REG - Gore Street Energy - Half-year Report and amendments to AIFM agreement
16/12/2022 07:00
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RNS Number : 9143J Gore Street Energy Storage Fund PLC 16 December 2022
Gore Street Energy Storage Fund Plc
('GSF' or the 'Company')
Half Year Results
Amendments to AIFM agreement and Commercial Management Agreement
Gore Street Energy Storage Fund plc (ticker: GSF), London's first listed
energy storage fund supporting the transition to low carbon power in the UK
and internationally, today announces its Half-Year Unaudited results for the
six-month period to 30 September 2022.
Financial Highlights as of 30 September 2022
· NAV increased by 45% from £369.6 million(1) in March 2022 to
£534.79 million as at September 2022
· NAV per share(2) increased 3.7% to 111.1 pence (31 March 2022: 107.1
pence)
· NAV Total Return of 4.65% for the six months ended 30 September 2022
· Market Capitalisation increased to £529.54 million as at 30
September 2022 (31 March 2022: £369.58 million)
· Quarterly dividends for the period of 4.0 pence per share, in line
with the 7% of NAV target (a total of 4.0 pence in dividends were announced
for the period. A total of 3p was paid during the period, 2p relating to the
December 2021 quarter, and 1p relating to the March 2022 quarter) (4)
· In April 2022, the Company raised £150.0 million in an upscaled and
oversubscribed issuance
o Issued Share Capital (ISC) increased to 481.4 million (31 March 2022: 345.0
million)
· Earnings per share (basic and diluted) of 4.81 pence as at 30
September 2022 (30 September 2021: 4.20 pence)
Operational Highlights as of 30 September 2022
· Average discount rate increased by 1% across the portfolio due to
higher interest rates generally in the UK, reflecting a weighted average
discount of 9.3%. Short-term inflation assumptions have also been updated to
reflect the current economic environment.
· Total portfolio (inclusive of grid expansion grants) increased to
698.2 MW (31 March 2022: 628.5 MW)
· Total operational assets increased to 16 projects, with a total
capacity of 291.6 MW across four grids (31 March 2022: 12 projects with 231.7
MW capacity)
· Completed acquisition of three 9.95 MW operational and four 9.95 MW
pre-construction assets in the ERCOT market of Texas, United States
· Successful commissioning of the 30 MW Porterstown phase I project
near Dublin, Ireland. The asset commenced generating cash flow in July 2022
under a DS3 capped contract
· Final consents for phase II, adding an additional 60 MW, is expected
to be completed before the end of the calendar year
· The operational fleet performed well during the period.
Post Period-end Highlights
· Acquisition of one of the largest energy storage assets in Europe; a
200 MW transmission-connected construction ready project in Heysham,
North-west England. Post-acquisition, the total portfolio capacity increased
to 898.2 MW
· As of the publication date, the Company's portfolio consisted of 25
projects, consisting of 898 MW of utility-scale energy storage assets across
the UK, the Republic of Ireland, Germany and the United States, of which 291.6
MW was operational, and 606.6 MW are at varying stages of construction
· The Company is actively reviewing opportunities in GB, Ireland,
Australia, Continental Europe and the US. The total pipeline stands at 1.5 GW
with 764 MW under exclusivity
· In the Irish market "EirGrid", the Company now has 310 MW of
capacity, the largest portfolio of Irish assets available in the public market
· The Company's portfolio now benefits from geographical
diversification across four high-growth markets, having entered the North
American markets during the fiscal year
Dividend Payment
In line with the Company's dividend policy, it will pay a 2.0 pence per share
dividend on or around 13 January 2023 to shareholders on the register on 30
December 2022. The ex-dividend date will be 29 December 2022.
Amendments to AIFM Agreement and Commercial Management Agreement
Following a review, the Company has agreed with the Investment Manager and its
subsidiary, Gore Street Operational Management Limited (the "Operations
Manager"), that with effect from 16 December 2022, the AIFM Agreement between
the Company and the Investment Manager and the Commercial Management Agreement
("CMA") between the Company and the Operations Manager will be amended. The
notice period under the CMA has been increased from 6 months to 12 months in
order to align with the notice period under the AIFM Agreement. Amendments
have also been made to both agreements: (i) to provide that in the specific
event of a takeover offer for the Company becoming wholly unconditional, the
agreements will terminate automatically with no requirement for notice to be
served; and (ii) to prescribe certain fees that will then become payable to
the Investment Manager and the Operations Manager on such termination. Any
fees in addition to the notice period that may become payable to the
Investment Manager and the Operations Manager in the event of a takeover offer
becoming wholly unconditional as a result of these contractual amendments are
capped in aggregate at below 5 per cent. of the Company's NAV at the relevant
time. Further details of the amendments, including the calculation of any exit
performance fee or minimum takeover fee that may become payable are set out in
the below and on page 26 of the half year report for the six months ended 30
September 2022.
The Investment Manager and any members of its group, which includes the
Operations Manager, are related parties of the Company for the purpose of the
FCA's Listing Rules. Based on the amounts involved, the changes to the AIFM
Agreement and CMA constitute a smaller related party transaction as set out in
the FCA's Listing Rule 11.1.10R. Further details are set out below and on page
26 of the half year report for the six months ended 30 September 2022.
CEO of Gore Street Capital, the investment adviser to the Company, Alex
O'Cinneide, commented:
"I am pleased to report another successful period of growth as we continue to
deliver on our strategic objectives of providing an attractive level of
returns to shareholders despite the changing macro inflationary environment
through providing an essential service enabling the renewable transition and
enhancing energy security. The portfolio grew significantly during the period,
with total capacity reaching nearly 900 MW in aggregate post-period end, of
which 291 MW is operational and generating strong cash flow for the Company.
A recent focus has been to diversify the portfolio through acquiring assets in
new territories, which we are pleased to have executed successfully, with the
acquisition of assets in both the US and Germany this year. In our view, this
strategy of avoiding single-country risk is of even more benefit to our
shareholders, given recent macroeconomic events.
During the period, we successfully completed an oversubscribed placing,
raising £150 million in April. The demand seen highlights both the
institutional and retail interest for access to companies which have a major
role in enabling the transition towards a net-zero economy, and the
increasingly large and attractive number of opportunities in our pipeline,
totalling 1.5 GW.
Post-period end, we acquired the Company's largest construction-ready asset to
date, the 200 MW transmission-connected project from Kona Energy, further
strengthening the Company's leadership position in the GB market. We are
highly encouraged by an asset of this scale being connected to the main
transmission network, which we expect will provide additional revenue streams.
I thank shareholders for their continued support and look forward to updating
investors on our progress."
1. (Adjusted NAV is calculated as the NAV per the Statement of Financial Position
as at 31 March 2022 adjusted for the interim dividend relating to the December
2021 quarter of £6.9 million, which was declared in March 2022 but paid
post-period end on 1 April 2022. This is an alternative performance measure.)
2. (Note on NAV per Share: Calculated as Total NAV divided by the total number of
shares in issue.)
3. (Note on NAV Total Return: Calculated as the difference between the NAV at 30
September 2022 and NAV at 30 September 2021, plus dividends paid for the
period divided by opening NAV at 30 September 2021 ((111.1 –
103.3+7)/103.3)4.100). This is an alternative performance measure.)
5. (See note 11 to the Financial Statements for further details.)
The half year report will shortly be available to download from the Company's
website www.gsfenergystoragefund.com (http://www.gsfenergystoragefund.com) .
Please click on the following link to view the document:
http://www.rns-pdf.londonstockexchange.com/rns/9143J_1-2022-12-15.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9143J_1-2022-12-15.pdf)
The Company has also submitted its half year report to the National Storage
Mechanism and it will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism.
Enquiries:
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 7 408 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: Gorestreet@buchanan.uk.com
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 an 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.
Half Year Report of Gore Street Energy Storage Fund Plc
For the six months ended 30 September 2022
Highlights and Key Metrics
Key Metrics
As of 30 September 2022
MARKET CAPITALISATION(1)
£529.54 million
DIVIDEND FOR THE PERIOD(2)
4.0p
SHARE PRICE TOTAL RETURN(3)
for the six months ended 30 September 2022
0.00%
NAV
£534.79 million
NAV PER SHARE(6)
111.1p
NAV TOTAL RETURN(4)
for the six months ended 30 September 2022
4.65%
Table 1: Key Metrics As at As at
30 September 2022 31 March 2022
Net Asset Value (NAV) £534.79m £369.58m(5)
NAV per share(6) 111.1p 107.1p
NAV Total Return(7) 14.3% 13.1%
Number of issued Ordinary shares 481.40m 345.04m
Share price based on closing price of indicated date 110p 113p
Discount/Premium to NAV(8) (1.0%) 5.5%
Market capitalisation based on closing price at indicated date(1) £529.54m £389.9m
Portfolio's total capacity 698.25MW 628.5 MW
Dividends announced(9) 4.0p 7.0p
Share Price Total return for the six months ended 30 September 2022(3) 0.0%
NAV Total Return for the six months ended 30 September 2022(4) 4.65%
1 Note on Market Capitalisation: closing share price of 110 pence as
of 30 September 2022. The total number of shares of 481.4 million.
2 Note on Interim Dividend: A total of 4.0 pence in dividends was
declared for the period between March and September 2022.
3 Note on Share Price Total Return for the six months ended 30
September 2022: Calculated as the difference between the closing share price
as at 30 September 2022 and opening share price as at 31 March 2022, plus
dividends paid since 31 March 2022 divided by opening share price as at 31
March 2022 ((110-113+3)/113)*100. This is an alternative performance measure.
4 Note on NAV Total Return for the six months ended 30 September
2022: Calculated as the difference between the NAV as at 30 September 2022 and
Adjusted NAV as at 31 March 2022, plus dividends paid since 31 March 2022
(excluding the dividend paid on 1 April 2022 as it is factored into the
Adjusted NAV figure) divided by Adjusted NAV as at 31 March 2022
((111.1-107.1+1)/107.1)*100. This is an alternative performance measure.
5 Adjusted NAV is calculated as the NAV per the Statement of
Financial Position as at 31 March 2022 adjusted for the interim dividend
relating to the December 2021 quarter of £6.9 million, which was declared in
March 2022 but paid post period end on 1 April 2022. This is an alternative
performance measure.
6 Note on NAV per Share: Calculated as Total NAV divided by the
total number of shares in issue.
7 Note on NAV Total Return: Calculated as the difference between the
NAV at 30 September 2022 and NAV at 30 September 2021, plus dividends paid for
the period divided by opening NAV at 30 September 2021 ((111.1 -
103.3+7)/103.3)*100). This is an alternative performance measure.
