company's key markets.
The Company has been awarded the London Stock Exchange's Green Economy mark,
which recognises leading companies and funds that derive more than 50 per
cent of revenues from products and services that contribute to environmental
objectives.
GSF is an Investment Trust managed by Gore Street Capital Limited (the
"Investment Manager") 7 (#_ftn7) , which is a full-scope Alternative
Investment Fund Manager ("AIFM"), authorised and regulated by the UK's
Financial Conduct Authority ("FCA"). The Company has an independent board of
non-executive directors that engages constructively with the Investment
Manager on an ongoing basis.
The Investment Manager was formed in 2015 as a platform to acquire, develop
and manage global renewable energy assets. The Investment Manager's
investment, technical and operating team has a wealth of combined experience
in sourcing, structuring the acquisition of, and managing the construction and
operation of energy assets worldwide.
The Investment Manager oversees the acquisition, development, and management
of the Company's operations and has been responsible for the Company's
portfolio development and growth since the Company's inception. Through its
subsidiary, Gore Street Operational Management Limited (the "Operations
Manager" or "GSOM"), 8 (#_ftn8) the Investment Manager has oversight of the
efficient and cost-effective buildout of energy storage assets from
acquisition through to commissioning. The Operations Manager is also
responsible for the supervision of asset management, fault correction, and
revenue optimisation strategies across the portfolio. 9 (#_ftn9)
The Company is authorised to invest up to 60 per cent. of Gross Asset Value
into opportunities outside of the UK and the Republic of Ireland, into target
developed markets in North America, Western Europe, Australia, Japan, and
South Korea. 10 (#_ftn10) The Company's recent expansion into the United
States and Germany is indicative of the Investment Manager's appetite for
capitalising on available and attractive opportunities for targeted growth.
Corporate Purpose
The Company aims to provide investors with a sustainable and attractive
dividend, generated from long-term investment in a diversified portfolio of
utility-scale energy storage assets. The Company targets a dividend payment to
shareholders at an annual rate of 7 per cent. of Net Asset Value per Ordinary
Share, with a minimum target of 7 pence per Ordinary Share(( 11 (#_ftn11) )).
In addition, the Company seeks to provide investors with capital growth
through the re-investment of net cash generated in excess of the target
dividend, in accordance with the Company's investment policy.
The Company has committed to disclose its Environmental, Social and Governance
("ESG") principles through its voluntary compliance with Article 8 of the EU
'Sustainable Finance Disclosure Regulation' (SFDR). GSF will disclose relevant
environmental and social data assessing the Company's alignment with the SFDR
requirements, as part of its first ESG Pillars Report, in August 2022. The ESG
Pillars Report will be published annually thereafter, in order to provide
investors with visibility of the Company's plans for continued integration of
target ESG principles into the Company's business activities, from acquisition
to construction and through the period of an asset's operations.
Why Energy Storage?
National grids face challenges in matching the demand for electricity with
fluctuating power system supply. This challenge is exacerbated by the
intermittent nature of some renewables. Much of the renewable power supply is
weather dependent: the sun does not always shine, the wind does not always
blow at the same speed, and this makes renewable energy sources, such as solar
and wind, less predictable as sources of power, over a longer period, than
fossil fuels. On the other hand, electricity demand follows a predictable
pattern, rising during the day, summer, and winter months, and falling at
night.
Energy storage can be used to solve the problem of intermittency of supply
against predictable demand patterns in the short term through a battery's
ability to store power, including energy generated by wind or solar and then
sell (or "trade") such stored power (including sustainably generated power)
for use at times of excess demand. Energy storage is also used to reduce the
risk of brownouts and blackouts resulting from the increased integration of
wind, solar and other intermittent sources of power into the global power
infrastructure. The introduction of larger volumes of intermittent forms of
energy into electricity networks affects the quality of available power and
therefore the stability of the grid. Battery storage has proven itself a
well-suited tool to provide the system stability necessary to avoid blackouts
(typically caused by voltage surges) and to manage other power quality issues.
Driven by renewable deployment, the global energy storage market has exceeded
installations of 11 GW / 24 GWh per annum and is predicted to grow to 26 GW /
60 GWh per annum by 2025.(( 12 (#_ftn12) ))
THE INVESTMENT PROPOSITION
Investment Objective and Target Yield
The Company seeks to provide investors with a sustainable and attractive
dividend over the long term by investing in a diversified portfolio of
utility-scale energy storage projects. The Company will target dividends in
each financial year based on the average Net Asset Value per Ordinary Share
during that financial year, subject to a minimum target of 7 pence per
Ordinary Share in each financial year. The target dividend will increase by
0.5 pence per Ordinary Share for each 7.0 pence increase in average Net Asset
Value per Ordinary Share in any financial year above 100 pence. In addition,
the Company seeks to provide investors with an element of capital growth
through the re-investment of net cash generated in excess of the target
dividend in accordance with the Company's investment policy.
Diversified Portfolio and Revenue Stream
The Company holds 13 (#_ftn13) and operates a diversified portfolio of
lithium-ion energy storage assets in four markets 14 (#_ftn14) , including
291.6 MW of operational assets (earning revenues) and 376.8 MW projects under
construction. Lithium-ion batteries deliver multiple grid balancing and power
quality services to power grids and present power trading opportunities.
Consequently, batteries generate multiple revenue streams. It is the Company's
intention that no single project or interest in any project will have an
acquisition value of greater than 20 per cent. of Gross Asset Value of the
Group as a whole (calculated at the time of acquisition). Geographical and
revenue contracting risks will be diversified between GB, Ireland, the United
States, Germany, and other target markets.
Proven Technology & Capability
Energy storage systems are utilised by power grid systems to aid in regulating
power security, ensuring power quality and in balancing electricity demand.
The Company is committed to maintaining best-in-class practices in the design
and management of its systems, and to ensuring adequate health and safety
standards are kept. Its operational discipline is not only relevant from an
environmental perspective but also ensures that its fleet of assets are
dependable generators of revenue. The Company represents a substantial 13 per
cent. market share of the Dynamic Containment ("DC") market in Great Britain,
and, in Ireland, it accounts for 55 per cent. of the 'Delivering a Secure
Sustainable Electricity System' ("DS3") capped contracts, and 13 per cent. of
DS3 uncapped agreements, inclusive of the provision of reactive power
services. GSF's market share of large-scale battery storage services
delivering grid balancing services not only demonstrates the Company's scale
but also confirms its operational and technological reliability. 15 (#_ftn15)
Market Leadership
The Investment Manager was one of the first movers to deploy privately owned
grid-scale battery projects in GB. It was also one of the first to
successfully enter and deliver services in the energy storage market in
Ireland, where the Company continues to hold a substantial market share. As of
the date of publication, the Company has also entered energy markets in the
United States and Germany.
The Investment Manager is comprised of industry experts, thought leaders, and
financial professionals, who leverage their collective expertise and work
collaboratively alongside industry leaders on system design, procurement, and
asset construction.
Environmental Sustainability, Social Impact and Governance
Energy storage is a critical piece of the infrastructure used to solve the
challenge of intermittency of supply from weather-dependent, variable
renewable energy sources, against predictable demand patterns. As a
sole-play energy storage fund, the Company takes pride in its contribution to
supporting clean energy ambitions for increased integration of renewable
energy into global power systems.
The Board of Directors of the Company is responsible for defining the
Company's environmental strategy and has committed to measuring and reporting
the Company's environmental sustainability in accordance with the SFDR
framework, which will be available on the Company's website in August 2022.
This will provide investors greater assurance and transparency around the
Company's environmental strategy. The Investment Manager is responsible for
the day-to-day implementation of that environmental strategy, including the
evaluation and possible amendment of the Company's construction and asset
management processes as necessary to embody or improve environmental
measurements under the SFDR framework.
The Board of Directors of the Company is responsible for defining the
Company's social impact strategy and has committed for the Company to measure
and report the social impact of its investments in accordance with the SFDR
framework.
A summary of the Company's performance under SFDR and under the United
Nation's Sustainable Development Goals (SDG) is provided in the Company's
first ESG Pillars Report which will be available on the Company website in
August 2022.
The Company is also a signatory to the United Nations Principles of
Responsible Investment (UN PRI). The UN PRI requires the Company to
participate in the next mandatory submission period, which will be in 2024.
Additionally, the Company has committed to comply with the 'Task Force on
Climate-Related Financial Disclosures' (TCFD) framework by the end of 2022.
INVESTMENT HIGHLIGHTS
Fundraise
During the fiscal year, the Company closed a Placing Programme in which it
issued all available shares, raising a total of £208.6 million (£135 million
in April 2021, and a further £73.6 million in October 2021). Both capital
raises were oversubscribed. 16 (#_ftn16)
In March 2022, the Company opened a new issuance programme of up to 750
million Ordinary and C Shares. In April 2022, the Company was again
significantly oversubscribed and raised gross proceeds of £150.0 million in
its issuance 17 (#_ftn17) of 136,363,636 new Ordinary Shares. The
Company's issued share capital comprises as of the date of publication amounts
to 481,399,478 Ordinary Shares.
Deployment of Capital
The Company grew by 66 per cent (in MWs) during the fiscal year.
During the period, the Company acquired 158.9 MW of energy storage projects
across England and Germany of which 22.0 MW are currently operational. Both
construction assets (Stony 79.9 MW and Enderby 57.0 MW) have target commission
dates in 2023. The Company also secured the right to expand its Kilmannock
("KBSL") project in the Republic of Ireland ("ROI"), resulting in a total
248.9 MW increase in its total portfolio capacity as of 31 March 2022.
Enderby 57.0 MW represents the Company's first asset connected to National
Grid's main transmission network. This means that Enderby will operate without
an intermediary distribution network operator, potentially reducing capital
and operating expenditure. The acquisition of the 22.0 MW operational projects
in Cremzow, Germany, represents the Company's first acquisition in Mainland
Europe.
The expansion of the KBSL site by 90.0 MW follows the 60.0 MW expansion grant
for Porterstown ("PBSL") and increases the Company's portfolio capacity in the
ROI from 60.0 MW (on acquisition in July 2019) to 210.0 MW. The initial 30.0
MW phase of development at PBSL ('PBSL Phase 1') became fully energised as of
the date of publication 18 (#_ftn18) . The PBSL expansion project ('PBSL
Phase 2') is expected to be operational by 2024. Given challenges amidst
global supply chain issues, the Company expects delays in the timeline for
KBSL and its expansion site ('Phase 1' and 'Phase 2', respectively) and will
inform the markets of the updated timeline in due course.
As of the date of publication, GSF has acquired 39.8 MW of energy storage
projects in the ERCOT (the 'Electric Reliability Council of Texas') market in
Texas, United States with rights to acquire an additional 40 MW upon
satisfaction of the terms of its purchase agreement. 29.9 MW of the ERCOT
assets (Synder, Westover and Sweetwater) are operational (2-hour duration).
The remaining 9.9 MW (Mineral Wells) is in its pre-construction phase with
operation targeted by the end of 2023.
Figure 1: Timeline and milestones of the Company since IPO: market
capitalisation, portfolio total capacity and operational portfolio capacity;
as well as contracted 'Engineering Procurement and Construction' (EPC)
contracted capacity
Pipeline
The Investment Manager intends to further diversify its investment pipeline
with acquisitions in Western Europe and North America, GB, and Australia. Its
investment pipeline currently stands at 1.57 GW of energy storage assets with
the capacity to deliver 3.24 GWh. 19 (#_ftn19) As of the date of
publication, the Investment Manager has actively engaged in exclusive
negotiations for projects totalling 495.0 MW with the capacity to deliver
980.0 MW of power per hour.
Key Metrics
As of Fiscal Year, Ending March 2022 20 (#_ftn20) :
Table 1: Key Metrics
Adjusted NAV is calculated as the NAV per the Statement of Financial Position
adjusted for the interim dividend relating to the December 2021 quarter of
£6.9m or 2.0 pence per share, which was declared in March 2022 but paid post
period end on 1 April 2022. This metric provides consistency and a more
meaningful comparison against the NAV on 31 March 2021, which already included
the 2.0 pence per share dividend relating to the December 2020 quarter, which
was paid in March 2021, prior to the period end.
The Company's market capitalisation increased by 151 per cent. since the end
of the last fiscal year. Further capital was raised post year-end, in April
2022, which together constitutes a total increase of 258 per cent in the
Company's market capitalisation since the end the of the last fiscal year 21
(#_ftn21) .
The Company declared a total of 7.0 pence dividend per share for the financial
year, with the final instalment of 1.0 pence to be paid post the date of
publication.
The increase in Total Adjusted NAV during the fiscal year is illustrated in
the bridge, shown in Figure 1. The key drivers of the increase in NAV from £
145.1 million (March 2021) to £ 369.6 million (March 2022 Adjusted NAV) were:
(i) Two fundraises totalling £208.6m; (ii) Both NI assets were operational
throughout the year; (iii) Acquisition of operational asset, Cremzow; (iv)
Successful de-risking of projects as they progress through their construction
stage; (iv) Revenue forecasts; and (v) Strong operational performance of the
assets due to efficient optimising of the revenue stacks.
On a NAV per share basis, the Company experienced an increase of 6.2 pence per
share since the last fiscal period. Since IPO (to the end of the fiscal year),
the Company has delivered a Net Asset Total return of 34.2 per cent (inclusive
of dividends) to shareholders. 22 (#_ftn22)
Figure 2: NAV Bridge March 2022 in £m
The Net DCF changes have been broken out in the below graph:
Figure 3: Net DCF changes bridge for the fiscal year £(m)
Portfolio Composition
The Company has a portfolio of 296.6 MW in GB and 310.0 MW of energy storage
assets across the island of Ireland(( 23 (#_ftn23) )). During the fiscal
year, it successfully completed its first acquisition in Mainland Europe, a
22.0 MW operational portfolio in Germany. As of the date of publication, the
Company has completed its first US acquisitions, consisting of four energy
storage assets totalling 39.8 MW in the ERCOT market in Texas.(( 24 (#_ftn24)
))
A breakdown of the total portfolio is present below, differentiated by: i)
Geography; ii) Asset status; and iii) Storage System suppliers 25 (#_ftn25) ,
on a per MW basis, as of March-end 2022:
As of the publication date, the updated breakdown is disclosed below:
Sources of Revenue
As of the publication date, the Company's operational assets deliver services
to the following Transmission System Operators (TSOs): The 'National Grid
Electricity System Operator' (NGESO or "National Grid") in GB; EirGrid and
SONI 26 (#_ftn26) in Ireland; the 'Electric Reliability Council of Texas'
(ERCOT), in Texas, US and, indirectly through participating in the German
ancillary services market 27 (#_ftn27) to eleven further TSOs, across eight
countries in Mainland Europe ("European Grids").
These services generate attractive income streams and diversify exposure to
different markets and sources of revenue. Revenue diversification is achieved
by selling services to different counterparties (including selected TSOs) and
through the ability to "stack" several income streams across various contract
lengths within individual assets.
Whilst ancillary services are currently the predominant revenue stream in the
portfolio, the Company also derives revenues from Capacity Market ("CM")
contracts, Triads, and participation in energy arbitrage ("Trading").
Ancillary Services include Dynamic Containment ("DC") and Firm Frequency
Response ("FFR") in GB; the 'Delivering a Secure Sustainable Electricity
System' ("DS3") contracts in the Irish Network; Frequency Containment Reserves
("FCR") in Europe, and Response Reserve Services ("RRS"), in Texas, US.
The figure below illustrates the breakdown of total portfolio revenue per TSO
and revenue stream at the end of the financial year. 28 (#_ftn28)
Figure 4: Geographical exposure and revenue services breakdown during the
2021/22 fiscal year. 29 (#_ftn29)
As of 31 March 2022, the National Grid constitutes the Company's primary
counterparty, from which 49 per cent. of the Company's revenues are
generated. A further 41 per cent. of operating revenues are generated in
Northern Ireland with EirGrid/SONI as the counterparty.
As of the date of publication, the Investment Manager has further diversified
its revenue stack as a result of its participation in the ERCOT and German
markets and by the commencement of delivery of DS3 capped contract services in
the Republic of Ireland in July 2022.
Figure 5: Expected geographical exposure based on expected revenue for the
next fiscal year (2022 /2023). 30 (#_ftn30)
Market Overview
The market backdrop wherein the company operates, shows a growing shift toward
low carbon energy generation, which represents strong fundamental drivers for
energy storage deployment. The UK(( 31 (#_ftn31) )) and Irish(( 32 (#_ftn32)
)) Governments are committed to achieving carbon neutrality by 2050, as well
as the US(( 33 (#_ftn33) )). Germany has set on a path of accelerated
clean-energy expansion, bringing forward its goal of 100 per cent. renewable
power to 2035 34 (#_ftn34) . This provides a tailwind for the deployment of
battery energy storage systems and has led to rapid growth within the sector.
The Company provides a number of critical services across these markets and
benefits from multiple revenue streams, of varying contract lengths, which can
be stacked. Furthermore, due to the flexible nature of the Company's assets,
it is able to take advantage of a variety of contracts depending on prevailing
market conditions.
The table below shows the relevant characteristics for each market relevant to
the Company, as well as the diverse mix of revenue streams available to the
Company's assets in each of these markets.
Market Market Structure Revenue Streams Characteristics
GB National Grid Capacity Market (CM) o CM: Procurement of future energy capacity to ensure sufficient generation
on the system
Firm Frequency Response (FFR)
o FFR: Balancing supply and demand of electricity to ensure that frequency
Dynamic Containment (DC) remains around 50Hz
Dynamic Moderation (DM) o DC: Fast-acting post-fault service to contain frequency outside of
acceptable limits
Wholesale Trading
o DM: Balancing supply and demand of electricity to ensure that frequency
Triads remains around 50Hz
o Wholesale Trading: The trade of energy between generators and suppliers
o Triads: Top three half-hour peaks of national energy demand across the
grid
Ireland EirGrid/SONI Capacity Market o Volume uncapped: Procurement that does not limit the volume of the service
being procured and to which regulated tariffs apply
DS3 Programme
o Volume capped: Procurement where an upper limit is applied to the volume
Volume uncapped of relevant DS3 services being procured and for which prospective providers
will offer a competitive price as part of their tender
Volume capped
o CM: Procurement of future energy capacity to ensure sufficient generation
on the system
Germany TSOs across 8 countries Frequency Containment Reserve (FCR) o FCR: Primary ancillary service in Germany and serves to stabile frequency
deviations in the system
o Wholesale Trading: (from January 2023)
Texas, US ERCOT Responsive Reserve Services (RRS) o RRS: Used to restore the frequency of the system within the first few
minutes of an event that causes a significant deviation from the standard
frequency
Market Share
During the fiscal year, the Company's delivery of FFR services accounted for 9
per cent of the FFR market in GB. In the same period, GSF's services accounted
for c. 13 per cent. of the DC market in the GB energy market(( 35 (#_ftn35)
)).
The Company's Northern Irish assets represent an ongoing 100.0 MW commitment
to delivering DS3 services to the Irish network. The Company's operational
assets represent a 13 per cent market share of DS3 services for uncapped
agreements in NI(( 36 (#_ftn36) )) including the provision of reactive power
services.
The Company also holds contracts for 60.0 MW of capped DS3 agreements for its
two assets in ROI, representing a 55 per cent market share of the Irish DS3
capped contracts' storage projects under development. In terms of uncapped
contracts, the Company represents 5 per cent of the market share. 37
(#_ftn37)
Ireland 38 (#_ftn38)
GB
New Markets: Germany and the US 39 (#_ftn39)
Portfolio Revenue Performance
The portfolio's growth, as represented below by the 23.2x increase in the
Fund's installed capacity from 10.0 MW in June 2018 to 231.7 MW in March 2022,
is largely attributable to the Company's strategic expansion into new markets.
The revenue growth, comprising a compound annual growth rate ("CAGR") of 181.5
per cent. since the Fund's inception, has been mostly driven by the increase
in the operational installed capacity of the portfolio companies, both through
the acquisition of operational sites and the commissioning of sites in
construction, during the financial year. Additionally, EBITDA for the
portfolio has experienced a CAGR of 191.2 per cent. largely due to the
Investment Manager's in-house technical capabilities that allow the Company to
minimise Opex, whilst optimising a revenue stacking strategy across its
assets.
The Company's growth and its delivery against projected revenue streams are
reflected in its Net Revenue and EBITDA performance, illustrated in the figure
below.
Figure 6: Representation of Total Net Revenue and EBITDA of operational
portfolio Companies (£) since IPO, alongside installed capacity progression
(historical and forecast). Data is presented per quarter.(( 40 (#_ftn40) ))
Figure 7: Total Revenue per MW represented per each of the four grids:
National Grid, EirGrid/SONI, European TSOs ('European Grid'), and ERCOT,
Texas, since IPO 41 (#_ftn41)
Regarding the Company's Capex per MW, the Investment Manager is focused on
capital discipline as a way of maximising returns to investors. The Investment
Manager has an in-house procurement team that manages all EPC negotiations,
including the assurance of warranties and technical specificities in
accordance with revenue strategies. This considers optimal system duration
strategy, degradation profile and Capex pricing expectation.
Notwithstanding material supply chain disruptions in the market during the
fiscal year, the Company sought to minimise price hikes, utilising economies
of scale. Through its existing EPC framework arrangements, the Group also
sought to maintain timely access to equipment despite market shortages.
Portfolio Overview 42 (#_ftn42)
GSF is currently the only listed energy storage fund in the UK that possesses
international exposure, providing services to four different markets and their
respective grids, in GB, Ireland, Western Mainland Europe (during the fiscal
year) and Texas, US (post year-end). As of March-end, the Company has 43
(#_ftn43) 26 assets across GB, Ireland, and Germany, and, as of the
publication date, it has increased its portfolio to 30 assets including 4
assets in the US.
Figure 8: Company's portfolio assets as of the date of publication.
Portfolio in GB and Ireland*
Asset name Capacity Ownership Asset Name Capacity Ownership
1. Boulby 6.0 MW/6.0 MWh 99.90% 9. Ferrymuir 49.9 MW 100.00%
2. Cenin 4.0 MW/4.8 MWh 49.00% 10. Hulley 20.0 MW/20.0 MWh 100.00%
3. Port of Tilbury 9.0 MW/4.5 MWh 100.00% 11. Lascar 20.0 MW/20.0 MWh 100.00%
4. Lower Road 10.0 MW/5.0 MWh 100.00% 12. Breach 10.0 MW/10.0 MWh 100.00%
5. Mulavilly 50.0 MW/21.3 MWh 51.00% 13. Larport 19.5 MW/19.5 MWh 100.00%
6. Drumkee 50.0 MW/21.3 MWh 51.00% 14. Ancala 11.2 MW/11.2 MWh 100.00%
7. Porterstown 30.0 MW/30.0 MWh 51.00% 15. Stony 79.9 MW 100.00%
Porterstown Phase 2 60.0 MW 51.00% 16. Enderby 57 MW 100.00%
8. Kilmannock 30.0 MW 51.00%
Kilmannock Phase 2 90.0 MW 51.00%
International Portfolio in US 44 (#_ftn44) and Germany*
Asset name Capacity Ownership Asset Name Capacity Ownership
17. Cremzow 22.0 MW/29.0 MWh 90.00% 20. Sweetwater 9.95 MW/19.9MWh 100.00%
18. Synder 9.95 MW/19.9 MWh 100.00% 21. Mineral Wells 9.95 MW 100.00%
19. Westover 9.95 MW/19.9MWh 100.00%
*MWh included for operational sites
Net Asset Value
There was a NAV increase of 6.2 pence per share, which together with dividends
declared for the fiscal year 45 (#_ftn45) , represents a net asset total
return of 13.1 per cent. during the fiscal year. From IPO to 31 March 2022,
the Company has delivered a net asset total return of 34.2 per cent. inclusive
of dividends.
Table 2: Net Asset Value of GSF: quarterly progress
Quarter End Pence per share
Mar-21 100.9
Jun-21 101.0
Sep-21 103.3
Dec-21 103.9
Mar-22 46 (#_ftn46) 107.1
Dividend History
Since IPO, the Company has targeted dividends at a minimum of 7 pence per
Ordinary Share in each financial year 47 (#_ftn47) . The Company is pleased
to announce that as of the publication date, the Company has declared total
dividends of 7.0 pence with respect to the period ending 31 March 2022, as
targeted.
Ordinary Shares
Quarter Dividends
30 June 2021 2.0p
30 September 2021 2.0p
31 December 2021 2.0p
31 March 2022 1.0p
CHAIR'S STATEMENT
On behalf of the Board, I am pleased to present the fourth audited Report and
Accounts of the Gore Street Energy Storage Fund for the year ended 31 March
2022 and to report that GSF has achieved strong financial results with average
net revenues per MW in Great Britain 68 per cent ahead of last year's, and
18.3 per cent higher than internal forecasts. NAV increased 154% to £369.6
million and NAV(( 48 (#_ftn48) ))per share (post-dividends) increased by 6.1
per cent. Net income increased 191 per cent. to £42.5 million. The Company
raised a total of £208.6 million in two issuances: £135 million in April
2021, and a further £73.6 million in October 2021. Both capital raises were
oversubscribed. Since IPO, the Company has targeted and delivered dividends of
7 pence per Ordinary Share in each financial year, and it shall do so again in
this fiscal year.
Our report issues against the backdrop of the most significant geopolitical
event of the 21(st) century, Russia's invasion of Ukraine. This has altered
the strategic energy landscape, heightened the focus on energy security, and
led to renewed pledges to hasten the energy transition towards renewables-led
decarbonisation. Both in terms of energy security and the energy transition
grid-scale battery storage has a vital contribution to make. The wider
macroeconomic and potential supply chain consequences of the war are being
kept under active review by the Board and our Investment Manager.
As the first UK-listed energy storage fund, we are proud to be the only such
fund to expand services into both Western Europe and North America. The Board
agreed to increase the scope of services delivered by the Investment
Manager 49 (#_ftn49) whose deepening talent pool and operational expertise
will permit Gore Street to deliver its ambitious expansion plans and to
maintain a position of leadership in the rapidly growing market for battery
energy storage.
Strategy and Performance
As of the date of publication, GSF's portfolio consists of 668(( 50 (#_ftn50)
)) megawatts (MW) of utility-scale energy storage assets across the UK, the
Republic of Ireland, Germany, and the United States, of which 291 MW are
operational and 377 MW are at varying stages of construction.
In the past year, the Company focused on operational growth through global
diversification, acquiring three projects in England and Germany during the
fiscal year and, an additional 4 sites in the United States (in Texas) as of
the date of publication. It is a personal pleasure to note that our first
asset in the Republic of Ireland, PBSL, became fully energised as of the date
of publication, increasing the operational portfolio by a total of 81 MW, a 38
per cent. Increase since our last Annual Report.(( 51 (#_ftn51) ))( )
While the operational portfolio increased by 10 per cent. from March-end 2021
to March-end 2022, revenues were nearly four times higher for the same period.
The rise in revenue from almost £3 million in the quarter ending March 2021
to over £10 million in the quarter ending March 2022 can be attributed both
to the growth of the operational portfolio in the previous fiscal year and to
increases in market demand for ancillary and trading services. Moreover, the
Investment Manager's team has improved its revenue stacking capability and has
entered stronger revenue optimisation partnerships.
Our NAV growth also results from our efforts at maintaining financial
discipline in construction and asset management. The Manager strongly believes
in capital efficiency and strives to achieve amongst the lowest Capex and/or
Capex/MW in the industry through leveraging its in-house technical know-how.
This, together with our strategic partners and the exploitation of economies
of scale, has ensured the timely development of construction projects despite
heavy supply chain instability within the industry related to the current
social and geopolitical climate.
New and Evolving Markets
There is a clear global shift towards low carbon energy generation. In all key
regions in which the Company provides grid balancing and market services,
there is a political commitment to achieve carbon neutrality by 2050, with
Germany now committed to 100 per cent renewable power by 2035 in the light of
Russia's invasion of Ukraine. (( 52 (#_ftn52) ),( 53 (#_ftn53) )),( 54
(#_ftn54) ), 55 (#_ftn55) These political ambitions should encourage a strong
economic tailwind for continued and rapid growth within the battery storage
sector.
Notwithstanding an increase in participants in the energy storage market, the
Company still maintains a material share of the grid balancing services of
large-scale battery storage systems. We accredit our market share to not
just our size and scale, but also to our operational and technological
reliability. 56 (#_ftn56) In the fiscal year, the Company maintained
operational performance at an average availability of 97 per cent. 57
(#_ftn57) Operational HSE performance has been very reassuring, as the
Manager works closely with EPC contractors and O&M providers to ensure
Health and Safety of the Company's sites during the construction and operation
stages. The Company aims to always operate in a manner that safeguards public
health, property and the environment and I am therefore proud to note that the
GSF has had no health or safety incidents or community complaints in the
fiscal year.
DC and FFR are two primary ancillary services delivered by large-scale
batteries to the UK National Grid. The Company represents13 per cent. of the
DC market and 8 per cent of the FFR market. In Ireland, where ancillary
services are delivered under the DS3 program, Gore Street accounts for 55 per
cent. of DSC capped (fixed price) contracts, and 13 per cent. of DS3 uncapped
(floating price) agreements.
The Company began to deliver Frequency Containment Reserves ("FCR") in Germany
during the fiscal year and now accounts for 4 per cent of grid-scale battery
ancillary services market in Germany. As of the date of publication, GSF's
services account for 3 per cent. of the grid-scale battery ancillary services
market in Texas's ERCOT market.(( 58 (#_ftn58) ))( )
The Company's strong performance further justifies the Manager's extensive
pipeline of energy storage assets spanning multiple continents, which, in
turn, enables the Manager to enhance the diversification of the Company's
portfolio whilst expanding into new markets. As of the publication date, we
have secured exclusive rights to negotiate contracts for 495.0 MW of new
projects, of which 295.0 MW are outside of the UK and the Republic of Ireland.
Environmental Impact and Social Sustainability
Gore Street's purpose is to deliver long-term capital growth to its investors
through the construction, operation, and optimisation of a geographically
diverse portfolio of utility-scale battery storage systems. Since IPO, the
Company has maintained that energy storage is a crucial component in
accelerating the transition of national grids to cleaner energy and that our
products and services are intrinsically entwined with these environmental
objectives.
In the fiscal year, we have commenced compliance with SFDR (including the TCFD
climate change disclosures) and committed to track and report environmental
and social performance utilising specific EU metrices that apply to global and
European investors. Similar metrices and performance targets are now
underway in the United Kingdom.(( 59 (#_ftn59) )) By signing up to SFDR,
the Company has committed to provide investors with visibility of the
Company's score card for select environmental principles and to continuously
evaluate and integrate those principles into the Company's business
activities, from acquisition to construction and through the operating and
decommissioning periods of an asset's life cycle.
SFDR compliance means that the Company will evaluate its progression towards
social and governance performance targets ahead of adoption and codification
by the Financial Conducts Authority in the UK.(( 60 (#_ftn60) ))
Specifically, we are tasked as market leaders to encourage industry-wide
evaluation of our sources of raw materials used in cell and battery production
and of the way decommissioning will occur as batteries approach end of life.
We intend to add to Board membership in the coming year, having regard to the
appropriate skills and diversity essential to ensuring the Fund's future
prosperity.
The Company will publish its first ESG Pillars Report on its website in August
2022 (including its environmental data) and thereafter will release an update
of its progress on an annual basis.
COVID-19, and Other Principal Risks and Uncertainties
Since IPO, the United Kingdom's economy has been impacted by Brexit and the
coronavirus (Covid-19) although the Company's operational and construction
activities have remained largely on target. The Company established supply and
procurement framework arrangements which allowed the Group to benefit from
economies of scale over the past few years and to maintain timely and
preferred access to equipment notwithstanding market shortages. However, there
is a risk that continued market disruption will begin to materially impact
construction and supply chain activities.
Whilst the UK is not materially reliant on Russian gas 61 (#_ftn61) , the
Russian-Ukrainian conflict does increase global instability and may arguably
have accelerated the business case for increased reliance on renewable power
in Ireland, Germany, and other parts of Europe. We discuss the potential
impact of geopolitical conditions and other risks alongside our mitigation
strategies on page 80.
Use of Funds, Dividends and AGM
We returned to investors twice during the fiscal year to raise funds and were
oversubscribed when we completed a modest 2021/2022 issuance programme for 250
million shares, raising £208 million during the fiscal year. The Fund market
cap exceeded £400 million during the fiscal year, growing to the point of
inclusion in the FTSE All-share index.
With funds raised and allocated across the existing construction and
acquisition pipelines, the Company elected, after the fiscal year, to issue a
2022/2023 issuance programme of 750 million shares but limited its initial
raise to 160 million shares (which was again oversubscribed). As of the date
of publication, Gore Street's market cap is £0.58 billion. The Company's
share price has consistently traded at a premium to NAV throughout the
reporting period.
The Board declared dividends for the reporting period amounting to 7p per
Ordinary Share, in keeping with its dividend policy. This represents the
fourth consecutive year of dividend allocation. The Board will propose for the
final 1p payment to be scheduled for distribution to shareholders around the
time of publication of this report.
The Company plans to host its 2022 AGM as a hybrid meeting on the 20(th) of
September 2022. With the recent increase in incidents of COVID 19,
shareholders are encouraged to attend virtually. Further details, including
the location, video and/or audio link, and questions and answers procedure,
will be provided in the Notice of AGM.
Dividend Ratification
The Board was concerned to learn a technical issue has arisen in respect of
the Company's procedure for the payment of the interim dividend of 2.0 pence
per Ordinary Share for the period from 1 July 2021 to 30 September 2021 paid
on 7 January 2022 and the interim dividend of 2.0 pence per Ordinary Share for
the period from 1 October 2021 to 31 December 2021 paid on 1 April 2022 (the
"Interim Dividends"). The aggregate amount of the Interim Dividends was
approximately £13.8 million.
This issue arises from an inadvertent failure to file interim accounts with
Companies House showing that sufficient distributable reserves were available
when the dividends were paid.
A special resolution will be proposed at the Company's forthcoming AGM to
resolve this technical issue.
The Board has been working closely with the Manager to ensure that lessons are
learned and that processes have been enhanced to avoid a recurrence.
More detail is set out in the Financial Notes 21 pages 157-158.
