REG - Gore Street Energy - Statement re Portfolio Update and Share Price

Gore Street Energy Storage FundAnnouncement

12/10/2023 07:00

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RNS Number : 8610P  Gore Street Energy Storage Fund PLC  12 October 2023

12 October 2023

Gore Street Energy Storage Fund plc

(the "Company" or "GSF")

Positive Portfolio Update and Share Price Commentary

 

Positive revenue trends continue, driven by the international assets. The
consolidated portfolio  outperformed the GB fleet by circa 3x during the
quarter

 

 

 

Gore Street Energy Storage Fund plc, the internationally diversified energy
storage fund, is pleased to share an update for FY Q2 ending 30 September
2023. This quarter again highlights the benefits of the Company's early
diversification strategy, with the consolidated portfolio outperforming the
Company's GB fleet by c.3x, based on average revenue per MW during the period.
The portfolio build-out continues to progress following September's
energisation of 79.9 MW of additional capacity.

The Board continues to monitor the current GSF share price volatility. The
Board and the Investment Manager confirm that they are not aware of any
portfolio-specific factors that have led to the recent sharp decline in the
share price. The Board believes that the discount to Net Asset Value at which
the Company's share price currently trades materially undervalues the Company
and its portfolio. The Board maintains confidence in the quality of the assets
across the five international energy markets, which continue to perform
strongly, underpinning the dividend.

 

Key FYQ2 Highlights:

·    International Diversification: The Company's non-GB portfolio spans
four uncorrelated international energy markets, including the integrated Irish
grid, Germany, Texas, and California. The operational international fleet now
accounts for over 62% of the Company's operational capacity. This
diversification insulates the Company from the current GB market saturation,
which at some stage will ameliorate as is typical of capital-intensive
industries, and enables the pursuit of diverse revenue streams.

·    Market-Specific Strategies: Tailored system durations, ranging from
26 minutes in Northern Ireland to two hours in Texas; optimised revenue
streams based on weather patterns, renewables penetration, and flexibility
needs. This adaptability minimises revenue variability, ensuring stability.

·    Market Success: In August, the Company's assets in the ERCOT market
in Texas generated record revenue of approximately £150/MW/hr, marking the
highest monthly revenue per MW ever achieved by the Company in a single grid.
This was achieved through strategic prequalification of new revenue streams
and collaboration with a new route-to-market partner. This achievement
highlights the advantages of having complete, in-house technical resources,
from construction to asset management and commercialisation.

 

Operational & Portfolio Update:

The operational fleet demonstrated strong performance, generating an estimated
weighted average revenue of £18.9/MW/hr during the September-end quarter.
Performance is broken down by grid below:

·    Ireland: Unseasonably high wind penetration led to estimated revenues
of over £20.2/MW/hr during the three months. This is especially pleasing for
the Company given that these months have historically been "off-season",
yielding lower revenues.

·    Texas: Record-breaking monthly revenue was generated in August
following the Company's prequalification for the new ECRS ancillary service,
aligning with historical trends of high summer revenue due to heatwaves and
grid scarcity. The Portfolio generated an estimated average of £65.2/MW/hr
during the three months in this market.

·    Great Britain (GB): Revenue in GB remains subdued and remains the
Company's lowest revenue market, which we believe will continue. The estimated
average revenue for the GB portfolio was £6.6/MW/hr for the three months.

·    Germany: Stable revenue was maintained despite declining ancillary
service prices due to sufficient spreads that allow energy storage to profit
from energy arbitrage. The estimated average revenue for the three-month
period was £10.4/MW/hr.

 

Capital Structure:

·    The Company remains well-capitalised, with c.£75m in cash or cash
equivalents as of 30 September 2023 without any outstanding debt. Of the 187
MW scheduled to come online in GB over the next 9 months, c.85% of the
required capex has already been paid. The Company currently remains undrawn on
its existing £50m RCF. In addition, the Company continues to progress towards
securing USD denominated project-level debt for its Big Rock asset in
California.

 

 

Construction Progress:

The Company remains on track to bring its operational portfolio to 813.4MW by
the end of 2024. A breakdown of progress is detailed below:

·      GB: Significant strides have been made in completing assets, with
Stony (79.9 MW) energised in September 2023 and Ferrymuir (49.9 MW) awaiting
confirmation from the grid operator to bring it to energisation with all
energy storage package work complete and ready to be energised. Enderby is
still on track for and targeting energisation in June 2024.