8 Note on Discount to NAV: Calculated as the difference between the
closing share price on 30 September 2022 to NAV on 30 September of 2022
((110-111.1/111.1)*100). This is an alternative performance measure.
9 A total of 4.0 pence in dividends was announced for the period. A
total of 3p was paid during the period, 2p relating to December 2021 quarter,
and 1p relating to March 2022 quarter. See note 11 to the Financial Statements
for further details.
Chair's Statement
I am pleased to present the Company's Interim report for the six months ending
30 September 2022.
Overview and Performance
The Company continues to go from strength to strength with the completion of
the acquisition of three 9.95 megawatts (MW) operational and four 9.95 MW
pre-construction assets in the ERCOT market of Texas, United States. Post the
reporting period, the Company also acquired a 200 MW construction-ready
project in Great Britain (GB) - the largest asset in the portfolio to date.
With the consolidated 269.6 MW capacity added through acquisitions, the
Company's portfolio capacity has reached 898.2 MW as of the date of
publication.
I am delighted to report an increase in the Company's operational portfolio
following the successful commissioning of the 30 MW Porterstown phase I
project, with final consents for phase II, adding an additional 60 MW,
expected before the end of the calendar year. The Company's operational
portfolio stands at 291.6 MW, with assets located internationally across four
grids.
Also, it is with great pleasure that I note that at the Citywire Investment
Trust Awards 2022, the Company won the inaugural award for Best Specialist
Alternatives trust in recognition of its consistent performance as the
closed-ended fund on the London Stock Exchange with the best three-year
performance in its category.
Macroeconomic context
The macroeconomic climate shifted rapidly over the reporting period, with
rising short-term inflation, rising interest rates, high foreign exchange (FX)
volatility and increasing construction costs. The Investment Manager has
sought to limit the impact on the Company's portfolio by securing
competitively priced EPC contracts through its dedicated construction team,
exploiting economies of scale, minimising debt exposure, and geographical
diversification of the operational portfolio to create natural hedges against
FX volatility.
Fundamental growth drivers for energy storage remained strong throughout the
period, with a clear global shift towards low-carbon energy generation
necessitating assets able to provide system flexibility, such as those owned
and operated by the Company. As a result, I am confident of the Company's
ability to continue delivering a sustainable and attractive dividend with an
element of capital growth to investors over the long term.
Further details may be found in the Investment Manager's report, below.
Dividends
The Company's dividend target is 7% of NAV. In line with this target the
Company paid an interim dividend of 2.0 pence per share on 8 April 2022 for
the period ending 31 December 2021. The Company also paid 1.0 pence for the
period ending 31 March 2022 on 26 August 2022 and 2.0 pence on 21 October 2022
for the period ending 30 June 2022. The Company will also pay a dividend of
2.0p for the September end quarter, with an ex-dividend date of 29 December
2022 and a payment date of 13 January 2023.
Share price and NAV Performance
I have been comforted by the resilience of the Company's share price during a
turbulent time for the global economy, particularly in the UK capital markets.
We have taken the prudent step of increasing the discount rates used in the
valuation of the Company's portfolio by 1%. This reflects the increased
interest rates and higher opportunity cost for investors within the renewables
sector. Despite the discount rate increase and dividends paid during the
period, the NAV total return achieved in the 6-month period was 4.65%.
NAV growth during the period was supported by financial discipline in
construction and asset management. The Investment 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.
Further details of NAV breakdown may be found in the Investment Manager's
report below.
Strategy and operational performance
The Investment Manager has been focused on diversifying the Company's
portfolio and mitigating its exposure to the effects of recent macroeconomic
events.
As of the publication date, the Company's portfolio consists of 898.2 MW of
utility-scale energy storage assets across the UK, the Republic of Ireland,
Germany and the United States. This consists of 291.6 MW of operational assets
and 606.6 MW of assets at varying stages of construction.
The Company's operational assets continue to yield higher-than-expected
revenues across the markets in which they operate through the efficient
optimisation of revenue stacks.
The average system availability during the period was satisfactory. For full
details, see pages 10 to 12 of the half year report for the six months ended
30 September 2022.
As a first mover with in-depth experience operating energy storage assets, we
have identified opportunities to improve safety above the current market
standard. The Company's portfolio is undergoing active trials of enhanced
analytical measures and hardware testing to prevent operations in unsafe
conditions. Risk assessments and safety improvements are expected in the near
term.
Sustainability
While the energy transition to replace fossil fuels with renewable
alternatives is accelerating, global pressures on energy supplies have
increased the need to support this shift. It has never been more important to
provide shareholders with accurate disclosures to help them make informed
decisions. The Company is committed to ensuring sustainability and
transparency are embedded in its business strategy.
During the reporting period, the Company published its first ESG and
Sustainability Report and, more recently, adopted the recommendations set out
by the Task Force for Climate-Related Financial Disclosures (TCFD) as part of
its sustainability engagement.
This follows the Company's decision to align with the EU framework on
sustainability-related disclosures in financial services and is indicative of
our ongoing commitment to improving climate risk management.
The Company's inaugural TCFD report is included on page 15 of the half year
report for the six months ended 30 September 2022. The TCFD report covers the
year ended 31 March 2022.
Fundraising
As I noted in the annual report, the Company raised £150m in April using a
significantly oversubscribed share issuance, having published a prospectus on
29 March 2022. The Company has the authority to issue a further 545,454,546
shares under the prospectus and intends to use this to underwrite future
growth opportunities in its pipeline.
Debt
The Company's capital structure leaves it well-placed within the current
environment and without exposure to increases in debt servicing costs. We also
are benefiting from higher-than-expected interest rates on our cash holdings
that, in turn, have positively impacted overall dividend cover.
Board composition
As announced in the annual report, the Board has resolved to appoint a new
Director and has engaged an independent recruitment agency to find candidates.
The nomination and remuneration committee has held interviews and plans to
provide an update in Q1 2023. In addition, the Board would like to engage in
orderly succession planning with another appointment and will be looking to
appoint another Director in the future.
AIFM changes
Following a review, the Company has agreed with the Investment Manager and its
subsidiary, Gore Street Operational Management Limited (the "Operations
Manager"), that with effect from 16 December 2022, the AIFM Agreement between
the Company and the Investment Manager and the Commercial Management Agreement
("CMA") between the Company and the Operations Manager will be amended. The
notice period under the CMA has been increased from 6 months to 12 months in
order to align with the notice period under the AIFM Agreement. Amendments
have also been made to both agreements: (i) to provide that in the specific
event of a takeover offer for the Company becoming wholly unconditional, the
agreements will terminate automatically with no requirement for notice to be
served; and (ii) to prescribe certain fees that will then become payable to
the Investment Manager and the Operations Manager on such termination. Based
on the amounts involved, the changes to the AIFM Agreement and CMA constitute
a smaller related party transaction as set out in the FCA's Listing Rule
11.1.10R. Further details are set out below and on page 26 of the half year
report for the six months ended 30 September 2022.
Outlook
The Company's international pipeline of over 1.5 GW indicates its appetite for
international expansion. North America and mainland Europe present compelling
economic cases for deploying energy storage.
In the United States, the electricity grids of individual states, in many
ways, act as islands, like GB, with unique challenges and opportunities. The
current regulatory landscape is also becoming more favourable, with the
Inflation Reduction Act introducing policies that support energy storage
deployment.
As the EU looks to its member states to build out its infrastructure of
renewable assets to meet decarbonisation targets, the Company intends to
continue to support this transition and execute pipeline opportunities across
Europe following the acquisition of the Cremzow asset in Germany.
The Investment Manager is pursuing pipeline opportunities in a range of
markets to further diversify the Company's portfolio and take advantage of
tangible opportunities in multiple grids. Following the addition of almost 70
MW of operational and pre-construction capacity in Texas during the reporting
period, further growth across the Company's mandated geographies is planned.
We look forward to providing shareholders with updates on both portfolio
capacity and performance as we continue to support the global low-carbon
energy transition.
Patrick Cox
Chair
15 December 2022
Investment Manager's Report
for the six months ending 30 September 2022
Results
The Company's NAV increased by 45% from the end of the last fiscal year (31
March 2022). The key drivers of the increase in NAV from £369.6 million(1)
(31 March 2022) to £534.8 million (30 September 2022 NAV) were: (i) a
fundraise of £147.3 million in net proceeds; (ii) acquisition of 29.9 MW in
operational assets in Texas, US; (iii) acquisition of project rights totalling
39.8 MW in Texas (US); (iv) successful de-risking of projects as they
progressed through their construction stages; (v) revenue forecasts updating;
and (vi) strong operational performance of the assets due to efficient
optimisation of the revenue stacks.
A capital raise of £150.0 million was completed during the reported period in
April 2022. The Company declared dividends of 4.0 pence per share for the
period and paid a total of 3.0 pence per share during the 6-month period, in
line with the 7.0% of NAV dividend target. Annualised ongoing charges for the
period represented 1.31% of average NAV in the period(2). The increase in
Total NAV during the fiscal year is further detailed in the bridge, shown in
Figure 1 of the half year report for the six months ended 30 September 2022.
Portfolio NAV drivers
During the period, portfolio NAV increased by over 30% (or £54.0 million), of
which £53.1 million is due to acquisitions or capex deployment on current
portfolio companies. NAV per SPV was updated to reflect operational
performance during the period. The Company adjusted key valuation assumptions
using reputable third-party research houses in response to the forecast
changes and current macroeconomic environment.
Discount Rate
In light of increased interest rates and a higher opportunity cost for
investors within the renewables sector, discount rates are on average over 1%
higher across the portfolio, reflecting a weighted average discount of 9.3%
compared to 8.3% in March‑end 2022. Further factors affecting the discount
rate stem from completed acquisitions within the period, alongside the
de-risking of existing portfolio capacity as it progresses from its
construction phase through to commercial operations, as shown by the current
291.6 MW in operations across the portfolio.
Inflation
The short-term inflation assumption has been updated to reflect the current
economic environment with rising interest rates. Over the long term, inflation
was assumed to be 2% as per the Central Bank target of 2.0% across the
geographies in which the Company operates.(3,4,5,6,7)
1 £369.6m is Adjusted NAV at 31 March 2022. Adjusted NAV is
calculated as the NAV per the Statement of Financial Position at 31 March 2022
adjusted for the interim dividend relating to the December 2021 quarter of
£6.9m, which was declared in March 2022 but paid post period end on 8 April
2022.