Directors' Responsibilities Pursuant to Section 172
The Directors are responsible for acting in good faith and towards the success
of the Company for the benefit of its members. In doing so, Directors must
have regard for the needs of stakeholders amongst other matters set out in
section 172 when performing their duties as discussed in the corporate
governance report, on pages 100-114.
Viability and Going Concern
The Directors have assessed the prospects of the Company over a period of five
years and confirm our reasonable expectation of viability and continuance over
that term. The Board deemed this period appropriate due to the early stage of
development of both the Company and its investment portfolio after 40 months
of trading, and the nature of the business in which the Company is involved.
The Directors' assessment of Gore Street's viability and going concern are
discussed in the corporate governance report, on pages 100-114.
Closing Remarks
The year ending March 2022 marks the year of strong performance at the
Company. The Investment Manager has added to its talent pool thus enhancing
our capacity to meet ambitious targets, contain costs, maximise revenues, and
grow both financially and responsibly, while entering new markets. On behalf
of the Board, I wish to thank the Investment Manager, its CEO, Alex O'
Cinneide, and the staff together with our suppliers and service providers for
their individual and collective contributions to our success.
The Company is now part of the critical infrastructure necessary for
incorporating greater amounts of renewable energy into national and regional
power grid systems in the United Kingdom, Ireland, Germany, and the United
States. With the support of our shareholders, I am confident of Gore
Street's capacity to deliver our ambitious growth plans and look forward to
continued success.
STRATEGIC REPORT
1. Business Model
Asset identification and assessment
The Investment Manager has assessed hundreds of projects since the Fund's IPO
to select opportunities that meet the Company's investment policy. As part
of its assessment of investment opportunities, the Investment Manager
routinely runs market analyses on each grid network within its geographical
mandate. The Investment Manager's team also works with local advisors to
evaluate the regulatory environment applicable to each grid operator. The
Company has established a strong network of project developers that possess a
deep understanding of early-stage project development to ensure that projects
identified for investments meet or will meet land, planning and grid
energisation requirements by the time of acquisition. The Investment Manager
has designed the Company's portfolio to be geographically diverse with
flexibility in mind so that the Company can withstand regulatory and
technological changes in the evolving energy policy climates of the various
markets in which it has a mandate to operate.
Acquisition execution and onboarding of new assets/projects
The Investment Manager's team is comprised of professionals with experience in
finance, legal, asset construction, engineering, and operations. The
Investment Manager manages the acquisition process from bid to close. It
relies on third parties to ensure due diligence and remove biases in assessing
opportunities. It aims to design transactions in a manner that allocates
project risks in accordance with the Company's investment policy. The
investment team is also responsible for monitoring and integrating the
Company's health, safety, environmental, social and investment objectives into
the Company's acquisition model.
Procurement and Construction
The Operations Manager has an in-house procurement team, with both the legal
and technical expertise to negotiate all key contracts for project engineering
and construction and obtain warranties for continued battery performance. The
construction and development team are responsible for monitoring project
construction and holding relevant stakeholders accountable for cost and
quality control and timeline management. The team is also responsible for
monitoring and integrating the Company's health, safety, environmental, social
and investment objectives into the Company's construction model.
Performance Optimisation, Responsible management, and monitoring
The Operations Manager dictates the parameters for revenue stacking and
optimisation for the portfolio. It forms its bidding strategies by taking
into consideration energy market dynamics, regulatory limitations, and
existing contract commitments and then works with optimisation and trading
professionals to maximise revenue streams. The Operations Manager also
monitors asset performance in order to ensure asset availability for revenue
contracts. The asset performance team is responsible for managing
relationships with stakeholders, monitoring technical performance and
maximising asset availability. The team is also responsible for monitoring and
integrating the Company's health, safety, environmental, social and investment
objectives into the Company's operations model.
2. Investment Summary
Investment Objective
The investment objective of the Company is to seek to provide investors with a
sustainable and attractive dividend over the long term by investing in a
diversified portfolio of utility-scale energy storage projects 62 (#_ftn62) .
In addition, the Company seeks to provide investors with an element of capital
growth through the re-investment of net cash generated in excess of the target
dividend in accordance with the Company's investment policy.
Asset Diversification and Revenue Stacking
Assets are diversified across different stages (operation, under construction
and pre-construction), and through the ability to participate in different
services, with most of the sites expected to generate revenue from more than
one contract. Furthermore, the portfolio is spread across four different
geographical grids. Revenue diversification is also achieved through the
potential to "stack" several different income streams in one battery, allowing
the Company to spread risks across different counterparties, contract lengths
and maintain varying return profiles. The Company aims to maintain similar
diversification across third-party service providers and works with a variety
of developers, EPC contractors, O&M contractors, battery manufacturers,
asset managers and route-to-market providers.
Geographical Concentration and
Diversification
The Company may invest in projects in the UK, the Republic of Ireland, North
America, Western Europe, Australia, Japan, and South Korea, although it does
not intend that the aggregate value of investments outside the UK and the
Republic of Ireland will be more than 60 per cent. of Gross Asset Value
(calculated at the time of investment).
It is the Company's intention that no single project will have an acquisition
price greater than 20 per cent. of Gross Asset Value of the Group as a whole
(calculated at the time of acquisition). However, to retain flexibility, the
Company will be permitted to invest in any single project (or interest in any
project) that has an acquisition price of up to a maximum of 25 per cent. of
the Company's Gross Asset Value (calculated at the time of acquisition).
Currency Exposure Management
The Company enters into hedging arrangements as appropriate to manage its
exposure to foreign currency, ensure repayment of capital expenditure, protect
against interest rate hikes, and efficiently manage operating cash flow to
ensure repayment of intra-Group debts. The Company will not enter into
derivative transactions for speculative purposes. During the fiscal year, the
Company hedged between 50-80 per cent. of near-term forecast cashflows in the
Republic of Ireland in order to manage its exposure against deviations in the
euro-pound exchange rate and ensure appropriate protection of the Company's
interests in Ireland and Northern Ireland.
Gearing
The Board and the Investment Manager periodically review the Company's gearing
policy to ensure that it is accretive to Shareholders and in line with the
financing needs of the Group's expanding portfolio.
During the fiscal year, the Company determined in light of the energy storage
market's maturity, to increase its ability to utilise debt where appropriate
(subject to the prior approval of the Board) to expand the size and scale of
operations, support the development of an expanding portfolio, and to seek to
enhance profitability. The Directors intend for the Company to maintain a
conservative level of borrowings but have increased the maximum cap from 15
per cent. to 50 per cent. of Gross Asset Value (calculated at the time of
drawdown of the relevant borrowings). 63 (#_ftn63) Notwithstanding the
increased cap, the Directors have instructed the Investment Manager to apply a
firm borrowing limit of no more than 30 per cent. of gross assets at any time
and the Directors commit to inform Shareholders prior to any amendment of its
views and guidelines on gearing.
The Company is a guarantor under a £15 million facility held by the Company's
subsidiary, GSES 1 Limited. The facility may be used to fund acquisitions, for
construction of assets, and for general working capital requirements.
INVESTMENT MANAGER'S REPORT
CEO of Gore Street Capital, the Investment Adviser to the Company, Alex
O'Cinneide commented:
"I am pleased to report that the Company continues to enjoy a sustained period
of rapid growth, responding to the pressing and global increasing need to
enable the energy transition to a low carbon society through energy storage
solutions and in the process, further diversifying our portfolio for
shareholders. We have achieved this through a mixture of financial and
operational success, raising additional capital via highly successful,
oversubscribed fundraises, from both institutional and retail investors; as
well as delivering on our strategy, first laid out in our IPO of 2018 when we
defined this category of investing, of building the industry-leading
international portfolio of energy storage assets, now totalling 628.5 MW.
Our growing team of technology and engineering resources are proactively
managing both the operational and in-construction assets to ensure that costs
and construction risks continue to maintain our market-leading position. This
active asset management approach continues to optimise Capex of the portfolio
of assets which increases both performance and profitability, providing
greater returns for shareholders.
Additionally, our onsite teams assess how best to keep construction on time
and within budget, something that the Company has had great success with to
date, even in this period of supply chain challenges; as well as carefully
designing each asset to be optimised for maximum efficiency once operational.
The 291.6 MW operational portfolio 64 (#_ftn64) continues to deliver
significant cash flow for the Company and has ensured we have maintained our
robust dividend of 7 pence per share. The end of the period saw the GB and
Northern Irish assets perform extremely well; outperforming revenue
expectations considerably.
During the 2021 financial year, we successfully raised £135.0 million in
April 2021 and a further £73.6 million in October 2021 via a Placing and
PrimaryBid offer, with an additional £150.0 million raised post-period end.
Both fundraisers were oversubscribed, resulting in a scaling back exercise.
The strong demand came from new and existing investors, further broadening our
capital base. The substantial increase of investible capital has given the
Company additional headroom to continue our strategy of expanding into other
geographies, with our first acquisition in Germany, during the period, and in
the United States post-reporting period, both of which add a layer of
geographical and revenue diversity to our already highly diverse portfolio of
energy storage assets, de-risking Gore Street further for our shareholders.
The global transition to clean and renewable energy generation continues to be
a dominant priority for governments both domestically and internationally, and
our assets play an important role in supporting energy security and the
transition to a low-carbon society, as well as creating substantial value for
shareholders.
We look ahead to the next year with optimism and look forward to updating
shareholders on our progress during regular intervals throughout 2022 and
beyond."
Portfolio Overview
As of March 2022, the Company has an interest in 26 assets held within 16
portfolio companies 65 (#_ftn65) .
Summary of Recent Portfolio Developments
As of March 2022, the Company has increased its total portfolio to 628.5 MW,
comprised of 231.7 MW of operational assets and 396.8 MW of construction and
pre-construction projects. The latter includes the grant secured in November
2021 from EirGrid to increase KBSL grid capacity in the ROI by a further 90.0
MW, and the 60.0 MW expansion of PBSL in the ROI secured last year.
The Company's portfolio as of March 2022 represents an increase of 134 per
cent. in portfolio development capacity (MW) since March 2021, and an 11 per
cent. increase in the operational capacity.
The Stony (79.9 MW) and Enderby (57.0 MW) assets acquired in April and
September, respectively, are expected to become commercially operational in Q2
and Q4 2023 calendar year, respectively.
The Company successfully marked its second stage of expansion outside the GB
market in March 2022 (having expanded into Ireland in July 2019), with the
acquisition of the Cremzow (22.0 MW) assets in Germany. The Cremzow site has
been operating to specification and delivering revenues to the Group since
January 2022 66 (#_ftn66) . This milestone is further evidence of the
successful application of the Company's investment methodology to new markets.
The Company also signed contracts for its first US acquisition in March 2022,
comprising an 79.6 MW portfolio of three operational sites and five
pre-construction sites in Texas. The Company has since completed acquisition
of three 9.95 MW operational assets and one 9.95 MW projects in
pre-construction stage 67 (#_ftn67) , post the reporting period. The three
operational sites began to generate merchant revenues for the Group, as of
April 2022 68 (#_ftn68) , through delivery of ancillary services in the ERCOT
market. The fourth asset is scheduled to be operational in the second half of
2023.
The Company also reached a milestone in the ROI after the reporting period,
with its Porterstown asset coming energised as of the date of publication.
PBSL will be delivering services to EirGrid 69 (#_ftn69)
In total, the Company's operating portfolio as of the date of publication is
291.6 MW and the total portfolio capacity is now 668.3 MW.
The portfolio buildout provided below illustrates the Company's acquisitions
since IPO, highlighting the relevant milestones as of March-end and as of the
publication date.
Figure 9: Portfolio by Stage. Note: colours indicate the status of assets, as
of March-end. LR and PT stand for the Company's assets, Lower Road, and Port
of Tilbury, respectively.
Investment commitments made during the year and for projects closed post-year
end are listed in the table below.
Table 3: Capital Commitment and expected Commercial Operational Dates (COD)
for projects acquired during the fiscal year as well as projects signed during
the fiscal year but closed post year-end. The percentage committed is
calculated based on the deals closed in the period up to publication and does
not include deals that were signed but not closed.
Completion Date Project Location COD 70 (#_ftn70) % Owned by the Company Status Capital Commitment* 71 (#_ftn71) % of cash on balance sheet as at 31 March 2022 committed to project
May 2021 Stony England Q2 2023 100% Pre-construction £30.8m 14.1%
September 2021 Enderby England Q4 2023 100% Pre-construction £29.7m 13.6%
March 2022 Cremzow Germany Q2 2019 90% Operational £0.0m 0.0%
Assets signed within the reported period, but completed post-reported period:
March 2022 Snyder Texas, US Q4 2021 100% Operational £7.5m 3.4%
March 2022 Sweetwater Texas, US Q4 2021 100% Operational £7.5m 3.4%
March 2022 Westover Texas, US Q4 2021 100% Operational £7.5m 3.4%
March 2022 Mineral Wells Texas, US H2 2023 100% Pre-construction £6.9m 3.1%
As of March 2022, the Company has outstanding commitments of £210.8m, broken
down below.
2022 2023 2024 2025 Total
Outstanding commitments (% of Cash on Balance Sheet as of 31 March 2022) 53.3% 16.6% 24.9% 1.6% 96.4%
Committed amounts (£ mil) 116.6 36.3 54.4 3.5 210.8
Table 4: Outstanding commitments as of 31 March 2022 72 (#_ftn72)
Portfolio Summary
The Company's 628.5 MW portfolio of energy storage assets is made up of
operational assets, assets under construction ("construction assets") and
assets undergoing design and contracting ("pre-construction assets").
A summary of the Company's operational assets is provided in table 7 below and
a summary of its construction projects and pre-construction projects is
available in table 8 below:
Table 5: Summary, as of 31 March 2022, of all sites in construction, including
the location of assets, capacity (MW), construction status and the expected
Commercial Operational Date (COD), expressed as calendar year.
Fiscal Year GB Location Nameplate power capacity Construction Status Expected COD Revenue Streams
(MW) (Calendar year)
Ferrymuir Fife, Scotland 50.0 Pre- Construction Q1 2023 Frequency
Capacity Market
Energy Trading
Enderby Leicestershire, England 57.0 Pre-construction Q4 2023 Frequency
Capacity Market
Energy Trading
Stony Buckinghamshire, England 79.9 Pre-construction Q2 2023 Frequency
Capacity Market
Energy Trading
Ireland Location Nameplate power capacity Construction Status Expected COD Revenue Streams
(MW)
Porterstown Phase 1 Co. Dublin 30.0 Under Construction Q3 2022 DS3 Capped
Capacity Market
Porterstown Phase 2 Co. Dublin 60.0 Pre-construction H1 2024 DS3 Uncapped
Capacity Market
Kilmannock Phase 1 Co. Wexford 30.0 Pre-construction Q4 2023* DS3 Capped
Capacity Market
Kilmannock Phase 2 Co. Wexford 90.0 Pre-construction Q4 2023* DS3 Uncapped
Capacity Market
Post year-end acquisitions US Location Nameplate power capacity Construction Status Expected COD Revenue Streams
(MW)
Mineral Wells Texas 9.95 Pre-construction H2 2023 Ancillary Services
Energy Trading
*Expected timeline as of 31 March 2022. As of the publication date, the
Investment Manager anticipates delays in the timeline. Commissioning dates to
be confirmed by the Investment Manager
Table 6: Summary, as of 31 March 2022, of operational sites including the
location of assets, nameplate capacity (MW and MWh), availability for the year
and services that can be performed.
Fiscal Year GB Location Name Plate Power Capacity Name Plate Energy Capacity Availability for the year Services that can be performed
MW MWh
Cenin Wales 4.0 4.8 94.9% DC, FFR, Capacity Market
Boulby Yorkshire 6.0 6.0 93.4% FFR, Capacity Market, Triads
Ancala Mixed* 11.2 11.2 96.7% DC, FFR, Capacity Market
Lower Road Essex 10.0 5.0 87.4% DC, FFR, Energy Trading, Capacity Market
Port of Tilbury Essex 9.0 4.5 92.3% DC, FFR, Capacity Market, Triads
Larport Hereford 19.5 19.5 99.6% DC, FFR, Energy Trading, Capacity Market
Lascar Bury 20.0 20.0 99.0% DC, FFR, Energy Trading, Capacity Market
Hulley Macclesfield 20.0 20.0 98.7% DC, FFR, Energy Trading, Capacity Market
Breach Farm Derbyshire 10.0 10.0 99.2% DC, FFR, Energy Trading, Capacity Market
Ireland Location Name Plate Power Capacity Name Plate Energy Capacity Availability for the year Services that can be performed
MW MWh
Drumkee Co. Tyrone 50.0 21.3 97.4% DS3 Uncapped
Mullavilly Co. Armagh 50.0 21.3 97.1% DS3 Uncapped
Germany Location Name Plate Power Capacity Name Plate Energy Capacity Availability - since acquisition Services that can be performed
MW MWh
Cremzow Cremzow 22.0 29.0 100% FCR, Energy Trading
TOTAL 231.7 172.6
Post year-end acquisitions US Location Name Plate Power Capacity Name Plate Energy Capacity Availability since acquisition Services that can be performed
MW MWh
Snyder Scurry County, Texas 9.95 19.9 N/A RRS, Energy Trading
Sweetwater Nolan County, Texas 9.95 19.9 N/A RRS, Energy Trading
Westover Ector County, Texas 9.95 19.9 N/A RRS, Energy Trading
TOTAL 29.9 59.7
*The Ancala asset comprises 10 smaller sites of 1.0 MW - 1.2 MW across the UK.
Availability for the year for US assets Snyder, Sweetwater and Westover is not
applicable, as these are post year-end acquisitions.
Portfolio Installed Capacity: Expected Completion Date
The Manager 73 (#_ftn73) expects all sites currently under construction or
pre-construction to begin commercial operations by the end of the second
quarter of the 2025 calendar year.
Figure 10: Expected Completion Date of sites under construction and Installed
Capacity expectations for the portfolio by 2025. 74 (#_ftn74)
Capex Optimisation
The Manager strongly believes in capital efficiency, and through financial
discipline and leveraging the technical know-how of its in-house team and
strives to achieve amongst the lowest Capex and/or Capex/MW in the industry.
The table below shows the declining trend in Capex expenditure across the
Company's assets, on a MW basis. Although Engineering and Procurement Contract
("EPC") prices have increased significantly in the fiscal year, the Manager
leveraged the support of its strategic partners to ensure responsible and
timely development of construction projects. The Operations Manager then
closely monitored construction progress with the aim of minimising unnecessary
expenditure.
£,000s/MW
Figure 11: Total Capex of the Company's greenfield projects, expressed as
£'000 per MW, for both 30min and 1h-duration systems. Capex figures include
(not restricted to): Development Fee, Grid connection Capex, EPC capex.
Asset Performance
Figure 12: Assets Availability by region for the 2021/2022 fiscal year,
including German revenues received for Q1 2022 upon acquisition in March
2022 75 (#_ftn75) .
During the fiscal year, the Company's portfolio of assets achieved an average
availability across all regions of 97 per cent 76 (#_ftn76) :
GB: In April 2021, availability was affected by the performance
of one of the Company's assets (Lower Road) which was taken offline for 13
days to allow for cable replacements. The site returned to full operational
capacity in May 2021.
Ireland: Asset availability in Ireland lowered periodically
between April and July 2021. In April, one of the projects in NI underwent
switchgear maintenance. In June, the assets were taken offline for three
days to improve inverter stability and in July, the assets experienced
inverter dropouts. Inverter stability has now been secured in both sites.
Germany: The Cremzow asset was acquired in March 2022 with a
commercial transfer date of Jan 1, 2022. The assets are assumed to have
achieved availability of 100 per cent. across Q4 of the reporting year.
US: The Texan assets were acquired after the reported period,
with a commercial transfer date of 1 March 2022. The three operational
assets are assumed to have achieved availability of 100 per cent. during the
fourth quarter of the reporting period.
Health & Safety (HSE)
The Manager monitors and collaborates with best-in-class EPC contractors
during the construction period. The EPC 77 (#_ftn77) contractor takes on the
role of principal contractor and HSE manager until commercial operation.
Following commercial operations, the Manager works with third-party asset
managers and O&M service providers to ensure the Health and Safety of the
Company's sites. GSF's service providers are chosen based on their performance
records and are required to deliver services in accordance with good industry
practice.
The Company aims to always operate in a manner that safeguards public health,
property and the environment and is proud to note that it has had no health or
safety incidents or community complaints in the fiscal year.
Revenue Stacking During the 2021/2022 Fiscal Year
The diverse ancillary and trading opportunities available to energy storage
assets create opportunities for diversification of revenues with the goal of
maximising the Company's return on capital. A breakdown of sources of revenue
across the different regions is detailed below.
Table 7: Revenue breakdown for the Company's revenue breakdown.
Revenue Stream (£million) % Within the Grid % Of overall portfolio Revenue / MW (£000's) Revenue / MWh (£000's) MW MWh
Fiscal Year GB
Firm Frequency Response (FFR) £4.83 29.4% £44.0 £47.8 110.0 101.0
Dynamic Containment (DC) £9.78 59.6% £89.1 £96.8 110.0 101.0
Capacity Market (CM) £0.97 5.9% £8.8 £9.6 110.0 101.0
Wholesale Trading £0.65 3.9% £5.8 £6.4 110.0 101.0
Triad £0.19 1.1% £12.6 78 (#_ftn78) £18.0 15.0 10.5
GB - Total £16.42 55.48% £149.3 £162.6 110.0 101.0
Ireland
DS3 £12.23 100.0% £122.2 £287.0 100.0 42.6
Ireland - Total £12.23 41.35% £122.2 £287.0 100.0 42.6
Germany - 3 months
Frequency Containment Reserve (FCR) £0.63 100.0% £28.8 £22.6 22.0 28.0
Germany - Total £0.63 2.14% £28.8 £22.6 22.0 28.0
Operating Revenues £29.28 98.97%
Post Year-End US - 1 month 79 (#_ftn79)
Responsive Reserve Services (RRS) £0.31 100.0% £10.2 £5.1 29.9 59.7
US - Total 80 (#_ftn80) £0.31 1.03% £10.2 £5.1 29.9 59.7
Operating Revenues £29.59 100.0%
Great Britain (Revenue Stack)
Figure 13: Overview of time allocated in the fiscal year for the Company's
operational assets in GB 81 (#_ftn81) .
Operating GB assets showed strong performance for the period: the average
revenue per MW for the fiscal year was more than 68 per cent. higher than the
previous fiscal year's average.
89 per cent. of GB asset delivery time was spent performing ancillary services
(DC and FFR) which generated 90.1 per cent. of revenues for the Company's GB
assets. The remaining time was spent in power trading, which generated 4 per
cent. of revenues. The remaining 6 per cent. of revenues were generated from
the Capacity Market ("CM") services which is a stackable service for which
revenue is earned in parallel with delivery of other services to the power
grid. All GB assets have capacity agreements with a duration of between one
to fifteen years. Capacity contracts are designed to deliver power to the
grid, at times of peak demand.
Ancillary service prices remained at high levels of £17.5/MW/hour during the
fiscal year. Between 1 January and 31 March 2022, prices averaged
£23.1/MW/hour, with February 2022 being the strongest month, when DC achieved
c. £48.0/MW/hour. In April 2022, ancillary service prices reached a
record-high of c. £104.0/MW/hour. Revenue per MWh in Q1 2022 calendar year
was 65 per cent. higher when compared to Q1 2021 and 22 per cent. higher than
2021 quarterly average. The Investment Manager anticipates that this trend
will continue into summer 2022 as National Grid procures increased volumes of
DC (around 1.0-1.1GW of capacity). 82 (#_ftn82)
Figure 14: FFR and DC average price levels secured by GSF Portfolio companies
since DC introduction 83 (#_ftn83)
When appropriate, the Manager participates in wholesale trading to exploit
spikes in power pricing as a result of market volatility. Although power
trading can offer higher payments than ancillary services, there are also
higher costs associated with faster degradation of the battery if it is used
for arbitrage.
During the fiscal year, the National Grid changed its procurement method for
DC from a 24-hour procurement period to four-hour EFA blocks, providing the
assets with greater flexibility to participate in both grid balancing and
wholesale trading services. Beginning in September 2021, volatility increased
in GB's wholesale energy markets, improving the opportunity for energy
trading. The opportunities for combined delivery of energy trading and
frequency response service resulted in an additional 4.3 per cent. uplift over
the forecasted ancillary services baseline.
Figure 15: Wholesale Market trading price in GB during FY 2021/2022 (£/MWh)
(Aurora EOS platform, 2022)
According to a third-party market researcher 84 (#_ftn84) , some of the
Company's assets attained the highest market revenues on a per MW and MWh
basis at least twice during the fiscal year. The batteries in question were of
30 min and 1-hour duration with lower Capex when compared to longer duration.
The Figure below showcases the increasing Capex for longer-duration batteries,
as per market data.
Although the ideal duration (MWh/MW) for delivery of market services will vary
by geographic region, ancillary services can appropriately be delivered using
short-duration systems (such as 30-minute or one-hour systems). Whilst
ancillary services remain the major source of revenue, there is little
incentive to increase the average battery duration.
The Figure below showcases the increasing Capex for longer-duration batteries,
as per market data.
Figure 16: Market data for Capex increase for 1h, 2h and 4h systems. Note:
Balance of System (BoS), a structural component of batteries. Source: Aurora
Energy Research Ltd, 2021.
Battery duration is obtained by increasing the number of cells behind each MW
of power capacity. The longer the duration, the more expensive the battery.
The Capex margin between short and long-duration battery systems is expected
to increase in the near-term raw material prices (lithium as well as
aluminium, graphite, and copper) increase 85 (#_ftn85) . Lithium alone has
increased c. 400 per cent over the last year.
The Investment Manager believes that it is premature to invest in a 2-hour
battery for the GB market given the current Capex. Moreover, as trading only
offers a marginal uplift to ancillary services revenues (ignoring degradation
concerns) it does not justify the greater Capex. When appropriate, the
Company has the options of both retrofitting existing assets with additional
MWh capacity and increasing its pipeline for larger duration batteries. A
retrofit can be completed within 6-8 months and will be appropriate if Capex
reduces to below £300k/MWh or if trading revenue strategies change to justify
the increase in Capex.
Ireland (Revenue stack)
Figure 17: Overview of time allocated in the fiscal year for the Company's
operational assets in Ireland 86 (#_ftn86) .
The Company's assets in NI and the ROI participate in the DS3 programme and
the Integrated Single Energy Market ("I-SEM") providing revenue streams which
are substantively similar to the GB markets. The Company's NI assets delivered
DS3 services for c. 94 per cent of the time in the fiscal year.
The Investment Manager currently provides uncapped DS3 services in NI with an
aggregate capacity of 100.0 MW. In NI, the Company uses sub-30-minute duration
batteries to deliver six ancillary services under its DS3 uncapped contracts.
Prices averaged c. £14/MW/hour during the fiscal year. In Q1 2022, NI
revenues exceeded forecast, and in February achieved an average price of c.
£31/MW/hour and c.£2m of the £4.9m net revenues generated in Q1 2022.
The uplifts against forecasted DS3 revenues were aided by improvements in
asset performance and availability but are materially based on the structure
of DS3 revenue contracts.
Under DS3, EirGrid and SONI impose trigger and trajectory scalars that
determine when batteries should kick in, and how steeply they should ramp up
their response. Under the System Non-Synchronous Penetration (SNSP) scalar,
battery assets are rewarded for adequately forecasting their availability to
provide frequency (and other ancillary services) and for actual delivery of
services following a performance incident(( 87 (#_ftn87) )) . The rationale
behind this scalar is to incentivise flexible assets, such as batteries, to be
available when the electricity network is vulnerable to intermittency and the
grid operators are under stress: The more reliable the generator, the greater
the revenues. This creates a very lucrative scheme for batteries during
months when renewable generation is high, as was the case during the recent
winter of 2022, when wind penetration in the island was relatively high.
The DS3 scalar component in pricing also means that revenues will fluctuate
based on wind penetration but will generally be lower in the summer months and
higher in winter months. In February 2022, as a result of volatility due to
high wind penetration, DS3 uncapped revenues were more than double the
annualised average.
Uncapped DS3 contracts will continue to be awarded by EirGrid and SONI until
30 April 2024 although regulatory authorities have the option to extend
contracts up to 2026.
The Group's assets in the ROI (Porterstown and Kilmannock) successfully won
60.0 MW out of the 110.0 MW awarded through a competitive tender for capped
(fixed tariff) DS3 services in 2019(( 88 (#_ftn88) )). The volume capped
contracts are offered for a maximum of a six-year term, which begins in June
2022 for Porterstown (30.0 MW) and is expected to commence in Q4 2023 for
Kilmannock (30.0 MW). 89 (#_ftn89) DS3 capped contracts pay a fixed tariff
and are not subject to the SNSP scalar.
The DS3 framework also includes CM services, and the Company possesses CM
contracts for both of its assets in NI for delivery years beginning 2022, 2024
and 2025 (and will seek 2023 contracts in upcoming auctions).
New Markets
The Company's Cremzow asset in Germany further diversifies portfolio revenues.
Frequency Containment Reserve (FCR), accounts for 100 per cent. of the
services provided between 1 January to 31 March 2022 by the asset(( 90
(#_ftn90) )).
The commercial transfer date for Cremzow was 1 January 2022. There has been
an uplift in projected FCR prices from the acquisition base case, spurred on
by increased volatility in the European energy market,(( 91 (#_ftn91) ))(.)
FFR prices have averaged €21.1/MW/hour across Q1 2022
Figure 18: Overview of time allocated between 1 January to 31 March 2022 for
the Company's operational asset in Germany 92 (#_ftn92)
The three operational assets acquired post-reporting period in the US were
subject to commercial transfer date of March 2022, and profits accrued by the
Company for the month of March 2022 93 (#_ftn93) . In March 2022, the three
operational assets in Texas delivered Response Reserve Service (RRS), at an
average market price of $18.7/MW/h in 2022, with peak market prices of
$183.5/MW/h.
Since April 2022 (post period-end), average RRS prices have been 15 per cent.
higher than the previous year, with peaks as high as $2,000/MW/h during
periods of sustained high temperatures 94 (#_ftn94) , as pricing closely
follows Texas temperature patterns, with high temperatures leading to high
grid demand.
Figure 19: Overview of time allocated in the month of March 2022 for the
Company's operational assets in the US, Texas 95 (#_ftn95) .
Cash generation for the Fund
During the period from 31 March 2021 to 31 March 2022, the operational
portfolio generated an EBITDA of c. £23 million. Inclusive of fund expenses,
the Company generated c. £16 million in EBITDA.
For the period between 31 March 2021 to 31 March 2022, dividends were fully
covered by the EBITDA of the operational portfolio. Dividend coverage 96
(#_ftn96) for the period between 31 March 2021 to 31 March 2022 was 1.09x for
the operational portfolio and 0.7x for the Company during the reporting
period.
Figure 20: Historical dividend coverage and shares in issue by the Company.
Profitability Drivers
o Lower Capex and Opex
The Manager aims to maintain financial discipline in its procurement,
construction, and ongoing management of the Company's energy storage
portfolio.
o Return on Capital
The Company's revenue strategy revolves around ancillary services better
suited to shorter duration batteries, as the asset is required to correct
small, but frequent, deviations in the grid's frequency. Given lucrative
opportunities in ancillary services in GB and Ireland, the Investment Manager
has optimised the Company's capital allocation by sizing the assets in GSF's
energy storage portfolio to the targeted revenue strategy. This has resulted
in some of the Company's GB assets periodically achieving the highest revenue
per MWh and MW, as reported by Modo Energy(( 97 (#_ftn97) )) and achieving
similar returns in Ireland.
Commitments / deployments
Figure 21: Cash bridge since the end of the 2020/2021 financial year,
reflecting the Capex spent during the period. until March-end 2022.
The above figure illustrates the movement of cash over the fiscal year,
including the two successful fundraises totalling £204 million (net of fees)
in April and December 2021. The Company spent £49 million in Capex and
acquisitions of its portfolio and paid a further £15 million in dividends.
The 'Fund Opex' is £6.4 million for the period. This implied a cash
generation of £20 million by portfolio companies over the period.
The figure below shows the budgeted investment Capex for the existing
portfolio projects, broken down by quarter for the next three years. The
'contracted Capex' comprises any pre-determined, contractual Capex, such as
signed EPC contracts, deferred development fee payments and grid payments. The
'uncontracted Capex' refers to anticipated Capex that the Company does not yet
have any contractual obligation to spend, such as EPC contracts under
negotiation or tender. The 'expansion Capex' and 'duration Capex' reflect the
expected expenditure for the second phases of the assets in the ROI (PBSL and
KBSL), and expenditure for an increase in duration to 1-hour systems for the
sites currently operating below a 1-hour duration. The running cash balance
shows decreasing cash on the balance sheet, as the Company incurs its expected
Capex over the next three years.
Figure 22: Planned Capital Deployments and net cash position (running cash
balance) for the Company over the next 3 years. 98 (#_ftn98)
The figure below illustrates the expected timing for the use of the Company's
cash on the balance sheet (cumulative) in percentage terms, on a quarterly
basis.
Figure 23: Capital commitments or future capital deployments, as a percentage
of Captial until 2025. 99 (#_ftn99)
Pipeline
To diversify revenues and market exposure, the Investment Manager's current
pipeline focuses heavily on international markets, particularly mainland
Western Europe and the United States. These markets generally rely on similar
grid balancing, capacity market and trading services that characterise the GB
and Irish markets. Nonetheless, revenues are not necessarily correlated given
different regulatory frameworks, barriers to entry, levels of renewable
penetration and weather conditions.
In addition to opportunities in the UK, the Republic of Ireland, the United
States and Western Europe, the Investment Team may invest in projects in
Australia, Japan, and South Korea, in accordance with the Company's investment
policy. The Company does not intend that the aggregate value of investments
outside the UK and the Republic of Ireland will be more than 60 per cent. of
Gross Asset Value (calculated at the time of investment).
The Investment Manager will leverage on its experience to secure new assets in
accordance with the Company's Investment Policy, so that the Company does not
assume early-stage development risks associated with obtaining land, planning
permission and grid connection rights.
As of the date of publication, the Investment Manager is actively reviewing
opportunities in GB, Ireland, Western Europe, and the United States. The total
pipeline stands at 1.57 GW or 3.24 GWh with transactions in exclusivity
amounting to a total of 495 MW or 980 MWh as of the date of publication.