·      California: The Big Rock asset (200.0 MW) construction is
proceeding well, with key equipment procured and on-site works scheduled to
commence this year. The project remains within budget and on track to meet its
energisation date in 2024.

·      Texas: Contracts for advanced engineering and procurement of HV
equipment for Dogfish (75.0 MW) have been signed, with further agreements in
progress. The project remains on track for its energisation in 2024.

·      Ireland: Engineering and procurement for Porterstown Phase II
(60.0 MW) are underway and are on track for energisation in October 2024.

 

Alex O'Cinneide, CEO of Gore Street Capital, the Investment Manager of the
Company, commented:

"I wish to address fellow shareholders directly regarding the recent
performance of the Company's share price, which has been disappointing,
particularly considering the Company's continued impressive operating
performance. In light of this, the Investment Manager, Gore Street Capital has
purchased shares, as announced on 3 October.

Energy storage faces the same challenges as the rest of renewable
infrastructure in a high-interest environment. It is important to recognise,
however, that despite these difficulties, our commitment to the Company's
objectives remains unchanged. We are successfully executing against the
strategy laid out to investors and delivering on the commitments made,
including those regarding dividend distributions to our Shareholders. Our
dividend coverage is the highest amongst peers and will continue to increase
and be underpinned as significant new capacity comes on stream over the next
12 months.

In terms of operational progress, we have achieved significant milestones.
Stony has been energised, and we remain confident of reaching our goal of
813.4 MW operational capacity by the close of 2024.

In our sector, there have been higher assumptions over future revenue
opportunities than we foresaw, and those assumptions have had to be unwound.
This has given the impression that volatility over energy storage revenues is
higher, and therefore, investors are placing a higher risk premium on funds
like ours. What that view fails to consider is the difference in strategy
enacted by those funds.

The Company's unique diversification strategy, which has seen the deployment
of operational assets across four uncorrelated markets, has reduced revenue
volatility by c.50%. The Company's balance sheet reflects prudent management,
with the lowest debt levels amongst our peers.

While markets remain turbulent, our team is more determined than ever to
navigate these challenges successfully. We remain focused on our objectives
and are fully committed to delivering value for shareholders."

 

Pat Cox, Chair of the Company, commented:

"The Board notes the recent weakness in share price, which, in our view,
significantly underrates the best-in-class performance of our portfolio.

Our operational assets have consistently met and often exceeded expectations,
especially in our international markets, where recent revenue generation has
surpassed projections.

 

 It is important to emphasise that our operating portfolio demonstrates
strong performance on the international stage and reinforces our confidence in
the strategic choices we have made.

 

We would like to reassure shareholders that despite the recent market
conditions, the Company's balance sheet remains strong, it continues to
perform particularly well operationally, and we remain committed to delivering
value for our Shareholders."

 

For further information:

 

Gore Street Capital Limited

Alex O'Cinneide / Paula Travesso
                                    Tel: +44 (0) 20 3826
0290

Shore Capital (Joint Corporate Broker)

Anita Ghanekar / Rose Ramsden / Iain Sexton (Corporate Advisory)     Tel:
+44 (0) 20 7408 4090

Fiona Conroy (Corporate Broking)

J.P. Morgan Cazenove (Joint Corporate Broker)
                  Tel: +44 203 493 8000

William Simmonds / Jérémie Birnbaum (Corporate Finance)
    Tel: +44 (0) 20 3493 8000

 

Buchanan (Media Enquiries)

Charles Ryland / Henry Wilson / George Beale
                     Tel: +44 (0) 20 7466 5000

Email: gorestreet@buchanan.uk.com

 

Notes to Editors

About Gore Street Energy Storage Fund plc

Gore Street is London's first listed and internationally diversified energy
storage fund dedicated to the low-carbon transition. It seeks to provide
Shareholders with sustainable returns from their investment in a diversified
portfolio of utility-scale energy storage projects. In addition to growth
through increasing operational capacity and a considerable pipeline, the
Company aims to deliver consistent and robust dividend yield as income
distributions to its Shareholders.

https://www.gsenergystoragefund.com (https://www.gsenergystoragefund.com/)

 

 

 

 

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