2 Ongoing charges include all expenses which are expected to recur
in the foreseeable future, and which relate to the ongoing operation of the
Company. This includes management fees, Directors' fees, audit and tax
compliance fees, administration fees, depositary fees, company secretarial
fees, and other recurring costs. It excludes performance fee, costs associated
with portfolio transactions, and other non-recurring costs
3
https://www.bankofengland.co.uk/knowledgebank/will-inflation-in-the-uk-keep-rising
4 https://www.statista.com/statistics/306720/cpi-rate-forecast-uk/
5
https://www.bloomberg.com/news/articles/2022-07-15/us-long-term-inflation-expectations-drop-to-one-year-low?leadSource=uverify%20wall
6 https://fred.stlouisfed.org/series/T5YIFR
7
https://www.statista.com/statistics/375207/inflation-rate-in-germany/
Revenue
Revenue assumptions across the portfolio were updated to reflect the
September-end energy market outlook for the grid networks in which the Company
operates. In GB and Ireland, an average of the central-case forecasts from
multiple independent consultants was applied to reflect a consolidated market
view. Revenue forecasts capturing the current market consensus were also
updated for assets located in Germany and the US.
Capital Expenses
Battery cell costs have been updated across the portfolio in line with the
short-term trends seen across battery technology markets, impacting the
expected repowering capex for assets once they reach their degradation
threshold. An EPC contract was also secured during the reporting period for
one of the Company's assets, Enderby.
Operating Expenses
The assumptions regarding operating costs across the fleet have been revised
and updated in line with our latest view, including energy costs.
Revenue
The Company's portfolio is optimised across multiple revenue streams and
benefits from diversification of monetisation strategies and customers
(predominantly Transmission System Operators "TSOs") procuring frequency and
capacity services from the Company's assets, alongside engaging in arbitrage
opportunities in wholesale markets. During the reporting period, ancillary
services revenues accounted for the largest portion of the Company's revenues,
notably consisting of Dynamic Containment (DC) and Firm Frequency Response
(FFR) in GB, DS3 Uncapped in NI, Frequency Containment Reserves in Germany and
Responsive Reserve Services in Texas, US. It is important to note that some
revenue streams can have severe seasonal variances as weather conditions and
high temperatures impact rates. Some services can also have intermittent
periods of low demand from the TSO.
Market Market Structure Revenue Streams Characteristics
GB National Grid • Capacity Market (CM) • CM: Procurement of future energy capacity to ensure sufficient generation
on the system
• Firm Frequency Response (FFR)
• Dynamic Containment (DC)
• Dynamic Moderation (DM)
• Dynamic Regulation (DR)
• Wholesale Trading
• Triads
• FFR: Balancing supply and demand of electricity to ensure that frequency
remains around 50Hz
• DC: Fast-acting post-fault service to contain frequency outside of
acceptable limits
• DM: Balancing supply and demand of electricity to ensure that frequency
remains around 50Hz
• DR: high energy throughput fast frequency response service, currently
still in trail phase
• Wholesale Trading: The trade of energy between generators and suppliers
• Triads: Top three half-hour peaks of national energy demand across the
grid
Ireland EirGrid/SONI • Capacity Market • Volume uncapped: Procurement that does not limit the volume of the service
being procured and to which regulated tariffs apply
• DS3 Programme (comprised of):
• Volume uncapped
• Volume capped
• Volume capped: Procurement where an upper limit is applied to the volume
of relevant DS3 services being procured and for which prospective providers
will offer a competitive price as part of their tender
• CM: Procurement of future energy capacity to ensure sufficient generation
on the system
Germany TSOs across eight countries • Frequency Containment Reserve (FCR) • FCR: Primary ancillary service in Germany and serves to stabilise
frequency deviations in the system
• Automatic frequency restoration reserve (currently in the prequalification
phase for the asset)
• Wholesale trading
• aFRR is an ancillary service procured and dispatched by the TSO
responsible for frequency in a specific area.
• Wholesale Trading: (from April 2023)
Texas, US ERCOT • Responsive Reserve Services (RRS) • 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
• Regulation Up (RegU) frequency
• Regulation Down (RegD)
• RegU is an ancillary service that provides generation to the grid or
signals stored power to be discharged
• RegD is an ancillary service that reduces excess generation on the grid or
stores power (i.e. charge batteries)
Table 2: Gross Revenue earned by the Company, broken down by revenue stream
and by grid
Revenue Stream (£million) % Within the Grid % Of overall portfolio Average hourly revenue per MW(2) Average hourly revenue per MWh(2) MW MWh
GB
Ancillary Services £8.79 91.9% 109.7 101.0
Capacity Market (CM) £0.59 6.1% 109.7 101.0
Wholesale Trading £0.19 2.0% 109.7 101.0
GB - Total £9.57 100.0% 47.4% £19.92 £21.63 109.7 101.0
Ireland
DS3 Uncapped/Capped((1)) £5.94 99.2% 130.0 72.6
Wholesale Trading £0.05 0.8% 130.0 72.6
Ireland - Total £5.99 100.0% 29.7% £10.52 £18.84 130.0 72.6
Germany
Ancillary Services £1.88 100.0% 22.0 29.0
Germany - Total £1.88 100.0% 9.3% £19.54 £14.82 22.0 29.0
US
Ancillary Services £2.70 98.3% 29.9 59.7
Wholesale Trading £0.05 1.7% 29.9 59.7
US - Total £2.75 100.0% 13.6% £20.99 £10.51 29.9 59.7
Operating Revenues £20.19 100% £17.74 £16.45 291.6 262.3
(1) The DS3 Revenues include accrued delays damages for Porterstown owed
in the amount of the missed revenues under the DS3 Capped contract
(2) Calculated by dividing hourly revenue by the operational portfolio
capacity in each grid (GB: 109.7 MW/ 101.0 MWh, Ireland: 130.0 MW / 72.6 MWh,
Germany: 22.0 MW / 29.0 MWh, US: 29.0 MW / 59.7 MWh)
Drivers of revenue
As the world moves away from conventional fuels((6)), which have historically
provided capacity and flexibility, in pursuit of a lower‑carbon future, the
problem of intermittent generation arises. Energy storage is a key enabler in
this energy transition. Wholesale markets and ancillary services are pegged to
gas prices, and as volatility impacts this commodity, the rest of the market
experiences the knock-on effect. As markets mature, grid operators seek to
revolutionise the way grid frequencies are maintained and begin to disconnect
gas prices from markets by introducing higher levels of renewables.
Ancillary services facilitate greater renewable penetration, but these markets
quickly saturate as battery storage systems are built out. Both providers and
procurers of services need to be competitive and flexible as new opportunities
emerge and the characteristics of battery storage technology shape frameworks
and market mechanisms previously designed for participation from conventional
assets.
Long and short-duration services exist in all the markets that the Company is
active in. The shorter-duration assets are better suited to the delivery of
ancillary services, which are currently the Company's key focus. As the
ancillary services market saturates over time with increased capacity
build-out, merchant opportunities such as wholesale arbitrage, in which
batteries seek to target growing spreads in power markets, are expected to
take precedence.
Great Britain:
During the reporting period, revenue was predominantly derived from DC and
FFR, as they offered better returns, with the capacity market adding to the
revenue stack. It is expected that DC and FRR will continue to drive the bulk
of revenue as both DM and DR have increased levels of activity. Merchant
markets such as Balancing Mechanism and wholesale could offer additional
avenues to generate revenue.
In GB, the average of the central scenario forecasts from multiple independent
research houses 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 Services & Trading
(£/MW/h) Dec-22 Dec-23 Dec-24 Dec-25 Dec-30 Dec-35 Dec-40
GB (real 2021) 17.07 16.27 11.84 9.41 7.04 7.41 7.87
Ireland/Northern Ireland:
The DS3 programme is the predominant source of revenue in this market and will
continue to provide future 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, with post-DS3 services
forecast post-2025. The average central forecasts from multiple third-party
research houses are shown below. In ROI, the assets have DS3 Capped fixed
tariff contracts in place for the first 5 years, after which there are
post-DS3 services forecasts applied.
Revenue Forecasts in NI and ROI
(€/MW/h) Dec-22 Dec-23 Dec-24 Dec-25 Dec-30 Dec-35 Dec-40
NI (real 2021) 15.94 18.14 16.93 12.13 9.16 7.68 6.96
ROI (real 2021) 6.79 6.79 6.90 9.20 8.39 7.23 6.65
Germany:
All revenue generated during the reporting period came from FCR. The Company
is seeking to explore new opportunities in aFRR and wholesale trading as these
markets open.
Texas, US:
RRS and wholesale market have provided the majority of revenues during the
reporting period. As the Company becomes more active in the market, ancillary
services such as reg-up and reg-down are expected to contribute towards the
revenue stack. An additional service, FFR, was introduced in September 2022 -
the Company will explore how best to access this revenue stream and evaluate
its viability and profitability compared with other existing services.
6
https://www2.deloitte.com/global/en/pages/energy-and-resources/articles/the-2030-decarbonization-challenge.html
Portfolio
Assets pre-construction or in construction
The Company has made significant progress on projects yet to be operational.
During the period, the Company completed the acquisition of four
pre-construction assets in Texas, US. Each of these adds an additional 9.95 MW
of capacity bringing the total construction and pre-construction assets in the
Company's portfolio to 606.6MW
Procurement of EPC services for the four Texas assets is underway, with the
Investment Manager seeking to enhance value by grouping the assets and
aligning construction schedules. The Investment Manager expects the four
assets to be operational by H1 2024 calendar year.
In Great Britain, the construction of Stony (79.9 MW) and Enderby (57.0 MW)
continue to progress well, with commercial operation remaining forecast for Q2
and Q4 2023, respectively. Grid connection works at Ferrymuir (50MW) have been
delayed; consequently, the commercial operation is now anticipated to slip
into Q2 2023.
In Ireland, commissioning at Porterstown Phase I was completed during the
reported period, with verification of testing and commencement of commercial
operation imminent. The asset has accrued construction delay damages since
April 2022, the scheduled take over date. At Kilmannock, phase I and II
preliminary engineering works has commenced ahead of procurement of grid
connection works and Phase I EPC energy storage works in 2023. The Investment
Manager expects commercial operation for Phase I in H2 2024. Phase II
operation remains subject to confirmation of the EirGrid connection timeline
but is envisaged to run concurrently with Phase I to commence operation in H1
2025.