Table 8: Pipeline as of the date of publication.
Project Location Total project size Total project size
MW MWh
Project A GB 200.0 400.0
Project B GB 99.8 199.6
Project C EUR 43.5 43.5
Project D US 200.0 400.0
Project E US 50.0 100.0
Project F US 95.0 180.0
Project G US 19.0 76.0
Project H US 200.0 400.0
Project J US 200.0 400.0
Project K US 200.0 400.0
Project L US 200.0 400.0
Project M US 60.0 240.0
Total 1,567.3 3,239.1
Valuation of the Portfolio
Net Asset Value
The NAV for the Company in March-end 2022 amounted to £376.5 million and with
an NAV per share of 109.1 pence. In March-end 2022, the Adjusted NAV for the
Company amounted to £369.6 million, with an Adjusted NAV per share for the
Company of 107.1 pence. Adjusted NAV is calculated as the NAV per the
Statement of Financial Position adjusted for the interim dividend relating to
the December 2021 quarter of £6.9 million or 2.0 pence per share, which was
declared in March 2022 but paid post period end on 1 April 2022.
The Adjusted NAV of March 2022 represents 6.1 per cent. increase on the NAV
per share achieved in March-end 2021 of 100.9 pence, inclusive of costs. This
metric provides consistency and a more meaningful comparison against the NAV
on 31 March 2021, which already included the 2.0 pence per share dividend
relating to the December 2020 quarter, which was paid in March 2021, before
period-end.
Figure 24: Net Asset Value (NAV) bridge for the fiscal year in £ m
The Net DCF changes have been broken out in the below graph:
Figure 25: Net DCF changes bridge for the fiscal year £(m).
Table 9: Portfolio NAV
Total NAV (£m)
NAV per geography
Great Britain 89.4
Ireland 74.7
Germany 12.6
Total NAV 176.7
NAV per MW 0.37
As shown above, the portfolio NAV is diversified across GB, Ireland, and
German markets, as of 31 March 2022. Furthermore, with the recent acquisitions
in Texas, US, the Investment Manager expects the Fund to successfully mitigate
the risk associated with concentrated exposure to a particular grid and
achieve diversification of revenue streams over the course of 2022 and 2023.
Key NAV Drivers
The Investment Manager reflected general NAV drivers such as inflation, across
the portfolio, as well as making asset/jurisdiction-specific NAV updates. The
major updates were as follows:
Inflation
All macroeconomic assumptions were independently determined by respective
research companies. The Investment Manager updated the long-term CPI
assumption from 2.5 per cent. to 3.0 per cent. across the portfolio, given the
current macro-outlook.
Grid Specific Drivers - Great Britain:
Revenues
In GB, updated price forecasts have been applied to all GB asset valuations
for ancillary services, trading, Capacity Market revenue, and other revenue
sources (such as voltage revenue and TNUoS benefit). The price forecasts for
ancillary services and trading are illustrated in the blended curve shown
below.
Blended Curve of Ancillary Service and Trading
(£/MW/h) Dec-22 Dec-23 Dec-24 Dec-25 Dec-30 Dec-35 Dec-40
GB (Real in 2021) 13.8 10.5 8.8 8.0 7.1 7.3 7.7
Assets which received T-4 Capacity Market contracts (Ferrymuir, Stony and
Enderby) and T-1 contracts (Ancala, Larport, Lascar, Hulley and Port of
Tilbury) in the 2022 Capacity Market auction have been updated and
reflected.(( 100 (#_ftn100) ))
Expenses
Higher assumptions on insurance have been applied across the
portfolio to reflect the increased premiums being seen in the market.
Capex: Battery cell cost forecasts have also been updated,
capturing the higher global prices seen currently in the market. Final EPC
contracts that were secured in the fiscal year, for two of the Company's
assets, Ferrymuir and Stony, have also been reflected.
Grid Specific Drivers - Ireland:
Revenue
In NI, updated price forecasts have also been applied to asset valuations for
Uncapped DS3, Trading and Capacity Market revenue. The forecast prices for NI
up until 2025 are driven by uncapped DS3 services. The average of the central
forecasts from multiple third-party research houses are shown below:
Blended Revenue stack including DS3 and trading
(€/MW/h) Dec-22 Dec-23 Dec-24 Dec-25 Dec-30 Dec-35
North Ireland (Real in 2020) 11.6 13.1 13.9 9.8 4.6 4.3
Republic of Ireland (Real in 2020) 5.7 5.0 4.4 4.0 4.6 3.9
The two NI assets were awarded Capacity Market contracts in 2019 for delivery
commencing in October 2022.
Expenses
Higher assumptions on insurance have been applied across the
portfolio to reflect the increase in premiums being seen in the market.
Capex: Battery cell cost forecasts have also been updated, which
capture the higher global prices currently seen in the current market.
Grid Specific Drivers - Germany:
The Company's asset in Germany, Cremzow, was acquired on 10th March 2022. GSF
is the majority stakeholder in the asset (which operates as a partnership
structure), owning 90 per cent. stake. The valuation of the asset saw the
following key updates since the time of its acquisition:
Revenue
Since the time of acquisition, the Investment Manager has updated the revenue
forecasts for delivery of FCR using central revenue scenarios.
Expenses
Higher assumptions on insurance have been applied to the Cremzow asset to
reflect the increase in premiums seen in the market.
Key Sensitivities
The NAV sensitivities are shown in the table above and cover the major
macro-economic factors and valuation assumptions that the portfolio is subject
to. Increased Inflation, a lower discount rate along with a stronger Euro will
lead to an increase in the value of the portfolio. Changes in EPC prices will
have a material impact on the NAV of the portfolio particularly in Great
Britain, given a number of assets in the pre-construction and construction
stage, which has been depicted in the table above.
Inflation rate: +/- 1.0%
FX volatility +/- 3.0%
Discount Rate: +/- 1.0%
EPC Capex: +/- 10.0%
Table 10: NAV Sensitivity Chart
Region NAV in Base Case (With DCF) NAV Sensitivity Chart
Inflation Inflation FX FX Discount Rate Discount Rate
+1.0% -1.0% +3.0% (£ stronger) -3.0% (£ weaker) +1.0% -1.0% EPC Capex +10.0% EPC Capex
-10.0%
Northern Ireland £57.1m £61.2m £53.5m £56.2m £58.0m £53.9m £60.8m n/a n/a
Republic of Ireland £17.7m £19.8m £15.4m £17.4m £18.1m £14.5m £21.5m £17.3m £18.2m
Great Britain £89.4m £105.3m £75.4m n/a n/a £77.0m £103.7m £84.20m £94.4m
Germany £12.6m £13.4m £11.9m £12.3m £12.9m £11.9m £13.4m n/a n/a
NAV scenarios
The NAV scenarios demonstrate the change in the value of the portfolio when
considering alternate scenarios, such as utilising High/Low revenue forecasts
or applying different discount rates for projects in construction. We have
taken forecasts from multiple independent research houses in order to derive a
blended revenue curve for both High and Low Cases. The below table also shows
the potential increase in value of the portfolio construction/pre-construction
assets when a lower operational discount rate is applied. This scenario
illustrates the stage that the assets will progress to as they transition from
the construction stage to the operational stage, in line with the valuation
matrix.
In addition, the valuation achieved from the capacity expansions of the assets
in the ROI has been considered, as they will be accretive to NAV once
included. This has not been currently modelled in our base case, although will
represent an increase in value to investors in future periods.
Revenue Scenarios: NAV based on third-party
high & low cases; these scenarios exhibit a deviation of c. 15 to 25 per
cent. from the central case
Discount rate: Applying an operational discount
rate of 7.5 per cent. to sites in construction.
ROI Expansion projects: NAV if including the
90.0 MW and 60.0 MW expansions of KBSL & PBSL, respectively.
Based on third-party market analysis, the
market average duration is 63 minutes, which exceeds the Company's portfolio
duration average of 50 minutes 101 (#_ftn101)
Key Scenarios
Table 11: NAV Scenarios
Region NAV in Base Case NAV Scenarios Chart
(With DCF)
Revenue Revenue Discount Rate ROI Expansion
(High case) (Low case) (Operational rate applied to construction assets) (NAV of 150.0 MW ROI capacity expansions)
Northern Ireland £57.1m £67.1m £47.1m n/a n/a
Republic of Ireland £17.7m £22.1m £12.8m £23.5m £35.3m
Great Britain £89.4m £136.0m £61.0m £110.8m n/a
Germany £12.6m £16.3m £8.1m n/a n/a
Valuation methodology
The Investment Manager is responsible for providing a fair market valuation of
the Company's underlying assets. Its valuation results are presented to the
Company's Board of Directors ("Directors") for review and approval prior to
reporting. Valuations are calculated quarterly and a sample which meets our
NAV materiality threshold is reviewed by an independent third party, before
the publication of the half-year and year-end reports.
All the assets in the Company's portfolio are valued using the Discounted Cash
Flow (DCF) approach that adheres to the principles of IFRS13 and the
International Valuation Standards Council ("IVSC guidelines").
Asset Life
The valuation assumes the assets have a useful life of up to 30 years, with
the Investment Manager assuming no residual value (despite possessing active
grid connections) at the end of life of the assets.
Movements in Valuation Discount Rates
The Investment Manager primarily applied a discount rate between 7.5 per cent.
and 10 per cent. except for contracted revenues within GB and Ireland, which
are discounted at 6 per cent. to each asset in the Company's portfolio, given
that large portions of the revenue were procured in response to near real-time
demands of the energy system. The 6.0 per cent discount rate is only applied
to cash flow from contracted revenues which an asset has actually secured for
the relevant contract period, reflecting the lower risk associated with the
contract. The weighted average discount rate is 8.31%.
The standard discount rates matrix used by the Investment Manager are set out
below:
Table 12: Discount Rate Matrix
Discount rate Matrix Pre-Construction Phase Pre-Construction Phase (Post EPC) Construction Phase * Operational Phase**
Contracted income 102 (#_ftn102) 10.0% 9.5% 6.5%-9.5% 6.0%-7.0%
Uncontracted income 103 (#_ftn103) 10.0% 9.5% 7.5%-9.5% 7.0%-8.5%
MW 180 136.9 80 231.7
* Construction discount rates vary based on programme status and lead time.
** Uncontracted revenue rates vary in accordance with market maturity.
Contracted revenue rates vary by counterparty
Revenue
For contracted revenue, the Investment Manager used the prices of the
contracts actually secured by the assets to project future revenue cashflows.
Regarding uncontracted revenue, the Investment Manager estimates uncontracted
revenue based on the unit price forecasts of independent third-party research
house(s) and the advice of independent third-party consultants.
To ensure objective and unbiased calculation of the Fund's Net Asset Value,
the Investment Manager has obtained high, central, and low cases from multiple
research companies and used the average of their central scenarios for the
purpose of the NAV calculation. These uncontracted revenues were not
influenced by the Investment Manager's view; no macro-economic assumptions
other than site-specific ones.
Operating Expenses
Where not already contracted and priced, operating expenditure (i.e. equipment
maintenance and lease costs) is based on the most recent contracted
expenditure and price quotes, with inflation adjustments. Energy costs are
estimated based on each system's efficiency (as determined under EPC technical
specifications), published transmission and distribution network tariffs, and
third-party electricity price forecasts.
Capital Expenses
The Investment Manager uses third-party curves for determining the benchmark
EPC prices and also tracks market changes within the commodities market for
determining pricing for its projects. In addition, there is an assumption of
(i) replacement of Inverters based on estimated Capex halfway into the life of
projects; (ii) augmentation of the assets based on markets where assets
operate; and (iii) degradation profile over time.
Fiscal Net Asset Value
Table 13: Fiscal Net Asset Value
Pence
NAV at 31 March 2021 100.9
Less 31 March 2021 declared dividend 1.0
NAV at 31 March 2021 (ex-dividend) 99.9
NAV at 31 March 2022 109.1
Less 31 December 2021 declared dividend 2.0
Adjusted NAV at 31 March 2022 107.1
Less 31 March 2022 declared dividend 1.0
NAV at 31 March 2022 (ex-dividend) 106.1
Movements in NAV (ex-dividend) 6.2
NAV Increase% 6.2
Share Price performance
Gore Street Energy Storage Fund has consistently traded at a premium to NAV
over the last fiscal year. Share price as at 31 March 2022 was 113 pence per
share 104 (#_ftn104) , representing a 5.5% per cent premium to Adjusted NAV.
The chart below shows the share price over the year, compared to Adjusted NAV
per share.
The Fund was also included in FTSE All-shares during the 2021/2022 fiscal
period.
Figure 26: Historical NAV per share and Closing Share Price for the Company
The Adjusted NAV per share as at 31 March 2022 was 107.1 pence. The chart
below shows the historical Net Asset Value per share.
Figure 27: Historical Net Asset Value per share 105 (#_ftn105)
Dividends
The Company declared a total dividend of 7.0 pence per share relating to the
fiscal year, with the final instalment of 1.0 pence to be paid post the date
of publication 106 (#_ftn106) .
Gearing
As at 31 March 2022, the Company acts as guarantor under a £15 million
facility agreement held by the Company's subsidiary, GSES 1 Limited. The
facility shall be used to fund the acquisition and/or development of
assets. There has been no significant drawdown as of the date of
publication.
Sustainability
The Company's purpose is to deliver long-term capital growth to its investors
by the development of a geographically diverse portfolio of utility-scale
battery storage systems that are a critical component in accelerating the
transition to greener national grids. Whilst GSF's core products and services
are designed to support the environmental sustainability of global grid
systems, the Board of Directors and its Investment Manager understand that the
Company has a broader responsibility to go beyond its environmental
contributions and to evaluate how best to imbed and improve the environmental,
social and governance frameworks of its investments and operations.
The Company has chosen to align with Article 8 of the Sustainable Finance
Disclosure Regulation (SFDR), and this is the first year that the Company has
tracked the metrics that are outlined in this regulation. These metrics will
be disclosed on the Company's website, as part of its 'ESG Pillars Report', in
August 2022. The Company has engaged the services of third-party experts to
ensure adequate oversight of its assessment regarding its alignment with TCFD
requirements. Neither regulatory framework is mandatory for the Company
currently. Nevertheless, the Board and Investment Manager believe that the
early monitoring of its sustainability against third-party frameworks is an
important step in improving accountability and in providing shareholders with
transparency on its progress in integrating ESG considerations into its
business framework.
The first edition of the Company's ESG Pillars Report, which will be available
on the Company's website in August 2022, will detail the environmental, social
and governance impact of the Company's actions, including its assessment under
the SFDR and the United Nations Sustainability Development Goals (SDGs)
frameworks.
Environmental Sustainability
The Company contributes to the path to net zero by investing, building, and
operating battery storage systems that enable national power grids to rely on
more heavily intermittent sources of renewable power. Energy storage
technologies also "make low carbon electricity systems more
cost-effective". 107 (#_ftn107)
The political drive for a greener grid stems from "unambiguous risks of
climate change". 108 (#_ftn108) In addition, social and political support
for a greener energy policy has increased since the fiscal year as a result of
COVID-19, rising natural gas prices and geopolitical instability in Europe.
For instance, Germany has increased its targets for electricity consumption
from renewables from 80 per cent by 2030, to 100 per cent. by 2035. 109
(#_ftn109) These targets will see Germany alone install 22 GW of solar and
10 GW of onshore wind per year. The UK will look to similarly decarbonise its
power systems by the same date 110 (#_ftn110) .
Energy consumption is also increasing. Between 2015 and 2019, global energy
consumption grew by 6.6 per cent. 111 (#_ftn111) In order to accommodate a
greater share of renewables in energy systems and support increased energy
consumption, it will be necessary to invest in a portfolio of technological
solutions, including energy storage, smart grids, as well as demand-side
management, enabling the transition to a greener power grid. 112 (#_ftn112)
Case Study: GSF delivers frequency response services that enable higher
renewable penetration into energy systems
The ultimate goal of grid system operators is to keep the lights on. National
transmission networks require electricity generators to spin at fifty
rotations per second (50Hz) for the power systems to run smoothly; too much
supply and the grid electricity frequency will rise, potentially
short-circuiting. On the other hand, too much demand will lower frequency and
equally cause system failure.
Energy storage is part of the infrastructure used by the Irish grid to
maintain system frequency in ROI and NI. System balancing is increasingly
challenging in Ireland because it is one of the world's leaders in developing
an environmentally sustainable grid: EirGrid had increased the cap on the
amount of variable renewable generation on the grid at a given time to 75 per
cent. following a successful trial. 113 (#_ftn113) Without balancing
infrastructure, the EirGrid and SONI network operators must resort to brown
and blackouts to maintain their system within normal operating limits of
49.9Hz to 50.1Hz.
The Company's energy storage systems in NI were activated to prevent system
imbalance on Monday, 22 November 2021 after the grid system measured a drop
below the trigger threshold of 49.8Hz.
Figure 28: Immediate response at Drumkee project in the first 15 seconds
following detection of the frequency event.
On 22 November 2021, two conventional generators within the Irish grid tripped
offline in quick succession, prompting two drops in frequency. By inversing
the frequency graph and scaling correctly, Drumkee was able to respond to the
changes in grid system electricity and output up to 50 MW of power until the
grid system returned to its normal operating thresholds.
Figure 29: Measured power's (nearly exact) tracking of frequency.
Without the intervention of Drumkee and other balancing systems, the Irish
grid may well have had to resort to a brown or black out to remain balanced.
Drumkee and Mullavilly can increase their combined grid power output by up to
100MW in less than half a second and, as the Irish grid moves towards net
zero, it will increasingly rely on the support of these and other battery
storage technologies for system balancing. In anticipation of increased
demand, the Company will increase its battery system capacity in Ireland by 30
MW as of the date of publication and has an additional 180MW of generation
under development in Ireland.
Sustainability in Governance
The Company has invested heavily in the fiscal year to document its
environmental sustainability and to identify areas for improvement in its
social sustainability and governance processes. The Company is committed to
disclosing any shortfalls in its environmental, social and governance metrices
to investors. It will rigorously evaluate its ESG performance, and when deemed
appropriate, shall integrate necessary changes to its investment, operations,
and leadership frameworks in an orderly and responsible manner.
A delegated team of engineers, compliance, reporting and legal professionals
at the Investment Manager (through its subsidiary, the Operating Manager) have
worked closely with third-party advisors during the fiscal year to begin data
collection and operational assessments as required to commence SFDR
reporting.
Over the next two years, the Investment Manager will continue its ESG
performance assessment process to incorporate other applicable regulatory
frameworks and initiatives, including as regulated by the Financial Conducts
Authority. Simultaneously with this assessment, the Investment Manager will
recommend to the Board that it evaluate and integrate improvements into every
aspect of the business as appropriate to meet the Company's stated
environmental, social and governance goals.
Sustainability Regulations and Awards
Sustainable Finance Disclosure Regulation (SFDR)
The Company, a sole-play investor in battery energy storage systems, confirms
that it constitutes a "financial product" that "promotes environmental or
social characteristics" under the SFDR. 114 (#_ftn114)
During the fiscal year, the Company engaged reputable third-party
environmental consultants to assess and track the Company's environmental and
social performance against 14 main metrics under Article 8 SFDR and six
additional environmental and social impact indicators, which are relevant to
the Company's business processes. In order to provide transparency, the
Company has engaged the services of a third-party organisation with expertise
in ESG and renewable energy, to track and monitor the metrics under SFDR. The
first ESG Pillars Report detailing this assessment will be available on the
Company's website in August 2022.
TCFD Disclosures
The Company has engaged the services of third-party experts to ensure adequate
oversight of its assessment of its alignment with TCFD requirements.
The Company aims to complete a formal climate risk assessment and make
necessary disclosures in accordance with TCDF requirements by the end of 2022
calendar year.
United Nations Sustainability Development Goals (SDGs)
The 2022 ESG Pillars Report (which will be available on the Company's website
in August) will also include the Company's ESG assessment against the UN's
Sustainability Development Goals (SDGs).
United Nations Principles for Responsible Investing (UN PRI)
The Company is a signatory of the UN PRI. The UN PRI requires the Company to
participate in the next mandatory submission period, which will be in 2024.
The Investment Manager is currently reviewing what steps need to be taken in
order for the Company to have greater alignment with the UN PRI. 115
(#_ftn115)
Green Economy Mark
The Company's role in energy storage has been recognised by the Exchange Green
Economy Mark, awarded by the London Stock Exchange's Green Economy Mark. The
award recognises companies that derive 50 per cent or more of their revenues
from environmental solutions.
Global Impact Investing Network
The Company is a member of the Global Impact Investing Network (GIIN) and is
aligned with GIIN's mission of reducing barriers to impact investment and
supporting the allocation of capital to fund solutions to the world's most
intractable challenges
Equality, Diversity, and Inclusion at GSF
The Company is an Investment Trust and has no employees nor any senior
management.
The Listing Rule 9.8.6R(10) requires the Company to specify Board diversity as
broken down by gender identity or sex, and ethnic background. The Board is
currently composed of four individuals (one female and three males) who
identify themselves as 'White British or other White (including minority-white
groups)'. It is the Company's intent to both grow the Board and to plan for
the succession of its members beginning in the 2023 fiscal year. The Company
supports the global investor community's efforts to improve diversity in
senior management and Board leadership. GSF is working with reputable
third-party advisors to evaluate the Board's composition in a manner
consistent with such efforts.
The Listing Rule 9.8.6R(10) requires the Company to specify Board diversity as
broken down by gender identity or sex, and ethnic background.
Table 14: Table for reporting on gender identity or sex.
Number of board members Percentage of the board* Number of senior positions on the board (CEO, CFO, SID and Chair) Number of executive management Percentage of executive management
Men 3 75% 1 n/a n/a
Women 1 25% 0 n/a n/a
Other categories 0 0 0 n/a n/a
Not specified/ prefer not to say 0 0 0 n/a n/a
* Note: the investment trust does not have any executive management
Table 15: Table for reporting on ethnic background.
Number of board members Percentage of the board Number of senior positions on the board (CEO, CFO, SID and Chair) Number of executive management Percentage of executive management
White British or other White (including minority-white groups) 4 100% 100% n/a n/a
Mixed/ Multiple Ethnic Groups 0 0% 0% n/a n/a
Asian/ Asian British 0 0% 0% n/a n/a
Black/ African/ Caribbean/ Black British 0 0% 0% n/a n/a
Other ethnic group, including Arab 0 0% 0% n/a n/a
Not specified/ prefer not to say 0 0% 0% n/a n/a
Principal Risks and Uncertainties
COVID 19 and Geopolitical Factors
The impacts of Covid-19, Brexit, and the Russo-Ukrainian war continue to
evolve at a rapid pace. The Board and Investment Manager are continuously
assessing how these social, economic, and geo-political events impact the
Group's principal risks.
Impact of Supply Chain Disruptions on EPC Strategy and Costs
The changes in cross-border trade between Britain and the EU on the one hand,
and the government ordered shutdowns and lockdowns in response to COVID -19,
including in China, on the other hand, continue to disrupt global supply
chains. Manufacturing and shipping delays may materially increase key
equipment costs. There is a risk that supply chain disruption will
materially increase the cost of construction delay bringing new projects
online, negatively impact the Group's overall financial returns.
Whilst the cost and supply of materials continues to fluctuate, the Investment
Manager has, to a substantial degree, mitigated the impact of such
fluctuations through its existing EPC framework arrangements. These
arrangements, implemented prior to the onset of supply chain disruptions, have
allowed the Group to benefit in the short term from fixed pricing for key
equipment, limit adjustments where pricing is variable and have also ensured
that the Group has timely and preferred access to equipment notwithstanding
market shortages. Nonetheless, there remains a risk that further or persistent
supply chain disruptions will materially increase the average cost of
construction and negatively impact the Group's construction operations in the
short term and its longer-term returns.
Impact on Operations
COVID-19 related illnesses and lockdowns may also restrict the ability of
engineers to access sites, negatively impacting the Company's ability to meet
deadlines for commencement of services or implement its asset maintenance
programs.
To date, the Company's construction activities constitute key infrastructure
activities that have not been subject to lockdown restrictions and none of its
EPC providers have suffered material delays in construction as a result of the
COVID pandemic. The Company continues to work closely with its suppliers and
service providers to seek to adjust project timelines to anticipate and allow
for delays and illnesses resulting from COVID. Nonetheless, there remains a
risk that severe or persistent staff shortages will negatively impact the
Group's construction activities in the short term.
The Investment Manager operates a hybrid work environment to allow staff the
maximum amount of flexibility to manage COVID-19 related disruptions.
Nonetheless, there remains a risk of short-term or persistent disruption to
business activities as a result of COVID-19 related illnesses.
THE GSF RISK CONTROL FRAMEWORK
The Company's Board has general oversight and responsibility for maintaining
and reviewing the effectiveness of the Company's risk management activities
and does so on a quarterly basis. In addition, risks are managed by the AIFM
through its Risk Committee and Internal Controls. The Risk Committee meets
on a monthly basis to review risks and controls, including those relating to
information security, regulatory compliance, and business continuity. Their
findings are shared with the Board on a quarterly basis.
The Board of Directors
The Company's Board is responsible for maintaining and reviewing the
effectiveness of the Company's risk management activities, from a strategic,
financial, and operational perspective. The Board aims to ensure that risks
are accurately identified and managed but does not seek to eliminate such
risks. Additional risks and uncertainties not currently known to the Board of
Directors, or that the Directors deem immaterial, may also have an adverse
effect on the performance of the Company.
The Risk Committee.
The AIFM's Risk Committee regularly monitors the principal risks and
uncertainties identified, along with the strategies developed and the actions
proposed to mitigate them. The risk identification, assessment and reporting
process are supported by the Investment Manager's Executive Team, who
continually review the effectiveness of the AIFM's risk management systems and
its internal controls.
Internal Controls
Each member of the Investment Manager's Executive Team is responsible for the
management of the specific risks within their own business unit. The Executive
Team assesses current risks, reviews, and monitors the controls that mitigate
those risks; and identifies potential new risks to the Board and Risk
Committee. They are also responsible for reviewing, monitoring, and agreeing
to the approach for mitigating specific risks faced by the Company.
Internal and External Auditors
The Investment Manager's internal auditors review and assess the Company's
risk management and internal controls process and report their findings and
recommendations to the board of directors of the Investment Manager and the
Company, respectively.
OUR RISK PROFILE
Our risk assessment program assesses the potential impact of key financial,
reputational, and operational risks against the probability of their
occurrence.
Identification & Assessment of Risks
Icon Risk
C19 COVID 19
CMD Changes to Market Design
INFL Inflation
BM Exposure to Lithium-Ion Batteries and Battery Manufacturers
KSR Key Skills Retention
OM Dependence on Long-Term Operations and Maintenance (O&M) Contracts
VUA Valuation of Unquoted Assets
GDL Delays in Grid Energisation or Commissioning
CFX Currency Exposure
CA Cyber-Attack and Loss of Data
ISA Insurability of Assets
KEY RISKS AND UNCERTAINTIES
Key risks highlighted by the Board of Directors as impacting the Company in
the year ending March 2022 are highlighted below:
Risk Description Mitigant
Changes to Market Design The Company's assets generate revenue by delivering balancing services to The Company owns and operates a diverse
power grid operators in the United Kingdom, Ireland, Germany, and United portfolio of assets across Great Britain, Ireland, Germany and (post year-end)
States. There is a risk in any of those markets that unanticipated changes the ERCOT market within the United States.
to the design of power system services or any change in the specifications and
CMD requirements for service delivery (including network charges or changes to In addition, the Investment Manager aims to
market rules) could negatively impact revenues or constrain revenue stack revenue contracts in order to vary the types of income streams received
projections for assets within the region in which a change occurs and thereby from each system operator and within each market.
reduce the net asset value of the affected assets.
In these two ways, the Company minimises its reliance on any single market or
any specific market service and mitigates against changes in any single market
product.
Inflation The Company's profit projections are based in part on its budget The Company ensures that it generates revenues in the markets in which it
for capital and operating expenditure incurred in the construction, operation, incurs operating costs from a diverse mix of short, medium and long-term
and maintenance of its portfolio of battery storage assets. These include contracts that are subject to fixed or floating contract prices. As revenues
the cost of battery cells, inverters, the cost of power required to charge the are pegged to operating expenditure, the Company shall aim to neutralise
INFL batteries and the labour costs for operations. There is a risk that inflationary increases (e.g. cost of power to charge the batteries) by
unanticipated inflation will increase capital expenditure and operating costs rebalancing its revenue services (e.g. changing the timing or bases for
materially beyond budget with the consequence of reducing profitability below charging batteries to either reduce costs or increase revenues) as appropriate
the investment forecast and/or rendering projects less economic or to maintain its investment forecast.
uneconomic.
There is also a risk that continued or severe inflation could
positively and/or negatively change the grid power market design (see Changes
to Market Design above).
The Company has little exposure to debt financing but has access
to debt facilities. 116 (#_ftn116) There is a risk that increases in the
inflationary index rates could render the interest rates applicable to these
debt facilities less economic or uneconomic.
The Company has sufficient access to equity capital and shall only utilise
debt to the extent considered accretive to shareholders.
Exposure to Lithium-Ion Batteries and Battery Manufacturers Gore Street's portfolio currently consists only of lithium-ion batteries. The The Company remains technology agnostic and continues to evaluate other
Group's battery energy storage systems are designed by a variety of EPC economically viable energy storage opportunities in order to minimise its
providers but the underlying lithium-ion batteries are manufactured primarily exposure to lithium-ion and further diversify its portfolio mix. The Company
by BYD, CATL and LG Chem. While the Company considers lithium-ion battery is not under an exclusivity agreement with any individual battery manufacturer
technology to be the most efficient and most competitive form of storage in and will manage its supply framework agreements in a manner that allows it to
today's market, there is a risk that other technologies may enter the market take advantage of any improvements or amendments to new storage technologies
with the ability to provide similar or more efficient services to power as they become commercially viable.
markets at comparable or lower costs, reducing the portfolio's market share of
revenues in the medium or long term.
Key Skills Retention The Company is an investment trust operated under the supervision of a The AIFM Agreement between the Company and the Investment Manager provides for
non-executive board of directors; it has no employees and relies exclusively a twelve-month notice period before termination by either party in order to
on third parties to manage and operate its assets and deliver information to afford the Company sufficient time to arrange for alternative services.
shareholders. In particular, the Investment Manager is responsible for the
development of the Company's acquisition pipeline and (through its subsidiary)
has operational oversight of the Company's procurement, construction, asset
management, and revenue generation functions. The Investment Manager engages
and supervises leading industry suppliers and service providers for
operational performance including for engineering, procurement, construction,
asset management and maintenance of battery energy storage assets. In
addition, the Investment Manager supports the Company's Administrator to
ensure adequate management of the Company's accounting functions. There is a
risk that the early termination of the AIFM and Operational Management
Agreements would result in a loss of key expertise required for the strategic,
financial and operational management of the Company.
Dependence on Long Term Operations and Maintenance (O&M) Contracts Each battery energy storage system contains multiple battery stacks connected The Investment Management routinely seeks to incorporate warranties and
in parallel, with each stack containing modules of battery cells that are liquidated damage clauses into the O&M service contracts to ensure that
partially independent and can be replaced and repaired separately, thereby service providers are adequately incentivised to maintain systems in the
partially limiting the impact of failure of any module of cells. The manner contracted for. Although these service contracts are long-term, there
performance of each Group asset is nonetheless dependent on scheduled are subject to early termination for breach of service terms.
maintenance and timely repair of batteries by these service providers in order
to ensure the health and safety of the communities and systems concerned and
to ensure the durability of the battery system for its anticipated life span.
There is a risk that the asset and O&M providers selected to maintain and
manage the battery systems fail to adequately deliver services, which could
lead to loss of revenue, health, and safety risks and/or untimely degradation
or destruction of the battery systems.
Investment in Unquoted Assets The Company invests predominantly in unquoted assets whose value involves the The Investment Manager is regulated by the FCA and managed by professionals
exercise of judgement by the Investment Manager. who have knowledge and expertise working in a regulated environment. The
Investment Manager works under the supervision of an Investment Committee
composed of investment professionals with decades of experience in clean
energy investing. The Investment Committee reviews each of the Investment
There is a risk that the Investment Manager may fail to fulfil its investment Manager's recommendations to ensure that they comply with the Company's
objectives in making these investments or may fail to appropriately implement investment policy and are in line with the Investment Manager's investment
its investment strategy in selecting assets for investment or may fail to strategy.
comply with the Company's investment policy in implementing its investment
strategy.
Valuation of Unquoted Assets The Company invests predominantly in unquoted assets whose fair value involves The Investment Manager routinely works with market experts to assess the
the exercise of judgement by the Investment Manager. There is a risk that reasonableness of key data utilised in the asset valuation process (such as
the Investment Manager's valuation of the portfolio may be deemed by other energy price forecasts) and to reassess its valuations on a quarterly basis.
third parties to have been overstated or understated. In addition, in order to ensure the object reasonableness of the Company's
NAV materiality threshold and the discount rates applied, substantive
components of the portfolio valuation, (based on a NAV materiality threshold)
are reviewed by an independent third party, prior to publication of the
half-year and year-end reports.
Delays in Grid Energisation or Commissioning The Company relies on EPC contractors for energy storage system construction, The Company works closely with EPC contractors
and on the relevant transmission systems and distribution systems' owners to ensure timely performance of services and imposes liquidated damage
(TSO) for timely energisation and connection of that battery storage asset to payments under the EPC contracts for certain delays in delivery.
the transmission and distribution networks appropriately. There is a risk
that either the EPC contractor or relevant TSO could delay the target The Company seeks commitments from TSOs to a
commercialisation date of an asset under construction and negatively impact target energisation date as a condition to project acquisition and provides
projected revenues. maximum visibility on project development to TSOs in order to encourage
collaboration towards that target energisation date.
Currency Exposure The Company is the principal lender of funds to Group assets (via intercompany The Company acts as guarantor under currency hedge arrangements entered into
loan arrangements) for their investments in projects, including projects by impacted subsidiaries to mitigate its exposure to the Euro under EirGrid
outside of the UK. This means that the Company may indirectly invest in and SONI contracts. The Company will also guarantee future hedging
projects generating revenue and expenditure denominated in a currency other arrangements as appropriate to seek to manage its exposure to foreign currency
than Sterling, including in US Dollars and Euros. There is a risk that the risks. As of publication date, it is completing similar hedging arrangements
value of such projects and the revenues projected to be received from them to mitigate its Euro and Dollar exposure in light of recent acquisitions in
will be diminished as a result of fluctuations in currency exchange rates. Germany and Texas, US.