Table 3: Summary, as of September 2022, of all sites in construction,
including the location of assets, capacity (MW), construction status and the
expected Commercial Operational Date (COD).
Reporting period GB Location Nameplate power capacity (MW) Construction Status Expected COD (Calendar year) Revenue Streams
Ferrymuir Fife, Scotland 50.0 Construction June 2023 Frequency Capacity Market Energy Trading
Enderby Leicestershire, England 57.0 Pre-construction December 2023 Frequency Capacity Market Energy Trading
Stony Buckinghamshire, England 79.9 Construction June 2023 Frequency Capacity Market Energy Trading
Ireland Location Nameplate power capacity (MW) Construction Status Expected COD Revenue Streams
Porterstown Phase 2 Co. Dublin 60.0 Pre-construction H1 2024 DS3 Uncapped Capacity Market
Kilmannock Phase 1 Co. Wexford 30.0 Pre-construction H2 2024 DS3 Uncapped Capacity Market
Kilmannock Phase 2 Co. Wexford 90.0 Pre-construction H1 2025 DS3 Uncapped Capacity Market
US Location Nameplate power capacity (MW) Construction Status Expected COD Revenue Streams
Mineral Wells Texas 9.95 Pre-construction H1 2024 Ancillary Services, Energy Trading
Cedar Hill Texas 9.95 Pre-construction H1 2024 Ancillary Services, Energy Trading
Wichita Falls Texas 9.95 Pre-construction H1 2024 Ancillary Services, Energy Trading
Mesquite Texas 9.95 Pre-construction H1 2024 Ancillary Services, Energy Trading
Post period GB Location Nameplate power capacity (MW) Construction Status Expected COD Revenue Streams
Middleton GB 200.0 Pre-construction H2 2026 Frequency, Capacity Market, Energy Trading
Operational asset performance
Average availability achieved across the portfolio (weighted by asset
capacity, in MW) was 94% for the six-month period to September-end 2022. Note
that this availability represents the assets' ability to be dispatched
commercially, so planned maintenance acts negatively against it. This leads to
lower availability calculations than the technical availability metrics tied
to availability warranties.
Great Britain:
The GB fleet includes the Company's two lower-performing assets, which brought
the availability average to 89% over the six-month period. All projects of 10
MW capacity or higher experienced availability of 96% or higher. When
available, commercial performance of the assets was excellent. There were no
issues with equipment design capability and warranty management, with
unavailability attributed to planned downtime and occasional equipment faults,
almost entirely rectified at the reporting period's end.
• Hulley and Lascar each achieved >98% availability with no
particular outages of note. Larport's technical performance is similarly
strong, with availability impacted predominantly due to unavoidable outages
imposed by the network operator.
• The fleet of 10 Ancala sites performed well, although the
Brook Hall site was unable to generate revenue in Dynamic Containment due to
its 0.8MW size.
• Cenin performed particularly well in the period, achieving an
average of 100% availability with few asset interactions required, and this
level of performance is anticipated to continue.
• Breach and Lower Road also had excellent performance, with 97%
availability achieved. Lower Road had downtime in April (85% availability that
month) whilst earthing was replaced following a theft (future concern has been
mitigated across the fleet through sophisticated security upgrades, some
ongoing).
• Port of Tilbury achieved only 59% availability due to inverter
issues (now resolved) impacting asset MW capacity, coupled with an imposed
state of change (SOC) restriction by the cell supplier.
• Boulby achieved 21% average availability. This was due to a
combination of site outages, controls outages and an extended battery
recharging process following these outages. All issues have been resolved with
the asset returning to service in September.
Ireland:
Both Irish operational assets, Mullavilly and Drumkee, performed well
throughout the period, with an average 98% availability achieved. Downtime was
mostly attributed to repair works on a circuit breaker at Drumkee, resolved in
May with no ongoing concerns. Each asset performed well in DS3 throughout both
quarters, passing all events which occurred without penalty for all DS3
services. The projects are set to continue operating well, with planned
maintenance in October ahead of windier months in winter and spring (where
revenue opportunity is highest).
Germany:
The Cremzow project is generally performing well. In July, an inverter issue
with the 2MW 'trial' project (the 22MW project comprised a 2 MW trial phase
with 20MW further expansion upon success) removed it from operations, with
issues ongoing into the next period. This downtime was extended due to supply
chain issues on inverter spare parts. Project performance was otherwise
excellent, allowing the project to achieve 95% availability over the six-month
period.
USA:
The three operational US-based projects in Texas-Snyder, Sweetwater and
Westover-all performed well during the period. Across each of the 9.95 MW
projects, technical performance was good and averaged over 95% at Sweetwater
and Westover and over 98% at Synder, with close to 97% achieved across the
projects on average. This is partly due to the consistent, responsive
engagement of O&M providers and asset managers for the project, as there
have been some stability issues with air conditioning and inverter parts.
Updates to the inverter controls have improved this during the period, and
parts were replaced in October to improve inverter stability. Asset
performance is expected to remain strong over the next period, with all three
assets expected to comfortably meet their service requirements and capture
merchant revenue where available.
Table 4: Summary, as of September 2022, of operational sites including the
location of assets, nameplate capacity (MW and MWh), availability for the year
and services that can be performed.
Reporting Period GB Location Nameplate Power capacity (MW) Nameplate Energy capacity (MWh) Availability for reporting period Services that can be performed
Cenin Wales 4.0 4.8 100.0% DC, FFR, Capacity Market
Boulby Yorkshire 6.0 6.0 21.3% FFR, Capacity Market, Triads
Ancala Mixed* 11.2 11.2 96.6% DC, FFR, Capacity Market
Lower Road Essex 10.0 5.0 97.3% DC, FFR, Energy Trading, Capacity Market
Port of Tilbury Essex 9.0 4.5 59.4% DC, FFR, Capacity Market, Triads
Larport Hereford 19.5 19.5 87.5% DC, FFR, Energy Trading, Capacity Market
Lascar Bury 20.0 20.0 99.1% DC, FFR, Energy Trading, Capacity Market
Hulley Macclesfield 20.0 20.0 98.1% DC, FFR, Energy Trading, Capacity Market
Breach Farm Derbyshire 10.0 10.0 97.0% DC, FFR, Energy Trading, Capacity Market
* The Ancala asset comprises 10 smaller sites of 1.0 MW -
1.2 MW across the UK.
Ireland Location Nameplate Power capacity (MW) Nameplate Energy capacity (MWh) Availability for the reporting period Services that can be performed
Drumkee Co. Tyrone 50.0 21.3 96.7% DS3 Uncapped
Mullavilly Co. Armagh 50.0 21.3 98.6% DS3 Uncapped
Porterstown Phase 1 Co. Dublin 30.0 30.0 n/a* DS3 Capped, Capacity Market
Germany Location Nameplate Power capacity (MW) Nameplate Energy capacity (MWh) Availability for the reporting period Services that can be performed
Cremzow Cremzow 22.0 29.0 94.7% FCR, Energy Trading
US Location Name Plate Power capacity (MW) Name Plate Energy capacity (MWh) Availability for the year Services that can be performed
Snyder ERCOT 9.95 19.90 98.8% Ancillary Services, Energy Trading
Sweetwater ERCOT 9.95 19.90 95.7% Ancillary Services, Energy Trading
Westover ERCOT 9.95 19.90 95.5% Ancillary Services, Energy Trading
TOTAL 291.6 262.3 89.1%
* For the Porterstown asset in the ROI, the asset was delayed
in reaching its commercial operations, thus although the site was energised,
it has no applicable availability data for this period.
Strategy
Deployment
This period marked continued progress in the Company's growth and
diversification strategy, with acquisitions completed in its fourth
international grid network, ERCOT, totalling 69.65 MW / 139.3 MWh across a
portfolio of 7 assets. Three of these projects are already operational, and
four are pre-construction, which have amounted to a total investment of $39.6
million, with a further c. $28.0 million expected to be spent on the
construction of the four pre-construction assets. Post-period, the Company
completed the acquisition of a further 200.0 MW in GB, solidifying its
position as a market leader in its existing geographies.
Following on from the EPC framework procurement of 129.8 MW for its Ferrymuir
and Stony assets in March 2022, the Investment Manager procured an EPC
contract for its 57.0 MW Enderby asset with NIDEC in April 2022 and is
assessing EPC solutions for the remainder of its 406 MW portfolio of
construction/ preconstruction assets. Taking this into account, alongside the
post-period acquisition of Middleton, the deployment of capital forecast
across the portfolio towards assets under construction (and expansions) now
amounts to a total commitment of over £300 million.
Whilst GB remains a key focus for the Company, it is increasingly looking at
new opportunities in Western Europe and the ERCOT / CAISO grids in the US,
where projects are increasing in scale and number. The Investment Manager is
in exclusive negotiations on projects totalling 75.0 MW / 150.0 MWh in ERCOT.
Fundraise
In April 2022, the Company raised gross proceeds of £150 million in the
issuance of 136,363,636 new Ordinary Shares. The initial issue was
significantly oversubscribed. The Company has 481,399,478 Ordinary Shares in
issue as at the publication date.
New Market Expansion
New market opportunities present themselves following policy changes or market
conditions that unveil the system's needs beyond what already exists. The
Company is seeking to explore these opportunities and further understand the
potential for revenue beyond the markets it is currently active in.
Pipeline
The Investment Manager has delivered on its strategic plan for international
diversification, with acquisitions in new grids and a diversified pipeline
across GB, Ireland, 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. As of the date of publication, the
total pipeline stands at over 1.5 GW or 2.6 GWh, with transactions in
exclusivity amounting to a total of 75.0 MW or 150.0 MWh. Please see below a
table illustrating the Company's top 10 projects.
Project Location Total Project Size (MW) Total Project Size (MWh)
Project A GB 99.9 99.9
Project B GB 250.0 250.0
Project C US, CAISO 60.0 240.0
Project D US, CAISO 200.0 400.0
Project E US, ERCOT 75.0 150.0
Project F US, ERCOT 89.1 178.2
Project G US, ERCOT 200.0 400.0
Project H US, ERCOT 150.0 300.0
Project I US, ERCOT 200.0 200.0
Project J US, ERCOT 200.0 400.0
Total 1.52 GW 2.62 GWh
Outlook
Significant long-term tailwinds are driving national grids to transition
towards renewable sources, evidenced by renewables growing to account for 13%
of energy generation globally.(1) The increased reliance on renewable energy
sources directly propels the deployment of battery energy storage systems,
which are expected to grow by 20.2% between 2022-2028.(2) The structural
changes required to shift to clean energy sources have been accelerated due to
OECD governments passing significant legislation to ensure they remain on
track to meet carbon neutrality targets.