The diminishing in value could impact a subsidiary's ability to pay back the
Company under the intercompany loan arrangements.
Cyber-Attack and Loss of Data The Company is exposed (through the server, software, and communications Among other measures, the Company ensures its contractors and service
systems of its primary service providers and suppliers) to the risk of providers incorporate firewalls and virtual private networks for any equipment
cyber-attacks that may result in the loss of data, violation of privacy and capable of remote access or control. Cybersecurity measures are incorporated
resulting reputational damage. for both external and internal ('local') access to equipment, preventing
exposure to ransomware attacks or unsolicited access for any purpose. The
Company engages experts to assess the adequacy of its cybersecurity measures
and has implemented a requirement for annual testing to confirm and certify
such adequacy for representative samples for the entire fleet.
Insurability of Assets The Company protects the value of its asset from property damage, theft, The Company is taking adequate procedures to protect its assets from theft and
vandalism, fire damage and other physical risks through property insurance. vandalism through upgrades to its security equipment and improvements in its
Property insurance is assessed and renewed on an annual basis. Battery remote monitoring. The Company will continue to monitor and upgrade its
storage is in its nascent stage from an insurance perspective and there is a surveillance systems as appropriate to prevent theft or vandalism.
risk that this class of assets will be deemed uninsurable or may become too
expensive to insure.
The Company continues to evaluate its fire prevention and control measures to
ensure the suitability of each system's design to sufficiently mitigate the
risk of fire and manage the consequences of such an event. The mitigation
solution is design risk assessed and tailored to the environments in which the
assets are based, taking into consideration (among others) the layout of the
battery system, its location (rural or urban), technology type and water
access. The Investment Manager is actively engaged in dialogue with
third-party insurers, fire safety professionals and other industry experts to
reaffirm the adequacy of its processes and to discuss operational safety in
general in the battery storage context
Emerging Risks
To ensure that the Company maintains a holistic view of risk management, the
AIFM and the Board will continue to monitor the relevant emerging risks and
assess their potential to adversely impact operations on a quarterly basis.
The risks identified this year are: (i) regulatory and legal changes impacting
strategy (including as may ensue from compliance with TCFD's climate-related
reporting and metrics), (ii) other impacts of climate risks on technologies
and markets, (iii) potential changes to national and cross-border energy
policy; (iv) interest rate risks (not yet relevant as the Company currently
has no floating rate debt facilities), and (v) changes to future investor
accreditation resulting from Brexit.
GOVERNANCE
Directors' Report
The Directors present their report together with the audited financial
statements for the period from 1 April 2021 to 31 March 2022. The Corporate
Governance Statement on pages 100-114 forms part of this report. The
Directors' Report together with the Strategic Report comprise the "management
report" for the purposes of Disclosure Guidance and Transparency Rule 4.1.5R.
Principal activity and status
The Company was incorporated in England and Wales on 19 January 2018 with
company number 11160422 and registered as an investment company limited by
shares under Section 833 of the Companies Act 2006. On 25 May 2018, the
Company's Ordinary Shares were admitted as a Premium Listing and commenced
dealings on the Main Market of the London Stock Exchange ("LSE"). The
Company has, subsequent to its launch, entered the Investment Trust Company
("ITC") regime for the purposes of UK taxation. The Company is a member of
the Association of Investment Companies ("AIC").
Business review
During the period the Company, through GSES 1 Limited, successfully acquired
three new facilities, including its first investment in Germany and two
additional investments in GB, of which all facilities are majority owned by
the Company. Post year-end, the Company has completed its first acquisition in
North America, in Texas, US. The registered address of GSES 1 Limited is The
Scalpel, 18th Floor, 52 Lime Street, London, EC3M 7AF. The Chair's statement
and Investment Manager's report expands on the business activity and
acquisitions in the period.
Results and dividends
The financial statements of the Company for the period appear from pages
128-132. Total Comprehensive income for the year 31 March 2022 was
£42,527,570 (31 March 2021 £14,594,694). The Directors recommend a fourth
interim dividend of 1.0 pence per share be paid, bringing the total dividend
in respect of the period ended 31 March 2022 to 7 pence per share (7 pence per
share 31 March 2021).
Dividend policy
Subject to market conditions and performance, financial position, and
financial outlook, it is the Directors' intention to pay an attractive level
of dividend income to Shareholders on a quarterly basis.
On 22 March 2022, the Company announced that, for the quarter to 31 March
2022, and for subsequent financial years, the Company will target dividends in
respect of the Ordinary Shares in each financial year based on a 7 per cent.
yield on the average Net Asset Value per Ordinary Share during that financial
year, subject to a minimum target of 7 pence per Ordinary Share in each
financial year. The annual target dividend will increase by 0.5 pence
increments per Ordinary Share based on a certain progression of the average
Net Asset Value per Ordinary Share in any financial year above 100 pence
(subject to rounding). For illustrative purposes only: if the average Net
Asset Value per Ordinary Share during a financial year is 107 pence per
Ordinary Share or greater (but less than 114 pence) the target dividend for
that financial year will be 7.5 pence per Ordinary Share; if the average Net
Asset Value per Ordinary Share during a financial year is 114 pence per
Ordinary Share or greater (but less than 121 pence) the target dividend for
that financial year will be 8.0 pence per Ordinary Share; and if the average
Net Asset Value per Ordinary Share during a financial year is 121 pence per
Ordinary Share or greater (but less than 128 pence) the target dividend for
that financial year will be 8.5 pence per Ordinary Share.
Dividends are paid quarterly, and the Company will target a dividend of 2.0
pence per Ordinary Share for the first three interim dividends in each
financial year and the amount of the final dividend will depend on the overall
annual dividend target for that financial year. If any C Shares are issued,
holders of C Shares will be entitled to participate in any dividends which the
Directors may resolve to pay to holders of C Shares out of the assets
attributable to the C Shares. The target dividends set out above shall not
apply to any C Shares prior to their conversion into Ordinary Shares.
Investors should note that the payment of dividends is at the discretion of
the Board and the Directors may resolve to pay dividends otherwise than in
accordance with the targets noted above in order to reflect the Company's
expected returns and future plans for the growth of the Company.
The targeted annual dividend to 31 March 2022 has been met.
Share capital
As at 31 March 2022, 345,035,842 Ordinary Shares were in issue (31 March 2021:
276,224,622) and no other classes of shares were in issue at the respective
2021 and 2022 year end.
Risk management and internal control
The Board is responsible for financial reporting and controls, including the
approval of the Annual Report and Accounts, the dividend policy, any
significant changes in accounting policies or practices, going concern and
treasury policies including the use of derivative financial instruments. The
Board takes comfort that it has outsourced and received assurance from those
service providers regarding their internal controls and risk management
processes. During the period, the Board has carried out a robust assessment of
the principal risks and uncertainties facing the Company and how they are
being mitigated, as described on pages 79--89. Further detail on how the board
ensure effective internal controls is provided on page 80.
The Board meets at least every quarter to review the Company's performance
against its strategic aims, objectives, business plans and budgets and ensures
that any corrective action considered necessary is taken. Additional
meetings are held as required to deal with the business of the Company in a
timely manner. Directors are expected to attend all meetings of the Board and
all meetings of those committees on which they sit, as well as the Annual
General Meeting ("AGM"). Meetings called outside of the scheduled quarterly
Board meetings may need to be convened at relatively short notice and
therefore at times when not every director is available. Every meeting
during the period was convened with an appropriate quorum and with the
Directors acting independently of the Investment Manager.
Insurance
The Company maintains £10 million of Directors' and Officers' Liability
Insurance cover for the benefit of the Directors, which was in place
throughout the period, and which continues in effect at the date of this
report.
Directors
All Directors are Non-Executive Directors. All the Directors will seek
re-election at the AGM in accordance with the recommendation of the AIC
Code. Full details of the processes by which Directors can be appointed or
replaced are set out in the Articles of Association.
Significant shareholdings
As at 31 March 2022 the following shareholders have a disclosable interest of
3 per cent or more in the Ordinary Shares of the Company:
Shareholder Number of Percentage of issued
Ordinary Shares share capital
Rathbones 51,165,522 14.83%
Hargreaves Lansdown Nominees Limited 22,048,703 6.39%
EFG Harris Allday 18,975,028 5.50%
Interactive Investor Services Nominee Limited 16,528,086 4.79%
Charles Stanley 12,682,956 3.68%
Momentum Global Investment Management 12,389,177 3.59%
National Treasury Management Agency 11,730,910 3.40%
AJ Bell 11,677,367 3.38%
First Avenue Capital 11,658,249 3.38%
Redmayne Bentley 10,972,508 3.18%
Privium Fund Management 10,947,263 3.17%
Political contributions
The Company made no political contributions during the period.
Greenhouse gas emissions reporting
The Board has considered the requirement to disclose the Company's measured
carbon emissions sources under The Companies Act 2006 (Strategic Report and
Directors' Report) Regulations 2013. The Company is a closed-ended
investment company which has no employees and so its own direct environmental
impact is minimal.
Employees
The Company has no employees and therefore no employee share scheme or
policies for the employment of disabled persons or employee engagement.
Restrictions on transfer of securities in the Company
There are no restrictions on the transfer of securities in the Company, except
as a result of:
The Financial Conduct Authority ("FCA") Listing
Rules that require certain individuals to have approval to deal in the
Company's shares: and,
The Company's Articles of Association that
allow the Board to decline to register a transfer of shares, or otherwise
impose restriction on shares.
The Company is not aware of any agreements between holders of securities that
may result in restrictions on transferring securities in the Company.
Securities carrying special rights
No person holds securities in the Company carrying special rights with regards
to control of the Company.
Change of control
The Company is not aware of any person who, directly or indirectly, owns or
controls the Company. The Company is not aware of any arrangements the
operations of which may give rise to a change in control of the Company.
Directors' share dealings
The Directors have adopted a code of Directors' dealing in Ordinary Shares,
which is in accordance with the Market Abuse Regulation. The Board is
responsible for taking all proper and reasonable steps to ensure any dealings
by Directors, or persons closely associated with them, are in compliance with
the Market Abuse Regulation.
Articles of Association
These are available on the Company's website at
https://www.gsenergystoragefund.com/ or by application to the Company
Secretary. Any amendment to the Company's Articles of Association (the
"Articles") may only be made by passing a special resolution of the
Shareholders of the Company.
Branches outside the UK
The Company does not have any branches outside the UK.
Powers of the Directors
The Board are responsible for managing the business affairs of the Company in
accordance with the Articles, the Companies Act, any direction given by the
Shareholders by special resolution and the investment policy and have overall
responsibility for the Company's activities including its strategy, investment
activities and reviewing the performance of the portfolio.
Powers in relation to the Company issuing its shares
Subject to company law and the Articles, the Directors are authorised to issue
shares of such number of tranches and on such terms as they determine,
provided that such terms are consistent with the provision of the Articles.
Statutory information contained elsewhere in the annual report
Information required to be part of this Directors' Report can be found
elsewhere in the annual report and is incorporated into this report by
reference, as indicated below:
Future developments, pages 38 and 89
Engagement with suppliers, customers, and others with business
relationships with the Company, pages 96-98
Corporate Governance statement, pages 100-114
Manager and service providers, pages 105-106
Directors' names and biographies, pages 108-110
Directors' interest in shares, page 122
Financial instruments, page 138-139
Share capital reserves, pages 155-157
Transactions with related parties, pages 158-160
Post balance sheet events, page 160-161
Other disclosures
Disclosures of financial risk management objectives and policies and exposure
to financial risks are included in the financial statements.
Disclosures in relation to the Company's business model and strategy have been
included within the Investment Manager's Report on pages 38-79. Disclosures in
relation to the main industry trends and factors that are likely to affect the
future performance and position of the business have also been included within
the Investment Manager's report.
Disclosure of information to Auditors
All of the Directors have taken all the steps that they ought to have taken to
make themselves aware of any information needed by the auditors for the
purposes of their audit, and to establish that the auditors are aware of that
information. The Directors are not aware of any relevant audit information
of which the auditors are unaware.
Independent Auditors
Ernst & Young LLP were appointed as auditors by the Directors during the
period and have expressed their willingness to continue as auditor for the
financial year ending 31 March 2023. A resolution to re-appoint Ernst &
Young LLP as auditors to the Company will be proposed at the AGM.
Going Concern and Viability
The Company's business activities, together with the factors likely to affect
its future development performance and position, are set out in the Investment
Manager's Report. The Company faces a number of principal risks and
uncertainties, as set out above, including with respect to the economic impact
of COVID-19, government regulation and political instability and financial
risks such as counterparty risk, credit risk, concentration risk as discussed
in the financial statements.
The Company also continues to monitor and assess emerging risks which may
potentially impact operations, including the impact of climate change. The
Company will also undertake a formal climate risk assessment, which will
facilitate the Company's resilience in a world where climate change is
altering the environment.
Going Concern
Since the year end, there have been reduced restrictions on travel and
lockdown, but the full human and economic impact of the COVID-19 pandemic
still remains difficult to assess.
The Company's ability to generate revenue from its operational assets
continues and remains largely unaffected by the pandemic. The Company and the
Investment Manager have worked closely and liaised with the operators to
ensure that commercial activities remain operational, and, in their view,
power generation will remain essential to the UK's infrastructure.
The completed going-concern analysis assumes continued annual expenditure at
the rate of current expenditure and continued discretionary dividend payments
to Shareholders at the target annual rate of 7% of NAV, subject to a minimum
target of 7 pence per Ordinary Share in each financial year. With
expenditure and discretionary dividends assumed unchanged, the Company will
continue to be operational and will have excess cash after payment of its
liabilities over the period to 31 July 2023, being at least 12 months from the
date of approval of the financial statements.
The Company also continues to monitor and assess emerging risks which may
potentially impact operations, including the impact of climate change. The
Company will also undertake a formal climate risk assessment, which will
facilitate the Company's resilience in a world where climate change is
altering the environment.
The Directors have reviewed Company forecasts and projections which cover a
period of five years from 31 March 2022, and as part of the going concern
assessment have modelled downside scenarios taking into account foreseeable
changes in investment and trading performance, which show that the Company has
sufficient financial resources.
The Directors consider the following scenarios:
The Company and the portfolio assets over at
least 12 months to 31 July 2023. We have assumed the Company's rate of
expenditure over the period will remain unchanged, that there are no
contractual capital commitments at fund level but has included potential
commitments of the subsidiaries in the analysis. There are no loan repayments
received from operational companies over the time frame.
A reverse stress test to determine the term
over which the Company can remain viable given its current resources before
the necessity for liquidation or protection from creditors. As the Company
has no financial responsibility for its operating companies.
The Directors acknowledge their responsibilities in relation to the financial
statements for the year ended 31 March 2022 and the preparation of the
financial statement on a going concern basis remains appropriate and the
Company expects to meet its obligations as and when they fall due for at least
12 months until 31 July 2023.
Long Term Viability
The Directors have assessed the prospects of the Company over a period of five
years.
As at 31 March 2022, the Company had net current assets of £195.72million and
had cash balances of £198.04 million (excluding cash balances within investee
companies), which are sufficient to meet current obligations as they fall
due. The major cash outflows of the Company are the payment of dividends and
costs relating to the acquisition of new assets, both of which are
discretionary. The Company continues to commit to its investors that its
business purpose is to invest funds solely for returns from capital
appreciation, investment income, or both. The Company is a
guarantor to GSES1 Limited's £15m revolving credit facility with
Santander. The Company had no outstanding debt as at 31 March 2022.
The Directors have reviewed Company forecasts and projections which cover a
period of five years from 31 March 2022, and as part of the going concern
assessment have modelled downside scenarios taking into account foreseeable
changes in investment and trading performance, which show that the Company has
sufficient financial resources.
The Directors further considered the following scenario:
An economic turmoil test to assess the impact of a continued market slowdown
during a five year term with no additional equity raised and annual
expenditures remaining the same over the defined period.
After assessing the risks, which include emerging risks like climate change
and reviewing the Company's liquidity position, together with the forecasts of
performance under various scenarios, the Directors confirm that the Company
will be able to continue in operation and meet its liabilities over the period
of at least five years.
SECTION 172 STATEMENT
The Role of the Board
The Directors are responsible for determining the Company's investment policy
and strategy and have overall responsibility for the Company's activities
including the review of investment activity and performance and the control
and supervision of the Company's service providers. The Directors may delegate
certain functions to other parties such as the Investment Manager, the
Administrator and the Registrar.
The Directors have had regard for the matters set out in section 172(1)(a) and
(c) to (f) of the Companies Act 2006 when performing their duty under section
172. Subsection (b) is not applicable to the Company as it has no employees.
The Directors consider that they have acted in good faith in the way that
would be most likely to promote the success of the Company for the benefit of
its members as a whole, while also considering the broad range of stakeholders
who interact with and are impacted by our business, especially with regard to
major decisions.
In doing the above, the Directors have taken into account the following:
(a) the likely consequences of any decision in the long-term.
(b) the need to foster the Company's business relationships with suppliers,
customers and others;
(c) the impact of the Company's operations on the community and the
environment.
(d) the desirability of the Company maintaining a reputation for high
standards of business conduct; and
(e) the need to act fairly as between members of the Company.
The Company continuously interacts with a variety of stakeholders important to
its success and strives to strike the right balance between engagement and
communication. The Company has identified the following key stakeholders:
The Company's shareholders
The Company's Investment Manager
The Company's business partners and key service
providers
The Company's key contractors
Regulators/Government
Understanding our stakeholders' views has influenced our investment strategy,
including our focus on asset diversification and introduction of a
consolidated ESG policy.
Engagement with shareholders
Existing Shareholders and prospective investors are therefore key to
implementing our strategy. We strive through our engagement activities to
obtain shareholder and prospective investor buy in into our strategic
objectives and have developed relationships with several cornerstone
shareholders. We have engaged with Shareholders and prospective investors
through the following:
Interim and Annual Accounts.
General Meetings.
Company's corporate broker and Investment Manager are in
regular communication with shareholders and shareholder views are reported to
the Board.
One to one meetings with the Investment
Manager.
Regular news and quarterly NAV updates.
The Company will continue to engage with shareholders in future either
directly or via the Company's corporate broker and Investment Manager as
further expansion becomes necessary. These engagement activities have ensured
that the Company's investment pipeline and fundraising programme have been
aligned, as the Company will require further funding to continue with the
investment strategy and obtain additional pipeline investments.
Engagement with the Investment Manager
The Investment Manager is responsible for the development and implementation
of the investment strategy, including the acquisition, origination, execution
and management assisting the Company in meeting the expectations of its
Investment and Dividend Policies. The Board engage constructively with the
Investment Manager in order to ensure that the expectations of the
Shareholders are being met and that the Board are aware of challenges being
faced. The Board and the Investment Manager maintain an ongoing open dialogue
on key issues facing the Company, this open dialogue takes the form of ad hoc
board meetings and more informal contact, as appropriate. It ensures that
the Company and Investment Manager have aligned interests to ensure the future
success of the Company.
Engagement with business partners and other key service providers
The Company has various key service providers who provide management and
administration services. The intention is to maintain long-term and
high-quality business partnerships to ensure stability while the Company
pursues its growth strategy. Through its Management Engagement Committee, the
Company reviews the performance of all key service providers to the Company
and the terms of their engagement on an annual basis and seeks two-way
engagement between the Board and key service providers on service delivery
expectations and feedback on important issues experienced by the service
provider during the period. The Board has regular contact with the three
main service providers: the Investment Manager, Administrator and Company
Secretary through quarterly board meetings with the Chair and Audit Chair
meeting more regularly.
Engagement with key contractors
The Company and its investments are reliant on the Investment Manager
selecting reputable suppliers and experienced O&M service providers. The
failure of any of the Group's suppliers (including EPC contractors and O&M
service providers) may result in closure, seizure, enforced dismantling or
other legal action in respect of the Group's projects.
NEC ES has recently announced that it intends to wind down operations by
2030. Since its announcement, NEC continues to meet its outstanding
obligations to the Company. Nonetheless, there is the risk that NEC's
internal restructuring efforts may adversely affect its ability to meet its
outstanding obligations to the Company.
Engagement with communities
The Board recognises the importance of the communities in which the Company
operates. As we start to develop assets closer to communities, we will look
to ensure that our environmental and social footprint takes account of the
local communities and is sympathetic to the locality, taking account of local
views which will be obtained via the planning process. The development of a
comprehensive ESG strategy is under active implementation.
Regulators / Government
The Board regularly considers how it meets regulatory and statutory
obligations and follows voluntary and best practice guidance, including how
any governance decisions it makes impact its stakeholders both in the short
and long term.
Key Board Decisions
The Board's principal decisions each year typically include approving capital
raises (equity and debt), payment and level of dividends to meet expectations.
Where potential conflicts of interest arise, these would be discussed at the
Board and resolved in line with the formal Conflicts of Interest policy. No
conflicts of interest occurred that prevented the Directors from carrying out
their duties during the year.
The nature of the Company's business means that the Directors must consider
the long-term impact of its decisions, given that the Company assumes its
operational assets will perform for 30 years. The Investment Manager
communicates regularly with the Board on both the pipeline and the individual
projects that the Investment Manager is transacting on, before such a
transaction is concluded. The Board retains the right to request such
additional information as necessary to confirm compliance with the Company's
investment policy. The Investment Manager actively assesses the Group's
portfolio risk and performance and routinely reports to the Board on the Deal
Team's execution of revenue strategy, month to month financials, operational
performance, health and safety performance and financial projections. At the
project level, the Investment Manager works closely with third parties to
monitor revenue contracts and cash flow level, and to review the financial
model to assess actual and projected project returns based on actual
performance.
The Board also agreed to create more distributable reserves, by way of
approval of the cancellation of £40 million from the share premium account
which was achieved through the issue of a special resolution at the AGM; this
request was approved by a minimum of 75% of shareholder votes and filing of a
court order to legally approve the cancellation. The Company strives to
maintain a reputation for high standards of business conduct, and this is
reflected in one of our core values, which is to always act openly and
transparently with all of our stakeholders. In relation to these key
decisions, stakeholders, such as key contractors, were involved to ensure
asset pipeline was available to the Company on the timescales required.
Shareholder discussions were held to ensure clear communication was made in
relation to progress and market interest for expansion of the Company. To
ensure dividend expectations were deliverable the Company worked with the
Investment Manager.
Statement of Directors' Responsibilities in respect of the preparation of the Annual
Financial Report
The Directors are responsible for preparing the Annual Report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each
financial period. Under that law the Directors are required to prepare the
Company financial statements, in accordance with UK adopted international
accounting standards.
Under company law, the Directors must not approve the financial statements
unless they are satisfied that they give a true and fair view of the state of
affairs of the Company and of the profit or loss for the Company for that
period.
In preparing these financial statements, the Directors are required to:
select suitable accounting policies and then apply them consistently.
make judgements and accounting estimates that are reasonable and prudent.
state whether they have been prepared in accordance with UK adopted
international accounting standards, subject to any material departures
disclosed and explained in the financial statements;
prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business; and
prepare a Report of the Directors, a Strategic Report and Directors'
Remuneration Report which comply with the requirements of the Companies Act
2006.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities. The Directors are responsible for
ensuring that the Annual Report, taken as a whole, is fair, balanced, and
understandable and provides the information necessary for Shareholders to
assess the Company's performance, business model and strategy.
Website Publication
The Directors are responsible for ensuring the Annual Report and the financial
statements are made available on a website. Financial statements are
published on the Company's website in accordance with legislation in the UK
governing the preparation and dissemination of financial statements, which may
vary from legislation in other jurisdictions. The maintenance and integrity
of the Company's website (https://www.gsenergystoragefund.com
(https://www.gsenergystoragefund.com) ) is the responsibility of the
Directors. The Directors' responsibilities also extend to the ongoing
integrity of the financial statements contained therein.
Directors' Responsibilities pursuant to DTR4
The Directors confirm that to the best of their knowledge:
the Company's financial statements have been prepared in accordance with UK
adopted international accounting standards and give a true and fair view of
the assets, liabilities, financial position and profit and loss of the
Company; and
the Annual Report includes a fair review of the development and performance of
the business and the financial position of the Company, together with a
description of the principal risks and uncertainties that it faces.
Disclosure of information to the Auditor
The Directors who were members of the Board at the time of approving the
Directors' report have confirmed that:
• so far as each director is aware, there is no relevant audit information
of which the Company's auditor is not aware; and
• each director has taken all the steps that they ought to have taken as a
director in order to make themselves aware of any relevant audit information
and to establish that the Company's auditor is aware of that information.
Signed on behalf of the Board of Directors
Patrick Cox
Chair
Date: 25 July 2022
Corporate Governance Report
This Corporate Governance Report forms part of the Report of the Directors as
further on pages 90-100. The Board operates under a framework for corporate
governance which is appropriate for an investment company.
Gore Street Energy Storage Fund plc is an investment trust and has been
compliant with section 1158 of The Corporation Tax Act, 2010. The Ordinary
Shares were admitted to trading on the Premium Segment of the Official List of
the London Stock Exchange on 25 May 2018.
The Board of Gore Street Energy Storage Fund plc has considered the Principles
and Provisions of the Association of Investment Companies Code of Corporate
Governance (the "AIC Code"). The AIC Code addresses the Principles and
Provisions set out in the UK Corporate Governance Code (the "UK Code"), as
well as setting out additional Provisions on issues that are of specific
relevance to the Company.
The Board considers that reporting against the Principles and Provisions of
the AIC Code, which has been endorsed by the Financial Reporting Council,
provides more relevant information to Shareholders.
The Board recognises the importance of good governance and considers that the
Company has, throughout the year under review, complied with the Principles
and Provisions of the AIC Code. The AIC Code is available on the AIC
website. It includes an explanation of how the AIC Code adopts the Principles
and Provisions set out in the UK Code to make them relevant for investment
companies. The Company is a member of the AIC.
Compliance with the AIC Code
The below table sets out the Company's compliance with the AIC Code:
Section 5: Board Leadership and Purpose
Principles Details of how the Company complies
A. A successful Company is led by an effective board, whose role is to Strategic report, pages 35-37
promote the long-term sustainable success of the Company, generating value for
shareholders and contributing to wider society. Chair's Statement, pages 30-35
Corporate Governance Report, pages 100-114
B. The Board should establish the Company's purpose, values, and strategy, Strategic report, pages 35-37
and satisfy itself that these and its culture are aligned. All Directors must
act with integrity, lead by example, and promote the desired culture. Chair's Statement, pages 30-35
Corporate Governance Report, pages 100-114
C. The Board should ensure that the necessary resources are in place for Environmental, social and governance report, pages 73-79
the Company to meet its objectives and measure performance against them.
The Board should also establish a framework of prudent and effective Principal risks and uncertainties, pages 79-89
controls, which enable risk to be assessed and managed.
Audit Committee report, pages 114-119
D. In order for the Company to meet its responsibilities to shareholders and Stakeholders, pages 96-98
stakeholders, the Board should ensure effective engagement with, and encourage
participation from, these parties. Section 172 statement, page 96-98
Corporate Governance Report, page 100-114
E. Intentionally left blank Per the AIC Code
Section 6: Division of Responsibilities
Principles
F. The chair leads the Board and is responsible for its overall Chair's Statement, page 30-35
effectiveness in directing the Company. They should demonstrate objective
judgement throughout their tenure and promote a culture of openness and Corporate Governance Report section, page 100-114
debate. In addition, the chair facilitates constructive board relations and
the effective contribution of all non-executive directors, and ensures that
Directors receive accurate, timely and clear information.
G. The Board should consist of an appropriate combination of Directors Corporate Governance Report, page 100-114
(and, in particular, independent non-executive directors) such that no one
individual or small group of individuals dominates the Board's decision Biographies, pages 108-110
making.
Remuneration and Nomination Committee, pages 120-125
H. Non-executive directors should have sufficient time to meet their board Corporate Governance Report, page 100-114
responsibilities. They should provide constructive challenge, strategic
guidance, offer specialist advice and hold third party service providers to Remuneration and Nomination Committee report, page 120-125
account.
Audit Committee report, page 114-119
Management Engagement Committee, page 125-127
I. The Board, supported by the Company Secretary, should ensure that it Corporate Governance Report, page 100-114
has the policies, processes, information, time and resources it needs in order
to function effectively and efficiently. Audit Committee report, page 114-119
Section 7: Composition, Succession and Evaluation
Principles
J. Appointments to the Board should be subject to a formal, rigorous and Remuneration and Nomination Committee report, page 120-125
transparent procedure, and an effective succession plan should be
maintained. Both appointments and succession plans should be based on merit
and objective criteria and, within this context, should promote diversity of
gender, social and ethnic backgrounds, cognitive and personal strengths.
K. The Board and its committees should have a combination of skills, Biographies, pages 108-111
experience and knowledge. Consideration should be given to the length of
service of the Board as a whole and membership regularly refreshed.
L. Annual evaluation of the Board should consider its composition, Remuneration and Nomination Committee report, page 120-125
diversity and how effectively members work together to achieve objectives.
Individual evaluation should demonstrate whether each director continues to
contribute effectively.
Section 8: Audit, Risk and Internal Control
Principles
M. The Board should establish formal and transparent policies and Audit Committee report, page 114-119
procedures to ensure the independence and effectiveness of external audit
functions and satisfy itself on the integrity of financial and narrative Notes 2 and 3 to the financial statements section, page 133 -135
statements.
N. The Board should present a fair, balanced and understandable assessment of Strategic report, page 35-37
the Company's position and prospects.
Audit Committee report, page 114-119
Financial statements, pages 128-132
O. The Board should establish procedures to manage risk, oversee the Principal risks and uncertainties, page 79-89
internal control framework, and determine the nature and extent of the
principal risks the Company is willing to take in order to achieve its Viability Statement, page 94-96
long-term strategic objectives.
Audit Committee report, page 114-119
Management Engagement Committee report, page 125-127
Section 9: Remuneration
Principles
P. Remuneration policies and practices should be designed to support Corporate Governance Report, page 100-114
strategy and promote long-term sustainable success.
Remuneration and Nomination Committee report, page 120-125
Q. A formal and transparent procedure for developing policy on Remuneration and Nomination Committee report, page 120-125
remuneration should be established. No director should be involved in
deciding their own remuneration outcome.
R. Directors should exercise independent judgement and discretion when Remuneration and Nomination Committee report, page 120-125
authorising remuneration outcomes, taking account of Company and individual
performance, and wider circumstances.
The Board
The Board consists of four non-executive directors all of whom are deemed to
be independent of the Investment Manager. The Board represent a range of
public service, investment, financial and business skills, and has a depth of
experience across these categories. The Chair of the Board is Patrick Cox.
In considering the independence of the Chair, the Board took note of the
provisions of the UK Code relating to independence and has determined that Mr
Cox is an independent Director. The Senior Independent Director is Mr Thomas
Murley. The Company has no employees and consequently there is no
requirement for a chief executive.
In accordance with the AIC Code, all the Directors will retire at the
forthcoming AGM. Patrick Cox, Caroline Banszky, Thomas Murley and Malcolm
King, being eligible, will offer themselves for re-election.
Biographical details of all Board members (including significant other
commitments) are shown on page 108-110.
Full Board meetings take place quarterly and the Board meets or communicates
more regularly to address specific issues. The Board has a formal schedule
of matters reserved for its decision which includes, but is not limited to,
considering recommendations of the Investment Manager, ensuring the Company is
delivering on its strategy and monitoring performance against the Company's
strategic objectives.
The Board has also established procedures whereby the Directors wishing to do
so in the furtherance of their duties may take independent professional advice
at the Company's expense.
All Directors have access to the advice and services of the Company
Secretary. The Company Secretary provides the Board with full information on
the Company's assets and liabilities and other relevant information requested
by the Chair, in advance of each Board meeting.
In keeping with the provisions of the AIC Code, the Company's policy is that
every three years an external consultant, who has no connection with the
Company, carries out a formal review of the Board's performance. The first
such review took place in 2021 and details can be found in the Remuneration
and Nomination Committee Report. In the intervening years, an internal board
evaluation will be carried out with the assistance of the Company Secretary.
Board Responsibilities
The Directors are responsible for managing the business affairs of the Company
in accordance with the Articles and the investment policy and have overall
responsibility for the Company's activities including its strategy, investment
activities and reviewing the performance of the portfolio.
The Board has a clearly articulated set of matters which are specifically
reserved to it and this is reviewed annually. These include:
• The strategic direction of the overall business, objectives,
budgets and forecasts, levels of authority to approve expenditure, and any
material changes to them.
• The commencement, material expansion, diversification, or
cessation of any of the Company's activities.
• The Company's regulatory, financial, and material operational
policies.
• Changes relating to the Company's capital, corporate, management
or control structures.
• Material capital or operating expenditures, outside predetermined
tolerances or beyond the delegated authorities.
• Any material contract or joint venture and material arrangements
with customers or suppliers.
• Ensuring the maintenance of a sound system of internal control and
risk management and review the effectiveness of the Company's overall internal
control arrangements and processes.
The Board may delegate certain functions to other parties such as the Board
committees, the Investment Manager, the Administrator, the Company Secretary
and the Registrar. In particular, the Board has delegated responsibility for
day-to-day management of the investments comprised in the Company's portfolio
to the Investment Manager. The Directors have responsibility for exercising
supervision of the Investment Manager.
Culture & Purpose
As a young company, our purpose and values are clear and fresh, and we believe
that the culture required to support these is straightforward and apparent -
respectful, pragmatic and to provide constructive challenge. The Board keeps
under review the culture and how this aligns with the Company's purpose and
strategy. Our culture is driven by our purpose and core values.
Our purpose is to deliver seven per cent income yield per annum and long-term
capital growth to its investors from its portfolio of utility-scale energy
storage assets located in the UK and the rest of the OECD. This forms the
foundation of our strategic framework.
Our core values are:
• To focus on the long-term sustainability of our business.
• To act openly and transparently with all our stakeholders.
• To combine entrepreneurial nimbleness with the strength of a
listed company.
Board Committees
The Board has delegated a number of areas of responsibility to its three
committees, the Audit Committee, the Management Engagement Committee and the
Remuneration and Nomination Committee. Each committee has defined terms of
reference and duties.