Even with the same target of decarbonisation, each country/ area may have a
different regulatory environment. Therefore, the Company recognises
geographical diversification as one of the core investment strategies to
address the challenges from regulatory and technological changes in the
evolving energy policy climates. The Company currently holds and operates a
diversified portfolio in four markets, including GB, Ireland, the US (Texas),
and Germany. The Investment Manager intends to further diversify its
investment pipeline with acquisitions in Western Europe and North America, GB,
Australia and other developed renewable energy markets. The acquisition price
of any single project can not exceed 25% of the Company's Gross Asset Value
(calculated at the time of acquisition) to maintain the diversification of the
portfolio.
The portfolio is further diversified through multiple stackable revenue
streams, which could be either under long-term contract or merchant. Due to
the flexible nature of the Lithium-ion batteries, the Investment Manager is
able to take advantage of a variety of contracts depending on prevailing
market conditions. The Company is also comfortable with 100% merchant revenue
as it has built its in‑house technical team to capture the market
opportunities.
The specialist technical team minimise Opex, whilst optimising a revenue
stacking strategy across the portfolio. In addition, by securing competitively
priced EPC contracts, the Investment Manager ensures a solid foundation for
generating target project returns.
The current macroeconomic climate has introduced potential headwinds such as
rising short-term inflation, high FX volatility and rising construction costs.
The Investment Manager has taken proactive measures to ensure that the impact
on the overall portfolio valuation is limited by using economies of scale,
securing competitively priced EPC contracts, minimising debt exposure and
investing across the OECD to create natural hedges against FX volatility. As a
result, the Investment Manager is confident of the Company's ability to
deliver long-term capital growth to investors through the construction,
operation, and optimisation of a geographically diverse portfolio of
utility-scale battery storage systems.
Despite such headwinds, the Investment Manager's experience and track record
in acquiring, constructing and operating utility-scale storage assets across
numerous grids means that it is well placed to capitalise on future
opportunities through deployment of capital across relevant projects which
fulfil its mandate. The Investment Manager believes that the macro and market
fundamentals underpinning renewable energy proliferation globally, combined
with the decline in baseload capacity and increasing relevance of national
energy security necessitate a requirement for flexible storage assets to
provide this wider system stability.
Europe:
As the EU positions itself as a beacon for renewable deployment, it encourages
member states to continue to build out capacity, imposing targets to deliver
on milestones. Further, there is an accelerated need to build out renewable
projects for certain member states that had been previously more reliant on
Russian gas imports.
United States:
CAISO, the ISO covering the majority of California, and other neighbouring
states, has introduced policies that support energy storage deployment and an
energy storage target of 41 GW by 2045 (including 37GW of battery energy
storage and 4GW of long-duration storage). CAISO differs from ERCOT as it is
connected with neighbouring ISO networks - this allows for the flow of energy
in and out of the region; however, these interconnection lines have limited
capacity. More recently, build-out of renewables has caused an imbalance
between times of peak energy demand and renewable energy generation which the
deployment of energy storage is aiming to normalise.
After the reporting period, the Company acquired the project rights for a 200
MW project located in Heysham, United Kingdom. It is anticipated that this
project will participate in the GB market across ancillary services, wholesale
trading and capacity market. The project will connect to National Grid's main
transmission network rather than the local distribution network, meaning it
will operate independently from an intermediary distribution network operator,
potentially opening additional revenue opportunities. Grid connection is
expected to be no later than Q4 2026. However, the Company will seek to
accelerate the connection date while maintaining a cost-efficient EPC
procurement process. The final capex will depend on the selection of the
system duration. The project has the flexibility to deploy a storage system
with a duration of up to two hours.
1
https://www.bp.com/content/dam/bp/business-sites/en/global/corporate/pdfs/energy-economics/statistical-review/bp-stats-review-2022-full-report.pdf
2
https://www.businesswire.com/news/home/20220923005452/en/Batteries-for-Solar-Energy-Storage-Market-Forecast-to-2028---Global-Analysis-By-Battery-Type-Application-and-Connectivity---Decline-in-Prices-of-Lithium-Ion-Batteries---ResearchAndMarkets.com
Directors' Interim Report
Amendments to AIFM agreement and Commercial Management Agreement
The Company has agreed with the Investment Manager and its subsidiary, Gore
Street Operational Management Limited (the "Operations Manager"), that with
effect from 16 December 2022, the AIFM Agreement between the Company and the
Investment Manager and the Commercial Management Agreement ("CMA") between the
Company and the Operations Manager will be amended to make the following
changes. The notice period under the CMA is increased from 6 months to 12
months with immediate effect in order to align with the notice period under
the AIFM Agreement.
The AIFM Agreement has been amended to provide that in the specific event of a
takeover offer for the Company becoming wholly unconditional the AIFM
Agreement will terminate automatically with no requirement for notice to be
served and:
• the Investment Manager will be entitled to a performance fee
equal to 20 per cent. of the amount (if any) by which the offer price
multiplied by the number of ordinary shares in issue exceeds the prescribed
benchmark for payment of a performance fee, such fee to be capped at 3.49% of
NAV in the financial year to 31 March 2023 and 3.99% of NAV thereafter (the
'Exit Performance Fee') plus a fee equal to 1 per cent. of Adjusted NAV(9); or
• where no Exit Performance Fee is payable, the Investment
Manager will instead be entitled to a fee equal to 2 per cent. of Adjusted
NAV (the 'Minimum Takeover Fee').
If the aggregate amount of any Exit Performance Fee payable plus 1 per cent.
of Adjusted NAV is less than the Minimum Takeover Fee, then the Investment
Manager shall instead receive the Minimum Takeover Fee.
The Board has further agreed to amend the terms of the Commercial Management
Agreement between the Operations Manager and the Company from today to provide
that, in the event of a takeover offer for the Company becoming wholly
unconditional, the CMA will terminate automatically with no requirement for
notice to be served and the Operations Manager will be entitled to receive:
• where an Exit Performance Fee is paid under the AIFM
Agreement, a fee equal to one per cent. of NAV; or
• where no Exit Performance Fee is paid under the AIFM
Agreement, a fee equal to two per cent. of NAV.
The Board has agreed these changes in recognition of the fact that the
Investment Manager and its subsidiary have created significant value for
shareholders in the form of the Company's existing portfolio, which may be
attractive to potential acquirors. In the event that a takeover offer is
accepted at a premium to the benchmark it is the Board's view that the
Investment Manager should share some element of this additional value created.
Furthermore, the Investment Manager and its subsidiary have and continue to
invest a significant amount of resources and capital building a portfolio
management, technical and operational team to service the Company, its
subsidiaries and its assets as it grows both in GB and internationally.
The Investment Manager and any members of its group, which includes the
Operations Manager, are related parties of the Company for the purpose of the
FCA's Listing Rules. Based on the amounts involved, the changes to the AIFM
Agreement and CMA constitute a smaller related party transaction as set out in
the FCA's Listing Rule 11.1.10R.
Principal Risks and Uncertainties
The principal risks and uncertainties with the Company's business fall into
the following categories: COVID-19, Changes to Market Design, Inflation,
Exposure to Lithium-Ion Batteries and Battery Manufacturers, Key Skills
Retention, Dependence on Long-Term Operations and Maintenance Contracts,
Valuation of Unquoted Assets, Delays in Grid Energisation or Commissioning,
Currency Exposure, Cyber-Attack and Loss of Data, and Insurability of Assets.
A detailed explanation of the risks and uncertainties in each of these
categories can be found on pages 58 to 61 of the Company's published annual
report and accounts for the year ended 31 March 2022.
These risks and uncertainties have not materially changed during the six
months ended 30 September 2022. However, the Board has noted that geopolitical
factors continued to create uncertainties, including relating to energy
policy, supply chains and interest rates.
Going Concern
Having assessed the principal risks and uncertainties, and the other matters
discussed in connection with the viability statement as set out on page 66 of
the published annual report and accounts for the year ended 31 March 2022, the
Directors consider it appropriate to adopt the going concern basis in
preparing the accounts.
9 For these purposes, "Adjusted Net Asset Value" shall be
equal to Net Asset Value, minus Uncommitted Cash; and "Uncommitted Cash" means
all cash on the Company balance sheet that has not been allocated for
repayment of a liability on the balance sheet or any earmarked capital costs
of any member of the Group.
Although the Company's articles of association require that a proposal for the
continuation of the Company be put forward at the Company's next AGM due to be
held after the publication of the Company's annual report for the year ended
31 March 2023, the Directors have no reason to believe that such a resolution
will not be passed by shareholders.
Related Party Transactions
There have been no transactions with related parties that have materially
affected the financial position or the performance of the Company during the
six months ended 30 September 2022.
As noted above, the amendments to the AIFM agreement and Commercial Management
Agreement agreed after the end of the reporting period constitute a smaller
related party transaction.
Directors' Responsibility Statement
The Directors confirm that, to the best of their knowledge, this set of
condensed financial statements has been prepared in accordance with IAS 34
Interim Financial Reporting and with the Statement of Recommended Practice,
"Financial Statements of Investment Companies and Venture Capital Trusts"
issued in July 2022, and that this half year report includes a fair review of
the information required by 4.2.7R and 4.2.8R of the FCA's Disclosure Guidance
and Transparency Rules.
Patrick Cox
Chair
Independent Auditor's Review Report
to Gore Street Energy Storage Fund Plc
Conclusion
We have been engaged by the Company to review the condensed set of financial
statements in the half-yearly financial report for the six months ended 30
September 2022 which comprises the Interim Condensed Statement of
Comprehensive Income, the Interim Condensed Statement of Financial Position,
the Interim Condensed Statement of Changes in Equity, the Interim Condensed
Statement of Cash Flows and the related explanatory notes. We have read the
other information contained in the half yearly financial report and considered
whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed set of financial statements.
Based on our review, nothing has come to our attention that causes us to
believe that the condensed set of financial statements in the half-yearly
financial report for the six months ended 30 September 2022 is not prepared,
in all material respects, in accordance with UK adopted International
Accounting Standard 34 and the Disclosure Guidance and Transparency Rules of
the United Kingdom's Financial Conduct Authority.
Basis for Conclusion
We conducted our review in accordance with International Standard on Review
Engagements 2410 (UK) "Review of Interim Financial Information Performed by
the Independent Auditor of the Entity" (ISRE) issued by the Financial
Reporting Council. A review of interim financial information consists of
making enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review procedures. A
review is substantially less in scope than an audit conducted in accordance
with International Standards on Auditing (UK) and consequently does not enable
us to obtain assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not express an audit
opinion.