All the independent Directors serve on the Committees of the Board, so the
links and overlaps between the responsibilities of the committees are fully
recognised and each committee has full knowledge of the business and
deliberations of the other committees.
In addition, the Investment Manager, as Alternative Investment Fund Manager
("AIFM"), has a Risk Committee, comprised of members of its own staff for the
purposes of monitoring the risk management framework of the Company.
Alternative Investment Fund Manager Directive ("AIFMD")
The Company is an Alternative Investment Fund for the purposes of the AIFMD
and related regimes in EEA member states.
Service and Support
The Company has no employees and is externally managed by the Investment
Manager as the mandatory AIFM, supported by the Administrator.
The Management Engagement Committee formally reviews the performance of the
Investment Manager, the Administrator and other service providers each year
and makes recommendations to the Board as it considers appropriate. Further
details of these reviews, and the relationships with the Investment Manager
and Administrator are given in the Management Engagement Committee Report on
pages 125-127.
The Investment Manager
Gore Street Capital Limited ("GSC") act as the AIFM, to provide investment
advice to the Company in respect of the assets of the Company and to provide
the day-to-day management of those investments.
GSC receive a further £75,000 in addition to its fee outlined in the Advisory
and Services Agreement. This is to cover the incremental cost of providing
additional services as AIFM.
Under the terms of the Management Agreement, the Investment Manager is
entitled to receive from the Company an advisory fee payable quarterly in
arrears calculated at the rate of a quarter of one per cent of Adjusted Net
Asset Value minus "Uncommitted Cash", where uncommitted Cash means cash that
has not been allocated for repayment of a liability on the balance sheet of
any member of the Group. Adjusted Net Asset Value means Net Asset Value,
minus cash on the Company balance sheet.
The Investment Manager is also entitled to a performance fee calculated by
reference to the movements in the Net Asset Value (before subtracting any
accrued performance fee) which is linked to gross proceeds raised on the
Company's IPO plus a 7% hurdle, and is set out in the Prospectus dated 29
March 2022.
During the year, the Management Agreement was amended to:
- change the term of adjusted NAV to mean net asset value minus uncommitted
cash. Uncommitted cash means all cash on the Company's balance sheet other
than committed cash. Committed cash means cash that has been allocated for
repayment of a liability on the balance sheet of any member of the group.
an additional fixed fee payable quarterly in advance with effect from 1
October 2020 to the Investment Manager of £50,000 per annum to support the
administrative and accounting function, plus an additional per asset fee of
£6,000 per annum in respect of each energy storage project held by the group
beginning with (and including) the tenth energy storage project, calculated
and payable quarterly in arrear with effect from 1 October 2020 and based on
the number of energy storage assets held by the Group at each quarter end.
a fixed fee of £10,382.97 per month payable monthly in arrear with
effect from 1 October 2020 to Investment Manager for the provision of
corporate services. Corporate services are defined in the side letter and is
in relation to supporting the execution of investment transactions and
managing third party advisors, a short-term fee for development and management
of assets through to completion of construction, for a maximum term of one and
one-half years.
In addition, the following changes to the management agreement were
implemented with fees being payable to the Investment Manager by each
respective subsidiary:
During the period, the Investment Manager and Company entered into a
Commercial Management Agreement for the provision of the Construction Services
and the Operational Services. The Investment Manager shall be entitled to
receive a fixed fee of £110,750 per Development Project per annum (the
"Construction Services Fee"), for a maximum term of 1.5 years in respect of
each Development Project and in respect of the Operational Services to be
provided by the Commercial Manager pursuant to this Agreement, the Commercial
Manager shall be entitled to receive a fixed fee of £20,000 per Operational
Asset per annum, save for the Ancala Assets in respect of which the fixed fee
shall be £6,000 per annum.
The Depositary
Indos Financial Limited are the Depositary to the Company.
The Administrator
Sanne Group Administration Services (UK) Limited ("Sanne") is Administrator to
the Company.
During the year ended 31 March 2022, as Administrator, Sanne on behalf of the
Directors, was responsible for the maintenance of the books and records, the
management and financial accounts, the management of all cash movements of the
Company and the calculation, in conjunction with the Investment Manager, of
the Net Asset Value of the Company.
The Company Secretary
JTC (UK) Limited ("JTC") are Company Secretary to the Company. As Company
Secretary, JTC is responsible for regulatory compliance and providing support
to the Board's corporate governance process and its continuing obligations. In
addition, JTC is responsible for liaising with the Company, the Investment
Manager, and the Registrar in relation to the payment of any dividends, as
well as general secretarial functions required by the Companies Act.
Member Board Audit Committee Management Engagement Committee Remuneration and Nomination Committee
Patrick Cox 4/4 2/2 1/1 1/1
Caroline Banszky 4/4 2/2 1/1 1/1
Malcolm King 4/4 2/2 1/1 1/1
Thomas Murley 4/4 2/2 1/1 1/1
Meetings and attendance
The Board meets formally on a quarterly basis. The table above gives the
names of all of the Directors who served during the year and shows each
individual Director's attendance at the scheduled board and committee meetings
for which they were eligible to attend during the year.
We also had 14 ad hoc meetings which are generally called to approve special
announcements, transactions or share issues that have taken place throughout
the year. JTC attend all our meetings as Secretary to the Board. In
addition, we invite representatives of the Investment Manager, our Independent
Auditor, and other advisors to attend as required.
The Board Agenda
At our quarterly meetings, the Board follows a formal agenda. This agenda
generally includes, amongst other things:
The Investment Manager's report for the period, including strategic
performance and acquisitions, a review of the performance of the investments,
operator performance and market conditions.
The AIFM report for the period, including discussion of risk.
Reviewing the risk register and considering internal controls.
The Depositary Report for the period.
Financial results against budget and cash flow forecasts, including dividends
declared and forecast.
Reports and updates on shareholder and investor communications.
The Corporate Governance and Secretary's Report, with a review of policies and
procedures, a compliance report, and an update on legislative/regulatory
obligations as appropriate.
Recommendations and updates from the Board committees as appropriate.
Key Activities of the Board during 2021/2022
The primary focus at regular Board meetings has been on delivering the
strategy and monitoring performance against our strategic objectives (see the
Strategic Report on pages 35-37 for more details). This included:
• Considering capital structure.
• Raising additional equity.
• Discussing and approving portfolio acquisitions.
• Reviewing conflicts of interest register and significant
shareholdings.
• Reviewing the Risk Register.
• Reviewing and approval of the quarterly NAV and dividend.
• Approval of the interim report.
• Monitoring performance of investments, risks, and market
conditions.
• Review of financial results against budget and cash flow forecasts
including dividends declared and forecast.
• Monitoring the situation with regards to COVID-19.
• Monitoring the impact of the Russia/Ukraine conflict.
The Board of Directors
Patrick Cox (Chair)
Mr Cox has significant board experience and is currently, a member of the
Appointment Advisory Committee for the European Investment Bank, Chair of
Ecocem Ltd., a non-executive director of Supernode Ltd and of Gresham House
Ireland Asset Management Ltd. He also sits on the Boards of various think
tanks and not-for- profit organisations, including as a Senior Fellow and
Board Member of the Institute for International and European Affairs, Ireland,
a Board Member of the Third Age Foundation Ireland. He was formerly the Chair
of the Public Interest Committee for KPMG Ireland until December 2020. Mr Cox
was President of the European Parliament from 2002 to 2004 and leader of its
Liberal Democrat Group from 1998 to 2002 and served as a Member of the
European Parliament for Munster, Ireland, from 1989 to 2004. He is the
European Coordinator for the Scandinavian- Mediterranean TEN-T Core Network
Corridor, appointed by the European Commission, and leader of a parliamentary
reform programme with Ukraine, appointed by the European Parliament. He has
been bestowed with National Honours by Presidents of Austria, Bulgaria,
Estonia, Italy, Latvia, Lithuania, Poland, and Romania, and is a Commander of
the Legion of Honour, France. He is a graduate of Trinity College, Dublin and
holds Honorary Doctorates from Trinity College Dublin, the National University
of Ireland, the University of Limerick, the Open University, and the American
College Dublin.
Mr Cox was appointed on 22 February 2018 and has been a director for 4 years
and 1 month. He sits on the Remuneration & Nomination Committee, the Audit
Committee, and the Management Engagement Committee.
Ms Caroline Banszky
Ms Banszky is currently a non-executive director of 3i Group plc, where she is
the Chairman of the Audit and Compliance Committee and a member of the
Remuneration Committee, and a non-executive director of IntegraFin Holdings
plc where she is Chairman of the Audit and Risk Committee. In addition, she
is a director of the Benefact Trust Limited and a member of their Finance
& Investment Committee, a director of the UK Stem Cell Foundation S and a
member of the Investment Sub-Committee of The Open University. Formerly the
Chief Executive of The Law Debenture Corporation plc., from 2002 to 2016, she
was also Chief Operating Officer of SVB Holdings plc (now Novae Group plc),
then a Lloyd's listed integrated vehicle, from 1997 to 2002 and Finance
Director of N.M. Rothschild & Sons Limited from 1995 to 1997, having
joined the bank in 1981. She originally trained at what is now KPMG. Ms
Banszky was appointed on 22nd February 2018 and has been a director for 4
years and 1 month. She is the Chair of the Audit Committee sits on the
Remuneration & Nomination Committee, and the Management Engagement
Committee.
Malcolm King
Mr King has had a varied career in financial services, including over 30 years
in investment management. For 10 years Mr King was the investment manager at
Finsbury Asset Management where he was responsible for the investments of
seven investment trusts. Subsequently he moved to J O Hambro Capital
Management where he was director and investment manager of two investment
trusts and a number of other portfolios. From 2004 until 2016, Mr King
worked at Investec Asset Management where he was the co-manager of various
multi-asset funds invested in internal and external funds, including
closed-ended funds. A Chartered Accountant, having trained at Peat, Marwick
& Mitchell (now KPMG), he is currently a non-executive director of Ecofin
Global Utilities & Infrastructure Trust plc and a former non-executive
director of Henderson Opportunities Trust. He writes regularly for MoneyWeek
as well as having a number of unpaid commitments.
Mr King is an economics graduate of Trinity College, Cambridge.
Mr King was appointed on 22 February 2018 and has been a director for 4 years
and 1 month. He sits on the Remuneration & Nomination Committee, the
Audit Committee, and the Management Engagement Committee.
Thomas Murley
Mr Murley has been involved in investing in renewable energy projects for over
25 years in both Europe and the United States. From 2004 to 2016 Mr Murley
was a director at HgCapital, a London-based private equity firm, where he
established its renewable energy investment fund business which raised and
invested over US$1 billion in equity in over 70 EU wind, solar, biomass and
hydroelectric projects. From 2016 to 2018 Mr Murley continued to act as
Chairman and Senior Advisor to the HgCapital Renewable Energy team, which spun
out of HgCapital in December 2017 and is now trading as Asper Investment
Management, serving on investment and portfolio committees. In 2012 Mr
Murley was appointed as a non-executive director to the inaugural board of the
UK Green Investment Bank, where he also served on the investment committee.
Mr Murley remained on the Board until the privatisation of the Green
Investment Bank in August 2017. In October 2016 he was appointed as an
independent non-executive director of Ameresco Inc., a renewable energy and
energy efficiency company listed on the New York Stock Exchange. Mr Murley
also serves as an independent investment committee member for two private
renewable energy investment funds, one based in New York and the other in
Amman, Jordan. From 1993-2003 Mr Murley was a lawyer and later Managing
Director of EIF Group in Boston Massachusetts, one of the first energy
infrastructure funds, where he was responsible for equity investments and
renewable and conventional power projects. Mr Murley has a degree in
History from Northwestern University in Evanston, Illinois, and a Law Degree,
with honours, from Fordham University in New York.
Mr Murley was appointed on 22 February 2018 and has been a Director for 4
years and 1 month. He sits on the Remuneration & Nomination Committee,
the Audit Committee and the Management Engagement Committee.
The Investment Committee
Frank Wouters is a director of the Investment Manager. He is Senior Vice
President New Energy at Reliance Industries and heads the EU Clean Energy
Technology Network from Abu Dhabi. Mr Wouters was recently the Deputy
Director General of the International Renewable Energy Agency ("IRENA").
IRENA is an intergovernmental organisation that supports governments in their
transition to a sustainable energy future. Prior to IRENA, Mr. Wouters was the
Director of the Clean Energy Unit at Masdar, a subsidiary of Mubadala, one of
Abu Dhabi's sovereign wealth funds. During his tenure as Director of the
Masdar Clean Energy Unit, Mr Wouters led the development and construction of
renewable energy projects worth more than US$3 billion, including a solar
plant in Abu Dhabi, three in Spain and the London Array, the largest offshore
wind park in the world. He received his MSc in Mechanical Engineering from
Delft University of Technology.
Suminori Arima, the Chief Investment Office (CIO) at the Investment Manager,
is a former Managing Director of RHJ International in Japan and London, and of
Kleinwort Benson in London. RHJ International was a parent company of
Kleinwort Benson and was a publicly listed private equity business spun off
from Ripplewood Holdings. Since Suminori joined Ripplewood in 2002, he has
gained over 20 years' experience in private equity, including various large
investments and divestments. He was also a board member of various public
and private companies. Prior to joining Gore Street Capital, Suminori had
been engaged in various investment activities in solar and wind (on-shore and
off-shore) in Europe. He has a Masters in Finance from Princeton University
and a BA in Economics from the University of Tokyo.
Alex O'Cinneide is CEO and Chair of the Investment Committee of Gore Street
Capital, a business he founded in 2015. Prior to this he was Managing
Director and Head of Europe for Paladin Capital, a Senior Advisor to Kleinwort
Benson Bank, and served on the Investment Committee of IndoChina Capital; and
from 2006 to 2013 was Head of Investments for Masdar, Abu Dhabi's USD15
billion sovereign wealth fund. From 2006 to 2012, Masdar invested in the
largest off-shore wind farm in the world, owning 20 per cent. Of the 1GWp
London Array project in a joint venture with E>ON UK and Dong; China's
largest non-SOE wind developer (over a GWp of active projects); a range of PV
and CSP plans in both Europe and the US, including 40 per cent. of a EUR1.76
billion investment in Torresol Energy devoted to the construction of three CSP
plants in Spain; Acciona Solargenix CSP plants (over 60MW) in the US; and
waste-to- energy plants in both the US and Europe, as well as a range of
growth equity positions in new technology companies located globally.
Alongside those commercial activities he is a trustee of the London Irish
Centre, a UNICEF Advisor, is an Associate Researcher to the Energy Policy
Group in Cambridge University, a Fellow of the Royal Geographical Society and
an Honorary Research Fellow of Imperial College London. Alex O'Cinneide holds
a MA from Trinity College Dublin, a MSc from the London School of Economics, a
MSc from the London Business School and a PhD from Trinity College Dublin on
Energy Policy.
Frank Wouters is a director of the Investment Manager. He is Senior Vice
President New Energy at Reliance Industries and heads the EU Clean Energy
Technology Network from Abu Dhabi. Mr Wouters was recently the Deputy
Director General of the International Renewable Energy Agency ("IRENA").
IRENA is an intergovernmental organisation that supports governments in their
transition to a sustainable energy future. Prior to IRENA, Mr. Wouters was the
Director of the Clean Energy Unit at Masdar, a subsidiary of Mubadala, one of
Abu Dhabi's sovereign wealth funds. During his tenure as Director of the
Masdar Clean Energy Unit, Mr Wouters led the development and construction of
renewable energy projects worth more than US$3 billion, including a solar
plant in Abu Dhabi, three in Spain and the London Array, the largest offshore
wind park in the world. He received his MSc in Mechanical Engineering from
Delft University of Technology.
Suminori Arima, the Chief Investment Office (CIO) at the Investment Manager,
is a former Managing Director of RHJ International in Japan and London, and of
Kleinwort Benson in London. RHJ International was a parent company of
Kleinwort Benson and was a publicly listed private equity business spun off
from Ripplewood Holdings. Since Suminori joined Ripplewood in 2002, he has
gained over 20 years' experience in private equity, including various large
investments and divestments. He was also a board member of various public
and private companies. Prior to joining Gore Street Capital, Suminori had
been engaged in various investment activities in solar and wind (on-shore and
off-shore) in Europe. He has a Masters in Finance from Princeton University
and a BA in Economics from the University of Tokyo.
Alex O'Cinneide is CEO and Chair of the Investment Committee of Gore Street
Capital, a business he founded in 2015. Prior to this he was Managing
Director and Head of Europe for Paladin Capital, a Senior Advisor to Kleinwort
Benson Bank, and served on the Investment Committee of IndoChina Capital; and
from 2006 to 2013 was Head of Investments for Masdar, Abu Dhabi's USD15
billion sovereign wealth fund. From 2006 to 2012, Masdar invested in the
largest off-shore wind farm in the world, owning 20 per cent. Of the 1GWp
London Array project in a joint venture with E>ON UK and Dong; China's
largest non-SOE wind developer (over a GWp of active projects); a range of PV
and CSP plans in both Europe and the US, including 40 per cent. of a EUR1.76
billion investment in Torresol Energy devoted to the construction of three CSP
plants in Spain; Acciona Solargenix CSP plants (over 60MW) in the US; and
waste-to- energy plants in both the US and Europe, as well as a range of
growth equity positions in new technology companies located globally.
Alongside those commercial activities he is a trustee of the London Irish
Centre, a UNICEF Advisor, is an Associate Researcher to the Energy Policy
Group in Cambridge University, a Fellow of the Royal Geographical Society and
an Honorary Research Fellow of Imperial College London. Alex O'Cinneide holds
a MA from Trinity College Dublin, a MSc from the London School of Economics, a
MSc from the London Business School and a PhD from Trinity College Dublin on
Energy Policy.
Information on the Investment Manager
The Company has appointed Gore Street Capital Limited as the Company's
investment manager, which is authorised and regulated by the UK's Financial
Conduct Authority as a full scope Alternative Investment Fund Manager (the
"Investment Manager").
The Investment Manager was formed in 2015 as a platform to acquire, develop
and manage global renewable energy assets. It is headquartered in the UK and
comprises a strong team of investment professionals with significant
experience in sourcing, structuring, and managing large renewable energy
projects globally. The Investment Manager was the first to deploy
privately-owned large-scale battery projects in Great Britain.
The Investment Manager is responsible for deal origination, execution, and
asset management of the portfolio in accordance with the Company's investment
objectives and policy. The Board has delegated authority to the AIFM to
acquire or dispose of assets without seeking further approval from the Board
provided that the Board is given the opportunity to consider each acquisition
or disposal before it is concluded.
Once a potential project which falls within the Company's investment policy
has been identified, and the Investment Manager wishes to proceed with the
acquisition of such project, its Investment Committee approval is required to
confirm that financial, legal, and technical diligence suggests that the
proposed transaction is consistent with the Company's investment policy.
Approach to risk management and internal control
The Directors acknowledge their responsibility for maintaining the Company's
system of internal control and risk management, in order to safeguard the
Company's assets. The Board review the reports on the internal controls of the
Company's key service advisers which identify the risk management systems in
place for assessing, managing, and monitoring risks applicable to such service
advisers. This system is designed to identify, manage, and mitigate the
financial, operational and compliance risks that are inherent to the Company,
and to manage rather than eliminate the risk of failure to achieve business
objectives. As such, it can only provide reasonable, but not absolute,
assurance against material misstatement or loss.
As part of each quarterly Board meeting during the period, the Directors
reviewed the financial position of the Company and assessed any risks in
relation to the Company's business model and the Company's future performance,
liquidity, and solvency. To facilitate this process the Investment Manager
produced financial reports, which included the latest management accounts, a
review and report on the Company's financial model, substantiation of any
dividend payments and a general update on the financial health of the Company.
The Board considered whether the Company should employ an internal audit
function during the period and concluded that, due to the Company's structure,
the nature of its activities, and taking into account the controls already in
place and, more particularly, the external service already provided by the
Administrator and the Manager, an internal audit function was not necessary.
As part of the internal risk review, we identified that whilst the
Administrator has its own internal audit performed on an annual basis, from
which the Company reviews any findings and takes particular comfort, the
Company should also independently assess whether these controls are sufficient
and if they operate effectively.
Internal Control
Although the Board is ultimately responsible for safeguarding the assets of
the Company, the Board has delegated, through written agreements, the
day-to-day operation of the Company (including the Financial Reporting Process
to the following key service advisers):
Investment Manager: Gore Street Capital Limited
Administrator: Sanne Group (UK) Limited
Company Secretary: JTC (UK) Limited
The Board keeps under review the effectiveness of the systems of internal
control and risk management, ensuring that the procedures to be followed by
the advisers and themselves are in place to ensure that the controls remain
relevant and were in operation throughout the year.
The Company's principal risks and uncertainties are detailed on pages 79-89 of
this report. As further explained in the Audit Committee Report, the risks
of the Company are outlined in a risk matrix which was reviewed and updated
during the period. The Board continually reviews its policy setting and
updates the risk matrix at least annually to ensure that procedures are in
place with the intention of identifying, mitigating, and minimising the impact
of risks should they crystallise. The Board relies on reports periodically
provided by the Investment Manager regarding risks that the Company faces.
As part of its regular risk assessment procedures, the Board reviews reports
on the conclusions of any testing carried out by the auditors, and takes
account of environmental, social and governance matters related to the
business of the Company. The Board has identified and assessed the ESG risks
to the Company's short and long-term value, as well as the opportunities to
enhance value that may arise from an appropriate response. Further
information on the Company's approach to ESG can be found on pages 73-79.
When required, experts, including tax and legal advisors, are employed to
gather information and advise the Board. The Board also regularly monitors
the investment environment and the management of the Company's portfolio, and
applies the principles detailed in the internal control guidance issued by the
Financial Reporting Council ("FRC"). The principal features of the internal
control systems which the Investment Manager and the Administrator have in
place in respect of the Company's financial reporting include:
• Internal reviews of all financial reports.
• Review by the Board of financial information prior to its publication.
• Authorisation limits over expenditure incurred by the Company.
• Review of valuations.
• Authorisation of investments.
Whistleblowing Policy
The Board has considered the UK Code recommendations in respect of
arrangements by which staff of the Investment Manager, Company Secretary or
Administrator may, in confidence, raise concerns within their respective
organisations about possible improprieties in matters of financial reporting
or other matters. It has concluded that adequate arrangements are in place
for the proportionate and independent investigation of such matters and, where
necessary, for appropriate follow up action to be taken within their
organisation.
Relations with Shareholders
The Company places great importance on communication with its Shareholders and
welcomes the views of Shareholders. The Investment Manager is available at all
reasonable times to meet with principal Shareholders and key sector
analysts. The Chair, the Senior Independent Director and other Directors are
also available to meet with Shareholders if requested or required. All
Shareholders have the opportunity to put questions to the Company at the
registered address.
The Company's AGM is scheduled to be held on 20 September 2022 and notice of
the meeting is published accompanying the Annual Report and Accounts. The
Company will notify shareholders of any changes to the proposed format for the
AGM as soon as possible via a RIS and its website (www.gsenergystoragefund.com
(http://www.gsenergystoragefund.com) )
The Board receives comprehensive Shareholder reports from the Company's
Registrar and regularly monitors the views of Shareholders and the Shareholder
profile of the Company. The Board is also kept fully informed of all
relevant market commentary on the Company by the Investment Manager.
Shareholders may also find Company information or contact the Company through
its website:
www.gsenergystoragefund.com (http://www.gsenergystoragefund.com)
The terms of reference of the Committees and the conditions of appointment of
non-executive directors are available to Shareholders on request.
Patrick Cox
Director
Date: 25 July 2022
Audit Committee's Report
The Audit Committee (the Committee) is chaired by Caroline Banszky and
comprises all the Directors. The Committee operates within clearly defined
terms of reference and includes all matters indicated by Rule 7.1 of the UK
FCA's DTRs and the AIC Code. The terms of reference were reviewed during the
year under review and were updated to enhance the Committee's scope to
consider key risks facing the Company. The Board is satisfied that the
Committee is properly constituted with at least one member of the Committee
who is a chartered accountant with recent and relevant financial experience.
The Committee plays an important role in the governance of the Company, with
its principal activities focused on the integrity of financial reporting,
quality and effectiveness of external audit, risk management and the system of
internal control.
The Committee meets a minimum of twice a year, and at such other times as the
Committee shall require. The Administrator and representatives of the
Investment Manager may be invited to attend meetings as and when deemed
appropriate.
Meetings
We met two times during the financial year ended 31 March 2022. These
meetings were attended by the committee members, as well as representatives of
the Investment Manager, Gore Street Capital Limited, the Company Secretary,
JTC (UK) Limited, the Independent Auditor, Ernst & Young LLP, and the
independent valuer BDO LLP.
The Audit Committee operates within clearly defined terms of reference which
are reviewed on an annual basis and approved by the Board. The terms of
reference include all matters indicated by Disclosure Guidance and
Transparency Rule 7.1 and the AIC Code.
Third parties are invited to attend meetings as and when deemed appropriate.
Summary of the Role and Work of the Audit Committee
The function of the Committee is to ensure that the Company maintains the
highest standards of integrity, financial reporting, internal and risk
management systems, and corporate governance. The main duties of the Audit
Committee are:
1. Monitoring the integrity of the financial statements of the
Company and any formal announcements relating to the Company's financial
performance and reviewing significant financial reporting judgements contained
in them.
2. Reporting to the Board on the appropriateness of the Board's
accounting policies and practices including critical judgement areas and going
concern and the viability statements.
3. Reviewing the valuation of the Company's investments prepared by
the Investment Manager and their underlying assumption, we review the work of
the independent valuer BDO LLP bi-annually prior to making a recommendation to
the Board on the valuation of the Company's investments.
4. Meeting regularly with the Auditor to review their proposed audit
plan and the subsequent audit report and assess the effectiveness of the audit
process and the levels of fees paid in respect of both audit and non-audit
work.
5. Making recommendations to the Board in relation to the
appointment, re-appointment, or removal of the Auditor, and approving their
remuneration and the terms of their engagement.
6. Monitoring and reviewing annually the Auditor's independence,
objectivity, expertise, resources, qualification, and non-audit work.
7. Reviewing the effectiveness of the accounting and internal control
systems of the Company and considering annually whether there is a need for
the Company to have its own internal audit function.
8. Reviewing and considering the UK Code, the AIC Code, the FRC
Guidance on Audit Committees and the Company's institutional investors'
commitment to the UK Stewardship code; and
9. Reviewing the risks facing the Company and monitoring the risk
matrix.
The Audit Committee is required to report formally to the Board on its
findings after each meeting on all matters within its duties and
responsibilities.
Overview
During the year, the Audit Committee has had regular contact and meetings with
the Investment Manager, the Administrator, and the Independent Auditor.
These meetings and discussions focused on, but were not limited to:
A detailed analysis of the Company's half year and interim
NAVs.
Reviewing the risk matrix of the Company.
Reviewing the Company's corporate governance framework.
Reviewing the internal controls framework for the Company, and
those of the Administrator and the Investment Manager with respect to the
Company.
Considering the ongoing assessment of the Company as a
going concern.
Considering the principal risks which took into consideration
the effects of the Covid-19 pandemic and period of assessment for the
longer-term viability of the Company.
Reviewing the detailed stress tests for the viability of the
Company to ensure that going concern basis is appropriate.
Monitoring compliance with AIFMD, the AIC code and other
regulatory and governance frameworks.
Reviewing and approving the audit plan in relation to the audit of
the Company's Annual Report and financial statements.
Considering the impact of the Russian invasion of Ukraine.
Financial Reporting
The primary role of the Committee in relation to financial reporting is to
review with the Investment Manager and the Administrator the appropriateness
of the half-year report and Annual Report and financial statements,
concentrating on, amongst other matters:
• The quality and acceptability of accounting policies and
practices.
• The clarity of the disclosures and compliance with financial
reporting standards and relevant financial and governance reporting
requirements. The Committee reviewed the disclosures related to the technical
infringement of the Company's Act 2006 and proposed remedial actions, as
described on page 34-35 of the Chair Statement and notes 21 and 24 of the
financial statements.
• Amendments to legislation and corporate governance reporting
requirements and accounting treatment of new transactions in the year.
• The impact of new and amended accounting standards on the
Company's financial statements.
• Whether the Audit Committee believes that proper and appropriate
processes and procedures have been followed in the preparation of the half
year report and Annual Report and financial statements.
• Whether the Annual Report and financial statements, taken as a
whole, are fair, balanced, and understandable and provides the information
necessary for Shareholders to assess the Company's performance, going concern,
viability, business model and strategy.
• Material areas in which significant judgements and estimates have
been applied or there has been discussion with the Auditor; and
• Any correspondence from regulators in relation to the Company's
financial reporting.
Significant Issues
The Audit Committee discussed the planning, conduct and conclusions of the
external audit as it proceeded. At the Audit Committee meeting in advance of
the year end, the Audit Committee discussed and approved the Independent
Auditor's audit plan. The Audit Committee considered:
• the more bespoke disclosure regarding the assessment of going
concern and long-term viability for the required statements by the Board which
took into consideration the effects of Covid-19 pandemic and having completed
the assessment do not consider it to be a key area of risk for the Company;
and
• identified the carrying value of investments as a key area of risk
of misstatement in the Company's financial statements.
Assessment of the Carrying Value of Investments
The Company's accounting policy is to designate investments at fair value.
As a consequence, the Committee reviewed valuation policies processes and
application. The most influential area of judgement within the Accounts
relates to the valuation of these investments. The key estimates and
assumptions include the useful life of the assets, revenue estimates, the
discount factors utilised, the rate of inflation, and the price at which the
power and associated benefits can be sold. In particular, the Audit Committee
challenged the appropriateness of the discount rate used and carefully
considered the impact of the macro-economic and industry related factors on
Income recognition and associated assumptions in relation to the valuation of
the assets that have been included in the 31 March 2022 valuation. At the
year end, the Company engaged BDO as independent valuation experts/advisors to
help the committee form a view as to the reasonableness as to the valuations.
The uncertainty involved in determining the fair value of investment
valuations represents a significant risk in the Company's financial
statements. An inherent risk of management override is present as the
Investment Manager's fee is calculated based on NAV (as disclosed in the
financial statements). The Investment Manager is responsible for calculating
the NAV with the assistance of the Administrator, prior to approval by the
Board.
On a quarterly basis, the Investment Manager provides a detailed analysis of
the NAV. This analysis highlights any movements and assumption alterations
to the NAV of the previous quarter. NAV movements and the principles behind
changes in assumptions are considered and challenged by the Chair of the Audit
Committee and subsequently approved by the Board. The Audit Committee is
satisfied that the key estimates and assumptions used within the valuation
model are appropriate and that the investments have been fairly valued.
Internal Control
The Audit Committee has established a set of ongoing processes with a view to
satisfying particular needs of the Company with respect to managing the risks
to which it is exposed. The process is one whereby the Investment Manager
has identified the key risks to which the Company is exposed and recorded them
on a risk matrix together with the controls employed to mitigate these
risks. The Audit Committee is responsible for reviewing the risk matrix and
associated controls before recommending to the Board for consideration and
approval. The Audit Committee is also responsible for challenging the
Investment Manager's assumptions to ensure a robust internal risk management
process. By their nature, these procedures provide a reasonable, but not
absolute, assurance against material misstatement or loss. Regular reports
are provided to the Audit Committee highlighting material changes to risk
ratings.
The Audit Committee discussed and reviewed the internal controls in place at
the Investment Manager and the Administrator. Discussions were centered
around assurances at operational level; internal oversight; and independent
objective assurance.
The Audit Committee concluded that these frameworks were appropriate for the
identification, assessment, management, and monitoring of financial,
regulatory and other risks, with particular regard to the protection of the
interests of the Company's Shareholders.
Internal Audit
The Audit Committee considers at least once a year whether or not there is a
need for an internal audit function. Currently it does not consider there to
be a need for an internal audit function, given that there are no employees in
the Company and all outsourced functions are with parties who have their own
internal controls and procedures. In light of the growing portfolio of
assets under management the requirement for an internal audit function is
under active discussion and review with the Investment Manager.
External Auditor
Effectiveness of the Audit Process
The Audit Committee assessed the effectiveness of the audit process by
considering Ernst & Young LLP's fulfilment of the agreed audit plan.
This assessment included the review of reporting presented to the Audit
Committee by Ernst & Young LLP and the discussions at the Audit Committee
meeting, highlighting such issues that arose during the course of the audit.
In addition, the Audit Committee also sought feedback from the Investment
Manager and the Administrator on the effectiveness of the audit process. For
this financial period, the Audit Committee was satisfied that there had been
appropriate focus and challenge on the primary areas of audit risk and
assessed the quality of the audit process to be good.
Non-Audit Services
The Audit Committee seeks to ensure that any non-audit services provided by
the Independent Auditor do not conflict with their statutory and regulatory
responsibilities, as well as their independence, before giving written
approval prior to their engagement.
The Audit Committee has a policy regarding the provision of non-audit services
by the external Auditor which precludes the Independent Auditor from providing
any of the prohibited non-audit services as specified in the FRC Revised
Ethical Standard 2019. The Audit Committee monitors the Company's
expenditure on non-audit services provided by the Independent Auditor, who
should be engaged for non-audit services in circumstances where they are
deemed to be the most commercially viable supplier, and prior approval of the
Audit Committee has been sought. During the year, the only non-audit service
provided by EY was their review of the half year accounts/financial
statements. The Audit Committee was satisfied that the provision of these
Non-Audit Services did not provide threats to the Independent Auditors'
independence.
Independence
The Audit Committee is required to consider the independence of the external
Auditor. In fulfilling this requirement, in addition to its own internal
assessment, the Audit Committee has considered a report from Ernst & Young
LLP describing its arrangements to identify, report and manage any conflict of
interest and the extent of non-audit services provided by them. The Audit
Committee has concluded that it considers Ernst & Young LLP to be
independent of the Company.
Auditor's Tenure
The Auditor is required to rotate the audit partner every five years. The
current partner is in her fourth year of tenure. There are no contractual
obligations restricting the choice of external auditor and the Company will
consider putting the audit services contract out to tender at least every ten
years. In line with the FRC's recommendations on audit tendering, this will
be considered further when the audit partner rotates every five years. Under
the Companies Act, the reappointment of the external Auditor is subject to
shareholder approval at the AGM.