As disclosed in note 2, the annual financial statements of the Company are
prepared in accordance with UK adopted international accounting standards. The
condensed set of financial statements included in this half-yearly financial
report has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions Relating to Going Concern
Based on our review procedures, which are less extensive than those performed
in an audit as described in the Basis of Conclusion section of this report,
nothing has come to our attention to suggest that management have
inappropriately adopted the going concern basis of accounting or that
management have identified material uncertainties relating to going concern
that are not appropriately disclosed.
This conclusion is based on the review procedures performed in accordance with
this ISRE, however future events or conditions may cause the entity to cease
to continue as a going concern.
Responsibilities of the Directors
The Directors are responsible for preparing the half-yearly financial report
in accordance with the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
In preparing the half-yearly financial report, the Directors are responsible
for assessing the company's ability to continue as a going concern,
disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the Directors either intend to
liquidate the company or to cease operations, or have no realistic alternative
but to do so.
Auditor's Responsibilities for the review of the financial information
In reviewing the half-yearly report, we are responsible for expressing to the
Company a conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our Conclusions
Relating to Going Concern, are based on procedures that are less extensive
than audit procedures, as described in the Basis for Conclusion paragraph of
this report.
Use of our report
This report is made solely to the company in accordance with guidance
contained in International Standard on Review Engagements 2410 (UK) "Review of
Interim Financial Information Performed by the Independent Auditor of the
Entity" issued by the Financial Reporting Council. To the fullest extent
permitted by law, we do not accept or assume responsibility to anyone other
than the company, for our work, for this report, or for the conclusions we
have formed.
Ernst & Young LLP
Edinburgh
15 December 2022
Interim Condensed Financial Statements
Interim Condensed Statement of Comprehensive Income
For the Interim period ended 30 September 2022
1 April 2022 to 30 September 2022 1 April 2021 to 30 September 2021
Revenue Capital Total Revenue Capital Total
Notes (£) (£) (£) (£) (£) (£)
Net gain on investments at fair value through profit and loss - 23,905,375 23,905,375 - 11,096,979 11,096,979
Investment income 2,575,055 - 2,575,055 1,969,922 - 1,969,922
Administrative and other expenses (3,795,540) - (3,795,540) (2,261,238) - (2,261,238)
(Loss)/profit before tax (1,220,485) 23,905,375 22,684,890 (291,316) 11,096,979 10,805,663
Taxation 4 - - - - - -
(Loss)/profit after tax and profit for the period (1,220,485) 23,905,375 22,684,890 (291,316) 11,096,979 10,805,663
Total comprehensive income for the period (1,220,485) 23,905,375 22,684,890 (291,316) 11,096,979 10,805,663
Profit per share (basic and diluted) - pence per share 5 4.81 4.20
All Revenue and Capital items in the above statement are derived from
continuing operations.
The Total column of this statement represents Company's Income Statement
prepared in accordance with UK adopted International Accounting Standards. The
total profit after tax for the period is the total comprehensive income and
therefore no additional statement of other comprehensive income is presented.
The supplementary revenue and capital columns are presented for information
purposes in accordance with the Statement of Recommended Practice issue by the
Association of Investment Companies.
The notes below and on pages 34 to 44 of the half year report for the six
months ended 30 September 2022 form an integral part of these financial
statements.
Interim Condensed Statement of Financial Position
As at 30 September 2022
Company Number 11160422
30 September 2022 31 March 2022
Notes (£) (£)
Non - Current Assets
Investments at fair value through profit or loss 6 231,567,953 180,762,419
231,567,953 180,762,419
Current assets
Cash and cash equivalents 162,941,390 198,047,440
Short-term investments 8 140,000,000 -
Trade and other receivables 1,138,459 46,476
304,079,849 198,093,916
Total assets 535,647,802 378,856,335
Current liabilities
Trade and other payables 854,383 2,375,241
854,383 2,375,241
Total net assets 534,793,419 376,481,094
Shareholders equity
Share capital 10 4,813,995 3,450,358
Share premium 10 415,686,632 269,708,123
Special reserve 10 186,656 186,656
Capital reduction reserve 10 30,544,181 42,258,892
Capital reserve 10 88,662,967 64,757,592
Revenue reserve 10 (5,101,012) (3,880,527)
Total shareholders equity 534,793,419 376,481,094
Net asset value per share 9 1.11 1.09
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: 15 December 2022
The notes below and on pages 34 to 44 of the half year report for the six
months ended 30 September 2022 form an integral part of these financial
statements.
Interim Condensed Statement of Changes in Equity
For the Period Ended 30 September 2022
Share Share Special Capital Capital Revenue Total
capital premium reserve reduction reserve reserve shareholders
(£) reserve (£) reserve (£) (£) equity
(£) (£) (£)
As at 1 April 2022 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Profit/(loss) for the period - - - - 23,905,375 (1,220,485) 22,684,890
Total comprehensive income/(loss) for the period - - - - 23,905,375 (1,220,485) 22,684,890
Transactions with owners
Ordinary shares issued at a premium during the period 1,363,637 148,636,363 - - - - 150,000,000
Share issue costs - (2,657,854) - - - - (2,657,854)
Dividends paid - - - (11,714,711) - - (11,714,711)
As at 30 September 2022 4,813,995 415,686,632 186,656 30,544,181 88,662,967 (5,101,012) 534,793,419
Capital reduction reserve and revenue reserves are available to the Company
for distributions to Shareholders as determined by the Directors.
For the Period Ended 30 September 2021
Share Share Special Capital Capital Revenue Total
capital premium reserve reduction reserve reserve shareholders
(£) reserve (£) reserve (£) (£) equity
(£) (£) (£)
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/(loss) for the period - - - - 11,096,979 (291,316) 10,805,663
Total comprehensive income/(loss) for the period - - - - 11,096,979 (291,316) 10,805,663
Transactions with owners
Ordinary shares issued at a premium during the period 1,323,529 133,676,471 - - - 135,000,000
Share issue costs - (2,874,699) - - - (2,874,699)
Dividends paid - - - (2,762,247) - (2,762,247)
As at 30 September 2021 2,762,246 238,515,497 186,656 14,684,101 32,323,166 (3,168,008) 285,303,658
Capital reduction reserve and revenue reserves are available to the Company
for distributions to Shareholders as determined by the Directors.
The notes below and on pages 34 to 44 of the half year report for the six
months ended 30 September 2022 form an integral part of these financial
statements.
Interim Condensed Statement of Cash Flows
For the Period Ended 30 September 2022
Notes 1 April 2021 to 1 April 2020 to
30 September 30 September
2022 2021
(£) (£)
Cash flows used in operating activities provided by
Profit for the period 22,684,890 10,805,663
Net gain on investments at fair value through profit and loss (23,905,375) (11,096,979)
(Increase)/decrease in trade and other receivables (1,091,983) 4,348,473
Decrease in trade and other payables (1,520,858) (731,834)
Net cash (used in)/generated from operating activities provided by (3,833,326) 3,325,323
Cash flows used in investing activities
Purchase of investments (26,900,159) (20,279,016)
Purchase of short-term investments (140,000,000) -
Net cash used in investing activities (166,900,159) (20,279,016)
Cash flows used in financing activities provided by
Proceeds from issue of ordinary shares at a premium 150,000,000 135,000,000
Share issue costs (2,657,854) (2,874,699)
Dividends paid (11,714,711) (2,762,247)
Net cash inflow from financing activities 135,627,435 129,363,054
Net (decrease)/increase in cash and cash equivalents for the period (35,106,050) 112,409,361
Cash and cash equivalents at the beginning of the period 198,047,440 60,152,317
Cash and cash equivalents at the end of the period 162,941,390 172,561,678
During the period, interest received by the Company totalled £2,575,055
(2021: £1,969,922).
The notes below and on pages 34 to 44 of the half year report for the six
months ended 30 September 2022 form an integral part of these financial
statements.
Notes to the Interim Condensed Financial Statements
For the Period Ended 30 September 2022
1. General information
Gore Street Energy Storage Fund plc (the "Company") was incorporated in
England and Wales on 19 January 2018 with registered number 11160422. The
registered office of the Company is First Floor, 16-17 Little Portland Street,
London, W1W 8BP.
Its share capital is denominated in Pound Sterling (GBP) and currently
consists of ordinary shares. The Company's principal activity is to invest in
a diversified portfolio of utility scale energy storage projects primarily
located in the UK and the Republic of Ireland, although the Company has
recently acquired projects in North America and Germany.
2. Basis of preparation
STATEMENT OF COMPLIANCE
The half yearly condensed financial statements for the period 1 April 2022 to
30 September 2022 have been prepared in accordance with IAS 34 Interim
Financial Reporting, and the Disclosure Guidance and Transparency Rules of the
United Kingdom's Financial Conduct Authority.
The half yearly financial statements do not include all the information and
disclosures required in the annual financial statements, and should be read in
conjunction with the Company's annual financial statements as at 31 March
2022.
The same accounting policies, presentation and methods of computation are
followed in these condensed financial statements as were applied in the
preparation of the Company's annual financial statements for the year ended 31
March 2022. These accounting policies will be applied in the Company's
financial statements for the year ended 31 March 2023.
The financial statements have been prepared on a historical cost basis except
for the investments which are accounted for at fair value through profit or
loss. The Company is an investment entity in accordance with IFRS 10 which
holds all its subsidiaries at fair value and therefore prepares separate
accounts only and does not prepare consolidated financial statements for the
Company.
The financial information for the year ended 31 March 2022 has been extracted
from the latest published audited financial statements which have been filed
with the Registrar of Companies. The Independent Auditor's Report on those
accounts contained no qualification or statement under Section 498 (2), (3) or
(4) of the Companies Act 2006.
The financial information contained in this Half Year Report does not
constitute statutory accounts as defined in Sections 434-436 of the Companies
Act 2006. The financial information for the six months ended 30 September 2022
and 30 September 2021 has not been audited by the Company's external auditor.
The financial statements do not contain any operating segment information on
the basis that there is only one reportable segment.
FUNCTIONAL AND PRESENTATION CURRENCY
The currency of the primary economic environment in which the Company operates
(the functional currency) is Pound Sterling ("GBP or £") which is also the
presentation currency.
GOING CONCERN
The 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 rate of 7 pence per Ordinary Share. 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 12 months
until 31 December 2023. Although the Company's articles of association
require that a proposal for the continuation of the Company be put forward at
the Company's next AGM due to be held after the publication of the Company's
annual report for the year ended 31 March 2023, the Directors have no reason
to believe that such a resolution will not be passed by shareholders.
As at 30 September 2022, the Company had net current assets of £303.23
million including cash balances of £162.94 million (excluding cash balances
within investee companies) and short term investments of £140 million, 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 is a
guarantor to GSES1 Limited's £15m revolving credit facility with Santander.
The Company had no outstanding debt as of 30 September 2022.
The Directors acknowledge their responsibilities in relation to the financial
statements for the half year ended 30 September 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 December 2023.
3. Significant accounting judgements, estimates and assumptions
The preparation of the financial statements requires management to make
judgements, estimates and assumptions that affect the application of
accounting policies and the reported amount of assets, liabilities, income and
expenses. Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to the accounting estimates are recognised in the period in
which the estimates are revised and in any future periods affected.
During the period the Directors considered the following significant
judgements, estimates and assumptions:
ASSESSMENT AS AN INVESTMENT ENTITY
Entities that meet the definition of an investment entity within IFRS 10 are
required to measure their subsidiaries at fair value through profit or loss
rather than consolidate them unless they provided investment related services
to the Company. To determine that the Company continues to meet the definition
of an investment entity, the Company is required to satisfy the following
three criteria:
a) the Company obtains funds from one or more investors for the
purpose of providing those investors with investment management services;
b) the Company commits to its investors that its business purpose is
to invest funds solely for returns from capital appreciation, investment
income, or both; and
c) the Company measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Company meets the criteria as follows:
• the stated strategy of the Company is to deliver stable
returns to shareholders through a mix of energy storage investments;
• the Company provides investment management services and has
several investors who pool their funds to gain access to infrastructure
related investment opportunities that they might not have had access to
individually; and
• the Company has elected to measure and evaluate the
performance of all of its investments on a fair value basis. The fair value
method is used to represent the Company's performance in its communication to
the market, including investor presentations. In addition, the Company reports
fair value information internally to Directors, who use fair value as the
primary measurement attribute to evaluate performance.
Having assessed the criteria above and in their judgement, the Directors are
of the opinion that the Company has all the typical characteristics of an
investment entity and continues to meet the definition in the standard. This
conclusion will be reassessed on an annual basis.
VALUATION OF INVESTMENTS
Significant estimates in the Company's financial statements include the
amounts recorded for the fair value of the investments. By their nature, these
estimates and assumptions are subject to measurement uncertainty and the
effect on the Company's financial statements of changes in estimates in future
periods could be significant. These estimates are discussed in more detail in
note 7.
4. Taxation
The Company is recognised as an Investment Trust Company ("ITC") for
accounting periods beginning on or after 25 May 2018 and is taxed at the main
rate of 19%.
30 September 30 September
2022 2021
(£) (£)
(a) Tax charge in profit and loss account
UK Corporation tax - -
(b) Reconciliation of the tax charge for the period
Profit before tax 22,684,890 10,805,663
Tax at UK standard rate of 19% 4,310,129 2,053,076
Effects of:
Unrealised gain on fair value investments (4,542,021) (2,108,426)
Expenses not deductible for tax purposes 6,026 861
Other differences - 5,700
Deferred tax not recognised 225,866 48,789
Tax charge for the period - -
Estimated losses not recognised due to insufficient evidence of future profits 3,338,021 903,422
Estimated deferred tax thereon 25% (2021: 25%) 834,505 225,855
As at 30 September 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: 25%) of £834,505 (2021: £225,855)
has not been recognised in respect of these expenses since they are
recoverable only to the extent that the Company has sufficient future taxable
revenue.
5. Earnings per share
Earnings per share (EPS) amounts are calculated by dividing the profit or loss
for the period attributable to ordinary equity holders of the Company by the
weighted average number of ordinary shares in issue during the period. As
there are no dilutive instruments outstanding, basic and diluted earnings per
share are identical.
30 September 30 September
2022 2021
Net gain attributable to ordinary shareholders £22,684,890 £10,805,663
Weighted average number of ordinary shares for the period 471,712,444 257,420,379
Profit per share - Basic and diluted (pence) 4.81 4.20
6. Investments
Percentage 30 September 30 September
Place of business ownership 2022 2021
GSES1 Limited ("GSES1") England & Wales 100% 231,567,953 112,070,270
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
30 September 2022 was £142,909,431 (31 March 2022: £116,009,272). The loan
is interest bearing and attracts interest at 5% per annum. Investments in the
indirect subsidiaries are also structured through loan and equity investments
and the ultimate investments are in energy storage facilities.
Realisation of increases in fair value in the indirect subsidiaries will be
passed up the structure as distributions on the equity investment. The Company
holds a direct investment in GSES 1, which in turn holds investments in
various holding companies and operating assets as detailed in Note 6 below.
Percentage
Immediate Parent Place of business Ownership Investment
GSF Albion Limited ("GSF Albion") GSES1 England & Wales 100%
NK Boulby Energy Storage Limited GSF Albion England & Wales 99.998% Boulby
Kiwi Power ES B GSF Albion England & Wales 49% Cenin
Ferrymuir Energy Storage Limited GSF Albion England & Wales 100% Ferrymuir
GSF England Limited ("GSF England") GSES1 England & Wales 100%
OSSPV001 Limited GSF England England & Wales 100% Lower Road and Port of Tilbury
Ancala Energy Storage Limited GSF England England & Wales 100% Beeches, Blue House
Farm, Brookhall, Fell
View, Grimsargh,
Hermitage, Heywood
Grange, High Meadow,
Hungerford, Low
Burntoft
Breach Farm Energy Storage Limited GSF England England & Wales 100% Breach Farm
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 Limited GSF England England & Wales 100% Stony
Enderby Battery Storage Limited GSF England England & Wales 100% Enderby
GSF IRE Limited ("GSF IRE") GSES1 England & Wales 100%
Mullavilly Energy Limited GSF IRE Northern Ireland 51% Mullavilly
Drumkee Energy Limited GSF IRE Northern Ireland 51% Drumkee
Porterstown Battery Storage Limited GSF IRE Republic of Ireland 51% Kilteel
Kilmannock Battery Storage Limited GSF IRE Republic of Ireland 51% Kilmannock
GSF Atlantic Limited ("GSF Atlantic") GSES1 England & Wales 100%
GSF Americas Inc. ("GSF Americas")((1)) GSF Atlantic North America 100%
GSF Green Power Cremzow Gmbh & Co KG GSF Atlantic Germany 90% Cremzow
GSF Green Power Cremzow Verwaltungs GmbH GSF Atlantic Germany 90% Cremzow
Snyder ESS Assets, LLC((1)) GSF Americas North America 100% Snyder
Sweetwater ESS Assets, LLC((1)) GSF Americas North America 100% Sweetwater
Westover ESS Assets, LLC((1)) GSF Americas North America 100% Westover
Mineral Wells ESS Assets, LLC((1)) GSF Americas North America 100% Mineral Wells
Cedar Hill ESS Assets, LLC((2)) GSF Americas North America 100% Cedar Hill
Wichita Falls ESS Assets, LLC((2)) GSF Americas North America 100% Wichita Falls
Mesquite ESS Assets, LLC((2)) GSF Americas North America 100% Mesquite
(1) The acquisition of Snyder ESS Assets, LLC, Sweetwater ESS
Assets, LLC, Westover ESS Assets, LLC and Mineral Wells ESS Assets, LLC was
completed on 22 April 2022.
(2) The acquisition of Cedar Hill ESS Assets, LLC, Wichita Falls
ESS Assets, LLC and Mesquite ESS Assets, LLC was completed on 26 August 2022.
All subsidiaries that have a place of business in England & Wales and
Northern Ireland, with the exception of GSES 1, are registered at 8th Floor,
100 Bishopsgate, London, EC2N 4AG from 5 September 2022 (18th Floor, The
Scalpel, 52 Lime Street, London, EC3M 7AF up until 5 September 2022).
GSES 1 is registered at 1st Floor, 16-17 Little Portland, London, England, W1W
8BP from 5 September 2022 (18th Floor, The Scalpel, 52 Lime Street, London,
EC3M 7AF up until 5 September 2022).
All subsidiaries that have a place of business in Republic of Ireland are
registered at 4th Floor, 76 Lower Baggot Street, Dublin 2 from 5 September
2022 (Block C, 77 Sir John Rogerson's Quay, Dublin, D02 VK60, Republic of
Ireland up until 5 September 2022).
GSF Cremzow GmbH & Co KG and GSF Cremzow Verwaltungs GmbH are registered
at Schenkenberg, Gut Dauerthal 3, 17291.
All subsidiaries with a place of business in North America are registered at
2093A Philadelphia Pike, Suite 312, Claymont, DE 19703.
7. Fair Value measurement
VALUATION APPROACH AND METHODOLOGY
There are three traditional valuation approaches that are generally accepted
and typically used to establish the value of a business; the income approach,
the market approach and the net assets (or cost based) approach. Within these
three approaches, several methods are generally accepted and typically used to
estimate the value of a business.
The Company has chosen to utilise the income approach, which indicates value
based on the sum of the economic income that an asset, or group of assets, is
anticipated to produce in the future. Therefore, the income approach is
typically applied to an asset that is expected to generate future economic
income, such as a business that is considered a going concern. Free cash flow
to total invested capital is typically the appropriate measure of economic
income. The income approach is the DCF approach and the method discounts free
cash flows using an estimated discount rate (WACC).
VALUATION PROCESS
In the period the Company acquired 69.65 MW in ERCOT from Perfect Power LLC
across seven projects in total, each of 9.95MW. This brings the Company's
portfolio of energy storage assets to a total capacity of 698.2 MW (March
2022: 628.5 MW). As at 30 September 2022, 291.6 MW of the Company's total
portfolio was operational and 406.6 MW pre‑operational (the "Investments").
The Investments comprise twenty seven projects, all of these are based in the
UK, the Republic of Ireland, mainland Europe or North America. The Directors
review and approve these valuations following appropriate challenge and
examination. The current portfolio consists of non-market traded investments
and valuations are analysed using forecasted cash flows of the assets and used
the discounted cash flow approach as the primary approach for the purpose of
the valuation. The Company engages external, independent and qualified valuers
to determine or review the fair value of certain of the Company's investments.