Having carried out the review described above and having satisfied itself that
the Auditor remains independent and effective, the Audit Committee has
recommended to the Board that Ernst & Young LLP be reappointed as Auditor
for the year ended 31 March 2023.
Annual General Meeting
The Chair of the Committee will be present at the Company's AGM to answer
questions on the Audit Committee's activity and matters within the scope of
the Audit Committee's responsibilities.
Fair, Balanced and Understandable Statements
The production and audit of the Company's Annual report and accounts is a
comprehensive process, requiring input from a number of contributors. To reach
a conclusion on whether the Company's annual report and accounts, taken as a
whole, are fair, balanced, and understandable, as required under the AIC Code,
the Board requested that the Audit Committee advise on whether we considered
that the Annual Report fulfilled these requirements.
In outlining our advice, we considered the detailed reviews undertaken at
various stages of the production process by the Investment Manager, third
party independent valuer, BDO LLP, Administrator and the Audit Committee,
which are intended to ensure consistency and overall balance. We then
discussed with the Investment Manager and Administrator the process of how
this was put together and received a series of drafts of the Company's Annual
report and accounts. These were scrutinised and discussed thoroughly at an
Audit Committee meeting. Additional comfort was also sought from the
Investment Manager and Administrator in relation to the conclusion reached by
the Board.
As a result of the work performed, we have concluded and reported to the Board
that the Annual Report and accounts for the period ended 31 March 2022, taken
as a whole, are fair, balanced, and understandable and provides the
information necessary for Shareholders to assess the Company's performance,
business model and strategy.
Effectiveness of the committee
A detailed and rigorous evaluation of the Committee was undertaken as part of
the overall evaluation of the Board and its committees. The skills and
experience of the members was found to appropriate, including recent and
relevant financial experience. The Committee will be concentrating on
personal development and training as the regulatory focus on audit and Audit
Committees increases. The Committee was found to be functioning effectively.
Caroline Banszky
Chair of the Audit Committee
Date: 25 July 2022
Remuneration & Nomination Committee Report
The Board has prepared this report in line with the AIC Code as well as the
requirements of the Large and Medium-sized Companies and Groups (Accounts and
Reports) Regulations 2008 (SI2008/410) and the Companies Act 2006.
Under the requirements of Section 497 of the Companies Act 2006, the Company's
Auditor is required to audit certain disclosures contained within the
report. These disclosures have been highlighted and the audit opinion
thereon is contained within the Auditor's Report on pages 114-119.
Annual Statement from the Chair of the Remuneration & Nomination Committee
The Committee comprises of the full Gore Street Energy Storage Fund Plc Board
with Pat Cox as Chair and consists solely of non-executive directors. The
Committee has responsibility for reviewing the remuneration of the Directors,
specifically reflecting the time commitment and responsibilities of the role
and meets at least annually. The Committee also undertakes external
comparisons and reviews to ensure that the levels of remuneration paid are
broadly in line with industry standards and members have access to independent
advice where they consider it appropriate.
We concluded that there is no need to change the remuneration policy this
year, the policy being approved in 2019 and will be put a shareholder vote at
the 2022 AGM as part of the regulatory three yearly approval process.
In accordance with the Articles and the AIC Code, we considered the current
levels of remuneration and whether they reflect the time commitment and
responsibilities the Company calls for. During the year neither the Board
nor the Committee has been provided with external advice of services by any
person but has received industry comparison information from the Company
Secretary in respect of Directors' remuneration. The remuneration policy set
by the Board is described below. Individual remuneration packages are
determined by the Remuneration and Nomination Committee within the framework
of the remuneration policy. The Directors are not involved in deciding their
own individual remuneration with each Director abstaining from voting on their
own remuneration.
At the end of the preceding year the Committee undertook a benchmarking
exercise of directors' remuneration across the Company's peer group and
considered the current level of remuneration for each individual board
member. It was agreed that directors' remuneration should increase in line
with the increased capitalisation of the Company up to a maximum
capitalisation of £100m to bring the directors remuneration in line with
market rates and the remuneration set out in the Prospectus at IPO from which
the directors had taken a temporary reduction to reflect the reduced market
capitalisation of the Company. The Committee decided in March 2021 that as
directors had received increases during the year to match the reflected growth
of the Company, any further additional increase was not appropriate at this
time and that no additional uplift would be made until such time as further
growth of substance had been achieved.
Remuneration Policy
Below is the Company's remuneration policy. This policy was adopted on 14
August 2019 and will next be put to a Shareholder vote at the 2022 AGM as part
of the regulatory three yearly approval process.
Policy
The Company's policy is to determine the level of Directors' fees with due
regard to the experience of the Board as a whole, the time commitment
required, and to be fair and comparable to non-executive directors of similar
companies. The Company may also periodically choose to benchmark Directors'
fees with an independent review to ensure they remain fair and reasonable.
Directors' fees will be adjusted from time to time and will be subject to
Shareholder approval in the subsequent AGM. The Directors may elect to apply
the cash amount equal to their annual fee to subscribe for, or to purchase,
Ordinary Shares. The Directors are entitled only to their annual fee and
their reasonable expenses. No element of the Directors' remuneration is
performance related, nor does any Director have any entitlement to pensions,
share options or any long-term incentive plans from the Company.
The Directors hold their office in accordance with the Articles of Association
and their appointment letters. No Director has a service contract with the
Company, nor are any such contracts proposed. The Directors' appointments
can be terminated in accordance with the Articles of Association and without
compensation. Under the Company's Articles of Association, all Directors are
entitled to remuneration determined from time to time by the Board and
approved by the Shareholders.
DIRECTORS' REMUNERATION REPORT
Details of Directors' Remuneration (Audited)
The emoluments in respect of qualifying services of each person who served as
a Director during the period are shown below. All the Directors are paid a
basic annual fee of £40,000 quarterly in arrears for their services. In
addition to this fee, Pat Cox is paid an additional £17,500 per annum for his
role as Chair of the Board. Caroline Banszky is paid an additional £5,000
per annum for serving as Chair of the Audit committee. No Director has
waived or agreed to waive any emoluments from the Company in the current
year. No other remuneration was paid or payable by the Company during the
current period, nor were any expenses claimed by or paid to them other than
for expenses incurred wholly, necessarily and exclusively in furtherance of
their duties as Directors of the Company.
The remuneration levels for the Directors were set at the time of IPO in May
2018 at a reduced level to reflect the £30million of equity raise. As the
market capitalisation of the Company has grown during the year the Directors'
remuneration was reviewed and increased to reflect the current market
capitalisation (capped at £100million) to realign the Directors' remuneration
in a stepped process to reflect the original intended level of remuneration
pre-IPO. Whilst this has resulted in stepped increases of substantial change
the directors' do not propose to apply any further remuneration increases
until such time as further Company growth of substance has been achieved.
Director Year ended 31 March 2023*** Year ended 31 March 2022 Year ended 31 March 2021
(£)
(£)
Pat Cox* 70,625 57,500 43,387
Caroline Banszky** 52,500 45,000 31,051
Malcolm King 43,750 40,000 26,734
Tom Murley 43,750 40,000 26,734
Total 210,625 182,500 127,906
*This includes £17,500 per annum in respect of serving as Chair of the Board.
**This includes £5,000 per annum in respect of serving as Chair of the Audit
committee.
*** uplift effective from 1 July 2022, amount shows remuneration on 3/12 and
9/12 split
2022 Percentage increase from 31 March 2020 to 31 March 2021 on salary annual fees Percentage increase from 31 March 2021 to 31 March 2022 on salary annual fees
Pat Cox 31.48% 32.53%
Caroline Banszky 47.86% 49.92%
Malcolm King 48.52% 49.62%
Tom Murley 48.52% 49.62%
2022/2023 Remuneration
The remuneration levels for the forthcoming year 2022/2023 for the Directors
are shown in the above table.
In accordance with FCA Listing Rules 9.8.6(R)(1), Directors' interest in the
shares of the Company (in respect of which transactions are notifiable to the
Company under FCA Disclosure and Transparency Rule 3.1.2(R)) as at 31 March
2022 were as follows:
(Audited)
Director Number of Ordinary Shares Per centage of Issued share Capital
Pat Cox 49,996 0.01%
Caroline Banszky 50,000 0.01%
Malcolm King 50,000 0.01%
Tom Murley 0 0.00%
Total 149,996 0.03%
All the Directors' share interests shown above were held beneficially.
Tom Murley as a US resident has limited options for owning shares. The
platform through which he owned shares closed and he was forced to sell. He
is looking for a new platform through which to purchase shares.
Relative Importance of Spend on Pay
The difference in actual spend between 31 March 2022 and 31 March 2021 on
Directors' remuneration in comparison to distributions (dividends and share
buybacks) and other significant spending are set out in the table below:
Payments made during the year ended 31 March 2022 Payments made during the year ended 31 March 2021
Directors' total remuneration 182,500 127,906
Dividends paid 24,139,922 10,090,673
Buy back of Ordinary Shares - -
Company-wide considerations
There are no executive directors, nor are there any employees of the Company,
so there are no statements to make on any consultations, comparisons, or pay
and employment conditions within the Company.
Statement of consideration of shareholder views
The levels of remuneration were set out in the Prospectus and did not receive
any negative comment from the investment community before or after the IPO.
The AGM will give the opportunity for opinions to be aired and demonstrated
formally through the voting process and will provide the basis for future
discussions and developments.
Payments to past directors or for loss of office
There are no payments to disclose. Under the terms of the Directors'
Remuneration Policy there would be no compensation for loss of office.
Statement of voting at general meeting
The Directors Remuneration Policy was put to a binding vote at the AGM on 14
August 2019 and is due for renewal at the AGM in 2022. The Directors
Remuneration Report was subject to an advisory vote at the AGM on 6 September
2021.
The voting outcome is set out in the table below:
Resolution to approve directors' remuneration report 2021 Resolution to approve remuneration policy 2020
Votes for* 111,448,581 30,512,395
% 99.86% 99.88%
Votes against 158,158 36,300
% 0.14% 0.12%
Total votes validly cast 111,606,739 30,548,695
Total votes cast as a per-centage of issued share capital 40.40% 39.58%
Votes withheld+ 96,000 15,750
*includes discretionary vote.
+A vote withheld is not a vote in law and is not counted in the calculation of
votes for or against a resolution.
Approval of the Remuneration Report
An ordinary resolution for the approval of this Directors' Remuneration Report
will be put to Shareholders at the Company's 2022 AGM and shareholders will
have the opportunity to express their views and raise any queries in respect
of the Remuneration Policy at this meeting.
(2) Nomination
The Committee's responsibilities are reviewing annually the structure, size,
and composition (including the skills, knowledge, and experience) required of
the Board and making recommendations to the Board with regard to any necessary
changes.
Considering the succession planning and replenishment of Directors as the
Board and Company progresses, identifying and nominating candidates to fill
Board vacancies as and when they arise and taking into account the challenges
and opportunities facing the Company, and what skills and expertise are needed
on the Board for the future.
Reviewing annually the time required from the Directors and using performance
evaluation to assess whether the Directors are spending enough time on their
duties.
Diversity
The Board recognises the benefits that diversity brings. Our approach is to
appoint the best possible candidate, considered on merit against objective
criteria and in accordance with the Equality Act 2010, rather than to set
quotas for a particular aspect that may deflect from achieving this
fundamental target every time. At the date of this report, 25% of the Board
was female.
In light of the ongoing development in governance best practice, the Committee
decided that the Company should have a formal diversity policy, which the
Board adopted on 19 September 2018. Diversity includes and makes good use of
differences in knowledge, and understanding of relevant diverse geographies,
peoples, and their backgrounds including race or ethnic origin, sexual
orientation, gender, age, disability or religion. Appointments to the Board
will be made on merit and objective criteria, in the context of complimenting
and expanding the skills, knowledge and experience of the Board as a whole.
Board Evaluation
A formal and rigorous external board evaluation is currently ongoing. The
Board have appointed Heidrick & Struggles to conduct and manage the
process and report to the Board accordingly on the outcomes.
The external evaluation consisted of a questionnaire covering a range of board
level topics, with accompanying reviews of each Committee, which addresses
issues specific to that Committee, as well as self-assessments by the
Directors and 1-2-1 interviews by the external evaluator of each non-executive
director. The final results will be reviewed and discussed by the
Remuneration and Nomination Committee and then the Board.
In addition to the ongoing external evaluation during the year, the Committee
discussed the size, composition, skill set and structure of the Board and its
Committees and considered that all of the Directors are independent from the
Investment Manager as defined in the AIC Code and no circumstances have been
identified that are likely to impair, or could appear impair, a Non-Executive
Director's independence. Further that the Board had the appropriate
combination of skills, experience and knowledge and that the current size of
the Board was appropriate for a Company of its market capitalisation. However,
this may change following the finalisation of the external board evaluation
report by Heidrick and Struggles. During 2022, the Company will monitor its
progress against the recommendations arising from the externally facilitated
Board evaluation.
Members of the Board work effectively together to achieve the Company's
objectives and that each director has the time and continues to contribute
effectively.
Succession Planning
The Nomination Committee considered succession planning during the year and
noted that currently all four Directors' tenure of nine years expires on the
same date and that therefore there was a need to refresh the board over the
next five years.
This Directors' Remuneration Report was approved by the Board on 25 July 2022
and is signed on its behalf by Patrick Cox (Director and Chair of the
Remuneration and Nomination Committee)
Patrick Cox
Chair of the Remuneration and Nomination Committee
Date: 25 July 2022
Management Engagement Committee Report
Introduction
The Management Engagement Committee is comprised of all the independent
directors of the Company: Caroline Banszky, Malcolm King, Thomas Murley and
me, Patrick Cox (Chair). The Committee's two principal functions are:
To review annually the compliance by the Investment Manager with the Company's
investment policy as established by the Board and with the Advisory and
Services Agreement entered into between the Company and the Investment Manager
from time to time (the "Management Agreement"); and
To review annually the performance of any other key service providers to the
Company
The Committee is required to report formally to the Board on its findings
after each meeting on all matters within its duties and responsibilities.
The Committee will meet as and when required, but formally at least once a
year.
JTC (UK) Limited attend our meetings as Secretary to the Committee. In
addition, we invite representatives of the Investment Manager to attend as
required.
The Committee met once in the period under review and all members were
present. During this meeting, Committees terms of reference were reviewed
and no alterations were made.
Investment Manager Review
When reviewing the Investment Manager's performance, the Committee considers
its compliance with the terms of the Management Agreement as well as its
overall performance against the Company's objectives.
The Committee also reviews the relationship with the Investment Manager
including (but not limited to):
Making recommendations on the Investment Manager's remuneration;
Approving the terms of engagement of the Investment Manager and the terms of
the Management Agreement;
Assessing annually the Investment Manager's independence and objectivity
taking into account relevant regulatory requirements;
Assessing annually the qualifications, expertise and resources of the
Investment Manager; and
Meeting regularly with the Investment Manager and at least twice a year, to
discuss the Investment Manager's remits, the performance of the Company's
investments and any issues arising from the management of the Company's
investments.
The Committee also reviews the level and method of remuneration of the
Investment Manager pursuant to the terms of the Management Agreement,
including the methodology of calculation of the relevant annual fee. The
review of these fee arrangements seeks to ensure that the methodology does not
encourage excessive risk and that it rewards demonstrably superior performance
by the Investment Manager in managing or advising on the portfolio against the
stated investment objective when compared to a suitable benchmark or peer
group.
The remuneration payable to the Investment Manager under the terms of the AIFM
Agreement, are set out on page 121.
Commercial Management Agreement
Pursuant to the Commercial Management Agreement, a subsidiary of the
Investment Manager, Gore Street Operational Management Limited ("GSOML")
provides certain operational and administrative services to the Company. These
include services in respect of the Development Projects (the "Construction
Services") and services in respect of the Operational Assets (the "Operational
Services").
The Construction Services include, inter alia, managing development related
matters that arise in relation to the project until the project has been
commissioned, overseeing the exercise of lease options and negotiation of
lease terms and overseeing the construction phase of the project.
The Operational Services include, inter alia, facilitating the timely response
to issues on site, including dispatch of engineering resources and
technicians, assessing daily performance of energy storage assets and
identifying and monitoring project operations risks and issues and interfacing
with and holding accountable the asset manager and operation and maintenance
provider.
Pursuant to the Commercial Management Agreement, GSOML also provides
administrative services to the Group, including in relation to financial
reporting, supporting transactions and in relation to the development and
implementation of ESG policies. As the Group's portfolio continues to grow,
including with the acquisition of assets in new jurisdictions, the scope of
the services to be provided by GSOML pursuant to the Commercial Management
Agreement will increase.
GSOML is entitled to receive a quarterly fee equal to the lower of: (i) its
costs associated with the provision of all services by it to the Group
pursuant to the Commercial Management Agreement during the relevant quarter
plus a 15 per cent. mark-up; and (ii) one-fourth of one per cent. of Net Asset
Value
The Committee reviewed the fee arrangements, compared them with comparable
Investment Trusts and concluded that they were reasonable. The Committee
agreed to undertake a full review of the Investment Manager's remuneration and
terms and conditions in 2022.
Following its review, the Committee have determined that the Investment
Manager was generally performing satisfactorily and had complied with the
terms of its engagement and had met its obligations to the Company. The
Committee and Investment Manager discuss opportunities for improvements in
communications on an ongoing basis. The committee recommended the Investment
Manager's continued appointment to the Board.
Other service providers
The Committee also review the performance of the Company's other service
providers and in particular:
Monitors compliance by providers of other services to the Company with the
terms of their respective agreement from to time;
Reviews and considers the appointment and remuneration of providers of
services to the Company; and
Considers any points of conflict which may arise between the providers of
services to the Company.
The Committee also carried out a full performance review of all its service
providers at its last meeting during which all terms of engagement and fees
were carefully considered by the Committee.
Administrator
Sanne Group Administration Services (UK) Limited ("Sanne") served as
Administrator during the period.
Under the terms of the Administration Agreement, Sanne is entitled to:
(a) an annual fee in respect of the accounting and administration services it
will provide of £50,000.
(b) an annual value fee of:
0.05% of NAV to the extent that NAV is between
£30m and £75m.
0.025% of NAV to the extent that NAV is between
£75m and £150m; and,
0.02% of NAV to the extent that such NAV
exceeds £150m.
The Committee found the Company's service providers were all performing
satisfactorily and concluded that the relevant appointments should continue.
Committee evaluation
An evaluation of the Committee was undertaken as part of the overall
evaluation of the Board and its committees. The Committee was found to be
functioning effectively.
Patrick Cox
Committee Chair
Date: 25 July 2022
FINANCIAL STATEMENTS
Statement of Comprehensive Income
For the Year Ended 31 March 2022
Notes Year Ended 31 March 2022 Year Ended 31 March 2021
Revenue Capital Total Revenue Capital Total
(£) (£) (£) (£) (£) (£)
Net gain on investments at fair value through profit and loss 7 - 43,531,405 43,531,405 - 16,205,729 16,205,729
Investment income 8 5,489,529 - 5,489,529 1,233,000 - 1,233,000
Administrative and other expenses 9 (6,493,364) - (6,493,364) (2,844,035) - (2,844,035)
Profit before tax (1,003,835) 43,531,405 42,527,570 (1,611,035) 16,205,729 14,594,694
Taxation 10 - - - - - -
Profit after tax and profit for the year (1,003,835) 43,531,405 42,527,570 (1,611,035) 16,205,729 14,594,694
Total comprehensive income for the year (1,003,835) 43,531,405 42,527,570 (1,611,035) 16,205,729 14,594,694
Profit per share (basic and diluted) - pence per share 11 14.15 16.06
All Revenue and Capital items in the above statement are derived from
continuing operations.
The Total column of this statement represents Company's Income Statement
prepared in accordance with IFRS. The return on ordinary activities after
taxation is the total comprehensive income and therefore no additional
statement of other comprehensive income is presented.
The supplementary revenue and capital columns are presented for information
purposes in accordance with the Statement of Recommended Practice issue by the
Association of Investment Companies.
The notes on pages 132-162 form an integral part of these financial
statements.
Statement of Financial Position
As at 31 March 2022
Company Number 11160422
Notes 31 March 2022 31 March 2021
(£) (£)
Non - Current Assets
Investments at fair value through profit or loss 12 180,762,419 80,694,275
180,762,419 80,694,275
Current assets
Cash and cash equivalents 13 198,047,440 60,152,317
Trade and other receivables 14 46,476 5,364,168
198,093,916 65,516,485
Total assets 378,856,335 146,210,760
Current liabilities
Trade and other payables 15 2,375,241 1,075,819
2,375,241 1,075,819
Total net assets 376,481,094 145,134,941
Shareholders equity
Share capital 20 3,450,358 1,438,717
Share premium 20 269,708,123 107,713,725
Special reserve 20 186,656 186,656
Capital reduction reserve 20 42,258,892 17,446,348
Capital reserve 20 64,757,592 21,226,187
Revenue reserve 20 (3,880,527) (2,876,692)
Total shareholders equity 376,481,094 145,134,941
Net asset value per share 19 1.09 1.01
Statement of Financial Position (continued)
As at 31 March 2022
Company Number 11160422
The annual financial statements were approved and authorised for issue by the
Board of directors and are signed on its behalf by;
Patrick Cox
Chair
Date: 25 July 2022
The notes on pages 132-162 form an integral part of these financial
statements.
Statement of Changes in Equity
For the Year Ended 31 March 2022
Share capital Share premium reserve Special reserve Capital reduction reserve Capital Revenue Total shareholders equity
(£) (£) reserve reserve (£)
(£) (£)
(£) (£)
As at 1 April 2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
Profit for the year - - - - 43,531,405 (1,003,835) 42,527,570
Total comprehensive profit for the year - - - - 43,531,405 (1,003,835) 42,527,570
Transactions with owners
Ordinary Shares issued at a premium during the year 2,011,641 206,616,364 - - - - 208,628,005
Share issue costs - (4,621,966) - - - - (4,621,966)
Transfer to capital reduction reserve - (40,000,000) - 40,000,000 - - -
Dividends paid - - - (15,187,456) - - (15,187,456)
As at 31 March 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Capital reduction reserve and revenue reserves are available to the Company
for distributions to Shareholders as determined by the Directors.
The notes on pages 132-162 form an integral part of these financial
statements.
Statement of Changes in Equity (continued)
For the Year Ended 31 March 2021
Share capital Share premium reserve Special reserve Capital reduction reserve Capital Revenue reserve Total shareholders equity
(£) (£) reserve (£)
(£) (£) (£)
(£)
As at 1 April 2020 525,488 19,707,058 186,656 25,516,500 5,020,458 (1,265,657) 49,690,503
Profit for the year - - - - 16,205,729 (1,611,035) 14,594,694
Total comprehensive profit for the year - - - - 16,205,729 (1,611,035) 14,594,694
Transactions with owners
Ordinary shares issued at a premium during the year 913,229 89,850,900 - - - - 90,764,129
Share issue costs - (1,844,233) - - - - (1,844,233)
Dividends paid - - - (8,070,152) - - (8,070,152)
As at 31 March 2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
The notes on pages 132-162 form an integral part of these financial
statements.
Statement of Cash Flows
For the Year Ended 31 March 2022
Year Ended Year Ended
31 March 31 March
Notes 2022 2021
(£) (£)
Cash flows used in operating activities
Profit for the year 42,527,570 14,594,694
Net profit on investments at fair value through profit and loss (43,531,405) (16,205,729)
Decrease / (Increase) in trade and other receivables 5,317,692 (400,641)
Increase in trade and other payables 1,299,422 362,160
Net cash used in operating activities 5,613,279 (1,649,516)
Cash flows used in investing activities
Purchase of investments (56,536,739) (34,076,053)
Net cash used in investing activities (56,536,739) (34,076,053)
Cash flows used in financing activities
Proceeds from issue of Ordinary Shares at a premium 208,628,005 90,764,129
Share issue costs (4,621,966) (1,844,233)
Dividends paid (15,187,456) (8,070,152)
Net cash inflow from financing activities 188,818,583 80,849,744
Net increase / (decrease) in cash and cash equivalents for the year 137,895,123 45,124,175
Cash and cash equivalents at the beginning of the year 60,152,317 15,028,142
Cash and cash equivalents at the end of the year 198,047,440 60,152,317
During the year, interest received by the Company totaled £5,489,530 (2021:
£1,098,000).
The notes on pages 132-162 form an integral part of these financial
statements.
Notes to the Financial Statements
For the Year Ended 31 March 2022
1. General information
Gore Street Energy Storage Fund plc (the "Company"), a public limited company
limited by shares was incorporated and registered in England and Wales on 19
January 2018 with registered number 11160422. The registered office of the
Company is 18th Floor, The Scalpel, 52 Lime Street, London, EC3M 7AF.
Its share capital is denominated in Pound Sterling (GBP) and currently
consists of Ordinary Shares. The Company's principal activity is to invest in
a diversified portfolio of utility-scale energy storage projects primarily
located in the UK and the Republic of Ireland, although the Company has
recently acquired a project in Germany and is also considering projects in
North America.
2. Basis of preparation
Statement of compliance
The annual financial statements have been prepared in accordance with UK
adopted international accounting standards. The Company has also adopted the
Statement of Recommended Practice issued by the Association of Investment
Companies which provides guidance on the presentation of supplementary
information.
The financial statements have been prepared on a historical cost basis except
for financial assets and liabilities at fair value through the profit or loss.
The Company is an investment entity in accordance with IFRS 10 which holds all
its subsidiaries at fair value and therefore prepares separate accounts only.
Functional and presentation currency
The currency of the primary economic environment in which the Company operates
(the functional currency) is Pound Sterling ("GBP or £") which is also the
presentation currency.
Going Concern
In assessing the going concern basis of accounting the Directors have had
regard to the guidance issued by the Financial Reporting Council. After making
enquiries and bearing in mind the nature of the Company's business and assets,
the Directors consider the Company to have adequate resources to continue in
operational existence over the period to 31 July 2023, being at least 12
months from the date of approval of the financial statements. As such, they
have adopted the going concern basis in preparing the annual report and
financial statements.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
2. Basis of preparation (continued)
In our going concern assessment, we have taken into account the impact of
Covid-19 and the Company's ability to generate revenue from its operational
assets continues and remains largely unaffected by the pandemic. The Company
and the Investment Manager have worked closely and liaised with the operators
to ensure that commercial activities remain operational and, in their view,
power generation will remain essential to the UK's infrastructure.
The going-concern analysis assumes continued annual expenditure at the rate of
current expenditure and continued discretionary dividend payments to
shareholders at the annual target rate of 7% of NAV, subject to a minimum
target of 7 pence per Ordinary Share in each financial year. With
expenditure and discretionary dividends assumed unchanged, the Company will
continue to be operational and will have excess cash after payment of its
liabilities for at least the next 12 months to 31 July 2023.
As at 31 March 2022, the Company had net current assets of £195.72 million
and had cash balances of £198.04 million (excluding cash balances within
investee companies), which are sufficient to meet current obligations as they
fall due. The major cash outflows of the Company are the payment of
dividends and costs relating to the acquisition of new assets, both of which
are discretionary. The Company continues to commit to its investors that its
business purpose is to invest funds solely for returns from capital
appreciation, investment income, or both. The Company is a
guarantor to GSES1 Limited's £15m revolving credit facility with
Santander. The Company had no outstanding debt as at 31 March 2022.
The Directors acknowledge their responsibilities in relation to the financial
statements for the year ended 31 March 2022 and the preparation of the
financial statement on a going concern basis remains appropriate and the
Company expects to meet its obligations as and when they fall due for at least
the next twelve months to 31 July 2023.
The board has considered the impact of climate change on the investments
included in Company's financial statements and have assessed that it does not
materially impact the estimates and assumptions used in determining the fair
value of the investments.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amount of assets, liabilities, income and
expenses. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to the accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
During the period the Directors considered the following significant
judgements, estimates and assumptions:
Assessment as an investment entity
Entities that meet the definition of an investment entity within IFRS 10 are
required to measure their subsidiaries at fair value through profit or loss
rather than consolidate them unless they provided investment related services
to the Company. To determine that the Company continues to meet the definition
of an investment entity, the Company is required to satisfy the following
three criteria:
a) the Company obtains funds from one or more investors for the purpose of
providing those investors with investment management services;
b) the Company commits to its investors that its business purpose is to invest
funds solely for returns from capital appreciation, investment income, or
both; and
c) the Company measures and evaluates the performance of substantially all of its
investments on a fair value basis.
The Company meets the criteria as follows:
the stated strategy of the Company is to deliver stable returns to
shareholders through a mix of energy storage investments;
the Company provides investment management services and has
several investors who pool their funds to gain access to infrastructure
related investment opportunities that they might not have had access to
individually; and
the Company has elected to measure and evaluate the performance of
all of its investments on a fair value basis. The fair value method is used to
represent the Company's performance in its communication to the market,
including investor presentations. In addition, the Company reports fair value
information internally to Directors, who use fair value as the primary
measurement attribute to evaluate performance.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
3. Significant accounting judgements, estimates and assumptions (continued)
Having assessed the criteria above and in their judgement, the Directors are
of the opinion that the Company has all the typical characteristics of an
investment entity and continues to meet the definition in the standard. This
conclusion will be reassessed on an annual basis.
Valuation of Investments
Significant estimates in the Company's financial statements include the
amounts recorded for the fair value of the investments. By their nature, these
estimates and assumptions are subject to measurement uncertainty and the
effect on the Company's financial statements of changes in estimates in future
periods could be significant. These estimates are discussed in more detail in
note 17.
4. New and revised standards and interpretations
New and revised standards and interpretations
The accounting policies used in the preparation of the financial statements
have been consistently applied during the year ended 31 March 2022.
There have been no new standards, amendments to current standards, or new
interpretations which the directors feel have an impact on these financial
statements.
New and revised IFRSs in issue but not yet effective
In February 2021, the International Accounting Standards Board issued further
amendments to IAS8: Accounting Policies, Changes in Accounting Estimates and
Errors. Those amendments clarify the distinction between changes in accounting
estimates, changes in accounting policies and correction of errors. They
further clarify how entities use measurement techniques and inputs to develop
accounting estimates. These amendments are effective for periods beginning on
or after 1 January 2023 and having reviewed the amendments, the Board is of
the opinion that these amendments will not have a material impact on the
Company's financial statements.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below:
Investment Income
Interest income is recognised on an accrual basis in the Revenue account of
the Statement of Comprehensive Income.
Investment income arising from the portfolio assets is recognised on an
accruals basis in totality, with amounts received in cash recognised in
investment income and the unrealised portion disclosed in net gain on
investments at fair value through profit and loss.
Expenses
Expenses are accounted for on an accrual basis and charged to the Statement of
Comprehensive Income. Share issue costs are allocated to equity. Expenses are
charged through the Revenue account except those which are capital in nature,
these include those which are incidental to the acquisition, disposal or
enhancement of an investment, which are accounted for through the Capital
account.
Net gain or loss on investments at fair value through profit and loss
Gains or losses arising from changes in the fair values of investments are
recognised in the Capital account of the Statement of Comprehensive Income in
the period in which they arise. The value of the investments may be increased
or reduced by the assessed fair value movement.
Taxation
The Company is approved as an Investment Trust Company ("ITC") under sections
1158 and 1159 of the Corporation Taxes Act 2010 and Part 2 Chapter 1 Statutory
Instrument 2011/29999 for accounting periods commencing on or after 25 May
2018. The approval is subject to the Company continuing to meet the
eligibility conditions of the Corporations Tax Act 2010 and the Statutory
Instrument 2011/29999. The Company intends to ensure that it complies with the
ITC regulations on an ongoing basis and regularly monitors the conditions
required to maintain ITC status.
From 1 April 2015 there is a single corporation tax rate of 19%. Current Tax
and movements in deferred tax asset and liability is recognised in the
Statement of Comprehensive Income except to the extent that it relates to the
items recognised as direct movements in equity, in which case it is similarly
recognised as a direct movement in equity. Current tax is the expected tax
payable on any taxable income for the period, using tax rates enacted or
substantively enacted at the end of the relevant period.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Taxation (continued)
Deferred taxation is recognised in respect of all timing differences that have
originated but not reversed at the Statement of Financial Position date where
transactions or events that result in an obligation to pay more tax or a right
to pay less tax in the future have occurred. Timing differences are
differences between the Company's taxable profits and its results as stated in
the financial statements. Deferred taxation assets are recognised where, in
the opinion of the Directors, it is more likely than not that these amounts
will be realised in future periods, at the tax rate expected to be applicable
at realisation.
Investment in subsidiaries
Subsidiaries are entities controlled by the Company. Control exists when the
Company is exposed, or has rights, to variable returns from its involvement
with the subsidiary entity and has the ability to affect those returns through
its power over the subsidiary entity. In accordance with the exception under
IFRS 10 Consolidated financial statements, the Company is an investment entity
and therefore only consolidates subsidiaries if they provide investment
management services and are not themselves investment entities. All
subsidiaries are held at fair value in accordance with IFRS 9 and therefore
not consolidated.
Cash and cash equivalents
Cash and cash equivalents comprise cash at bank and call deposit held with the
bank on a 32 day notice which can be readily converted to cash.
Trade and other receivables
Trade and other receivables are recognised initially at fair value and
subsequently stated at amortised cost less loss allowance which is calculated
using the provision matrix of the expected credit loss model.
Trade and other payables
Trade and other payables are recognised initially at fair value and
subsequently stated at amortised cost.
Dividends
Dividends are recognised, as a reduction in equity in the financial
statements. Interim equity dividends are recognised when legally payable.
Final equity dividends will be recognised when approved by the
Shareholders.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Equity
Equity instruments issued by the Company are recorded at the amount of the
proceeds received, net of directly attributable issue costs. Costs not
directly attributable to the issue are immediately expensed in the Statement
of Comprehensive Income.
Financial Instruments
In accordance with IFRS 9, the Company classifies its financial assets and
financial liabilities at initial recognition into the categories of amortised
cost or fair value through profit or loss.
Financial assets
The Company classifies its financial assets at amortised cost or fair value
through profit or loss on the basis of both:
the entity's business model for managing the
financial assets
the contractual cash flow characteristics of
the financial asset
Financial assets measured at amortised cost
A debt instrument is measured at amortised cost if it is held within a
business model whose objective is to hold financial assets in order to collect
contractual cash flows and its contractual terms give rise on specified dates
to cash flows that are solely payments of principal and interest on the
principal amount outstanding. The Company includes in this category short-term
non-financing receivables including cash and trade and other receivables.