As at 30 September 2022, the fair value of any investment held with a value
greater than 2.2% of the total net asset value of the portfolio, have been
determined, (presented by the Investment Advisor and reviewed) by BDO LLP and
further presented and reviewed by the Company's Board of Directors.
The fair value of all other investments have been determined by the Investment
Advisor and presented directly to and reviewed by the Company's Board of
Directors.
The below table summarises the significant unobservable inputs to the
valuation of investments.
Significant Inputs Fair Value
Investment Portfolio Valuation Description (Range) 30 September 31 March
technique 2022 2022
(£) (£)
Great Britain (excluding Northern Ireland) DCF Discount Rate 7% - 10% 101,970,831 89,350,935
Revenue/MW/hour £5 - £20
Northern Ireland DCF Discount Rate 8% - 9% 53,469,138 57,076,847
Revenue/MW/hour €5 - €20
Republic of Ireland DCF Discount Rate 8% - 10% 25,420,739 17,595,232
Revenue/MW/hour €5 - €15
Other OECD DCF Discount Rate 9% 46,953,608 12,583,705
Revenue/MW/hour €5 - €30 /
Holding Companies NAV $10 - $30 3,753,637 4,155,700
Total Investments 231,567,953 180,762,419
The fair value of the holding companies represents the net current assets
including cash, held within those companies in order to settle any operational
costs.
SENSITIVITY ANALYSIS
The below table reflects the range of sensitivities in respect of the fair
value movements of the Company's investments.
Significant Inputs Estimated effect on Fair Value
30 September 31 March
Valuation 2022 2022
Investment Portfolio technique Description Sensitivity (£) (£)
Great Britain (excluding Northern Ireland) DCF Revenue + 10% 22,262,000 46,600,000
- 10% (22,767,000) (28,312,000)
Discount rate +1% (11,178,000) (12,378,000)
-1% 12,765,000 14,357,000
Northern Ireland DCF Revenue + 10% 5,374,000 9,984,000
- 10% (5,325,000) (10,034,000)
Discount rate +1% (3,236,000) (3,226,000)
-1% 3,687,000 3,675,000
Republic of Ireland DCF Revenue + 10% 5,359,000 4,404,000
- 10% (9,351,000) (4,937,000)
Discount rate +1% (6,227,000) (3,242,000)
-1% 7,300,000 3,772,222
Other OECD DCF Revenue + 10% 5,010,000 3,698,000
- 10% (5,187,000) (4,465,000)
Discount rate +1% (1,833,000) (704,000)
-1% 2,069,000 804,000
High case (+10%) and low case (-10%) revenue information used to determine
sensitivities are provided by third party pricing sources.
VALUATION OF FINANCIAL INSTRUMENTS
The investments at fair value through profit or loss are Level 3 in the fair
value hierarchy and the reconciliation in the movement of this Level 3
investment is presented below. No transfers between levels took place during
the period.
30 September 31 March
2022 2022
Reconciliation (£) (£)
Opening balance 180,762,419 80,694,275
Purchases during the period/year 26,900,159 56,536,739
Total fair value movement through profit and loss 23,905,375 43,531,405
231,567,953 180,762,419
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.
8. Short-term investments
Short-term investments include cash deposits held with Barclays Bank plc and
Santander UK plc, both reputable financial institutions each with a Moody's
credit rating of A1. Both deposits have a maturity period of 6 months, £100m
maturing in November 2022 and £40m maturing in January 2023. As at 30
September 2022, the total short-term investments amounted to £140m (2021:
£nil).
9. Net asset value per share
Basic NAV per share is calculated by dividing the Company's net assets as
shown in the Statement of Financial Position that are attributable to the
ordinary equity holders of the Company by the number of ordinary shares
outstanding at the end of the period. As there are no dilutive instruments
outstanding, basic and diluted NAV per share are identical.
30 September 31 March
2022 2022
Net assets per Statement of Financial Position £534,793,419 £376,481,094
Ordinary shares in issue as at 30 September/31 March 481,399,478 345,035,842
NAV per share - Basic and diluted (pence) 111.09 109.11
10. Share capital and reserves
Share Capital
Share premium Special reduction Capital Revenue
capital reserve reserve reserve reserve reserve Total
(£) (£) (£) (£) (£) (£) (£)
At 1 April 2021 3,450,358 269,708,123 186,656 42,258,892 64,757,592 (3,880,527) 376,481,094
Issue of ordinary £0.01 shares: 14 April 2022 1,363,637 148,636,363 - - - - 150,000,000
Share issue costs - (2,657,854) - - - - (2,657,854)
Dividends paid - - - (11,714,711) - - (11,714,711)
Profit/(loss) for the period - - - - 23,905,375 (1,220,485) 22,684,890
At 30 September 2022 4,813,995 415,686,632 186,656 30,544,181 88,662,967 (5,101,012) 534,793,419
Share Capital
Share premium Special reduction Capital Revenue
capital reserve reserve reserve reserve reserve Total
(£) (£) (£) (£) (£) (£) (£)
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/(loss) 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.
SHARE ISSUES
On 14 April 2022, the Company issued 136,363,636 ordinary shares at a price of
101 pence per share, raising net proceeds from the Placing of £150,000,000.
11. Dividends
30 September 30 September
Dividend 2022 2021
per share (£) (£)
Dividends paid during the period
For the 3 month period ended 31 March 2021 1 pence - 2,762,247
For the 3 month period ended 31 December 2021 2 pence 6,900,716 -
For the 3 month period ended 31 March 2022 1 pence 4,813,995 -
11,714,711 2,762,247
An interim dividend of 2 pence for the period 1 October 2021 to 31 December
2021 was proposed by the Directors, and subsequently paid on the 8 April 2022.
An interim dividend of 1 pence for the period 1 January 2022 to 31 March 2022
was proposed by the Directors and subsequently paid on 26 August 2022.
12. Transactions with related parties
Since the listing of the ordinary shares in 2018, the Company and the
Directors are not aware of any person who, directly or indirectly, jointly or
severally, exercises or could exercise control over the Company. The Company
does not have an ultimate controlling party.
Details of related parties are set out below:
DIRECTORS
With effect from 1 July 2022, Patrick Cox, Chair of the Board of Directors of
the Company, is paid a Director's remuneration of £75,000 per annum, (2021:
£57,500), Caroline Banszky is paid a Director's remuneration of £55,000
per annum, (2021: £45,000) with the remaining Directors being paid
Directors' remuneration of £45,000 per annum, (2021: £40,000).
Total Director's remuneration and associated employment costs of £106,890
were incurred in respect of the period with £nil being outstanding and
payable at the period end.
INVESTMENT ADVISOR
The Investment Advisor, Gore Street Capital Limited (the "Investment
Advisor"), is entitled to advisory fees under the terms of the Investment
Advisory Agreement amounting to 1% of Adjusted Net Asset Value. The advisory
fee will be calculated as at each NAV calculation date and payable quarterly
in arrears.
For the avoidance of doubt, where there are C Shares in issue, the advisory
fee will be charged on the Net Asset Value attributable to the Ordinary Shares
and C Shares respectively.
For the purposes of the quarterly advisory fee, Adjusted Net Asset Value
means:
a. for the four quarters from First Admission, Adjusted Net Asset
Value shall be equal to Net Asset Value;
b. for the next two quarters, Adjusted Net Asset Value shall be
equal to Net Asset Value minus Cash on the Company's Statement of Financial
Position, plus any committed Cash on the Company's Statement of Financial
Position;
c. thereafter, Adjusted Net Asset Value shall be equal to Net Asset
Value minus Cash on the Company's Statement of Financial Position.
During the prior year, the management agreement was amended to change the term
of adjusted NAV to mean net asset value minus uncommitted cash. Uncommitted
cash means all cash on the Company's balance sheet other than committed cash.
Committed cash means cash that has been allocated for repayment of a liability
on the balance sheet of any member of the group. Investment advisory fees of
£2,160,498 (30 September 2021: £1,353,252) were paid during the period,
there were no outstanding fees as at 30 September 2022, (31 March 2022: £nil
outstanding).
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 £318,177 were
accrued for the period ended 30 September 2022, (31 March 2022: £1,545,369).
During the period the Investment Advisor provided operations management
services to SPV companies resulting in charges to the amount of £419,574 (31
March 2022: £781,600) being payable by the SPV companies to the Investment
Advisor.
13. Capital commitments
The Company together with its direct subsidiary, GSES1 Limited entered into
Facility and Security Agreements with Santander UK PLC in May 2021 for £15
million. Under these agreements, the Company acts as chargor and guarantor to
the amounts borrowed under the Agreements by GSES1 Limited. As at 30 September
2022, no amounts had been drawn on this facility.
The Company had no contingencies and significant capital commitments as at the
30 September 2022.
14. Post balance sheet events
The Directors have evaluated the need for disclosures and/or adjustments
resulting from post balance sheet events through to 15 December 2022, the date
the financial statements were available to be issued.
The Board approved on the 20 September 2022, the issuance of an interim
dividend of 2 pence per share. This dividend totalling £9,627,989.56 was paid
to investors on the 21 October 2022.
Following the approval at the Company's AGM on the 20 September 2022, the
Company made an application to the High Court, together with a lodgement of
the Company's statement of capital with the Registrar of Companies, the
Company was permitted to reduce the capital of the Company by an amount of
£100,000,000. This was effected on the 28 November 2022 by a transfer of
that amount from the share premium account to distributable reserves.
Post year end, the Company acquired the project rights for Project Middleton,
a 200 MW project located in Great Britain, for £11,629,145.41.
Following a review, the Company has agreed with the Investment Manager and its
subsidiary, Gore Street Operational Management Limited (the "Operations
Manager"), that with effect from 16 December 2022, the AIFM Agreement between
the Company and the Investment Manager and the Commercial Management Agreement
("CMA") between the Company and the Operations Manager will be amended. The
notice period under the CMA has been increased from 6 months to 12 months in
order to align with the notice period under the AIFM Agreement. Amendments
have also been made to both agreements: (i) to provide that in the specific
event of a takeover offer for the Company becoming wholly unconditional, the
agreements will terminate automatically with no requirement for notice to be
served; and (ii) to prescribe certain fees that will then become payable to
the Investment Manager and the Operations Manager on such termination. Based
on the amounts involved, the changes to the AIFM Agreement and CMA constitute
a smaller related party transaction as set out in the FCA's Listing Rule
11.1.10R. Further details are included above, and on page 26 of the half year
report for the six months ended 30 September 2022.
There were no adjusting post balance sheet events and as such no adjustments
have been made to the valuation of assets and liabilities as at 30 September
2022.
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