Financial asset measured at fair value through profit or loss (FVPL)
A financial asset is measured at fair value through profit or loss if:
a) its contractual terms do not give rise to cash flows on specified dates that
are solely payments of principal and interest (SPPI) on the principal amount
outstanding; or
b) it is not held within a business model whose objective is either to collect
contractual cash flows, or to both collect contractual cash flows and sell; or
c) it is classified as held for trading (derivative contracts in an asset
position).
The Company includes in this category equity instruments and loans to
investments.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Financial Instruments (continued)
Financial liabilities
Financial liabilities measured at fair value through profit or loss (FVPL)
A financial liability is measured at FVPL if it meets the definition of held
for trading of which the Company had none.
Financial liabilities measured at amortised cost
This category includes all financial liabilities, other than those measured at
fair value through profit or loss, including short-term payables.
Recognition and derecognition
Financial assets and liabilities are recognised on trade date, when the
Company becomes party to the contractual provisions of the instrument. A
financial asset is derecognised where the rights to receive cash flows from
the asset have expired, or the Company has transferred its rights to receive
cash flows from the asset. The Company derecognises a financial liability when
the obligation under the liability is discharged, cancelled or expired.
Impairment of financial assets
The Company holds trade receivables with no financing component and which have
maturities of less than 12 months at amortised cost and, as such, has chosen
to apply the simplified approach for expected credit losses (ECL) under IFRS 9
to all its trade receivables. Therefore, the Company does not track changes in
credit risk, but instead recognises a loss allowance based on lifetime ECLs at
each reporting date.
The Company's approach to ECLs reflects a probability-weighted outcome, the
time value of money and reasonable and supportable information that is
available without undue cost or effort at the reporting date about past
events, current conditions and forecasts of future economic conditions.
The Company uses the provision matrix as a practical expedient to measuring
ECLs on trade receivables, based on days past due for groupings of receivables
with similar loss patterns. Receivables are grouped based on their nature. The
provision matrix based on historical observed loss rates over the expected
life of the receivables and is adjusted for forward looking estimates.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
5. Summary of significant accounting policies (continued)
Fair value measurement and hierarchy
Fair value is the price that would be received on the sale of an asset, or
paid to transfer a liability, in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on
the presumption that the transaction takes place either in the principal
market for the asset or liability, or in the absence of a principal market, in
the most advantageous market. It is based on the assumptions that market
participants would use when pricing the asset or liability, assuming they act
in their economic best interest.
The fair value hierarchy to be applied under IFRS 13 is as follows:
Level 1: Quoted (unadjusted) market prices in active markets for identical
assets or liabilities.
Level 2: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is directly or indirectly
observable.
Level 3: Valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable.
For assets and liabilities that are carried at fair value, and which will be
recorded in the financial information on a recurring basis, the Company will
determine whether transfers have occurred between levels in the hierarchy by
reassessing categorisation at the end of each reporting period.
6. Fees and expenses
Accounting, Secretarial and Directors
JTC (UK) Limited had been appointed to act as secretary for the Company
through the Administration and Company Secretarial Agreement. JTC (UK) Limited
is entitled to a £70,000 annual fee for the provision of Company Secretarial
services.
During the year, expenses incurred with JTC (UK) Limited for secretarial
services amounted to £64,657 with £25,000 being outstanding and payable at
the year end.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
6. Fees and expenses (continued)
Accounting, Secretarial and Directors (continued)
Sanne Fiduciary Services (UK) Limited ("Sanne") had been appointed as
administrator. Through an Administration agreement, Sanne is entitled to an
annual fee of £50,000 for the provision of accounting and administration
services based on a Company Net Asset Value of up to £30 million. An ad
valorem fee based on total assets of the Company which exceed £30 million
will be applied as follows:
0.05% on a net asset value of £30 million to £75 million
0.025% on a net asset value of £75 million to £150 million
0.02% on a net asset value thereafter.
During the year, expenses incurred with Sanne for accounting and
administrative services amounted to £97,155, with £25,765 being outstanding
and payable at the year end.
AIFM
The AIFM, Gore Street Capital Limited (the "AIFM"), was entitled to receive
from the Company, in respect of its services provided under the AIFM
agreement, a fee of £75,000 per annum for the term of the AIFM agreement.
During the year, AIFM fees amounted to £75,207, there were no outstanding
fees payable at the year end.
At the year end, an amount of £18,647 paid in the year to Gore Street Capital
Limited in respect of these fees, is being disclosed in prepayments as it
relates to the period 1 April 2022 to 30 June 2022.
Investment Advisory
The fees relating to the Investment Advisor are disclosed within note 22
Transactions with related parties.
7. Net gain on investments at fair value through profit and loss
31 March 31 March
2022 2021
(£) (£)
Net gain on investments at fair value through profit and loss 43,531,405 16,205,729
43,531,405 16,205,729
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
8. Investment Income
31 March 31 March
2022 2021
(£) (£)
Bank interest income 58,977 -
Investment income 5,430,552 1,098,000
Interest income (on advance to NEC) - 135,000
5,489,529 1,233,000
9. Administrative and other expenses
31 March 31 March
2022 2021
(£) (£)
Accounting and Company Secretarial fees 161,812 155,718
Audit fees (see below) 226,000 211,600
Bank interest and charges 8,464 6,810
Directors' remuneration and expenses 182,500 135,378
Directors & Officers insurance 18,617 13,431
Foreign exchange loss 13,604 1,050
Investment advisory fees 3,090,737 1,128,107
Irrecoverable VAT - (26,626)
Legal and professional fees * 772,617 483,724
AIFM fees 75,207 75,246
Marketing fees 69,652 80,144
Performance fees 1,545,369 496,461
Sundry expenses 244,851 82,994
Write back of NEC interest receivable 83,934 -
6,493,364 2,844,037
* The Company incurred one-off expenses totalling £126,703 in respect of
transactional documentation relating to NEC (see note 14).
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
9. Administrative and other expenses (continued)
During the year, the Company received the following services from its auditor,
Ernst & Young LLP.
31 March 31 March
2022 2021
(£) (£)
Audit services
Statutory audit Annual accounts - current year 210,000 191,100
Annual accounts - prior year under accrual - 5,000
210,000 196,100
Non-audit services
Other assurance services 16,000 15,500
Total audit and non-audit services 226,000 211,600
The statutory auditor is remunerated £145,900 (2021: £119,000), in relation
to SPV audits. This amount is not included in the above.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
10. Taxation
The Company is recognised as an Investment Trust Company ("ITC") for
accounting periods beginning on or after 25 May 2018 and is taxed at the main
rate of 19%.
31 March 31 March
2022 2021
(£) (£)
(a) Tax charge in profit and loss account
UK Corporation tax - -
(b) Reconciliation of the tax charge for the year
Profit before tax 42,527,570 14,594,694
Tax at UK standard rate of 19% 8,080,238 2,772,992
Effects of:
Unrealised gain on fair value investments (8,270,966) (3,079,089)
Expenses not deductible for tax purposes 995 20,600
Deferred tax not recognised 189,733 285,497
Tax charge for the year - -
Estimated losses not to be recognised due to insufficient evidence of future 3,147,853 2,142,752
profits
Estimated deferred tax thereon 25% (2021: 19%) 786,963 407,123
As at 31 March 2022, the Company has excess management expenses that are
available to offset future tax revenues. A deferred tax asset, measured at the
prospective corporate rate of 25% (2021: 19%) of £786,963 (2021: £407,123)
has not been recognised in respect of these expenses since they are
recoverable only to the extent that, it is considered more likely than not,
the Company has sufficient future taxable revenue.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
11. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing the profit or loss
for the period attributable to ordinary equity holders of the Company by the
weighted average number of Ordinary Shares in issue during the period. As
there are no dilutive instruments outstanding, basic, and diluted earnings per
share are identical.
31 March 31 March
2022 2021
Net gain attributable to ordinary shareholders £ 42,527,570 £ 14,594,694
Weighted average number of Ordinary Shares for the year 300,542,518 90,860,919
Profit per share - Basic and diluted (pence) 14.15 16.06
12. Investments
Place of business Percentage ownership 31 March 31 March
2022 2021
GSES1 Limited ("GSES1") England & Wales 100% 180,762,419 80,694,275
The Company meets the definition of an investment entity. Therefore, it does
not consolidate its subsidiaries or equity method account for associates but,
rather, recognises them as investments at fair value through profit or loss.
The Company is not contractually obligated to provide financial support to the
subsidiaries and associate and there are no restrictions in place in passing
monies up the structure.
The investment in GSES1 is financed through equity and a loan facility
available to GSES1. The facility may be drawn upon, to any amount agreed by
the Company as lender, and is available for a period of 20 years from 28 June
2018. The rest is funded through equity. The amount drawn on the facility at
31 March 2022 was £116,009,272 (2021: £59,472,534). The loan is interest
bearing and attracts interest at 5% per annum. Investments in the indirect
subsidiaries are also structured through loan and equity investments and the
ultimate investments are in energy storage facilities.
Realisation of increases in fair value in the indirect subsidiaries will be
passed up the structure as distributions on the equity investment. GSES1
controls GSF Albion, GSF England, GSF IRE and GSF Atlantic as listed below
which in turn hold an interest in project companies.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
12. Investments (continued)
Immediate Parent Place of business Percentage Ownership Investment
GSF Albion Limited GSES1 England & Wales 100%
("GSF Albion")
NK Boulby Energy Storage Limited GSF Albion England & Wales 99.998% Boulby
Kiwi Power ES B GSF Albion England & Wales 49% Cenin
GSF England Limited GSES1 England & Wales 100%
("GSF England")
OSSPV001 Limited GSC LRPOT England & Wales 100% Lower Road
Port of Tilbury
GSF IRE Limited GSES1 England & Wales 100%
Mullavilly Energy Limited GSF IRE Northern Ireland 51% Mullavilly
Drumkee Energy Limited GSF IRE Northern Ireland 51% Drumkee
Porterstown Battery Storage Limited GSF IRE Republic of Ireland 51% Kilteel
Kilmannock Battery Storage Limited GSF IRE Republic of Ireland 51% Kilmannock
Ferrymuir Energy Storage Limited GSF Albion England & Wales 100% Ferrymuir
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 Limited GSF England England & Wales 100% Breach Farm
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
12. Investments (continued)
Hulley Road Energy Storage Limited GSF England England & Wales 100% Hulley Road
Larport Energy Storage Limited GSF England England & Wales 100% Larport
Lascar Battery Storage Limited GSF England England & Wales 100% Lascar
Stony Energy Storage GSF England England & Wales 100% Stony
Limited ((1))
Enderby Battery Storage Limited ((2)) GSF England England & Wales 100% Enderby
GSF Atlantic Limited ((3)) GSES1 England & Wales 100%
GSF Cremzow GmbH & Co KG ((4)) GSF Atlantic Germany 90% Cremzow
GSF Cremzow Verwaltungs GmbH ((4)) GSF Atlantic Germany 90%
((1)) The acquisition of Stony Energy Storage Limited was completed on the 12
May 2021.
((2)) The acquisition of Enderby Battery Storage Limited was completed on the
17 September 2021.
((3)) GSF Atlantic Limited was incorporated on the 11 February 2022.
((4)) The acquisition of GSF Cremzow GmbH & Co KG and its General Partner,
GSF Cremzow Verwaltungs GmbH was completed on the 10 March 2022.
All subsidiaries that have a place of business in England & Wales are
registered at 18 Floor, The Scapel, 52 Lime Street, London, EC3M 7AF.
Porterstown Battery Storage Limited and Kilmanock Battery Storage Limited are
registered at Block C, 77 Sir John Rogerson's Quay, Dublin, D02 VK60, Republic
of Ireland.
GSF Cremzow GmbH & Co KG and GSF Cremzow Verwaltungs GmbH are registered
at Schenkenberg, Gut Dauerthal 3, 17291 Schenkenberg
( )
13. Cash and cash equivalents
31 March 31 March
2022 2021
(£) (£)
Cash at bank 198,047,442 60,152,317
198,047,442 60,152,317
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
14. Trade and other receivables
31 March 31 March
2022 2021
(£) (£)
VAT recoverable - 359,954
Prepaid Director's and Officer's insurance 4,920 6,239
Other Prepayments 39,027 37,384
Other Debtors 2,529 76,673
Advance to NEC ES - 4,500,000
Interest on advance to NEC ES - 383,918
46,476 5,364,168
The Company advanced to NEC ES an advance of £4,500,000 on the date at which
it was admitted to the Premium segment of the London Stock Exchange. The
advance was agreed to be used in conjunction with the Company's purchase of
products, equipment and / or services from NEC ES for the projects in which
the Company is to be invested. The Company's purchase of such products and
equipment from NEC ES was conditional upon NEC ES' ability to meet the
requirements of the Company's projects and subject to the terms and pricing of
the products, equipment and/or services being provided on market standard
terms (as defined by the Company).
During the year, the Company had offset the entire £4.5 million advance
against amounts due to NEC (UK) Limited, whilst it was agreed that an amount
of £299,984 would be settled as the final interest charge, the balance of
£83,934 was written off (see note 9). The interest amount was received in
full from NEC ES on the 19 July 2021.
15. Trade and other payables
31 March 31 March
2022 2021
(£) (£)
Administration fees 50,765 25,826
Audit fees 226,000 127,400
Directors remuneration 6,668 6,669
Professional fees 1,897,707 529,549
Other creditors 5,002 13,003
VAT payable 189,099 370,372
2,375,241 1,075,819
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
16. Categories of financial instruments
31 March 31 March
2022 2021
(£) (£)
Financial assets
Financial assets at amortised cost
Cash and cash equivalents 198,047,440 60,152,317
Trade and other receivables 46,476 5,364,168
Fair value through profit and loss account
Investment 180,762,419 80,694,275
Total financial assets 378,856,335 146,210,760
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 2,375,241 1,075,819
Total financial liabilities 2,375,241 1,075,819
At the balance sheet date, all financial assets and liabilities were measured
at amortised cost except for the investment in equity and loans to
subsidiaries which are measured at fair value. The amortised cost of all
other assets approximates to the cost value.
16.
Categories of financial instruments
31 March
2022
(£)
31 March
2021
(£)
Financial assets
Financial assets at amortised cost
Cash and cash equivalents
198,047,440
60,152,317
Trade and other receivables
46,476
5,364,168
Fair value through profit and loss account
Investment
180,762,419
80,694,275
Total financial assets
378,856,335
146,210,760
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables
2,375,241
1,075,819
Total financial liabilities
2,375,241
1,075,819
At the balance sheet date, all financial assets and liabilities were measured
at amortised cost except for the investment in equity and loans to
subsidiaries which are measured at fair value. The amortised cost of all
other assets approximates to the cost value.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair Value measurement
Valuation approach and methodology
There are three traditional valuation approaches that are generally accepted
and typically used to establish the value of a business; the income approach,
the market approach, and the net assets (or cost based) approach. Within these
three approaches, several methods are generally accepted and typically used to
estimate the value of a business.
The Company has chosen to utilise the income approach, which indicates value
based on the sum of the economic income that an asset, or group of assets, is
anticipated to produce in the future. Therefore, the income approach is
typically applied to an asset that is expected to generate future economic
income, such as a business that is considered a going concern. Free cash flow
to total invested capital is typically the appropriate measure of economic
income. The income approach is the DCF approach and the method discounts free
cash flows using an estimated discount rate (WACC).
The International Valuation Standards Council ("IVSC") issued guidance in
March 2020 in response to the COVID-19 pandemic.
It notes that one of the main issues when dealing with valuation is
uncertainty and that valuation is not a fact, but an estimate of the most
probable of a range of possible outcomes based on the assumptions made in the
valuation process.
Valuation uncertainty can be caused by various factors, including market
disruption, input availability and the choice of method or model of valuation.
The guidance issued by the IVSC was considered by the Investment Advisor in
the determination of the valuations disclosed at 31 March 2022.
Valuation process
In the year, the Company acquired Stony Energy Storage Limited and Enderby
Battery Storage Limited, with capacities of 79.9MW and 57MW respectively. It
also acquired its first mainland European Asset, through GSF Cremzow GmbH
& Co KG, a German limited partnership and its German general partner, GSF
Cremzow Verwaltungs GmbH, the asset having a capacity of 22MW. These
acquisitions bring the Company's portfolio of lithium-ion energy storage
investments to a total capacity of 628.5 MW (2021: 440.0 MW). As at 31 March
2022, 231.7 MW of the Company's total portfolio was operational and 396.8 MW
pre-operational (the "Investments").
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair Value measurement (continued)
Valuation process (continued)
The Investments comprise twenty six projects, all based in the UK, the
Republic of Ireland or mainland Europe. The Directors review and approve these
valuations following appropriate challenge and examination. The current
portfolio consists of non-market traded investments and valuations are
analysed using forecasted cash flows of the assets and used the discounted
cash flow approach as the primary approach for the purpose of the valuation.
The Company engages external, independent and qualified valuers to determine
the fair value of the Company's investments or are produced by the office of
the Investment Advisor.
Valuations are calculated quarterly by the Investment Advisor, and a sample
which meets our Net Asset Value materiality threshold are reviewed by an
independent third party, prior to presentation and review by the Company's
board of directors and publication of the half year and year-end reports.
The below table summarises the significant unobservable inputs to the
valuation of investments.
Investment Portfolio Valuation technique Significant Inputs Fair Value
Description (Range) 31 March 31 March
2022 2021
(£) (£)
Great Britain DCF Discount Rate 6% - 8% 89,350,935 49,216,281
(excluding Northern Ireland) Revenue / MWH £5.5 - £40
Northern Ireland DCF Discount Rate 9.5% 57,076,847 23,968,276
Revenue / MWH £8 - £21
Republic of Ireland DCF Discount Rate 9.5% 17,595,232 6,015,352
Revenue / MWH €6 - €15
Germany DCF Discount Rate 12,583,705 -
Revenue / MWH
Holding Companies NAV 4,155,700 1,494,366
Total Investments 180,762,419 80,694,275
The fair value of the holding companies represents the net assets together
with any cash held within those companies in order to settle any operational
costs.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair value measurement (continued)
Sensitivity Analysis
The below table reflects the range of sensitivities in respect of the fair
value movements of the Company's investments.
Investment Portfolio Valuation technique Estimated effect on
Significant Inputs Fair Value
Description Sensitivity 31 March 31 March
2022 2021
(£) (£)
Great Britain DCF Revenue + 10 % 46,600,000 9,626,000
(excluding Northern Ireland) - 10 % (28,312,000) (9,846,000)
Discount rate +1 % (12,378,000) (4,278,000)
-1 % 14,357,000 4,919,000
Northern Ireland DCF Revenue + 10 % 9,984,000 4,210,000
- 10 % (10,034,000) (4,095,000)
Discount rate +1 % (3,226,000) (2,407,000)
-1 % 3,675,000 2,787,000
Exchange rate +3 % (839,000) (1,233,000)
-3 % 897,000 1,291,000
Republic of Ireland DCF Revenue + 10 % 4,404,000 715,000
- 10 % (4,937,000) (1,392,000)
Discount rate +1 % (3,242,000) (2,999,000)
-1 % 3,772,222 2,787,000
Exchange rate +3 % (362,000) (192,000)
-3 % 382,000 208,000
Germany DCF Revenue +10 % 3,698,000 -
-10 % (4,465,000) -
Discount rate +1 % (704,000) -
-1 % 804,000 -
Exchange rate +3 % (285,000) -
-3 % 303,000 -
High case (+10%) and low case (-10%) revenue information used to determine
sensitivities are provided by third party pricing sources.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
17. Fair value measurement (continued)
Valuation of financial instruments
The investments at fair value through profit or loss are Level 3 in the fair
value hierarchy and the reconciliation in the movement of this Level 3
investment is presented below. No transfers between levels took place during
the year.
Reconciliation 31 March 31 March
2022 2021
(£) (£)
Opening balance 80,694,275 30,412,493
Purchases during the year 56,536,739 34,076,053
Total fair value movement through the profit and loss 43,531,405 16,205,729
180,762,419 80,694,275
A minority shareholder of Boulby has a right to receive a certain share of
Boulby distributions once NK Energy Solutions realises excess return over an
agreed hurdle return from its investment into Boulby.
Based on free cash flow forecast used to compute the net asset value of Boulby
for this period, it is not expected to reach the threshold return and thus no
payment to the minority shareholder is taken into account. However, if the
actual cash flow significantly exceeds the forecast cash flow used for current
net asset value, a part of the excess cash flow may be distributed to the
minority shareholder, impacting the ultimate fair value.
18. Financial risk management
The Company is exposed to certain risks through the ordinary course of
business and the Company's financial risk management objective is to minimise
the effect of these risks. The management of risks is performed by the
Directors of the Company and the exposure to each financial risk is considered
potentially material to the Company, how it arises and the policy for managing
it is summarised below:
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Capital risk management
The capital structure of the Company at year end consists of equity
attributable to equity holders of the Company, comprising issued capital,
reserves and accumulated gains. The Company has no return on capital
benchmark, but the Board continues to monitor the balance of the overall
capital structure so as to maintain investor and market confidence. The
Company is not subject to any external capital requirements.
Counterparty risk
The Company is exposed to third party credit risk in several instances,
including the possibility that counterparties with which the Company and its
subsidiaries, together the Group, contract with, may default or fail to
perform their obligations in the manner anticipated by the Group. Such
counterparties may include (but are not limited to) manufacturers who have
provided warranties in relation to the supply of any equipment or plant, EPC
contractors who have constructed the Company's projects, who may then be
engaged to operate assets held by the Company, property owners or tenants who
are leasing ground space and/or grid connection to the Company for the
location of the assets, contractual counterparties who acquire services from
the Company underpinning revenue generated by each project or the energy
suppliers, or demand aggregators, insurance companies who may provide coverage
against various risks applicable to the Company's assets (including the risk
of terrorism or natural disasters affecting the assets) and other third
parties who may owe sums to the Company. In the event that such credit risk
crystallises, in one or more instances, and the Company is, for example,
unable to recover sums owed to it, make claims in relation to any contractual
agreements or performance of obligations (e.g. warranty claims) or require the
Company to seek alternative counterparties, this may materially adversely
impact the investment returns.
Further the projects in which the Company may invest will not always benefit
from a turnkey contract with a single contractor and so will be reliant on the
performance of several suppliers. Therefore, the key risks during battery
installation in connection with such projects are the counterparty risk of the
suppliers and successful project integration. The Company accounts for its
exposure to counterparty risk through the fair value of its investments by
using appropriate discount rates which adequately reflects its risk exposure.
The Company regularly assesses the creditworthiness of its counterparties and
enters into counterparty arrangements which are financially sound and ensures,
where necessary, the sourcing of alternative arrangements in the event of
changes in the creditworthiness of its present counterparties.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Concentration risk
The Company's investment policy is limited to investment in energy storage
infrastructure, which will principally operate in the UK. This means that the
Company has a significant concentration risk relating to the UK energy storage
infrastructure sector. Significant concentration of investments in any one
sector may result in greater volatility in the value of the Group's
investments and consequently the Net Asset Value and may materially and
adversely affect the performance of the Group and returns to Shareholders.
During the year, the Company has expanded its investment base to include
Germany. The Company intends to further limit its exposure to concentration
risk through further projects in Western Europe and is considering projects in
North America.
Credit risk
The Company regularly assesses its credit exposure and considers the
creditworthiness of its customers and counterparties. Cash and bank deposits
are held with Barclays plc and Santander UK plc, both reputable financial
institution with a Moody's credit ratings of A and A1 respectively.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Currency risk
The majority of investments, together with the majority of all transactions
during the current period were denominated in Pounds Sterling.
The Company holds two investments (Kilmannock and Kilteel) in the Republic of
Ireland, together with the newly acquired Cremzow in Germany, acquisition
costs were denominated in Euros, creating an exposure to currency risk. These
investments have been translated into Pounds Sterling at year end and
represent 16.69% (2021: 7.45%) of the Company's fair valued investment
portfolio. The contracted revenue stream due from these investments has been
agreed in Pounds Sterling, thus limiting the exposure to fluctuations in
exchange rates.
Any expenditure denominated in Euros will be translated into Pounds Sterling
at the transaction date and any gain or loss resulting from the foreign
exchange exposure will be taken to the Statement of Comprehensive Income. The
Company does not hold any financial instrument at period end which are not
denominated in Pounds Sterling and is therefore does not believe it is exposed
to any significant currency risk.
Interest rate risk
Interest rate risk arises from the possibility that changes in interest rates
will affect future cash flows or the fair values of financial instruments. The
Company is exposed to interest rate risk on its cash balances held with
counterparties, bank deposits, advances to counterparties and through loans to
related parties. Bank deposits carry a fixed rate of interest for a definite
period, and loans to related parties carry a fixed rate of interest for an
initial period of 20 years. The Company is not exposed to changes in variable
market rates of interest and has therefore not considered any sensitivity to
interest rates.
Liquidity risk
The objective of liquidity management is to ensure that all commitments which
are required to be funded can be met out of readily available and secure
sources of funding. Although there is no present intention to utilise
borrowings, the Company may, where the Board deems it appropriate, use short
term leverage to acquire assets but with the intention that such leverage be
repaid with funds raised through a new issue of equity or cash flow from the
Company's portfolio. Such leverage will not exceed 15 per cent. at the time of
borrowing of Gross Asset Value without Shareholder approval. The Company's
only financial liabilities are trade and other payables. The Company has
sufficient cash reserves to cover these in the short-medium term. The
Company's cash flow forecasts are monitored regularly to ensure the Company is
able to meet its obligations when they fall due. The Company's investments are
level 3 and thus illiquid and this is taken into assessment of liquidity
analysis.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Liquidity risk
The following table reflects the maturity analysis of financial assets and
liabilities.
31 March 2022 < 1 year 1 to 2 years 2 to 5 years > 5 years Total
Financial assets
Cash and cash equivalents 198,047,440 - - - 198,047,440
Trade and other receivables 46,476 - - - 46,476
Fair value through profit and loss
Investments - - - 180,762,419 180,762,419
Total financial assets 198,093,916 - - 180,762,419 378,856,335
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 2,375,241 - - - 2,375,241
Total financial liabilities 2,375,241 - - - 2,375,241
31 March 2021 < 1 year 1 to 2 years 2 to 5 years > 5 years Total
Financial assets
Cash and cash equivalents 60,152,317 - - - 60,152,317
Trade and other receivables 5,364,168 - - - 5,364,168
Fair value through profit and loss
Investments - - - 80,694,275 80,694,272
Total financial assets 65,516,485 - - 80,694,275 146,210,760
Financial liabilities
Financial liabilities at amortised cost
Trade and other payables 1,075,819 - - - 1,075,819
Total financial liabilities 1,075,819 - - - 1,075,819
Investments include both equity and debt instruments. As the equity
instruments have no contractual maturity date, they have been included with
the >5-year category. Additionally, the debt instruments have an original
maturity of 20 years.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
18. Financial risk management (continued)
Market risk
Market risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. Market risk
reflects interest rate risk, currency risk and other price risks. The
objective is to minimise market risk through managing and controlling these
risks to acceptable parameters, while optimising returns. The Company uses
financial instruments in the ordinary course of business, and also incurs
financial liabilities, in order to manage market risks.
Price risk is the risk that the fair value or cash flows of a financial
instrument will fluctuate due to changes in market prices. If the market
prices of the investments were to increase by 10%, there will be a resulting
increase in net assets attributable to ordinary shareholders for the period of
£18,025,549 (2021: £8,069,427). Similarly, a decrease in the value of the
investment would result in an equal but opposite movement in the net assets
attributable to ordinary shareholders. The Company relies on the market
knowledge of the experienced Investment Advisor, the valuation expertise of
the third-party valuer BDO and the use of third-party market forecast
information to provide comfort with regard to fair market values of
investments reflected in the financial statements.
19. Net asset value per share
Basic NAV per share is calculated by dividing the Company's net assets as
shown in the Statement of Financial Position that are attributable to the
ordinary equity holders of the Company by the number of Ordinary Shares
outstanding at the end of the period. As there are no dilutive instruments
outstanding, basic, and diluted NAV per share are identical.
31 March 31 March
2022 2021
Net assets per Statement of Financial Position £ 376,481,094 £
145,134,941
Ordinary Shares in issue as at 31 March 345,035,842 143,871,681
NAV per share - Basic and diluted (pence) 109.11 100.88
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
20. Share capital and reserves
Share Share Special Capital Capital Revenue Total
capital premium reserve reduction reserve reserve
reserve reserve
(£) (£) (£) (£) (£) (£) (£)
At 1 April 2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
Issue of ordinary £0.01 shares: 27 April 2021 1,323,529 133,676,471 - - - - 135,000,000
Issue of ordinary £0.01 shares: 4 October 2021 688,112 72,939,893 - - - - 73,628,005
Transfer to capital reduction reserve (1) - (40,000,000) - 40,000,000 - - -
Share issue costs - (4,621,966) - - - - (4,621,966)
Dividends paid - - - (15,187,456) - - (15,187,456)
Profit for the year - - - - 43,531,405 (1,003,835) 42,527,570
At 31 March 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
((1)) Following the approval at the Company's AGM on the 6 September 2021, the
Company made an application to the High Court, together with a lodgement of
the Company's statement of capital with the Registrar of Companies, the
Company was permitted to reduce the capital of the Company by an amount of
£40,000,000. This was affected on the 15 December 2021 by a transfer of that
amount from the share premium account to distributable reserves.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
20. Share capital and reserves (continued)
Share Share Special Capital Capital Revenue Total
capital premium reserve reduction reserve reserve
reserve reserve
(£) (£) (£) (£) (£) (£) (£)
At 1 April 2020 525,488 19,707,058 186,656 25,516,500 5,020,458 (1,265,657) 49,690,503
Issue of ordinary £0.01 shares: 30 June 2020 30,000 2,853,000 - - - - 2,883,000
Issue of ordinary £0.01 shares: 8 July 2020 216,274 20,567,624 - - - - 20,783,898
Issue of ordinary £0.01 shares: 30 October 2020 66,955 7,030,276 - - - - 7,097,231
Issue of ordinary £0.01 shares: 16 December 2020 600,000 59,400,000 - - - - 60,000,000
Share issue costs - (1,844,233) - - - - (1,844,233)
Dividends paid - - - (8,070,152) - - (8,070,152)
Profit for the year - - - - 16,205,729 (1,611,035) 14,594,694
At 31 March 2021 1,438,717 107,713,725 186,656 17,446,348 21,226,187 (2,876,692) 145,134,941
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
20. Share capital and reserves (continued)
Share Issues
On 27 April 2021, the Company issued 132,352,941 ordinary Shares at a price of
102.00 pence per share, raising net proceeds from the Placing of
£132,125,301. Admission subsequently took place on 27 April 2021.
On 4 October 2021, the Company issued 68,811,220 ordinary Shares at a price of
107.00 pence per share, raising net proceeds from the Placing of £72,120,250.
Admission subsequently took place on 4 October 2021.
Following the approval at the Company's AGM on the 6 September 2021, the
Company made an application to the High Court, together with a lodgement of
the Company's statement of capital with the Registrar of Companies, the
Company was permitted to reduce the capital of the Company by an amount of
£40,000,000. This was affected on the 15 December 2021 by a transfer of that
amount from the share premium account to distributable reserves.
Ordinary shareholders are entitled to all dividends declared by the Company
and to all of the Company's assets after repayment of its borrowings and
ordinary creditors.
Ordinary shareholders have the right to vote at meetings of the Company. All
ordinary Shares carry equal voting rights.
The nature and purpose of each of the reserves included within equity at 31
March 2022 are as follows:
Share premium reserve: represents the surplus of the gross proceeds of share
issues over the nominal value of the shares, net of the direct costs of equity
issues and net of conversion amount.
Special reserve: represents a distributable reserve totalling the amount of
outstanding creditors at the date of the Company's approved reduction in
capital.
Capital reduction reserve: represents a distributable reserve created
following a Court approved reduction in capital.
Capital reserve: represents a non-distributable reserve of unrealised gains
and losses from changes in the fair values of investments as recognised in the
Capital account of the Statement of Comprehensive Income.
Revenue reserve: represents a distributable reserve of cumulative gains and
losses recognised in the Revenue account of the Statement of Comprehensive
Income.
The only movements in these reserves during the period are disclosed in the
Statement of Changes in Equity.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
21. Dividends
Dividend per share 31 March 31 March
2022 2021
(£) (£)
Dividends declared during the year
For the 3 month period ended 31 March 2020 1 pence - 771,761
For the 3 month period ended 30 June 2020 2 pence - 1,543,523
For the 3 month period ended 30 September 2020 2 pence - 2,877,434
For the 3 month period ended 31 December 2020 2 pence - 2,877,434
For the 3 month period ended 31 March 2021 1 pence 2,762,246 -
For the 3 month period ended 30 June 2021 2 pence 5,524,492 -
For the 3 month period ended 30 September 2021 2 pence 6,900,718 -
15,187,456 8,070,152
The table below sets out the proposed final dividend, together with the
interim dividends paid, in respect of the financial year, which is the basis
on which the requirements of Section 1158 of the Corporation Tax Act 2010 are
considered.
31 March 31 March
2022 2021
(£) (£)
Interim dividends for 2021 - 4 pence (2021: 6 pence) 12,425,210 7,298,391
Interim dividend - 2 pence 6,900,718 -
Proposed final dividend for 2022 - 1 pence (2021: 1 pence) 4,813,995 2,762,246
24,139,923 10,060,637
During the period, the Company declared and paid dividends totalling £15.18m
out of distributable reserves. The Companies Act 2006 requires public
companies where necessary to prepare and file relevant accounts with the
Registrar of Companies showing its distributable profits position if the last
filed accounts do not show sufficient distributable profits. It has come to
the attention of the Directors that the Company did not fully comply with
these requirements resulting in a technical infringement of the Companies Act
in respect of the payment of the interim dividends for the periods from 1 July
2021 to 30 September 2021 and 1 October 2021 to 31 December 2021. The matter
does not have any impact on the financial statements.
In order to address this situation a special resolution will be proposed at
the Company's forthcoming Annual General Meeting to authorise the
appropriation of distributable profits to the payment of the relevant
dividends and remove any right for the Company to pursue shareholders or
directors (the Director Release') for repayment. The Director Release will
constitute a smaller related party transaction under the Listing Rules of the
FCA. The overall effect of the special resolution being passed will be to
return all parties to the position they would have been in, had the relevant
dividends been made in full compliance with the Acts.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
22. Transactions with related parties
Following admission of the Ordinary Shares (refer to note 20), the Company and
the Directors are not aware of any person who, directly or indirectly,
jointly, or severally, exercises or could exercise control over the Company.
The Company does not have an ultimate controlling party.
Details of related parties are set out below:
Directors
During the year, it was agreed to increase each of the directors' renumeration
and as at 31 March 2021, Patrick Cox, Chair of the Board of Directors of the
Company, is paid a director's remuneration of £57,500 per annum, (2021:
£43,387), Caroline Banszky is paid a director's remuneration of £45,000 per
annum, (2021: £31,051) per annum, with the remaining directors' renumeration
of £40,000 per annum, (2021: £26,734).
Total director's remuneration of £182,500 and employment associated costs and
expenses of £21,509 were incurred in respect of the period with £6,669 being
outstanding and payable at the year end.
Investment Advisor
The Investment Advisor, Gore Street Capital Limited (the "Investment
Advisor"), is entitled to advisory fees under the terms of the Investment
Advisory Agreement amounting to 1% of Adjusted Net Asset Value. The advisory
fee will be calculated as at each NAV calculation date and payable quarterly
in arrears.
For the avoidance of doubt, where there are C Shares in issue, the advisory
fee will be charged on the Net Asset Value attributable to the Ordinary Shares
and C Shares respectively.
For the purposes of the quarterly advisory fee, Adjusted Net Asset Value
means:
(i) for the four quarters from First Admission, Adjusted Net Asset Value shall be
equal to Net Asset Value;
(ii) for the next two quarters, Adjusted Net Asset Value shall be equal to Net
Asset Value minus Cash on the Company's Statement of Financial Position, plus
any committed Cash on the Company's Statement of Financial Position;
(iii) thereafter, Adjusted Net Asset Value shall be equal to Net Asset Value minus
Cash on the Company's Statement of Financial Position.
During the year, the management agreement was amended to change the term of
adjusted NAV
to mean net asset value minus uncommitted cash. Uncommitted cash means all
cash on the Company's balance sheet other than committed cash. Committed cash
means cash that has been allocated for repayment of a liability on the balance
sheet of any member of the group. Investment advisory fees of £3,090,737
(2021: £1,029,876) were paid during the year, there were no outstanding fees
as at 31 March 2022, (2021: £nil outstanding).
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
22. Transactions with related parties (continued)
Investment Advisor
In addition to the advisory fee, the Advisor is entitled to a performance fee
by reference to the movement in the Net Asset Value of Company (before
subtracting any accrued performance fee) over the Benchmark from the date of
admission on the London Stock Exchange.
The Benchmark is equal to (a) the gross proceeds of the Issue at the date of
admission increased by 7 per cent. per annum (annually compounding), adjusted
for: (i) any increases or decreases in the Net Asset Value arising from issues
or repurchases of Ordinary Shares during the relevant calculation period; (ii)
the amount of any dividends or distributions (for which no adjustment has
already been made under (i)) made by the Company in respect of the Ordinary
Shares at any time from date of admission; and (b) where a performance fee is
subsequently paid, the Net Asset Value (after subtracting performance fees
arising from the calculation period) at the end of the calculation period from
which the latest performance fee becomes payable increased by 7 per cent. per
annum (annually compounded).
The calculation period will be the 12-month period starting 1 April and ending
31 March in each calendar year with the first year commencing on the date of
admission on the London Stock Exchange.
The performance fee payable to the Investment Advisor by the Company will be a
sum equal to 10 per cent. of such amount (if positive) by which Net Asset
Value (before subtracting any accrued performance fee) at the end of a
calculation period exceeds the Benchmark provided always that in respect of
any financial period of the Company (being 1 April to 31 March each year) the
performance fee payable to the Investment Advisor shall never exceed an amount
equal to 50 per cent of the Advisory Fee paid to the Investment Advisor in
respect of that period. Performance fees are payable within 30 days from the
end of the relevant calculation period. Performance fees of £1,545,369, were
accrued as at 31 March 2022, (2021: £496,461).
During the period the Investment Advisor provided operations management
services to SPV companies resulting in charges in the amount of £781,600
(2021: £686,025) being paid by the SPV companies to the Investment Advisor.
Notes to the Financial Statements (continued)
For the Year Ended 31 March 2022
23 Capital commitments
The Company together with its direct subsidiary, GSES1 Limited entered into
Facility and Security Agreements with Santander UK PLC in May 2021 for £15
million. Under these agreements, the Company acts as charger and guarantor to
the amounts borrowed under the Agreements by GSES1 Limited. As at 31 March
2022, no amounts had been drawn on this facility.
The Company had no contingencies and significant capital commitments as at the
31 March 2022.
24. Post balance sheet events
The Directors have evaluated the need for disclosures and / or adjustments
resulting from post balance sheet events through to 25 July 2022, the date the
financial statements were available to be issued.
The board approved on the 4 March 2022, the issuance of an interim dividend of
2 pence per share. This dividend totalling £6,900,718 was paid to investors
on the 1 April 2022. Post year-end, it has come to the attention of the
Directors that the Company did not fully comply with The Companies Act 2006
requirements resulting in a technical infringement in respect of the payment
of the interim dividends for the periods from 1 July 2021 to 30 September 2021
and 1 October 2021 to 31 December 2021. The matter does not have any impact on
the financial statements. In order to address this situation a special
resolution will be proposed at the Company's forthcoming Annual General
Meeting to authorise the appropriation of distributable profits to the payment
of the relevant dividends and remove any right for the Company to pursue
shareholders or directors (the Director Release') for repayment. The Director
Release will constitute a smaller related party transaction under the Listing
Rules of the FCA.
In April 2022, the Company issued a further 136m shares, raising gross
proceeds of £150 million.
Post year end, the Company acquired 4 assets in the US for USD 32.03m, three
operational projects and one in its construction phase. These combined assets
have a total capacity of 39.8MW with 30MW operational and are the Company's
first investment in the US.
There were no adjusting post balance sheet events and as such no adjustments
have been made to the valuation of assets and liabilities as at 31 March 2022.
25. Notes to Financial Statements
The financial information set out above does not constitute Company's
statutory accounts for the years ended 31 March 2022 or 2021 but is derived
from those accounts. Statutory accounts for 2021 have been delivered to the
Registrar of Companies, and those for 2022 will be delivered in due course.
The auditor has reported on those accounts; their reports were (i)
unqualified, (ii) did not include a reference to any matters to which the
auditor drew attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of the
Companies Act 2006.
Directors and Advisors
Directors Administrator Independent Valuer
Patrick Cox - Chair Sanne Fiduciary Services (UK) Limited BDO LLP
Caroline Banszky 6(th) Floor 55 Baker Street
Malcolm Robert King 125 London Wall London
Thomas Scott Murley London W1U 7EU
EC2Y 5AS
Registered office Ticker: GSF
The Scalpel, 18th Floor Company Secretary
52 Lime Street JTC (UK) Limited Independent Auditor
London The Scalpel, 18th Floor Ernst & Young LLP
EC3M 7AF 52 Lime Street 144 Morrison Street
London Edinburgh
AIFM EC3M 7AF EH3 8EX
Gore Street Capital Limited United Kingdom
16-17 Little Portland Street Registrar and Receiving Agent
First Floor Computershare Investor Services Plc LEGAL ADVISOR
London The Pavilions Stephenson Harwood LLP
W1W 8BP Bridgewater Road 1 Finsbury Circus
Bristol London
Investment Manager BS13 8AE EC2M 7SH
Gore Street Capital Limited
16-17 Little Portland Street Sponsor and Joint Corporate Broker
First Floor Shore Capital
London Cassini House
W1W 8BP 57 St James Street
London
Joint Corporate Broker SW1A 1LD
J.P. Morgan Cazenove
Floor 29
25, Bank Street Depositary
London INDOS Financial Limited
E14 5JP St Clements House
27-28 Clements Lane
London
EC4N 7AE
1 (#_ftnref1) For March-end 2022, based on Adjusted NAV. Adjusted NAV is
calculated as the NAV per the Statement of Financial Position adjusted for the
interim dividend relating to the December 2021 quarter of £6.9m or 2.0 pence
per share, which was declared in March 2022 but paid post period end on 1
April 2022.
2 (#_ftnref2) For March-end 2022, based on Adjusted NAV. Adjusted NAV is
calculated as the NAV per the Statement of Financial Position adjusted for the
interim dividend relating to the December 2021 quarter of £6.9m or 2.0 pence
per share, which was declared in March 2022 but paid post period end on 1
April 2022
3 (#_ftnref3) Dividend coverage means the number of times the Company could
pay dividends to its common shareholders using its net income over the fiscal
year. The Company's dividend coverage from the EBITDA of its operational
portfolio exceeds the coverage achieved based on Company-level EBITDA because
it excludes fund-level expenses
4 (#_ftnref4) The 628.5 MW include the additional 60.0 MW of grid capacity
approved for Porterstown (announced March 2021) and a further 90.0 MW of
capacity for Kilmannock (announced November 2021). It does not account for the
four US acquisitions completed in April 2022, post year-end
5 (#_ftnref5) As of the publication date
6 (#_ftnref6) The 668 MW portfolio includes the four assets totalling 39.8
MW in Texas, US, acquired from Perfect Power Solutions in April 2022.
7 (#_ftnref7) Operational management services are provided to the Company by
Gore Street Operational Management Limited through its subsidiary, Gore Street
Operational Management Limited (the "Operations Manager" or "GSOM"), a
subsidiary of the Investment Manager.
8 (#_ftnref8) Formerly Gore Street Technical Management Limited.
9 (#_ftnref9) The Investment Manager and Operations Manager are collectively
referred to as the "Manager".
10 (#_ftnref10) The increase in the percentage of non-UK and Irish
investments from 40 per cent. of Gross Asset Value, to 60 percent of GAV (in
each case calculated at the time of investment) was approved by shareholders
in the April 11, 2022, General Meeting
11 (#_ftnref11) Effective for the quarter to 31 March 2022, the annual
target dividend will increase by 0.5 pence increments per Ordinary Share based
on a certain progression of the average Net Asset Value per Ordinary Share in
any financial year above 100 pence (subject to rounding). For illustrative
purposes only: if the average Net Asset Value per Ordinary Share during a
financial year is 107 pence per Ordinary Share or greater (but less than 114
pence) the target dividend for that financial year will be 7.5 pence per
Ordinary Share; if the average Net Asset Value per Ordinary Share during a
financial year is 114 pence per Ordinary Share or greater (but less than 121
pence) the target dividend for that financial year will be 8.0 pence per
Ordinary Share; and if the average Net Asset Value per Ordinary Share during a
financial year is 121 pence per Ordinary Share or greater (but less than 128
pence) the target dividend for that financial year will be 8.5 pence per
Ordinary Share.
(( 12 (#_ftnref12) )) Bloomberg NEF, July 2021. '2H 2021 Energy Storage
Market Outlook. Leap Ahead'.
13 (#_ftnref13) GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to as the
'Company's portfolio' or 'GSF's portfolio').
14 (#_ftnref14) as of the date of publication.
15 (#_ftnref15) Further details on the Company's market share are explained
in the 'Market Share' section below.
16 (#_ftnref16) The November 2020 Placing Programme was for 250 million
shares of which 60 million shares were issued in December 2020, leaving 190
million shares available under the Programme during the fiscal year.
17 (#_ftnref17) The Initial Issues consists of the Initial Placing, Initial
Offer for Subscription and Initial Intermediaries Offer.
18 (#_ftnref18) The site is fully energized and now waiting for confirmation
on contract commencement.
19 (#_ftnref19) Assuming seller specifications.
(( 20 (#_ftnref20) )) Note on Market Capitalisation: Closing Share Price
of 113.0 pence as of 31
March 2022. The Market Capitalisation reported does not account for
the 136,363,636 new shares admitted post-reported period on 14 April
2022.
Note on Annual Dividend: A total of 7.0 pence in dividends were declared for
the financial year: 4.0 pence in dividends were paid in the financial year and
2.0 pence in dividends have been paid as at the date of publication. The
remaining 1.0 pence shall be paid in August 2022.
Note on Total Share Returns since IPO: On a share price basis. Calculated as
the difference between the closing share price as at 31 March 2022 and
share price at IPO, plus dividends paid or declared since IPO divided
by share price at IPO (113p-100p+24p)/100p)*100. This is an alternative
performance measure.
Note on the Adjusted NAV: Adjusted NAV is calculated as the NAV per the
Statement of Financial Position adjusted for the interim dividend relating to
the December 2021 quarter of £6.9m or 2.0 pence per share, which was declared
in March 2022 but paid post period end on 1 April 2022.
Note on NAV per Share: Calculated as Total Adjusted NAV divided by the total
number of shares.
Note on NAV Total Increase since IPO: Calculated as the difference between the
closing Adjusted NAV per share as at 31 March 2022 and
opening. NAV per share at IPO, plus dividends declared since IPO divided by
opening NAV at IPO (107.1-97.7p+24p)/97.7p)*100. This is an alternative
performance measure.
(( 21 (#_ftnref21) )) Note on market capitalisation increase: calculated
between 31 March 2021 and 14 April 2022 (the admission date for April 2022
fundraise).
22 (#_ftnref22) Net Asset Total Return is calculated as the change in the
Company's Net Asset value plus the dividend declared in the period.
(( 23 (#_ftnref23) )) The 310 MW include the 90 MW capacity expansion for
Kilmannock secured with EirGrid in the fiscal year, as well as the previously
secured 60 MW expansion for Porterstown, in March 2021.
24 (#_ftnref24) Sales and Purchase Agreement (SPA) have been signed for
eight assets in Texas, US, as per the Company announcement on 10 March 2022.
Nonetheless, the transfer of ownership was completed for only four of the
assets as of publication date and post year-end, in April 2022. The Investment
Manager expects to complete the acquisition of the remaining four assets in
the coming months once the various condition precedents have been met.
25 (#_ftnref25) Note on Battery Integrators: companies involved in system
assembly, design, and commissioning of energy storage projects. The system
integrator often serves as the EPC contractor for the asset and designs the
battery storage system for the asset. Please note that LG Chem includes former
NEC ES.
26 (#_ftnref26) The System Operator for Northern Ireland (SONI) and EirGrid,
plc, the state-owned electric power transmission operator in Ireland. The
electricity market in Ireland is common between the ROI and NI, under the
Integrated Single Electricity Market (I-SEM).
27 (#_ftnref27) The primary ancillary service in Germany (Frequency
Containment Reserve) is regionally procured between eight European and eleven
associated TSOs.
28 (#_ftnref28) The services the Company provides, their respective sources
of revenue, and further characteristics of the markets wherein the Company
operates, are further explained in the 'Market Background and Sources of
Revenue' section in this report.
29 (#_ftnref29) Cremzow acquisition was completed on 3 March 2022 but
cashflow transfer to the Company commenced as of 1 January 2022. For the
purpose of this illustration, the graph includes revenue relative to January,
February, and March. The ERCOT acquisitions were completed post reported
period but cashflow transfer to the Company commenced as of 1 March 2022. For
the purpose of this illustration, the graph includes revenue relative to
March.
30 (#_ftnref30) Projections are not indicative of future results.
Projections do not assume any new acquisitions have been made this year.
31 (#_ftnref31)
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1033990/net-zero-strategy-beis.pdf
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1033990/net-zero-strategy-beis.pdf)
32 (#_ftnref32)
https://www.gov.ie/en/press-release/9336b-irelands-ambitious-climate-act-signed-into-law/
(https://www.gov.ie/en/press-release/9336b-irelands-ambitious-climate-act-signed-into-law/)
33 (#_ftnref33)
https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/#:~:text=Building%20on%20and%20benefiting%20from,economy%20by%20no%20later%20than
(https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/#:~:text=Building%20on%20and%20benefiting%20from,economy%20by%20no%20later%20than)
34 (#_ftnref34)
https://www.bloomberg.com/news/articles/2022-02-28/germany-brings-forward-goal-of-100-renewable-energy-to-2035
(https://www.bloomberg.com/news/articles/2022-02-28/germany-brings-forward-goal-of-100-renewable-energy-to-2035)
35 (#_ftnref35) Note this market share is based on GSF awarded MW out of the
total awarded MW for DC and FFR in Great Britain for the 2021/2022 fiscal
year.
36 (#_ftnref36) The DS3 system services are procured by EirGrid and SONI
under two separate procurement routes: (i) volume uncapped procurement, also
known as the regulated arrangements; and (ii) volume capped procurement, also
known as fixed contract procurement. For uncapped agreements, market share
considers NI procured volumes only, as EirGrid procures volumes separately for
ROI and NI. This market share based on July 2021 data. No further data is
available from EirGrid/SONI. Provided there is more volume procured, this per
centage will change.
37 (#_ftnref37) Market share calculated based on DS3 uncapped contracts for
FFR, POR, SOR, TOR1, TOR2 and SSRP.
38 (#_ftnref38) Market share calculated based on DS3 capped contracts
awarded in 2019. The Asset providing services under the DS3 capped contract
started generating income after the reported period, in July 2022
39 (#_ftnref39) Note on methodology: for Germany and US (Texas) market share
is expressed in terms of total installed capacity. German battery energy
storage systems' market capacity is estimated at 619 MW, considering batteries
> 1 MWh, according to 'The development of battery storage systems in
Germany - a market review (status 2022)', Jan Figgener et al., RWTH Aachen
University. For ERCOT, battery energy storage systems' market capacity is
estimated as 1,007 MW based on Ascend Analytics ERCOT Market Report.
(( 40 (#_ftnref40) )) Cremzow acquisition was completed on 3 March 2022, and
it had a locked box date as of 1 January, which translates into all Assets'
profits directed to the Company from locked box date. For the purpose of this
illustration, the graph includes revenue and EBITDA relative to January,
February, and March. US, Texas acquisitions were completed post-reported
period and had a locked box date as of 1 March, which translates into all
three operating Assets' profits directed to the Company from locked box date.
For the purpose of this illustration, the graph includes revenue and EBITDA
relative to March. Projections are not indicative of future results. Note on
timeline: This timeline is based on events occurred after 31 March 2022 and
incudes estimates to the best of the Investment Manager's knowledge.
41 (#_ftnref41) Cremzow acquisition was completed on 3 March 2022, and it
had a locked box date as of 1 January, which translates into all Assets'
profits directed to the Company from locked box date. For the purpose of this
illustration, the graph includes revenue relative to the months of January,
February, and March. The US acquisitions in Texas were completed post-reported
period and had a locked box date as of 1 March 2022, which translates into all
three operating Assets' profits directed to the Company from this locked box
date. For the purpose of this illustration, the graph includes revenue
relating to March only for these US assets, hence its reduced revenue/MW
figures.
42 (#_ftnref42) Note on Ancala: The Ancala asset comprises 10 smaller sites
of 1.0 MW - 1.2 MW across the UK. The pin location represents Brook Hall, one
of the assets within Ancala.
Note on US assets: consist of three operational assets and one
pre-construction asset located in Texas, US.
Note on ROI Assets: Both projects in ROI have been granted capacity expansions
by EirGrid, resulting in an additional 60.0 MW for Porterstown and an
additional 90.0 MW Kilmannock, indicated as 'Phase 2' in each case above.
43 (#_ftnref43) GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to as the
'Company's portfolio' or 'GSF's portfolio').
44 (#_ftnref44) Sales and Purchase Agreement (SPA) have been signed for
eight assets in Texas, US, as per the Company announcement on 10 March 2022.
Nonetheless, the transfer of ownership was completed for only four of the
assets as of publication date and post year-end, in April 2022. The Investment
Manager expects to complete the acquisition of the remaining four assets in
the coming months once the various condition precedents have been met.
45 (#_ftnref45) Note on 6.2 pence per share: based on Adjusted NAV. Adjusted
NAV is calculated as the NAV per the Statement of Financial Position adjusted
for the interim dividend relating to the December 2021 quarter of £6.9m or
2.0 pence per share, which was declared in March 2022 but paid post-period end
on 1 April 2022. Note on Annual Dividend: A total of 7.0 pence in dividends
were declared for the financial year: 4.0 pence in dividends were paid in the
financial year and 2.0 pence in dividends have been paid as of the date of
publication. The remaining 1.0 pence shall be paid in August 2022.
46 (#_ftnref46) Adjusted NAV: Adjusted NAV is calculated as the NAV per the
Statement of Financial Position adjusted for the interim dividend relating to
the December 2021 quarter of £6.9m or 2.0 pence per share, which was declared
in March 2022 but paid post-period end on 1 April 2022.
47 (#_ftnref47) As per March 2022 Dividend policy, the Company will target
dividends in respect of the Ordinary Shares in each financial year based on a
7 per cent. yield on the average Net Asset Value per Ordinary Share during
that financial year, subject to a minimum target of 7 pence per Ordinary Share
in each financial year. The annual target dividend will increase by 0.5 pence
increments per Ordinary Share based on a certain progression of the average
Net Asset Value per Ordinary Share in any financial year above 100 pence
(subject to rounding).
48 (#_ftnref48) Adjusted NAV of March 2022 compared to NAV 2021. Adjusted
NAV is calculated as the NAV per the Statement of Financial Position adjusted
for the interim dividend relating to the December 2021 quarter of £6.9m or
2.0 pence per share, which was declared in March 2022 but paid post period end
on 1 April 2022.
49 (#_ftnref49) Through its subsidiary, Gore Street Operational Management
Limited, the Investment Manager oversees the construction, and management of
the Company's operations post acquisition, and is responsible for the
supervision of asset construction, asset management, fault correction, and
revenue optimisation strategies across the portfolio.
50 (#_ftnref50) The 668 MW portfolio includes the four assets totalling 39.8
MW in Texas, US, acquired from Perfect Power Solutions in April 2022.
51 (#_ftnref51) The site is fully energized and now waiting for confirmation
on contract commencement.
52 (#_ftnref52)
https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1033990/net-zero-strategy-beis.pdf
(https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1033990/net-zero-strategy-beis.pdf)
53 (#_ftnref53)
https://www.gov.ie/en/press-release/9336b-irelands-ambitious-climate-act-signed-into-law/
(https://www.gov.ie/en/press-release/9336b-irelands-ambitious-climate-act-signed-into-law/)
54 (#_ftnref54)
https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/#:~:text=Building%20on%20and%20benefiting%20from,economy%20by%20no%20later%20than
(https://www.whitehouse.gov/briefing-room/statements-releases/2021/04/22/fact-sheet-president-biden-sets-2030-greenhouse-gas-pollution-reduction-target-aimed-at-creating-good-paying-union-jobs-and-securing-u-s-leadership-on-clean-energy-technologies/#:~:text=Building%20on%20and%20benefiting%20from,economy%20by%20no%20later%20than)
55 (#_ftnref55) Panorama - Germany raises the bar on renewable energy with
new set of laws for 100 percent renewable power - Renewable Energy Magazine,
at the heart of clean energy journalism
(https://www.renewableenergymagazine.com/panorama/germany-raises-the-bar-on-renewable-energy-20220414)
56 (#_ftnref56) Further details on the Company's market share are explained
in the 'Market Share' section below.
57 (#_ftnref57) Availability expressed as the percentage of hours without
unexpected technical issues or maintenance preventing operation.
58 (#_ftnref58) Note on methodology: for Germany and US (Texas) market share
is expressed in terms of total installed capacity. German battery energy
storage systems' market capacity is estimated at 619 MW, considering batteries
> 1 MWh, according to 'The development of battery storage systems in
Germany - a market review (status 2022)', Jan Figgener et al., RWTH Aachen
University. For ERCOT, battery energy storage systems' market capacity is
estimated as 1007 MW based on Ascend Analytics ERCOT Market Report.
59 (#_ftnref59) FCA (2021): "We are considering the European Commission's
Sustainable Finance Disclosure Regulation and proposed Regulatory Technical
Standards as we develop our policy design for the FCA's implementation actions
under the Government's proposed SDR". ('A strategy for positive change: our
ESG priorities'. Available at:
https://www.fca.org.uk/publications/corporate-documents/strategy-positive-change-our-esg-priorities#lf-chapter-id-executive-summary
(https://www.fca.org.uk/publications/corporate-documents/strategy-positive-change-our-esg-priorities#lf-chapter-id-executive-summary)
60 (#_ftnref60) FCA (2021): "We are considering the European Commission's
Sustainable Finance Disclosure Regulation and proposed Regulatory Technical
Standards as we develop our policy design for the FCA's implementation actions
under the Government's proposed SDR". ('A strategy for positive change: our
ESG priorities'. Available at:
https://www.fca.org.uk/publications/corporate-documents/strategy-positive-change-our-esg-priorities#lf-chapter-id-executive-summary
(https://www.fca.org.uk/publications/corporate-documents/strategy-positive-change-our-esg-priorities#lf-chapter-id-executive-summary)
61 (#_ftnref61) In 2021 imports from Russia made up only 4% of gas used in
the UK, 9% of oil and 27% of coal.
62 (#_ftnref62) GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to as the
'Company's portfolio' or 'GSF's portfolio').
63 (#_ftnref63) As per the Circular published to shareholders on 22 March
2022
64 (#_ftnref64) As of the date of publication
65 (#_ftnref65) GSES 1 Limited is a wholly owned subsidiary of the Company,
and it is the entity that holds the Company's Assets (referred to as the
'Company's portfolio' or 'GSF's portfolio'. The 26 assets and 16 portfolio
companies do not account for the four US acquisitions (Snyder, Westover,
Sweetwater, and Mineral Wells) completed in April 2022, as this falls outside
of the fiscal year. Signature of Purchase agreement was announced on the
10(th) of March 2022
66 (#_ftnref66) The Cremzow acquisition was completed on 3 March 2022,
however the revenues for the asset were held in a locked box since 1 January
2022 and are payable to the Company.
67 (#_ftnref67) The Company expects to complete the acquisition of the
remaining four assets in the coming months once the various condition
precedents have been met.
68 (#_ftnref68) Acquisition of the sites closed in April 22 with a locked
box date on 1 March 2022.
69 (#_ftnref69) The site fully energized and now waiting for confirmation on
contract commencement.
70 (#_ftnref70) Including grid connection date.
71 (#_ftnref71) Expected capex (including development fee, grid connections
costs and EPC) committed but yet to be deployed.
72 (#_ftnref72) Note on timeline: This timeline assumes events occurred
after 31 March 2022 and includes estimates to the best of the Investment
Manager's knowledge.
73 (#_ftnref73) Investment Manager and Operations Manager collectively
referred to as the Manager.
74 (#_ftnref74) Note on timeline: This timeline is based on events occurred
after 31 March 2022 and includes estimates to the best of the Investment
Manager's knowledge.
(( 75 (#_ftnref75) ))The Cremzow acquisition was completed on 3 March 2022
with commercial transfer effective as of 1 January 2022. The graph assumes 100
per cent availability between January and March 2022 for illustrative purposes
only. The Texas acquisitions were completed post-reported period with
commercial transfer effect as of 1 March 2022. The graph assumes 100%
availability for the Texan assets in March.
76 (#_ftnref76) Availability expressed as the percentage of hours without
unexpected technical issues or maintenance preventing operation.
77 (#_ftnref77) Third-party service provider for Engineering, Procurement
and Construction (EPC).
78 (#_ftnref78) Triad revenue is only available to the Company's
behind-the-meter sites, which are Boulby and Port of Tilbury, thus only these
two sites are included in the /MW and /MWh calculations.
79 (#_ftnref79) The US acquisitions in Texas were completed post reported
period and had a locked box date as of 1 March 2022, which translates into all
three operating Assets' profits directed to the Company from this locked box
date. For the purpose of this illustration, the table includes revenue
relating to 1 March to 31 March 2022
80 (#_ftnref80) Assuming average rate of exchange as of April 2022.
81 (#_ftnref81) Project availability and service allocation is presented as
a percentage of total hours within the period. Note on Capacity Market:
revenue is not including the percentage allocation of project delivery hours.
Capacity Market revenue is stackable with all other revenue streams as the
Company is paid to be available to deliver this service whilst delivering
other revenue streams.
82 (#_ftnref82) Past performance is not indicative of future performance.
83 (#_ftnref83) From November 2021 onwards, National Grid has split DC
between DC high and DC Low (DCH and DCL). For simplifications purposes, we
refer to DC prices throughout the year, with DC prices being the average of
the sum of DCH and DCL after November 2021. Figure indicates price levels
contracted by GSF.
84 (#_ftnref84) Modo Leadership Board, 2021
85 (#_ftnref85) Aurora Energy Research Ltd, 2021.
86 (#_ftnref86) Project availability and service allocation is presented as
a percentage of total hours within the period.
87 (#_ftnref87) There are two types of electricity generation: synchronous
generation and non-synchronous generation. Non-synchronous generation produces
a different amount of electricity depending on the energy available. Most
renewable forms of energy, such as wind and solar, are types of
non-synchronous generation.
88 (#_ftnref88)
https://www.gsenergystoragefund.com/content/news/archive/2019/041019
(https://www.gsenergystoragefund.com/content/news/archive/2019/041019)
89 (#_ftnref89) Under the terms of the DS3 Capped Contract, in circumstances
where the date of energization is delayed by the TSO, the contract term will
be maintained, and contract commencement delayed until the date of
energization by the TSO.
90 (#_ftnref90) Operational site closed in March 22 with a locked box date
on 1 January 2022.
91 (#_ftnref91) Past performance is not indicative of future results.
92 (#_ftnref92) Project availability and service allocation is presented as
a percentage of total hours within the period. Note on Capacity Market:
revenue is not including the percentage allocation of project delivery hours.
Capacity Market revenue is stackable with all other revenue streams as the
Company is paid to be available to deliver this service whilst delivering
other revenue streams.
93 (#_ftnref93) US, Texas acquisitions were completed post-reported period
and had a locked box date as of 1 March 2022, which translates into all three
operating Assets' profits directed to the Company from locked box date.
94 (#_ftnref94) Data is for the period of 1st April 2022 to 12th July 2022.
95 (#_ftnref95) Project availability and service allocation is presented as
a percentage of total hours within the period. Note on Capacity Market:
revenue is not including the percentage allocation of project delivery hours.
Capacity Market revenue is stackable with all other revenue streams as the
Company is paid to be available to deliver this service whilst delivering
other revenue streams.
96 (#_ftnref96) Dividend coverage means the number of times the
Company could pay dividends to its common shareholders using its net income
over the fiscal year. The Company's dividend coverage from the EBITDA of its
operational portfolio exceeds the coverage achieved based on Company-level
EBITDA because it excludes fund-level expenses.
97 (#_ftnref97)
https://www.linkedin.com/posts/modo-energy_november-leaderboard-roundtable-activity-6874279809028038656-5p4h/
(https://www.linkedin.com/posts/modo-energy_november-leaderboard-roundtable-activity-6874279809028038656-5p4h/)
98 (#_ftnref98) Note on timeline: This timeline is based on events occurred
after 31 March 2022 and includes estimates to the best of the Investment
Manager's knowledge.
99 (#_ftnref99) Note on timeline: This timeline is based on events occurred
after 31 March 2022 and includes estimates to the best of the Investment
Manager's knowledge.
100 (#_ftnref100) T-1 auction occur a year ahead of the delivery year, T-4
auctions occur four years ahead of the delivery year.
101 (#_ftnref101) Source: Modo, 2021.
102 (#_ftnref102) Construction discount rates vary based on programme status
and lead time. Similar to *
103 (#_ftnref103) Uncontracted revenue rates vary in accordance with market
maturity. Contracted revenue rates vary by counterparty Similar to **
104 (#_ftnref104) Share price at March 2022: post publication of Share
issuance programme circular, released on 29 March 2022.
105 (#_ftnref105) For the 31 March 2022, it was assumed the Adjusted NAV
106 (#_ftnref106) A total of 7.0 pence in dividends were declared for the
financial year: 4.0 pence in dividends were paid in the financial year and 2.0
pence in dividends have been paid as the date of publication. The remaining
1.0 pence shall be paid in August 2022.
107 (#_ftnref107) IPCC_AR6_WGIII_FinalDraft_FullReport.pdf
(https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf)
pg 995
108 (#_ftnref108) IPCC_AR6_WGIII_FinalDraft_FullReport.pdf
(https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf)
pg 80
109 (#_ftnref109) Panorama - Germany raises the bar on renewable energy with
new set of laws for 100 percent renewable power - Renewable Energy Magazine,
at the heart of clean energy journalism
(https://www.renewableenergymagazine.com/panorama/germany-raises-the-bar-on-renewable-energy-20220414)
110 (#_ftnref110) Department for Business, Energy & Industrial Strategy
and The Rt Hon Kwasi Kwarteng MP, 2021. 'Plans unveiled to decarbonise UK
power system by 2035'. Available at:
https://www.gov.uk/government/news/plans-unveiled-to-decarbonise-uk-power-system-by-2035
(https://www.gov.uk/government/news/plans-unveiled-to-decarbonise-uk-power-system-by-2035)
111 (#_ftnref111) IPCC_AR6_WGIII_FinalDraft_FullReport.pdf
(https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf)
pg. 116
112 (#_ftnref112) IPCC_AR6_WGIII_FinalDraft_FullReport.pdf
(https://report.ipcc.ch/ar6wg3/pdf/IPCC_AR6_WGIII_FinalDraft_FullReport.pdf)
pg. 37
113 (#_ftnref113)
https://www.eirgridgroup.com/newsroom/electricity-grid-to-run-o/#:~:text=07%20April%202022,project%20by%20grid%20operator%20EirGrid
(https://www.eirgridgroup.com/newsroom/electricity-grid-to-run-o/#:~:text=07%20April%202022,project%20by%20grid%20operator%20EirGrid)
114 (#_ftnref114) Per Regulation (EU) 2019/2088 on sustainability-related
disclosures in the financial services sector. Please see the Company's website
for further information.
115 (#_ftnref115)
https://www.unpri.org/about-us/what-are-the-principles-for-responsible-investment
116 (#_ftnref116) The Company has circa £2m in debt drawn on a £15m
facility.
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